This changes the picture considerably when we look at how many “average” plan packages the organisation held between periods. It should be noted that these providers likely have a disproportionate number of SIL customers, so these numbers in no way reflect their actual numbers. Still, it does provide a normalised indicator of net customer movement. It is also worth noting that Northcott didn’t lose customers. In fact, they grew significantly. Our analysis simply shows that the growth rate was less than the average increase in plan size.

Profit (Surplus)

The picture is just as curious when evaluating profit (or surplus). Just a note, the profit represents the entire organisation’s operations, not just the NDIS, but views can be drawn nonetheless. For example, while the average profit was $19,036,466, the standard deviation was $25,900,361.35 – how is this possible?

A significant driver of profitability during the 2019/2020 financial year was JobKeeper. When we see massive jumps in profit between years, JobKeeper is often the key driving factor. Indeed, many of our providers appear to have managed to keep their operations largely intact while JobKeeper flowed.

Another major determinant of margin is donations and fundraising. Our best performing organisations almost always have comprehensive fundraising machinery that makes considerable contributions to their revenue with limited expenses.

It is worth looking at the 2018/2019 year to draw conclusions about profitability since it likely reveals a view before JobKeeper is considered. Many of our largest providers operate on extremely thin margins, while mid-size providers seem to vary significantly in their margins. While much of this is attributable to different revenue streams and programs, some may be attributed to the overhead structure of the organisations. For example, when we evaluated organisations that essentially provided strictly NDIS services, we found that the key driver of variance in profit was the size of the donation pool.

These organisations aren’t small players in the sector. Together they nearly accounted for 10% of scheme expenditure at the time. They were on average 151 times larger than the mean provider. There are real lessons to be drawn from their experiences. If we take away anything from this analysis, it is that there are significant variations in performance across the sector, especially in growth. If these significant players are subject to serious variation, smaller providers should note that there is a real market emerging where great products and services are rewarded.

You would have seen from this data that providers enjoyed significant growth. Our next article will show how the growth in the SIL market has ground to a halt. If organisations have factored a continued growth pattern into their strategy, then there may be interesting results in subsequent financial statements.

Clearly, Empathia Group loves to get into the details of financial performance and growth in the NDIS. If you’d like to work with us, please reach out to us on our website. Also, consider taking our SIL assessment for a free report on the drivers of growth and profitability. If you thought this was interesting or useful, let us know, we’ll keep doing it if it helps your organisation position itself. Finally, we know very well that profitability and growth aren’t the most critical elements of the scheme. So we are working on standardising outcome measures which we intend to release soon. If you have views on measuring outcomes, let us know.

John Harries
Managing Partner