WORKING CAPITAL
REPORT 2014
Prepared by the McGrathNicol
Cash and Working Capital Centre of Excellence
Welcome
While the overall reduction in cash tied up in working
capital was not as great in 2014 as it was in 2013, the
spread of results in most industries widened, meaning
the comparative advantage gained by the best
performers increased.
Welcome to the 2014 McGrathNicol Working Capital Report, prepared by our
Cash and Working Capital Management Centre of Excellence.
This report profiles the working capital performance of a sample of 91 ASX listed
companies across the Building Products, Construction & Engineering,
Media & Leisure, Utilities, Retail and Transport & Distribution sectors.
The combined market capitalisation of the companies included is $153.1 billion,
representing 76.5% of the total for the selected sectors. The information is
based on the most recent full-year results for 2014, compared to 2013 results.
Overall, the amount of cash tied up in working capital fell in 2014 compared to
2013 due predominantly to a reduction in average debtor collection cycles in
the majority of the profiled sectors. However, consistent with 2013, there were
varying results across companies and sectors. The following pages include our
analysis for each sector.
Information about our Cash and Working Capital Management Centre of
Excellence, including contact details, is provided at the end of this report.
1
Summary
Overall improvement driven by lower debtor days. Building Products,
Transport & Distribution and Utilities saw the largest improvements while
Construction & Engineering was the only Sector to show an increase.
Average Days Working Capital (DWC) in
2014 was 53.1 days, representing a
0.3 day reduction from 2013, “releasing”
over $150.9 million in cash from the
combined working capital cycles of our
sampled companies.
additional cash was absorbed in part by
a 1.5 day increase in inventory days (or
DIO) and was also used to pay creditors
more promptly than in 2013 (reducing
creditor days, or DPO).
By Sector, the biggest improvements
were achieved in the Building Products,
Transport & Distribution and Utilities
sectors. Only the Construction &
Engineering sector showed an increase
in average DWC after achieving a
material improvement in 2013.
As shown in the table below, the
improvement was driven by a 2.2 day
reduction in debtor days (or DSO). This
means that, on average, management
teams were able to generate
comparatively more cash through better
billing and collections performance. The
Average DWC by Sector
The following pages highlight the
stronger performers (relative to the
prior year) in each Sector.
Summary sample
100
80
Whilst there was an overall reduction in
net working capital, underlying results
were mixed with 49% of the profiled
companies reporting an increase in
DWC. In addition, the metrics in 2014
were impacted by a higher reported
instance of operational restructuring
and/or investment/divestment activity.
83.7
67.0
60
Days
2013
2014
Change
DSO
55.3
53.1
(2.2)
DIO
52.2
53.7
1.5
DPO
55.4
52.4
(3.0)
DWC
53.4
53.1
(0.3)
Days
60.9
53.1
40
44.3
28.8
20
24.7
0
Building
Products
Construction
& Engineering
Media
& Leisure
Utilities
Retail
Transport &
Distribution
Sample
DWC at 30 June (or latest available)
2013
2014
DSO = Days sales outstanding (debtors)
DIO = Days inventory outstanding (inventory held)
DPO = Days purchases outstanding (creditors)
DWC = Days working capital (net working capital)
For details of the basis of preparation and calculations, see pages 10, 11 & 12.
2
Cash and Working Capital
Centre of Excellence
Building Products
The second most material sector improvement, driven by lower debtor days.
“Operating cash flow increased by
$198.3 million to $507.3 million
in FY2014, reflecting improved
earnings from trading operations
and a continued focus on working
capital management… working
capital benefited from improved
debtor management, together
with a reduction in inventories in
the Australian Brick and Timber
businesses.”
Financial Review
Boral Limited
FY14 Annual Report
Although building dwelling approvals
were up 21% in 2014 overall revenue
growth was minimal – indicative of both
the continued subdued commercial
construction conditions and the
continued move to higher-density
developments, which industry feedback
suggests typically pull through about
one-third of the building products
volume of a detached house.
From a working capital perspective,
companies often find themselves acting
as the “middle man” in this sector,
having to deal with large construction
companies or developers whilst also
managing numerous subcontractors
and suppliers. Both suppliers and
customers are trying to tighten working
capital cycles and minimise inventory
holdings, which means tight debtor and
inventory management is vital.
Building Products
Days
2013
2014
Change
DSO
63.8
59.6
(4.2)
DIO
92.4
96.2
3.8
DPO
59.3
59.4
0.1
DWC
85.8
83.7
(2.1)
After a material improvement in 2013,
driven by better debtor and inventory
management, improvement slowed in
2014, but the average improvement of
2.1 days still represented the second
best industry result.
The improvement was driven by a
4.2 day reduction in DSO coupled with
a marginal increase in creditor days
(DPO), partly offset by a 3.8 day increase
in inventory days (DIO). Inventory is the
most material working capital element
in this sector.
Boral, James Hardie and Brickworks
were amongst the companies that
improved their DWC metrics in 2014.
Whilst assisted by the sale of its Gypsum
and Windows businesses during the
period, Boral was able to significantly
decrease its DSO and DIO, allowing it to
pay suppliers more quickly.
Top 5 DWC improvements - Building Products
140
120
112.9
112.1
100
Days
Best
Worst
Spread
DSO
52.4
89.3
36.9
DIO
54.2
161.2
107.0
DPO
85.1
34.7
50.4
DWC
48.2
124.6
76.4
Days
Best & Worst - 2014
80
83.7
60
40
61.8
54.1
48.2
20
Boral Limited
Days
2013
2014
Change
DSO
77.8
58.1
(19.7)
DIO
80.8
59.7
(21.1)
DPO
90.0
73.3
(16.7)
DWC
71.0
48.2
(22.8)
Cash and Working Capital
Centre of Excellence
0
Boral Limited
James Hardie
Industries plc
Brickworks
Limited
DuluxGroup
Limited
Adelaide
Brighton Ltd.
Peer group
average
DWC at 30 June (or latest available)
2013
2014
3
Construction
& Engineering
Net working capital increased due to increased inventory holdings and tightening
creditor terms.
“A recent compression in
contractors’ margins, which
is attributable to the current
market cycle, means this
business [Civil & Mining]
must focus on operational
efficiencies and taking a more
dynamic approach to capital
management in order to
maximise shareholder value.”
Mark Baker
CFO and Company Secretary
Watpac
FY14 Annual Report
Construction & Engineering
Days
2013
2014
Change
DSO
64.9
64.9
-
DIO
27.7
29.5
1.8
DPO
37.2
34.1
(3.1)
DWC
57.9
60.9
3.0
The Construction & Engineering sector
continues to rebalance with a broad
slowdown in activity and a change in the
nature of investment away from mining
and resources towards residential
and non-residential construction
in the eastern states, as well as
newly announced Government led
infrastructure projects. Operators have
also experienced increased scrutiny on
variations, claims and contract terms.
These themes have impacted margins
and working capital metrics. A key
success factor is each business’ ability
to manage its projects and client
relationships so that large debtors and
WIP balances do not tie up capital.
After a material improvement in 2013,
2014 saw DSO level off, however DPO
fell by 3.1 days, driving DWC up by
3.0 days to 60.9 days. The sample
indicates that companies in the sector
are paying suppliers in nearly half the
time that they are collecting debtors –
reflective in part of recent amendments
to the Securities of Payments Act in
various states and mandatory deadlines
for making progress payments from
principals to contractors, as well
as subsequent payments down the
supply chain.
Notwithstanding the above shift in
metrics, strong performers included
UGL (mainly a result of holding its
property business DTZ for sale at
30 June 2014), WDS and Watpac, with
WDS generating approximately
$24 million of cash by reducing DSO by
24.4 days to 59.4 days, in turn allowing it
to invest in plant and equipment.
As was the case in 2013, there was a
wide range of outcomes in the sector
in 2014, and while there was an average
overall increase, 42% of the sample
experienced a decrease in net DWC,
representing a material comparative
advantage.
Top 5 DWC improvements - Construction & Engineering
120
Best & Worst - 2014
Best
Worst
Spread
DSO
30.1
96.0
65.9
DIO
-
146.0
146.0
DPO
143.3
4.4
138.9
DWC
3.1
155.7
152.6
100
80
Days
Days
60
71.1
43.2
20
Days
2013
2014
Change
DSO
41.0
37.8
(3.2)
DIO
19.7
14.1
(5.6)
DPO
6.2
8.2
2.0
DWC
53.8
43.2
(10.6)
0
UGL Limited
WDS
Limited
Lycopodium
Ltd.
Watpac
Ltd.
WorleyParsons
Limited
Peer group
average
DWC at 30 June (or latest available)
2013
4
60.9
49.9
40
Watpac Ltd.
61.0
57.3
2014
Cash and Working Capital
Centre of Excellence
Media & Leisure
No overall change in net working capital days but a tightening of creditor days was
offset by an improvement in debtor days.
“Cash outflows from operating
activities of $36.1 million are
driven by the operating loss for
the period, partly offset by net
working capital reduction.”
HR McLennan
Executive Chairman
Ten Network Holdings Limited
FY14 Annual Report
Media & Leisure
Days
2013
2014
Change
DSO
66.7
65.2
(1.5)
DIO
7.4
7.0
(0.4)
DPO
77.3
70.3
(7.0)
DWC
28.8
28.8
-
Best & Worst - 2014
Days
Best
Worst
Spread
DSO
16.0
155.4
139.4
DIO
-
22.0
22.0
DPO
205.9
2.2
203.7
DWC
(30.7)
111.9
142.6
The Media & Leisure industry, particularly
operators involved with print media
and free-to-air television, continued to
experience a decline in revenues from
traditional sources in 2014.
As a result, companies looked to identify
new income streams, growing digital
offerings (both mobile and web) and
‘on-demand’ viewing platforms.
At the same time, many Media & Leisure
companies turned their focus to
implementing cost-reduction measures
to maintain profitability. The level of
change in the industry is highlighted
by the fact that 50% of the companies
sampled undertook refinancing
and/or restructuring activities, including
divesting underperforming business
units, during the year.
Across our sample, cash tied up in
working capital remained at an average
28.8 days in 2014 (consistent with 2013
2013
2014
Change
DSO
73.4
59.3
(14.1)
DIO
-
-
-
DPO
79.6
78.0
(1.6)
DWC
(3.2)
(30.7)
(27.5)
The chart below shows that
Ten Network Holdings and Nine
Entertainment had negative working
capital and DWC in both 2013 and
2014, meaning that working capital has
provided a source of funding to those
companies over the past two years.
80
60
57.2
Days
Days
Whilst DWC was stable across the
sector, there were some companies
that achieved material reductions. Ten
Network Holdings, Southern Cross
Media and News Corporation were the
best performers, reducing DWC and
“releasing” the equivalent of $16 million
(Southern Cross Media) and $122 million
(News Corporation) of cash respectively,
predominantly by improving DSO.
Top 5 DWC improvements - Media & Leisure
60.5
40
Ten Network Holdings Limited
levels). However, there were swings in the
underlying metrics, most notably a 7 day
reduction in DPO.
43.9
28.8
20
0
(12.0)
(20)
(30.7)
(40)
Ten Network
Holdings Limited
Southern
Cross Media
Group Limited
News
Corporation
REA Group
Limited
Nine Entertainment
Co. Holdings
Limited
Peer group
average
DWC at 30 June (or latest available)
2013
Cash and Working Capital
Centre of Excellence
2014
5
Utilities
The Utilities sector achieved the most material reduction in net working capital days,
driven by improved debtor management.
“Group operating cash flow
after tax was up 74 per cent
… primarily due to a positive
change in working capital
from an improved billing and
collections performance.”
Utilities companies continued to
experience challenging operating
and market conditions in 2014 due to
declining demand for energy amongst
households and rising competitive
pressures following a period of industry
deregulation. Industrial demand also
softened as some manufacturers
moved offshore.
Gordon Cairns, Chairman
Grant King, Managing Director
Origin Energy Limited
FY14 Annual Report
As a result, and consistent with other
sectors facing “top-line” pressures, a
number of Utilities companies focussed
on improving operating efficiencies and
cost-reduction initiatives in 2014 to
preserve earnings. For some, this has
involved implementing new systems,
streamlining and (where needed)
“cleaning up” the billing cycle and
restructuring operating arrangements.
Utilities
Days
2013
2014
Change
DSO
50.1
42.3
(7.8)
DIO
28.1
31.9
3.8
DPO
90.3
80.3
(10.0)
DWC
28.8
24.7
(4.1)
Best & Worst - 2014
From a working capital perspective,
average DWC across our sample
of Utilities companies improved
4.1 days from 28.8 days in 2013 to
Strong performers were Ethane Pipeline
Income Fund, Energy World Corp and
Origin Energy, the latter achieving
an improvement in DWC from
24.8 days in 2013 to 15 days in 2014 due
to its increased focus on billings and
collections. For the Ethane Pipeline
Income Fund, the material improvement
in DWC (from 32.7 days in 2013 to
9.6 days in 2014) was driven by a
23.7 day decrease in DSO although
this was skewed by the timing of
receipts from its sole customer. For the
companies operating on the production
side of the industry, the dependence on
one or a few customers (and the ability
to manage trading terms) can have a
significant impact on working capital.
Top 5 DWC improvements - Utilities
Best
Worst
Spread
DSO
9.8
66.7
56.9
DIO
-
120.7
120.7
DPO
214.3
0.8
213.5
DWC
9.6
45.9
36.3
60
40
Days
Days
38.4
20
Origin Energy Limited
0
Days
2013
2014
Change
DSO
71.2
62.8
(8.4)
DIO
7.0
9.0
2.0
DPO
64.1
68.8
4.7
DWC
24.8
15.0
(9.8)
6
24.7 days in 2014. This was driven by
a 7.8 day improvement in DSO. All but
one company in our sample was able to
reduce DSO.
15.0
9.6
Ethane Pipeline
Income Fund
24.7
23.0
22.2
Energy World
Corp. Ltd.
Origin Energy
Limited
AusNet
Services
APA Group
Peer group
average
DWC at 30 June (or latest available)
2013
2014
Cash and Working Capital
Centre of Excellence
Retail
M&A activity and broader restructuring had a material impact on working capital metrics.
“Continued focus on working
capital efficiency has led to
further rationalisation and
liquidation of marginally profitable
product ranges.”
David Allman, Chairman
Paul Maguire, Managing Director
McPherson’s Limited
FY14 Annual Report
Retail
Days
2013
2014
Change
DSO
33.4
31.3
(2.1)
DIO
119.9
121.2
1.3
DPO
47.3
47.7
0.4
DWC
67.6
67.0
(0.6)
Best & Worst - 2014
Days
Best
Worst
Spread
DSO
0.3
173.0
172.7
DIO
59.9
261.6
201.7
DPO
87.5
10.9
76.6
DWC
25.3
194.0
168.7
Australian retailers experienced the
strongest growth in retail sales in five
years in 2014 (5.3%), however the rate of
growth slowed during the year with only
1.7% growth in the six months postChristmas. Online retail sales experienced
stronger growth than “traditional” sales,
although the rate of growth was slower
than the past two years.
In general, retailers continue to be
impacted by high competition and margin
erosion. Inventory is usually the most
significant capital item on a retailer’s
balance sheet so its management is a key
success factor in the industry.
During 2013 operators achieved a 21 day
reduction in DIO as many increased focus
and adjusted business models. However
in 2014 average inventory days drifted up
by 1.3 days to 121.2 days.
performers in the sector, including
McPherson’s, Billabong, OrotonGroup
and Specialty Fashion Group.
McPherson’s 41.2 day improvement
in DWC was driven by $26.1 million of
inventory being recategorised as “assets
held for sale” in its accounts at 30 June
2014 (decreasing DIO) as it pursued
the sale of its household consumables
and housewares business. Billabong
implemented a significant restructuring
plan that included the sale of West 49,
closure of 41 stores and a write down of
inventory, all contributing to a 39.8 day
improvement in DWC.
By contrast, Specialty Fashion Group’s
DWC increased by 29.9 days following a
tightening of average supplier terms as
it increased its mix of directly sourced
product (reducing DPO from 62 days in
2013 to 36.4 days in 2014) and acquired
the Rivers business in November 2013
(increasing DIO from 68.4 in 2013 to
130.4 days in 2014).
On average operators were able to
offset the DIO increase by reducing
DSO and slightly increasing DPO,
achieving a marginal improvement in
DWC, from an average of 67.6 days in
2013 to 67 days in 2014. The underlying
data showed that for many operators,
M&A activity and broader (ongoing)
restructuring had a material impact on
working capital metrics, most notably
for a number of the best and worst
Whilst average DWC in 2014 remained
broadly in line with 2013 levels, the sector
showed a particularly wide spread of
metrics, reflecting the varying operating
models and increased level of acquisition/
divestment activity during the year.
Top 5 DWC improvements - Retail
McPherson’s Limited
2013
2014
Change
DSO
69.2
65.3
(3.9)
DIO
150.6
80.7
(69.9)
DPO
54.9
54.8
(0.1)
DWC
121.6
80.4
(41.2)
140
120
100
80
Days
Days
86.9
80.4
60
67.0
67.2
58.0
40
33.6
20
0
McPherson’s
Limited
Billabong
International
Limited
RCG
Corporation
Limited
Nick Scali
Limited
OrotonGroup
Limited
Peer group
average
DWC at 30 June (or latest available)
Cash and Working Capital
Centre of Excellence
2013
2014
7
Transport
& Distribution
Overall improvement driven by lower inventory days and an increase in creditor days.
“The increase in cash flow from
Operations reflected higher
earnings and a positive working
capital movement.”
Operating and Financial Review
Brambles Limited
FY14 Annual Report
Transport & Distribution
Days
2013
2014
Change
DSO
62.6
62.8
0.2
DIO
17.5
16.6
(0.9)
DPO
40.7
41.7
1.0
DWC
46.4
44.3
(2.1)
Sector activity in 2014 was buoyed by
higher imports (supported by the stable
price of crude oil and a weaker Australian
dollar) and the increased outsourcing
of logistics functions as companies
in other sectors refocused on core
operations. As a result, revenues for our
sampled companies increased by 4.2%
(compared to 2013).
From a working capital perspective,
most operators have to manage
payment terms with their suppliers
that (on average) are shorter than the
terms they have been able to agree with
their customers. This is reflective of
the critical nature of some key inputs
and inflexibility in related payment
arrangements – fuel, contract labour
and warehousing – and the bargaining
power of the major retail, primary
production and mining customers.
Notwithstanding the above, the sector
was able to achieve a net cash release
from working capital with DWC reducing
by 2.1 days from 46.4 days in 2013 to
44.3 days in 2014. The reduction was
achieved by a 0.9 day average reduction
in inventory days (DIO) and a 1 day
increase in creditor days (DPO).
We note that the best and worst
performers in this sector, including
McAleese, Steamships and Mermaid
Marine Australia, were involved in
acquisition/divestment activity during
the past 12 months – impacting their
working capital metrics. McAleese had
the largest DWC improvement
(18 days), driven by the Liquip Group (oil
and gas) and the Castlereagh Quarry
(bulk haulage) businesses being held
for sale at 30 June 2014 and therefore
excluded from its metrics.
Best & Worst - 2014
Days
Best
Worst
Spread
DSO
39.6
123.6
84.0
DIO
1.6
100.4
98.8
DPO
84.2
16.5
67.7
DWC
11.9
110.8
98.9
Top 5 DWC improvements - Transport & Distribution
100
80
Days
73.9
Brambles Limited
Days
2013
2014
Change
DSO
81.5
75.5
(6.0)
DIO
6.0
6.7
0.7
DPO
50.1
48.2
(1.9)
DWC
51.8
47.6
(4.2)
60
47.6
40
20
44.3
28.4
25.4
11.9
0
McAleese
Limited
Steamships
Trading Company
Limited
Brambles
Limited
K&S Corporation
Limited
Qube Holdings
Limited
Peer group
average
DWC at 30 June (or latest available)
2013
8
2014
Cash and Working Capital
Centre of Excellence
Cash and Working Capital
Centre of Excellence
Our Cash and Working Capital
Management Centre of Excellence
is focused on increasing cash flow by
implementing practical and effective
procedures to forecast, track, save and
generate cash. We help businesses to
improve cash flow and give them the
tools to sustain improvements.
Our Centre of Excellence program for
CFO’s and finance staff provides training
and advice on best practice cash and
working capital management.
If you are interested in participating, or
having a staff member attend a Centre
of Excellence program, please contact
Jason Ireland, Jason Preston or
Sean Wiles.
Authors - Jason Ireland, Jason Preston, Sean Wiles and Sijmon van Loon.
Research Team - Dom Barnes, Kristen Legge, Lauren Scott-Logan, Leah Sammut and Michael Halfhide.
State Contacts
Adelaide
Sam Davies
Brisbane
Jason Ireland
+61 2 9338 2694
jireland@mcgrathnicol.com
+61 8 8468 3710
sdavies@mcgrathnicol.com
+61 7 3333 9806
aconnelly@mcgrathnicol.com
Jason Preston
Thea Eszenyi
Anne-Maree Keane
+61 2 9338 2655
jpreston@mcgrathnicol.com
+61 8 8468 3705
teszenyi@mcgrathniol.com
+61 7 3333 9830
akeane@mcgrathnicol.com
Melbourne
Peter Anderson
Perth
James Thackray
+61 3 9038 3120
panderson@mcgrathnicol.com
+61 8 6363 7690
jthackray@mcgrathnicol.com
Sydney
Sean Wiles
+61 2 9248 9986
swiles@mcgrathnicol.com
Canberra
Shane O’Keeffe
+61 2 6222 1420
sokeeffe@mcgrathnicol.com
Cash and Working Capital
Centre of Excellence
Anthony Connelly
Robert Smith
+61 3 9038 3166
rbsmith@mcgrathnicol.com
9
Basis of preparation
Data used in this survey has been sourced
from the S&P Capital IQ platform.
Peer group classification
The Construction & Engineering, Retail,
Media & Leisure, Building Products,
Utilities and Transport & Distribution peer
group samples underpinning this report
have been selected according to the
Global Industry Classification Standard
(“GICS”) listed in the table opposite.
Accounting periods
Financial information in this survey draws
on most recently published full year
accounts as at 31 October 2014 (i.e. the
most recently published full year financial
information prior to this date has been
used). Prior year comparable figures
may differ from our 2013 report for
companies in the sample that adjusted
their 2013 accounts following the release
of our report. Adjustments may occur if a
material error is identified or where there
has been a change in accounting policy.
Peer group sample
GICS groups included
Construction & Engineering
Construction and engineering
Energy equipment and services
Commercial services and supplies
Retail
Textiles, apparel and luxury goods
Specialty retail
Multiline retail
Household durables
Distributors
Media & Leisure
Media
Leisure
Building Products
Building products
Construction materials
Chemicals
Trading companies and distributors
Utilities
Multi-utilities
Gas utilities
Electric utilities
Electrical equipment
Oil, gas and consumable fuels
Independent power producers and energy traders
Transport & Distribution
Transportation
Roads and rail
Air freight and logistics
Marine
Commercial services and supplies
Capital Goods
The full peer group samples are included on pages 13, 14 and 15.
10
Cash and Working Capital
Centre of Excellence
Basis of preparation
Source data
Days sales outstanding
This publication contains high level
financial information sourced from
the S&P Capital IQ database of the
latest available published financial
statements of ASX listed entities for
the 2014 financial year. The information
contained herein is based on sources we
believe reliable, but we do not guarantee
its accuracy, and it should be understood
to be general information only. The
information is not intended to be taken
as advice with respect to any specific
organisation or situation and cannot be
relied upon as such.
Debtors include GST, whilst sales do not.
To the extent that a company makes
more or less of its sales in Australia
(or another jurisdiction that levies a
consumption tax), results will vary.
McGrathNicol accepts no responsibility
for errors or omissions in financial
information underpinning this
publication, nor the loss of any person
arising from use of or reliance on
information herein. All readers of
this publication must make their own
enquires or obtain professional advice in
relation to any issue or matter referred
to in this publication.
Creditors include GST, whilst cost
of sales do not. To the extent that
a company acquires inventory or
input services in Australia (or another
jurisdiction that levies a consumption
tax), results will vary.
Limitations
Days inventory outstanding
To the extent that a company has more
or less labour included in its cost of sales,
results will vary.
Days purchases outstanding
In addition, to the extent that there has
been an accounting adjustment that has
affected a company’s sales, purchases,
debtors, inventory or creditors, this has
not been isolated in the analysis and
will be reflected as a change in working
capital.
McGrathNicol acknowledges that at the
level of detail applied, the analysis has
limitations, some of which are noted
below. For this reason, the analysis
focusses on performance relative to
the prior period, rather than in absolute
terms against peers.
Cash and Working Capital
Centre of Excellence
11
Basis of preparation
Calculation methodology
The working capital metrics referred to
in this report have been calculated, as
follows:
Days Sales Outstanding (“DSO”)
Days Inventory Outstanding (“DIO”)
DSO is the number of days’ worth of sales
represented by the outstanding debtors
at the relevant calculation date. The
calculation used in this survey is:
DIO is the number of days’ worth of
purchases represented by the inventory
balances at the relevant calculation date.
The calculation used in this survey is:
Inventory
Debtors
DSO =
x 365
DIO =
x 365
Cost of Sales
Sales
A low DSO metric is desirable and
indicates that it takes a relatively low
number of days for a company to
collect debtors.
A low DIO metric is desirable and
indicates a relatively high turnover of
inventory.
Days Purchases Outstanding (“DPO”)
Days Working Capital Outstanding
(“DWC”)
DPO is the number of days’ worth
of purchases represented by the
outstanding creditors at the relevant
calculation date. The calculation used in
this survey is:
DWC is a relative measure of total
working capital tied up in a company
relative to sales. The calculation used in
this survey is:
Debtors + Inventory
- Creditors
Creditors
DPO=
x 365
Cost of Sales
A low DPO metric indicates that it takes
fewer days for a company to pay its
trade creditors. A high DPO is desirable
from a cash flow and working capital
management perspective, but can be an
indicator of tight liquidity and the cause
of strained supplier relationships.
12
DWC =
x 365
Sales
A low DWC metric is favourable as it
indicates a low level of working capital
relative to the size of the business.
Cash and Working Capital
Centre of Excellence
Findings
Building Products
DSO
Company Name
Boral Limited
DIO
DPO
DWC
2013
2014
Change
2013
2014
Change
2013
2014
Change
2013
2014
Change
77.8
58.1
(19.7)
80.8
59.7
(21.1)
90.0
73.3
(16.7)
71.0
48.2
(22.8)
105.1
89.3
(15.8)
69.6
70.5
0.9
30.4
34.7
4.3
131.9
112.9
(19.0)
Brickworks Limited
53.5
53.5
-
166.2
148.9
(17.3)
66.4
64.4
(2.0)
122.4
112.1
(10.3)
DuluxGroup Limited
55.7
52.7
(3.0)
89.0
87.5
(1.5)
87.8
84.7
(3.1)
56.3
54.1
(2.2)
Adelaide Brighton Ltd.
50.8
52.6
1.8
54.2
52.8
(1.4)
38.2
40.9
2.7
63.1
61.8
(1.3)
Fletcher Building Ltd.
59.0
63.3
4.3
77.8
79.5
1.7
46.6
50.0
3.4
82.2
85.2
3.0
Coventry Group Ltd.
57.8
56.8
(1.0)
135.3
161.2
25.9
41.3
47.0
5.7
114.2
124.6
10.4
Reece Australia Limited
58.4
58.1
(0.3)
78.6
98.3
19.7
82.9
85.1
2.2
55.4
67.1
11.7
GWA Group Limited
56.5
52.4
(4.1)
79.7
107.8
28.1
49.8
54.5
4.7
75.9
87.7
11.8
Peer group average
63.8
59.6
(4.2)
92.4
96.2
3.8
59.3
59.4
0.1
85.8
83.7
(2.1)
James Hardie Industries plc
Construction & Engineering
DSO
DIO
DPO
DWC
Company Name
2013
2014
Change
2013
2014
Change
2013
2014
Change
2013
2014
Change
UGL Limited
121.9
49.3
(72.6)
75.5
70.7
(4.8)
81.6
46.8
(34.8)
116.4
71.1
(45.3)
WDS Limited
83.8
59.4
(24.4)
3.6
3.6
-
14.8
14.8
0.1
74.3
49.9
(24.4)
Lycopodium Ltd.
80.7
61.1
(19.6)
-
-
-
4.6
4.4
(0.2)
77.0
57.3
(19.7)
Watpac Ltd.
41.0
37.8
(3.2)
19.7
14.1
(5.6)
6.2
8.2
2.0
53.8
43.2
(10.6)
WorleyParsons Limited
86.8
79.3
(7.5)
-
-
-
17.8
20.0
2.2
70.7
61.0
(9.7)
Calibre Group Limited
55.6
42.3
(13.3)
7.6
11.4
3.8
44.1
40.0
(4.1)
28.7
20.4
(8.3)
RCR Tomlinson Limited
65.2
64.4
(0.8)
8.7
6.3
(2.4)
19.5
22.9
3.4
55.4
49.3
(6.1)
Logicamms Limited
92.3
83.1
(9.2)
-
-
-
18.5
10.3
(8.2)
81.3
76.8
(4.5)
Seymour Whyte Limited
47.7
65.3
17.6
-
-
-
15.5
41.4
25.9
35.1
32.3
(2.8)
Sedgman Limited
75.0
91.1
16.1
4.1
3.5
(0.6)
13.5
34.7
21.2
67.1
64.6
(2.5)
Downer EDI Limited
63.6
59.2
(4.4)
16.7
22.1
5.4
21.4
20.0
(1.4)
59.5
61.0
1.5
MacMahon Holdings Ltd.
57.7
55.3
(2.4)
65.6
95.6
30.0
46.0
59.7
13.7
65.0
67.0
2.0
Transfield Services Limited
51.8
48.7
(3.1)
25.2
21.7
(3.5)
50.7
38.0
(12.7)
27.8
33.4
5.6
Ausenco Limited
76.7
81.6
4.9
-
-
-
39.7
33.9
(5.8)
44.7
50.9
6.2
Cardno Limited
62.0
68.3
6.3
48.5
46.2
(2.3)
39.4
34.4
(5.0)
69.8
78.4
8.6
Boart Longyear Limited
54.4
64.2
9.8
129.9
106.9
(23.0)
39.0
24.7
(14.3)
122.2
132.9
10.7
Leighton Holdings Limited
66.1
82.0
15.9
16.4
14.6
(1.8)
144.2
143.3
(0.9)
(11.6)
3.1
14.7
AJ Lucas Group Limited
48.8
30.1
(18.7)
54.0
80.1
26.1
63.2
34.1
(29.1)
42.6
57.4
14.8
NRW Holdings Limited
55.4
64.5
9.1
29.6
29.5
(0.1)
70.6
54.0
(16.6)
37.6
54.7
17.1
Southern Cross Electrical
Engineering Limited
82.6
96.0
13.4
3.9
5.5
1.6
23.6
16.9
(6.7)
67.2
86.8
19.6
Monadelphous Group Limited
31.1
36.1
5.0
27.1
27.4
0.3
21.9
5.0
(16.9)
35.8
56.2
20.4
Decmil Group Limited.
53.7
78.8
25.1
-
-
-
32.4
31.5
(0.9)
28.6
53.5
24.9
MACA Limited
46.3
85.5
39.2
3.4
2.2
(1.2)
40.3
48.9
8.6
15.7
45.3
29.6
Ausdrill Ltd.
57.3
73.9
16.6
126.1
146.0
19.9
24.4
29.6
5.2
124.2
155.7
31.5
Peer group average
64.9
64.9
-
27.7
29.5
1.8
37.2
34.1
(3.1)
57.9
60.9
3.0
Cash and Working Capital
Centre of Excellence
13
Findings
Media & Leisure
DSO
DIO
DPO
DWC
Company Name
2013
2014
Change
2013
2014
Change
2013
2014
Change
2013
2014
Change
Ten Network Holdings Limited
73.4
59.3
(14.1)
-
-
-
79.6
78.0
(1.6)
(3.2)
(30.7)
(27.5)
Southern Cross Media Group Limited
70.7
63.0
(7.7)
-
-
-
27.1
30.8
3.7
66.3
57.2
(9.1)
News Corporation
63.3
59.1
(4.2)
20.3
22.0
1.7
16.3
19.6
3.3
65.7
60.5
(5.2)
REA Group Limited
57.0
52.2
(4.8)
-
-
-
38.7
34.9
(3.8)
47.2
43.9
(3.3)
Nine Entertainment Co.
Holdings Limited
75.7
76.7
1.0
0.3
0.2
(0.1)
105.3
111.0
5.7
(10.1)
(12.0)
(1.9)
Amalgamated Holdings Limited
19.3
16.0
(3.3)
18.3
16.9
(1.4)
36.3
27.8
(8.5)
13.7
12.7
(1.0)
APN News & Media Ltd.
57.3
54.8
(2.5)
11.5
8.6
(2.9)
132.0
127.6
(4.4)
8.9
8.0
(0.9)
Prime Media Group Limited
83.0
78.5
(4.5)
-
-
-
9.2
2.2
(7.0)
76.6
76.9
0.3
Fairfax Media Limited
54.3
56.6
2.3
6.8
6.1
(0.7)
35.6
37.3
1.7
30.8
31.1
0.3
Sky Network Television Ltd.
28.2
26.4
(1.8)
0.7
0.1
(0.6)
45.7
41.4
(4.3)
4.7
5.7
1.0
160.1
155.4
(4.7)
-
-
-
209.0
187.5
(21.5)
34.0
39.7
5.7
Seven West Media Limited
54.4
62.9
8.5
7.3
7.1
(0.2)
63.1
63.8
0.7
18.0
25.4
7.4
Beyond International Limited
92.1
111.1
19.0
19.8
17.9
(1.9)
16.2
16.9
0.7
94.9
111.9
17.0
Village Roadshow Limited
44.6
41.1
(3.5)
17.9
18.7
0.8
267.4
205.9
(61.5)
(44.5)
(26.9)
17.6
Peer group average
66.7
65.2
(1.5)
7.4
7.0
(0.4)
77.3
70.3
(7.0)
28.8
28.8
-
STW Communications Group Ltd.
Utilities
DSO
DIO
DPO
DWC
Company Name
2013
2014
Change
2013
2014
Change
2013
2014
Change
2013
2014
Change
Ethane Pipeline Income Fund
33.5
9.8
(23.7)
-
-
-
3.8
0.8
(3.0)
32.7
9.6
(23.1)
Energy World Corp. Ltd.
80.0
54.5
(25.5)
18.4
8.3
(10.1)
102.7
85.3
(17.4)
41.3
22.2
(19.1)
Origin Energy Limited
71.2
62.8
(8.4)
7.0
9.0
2.0
64.1
68.8
4.7
24.8
15.0
(9.8)
AusNet Services
64.9
57.1
(7.8)
50.5
43.1
(7.4)
217.2
214.3
(2.9)
30.6
23.0
(7.6)
APA Group
47.2
40.9
(6.3)
45.1
96.6
51.5
100.7
150.5
49.8
42.7
38.4
(4.3)
ERM Power Limited
36.6
35.6
(1.0)
15.6
10.4
(5.2)
38.4
34.2
(4.2)
14.9
12.7
(2.2)
Pacific Energy Ltd.
58.1
48.8
(9.3)
122.1
120.7
(1.4)
292.9
173.9
(119.0)
47.8
45.9
(1.9)
Spark Infrastructure Group
14.2
13.8
(0.4)
-
-
-
30.0
52.4
22.4
12.0
11.0
(1.0)
DUET Group
47.2
38.7
(8.5)
18.4
20.0
1.6
45.6
20.0
(25.6)
37.8
38.7
0.9
AGL Energy Limited
69.3
66.7
(2.6)
5.9
8.5
2.6
56.4
49.3
(7.1)
26.1
31.7
5.6
Mighty River Power Limited
47.7
46.7
(1.0)
6.1
8.5
2.4
65.2
59.7
(5.5)
9.3
15.6
6.3
Infigen Energy
31.8
31.9
0.1
47.8
57.7
9.9
66.6
54.2
(12.4)
26.0
32.9
6.9
Peer group average
50.1
42.3
(7.8)
28.1
31.9
3.8
90.3
80.3
(10.0)
28.8
24.7
(4.1)
14
Cash and Working Capital
Centre of Excellence
Findings
Retail
DSO
DIO
DPO
DWC
Company Name
2013
2014
Change
2013
2014
Change
2013
2014
Change
2013
2014
Change
McPherson’s Limited
69.2
65.3
(3.9)
150.6
80.7
(69.9)
54.9
54.8
(0.1)
121.6
80.4
(41.2)
Billabong International Limited
71.5
50.9
(20.6)
187.9
121.3
(66.6)
112.0
87.5
(24.5)
107.0
67.2
(39.8)
RCG Corporation Limited
68.0
52.0
(16.0)
203.2
167.5
(35.7)
62.9
69.1
6.2
106.4
86.9
(19.5)
Nick Scali Limited
18.3
0.4
(17.9)
106.5
123.9
17.4
40.6
40.0
(0.6)
44.2
33.6
(10.6)
OrotonGroup Limited
7.1
6.6
(0.5)
206.2
214.9
8.7
19.3
78.0
58.7
68.5
58.0
(10.5)
Gazal Corporation Limited
17.4
17.7
0.3
149.8
122.3
(27.5)
72.5
65.9
(6.6)
58.6
48.9
(9.7)
Breville Group Ltd
68.7
53.6
(15.1)
99.1
94.2
(4.9)
92.2
78.3
(13.9)
73.1
64.3
(8.8)
Automotive Holdings Group Limited
24.3
22.6
(1.7)
75.4
67.2
(8.2)
13.6
11.2
(2.4)
72.1
65.8
(6.3)
AP Eagers Ltd.
13.5
13.0
(0.5)
68.6
68.2
(0.4)
9.8
10.9
1.1
62.1
60.0
(2.1)
The Reject Shop Limited
0.5
0.3
(0.2)
90.7
92.4
1.7
23.0
28.9
5.9
38.0
35.9
(2.1)
Myer Holdings Limited
1.8
2.2
0.4
92.0
94.5
2.5
48.0
51.0
3.0
25.0
25.3
0.3
Super Retail Group Limited
2.8
6.0
3.2
147.2
152.7
5.5
59.3
63.8
4.5
51.7
55.3
3.6
50.8
48.7
(2.1)
67.2
81.8
14.6
53.8
53.4
(0.4)
57.2
61.7
4.5
5.6
7.6
2.0
93.1
96.9
3.8
10.7
11.2
0.5
59.6
66.2
6.6
163.7
173.0
9.3
84.4
78.5
(5.9)
21.1
19.9
(1.2)
185.6
194.0
8.4
2.5
4.9
2.4
95.2
105.4
10.2
39.5
37.6
(1.9)
20.1
30.5
10.4
AMA Group Limited
Fantastic Holdings Ltd.
Cash Converters International Limited
Premier Investments Limited
JB Hi-Fi Limited
7.1
7.4
0.3
59.9
61.4
1.5
47.1
32.7
(14.4)
17.1
29.9
12.8
GUD Holdings Limited
46.8
57.1
10.3
96.7
109.4
12.7
51.0
59.0
8.0
75.2
88.8
13.6
ARB Corporation Limited
46.3
48.7
2.4
162.4
195.1
32.7
66.5
71.4
4.9
89.7
103.5
13.8
Pacific Brands Limited
41.7
44.5
2.8
127.9
145.2
17.3
60.4
57.9
(2.5)
76.3
91.1
14.8
Kathmandu Holdings Limited
3.5
3.5
-
205.8
261.6
55.8
20.4
29.9
9.5
72.0
88.9
16.9
Specialty Fashion Group Limited
4.6
2.2
(2.4)
68.4
130.4
62.0
62.0
36.4
(25.6)
7.0
36.9
29.9
33.4
31.3
(2.1)
119.9
121.2
1.3
47.3
47.7
0.4
67.6
67.0
(0.6)
Peer group average
Transport & Distribution
DSO
DIO
DPO
DWC
Company Name
2013
2014
Change
2013
2014
Change
2013
2014
Change
2013
2014
Change
McAleese Limited
55.0
46.0
(9.0)
11.2
1.3
(9.9)
22.2
22.5
0.3
46.4
28.4
(18.0)
Steamships Trading Company Limited
90.3
70.1
(20.2)
102.1
100.4
(1.7)
110.6
84.2
(26.4)
88.2
73.9
(14.3)
Brambles Limited
81.5
75.5
(6.0)
6.0
6.7
0.7
50.1
48.2
(1.9)
51.8
47.6
(4.2)
K & S Corporation Limited
41.4
51.2
9.8
3.4
4.1
0.7
49.3
73.4
24.1
15.0
11.9
(3.1)
Qube Holdings Limited
52.8
55.1
2.3
1.6
1.1
(0.5)
37.5
40.5
3.0
25.9
25.4
(0.5)
Asciano Limited
38.8
39.6
0.8
3.9
4.1
0.2
17.1
18.9
1.8
28.9
28.6
(0.3)
Aurizon Holdings Limited
56.8
62.3
5.5
31.7
35.7
4.0
42.4
54.8
12.4
49.8
50.2
0.4
Toll Holdings Limited
52.0
51.3
(0.7)
2.9
2.8
(0.1)
18.1
16.5
(1.6)
38.6
39.3
0.7
CTI Logistics Limited
57.8
53.0
(4.8)
9.5
5.7
(3.8)
50.5
37.8
(12.7)
25.0
27.2
2.2
Mermaid Marine Australia Limited
99.3
123.6
24.3
2.6
4.5
1.9
8.9
19.8
10.9
94.3
110.8
16.5
Peer group average
62.6
62.8
0.2
17.5
16.6
(0.9)
40.7
41.7
1.0
46.4
44.3
(2.1)
Cash and Working Capital
Centre of Excellence
15
Our offices
Adelaide +61 8 8468 3700
Level 26, 91 King William Street
Adelaide SA 5000
Brisbane +61 7 3333 9800
Level 14, 145 Eagle Street
Brisbane QLD 4000
Canberra +61 2 6222 1400
Level 1, 24 Brisbane Avenue
Barton ACT 2600
Melbourne
+61 3 9038 3100
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Melbourne VIC 3000
Perth
+61 8 6363 7600
Level 17, 37 St Georges Terrace
Perth WA 6000
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+61 2 9338 2600
Level 31, 60 Margaret Street
Sydney NSW 2000
Auckland
+64 9 336 4655
Level 17, 34 Shortland Street
Auckland 1142 New Zealand
www.mcgrathnicol.com