WORKING CAPITAL REPORT - McGrathNicol...reducing DSO. Huon Aquaculture Group, Treasury Wine Estates...

WORKINGCAPITAL REPORT

2 0 1 9

MCGRATHNICOLADVISORY

Sector Summary

Increase in average DWC driven by growing inventory levels.

Welcome to the 2019 McGrathNicol Advisory Working Capital Report, prepared by our Cash and Working Capital Centre of Excellence.

This is the seventh consecutive year that we have released our Working Capital Report. This year we have profiled the working capital performance of ASX listed companies across the Agriculture, Building Products, Construction & Engineering, Food & Beverage Production, Healthcare Services, Mining & Resources, Mining Services, Retail, and Transport & Logistics sectors. The combined market capitalisation of the 140 companies included in the sample is $726 billion, representing close to two thirds of the total for the selected sectors. The information is based on the most recent full-year results for 2019, compared to 2018 results.

An increase in activity levels was reported across the sectors covered, with 89% of sampled companies growing revenues during the year. At the same time our sampled businesses were able to reduce the average time it took to collect their debtors and reduce inventory holdings. Growing revenue and reducing DSO and DIO is a major ”win” in terms of cash flow.

Not all businesses that achieved revenue growth were able to achieve EBITDA growth, with increasing competition and higher input costs impacting margins. From a working capital perspective, there was a shortening of the average supplier payment cycle in 2019. Decreasing DPO is not surprising in the context of higher activity levels as participants compete to secure materials, labour and equipment to meet customer demand and are willing to accept shorter terms from suppliers.

Overall, there was a release in cash from working capital in 2019 but results were mixed across all sectors and within sectors, highlighting that achieving an improvement in working capital is not only desirable to “keep up” with competitors, it also presents an opportunity for material competitive advantage over much of the market. Across the majority of sectors covered, the gap between the “best” and ”worst” performers was in excess of 100 days.

In our view, working capital performance is a primary indicator for assessing the overall health of an organisation. It provides significant insight into the way management teams operate and the strength of their relationships with customers, suppliers and other key stakeholders. It is not surprising then that the most significant improvements in 2019 were achieved by management teams who implemented focused working capital improvement programs.

The following pages provide a break down by sector and highlight the stronger performers relative to the prior year. Information about our Cash and Working Capital Centre of Excellence, including contact details, is provided at the end of this report.

The length of the average working capital cycle shortened in 2019. This translated to the equivalent of c.$1.3 billion in additional cash released from the working capital balances of our sampled companies. There was a mix of results at the company level with only half of the businesses achieving a reduction in net working capital. This shows that a material competitive advantage can be achieved by implementing best practice.

Welcome

1

Jason Ireland

Partner, McGrathNicol Advisory

+61 2 9338 2694 +61 434 144 958 [email protected]

Sean Wiles

Partner, McGrathNicol Advisory

+61 2 9248 9986 +61 437 097 180 [email protected]

Summary

DSO

Average DWC decreased in five of the nine sectors and 50% of all sampled companies reported lower net working capital.

In four of the sectors with lower average DWC, there was an improvement in both collections and inventory management. In all sectors with higher average DWC, inventory holdings increased.

Average DIO across the sample reduced slightly however only 46% of the sample reported a reduction.

Average DIO increased in four of the nine sectors covered. In three of these (Food & Beverage Production, Retail and Agriculture), inventory balances represented more than three months of sales.

In six of the seven sectors where DSO was reduced, the benefit was passed onto suppliers through lower DPO.

Average DPO decreased in seven of the nine sectors covered. In two of these (Healthcare and Mining Services), the supplier payment cycle reduced by more than a week.

Average DSO reduced in seven of the nine sectors covered and 51% of all sampled companies.

With close to half of sampled companies reporting higher DSO, this is an area that presents as a clear opportunity for material competitive advantage.

2018 2019 Change40.2 38.3 (1.9)

DIO2018 2019 Change78.4 78.0 (0.4)

DPO2018 2019 Change66.4 63.5 (2.9)

DWC2018 2019 Change49.8 48.9 (0.9)

3

Industry Sector Findings

AgricultureHighest working capital load of all sectors covered with 60% reporting an increase in average DIO. For half of these companies, the increase was two weeks or more. +2.5Building ProductsLargest reduction in average DWC of all sectors covered, driven by lower inventory and shorter collection cycles. Two thirds of the sampled companies that reduced average DSO also reduced average DPO.

-7.9Construction & EngineeringContinued trend of higher average DSO, although longer payment cycles (influenced by increased use of “reverse factoring”) resulted in a reduction in average DWC. -5.6Food & Beverage ProductionLargest increase in average DWC of all sectors covered, driven by higher inventory. Over a third of companies that increased average DIO also paid their suppliers more quickly. +6.4Healthcare ServicesIncrease in average DWC driven by a decrease in average DPO. Remains the lowest DWC of all sectors covered with collection cycles shorter than supplier payment cycles for the majority of sampled companies.

+1.0

Transport & LogisticsLargest reduction in average DSO of all sectors drove lower average DWC. “Funding gap” for more than half of the sample (DSO higher than DPO). -6.0

Mining & ResourcesContinued trend of reducing average DWC driven by reduction in average DIO and DSO. Some variability in both metrics across the sample with a broad range of outcomes. -5.1Mining ServicesShorter collection cycles and reduced inventory holdings used to pay suppliers materially more quickly. All of the sampled companies that reduced average DSO also reduced average DPO.

-1.7RetailOnly sector covered that reported an increase in both average DIO and DSO. A third of the sample increased average DIO by more than a week. +3.5

DWC

DSO = Days sales outstanding (debtors)

DIO = Days inventory outstanding (inventory held)

DPO = Days purchases outstanding (creditors)

DWC = Days working capital (net working capital)

Sector Summary

The longest average working capital cycle of all sectors in 2019 driven by higher inventory loads.

5

Huon AquacultureGroup

Limited

TreasuryWine Estates

Limited

Tassal GroupLimited

RuralcoHoldingsLimited

NufarmLimited

Peer groupaverage

BUILDING

-

Coventry Group LimitedBrickworks LimitedIncitec Pivot LimitedJames Hardie Industries plcGWA Group LimitedPeer group average

DWC at 30 June (or latest available)

2018 2019

Day

s

(40)

14012010080604020

(20)

160

128.8

(15.6)

94.9

(13.5)

(29.3)(9.6)

56.9(7.7) 73.6

(4.0)

62.5(3.4)(60)

30

0

60

(30)

(45)(37.5)

(52.5)

(15)(7.5)

(22.5)

(15)(22.5)

(7.5)

(45)(52.5)

(37.5)

(75)(82.5)

(67.5)

(105)(112.5)

(97.5)

(135)(142.5)

(127.5)

(165)(172.5)

(157.5)

90

120

153.9

83.6

43.6

(16.3)

0.2

2.5

150

180

(33.1)

(28.0)

(13.3)

(13.5)

128.1

1.2

Day

s

Our sample of Agriculture companies comprises a mix of viticulture, aquaculture, livestock and grains farming and processing, and agricultural chemicals businesses. Despite some difficult trading conditions tied to weather related events, there was an uplift in activity in 2019 with 70% of the sampled companies reporting higher revenue. However, only half of the sample was able to achieve EBITDA growth as rising feed and transport costs and inventory write-downs impacted margins.

From a working capital perspective, the average DWC of the sampled companies increased by 2.5 days to 83.6 days in 2019, primarily driven by a 2.8 day increase in DIO (inventory). The sector reported the highest DWC of all sampled sectors in 2019.

As inventory is the main driver of working capital performance for Agriculture companies, it presents as the area with the greatest opportunity for companies to release cash. However, it also brings challenges as the external factors that

primary producers and other operators face including production yields, seasonality and environmental issues, can be difficult to manage.

Of the sample, 60% reported an increase in DIO and for half of these companies, the increase was two weeks or more. All companies that reported a higher DIO also reported an increase in DWC. However, two thirds of these companies lengthened their supplier payment cycles (higher DPO) to help manage the increased cash held in inventory. There were mixed results in the management of debtor collections, with 60% of sampled companies reducing DSO.

Huon Aquaculture Group, Treasury Wine Estates and Tassal Group achieved the largest DWC improvements in 2019. All three were able to do so by bucking the sector trend and reducing DIO. For Treasury Wine Estates, the 16.3 day decrease in DWC was driven by lower DIO, contributing to a notional cash release of $128.7 million from working capital.

“The continued strength in operating cashflow generation supports Tassal’s strategic investment in salmon biomass and capital infrastructure.”

A. D. McCallum, Chairman and M. A. Ryan, Managing Director and Chief Executive OfficerTassal Group Limited Annual Report

Huon Aquaculture Group Limited

Days 2018 2019 Change

DSO 36.3 37.4 1.1

DIO 27.1 24.2 (2.9)

DPO 105.8 127.0 21.2

DWC (5.1) (33.1) (28.0)

Best & Worst

Days Best Worst Spread

DSO 6.3 116.4 110.1

DIO 24.2 293.7 269.5

DPO 147.4 26.0 (121.4)

DWC (33.1) 216.2 249.3

Agriculture


DSO 56.1 55.3 (0.8)

DIO 119.8 122.6 2.8

DPO 86.6 86.9 0.3

DWC 81.1 83.6 2.5

Top 5 DWC improvements - Agriculture

Agriculture

Sector Summary

A material reduction in DWC driven by shorter collection cycles (lower DSO) and better inventory management (lower DIO).

7

Despite a softening in residential construction activity, continued government funded infrastructure investment drove growth in the Building Products sector, with 80% of our sample reporting an increase in revenue and EBITDA in 2019. The majority of our sample also reported new acquisitions, divestments, or both.

In terms of working capital performance, average DWC fell by 7.9 days to 75.1 days in 2019. This was driven by a 5.6 day reduction in DSO coupled with a 7.5 day decrease in DIO.

The sector had the second highest working capital load (DWC) of all sampled sectors, driven by large inventory holdings that reflect the nature of activities undertaken by market participants (including wholesale, retail and project work). Customers also typically require quick access to product. That said, those participants supplying into projects do have some leverage by requiring prompt payment for continuity of supply.

Effective inventory management is the key differentiator in the Building Products sector. The mix of raw materials, work in

progress and finished goods held means that there is no single “sector answer” to improvement. Instead, a combination of direct initiatives to improve supply chain efficiencies and better align product development with market demands is required. In 2019, 60% of sampled companies were able to reduce DIO. Half of these companies did so by 20 days or more which helps to create a significant competitive advantage for those operators.

Of the sample, 60% reduced DSO. Within that group, two thirds of the companies also reduced DPO, suggesting that the benefit of faster collections was passed on (at least in part) to suppliers. This follows a similar trend to the prior year.

Reliance Worldwide Corporation, CSR and Fletcher Building achieved the most material improvements of the sampled companies in terms of DWC reduction. Fletcher Building delivered a 10.4 day reduction in DWC driven by the improved collection of its debtors. It reported lower DSO in four of its five materials and distribution divisions in 2019 (relative to the prior year).

RelianceWorldwide

Corporation Limited

CSRLimited

Fletcher BuildingLimited

WagnersHolding Company

Limited

AdelaideBrightonLimited

Peer groupaverage

BUILDING

-



2018 2019

Day

s

(40)

14012010080604020

(20)

160

128.8

(15.6)

94.9

(13.5)

(29.3)(9.6)

56.9(7.7) 73.6

(4.0)

62.5(3.4)

20

0

40

Day

s

60

80

100

120

140

160

128.4

59.5

75.162.3

72.4

(31.5)

(16.9)(9.0)

(10.4) (7.9)

55.5

(5.2)

Top 5 DWC improvements - Building Products

Reliance Worldwide Corporation Limited


DSO 92.8 73.5 (19.3)

DIO 163.5 131.0 (32.5)

DPO 49.3 36.1 (13.2)

DWC 159.9 128.4 (31.5)

Best & Worst


DSO 34.9 73.5 38.6

DIO 48.5 144.5 96.0

DPO 92.4 31.0 (61.4)

DWC 43.9 128.4 84.5

Building Products


DSO 57.4 51.8 (5.6)

DIO 99.3 91.8 (7.5)

DPO 59.2 55.5 (3.7)

DWC 83.0 75.1 (7.9)

“Cash flow from operations increased by $20.5 million … supported by improvements to working capital management.”

Zlatko TodorcevskiChairman Adelaide Brighton Limited Annual Report

Building Products

Sector Summary

Despite higher DSO, longer supplier payment cycles drove a reduction in average DWC.

9

Top 5 DWC improvements - Construction & Engineering

SRG GlobalLimited

CIMIC GroupLimited

EngencoLimited

Downer EDILimited

Service StreamLimited

Peer groupaverage

BUILDING

-



2018 2019

Day

s

(40)

14012010080604020

(20)

160

128.8

(15.6)

94.9

(13.5)

(29.3)(9.6)

56.9(7.7) 73.6

(4.0)

62.5(3.4)

(80)

40

0

80

(40)

120

63.7

32.8

(35.8)

(5.6)

(60.4)

(20.7)

57.0

(4.5)

(4.4)

(5.6)

94.1

(12.0)

Day

s

SRG Global Limited


DSO 110.0 87.9 (22.1)

DIO 46.1 19.4 (26.7)

DPO 73.1 67.4 (5.7)

DWC 99.5 63.7 (35.8)

Best & Worst


DSO 50.2 141.8 91.6

DIO - 159.6 159.6

DPO 270.1 30.7 (239.4)

DWC (60.4) 94.1 154.5

Construction & Engineering


DSO 71.7 77.7 6.0

DIO 24.2 22.3 (1.9)

DPO 75.2 87.6 12.4

DWC 38.4 32.8 (5.6)

“The Group has maintained its strict focus on managing working capital and generating sustainable cash-backed profits.”

Operating and Financial ReviewCIMIC Group Limited Annual Report

The government-led uptick in infrastructure construction contributed to 90% of the sample of Construction & Engineering companies reporting higher revenue in 2019. However, only 70% of the sample also achieved EBITDA growth.

The average DWC of our sampled companies fell by 5.6 days to 32.8 days in 2019, with 50% of the sample showing improvement. This was driven by an average 12.4 day lengthening of the supplier payment cycle (to 87.6 days) and lower inventory holdings (DIO down 1.9 days to 22.3 days).

In our past reports, this sector was characterised by relatively long collection cycles (DSO) and shorter creditor payment timeframes (DPO) creating a “structural funding gap”. In 2019, 60% of sampled companies reported a “funding gap” and two thirds experienced an increase in the size of the gap from the prior year. However, a number of companies were able to extend the length of their supplier payment cycle. Notably, half of the sample did so by two weeks or more. This resulted in a material increase in

average DPO for the sample, so much so that, on average, the sample does not show a “funding gap” - DPO is now higher than DSO. A contributing factor to this has been the increased use of “reverse factoring” and other supply chain financing encouraged by larger businesses to their suppliers to offset extended payment terms.

For our sample, we also noted a general trend over recent years of DSO drifting upward due to developers and end-clients becoming more demanding in examining and approving claims. This means that there is increasing pressure on the sector to look for continued process improvement initiatives (coupled with the above financing strategies) to keep billing and collection cycles as short as possible.

SRG Global was the biggest improver in 2019, with a 35.8 day decrease in DWC driven by reductions in DIO and DSO of 26.7 days and 22.1 days, respectively (that allowed the business to pay its suppliers nearly a week more quickly than the previous year). This unlocked a notional $23.3 million in additional cash from working capital.

Construction & Engineering

Sector Summary

Increase in average DWC driven by growing inventory levels and shorter supplier payment cycles.

11

20

0

40

(20)

Keytone DairyCorporation

Limited

Bega CheeseLimited

Coca-ColaAmatil

Limited

Synlait MilkLimited

Domino’s PizzaEnterprises

Limited

Peer groupaverage

Day

s

60

80

100

BUILDING

-



2018 2019

Day

s

(40)

14012010080604020

(20)

160

128.8

(15.6)

94.9

(13.5)

(29.3)(9.6)

56.9(7.7) 73.6

(4.0)

62.5(3.4)

6.2

45.5

64.2

49.9

67.9

(15.1)

(14.9)

(1.2)

(3.4)

(6.8)

(10.2)

6.4

Keytone Dairy Corporation Limited


DSO 15.7 24.9 9.2

DIO 44.9 48.5 3.6

DPO 36.0 77.8 41.8

DWC 21.3 6.2 (15.1)

Best & Worst


DSO 1.3 82.9 81.6

DIO 5.4 193.4 188.0

DPO 113.3 35.8 (77.5)

DWC (25.3) 176.8 202.1

Food & Beverage Production


DSO 44.3 42.9 (1.4)

DIO 85.2 95.3 10.1

DPO 68.0 65.5 (2.5)

DWC 57.8 64.2 6.4

Top 5 DWC improvements - Food & Beverage Production

“Cash realisation from continuing operations was higher than the comparative period...due to the reduction in working capital in the year.”

Operating and Financial ReviewCoca-Cola Amatil Limited Annual Report

Our sample of Food & Beverage Production companies reported an average increase in revenue of 11% during 2019. All aside from one company achieved top-line growth, which was largely driven by higher offshore sales (particularly into the Asian market) for dairy and other products. However, an increasingly competitive environment and higher direct costs impacted margins with only 46% of sampled companies delivering EBITDA growth in 2019.

International expansion and competition create a number of challenges for managing working capital as companies diversify product offerings and supply chains become more complex. Food & Beverage Production companies are also typically required to manage a range of logistical functions including manufacturing, packaging and distribution. A common theme for operators in the sector in 2019 has been a focus on supply chain management through direct sourcing of inputs, and entering into longer-term supply and partnership arrangements to secure supply and reduce price volatility.

The combination of these factors increased the cash tied up in working capital by 6.4 days to 64.2 days in 2019. This reversed the trend over the last two years of net working capital reductions for this sample of companies. The higher DWC in 2019 was primarily driven by a 10.1 day increase in average DIO, with 69% of companies holding inventory for longer. In addition, close to two thirds of the sample paid their suppliers more quickly in 2019, resulting in average DPO decreasing by 2.5 days. Over a third of the companies sampled experienced both an increase in DIO and a decrease in DPO, exacerbating the working capital “strain” in a sector that is already recognised for requiring a higher level of working capital investment than other sectors.

Despite the increase in average DWC across our sample, many companies showed improvement in 2019 (some considerable) including Keytone Dairy, Bega Cheese and Coca-Cola Amatil. Coca-Cola Amatil reported a 10.2 day reduction in DWC, resulting in a notional cash release of over $130 million from working capital.

Food & Beverage Production

Sector Summary

The lowest DWC of all sector samples despite an increase in average DWC during the year.

13

20

0

40

(20)

Monash IVFGroup

Limited

1300 SmilesLimited

NationalVeterinary Care

Ltd

SonicHealthcare

Limited

AustralianPharmaceutical

Industries Limited

Peer groupaverage

Day

s

BUILDING

-



2018 2019

Day

s

(40)

14012010080604020

(20)

160

128.8

(15.6)

94.9

(13.5)

(29.3)(9.6)

56.9(7.7) 73.6

(4.0)

62.5(3.4)

9.9

27.1

(0.5)

1.0

(5.6)

(2.0)1.3(2.6)

5.7

(4.6) 24.9

0.1

Top 5 DWC improvements - Healthcare Services

Monash IVF Group Limited


DSO 7.8 6.6 (1.2)

DIO 34.6 35.2 0.6

DPO 25.2 38.8 13.6

DWC 10.3 5.7 (4.6)

Best & Worst


DSO 2.6 59.3 56.7

DIO - 54.9 54.9

DPO 166.6 9.7 (156.9)

DWC (5.6) 36.7 42.3

Healthcare Services


DSO 21.1 21.0 (0.1)

DIO 21.6 22.4 0.8

DPO 98.0 89.9 (8.1)

DWC 8.9 9.9 1.0

Amid changing market conditions influenced by regulatory reform and the impending Aged Care Royal Commission, our sample of Healthcare Services companies achieved average revenue growth of 12% during 2019. Approximately 85% of the sampled companies reported top-line growth, driven by a mix of acquisitions and new clinic and facility openings. However, only 54% of the sample was able to achieve EBITDA growth.

The average DWC for our sampled companies was 9.9 days in 2019 highlighting that Healthcare Services companies are relatively “light” in terms of working capital burden. In 2019, the average DWC increased by 1.0 day, driven by an 8.1 day decrease in DPO, with 69% of the sample paying suppliers more quickly. Notably, of the companies that reduced DSO (or shortened their collection cycles), 67% passed the benefit onto their suppliers in part or in full by paying them more quickly.

Notwithstanding the above, collection terms are typically shorter than supplier payment terms for Healthcare Services companies. The gap between the two cycles was 68.9 days (on average), and all but one of the sampled companies benefited from this gap. A number of companies also held little or no inventory.

Monash IVF Group was the biggest improver in 2019 with a 4.6 day reduction in DWC, by reducing DSO by 1.2 days and extending supplier payments (increasing DPO) by 13.6 days. This assisted the business to reduce its debt by c.$9 million during the year. Whilst this sector reported the lowest DWC, the range between the highest and lowest was over 42 days suggesting opportunity for improvement for some sector participants.

“Its strong balance sheet, derived from consistent cash generation, has provided confidence for investors in the long-term health of the Company.”

Mark SmithChairman Australian Pharmaceutical Industries Limited Annual Report

Healthcare Services

Sector Summary

Decrease in average DWC driven by lower inventory levels (DIO) and shorter collection cycles (DSO).

15

Top 5 DWC improvements - Mining & Resources

Oz MineralsLimited

GrangeResources

Limited

StanmoreCoal

Limited

WestgoldResources

Limited

IndependenceGroup

NL

Peer groupaverage

BUILDING

-



2018 2019

Day

s

(40)

14012010080604020

(20)

160

128.8

(15.6)

94.9

(13.5)

(29.3)(9.6)

56.9(7.7) 73.6

(4.0)

62.5(3.4)

20

0

40

Day

s

60

80

100

120

66.271.7

35.7

17.70.5

(44.4) (38.4)

(28.8)

(36.2)(5.1)53.6

(22.5)

Oz Minerals Limited


DSO 50.5 23.2 (27.3)

DIO 163.4 158.4 (5.0)

DPO 58.6 83.1 24.5

DWC 110.6 66.2 (44.4)

Best & Worst


DSO - 120.5 120.5

DIO 21.7 158.4 136.7

DPO 134.2 3.5 (130.7)

DWC 0.5 134.4 133.9

Mining & Resources


DSO 31.8 27.1 (4.7)

DIO 71.7 65.6 (6.1)

DPO 58.6 53.0 (5.6)

DWC 40.8 35.7 (5.1)

“Our strength is demonstrated by our solid cash flow.”

Michelle Li, Chairperson and Honglin Zhao, Chief Executive OfficerGrange Resources Limited Annual Report

In 2019, 91% of our sampled Mining & Resources companies delivered an increase in revenue, largely fuelled by stronger iron ore and gold prices. Notably, only 66% of the sample was able to translate this into EBITDA growth with a number of participants referencing softer prices for copper and liquefied natural gas, adverse weather events and production outages as key reasons for lower earnings.

The average DWC for the sample decreased by 5.1 days to 35.7 days in 2019. This was driven by a 4.7 day reduction in average DSO, with 53% of the sample shortening their collection cycles. Growing revenue and reducing DSO is a major “win” in terms of cash flow. However, the variability in DSO and the fact that nearly half of the sample collected more slowly in 2019 reinforces the importance of billing and debtors management as part of any plan to manage working capital. Of the sampled companies that were able to reduce DSO, 71% passed this on (at least in

part) to their suppliers by paying more quickly. Across the sample, average DPO fell by 5.6 days.

Inventory holdings typically soak up the most working capital in the mining industry. However, the buoyant market conditions allowed 63% of the sample to reduce inventory holdings and increase the throughput of production to sales in 2019. As a result, average DIO fell by 6.1 days. Interestingly, the average DIO for the ten largest companies in the sector (contributing 90% of combined revenue) actually increased by 3.0 days. This highlights the differences in the production profile of these companies when compared to the smaller operators and their ability to stockpile some inventory whilst still delivering sales growth.

Oz Minerals, Grange Resources and Stanmore Coal achieved the biggest DWC improvements in 2019, unlocking a combined total of $214.6 million in cash from working capital.

Mining & Resources

Sector Summary

Shorter collection cycles (lower DSO) and reduced inventory holdings (lower DIO) used to pay suppliers more quickly (lower DPO).

17

BlueScopeSteel

Limited

EmecoHoldingsLimited

BoartLongyear

Limited

Peer groupaverage

BUILDING

-



2018 2019

Day

s

(40)

14012010080604020

(20)

160

128.8

(15.6)

94.9

(13.5)

(29.3)(9.6)

56.9(7.7) 73.6

(4.0)

62.5(3.4)

20

0

40

Day

s

60

80

46.5 46.051.2

104.5

(11.4) (9.6)

(9.4)

(1.7)

Sims MetalManagement

Limited

NRWHoldingsLimited

28.621.5

(3.8)(9.1)

100

120

Top 5 DWC improvements - Mining Services

The Mining Services sector benefited from a ramp up in mining production buoyed by strong commodities prices in 2019, which drove demand for rental assets and ancillary services. This resulted in all of our sampled companies reporting an increase in revenue and 80% delivering EBITDA growth in 2019.

Whilst the broader sample showed a reduction in average DWC in 2019 (by 1.7 days to 51.2 days) only half of the companies covered achieved the reduction, highlighting a wide range of outcomes in the sector.

The relatively small movement in average DWC was underpinned by relatively large movements across all three metrics. On average, companies collected more quickly (DSO reduced by 4.9 days) and reduced inventory (DIO) by 2.2 days. However, those improvements were mostly offset by a 12.1 day reduction in DPO as suppliers were paid more quickly.

Decreasing DPO is not surprising in the context of sector growth during 2019 as participants compete to secure

equipment, materials and contracted labour to meet customer demand and are willing to accept shorter terms from their suppliers. Equally, debtors management is an area that requires close attention for companies operating in this sector, particularly the conversion of work to billings (and ultimately cash).

Across our sample, BlueScope Steel, Emeco Holdings, Boart Longyear and Sims Metal Management reported the largest improvements in DWC in 2019. Sims Metal Management reported a c.$90 million cash release from working capital. This was driven by a reduction in inventory holdings and lower debtors attributed to a global initiative to maximise collections during the second half of the year.

The sector has experienced material fluctuations in fortunes over the past eight years. Successful operators are those with working capital (and therefore cash flow) management high on their agenda.

BlueScope Steel Limited


DSO 40.7 32.0 (8.7)

DIO 106.1 99.6 (6.5)

DPO 76.3 75.3 (1.0)

DWC 57.9 46.5 (11.4)

Best & Worst


DSO 15.2 96.3 81.1

DIO 9.1 161.3 152.2

DPO 201.6 20.4 (181.2)

DWC (22.6) 104.5 127.1

Mining Services


DSO 56.4 51.5 (4.9)

DIO 67.5 65.3 (2.2)

DPO 83.1 71.0 (12.1)

DWC 52.9 51.2 (1.7)

“...we now have strong earnings and cash flows through prudent balance sheet management...”

John BevanChairman BlueScope Steel Limited Annual Report

Mining Services

Sector Summary

Lengthening of the working capital cycle driven by an increase in inventory (DIO).

19

PWRHoldingsLimited

AutomotiveHoldings Group

Limited

MotorCycleHoldingsLimited

Baby BuntingGroup

Limited

AutosportsGroup

Limited

Peer groupaverage

BUILDING

-



2018 2019

Day

s

(40)

14012010080604020

(20)

160

128.8

(15.6)

94.9

(13.5)

(29.3)(9.6)

56.9(7.7) 73.6

(4.0)

62.5(3.4)

20

0

40

Day

s

60

80

100

120

53.060.6 58.4

37.6

98.5

(13.9)(13.6)

(7.5)

(12.6)

3.5

83.0

(2.7)

Top 5 DWC improvements - Retail

PWR Holdings Limited


DSO 28.5 26.2 (2.3)

DIO 249.3 188.5 (60.8)

DPO 48.6 62.4 13.8

DWC 66.9 53.0 (13.9)

Best & Worst


DSO 0.1 117.3 117.2

DIO 16.8 302.7 285.9

DPO 98.9 7.2 (91.7)

DWC (5.0) 145.9 150.9

Retail


DSO 21.7 22.3 0.6

DIO 123.4 126.1 2.7

DPO 50.7 49.1 (1.6)

DWC 54.9 58.4 3.5

“Maintaining appropriate inventory levels to fulfil customer needs continues to be a key focus of the business.”

Ian CornellChairman Baby Bunting Group Limited Annual Report

Our sample of Retail companies delivered average revenue growth of 9% in 2019, with 85% reporting an increase. Growth within the subset of supermarket/food retailers was more modest. The uptick in revenues did not translate to a blanket improvement in EBITDA, with one in four of the sampled companies experiencing a contraction in earnings. This suggests that there continues to be pressure on margins and a limited ability for some retailers to pass on cost increases to consumers in a highly competitive environment.

The investment in working capital also increased in 2019, with the average DWC of the sampled retailers increasing by 3.5 days to 58.4 days. Of the sample, 55% reported an increase in DWC and over 66% of those companies took on more debt, at least in part, to manage the extra working capital load.

For most retailers, inventory remains the biggest driver of working capital performance. Across the sample, DIO

increased by 2.7 days to 126.1 days (or over four months of inventory holdings), suggesting that retailers are still trying to adjust to changing purchasing behaviour and distribution models. Of particular note was that more than a third of the sampled retailers reported an increase in DIO of more than a week.

This is the second consecutive year that the length of the payment cycle shortened, with average DPO decreasing by 1.6 days to 49.1 days. Average DSO was relatively stable, with a reported increase of 0.6 days to 22.3 days.

The mix of participants and business models in the sector is broad, producing a wide spread of working capital cycles. Notably, the two major food retailers reported negative DWC. The biggest improver in 2019 was PWR Holdings, which reported a 13.9 day reduction in DWC. It was one of four retailers in our sample to report an improvement across all three metrics.

Retail

Sector Summary

Large reduction in DWC driven by shorter average collection cycles (lower DSO).

21

BramblesLimited

MMA OffshoreLimited

AucklandInternational

Airport Limited

Cleanaway WasteManagement

Limited

QubeHoldingsLimited

Peer groupaverage

BUILDING

-



2018 2019

Day

s

(40)

14012010080604020

(20)

160

128.8

(15.6)

94.9

(13.5)

(29.3)(9.6)

56.9(7.7) 73.6

(4.0)

62.5(3.4)(20)

Day

s

(0.3)

20

0

40

60

80

100

26.3

69.3

42.744.2

(28.7)

(24.6)

(13.2)

(17.7)

(6.0)

28.9

(4.9)

Top 5 DWC improvements - Transport & Logistics

Brambles Limited


DSO 93.1 54.9 (38.2)

DIO 7.4 7.0 (0.4)

DPO 64.6 49.5 (15.1)

DWC 55.0 26.3 (28.7)

Best & Worst


DSO 5.2 121.3 116.1

DIO - 39.1 39.1

DPO 102.1 13.1 (89.0)

DWC (0.3) 106.5 106.8

Transport & Logistics


DSO 69.8 62.6 (7.2)

DIO 12.4 11.6 (0.8)

DPO 61.7 59.3 (2.4)

DWC 48.7 42.7 (6.0)

“Continuing to drive growth in earnings and cash flow will further enhance shareholder returns.”

Vik BansalChief Executive Officer and Managing Director Cleanaway Waste Management Limited Annual Report

Our sample of Transport & Logistics companies reported an average growth in revenue of 13% in 2019 as activity levels increased on the back of favourable trading conditions for customers in the Mining & Resources, Food & Beverage Production and Construction & Engineering sectors. Whilst a number of operators delivered improvements in network efficiency, only 78% of the sample reported EBITDA growth as rising fuel costs and other cost pressures dampened margins.

Average DWC decreased by 6.0 days to 42.7 days in 2019, with two thirds of the sample reducing their net working capital load. This was driven by a 7.2 day reduction in DSO. Notably, it was the second consecutive year that our sample of Transport & Logistics operators were able to shorten collection cycles. Of the companies that reduced DSO, 80% were able to do so by more than two weeks.

Whilst 55% of the sample reported a structural ”funding gap” (meaning companies paid their suppliers on shorter terms than they collected from their customers), all aside from two of these companies were able to reduce

the size of the gap through better debtor collection efficiency. Given that the sector is typically defined by suppliers (fuel, subcontracted labour, warehousing) that are inflexible on terms, the ability to tightly manage debtor collections is critical for Transport & Logistics companies in managing cash flow and avoiding liquidity pressures.

On the payments side, average DPO decreased by 2.4 days. Of the sampled companies that reduced DSO, 60% also paid their suppliers more quickly in 2019. Inventory loads remained relatively stable (and relatively low).

Brambles, MMA Offshore and Auckland International Airport achieved the biggest DWC improvements in 2019. Whilst still carrying a higher working capital load than a number of its peers, MMA Offshore was able to reduce the length of its net working capital cycle by over three weeks, equating to a release of approximately $16 million in cash.

Note: airlines were excluded from our sample due to the contrasting nature of their working capital cycles (often negative) and the size and scale of their operations (which disproportionately skew the sample set).

Transport & Logistics

Basis of Preparation

Peer group classification

The Agriculture, Building Products, Construction & Engineering, Food & Beverage Production, Healthcare Services, Mining & Resources, Mining Services, Retail and Transport & Logistics 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 publication draws from the most recently published full year accounts as at 15 October 2019 (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 2018 report for companies in the sample that adjusted their 2018 accounts following the release of our report or restated them when presenting current year results. Adjustments may occur if there has been a change in accounting policy.

Peer group sample GICS groups included

Agriculture Food products

Beverages

Chemicals

Distributors

Building Products Construction materials

Building products

Trading companies and distributors

Construction & Engineering Construction and engineering

Commercial services and supplies

Machinery

Energy equipment and services

Semiconductors and semiconductor equipment

Food & Beverage Production Food products

Personal products

Chemicals

Beverages

Hotels, restaurants and leisure

Healthcare Services Healthcare providers and services

Mining & Resources Metals and mining

Oil, gas and consumable fuels

Mining Services Metals and mining

Trading companies and distributors

Construction and engineering

Chemicals

Retail Specialty retail


Auto components

Electronic equipment, instruments and components

Distributors

Household durables

Food and staples retailing

Multiline retail

Internet and direct marketing retail

Transport & Logistics Road and rail

Transportation infrastructure


Consumer finance

Air freight and logistics

Energy equipment and services

The full peer group samples are included on pages 25 - 29.

Data used in this publication has been sourced from the S&P Capital IQ platform.

Source data

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 2019 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.

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 enquiries or obtain professional advice in relation to any issue or matter referred to in this publication.

Limitations

McGrathNicol acknowledges that at the level of detail applied, the analysis has limitations, some of which are noted below. For this reason, the analysis focuses on performance relative to the prior period, rather than in absolute terms against peers.

Days sales outstanding

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.

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

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. To the extent that a company has more or less labour included in its cost of sales, results will vary.

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 may be reflected as a change in working capital.

Calculation methodology

The working capital metrics referred to in this report have been calculated, as follows:

Days Sales Outstanding (“DSO”)

DSO is the number of days’ worth of sales represented by the outstanding debtors at the relevant calculation date. The calculation used in this publication is:

A low DSO metric is desirable and indicates that it takes a relatively low number of days for a company to collect debtors.

Days Purchases Outstanding (“DPO”)

DPO is the number of days’ worth of purchases represented by the outstanding creditors at the relevant calculation date. The calculation used in this publication is:

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.

Days Inventory Outstanding (“DIO”)

DIO is the number of days’ worth of purchases represented by the inventory balances at the relevant calculation date. The calculation used in this publication is:

A low DIO metric is desirable and indicates a relatively high turnover of inventory.

Days Working Capital (“DWC”)

DWC is a relative measure of total working capital tied up in a company relative to sales. The calculation used in this publication is:

A low DWC metric is favourable as it indicates a low level of working capital relative to the size of the business.

DebtorsDSO = x 365

Sales

CreditorsDPO = x 365

Cost of Sales

InventoryDIO = x 365

Cost of Sales

Debtors + Inventory - Creditors

DWC = x 365 Sales

Basis of Preparation

23

Cash & Working Capital Centre of Excellence

Cash is the lifeblood of business. The capacity to turn sales into cash faster reduces the cost of running a business and provides a material competitive advantage.

Our Cash and Working Capital Centre of Excellence is focused on increasing cash flow for our clients by using our Cash Flow Optimisation System to forecast, track, save and generate cash.

Report authors Jason Ireland

Sean Wiles

Adam Blogg

Grace Chessman

Stefan Maricic

Contributors

Ali Abdo

Paddy Hayes

Isabella Horne

Sharan Kandola

Michael May

Chloe Miller

Damien Pasfield

Adam Ryan

Rhyan Stephens

Sarah Wright

Yvonne Young

Cash Flow Optimisation System

Insightful analytics and benchmarking Staff training and coaching

Tools and techniques to increase visibility and accountability over cash flow

Tailored and flexible forecasting and variance analysis

Dashboard reporting templates

Clear policies and procedures to clarify responsibility and drive improvement

Staff incentive plans linked to cash flow, not just profit

Planning for growth

Our Cash and Working Capital Health Check can help you determine which parts of our Cash Flow Optimisation System will best benefit you and calculate the “size of the prize” available for your business.

State contacts

SydneyJason Ireland +61 2 9338 2694 [email protected]

Sean Wiles +61 2 9248 9986 [email protected]

BrisbaneAnthony Connelly +61 7 3333 9806 [email protected]

Graham Newton +61 7 3333 9875 [email protected]

CanberraShane O’Keeffe +61 2 6222 1420 [email protected]

MelbourneMatthew Caddy +61 3 9038 3157 [email protected]

Rob Smith +61 3 9038 3166 [email protected]

PerthRob Brauer +61 8 6363 7603 [email protected]

Rob Kirman +61 8 6363 7685 [email protected]

Findings

25

AgricultureDSO DIO DPO DWC

Company name 2018 2019 Change 2018 2019 Change 2018 2019 Change 2018 2019 Change

Australian Vintage Limited 65.2 60.3 (4.9) 279.1 293.7 14.6 74.9 77.8 2.9 214.9 216.2 1.3

Elders Limited 82.2 94.5 12.3 45.5 52.0 6.5 91.9 94.2 2.3 45.6 61.5 15.9

GrainCorp Limited 28.8 36.3 7.5 58.4 86.7 28.3 19.5 26.0 6.5 59.6 85.9 26.3

Huon Aquaculture Group Limited 36.3 37.4 1.1 27.1 24.2 (2.9) 105.8 127.0 21.2 (5.1) (33.1) (28.0)

Inghams Group Limited 27.7 26.2 (1.5) 27.5 29.7 2.2 46.5 43.7 (2.8) 12.2 14.7 2.5

Nufarm Limited 116.7 116.4 (0.3) 183.7 163.4 (20.3) 169.4 147.4 (22.0) 126.9 128.1 1.2

Ruralco Holdings Limited 72.2 69.3 (2.9) 39.2 42.8 3.6 74.4 74.1 (0.3) 43.4 43.6 0.2

Seafarms Group Limited 55.8 37.7 (18.1) 190.1 246.6 56.5 99.6 103.5 3.9 143.5 178.2 34.7

Tassal Group Limited 7.6 6.3 (1.3) 90.1 61.6 (28.5) 103.2 98.1 (5.1) 0.2 (13.3) (13.5)

Treasury Wine Estates Limited 68.4 68.8 0.4 257.4 225.0 (32.4) 80.3 77.3 (3.0) 170.2 153.9 (16.3)

Peer group average 56.1 55.3 (0.8) 119.8 122.6 2.8 86.6 86.9 0.3 81.1 83.6 2.5

Building ProductsDSO DIO DPO DWC


Adelaide Brighton Limited 54.0 45.8 (8.2) 48.0 48.5 0.5 40.1 36.6 (3.5) 60.7 55.5 (5.2)

Boral Limited 56.3 53.3 (3.0) 60.5 64.9 4.4 74.2 79.0 4.8 47.3 43.9 (3.4)

Brickworks Limited 47.4 51.2 3.8 147.6 144.5 (3.1) 74.2 75.0 0.8 97.0 98.4 1.4

CSR Limited 45.2 37.5 (7.7) 114.4 84.8 (29.6) 67.6 53.4 (14.2) 76.4 59.5 (16.9)

Fletcher Building Limited 61.2 47.0 (14.2) 86.6 81.2 (5.4) 59.6 46.1 (13.5) 82.8 72.4 (10.4)

GWA Group Limited 62.4 67.1 4.7 125.0 128.1 3.1 82.2 92.4 10.2 86.8 87.5 0.7

James Hardie Industries plc 34.5 34.9 0.4 70.5 69.1 (1.4) 30.8 31.0 0.2 60.1 60.4 0.3

Reece Limited 52.8 53.5 0.7 109.6 88.8 (20.8) 58.2 48.9 (9.3) 87.3 82.3 (5.0)

Reliance Worldwide Corporation Limited 92.8 73.5 (19.3) 163.5 131.0 (32.5) 49.3 36.1 (13.2) 159.9 128.4 (31.5)

Wagners Holding Company Limited 67.1 54.3 (12.8) 66.9 77.0 10.1 56.1 56.6 0.5 71.3 62.3 (9.0)

Peer group average 57.4 51.8 (5.6) 99.3 91.8 (7.5) 59.2 55.5 (3.7) 83.0 75.1 (7.9)

Construction & EngineeringDSO DIO DPO DWC


CIMIC Group Limited 83.3 73.6 (9.7) 11.3 14.9 3.6 253.7 270.1 16.4 (39.7) (60.4) (20.7)

Decmil Group Limited 77.5 76.7 (0.8) - - - 40.1 37.5 (2.6) 41.6 42.6 1.0

Downer EDI Limited 62.3 55.5 (6.8) 16.4 17.6 1.2 139.2 139.2 - 1.2 (4.4) (5.6)

Engenco Limited 55.1 50.2 (4.9) 161.9 159.6 (2.3) 57.0 67.9 10.9 106.1 94.1 (12.0)

Johns Lyng Group Limited 44.9 56.8 11.9 1.0 1.1 0.1 57.4 69.2 11.8 0.3 2.5 2.2

Monadelphous Group Limited 44.9 61.4 16.5 - 1.2 1.2 15.8 30.7 14.9 30.5 34.5 4.0

Service Stream Limited 71.5 75.5 4.0 3.1 6.9 3.8 20.2 37.6 17.4 61.5 57.0 (4.5)

Southern Cross Electrical Engineering

Limited

79.1 97.2 18.1 2.6 2.5 (0.1) 31.1 48.7 17.6 54.0 56.7 2.7

SRG Global Limited 110.0 87.9 (22.1) 46.1 19.4 (26.7) 73.1 67.4 (5.7) 99.5 63.7 (35.8)

WorleyParsons Limited 88.6 141.8 53.2 - - - 64.8 108.1 43.3 28.9 41.8 12.9

Peer group average 71.7 77.7 6.0 24.2 22.3 (1.9) 75.2 87.6 12.4 38.4 32.8 (5.6)

Findings

Healthcare ServicesDSO DIO DPO DWC


1300 Smiles Limited 23.4 16.7 (6.7) 1.6 1.8 0.2 180.1 153.8 (26.3) 3.9 1.3 (2.6)

Australian Pharmaceutical Industries

Limited

61.3 59.3 (2.0) 40.9 40.9 - 82.3 80.1 (2.2) 24.8 24.9 0.1

Capitol Health Limited 3.8 4.4 0.6 - - - 21.7 9.7 (12.0) 0.3 3.0 2.7

Estia Health Limited 6.0 4.0 (2.0) - - - 119.2 91.0 (28.2) (5.1) (4.0) 1.1

Integral Diagnostics Limited 13.1 15.2 2.1 14.6 13.7 (0.9) 186.4 166.6 (19.8) 5.2 8.4 3.2

Japara Healthcare Limited 6.6 9.2 2.6 - - - 113.1 97.4 (15.7) (3.4) 0.8 4.2

Monash IVF Group Limited 7.8 6.6 (1.2) 34.6 35.2 0.6 25.2 38.8 13.6 10.3 5.7 (4.6)

National Veterinary Care Ltd 5.9 6.4 0.5 51.8 54.9 3.1 93.4 105.8 12.4 (3.6) (5.6) (2.0)

Ramsay Health Care Limited 45.9 50.2 4.3 47.3 48.6 1.3 132.7 145.1 12.4 26.0 28.5 2.5

Regis Healthcare Limited 2.6 2.6 - 9.8 13.0 3.2 135.9 109.0 (26.9) (4.8) (3.0) 1.8

Sigma Healthcare Limited 49.1 50.4 1.3 33.6 33.8 0.2 50.4 48.6 (1.8) 33.4 36.7 3.3

Sonic Healthcare Limited 34.2 33.6 (0.6) 42.4 43.9 1.5 82.3 84.2 1.9 27.6 27.1 (0.5)

Virtus Health Limited 14.6 13.9 (0.7) 3.7 5.8 2.1 51.1 38.9 (12.2) 1.3 4.6 3.3

Peer group average 21.1 21.0 (0.1) 21.6 22.4 0.8 98.0 89.9 (8.1) 8.9 9.9 1.0

Food & Beverage ProductionDSO DIO DPO DWC


Bega Cheese Limited 51.7 22.9 (28.8) 79.0 88.8 9.8 67.8 60.3 (7.5) 60.4 45.5 (14.9)

Bellamys Australia Limited 48.5 56.6 8.1 149.5 193.4 43.9 87.4 112.1 24.7 90.2 111.9 21.7

Blackmores Limited 88.5 82.7 (5.8) 157.3 178.6 21.3 149.4 113.3 (36.1) 91.7 110.1 18.4

Bubs Australia Limited 61.6 69.1 7.5 144.2 150.5 6.3 101.4 42.9 (58.5) 100.2 155.5 55.3

Clover Corporation Limited 80.6 82.9 2.3 161.4 191.5 30.1 48.8 55.1 6.3 160.5 176.8 16.3

Coca-Cola Amatil Limited 71.6 65.7 (5.9) 85.2 77.1 (8.1) 74.6 73.5 (1.1) 78.1 67.9 (10.2)

Collins Foods Limited 1.3 1.3 - 6.0 5.4 (0.6) 62.0 61.5 (0.5) (25.3) (25.3) -

Domino's Pizza Enterprises Limited 23.2 21.4 (1.8) 10.4 10.9 0.5 41.8 46.5 4.7 2.2 (1.2) (3.4)

Freedom Foods Group Limited 54.7 58.5 3.8 111.4 122.5 11.1 67.3 58.9 (8.4) 87.9 106.3 18.4

Keytone Dairy Corporation Limited 15.7 24.9 9.2 44.9 48.5 3.6 36.0 77.8 41.8 21.3 6.2 (15.1)

Ridley Corporation Limited 38.2 39.4 1.2 33.0 32.9 (0.1) 67.0 62.3 (4.7) 6.7 12.1 5.4

Synlait Milk Limited 19.3 20.4 1.1 74.5 71.8 (2.7) 28.3 35.8 7.5 56.7 49.9 (6.8)

The a2 Milk Company Limited 21.1 12.5 (8.6) 51.1 67.0 15.9 52.7 52.0 (0.7) 20.4 19.3 (1.1)

Peer group average 44.3 42.9 (1.4) 85.2 95.3 10.1 68.0 65.5 (2.5) 57.8 64.2 6.4

Findings

27

Mining & ResourcesDSO DIO DPO DWC


Base Resources Limited 31.0 65.0 34.0 60.3 54.2 (6.1) 36.2 32.4 (3.8) 45.6 78.7 33.1

Beach Energy Limited 78.8 50.0 (28.8) 44.5 30.1 (14.4) 138.3 98.1 (40.2) 21.5 10.5 (11.0)

BHP Group Limited 26.2 28.5 2.3 47.3 47.3 - 75.0 82.7 7.7 7.5 4.8 (2.7)

Coronado Global Resources Inc 45.3 38.7 (6.6) 13.1 26.7 13.6 15.2 12.0 (3.2) 43.9 48.5 4.6

Evolution Mining Limited 16.9 20.8 3.9 84.6 83.7 (0.9) 48.8 50.5 1.7 43.4 45.8 2.4

Fortescue Metals Group Limited 6.4 33.8 27.4 36.7 55.1 18.4 20.1 22.5 2.4 18.2 50.5 32.3

Grange Resources Limited 44.3 31.4 (12.9) 133.0 92.8 (40.2) 39.0 30.8 (8.2) 110.1 71.7 (38.4)

Independence Group NL 44.1 22.2 (21.9) 107.3 87.4 (19.9) 18.8 3.5 (15.3) 76.1 53.6 (22.5)

Lynas Corporation Limited 12.1 12.9 0.8 74.5 78.0 3.5 50.5 49.5 (1.0) 28.3 34.3 6.0

New Hope Corporation Limited 62.0 50.9 (11.1) 42.5 49.1 6.6 54.8 55.4 0.6 56.1 47.5 (8.6)

Newcrest Mining Limited 7.9 13.2 5.3 74.0 79.4 5.4 55.4 61.2 5.8 22.1 26.0 3.9

Northern Star Resources Limited 11.8 17.6 5.8 49.1 37.7 (11.4) 31.8 19.9 (11.9) 23.0 31.6 8.6

OceanaGold Corporation 21.3 9.9 (11.4) 131.2 112.2 (19.0) 162.9 118.8 (44.1) 9.3 6.9 (2.4)

OM Holdings Limited 33.6 21.9 (11.7) 118.4 84.2 (34.2) 62.5 29.7 (32.8) 77.7 63.7 (14.0)

Oz Minerals Limited 50.5 23.2 (27.3) 163.4 158.4 (5.0) 58.6 83.1 24.5 110.6 66.2 (44.4)

Perseus Mining Limited 21.1 7.2 (13.9) 189.5 134.4 (55.1) 148.9 71.5 (77.4) 46.9 49.9 3.0

Ramelius Resources Limited 3.6 7.0 3.4 75.2 48.5 (26.7) 9.2 11.1 1.9 58.1 39.7 (18.4)

Regis Resources Limited 12.7 - (12.7) 46.1 50.9 4.8 22.4 26.1 3.7 26.2 15.3 (10.9)

Rio Tinto Limited 31.4 28.6 (2.8) 47.0 46.4 (0.6) 44.3 43.7 (0.6) 33.2 30.4 (2.8)

Sandfire Resources NL 8.8 9.4 0.6 84.2 107.1 22.9 95.6 134.2 38.6 5.9 2.4 (3.5)

Santos Limited 51.8 52.0 0.2 42.2 45.1 2.9 65.9 78.8 12.9 34.1 30.5 (3.6)

Saracen Mineral Holdings Limited 0.9 0.2 (0.7) 63.9 66.7 2.8 54.0 65.7 11.7 6.6 0.8 (5.8)

Silver Lake Resources Limited 3.0 5.4 2.4 44.8 66.6 21.8 42.7 52.4 9.7 4.8 18.3 13.5

South32 Limited 39.9 44.6 4.7 97.4 109.2 11.8 81.7 91.5 9.8 46.9 52.3 5.4

St Barbara Limited 6.2 7.3 1.1 78.9 75.9 (3.0) 48.1 62.5 14.4 19.8 13.9 (5.9)

Stanmore Coal Limited 39.3 18.8 (20.5) 49.1 45.4 (3.7) 52.6 76.4 23.8 36.7 0.5 (36.2)

Viva Energy Group Limited 30.6 25.4 (5.2) 43.3 34.2 (9.1) 71.1 64.9 (6.2) 14.3 5.1 (9.2)

Westgold Resources Limited 17.0 2.3 (14.7) 73.3 39.6 (33.7) 46.3 24.3 (22.0) 46.5 17.7 (28.8)

Whitehaven Coal Limited 15.8 22.8 7.0 48.5 48.1 (0.4) 18.4 20.4 2.0 28.3 35.4 7.1

Woodside Petroleum Ltd 37.3 33.9 (3.4) 32.6 21.7 (10.9) 41.5 29.7 (11.8) 32.6 30.0 (2.6)

Yancoal Australia Ltd 92.3 41.5 (50.8) 38.0 36.3 (1.7) 123.4 68.0 (55.4) 45.0 26.7 (18.3)

Zimplats Holdings Limited 112.8 120.5 7.7 59.8 45.3 (14.5) 40.6 25.8 (14.8) 125.5 134.4 8.9


Findings

Mining ServicesDSO DIO DPO DWC


BlueScope Steel Limited 40.7 32.0 (8.7) 106.1 99.6 (6.5) 76.3 75.3 (1.0) 57.9 46.5 (11.4)

Boart Longyear Limited 60.1 51.1 (9.0) 101.3 94.5 (6.8) 38.0 30.1 (7.9) 113.9 104.5 (9.4)

Emeco Holdings Limited 81.5 63.6 (17.9) 8.8 10.5 1.7 57.5 47.8 (9.7) 55.6 46.0 (9.6)

Imdex Limited 78.5 77.9 (0.6) 154.7 161.3 6.6 102.9 98.2 (4.7) 97.3 99.6 2.3

Incitec Pivot Limited 35.5 29.5 (6.0) 82.5 95.5 13.0 221.6 201.6 (20.0) (33.4) (22.6) 10.8

MACA Limited 80.9 96.3 15.4 7.8 9.1 1.3 30.7 39.1 8.4 58.8 67.1 8.3

Macmahon Holdings Limited 63.4 56.1 (7.3) 46.5 35.7 (10.8) 75.6 45.1 (30.5) 49.9 52.1 2.2

NRW Holdings Limited 62.5 51.8 (10.7) 47.6 37.0 (10.6) 166.9 119.7 (47.2) 32.4 28.6 (3.8)

Orica Limited 40.4 41.3 0.9 83.5 82.5 (1.0) 37.3 32.3 (5.0) 65.5 68.6 3.1

Sims Metal Management Limited 20.0 15.2 (4.8) 36.5 27.5 (9.0) 24.4 20.4 (4.0) 30.6 21.5 (9.1)


RetailDSO DIO DPO DWC


A.P. Eagers Limited 14.6 13.9 (0.7) 71.2 74.1 2.9 6.2 7.2 1.0 68.2 69.2 1.0

Accent Group Limited 8.6 12.2 3.6 117.8 141.4 23.6 47.5 61.4 13.9 39.2 46.3 7.1

Adairs Limited 0.9 2.0 1.1 97.9 106.0 8.1 41.4 48.2 6.8 23.4 26.7 3.3

AMA Group Limited 25.0 17.4 (7.6) 48.5 57.2 8.7 88.0 69.4 (18.6) 7.8 12.2 4.4

ARB Corporation Limited 47.2 47.5 0.3 206.8 226.1 19.3 43.6 34.1 (9.5) 121.3 135.0 13.7

Audinate Group Limited 32.3 34.1 1.8 89.2 90.8 1.6 87.5 56.5 (31.0) 32.7 42.9 10.2

Automotive Holdings Group Limited 22.1 16.7 (5.4) 81.4 76.4 (5.0) 13.7 22.4 8.7 74.2 60.6 (13.6)

Autosports Group Limited 21.2 21.1 (0.1) 90.3 89.2 (1.1) 13.7 15.2 1.5 85.7 83.0 (2.7)

Baby Bunting Group Limited 0.6 0.1 (0.5) 112.9 103.9 (9.0) 46.3 46.3 - 45.1 37.6 (7.5)

Bapcor Limited 37.8 38.5 0.7 157.2 172.8 15.6 80.0 75.5 (4.5) 79.5 90.2 10.7

Beacon Lighting Group Limited 14.8 17.4 2.6 281.7 283.0 1.3 27.1 27.1 - 102.1 109.5 7.4

Breville Group Limited 57.3 72.9 15.6 87.8 113.8 26.0 74.5 91.6 17.1 65.8 87.2 21.4

City Chic Collective Limited 8.8 10.3 1.5 106.7 112.9 6.2 46.9 62.0 15.1 33.3 31.8 (1.5)

Coles Group Limited 2.7 2.1 (0.6) 41.7 24.5 (17.2) 50.9 33.2 (17.7) (4.3) (4.6) (0.3)

GUD Holdings Limited 89.0 89.8 0.8 159.2 179.1 19.9 75.0 70.4 (4.6) 131.5 145.4 13.9

Harvey Norman Holdings Limited 119.4 117.3 (2.1) 95.0 95.7 0.7 63.1 53.5 (9.6) 140.7 145.9 5.2

JB Hi-Fi Limited 3.0 3.3 0.3 60.4 58.1 (2.3) 39.5 37.4 (2.1) 19.4 19.6 0.2

Kathmandu Holdings Limited 6.1 6.4 0.3 224.5 210.3 (14.2) 48.1 52.2 4.1 70.6 68.2 (2.4)

Kogan.com Limited 2.4 4.0 1.6 55.2 79.5 24.3 35.8 34.0 (1.8) 18.0 40.2 22.2

Lovisa Holdings Limited 1.6 4.6 3.0 125.8 170.0 44.2 43.8 68.2 24.4 18.0 24.5 6.5

McPherson's Limited 46.8 50.9 4.1 125.2 120.4 (4.8) 53.2 57.2 4.0 85.2 84.3 (0.9)

Metcash Limited 40.0 38.9 (1.1) 24.7 25.0 0.3 62.3 63.1 0.8 6.3 4.7 (1.6)

Michael Hill International Limited 13.5 15.8 2.3 336.0 302.7 (33.3) 43.2 34.9 (8.3) 119.7 117.6 (2.1)

MotorCycle Holdings Limited 8.7 9.5 0.8 148.5 131.9 (16.6) 12.6 11.8 (0.8) 111.1 98.5 (12.6)

Myer Holdings Limited 0.5 1.2 0.7 96.5 94.8 (1.7) 50.0 51.2 1.2 27.3 26.0 (1.3)

Nick Scali Limited 0.6 0.4 (0.2) 141.1 138.1 (3.0) 45.2 41.1 (4.1) 36.4 36.3 (0.1)

Noni B Limited 5.2 2.3 (2.9) 125.1 159.2 34.1 111.5 69.3 (42.2) 10.2 42.1 31.9

Premier Investments Limited 6.7 6.6 (0.1) 131.0 129.0 (2.0) 35.6 26.6 (9.0) 42.5 45.6 3.1

PWR Holdings Limited 28.5 26.2 (2.3) 249.3 188.5 (60.8) 48.6 62.4 13.8 66.9 53.0 (13.9)

Super Retail Group Limited 1.3 2.1 0.8 140.7 137.4 (3.3) 65.9 67.4 1.5 42.5 40.5 (2.0)

Supply Network Limited 41.8 40.3 (1.5) 191.2 215.6 24.4 97.6 98.9 1.3 96.5 108.6 12.1

Vita Group Limited 7.8 9.8 2.0 14.7 16.8 2.1 27.2 27.3 0.1 (0.9) 2.5 3.4

Woolworths Group Limited 0.8 0.7 (0.1) 38.4 36.7 (1.7) 46.7 44.8 (1.9) (5.0) (5.0) -

Peer group average 21.7 22.3 0.6 123.4 126.1 2.7 50.7 49.1 (1.6) 54.9 58.4 3.5

Findings

29

Transport & LogisticsDSO DIO DPO DWC


A2B Australia Limited 116.0 121.3 5.3 31.1 24.0 (7.1) 65.3 80.8 15.5 106.8 106.5 (0.3)

Auckland International Airport Limited 22.0 5.2 (16.8) 1.1 - (1.1) 39.9 44.1 4.2 17.4 (0.3) (17.7)

Bingo Industries Limited 57.2 69.1 11.9 18.1 16.0 (2.1) 88.2 79.2 (9.0) 30.8 41.6 10.8

Brambles Limited 93.1 54.9 (38.2) 7.4 7.0 (0.4) 64.6 49.5 (15.1) 55.0 26.3 (28.7)

Cleanaway Waste Management Limited 77.0 60.7 (16.3) 12.0 8.5 (3.5) 64.3 52.5 (11.8) 57.4 44.2 (13.2)

Eclipx Group Limited 54.2 63.7 9.5 33.2 39.1 5.9 61.8 44.6 (17.2) 41.1 61.1 20.0

K&S Corporation Limited 43.6 43.2 (0.4) 4.5 4.3 (0.2) 79.0 67.8 (11.2) 2.1 7.0 4.9

MMA Offshore Limited 100.1 79.4 (20.7) 2.9 3.0 0.1 8.9 13.1 4.2 93.9 69.3 (24.6)

Qube Holdings Limited 64.6 66.2 1.6 1.5 2.6 1.1 83.2 102.1 18.9 33.8 28.9 (4.9)


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WORKING CAPITAL REPORT - McGrathNicol...reducing DSO. Huon Aquaculture Group, Treasury Wine Estates...

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