bridging the gap 2015 - benelux
TRANSCRIPT
Bridging the Gap2015 Annual Benelux Working Capital Survey
pwc.com/workingcapitalsurvey
2 Bridging the Gap
Contents
Executive summary
What is driving working capital?
1. Industry analysis
2. Geography analysis
3. Size analysis
4. Financial performance analysis
How we can support you
Contacts
3 8 11 17 23 27 32 42
Appendices
34
32015 Annual Benelux Working Capital Survey
First year ofsignificantimprovementin the Beneluxsince 2011
Benelux's cash balances swelled at
EUR 78bn
There is a
wide gap between top and bottom performersacross most sectors
12 out of 16 sectors managed to improve working capital since 2010
is characterised bythe lowest NWC%in the region
Small enterprises have a significantly
higher NWC %than large corporations
Companies that are top performers in working capital, are also better at
could be released from the balancesheets of Benelux listed companiesby addressing poor workingcapital performance
12/16
generating cash
Belgium
EUR 17bn
-10.9% The revenue trend in the lastfive years suggests that
EUR 8.5bnof additional working capital isneeded to enable next year's growth
4 Bridging the Gap
In the Benelux working capital has significantly improved in 2014 after two years of virtually flat performance
-17.6%
0.7%
-0.4% -10.9%
Days working capital
45.737.7 38.0 37.8 33.7
NWC days
Delta days %
2010 2011 2012 2013 2014
Working capital is the life blood of every company. During the 2007/08 global financial crisis companies were slow to respond to declining sales, resulting in excess inventory. Combined with the reduced payment morale this led to a steady increase in working capital ratios. In the aftermath of the crisis, working capital started to become a key lever to repay debt and sustain future growth.
After two consecutive years of vitually flat working capital performance, the last year marked a significant improvement in the net working capital (NWC)days of Benelux listed companies.
52015 Annual Benelux Working Capital Survey
Execu
tive su
mm
ary
Wh
at is drivin
g w
orking capital?
1. Indu
stry a
nalysis
2. G
eography
an
alysis3. Size
an
alysis
4. Financial perform
ance analysis
How
we ca
n su
pport youA
ppend
icesThe year-on-year improvement was primarily driven by a strong improvement in inventory, as well as trade receivables
Days sales outstanding
Days inventory outstanding
Days payables outstanding
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
37.334.2
51.1
54.052.6
71.0
54.9
54.753.254.1
59.9
8.3%
2010 2011 2012 2013 2014
37.5
50.6
41.9
51.7
6.5%
4.1%
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
37.334.2
51.1
54.052.6
71.0
54.9
54.753.254.1
59.9
8.3%
2010 2011 2012 2013 2014
37.5
50.6
41.9
51.7
6.5%
4.1%
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
37.334.2
51.1
54.052.6
71.0
54.9
54.753.254.1
59.9
8.3%
2010 2011 2012 2013 2014
37.5
50.6
41.9
51.7
6.5%
4.1%
Receivables performance, measured in days sales outstanding (DSO), improved by 8.3% to 34.2 days in the last year. This is significantly lower than what was four years ago, when DSO was 41.9 days. Many corporates continue to consider overdue reduction programmes, combined with delayed supplier payments, as the easiest and safest way to improve working capital. Opportunities relating to billing timeliness & quality, dispute resolution & root cause eradication, trade-offs in logistics & inventories, securitisation & outsourcing, terms & conditions, etc. have frequently remained unaddressed.
Inventory performance, measured in days inventories on-hand (DIO), has shown a year-on-year improvement of 3.6 days (6.5%). Both corporates and advisors typically focus on supply chain efficiencies, leaving many inventory reduction opportunities unaddressed. There are also some key trends at play that impact performance, such as the changing global economy or increasing environmental considerations, which have encouraged more companies to source or manufacture locally, thereby changing the retail landscape.
The amelioration made on the asset side of the balance sheet was partially countered by a deterioration on the liability side, where days payables outstanding (DPO) decreased by 4.1%. As with inventories, the focus is usually on efficiency (cost) improvements. There is certainly untapped opportunity in this space relating to new developments such as supply chain finance, dynamic discounting platforms and overall supplier performance (including goods in transit, inventories and returns). It is often argued that changes in payables and receivables are a zero sum game for the value chain as a whole: the improvement for one entity is eliminated by the deterioration for the other. However, this is not strictly true. Towards the beginning and the end of the value chain (end-users, commodity settlements, etc.) the terms usually remain unchanged. More importantly, many corporates are starting to think about trade-offs between cash, cost and service. A change in payment behaviour for one can therefore result in cost saving for the other. Lastly, the difference between the Benelux region DSO and DPO of 17.5 days can also be seen as evidence that it is not a zero sum game.
6 Bridging the Gap
Last year’s working capital improvement has contributed to a significant jump of 9.4% in the cash-on-hand balances, which grew to 77.7 billion in 2014
Cash-on-hand
2010 2011 2012 2013 2014
Cash-on-hand (EUR billion) Year-on-year change
66.8
60.5
Companies appear to be more awash with a steady improvement of their cash balance (+16.4% over the last five years). The amelioration in working capital is likely to be a key contributing factor.
As bank lending rates remain low across many of the world’s developed economies, this increasing pile of cash is starting to look extravagant to some investors. We expect to see more shareholders demanding excess cash to either be reinvested into their businesses or to be distributed in the form of dividends/share repurchase programmes. We are seeing more and more evidence in the market that investors are seeking to do both.
71.072.7
-9.1%
19.6%
-2.5%
9.4%
77.7
72015 Annual Benelux Working Capital Survey
Execu
tive su
mm
ary
Wh
at is drivin
g w
orking capital?
1. Indu
stry a
nalysis
2. G
eography
an
alysis3. Size
an
alysis
4. Financial perform
ance analysis
How
we ca
n su
pport youA
ppend
icesThe revenue trend in the last five years suggests that EUR 8.5bn billion of additional working capital is required to enable next year’s growth
Revenue
Net working capital
At the same time, companies’ overall ability to generate new cash from operations has increased to the highest levels in five years
2010 2011 2012 2013 2014
67.2%70.9%
81.7%77.1%
81.7%
Cash conversion efficiency (CCE)
EUR8.5bn
2010
2010–2014 Compound annual growth rate (CAGR): 3.2%2010–2014 Compound annual growth rate (CAGR): 3.2%
2011
2012
2013
2014
EUR billion
EUR billion
770
920
920
880
940
2014
2015 95.6
87.1
2012-2014
CAGR: 1.4%
2010-2014
CAGR: 3.2%
EUR8.5bn
2010
2010–2014 Compound annual growth rate (CAGR): 3.2%2010–2014 Compound annual growth rate (CAGR): 3.2%
2011
2012
2013
2014
EUR billion
EUR billion
770
920
920
880
940
2014
2015 95.6
87.1
2012-2014
CAGR: 1.4%
2010-2014
CAGR: 3.2%
While cash levels are high at the moment, there is still a significant requirement for funds to support and enable future growth. Over the last three years the growth rate has been 1.3% per annum (compound annual growth rate).
If this growth rate remains constant and companies maintain the same level of average working capital performance in the last five years they will need a further EUR 8.5billion of working capital to fund their operations in 2015.
Linked to the working capital reduction, we have observed an improvement in the ability to convert EBITDA into operating cash flow (measured by CCE), which increased by 4.6 percentage points (pp) over the last year.
8 Bridging the Gap
What is driving working capital?
92015 Annual Benelux Working Capital Survey
There are four factors impacting a company’s working capital requirementsand relative performance
Industry
Geo
grap
hy
Fina
ncia
l perfo
rma
nce
Size
1The type of business
2 The economic maturityof the region
4 Whether managementcares about cash
3 The companysize
Execu
tive su
mm
ary
Wh
at is drivin
g w
orking capital?
1. Indu
stry a
nalysis
2. G
eography
an
alysis3. Size
an
alysis
4. Financial perform
ance analysis
How
we ca
n su
pport youA
ppend
ices &
Con
tacts
10 Bridging the Gap
112015 Annual Benelux Working Capital Survey
Industry analysis
There is a
wide gap between top and bottom performersacross most sectors
Engineering & Construction top the table in theBenelux region with a 8.5% improvement inNWC % in the last five years
12 out of 16 sectors improved workingcapital performance since 2010
12/16
-8.5%
Ind
ust
ry
Geography
Financial performance
Siz
e
Execu
tive su
mm
ary
Wh
at is drivin
g w
orking capital?
1. Indu
stry a
nalysis
2. G
eography
an
alysis3. Size
an
alysis
4. Financial perform
ance analysis
How
we ca
n su
pport youA
ppend
ices &
Con
tacts
12 Bridging the Gap
NWC Days
0
30
60
90
120
150
6370 26 13 11364485 38125 5759 50 4783 52
Engineering& construction
CommunicationsTransportation& logistics
Retail & consumer
Technology Forest, paper & packaging
Healthcare Industrial manufacturing
Hospitality& leisure
MetalsPharmaceuticals & life sciences
Entertainment & media
Aerospace, defence & security
Chemicals Automotive Energy, utilities & mining
While working capital consumption is dependent on each industry…
… most sectors show a significant spread in performance between top and bottom performers
NWC Days
“Healthcare”, “Technology”, and “Pharmaceuticals & life sciences” have the highest median working capital days
20
-
40
60
80
100
120
140
160
97
28
131
5
82
43
17
73 72
32
66
83
70
54
42 50
95
2535
19
38
(9)
154
97
81
37
5041
31
(9)
23
83
Engineering& construction
CommunicationsTransportation& logistics
Retail & consumer
Technology Forest, paper & packaging
Healthcare Industrial manufacturing
Hospitality& leisure
MetalsPharmaceuticals & life sciences
Entertainment & media
Aerospace, defence & security
Chemicals Automotive Energy, utilities & mining
Top performers (top quartile)
Bottom performers (bottom quartile)
132015 Annual Benelux Working Capital Survey
“Healthcare” and “Engineering & construction” are the sectors with the longest median DSO
“Pharmaceuticals & life sciences” and “Healthcare” are the sectors with the longest median DIO
“Hospitality & leisure” and “Transportation & logistics” are the sectors with the shortest DPO
DSO
DIO
DPO
Top performers
Median
Bottom performers
Top performers
Median
Bottom performers
Top performers
Median
Bottom performers
60
85
3940
74
39
49
67
30
88
59
65
5234
47
25
46
66
22
46
65
38
54
65
49
56
63
4729
41
20
82
149
56
4044
44
44
47
102
33
86
88
72
78
65
38
70
20
50
56
30
43
50
3639
49
17
30
44
25
46
55
31
54
83
32
43
69
32
66
86
4239
39
39
55
68
4135
38
32
97
62
103
186
102
65
78
47
74
151
3
71
121
49
86
92
54
8
11
5
22
63
13
57
57
57
52
82
-
93106
148
57
80
120
25
0
20
10
40
30
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70
90
60
80
100
160
180
200
0
60
40
20
80
140
120
100
0
120
100
60
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180
140
160
80
136
51
97
67
68
10
18
91
2
1
59
60
3732
58
10
84
58
75
43
Engineering& construction
CommunicationsTransportation& logistics
Retail & consumer
Technology Forest, paper & packaging
Healthcare Industrial manufacturing
Hospitality& leisure
MetalsPharmaceuticals & life sciences
Entertainment & media
Aerospace, defence & security
Chemicals Automotive Energy, utilities & mining
58
83 103
83
109
60
85
3940
74
39
49
67
30
88
59
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5234
47
25
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38
54
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63
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41
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56
4044
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86
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72
78
65
38
70
20
50
56
30
43
50
3639
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32
43
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32
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39
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38
32
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62
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65
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8
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22
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57
57
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20
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43
Engineering& construction
CommunicationsTransportation& logistics
Retail & consumer
Technology Forest, paper & packaging
Healthcare Industrial manufacturing
Hospitality& leisure
MetalsPharmaceuticals & life sciences
Entertainment & media
Aerospace, defence & security
Chemicals Automotive Energy, utilities & mining
58
83 103
83
109
60
85
3940
74
39
49
67
30
88
59
65
5234
47
25
46
66
22
46
65
38
54
65
49
56
63
4729
41
20
82
149
56
4044
44
44
47
102
33
86
88
72
78
65
38
70
20
50
56
30
43
50
3639
49
17
30
44
25
46
55
31
54
83
32
43
69
32
66
86
4239
39
39
55
68
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38
32
97
62
103
186
102
65
78
47
74
151
3
71
121
49
86
92
54
8
11
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22
63
13
57
57
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148
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120
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20
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90
60
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160
180
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Engineering& construction
CommunicationsTransportation& logistics
Retail & consumer
Technology Forest, paper & packaging
Healthcare Industrial manufacturing
Hospitality& leisure
MetalsPharmaceuticals & life sciences
Entertainment & media
Aerospace, defence & security
Chemicals Automotive Energy, utilities & mining
58
83 103
83
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xx
xx
xx
Execu
tive su
mm
ary
Wh
at is drivin
g w
orking capital?
1. Indu
stry a
nalysis
2. G
eography
an
alysis3. Size
an
alysis
4. Financial perform
ance analysis
How
we ca
n su
pport youA
ppend
ices &
Con
tacts
14 Bridging the Gap
152015 Annual Benelux Working Capital Survey
Communications
-6.3%
Engineering & construction
-8.5%
Metals
-3.3%
Energy, utilities & mining
-3.9%
Retail & consumer
-3.0%
Hospitality & Leisure
Entertainment & media
-1.2%
Aerospace & defence
-4.3%
Transportation & logistics
-4.0%
Healthcare
-4.9%
Forest, paper & packaging
-5.3%Pharmaceuticals
& life sciences
0.0%0.4%
Automotive Industrial manufacturing
Technology
-2.5%Chemicals
-2.0%
0.7%
-1.0%
12 out of 16 sectors managed to improve working capital since 2010
Working capital improvement from 2010 to 2014 (in percentage points of NWC%)
Overall, 69% of the analysed sectors have shown an improvement in working capital since 2010.
The big winners in terms of working capital performance are companies within the “Engineering & Construction”, “Forest, paper & packaging” and “Healthcare” sectors.
Note that despite the improvements realised by the Healthcare sector, it is still the worst performing sector in absolute terms with an absolute median NWC performance of 125 days.
Of the companies that have failed to show an improvement over this period, those in the “Technology” sector have shown the most significant deterioration (4.3%).
Non-improversImprovers
16 Bridging the Gap
17
Geo
gra
ph
y
Size
Industry
Fina
nci
al
per
form
an
ce
2015 Annual Benelux Working Capital Survey
Geography analysis
Netherlandsand Belgiumhave a higher ability to convert EBITDAinto cash than all global regions
Belgiumrealised the strongestdecrease in NWC%
has the highest NWC%(14.7%) in theBenelux region
Luxembourg
-4pp
Execu
tive su
mm
ary
Wh
at is drivin
g w
orking capital?
1. Indu
stry a
nalysis
2. G
eography
an
alysis3. Size
an
alysis
4. Financial perform
ance analysis
How
we ca
n su
pport youA
ppend
ices &
Con
tacts
18 Bridging the Gap
Luxembourg lags behind from a working capital perspective which is reflected in the ability to convert EBITDA into cash
NWC % EBITDA Margin CCE
82.4%20.6%
Belgium
77.1%16.9%9.3%
USA, Canada
78.1%14.4%10.8%
Europe
73.8%11.9%13.5%
Asia
77.8%18.7%11.0%
Americas
63.5%15.2%14.7%
Luxembourg
3.5%
85.0%9.2% 12.4%
Netherlands
Working capital varies greatly in the Benelux-region:
• Companies in Luxembourg have a significantly higher NWC% (14.7%) than those in Belgium and the Netherlands.
• On the contrary Belgium has the lowest NWC% of 3.5%. Also Belgian companies have the highest ability to convert EBITDA into cash.
• Belgium and the Netherlands have a lower NWC% than all global regions, whilst Luxembourg has a higher NWC% than all global regions.
• EBITDA margin is lowest in the Netherlands. From a global perspective only Asia has a lower EBITDA margin.
192015 Annual Benelux Working Capital Survey
Belgium exhibited the best performance improvement in the last five years with a decrease of 4 percentage points. The Netherlands and Luxembourg improved by 3.5 and 1.8 percentage points, respectively
Execu
tive su
mm
ary
Wh
at is drivin
g w
orking capital?
1. Indu
stry a
nalysis
2. G
eography
an
alysis3. Size
an
alysis
4. Financial perform
ance analysis
How
we ca
n su
pport youA
ppend
ices &
Con
tacts
Luxembourg
-1.8pp
Change in percentage point (pp) between 2010 and 2014
Netherlands
-3.5pp
Belgium
-4.0pp
20
212015 Annual Benelux Working Capital Survey
DSO improved in all countries in the last five years with the biggest improvements observed in Belgium and The Netherlands
DSO Trend
DIO improved by 17 days in Luxembourg and by 9 days in the Netherlands whereas Belgium saw a slight increase of 5%...
DIO Trend
However, only Belgium improved DPO performance, by 14 days
DPO Trend
Belgium
43
55
3935
38
38 39
4543
48
38 37
44
47
41
4240
39
4846
40
39
40
41
40
2010 2011 2012 2013 2014
44 44
373636
32
31
32
30
32
48
52
48
5150
4447
565454
3 3 3 33
14
13
14
1212
4342
44 44
46
2010 2011 2012 2013 2014
102
9087
8985
55
4849
50
46
2011 2012 2013 2014
28
2524
29
24
44
40
36 3533
96
2010
75 73
80
89
66
5457 58
54
50
70
49 5046
Luxembourg
43
55
3935
38
38 39
4543
48
38 37
44
47
41
4240
39
4846
40
39
40
41
40
2010 2011 2012 2013 2014
44 44
373636
32
31
32
30
32
48
52
48
5150
4447
565454
3 3 3 33
14
13
14
1212
4342
44 44
46
2010 2011 2012 2013 2014
102
9087
8985
55
4849
50
46
2011 2012 2013 2014
28
2524
29
24
44
40
36 3533
96
2010
75 73
80
89
66
5457 58
54
50
70
49 5046
Netherlands
43
55
3935
38
38 39
4543
48
38 37
44
47
41
4240
39
4846
40
39
40
41
40
2010 2011 2012 2013 2014
44 44
373636
32
31
32
30
32
48
52
48
5150
4447
565454
3 3 3 33
14
13
14
1212
4342
44 44
46
2010 2011 2012 2013 2014
102
9087
8985
55
4849
50
46
2011 2012 2013 2014
28
2524
29
24
44
40
36 3533
96
2010
75 73
80
89
66
5457 58
54
50
70
49 5046
22 Bridging the Gap
232015 Annual Benelux Working Capital Survey
Size analysis
Size
Financial performance
Geography
Ind
ust
ry
However, there is no evidence that
... and also have significantly higher
than large corporations
large corporationsstretch their creditorsmore than SMEs doas DPO levelsare comparable
SMEs have
higher NWC %
DSO and DIO
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at is drivin
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eography
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alysis3. Size
an
alysis
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ance analysis
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24 Bridging the Gap
Small companies have significantly higher NWC% than large corporations, and the gap has consistently been above 8 percentage points since 2011
17.5%
18.4%18.5%
17.5%
18.2%
13.7%
17.6% 16.7%
14.9%15.4%
Large corporations
Revenues >= EUR 1,000m
2010 2011 2012 2013 2014
10.2%10.2%10.1%
12.4%
9.0%
In 2010, the gap between working capital levels of large corporations and SMEs was only 5.1 pp. Over the following four years, this gap has widened to remain between 8.1 and 8.5 pp.
5.1 percentage
points 8.5 percentage
points
Small enterprises (SMEs)Revenues < EUR 500m
Mid-sized companies
Revenues between EUR 500m and EUR 1,000m
252015 Annual Benelux Working Capital Survey
The spread between DSO and DPO in large corporations suggests that these companies are better at negotiating terms with both their customers and suppliers than their SME counterparts, where we observe a balance between DSO and DPO. In addition, DIO levels suggests that large corporations manage their inventory more efficiently than SMEs
Small enterprises Mid-sized enterprises Large corporations
5256 54 52
61
51
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tive su
mm
ary
Wh
at is drivin
g w
orking capital?
1. Indu
stry a
nalysis
2. G
eography
an
alysis3. Size
an
alysis
4. Financial perform
ance analysis
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we ca
n su
pport youA
ppend
ices &
Con
tacts
71
34
54
DSO DSO DSODIO DIO DIODPO DPO DPO
26 Bridging the Gap
272015 Annual Benelux Working Capital Survey
Financial performance analysis
Finan
cia
l per
form
ance
Industry
Size
Geo
gra
ph
y
The gapbetween NWC %top and bottomperformers issignificant
Bottom performers need to take on more debt tofinance theirinvestments
Better working capital leads to better conversion of
EBITDA into cash…
27.5pp
Execu
tive su
mm
ary
Wh
at is drivin
g w
orking capital?
1. Indu
stry a
nalysis
2. G
eography
an
alysis3. Size
an
alysis
4. Financial perform
ance analysis
How
we ca
n su
pport youA
ppend
ices &
Con
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28 Bridging the Gap
292015 Annual Benelux Working Capital Survey
Investment rate
7.0%
5.1%
NWC %
2.6%
30.1%
Companies that are top performers (upper quartile) in working capital are also better at generating cash, as confirmed by the 19.7 pp difference in CCE. If bottom performers (lower quartile) were to improve their CCE to top performers’ levels, they would be able to generate extra EUR 3.8bn in operating cash flow
Bottom performers have a lower investment rate. This can be explained by the difficulties they face of converting EBITDA into the cash necessary for investments
CCE
Top performers
Bottom performers
88.0%
68.3%
19.7 percentage
points
30 Bridging the Gap
312015 Annual Benelux Working Capital Survey
Summary Execu
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at is drivin
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orking capital?
1. Indu
stry a
nalysis
2. G
eography
an
alysis3. Size
an
alysis
4. Financial perform
ance analysis
How
we ca
n su
pport youA
ppend
ices &
Con
tacts
In the Benelux there is an opportunity to realise EUR 17bn if under-performers improve to the next quartile
Working capital
€
€
€
€
€ €EUR 17bn
32 Bridging the Gap
How we can support you
Addressing the key levers: • Identification, harmonisation and improvement of
commercial terms
• Process optimisation throughout the end-to-end working capital cycles
• Process compliance and monitoring
• Creating and embedding a ‘cash culture’ within the organisation, optimising the trade-offs between cash, cost and service
21
34
Complete a working capital benchmarking exercise to compare performance against peers and identify potential improvement opportunities
Assist the realisation of sustainable working capital reduction by implementing robust, efficient and collaborative processes
Perform a diagnostic review to identify ‘quick wins’ and longer-term working capital improvement opportunities
Develop detailed action plans for implementation to generate cash and make sustainable improvements
Danny SiemesNL Director
“Working capital is the easiest and fastest source of cash to bridge funding gaps. Our team of dedicated working capital practioners has delivered sustainable cash improvements for many companies equal to 5-10% of revenues”
332015 Annual Benelux Working Capital Survey
Execu
tive su
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Wh
at is drivin
g w
orking capital?
1. Indu
stry a
nalysis
2. G
eography
an
alysis3. Size
an
alysis
4. Financial perform
ance analysis
How
we ca
n su
pport youA
ppend
ices &
Con
tacts
Accounts receivable
• Credit risk policies• Aligned and optimised
customer terms• Billing timeliness
and quality• Contract and
milestone management
• Prioritised and proactive collection procedures
• Systems-based dispute resolution
• Dispute root cause elimination
Accounts payable
• Consolidated spending• Increased control with
centre-led procurement• Avoid leakage with
purchasing channels• Payment terms
• Supply chain finance• Payment methods• Eradicate early payments
Examples of areas where PwC could help you to release cash from working capital:
Inventory
• Lean and agile supply chain strategies
• Global coordination• Forecasting techniques• Production planning
• Accurate tracking of inventory quantities
• Differentiated inventory levels for different goods
• Balanced cash, cost and service considerations
Appendices
34 Bridging the Gap
Basis of calculations and limitations
Basis of calculationsThis study provides a view of working capital performance. The study is part of our global research of the largest 10,215 listed companies worldwide. The Financial Services, Real Estate and Insurance sectors are excluded.
LimitationsIn this Benelux report there are some constraints compared to the global sample. In the Benelux sample some industries are dominant whilst others are less populated.
Companies have been assigned to countries based on the location of their headquarters. Although a significant part of their sales and purchases might be realised in that country, it does not necessarily reflect typical payment terms or behaviour in that country.
As the research is based on publicly available information, all figures are financial year-end figures. Due to the disproportionate efforts to improve working capital performance towards year-end the real underlying working capital requirement within reporting periods might be higher. Also, off-balance-sheet financing or the effect of asset securitisation have not been taken into account.
Metric Basis of calculation
NWC % (Net working capital %) NWC % measures working capital requirements relative to the size of the company.
(Accounts Receivable + Inventories – Accounts Payable) / Sales
DSO (Days Sales Outstanding) DSO is a measure of the average number of days that a company takes to collect cash after the sale of goods or services have been delivered.
Accounts Receivable / Sales x 365
DIO (Days Inventories On‑hand) DIO gives an idea of how long it takes for a company to convert its inventory into sales. Generally, the lower (shorter) the DIO, the better.
Inventories / Cost of Goods Sold x 365
DPO (Days Payables Outstanding) DPO is an indicator of how long a company takes to pay its trade creditors.
Accounts Payable / Cost of Goods Sold x 365
CCE (Cash Conversion Efficiency) CCE is an indicator of how efficiently a company is able to convert profit into cash.
Cash Flow from Operations / EBITDA
Investment Rate Investment Rate measures the amount of investment relative to the revenues of a company.
Capital Expenditure / Sales
ROC (Return on Capital) ROC is an indicator of profit as a proportion of a company’s capital.
EBIT x (1 – tax) / Average Total Capital
EBITDA Margin (Earnings before interest, taxes, depreciation and amortisation)
EBITDA Margin is an indicator of a company’s profitability level as a proportion of its revenue.
EBITDA / Sales
Cost of Debt Cost of Debt is the effective rate that a company pays on its debt.
Interest Expense / Average Total Debt
352015 Annual Benelux Working Capital Survey
Execu
tive su
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Wh
at is drivin
g w
orking capital?
1. Indu
stry a
nalysis
2. G
eography
an
alysis3. Size
an
alysis
4. Financial perform
ance analysis
How
we ca
n su
pport youA
ppend
ices &
Con
tacts
36 Bridging the Gap
In the Benelux region and across all sectors there is a total cash opportunity from working capital of more than EUR 17bn primarily concentrated the Netherlands and Luxembourg
Sector Belgium Luxembourg Netherlands Total
Aerospace, defence & security 5,752 5,752
Automotive - -
Chemicals 212 32 152 397
Communications 125 594 - 719
Energy, utilities & mining 46 1,028 579 1,652
Engineering & construction 23 11 285 319
Entertainment & media 8 433 441
Forest, paper & packaging - 3 3
Healthcare 338 338
Hospitality & leisure 1 187 188
Industrial manufacturing 93 43 942 1,078
Metals 435 2,730 12 3,177
Pharmaceuticals & life sciences 122 - 18 141
Retail & consumer 106 121 424 651
Technology 26 38 1,879 1,943
Transportation & logistics 257 - 89 347
Country Total 1,793 4,597 10,757 17,147
Total cash opportunity from working capital
High opportunity Low opportunity
372015 Annual Benelux Working Capital Survey
Sampled companies by sector and macro-region
Sector Belgium Luxembourg Netherlands Total
Aerospace, defence & security 2 2
Automotive 1 1
Chemicals 5 1 4 10
Communications 4 4 2 10
Energy, utilities & mining 3 3 6 12
Engineering & construction 2 1 8 11
Entertainment & media 2 2 4
Forest, paper & packaging 1 2 3
Healthcare 3 3
Hospitality & leisure 1 3 4
Industrial manufacturing 4 4 11 19
Metals 1 3 3 7
Pharmaceuticals & life sciences 1 1 1 3
Retail & consumer 9 5 13 27
Technology 3 2 11 16
Transportation & logistics 2 1 2 5
Total 41 26 70 137
Execu
tive su
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1. Indu
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nalysis
2. G
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an
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an
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4. Financial perform
ance analysis
How
we ca
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ices &
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38 Bridging the Gap
NWC/Sales by sector and macro-region
Sector Belgium Luxembourg Netherlands Total
Aerospace, defence & security 31.0% 31.0%
Automotive 13.6% 13.6%
Chemicals 12.6% 16.7% 12.7% 12.7%
Communications -0.8% 8.6% -8.0% ‑2.5%
Energy, utilities & mining 4.6% 36.0% 4.1% 4.9%
Engineering & construction 18.8% 15.7% 16.1% 16.2%
Entertainment & media -5.0% 20.0% 17.0%
Forest, paper & packaging 9.4% 10.9% 10.3%
Healthcare 32.0% 32.0%
Hospitality & leisure 1.6% 30.5% 19.5%
Industrial manufacturing 16.7% 10.4% 21.0% 19.7%
Metals 33.3% 13.4% 6.6% 13.7%
Pharmaceuticals & life sciences 22.8% 15.5% 26.1% 21.7%
Retail & consumer -5.5% 14.5% 3.2% ‑0.1%
Technology 24.9% 21.0% 29.8% 29.2%
Transportation & logistics 10.7% -0.7% 7.2% 8.1%
Total 3.5% 14.7% 9.4% 9.2%
392015 Annual Benelux Working Capital Survey
DSO by sector and macro-regionE
xecutive
sum
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ryW
hat is d
riving
workin
g capital?1. In
dustry
an
alysis2
. Geograph
y a
nalysis
3. Size a
nalysis
4. Financial perform
ance analysis
How
we ca
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tacts
Sector Belgium Luxembourg Netherlands Total
Aerospace, defence & security 39 39
Automotive 39 39
Chemicals 39 55 40 40
Communications 63 48 31 42
Energy, utilities & mining 77 70 26 27
Engineering & construction 98 32 71 70
Entertainment & media 53 97 92
Forest, paper & packaging 43 46 45
Healthcare 79 79
Hospitality & leisure 18 64 46
Industrial manufacturing 55 51 68 65
Metals 93 18 42 23
Pharmaceuticals & life sciences 58 83 72 67
Retail & consumer 22 33 25 24
Technology 68 57 63 63
Transportation & logistics 29 46 47 40
Total 36 30 35 34
40 Bridging the Gap
DIO by sector and macro-region
Sector Belgium Luxembourg Netherlands Total
Aerospace, defence & security 154 154
Automotive 57 57
Chemicals 60 45 55 56
Communications 11 13 7 9
Energy, utilities & mining 21 151 20 23
Engineering & construction 43 85 31 33
Entertainment & media 8 33 27
Forest, paper & packaging 59 37 47
Healthcare 112 112
Hospitality & leisure 3 125 78
Industrial manufacturing 34 8 75 63
Metals 86 90 48 87
Pharmaceuticals & life sciences 190 8 106 96
Retail & consumer 46 118 45 47
Technology 103 46 148 142
Transportation & logistics 40 1 1 14
Total 51 85 46 51
412015 Annual Benelux Working Capital Survey
DPO by sector and macro-regionE
xecutive
sum
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hat is d
riving
workin
g capital?1. In
dustry
an
alysis2
. Geograph
y a
nalysis
3. Size a
nalysis
4. Financial perform
ance analysis
How
we ca
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ices &
Con
tacts
Sector Belgium Luxembourg Netherlands Total
Aerospace, defence & security 68 68
Automotive 44 44
Chemicals 52 38 47 48
Communications 123 65 173 136
Energy, utilities & mining 159 47 33 34
Engineering & construction 79 49 46 47
Entertainment & media 103 106 105
Forest, paper & packaging 70 47 58
Healthcare 54 54
Hospitality & leisure 21 53 41
Industrial manufacturing 26 25 59 52
Metals 52 56 68 57
Pharmaceuticals & life sciences 108 40 37 67
Retail & consumer 124 76 65 87
Technology 66 18 65 64
Transportation & logistics 27 53 24 27
Total 89 54 46 52
42 Bridging the Gap
Authors of the study
Saverio MitraniManagerT: +44 7711 562120 E: [email protected]
Saverio is a manager in the firm’s working capital practice and has spent his career delivering working capital and cash flow related projects across the UK and internationally. His expertise covers all the key areas of working capital, from order-to-cash to inventory management and procure-to-pay.
Saverio Mitrani
Contacts
Danny Siemes
Robert SmidUK Partner, Working Capital Practice LeaderT: +44 20 7804 3598E: [email protected]
Robert leads our working capital practice and brings over twenty years of working capital advisory experience. He has made an instrumental difference to the free cash flow and balance sheet structure of many companies.
Danny Siemes DirectorT: +31 (0)88 792 42 64 E: [email protected]
Danny leads our working capital practice in the Netherlands & Belgium and has over 10 years of experience.He successfully advised company management and investors on improving cash flow and working capital management.
Robert Smid
Rob Kortman
Rob KortmanGermany PartnerT: +49 1709 879253 E: [email protected]
Rob is a partner in our European working capital practice. He has over seventeen years of extensive experience of delivering working capital management programmes to generate cash for large, corporate clients across Europe, Asia and the Americas.
Nicolas Beaumont Senior Manager T: +32 2 7104130E: [email protected]
Nicolas leads our working capital practice in Belgium and has over 7 years of working capital advisory experience. He advised clients on working capital management, helping to release cash from their operations.
Nicolas Beaumont
Daniel WindausUK Partner, Lead AuthorT: +44 20 7804 5012E: [email protected]
Daniel is a partner in our working capital practice, with over sixteen years of working capital experience. He has advised company management and private equity investors on improving cash flow throughout Europe and North America.
Daniel Windaus
43
Denmark
Bent Jorgensen T: +45 3945 9259E: [email protected]
Middle East
Mihir Bhatt T: +971 4304 3641 E: [email protected]
Malaysia
Ganesh Gunaratnam T: +603 2173 0888E: [email protected]
Switzerland
Reto Brunner T: +41 58 792 1419 E: [email protected]
Germany & Austria
Rob KortmanT: +49 1709 879253 E: [email protected]
Finland
Michael HardyT: +358 50 346 8530E: [email protected]
Turkey
Gokdeniz GurT: +90 212 376 5332 E: [email protected]
The Netherlands & Belgium
Danny Siemes T: +31 88 792 42 64 E: [email protected]
France
Francois GuilbaudT: +33 156 578 537 E: [email protected]
Hong Kong
Ted Osborn T: +852 2289 2299E: [email protected]
Norway
Jørn Juliussen T: +47 95 26 00 60E: [email protected]
USA
Paul GaynorT: +1 925 699 5698E: [email protected]
Spain
Josu EcheverriaT: +34 91 598 4866E: [email protected]
Singapore
Peter Greaves T: +65 6236 3388E: [email protected]
CEE
Petr SmutnyT: +42 25 115 1215 E: [email protected]
Italy
Riccardo Bua OdettiT: +39 026 672 0536 E: [email protected]
Sweden
Jesper LindbomT: +46 70 9291154 E: [email protected]
Working Capital Management Global Network
Australia
David Pratt T: +612 8266 2776 E: [email protected]
Execu
tive su
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Wh
at is drivin
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orking capital?
1. Indu
stry a
nalysis
2. G
eography
an
alysis3. Size
an
alysis
4. Financial perform
ance analysis
How
we ca
n su
pport youA
ppend
ices &
Con
tacts
432015 Annual Benelux Working Capital Survey
pwc.com/workingcapitalsurvey
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This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
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Design Services 21810 (08/15).