cash for growth - pwc uk · pwc – cash for growth. executive summary. working capital can deliver...

2014

Cash for Growth Working capital opportunities across the UK

www.pwc.com/workingcapital

2 PwC – Cash for Growth

Contents

Global trends 4

UK trends 12

Regional analysis 17

Scotland 18

North 24

Midlands 30

Wales and West 36

London 42

South East 49

Northern Ireland and Isle of Man 48

How we can help? 60

Foreword

Stephanie Hyde

Welcome to PwC’s Annual Working Capital Survey. Working capital is a barometer for how freely cash flows. In efficiently run businesses, cash runs freely. In others, cash gets trapped in working capital, restricting the company’s ability to grow.

In this year’s UK Working Capital Survey, we look at how companies have performed and what the key trends are around the UK and across sectors. We are working with many companies to help them optimise their working capital and achieve sustainable performance improvements.

This study shows that working capital continues to present a significant opportunity for releasing cash and should therefore receive special attention as companies seek to take full advantage of the economic upturn.

Stephanie HydeHead of UK Regions, PwC


Executive summaryWorking capital can deliver cash today, for growth tomorrow

Companies in the UK have been experiencing slow growth over the last three years with annual growth averaging at around 0.3%. But looking across the different sectors and regions of the UK, there are clear winners and losers. London as a region experienced an average annual contraction of around 0.8%, whereas Northern Ireland and the Midlands experienced average annual growth rates of over 3% pa. From a sector perspective, the Automotive and Health Care Equipment sectors were the key winners experiencing average growth in excess of 4% pa whilst the Chemicals, Pharmaceuticals and Metals & Mining sectors struggled the most, with average contractions of around 3% pa.

The fight to maintain this top line growth has come at a price, with overall working capital outgrowing sales by a factor of four. In absolute terms, the levels of working capital have increased by £2bn over the last year, trapping precious cash at a time when many companies are in most need of this capital to fund growth.

As a result, many companies are putting closer scrutiny on working capital performance, as this is amongst the cheapest sources of capital. As

such, ‘cash management’ features further up the corporate agenda than it has since the start of the economic recession. This increased focus is paying dividends for some. Geographically, the winners are the Midlands and Wales and West whilst the main losers are Scotland, London and the South East. By sector, the big winners are in the Healthcare Equipment & Supplies and Building Products sectors. But there is more that can be done to improve working capital and release this trapped cash.

This can be achieved through working capital improvements across all three cycles: receivables, payables and inventory, with the latter playing a key role especially for companies in the retail, wholesale and manufacturing focused sectors. As companies in these sectors seek to unlock benefits in this area by optimising inventory levels and supply chain management, they must manoeuvre challenges posed by the increasingly global footprint for manufacturing. For instance, globalisation has put price pressures onto manufacturers, challenging them to carefully manage the trade-off between variables such as price, lead times and cash.

Despite these challenges, inventory management has been a significant driver of working capital performance improvements over the last year, particularly for UK companies. This recent trend, coupled with the widening gap between strong and poor performers, suggests that inventory management could be a key differentiator.

To return to the levels of revenue growth achieved in 2010 and 2011, companies need to invest in their future, which will require significant extra cash over the next few years. No matter what financing is available in the market, companies could find there are extensive cash reserves tied up in their own balance sheets. Our survey shows that if UK companies were to move to the next performance quartile, they would generate a total of £125bn of cash, while moving to upper quartile performance would release £167bn of cash. Cash is at your finger-tips.

Glen BabcockPartner – Working Capital Management Lead, UK Regions

2

3

Global trends

PwC – Cash for Growth


Revenue growth has stalled in recent years following a surge during the post-recession period

Sales for the largest 7,368 global companies grew by 36% over the past four years equivalent to a Compound Annual Growth Rate (CAGR) of 8%. Much of this growth rate was achieved in the two years following the start of the financial crisis (in 2008) but has been tailing off ever since. The CAGR for the past three years was just 1% and in 2013, the growth rate was just 0.4% year-on-year.

+1% 3-year CAGR

globally

2009 2010 2011 2012 2013

0%

2%

4%

8%

12%

14%

18%

Yea

r-o

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ar s

ales

gro

wth

Sal

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£ t

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Sales

5

0

10

15

20

25

Indicates change in sales growth from one year to the next

10%

6%

16%

20%

18.9%

12.1%

1.7% 0.4%

Total global sales

5

Working capital has been relatively stable in recent years, but remains worse than it has been historically

While the absolute value of working capital has increased globally, working capital performance has shown a slight improvement, reducing by 3.1 days over five years (7.5% overall). This is the equivalent to around 2% per annum. This improved performance is primarily due to enhanced performance of European companies.

Much of this reduction in days working capital was achieved immediately after the financial crisis as companies focused on optimising cash and working capital. Since then, working capital performance improvement has shown only a slight improvement.

In absolute terms, however, working capital has grown, locking in an additional £417bn of cash in working capital.

£417bn increased working capital2%

fall in days working capital

between 2012 and 2013

1.5

1.75

2 2 2

35

36

37

38

39

40

41

42

43

44

45

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2009 2010 2011 2012 2013

Global net working capital DWC trend

41.3

39.4 39.338.9

38.2

£417bn of extra cash tied up in working capitalbn

Wo

rkin

g c

apit

al£

bn

DW

C

Global working capital trend

For detail on how Days Working Capital (DWC) is calculated, please refer to page 67


Europe has made the greatest improvements in working capital, especially in southern Europe...

0.6%

0.6%

2.5%

Americas

Europe

Asia, Africa and Australasia

2009 2010 2011 2012 2013

47.344.0 44.4 42.5

40.8

2009 2010 2011 2012 2013

38.6 37.535.9 36.9 36.9

2009 2010 2011 2012 2013

37.6 37.0 38.9 38.1 37.2

Days of working capital

3 years’ revenue growth (CAGR)

Key

Companies in Europe are having to invest more to finance working capital than their overseas competitors.

7

...but UK performance lags behind many other countries

In Europe, seven out of ten clusters have improved year-on-year with Italy showing the most significant deterioration.

In the Americas, we have seen an overall improvement in working capital days across the region.

In the rest of the world, India has shown the greatest deterioration. The manufacturing hotspots of China, Hong Kong and Taiwan have seen the greatest improvements.

Average working capital days by cluster: Year-on-year movement

(19)%

(18)%

(10)%

(8)%

(8)%

(2)%

(2)%

0%

1%

11%

(8)%

(3)%

1%

(10)%

(8)%

(2)%

0%

1%

1%

4%

16%

0 10 20 30 40 50 60 70 80 90

Other Southern Europe

Spain, Portugal

Benelux

Germany, Switzerland, Austria

Central Europe

France

Nordics

Russia, Ukraine

Italy

Brasil

Other Americas

USA, Canada

China

Hong Kong, Taiwan

Africa

Other Asia

Middle East

Australasia

Japan

India

Eur

op

e A

mer

icas

A

sia,

Afr

ica

&

Aus

tral

asia

Working capital days

2012 2013

UK, Ireland

Average working capital days by cluster: Year-on-year movement


Companies that trail their industry in terms of performance are trying to catch up

58% of the companies that improved their performance between 2011 and 2013 are still below the average performers in 2013

between them and industry leaders. These firms are trying to close the gap

However, these companies have been lagging since 2011.

The best performing companies generate 15% more cash from their EBITDA.

51% of all companies improved working capital performance between 2011 and 2013

58% 15%

9

Companies that have consistently focused on optimising working capital have also shown the greatest improvements in EBITDA. These companies are benefiting not only from the cost savings from more efficient processes and reduced working capital write offs, but also the enhanced flexibility that comes from having good cash reserves.

(100)

(50)

0

50

100

150

(200)%

(150)%

(100)%

(50)%

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150%

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Avg DWC 2011

High performers

Average performers

Poor performers

Avg DWC 2013 EBITDA change 3 yr

137%

(59)%

(158)%

The best performers have reduced working capital and improved EBITDA

How have companies fared that have improved working capital each year (since 2011)

UK trends


11

In the UK as a whole, since 2011, working capital performance has been steady

Following the recession, working capital performance gradually improved across the UK in the years up to 2011.

Since that time, performance has fluctuated slightly with a 0.9 day deterioration over the past year, causing an additional £1.6bn to be trapped in working capital. However, performance varies across industries and regions within the UK.

United Kingdom working capital trend

41.6

36.8

32.0 31.7 32.6

10

15

20

25

30

35

40

45

50

20

30

40

50

60

70

80

90

100

110

120

2009 2010 2011 2012 2013

DW

C

Wo

rkin

g c

apita

l £b

illio

ns

Net Working Capital DWC trend

2.8%increase in daysworking capitall

since 2012

increase inworking capital

since 2012

£1.6bn


14 out of 21 sectors have shown a year-on-year deterioration in working capital

Average working capital days YoY movement by sector, Financial Years 2012 – 2013: UKWorking capital performance over the last year has varied across sectors.

Seven sectors have seen an improvement in working capital days, with the Automotive sector improving by 5.1 days.

14 sectors have deteriorated since 2012, with poor performance particularly in Healthcare Services, where working capital days have more than doubled from 28.5 to 59 days.

(5.1)

(2.3) (2.2) (1.8) (1.3)(0.6) (0.3)

0.8 0.8 1.1 1.9 2.5 2.7 2.8 2.8

3.7 4.1

6.0 6.8

7.7 9.0

Aut

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Food

, Drin

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Con

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Pha

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Oil

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as

Text

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uxur

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Met

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g

Che

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Hea

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13

Average working capital days by sector, For Financial Year 2013: UKDespite some improvements, all sectors except Travel and Leisure remain working capital positive.

High working capital days are seen in sectors that typically have a large cash requirement, for example Industrial Products, Pharmaceuticals, Aerospace and Defence, Textiles, Apparel and Luxury Goods.

However, there are also high working capital days in sectors not usually associated with a high cash requirement: Food, Drink and Tobacco and Retail and Wholesale.

Good performance, in comparison to average global working capital days, was achieved by companies in the Travel and Leisure, Consumer Goods, Automotive, Farming, Fishing and Forestry and Aerospace and Defence sectors.

(4)

14 17 20 24 24 26 27 36 36 36 38 39

45 49 58 59 60

65 70

103

Trav

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Working capital

Overall, £125bn to £167bn of cash could be released from working capital by UK businesses

£

£

£££

£

£125bn to

£167bn


Regional analysisWe look at the working capital performance in the following regions: Scotland, the North, Northern Ireland and Isle of Man, Midlands, Wales and West, London and the South East


17

There is a marked difference between the working capital performance across the different regions

For our UK study, we have analysed data from listed and unlisted companies with an annual turnover of more than £50m (4,829 companies), excluding the financial services, real estate and insurance sectors.

Working capital performance (as measured by average working capital days) varies across the UK regions and in general has improved over the last year (2012-2013).

There are higher cash demands on companies in Wales and West, Scotland, and Northern Ireland and Isle of Man.

Scotland, London and the South East have seen a deterioration in performance over the last year.

Northern Ireland and Isle of Man

30 34

37 35 34

2009

2010

2011

2012

2013

Scotland

39 40 38 36

43

2009

2010

2011

2012

2013

Wales and West

5155 55

51 50

2009

2010

2011

2012

2013

South East

25 24 24 25 27

2009

2010

2011

2012

2013

North

27 28 28 26 26

2009

2010

2011

2012

2013

Midlands

33 33 31 34 32

2009

2010

2011

2012

2013

London

34 32 30 29 31 20

09

2010

2011

2012

2013

O deterioration since 201219%

P improvement since 20123%


O deterioration since 20128% O deterioration

since 20127%


No change since 20120%

Annual average days of working capital “DWC” by region

Scotland


19

An improving trend in Scotland was dramatically reversed in 2013

Scotland has the second worst level of working capital in the UK at 43 days in 2013. This is a seven day deterioration over the 2012 performance where a period best of 36 days was achieved.

There are companies operating in a wide range of sectors, with little dependence on a single sector for cash performance.

Scotland: Days working capital Scotland: Companies analysed, by sector

2009

2010

2011

2012

2013

39 40

38 36

43

Logistics Construction

Fo

Oil and Gas

od, Drink and Tobacco

Industrial Products

Automotive

Other Services

Retail & Wholesale

4819

20

29

1616

24

3423


*Study excludes the financial services, real estate and insurance sectors.


There is a wide disparity between the fortunes of the best and worst sectors in Scotland, as illustrated by year-on-year movements...

Year-on-year movement in working capital days, 2012 – 2013Two sectors notably improved working capital days in 2013. Food, Drink and Tobacco reduced their cash requirement by 37.1 days (c25%) and Industrial Products reduced by 5.5 day, a strong driver of the overall regional reduction in cash.

Five sectors saw worsening performance over the last year, with Services (c 57%) and Oil and Gas (43%) increasing by 11.7 days.

The year-on-year movement in average DWC position for the Food, Drink & Tobacco sector has been distorted by the inclusion of two large new businesses in the sector in 2013. Excluding these two companies, the year-on-year movement would have been an improvement of eight days.

1.7

Tran

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ogis

tics

1.5

Aut

omot

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(37.1)

Food

, Drin

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8.4

Ser

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s

(0.9)

Ret

ail &

Who

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(0.6)

Con

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3.3

Farm

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For

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11.711.7

Oil

& G

as

21

... and average working capital days

Average working capital days by sector, 2013Every sector, except Retail and Wholesale and Services, under performed in comparison to the UK average.

Construction and Food, Drink and Tobacco sectors ended 2013 with average working capital days twice as high as the UK average.

8

Tran

spor

t & L

ogis

tics

35

Aut

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109

Food

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Toba

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32

Ser

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s

27

Ret

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100

Con

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Indu

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s39

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as

69

Farm

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Fis

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s &

Fore

stry

21


Average DSO by sector, 2013: Scotland Average DIO by sector, 2013: Scotland

Average DPO by sector, 2013: Scotland

01020 14

23

3641

52 5363

70

36304050607080

Tran

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0

19 21 23 25 26 28 2833

43

20

30

40

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.

Performance across all three working capital cycles was largely in line with prior years results.

Trade receivables performance deteriorated significantly in the Oil and Gas sector, with DSO increasing by almost 70% since 2012 to almost double the UK average of 30 days.

Food, Drink and Tobacco managed to reduce inventory levels over the year by 25%, however they still remain the worst performers in Scotland.

The Services sector saw worsening DPO performance, however it still outperforms versus the UK average for the sector (22 days).

The regional performance for 2013, by sector

Refer to appendix for prior year data

0

205 5

1427

3749

5673

96

40

60

80

100

120

Tran

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.

23

Companies in Scotland could release between 6% and 9% of revenue as cash from working capital

Mixed working capital performance from companies across sectors, with an average upper to lower quartile working capital ratio range of 15%.

£1.5bn cash is potentially tied up in Food, Drink and Tobacco and Services in comparison to Q1 performance.

The overall opportunity for Scotland across all sectors is £2.9bn for companies who move to the next performance quartile, and £4.3bn is available if everyone moves to the top performance quartile.

Sectors Number of companies

Upper quartile (average

wcap ratio)

Median (average

wcap ratio)

Lower quartile (average

wcap ratio)

Average opportunity – moving to

next quartile (£m)

Average opportunity – moving to top quartile

(£m)

Food, Drink & Tobacco 20 7% 19% 26% 33.4 44.7

Services 34 6% 15% 25% 11.7 17.5

Industrial Products 19 13% 19% 29% 26.4 40.8

Oil & Gas 23 1% 7% 15% 22.1 32.4

Construction 16 4% 15% 21% 23.1 30.3

Retail & Wholesale 24 2% 7% 16% 8.0 11.5

Automotive 29 5% 9% 12% 3.5 6.8

Transport & Logistics 16 1% 5% 12% 7.5 11.7

Farming, Fisheries & Forestry 13 12% 16% 22% 6.9 8.2

Total for selected sectors 194 15.2 22.0

Wcap ratio is calculated as net working capital as a percentage of sales. Q1 represents upper quartile performance.


North

25

The North region has the lowest working capital requirement of all the UK regions

The North has the best working capital performance in the UK, ending 2013 with an average working capital of 26 days. This equals last years performance of the lowest rate in the past four years.

A greater emphasis on manufacturing in the North will lead to higher working capital and inventory levels for the region, driven by Industrial Products and Automotive companies.

The strong working capital performance is driven by the low cash requirement of the key sectors, Services and Retail and Wholesale, which make up c35% of companies in the region. This further emphasises how impressive the working capital performance is in relative terms to the rest of the UK.

North: Days working capital North: Companies analysed, by sector

27 28 28

26 26

2009

2010

2011

2012

2013

93

71

69 62

48

177

143155

Logistics and Logistics Construction

Food, Drink and Tobacco

Industrial Products

Automotive

Other Services

Retail & Wholesale

No change since 20120%


9 out of 13 sectors have shown a year-on-year improvement in the North

Year-on-year movement in working capital days, 2012 – 2013Six sectors have seen an improvement in working capital performance of a day or more since 2012. The Travel and Leisure sector, which is already working capital negative, managed to reduced working capital days even further.

Four sectors have seen a slight worsening in working capital performance over the year. Industrial Products, the third largest sector in the North, has deteriorated the most over the year, increasing average working capital from 58 to 60 days.

(4.7)

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1.7

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27

... although many sectors can still improve

Average working capital days by sector, 2013Following the UK trend, the only sector in the North that has negative working capital days is Travel and Leisure.

The Consumer Goods, Food, Drink and Tobacco and Pharmaceutical sectors are all notably outperforming the UK trend.

However, the Transport and Logistics, Automotive, and Technology, Media & Telecoms (TMT) sectors are all significantly under performing, compared with the UK trend.

33A

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Con

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Average DSO by sector, 2013: North Average DIO by sector, 2013: North

Average DPO by sector, 2013: NorthPerformance across all three working capital cycles was largely in line with prior years results.

Within DSO, Transport and Logistics is the sector that stands out with DSO of 56 days versus a global average of 20 days. This could be due to a lengthening of payment terms by government departments as they are forced to put a greater focus on cash.

In terms of inventory, the Automotive sector appears inflated where a DIO of 30 days is common globally.

A DPO around 30 days is standard for the Energy and Utilities sector, indicating potential improvement is possible in this sector.

0

1014

25 2530 32

35 37

50 52 53 54 56 56

20

30

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10 712 13 17

22 23 2631

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Tech

, Med

ia &

Tel

co

Con

sum

er G

oods

Food

, Drin

k &

Tob

.



29

Companies in the North have the capacity to release on average 4% to 5% of revenue as cash from working capital

There is a wide variety of performance within the sectors, with many exhibiting a range of c15% between upper quartile and lower quartile working capital ratios.

Due to its prevalence in the region, Retail and Wholesale is the sector with the largest potential opportunity. Benchmarking indicates that £3.0bn cash is tied up in this sector.

Across all of the sectors, £13.6bn cash could be released from improving performance to Q1 levels. �e average opportunity per company is between £11m and £17m.


Upper quartile

(average wcap ratio)

Median (average

wcap ratio)

Lower quartile



next quartile (£m)


(£m)


Services 155 1% 8% 17% 8.7 16.7


Automotive 71 4% 8% 13% 9.7 14.6


Construction 48 -1% 8% 15% 9.3 19.8


Energy & Utilities 19 3% 9% 13% 13.8 34.7

Travel & Leisure 35 -11% -1% 2% 8.2 15.1

Technology, Media & Telecoms 27 3% 11% 19% 10.8 19.4

Chemicals 23 11% 17% 21% 11.4 20.5

Consumer Goods 25 9% 17% 21% 5.5 13.6

Pharmaceuticals 12 9% 12% 26% 9.6 11.8




Midlands

31

Midlands companies have shown a year-on-year improvement in working capital

The Midlands has average working capital performance in the UK, with working capital days of 32 in 2013. Although this is an improvement of two days over 2012, best performance of 31 days was achieved in 2011.

The majority of companies in the region fall into only four sectors, with Services and Retail and Wholesale once again being predominant. Industrial Products and Retail and Wholesale drive the high cash requirement in the region.

Midlands: Days working capital Midlands: Companies analysed, by sector

92

96 3733

150

118

106

Construction Travel & Leisure

Industrial Products

Automotive

Other Services

Retail & Wholesale

2009

2010

2011

2012

2013

33 33 31

34 32




The biggest improvements in Midlands’ working capital were seen in the Automotive sector

Year-on-year movement in working capital days, 2012 – 2013Six sectors improved their working capital days in 2013.

Generally it was the sectors that already exhibit lower working capital that managed to reduce further. The Automotive sector reduced by 12.1 days (c35%) and Food, Drink and Tobacco sector improved by 7.0 days (c25%).

Average working capital days for five sectors increased over the year, with the Construction sector rising by 20.8 days (c70%).

(12.1)

Aut

omot

ive

(7.0)

Food

, Drin

k &

Tob

acco

4.9

Con

sum

er G

oods

7.8

Pha

rmac

eutic

als

(5.9)

Ser

vice

s

(2.5)

Tran

spor

t & L

ogis

tics

1.8

Trav

el &

Lei

sure

(2.1)

Indu

stria

l Pro

duct

s

3.2

Ret

ail &

Who

lesa

le

(3.4)

Tech

nolo

gy, M

edia

& T

elec

oms

20.8

Con

stru

ctio

n

33

Average working capital days by sector, 2013Half of the sectors in the Midlands outperformed the UK trend. The Food, Drink and Tobacco sector has less than half the cash requirement of the UK average, and the Pharmaceuticals sector has a third less.

TMT, Retail and Wholesale and Consumer Goods sectors all significantly under performed compared with the UK trend, with Consumer Goods requiring almost three times the cash requirement, and TMT requiring almost 50% more cash.

10

Tran

spor

t & L

ogis

tics

2

Trav

el &

Lei

sure

23

Aut

omot

ive

22

Food

, Drin

k &

Toba

cco

29

Tech

nolo

gy, M

edia

& T

elec

oms

47

Pha

rmac

eutic

als

35

Ser

vice

s

37R

etai

l & W

hole

sale

52

Con

stru

ctio

n

49

Con

sum

er G

oods

54

Indu

stria

l Pro

duct

s


Average DSO by sector, 2013: Midlands Average DIO by sector, 2013: Midlands

Average DPO by sector, 2013: Midlands

01020

7

25 29 3036

31

42 45 46

6166

3040506070

Tran

spor

t & L

ogis

tics

Pha

rmac

eutic

als

Ser

vice

s

Indu

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l Pro

duct

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sure

Food

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k &

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.

Ret

ail &

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le

Con

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oods

Aut

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ive

Tech

, Med

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co

Con

stru

ctio

n

0

10

20

30

40

50

60

12 1421 21

26 27

41 42 42 4251

Tran

spor

t & L

ogis

tics

Pha

rmac

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Ser

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stria

l Pro

duct

s

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Food

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k &

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ail &

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stru

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el &

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ail &

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, Med

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co

Con

stru

ctio

n

01020 19 20

28 30 32 34 35 3544

54

65

3040506070

Food

, Drin

k &

Tob

.

Performance across all three working capital cycles was largely in line with prior years results.

Pharmaceuticals sector’s DSO increased by over 20%, whereas the Automotive sector was able to reduce DSO by 30%.

The Construction sector saw a large increase in inventory levels, rising almost 70% since 2012 and is significantly under performing the UK average of 29 days. Retail and Wholesale, the sector with the highest number of companies in the Midlands, has the highest DIO in the UK, potentially due to long transit times for stock coming from the Far East.

Pharmaceuticals companies in the Midlands were still not able to recover from the large reduction in DPO seen in 2011 and still under perform versus the UK average of 34 days.



35

Midlands companies could release on average 5% to 7% of revenue as cash from working capital

Performance within the sectors varies greatly, ranging from an upper quartile of 21% to a lower quartile of -3% working capital ratio.

Automotive and Retail and Wholesale companies account for c35% of the region they present the largest opportunity sectors, with potential cash release of £6.4bn.

If all companies in the region could achieve Q1 performance, £12.5bn of cash would be generated.


Upper quartile (average

wcap ratio)

Median (average

wcap ratio)

Lower quartile (average

wcap ratio)


next quartile (£m)


(£m)

Automotive 96 3% 7% 12% 2.4 3.2

Retail and Wholesale 118 4% 8% 18% 2.0 3.2

Construction 37 1% 7% 18% 1.4 1.7


Services 106 1% 6% 16% 1.0 1.5

Travel and Leisure 33 (3)% 0% 2% 0.5 0.6

Food, Drink and Tobacco 28 4% 7% 12% 0.2 0.3

Technology, Media and Telecoms 27 7% 9% 17% 0.2 0.2

Transport and Logistics 24 (1)% 2% 5% 0.1 0.2

Consumer Goods 14 5% 9% 15% 0.1 0.1





Wales and West

37

Wales and West have the highest levels of working capital in the UK

Wales and West has the highest average working capital days of all the regions in the UK at 50 days. This is despite an improvement of one day in 2013, and five days since 2010.

The region has a wide range of sectors. However the high working capital days are driven by the prevalence of sectors with a high cash requirement, Industrial Products and Construction, which constitute 18% of the companies in the region, and poor performance in sectors typically with a low cash requirement (Food, Drink and Tobacco, TMT, Energy and Utilities).

Wales and West: Days working capital

Wales and West: Companies analysed, by sector

2009

2010

2011

2012

2013

51 55 55

51 50

46

2225

46

30

23

79

62 48

Technology, Media & Telecoms Energy & Utilities

Food, Drink and TobaccoConstruction

Industrial ProductsAutomotive

Other ServicesRetail & Wholesale




Year-on-year changes in working capital were negligible in Wales and West

Year-on-year movement in working capital days, 2012 – 2013Little change was seen in any sector over 2013.

Notable working capital improvements were achieved in three sectors, with Energy and Utilities reducing their average days by 4.8 (c11%).

Working capital deteriorated in five sectors over the year, with TMT increasing by 6.1 days (c13%).

(0.4)

Tran

spor

t & L

ogis

tics

(0.8)

Aut

omot

ive

(2.0)

Ser

vice

s

0.8

Ret

ail &

Who

lesa

le

(2.8)

Con

stru

ctio

n

1.0

Indu

stria

l Pro

duct

s

0.1

Food

, Drin

k &

Tob

acco

0.4

Trav

el &

Lei

sure

6.1

Tech

nolo

gy, M

edia

& T

elec

oms

(4.8)

Ene

rgy

& U

tiliti

es

39

Average working capital days by sector, 2013Only two sectors in Wales and West performed better than the UK average, Travel and Leisure and Retail and Wholesale.

However, every other sector performed worse than the UK average. Energy and Utilities ended 2013 with an average working capital days of 38, over 50% higher than the UK average, and TMT ended with 52 days, over 2.5 times higher than the UK average of 20.

(6)

21 24

35 38 46 48 52

61

107

Tran

spor

t & L

ogis

tics

Aut

omot

ive

Ser

vice

s

Ret

ail &

Who

lesa

le

Con

stru

ctio

n

Indu

stria

l Pro

duct

s

Food

, Drin

k &

Tob

acco

Trav

el &

Lei

sure

Tech

nolo

gy, M

edia

& T

elec

oms

Ene

rgy

& U

tiliti

es


Average DSO by sector, 2013: Wales and West Average DIO by sector, 2013: Wales and West

Average DPO by sector, 2013: Wales and West

010

12 16 20

36 4151 53

63 64 67

20304050607080

Tran

spor

t & L

ogis

tics

Trav

el &

Lei

sure

Ret

ail &

Who

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k &

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Tech

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stru

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010 4 7

1319 21

3443

57

71

3

20304050607080

Food

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k &

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.

05

10

1922 24

27 30 32 32 3338

1015202530354045

Trav

el &

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sure

Ene

rgy

& U

tiliti

es

Tran

spor

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ogis

tics

Indu

stria

l Pro

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Tech

, Med

ia &

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co

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Ret

ail &

Who

lesa

le

Con

stru

ctio

n

Aut

omot

ive

Food

, Drin

k &

Tob

.

Performance was flat across all three working capital cycles from 2012 to 2013.

On the whole, DSO performance across the sectors in the Wales and West region improved over the year, however no sector saw a notable movement in performance. Energy and Utilities DSO remains inflated as the continuing squeeze on household income makes it more difficult for customers to pay.

Inventory levels increased marginally compared to 2012. Food, Drink and Tobacco continued a five year rise and remains high in comparison to the global average for the sector of 37 days.

For DPO, the Travel and Leisure sector has not been able to recover since falling by 15 days in 2012, and TMT still shows significant improvement potential in comparison to the UK average of 40 days.



41

Companies in Wales and West could release 10% to 13% of revenue as cash from working capital

Performance varies across companies in all sectors. The largest range is in Services, but it is the Food, Drink and Tobacco industry which provides the greatest area of potential opportunity (up to £4.4bn if they all move to the top performance quartile).

The average opportunity per company is between £25m and £32m.

Total cash tied up in the region is £10.4bn, if all companies align to Q1 performance.


Upper quartile


Median (average

wcap ratio)

Lower quartile



next quartile (£m)


(£m)





Services 48 3% 8% 22% 11.1 14.4


Automotive 46 6% 9% 12% 4.4 6.8

Construction 25 6% 9% 15% 7.4 9.2


Travel & Leisure 10 -3% -3% 3% 2.5 2.7




London

43

Working capital in London was on an improving trend until 2013

London has average working capital performance when compared with other UK regions. Average working capital days have increased by two since 2012 to 31 days. This ends a downward trend since 2009.

32% of companies in the region operate in the Services sector which strongly influences London’s average working capital days, 17% in Retail and Wholesale and 12% in TMT.

This study excludes the financial services, real estate and insurance sectors.

London: Days working capital London: companies analysed, by sector

2009

2010

2011

2012

2013

34

32

30 29

31

232

8095

73

163

68

218

425

Technology, Media & Telecoms Oil & Gas

Travel & Leisure

Transport & Logistic

Construction

Other Services

Retail & Wholesale




9 out of 15 sectors saw a year-on-year deterioration in the level of working capital in London...

Year-on-year movement in working capital days, 2012 – 2013Most sectors saw minimal changes in average working capital days since 2012.

Six sectors saw working capital improvements greater than a day, with Consumer Goods sector decreasing by 15.0 days (32%) over the period.

Nine sectors experienced a deterioration in working capital. Energy and Utilities increased by 7.3 days, almost 50% higher than its 2012 level.

(15.0)

2.0

Aut

omot

ive

(6.5)

Food

, Drin

k &

Tob

acco

Con

sum

er G

oods

(2.0)P

harm

aceu

tical

s(2.1)

Ser

vice

s(0.5)

Tran

spor

t & L

ogis

tics

1.5

Trav

el &

Lei

sure

0.2

Indu

stria

l Pro

duct

s

1.8

Oil

& G

as

2.1

Met

als

& M

inin

g

2.9

Ret

ail &

Who

lesa

le

7.1

Tech

nolo

gy, M

edia

& T

elec

oms

(0.1)

Con

stru

ctio

n

7.3

Ene

rgy

& U

tiliti

es

4.6

Hea

lthca

re S

ervi

ces

45

Average working capital days by sector, 2013

(3)

12 19 21 23 24 26

32 35 40

45 49

58

71

97

Trav

el &

Lei

sure

Tran

spor

t & L

ogis

tics

Tech

nolo

gy, M

edia

& T

elec

oms

Aut

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Ene

rgy

& U

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Oil

& G

as

Ret

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lesa

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Con

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Met

als

& M

inin

g

Hea

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re S

ervi

ces

Ser

vice

s

Con

stru

ctio

n

Indu

stria

l Pro

duct

s

Pha

rmac

eutic

als

Food

, Drin

k &

Tob

acco

On the whole, the London trend followed the UK trend with many sectors performing very similarly.

However, Food, Drink and Tobacco and Consumer Goods under performed achieving working capital days over 1.5 times higher than the UK average.


Average DSO by sector, 2013: London Average DIO by sector, 2013: London

Average DPO by sector, 2013: London

010

1423 25 25 28 30 31

36 3646

51 5459 62 64

203040506070

Aut

omot

ive

Trav

el &

Lei

sure

Ret

ail &

Who

lesa

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Met

als

& M

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Tech

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Pha

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als

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0102030405060

80

4 6 10 1323 23 25

33 3443 43

53 55

73

3

70

Ret

ail &

Who

lesa

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Tran

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ogis

tics

Ene

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& U

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Con

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Indu

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s

Hea

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re S

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ces

Food

, Drin

k &

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.

Tech

, Med

ia &

Tel

co

0

10

20

30

1219

26 29 2929 30 33 33 3336 36 38

46 4640

50

Ser

vice

s

Trav

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as

Met

als

& M

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Hea

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ces

Food

, Drin

k &

Tob

.

Tech

, Med

ia &

Tel

co

Aside from Consumer Goods, working capital performance across all three cycles remained largely flat since 2012.

DSO levels in the Consumer Goods sector in London fell by over 40% to 36 days, bringing it more in line with the UK average of 31 days and indicating a continuing focus on cash despite pressure on margins for this sector.

In addition, inventory performance improved by almost 40%, however it is still a couple of days higher than the UK and global average (31 days for both).

For DPO, the Consumer Goods sector performance deteriorated significantly over the year, falling by almost 40%. This was likely driven by more purchases from the Far East on shorter payment terms. In addition, TMT’s DPO fell by 30% despite good performance historically.



47

Companies in London could release an average of 6% and 7% of revenue as cash from working capital

The London region has the largest number of companies in our Working Capital Survey. Similar to other regions, these companies showed a wide range of performance over the year, with a 13% gap between upper and lower quartiles of working capital ratio performance on average.

Due to the high revenues of Oil and Gas companies, significant potential opportunity lies in this sector for companies to improve to the sector Q1 performance.

The average opportunity per company is close to £73m, if they can move to the upper performance quartile. This is by far the highest opportunity of any region in the UK.


Upper quartile


Median (average

wcap ratio)

Lower quartile



next quartile (£m)


(£m)

Oil & Gas 68 1% 8% 17% 504.3 534.7

Services 425 2% 9% 18% 20.4 30.9

Metals & Mining 24 2% 8% 18% 221.1 386.3



Food, Drink & Tobacco 37 5% 13% 19% 106.5 148

Construction 80 0% 6% 17% 38.1 57.1



Travel & Leisure 95 -4% 0% 2% 16.0 21.3



Healthcare Services 18 -1% 5% 12% 41.9 67.7

Automotive 30 1% 5% 14% 12.7 16.1

Consumer Goods 13 4% 7% 20% 29.3 34.2

Total for selected sectors 1,330 55.2 72.6



South East

49

Working capital levels have been gradually deteriorating in the South East

The South East has the second best performance of all of the regions in the UK, with an average working capital of 27 days. However, the South East was one of only three regions that saw an increase in average days in 2013. This was the second year in a row that performance has deteriorated.

Similar to the North, the predominant sectors are Services and Retail and Wholesale, both of which have a low cash requirement.

South East: Days working capital South East: Companies analysed, by sector

25 24 2425

27

2009

2010

2011

2012

2013

91

111

71 120100

306

224

321

Transport and Logistics

Technology media and telecoms

Transport and Logistics

Industrial Products

Automotive

Other

Services

Retail & Wholesale




10 out of 17 sectors in the South East have deteriorated year-on-year

Year-on-year movement in working capital days, 2012 – 2013The main sectors in the South East have had varied working capital performance over the last year.

Seven sectors have improved, with Aerospace and Defence improving by 6.8 days and Consumer Goods by 6.4 days since 2012.

Ten sectors have deteriorated over the period, with a significant worsening in the Energy and Utilities sector where working capital days have tripled, and the Construction and Chemicals sectors which have increased by over a third.

(6.8)

Aer

ospa

ce &

Def

ence

(2.1)

Aut

omot

ive

(2.0)

Food

, Drin

k &

Tob

acco

(6.4)

Con

sum

er G

oods

(2.8)P

harm

aceu

tical

s(1.1)

Ser

vice

s

(0.6)

Tran

spor

t & L

ogis

tics

0.9

Farm

ing,

Fis

herie

s &

For

estr

y

0.7

Trav

el &

Lei

sure

6.4

Indu

stria

l Pro

duct

s

1.9

Oil

& G

as

3.9

Ret

ail &

Who

lesa

le

12.8

Che

mic

als

1.3

Tech

nolo

gy, M

edia

& T

elec

oms

9.2

Ene

rgy

& U

tiliti

es

11.3

Hea

lthca

re S

ervi

ces

10.6

Con

stru

ctio

n

51

Average working capital days by sector, 2013The South East region also follows the UK trend with only Travel and Leisure having negative working capital days.

Most sectors perform better than the UK trend, especially Food, Drink and Tobacco and Farming, Forestry and Fishing.

Oil and Gas, Consumer Goods and Healthcare Services under performed versus the UK trend indicating potential opportunity to improve.

(9)

Trav

el &

Lei

sure

27

Aut

omot

ive

28

Food

, Drin

k &

Tob

acco

42

Con

sum

er G

oods

68

Pha

rmac

eutic

als

31

Ser

vice

s

58

Aer

ospa

ce &

Def

ence

11

Tran

spor

t & L

ogis

tics

30

Farm

ing,

Fis

herie

s &

For

estr

y

52

Indu

stria

l Pro

duct

s

32

Oil

& G

as

29

Ret

ail &

Who

lesa

le

13

Tech

nolo

gy, M

edia

& T

elec

oms

14

Ene

rgy

& U

tiliti

es

43

Che

mic

als

53

Hea

lthca

re S

ervi

ces

39C

onst

ruct

ion


Average DSO by sector, 2013: South East Average DIO by sector, 2013: South East

Average DPO by sector, 2013: South EastAside from a couple of sectors, performance across all three working capital cycles was largely in line with prior years results.

The Aerospace and Defence sector achieved a dramatic reduction in DSO since 2012, bringing it back in line with the global average of 41 days.

Inventory levels in the Chemicals sector are rising again following a dramatic fall from 2010 to 2011, but companies are still performing well in this sector.

Energy and Utilities DPO fell for the third year in a row and is now 50% below global average of 32 days.



010

15203040506070

Trav

el &

Lei

sure

Aut

omot

ive

Tran

spor

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ogis

tics

Ret

ail &

Who

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Oil

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Che

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als

Food

, Drin

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.

Farm

ing,

Fis

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, Etc

Indu

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s

Tech

, Med

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Tel

co

Con

sum

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oods

Ser

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s

Aer

ospa

ce &

Def

ence

Hea

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re S

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47

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1316 16

19 1922 23 25 26

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44

53

Companies in the South East could release on average 3% to 5% of revenue as cash from working capital

Similar to the North, there is a wide range of performance within the sectors in the South East, with many sectors ranging by c10% from lower to upper quartile working capital ratio.

The Services and Retail and Wholesale sectors have the largest opportunity to improve, with benchmarking indicating a potential £11.8bn cash for under performing companies in these sectors to improve to Q1 performance. The average opportunity per company is £14m for companies who move to the next performance quartile, to £22m if companies move to the top performance quartile.

Total cash tied up in the region is £28.7bn.


Upper quartile


Median (average

wcap ratio)

Lower quartile



next quartile (£m)


(£m)

Services 321 3% 9% 17% 13.0 20.8


Construction 120 0% 5% 13% 24.4 32.7



Automotive 111 3% 7% 12% 10.1 14.0



Chemicals 28 5% 18% 26% 16.1 33.2

Travel & Leisure 58 -5% -1% 1% 10.5 14.9

Consumer Goods 20 7% 13% 20% 24.3 43.1


Healthcare Services 23 4% 7% 15% 19.9 23.1


Farming, Fisheries & Forestry 31 4% 6% 10% 7.7 9.8

Oil & Gas 14 8% 10% 14% 22.0 16.1

Aerospace & Defence 10 13% 18% 27% 8.4 11.1

Total for selected sectors 1,321 14.2 21.7



Northern Ireland and Isle of Man

55

The deterioration in working capital between 2009 and 2011 has only partly recovered since 2011

Northern Ireland and Isle of Man has seen one of the largest improvements in average working capital days, reducing from 35 to 34 days in 2013. However, this is still 4 days short of best performance achieved in 2009 of 30 days.

The predominant sectors in the region, based on the companies used in the survey, are the Retail and Wholesale and Services sectors that account for over 50% of companies.

Northern Ireland and Isle of Man: Days working capital

Northern Ireland and Isle of Man: Companies analysed, by sector

19

7

7

5

6

18

9

Food, Drink and Tobacco Energy & Utilities

Industrial Products

Automotive

Other Services

Retail & Wholesale


2009

2010

2011

2012

2013

30

34

37 35 34



4 out of 6 sectors have shown a year-on-year improvement in working capital...

Year-on-year movement in working capital days, 2012 – 2013Four sectors saw improved working capital days in

2013, and these were the sectors that already have lower working capital. Best performer was the Automotive sector which improved their performance by 7.0 days (17%).

Working capital worsened slightly in 2 sectors, however only by up to 5%.

(7.0)

Aut

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(4.7)

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(1.8)

Ret

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Ser

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s

2.3

Food

, Drin

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acco

1.2

Indu

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57

Average working capital days by sector, 2013Most of the sectors in the region outperformed the UK average. Good performance was seen in the Retail and Wholesale sector, which was almost three times lower, Energy and Utilities which was 50% lower, and the Food, Drink and Tobacco sector which was 16 days better than the average.

However, the Automotive and the Services sectors under performed in comparison to the UK average.

34

Aut

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13

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10

Ret

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48

Ser

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44

Food

, Drin

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acco

48

Indu

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s


Average DSO by sector, 2013: Northern Ireland and Isle of Man Average DIO by sector, 2013: Northern Ireland and Isle of Man

Average DPO by sector, 2013: Northern Ireland and Isle of ManDespite little change since 2012, the Northern Ireland and Isle of Man region has mixed sector performance when compared to other UK regions.

For most sectors, DSO performance is in line with the UK average, however good performance has been achieved by companies in the Industrial Products sector which significantly outperforms other UK regions and the global average (43 days).

However when it comes to inventory performance, Industrial Products performs the worst at 64 days, 20 days above the UK average.

DPO performance is mixed across the sectors. The Food, Drink and Tobacco, Retail and Wholesale and Services sectors all have the lowest DPO of the UK regions, although the Industrial Products and Automotive sectors have the highest.



0102030405060

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54

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59

Northern Ireland and Isle of Man companies could release 3% to 5% of revenue as cash from working capital

Company performance varied throughout the sectors within Northern Ireland and Isle of Man. Services and Automotive sectors showed the smallest range, whereas Retail and Wholesale and Industrial Products appear to have the largest range of performance.

There is a potential to release £317m cash if all companies improve to sector Q1 performance.


Lower quartile


Median (average

wcap ratio)

Upper quartile



next quartile (£m)


(£m)



Energy & Utilities 6 -2% 0% 5% 7.4 9.1


Services 9 12% 13% 17% 2.7 3.4

Automotive 7 9% 11% 12% 1.7 2.2

Total for selected sectors 53 2% 10% 15% 3.6 6.0


How we can help?



How can we support you?

Complete a working capital benchmarking exercise to compare performance against peers and identify potential improvement opportunities.

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.

Assist the realisation of sustainable working capital reduction by implementing robust, efficient and collaborative processes.

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.

1.

2.

3.

4.

63

Cash culture and visibility – The aim is to create a culture whereby cash is important and performance is clearly visible

Key cash driver focus areas:

• Cash related management incentives

• Top management sponsorship

• Clear roles and accountability’s

• Corporate Working capital framework

• Defined targets per division/country

• Working capital reporting dashboards by division/country

Examples of areas where PwC could help you to release cash from working capital

Accounts payable

• ‘Centre Led’ procurement

• Consolidated spending

• Supply Chain Finance

• Purchasing channels (to avoid contract leakage)

• Early payment prevention

• Supplier payment terms standradisation and optimisation programmes across global supplier base

• Improved visibility of cash/cost trade offs across the supplier base to enable conscious optimal decision making

• Assistance with establishment and optimisation of supply chain finance programmes (through an association with an independent finance provider)

Accounts receivable

• Credit risk policies

• Billing timeliness and quality

• Systems-based dispute resolution

• Dispute root cause elimination

• Good contract management (for large scale project type businesses)

• Aligned and optimised customer payment terms across global customer base

• Timely order entry and order processing

• Formalised collections strategy with tailored and proactive collections approach

• Dispute management process to avoid/minimise queries resulting from complex products, variants portfolio, and payment delays

Inventory • Lean and agile supply chain strategies

• Global manufacturing footprint

• Demand management and forecasting techniques

• Production planning and batch size optimisation

• Accurate tracking of inventory segmentation per product group

• Balanced cash, cost and service

• Sales and operations planning (S&OP)

• Standardisation of components

• Extended supply chain integration

• Collaborative replenishment strategies


To discuss how you can use working capital to free up cash for growth, please get in touch with one of our regional working capital experts

Glen Babcock T: +44 (0)20 7804 5856

E: [email protected]

Stephen TebbettT: +44 (0)20 7213 5511


Christian TerryT: +44 (0)20 7804 1905


Neil EversteadT: +44 (0)7554 408475


Niall CooterT:+44 (0)1509 60 4319


PwC’s Working Capital Management Group brings together experienced practitioners from across the world. Our people have many years of experience at delivering world class working capital performance both as consultants and from time spent in industry.

To find out more, please go to www.pwc.com/working capital

Our Global Working Capital Management team

65

UK

Our global networkAsia

Tze Wee Wee T: +65 6236 4619E: [email protected]

Denmark

Bent Jorgensen T: +45 3945 9259E: [email protected]

Middle East

Matt Wilde T: +971 50 900 3071E: [email protected]

Switzerland

Reto Brunner T: +41 58 792 1419 E: [email protected]

Austria

Christine Catasta T: +43 1 501 88 1100 [email protected]

Finland

Michael HardyT: +358 50 346 8530E: [email protected]

The Netherlands

Rick van DommelenT: +31 887 926 476E: [email protected]

Turkey

Husnu DincsoyT: +90 212 376 5308 E: [email protected]

Australia

Aileen Savill T: +61 8266 2484 E: [email protected]

France

Francois GuilbaudT: +33 156 578 537 E: [email protected]

Norway

Jonathan PycroftT: +47 952 601 97 E: [email protected]

USA

Paul GaynorT: +1 925 699 5698E: [email protected]

UK

Glen BabcockT: + 44 (0)20 7804 5856E: [email protected]

Belgium

Damien McMahonT: +32 2 710 9493 E: [email protected]

Germany

Joachim EnglertT: +49 699 585 5767 E: [email protected]

Spain

Josu EcheverriaT: +34 91 598 4866E: [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]

Rob KortmanDirectorT: +44 (0)20 7213 2491 E: [email protected]

Kim StubbsDirectorT: +44 (0)20 7213 5502E: [email protected]

Robert SmidPartnerT: +44 (0)20 7804 3598E: [email protected]

Simon BoehmeDirectorT: +44 (0)20 7212 6927E: [email protected]

Stephen TebbettDirectorT: +44 (0)20 7213 511E: [email protected]

Daniel WindausPartnerT: +44 (0)20 7804 5012E: [email protected]


Appendices

67

Basis of calculations and limitations

Basis of calculations

This study provides a view of global and UK working capital performance and is based on the research of the largest companies in the UK. For consistency reasons, and to be able to add the individual ratios together, we have calculated DSO, DPO and DIO based on sales.

The financial services, real estate and insurance sectors are excluded.

DSO (Days Sales Outstanding) 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.

= (trade receivables/sales * 365).

DPO (Days Payables Outstanding) is an indicator of how long a company takes to pay its trade creditors.

= (trade payables/sales * 365).

DIO (Days Inventories On-hand) 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.

= (total inventories/sales * 365).

DWC (Days Working Capital) = DSO + DIO – DPO.

NWC as % of Sales = (receivables + inventories – payables)/sales.

Calculation of improvement potential The potential improvement opportunity is calculated using the performance of the upper quartile performers (i.e. the top 25%) as a benchmark, and moving, on a sector basis, all companies outside upper quartile performers to the performance of the upper quartile.

ROCE (Return on Capital Employed) Establishes the relationship between the profit and the capital employed. It indicates the percentage of return on capital employed in the business and it can be used to show the overall profitability and efficiency of the business.

= (operating profit – tax)/(total assets – current liabilities).

Limitations of this study

For the global study, companies have been assigned to countries based on the location of their headquarters. Although a significant part of sales and purchases might be realised in that country, it does not necessarily reflect typical payment terms or behaviour in that country.

The UK and global research is based on publicly available information, all figures are financial year-end figures. Due to disproportionate management efforts to improve working capital performance towards year-end (also referred to as ‘window dressing’) the real underlying working capital requirement within reporting periods might be higher. Also off-balance-sheet financing or the effects of asset securitisation (e.g. receivables) have not been taken into account.


DSO averages by sector and region

Sectors Scotland North Midlands Wales & West London South East Northern Ireland & Isle of Man

Aerospace & Defence 19 91 26 48 47

Automotive 14 14 25 12 14 15 30

Building Products 58 60 6 55 76 33

Chemicals 28 32 54 39 37 33 51

Construction 70 52 66 64 62 58 42

Consumer Goods 29 25 61 27 36 43 61

Energy & Utilities 28 30 34 53 31 29 28

Farming, Fisheries & Forestry 41 33 33 73 54 40 22

Food, Drink & Tobacco 36 37 30 63 51 37 42

Healthcare Equipment & Supplies 71 21 9 51

Healthcare Services 5 31 39 39 46 47

Industrial Products 63 50 46 51 36 41 26

Metals & Mining 64 19 38 52 25 24 26

Oil & Gas 53 30 66 83 30 27

Pharmaceuticals 55 54 45 45 64 59 81

Retail & Wholesale 26 25 31 20 25 26 22

Services 52 53 42 67 59 46 54

Technology, Media & Telecoms 40 56 36 41 54 43 61

Textiles, Apparel & Luxury Goods 65 45 40 57 23 65 57

Transport & Logistics 23 56 29 36 28 21

Travel & Leisure 12 35 7 16 23 15 38

All sectors 40 35 33 42 36 36 34

69


Aerospace & Defence 26% 16% 6% (8% (7)%

Automotive (1)% (2)% 6% (3)% 1% (7)% 11%

Building Products 11% 2% (45)% 0% 10% 0%

Chemicals (9)% (5)% 8% (9)% (1)% (9)%

Construction 21% 6% 11% 19% 10% 14% 28%

Consumer Goods (12)% 1% 6% 1% (13)% 0% 6%

Energy & Utilities 20% 1% (5)% 12% 7% (3)% 20%

Farming, Fisheries & Forestry 4% (26)% (7)% 5% 28% (1)% 36%

Food, Drink & Tobacco (1)% 0% (1)% 0% (1)% 3% 2%

Healthcare Equipment & Supplies 16% (2)% (9)% 5%

Healthcare Services 12% 0% (1)% (5)% (3)% 8%

Industrial Products 4% 1% (1)% 5% (9)% 1% 3%

Metals & Mining 8% (18)% (5)% 0% (4)% (1)% (3)%

Oil & Gas 17% (10)% 5% (5)% (4)% (2)%

Pharmaceuticals (4)% 5% 5% 1% (1)% 7% (3)%

Retail & Wholesale 2% 3% 2% (6)% 5% 11% (5)%

Services 1% 3% (3)% (5)% 6% 0% 2%

Technology, Media & Telecoms (3)% 3% (4)% 0% (4)% 3% 2%

Textiles, Apparel & Luxury Goods 0% 1% (6)% (9)% (1)% 8% 8%

Transport & Logistics (3)% 2% 3% (3)% (2)% (2)%

Travel & Leisure 1% 7% (8)% 0% 7% (6)% 0%

All sectors 5% 2% 1% 0% (2)% 3% 2%

DSO 4 year CAGR


DIO averages by sector and region



Automotive 49 54 42 57 53 46 51


Chemicals 79 49 37 44 34 29 87

Construction 73 23 51 19 25 25 26

Consumer Goods 20 31 42 37 33 31 23







Metals & Mining 165 4 48 37 43 2 23

Oil & Gas 5 24 28 107 23 20



Services 14 7 21 13 4 7 27




Travel & Leisure 4 3 14 3 3 2 26

All sectors 26 26 35 35 26 19 27

71

DIO 4 year CAGR


Aerospace & Defence (6)% 4% 4% 4% 8%

Automotive 6% 2% (6)% 1% 3% 0% 1%

Building Products (4)% 1% (40)% 4% (13)% (1)%

Chemicals (2)% 3% (1)% 4% 0% (9)%

Construction (3)% (3)% 17% (4)% 3% 5% (8)%

Consumer Goods 11% (2)% 9% 0% (5)% 2% (4)%

Energy & Utilities 49% (4)% (6)% 3% 24% (4)% (4)%

Farming, Fisheries & Forestry 3% (8)% 6% 5% 19% (1)% 20%

Food, Drink & Tobacco (10)% 2% 0% 2% (2)% (4)% 2%

Healthcare Equipment & Supplies 74% 13% (11)% 5%

Healthcare Services 9% (12)% (2)% (9)% 14% 21%

Industrial Products (6)% 0% (8)% 1% (3)% (2)% (2)%

Metals & Mining 70% (43)% (9)% 1% 0% 43% 9%

Oil & Gas (9)% (1)% 3% 28% (7)% 1%

Pharmaceuticals (5)% 3% 12% (6)% 3% (8)% 8%

Retail & Wholesale 2% 4% 3% (1)% 1% 9% 2%

Services (2)% 0% 3% 2% (3)% (1)% 4%

Technology, Media & Telecoms (11)% 2% 0% (11)% (9)% 6% 8%

Textiles, Apparel & Luxury Goods (4)% 1% 1% (2)% 7% (6)% 14%

Transport & Logistics (4)% (1)% 13% 18% 4% 2%

Travel & Leisure 1% (3)% 32% 2% (12)% 1% 0%

All sectors (1)% 0% 0% (1)% (2)% 2% 2%


DPO averages by sector and region



Automotive 28 35 44 33 46 34 48


Chemicals 52 23 35 27 23 19 43

Construction 43 42 65 38 38 44 34

Consumer Goods 30 51 54 37 36 33 20







Metals & Mining 65 17 24 52 33 3 11

Oil & Gas 19 30 20 8 29 16



Services 33 23 28 32 19 23 32




Travel & Leisure 25 46 19 24 29 26 29

All sectors 23 35 36 27 31 28 28

73

DPO 4 year CAGR


Aerospace & Defence (27)% 8% 4% 0% (4)%

Automotive 0% 0% 10% 6% 6% 4% 9%

Building Products (7)% 3% (48)% 5% 15% (1)%

Chemicals (4)% 1% (2)% (2)% 2% (8)%

Construction 9% 7% 3% 2% 2% (2)% (21)%

Consumer Goods 25% 8% 2% 2% (8)% (1)% 17%

Energy & Utilities 31% 6% 10% 14% 5% (11)% 12%

Farming, Fisheries & Forestry 3% (5)% 2% 4% 10% 5% 69%

Food, Drink & Tobacco 4% 8% 7% (3)% (2)% 2% (1)%

Healthcare Equipment & Supplies (10)% 1% 20% 9%

Healthcare Services (2)% 11% 9% (10)% 4% 14%

Industrial Products 1% 4% 0% (1)% (8)% (3)% 8%

Metals & Mining 28% (19)% (2)% 14% 3% (30)% 1%

Oil & Gas 5% (1)% 6% 20% (3)% 2%

Pharmaceuticals 1% (4)% (17)% (8)% 10% 3% (2)%

Retail & Wholesale (1)% 1% (1)% 1% 1% 8% (1)%

Services 4% 0% 0% 5% 1% 2% (2)%

Technology, Media & Telecoms (26)% 6% 1% (7)% (6)% 14% (18)%

Textiles, Apparel & Luxury Goods 0% 1% (7)% (14)% 4% (10)% 14%

Transport & Logistics 1% (2)% 5% (5)% 3% (4)%

Travel & Leisure 1% (2)% 5% (10)% 2% (5)% 1%

All sectors 3% 3% 2% 0% (1)% 3% 0%


DWC averages by sector and region



Automotive 35 33 23 35 21 27 34


Chemicals 55 57 57 57 48 43 95

Construction 100 33 52 46 49 39 34

Consumer Goods 19 4 49 26 32 42 64







Metals & Mining 164 6 63 37 35 23 38

Oil & Gas 39 24 74 182 24 32



Services 32 37 35 48 45 31 48




Travel & Leisure (9) (8) 2 (6) (3) (9) 35

All sectors 43 26 32 50 31 27 34

75

DWC 4 year CAGR


Aerospace & Defence 32% 12% 5% (4)% 0%

Automotive 9% 2% (15)% (5)% (3)% (8)% (2)%

Building Products 11% 1% (39)% (5)% 1% 0%

Chemicals (4)% (1)% 7% (4)% (2)% (10)%

Construction 5% (2)% 42% 24% 15% 51% 31%

Consumer Goods (22)% (32)% 15% (2)% (8)% 2% 0%

Energy & Utilities 24% (3)% (9)% 10% 29% 17% 22%

Farming, Fisheries & Forestry 3% (7)% (4)% 15% 31% (6)% 16%

Food, Drink & Tobacco (10)% (6)% (9)% 3% (2)% (2)% 3%

Healthcare Equipment & Supplies 32% 9% (20)% 4%

Healthcare Services 29% (7)% (20)% 2% (3)% 10%

Industrial Products 0% (1)% (7)% 5% (4)% 0% (6)%

Metals & Mining 39% (40)% (9)% (10)% (5)% 22% 2%

Oil & Gas 19% (12)% 4% 7% (7)% (2)%

Pharmaceuticals (6)% 12% 57% (1)% (3)% 0% 0%

Retail & Wholesale 5% 8% 8% (6)% 5% 11% (5)%

Services (2)% 5% (2)% (9)% 8% (2)% 7%

Technology, Media & Telecoms 2% (3)% (5)% (4)% (1)% (12)% 33%

Textiles, Apparel & Luxury Goods (3)% 1% 1% (5)% 6% 3% 9%

Transport & Logistics (12)% 5% 7% 6% (6)% 4%

Travel & Leisure 1% (20)% 31% (25)% (8)% (5)% 0%

All sectors 2% (1)% (1)% 0% (3)% 2% 3%


Notes

77

Notes

www.pwc.com/workingcapitalPwC UK helps organisations and individuals create the value they’re looking for. We’re a member of the PwC network of firms in 157 countries with more than 184,000 people committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com/uk.

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, PricewaterhouseCoopers LLP, its members, employees and agents do 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.

© 2014 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to the UK member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

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