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Working Capital – the cheapest source of cash 2017 Middle East Working Capital study
Key findings
Working capital performance has continued to deteriorate further across key Middle East territories
1
2 Middle market companies have seen a significant deterioration in working capital performance
Top working capital performers in each sector continue to widen their lead against their peers across key financial metrics
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4
Despite the overall negative working capital trend, there are companies in each sector that have been able to improve their working capital performance
An untapped source of cash Working capital performance has deteriorated significantly, each quarter, since the oil price decline in Q414 Since our last study, the Middle East has seen a continued lower oil price environment, an overall decline in revenues for those companies in our survey, and a further deterioration of working capital performance. FY16 has seen further 9 day (7%) deterioration in working capital performance, a cumulative 14 day (11%) deterioration since FY14. Most interestingly our latest study of working capital performance shows that while smaller companies were initially impacted by the lower oil price environment in FY15, FY16 has seen a significant deterioration of working capital performance for larger companies. Our study also however demonstrates that regardless of size or sector companies can improve their working capital performance. In addition to the cash benefits from better working capital management, leading working capital performers have demonstrated better KPIs across all key financial metrics. Working capital performance is often cited as one of the best indicators to demonstrate the quality of management.
Net Working Capital performance across regions, sectors and company size categories NWC days trend and oil price development 100
100 87
90
75
60
135
130
126
62
123
123
122
130
128
125
54
49
50
45
46
44
40
120 115
30
110
20
105
10 0
140
Days
USD/bbl
70
135
133
80
137
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
100
NWC days
Crude Oil – Brent (Average of LTM daily closing quotes)
Quarterly NWC days by country (19%) 180 +11%
160 140
Days
120
+4%
+11% +11%
0%
+18%
+14%
100
(26%)
80
+39%
60 40 20 0 Kuwait 4Q14
1Q15
2Q15
Saudi Arabia
Qatar
Oman 3Q15
4Q15
1Q16
2Q16
United Arab Emirates
3Q16
4Q16
Quarterly NWC days development by company size category (indexed) 130
120
110
100
90
80 4Q14
1Q15
2Q15 Small
3Q15
4Q15 Mid
Large
1Q16 Very large
2Q16
3Q16
4Q16
NWC performance improvers vs. non-improvers 2015-2016 by sector Transportation & logistics
69%
Communications
31%
55%
Hospitality & leisure
48%
51%
49%
Energy, utilities & Mining Aerospace, defence & security
50%
Automotive
50%
Retail & consumer Chemicals Metals Pharmaceuticals & life sciences
45%
52%
50% 50%
46% 44%
54% 56%
43%
57%
40%
60%
37%
Industrial manufacturing Technology Engineering & construction
63%
33%
67%
33%
67%
14%
Healthcare
86% 100%
Forest, paper & packaging Improvers
Non-Improvers
How we can help Phases in the journey 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
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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
Contact us Middle East Deals Advisory
Laurent Depolla Partner, Deals Advisory
E:
[email protected]
Matthew Wilde Partner, Deals Advisory E:
[email protected]
Erwan Colder Partner, Deals Advisory E:
[email protected]
Middle East Working Capital team
Mihir Bhatt
Director, Deals Advisory E:
[email protected]
Matti Kasi
Senior Manager, Deals Advisory E:
[email protected]
Henri Jansson
Assistant Manager, Deals Advisory E:
[email protected]
Global Working Capital team
Daniel Windaus Partner
E:
[email protected]
Stephen Tebbett Partner
E:
[email protected]
Rob Kortman Partner
E:
[email protected]
Simon Boehme Director
E:
[email protected]
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. © 2017 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. 170815-113432-DR-OS
