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2015 Europe REL working capital survey

Sortie de l'étude annuelle comparant le BFR des 1000 premiers groupes européens cotés de REL (texte et étude en anglais).

In 2015, REL have developed the measure of working capital performance with the use of the Cash Conversion Cycle

- REL will be turning 40 this year, and as the world’s foremost cash flow experts we continue to lead the way in Working Capital management

- This year, in performing the REL 2015 working capital survey, we have used an extensive data set to allow us to calculate the Cash Conversion Cycle (CCC)
. Previous and similar studies have used Days Working Capital (DWC) as the primary measure of performance
. When calculating Days Working capital, revenue is traditionally used as the common denominator for working capital comparison. In the Cash Conversion Cycle, Cost of Goods Sold (COGS) is used to assess Inventory & Payables
. REL believe that COGS is a more accurate approach to measure inventory and payables performance than revenue

- While Days Working Capital is a measure of working capital coverage, the Cash Conversion Cycle looks at the time (in days) that cash is actually tied up in the business
. A measure of the amount of time each net input dollar is tied up in the production and sales process before it is converted into cash through sales to customers

- As leaders in Working Capital development, REL believe that the Cash Conversion Cycle is a more accurate representation of real working capital performance and the true opportunity that exists.

Working Capital performance has demonstrated the 2nd improvement in row, continuing the gains made in 2013 as cash regains importance on the corporate agenda

- The top 947 companies by revenue are used in this years European study

- Working Capital performance has continued an improvement trend from 2013
. A positive improvement in the Cash Conversion Cycle (CCC) year on year of 5.5% from 2013
. Two of the working capital elements, payables and receivables, improved for the European REL 1000, driving this year’s improvement

- However, despite the positive working capital trend, the improvement opportunity still stands at close to €1.1 trillion, the equivalent to 7.8% of FY 2014 European GDP of €13.92 trillion
. €468 B opportunity within payables, a further €320 B available in receivables and €304 B in inventories

- With European GDP increasing by 1.3% higher revenues reported (+3.1%), companies seem to struggle to keep costs and profit margins under control (Gross Margin has deteriorated by 1.7%)
. Costs are going up: COGS (+3.9%), slightly more than Revenue, at the same time EBIT Margin has deteriorated by 2.7%

- Although improvements are seen in working capital, the total debt continues to rise (+5.2%), this being reflected in the cash positions
. Cash on hand and free cash flow are up (cash on hand +6.2%), (free cash flow +13.7%)

- Sustaining working capital improvements remains a key issue Only 13.1% of companies within REL 1000 improved CCC performance for 3 consecutive years
. 63 companies (7%) have seen performance steadily deteriorate during the same time period.

Read more: download below the survey (PDF 53 pages)

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Jeudi 9 Juillet 2015

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