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Prepared by the McGrathNicol Advisory Cash and Working Capital Centre of Excellence

1 Welcome

The average working Welcome to the 2017 McGrathNicol Advisory Working Capital Report, capital cycle of the sampled prepared by our Cash and Working Capital Centre of Excellence. companies lengthened in This report profiles the working capital performance of a sample of 160 ASX listed companies across the Building Products, Construction & 2017. This translated to the Engineering, Food & Beverage, Leisure, Media, Mining & Resources, Retail, equivalent of c.$288 million Transport & Distribution and Utilities sectors. The combined market in additional cash being held capitalisation of the companies included is $738.6 billion, representing in working capital. Not all 86% of the total for the selected sectors. The information is based on the most recent full-year results for 2017, compared to 2016 results. businesses in the sample Overall, the amount of cash tied up in working capital increased in 2017 experienced a “lock up” compared to 2016 due to a lengthening of average debtor collection of cash, with 53% actually and inventory cycles across the majority of the profiled sectors, partly delivering an improvement in offset by longer average supplier payment cycles. There were however varying results across companies within sectors and three of the nine metrics, meaning a material sectors analysed showed a net release in cash from working capital. competitive advantage can The most significant improvements were achieved by management be achieved by implementing teams who implemented focused working capital improvement best practice. programs. The following pages provide a break down by sector and highlight the stronger performers relative to the prior year. Information about our Cash and Working Capital Centre of Excellence, including contact details, is provided at the end of this report.

Jason Ireland Partner, McGrathNicol Advisory +61 2 9338 2694 +61 434 144 958 [email protected]

Sean Wiles Partner, McGrathNicol Advisory +61 2 9248 9986 +61 437 097 180 [email protected]

1 Summary

Overall increase in cash tied up in working capital driven by higher inventory and debtor days. Retail, Building Products and Leisure were the only sectors that saw an improvement (lower average DWC). The Food & Beverage and Media sectors experienced the largest increases in average DWC. Average Days Working Capital (DWC) in 2017 was 55.2 days, Construction & Engineering companies collected 8.5 days more representing a 0.6 day increase from 2016 and c.$288 million slowly which flowed to them paying their suppliers 10.5 days in additional cash held in working capital for our sampled more slowly. This resulted in increases in DSO metrics for the companies. Building Products and Transport & Distribution sectors, in turn As shown in the table below, on average, businesses held resulting in DPO increases as they passed on longer terms to more inventory (2.9 day increase in DIO) and took longer to their suppliers. collect cash from their customers (1 day increase in DSO). Four of the nine sectors experienced a “structural funding gap” To help manage the cash flow impact of longer inventory and where they pay their suppliers more quickly than they receive collection cycles, payments to suppliers were delayed (4 day payment from their customers (Construction & Engineering, increase in DPO). Media, Leisure and Transport & Distribution). All but Media Of the sampled companies, 69% reported an increase in managed to close the gap in 2017, however it was achieved by revenue in 2017, whereas only 61% increased EBITDA. Whilst increasing DPO. results and individual companies varied significantly, the Simply increasing the time taken to pay suppliers is not a increase in DSO (the first since we began preparing reports sustainable strategy. Management teams must be focused in 2013) suggests longer terms may have been offered by on ensuring working capital processes and initiatives are (or forced upon) some businesses as they sought to grow or continually improved to minimise the impact of challenges maintain revenue. Close to half of the sampled companies that coming from elsewhere across their supply chain. grew revenue experienced a deterioration in DSO. Results were mixed across all sectors and within sectors, Inventory remains the largest element of working capital for highlighting that achieving an improvement in working capital many sectors. While market forces and business models varied is not only desirable to “keep up” with competitors, it presents significantly across sectors, average DIO increased. an opportunity for material competitive advantage over much After consecutive years of shorter supplier payment cycles of the market. For some companies this opportunity was even (falling DPO), the trend reversed in 2017. Of the sampled more marked with the gap between the “best” and “worst” in companies, 63% took longer to pay their suppliers and over excess of 100 days. Of the profiled companies that reduced 40% did so by more than a week. Six of the nine sectors saw an their DWC, there was a reported focus on driving better increase in DPO. Interestingly, four of those sectors appeared processes which demonstrates that sustainable improvement to do so in response to an increase in DSO, highlighting the requires focus and a concerted program of change. interplay between some sectors. For example, on average, SUMMARY BUILDING

Average DWC by sector 160 (15.6) 140 100 120 128.8 6.2(13.5) 100 86.9 80 (4.0) 94.9 (3.4) 80 1.7 (7.7) (3.4) (2.0) 60 Days 73.6 0.6 60 64.0 4.8 Days 62.5 0.4 62.5 (4.1) 56.9 55.2 40 51.4 54.5 0.8 40 45.7 20 39.7 37.2(9.6) 0.5 - 20 23.9 (20) (29.3) - (40) Building ConstructionCoventry FoodBrickworks & LeisureIncitec Pivot MediaJames HardieMining &GWA GroupRetail Peer Transportgroup & Utilities Full Products & EngineeringGroup Limited BeverageLimited Limited Industries Resourcesplc Limited averageDistribution sample

DWCDWC at 30 atJune 30 (or June latest (or available) latest available) 2016 20162017 2017

Summary sample Days 2016 2017 Change DSO = Days sales outstanding (debtors) DSO 43.6 44.6 1.0 DIO = Days inventory outstanding (inventory held) DPO = Days purchases outstanding (creditors) DIO 72.8 75.7 2.9 DWC = Days working capital (net working capital) DPO 51.6 55.6 4.0 For details of the basis of preparation and calculations, see pages 22 - 23. DWC 54.6 55.2 0.6

3 Building Products A reduction in DWC driven by improved inventory management and an increase in creditor days (DPO). An uplift in residential and commercial single “sector answer” to improvement. construction along the eastern Instead, a combination of direct “Reducing working seaboard and continued government initiatives to improve supply chain capital to maximise cash funded infrastructure investment drove efficiencies and better align product growth in the Building Products sector, development with market demands is generation and reduce with 58% of our sample reporting an required. debt is a key focus area increase in revenue and EBITDA. The most material driver of lower DWC In terms of working capital was participants taking (on average) for management.” performance, average DWC fell by 6.5 days longer to pay suppliers. Of the 3.4 days to 62.5 days in 2017. This was sample, 58% increased DPO. Within Robert J Bulluss driven by a 2.2 day reduction in DIO that group, the most material increases Chief Executive Officer coupled with a 6.5 day increase in DPO. came from companies who recorded Coventry Group Limited 2017 Annual Report The sector had the third highest DWC large increases in their DSO, suggesting of all sampled sectors, driven by large that payments were managed to reduce inventory holdings that reflect the the impact of longer collection cycles. nature of activities undertaken by Overall, average DSO across the sample market participants (ranging from remained relatively stable (with only a wholesale or trade distribution to retail 1.9 day increase in 2017). and project work). Customers typically Coventry Group, Brickworks and require quick access to product. That achieved the most said, those participants supplying material improvements of the sampled into projects do have some leverage companies in terms of DWC reduction. by requiring prompt payment for Despite a challenging year that continuity of supply. saw a contraction in both sales and Effective inventory management is earnings, Coventry Group delivered a the key differentiator in the Building concentrated inventory rationalisation Products sector. The mix of raw program that enabled it to reduce materials, work in progress and finished its DIO and DWC by 24.2 days and goods held means that there is no 15.6 days, respectively.

BUILDINGTop 5 DWC improvements - Building Products Building Products Days 2016 2017 Change 160 (15.6) DSO 48.4 50.3 1.9 140 DIO 93.9 91.7 (2.2) 120 128.8 (13.5) DPO 68.2 74.7 6.5 100 (4.0) DWC 65.9 62.5 (3.4) 94.9 80 (7.7) (3.4)

Days 60 73.6 62.5 56.9 40 Best & Worst 20 (9.6) Days Best Worst Spread - DSO 21.2 74.9 53.7 (20) (29.3) DIO 38.1 174.2 136.1 (40) DPO 193.6 31.7 (161.9) Coventry Brickworks Incitec Pivot James Hardie GWA Group Peer group Group Limited Limited Limited Industries plc Limited average DWC (29.3) 128.8 158.1

DWC at 30 June (or latest available) 2016 2017 Coventry Group Limited Days 2016 2017 Change DSO 62.1 62.1 - DIO 198.4 174.2 (24.2) DPO 60.5 65.0 4.5 DWC 144.4 128.8 (15.6)

5 Construction & Engineering Despite lower inventories (DIO) and longer payment cycles (DPO), slower customer collections drove a net increase in DWC. Construction activity was dominated upward due to developers and end- by continued growth in residential clients becoming more demanding in “The Group will building and government funded examining claims, indicating increasing leverage long-standing infrastructure – both of which can pressure on the sector to look for be lower margin work. This resulted continued process improvement relationships with in a mixed year for the companies in initiatives to offset the impact. clients to ensure that our sample – 63% achieved revenue As noted above, in 2017 the sampled growth, however only 38% achieved companies passed on most of the working capital and EBITDA growth. burden of longer collection cycles to capital expenditure In terms of working capital their suppliers by increasing DPO. All performance, the average DWC of but one company recorded an increase is deployed in a way the sampled companies increased in DPO, which was in contrast to our by 1.7 days in 2017. This was driven 2016 research where close to 60% of that maximises by longer collection cycles (DSO the sample reduced the length of time return on capital while up 8.5 days), however the impact it took to pay their suppliers. While was softened by better inventory offsetting the impact in 2017, the use of maintaining prudent management (DIO down 1.4 days) creditors as a lever to improve working and pushing out supplier payments capital performance over the longer reserves as necessary.” (DPO up 10.5 days). term remains limited in a sector that is reliant on continuity of supply of Theresa Mlikota This sector is characterised by Chief Financial Officer a supplier payment cycle that is contracted labour and other project- critical materials. Ausdrill Limited materially shorter than the client 2017 Annual Report collection cycle. Despite the increase Inventory levels (DIO) remained in DPO (to an average of 49.3 days), relatively stable in 2017, although we there was a lag of approximately note material variances in performance one month between the sampled at the individual company level. companies paying their suppliers The most material improvements and collecting from their debtors were achieved by Macmahon (average DSO of 75.4 days). For our Holdings, CIMIC Group, Ausdrill and sample, the combined cash impact of Monadelphous Group. Macmahon this lag (or “funding gap”) equates to Holdings reduced its DWC by 28.8 days approximately $1.5 billion. This funding due to 17.6 day and 37.4 day reductions gap means that contracting, billing and in DSO and DIO, respectively. It was the collections processes must be very only company in the sample that paid Construction & Engineering efficient or market participants can its suppliers more quickly. Days 2016 2017 Change come under liquidity pressure. DSO 66.9 75.4 8.5 We have noted a general trend over DIO 32.9 31.5 (1.4) recent surveys of DSO drifting DPO 38.8 49.3 10.5 DWC 62.3 64.0 1.7 CONSTRUCTIONTop 5 DWC improvements - Construction & Engineering

200 Best & Worst (19.7) Days Best Worst Spread 150 DSO 41.2 117.7 76.5 130.9 (28.8) (15.7) DIO - 118.7 118.7 100

Days 1.7 DPO 255.9 6.0 (249.9) (5.5) 70.5 76.4 DWC (42.7) 130.9 173.6 50 64.0 53.5 (22.8) - Ausdrill Limited (42.7) Days 2016 2017 Change (50) Macmahon CIMIC Group Ausdrill Monadelphous Cardno Peer group DSO 81.2 72.2 (9.0) Holdings Limited Limited Group Limited Limited average DIO 129.6 118.7 (10.9) Limited DPO 32.9 39.5 6.6 DWC at 30 June (or latest available) DWC 150.6 130.9 (19.7) 2016 2017 7 Food & Beverage Highest working capital load of sampled sectors and the largest increase in DWC, due to an increase in inventory (DIO). Despite challenging market conditions Inventory management is the main influenced by variable commodity driver of working capital performance “Effective working capital prices, weather and livestock supply, for Food & Beverage companies and management has led 70% of the Food & Beverage companies therefore the key area for companies in our sample were able to increase seeking competitive advantage, to an improved working revenue in 2017. Only 44% were able however reducing inventory holdings capital position, as to achieve growth in EBITDA, reflecting in an environment of more demanding those challenging conditions. clients (themselves seeking to reduce reflected in the strong The average DWC across the sample inventory) is challenging and requires closing cash balance at increased by 6.2 days to 86.9 days in constant focus and innovation. While 2017, which diminished some of the there was an overall increase in DIO of 1 July 2017.” gains in EBITDA. This movement was 3.5 days, 48% of companies achieved driven by a 3.5 day increase in DIO a reduction and released cash, a considerable comparative advantage. Peter Bush (meaning inventories grew) coupled Chairman with a 2.9 day fall in DPO (shorter Supplier payment cycles shortened Inghams Group Limited payment cycle). DSO remained relatively by an average of 2.9 days, meaning 2017 Annual Report stable. While there was an overall those companies that did not reduce increase across the sample, 57% of the DIO experienced a net cash outflow. companies actually recorded a reduction Operators in this sector must be vigilant in DWC. to avoid a cash “squeeze” – this is the The Food & Beverage sector reported second successive year where both DIO the highest average DIO and DWC and DPO have moved unfavourably in a of all sampled sectors in 2017. This relatively material way. reflects the mix of primary producers, Strong improvers in the sector included processors and wholesaling businesses , Group that manage a range of logistical and Wellard. Wellard reduced its DIO functions (including manufacturing, by 29.4 days and it’s DSO by 24.4 days, packaging and distribution) that impact driving a 28.5 day reduction in DWC. their working capital cycles.

FOODTop 5 DWC improvements& BEV - Food & Beverage Food & Beverage Days 2016 2017 Change 100 DSO 51.4 51.3 (0.1) (8.6) 6.2 DIO 108.1 111.6 3.5 80 86.9 (18.4) 75.8 DPO 70.4 67.5 (2.9) 60 (28.5) DWC 80.7 86.9 6.2

40 44.7 (19.1)

Days 20 18.8 Best & Worst 5.9 (10.2) - Days Best Worst Spread

(22.1) DSO 11.5 91.7 80.2 (20) DIO 8.9 303.0 294.1 (40) DPO 204.8 13.3 (191.5) Wellard Tassal Group The a2 Milk Huon Coca-Cola Peer group DWC (22.1) 241.9 Limited Limited Company Limited Aquaculture Amatil Limited average 264.0 Group Limited

DWC at 30 June (or latest available) 2016 2017 Inghams Group Limited Days 2016 2017 Change DSO 34.1 32.5 (1.6) DIO 30.4 28.8 (1.6) DPO 41.2 42.1 0.9 DWC 25.1 21.6 (3.5)

9 Leisure Better performers reported improved collections and inventory management. Longer payment cycles also contributed to an overall reduction in DWC. After significant growth in revenue and While the average DSO fell by only EBITDA in 2016, 50% of our sample 1.8 days, there were some material Two companies enjoyed of Leisure companies reported a movements across the sample. The negative DWC in 2017, contraction in EBITDA in 2017. This “top 5” performing companies (in terms put more of a focus on managing cash of DWC reduction) also reduced DSO – illustrating the ability flow to drive better performance. four of these took a week or longer out to achieve incremental Leisure is a relatively “light” working of their collection cycles. capital sector, however the sample Overall, 60% of the sampled companies improvement of companies was able to achieve an collected from their customers more regardless of the sector average DWC reduction of 4.1 days quickly than they paid their suppliers. (to 37.2 days). This was driven by Two companies also enjoyed negative and underlying cycle shorter average holding periods for the DWC in 2017 with one able to reduce companies with inventory (DIO down DWC, illustrating the ability to achieve if a sustained focus is by 5.6 days) and small but favourable incremental improvement regardless applied. movements in DSO and DPO. of the sector and underlying cycle if a Seven of the ten sampled companies sustained focus is applied. reduced their DWC in 2017. 40% of the Despite a challenging year operationally, sample recorded an increase in the time Group recorded the they took to pay suppliers (DPO). 25% largest improvement in 2017, reducing of the companies that stretched the its DWC by 14 days. Interestingly, Ardent payment cycle did so on the back of a Leisure Group was also one of only a contraction in either EBITDA or revenue. few sampled companies that passed Inventory holdings are relatively low in on the benefit of a lower DSO and DIO the Leisure sector, however 70% of the (combined reduction of 49.5 days) to its sample reduced DIO and the one “high- suppliers, reducing its DPO by 13.1 days. inventory” entity (Ardent Leisure Group) managed a material reduction in 2017 that drove the average reduction of 5.6 days.

LEISURETop 5 DWC improvements - Leisure Leisure Days 2016 2017 Change 250 DSO 51.0 49.2 (1.8)

(8.8) DIO 27.9 22.3 (5.6) 200 DPO 36.7 37.7 1.0 195.9 DWC 41.3 37.2 (4.1) 150 Days 100 Best & Worst (14.0) (7.7) Days Best Worst Spread 50 (4.1) DSO 4.4 210.7 206.3 (10.2) 45.3 45.5 (6.3) 37.2 DIO - 153.8 153.8 17.0 3.7 - DPO 99.7 13.5 (86.2) Ardent Leisure SeaLink Travel Corporate Travel Donaco SKYCITY Peer group DWC (22.0) 195.9 217.9 Group Group Limited Management International Entertainment average Limited Limited Group Limited

DWC at 30 June (or latest available) 2016 2017 Ardent Leisure Group Days 2016 2017 Change DSO 15.2 4.4 (10.8) DIO 192.5 153.8 (38.7) DPO 44.1 31.0 (13.1) DWC 59.3 45.3 (14.0)

11 Media Shortening payment cycles drove an increase in average DWC. The Media industry is experiencing For 36% of the surveyed companies, unprecedented levels of change. the reduction was ten days or more. “Excellent cash position The weaker market conditions in print The 5.3 day reduction in average funds new investments media were well reported in 2017 with payment cycles (to 35.5 days) meant continued pressure on advertising that participants (on average) paid and repayment of debt revenues. In response, a number of their suppliers twice as quickly as they in FY 2018.” sampled companies either made received payment from their customers acquisitions to increase their digital (DSO is 68.9 days). Continual focus is presence, or divested more traditional therefore required to avoid liquidity Owen Wilson but less profitable businesses / pressure. CFO operations. REA Group Limited For the sampled companies that were Investor & Analyst Presentation Whilst there was some revenue growth able to reduce DWC, the improvement achieved across the sector a number was driven by lower DSO. The structural of the significant industry players “funding gap” and shortening payment experienced EBITDA contraction and cycles for Media companies means significant restructuring costs. that it is imperative that participants In terms of working capital focus on customer management and performance, the average DWC of collections. Over half the sampled the sampled companies increased companies hold little or no inventory by 4.8 days to 51.4 days in 2017. which indicates that DIO is not a key This was primarily driven by a 5.3 day metric in the sector. reduction in DPO, but was compounded The most material improvements in by 1.3 day and 1.8 day increases in 2017 were achieved by REA Group, DSO and DIO, respectively. Only three and Fairfax Media. companies (21% of the sample) were Fairfax Media reduced its DSO by able to shorten the length of their 5.4 days, which drove a 2.7 day working capital cycle in 2017. reduction in DWC and contributed to Close to two thirds of the sampled a c.$65 million increase in cash from companies reported a reduction in DPO. operational activities in 2017.

MEDIATop 5 DWC improvements - Media Media Days 2016 2017 Change 80 0.3 DSO 67.6 68.9 1.3 (6.8) 70 74.8 DIO 4.2 6.0 1.8 60 (7.2) 61.8 4.8 DPO 40.8 35.5 (5.3) 50 51.4 DWC 46.6 51.4 4.8 40 43.2 (2.7) Days 30 30.2 20 Best & Worst 10 Days Best Worst Spread 1.7 - DSO 25.9 91.7 65.8 (10) (7.1) DIO - 46.5 46.5

REA Group Prime Media Fairfax Media APN Outdoor SKY Network Peer group DPO 63.9 5.3 (58.6) Limited Group Limited Limited Group Limited Television average Limited DWC (7.1) 78.7 85.8

DWC at 30 June (or latest available) 2016 2017 REA Group Limited Days 2016 2017 Change DSO 57.5 51.2 (6.3) DIO - - - DPO 35.2 36.8 1.6 DWC 50.4 43.2 (7.2)

13 Mining & Resources Relatively stable average DWC but significant swings in underlying inventory (DIO) and creditor (DPO) metrics. After subdued market conditions in (contributing 94% of combined 2016, 81% of our sampled Mining & revenues) lengthened their payment “The free cash flow Resources companies delivered an terms (on average) by 18.3 days. These performance of the increase in revenue in 2017. This was companies included Limited largely fuelled by stronger iron ore, (13.5 day increase) and Newcrest Group enabled a gold and coal prices. There was also an Mining (13 day increase). This clearly $608m reduction in uptick in margins as 96% of the sample reflects the size and scale of some of reported EBITDA growth. the companies in the sample, and the net debt during the The changing market conditions influence they exert on the working period, delivering also produced some material working capital cycles across their supply capital changes. While overall there chains. an improvement in was only a slight movement in the As mentioned above, DSO in the net working capital position of the Mining & Resources sector is relatively Newcrest’s key target sampled companies (with DWC up low although it did increase by 1.7 financial ratios.” only 0.4 days to 45.7 days), there were days to 30.3 days. That said, 54% of significant (offsetting) movements in the sample reduced DSO. Growing Peter Hay DIO and DPO. revenue and EBITDA, and reducing Chairman DSO, is a major “win” in terms of cash The sampled companies enjoy a Limited flow. Despite the obvious focus on relatively short collection cycle (DSO of 2017 Financial Report 30.3 days) compared to their average inventory and supplier payment cycles payment cycle (DPO of 70.3 days). in 2017, the variability in DSO reinforces It is inventory holdings that soak up the importance of billing and debtors working capital in the mining industry. management as part of any plan to manage working capital. The 16.6 day increase in DIO in 2017 was driven by increased production as While average DWC increased slightly, companies sought to take advantage 42% of the sample actually achieved a of the higher commodity prices. To reduction in DWC providing a material manage and share this burden, the comparative advantage. Westgold sampled companies increased the Resources, OceanaGold Corporation, length of time they took to pay their New Hope Corporation and Newcrest suppliers – represented by the Mining recorded the largest reductions 14.5 day increase in DPO. Most notably, in DWC in 2017, unlocking a combined the fifteen largest companies in the total of $252 million in cash from sample by market capitalisation working capital. Mining & Resources Days 2016 2017 Change MINIG DSO 28.6 30.3 1.7 Top 5 DWC improvements - Mining & Resources DIO 86.1 102.7 16.6 DPO 55.8 70.3 14.5 60 DWC 45.3 45.7 0.4 (42.0) (14.3) 50 0.4

40 45.7 (12.0) Best & Worst 30 33.0 Days Best Worst Spread

Days 20 (31.6) 22.6 DSO 3.3 127.5 124.2 (9.8) 10 DIO 8.8 561.6 552.8 9.3 0.0 - DPO 316.3 6.2 (310.1) DWC (18.9) 274.1 293.0 (10) (18.9) (20) Westgold OceanaGold New Hope Newcrest Mining Saracen Mineral Peer group Newcrest Mining Limited Resources Corporation Corporation Limited Holdings Limited average Limited Limited Days 2016 2017 Change DWC at 30 June (or latest available) DSO 15.1 12.0 (3.1) 2016 2017 DIO 77.3 79.9 2.6 DPO 52.4 65.4 13.0 DWC 34.6 22.6 (12.0)

15 Retail Improvement in DWC on the back of DSO improvements and lengthening payment cycles (DPO). The ABS reported a modest 2.9% sale payment options such as increase in retail sales in 2017 to $307 and ZipMoney, replacing traditional “Net working capital billion. This compared to 4.4% in 2016, in-store financing and laybys likely well managed with highlighting the impact of headwinds played some part in the change. While such as subdued consumer confidence, DSO averaged 25.2 days (the lowest of increased inventory low wage growth, and increased non- any sector), the mix of participants and funded by continuation retail living expenses for consumers. business models drove a broad range of Despite the limited growth in the DSO (from 0.2 days to 128.5 days). of improved supplier broader retail sector, the listed retailers The other key driver of lower DWC was terms.” in our sample performed relatively well, a 2.8 days increase in DPO, reflecting with 70% recording revenue increases some “stretching” of suppliers and above the industry growth. Despite the suggesting some potential funding Adairs Limited top line sales growth, only 58% achieved pressures. FY17 Results Presentation EBITDA growth reflecting the difficult For most retailers, inventory retail conditions, with many retailers management is the driver of working being in a “consolidation” phase and capital performance. Across the focusing on debt reduction. sample, DIO increased by 0.9 days Those operators with a strong online to 111.5, suggesting retailers are still offering benefited from the fact that trying to adjust to changing purchasing across the entire sector online sales behaviour and distribution models. grew by 7.9%. The majority of the participants in the The average DWC of the sampled sample group saw limited movement in companies improved slightly, reducing terms of overall DWC, with 52.5% of the by 2.0 days to 54.5 days in 2017. An sample seeing movement of 3 days or improvement in both DSO and DPO was fewer. The most material improvements partially offset by an increase in DIO. were achieved by GUD Holdings and DSO improved by 1.7 days. The Gazal Corporation. accelerated adoption of new point of

RETAILTop 5 DWC improvements - Retail Retail Days 2016 2017 Change 200 DSO 26.9 25.2 (1.7) (23.9) (12.9) DIO 110.6 111.5 0.9 (25.0) 150 DPO 43.9 46.7 2.8 153.3 147.3 DWC 56.5 54.5 (2.0) 128.8 100 Days Best & Worst (10.2) (2.0) Days Best Worst Spread 50 (14.8) 54.5 43.5 DSO 0.2 128.5 128.3 22.2 DIO - 351.3 351.3 - DPO 84.6 9.3 (75.3) GUD Holdings Gazal Adairs Cash Converters RCG Peer group Limited Corporation Limited International Corporation average DWC (23.4) 153.3 176.7 Limited Limited Limited

DWC at 30 June (or latest available) 2016 2017 Adairs Limited Days 2016 2017 Change DSO 9.5 1.0 (8.5) DIO 97.0 111.3 14.3 DPO 26.6 59.2 32.6 DWC 37.0 22.2 (14.8) 17 Transport & Distribution Slight lengthening of the working capital cycle driven by higher DSO and DIO. There was an uptick in activity across On the other side of the “funding gap” the Transport & Distribution sector in (payments to suppliers - DPO), 89% “Movements in working 2017, which was reflected in an increase of the sampled companies extended capital resulted in in revenue for 67% of our sampled their payment cycles with DPO across companies. In terms of EBITDA, 78% of the group increasing by 5.1 days. This a US$104.3 million the sample achieved growth, indicating goes against recent trends in the increase in cash flow due margin improvement. sector, which is typically defined by From a working capital perspective, suppliers (fuel, subcontracted labour, to the cycling of one-off average DWC increased by 0.8 days to warehousing) that are inflexible on increases in prior year 39.7 days in 2017, driven by a 3.4 day terms. On average the funding gap increase in DSO and 1.5 day increase in closed slightly in 2017 as DPO increased outflows associated DIO. The small increase in DWC came by more than DSO. after considerable reductions in 2015 The best performing sampled with standardisation of and 2016. In contrast to the revenue and companies were Lindsay , payments practices.” EBITDA results where performance was CTI Logistics and Brambles. CTI relatively consistent, DWC performance Logistics reduced its DSO and DWC Operating & Financial Review was mixed with 44% of sampled by 4.7 days and 6.9 days, respectively, companies reducing DWC. on the back of a reported focus on 2017 Annual Report Notably, 67% of the sampled Transport debtor management. This contributed & Distribution companies reported a to a $9.9 million increase in operating structural “funding gap” in 2017. This cash flows in 2017. At the other end of means that these companies typically the sample, Royal Wolf Holdings and pay their suppliers on shorter terms heavily influenced the than they collect from their customers. sector averages with DWC increases of As a result, tight control of debtors 20.7 and 6.6 days, respectively. and collections is critical for managing Note: airlines were excluded from our cash flow. To this end, the sampled sample due to the contrasting nature companies that achieved the largest of their working capital cycles (often improvements and reductions in DWC negative) and the size and scale of their achieved it through reductions in DSO. operations (which disproportionately skew the sample set).

TRANSPORTTop 5 DWC improvements - Transport & Distribution Transport & Distribution Days 2016 2017 Change 70 DSO 49.4 52.8 3.4 (4.8) DIO 25.7 27.2 1.5 60 DPO 42.6 47.7 5.1 57.1 50 DWC 38.9 39.7 0.8 (6.9) (3.6) 0.8 40 (11.6)

Days 39.7 37.3 30 34.0 Best & Worst

20 23.2 Days Best Worst Spread DSO 27.4 82.8 55.4 10 0.7 DIO 0.3 108.2 107.9 5.7 - DPO 71.3 12.9 (58.4) Lindsay Australia CTI Logistics Brambles Holdings K&S Corporation Peer group DWC 5.7 72.6 66.9 Limited Limited Limited Limited Limited average

DWC at 30 June (or latest available) 2016 2017 Brambles Limited Days 2016 2017 Change DSO 84.6 82.8 (1.8) DIO 9.7 6.1 (3.6) DPO 44.6 45.1 0.5 DWC 61.9 57.1 (4.8)

19 Utilities A slight increase in overall DWC, however the majority of sampled companies reduced DWC. Utilities was a sector in the spotlight in While average DSO increased by 2017 with supply issues putting upward 0.4 days, 70% of companies actually “Earnings are pressure on gas and electricity prices. shortened their collection cycle underpinned by solid The sector remains open to legislative (reducing DSO) with a number of these changes and high levels of competition companies passing on part of the cash flows generated and M&A activity. For our sampled benefit to suppliers by way of shorter from high quality, companies this translated into mixed payment terms. Similarly, while there results in 2017, with 50% reporting a was an uptick in the average DWC, 70% geographically growth in revenue and 40% delivering of sampled companies reduced DWC. EBITDA growth. This shows that it was a small number diversified assets In terms of working capital of companies that experienced an and a portfolio of performance, the average DWC of increase in DWC that heavily influenced the sampled companies increased by the average metrics. highly creditworthy 0.5 days to 23.9 days. This was driven Pacific Energy, AGL Energy and Meridian customers.” by a 2.4 day decrease in DPO, partly Energy were the best performing offset by lower inventory holdings (DIO sampled companies in 2017. AGL was APA Group down 2.3 days). able to reduce its collection cycle (DSO 2017 Annual Report It was reported in 2016 that a number down 8.3 days) and inventory holdings of sector participants invested in (DIO down 4.7 days). While it shared billing and collection systems to drive some of this improvement with its better productivity and improve debtor suppliers (DPO down 10.4 days), it still management. The results of this were reduced DWC by 4.2 days. seen across our sample in 2017.

UTILITIESTop 5 DWC improvements - Utilities Utilities Days 2016 2017 Change

50 (2.5) DSO 41.9 42.3 0.4 (10.1) DIO 28.6 26.3 (2.3) 40 43.0 (4.2) DPO 67.7 65.3 (2.4) 30 0.5 DWC 23.4 23.9 0.5 29.6 28.0 20 23.9 Days (3.3) 10 Best & Worst (4.0) 6.9 - Days Best Worst Spread (5.7) DSO 12.7 60.9 48.2 (10) Pacific Energy AGL Energy Meridian Energy ERM Power APA Group Peer group DIO - 96.7 96.7 Limited Limited Limited Limited average DPO 244.8 - (244.8) DWC (5.7) 58.2 63.9 DWC at 30 June (or latest available) 2016 2017

APA Group Days 2016 2017 Change DSO 45.9 45.5 (0.4) DIO 70.1 44.5 (25.6) DPO 77.0 71.9 (5.1) DWC 45.5 43.0 (2.5)

21 Basis of preparation

Data used in this survey has been Peer group sample GICS groups included sourced from the S&P Capital IQ platform. Building Products Construction materials Chemicals Peer group classification Building products Trading companies and distributors The Building Products, Construction & Engineering, Food & Beverage, Construction & Engineering Construction and engineering Leisure, Media, Mining & Resources, Commercial services and supplies Retail, Transport & Distribution Energy equipment and services and Utilities peer group samples underpinning this report have been Food & Beverage Food products selected according to the Global Manufacturers and distributors of food Industry Classification Standard Consumer staples (“GICS”) listed in the table opposite. Beverages Agricultural products Food staples and retailing Accounting periods Financial information in this survey Leisure Casinos and gaming draws on most recently published full Leisure facilities year accounts as at 26 October 2017 Hotels, resorts and cruise lines (i.e. the most recently published full Movies and entertainment year financial information prior to this date has been used). Prior year Media Advertising comparable figures may differ from Publishing our 2016 report for companies in Broadcasting the sample that adjusted their 2016 Media accounts following the release of Mining & Resources Metals our report or restated them when Mining presenting current year results. Materials Adjustments may occur if there has been a change in accounting policy. Retail Textiles, apparel and luxury goods Specialty retail Distributors Automotive retail Food retail Multiline retail Household durables Internet and direct marketing retail Restaurants

Transport & Distribution Roads and rail Air freight and logistics Commercial services and supplies Marine Transportation infrastructure

Utilities Independent power producers and energy traders Multi-utilities Electric utilities Gas utilities Integrated oil and gas

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

Source data Days purchases outstanding Days Inventory Outstanding (“DIO”) This publication contains high level Creditors include GST, while cost DIO is the number of days’ worth of financial information sourced from the of sales do not. To the extent that purchases represented by the inventory S&P Capital IQ database of the latest a company acquires inventory or balances at the relevant calculation date. available published financial statements input services in Australia (or another The calculation used in this survey is: of ASX listed entities for the 2017 jurisdiction that levies a consumption financial year. The information tax), results will vary. Inventory contained herein is based on sources DIO = x 365 In addition, to the extent that there we believe reliable, but we do not Cost of Sales has been an accounting adjustment guarantee its accuracy, and it should be that has affected a company’s sales, understood to be general information purchases, debtors, inventory or A low DIO metric is desirable and only. The information is not intended to creditors, this has not been isolated indicates a relatively high turnover be taken as advice with respect to any in the analysis and may be reflected of inventory. specific organisation or situation and as a change in working capital. cannot be relied upon as such. Days Working Capital (“DWC”) McGrathNicol accepts no responsibility Calculation methodology DWC is a relative measure of total for errors or omissions in financial working capital tied up in a company The working capital metrics referred information underpinning this relative to sales. The calculation used to in this report have been calculated, publication, nor the loss of any person in this survey is: arising from use of or reliance on as follows: information herein. All readers of Debtors + Inventory this publication must make their own Days Sales Outstanding (“DSO”) - Creditors enquiries or obtain professional advice DSO is the number of days’ worth of DWC = x 365 in relation to any issue or matter sales represented by the outstanding Sales referred to in this publication. debtors at the relevant calculation date. The calculation used in this survey is: A low DWC metric is favourable as it Limitations indicates a low level of working capital Debtors relative to the size of the business. McGrathNicol acknowledges that at DSO = x 365 the level of detail applied, the analysis Sales has limitations, some of which are noted below. For this reason, the A low DSO metric is desirable and analysis focuses on performance indicates that it takes a relatively low relative to the prior period, rather number of days for a company to than in absolute terms against peers. collect debtors.

Days sales outstanding Days Purchases Outstanding (“DPO”) Debtors include GST, while sales DPO is the number of days’ worth do not. To the extent that a company of purchases represented by the makes more or less of its sales in outstanding creditors at the relevant Australia (or another jurisdiction calculation date. The calculation used that levies a consumption tax), in this survey is: results will vary. Creditors Days inventory outstanding DPO = x 365 Cost of Sales To the extent that a company has more or less labour included in its A low DPO metric indicates that it takes cost of sales, results will vary. fewer days for a company to pay its trade creditors. A high DPO is desirable from a cash flow and working capital management perspective, but can be an indicator of tight liquidity and the cause of strained supplier relationships.

23 Cash and Working Capital

State contacts

Sydney Jason Ireland +61 2 9338 2694 [email protected] Our Cash and Working Capital Centre of Excellence is focused on increasing cash flow by implementing practical and effective Sean Wiles procedures to forecast, track, save and generate cash. We help +61 2 9248 9986 businesses to improve cash flow and give them the tools to sustain [email protected] improvements. Jason Preston Our Centre of Excellence program for CFO’s and finance staff +61 2 9338 2655 provides training and advice on best practice cash and working [email protected] capital management. If you are interested in participating, or having a staff member attend a Centre of Excellence program, please contact Jason Ireland Anthony Connelly or Sean Wiles. +61 7 3333 9806 [email protected]

Authors Graham Newton +61 7 3333 9875 Jason Ireland [email protected] Sean Wiles Ben Ryan Canberra Thomas Scarf Shane O’Keeffe Timothy Duncan +61 2 6222 1420 [email protected]

Contributors Grace Chessman Robert Smith Joshua Crick +61 3 9038 3166 Lauren Del Monte [email protected] Jack Freeman Matthew Caddy Stuart Johnstone +61 3 9038 3157 Damien Pasfield [email protected] Aleksandra Pejoska Dominic Steer Johnathon Tawil Rob Brauer Richard Woolf +61 8 6363 7603 [email protected]

Rob Kirman +61 8 6363 7685 [email protected] Findings

Building Products DSO DIO DPO DWC Company name 2016 2017 Change 2016 2017 Change 2016 2017 Change 2016 2017 Change Coventry Group Limited 62.1 62.1 - 198.4 174.2 (24.2) 60.5 65.0 4.5 144.4 128.8 (15.6) 51.8 57.8 6.0 139.4 127.8 (11.6) 57.4 71.9 14.5 108.4 94.9 (13.5) Incitec Pivot Limited 28.6 28.0 (0.6) 78.3 83.6 5.3 173.4 193.6 20.2 (19.7) (29.3) (9.6) plc 40.1 39.0 (1.1) 64.5 59.4 (5.1) 25.8 31.7 5.9 64.6 56.9 (7.7) GWA Group Limited 43.2 53.9 10.7 107.2 101.4 (5.8) 49.0 67.6 18.6 77.6 73.6 (4.0) CSR Limited 50.8 46.2 (4.6) 83.4 86.1 2.7 54.3 53.7 (0.6) 70.1 67.7 (2.4) Simonds Group Limited 27.7 21.2 (6.5) 36.4 38.1 1.7 37.1 33.0 (4.1) 27.2 25.2 (2.0) Reece Limited 55.7 54.2 (1.5) 97.6 103.0 5.4 76.3 79.8 3.5 69.9 69.7 (0.2) DuluxGroup Limited 55.7 54.5 (1.2) 111.6 112.4 0.8 109.8 107.0 (2.8) 56.5 56.7 0.2 Brighton Limited 52.2 52.2 - 53.8 54.1 0.3 41.0 39.5 (1.5) 62.2 63.4 1.2 Limited 57.7 74.9 17.2 76.1 77.5 1.4 83.0 103.7 20.7 53.0 57.2 4.2 Limited 55.3 59.8 4.5 79.8 82.4 2.6 50.9 49.6 (1.3) 77.0 85.4 8.4 Peer group average 48.4 50.3 1.9 93.9 91.7 (2.2) 68.2 74.7 6.5 65.9 62.5 (3.4)

Construction & Engineering DSO DIO DPO DWC Company name 2016 2017 Change 2016 2017 Change 2016 2017 Change 2016 2017 Change

Macmahon Holdings Limited 84.3 66.7 (17.6) 102.2 64.8 (37.4) 66.8 57.2 (9.6) 99.3 70.5 (28.8) CIMIC Group Limited 73.8 108.9 35.1 11.8 11.5 (0.3) 164.0 255.9 91.9 (19.9) (42.7) (22.8) Ausdrill Limited 81.2 72.2 (9.0) 129.6 118.7 (10.9) 32.9 39.5 6.6 150.6 130.9 (19.7) Monadelphous Group Limited 101.2 92.2 (9.0) - - - 10.2 17.6 7.4 92.1 76.4 (15.7) Cardno Limited 61.4 67.5 6.1 38.0 31.2 (6.8) 40.5 45.8 5.3 59.0 53.5 (5.5) Seymour Whyte Limited 56.6 54.9 (1.7) 0.4 0.4 - 16.6 19.4 2.8 43.6 39.7 (3.9) Decmil Group Limited 56.0 56.3 0.3 - - - 30.5 33.5 3.0 29.7 26.5 (3.2) NRW Holdings Limited 46.3 56.2 9.9 46.7 38.5 (8.2) 51.2 67.4 16.2 44.3 43.2 (1.1) Service Stream Limited 82.0 87.2 5.2 9.3 5.0 (4.3) 19.7 22.7 3.0 76.0 77.2 1.2 Watpac Limited 42.3 51.8 9.5 7.0 4.0 (3.0) 4.9 6.0 1.1 44.3 49.9 5.6 WorleyParsons Limited 73.7 90.8 17.1 - - - 44.5 55.0 10.5 30.6 38.6 8.0 MACA Limited 68.2 90.4 22.2 9.4 10.6 1.2 25.9 38.8 12.9 53.0 64.6 11.6 Boart Longyear Limited 57.9 63.8 5.9 92.1 108.8 16.7 33.0 36.3 3.3 110.9 126.3 15.4 Downer EDI Limited 62.4 89.0 26.6 20.1 17.3 (2.8) 22.0 30.2 8.2 60.7 77.6 16.9 AJ Lucas Group Limited 44.2 41.2 (3.0) 52.8 89.5 36.7 32.6 36.2 3.6 62.0 96.2 34.2 RCR Tomlinson Limited 79.5 117.7 38.2 6.2 4.3 (1.9) 25.8 27.3 1.5 60.9 95.9 35.0 Peer group average 66.9 75.4 8.5 32.9 31.5 (1.4) 38.8 49.3 10.5 62.3 64.0 1.7

25 Findings

Food & Beverage DSO DIO DPO DWC Company name 2016 2017 Change 2016 2017 Change 2016 2017 Change 2016 2017 Change Wellard Limited 47.4 23.0 (24.4) 38.3 8.9 (29.4) 38.3 13.3 (25.0) 47.3 18.8 (28.5) Tassal Group Limited 24.7 18.7 (6.0) 85.6 94.9 9.3 85.1 121.0 35.9 25.0 5.9 (19.1) The a2 Milk Company Limited 47.0 48.4 1.4 95.2 36.3 (58.9) 67.0 43.5 (23.5) 63.1 44.7 (18.4) Huon Aquaculture Group Limited 36.6 40.7 4.1 29.5 43.4 13.9 113.1 204.8 91.7 (11.9) (22.1) (10.2) Coca-Cola Amatil Limited 74.3 69.1 (5.2) 83.9 76.2 (7.7) 67.8 65.4 (2.4) 84.4 75.8 (8.6) 83.6 83.6 - 44.3 39.7 (4.6) 78.4 82.8 4.4 56.2 48.5 (7.7) GrainCorp Limited 37.8 36.7 (1.1) 60.8 52.8 (8.0) 19.7 20.0 0.3 71.3 64.0 (7.3) Limited 88.7 83.3 (5.4) 217.8 223.6 5.8 70.3 65.9 (4.4) 183.2 179.6 (3.6) Inghams Group Limited 34.1 32.5 (1.6) 30.4 28.8 (1.6) 41.2 42.1 0.9 25.1 21.6 (3.5) FFI Holdings Limited 45.7 41.1 (4.6) 95.4 97.0 1.6 59.5 60.3 0.8 64.3 60.9 (3.4) Limited 43.4 50.0 6.6 67.4 57.1 (10.3) 47.0 45.8 (1.2) 61.2 59.9 (1.3) Holdings Limited 32.3 35.1 2.8 62.6 67.4 4.8 42.1 56.2 14.1 40.4 39.4 (1.0) Ridley Corporation Limited 44.2 48.6 4.4 38.5 39.1 0.6 64.0 69.4 5.4 20.9 20.8 (0.1) Select Harvests Limited 57.3 62.6 5.3 166.0 153.1 (12.9) 12.7 14.3 1.6 180.3 183.2 2.9 Limited 82.1 87.8 5.7 194.2 128.2 (66.0) 170.2 114.7 (55.5) 90.9 93.8 2.9 Freedom Foods Group Limited 97.5 91.7 (5.8) 139.7 114.9 (24.8) 113.5 78.8 (34.7) 115.9 119.4 3.5 Australian Vintage Limited 64.4 64.8 0.4 285.8 303.0 17.2 55.9 67.8 11.9 232.6 241.9 9.3 Capilano Honey Limited 62.4 66.6 4.2 171.6 198.3 26.7 10.9 21.9 11.0 161.7 174.3 12.6 Gage Roads Brewing Co Limited 42.5 49.6 7.1 52.0 45.6 (6.4) 154.3 130.9 (23.4) (6.5) 13.7 20.2 Australian Agricultural Company Limited 17.7 11.5 (6.2) 187.2 215.7 28.5 17.0 14.0 (3.0) 200.2 239.5 39.3 Refresh Group Limited 28.9 51.4 22.5 111.0 179.4 68.4 32.3 41.3 9.0 64.7 116.3 51.6 Yowie Group Limited 35.7 27.1 (8.6) 66.3 154.5 88.2 155.5 111.1 (44.4) (7.5) 46.7 54.2 Bellamy's Australia Limited 52.8 56.7 3.9 163.9 208.0 44.1 102.5 67.7 (34.8) 92.4 152.5 60.1 Peer group average 51.4 51.3 (0.1) 108.1 111.6 3.5 70.4 67.5 (2.9) 80.7 86.9 6.2

Leisure DSO DIO DPO DWC Company name 2016 2017 Change 2016 2017 Change 2016 2017 Change 2016 2017 Change Ardent Leisure Group 15.2 4.4 (10.8) 192.5 153.8 (38.7) 44.1 31.0 (13.1) 59.3 45.3 (14.0) SeaLink Travel Group Limited 30.8 18.7 (12.1) 11.4 10.6 (0.8) 17.9 13.5 (4.4) 27.2 17.0 (10.2) Corporate Travel Management Limited 211.2 210.7 (0.5) - - - 11.8 27.4 15.6 204.7 195.9 (8.8) Donaco International Limited 62.4 55.1 (7.3) 12.5 8.6 (3.9) 44.5 43.1 (1.4) 53.2 45.5 (7.7) SKYCITY Entertainment Group Limited 15.9 7.6 (8.3) 7.2 6.8 (0.4) 22.1 16.5 (5.6) 10.0 3.7 (6.3) Skydive the Beach Group Limited 15.5 17.7 2.2 17.0 17.7 0.7 12.4 23.8 11.4 18.0 14.2 (3.8) Limited 25.1 24.6 (0.5) 2.0 2.3 0.3 59.4 59.3 (0.1) (21.1) (22.0) (0.9) Mantra Group Limited 24.7 25.7 1.0 2.6 2.5 (0.1) 42.0 42.6 0.6 (0.6) (0.5) 0.1 Event Hospitality & Entertainment 11.3 15.6 4.3 33.1 20.5 (12.6) 21.8 20.5 (1.3) 14.5 15.6 1.1 Limited Travel Group Limited 97.5 111.5 14.0 0.4 0.3 (0.1) 90.7 99.7 9.0 47.9 57.0 9.1 Peer group average 51.0 49.2 (1.8) 27.9 22.3 (5.6) 36.7 37.7 1.0 41.3 37.2 (4.1) Findings

Media DSO DIO DPO DWC Company name 2016 2017 Change 2016 2017 Change 2016 2017 Change 2016 2017 Change REA Group Limited 57.5 51.2 (6.3) - - - 35.2 36.8 1.6 50.4 43.2 (7.2) Prime Media Group Limited 73.4 65.5 (7.9) - - - 6.8 5.3 (1.5) 68.6 61.8 (6.8) Fairfax Media Limited 65.4 60.0 (5.4) 7.1 6.4 (0.7) 45.6 42.3 (3.3) 32.9 30.2 (2.7) APN Outdoor Group Limited 76.2 76.3 0.1 4.1 4.5 0.4 12.1 13.3 1.2 74.5 74.8 0.3 SKY Network Television Limited 24.4 25.9 1.5 - - - 62.0 57.9 (4.1) (8.8) (7.1) 1.7 54.1 57.2 3.1 16.8 16.8 - 16.8 17.9 1.1 54.1 56.6 2.5 Limited 62.7 61.1 (1.6) 6.1 5.5 (0.6) 56.9 47.0 (9.9) 23.7 27.7 4.0 oOh!media Limited 78.4 86.2 7.8 2.5 1.1 (1.4) 11.1 14.2 3.1 73.2 78.7 5.5 QMS Media Limited 80.6 81.9 1.3 4.3 3.0 (1.3) 79.9 63.9 (16.0) 44.7 50.3 5.6 Co. Holdings Limited 81.4 80.3 (1.1) - - - 49.3 41.3 (8.0) 38.0 43.9 5.9 Southern Cross Media Group Limited 73.9 77.1 3.2 - - - 51.0 32.0 (19.0) 65.0 71.0 6.0 Macquarie Media Limited 79.1 79.2 0.1 0.3 - (0.3) 32.0 8.5 (23.5) 57.9 73.6 15.7 IVE Group Limited 66.0 71.6 5.6 17.0 46.5 29.5 48.9 63.3 14.4 42.7 59.3 16.6 GTN Limited 73.9 91.7 17.8 - - - 63.7 53.3 (10.4) 35.5 56.0 20.5 Peer group average 67.6 68.9 1.3 4.2 6.0 1.8 40.8 35.5 (5.3) 46.6 51.4 4.8

Mining & Resources DSO DIO DPO DWC Company name 2016 2017 Change 2016 2017 Change 2016 2017 Change 2016 2017 Change Westgold Resources Limited 46.4 7.3 (39.1) 43.3 43.1 (0.2) 38.3 41.0 2.7 51.3 9.3 (42.0) OceanaGold Corporation 25.2 18.6 (6.6) 126.7 87.5 (39.2) 150.6 168.1 17.5 12.7 (18.9) (31.6) New Hope Corporation Limited 54.9 34.2 (20.7) 55.3 47.8 (7.5) 66.8 50.0 (16.8) 47.3 33.0 (14.3) Newcrest Mining Limited 15.1 12.0 (3.1) 77.3 79.9 2.6 52.4 65.4 13.0 34.6 22.6 (12.0) Saracen Mineral Holdings Limited 6.8 5.5 (1.3) 56.4 40.5 (15.9) 52.1 48.3 (3.8) 9.8 - (9.8) Limited 12.4 6.1 (6.3) 39.9 43.9 4.0 13.7 17.5 3.8 31.2 21.4 (9.8) Sandfire Resources NL 15.0 11.4 (3.6) 77.0 67.1 (9.9) 78.8 89.7 10.9 14.5 5.0 (9.5) BHP Billiton Limited 43.3 28.6 (14.7) 49.5 43.7 (5.8) 78.2 66.1 (12.1) 20.3 10.9 (9.4) South32 Limited 40.5 37.8 (2.7) 88.4 95.1 6.7 71.4 84.9 13.5 48.7 42.1 (6.6) AngloGold Ashanti Limited 14.5 15.2 0.7 71.8 75.5 3.7 34.0 42.8 8.8 45.4 41.2 (4.2) Limited 29.3 28.9 (0.4) 35.9 33.3 (2.6) 23.4 22.2 (1.2) 40.1 38.5 (1.6) Northern Star Resources Limited 4.6 10.1 5.5 42.7 40.0 (2.7) 29.2 34.2 5.0 13.4 13.8 0.4 Limited 2.6 3.3 0.7 70.2 69.0 (1.2) 47.5 44.1 (3.4) 13.8 14.6 0.8 BlueScope Steel Limited 46.5 45.6 (0.9) 101.4 101.4 - 87.6 84.4 (3.2) 54.2 55.1 0.9 Atlas Iron Limited 2.7 4.4 1.7 7.9 8.8 0.9 6.3 6.2 (0.1) 4.3 6.8 2.5 Resolute Mining Limited 4.6 3.9 (0.7) 189.9 221.6 31.7 12.6 39.8 27.2 111.5 115.7 4.2 Regis Resources Limited 20.1 20.3 0.2 31.7 42.7 11.0 15.4 18.4 3.0 30.9 35.4 4.5 Yancoal Australia Limited 66.3 127.5 61.2 29.9 31.4 1.5 114.6 196.4 81.8 6.6 11.8 5.2 Mineral Resources Limited 27.0 23.4 (3.6) 111.6 224.4 112.8 206.2 316.3 110.1 5.9 11.4 5.5 Limited 24.1 35.6 11.5 41.4 40.0 (1.4) 33.6 38.0 4.4 30.4 37.2 6.8 Whitehaven Coal Limited 19.3 23.2 3.9 41.6 50.1 8.5 34.6 32.8 (1.8) 22.9 30.2 7.3 Zimplats Holdings Limited 102.6 115.8 13.2 43.0 51.9 8.9 20.4 29.2 8.8 121.9 132.6 10.7 OZ Minerals Limited 40.9 34.2 (6.7) 230.2 561.6 331.4 101.9 212.0 110.1 74.0 88.7 14.7 Limited 6.7 14.8 8.1 70.9 87.8 16.9 32.1 32.5 0.4 38.7 57.7 19.0 Limited 46.3 72.0 25.7 400.1 345.3 (54.8) 27.3 32.9 5.6 236.7 274.1 37.4 Independence Group NL 24.8 48.9 24.1 104.4 135.5 31.1 22.3 13.7 (8.6) 57.1 98.0 40.9 Peer group average 28.6 30.3 1.7 86.1 102.7 16.6 55.8 70.3 14.5 45.3 45.7 0.4 27 Findings

Retail DSO DIO DPO DWC Company name 2016 2017 Change 2016 2017 Change 2016 2017 Change 2016 2017 Change GUD Holdings Limited 108.5 79.2 (29.3) 187.6 148.7 (38.9) 100.1 56.1 (44.0) 153.8 128.8 (25.0) Gazal Corporation Limited 90.6 71.5 (19.1) 151.8 172.1 20.3 20.7 52.4 31.7 171.2 147.3 (23.9) Adairs Limited 9.5 1.0 (8.5) 97.0 111.3 14.3 26.6 59.2 32.6 37.0 22.2 (14.8) Cash Converters International Limited 148.3 128.5 (19.8) 58.9 78.3 19.4 8.1 9.3 1.2 166.2 153.3 (12.9) RCG Corporation Limited 21.0 11.4 (9.6) 141.6 142.4 0.8 70.1 71.2 1.1 53.7 43.5 (10.2) Ruralco Holdings Limited 84.1 74.4 (9.7) 33.7 32.8 (0.9) 75.3 74.3 (1.0) 50.4 40.2 (10.2) Kathmandu Holdings Limited 0.1 0.2 0.1 218.8 192.5 (26.3) 28.7 31.1 2.4 71.2 61.5 (9.7) Michael Hill International Limited 17.1 15.7 (1.4) 369.9 351.3 (18.6) 43.9 47.6 3.7 133.8 126.0 (7.8) Lovisa Holdings Limited 1.1 2.1 1.0 137.5 126.3 (11.2) 39.3 44.0 4.7 26.7 19.6 (7.1) Beacon Lighting Group Limited 17.3 16.3 (1.0) 273.7 256.1 (17.6) 35.1 41.8 6.7 101.0 94.0 (7.0) Limited 2.7 2.9 0.2 133.5 128.8 (4.7) 44.5 48.0 3.5 53.1 47.5 (5.6) Woolworths Limited 2.9 2.7 (0.2) 43.2 37.5 (5.7) 45.5 46.6 1.1 1.2 (3.8) (5.0) The Reject Shop Limited - 0.2 0.2 79.4 74.1 (5.3) 22.2 22.9 0.7 32.4 29.7 (2.7) Vita Group Limited 17.7 14.2 (3.5) 12.9 13.9 1.0 24.9 24.1 (0.8) 10.0 7.7 (2.3) Baby Bunting Group Limited 12.5 12.5 - 96.2 95.6 (0.6) 41.9 44.6 2.7 48.2 46.1 (2.1) Myer Holdings Limited 3.8 2.4 (1.4) 94.7 95.6 0.9 45.0 46.7 1.7 30.8 28.7 (2.1) Automotive Holdings Group Limited 21.6 21.4 (0.2) 72.1 71.0 (1.1) 8.4 10.8 2.4 69.1 67.2 (1.9) Nick Scali Limited 0.4 0.3 (0.1) 118.4 121.4 3.0 28.6 31.8 3.2 35.6 33.9 (1.7) Godfreys Group Limited 11.5 17.1 5.6 155.6 134.4 (21.2) 75.9 76.2 0.3 48.0 46.4 (1.6) ARB Corporation Limited 45.2 48.2 3.0 196.1 185.1 (11.0) 47.4 45.6 (1.8) 112.2 111.2 (1.0) JB Hi-Fi Limited 9.0 12.8 3.8 64.6 71.4 6.8 35.7 48.4 12.7 31.6 30.7 (0.9) A.P. Eagers Limited 15.9 15.4 (0.5) 73.3 72.8 (0.5) 9.4 9.5 0.1 67.8 67.1 (0.7) Limited 56.1 63.6 7.5 101.4 104.0 2.6 70.5 84.6 14.1 76.9 76.7 (0.2) Group Limited 23.4 25.5 2.1 - - - 56.1 64.3 8.2 9.9 9.9 - Specialty Fashion Group Limited 2.8 2.7 (0.1) 86.3 90.6 4.3 32.2 35.3 3.1 27.4 27.7 0.3 Limited 2.8 1.4 (1.4) 5.9 6.2 0.3 62.0 58.4 (3.6) (23.7) (23.4) 0.3 Limited 9.0 8.7 (0.3) 49.7 51.0 1.3 51.6 51.6 - 7.7 8.3 0.6 Greencross Limited 4.5 5.2 0.7 103.3 97.6 (5.7) 59.9 53.0 (6.9) 23.7 25.0 1.3 Limited 26.7 29.4 2.7 20.0 21.5 1.5 40.4 43.2 2.8 8.1 9.6 1.5 Domino's Pizza Enterprises Limited 33.4 30.9 (2.5) 10.5 11.0 0.5 41.9 37.0 (4.9) 11.6 13.1 1.5 Kogan.Com Limited 5.4 2.6 (2.8) 42.0 61.0 19.0 20.7 32.5 11.8 23.4 26.0 2.6 AMA Group Limited 31.5 33.4 1.9 50.4 42.7 (7.7) 93.4 82.7 (10.7) 13.3 16.2 2.9 PWR Holdings Limited 31.5 33.0 1.5 249.5 264.0 14.5 34.8 43.0 8.2 76.3 79.2 2.9 The PAS Group Limited 28.5 28.6 0.1 90.4 104.7 14.3 31.7 35.7 4.0 55.0 59.0 4.0 Premier Investments Limited 5.7 7.9 2.2 119.0 127.4 8.4 30.5 35.6 5.1 37.4 41.5 4.1 McPherson's Limited 53.1 52.8 (0.3) 121.6 135.3 13.7 51.6 56.0 4.4 93.2 98.1 4.9 Billabong International Limited 58.8 63.1 4.3 125.1 124.4 (0.7) 83.2 78.8 (4.4) 79.5 85.3 5.8 MotorCycle Holdings Limited 2.9 4.8 1.9 87.3 95.4 8.1 10.3 11.6 1.3 63.3 70.9 7.6 OrotonGroup Limited 9.5 4.0 (5.5) 205.7 250.0 44.3 45.2 60.9 15.7 73.4 83.3 9.9 Oneall International Limited 48.9 59.6 10.7 144.8 161.4 16.6 61.9 60.7 (1.2) 96.7 124.2 27.5 Peer group average 26.9 25.2 (1.7) 110.6 111.5 0.9 43.9 46.7 2.8 56.5 54.5 (2.0) Findings

Transport & Distribution DSO DIO DPO DWC Company name 2016 2017 Change 2016 2017 Change 2016 2017 Change 2016 2017 Change Lindsay Australia Limited 56.5 48.2 (8.3) 22.8 23.2 0.4 55.2 60.0 4.8 34.8 23.2 (11.6) CTI Logistics Limited 49.3 44.6 (4.7) 0.4 0.3 (0.1) 10.3 12.9 2.6 40.9 34.0 (6.9) Brambles Limited 84.6 82.8 (1.8) 9.7 6.1 (3.6) 44.6 45.1 0.5 61.9 57.1 (4.8) Aurizon Holdings Limited 54.2 54.4 0.2 28.8 20.9 (7.9) 52.6 51.3 (1.3) 40.9 37.3 (3.6) K&S Corporation Limited 35.8 42.8 7.0 4.1 4.2 0.1 59.8 71.1 11.3 5.0 5.7 0.7 Auckland International Airport Limited 25.2 27.4 2.2 0.4 0.3 (0.1) 14.8 18.6 3.8 22.7 24.3 1.6 MaxiTRANS Industries Limited 44.3 46.5 2.2 94.6 108.2 13.6 62.3 71.3 9.0 63.8 68.6 4.8 Qube Holdings Limited 54.3 72.3 18.0 0.9 0.7 (0.2) 34.8 49.6 14.8 28.1 34.7 6.6 Royal Wolf Holdings Limited 40.2 55.8 15.6 69.4 81.3 11.9 48.9 49.1 0.2 51.9 72.6 20.7 Peer group average 49.4 52.8 3.4 25.7 27.2 1.5 42.6 47.7 5.1 38.9 39.7 0.8

Utilities DSO DIO DPO DWC Company name 2016 2017 Change 2016 2017 Change 2016 2017 Change 2016 2017 Change Pacific Energy Limited 46.7 40.3 (6.4) 72.0 96.7 24.7 188.0 244.8 56.8 38.1 28.0 (10.1) AGL Energy Limited 64.7 56.4 (8.3) 18.6 13.9 (4.7) 61.0 50.6 (10.4) 33.8 29.6 (4.2) Meridian Energy Limited 29.8 40.9 11.1 - - - 44.9 64.8 19.9 (1.7) (5.7) (4.0) ERM Power Limited 44.9 42.1 (2.8) 3.1 5.1 2.0 38.7 41.2 2.5 10.2 6.9 (3.3) APA Group 45.9 45.5 (0.4) 70.1 44.5 (25.6) 77.0 71.9 (5.1) 45.5 43.0 (2.5) Group 14.3 12.7 (1.6) ------14.3 12.7 (1.6) Contact Energy Limited 33.6 32.8 (0.8) 12.9 10.6 (2.3) 49.8 46.6 (3.2) 5.7 5.4 (0.3) Limited 63.8 60.9 (2.9) 9.4 4.3 (5.1) 77.5 58.9 (18.6) 6.5 14.0 7.5 Genesis Energy Limited 35.0 43.3 8.3 20.9 22.1 1.2 - - - 49.4 58.2 8.8 AusNet Services Limited 40.1 48.0 7.9 78.7 66.1 (12.6) 140.1 74.0 (66.1) 32.4 47.0 14.6 Peer group average 41.9 42.3 0.4 28.6 26.3 (2.3) 67.7 65.3 (2.4) 23.4 23.9 0.5

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