2020 Working Capital Report | FTI Consulting

2020 Working Capital Report

Total Working Capital Management – the Hidden Gold Mine on Your Balance Sheet

Corporate Finance & Restructuring

December 9, 2020

Gold

As the historic year of 2020 draws to a close, the COVID-19 crisis has seen the global economy plunge into a deep recession, with only a glimpse of hope that the worst is now over. While COVID-19 continues to infect millions across the globe, we wanted to understand how the virus has impacted the lifeblood of every company – the working capital.

How have companies reacted to rapid shifts or elimination of consumer demand? What did companies do to avoid bleeding out cash? FTI Consulting has analysed the annual reports of the 316 largest ASX listed companies that have reported their FY20 results.

As was evident in previous iterations of our analysis, there remains a significant untapped ‘gold mine’ on the balance sheets of Australian companies, which could be used to navigate upcoming liquidity events. By sustainably improving business processes, most companies could release cash of 5% to 10% of revenues, which indicates a gold mine of more than $20 billion of internal and largely ‘free’ financing for Australian companies that remains untapped.

As you read through our report, we believe that these key findings are worth highlighting:

  • Profitability of companies has taken a hit, while revenue of companies in scope still grew year-over-year
  • Companies have stock piled an additional $5.3b cash in the face of significant uncertainty via a range of actions
  • Australian companies have reduced working capital by more than $3.4b
  • The major industries in Australia have shown very different trends
  • Retail: Working capital levels in the retail industry plunged by ca. $2.3b
  • Mining & Materials: Mining companies demonstrated a further growth in working capital, while performance has been significantly improved through stocks and debtor reduction
  • Construction: Projects industries have improved overall working capital performance despite delays in project delivery leading to an increase in inventories (WIP)

We hope you find our report’s findings of interest.


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