Media

Lower inventory and marginally better collection and payment metrics drove a reduction in DWC.

After consecutive periods of significant restructuring costs and weaker market conditions contributing to revenue and earnings contraction, our sampled Media companies reported combined revenue and EBITDA growth of 8% and 22%, respectively in 2018.

The transition from print and other traditional forms of media to digital and online mediums also resulted in an improvement in working capital performance, with average DWC contracting by 0.7 days to 44.7 days in 2018.

A key driver of the DWC reduction was lower inventory days (DIO). While most of our sample held minimal or no inventory, those that did managed (on average) to reduce holdings.

The Media sector reports a structural “funding gap” where average days to collect from customers (DSO) is longer than average days to pay suppliers (DPO).

This requires Media companies to focus on customer management and collections. To this end, 62% of the sampled companies achieved a reduction in DSO during the year. However, we note the spread between the best and worst performers was 55.1 days, which highlights the potential for further improvement and a competitive advantage for those companies able to achieve shorter collection periods.

Of the sample, APN Outdoor Group delivered the most material improvement with a 10.9 day reduction in DWC in 2018, driven by a 14.8 day increase in DPO. We note that even with this improvement, APN paid its suppliers (on average) 10.6 days faster than the sample average and 40 days faster than it collected cash from its customers, which suggests that there may be further improvement potential.