DSO 7.0 ⇓

DIO 2.0 ⇓

DPO 5.6 ⇓

DWC 3.5 ⇓

Shorter collection cycles (lower DSO) used to pay suppliers more quickly (lower DPO).

Whilst the Transport & Logistics sector has faced some significant challenges in 2020, it has shown resilience and an ability to adapt to the short-term supply chain constraints brought on by COVID-19. This is evidenced by the performance of our sampled companies, which reported 3.1% and 4.6% increases in average revenue and earnings respectively. The “winners” in the sector were those associated with online retail deliveries and other “final mile” courier services, as well as freight businesses that benefited from the temporary lifting of curfew restrictions across road and rail networks.

From a working capital perspective, average DWC fell by 3.5 days to 27.5 days in 2020, notionally releasing over $450 million in cash. This was driven by a 7 day reduction in average DSO (to 38.9 days), with 75% of sampled companies shortening their collection cycles. Notably, all but one of the sampled companies reduced DSO in H2 (relative to H1), suggesting a focus from management teams on tightening collection processes and customer payment terms as the uncertainty of the COVID-19 period set in.

The improvement in DSO was offset by a reduction in DPO of 5.6 days (to 87.2 days). Of the sampled companies that reduced DSO, close to 42% also paid their suppliers more quickly (reduced DPO) in 2020. Inventory loads remained relatively stable on average, with some significant reductions for a few companies. Looking internationally, Australian operators sit within the range of DWC achieved in Asia, EU and US (noting a DWC spread of approximately one week in 2020).

In terms of the sector outlook, demand for online courier services is expected to remain high (even as “bricks and mortar” retail recovers post COVID-19). From a logistics viewpoint, the Australian Government has extended its International Freight Assistance Mechanism to aggregate cargo loads, negotiate with airlines, and work with partner Governments to facilitate clearances.

Note: airlines were excluded from our sample due to the contrasting nature of their working capital cycles (often negative) and the size and scale of their operations (which disproportionately skew the sample set).

“Cash generation was strong during the year…driven by disciplined capital allocation and effective working capital management.”

John Mullen, Chairman and Graham Chipchase, CEO
Brambles Limited
FY20 Annual Report


COVID-19 Impact

Net working capital performance

Cash Impact ($'m)*

*A positive cash impact is a “release” of cash from working capital (improvement). A negative cash impact is additional cash invested or “locked up” in working capital (deterioration).

Transport & Logistics - Financial Year
Days 2019 2020 Change
DSO 45.9 38.9 (7.0)
DIO 50.8 48.8 (2.0)
DPO 92.8 87.2 (5.6)
DWC 31.0 27.5 (3.5)
Transport & Logistics
Days H1 2020 H2 2020 Change
DSO 47.8 39.9 (7.9)
DIO 48.4 48.9 0.5
DPO 83.3 83.6 0.3
DWC 39.4 37.3 (2.1)
Best & Worst
Days Best Worst Spread
DSO 11.8 54.5 42.7
DIO - 217.1 217.1
DPO 136.2 21.7 (114.5)
DWC (37.2) 113.8 151.0
International Benchmarking
Days Asia EU US
DSO 55.3 49.3 40.1
DIO 11.9 30.7 30.8
DPO 38.1 79.8 57.5
DWC 29.1 20.3 23.5