Transport & Logistics

An improvement in DWC driven by lower DSO, despite deteriorating DIO and DPO metrics.

The Transport & Logistics sector experienced significant growth, with average revenues for our sample increasing by 23% in 2022. In particular, growth was achieved by those operators with markets linked to energy, grain, and mining.

Cost pressures were also felt across the sector, largely driven by elevated labour costs, inflation-linked increases in utilities prices, and additional third-party freight charges. Notably, 82% of the sample reported a lower gross margin and all but one of the sampled companies also experienced a deterioration in EBITDA margin in 2022.

In terms of working capital performance, average DWC decreased by 1.1 days to 26.6 days in 2022, although there was a mix of outcomes across the sample with 36% of operators experiencing an increase in DWC. Interestingly, 75% of the sampled companies that were able to lower their DWC did so by collecting from their customers more quickly (lower DSO). On average, DSO fell by 0.9 days to 39.2 days in 2022, with a considerable improvement in H2 2022. The three largest operators in the sample (being Amcor, Brambles, and Sims) shortened their collection cycle by close to 5 days (on average), which heavily influenced the overall performance of the sector (in terms of both DSO and DWC).

Average DIO increased by 2.1 days to 57.2 days in 2022, with 55% of the sample holding more inventory. After a considerable lengthening of the supplier payments cycle in 2021, average DPO decreased in 2022 (by 3.5 days to 87.6 days). In fact, 73% of our sample paid their suppliers more quickly, and 75% of those operators did so whilst reporting lower margins. This highlights the dual challenge that many companies faced, paying more for inputs on shorter payment terms.

Looking internationally, Australian operators appear to manage working capital well when compared with their overseas counterparts. This is particularly the case for Asia and EU where longer customer collection cycles and shorter supplier payment cycles resulted in average DWC metrics that were 10 – 20 days higher than Australian averages in 2022.

Looking ahead for the Transport & Logistics sector, while the international market dynamics appear to be easing around congestion, vessel capacity, and reducing shipping charges, the domestic market is expected to face continued challenges. Although demand for online courier services and transportation to support domestic manufacturing is expected to remain high, supply side constraints are also likely, with a lack of drivers, reduced access to road freight equipment, and increased fuel costs, anticipated to impact the sector in 2023.

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).

Net working capital performance

*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).