Transport & Logistics
A shortening of the net working capital cycle by 1.1 days achieved by a reduction in DSO and DIO, offset by a shortening of average supplier payment cycles (lower DPO).
For our sample of Transport & Logistics companies, average revenue and direct costs both increased by 9% in FY23, resulting in stable margins. Whilst some operators achieved organic volume growth, cost pressures continued to be driven by adverse weather conditions, elevated labour costs, and ongoing cost increases related to port congestion and fuel.
In terms of working capital performance, average DWC decreased by 1.1 days to 23.3 days in FY23 (the lowest DWC of all sectors covered). However, there was a mix of outcomes across the sample with 57% of operators experiencing an increase in DWC. Interestingly, all but one of the sampled companies that were able to lower DWC did so by collecting more quickly from their customers (reducing DSO). On average, DSO fell by 3.4 days to 37.3 days in FY23.
The most significant working capital movement was observed in DPO, with our sampled companies reducing DPO by 9 days in FY23 (to 71.4 days). Close to 90% of our sample paid their suppliers more quickly in FY23, and 42% of those operators did so whilst still achieving a reduced net DWC, highlighting their preparedness to share the cash flow benefits from tighter working capital management with their suppliers. Average DIO also decreased by 4.7 days to 42.5 days in FY23 (almost back to pre-COVID levels).
Looking internationally, our Australian sample companies appeared to manage working capital well when compared with their overseas counterparts, with comparable figures to the US and Europe, and much lower DWC than the Asia sample. While global market dynamics have eased around congestion, vessel capacity, and reduced shipping charges, the domestic market is expected to face continued challenges. Inflationary pressures associated with key inputs are expected to continue and there is some risk of reduced demand as consumer spending comes under pressure.
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
Best & Worst