Construction & Engineering

Shorter customer collection cycles drove a 3.6 day improvement in DWC.

Following a prolonged period of contraction, the Construction & Engineering sector saw modest growth in FY25 with higher government infrastructure spending and lower interest rates driving a recovery in residential housing.

Our sampled companies saw an uplift in activity, with 69% reporting higher revenue in FY25 relative to the prior year. Despite continued labour shortages and variable raw material prices (particularly for concrete and bricks), all but two of the companies that achieved revenue growth also reported higher EBITDA, reflecting improved cost management and margin control across the sample.

From a working capital perspective, DWC decreased by 3.6 days to 37.1 days (the shortest cycle since FY21). DSO was the main driver of the working capital improvement, with our sample collecting from customers 3.3 days faster than in FY24. Inventory holdings reduced slightly (DIO down 0.8 days) and suppliers were paid slightly more quickly (DPO reduced by 0.7 days), with some of the larger operators reversing the increase in DPO seen in FY24. Despite the shortening of the collection cycle, 56% of the sample continued to experience a structural “funding gap”, where suppliers were paid more quickly than collections were made. This reemphasises the need for operators in the sector to maintain a disciplined approach to billings, collections and customer management to support cash flow.

Our analysis of international metrics shows that the average DWC for the Australian sample was lower than their counterparts in Asia, Europe and the US due to lower average DSO and DIO. Looking ahead to FY26, further growth is expected to be driven by the energy transition, new investment in water and other infrastructure, and continued high housing demand, however the challenges being faced by operators in relation to input costs, skills shortages, and subcontractor insolvencies will remain.