Working capital performance is an untapped opportunity in the Middle East
Source: PwC , Author: Posted by BI-ME staff
Posted: Wed October 3, 2018 1:25 pm

UAE. Our latest Middle East working capital study shows a 5th year of working capital deterioration since 2013. What is most interesting in this years Middle East 2018 working capital study is that very large companies have seen a 40% decline in net working capital performance, the first time in our study's history.

Whilst in previous years we have seen deterioration of working capital within small and mid sized companies, the very large companies are now also feeling the impact of tightening liquidity, with cash collections processes most under pressure.

Our study also highlights that both dividend payouts and capex spend is at the lowest point in the past 5 years. At the same time,  total debt levels were at the highest point in the past 5 years. These two factors, combined with actual and further anticipated interest rate rises, makes working capital an even more compelling source of cash to fund operations, capex or future dividends.

Mihir Bhatt, Deals Advisory at PwC Middle East said: " Working capital performance has continued to deteriorate driven mainly by inventory and receivables as in the previous years. It appears that companies continued to address this issue by increasing the creditor cycle rather than more sustainable operational improvements across debtors and inventory."

Working capital has improved for almost 50% of the companies year on year,  however sustainable working capital improvement remains elusive for the majority of Middle East companies. Only 7% of companies in our survey sustainably decreased net working capital days for 3 consecutive years, and a mere 2% for 4 consecutive years.

He added: "Smarter working capital management enables companies to pay for more capex, continue to fund dividends and unlock cash to enable future growth. Technology enabled solutions using real-time data, coupled with fundamental process changes are enabling companies to redefine their working capital cycles"

Link to the study
https://www.pwc.com/m1/en/publications/working-capital-2018.html

About the study
In our 2018 Middle East Working Capital Study we have reviewed the working capital performance of more than 370 companies over a 3 year period. The study included 8 countries in the region.

About PwC
At PwC, our purpose is to build trust in society and solve important problems. We're a network of firms in 158 countries with more than 236,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.

Established in the Middle East for 40 years, PwC has 22 offices across 12 countries in the region with around 4,500 people. (

For more information, please visit www.pwc.com/me.

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity.

Please see www.pwc.com/structure for further details.

 

MIDDLE EAST BUSINESS COMMENT & ANALYSIS

date:Posted: May 20, 2019
INTERNATIONAL. With "all things digital", a generous amount of ambiguity and experimentation is always to be expected. But one thing seems fairly certain: big data will demand more of people, not less, as our digital epoch unfolds.
date:Posted: May 17, 2019
LONDON. The UAE is the best-known example of business-friendly reform in the MENA region; Many Western countries' instinct to protect and turn inwards, combined with a wider stagnation in the quality of Governance globally is acting as a brake on Economic Openness.
date:Posted: May 17, 2019
UAE. Ecosystems and open platforms create an economy of things; First Digital Trust Forum with international experts; "We need secure, open platforms and an internet in which users have the power to decide for themselves."
INTERNATIONAL. With "all things digital", a generous amount of ambiguity and experimentation is always to be expected. But one thing seems fairly certain: big data will demand more of people, not less, as our digital epoch unfolds.
dhgate