Ronaldo, 47, agreed with BPW Sports company to sell the 90% stake he acquired in 2021 for $70 million
football4 hours ago
Working capital performance has continued to deteriorate in the Middle East, driven mainly by inventory and receivables, leading to Dh112 billion in trapped liquidity in listed companies, a study by PwC said.
The latest Middle East working capital study shows a consistent working capital deterioration over five years since 2013 with some very large companies witnessing up to 40 per cent decline in net working capital performance.
"While 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," said Mihir Bhatt, director of deals advisory at PwC Middle East.
The PwC study that reviewed the working capital performance of more than 370 companies across eight countries over a three-year period also highlights that both dividend payouts and capex spend is at the lowest point in the past five years. Total debt levels were also at the highest point in the past five 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," said the study.
Interest rates are set to increase further in the future in line with US Fed's rates hike, and if this is the case, working capital becomes the most attractive source of cash to fund the potential capex or dividend needs, said the study.
"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," said Bhatt.
However, for almost 50 per cent of the companies, working capital has improved year-on-year, although sustainable working capital improvement remains elusive for the majority of Middle East companies. Only 7 per cent of companies in the survey sustainably decreased net working capital days for three consecutive years, and a mere 2 per cent for four consecutive years.
"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," said Bhatt.
On average, working capital efficiency in the Middle East has deteriorated since 2013. During 2013-17, net working capital days have deteriorated by 14 days, which corresponds to around Dh33 billion of additional cash tied up in operations by business in the Middle East.
"Despite a continued stretch of payables and a rebound in revenues during 2017, working capital continued to deteriorate driven by the inability to accurately plan the right inventory requirements and a decline in collections performance," said Bhatt.
At the same time, total debt in the Middle East has been building up while both capex and dividend payments have been curtailed. Better working capital management has a key role to play to help support increased capex and enable further dividends for the companies, according to the study.
- issacjohn@khaleejtimes.com
Ronaldo, 47, agreed with BPW Sports company to sell the 90% stake he acquired in 2021 for $70 million
football4 hours ago
The decision aims to ensure the safety of teachers as well as students across the country
uae4 hours ago
The facility had been targeted by a drone on Friday in which four workers were killed
energy4 hours ago
The airline will initially fly once a week between the two destinations
uae4 hours ago
Australia has invested heavily in women's cricket over the past decade
cricket4 hours ago
Try some local food that'll enchant your taste buds with a mix of legacy and contemporary flair
food4 hours ago
DP World has been actively expanding its footprint across the region
business4 hours ago
The rule allows teams to bring in one substitute at any time for a player in the starting 11
cricket5 hours ago