ARE SOUTH AFRICAN CFOS LACKING A HEALTHY …api.ning.com/.../PresentationJonasSchoeferTheHackettGroup.pdf · ARE SOUTH AFRICAN CFOS LACKING A HEALTHY CASH CULTURE? Hackett's Annual

ARE SOUTH AFRICAN CFOS LACKING A HEALTHY CASH CULTURE?

Hackett's Annual Working Capital

Management Survey

Jonas Schöfer

Director South Africa and Subsahara

The Hackett Group

© 2013 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion

thereof without prior written consent is prohibited.

What if South Africa had R300 Billion available

to fund investments and

innovations?

330kms

• Low orbit of the International

Space Station!



Sources of Cash

Yup, got it.

Equity Debt and

Borrowings

Dividends

Management

Securitization

Divestment Third Party

Financing Corporate Finance

Corporate Finance

Sure. What else?

Treasury Management

Dividends from

holdings

Financial

Investments

Tax Strategies Been there, done

that.

Trade Creditors

Trade Receivables

Inventory

Working

Capital 5-25%

10-25%

15-30%

ROCE

ROI

EBIT

Service

HEPS

…

Hm....!

Operations Cost,

Spend, Labor …

Capex

Fixed Assets

Revenue

Operations



Do more with less

4



Sustainability of achieved working capital improvements still a major issue for most companies

199 Largest Companies

10 Companies

improved DWC

every year for 3

years

None of them

improved all elements of

DWC every year for 3

years



Innovate how you approach your business: end-to-end, not silo to silo

Customer to

Cash (C2C)

Credit and

Risk

Management

Cash

Application

Sales and Bid

Management

Order

Processing Dispute

Management

Invoicing Collections

Management

Forecast to

Fulfil (F2F) Forecasting

and Supply

Chain Planning

Product

Range

Management

Sales

Order

Processing Materials

Scheduling

Manufacturing

Execution

Warehousing

and

Distribution

Inventory

Management

Source to

Settle (S2S)

Planning

and

Strategy Sourcing and

Supplier

Management

Requisitioning

and Ordering

Receipting

and

Evaluating

Invoice

Processing

Payment

Discrepancy

Management



Working capital performance (DWC) deteriorated by 11% to 2013, and South African companies still struggle to convert sales into cash

DWC (Days Working Capital) deteriorated

YOY +11%

Total Net working capital of the SA

studied companies increased by 24 %

YOY and 38% over a 3 year period

Revenue increased by 12% YOY and

28% over a 3 year period

Cost of Goods Sold has increased by

14% YOY and 32% over a 3 year period

13.6%12.8% 12.6%

13.9%

11.5%

'08 '09 '10 '11 '12

Cash Conversion Efficiency

45

40 40

39

43

35

36

37

38

39

40

41

42

43

44

45

46

ZAR 0.00

ZAR 50.00

ZAR 100.00

ZAR 150.00

ZAR 200.00

ZAR 250.00

ZAR 300.00

ZAR 350.00

'08 '09 '10 '11 '12

Billions S.A. Working Capital Performance

NWC DWC

’12 = all public numbers released until data pulling until mid 2013

2009 2010 2013 2012 2011

2009 2010 2013 2012 2011



0

50

100

150

200

250

0

100

200

300

400

500

600

'08 '09 '10 '11 '12

Cash

o o

n H

and

/FCF (B

illion

s ZAR

)

Tota

l De

bt

(bill

ion

s ZA

R)

S.A. Cash and Debt Profile

Total Debt (Left Axis) Cash on Hand Free Cash Flow

Free cash flow performance is declining despite ongoing cash hoarding and financing using debt

Corporate cash performance - Free cash flow

(FCF) dropped massively by 91% YOY to settle

at ZAR 9 Billion in 2012.

Cash on Hand remains around ZAR 200 Billion,

however when compared as a % of revenue the

ratio decreased by 1point YOY for the REL

studied companies

As Debt continued to increase to ZAR 532 B in

2012 (+18% YoY) and Free cash flow critically

followed the opposite trend, the Cash flow to

Debt ratio dropped to an all time low of 2%.

The decrease in Interest Coverage ratio

(EBIT/Interest expenses) of 16% since 2011

indicates it is harder for S.A. companies to pay

interests on outstanding debt

8

57

9 7

0

5

10

15

20

25

0%

5%

10%

15%

20%

25%

'08 '09 '10 '11 '12

S.A. Cash and Debt Profile

Cash Flow to Debt Ratio Interest Coverage Ratio (Right Axis)

2009 2010 2013 2012 2011

2009 2010 2013 2012 2011



The deterioration in DWC came from a weakening in DSO and DIO whereas no major improvement on DPO can be noted to balance the situation

43.544.4

46.647.1

48.147.3

45.7

41.042.1 42.6

44.7

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

DSO

38.3

37.237.9

37.6

36.937.5

39.7

36.036.5

37.6

39.7

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

DIO

44.942.3 42.4 41.3 42.6 41.9 40.5

37.1 38.441.3 41.4

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

DPO

‘13 ‘13

‘13



Some industries have improved / worsened more than others Im

pro

ving

W

orsen

ing

% Change

-89%

-16%

-9%

-9%

-8%

-6%

-2%

5%

6%

13%

13%

22%

23%

23%

Hotels, Restaurants and Leisure industry and Airlines industry have been removed from the list, since these are

industries that see big swings due to the nature of the business and dependence on external factors

62

62

46

60

55

68

78

54

92

61

48

59

21

0

51

51

38

54

49

64

74

55

97

66

53

65

25

3

Metals and Mining

Construction and Engineering

Paper and Forest Products

Trading Companies and Distributors

Professional Services

Containers and Packaging

Chemicals

Construction Materials

Specialty Retail

Food Products

IT Services

Oil, Gas and Consumable Fuels

Media

Food and Staples Retailing

- 25 50 75 100

Days

2011 DWC

2012 DWC

Best / Worst Change in DWC Performance by Industry2012

2013



Upper quartile companies* in the top SA firms have 53% less working capital tied up in operations than Median† performers

* Upper or 1st quartile performance – Lowest DIO / DSO, or highest DPO in top 25% of companies

† Median performance – Median DIO, DSO, or DPO in all companies

51.6

33.1

Median 1st Quartile

36%

Days Sales Outstanding Days Inventory On-Hand Days Payables Outstanding Days Working Capital

40.1

12.1

Median 1st QuartileMedian 1st Quartile

70%

37.6

55.3

Median 1st Quartile

47%

51.4

24.4

Median 1st Quartile

53%



Jonas Schoefer

Director

South Africa & Subsahara

Mobile +27 730 919 674

[email protected]

Contact Information

Amsterdam | Atlanta | Chicago | Frankfurt | Hyderabad | Johannesburg

London | Miami | New York | Paris | Philadelphia | San Francisco | Sydney

Statement of Confidentiality and Usage Restrictions

This document contains trade secrets and other information that is company sensitive, proprietary, and confidential, the disclosure of which would provide a competitive advantage to others. As a result, the

reproduction, copying, or redistribution of this document or the contents contained herein, in whole or in part, for any purpose is strictly prohibited without the prior written consent of The Hackett Group.

www.thehackettgroup.com

mailto:[email protected]


Background on

The Hackett Group

The Hackett Group, a global strategic business advisory,

operations consulting and finance strategy firm, is a

leader in business best practices, business

benchmarking, and transformation consulting services

including strategy and operations, working capital

management, and globalisation advice.

Utilising business best practices and implementation

insights from more than 5,000 business benchmarking

engagements, executives use The Hackett Group's

empirically-based approach to quickly define and

implement initiatives to enable world-class performance.

Founded in 1991, The Hackett Group was acquired by

Answerthink, Inc. in 1997. Answerthink was renamed The

Hackett Group, Inc. in 2008. The Hackett Group has

global offices in the United States, Europe and

Asia/Pacific and is publicly traded on the NASDAQ

as HCKT.

Bridging the gap between planning and doing.

Established in 1998, IQ Business is a management

consulting organisation that helps clients be more

efficient, enhance business and reduce costs.

IQ Business, headquartered in Rivonia, provides

consulting and business solutions through specialist

teams located in South Africa, Australia and the USA.

The group has built a significant and expanding client

base that values its local market knowledge and expert

resources, with a solid track record in implementing

practical solutions, bridging the gap between planning

and doing.

IQ Business is a performance partner with The Hackett

Group Inc., utilising IQ’s presence to provide industry-

leading benchmarking and business advisory programs

to organisations in Sub-Saharan Africa.

The Partnership provides CEOs, CFOs, CIOs and senior

IT executives with benchmarking, transformation and

advisory services that enable objective performance

evaluation, utilise proven and leading best practices and

guide the design and implementation of client-centric

transformation solutions. Real results driven by real facts.



The Hackett Group offers of business improvement capabilities to help clients achieve World Class Performance through Operational Excellence

BENCHMARKING

STRATEGY &

OPERATIONS

ENTERPRISE

PERFORMANCE

MANAGEMENT

ADVISORY

TECHNOLOGY

SERVICES

TRANSFORMATION

WORKING CAPITAL

Cash Flow, Cost and

Service Optimisation

World Class Performance

Through Operational Excellence Growth Agility

Cash Service Cost Risk



Hackett has the only global consulting practice dedicated exclusively to Working Capital management

Specialists in Working Capital focused on optimizing three critical end-to-end

processes: – Forecast-to-Fulfill (Supply Chain & Operations)

– Customer-to-Cash (Customer Management & Receivables)

– Source-to-Settle (Sourcing & Payables)

Unique implementation focus and capability

More than ZAR >250bn released cash in the last 10 years,

10-30% released from working capital in every engagement

Hackett Working Capital are ‘Do-ers’ not ‘Advisors’

Unmatched 38 year track record

More than 400 working capital engagements

Project experience in more than 60 countries

10 offices across America, Europe, Africa and Asia

Level 3 BBBEE in South Africa through Alliance Partner

Johannesburg

IQ Business Park

3 Third Avenue

Rivonia, 2128

South Africa

85% of Hackett revenue comes from

implementations resulting in quick wins and

sustainable results for our clients



Hackett Working Capital Delivered Results

Customer to CashSM

85

70

100

DSO improvement

80

20

100

Dispute Cycle Time

92

79

100

Supply Chain Costs

Inventory turns improvement

Forecast to FulfillSM

125

105

100

Service Quality

115

105 100

Source to SettleSM

120

105

100

DPO improvement

150

125 100

Payment Productivity

160

130 100

Price Discount Capture

5% - 20% 5% - 25% 15% - 30%

Source: Survey of 200 Hackett-REL clients

80

10

100

Dispute Quantity



Global client base: Hackett has serviced a large portion of the Global 1000 as well as mid-cap and small cap markets across

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Selected clients in Africa and Middle East

Kenya

Egypt Morocco

Saudi Arabia

UEA

Southern Africa

Nigeria/Ghana/Mali



The Hackett Group enables optimised Working Capital performance through hands-on implementation

Hands-On

• Hackett consultants are specialists in driving operational

performance

• Focused on implementation of improvements on the ground

Proven Tool Kit • 38 years experience in implementing projects

• Proven toolkits established that can be implemented fast

Results Driven • Focus to deliver measureable results quickly

• Move ahead fast with pragmatic solutions

Sustainable • Focus on up-skilling the client teams: Training & Coaching

• Transfer of knowledge to ensure improvements are sustained



Jonas Schoefer

Director

South Africa & Subsahara

Mobile +27 730 919 674

[email protected]

Contact Information

Amsterdam | Atlanta | Chicago | Frankfurt | Hyderabad | Johannesburg

London | Miami | New York | Paris | Philadelphia | San Francisco | Sydney

Statement of Confidentiality and Usage Restrictions

This document contains trade secrets and other information that is company sensitive, proprietary, and confidential, the disclosure of which would provide a competitive advantage to others. As a result, the

reproduction, copying, or redistribution of this document or the contents contained herein, in whole or in part, for any purpose is strictly prohibited without the prior written consent of The Hackett Group.

www.thehackettgroup.com



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