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New DSO Data: A High Stakes Game Speaker: Maxime Lemerle, Economic - PowerPoint PPT Presentation

Euler Hermes World Agency Webinar New DSO Data: A High Stakes Game Speaker: Maxime Lemerle, Economic Research Moderator: Ilan Goren, Economic Research 27 th July 2017 16.00 CET 1 Maxime Lemerle joined Euler Hermes in 1993 as a Credit Analyst


  1. Euler Hermes World Agency Webinar New DSO Data: A High Stakes Game Speaker: Maxime Lemerle, Economic Research Moderator: Ilan Goren, Economic Research 27 th July 2017 16.00 CET 1

  2. Maxime Lemerle joined Euler Hermes in 1993 as a Credit Analyst for EH France, specializing in the food and retail sectors. He then moved to the Research team in 1999 before becoming Team Leader for global forecasts. Maxime now leads cross-cutting sector and insolvency research and is in charge of sector risk ratings. 2

  3. Agenda 1 Global figures 2 Country Trends 3 Sector Trends 4 The 2016 DSO Heat Map 3

  4. 1 Global figures 2 Country Trends 3 Sector Trends 4 The 2016 DSO Heat Map 4

  5. What is DSO? Days Sales Outstanding (DSO) based on balance sheets financial data DSO = (Accounts Receivables / Total Revenues) * 365 What? • Systematic updating on a yearly basis 5

  6. What is DSO? Days Sales Outstanding (DSO) based on balance sheets financial data DSO = (Accounts Receivables / Total Revenues) * 365 • Leading indicators of payment terms What? • Keys for our business/clients since 1 out of 4 insolvencies due to a major payment Why? incident • Systematic updating on a yearly basis 6

  7. What is DSO? Days Sales Outstanding (DSO) based on balance sheets financial data DSO = (Accounts Receivables / Total Revenues) * 365 • Leading indicators of payment terms What? • Keys for our business/clients since 1 out of 4 insolvencies due to a major payment Why? incident • • Systematic Perimeter of 27,000 listed updating on companies a yearly • 20 sectors How? basis • 36 countries all around the world 7

  8. What is DSO? Days Sales Outstanding (DSO) based on balance sheets financial data DSO = (Accounts Receivables / Total Revenues) * 365 • Leading indicators of payment terms What? • Keys for our business/clients since 1 out of 4 insolvencies due to a major payment Why? incident • • Systematic Perimeter of 27,000 listed • EH’s Economic updating on companies Research Department a yearly • 20 sectors Who? How? basis • Based on Bloomberg • 36 countries all around the database world 8

  9. What is DSO? Days Sales Outstanding (DSO) based on balance sheets financial data DSO = (Accounts Receivables / Total Revenues) * 365 • Leading indicators of payment terms What? • Yearly updates • Keys for our business/clients since 1 out of 4 insolvencies due to a major payment When? Why? incident • • Systematic Perimeter of 27,000 listed • EH’s Economic updating on companies Research Department a yearly • 20 sectors Who? How? basis • Based on Bloomberg • 36 countries all around the database world 9

  10. Worldwide DSO average stable around 64 days… Global steadiness of world average - Little fluctuation since 2012 around 64 days - Slightly lower than pre crisis level – 2017 expected at 64 days DSO- worldwide average (in number of days) 66 65.1 65 64.3 64.1 64.1 64.0 63.9 63.8 63.7 64 63 62.2 62 60.8 61 60 59.5 59 58 57 56 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017f Sources: Bloomberg, Euler Hermes 10

  11. …but watch out for the distribution High dispersion: 1 out of 4 companies were paid after 88 days in 2016 (2 days faster than in 2015) Worldwide DSO – Distribution around the average (in number of companies by range of DSO, in %) 35% 31.2% 30% 2015 2016 23.9% 25% 20% 14.9% 15% 12.2% 9.0% 8.8% 10% 5% 0% Below 10 Between 10 Between 30 Between 60 Between 90 Above 120 days and 30 days & 60 days & 90 days & 120 days days Sources: Bloomberg, Euler Hermes 11

  12. 1 Global figures 2 Country Trends 3 Sector Trends 4 The 2016 DSO Heat Map 12

  13. Heterogeneity and Country trends We see 4 main country groups in terms of levels: 1 out 3 countries posted an increase in DSO (1 out of 3 a decrease) DSO level by country in 2016 (in number of days and changes versus 2015, selected countries) 140 120 100 85 88 89 42 44 46 48 49 49 50 53 53 53 54 56 58 61 64 67 67 69 69 73 75 80 80 60 40 20 0 Sources: Bloomberg, Euler Hermes 13

  14. Heterogeneity and Country trends We see 4 main country groups in terms of levels: 1 out 3 countries posted an increase in DSO (1 out of 3 a decrease) DSO level by country in 2016 (in number of days and changes versus 2015, selected countries) 140 : increase in DSO : decrease in DSO 120 100 89 88 85 80 75 80 73 69 69 67 67 64 61 58 56 54 60 53 53 53 49 50 49 48 46 44 42 40 -4 -1 +1 +2 +3 -1 +5 +2 -3 +3 -2 -2 +1 +7 -1 -3 -4 +1 20 0 Sources: Bloomberg, Euler Hermes 14

  15. Focus 1: Western Europe Western Europe: a clear improvement in companies’ longest-delayed payments (DSO above 90 days) DSO distribution across Western Europe for the share of DSO exceeding 90 days Sources: Bloomberg, Euler Hermes 15

  16. Focus 2: China China has not succeeded in reducing outstanding payments (DSO above 120 days) since at least 2015 DSO split in China between 2007 and 2016 (% of Chinese companies paid within a given time period, in number of days) Sources: Bloomberg, Euler Hermes 16

  17. DSO distribution varies by country From the smallest (Austria, Netherlands) to the largest dispersion (China) DSO level and distribution by country in 2016 (in number of days, selected countries) 140 133 25% of companies are paid after 25% of companies are paid before 120 Average DSO in the country 112 114 120 98 97 96 94 100 91 90 89 88 88 85 82 80 77 75 80 73 73 71 70 69 69 67 68 67 67 65 65 66 65 64 61 59 58 56 55 54 60 53 53 53 53 50 49 49 48 46 44 42 55 49 40 44 43 40 40 38 37 35 34 33 33 33 32 31 31 31 31 28 20 26 24 24 22 22 18 0 Sources: Bloomberg, Euler Hermes 17

  18. 1 Global figures 2 Country Trends 3 Sector Trends 4 The 2016 DSO Heat Map 18

  19. A structural difference between B2C and B2B On average, upstream sectors (Electronics, Machinery and Equipment, Construction) have to cope with higher DSO than sectors related to household consumables Sector DSO on a global average ( 2016 level and change since 2012, in number of days) 100 10 2016 (lhs) 88 90 87 8 2016 vs. 2012 (rhs) 82 8 80 80 6 73 71 Number of days 69 68 70 Change in the number of days 64 4 61 60 59 4 58 60 56 56 3 3 3 3 2 51 50 46 46 46 0 1 1 1 1 1 1 40 0 0 0 0 0 -2 30 27 -2 -4 20 -4 -6 10 0 -8 -7 Sources: Bloomberg, Euler Hermes 19

  20. DSO distribution varies by sector From the smallest (Retail) to the largest range (Construction) DSO level and dispersion by sector in 2016 (in number of days) 115 120 113 113 106 25% of companies are paid after 25% of companies are paid before Average DSO in the sector worldwide 94 95 100 87 86 83 88 87 80 79 79 78 82 75 74 80 80 68 68 73 71 62 68 69 62 64 61 60 60 59 58 56 56 51 55 46 46 46 51 39 40 46 44 44 43 41 40 38 35 27 33 31 29 29 20 27 22 22 21 13 0 5 Sources: Bloomberg, Euler Hermes 20

  21. Compare DSO with Working Capital Requirements On a global basis, 8 sectors have registered an increase in Working Capital Requirements (WCR). Aeronautics requires attention as both DSO (+8 days since 2012) and WCR (+16) are up Sector DSO (x-axis) and WCR (y-axis) on a global average ( 2016 level versus 2015 level, in number of days) 20 Aero 15 Personal & recreational goods 10 Chemicals Pharma 5 Construction Auto Retail Machinery & eq Metals Telecom Electronics 0 Other services Food Transportation Paper Utilities Oil & gas Household goods Business services -5 Technology -10 Sources: Bloomberg, Euler Hermes -10 -8 -6 -4 -2 0 2 4 6 8 10 21

  22. 1 Global figures 2 Country Trends 3 Sector Trends 4 The 2016 DSO Heat Map 22

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