Working Capital - The Cheapest Source of Cash

2017 Middle East Working Capital Study

We have reviewed the working capital performance of more than 400 companies over a 3 year period. Our review has identified significant opportunities to release cash from the cheapest source available, working capital.

Working capital performance has deteriorated significantly, each quarter, since the oil price decline in Q414

Since our last study, the Middle East has seen a continued lower oil price environment, an overall decline in revenues for those companies in our survey, and a further deterioration of working capital performance. FY16 has seen further 9 day (7%) deterioration in working capital performance, a cumulative 14 day (11%) deterioration since FY14.

Most interestingly our latest study of working capital performance shows that while smaller companies were initially impacted by the lower oil price environment in FY15, FY16 has seen a significant deterioration of working capital performance for larger companies.

Our study also however demonstrates that regardless of size or sector companies can improve their working capital performance. In addition to the cash benefits from better working capital management, leading working capital performers have demonstrated better KPIs across all key financial metrics. Working capital performance is often cited as one of the best indicators to demonstrate the quality of management.

Key findings

Key findings
Revenues and working capital days trend

Revenues and working capital days trend

Companies in the Middle East, on average, have not been able to respond fast enough to a deteriorating revenue. On absolute terms whilst the level of invested net working capital has reduced on average, the decline in average revenue has been steeper.

DSO, DIO and DPO trends

DSO and DIO are the main drivers of working capital performance deterioration in FY16. DSO has increased by 8 days whilst DIO increased by 4 days in between FY15 and FY16. In absolute terms ME companies in our survey had AED 6b more in Accounts Receivables in FY16 compared with FY15.

Whilst DPO performance improved slightly in FY16, our experience suggests payables is often an overlooked area of opportunity. In addition to the 'traditional' working capital levers (including better processes) leading businesses and management teams are adopting innovative solutions to optimise working capital. New and innovative supply chain financing solutions to optimise working capital financing, data analytics to facilitate better decisions about spend and terms, as well as investing the time to improve working capital awareness in the Middle East are some of the areas of focus.

NWC days and oil price evolution

NWC days and oil price evolution

Our study shows that working capital performance in the Middle East has deteriorated for 6 consecutive quarters commencing in 3Q15 and continuing throughout FY16.

Working capital performance is complex and is influenced by many factors (discussed below). However, given the reliance on hydrocarbons in the region and the significance of government spending, the decline in oil price has had an impact on revenue and liquidity at all levels. Whilst this has wider implications for the region, working capital performance has also been influenced by the decline of oil prices.


Drivers of working capital

Our survey and experience in the field shows that a company’s working capital performance is driven by four main factors:


Some sectors require more working capital than others due to the nature of their business. However, our analysis shows there is a wide gap between the bottom and top performers in every industry, demonstrating that some companies are better at managing their working capital.

View more


Companies operating in developed economies have been able to fine-tune their operational processes over many years, and adjust their business models if needed. In the emerging, fast growth economies like the Middle East cash and working capital are typically managed less well, as cash flows have been growing each year and top-line growth has been the key and sometimes sole focus area. Only when growth curves flatten or even decline, cash and working capital management become a top priority in the boardroom.

View more


Larger companies tend to be better at managing their working capital. Smaller, at times even fledgling businesses, often have a weaker position in negotiations, less sophisticated working processes, systems and functional expertise, whilst arguably they have a greater need for effective cash management to finance their growth due to the limited financing options often available.

View more


Management's focus on cash and working capital is critical. Every company needs cash to run their day-to-day operations, but not every company attributes good working capital management to improved and more reliable cash flows. Too often management turns to banks or investors to fund their working capital rather than finding ways of generating more free cash flows themselves or reducing the funding requirements by becoming more working capital efficient.

View more

Key Findings

Corporation size

NWC performance of all companies (except the very large) has deteriorated since Q315 and has continued to deteriorate throughout FY16. In particular, mid and large companies have felt the sharpest deterioration in working capital performance, while smaller companies continue to feel the working capital squeeze they felt in FY15.

Find out more

Geographical performance

NWC performance has deteriorated across key economies in the region. With the exception of the UAE, working capital performance in all key economies in our survey has deteriorated.

Find out more

Sector performance

Each sector (with the exception of one) has demonstrated companies improving their working capital performance in FY16.

Find out more

Top vs bottom performers

Companies that are able to achieve top quartile working capital performance outperform their peers across various key metrics demonstrating the impact of working capital efficiency well beyond cash.

Find out more

How we can help


Complete a working capital benchmarking exercise to compare performance against peers and identify potential improvement opportunities.


Perform a diagnostic review to identify ‘quick wins’ and longer-term working capital improvement opportunities.

Roadmap Definition

Develop detailed action plans for implementation to generate cash and make sustainable improvements.


We take a hands-on approach to change operational behavior 'on the shop floor'. We provide a proven toolkit and expertise to support management in driving sustainable improvements. Typically, achieved improvements range from 15-30% of existing working capital.



This study provides a view of the Middle East working capital performance and is based on the financial results of 431 publicly listed companies across the Middle East. The countries covered include: Bahrain, Egypt, Jordan, Kingdom of Saudi Arabia, Kuwait, Oman, Qatar and United Arab Emirates. All currencies have been converted to UAE dirhams at historical rates. The financial services, real estate and insurance sectors are excluded. All financial data has been downloaded in a standardised format from S&P Global Market Intelligence.


Companies have been assigned to countries based on the location of their headquarters. Although a significant part of their sales and purchases might be realised in that country, it does not necessarily reflect typical payment terms or behaviour in that country. As the research is based on publicly available information, all figures are financial quarterly figures. Off-balance sheet financing or the effect of asset securitisation have not been taken into account.



Contact us

Mihir Bhatt
Director, Deals Advisory, Lead Author, PwC Middle East
Tel: +971 50 900 9471

Henri Jansson
Assistant Manager, Deals Advisory, Co-Author, PwC Middle East
Tel: +971 52 846 9688

Laurent Depolla
Partner, Deals Advisory, PwC Middle East
Tel: +971 26 946811

Matthew Wilde
Partner, Deals Advisory, PwC Middle East
Tel: +971 50 900 3071

Erwan Colder
Partner, Deals Advisory, PwC Middle East
Tel: +971 56 547 5350

Follow us