ARE SOUTH AFRICAN CFOS LACKING A HEALTHY CASH CULTURE? Hackett's Annual Working Capital Management Survey

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1 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

2 What if South Africa had R300 Billion available to fund investments and innovations? 330kms Low orbit of the International Space Station!

3 Yup, got it. Corporate Finance Dividends Management Trade Creditors Inventory 5-25% 10-25% Working Capital Securitization 15-30% Trade Receivables Debt and Borrowings Equity ROCE ROI Divestment Corporate Finance Third Party Financing Hm...! EBIT Service HEPS Sources of Cash Revenue Treasury Management Operations Cost, Spend, Labor Capex Financial Investments Fixed Assets Dividends from holdings Tax Strategies Sure. What else? Operations Been there, done that.

4 Do more with less 4

5 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

6 Innovate how you approach your business: end-to-end, not silo to silo Cash Application Dispute Management Customer to Cash (C2C) Collections Management Sales and Bid Management Invoicing Credit and Risk Management Order Processing Warehousing and Distribution Manufacturing Execution Product Range Management Forecast to Fulfil (F2F) Inventory Management Forecasting and Supply Chain Planning Payment Discrepancy Management Source to Settle (S2S) Invoice Processing Planning and Strategy Sourcing and Supplier Management Requisitioning and Ordering Receipting and Evaluating Materials Scheduling Sales Order Processing

7 Working capital performance (DWC) deteriorated by 11% to 2013, and South African companies still struggle to convert sales into cash Billions S.A. Working Capital Performance ZAR ZAR ZAR ZAR ZAR ZAR.00 ZAR ZAR ' ' ' ' ' 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 NWC DWC Cash Conversion Efficiency Revenue increased by 12% YOY and 28% over a 3 year period 13.6% 12.8% 12.6% 13.9% 11.5% Cost of Goods Sold has increased by 14% YOY and 32% over a 3 year period ' ' ' ' '12 12 = all public numbers released until data pulling until mid 2013

8 Total Debt (billions ZAR) Free cash flow performance is declining despite ongoing cash hoarding and financing using debt S.A. Cash and Debt Profile ' ' ' ' ' Casho on Hand/FCF (Billions ZAR) Corporate cash performance - Free cash flow (FCF) dropped massively by 91% YOY to settle at ZAR 9 Billion in 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 Total Debt (Left Axis) Cash on Hand Free Cash Flow 25% 20% S.A. Cash and Debt Profile 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%. 15% 15 10% 5% 0% ' ' ' ' ' 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 Cash Flow to Debt Ratio Interest Coverage Ratio (Right Axis)

9 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 DSO DIO '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 13 '12 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 13 '12 DPO '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 13 '12

10 Some industries have improved / worsened more than others Food and Staples Retailing Media Oil, Gas and Consumable Fuels IT Services Food Products Specialty Retail Construction Materials Chemicals Containers and Packaging Professional Services Trading Companies and Distributors Paper and Forest Products Construction and Engineering Metals and Mining Best / Worst Change in DWC Performance by Industry DWC DWC % Change -89% -16% -9% -9% -8% -6% -2% 5% 6% 13% 13% 22% 23% 23% Improving Worsening 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 Days

11 Upper quartile companies * in the top SA firms have 53% less working capital tied up in operations than Median performers Days Sales Outstanding Days Inventory On-Hand Days Payables Outstanding Days Working Capital % 47% % % Median 1st Quartile Median 1st Quartile Median 1st Quartile Median 1st Quartile * Upper or 1 st quartile performance Lowest DIO / DSO, or highest DPO in top 25% of companies Median performance Median DIO, DSO, or DPO in all companies

12 Contact Information Jonas Schoefer Director South Africa & Subsahara Mobile 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.

13 Background on The Hackett Group

14 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 Answerthink was renamed The Hackett Group, Inc. in 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 industryleading 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.

15 The Hackett Group offers of business improvement capabilities to help clients achieve World Class Performance through Operational Excellence BENCHMARKING ENTERPRISE PERFORMANCE MANAGEMENT Growth Agility World Class Performance Through Operational Excellence STRATEGY & OPERATIONS WORKING CAPITAL Cash Flow, Cost and Service Optimisation Cash Service Cost Risk TECHNOLOGY SERVICES TRANSFORMATION ADVISORY

16 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

17 Hackett Working Capital Delivered Results 120 5% - 20% 5% - 25% % - 30% DPO improvement Source to Settle SM Inventory turns improvement Forecast to Fulfill SM DSO improvement Customer to Cash SM Price Discount Capture Payment Productivity Service Quality Supply Chain Costs Dispute Cycle Time Dispute Quantity Source: Survey of 200 Hackett-REL clients

18 Global client base: Hackett has serviced a large portion of the Global 0 as well as mid-cap and small cap markets across

19 Selected clients in Africa and Middle East Morocco Egypt Nigeria/Ghana/Mali UEA Saudi Arabia Southern Africa Kenya

20 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

21 Contact Information Jonas Schoefer Director South Africa & Subsahara Mobile 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.