MEDIA RELEASE

24 January 2011

SEVERELY DELINQUENT BILLS AT 12 MONTH HIGH

Bills unpaid for more than 90 days up more than 20 per cent
Australian businesses are increasingly neglecting their bills with the number of severely delinquent payments jumping 28 percent over the Christmas period. According to the recent Dun & Bradstreet Trade Payments Analysis examining the ability of firms to pay their bills, and pay them on time during the December quarter last year, the number of bills left unpaid for 90 days or more grew 20 per cent compared with 12 months ago. While overall payment terms fell to 52.3 days during the December quarter, a fall of 0.7 days, terms remain elevated by 0.5 days compared with the previous year. This represents an average trade payment term almost a month beyond the standard 30 day payment period. According to Dun & Bradstreet CEO, Christine Christian, given the importance of trade credit, overdue accounts can have a serious run-on effect for the economy as a whole. Business to business lending through the extension of trade credit amounts to billions of dollars a year and the rate at which these micro-loans are being paid back is a leading indicator of cash-flow performance and financial stability," Ms Christian said.

Severely Delinquent (90+ days) Trade Payment Growth

40% 30% 20% 10% 0% -10% -20% -30% 2010 Q4 2011 Q1 -18% 2011 Q2 2011 Q3 2011 Q4 -2% 11% 16% 28%

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The D&B Trade Payments Analysis for the December 2011 quarter revealed: The Forestry sector was the slowest to pay during the December quarter 2011. This group took 57.8 days to settle its accounts following an increase of just over one day year on year. This was followed by Mining, at 55.2 days. Transportation firms were the quickest payers at 50.3 days. Firms in the ACT and those based in New South Wales recorded the worst trade payment terms during the December quarter 2011, at 54 and 53 days respectively. The best performers during the December quarter were Western Australia with an average term of 51.2 days and Victoria at 51.5 days. Publicly-listed firms have shown steady, if marginal, improvement over the last three quarters of 2011, contracting from 57.6 during the March quarter to 54.2 for the December quarter. The private sector improved terms by almost a full day during the December quarter, to 52.3 its lowest trade payment term for the year.

Australian businesses also recorded a year-on-year 42 per cent spike in the number of bills 61-90 days late, with a rise of 10 per cent during the December quarter alone. This was in contrast with both the June and September quarters last year where severely delinquent payments actually fell as much as 18 per cent. The jump in severely delinquent (90+ days) bills was particularly evident among the Finance, Insurance & Real Estate sector, where the number of accounts in this category grew by over 50 per cent during the fourth quarter. Likewise, Service sector businesses recorded a jump of 28 per cent in the number of severely delinquent payments over the same period. Trade credit represents more than $20 million dollars to the local economy, with severely overdue accounts representing nearly a million dollars being withheld from Australian businesses each quarter, Ms Christian said. When around two-thirds of all trade credit falls outside standard 30-day terms, we are talking about a significant portion of the nations economy effectively stagnating while it waits to be paid. Businesses forced to wait up to three months or more for payment are being placed under tremendous financial stress to the point where day-to-day operations, such as paying employee wages, can be compromised. Detailed results for the Dun & Bradstreet Trade Payments Analysis are below.

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For further information please contact:
Sarah Gorman T: (03)9828 3644 M: 0420 853 155 E: gormans@dnb.com.au

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Dun & Bradstreet Trade Payments Analysis
December Quarter 2011 Industry
During the December quarter 2011, the majority of the fourteen sectors examined saw some improvement in payment terms from just 0.1 of a day in Manufacturing to 2.9 days in the Forestry sector. Quarter on quarter, however, Agriculture, Fishing, Mining, Transportation and Wholesale firms all saw terms deteriorate compared with the September quarter. The Forestry sector was the slowest to pay during the December quarter 2011. This group took 57.8 days to settle its accounts following an increase of just over one day year on year. This was followed by Mining, at 55.2 days and Electric, Gas & Sanitary Service (EG&S) firms with a 55 day payment term during the fourth quarter 2011. Transportation firms were the quickest payers at 50.3 days followed by Services with an average 50.4 day payment term and Wholesale at 50.7.

Payment Terms by Industry

60.00 58.00 56.00 54.00 52.00 50.00 48.00 46.00

*Finance, Insurance and Real Estate

State
Firms in the ACT and those based in New South Wales recorded the worst trade payment terms during the December quarter 2011, at 54 and 53 days respectively. Although an improvement on the previous quarter, both States have maintained the longest average trade payment terms over the last two years.

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While most States and Territories experienced mild improvement in trade payment terms during the December quarter, Tasmanian firms recorded a deterioration of 0.5 days. The best performers during the December quarter were Western Australia with an average term of 51.2 days and Victoria at 51.5 days. West Australians firms also maintained the lowest two-year average of all States and Territories, at 51.8 days.

Payment Terms by State

54.5 54.0 53.5 53.0 52.5 52.0 51.5 51.0 50.5 50.0 49.5 ACT NSW NT QLD SA TAS VIC WA

Firm Size
Bigger businesses (500+) consistently maintain far longer payment terms than smaller firms, averaging 56.5 days since the December quarter 2009 compared with 50.8 days for those with six to 19 members of staff. In particular, firms with between 50 and 199 employees saw payment terms deteriorate most noticeably during the last 12 months. Firms of this size took an additional 1.4 days to complete payment compared with the December quarter 2011. During the December quarter 2011, firms of all sizes were able to reduce payment terms to varying degrees from just 0.1 days for firms with 50-199 employees to a 1.4 day improvement for firms with one to five members of staff. The exceptions were firms within the 200-499 bracket, where a deterioration of 0.2 days was recorded during the final quarter.

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Payment Terms by Firm Size
56.0 55.0 54.0 53.0 52.0 51.0 50.0 49.0 48.0 47.0 46.0 1-5 6-19 20-49 50-199 200-499 500+

Publicly vs. Private Firms

Publicly-listed firms have operated under average payment terms of at least 54 days since the end of 2009, deteriorating to nearly 58 days in the March quarter 2010 and 2011. Terms have shown steady, if marginal, improvement over the last three quarters of 2011, contracting from 57.6 during the March quarter to 54.2 for the December quarter. Over the course of the last two-years, publiclyowned companies operated with an average of 55.5 days. From a low of 51.8 in the December quarter 2009 to a high of 56 days in the March quarter 2011, private firms are consistently faster to pay accounts than listed firms. This sector improved terms by almost a full day during the December quarter, to 52.3 its lowest trade payment term for the year. This also meant the sector fell below its two-year average of 53.2 days.

Public vs. Private Payment Terms

54.5 54 53.5 53 52.5 52 51.5 51 Private Public