Highview Industries

Run the same read you ran in Issue 01, in the same order. Working capital lines are sized for the cash conversion cycle applied to the revenue base — so first ask what a NZ$38m components manufacturer needs. DSO of 44 days, inventory around 60, payables around 38: a cycle of roughly 66 days, which on NZ$38m of revenue is about NZ$6.9m of working capital, of which the incremental NZ$10m of revenue accounts for roughly NZ$1.8m. The MD is asking for NZ$1.5m. The request is not a round number reached for in a hallway — it is the arithmetic of the growth, asked for slightly under what the maths would justify. In Issue 01 the first diagnostic failed before the file was open. Here it passes before the file is open.

Now the file itself, and every needle points the other way from Pacific Premium. The cycle did not lengthen — DSO moved two days in two years. Margin expanded 80 basis points while revenue grew 36%, which means the volume was priced, not bought. Operating cash flow is positive and growing in line with revenue: the growth funds itself except for the working capital it mechanically carries, which is exactly what the revolver is for. And the two numbers that make the whole file legible: 78% of next year's revenue is under three-year agreements with CPI pass-through, and the capacity expansion is already funded by a separate, amortising term loan. This balance sheet is structured the way Issue 01's should have been. The business got bigger. The cycle stayed the same shape.

Which brings us to B — the reader's favourite, and the interesting mistake. A borrowing base, monthly aged debtors, a tightened covenant package: every element sounds like rigour, and after Issue 01 it feels like the lesson applied. But conditions are not free. They cost the borrower administrative weight every month, and they tell a clean client that the bank read his file with a template rather than with judgment. Intensity of structure is a scarce resource priced in relationship currency — spend it on files that earn it, or it stops meaning anything. C buys the bank nothing but six months of the client wondering why. D is diligence theatre: the agreements are in the file and they read fine.

The senior banker's read is A. Approve as requested, full and fast, with the annual review the only machinery — because the file earned exactly that. This is the half of the discipline nobody writes memos about: a clean yes, delivered quickly, is also a credit skill, and it is what buys the bank the right to be slow and demanding on the murky files. If your instinct after Issue 01 was "never approve as framed", you learned a posture, not a framework. The Three Diagnostics cut both ways. They exist to tell deterioration from growth — and when they say growth, the discipline is to believe them.