Deloitte Belgium CFO Survey Q1 2014

CFOs most optimistic in years: more appetite for risk and improved financial performance

Corporates seek to strike the right balance between prudent expansionary strategies on the one hand and defensive strategies on the other.

Diegem, 29 April 2014 – Deloitte Belgium announces the results of its quarterly CFO Survey, conducted between 6 and 26 March 2014. Belgian CFOs are finally putting behind them the long months of worrying about economic recovery. Optimism indicators are positive and appetite for risk is on the rise.
However, defensive strategies remain prevalent. Efficiency improvement and cost reduction are still high on the agenda for all companies. But the favourable perception of risk and leverage, the availability of internal cash and the availability and attractiveness of external financing, are motivating corporates to increase investments going forward.

Optimism continues to grow
Having begun 2014 in a positive mood, Belgian CFOs remain upbeat about business prospects. Over 70% of survey respondents expect revenues to grow in 2014 compared with 2013 and over 50% also expect higher operating margins.

Looking back, 27% of organisations performed better than budget, a big increase compared to the 8% at that same point a year ago. While 32% performed worse than expected, this is a major decrease on the previous four quarters, which saw figures in the region of 50% or more.

Other indicators confirm the trend. Only 16% of CFOs rate the current level of financial and economic uncertainty as high, down from 33% one year ago and 42% two years ago.

“CFO optimism already improved in the second half of last year, but this regained optimism had not yet translated into improved financial performance. It is hopeful that in the first quarter of this year - for the first time in 2.5 years - two thirds of organisations are performing as planned, or are even doing better than initially budgeted,” said Deloitte Partner Thierry Van Schoubroeck.

Competitiveness is becoming CFOs’ main concern
Putting most of their worries about economic recovery behind them, CFOs are increasing their focus on retaining their competitive position, with a corresponding increase in appetite for risk. 35% think now is a good time to be taking greater risk on their balance sheet, up from 21% last quarter.

CFOs also anticipate a more dynamic M&A environment, with 73% expecting activity to increase in the next 12 months, compared to 60% three months ago.

“Over the past quarters, safeguarding the competitive position of their businesses has gradually overtaken the economic recovery as top concern for CFOs,” observed Thierry Van Schoubroeck. “With this, it is not surprising that corporates seek to strike the right balance between prudent expansionary strategies on the one hand and defensive strategies on the other.”

This defensive stance is indicated by the continued drive to improve productivity and efficiency while reducing costs. These will be the top business strategies for Belgian CFOs in the next 12 months, with 64% putting increasing productivity/efficiency as a top priority and cost reduction coming second at 51%. The gap between defensive and expansionary strategies widened this quarter, with defence remaining the priority.

Ambition yet to be converted into achievement
While business growth aspirations are climbing, CFOs continue to have low expectations of the Belgian economy. Only 9% predict growth of more than 1% in 2014, with 44% expecting movement in the range 0.6% to 1%.

“CFOs are more optimistic for the growth potential of their own organisation than they are for the economy as a whole,” said Thierry Van Schoubroeck. “CFOs’ expectations of the pace of Belgian economic growth are less upbeat than those of international organisations or the Belgian National Bank.”

CFOs’ evaluation of priorities set by the Belgian government, for financial and economic policy making, remains poor, with labour market policies and costs still not considered appropriate to support the long-term success of businesses. Against this background, and with the continued prioritisation of defensive strategies, confirmation of consistent recovery is still awaited.

“The CFO Survey’s performance to budget indicator marked a significant increase in the first quarter. Provided that the second quarter survey confirms this performance, things are indeed looking up,” commented Thierry Van Schoubroeck.

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Thierry Van Schoubroeck

Partner, Consulting

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