Government performing well on FDI & fiscal stability
The findings of the Q1 2012 Deloitte CFO Survey show that CFO sentiment in relation to their company’s performance is at its highest levels in over a year. One third of respondents indicated that they are optimistic about their company’s financial prospects. In addition, net optimism, which tracks aggregate optimism on a quarterly basis, stands at 17%, double the net figure in Q4 2011 of 7%.
The survey also shows that CFO sentiment on the performance of the Government is positive with regards to a number of areas. 79% believe the Government has had a positive impact on encouraging further FDI; 70% believe that it has had a positive impact on restoring fiscal stability; and 65% believe that it has had a positive impact on the renegotiation of the EU/IMF rescue package.
However, there is consensus that more work needs to be in done in the area of employment creation with just 32% believing the Government has had a positive impact on employment and job creation, while 53% believe it has had a negative impact on levels of taxation.
These are some of the findings of the latest Deloitte CFO Quarterly Survey, which seeks to provide a barometer of business trends and economic outlook among publicly quoted companies, large private companies, and Irish subsidiaries of multinational companies.
Shane Mohan, Partner, Deloitte commented: “It is positive to see general CFO sentiment at its highest level in a year, and that there’s a very balanced perspective on how the Government is performing. However Irish CFOs are still feeling the effects of the continuing instability in the Eurozone and the subdued economic performance here in Ireland. Over half of respondents cited market risk as their most dominant worry. The now omnipresent uncertainty that this is creating remains as much an issue as ever for Irish CFOs.”
The rise in confidence amongst CFOs is reflected in their outlook for revenues and profitability. 53% of CFOs now expect turnover to have increased in six months’ time, up from 48% in the last quarter. The rise in turnover is based on an expected rise in demand from both export and domestic markets. 53% also expect profitability to increase in the next six months. Encouragingly, 44% of respondents indicated that their company has returned to growth.
In contrast to the increasingly positive sentiment with regards to their own companies, just 6% believe that the Irish economy has returned to growth. Furthermore, 53% of CFOs do not believe that the economy will return to growth before Q2 2013.
The Q1 2012 survey findings also show that CFOs are more pessimistic with regards to the cost and availability of credit to Irish corporates. 68% believe that credit is hard to get, up sharply from 38% in the previous quarter, while the perceived cost of credit has also increased this quarter by 14 percentage points to 76%. 55% of respondents indicated that credit is very hard to get from domestic banks, compared to just over a fifth of respondents who believe credit is very hard to get from overseas banks.
While 43% indicated that domestic banks were still their preferred method of funding, this is a steady fall from 57% in Q3 2011. In terms of servicing debt, 62% of respondents indicated that their company’s ability to service its debt will improve and encouragingly, no respondents believe that this ability will decrease.
“Irish CFOs are still contending with an external environment that is awash with challenges, not least the political upheaval and on-going economic uncertainty in the Eurozone. This quarter’s findings show that, despite these, optimism is on the rise which is testament to Irish CFOs’ ability to deal with these challenges,” concluded Mohan.
About the survey
This is the eleventh in a series of quarterly surveys by Deloitte of Chief Financial Officers of major Irish based companies. The survey was conducted in March 2012. The Deloitte CFO Survey is the only survey that seeks to establish the views of CFOs in relation to relation to the financial markets, economic outlook and business trends on a quarterly basis.