Deloitte issues its CFO Signals survey for the third quarter of 2014
15 December, 2014 - The Q3 2014 edition of Deloitte’s Global CFO Signals report finds that, despite ongoing turbulence in the Middle East, in the third part of the year, Chief Financial Officer (CFO) optimism in the region was at its highest levels in the last three years. A net 47% of survey respondents in the Middle East were decidedly more optimistic regarding the financial prospects of their companies compared with the preceding six months.
The Deloitte Global CFO Signals report provides highlights of recent CFO surveys undertaken by Deloitte practices across the world in 56 countries. In the Middle East, 125 respondents representing both listed and non-listed companies, participated in the latest survey for Q3 2014. “The disparate nature of the countries, their economies, and rates of growth across the region is reflected in the responses of CFOs at that time, with the strongest optimism coming from those in the Gulf countries where economic growth is the strongest,” said James Babb, Deloitte Middle East CFO Program leader. “As of Q3, 2014, CFOs in the United Arab Emirates reported a net 62% increase in optimism, for example, whereas CFOs in Lebanon and Syria did not report any net increase in optimism.”
With a continued focus on increasing cash flow and reducing costs, CFOs were also prioritizing organic growth, the introduction of new products/services, and expansion into new markets. According to James Babb, this is a valid indicator of the evolving role of a CFO from simply being an operator within the company to becoming the strategic driver of an organization.
The report indicates that CFOs expected in the third quarter that equity issuance and M&A activity to increase over the next year. A net 61% of CFOs reported they would consider these transactions in order to streamline current offerings rather than to diversify.
CFOs anticipated equity-driven growth for the Middle East, with a net 52% believing that major equity indices will continue to grow over the next year while a net 34% believed that equity issuance will continue to increase over the same period. CFO forecasts for the performance of major equity indices rebounded to high thresholds that were previously consistently seen between 2009 and the first half of 2011.
When it came to financing and leverage, bank borrowing and capital expenditure were identified as the key business metrics most likely to increase over the coming year by those polled. Measured against other channels of external financing, bank borrowing was considered the most favorable (net 54%) between equity issuance (net 43%) and corporate debts (31%).
One other notable rebound in CFO sentiments in the third quarter of 2014 was the appetite for risk. When asked if it was a good time to be taking greater risk onto the balance sheet, 45% of CFOs agreed, marking one of the highest levels since the first half of 2011.
“Low interest rates are among the driving factors causing this increase in risk appetite,” commented James Babb. “This coupled with the perceived higher availability of credit seems to be encouraging CFOs to be less risk averse than in the past few years.”
To view the Global CFO Signals report, please click here
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About Deloitte & Touche (M.E.):
Deloitte & Touche (M.E.) is a member firm of Deloitte Touche Tohmatsu Limited (DTTL) and is the first Arab professional services firm established in the Middle East region with uninterrupted presence since 1926.
Deloitte is among the region’s leading professional services firms, providing audit, tax, consulting, and financial advisory services through 26 offices in 15 countries with around 3,000 partners, directors and staff. It is a Tier 1 Tax advisor in the GCC region since 2010 (according to the International Tax Review World Tax Rankings). It has received numerous awards in the last few years which include Best Employer in the Middle East, best consulting firm, and the Middle East Training & Development Excellence Award by the Institute of Chartered Accountants in England and Wales (ICAEW).