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CFO ServicesSecond quarter edition 2014
Deloitte Belgian CFO SurveyConcern over government policies clouds current optimism Benchmarking corporate financial attitudes
CFOs are above all concerned about the long-term success of business in Belgium. Policital stability and regulatory predictability are key.
Key points 4
Looking Back: Business confidence through the financial and economic cycle (2009-2014) 6
Short term prospects improving, but concerns about the future success of business in Belgium 8
Positive highlights 10
Current Focus Areas 17
Attention points 21
Profile Q2 survey participants 25
Content
4
Key points from the 2014 Q2 Belgian CFO survey
•CFOoptimismhaseasedslightlythisquarter,butcontinuestorunwellaboveitslong-termaverage.Only10%ofCFOsarepessimistictoday,downfrom40%ayearago
•Thepositivesentimentisincreasinglybeingreflectedinthenumbers:70%ofsurveyrespondentsreportfinancialperformanceattheendofthesecondquarterisinlinewith–orfor40%above–thebudget.
•Levelsoffinancialandeconomicriskhavefallensharplyinthelastyearandcompetitivenesshaseclipsedworriesabouttheeconomy.SafeguardingthecompetitivepositionoftheircompaniesistheCFOs’mainconcern.
•Defensivestrategieswithfocusonefficiencyandcostreductionremaintopoftheagenda,andexpansionarystrategiesgainlittleground.Forthecurrentyear,toplinegrowthexpectationsareambitious,notwithstandinglowgrowthprojectionsforBelgiumandEurozoneeconomies.
•CFOsareaboveallworriedaboutthelongtermsuccessofbusinessinBelgium.Politicalstabilityandregulatorypredictabilityarekeyfactorstoinvestmentandexpansionarystrategies.Currentpolicymaking-acrossallareas-isinappropriateforthelongtermsuccesofbusiness.
•Longgovernmentformationprocessesswillleadtolowerhiring,delayedcapitalspendingandreducedforeigninvestment.
Key points
Deloitte Belgian CFO SurveySecondquarter20145
Macro-economic backdrop to the second quarter CFO surveyGlobalequitymarketsrose4.2%inthesecondquarterandyieldsontheUSandGermanbondsfell.Growthforecastsforemergingeconomiesedgedloweronamixofgeopolitical,financialandeconomoicconcerns.TheUSeconomyshrankinthefirstquarter,althoughtheeffectsofanunusuallyharshwinterandbusinessinventoryrestockingappeartobetemporary.PortugalexiteditsbailoutprogrammeandGreecesuccessfullyraisedmoneyinthemarkets,butconcernsaboutdeflationandlowgrowthpromptedtheEuropeanCentralBanktocutinterestrates.IntheUK,inflationsoftenedandoutputroseby3.1%intheyeartoQ12014,thestrongestperformanceinthedevelopedworld.
Ian Stuart, Chief Economist Deloitte UK
6
Looking Back: Business confidence through the financial and economic cycle (2009-2014)
Mor
e O
ptim
istic
Less
Opt
imis
tic
Q2 2009 “Preparing for a slow recovery”
Q1 2009“First signs of optimism in
uncertain times”
Q3 2009 “Financial
conservatism is back”
Q4 2009“Diverging fortunes
going into 2010”
Q1 2010“Financial
Repair, economical uncertainty”
Q2 2010“Confidence
grows”
Q3 2010“Higher confidence,
good results”
Q4 2010“Planning for
Growth”
Q1 2011“Call for caution” Q2 2011
“At a turning point”
Q3 2011“Results under
pressure”
Q4 2011“Outlook 2012:
a very difficult year”
Q1 2012“Anxiety has eased,
but plenty ofrisks remain”
Q4 2012“Outlook 2013:
how CFOs are preparing for 2014”
Q1 2013“Concerns Dominate”
Q2 2013“Call for Action”
Q3 2012“The New Normal
is here to stay“
Q2 2012“Corporates
are defensive“
Q3 2013“A new mood”
Q4 2013“Growth ambitions”
Q1 2014“More appetite
for risk”
Q2 2014“Concern over
government policies clouds current optimism”
Optimism
Looking Back: Business confidence through the financial and economic cycle (2009-2014)
Looking Back: Business confidence through the financial and economic cycle (2009-2014)
Mor
e O
ptim
istic
Less
Opt
imis
tic
Q2 2009 “Preparing for a slow recovery”
Q1 2009“First signs of optimism in
uncertain times”
Q3 2009 “Financial
conservatism is back”
Q4 2009“Diverging fortunes
going into 2010”
Q1 2010“Financial
Repair, economical uncertainty”
Q2 2010“Confidence
grows”
Q3 2010“Higher confidence,
good results”
Q4 2010“Planning for
Growth”
Q1 2011“Call for caution” Q2 2011
“At a turning point”
Q3 2011“Results under
pressure”
Q4 2011“Outlook 2012:
a very difficult year”
Q1 2012“Anxiety has eased,
but plenty ofrisks remain”
Q4 2012“Outlook 2013:
how CFOs are preparing for 2014”
Q1 2013“Concerns Dominate”
Q2 2013“Call for Action”
Q3 2012“The New Normal
is here to stay“
Q2 2012“Corporates
are defensive“
Q3 2013“A new mood”
Q4 2013“Growth ambitions”
Q1 2014“More appetite
for risk”
Q2 2014“Concern over
government policies clouds current optimism”
Optimism
Looking Back: Business confidence through the financial and economic cycle (2009-2014)
8
It is tough running a business in Belgium. Taking into account the financial and economic situation in recent years, the outlook for the coming 12 months is overall positive. The mood amongst CFOs remains optimistic. It is encouraging that the proportion of CFOs who are today less optimistic about the financial prospects of their organisations than they were three months ago, has once again decreased. For the first time in several years, one third of CFOs report that their organisations are outperforming the budget. Risk appetite is at the highest level since the launch of the survey in 2009. On the other hand, many organisations remain first and foremost focused on defensive strategies rather than on expansion. CFOs are above all concerned about policy risk and the long-term success of businesses in Belgium. Policy makers are not providing the answers CFOs are looking for.
Business conditions improvingNotwithstandingunexcitingoverallgrowthexpectationsinBelgiumandintheEurozone,CFOsareinanoptimisticmoodforthefourthquarterinarow.
Thegeneralleveloffinancialandeconomicuncertaintyhasfurtherdecreased,andfollowingthestrongruninfinancialmarketslastyear,equitiesandgovernmentbondsareconsideredadequatelypriced.Interestratesareexpectedtoremainlowforsometime,andthefeelingisthatcentralbankerswillprovidemorestimulustotheeconomytogetthingsmovingifrequired.
IllustrativeforthegraduallyimprovingclimateisthatthepercentageofCFOsthatturnedmorepessimisticabouttheprospectsoftheirownorganisationhasfallenfrom50%atthebeginningof2013toonly10%today,thelowestreadinginyears.
Good financial performanceGraduallyimprovingbusinessconditionshavetranslatedintogoodbusinessresults:attheendofthesecondquarter70%ofsurveyrespondentsreportfinancialperformanceisinlinewiththebudget,upfromaround50%lastyearandonly40%in2012.ThepercentageofCFOsreportingthatsecondquarterresultswilloutperformthebudgetshasgoneupfrom20%in2012andin2013to40%today.
Moregoodnewsonthetopline,whichisexpectedtogrowfor70%ofrespondents.ConsideringthemodestgrowthexpectationsfortheBelgianeconomy
asawhole–typicallybetween1and1.5%-growthprojectionsofsurveyrespondentsfortheirowncompaniesevenseembullish:56%expecttoplinetogrowmorethan2%.32%evenpredicttheirrevenuestogoupbymorethan5%. Desire to growRiskappetitehadseenamarkedincreasefromthebeginningoftheyear,andhassteppedupagainthisquartertothehighlevelswewitnessedin2010.Balancesheetsseemhealthyandfundingisoverallattractiveandavailable.Growthexpectationsinoverseasandemergingmarketsand,toamuchlesserextent,intheEurozoneorBelgiumarethemostimportantdriversforinvestment.
Costcontrol,debtreductionandbuildingupcashhelpedgetbusinessthroughtherecession.CFOsareplacingemphasisonexpansionarystrategiessuchasincreasingcapitalexpenditureandexpandingbyacquisition.Yetweseethatforabouthalfoforganisations,defensivestrategieswithfocusonefficiencyandcostreductionremainthemostimportantpriority–moreimportantthangrowthandexpansion.
SafeguardingthecompetitivepositionoftheirbusinessesremainstheCFOstopconcernintheshortrun,butalsointhelongrun.TheUkrainiancrisisistosomeextentaconcernforCFOs.Abouthalfofrespondentsexpectthat(additional)EUsanctionsagainstRussiawillhaveanegativeimpactontheirbusinesses,althoughtheimpactislikelytobelimited.
Short term prospects improving, but concerns about the future success of business in Belgium
Deloitte Belgian CFO SurveySecondquarter20149
Worrying long-term perspectiveSincethebeginningof2012,wehavereportedhowCFOsevaluatetheappropriatenessofBelgianfinancialandeconomicpolicy-makingforthelong-termsuccessoftheirbusinesses.Sincethen,thereporthasshownreasonsforconcern.Lookingintothedetailsofthevariouspolicyareas,BelgianCFOsaremostnegativeabout–andthisisnotnew-taxationandlabourmarketpolicies.Butalsopolicyareasrelatedtourbanplanning,energy,infrastructure,publicexpenditureandgenerallevelsofregulationforbusinessesareconsideredinappropriateforthelong-termsuccessandviabilityofbusinessesinBelgium.Onlyonepolicyareaisevaluatedpositively:themonetarypolicy,includinginterestratesandinflationwhichfallundertheEuropeanauthorityoftheEuropeanCentralBank(ECB).
Challenges for policy makersWithJuneelectionsjustbehindus,30%ofCFOsareoptimisticthattheresultsofthevotewillhaveapositiveeffectonthelong-termsuccessofbusinesses,whereas15%arepessimistic.CFOsareclearaboutwhatshouldbepolicymakers’keyfinancialandeconomicpriority:reducingthelabourcostbyloweringemployercontributions.Otherpriorities–butsignificantlyloweronthelist–arethereformoftheautomaticwageindexationsystemandlabourmarketflexibility.
CFOshopenewFederalandRegionalgovernmentswillbeformedsoon.AlthoughhalfofCFOsreportalonggovernmentformationprocessmighthaveanegativeimpactonconsumerdemandanddelaycapital
spending,hiringorforeigninvestments,theotherhalfreporttheirbusinesseswilllikelynotbeimpacted.
CFOsmightevenpreferalong(er)governmentformationprocess,aslongasthisintheendresultsinfinancialandeconomicpolicyprioritiesthatwillcontributetothelong-termviabilityoftheirbusinesses.
Itisuptothepolicymakerstotakeupthechallenge.TheresultsoftheDeloitteCFOsurveysuggestbusinessesarewillingandreadytoinvest,providedthelong-termperspectiveisclear.Tothisend,politicalstabilityandregulatorypredictabilityarekey.
ThierryVanSchoubroeck, JoëlBrehmenPartner,CFOServices FinanceLead,Partner
10
Positive highlightsOptimistic mood lasts
InthecourseofthelastfourquartersNetOptimism,oneofthekeyindicatorsofthesurvey,hasstabilisedandremainspositive.Sincethethirdquarteroflastyear,CFOsareoveralloptimisticaboutthefinancialprospectsoftheircompany.
Theoptimisticmoodcoincideswithagradualreductionofthegeneralleveloffinancialandeconomicuncertainty.Inthesecondquarter,theindicatorfurtherdecreasedfortheseventhquarterinarowsince2012.12%ofCFOsnowratethegenerallevelofexternalfinancialandeconomicuncertaintyhigh/veryhigh.
Mor
e op
timis
ticLe
ss o
ptim
istic
Net % of CFOs who are more/less optimistic about financial prospects for their company
-100%-90%-80%-70%-60%-50%-40%-30%-20%-10%
0%10%20%30%40%50%60%
-18%
0%
22%17%
25%
44%40%
53%
26%
8%
-34%
-75%
-42%
-27%
-11%
-29%
-15%
34%30%
39%35%
12%
'14 Q1
'14 Q2
'13 Q4
'13 Q3
'13Q2
'13Q1
'12 Q4
'12 Q3
'12 Q2
'12Q1
'11 Q4
'11 Q3
'11 Q2
'11 Q1
'10 Q4
'10 Q3
'10 Q2
'10 Q1
'09 Q4
'09 Q3
'09 Q2
'09 Q1
% of CFOs rating the general level of external financial and economic uncertainty high/very high
0%
10%
20%
30%
40%
50%
60%
2014 Q2
2014 Q1
2013 Q4
2013 Q3
2013 Q2
2013 Q1
2012 Q4
2012 Q3
2012 Q2
2012 Q1
2011 Q4
2011 Q3
2011 Q2
21%
47%
51%
42%
53%
41%37%
33%
27%
26%
17%16%
12%
Deloitte Belgian CFO SurveySecondquarter201411
AlthoughNetOptimismhasremainedrelativelyconstantinthelastyear(andhashencenotincreased),weobservethatthepercentageofCFOswhoarelessoptimisticabouttheprospectsoftheircompanycomparedtothreemonthsagostillcontinuesitsgradualdecline.
Followingtheimportantrallyinfinancialmarketsinthelastyear,andthefurtherstabilisationofthesovereigndebtcrisis,equityandgovernmentbondvaluationsareconsiderednormal.
55%
48%
30%
48%
38%
18% 18%
13%10%
% of CFOs who are less optimistic about the financial prospects for their company
0%
10%
20%
30%
40%
50%
60%
2013Q4
2014Q1
2014Q2
2013Q3
2012Q2
2013Q1
2013Q2
2012Q3
2012Q4
Net % of CFOs who think that the following assets are overvalued/undervalued
-80%
-60%
-40%
-20%
0%
20%
40%
Equity Governments bonds
‘13Q4
‘14Q1
‘14Q2
‘13Q3
‘10Q3
‘10Q4
‘11Q2
‘11Q1
‘11Q3
‘11Q4
‘12Q1
‘12Q3
‘13Q1
‘13Q2
‘12Q2
‘12Q4
‘10Q2
‘10Q1
‘9Q1
‘9Q2
‘9Q3
‘9Q4
Ove
rval
ued
Und
erva
lued
12
Performancetobudgetmarkedanimportantimprovementinthefirstquarteroftheyear.Attheendofthesecondquarter,70%oforganisationsreporttheirfinancialperformanceisinlinewith,orbetter,thanbudgeted.Sinceafewquarters,thepercentageofcompaniesthatareoutperformingtheirbudgetshasbeenincreasing,reaching40%today.
Actual performance & expectations on the rise
Comparison of the surveyed organizations' actuals performance versus budget over time
Worse than expected As expected Better than expected
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
‘13Q4
‘14Q1
‘14Q2
‘13Q3
‘10Q3
‘10Q4
‘11Q2
‘11Q3
‘11Q4
‘12Q1
‘12Q2
‘13Q1
‘13Q2
‘12Q3
‘12Q4
18%
41%
41%
‘10Q2
20%
38%
42%
12%
35%
53%
29%
37%
34%
50%
23%
27%
49%
22%
29%
37%
39%
24%
57%
23%
20%
45%
30%
25%
43%
22%
35%
57%
8%
35%
47%
35%
18%
54%
52%
32%
24%32%
28%
40%
32%
42%
27%22%
15%
CFOs' expectations on the evolution of the following metrics in the next twelve months
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
71% 12% 17%
69% 10% 21%
62% 22% 16%
59%
37%
29%
29%
29%
26%
23%
17%
22%
33%
29%
53%
46%
41%
42%
58%
19%
30%
42%
19%
25%
33%
35%
25%
Increase Same level Decrease
Revenues
Profit before taxes
Operating cash flow
Operating margins
Operating costs
Headcount
Levels of cash and cash equivalentson balance sheet
Capital expenditure
Financing costs
Discretionary spending, for instance on travel,training and marketing
Inventory levels
ThevastmajorityofCFOsexpecttogrowtheirtopline,marginsandprofitsthisyear.Withover40%oforganisationsplanningtoreduceheadcount,averageproductivityshouldgoup.
Deloitte Belgian CFO SurveySecondquarter201413
TakingintoaccountthemoderategrowthexpectationsfortheEurozoneandBelgium,manyCFOsseembullishwithregardstothegrowthexpectationsfortheirbusinesses:80%expecttobeatgeneraleconomicgrowth,withonethirdlookingat+5%growth.
0% 20% 40% 60% 80% 100%
Operating margins
Revenues
CFO’s expectations on key metrics for their companies in the next 12 months
19%
32% 24% 15% 12% 7% 7%
16% 24% 22% 12%
3%
3%
3%
Increase with more than 5%
Increase between 2% and 5%
Increase between 0% and 2%
Same level
Decrease between 0% and 2%
Decrease between 2% and 5%
Decrease with more than 5%
14
Riskappetitecontinuesitssharpincreasesincethebeginningoftheyearwith42%oftherespondingCFOssayingthatnowisagoodtimetotakegreaterriskontotheirbalancesheet.Withthis,wearebackatthelevelswewitnessedattheendof2010–justbeforetheEurocrisisescalated.
Appetite for risk grows
% of CFOs who think now is a good time to be taking greater risk onto their balance sheet
5%
17%17%
21% 23%
28%
31% 35%
41%
35%
30%
21%
22%21%
35%
42%
24%
14%
19%
19%
8%
13%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
'14 Q2
'14 Q1
'13 Q4
'13 Q3
'13 Q2
'13 Q1
'12 Q4
'12 Q3
'12 Q2
'12 Q1
'11 Q4
'11 Q3
'11 Q2
'11 Q1
'10 Q4
'10 Q3
'10 Q2
'10 Q1
'09 Q4
'09 Q3
'09 Q2
'09 Q1
Net % of CFOs who think Belgian corporate balance sheets are overleveraged/underleveraged
34%
16%13%
4%
9%
2%
-11%-13%
-11% -10%
-10%
-3%
-9%
0%
-7%
0%
-4%
0%
-22%
-15%
-17%
-9%
-30%
-20%
-10%
0%
10%
20%
30%
40%
'14 Q2
'14 Q1
'13 Q4
'13 Q3
'13 Q2
'13 Q1
'12 Q4
'12 Q3
'12 Q2
'12 Q1
'11 Q4
'11 Q3
'11 Q2
'11 Q1
'10 Q4
'10 Q3
'10 Q2
'10 Q1
'09 Q4
'09 Q3
'09 Q2
'09 Q1
Ove
rleve
rage
dU
nder
leve
rage
d
Belgiancorporatebalancesheetsseemhealthyandallowforopportunityforleverage.
Deloitte Belgian CFO SurveySecondquarter201415
Funding is attractive
Allsourcesoffundingarereportedtobeattractive.Whereasbankborrowingandcorporatedebtgrewinattractivenesssincelastquarterandcontinuetofollowanupslopingtrend,theattractivenessofequitydecreasedinthepasttwoquarters.
Onaverage,bankcreditischeapandavailable,althoughonequarterofCFOsstillcomplainaboutunavailabilityofbankcredit.Surveyresultsalsoindicatethatlargerorganisationshaveeasieraccesstobankcreditthansmallerones.
Net % of CFOs reporting the following sources of funding as attractive/unattractive
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
'14 Q2
'14 Q1
'13 Q4
'13 Q3
'13 Q2
'13 Q1
'12 Q4
'12 Q3
'12 Q2
'12 Q1
'11 Q4
'11 Q3
'11 Q2
'11 Q1
'10 Q4
'10 Q3
'10 Q2
'10 Q1
'09 Q4
'09 Q3
'09 Q2
'09 Q1
Att
ract
ive
Una
ttra
ctiv
e
Bank borrowings EquityCorporate debt
Net % of CFOs reporting credit is costly and net % reporting credit is available
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
'14 Q2
'14 Q1'
'13 Q4
'13 Q3
'13 Q2
'13 Q1
'12 Q4
'12 Q3
'12 Q2
'12 Q1
'11 Q4
'11 Q3
'11 Q2
'11 Q1
'10 Q4
'10 Q3
'10 Q2
'10 Q1
'09 Q4
'09 Q3
'09 Q2
'09 Q1
Cre
dit
is c
ostly
Cre
dit
is c
heap
Cre
dit
is a
vaila
ble
Cre
dit
is u
nava
ilabl
e
Cost of credit Availability of credit
16
Overall,mostBelgianCFOsexpectthatpriceandlendingtermswillnotchangesignificantlyoverthenext6months.
CFOs' expectations about evolutions of price terms and lending terms in the next 6 months
25%27%
48%
Higher price terms and/ or harder lending terms
No change
Lower price terms and/ or easier lending terms
Deloitte Belgian CFO SurveySecondquarter201417
AlthoughthecrisisintheUkraineisnottopoftheCFOsprioritylist,itmighthaveanimpactonthebusinessenvironmentinBelgium.IncaseadditionalsanctionswillbeimposedonRussia,approximatelyhalfofthesurveyedCFOsexpectsomenegativeimpactontheirbusiness.
Withtheeconomicrecoveryprettymuchontrack,CFOsaremostofallconcernedabouttheircompetitivepositioninthemarket.Asinpreviousquarters,CFOsalsoremainconcernedabouttheimpactoffinancialandeconomicpolicymakingandregulatorychanges.
Current Focus Areas
CFOs' perception on the greatest concern for their business in the next 12 months
Competitive position in the market
Economic recovery/outlook
Impact of Belgian financial & economic policy making
Changes in regulation
Slow-down in China
Increasing sovereign risk
Access to capital
Commodity prices
Interest rates
Situation in Russia & Ukraine
Shortage of (skilled) labour
32%
27%
12%
7%
7%
3% 3%
3%3% 3%
0%
Impact of additional sanctions against Russia in the context of the Ukrainian crisis on CFO's company/business
0%
2%
52%37%
10%
Very positive
Positive
Neither positive nor negative
Negative
Very negative
18
Business strategies likely to be a priority for the CFO's businesses over the next 12 months (2014 Q2)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Strong priority Somewhat of a priority Not a priority
Increasing productivity/efficiency
Expanding organically
Reducing costs
Increasing cashflow
Introducing new products/services or expanding into new markets
Reducing leverage
Increasing focus on sustainability programmes
Expanding by acquisition
Increasing capital expenditure
Disposing of assets
Raising dividends or share buy backs
69%
53% 32% 15%
7%41%53%
51% 44% 5%
19%44%37%
20% 41% 39%
31%51%
25% 56%
19%
19%
12% 31% 58%
60%34%5%
3% 12% 84%
29%
2%
3%
13%
0%
10%
-2%
5%
2%
1%
-1%
Change in strong priority from 2013 to 2014
Increasing productivity/efficiency
Expanding organically
Reducing costs
Increasing cashflow
Introducing new product/service or expanding into new markets
Reducing leverage
Expanding by acquisition
Increasing capital expenditure
Disposing of assets
Raising dividens or share buy backs
-6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14%
decreased as priority increased as priority
-5%
Notwithstandingtheimprovedbusinessclimateandtoplinegrowthambitionsofmostcompanies,safeguardingthecompetitivepositionthroughcostreductionandefficiencyimprovementstillrankstopofthestrategicprioritylist.
Today’sstrategicprioritiesarenotverydifferentfromthosereportedoneyearago.Organicexpansionhasgainedsomeground,reflectingtoplinegrowthambitions.
Deloitte Belgian CFO SurveySecondquarter201419
FormostCFOs,defensivestrategiesremainmoreimportantthanexpansionarystrategiesinspiteofgrowingoptimismandriskappetite.
CFO priorities: defensive vs. expansionary strategies
Arithmetic average of the % of CFOs who rated expansionary and defensive strategies as a strong priority for their businesses in the next 12 months. Expansionary strategies are introducing new products/services or expanding into new markets, expanding by acquisition and increasing capital expenditure. Defensive strategies are increasing productivity/efficiency, reducing costs, reducing leverage, disposing of assets and increasing cash flow.
Expansionary strategies Defensive strategies
20%
30%
40%
50%
2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2
Stimulating/Inhibiting factors to investment plans (current impact)
0% 10% 20% 30% 40% 50% 60%
10%
10%
8%
37%
32%
44%
59%
Actual or expected growth in Belgium
Actual or expected growth in the euro area
Cost and availability of external finance
Actual or expected growth in US,Japan, Asia-Pacific
Availability of internal finance
Actual or expected growth inemerging markets
Secular or long-term growth for your products or services
Secularorlong-termgrowthforproductsandservicestogetherwithgrowthinUS,Japan,AsiaPacificandtheemergingmarketsarethemostimportantdriversforinvestment.TheprospectsforBelgiumandtheeuroareaarelessexciting.
20
Inparticularorganisationswhoderiveatleast70%oftheirrevenuefromabroad,expectgrowthinUS,Japan,Asia-Pacificandtheemergingmarketstohaveapositiveimpactontheirinvestment.Theyarealsomorepositiveabouttheimpactoftheavailabilityofinternalfinanceandlong-termgrowthfortheirproductsandservices.
Stimulating/Inhibiting factors to investment plans (current impact) - Local vs. international companies
0% 10% 20% 30% 40% 50% 60% 70% 80%
Actual or expected growth in Belgium
Actual or expected growth in the euro area
Cost and availability of external finance
Actual or expected growth in US, Japan, Asia-Pacific
Availability of internal finance
Actual or expected growth in emerging markets
Secular or long-term growth for your products or services
13%
17%
4%
11%
17%
6%
54%
11%
42%
22%
61%
18%
65%
44%
Organisations deriving 70-100% of revenue from outside Belgium
Organisations deriving 0-30% of revenue from outside Belgium
Deloitte Belgian CFO SurveySecondquarter201421
Attention points
ThismeansCFOsaresignificantlylessoptimisticthanTheNationalBankofBelgium.IntheirJuneforecast,theNBBanticipatesgrowthof1.5%forBelgiumin2014.
AlthoughCFOsarepositiveaboutboththetopandbottomlineprospectsfortheirownorganisations,theyarelessoptimisticaboutBelgianeconomicgrowthprospectsforthisyear.90%expectthatgrowthwillnotexceed1%.
CFOs' expectations for the Belgian economic growth in 2014
Greater than 1%
0,6% to 1%
0,2% to 0,5%
-0,1% to 0,1%
-0,5% to -0,2%
-1% to -0,6%
Less than -1%
10%
32%
45%
13%
0%
Real GDP evolution: Belgium vs. the Eurozone
-2,0%
-1,5%
-1,0%
-0,5%
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
3,0%
Belgium Eurozone
2010 2011 2012 2014*2013
* Source of data: Economic Indicators for Belgium N° 2014-24, National Bank of Belgium2014 data are forecasts, the Belgian forecast is based on NBB estimates from June 2014, Eurozone forecast on OECD data from May 2014
22
CFOshavegenerallybeendissatisfiedwithBelgianprioritiesforfinancialandeconomicpolicy-making.Thisremainsthecasetoday.However,itissomewhatencouragingthatthepositivetrendofdecreasingdissatisfactionseeninthepastyearcontinues.
-33%
-25%
-29%
-20%
-52%
-44%
-27%-34%
-46%
-63%
2012 Q1
2012 Q2
2012 Q3
2012 Q4
2013 Q1
2013Q2
2013 Q3
2014 Q1
2014 Q2
2013 Q4
Perception of a net % of CFOs of the way in which the Belgian government is setting the right priorities for financial and economic policy making
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
appr
opria
teun
appr
opria
te
-63%
-45%
-43%
-26%
-23%
-22%
-16%
-9%
-14%
14%
53%
Net % of CFOs evaluating appropriateness of the current policy settings in the following areas for the long-term success of business in Belgium
Taxation policy
General levels of regulation affecting business
Labour market
Public expenditure
Energy policy
Urban & town planning
Infrastructure
Financial regulation
Immigration policy
Education & training
Monetary policy, including interest rates, inflation and the
availability of credit (Eurozone policy)
-80% -70% -60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60%
Inappropriate Appropriate
CFOsaretodaypositiveaboutthemonetarypolicyoftheEuropeanCentralBank.Itisworryingthat–withtheexceptionofeducation-noneofthepolicyareasundertheresponsibilityoftheBelgian/regionalauthoritiesthatwesurveyedareperceivedasappropriateforthelong-termsuccessofbusinessesinBelgium.
Deloitte Belgian CFO SurveySecondquarter201423
Shortlyafterthelatestregionalandfederalelections,mostCFOsdonotexpectthenewlycreatedpoliticalsituationwillresultinamarkedchangeinthebusinessenvironmentinBelgium.However,withanetbalanceof+15andwiththegovernmentformationprocessstillongoing,theaverageCFOissomewhatpositiveaboutthepotentialforimprovement.
Ifthegovernmentformationprocesswouldbeverylong,aswasthecaseafterthe2010elections,impactwillbelimitedtohalfofthesurveyedorganisations.Ontheotherhand,forthathalfcontinuedpoliticalinstabilitywillresultinreducedconsumerdemand,lowerordelayedcapitalspending,andreducedforeigninvestment.
Extent to which outcome of current elections will have a positive impact on businesses in Belgium, also in the long-term
Very positive
Positive
Neither positive nor negative
Negative
Very negative
29%
53%
14%
2% 2%
Expected impact of a long federal government formation process of CFOs' companies
Planned investments delayed
Drop in consumer demand
Loss of investments from foreign investors
Cutback on hiring new employees
Reduction in capital spending
Reduction in spending on e.g. R&D,
marketing and other discretionary spending
No impact
25%
10%
5%
2%0%
49%
9%
24
Aboveall,CFOsdemandpolicymakerstogiveprioritytolabourcostreductionbyloweringemployercontributions.AsCFOsareoverallconcernedabouttheircompetitivepositioninthemarketandfocusedoncostreduction,thisdirectmeasurecouldprovidetheoxygenthatmanyorganisationsneed.
Measures that would have the most positive impact on CFOs' business
Decrease labour cost by lowering employer contributions
Decrease labor cost by changing automatic wage indexation
Increase labour market flexibility
Deregulation/stable regulation
Mobilise savings for long term financing of businesses
Lower energy costs
Increase amount of tax free personal allowance50%
17%
10%
9%
9%
5%
0%
Deloitte Belgian CFO SurveySecondquarter201425
Atotalof60CFOs,activeinavarietyofindustriescompletedour2014secondquartersurvey.27%oftheparticipatingcompanieshaveaturnoverofover€1billion,46%ofbetween€100millionand€1billionand27%oflessthan€100million.
31%oftheparticipatingcompaniesderiveupto30%oftheirrevenuesfromoutsideBelgium,29%between31%and69%and41%derivemorethan69%oftheirrevenuesfromoutsideBelgium.
Profile Q2 survey participants
Industry sector
Manufacturing
Banking/finance/insurance
Construction/mining
Retail/wholesale
Services/consulting
Transport
Healthcare/pharmaceuticals
Communication/media
Energy/utilities
Real estate
Technology
Leisure/entertainment
28%
14%
12%9%
7%
7%
5%
5%
5%3%
3% 2%
Revenues derived from outside Belgium
0% - 30%
31% - 69%
70% - 100%30%
29%
41%
Turnover
> € 1 bn
€ 100-€ 999 mn
< € 100 mn
27%
46%
27%
26
The Deloitte Belgian CFO Survey is produced by Thierry Van Schoubroeck, Partner, and Romana Jelinkova, Senior Consultant.
A note on methodologyNotallsurveyquestionsarereportedineachquarterlysurvey.Inresponsetothecurrentfinancialeconomicsituation,surveyquestionswillbeselected.Incaseyouparticipatedinthesurveyandwouldliketoreceiveinformationaboutnon-reportedquestions,donothesitatetocontactus.
SomeofthechartsintheDeloitteCFOsurveyshowtheresultintheformofanet%balance.Thisisthepercentageofrespondentsreporting,forinstance,thatbankcreditisattractiveminusthepercentagesayingbankcreditisunattractive.Thisisastandardwayofpresentingsurveydata.
The2014secondquartersurveytookplacebetween2Juneand19June,2014.Atotalof60CFOscompletedoursurvey.TheparticipatingCFOsareactiveinvarietyofindustries.27%oftheparticipatingcompanieshaveaturnoverofover€1billion,46%ofbetween€100millionand€1billion,and27%oflessthan€100million.
WewouldliketothankallparticipatingCFOsfortheireffortsincompletingoursurvey.Wehopethereportmakesaninterestingread,clearlyhighlightingthechallengesfacingCFOs,andprovidinganimportantbenchmarktounderstandhowyourorganisationratesamongpeers.
Delivering the voice of the CFO community
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©July2014,DeloitteConsultingDesignedandproducedbytheCreativeStudioatDeloitte,Belgium.
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ContactThierry Van SchoubroeckPartner,[email protected]+3227495604