The Deloitte Belgium CFO Survey Third quarter 2017 Edition

Transcription

1 The Deloitte Belgium CFO Survey Third quarter 2017 Edition This survey is a clickable pdf

2 Skilled labour scarcity threatens growth prospects Deloitte CFO Survey 2017 Dashboard Click on the dashboard frames to see a detailed overview General environment Business priorities Optimism Expansionary focus Business conditions are favourable and our survey respondents plan for growth. As a consequence, most companies will significantly boost capital expenditure and headcount in the period to come. With this expansionary focus CFOs are above all concerned about their ability to attract sufficient skilled talent. Economic uncertainty Risk appetite Turnover growth Belgian economic growth Top 3 CFOs concerns: 1. Shortage of (skilled) labour. 2. Current geopolitical risks. 3. Competitive position in the market Capital expenditure growth Headcount growth Discretionary spending Top 3 CFOs priorities: 1. Organic growth. 2. Increasing productivity/ effectiveness. 3. Digitalisation Special topic: relocation and sourcing strategies In this edition of the survey we have included a special topic on relocation and sourcing strategies. Survey results show these are high on the corporate agenda and the vast majority of CFOs are considering changing current practices. Financing options Bank borrowing availability Bank borrowing costliness Interest rate evolution Financial leverage Attractiveness bank borrowings Attractiveness corporate debt Attractiveness equity Attractiveness internal financing Policies Appropriateness of financial and economic policies Top 3 CFOs priorities: Relocation and sourcing strategies 1. Nearshoring (Europe). 2. Outsourcing (external vendor). 3. Onshoring (Belgium)

3 Business sentiment has stabilised in the third quarter and remains optimistic. CFO optimism, one of the key indicators of the CFO survey remains at the highest levels we have witnessed in years. CFOs feel optimistic about the prospects of their company, and are also looking more positively at overall Belgian Economic Growth. The median expectation is that growth in 2017 will be somewhere between 1,5% and 2% of GDP, which is in line with the expectations set out by the National Bank of Belgium. Corporate outlook and performance In financial terms, 2017 financials look promising at the end of the third quarter, with of our survey respondents reporting having done so far better as planned this year. And going forward, the vast majority of CFOs are expecting that the positive economic environment will result in further improvement of the financial results of their companies: 9 of survey participants expect turnover and profit to increase in the next 12 months. Priorities In this environment it is no surprise that (organic) growth is the main priority for surveyed CFOs, while focus on productivity and effectiveness remains high. In this quarter edition of the survey, we have added digitalisation to the list of priorities: 6 report that digitalisation is a strong priority for their company. Concerns With growth as the top priority, CFOs worry most about potential shortage of skilled labour: half of the survey participants express strong concerns about how the availability of skilled labour might impact their business over the next 12 months. Investment appetite 52% of corporates say that it is a good time to take additional risk on the balance sheet. Although risk appetite dropped compared to the previous quarter, it remains at the second highest level since the launch of the CFO survey in % of CFOs favour expansionary strategies over defensive strategies for their business, and this translates into investment indicators: Half of CFOs expect to increase capital expenditure over the next 12 months and 3 out of 4 are planning to increase headcount. Discretionary spending such as training and marketing are also expected to see a further increase over the coming 12 months. Funding Funding conditions remain attractive, bank borrowing is available and remains cheap. The consensus among surveyed CFOs is that interest rates will increase, with 85% saying they expect moderate interest rate increases in the next 12 months. For the first time since 2010 survey participants overall perception is no longer that their balance sheets are underleveraged. Policies Over summer, the Belgian federal government announced a tax reform agreement. Overall perception of the appropriateness of federal financial and economic policy making has somewhat improved as compared to the previous quarter but it is still lower than last year. Looking at individual policy areas we see that both labour market and tax policy perception has seen a significant improvement. Special topic: Relocation and Sourcing Our third quarter survey includes a special section on relocation and sourcing strategies. Two-thirds of CFOs are planning relocation and sourcing activities in the next 12 months. Near-shoring is highest on the agenda and the Eurozone is the preferred destination. The business processes for which the most changes in relocation and sourcing strategy are planned are Finance and IT. Almost of corporates are planning changes in sourcing or location of their finance processes. The top 3 drivers that influence sourcing and location decisions are: product or service quality, focus on core business functions and trade or other legislative constraints. Thierry Van Schoubroeck Partner The macroeconomic backdrop to the Deloitte CFO Survey 2017 The momentum in the global recovery picked up as growth became more synchronised across countries. Growth in the euro area has been particularly strong and the European Central Bank (ECB) now expects it to reach 2.2% in 2017, the fastest rate in a decade. Business and consumer confidence was buoyant, particularly in the euro area and the US. Business confidence in Japan reached a 25-year high and the economy posted its largest unbroken period of growth in more than a decade. Central banks have begun to normalise monetary policy. Having raised rates four times since 2015, the US Federal Reserve plans to start unwinding its Quantitative Easing (QE) programme at the end of October. The Bank of Canada has begun to raise rates and the ECB also intends to announce how it plans to unwind its QE programme at the end of October. Meanwhile, there is renewed speculation that the Bank of England will raise rates at its next meeting in November. Ian Stewart, Deloitte UK Chief Economist

4 Looking back: Skilled labour scarcity threatens growth prospects More Optimistic Less Optimistic 2009 Financial conservatism is back Optimism 2010 Financial repair, economical uncertainty 2009 Diverging fortunes going into Confidence grows 2010 Planning for growth 2010 Higher confidence, good results 2011 Call for caution 2011 Results under pressure 2011 At a turning point 2012 Anxiety has eased, but plenty of risks remain 2012 Outlook 2013: how CFOs are preparing for The New Normal is here to stay 2013 Concerns dominate 2013 A new mood 2013 Growth ambitions 2013 Call for action 2014 More appetite for risk 2014 Concern over government policies clouds current optimism 2014 Amid more uncertainty, declining optimism 2014 Reasonable year, prudent growth 2015 Favourable business conditions give confidence for expansion 2015 Solid mid-year financials 2015 Good performance amid the haze 2015 Cautious investment towards growth 2016 Optimism fades, but growth ambitions hold 2016 Post Brexit Vote Outlook 2016 Optimism is close to recent years highs 2016 Persist focus on investment 2017 Favourable business environment drives expansion 2017 Optimistic business sentiment accelerates focus on growth 2017 Skilled labour scarcity threatens growth prospects 2011 Outlook 2012: a very difficult year 2012 Corporates are defensive

5 Optimism General environment Net % of CFOs who are more/less optimistic about the financial prospects for their company Economic uncertainty 6 Risk appetite 5 53% 49%48% Turnover growth Belgian economic growth More optimistic 26% 39% 34% 35% 27% 24% 23% 23% 37% 38% Concerns 1 8% 12% 12% 8% 9% 8% 11% Actuals performance vs. budget CFOs remain in an optimistic mood Less optimistic % -11% -15% -27% -29% -13% -5-42% '10 '11 '11 '11 '11 '12 '12 '12 '12 '13 '13 '13 '13 '14 '14 '14 '14 '15 '15 '15 '15 '16 '16 '16 '16 '17 '17 '17

6 Optimism General environment % CFOs rating the general level of external financial and economic uncertainty facing their business as high Economic uncertainty 10 Risk appetite 9 88% 85% Turnover growth Belgian economic growth Concerns Actuals performance vs. budget % 82% 79% 77% 66% 63% 49% 69% 77% 63% 6 54% 56% 56% 49% % Financial and economic Rompravo, uncertainty: oca; Cas crem Navigating morte, Catalab in calm usperox siciam ad sil virit peria sent grae waters convere ius adhuit, prio, nosultus, qui potius, ner huius hore publiu cute dum mero mandam fectorectam comniri condam in tus consupiciam diumus, etiam tistem nos iurnihi liceres convo, Cupio maximpo publicit, nocus, omnit videm es intis periam noris, convo, noveres se concerudem adduciae 1 '12 '12 '12 '12 '13 '13 '13 '13 '14 '14 '14 '14 '15 '15 '15 '15 '16 '16 '16 '16 22% '17 33% '17 24% '17

7 Optimism General environment % of CFOs who think now is a good time to be taking greater risk onto their balance sheets Economic uncertainty Risk appetite % Turnover growth 6 Belgian economic growth Concerns Actuals performance vs. budget Appetite for risk weakens somewhat, but remains high % 28% 21% 23% '09 '10 '10 35% '10 '10 41% '11 19% '11 35% 13% '11 '11 19% '12 '12 8% '12 35% 33% 24% 21% 21% 22% 14% '12 '13 '13 '13 '13 '14 42% '14 '14 41% '14 44% 36% 39% '15 '15 '15 '15 '16 38% '16 23% '16 41% 39% 31% '16 '17 '17 52% '17

8 General environment How do you expect your turnover/top-line to evolve in the next 12 months? Optimism Economic uncertainty 1 14% 48% 29% Risk appetite Turnover growth Decrease between and 2% Increase between and 2% Belgian economic growth Concerns Same level Increase between 2% and 5% Increase with more than 5% Actuals performance vs. budget Topline growth expectations are Rompravo, oca; Cas crem morte, Catalab bullish usperox siciam ad sil virit peria sent grae convere ius adhuit, prio, nosultus, qui potius, ner huius hore publiu cute dum mero mandam fectorectam comniri condam in tus consupiciam diumus, etiam tistem nos iurnihi liceres convo, Cupio maximpo publicit, nocus, omnit videm es intis periam noris, convo, noveres se concerudem adduciae

9 General environment What do you expect the economic growth in Belgium to be? Optimism Economic uncertainty Risk appetite 19% Turnover growth Belgian economic growth Concerns Actuals performance vs. budget 43% Rompravo, oca; Cas crem morte, Catalab usperox siciam ad sil virit peria sent grae convere ius adhuit, prio, nosultus, qui potius, ner huius hore publiu cute dum mero mandam fectorectam comniri condam in tus consupiciam diumus, etiam tistem nos iurnihi liceres convo, Cupio maximpo publicit, nocus, omnit videm es intis periam noris, convo, noveres se concerudem adduciae 38% 1,9% to 2,5% 1,5% to 1,9% 1% to 1,4%

10 General environment CFO business concerns over the next 12 months Optimism Shortage of (skilled) labour 5 Economic uncertainty Current geopolitical risks 29% 48% 24% Risk appetite Competitive position in the market 24% 62% 14% Turnover growth Euro exchange rate Changes in regulation 24% 24% 38% 57% 38% 19% Belgian economic growth Impact of Belgian financial & economic policy making 1 71% 19% Concerns Economic outlook/growth 1 6 Actuals performance vs. budget Eurozone stability 5% 67% 29% Inflation risk 5% 29% 67% China's slow-down 5% 19% 76% War for talent intensifies Rompravo, oca; Cas crem morte, Catalab usperox siciam ad sil virit peria sent grae convere ius adhuit, prio, nosultus, qui po- European Union Stability Increasing sovereign risk Access to capital/funding 29% 24% 67% 71% 76% 33% tius, ner huius hore publiu cute dum mero mandam fectorectam comniri condam in Deflation risk 19% 81% tus consupiciam diumus, etiam tistem nos iurnihi liceres convo, Cupio maximpo publicit, nocus, omnit videm es intis periam noris, Strong concern Somewhat of a concern Not a concern convo, noveres se concerudem adduciae

11 General environment Comparison of the surveyed organisations' actuals performance versus budget Optimism Economic uncertainty Risk appetite Turnover growth % -8% 57% 47% 54% 52% 32% -5% 8% 32% 35% 44% -5% 45% -13% -9% 6% 7% 36% 37% 41% 38% -4% -5% -5% -9% 44% 21% -4% 21% Belgian economic growth Concerns Actuals performance vs. budget 6 22% 35% -29% 35% -32% 24% -37% 42% 28% 35% 24% 33% 31% 26% 33% -17% 29% 62% 21% Strong year-to-date financial Rompravo, oca; Cas crem morte, Catalab performance usperox siciam ad sil virit peria sent grae convere ius adhuit, prio, nosultus, qui potius, ner huius hore publiu cute dum mero mandam fectorectam comniri condam in tus consupiciam diumus, etiam tistem nos iurnihi liceres convo, Cupio maximpo publicit, nocus, omnit videm es intis periam noris, convo, noveres se concerudem adduciae 35% 12-49% 18% 8% Better than expected Net % 22% 32% 15% 27% 31% 29% As expected 37% 32% 37% 33% 37% 32% 27% Worse than expected 17% 21% -5-6

12 Business priorities CFO business priorities over the next 12 months Priorities Capex, headcount and discretionary spending Increasing productivity/efficiency Organic Growth 81% 19% 62% 24% 14% Capex expectations Metrics Investment Factors Digitalisation On-going cost control Hiring new talent Introducing new products/services Increasing cash flow Cost Reduction Expanding into new markets Increasing capital expenditure (CAPEX) Increasing focus on sustainability programmes Reducing leverage Expanding by acquisition abroad Increasing operating expenditure (OPEX) Expanding by acquisition in Belgium Raising dividends or share buy backs Disposing of assets 6 35% 48% 52% 38% 62% 38% 52% 1 38% 33% 29% 33% 48% 19% 19% 43% 52% 14% 33% 52% 1 48% 43% 1 35% 55% 1 29% 62% 1 7 5% 24% 71% 19% 81% Strong priority Somewhat of a priority Not a priority

13 Priorities Business priorities Net % of CFOs who expect Belgian corporates' capital expenditure, headcount, and discretionary spending to increase over the next 12 months Capex, headcount and discretionary spending Capex expectations % 57% 63% Metrics Investment Factors Leading investment indicators continue their steady increase % -2% -1 22% 5% -5% -9% 14% 11% 33% 32% 28% 17% 13% 6% 2% -11% 39% 32% -7% 45% 11% 41% 12% 2% 51% 5 48% 14% 35% - Capital Expenditure Headcount Discretionary Spending

14 Business priorities Capital Expenditures expectations Priorities Capex, headcount and discretionary spending 5% 43% 24% 1 19% Capex expectations Metrics Investment Factors Decrease between 1% and 5% Increase between 6% and 1 Same level Increase with more than 1 Increase between 1% and 5%

15 Business priorities Priorities CFOs' expectations on the evolution of the following metrics in the next 12 months Capex, headcount and discretionary spending Revenues 95% 5% Capex expectations Operating cash flow 9 1 Metrics Profit before taxes Operating margins 9 8 5% 5% Investment Factors Operating costs 75% 15% 1 All key financial metrics improved as compared to the second quarter Headcount Levels of cash and cash equivalents on balance sheet Discretionary spending, for instance on travel, training and marketing Inventory levels Financing costs 25% 6 74% 55% 16% 11% 35% 5% 6 15% % 7 1 Increase The same Decrease

16 Business priorities Priorities Factors that have an impact on current investment plans Capex, headcount and discretionary spending Actual or expected growth in the Eurozone 62% Capex expectations Actual or expected growth in Belgium 62% Metrics Investment Factors Availability of internal finance Secular or long-term growth for your products or services 57% 43% Actual or expected growth in US, Japan, Asia-Pacific 29% Cost and availability of external finance 29% Actual or expected growth in emerging markets 19% Financial and economic policy making in Belgium -5% negative impact positive impact

17 Financing options Financial leverage Attractivenes of funding sources Usage of resources Net % of CFOs who think Belgian corporate balance sheets are overleveraged/underleveraged Availability and cost of credit Interest rates Euro Interest rate strategy overleveraged underleveraged % -11% 2% -1-11% -13% -3% -1-9% % -7% -15% -9% -17% -5% -1-5% -13% -14% -19% -13% -17% -8% -14% 11% -14% -22% -25%

18 Financing options Financial leverage Attractivenes of funding sources Net % of CFO rating the following sources of funding as attractive/unattractive 10 Usage of resources Availability and cost of credit Interest rates Euro Attractive 8 6 Interest rate strategy Unattractive Internal Financing Equity Corporate debt Bank Borrowings

19 Financing options Financial leverage Attractivenes of funding sources % of CFOs who want to increase the usage of resources 10 Usage of resources Availability and cost of credit 8 Interest rates Euro 6 Interest rate strategy 14% 45% 82% Raising equity Raising corporate debt Raising bank borrowings Using internal financing

20 Financing options Financial leverage Attractivenes of funding sources Net % of CFOs reporting the availability and cost of credit 8 Usage of resources 6 Availability and cost of credit Interest rates Euro Interest rate strategy External financing remains cheap and available Available Costly

21 Financing options Financial leverage Net % of CFOs expecting interest rates to increase in the next 12 months Attractivenes of funding sources 10 Usage of resources 88% Availability and cost of credit Interest rates 8 81% 69% 61% 85% 85% 83% Euro Interest rate strategy Gradually strengthening monetary policy will likely increase interest rates somewhat 6 32% 55% 48% 54% 38% 46% 29% 54% 45% 47% 36% 14% 51% 26% 43%

22 Financing options Financial leverage % of CFOs preferring a weak/strong Euro Attractivenes of funding sources Usage of resources Availability and cost of credit Interest rates Euro Interest rate strategy 6 Stronger Euro Weaker Euro

23 Financing options Financial leverage Which strategy is most appropriate in case interest rates rise in the next 12 months Attractivenes of funding sources Usage of resources Availability and cost of credit Strategy remains unchanged a rise in interest rate will have little impact on my business Strategy remains unchanged we do not believe interest rates will rise 37% 21% Interest rates Reduce debt 16% Euro Interest rate strategy Revaluate investment plans Reduce leverage ratio 11% 5% Refinance debt 5% Shift marketing approach (e.g. less emphasis on pricing and more on other apsects) 5% Increase debt Adapt production plans to cope with changes in demand 5% 1 15% 25% 35%

24 Policies Appropriateness of financial and economic policies Detailed appropriateness 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 Importance of government policies % 59% Federal government s summer agreement restores some trust in financial and economic policy making % - -52% -63% 19% -34% -27% -44% -46% 31% 33% 31% 25% 25% 25% 14% -3% 21% 12%

25 Policies Appropriateness of financial and economic policies Detailed appropriateness Importance of government policies Perception of tax and labour policies improved significantly CFO's net perception about appropriateness of government policies Monetary policy, including interest rates, inflation and the availability of credit (Eurozone policy) Labour market Immigration policy Taxation policy Financial regulation Education & training Energy policy General levels of regulation affecting business Urban & town planning Public expenditure Infrastructure -44% -12% -1-17% -35% - -47% -45% -32% -58% -44% -6-47% -6% 3% -5% -3% 5 42% 35%

26 Policies Appropriateness of financial and economic policies Net % of CFOs rating the government policies as important Detailed appropriateness Importance of government policies Labour market 94% Taxation policy 88% Education & training Monetary policy, including interest rates, inflation and the availability of credit (Eurozone policy) Financial regulation 85% 76% 74% Energy policy 74% Infrastructure 74% General levels of regulation affecting business 67% Public expenditure 65% Immigration policy 44% Urban & town planning 29%

27 This quarter s hot topics Relocation and sourcing activities For which activities do CFOs plan changes in location or sourcing strategy? Changes in location or sourcing strategy Drivers influencing changes in location or sourcing strategies None 33% Finance 29% IT 24% Logistics 14% Manufacturing / production 14% Human Resources 1 Marketing 5% R&D Sales Legal 5% 1 15% 25% 35%

28 This quarter s hot topics Relocation and sourcing activities Which relocation and sourcing activities do CFO s plan in the next 12 months? Changes in location or sourcing strategy Drivers influencing changes in location or sourcing strategies None 33% Nearshoring (Eurozone) 19% Outsourcing (to an external vendor) 19% Nearshoring (European continent other than Eurozone) 14% Offshoring (outside of Europe) 14% Onshoring (moving activities back to Belgium) 14% Insourcing (from an external vendor) 5% 5% 1 15% 25% 35%

29 This quarter s hot topics Relocation and sourcing activities Drivers influencing changes in location or sourcing strategies Changes in location or sourcing strategy Drivers influencing changes in location or sourcing strategies Product/service quality Focus on core business functions 63% 32% 5% 56% 28% 17% Trade or other legislative constraints 24% 41% 35% Access to (skilled) labour 17% 44% 39% Risk management 6% 47% 47% Proximity to suppliers or customers 18% 35% 47% Taxes or subsidies 18% 35% 47% Freeing up internal resources 12% 18% 71% Cost reduction 29% 71% Brexit Strong driver Somewhat a driver Not a driver

30 Profile survey participants % of revenues generated outside of Belgium Business category of respondents Companies' approximate turnover Authors 35% - 35% 31% - 69% % 6% 18% 24% Construction Manufacturing Life Sciences Consumer business (incl. transport & logistics, leisure&travel) Technology, Media, Telecommunication) 12% 12% 6% 18% Other Real Estate Financial Services Turnover > 1bn mn < Turnover < 999mn A note on methodology Not all survey questions are reported in each quarterly survey. In response to the current financial economic situation survey questions will be selected. In case you participated to the survey and would like to receive information about non-reported questions do not hesitate to contact us. Some of the charts in the Deloitte CFO survey show the result in the form of a net % balance. This is the percentage of respondents reporting, for instance, that bank credit is attractive minus the percentage saying bank credit is unattractive. This is a standard way of presenting survey data. The 2017 Third quarter survey took place between September 14th and October 6th We would like to thank all participating CFOs for their efforts in completing our survey. We hope the report makes an interesting read, clearly highlighting the challenges facing CFOs, and providing an important benchmark to understand how your organisation rates among peers. Rules on the dashboard indicators The following methodology was applied for the symbols and indicators used in the CFO survey dashboard: An upward arrow is displayed in case an indicator has increased with 5 or more percentage points since the previous survey. A downward arrow is used in case an indicator has decreased with 5 or more percentage points since the previous survey. The equals signs is used in case the indicator remained stable between these upper and lower thresholds. A green symbol is used in case the indicator, from a business perspective, displays a favourable trend or situation; a red colour is used in case the indicator displays an unfavourable trend or situation; a grey colour is in case of ambiguous or neutral outcomes. Turnover < 100mn Thierry Van Schoubroeck Partner, Finance Transformation tvanschoubroeck@deloitte.com Wim Jansens Senior Consultant wjansens@deloitte.com Thomas Backès Consultant tbackes@deloitte.com Veronika Müllerova Consultant vmullerova@deloitte.com Contacts Thierry Van Schoubroeck Partner, Finance Transformation tvanschoubroeck@deloitte.com Tom Van Cauwenberge Finance Lead, Partner tvancauwenberge@deloitte.com For current and past copies of the survey, please visit:

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