CFOs predict increased revenue and cash flow for 2011DOWNLOAD
Monday, 7 February 2011: Australian Chief Financial Officers (CFOs) are increasingly confident about the outlook for the economy and their own businesses in 2011, according to the latest Deloitte Chief Financial Officer Quarterly Survey.
The vast majority (76%) of CFOs expect corporate Australia to enjoy an increase in revenues and 63% predict a boost to operating cash flows in the next 12 months. Another indicator of positive sentiment is the capital expenditure levels which 61% of CFOs predict will rise across Australia.
The net percentage of CFOs who are more confident about their own company’s financial prospects than they were in the previous quarter has stayed constant at 45% for the last two quarters.
Deloitte chief operating officer, Keith Skinner said, “The message from CFOs is clear, they are more confident about the Australian economic outlook and are predicting revenue, cash flow and capital expenditure to rise.”
“Although the majority of respondents completed this survey prior to the recent Queensland and Victorian flooding, there is little doubt that CFOs ended 2010 and begun 2011 in a positive frame of mind about the future for both their businesses and the wider economy.”
When asked to identify the biggest opportunity for their own business in 2011, the vast majority (73%) singled out growth. However, CFOs remain committed to cost reduction, with 37% expecting that discretionary expenditure across Australian corporations will decrease somewhat in 2011.
“This survey could indicate that 2011 will see CFOs accelerate their strategic growth plans, albeit while maintaining a close control on costs,” said Mr Skinner.
In terms of how they will achieve growth in 2011, CFOs outlined organic expansion, mergers and acquisitions and targeting of Asian markets as their three most popular strategies.
Deloitte Assurance & Advisory partner, Stephen Gustafson said, “This time last year CFOs were focused on cost and risk reduction. Now organic growth is the number one priority for 75% of those surveyed.”
“However, while this type of growth is the least risky it is also the hardest to achieve. A quarter (26%) of CFOs say pursuing acquisition led growth is a strong priority with a further 33% saying it is somewhat of a priority. Adopting an M&A led growth strategy can be riskier but it has the potential to be quicker to execute and deliver a more significant impact to the bottom line than organic growth,” said Mr Gustafson.
Strong Australian Dollar
According to this quarter’s survey, more than half (52%) of Australian CFOs have been negatively impacted by the rising Australian dollar while only 16% have benefited. Nearly a fifth (18%) of CFOs had taken proactive steps to revise their hedging arrangements. However, the majority (71%) of CFOs had made no changes to either take advantage or mitigate against the negative impacts of the strengthening Australian dollar.
Mr Gustafson commented, “We would have expected more CFOs to have taken some action in response to the strengthening of the A$ over the last six months. This could have involved greater steps to manage the risks or actions to pursue new opportunities.”
About The Deloitte CFO Survey
The Deloitte CFO survey targets the CFOs of major Australian listed companies, it has been conducted on a quarterly basis since the third quarter of 2009. This edition of the survey covers the fourth quarter of 2010 and took place between 9 December, 2010 and 21 January 2011.
Sixty three CFOs participated, representing businesses with a combined market value of approximately $288 billion or 18% of the Australian quoted equity market.
The majority of the survey respondents completed the survey prior to the Queensland and Victorian floods.