The Deloitte CFO Survey: 2008 Q4 results
Priorities for 2009 - Cash, confidence, costs: 2008 Q4 results
The latest Deloitte Chief Financial Officer survey, published on 5th January 2009, shows the overriding aim for most CFOs in 2009 is to strengthen their balance sheets. In doing so, CFOs are focussing on three priorities: maximising cash flow, bolstering investor confidence and curbing costs.
The dominant themes of the fourth quarter 2008 CFO Survey are a shortage of credit and weakness in the economy. CFOs see these threats as posing the greatest challenges to their businesses in 2009. When we asked about the greatest concern for their own business the words “liquidity” and “cash flow” kept recurring in the responses. Faced with a downturn and exceptional uncertainties, CFOs have become significantly more risk averse. 98% of CFOs surveyed believe this is a bad time to be taking additional risk onto their balance sheets, twice the level of a year ago.
2009 is set to be a year of debt reduction and dividend cuts. 56% of CFOs plan to reduce debt levels. 23% plan to cut dividends, compared with just 3% in March 2008. Given the traditional reluctance of corporates to reduce dividends, this finding underscores the seriousness of the downturn and a willingness on the part of CFOs to contemplate more radical responses
Opportunities in the downturn
Despite elevated levels of risk a clear majority of CFOs, some 84%, see opportunities in the current downturn. About three quarters of CFOs see opportunities to expand market share and to acquire companies or other assets at discounted valuations. And while the priorities for 2009 of cash, confidence and costs are pressing and immediate, CFOs are also thinking ahead:
- 65% of CFOs think the downturn provides a chance to build long term presence and capacity in markets
- 55% believe it offers an opportunity to make significant changes that were needed before the credit crisis
- More than a third of corporates plan to profit from weaker labour markets with some 38% of CFOs expecting to take on more skilled staff.
Credit conditions tighten
CFOs report that, despite reductions in central bank interest rates and government action to recapitalise the banking system, credit remains in very short supply.
In the fourth quarter of 2008:
- 99% of CFOs rated credit as hard to obtain, up from 55% a year ago.
- 95% of CFOs rated credit as costly, up from 64% a year ago.
Credit crunch = Deleveraging
Banks and other financials have responded to the credit crunch by seeking to reduce debt levels. A similar process seems to be taking hold in the wider corporate sector. Tighter credit conditions have brought about a dramatic shift in corporates’ attitudes to debt. A year ago the balance of opinion among CFOs was that the UK corporate sector was under-geared. Today, the view is that corporates have too much debt. 56% of CFOs plan to reduce debt levels in the next year while only 11% plan to raise them.
About the Deloitte CFO Survey
The Deloitte CFO Survey, launched in September 2007, is a quarterly survey of Chief Financial Officers and Group Finance Directors of major UK companies. Over the last year, the survey has become the benchmark for gauging financial attitudes of major corporate users of capital in the UK. The results capture shifts in UK CFOs' opinions on valuations, risks and financing.
Over 200 CFOs, mainly from FTSE350 companies, have joined the CFO Survey panel. In the latest survey, 86 CFOs participated including CFOs from a quarter of FTSE100 companies. The rest were from a combination of FTSE250, FTSE Small cap and private companies and UK subsidiaries of major companies listed overseas. The combined market value of the listed companies surveyed is over £170 billion, or approximately 14% of the quoted UK equity market.
The Deloitte CFO Survey has been widely quoted in the media and is firmly established with the policymakers. The Bank of England cited the CFO Survey in the August 2008 Inflation Report. The Survey findings have also been used to brief members of the Bank's Monetary Policy Committee and have been quoted in the minutes of the meeting.
For more information on the survey, please contact Ian Stewart.
Download the full report: The Deloitte CFO Survey: 2008 Q4 results (PDF, 1204KB).
The Deloitte CFO survey in the media
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