Christine Wakefield
Chief Financial Officers from some of Australia’s largest companies are heralding positive signs leading into next month’s Federal Budget, with reports of strong revenues, export expansion and the belief the economy will positively contribute to company growth. Despite the bright outlook, CFOs report a 20 per cent year-on-year decline in plans for aggressive investment for 2015.
The findings are from the eighth annual American Express/CFO Research Global Business and Spending Monitor, an annual global survey exploring attitudes and sentiment of senior finance executives from companies with revenues exceeding US$500 million.
Christine Wakefield, Vice President of American Express Global Corporate Payments said that while there had been some loosening of purse strings following the Financial Crisis, spending intentions over the next 12 months reflected more caution. In fact, Australia was the second most reluctant market in the Asia Pacific region to aggressively invest this year, behind Hong Kong.
“Half of Australian CFOs say their level of investment over the next 12 months will stay flat or increase by less than 10 per cent and an additional three per cent say their investment will decrease”, said Christine Wakefield. “At a time when the Government is looking to big business to help drive the economy forward, this research shows more needs to be done to give CFOs the confidence to spend.”
Of surprise was the number of CFOs not willing to increase investment to achieve crucial business goals. These included improving market capitalisation (42%), remaining competitive with other companies (35%), pursuing business transformation and innovation (32%) and better meeting customers’ needs (32%).
The majority of CFOs surveyed said that for fundamental business activities they are likely to invest at the same level as last year or less. This included investment for improving production process efficiency (75%), developing new products and services (71%) and sales and marketing (69%).
Recruitment to support business growth is also not a top priority for three quarters of those surveyed. Instead, the focus is on up skilling employees and acquiring specialised skills to fill niche positions.
“Companies are looking for ways to do more with less and stretch every dollar further”, continued Wakefield. “Yet with competition increasing and innovation needed to drive organisations into the future, it’s vital Australian big business doesn’t pull back excessively and forego long-term returns. With our dollar performing weakly against the US Dollar, now especially is a great time for exporters.”
A closer look at the findings:
Positive signs for big business:
- Half of the survey’s respondents report higher revenues compared to a year ago with only 13 per cent reporting declines.
- 60 per cent predict economic expansion over the next 12 months, with only 13 per cent anticipating the economy will take a modest backward step.
- CFOs are confident of increased sales particularly in Asia and locally in Australia and New Zealand. Half say exports will become more important for their company’s growth this year.
- The largest number of companies are looking to expand activities in China, including sourcing, distribution, production and/or outsourcing.
- Significantly more CFOs feel the economy will be positive (42%), rather than negative (10%), for their company’s growth this year.
Cautious approach:
- 68 per cent say their level of spending and investment will be moderate and only 10% say they’ll invest aggressively – down from 31% in 2014. 23 per cent say spending will be tightly controlled to preserve profitability.
- India has the most aggressive investment plans of all markets surveyed in the region, with approximately 4 in 10 CFOs admitting this is their intention for the next 12 months.
- Where spending and investment will increase most will be to protect existing share in current markets.
- The cost of labour in Australia continues to be a concern with 32% of CFOs saying it will have a negative impact on Australian employment.
