The Deloitte CFO Survey Growing Confidence

Quarter 3 2014 survey results

Leading business advisers

2

Contents

Quarter 3 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Snapshot of key findings . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Key events and economic trends . . . . . . . . . . . . . . . . . . . . . . 6

Survey findings

Section 1 . The economy and your company – financing, debt and credit . . . . . 8

Section 2 . Anticipated impacts of new Irish GAAP and new company law . . . . .12

Section 3 . Corporate Priorities for CFO’s businesses in the next 12 months . . . .18

Section 4 . Sustainability and the CFO . . . . . . . . . . . . . . . . . . . . . . .23

About the survey This is the twenty first in a series of quarterly surveys of Chief Financial Officers of major Irish based companies. The survey was conducted in September / October 2014, and CFOs of listed companies, large private companies and Irish subsidiaries of overseas multi-national companies participated.

The Deloitte CFO Survey is the only survey that seeks to establish the views of CFOs in relation to the financial markets, economic outlook and business trends on a quarterly basis.

Due to rounding, responses to the questions covered in this report may not aggregate to 100.

“

3

Optimism and positivity continue to be the trend for Quarter 3 2014 as the country continues to make steps towards recovery. The Government announced the results of the Cabinet reshuffle and released a document setting out the coalition’s key priorities including employment and domestic economic growth. Statistics released by the CSO show an increase in residential property prices and a decrease in the Standard Unemployment Rate in comparison with Quarter 3 2013.

Business optimism drops from 62% to 48% this quarter, however, continues to reflect the net optimism of Q1 2014 (50%) and Q4 2013 (52%), and is a significant improvement on optimism in Q3 2013 (28%). The survey was conducted in the lead up to Budget 2015 which may account for the drop in optimism this quarter, as companies awaited the impact of these announcements. The increased appetite amongst CFOs to take greater risk on to their balance sheets continues with 65% of respondents stating they believe it to be a good time.

For the third consecutive quarter a larger percentage of respondents feel that their corporate strategy is expansionary rather than defensive. This highlights the positive outlook that the Irish economy is on the road to recovery and the confidence which CFOs have that this growth will continue. These trends are in stark contrast to the volatile responses which had been received quarter to quarter in 2012 and early 2013.

As optimism, confidence and the risk appetite among CFOs continues to reflect the positive view seen since the beginning of the year, perhaps we can expect to see Irish companies making more investments and expanding their businesses and also an increase in the number of mergers and acquisitions in the Irish business environment. As outlined by the Financial Times in September, Ireland is still in the early days of recovery but has demonstrated that tough choices do pay off through being the first country to exit its EU bailout, and forecasts of continued strong growth while countries such as France and Italy stagnate.

Fundamental changes have been introduced to Irish GAAP effective for periods commencing 1 January 2015 with early adoption permissible. All extant FRSs and SSAPs will be withdrawn and replaced by one standard based on

IFRS for SMEs called FRS 102. The changes introduce a wide range of choice of accounting frameworks including IFRS, IFRS with reduced disclosures for qualifying entities, as well as FRS 102. The new frameworks set out regulation for all entities (other than certain listed entities) to transition to the new accounting frameworks. Most listed companies transitioned to IFRS in 2005 for at least their consolidated accounts as required by the EU IAS regulation. It is interesting to note as we progress towards 1 January 2015, that 56% of CFOs believe they have adequate resources in their finance function to ensure a smooth transition compared to 68% of CFOs when asked in Q3 2013. 50% of CFOs state their Board of Directors have yet to conclude on the type of accounting framework for 2015 & beyond - a decrease of 9% in twelve months.

The Companies Bill 2012 once enacted later this year will comprehensively reform and modernise Irish Company Law.  One key change to be introduced is that Directors of PLCs and companies with balance sheets greater than €12.5m and turnover of more than €25m will be required to have policies, procedures and processes in place and make an annual statement in their directors report regarding compliance with certain company law and all tax law.

Only 42% of CFOs stated that their Board of Directors is aware of these new requirements and of this 42%, only 37% have commenced putting the procedures and arrangements in place to meet these requirements in a timely manner. The Companies Bill 2012 will introduce two types of private companies limited by shares – the Limited Company (LTD) and the Designated Activity Company (DAC). There will be an 18 month transition period, after which all the affected companies who have not proactively made a choice will automatically convert to a LTD. 83% of respondents stated that their Board has not chosen the type of company that will best suit the business.

Sustainability continues to attract attention from investors, regulators, activists and the media. However, in addressing sustainability, many organisations tend to have shifting priorities that are insufficiently aligned with strategic business considerations. 61% of CFOs believe sustainability remains an important part of the CFO’s agenda, however, only 29% of CFOs provide sustainability measures as part of their company’s reporting cycle.

Quarter 3 overview

“CONTACTS

If you would like further information on the CFO Survey or wish to participate in the future, please contact:

Shane Mohan Partner T: +353 1 417 2543 E: smohan@deloitte.ie

Alan Flanagan Partner T: +3531 417 2873 E: aflanagan@deloitte.ie

Emily Cunniffe Manager T: +3531 417 3893 E: ecunniffe@deloitte.ie

4

Snapshot of key findings

65%BALANCE SHEET RISK65% of CFOs believe it is a good time to take risk on to their balance sheet.

48%NET OPTIMISMWhile net optimism drops from 62% to 48% this quarter it continues to reflect the net optimism of Q1 2014 (50%) and Q4 2013 (52%) and is a significant improvement on optimism in Q3 2013 (28%).

80%

50%

ACCOUNTING FRAMEWORK

COMPANY STRATEGYOver 80% of CFOs now believe their company’s strategy is expansionary rather than defensive.

50% of CFOs state their Board of Directors have yet to conclude on the type of accounting framework for 2015 & beyond. A decrease of 9% in twelve months.

5

42%COMPANIES BILL 2012 REQUIREMENTSOnly 42% of CFOs stated that their Board of Directors is aware of the new requirements imposed by the Companies Bill 2012 which will be enacted later this year. Of this 42%, only 37% have commenced putting the procedures and arrangements in place to meet these requirements on a timely basis.

56%

FINANCIAL REPORTING RESOURCES

56% of CFOs consider their current financial reporting resources adequate to ensure a smooth transition to these new frameworks compared to 68% of CFOs who were asked in Q3 2013.

61%SUSTAINABILITY IN CFO’S AGENDA61% of CFOs believe sustainability remains an important part of the CFO’s agenda.

29%

SUSTAINABILITY MEASURESHowever, only 29% of CFOs provide sustainability measures as part of their company’s reporting cycle.

6

Key Economic Events and Trends

Bond yield to maturity ISEQ® overall

1.8

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0.0

Yie

ld o

n Iri

sh

go

vern

men

t b

ond

s

AUGUST

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

JULY

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

AUGUST

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

JULY

Glo

bal

Eco

no

my The US Congressional

Research Service publish a report condemning Ireland’s

attractive low cost tax regime. The report found that 76 US multinationals have shifted

their tax domiciles to foreign addresses since 1983.

Statistics released show that China’s trade surplus narrowed to $32 billion in June, after export growth

slowed and imports increased.

The international spotlight falls on the Middle East, as

the Israeli - Palestinian conflict continues, claiming hundreds

of lives.

The Italian economy slips back into recession for the third time since 2008, after contracting by 0.2% in the

second quarter of 2014, according to figures released by the statistics agency ISTAT. 

€/$: 1 .36 €/£: 0 .80

Do

mes

tic

Eco

no

my

FX R

ates

Statistics released by the CSO show that Irish exports increased by 9% from May

2013 to May 2014. This was driven mainly by increases in the exports of organic chemicals (+14%) and in

medical and pharmaceutical products (+12%).

The Chief Executive of Bord Bia warns that up to €70

million worth of Irish exports could be affected by the one-year ban imposed by Russia on imports from the EU and

other countries.

The International Monetary Fund (IMF) confirms that Ireland can pay back its

bailout loans early without having to pay a penalty.

The Government announce the results of the Cabinet

reshuffle and release a document setting out the

Coalition’s key priorities for the remainder of its term. These key priorities include employment and domestic

economic growth.

7

ISEQ in

dex valu

eAUGUST

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

SEPTEMBER

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

5,000

4,900

4,800

4,700

4,600

4,500

4,400

4,300

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

AUGUST

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

SEPTEMBER

Russian Prime Minister, Dmitry Medvedev, announces a one year food sanction imports from the EU, US, Australia,

Canada and Norway. The ban is in response to a series of penalties imposed by the US

and EU in reaction to Russia’s actions in the Ukraine.

The World Economic Forum releases its latest survey,

ranking Ireland the 25th most competitive country globally,

its highest placing in the index since 2009.

The ECB cut interest rates to a record low of 0.5%, as part of a series of measures to boost

economic growth in the Eurozone economy.

The OECD proposes major changes to international

corporate tax rules, aimed at ensuring that corporate

profits are taxed where economic activities are

performed and where value is created.

Despite much debate, 55% of the Scottish electorate vote

‘no’ to independence from the United Kingdom.

€/$: 1 .26 €/£: 0 .78

The credit ratings agency Fitch upgrade Ireland’s

sovereign debt rating from BBB+ to A-. Fitch is the second agency to move

Ireland back to an A rating, following Standard & Poor’s

in June.

Statistics released by the CSO show that residential property

prices increased by 13.4% nationally in July, compared with the same period last

year.

Statistics released by the CSO show that the Standard Unemployment Rate (SUR) for August was 11.2%, a

decrease of 1.5% from the same period last year.

Speculation continues in relation to the 2015 budget, as the European Commission urges the government to implement €2 billion in budget

cuts. Despite Ireland’s strong economic performance, the

European Commission warns that there was “no room to manoeuvre”

on the deficit.

8

The preference for funding from overseas banks continues to rise with an increase of 5% in the last quarter. CFO respondents’ preferences for Domestic Banks and Equity as a means of financing have remained largely similar to Q2 2014’s results. 30% of CFO respondents cite their firms as not requiring funding at this time; a 6% increase on the previous quarter.

A net 22% of CFOs believe new credit to be easily available for Irish Corporates. While last quarter showed a net 33%, we continue to see a positive sentiment amongst Irish CFOs as it is the second highest response in two years.

A net 26% perceive the overall cost of credit as high, a decrease of 15% compared to Q2 2014.

Section 1 – The economy and your company - financing, debt and credit

Figure 1: What is your company, or your parent company’s, preferred method of funding?

Figure 2: How would you rate the overall cost of new credit for Irish corporates?

6%

0%

Q1 2014

Q4 2013

Q2 2014

Bank (domestic)

Q1 2014

Q4 2013

Q2 2014

Bank (overseas)

Q1 2014

Q4 2013

Q2 2014

Equity

Q1 2014

Q4 2013

Corporate bonds Reduced dividend payments Leasing

32%30%Q3 2014

31%

44%

3%

19%

17%

22%Q3 2014

30%

10%

9%Q3 2014

15%

Q2 2014

Q1 2014

Q4 2013

0%

Q3 2014

Q2 2014 Q2 2014

Q1 2014

Q4 2013

Q3 201418%

0%

0%

4%

17%

Q2 201424%

Q1 201426%

9%

Funding not required

Q3 201430%

0%4%

0%Q3 2014

Q3 2012 Q4 2012 Q1 2013 Q2 2013

Availability

Cost

-40

-30

-20

-10

0

10

20

30

40

50

60

70

80

CostlyEasily available

CheapHard to attain

Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014

41%

26%

62% 62%

53%

27%

50%

26%

44%

33%

22%

-29%

-23%

-31%

12%17%

-19%

6%

9

CFO respondents have cited mixed results on the availability of new credit for Irish corporations.

The number of CFOs that perceive the availability of new credit from Overseas Banks and Equity sources has risen in the last quarter. However, the availability of funding from Domestic Banks and Corporate Bonds has not followed the same trajectory. Credit from Domestic Banks is considered easily available by 22% of respondents, while credit from corporate Bonds is now considered hard to get by 11% of respondents.

While net optimism drops from 62% to 48% this quarter, CFOs continue to reflect the net optimism of Q1 2014 (50%) and Q4 2013 (52%) and a significant improvement on optimism in Q3 2013 (28%) can be seen.The majority of optimistic respondents cite external factors such as the economy and market trends as the reason for their optimism.

Figure 3: How would you rate the overall availability of new credit for Irish corporates compared to six months ago from the following sources?

Figure 4: Compared with three months ago how do you feel about the financial prospects for your company?

Easily available

Hard to get

-40

-30

-20

-10

0

10

20

30

40

50

Domestic banks

Overseas banks

Corporate bonds

EquityQ4 2013 Q1 2014 Q2 2014 Q3 2014

-33

-19 -19

18

3633

4

12

22

43

17

-9

6

-26

-16

Q4 2013 Q1 2014 Q2 2014 Q3 2014

Op

tim

isti

c Sentiments on your company’s financial prospects

40

50

60

70

80

52%

50%

62%

48%

More optimistic primarily due to external factors(e.g. economy, industry and market trends)

Most optimistic primarily due to internal company specific factors (e.g. products/services, operations and financing)

Unchanged

Less optimistic primarily due to external factors (e.g. economy, industry and market trends)

Less optimistic primarily due to internal company specific factors (e.g. products/services, operations and financing)

44%

26%

17%

9%

4%

10

A net 13% of respondents reported a decrease in gearing this quarter, an increase of 1% from last quarter.

CFOs’ appetite for risk has continued to grow this quarter with 65% of respondents citing now is a good time to take greater risk onto their company’s balance sheet. This is a significant improvement to the 24% reporting in Q3 2013.

Figure 5: How has your company’s gearing changed since this time last year?

Figure 6: Do you think it is a good time to take greater risk onto your company’s balance sheet?

Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013-40

-35

-30

-25

-20

-15

-10

-5

0

Q4 2013 Q1 2014 Q2 2014 Q3 2014

-14% -14%-13%

-22%

0%

-28%

-24%

-4%

-38%

Increase

Decrease

65%

35%

Yes

No

Q3 14 Q1 14 38%

62%

Q2 14 38%

62%

Q4 13 44%

56%

11

The perceived external financial and economic uncertainty facing business has largely stabilised this quarter on the back of large reductions in each of the preceding three quarters.

Figure 7: How would you rate the level of external financial and economic uncertainty facing your business?

11%59%

26%

12%3%

4%0%

6%53%

26%

4%4%

22%

70%

Q3 14Q1 14

Very High

High

Normal

Low

Very low

Q2 14

14%

48%38%

Q4 13

Deloitte Perspective:

The sense of positivity and optimism expressed by CFOs was clearly visible in the Q2 CFO Survey report and has remained strong in Q3 2014. There has been a slight fall in results compared to last quarter; however they remain in line with Q4 2013 and Q1 2014. This sentiment has been compounded by a further increase in CFOs’ appetite for risk. There has been a general stabilisation in the level of financial and economic uncertainty facing CFOs after back-to-back reductions in the last four quarters. An increase in uncertainty was noted by a minority of respondents and may be as a result of respondents awaiting the budget announcements and possible associated implications.

The availability of credit to Irish corporates from overseas banks continues to rise, possibly as a result of the Irish economy achieving the highest growth rate within the Eurozone in Q2 of this year. This availability has also had the knock on effect of increasing the number of CFOs with a preference for credit from overseas banks. CFOs confirmed that they have continued with their strategy of reducing the gearing level within their company.

12

CFO respondents highlighted a broad range of areas that have the potential to be impacted by the choice of accounting framework. There is no single area that stands out as being a key concern to respondents either when first asked the question in Q3 2013 or a year on in Q3 2014.

Training, reporting financial instruments, budgeting and forecasting, and covenant compliance have increased as areas of concern.

Tax, investor relations, dividend flows, performance related pay and bonuses, earnouts and other contractual agreements and measurement of profit and other KPI’s have decreased as areas of concern.

Section 2 – Anticipated impacts of new Irish GAAP and new company law

Figure 8: Do you think that the choice of framework has the potential to adversely impact on the business:

Q3 2014 Q3 2013

Training requirements

IT systems

Investor relations

Budgets and forecasts

Reporting financial instruments

Earn outs and other contractualarrangements

Tax

Dividend flows

Performance related pay and bonuses

Covenant compliance

Measurement of profit and other KPIs

0 2 4 6 8 10 12 14

13%

13%

8%8%

8%

9%

9%

10%

10%

12%

12%

6%7%

5%7%

6%8%

11%7%

9%

12%

11%

13

In Q3 2013 68% of respondents believed that their current level of finance function resources would be adequate to ensure a smooth transition to the chosen accounting framework. As 1 January 2015 approaches, CFO confidence in the ability of their finance departments to independently manage the transition between accounting frameworks has dropped by 12%.

33% of CFOs now believe that their finance teams will require assistance to ensure a smooth transition.

Figure 9: Given the highly detailed nature of the work including but not limited to research into past transactions required to transition from one accounting framework to another do you consider that your current financial reporting resources within the finance function are adequate to ensure a smooth transition?

0

10

20

30

40

50

60

70

80Q3 2014

Q3 2013

With some help required

NoYes

68

56

5

11

27

33

14

It is interesting to note that with only 3 months left until mandatory adoption, 50% of companies have not yet decided which accounting framework to use.

The majority of companies are not aware of the new requirements set out by the Companies Bill 2012, regarding the Directors’ Compliance Statement.

Figure 10: Has your Board of Directors decided which accounting framework to adopt for 2015 and beyond?

Figure 11: Is your Board of Directors aware of new Companies Bill requirements, regarding the Director’s Compliance Statement?

0

10

20

30

40

50

60Q3 2014

Q3 2013

NoYes - otherYes – IFRSwith reduced

disclosure(FRS 101)

Yes – newIrish GAAP(FRS 102)

Yes – IFRS

23

15

9

15

9

20

0 0

59

50

42%

58%

Yes

No

Q3 14

15

Figure 11a: If yes, has your Board of Directors commenced putting the procedures and arrangements in place to be able to meet this requirement on a timely basis?

Figure 11b: If yes, are there sufficiently appropriately qualified in house resources available to meet the requirement on an ongoing basis?

Yes

No

37%

63%

Yes

No

25%

75%

Of the Boards of Directors that are aware of the new Companies Bill requirements, only 37% have taken measures to ensure they will have the necessary Directors’ Compliance Statement processes in place.

Of the Boards of Directors that are aware of the new Companies Bill requirements, 3 quarters have the appropriate in-house resources in place to meet the Directors’ Compliance Statement requirements on an ongoing basis.

16

Only 17% of companies have chosen which form of legal entity status to adopt as per the new Bill.

71% of companies that have not chosen their new form of legal entity have also not investigated impacts of each statutory type to their business.

Figure 12: Has your Board of Directors chosen which type of company to adopt once the Companies Bill is commenced?

Figure 12a: If no, have they investigated the implications on their business of the two types of company?

11%

6%

83%

Yes - DAC

Yes - LTD

No

Q3 14

29%

71%

Yes

No

Q3 14

17

Deloitte perspective:

Financial statements for periods commencing after 1st January 2015 – except consolidated statements of certain listed entities – will have to be prepared according to either FRS 101 Reduced Disclosure Framework or FRS 102 The Financial Reporting Standard Applicable in the UK and Republic of Ireland. Despite this, 50% of companies have not chosen their new accounting framework, down from 59% last year. This could represent a large constituency of companies that have underestimated the challenges of transitioning between accounting frameworks which include impacts on reporting systems, banking covenants, distributable profits and staff training.

Best practice advice is to start planning for adoption as early as possible to ensure opening balances, comparative figures and recording systems are in place for an orderly migration. These challenges are underscored by a comparison to our survey of CFOs in Q3 2013, which shows that more companies have come to believe that their finance departments do not possess the required resources to fully manage a smooth transition internally.

2015 will likely see another large statutory change for Irish companies with the expected commencement of the 2012 Companies Bill. The bill will replace more than 2 dozen statutes, consolidating them into one piece of legislation, introducing 2 new forms of private company to replace the existing “Limited” entity, and creating new reporting and filing requirements. Worryingly, only 42% of Boards of Directors are aware of Directors’ Compliance Statement requirements and only 37% have commenced measures to ensure timely compliance with them. However 75% of respondents believe their in-house teams can meet the additional requirements.

Similarly, 83% have not decided on which new form of private company to choose, 71% of which haven’t even considered the implications of the decision. While there is an 18 month transition window, the need for: an analysis of the implications; passing of the necessary shareholder resolutions; filing of documentation; and updating of official documents with the DAC suffix could require an extended changeover timeframe. Once again, early planning and execution is seen as best practice to ensure that there is no disruption to corporate operations.

18

Section 3 – Corporate priorities for CFO’s businesses in the next 12 months

Over 80% of CFOs now believe their company’s strategy is expansionary. This upward trend has continued for the third consecutive quarter and is consistent with the recovery of the Irish economy.

Interestingly, for the first time, less than one in five CFOs now consider their corporate strategy to be defensive.

Consistent with previous quarters, long term growth for products and services remains the most positive influencing factor with regard to investment plans being made by companies over the next 12 months. This is followed by growth in Ireland, the EU, the US and Asia.

Market uncertainty is again the most unfavourable factor when a company is considering its investment plans.

Figure 13: Would you consider your corporate strategy: Figure 14: What effect do the following factors have on your company’s investment plans for the next 12 months?

82%Q3 2014

Expansionary

Defensive

71%Q4 2013Q1 2014

77%

23%Q1 2014

Q2 201479%

21%Q2 2014

18%Q3 2014

29%Q4 2013

0%

Neutral Negative

0 20 40 60 80 100

Market uncertainty

Actual or expected growth in Ireland

Actual or expected growth in Euro area

Actual or expected growth in the US

Actual or expected growth in Asia

Actual or expected growth in the emerging markets (BRICS)

Cost and availability of external finance

Availabilty of internal finance

Long-term growth for your products and services

6% 72% 22%

67% 28% 5%

Positive

67% 33%

56% 44%

44% 56%

61%39% 0%

0%

0%

0%

28% 5%67%

33% 56% 11%

76% 12% 12%

Q3

14

0 20 40 60 80 100

Market uncertainty

Actual or expected growth in Ireland

Actual or expected growth in Euro area

Actual or expected growth in the US

Actual or expected growth in Asia

Actual or expected growth in the emerging markets (BRICS)

Cost and availability of external finance

Availabilty of internal finance

Long-term growth for your products and services

4% 70% 26%

54% 43%

61% 32% 7%

3%

3%

4%

54% 43%

39% 57%

56%44%

21% 11%68%

39% 50% 11%

78% 15% 7%

Q2

14

19

CFOs believe bank borrowings and the levels of cash and cash equivalents on their balance sheets will be the financial metrics which will experience the most decline over the coming 12 months. According to respondents, operating costs, revenues and operating cash flows are the metrics which will increase the most in the same period.

Retention of talent has climbed for the second consecutive quarter and is now just 3% short of the highs of Q4 2013. 89% of CFOs now believe that retaining their current employees is a top priority. This links closely with the value which current employees can provide when pursuing an expansionary strategic policy.

Figure 15: What change, if any, do you expect in the following financial metrics over the next 12 months for your company?

Figure 16: Has retention of talent remained a priority in your firm despite pressures to engage in cost cutting and downsizing?

0

20

40

60

80

100Q3 2014

Q2 2014

Q1 2014

Q4 2013

NoYes

1114

19

8

8986

81

92

0 20 40 60 80 100

Decrease significantly

Decrease somewhat

No change

Increase somewhat

Increase significantly

Research and Development expenditure

New Product Development

Discretionary spending

Operating margins

Inventory levels

Capital expenditure

Employee numbers

Equity issuance

Financing costs

Bank borrowing

Operating cash flows

Revenues

Dividends/share buybacks

Operating costs

Levels of cash and cash equivalents on Balance Sheet

Bond issuance 100

100

59

22

67

50 17

11 17

11

72

18 23

16 6 6

5

12

1717 78 5

1128501117 33 39 11

66529

53 35 12

6445018 41 35 6

6383125

78 5

65 23

20

It appears that the focus among CFOs continues to be weighted in favour of executing strategy rather than reigning in or adapting strategy. This is consistent with the expansionary strategy which has been adopted and also ties into the view that CFOs are pursuing opportunity, rather than limiting risk and employing a defensive strategy.

CFOs are in favour of growing/scaling their revenues and in turn their organisations.

On a whole, respondents are leaning towards revenue growth from new offerings and new geographies, however, there appears to be little distinction in preference to growing via acquisition or organically.

While CFOs appeared neutral on the decision to hold/invest cash in Q2 2014, they now appear to be in support of investing cash.

Figure 17: Please indicate in the 5-point scale where you believe your business’s focus will be in the next 12 months in relation to these priorities.

Figure 19. Please indicate in the 5-point scale where you believe your business’s focus will be in the next 12 months in relation to these priorities.

Planning versus executing

Execute strategy

Refine/adapt strategy

Scale:

0-10% 11-20% 21-30% 31-40% 41-50% 51+%

Business Focus

Limit risk

Pursueopportunity

Contract/rationalise

Grow/scale

Denotes the meanfor Q2 14

Denotes the meanfor Q1 14

Denotes the meanfor Q4 13

Cost Reduction Revenue growth

Reduce costs

Growrevenue

Employee Numbers

Increase employee numbers

Decreaseemployee numbers

Save versus invest

Hold/ build cash

Investcash

Cost Reduction

Reducedirect costs

Reduceindirect costs

Grow viacurrent offerings

Grow vianew offerings

Revenue growth

Revenue growth

Grow in current geographies

Grow in new geographies

Grow in organically

Grow via acquisition

Denotes the meanfor Q3 14

Figure 19. Please indicate in the 5-point scale where you believe your business’s focus will be in the next 12 months in relation to these priorities.

Planning versus executing

Execute strategy

Refine/adapt strategy

Scale:

0-10% 11-20% 21-30% 31-40% 41-50% 51+%

Business Focus

Limit risk

Pursueopportunity

Contract/rationalise

Grow/scale

Denotes the meanfor Q2 14

Denotes the meanfor Q1 14

Denotes the meanfor Q4 13

Cost Reduction Revenue growth

Reduce costs

Growrevenue

Employee Numbers

Increase employee numbers

Decreaseemployee numbers

Save versus invest

Hold/ build cash

Investcash

Cost Reduction

Reducedirect costs

Reduceindirect costs

Grow viacurrent offerings

Grow vianew offerings

Revenue growth

Revenue growth

Grow in current geographies

Grow in new geographies

Grow in organically

Grow via acquisition

Denotes the meanfor Q3 14

Figure 19. Please indicate in the 5-point scale where you believe your business’s focus will be in the next 12 months in relation to these priorities.

Planning versus executing

Execute strategy

Refine/adapt strategy

Scale:

0-10% 11-20% 21-30% 31-40% 41-50% 51+%

Business Focus

Limit risk

Pursueopportunity

Contract/rationalise

Grow/scale

Denotes the meanfor Q2 14

Denotes the meanfor Q1 14

Denotes the meanfor Q4 13

Cost Reduction Revenue growth

Reduce costs

Growrevenue

Employee Numbers

Increase employee numbers

Decreaseemployee numbers

Save versus invest

Hold/ build cash

Investcash

Cost Reduction

Reducedirect costs

Reduceindirect costs

Grow viacurrent offerings

Grow vianew offerings

Revenue growth

Revenue growth

Grow in current geographies

Grow in new geographies

Grow in organically

Grow via acquisition

Denotes the meanfor Q3 14

21

Reporting timelines and quality are the stand out indicators which 78% of CFOs use to monitor performance within the finance function. Achievements of plans/budgets, engagements with operations/a seat at the table, and forecast accuracy are the other factors which CFOs use to appraise performance.

Figure 18: What indicators do you use to monitor the performance of your finance function?

Reporting timliness/quality

Achievement of plans/budgets

Engagement with operations/seat at table

Forecast accuracy

Compliance

Analysis quality/decision support

Close timelessness / quality

Cost savings idendified/achieved

Finance Talent bench/development/capability

Cost of finance function

Finance transaction efficiency/effectivness

Internal customer satifaction

Percentage of CFOs who mentioned indicator

Talent retention

Other

78%61%

56%56%

50%39%39%

33%33%

28%11%

6%

0%0%

22

Deloitte perspective:

Trends of expansion and growth have continued this quarter among Irish CFOs. For the third consecutive quarter a larger percentage of respondents feel that their corporate strategy is expansionary rather than defensive. This highlights the return to growth of the Irish economy and the confidence which CFOs have that this growth will continue. These trends are in stark contrast to the volatile responses which had been received quarter to quarter in 2012 and early 2013. CFOs have highlighted that investment plans are being driven by demand for their products/services along with growth in their main markets (Ireland, Europe, the US and Asia).

It has become evident that talent retention among companies is a high priority as they target an expansionary strategic policy in the hope of capturing the growth which is forecast for the Irish economy. Talent retention rather than expansion appears to be the focus and will particularly help to scale businesses over the coming months. There is an increasing risk appetite among CFOs in the three quarters of 2014. The majority of respondents are now in favour of pursuing opportunity, growing their business and investing cash rather than putting cautious measures in place.

Reporting timelines/quality continues to be the key metric used by CFOs when evaluating the performance of the finance function. Analysis quality/decision support has been replaced as the second most important metric this quarter by achievements of plans/budgets – this suggests that CFOs recognise the importance of setting example by meeting their own plans and budgets as year-end approaches in many companies. Despite the focus on the importance of talent retention, CFOs do not see retaining talent as an indicator of performance within finance teams.

23

Section 4 – Sustainability and the CFO

Opinion among CFOs has largely remained stable over the last year with 61% believing that sustainability remains an important part of the CFO’s agenda.

Compared to Q3 2013, an increased number of CFOs strongly agree that there is a direct relationship between sustainability and business performance.

Figure 19: In your view, how important is it for sustainability programmes to be part of the CFO’s role?

Figure 20: Do you believe there is a direct link between sustainability programmes and business performance?

Extremely important

19%Q3 2013

15%Q2 2012

Important

62%Q3 2013

43%Q2 2012

Somewhat important

19%Q3 2013

36%Q2 2012

Not important

0%Q3 2013

6%Q2 2012

17%Q3 2014

61%Q3 2014

22%Q3 2014

0%Q3 2014

0

20

40

60

80

100Q3 2014

Q3 2013

Q2 2012

Strongly DisagreeDisagreeNeither Agree or Disagree

AgreeStrongly Agree

1310

22

61

7

17

55

8180

24

24% of CFOs believe the marketplace is now the most pertinent area of sustainability to their role across the five pillars of corporate responsibility, an increase of 2% on Q3 2013.

This is followed closely by 23% of CFOs who indicated that the workplace is the most relevant area of sustainability to their role.

Only 29% of CFOs provide sustainability measures as part of their company’s reporting cycle.

For CFOs who do provide sustainability measures as part of their company’s reporting cycle, the preferred methods of sustainability reporting are through Standalone Sustainability Corporate Responsibility Reports and Sustainability Corporate Responsibility sections in the Annual Report.

Figure 21: Which pillars of sustainability are most important to you in your role as CFO?

Figure 22: Does your company currently report on sustainability measures as part of its reporting cycle?

29%

71%

Yes

No

0 5 10 15 20 25 30

Q3 2014

Q3 2013

Q2 2012

Communication, Reporting & Governance

Community

Environment

Workplace

Marketplace

2822

24

2426

23

1517

19

151616

191818

25

The results indicate that sustainability did not feature as prominently in either the bidding or procurement processes compared to Q3 2013.

The percentage of CFOs including sustainability in the bidding process declined by 31%. Just 31% of CFOs now include sustainability in their procurement process- down from 81% in 2013.

Moreover, fewer CFOs indicate an intention to incorporate sustainability in to these processes compared to previous years.

Figure 23a (i): Are sustainability dimensions incorporated into your company’s bidding processes?

Figure 23a (ii) : If no, are you planning to incorporate them for bidding?

Figure 23b (i): Are sustainability dimensions incorporated into your company’s procurement process?

Figure 23b (ii): If no, are you planning to incorporate them for procurement?

0

10

20

30

40

50

60

70

80Q3 2014

Q3 2013

Q2 2012

NoYes

56

25

63

44

75

37

0

20

40

60

80

100Q3 2014

Q3 2013

Q2 2012

NoYes

14

40

13

86

60

88

0

20

40

60

80

100Q3 2014

Q3 2013

Q2 2012

NoYes

69

19

61

31

81

39

0

10

20

30

40

50

60

70

80Q3 2014

Q3 2013

Q2 2012

NoYes

26

50

36

74

50

64

26

Sustainability practices can impact a wide range of business areas and initiatives which are of concern for the CFO.  Of those surveyed, business value (14%) is the foremost area of concern in relation to the impact of sustainability whilst long term value creation (12%) is second. An increasing number of CFOs recognise the impact sustainability has on reporting to stakeholders and on building trust.

Figure 24: Do you think Sustainability has an impact on:

0 5 10 15 20

Q3 2014

Q3 2013

Reporting to stakeholders

Building trust

M&A activity / investment analysis

Investment planning

Investor relations

Financial auditing and reporting

Compliance and risk management

Long-term value creation

Cost control

Revenue generation

Business value

27

Deloitte perspective:

Sustainability continues to attract attention from investors, regulators, activists and the media. However, in addressing sustainability, many organisations tend to have shifting priorities that are insufficiently aligned with strategic business considerations. Lack of alignment with strategy leaves sustainability out of sync with business objectives, which can place programmes in continual jeopardy or at cross purposes to business goals. In the roles of strategist and catalyst, CFOs are uniquely positioned to correct these deficiencies by assisting in setting strategy and direction, and instilling a financial approach in all organisational activities- including sustainability. Additionally, CFOs can track reporting practices related to financial statements, assist in assessing the materiality of sustainability impacts, and focus disclosures on material impacts to the organisation and its stakeholders.

Leading organisations view sustainability as a game-changing business opportunity, with many looking at the core business through a sustainability lens, and creating competitive differentiation and long-term value.

Download our dedicated Deloitte CFO Survey app at www .deloitte .com/ie/cfoapp

Tom Cassin Partner, Audit T: +353 1 417 2210 E: tcassin@deloitte.ie

Pádraic Whelan Partner, Taxation T: +353 1 417 2848 E: pwhelan@deloitte.ie

Michael Flynn Partner, Corporate Finance T: +353 1 417 2515 E: miflynn@deloitte.ie

Cathal Treacy Partner, Audit T: +353 61 435511 E: ctreacy@deloitte.ie

Ciarán O’Brien Partner, Audit T: +353 1 3829 E: ciobrien@deloitte.ie

ContactsFor more details please contact:

DublinDeloitte & ToucheDeloitte & Touche HouseEarlsfort TerraceDublin 2T: +353 1 417 2200F: +353 1 417 2300

CorkDeloitte & ToucheNo.6 Lapp’s QuayCorkT: +353 21 490 7000F: +353 21 490 7001

LimerickDeloitte & ToucheDeloitte & Touche HouseCharlotte QuayLimerickT: +353 61 435500F: +353 61 418310

www.deloitte.com/ieDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/ie/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte has in the region of 200,000 professionals, all committed to becoming the standard of excellence. This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, Deloitte Global Services Limited, Deloitte Global Services Holdings Limited, the Deloitte Touche Tohmatsu Verein, any of their member firms, or any of the foregoing’s affiliates (collectively the “Deloitte Network”) are, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your finances or your business. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this publication. © 2014 Deloitte & Touche. All rights reserved

For more information on the Deloitte CFO Survey please contact:

Shane MohanPartner, Management Consulting T: +353 1 417 2543 E: smohan@deloitte.ie

Alan FlanaganPartner, Management Consulting T: +353 1 417 2873 E: aflanagan@deloitte.ie