UK CFOs less optimistic about revenue growth


By Jack Hagel

CFOs of private-equity-backed businesses in the UK are less optimistic about revenue growth than they were a year ago—and they appear increasingly poised to cut costs to stem losses, a new survey shows. Consternation over the economy appears to also be foiling plans for initial public offerings (IPOs).

A Deloitte survey of 70 UK CFOs, taken to assess priorities for the year ahead, showed that 54% of respondents were optimistic about revenue growth over the next 12 months, down from 70% a year ago.

The results, released Monday, also revealed shifts in strategies to deal with slower business. Revenue growth remains the top priority for CFOs in the next 12 months (40%). But 24% said protecting margins through cost-cutting was the top priority, up from 11% in 2011.

Meanwhile, market uncertainty was reflected by a decline in plans to exit a business—whether through a sale, buyout or public offering—during the next year. Only 4% expected an exit in the next 12 months, down from 18% in 2011. The biggest drop was in exits through an IPO. Only 4% this year see an IPO as an exit route, down from 17% last year.

“The results of the survey very much reflect current market sentiment, and we have seen a dip in the overall outlook for the coming months,” Emma Cox, lead partner for Deloitte’s private-equity-backed business team, said in a statement. “However, it is good to see that, despite the current recessionary woes blighting the UK and concerns around the euro zone, 54% of CFOs of private-equity-backed businesses are optimistic about revenue growth.”

Europe impact on US IPOs

The euro zone’s woes appear to be spreading to the US IPO market as well. Only 33% of capital markets executives at investment banks predict an increase in the number of IPOs on US exchanges during the remainder of 2012, according to a recent survey by consulting firm BDO. The rest are forecasting flat (36%) or negative growth (31%).

Renewed concerns with the European debt crisis and negative US economic data brought new offerings to a halt, Wendy Hambleton, a partner in the Capital Markets Practice of BDO USA, said in a statement.

“The capital markets community is clearly concerned that economic turmoil overseas will keep markets volatile, making for a challenging time to conduct initial offerings,” she said.

Related CGMA Magazine content:

Ripe time for M&A, but appetite is missing”: The economic and financial ingredients for an M&A boom are all there. But large corporations aren’t taking the plunge—and many are backing away from combination plans. New research explains why.

Outlook remains cautious despite strong US IPO returns in the first quarter”: In the US, one-third more companies went public in the first quarter than a year ago, and new issuers attracted strong after-market interest from investors. But, going forward, uncertainties in the global economy might add some choppiness to the IPO market.

Jack Hagel (jhagel@aicpa.org) is the editorial director of CGMA Magazine.

Don't miss out on additional news and features from CGMA Magazine.
Sign up for our free e-newsletter.