EXPORT IRELAND SURVEY & INTERNATIONAL TRADE FINANCE REVIEW 2014
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FOREWORD
Foreword Welcome to the 2014 edition of the Export Ireland Survey. This Report looks at the export trends over the past year, how they compare with 2013 and it provides an overview of new emerging trends. This comprehensive Report looks at export opportunities and challenges in the marketplace, currency issues, trade finance and banking, payment issues, credit management, support for exporters, and a review by Grant Thornton. The results are based on analysis of in-depth survey findings across a representative sample of the Irish export industry. The outlook for the Irish economy has greatly improved during the course of 2014. Some of the key findings reflect this, such as 71% of exporters reported an increase in exports in 2014 and over 80% of exporters invested in new product/ service development over the past two years, while almost 47% of respondents reported an increase in spending on R&D this year compared with 2013. The Report highlights interesting trends with regard to investing in emerging markets with greater analysis across a wider range of individual markets this year. However, a number of challenges are highlighted such as increased costs, access to finance and the increased demand for personal guarantees and other security, the growth of bad debts as a percentage of turnover, and a very low general awareness of Government schemes. The findings will provide a useful guide to those supporting the sector. The Irish Exporters Association hopes this publication will help policy-makers and service providers, make the most informed decision to ensure maximum support for exporters. While these remain very challenging times for exporters, the economic forecasts are positive to assist sustainable export growth.
Simon McKeever, Chief Executive Irish Exporters Association
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ACKNOWLEDGEMENTS
The IEA wishes to acknowledge the professional expertise brought to this publication by John Beggs, economic adviser to the IEA. The analysis carried out on the survey responses and chart analysis by John ensures a full understanding of the key issues is brought clearly to the reader’s attention. The management of the project has been carried out by Vicki Caplin. Mark Gorman was Statistical Analyst for the survey. Monica Duff worked on putting the final publication together. The IEA wishes to thank the 201 business executives who took time out of their busy schedule to complete the survey and give insights into what they see as the key issues facing them in their day-to-day work of running their businesses and exporting their goods and services. Our thanks to Patrick Burke, partner at Grant Thornton and Roisin Grant, marketing director at Grant Thornton for their continued support and guidance in the production of this important publication for the export industry. Published in November 2014 by: The Irish Exporters Association 28 Merrion Square Dublin 2 Ireland www.irishexporters.ie All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording storage and retrieval system, without prior permission in writing from the publisher.
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INTRODUCTION
Don’t talk. Do. We are pleased to continue to partner with the Irish Exporters Association and welcome the launch of this Review. The findings are broadly positive for Irish exporters and the Irish economy, as businesses continue to build for the future with continuing forward momentum, greater confidence and ambition. The increasingly global dynamic of market opportunities to expand, interconnectedness of organisations and an accelerated recognition of the importance of data and talent to successfully execute a business’s strategic ambitions offer both significant opportunities and challenges to achieve growth. The threat of deflation and the overall eurozone economic performance is a significant risk and is now recognised as the biggest threat to Irish growth and the largest single drag on global growth. The European position is changing as the EU today accounts for just over 7% of the world’s population, produces around 25% of global GDP and has to finance 50% of global social spending – not to mention the many growing geopolitical issues across the EU. Seven years on from the beginnings of the credit crunch and launch of the iPhone in 2007 we are continuing to experience a fundamental change in how and where talent, technology and capital are applied and rewarded. Knowledge is created, used, monetised and purified at an ever faster rate while the distribution of global wealth and demand is changing. SMEs (not just mega corporations) are at the forefront of this movement. Recessionary induced changes, such as constrained consumer/government spending, Central Bank experimentation, increased unemployment and greater banking regulation tend to deflect the focus away from the long-term step change in the manner that talent, technology and capital are deployed.
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INTRODUCTION
At Grant Thornton we continue to see success in those businesses that strategically deploy their human and financial capital into bundles of processes and technologies to become global leaders by creating businesses, products and services that are sustainable and which competitors cannot easily adopt or copy. These companies don’t talk. They do.
Patrick Burke Partner, Grant Thornton Email:
[email protected]
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TABLE OF CONTENTS
Executive Summary and Key Findings 9 Section One: Export Opportunities and Challenges 1.1 Opportunities in the Marketplace 22 1.1a During 2014 did your exports increase, decrease or stay the same? 22 1.1b In 2015 do you expect your exports to increase, decrease or stay the same? 23 1.2a Have you developed new products/services during the last 24 months? 24 1.2b Have you generated any exports from these products/services? 24 1.2c Did you receive any research and development (R&D) aid for the development? 25 1.3a Do you plan to develop new products/services in the next 24 months? 25 1.3b How does your spend on R&D compare in 2014 to 2013? 26 1.3c What is your expected spend on R&D in 2015 compared to 2014? 27 1.4 Challenges in the Marketplace 1.4a What are the major challenges facing your company in 2014? 28 1.4b Will the expected increase in energy costs and continued high cost of other utilities reduce your ability to export? 29 1.4c What do you consider to be the most significant barriers to doing business overseas? 30 1.4d Have you targeted new country markets? 32 1.4e If you have targeted new country markets, which ones have you been targeting? 32 1.4f What was your experience of those new markets in 2014? 35 1.4g What are you doing differently this year to previous years? 37 1.4h How could Irish businesses learn from other exporting nations to stimulate growth? 38 1.4i What are the non-financial benefits of exporting? 38 1.4j In the medium term (up to five years), do you see any major new 39 opportunities to develop export activities in the following regions? 1.4k Have you recruited any new export development staff in the last 12 40 months? 1.4l If you have recruited, have you found difficulties in finding experienced staff at competitive prices? 40 1.4m Is your business hampered by an inability to attract suitably capable senior management staff? 41 1.4n Has your cost base increased or decreased in the past 12 months? 41 1.4o If your cost base has increased, what have been the major areas of increased expense? 42
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1.4p If your cost base has decreased, what have been the major areas of increased savings? 43 1.4q To what extent has the debate about Ireland’s tax regime affected your decision to invest in Ireland? 43 1.4r Has Ireland’s reputation improved in the last year? 44
Section Two: Currency Issues 2.1 What proportion of your invoicing is conducted in euros, US dollars, sterling or other currencies? 45 2.2 In which currencies would you typically transact in the following regions? 46 2.3 Which method of payment is typically used for your exports or imports from the following markets? 47 2.4 How do you manage your foreign currency risks? 48 2.5a Has your financial performance been affected by sterling and US dollar 49 fluctuations? 2.5b Do you have plans to hedge these currencies? 49 Section Three: Trade Finance and Banking 50 3.1a What is your usual method for financing your exports? 3.1b Does your bank understand your working capital cycle? 51 3.1c During the last year, have you experienced any difficulties in obtaining trade finance from your bank? 51 3.1d Please specify reasons given for not approving lending/ not accepting bank loan application? 52 3.1e Has access to finance improved since last year? 53 3.2a What international services do you seek from your main bank and other 54 banks? 3.2b Have you been required to give a personal guarantee when seeking finance from the bank in the last 12 months? 55 3.2c Do you believe a new State supported bank focused on small businesses is necessary? 55 3.3a Do you use performance bonds as part of your export sales? 56 3.3b If yes, do you find them difficult to organise? 56 3.4a Are you aware of the following forms of non-bank finance? 57 3.4b If you are aware of the Credit Guarantee Scheme, has your business availed of it? 58 3.4c If yes, have you found it satisfactory? 58
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Section Four: Payment Issues 4.1a Did you suffer bad debts last year? 59 4.1b If Yes, what percentage of your annual turnover? 60 4.2 What are the main causes of late payment? 61 4.3 Where do you see the majority of your risk lying? 62 4.4a Are you aware of the Late Payments Directive? 62 4.4b Has the Directive improved the payments by Government agencies to you? 63 4.4c Has the Directive improved general business payments to you? 64 Section Five: Credit Management 5.1a Do you use credit insurance? 65 5.1b If yes, which services do you value? 65 5.1c If no, why don’t you use credit insurance? 66 5.2 Which difficulties have you faced when applying for credit insurance? 67 5.3a Are you aware that the following countries provide export credit guarantee schemes? 68 5.3b Does the lack of an export credit guarantee scheme put Ireland at a competitive disadvantage? 69 Section Six: Support for Exporters 6.1 Which of the following organisations have you used for business advice/ support? 70 6.2 What method of support do you use to identify sales opportunities? 71 6.3a How do you rate the level of export support you get from Government? 72 6.3b How does this support in 2014 compare with 2013? 72 6.4a Please specify what schemes you are aware of? 73 6.4b Are you satisfied with the information provided by the Government to create awareness of the following schemes? 75 6.4c Are you satisfied with the information provided by the Government on the application process for the following schemes? 75 6.5 Does overly bureaucratic decision making by State organisations/ Government departments (red tape) impact your business? 76 6.6 Is the current level of Capital Gains Tax (CGT) at 33% a disincentive to attracting investment in your business? 76 6.7a Have you applied for an Employment Investment and Incentive Scheme (EIIS)? 77 6.7b If yes, has it been successful? 77 6.7c If no, why have you not applied? 78
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6.8a Do you avail of the R&D tax credits? 6.8b If yes, has it been successful? 6.8c If no, why have you not applied? 6.9a Are you aware of the €5,000 Innovation Voucher scheme? 6.9b If yes, have you found it useful? 6.9c Do you think the €5,000 value of the scheme should be larger? 6.9d If yes, larger by how much?
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Section Seven: Food & Drink 7.1a What percentage increase in the value of your exports are you expecting by the year: 2015? 2020? 7.1b What percentage increase in the volume of your exports are you expecting by the year: 2015? 2020?
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Section Eight: Grant Thornton Review
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Appendix: Company Sample Characteristics
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EXECUTIVE SUMMARY
The 2014 Irish Exporters Survey, conducted in September, was set against a background of improving global economic activity and a return to stronger economic growth in the Irish economy. Though the general economic performance in 2014 is more favourable than in 2013, considerable risks and uncertainties remain. The IMF describes these risks as financial and geopolitical, which if they become significant, are capable of disrupting international trade flows. Indeed, both the OECD and the IMF have seen fit to downgrade their expectations for global growth in 2014 and in 2015. The outlook for some of Ireland’s main trading partners remains positive with real GDP expected to increase within a range of 2.5%–3% in the UK and the US in 2014–2015. However, prospects for the eurozone are less favourable with the continuation of deflationary risks and weak economic growth in a 1-1.5% range this year and next. Growth in advanced economies as a whole is forecast in a 1.5% to 2.5% range over the next 12 months. In newer/emerging markets, the IMF expects that real GDP will expand in a 4.5% to 5% range. As a result of the more stable international climate and the improvement in domestic demand, the outlook for the Irish economy has improved greatly in the course of 2014. Real GDP rose by 0.2% in 2013, at a time when the volume of Irish exports of goods and services increased by just over 1%. The latest available CSO statistics show that in the first half of 2014 the volume of exports of goods and services rose by over 10%. Within this total, exports of goods rose by over 13% while exports of services increased by more than 7%. The likelihood is that the Irish economy will grow by about 4.5% to 5% in 2014, boosted by strong export growth, with favourable prospects for 2015. The results of the 2014 Exporters Survey confirm the more buoyant picture painted by official statistics. Exporters are more confident about short-term trends and prospects and determined to take measures so that they can compete more successfully in global markets. However, they also face a number of key challenges that must be addressed if the exporting sector is to sustain strong growth over the medium term and contribute to Ireland’s economic, financial and social recovery beyond what has been achieved to date. The primary challenges relate to a wide
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EXECUTIVE SUMMARY
range of costs, access to finance, banking relationships and Government support for the sector. The survey shows that 71% of exporters reported an increase in exports in 2014 compared with 62% in 2013. Almost one quarter of respondents reported an increase in exports of over 15%. Almost 85% of companies expect that their exports will increase in 2015. Realising these expectations will be critically important for Ireland’s return to a path of sustainable export-led growth. The food and drink sector forecasts that the volume of exports will increase by 20.2% in 2015 and record a cumulative rise of almost 42% by 2020. Over 80% of exporters invested in new product/service development over the past two years, demonstrating the strong commitment of Irish exporters to adapt to ever changing market conditions. Just over 83% of respondents plan to develop new products/services over the next two years. It’s heartening to report that almost 80% of respondents stated that investment in new products/service development resulted in additional exports. Spending on research and development (R&D) is also critical to market success. Almost 47% of respondents reported an increase in spending on R&D in 2014 compared with 2013. The importance of spending on product/service research and development is reflected in the growing proportion of respondents (55%) who expect to increase their spend in 2015. The development of new market opportunities continues to be very important to Irish exporters. Almost three-quarters of respondents have targeted new markets. Expansion is planned across a large number of countries with Ireland’s traditional main trading partners at the top of the list. As regards plans to develop in emerging markets, the survey shows the proportion planning to target the BRICS economies falling from 26.8% in 2013 to 10.6% in 2014. Over the medium term, opportunities to develop export activities are regarded as strongest in Ireland’s traditional markets of the eurozone, the United States and the United Kingdom. The Gulf States, Canada, China and Brazil are also seen as providing opportunities. Exporters reported a mixed experience operating in new markets in 2014. In the UK, almost 78% of respondents reported a “good” or “very good” experience while in the US over 60% reported a “good” or “very good” outcome. However, there were cumulative “not good” or “not good at all” responses of 21% in China, 31.3%
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in Russia and 33.3% in India. This year’s survey shows that in terms of what exporters are doing differently to last year, new product development tops the list (20% compared with 12% in 2013) with the targeting of new markets as a close second (19% compared with 13% in 2013). Over 40% of respondents believe that the sustainability of the business and their understanding of the home market are helped by exporting. However, the survey also highlights other key benefits such as product innovation (23.7%), targeted marketing (14.8%) and balance sheet management (12.6%). Over 60% of companies did not recruit new export development staff in 2014. Just over 51% of exporters reported that they did not have difficulties in recruiting experienced staff at competitive rates. A significant majority of respondents report that their business is not hampered by their inability to attract suitably capable senior management personnel. Over 55% of respondents stated that their costs had increased in the past year. The survey highlights that where costs have increased, these have been well above the average rate of inflation in Ireland and the eurozone. Cost issues remain the main challenge identified by Irish exporters. Labour related costs were ranked the most important by almost 25% of exporters (35.2% in 2013). Energy costs were ranked next by 14.1% of respondents. Many exporters would argue that despite some improvement in Irish cost competitiveness, the gains are not sufficient to compete successfully in key international markets, particularly in the euro area, where deflationary pressures are at work. As regards the role of taxation and Government efficiency in the economy, the survey indicates that the current debate about Ireland’s corporate tax regime is unlikely to influence about 87% of respondents in relation to their decision to invest in Ireland. However, a little over 50% of respondents state the current level of Capital Gains Tax (CGT) at 33% is a disincentive to attracting investment in their business. Almost 95% of respondents believe that Ireland’s international reputation has improved over the past year. Almost two-thirds of exporters state that overly bureaucratic decision making by State organisations/Government departments (red tape) impacts on their business. Support for a State supported bank remains very strong among exporters, particularly in view of a range of difficulties experienced by many exporters with existing financial institutions.
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EXECUTIVE SUMMARY
Almost seven out of ten exporters report invoicing in euro, 16.9% in US dollars, and 12.4% in sterling. In Ireland’s traditional export markets, the UK, the US and the eurozone the most common used currencies are sterling (72.4%), the US dollar (79.8%) and the euro (96.5%) respectively. Respondents conduct about 50.5% of their overall transactions in euro, 40.9% in US dollars and 5% in sterling. As regards currency risk management, the main method employed (by 16.5% of respondents) is the use of currency accounts (netting/pooling). An almost equal percentage run currency positions and make fx payments when due. Forward contracts are used by 14.3% of companies. Currency options are only used by 2.6% of respondents. Over 31% of respondents trade in euro only and therefore have no currency exposure. Fifty seven per cent of companies report that their financial performance was affected by sterling and US dollar fluctuations in 2014. Despite the reported impact of currency fluctuations on company financial transactions, two-thirds of companies do not plan to hedge their exposure to the US dollar and sterling. This is somewhat surprising considering that in the UK, exchange rate fluctuations are identified as the prime barrier to doing business (31%) and to a lesser extent in the US (almost 16% of respondents). In established markets for Irish exports such as the UK, the US and the eurozone, exporters conduct in excess of 75% of trade via open account. In many of the newer/emerging markets, open account is also the primary method of payment. Advanced payment is the main payment method in Russia and India. The vast majority of exporters did not experience any difficulty obtaining trade finance from their bank during the past year. However, a little under a quarter did experience difficulty which is a serious issue for the companies concerned. The main reasons cited by respondents for not obtaining loan approval/accepting loan applications were, in equal measure at 21.4%, failure to understand the exporter’s business, lack of security and numerous changes to bank relationship teams. The next important factor was companies being informally advised that their lending application would not be successful (15.5%). The biggest difference between the results of the 2013 and 2014 surveys is the 7 percentage point rise in the “lack of security” reason from 14.4% to 21.4%. There is also a close to five percentage point rise, from 16.5% to 21.4%, in the “numerous changes to bank relationship teams” reason.
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Well over three-quarters of respondents stated that their bank understood their working capital cycle. Over 62% of respondents report that access to finance has improved since last year. This is up from last year’s 38% who reported an improvement. However, well over a quarter of respondents report that they were required to give a personal guarantee when seeking finance from their bank over the past year. Over 47% of exporters reported incurring bad debts last year. Over 36% of bad debts were reported at over 8% of turnover, with over a quarter of those in excess of 12% of turnover. This is a significant deterioration on the position reported in the 2013 Survey. The main causes of late payment were reported as being, deliberate late payment to assist cash flow (33% of respondents), queried accounts (22.7% of respondents) and financial difficulties (19% of respondents). Almost 58% of respondents are aware of the Late Payments Directive. However, over 60% of respondents state that the Directive has not improved payments by Government agencies to them and 75% report negatively on the impact of the Directive on general payments to exporters. Fewer than 30% of exporting companies use credit insurance. Bad debt insurance at almost 44% (38.4% in 2013) is the most important service required by exporters followed by credit information and advice (27%) with access to trade finance (12.2%). Cost (36.8%) and the complicated process (19.1%) remain the key reasons why respondents do not use credit insurance. Almost two-thirds of respondents are not aware that other countries provide an export guarantee scheme to their respective exporters. A significant majority of Irish exporters believe that Ireland should have its own export guarantee scheme. Own marketing effort (78.1%) is the most frequently used process by respondents for identifying sales opportunities. As evident from previous surveys, the proportion of respondents who “never use” business organisations listed in the report for business advice/support in general is on the high side. Over 70% of respondents rate the level of export support from the Government as average to good. Almost 80% of respondents rate the level of support as unchanged from 2013. The results show that respondents have a very low general awareness of Government schemes. Over 50% of respondents have “no”
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awareness of any of the schemes listed. This issue requires action both within the sector and by Government agencies. Well over two-thirds of respondents are dissatisfied with the information provided by the Government to create awareness of the schemes outlined.
John Beggs Economic Adviser to the IEA
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KEY FINDINGS
Section One: Export Opportunities and Challenges Challenges in 2014 Cost issues remain the main challenge identified by Irish exporters. Labour related costs were ranked the most important by almost 25% of exporters (35.2% in 2013). Energy costs were ranked next by 14.1% of respondents. Finance issues continue to pose major challenges for Irish exporters. Cash flow management was ranked highest by 12.3% of exporters with access to finance ranked important by a further 10.4%. A wide range of issues emerge once again with respect to doing business in export markets. Language/culture and establishing relationships are again highlighted with regard to doing business in newer/emerging markets. However, these same issues are also prominent in relation to more established European markets. In the UK, exchange rate fluctuations are identified as the prime barrier to doing business (31%) and to a lesser extent in the US (almost 16% of respondents). Opportunities in 2014 71% of exporters reported an increase in exports in 2014. This is a very positive outcome in what remains a challenging international trading environment. Almost one quarter of respondents reported an increase in exports of over 15%. Almost 85% of companies expect that their exports will increase in 2015. Realising these expectations will be critically important to the prospects for the Irish economy, particularly the requirement to return to a path of sustainable exportled growth. Over 80% of exporters invested in new product/service development over the past two years, demonstrating the strong commitment of Irish exporters to adapt to ever changing market conditions. Just over 83% of respondents plan to develop new products/services over the next two years. Almost 80% of respondents reported that investment in new products /service development resulted in additional exports. A little over 40% of responding companies to the survey reported receiving aid for
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new product/service development undertaken. Almost 47% of respondents reported an increase in spending on research and development in 2014 compared with 2013. The importance of spending on product/service research and development is reflected in the growing proportion of respondents (55%) who expect to increase their spend in 2015. The development of new market opportunities continues to be very important to Irish exporters. Almost three quarters of respondents have targeted new markets. Expansion is planned across a large number of countries with Ireland’s traditional main trading partners at the top of the list. As regards plans to develop in emerging markets, the survey shows the proportion planning to target the BRICS economies falling from 26.8% in 2013 to 10.6% in 2014. Exporters reported a mixed experience operating in new markets in 2014. In the UK, almost 78% of respondents reported a “good” or “very good” experience while in the US over 60% reported a “good” or “very good” outcome. However, there were cumulative “not good” or “not good at all” responses of 21% in China, 31.3% in Russia and 33.3% in India. This year’s survey shows that in terms of what exporters are doing differently to last year, new product development tops the list (20% compared with 12% in 2013) with the targeting of new markets as a close second (19% compared with 13% in 2013). Over 40% of respondents believe that the sustainability of the business and their understanding of the home market are helped by exporting. However, the survey also highlights other key benefits such as product innovation (23.7%), targeted marketing (14.8%) and balance sheet management (12.6%). Over the medium term, opportunities to develop export activities are regarded as strongest in Ireland’s traditional markets of the eurozone, the US and the UK. The Gulf States, Canada, China and Brazil are also seen as providing opportunities.
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Over 60% of companies did not recruit new export development staff in 2014. Just over 51% of exporters reported that they did not have difficulties in recruiting experienced staff at competitive rates. A significant majority of respondents report that their business is not hampered by their inability to attract suitably capable senior management personnel. Over 55% of respondents stated that their costs had increased in the past year. The current debate about Ireland’s corporate tax regime is unlikely to influence about 87% of respondents in relation to their decision to invest in Ireland. Almost 95% of respondents believe that Ireland’s international reputation has improved over the past year. Section Two: Currency Issues Almost seven out of ten exporters report invoicing in euro, 16.9% in US dollars, and 12.4% in sterling. In Ireland’s traditional export markets of the UK, the US and the eurozone the most common used currencies are sterling (72.4%), the US dollar (79.8%) and the euro (96.5%) respectively. Respondents conduct about 50.5% of their overall transactions in euro, 40.9% in US dollars and 5% in sterling. In established markets for Irish exports such as the UK, the US and the Eurozone exporters conduct in excess of 75% of trade via open account. In many of the newer/emerging markets, open account is also the primary method of payment. Advanced payment is the main payment method in Russia and India. The main method employed (by 16.5% of respondents) to manage risk is the use of currency accounts (netting/pooling). An almost equal percentage run currency positions and make fx payments when due. Forward contracts are used by 14.3% of companies. Currency options are only used by 2.6% of respondents.
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Over 31% of respondents trade in euro only (32.7% in 2013) and therefore have no currency exposure. Fifty seven per cent of companies (55% in 2013) report that their financial performance was affected by sterling and US dollar fluctuations in 2014. Despite the reported impact of currency fluctuations on company financial transactions, two-thirds of companies do not plan to hedge their exposure to the US dollar and sterling. Section Three: Trade Finance and Banking Own funds were used by over 53% of exporters with overdrafts (15.8%) and advance payments (12.8%) bringing the total of these three sources to almost 82% of all financing means. Well over three-quarters of respondents stated that their bank understood their working capital cycle. The vast majority of exporters (76.1%) did not experience any difficulty obtaining trade finance from their bank during the past year. However, a little under a quarter did experience difficulty which is a serious issue for the companies concerned. The main reasons cited by respondents for not obtaining loan approval/accepting loan applications were, in equal measure at 21.4%, failure to understand the exporter’s business, lack of security and numerous changes to bank relationship teams. The next important factor was companies being informally advised that their lending application would not be successful (15.5%). The biggest difference between the results of the 2013 and 2014 surveys is the seven percentage point rise in the “lack of security” reason from 14.4% to 21.4%. There is also a close to 5 percentage point rise in the in the “numerous changes to bank relationship teams” reason from 16.5% to 21.4%. Over 62% of respondents report that access to finance has improved since last year. This is up from last year’s 38% who reported an improvement. However, well over a quarter of respondents report that they were required to give a personal
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KEY FINDINGS
guarantee when seeking finance from their bank over the past year. The main international services sought from banks are foreign exchange (25.3%), international payments/cash management (21.4%), online transaction reporting (13.8%) and relationship management/advice (10.8%). Support for a State supported bank remains very strong among exporters. Almost 95% of exporters do not use performance bonds as part of export sales. Only 5% of companies have availed of the Credit Guarantee Scheme. Section Four: Payment Issues Over 47% of exporters report incurring bad debts last year. The report of bad debts as a percentage of turnover in the 2014 survey is very different and more disturbing than in last year’s survey. Last year, over 55% of bad debts amounted to less than 2% of turnover, with 94% less than 6% of turnover. In the 2014 survey, this proportion less than 2% has fallen to under 30% while the proportion less than 6% of turnover is reported at 63.6%. As a result, over 36% of bad debts were reported at over 8% of turnover, with over a quarter of those in excess of 12% of turnover. The main causes of late payment were reported as being deliberate late payment to assist cash flow (33% of respondents), queried accounts (22.7% of respondents) and financial difficulties (19% of respondents). In terms of location risk, over 27% of respondents highlight the slow growing eurozone economy, the UK (16.8%) and the US (12%). Almost 58% of respondents are aware of the Late Payments Directive. However, over 60% of respondents state that the Directive has not improved payments by Government agencies to them and 75% report negatively on the impact of the Directive on general payments to exporters.
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KEY FINDINGS
Section Five: Credit Management Fewer than 30% of exporting companies use credit insurance. Bad debt insurance at almost 44% (38.4% in 2013) is the most important service required by exporters followed by credit information and advice (27%) with access to trade finance (12.2%). Cost (36.8%) and the complicated process (19.1%) remain the key reasons why respondents do not use credit insurance. Almost two-thirds of respondents are not aware that other countries provide an export guarantee scheme to their respective exporters. A significant majority of Irish exporters believe that Ireland should have its own export guarantee scheme. Section Six: Support for Exporters Own marketing effort (78.1%) is the most frequently used process by respondents for identifying sales opportunities. As evident from previous surveys, the proportion of respondents who “never use” business organisations listed in the report for business advice/support in general is on the high side. Irish embassies are never used by over 48% of respondents (57.4% in 2013, 48.9% in 2012). Enterprise Ireland’s offices are never used by over 30% of respondents (25.7% in 2013). The IEA is never used by 31.7% of respondents. Over 70% of respondents rate the level of export support from the Government as average to good. Almost 80% of respondents rate the level of support as unchanged from 2013. The results show that respondents have a very low general awareness of Government schemes. Over 50% of respondents have “no” awareness of any of the schemes listed. This issue requires attention both within the sector and by Government agencies. Well over two-thirds of respondents are dissatisfied with the information provided
20
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KEY FINDINGS
by the Government to create awareness of the schemes outlined. Almost two-thirds of exporters state that overly bureaucratic decision making by State organisations/ Government departments (red tape) impacts on their business. Just over 50% of respondents state the current level of Capital Gains Tax (CGT) at 33% is a disincentive to attracting investment in their business. Eighty six per cent of respondents have not applied for an Employment Investment and Incentive Scheme (EIIS). Almost 51% of exporters avail of the R&D tax credits (42.7% in 2013). Almost 44% of companies are aware of the €5,000 Innovation Voucher Scheme which they believe should be much larger than €5,000. Section Seven: Food and Drink The food and drink sector forecasts that the value of exports will increase by 19.5% in 2015 and record a cumulative rise of almost 40% by 2020. The food and drink sector forecasts that the volume of exports will increase by 20.2% in 2015 and record a cumulative rise of almost 42% by 2020.
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1: EXPORT OPPORTUNITIES AND CHALLENGES
1.1 Opportunities in the Marketplace 1.1a During 2014 did your exports increase, decrease or stay the same? Figure 1: Export growth rate in 2014 25 21.3 19.4
20
18.9
18.4
15 10
8.5 6 3.5
Increased by >20%
Increased by 16-20%
Increased by 11-15%
Increased by 6-10%
Increased by 1-5%
No change 0%
Decreased by 1-5%
1 Decreased by 6-10%
0.5
2 Decreased by 11-15%
0.5
Decreased by 16-20%
0
Decreased by >20%
5
71% of exporters reported an increase in exports in 2014 while just over 21% saw no change from the previous year. This is a very positive outcome in what remains a challenging international trading environment. Indeed, against this background, almost one quarter of respondents reported an increase in exports of over 15%. The results of the latest survey represent a further improvement on the outcome in 2013 when just over 62% of respondents reported an increase in exports and 58% of exporters reported increased sales in 2012.
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1: EXPORT OPPORTUNITIES AND CHALLENGES 1.1b In 2015 do you expect your exports to increase, decrease or stay the same? Figure 2: Expected growth rate in 2015 90
84.6
80 70 60 50 40 30 20
13.4
10 2 0 Increase
Stay the same
Decrease
Almost 85% of companies expect that their exports will increase in 2015. As in the last two surveys, only a small percentage of companies expect their exports to decline. This positive sentiment is in keeping with the expected outcome for 2014. The proportion of companies expecting a positive outcome in the following year has risen from just over 77% in the 2012 survey and almost 80% in last year’s survey. Realising these expectations will be critically important to the prospects for the Irish economy, particularly the requirement to return to a path of sustainable export-led growth.
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1: EXPORT OPPORTUNITIES AND CHALLENGES 1.2a Have you developed new products/services during the last 24 months? Figure 3: New product/service development over the last two years
Yes
81.6
No
18.4
0
10
20
30
40
50
60
70
80
90
Over 80% of exporters invested in new product/service development over the past two years. This is a very similar result to last year’s outturn, and while down slightly on the 85% of positive responses in 2012, it nevertheless demonstrates the strong commitment of Irish exporters to adapt to ever changing market conditions. 1.2b Have you generated any exports from these products/services? Figure 4: Generation of exports from new products/services developed over the last two years
Yes
78.7
No
21.3
0
10
20
30
40
50
60
70
80
90
Almost 80% of respondents reported that the investment in new products/service development resulted in additional exports. This is a very welcome outcome. 24
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1: EXPORT OPPORTUNITIES AND CHALLENGES 1.2c Did you receive any R&D aid for the development? Figure 5: R&D support aid for the development of new products/services
Yes
42.3
No
57.7
0
10
20
30
40
50
60
70
A little over 40% of responding companies to the survey reported receiving aid for new product/service development undertaken. The percentage that received support in 2014 is up from just under 37% in 2013. 1.3a Do you plan to develop new products/services in the next 24 months? Figure 6: Planned new product/service development over the next two years
83.1
Yes
16.9
No
0
10
20
30
40
50
60
70
80
90
Just over 83% of respondents plan to develop new products/services over the next two years. This compares with 88% who answered “yes” in 2013 and almost 86% in 2012. The consistently positive response to this question in the annual EXPORT IRELAND SURVEY & INTERNATIONAL TRADE FINANCE REVIEW 2014
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1: EXPORT OPPORTUNITIES AND CHALLENGES surveys reflects the determination of exporters to take advantage of market opportunities over the next two years. 1.3b How does your spend on R&D compare in 2014 to 2013? Figure 7: R&D spend in 2014 vs 2013
Increased
46.8
Stayed the same
47.2
Decreased
6
0
5
10
15
20
25
30
35
40
45
50
Almost 47% of respondents reported an increase in spending on R&D in 2014 compared with 2013. Only 6% reported a decline. The number reporting an increase in R&D spending is up on last year’s 45% and the relatively low positive response of almost 38% in 2012.
26
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1: EXPORT OPPORTUNITIES AND CHALLENGES 1.3c What is your expected spend on R&D in 2015 compared to 2014? Figure 8: Expected spend on R&D in 2015 vs 2014
Increase
55.2
Same
40.8
Decrease
4
0
10
20
30
40
50
60
The importance of spending on product/service research and development is reflected in the growing proportion of respondents who expect to increase their spend in 2015. Over 55% of companies expect to raise their levels of investment compared with 45% of respondents last year and just over 43% in the 2012 survey. The results of the 2013 and 2014 surveys in relation to R&D investment show that the proportion of companies reporting an increase in spending in both years actually exceeded expectations.
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1: EXPORT OPPORTUNITIES AND CHALLENGES
1.4 Challenges in the Marketplace 1.4a What are the major challenges facing your company in 2014? Figure 9: Main challenges among respondents 16
14.1
13.6
14
12.3
12
11.8 10.4
9.5
10 8
6.6 4.6
4.5 2.2
Infrastructural congestions (road/rail/ports)
Exchange rates
1.7 Regulatory burdens (red tape costs)
3 1.7
Broadband access/costs
2.2
Interest rates
2
Insurance costs
Access to capital/finance
Energy costs (electricity/gas/ fuel)
Local government charges
Labour costs
Lack of availability of skilled workforce
Lack of necessary management capability
0
Cash flow management
2
Inflation
4
Environmental issues
6
Cost issues remain the main challenge identified by Irish exporters. Labour related costs were ranked the most important by almost 25% of exporters. However, as the responses show, the issue is not solely about uncompetitive absolute or relative labour costs, but also encompasses the ability to attract and retain necessary management and other skills to develop and sustain Irish businesses in international markets. Energy costs were ranked as the next major challenge by 14.1% of respondents. Indeed, when labour, energy and local government costs are combined, over 43% of respondents identify these as major challenges. This combined category is down from almost 50% in the 2013 survey but above the 39% of exporters who identified costs as a primary challenge in the 2012 survey. Finance issues continue to pose major challenges for Irish exporters. Cash flow management was ranked highest by 12.3% of exporters with access to finance ranked next by a further 10.4%. This combined total of finance related issues of 22.7% is down on the 2013 figure of 30.7% and the combined financial issues total of almost 36% in 2012.
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1: EXPORT OPPORTUNITIES AND CHALLENGES The 2014 survey shows that cost and finance issues are identified by over twothirds of Irish exporters as the primary challenges facing the sector. This is down from over 80% of respondents in 2013 and almost 75% in 2012. It is worth noting that over 20% of respondents rank regulator burdens and exchange rate volatility as key challenges to success in international markets. The former was ranked by almost 12% of respondents, up from 7.4% in the 2013 survey. 1.4b Will the expected increase in energy costs and continued high cost of other utilities reduce your ability to export? Figure 10: Increase in energy costs / utilities reduce your ability to export
42.8
Yes
No
57.2
0
10
20
30
40
50
60
70
The results reported in 1.4a and in previous export surveys show a growing concern about the threat of higher energy and other utility costs to Irish export performance. However, the response to question 1.4b suggests that a majority of exporters do not expect that these costs will reduce their ability to export in the short term. The proportion answering “no” has grown from just under 54% in 2012 to 55.3% in 2013 and now stands at over 57%. Nevertheless, the proportion of exporters who believe that higher energy costs will reduce their ability to export is very high in the current difficult climate.
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30
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14.6 13.6 13.4 14.8 17.9
25.8 18.4 30.5 28.2
Adequacy of state supports
Establishing local relationships
Marketing/brand building costs
Scale required for larger markets
Staffing Issues
17.9 17.9 12.1 20.5 16.7
20 18.7 7.7 20.4
Transport/logistics
Language/cultural differences
Exchange rate fluctuations
Other barrier
12.5
30 34.3
Capital investment required
Most significant barriers to doing business overseas - Regions
13.9
5.6
6.1
10.6
10.7
5.4
5.2
9.3
6.2
9.2
12.5
11.4
India
Lack of awareness of export market opportunities
6.4
2.4
8.8
6.7
5.4
6.5
4.7
4.3
8.4
6.3
9.1
Turkey
EU non-Eurozone
7.2
0.6
5.6
5.1
14.3
5.2
8.7
12.8
8.6
7.8
4.5
Germany
Eurozone
9.6
Other barrier
14.3
Capital investment required
31.1
20.8
Staffing issues
Exchange rate fluctuations
16.3
Scale required for larger markets
7.3
18.3
Marketing/brand building costs
0.6
8.6
Establishing local relationships
Language/cultural differences
14.1
Adequacy of state supports
Transport/logistics
5.9
UK
Lack of awareness of export market opportunities
Most significant barriers to doing business overseas - Countries
10.4
6.7
6.3
9
5.4
3.9
4.7
7
7.8
7.8
10
South Africa
13
15.4
17.6
13.7
13.4
17.5
12.8
18
19.6
15.2
18.2
Gulf States
15.2
6.1
13.8
9
8.2
9.1
5.2
8.6
10.4
8.6
10.5
Russia
8
9.1
17.5
10.1
10.2
14.3
11.6
8.2
9.2
9.4
11.4
China
20.4
15.4
15.4
18.9
11.9
12.5
7.7
11.7
17.3
12.1
18.2
Sub Saharan Africa
6.4
5.5
12.5
6.2
4.8
5.2
4.7
5.4
8.4
7
9.5
Japan
8.8
15.9
3.1
10.1
10.9
10.4
15.7
11.7
8.1
7.8
6.8
US
14.8
20.5
17.6
16.8
13.4
17.5
19.2
14.1
15.6
21.2
18.2
Rest of World
8
4.9
1.9
7.3
5.4
5.2
6.4
7
6.3
4.7
4.1
Canada
7.2
6.1
11.3
10.7
9.5
9.1
8.1
5.8
8.4
7.8
10.9
Brazil
14.8
20.5
18.7
12.6
9
10
14.1
10.9
15.6
12.1
16.8
Latin America
7.2
5.5
8.1
7.9
6.1
5.2
4.7
4.7
6.6
6.3
5.9
Mexico
1: EXPORT OPPORTUNITIES AND CHALLENGES
1.4c What do you consider to be the most significant barriers to doing business overseas
Figure 11: Most significant barriers to doing business overseas
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1: EXPORT OPPORTUNITIES AND CHALLENGES A wide range of issues emerges once again with respect to doing business in export markets. Language/culture and establishing relationships are again highlighted in regards to doing business in newer/emerging markets. However, these same issues are also prominent in relation to more established European markets. Language/culture and establishing relationships are considered a barrier to doing business by: • 17.5% and 9.2% of respondents respectively exporting to China. • 13.8% and 10.4% of respondents respectively exporting to Russia. • 11.3% and 8.4% of respondents respectively exporting to Brazil. • 10.6% and 9.2% of respondents respectively exporting to India. • 18.7% and 15.6% of respondents respectively exporting to Latin America. • 17.6% and 19.6% of respondents respectively exporting to the Gulf States. • 18.7% and 18.4% of respondents respectively exporting to the eurozone. In addition, staffing issues, scale required for larger markets and lack of awareness of market opportunities are highlighted in China (14.3%, 11.6% and 11.4% respectively). In India, additional factors are lack of adequate state supports (12.5%) and lack of awareness of market opportunities (11.4%). In Japan, language/culture (12.5%) and lack of awareness of market opportunities (9.5%) are the main obstacles. In the UK, exchange rate fluctuations are identified as the prime barrier to doing business (31%). This is down from 50% in the 2013 survey. Other key issues identified include staffing issues (20.8%), marketing/brand building costs (18.3%) and scale required for larger markets (16.3%). In Germany, the main issues identified are capital investment required (14.3%) and marketing/brand building costs (12.8%). In the US, exchange rate fluctuations come out on top (15.9%, compared with 18% in 2013) with scale required for larger markets also high on the list of issues (15.7%).
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1: EXPORT OPPORTUNITIES AND CHALLENGES 1.4d Have you targeted new country markets? Figure 12: Targeted new country markets
Yes
73.6
No
26.4
0
10
20
30
40
50
60
70
80
The development of new country market opportunities continues to be very important to Irish exporters. Almost three-quarters of respondents have targeted new markets. This compares with 69.7% in 2013 and 71% in 2012. 1.4e If you have targeted new country markets, which ones have you been targeting? Figure 13: New country markets targeted
32
Top 50 Countries
Percent
United Kingdom
4.5
US
4.1
Germany
3.2
France
2.6
China
2.4
India
2.2
Canada
2.2
South Africa
2.1
Nigeria
2
Denmark
2
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1: EXPORT OPPORTUNITIES AND CHALLENGES Top 50 Countries
Percent
Russian Federation
2
Australia
1.9
Spain
1.9
Brazil
1.9
Hong Kong
1.7
Malaysia
1.6
Thailand
1.6
Belgium
1.6
Italy
1.6
Singapore
1.5
Netherlands
1.5
Norway
1.5
Poland
1.5
Sweden
1.5
Turkey
1.5
Gulf States
1.5
New Zealand
1.4
Switzerland
1.4
Mexico
1.4
South Korea
1.2
Austria
1.2
Croatia
1.2
Morocco
1.1
Israel
1.1
Taiwan
1.1
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1: EXPORT OPPORTUNITIES AND CHALLENGES Top 50 Countries
Percent
Finland
1.1
Greece
1.1
Portugal
1.1
Japan
1
Czech Republic
1
Slovena
1
Chile
1
Ethiopia
0.9
Kenya
0.9
Indonesia
0.9
Iran
0.9
Lebanon
0.9
Pakistan
0.9
Estonia
0.9
Rest of the World
21.9
This year’s survey sought information on a more diversified range of countries. Expansion is planned across a large number of countries with Ireland’s traditional main trading partners, comprising of the UK, US and Europe, at the top of the list. The top five countries in the 2014 list, the UK, the US, Germany, France and China only account for 16.8% of all target markets whereas in the 2013 survey, the top five country targets accounted for 38.6% of all respondents’ plans. A resurgence of Ireland’s more traditional markets in expansion plans was also evident in last year’s survey but while they are also towards the top this year, it is clear that exporters are also expanding their horizons to a wide range of other markets. As regards plans to develop in emerging markets, the survey shows the proportion planning to target the BRICS economies fell from 26.8% in 2013 to 10.6% in 2014.
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1: EXPORT OPPORTUNITIES AND CHALLENGES 1.4f What was your experience of those new markets in 2014? Figure 14: Experience of those new markets in 2014 Country
Not good at all
Not good
Borderline
Good
Very good
United Kingdom
2.8
5.6
13.9
38.9
38.9
US
12.1
9.1
18.2
42.4
18.2
Germany
0
3.8
34.6
42.3
19.2
France
4.8
0
28.6
47.6
19
China
10.5
10.5
31.6
36.8
10.5
India
11.1
22.2
38.9
16.7
11.1
Canada
5.6
11.1
22.2
50
11.1
South Africa
5.9
5.9
11.8
52.9
23.5
Nigeria
25
6.3
25
37.5
6.3
Denmark
0
0
50
37.5
12.5
Russian Federation
0
31.3
37.5
25
6.3
Australia
6.7
6.7
20
46.7
20
Spain
0
0
33.3
40
26.7
Brazil
20
6.7
26.7
40
6.7
Hong Kong
7.1
0
28.6
35.7
28.6
Malaysia
7.7
7.7
23.1
61.5
0
Thailand
0
0
23.1
69.2
7.7
Belgium
0
7.7
23.1
53.8
15.4
Italy
0
15.4
38.5
38.5
7.7
Singapore
8.3
0
25
33.3
33.3
Netherlands
0
8.3
8.3
41.7
41.7
Norway
0
0
50
25
25
Poland
0
8.3
33.3
50
8.3
Sweden
8.3
8.3
16.7
50
16.7
Turkey
8.3
33.3
25
25
8.3
Gulf States
13.8
13.8
13.8
13.8
44.8
New Zealand
9.1
18.2
9.1
36.4
27.3
Switzerland
18.2
9.1
36.4
18.2
18.2
Mexico
9.1
9.1
9.1
72.7
0
South Korea
10
10
20
40
20
Austria
0
10
20
50
20
Croatia
0
30
10
30
30
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1: EXPORT OPPORTUNITIES AND CHALLENGES Country
Not good at all
Not good
Borderline
Good
Very good
Morocco
11.1
11.1
Israel
11.1
11.1
0
66.7
11.1
22.2
55.6
0
Taiwan
0
0
44.4
33.3
22.2
Finland
0
22.2
11.1
33.3
33.3
Greece
0
11.1
11.1
44.4
33.3
Slovenia
0
12.5
37.5
37.5
12.5
Chile
25
0
12.5
62.5
0
Estonia
14.3
14.3
0
57.1
14.3
Kenya
14.3
0
14.3
57.1
14.3
Indonesia
14.3
0
28.6
57.1
0
Iran
14.3
14.3
28.6
28.6
14.3
Lebanon
14.3
14.3
28.6
28.6
14.3
Pakistan
14.3
14.3
28.6
28.6
14.3
Ethiopia
14.3
0
28.6
57.1
0
Rest of the World
21.6
9.1
14.2
43.2
11.9
The response to this question shows a mixed experience by exporters operating in new markets in 2014. In the UK, almost 78% of respondents reported a “good” or “very good” experience with a further 14% as “borderline”. Fewer than 10% reported a “not good at all” or “not good” outcome. In the US, the cumulative negative experience was 21%, but a cumulative 60% reported a “good” to “very good” response. The balance of 18% reported a “borderline” experience. The percentage of “borderline” cases in Germany was quite high at 34.6% but, on the other hand, negative experiences were quite low. A similar pattern was evident in relation to new market developments in France in 2014. In China, response rates of “not good at all“ and “not good” were quite even at over 10% respectively but the proportion of “good” to “very good” experiences was close to 50%. Turkey (41.6%), India (33.3%) and the Russian Federation (31.3%) were the three economies where the reported experiences of “not good at all “ and “not good” were highest.
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1: EXPORT OPPORTUNITIES AND CHALLENGES 1.4g What are you doing differently this year to previous years? Figure 15: Difference in 2014 to previous years 25 20
20 15
19
13.5 10
10
12 9.5 7
6.5
5
2.5
Other
Targeting new markets
Reducing costs
Recruiting local person for new markets
New product development/ brand
More investment
Improving communications and marketing
Focusing on one market
Building new networks
0
This year’s survey shows that new product development tops the list (20% compared with 12% in 2013) with the targeting of new markets as a close second (19% compared with 13% in 2013). The relative importance of improving communication and marketing has fallen from its prime position of 21% in 2013 to 10% in 2014. However, the role of reducing costs has risen to 12% in 2014, up from 5% in 2013. The strategy of focusing on one market has fallen sharply to 2.5% from 9% in 2013 and 8.7% in 2012.
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1: EXPORT OPPORTUNITIES AND CHALLENGES 1.4h How could Irish businesses learn from other exporting nations to stimulate growth? Figure 16: Learning from other exporting nations 25 20.9 20 16.8
15.7
14.1
15
12.6 8.9
10
6.8 4.2
5
0 Be more open to new markets
Education system
Learn from examples
More investment
More networking
More support New product Reduce costs for business development
One in five companies emphasised the importance of more support for business (13% in 2013) with more networking (16.8% in 2014 and 14% in 2013) also seen as a key element. In keeping with the results of other questions, being more open to new markets (15.7%) is well up on its 2013 ranking of 3%. New product development is also given a higher weighting at 12.6% versus 2% in 2013. The need to reduce costs maintains a relatively important place in what we can learn from other exporting nations.
4.8
1.4i What are the non-financial benefits of exporting? 10.9 Figure 17: Non-financial benefits of exporting 2.5 4.8
10.9 Helped to improve understanding of the home market Sustainability of the business
Helped to improve understanding of the home market
Sustainability of the business Balance sheet
23.7
Balance sheet
30.7
30.7
Targeted marketing Targeted marketing Product innovation Product innovation
Aided relationship with the bank
Aided relationship with the bank Ability to access nance Ability to access nance
14.8 12.6
12.6
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1: EXPORT OPPORTUNITIES AND CHALLENGES In the 2013 survey, 95% of respondents reported that the sustainability of the business was the prime non-financial benefit of exporting. In a separate question, over 60% found that exporting helped their understanding of the home market. In the 2014 survey, these questions have been merged. The results show that over 40% of respondents believe that the sustainability of the business and their understanding of the home market are helped by exporting. However, the survey also highlights other key benefits such as product innovation (23.7%), targeted marketing (14.8%) and balance sheet management (12.6%). 1.4j In the medium term (up to five years), do you see any major new opportunities to develop export activities in the following regions? Figure 18: Regions for new opportunities to develop export activities 100 87.6
90 80.9
83.6
80.2
80
76.1
73.5
70
71.4
65.7
66.7 61.1
60 50
60.5
56.3
55.8 44.2
45.7
53.6 46.4
43.3
39.5
38.9
40
56.7
54.3
43.7
19.1
33.7
33.3
28.6
26.5
20
Yes
39.6
34.3
30
66.3 60.4
No
23.9
19.8
16.4
12.4 10
il
co
Br az
a ad
ex i M
Ca n
ica Un
ite d
St at es
ld
er
La tin
Am
a
W or of
st
an
ca
Ch in Re
ha Sa
Ja p
ca
Af ri
ra n
h ut
So
b Su
a
ia
Af ri
ss
di In
Ru
Ge
rm an y Eu r EU oz on no e nEu ro zo ne Tu rk ey Gu lf St at es
Un
ite d
Ki
ng
do m
0
Over the medium term, opportunities to develop export activities are regarded as strongest in Ireland’s traditional markets of the eurozone (87.6% of respondents, 91.8% in 2013), the US (83.6%, 73.6% in North America in 2013) and the United Kingdom (80.9%, 89.8% in 2013). Germany is also identified as a significant market opportunity over the medium term. The Gulf States, Canada, China and Brazil are also seen as providing opportunities. There are mixed feelings about the potential of many other areas such as Turkey, India and South Africa. China’s ranking has slipped to sixth (71.4%). It was ranked fifth in 2013 with 68.9% and third in 2012 with 71%. Russia’s ranking has also fallen (61.1% this year, 66.7% in 2013). EXPORT IRELAND SURVEY & INTERNATIONAL TRADE FINANCE REVIEW 2014
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1: EXPORT OPPORTUNITIES AND CHALLENGES 1.4k Have you recruited any new export development staff in the last 12 months? Figure 19: Recruitment of new export development staff in the last year
Yes
39.8
60.2
No
0
10
20
30
40
50
60
70
Over 60% of companies did not recruit new export development staff in 2014. Last year, over 50% had recruited, and 53% in 2012. The results of those answering “yes” to this question in 2014 at just under 40% is the lowest since 2010. 1.4l If you have recruited, have you found difficulties in finding experienced staff at competitive prices? Figure 20: Difficulty of finding experienced people at competitive prices
Yes
48.7
No
51.3
47
47.5
48
48.5
49
49.5
50
50.5
51
51.5
51.3% of exporters reported that they did not have difficulties in recruiting experienced staff at competitive rates. The proportion that did, at 48.7%, is much lower than the 63% response rate in 2013. However, the result in 2013 was a 40
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1: EXPORT OPPORTUNITIES AND CHALLENGES reversal of the situation in 2012 when 58% of respondents stated that they did not have any difficulty in recruiting experienced people at competitive prices. The 2011 survey showed a 50/50 split. 1.4m Is your business hampered by an inability to attract suitably capable senior management staff? Figure 21: Business hampered by absence of suitably qualified staff
Yes
23.9
No
76.1
0
10
20
30
40
50
60
70
80
A significant majority of respondents report that their business is not hampered by their inability to attract suitably capable senior management personnel. In last year’s survey, a broadly similar question elicited the result that almost 63% of businesses were not hampered by an inability to attract suitably qualified staff. 1.4n Has your cost base increased or decreased in the past 12 months? Figure 22: Cost base over the past year
56.2
60 50 40 30.9 30 20
12.9
10 0 Decreased
Stayed the same
Increased
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1: EXPORT OPPORTUNITIES AND CHALLENGES Over 55% of respondents stated that their costs had increased in the past year. This is a decline on the 68.6% who reported a rise in 2013. Just under 13% reported a decrease in costs (10.7% in 2013). As a result, the proportion that remained unchanged rose to 30.9% in 2014 from 20.7% in the 2013 survey. Costs were identified as a key challenge in this survey and the need to improve Irish cost competitiveness is essential to the development of a broad based Irish export sector. 1.4o If your cost base has increased, what have been the major areas of increased expense? Figure 23: Major areas of increased expense
45
Other
30
47.5
Raw material costs
30.5
38.8
Travel costs
0
15
3.4 5.1
13.6
26.9
10
7.5
19.4
7.5
1-5% 6-10% 11-15%
44.3
Electricity, gas costs
10
41.4
4.3
16-20% >20%
59.1
Rent & rates/waste disposal costs
22.7
51.2
Sta /wage costs
0%
10%
20%
30%
27.4
40%
50%
60%
70%
80%
6.8
9.1 2.3
11.9
4.8 4.8
90%
100%
The vast majority of exporters who experienced a rise in costs over the past year reported significant increases well in excess of the average rate of inflation in Ireland or among our main trading partners. At the bottom of the scale, increases of 1% to 5% were reported by almost 40% of respondents in respect to travel costs; this rose to almost 60% of respondents in relation to rent, rates and waste disposal costs. It is quite disheartening that such a high percentage of respondents reported an increase in costs in excess of 6% across a wide range of headings.
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1: EXPORT OPPORTUNITIES AND CHALLENGES 1.4p If your cost base has decreased, what have been the major areas of increased savings? Figure 24: Major areas of increased savings 50
Other
28.6
45
Raw material costs
20
5
53.3
Travel costs
7.1
14.3
30
26.7
6.7
1-5%
13.3
6-10% 11-15% 71.4
Electricity, gas costs
21.4
7.1
16-20% >20%
57.1
Rent & rates/waste disposal costs
28.6
38.9
Sta /wage costs
0%
10%
20%
16.7
30%
40%
50%
11.1
7.1
16.7
60%
70%
80%
7.1
16.7
90%
100%
Where cost savings were achieved, a fall of between 1% to 15% in rent/rates/waste disposal charges was reported by over 93% of respondents, with a similar range of decreases reported by two-thirds of respondents in relation to staff/wage costs. 1.4q To what extent has the debate about Ireland’s tax regime affected your decision to invest in Ireland? Figure 25: Impact of Irish tax regime on decision to invest in Ireland 60 53.1 50
40
30
20
17.2
17.2
9.4
10
3.1 0 Not at all likely to invest
Less likely to invest
Moderately likely to invest
More likely to invest
Completely likely to invest
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1: EXPORT OPPORTUNITIES AND CHALLENGES Ireland’s corporate tax regime has been in the spotlight over the past year with increased levels of international attention on the potential for changes. The results of the question posed to Irish exporters indicate that, whatever uncertainty might exist, it is unlikely to influence the vast majority of companies in terms of investment decisions. 1.4r Has Ireland’s reputation improved in the last year? Figure 26: Improvement of Ireland’s reputation
Yes
94
No
6
0
10
20
30
40
50
60
70
80
90
100
The improvement in Ireland’s international reputation is reflected in the increase in the proportion of respondents that answered “yes” in 2014 at 94% compared with 80.3% in 2013.
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2: CURRENCY ISSUES
2.0 Currency Issues 2.1 What proportion of your invoicing is conducted in euros, US dollars, sterling or other currencies? Figure 27: Proportion of invoicing conducted in EUR, USD, GBP or other currencies 80
70
69
60
50
40
30
20
16.9 12.4
10 1.7 0 EUR
USD
GBP
Other
Almost seven out of ten exporters report invoicing in euro, 16.9% in US dollars, 12.4% in sterling and 1.7% in other currencies. This is very similar to the results of the 2013 survey.
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2: CURRENCY ISSUES 2.2 In which currencies would you typically transact in the following regions? 55.6
Brazil 42.2 Figure 28: Currencies transacted in various regions 29.7
Canada
Brazil
18.2
United States
27.5
Mexico
Latin America Rest of World China
70.6
43.9
79.8
33.3
33.3
ChinaAfrica South JapanRussia
4.2 18.3
53 61.1
53.3 65.7
Turkey
Eurozone
72.4 20%
32.8
30%
79.1
75.5
40%
50%
96.5
Germany
98.4
60%
70%
80%
72.4 0%
10%
20%
30%
16.4 20.4
90%
50%
60%
70%
80%
Other
GBP EUR USD JPY
3.3
3.3
Other
3 4.1
100%
2.8
3.3
24.3 40%
JPY
3
2.8
24.3
USD
10 4.1
48.6
98.4
Eurozone
United Kingdom
16.4
20.4
42.6
96.5
United Kingdom 10%
3.3
41
79.1 75.5
Turkey
0%
5
35
45.8
4.2
Germany
18.3
48.6
52.5
India
EUR
32.8 42.6
65.7
Russia
EU non-Eurozone
GBP
4.2
10
43.3
45.8 53.3
4.2
Gulf States South Africa
5
41
35
52.5 59
Sub Saharan Africa India
EU non-Eurozone
53 61.1
59
33.3
9.4
66.7
43.3
43.9
Rest WorldAfrica Sub of Saharan
2
66.7
60.9
31.3 33.3
Latin AmericaJapan
9.4
55.6
79.8
31.3
18.2
United States
2
60.9
42.2
29.7
Canada
Gulf States
70.6
27.5
Mexico
90%
100%
In Ireland’s traditional export markets of the UK, the United States and the eurozone the most common used currencies are sterling, the US dollar and the euro respectively. In the UK, 72.4% of transactions are conducted in sterling and 24.3% in euro (21% in 2013). In the United States, 79.8% of transactions are in US dollars and 18.2% in euro. In the eurozone, 96.5% of transactions are in euro with the balance in US dollars and sterling. These results are broadly in line with the 2013 survey. In Latin America, China, Brazil and the Gulf States, the US dollar remains the dominant currency accounting for 66.7%, 61.1%, 55.6% and 48.6% of transactions respectively. In 2013, the US dollar accounted for 50% of transactions in Sub Saharan Africa but this has fallen to 41% with the euro now the dominant currency at 59% of all transactions. The euro accounts for 45.8% of transactions in the Gulf States, 42.2% in Brazil, 33.3% in China and 31.3% in Latin America. In Turkey, Russia, South Africa and India the euro is the dominant currency accounting for 79.1%, 65.7%, 53.3% and 52.5% of transactions respectively. The US dollar accounts for almost 33% of transactions in Russia.
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2: CURRENCY ISSUES
Apart from Japan where the yen accounts for over 18% of transactions and the UK where sterling is dominant, the euro and the US dollar account for the bulk of all transactions. Respondents conduct about 50.5% of their overall transactions in euro, 40.9% in US dollars and 5% in sterling. 2.3 Which method of payment is typically used for your exports or imports from the following markets? Figure 29: Method of payment used for exports/imports in various markets 13
Brazil Mexico Canada United States
6.5
18.4
2.2 Mexico 4.4 Canada
ted States
54.3
4.4
8.9 54.3 3.3 4.9 57.8 6.5
14.8
78.7 18.4
18.4 t of World 2
76.3 15.6
China6.344.9
India
57.8
2
Turkey
28.9
76.3
EU non-Eurozone
6.3 44.9
13.1
34.7
Germany
12.8
20.4
1.7
4
45.3
34.7 38.5
32.828.9
28.9
12.9
45
13.1 12.9
12.9 34.7 32.8
34.7
Advance paymen 39.7
13.1
43.3 13.1
Open account
54.5
30.4
30.4 1.7
25.9
Bills of exchange
35
33.3
1.5
Letters of credit
53.2
21.3 55
44.9
4.5 3.6 32.8
32.3
63
28.9 11.7 76.3 5
5.3
32.8
38.5
1.9
30.4 78.7 21.7
Eurozone 2.3 3.9 12.9
45.3 9.2
20
45.3 9.2 14.8
78.7
34.7
45.3
6.7 3.3 10.6 54.3
12.9
44.9
9.2
12.8
57.8 Gulf States 30.4
4.3
4.3 n America
.6
Russia
2.2
2 6.3
20
Japan
13.1
76.3
4.3
China
13
28.9 78.7
15.6
Rest of World
Brazil
30.4
54.3 57.8
3.3 4.9
Latin America
Sub Saharan Africa South Africa
2.2 4.4
8.9
33.3 38.3 25.3
65.3
32.8
81.4
32.3
83
32.3 38.5 20.4 63 Letters of credit 32.8 84 4.3 United Kingdom 3.7 32.3 63 20.4 53.2 12.8 21.3 Bills of exchange Letters of credit 20.4 53.2 21.3 32.3 55 0% 10% 20% 30% 40% 35 50% 60% 70% 80% 90% Open account Bills of exchange Letters of credit 20.4 21.3 35 .3 Russia 55 54.5 33.3 53.2 10.6 1.5 Advance payment Open account Bills of exchange Letters of credit 53.2 55 35 33.3 1.5India 39.7 32.8Bills of54.5 25.9 1.7 Advance payment Open account exchange 35 32.8 54.5 .3 25.9 1.721.7 Advance payment Open account 39.7 33.3 1.7 43.3 Gulf States 54.5 39.7 32.8 Advance payment33.3 43.3 21.7 1.7 38.3 5 45 11.7 Turkey 39.7 33.3 43.3 38.3 5 45 -Eurozone 65.3 25.3 5.3 4 33.3 38.3 81.4 25.3 65.3 12.4 Eurozone452.3 3.9 38.3 25.3 81.4 12.4 8.9 3.6 4.5 83 Germany 65.3 25.3 83 81.4 8.9 8 84 12.4 Kingdom 3.7 4.3 12.4 8.9 83 8 84 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 8.9 84 8 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 8 0% 40% 50% 60% 70% 80% 90% 100% 20 Japan
1.9
b 38.5 1.9 8 Saharan 12.8 Africa 8 3.3 outh Africa12.86.7 63
%
12.4 8.9 8 100%
In established markets for Irish exports such as the UK, the US and the eurozone, exporters conduct in excess of 75% of trade via open account. This ranges from around 77% in North America to 81% (73.5% in 2013) in the eurozone and 84% in the UK (77% in 2013).
60%
70%
In many of the newer/emerging markets, open account is also the primary method of payment (with the exception of Russia, India and Sub Saharan Africa), ranging from 45% in Turkey to 58% in Mexico. Advance payments and letters of 80% credit 90%remain 100% the more usual method of payments in those markets. The results are broadly similar to last year. EXPORT IRELAND SURVEY & INTERNATIONAL TRADE FINANCE REVIEW 2014
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2: CURRENCY ISSUES 2.4 How do you manage your foreign currency risks? Figure 30: Managing foreign currency risks 35
31.4 30
25
20
16.5 15
16.4
14.3
10
7.9
6.9 5
4
2.6
0
Forward Contracts
Currency Trade in Euro Accounts only (Netting/Pooling)
Trade in US Dollar only
Currency options
Centrally managed by parent/3rd party
Make FX payments when due
Other
Leaving aside the 31.4% of respondents who trade in euro only (32.7% in 2013) and therefore have no currency exposure, the main method employed (by 16.5% of respondents) to manage risk is the use of currency accounts (netting/pooling). An almost equal percentage run currency positions and make fx payments when due. Forward contracts are used by 14.3% of companies. Currency options are only used by 2.6% of respondents.
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2: CURRENCY ISSUES 2.5a Has your financial performance been affected by sterling and US dollar fluctuations? Figure 31: Impact on financial performance by sterling and US dollar fluctuations
Yes
57.3
No
42.7
0
10
20
30
40
50
60
70
Fifty seven per cent of companies (55% in 2013) report that their financial performance has been affected by sterling and US dollar fluctuations in 2014. 2.5b Do you have plans to hedge these currencies? Figure 32 Plans to hedge
US dollars
66.5
33.5
No Yes Sterling
63.1
0%
36.9
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Despite the reported impact of currency fluctuations on company financial transactions, the majority of companies (about two-thirds) do not plan to hedge their exposure to the US dollar or sterling. The percentage declaring that they will not hedge either currency in the 2014 survey is down from a “no” response of 77% and 79% in respect of sterling and the US dollar in last year’s survey. EXPORT IRELAND SURVEY & INTERNATIONAL TRADE FINANCE REVIEW 2014
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3: TRADE FINANCE AND BANKING
3.0 Trade Finance and Banking 3.1a What is your usual method for financing your exports? Figure 33: Usual methods for financing exports
60 53.3 50
40
30
20
15.8 12.8
10
5.9
0 Overdrafts Own funds
0.3
1.3
Export nance schemes
Bonds & guarantees
3.6
Letter of Factoring credit discounting
2.6
3
Advance Structured Bill payments trade nance discounting
1.4 Other:
Own funds were used by over 53% of exporters with overdrafts (15.8%) and advance payments (12.8%) bringing the total of these three sources to almost 82% of all financing means. The result for the aggregate of the three main sources in 2014 is similar to those reported in previous export surveys. Last year, the total was 79% of respondents (82% in 2012 and 81% in 2011). However, the use of own funds rose this year from last year’s level of 49.3%, which is still below the 2011 level of 54.2% and the 60.1% response rate in 2010. Export finance schemes are only used by 0.3% of respondents, the same result as in 2013.
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3: TRADE FINANCE AND BANKING 3.1b Does your bank understand your working capital cycle? Figure 34: Bank understanding of working capital cycle
Yes
77.6
22.4
No
0
10
20
30
40
50
60
70
80
90
More than three-quarters of respondents stated that their bank understood their working capital cycle. While it is welcome that the percentage of “yes” respondents is high, the percentage of respondents answering “no” at over 20%, requires attention and is a concern. 3.1c During the last year, have you experienced any difficulties in obtaining trade finance from your bank? Figure 35: Experienced difficulties obtaining trade finance from your bank
Yes
23.9
No
76.1
0
10
20
30
40
50
60
70
80
The vast majority of exporters (76.1%) did not experience any difficulty obtaining trade finance from their bank during the past year. A little under a quarter EXPORT IRELAND SURVEY & INTERNATIONAL TRADE FINANCE REVIEW 2014
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3: TRADE FINANCE AND BANKING did experience difficulty, however, which is a serious issue for the companies concerned. The results from the 2014 survey are very similar to those in previous surveys, but, while still unsatisfactory, there has been a slight improvement in the proportion of companies reporting difficulties in obtaining finance from their banks. 3.1d Please specify reasons given for not approving lending/ not accepting bank loan application? Figure 36: Reasons for not approving lending / not accepting bank loan application 25
21.4
21.4
21.4
20
15.5 15
11.9 10
5
4.8
3.6
0
Informally advised Formally advised that lending will that lending will not be successful not be successful
Lack of security
Finance too expensive
Numerous changes to bank relationship team
Failure to understand your business
Other
The main reasons cited by respondents for not obtaining loan approval/accepting loan applications were, in equal measure at 21.4%, failure to understand the exporter’s business, lack of security and numerous changes to bank relationship teams. The next important factor was companies being informally advised that their lending application would not be successful (15.5%). The biggest difference between the results of the 2013 and 2014 surveys is the seven percentage point rise in the “lack of security” reason from 14.4% to 21.4%. There is also a close to 5 percentage point rise in the “numerous changes to bank relationship teams” reason from 16.5% to 21.4%. Overall, the results of the 2014 survey in relation to the reasons for not approving lending/accepting bank loan applications are worrying for Irish exporters.
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3: TRADE FINANCE AND BANKING 3.1e Has access to finance improved since last year? Figure 37: Improvement in access to finance since last year
Yes
62.2
No
37.8
0
10
20
30
40
50
60
70
Over 62% of respondents report that access to finance has improved over the past year. While this still leaves a very high percentage of companies where no improvement has occurred, the results this year are a sharp turnaround from last year when almost 62% reported no improvement.
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3: TRADE FINANCE AND BANKING 3.2a What international services do you seek from your main bank and other banks? Figure 38: Main international services sought from your main bank / other banks 30
25.3 25
21.4 20
13.8
15
10
10.8
8.8
7.9
5.4 5
2.7
2.2
1.7 r he Ot
ng po re n tio
ac
ag
ns
an
tra
m
e
p
On
lin
hi ns Re
la
tio
rti
dv t/a en em
as se er
st re te In
ice
ts co ac
fin Ov
ra
Ov
er
se
as
ag an km ris te
un
ce an
en em
m ire qu re g
w rro bo e/ nc
na Fi
t
ts en
n io at rm in
C an fin
e ad Tr
In te r
na tio
na
lp
ay m
en ts
ce
/c
/L
as
Fo re i
h
gn
m
Co
an
nfi
ag
ex ch
an
em
ge
en t
0
The main international services sought from banks are foreign exchange (25.3%), international payments/cash management (21.4%), online transaction reporting (13.8%) and relationship management/advice (10.8%). These results are very similar to last year’s survey.
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3: TRADE FINANCE AND BANKING 3.2b Have you been required to give a personal guarantee when seeking finance from the bank in the last 12 months? Figure 39: Requirement to give a personal guarantee when seeking finance
Yes
27.9
No
72.1
0
10
20
30
40
50
60
70
80
Over a quarter of respondents report that they were required to give a personal guarantee when seeking finance from their bank over the past year. 3.2c Do you believe a new State supported bank focused on small businesses is necessary? Figure 40: Necessity of State supported bank focused on small business
Yes
70.6
No
29.4
0
10
20
30
40
50
60
70
80
Support for a State supported bank remains very strong among exporters with over 70% responding “yes” compared with just over 72% in last year’s survey. EXPORT IRELAND SURVEY & INTERNATIONAL TRADE FINANCE REVIEW 2014
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3: TRADE FINANCE AND BANKING 3.3a Do you use performance bonds as part of your export sales? Figure 41: Use of performance bonds as part of export sales
Yes
5.5
94.5
No
0
10
20
30
40
50
60
70
80
90
100
Almost 95% of exporters do not use performance bonds as part of export sales. 3.3b If yes, do you find them difficult to organise? Figure 42: Difficulty organising performance bonds
Yes
45.5
No
54.5
40
42
44
46
48
50
52
54
56
Only about 5% of exporters use performance bonds (3.3a) and there is mixed opinion as to the difficulty in organising them.
56
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3: TRADE FINANCE AND BANKING 3.4a Are you aware of the following forms of non-bank finance? Figure 43: Awareness levels of various forms of non-bank finance
30.3
Credit guarantee scheme
69.7
28.9
Bonds (various)
71.1
43.3
Crowd funding
56.7 No Yes
11.4
Venture capital
88.6
60.7
Sale of invoices at auction to non-banks
39.3
10
Invoice discounting
0%
90
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
With the exception of the sale of invoices at auction to non-banks (39.3% awareness rate), exporters are very familiar with other forms of non-bank finance, particularly invoice discounting (90%), venture capital (88.6%) and bonds (71.1%). Almost 70% are aware of the credit guarantee scheme, which is a significant improvement on the 50.8% who responded positively to this question in the 2013 survey.
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3: TRADE FINANCE AND BANKING 3.4b If you are aware of the Credit Guarantee Scheme, has your business availed of it? Figure 44: Businesses availing of the Credit Guarantee Scheme
Yes
5.1
No
94.9
0
10
20
30
40
50
60
70
80
90
100
Despite the increased awareness of this scheme reported in 3.4a, only 5% of companies have availed of it. 3.4c If yes, have you found it satisfactory? Figure 45: Satisfaction of companies availing of the Scheme
Yes
72.7
No
27.3
0
10
20
30
40
50
60
70
80
For the minority of companies that have availed of the Scheme, almost threequarters are satisfied. Respondents were evenly split on their satisfaction rating in 2013 when 7.8% of companies had availed of the Scheme. 58
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4: PAYMENT ISSUES
4.0 Payment Issues 4.1a Did you suffer bad debts last year? Figure 46: Suffer bad debts last year
47.3
No 47.3
Yes
52.7
No 52.7
Yes
Over 47% of exporters report incurring bad debts last year. This was only marginally lower than the percentage reported in the 2013 survey. However, the proportion is down from an adverse response rate of almost 55% in the 2012 survey.
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4: PAYMENT ISSUES 4.1b If Yes, what percentage of your annual turnover? Figure 47: Percentage of bad debts in turnover 35
30
29.4 26.7
25
20
18.2 16
15
10
4.3
5
5.3
0
0 Less than 2
From 2 to 4
From 4 to 6
From 6 to 8
From 8 to 10
From 10 to 12
12 and more
The distribution of bad debts as a percentage of turnover in the 2014 survey is very different and more disturbing than in last year’s survey. Last year, over 55% of bad debts amounted to less than 2% of turnover, with 94% less than 6% of turnover. In the 2014 survey, the proportion less than 2% has fallen to under 30% while the proportion less than 6% of turnover is reported at 63.6%. As a result, over 36% of bad debts are now estimated at over 8% of turnover, with over a quarter in excess of 12% of turnover.
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4: PAYMENT ISSUES 4.2 What are the main causes of late payment? Figure 48: Main causes of late payment 35
33
30 25
22.7 19
20 15
11.3 10
8.2 4.5
5
1.3 0
Queried Accounts
No supporting Financial documentation difficulties
Deliberate late payment to assist cash flow
Incorrect contact details
Billing errors
Other
The main causes of late payment were reported as follows: • Deliberate late payment to assist cash flow (33%) (37.7% in 2013). • Queried accounts (22.7%) (20.9% in 2013). • Financial difficulties (19%) (23.3% in 2013). These results are broadly similar to the findings of earlier surveys.
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4: PAYMENT ISSUES 4.3 Where do you see the majority of your risk lying? Figure 49: Majority of risk lying 30
27.5
25
20 16.8 15 12 9
10 4.8 1.8
1.8
1.2
4.8
3.6
2.4
ica
4.8
ex ico
5.4
5
2.4
1.8
m Un
ite
d
ng
St at es
do
y
ca Af ri
ke
Ki d
ite Un
ha Sa
b Su
EU
Tu r
ca h
ut So
st Re
ra n
ss
Af ri
ia
ld
Ru
W or
er
M
of
a di
Am
In
La tin
in a nEu ro zo ne Eu ro zo ne Gu lf St at es no
Ch
Br az
il
0
On a country basis, the majority of the risks are in the economies in which Ireland carries out a high proportion of its international trade. Over 27% of respondents highlight the slow growing eurozone economy. Elsewhere, the UK (16.8%) and the US (12%) account for almost a further 30% of the main geographical risk. 4.4a Are you aware of the Late Payments Directive? Figure 50: Awareness of the Late Payments Directive
Yes
57.8
No
42.2
0 62
10
20
30
40
50
60
70
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4: PAYMENT ISSUES Almost 58% of respondents are aware of the Late Payments Directive. Though this positive response is up from over 55% last year, it is, nevertheless, down from the “yes” response rate of 63% in 2012. Furthermore, the level of unawareness of the Directive is very high. 4.4b Has the Directive improved the payments by Government agencies to you? Figure 51: Improvement of payments by Government agencies
Yes
39
61
No
0
10
20
30
40
50
60
70
Over 60% of respondents state that the Directive has not improved payments by Government agencies to them. On a slightly positive note, however, the scale of the “no” response has fallen from 83% in 2012 and 73% in 2013 to 61% in 2014.
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4: PAYMENT ISSUES 4.4c Has the Directive improved general business payments to you? Figure 52: Improvement of business payments
Yes
24.5
No
75.5
0
10
20
30
40
50
60
70
80
As with the replies to question 4.4b, there is an overwhelmingly negative response that the Directive has improved business payments to exporters but there has been a marginal improvement in the trend over the past two surveys. In 2012, over 91% of respondents answered “no” to this question and 89% responded “no” in 2013.
64
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5: CREDIT MANAGEMENT
5.0 Credit Management 5.1a Do you use credit insurance? Figure 53: Use of credit insurance
Yes
28.3
71.7
No
0
10
20
30
40
50
60
70
80
Fewer than 30% of exporting companies use credit insurance. The uptake remains low, despite an increase on the 2013 level of 22.4%. 5.1b If yes, which services do you value? Figure: 54 Services valued 50 43.9
45 40 35 30
26.8
25 20 15
12.2
10
9.8
7.3
5
0
0 Bad debt insurance
Credit information & advice
Access to trade nance
Country risk advice
Trade sector information
Other
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5: CREDIT MANAGEMENT Not surprisingly, bad debt insurance at almost 44% (38.4% in 2013) is the most important service required by exporters. Credit information and advice is also high up the list at almost 27% (but down from 32.3% in 2013), with access to trade finance rising to third spot (12.2%) in the 2014 survey (up from 7.1% in 2013). Country risk advice continues to decline, falling to 9.8% in 2014 from 13.1% in 2013. 5.1c If No, why don’t you use credit insurance? Figure 55: Reasons for not using credit insurance 40 36.8 35 30 25 19.1
20
18.4
15 11.8 10
7.2
6.7
5 0
Expensive
Complicated
Insurers try to avoid paying claims
Not available
Not required
Other
Cost (36.8%) and the complicated process (19.1%) remain the key reasons why respondents do not use credit insurance. Lack of availability is also cited by almost 12%. Just under a fifth of companies report that they do not require it. Compared with last year’s survey, cost has fallen by nine percentage points but “complicated” has risen by over five percentage points.
66
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5: CREDIT MANAGEMENT 5.2 Which difficulties have you faced when applying for credit insurance? Figure 56: Difficulties when applying for credit insurance
10.6
3.3 10.6
3.3
41.7 25.2
41.7
Expensive Expensive Unrealistic limit Unrealistic limit Terms and conditions Terms and conditions
25.2
Refuse small companies Refuse small companies Other
19.2
Other
19.2
The difficulties faced by exporters when applying for credit insurance include “expensive” 41.7% (a large rise on last year’s 24%), terms and conditions (25.2%) unrealistic limits (19.2%) and refusal based on their being a small company (10.6%). The responses to the 2014 survey suggest that companies were more explicit in outlining their difficulties than in the 2013 survey. Last year, the “other” category accounted for 29% of all responses whereas in the 2014 survey, the “other” category was 3.3%.
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5: CREDIT MANAGEMENT 5.3a Are you aware that the following countries provide export credit guarantee schemes: Australia; Austria; Belgium; Canada; China; Czech Republic; Denmark; Estonia; Finland; France; Germany; Greece; Hungary; Israel; Italy; Japan; Korea; Luxembourg; Mexico; Netherlands; New Zealand; Norway; Poland; Portugal; Slovak Republic; Slovenia; Spain; Sweden; Switzerland; Turkey; United Kingdom; United States? Figure 57: Awareness of countries with an export guarantee scheme
Yes
35.5
No
64.5
0
10
20
30
40
50
60
70
Almost two-thirds of respondents are not aware that a large number of other countries, many of which are major competitors of ours, provide an export guarantee scheme to their respective exporters.
68
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5: CREDIT MANAGEMENT 5.3b Does the lack of an export credit guarantee scheme put Ireland at a competitive disadvantage? Figure 58: Lack of export credit guarantee scheme puts Ireland at a competitive disadvantage
Yes
71
No
29
0
10
20
30
40
50
60
70
80
A significant majority of Irish exporters believe that Ireland is at a competitive disadvantage by not having its own export guarantee scheme.
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6: SUPPORT FOR EXPORTERS
6.0 Support for Exporters 6.1 Which of the following organisations have you used for business advice/ support? Figure 59: Use of organisations for business advice / support 18
Irish Exporters Association
19.7 31.1
Chamber of Commerce
18
Enterprise Ireland
10.4
18
19.7
18
19.7 Chamber of Commerce 19.7 12.6 31.1 Commerce
10.4
31.1
36.1
IDA 36.1
36.1
36.1 31.1Local Enterprise 16.9 O ce 14.244.8 prise O ce 16.9 14.244.8 Enterprise Ireland28.4
28.4
16.9
33.9
14.2
9.3
6
10.9
Never used
14.2 3.8 4.9
13.7
9.3 49.2 14.2 16.9
14.8 9.3
28.4
28.4
28.4
3.8
Rarely used 2.7
13.7 13.7 14.2 59
13.7 14.2
16.9 13.7 44.8 14.2 IBEC
12.6
20.2
27.3
36.185.2
9.3
16.9
9.8
12.6
12.6
12.6
28.4
59
Bord 18 Iascaigh Mhara 19.7
13.7
14.2 14.2
Bord Bia
Association
36.1
16.9 44.8
Local Enterprise O ce
Irish Exporters Association
12.6
7.7
9.8
8.7
Seldom used Sometimes used Frequently used
9.3
10.9 20.2
16.9 20.2
7.1 3.8
24
8.7
3.8
9.3 10.4 14.2 16.9 10.4 20.2 27.3 3.8 69.4 10.4 8.7 7.7 3.8 ISME 33.9 18 20.2 3.8 33.9 18 14.2 10.4 16.9 10.4 27.3 Never used 3.8 33.9 10.4 16.9 10.4 27.3Management IrishBia Institute of20.2 Credit 83.1 8.2 4.9 3.3 59 9.8 6 10.9 14.2 Bord Never used Rarely used 33.9 .4 Bord Bia 10.4 27.3 59 9.8 6 10.9 14.2 Never used Rarely used Seldom used 33.9 27.3 Bord Iascaigh 10% 40% 50% 70% 80% 90% 100% 59 Mhara 9.8 0%6 10.9 14.2 30% 85.2 20% 3.860% 4.9 2.7 Never used Rarely used Seldom used Sometimes used 59 9.8 6 10.9 14.2 aigh Mhara 85.2 3.8 4.9 2.7 Never used Rarely used Seldom used Sometimes used Frequently used 9.8 6IDA 85.2 10.9 14.2 3.8 4.9 2.7 59 7.7 9.8 8.7 Rarely used Seldom used 14.8 Sometimes used Frequently used 85.2 3.8 4.9 2.7 59 7.7 9.8 8.7 IDA Seldom used 14.8 Sometimes used Frequently used 5.2 3.8 4.9 2.7 49.2 59 14.8 7.7 9.8 8.7 IBEC 10.9 7.1 24 8.7 Sometimes used Frequently used 59IBEC 7.7 9.8 10.9 8.7 7.1 49.2 14.8 24 8.7 Frequently used 9.8 10.9 8.7 7.1 49.2 14.8 ISME 7.7 8.7 69.424 10.4 8.7 7.7 3.8
8 rise Ireland 18 14.2
Enterprise Ireland is “frequently used” by 33.9% of respondents and “sometimes” 24 8.7 10.4 8.7 7.7 3.8 rate than shown in last year’s by 27.3% of69.4 respondents. This is a higher utilisation 8.7 10.4 8.7 7.7 3.8 83.1 8.2 4.9 3.3 survey. Bord Bia is “frequently” used by 14.2% and also “sometimes” by 10.9% and 10.483.1 8.7 7.7 3.8 8.2 4.9 3.3 IEA10.4 by 13.7% and 36.1% respectively. 3.8 0% 30% 40% 8.250%4.9 3.360% 70% 80% 90% 100% 83.1 8.710% 7.7 20%
49.2
10.9 7.1 ISME 24 69.4 sh Institute10.9 of Credit 7.1 Management
69.4 anagement 0% 83.1 10%
1 10% 30% 50%
20%
20%
30%
40%
50% 8.2
60% 4.9 3.3
70%
80%
90%
100%
40% 50% 60% 70% 80% 90% 8.2 4.9 3.3 As evident from previous surveys, the 100% proportion of respondents who “never use” 50% 60% 70% 80% 90% 100% the ten business organisations listed for business advice/support in general is on 70% 80% 90% 100% the high side.
30%
40% 60%
70
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6: SUPPORT FOR EXPORTERS
6.2 What method of support do you use to identify sales opportunities? Figure 60: Method of support to identify sales opportunities
Own marketing e orts
Overseas agents/ distributors
Referrals
31.7
rs Association
19.1 15.8
31.7
19.1 Trade Fairs 15.8
7.7
2.7
14.8 17.5
78.1
10.9 4.9 4.9
47
21.3
12
15.8 10.4 5.5 16.4 27.9 5.5 27.9 78.1 48.1 5.5
27.9 5.5
29
5.5
40%
50% 60%
Rarely used Seldom used
38.8
Sometimes used Frequently used
11.5
7.1
22.4
90%
100%
Own marketing effort (78.1%) is the most frequently used process by respondents for identifying sales opportunities. This is up from a response rate of 68% in last year’s survey. The use of overseas agent/distributors is the second frequently used channel at 47% with the internet now frequently used by 46.4% of respondents, up from 28% last year. Trade fairs are also more frequently used (38.8%) by respondents (22.9% in 2013). Referrals remain important, frequently used by 32.2% of 70% 80%respondents 90% 100%(25.3% in 2013).
60% 70%
Never used
32.2
30.6
14.8
19.1 7.7 2.7 10.9 keting e orts 15.3 18 Irish Embassies 27.9 15.8 19.1 78.1 7 2.7 10.9 5.5 27.9 15.8 78.1 erseas agents/ 47 21.3 12 4.9 14.8 distributors 25.7 13.7 7.7 30.6 Enterprise Ireland 78.1 47 21.3 12 4.9 14.8 78.1 47 21.3 12 Never used 32.2 30.6 14.8 4.9 17.5 Referrals 20.2Never used 13.1 7.1 13.1 Internet 47 21.3 Rarely used 46.4 32.2 30.6 14.8 4.9 17.5 47 Seldom used Rarely used Never used 32.2 30.6 14.8 .9 38.8 10.4 5.5 16.4 Trade Fairs 0% 29 10% 20%used 30%Rarely 40% 50%used 60% Sometimes 70% used 80% Seldom used Never 32.2 30.6 38.8 used 29 10.4 5.5 16.4 Frequently used Sometimes used Seldom used Rarely Never used 32.2 30.6 38.8 used 29 10.4 5 Sometimes used Frequently used Rarely 7.1 11.5 18 Seldom used 15.3 48.1 sh Embassies 38.8 29 used Frequently used Seldom used 7.1 11.5 15.3 Sometimes 18 48.1 38.8 used Frequently used 7.1 11.5 15.3 Sometimes 18 48.1 22.4 25.7 13.7 7.7 30.6 rprise Ireland Frequently used 7.1 11.5 15.3 18 22.4 25.7 13.7 7.7 30.6 7.1 11.5 15.3 18 22.4 25.7 13.7 7.7 46.4 20.2 13.1 7.1 13.1 Internet 22.4 25.7 13.7 .7 46.4 20.2 13.1 7.1 13.1 22.4 25.7 20.2 13.1 0% 10% 20% 30% 40% 46.4 50% 60% 70% 80% 90% 100% 46.4 10% 20.2 20% 30% 40% 50% 60% 70% 80% 90% 100% 46.4 % 30% 40% 50% 60% 70% 80% 90% 100%
50%
5.5
27.9
15.8
19.1
31.7
Irish Exporters Association
80%
90%
100%
Irish embassies are never used by over 48% of respondents (57.4% in 2013, 48.9% in 2012). Enterprise Ireland’s offices are never used by over 30% of respondents (25.7% in 2013). The IEA is never used by 31.7% of respondents.
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6: SUPPORT FOR EXPORTERS 6.3a How do you rate the level of export support you get from Government? Figure 61: Level of export support from Government
50
44.3
45 40 35 30
27.3
25
18.6
20 15
9.8
10 5 0 Good
Average
Poor
None at all
Over 70% of respondents rate the level of export support from the Government as average to good. The proportion who rate it as “good” has risen from 21.2% in 2013 to 27.3% in 2014 while the proportion who rate it as “poor” has fallen from 23.5% in 2013 to 18.6% this year. 6.3b How 2.7 does this support in 2014 compare with 2013? Figure 62: Government support in 2014 vs 2013
18
2.7 18
Better
Better
SameSame
Worse Worse
79.2
79.2 Almost 80% of respondents rate the level of support as unchanged. Less than 20% rate it better while the proportion who rate it ”worse” has fallen to very low levels (2.7%), down from 7.1% in 2013. 72
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6: SUPPORT FOR EXPORTERS 6.4a Please specify what schemes you are aware of? Figure 63: Awareness of schemes
33.3 66.7 22.4 77.6 New Geographic Market Research Grant 13.7 86.3 Tailored Company Expansion Packages 34.4 65.6 Job Expansion Fund 31.7 68.3 Lean Transform Grant 23.5 76.5 Business Process Improvement Grant 21.3 78.7 GreenStart Grant 37.7 62.3 Lean Start Grant 33.3 66.7 Management for Growth Programme 37.7 62.3 Leadership4Growth Programme 35.5 64.5 Key Manager Grant 21.9 78.1 Strategic Consulting Grant 36.6 63.4 Innovation Partnership Grant Programme 48.1 51.9 R&D Fund Standard Project 47 53 R&D Fund Small Project 30.6 69.4 International Selling Programme 20.2 79.8 Acumen Programme 33.3 66.7 41.5 58.5 Graduates for International Growth Programme 22.4 77.6 Internationalisation Grant 26.8 73.2 13.7 86.3Market Access Grant 30.6 69.4 25.1 74.9 34.4 65.6 Strategic Marketing Review Grant 25.1 74.9 31.7 Excel at Export Selling 68.3 18 82 Business Links Grant 23.5 76.5 37.2 62.8 Mentor Grant 21.3 78.7 20.8 79.2 37.7 62.3 Internet Growth Acceleration Programme 28.4 71.6 Skills Voucher (Software Development) 33.3 66.7 29.5 70.5 37.7 Innovative HPSU Fund 62.3 29.5 70.5 Competitive Start Fund 35.5 64.5 18 82 New Frontiers Development Programme 21.9 78.1 33.3 HPSU Feasibility Grant 66.7 36.6 63.4 48.140% 50% 60% 70% 80% 90% 100% 51.9 0% 10% 20% 30% 47 53 No 30.6 69.4 Yes 20.2 79.8 58.5 EXPORT IRELAND SURVEY &41.5 INTERNATIONAL TRADE FINANCE REVIEW 2014 73 26.8 73.2 30.6 69.4 Section 6 page 70-81.indd 73 29/10/2014 25.1 74.9 Technical Feasibility Study Grant
No Yes
15:09
6: SUPPORT FOR EXPORTERS
The results show that respondents have a very low general awareness of Government schemes. Over 50% of respondents have “no” awareness of any of the schemes but the lack of awareness of specific schemes rises as high as 86.3% in respect of the Tailored Company Expansion Packages. In last year’s survey, the Competitive Start Fund scored a “no” with 86.5% of respondents. It remains largely unknown by 70.5% in 2014. The scale of awareness of Government schemes in the 2014 survey is a lost opportunity for Irish exporters. This issue requires attention both within the sector and by Government agencies. In terms of awareness, the R&D Fund Standard Project (48.1%), R&D Fund Small Project (47%) and the Graduates for International Growth Programme (41.5%) are the three schemes with the highest awareness level.
74
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6: SUPPORT FOR EXPORTERS 6.4b Are you satisfied with the information provided by the Government to create awareness of the following schemes? Figure 64: Satisfaction levels on information provided by the Government to create awareness of the following schemes
Yes
31.1
No
68.9
0
10
20
30
40
50
60
70
80
Well over two-thirds of respondents are dissatisfied with the information provided by the Government to create awareness of the schemes listed in 6.4a. 6.4c Are you satisfied with the information provided by the Government on the application process for the following schemes? Figure 65: Satisfaction levels on information provided by the Government on the application process for the following schemes
Yes
33.9
No
66.1
0
10
20
30
40
50
60
70
There is also a high level of dissatisfaction (66.1%) with the information provided by the Government on the application process for the schemes listed in 6.4a. EXPORT IRELAND SURVEY & INTERNATIONAL TRADE FINANCE REVIEW 2014
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6: SUPPORT FOR EXPORTERS 6.5 Does overly bureaucratic decision making by State organisations/ Government departments (red tape) impact your business? Figure 66: Impact of overly bureaucratic decision making by State organisations/Government departments on your business
Yes
65.6
No
34.4
0
10
20
30
40
50
60
70
Almost two-thirds of exporters state that overly bureaucratic decision making by State organisations/ Government departments (red tape) impacts on their business. This is a very similar result to last year, but down on the 70% “yes” response in 2012. 6.6 Is the current level of Capital Gains Tax (CGT) at 33% a disincentive to attracting investment in your business? Figure 67: Current levels of Capital Gains Tax (CGT) at 33% a disincentive to attracting investment in your business
Yes
50.3
No
49.7
49.4 76
49.5
49.6
49.7
49.8
49.9
50
50.1
50.2
50.3
50.4
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6: SUPPORT FOR EXPORTERS Just over 50% of respondents state the current level of Capital Gains Tax (CGT) at 33% is a disincentive to attracting investment in their business. The “yes” response has risen from 42.3% of respondents in 2013. 6.7a Have you applied for an Employment Investment and Incentive Scheme (EIIS)? Figure 68: Applied for an Employment Investment and Incentive Scheme (EIIS)
Yes
13.7
86.3
No
0
10
20
30
40
50
60
70
80
90
100
Eighty six per cent of respondents have not applied for an EIIS scheme. Last year, 89% responded negatively. 6.7b If yes, has it been successful? Figure 69: Success of Employment Investment and Incentive Scheme (EIIS)
91.7
Yes
8.3
No
0
10
20
30
40
50
60
70
80
90
100
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6: SUPPORT FOR EXPORTERS For the 14% of companies that applied for the EIIS scheme, over 90% were successful. In last year’s survey, it was reported that of the 11% of companies that applied only 55% were successful. 6.7c If no, why have you not applied? Figure 70: Reasons for not applying for an Employment Investment and Incentive Scheme (EIIS) 50
47.1
45 40 35 30
24.2
25 20 15
12.4
10
7.2
5.9
5
2
0 Not aware of the scheme
Not applicable
Only a little Condsidering Bureaucracy Labour awareness it for 2015 intensive and of this scheme costly
0.7
0.7
Ability to repay
Slow take up from potential investors
The key reason for not applying is that 47% of respondents are not aware of the scheme. This ranked highest in the 2013 survey at 46% of respondents. A further 24% of respondents this year stated the scheme was not applicable to them (35% in 2013). About 12% claim to have “ only a little awareness of this scheme” (6% in 2013). 6.8a Do you avail of the R&D tax credits? Figure 71: Avail of the R&D tax credits
50.8
Yes
49.2
No
48
48.5
49
49.5
50
50.5
51
Almost 51% of exporters avail of the R&D tax credits (42.7% in 2013). 78
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6: SUPPORT FOR EXPORTERS 6.8b If yes, has it been successful? Figure 72: Success of availing of the R&D tax credits
Yes
97.7
No
2.3
0
20
40
60
80
100
120
Ninety eight per cent of exporting companies that avail of R&D tax credits report it as being successful. 6.8c If no, why have you not applied? Figure 73: Reasons for not applying for the R&D tax credits 60
52.3
50 40 30
20.5
20
13.6
10
11.4
2.3
0 Disallowed by Revenue Not applicable to business
Not aware
Planning to apply
Too complicated
Over half the companies that did not apply for R&D tax credits report that it is not applicable to their business. One in five companies report the reason as not being aware of the scheme. These results are very close to those in the 2013 survey.
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6: SUPPORT FOR EXPORTERS 6.9a Are you aware of the €5,000 Innovation Voucher scheme? Figure 74: Awareness of the €5,000 Innovation Voucher Scheme
Yes
43.7
No
56.3
0
10
20
30
40
50
60
Almost 44% of companies (34.2% in 2013) are aware of the €5,000 Innovation Voucher Scheme. 6.9b If yes, have you found it useful? Figure 75: Have you found the €5,000 Innovation Voucher Scheme useful
Yes
40.3
No
59.7
0
10
20
30
40
50
60
70
From a 50:50 split in 2013 as to the usefulness of the Voucher Scheme, the balance has swung to almost 60% returning a negative assessment of the Scheme.
80
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6: SUPPORT FOR EXPORTERS 6.9c Do you think the €5,000 value of the scheme should be larger? Figure 76: Should the value of the €5,000 Innovation Voucher Scheme be larger
Yes
80.7
No
19.3
0
10
20
30
40
50
60
70
80
90
Over 80% of respondents think that the value of the Voucher Scheme should be larger than €5,000. 6.9d If yes, larger by how much? Figure 77: Larger by how much
60
52.6
50 40
35.1
30 20
12.3
10 0 Between €5,000 and €20,000
Between €20,000 and €50,000
Greater than €50,000
More than half of respondents believe that it should be between €5,000 to €20,000 with more than a third of the view that it should be between €20,000 and €50,000.
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7: FOOD & DRINK
7.0 Food & Drink 7.1a What percentage increase in the value of your exports are you expecting by the year: 2015? 2020? Table 1: Percentage increase in Value of Exports by the year 2015
19.50%
2020
39.50%
The food and drink sector forecasts that the value of exports will increase by 19.5% in 2015 and record a cumulative rise of almost 40% by 2020. 7.1b What percentage increase in the volume of your exports are you expecting by the year: 2015? 2020? Table 2: Percentage increase in Volume of Exports by the year 2015
20.20%
2020
41.80%
The food and drink sector forecasts that the volume of exports will increase by 20.2% in 2015 and record a cumulative rise of almost 42% by 2020.
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8: GRANT THORNTON REVIEW
Using M&A to expand abroad Deciding on the best strategy to adopt when entering into a new market presents a dilemma for any company. Expanding through M&A is a strategy often used by larger plc’s, but overlooked by SME’s. Establishing your company’s presence in a new market via M&A has a number of advantages over direct expansion. In this article we discuss the factors a company should consider when considering expanding into a new market through M&A. We also highlight the steps that an exporter can take to minimise the risk associated with acquiring a company, to ensure a successful outcome. Preparation I recently interviewed CRH CEO Albert Manifold as part of Grant Thornton’s annual Corporate Finance Conference. I discussed with Albert the steps CRH takes in preparing to enter a new market. He emphasised preparation above all else. He told me that in a role prior to becoming CEO, he was involved in CRH’s expansion into China. He spent 6 years visiting and researching the 23 provinces in China before selecting six strategic locations. Obviously most companies will not be able to afford to put someone on the ground to undertake research for M&A purposes for this length of time, but research options, preparation and business planning are key factors. Ultimately an exporter thinking of expanding abroad via M&A, should be very familiar with the country or region they wish to expand into. Each region will have its own legal and cultural barriers – understanding these will help lower the risk of acquiring a company abroad. Paying the right price M&A deal activity tends to be highest when cheap finance is available to companies, so that they can easily access credit to fund deals. Availability of credit can lead to asset values straying from fundamentals and companies often overpay for acquisitions, which can lead to a failed acquisition. In establishing the price to pay for an acquisition, companies should ensure that the return exceeds their cost of capital. In calculating the potential return, exporters should be sure to adopt an element of prudence in forecasting their projections. EXPORT IRELAND SURVEY & INTERNATIONAL TRADE FINANCE REVIEW 2014
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8: GRANT THORNTON REVIEW
Pre-acquisition A thorough due diligence process is essential in any successful transaction. In many of the due diligence assignments that we carry out we identify issues which subsequently result in the acquisition price being reviewed. For example: n A multi-year contract may not be accounted for correctly on the target company’s income statement; n The target may not have made a provision for bad debts, even though some of their debtors are overdue by more than 90 days; n The target company may require further investment in working capital or fixed assets; n Projections may be overly optimistic; and n The target company may be relying on a small number of key customers. Ignoring these issues increases an acquirer’s risk of a failed acquisition. Post-acquisition For post-acquisition success, putting the correct team in place ensures that the integration of the target company is as smooth as possible. Albert Manifold highlighted that the post-acquisition team should be a team that is familiar to the acquirer; a tried and trusted team. Putting in place a new team that is unfamiliar to your company and your company’s culture increases the risk associated with that acquisition. Therefore to minimise risk, companies should have personnel identified to undertake the post-acquisition integration. These personnel should be experienced within your company, understand your company’s culture and have a strong understanding of what you are looking to achieve. Conclusion M&A is a process which often goes wrong for many companies. Nonetheless firms such as CRH have shown that through establishing the correct methodologies and practices, companies can reduce the risk associated with acquisitions. Preparation, paying the right price, due diligence and post-acquisition integration are the key elements involved in the process. Companies looking to expand abroad should be focusing their attention on these aspects if they want to ensure success in their M&A activity. Michael Neary Partner, Corporate Finance, Grant Thornton Email:
[email protected] 84
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APPENDIX
Appendix one: Company Sample Characteristics Figure A1: What is your company’s annual turnover? 35
31.8
30 25 20
17.4
15.9
13.4
15 10
8
7
€25m €50m
€50m €100m
6.5
5 0 Up to €1m €1m - €10m
€10m €25m
€100 €500m
Above €500
Figure A2: Please list the main countries that you presently export to: Country
Percent
United Kingdom
4.9
Germany
3.1
United States
2.9
France
2.9
Netherlands
2.6
Italy
2.4
Belgium
2.2
Spain
2.1
Denmark
1.8
Sweden
1.8
Canada
1.7
United Arab Emirates
1.7
Norway
1.7
Poland
1.7
Australia
1.6
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APPENDIX
86
China
1.6
Austria
1.5
Greece
1.5
Switzerland
1.5
Czech Republic
1.5
Turkey
1.5
Portugal
1.4
Singapore
1.4
South Africa
1.3
Hungary
1.3
Japan
1.3
Finland
1.3
Russia
1.3
Hong Kong
1.3
Saudi Arabia
1.3
India
1
South Korea
1
Malaysia
1
Lithuania
1
Mexico
1
Thailand
1
Malta
1
Brazil
1
Israel
1
New Zealand
1
Estonia
1
Croatia
0.9
Romania
0.9
Slovakia
0.9
Qatar
0.9
Bulgaria
0.9
Latvia
0.9
Cyprus
0.8
Slovenia
0.8
Rest of World
26.2
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APPENDIX Figure A3: What percentage (%) of your company’s turnover is in Exports? 50 44
45 40 35 30 25 20 15
12
10
8
7.5
5 0.5
0.8
0.3
2.2
0.7
0.6
2.8
1.2
0.3
5
4.7
3.7
2.7
2
0.5
0.5
95 95
an
d
m
or e
90
to 90
85
Fr om
Fr om
80
to
to
85
80
75
to 75
Fr om
70
to Fr om
65
Fr om
70
to
65
60
to 60
Fr om
55
to Fr om
50
Fr om
55
to
50
45 45
Fr om
Fr om
40
to
to
40
35
to 35
Fr om
30
to Fr om
30
to 25
Fr om
Fr om
20 20
Fr om
15
Fr om
10 Fr om
to
15
to
10
to
ss
to
le
5
d an 5
Fr om
25
0
Figure A4: For how many years has your company been exporting?
> 5 years
75.6
1 - 5 Years
18.9
< 1 Year
5.5
0
10
20
30
40
50
60
70
80
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APPENDIX Figure A5: Company size by number of employees
18.4
20.4
Micro-sized Small-sized Medium-sized 24.9
Large-sized
36.3
Figure A6: Please indicate the principle manufacturing or services sector in which you would classify your company: 30
25
23.9
20 17.3
16.9 15
12.9
10 5.5 2.5
2.5
2.5
Drinks industry
2
Construction
3
4
Chemical
5
1.5
3
2.5
88
Other
Transport/logistics/ distribution
Software industry
Pharmaceutical/medical devices
ICT industry
Food industry
Financial services/ insurance
Energy & clean tech
Business services
Automotive
Agriculture, forestry, shing
0
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NOTES
............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................
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NOTES
............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................
90
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NOTES
............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................ ............................................................................................................................................................................................................
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APPENDIX
DISCLAIMER The material and information contained in this publication is provided for general information purposes only and does not constitute legal or other professional advice. While every care has been taken in the preparation of the material and information in this publication, readers are advised to seek specific legal advice in relation to any decision or course of action. This publication is provided without any representations, warranties or undertakings of any kind, either express or implied, in relation to the information, material or content in this publication, or in any other publication or website referred to or otherwise in this publication. The Irish Exporters Association, or any connected parties, will not be liable for loss or damage arising out of or in connection with use of the materials, information or content in this publication, or information, materials, content, facilities, or services referred to or accessed through its publication. Copyright ©2014 Irish Exporters Association All rights reserved. Except for the quotation of short passages for the purposes of criticism and review, no part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical photocopying, recording or otherwise without the permission of the Irish Exporters Association.
92
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n
Ad 2014.pdf1 IEA IEA Ad 2014.pdf
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