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Annual Enterprise Survey: 2004 financial year (provisional)
Embargoed until 10:45am  –  07 October 2005
Commentary

Introduction

The Annual Enterprise Survey (AES) is New Zealand’s most comprehensive source of financial statistics and provides annual financial performance and financial position information about industry groups operating within New Zealand. The industries covered in the survey contribute approximately 90 percent of New Zealand’s gross domestic product (GDP). AES is an important source of data for GDP as it is used to calculate detailed annual industry and sector National Accounts.

Data used in this survey is collected from a number of sources, including:

  • Administrative data from Inland Revenue (IR10)
  • Central Government data from the Treasury's Crown Financial Information System (CFIS)
  • Superannuation data from the New Zealand Companies Office (Ministry of Economic Development)
  • Local Government data from Statistics New Zealand's Local Authority Statistics
  • A sample survey of business financial data representing the rest of the population.

Statistics New Zealand would like to thank respondents for their contribution to this survey. We also acknowledge the cooperation of Inland Revenue, the Treasury and the New Zealand Companies Office in providing administrative data that enables us to lower the size of the postal sample and thereby reduce compliance costs on the business community.

Overview of results

The AES 2004 financial results reflect a growing economy.

  • 14 of the 16 industry groups recorded increases in sales for the 2004 year, resulting in a 5.2 percent increase in the all industries total of $345,678 million. This year's increase is lower than the 7.8 percent average recorded since 1999, but higher than the 2.5 percent increase recorded in 2003.
  • The 5.3 percent increase for purchases and other operating expenses is consistent with the sales result. The increase of $12,907 million, to $255,125 million, is lower than the average increase of $14,761 million since 1999.
  • Total operating surplus increased by 3.3 percent to $42,704 million, maintaining the levels reached after a strong increase in 2002.
  • After two relatively flat years, the level of investment in fixed assets grew by 36.0 percent to $40,854 million in the 2004 year. For further information on the quality of this data refer to point 5 in the Further information for users section of this commentary.
  • The current ratio, which measures current assets to current liabilities, is 86.4 percent in the 2004 year. This is down on the 91.5 percent recorded in 2003, due to a drop in current assets and an increase in current liabilities.

Graph, Net Additions to Fixed Assets.

These economy-wide results provide an indication of the change in the size of the economy during the period. However, much of the value available from this data can be found in the specific industry outcomes. Data on a consistent basis is available from 1999 by industry.

Data availability

Data collected in the AES is available at various levels of detail. The tables included in this release are at ANZSIC division level (16 industries), and a further disaggregation is contained in the supplementary tables, available on the Statistics New Zealand website (40 industries). A finer level is available on request, subject to confidentiality and quality constraints. Depending on the detail and the type of analysis required, there are a number of available options. Statistics New Zealand will advise on the most appropriate data to suit a user's needs. The focus of the remainder of this commentary is on providing information to help users understand more about AES and how it can be used.

Data on the real estate industry provides an example of the range of information available.

The 2004 financial year was another strong year for the real estate industry. Sales increased 22.3 percent in 2004 following a 20.3 percent increase in 2003. Average house prices continued to rise and the average number of days a house was on the market fell. Supporting data suggests a climate of low interest rates and population growth, in which the number of houses sold increased for the third year in a row. Operating surplus was up 54.5 percent and 27.4 percent for the 2003, and 2004 years, respectively. Return on total assets is up from 32.1 percent in 2003 to 37.0 percent in 2004. This is a result of a larger increase in operating surplus than in total assets. Return on equity has been increasing over the last few years, up from 30.9 percent in 2002 to 54.2 percent in 2004. The housing boom has also been reflected in the construction industry, with residential building construction sales up 18.7 percent and operating surplus up 20.6 percent in the 2004 year.

Graph, Real Estate Agents: Operating Surplus and Sales.

Changes introduced in the Annual Enterprise Survey 2004

There are a number of changes introduced into the survey to improve industry estimates and the efficiency of processes for the 2004 year.

Changes to AES population

Statistics New Zealand implemented a project to review and refine the maintenance of the Business Frame (BF). As a result, a number of improvements were made to the BF population, including automation of the ceasing and birthing of businesses through the use of tax data.

One of the more significant implications for AES 2004 was the addition of approximately 10,000 small units that were not previously in the population. This has resulted in an improved coverage of the population and an enhancement to the levels recorded. A number of industries are affected. However, these units are predominately in the GST-exempt industries of Financial Asset Investors (ANZSIC division K) and Property and Business Services (ANZSIC division L). Their inclusion in the population has introduced a discontinuity in these industries for the AES 2004 results, as they have not been included in any previous years. This will be reviewed as part of a reassessment of our revisions policy in 2006. The published tables include these additional units. Tables that exclude these units are available on request. The tables below show the impact on selected financial variables, for ANZSIC divisions K and L.

Table 1.01

Graph, Finance and Insurance.

Table 1.02

Graph, Property and Business Services.

Questionnaire changes

A supplementary question asking about fuel use was added to all questionnaires for 2004, to provide data for Statistics New Zealand's commodity collection project. This information will feed into the National Accounts supply-use tables and into the redesign of the Business Price Indexes (BPI).

In the questionnaires sent to the health industry, an additional question was included asking respondents to identify their income from sponsorship, donations and non-government grants. This will provide improved information for the non-profit sector in the national accounts.

The introduction of scanning

Statistics New Zealand has introduced scanning and recognition as a means to capture information supplied via surveys. 2004 is the first year that AES responses have been scanned. It is not expected that scanning will have any significant effect on results. Scanning has provided the opportunity to remove the manual capture phase, allowing more time for confrontation and analysis of the data.

Changes in the health industry

A number of changes in health funding arrangements have impacted on the AES 2004 results for ANZSIC division O, Health and Community Services. In 2004, total income increased 23.1 percent and total expenditure increased 21.2 percent. Since the 2002 financial year, district health boards (DHBs) have been progressively taking over responsibility for an increasing range of public health and disability services. Besides providing public hospital and health services, the DHBs are now responsible for the needs analysis, health planning, prioritisation and funding of health and disability services. These functions were formerly carried out by the Ministry of Health, which is classified to division M, Government Administration and Defence. This transaction has not previously been included in the AES results, as it was a non-departmental expense which are currently out of scope for AES. The change in funding arrangement means this transaction is now a departmental expense and is included in division O.

In addition, in the year ended June 2003, DHBs were funded on the basis of contracts with health providers located in their area. As from 1 July 2003, DHBs have moved to funding based on the population living in their area.

Agriculture time series

Results for the agriculture industries are currently based on IR10 data. Reintroduction of the agriculture production census in 2002, and the sample surveys in 2003 and 2004, has resulted in progressive enhancement of estimates of the agriculture population. A project to investigate the impact of this feedback on the AES time series is planned for early 2006. In the interim, the time series results should be treated with caution.

Size adjustment

The AES sample is managed within size constraints, and the adjustment made in 2003 for the Accommodation, Cafes and Restaurants had a disproportionate impact on the sample. GST sales for this industry show an increase of 8.5 percent for the 2003 year and 6.1 percent for the 2004 year compared with 0.7 percent and 10.6 percent, respectively, from the AES results. This suggests that the AES results may have been too low in 2003.

Impact of restructuring on the Fishing industry

In the 2004 year, structural changes by units operating within the industry have resulted in some activity being reclassified from other industries into Fishing.

Further information for users

AES provides a wealth of information that can assist in understanding the structure and performance of industries within the New Zealand economy. When using AES data, it is important to be aware that there are a number of design issues that may impact on results. These are discussed below.

1. Results in the AES can be affected by how companies structure themselves and therefore how they are captured and reported in AES. Large corporates often set up separate entities to manage different divisions of their business. These divisions are classified based on their predominant activity. For example, their administration (head office) and their asset-owning activities may be classified to Other Business Services (Division L) and Financial or Non-financial Asset Investors (Division K), respectively. This may mean that a manufacturing unit will not have these support activities recorded in the manufacturing industry.

If a business is divided into different divisions, this may mean AES results will include inter-company flows between divisions. These flows are referred to as gross flows.

2. The time series of AES can be affected by the restructuring of companies. For example, if a business was to restructure and amalgamate the different divisions then the following would happen:

  • The consolidation of these units would remove the gross flows and would leave net flows.
  • The industrial classification of the resulting unit would be determined by predominant activity and the activity in the other industries would disappear.
  • Value added would remain the same in both options.

The reverse may also occur, when restructuring results in net flows being represented in a gross form.


3. The All Industries table is a summation of divisional tables and therefore will include gross flows.



4. AES results are presented for a nominal March year. However, the data is collected from businesses with balance dates between 1 October 2003 and 30 September 2004. The table below lists, for each industry, the predominant balance date by total income.

Graph, Predominant Balance Dates by ANZSIC Divison.  

Note: This table has been produced using weighted data, and therefore reflects the population as it is represented in AES. The count of predominant balance dates is dominated by the small businesses sourced from IR10s. However, because these units have small values, it is possible for the industry to have a different predominant balance date when looking at total income.


5. In the postal collection, additions and disposals of fixed assets are specifically requested. However, in the administrative data source (IR10), only the closing book value of fixed assets and depreciation are requested. Where IR10s are used the information is modelled using a simple fixed asset equation:

net additions = closing book value - opening book value + depreciation - net gain on sale

where:
Opening book value is taken from the previous year's IR10
Positive net additions are reflected as 'additions' and negative values as 'disposals'.

There are three points to note:

  • Revaluations should be accounted for, and where they are significant they will impact on results.
  • Only net additions are recorded, total additions and disposals are not available.
  • Net additions are calculated for total fixed assets and then apportioned by closing book values of each asset type.

6. Statistics New Zealand has a legal obligation to protect companies' privacy and industry-sensitive information. It is for this reason that all tables released have confidentiality rules applied to protect the information supplied by an individual company. Once all confidential financial items have been identified, further items are suppressed to complete the protection of the confidential value.

Use of Annual Enterprise Survey data

In addition to its use in the National Accounts, AES is also a data source for a number of other existing and upcoming Statistics New Zealand outputs including:

  • Regional Gross Domestic Product project
  • Longitudinal Research of Business Dynamics project
  • Non-profit Satellite Account
  • Business Price Indexes
  • Industry performance benchmarking project

Since the last redesign of AES, there has been increased demand for non-standard output from users. Statistics New Zealand is providing more input into research surrounding these requests. Examples include:

  • The Reserve Bank use of financial position data in their Financial Stability Report
  • The Centre for Advanced Engineering (CAE) has established a set of National Key Performance Indicators (KPIs) for the construction industry, one of which is a profitability indicator for which AES data is used
  • Requests by turnover bands, which can add significant analytical value and are a popular request
  • Requests from businesses for financial data to gauge their performance against industry averages
  • Value added per employee count, and turnover per employee count.

Note that any release of information is subject to confidentiality and may have caveats placed on the data.

Graph, Return on Total Assets by Industry.

Future enhancements

New industrial classification

The development of a new version of ANZSIC has been driven by changes in the structure, composition and organisation of industrial and business activities in Australia and New Zealand. Significant technological changes since ANZSIC 1996 was developed have affected the way industry and businesses operate. In addition, industries undertaking new activities have emerged, requiring a review of ANZSIC 1996 and the development of a more contemporary version of the classification to better reflect the new economy. Planning for incorporating the new classification into Statistics New Zealand's industry based statistics (including AES) has started. Further updates will be notified on the Statistics New Zealand website.

Review of Annual Financial Statistics

The AES was last redeveloped in 1999 largely to meet requirements for national accounting purposes. Statistics New Zealand has recently begun a review of the survey against current and future user needs. As part of this investigation, methods of improving the quality of data and the potential to reduce respondent load will be researched.

Previous consultations with users have identified a demand for the following: 

  • The ability to measure the performance of sub-populations of interest, for example, the tourism industry and regional estimates
  • Longitudinal micro-data analysis of financial data
  • Data integration with other Statistics New Zealand datasets, such as Balance of Payments
  • A sample design that supports the measurement of financial position data by industry.


For more information on this review, contact Julie Smith: julie.smith@stats.govt.nz

Commercial property

Currently commercial property information is sourced from IR10s. From 2004 more extensive data for this industry was collected through a sample survey providing better quality information. The complex units have been surveyed and data will be available for the 2005 financial year in 2006.

Benchmarking

Statistics New Zealand has received funding to introduce a web-based service to provide information against which businesses can benchmark their performance by industry. It is expected that the AES will be a key data source for this project. This is expected to be available during 2007.


For technical information contact:
Stuart Jones or Joanna Heeney
Christchurch 03 964 8700
Email: info@stats.govt.nz.

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