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Annual Enterprise Survey: 2005 financial year (provisional)
Embargoed until 10:45am  –  06 October 2006
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 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 for 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 2005 financial results reflect continued growth in the economy.

  • Total income for all industries increased by 7.8 percent to $461,099 million in 2005. This increase is higher than the 6.9 percent average increase recorded since 1999, and up on the 7.2 percent increase recorded in 2004. All 16 industry groups recorded increases in total income for 2005. Total income has been influenced by some large one-off events in the finance and insurance industry, which are explained later in the commentary.
  • Surplus before income tax, which is total income less total expenditure (excluding salaries and wages to working proprietors), across all industries is $48,493 million. This is a decrease of 2.1 percent (or $1,056 million), following a 22.5 percent (or $9,097 million) increase in the 2004 year. When excluding the finance and insurance industry, which was affected by one-off events, the surplus increased by 9.3 percent and 4.8 percent in the 2004 and 2005 years, respectively. 
     
Graph, Surplus Before Income Tax.
 
  • Salaries and wages paid to employees increased by 7.8 percent (or $4,558 million) in the 2005 financial year. This follows a similar increase of $4,553 million in the 2004 financial year.
  • Total expenditure was $418,316 million, an increase of $34,891 million (or 9.1 percent) on 2004. This increase is higher than the average increase of 6.8 percent recorded since 1999 and is higher than the 5.5 percent increase recorded in 2004. Total expenditure has also been influenced by one-off events in the finance and insurance industry.
  • The level of investment in fixed assets grew by 12.3 percent to $38,552 million in the 2005 financial year. This follows a 34.5 percent increase in the 2004 financial year. The level of net additions to fixed assets has been revised down for the years 1999–2004 due to the inclusion of new data for the commercial property industry. This and other data changes regarding commercial property are explained later in this Hot Off The Press.
  • The value of total assets increased by 7.5 percent (or $85.5 billion) in the 2005 financial year. The total value of assets held was $1,226 billion.
  • Return on equity, which represents surplus as a percentage of owner equity, was 10.6 percent for 2005. This is down on the 11.1 percent recorded in 2004. The 2004 surplus was influenced by one-off events in the finance and insurance industry.
Graph, All Industries: Net Additions to Fixed Assets.

Finance and insurance industry

A significant event has impacted on the AES results for ANZSIC division K73, Finance. In December 2003, the ANZ Banking Group (New Zealand) Limited acquired all shares of National Bank of New Zealand Holdings Limited, the owner of The National Bank of New Zealand Limited. In June 2004, ANZ Banking Group (New Zealand) Limited purchased all of the shares in The National Bank of New Zealand Limited from National Bank of New Zealand Holdings Limited. The National Bank of New Zealand and ANZ Banking Group (New Zealand) Limited amalgamated in June 2004 and ANZ Banking Group (New Zealand) Limited changed its name to ANZ National Bank Limited. This event has had a number of impacts on the industry, including:

  • Information received after publication of the AES in 2004 has resulted in updating of the previously published values.
  • Large one-off transactions have occurred. A one-off dividend flow and a non-operating expense item resulting from a write-down of investment have subsequently occurred in 2005. These one-off items are all equal in value.
  • Changes in reporting structure have resulted in shifts in some financial performance and balance sheet items. Where possible, these items have been backdated to 2003 to preserve consistency in the time series.

Graph, Finance and Insurance Industry (ANZSIC division k).  
Symbol:
... not applicable

Changes introduced in the Annual Enterprise Survey 2005

Questionnaire changes

Some minor changes were made to the questionnaires in 2005, including:

Supplementary questions about fuel use that were included in all questionnaires for 2004 were removed.
The questionnaire sent to smash repairers (G532300) was changed from a retail questionnaire to a services questionnaire to better reflect the nature of the industry.

Commercial property

Information on the commercial property operators and developers industry (L7712) was sourced from direct survey for the first time in the 2004 AES, and is introduced in this publication. Prior to 2004, all commercial property information was sourced from the Inland Revenue Department Accounts Information Form (IR10). By surveying respondents directly with questions related to the commercial property industry, an enhanced range of key variables is available.

The time series of the commercial property industry has been backdated from 1999 to 2003 using the 2004 survey data as a benchmark. This means that the data for 2003 shown in this publication uses an estimate derived by backcasting, rather than by direct survey. The back-casting method incorporates a constant correction factor, accounting for the level differences identified between the old and new estimates in the 2004 link year. This assumes that the movements in the time series when tax data was used are correct, and that the 2004 value for commercial property is the new benchmark level. This method has ensured that the direction and relative magnitude of movements in the historical series have been maintained.

As data was previously collected from an administrative source, no direct feedback from respondents was available with regard to their main activity. As part of the commercial property questionnaire, respondents were asked to identify their main activity. Using this information, the industry classification was updated for many units. As a result, this has helped to provide a better-quality set of data. Due to the nature of the industry, this question will be maintained in the survey. The table below shows the differences between 2004 postal data and 2004 tax-sourced data, and the difference between 2003 backcast data and 2003 tax-sourced data.

Graph, Commercial Property Operators and Developers (L7712).

Detailed 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 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 the AES and how it can be used.

Illustrated below are two examples of data that is available in supplementary tables and on request.

Data on the non-metallic mineral product manufacturing industry (ANZSIC C26) provides an example of information that is available in the supplementary tables. This industry involves the manufacture of concrete, cement, glass, ceramics and other non-metallic products. Many of these products are used in the construction industry.

The 2005 financial year was another strong year for the non-metallic mineral product manufacturing industry. Sales increased by 14.9 percent in 2005 following a 9.1 percent increase in 2004. Building activity in New Zealand continues to grow, increasing demand for construction products. Supporting data included a 17.4 percent increase in the total value of building work put in place for the March 2005 year. Surplus before income tax was up 36.8 percent and 28.1 percent for the 2004 and 2005 years, respectively. The increase in sales is supported by a 20.9 percent increase in purchases in the construction industry.

The road freight transport industry (ANZSIC I611000) provides an example of data that is available on request. Sales increased by 11.2 percent, reflecting rising demand for the transportation of goods. Surplus before income tax for the industry increased by 3.6 percent. Salaries and wages paid to employees rose by 9.2 percent, which is consistent with increases in business demography employee count for the road freight transport industry and the Labour Cost Index for the transport and storage industry.

 Graph, Non-metallic Mineral Product Manufacturing.  Graph, Road Freight Transport Industry.

Further information for users

The 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 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 that the 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 the various divisions within a company were to be restructured or amalgamated, then the following would happen:

  • The consolidation of these units would remove the gross flows and 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 includes 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 2004 and 30 September 2005. 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 net additions value 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 on sale should be accounted for and will impact on results if they are significant.
  • 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 its 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
  • Ad hoc requests from other government departments such as the Ministry of Economic Development
  • 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.

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 is underway for the AES to introduce the new classification with AES 2007, which is due for release in October 2008. Further updates will be displayed 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 begun a review of the survey against current and future user needs. As part of this investigation, methods for improving the data quality and options for reducing respondent load are being 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: info@stats.govt.nz.  

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. It is expected to be available in 2007.

For technical information contact:
Darren Allan or Ian Tinkler
Christchurch 03 964 8700
Email: info@stats.govt.nz.  

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