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Annual Enterprise Survey: 2014 financial year (provisional)
Embargoed until 10:45am  –  28 August 2015
Commentary

The Annual Enterprise Survey (AES) is New Zealand's most comprehensive source of financial statistics. It provides information on the annual financial performance and position of businesses in New Zealand. AES provides a wide range of detailed variables. For a list of these variables, see Annual Enterprise Survey – information releases.

This release focuses on profitability, which is a key measure of the success and sustainability of a business. We used information about operating profit before tax to help us understand the core operating activities of a business.

Operating profit is the excess of income less expenditure (excluding non-operating items).

This release also includes information on industries' financial and non-financial assets in the form of equity-to-assets ratios.

This year we added new data, including information by sales. If you want information that is not provided in these tables, call our Information Centre at 0508 525 525 or email info@stats.govt.nz.

Agricultural industries lead profit growth in 2014

Operating profit before tax was up $4.1 billion (7.0 percent) to $62.6 billion for all industries in the 2014 financial year. This increase follows a fall of $8.3 billion (12 percent) in 2013, which was mainly due to an $11.3 billion decrease in interest, dividends, and donations received. The agricultural industries led the overall profit growth in 2014, with a $3.3 billion increase after a profit decrease of $1.1 billion in 2013.

Graph, Largest movements in operating profit, 2014, change from 2013 financial year.

Dairy cattle farming had the largest increase in operating profit, up $1.9 billion in 2014 after a $0.4 billion fall in 2013. About 85 percent of dairy cattle farmers made a profit in 2014, compared with about 70 percent in 2013. The 2014 result coincided with a record payout ($8.40 per kilo of milk solids) and record dairy (particularly milk powder) export values as reported in Overseas Merchandise Trade. For the year ended June 2015, prices for dairy product exports fell and export values dropped 22 percent.

Sheep, beef cattle, and grain farming, and forestry and logging showed significant profit increases in 2014 after falls in 2013. Sheep, beef cattle, and grain farming profit increased $0.8 billion (314 percent) to $1.0 billion. About 55 percent of  sheep, beef cattle, and grain farms made a profit in 2014, up from 50 percent in the previous year. Forestry and logging profit increased $0.3 billion (68 percent) to $0.7 billion in 2014. The proportion of businesses in forestry and logging that made a profit increased by 5 percent.  

Non-residential property operation and construction services experienced strong growth in 2014. Non-residential property operation had the third-largest profit growth of all industries, up $0.5 billion (10.9 percent) to $4.9 billion in 2014. Construction services followed with a $0.4 billion increase. About 80 percent of the businesses in both non-residential property operation and construction services made a profit in 2014, which was similar to 2013.

Of 88 industries, 30 showed decreases in operating profit in 2014. Mining had the largest profit decline, down $0.7 billion (29 percent) to $1.8 billion. The decrease was mainly due to a decrease in dividends received and an increase in expenditure.

Financial industries – operating profit and surplus before income tax

The financial and insurance services industry's operating profit was up $0.3 billion (1.7 percent) to $19.6 billion in 2014. This followed a $10.7 billion fall in 2013, which was mainly due to a drop in interest, dividends, and donations received from financial assets investing.

Other significant movements in operating profit for the financial and insurance services industry, for 2014:

  • Financial assets investing operating profit increased, up $0.2 billion (2.0 percent) after a significant decrease of $13.1 billion in 2013.
  • Auxiliary finance and insurance services showed a $0.2 billion (22.6 percent) increase after a small profit decline in 2013.
  • Banking and financing showed continued growth in profit, up $32 million (0.5 percent) to $6.8 billion.
  • Life insurance, and health and general insurance both had profit declines in 2014. This was the third consecutive year of profit decline for the life insurance industry. Health and general insurance had a $0.1 billion decrease in profit after a strong increase of $1.9 billion in 2013. There was a large loss in the health and general insurance industry in 2012 due to the Canterbury earthquakes. 

Surplus before income tax (surplus BIT) is the total income less total expenditure (including non-operating items) plus the change in stocks.

In the financial and insurance services industry, regular business activity includes income and expenditure, which may be considered 'extraordinary' in other industries. For example, the profit from foreign exchange trading is part of a bank’s operating income, but for the goods and services industries, this profit is regarded as an extraordinary item. To better understand the profit of the financial and insurance services industry, we looked at their surplus before income tax (surplus BIT) information, which includes extraordinary items.

The financial and insurance industry's surplus BIT rose $7.6 billion to $24.6 billion in 2014. The increase was mainly due to a $2.1 billion increase in non-operating income and a $5.2 billion decrease in non-operating expenses. These changes in non-operating items occurred in the financial assets investing industry.

Graph, Operating profit and surplus before income tax – financial industries

Agriculture, forestry, and fishing, and construction show largest increases in return on total assets

Return on total assets (ROA) measures how efficiently and effectively a company uses their total assets to generate earnings. ROA is measured by the ratio of surplus BIT on a company’s total assets.

ROA improved for all industries, up from 3.2 percent to 4.0 percent in 2014. Surplus BIT increased significantly, up $15.5 billion (25.2 percent) to $77.0 billion. Total assets increased $47.9 billion (2.5 percent) over the period.

ROA for all industries excluding financial and insurance services was 5.2 percent in 2014.

Construction returned the highest ROA, at 11.2 percent in 2014 compared with 9.3 percent in 2013. The increase in ROA for construction is consistent with the overall profit growth in this industry division.

The agriculture, forestry, and fishing industry division had the largest increase in ROA, from 2.5 percent in 2013 to 4.9 percent in 2014. The largest increase was mainly due to the strong profit increase in the agricultural industries.

ROA for financial and insurance services was less than 5 percent in 2014 ( up from 1.8 percent to 2.6 percent), due to the large amount of total assets.

aes-largest-returns-on-total-assets

Equity-to-assets ratio unchanged in 2014

Equity-to-assets ratio measures a company’s liability structure. In 2014, the equity-to-assets ratio for all industries remained at 37 percent. Shareholders’ equity increased to $717.3 billion. Total assets were up $47.9 billion (2.5 percent) to $1,947 billion in 2014. Other assets was the main contributor to the rise, up $21.5 billion (2.5 percent). (Other assets includes items such as goodwill, trademarks, shares in associated and subsidiary companies, and long-term bond and loans.) Fixed assets, which contributed more than one-quarter to total assets from 2012-14, was up $12.9 billion (2.4 percent) in 2014.

For the producer enterprisers sector, the equity-to-assets ratio was about 45 percent over the 2012-14 period. (Most of New Zealand's privately owned and profit-oriented businesses are classified in this sector.) Rental and hiring services had about a $1.3 billion (38 percent) increase in shareholders’ equity, resulting in their equity-to-assets ratio rising from 27 percent to 36 percent in 2014. This increase means that business owners in rental and hiring services injected more funds into their operations in 2014.

Central government and private non-profit organisations serving households held high proportions of equities to finance their operating activities, compared with New Zealand businesses overall. Their equity-to-assets ratio was over 70 percent over the 2012–14 period.

Financial intermediaries, such as banks, tend to rely more on liabilities and less on equity. The equity-to-assets ratio for the financial intermediaries sector was less than 10 percent over the 2012–14 period.

Graph, Equity-to-assets ratio – by sector, 2013 and 2014 financial years.  

Turnover bands by total sales

In 2014:

  • Businesses that had sales greater than zero and less than $1 million (small businesses) made up 85 percent of all businesses operating in New Zealand. These businesses employed about 20 percent of the total workforce and contributed about 14 percent to the total income generated in the economy. This group tends to hold a higher proportion of fixed assets compared with the income they generate.
  • Businesses that had sales of more than $100 million (large businesses) employed almost 30 percent of the workforce and contributed about 40 percent to total income.
  • Businesses that had sales of $1 million to less than $100 million (medium-sized businesses) employed more than half of the workforce and contributed nearly 50 percent to total income. Of these businesses, 80 percent made a profit. This proportion is a 4 percent increase from 2013.
  • Over 70 percent of businesses made a profit in 2014, similar to the proportion in 2013. The proportion of large businesses that made a profit was greater than the proportion of small and medium-sized businesses that made a profit.

For more detailed data on industries and turnover bands by total sales, see the Excel tables in the ‘Downloads’ box.

   

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