STATEMENT OF PERFORMANCE EXPECTATIONS 2017/2018 G45 SPE (2017)

Transcription

1 STATEMENT OF PERFORMANCE EXPECTATIONS 2017/2018 G45 SPE (2017)

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3 CONTENTS 02 Setting the scene 05 Our strategy 07 What we will focus on in 2017/18 08 Measuring our performance 09 NZTE s Performance Framework 10 Statement of Performance Expectations 18 Consultation and Reporting 19 Prospective Financial Statements for the Year Ending 30 June NZTE s International Network NZTE Statement of Performance Expectations 1

4 SETTING THE SCENE New Zealand Trade and Enterprise (NZTE), Te Taurapa Tūhono, is the Government s international business development agency. We take our direction from the Government s Business Growth Agenda (BGA) which aims to create a diverse and internationally connected economy to deliver improved quality of life for New Zealanders. Alongside other New Zealand government agencies, NZTE is a key player in contributing to the BGA s goal of increasing exports to 40% of GDP by From this, NZTE has a clear purpose: to grow companies internationally bigger, better, faster for the benefit of New Zealand. As a small country on the edge of the world, New Zealand cannot become prosperous selling to itself. We need to go global. Scale and distance remain issues for New Zealand companies growing internationally, in terms of the comparative size of our companies, and distance from markets. In addition, we face a challenging external environment. The forces of anti-globalisation and protectionism are alive and well, and in turbulent global markets, New Zealand s small companies can be easily buffeted. To mitigate the challenges of distance and scale, and to build resilience in an increasingly volatile environment, New Zealand needs to become more internationally connected through flows of people, technology and ideas, and to ensure that we have a diverse goods and services export mix, to a broader range of markets, for higher value. These themes of the BGA and its ambitious goals are NZTE s light on the hill it guides us to where we need to be. We know we re up against some tough challenges from our external environment, but at NZTE, we remain optimistic. Through the BGA we have a clear and coherent path ahead; and we believe that NZ Inc 1, (our partners within government and the business community) is more joined up than it ever has been. We also believe that there is huge potential for Māori economic development and our regions to contribute to New Zealand s future (Left to right) Robin Hapi, Charles Finny, Jennifer Kerr, Andrew Ferrier, Wayne Norrie, Charlotte Walshe, Carmel Fisher, Peter Chrisp. 1 NZ Inc agencies include the Ministry of Foreign Affairs (MFAT), the Ministry of Business, Innovation and Employment (MBIE), Callaghan Innovation, the Ministry of Primary Industries (MPI), the Treasury, Te Puni Kōkiri and others. 2 NZTE Statement of Performance Expectations

5 prosperity. NZTE has performed strongly in the last few years, and we continue to learn how to have greater impact for our customers. In 2017/18, we will continue to support the BGA by focusing on our strategy of growing a diversified portfolio of knowledge-intensive, value-adding companies and coalitions. We will also continue to contribute to the BGA Investment workstream, to support and attract investment to accelerate growth throughout New Zealand. NZTE has two operating models for our two overlapping groups of customers: The Customer Way, and The Investment Way. The Customer Way is how we work with our trade customers. This includes intensive engagement with the Focus 700 (F700) portfolio and coalitions, and a lighter touch engagement with our Foundation Build and Foundation Start customers. The Investment Way is our operating model for investment customers. We work with New Zealand sectors, regions and companies to identify and develop opportunities, then match these opportunities with investors, both in New Zealand and overseas. NZTE s global presence enables us to deliver value to our customers through our know-how for international growth and know-who to make the right connections along the way. Our know-how and know-who is expressed in our Māori name: Te Taurapa Tūhono. Te Taurapa is the stern post of a traditional Māori waka, which records valuable knowledge, and stabilises and guides the craft forward. Tūhono represents connections to people and an ability to build relationships. NZTE has a team of highly connected and knowledgeable people around the world, wrapped around the customer and sharing a common goal: international growth. For both sets of customers, we deliver services in New Zealand and in international markets. These include capability building services such as Export Essentials, investment readiness, and digital marketing. We also provide services to boost our customers global reach, for example, in-market immersion, investor connections and access to trade promotions events. Having reached our previous goal of 10% international revenue growth in 2016, earlier than anticipated, we ve set ourselves a new, very ambitious goal. Our aim is to reach a customer growth rate of 15% 2 for our F700 portfolio and to achieve an investment impact of $5b 3 by In short, to reach 15% + $5b by This is a deliberately aspirational goal which, for NZTE, will stretch our thinking and drive us towards achieving exceptional outcomes for our customers. By focusing our efforts on achieving 15% + $5b by 2020, we re setting our sights on making a significant contribution to the BGA goals. To drive the delivery of great impact for our customers and achieve our goals, we commenced Ascent, our three-year change programme. NZTE will continue to work on implementing and embedding our Ascent programme in 2017/18. Through Ascent, our aims are to increase quality investment, to relentlessly focus on growth, and to deliver breakthrough customer experiences. To deliver this, we are progressing on a journey within NZTE to align our operating model, culture and leadership with our customers needs. We know that we can only provide optimal value to our customers if our global team is aligned in terms of how we work together. We will continue to work closely with our NZ Inc partners, as we believe that NZTE has an integral role to ensure the effective flow of information, insights and knowledge, in both directions. For example, in the coming year, we will work with MFAT to utilise their knowledge to keep our customers informed on global trade and economic trends and export opportunities. To achieve success, we ll need to execute our strategy with sustained focus and energy. We are determined to do just that. Andrew Ferrier Chair, NZTE Board Charles Finny NZTE Board Peter Chrisp Chief Executive, NZTE 2 15% International Revenue Growth for our portfolio of Focus 700 customers under $500m. 3 $5 billion in investment impact, also known as pdei: potential Direct Economic Impact. 4 By the end of the 2020/21 financial year. NZTE Statement of Performance Expectations 3

6 WHY To grow companies internationally BIGGER, BETTER, FASTER for the benefit of New Zealand. KNOW HOW & KNOW WHO To grow companies internationally WHAT CUSTOMER WAY Growing companies from New Zealand INVESTMENT WAY Matching investors with opportunities OUR ASPIRATIONAL GOAL 15% + $5B by 2020 AMBITION DRIVES US HOW ADVENTURE TEACHES US HONESTY FREES US TRUST BINDS US MANAAKI IS US 4 NZTE Statement of Performance Expectations

7 OUR STRATEGY Our purpose At NZTE, we re here to be part of something that is bigger than ourselves: to grow companies internationally bigger, better, faster for the benefit of New Zealand. NZTE is uniquely positioned to do this through our global network and our government imprimatur. We have a network of over 600 people across 40 locations. This gives our customers a bigger footprint on the world stage than they could ever have by themselves, helping to mitigate the challenge of scale and distance. NZTE s government imprimatur or endorsement, provides credibility and mana to help open doors for companies in markets around the world. Know-how and Know-who Our global presence enables us to deliver value to our customers through our know-how for international growth, and know-who to make the right connections along the way. Having people in locations around the world gives us in-depth knowledge and experience of how to compete in a range of markets. Our people have the sharp commercial, investment and advisory skills to lift international growth. This is our know-how. Our know-who is the global network of committed people in New Zealand and around the world who we can call upon in our customers interests. This includes NZ Inc partners, industry leaders, local business people or expat Kiwis. We can help with connections to experts who are experienced in running international businesses, both in New Zealand and in market, as well as partners and distributors, local experts, investors and other businesses at a similar stage on their international journey. Operating models: The Customer Way and The Investment Way Our two business models, The Customer Way, and The Investment Way reflect our two defined groups of customers. For each group, we have specific ways of working and outcomes we are aiming towards. We work with trade customers using The Customer Way. In order to use our resources most effectively and achieve the most impact, we segment our customer base, with the majority of our efforts on the F700 portfolio and coalitions. We ve weighted the F700 towards ICT, high value F&B, specialised manufacturing and Māori companies, reflecting the BGA commitment to grow a diversified value-added economy. A coalition is a self-selected, business-led group of companies, who are willing to work together for a common go-to-market purpose. Companies who form a coalition can benefit by sharing knowledge, and leveraging collective resources, expertise and technology to bolster their chances of long term success. Our Foundation customers are at an earlier stage in their international journey. They are either committed to getting started, already exporting and wanting to become better or they may be companies who prefer a less intense engagement. NZTE supports Foundation customers with the practical tools, knowledge and advice they need to start or build their international journey. The Investment Way is our operating model for investment customers, focused on matching investment with opportunities. NZTE is a major contributor to the BGA Investment workstream, which has a key priority to support and attract investment to accelerate growth throughout New Zealand. To match quality investment with opportunities, NZTE identifies and develops New Zealand investment opportunities in target sectors and regions. To help companies prepare for investment, we work with them to build capability and become investment ready. Then we connect New Zealand opportunities with investors identified through our networks internationally and in New Zealand. Our Māori business strategy is integrated into our overall strategy, with the same areas of focus. NZTE s Māori F700, Coalition and Investment teams have strong knowledge of Māori business, culture and economic development, with deep connections within Māoridom. NZTE plays an active role in the implementation of the Māori Economic Development Strategy: He kei kai aku ringa. We are committed to growing more Māori companies of international scale across a range of industries, developing more commercial leaders and mobilising more capital and partners. Our focus is working with high intensity Māori companies to increase the value of Māori exports year on year, and to increase the pdei from investment deals. What we offer our customers For both investment and trade customers, we deliver services in New Zealand and in international markets. NZTE provides capability building services to strengthen a customer s business such as Export Essentials, market research and connections with NZTE Statement of Performance Expectations 5

8 Beachheads advisors 5. We boost customers global reach with information about trends in markets and sectors, and connect customers with local experts, potential distributors, and customers. In addition, we provide investment readiness advice and connections to international and local investors. Working with NZ Inc Our NZ Inc partners are fundamental to delivering our strategy. They provide expertise and services that benefit our customers, and are beyond NZTE s expertise. NZTE works with agencies such as MFAT, MBIE, MPI and Callaghan Innovation on a range of activities such as resolving non-tariff barriers, ensuring companies know how to benefit from Free Trade Agreements, and identifying and coordinating work with shared customers. NZTE works closely with MFAT on G2G Know-How, a partnership to take New Zealand governmental skills, systems and know-how to market on a commercial basis. NZTE also assists with the New Zealand Story, an online free marketing toolkit to help companies showcase the unique value that New Zealand offers the world through our people, culture and character. Our aspirational goal: 15% + $5b by NZTE s aspirational goal is to achieve 15% customer growth and $5 billion in investment impact by This is a very ambitious goal. It is designed to stretch our thinking and push toward the BGA goals. Our ambition for customers is high and we expect a lot from ourselves. We measure customer growth based on the international revenue of the F700 (under $500m). Once we ve reached 15%, the goal is to achieve this level of growth each year after that so in effect each year we start afresh. For investment, we measure the potential Direct Economic Impact (pdei) 7 calculated from investment deals. We re increasing the pdei goal each year until we reach $5 billion in Again, the goal is to achieve this level of pdei each year after One Global Team We know that we can only provide optimal value to our customers if our global team is aligned in terms of how we work together. We share five characters, which guide our actions and behaviour. It s what we do and how we treat others. Ambition drives us, Adventure teaches us, Honesty frees us, Trust binds us and Manaaki is us. It s about how we do what we do we want to embody these characters to work across continents and time zones. We believe that together, as One Global Team, we can show the world just how big a small country can be. Ambition Drives Us Our ambition for our customers is high, and we always rise to the occasion. We help meet their business expectations by expecting greatness of ourselves. Adventure Teaches Us Experimentation is more powerful than perfection as only through learning from our missteps can we truly succeed. That s why giving it a go is the best way to learn. Honesty Frees Us Clarity of action can only come from brave conversations. That s why every interaction welcomes deep exploration, intellectual challenge and absolute honesty. GLOBAL TEAM Manaaki Is Us We celebrate the mana (strength and dignity) of each other as being equal to or greater than our own. We strive to enhance mana in everything we do through our hospitality, generosity and mutual respect. Trust Binds Us Our people may be worlds apart, but it s trust that holds us together. Growing a nation is only possible when we keep promises and honour commitments. 5 Our Beachheads Program connects participating companies to a network of private sector advisors in New Zealand and around the world who provide insights into the realities of growing internationally successful businesses. 6 By the end of the 2020/21 financial year. 7 Potential Direct Economic Impact is the forecast return to the economy though increased profits, wages and supplier spend. 6 NZTE Statement of Performance Expectations

9 WHAT WE WILL FOCUS ON IN 2017/18 We will continue to support the BGA by focusing on our strategy of growing a diversified portfolio of knowledge-intensive, value-adding companies and coalitions. We will also continue to contribute to the BGA Investment workstream, to support and attract investment to accelerate growth throughout New Zealand. We will focus on implementing and embedding our change programme, Ascent, to drive the delivery of greater impact for our customers. Our work with NZ Inc is another important area for NZTE in 2017/18, with activities planned with many of our NZ Inc partners. In particular, in 2017/18, NZTE will focus on the following areas: Ascent: Increase catalytic investment This means attracting quality investment into New Zealand s regions, target sectors and companies. We will be scoping and developing innovative projects like Project Palace, and work with regions to grow the pipeline of regional investment prospects and finalise the Regional Investment Attraction model. We will also work to address the capital raising needs of early stage companies, and the investment needs of our F700 customers. Ascent: Relentless focus on growth We will develop deeper insights into the F700 to enable more active and effective management of the portfolio. We will develop strategies to identify which companies will most benefit from NZTE assistance and to address poor performance in the F700. We will continue to embed The Customer Way, with clear and sharp value propositions and engagement models for our different customer segments. Ascent: Deliver breakthrough customer experiences Having recently launched our new Export Essentials module for Foundation customers, we will focus on bedding this in, which includes rolling out workshops in regions across New Zealand. We will continue to improve our support to Foundation customers, with emphasis on online tools, and more one-to-many services and activities to help more early stage companies. We will also ensure that we have a defined, fitfor-purpose and scalable service offering and evolve our service delivery to meet our customers changing growth needs. This includes reviewing service locations and delivery modes. Ascent: Knowledge, leadership and capability As part of Ascent, we are progressing on a journey within NZTE to align our operating model, culture and leadership with our customers needs. We know that we can only provide optimal value to our customers if our global team is aligned in terms of how we work together. We are working to make our collective knowledge more accessible and usable. We will also be focusing on aligning and embedding our culture, capability and leadership so that we can work together effectively as a global team and have greater impact for our customers. Delivering with NZ Inc While our Ascent challenges will involve engaging with other NZ Inc agencies, we will also work with NZ Inc on the following: Leading the commercialisation of government knowledge through G2G Know-How Investing in the NZ Story as a comprehensive and compelling narrative to support the successes of New Zealand businesses on the world stage Alongside MBIE, gaining better understanding of the broader exporter population and identifying high-growth potential firms that may benefit from NZTE s support, and using cost-to-serve analysis as part of ongoing management of the F700 Jointly with Callaghan Innovation, ensuring effective and coordinated engagement around shared customers Using the knowledge gained through NZTE s work with customers to inform wider policy development Contributing information about export businesses into the Longitudinal Business Database in conjunction with MBIE and Statistics NZ Incorporating MFAT s knowledge of global trade and economic trends to inform customers, identify emerging export opportunities, and ensuring that NZTE s work fits within the broader trade policy framework Continuing to identify non-tariff barriers impacting on specific exporters Agreeing with MPI how to gather and use data to assist exporters to capture emerging opportunities, including through their Exporter Regulator Advice service. NZTE Statement of Performance Expectations 7

10 MEASURING OUR PERFORMANCE NZTE s performance framework is closely aligned with the goals of the BGA agenda, and is directed towards customer growth. and engagement, including completion rate for the actions in customer growth plans and the Net Promoter Score for our services. We have two headline growth measures, for our two sets of customers. These provide us with a clear view to how we are progressing towards our aspirational goal 15% + $5b by 2020, and alongside this, the longer term BGA focus. These are: Are trade customers growing their international revenue? Are we attracting and matching high quality investment? NZTE s impact on our customers is the key to achieving growth. We look at measures such as: Are trade customers achieving deals in-market as a result of our efforts? Do our customers perceive that we are adding value? To deliver impact, we need to ensure that we are effectively engaging with our customers, actively managing our portfolios and pipelines, and providing services that will achieve results for our customers. We have a range of indicators to track our servicing We know that we need to have robust organisational health to achieve the outcomes we re striving for. This means keeping our finances healthy and keeping a close eye on the health, safety and engagement of employees. To keep us on track, our Board and Leadership Team monitor organisational performance through a monthly dashboard of key performance indicators. For example, we measure International Growth Outcomes (IGOs), which are earlier in the pipeline than deals. IGOs relate to commercial results or milestones that create a new platform and/or capability for NZTE customers, such as opening an office or hiring staff in-market. At an operational level, team dashboards provide performance information to support and improve our decision making capabilities. The full set of top level performance measures are included on the following page. 8 NZTE STATEMENT OF PERFORMANCE EXPECTATIONS 8 NZTE Statement of Performance Expectations

11 NZTE S PERFORMANCE FRAMEWORK BUSINESS GROWTH AGENDA Goal: Exports to 40% of GDP by 2025 INFRASTRUCTURE NATURAL RESOURCES EXPORT MARKETS BUSINESS GROWTH AGENDA INVESTMENT INNOVATION SKILLED & SAFE WORKPLACES NZTE s ASPIRATIONAL GOAL: 15% + $5b by 2020 * TRADE CUSTOMERS Annual F700 Customer Growth % International Revenue Growth INVESTMENT CUSTOMERS Annual Investment Impact $ pdei IMPACT MEASURES: CONTRIBUTIONS TO GROWTH $ Trade Customer Deals # International Growth Outcomes $ International Growth Fund: pdei & rdei % Customer View: F700 customers in a stronger position to grow internationally $ Investment Deals SERVICING & ENGAGEMENT INDICATORS # F700 Customers # Foundation Customers # Business accessing RBPN # Active Coalitions % Growth Plan Actions completed # IGF & SIF grants # Days between IGF consent and approval # Services NPS # NPS All Customers # Tier 1 Investment deals in the pipeline # F700 Customers working with Callaghan Innovation ORGANISATIONAL HEALTH % Employee Engagement % PDPs completed % H&S incidents and hazards reported, investigated and controlled/closed within 4 weeks # NPS: NZ Inc, IP & Strategy % Challenge Traffic Lights (Green) % Budget Variance GLOSSARY F700 Focus 700 customers pdei Potential Direct Economic Impact rdei Realised Direct Economic Impact SIF Strategic Investment Fund NPS Net Promoter Score RBPN Regional Business Partner Network H&S Health and Safety PDP Performance Development Plan IGF International Growth Fund IP Internal Partners SPE Measures Non SPE Measures * By the end of the 2020/21 financial year. NZTE Statement of Performance Expectations 9

12 Statement of Performance Expectations Our core performance measures represent the majority of NZTE s spend and reflect the most important aspects of our business and performance. Our full suite of organisational measures is shown in the diagram on the previous spread, and our core group of performance measures are set out in the following pages. NZTE is funded under two Multi-Category Appropriations through Vote, Business, Science and Innovation. NZTE S Multi-category appropriations 2017/18 $m Category: International business growth services Services to support the growth and development of New Zealand businesses 15.2 Collaborative activity and special events 5.8 Grants International Growth Fund 30.0 Sector Strategies and Facilitation Strategic Investment Fund 1.2 Total NZTE Statement of Performance Expectations

13 International business growth services We support individual or groups of companies to enhance their global reach and grow in international markets, and match quality investment with opportunities, the growth of whom benefits New Zealand. This output category is our greatest area of focus. We help individual or groups of companies to internationalise by: Improving their capability and readiness Identifying and exploiting market opportunities Overcoming internationalisation barriers and enabling access to international business networks We help potential recipients of investment funds, and investors looking to invest in New Zealand business opportunities by: Identifying and connecting with investors domestically and internationally Matching quality investment with New Zealand opportunities in target sectors Our customer managers and international teams provide tailored support, advice and linkages for our internationalising customers. Around this, we wrap services to build capability, connect with global opportunities, access capital and develop effective strategies for growth. International business growth services 2017/18 revenue and expenses $m Revenue Crown Revenue Other 4.1 Total Revenue Expenses Total 0 NZTE Statement of Performance Expectations 11

14 International business growth services Performance Measure Target 2015/16 Actual 2015/16 Target 2016/17 Target 2017/18 Annual growth in international revenue for NZTE s F700 customers with international revenue under $500m. 3 percentage points above NZ export benchmark percentage points above NZ export benchmark. 3 percentage points above NZ export benchmark. 3 percentage points above NZ export benchmark. $ potential Direct Economic Impact (pdei) for investment deals Total value of trade deals 9 achieved with NZTE involvement Number of International Growth Outcomes (IGOs) achieved with NZTE involvement 10 % F700 that consider to a great or very great extent that NZTE has put them in a stronger position to grow internationally 11 Total Net Promoter Score for Build Foundation customers 13 Total Net Promoter Score for NZTE services Baseline $2b $1.5b $2b Exceeds 2014/15 result Meets or exceeds 2014/15 result New measure in 2017/18 New measure in 2017/18 $1.5b Exceeds 2015/16 result 635 Meets or exceeds 2015/16 result $1.5b % In 2015/16 and 2016/17, NZTE measured the F700 (less than $500m) portfolio against the NZ Goods & Services Exports Benchmark. The Benchmark, calculated by NZTE, is a subset of the total NZ Goods & Services exports (sourced from Statistics New Zealand) which only includes companies with exports under $500m, and in similar sectors as the F700. The model adjusts for the difference in financial year end reporting dates, to create a like for like comparison. The measure excludes customers who have changed their financial year-end, have not provided financial data at year-end or had other types of incomplete financial data. 9 A deal is a sale of goods and services with a dollar value over a defined time period, achieved with the assistance of NZTE. The deal value should generally be calculated over a 12 month period, but can be calculated beyond this period if it is specified in an agreed signed contract 10 An IGO is a result achieved with the assistance of NZTE, that is not a sale, but that provides a significant platform for future international growth. 11 This is a new measure in 2017/18 which replaces the previous measure, %F700 that agree or strongly agree NZTE has added value to their business. 12 NZTE monitored this result internally in 2016/17 and therefore chose to set a target in 2017/18 rather than a baseline. 13 This is a new measure in 2017/18 which replaces the previous measure % Build Foundation that agree or strongly agree that NZTE has added value to their business. The Net Promoter Score is calculated by taking the percentage of promoters (those that gave a score of 9 or 10) and subtracting the percentage of detractors (those that gave a score of 0 to 6). This is a measure of how likely customers are to promote the service to others, and is an indicator of the perceived value added by that service. 14 NZTE monitored this result internally in 2016/17 and therefore chose to set a target in 2017/18 rather than a baseline. 12 NZTE Statement of Performance Expectations

15 International business growth services Activity Indicator Number of F700 customers in NZTE s customer portfolio Total number of customers in NZTE s foundation customer portfolio Number of coalitions under active management Activity Standard 2015/16 Actual 2015/16 Activity Standard 2016/17 Activity Standard 2017/ (demand driven) (demand driven) 3500 (demand driven) 25 (demand driven) (demand driven) 25 (demand driven) 15 Performance standard is the number of F700 customers in NZTE s customer portfolio at the end of the financial year. NZTE Statement of Performance Expectations 13

16 Services to support the growth and development of New Zealand businesses We build and enhance business and management capability by providing access to effective assessment, advice, training, mentoring and information. Services funded under this output category are mainly delivered via the Regional Business Partner Network or other third party providers. The Regional Business Partner Network is a network of 14 regional organisations that are jointly funded by NZTE and Callaghan Innovation to deliver specialist services, support and funding, to enhance business management capability and grow business investment in research and development. Services to support the growth and development of New Zealand businesses 2017/18 revenue and expenses $m Revenue Crown 15.2 Revenue Other 0 Total Revenue 15.2 Expenses 15.2 Total 0 Services to support the growth and development of New Zealand businesses Performance Measure Total Net Promoter Score for the Regional Business Partner Network Target 2015/16 Meets or exceeds 2014/15 result Actual 2015/16 Target 2016/17 Target 2017/ Services to support the growth and development of New Zealand businesses Activity Indicator Number of businesses receiving business development services through the Regional Business Partner Network Activity Standard 2015/16 Actual 2015/16 Activity Standard 2016/17 2,500 4,410 5,000 (demand driven) Activity Standard 2017/18 5,000 (demand driven) 14 NZTE Statement of Performance Expectations

17 Collaborative activity and special events We collaborate with other New Zealand agency partners to leverage New Zealand s profile in international markets, and secure and capitalise on special events or opportunities that support New Zealand s export growth. Activities within this output class include: G2G Know-How established with MFAT to internationalise our public sector skills, systems and know-how The New Zealand Story a free business toolkit, delivered with NZ Inc partners to help New Zealand businesses promote themselves internationally Leveraging special events Collaborative activity and special events 2017/18 revenue and expenses $m Revenue Crown 5.8 Revenue Other 0.8 Total Revenue 6.6 Expenses 6.6 Total 0 Collaborative activity and special events Performance Measure Value of contracts secured through G2G Know-How Total Net Promoter Score for the New Zealand Story Total number of organisations working with Callaghan Innovation and NZTE as an F700 customer Target 2015/16 Actual 2015/16 Target 2016/17 $21m Cumulative target for the period Jan15-Jun18 Baseline 2015/ Meets or exceeds 2015/16 result New measure in 2017/18 Target 2017/18 $12.9m $21m $16m 16 Cumulative target for the period Jul17-Jun Baseline 16 The G2G Know-How targets have been updated to be based on cumulative periods. These longer periods take into account the uneven nature of G2G deals and the time required to negotiate deals between governments. Due to the budget rollover of G2G Know-How, the previous period was to Jun 18, but will now end in Jun 17 and be reported on in NZTE s 16/17 Annual Report. The new cumulative period will commence in Jul 17. NZTE Statement of Performance Expectations 15

18 Grants NZTE administers two grants: International Growth Fund (IGF) The IGF supports high-growth businesses to carry out additional market development and business capability activities required for internationalising and growth in new markets. This delivers benefits for both the businesses concerned and the wider New Zealand economy. Sector Strategies and Facilitation Strategic Investment Fund The Strategic Investment Fund co-funds feasibility studies. These studies are used to develop and present the business case for investment in New Zealand. Grants 2017/18 revenue and expenses $m International Growth Fund Revenue Crown 30.0 Revenue Other 0 Total Revenue 30.0 Expenses 30.0 Total 0 Sector Strategies and Facilitation Revenue Crown 1.2 Revenue Other 0 Total Revenue 1.2 Expenses 1.2 Total 0 16 NZTE Statement of Performance Expectations

19 Grants Performance Measure Potential Direct Economic Impact ratio for approved IGF grants 17 Realised Direct Economic Impact ratio for completed IGF projects 18 Target 2015/16 Actual 2015/16 Target 2016/17 Target 2017/18 4 to to 1 4 to 1 4 to 1 4 to to 1 4 to 1 4 to 1 19 Grants Activity Indicator Number of IGF grants awarded Number of SIF grants awarded Activity Standard 2015/16 Actual 2015/16 Activity Standard 2016/17 Activity Standard 2017/18 60 (demand driven) (demand driven) 80 (demand driven) 20 6 (demand driven) 3 6 (demand driven) 6 (demand driven) 17 Potential DEI is the forecast return to the economy through increased profits, wages and supplier spend. The target is $4 for every dollar invested (by both business and government). The potential DEI return of 4x is measured after adjusting each application and the portfolio by a risk factor of 35%. Potential DEI does not apply to market validation and coalition projects. 18 Results are based on completed IGF projects for IGF grants approved in the preceding five years. 19 rdei is based on results from completed IGF projects for IGF grants approved in the preceding five years so the same target has been retained. 20 This demand driven activity standard remains at the same level in 2017/18. This is due to a diminishing pool of F700 companies not already engaged with an IGF, and a sharper focus on quality IGF applications. NZTE Statement of Performance Expectations 17

20 Consultation and Reporting As a Crown Agency, our agenda and direction is set by the government; therefore, we consult with and report to Ministers regularly. The Board and/ or the Chief Executive provide the Minister for Economic Development and the Minister of Trade with regular reports. Three progress reports will be provided in 2017/18 for the periods July October, November February and March June. These will be provided within 30 days following the end of each period. These reports will cover: Progress against key performance indicators Key organisational risks Financial management Ministers and relevant government agencies are consulted before NZTE makes a decision regarding: Any material change in the capability and functionality of NZTE s network (in New Zealand and internationally) Any activities that are potentially outside of the scope of appropriations made by Parliament or relevant legislation applying to NZTE Any significant organisational decisions that will give rise to Parliamentary interest or public debate. The Board reports to joint Ministers annually on full-year performance against the SPE. This report also includes Board updates regarding fees and allowances paid, and attendance levels. NZTE is also committed to sharing information with our NZ Inc partners. We undertake to provide regular updates, insights and analysis on areas of mutual interest. Lastly, we will be working with MBIE to share knowledge and practices so that we can better understand and demonstrate our impact on companies and the economy. 18 NZTE Statement of Performance Expectations

21 Prospective Financial Statements For the year ending 30 June 2018 Prospective Financial Statements 2017/18 These statements are presented in accordance with the requirements of the Crown Entities Act 2004, which includes the requirement to comply with New Zealand generally accepted accounting practice (NZ GAAP). The prospective financial statements have been prepared in accordance with Tier 1 PBE (public benefit entity) accounting standards, New Zealand PBE Financial Reporting Standard No 42 Prospective Financial Statements and other applicable financial reporting standards, as appropriate for Public Benefit entities. Other information These statements have been prepared on the basis of government policies and NZTE outputs at the time the statements were finalised. Please note that this is forecast information and therefore the actual results achieved for the period may vary from the information presented due to external factors. The financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars ($000). The functional currency of NZTE is New Zealand dollars. NZTE Statement of Performance Expectations 19

22 Statement of Comprehensive Revenue and Expense Budget 2018 $000 Income Revenue Crown Operating 166,349 Revenue Crown Grants 31,231 Other operating income 4,899 Finance income 610 Total revenue 203,089 Expenditure Personnel costs 87,469 Other operating expenses 79,389 Depreciation and amortisation expense 5,000 Grant expense 31,231 Total expenditure 203,089 NET SURPLUS/(DEFICIT) 0 OTHER OPERATING EXPENSES Other operating expenses include the following major categories: development and implementation of iplans, business capability services, rental expense on operating leases and promotional activities. Statement of Changes in Equity Budget 2018 Equity at the beginning of the year 21,642 Net operating Surplus/(Deficit) for the year 0 Total Recognised Revenue and Expenses 21,642 EQUITY AT THE END OF THE YEAR 21,642 $ NZTE Statement of Performance Expectations

23 Statement of Financial Position Budget 2018 $000 Current Assets Cash 7,196 Trade and other receivables 17,452 Crown debtor grants 14,600 Prepayments 2,570 Deposits 1,073 Total Current Assets 42,891 Non Current Assets Deposits 1,113 Property, plant and equipment 16,628 Intangible Assets 1,898 Total Non Current Assets 19,639 Total Assets 62,530 Current Liabilities Trade and other payables 15,666 Employee benefits and provisions 6,050 Finance and other liabilities 280 Provisions grants 14,600 Total Current Liabilities 36,596 Non Current Liabilities Employee benefits 2,693 Finance and other liabilities 1,599 Total Non Current Liabilities 4,292 Total Liabilities 40,888 NET ASSETS 21,642 EQUITY 21,642 NZTE Statement of Performance Expectations 21

24 Financial statements Statement of Costs by Output Expense International Business Growth Services 145,382 Services to Support the Growth and Development of NZ Businesses 15,181 Collaborative Activity and Special Events Total Budget 5, ,349 $000 Statement of Comprehensive Revenue and Expense Income Budget 2018 $000 Revenue from Crown operating 156,633 Revenue from Crown grants 22,083 Customer revenue 236 Budget Other operating revenue 12, Finance revenue $000 5,330 Total revenue 197,270 International Growth Fund 30,027 Sector Expenditure Strategies and Facilitation Personnel Total costs 1,204 78,013 31,231 Depreciation and amortisation expense 5,004 Finance expense 1,615 Grant expense 22,083 Other operating expenses 82,366 Total expenses 189,081 Budget 2018 Surplus/(deficit) before income tax $000 8,189 Statement of Grant Expense Reconciliation: Statement of Costs by Output Class to Total Expenditure Statement of Costs by Output Class 166,349 Income tax Revenue Crown Grants (43) 31,231 Sundry Revenue, including Interest 5,509 Total Comprehensive Expenditure per Revenue Statement and of Expense Comprehensive Income 203,089 8,146 Explanations of significant variances against budget are detailed in note 25. The accompanying notes form part of these financial statements. 22 NZTE Statement of Performance Expectations

25 Statement of Cash Flows Budget 2018 $000 Net cash flows from: Operating activities: Revenue from Crown operating 167,757 Revenue from Crown grants 31,231 Client and other income 4,316 Interest received 610 Payments to suppliers (79,176) Payments to employees (86,449) Payments to grant recipients (31,231) Capital Charge Paid (1,731) Net Cash Flows from operating activities 5,327 Investing activities Proceeds from sale of property, plant and equipment - Purchase of property, plant and equipment (5,500) Purchase of intangible assets (600) Net Cash Flows from investing activities (6,100) Net increase/(decrease) in cash and cash equivalents (773) Cash and cash equivalents at beginning of year 7,969 BALANCE CASH AT END OF PERIOD 7,196 NZTE Statement of Performance Expectations 23

26 ACCOUNTING POLICIES REPORTING ENTITY NZTE is a Crown Agency as defined by the Crown Entities Act 2004 and is domiciled in New Zealand. NZTE s parent is the New Zealand Crown. The consolidated financial statements of the Group consist of the parent entity, NZTE and it s subsidiaries, NZ G2G Partnerships Ltd, NZTE Limited and the wholly owned foreign entity, New Zealand Trade and Enterprise Consulting (Shanghai) Co. Limited. NZTE s primary objective is to encourage and promote economic development and investment opportunities in New Zealand, as opposed to making a financial return. NZTE has designated itself as a public benefit entity (PBE) for financial reporting purposes. Foreign currency transactions Foreign currency transactions (including those for which forward exchange contracts were held) are translated into New Zealand dollars using the exchange rates prevailing at the date of transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at yearend exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Revenue and Expense. Accounting estimates and judgements Application of NZTE s accounting policies requires the use of estimates and judgements. The estimates are based on historical experience and other factors that are believed to be reasonable. Actual results may differ from these estimates. The areas of significant estimation and judgement are as follows: grant accrual useful lives of property, plant and equipment useful lives of intangible assets. SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies, which materially affect the measurement of financial results and financial position, have been applied consistently to all periods presented in these financial statements. REVENUE CROWN OPERATING AND REVENUE CROWN GRANTS NZTE receives funding from the Crown for the specific purposes of NZTE as set out in the Statement of Performance Expectations and the scope of the relevant government appropriations. NZTE considers there are no conditions attached to the funding and it is recognised as revenue at the point of entitlement. NZTE receives funding from the Crown for grants as set out in the Statement of Performance Expectations and the scope of the relevant government appropriations. Revenue Crown Grants is recognised when the revenue conditions have been met, which is when the related grant expenditure is incurred, and a grant receivable is due. Grant expenditure is recognised when the third party recipient incurs expenditure that meets the grant conditions. These two revenue streams are considered non-exchange transactions. CAPITAL CHARGE The capital charge is recognised as an expense in the period to which the charge relates. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand, deposits held on call with both domestic and international banks, and other short-term, highly liquid investments, with original maturities of three months or less. TRADE AND OTHER RECEIVABLES Debtors and other receivables are initially measured at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Impairment of a receivable is established when there is objective evidence that NZTE will not be able to collect amounts according to the original terms of the receivable. Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy, and default in payments are considered indicators that the debtor is impaired. The amount of the impairment is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted using the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the Statement of Comprehensive 24 NZTE Statement of Performance Expectations

27 Revenue and Expense. When the receivable is uncollectible, it is written off against the allowance account for receivables. Overdue receivables that have been renegotiated are reclassified as current (i.e. not past due). PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment asset classes consist of computer hardware, leasehold improvements, furniture and office equipment, and motor vehicles. Property, plant and equipment are shown at cost, less any accumulated depreciation and impairment losses. Leased assets Leases where NZTE assumes substantially all the risks and rewards of ownership are classified as finance leases. The assets acquired by way of finance lease are stated at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses. Additions The cost of an item of property, plant or equipment is recognised as an asset only when it is probable that future economic benefits or service potential associated with the item will flow to NZTE and the cost of the item can be measured reliably. Where an asset is acquired at no cost, or for a nominal cost, it is recognised at fair value when control over the asset is obtained. Disposals Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of the asset. Gains and losses on disposals are included in the Statement of Comprehensive Revenue and Expense. Subsequent costs Costs incurred subsequent to initial acquisition are capitalised only when it is probable that future economic benefits or service potential associated with the item will flow to NZTE and the cost of the item can be measured reliably. The costs of dayto-day servicing of property, plant and equipment are recognised in the Statement of Comprehensive Revenue and Expense as they are incurred. Depreciation Depreciation is provided on a straight-line basis on all property, plant and equipment at rates that will write off the cost of the assets to their estimated residual values over their useful lives. The useful lives and associated depreciation rates of major asset classes have been estimated as follows: Computer equipment 3 years 33% Furniture and office equipment 4 to 5 years 20% to 25% Leasehold improvements Up to 9 years 11% to 33% Motor vehicles 4 years 25% Leasehold improvements are depreciated over the unexpired period of the lease or the estimated remaining useful lives of the improvements, whichever is the shorter. The residual value and useful life of an asset is reviewed, and adjusted if applicable, at each financial year end. INTANGIBLE ASSETS Software acquisition and development Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Costs that are directly associated with the development of software for internal use by NZTE, are recognised as an intangible asset. Direct costs include software development, employee costs and an appropriate portion of relevant overheads. Staff training costs, costs associated with maintaining computer software, and costs associated with the development and maintenance of NZTE websites are recognised as an expense when incurred. Amortisation The carrying value of an intangible asset with a finite life is amortised on a straight-line basis over its useful life. Amortisation begins when the asset is available for use and ceases when the asset is derecognised. The amortisation charge for each period is recognised in the Statement of Comprehensive Revenue and Expense. The useful lives and associated amortisation rates of major classes of intangible assets have been estimated as follows: Computer software (developed) 3 to 5 years 20% to 33% Computer software (acquired) 4 to 5 years 20% to 25% NZTE Statement of Performance Expectations 25

28 IMPAIRMENT OF NON-FINANCIAL ASSETS Property, plant and equipment and intangible assets that have a finite useful life are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. Value in use is depreciated replacement cost for an asset where its future economic benefits or service potential are not primarily dependent on its ability to generate net cash inflows and where NZTE would, if deprived of the asset, replace its remaining future economic benefits or service potential. If an asset s carrying amount exceeds its recoverable amount, the asset is impaired and the carrying amount is written down to the recoverable amount. The total impairment loss is recognised in the Statement of Comprehensive Revenue and Expense. For assets not carried at a revalued amount, the reversal of an impairment loss is recognised in the Statement of Comprehensive Revenue and Expense. FINANCIAL RISK MANAGEMENT NZTE s principal financial instruments (other than derivatives), comprise cash and short-term deposits. The main purpose of these financial instruments is to fund NZTE s operations. NZTE has various other financial instruments such as trade debtors and trade creditors which arise directly from its operations. NZTE also enters into derivative transactions consisting principally of forward currency contracts. The purpose of these is to manage the currency risks arising from NZTE s operations and its sources of finance. It is NZTE s policy that no trading in financial instruments shall be undertaken. NZTE is exposed to credit risk, interest rate risk, liquidity risk and foreign currency risk. NZTE s senior management oversees the management of these risks. NZTE s senior management is supported by an Audit and Risk Committee that provides assurance to senior management and the Board that NZTE s financial risks are identified, measured and managed in accordance with NZTE s policies and procedures and that financial risks are identified, measured and managed in accordance with NZTE s policies and risk objectives. Financial instruments categories and fair value The carrying amounts represent the fair values of financial instruments. The carrying amounts of financial instruments included in the Statement of Financial Position reflect the fair values of the financial instruments at balance date. Estimation of fair values analysis Major methods and assumptions used in estimating the fair values of financial instruments are summarised below: Derivatives The fair value of forward exchange contracts has been determined using a discounted cash flow valuation methodology based on quoted forward foreign exchange market rates. Where discounted cash flow techniques are used, estimated future cash flows are based on management s best estimates and the discount rate is a market related rate for a similar instrument at balance date. Where other pricing models are used, inputs are based on market-related data at balance date. Trade and other receivables and payables For receivables and payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. Capital management NZTE s capital is its equity, which comprises capital injections by the Crown and accumulated funds. Equity is represented by net assets. NZTE is subject to the financial management and accountability provisions of the Crown Entities Act 2004, which imposes restrictions in relation to borrowings, acquisition of securities, issuing guarantees and indemnities and use of derivatives. NZTE will comply with these restrictions throughout the period. NZTE manages its equity as a by-product of prudently managing revenue, expenses, assets, liabilities, investments, and general financial dealings to ensure that NZTE effectively achieves its objectives and purpose, while remaining a going concern. a) Credit risk In the normal course of business, NZTE is exposed to credit risk from cash and term deposits with banks, trade and other receivables, and derivative financial instrument assets. For each of these, the maximum credit exposure is best represented by the carrying amount in the Statement of Financial Position. 26 NZTE Statement of Performance Expectations