Tower set to take earnings haircut

By NZPA

Thursday 31st October 2002

Shares in financial services company Tower Ltd were placed on a trading halt today as it looked set to become the latest in the sector to take an earnings haircut.

Tower's board meets tomorrow to discuss the company's results for the year to September, and it hinted in a statement today that earnings would be "adverse to current market expectations".

The Australasian company is New Zealand's second biggest fund manager for individual investors, with about $22 billion of assets. About 70 percent of the company's profit is generated across the Tasman.

"Over the last three months in particular, global insurance and financial companies have all had a haircut on their earnings," ABN Amro Craigs retail equities dealer Nigel Scott said.

"The global financial sector has come under greater pressure than any other (in recent months) and the directors are being prudent in putting the stock into a trading halt for both positive or negative reasons going forward.

"In the past we've had too much misinformation change share prices when possibly a halt would have been more appropriate," he added.

Tower posted a net profit of $40.7 million for the half year to March 31 and $77.2 million for the year to September 2001.

Analysts surveyed by Multex Global Estimates expect Tower to post a net profit after tax of $71.1 million for the year.

ABN Amro Craigs had put a figure of $71 million on the result, but that now looked like "too much money", Mr Scott said.

Tower declined to comment further today, saying only that the company "considers it desirable that the trading halt occur so as to prevent any trading in the company's securities today and tomorrow on an uninformed basis".

Shares in Tower traded up five cents at $3.55, prior to the trading halt. They hit an all time low of $3.40 on Tuesday, against a year high of $5.34 in February.

Mr Scott said tomorrow's announcement could also have something to do with the potential purchase of Royal Sun & Alliance's fund management arm -- which has been rumoured in the market for a couple of months.

The Melbourne Age newspaper today reported that the sale was now not expected to proceed -- casting a shadow over the future of Tower, a frontrunner to buy the assets, in the increasingly competitive funds management sector.

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