Tower posts slight rise in first half profit

By NZPA

Wednesday 29th May 2002

Financial services company Tower Ltd posted a half year net profit of $40.7 million, up 4.6 percent on the same time last year.

Tower, New Zealand's number one retail fund manager, said two weeks ago that its six month profit was on track largely because of rising interest rates on discounted future earnings.

The market level of return on fixed interest assets -- in which Tower shareholder funds are largely invested -- had been lower than original forecasts, the company said on May 9.

Sales revenue of $516.4 million was well up on the first half last year's $376.5 million, as was profit before tax and unusual items of $72.68 million ($49.04 million), the company said today.

Tower will pay a dividend of 15 cents per share, including a 1c imputation credit, on July 30.

"Strong growth in net profit after tax was recorded by the group's savings and investment divisions, up 23 percent to $40 million; risk insurance, up 66 percent to $9.8 million; and trustee services, up 17 percent to $4.9 million," Tower chairman Colin Beyer said.

An improvement in investment income -- up 151 percent to $206.4 million from $82.1 million -- reflected improved returns from equity markets.

Assets under management increased by 3 percent to $21.9 billion in the six month period.

Tower said today it would exit its China operations to concentrate on Australia.

Tower group managing director James Boonzaier said the company made the decision after a review of Tower's business strategy.

"Factors such as China's imminent entry to the World Trade Organisation and the consequent increase in multi-national foreign insurance and investment companies in the market were likely to fuel competition and reduce the chances of Tower reaching its profit targets," Mr Boonzaier said.

"The projected benefits accruing from a focus on wealth management in Australia and on maximising value from New Zealand businesses include the transformation of Tower into a growth stock over the next one to two years," he said.

Operations on both sides of the Tasman are setting in train recommendations from a recent operational and strategy review.

Gearing -- total debt to total debt-plus-equity -- was reduced to 33 percent from 36.2 percent, a 10 percent improvement. Total debt was cut back from $511.5 million to $463. million.

Tower shares were up 3 about midday at $4.80.

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