Tower shares mugged again after $75m loss announcement

By NZPA

Thursday 5th December 2002

There was initial shock at Tower Ltd today reporting a $75 million September year loss that was double what the company had forewarned last month.

Shares in the financial services group plumbed an all-time low of $1.56 but recovered to close three cents down from yesterday at $1.66 when investors realised $36 million of the loss came from the writedown of Tower's Australian unit Bridges.

The shares are still a third of their $5.34 January peak and compare with $3.55 before the November 1 profit warning that sent them tumbling 44 percent lower.

Before that warning analysts had expected a profit slightly below last year's $77 million result.

Excluding the Bridges writedown, the loss was $39 million -- at the top end of the $30-40 million range in the warning. Tower lost $26 million through poor investment markets, $31 million in IT writedowns, $10 million in restructuring costs and booked $44 million from its various Australian operations.

Macquarie Equities head Arthur Lim said in the end there were no big surprises.

"It is consistent with what they've indicated to the market."

The big unknown was how big the Bridges writeoff was going to be and in terms of a $180 million investment by them, $35.8 million sounded "probably about right", Mr Lim said.

No dividend was declared in today's result, which saw the group's total income plunge 17 percent to $580.6 million, reflecting negative investment income in the second half of the year and the Bridges writedown.

Acting chief executive Keith Taylor said the losses were mostly one-offs and the company was expecting "normal levels of profitability" in the current year and a resumption of dividend payments.

Tower had been profitable in the first quarter of the current year and, all going to plan, expected to restore dividends in the first half to the lower end of the 40-60 percent of net profits range.

There would be further one-off writedowns, though, as the company laid off "significantly" more staff in Australia as it grappled to reduce costs. It had already cut 90 of 1900 staff across the group.

Mr Taylor said investment markets were still uncertain and the company had no control over those. Assets under management declined 2 percent to $20.7 billion in the year.

Chairman Colin Beyer was in damage control mode, saying that Tower "continues to be in a sound financial position to meet its financial obligations", despite the loss.

He heaped blame on former chief executive James Boonzaier and although he said he "sincerely apologises" to shareholders he would not resign.

"The group's loss is a responsibility which must be carried by the board. Following a rigorous operational review, steps have been taken to address underlying issues to ensure the business will move forward profitably."

Mr Beyer said that the true value of the company was well over $4/share and hinted the company could be a takeover or break-up target. It was a dominant force in New Zealand and "it may be that one or two of our businesses in New Zealand are worth a lot more to others than they are to us".

Mr Beyer also announced that the company expects to appoint a new chief executive by the end of the calendar year.

The company has been without one since Mr Boonzaier stood down in July after 12 years at the helm.

Mr Lim said investors were seeking a firmer indication of what profitability levels were likely to be in the current financial year, rather than the vague statements offered by Mr Taylor. The market had wanted an announcement on the new CEO, he said.

"They've given an indication that they'll return to profitability, but they haven't said what level of profitability," Mr Lim said.

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