Net profit up 55 per cent for Tower

Shareholders in insurer and fund manager Tower Ltd will have to keep waiting to see a dividend.

The company today announced a first half net profit after tax up 55 per cent to $32.5 million.

But Tower, which has been restructuring since February 2003, stretched to three years its period without a dividend.

Total revenue from continuing operations was up 21 per cent to $604.1 million in the six months to March 31, Tower said.

Adjusted earnings per share on continuing operations were up 73 per cent to 9c a share, compared to 5.3c a share in the previous corresponding period.

Today's profit result was in line with market expectations and reported under new international accounting standards. It did not include earnings from the acquisition of PrefSure in Australia as that purchase was completed on March 31.

The A$145 million ($174.4 million) purchase of PrefSure effectively doubled Tower's Australian business, jetting it from a market minnow to a top player in the Australian life insurance business.

Tower managing director Jim Minto said Tower was now clearly well into a growth phase with all operating businesses showing stronger performance and improving competitive positions.

But there was more work to be done and opportunity ahead.

"The question of a dividend has been considered and no dividend will be paid at this point," Mr Minto said.

"Tower has in recent years focused strongly on rebuilding value for shareholders which is reflected in the share price."

While Tower's financial position was strong, the company's businesses needed significant retention of profits to fund growth which in turn created value for shareholders.

Despite that, Tower had sufficient cash reserves and free cash flows from its operations to consider resumption of dividend payments.

But with its trans-Tasman business structure, spread of shareholders and large base of 70,000 shareholders, leakage of franking credits was significant, making distributions to shareholders via dividends inefficient.

Tower was reviewing ways to maximise the value of franking credits and to more efficiently structure returns to shareholders, and hoped for a positive distribution announcement by the end of 2006.

Mr Minto said that in terms of market operating environments, Tower continued to see the faster growing Australian market as attractive. Levels of savings growth and sales of life insurance were pleasing.

In New Zealand, growth was seen in all insurance markets, especially life insurance where large levels of underinsurance were evident, creating future social policy issues.

The savings environment in New Zealand was now more attractive and Tower saw the trend towards compulsory savings as being highly logical, Mr Minto said.

Tower supported the Government's KiwiSaver proposal but saw its further evolution as necessary and inevitable.

Mr Minto said the integration of PrefSure was progressing well and further strengthened Tower in Australia in the risk (life insurance) sector.

Net profit after tax (NPAT) for Tower Australia in the six months to 31 March 2006 was up 13 per cent to $21.5m including investment earnings.

Tower New Zealand NPAT including investment earnings for NZ operations was up 36 per cent in the six months to $19.1 million.

Shortly after today's profit announcement shares in Tower were trading unchanged at $2.85, having been as high as $3.01 a fortnight ago and as low as $1.73 in November.

- NZPA