Dismal share price puzzles Tower heads

By RICHARD BRADDELL

WELLINGTON - Demutualised financial services group Tower, on track to equal at least prospectus forecasts, is puzzled at its languid share price.

"It's very difficult to understand how with a company that's performing as well as this, that's not being reflected in the value of the shares," said chief executive James Boonzaier after yesterday's annual meeting in Wellington.

The diversified Australasian group, which recorded 28 per cent growth and net profit of $73 million in 1999, has forecast a $75 million profit in the current year.

But although it expects to maintain its solid growth, it is still trading well below the multiples of its Australian peers.

Asked if the four-year cap on individual holdings imposed at the time of demutualisation was a factor in the poor performance, Mr Boonzaier said it had not been in the case of the Australian companies, which all had similar provisions.

Tower stock has firmed in the past week, helped by rumour that it may have been the subject of a takeover offer.

Mr Boonzaier repeated the categorical denial he made this week, but was less dismissive when pressed on whether discussion, albeit preliminary and informal in nature, might have taken place.

"Nothing of substance," he said, when asked if there had been approaches.

Asked if the board might recommend to shareholders that they vote to have the share cap removed if a really good offer came along, he said: "Possibly."

The meeting was told that Tower was performing ahead of budget in the first quarter, and while the usual caveat that investment markets might throw things off track was applied, the company was otherwise confident of performing ahead of forecast in 2000.

Shareholders seemed impressed with initiatives to expand the group by building on its strength in Australia and New Zealand and by continuing its push for a licence to operate in China.

But their approval did not extend to a motion to boost fees for the eight non-executive directors by $130,000 to $360,000.

Many of the shareholders, most of whom had been members in the pre-demutualisation Tower Corporation, were unimpressed by a proposal to lift fees at a time when the share price was performing so badly.

Called on to justify the rise, chairman Colin Beyer said it recognised the fact that fees had been constant over the past five years and directors had done a considerable amount of work in achieving the company's demutualisation to the benefit of shareholders and in the face of bitter court action.

Directors' duties were also more onerous these days and higher fees were needed to attract Australian directors, with two more to be appointed to the board this year.

He said the rise was justified by a PricewaterhouseCoopers and Institute of Directors survey which supported the average of $45,000 a director.

When challenged by a shareholder who said the survey supported an average $30,000 for companies with turnover between $500 million and $1 billion, he said Tower's turnover was $1.3 billion.

"We won't be coming back to the shareholders for some years for another increase," said Mr Beyer.

On a show of hands, the motion was defeated 70 to 47. But in a subsequent poll in which only proxies who expressed an opinion one way or the other were counted, the motion passed 24.3 million in favour, 4.6 million against.