Bridges burns Tower

Tower has reported a $74.9 million bottom line loss, considerably more than the $40 million loss it flagged a month ago because of a $35.8 million writedown in the value of its Australian financial planning group Bridges.

Last year, Tower wrote up Bridges’ value by $17 million. As foreshadowed, writedowns of Australian assets accounted for most of the other losses announced today.

Acting chief executive Keith Taylor said the Bridges writedown was despite its net profit rising 34% to $A9.5 million and funds under management rising 8% to $A3.1 billion.

The reasons for the writedown were poor investment markets, expectations that margins in future will be squeezed and that Tower has instituted a new fee sharing arrangement with the Bridges financial planners which will see them take a greater share.

"All the comments people were making about Bridges being part of our problems going forward were untrue," Taylor said.

Jim Minto, the former head of Tower’s New Zealand operations who was sent to head the Australian operations in early November, said the key requirement was to cut expenses in Australia to match the size of the business.

At 30 September, ongoing annual expenses were $102 million and that has been cut already to $97 million. The aim is to cut ongoing expenses to $85 million over the next 12 months, he said.

"Most of this will be initiated pre-Christmas," Minto said.

"It’s early days for me, but we have a plan in place to turn this around. It’s a low-risk plan. It doesn’t immediately rely on high levels of sales." Trying to rebuild sales will be a longer, slower process, he said.

About 50 staff have been laid off so far in Australia and further layoffs will be significant. Tower has about 1,000 staff in Australia. A further 40 staff have been laid off in New Zealand since September.

Taylor, who has been Tower’s chief financial officer for 12 years, said most of this year’s losses are one-off in nature.

While Tower’s strategy "has certainly been refined," it hasn’t essentially changed, he said.

In view of the losses, Tower won’t be paying a final dividend. Taylor said Tower has traditionally paid between 40% and 60% of earnings as dividends but the next dividend is likely to be at the bottom of that range.

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