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Tower reports strong result

Tower shareholders will have to keep waiting to see a dividend.

Friday, May 26th 2006, 7:13AM
The company today announced a first half net profit after tax (NPAT) up 55 percent to $32.5 million.

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

Speaking from Sydney, Tower managing director Jim Minto said the company had enough cash reserves and free cash flows from its operations to consider a resumption of dividends.

"But we have 70,000 shareholders. With the trans-Tasman imputation regime there's significant leakage of franking credits," he said.

"At this point it's better for our shareholders to have the dividend in their share price, they receive the value in that form, than having us lose value paying money to them that's not going to be tax effective for the business."

Tower was looking at alternative methods of making distributions to shareholders and a distribution would be considered in late-2006, Minto said.

"So the emphasis has moved from whether we can, to how do we do it, and I'm pleased about that."

Group chief financial officer John de Zwart said a distribution could be through a share buyback, dividends or reinvestment back into the business.

Tower's total revenue from continuing operations in the six months to March 31 up 21% on the same period a year ago to $604.1 million.

Adjusted earnings per share on continuing operations were up 73% to 9c a share.

Among the group's business units Tower Australia's NPAT for the six months to March 31 was up 13% on the same period a year ago to $21.5 million.

In New Zealand NPAT was up 36 percent to 19.1 million for the half-year.

Within that figure, Tower Health & Life was up 35% to $11.1 million, Tower General Insurance up 33% to $5.2 million, and Tower Investments up 47% to $2.8 million.

Today's profit result did not include earnings from the acquisition of PrefSure in Australia as that purchase was completed on March 31. It lifted Tower to third position in the Australian life insurance market.

Minto described the six-monthly figures as a major improvement on last year's second half "dire story" for New Zealand businesses.

All businesses performed well, with much work going on to improve competitive performance and margins, he said.

Tower believed the environment in New Zealand was now "very attractive" for health insurance as the Government came under increasing fiscal pressure.

Tower wanted to see sales pick up in the New Zealand life business, which they had started to do "quietly".

De Zwart said that in New Zealand individual life sales were disappointing and individual life lapses continued the increase of the past year to near 20% resulting from service issues in 2005.

"A lot of investment has gone into rebuilding that service and also rebuilding the skill levels within that business," he said.

Minto warned the market to avoid getting carried away extrapolating the half-year results into the future, with net profit for the second half not expected to exceed that of the first half.

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