TOWER's operating profit up 67% to NZ$43 million 

TOWER Limited today reported strong operating earnings growth for the Financial Year ended 30 September 2005 with NPAT (excluding revaluations, amortisations and revenue from the spin-off of Australian Wealth Management) of NZ$42.7 million, up 67%. 

The result was at the upper end of the guidance range announced this month and in line with revised market expectations.

The total NPAT for the 2005 year was NZ$97.8 million which included a NZ$23 million gain on the sale of AWM. This was an increase of 79% compared with 2004.

Earnings per share - excluding the profit on the sale of AWM, goodwill, amortisation and revaluations - increased by 82% from NZ6.2 cents to NZ11.3 cents.

In line with a prudent capital management program to support future growth and while final details of International Financial Reporting Standards are being worked through, the Board of Directors has decided there will be no dividend for the reporting period.

The year’s encouraging operating result was achieved despite a tough second half for the NZ insurance businesses.

TOWER Group Managing Director, Mr Jim Minto, said his new management team had created momentum for further growth in Australia and New Zealand for the 2006 financial year.

Highlights for TOWER Australia in 2005 included:

• Net profit after tax increased from NZ$23.2m to NZ$35.1m;
  
• Strong growth (more than 40%) in life insurance sales for the year to June 2005 - a rate almost triple that of the overall market;
  
• Income protection sales up 53% - one of the highest growth rates in the market;
  
• Continued reduction in lapse rates;
  
• Ongoing success in group risk market with TOWER winning the mandate to supply life insurance to Telstra Super; and
  
• Solid contributions from investment earnings.

Highlights for TOWER New Zealand in 2005 included:

• Net profit after tax from the investment business increased 26% to NZ$2.4m;
  
• TOWER NZ Investments was awarded “Fund Manager of the Year” and remains New Zealand’s second largest wholesale fund manager with an 18% share of the market; and
  
• The general insurance business recorded a NZ$1.6m underwriting profit (compared with a NZ$5.7m loss for 2004) and together with investment income of NZ$18.1m, delivered a 59% increase in NPAT to NZ$12.6m.

The operating result for the NZ insurance businesses was affected by issues of poor service early in 2005 and is below management expectations.

“The TOWER Health & Life business, while recording a lower profit, is being vigorously renewed and we are working hard on increasing staff skills, building our competitive strategy and the value we provide to our customers,” Mr Minto said.

In Australia, TOWER continues to look to grow its retail and group life insurance businesses both by increasing market share and addressing the underinsurance gap. TOWER Australia’s investment business is developing a strategy to place it as a specialist provider in a growing market.

“We have taken decisive action this year to give us a stable, reliable and sustainable platform for growth and improved performance in NZ while in Australia, the team is focused on building on recent market achievements,” Mr Minto said.

“TOWER Limited’s priorities are to increase returns on shareholders’ funds and deliver quality customer service.

“We are working to become more competitive and to increase our growth rates where we can do this profitably.  Our goal is to maintain the momentum achieved in 2005 and to accelerate TOWER’s performance in 2006,” he said.

Back to Archived Announcements 2005