KEY POINTS:
Tower is to pay a dividend to its shareholders for the first time in five years after reporting a strong net profit of $34.6 million for its New Zealand and pacific businesses.
The insurance and fund management firm yesterday declared a 6c per share dividend would be available
to shareholders on February 5 with the option of re-investing it in Tower shares with a 2.5 per cent discount on the listed price.
The group has not paid a dividend since 2002 when shareholders received 28c per share for the year.
Since then it has significantly restructured and last year the Australian business split off to form a separate company listed on the Australian stock exchange.
Group chief executive Rob Flannagan, who joined the company just over a year ago, said the result had been within expectations.
"The dividend ratio is around 30 per cent of the share price - a similar level to the 2002 dividend when the share price of the combined group was around $5.
"Some analysts would argue that that is not high enough. But from the board's point of view it's a start. Whether that increases will depend on the performance of the business next year. The directors don't want to over promise on the dividend payout - we want to have a steady level," he said.
The dividend came as a surprise to analysts who had forecast a much weaker result from the group. Goldman Sachs JB Were analyst Rodney Deacon said he had predicted a payout of 2c per share.
"By far and away the result was much better than I thought it would be. It is a lot better than other analysts had predicted."
Forsyth Barr analyst John Cairns said that compared with the market it was still a relatively low dividend but the group appeared to be trying to make it sustainable. "The company is still in the early stages of restructuring. I think the market would prefer that the dividend was progressively increased rather than them having to cut it back," he added. Flannagan said the result had been driven by a focus on getting back to fundamentals.
"Before splitting from the Australian business Tower had lost its way. This year has been about getting the fundamentals back on track such as getting the right people, the right processes and technology aligned and focusing on customers and profit growth."
The strongest performer across the group was the health and life division where profit after tax was up from $19.1 million to $22.7 million while the general insurance division was up from $7.9 million to $12.4 million. The investment arm was up marginally from $6.8 million to $7.6 million.
Flannagan said it had undertaken a strategic review of the investment business this year after a decline for the past few years and it had now been refocused.
He said the group had made an active decision to make KiwiSaver a core part of its business and had invested more than $3 million in systems for both KiwiSaver and the portfolio investment entity changes introduced this year.
"It's a slow process but we have decided that it is a core part of our business and we are going to be in it for the long haul."
Flannagan said the strategy for the business would be more of an external focus on the market and developing new products to take advantage of opportunities presented such as PIE and KiwiSaver. Tower NZ shares closed yesterday up 10c at $2.12.
