Tower is brimming with power

Jim Minto intends updating the market on Tower's dividend intentions today. Picture / Getty Images

Tower shareholders may get some welcome news today - the healthy first-half result the company is expected to deliver will increase chances it will pay a dividend later this year, the first since 2003.

The result will also be Tower's first under the new International Financial Reporting Standards which are expected to reduce the company's reported net assets by $234 million. However, despite that, and the company's A$145 million ($175 million) purchase of Australian rival PrefSure early this year, Tower's balance sheet and net profit are likely to show the company's recovery - from the disastrous writedowns and consequent share price collapse at the start of the decade - remains on track.

The company has indicated it is comfortable with consensus half-year, net-profit forecasts of $28 million to $32 million.

"We feel that the first-half result will confirm the business is travelling well," said First NZ Capital research manager Barry Lindsay. "Our firm is positive on the outlook for Tower, very much on the back of the boost to its critical mass and growth provided by that PrefSure acquisition."

Tower has said it wants to achieve "sustainable recurring profits" before resuming payouts.

"We'll look at a dividend next year on the back of what we hope will be a strong first half," said managing director Jim Minto at the company's full-year results briefing last November. Yesterday, Minto confirmed the company would be updating the market on its dividend intentions but gave no further information.

Forsyth Barr head of research John Cairns said news of a reinstatement of dividend payments was "on the cards".

"There's certainly been a significant turnaround in the Australian life risk part of the business, that seems to be going pretty well.

"The other thing is they've got a reasonably large part of their asset base in Australia when the currency obviously has a benefit there, too."

He said the company, which had "been to hell and back" over the past few years, was now looking pretty healthy and he estimated Tower could pay a 6c a share final dividend.

Tower's profits have surged in recent times, thanks to the booming Australian financial services sector.

However, investors and analysts will also be looking for indications the company has addressed problems with its local operations that emerged last year.

The business was hit by issues of poor service, restructuring charges, costly weather events and a more competitive insurance market.

Tower shares closed down 5c to $2.85 yesterday.