Tower wary despite firm start

Tony Gibbs, Tower chairman. Photo / Greg Bowker

Insurance and fund manager Tower says it has made a good start to its financial year but expects conditions to remain tough.

Speaking at the company's annual meeting in Auckland yesterday chairman Tony Gibbs said the first three months of the NZX-listed company's financial year were ahead of last year.

"Without going into details, I can say that for the first three months of the year, that is through to December 31, results are tracking ahead of the same period last year and the board is pleased with its performance."

The company made a net profit of $50.1 million in the year to September 31, 2009 and Gibbs said the company was in line to match that or do slightly better.

But Gibbs said the financial services sector faced an unprecedented degree of regulatory change this year in both the life insurance sector and the regulation of financial advice.

It was also facing prudential supervision of insurance businesses by the Reserve Bank and changes to the anti-money laundering regulations.

But Gibbs did not believe the regulatory changes would hit the company's bottom line.

"I don't think the bottom line is necessarily going to go down."

Managing director Rob Flannagan said the company also expected market conditions to remain challenging.

"There are good signs that the economy is improving but we are not through the downturn yet."

But Gibbs said the company was well placed to continue with its consistent performance and was still looking for growth opportunities.

At its full year results announcement at the end of last year the company signalled it was looking for potential acquisition targets.

Gibbs said Tower had looked at several opportunities already but they had not come up to scratch.

"We have looked at several opportunities but they don't come up to the standard we want."

Gibbs said the acquisition would likely be in the range of $100 million.

Tower is in the process of completing a systems upgrade and has spent millions on the project which it expects to complete in the next 18 months.

Gibbs he was looking for an acquisition that could bolt on to the company's existing business. But he ruled out a sale of shares by major shareholder Guinness Peat Group of which Gibbs is New Zealand director.

Gibbs and fellow director Susie Staley were both re-elected at the meeting.

Tower's share price yesterday closed up 3c at $1.94.