Tower leans towards Australia

The financial services group's head office shift to Sydney is just a matter of time, reports RICHARD BRADDELL.

It is not a matter of if but when for Tower's head office move to Australia.

Chief executive James Boonzaier indicated yesterday that it would be a logical move, with 70 per cent of the company's business and half its 300,000 shareholders in Australia.

Presenting an annual profit well ahead of prospectus forecasts, Mr Boonzaier said moving the financial services group's head office from Wellington to Sydney would soon be considered.

"I think at some point in time we will have to redomicile [Tower's] business - when is not clear," Mr Boonzaier said.

In a break from the traditional press conference in Wellington, Mr Boonzaier yesterday spoke to reporters via a satellite link from a press conference in Sydney.

Tower reported a maiden full-year net profit of $99.6 million, helped by a one-off non-taxable $18.9 million gain from the reinsurance of term business.

But even without that, the $80.8 million net profit was comfortably ahead of the $74 million prospectus forecasts and analysts' expectations of $76 million.

The result is another substantial milestone in Tower's Australianisation with 77 per cent of revenue, compared with 69 per cent last year, now coming from across the Tasman and 72 per cent of profits.

Buying Bridges Financial Services and IOOF Trustees had helped to fill a gap in Tower's Australian distribution that had been worrying analysts, but the share price continued to languish below net asset backing of $5.06 a share.

Though Mr Boonzaier said the share price was "far too low," it closed only 3c higher yesterday, at $4.85.

Substantial Australian growth had driven Tower's asset base 40 per cent higher to $22.1 billion but New Zealand had not kept pace.

NZ assets had slipped below $2 billion, revenue had dropped $14 million to $360 million and net profit, after tax, had fallen nearly $5 million to $23 million.

Asked if Tower had "dropped the ball" in New Zealand, Mr Boonzaier said the weaker performance had not been helped by challenging economic conditions.

He said investment had been weaker than expected, possibly due to higher interest rates making bank deposits more attractive, but the key problem area was in the health insurance business, which had suffered restructuring costs.

The health sector was now being revamped under the leadership of its new managing director, Jim Minto, who was also working on integration of the Axa Health operation bought last month.

Mr Boonzaier said there were no takeovers on the horizon, and Tower had its plate full with the Bridges, IOOF and Axa integrations.

"I can't say we are massively motivated to look for acquisitions at this point in time but that could change in six months."

He was lukewarm about the imminent sale of State Insurance, saying Tower had not yet examined the information memorandum.

While Tower would not rule out buying New Zealand's leading personal lines insurer, he said the benefits for Tower were not obvious.

It involved a lot of money which might be better spent elsewhere.

A fully imputed final dividend of 14c a share will be paid, making 28c for the year.