Tower says first quarter on budget as Australian division improves

11.45am

Financial services company Tower Ltd said today that trading in the first quarter was in line with budget and its troublesome Australian division had returned to profit.

Tower chairman Olaf O'Duill told shareholders at today's shareholder meeting that "despite a dreadful overall result for the year, we did return to modest profitability in the second half".

"In the first quarter of the current financial year, I am pleased to advise a profit in line with our budget and most particularly, a return to profitability for Tower Australia, a good sign, as at the same time the previous year (it) was losing money."

The company raised $210 million to strengthen its balance sheet last year.

Mr O'Duill said that net tangible assets were not a good indicator of the company's worth and he felt the company was fairly valued, "perhaps even a little conservative".

"The board's intention is to add to the group's inherent value through enhanced profitability and sound business strategies."

Local and international investment markets had been recovering over the past nine months, which would obviously help financial performance throughout the sector.

"We are halfway through our two-year programme of remedy and renewal. I look forward to the prospect of advising you of a significantly improved outcome next year," he said.

A proposal to grant $2 million of share options to Tower's new managing director, Keith Taylor, is set to meet shareholder opposition at the meeting.

Shareholders are expected to vent their wrath at the meltdown of Tower's share price in the last 18 months. Tower is still in the midst of recovery after a shake-up that has seen it shed 320 staff in the past two years.

It posted a $149 million loss for the September 2003 year.

Other contentious issues likely to raise the temperature of the annual gathering are Tower not seeking retrospective ratification of the payment of hundreds of thousands of dollars in directors' fees to subsidiary boards of Tower, and a change to Tower's constitution relating to employees' share option schemes.

Flexing its muscles, the New Zealand Shareholders' Association will be voting proxies it holds against the issue of 1.5 million share options to Mr Taylor at an exercise price of $1.39.

The association considers the options scheme too easy for Mr Taylor. The options are almost "in the money" already with the shares trading at $1.33 yesterday.

There are also no performance hurdles to scale before he is allowed to exercise them. Mr Taylor would be able to exercise the options in September 2005 or earlier if he left his position at Tower, according to the resolution that will be put to shareholders.

Tower shares were down 1c at $1.36 today.

- NZPA