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Tower crawls back but problems remain

By Duncan Bridgeman

Friday 28th November 2003

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Tower shares took a further pasting yesterday morning as investors appeared to dismiss the company's story that it had turned the corner.

At noon yesterday Tower shares had tumbled another 6c, or 4.7% to $1.23, following a 4.5% drop on Wednesday when the insurer reported a worse than expected $149 million annual loss.

The result, mainly due to writeoffs from changes in accounting policy, was softened by news the troubled transtasman group had traded back into profitability, with a $5.5 million net profit for the second half.

Tower's problem area continues to be in Australia, where the division lost $13.1 million for the year and $6.6 million in the six months to September 30.

However, despite expecting more one-off costs, Tower Australia was budgeting for a financial profit this year, chairman Olaf O'Duill said.

Mr O'Duill said the improved second half reflected more favourable investment conditions and the reduced impact of one-off items including writedowns in carrying values.

Group managing director Keith Taylor said yesterday Tower Australia was making steady progress but continued to experience significant costs in repositioning the division in respect of compliance issues.

"We overpaid some people more than we underpaid in terms of withdrawal benefits," he said.

He said the company had included a provision of about $4.5 million that covered both compensation and remedial actions.

Tower, 17.7% owned by Guinness Peat Group and 9.7% by Hanover Group, has culled much of its senior management after nine months of a two-year recovery mission.

The company has also sold a business and bolstered its balance sheet through a $210 million rights issue, the proceeds of which were used to repay debt and reduce the company's gearing from 45% to 22%.

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