Tower slumps on back of Bridges writedown

New Zealand based financial services groupTowerhas announced a $32 million writedown of its Australian financial planning business,Bridges Financial Services, to record a $68.9 million loss for the year to September 30, 2002.

The loss, the first ever for the trans-Tasman group as a listed company, compares to a $68.7 million profit for the year to September 2001.

In what Tower chairman Colin Beyer described as a “most disappointing result”, Tower’s bottom line was also hit by a $23.20 million loss as a result of downcast investment markets, a $27.7 million loss due to IT write-offs and a $39 million loss due to the poor performance of its Australian business.

The writedown of the Bridges business, the result of a recent valuation of the company by Deutsche Bank, comes just two years after Tower paid $168 million for the financial planning group.

The writedown also coincides with plans by Bridges to implement more generous income sharing arrangements with financial planners.

The changes, to come into effect from next April, will see financial planners get a better share of income from the group’s master trust, as well as better cut of commissions for recommending the group’s other investment products.

It is expected the changes will result in a 20 per cent drop in the profitability of Bridges for at least the next two years.

However Bridges managing director David Bleakley says the group would eventually recoup the profits by boosting funds under management through its previously stated goal of increasing the number of its financial planners.

Bleakley has also denied the instability of the Tower group was causing concern amongst Bridges planners, particularly in Western Australia where there was speculation the Perth based office was looking to pull away from the group.

“I was in Perth yesterday and I am confident they will stay with Bridges,” Bleakley says.

The announcement of the poor Tower result today caps off a difficult year for the group, which included the departure of both its long standing group managing director James Boonzaier and group chief operating executive Ken Boag.

In late October, Tower was also forced to halt trading in its shares after admitting its interim performance results would not live up to market expectations.