AMP Limited earnings results

CommSec CommSec

 

14 February 2019

Results ($m)

Full Year 2018

Full Year 2017

Change

Revenue 

8,286.0

18,439.0

-55%

Underlying Profit 

680.0

1,040.0

-34.6%

Significant Items 

710.0

125.0

+468%

Advice remediation/Royal Commission costs 

501.0

-

-

Net Profit after Tax 

28.0

848.0

-96.7%

Bloomberg Consensus 

30.8

 

 

Final Dividend ($)

0.04

0.145

-72.4%

AMP Limited (AMP) profits slide on advice remediation costs 

 

Results

  • Wealth manager, AMP Limited (AMP) posted its full year results. While most of its key metrics were pre-announced in late January, net profit fell by close to 97% to $28m. The result was not only slightly below the expectations of eight analysts surveyed by Bloomberg but also underwhelmed on its own guidance of “…approximately $30m” announced just three weeks ago.

Drivers

  • AMP attributed the plummeting earnings on advice remediation and the subdued performance of its wealth protection division (which it has decided to sell). The underlying result was boosted by positive momentum in AMP Bank and AMP Capital. AMP Bank’s earnings rose by close to 6% thanks to a reduction in costs and growth in residential mortgages. 
  • Customers pulled $4bn from its wealth management business over the year due to reputational damage following the Royal Commission. This compares to $931m of inflows in the prior year. It was held back by tighter margins, weaker markets and the transition of clients to lower cost products. 
  • AMP announced a number of leadership changes in recent months to navigate the challenges ahead. This included a new head of wealth management in Australia and New Zealand, a new Chief Operating Officer and changes in its wealth protection unit. This is the first result under the leadership of new CEO, Francesco De Ferrari, who joined the company on 1 Dec 18. 
  • AMP sold its wealth protection and mature businesses (life insurance) to Resolute Life for $3.3bn in a bid to streamline the company and reduce the capital intensity of its portfolio. It expects to complete the sale by the end of 3Q19. 

Dividend

  • A $0.04 per share dividend was declared, franked to 90% (pre-announced), payable 28 March and will trade ex-dividend on 27 February. While there is uncertainty surrounding future dividend payments, AMP currently has a dividend yield near 6% at current share prices. 

Outlook

  • Looking forward, AMP said it “remains committed to making the changes that are required to transform the business and reposition it to deliver significantly better performance and value over the long term”. AMP expects approximately $35m per annum in one-off costs over the next two years to strengthen risk management and a $100m increase in controllable expenses due to higher professional indemnity insurance costs.  

Share price

  • AMP shares more than halved in value in 2018 and have slumped further following today’s results.

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