AMP Ltd (ASX: AMP) is financial services company in Australia and New Zealand. AMP specialises in providing personal and business financial services that include superannuation and investment products, insurance, financial advice and a range of banking products such as home loans and savings accounts. Its market capitalisation is $A6.3 billion.
What are the key features of AMP FY19 (calendar year 2019) results?
- Total operating earnings for FY19 is A$554 million, down 25.3% compared with the corresponding period.
- Underlying net profit after tax (NPAT) for FY19 is A$464 million, down 46% compared with the corresponding period.
- FY19 net loss attributable to shareholders of A$2.5 billion largely due to impairments taken in 1H 19 of A$2.35 billion (post-tax) to address legacy issues and position AMP for the future.
- AMP has not declared a final dividend for FY19. This position will be reviewed after completion of the AMP Life sale.
- Earnings per share (underlying) for FY19 is A14.8 cents per share, down 36% compared with the previous period.
What are the key drivers of this result?
Performance from business operations are as follows:
- Australia Wealth Management operating earnings for FY19 is down 49.9% compared with the corresponding period.
- Cashflows were impacted by weaker external inflows and higher outflows, reflecting ongoing reputational impact and strong competition.
- Concerns surrounding the findings from the Hayne Royal Commission along with the costs associated impacted the result
- AMP Bank operating earnings for FY19 is down 4.7% compared with the corresponding period.
- Operating earnings is down mainly reflecting an increase in regulatory and compliance project costs. In addition, net interest rate margin has remained on the lower end due to Australia being in a low-interest rate environment. Net interest rate margin was sustained at 1.69% in FY19.
- AMP Capital operating earnings was up 18.6% compared with the corresponding period.
- This positive result was driven by growth in infrastructure, real estate and continued interest from global investors in real assets drove positive external net cashflows of A$2.5 billion.
- New Zealand Wealth Management operating earnings was down 17% compared with the corresponding period.
- The result was driven by increase competition in the sector and the wind-up of two legacy products including AMP life.
What is the outlook for AMP?
AMP has committed to re-brand the business after the concerning findings from the Hayne Royal Commission. AMP have committed approximately A$450 – 650 million in total investment in FY20 to revitalise the company.
HY20 controllable costs are expected to be approximately A$810 million. Reflecting the removal of AMP Life (A$170 million), cost reductions (`A$90 million) and reinvestment in strategy (A$50 million) are expected. AMP capital HY20 controllable costs expected to reflect 60-65% cost to income ratio.
What is the market reaction to AMP FY19 results?
The market reaction to AMP FY19 results is negative. AMP is down 3% and is currently trading at A$1.77.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.