AMP Limited has reported a net profit of A$704 million for the financial year to 31 December 2012 [1], compared with A$688 million for FY 11 [2].
Underlying profit [3] was A$955 million compared with A$909 million for FY 11. The Board has declared a final dividend of 12.5 cents per share, the same rate as the 1H 12 interim dividend. This represents a payout ratio of 76 per cent for FY 12 of underlying profit and is within AMP’s target range of 70-80 per cent of underlying profit. The dividend will be 65 per cent franked, with the unfranked amount being declared as conduit foreign income.
Shareholders will be invited to participate in AMP’s dividend reinvestment plan (DRP), however no discount will apply to the DRP allocation price.
Performance against key measures:
- Underlying profit: A$955 million in FY 12. This includes A$464 million for 2H 12 up 3.1 per cent compared with 2H 11.
- Cost to income ratio: 47.3 per cent for FY 12 and 48.4 per cent for 2H 12, falling 2.2 percentage points from 2H 11. Group-wide controllable costs fell 3 per cent in 2H 12 compared with 2H 11 – in line with market guidance. Group-wide controllable costs are expected to be around 2 per cent lower in FY 13.
Growth measures:
- AMP Financial Services (AFS) net cash inflows were A$1,152 million, up from net outflows of A$581 million in FY 11 reflecting the ongoing success of Flexible Super, the North wrap platform and AMP’s new SMSF business unit.
- AMP Capital external net cash outflows were A$1,784 million compared with net cash outflows of A$1,166 million in FY 11. Improving cash inflows were offset by the internalisation of the management of DUET (A$1.2 billion) and net outflows from retail Japanese clients (A$1.2 billion) following regulatory change in Japan and reflecting the strong Australian dollar.
- AMP Financial Services value of risk new business was A$203 million, down from A$215 million for FY 11.
- Underlying return on equity: 12.8 per cent for FY 12 compared with 15.1 per cent for FY 11. This reflects an expanded capital base following the merger with AXA, proceeds from the sale of a 15 per cent interest in AMP Capital to MUTB and use of the dividend reinvestment plan to build a buffer ahead of changes in regulatory capital requirements.
AMP Chief Executive Officer Craig Dunn said the company’s result demonstrates good momentum in earnings, particularly in AMP’s AUM driven businesses.
In Wealth Management and AMP Capital, operating earnings in 2H 12 were up on 2H 11 by 21 and 42 per cent respectively. This demonstrates the operating leverage of both these businesses to improving market conditions while maintaining disciplined cost control.
“The strong performance of our Wealth Management business reinforces the benefits of the merger with AXA, with a suite of contemporary products and services that cater for all key market segments, supported by Australia’s leading financial advice network,” Mr Dunn said.
Following the merger with AXA, planner and adviser numbers have continued to grow strongly in Australia, while the success of the North platform has helped to grow market share in superannuation and retail managed funds strongly over the past 12 months [4].
“The ongoing strengthening of our core Australian business, along with our expansion into the self-managed fund sector and selected offshore markets through AMP Capital, continue to provide further opportunities for growth,” Mr Dunn said.
[1] AMP’s FY 12 profit metrics exclude MUTB’s 15% share of AMP Capital’s earnings from 1 March 2012.
[2] The FY 11 results included only nine months’ contribution from the former AXA business, so in some instances like for like comparisons are not always meaningful. Therefore where appropriate, results for 2H 12 are compared with 2H 11 to provide more useful comparisons.
[3] Underlying profit is the basis on which the AMP Board determines the dividend payment and reflects the business performance of AMP. It is AMP’s preferred measure of profitability as it removes one off costs and some of the impact of investment market volatility.
[4] Source: Plan for Life 30 September 2012 – QDS Retail & Wholesale.
