Craig Meller
AMP Limited has reported a net profit of A$884 million for the full year to 31 December 2014[1], up 32 per cent on A$672 million reported for FY 13.
Underlying profit[2] was A$1,045 million compared with A$849 million for FY 13, up 23 per cent year on year, driven by double digit growth in operating earnings across all contemporary businesses.
The Board has declared a 17 per cent increase to the final dividend to 13.5 cents per share compared with 11.5 cents per share for the 2013 final dividend. This represents a FY 14 payout ratio of 74 per cent of underlying profit and is within AMP’s target range of paying 70 to 80 per cent of underlying profit.
Chief Executive Craig Meller said: “An increase of 23 per cent in underlying profit reflects a strong result in our domestic franchises of wealth and investment management, targeted offshore expansion and improving performance in our wealth protection business.
“In 2014 we made marked progress on our strategy to be an increasingly customer-driven organisation that is leaner and more efficient. The other element of AMP’s strategy, to invest selectively in Asia and take our expertise into new markets, is starting to deliver good cashflows with strong long-term growth potential.
“These results demonstrate that we are executing well on our strategy and the potential of AMP’s business model,” Mr Meller said.
Performance against key measures:
Underlying profit: A$1,045 million in FY 14, up 23 per cent on FY 13.
Cost to income ratio: The group cost to income ratio was managed tightly to 44.8 per cent for FY 14, down from 49.4 per cent in FY 13. Controllable costs increased 1.1 per cent and are tracking in line with guidance having been impacted positively by the business efficiency program.
Cashflows:
- Australian wealth management net cashflows were A$2.3 billion in FY 14, up A$115 million on net cashflows of A$2.2 billion in FY 13. AUM rose 9 per cent over the year to $109.5 billion, against a relatively flat Australian market. Total net cashflows on AMP platforms continue to perform strongly, growing 35 per cent to A$3.6 billion in
FY 14. - AMP Capital external net cashflows were A$3.7 billion, a A$4.8 billion improvement from net cash outflows of A$1,039 million in FY 13.
Underlying return on equity: Increased to 12.7 per cent in FY 14 from 10.7 per cent in FY 13, reflecting the 23 per cent increase in underlying profit.
In Australian wealth management, operating earnings for FY 14 were up 13 per cent compared with FY 13, reflecting higher net cashflows supporting good growth in AUM and disciplined cost control in a growing business.
Australian wealth protection has recovered well with operating earnings of A$188 million compared with A$64 million in 2013.
“Pleasingly the wealth protection business improvement plan is delivering results and our focus is now on ensuring the changes are sustained with continued improvement to processes, products and culture,” Mr Meller said.
Other key highlights include:
- AMP Capital’s improved performance: Operating earnings increased 16 per cent reflecting strong fee growth and investment returns. The internationalisation of the business drove this with global investors attracted by leading infrastructure and property capabilities alongside new inflows generated by the China Life AMP Asset Management joint venture and improved flows from the MUTB alliance. The cost to income ratio of 63 per cent was within AMP Capital’s target range of 60 to 65 per cent.
- Seventh quarter of more than A$1 billion net cashflows on North platform: Net cashflows improved 34 per cent to A$5.5 billion for FY 14 and North AUM grew 66 per cent to A$16 billion since December 2013. North also had 50 per cent growth in customers with a total of over 76,000 customers on the platform in 2014.
- AMP Bank: The bank delivered A$91 million in operating earnings, up 10 per cent compared with FY 13, reflecting an increase in residential mortgages with AMP growing above system in an intensely competitive environment and AMP aligned advisers contributing a quarter of new business.
- New Zealand achieved improved cashflows: Operating earnings of A$110 million, up 13 per cent compared with FY 13, reflecting growth in profit margins, experience profits and favourable currency movements.
- Future of advice strategy: A package of measures to lift the quality of advice is being introduced along with a new approach to advice being piloted in five locations. AMP is also investing in services, platforms and digital capabilities to improve adviser quality and productivity. Australian adviser numbers are up slightly at 3,844 in a period of regulatory uncertainty.
Capital management
AMP continues to hold an appropriate capital surplus, with A$2.0 billion capital above minimum regulatory requirements at 31 December 2014, down from A$2.1 billion at 31 December 2013. The decrease was driven by the redemption of AMP Notes and the impact of falling bond yields, partially offset by retained profits and other capital impacts.
AMP maintains a strong balance sheet and has access to significant liquidity.
AMP continues to offer a DRP to eligible shareholders and no discount will apply to the allocation price. Shares will again be bought on market and the dividend will be 80 per cent franked with the unfranked amount being declared as conduit foreign income.
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[1] AMP’s profit measures exclude MUTB’s 15 per cent share of AMP Capital’s earnings.
[2] 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, the impact of some investment market volatility and accounting mismatches.