Craig Meller
AMP Limited has reported a net profit of A$507 million for the half year to 30 June 2015 [1], up 33 per cent on A$382 million reported for 1H 14.
Underlying profit[2] was A$570 million compared with A$510 million for 1H 14, up 12 per cent half on half, driven by strong growth in all contemporary businesses.
The Board has declared a 12 per cent increase to the interim dividend to 14 cents per share compared with 12.5 cents per share for the 2014 interim dividend. This represents a payout ratio of 73 per cent of underlying profit and is within AMP’s target range of paying 70-80 per cent.
“This is a very good result with contemporary businesses continuing to deliver growth,” said AMP Chief Executive Craig Meller.
“The performance reflects a strong contribution from our core Australian business. The continuing delivery of our strategy to be a more customer driven organisation and our business efficiency program are on track.
“Together with the improvements across our Australian businesses, it is also particularly encouraging to see strong progress from our partnership in China,” Mr Meller said.
Key performance measures
- Underlying profit: A$570 million in 1H 15, up 12 per cent on 1H 14.
- Cost to income: The cost to income ratio was 43.1 per cent for 1H 15, an improvement of 1.9 percentage points on 1H 14. Controllable costs increased 1.1 per cent.
- Cashflows:
– AMP Australian wealth management net cashflows were A$1.2 billion in 1H 15, up A$36 million on net cash flows of A$1.1 billion in 1H 14. Total cashflows on AMP platforms continue to perform strongly, growing 11 per cent to A$1.9 billion in 1H 15. These flows were partially offset by higher net cash outflows on external platforms of A$774 million.
– AMP Capital external net cashflows were A$3.0 billion, an increase of A$1.4 billion from net cashflows of A$1.6 billion for 1H 14. This was driven by stronger inflows generated by the China Life AMP Asset Management joint venture as well as institutional and retail domestic client flows. - Underlying return on equity: Increased 1 percentage point to 13.5 per cent in 1H 15, largely reflecting the increase in underlying profit.
In wealth management, operating earnings for 1H 15 were up 13 per cent compared with 1H 14, reflecting stronger net cashflows and investment returns alongside a continued focus on managing costs.
In wealth protection, operating earnings were A$99 million, up 9 per cent half on half, reflecting the impact of management actions. The environment continues to be volatile however claims and lapse outcomes remain in line with best estimate assumptions.
“The wealth protection business continues to stabilise and is delivering improved results, however we have more to do,” Mr Meller said.
Other key highlights
AMP Capital delivers strongly: Operating earnings increased 26 per cent reflecting stronger performance fees and supportive market conditions for much of the half. There was a A$1.4 billion improvement in external net cashflows[3] to A$3.0 billion, strong investment performance led by flagship funds and the continued success of the internationalisation of the business. The cost to income ratio of 58.7 per cent is below the target range of 60-65 per cent largely because of strong performance fees in 1H 15.
North AUM grew 16 per cent to A$18.6 billion: Customer numbers increased 14 per cent on the North platform to over 87,000 and North AUM increased A$2.6 billion to A$18.6 billion since December 2014. However net cashflows fell 4 per cent to A$2.3 billion for 1H 15 largely as a result of more pension customers drawing down an income stream.
AMP Bank performs well: The bank delivered A$50 million operating earnings, up 19 per cent compared with 1H 14, reflecting an increase in residential mortgages and improved net interest margin. AMP aligned advisers contributed almost a quarter of new business in a period of intense competition.
Future of advice strategy: A package of measures to lift the quality of advice is underway alongside a new approach to advice being piloted with encouraging results from consumer testing in five locations. AMP continues to invest in service, platforms and digital capability to improve adviser quality and productivity. Australian adviser numbers are stable at 3,762 in a period of considerable change.
New Zealand: Operating earnings of A$61 million, up 11 per cent compared with 1H 14, reflecting a turnaround in experience, favourable currency movements and costs being tightly managed. Cashflows continue to reflect the success of KiwiSaver, with KiwiSaver AUM up 20 per cent to NZ$3.7 billion.
Capital management
AMP has A$2.3 billion capital above minimum regulatory requirements at 30 June 2015, up from A$2.0 billion at 31 December 2014. The increase is due to retained profits and the AMP Wholesale Capital Notes issuance, but partially offset by AMP’s investment in China Life Pension Company in Q1 2015.
AMP maintains a strong balance sheet, with little change to gearing and has access to significant liquidity.
AMP will again offer a DRP to eligible shareholders and no discount will apply to the allocation price. Shares will be bought on market and the dividend will be franked to 85 per cent, up from 70 per cent 1H 14, with the unfranked amount being declared as conduit foreign income.
——–
[1] AMP will again offer a DRP to eligible shareholders and no discount will apply to the allocation price. Shares will be bought on market and the dividend will be franked to 85 per cent, up from 70 per cent 1H 14, with the unfranked amount being declared as conduit foreign income.
[2] AMP’s profit measures exclude MUTB’s 15 per cent share of AMP Capital’s earnings. Underlying profit is AMP’s key measure of business profitability.
[3] Includes AMP Capital’s 15 per cent share in cashflows of China Life AMP Asset Management joint venture.
