AMP Limited (ASX: AMP) shares fell more than 7% after the company disappointed investors with lower final dividend and downgraded earnings expectation for the year ended 31 December 2018. The Financial Services company now anticipates declaring a final dividend of 4 cents per share, drastically lower than 14.5 cps final dividend declared in the previous corresponding period and 10 cents of interim dividend declared for FY18.
Although Fiscal 2018 results are in the process of completion, the company released its expectation to report an FY18 underlying profit of around $680 million and profit attributable to shareholders of approximately $30 million. It compares to the previous corresponding period’s underlying profit of $1,040 million and profit attributable to shareholders of $848 million. Needless to say, the guidance explains the dramatic downturn in the company’s operating performance beside bearing the operating loss for sold businesses.
The company now projects its total business unit operating earnings in the second half of Fiscal 2018 to be approximately $220 million. It includes $325 million earnings from a retained business that had been utilized to set-off the net operating loss of around A$105 million from the businesses subject to a sale agreement with Resolution Life.
However, AMP Limited confronted its downgraded profit expectation on the back of costs associated with the range of one-off transactions including Royal Commission response, portfolio review, increased investment in risk, governance and controls, and advice remediation. On the bright side, the company has managed to retain a strong capital position, with its Level 3 eligible capital above minimum regulatory requirements (MRR) expected to be in the order of A$1.6 billion as at 31 December 2018. AMP’s FY 18 results are reported to be announced on 14 February 2019.
Looking into Fiscal Year 2019, the company told upfront that its earnings of the retained business could be impacted by external market conditions, the implication of the future strategy and the regulatory environment. The other business-related factors that are expected to cast impact in FY19’s earnings include MySuper pricing change, Stranded group office costs of circa $40 million, and adjustment of tax and products transferring on sale to Resolution Life with an annual impact of approximately A$85 million (post-tax).
The company had made continued efforts to win investors’ confidence by reaffirming its commitment to return the majority of the net cash proceeds that it will receive on settlement of the transaction with Resolution Life to shareholders, subject to unforeseen circumstances. This sale transaction is due to be completed by 2H 2019.
But it seems investors were not convinced with the company’s capital distribution plan and decided to sell their position for AMP Limited shares. As a result, AMP stock price plunged 7.874% or $0.200 to last trade at $2.340 on 25 January 2019. It marks the tremendous volume of 31 million shares traded within a day.
Today, AMP last traded at a Price to Earnings multiple of 14.110 x with a market capitalization of $7.46 billion. The stock has even witnessed a massive negative price change of 51.15% over the past 12 months.
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