Shareholder update – 10 August 2023
The announcement of AMP’s 2023 half year results provides an update to shareholders on the performance of the business, our capital return program and the Board and management’s continuing commitment to deliver a more streamlined and cost-efficient AMP that is well equipped to reposition itself for future success and growth.
It is the Board’s responsibility, as we guide AMP through its next chapter, to ensure that we have a strong and well capitalised business to navigate the current uncertain economic environment and continue to improve performance for all stakeholders. In that light, AMP remains focused on delivering on our purpose – helping people create their tomorrow through our five operating businesses: AMP Bank, Platforms, Master Trust, Advice and New Zealand Wealth Management.
For the first half of 2023, AMP delivered an underlying net profit after tax (NPAT) of $112 million, in line with 1H 22. This reflects improved underlying profit across our businesses, including in our growth businesses, AMP Bank and Platforms, while we continued to reduce losses in our Advice business. These positive results were offset by reduced revenue from assets under management due to the long-term strategic simplification of our Master Trust business, and lower strategic partnership earnings based on external market valuations.
Controllable costs were in line with 1H 22, with the negative impacts of inflation, and costs incurred due to recent divestments, positively offset by successful ongoing cost reduction initiatives.
Key business highlights for 1H 23:
· AMP Bank delivered above system growth in the mortgage book, reflected in a 23.9% increase in underlying NPAT to $57 million.
· Platforms underlying NPAT rose 25.7% to $44 million.
· The underlying NPAT loss in Advice improved 16.7% to $25 million, with ongoing improvements in variable and controllable costs.
Moreover, the sales of the AMP Capital and SuperConcepts businesses, together with the introduction of a more streamlined management structure mark significant milestones as we continue to focus on delivering on our promise to create value through simplification of AMP’s business.
Capital and shareholder return
We have returned $610 million of capital to shareholders since last August, via the FY 22 final dividend and our on-market share buyback. $140 million is expected to be returned in the coming months, starting with the 1H 23 interim dividend of 2.5 cents, 20% franked (to be paid 29 September), with the remainder to be delivered through our on-market share buyback. This will amount to $750m of capital returned to shareholders.
Our capital management initiatives have underpinned earnings per share growth of 11.8% on 1H 22 to 3.8 cents per share.
In July, we received the judgment in the Financial Adviser class action, which relates to AMP’s changes to the Buyer of Last Resort (‘BOLR’) policies in 2019. In response management has booked a provision of $50 million for the half year, reflecting a current assessment of the potential liability related to the various advice practices that were subject of the judgment. Until final court orders are received the pathway to resolution of this matter remains unclear, however sensible resolution is a clear priority for the company and provides an opportunity to put another legacy issue behind us.
We remain absolutely committed to returning surplus capital to shareholders. However, with the uncertainty surrounding litigation matters we must remain vigilant towards capital and liquidity. Considering this, the Board has agreed for the third tranche of capital return of $350 million to be temporarily paused, with an update to the market to be provided by 31 December 2023.
Delivering further cost efficiency
Critical to the success of the business is ensuring we operate efficiently and sustainably. Management has outlined a pathway to reduce the total controllable costs for the business going forward by $120 million by FY 25. To achieve this we will require a one-off investment in the range of $120 - $150 million over the next two years and will focus on initiatives including technology simplification, removing costs associated with asset sales, reducing group costs, and continued focus on efficiency within the Advice and Master Trust businesses. Cost efficiency will continue to be an ongoing focus for the group.
Customer, culture and community
In the first half of the year AMP made more than $1.0 billion in customer retirement payments; we supported 4,295 customers with new home loans; and we continue to proactively engage to assist customers experiencing increased financial pressure due to the rising interest rates and high inflation.
Also, earlier this year we celebrated the 30th anniversary of the AMP Foundation. As one of Australia’s largest, independently funded corporate foundations, the AMP Foundation continues to demonstrably grow its strong and proud legacy of positive social impact investment.
During this time the Board has also continued to actively engage with shareholders and other stakeholders to ensure that we understand and continue to respond to governance expectations.
AMP remains focused on delivering on its strategy to simplify its operating model, repositioning the businesses for success in their respective markets, and exploring new opportunities for growth. We are focused on aligning the cost base to reflect the shape of the business going forward. The renewed executive committee structure, which has each of our operating businesses represented at the executive table, reaffirms our focus on growing and improving our business units and driving cost reduction through efficiency initiatives.
We have a clear plan to deliver on our strategy, and the AMP Board remains committed to high standards of governance as we steward the organisation through this changing environment.
Thank you for your support, as we work towards a simpler, purpose-led and customer-focused AMP that drives value creation.
Chair, AMP Limited