AMP Limited (ASX: AMP) shares went into a trading halt as the diversified financials business released its June 2019 report.
AMP is a diversified financial services company which has its primary operations in financial advice, including financial planning and wealth management. A big part of its business is licensing other planning groups to provide advice. AMP also has capabilities in investing (AMP Capital), banking and insurance.
What Did AMP Announce?
AMP reported a half year net loss of $2.3 billion, largely due to a $2.35 billion impairment after tax to address legacy issues and position AMP for the future.
Looking at the business units, all of them except AMP Capital experienced a fall in their operator earnings. Total operating earnings dropped by 31% to $347 million.
As part of the plan to reinvigorate the business, AMP is asking shareholders for $650 million in the form of a capital raising to immediately get on with its plans.
However, AMP did announce that it has a revised agreement for the sale of AMP Life to Resolution Life with updated terms. It will consist of a $3 billion consideration with $2.5 billion in cash and $500 million of equity interest in Resolution Life Australia. This is expected to complete in the first half of AMP’s FY20. But this remains subject to regulatory approvals in Australia, New Zealand and China.
The new AMP strategy will take three years and will include a shift to direct-to-client channels and digital solutions. it will also fix its legacy issues by reshaping aligned advice through buyback changes and with fewer & more productive advisers. This will hopefully fix some of the issues raised in the Royal Commission.
The AMP Board has decided not to pay a first half dividend and will maintain a consistent approach until the completion of the sale of AMP Life.
After the sale, AMP expects to target dividend payout ratio of 40% to 60% of net profit after adjustments.
Is AMP A Buy?
It’s good to hear the AMP is taking some of the painful steps needed to turn the business around. However, investors taking part in the capital raising will be hoping they are not throwing good money after bad.
AMP has a long road ahead and it’s not on my watchlist due to all of the issues, I think there are other options to consider that could provide a better ride for investors such as the shares in the free report below.
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At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.