AMP share price up 11%, special 10c dividend and buybacks announced

AMP share price surges following H1 release

It seems as if AMP has a few tricks left up its sleeve.

Heading into the release of the firm’s first-half results, much was made of AMP’s seeming reluctance to comment on its capital management intentions in the wake of the $3.0 billion AMP life sale.

Shaw analysts said:

‘It’s expected that there won’t be anything material left for shareholders after paying for that strategy and the other mistakes of the past.’

While Citibank analysts argued that:

‘We continue to see low likelihood of a capital return and/or dividend alongside this result.’

AMP looks to have flipped that narrative on its head – today announcing a hefty special dividend as well as plans for an on-market share buyback. Such news likely contributed to the bullish run-up in the stock this morning, with AMP trading 11.59% higher, to $1.54 per share, a little before noon.

Looking at these developments in more depth, the AMP board said it would be using $344 million of surplus capital to issue a fully-franked, special dividend of 10 cents per share. The ex-dividend date for this special dividend has been set at 18 September.

In light of this special dividend and looking forward, AMP's Board said it does not expect to declare a final dividend.

In addition to that dividend, it was noted that AMP would pursue a $200 million on-market share buyback over the next twelve months.

Finally, AMP also announced that it would be repurchasing Mitsubishi UFJ Trust and Banking Corporations’ 15% stake in AMP Capital – in a deal valued at $460 million.

This move, said AMP’s Chief Executive Officer, Francesco De Ferrari, will provide:

‘Strategic flexibility for AMP to position the business for its next phase of growth under new leadership. We have an opportunity to build the best global private markets platform in the world, underpinned by our strength in real assets.’

Half-year results unpacked

Though AMP’s capital management initiatives will likely please income-focused investors, its H1 results – while not surprising given the company’s recent trading update – leave much to be desired.

Overall, accounting for the impact of Covid-19, AMP reported an underlying first-half profit of $149 million, well down on the prior corresponding period’s profit of $256 million. Ultimately, the coronavirus pandemic drove steep declines across AMP’s core business arms, with the firm reporting:

• Australian wealth management operating earnings of $59 million, down 43%
• AMP Capital operating earnings of $72 million, down 40%
• AMP Bank operating earnings of $50 million, down 30%
• New Zealand Wealth management operating earnings of $18 million, down 18%

Beyond those earnings results, AMP said it was on track to realise $300 million worth of cost savings by FY22 and finalise its customer remediation program by FY21.

Looking forward, Mr De Ferrari said

'With the second wave of COVID-19 impacting the economy here and overseas, we expect conditions to remain challenging. However, we also see opportunities over the longer term as we transform AMP to be a simpler, client-led and growth-oriented business.'

AMP last traded at $1.53 per share.

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