Ares withdraws from AMP bid as wealth manager’s financial results spell trouble

February 11 2021
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The bad news keeps rolling in for AMP, with the wealth manager reporting a significant drop in profit as its US bidder, Ares Management Corp, announces that it is backing out.

Australia’s wealth management giant reported an underlying net profit of $295 million in FY20 on Thursday, down from $439 million a year earlier, reflecting the impacts of COVID-19 on its business.

Meanwhile, AMP signalled that Ares Management Corp doesn’t intend to proceed with its non-binding indicative proposal for 100 per cent of AMP at $1.85 per share.

The wealth manager noted that it will “continue to engage constructively” with Ares as part of the portfolio review.

The review has found that AMP’s transformation strategy for the AMP Australia and New Zealand wealth management businesses is likely to be the optimal outcome for shareholders.

In a filing to the ASX, AMP revealed that its statutory net profit reached $177 million in 2020, reversing a $2.5 billion loss in 2019.

Its assets under management in Australian wealth management contracted by 8 per cent to $124.1 billion, primarily due to net cash outflows, which included early release of super payments, while AMP Capital suffered a 7 per cent drop.

As a result of a “tough” 2020, AMP also decided not to declare a final dividend for FY20, after paying $344 million to shareholders in the form of a 10¢ per share special dividend in the first half.

Instead, the board is said to be “committed” to restarting the group’s capital management initiatives, including the payment of dividends, share buyback and other capital initiatives in 2021. This, however, is subject to the completion of the portfolio review, market conditions and business performance.

“2020 was a tough year across the world. COVID-19 unsettled our clients, our workplaces and the broader community,” said AMP chief executive Francesco De Ferrari.

“Volatility in markets and the economic downturn impacted the investments and financial security of many Australians and New Zealanders.”

Looking ahead, the chief executive said AMP continues to focus on its “cultural transformation”, following last year’s revelation that Boe Pahari was being promoted to the chief executive role despite settling a sexual harassment claim in 2018.

“We have maintained focus on costs, with an acceleration of efficiency initiatives in 2H20, following increased investment in client support in the first half.

“Underpinning our strategy, we have also accelerated our cultural transformation and are determined to drive a culture of inclusion, accountability and high performance,” Mr De Ferrari said.

About the author

Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of nestegg and Smart Property Investment. Email Maja at [email protected]

About the author

Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of nestegg and Smart Property Investment. Email Maja at [email protected]

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