Aus & NZ: AMP Capital’s offshore push offsets group woes

08 August 2018 - 12:00 am UTC

AMP Capital is defying its troubled parent company’s profit slump for the first half of its 2018 financial year as its overseas expansion continues to drive growth.

AMP Ltd revealed a statutory profit dive of 74% to AUD 115m (USD 85.4m) for the six months to 30 June on Wednesday (8 August), although the “underlying profit” fall excluding one-off factors was 7% to AUD 495m.

Excluding minority stakes in the business, AMP Capital reported a YoY 2.2% rise in profit for the half to AUD 94m. Fee income rose 3% to AUD 360m.

AMP Capital was again one of three of AMP’s six business divisions that recorded growth in the half – alongside AMP Bank and its wealth management business.

The wealth manager is battling a huge backlash following revelations of malpractice and fees-for-no-service at AMP and other institutions from the ongoing financial services royal commission, which is now examining the superannuation sector.

“Advice remediation and related costs” and the Royal Commission accounted for about AUD 325m of the one-off costs that were discounted from AMP’s underlying results.

On the question of spinning off parts of the AMP business in the wake of the scandal, acting chief executive Mike Wilkins would not be drawn on future plans beyond what has already been announced.

“We are looking at all options available to us, we just have to weigh them up,” he said, but noted the current priority was to focus on stabilising the business as a whole after a period of major tumult and appointing a new board of directors.

He noted, however, there have been talks with outside parties on possible business divestments.

Offshore investment

The growth in client fees was offset by investment in “real asset capabilities”, including infrastructure and property, plus its ongoing investment in assets offshore, which includes the Australian asset manager’s venture with China Life.

At the end of the half, AMP Capital was managing AUD 14.2bn in assets for 295 direct international institutional clients and had an additional AUD 5.2bn in uncalled, committed capital available for deployment, with AUD 2bn earmarked for committed transactions yet to close.

AMP Capital invested AUD 1.5bn in new real estate and infrastructure during the first six months of 2018 including snapping up a 49% stake in London’s Luton Airport. 

It has also made several other European acquisitions including primary care centres in Ireland.

The division’s external net cashflows continued to fall, as a result, and were down by AUD 800m to AUD 1.6bn in 1H18 compared to 1H17. The drop was also attributed to a fall in cashflow from China Life (blamed on seasonal client redemptions and regulatory reform), offset by a doubling of its international cash balance.

Assets under management at China Life AMP Asset Management rose to AUD 38.4bn, up 3%. This was attributed to the launch of new diversified, equity and fixed income funds.

AMP Capital also owns a 22% stake in China Life Pension Company, which has been selected as a trustee manager for occupational pension plans for the Xinjiang and Shandong provinces plus the central government.

The division is also understood to have recently reached first close on its second global infrastructure fund AMP Capital Global Infrastructure Fund II (GIF II), but this may not have occurred in the first half. ​​

A spokesperson would not comment on whether it is the undisclosed seller of an 8.24% stake in Sydney’s M5 motorway to Transurban, which the toll road giant revealed at its earnings call on Tuesday. That deal has yet to reach financial close.

AMP Capital also boosted its client base by 18% from FY17, driven by strong interest in the infrastructure platform.  

The appointment of the former Head of Treasury for the Australian government, John Fraser, as a new non-executive director was also announced today.