AMP

AMP has announced an underlying annual net profit (the company has a calendar year end) of $909m, up 20%, due to the inclusion of nine months of profits from AXA (the figures also exclude $222m of costs related to the AXA acquisition). But underlying earnings per share fell 7% to 34.3 cents, as shares issued to help fund the AXA acquisition increased the total share count by a massive 37%.     

AMP also announced a slight cut in the amount of profit it will pay out in future as dividends, from between 75% and 85% to between 70% and 80%. A final dividend of 14 cents was declared (franked to 50%, ex date 27 Feb), down one cent from 2010, bringing the full-year total to 29 cents.

Though a forecast 6.6% fully franked yield seems attractive, we’re cognisant that today’s acquisition is often tomorrow’s ‘non-core write-off’. Despite AMP’s share price languishing near lows not seen since 2004 and 2009, in our view it’s not low enough to compensate investors for AMP’s poor track record with acquisitions, the high price it has paid for AXA and AMP’s history of lousy shareholder returns.

Despite management’s confidence that the recent acquisition of AXA will transform the company, we share the market’s scepticism. The share price has fallen 6% since the previous update on 31 Aug 11 (Sell – $4.53), and we’re sticking with SELL.