AMP 2.19% $1.12 amp limited

market predicts bad news

  1. 5,237 Posts.
    Silence on UK figures talks loudly to market
    By Sharon Kemp
    May 8 2002

    Investors fear AMP is about to release a profit downgrade; at risk is the forecast double-digit growth in core operating margins.
    Picture: JOE CASTRO

    Investors are bracing for bad news from AMP after chief financial officer Marc de Cure yesterday refused to give an outlook for the financial service giant's profitability in the tough United Kingdom market.

    After reporting a net outflow of client money in the UK, Mr de Cure sidestepped all questions about the outlook, saying AMP chief executive Paul Batchelor would talk about profitability at next week's annual meeting.

    The response was enough to raise doubts among analysts and investors in what is already a jittery market that has shown no mercy to companies that fall short of targets.

    Uppermost in investors' fears, according to an analyst, was that AMP is about to release a profit downgrade.

    At risk is the double-digit growth in core operating margins that the life insurer and wealth management group forecast for 2002 earnings.

    Mr de Cure referred to the target as only a long-term aim.

    AMP shares were beaten down another 4.4 per cent yesterday, taking the fall in its market capitalisation to more than 11 per cent in just over two weeks.

    Yesterday was the first time AMP shares have closed below $17 since the September 11 terrorist attacks. They finished at $16.92.

    Coles Myer and Mayne Group are the latest blue-chips to have their share prices savaged after coming out with negative news, but AMP looks set to join the list.

    "The market is relying on gut feeling and is reading between the lines, rather than selling off for any definitive reason," the analyst said.

    "It is difficult to downgrade earnings, because you could get to the AGM and they could say everything is OK, they are cutting costs and are on track to earn double-digit growth.

    "Having said that, it doesn't smell that way."

    Another analyst said: "You just have to read through all the commentary about the business; it is all about difficult markets".

    Cash inflows include cash from product sales and servicing activities. Outflows are benefit payments, surrenders and redemptions.

    Cashflow has little impact on the near-term profitability of a business but indicates its long-term health, because wealth managers generate profits from the total volume of business turned over.

    AMP's cashflow report showed a net outflow across all countries during the first quarter of $398 million compared with net inflows of $8.5 billion in the previous corresponding period.

    The fall is largely due to the loss of a $4 billion institutional cash mandate by asset management arm Henderson based in the UK.

    However, Mr de Cure indicated that the "value of new business", or the present value of earnings from sales, was "stable" over the quarter.

    This is because much of AMP's outflow includes products the group believed were not profitable, such as some pension products in the UK, while the Australian operations, AMP Financial Services, still saw strong flows into master-trust and even risk products
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