AMP jumps on profit upgrade
 |
Mohl, left, with chairman Peter Willcox at December's meeting which approved AMP's historic split-up.
Story Tools
YOUR E-MAIL ALERTS
|
Follow the news that matters to you. Create your own alert to be notified on topics you're interested in.
Or, visit Popular Alerts for suggestions.
|
|
SYDNEY, Australia (Reuters) -- Australian insurer and fund manager AMP Ltd has raised its 2003 core profit forecasts as much as 16 percent and flagged plans to repay more debt following a stronger-than-expected performance late last year.
AMP, which hived off its loss-making British operations in December, is still expected to report a massive net loss next week after hefty writedowns linked to the value of its offshore life units.
However, the rare piece of positive news sent its shares rocketing 9 percent to close at a four-week high of Aust. $4.91 Monday, despite some fund managers urging caution until there were more details available.
"At face value it seems like the market will upgrade their numbers 10 or 15 percent for 2003," said Nick Vidale, portfolio manager at Deutsche Asset Management.
"It is a big upgrade, but I think the market is still trying to come to grips with where these upsides are coming from. The devil is in the detail with this company."
AMP said Monday net profit before goodwill amortization and other items would be in the range of A$600 million ($462 million) to A$620 million for the year ended December 31.
In documents outlining its split plan last year, AMP had tipped a net profit at the upper end of a A$492 million-A$535 million range. The figure was calculated after adding back A$40 million in goodwill amortization.
"The better-than-expected profit result reflects, in roughly equal parts, improved business unit performance, particularly in the final months of the year, and a number of positive one-off items that emerged in the end-of-year review process," Chief Executive Andrew Mohl said in a statement.
Fund managers said the full value of the upgrade would not be known until AMP revealed whether the additional earnings were recurring or one-offs from improved investment income. BT Financial and Deutsche forecast extra recurring earnings linked to this upgrade of around A$40 to A$50 million.
AMP is expected to post a total loss of A$5.4 billion on the back of huge writedowns after it split into two companies to stem massive losses from Britain. The writedowns are mainly on the value of the British business.
It will be the second-largest loss in Australian corporate history after News Corp's A$11.96 billion loss in 2001-02 following writedowns on its Gemstar-TV Guide International stake.
AMP also said it planned to accelerate its debt repayment program and would buy back as much of its A$1.24 billion in income securities trading on the Australian Stock Exchange as soon as possible.
"The reduction in debt is significant because it has a two-fold effect. It de-risks the business in that it's devoted to that high debt ratio and you get an earnings improvement through the reduction in interest, so it is very positive," said Andrew Waddington, analyst at BT Financial.
AMP will offer income securities holders A$98.00 per security to buy back their holdings. The securities closed on Friday at A$94.10 and jumped 4.3 percent to A$98.15 on Monday.
AMP has debt of A$3.2 billion and previously had flagged intentions to pay back A$600 million. However, higher interest rates have increased the cost of the income securities for AMP compared with other debt instruments.
Copyright 2004
Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
