AMP sell some assets to relieve debt stress
Stock
AMP Limited (AMP) $3.01 as at 25/10/2018
Event
AMP is getting hit hard on market today, down ~18% at time of writing after they announced the sale of their wealth protection + a few other mature businesses as they called it, in transactions totalling $3.45b. The sales come at the end of the portfolio review the company embarked on 12 months ago as AMP looks to simplify the business and reduce balance sheet stress. The deal will see around $2b of cash for AMP, allowing the company to reduce debt by $800m, reducing the need for a capital raise, whilst also having left over funds to redeploy into cost cutting programs (but also likely to be chewed into by fines and further customer remediation).
The deal certainly takes some pressure off the balance sheet, but also will significantly reduce earnings in the years ahead. The divested assets contributed around $340m of AMPs 2017 earnings, or over 30%.
On top of this news, AMP announced a $1.5b net outflow over the third quarter. This is clearly a big number and along with a 30% earnings hit, it’s easy to see why the stock is getting whacked.
AMP Limited (AMP) Chart
Market Matters Take/Outlook
