MBA403 Financial Analysis Report: AMP Limited Performance Review

This report provides a financial analysis of AMP Limited, an Australian financial services company. It examines both financial and non-financial performance indicators to assess the company's overall health and investment suitability. The analysis includes a review of key financial ratios such as profit margin, asset turnover, current ratio, debt-to-equity ratio, and dividend yield, comparing data from 2017 and 2018. The report also considers non-financial factors, including the impact of the Royal Commission, management changes, and restructuring efforts. The conclusion suggests that while the company is currently undergoing a turnaround, its financial performance has declined, and investment is not recommended at this time. The report highlights challenges and provides recommendations based on the analysis of the company's performance and future outlook.

Running Head: FINANCIAL AND ECONOMIC INTERPRETATION AND
COMMUNICATION
FINANCIAL AND ECONOMIC INTERPRETATION AND COMMUNICATION
Name of the Student
Name of the University
Author Note

1FINANCIAL AND ECONOMIC INTERPRETATION AND COMMUNICATION
Table of Contents
Executive Summary...................................................................................................................2
Analysis......................................................................................................................................3
Interpretation..............................................................................................................................3
Conclusion and Recommendations............................................................................................5
Reference....................................................................................................................................7

2FINANCIAL AND ECONOMIC INTERPRETATION AND COMMUNICATION
Executive Summary
The aspects of financial as well as non-financial aspects are the most vital aspects of
the company’s overall performance. In the contemporary business environment, investors for
making the decisions regarding investment, not only focuses on financial performance of the
company but they also look for non-financial performance indicators of the company (Creel,
Hubert and Labondance 2015). Further, AMP Limited is the company of financial services in
Australia as well as New Zealand, which provides superannuation and the investment
products, financial advices, insurance and the banking products that includes savings
accounts as well as home loans (Annualreports.com. 2019). Therefore, this report includes
interpretation and the analysis of financial and non-financial performances of AMP Limited.

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Analysis
Profit Margin 2018 2017
Net Profit 51.00$ 873.00$
Revenue 6,390.00$ 6,522.00$
Result 1% 13%
Current Ratio 2018 2017
Current Assets 6,854.00$ 5,898.00$
Current Liabilities 4,617.00$ 2,892.00$
Result 1.48 2.04
Assets Turnover 2018 2017
Revenue 6,390.00$ 6,522.00$
Total Assets 145,278.00$ 148,239.00$
Result 4% 4%
Debt Equity Ratio 2018 2017
Long Term Debt 133,870.00$ 138,064.00$
Equity 6,685.00$ 7,202.00$
Result 20.03 19.17
Dividend Yield Ratio 2018 2017
Dividend 708.00$ 828.00$
Share Price 5.19$ 2.45$
Result 136.42$ 337.96$
AMP Limited
Leverage Ratio
Market Potential Ratio
Profitability Ratio
Efficiency Ratio
Liquidity Ratio
Table: Ratio Calculation (Annualreports.com. 2019)
Interpretation
Financial Analysis
The analysis of the financial information is the great indicator of company’s financial
performance over years. It is the tool used by the investor for analysis financial position of
the company. The profit margin of AMP limited for 2017 was 13% and in 2018 was 1%,
which means ratio decreased by 12%. It indicates that the ability of the company has been
highly decreased over 2017. This is because of increasing cost of operations. Further, for the
year 2017 and 2018, the assets turnover ratio was 4%, which means no changes in the

4FINANCIAL AND ECONOMIC INTERPRETATION AND COMMUNICATION
efficiency ratio for this period (Isidro and Sobral 2015). It indicates that company’s efficiency
remains stagnant or constant over previous year. Moreover, current ratio of the company for
2017 was 2.04 and for 2018 was 1.48, which means the current ratio has been decreased by
0.56. It indicates that the ability of company for meeting its obligations of short-term has
decreased over previous year (Lee et al. 2015). In addition, debt-to-equity ratio of AMP
Limited for 2017 was 19.17 and for 2018 were 20.03. It indicates increase of ratio by 0.86. It
indicates high use of debt over equity, which is quite risky. Lastly, dividend yield ratio shows
that company has reduced paying dividend over shares price. It indicates that company
reduction of market value of company (Annualreports.com. 2019).
Non-Financial Analysis
The Australian based company, AMP Limited is the company of wealth management.
The segments of operations of the company includes Australian wealth management that
provides the services of financial advices, platform administration, superannuation,
retirement and the managed products of investments, AMP Capital, AMP Bank, New
Zealand financial services as well as Australian mature business (Annualreports.com. 2019).
The company has loss majority of shares because of the misconduct aired at financial services
aired at the royal commission. There was great reputational damage of the company from
banking royal commission. The company has faced difficult set of the situations in 2017,
which has affected confidence and trust of the shareholders (Cavaco and Crifo 2014). This
has resulted into major changes in the management structure of the company, which includes
renewal of board, appointing Chief Executive Officer, commencing the oversights of
transforming the business and strengthening governance framework. There is great
transformation going on the company, which includes reviewing wealth protection as well as
mature businesses, which initiated in the responses to the structural changes in industry that
restrict the abilities for competing on the sustainable basis as well as delivering acceptable

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returns to the shareholders. The board of the company has decided for selling the Australian
as well as New Zealand wealth protection and the mature businesses to the UK based
international insurance group that is Resolution Group (O’Neill, Sohal and Teng 2016).
The remuneration report shows the decision of board for awarding leadership team of
AMP-zero short term incentives in 2018, which includes AMP Capital. There is also
application of appropriate consequence management that includes forfeiture of the long-term
as well as short-term incentives for the number of the former executives and the reductions of
the fees of the board of directors. Further, there are various decisions being taken by the firm
in the processes of the turnaround (Kallio, Kallio and Grossi 2017). The company is
committed towards rebuilding AMP for ensuring the sustainable future that is consists of
shared value for their customers, environment, community, employees as well as
shareholders. It has realized that in recent times, they have fallen short but they are
committed genuinely for improving the overall structure of company (Annualreports.com.
2019). Moreover, the company is having over 6,100 employees, approx. 740,000
shareholders as well as administers and manages $258 billion in assets. The current structure
of company’s board ratio includes 9: 12, which means nine independent director and twelve
dependent directors (Kroes and Manikas 2014).
Conclusion and Recommendations
Therefore, this report provides the conclusion after analyzing financial and non-
financial analysis that company is not performing well. The financial performance of AMP
Limited indicates that company’s financial performance is reduced drastically from 2017 to
2018, which has been analyzed by financial ratios. Further, the analysis of non-financial
indicators shows that AMP Limited is facing great challenges in the turnaround of their
business for, which includes changes the management structure, remuneration structure,
business restructure and governance restructure. These processes will take one more year. It

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has been analyzed that company is taking various important decisions for gaining the trust of
the customers as well as shareholders and increasing their value.
Hence, potential investors are not recommended for investing in this company
because currently, it is not performing well. The company is not generating profitability,
neither market value is increasing. Further, company’s high use of debt is more risky in
nature. The investment in this company will be more risky because it is in the turnaround
phase, where various restructuring processes are going on.

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Reference
Annualreports.com. 2019. [online] Available at:
http://www.annualreports.com/HostedData/AnnualReports/PDF/OTC_AMLTY_2018.pdf
[Accessed 5 Oct. 2019].
Cavaco, S. and Crifo, P., 2014. CSR and financial performance: Complementarity between
environmental, social and business behaviours. Applied Economics, 46(27), pp.3323-3338.
Creel, J., Hubert, P. and Labondance, F., 2015. Financial stability and economic
performance. Economic Modelling, 48, pp.25-40.
Isidro, H. and Sobral, M., 2015. The effects of women on corporate boards on firm value,
financial performance, and ethical and social compliance. Journal of Business Ethics, 132(1),
pp.1-19.
Kallio, K.M., Kallio, T.J. and Grossi, G., 2017. Performance measurement in universities:
ambiguities in the use of quality versus quantity in performance indicators. Public Money &
Management, 37(4), pp.293-300.
Kroes, J.R. and Manikas, A.S., 2014. Cash flow management and manufacturing firm
financial performance: A longitudinal perspective. International Journal of Production
Economics, 148, pp.37-50.
Lee, Y.K., Kim, S.H., Seo, M.K. and Hight, S.K., 2015. Market orientation and business
performance: Evidence from franchising industry. International Journal of Hospitality
Management, 44, pp.28-37.
O’Neill, P., Sohal, A. and Teng, C.W., 2016. Quality management approaches and their
impact on firms׳ financial performance–An Australian study. International Journal of
Production Economics, 171, pp.381-393.