This extract is from the 1H 20 Update, July 31st.
Something has changed....
As recently as the AGM, Francesco maintained that the strategy with AMP Capital was to grow AMP Capital through differentiated capabilities. (Whatever that meant, sounds like 'corporate speak' for no strategy.) Below is an extract from the Feb 13th 2019 results and strategic update.
This was also included in the AGM presentation given by Francesco.
Since that time we have been watching in amazement at the elevation of the head of infrastructure investment to the position of CEO of AMP Capital. The incumbent Adam resigned and departed all within two weeks. The 'next best' contender for the position, Head of Property, and several others have resigned.
I have always had difficulty with these timelines as Adam's departure seemed very surprising and in-haste and yet I understand that as part of the process to select the new CEO, details presentations were called for by the board. As a result the successful applicant is also the most controversial, by far.
The Board bought HIS strategy. And in the 1H 20 results Update, identified that a 'new AMP Capital Strategy' existed.
My read is that this will be a significant announcement with considerable implication for the share price.
The presentation must have been impressive enough that the highlighted growth in profit was sufficiently alluring for the board to be willing to live through the negative press that the new CEO has attracted. Given that we are in an environment of uncertainty and economic challenge, where governments worldwide will soon embark upon major capital works and infrastructure projects in an attempt to rescue economies, AMP Capital is well placed. The down side is that considerable risk exists in the valley between now and then. Interestingly at the Macquarie Bank AGM, guidance has been withdrawn and the tone for the near term outlook is decidedly cautions (read negative).
So what can the New AMP Capital involve.
I have two observations...
- The return of "surplus" capital will be less than the board originally targeted because the 'new' strategy will want to be fully funded in the promise that the 'new' CEO can deliver better quicker returns than returning the money to the owners.
- It is possible that the 'new' CEO wants to run his own race and has presented a scenario where AMP divests say 35% of AMP Capital by listing the business and returning the 35% in-species to AMP shareholders. That way, AMP Capital will become a listed wealth manger in its own right whilst AMP maintains control with a 50% interest and achieves a valuation that is not possible saddled with the drag of the Wealth business.
(20min delay)