Performance And Position Analysis Of AMP Company – A Financial And Business Analysis Report

Purpose/ Aims

The objective of the paper is to conduct performance and position analysis of AMP Company. Performance analysis of a company serves as a process in recognising the company’s financial strengths along with weaknesses of the company through properly maintaining the relationship among the balance sheet items along with profit and loss account. The purpose of the paper is to conduct short-term and long-term forecasting long with forecasting and the organizational goal can be observed with evaluation of financial performance (Zalengera et al., 2014). The purpose of the company is to conduct financial as well as business analysis of AMP Company and evaluate the financial changes over five years period. Business performance of the company will be will be evaluated through conducting PESTEL analysis and competitive situation of the company.

From evaluation of the business of AMP Company it has been observed that the industry crunch has resulted in loss of the AMP. The company also have a large number of consumers those tend to be failing drastically. Certain problems have been recognised in the business as well as financial performance of the company (Uechi et al., 2015). This has necessitated superior wealth management along with renowned insurance AMP Company has modified the business lines for superannuation and certain other departments following its current set of poor financial results.                   

AMP Limited is positioned as a renowned wealth management company. The operating systems of the company includes Australian wealth management that offers financial advice services, unit-based superannuation, administration of performance that encompass group and individual group, insurance products along with disability and income protection (Petruzzo et al., 2015). AMP Bank is deemed to offer housing mortgages, transaction banking along with self-managed superannuation fund offerings, financial services of New Zealand that offers risk insurance, mature book, and wealth management along with Australian mature business. Such businesses includes whole of life, investment-based, endowment, investment-based investment account, retirement savings account, annuities, eligible rollover fund, insurance bonds, individual superannuation along with guaranteed savings account (Azzopardi & Nash, 2013).

PESTEL Analysis serves as a tool or framework that is employed in case of the marketers in order to evaluate and monitor AMP Limited Company’s macro-environmental factors that have an effect on the business of the company. Such evaluation will help in analysing the business performance of the company along with the environment in which it is operating (Rabl et al., 2014).

• Political-Government policies is deemed to impact the financial services industry. In some cases political advantage of a specific party, the government indicates certain measures as per their advantages associated with wavier of short-term agricultural loans for attracting attention of farmers. FDI considers increasing certain limits from 49% to 26%. The Union-budget presented has facilitated the farmers certain rebate on the loan if they repay 75% of such overdue within specific time (Grant, 2016).
• Economic- Cash reserve ratio is observed to be decreased by 0.25% to 4.5% of the net time and demand liabilities to possibly induce major liquidity of a few billion, token reduction in expected lending rates along with comfortable liquidity position and current products considered by these financial institutions. Benchmark repo rate is observed to be 8%, reverse repo along with marginal standing facility stand that remain unchanged 7% to 9% considerably. Bank rate is also observed to be maintained at 9%. Following the 1% decrease in the recent year, statutory liquidity ratio is deemed to remain unchanged at 23% of NDTL (Rosemann & vom Brocke, 2015). The major focus of the financial policy maintains inflation control and anchoring along with inflation anticipations other than enhancing risks for economic growth. The government policies indicated that inflationary risks and pressures associated with fiscal deficit and current account deficit constrain it from offering an efficient fiscal policy response for enhancing economic growth.
• Social- AMP Company has decided to develop strategies in order to enter the education sector. The company is considering partnering with municipal authorities of the city for making people aware of the environmental threats posed by the plastic bags within the surrounding. The financial services company already offers loans for small businesses in which it owns 62.3% stake (Wilson, Harper & Darling, 2013). The company considers enhancing the distribution network along with consumer base of the AMP Companyfor expanding and also decreasing the cost of funds. The company intended to gain an entry within the education industry might be advantageous within the long run.
• Technological- Profitability ratio of AMP Company has gradually increased over the past three years. Number of employees within the group increased in the year 2011 in comparison to 2010. Administration cost per asset ratio decrease in the year 2011 in comparison to 2010 and similarly cost to income ratio enhanced by gradual percentage. Enhancing productivity might likely improve the profit margin of the company (Real, Roldán & Leal, 2014). ATM serves as the latest developments in consideration to computer technology along with telecommunications that encouraged the financial institutions to alter concept of offering financial services in any region. The financial institutions these days are utilising SMS and internet as a vital tool for promotions that can offer increased utility to all its consumers. Within the buzzword in the recent years and all the financial institutions is attempting to adopt it within centralised financial institution through which it can control its overall business operation.
• Legal – Certain government policies considers stimulating growth materialization, fiscal policy in order to reinforce certain positive impact of certain actions along with retaining a focus on dealing with inflation (Alexander et al., 2014). Guidance offered that liquidity management from the Australian government can make sure suitable credit flows within certain productive actors in the economy along with suitable responses to shocks confirmed by external developments.
• Environmental- AMP Company is being highly aware of the environment along with being associated with certain environmentally concerned associations. The company imposed by the plastic bags to the surrounding along with the recycle bags instead (Blackburn, Hart & Wainwright, 2013). The company distributed recycled and eco-friendly bags and consumers along with retailers across several insurance markets within the city.

Income Statement (Vertical Analysis) Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper
Particulars	2014 (in million AUD)	2015 (in million AUD)	2016 (in million AUD)	Percentage change in 2015	Percentage change in 2016
Revenues
Premiums	2,149	2,161	2,640	0.56%	22.17%
Service fees and commissions	2,790	2,941	3,581	5.41%	21.76%
Investment income, net	769	133	–	-82.70%	-100.00%
Other income (loss)	9,434	8,443	8,567	-10.50%	1.47%
Total revenues	15,142	13,678	14,788	-9.67%	8.12%
Benefits, claims and expenses
Policyholder benefits and claims incurred	1,888	1,860	1,888	-1.48%	1.51%
Selling, general and administrative	1,613	1,557	3,491	-3.47%	124.21%
Interest expense	685	732	551	6.86%	-24.73%
Other expenses	9,142	7,536	8,500	-17.57%	12.79%
Total benefits, claims and expenses	13,328	11,685	14,430	-12.33%	23.49%
Income before income taxes	1,814	1,993	358	9.87%	-82.04%
Income tax (expense) benefit	(843)	(280)	(166)	-66.79%	-40.71%
Other income (expense)	(87)	(741)	(536)	751.72%	-27.67%
Net income	884	972	(344)	9.95%	-135.39%
Net income available to common shareholders	884	972	(344)	9.95%	-135.39%
Earnings per share
Basic	0	0	(0)	0.00%	0.00%
Diluted	0	0	(0)	0.00%	0.00%
Weighted average shares outstanding
Basic	2,920	2,918	2,929	-0.07%	0.38%
Diluted	2,947	2,937	2,929	-0.34%	-0.27%

Balance Sheet Statement (Vertical Analysis)
Particulars	2014 (in million AUD)	2015 (in million AUD)	Percent change in 2015	2016 (in million AUD)	Percent change in 2016
Assets
Loans, total	14,590	15,281	4.74%	17,204	12.58%
Cash and cash equivalents	3,581	3,955	10.44%	3,476	-12.11%
Premiums and other receivables	2,518	2,558	1.59%	2,521	-1.45%
Deferred income tax assets	697	557	-20.09%	656	17.77%
Property and equipment	401	423	5.49%	66	-84.40%
Goodwill	4,042	3,983	-1.46%	3,199	-19.68%
Other assets	109,026	112,951	3.60%	112,938	-0.01%
Total assets	134,855	139,708	3.60%	140,060	0.25%
Liabilities and stockholders’ equity
Liabilities
Short-term debt	4,536	–	-100.00%	8,832	0.00%
Long-term debt	5,574	10,680	91.60%	5,241	-50.93%
Deferred income taxes	2,583	2,347	-9.14%	2,001	-14.74%
Other liabilities	113,976	118,162	3.67%	116,524	-1.39%
Total liabilities	126,669	131,189	3.57%	132,598	1.07%
Stockholders’ equity
Common stock	9,508	9,566	0.61%	9,619	0.55%
Retained earnings	566	819	44.70%	(185)	-122.59%
Accumulated other comprehensive income	(1,888)	(1,866)	-1.17%	(1,972)	5.68%
Total stockholders’ equity	8,186	8,519	4.07%	7,462	-12.41%
Total liabilities and stockholders’ equity	134,855	139,708	3.60%	140,060	0.25%
Cash Flow Statement (Vertical Analysis)
Particulars	2014 (in million AUD)	2015 (in million AUD)	Percent change in 2015	2016 (in million AUD)	Percent change in 2016
Cash Flows From Operating Activities
Other operating activities	1,086	1,342	23.57%	175	-86.96%
Net cash provided by operating activities	1,086	1,342	23.57%	175	-86.96%
Cash Flows From Investing Activities
Sales/maturities of fixed maturity and equity securities	2,879	26	-99.10%	1,453	5488.46%
Acquisitions and dispositions	(135)	(348)	157.78%	10	-102.87%
Purchases of investments	–	(5,622)	0.00%		-100.00%
Purchases of intangibles, net	(186)	(198)	6.45%	(11)	-94.44%
Net cash used for investing activities	2,558	(6,142)		1,452	-123.64%
Cash Flows From Financing Activities
Long-term debt issued	451	1,212	168.74%	361	-70.21%
Long-term debt repayment	(280)	(812)	190.00%	(935)	15.15%
Cash dividends paid	(700)	(800)	14.29%	(821)	2.63%
Other financing activities	950	567	-40.32%	1,972	247.80%
Net cash provided by (used for) financing activities	421	167	-60.33%	577	245.51%
Effect of exchange rate changes	10	2	-80.00%	5	150.00%
Net change in cash	4,075	(4,631)	-213.64%	2,209	-147.70%
Cash at beginning of period	7,157	11,232	56.94%	6,601	-41.23%
Cash at end of period	11,232	6,601	-41.23%	8,810	33.46%
Supplemental schedule of cash flow data
Cash paid for income taxes	117	(379)	-423.93%	(639)	68.60%
Cash paid for interest	(682)	(806)	18.18%	(534)	-33.75%

Income Statement (Trend analysis)
Particulars	2014 (in million AUD)	Percent	2015 (in million AUD)	Percent	2016 (in million AUD)	Percent
Revenues
Premiums	2,149	14.19%	2,161	15.80%	2,640	17.85%
Service fees and commissions	2,790	18.43%	2,941	21.50%	3,581	24.22%
Investment income, net	769	5.08%	133	0.97%	–	0.00%
Other income (loss)	9,434	62.30%	8,443	61.73%	8,567	57.93%
Total revenues	15,142	100.00%	13,678	100.00%	14,788	100.00%
Benefits, claims and expenses
Policyholder benefits and claims incurred	1,888	14.17%	1,860	15.92%	1,888	13.08%
Selling, general and administrative	1,613	12.10%	1,557	13.32%	3,491	24.19%
Interest expense	685	5.14%	732	6.26%	551	3.82%
Other expenses	9,142	68.59%	7,536	64.49%	8,500	58.91%
Total benefits, claims and expenses	13,328	100.00%	11,685	100.00%	14,430	100.00%
Income before income taxes	1,814	11.98%	1,993	14.57%	358	2.42%
Income tax (expense) benefit	(843)	-5.57%	(280)	-2.05%	(166)	-1.12%
Other income (expense)	(87)	-9.84%	(741)	-76.23%	(536)	155.81%
Net income	884	5.84%	972	7.11%	(344)	-2.33%
Net income available to common shareholders	884	5.84%	972	7.11%	(344)	-2.33%
Earnings per share
Basic	0	0.00%	0	0.00%	(0)	0.00%
Diluted	0	0.00%	0	0.00%	(0)	0.00%
Weighted average shares outstanding
Basic	2,920		2,918		2,929
Diluted	2,947		2,937		2,929

Balance Sheet (Trend analysis)
Particulars	2014 (in million AUD)	Percent	2015 (in million AUD)	Percent	2016 (in million AUD)	Percent
Assets
Loans, total	14,590	10.82%	15,281	10.94%	17,204	12.28%
Cash and cash equivalents	3,581	2.66%	3,955	2.83%	3,476	2.48%
Premiums and other receivables	2,518	1.87%	2,558	1.83%	2,521	1.80%
Deferred income tax assets	697	0.52%	557	0.40%	656	0.47%
Property and equipment	401	0.30%	423	0.30%	66	0.05%
Goodwill	4,042	3.00%	3,983	2.85%	3,199	2.28%
Other assets	109,026	80.85%	112,951	80.85%	112,938	80.64%
Total assets	134,855	100.00%	139,708	100.00%	140,060	100.00%
Liabilities and stockholders’ equity
Liabilities
Short-term debt	4,536	3.58%	–	0.00%	8,832	6.66%
Long-term debt	5,574	4.40%	10,680	8.14%	5,241	3.95%
Deferred income taxes	2,583	2.04%	2,347	1.79%	2,001	1.51%
Other liabilities	113,976	89.98%	118,162	90.07%	116,524	87.88%
Total liabilities	126,669	100.00%	131,189	100.00%	132,598	100.00%
Stockholders’ equity
Common stock	9,508	116.15%	9,566	112.29%	9,619	128.91%
Retained earnings	566	6.91%	819	9.61%	(185)	-2.48%
Accumulated other comprehensive income	(1,888)	-23.06%	(1,866)	-21.90%	(1,972)	-26.43%
Total stockholders’ equity	8,186	6.07%	8,519	6.10%	7,462	5.33%
Total liabilities and stockholders’ equity	134,855	100.00%	139,708	100.00%	140,060	100.00%

Cash Flow (Trend analysis)
Particulars	2014 (in million AUD)	Percent	2015 (in million AUD)	Percent	2016 (in million AUD)	Percent
Cash Flows From Operating Activities
Other operating activities	1,086	100.00%	1,342	100.00%	175	100.00%
Net cash provided by operating activities	1,086	100.00%	1,342	100.00%	175	100.00%
Cash Flows From Investing Activities
Sales/maturities of fixed maturity and equity securities	2,879	112.55%	26	-0.42%	1,453	100.07%
Acquisitions and dispositions	(135)	-5.28%	(348)	5.67%	10	0.69%
Purchases of investments	–	0.00%	(5,622)	91.53%		0.00%
Purchases of intangibles, net	(186)	-7.27%	(198)	3.22%	(11)	-0.76%
Net cash used for investing activities	2,558	100.00%	(6,142)	100.00%	1,452	100.00%
Cash Flows From Financing Activities
Long-term debt issued	451	107.13%	1,212	725.75%	361	62.56%
Long-term debt repayment	(280)	-66.51%	(812)	-486.23%	(935)	-162.05%
Cash dividends paid	(700)	-166.27%	(800)	-479.04%	(821)	-142.29%
Other financing activities	950	225.65%	567	339.52%	1,972	341.77%
Net cash provided by (used for) financing activities	421	3.75%	167	2.53%	577	6.55%
Effect of exchange rate changes	10		2		5
Net change in cash	4,075	36.28%	(4,631)	-70.16%	2,209	25.07%
Cash at beginning of period	7,157	63.72%	11,232	170.16%	6,601	74.93%
Cash at end of period	11,232	100.00%	6,601	100.00%	8,810	100.00%
Supplemental schedule of cash flow data
Cash paid for income taxes	117	1.04%	(379)	-5.74%	(639)	-7.25%
Cash paid for interest	(682)	-6.07%	(806)	-12.21%	(534)	-6.06%

Profitability Ratios:-
Particulars	Details	2014	2015	2016
Total revenues	A	$        15,142	$        13,678	$        14,788
Income before income taxes	B	$          1,814	$          1,993	$             358
Net income	C	$             884	$             972	$           (344)
Total stockholders’ equity	D	$          8,186	$          8,519	$          7,462
Gross Profit Margin	B/A	11.98%	14.57%	2.42%
Net Profit Margin	C/A	5.84%	7.11%	-2.33%
Return on Equity	C/D	10.80%	11.41%	-4.61%

Limitations

Gross profit margin of AMP Company is observed to decrease from the year 2014 to 2016. Decreased ratio indicates that that the organization is selling its inventory at an increased profit percentage. The company is recommended to purchase inventory at a cheap price and also try to purchase their inventory at by gaining purchase discount from manufacturers. Net profit margin is also observed to be declined from 5.84% in 2014 to -2.33% in 2016. This indicates that the company is not able to manage its expenses and is not able to revenues constant (Spronk, Steuer & Zopounidis, 2016). The company is recommended to reduce spending budgets in order to enhance the profit ratio. Return on equity is observed to decrease from 10.80% in 2014 to -4.61% in 2016. This indicates that the company is not able to employ its stakeholder’s money to attain profits. It is recommended that the company must use investor’s funds in a better manner (AMP Ltd. – AnnualReports.com., 2017).

Liquidity Ratios:-
Particulars	Details	2014	2015	2016
Cash and cash equivalents	A	$          3,581	$          3,955	$          3,476
Premiums and other receivables	B	$          2,518	$          2,558	$          2,521
Total Current Assets	C=(A+B)	$          6,099	$          6,513	$          5,997
Inventory	D	$               –	$               –	$               –
Current Liabilities	E	$          4,536	$               –	$          8,832
Current Ratio	C/E	1.34	0.00	0.68
Quick Ratio	(C-D)/E	1.34	0.00	0.68
Cash Operating Cycle:-
Particulars	Details	2014	2015	2016
Cost of sales	A	$      1,814	$      1,993	$         358
Opening inventory	B	$           –	$           –	$           –
Closing inventory	C	$           –	$           –	$           –
Average inventory	D=(B+C)/2	$            –	$            –	$           –
Cost of sales per day	E=A/365	$        4.97	$        5.46	$        0.98
Days Inventory Outstanding (DIO)	F=D/E	$            –	$            –	$           –
Opening accounts receivable	G	$      2,418	$      2,518	$      2,558
Closing accounts receivable	H	$      2,518	$      2,558	$      2,521
Average accounts receivable	I=(G+H)/2	$      2,468	$      2,538	$      2,540
Days Sales Outstanding (DSO)	J=I/E	496.59	464.81	2589.16
Opening accounts payable	K	$           –	$           –	$           –
Closing accounts payable	L	$           –	$           –	$           –
Average accounts payable	M=(K+L)/2	$            –	$            –	$           –
Days Payables Outstanding (DPO)	N=M/E	0	0	0
Cash Operating Cycle	F+J-M	497	465	2589

Capital Gearing Ratios:-
Particulars	Details	2014	2015	2016
Total liabilities	A	$      126,669	$      131,189	$      132,598
Total assets	B	$      134,855	$      139,708	$      140,060
Debt Ratio	A/B	0.94	0.94	0.95

Total current ratio of AMP Company is observed to decline from 1.34 in the year 2014 to 0.68 in the year 2016. This indicates that the company is not that capable to make its debt payments in a prompt manner. It is recommended that AMP Company must make enough profit from its operations too support its activities. Moreover, quick ratio of the company is gathered to decline from 1.34 in 2014 to 0.68 in 2016. This indicates that the company is not that capable to address its current liabilities without selling its long term assets. It is recommended that more assets will be easily converted within cash if needed (Rosenbusch, Rauch & Bausch, 2013).

Cash operating cycle of AMP Company is gathered to increase from 497 in 2014 to 2589 in 2016. These indicators that the company is taking more time to receive cash from its consumers from its initial inventory cash outlay. It is recommended that the company must make greater attempts in quickly and effectively buy, sell and collect from selling its inventory (Barrett & Weinstein, 2015).

Debt ratio of AMP Company is observed to increase from 0.94 in 2014 to 0.95 in 2016. This indicates that the company’s business is not that stable as it is not capable to pay off its debt quickly. It is recommended that the company should focus more on equity financing in order to enhance their operations (Löfsten, 2014).

Explanation of the Business

Conclusion

The objective of the paper was to conduct performance and position analysis of AMP Company. It was gathered from the analysis that the business of AMP Company it has been observed that the industry crunch has resulted in loss of the AMP. The company also have a large number of consumers those tend to be failing drastically. AMP Company has decided to develop strategies in order to enter the education sector. The company is considering partnering with municipal authorities of the city for making people aware of the environmental threats posed by the plastic bags within the surrounding. Based on the ratio analysis AMP Company is recommended that the company should focus more on equity financing in order to enhance their operations.

References

Alexander III, W. P., Dimpsey, R. T., Levine, F. E., & Urquhart, R. J. (2014). U.S. Patent No. 8,843,898. Washington, DC: U.S. Patent and Trademark Office.

AMP Ltd. – AnnualReports.com. (2017). Annualreports.com. Retrieved 23 April 2017, from https://www.annualreports.com/Company/amp-ltd

Azzopardi, E., & Nash, R. (2013). A critical evaluation of importance–performance analysis. Tourism Management, 35, 222-233.

Barrett, H., & Weinstein, A. (2015). Corporate entrepreneurship, the marketing mix, and business performance. In Proceedings of the 1997 Academy of Marketing Science (AMS) Annual Conference (pp. 144-150). Springer International Publishing.

Blackburn, R. A., Hart, M., & Wainwright, T. (2013). Small business performance: business, strategy and owner-manager characteristics. Journal of small business and enterprise development, 20(1), 8-27.

Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Löfsten, H. (2014). Product innovation processes and the trade-off between product innovation performance and business performance. European Journal of Innovation Management, 17(1), 61-84.

Petruzzo, P., Gazarian, A., Kanitakis, J., Parmentier, H., Guigal, V., Guillot, M., … & Badet, L. (2015). Outcomes after bilateral hand allotransplantation: a risk/benefit ratio analysis. Annals of surgery, 261(1), 213-220.

Rabl, T., Jayasinghe, M., Gerhart, B., & Kühlmann, T. M. (2014). A meta-analysis of country differences in the high-performance work system–business performance relationship: The roles of national culture and managerial discretion. Journal of Applied Psychology, 99(6), 1011.

Real, J. C., Roldán, J. L., & Leal, A. (2014). From entrepreneurial orientation and learning orientation to business performance: analysing the mediating role of organizational learning and the moderating effects of organizational size. British Journal of Management, 25(2), 186-208.

Rosemann, M., & vom Brocke, J. (2015). The six core elements of business process management. In Handbook on business process management 1 (pp. 105-122). Springer Berlin Heidelberg.

Rosenbusch, N., Rauch, A., & Bausch, A. (2013). The mediating role of entrepreneurial orientation in the task environment–performance relationship: A meta-analysis. Journal of Management, 39(3), 633-659.

Spronk, J., Steuer, R. E., & Zopounidis, C. (2016). Multicriteria decision aid/analysis in finance. In Multiple Criteria Decision Analysis (pp. 1011-1065). Springer New York.

Uechi, L., Akutsu, T., Stanley, H. E., Marcus, A. J., & Kenett, D. Y. (2015). Sector dominance ratio analysis of financial markets. Physica A: Statistical Mechanics and its Applications, 421, 488-509.

Wilson, P., Harper, N., & Darling, R. (2013). Explaining variation in farm and farm business performance in respect to farmer behavioural segmentation analysis: implications for land use policies. Land Use Policy, 30(1), 147-156.

Zalengera, C., Blanchard, R. E., Eames, P. C., Juma, A. M., Chitawo, M. L., & Gondwe, K. T. (2014). Overview of the Malawi energy situation and A PESTLE analysis for sustainable development of renewable energy. Renewable and Sustainable Energy Reviews, 38, 335-347.