Australian Ethical profit up six-fold as customer numbers rise

Sydney-headquartered investment manager Australian Ethical (ASX: AEF) has delivered a six-fold lift in net profit after tax (NPAT) to $6.2 million in the December half, buoyed by rises in revenue, customer numbers and a positive investment performance of around $200 million.

Net flows were up 39 per cent year-on-year at $259 million, underpinned by superannuation net flows of $269 million which served to more than offset a "modest" $10 million in net outflow for its managed funds due to volatile market conditions.

Australian Ethical's total funded customer numbers were up 13 per cent at more than 130,000, while the number of super members grew 16 per cent to more than 117,000.

The majority of the group's $9.67 billion in funds under management (FUM) relates to its superannuation offerings, while 21 per cent is from managed funds, predominantly wholesale.

Revenue grew by 33 per cent to $48.5 million, which is almost half of Australian Ethical's target of $100 million in annualised revenue by the end of this financial year.

"This is a really strong first half result for Australian Ethical, and we're pleased to report increases in FUM, customer numbers, revenue and profit," says Australian Ethical chief executive officer John McMurdo.

"Our growth strategy is gathering momentum and we are seeing an uplift in our key financial metrics as well as strong momentum on key strategic initiatives.

"We are proud of the way we operate our purpose-driven business and were delighted that many aspects of our business - customer experience, growth, governance, investment philosophy as well as investment excellence - were all recognised by awards and accolades during the period."

McMurdo says it is positive to continue reporting positive net flows, and solid investment performance during a period of continued market volatility.

"As a result, we continue to see growth in our revenue and remain enthusiastic about the opportunities that lie ahead," he says.

"At Australian Ethical, we continue to demonstrate it is possible to deliver both sound investment returns while also influencing progress towards a better future for the planet and all its inhabitants."

The group also provisioned approximately $900,000 in the half for the Australian Ethical Foundation aimed at unearthing and funding high-impact charities driving solutions addressing climate change. This compares to $1.1 million provisioned for such donations in the entirety of FY23.

"As Morningstar has acknowledged for the second year running, Australian Ethical is one of only eight ESG (Environment, Social, Governance) leaders globally to achieve a 'Leader' for ESG commitment rating, which makes us an attractive choice for the growing number of Australians who want their investments to support decarbonisation, emissions reduction and social good — as well as delivering long-term returns," McMurdo adds.

He says the company has entered the second half of FY24 in a good position, with a "deeply capable and purpose-driven team of professionals, enhanced investment capability and an expanded product suite".

"We are seeing positive momentum on strategic initiatives to deliver an enhanced business platform capable of supporting a much larger business, as we target $100 million in annualised revenue run-rate by the end of FY24," he explains.

"Whilst uncertain market conditions may well prevail in the second half, we remain focused on our strategic plan. Our larger scale will allow us to continue to invest for growth whilst also delivering profit for shareholders.

"We will continue to invest prudently in our technology and data analytics capability, brand and customer experience, as well as progress our inorganic pipeline of opportunities."

The largest chunk of Australian Ethical's FUM is around $4.3 billion in the Balanced Super Fund, for which six of the Top 10 holdings are fixed interest assets including with the Federal Government and the treasuries of NSW and Victoria, with other key holdings including property group Dexus (ASX: DXS), Investa Property and Apple Inc (NASDAQ: AAPL).

The top 10 holdings for its $715 million Growth superannuation fund are very similar but ordered differently, while the largest holdings in its $660 million Australian Shares fund are National Australia Bank (ASX: NAB), Suncorp Group (ASX: SUN), Contact Energy (ASX: CEN), Macquarie Technology Group (ASX: MAQ), Insurance Australia Group (ASX: IAG), Westpac (ASX: WBC), Domain (ASX: DHG), Bank of Queensland (ASX: BOQ), Mirvac (ASX:MGR) and Healius (ASX: HLS).