Australian Ethical Investment Ltd · ASX:AEF
Australian Ethical Investment — FY2023 Earnings Presentation
40 slides from Australian Ethical Investment's earnings presentation, Aug 25, 2023
Slide 1: FY23 Results
Australian Ethical As Australian Ethical Investment Ltd FY23 Results John McMurdo (Managing Director & CEO) and Mark Simons (CFO) | 25 August 2023
Slide 2: Contents
Contents 01 Overview & highlights 02 Financial results 03 Business update Australian Ethical AS
Slide 3: Overview & highlights
Slide 4: Our authenticity
Our authenticity We are an authentic purpose-driven investment manager, focused on investor returns and positive impact. Low carbon future The structural drivers for a more sustainable, low carbon future have never been stronger, with our potential addressable market growing significantly” Scaling b
Slide 5: Our strategic pillars
Our strategic pillars Ss 1. Principled investment leadership * Deliver leading products with long term competitive returns & portfolio resilience for investors. * Bea powerful proof-point for ethical investing. aN 2. Advocates for a better world + Fostering a coalition of co- investors in the cause
Slide 6: FY23 results
FY23 results Consistent and disciplined strategic execution is yielding strong results +48% FUM growth +54% Customer growth + Strong FUM & customer growth * Diversification of channels & products, driving a more resilient business + Solid investment performance despite challenging market conditions
Slide 7: FY23 results
FY23 results $9.2bn + Strategy delivering strong momentum into FY24 Record FUM + Strong second half revenue and profit uplift + Operating leverage emerging following Christian Super SFT +22% +38% | $92m 2H revenue 2H UPAT revenue run rate increase increase at 30 June 2023 5c final dividend Australia
Slide 8: FY23 operational highlights
FY23 operational highlights Progressed M&A strategy with Christian Super SFT +28.000 +81. 93bn nena $0,65bn° positive organic net flows (excl. institutional) Reached milestones of $9bn $7bn total FUM in super FUM + Excludes Cision Super FUM unit of 19360 investment Tends Super Member Engagement Repo
Slide 9: We continue to gain recognition for our ethical investment leadership
We continue to gain recognition for our ethical investment leadership ane sures RATINGS | fete Sib%02 SUPERRAT SuperRatings GOLD 2023, MySuper, MyChoice & Pension fine fine ‘fin finder? Awa 4 Awan aman, “AWAROS & Green Superannuation Fund of the Year 2020-2023 MORNINGSTAR Highest Honours ESG Commitm
Slide 10: Our ethical pedigree is embedded in our business
Our ethical pedigree is embedded in our business Certified tt Nay Australian ry 2 Ethical | c Foundation —. ", , 4 > Ai Corporatio e rp ion ’¢ Nate Australia’s first publicly listed B Corp. Highest 10% of AEI profits are allocated to scoring Certified B Corporation in Australia & Tobacco Free Financ
Slide 11: Sustainability highlights - Investment portfolio
Sustainability highlights - Investment portfolio 78% 2Ax 43x 4 lx investment in sustainable water & renewables and solutions* agriculture and pollution energy solutions* prevention* lower CO, intensity" revenue from revenue from in listed companies in our share portfolio, sustainable impact compared
Slide 12: Sustainability highlights - Ethical stewardship
Sustainability highlights — Ethical stewardship In-depth multi-year engagements To have influence and impact beyond our invested capital, we continue to use our voice and position to advocate for the changes needed for the sustainable and equitable future we are striving for. 250+ engagements for pe
Slide 13: Our Foundation supports charities combatting climate change
Our Foundation supports charities combatting climate change Our Foundation’s vision is to direct as much philanthropy as possible to effective solutions and charities addressing the climate emergency. $l.im $9m+ 10% provisioned allocated to of AEI profits allocated in FY23 not-for-profits to not-for
Slide 14: With Foundation grants distributed through two funding streams
With Foundation grants distributed through two funding streams Strategic grants * directed to effective, proven climate i Y ] + mitigation strategies which: Stop sources of carbon pollution Support carbon sinks Educate and empower women and girls * Utilising funding provisioned in FY22 Some of the p
Slide 15: And our success is underpinned by our people
And our success is underpinned by our people Purpose-driven, high performance culture Attracts top talent and is led from the top 2 Gender diversity 50% female representation on executive leadership team, 67% on the board Investment in capability Increased FTE from 99 to 118 during the year [<< Inve
Slide 16: Financial Results
Financial Results
Slide 17: Despite challenging markets, FUM grew a record $3bn to $9.2bn
Despite challenging markets, FUM (Sbn) As at 30 June of each year 10.00 9.00 800 700 6.00 500 400 3.42 300 2.00 100 0.00 2019 I Managed tunds 4,05 6.07 6.20 FUM grew a record $3bn to $9.2bn, up 48% 9.20 2020 HE institutional * Includes SMA, excludes Institutional 2021 1) superannuation 2022 2023 Fun
Slide 18: Customer numbers increased 54%
Customer numbers increased 54% driven by Key themes both organic and inorganic growth - Custom number tS boosted by Christian Super SFT, and growth in organic channels + Super members grew 65% to >114,000, boosted by the acquisition of 28,000 Christian Super members Customers at 30 June 9 CAGR 28% 7
Slide 19: And positive net flows continue despite challenging markets
And positive net flows continue despite challenging markets Flows by product ($bn) ~ - = Outflows 2019 2020 2021 2022 2023 © Superannuation I Managed funds Bh institutional Institutional redemption of $0.18bn* Note: Managed funds includes SMA. Netflows exclude $1.93bn FUM transferred from Christian
Slide 20: Increased scale has enabled further fee reductions in line with fee strategy
Increased scale has enabled further fee reductions in line with fee strategy Revenue margin Ave FUM (Sbn) Ave revenue margin 10.0 1.80% 9.0 1.60% 80 1.40% 7.0 1.20% 6.0 1.00% 5.0 0.80% 40 3.0 20 al 0.0 2016 2017 2018 2019 2020 2021 2022 2023 I Average FUM (LHS) — Total average revenue margin (RHS)*
Slide 21: Operating revenue increased 15% to $81.1m
Operating revenue increased 15% to $81.1m \ FY22 1.0 — (2.2) (0.4) Managed Funds (FUM Managed Funds. Superannuation (FUM Other FY23 based) (Performance Fee) and member based) Key themes + Solid operating revenue growth despite challenging markets and fee reductions + 2H revenue up 22% compared to 1H
Slide 22: And expense growth reflects disciplined investment in the business
And expense growth reflects disciplined investment in the business 04 FY22 Employee Fund Related Marketing Other FY23 investment of $2.6m S Key themes Expenses* increased 15%, with key drivers being: + Investment in capability drove higher employee costs (~25% of the increase) delivering: © strength
Slide 23: FY23 Financial Results
FY23 Financial Results UPAT up 15% and total dividend up 17% Key financials ($'000) FY2023 FY2022__ Change (YoY) Operating Revenue 81,096 70,409 15% Performance fee - 375 Total Revenue 81,096 70,784 15% Total expenses (excluding SFT integration costs, and due diligence & transaction costs) (64,181)
Slide 24: We retain a strong capital position with no debt
We retain a strong capital position with no debt | Key themes With $13.5m surplus above regulatory capital + Strong balance sheet with no debt Net Tangible Assets** (Sm) * Strong cash position 25 + Minimum regulatory capital requirement of $6.1m at 30 June 20 $m FY2023 FY2022 2023 Cash & term deposi
Slide 25: Key financials
Key financials * Attributable to shareholders Funds under management ($bn) 9.20 6.07 E20 4.05 3.42 l] 2019 2020 2021 2022 2023 Statutory Profit after tax* ($m) 6.5 || 6.6 2019 2020 2021 2022 2023 PAT After tax & grants impact of performance fees on NPAT Profit after tax (pre-performance fees) Operat
Slide 26: Dividends
| Dividends (cps) 8.0 . 7.0 Key metrics eo 60 5.0 2019 2020 2021 2022 2023 Interim dividend ™ Final dividend Special dividend Diluted earnings per share* (UPAT) (cps) Diluted earnings per share* (NPAT) (cps) am 10.46 10.02 9.16 8.42 8.55 8.26 5.84 : S77 $84 2019 2020 2021 2022 2023 NPAT /UPAT attrib
Slide 27: Business update
Business update (4
Slide 28: Strong execution against strategy is delivering pleasing results
Strong execution against strategy is delivering pleasing results... 1. Principled investment leadership New CIO with importantalternatives & international asset class expertise New Head of Impact & Ethics role to further positive investment outcomes Solid fund ratings & investment performance despit
Slide 29: Outlook
Outlook Positive momentum to continue through FY24 as we target $100m annualised revenue run rate by end FY24 (subject to market conditi Medium term market Disciplined strategic execution opportunity remains to continue compelling * transitioning super administration and custody/investment administr
Slide 30: Appendices
Appendices Australian Ethical
Slide 31: Appendix 1: Historical performance fee impact on results
Appendix 1: Historical performance fee impact on results Key financials ($'000) FY2023 FY2022 Change (YoY) Operating Revenue pre performance fee 81,096 70,409 15% Performance fee 5 375 Operating Revenue post performance fee 81,096 70,784 15% Net profit after tax attributable to shareholders (post pe
Slide 32: Appendix 2: UPAT reconciliation
Appendix 2: UPAT reconciliation Key financials ($'000) FY2023 FY2022 Decrease % Net profit after tax — statutory 6,576 9,511 (31%) Add: Net Loss attributable to The Foundation 10) 86 Net profit after tax attributable to shareholders 6,576 9,597 (31%) SFT integration costs 3,733 - Fair value movement
Slide 33: Appendix 3: Performance tables
Appendix 3: Performance tables Australian | AS
Slide 34: Balanced Fund performance
(> _Y B l d 1 3Y 5Y 7Y 10Y 20Y Since a ance (%pa) (%pa) (%pa) (%pa) (%pa) inception A lati = 0 g Absolute Performance ~ 9.2% 6.3% 6.3% 6.9% 7.0% 5.9% 6.2% P ( Y P ) Perfoimance gross of 9.3% 6.5% 64% 7.0% 7.1% 60% 6.3% nES Peivcintee) CN Ci EltoKS Benchmark# 9.0% 7.5% 5.6% 6.3% 6.1% 5.7% 5.1% benchm
Slide 35: Australian Shares Fund performance
Q ° Australian Shares Fund Investments into Financials, Healthcare and Utilities sectors added value, while Cash holdings, Consumer Discretionary and Information Technology detracted value. In FY23, the fund’s large cap names outperformed while small and microcap holdings performed strongly in the f
Slide 36: Emerging Companies Fund performance
OQ Emerging Companies Fund Has outperformed the benchmark for all periods of 2 years and above. Over the last year ECF investments in Financials and Utilities added value, and being significantly underweight the poor performing sectors of Consumer Staples and Real Estate investment also assisted inv
Slide 37: High Conviction Fund performance
wy, High Conviction Fund Headwinds in the first half of FY23 contributed to underperformance relative to benchmark, followed by recovery in the second half as these headwinds subsided. Financials was the Fund's best performing sector in FY23, with stock selection a key driver of performance. Materia
Slide 38: Contact
Contact John McMurdo Chief Executive Officer jmcmurdo@australianethical.com.au 0449 903 207 Mark Simons Chief Financial Officer msimons@australianethical.com.au 0434 369 746 Melanie Hill Head of Business Performance & Investor Relations mhill@australianethical.com.au 0428 879 348 Elise Davidson Blue
Slide 39: Disclaimer
Disclaimer Australian Ethical Investment Ltd (ABN 47 003 188 930; AFSL No. 229949) (AEl) is the Responsible Entity and Investment Manager of the Australian Ethical Managed Funds. Interests in the Australian Ethical Retail Superannuation Fund (ABN 49 633 667 743) are offered by Australian Ethical Inv
Slide 40: Thank you
Australian Ethical Investment — FY2023 Earnings Presentation on 6ix