Australian Ethical Investment Ltd · ASX:AEF
Australian Ethical Investment — FY2020 Earnings Presentation
36 slides from Australian Ethical Investment's earnings presentation, Aug 26, 2020
Slide 1: FY20 Shareholder Presentation
John McMurdo | Managing Director and CEO Mark Simons| CFO
Slide 2: Highlights, Financials, Business Update
HIGHLIGHTS FINANCIALS BUSINESS UPDATE
Slide 3: Highlights
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Slide 4: FY20 highlights
Growth FASTEST GROWING super fund over 5 years1 reaching $4.05 BILLION in FUM. FY20 highlights Customer Record net inflows Funds under management NPAT attributable to shareholders2 numbers up $0.66bn $4.05bn $9.5m Record results in a challenging 20% 100% 19% 46% year – performance with purpose Reven
Slide 5: FY20 highlights: excellent investment performance
Excellent investment performance Investment philosophy Continued focus on Multi award FY20 winning and process robust and returns from clean, “future-building” industries that deliver highlights investment portfolio in both ESG sector and broader market resilient through COVID-19 positive impact eco
Slide 6: FY20 investment awards
WINNER 2 Financial Standard Investment Leadership Awards 2020 AE Australian Shares AE Australian Shares Fund won Fund won ESG Australian Equities Australian Equities FY20 High Performance Award Award investment Awards recognise Australian investment managers consistently producing solid returns Comp
Slide 7: Impact highlights
INVESTMENT Share investments produced PORTFOLIO 75% less CO2 than benchmark10 Nil Nil Nil investment in fossil investment investment fuel companies11 in nuclear in tobacco Engaged with Over 70 Impact over 400 companies companies highlights for people, planet & animals we engaged with have committed
Slide 8: Impact highlights
OUR FOUNDATION 10% of AEI profits allocated to not-for-profit organisations16 $1.3m >$5m Donations made to aid bushfire Provisioned for allocated to not- recovery, and to fund COVID-19 impact initiatives for-profits since response initiatives in FY20 inception committed investment Impact through SVA
Slide 9: Financials
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Slide 10: Financial highlights
Record profit NPAT attributable Average Diluted to shareholders* revenue EPS^ 3 year $9.5m, up margin~ CAGR Financial 46% 1.13% 47.6% highlights Dividends 6c, up Includes special performance Final dividend 3.5c payable Continued revenue 20% fee dividend of 1c 16 Sep and profit growth Strong FUM & In
Slide 11: Key financials
Key financials Revenue excluding performance fee 46,262 40,208 15% Performance fee 3,640 769 - Total Revenue 49,902 40,977 22% • Continued FUM & customer growth Operating expenses (37,015) (31,820) 16% driving higher revenues Non operating gain/(loss) 178 (75) - • NPAT growth of 46%; UPAT growth Pro
Slide 12: Continued strong growth in FUM
Continued strong growth in FUM 4.50 FUM ($bn) 4.05 3.42 0.27 3.50 2.82 0.21 1.06 $4.05bn as at 30 June 2020 0.17 0.95 2.50 2.15 1.56 0.01 0.81 0.64 1.50 0.01 2.72 0.51 2.26 1.49 1.84 0.50 1.04 -0.50 2016 2017 2018 2019 2020 Managed Funds Wholesale Superannuation Managed Funds* Institutional 19% Supe
Slide 13: Strong customer growth in FY20
Strong customer growth in FY20 Customers at 30 June 57,814 • Managed Fund investors grew 16% • Super membership grew 20% 48,306 8,995 • Overall, customers up 20% 43,869 39,006 7,776 • 638 member accounts closed 7,387 following early release of super 30,649 6,847 6,274 48,819 40,530 36,482 32,159 24,
Slide 14: Net flows up 100% in FY20
Net flows up 100% in FY20 Net flows by product ($bn) • Record net inflows up 100% from FY19 • Managed Funds net inflows up 0.66 126% to $0.19bn 0.52 • Super net inflows up 88% to 0.45 $0.47bn 0.32 0.33 • $0.04bn outflows relate to Federal Government’s changes to early Inflows release of super condit
Slide 15: Revenue margin
Revenue margin ARM % • Continued fee reductions to pass on $4,500 3.00% benefits of scale to our customers $4,000 & remain competitive 2.50% • Average revenue margin of 1.13% $3,500 in FY20* down from 1.19% in FY19, $3,000 2.00% with revenue margin of 1.06% as at FUM ($m) 30 June 2020 $2,500 1.50% •
Slide 16: Revenue
Revenue Revenue ($’m) • Revenue growth driven by FUM (0.5) (0.2) growth & the performance fee 5.3 • Member based fees lower than 1.4 2.9 FY19 due to 3% fee cap21 & removal of exit fees in FY20 49.9 41.0 FY19 Managed Funds Managed Funds Superannuation Superannuation Other FY20 (FUM based) (Performanc
Slide 17: Revenue drivers
Revenue drivers Revenue ($’m) (0.1) • Strong growth in FUM and the 0.2 (1.0) Emerging Companies Fund (0.6) (0.1) (0.2) performance fee drove a 22% increase in revenue 6.4 • Revenue growth was offset by super fee reductions 2.9 • New 3% fee cap21 (PYS legislation) (0.1) reduced revenue by $0.6m in FY
Slide 18: Expense drivers
Expense drivers Operating expenses ($’m) • Employee expenses increased 18% in FY20 due to full year impact of 0.4 FY19 hires & new hires in FY20 to 0.4 0.5 enhance business capability 1.2 • Increase in fund related costs driven by growth in customer base and 2.8 early release of super processing cos
Slide 19: Expenses
Expenses Expenses by category • FY20 saw focused strategic 45 investment (variable expense) on enhancing our digital platform, 40 driving brand awareness, enhancing 35 the customer experience and developing new products 30 • Costs will increase as we invest to $ Millions 25 capture future growth 20
Slide 20: Balance sheet strength
Balance sheet strength • Strong balance sheet with no debt • Strong cash position • Parent holds a surplus above 20.2 regulatory capital of $5m 16.4 14.8 13.5 12.8 2016 2017 2018 2019 2020 Net Assets Cash and cash equivalents * Represents total assets less total liabilities attributable to sharehold
Slide 21: Key financials
Funds under management ($bn Revenue ($m) 4.05 49.9 3.42 41.0 2.82 36.0 Key 2.15 28.3 1.56 23.0 financials 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Profit after tax * ($m) Underlying profit after tax * ($m) 9.5 9.3 After tax and After tax and grants impact grants impact of ECF of ECF 6.5 per
Slide 22: Key metrics
Dividends (cps Number of Shareholders 7,856 6.00 5.00 4.00 Key 3.00 2.60 1,209 1,404 1,832 2,903 metrics 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Interim Dividend Final Dividend Special Dividend Diluted earnings per share * (cps Net Cash from operating activities per share (cps) 8.42 7.88 7
Slide 23: Business update
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Slide 24: Strategic pillars
Strategic pillars Principled Advocates Compelling Impactful investment for a better client business leadership world experience • Extend our leadership in • Foster a coalition of • Enrich our client experience • Enhance our brand to principled investment co-investors for a through enhancing our capt
Slide 25: Investing for a better world
OUR PURPOSE OUR VISION Investing Money as for a better a force world for good OUR VALUES Wisdom Authenticity Action Empathy 25
Slide 26: Investment leadership – performance & purpose
Investment leadership – performance & purpose Market-leading Strong returns Experienced and performance with lower risk stable team • Strong outperformance across most • Balanced Fund ranked • In-house team of investment funds equal first for its Sharpe professionals • Multiple industry awards ratio
Slide 27: Outperformance in challenging markets – Australian Shares Fund
Outperformance in challenging markets – Australian Shares Fund • Stuck to investment philosophy • Looking through current market volatility • Assessing impacts company- by-company focusing on fundamentals • Participated in over 25 capital raisings during COVID across all our domestic equities portfo
Slide 28: Investment leadership
Investment leadership Value of $1000 invested since inception Risk/return over ten years to 2020 14,000 Australian Share Funds (Retail) 12,000 S&P/ASX Small Industrials 10,000 S&P/ASX 300 8,000 6,000 4,000 2,000 0 2006 2017 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2007 2008 2009 2010 2
Slide 29: Long track record of outperformance
Long track record of outperformance Balanced Accumulation Option (MySuper) Since 1Y 3Y 5Y 7Y 10Y inception* Our high ranking default Balanced Accumulation Option ~ 2.3% 6.4% 6.3% 7.2% 6.7% 6.2% MySuper option, the Balanced Accumulation Benchmark# (0.9%) 4.4% 4.6% 5.5% 5.7% 4.7% option, has met its 5
Slide 30: Long track record of outperformance
Long track record of outperformance Australian Shares Fund Since 1Y 3Y 5Y 7Y 10Y 20Y inception Retail* 2.0% 6.1% 8.5% 10.8% 10.3% 8.4% 9.6% Benchmark^^ (7.7%) 5.1% 7.2% 8.0% 8.4% 5.6% 6.7% Multi-award winning Australian Shares Fund Relative Performance 9.8% 1.0% 1.3% 2.8% 1.8% 2.8% 2.8% has a track
Slide 31: Significant outperformance
Significant outperformance Emerging Companies Fund Since 1Y 3Y 5Y inception Emerging Companies Fund has outperformed Retail* 13.2% 14.0% 14.0% 14.0% the benchmark for all time periods with S&P/ASX Small Industrials Accum Index (7.4%) 5.2% 7.2% 7.2% significant outperformance in Relative Performance
Slide 32: Outlook
There has been a seismic Uncertainty prevails shift in sentiment • FY21 will be a difficult year with economic uncertainty & market • More than 2 in 3 Australians do not volatility as COVID-19 continues want their money to cause harm to the planet26 • The full year impact of recent super fee reducti
Slide 33: Outlook
Increasing brand Further enhancement awareness with a of our customer clear differentiation of experience through our ethical investment additional investment approach and in digital platform and Outlook investment excellence other touch points In FY21, investment will be focused on Building Further
Slide 34: Footnotes
Footnotes 1. By both members and funds under management - KPMG 2020 Super Insights Report – 15. Proportion of our share investments in renewable power generation compared to published May 2020, using statistics published by APRA and ATO as at 30 June 2019 global share market 2. This excludes the res
Slide 35: Contacts
Contacts John McMurdo Melanie Hill Chief Executive Officer Head of Business Performance jmcmurdo@australianethical.com.au mhill@australianethical.com.au 0449 903 207 0428 879 348 Mark Simons Camilla Herring Chief Financial Officer Head of Communications msimons@australianethical.com.au cherring@aust
Slide 36: Disclaimer
Disclaimer Australian Ethical Investment Ltd (ABN 47 003 188 930; Australian Financial Services Certain statements in this presentation relate to the future. Such statements involve Licence No. 229949) is the Responsible Entity and Investment Manager of the known and unknown risks and uncertainties
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