Australian Ethical Investment Ltd · ASX:AEF
Australian Ethical Investment — FY2019 Earnings Presentation
37 slides from Australian Ethical Investment's earnings presentation, Aug 28, 2019
Slide 1: FY19 Shareholder Presentation
Phil Vernon | Managing Director and CEO Mark Simons| CFO
Slide 2: Highlights, Financials, Business Update
HIGHLIGHTS FINANCIALS BUSINESS UPDATE
Slide 3: Highlights
Highlights
Slide 4: Growth, client engagement, our people, investment performance
Investment performance Growth Client engagement Continue to be the fastest growing super fund over 5 • Multiple industry awards, including three Gold years1,2. Top 10 funds by growth in FUM and member • Industry leading NPS for both super & managed funds, numbers over both 1 and 5 year period2 . Ove
Slide 5: Awards and ratings
Winner – Financial Standard Investment Leadership Award – ESG for the Australian Shares Fund Money Magazine ‘Best Green Super Fund’ in ‘Best of the Best’ December 2018 issue Money Management’s Fund Manager of the Year – Responsible Investments for the Australian Shares Fund (Wholesale). Winner – Sup
Slide 6: Financials
australianethical a australianethical
Slide 7: Continued revenue and profit growth
Continued revenue and profit growth Record profit Strong FUM & revenue growth • FUM up 21% • Revenue up 14% to $41m (12% excl performance fee) Diluted EPS^ NPAT attributable to 3 year CAGR 29% • Fee reductions resulting in lower margin in FY19 shareholders* $6.5m, up 29% • Emerging Companies perform
Slide 8: Key themes
Key themes Revenue 35,992 40,977 14% • Continued FUM & member growth Operating expenses (28,594) (31,820) 11% driving higher revenues Non operating expenses - (75) - Total expenses (28,594) (31,895) 12% • Solid revenue growth and lower Income tax expense (2,317) (2,468) 7% expense growth driving str
Slide 9: FUM $3.42bn as at 30 June 2019
Superannuation FUM ($bn) ($m) 21% 3.42 Managed Funds 0.21 32% 2.82 $3.42bn as at 30 June 2019 Institutional 0.17 0.95 38% 2.15 0.81 0.01 33% 1.56 0.64 0.01 1.17 0.51 Managed Funds 2.26 0.37 1.84 Retail 1.49 8% 1.04 0.79 2015 2016 2017 2018 2019 Funds under management ($bn) 30 June 2018 30 June 2019
Slide 10: Funded super members up 11%
Key themes • Super membership continues to Funded super members up 11% grow, primarily from direct channel 40,530 • 43,079 super members at 30 June 2019 – comprising 40,530 funded 36,482 members with ~2,500 yet to be 32,159 funded • Funded super members (excluding zero balance members) grew 11% 24,3
Slide 11: Net flows key themes
Key themes • Strong positive netflows continue however are lower than FY18 primarily due to large institutional win in FY18 • Strong positive flows with super netflows of $250m compared to $255m in FY18 • Following improvements to our online join Superannuation processes in February 2019, we have se
Slide 12: FUM and average revenue margin
Key themes ARM % • Ongoing targeted fee Total FUM (LHS) Total average revenue margin (RHS)* reductions since 2014 $4,000 2.50% • FY19 fee and threshold reductions within retail $3,500 managed funds and fee reductions within selected 2.00% super and pension options $3,000 • Change in managed funds pr
Slide 13: Revenue and operating expenses
Revenue ($’m) Operating expenses ($’m) 0.8 0.4 (0.2) 0.6 0.2 4.0 0.4 0.8 41.0 1.2 31.8 36.0 28.6 FY18 Superannuation Superannuation Managed Funds Managed Funds FY19 FY18 Employee Fund Related Marketing Community Other FY19 (FUM based) (Member based) (FUM based) (Performance) Grant Key themes Key the
Slide 14: Expenses by category; revenue vs expenses
Key themes • Maintaining margins as we continue to invest in growth • Focused strategic investment in digital platform, client experience enhancements and client acquisition is driving increase in some variable costs • Fund related costs grew 15% to $6m in FY19 • Low growth of fixed expenses in FY19
Slide 15: Net assets and cash
Key themes • Strong balance sheet with no debt • Strong cash position 16.4 • Parent holds surplus above 14.8 regulatory capital of $5m 13.5 12.8 11.2 2015 2016 2017 2018 2019 Net Assets Cash and cash equivalents 15 * Represents total assets less total liabilities attributable to shareholders (exclud
Slide 16: Key themes: FUM, revenue, profit
Key themes 41.0 3.42 36.0 2.82 • Delivered strong growth 28.3 2.15 23.0 across all key financial 21.2 1.56 metrics 1.17 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 6.5 6.5 After tax impact After tax impact 5.0 of performance of performance fee on NPAT 5.0 fee on UPAT 4.2 3.8 3.0 2.9 2.0 2.5 20
Slide 17: Key themes: EPS, dividends, cash flow
Key themes 1.77 5.00 • Continue to deliver value 1.35 4.00 0.81 0.95 3.00 to shareholders 0.59 2.60 2.00 • Strong share price growth 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 • FY19 dividends 5c, up 25% • Strong operating cash flow 5.77 7.42 7.50 4.46 5.92 2.72 2.62 4.22 1.81 2.95 2015 2016
Slide 18: Business update
Business upo a australianethical
Slide 19: Strategic pillars
PILLAR PILLAR PILLAR PILLAR Ethical leadership Professional Client focus Sustainable Be a bold ethical voice and investment Offer a client experience and business drive change for good. product suite to meet the management expectations of the conscious Be of a scale that meets customer needs, shareh
Slide 20: Investment portfolio and our Foundation
Investment portfolio Our Foundation Share investments produced 70% less CO2 than benchmark1 10% of AEI profits donated to not-for-profit organisations 5 $937k provisioned for impact initiatives in FY19 Nil investment in fossil fuels2 $3.5m donated to not-for-profits since inception Nil investment in
Slide 21: Strong performance across super and investment products
• Strong performance across our super and investment products over 1 year • All funds (with exception of fixed interest), met or exceeded benchmark over 1 year • Continued outperformance over the long term • Emerging Companies Fund significantly outperformed benchmark, generating a performance fee •
Slide 22: Australian Shares Fund performance
12,000 AE Australian Shares Fund 10,000 Australian Share Fund - Net ASX Small Industrials 8,000 S&P/ASX 200 6,000 4,000 2,000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: Morningstar June 2019. Universe include
Slide 23: Balanced Accumulation option met its 5 year objective
Our default MySuper Option, the Balanced Accumulation option, has met its 5 year objective and outperformed the benchmark over all time periods 1Y 3Y 5Y 7Y 10Y Since Inception* Balanced Accumulation Option ~ 10.2% 8.9% 7.9% 8.9% 6.8% 6.4% Benchmark# 6.7% 7.7% 6.1% 7.3% 6.8% 5.0% Relative Performance
Slide 24: Australian Shares Fund outperforms over medium and long term
Australian Shares Fund continues to outperform the market over the medium, long and very long term 20Y 1Y 3Y 5Y 7Y 10Y Since Inception Retail* 8.4% 9.3% 11.5% 13.7% 10.6% 10.0% 9.9% S&P/ASX 200 Accum Index 11.5% 12.9% 8.9% 11.9% 10.0% 8.6% 9.4% Relative Performance (3.1)% (3.6)% 2.6% 1.8% 0.6% 1.4%
Slide 25: Performance fee for Emerging Companies Fund
Performance fee received in FY19 for strong outperformance of Emerging Companies Fund 1Y 3Y Since Inception Retail* 15.6% 13.5% 14.2% S&P/ASX Small Industrials Accum Index 6.4% 10.7% 11.2% Relative Performance 9.2% 2.8% 3.0% Wholesale* 16.2% 14.4% 15.1% S&P/ASX Small Industrials Accum Index 6.4% 10.
Slide 26: Super outflows as a % of inflows
Key themes 600% Super outflows as a % of inflows • One of the best performing 500% funds in terms of outflows - High outflows Low outflows super outflow ratio continues to be the lowest 400% across all retail funds in the industry 300% • AE retention has consistently been in the top 5 funds over a 5
Slide 27: Annual growth by AUM
Annual growth by AUM Average annual growth 5 years to 2018 by AUM EQT Tasplan Tasplan Sandhurst Trustees Equipsuper Australian Ethical Super Netwealth Investments Netwealth Investments Hostplus Public Sector EQT Retail Australian Ethical Super Retail Prime Super Industry Diversa Trsutees Industry Ho
Slide 28: Scalability key themes
Key themes Funds under management^ ($bn) Funded super members 40,530 • Scalability continues to 3.42 36,482 increase across the 2.82 32,159 business 2.15 24,375 1.56 18,834 1.17 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 40 Expenses* ($m) Revenue vs Expenses ($m) 35 45 30 40 25 35 20 30 25 15
Slide 29: Diversity & inclusion
64 staff Diversity & inclusion Diversity across many dimensions including gender, age and ethnicity Top quartile employee engagement of 71% 2 paid volunteering days per year Equality in leadership - FY19 Generational split of AE employees 50% 44% 54% 8% Wellbeing program including annual health chec
Slide 30: Outlook
• Ideally placed to capture opportunities for growth as more people realise that our approach is achieving strong returns and delivering social good • Ongoing growth in FUM and strong inflows expected to drive continued profit growth • Strong start to FY20 with higher rollover rate positively impact
Slide 31: Managed funds performance
1Y 3Y 5Y 7Y 10Y 20Y Since Incept’n Australian Ethical Funds – Managed Funds Balanced Fund Retail 10.0% 7.7% 7.4% 9.2% 7.2% 6.8% 6.8% Balanced Fund Wholesale 11.2% n/a n/a n/a n/a n/a 11.4% Australian Shares Fund Retail 8.4% 9.3% 11.5% 13.7% 10.6% 10.0% 9.9% Australian Shares Fund Wholesale 9.6% 10.8
Slide 32: Super and Pension performance
Australian Ethical Funds – Super and 1Y 3Y 5Y 7Y 10Y 20Y Since Incept’n Pension Defensive Accumulation Fund 1.3% 1.2% 1.2% 1.5% 2.3% 3.1% 3.1% Conservative Accumulation Fund 7.5% 4.6% 4.4% 4.5% n/a n/a 4.3% Balanced Accumulation Fund 10.2% 8.9% 7.9% 8.9% 6.8% 6.4% 6.4% Growth Accumulation Fund 11.2%
Slide 33: Managed funds relative performance
1Y 3Y 5Y 7Y 10Y 20Y Since Incept’n Australian Ethical Funds – Managed Funds Balanced Fund Retail1 0.0% (1.8)% (1.0)% (1.5)% (2.1)% 0.1% (0.7)% Balanced Fund Wholesale1 1.2% n/a n/a n/a n/a n/a (0.1)% Australian Shares Fund Retail2 2.1% (1.4)% 1.1% 2.1% 0.2% 3.9% 2.5% Australian Shares Fund Wholesale
Slide 34: Super and Pension relative performance
Australian Ethical Funds – Super and 1Y 3Y 5Y 7Y 10Y 20Y Since Incept’n Pension Defensive Accumulation Fund7 0.2% 0.2% (0.1)% (0.3)% (0.3)% (1.0)% (1.1)% Conservative Accumulation Fund8 2.6% 0.6% 0.6% (0.3)% n/a n/a (0.1)% Balanced Accumulation Fund9 3.6% 1.2% 1.8% 1.5% 0.0% 1.3% 1.4% Growth Accumul
Slide 35: Footnotes
FY19 Highlights – slide 4 1. Represents membership growth 2. KPMG 2019 Super Insights Report – published April 2019 3. Excluding institutional 4. This excludes the results for the Australian Ethical Foundation Limited (‘The Foundation’) 5. Pollinate research 6. Morningstar Australian Shares Funds (A
Slide 36: Important information
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 and other i
Slide 37: Australian Ethical
australianethical i a
Australian Ethical Investment — FY2019 Earnings Presentation on 6ix