Australian Ethical Investment Ltd · ASX:AEF
Australian Ethical Investment — FY2022 Earnings Presentation
40 slides from Australian Ethical Investment's earnings presentation, Aug 26, 2022
Slide 1: FY22 Results
Australian Ethical Australian Ethical Investment Ltd FY22 Results John McMurdo, Managing Director & CEO Mark Simons, CFO 26 August 2022 Ag
Slide 2: Agenda
Agenda 01 Key themes & highlights 02 Financials 03 Business update Australian Ethical AS
Slide 3: Key themes & highlights
Key themes & highlights
Slide 4: Context & strategy
Context & strategy We are an authentic purpose-driven investor, focused on investor returns and positive impact The structural drivers for a more sustainable, low carbon future have never been stronger We're scaling our business to capitalise on growing demand for ethical investing and contribute to
Slide 5: FY22 themes
FY22 themes Strong growth in retail and wholesale net flows, revenue and customer numbers Diversification of channels & products in line with strategy, driving a more resilient business Targeted cost growth is delivering a scalable business and attractive new organic and inorganic growth options We
Slide 6: FY22 results
FY22 results Growth in retail & wholesale net flows and revenue in challenging market conditions Continued reinvestment for long term growth Australian Ethical AS S0.94bn total net flows in challenging market, down (8%) 20% growth in retail and wholesale net flows to $1.14bn~ 22% growth in super net
Slide 7: Award-winning business — authentic and ethical
Award-winning business — authentic and ethical Leadership Resp Im sible nent 2021 Responsible Investment Association Australasia Responsible Investment Leader 2021 Managed funds Best Australian Shares ESG Fund — Diversified Shares Fund Money Magazine Best of the Best 2022 Super ANANGIAL REVIEW SUSTA
Slide 8: FY22 highlights
FY22 highlights BRAND Brand familiarity increasing? 5 SFT deed with Christian Super signed 2 new products launched, including first ETF #1 NPS for HNW managed funds HNWe Money Magazine Best of the Best 2022 Best Australian Equities ESG Fund for Diversified Shares Multiple strategic projects delivere
Slide 9: Impact highlights - Investment portfolio
Impact highlights - Investment portfolio a Listed companies in our portfolio have, compared to benchmark 77% lower CO, intensity’ ®) Nil investment in nuclear ®) Nil investment in fossil fuel companies® ®) Nil investment in tobacco? H <a> 1.8x more ((4( 3.7x pes Zi revenue from for sustainable water
Slide 10: Impact highlights - Our Foundation
Impact highlights - Our Foundation Our Foundation’s vision is to direct as much philanthropy as possible to effective solutions and charities addressing the climate emergency. $1.6m >$8m 10% of AEI profits allocated for impact initiatives allocated to not-for-profits allocated to not-for-profit in F
Slide 11: Financials
Financials
Slide 12: Key financials
Key financials Key financials ($'000) FY2022 FY2021 Change (YoY) Operating Revenue pre performance fee 70,409 55,816 26% Performance fee 375 2,895 (87%) Operating Revenue 70,784 58,711 21% Other Revenue 2 399 2 Total Revenue 70,784 59,110 20% Expenses (excluding due diligence & transaction costs) (5
Slide 13: FUM growth impacted by institutional outflow and volatile markets
FUM growth impacted by institutional outflow and volatile markets FUM (Sbn) As at 30 June of each year 2018 2019 © Superannuation CAGR 22% 2020 I Managed funds 2021 I Institutional 2022 Funds under management ($bn) FY2022 FY2021 Change (Yo Opening FUM 6.07 4.05 50% Super net flows 0.75 0.61 22% ene
Slide 14: Building a diversified, resilient business
Building a diversified, resilient business to deliver sustainable growth Direct remains predominant channel; strong focus on growing advised off a lower base Super FUM represents 68% of our book FUM by product Domestic equities* comprise 48% of portfolio FUM by asset class I Institutional Advised Il
Slide 15: Strong customer growth continues
Strong customer growth continues Customers at 30 June CAGR 17% 57,814 48,306 : Be a 2018 2019 2020 2021 1 Funded super members Ill Managed fund investors* * Each platform is regarded as one investor (in managed fund investor numbers) as platforms don't disclose investor numbers. We have 23 platform
Slide 16: Strong growth in retail & wholesale net flows
Strong growth in retail & wholesale net flows Net flows by product (Sbn) Net flows by product (excl insto) ($bn) Inflows =———— we Outflows, 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 © Superannuation Ill Managed funds — Net Flows “Superannuation Hil ei set is — Net Flows (excl insto) Note: Ma
Slide 17: Net flows by channel
Net flows by channel Net flows by channel ($bn) 2018 2019 2020 2021 2022 © Direct ll Advised i Institutional — Net Flows aa Key Themes + Institutional redemption of $0.20bn in FY22 + Advised channel net flows grew 46% to $0.25bn following targeted strategic investment + Our more mature direct channe
Slide 18: Revenue margin
Revenue margin FUM (Sbn) 70 60 5.0 40 3.0 2.0 - _ a 0.0 2015 2016 2017 2018 2019 2020 ‘=== Total FUM (LHS) * Average revenue margin calculated on FUM based revenue (excluding member based fees & excluding performance fee) as a percentage of average annual FUM Total average revenue margin (RHS)* 2021
Slide 19: Operating revenue increased 21%
Operating revenue increased 21% Operating Revenue ($'m) 06 (25) Fy21 Managed Funds(FUM ManagedFunds — Superannuation(FUM Superannuation based) (Performance Fee) based) (Member based) FY22 aa Key Themes + Revenue growth driven by strong average FUM growth of 33% + This growth is partially offset by t
Slide 20: Expenses
Expenses Total expenses ($’m) 1A 1.0 3.6 18 23 1 15 0” 0:3 as Key Themes + Expense increase driven by strategic investment to accelerate growth, with further acceleration anticipated as demand for responsible investing continues. Key ateas of FY22 investment include: Y Targeted strategic hires to bo
Slide 21: Balance sheet strength
Balance sheet strength* aa Key Themes + Strong balance sheet with no debt + Strong cash position + Parent holds a surplus above regulatory capital of $12.2m (pre- dividend) + Reserves over regulatory requirements retained to fund potential future inorganic opportunities $m FY2022 Cash & cash equival
Slide 22: Key financials
() Funds under management ($bn) Operating Revenue ($m) 70.8 o o 6.20 58.7 Key financials = ws 41.0 aa 4.05 36.0 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 Profit after tax* (Sm) Underlying profit after tax* (Sm) 13 a |_| os, 114 8 UI | 5.0 — 5.0 2018 2019 2020 2021 2022 2018 2019 2020 2021 20
Slide 23: Key metrics
[Hh Key metrics Australian Ethical AS Dividends (cps) 8.0 6.0 6.0 5.0 2018 2019 2020 2021 2022 Interim dividend Final vidend_® Special dividend Diluted earnings per share* (cps) 10.02 8.42 8.55 S17 i l 2018 2019 2020 2021 2022 Net Cash from operating activities per share (cps) # 14.40 ; | 2018 2019
Slide 24: Business update
Business update ana | AS 24
Slide 25: 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 26: Delivering on strategy in FY22
Delivering on strategy in FY22 Strong momentum on delivering against our strategic pillars through FY22. We are investing now to support sustainable, long-term growth 1. Principled investment leadership New capability: Investment Director, Head of Investment Business Management & 3 new Investment Co
Slide 27: Christian Super SFT on track
Christian Super SFT on track for completion by early 2023 Christian Super is a profit-for-members Australian superannuation fund ~30,000 members and $1.96bn in FUM An investment philosophy focused on ethical investing Predominantly direct and employer channels (via Christian Schools / faith-based or
Slide 28: Christian Super SFT on track
Christian Super SFT on track for completion by early 2023 Benefits + Benefits expected for all stakeholders, and will significantly accelerate our growth plans, bolster capability and add immediate scale + Up to 30,000 members and $1.96bn FUM to transition to Australian Ethical (but some member attr
Slide 29: Outlook
Outlook Further disciplined investment in FY23 to capture the significant growth opportunity * From 1 September fee reductions of ~2BP planned. Further planned aggregate fee reductions of ~38P on completion of the Christian Super SFT (with reference to AE's current total fee margin). Note that this
Slide 30: Appendices
Appendices
Slide 31: Balanced Accumulation Option (MySuper) performance
Balanced Accumulation Option (MySuper) 1 year relative performance has been impacted by lack of exposure to fossil fuels and commodities and the tilt towards Small Caps, Information Technology and Healthcare, through the option’s allocation to domestic equities The option has exceeded its objective
Slide 32: Australian Shares Fund
Australian Shares Fund The largest driver of negative absolute and relative performance came from our domestic equities portfolio, which was down -12% over the 12-months against the benchmark, the S&P ASX 200 index, return of -6.5%. Our domestic equities portfolios, in line with the principles of ou
Slide 33: Emerging Companies Fund
Emerging Companies Fund Over 1 year, the Fund’s investments in the Financials sector outperformed while its IT investments detracted, with early stage microcap and small-cap Australian companies particularly hard hit. Higher degree of volatility expected from smaller-cap investments, but through dee
Slide 34: High Conviction Fund - Launched Oct 2021
High Conviction Fund - Launched 1 Oct 2021 The Fund commenced on 1 October 2021 and has delivered -9.9% since inception. This is -1.5 percentage points (ppts) behind the S&P/ASX 300 Accumulation index benchmark and 3.6ppts ahead of the S&P/ASX 300 Industrials index (which excludes resources). Underp
Slide 35: Historical performance fee impact on results
Historical performance fee impact on results Key financials ($'000) FY2022 FY2021 Operating Revenue pre performance fee 70,409 55,816 26% Performance fee 375 2,895 (87%) Operating Revenue post performance fee 70,784 58,711 21% Net profit after tax attributable to shareholders (post performance fee)
Slide 36: UPAT reconciliation
UPAT reconciliation Key financials ($'000) FY2022 FY2021 ge (YoY) Net profit after tax — statutory 9,511 11,118 (14%) Add: Net Loss attributable to The Foundation 86 143 (40%) Net profit after tax attributable to shareholders 9,597 11,261 (15%) Due diligence & transaction costs relating to mergers &
Slide 37: Footnotes
Footnotes 1. BCorp ‘Best for the World Honouree’ Customer 2022 and BCorp ‘Best for the World 10. Revenue from impact solutions compared to a blended benchmark of S&P ASX 200 Index Honouree’ Governance 2022. The Best for the World are BCorps whose score in the toy (for Australian and NZ shareholdings
Slide 38: Contacts
Contacts Australian Ethical AS John McMurdo Chief Executive Officer ix a ah: & 0449 903 207 Mark Simons Chief Financial Officer &, 0434 369 746 Melanie Hill Head of Business Performance & Investor Relations mnie ah: & 0428 879 348 Camilla Herring Head of Communications & 0432 988 980 38
Slide 39: Disclaimer
Disclaimer Australian Ethical Investment Ltd (ABN 47 003 188 930; AFSL No. 229949) is the Responsible Entity and Investment Manager of the Australian Ethical Managed Investment Funds. Interests in the Australian Ethical Retail Superannuation Fund (ABN 49 633 667 743; Fund Registration No. R1004731)
Slide 40: Thank you
Thank you
Australian Ethical Investment — FY2022 Earnings Presentation on 6ix