Australian Ethical Investment Ltd · ASX:AEF
Australian Ethical Investment — H1 FY2023 Earnings Presentation
43 slides from Australian Ethical Investment's earnings presentation, Feb 22, 2023
Slide 1: FY23 Half Year Results
Australian Ethical Australian Ethical Investment Ltd FY23 Half Year Results John McMurdo, Managing Director & CEO Mark Simons, CFO 22 February 2023
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 continue to be strong, with the shift to responsible investing expected to accelerate over the next decade We're scaling ou
Slide 5: 1H FY23 themes
1H FY23 themes We continue to execute on our high growth strategy despite challenging market conditions to ensure we're well placed to capture the growth opportunity ahead The resilience of our business has been demonstrated by the uplift in FUM, continued positive net flows and revenue growth, desp
Slide 6: 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 7: First half FY23 results
First half FY23 results demonstrate a resilient business in challenging market conditions to 6 months ended 31 Decer 2021. All footnotes appear oF FUM growth of 21% Positive net flows of $0.19bn* + Christian Super FUM transfer of $1.93bn Revenue continues to grow — 4% revenue growth 50% growth in to
Slide 8: H1 FY23 highlights
H1 FY23 highlights Progressed M&A strategy with Christian Super SFT +28,000 members +$1.93bn +21% growth in FUM to over $8bn $0.19bn positive net inflows* +15% average super FUM growth $0.3bn positive super net flows
Slide 9: H1 FY23 highlights
H1 FY23 highligh +50% in customers to over 110,000 Adviser overall brand rank increased by 7 places! Top quartile employee engagement? of 79% Multiple awards and accolades continue Long term track record of strong performance $500k granted through our Foundation to 12 winners of the 2022 Visionary G
Slide 10: H1 FY23 results
H1 FY23 results Expenses and profit reflect continuing targeted investment in brand, channel expansion, M&A and technology capability, platform transformation and investment excellence Underlying profit is in line with expectations as we invest now for the medium term higher profit opportunity cial
Slide 11: We continue to receive awards & recognition
We continue to receive awards & recognition for our investment expertise and ethical pedigree Responsible Investment Association Australasia Responsible Investment Leader 2022 SuperRatings GOLD 2023, MySuper, MyChoice & Pension PRODUCT (@) REVIEW ASSeAURRDS COM.AU Productreview.com.au Best Retail Su
Slide 12: Our investment portfolio continues to deliver impact
Our investment portfolio continues to deliver impact &) Nil investment” in nuclear Nil investment” in fossil fuel companies® Nil investment & 77% lower CO, intensity from listed companies in our portfolio, compared to benchmark* © 1.8x more revenue from sustainable impact solutions’ in tobacco® 444
Slide 13: And we engaged companies for people, animals and the planet
And we engaged companies for s and the planet people, anima QD 193+ company engagements for people, planet and animals? including 31 proactive company Co-filed shareholder resolutions against NAB & Westpac over concerns about weak lending restrictions for companies engaged in fossil fuel expansion,
Slide 14: With our Foundation supporting climate solutions
With our Foundation supporting climate solutions $0.3m allocated for impact initiatives in 1H FY23 >$8m allocated to not-for- profits since 2000 25+ charities supported fighting climate change 10% of AEI profits allocated to not-for-profit organisations!0 Australian Ethical AL 14
Slide 15: And FY22 donations allocated through our funding channels
And FY22 donations allocated through our 2 funding channels Strategic grants $lm+ donated to 17 charities working across our focus areas: * Stopping sources of carbon pollution + Supporting carbon sinks Empowering women & girls Visionary grants $500k donated to innovative climate solutions + 12 char
Slide 16: fa) oe oO S oO = om poy AS Australian Ethical
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Slide 17: FUM continued to grow in a challenging market — up 21%
FUM continued to grow ina challenging market — up 21% Funds under management ($bn) 1H2022 FUM (Sbn) As at 31 December of each year Opening FUM 6.20 6.07 2% 200 on Super net flows 0.30 0.37 (18%) eee CAGR 31% Managed Funds net flows* 0.07 0.28 (76%) 193 698 500 Net flows excluding Institutional 0.37
Slide 18: As we continue to build a more diversified, resilient business
As we continue to build a more diversified, resi focussed on delivering growth ient business Direct remains predominant channel with continuing focus on growing advised channel 81% Advised BH Diect Super FUM a larger proportion of overall book following Christian Super SFT FUM by product [ll Menaged
Slide 19: Strong customer uplift in 1H23
Strong customer uplift in 1H23 driven by both organic and inorganic growth Customers at 31 December 2018 2019 Ml Funded super members 1) Funded super members exCs CAGR 26% 10,111 2020 Hi Managed fund investors* 2021 115,302 2022 * Each platform is regarded as one investor (we have 24 platform accoun
Slide 20: And continued positive net flows despite challenging markets
And continued positive net flows despite challenging markets Net flows by product (Sbn) Inflows, Outflows 2018 2019 2020 2021 2022 1 Superannuation I Managed funds Bh institutional — Net Flows For the 6 months ended 31 December each year. Note: Managed funds includes SMA Nettlows exclude $1.93bn FUM
Slide 21: We continue to pass on benefits of scale through lower fees
We continue to pass on benefits of scale to our customers through lower fees Revenue margin Ave FUM (Sbn) Ave revenue margin 10.0 2.00% 9.0 8.0 1.50% 7.0 6.0 5.0 1.00% 40 3.0 0.50% 20 0.0 0.00% 2015 2016 2017 2018 2019 2020 2021 2022 I Average FUM (LHS) — Total average revenue margin (RHS)* Represen
Slide 22: Operating revenue increased 4% despite the challenging markets and fee reductions
Operating revenue increased 4% despite the challenging markets and fee reductions Operating revenue (Sm) excl fee reductions) (1.2) 1H22 Managed Funds Superannuation: Superannuation (effect of Other (FUM based) (FUM and member based. fee reductions) 1H23 Key themes + Revenue growth driven by super F
Slide 23: As we continue to invest in the business now to support the long term
As we continue to invest in the business now to support the long term growth opportunity Expenses* ($‘m) 1 45 02 — 03 a (0.6) (0.4) 1H22 Employee Fund Related Marketing External services Community grants Other 1H23 * Excluding SFT integration costs and fair value adjustment in Sentientinvestment Key
Slide 24: Underlying profit in line with expectations
Underlying profit in line with expectations as we invest for the medium term higher profit opportunity Key financials ($'000) 1H 2023 1H 2022 Change (YoY) Operating Revenue 36,562 35,225 4% Total Revenue 36,562 35,225 4% Total expenses (excluding SFT integration costs) (29,440) (27,395) 7% SFT integ
Slide 25: We retain a strong balance sheet
We retain a strong balance sheet Key themes + Strong balance sheet with no debt + Strong cash position + Parent holds a surplus above 1H 2023 1H 2022 regulatory capital of $7.7m Cash & cash equivalents* 25.8 24.9 + Reserves over regulatory requirements retained to fund potential future Surplus above
Slide 26: Funds under management and operating revenue
Funds under management (Sbn) Operating Revenue ($m) 8.37 35.2 36.6 6.94 5.05 oi) = 198 3.87 2.85 Y 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 As at 31 December of each yea For the 6 months ended 31 December each year Profit after tax* (Sm) Underlying profit after tax * (Sm) * Attributable to
Slide 27: Diluted earnings per share
Australian Ethical AS Diluted earnings per share * (cps) *Based on NPAT attributable to shareholders 4.60 3.95 2.84 4.83 Interim Dividend (cps) 3.00 3.00 2.50 2.00 0.85 2.00 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 27
Slide 28: Australian Ethical
Australian Ethical AS
Slide 29: 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 30: Continued execution against our strategic pillars in the first half FY23
Continued execution against our strategic pillars in the first half FY23 1. Principled investment leadership Lonsec ‘Recommended’ rating for all domestic active funds and SMA; High Conviction Fund (incl, ETF) rated for first time. ‘Superior’ 4 star rating for Balanced Fund by SQM Research 2. Advocat
Slide 31: A significant strategic milestone achieved with Christian Super SFT
A significant strategic milestone achieved with Christian Super SFT SFT successfully completed on 25 November 2022, accelerating our growth plans, adding scale and bolstering capability 28,000 members and $1.93bn FUM transferred into AE’s super options Increased scale allowed fee reductions for all
Slide 32: A significant strategic milestone achieved with Christian Super SFT (contd)
A significant strategic milestone achieved with Christian Super SFT (contd) Profit uplift will support further investment in member experience enhancements, and accelerate growth and impact Further synergies expected in the medium term following administration provider integration and realisation of
Slide 33: Outlook
Outlook Committed to further investment to ensure we are well positioned to capture the growth opportunity. If current market conditions prevail, and growth expectations don't eventuate, however, we will adopt a rigorous approach to expense containment. Volatile markets expected to continue having t
Slide 34: Appendices
Appendices
Slide 35: UPAT reconciliation
UPAT reconciliation Key fi ials ($1000) 1HFY2023 AHFY2022 Decrease % Net profit after tax — statutory 997 5,506 (82%) Add: Net Loss attributable to The Foundation (36) (82) Net profit after tax attributable to shareholders 961 5,424 (82%) SFT integration costs 1,999 Fair value movement in investment
Slide 36: Balanced
(> Y Balanced Accumulation Option (MySuper) Has met 10 year objective of CPI +3.5% Recent relative performance impacted by lack of exposure to fossil fuels and commodities. Has outperformed Benchmark over 5, 7 and 10 years. 3Y 5Y 10Y 20Y Since (%pa) ——(%pa) (%pa) — (%pa) inception (%pa)* Absolute Pe
Slide 37: Australian Shares Fund
Australian Shares Fund Recent relative performance impacted by underweight allocation to resources, and investments in smaller capitalisation companies. Has outperformed Benchmark over 5 and 10 year periods. 3Y BY 20Y Since (%pa) (%pa) (%pa) inception (%pa) Retail* 5.2% (17.6%) 4.1% 6.6% 7.1% 10.2%
Slide 38: Emerging Companies Fund
c\ Emerging ee nc (%pa) Companies Fund Retail* 3.8% (25.8%) 47% 10.1% 10.3% 11.8% Recent relative performance impacted Benchmark* 5.5% (21.8%) (2.0%) 1.9% 44% 5.7% by information technology exposures. Has outperformed Benchmark over 3, 5 Relative Performance (1.8%) (4.0%) 6.6% 8.2% 5.9% 6.2% and 7 y
Slide 39: High Conviction Fund
c\ . . . Since 1 onvicuion inception* (Sopa) Fund High Conviction Fund (2.0%) 4.6% 2.0% (6.5%) (6.6%) Recent relative performance impacted Benchmark* (3.3%) 9.1% 9.6% (1.8%) 0.3% by underweight allocation to resources Relative Performance 1.3% (4.5%) (77%) (4.7%) (6.9%) S&P/ASX 300 Industrials A\ in
Slide 40: Footnotes
Footnotes 2022 Investment Trends Adviser product and marketing needs report 2. Top quartile Australian Financial Services Benchmark (Culture Amp) 3. 4' fastest growing super fund for FY22 relative to size, based on FY22 APRA statistics. Calculated by dividing net inflows by FUM - Investment Magazine
Slide 41: Contacts
Contacts Australian Ethical AS John McMurdo Chief Executive Officer &, 0449 903 207 Mark Simons Chief Financial Officer [J msimons@australianethical.comau 0434369746 Melanie Hill Head of Business Performance & Investor Relations & 0428 879 348 Elise Davidson BlueChip Communication & 0405 825 005 41
Slide 42: 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)
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