Australian Ethical (ASX:AEF) share price soars 6% on FY21 results

The wealth management company has had a great financial year 2021.

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The Australian Ethical Investment Limited (ASX: AEF) share price is gaining after the company released its financial year 2021 (FY21) earnings this morning.

Right now, the Australian Ethical Investment share price is $9.73, 6.34% higher than its previous close.

Australian Ethical share price jumps on 5 cents of dividends

Here’s how the ethically-focused wealth management company performed in FY21:

  • Profit after tax of $11.3 million, 19% more than that of FY20
  • $58.7 million of revenue, up 18%
  • $6.07 billion of funds under management, up 50%
  • 4 cent fully franked final dividend, with a 1 cent fully franked performance fee dividend

Over FY21, Australian Ethical saw a 43% bump to the amount of funds managed by its super services while its managed funds’ balances increased 63%.

It reported a record $1.6 million donated to its Foundation throughout FY21.

At the same time, its operating expenses were $43.6 million, up 18% on that of FY20, driven by reinvestment into the business.

What happened in FY21 for Australian Ethical?

Here’s what drove Australian Ethical and its share price in FY21:

Over FY21, the company’s customer base grew 23%. Managed fund customers increased 31% while super customers increased 22%.

Additionally, it was recognised by Morningstar as 1 of 6 global leaders for its commitment to ethical, social, and governance (ESG). Morningstar described the company’s shares fund as “setting the ESG standard for Australian domestic-equity strategies”.

Australian Ethical reduced fees on its Defensive super option, its Income and Fixed Interest funds, its Australian Shares and International super options, its Balanced, International, Diversified, Advocacy, Australian Shares and Emerging Companies retail funds, and its Balanced and International wholesale funds.

Australian Ethical also reduced the threshold on its Balanced wholesale fund.

The company’s highlights include the performance of its Australian Shares Fund (retail) which returned 41.9%. Its Emerging Companies Fund (retail) returned 50.3%. Additionally, Australian Ethical’s Emerging Companies Fund generated performance fees of $2.9 million.

Australian Ethical’s Balanced option also delivered a 17.5% return while its Australian Shares super option delivered a 38.8% return.

COVID-19‘s impact on the company’s business has been minimal.

What did management say?

Australian Ethical’s CEO John McMurdo commented on the results driving the company’s share price today, saying:

Despite the ongoing challenges posed by the pandemic, it has been a pivotal year for ethical investing, climate pledges, and sustainable commitments around the world. As the coronavirus continues to reshape economies and global markets, a near-universal desire for the more sustainable future is emerging.

As a result, out ethical approach is rapidly gaining popularity for its inherent tilt towards quality, resilience, and long-term capital appreciation…

However, the most recent Intergovernmental Panel on Climate Change (IPCC) report makes for sobering reading and tells us that the climate emergency is here, and the clock is ticking, Recent climate pledges and commitments must now be accelerated with a clear role for investors to push for mandatory climate action plans. Because as much as the report is bleak and troubling, it is also a historic moment for investors to step up and support urgent and large-scale initiatives to reduce emissions.

What’s next for Australian Ethical?

Here’s what might drive the Australian Ethical share price in FY22:

The company is expecting to experience an increase in demand shortly as ethical investing nears the mainstream.

As a result, it’s embarking on a growth strategy to reinforce and expand its market share.

In the short term, Australian Ethical will focus on deepening its investment capability, expanding its product offerings, and growing its brand awareness.

Over the long term, it plans to cement its leadership with the above short term focuses and scale its business.

Australian Ethical also plans to update its digital channels in FY22.

Australian Ethical share price snapshot

The Australian Ethical share price has gained 98% year to date. It has also gained 116% since this time last year.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Australian Ethical Investment Ltd. The Motley Fool Australia has recommended Australian Ethical Investment Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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