Australian Ethical (ASX:AEF) share price sinks on earnings update

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The Australian Ethical Investment Limited (ASX: AEF) share price is sliding in early trade, down 3.36%.

This comes as the All Ordinaries Index (ASX: XAO) follows US markets downwards, currently down 0.32%.

Below we look at the earnings guidance update released by the Australian Ethical fund manager before market open this morning.

What earnings guidance was given?

The Australian Ethical share price is sinking this morning. It comes after the company reported it expects its underlying profit before tax (UPAT) for the half year ending 31 December 2021 to come in 8% above the UPAT reported for the prior corresponding half year.

According to the release, UPAT is expected to be between $5–$5.5 million, before performance fees. Performance fees from the company’s High Conviction Fund and Emerging Companies Fund “will only crystallise” on 30 June 2022 if those funds outperform their benchmarks.

The guidance is based on the assumption there won’t be any “significant market movement” during the rest of the financial year, according to Australian Ethical.

The company also reported a 9% increase in its funds under management (FUM) from 30 June. FUM stood at $6.64 billion as at 31 October.

Looking ahead, Australian Ethical’s CEO, John McMurdo, said:

The positive momentum we have been experiencing has carried over into the current financial year. While the emergence of a new coronavirus strain shows COVID-19 remains an ongoing concern, discussions around mobilising private finance to tackle climate change were high on the agenda during COP26 and shifting capital flows is an essential part of the decarbonisation process.

The Australian Ethical share price could be under pressure with the report that costs are going to increase in H2. According to McMurdo:

Australian Ethical will continue to invest in its high growth strategy given the positive momentum we are experiencing and the scale of the opportunity ahead. As such, costs in the second half will grow compared to the first half, as we continue to implement our strategic roadmap.

Australian Ethical share price snapshot

The Australian Ethical share price has surged ~180% in 2021. That far outpaces the 10.4% year-to-date gains posted by the All Ords.

Over the past month, Australian Ethical shares have gained around 3%.

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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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