Australian Ethical Investment (ASX:AEF) share price falls despite profit boost

What did Australian Ethical Investment report today?

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Key points

  • The Australian Ethical share price is down more than 4%
  • The company revealed a 12% increase in underlying profit after tax in its half-yearly results today
  • It will pay an interim dividend of 3 cents a share

The Australian Ethical Investment Ltd (ASX: AEF) share price is sliding today amid the company's half-year results.

At the time of writing, the company's shares are trading at $7.69 apiece, a 4.47% fall. In comparison, the S&P/ASX 200 Index (ASX: XJO) is down 0.22%.

Let's take a look at what the wealth management company reported today.

Australian Ethical reports boost in net profit

Highlights of the company's half-year (H1 FY22) results include:

  • Underlying profit after tax (UPAT) of $5.4 million, a 12% gain on the previous corresponding period (PCP) of H1 FY21
  • Net profit after tax (NPAT) attributable to shareholders of $5.4 million, up 5%
  • Operating revenues surged 38% to $35.2 million
  • Interim dividend of 3 cents per share, fully franked
  • Diluted earnings per share (EPS) compound annual growth rate of 24%

What else happened in the half?

The surge in operating revenue was underpinned by excellent growth of new customers and net flows, along with solid investment performance. However, this was partly offset by fee reductions in June and October.

The company's operating expenses also soared 45% to $27.4 million due to more hires, marketing, and project expenses. The company hired five new strategic project contractor staff and employee numbers jumped from 72 in the PCP to 92.

Australian Ethical increased its funds under management by 38% from $5.05 billion in the PCP to $6.94 billion. Average funds under management also surged 47%.

Net flows increased by 42% to $0.6 billion while managed fund flows, excluding institutional, exploded 129%. This was due to strong traction with advisers and direct investors. Total managed fund flows including institutional grew by 37%.

Customer numbers increased 22% compared to the previous half. Managed fund customers rose 32%, while super members went up 20%.

Australian Ethical allocated $0.7 million to its philanthropic foundation during H1 FY22. This went towards a new grants program and a 'Giving Green' guide to help Australians donate to climate change.

The interim dividend of 3 cents per share was the same as the previous financial year. The record date for the dividend is 2 March while it will be paid on 17 March.

Management commentary

Speaking on the results, Australian Ethical CEO John McMurdo said:

As an investment business, we are of course closely leveraged to the markets and mindful that current volatility is likely to continue. Even with restrictions easing, the sweeping impact of Omicron shows that sentiment around the pandemic can still shift quickly, while inflationary pressures and political tensions are a front of mind concern for investors.

And while we remain well-positioned to benefit from regulatory, policy, market, and investor tailwinds, any outlook is subject to economic and market conditions.

What's next for Australian Ethical

Australian Ethical is looking into options to grow its institutional client base. At the moment, institutional clients represent 6% of funds under management.

Commenting on the future outlook, McMurdo added:

We remain focused on implementing our strategic roadmap to capture the opportunities ahead of us amid growing demand from retail and institutional investors for quality ethical investing solutions.

Our confidence to succeed comes from the quality of our people, our ethical investing pedigree and our financial strength.

Australian Ethical share price summary

The Australian Ethical share price has gained nearly 8% in the past year although it is down a significant 44% year to date.

For perspective, the benchmark ASX index has returned around 5% over the past year.

Australian Ethical has a market capitalisation of about $868 million based on today's share price.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns 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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