Australian Ethical shares fall as profits slide 15%

Australian Ethical has reported its FY22 earnings. What happened?

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Key points

  • The ASX 200 is enjoying a positive end to the week so far this Friday
  • That can't be said of the Australian Ethical share price
  • The fund manager reported its FY22 numbers this morning and investors didn't like what they saw

The Australian Ethical Investment Ltd (ASX: AEF) share price is falling today after the ASX 200 fund manager reported its full-year results for the 2022 financial year this morning.

Australian Ethical shares have fallen 4% to $6.45 at the time of writing. They closed at $6.72 yesterday and opened at $6.79 this morning.

Australian Ethical share price falls on lacklustre full-year results

Here's a summary of what the ethically-minded fund manager reported this morning:

  • Total revenue of $70.78 million, up 20% over FY21's $59.1 million
  • 2% growth in funds under management (FUM) to $6.2 billion
  • 7% drop in underlying profits before tax to $10.3 million
  • 15% fall in net profit after tax (NPAT) to $9.6 million
  • Final dividend of 3 cents per share declared, fully franked.

Overall FUM growth for Australian Ethical over FY22 was 2% and came to $6.2 billion. However, the company reported that it had enjoyed 20% growth in retail and wholesale net flows to $1.14 billion. Australian Ethical also saw a record net flow of $750 million into superannuation, an increase of 20%.

Meanwhile, the fund manager's overall customer base continued to grow as well. Australian Ethical reported a 16.55% increase in customers from 71,273 in FY21 to 83,066 in FY22.

The fully franked final dividend of 3 cents per share is down 25% from last year's final payment of 4 cents per share.

What else happened in FY22?

Australian Ethical's funds had a tough year. The company reported that its MySuper Balanced Accumulation Option delivered a loss of 6.3% for the 12 months to 30 June 2022, underperforming its benchmark, which lost 3.4%.

Outside super, Australian Ethical's Australian Shares Fund went backwards by 17.8% over FY22. That's under the S&P/ASX 300 Accumulation Index benchmark, which delivered a loss of 6.8%.

What did management say?

Here's some of what Australian Ethical CEO John Mcmurdo had to say on these numbers today:

Australian Ethical has delivered another set of positive results despite the volatility in investment markets and widespread macroeconomic uncertainty.

Our operating revenue has increased and profit has remained solid as we invested in line with our high growth strategy. At a time when many in the financial services industry are seeing outflows, we've seen strong growth in both retail and wholesale net flows, as well as customer numbers, as people seek to invest in line with their values.

Our long-term investment performance remains competitive with our ethical conviction intact. As a leading pureplay ethical investor, we're proud to stay the course through market cycles because we've demonstrated that our ethical approach delivers over the long term.

What's next?

Looking to FY23, Australian Ethical's management noted that there are still many headwinds facing global investment markets. These include the war in Ukraine, high inflation, and rising interest rates.

However, the company still expects "the growth in net flows to continue in FY23, with further diligent investment in the business as we execute on our strategic roadmap, balancing market volatility with the growth opportunity".

It concluded by stating "our profit outlook will reflect the higher growth in operating expenses versus revenue".

Australian Ethical share price snapshot

Including the falls we have seen in the Australian Ethical share price this Friday, it has indeed been a tough year for the company. Australian Ethical shares remain down 52% so far in 2022. They are also down 32% over the past 12 months.

At the current Australian Ethical share price, this ASX 200 fund manager has a market capitalisation of $737.3 million, with a dividend yield of 1.07%.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in 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 Scott Phillips.

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