The Australian Ethical Investment Ltd (ASX: AEF) share price is up 10% after impressive update.
Australian Ethical is a fund manager that provides investment options for people that exclude a range of industries and companies that are deemed to be unethical, such as fossil fuels.
Strong performance in FY23 to date
Australian Ethical reported that its funds under management (FUM) had increased 3% since 31 March 2023. This was partly thanks to $90 million of positive net inflows, despite the “challenging economic and market environment all investment managers are currently experiencing.”
Superannuation inflows were “particularly resilient” with $110 million of inflows.
There was a positive investment performance, which contributed $170 million of net growth for the period.
It ended May 2023 with $9.02 billion of FUM.
Revenue and earnings growth
Australian Ethical said that in the second half, revenue is expected to be approximately 21% higher than the first half, thanks to higher average FUM. Underlying profit after tax (UPAT) for the FY23 second half is expected to be approximately 30% higher than the first half, with it being in a range of between $11.3 million and $11.8 million.
The ASX share explained that “stronger revenue and disciplined cost management have contributed to the emergence of operating leverage and the underlying profit increase.”
Australian Ethical has completed the initial integration program of Christian Super members. The company said that the higher level of FUM now gives it an opportunity to invest and also capture stronger operating leverage.
The business will look to extract “middle and back office” synergies, which combined with other initiatives are expected to deliver cost savings over the medium-term-to-long-term and help growth.
Final thoughts on the Australian Ethical share price
It’s doing well to continue to attract fund inflows, and if it can keep winning new customers then I think it can do very well over the long-term from this valuation which is much lower than the last few years. I think it’s one to watch.