The Australian Ethical Investment Limited (ASX: AEF) share price is in focus today after giving guidance for FY21.
What’s the FY21 guidance?
Australian Ethical has told investors that its underlying profit after tax (UPAT) before performance fees for FY21 is expected to be in a range of $8.8 million to $9.3 million. This would represent growth of 29% if the mid-point of the guidance is achieved.
The guidance was based on unaudited management accounts to 30 April 2021. It includes the impact of expensing cloud based software development costs, amounting to $0.4 million, which would have previously been capitalised.
Any current year performance fee from the emerging companies fund will only crystallise on 30 June 2021 if the fund outperforms the Small Industrials Index benchmark.
Funds under management (FUM)
Australian Ethical revealed that its FUM was up 5% from 31 March 2021 to $5.68 billion at 30 April 2021 and up 40% from 30 June 2020. The increase in April was driven by investment performance of $0.17 billion and continued solid netflows of $0.10 billion. Since the start of the financial year, it has seen year to date inflows of $0.8 billion.
Its Australian shares super option has ranked first over 1 year, 5 years, 7 years and 10 years.
Customer numbers are up 17% since June 2020. One of the things that the company revealed was that it has brought the customer contact centre in-house to significantly enhance customer engagement and the customer experience.
Australian Ethical CEO John McMurdo said: “We are seeing unprecedented interest and demand for ethical investing as Australians open their eyes to how our products deliver attractive investment returns and make a positive difference in the world. Looking ahead, we expect this growth in ethical investing to accelerate.”
Fee reductions
The company said it’s committed to making ethical investing as accessible as possible for all Australians. This is includes sharing the success of its increasing scale through fee reductions.
It’s going to reduce its fees across targeted super options and managed funds products from 1 June 2021. These fee reductions are expected to reduce the average revenue margin by approximately 0.04% per annum, but improve the competitiveness of its products and contribute to long-term FUM growth.
Summary thoughts
My Rask Media colleague Lachlan Buur-Jensen recently outlined his investment thesis for Australian Ethical. I think it’s one of the interesting ASX growth shares that can benefit from multiple tailwinds like ethical investing and the growth of superannuation.
It’s certainly expensive, but some of the best businesses are always expensive but keep delivering returns. I think it’s one to put on the watchlist.
