• Underlying Profit: Increased by 35% to $11.5 million compared to the first half of FY24.
• Net Profit After Tax (NPAT): Up 50% to $9.3 million.
• Revenue: Increased by 21% compared to the prior corresponding period.
• Funds Under Management (FUM): Reached a record high of $13.26 billion, up 27% since June 2024.
• Cost to Income Ratio: Improved to 72% from 75% in the first half of FY24.
• Dividend: Declared a first half dividend of $0.05 per share, a 67% increase from the first half of FY24.
• Net Flows: Positive organic net flows of $211 million, with superannuation net inflows of $194 million.
• Revenue Margin: First half average revenue margin was 0.96%, expected to be approximately 0.9% in the second half.
• Operating Expenses: Increased by 14% to $41.5 million.
• Employee Expenses: Increased by 21%, with FTE numbers at 140.

• Warning! GuruFocus has detected 3 Warning Sign with ASX:AEF.

Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Australian Ethical Investment Ltd (ASX:AEF) reported a significant 35% increase in underlying profit for the first half of FY25 compared to the first half of FY24.
• The company achieved a 50% increase in net profit attributable to shareholders, reaching $9.3 million.
• Revenue grew by 21% year-over-year, driven by organic growth and the successful integration of Altius Asset Management.
• Funds under management reached a new record high of $13.26 billion, up 27% since June 2024.
• The company declared a first half dividend of $0.05 per share, a 67% increase from the previous year.

Negative Points

• Net flows were disrupted due to a change in superannuation administration providers, impacting the first half results.
• Operating expenses increased by 14%, with employee expenses rising by 21% due to new hires and inflationary salary increases.
• The average revenue margin decreased following the Altius acquisition, with expectations of further reduction in the second half.
• Marketing costs decreased by 15% due to a temporary pullback during the administration transition, which may affect brand visibility.
• The company faces potential challenges from political and economic cycles, although it remains confident in its resilience.

Q & A Highlights

Q: Can you elaborate on the timing and impact of the $4 million annualized cost benefit from the growth transition? A: The cost savings from the growth transition began to materialize at the end of the first half, contributing to a 3% improvement in operating leverage. The savings are being reinvested into institutional-grade investment front office systems, which will enhance future operating leverage. Mark Simons, CFO

Q: What are the expected savings from the consolidation of the Christian super members to the new platform? A: The transition of the remaining 20% of members to the new platform is expected to be completed by the end of the calendar year, contributing to additional unit cost savings. The full $3 million cost saving is anticipated to be realized by then. Mark Simons, CFO

Q: Are there any comments on the recent media speculation about a major acquisition with Future Super? A: The board does not comment on M&A activity or media speculation. They are committed to fulfilling their continuous disclosure obligations. John McMurdo, CEO

Q: How will marketing spend be managed in the second half of the year? A: Marketing spend was reduced during the seven-week limited service period but will increase in the second half to align with last year's full-year spend. This is expected to drive an increase in net flows. Mark Simons, CFO

Q: What is the outlook for managed fund inflows, particularly concerning Altius's key relationships? A: The focus is on building a robust platform for retail superannuation and exploring non-superannuation opportunities. The infrastructure and capability are in place to succeed in this space, with a meaningful pipeline of opportunities. John McMurdo, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.