Australian Ethical’s Underlying Profit Climbs 25% as Funds Under Management Hit $14 Billion
Australian Ethical Investment Limited has reported a robust half-year performance, with profits and funds under management hitting new highs, underpinned by strategic platform upgrades and sustained net inflows.
- Underlying profit after tax up 25% to $14.4 million
- Net profit after tax attributable to shareholders rises 42% to $13.3 million
- Funds under management reach $14.08 billion, nearly tripling in five years
- Cost to income ratio improves to 68.8%, reflecting operational efficiencies
- Interim fully franked dividend increased by 60% to 8 cents per share
Strong Financial Momentum
Australian Ethical Investment Limited (ASX: AEF) has delivered a compelling half-year financial report for the six months ending 31 December 2025. The company posted an underlying profit after tax (UPAT) of $14.4 million, marking a 25% increase from the previous corresponding period. Even more striking, the net profit after tax (NPAT) attributable to shareholders surged 42% to $13.3 million, underscoring the firm’s growing profitability amid a competitive asset management landscape.
Funds under management (FUM) reached a significant milestone of $14.08 billion, nearly tripling since December 2020 when the figure stood at $5 billion. This growth has been fuelled by positive organic net flows, particularly in the superannuation segment, which saw a 19% increase in net inflows compared to the prior year.
Strategic Platform Enhancements
Behind these strong numbers lies a series of strategic initiatives designed to strengthen Australian Ethical’s business platform. The company successfully transitioned its superannuation administration to a single platform, GROW, streamlining operations and enhancing member services. This move is expected to generate ongoing cost savings and improve customer experience.
Additionally, the implementation of the Charles River front office system for fixed income and equities marks a significant upgrade to the firm’s investment platform. This institutional-grade system lays the foundation for Australian Ethical’s ambition to expand beyond superannuation into broader investment products, potentially unlocking new growth avenues.
Operational Efficiency and Cost Management
Despite a 9% rise in operating expenses, Australian Ethical improved its underlying cost to income ratio from 71.4% to 68.8%. This reflects successful efficiency initiatives and expense savings realized during the period. Employment costs rose moderately due to prior hires and inflationary pressures, while fund-related expenses remained largely stable, benefiting from reduced administration and custody fees following service transitions.
Marketing expenditure returned to normal levels after a subdued prior period, supporting the company’s efforts to boost superannuation member acquisition. Legal and external service costs increased slightly, driven by governance enhancements and new product development.
Dividend and Philanthropic Commitment
Reflecting confidence in its financial position, Australian Ethical declared a fully franked interim dividend of 8 cents per share, a 60% increase from the previous half-year. The company also provisioned $1.5 million for the Australian Ethical Foundation, reinforcing its commitment to philanthropy by allocating 10% of profits annually to not-for-profit organisations.
Outlook and Market Positioning
CEO John McMurdo highlighted the company’s strong positioning to capitalize on future growth opportunities. While acknowledging short-term market challenges, including sector rotations impacting investment performance, he expressed confidence in the firm’s ethical investment approach and medium-term prospects. The focus remains on executing strategies to enhance superannuation capabilities and develop investment products beyond this core segment.
With a robust balance sheet, no gearing, and a diversified business model, Australian Ethical appears well-equipped to navigate evolving market conditions while maintaining its ethical investment leadership.
Bottom Line?
Australian Ethical’s strong half-year results and strategic investments set the stage for sustained growth amid evolving market dynamics.
Questions in the middle?
- How will Australian Ethical’s new investment platform accelerate product diversification beyond superannuation?
- What impact will the loss of the low-margin institutional mandate have on future revenue streams?
- Can the company sustain its improved cost to income ratio amid planned growth and market uncertainties?
