Kelly Partners Group Holdings Ltd. · ASX:KPG
Kelly Partners — H1 2021 Earnings Presentation
40 slides from Kelly Partners's earnings presentation, Feb 12, 2021
Slide 1: 1H21 Results Presentation
KP+GH KELLY PARTNERS GROUP HOLDINGS LIMITED (ASX: KPG) 1H21 RESULTS PRESENTATION PRESENTED BY Brett Kelly Founder and CEO Kenneth Ko CFO February 2021 kellypartnersgroup.com.au
Slide 2: KPG Owners' Principles
KPG OWNERS’ PRINCIPLES 1 Our attitude is partnership in everything we do. 2 Our founder and Partner Owner Drivers™ have their majority net worth invested in the business. 3 Our long term goal is to maximise KPG's intrinsic value on a per share basis. 4 Our intention is to grow by continuing to acqui
Slide 3: 1H21 Growth and Performance Continues
1H21 Growth and Performance Continues 14 years of continual growth. The business has doubled on average every 4 years. Double Double Double Double $50.0 2007 2008 2009 2013, $450 1Year 1Year 4 Years 54% in 3 Years ” T 2 3 $35.0 : : [o} $30.0 32% c Revenue & $25.0 CAGR* $20.0 $15.0 $u0m $23.5 fa $24.
Slide 4: Section One: Summary
SECTION ONE: Summary <a A | aii = | : § ee : i‘
Slide 5: Company Overview
COMPANY OVERVIEW KELLY+PARTNERS WHO WE ARE + Kelly Partners Group Holdings Limited (KPG.ASX) has a ~51% interest in 22 operating businesses operating from 16 locations in NSW and VIC * Our businesses provide accounting, taxation and other services to private businesses and their owners * We operate
Slide 6: Resilient K+P Business Model Delivering Solid Fundamentals
RESILIENT K+P BUSINESS MODEL DELIVERING SOLID FUNDAMENTALS - GROUP/PARENT PROFIT & LOSS 455% UNDERLYING NPATA GROWTH 433% EBITDA MARGIN 45.8% REVENUE GROWTH REVENUE MARGIN PARENT NPATA Revenue 1H21 Underlying 1H21 Underlying increased +5.8% EBITDA (pre NPATA to $24.8m AASB 16) $8.3m increased +55% (
Slide 7: K+P COVID-19 Response
K+P COVID-19 RESPONSE The Group's prior years of investment in strong infrastructure has minimized interruptions to operating _ businesses during the COVID-19 period. From March 2020, to further strengthen the Group's position in light of COVID we took the following proactive measures: * Over ~90% o
Slide 8: KPG Strategy
KPG STRATEGY To maximise average annual rate of gain in intrinsic value on a per- share basis Kelly Partners Group Holdings Limited aims to build per-share intrinsic value by: TFv20 | 32.5% 32.5% 36.6% (EBITDA margin) (EBITDA margin) (EBITDA margin) 1 Improving the earning power of our many operatin
Slide 9: The Kelly+Partners Business Model
The Kelly+Partners Business Model * Kelly+Partners is the pioneer and world leader in a 1. Mission +Values Partner Owner Driver™ accounting model focused on eee ee es Private Business Owners. KPGH has deployed a business model marked by dynamic growth of more than 32% year-on-year CAGR since its cre
Slide 10: KPG: Partner Owner Driver Typical Rollup
KPG: Partner Owner DriverTM Typical Rollup
Slide 11: Build, Accelerate and Lead
BUILD, ACCELERATE AND LEAD Five Year Plan on track to double revenue to $80m+ by FY24 1. Build | 2. Accelerate | 3. Lead $90.0m H : + 54% Total Revenue Growth H i+ Double Revenue to + 15.4% YOY Revenue Growth H Grow NPATA H $80m Revenue $80.0m + Invest in Corporate Team to scale : ; + Double NPATA t
Slide 12: Expected NPATA contribution is post transaction improvement
• • • • • *Expected NPATA contribution is post transaction improvement
Slide 13: Kelly+Partners New Services
Kelly+Partners New Services 3 New Complementary businesses launched Business Kelly Partners Investment Office Kelly Partners General Insurance Kelly Partners Alternative Investments rege Kelly+Partners austbrokers KELLY Invéstment Office KELLY+PARTNERS PARTNER: InsuRANcE finaceenr Commenced July 202
Slide 14: Kelly+Partners is now B Corp Certified
Kelly+Partners is now B Corp Certified B Corps meet high standards of social, environment performance, transparency and accountability Score to qualify rs] Average + Kelly+Partners is Australia’s first ASX listed accounting group and 1 of only 5 ASX listed companies to be —g8 certified as a B Corp C
Slide 15: Section Two: The Heart of Australia's Financial Market
cial Mar} @ The Heart of Australia's Finan cu i oO c © = re SECTION TWO:
Slide 16: 1H21 Financial Highlights
1H21 Financial Highlights Underlying Shareholder NPATA up 55.0% to $2.8m NH21 Financial Highlights (m) KPGHL & Controlled Entities KPGHL Attributed (parent only) c 1H20 1H21 ange 1H20 1H21 Revenue $23.5 $24.8 5.8% - - - Underlying EBITDA (pre AASB 16) $6.9 $8.3 19.3% - - - Margin % 29.6% 33.3% 12.7%
Slide 17: 1H21 Income Statement
1H21 Income Statement Strong earnings growth driven by improved operating efficiencies Revenue of $24.8m (+$1.4m, up 5.8%), driven mainly by acquisition revenue contributions from acquisitions completed in FY20. Organic revenue is flat compared to the prior period as the Group has invested significa
Slide 18: Attributable NPAT to Underlying NPATA Reconciliation
Attributable NPAT to Underlying NPATA Reconciliation Reconci ion of attributed NPAT/NPATA ($m) 1H20 1H21 Statutory NPAT attributable owners of Kelly Partners Group Holdings Limited 14 3.2 Amortisation of customer relationship intangibles 0.2 03 NPATA attributable to owners of Kelly Partners Group Ho
Slide 19: 1H21 Operating Business Margins
1H21 Operating Business Margins Actual Operating Business EBITDA margin of 36.6%, 17.6% above the industry average of 19.0%" KPG delivers superior returns through high quality operations at a very low cost base. Margins by Cohort Operating Other Businesses Established Growth Services Revenue $18.6 $
Slide 20: Balance Sheet as at December 2020
Balance Sheet as at 31 December 2020 Conservative balance sheet with gearing reducing 19.1% to 0.76x Consistently reducing lock up and increasing efficiency WIP Days * Conservative capital structure with 40.3% 70.0 $7.7m ™ Debtor Days Equity / Total Assets ratio, and Net Debt / 64,0 $7:1m Underlying
Slide 21: 1H21 Cashflow
1H21 Cashflow Operating Cashflow up 41.8% and cash conversion at 92.9% reflects high quality earnings CASH FROM OPERATIONS (CFO) FREE CASHFLOW TO FIRM (FCFF) * Cash from Operations pre AASB 16 of $8.1m increased 41.8% (1H20: $5.7m) $8.1m driven by $1.3m of other income — $4.8m received in this half,
Slide 22: Gearing and Liquidity
Gearing and liquidity $13.2m in liquidity, continuous reduction in debt $30.0m $25.0m $13.2 Cash & em Headroom $15.0m Eee $17.4m Drawn som $13.1m Net $0.0m + Up to $13.2m cash and headroom in debt facility equates to acquisition capability of cash $4.3M Available Headroom, $8.9m Property, $1.3m Acqu
Slide 23: Profit attributable to Parent vs. NCI
Profit attributable to Parent vs. NCI Profit attributable to the parent and non controlling interest may differ from the ownership interests due to income tax and additional investments attributed only to the parent. + Profit after income tax expense for the half year was $7.1m, with: * Profit attri
Slide 24: 1H21 Dividends and Return to Shareholders
1H21 Dividends and Return to Shareholders Consistent and regular returns to shareholders via quarterly and monthly dividends * The Company since IPO, has consistently paid out Dividends Declared and Paid quarterly dividends growing at 10% per annum from a base of 1.00 cent per share per quarter in F
Slide 25: Section Three: Outlook
Slide 26: Outlook
Outlook Strong outlook underpinned by annuity income and industry leading margins The Company will maintain its focus on organic growth, network expansion and offering new services. During FY21 the Companyaims to: * Continue driving market share gains, underpinned by strong brand presence and growin
Slide 27: Revenue Growth since IPO
Revenue Growth since IPO 54% revenue growth since IPO in 2017 + Total Revenue has increased 54% since the 2017 IPO, representing a year on year revenue growth of 15.4%. + Annuity revenue comprise ~99% of total group revenue, demonstrating defensive and recurring nature of K+P. + Since the IPO, the G
Slide 28: Build, Accelerate and Lead
Build, accelerate and lead Double revenue to $80m+ by FY24 1. Build | 2. Accelerate | 3. Lead $90.0m H : + 54% Total Revenue Growth H i+ Double Revenue to + 15.4% YOY Revenue Growth H Grow NPATA H $80m REEVE) $80.0m + Invest in Corporate Team to scale H ; + Double NPATA to$8m, ~$80.0m ! : : -7 15% C
Slide 29: Revenue Growth Plan to FY24
5 Year Revenue Growth Plan to FY24 Double revenue to $80m+ by FY24 Build ; Accelerate Lead Actual CAGR t Target CAGR —_—_——__ “ox m 15.4% + ; 15.1% 80 Total Growth Total Growth $ 53.5% 2X from FYI9 $70 $60 $50 $46.4m $40 LS | 0.2m $30 $ $20 $30.2m $10 $0 a IPO YO Yl Y2 Y3 Y4 YS FYI7 FY18 FY19 FY20 F
Slide 30: Complementary Business Progress
Complementary Business Progress Positive momentum in complementary businesses with significant runway ahead * Two new complementary businesses commencing in Jan-21: WEALTH FINANCE TOTAL * Kelly Partners General Insurance partnering with Austbrokers in the “Austbrokers Kelly ESTABLISHMENT DATE Decl6
Slide 31: Appendix
Appendix
Slide 32: Industry Size and Structure Provides a Significant Growth Opportunity
INDUSTRY SIZE AND STRUCTURE PROVIDES A SIGNIFICANT GROWTH OPPORTUNITY Similar to the insurance-broking industry, there is significant opportunity to grow under the Partner Owner Driver™ model Insurance Brokers Market Accounting Services Market $13.2b Annual Revenue $20.4b Annual Revenue* Typical Acc
Slide 33: We Are the 23rd Largest Accounting Firm in Australia
WE ARE THE 23®° LARGEST ACCOUNTING FIRM IN AUSTRALIA AND THE OPPORTUNITY REMAINS ENORMOUS BUILDING A PLATFORM BUSINESS FOR PROFESSIONAL SERVICES FIRMS Top 100 Accounting Firms Firm Deloitte Ea wc Ernst & Young 2 4 KPMG 5S Findex RK BDO | 328 | 10.00% | 205 6 _— 7 Pitcher Partners $12b = 64 | 00% 6 |
Slide 34: NPAT to Operating Cashflow Reconciliation
NPAT to Operating Cashflow Reconciliation Reconciliation of NPAT to Operating Cashflow ($m) 1H20 1H21 Reported NPAT 48 71 Adjustments for: Depreciation and amortisation 0.8 2.0 Change in fair value of contingent consideration - -0.4 Unwinding of interest on contingent consideration 01 01 Other non-c
Slide 35: Seasonality in accounting business
• Seasonality in accounting business (excludes acquisitions) 75% • 65% 52.8% 53.2% • 55% 52.2% 45% 47.2% 47.8% 46.8% 35% 25% 1H18 2H18 1H19 2H19 1H20 2H20
Slide 36: Case Study: Business Transformation
Case Study: Business Transformation Kelly+Partners has a proven track record of delivering transformational outcomes for smaller firms Post-acquisition * Significant improvement in margins Pre-acquisition and revenue in the first 5 years after 40.0% joining the network. + Following an acquisition, 3
Slide 37: EBITDA Revenue EBITDA Margin
• $1,800,000 50.0% $1,600,000 40.0% $1,400,000 $1,200,000 30.0% $1,000,000 $800,000 20.0% $600,000 10.0% $400,000 $200,000 0.0% $0 0 1 2 3 4 5 6 ($200,000) EBITDA Revenue EBITDA Margin -10.0%
Slide 38: Shareholder Composition
Shareholder Composition 13% 13% 50% 14% 7% 3% Founder and CEO Partners Management & Board of Directors Institutional Retail Remaining Shareholders
Slide 39: Disclaimer
Disclaimer SUMMARY INFORMATION This document has been prepared by Kelly Partners Group Holdings Limited ACN 124-908 363 (Company) of Level 8, 32 Walker Street, North Sydney NSW 2060. This document contains information in a summary form and general background information about the Company's activitie
Slide 40: Thank You
KP+GH KELLY PARTNERS GROUP HOLDINGS LIMITED Thank you kellypartnersgroup.com.au
Kelly Partners Group Holdings — H1 2021 Earnings Presentation on 6ix