Kelly Partners Group Holdings Ltd. · ASX:KPG
Kelly Partners — H1 2020 Earnings Presentation
41 slides from Kelly Partners's earnings presentation, February 2020
Slide 1: 1H20 Results Roadshow
KP+GH 1H20 RESULTS ROADSHOW ASX: KPG PRESENTED BY Brett Kelly CEO and Executive Chairman Justin Sweeting CFO Kenneth Ko Group Finance Manager February 2020 kellypartnersgroup.com.au
Slide 2: p25 * excluding finance costs and income taxes paid p27
p25 p27 p28 * excluding finance costs and income taxes paid
Slide 3: 1H20 Growth and Performance Continues
1H20 Growth and Performance Continues 13 years of continual growth. The business has doubled on average every 3 years, 4 times in a row. Double Double Double Double Revenue 2007 2008 2009 2018 2Years i; 1Year ; 4 Years . 4 Years $45.0 i t i 32% in2 : ' Years $40.0 T 4 : | $35.0 ‘ me — 34% $25.0 | |
Slide 4: FY19 Revenue Progress and FY2020
• • • • • • • • • • • • • • • • • • • • • • • FY19 ~$40.0m Revenue FY2020 REVENUE PROGRESS EBITDA
Slide 5: Agenda
AGENDA T SECTION ONE MISSION AND MOMENTUM SECTION TWO INVESTMENT CASE AND STRATEGY SECTION FOUR SECTION THREE 3 RESULT HIGHLIGHTS 4 FINANCIALS APPENDIX KP+GH
Slide 6: Section One: Mission and Momentum
SECTION ONE MISSION AND MOMENTUM KPG continues to focus on building out a scalable and difficult to replicate model. We have proven the model in Sydney and have commenced expansion geographically, with Melbourne as the first new target. It is estimated that the addressable market in Sydney and Melbo
Slide 7: Strategic Pillars
STRATEGIC PILLARS CHALLENGE Continue to challenge the status quo by delivering to our professionals in our team and clients of our industry our core values and unique systematic approach embodied in our Kelly+Partners Purple File Program(‘PFP’) and Kelly+Partners Financial Advice System (‘KPFAS). FO
Slide 8: 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 Typical Client Base ASX listed and multi-national Accounting Services Market $20.3b Annual Revenue* Typical A
Slide 9: We Are the 24th Largest Accounting Firm in Australia
WE ARE THE 24TH LARGEST ACCOUNTING FIRM IN AUSTRALIA AND THE OPPORTUNITY REMAINS ENORMOUS BUILDING A PLATFORM BUSINESS FOR PROFESSIONAL SERVICES FIRMS Financial Review Top 10 FY | ($m) | 6 YOY | | i 2600.00 H 10.6% H 734 H H | 230000 | 143% | 883 : . $8.6b~ iga700 5% 569 : : Big 4 L_|__ 1780.00 | 85
Slide 10: Different on Purpose
DIFFERENT ON PURPOSE «. TO TRADITIONAL ACCOUNTING FIRMS 1. Mission +Values Clearly defined mission and values bid ~ ea a. 6, Brand Z 4 = Single Brand and Marketing i i 4, Management Centralised Back Office Services
Slide 11: Executing Our Year Plan
EXECUTING OUR 5 YEAR PLAN OUR ADDRESSABLE MARKET IS VERY LARGE We must expand in our target markets and dominate the market for Private Business Owners accounting and advice services within 5 years. 8 ‘nfl Improve EBITDA Lower operating cost margin in underlying base of Central businesses Management
Slide 12: Section Two: Investment Case and Strategy
SECTION TWO: Investment Case and Strategy
Slide 13: KPG Strategy
KPG Strategy To build per-share intrinsic value Kelly Partners Group Holdings Limited aims to build per-share intrinsic value by: 1 Improving the earning power of our many operating businesses Y 2 Further increasing their earnings through tuck-in acquisitions v 3 Participating in the growth of our b
Slide 14: KPG Business Model
KPG — Business Model 1 Recurring, defensive, diversified (geographic, business and client) revenue streams 2 Proven ‘Partner-Owner-Driver’ (“POD”) operating model which creates alignment of interests 3 Longstanding client relationships across a diverse SME focussed client base 4 Single brand with a
Slide 15: *Expected EBITDA contribution is post transaction improvement
• • • • • • *Expected EBITDA contribution is post transaction improvement
Slide 16: CentralCo
CentralCo + CentralTablelands @ @ Western Sydney Norwest @ @ Blue Mountainst + | @inner west ob © Oran Park*+ @ Southern Highlands+ +Melbourne CBD @
Slide 17: Newcastle and Western Sydney Sites
Newcastle + WesternSydney Norwest : + 4 existing sites target 4 new sites
Slide 18: Melbourne CBD New Sites
+ Melbourne CBD + Essendon Monee Ponds+ + Brunswick + Cranbourne 5 new sites B
Slide 19: Organic Growth Driven by Focussed Differentiated Offer
Organic Growth Driven by Focussed Differentiated Offer Only firm focussed exclusively on Private Business Owner clients, at scale, with a unique offer PRIVATE BUSINESS OWNERS ARE THE FASTEST Accountant GROWING GROUP IN THE ECONOMY KEEP THEIR ACCOUNTANTS THE LONGEST GENERATORS OF NEW AND EXTRA WEALTH
Slide 20: Complementary Business' Progress
Complementary Business’ Progress The complementary established are now undergoing rapid and significant growth WEALTH FINANCE CORPORATE ADV VESTRY ESTABLISHMENT DATE Dec-16 Sep-17 Sep-17 Jun-18 INVESTMENT < $5k $34k $90K $nlok < $250k KPG share of profit 51.0% 51.0% 51.0% 75.5% 1H20 Revenue $493K $3
Slide 21: Section Three: Result Highlights
Slide 22: Operational Highlights
Operational Highlights Strong growth - Total Customer Group Numbers grew to 7,924 up +11.1%. ait ORGANIC GROWTH * Organic Revenue up 16.5%, driven by both volume and price growth. * Target 5% organic growth +®> 4 NETWORK EXPANSION FY19 acquisitions + $1.7m revenue YTD + Additional $0.9m revenue grow
Slide 23: Section Four: Financials
cial Mar} @ The Heart of Australia's Finan cu a o c © = i SECTION FOUR:
Slide 24: 1H20 Financial Highlights
1H20 Financial Highlights Strong 1H20 performance significantly above prior corresponding pe 1H20 Financial Highlights ($m) KPGHL & Controlled Entities P&L and Ca: low 1H20, 1H19 Change Revenue $24.3 $19.7 23.4% $40.0 $6.1 $48 26.5% $8.4 Underlying EBITDA (pre AASB 16) $7.3 $4.7 55.6% $10.9 $3.2 $2.
Slide 25: 1H20 Income Statement
1H20 Income Statement Strong revenue & earnings growth driven by acquisitions and existing businesses + Revenue from ordinary activities grew to $24.3m (+$4.6m, up 23.4%), driven by $0.6m in current year acquisitions, $0.9m in acquisitions completed in the prior year and the remaining $3.1m resultin
Slide 26: 1H20 Margins
1H20 Margins Targeting EBITDA margins of 32.5% across the Group Margins by Cohort Operating Businesses Established Growth Sti s_ Other Services Total} Revenue $17.7 $4.4 $02 $2.0 $243 EBITDA $5.7 S12 $0.0 $11 $8.0 EBITDA Margin % 32.40% 26.70%. 16.04% 52.27% 32.88% AEBITDA before head office costs;
Slide 27: Balance Sheet as at December 2019
Balance Sheet as at 31 December 2019 Conservatively geared balance sheet * Total Asset growth to $64.3m (+$14.8m) LOCKUP DAYS driven mainly by acquisitions, property 100.0 purchases and the recognition of right 79.9 of use assets as part of the leasing 80.0 62.8 69.6 23.8 standard WIP Days $ 60.0 ps
Slide 28: 1H20 Cashflow
1H20 Cashflow Strong cash conversion * Strong cashflow supports dividend payment + Lease payments as a financing activity have a $0.9m impact on cash conversion metrics * Strong Cash from Operations driven by billings growth and reduction in lock up. + Strong Cash Conversion of 101% (Operating Cashf
Slide 29: Borrowings as at December 2019
Borrowings as at 31 December 2019 Borrowings increased to $21.1m as a result of acquisitions completed in the half year * Total Borrowings of $21.1m include nee $3.5m debt attributable to equity Revolver / insurance partners; $7.6m debt attributable to Overdraft__& fitout erty Amortiser | _ Total De
Slide 30: 1H20 Dividends
1H20 Dividends Dividend growth of 10%+ per annum Total fully franked Amount per Fully Franked amount dividends paid security Cents per security Cents Payment date For the year ended 30 June 2019 Final dividend 1 July 2019 $500,445 110 110 For the year ended 30 June 2020 Special dividend 18 September
Slide 31: Property Strategy
Property Strategy 1 14 1S sydney CBD North Sydney Northern Beaches Central Coast Inner West Norwest Western Sydney Central Tablelands - Bathurst Central Tablelands— Glenbrook Oran Park South West Sydney Southern Highlands Wollongong Melbourne Leased Leased Leased Owned x2 Owned x1 (settlement in Apr
Slide 32: Appendix
Appendix
Slide 33: Shareholder Composition
Shareholder Composition 10% 12% 51% 19% 7% 1% Founder and CEO Partners Management & Employees Institutional Retail Remaining Shareholders
Slide 34: NPAT to Operating Cashflow Reconciliation
NPAT to Operating Cashflow Reconciliation Reconci n of NPAT to Operating Cashflow ($m Reported NPAT Adjustments for: Depreciation and amortisation Change in fair value of contingent consideration Net fair value (gain ) /loss on other financial assets Unwinding of interest on contingent consideration
Slide 35: Reconciliation of attributed NPAT/NPATA
Reconciliation of attributed NPAT/NPATA ($m)
Slide 36: Interests in Operating Businesses
Interests in operating bus 1 Kelly Partners North Sydney 58.50% 2 Kelly Partners South West Sydney 50.50% 3 Kelly Partners Sydney 50.05% 4 Kelly Partners Tax Consulting 51.00% 5 Kelly Partners Wollongong 51.00% 6 Kelly Partners Northern Beaches 51.00% 7 Kelly Partners Melbourne 66.00% inesses a 16 S
Slide 37: Organisation Structure
1 CEO People Finance Marketing Risk Operations IT Acquisitions Admin 2 4 9 13 14 16 17 18 Personal HR Marketing Market CFO CRO COO IT Manager Assistant to Coordinator Director Manager CEO 3 5 10 15 HR Finance Graphic Operations Coordinator Manager Designer Coordinator 6 11 Senior Marketing Accountan
Slide 38: 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 39: EBITDA, Revenue and 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 40: Disclaimer
Disclaimer SUMMARY INFORMATION This document has been prepared by Kelly Partners Group Holdings Limited ACN 124 908 363 (Company). This document contains information in a summary form and general background information about the Company's activities current as at the date of the document. It is to b
Slide 41: Thank you
KP+GH KELLY PARTNERS GROUP HOLDINGS LIMITED Thank you kellypartnersgroup.com.au 4]
Kelly Partners Group Holdings — H1 2020 Earnings Presentation on 6ix