Kelly Partners Group Holdings Ltd. · ASX:KPG
Kelly Partners — FY2019 Earnings Presentation
42 slides from Kelly Partners's earnings presentation, Sep 9, 2019
Slide 1: FY19 Results Roadshow
KP+GH FY19 RESULTS ROADSHOW ASX: KPG PRESENTED BY Brett Kelly CEO and Executive Chairman Justin Sweeting Deputy CFO Kenneth Ko Group Finance Manager September 2019 kellypartnersgroup.com.au
Slide 2: KPG in 10 Seconds
KPG IN 10 SECONDS 27.2% 117% 32% 0.3% EBITDA CASH MARGIN CONVERSION RETURN ON MARKET EQUITY PENETRATION GROWTH MARGIN EFFICIENCY RETURN OPPORTUNITY 13 year CAGR since FY19 Underlying FY19 Operating FY19 Group NPATA Market inception 2006. EBITDA $10.9m to Cashflow $11.9m $7.9m on Group penetration Re
Slide 3: Agenda
AGENDA Ou KRWN = SECTION ONE OUR MISSION AND MOMENTUM SECTION TWO INVESTMENT CASE AND STRATEGY SECTION THREE RESULT HIGHLIGHTS SECTION FOUR FINANCIALS SECTION FIVE OUTLOOK AND FUTURE GROWTH SECTION SIX PERFORMANCE ENHANCEMENTS APPENDIX KP+GH
Slide 4: Section One: Our Mission and Momentum
TO BE SYDNEY'S FIRST CHOICE ACOUNTANTS AND ADVISORS FOR PRIVATE BUSINESS OWNERS. 99 SECTION ONE OUR MISSION AND MOMENTUM KPG continues to focus on building out a scalable and difficult to replicate model with a focus on first winning in the Sydney market. It is estimated that the addressable market
Slide 5: 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 6: Different on Purpose
DIFFERENT ON PURPOSE «. TO TRADITIONAL ACCOUNTING FIRMS DIFFERENT ON PURPOSE FOR PROFESSIONALS MISSION AND VALUES CLEARLY DEFINED MISSION AND VALUES STRATEGY AND MARKET SME FOCUS IN GREATER SYDNEY AREA STRUCTURE 51/49 OWNER-DRIVER PARTNERSHIP MODEL MANAGEMENT CENTRALISED BACK OFFICE BRAND SINGLE BRA
Slide 7: Most Valuable Clients: Private Business Owners
MOST VALUABLE CLIENTS: PRIVATE BUSINESS OWNERS KPG IS THE ONLY FIRM AT SCALE WHO FOCUS ON THIS ONE TYPE OF CLIENT PRIVATE BUSINESS OWNERS ARE THE FASTEST GROWING GROUP IN THE ECONOMY KEEP THEIR ACCOUNTANTS THE LONGEST GENERATORS OF NEW AND EXTRA WEALTH LARGE USERS OF SERVICES FROM ADVISORS O Private
Slide 8: 24th Largest Accounting Firm in Australia; Opportunity Remains Enormous
WE ARE THE 24TH LARGEST ACCOUNTING FIRM IN AUSTRALIA AND THE OPPORTUNITY REMAINS ENORMOUS BUILDING A PLATFORM BUSINESS FOR PROFESSIONAL SERVICES FIRMS Total Market $20 Billion Annual Revenue Typical Client Base Typical Accounting Provider Big 4 Firms ‘ASXdisted and pwe multi-national : Companies vet
Slide 9: Executing Our Plan
EXECUTING OUR 5 YEAR PLAN OUR ADDRESSABLE MARKET IS VERY LARGE But we must first win ‘at home’ in Sydney within 5 years to dominate the market for Private Business Owners accounting and advice services. 8 ‘nfl Improve EBITDA Lower operating cost margin in underlying base of Central businesses Manage
Slide 10: Section Two: Investment Case and Strategy
SECTION TWO: Investment Case and Strategy
Slide 11: 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 2 Further increasing their earnings through tuck-in acquisitions 3 Participating in the growth of our busin
Slide 12: KPG — Business Model
KPG — Business Model Highly differentiated 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 focuss
Slide 13: For personal use only
For personal use only • • • • • • • • • • • • • • • • • • • • • • • ~$39.5m Revenue FY2019 PROGRESS EBITDA
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Slide 15: FY19 Financial Highlights
FY19 Financial Highlights Revenues and underlying EBITDA in line with guidance FY19 Financial Highli KPGHL & Controlled Entities KPGHL Attributed (parent only) Revenue Underlying EBITDA -189% $51 $6.4 -20.9% Margin % 5 61% 72% - Margin (Ex Sydney CBD) a - - - EBITDA 25.0% $4.5, $6.7 32.4% Underlying
Slide 16: For personal use only
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Slide 17: Section Four: Financials
cial Mar} @ The Heart of Australia's Finan cu a o c © = i SECTION FOUR:
Slide 18: FY19 Income Statement
FY19 Income Statement Revenues in line with guidance, driven by increased organic and acquired billings Revenue from ordinary activities grew to $40.0m (+$0.5m, up 1.3%), driven by acquisitions, contributing $2.5m on YTD basis, organic growth. Operating expenses of $29.2m (+$2.9m on FY18), of which
Slide 19: Accounting Industry vs Kelly+Partners Costs
For personal use only 70% 83% • 30% 17% • ACCOUNTING KELLY+PARTNERS INDUSTRY EBITDA Costs • •
Slide 20: FY19 Cashflow
FY19 Cashflow Strong cash conversion underpinning good earnings quality ; ; CASHFLOW COMPARATIVES * Strong Cash from Operations driven by billings growth and reduction in lock $15.0m up. $10.0m $10.0m $66m $7.0m * Strong Cash Conversion of 117% $5.0m $3.9m (Operating Cashflow to EBITDA). We | expect
Slide 21: FY19 Balance Sheet
FY19 Balance Sheet Total Asset growth to $49.5m (+$5.0m) driven by acquisitions. Conservative capital structure with 49.8% Equity / Total Assets ratio, and Net Debt / EBITDA of 1.4x Lock up reduced to $7.6m (-$2.5m). Lock up days reduced to 69.6 from 93.2 days. Total Borrowings of $18.6m include $8.
Slide 22: FY19 Dividends
FY19 Dividends Anticipated dividend growth in line with business growth of 10%+ per annum Total fully franked Amount per Fully Franked amout ividends pai security Cents per security Cents Payment date For the year ended 30 June 2018 Final dividend 12 Jul 2018 $454,972 1.00 1,00 For the year ended 30
Slide 23: Section Five: Outlook and Future Growth
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Slide 24: For personal use only
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Slide 25: For personal use only
Central Coast + + Central Tablelands Norwest+ Nort bSydneys Sydney CBD, fe} apPark+ + Western Sydney + South West Sydney Southern Highlands + 8 existing si geted +Blue Mountains 5 new sites &
Slide 26: Section Six: Performance Enhancements
SECTION SIX: Performance Enhancements
Slide 27: Capital Allocation: Share Buyback and Special Dividend
Capital Allocation: Share Buyback and Special Dividend Benefitting shareholders and improving returns on equity Number of Shares on Issue at IPO 45,497,181 45,432,809 64,372 * The group seeks to maximise its return on capital. Where the group believes its shares are trading at a significant discount
Slide 28: New Business Progress
New Business Progress The new businesses established are seeds of future growth INVESTMENT OFFICE WEALTH FINANCE ESTABLISHMENT DATE Jun-18 Dec-16 Sep-17 INVESTMENT $nlok < $5k $34k < $140k KPG share of profit 75.5% 51.0% 51.0% REVENUE $n4k $779k $514k $1,407k Annual Growth % n/a 51% 126% 89% EBITDA
Slide 29: Property Acquisition Strategy
Property Acquisition Strategy Acquiring the property opportunities in the network Owned/Leased $Value 1 sydney CBD Leased - 2 North Sydney Leased - 3 Northern Beaches Leased - 4 Central Coast Owned x2 $780,000 5 Inner West Leased - 6 Norwest Leased - 7 Western Sydney Leased - 8 Central Tablelands Ow
Slide 30: Board and Senior Management
Board and Senior Management Brett Kelly Founder, Executive Chair, Chief Executive Officer Founded Kelly+Partners in 2006 See below for experience Brett Kelly CEO 15 years management experience 20+ years experience in financial services BBus, CA, MTax, DipFs, RTA, JP. Stephen Rouvray Deputy Chair and
Slide 31: Board & Management Next Generation
Board & Management Next Generation hud 7 BOARD Ada Poon - Executive Director Ada has been with the Group since inception in 2006 in the North Sydney office. Ada has more than 15 years professional accountancy experience and has specialised in accounting and taxation services to Private Business Owne
Slide 32: Appendix
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Slide 33: FY19 Growth and Performance Continues
FY19 Growth and Performance Continues 13 years of continual growth Revenue $45 $40.0 $40 $39.5 $35 $302 ~ 34% $28 CAGR & $203 $211 $20 $172 #15 $13.0 $10 $79 $78 $84 $63 $5 $32 $12 $0 7 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 *CAGR means Compound Annual Growth Rate and repre
Slide 34: NPAT to Operating Cashflow Reconciliation
NPAT to Operating Cashflow Reconciliation Reconciliation of NPAT to Operating Cashflow ($m) FY19 Fy18 Reported NPAT 71 10.0 Adjustments for: Depreciation and amortisation 12 1.0 Shares issued to employees - 02 Change in fair value of contingent consideration (0.2) (1.2) Net fair value (gain ) /loss
Slide 35: Reconciliation of Attributed NPAT/NPATA
For personal use only Reconciliation of attributed NPAT/NPATA ($m)
Slide 36: Interests in Operating Businesses
Interests in operating businesses Establi 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 Central Coast 50.10% 7 Kelly Partners Inner West 51.00% 8
Slide 37: Case Study: Business Transformation
For personal use onlv Case Study: Business Transformation Kelly+Partners has a proven track record of delivering transformational outcomes for smaller firms * Significant improvement in margins Pre-acquisition Post-acquisition and revenue in the first 5 years after 40.0% joining the network. + Follo
Slide 38: For personal use only
For personal use only • $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 39: Shareholders
Shareholders Significant portion of shares held by Management, Partners and Employees Founder and CEO Partners Management & Employees Employees Subtotal Institutional Retail Total Shares Outstanding *as at 31 July 2019 No shares 23,253,378 3,401,659 1,947,050 453,500 28,602,087 8,073,811 8,814,749 4
Slide 40: Definitions
Definitions CAGR = Compound Annual Growth Rate CfO = Cashflow from Operations EBIT = Earnings Before Interest And Tax EBITDA = EBIT before Depreciation and Amortisation EPS = Earnings per Share EPSA = Earnings per Share before Amortisation NPAT = Net Profit After Tax NPATA = Net Profit After Tax and
Slide 41: 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 42: Thank you
KP+GH KELLY PARTNERS GROUP HOLDINGS LIMITED Thank you kellypartnersgroup.com.au 42
Kelly Partners Group Holdings — FY2019 Earnings Presentation on 6ix