Kelly Partners Group Holdings Ltd. · ASX:KPG
Kelly Partners — FY2024 Earnings Presentation
46 slides from Kelly Partners's earnings presentation, Aug 21, 2024
Slide 1: FY24 Results
August 2024 FY24 RESULTS KELLY PARTNERS GROUP HOLDINGS LIMITED (ASX: KPG) Brett Kelly Kenneth Ko Founder and CEO CFO 600 100 37 4 $108m $130m 45m 17.4cps 28% Team Partners Businesses Countries Revenue Rev run rate Shares FCF per share ROIC + Org Gr
Slide 2: Mitch Rales, Danaher
Mitch Rales, Danaher “But we also think institutions of greatness aren't, once again, built quickly. You can't be great quickly. Great takes time and compounding. So this journey of 30 years to get to that point is what we're really after, and that's the BHAG that we want.…. It's no different in the
Slide 3: Businesses
Businesses 30 35 +5 / +17% UNITED STATES: 7 INDIA: 1 HONG KONG: 1 AUSTRALIA: 26
Slide 4: KPG in 10 seconds
KPG in 10 seconds Profit & loss Balance sheet Cashflow Revenue Margin Parent NPATA Return Gearing Cashflow Efficiency +29.2% +4.4% +52.3% 40.6% -0.37x +30.7% +2.5% Revenue EBITDA Underlying NPATA Return Net debt to underlying Operating Cash Growth Margin Growth on Equity EBITDA cashflow Conversion F
Slide 5: FY24 Profitability
FY24 Profitability Accounting Accounting Accounting Total inc. Acquired – Acquired – Total inc. Operating Businesses Other Services Total Established Growth Subscale Subscale Accounting AU* Accounting US* Acquired Revenue $72.2 $7.5 $4.8 $84.6 $3.1 $87.7 $16.2 $4.2 $108.1 EBITDA^ $22.2 $1.3 $2.1 $25
Slide 6: Capital Allocation – FY
Capital Allocation – FY KPG aims to build per-share intrinsic value by: FY18 FY19 FY20 FY21 FY22 FY23 FY24 Improving the earning power of our operating 34.0% 27.7% 32.5% 33.4% 30.9% 27.3% 29.6% 1. businesses EBITDA margin of operating businesses 17.2% 6.4% 6.6% 4.8% 26.5% 28.7% 26.3% 2. Further incr
Slide 7: EPS & Free Cashflow per Share
EPS & Free Cashflow per Share (Owners’ earnings per share) 25.00 50,000,000 45,418,414 45,142,289 45,000,000 45,000,000 45,000,000 45,000,000 20.00 40,000,000 17.44 17.84 35,000,000 15.00 14.03 13.99 30,000,000 13.33 11.33 11.72 25,000,000 11.11 10.00 8.67 20,000,000 8.55 15,000,000 5.00 10,000,000
Slide 8: 18 Years of Growth
18 Years of Growth (Doubled 6 times) due to KPG Business System Double Double Double Double Double Double Revenue 2007 2008 2009 2013 2017 2022 $140.0 1 Year 1 Year 4 Years 4 Years 5 Years 3 Years $120.0 $100.0 12 3 4 5 6 $108.1m $130.0m $86.5m $80.0 30% $55.3m $m Revenue $64.9m $42.5m $60.0 CAGR* $
Slide 9: Performance
Performance Strong revenue growth EBITDA 2.5x since FY19(1) Successful programmatic acquisition strategy A$m A$m Number of acquisitions 108 30 22% 5YR CAGR 23% 5YR CAGR 33 acqns L5Y 84 20 9 65 20 8 16 7 45 49 13 6 40 11 3 FY19 FY20 FY21 FY22 FY23 FY24 FY19 FY20 FY21 FY22 FY23 FY24 FY20 FY21 FY22 FY2
Slide 10: Powerful Global Structural Growth Drivers
Powerful Global Structural Growth Drivers Paying taxes in the U.S. and Australia is Taxpayers pay massive costs to Tax codes are incredibly complex and more difficult than other countries comply with income tax codes growing each year Ease of paying taxes (ranked easiest to hardest)(1) Estimated tax
Slide 11: Strategy
Strategy Objective Top 10 in Australia Go Global Grow to become a top 10 accounting firm in Australia Growing Kelly+Partners Business System in global markets Scope PwC Financial Review Top 100 Accounting Firms ($m) Rev ($m) 3,170.0 Est. % Audit Deloitte 2,850.0 EY 2,660.0 KPMG 2,378.0 1 BDO 474.9 F
Slide 12: USA Opportunity
USA Opportunity Kelly+Partners now has 7 office locations in US (California, Texas, Florida) which represent 12.2%-15.2% of Group Revenues Australia California Texas Florida Population 26.4m 39.0m 30.0m 22.2m GPD $1.7tn $3.6tn $2.6tn $1.3tn (USD $trillion) Land (thousands sq 2,996 164 269 66 miles)
Slide 13: USA Progress
USA Progress # Location Revenue to Group ($AUD) • 2 offices in Florida and North Carolina • Revenues of $USD7.0m-$USD8.2m 1 Woodland Hills, CA $1.8m to $2.5m ($AUD10.8m-$AUD12.5m), accounting for ~10% of Group revenues 2 Burbank, CA $4.0m to $4.8m • Kelly+Partners purchased 50.1% of interest 3 San A
Slide 14: Progress in 5-year periods
Progress in 5-year periods 1. Start-up 2. Foundation 3. Build 4. Accelerate $120.0m $108.1m $100.0m $80.0m 30%Revenue $60.0m CAGR $48.9m $40.0m $30.2m $30.0m $16.0m 28% Margin $20.0m 33% Margin $8.7m $7.8m 29% Margin $5.1m $8.0m $2.0m $0.0m $3.4m FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY1
Slide 15: About
About 15 FY24 results
Slide 16: Leading Platform
Leading Platform People 600 team members 35 office locations 52 partnerships 93% Great Place Inc. 100 operating partners 26 Australia and 9 global Since inception to Work® Clients 23,000 active clients 95% tax & accounting 5% organic growth p.a. +70 NPS vs across Australia & US Proportion of FY24 re
Slide 17: Opportunistic and Programmatic Partnerships
Opportunistic AND Programmatic PARTNERSHIPS ~4x Pre-IPO 6 8 37 Firms 50,150 8% Prospects 4,070 IPO 8% Leads 331 9 8 7 Opportunities 6 X 4 3 3 3 2 2 Conversions 1 1 1 1 X 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 202
Slide 18: Capital allocation
Capital allocation 18 FY24 results
Slide 19: ROIC
ROIC “And when we think about Invested Capital, we think about the shareholder capital that has been invested in the businesses, plus any Adjusted Net Income less any distributions. Obviously, when you divide Adjusted Net Income by Invested Capital, you get a measure of the return on our shareholder
Slide 20: Additional Investment
Additional Investment • Additional investment of $2.0m Sources of capital Use of capital (1.8% of revenue) to ensure we can • Internal cashflow • Invest in existing operations • Pay down debt handle next stage of growth Additional investment has reduced • Issue debt • Buy other companies • Pay divid
Slide 21: A Tribute to Charlie Munger
A Tribute to Charlie Munger On Investing “The best advice I ever got from Warren was to stop practicing law,” says Munger. “He thought it was all right as a hobby, but as a business it was pretty stupid.” On Going Public @awilkinson has written a book very much worth reading #baristatobillionaire it
Slide 22: A Tribute to Charlie Munger
A Tribute to Charlie Munger On Living Well 1) Ingesting chemicals in an effort to alter mood or perception; 2) Envy; and 3) Resentment. 4) First, be unreliable; 5) to learn everything you possibly can from your own personal experience, minimizing what you learn vicariously from the good and bad expe
Slide 23: Fastenal’s Foundation: Bob Kierlin’s Leadership Rules
Fastenal’s Foundation: Bob Kierlin’s Leadership Rules 23 FY24 results
Slide 24: We don’t know a millionth of one percent about anything.
We don’t know a millionth of one percent about anything. ~ Thomas A. Edison 24 FY24 results
Slide 25: Financial Highlights
Financial Highlights 25 FY24 results
Slide 26: Financial Highlights
Financial Highlights FY24 Financial Highlights (m) KPGHL & Controlled Entities KPGHL Attributed (parent only) *FY23 P&L adjusted to exclude discontinued operations for like for like comparison P&L and Cashflow FY23* FY24 % Change FY23 FY24 % Change Revenue $83.7 $108.1 29.2% – – – 1 Owner earnings –
Slide 27: Income Statement
Income Statement Revenue of EBITDA margin at Income Statement Summary ($m) FY23 FY24 ∆% Professional services revenue $83.7 $108.1 29.2% $108.1m 27.8% Other income Total Revenue $0.9 $84.5 $1.8 $110.0 111.5% 30.1% (+$24.5m, up 29.2%), (FY23: 22.7%) driven both by organic revenue growth has improved
Slide 28: Balance Sheet
Balance Sheet Lockup Days WIP Days Debtor Days • Net Debt / Underlying EBITDA of 1.28x (FY23: 1.65x) due to a full year’s profit contribution from acquisitions 60.0 56.4 56.0 48.1 3.7 completed in the prior year, as well as an increase in the 50.0 11.4 profitability of the Group. 5.8 40.0 Days • Gro
Slide 29: Debt & Liquidity
Debt & Liquidity $100.0m Loan type (m)* Parent Op. Bus Total Debt $90.0m Cash, $3.3m Working Capital Debt $0.2 $4.2 $4.5 $80.0m Property Debt $0.0 $4.0 $4.0 $40.4m $85.6m Acquisition & other term debt $9.1 $30.9 $40.0 $70.0m Cash & Available Headroom, Gross Debt – FY24 $9.3 $39.1 $48.4 Headroom $37.
Slide 30: Cashflow
Cashflow • Cash from Operations pre AASB 16 of $20.2m Cash from Operations (CfO) Free Cashflow to Firm (FCFF) after increased by 30.7% (FY23: $15.4m) scheduled debt reductions • Free Cashflow to Firm increased 44.1% • Cash Conversion1 of 96.9% (FY23: 94.4%) and is within our expected 85%-100% conver
Slide 31: Parent & NCI Waterfall
Parent & NCI Waterfall • The profit attributable to the parent vs. NCI represent a 24%/76% split and differs from the ownership interests of ~51%/49%. 51% This is due to the following items: 49% $11,226 ($1,436) • Income tax expense of $1.4m of the parent entity. As the $10,871 majority of operating
Slide 32: Thank You
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Slide 33: Appendix
Appendix 33. | FY24 results
Slide 34: Trinity - Parent
Trinity - Parent FY23 FY24 1. ROIC 1. ROIC 20.0% 24.8% EARNINGS PER EARNINGS PER SHARE SHARE 12.01 cps 17.8 cps (-14.2%) +48.2% 2. Net Debt 3. Cashflow 2. Net Debt 3. Cashflow to EBITDA Conversion to EBITDA Conversion 1.65x 94.4% 1.28x 97.7% 34 FY24 results
Slide 35: Trinity - OP CO
Trinity - OP CO FY23 FY24 1. WIP 1. WIP 5.8 days* 3.7 days* CASH CASH CONVERSION CONVERSION ON EBITDA ON EBITDA 94.4% 96.9% 3. Revenue 3. Revenue 33.4% 29.2% 2. Debtors Growth 2. Debtors Growth 42.3 days* EBITDA 52.3 days* EBITDA 27.3% 29.6% Margins Margins * Calculated on estimated annualised run r
Slide 36: Revenue growth
Revenue growth Revenue growth contributions by year FY18 FY19 FY20 FY21 FY22 FY23 FY24 AVG Organic – Accounting 10.3% -6.4% 6.6% 1.5% 4.7% 2.9% 2.7% 3.2% Organic – Complementary 2.7% 1.8% 1.4% 1.2% 1.5% 1.8% 0.3% 1.5% Organic – Total 13.0% -4.6% 8.0% 2.7% 6.2% 4.7% 3.0% 4.7% Acquired 17.2% 6.4% 6.6%
Slide 37: Revenue & EPS
Revenue & EPS YOY Contrib. Internal Revenue compounded Organic – Accounting 2.8% 2.7% annual growth rate since 2006 Internal 30.2% Organic - Complementary 4.7% 0.3% External Earnings per share annual Acquired ∞ 26.3% growth rate since IPO (FY24) Total 29.2% 29.2% 13.0% Excluding organic growth from
Slide 38: 1H/2H Skews
1H/2H Skews • Revenue seasonality in the accounting Revenue seasonality in accounting business businesses is approximately 1H: 52% / 2H: (excludes impacts of in year acquisitions) 48%, equating to a 5% (or c. $5.4m swing) 75.0% down swing in 2H24. • Seasonality is predominantly due to timing of 65.0
Slide 39: NPATA reconciliation
NPATA reconciliation Reconciliation of attributed NPAT/NPATA ($m)* FY23^ FY24 Statutory NPAT attributable owners of Kelly Partners Group Holdings Limited 3.9 3.3 Amortisation of customer relationship intangibles 2.1 2.9 NPATA attributable to owners of Kelly Partners Group Holdings Limited 6.0 6.2 Ad
Slide 40: Parent & NCI
Parent & NCI • The profit attributable to the parent vs. NCI represent a 24%/76% (‘000) NCI Parent Total split and differs from the ownership interests of ~51%/49%. Group NPBT before parent entity costs $10,871 $11,226 $22,098 This is due to the following items: 49% 51% • Income tax expense of $1.4m
Slide 41: Free Cashflow - Group
Free Cashflow - Group FY18 FY19 FY20 FY21 FY22 FY23 FY24 CAGR Cash From Operations (CfO) $6.6 $10.0 $14.3 $15.1 $17.6 $19.5 $25.6 25.3% Owners' Earnings (CfO - Maint. Capex) $6.3 $9.7 $12.2 $12.8 $14.0 $14.9 $19.5 20.7% Cash Conversion (Operating Cash Flow / EBITDA) 63.5% 116.8% 97.3% 93.5% 83.3% 94
Slide 42: Free Cashflow (“Owner earnings”)
Free Cashflow (“Owner earnings”) FY20 FY21 FY22 FY23 FY24 CAGR Owner earnings $3.9m $5.0m $6.3m $6.0m $7.8m 19.2% Owner earnings per share (cents) 8.55 11.11 14.03 13.33 17.44 19.5% % Growth 24.4% 29.9% 26.3% -5.0% 30.8% Underlying NPATA $3.9m $5.1m $6.3m $5.3m $8.0m 19.5% Cashflow Conversion - Pare
Slide 43: Cash reconciliation
Cash reconciliation Reconciliation of NPAT to Operating Cashflow ($m) FY23 FY24 Reported NPAT 11.1 14.2 Adjustments for Depreciation and amortisation 9.6 12.3 Unwinding of interest on contingent consideration 0.6 0.5 Other non-cash movements* -1.5 0.2 Change in operating assets and liabilities Decre
Slide 44: Net debt per partner
Net debt per partner • Total number of equity partners Net Debt per Partner increased to 96 (as at 30 June 2024): $600,000 120 • 6 New partners promoted internally $500,000 96 100 • 3 New partner recruited externally 78 • 18 New partners from completed acquisitions $400,000 80 • Although net debt in
Slide 45: Dividends >10% p.a.
Dividends • Since IPO in June 2017, the Company has consistently paid out dividends growing at >10% per annum 9.00cps >10% p.a. growth in Ordinary Dividends 8.17cps Dividend payments ceased 8.00cps for 5 years in a row in Feb 2024 • The Company has paid out monthly dividends from Jan- 7.08cps 7.00cp
Slide 46: Metrics since IPO
Metrics since IPO KPGHL & Controlled Entities ("Group") 1 2 3 4 5 6 7 P&L and Cashflow FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 CAGR Revenue $30.2 $39.5 $40.0 $45.5 $48.9 $64.9 $86.5 $108.1 20.0% Underlying EBITDA (pre AASB 16) $8.7 $14.5 $10.9 $13.5 $16.0 $20.0 $19.7 $30.0 19.3% Margin % 28.9% 36.6%
Kelly Partners Group Holdings — FY2024 Earnings Presentation on 6ix