Kelly Partners Group Holdings Ltd. · ASX:KPG
Kelly Partners — FY2020 Earnings Presentation
40 slides from Kelly Partners's earnings presentation, August 2020
Slide 1: FY20 Results Roadshow
KP+GH FY20 RESULTS ROADSHOW ASX: KPG PRESENTED BY Brett Kelly CEO and Executive Chairman Justin Sweeting CFO Kenneth Ko Group Finance Manager August 2020 kellypartnersgroup.com.au
Slide 2: Section One: Summary
SECTION ONE: Summary ‘ 4 al he
Slide 3: Company Overview
COMPANY OVERVIEW KELLY+PARTNERS WHO WE ARE Kelly Partners Group Holdings Limited (KPG.ASX) has a ~51% interest in 21 operating businesses operating from 15 locations in NSW and VIC Our businesses provide accounting, taxation and other services to private businesses and their owners We operate under
Slide 4: Resilient K+P Business Model Delivering Solid Fundamentals
RESILIENT K+P BUSINESS MODEL DELIVERING SOLID FUNDAMENTALS PROFIT & LOSS BALANCE SHEET ¥1.1X NET DEBT TO UNDERLYING EBITDA t 25% t49% 430% EBITDA MARGIN 416% REVENUE GROWTH UNDERLYING NPATA GROWTH RETURN ON EQUITY REVENUE MARGIN PROFIT RETURN GEARING Revenue FY20 Underlying FY20 Underlying NPATA $11
Slide 5: K+P COVID-19 Response
K+P COVID-19 RESPONSE The Group was in a strong position pre COVID, and existing infrastructure enabled a smooth transition with minimal business impact across the second half. From March, to further strengthen the Group's position in light of COVID we took the following proactive measures: Over ~90
Slide 6: KPG Strategy
KPG STRATEGY To build intrinsic value Kelly Partners Group Holdings Limited aims to build per-share intrinsic value by: 10, 0, 1 Improving the earning power of our many operating businesses 27.7% 32.5% (EBITDA margin) (EBITDA margin) ; . a ; _ 6.4% 6.6% 2 Further increasing their earnings through tu
Slide 7: 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 $20.0m : H + 54% Total Revenue Growth H H : ' + Double R t + 15.4% YOY Revenue Growth i; Grow NPATA _ pou Nomen A sor Revenue $80.0m + Invest in Corporate Team to scale : : ~$80.0
Slide 8: Section Two: Financials
cial Mar} @ The Heart of Australia's Finan cu i oO c © = re SECTION TWO:
Slide 9: FY20 Financial Highlights
FY20 Financial Highlights Underlying Shareholder NPATA up 25.3% to $4.0m IFY20 Financial Highlights (m) KPGHL & Controlled Entities KPGHL Attributed (parent only) d Cashfl F F Revenue $40.0 16.0% - - - Underlying EBITDA (pre AASB 16) $10.9 26.1% - - - Margin % 272% - - - - EBITDA (pre AASB 16) $10.2
Slide 10: FY20 Income Statement
FY20 Income Statement Strong revenue & earnings growth driven by acquisitions and existing businesses Income Statement Summary ($ * Revenue of $46.4m (+$6.4m, up 16.0%), driven by in year acquisition revenue of +$2.3m (Melbourne and Glenbrook) and Professional Services Revenue 16.0% +$0.3m prior yea
Slide 11: Attributable NPAT to Underlying NPATA Reconciliation
Attributable NPAT to Underlying NPATA Reconciliation Reconciliation of attributed NPAT/NPATA ($m) FY19 FY20 Statutory NPAT attributable owners of Kelly Partners Group Holdings Limited 2.4 4.0 Amortisation of customer relationship intangibles 04 os NPATA attributable to owners of Kelly Partners Group
Slide 12: FY20 Margins
FY20 Margins Targeting EBITDA margins of 32.5% across the Group Margins by Cohort Operating Businesses Established Growth __ Start-ups Total Revenue $345 $86 $0.4 $46.4 EBITDAn $116 $21 $0.0 $151 EBITDA Margin % 33.5% 24.7% 12.3% 45.4% 32.5% AEBITDA before head office costs and pre AASB 16; EBITDA a
Slide 13: Balance Sheet as at June 2020
Balance Sheet as at 30 June 2020 Conservative balance sheet with gearing reducing 18% to 1.1x * Conservative capital structure with 39.7% Equity / Total Assets ratio, and Net Debt / Underlying EBITDA (pre AASB 16) of 1.1x (FY19: 1.3x) * Group ROE of 49.2% (Group NPATA $11.3m / Group Equity of $22.9m
Slide 14: FY20 Cashflow
FY20 Cashflow Operating Cashflow up 27.0% and cash conversion at 98% reflects high quality earnings CASHFLOW COMPARATIVES * Cash from Operations $12.7 (+27%) ‘ ae ow ) $14.0m $12.7m driven by billings growth and reduction in lock up $120m $10.0m * Strong cashflow supports dividend. $8.0m $65m $6.6m
Slide 15: Debt and Liquidity
Debt and liquidity $12.5m in liquidity for COVID cushioning and $31m in acquisition capability + Up to $12.5m equates to ~$31m in acquisition capability, i.e. accretive Revenue of ~$3lm and accretive EBITDA of $10m!: + Liquidity COVID cushion - Lock-up days could more than double without placing str
Slide 16: Section Three: Outlook
Slide 17: 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 Company aims to: * Grow EBITDA margins (pre-AASB 16) to 32.5% in each individual accounting practice;
Slide 18: Build, Accelerate and Lead
Build, accelerate and lead Double revenue to $80m+ by FY24 $90.0 1. Build : 2. Accelerate : 3.Lead : + 54% Total Revenue Growth H : + 15.4% YOY Revenue Growth Grow NPATA iy pope a Revenue $80.0m + Invest in Corporate Team to scale : i m 1 CAGR - - $70.0m uc - | - H -7 $60.0m Revenue co” $46.4m co H
Slide 19: Year 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 20: Appendix
Appendix
Slide 21: 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 Acco
Slide 22: 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 Top 100 Accounting Firms Firm Total Partners 2600.00 9.9% 2300.00 i . $8.6b 1887.00 Big 4 average growth S 1780.00 (Pre Covid) 20917 4.7% $1.2b 566.2
Slide 23: CentralCo
CentralCo + CentralTablelands @ @ Western Sydney Norwest @ @ Blue Mountainst + | @inner west ob © Oran Park*+ @ Southern Highlands+ +Melbourne CBD @
Slide 24: Mission and Momentum
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 Melbourne for acc
Slide 25: 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 26: 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 27: FY20 Growth and Performance Continues
FY20 Growth and Performance Continues 14 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 2013 $50.0 2Years i 1Year_; 4 Years ‘ 4 Years 54% in 3 Years / | i $46.4M FY Revenue $45.0 T : : Eyedelag) 2H Re
Slide 28: Revenue Growth since IPO
Revenue Growth since IPO 54% revenue growth since IPO in 2017 Revenue + Total Revenue has increased 54% since the 2017 IPO, representing a year on year revenue growth of 15.4%. $50.0 + Annuity revenue comprise ~95% of total group revenue, $45.0 demonstrating defensive and recurring nature of K+P. $4
Slide 29: *Expected EBITDA contribution is post transaction improvement
• • • • • *Expected EBITDA contribution is post transaction improvement
Slide 30: Complementary Business Progress
Complementary Business* Progress Positive momentum in complimentary businesses with significant runway ahead WEALTH FINANCE jCORRORATE: mVESTMENY TOTAL Establishment date Dec-16 Sep-17 Sep-17 Jun-18 Investment < $5k $34k $90K $110k < $250k KPG share of profit 51.00% 51.00% 51.00% 75.50% FY20 Revenue
Slide 31: Investment Team
Kelly+Partners Investment Office Special Opportunities Fund #2 Kelly Partners (Investment Office) Pty Ltd Columbus Investment Services Ltd (One Investment Group) Closed and unlisted unit trust The Fund targets an absolute return. Aims to outperform the Benchmark after all fees and expenses over the
Slide 32: FY20 Dividends
FY20 Dividends Dividend growth of 10%+ per annum Total fully franked Amount per Fully Franked amount Payment date dividends paid security Cents per security Cents For the year ended 30 June 2020 Special dividend 18 September 2019 $249,881 055 055 First interim dividend 30 September 2019 $549,737 121
Slide 33: Return to Shareholders since IPO
Return to shareholders since IPO Consistent and regular returns to shareholders via quarterly dividends + The Company since IPO, has consistently paid out quarterly dividends growing at 10% per annum from a base of 1.00 cent per share per 6.00cps quarter in FY20 to 1.21c in FY21. 5.00. cps + The Com
Slide 34: NPAT to Operating Cashflow Reconciliation
NPAT to Operating Cashflow Reconciliation Reconciliation of NPAT to Operating Cashflow ($m) FY19 FY20 Reported NPAT 741 10.4 Adjustments for: Depreciation and amortisation 12 3.7 Change in fair value of contingent consideration -02 - Repayments of lease liabilities - 20 Net fair value (gain ) /loss
Slide 35: Case Study: Business Transformation
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. + Following an acquisition, 3
Slide 36: 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 37: Top Shareholders at June 2020
Top 50 Shareholders at 30 June 2020 Strong alignment of employee, partners and owners, holding 59.8% Founder and CEO 23,400,000 51.5% Partners 3,178,251 0% Management & Team 593,550 1.3% Top 50 - Internal 27,171,801 59.8% Institutional 7,314,781 16.1% Retail 6,056,600 13.3% Top 50 - External 13,371,
Slide 38: FY19 ~$40.0m ~$46.4m
• • • • • • • • • • • • • • • • • • • • • • • FY19 ~$40.0m Revenue FY2020 REVENUE ~$46.4m EBITDA
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 40
Kelly Partners Group Holdings — FY2020 Earnings Presentation on 6ix