Kelly Partners Group Holdings Ltd. · ASX:KPG
Kelly Partners — FY2023 Earnings Presentation
45 slides from Kelly Partners's earnings presentation, Aug 11, 2023
Slide 1: FY23 Results Presentation
KELLY PARTNERS GROUP HOLDINGS LIMITED KELLY PARTNERS GROUP HOLDINGS (ASX: KPG) FY23 RESULTS PRESENTATION PRESENTED BY Brett Kelly Founder and CEO Kenneth Ko CFO August 2023 KP+GH 1
Slide 2: Double 5 Times in a Row
DOUBLE 5 TIMES IN A ROW Revenue $120.0 $100.0m to $100.0 T ? $80.0 31 Revenue CAGR* $45.5m $48.9m $39.5m $40.0m $30.2m $20.0 2007 2008 2009 2010 201 2012 «2013:«2014~—Ss«2015_~—=«2016 2019 2020.» 2021:«S «2022S FY23 pawn (RUN-RATE) FY mamiH mmm2H —©-EBITDA ‘Annual Gr 1d represents the constant rate
Slide 3: KPG in 10 Seconds
KPG IN 10 SECONDS PROFIT & LOSS BALANCE SHEET CASHFLOW 133.4% {-8.1% t0.29x NET DEBT TO UNDERLYING EBITDA 4-14.2% 43.3% t 8.2% t 11.1% REVENUE EBITDA GROWTH MARGIN UNDERLYING RETURN ON NPATA EQUITY GROWTH OPERATING CASH CASHFLOW CONVERSION REVENUE MARGIN PARENT RETURN GEARING CASHFLOW EFFICIENCY NPA
Slide 4: Aims to build per-share intrinsic value
See aims to build per-share intrinsic value | | FY20 FY21 FY22 FY23 34.0% 27.7% 32.5% 33.4% 30.9% PAEyEd EBITDA margin of operating businesses 17.2% 64% 66% 4.8% 26.5% PEWS Contribution to revenue growth 10.3% (6.4%) 66% 1.5% 4.7% Contribution to revenue growth 2.7% 1.8% 1.4% 12% 1.5% Contribution t
Slide 5: 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 6: Additional Investment
ADDITIONAL INVESTMENT Additional investment of $2.5m (2.9%) of revenue to ensure we can handle next stage of growth (revenue growing 60% from FY22 ($64.9m) to FY24 run rate of $100-$110m) We have always invested in advance to have the right team and platform to service newly acquired businesses join
Slide 7: Programmatic Acquisitions
PROGRAMMATIC ACQUISITIONS ~4x Pre-IPO Total Acquisition Contacts: 6 8 31 28,115 Prospects we have gq met or plan to meet with 7 Prospects 4 actively in 3 y HY 3 final stage 5 0 Ud70C BO oT 2 8b 4 6S 6 1 2010 201 2007 2008 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Note: based on acquisit
Slide 8: Strategic Review
STRATEGIC REVIEW = To maximise value for all shareholders, we have appointed legal, tax and financial advisors to assist the board in undertaking a broader strategic review of ownership and capital structure options = Strategic review is in a preliminary phase, and will consider a range of options,
Slide 9: Digital
DIGITAL KELLY:PARTNERS | Progress Portal * Profile: John Citizen KELLY+ PARTNERS
Slide 10: Incumbents
INCUMBENTS . : A PwC scandal: Australian Tax Office tried Hoh ereererermres TERS to get federal police to investigate in 2018 In their own words: What staff say about EY net fe penetis “The partners protect bullies. Often they are bullies and ageressive themselves” EY personnel describe what itis ik
Slide 11: Appendix
APPENDIX KP+GH
Slide 12: Contents
CONTENTS 1 GROWTH 2 FINANCIALS 3 BOOK OF THE YEAR ulations presented in this presentation may be impacted by rounding Note all totals and other calc KP+GH 2
Slide 13: Growth
1 GROWTH KP+GH
Slide 14: Offices
OFFICES 32 19 +13 / +68% Note: Bundall completion on 15 August 2023 KP+GH © + QNewcastle entral Coast @ twater orthern Beaches North Sydney
Slide 15: Revenue & EPS
REVENUE & EPS INTERNAL Accounting INTERNAL Complementary EXTERNAL Acquired Excluding organic growth from acquisitions made in the last 12-24 months (where we typically do not implement significant price or volume changes), our accounting businesses grew at 4.8% on prior year +33.4% KP+GH Revenue com
Slide 16: Growth: Owner Earnings
GROWTH: OWNER EARNINGS Owner earnings $3,128,904 $3,885,041 $5,014,894 $6,312,568 $5,998,621 Owner earnings per share (cents) 688 8.55 1.1 14.03 13.33 9.9% % Growth 24.4% 29.9% 26.3% (5.0%) Underlying NPATA $3,193,208 $3,937,677 $5,114,832 $6,296,954 $5,403,346 Cashflow Conversion - Parent 98% 99% 9
Slide 17: EPS & Owners' Earnings
EPS & OWNERS’ EARNINGS $016 45,497,181 45,497,181 45,495,000 45,400,000 45,000,000 $0. $0. . Recurring $0.10 $0.10$0.10 : ee aanet $0,080.09 0 per ever to $0,080.08 00,00 $0,080.07 $0.06 om $0.04 $0.02 Owner “ Earnings — (Parent) per $0.00 . . 7 ; ; share to FY23 FYI7 FYI8. FY19 FY20. FY21 Owners ea
Slide 18: People
PEOPLE 90% Great Place to Work® Statement 456 Team Members SERVICES Other Services, 0.31% investment Wealth, office, 0.50% 6.13% Finance, 1.71% Audit, 3.87% FY23 Revenue $86.5m Accounting, 87.49% $86.5m Revenue (+33% ( ) KP+GH CLIENTS NPS 19,000+ Groups (+41%) 18
Slide 19: Financials
2 FINANCIALS KP+GH
Slide 20: Highlights
HIGHLIGHTS ibuted (parent only) Revenue $64.9 33.4% - - - Underlying EBITDA (pre AASB 16) $20.0 1.6% - - - Margin % 30.8% -26.3% - - - EBITDA (pre AASB 16) $21.7 -03% - - - Underlying NPATA $14.2 -3.9% $6.3 $5.4 14.2% Margin’ 218% -28.0% - - - NPATA $15.5 3.3% $6.7 $63 65% Dividends & Distributions
Slide 21: Revenue Growth
REVENUE GROWTH Revenue growth contributions by year Organic - Accounting 10.3% -6.4% 6.6% 1.5% 4.7% 2.9% 3.3% Organic - Complementary 2.7% 1.8% 1.4% 1.2% 1.5% 1.8% 1.7% Organic — Total 13.0% -4.6% 8.0% 2.7% 6.2% 4.7% 5.0% Acquired 17.2% 6.4% 6.6% 4.8% 26.5% 28.7% 15.0% Total 30.2% 1.8% 14.6% 7.5% 32
Slide 22: Income Statement
INCOME STATEMENT income Statement Summary ($m)* + Revenue of $86.5m (+$21.7m, up 33.4%), driven both by organic Professional services revenue $649 $865 33.4% revenue growth (4.7%) and by contributions from acquisitions Other income exe Non Recurring Income $01 $02 679% completed in FY22 (28.7%). Tot
Slide 23: Gross Margin
GROSS MARGIN “high gross margins are the most important single factor of long run performance. The resilience of gross margins pegs companies to a level of performance.” - Matthew Berry, “Mean Reversion in Corporate Returns” ! 70.00% 618% 62.9% 61.9% 61.7% 59.5% 60.00% $8.5% 57.56% 50.00% 44.10% 41.
Slide 24: Profitability
PROFITABILITY Total inc. Businesses Growth Other Servi Subscale Subscale Revenue $57.6 $4.7 $6.6 $68.9 $2.4 $713 $15.2 $86.5 EBITDA $17.5 $0.8 $2.4 $20.7 $0.4 $21.1 $2.5 $23.6 EBITDA Margin % 30.4% 17.7% 36.5% 30.1% 15.8% 29.6% 16.5% 27.3% KELLY+PARTNERS ACCOUNTING INDUSTRY MEBITDA mCosts Source: IB
Slide 25: NPATA Reconciliation
NPATA RECONCILIATION Reco! ation of attributed NPAT/NPATA ($m) FY22 FY23 Statutory NPAT attributable owners of Kelly Partners Group Holdings Limited 5.6 3.9 Amortisation of customer relationship intangibles 12 24 NPATA attributable to owners of Kelly Partners Group Holdings Limited 6.7 63 Add: non-r
Slide 26: Trinity - Op Co
TRINITY - OP CO 2. Debtors CASH CONVERSION ON EBITDA 3. Revenue EBITDA Margins 2. Debtors 42.3 days* CASH CONVERSION ON EBITDA 94.4% 3. Revenue 33.4% Growth EBITDA 27.3% Margins * Calculated on estimated annualised run rate revenue KP+GH
Slide 27: Trinity - Parent
TRINITY —- PARENT EARNINGS PER EARNINGS PER SHARE SHARE 1 12.01 cps 2. Net Debt 3. Cashflow 2. Net Debt 3. Cashflow to EBITDA Conversion to EBITDA Conversion 1. 1.65x 94.4%
Slide 28: Balance Sheet
BALANCE SHEET Net Debt / Underlying EBITDA of 1.65x (FY22: 1.36x) as a result of increased term debt taken out to fund acquisitions. Debt is repaid from profits generated in acquired businesses over 4-5 years Group ROE of 38.4% (Group Underlying NPATA $13.6m / Group Equity of $35.5m) (FY22: 41.7%),
Slide 29: Debt & Liquidity
DEBT & LIQUIDITY DEBT AND CASH Working Capital Debt Property Debt Acquisition & other term debt Cash, $5.3m Available Headroom, $6.1m IFY22 Gross Debt - FY22 $1.0 $33.3 $34.3, $45.2m Cash - FY22 $0.0 -$29 -$3.0) Drawn Net Debt -FY22 $1.0 $30.4 $314 $39.9m Net Gross Debt $4.0 $6.7 $10.7 Cash $0.5 $1.
Slide 30: Net Debt per Partner
NET DEBT PER PARTNER + Total number of equity partners Net Debt per Partner increased to 78: $600,000 0 * 6new partners promoted internally 20 + 2new partner recruited externally $500,000 + 12 new partners from completed 7 acquisitions $400,000 60 + In July 2023, 12 new partners joined from the Grif
Slide 31: Cashflow
CASHFLOW FREE CASHFLOW TO FIRM (FCFF) * Cash from Operations pre AASB 16 of $15.4m CASH FROM OPERATIONS (CFO) . $92m increased 8.2% (FY22: $14.3m) as $15.4m $73m - jm + Free Cashflow to Firm has reduced due to increased scheduled debt repayments from debt used to fund acquisitions + Cash Conversion!
Slide 32: 9.00cps 8.00cps 7.00cps
• 9.00cps 8.00cps • 7.00cps 6.00cps • 5.00cps 4.00cps • 3.00cps 2.00cps 1.00cps • 0.00cps FY18 FY19 FY20 FY21 FY22 FY23 Monthly Final Special
Slide 33: Parent & NCI
PARENT & NCI Profit after income tax expense was $11.1m, with: + Profit attributable to shareholders of Kelly Partners Group Holdings Limited of $3.9m + Profit attributable to non controlling interests (NCI) of $7.1m The profit attributable to the parent vs. NCI represent a 36%/64% split and differs
Slide 34: Cashflow
CASHFLOW Cash From Operations (CfO) - Group $6.6 $14.3 $15.1 $17.6 $19.5 24.2% Owners’ Earnings (CfO - Maint. Capex) - Group $6.3 $12.2 $12.8 $14.0 $14.9 18.8% Cash Conversion (Operating Cash Flow / EBITDA) 63.5% 116.8% 97.3% 93.5% 83.3% 94.4% Days Lockup 93.3 69.6 55.2 Si 55.8 48.1 $25.0 $20.0 $19.
Slide 35: Cash Reconciliation
CASH RECONCILIATION in of NPAT to Operating Cashflow ($m) FY22 FY23 Recon: Reported NPAT 13.3 1 Adjustments for: Depreciation and amortisation 63 9.6 Unwinding of interest on contingent consideration 03 0.6 Other non-cash movements -31 -15 Change in operating assets and liabilities: Decrease / (incr
Slide 36: 1H/2H Skews
1H/2H SKEWS + Revenue seasonality in the accounting Revenue seasonality in accounting business businesses is approximately 1H: 52% / (excludes acquisitions) 2H: 48%, equating to a 5% (or c. $2.4m 75.0% swing) down swing in 2H22. + Seasonality is predominantly due to timing of tax work related to 30
Slide 37: Metrics Since IPO
METRICS SINCE IPO PGHL & Controlled Entities ("Group") >&L and Cash Revenue Underlying EBITDA (pre AASB 16) $8.7 $145 $10.9 $13.5 $16.0 14.5% Margin % 28.9% 36.6% 27.2% 29.6% 32.6% Underlying NPATA $73 sus $6.8 $10.1 sue 10.9% Margin% 24.2% 29.2% 22.1% 223% 23.7% NPATA $15 $106 $79 $io sus Dividends
Slide 38: 5 Year Plan 1: FY19-FY24
5 YEAR PLAN 1: FY19-FY24 $120.0m, $100.0m $80.0m $60.0m $40.0m $20.0m $0.0m 1. Build + 54% Total Revenue Growth + 15.4% YOY Revenue Growth * Invest in Corporate Team to scale 2. Accelerate Grow NPATA Revenue $86.5m 19% CAGR Revenue $64.9m 17% CAGR Revenue Revenue $48.9m Revenue $45.5m 13% CAGR Reven
Slide 39: Next 5 Years (FY25-FY29)
NEXT 5 YEARS (FY25-FY29) Grow to become a top 10 accounting Growing Kelly+Partners System, firm in Australia Build vs. Buy vs. Partner Business Model and Partner-Owner- Driver® model in markets globally SCOPE c eee Finance 9? 2179.0 O GEE spo 403.0 Findex (financial planning) 3890 RE crant thornton
Slide 40: Advantage
ADVANTAGE (e na, PROGRESS)
Slide 41: Employee Share Scheme
EMPLOYEE SHARE SCHEME + 250,000 shares vested over 10 years - to recognise Senior Team Members in the Central Services Team, we have allocated 250,000 of KPG shares currently in the Employee Share Scheme Trust to our team members, vested annually over 10 years. + Founder & CEO - did not participate
Slide 42: On EBITDA
ON EBITDA “We should issue an important warning: Investors are often led astray by CEOs and Wall Street analysts who equate depreciation charges with the amortization charges we have just discussed. In no way are the two the same: With rare exceptions, depreciation is an economic cost every bit as r
Slide 43: Book of the Year
3 =1ele}] Gels THE YEAR KP+GH
Slide 44: Book of the Year
BOOK OF THE YEAR GOING ae DAK CAMPBELL KP+GH
Slide 45: Thank you
Thank you KP+GH
Kelly Partners Group Holdings — FY2023 Earnings Presentation on 6ix