Kelly Partners Group Holdings Ltd. · ASX:KPG
Kelly Partners — FY2021 Earnings Presentation
59 slides from Kelly Partners's earnings presentation, August 2021
Slide 1: FY21 Results Presentation
KP+GH KELLY PARTNERS GROUP HOLDINGS LIMITED (ASX: KPG) FY21 RESULTS PRESENTATION PRESENTED BY Brett Kelly Founder and CEO Kenneth Ko CFO August 2021 kellypartnersgroup.com.au
Slide 2: Contents
CONTENTS T SECTION ONE OPPORTUNITY SECTION TWO BUSINESS SUMMARY SECTION THREE FINANCIALS QUALITY SHAREHOLDERS SECTION FIVE OUTLOOK 2 3 5
Slide 3: Section One: Opportunity
SECTION ONE: Opportunity ‘ 4 al he
Slide 4: Opportunity
OPPORTUNITY There is significant opportunity to grow under the Partner Owner Driver™ model Typical Client Base ASX listed and multi-national Accounting Services Market $20.4b Annual Revenue* Companies Large and national $1.2 billion 6% of total companies SMEs, Private Business Owners, SMSF's and Oth
Slide 5: Performance: years of continual growth
PERFORMANCE 15 years of continual growth. The business has doubled on average every 4 years. Double — Double Double Double $60.0 2007-2008 2009 2013 62% in 4 Years, 13% CAGR since IPO lYear | 1Year 1 4 Years i 4 Years $50.0 $40.0 P 30% Revenue $30.0 : CAGR* $201m $20.0 $23.5m) $10.0 : $193m 1.21 im
Slide 6: Building a platform business for professional services firms
IMPACT BUILDING A PLATFORM BUSINESS FOR PROFESSIONAL SERVICES FIRMS Financial Review Top 100 Accounting Firms Firm Ea wc 2 Deloitte 2500 ' 4 oe 3 Ernst & Young 2130 12.70% | a2 | Big4 4 KPMG Li} 1905 7.00% _| a 5 Findex 372 720% 4 ER D0 328 70.00% | 6 ioe GRE Pitcher Partners S15 lick to add texto 6
Slide 7: Section One: Business Summary
SECTION ONE: Business Summary ‘ 4 al he
Slide 8: Reimagining the client experience
Reimagining the client experience KP+GH 8
Slide 9: The business is in great shape
The business is in great shape Employer of Net Promoter® Brand Score Choice Score! Great Certified Place Work. 71% 12% Certified ® Es MAY 2021 - MAY 2022 Corporation Kelly Partners Satisfaction: 85% Macquarie Telecom: 75% AFR Top 23 Average: 6.3% 1 of 5 B Corp ASX Companies: Typical Company: 55% Tal
Slide 10: Company Overview
Company Overview WHO WE ARE + Kelly Partners Group Holdings Limited (KPG.ASX) has a ~51% interest in 26 operating businesses operating from 17 locations in NSW and VIC * Our businesses provide accounting, taxation and other services to private businesses and their owners + We operate under our uniqu
Slide 11: KPG Owners' Principles
KPG Owners' Principles 1 Our attitude is partnership in everything we do. 2 Our founder and Partner Owner Drivers™ have their majority net worth invested in the business. 3 Our long term goal is to maximise KPG's intrinsic value on a per share basis. 4 Our intention is to grow by continuing to acqui
Slide 12: Growing during a pandemic
FY21 FY20* GROWING DURING A PANDEMIC PROFIT & LOSS 429.9% UNDERLYING NPATA GROWTH 410.2% EBITDA MARGIN 47.5% REVENUE GROWTH REVENUE MARGIN PARENT NPATA $48.9m 32.6% $5.1m $45.5m 29.6% $3.9m Revenue from Underlying Underlying ordinary EBITDA pre NPATA activities AASB 16 to. attributable to Revenue pa
Slide 13: Strategy
STRATEGY To maximise average annual rate of gain in intrinsic value on a per- share basis Dashboard 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 acq
Slide 14: Share Buyback Update
Share Buyback Update 497,181 shares repurchased since IPO, with no new shares issued. + Inline with KPC's strategy KPG intends to build Date Closing Shares Shares Repurchased per-share intrinsic value by repurchasing KPG Open at IPO™ 45,497,181 Shares when they are available at a meaningful discount
Slide 15: The Kelly+Partners Business Model
The Kelly+Partners Business Model * Kelly+Partners is the pioneer and world leader in a 1. Mission +Values Partner Owner Driver™ accounting model focused on eee ee es Private Business Owners. KPGH has deployed a business model marked by dynamic growth of more 2. Market than 30% year-on-year CAGR sin
Slide 16: Rollup KPG: Partner Owner Driver
Rollup KPG: Partner Owner DriverTM
Slide 17: 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 $90.0m H 1 + 54% Total Revenue Growth H + Double Revenue to + 15.4% YOY Revenue Growth H Grow NPATA i $80m REEVE) $80.0m + Invest in Corporate Team to scale i ; + Double NPATA to$
Slide 18: FY21 Network Expansion Update
FY21 Network Expansion Update Prownrare Tapnwnes 0 [stnnerwens | [eccanvcont Tuck-in to existing site Revenue: $0.4m-$0.5m Completion: Nov 2020 + Tuck-in of acquired business in to existing team and site * Relocation occurred same day, no interruption to clients KP+GH Greenfield Revenue: $0.0m-$0.5m
Slide 19: FY22 Network Expansion Update
FY22 Network Expansion Update meuceiil ( Ee — Tuck-in to existing site Marque Tuck-in to existing site Revenue: $1.9m-$2.4m Revenue: $0.8-$1.0m Revenue: $0.3-$0.4m Completion: Jul 2021 Completion: Jul 2021 Completion: Jul 2021 * Tuck-in of acquired business * 10 year agreement with a * Tuck-in of ac
Slide 20: Section Two: Financials
cial Mar} @ The Heart of Australia's Finan cu i oO c © = re SECTION TWO:
Slide 21: KPG Owners' Earnings
KPG Owners’ Earnings Owners’ Earnings increasing 26.6% per annum since FY19 Underlying NPATA $3,193,208 $3,937,677 $5,114,832 26.6% Cashflow from Operating Activities / Owners Earnings $3,128,904 $3,885,041 $5,014,894 26.6% Cashflow Conversion to Underlying NPATA 98% 99% 98% + Owners’ earnings repre
Slide 22: FY21 Financial Highlights
FY21 Financial Highlights Underlying Shareholder NPATA up 29.9% to $5.1m Revenue KPGHL Attributed (parent only) Pp Underlying EBITDA (pre AASB 16) 18.4% - - - Margin % 10.2% - - - EBITDA (pre AASB 16) 12.4% - - - Underlying NPATA 14.2% $3.9 $5.1 29.9% Margin% 2% - - - NPATA 72% $4.4 $52 17.6% Divide
Slide 23: Financial Highlights since IPO
Financial Highlights since IPO Strong growth in financial metrics for 5 years since IPO IKPGHL & Controlled Entities ("Group") P&L and Cashflow $40.0 $45.5 $48.9 12.8% Revenue $30.2 Underlying EBITDA (pre AASB 16) $8.7 $10.9 $13.5 $16.0 16.3% Margin % 28.9% 27.2% 29.6% 32.6% Underlying NPATA $7.3 $8
Slide 24: FY21 Income Statement
FY21 Income Statement Strong earnings growth driven by improved operating efficiencies + Revenue of $48.9m (+$3.4m, up 7.5%), driven both by organic Statement Summary ( FY20 FY21 Ax revenue growth (2.7%) and by acquisition revenue contributions Professional services revenue $45.5 $489 75% (4.8%) fro
Slide 25: Attributable NPAT to Underlying NPATA Reconciliation
Attributable NPAT to Underlying NPATA Reconciliation Reconci ion of attributed NPAT/NPATA ($m) FY20 FY21 Statutory NPAT attributable owners of Kelly Partners Group Holdings Limited 3.9 46 Amortisation of customer relationship intangibles OS 0.6 NPATA attributable to owners of Kelly Partners Group Ho
Slide 26: Working capital, cash conversion and margins
1. WIP 4.8 days* CASH CONVERSION 93.5% 3. Revenue 7.5% Growth 2. Debtors 46.3 days* EBITDA 33.4% Margins
Slide 27: Balance Sheet as at June 2021
Balance Sheet as at 30 June 2021 Conservative balance sheet with gearing reducing 11.9% to 0.84x Consistently reducing lock up and increasing efficiency WIP Days * Conservative capital structure with 37.2% 60.0 552 ee ™ Debtor Days Equity / Total Assets ratio, and Net Debt / 55 Su Underlying EBITDA
Slide 28: FY21 Operating Business Margins
FY21 Operating Business Margins Actual Operating Business EBITDA margin of 33.4%, 14.4% above the industry average of 19.0%" KPG delivers superior returns through high quality operations at a very low cost base. Margins by Cohort Established Revenue $33.6 $10.6 $3.0, $472 $1.7 $489 EBITDAa $n.7 $3.4
Slide 29: FY21 Cashflow
FY21 Cashflow Operating Cashflow up 5.1% and cash conversion at 93.5% reflects high quality earnings * Cash from Operations pre AASB 16 of $13.0m increased 5.1% (FY20: $12.3m). Cash from Operations in FY20 was high due to reduction in lockup by $0.8m from the preceding year (from $7.6m to $6.9m). Lo
Slide 30: Gearing and liquidity
Gearing and liquidity $10.2m in liquidity, continuous reduction in debt $35.0m Cash hin oF Headroom $6.2M Property $1.3m $25.9m Facility Acquisition & Limits Term Debt $14.2m $15.7m Net Working capital $0.0m $4.3m + Up to $10.2m cash and headroom in debt facility equates to acquisition capability of
Slide 31: Net Debt per Partner - 5 Years
Net Debt per Partner -—5 Years Partner-Owner-Driver™ structure delivers alignment Total number of equity partners increased to 53: + 5new partners promoted internally + 4new partners recruited externally + 2mnew partners from completed acquisitions Net debt per partner decreased from $346k per partn
Slide 32: Profit attributable to Parent vs. NCI
Profit attributable to Parent vs. NCI Profit attributable to the parent and non controlling interest may differ from the ownership interests due to income tax and additional investments attributed only to the parent. + Profit after income tax expense for the year was $10.9m, with: * Profit attributa
Slide 33: Monthly Dividends growing at 10% per annum
Monthly Dividends growing at 10% per annum for 5 years * Since IPO in June 2017, the Company has consistently Lo) paid out dividends growing at +] oO % per annum 6.00cps + The Company has paid out monthly dividends from Jan- —5.00cps 21, reflecting the resilience and strength of its earnings and cas
Slide 34: Section Three: Quality Shareholders
Slide 35: Owners' manual
Owners’ manual We released the KPG Owners’ Manual in Nov 2020 to attract likeminded shareholders KP+GH KPG Owner's Manual ‘Corporation
Slide 36: KPG.ASX vs ASX All Ordinaries
0.00% 50.00% 100.00% 150.00% 200.00% 250.00% 300.00% 350.00% -100.00% -50.00% Jul 14, 2017 Aug 10, 2017 Sep 06, 2017 Oct 03, 2017 Oct 30, 2017 Nov 24, 2017 Dec 21, 2017 Jan 22, 2018 Feb 19, 2018 Mar 16, 2018 Apr 16, 2018 May 14, 2018 Jun 08, 2018 Jul 06, 2018 Aug 02, 2018 Aug 29, 2018 Sep 25, 2018 O
Slide 37: 41.6% compounded return to shareholders
4|.6% compounded return to shareholders 300% increase in share price and monthly dividends growing at 10% per annum Closing Issue price at Share Price KPG.ASX Return IPO FY20 FY21 2/8/2021 Share Price $1.0000} $4.0000} —$3.0000} Dividends per share - Ordinary $0.0400} $0.0440} $0.0484 $0.0532| $0.18
Slide 38: Quality shareholders
Quality shareholder #1 Quality shareholder #2 Quality shareholder #3 Quality shareholder #4 Quality shareholder #5
Slide 39: Map of shareholders
Map of shareholders We have expanded our shareholder base internationally in FY21 BRAZIL” r KP+GH 39 ©}
Slide 40: Shareholder Composition
Shareholder Composition 13% 14% 50% 14% 6% 3% Founder and CEO Partners Management & Board of Directors Institutional Retail Remaining Shareholders
Slide 41: Intrinsic value model
Assumptions Stage 1 Growth Rate (Years 1 - 10) Stage 2 Growth Rate (Terminal Value) Discount rate Base Year Earnings Stage 2 - Stage 1 Term Value 0 1 2 3 4 5 6 7 8 9 10 Revenue 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Owners Earnings (FCF) - Nominal 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 #DI
Slide 42: Upcoming AGM
Upcoming AGM Guest Speakers to address KPG AGM on Friday, 8 October 2021 Lawrence A. Cunningham is an expert on corporate governance, culture, and structure. Since 2007, he has been the Tucker Research Professor at The George Washington University. Cunningham has written extensively on corporate aff
Slide 43: Section Five: Outlook
Slide 44: Key outlook themes
1. The Kelly+Partners Business System powers our performance, builds our cultures & drives our competitive advantage 2. Kelly+Partners continues to build dominant firms & seeding network effects 3. Kelly+Partners has generated superior cashflow returns
Slide 45: The Kelly+Partners Business System powers our performance
1. The Kelly+Partners Business System powers our performance, builds our cultures & drives our competitive advantange
Slide 46: Kelly+Partners Business System
Kelly+Partners Business System we FORWARD 2 & iz) <f LOOKING ey FINANCIAL y ADVICE WE WANT THE BEST FOR OTHERS WE DO WHAT WE SAY PROGRESS \ ACCESS 24/7 ONE TEAM ONE BEST WAY % 5 & fog 0, Hy SURPRISES a el KP+GH 46 ©}
Slide 47: Building dominant firms & seeding network effects
2. Building dominant firms & seeding network effects
Slide 48: KP+GH
KP+GH O% of KPG Accounting Firms would qualify in their own right as AFR Top 100 Accounting Firms by size out of existing 17 Locations 48
Slide 49: Kelly+Partners continues to generate superior cashflow returns
3. Kelly+Partners continues to generate superior cashflow returns
Slide 50: Annual Free Cashflow Growth of 21.5% p.a.
5 Year Annual Free Cashflow Growth of 21.5% p.a. KPGHL & Controlled Entities ("Group") P&L and Cashflow Cash From Operations (CfO) $6.9 $6.6 $10.0 $14.3 Owners’ Earnings (CfO - Maint. Capex) $6.6 $6.3 $9.7 $12.2 Cash Conversion (Operating Cash Flow / Reported EBITDA) 269.6% 63.5% 116.8% 97.3% Days L
Slide 51: Appendix
Appendix
Slide 52: NPAT to Operating Cashflow Reconciliation
NPAT to Operating Cashflow Reconciliation Reconciliation of NPAT to Operating Cashflow ($m) FY20 FY21 Reported NPAT 10.4 10.9 Adjustments for: Depreciation and amortisation 3.7 44 Repayment of lease liabilities -2.0 -2.2 Unwinding of interest on contingent consideration 0.2 02 Other non-cash movemen
Slide 53: Seasonality in accounting business
• Seasonality in accounting business (excludes acquisitions) 75.0% • 65.0% • 55.0% 52.8% 52.2% 53.2% 52.8% 47.2% 47.8% 46.8% 47.2% 45.0% 35.0% 25.0% 1H18 2H18 1H19 2H19 1H20 2H20 1H21 2H21 Seasonality in Accounting Businesses
Slide 54: Seasonality in Half Year Profits
Seasonality in Half Year Profits ~ 53% / 47% Reconciliation of seasonality in profits to seasonality in revenues Reconciliation of seasonality in profits Group Net Profit After Tax - Statutory Adjustments: One-off income Business acquisitions and restructuring costs Amortisation expenses Depreciatio
Slide 55: 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 56: 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 57: K+P COVID-19 Response
K+P COVID-19 RESPONSE The Group's prior years of investment in strong infrastructure has minimized interruptions to operating _ businesses during the COVID-19 period. From March 2020, to further strengthen the Group's position in light of COVID we took the following proactive measures: * Over ~90% o
Slide 58: 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 59: Thank you
KP+GH KELLY PARTNERS GROUP HOLDINGS LIMITED Thank you kellypartnersgroup.com.au
Kelly Partners Group Holdings — FY2021 Earnings Presentation on 6ix