KPG - Kelly Partners Group Holdings

Kelly+Partners is a single-brand accounting network consisting of 15 owner-driver operating businesses across Greater Sydney and one operating business in Hong Kong. The network is focused on providing accounting and taxation services to private small and medium enterprises (SMEs).

The Company holds a controlling interest (>50%) in each operating business (excluding Kelly Partners Oran Park), and provides intellectual property and centralised management services to the network. Operating business owners in each entity own the remaining interests in the underlying operating business.

It is anticipated that KPG will list on the ASX during June 2017.

http://kellypartnersgroup.com.au

Another business I have researched recently, a lot to like and most of my metrics for an investible business were met or exceeded, unfortunately the company operates with significant debt and thats always a hard no for me, so another rock turned, but alas no hidden gems! On to the next one.

Thank you for these type of posts. I'm interested in the rocks you take the time to look at.

The price of KPG has fallen consistently (in a bullish market) since listing. Price is now trading sideways with very low volume (untradable for me). I'll put in in my spec watch list.

A decent result for the FY. Not sure I'll buy more yet, but for me they are fairly priced and depending on how you define their TAM there is a decent amount of growth possible so buying at a bit of a premium might be ok, still only a ~ $54 m MC, so probably a bit under the radar, if they can grow to ~$100 m MC will get more coverage etc.

On the surface to managment seem like good capital allocators, but also seem to be doing eveything at once (aquisitions, increase div, buybacks, etc) not bad but I'm always cautious of the "Buffett" imitators as it can be more of a sales pitch than reality.
Currently not too phased by the debt (only 1 x cashflow, or 2 x if you want to be conservative), usually the same as Galumay and not a fan of debt, but (famous last words,haha) being an accounting business I assume its accountants maximising capital efficiency etc and not a requirement to maintaining operations (eg manufacturing). It's defintinely something I'm watching and as covid shows conservative balance sheets sleep easy.

I had a deep dive into KPG to see if I could find any conviction given the strong run in share price and the enthusiasm some investors I respect, had for the business. In the end I couldn't find the conviction and here are a few of the reasons.

The debt still troubles me, a lot of it is in the partner businesses, but overall its more than I like to see and its complicated to break out and understand.

The promotional nature of the founder, as @omac mentioned, he is big on the Buffett stuff, but then strongly promotes the total return to investors - which is almost entirely due to multiple expansion. Another words Mr Market has delivered nearly all this 'value', not KPG. A very un-Buffett approach. The founder has gone to a lot of effort to promote the business as being very shareholder friendly, which sounds good until you really ask how, because its not at all obvious!

The complicated structure of the company, holding 51% interest in all the acquired practices means making any sense of the financial reports is torturous, the Founder attempts to smooth over this by again using a Buffettism - KPG's version of Owners' Earnings, trouble is this is nothing like Buffett's process. Also he quotes variously the group OE, the parent OE and sometimes per share, sometimes not.

So when you try to breakdown the financials you have to try to work out the impact of the 51% holdings and it seems to me that nearly all the costs are 100% attributable to the company shareholders own part of, but only 51% of the profit. You can see the clear result when you see how EPS is calculated and hence why it is so low - its only roughly 51% of the total profit, the rest goes to the minority interests.

Its even more impact on the FCF, if you back out the $1.3m Covid grants this year the company ended up with a 0 cash position, partly because they chose to also pass cash back to the partners to pay down debt (here is the debt issue again). But also because once profits are distributed and dividends paid there aint much left! It also distorts the dividend payout ratio which is calculated on total cash not the proportional amount.

In saying all that, I am not even sure how much of that is strictly true, because the financials are so opaque and difficult to break down, but my guesstimate is that FCF to the shareholders of KPG is slightly more than the reported EPS and on my quick & dirty DCF implies a range of value that is less than half the current share price.

Anyway, my ddep dive didn't deliver any more conviction!

to me under $1.20 looked good ( not great )

i am totally puzzled on what investors see at 3 times that price

yes they are picking off smaller players to imply growth

the monthly divs will lure some that are chasing divs ( but i expect going back to 3 monthly divs in the mid-term )

and as a holder of CUP also , opaque financials seem to be par for the course , but of course that might be part of the franchise system ( so many small parts that the paperwork is never fully up to date )

cheers

November-23 Monthly Dividend for the 2024 Financial Year

The Board of Directors of Kelly Partners Group Holdings Limited (ASX: KPG) today announces a fully franked dividend of 0.4392 cents per share for the November 23 month, representing a 10% increase on last financial year’s monthly dividend.
Details of this Dividend are as follows: Ex-dividend Date: Tuesday 21 November 2023 Record Date: Wednesday 22 November 2023 Payment Date: Thursday 30 November 2023 Dividend Amount: 0.4392 cents per Ordinary share Franking: 100% Franked (to 30.0% tax rate)
All dividends will be paid electronically as outlined in the Prospectus.
Shareholders are reminded to record their banking details with Computershare: www.computershare.com.au/easyupdate/kpg.
Payment will be credited on the dividend payment date and confirmed by a payment advice sent to each Shareholder.

The Board of Directors of Kelly Partners Group Holdings Limited has approved the release of this document to the market.

i hold ( but bought several parcels all under $1 a share )

caution , i still half-expect this company to swap back to 3 monthly divs. ( as it was when i first bought into them )

December-23
Monthly Dividend for the 2024 Financial Year The Board of Directors of Kelly Partners Group Holdings Limited (ASX: KPG) today announces a fully franked dividend of 0.4392 cents per share for the December 23 month, representing a 10% increase on last financial year’s monthly dividend.
Details of this Dividend are as follows:
Ex-dividend Date: Tuesday 19 December 2023 Record Date: Wednesday 20 December 2023
Payment Date: Friday 29 December 2023
Dividend Amount: 0.4392 cents per Ordinary share
Franking: 100% Franked (to 30.0% tax rate)
All dividends will be paid electronically as outlined in the Prospectus
. Shareholders are reminded to record their banking details with Computershare: www.computershare.com.au/easyupdate/kpg.
Payment will be credited on the dividend payment date and confirmed by a payment advice sent to each Shareholder.
The Board of Directors of Kelly Partners Group Holdings Limited has approved the release of this document to the market.

i hold KPG

and another pick for the full year competition

this little accounting group has been a real surprise packet for me

it plays monthly franked dividends ( although i always half expect it to return to 3 monthly payments )

my av. SP is under 90 cents and @ 4.8 cents a share per year , my returns are acceptable ( at over $4.50 a share not so attractive to others )

this group has been buying up smaller rivals , so it is trying to grow , so some chance of a capital gain on top of the divs.

2 nd Californian Firm chooses Kelly+Partners

Kelly Partners Group Holdings Limited (“Group”, ASX:KPG) announces the completion of its partnership with a 2 nd accounting business located in California, USA, on 1 st January 2024.

Details on the partnership are as follows: Location: Burbank, Los Angeles,

CA Revenue to Group: US$2.7m to US$3.3m (A$4.0m to A$4.8m)
NPATA to Parent: US$0.3m to US$0.4m (A$0.4m to A$0.6m)
Completion on: 1 st January 2024
The acquired business will be rebranded to Kelly Partners Burbank.
The existing partner of the acquired business will continue as a 49.9% equity partner.
This represents the second business joining the Kelly+Partners Group in the US.
The partnership is not material to KPG, however it indicates our focus on the California market.
The Group is in ongoing discussions with other accounting firms in the Los Angeles area.
Founder and CEO of Kelly+Partners, Brett Kelly said, “The partnership confirms the attractiveness of the Kelly+Partners offer and our Partner-Owner-Driver® model to owners of leading accounting firms in Australia and the United States.
We are excited to complete two partnerships in California in our first year of establishing our presence in the US.”
A summary of partnerships completed in the US are as follows:
# Date of completion Location Type Revenue to Group ($A)
1 1 December 2023 Woodland Hills, CA Marquee $1.8m to $2.5m 2 1 January 2024 Burbank,
CA Marquee $4.0m to $4.8m Total $5.8m to $7.3m % of Group Revenue 5.6% to 7.1%

The Executive Chairman of Kelly Partners Group Holdings Limited has approved the release of this document to the market.

i hold KPG ( 'free-carried' )

no i didn't see this coming when i tipped it for the 2024 full year comp.

i half expected some more Australian partnership deals

1H24 Revenue up +23.1% to $52.9m (1H23: $42.9m) KPG 1H24 Underlying attributed NPATA1 up +25.0% to $4.4m 1H24

Highlights –

Overview
• KPG continues to execute its mission to become Australia’s global accounting firm for private business owners.
• KPG now operates in Australia, Hong Kong (since 2015), India and USA (both since 2023).
• KPG global team now consists of 542 team members (including 91 partners).
• KPG opened Mumbai, India in May 2023 and has grown to 30+ team members, building within the businesses an ability to work across time zones and distance.
• KPG expanded to Los Angeles, USA in January 2023 and have successfully established partnerships with two accounting businesses to date.
• The two US businesses account for $6.5m or 6% of the Group’s revenue, which now totals $110m annually. In both partnerships, the existing owners of the original business have remained as equity partners with a minimum 10 year commitment, confirming the attractiveness of the Kelly Partners Partner-Owner-Driver® model.
• In FY23, KPG made significant investments in building capabilities to grow materially on a global basis and to accommodate the ~60% revenue growth from FY22 to FY24 (from $64.9m ~$110m).
This expenditure impacted the underlying earnings in FY23.
• KPG has reduced its additional investments by ~40% this half year.
• Strong performance from existing businesses.
• Underlying NPATA for the first half increased 25.0% on the prior period. 1H24

Highlights –

Business
• Mission, Values & Vision – We exist to help our people, Private Business Owners and the communities in which we work in be better off. • Strategy – 2 new locations in Los Angeles, USA.
Our new office in Mumbai, India also now holds 30+ team members supporting our Australian businesses and is part of the Group’s strategy to develop a global team.

• Structure - Partner-Owner-Driver® model implemented in 3 acquisitions completed in 1H24.
• People – awarded Australia’s Best Workplace for Women in 2023 by Great Place to Work®
• Clients - Net Promoter® Score2 of +70 vs an industry average of -183 , client groups increased by 22% to 23,000.
• Financial – see below
• Digital – Be Better Off Challenge, Kelly+Partners app further developed.
• Brand – 80% of clients associate “Transparency” and “24/7 Access” attributes to Kelly Partners4
• Growth – 23.1% revenue growth in 1H24, 20.4% acquired growth and 2.8% organic growth5
• Succession – assisted senior practitioners from 3 acquisitions manage their succession 1

Underlying Attributed NPATA is adjusted for 1) amortisation of customer relationship intangible assets acquired;
2) other non recurring income and expense items; and represents the profit attributable to the parent after non-controlling interests.
2 NPS®, Net Promoter® & Net Promoter® Score are registered trademarks of Satmetrix Systems, Inc., Bain & Company and Fred Reichheld
3 The Evolved Group Australian B2B NPS® Industry Benchmarks
4 Sample population size 1,162 clients 5 Total impacted by rounding 2 of 9 1H24 Highlights - Financials Consolidated Group
• Group Revenue up 23.1% to $52.9m (1H23: $42.9m)
• Underlying EBITDA (pre-AASB16) up 33.7% to $15.5m (1H23: $11.6m)
• Underlying EBITDA margin (pre-AASB16) of operating businesses at 30.6% (1H23: 30.3%)
• Cashflow from Operations (pre-AASB 16) up 11.4% to $11.5m (1H23: $10.3m)
• Number of active client groups up 22% to c.23,000 (FY23: c.19,000) Attributed Parent
• Underlying NPATA up 25.0% to $4.4m (1H23: $3.5m)
• Owner Earnings up 17.9% to $4.2m (1H23: $3.5m)
• Underlying NPATA Earnings Per Share (EPS) up 25.0% to 9.78c (1H23: 7.82c)
• Ordinary Dividends per Share (DPS) up 10.0% to 2.64c (1H23: 2.40c)


part of a much larger release

i hold KPG ( 'free-carried' )

hmmm i bought it as an income stock ( paid divs. 3 monthly back then ) and it became a growth stock

but please be careful it seems to be buying growth

KPG begins trading on OTCQX

Kelly Partners Group Holdings Limited (“Company”, ASX: KPG) announces today that its application to have its shares traded on the OTCQX® Best Market has been approved.

The Company will begin trading on the OTCQX under the symbol “KPGHF” from Monday, 12th February 2024.
The Company is pleased to have its shares traded on the top tier of the three marketplaces for over-the-counter trading of securities. Founder and CEO Brett Kelly said, “We have been approached by many US prospective shareholders in the past to make it easier for them to acquire KPG shares.

Having our shares traded on the OTCQX will provide another avenue for investors and shareholders to access our shares.
We continue to look for Quality Shareholders who are invested in our business for the long term and view themselves as part-owners of Kelly+Partners.”

The Founder and CEO of Kelly Partners Group Holdings Limited has approved the release of this document to the market.

i hold KPG ( 'free-carried' )

@debtfree two in a month can i bank this post for next month ?? ( only joking )

divs4ever said:

@debtfree two in a month can i bank this post for next month ?? ( only joking )

Click to expand...

Did you tag me in the other one ? Thanks divs

debtfree said:

Did you tag me in the other one ? Thanks divs

Click to expand...

i did mention it previously

but the 'tagging idea ' wasn't floated until later in the day after i had posted it

ASF doesn't allow editing hours later ( see @11 in this thread )

cheers

@debtfree

i notice KPG has touched a new 12 month high ( seems to be a record high as well ) of $7.09

it pays monthly divs. and has an ambitious growth strategy

but is it really good value over $7 ??

( i hold KPG 'free-carried ' )

@debtfree

i see KPG has put out a fairly large , detailed and impressive presentation ( made on the 11th of April ( in Barcelona ? )

lots of charts and graphs
but is it worth over $7 a share ( as it is currently trading at ) , you can be the judge of that

a special note to novices here

right down at the bottom is a page of suggested reading ( on investing ) some are the usual list ( the Intelligent Investor , and such ) but some might be interesting for those seeking better knowledge


( i hold KPG 'free-carried ' )

cheers

@debtfree

Dividend Cessation & Founder’s Shares Dividend Cessation Kelly Partners Group Holdings Limited (“Company”, ASX:KPG) announces today that it will declare and pay the final monthly dividend of 0.4392 cents per share in February 2024, and will cease the payment of dividends thereafter.

As disclosed in the FY24 half year results, the Company did not declare and pay the final dividend for FY23 of 1.65 cents per share due to funds being required to complete the acquisition of the accounting firms in California.

The Company no longer expects to pay this as a result of the change in dividend policy as outlined below.

As announced in the 1H24 results release on 1 February 2024, the Company paid regular dividends since listing on the ASX in June 2017 to demonstrate the cash generative ability of KPG and to attract a quality shareholder group that understood the Company’s approach to business.

As the Company now has access to continuing opportunities the cessation of the dividends will allow the Company to better allocate and invest its capital into such opportunities.

Please refer to the Appendix for an illustrative pro forma analysis demonstrating the incremental earnings potential from ceasing dividends and reinvesting capital.

Founder’s Shares Since the IPO, Founder and CEO Brett Kelly has been remunerated via a fixed salary, as well as dividends from his shareholding in the Company.

He has not been issued any performance based shares.

The cessation of dividends reduces Brett’s personal cashflows by ~60% and he intends to sell shares on a daily basis for a period of time to cover his personal cashflow shortfall.

This is also in line with the founder’s goal to maintain a 35%+ shareholding in the Company, as disclosed in the Company’s Owners’ Manual in November 2020.

The Board of Directors of Kelly Partners Group Holdings Limited has approved the release of this document to the market.

i hold KPG ( free-carried )

i absolutely missed this announcement when it was made Monday, 5th February 2024

i don't feel too bad about rescuing that investment cash NOW ( but completely stuffed my comp. strategy )

@debtfree

oh the irony , my best performing share in the yearly comp. is RISING despite apparently stopping paying divs. .. for an indefinite period

talk about an illogical market

( i hold KPG 'free-carried ' )

what next ?

@debtfree

KPG Trading Update

FY24 Trading Update

Kelly Partners Group Holdings Limited (“Company”, ASX:KPG) is providing a trading update to inform the market of all material information and allow the Company to undertake a share buyback.

The Company’s share buy back program is in place until 30 August 2024 and will be renewed for a further 12 months.

FY24 Preliminary Results

Based on unaudited management accounts1, the preliminary key financial results for FY24 are disclosed below:

• Group Revenue of $105m-$110m (FY23: $86.5m, up 20%-23%);
• Operating Business EBITDA margin of 30-31% (FY23: 27.3%, up 11%);
• Underlying Attributable NPATA of $7.5m-$8.2m (FY23: $5.4m, up 39%-52%);
• Additional investments beyond 9% of $2m (FY23: $2.5m).

• KPG continues to focus on integrating the businesses that partnered in the last 12 months into the Kelly Partners System;
• KPG continues to receive high levels of interest from accounting business owners both in Australia and in the United States;
• KPG currently has 47,161 contacts in its database, with 161 active leads.
5 Year Plan Outperformance

The Company is pleased to announce that it has outperformed its financial metrics in its 5 year plan.
The Company is currently developing its 2nd 5 year plan.
$22m Growth Funding

As disclosed in the announcement on 2nd July 2024, the Company secured a further $22 million facility with Westpac Banking Corporation.

The $22 million facility is expected to be used to drive the growth of the USA market including acquiring firms in the US, as well as for general corporate purposes.

Applied to our growth model this funding is expected to facilitate the partnering in a further up to $80m or more of additional revenue in the USA market

Revenue $40m $80m Investment 51% $20m $40m
Upfront 50%(funded by debt facility) $10m $20m

FY24 Annual Report & Audited Financial Statements

The Company’s FY24 results is expected to be released on Thursday, 1 st August 2024.

Further details on the post results conference call will be shared closer to the date of release.

Unaudited Numbers

This release contains unaudited numbers and forward-looking statements.

The Board of Directors of Kelly Partners Group Holdings Limited has approved the release of this document to the market.

( i hold KPG 'free-carried ' )

@debtfree

CPA Firm located in Florida Chooses Kelly+Partners

Kelly Partners Group Holdings Limited (“Group”, ASX:KPG) announces today that it has executed agreements to partner with FRSCPA, a CPA firm located in Florida, United States.
The details of the partnership are as follows:

Location: Florida, United States

Revenue to Group: $USD7.0m-$USD8.2m ($AUD10.0m-$AUD12.5m)NPATA to Parent:

$USD0.7m-$USD0.8m ($AUD1.0m-$AUD1.3m)(based on 35% EBITDA margin post improvements)Purchased interest: 50.10%Purchase

Price - Cash: $USD5.1m (A$7.6m)Upfront / Retention: 78%/22%
Retention Period: 5 years A wholly owned subsidiary of Kelly Partners Group Holdings Limited will acquire 50.1% of the business with the remaining 49.9% held by all four existing equity partners of the business under our Partner-Owner-Driver TM model. All four existing equity partners have made long term commitments to the new partnership (1 by 5 years, 1 by 7 years and 2 by 10years).

This partnership is material to KPG (approximately 10% of run rate revenue) and is expected to be accretive to earnings.

Founder and CEO of Kelly+Partners, Brett Kelly said,“We are humbled to be chosen by this terrific group of Partners in this leading USA accounting firm.
The partnership confirms the attractiveness of the Kelly+Partners offer and our Partner-Owner-DriverTM model to owners of leading accounting firms.”
FRSCPA has been a leading accounting group to McDonalds franchisees for more than 35years and service approximately 5% of all McDonalds restaurants in USA.

Kelly+Partners services franchisees that own some 10% of McDonalds restaurants in Australia.

i hold KPG ( 'free-carried' )

sadly i bought this because of the dividends ( which have now been paused indefinitely ) and now i have 'an aggressive growth ' company but @ my 89 cents a share average , is climbing towards a 10-bagger