KELLY PARTNERS GROUP HOLDINGS LIMITED
ABN 25 124 908 363
2019
ANNUAL REPORT
Kelly Partners Group Holdings Limited
Contents
30 June 2019
Corporate directory
Directors' report
Auditor's independence declaration
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members of Kelly Partners Group Holdings Limited
Shareholder information
End of annual report
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1
Kelly Partners Group Holdings Limited
Corporate directory
30 June 2019
Directors
Brett Kelly – Chairman, Executive Director
Stephen Rouvray – Deputy Chairman, Non-Executive Director
Paul Kuchta – Executive Director
Ryan Macnamee – Non-Executive Director
Company secretary
David Franks
Notice of annual general meeting
The details of the annual general meeting of Kelly Partners Group Holdings Limited
are:
Level 53
MLC Centre
19 Martin Place
Sydney NSW 2000
10 a.m. on Friday, 29 November 2019
Registered office
Share register
Auditor
Level 8
32 Walker Street
North Sydney NSW 2060
Telephone: (02) 9923 0800
Computershare Investor Services Pty Limited
Level 3
60 Carrington Street
Sydney NSW 2000
Telephone: 1300 787 272
Deloitte Touche Tohmatsu
Grosvenor Place
225 George Street
Sydney NSW 2000
Stock exchange listing
Kelly Partners Group Holdings Limited shares are listed on the Australian Securities
Exchange (ASX code: KPG)
Website
http://www.kellypartnersgroup.com.au
Corporate Governance Statement
The directors and management are committed to conducting the business of Kelly
Partners Group Holdings Limited in an ethical manner and in accordance with the
highest standards of corporate governance. Kelly Partners Group Holdings Limited
has adopted and has substantially complied with the ASX Corporate Governance
Principles and Recommendations (Third Edition) ('Recommendations') to the extent
appropriate to the size and nature of its operations.
The Corporate Governance Statement, which sets out the corporate governance
practices that were in operation during the financial year and identifies and explains
any Recommendations that have not been followed, which is approved at the same
time as the Annual Report can be found at: www.kellypartnersgroup.com.au/investor-
centre/corporate-governance-2
2
Kelly Partners Group Holdings Limited
Directors' report
30 June 2019
The directors present their report, together with the consolidated financial statements, on the consolidated entity (referred
to hereafter as the 'Group') consisting of Kelly Partners Group Holdings Limited (referred to hereafter as the 'Company' or
'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2019.
Directors
The following persons were directors of Kelly Partners Group Holdings Limited during the whole of the financial year and
up to the date of this report, unless otherwise stated:
Brett Kelly - Chairman
Stephen Rouvray - Deputy Chairman
Paul Kuchta
Ryan Macnamee
Pauline Michelakis (Resigned on 26 March 2019)
Principal activities
During the financial year the principal continuing activities of the Group were the provision of chartered accounting and
other professional services, predominantly to private businesses and high net worth individuals.
Strategy
In summary, the Company aims to build per-share intrinsic value by:
●
●
●
●
● making an occasional large acquisition.
improving the earning power of its subsidiaries;
further increase their earnings through tuck-in acquisitions;
participating in the growth of its investees;
repurchasing Company’s shares when available, at a meaningful discount from intrinsic value; and
The Group expects to grow revenue at 10% per annum, 5% organically and 5% through acquisitions.
Review of operations
In the year ended 30 June 2019 ('FY19'), the Group has recorded a consolidated statutory net profit after providing for
income tax of $7,147,654 (year ended 30 June 2018 ('FY18'): $9,964,034). The statutory net profit attributable to the
members of the parent entity was $2,435,695 (FY18: $4,382,654).
The directors consider Underlying Earnings Before Interest, Tax, Depreciation and Amortisation ('Underlying EBITDA') and
Underlying Net Profit After Tax Before Amortisation ('Underlying NPATA') to reflect the core earnings of the Group.
Underlying EBITDA and Underlying NPATA are financial measures not prescribed by Australian Accounting Standards
('AAS'). Reconciliation of statutory results to Underlying EBITDA and NPATA is set out in this section.
3
Kelly Partners Group Holdings Limited
Directors' report
30 June 2019
Underlying EBITDA and Underlying NPATA are key measurements used by management and the board to assess and
review business performance and accordingly the following table provides a reconciliation between profit after income tax
expense and Underlying EBITDA.
Statutory net profit after income tax ('NPAT')
Finance costs
Income tax expense
Depreciation and amortisation expense
Consolidated
2019
$
2018
$
7,147,654
868,595
899,616
1,249,279
9,964,034
611,208
1,941,144
1,037,217
Earnings before interest, tax, depreciation and amortisation ('EBITDA')
10,165,144
13,553,603
Add: non-recurring expenses
Restructuring costs
Acquisition costs
Initial public offering ('IPO') and other acquisition costs
Shares issued to employees under Employee Share Scheme ('ESS') as part of IPO
Other non-recurring expenses
Less: Non-recurring revenue
Change in fair value of contingent consideration
Underlying EBITDA
197,952
614,882
-
-
131,721
515,375
-
143,692
247,029
172,932
(220,463)
(1,201,200)
10,889,236
13,431,431
Reconciliation of Statutory Net Profit After Tax ('NPAT') to Underlying NPATA attributable to owners of Kelly Partners
Group Holdings Limited.
Consolidated
2019
$
2018
$
Statutory NPAT attributable to owners of Kelly Partners Group Holdings Limited
2,435,695
4,382,654
Add: Non-recurring expenses
Restructuring costs
Acquisition costs
IPO and other acquisition costs
Shares issued to employees under ESS as part of IPO
Other non-recurring expenses
Tax effect of non-recurring expenses
Less: Non-recurring revenue
Change in fair value of contingent consideration
181,488
347,312
-
-
192,861
(198,457)
416,152
-
143,692
247,029
64,665
(261,461)
(128,971)
(1,201,200)
Underlying NPAT attributable to owners of Kelly Partners Group Holdings Limited
2,829,928
3,791,531
Amortisation of customer relationship intangibles
363,280
534,445
Underlying NPATA attributable to owners of Kelly Partners Group Holdings Limited
3,193,208
4,325,976
4
Kelly Partners Group Holdings Limited
Directors' report
30 June 2019
Financial performance
Acquisitions and integration
Three of the controlled entities of the Company made tuck-in acquisitions during the year. A tuck-in is where an acquired
entity moves into an existing Kelly + Partners premises, which benefits both businesses through increased operating
leverage. A fourth acquisition (marquee acquisition) was also completed in the Inner West of Sydney. A marquee
acquisition represents a new site acquired. Acquisitions made during FY19 are expected to contribute $3,000,000 to
$4,000,000 in revenue on a full year basis, or 7.6% to 10.1% growth on existing revenues, having contributed $2,506,796
since acquisition (representing 6.4% growth on FY18 revenue). EBITDA margins, net of non-recurring costs, are slightly
below Kelly + Partners operating benchmarks and it is expected that full synergy realisation and benchmark margins will be
achieved by 30 June 2020.
Revenue
FY19 saw revenue increase to $39,975,031 (up $506,365 or 1.3% on FY18). Organic revenue (excluding Sydney central
business district ('Sydney CBD')) grew to $31,647,560 (up $2,200,221 or 7.5% on FY18). Total revenue growth (excluding
Sydney CBD) is up 11.9% on the prior year.
Operating expenses
Operating expenses comprising employee expenses, rent and utilities, and other expenses have increased to $29,232,435
(up $2,867,583 or 11% on FY18), of which $1,571,478 relates to the acquired entities. Expenses (excluding acquired
entities related operating expenses) increased by $1,296,104, which is attributable to controlled entities (up $593,563) and
the parent ($702,541).
Controlled entity costs increases were predominantly wage increases (up $548,406) and other expenses (up
$48,320). Parent expense increases include $235,561 wages, $279,402 in marketing and $237,780 in compliance costs.
Underlying EBITDA
Underlying EBITDA of $10,889,236 (down $2,542,195 or 18.9% on FY18), with the Group running at a 27.1% margin
(FY18: 33.9%).
Non-recurring items
Non-recurring expenses totalled $944,555 (FY18: $1,079,028) and included:
1)
2)
$614,882 in acquisition costs related to the four acquisitions;
$197,952 in restructuring costs, which relate primarily to sign-on incentives as part of organic opening of new
complimentary business services, a one-off major Information Technology ('IT') system upgrade (public to private
cloud, increasing scalability with financial economies of scale), additional one-off rent incurred during the re-fit out of
Sydney CBD; and
other costs of $131,721 relating to closure of businesses which do not meet the size criteria for a discontinued
operation and other items.
3)
Non-recurring gains included $220,463 favourable movement in the fair value re-measurement of contingent consideration
arising on acquisition (FY18: $1,201,200), refer note 6 to the financial statements.
Cash flow
Cash from operations ('CfO') is a highlight for the business, with receipts from customers of $46,594,198 (up $5,317,061 or
12.9% on FY18), and net cash from operating activities of $9,973,451 (up $3,368,539 on FY18). This increase in net cash
from operating activities is largely attributable to increased billings, a strong focus on lock up (defined as trade receivables
and other receivables, plus accrued income, less contract liabilities) management, with Lockup Days reducing to 69.6
(FY18: 93.3). As a result, the Group has generated a strong cash conversion (CfO / EBITDA) of 98.1%.
During the year, the Group repaid $3,201,279 in debt relating to acquisition facilities. Of the $6,506,684 in new borrowings,
$2,789,200 related to the four new acquisitions, $1,063,424 in net loans on-advanced to partners (primarily in respect of
their acquisition buy-in loans), and $1,626,410 in the debt funding portion of capital expenditures. A further $1,027,650 was
drawn into the parent’s banking revolver facility, to assist with timing differences on cashflows and other items.
5
Kelly Partners Group Holdings Limited
Directors' report
30 June 2019
The business is capital light. Of the $2,223,624 in property, plant and equipment capital expenditure, the majority related to
growth capital expenditure (mainly new office fit outs for Sydney CBD and Melbourne CBD, as well as growth IT capital
expenditure largely debt funded). Maintenance Capital Expenditure represents the amount of cash investment (through the
cash from investing activities statement) into property, plant and equipment, which is necessary to maintain the ongoing
operations over the long term. It includes cash investment into replacement and ongoing maintenance of capital items. It
does not include any expenditure which runs through the profit and loss as repairs or maintenance, nor does it include
cash expenditure on capital items in order to grow the business. The Group’s maintenance capital expenditure is
approximately $300,000 per year, which is reflective of the capital expenditure required to maintain fit out, IT equipment
and vehicles.
Working capital
During the year, the Group reduced its Lockup to $7,625,583 (down $2,461,061 on FY18), notwithstanding growing the
Group by the four acquisitions. Contract liabilities represents prepaid revenue.
Capital structure
The Group continues to maintain a conservative capital structure, with an Equity / Total Assets ratio of 49.8% (FY18:
54.2%) and Net Debt / Underlying EBITDA of 1.35x (FY18: 0.85x).
Total borrowings as at 30 June 2019 were $18,627,633 (refer to note 24 to the financial statements), of which $12,753,088
relates to non-current borrowings and $5,874,545 relates to current borrowings.
Of the $18,627,633 total debt, $8,890,467 is attributable to equity partners, equating to $222,261 debt (excluding parent
debt) per equity partner (40 equity partners). $7,210,727 is attributable to the parent (which includes acquisition funding of
controlled entities, parent working capital, and some equipment finance). A further $2,526,439 relates to overdraft facilities
(refer to note 24 to the financial statements), which are covered approximately 3.0x by $7,625,583 in Lockup.
Key financial metrics
The Company uses Return on Equity ('ROE'), Return on Invested Capital ('ROIC'), Earnings Per Share ('EPS') and
Owners' earnings as key financial metrics to measure the performance of the Group and its return to shareholders. The
Group continues to achieve superior returns on equity and invested capital, as measured by ROE and ROIC.
ROE
ROIC
EPS
NPATA / Equity
$7,886,267 / $24,628,630
32.0%
(NPATA + Interest) / (Equity + Debt)
($7,886,267 + $868,595) / ($24,628,630 + $18,627,633)
20.2%
Profit attributable to owners / Weighted average number of shares
$2,435,695 / 45,496,894
5.35 cents per share
Owners’ earnings
The Group uses owner’s earnings to measure cash flow available to the group. It is a good measure of cash flow for
owners of the Group as it takes into account:
●
the necessary working capital investment (debtors, work-in-progress and other accrual movements) required as the
business grows and makes acquisitions;
the maintenance capital expenditure required for business as usual operations; and
taxes and finance costs paid.
●
●
In FY19, Owners’ earnings increased to $9,673,451 (FY18: $6,304,912) driven by increased billings and reduced net
working capital investment.
Cash from operating activities
Less: Maintenance expense
Owners' earnings
$
9,973,451
(300,000)
9,673,451
6
Kelly Partners Group Holdings Limited
Directors' report
30 June 2019
Dividends
Dividends paid during the financial year were as follows:
For the year ended 30 June 2018:
First interim dividend of $0.01 per ordinary share, paid on 16 Nov 2017
Second interim dividend of $0.01 per ordinary share, paid on 16 Feb 2018
Third interim dividend of $0.01 per ordinary share, paid on 16 May 2018
Final dividend of $0.01 per ordinary share, paid on 12 Jul 2018
For the year ended 30 June 2019:
First interim dividend of $0.011 per ordinary share, paid on 30 Oct 2018
Second interim dividend of $0.011 per ordinary share, paid on 31 Dec 2018
Third interim dividend of $0.011 per ordinary share, paid on 29 Mar 2019
Consolidated
2019
$
2018
$
-
-
-
454,972
500,469
500,469
500,469
454,972
454,972
454,972
-
-
-
-
1,956,379
1,364,916
On 1 July 2019, the Company paid the final dividend for the year ended 30 June 2019 of $0.011 per ordinary share. This
dividend equates to a distribution of $500,445, based on the number of ordinary shares on issue as at 30 June 2019. The
financial effect of dividends declared after the reporting date is not reflected in the 30 June 2019 financial statements and
will be recognised in subsequent financial reports.
Significant changes in the state of affairs
Acquisition
During the financial year, subsidiaries of the Group acquired four accounting businesses in North Sydney, Inner West of
Sydney, Warriewood and Oran Park which were tucked in to the existing subsidiary businesses. Synergies are expected to
be achieved from integrating these businesses into the existing Kelly Partners businesses.
Share buy-back
On 17 April 2019, the Company announced a share buy-back of up to 10% of the minimum number of Company's shares
outstanding in the last 12 months (being a buy-back of up to 4,549,718 shares at 17 April 2019). During the financial year
ended 30 June 2019, the Company purchased and cancelled 2,181 shares. At 30 June 2019, 4,547,537 shares are
authorised for on-market buy-back.
There were no other significant changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
Banking restructure
During the year, the Group commenced restructuring its debt facilities with Westpac. As at 30 June 2019, Kelly Partners
Group Holdings Limited and two controlled entities had entered into the new facility structure. Post balance date, all but
one of the controlled entities with debt facilities, have entered into the new facility structure. The final outstanding entity is
expected to enter into the new arranged facilities in the first quarter of FY20. Refer note 24 for further details.
Property purchases
On 28 July 2019, Kelly Partners (Central Coast) Property Trust purchased a property in Central Coast NSW for
$780,000. Kelly Partners (Central Coast) Pty Ltd will occupy the premise to operate its business.
On 27 June 2019, the Board of Directors resolved and approved Kelly Partners (Central Tablelands) Property Trust to
purchase a property in Bathurst for $599,000, with settlement on 13 August 2019.
Apart from the dividend declared as discussed above, no other matter or circumstance has arisen since 30 June 2019 that
has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's
state of affairs in future financial years.
Likely developments and expected results of operations
The Group will continue to pursue its policy of increasing the profitability and market share in the markets within which it
operates during the next financial year.
7
Kelly Partners Group Holdings Limited
Directors' report
30 June 2019
The Group’s growth plan is based on a three-pronged strategy: organic growth, network expansion (which includes
acquisitions, tuck-ins and greenfields) and the introduction of new services.
Economic, environmental and social sustainability risks
The operations of the Group are not subject to any particular or significant Commonwealth, State or Territory
environmental regulations.
Accounting services, which require associated expert advice typically provided by accountants, are important particularly in
the case of small and medium enterprises where the complexity of taxation and other compliance requirements are
increasing, and therefore it is unlikely that there would be a material risk in relation to economic sustainability. Risks that
may arise include rapidity in changes in technology and simplification of tax legislation. The risks in relation to economic
sustainability are considered as part of determining strategy and management regularly monitor market developments.
Part of the Group’s commitment to managing these risks is ensuring that it has governance systems, structures, values,
principles, frameworks and policies to define its decision making context for managing its business sustainably.
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Brett Kelly
Executive Chairman and Chief Executive Officer
BBus, CA, MTax, DipFS, RTA, JP
Brett is the Founder and CEO of Kelly+Partners. He has more than 20 years
commercial and professional accountancy experience, specialising in assisting
private clients, private business owners and families. He commenced his career as a
Chartered Accountant with 5 years at PwC Australia, and then worked at 3 mid-sized
accounting firms. In 2006, Brett founded Kelly+Partners with accounting businesses
in North Sydney and the Central Coast, before building out the network to 21
businesses over 15 locations to date. Brett is also the best-selling author of four
books on life, business and wisdom.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
Contractual rights to shares:
Member of the Nomination and Remuneration Committee
23,276,378 ordinary shares
None
None
Name:
Title:
Qualifications:
Experience and expertise:
Stephen Rouvray
Deputy Chairman and Non-Executive Director
BEc, CA
Stephen has over 45 years’ experience in financial services across many senior
leadership roles. He was Chief Financial Officer, Company Secretary and Manager of
Investor Relations for AUB Group (formerly Austbrokers) from 2005 until 2015. Prior
to this, he was General Manager for ING Australia Holdings from 2002 to 2005 having
joined ING’s predecessor company, Mercantile Mutual, in 1985. Over this 20 year
period, Stephen held the position of Company Secretary which included its subsidiary
companies operating in the life & general insurance, investment management, funds
management and banking sectors. At the start of his career, he worked in the
accountancy profession from 1971 to 1984. Since retiring as CFO, Stephen continues
to represent AUB as a director for a number of its subsidiaries and associates.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
Contractual rights to shares:
Chairman of the Nomination and Remuneration Committee
Chairman of the Audit and Risk Committee
50,000 ordinary shares
None
None
8
Kelly Partners Group Holdings Limited
Directors' report
30 June 2019
Name:
Title:
Qualifications:
Experience and expertise:
Paul Kuchta
Executive Director
BBus, CA, FTIA, DipFP, RTA, JP
Paul is a Chartered Accountant with more than 17 years accounting experience
specialising in the provision of compliance, tax and advisory services to private SME’s
and their owners. He commenced his career with Farrar & Company Chartered
Accountants in 1998, where he worked for 10 years. Paul then joined Crowe Horwath
in 2008 for a further 4 years. He was a founding partner of Kelly+Partners Norwest
when the practice was launched in 2012.
Other current directorships:
None
Former directorships (last 3 years): None
Interests in shares:
Interests in options:
Contractual rights to shares:
164,000 ordinary shares
None
None
Name:
Title:
Qualifications:
Experience and expertise:
Ryan Macnamee
Non-Executive Director
BCom, GACID
Ryan is an experienced business technology executive with over 25 years of IT
management experience. He has been Chief Information Officer ('CIO') at Laing
O’Rourke since 2012, with 6 years as the Global CIO. Ryan is responsible for all IT
functions within Laing O’Rourke with a focus on strategic objectives, global alignment
and delivering business value. Prior to his current role, he held several senior IT
management positions at Woolworths from 2008 to 2012. Earlier in his career, Ryan
undertook various senior IT positions at financial, insurance, construction and retail
operations globally. Ryan has served as non-executive director on a number of
boards, including Open Data Institute and Advanced Navigation.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
Contractual rights to shares:
Member of the Audit and Risk Committee
Member of the Nomination and Remuneration Committee
125,046 ordinary shares
None
None
Name:
Title:
Qualifications:
Experience and expertise:
Pauline Michelakis
Chief Financial Officer and Former Executive Director (resigned on 26 March 2019)
BCom (Hons), CA
Pauline joined Kelly+Partners in 2013 as Group CFO. She has more than 20 years’
experience in senior financial roles in financial services and investment companies.
Pauline is a Chartered Accountant who commenced her career in 1981 as an auditor
with Arthur Young & Company (now EY). In 1986 she joined listed international
investment company AFP Group in an executive role. In total, she worked for the
group for 10 years, including 5 years as General Manager Finance of Lang
Corporation, the ASX-listed Australian spin-off (subsequently renamed Patrick
Corporation Limited). She also held CFO roles at Kaplan Funds Management and
Committed Capital Limited before joining Kelly+Partners.
None
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Former Member of the Audit and Risk Committee
1,000,000 ordinary shares
None
None
9
Kelly Partners Group Holdings Limited
Directors' report
30 June 2019
Company secretary
David Franks - BEc, CA, F Fin, FGIA JP
David Franks is a former principal of Franks & Associates Pty Ltd, which merged with the Automic Group in 2018. David is
a Director and Principal of the Automic Group. David is a Chartered Accountant, Fellow of the Financial Services Institute
of Australia, Fellow of the Governance Institute of Australia, Justice of the Peace, Registered Tax Agent and holds a
Bachelor of Economics (Finance and Accounting) from Macquarie University. With over 20 years in finance and
accounting, initially qualifying with Price Waterhouse in their Business Services and Corporate Finance Divisions, David
has been CFO, Company Secretary and/or Director for numerous ASX listed and unlisted public and private companies, in
a range of industries covering energy retailing, transport, financial services, mineral exploration, technology, automotive,
software development and healthcare. David is also currently the Company Secretary for the following public entities: AUB
Group Limited, Adcorp Australia Limited, Elk Petroleum Limited, JCurve Solutions Limited, Noxopharm Limited, Nyrada
Inc, Tomorrow Entertainment Limited, White Energy Company Limited, White Energy Technology Limited and ZIP Co
Limited. David is also a Non-Executive Director of, JCurve Solutions Limited.
Meetings of directors
The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee held during the
year ended 30 June 2019, and the number of meetings attended by each director were:
Nomination and
Full Board
Attended
Held
Remuneration Committee Audit and Risk Committee
Attended
Attended
Held
Held
Brett Kelly
Stephen Rouvray
Paul Kuchta
Ryan Macnamee
Pauline Michelakis
7
7
7
7
6
7
7
7
7
6
2
2
-
2
-
2
2
-
2
-
-
4
1
4
3
-
4
1
4
3
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
Committee membership
As at the date of this report, the Company had an Audit and Risk Committee and a Nomination and Remuneration
Committee. Members acting on the Committees of the Board during the year were:
Audit and Risk Committee
Nomination and Remuneration Committee
Stephen Rouvray (Chairman)
Ryan Macnamee
Pauline Michelakis (resigned on 26 March 2019)
Paul Kuchta (appointed on 4 June 2019)
Stephen Rouvray (Chairman)
Ryan Macnamee
Brett Kelly
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance
with the requirements of the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
●
●
●
●
●
●
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional information
Additional disclosures relating to key management personnel
10
Kelly Partners Group Holdings Limited
Directors' report
30 June 2019
Principles used to determine the nature and amount of remuneration
The objective of the Group's executive reward framework is to ensure reward for performance is competitive and
appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives
and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of
reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good
reward governance practices:
●
●
●
●
competitiveness and reasonableness
acceptability to shareholders
performance linkage / alignment of executive compensation
transparency
The Nomination and Remuneration Committee is responsible for determining and reviewing remuneration arrangements
for its directors and executives. The performance of the Group depends on the quality of its directors and executives. The
remuneration philosophy is to attract, motivate and retain high performance and high quality personnel.
The reward framework is designed to align executive reward to shareholders' interests. The Board have considered that it
should seek to enhance shareholders' interests by:
●
●
having economic profit as a core component of plan design;
focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering
constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value; and
attracting and retaining high calibre executives.
●
Additionally, the reward framework should seek to enhance executives' interests by:
●
●
●
rewarding capability and experience;
reflecting competitive reward for contribution to growth in shareholder wealth; and
providing a clear structure for earning rewards.
In accordance with best practice corporate governance, the structure of non-executive director and executive director
remuneration is separate.
Non-executive directors remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive
directors' fees and payments are reviewed annually by the Nomination and Remuneration Committee. The Nomination and
Remuneration Committee may, from time to time, receive advice from independent remuneration consultants to ensure
non-executive directors' fees and payments are appropriate and in line with the market.
ASX listing rules require the aggregate non-executive directors' remuneration be determined periodically by a general
meeting. A maximum annual aggregate remuneration of $70,000 is currently in place.
Executive remuneration
The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration which
has both fixed and variable components.
The executive remuneration and reward framework has four components:
●
●
●
●
base pay and non-monetary benefits;
short-term performance incentives;
share-based payments; and
other remuneration such as superannuation and long service leave.
The combination of these comprises the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the
Nomination and Remuneration Committee based on individual and business unit performance, the overall performance of
the Group and comparable market remunerations.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle
benefits) where it does not create any additional costs to the Group and provides additional value to the executive.
The Group may introduce incentive arrangements in the future in order to attract, motivate and retain its executives.
11
Kelly Partners Group Holdings Limited
Directors' report
30 June 2019
Group performance and link to remuneration
For the year ended 30 June 2019 there was no link between Group performance and key management personnel
remuneration.
Use of remuneration consultants
During the financial year ended 30 June 2019, the Group engaged Egan Associates, remuneration consultants, to review
its existing remuneration policies and provide recommendations on STI and LTI programs. A total amount of $30,345 was
paid to engage Egan Associates. The Board was satisfied that the remuneration recommendation received was free from
undue influence by members of the key management personnel to whom the recommendation relates, because of strict
protocols observed and complied with regarding any interaction between Egan Associates and management, and because
all remuneration advice was provided to the Nomination and Remuneration Committee. At the date of the report, no
recommendations have been implemented.
Voting and comments made at the Company's 2018 Annual General Meeting ('AGM')
The motion was carried on a show of hands and for the record the show of hands and proxy portion were in excess of 75%
in favour of the resolution.
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of the Group are set out in this section.
The key management personnel of the Group consisted of the following directors of Kelly Partners Group Holdings Limited:
●
●
●
●
●
Brett Kelly – Chairman, Chief Executive Officer, Executive Director
Stephen Rouvray – Deputy Chairman, Non-Executive Director
Paul Kuchta – Executive Director
Ryan Macnamee – Non-Executive Director
Pauline Michelakis – Chief Financial Officer (resigned on 26 March 2019 with a 6 month notice period), Former
Executive Director (resigned on 26 March 2019)
Short-term benefits
Post
employ-
ment
benefits
Cash
salary and
fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Share-
based
payments
Equity-
settled
$
Leave
Annual
/long
service
$
27,397
27,397
339,509
316,513
112,956
823,772
-
-
-
-
-
-
-
-
2,603
2,603
-
-
63,511
-
20,531
15,131
10,839
(1,308)
-
63,511
5,400
46,268
(467)
9,064
-
-
-
-
-
-
Total
$
30,000
30,000
434,390
330,336
117,889
942,615
2019
Non-Executive Directors:
Stephen Rouvray
Ryan Macnamee
Executive Directors:
Brett Kelly
Pauline Michelakis*
Other Key Management
Personnel:
Pauline Michelakis*
Refer to the section 'Service agreements' for Paul Kuchta's remuneration.
*
Pauline resigned as a director of the Company on 26 March 2019, but has been the Chief Financial Officer for the
entire financial year. The amount set out in the table represents her remuneration for the entire financial year.
12
Kelly Partners Group Holdings Limited
Directors' report
30 June 2019
Short-term benefits
Post
employ-
ment
benefits
Cash
salary and
fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Share-
based
payments
Equity-
settled
$
Leave
Annual
/long
service
$
27,397
27,397
339,950
304,850
699,594
-
-
-
-
-
-
-
2,603
2,603
-
-
29,011
-
29,011
20,049
20,049
45,304
39,467
27,940
67,407
-
-
-
-
-
Total
$
30,000
30,000
428,477
352,839
841,316
2018
Non-Executive Directors:
Stephen Rouvray
Ryan Macnamee
Executive Directors:
Brett Kelly
Pauline Michelakis
Refer to the section 'Service agreements' for Paul Kuchta's remuneration.
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
Stephen Rouvray
Ryan Macnamee
Executive Directors:
Brett Kelly
Pauline Michelakis
Fixed remuneration
2018
2019
At risk - STI
At risk - LTI
2019
2018
2019
2018
100%
100%
100%
100%
100%
100%
100%
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements.
Details of these agreements are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Brett Kelly
Chairman, Chief Executive Officer, Executive Director
16 May 2017
No fixed period
Base salary of $360,000 p.a. inclusive of superannuation, to be reviewed annually by
the Nomination and Remuneration Committee. Terms include a 12 month termination
notice by either party, non-solicitation and non-compete clauses.
Stephen Rouvray
Deputy Chairman, Non-Executive Director
2 May 2017
No fixed period
Director fees $30,000 inclusive of superannuation, to be reviewed annually by the
Nomination and Remuneration Committee.
Paul Kuchta
Executive Director
Not applicable
Not applicable
Paul Kuchta is an Operating Business Owner in the Kelly Partners Norwest
Partnership and receives a base distribution plus a distribution of profits from that
Operating Business in accordance with the terms of the Partnership Agreement.
13
Kelly Partners Group Holdings Limited
Directors' report
30 June 2019
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Share-based compensation
Pauline Michelakis
Chief Financial Officer, Former Executive Director (resigned on 26 March 2019 with a
6 month notice period)
16 May 2017
No fixed period
Base salary $450,000 p.a. inclusive of superannuation, to be reviewed annually by
the Nomination and Remuneration Committee. 6 month termination notice by either
party, non-solicitation and non-compete clauses.
Ryan Macnamee
Non-Executive Director
2 May 2017
No fixed period
Director fees of $30,000 inclusive of superannuation, to be reviewed annually by the
Nomination and Remuneration Committee.
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during the year
ended 30 June 2019.
Options
There were no options over ordinary shares issued to directors and other key management personnel as part of
compensation that were outstanding as at 30 June 2019.
Additional information
The earnings of the Group for the three years to 30 June 2019 are summarised below:
Revenue and other gains
EBITDA
Profit after income tax
2019
$
2018
$
2017
$
40,342,134
10,165,144
7,147,654
40,824,551
13,553,603
9,964,034
30,331,286
2,914,140
1,085,446
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
Share price at financial year end ($)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
2019
2018
2017
0.89
5.35
5.35
1.23
9.63
9.63
1.42
(8.37)
(8.37)
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Company held during the financial year by each director and other members of key
management personnel of the Group, including their personally related parties, is set out below:
Ordinary shares
Brett Kelly
Stephen Rouvray
Paul Kuchta
Ryan Macnamee
Pauline Michelakis
*There were no shares received as part of remuneration.
14
Balance at
the start of
the year
23,253,378
50,000
152,995
125,046
937,061
24,518,480
Additions*
Disposals/
other
23,000
-
11,005
-
62,939
96,944
-
-
-
-
-
-
Balance at
the end of
the year
23,276,378
50,000
164,000
125,046
1,000,000
24,615,424
Kelly Partners Group Holdings Limited
Directors' report
30 June 2019
This concludes the remuneration report, which has been audited.
Shares under option
There were no unissued ordinary shares of Kelly Partners Group Holdings Limited under option outstanding at the date of
this report.
Shares issued on the exercise of options
There were no ordinary shares of Kelly Partners Group Holdings Limited issued on the exercise of options during the year
ended 30 June 2019 and up to the date of this report.
Employee share plan
The Company has adopted an Employee Share Scheme in order to assist in the motivation and retention of selected
employees of the Company. The Employee Share Scheme is designed to align the interest of eligible employees more
closely with the interest of Shareholders, by providing an opportunity for eligible employees to receive equity interest in the
Company.
Indemnity and insurance of officers
The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a
director or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of
the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the
Company or any related entity.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 34 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 34 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company,
acting as advocate for the Company or jointly sharing economic risks and rewards.
●
Officers of the Company who are former partners of Deloitte Touche Tohmatsu
There are no officers of the Company who are former partners of Deloitte Touche Tohmatsu.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors' report.
15
Kelly Partners Group Holdings Limited
Directors' report
30 June 2019
Auditor
Deloitte Touche Tohmatsu continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act
2001.
On behalf of the directors
___________________________
Brett Kelly
Executive Chairman and Chief Executive Officer
20 August 2019
Sydney
16
D eloitte T ouche Tohmatsu
A BN 7 4 4 90 1 21 0 60
G ros venor P lace
2 2 5 G eorge Street
Sydney, N SW, 2 0 00
A us tralia
P hone: +6 1 2 9 3 22 7 000
www.deloitte.c om.au
Board of Directors
Kelly Partners Group Holdings Limited
Level 8, 32 Walker Street
North Sydney NSW 2000
20 August 2019
Dear Board Members
Auditor’s Independence Declaration to Kelly Partners Group Holdings Limited
In accordance with section 307C of the C orporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of Kelly Partners Group Holdings Limited.
As lead audit partner for the audit of the financial report of Kelly Partners Group Holdings Limited for the
financial year ended 30 June 2019, I declare that to the best of my knowledge and belief, there have been
no contraventions of:
(i)
the auditor independence requirements of the C orporations Act 2001 in relation to the
audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUC HE TOHMATSU
C heryl Kennedy
Partner
C hartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
17
Kelly Partners Group Holdings Limited
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2019
Revenue
Other gains
Total revenue and other gains
Expenses
Employment and related expenses
Rent and utilities
Other expenses
Business acquisition and restructuring costs
Employee shares issued and related expenses
Initial public offering and other transaction costs
Depreciation and amortisation expense
Finance costs
Total expenses
Profit before income tax expense
Income tax expense
Profit after income tax expense for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit for the year is attributable to:
Non-controlling interest
Owners of Kelly Partners Group Holdings Limited
Total comprehensive income for the year is attributable to:
Non-controlling interest
Owners of Kelly Partners Group Holdings Limited
Consolidated
Note
2019
$
2018
$
5
6
7
7
7
8
39,975,031
39,468,666
367,103
40,342,134
1,355,885
40,824,551
(19,555,935)
(2,500,714)
(7,175,786)
(944,555)
-
-
(1,249,279)
(868,595)
(32,294,864)
(17,776,114)
(2,288,742)
(6,299,996)
(515,375)
(247,029)
(143,692)
(1,037,217)
(611,208)
(28,919,373)
8,047,270
11,905,178
(899,616)
(1,941,144)
7,147,654
9,964,034
1,585
1,585
-
-
7,149,239
9,964,034
4,711,959
2,435,695
5,581,380
4,382,654
7,147,654
9,964,034
4,712,736
2,436,503
5,581,380
4,382,654
7,149,239
9,964,034
Cents
Cents
Basic earnings per share
Diluted earnings per share
29
29
5.35
5.35
9.63
9.63
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
18
Kelly Partners Group Holdings Limited
Consolidated statement of financial position
As at 30 June 2019
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Accrued income
Other financial assets
Other assets
Total current assets
Non-current assets
Financial assets
Other financial assets
Property, plant and equipment
Intangible assets
Other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Contract liabilities
Borrowings
Current tax liabilities
Provisions
Contingent consideration
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Contingent consideration
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserve
Retained profits
Equity attributable to the owners of Kelly Partners Group Holdings Limited
Non-controlling interest
Total equity
Consolidated
Note
2019
$
2018
$
9
10
11
12
13
14
15
16
17
18
19
20
8
21
22
23
24
8
25
26
27
28
30
3,955,119
6,099,138
2,009,017
1,704,255
687,972
14,455,501
3,410,934
6,602,607
3,484,037
626,925
481,870
14,606,373
15,481
3,212,503
3,957,842
27,227,897
633,005
35,046,728
14,780
2,853,078
2,439,659
23,876,857
698,445
29,882,819
49,502,229
44,489,192
2,229,838
482,572
5,874,545
570,187
1,480,562
-
193,991
10,831,695
2,795,950
-
4,627,422
97,012
1,181,645
231,418
152,721
9,086,168
12,753,088
412,468
285,385
544,719
46,244
14,041,904
10,139,039
827,427
270,511
-
46,244
11,283,221
24,873,599
20,369,389
24,628,630
24,119,803
14,169,601
808
1,198,882
15,369,291
9,259,339
14,171,477
-
719,566
14,891,043
9,228,760
24,628,630
24,119,803
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
19
Kelly Partners Group Holdings Limited
Consolidated statement of changes in equity
For the year ended 30 June 2019
Consolidated
Issued
capital
$
Reserve
$
Retained
profits
$
Non-
controlling
interest
$
Total equity
$
Balance at 1 July 2017
13,988,051
Profit after income tax expense for the year
Other comprehensive income for the year, net
of tax
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Shares issued to employees
Share issue costs
Distributions to non-controlling interests
Dividends paid (note 31)
-
-
-
220,473
(37,047)
-
-
Balance at 30 June 2018
14,171,477
Consolidated
Issued
capital
$
Reserve
$
Balance at 1 July 2018
14,171,477
Profit after income tax expense for the year
Other comprehensive income for the year, net
of tax
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Share-buy back
Adjustment to non-controlling interest
Distributions to non-controlling interests
Dividends paid (note 31)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,298,172)
8,144,162
19,834,041
4,382,654
5,581,380
9,964,034
-
-
-
4,382,654
5,581,380
9,964,034
-
-
-
(1,364,916)
-
-
(4,496,782)
-
220,473
(37,047)
(4,496,782)
(1,364,916)
719,566
9,228,760
24,119,803
Retained
profits
$
Non-
controlling
interest
$
Total equity
$
719,566
9,228,760
24,119,803
2,435,695
4,711,959
7,147,654
808
808
-
777
1,585
2,435,695
4,712,736
7,149,239
(1,876)
-
-
-
-
-
-
-
-
-
-
(1,956,379)
-
65,846
(4,748,003)
-
(1,876)
65,846
(4,748,003)
(1,956,379)
Balance at 30 June 2019
14,169,601
808
1,198,882
9,259,339
24,628,630
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
20
Kelly Partners Group Holdings Limited
Consolidated statement of cash flows
For the year ended 30 June 2019
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Finance costs paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Payment for purchase of business
Payment in respect of contingent consideration
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Payments for intangibles
Deposits refunded
Proceeds from release of deposits
Loans to partners - loans advanced
Loans to partners - proceeds from repayments
Proceeds from disposal of investments
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Payments for share buy-backs
Distributions paid to non-controlling interests
Dividends paid
Repayment of borrowings
Share issue transaction costs
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Consolidated
Note
2019
$
2018
$
41
39
26
28
31
28
46,594,198
(34,724,287)
(819,926)
(1,076,534)
41,277,137
(32,670,704)
(611,208)
(1,390,313)
9,973,451
6,604,912
(2,827,771)
(231,418)
(2,223,624)
167,804
(163,702)
-
65,440
(2,371,809)
1,000,900
-
-
-
(390,420)
-
(105,290)
(197,076)
-
(450,559)
815,944
10,000
(6,584,180)
(317,401)
6,506,684
(1,876)
(4,748,003)
(1,956,379)
(3,201,279)
-
3,695,310
-
(4,496,782)
(1,364,916)
(3,831,299)
(37,047)
(3,400,853)
(6,034,734)
(11,582)
1,440,262
252,777
1,187,485
Cash and cash equivalents at the end of the financial year
9
1,428,680
1,440,262
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
21
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 1. General information
The financial statements cover Kelly Partners Group Holdings Limited (the 'Company' or 'parent entity') and its controlled
entities as a consolidated entity consisting of Kelly Partners Group Holdings Limited and the entities (the 'Group') it
controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is Kelly
Partners Group Holdings Limited and its controlled entities functional and presentation currency.
Kelly Partners Group Holdings Limited is a listed public company limited by shares, incorporated and domiciled in
Australia. Its registered office and principal place of business is:
Level 8, 32 Walker Street
North Sydney
NSW 2060
A description of the nature of the Group's operations and its principal activities are included in the directors' report, which is
not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 20 August 2019. The
directors have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The following Accounting Standards and Interpretations adopted during the year are most relevant to the Group:
AASB 9 Financial Instruments
The Group has adopted AASB 9 from 1 July 2018. The Group has adopted the modified retrospective approach where
comparatives are not restated. The Group has no complex financial instruments and does not apply hedge accounting. The
primary impact is in relation to the calculation of impairment losses that impacts the way the Group calculates the bad
debts provision, now termed the credit loss allowance.
All recognised financial assets that are within the scope of AASB 9 are required to be subsequently measured at amortised
cost or fair value on the basis of the entity’s business model for managing the financial assets and the contractual cash
flow characteristics of the financial assets. The directors of the Company reviewed and assessed the Group’s existing
financial assets and liabilities as at 1 July 2018 based on the facts and circumstances that existed at that date and
concluded that the initial application of AASB 9 has had no impact on the classification and measurement of the Group’s
financial assets and liabilities.
In relation to the impairment of financial assets, AASB 9 requires an expected loss model in relation to the determination of
impairment of trade receivables including trade receivables and accrued income. The Group has applied the simplified
approach to measuring expected credit losses in respect of trade receivables and accrued income balances. Expected
credit losses have been determined based on historical credit loss experience and considered future information. Trade
receivables and accrued income are written off when there is no reasonable expectation of recovery.
On adoption of the new standard there was no material change to retained earnings or the classification of financial assets
and financial liabilities which continue to be measured at amortised cost, or fair value where applicable.
AASB 15 Revenue from Contracts with Customers
The Group has adopted AASB 15 from 1 July 2018. The standard moves away from the previous focus on identifying
whether the seller has transferred to the buyer the significant risks and rewards of ownership. The core principle of the new
standard is to recognise revenue to depict the transfer of promised services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those services.
22
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
For each type of contract entered into by Kelly Partners, the Group has identified the contract; identified the performance
obligations in the contract; determined the transaction price; allocated the transaction price to performance obligations and
recognised the revenue as and when the performance obligations are satisfied. Professional services provided by Kelly
Partners are primarily contracted via an engagement letter (“contract”) which sets out the engagement, performance
obligations, the consideration and the terms of the business.
The standard defines a customer as ‘a party that has contracted with an entity to obtain services that are an output of the
entity’s ordinary activities in exchange for consideration’. Management has undertaken an exercise to assess the Group’s
contractual arrangements with its customers as part of its implementation of AASB 15.
Performance obligations are identified at contract inception and represent each promise to transfer services whereby the
customer can benefit from the service either on its own or with other readily available resources.
The transaction price allocated to the performance obligation is determined at the amount that reflects the consideration to
which the entity expects to be entitled in exchange for those services. Consideration promised in a contract may therefore
be variable and such variables may be either explicitly or implicitly stated in the contract.
Revenue is only recognised to the extent to which it is considered highly probable that there will be no significant reversal
of that revenue. This determination is made having regard to contract terms, the nature of the services provided and past
experience with the customer.
The transition provisions of AASB 15 allow an entity to not restate comparatives. However, accrued income and contract
liabilities which were previously included within trade and other receivables has been reclassified and disclosed separately.
The application of AASB 15 has not had a significant impact on the financial position and/or the financial performance of
the Group. There was no material change to retained earnings arising on adoption of the new standard.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as
appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention except for certain financial assets at fair
value.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial
statements, are disclosed in note 3.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only.
Supplementary information about the parent entity is disclosed in note 38.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Kelly Partners Group
Holdings Limited as at 30 June 2019 and the results of all subsidiaries for the year then ended.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date that control ceases.
23
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity
attributable to the parent.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and
other comprehensive income, statement of financial position and statement of changes in equity of the Group. Losses
incurred by the Group are attributed to the non-controlling interest in full, even if that results in a deficit balance.
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-
controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group
recognises the fair value of the consideration received and the fair value of any investment retained together with any gain
or loss in profit or loss.
Foreign currency translation
The financial statements are presented in Australian dollars, which is Kelly Partners Group Holdings Limited's functional
and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the
reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average
exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange
differences are recognised in other comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.
Revenue recognition
The Group recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in
exchange for transferring goods or services to a customer. For each contract with a customer, the Group: identifies the
contract with a customer; identifies the performance obligations in the contract; determines the transaction price which
takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the
separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be
delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the
transfer to the customer of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts
and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are
determined using either the 'expected value' or 'most likely amount' method. The measurement of variable consideration is
subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a
significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues
until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject
to the constraining principle are initially recognised as deferred revenue in the form of a separate refund liability.
24
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
Provision of services
Revenue from a contract to provide services is recognised over time as the services are rendered based on either a fixed
price or an hourly rate.
Commissions and other income
Commissions and other income is recognised when it is received or when the right to receive the payment is established.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to
temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when
the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted,
except for:
● When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting
nor taxable profits; or
● When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and
the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the
foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred
tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for
the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is
probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets
against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable
authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.
Kelly Partners Group Holdings Limited (the 'head entity') and its wholly-owned Australian subsidiaries have formed an
income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax
consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has
applied the 'separate taxpayer within group' approach in determining the appropriate amount of taxes to allocate to
members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax
consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the
intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a
contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the
Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months
after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle
a liability for at least 12 months after the reporting period. All other assets are classified as non-current.
25
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities
are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value. For the statement of cash flows presentation purposes, cash
and cash equivalents also includes bank overdrafts, which are shown within borrowings in current liabilities on the
statement of financial position.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within
30 days.
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss
allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
Accrued income
An accrued income asset arises where the Group has performed by transferring goods or services to a customer prior to
the receipt of consideration from the customer or prior to payment becoming due and represents the Group's right to
consideration for the transferred good or service.
When a customer pays in advance, the amount received by the Group is recognised as a contract liability until the service
has been provided to the customer.
Accrued income of $3,484,037 previously included on the balance sheet within trade and other receivables at 30 June
2018 has been reclassified separately as Accrued income.
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the
initial measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured
at either amortised cost or fair value depending on their classification. Classification is determined based on both the
business model within which such assets are held and the contractual cash flow characteristics of the financial asset.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the
Group has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of
recovering part or all of a financial asset, it's carrying value is written off.
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as
financial assets at fair value through profit or loss. Typically, such financial assets will be either: (i) held for trading, where
they are acquired for the purpose of selling in the short-term with an intention of making a profit, or a derivative; or (ii)
designated as such upon initial recognition where permitted. Fair value movements are recognised in profit or loss.
Financial assets at amortised cost
A financial asset is measured at amortised cost only if both of the following conditions are met: (i) it is held within a
business model whose objective is to hold assets in order to collect contractual cash flows; and (ii) the contractual terms of
the financial asset represent contractual cash flows that are solely payments of principal and interest.
26
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on financial assets which are either measured at
amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon
the Group's assessment at the end of each reporting period as to whether the financial instrument's credit risk has
increased significantly since initial recognition, based on reasonable and supportable information that is available, without
undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected
credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable
to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where
it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected
credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present
value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate.
For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised within
other comprehensive income. In all other cases, the loss allowance is recognised in profit or loss.
Property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment
over their expected useful lives as follows:
Buildings
Leasehold improvements
Plant and equipment
Motor vehicles
Not depreciated
3-10 years
3-7 years
8 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting
date.
Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or
the estimated useful life of the assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets
and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the
risks and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively
retains substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if lower,
the present value of minimum lease payments. Lease payments are allocated between the principal component of the
lease liability and the finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the shorter of the asset's
useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease
term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line
basis over the term of the lease.
27
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value
at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible
assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are
subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss
arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the
carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually.
Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation
method or period.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for
impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at
cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not
subsequently reversed.
Brand names and intellectual property
Brand names and intellectual property have indefinite useful lives and are not amortised.
Customer relationships
Customer contracts acquired in a business combination are amortised on a straight-line basis over the period of their
expected benefit, being their finite life of 3 to 7 years.
Software - Computer software
Significant costs associated with computer software are deferred and amortised on a straight-line basis over the period of
their expected benefit, being their finite life of 1 to 3 years.
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.
Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to
form a cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and
which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The
amounts are unsecured and are usually paid within 30 days of recognition.
Contract liabilities
Contract liabilities represent the Group's obligation to transfer services to a customer and are recognised when a customer
pays consideration, or when the Group recognises a receivable to reflect its unconditional right to consideration (whichever
is earlier) before the Group has transferred the services to the customer.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method.
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the
loans or borrowings are classified as non-current.
28
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to
another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in
profit or loss as other income or finance costs.
Finance costs
All finance costs are expensed in the period in which they are incurred.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be
settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities
are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured at the present value of expected future payments to be made in respect of services provided by employees up to
the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures
and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality
corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Equity-settled compensation
Equity-settled compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for
the rendering of services.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the
vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the
best estimate of the number of awards that are likely to vest and the expired portion of the vesting period.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the
fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date; and assumes that the transaction will take place either: in the
principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its
highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data is
available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Share buy-back
Where any group company purchases the Company’s equity instruments, for example as the result of a share buy-back or
a share-based payment plan, the consideration paid, including any directly attributable incremental costs (net of income
taxes) is deducted from equity attributable to the owners of Kelly Partners Group Holdings Limited as treasury shares until
the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received,
net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity
attributable to the owners of Kelly Partners Group Holdings Limited.
29
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
Dividends
Dividends are recognised when declared during the financial year and no longer at the discretion of the Company.
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity
instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments
issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest
in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value
or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to
profit or loss.
On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic conditions, the Group's operating or
accounting policies and other pertinent conditions in existence at the acquisition-date.
Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in the
acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is
recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent
changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss.
Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within
equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling
interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment
in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair
value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a
gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and
measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred
and the acquirer's previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based
on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement
period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the
information possible to determine fair value.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Kelly Partners Group Holdings
Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary
shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial
year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part
of the expense.
30
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2019. The Group's
assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group,
are set out below.
AASB 16 Leases
This standard is currently applicable to annual reporting periods beginning on or after 1 January 2019. AASB 16 replaces
the current AASB 117 'Leases' standard and sets out a comprehensive model for identifying lease arrangement and the
subsequent measurement. A contract contains a lease if it conveys the right to control the use of an identified asset for a
period of time. The majority of leases from the lessee perspective within the scope AASB 16 will require the recognition of
a 'right of use' asset and a related lease liability, being present value of future lease payments. This will result in an
increase in the recognised assets and liabilities in the Statement of Financial Position as well as a change in expense
recognition, with interest and depreciation replacing lease expense, with the exception of leases of low value assets and
leases with a term of 12 months or less.
The Group expects to adopt the standard from 1 July 2019 and the primary impact from adoption will be the treatment of
premises across the Group. The adoption of the standard will increase net current assets and lease liabilities due to the
recognition of the lease liability and right of use asset; expense relating to minimum lease payments will reduce and there
will be an increase in interest expense.
A preliminary assessment has been performed and an assessment of the quantitative impact on the adoption of the
standard is currently being undertaken.
IASB revised Conceptual Framework for Financial Reporting
A revised Conceptual Framework for Financial Reporting has been issued by the AASB and is applicable for annual
reporting periods beginning on or after 1 January 2020. This release impacts for-profit private sector entities that have
public accountability that are required by legislation to comply with Australian Accounting Standards and other for-profit
entities that voluntarily elect to apply the Conceptual Framework. Phase 2 of the framework is yet to be released which will
impact for-profit private sector entities. The application of new definition and recognition criteria as well as new guidance on
measurement will result in amendments to several accounting standards. The issue of AASB 2019-1 Amendments to
Australian Accounting Standards – References to the Conceptual Framework, also applicable from 1 January 2020,
includes such amendments. Where the Group has relied on the conceptual framework in determining its accounting
policies for transactions, events or conditions that are not otherwise dealt with under Australian Accounting Standards, the
Group may need to revisit such policies.
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates
and assumptions on historical experience and on other various factors, including expectations of future events,
management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will
seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next
financial year are discussed below.
31
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 3. Critical accounting judgements, estimates and assumptions (continued)
Allowance for expected credit losses
The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the
lifetime expected credit loss, grouped based on shared credit risk characteristics and on days overdue, and makes
assumptions to allocate an overall expected credit loss rate for each group. These assumptions include past default
experience of the debtor profile and an assessment of the historical loss rates.
Accrued income
An accrued income asset arises where the Group has performed by transferring goods or services to a customer prior to
the receipt of consideration from the customer and represents the Group’s right to consideration for the transferred good or
service. While assessing the accrued income balance, a degree of estimation needs to be applied on its recoverability and
the assessment is primarily based on the Operating Business Owner’s professional judgement on the proportionate
completion of the performance obligations in comparison to the transaction price stated in the contract .
Goodwill and other indefinite life intangible assets
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill
and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in
note 2. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations.
These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital
and growth rates of the estimated future cash flows.
Business combinations
As discussed in note 2, business combinations are initially accounted for on a provisional basis. The fair value of assets
acquired, liabilities and contingent liabilities assumed are initially estimated by the Group taking into consideration all
available information at the reporting date. Fair value adjustments on the finalisation of the business combination
accounting is retrospective, where applicable, to the period the combination occurred and may have an impact on the
assets and liabilities, depreciation and amortisation reported.
Note 4. Operating segments
The Group has only one reportable segment. The Group primarily provides accounting and tax services to small and
medium enterprises predominantly in Australia. This assessment is based on the internal reports that are reviewed by the
Board of Directors (identified as the Chief Operating Decision Maker) in assessing performance and in determining
allocation of resources.
The operating segment information is the same information as provided throughout the financial statements and are
therefore not duplicated.
No revenue from a single customer exceeds 10% of group revenue.
Note 5. Revenue
Provision of services
Consolidated
2019
$
2018
$
39,975,031
39,468,666
Timing of revenue recognition
The revenue from provision of services from contracts with customers is recognised over time.
32
Consolidated
2019
$
2018
$
220,463
110,667
35,973
1,201,200
113,688
40,997
367,103
1,355,885
Consolidated
2019
$
2018
$
510,666
738,613
385,738
651,479
1,249,279
1,037,217
868,595
611,208
26,971
60,753
2,092,480
2,089,822
17,314,745
1,330,840
846,612
63,738
15,654,722
1,167,849
825,937
127,606
19,555,935
17,776,114
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 6. Other gains
Change in fair value of contingent consideration
Commissions
Other income
Other gains
Note 7. Expenses
Profit before income tax includes the following specific expenses:
Depreciation and amortisation
Depreciation
Amortisation
Total depreciation and amortisation
Finance costs
Interest on bank overdrafts and loans
Net loss on disposal
Net loss on disposal of property, plant and equipment
Rental expense relating to operating leases
Minimum lease payments
Employment and related expenses
Salaries and wages
Superannuation
Other on costs
Employee leave
Total employment and related expenses
33
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 8. Income tax
Income tax expense
Current tax
Origination and reversal of temporary differences
Adjustment recognised for prior periods
Aggregate income tax expense
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
Tax at the statutory tax rate of 27.5% (2018: 30%)
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Other non-allowable items
Adjustment recognised for prior periods
Distributions to non-controlling interests
Change in tax rate to 27.5%
Income tax expense
Consolidated
2019
$
2018
$
1,497,755
(634,585)
36,446
1,480,699
523,407
(62,962)
899,616
1,941,144
8,047,270
11,905,178
2,212,999
3,571,553
(58,207)
(219,888)
2,154,792
36,446
(1,196,562)
(95,060)
3,351,665
(62,962)
(1,347,559)
-
899,616
1,941,144
The reduction in tax rate from 30% to 27.5% is due to the Company being considered a base rate entity for the 2019
financial year as the Group’s aggregated turnover is less than $50 million.
As the majority of operating businesses are structured as partnerships, the income tax expense attributable to the minority
interests in these partnerships are not included in the consolidated accounts. This is with the exception of subsidiaries that
are in a corporate structure where the consolidated income tax expense is included in the profit attributable to minority
interests in these subsidiaries. The remaining balance of the consolidated income tax expense is included in the profit
attributable to the shareholders in the parent entity.
Net deferred tax liability
Amounts recognised in profit or loss:
Accrued expenses
Income assessable on receipt
Differences between accounting and tax depreciation
Customer relationship intangibles
Expenses deductible over five years
Net deferred tax liability
Movements:
Opening balance
Charged/(credited) to profit or loss
Additions through business combinations (note 39)
Other movements
Closing balance
34
Consolidated
2019
$
2018
$
(431,982)
374,723
67,388
754,646
(352,307)
(401,179)
954,713
14,587
782,918
(523,612)
412,468
827,427
827,427
(634,585)
235,134
(15,508)
306,414
523,407
-
(2,394)
412,468
827,427
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 8. Income tax (continued)
Provision for income tax
Provision for income tax
Note 9. Current assets - cash and cash equivalents
Cash at bank and in hand
Reconciliation to cash and cash equivalents at the end of the financial year
The above figures are reconciled to cash and cash equivalents at the end of the financial
year as shown in the statement of cash flows as follows:
Cash at bank and in hand
Bank overdrafts (note 20)
Balance as per statement of cash flows
Note 10. Current assets - trade and other receivables
Trade receivables
Less: Allowance for expected credit losses
Other receivables
Consolidated
2019
$
2018
$
570,187
97,012
Consolidated
2019
$
2018
$
3,955,119
3,410,934
3,955,119
(2,526,439)
3,410,934
(1,970,672)
1,428,680
1,440,262
Consolidated
2019
$
2018
$
6,424,827
(339,956)
6,084,871
6,858,723
(261,958)
6,596,765
14,267
5,842
6,099,138
6,602,607
Allowance for expected credit losses
The Group has recognised a loss of $131,326 in profit or loss in respect of the credit losses and a movement of $79,282 in
respect of expected credit losses during the year ended 30 June 2019.
The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected
loss allowance for all trade receivables.
To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics
and the days past due.
The Group measures the loss allowance for trade receivables at an amount equal to lifetime expected credit losses. The
expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience
of the debtor profile and an assessment of the loss rates based on the payment profiles of sales over a period of 18
months before 30 June 2019. The historical loss rates are adjusted to reflect current and forward looking information
affecting the ability of the customers to settle the receivables.
The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty
and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation or has entered into
bankruptcy proceedings.
35
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 10. Current assets - trade and other receivables (continued)
Consolidated
0 to 3 months overdue
3 to 6 months overdue
Over 6 months overdue
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Receivables written off during the year as uncollectable
Unused amounts reversed
Closing balance
Note 11. Current assets - accrued income
Accrued income
Expected
credit loss
rate
2019
%
Carrying
amount
2019
$
Allowance
for expected
credit losses
2019
$
1.17%
5.59%
42.50%
4,945,247
939,921
539,659
58,037
52,552
229,367
6,424,827
339,956
Consolidated
2019
$
2018
$
261,958
157,280
(79,282)
-
245,814
245,101
(52,812)
(176,145)
339,956
261,958
Consolidated
2019
$
2018
$
2,009,017
3,484,037
Contract liabilities (previously net off against accrued income in the prior period) has been reclassified to current liabilities
in the current period.
Note 12. Current assets - other financial assets
Consolidated
2019
$
2018
$
1,704,255
626,925
Consolidated
2019
$
2018
$
687,972
481,870
Loans to partners
Note 13. Current assets - other assets
Prepayments
36
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 14. Non-current assets - financial assets
Shares in listed entities - at fair value
Note 15. Non-current assets - other financial assets
Loans to partners
Consolidated
2019
$
2018
$
15,481
14,780
Consolidated
2019
$
2018
$
3,212,503
2,853,078
Loans to partners primarily represents amounts of money which have first been borrowed on the balance sheet of various
controlled entities, and then secondly on lent to partners to assist them with their purchase of equity into that entity. This
results in the controlled entity having both a financial liability to the financier, and a corresponding financial asset to the
partner. These loans are typically repaid over a four to eight year period. As the loans are repaid by the partners and the
financial asset amortises, there is a corresponding amortisation in the financial liability. Repayment of these loans is
typically from partner equity distributions.
Note 16. Non-current assets - property, plant and equipment
Buildings - at cost
Leasehold improvements - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation
Motor vehicles - at cost
Less: Accumulated depreciation
Consolidated
2019
$
2018
$
625,825
625,825
3,127,492
(960,322)
2,167,170
1,968,640
(1,217,403)
751,237
1,879,397
(1,074,484)
804,913
2,044,946
(1,418,885)
626,061
581,842
(221,908)
359,934
664,032
(227,496)
436,536
3,957,842
2,439,659
37
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 16. Non-current assets - property, plant and equipment (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2017
Additions
Disposals - written down value
Depreciation expense
Balance at 30 June 2018
Additions
Disposals - written down value
Depreciation expense
Leasehold
improve-
ments
$
708,640
88,582
-
(45,985)
751,237
1,646,533
(5,893)
(224,707)
Buildings
$
571,396
54,429
-
-
625,825
-
-
-
Plant and
equipment
$
Motor
vehicles
$
685,157
203,975
(22,483)
(240,588)
626,061
409,486
(10,072)
(220,562)
530,537
43,434
(38,270)
(99,165)
436,536
167,605
(178,810)
(65,397)
Total
$
2,495,730
390,420
(60,753)
(385,738)
2,439,659
2,223,624
(194,775)
(510,666)
Balance at 30 June 2019
625,825
2,167,170
804,913
359,934
3,957,842
Note 17. Non-current assets - intangible assets
Goodwill - at cost
Brand names and intellectual property - at cost
Customer relationships - at cost
Less: Accumulated amortisation
Computer software - at cost
Less: Accumulated amortisation
Consolidated
2019
$
2018
$
20,211,955
17,847,638
3,300,000
3,300,000
7,605,813
(4,053,672)
3,552,141
6,008,429
(3,356,471)
2,651,958
218,771
(54,970)
163,801
93,904
(16,643)
77,261
27,227,897
23,876,857
38
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 17. Non-current assets - intangible assets (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2017
Additions
Amortisation expense
Balance at 30 June 2018
Additions
Additions through business combinations (note
39)
Disposals
Amortisation expense
Brand names
and
intellectual
property
$
Goodwill
$
Customer
relationships
$
Computer
Software
$
Total
$
17,847,638
-
-
3,300,000
-
-
3,240,055
50,710
(638,807)
35,353
54,580
(12,672)
24,423,046
105,290
(651,479)
17,847,638
-
3,300,000
-
2,651,958
35,750
77,261
130,249
23,876,857
165,999
2,364,317
-
-
-
-
-
1,561,634
-
(697,201)
-
(2,297)
(41,412)
3,925,951
(2,297)
(738,613)
Balance at 30 June 2019
20,211,955
3,300,000
3,552,141
163,801
27,227,897
Brand names and intellectual property have indefinite useful lives and are not amortised.
Impairment testing
For the purpose of impairment testing, goodwill and other indefinite life intangibles are allocated to cash-generating units
('CGU') which are based on the Group's operating divisions. The aggregate carrying amount of goodwill allocated to each
CGU is:
Kelly Partners (Sydney) Pty Ltd
Kelly Partners South West Sydney Partnership
Kelly Partners Wollongong Partnership
Other partnerships
Total
Consolidated
2019
$
2018
$
3,538,147
5,246,636
3,391,692
8,035,480
3,538,147
5,001,779
3,391,692
5,916,020
20,211,955
17,847,638
The carrying value of indefinite life intangibles is $3,300,000 (2018: $3,300,000).
The recoverable amount of each cash-generating unit above is determined based on value in use calculations. These
calculations use cashflow projections over a five year period, based on financial budgets approved by management. These
budgets use historical growth rates to project revenue. Costs are calculated taking into account historical gross margins as
well as estimated inflation rates over the period which are consistent with inflation rates applicable to the locations in which
the CGU operates. With regard to the assessment of the CGU's, management believes that no reasonably possible
change in any of the key assumptions used would cause the carrying value of the unit to materially exceed its recoverable
amount.
39
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 17. Non-current assets - intangible assets (continued)
The following assumptions were used in the calculations:
Terminal growth rate
Post tax discount rate
Note 18. Non-current assets - other assets
Deposits
Consolidated
2019
%
2018
%
2.5%
16.5%
2.5%
16.5%
Consolidated
2019
$
2018
$
633,005
698,445
Deposits primarily comprise of amounts used as security for bank guarantees. Refer to note 35 for further information on
guarantees.
Note 19. Current liabilities - trade and other payables
Trade payables
GST payable
Sundry payables and accrued expenses
Refer to note 32 for further information on financial instruments.
Note 20. Current liabilities - borrowings
Bank overdrafts
Bank loans
Refer to note 32 for further information on financial instruments, including borrowings
Note 21. Current liabilities - provisions
Employee entitlements
40
Consolidated
2019
$
2018
$
352,791
838,331
1,038,716
389,572
857,393
1,548,985
2,229,838
2,795,950
Consolidated
2019
$
2018
$
2,526,439
3,348,106
1,970,672
2,656,750
5,874,545
4,627,422
Consolidated
2019
$
2018
$
1,480,562
1,181,645
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 22. Current liabilities - contingent consideration
Contingent consideration
Consolidated
2019
$
2018
$
-
231,418
Contingent consideration relates to the fair value of the contingent component of the purchase price in relation to the
acquisitions.
The contingent consideration liability in the prior period related to acquisition of Kelly Partners Southern Highlands which
was paid in August 2018.
Refer to note 26 for movement in contingent consideration.
Note 23. Current liabilities - other liabilities
Deferred rent
Note 24. Non-current liabilities - borrowings
Bank loans
Refer to note 32 for further information on financial instruments.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Bank overdrafts
Bank loans
Consolidated
2019
$
2018
$
193,991
152,721
Consolidated
2019
$
2018
$
12,753,088
10,139,039
Consolidated
2019
$
2018
$
2,526,439
16,101,194
1,970,672
12,795,789
18,627,633
14,766,461
Controlled entities' facilities
The Group has banking facilities in place with Westpac for all of its operating businesses, with the loans of each operating
businesses being non-recourse to the cashflows and assets of the parent entity, except for the two subsidiaries that had
entered
loans and bank
guarantees. Typically each operating business’ debt facilities are granted security by that entity as well as having personal
guarantees from the operating business owners.
facilities consist of overdraft
facility structure. The
the new
facilities,
term
to
in
During the year, the Group commenced restructuring its debt facilities with Westpac. As at 30 June 2019, two subsidiaries
had entered into the new facility structure. The revised facilities will offer the Group consistent and improved terms and
conditions, consistent and reduced reporting and undertaking requirements, consistent risk margins and a consistent
security structure across its subsidiaries. Each subsidiaries debt facilities will be granted security by that entity, the
corporate partners of that entity, limited personal guarantees of the operating business owners, and a guarantee provided
by the parent over all existing and future assets and undertakings.
41
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 24. Non-current liabilities - borrowings (continued)
Post balance date, all but one of the controlled entities with debt facilities, have entered into the new facility structure. The
final outstanding entity is expected to enter into the new arranged facilities in the first quarter of FY20.
Subsidiaries also have bilateral arrangements in place with Westpac and other financiers for other facilities including credit
cards, equipment finance, and bank guarantees. These facilities and their securities are permitted under the Westpac
arrangements.
Parent entity facilities
In May 19, the parent increased its existing facilities with the addition of a $2,000,000 revolving line of term credit. The debt
facilities are granted security over the parent entity, as well as the guarantor group which comprises Kelly Partners Group
Holdings Limited and of each of its wholly owned subsidiaries. The guarantor group must comprise at least 95% of the total
consolidated assets and 95% of the total consolidated EBITDA of the Group, and each of its wholly owned subsidiaries.
The guarantor group does not include the local owner-driven operating partnerships, as these controlled entities are not
wholly owned.
The parent entity also has bilateral arrangements in place with Westpac and other financiers for other facilities including
credit cards, equipment finance, and bank guarantees. These facilities and their securities are permitted under the
Westpac arrangements.
Covenants
The Group’s financier have financial covenants in place, which may act to limit the total indebtedness of the Group under
certain circumstances, such as if there were a significant drop in earnings. As at balance date, the Group is in compliance
with its financial covenants.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank overdrafts
Bank loans
Used at the reporting date
Bank overdrafts
Bank loans
Unused at the reporting date
Bank overdrafts
Bank loans
Note 25. Non-current liabilities - provisions
Employee entitlements
42
Consolidated
2019
$
2018
$
4,224,506
17,759,989
21,984,495
2,552,000
14,127,364
16,679,364
2,526,439
16,101,194
18,627,633
1,970,672
12,795,789
14,766,461
1,698,067
1,658,795
3,356,862
581,328
1,331,575
1,912,903
Consolidated
2019
$
2018
$
285,385
270,511
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 26. Non-current liabilities - contingent consideration
Contingent consideration
Consolidated
2019
$
2018
$
544,719
-
A reconciliation of the movement in contingent consideration (current and non-current) for the financial year is set out
below:
Opening balance
Recognition on acquisition (note 39)
Change in fair value of contingent consideration
Settled in cash
Unwinding of interest over contingent period
Consolidated
2019
$
2018
$
231,418
716,513
(220,463)
(231,418)
48,669
1,432,618
-
(1,201,200)
-
-
544,719
231,418
Non-current contingent consideration relates to the fair value of the contingent component of the purchase price in relation
to the acquisitions in the current period.
Note 27. Non-current liabilities - other liabilities
Deposits held
Note 28. Equity - issued capital
Consolidated
2019
$
2018
$
46,244
46,244
Consolidated
2019
Shares
2018
Shares
2019
$
2018
$
Ordinary shares - fully paid
45,495,000
45,497,181
14,169,601
14,171,477
Movements in ordinary share capital
Details
Balance
Shares issued to employees
Transaction costs arising on share issue, net of tax
Balance
Share buy-back
Balance
Date
1 July 2017
3 July 2017
30 June 2018
14 May 2019
Shares
Issue price
$
45,344,181
153,000
-
45,497,181
(2,181)
$1.441
-
13,988,051
220,473
(37,047)
$0.860
14,171,477
(1,876)
30 June 2019
45,495,000
14,169,601
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the
Company does not have a limited amount of authorised capital.
43
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 28. Equity - issued capital (continued)
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Share buy-back
On 17 April 2019, the Company announced a share buy-back of up to 10% of the minimum number of Company's shares
outstanding in the last 12 months (being a buy-back of up to 4,549,718 shares at 17 April 2019). During the financial year
ended 30 June 2019, the Company purchased and cancelled 2,181 shares. At 30 June 2019, 4,547,537 shares are
authorised for on-market buy-back.
Capital risk management
Management controls the capital of the Group in order to maintain an acceptable debt to equity ratio, provide the
shareholders and partners with adequate returns and ensure that the Group can fund its operations and continue as a
going concern. The Group's debt and capital includes ordinary share capital and financial liabilities.
There are no externally imposed capital requirements.
Management effectively manages the Group's capital by assessing the Group's financial risks and adjusting its capital
structure in response to changes in these risks and the market. These responses include the management of debt levels,
distributions to shareholders and partners and share issues.
There have been no changes to the strategy adopted by management to manage the capital of the Group since the prior
year.
Note 29. Earnings per share
Profit after income tax
Non-controlling interest
Consolidated
2019
$
2018
$
7,147,654
(4,711,959)
9,964,034
(5,581,380)
Profit after income tax attributable to the owners of Kelly Partners Group Holdings Limited
2,435,695
4,382,654
Weighted average number of ordinary shares used in calculating basic earnings per share
45,496,894
45,495,923
Weighted average number of ordinary shares used in calculating diluted earnings per share
45,496,894
45,495,923
Number
Number
Basic earnings per share
Diluted earnings per share
Note 30. Equity - reserve
Foreign currency reserve
Cents
Cents
5.35
5.35
9.63
9.63
Consolidated
2019
$
2018
$
808
-
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign
operations to Australian dollars.
44
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 30. Equity - reserve (continued)
Movements in reserve
Movements in reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2017
Balance at 30 June 2018
Foreign currency translation
Less: share of non-controlling interest
Balance at 30 June 2019
Note 31. Equity - dividends
Dividends
Dividends paid during the financial year were as follows:
For the year ended 30 June 2018:
First interim dividend of $0.01 per ordinary share, paid on 16 Nov 2017
Second interim dividend of $0.01 per ordinary share, paid on 16 Feb 2018
Third interim dividend of $0.01 per ordinary share, paid on 16 May 2018
Final dividend of $0.01 per ordinary share, paid on 12 Jul 2018
For the year ended 30 June 2019:
First interim dividend of $0.011 per ordinary share, paid on 30 Oct 2018
Second interim dividend of $0.011 per ordinary share, paid on 31 Dec 2018
Third interim dividend of $0.011 per ordinary share, paid on 29 Mar 2019
Foreign
currency
$
-
-
1,585
(777)
808
Consolidated
2019
$
2018
$
-
-
-
454,972
500,469
500,469
500,469
454,972
454,972
454,972
-
-
-
-
1,956,379
1,364,916
On 1 July 2019, the Company paid the final dividend for the year ended 30 June 2019 of $0.011 per ordinary share. This
dividend equates to a distribution of $500,445, based on the number of ordinary shares on issue as at 30 June 2019. The
financial effect of dividends declared after the reporting date is not reflected in the 30 June 2019 financial statements and
will be recognised in subsequent financial reports.
Franking credits
Franking credits available for subsequent financial years
1,678,058
1,464,371
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
●
●
●
franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date
Consolidated
2019
$
2018
$
45
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 32. Financial instruments
Financial risk management objectives
The Group is exposed to a variety of financial risks through its use of financial instruments: market risk (including interest
rate risk and price risk), credit risk and liquidity risk.
The Group‘s overall risk management plan seeks to minimise potential adverse effects due to the unpredictability of
financial markets.
The Group does not use derivative financial instruments or speculate in financial assets.
Risk management is carried out by senior management under policies approved by the Board of Directors ('the Board').
The policies include identification and analysis of the risk exposure of the Group and appropriate procedures, controls and
risk limits. Management identifies and evaluates financial risks within the Group's businesses and reports to the Board on a
regular basis.
The Group's financial instruments consist mainly of deposits with banks, accounts receivable and payable, bank loans and
overdrafts, loans to and from subsidiaries, and leases.
Market risk
Price risk
The Group is not exposed to any significant price risk.
Interest rate risk
The Group is exposed to interest rate risk as funds are borrowed at floating and fixed rates. Borrowings issued at fixed
rates expose the Group to fair value interest rate risk.
The Group's policy is to minimise interest rate cash flow risk exposures on long-term financing. At the reporting date,
the Group is exposed to changes in market interest rates through its bank borrowings, which are subject to variable interest
rates.
The following table illustrates the sensitivity on the net result for the year and equity to a reasonably possible change in
interest rates of +1% and -1% (2018: +1% and -1%), with effect from the beginning of the year. These changes are
considered to be reasonably possible based on observation of current market conditions.
The calculations are based on the financial instruments held at each reporting date. All other variables are held constant.
Borrowings
Bank overdrafts
Bank loans
Weighted
average
interest rate
%
2019
+1%
$
Weighted
average
interest rate
%
-1%
$
2018
+1%
$
-1%
$
5.07%
4.73%
(25,264)
(161,012)
25,264
161,012
5.02%
5.24%
(19,980)
(128,637)
19,980
128,637
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net
of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the
financial statements. The Group does not hold any collateral.
The Group has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables
through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered
representative across all customers of the Group based on recent sales experience, historical collection rates and forward-
looking information that is available.
46
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 32. Financial instruments (continued)
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include
the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual
payments for a period greater than 1 year.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on
its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become
due. The Group maintains cash to meet its liquidity requirements for up to a 30-day period.
The Group manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term financial
liabilities as well as cash-outflows due in day-to-day business.
Liquidity needs are monitored in various time bands, on a day-to-day and week-by-week basis, as well as on the basis of a
rolling 30-day projection. Long-term liquidity needs for a 180-day and a 360-day periods are identified monthly.
At the reporting date, these reports indicate that the Group expected to have sufficient liquid resources to meet its
obligations under all reasonably expected circumstances.
The Group’s liabilities have contractual maturities which are summarised below:
Consolidated - 2019
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Contract liabilities
Contingent consideration
Interest-bearing - fixed rate
Bank overdraft
Bank loans*
Total non-derivatives
Weighted
average
interest rate
%
1 year or
less
$
Between 1
and 2 years
$
Between 2
and 5 years Over 5 years
$
$
Remaining
contractual
maturities
$
-
-
-
-
352,791
1,877,047
482,572
-
-
-
-
544,719
-
-
-
-
5.07%
4.73%
2,526,439
3,348,086
8,586,935
-
6,295,328
6,840,047
-
6,457,780
6,457,780
-
-
-
-
-
-
-
352,791
1,877,047
482,572
544,719
2,526,439
16,101,194
21,884,762
*
As at 30 June 2019, bank loans of $3,348,086 represents the current portion of long term debt which is being repaid
under scheduled amortisation repayments, and is not expected to be refinanced or face refinance risk.
Consolidated - 2018
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Contingent consideration
Interest-bearing
Bank overdrafts
Bank loans
Total non-derivatives
Weighted
average
interest rate
%
1 year or
less
$
Between 1
and 2 years
$
Between 2
and 5 years Over 5 years
$
$
Remaining
contractual
maturities
$
-
-
-
389,572
2,406,378
231,418
-
-
-
-
-
-
-
-
-
389,572
2,406,378
231,418
5.02%
5.24%
1,970,672
2,656,750
7,654,790
-
3,261,459
3,261,459
-
6,144,861
6,144,861
-
732,719
732,719
1,970,672
12,795,789
17,793,829
47
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 32. Financial instruments (continued)
Fair value of financial instruments
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes. The carrying value less impairment provision of trade and other receivables and of trade and other
payables is a reasonable approximation of their fair values due to the short-term nature of these balances.
Note 33. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Group is set out
below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Consolidated
2019
$
2018
$
895,142
46,268
1,205
782,541
45,304
13,471
942,615
841,316
Other key management personnel transactions
For details of other transactions with key management personnel, refer to note 37.
Note 34. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by Deloitte Touche Tohmatsu, the
auditor of the Company:
Audit services
Audit or review of the financial statements
Other services
Other advisory services
Note 35. Contingent liabilities
Consolidated
2019
$
2018
$
147,000
140,000
7,000
-
154,000
140,000
Bank guarantees totalling $766,000 have been provided in relation to the leases of various premises by the Group. These
guarantees will only be payable in specific circumstances, such as failure to meet rental liabilities. In the opinion of the
directors, no loss will result to the Group as a result of these guarantees.
Guarantees have been provided in relation to the banking facilities of the operating businesses by the parent entity. These
guarantees will only be payable in specific circumstances, such as when the operating business is unable to meet its
repayment obligations.
Except as noted above, in the opinion of the directors, the Group did not have any contingencies at 30 June 2019 (30 June
2018: None).
48
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 36. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
More than five years
The above balances are gross of sublease income of:
Within one year
One to five years
More than five years
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Property, plant and equipment
Land and buildings
Consolidated
2019
$
2018
$
2,810,420
8,083,628
1,002,146
2,449,126
9,379,540
1,500,550
11,896,194
13,329,216
304,773
258,092
16,413
295,683
514,401
16,413
579,278
826,497
-
1,332,745
1,107,626
-
1,332,745
1,107,626
Operating leases relate to office premises and office equipment.
Capital commitments relate to two property purchases made in FY2020. Refer to note 43 for details.
Note 37. Related party transactions
Parent entity
Kelly Partners Group Holdings Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 40.
Key management personnel
Disclosures relating to key management personnel are set out in note 33 and the remuneration report included in the
directors' report.
Transactions with related parties
Transactions between related parties are on normal commercial terms and conditions no more favourable than those
available to other parties unless otherwise stated.
On 28 June 2019, a property owned by an associated entity of Brett Kelly, was leased to Kelly Partners Central Tablelands
on a 12 month term. The Board of Directors approved the related party transaction noting that the lease terms were
considered to be on normal commercial terms.
On 27 June 2019, the Board of Directors also resolved and approved the purchase of this property by Kelly Partners
(Central Tablelands) Property Trust, from an associated entity of Brett Kelly for $599,000 with settlement on 13 August
2019. This transaction was at market value.
Loans to related parties
There were no loans to or from related parties at the current and previous reporting date other than those set out in note 12
and note 15.
49
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 37. Related party transactions (continued)
Direct interest in subsidiaries
The following related parties hold a direct interest in the respective subsidiary of the Group:
Related party
Pauline Michelakis*
Paul Kuchta
Subsidiary
2019
2018
Interest held Interest held
Kelly Partners Private Wealth Sydney
Kelly Partners Norwest Partnership
-
25.50%
7.50%
25.50%
*
Up to the date of resignation, 26 March 2019
Note 38. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Retained profits
Total equity
2019
$
2018
$
2,265,359
3,164,443
2,265,359
3,164,443
2019
$
2018
$
5,297,300
5,849,107
24,283,099
23,966,944
3,104,086
3,449,523
8,463,297
8,454,246
15,819,802
15,512,698
14,169,601
1,650,201
14,171,477
1,341,221
15,819,802
15,512,698
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
During the year, the Group commenced restructuring its debt facilities with Westpac. As at 30 June 2019, two subsidiaries
had entered into the new facility structure. The revised facilities will offer the Group consistent and improved terms and
conditions, consistent and reduced reporting and undertaking requirements, consistent risk margins and a consistent
security structure across its subsidiaries. Each subsidiaries debt facilities will be granted security by that entity, the
corporate partners of that entity, limited personal guarantees of the operating business owners, and a guarantee provided
by the parent over all existing and future assets and undertakings.
Post balance date, all but one of the controlled entities with debt facilities, have entered into the new facility structure. The
final outstanding entity is expected to enter into the new arranged facilities in the first quarter of FY20.
As at 30 June 2018, the parent entity had no guarantees in relation of the debts of its subsidiaries.
50
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 38. Parent entity information (continued)
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2019 and 30 June 2018.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2019 and 30 June 2018.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the
following:
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Note 39. Business combinations
Kelly Partners North Sydney
On 1 September 2018, Kelly Partners (North Sydney) Pty Ltd acquired an accounting business in North Sydney, NSW.
The goodwill is attributable to synergies expected to be achieved from integrating the business into the Kelly Partners
North Sydney business.
The acquired business contributed revenues of $965,688 and profit before tax of $123,080 to the Group for the period from
1 September 2018 to 30 June 2019.
Details of the acquisition are as follows:
Customer relationships
Deferred tax liabilities
Employee benefits
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash to vendor
Contingent consideration
Fair value
$
835,023
(117,112)
(30,277)
687,634
822,551
1,510,185
1,289,722
220,463
1,510,185
51
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 39. Business combinations (continued)
Kelly Partners Inner West
On 4 September 2018, Kelly Partners (Inner West) Pty Ltd acquired an accounting business in Rozelle, NSW.
The goodwill is attributable to synergies expected to be achieved from integrating the business into the Kelly Partners Inner
West business.
The acquired business contributed revenues of $879,493 and profit before tax of $120,764 to the Group for the period from
4 September 2018 to 30 June 2019.
Details of the acquisition are as follows:
Customer relationships
Deferred tax liabilities
Employee benefits
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid to vendor
Contingent consideration
Fair value
$
437,958
(66,812)
(61,424)
309,722
788,065
1,097,787
825,147
272,640
1,097,787
Kelly Partners Northern Beaches
On 3 December 2018, Kelly Partners (Northern Beaches) Pty Ltd acquired an accounting business in Warriewood, NSW.
The goodwill is attributable to synergies expected to be achieved from integrating the business into the Kelly Partners
Northern Beaches business.
The acquired business contributed revenues of $502,857 and profit before tax of $42,609 to the Group for the period from
3 December 2018 to 30 June 2019.
Details of the acquisition are as follows:
Customer relationships
Deferred tax liabilities
Employee benefits
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid to vendor
Contingent consideration
52
Fair value
$
130,947
(43,591)
(18,365)
68,991
607,359
676,350
488,409
187,941
676,350
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 39. Business combinations (continued)
Kelly Partners Oran Park
On 1 February 2019, Kelly Partners (Oran Park) Pty Ltd acquired an accounting business in South West Sydney, NSW.
The goodwill is attributable to synergies expected to be achieved from integrating the business into the Kelly Partners Oran
Park business.
The acquired business contributed revenues of $158,758 and a net loss before tax of $16,076 to the Group for the period
from 1 February 2019 to 30 June 2019.
Details of the acquisition are as follows:
Customer relationships
Deferred tax liabilities
Employee benefits
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid to vendor
Contingent consideration
Note 40. Interests in subsidiaries
Fair value
$
157,706
(7,619)
(36,467)
113,620
146,342
259,962
224,493
35,469
259,962
(a) Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 2:
Name
KP GH NS Pty Limited
Kelly Partners North Sydney Partnership
KP GH CC Pty Limited
Kelly Partners Central Coast Partnership
KP GH WS Pty Limited
Kelly Partners (Western Sydney) Partnership
KP GH SWS Pty Limited
Kelly Partners South West Sydney Partnership
Kelly Partners Management Services Pty Limited
Kelly Partners Services Trust
KP GH NW Pty Limited
Kelly Partners Norwest Partnership
KP GH TC Pty Limited
Kelly Partners Tax Consulting Partnership
Kelly Partners Strategy Consulting Pty Ltd
KP GH CT Pty Limited
Kelly Partners Central Tablelands Partnership
KP GH WO Pty Limited
Principal place of business /
Country on incorporation
Ownership interest
2018
2019
%
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
53
100.00%
58.50%
100.00%
50.10%
100.00%
51.00%
100.00%
50.50%
100.00%
100.00%
100.00%
51.00%
100.00%
51.00%
100.00%
100.00%
68.00%
100.00%
100.00%
58.50%
100.00%
50.10%
100.00%
51.00%
100.00%
50.50%
100.00%
100.00%
100.00%
51.00%
100.00%
51.00%
100.00%
100.00%
51.00%
100.00%
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 40. Interests in subsidiaries (continued)
Name
Principal place of business /
Country on incorporation
Ownership interest
2018
2019
%
%
Australia
Hong Kong
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Kelly Partners Wollongong Partnership
KP GH NB Pty Limited
Kelly Partners Northern Beaches Partnership
KP GH SH Pty Limited
Kelly Partners Southern Highlands Partnership
Kelly Partners (South West Sydney) Trust
Kelly Partners Oran Park Partnership
Super Certain Pty Limited
Kelly Partners Management Services (Hong Kong)
Limited
KP GH FIN Pty Ltd
KP GH WM Pty Ltd
KP GH HK Pty Limited
Kelly Partners Finance Partnership
Kelly Partners Private Wealth Sydney Partnership
(previously Kelly Partners Wealth Management
Partnership)
Kelly Partners Marketing Advisory Pty Ltd (previously
Round 12 Collective Pty Ltd)
Kelly Partners Property (Central Coast) Pty Ltd
Kelly Partners Property Group Holdings Pty Ltd
Kelly Property Group Pty Ltd
Kelly Partners (Central Coast) Property Trust
KP GH SYD CBD Pty Ltd
Kelly Partners (Sydney) Pty Limited
KP GH IW Pty Limited
Kelly Partners Inner West Partnership
Kelly Partners (Tax Legal) Pty Ltd
Kelly Partners (Sydney) Audit Partnership
KP GH LM Pty Ltd (deregistered)
Kelly Partners Lifestyle Management Services
Partnership (deregistered)
Australia
Kelly Partners Private Wealth Group Holdings Pty Ltd Australia
KP GH WM MCBD Pty Ltd
Australia
Kelly Partners Private Wealth Melbourne Partnership Australia
Australia
KP GH CA Pty Ltd
Australia
Kelly Partners Corporate Advisory Partnership
New Zealand
KP GH NZ Pty Ltd
New Zealand
Kelly Partners New Zealand Partnership
KP GH GII Pty Ltd
Australia
Kelly Partners Government, Incentives & Innovation
Australia
Partnership
Australia
Kelly Partners SMSF Advisory Pty Ltd
Australia
Kelly Partners (Investment Office) Pty Ltd
Australia
Kelly Partners Legacy Team Pty Ltd
Australia
Kelly Partners (Sports & Entertainment) Pty Ltd
Australia
Kelly Partners (Private Wealth) Pty Ltd
Australia
KP GH MEL Pty Ltd
Australia
Kelly Partners Melbourne CBD Partnership
Australia
Kelly Partners Private Wealth (Melbourne) Pty Ltd
Kelly Partners Private Wealth (International) Pty Ltd Australia
Australia
Kelly Partners (Family Office) Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
51.00%
100.00%
51.00%
100.00%
51.00%
50.50%
25.30%
50.50%
51.00%
100.00%
100.00%
100.00%
51.00%
51.00%
100.00%
51.00%
100.00%
51.00%
50.50%
25.30%
50.50%
51.00%
100.00%
100.00%
100.00%
51.00%
51.00%
51.00%
51.00%
51.00%
100.00%
100.00%
51.00%
100.00%
50.50%
100.00%
51.00%
51.00%
50.04%
-
-
100.00%
100.00%
51.00%
100.00%
51.00%
100.00%
51.00%
100.00%
51.00%
100.00%
75.50%
100.00%
100.00%
100.00%
100.00%
51.00%
100.00%
100.00%
100.00%
51.00%
51.00%
100.00%
100.00%
51.00%
100.00%
50.50%
100.00%
51.00%
51.00%
50.04%
100.00%
51.00%
100.00%
100.00%
51.00%
100.00%
51.00%
100.00%
51.00%
100.00%
51.00%
100.00%
75.50%
100.00%
100.00%
100.00%
100.00%
51.00%
-
-
-
The percentage of ownership interest held is equivalent to the percentage voting rights for all subsidiaries.
54
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 40. Interests in subsidiaries (continued)
The Group has control over the Kelly Partners Oran Park Partnership because it controls the controlling partner of the
partnership, the Kelly Partners (South West Sydney) Trust.
(b) Subsidiaries with non-controlling interests
The following table summarises the aggregate financial information in relation to the share of the Group's subsidiaries held
by non-controlling interests. The information is before inter-company eliminations with other companies within the Group.
Revenue
Profit attributable to non-controlling interests
Distributions to non-controlling interests
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Consolidated
2019
$
2018
$
18,745,766
4,711,959
4,748,003
4,472,327
15,320,414
(1,878,047)
(6,322,736)
11,591,958
19,569,897
5,581,380
4,496,782
7,320,580
12,455,315
(3,255,324)
(4,931,628)
11,588,943
(c) Consequences of changes in a parent's ownership in a subsidiary that do not result in a loss of control
There were no material changes to the parent entity's ownership in subsidiaries during the current and prior financial year.
(d) Significant restrictions
There are no significant restrictions on the ability of the holding company or its subsidiaries to access or use the assets and
settle the liabilities of the Group.
Note 41. Reconciliation of profit after income tax to net cash from operating activities
Consolidated
2019
$
2018
$
7,147,654
9,964,034
1,249,279
26,971
-
(701)
(220,463)
48,669
-
1,037,217
60,753
220,473
213
(1,201,200)
-
460,499
1,772,387
(650,093)
126,573
473,175
(2,293,083)
521,013
(2,194,825)
29,818
9,973,451
6,604,912
Profit after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Loss on disposals
Shares issued to employees
Net fair value (gain)/loss on other financial assets
Change in fair value of contingent consideration
Unwinding of interest on contingent consideration
Other non-cash movements
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in deferred tax assets
Increase/(decrease) in trade and other payables
Increase in provision for income tax
Net cash from operating activities
55
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2019
Note 42. Changes in liabilities arising from financing activities
Consolidated
Balance at 1 July 2017
Proceeds from borrowings
Repayment of borrowings
Balance at 30 June 2018
Proceeds from borrowings
Repayment of borrowings
Balance at 30 June 2019
Bank
loans
$
12,931,778
3,695,310
(3,831,299)
12,795,789
6,506,684
(3,201,279)
16,101,194
Note 43. Events after the reporting period
Banking restructure
During the year, the Group commenced restructuring its debt facilities with Westpac. As at 30 June 2019, Kelly Partners
Group Holdings Limited and two controlled entities had entered into the new facility structure. Post balance date, all but
one of the controlled entities with debt facilities, have entered into the new facility structure. The final outstanding entity is
expected to enter into the new arranged facilities in the first quarter of FY20. Refer note 24 for further details.
Property purchases
On 28 July 2019, Kelly Partners (Central Coast) Property Trust purchased a property in Central Coast NSW for
$780,000. Kelly Partners (Central Coast) Pty Ltd will occupy the premise to operate its business.
On 27 June 2019, the Board of Directors resolved and approved Kelly Partners (Central Tablelands) Property Trust to
purchase a property in Bathurst for $599,000, with settlement on 13 August 2019.
Apart from the dividend declared as disclosed in note 31, no other matter or circumstance has arisen since 30 June 2019
that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the
Group's state of affairs in future financial years.
56
Kelly Partners Group Holdings Limited
Directors' declaration
30 June 2019
In the directors' opinion:
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the Group's financial position as at 30 June
2019 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Brett Kelly
Executive Chairman and Chief Executive Officer
20 August 2019
Sydney
57
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney, NSW, 2000
Australia
Phone: +61 2 9322 7000
www.deloitte.com.au
Independent Auditor’s Report to
the Members of Kelly Partners Group Holdings Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Kelly Partners Group Holdings Limited (the “Entity”) and its
subsidiaries (the “Group”) which comprises the consolidated statement of financial position as at 30 June
2019, the consolidated statement of profit or loss and other comprehensive income, the consolidated
statement of changes in equity and the consolidated statement of cash flows for the year then ended, and
notes to the financial statements, including a summary of significant accounting policies, and the directors’
declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2019 and of their financial
performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section
of our report. We are independent of the Group in accordance with the auditor independence requirements
of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our
audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given
to the directors of the Company, would be in the same terms if given to the directors as at the time of this
auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report for the current period. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
58
Key Audit Matter
How the scope of our audit responded to the Key
Audit Matter
Recoverability of Goodwill and Intangible
Assets
As at 30 June 2019 the Group has goodwill
totalling $20,211,955 and other intangibles of
$3,552,141 recognised on its statement of
financial position as a result of acquisitions
over a number of years as disclosed in Note
17.
The directors’ assessment of the recoverability
of goodwill and intangible assets requires the
exercise of significant judgement, including:
Identifying the cash generating units
(CGU’s) to which the goodwill has
been allocated; and
Estimating the future growth rates,
discount rates and expected cash
flows of each CGU.
Our procedures included, but were not limited to:
Assessing the Group’s identification of CGU’s and
the basis of allocation of goodwill to the carrying
value of the CGU’s based on our understanding of
the Group’s business;
Challenging management’s ability to accurately
forecast cash flows by assessing the precision of
the prior year forecasts against actual outcomes;
and
With the assistance of our valuation specialists:
o Comparing the discount rate utilised by
management to an independently
calculated discount rate,
o Comparing the Group’s forecast cash
flows for each CGU to the budgets,
challenging the growth rates used,
o
Performing sensitivity analysis on the
growth and discount rates, and
o Testing the mathematical accuracy and
mechanics of the impairment model.
We also assessed the appropriateness of the
disclosures in Note 17 to the financial statements.
Other Information
The directors are responsible for the other information. The other information comprises the Directors’
Report, Corporate Directory and Shareholder Information, which we obtained prior to the date of this
auditor’s report, and also includes additional information which will be included in the Group’s annual report
(but does not include the financial report and our auditor’s report thereon), which is expected to be made
available to us after that date.
Our opinion on the financial report does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.
When we read the additional other information, if we conclude that there is a material misstatement therein,
we are required to communicate the matter to the directors and use our professional judgement to determine
the appropriate action.
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Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations,
or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with the Australian Auditing Standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Group to cease to continue as
a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are responsible
for the direction, supervision and performance of the Group’s audit. We remain solely responsible
for our audit opinion.
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We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected
to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 10 to 14 of the Directors’ Report for the year
ended 30 June 2019.
In our opinion, the Remuneration Report of Kelly Partners Group Holdings Limited, for the year ended 30
June 2019, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.
DELOITTE TOUCHE TOHMATSU
Cheryl Kennedy
Partner
Chartered Accountants
Sydney, 20 August 2019
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Kelly Partners Group Holdings Limited
Shareholder information
30 June 2019
The shareholder information set out below was applicable as at 1 August 2019.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Kelly Investments 1 Pty Ltd
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Sargon Ct Pty Ltd
Kalumic Pty Ltd
Hampton Pty Ltd
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd DRP
Gildale Family Company Pty Ltd
David Bullock + Kay Bullock + Anthony Bullock
Eric Golf Pty Ltd
Dr David John Ritchie + Dr Gillian Joan Ritchie
Kenneth Ko
Mikalu Pty Ltd
Brojo Investments Pty Ltd
BRJT Accounting Pty Ltd
Winda Holdings Pty Ltd
David Bullock + Kay Bullock + Anthony Bullock
Scott Elwin Family Co Pty Ltd
Mrs Penelope Alice Marjorie Seidler
Invia Custodian Pty Limited
Unquoted equity securities
There are no unquoted equity securities.
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Number
of holders
of options
over
ordinary
shares
Number
of holders
of ordinary
shares
202
130
74
142
37
585
21
-
-
-
-
-
-
-
Ordinary shares
Number held
% of total
shares
issued
23,253,378
5,778,220
1,272,946
942,645
636,000
609,400
521,915
466,420
458,984
409,162
400,000
393,504
364,000
326,767
286,120
278,172
264,263
264,263
250,054
250,000
37,426,213
51.11
12.70
2.80
2.07
1.40
1.34
1.15
1.03
1.01
0.90
0.88
0.86
0.80
0.72
0.63
0.61
0.58
0.58
0.55
0.55
82.27
Kelly Partners Group Holdings Limited
Shareholder information
30 June 2019
Substantial holders
Substantial holders in the Company are set out below:
Kelly Investments 1 Pty Ltd
HSBC Custody Nominees (Australia) Limited
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
Number held
% of total
shares
issued
23,253,378
5,778,220
51.11
12.70
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
There are no other classes of equity securities.
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KELLY PARTNERS GROUP HOLDINGS LIMITED
Office - Level 8/32 Walker Street, North Sydney, NSW 2060
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