KELLY PARTNERS GROUP HOLDINGS LIMITED
ABN 25 124 908 363
2020
ANNUAL REPORT
Kelly Partners Group Holdings Limited
Contents
30 June 2020
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 2020
Directors
Brett Kelly – Chairman, Executive Director
Stephen Rouvray – Deputy Chairman, Non-Executive Independent Director
Ryan Macnamee – Non-Executive Independent Director
Paul Kuchta – Executive Director
Ada Poon - Executive Director
Company secretary
Joyce Au
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 Wednesday 25 November 2020
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
William Buck Accountants & Advisors
Level 29
66 Goulburn Street
Sydney, NSW 2000
Stock exchange listing
Kelly Partners Group Holdings Limited shares are listed on the Australian Securities
Exchange (ASX code: KPG) since 21 June 2017
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 2020
The directors present their report, together with the 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 2020.
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
Ryan Macnamee
Paul Kuchta
Ada Poon (appointed on 6 September 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
The Company aims to build per-share intrinsic value by:
●
●
●
●
● making an occasional large acquisition (i.e. greater than $5m in revenue).
improving the earning power of our subsidiaries;
further increase our subsidiaries' earnings through tuck-in acquisitions;
participating in the growth of our subsidiaries and developing complementary businesses;
repurchasing Company’s shares when available at a meaningful discount from intrinsic value; and
The following table presents the performance of the business against the comparative year in delivering the above
strategy:
Strategy
Measure
Improving the earning power of our subsidiaries
EBITDA margin of operating
businesses
FY20
FY19
32.5% 27.7%
Further increase their earnings through tuck-in
acquisitions
Contribution to revenue growth from
acquired businesses
6.6% 6.4%
Participating in the growth of our subsidiaries and
developing complementary businesses
Contribution to revenue growth from
existing businesses
9.4% 7.5%*
Repurchasing the Company's shares when available
at a meaningful discount from intrinsic value
Number of shares repurchased
95,000
2,181
●
●
●
●
● Making an occasional large acquisition (i.e. greater
Number of large acquisitions
-
-
than $5m in revenue)
*
Excludes Sydney CBD
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.
Return on equity
= Trailing 12 months NPATA/Equity
= $11,222,220 / $22,923,398
= 49.0%
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Kelly Partners Group Holdings Limited
Directors' report
30 June 2020
Return on invested capital
= (Trailing 12 months NPATA + Trailing 12 months Cash Interest) / (Equity + Debt)
= ($11,222,220 + $822,514) / ($22,923,398 + $19,011,843)
= 28.7%
Earnings per share
Kelly Partners Group Holdings Limited uses Earnings Per Share (‘EPS’) as the key financial metric to measure the
performance of the Group and its return to shareholders.
EPS
Profit attributable to owners / Weighted average number of shares
$4,014,509 / 45,418,414
8.84 cents per share
FY20
FY19
FY18
FY17 (IPO)
Profit attributable to owners ($)
4,014,509
2,435,695
4,382,654
(2,789,526)
Weighted average number of shares*
45,418,414
45,496,894
45,495,923
33,342,437
EPS (cents per share)
8.84
5.35
9.63
(8.37)
Dividends (cents per share)**
5.39
4.40
4.00
N/A
Dividends payout ratio***
60.97%
82.24%
41.54%
N/A
*
**
Shares outstanding as at 30 June 2020 is 45,400,000 shares
The Group targets ordinary DPS growth at 10% per annum as well as a 50-75% through-the-cycle payout ratio, with a
3 year average payout of 61.58% since the Initial Public Offering ('IPO') in 2017
*** Dividend per share / Earning per share
Owners’ earnings
The Group uses owner’s earnings to measure cash flow available to the group. Owner’s earnings is a non-IFRS measure
which is used to measure cash flow to the Group (after taxes and finance costs) and after taking into account the
necessary:
●
Additions or deductions of working capital investment (debtors, accrued Income, and other accrual movements)
required as the business grows and makes acquisitions;
Deductions required for the maintenance capital expenditure for the business to maintain on-going operations in the
long term; and
Deducting the repayment of lease liabilities from cash from operations (which AASB16 reclassifies to cash from
financing activities).
●
●
In FY20, Owners’ earnings for the 12 months were $12,516,188 (FY19: $9,673,451).
Net cash from operating activities post implementation of AASB 16
Less: Repayment of lease liabilities
Less: Maintenance capex
Owners' earnings
$
14,644,222
(1,978,034)
(150,000)
12,516,188
The below table shows the Owners’ earnings for the Group since IPO:
FY20
FY19
FY18
Owners' earnings
YOY Growth %
$12,516,188
29.4%
$9,673,451
53.4%
$6,304,912
4
Kelly Partners Group Holdings Limited
Directors' report
30 June 2020
Review of operations
In the year ended 30 June 2020 ('FY20'), the Group has recorded a consolidated statutory net profit after providing for
income tax of $10,359,306 (year ended 30 June 2019 ('FY19'): $7,147,654). The statutory net profit attributable to the
members of the parent entity was $4,014,509 (FY19: $2,435,695), an increase of 64.8%.
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') and represents the profit under AAS adjusted for non-cash and other items which management consider to be one-
off non-recurring in nature.
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
2020
$
2019
$
10,359,306
1,535,539
1,473,667
3,740,900
7,147,654
868,595
899,616
1,249,279
Earnings before interest, tax, depreciation and amortisation ('EBITDA')
17,109,412
10,165,144
Add: Non-recurring costs
Restructuring costs
Acquisition costs
Other non-recurring expenses
Less: Non-recurring revenue
One-off government grants in relation to COVID-19
Lease standard - impact on changes on extension of options
Change in fair value of contingent consideration
Underlying EBITDA
Impact on adoption of AASB 16
Underlying EBITDA before implementation of AASB 16
EBITDA
Impact on adoption of AASB 16
EBITDA before implementation of AASB 16
165,389
540,682
-
197,952
614,882
131,721
(1,075,910)
(557,012)
-
-
-
(220,463)
16,182,561
10,889,236
(2,456,469)
-
13,726,092
10,889,236
17,109,412
(2,456,469)
10,165,144
-
14,652,943
10,165,144
Underlying NPATA attributable to members of the parent entity was $4,002,232 (2019: $3,193,208), an increase of 25.3%.
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Kelly Partners Group Holdings Limited
Directors' report
30 June 2020
The following table provides a reconciliation between NPAT attributable to the owners of Kelly Partners Group Holdings
Limited and Underlying NPATA attributable to owners of Kelly Partners Group Holdings Limited.
Consolidated
2020
$
2019
$
Statutory NPAT attributable to owners of Kelly Partners Group Holdings Limited
Amortisation of customer relationship intangibles
4,014,509
452,728
2,435,695
363,280
NPATA attributable to owners of Kelly Partners Group Holdings Limited
4,467,237
2,798,975
Add: Non-recurring costs
Restructuring costs
Acquisition costs
Other non-recurring costs
Less: Non-recurring revenue
One-off government grants in relation to COVID-19
Lease standard - impact on changes on extension of options
Change in fair value of contingent consideration
Less: Tax effect of non-recurring expenses
97,914
372,142
-
181,488
347,312
192,861
(592,515)
(322,321)
-
-
-
(128,971)
(20,225)
(198,457)
Underlying NPATA attributable to owners of Kelly Partners Group Holdings Limited
4,002,232
3,193,208
COVID-19
Management response and action
As at 30 June 2020, the Group has not experienced a slow down in revenue or collections. Out of an abundance of
prudence and caution the Group has sought to protect margins through reducing expenses and protect the balance sheet
by managing working capital and maximising liquidity through increasing its bank lines of credit. Operationally the Group
has as its number one priority looked to protect the physical health, safety and mental well being of its people. The Group
has also sought to maximise the integration and use of technology whilst simultaneously upgrading its IT infrastructure and
security. In respect of acquisitions, the Group continues to see a strong pipeline and has adjusted its commercial terms
and due diligence processes to reflect the current market environment.
In FY20 management undertook the following specific actions:
Income and expenses
●
●
Reduced parent company senior executive salaries by 20% for the months of April, May and June.
Reduced ongoing expenses in both the parent and the operating businesses through renegotiating spend on
overheads, advertising, marketing and other discretionary expenses.
The Group has negotiated rent abatements for some of its leases where the business operating from the premise has,
or is expected, to be impacted by the pandemic.
Reduced team size. There was no reduction in partner numbers. This was not an easy decision for the business and
management sought to limit the impact on staff through firstly reducing non-salary overheads and secondly through
voluntary attrition.
Received government assistance of $1,075,910 for the period 1 April 2020 to 30 June 2020. This income is non-
taxable and has been excluded from underlying performance measures.
Dividend grew but at a slower rate than profits with payout ratio reduced to 61.0% (FY19: 82.2%).
●
●
●
●
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Kelly Partners Group Holdings Limited
Directors' report
30 June 2020
Balance sheet
●
Increased group working capital facility limits by $4,179,000 (an increase of 99% on the working capital facilities
available to the group in the prior year as at 30 June 2019) to provide additional liquidity lines of credit out of an
abundance of caution. There were no changes to the Group’s financial covenants as part of this arrangement and the
Group’s unused limits at 30 June 2020 were $8,745,859 (30 June 19: $3,356,862). There are no facilities due for
refinance prior to 30 June 2021. The implementation of AASB 16 increased headroom under the Group’s gearing
covenant.
The Group applied additional focus on managing the invoicing of work in progress (WIP) and the collection of debtors.
Notably the Group’s Working Capital reduced by 15.4% over the year to $4,562,337 (30 June 19: $5,395,745) and
runs at 35.9 days.
Non-essential capital expenditure, including fit-out upgrades, have been indefinitely deferred.
●
●
Financial performance
Acquisitions and integration
During FY20 the Group acquired two accounting businesses located in Melbourne and Glenbrook (Blue Mountains) as well
as purchasing a small fee base in Bathurst. The Melbourne and Glenbrook acquisitions were both completed on 1
November 2019. These two acquisitions have contributed eight months revenue of $2,293,584 and are expected to
contribute approximately $3,200,000 to $3,950,000 in recurring revenue on a full year basis. The Bathurst fee purchase
was completed on 17 June 2020 and is expected to contribute $270,000 in recurring revenue on a full year basis. The
Bathurst transaction is not considered to have a material impact on earnings.
Strategically, the Melbourne acquisition sees Kelly Partners expand into Victoria in the highly renowned 333 Collins Street
address. The Melbourne acquisition is expected to contribute $2,000,000 to $2,550,000 in annual recurring revenue to the
consolidated Group and approximately $500,000 of EBITDA to the parent entity post transaction improvement.
The Glenbrook acquisition, together with the Group’s offices in Penrith and Bathurst, provide a very significant presence in
the outer west of Sydney, one of Sydney’s fastest growing markets. The acquisition is expected to contribute $1,200,000 to
$1,400,000 in annual recurring revenue to the consolidated group and approximately $300,000 of EBITDA to the parent
entity post transaction improvement.
Acquired businesses generally have had lower gross margins and higher operating costs due to their smaller size. It is
expected that any dilutive impact of their existing margins will reduce over time as they evolve to our more efficient
business model.
During FY20, the Group also benefited from the contribution for the full year from the four acquisitions made in FY19 (Inner
West, Northern Beaches, North Sydney and Oran Park).
Post balance date, on 6 July 2020 the Group completed the acquisition of a small fee base located in Rozelle. The Rozelle
transaction is expected to contribute $120,000 in recurring revenue on a full year basis and is not considered to have a
material impact on earnings.
Offices and partners
As at 30 June 2020, the Group operates out of 15 offices (30 June 2019: 15), having opened offices in Glenbrook and
combined the Parramatta office with the Rozelle office during the first half of the financial year. The Melbourne office is now
fully operational with all team members working from home through the lockdown period.
As at 30 June 2020, total number of equity partners (excluding the CEO, Brett Kelly) was 44 (30 June 2019: 40) with 4 new
partners promoted internally and 1 new partner as a result of acquisitions in the period. The equity partner of Kelly Partners
Government Incentives & Innovation exited from the business following his successful election to Federal Parliament. The
dissolution of the Kelly Partners Government Incentives & Innovation partnership is not expected to have any material or
adverse impact on the Group. Post balance date, on 1 July 2020, two new partners were also promoted internally.
Properties
As at 30 June 2020, the Group holds controlling interests in two of the properties out of which the Group operate. These
properties house the Central Coast and Central Tablelands offices which the Group acquired controlling interests in August
2019. Following a review of the property strategy, the Group has decided to unlock capital and is now aiming to sell these
properties by 31 December 2020.
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Kelly Partners Group Holdings Limited
Directors' report
30 June 2020
Revenue
Revenue for FY20 increased 15.9% to $46,354,466 (FY19: $39,975,031). A reconciliation of acquisition and organic
growth is set out below:
FY19 Revenue
Accounting business growth
Complementary business growth
Total organic growth
FY20 in year acquisitions
FY19 Run Rate
Acquisition revenue
FY20 Revenue
$
Growth rate
%
39,975,031
2,666,260
1,082,742
3,749,002
2,293,584
336,849
2,630,433
-
6.7
2.7
9.4
5.7
0.8
6.5
46,354,466
15.9
Organic revenue contributed 9.4% of revenue growth, with accounting businesses contributing 6.7% and complementary
businesses contributing 2.7%.
Acquired revenue of $2,630,433 contributed 6.5% of revenue growth, with in year acquisitions completed in FY20
contributing $2,293,584 and run rate from four acquisition completed in FY19 contributing $336,849.
Operating expenses
●
●
●
Employment and related expenses are the Group’s largest expense. Whilst the expense went up 11.3% to
$21,762,214, importantly, the expense fell 2.00 percentage points to 46.9% of revenue (FY19: 48.9%) driven by
strong revenue growth. Of the 11.3% increase, the acquired businesses made up $1,205,544 (6.2%), and the
remainder (5.1%) came from existing businesses.
Rent and utilities expense have dropped from $2,500,714 to $188,704. This predominantly reflects a reclassification
of expenses on implementation of AASB 16 from rent to depreciation and finance costs.
Other Expenses have increased by $1,365,079 or 19.0% to $8,540,865, with acquired businesses making up
$408,808 (5.7%) of the increase. The remaining increase (13.3%) includes $475,301 from existing businesses and
$480,970 from the parent entity as a result of increased compliance and marketing costs. Additional information
technology costs of $350,870 were incurred to strengthen the Groups’ IT infrastructure and security. These
investments have allowed the businesses to operate productively with minimal interruptions during the COVID-19
period.
Underlying EBITDA
Underlying EBITDA (which measures EBITDA before one-off and non-recurring items) increased 48.6% to $16,182,561
(FY19: $10,889,236). The current period Underlying EBITDA is impacted by the implementation of AASB 16 and is not
directly comparable to the prior period.
Underlying EBITDA on a like for like basis has increased 26.1% to $13,726,092 (FY19: $10,889,236). The underlying
EBITDA margin before AASB 16 has increased to 29.6% (FY19: 27.2% and FY18: 36.6%). The business continues to
target Underlying EBITDA margins (before AASB 16) of 32.5%. A reconciliation of Underlying EBITDA before and after the
AASB 16 leasing adjustment is set out in the table below.
Underlying EBITDA
AASB 16 leasing adjustment - Rent expense
2020
$
2019
$
2018
$
16,182,561
(2,456,469)
10,889,236
-
14,459,699
-
Underlying EBITDA before AASB 16 leasing adjustments
13,726,092
10,889,236
14,459,699
As a % of revenue
29.60%
27.20%
36.60%
8
Kelly Partners Group Holdings Limited
Directors' report
30 June 2020
Additional investments in the Parent Entity
The parent entity has since the IPO continued to invest significantly in growth in order to further develop the capabilities of
the central services team and for the business to be positioned for long term growth as well as to grow its competitive
advantage. These investments for growth have exceeded the central Services Fee and IP Fee income that the Company
receives from its operating businesses, as shown in the table below. With these investments in place, the Company
believes it is now well established and positioned to scale further and management intend to limit investment spend to the
amount of fee income received by 30 June 2021.
Additional investments
1,630,905
742,439
371,913
2020
$
2019
$
2018
$
Non-recurring and one-off items
Total non-recurring income for the Group for the year was $1,632,922 (FY19: $220,413) and included:
1)
$1,075,910 in one-off government grants in relation to COVID-19. Of this amount $776,024 was received in cash in
FY20 and $299,886 is to be received in the first quarter of FY21; and
$557,012 non-cash income relating to remeasurements of lease liabilities and right of use assets as a result of
changes in the extension of options in a number of premise leases.
2)
Non-recurring expenses for the year of $709,071 (FY19: $944,555) which included:
1)
2)
$300,527 in acquisition costs relating to the Melbourne and Glenbrook acquisitions;
$158,460 in non-cash adjustments in relation to interest on unwinding of the contingent consideration payable on the
acquisitions, that were discounted to presented value on initial recognition per the accounting standards;
$123,589 in redundancy costs following restructuring initiatives completed during COVID-19;
$56,944 in costs relating to the surrender of the lease in Parramatta; and
$66,551 in other non-recurring costs including legal fees.
3)
4)
5)
The Group classifies costs related to successfully acquired business under non-recurring and one-off items on the basis
that those specific acquisitions costs (related to specific businesses acquired) will not re-occur in future periods whilst their
associated revenues and earnings are expected to continue into future periods. As part of its growth strategy, management
continue to identify acquisition targets and any future acquisition expenses are expected to be accompanied by future
revenues and earnings associated with those expenses. The separate classification of acquisition costs into non-recurring
and one-off items provides transparency to look-through to the underlying performance of the Group.
Depreciation and amortisation and finance costs
Depreciation and Amortisation expense increased to $3,740,900 (FY19: $1,249,279) and includes depreciation expense of
$2,816,687 (FY19: $510,666). The increase in depreciation expense is predominantly due to the implementation of AASB
16 and reclassification of rent expense to finance and depreciation costs.
Finance costs increased to $1,535,539 (FY19: $868,595). The increase in finance costs is predominantly due to the
implementation of AASB 16 and reclassification of rent expense to finance and depreciation costs. On a cash basis,
finance costs of $822,514 is line with the prior year (FY19: $815,505).
Income tax expense
The Group’s Income Tax Expense has increased to $1,473,667 (FY19: $899,616). As the majority of businesses are
structured as partnerships, the income tax expense attributable to the minority interests in these partnerships is not
included in the consolidated accounts.
Cash flow
Cash from operations
Receipts from customers increased 11.4% to $51,901,820 (FY19: $46,594,198) whilst payments to suppliers and
employees increased by 3.6% to $35,946,225 (FY19: $34,724,287), with operating cashflow (defined as receipts from
customers less payments to suppliers and employees) up 46.8% to $14,644,222. As a result of the implementation of
AASB 16, the principal portion of lease payments are now disclosed separately in financing activities, while the interest
portion is disclosed in finance costs paid within operating activities. Operating cashflow before AASB 16 is $12,666,189, up
27.0% from the prior year. This is predominantly attributable to increased billings as well as a $833,408 decrease in Net
Working Capital Investment (defined as trade and other receivables plus accrued Income less trade payables and contract
liabilities).
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Kelly Partners Group Holdings Limited
Directors' report
30 June 2020
Cash from investing activities
In FY20, the Group spent $1,944,240 on property, plant and equipment capital expenditure. This included $1,459,588 on
property purchases and $116,395 on leaseholds improvements and furniture and fittings to upgrade existing locations. The
remaining $368,257 represents office equipment, new motor vehicles and other capital expenditures.
Cash from financing activities
In FY20, the Groups’ borrowings increased by $384,210 to $19,011,843 (FY19: $18,627,633). Proceeds from borrowings
of $6,037,413, included $1,817,000 relating to the Melbourne and Glenbrook acquisitions, $1,361,681 related to property
purchases, $1,191,000 related to partner buy-in loans, and $1,667,732 in other items.
Repayment of borrowings of $5,761,572 relates to acquisition and partner-buy-in loans, with the Group maintaining a
disciplined approach to the amortisation of its acquisition debt.
FY20 dividends of $2,398,743 includes the special dividend of $249,881 paid in September 2019.
As a result of the implementation of AASB 16, lease payments which were previously classified under cash from
operations, are now disclosed separately under cash from financing activities.
Working capital
The Group continues to maintain a disciplined approach to managing its lockup (defined as trade receivables and accrued
income less contract liabilities) , which reduced 9.8% to $6,875,094 (54.1 days) as at 30 June 2020 from $7,625,583 (70.0
days) as at 30 June 2019. This is a strong result and has been achieved despite acquisition and organic revenue growth.
Capital structure
The business continues to maintain an appropriately conservative capital structure. As at 30 June 2020 the Group’s
Gearing Ratio (defined as Net Debt / Underlying EBITDA pre AASB 16) reduced to 1.11x (30 June 2019: 1.35x). Net Debt
is a non-IFRS measure and means total borrowings less cash and cash equivalents.
Equity to Total Assets ratio has decreased to 39.7% (30 June 2019: 48.7%). The decrease is predominantly due to the
change in accounting standards (AASB 16). Reversing out the impact of AASB 16 on the balance sheet, the adjusted
equity to adjusted total assets ratio is 46.3%, demonstrating the well capitalised nature of the balance sheet which includes
$14,081,465 in issued capital and $7,028,325 in non-controlling equity interests.
AASB16
It is the Group’s view that AASB16 creates a fundamental breakdown of the matching principal and does not capture the
economic substance and contractual nature of the Group’s rental lease agreements. AASB16 capitalises the future rent
expenses (both contracted and optioned) onto the balance sheet as both an asset and a liability. There are several issues
in applying this standard to the Group, as outlined below:
FY20 Balance Sheet
Right-of-use assets
Other assets
Total assets
Lease liabilities
Other liabilities
Total liabilities
Net assets/equity
Equity ratio %
Reported
$
Adjustment
$
Adjusted
$
Change
$
Change
%
5,895,450
51,836,993
57,732,443
(5,895,450)
-
(5,895,450)
-
51,836,993
51,836,993
7,093,874
27,715,171
34,809,045
(7,093,870)
-
(7,093,870)
-
27,715,171
27,715,171
-
5,895,450
5,895,450
-
7,093,874
7,093,874
-
11.40
11.40
-
25.60
25.60
22,923,398
-
24,121,822
(1,198,424)
(5.00)
39.7%
46.5%
(6.8)%
10
Kelly Partners Group Holdings Limited
Directors' report
30 June 2020
1)
2)
3)
The standard results in an overall decrease to the Group’s equity by 5.0% (or $1,198,424) and a 6.8 percentage point
decrease to the equity ratio from 46.5% to 39.7%. The is because the Right-of- use assets are expensed on a
straight-line basis, whilst the Lease liability is expensed on a declining value basis and in the earlier years the Lease
liability exceeds the Right-of-use asset.
The standard requires management to assess whether it expects to exercise options on its property lease
agreements. Whilst in the majority of cases management do expect to exercise those options, the resultant liability
overlooks the (real) options in those lease agreements and instead capitalises those optioned period amounts to the
balance sheet. The Group has disclosed the maturity profile of its leases, which including the option periods, have a
weighted average lease expiry (WALE) of 5 years. However, excluding options, the contracted WALE is c.3 years.
The contracted amounts due and payable (not taking into account the option periods) are $4,883,235 (after applying
the same discount rate used in the standard). The commitment is significantly less (c. 31%) than as indicated on the
balance sheet.
The standard creates a liability as if it were fact, when in economic substance, it is not fact. This is because the Group
maintains the ability to 1) not exercise future option periods; 2) renegotiate leases in the Group’s favour, (as has
occurred during the COVID-19 period); 3) sublease space if desired; and 4) renegotiate more favourable lease
agreements with landlords (as has occurred) if and when the Group’s footprint requirements change.
Whilst AASB16 is here to stay, it is important that users of these accounts understand the reported impact of the standard
compared to the economic substance of the underling lease agreements. The reality is there is no change to the way the
cashflow of this business operates regardless of what the changes to the accounts say.
Dividends
Amounts recognised as dividends:
For the year ended 30 June 2020:
Special dividend of $0.0055 per ordinary share, paid on 18 September 2019
First interim dividend of $0.0121 per ordinary share, paid on 30 September 2019
Second interim dividend of $0.0121 per ordinary share, paid on 2 January 2020
Third interim dividend of $0.0121 per ordinary share, paid on 2 April 2020
Final dividend of $0.0121 per ordinary share, paid on 2 July 2020
For the year ended 30 June 2019:
First interim dividend of $0.011 per ordinary share, paid on 30 October 2018
Second interim dividend of $0.011 per ordinary share, paid on 31 December 2018
Third interim dividend of $0.011 per ordinary share, paid on 29 March 2019
Final dividend of $0.011 per ordinary share, paid on 1 July 2019
For the year ended 30 June 2018:
Final dividend of $0.01 per ordinary share, paid on 12 July 2018
Consolidated
2020
$
2019
$
249,881
549,737
549,340
549,340
549,340
2,447,638
-
-
-
-
-
-
-
-
-
-
-
-
500,469
500,469
500,469
500,445
2,001,852
454,972
2,447,638
2,456,824
On 2 July 2020, the Company paid the final dividend for the year ended 30 June 2020 of $0.0121 per ordinary share. This
dividend equates to a distribution of $549,340, based on the number of ordinary shares on issue as at 30 June 2020. The
dividend was declared before the reporting date and is reflected in the 30 June 2020 financial statements.
Significant changes in the state of affairs
Acquisition
During the financial year, the Company acquired two accounting businesses in Melbourne CBD and Blue Mountains which
were tucked into the existing businesses.
Synergies are expected to be achieved from integrating these businesses into existing Kelly Partners businesses.
11
Kelly Partners Group Holdings Limited
Directors' report
30 June 2020
Share buy-back
As at 30 June 2019, the Company had total shares outstanding of 45,495,000. 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). The Company announced the closure of this share buy-back on 2
September 2019. The Company purchased and cancelled a total of 64,372 shares during the period 17 April 2019 to 2
September 2019 including 62,191 during the financial year ended 30 June 2020.
On 9 September 2019, the Company announced a new 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 4,543,280 shares at 9 September 2019)
less shares bought back in the buy-back closed on 2 September 2019 (being 64,372 shares), therefore a total of 4,478,908
shares. During the financial year ended 30 June 2020, the Company purchased and cancelled 32,809 shares. At 30 June
2020, 4,446,099 shares are authorised for on-market buy-back.
As at 30 June 2020, the Company had total shares outstanding of 45,400,000.
COVID-19
Given the uncertainty regarding the duration of COVID-19 pandemic and its potential impact on trading, management have
undertaken the following actions across the Group, including its controlled entities:
●
●
●
The Executive Chair Brett Kelly, CFO Justin Sweeting, COO Kristian Haigh, Finance Manager Kenneth Ko have
voluntarily reduced their salaries by 20%, for 3 months from 1 April 2020.
The Group has reduced its headcount by 11%. There has been no reduction in partner numbers.
The Group has reduced its expenses through renegotiating spend on outsourced services, advertising, marketing and
other discretionary expenses.
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
On 1 July 2020, Kelly Partners (Inner West) Pty Ltd acquired a fee base in the Inner West with an estimate annual
recurring fee of $127,000. The transaction is expected to contribute to the growth of the Kelly Partners (Inner West)
business.
The Group continues to monitor the impact of COVID-19 on its operating businesses. Despite the challenges from COVID-
19, KPG remains well positioned to execute its long term growth strategy and deliver shareholder wealth.
Apart from the matters discussed above, no other matter or circumstance has arisen since 30 June 2020 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.
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.
12
Kelly Partners Group Holdings Limited
Directors' report
30 June 2020
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Brett Kelly (appointed on 16 April 2017)
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 of
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.
None
Other current directorships:
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
23,400,000 ordinary shares
None
None
Name:
Title:
Qualifications:
Experience and expertise:
Stephen Rouvray (appointed on 2 May 2017)
Deputy Chairman and Non-Executive Independent 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 Group 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
100,000 ordinary shares
None
None
Name:
Title:
Qualifications:
Experience and expertise:
Ryan Macnamee (appointed on 2 May 2017)
Non-Executive Independent 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:
Interests in rights:
Contractual rights to shares:
Member of the Nomination and Remuneration Committee
Member of the Audit and Risk Committee
145,046 ordinary shares
None
None
13
Kelly Partners Group Holdings Limited
Directors' report
30 June 2020
Name:
Title:
Qualifications:
Experience and expertise:
Paul Kuchta (appointed on 2 May 2017)
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
Special responsibilities:
Interests in shares:
Interests in options:
Contractual rights to shares:
Member of the Audit and Risk Committee
164,000 ordinary shares
None
None
Name:
Title:
Qualifications:
Experience and expertise:
Ada Poon (appointed on 6 September 2019)
Executive Director
BCom, MCom, JP, Registered Tax Agent, SMSF Specialist Advisor
Ada has more than 15 years' professional accountancy experience and has
specialised in accounting and taxation services to Private Business Owners based in
Sydney, business and personal taxation compliance self-managed super funds and
outsourced finance department services.
Other current directorships:
None
Former directorships (last 3 years): None
None
Special responsibilities:
326,398 ordinary shares
Interests in shares:
None
Interests in options:
None
Interests in rights:
Company secretary
David Franks - BEc, CA, F Fin, FGIA JP (resigned on 30 April 2020)
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.
Joyce Au - BCom, MCom, MTax, MA(Law), MAppFin. CA (appointed on 1 May 2020 as Company Secretary and General
Counsel)
Joyce is a solicitor admitted to the Supreme Court of NSW and a Chartered Accountant. Joyce has 15 years' experience
across accounting, tax, finance, commercial law, corporate transactions and business operations. Joyce has worked with
Kelly Partners for over 10 years since its inception in 2006 across a number of roles including accounting, audit, finance
and operations. Most recently she worked as the Corporate Advisor and Investment Analyst in KP Corporate Advisory and
KP Investment Office businesses, covering due diligence, transactions management, financial analysis and fund
administration. Prior to that, Joyce practised commercial law for several years advising on corporate structures &
transactions, taxation and Corporations Act matters. Joyce is an alumni of the University of Cambridge and have graduated
with a first class honours in law. She also holds Masters degrees in Accounting, Tax and Applied Finance.
14
Kelly Partners Group Holdings Limited
Directors' report
30 June 2020
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 2020, 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
Ryan Macnamee
Paul Kuchta
Ada Poon*
4
6
6
6
2
6
6
6
6
4
1
1
1
-
-
1
1
1
-
-
-
3
3
3
-
-
3
3
3
-
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
*
Appointed on 6 September 2019.
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
Paul Kuchta
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
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; and
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.
15
Kelly Partners Group Holdings Limited
Directors' report
30 June 2020
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 $160,000 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.
Employee Incentive Plan ('EIP')
In December 2019, the Board approved the establishment of the EIP. The EIP is designed to assist in the attraction,
motivation, retention and reward of employees by allowing them to participate in the overall success and growth of the
Group. The EIP is also designed to align the interests of employees with the interests of shareholders by providing an
opportunity for the participants to receive an equity interest in the Company. In FY2020 the EIP Trust purchased 9,729
shares on market for a total of $7,500 with an average share price of $0.77. As at 30 June 2020, the shares continue to be
held in trust and have not been allocated to any employees.
Group performance and link to remuneration
For the year ended 30 June 2020 there was no link between Group performance and key management personnel
remuneration.
16
Kelly Partners Group Holdings Limited
Directors' report
30 June 2020
Use of remuneration consultants
During the financial year ended 30 June 2020, the Group engaged Egan Associates, remuneration consultants, to review
its existing remuneration policies and provide recommendations on short term incentive ('STI') and long term incentive
('LTI') programs. A total amount of $10,710 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 2019 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 Independent Director
Paul Kuchta - Executive Director
Ryan Macnamee - Non-Executive Independent Director
Ada Poon - Executive Director (appointed on 6 September 2019)
Pauline Michelakis – Chief Financial Officer (resigned on 26 March 2019 with a 6 month notice period)
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
321,351
9,132
9,132
394,409
-
-
-
-
-
-
-
-
2,603
2,603
-
-
31,567
-
-
31,567
21,003
868
868
27,945
67,646
-
-
67,646
-
-
-
-
-
-
Total
$
30,000
30,000
441,567
10,000
10,000
521,567
2020
Non-Executive Directors:
Stephen Rouvray
Ryan Macnamee
Executive Directors:
Brett Kelly*
Paul Kuchta**
Ada Poon**
*
**
Brett Kelly voluntarily received a 20% reduction in his base salary from 1 April 2020 to 30 June 2020 in response to
the uncertainty of COVID-19.
The Nomination and Remuneration Committee approved an annual director fee of $12,000 inclusive of
superannuation for executive directors Paul Kuchta and Ada Poon, commencing September 2019.
17
Kelly Partners Group Holdings Limited
Directors' report
30 June 2020
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*
Details of Paul Kuchta and Ada Poon's remuneration are outlined below under 'Service agreements'.
*
Pauline resigned as the Chief Financial Officer on 26 March 2019 with a 6 month notice period. The amount set out in
the table represents her remuneration from the beginning of the financial year till the end of her notice period.
The fixed and the variable at risk proportions of remuneration are as follows:
Name
Non-Executive Directors:
Stephen Rouvray
Ryan Macnamee
Executive Directors:
Brett Kelly
Paul Kuchta
Ada Poon
Pauline Michelakis
Fixed remuneration
2019
2020
At risk - STI
At risk - LTI
2020
2019
2020
2019
100%
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:
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.
18
Kelly Partners Group Holdings Limited
Directors' report
30 June 2020
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Stephen Rouvray
Deputy Chairman, Non-Executive Independent Director
2 May 2017
No fixed period
Director fees $30,000 inclusive of superannuation, to be reviewed annually by the
Nomination and Remuneration Committee.
Ryan Macnamee
Non-Executive Independent 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.
Paul Kuchta
Executive Director
2 May 2017
No fixed period
Director fees of $12,000 inclusive of superannuation, to be reviewed annually by the
Nomination and Remuneration Committee.
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.
Ada Poon
Executive Director
6 September 2019
No fixed period
Director fees of $12,000 inclusive of superannuation, to be reviewed annually by the
Nomination and Remuneration Committee.
Ada Poon is an Operating Business Owner in the Kelly Partners North Sydney
Partnership and receives a base distribution plus a distribution of profits from that
Operating Business in accordance with the terms of the Partnership Agreement.
Share-based compensation
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 2020.
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 2020.
Additional information
The earnings of the Group for the four years to 30 June 2020 are summarised below:
Revenue and other gains
EBITDA
Profit after income tax
2020
$
2019
$
2018
$
2017
$
48,148,806
17,109,412
10,359,306
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
19
Kelly Partners Group Holdings Limited
Directors' report
30 June 2020
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)
2020
2019
2018
2017
0.88
8.84
8.84
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
Ryan Macnamee
Paul Kuchta
Ada Poon
Pauline Michelakis
Balance at
the start of
the year
23,276,378
50,000
125,046
164,000
-
1,000,000
24,615,424
Additions*
Other**
123,622
50,000
20,000
-
326,398
-
520,020
-
-
-
-
-
(1,000,000)
(1,000,000)
Balance at
the end of
the year
23,400,000
100,000
145,046
164,000
326,398
-
24,135,444
*
**
There were no shares received as part of remuneration.
Pauline is no longer a key management personnel as at 30 June 2020 and hence her shareholding is not disclosed.
Loans to key management personnel and their related parties
Loans to directors:
Balance at the beginning of the year
- loans advanced
- interest on loans
- repayment of loans advanced
Balance at the end of the year
$
-
333,623
11,220
(326,700)
18,143
On 18 March 2020, the Board of Directors resolved and approved the advancing of a short term loan facility between the
Group and an associated entity of Brett Kelly and David Irwin, the Operating Partner in the Kelly Partners Inner West
Partnership, to assist with the purchase of 766 Darling St, Rozelle ('the Rozelle Property'). The facility is unsecured,
repayable on demand and interest is charged at commercial rates. As at 30 June 2020, there was $18,143 owing on this
facility. The Kelly Partners (Inner West) Property Trust business operates out of the Rozelle Property. As at 30 June 2020,
the operating business continues under the lease which was in place prior to the sale and purchase of the Rozelle
Property.
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 2020 and up to the date of this report.
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.
20
Kelly Partners Group Holdings Limited
Directors' report
30 June 2020
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 33 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 33 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 (including Independence Standards) 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 William Buck Accountants & Advisors
There are no officers of the Company who are former partners of William Buck Accountants & Advisors.
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.
Auditor
William Buck Accountants & Advisors was appointed as auditor during the year and continues in office in accordance with
section 327 of the Corporations Act 2001.
The appointment follows the resignation of Deloitte Touche Tohamatsu in accordance with section 329(5) of the
Corporation Act 2001.
21
Kelly Partners Group Holdings Limited
Directors' report
30 June 2020
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
21 August 2020
Sydney
22
Kelly Partners Group Holdings Limited
Auditor’s independence declaration under section 307c of
the Corporations Act 2001
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2020
there have been:
— no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
— no contraventions of any applicable code of professional conduct in relation to the
audit.
William Buck
Accountants & Advisors
ABN: 16 021 300 521
L.E. Tutt
Partner
Sydney, 21 August 2020
23
ACCOUNTANTS & ADVISORSSydney Office Level 29, 66 Goulburn Street Sydney NSW 2000Parramatta Office Level 7, 3 Horwood Place Parramatta NSW 2150Telephone: +61 2 8263 4000williambuck.comWilliam Buck is an association of firms, each trading under the name of William Buck across Australia and New Zealand with affiliated offices worldwide. Liability limited by a scheme approved under Professional Standards Legislation.(WB013_2007) Kelly Partners Group Holdings Limited
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2020
Revenue
Professional services revenue
Other income
Total revenue and other income
Expenses
Employment and related expenses
Rent and utilities
Other expenses
Business acquisition and restructuring 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
Consolidated
Note
2020
$
2019
$
6
7
8
8
8
9
46,354,466
1,794,340
48,148,806
39,975,031
367,103
40,342,134
(21,762,214)
(188,704)
(8,540,865)
(547,611)
(3,740,900)
(1,535,539)
(36,315,833)
(19,555,935)
(2,500,714)
(7,175,786)
(944,555)
(1,249,279)
(868,595)
(32,294,864)
11,832,973
8,047,270
(1,473,667)
(899,616)
10,359,306
7,147,654
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
1,440
1,440
1,585
1,585
Total comprehensive income for the year
10,360,746
7,149,239
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
6,344,797
4,014,509
4,711,959
2,435,695
10,359,306
7,147,654
6,345,531
4,015,215
4,712,736
2,436,503
10,360,746
7,149,239
Cents
Cents
Basic earnings per share
Diluted earnings per share
28
28
8.84
8.84
5.35
5.35
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
24
Kelly Partners Group Holdings Limited
Consolidated statement of financial position
As at 30 June 2020
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Lease receivables
Accrued income
Other financial assets
Other assets
Total current assets
Non-current assets
Lease receivables
Financial assets
Other financial assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Contract liabilities
Borrowings
Lease liabilities
Current tax liabilities
Provisions
Contingent consideration
Other financial liabilities
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Deferred tax liabilities
Provisions
Contingent consideration
Other financial liabilities
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
Consolidated
Note
2020
$
2019
$
10
11
12
13
14
15
12
16
14
17
18
19
15
20
21
22
9
23
24
25
26
21
22
9
23
24
25
26
3,779,132
5,782,772
92,956
1,656,656
903,610
635,113
12,850,239
3,955,119
6,099,138
-
2,009,017
1,704,255
687,972
14,455,501
180,298
11,637
2,865,078
5,188,052
5,895,450
30,299,572
442,117
44,882,204
-
15,481
3,212,503
3,957,842
-
27,227,897
633,005
35,046,728
57,732,443
49,502,229
2,312,757
564,334
6,291,235
1,742,850
886,105
2,202,475
637,256
10,992
-
14,648,004
2,229,838
482,572
5,874,545
-
570,187
1,981,007
-
-
193,991
11,332,140
12,720,608
5,351,024
307,394
237,313
808,544
689,914
46,244
20,161,041
12,753,088
-
412,468
285,385
544,719
-
46,244
14,041,904
34,809,045
25,374,044
22,923,398
24,128,185
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
25
Kelly Partners Group Holdings Limited
Consolidated statement of financial position
As at 30 June 2020
Equity
Issued capital
Reserve
Retained profits
Equity attributable to the owners of Kelly Partners Group Holdings Limited
Non-controlling interest
Total equity
Consolidated
Note
2020
$
2019
$
27
29
14,081,465
1,514
1,812,094
15,895,073
7,028,325
14,169,601
808
698,437
14,868,846
9,259,339
22,923,398
24,128,185
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
26
Kelly Partners Group Holdings Limited
Consolidated statement of changes in equity
For the year ended 30 June 2020
Consolidated
Issued
capital
$
Reserve
$
Retained
profits
$
Non-
controlling
interest
$
Total equity
$
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 (note 27)
Adjustment to non-controlling interest
Amounts recognised as dividends (note 30)
Distributions to non-controlling interests
-
-
808
808
719,566
9,228,760
24,119,803
2,435,695
4,711,959
7,147,654
-
777
1,585
2,435,695
4,712,736
7,149,239
-
-
-
(1,876)
-
-
-
-
-
-
-
-
-
(2,456,824)
-
-
65,846
-
(4,748,003)
(1,876)
65,846
(2,456,824)
(4,748,003)
Balance at 30 June 2019
14,169,601
808
698,437
9,259,339
24,128,185
Consolidated
Issued
capital
$
Reserve
$
Retained
profits
$
Non-
controlling
interest
$
Total equity
$
Balance at 1 July 2019
14,169,601
808
698,437
9,259,339
24,128,185
Adjustment for change in accounting policy
(note 4)
-
-
(453,214)
(488,852)
(942,066)
Balance at 1 July 2019 - restated
14,169,601
808
245,223
8,770,487
23,186,119
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 (note 27)
Amounts recognised as dividends (note 30)
Distributions to non-controlling interests
-
-
-
-
4,014,509
6,344,797
10,359,306
706
706
-
734
1,440
4,014,509
6,345,531
10,360,746
(88,136)
-
-
-
-
-
-
(2,447,638)
-
-
-
(8,087,693)
(88,136)
(2,447,638)
(8,087,693)
Balance at 30 June 2020
14,081,465
1,514
1,812,094
7,028,325
22,923,398
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
27
Kelly Partners Group Holdings Limited
Consolidated statement of cash flows
For the year ended 30 June 2020
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Government grants received
Finance costs paid
Income taxes paid
Consolidated
Note
2020
$
2019
$
51,901,820
(35,946,225)
776,024
(822,514)
(1,264,883)
46,594,198
(34,724,287)
-
(819,926)
(1,076,534)
Net cash from operating activities
40
14,644,222
9,973,451
Cash flows from investing activities
Payment for purchase of business
Payment in respect of contingent consideration
Payments for property, plant and equipment
Payments for intangibles
Loans to partners - loans advanced
Loans to partners - proceeds from repayments
Proceeds from disposal of property, plant and equipment
Proceeds from release of deposits
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Payments for share buy-backs
Dividends paid
Distributions paid to non-controlling interests
Repayment of lease liabilities
Proceeds from sub lease
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
38
40
40
27
40
(2,531,000)
-
(1,944,240)
(236,438)
(305,009)
2,153,985
20,000
190,888
(2,827,771)
(231,418)
(2,223,624)
(163,702)
(2,371,809)
1,000,900
167,804
65,440
(2,651,814)
(6,584,180)
6,037,413
(5,761,572)
(88,136)
(2,398,743)
(8,087,693)
(2,158,946)
180,913
6,506,684
(3,201,279)
(1,876)
(1,956,379)
(4,748,003)
-
-
(12,276,764)
(3,400,853)
(284,356)
1,428,680
(11,582)
1,440,262
Cash and cash equivalents at the end of the financial year
10
1,144,324
1,428,680
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
28
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
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 21 August 2020. 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, amendments and Interpretations issued by the
Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards, amendments or Interpretations that are not yet mandatory have not been
early adopted.
The following Accounting Standards, amendments and Interpretations adopted during the year are most relevant to the
Group:
AASB 16 Leases
The Group has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 'Leases' and for lessees eliminates
the classifications of operating leases and finance leases. Except for short-term leases and leases of low-value assets,
right-of-use assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-line
operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in
depreciation and amortisation expense) and an interest expense on the recognised lease liabilities (included in finance
costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when
compared to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortisation) results improve as the operating expense is now replaced by interest expense and depreciation in profit or
loss. For classification within the statement of cash flows, the interest portion is disclosed in operating activities and the
principal portion of the lease payments are separately disclosed in financing activities. For lessor accounting, the standard
does not substantially change how a lessor accounts for leases.
Refer to note 4 for impact of adoption of AASB 16 Leases.
AASB 2020-4 Amendment to Australian Accounting Standards - Covid-19-Related Rent Concessions
The Group has early adopted the amendment to AASB 16 from 1 July 2019. The amendment provides a practical
expedient for lessees to account for COVID-19-related rent concessions that: result in lease payments that are
substantially the same as, or less than, the consideration for the lease immediately prior to the change; where any
reduction in the lease payments affects only payments originally due on or before 30 June 2021; and where there is no
substantive change to other terms and conditions of the lease. The practical expedient allows an entity not to assess rent
concessions meeting the criteria as a lease modification. As a result, to the extent that lease concessions represent a
forgiveness or waiver of lease payments, such concessions are treated as variable lease payments recognised in profit or
loss with a corresponding adjustment to the lease liability. The Group has applied the practical expedient to all rent
concessions that meet the above mentioned criteria and the profit or loss impact from the adoption is minimal.
29
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
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 and
financial liabilities 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 37.
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 2020 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.
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.
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same
basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the
allocation of resources to operating segments and assessing their performance.
Foreign currency translation
The financial statements are presented in Australian dollars, which is Kelly Partners Group Holdings Limited's functional
and presentation currency.
30
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
Foreign currency transactions
Foreign currency transactions are translated into the entity's functional currency 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.
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.
Government grants
Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them
with the costs that they are intended to compensate.
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.
31
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
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.
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.
32
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
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.
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, its 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.
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 mandatorily measured at fair value through other comprehensive income, the loss allowance is
recognised in other comprehensive income with a corresponding expense through profit or loss. In all other cases, the loss
allowance reduces the asset's carrying value with a corresponding expense through 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.
33
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
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:
Land and 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 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.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in
the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset,
and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful
life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of
the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted
for any remeasurement of lease liabilities.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with
terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss
as incurred.
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.
34
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
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 and borrowings are classified as non-current.
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.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the lease, discounted using the Group's incremental borrowing
rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that
depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase
option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties.
The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are
incurred. Variable lease payments include rent concessions in the form of rent forgiveness or a waiver as a direct
consequence of COVID-19 and which relate to payments originally due on or before 30 June 2021.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured
if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual
guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an
adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use
asset is fully written down.
Group as a lessor
When the Group is an intermediate lessor, it accounts for the head lease and the sublease as two separate contracts. The
sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
35
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
Leases in which the Group transfers substantially all the risks and rewards incidental to the ownership of an asset are
classified as a finance lease, where the asset is recognised on the statement of financial position and presented as a lease
receivable at an amount equal to the net investment in the lease. The interest rate implicit in the lease is used to measure
the net investment in the lease. Initial direct costs are included in the initial measurement of the net investment in the lease.
Finance costs
All finance costs are expensed in the period in which they are incurred.
Provisions
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is
probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value
of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the
provision resulting from the passage of time is recognised as a finance cost.
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.
36
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
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.
Dividends
Dividends are recognised when declared during the financial year and no longer at the discretion of the Company.
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion
of the Company, on or before the end of the financial year but not distributed at the reporting date.
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.
37
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
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.
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 2020. 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.
Conceptual Framework for Financial Reporting (Conceptual Framework)
The revised Conceptual Framework is applicable to annual reporting periods beginning on or after 1 January 2020 and
early adoption is permitted. The Conceptual Framework contains new definition and recognition criteria as well as new
guidance on measurement that affects several Accounting Standards. Where the Group has relied on the existing
framework in determining its accounting policies for transactions, events or conditions that are not otherwise dealt with
under the Australian Accounting Standards, the Group may need to review such policies under the revised framework. At
this time, the application of the Conceptual Framework is not expected to have a material impact on the Group's financial
statements.
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.
COVID-19
Judgement has been exercised in considering the impacts that COVID-19 has had, or may have, on the Group based on
known information. This consideration extends to the nature of the products and services offered, customers, supply chain,
staffing and geographic regions in which the Group operates. Other than as addressed in specific notes, there does not
currently appear to be either any significant impact upon the financial statements or any significant uncertainties with
respect to events or conditions which may impact the Group unfavourably as at the reporting date or subsequently as a
result of COVID-19.
38
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
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.
Lease term
The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement
is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the
underlying asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods
to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical
incentive to exercise an extension option, or not to exercise a termination option, are considered at the lease
commencement date. Factors considered may include the importance of the asset to the Group's operations; comparison
of terms and conditions to prevailing market rates; incurrence of significant penalties; existence of significant leasehold
improvements; and the costs and disruption to replace the asset. The Group reassesses whether it is reasonably certain to
exercise an extension option, or not exercise a termination option, if there is a significant event or significant change in
circumstances.
Incremental borrowing rate
Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to
discount future lease payments to measure the present value of the lease liability at the lease commencement date. Such
a rate is based on what the Group estimates it would have to pay a third party to borrow the funds necessary to obtain an
asset of a similar value to the right-of-use asset, with similar terms, security and economic environment.
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. Impact of adoption of AASB 16 Leases
AASB 16 was adopted using the modified retrospective approach and as such the comparatives have not been restated.
The impact of adoption on opening retained earnings as at 1 July 2019 was as follows:
39
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 4. Impact of adoption of AASB 16 Leases (continued)
Operating lease commitments as at 30 June 2019
Discounted using the Group's incremental borrowing rate of 4.63% - 5.13%
Add: finance lease liabilities recognised as at 1 July 2019
Less: short-term leases recognised on a straight-line basis as expense
Add: adjustments as a result of a different treatment of extension and termination options
Lease liabilities recognised at 1 July 2019
Right-of-use assets
Lease receivable
Lease liabilities
Deferred rent liability
Tax effect on the above adjustments
Reduction in retained profits as at 1 July 2019
Note 5. Operating segments
The Group is organised into two reportable segments: (1) Accounting and (2) Other services.
1 July 2019
$
11,896,194
(1,636,026)
93,433
(37,445)
909,233
11,225,389
1 July 2019
$
9,413,661
454,167
(11,225,389)
193,912
221,583
(942,066)
The principal products and services of each of these operating segments are as follows:
Accounting
Accounting and taxation services, corporate secretarial, outsourced CFO, audits, business
structuring, bookkeeping, and all other accounting related services.
Financial broking services, wealth management, corporate advisory, investment office and
all other non-accounting services.
Other services
The operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are
identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of
resources.
The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting policies
adopted for internal reporting to the CODM are consistent with those adopted in the financial statements.
Operating reportable segment information
Year ended 30 June 2020:
Revenue
EBITDA
Profit before income tax expense
Segment assets, liabilities and net assets at 30 June 2020:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
40
Accounting
$
Other
services
$
Total
$
43,396,473
15,745,339
10,500,324
2,957,993
1,364,073
1,332,649
46,354,466
17,109,412
11,832,973
12,080,406
44,837,660
(14,157,099)
(20,137,154)
22,623,812
769,833
44,544
(490,905)
(23,887)
299,586
12,850,239
44,882,204
(14,648,004)
(20,161,041)
22,923,398
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 5. Operating segments (continued)
Year ended 30 June 2019:
Revenue
EBITDA
Profit before income tax expense
Segment assets, liabilities and net assets at 30 June 2019:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Note 6. Professional services revenue
Accounting
$
Other
services
$
Total
$
38,099,780
9,726,049
7,626,128
1,875,251
439,095
421,142
39,975,031
10,165,144
8,047,270
13,893,346
35,029,513
(11,188,084)
(13,945,216)
23,789,560
562,155
17,215
(144,056)
(96,688)
338,625
14,455,501
35,046,728
(11,332,140)
(14,041,904)
24,128,185
Professional services revenue
Timing of revenue recognition
The revenue from provision of services from contracts with customers is recognised over time.
Refer to note 5 for revenue by operating segments.
Note 7. Other income
Government grants
Remeasurement of lease liabilities
Change in fair value of contingent consideration
Commissions
Other income
Other income
Consolidated
2020
$
2019
$
46,354,466
39,975,031
Consolidated
2020
$
2019
$
1,075,910
557,012
-
109,238
52,180
-
-
220,463
110,667
35,973
1,794,340
367,103
Government grants
Of the $1,075,910 recognised in government grants relating to the Australian Governments’ supporting measures in
response to COVID-19, $776,024 has been received in cash and $299,886 has been accrued relating to FY20 amounts
expected to be received in FY21.
41
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 8. Expenses
Profit before income tax includes the following specific expenses:
Depreciation and amortisation
Depreciation right-of-use of assets
Depreciation property, plant and equipment
Amortisation
Finance costs
Interest and finance charges paid/payable on lease liabilities
Interest on bank overdrafts and loans
Interest on unwinding retention
Net loss on disposal
Net loss on disposal of property, plant and equipment
Leases (included in rent and utilities expense)
Minimum lease payments
Short-term lease payments
Employment and related expenses
Salaries, wages and contractors
Superannuation
Other on costs
Employee leave
Total employment and related expenses
Consolidated
2020
$
2019
$
2,102,657
714,030
924,213
-
510,666
738,613
3,740,900
1,249,279
554,565
822,514
158,460
-
815,505
53,090
1,535,539
868,595
20,488
26,971
-
55,026
2,092,480
-
55,026
2,092,480
19,763,668
1,391,764
877,256
(270,474)
17,314,745
1,330,840
846,612
63,738
21,762,214
19,555,935
42
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 9. 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%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Other non-taxable items
Adjustment recognised for prior periods
Distributions to non-controlling interests
Change in tax rate to 27.5%
Income tax expense
Consolidated
2020
$
2019
$
1,596,483
(57,578)
(65,238)
1,497,755
(634,585)
36,446
1,473,667
899,616
11,832,973
8,047,270
3,254,068
2,212,999
(226,345)
(58,207)
3,027,723
(65,238)
(1,488,818)
-
2,154,792
36,446
(1,196,562)
(95,060)
1,473,667
899,616
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
Leases
Deferred tax liability
Movements:
Opening balance
Credited to profit or loss
Additions through business combinations (note 38)
Other movements
Closing balance
43
Consolidated
2020
$
2019
$
(425,655)
297,771
242,097
594,596
(212,015)
(189,400)
(431,982)
374,723
67,388
754,646
(352,307)
-
307,394
412,468
412,468
(57,578)
223,643
(271,139)
827,427
(634,585)
235,134
(15,508)
307,394
412,468
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 9. Income tax (continued)
Provision for income tax
Provision for income tax
Note 10. 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:
Balances as above
Bank overdrafts (note 21)
Balance as per statement of cash flows
Note 11. Trade and other receivables
Current assets
Trade receivables
Less: Allowance for expected credit losses
Other receivables
Consolidated
2020
$
2019
$
886,105
570,187
Consolidated
2020
$
2019
$
3,779,132
3,955,119
3,779,132
(2,634,808)
3,955,119
(2,526,439)
1,144,324
1,428,680
Consolidated
2020
$
2019
$
5,738,538
(253,954)
5,484,584
6,424,827
(339,956)
6,084,871
298,188
14,267
5,782,772
6,099,138
Allowance for expected credit losses
The Group has written off a loss of $60,059 (2019: $79,282) in respect of credit losses during the year ended 30 June
2020.
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
Consolidated
0 to 3 months overdue
3 to 6 months overdue
Over 6 months overdue
Expected credit loss rate
2020
%
2019
%
Carrying amount
2019
$
2020
$
Allowance for expected
credit losses
2020
$
2019
$
0.88%
6.17%
43.09%
1.17%
5.59%
42.50%
4,939,036
362,767
436,735
4,945,247
939,921
539,659
43,398
22,376
188,180
58,037
52,552
229,367
5,738,538
6,424,827
253,954
339,956
44
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 11. Trade and other receivables (continued)
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. As at 30 June 2020 the historic roll rates, including those roll rates through the COVID-
19 pandemic period, do not indicate a slow down in collections. Furthermore management are not aware of forward looking
information which indicates or identifies a slow down in collection rates in its 30 June 2020 trade receivables balance and
as such, the calculation of expected credit loss is based on the historic roll rates without further adjustments.
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Reductions in provisions recognised
Receivables written off during the year as uncollectable
Closing balance
Note 12. Lease receivables
Current assets
Lease receivables
Non-current assets
Lease receivables
Note 13. Accrued income
Current assets
Accrued income
Note 14. Other financial assets
Current assets
Loans to partners
Non-current assets
Loans to partners
45
Consolidated
2020
$
2019
$
339,956
-
(25,943)
(60,059)
261,958
157,280
-
(79,282)
253,954
339,956
Consolidated
2020
$
2019
$
92,956
180,298
273,254
-
-
-
Consolidated
2020
$
2019
$
1,656,656
2,009,017
Consolidated
2020
$
2019
$
903,610
1,704,255
2,865,078
3,212,503
3,768,688
4,916,758
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 14. Other financial assets (continued)
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 15. Other assets
Current assets
Prepayments
Non-current assets
Deposits
Consolidated
2020
$
2019
$
635,113
687,972
442,117
633,005
1,077,230
1,320,977
Deposits primarily comprise of amounts used as security for bank guarantees. Refer to note 34 for further information on
guarantees.
Note 16. Financial assets
Non-current assets
Shares in listed entities - at fair value
Note 17. Property, plant and equipment
Non-current assets
Land and 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
46
Consolidated
2020
$
2019
$
11,637
15,481
Consolidated
2020
$
2019
$
2,085,413
625,825
3,172,594
(1,274,334)
1,898,260
3,127,492
(960,322)
2,167,170
2,133,789
(1,326,961)
806,828
1,879,397
(1,074,484)
804,913
624,503
(226,952)
397,551
581,842
(221,908)
359,934
5,188,052
3,957,842
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 17. 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 2018
Additions
Disposals - written down value
Depreciation expense
Balance at 30 June 2019
Additions
Disposals - written down value
Other movements
Depreciation expense
Land and
buildings
$
Leasehold
improve-
ments
$
Plant and
equipment
$
Motor
vehicles
$
625,825
-
-
-
625,825
1,459,588
-
-
-
751,237
1,646,533
(5,893)
(224,707)
2,167,170
98,974
(11,554)
(1,000)
(355,330)
626,061
409,486
(10,072)
(220,562)
804,913
333,523
(43,852)
702
(288,458)
436,536
167,605
(178,810)
(65,397)
359,934
141,546
(37,345)
3,658
(70,242)
Total
$
2,439,659
2,223,624
(194,775)
(510,666)
3,957,842
2,033,631
(92,751)
3,360
(714,030)
Balance at 30 June 2020
2,085,413
1,898,260
806,828
397,551
5,188,052
Note 18. Right-of-use assets
Non-current assets
Land and buildings - right-of-use assets
Less: Accumulated depreciation
Plant and equipment - right-of-use
Less: Accumulated depreciation
Consolidated
2020
$
2019
$
13,432,769
(7,597,420)
5,835,349
174,247
(114,146)
60,101
5,895,450
-
-
-
-
-
-
-
The Group leases land and buildings for its offices under agreements of between 1 to 7 years with, in some cases, options
to extend. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated. The Group
also leases office equipment under agreements of between 2 to 5 years.
Reconciliations
Reconciliations of the written down values at the beginning and end of the current financial year are set out below:
47
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 18. Right-of-use assets (continued)
Balance at 1 July 2019
Recognised on adoption of AASB 16
Additions through business combinations (note 38)
Disposals
Adjustments as a result of a different treatment of extension and termination
options
Depreciation expense
Note 19. Intangible assets
Non-current 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
Land and
buildings
$
Plant and
equipment
$
Total
$
-
9,325,329
587,611
(114,884)
-
88,332
8,623
-
-
9,413,661
596,234
(114,884)
(1,896,904)
(2,065,803)
-
(36,854)
(1,896,904)
(2,102,657)
5,835,349
60,101
5,895,450
Consolidated
2020
$
2019
$
22,438,348
20,211,955
3,300,000
3,300,000
9,359,097
(4,916,586)
4,442,511
7,605,813
(4,053,672)
3,552,141
221,986
(103,273)
118,713
218,771
(54,970)
163,801
30,299,572
27,227,897
48
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 19. 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 2018
Additions
Additions through business combinations (note
38)
Disposals
Amortisation expense
Balance at 30 June 2019
Additions
Additions through business combinations (note
38)
Disposals
Amortisation expense
Brand names
and
intellectual
property
$
Goodwill
$
Customer
relationships
$
Computer
Software
$
Total
$
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)
20,211,955
-
3,300,000
-
3,552,141
344,198
163,801
21,144
27,227,897
365,342
2,226,393
-
-
-
-
-
1,409,086
-
(862,914)
-
(4,933)
(61,299)
3,635,479
(4,933)
(924,213)
Balance at 30 June 2020
22,438,348
3,300,000
4,442,511
118,713
30,299,572
Brand names and intellectual property have indefinite useful lives and are not amortised.
Impairment testing
In disclosing the carrying amount of goodwill allocated to each cash-generating units ('CGU'), a materially threshold of 10%
of the total value of goodwill was used. Any individual CGU with a carrying amount of goodwill under the threshold is
grouped in the "Other partnerships" category. The aggregate carrying amount of goodwill allocated to each CGU is:
2020 - Consolidated
Kelly Partners (Sydney) Pty Ltd
Kelly Partners South West Sydney Partnership
Kelly Partners Wollongong Partnership
Other partnerships
Brand names
and
intellectual
property
$
Total
$
520,354
771,621
498,815
1,509,210
4,058,501
6,018,257
3,890,507
11,771,083
Goodwill
$
3,538,147
5,246,636
3,391,692
10,261,873
22,438,348
3,300,000
25,738,348
49
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 19. Intangible assets (continued)
2019 - Consolidated
Kelly Partners (Sydney) Pty Ltd
Kelly Partners South West Sydney Partnership
Kelly Partners Wollongong Partnership
Other partnerships
Brand names
and
intellectual
property
$
Total
$
Goodwill
$
3,538,147
5,246,636
3,391,692
8,035,480
577,672
856,617
553,761
1,311,950
4,115,819
6,103,253
3,945,453
9,347,430
20,211,955
3,300,000
23,511,955
The recoverable amount of each CGU 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 reasonable possible change in
any of the key assumptions used would cause the carrying value of the unit to materially exceed its recoverable amount.
The following assumptions were used in the calculations:
Terminal growth rate
Post-tax discount rate
Consolidated
2020
%
2019
%
2.5%
11.3%
2.5%
16.5%
The post-tax discount rate is calculated using the Weighted Average Cost of Capital (WACC) of the Group, taking into
account the Group's sources of capital including listed equity, unlisted equity and bank debt.
Note 20. Trade and other payables
Current liabilities
Trade payables
GST payable
Sundry payables and accrued expenses
Refer to note 31 for further information on financial instruments.
Consolidated
2020
$
2019
$
479,951
914,711
918,095
352,791
838,331
1,038,716
2,312,757
2,229,838
50
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 21. Borrowings
Current liabilities
Bank overdrafts
Bank loans
Non-current liabilities
Bank loans
Consolidated
2020
$
2019
$
2,634,808
3,656,427
2,526,439
3,348,106
6,291,235
5,874,545
12,720,608
12,753,088
19,011,843
18,627,633
Refer to note 31 for further information on financial instruments.
Controlled entities' facilities
The Group has banking facilities in place with Westpac for all of its operating businesses. The facilities consist of overdraft
facilities, term loans, bank guarantees and other ancillary facilities.
In June 2020, the Group’s financier approved working capital facility increases in aggregate of $4,179,000 across the
operating businesses. The Group requested the facility increases out of an abundance of caution to provide additional lines
of liquidity in response to the COVID-19 related slow down to the economy. The additional facilities are in place for 12
months. As part of the approved facilities there were no changes to the Group’s financial covenants or existing amortisation
arrangements which continue to be met. The Group considers the additional working capital lines to be both precautionary
and prudent. The Group has not taken up any of the banks, COVID-19 Customer Support packages or deferral of interest
payments. As at the date of this report, these additional working capital lines have not been utilised.
In the prior year ended 30 June 2019, the Group commenced restructuring its debt facilities with Westpac. As at 30 June
2020, all subsidiaries had entered into the new facility structure. The facilities provide the Group with consistent terms and
conditions, consistent reporting and undertaking requirements, consistent risk margins and a consistent security structure
across its subsidiaries. Each subsidiaries debt facilities is 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.
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
As at 30 June 2020, the parent has a $2,000,000 revolving line of term credit, as well as a $894,976 term amortising loan.
The debt facilities are granted security over the parent entity, as well as the guarantor group which comprises Kelly
Partners Group Holdings Limited and the majority of its wholly owned subsidiaries. The guarantor group does not include
the local owner-driven operating partnerships.
The parent entity also has bilateral arrangements in place with Westpac and other financiers for ancillary 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.
51
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 21. Borrowings (continued)
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank overdraft
Bank loans
Used at the reporting date
Bank overdraft
Bank loans
Unused at the reporting date
Bank overdraft
Bank loans
Note 22. Lease liabilities
Current liabilities
Lease liabilities
Non-current liabilities
Lease liabilities
Consolidated
2020
$
2019
$
10,559,000
17,198,702
27,757,702
4,224,506
17,759,989
21,984,495
2,634,808
16,377,035
19,011,843
2,526,439
16,101,194
18,627,633
7,924,192
821,667
8,745,859
1,698,067
1,658,795
3,356,862
Consolidated
2020
$
2019
$
1,742,850
5,351,024
7,093,874
-
-
-
Refer to note 31 for further information on financial instruments.
Contractual maturities of lease liabilities at 30 June 2020 is set below:
Consolidated
Lease liabilities
1 year or
less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5
years
$
Remaining
contractual
maturities
$
1,742,850
1,301,710
2,924,862
1,124,452
7,093,874
52
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 23. Provisions
Current liabilities
Employee entitlements
Dividends
Lease make good
Non-current liabilities
Employee entitlements
Note 24. Contingent consideration
Current liabilities
Contingent consideration
Non-current liabilities
Contingent consideration
Consolidated
2020
$
2019
$
1,453,135
549,340
200,000
1,480,562
500,445
-
2,202,475
1,981,007
237,313
285,385
2,439,788
2,266,392
Consolidated
2020
$
2019
$
637,256
-
808,544
544,719
1,445,800
544,719
Contingent consideration relates to the fair value of the contingent component of the purchase price of the acquisitions
completed in the current and prior period(s).
A reconciliation of the movement in contingent consideration for the financial year is set out below:
Opening balance
Recognition on acquisition
Change in fair value of contingent consideration
Settled in cash
Unwinding of interest over contingent period
Consolidated
2020
$
2019
$
544,719
742,621
-
-
158,460
231,418
716,513
(220,463)
(231,418)
48,669
1,445,800
544,719
53
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 25. Other financial liabilities
Current liabilities
Loans from partners
Non-current liabilities
Loans from partners
Refer to note 14 for details on loans to and from partners.
Note 26. Other liabilities
Current liabilities
Deferred rent
Non-current liabilities
Deposits held
Note 27. Issued capital
Consolidated
2020
$
2019
$
10,992
689,914
700,906
-
-
-
Consolidated
2020
$
2019
$
-
193,991
46,244
46,244
46,244
240,235
Ordinary shares - fully paid
45,400,000
45,495,000
14,081,465
14,169,601
Movements in ordinary share capital
Consolidated
2020
Shares
2019
Shares
2020
$
2019
$
Details
Balance
Share buy-back
Balance
Share buy-back
Share buy-back
Share buy-back
Share buy-back
Share buy-back
Share buy-back
Share buy-back
Share buy-back
Balance
Date
Shares
Issue price
$
1 July 2018
14 May 2019
45,497,181
(2,181)
$0.860
14,171,477
(1,876)
30 June 2019
01 July 2019
20 August 2019
27 August 2019
28 August 2019
29 August 2019
30 August 2019
21 October 2019
22 October 2019
45,495,000
(4,353)
(40,647)
(1,000)
(1,000)
(1,000)
(14,191)
(25,745)
(7,064)
30 June 2020
45,400,000
$0.830
$0.900
$0.930
$0.880
$0.880
$0.930
$0.970
$1.010
14,169,601
(3,613)
(36,582)
(930)
(879)
(880)
(13,158)
(24,960)
(7,134)
14,081,465
54
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 27. Issued capital (continued)
Ordinary shares
Ordinary shares entitle the holder to participate in any dividends and any proceeds attributable to shareholders should the
company be wound up, in proportions that consider both the number of shares held and the extent to which those shares
are paid up. The fully paid ordinary shares have no par value and the Company does not have a limited amount of
authorised capital.
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 9 September 2019, the Company announced a new 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 4,543,280 shares at 9 September 2019)
less shares bought back in the buy-back closed on 2 September 2019 (being 64,372 shares), therefore a total of 4,478,908
shares. During the financial year ended 30 June 2020, the Company purchased and cancelled 32,809 shares. At 30 June
2020, 4,446,099 shares are authorised for on-market 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). The Company announced
the closure of this share buy-back on 2 September 2019. The Company purchased and cancelled a total of 64,372 shares
during the period 17 April 2019 to 2 September 2019 including 62,191 during the financial year ended 30 June 2020.
Capital risk management
Management controls the capital of the Group in order to maintain acceptable debt to equity and debt to EBITDA ratios,
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 capital includes ordinary share capital and financial liabilities.
There are no externally imposed capital requirements other than the financial covenants outlined in note 21.
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 28. Earnings per share
Profit after income tax
Non-controlling interest
Consolidated
2020
$
2019
$
10,359,306
(6,344,797)
7,147,654
(4,711,959)
Profit after income tax attributable to the owners of Kelly Partners Group Holdings Limited
4,014,509
2,435,695
Weighted average number of ordinary shares used in calculating basic earnings per share
45,418,414
45,496,894
Weighted average number of ordinary shares used in calculating diluted earnings per share
45,418,414
45,496,894
Number
Number
Basic earnings per share
Diluted earnings per share
Cents
Cents
8.84
8.84
5.35
5.35
55
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 29. Reserve
Foreign currency reserve
Consolidated
2020
$
2019
$
1,514
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.
Movements in reserve
Movements in reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2018
Foreign currency translation
Less: share of non-controlling interest
Balance at 30 June 2019
Foreign currency translation
Less: share of non-controlling interest
Balance at 30 June 2020
Note 30. Dividends
Amounts recognised as dividends:
For the year ended 30 June 2020:
Special dividend of $0.0055 per ordinary share, paid on 18 September 2019
First interim dividend of $0.0121 per ordinary share, paid on 30 September 2019
Second interim dividend of $0.0121 per ordinary share, paid on 2 January 2020
Third interim dividend of $0.0121 per ordinary share, paid on 2 April 2020
Final dividend of $0.0121 per ordinary share, paid on 2 July 2020
For the year ended 30 June 2019:
First interim dividend of $0.011 per ordinary share, paid on 30 October 2018
Second interim dividend of $0.011 per ordinary share, paid on 31 December 2018
Third interim dividend of $0.011 per ordinary share, paid on 29 March 2019
Final dividend of $0.011 per ordinary share, paid on 1 July 2019
For the year ended 30 June 2018:
Final dividend of $0.01 per ordinary share, paid on 12 July 2018
Foreign
currency
$
-
1,585
(777)
808
1,440
(734)
1,514
Consolidated
2020
$
2019
$
249,881
549,737
549,340
549,340
549,340
2,447,638
-
-
-
-
-
-
-
-
-
-
-
-
500,469
500,469
500,469
500,445
2,001,852
454,972
2,447,638
2,456,824
On 2 July 2020, the Company paid the final dividend for the year ended 30 June 2020 of $0.0121 per ordinary share. This
dividend equates to a distribution of $549,340, based on the number of ordinary shares on issue as at 30 June 2020. The
dividend was declared before the reporting date and is reflected in the 30 June 2020 financial statements.
56
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 30. Dividends (continued)
Franking credits
Consolidated
2020
$
2019
$
Franking credits available for subsequent financial years
2,293,566
1,678,058
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
Note 31. 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 market risk in relation to the prices it charges for the provision of professional
services.
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% (2019: +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.
57
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 31. Financial instruments (continued)
Borrowings
Bank overdrafts
Bank loans
Weighted
average
interest rate
%
2020
+1%
$
Weighted
average
interest rate
%
-1%
$
2019
+1%
$
-1%
$
4.16%
4.27%
(26,348)
(163,770)
26,348
163,770
5.07%
4.73%
(25,264)
(161,012)
25,264
161,012
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. As at 30 June 2020 the historic roll rates, including those roll rates through the COVID-
19 pandemic period, do not indicate a slow down in collections. Furthermore management are not aware of forward looking
information which indicates or identifies a slow down in collection rates in its 30 June 2020 trade receivables balance and
as such, the calculation of expected credit loss is based on the historic roll rates without further adjustments.
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 and no active enforcement activity.
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 and available facilities to meet its liquidity requirements for up to a minimum 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:
58
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 31. Financial instruments (continued)
Consolidated - 2020
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Contract liabilities
Contingent consideration
Interest-bearing
Bank overdrafts
Bank loans*
Lease liabilities
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
$
-
-
-
-
479,951
1,832,806
564,334
637,256
-
-
-
789,532
-
-
-
19,012
-
-
-
-
479,951
1,832,806
564,334
1,445,800
4.16%
4.27%
5.05%
2,634,808
3,656,427
1,742,850
11,548,432
-
7,262,412
1,301,710
9,353,654
-
5,458,196
2,924,862
8,402,070
-
-
1,124,452
1,124,452
2,634,808
16,377,035
7,093,874
30,428,608
Lease liabilities of $1,742,850 includes $1,083,770 payable within 6 months.
*
As at 30 June 2020, bank loans of $3,568,388 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 - 2019
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Contract liabilities
Contingent consideration
Interest-bearing
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
3,348,106
8,586,955
-
6,295,308
6,840,027
-
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 $3,348,106 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.
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.
59
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 32. 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
2020
$
2019
$
490,486
26,208
4,873
895,142
46,268
1,205
521,567
942,615
Other key management personnel transactions
For details of other transactions with key management personnel, refer to note 36.
Note 33. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by William Buck Accountants &
Advisors, the auditor of the Company, and unrelated firms:
Consolidated
2020
$
2019
$
Audit services - William Buck Accountants & Advisors (2019: Deloitte Touche Tohmatsu)
Audit or review of the financial statements
53,800
147,000
Other services - William Buck Accountants & Advisors (2019: Deloitte Touche Tohmatsu)
Other services
Audit services - unrelated firms (Deloitte Touche Tohmatsu)
Audit or review of the financial statements
Note 34. Contingent liabilities
7,900
7,000
61,700
154,000
60,587
-
Bank guarantees totalling $806,339 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.
Contingent considerations in respect of acquisitions are carried on balance sheet and are not classified as contingent
liabilities by the management.
Except as noted above, in the opinion of the directors, the Group did not have any contingencies at 30 June 2020 (30 June
2019: $766,000).
60
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 35. Commitments
Short-term lease commitments
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Land and buildings
Capital commitments in FY2019 relate to two property purchases made in FY2020.
Note 36. Related party transactions
Parent entity
Kelly Partners Group Holdings Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 39.
Consolidated
2020
$
2019
$
8,845
-
-
1,332,745
Key management personnel
Disclosures relating to key management personnel are set out in note 32 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 18 March 2020, the Board of Directors resolved and approved the sale of the Group's 51 units (representing 51%) in
the Kelly Partners (Inner West) Property Trust ('KP(IW)PT') for consideration of $1.00 (actual) to an associated entity of
Brett Kelly and David Irwin, the Operating Partner in the Kelly Partners Inner West Partnership. At the time of sale, the net
assets of KP(IW)PT were $nil, the transaction was completed on arms length terms and the Group made a gain on sale of
$1.00.
On 28 June 2019, the Bathurst Property was leased to Kelly Partners (Central Tablelands) Pty Ltd under a short term
lease. The Board of Directors approved the related party lease noting that the lease was on market terms and was short
term in nature. The lease was terminated when settlement on the Bathurst Property occurred on 13 August 2019.
On 27 June 2019, the Board of Directors resolved and approved the purchase of 89 William Street, Bathurst NSW ('the
Bathurst Property'), by the Kelly Partners (Central Tablelands) Property Trust, from an associated entity of Brett Kelly and
Anna Lewis, the Operating Business Owner in the Kelly Partners Blue Mountains and Tablelands Partnership. The
purchase price was $599,000 and settlement occurred on 13 August 2019. The transaction was completed at market value
and there was no gain on sale made by the associated entity of Brett Kelly.
61
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 36. Related party transactions (continued)
Loans (to)/from related parties
Key management personnel
Loans to directors:
Balance at the beginning of the year
- loans advanced
- interest on loans
- repayment of loans advanced
Balance at the end of the year
2020
$
2019
$
-
333,623
11,220
(326,700)
18,143
-
-
-
-
-
On 18 March 2020, the Board of Directors resolved and approved the advancing of a short term loan facility between the
Group and an associated entity of Brett Kelly and David Irwin, the Operating Partner in the Kelly Partners Inner West
Partnership, to assist with the purchase of 766 Darling St, Rozelle ('the Rozelle Property'). The facility is unsecured,
repayable on demand and interest is charged at commercial rates. As at 30 June 2020, there was $18,143 owing on this
facility. The KW(IW)PT business operates out of the Rozelle Property. As at 30 June 2020, the operating business
continues under the lease which was in place prior to the sale and purchase of the Rozelle Property.
Partners
Loans (to)/from partners are set out in note 14 and note 25.
Direct interest in subsidiaries
The following related parties hold a direct interest in the respective subsidiary of the Group:
Related party
Paul Kuchta
Ada Poon
Subsidiary
2020
2019
Interest held Interest held
Kelly Partners Norwest Partnership
Kelly Partners North Sydney Partnership
25.50%
10.00%
25.50%
12.25%
Note 37. 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
2020
$
2019
$
3,537,134
2,265,359
3,537,134
2,265,359
62
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 37. Parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Retained profits
Total equity
2020
$
2019
$
6,752,174
5,297,300
25,154,690
24,283,099
1,832,525
3,604,531
7,002,102
8,963,742
18,152,588
15,319,357
14,081,465
4,071,123
14,169,601
1,149,756
18,152,588
15,319,357
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
In the financial year ended 30 June 2019, the Group commenced restructuring its debt facilities with Westpac. The facility
restructure was completed in November 2019. The facility restructure provides the Group with 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 subsidiary's debt facilities are 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.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2020 and 30 June 2019.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020 and 30 June 2019.
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 38. Business combinations
Acquisitions during the year ended 30 June 2020
Kelly Partners Melbourne CBD
On 1 November 2019, Kelly Partners (Melbourne CBD) Pty Ltd acquired an accounting business in Melbourne, VIC.
The acquired business contributed revenues of $1,636,214 and net profit before tax of $60,962 to the Group for the period
from 1 November 2019 to 30 June 2020. The profit includes one off transaction and implementation costs. The business
continues to be integrated in to the Kelly Partners group and management expect the business to be profitable on a full 12
month basis.
63
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 38. Business combinations (continued)
Details of the acquisition are as follows:
Customer relationships
Deferred tax liabilities
Employee benefits
Provisions
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash to vendor
Contingent consideration
Fair value
$
771,176
(113,841)
(143,953)
(67,500)
445,882
1,741,460
2,187,342
1,811,733
375,610
2,187,343
Kelly Partners Blue Mountains & Central Tablelands
On 1 November 2019, Kelly Partners (Blue Mountains & Central Tablelands) Pty Ltd acquired an accounting business in
Glenbrook, NSW.
The acquired business contributed revenues of $657,370 and net profit before tax of $65,976 to the Group for the period
from 1 November 2019 to 30 June 2020. The profit includes one off transaction and implementation costs. The business
continues to be integrated in to the Kelly Partners group and management expect the business to be profitable on a full 12
month basis.
Details of the acquisition are as follows:
Right-of-use assets
Customer relationships
Deferred tax liabilities
Employee benefits
Lease liabilities
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid to vendor
Contingent consideration
64
Fair value
$
596,234
637,910
(109,802)
(50,733)
(596,234)
477,375
484,933
962,308
719,267
243,041
962,308
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 38. Business combinations (continued)
Acquisitions during the year ended 30 June 2019
Kelly Partners North Sydney
On 1 September 2018, Kelly Partners (North Sydney) Pty Ltd acquired an accounting business in North Sydney, NSW.
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.
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
$
835,023
(117,112)
(30,277)
687,634
822,551
1,510,185
1,289,722
220,463
1,510,185
Kelly Partners Inner West
On 4 September 2018, Kelly Partners (Inner West) Pty Ltd acquired an accounting business in Rozelle, NSW.
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
65
Fair value
$
437,958
(66,812)
(61,424)
309,722
788,065
1,097,787
825,147
272,640
1,097,787
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 38. Business combinations (continued)
Kelly Partners Northern Beaches
On 3 December 2018, Kelly Partners (Northern Beaches) Pty Ltd acquired an accounting business in Warriewood, NSW.
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
Fair value
$
130,947
(43,591)
(18,365)
68,991
607,359
676,350
488,409
187,941
676,350
Kelly Partners Oran Park
On 1 February 2019, Kelly Partners (Oran Park) Pty Ltd acquired an accounting business in South West Sydney, NSW.
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
66
Fair value
$
157,706
(7,619)
(36,467)
113,620
146,342
259,962
224,493
35,469
259,962
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 39. Interests in subsidiaries
(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
Country on incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
KP GH NS Pty Ltd
Kelly Partners North Sydney Partnership
KP GH CC Pty Ltd
Kelly Partners Central Coast Partnership
KP GH WS Pty Ltd
Kelly Partners (Western Sydney) Partnership
KP GH SWS Pty Ltd
Kelly Partners South West Sydney Partnership
Kelly Partners Management Services Pty Ltd
Kelly Partners Services Trust
KP GH NW Pty Ltd
Kelly Partners Norwest Partnership
KP GH TC Pty Ltd
Kelly Partners Tax Consulting Partnership
Kelly Partners (Strategy Consulting) Pty Ltd
KP GH BMCT Pty Ltd (formerly KP GH CT Pty Ltd)
Kelly Partners Blue Mountains & Central Tablelands
Partnership (formerly Kelly Partners Central Tablelands
Partnership)
KP GH WO Pty Ltd
Kelly Partners Wollongong Partnership
KP GH NB Pty Ltd
Kelly Partners Northern Beaches Partnership
KP GH SH Pty Ltd
Kelly Partners Southern Highlands Partnership
Kelly Partners (South West Sydney) Trust
Kelly Partners Oran Park Partnership
Super Certain Pty Ltd
Kelly Partners Management Services (Hong Kong)
Limited
KP GH FIN Pty Ltd
KP GH WM Pty Ltd
KP GH HK Pty Ltd
Kelly Partners Finance Partnership
Kelly Partners Private Wealth Sydney Partnership
(formerly Kelly Partners Wealth Management
Partnership)
Kelly Partners Marketing Advisory Pty Ltd
Australia
(deregistered)
Australia
Kelly Partners Property Group Holdings Pty Ltd
Australia
Kelly Property Group Pty Ltd
Australia
Kelly Partners (Central Coast) Property Trust
Australia
KP GH SYD CBD Pty Ltd
Australia
Kelly Partners (Sydney) Pty Ltd
Australia
KP GH IW Pty Ltd
Australia
Kelly Partners Inner West Partnership
Australia
Kelly Partners (Tax Legal) Pty Ltd
Kelly Partners (Sydney) Audit Partnership
Australia
Kelly Partners Private Wealth Group Holdings Pty Ltd Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Hong Kong
Australia
Australia
Australia
Australia
67
Ownership interest
2019
2020
%
%
100.00%
58.25%
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%
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%
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%
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%
100.00%
100.00%
51.00%
100.00%
50.05%
100.00%
51.00%
51.00%
50.04%
100.00%
51.00%
100.00%
100.00%
51.00%
100.00%
50.05%
100.00%
51.00%
51.00%
50.04%
100.00%
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 39. Interests in subsidiaries (continued)
Name
Country on incorporation
Australia
Australia
Australia
New Zealand
New Zealand
Australia
Australia
KP GH MCBD Pty Ltd (formerly KP GH WM MCBD
Pty Ltd)
Kelly Partners Private Wealth Melbourne
Partnership (did not commence operation)
KP GH CA Pty Ltd
Kelly Partners Corporate Advisory Partnership
KP GH NZ Pty Ltd
Kelly Partners New Zealand Partnership
KP GH GII Pty Ltd (deregistered)
Kelly Partners Government, Incentives & Innovation
Partnership (dissolved)
Kelly Partners SMSF Advisory Pty Ltd
Kelly Partners (Investment Office) Pty Ltd
Kelly Partners Legacy Team Pty Ltd
Kelly Partners (Sports & Entertainment) Pty Ltd
Kelly Partners Private Wealth Pty Ltd
KP GH MEL Pty Ltd
Kelly Partners Melbourne CBD Partnership
Kelly Partners (Melbourne CBD) Pty Ltd (formerly
Australia
Kelly Partners Private Wealth (Melbourne) Pty Ltd)
Kelly Partners Private Wealth (International) Pty Ltd Australia
Australia
Kelly Partners (Estate Office) Pty Ltd
KP GH ES Pty Ltd
Australia
Kelly Partners Private Wealth Wholesale Partnership Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ownership interest
2019
2020
%
%
100.00%
100.00%
-
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%
100.00%
51.00%
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%
100.00%
-
The percentage of ownership interest held is equivalent to the percentage voting rights for all subsidiaries.
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
2020
$
2019
$
22,005,678
6,344,797
8,087,693
6,100,394
12,230,579
(2,606,778)
(6,036,802)
9,687,393
18,745,766
4,711,959
4,748,003
4,472,327
15,320,414
(1,878,047)
(6,322,736)
11,591,958
(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.
68
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 40. Cash flow information
Reconciliation of profit after income tax to net cash from operating activities
Profit after income tax expense for the year
10,359,306
7,147,654
Consolidated
2020
$
2019
$
Adjustments for:
Depreciation and amortisation
Loss on disposals
Net fair value gain on other financial assets
Change in fair value of contingent consideration
Repayments of lease liabilities
Unwinding of interest on contingent consideration
Other non-cash movements
Change in operating assets and liabilities:
Decrease in trade and other receivables
Increase in deferred tax assets
Increase in trade and other payables
Increase in provision for income tax
Net cash from operating activities
Changes in liabilities arising from financing activities
Consolidated
Balance at 1 July 2018
Proceeds from borrowings
Repayment of borrowings
Balance at 30 June 2019
Net cash used in financing activities
Proceeds from borrowings
Repayment of borrowings
Leases recognised on the adoption of AASB 16
Acquisition of leases
Adjustments as a result of a different treatment of extension and termination
options
3,740,900
-
-
-
(1,978,034)
158,460
785,190
1,249,279
26,971
(701)
(220,463)
-
48,669
-
803,348
(105,074)
564,208
315,918
1,772,387
(650,093)
126,573
473,175
14,644,222
9,973,451
Bank
loans
$
Lease
liabilities
$
Total
$
12,795,789
6,506,684
(3,201,279)
16,101,194
-
6,037,413
(5,761,572)
-
-
-
-
-
12,795,789
6,506,684
(3,201,279)
-
(2,158,946)
-
-
11,225,389
596,234
16,101,194
(2,158,946)
6,037,413
(5,761,572)
11,225,389
596,234
-
(2,568,803)
(2,568,803)
Balance at 30 June 2020
16,377,035
7,093,874
23,470,909
69
Kelly Partners Group Holdings Limited
Notes to the consolidated financial statements
30 June 2020
Note 41. Events after the reporting period
On 1 July 2020, Kelly Partners (Inner West) Pty Ltd acquired a fee base in the Inner West with an estimate annual
recurring fee of $127,000. The transaction is expected to contribute to the growth of the Kelly Partners (Inner West)
business.
The Group continues to monitor the impact of COVID-19 on its operating businesses. Despite the challenges from COVID-
19, KPG remains well positioned to execute its long term growth strategy and deliver shareholder wealth.
Apart from the matters discussed above and dividend declared as disclosed in note 30, no other matter or circumstance
has arisen since 30 June 2020 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.
70
Kelly Partners Group Holdings Limited
Directors' declaration
30 June 2020
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
2020 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
21 August 2020
Sydney
71
Kelly Partners Group Holdings Limited
Independent auditor’s report to members
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Kelly Partners Group Holdings Limited (the
Company and its subsidiaries [the Group]), which comprises the consolidated statement of
financial position as at 30 June 2020, the consolidated statement of 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 other explanatory information, 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 2020 and of
its financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001.
(ii)
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
(including independence standards) (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 of 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.
72
ACCOUNTANTS & ADVISORSSydney Office Level 29, 66 Goulburn Street Sydney NSW 2000Parramatta Office Level 7, 3 Horwood Place Parramatta NSW 2150Telephone: +61 2 8263 4000williambuck.comWilliam Buck is an association of firms, each trading under the name of William Buck across Australia and New Zealand with affiliated offices worldwide. Liability limited by a scheme approved under Professional Standards Legislation.(WB013_2007) KEY AUDIT MATTER
Recovery of Goodwill and Intangible Assets
Refer also to note 19
How our audit addressed it
The Group has $30,299,572 of intangible
assets including:
— Goodwill of $22,438,348
— Brand names and intellectual property of
$3,300,000
— Customer relationships of $4,442,511
— Computer software of $118,713
The Group has assessed that the customer
relationships and computer software have
finite lives and are amortising these assets
over their useful lives. The other intangible
assets have indefinite lives.
The carrying values of the identifiable
intangible assets are contingent on future
cash flows and there is a risk that, if these
cash flows do not meet the Group’s
expectations, the assets might be impaired.
These recoverable amounts use cash flow
forecasts in which the Directors make
judgements over certain key inputs, for
example, but not limited to, revenue growth,
discount rates applied, long term growth
rates and inflation rates.
We have performed procedures to respond to
the risk of misstatement of Goodwill and
Intangible Assets, these procedures included:
— Assessing the Group’s
determination of finite and indefinite
lives of intangible assets;
— Evaluating the Group’s budgeting
procedures (upon which the
forecasts are based);
— Assessing the principles and integrity of
the cash flow models;
— Consulting our own valuation specialists
when considering the appropriateness of
the discount rates and the long-term
growth rates;
— Testing the sensitivity of the value in use
calculations to variations in the
underlying assumptions;
— Reviewing the historical accuracy by
comparing actual results with the
original forecasts; and
— Assessing the amortisation rates used
for customer relationships and
computer software as well as testing
the corresponding charges made in
the year.
We have also assessed the adequacy of the
Group’s disclosures in respect of the intangible
assets.
Other Information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2020 but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
73
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.
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.
A further description of our responsibilities for the audit of these financial statements is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our independent auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included on pages 15 to 20 of the directors’ report for the
year ended 30 June 2020.
In our opinion, the Remuneration Report of Kelly Partners Group Holdings Limited, for the year ended
30 June 2020, complies with section 300A of the Corporations Act 2001.
74
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.
William Buck
Accountants & Advisors
ABN: 16 021 300 521
L.E. Tutt
Partner
Sydney, 21 August 2020
75
Kelly Partners Group Holdings Limited
Shareholder information
30 June 2020
The shareholder information set out below was applicable as at 22 July 2020.
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
Sandhurst Trustees Ltd
Kalumic Pty Ltd
BNP Paribas Nominees Pty Ltd IB AU Noms Retail Client DRP
Eric Golf Pty Ltd
Gildale Super Fund Pty Ltd
David Bullock + Kay Bullock + Anthony Bullock
BNP Paribas Nominees Pty Ltd Hub24 Cust Serv Ltd DRP
Dr David John Ritchie + Dr Gillian Joan Ritchie
Kenneth Ko
J P Morgan Nominees Australia Pty Limited
Mikalu Pty Ltd
ACLC Super Pty Ltd
Brojo Investments Pty Ltd
Skyplaza Investments Pty Ltd
BRJT Accounting Pty Ltd
Winda Holdings Pty Ltd
David Bullock + Kay Bullock + Anthony Bullock
Scott Elwin Family Co Pty Ltd
Unquoted equity securities
There are no unquoted equity securities.
76
Number
of holders
of options
over
ordinary
shares
Number
of holders
of ordinary
shares
212
137
78
143
40
610
27
-
-
-
-
-
-
-
Ordinary shares
Number held
% of total
shares
issued
23,276,378
5,010,424
1,442,655
636,000
504,932
491,338
466,420
458,984
455,446
400,000
393,504
371,450
364,000
336,000
326,767
300,000
286,120
278,172
264,263
264,263
36,327,116
51.27
11.04
3.18
1.40
1.11
1.08
1.03
1.01
1.00
0.88
0.87
0.82
0.80
0.74
0.72
0.66
0.63
0.61
0.58
0.58
80.01
Kelly Partners Group Holdings Limited
Shareholder information
30 June 2020
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
23,276,378
5,010,424
51.27
11.04
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.
77
KELLY PARTNERS GROUP HOLDINGS LIMITED
Office - Level 8/32 Walker Street, North Sydney, NSW 2060
78