Kelly Partners Group
Annual Report 2021

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KELLY PARTNERS GROUP HOLDINGS LIMITED ABN 25 124 908 363 2021 ANNUAL REPORT Kelly Partners Group Holdings Limited Contents 30 June 2021 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 2 3 22 23 25 27 28 29 76 77 81 83 1 Kelly Partners Group Holdings Limited Corporate directory 30 June 2021 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 annual general meeting ('AGM') of Kelly Partners Group Holdings Limited will be held on Friday, 8 October 2021. The format and venue of the AGM is yet to be finalised due to the uncertainty brought upon by the recent COVID-19 outbreak in NSW. 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 (Fourth Edition) ('Recommendations') to the extent appropriate to the size and nature of its operations. The Group’s 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 and ASX Appendix 4G are released to the ASX on the same day the Annual Report is released. The Corporate Governance Statement and Corporate Governance Compliance Manual can be found on the Company’s website - www.kellypartnersgroup.com.au/investor- centre/corporate-governance-2. 2 Kelly Partners Group Holdings Limited Directors' report 30 June 2021 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 2021. 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 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: (1) (2) Further increase our subsidiaries' earnings through tuck-in acquisitions; (3) Improving the earning power of our subsidiaries; (a) Growing our accounting subsidiaries; (b) Growing our complementary businesses; (4) Repurchasing Company’s shares when available at a meaningful discount from intrinsic value; and (5) Making an occasional large acquisition (i.e. greater than $5m in revenue). 3 Kelly Partners Group Holdings Limited Directors' report 30 June 2021 The following table presents the performance of the business against the comparative year in delivering the Group's strategy: (1) (2) Strategy Measure FY21 FY20 FY 19 FY18 FY 17 (IPO) Improving the earning power of its subsidiaries EBITDA margin of operating businesses 33.4% 32.5% 27.7% 34.0% 30.9% Further increase their earnings through tuck-in acquisitions (3) a. Growing our accounting subsidiaries Contribution to revenue growth from acquired businesses Contribution to revenue growth from existing accounting businesses 4.8% 6.6% 6.4% 17.2% - 1.4% 6.6% (6.9%) 10.5% - (3) b. Growing our complementary businesses Contribution to revenue 1.2% 2.8% 1.8% 3.1% growth from existing accounting businesses Wealth Finance Investment office Discontinued operations* Insurance(from Jan-21) Alternative Investments (from Jan-21) 1.0% 0.2% 0.0% n/a n/a n/a 0.4% 0.4% 0.9% 1.1% n/a n/a 0.7% 0.7% 0.0% 0.4% n/a n/a 1.0% 0.8% 0.4% 0.9% n/a n/a (4) Repurchasing the Company's shares when available at a meaningful discount from intrinsic value (i) Number of shares repurchased 400,000 95,000 2,181 (ii) % of shares issued repurchased 0.88% 0.21% - (5) Making an occasional large acquisition (i.e. greater than $5m in revenue) Number of large acquisitions - - - - - - - - - - - n/a n/a - - 1 * Discontinued operations being Kelly Partners Corporate Advisory. Financial metrics shown in this report exclude discontinued operations. 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. 4 Kelly Partners Group Holdings Limited Directors' report 30 June 2021 The following table summarises the key financial metrics used by the Company to measure the performance of the Group and its return to shareholders, since IPO: Key financial metric Formula FY21 FY20 FY19 FY18 FY17 (IPO) Return to owners Owners' earnings* - Group Cash from operating $12,807,837 $12,174,442 $9,673,451 $6,304,912 $6,619,077 activities - repayment of lease liabilities - maintenance capex Owners' earnings* - Parent Cash from operating $5,014,894 $3,885,041 $3,128,904 n/a n/a Return on equity Return on invested capital Earnings per share (EPS) (cents per share) Ordinary dividends (cents per share)** Ordinary dividends payout ratio** Cash conversion / debt Cash conversion Gearing ratio Net debt per partner activities - repayment of lease liabilities - maintenance capex Underlying NPATA / Equity (Underlying NPATA + cash interest) / (Equity + debt) Underlying attributed NPATA / Weighted average number of shares 46.7% 44.2% 36.6% 47.8% 35.1% 27.9% 26.1% 22.7% 31.2% 21.9% 11.32 8.67 7.02 9.51 4.97 Ordinary dividends paid 5.32 4.84 4.40 4.00 47.0% 55.8% 62.7% 42.1% - - Ordinary dividends share / EPS (underlying NPATA) Operating cashflow / Statutory EBITDA Net Debt / Underlying EBITDA Net Debt / Number of Partners 93.5% 97.3% 116.8% 63.5% 269.6% 0.84x 0.96x 1.35x 0.79x 1.4x $296,758 $346,198 $366,813 $291,167 $326,230 Number of partners Number of partners 53 44 40 39 36 * The Group uses owners' 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 liability from cash from operations (which AASB16 reclassifies to cash from financing activities). 5 Kelly Partners Group Holdings Limited Directors' report 30 June 2021 In FY21, Owners’ earnings for the 12 months were $12,807,837 (FY20: $12,174,442) up 5.2% from the prior corresponding period. Owners' earnings for the parent entity were $5,041,894 (FY20: $3,885,041), up 29.08% from the prior corresponding period. ** Ordinary dividends for FY21 includes the final dividend for FY21 expected to be declared and paid prior to November 2021. The final dividend is expected to be at least 0.68 cents per share. Review of operations In the year ended 30 June 2021 ('FY21'), the Group has recorded a consolidated statutory net profit after income tax from continuing operations of $10,945,476 (year ended 30 June 2020 ('FY20'): $10,142,653). The total comprehensive income attributable to the owners of the parent entity was $4,625,330 (FY20: $3,949,955), an increase of 17.1%. 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 unrelated to the underlying performance of the Group. 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. The following table provides a reconciliation between the NPAT and the Underlying EBITDA of the consolidated Group: Statutory net profit after income tax ('NPAT') from continuing operations Finance costs Income tax expense Depreciation and amortisation expense Consolidated 2021 $ 2020 $ 10,945,476 1,550,839 1,963,663 4,427,456 10,142,653 1,535,539 1,430,335 3,740,900 Earnings before interest, tax, depreciation and amortisation ('EBITDA') 18,887,434 16,849,427 Add: Non-recurring expenses Restructuring costs Acquisition costs Non-operating business losses Other non-recurring expenses Less: Non-recurring income 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 Net proceeds received from settlement of legal dispute Underlying EBITDA 91,306 721,474 169,246 165,314 165,389 540,682 - - (825,368) - (447,508) (107,963) (1,075,910) (557,012) - - 18,653,935 15,922,576 Underlying EBITDA of the Group was $18,653,935 (2020: $15,922,576), an increase of 17.2%. 6 Kelly Partners Group Holdings Limited Directors' report 30 June 2021 The following table provides a reconciliation between the NPAT and the Underlying NPATA which is attributable to the owners of Kelly Partners Group Holdings Limited. Consolidated 2021 $ 2020 $ Statutory NPAT from continuing operations attributable to owners of Kelly Partners Group Holdings Limited Amortisation of customer relationship intangibles NPATA attributable to owners of Kelly Partners Group Holdings Limited 4,625,330 553,624 5,178,954 3,949,955 452,728 4,402,683 Add: Non-recurring expenses Restructuring costs Acquisition costs Non-operating business losses 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 Net proceeds from settlement of legal dispute Net non-recurring items Less: Tax effect of non-recurring items 87,366 426,836 96,180 82,854 97,914 372,142 - - (450,458) - (211,462) (49,107) (17,791) (592,515) (322,321) - - (444,780) (46,331) (20,225) Underlying NPATA attributable to owners of Kelly Partners Group Holdings Limited 5,114,832 3,937,678 Underlying NPATA attributable to members of the parent entity was $5,114,832 (2020: $3,937,678), an increase of 29.9%. COVID-19 Management response and action As at 30 June 2021 the Group has not experienced a decline in revenue or collections. In FY20, out of an abundance of prudence and caution, the Group has sought to protect margins through reducing expenses and to protect the balance sheet by managing working capital and maximising liquidity through increasing its bank lines of credit. The additional bank lines of credit were reduced to their original limits in FY21 as they were not utilised. In July 2021, a renewed COVID-19 outbreak has led to lockdown and extensive restrictions imposed in the Greater Sydney area. In response to this, the Group has recommenced working from home arrangements for its team members. At the date of this report, the Group has not seen a significant impact on its revenue or collections but continues to act with prudence and caution in the current pandemic environment. Operationally the Group continues its focus on protecting the physical health, safety and mental wellbeing of its people. The Group continues to maximise the use of technology and proactively seek opportunities to improve and upgrade 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, the management undertook specific actions in response to the COVID-19 pandemic, including a reduction in ongoing expenses and overheads, negotiations of rent abatements, reduction in team sizes etc. In response to the recent COVID-19 outbreak, management may revisit these strategies to protect the Group from the potential impacts of the pandemic. Financial performance Acquisitions and integration Since 1 July 2020, the Group has completed 7 acquisitions with total annual revenues of $6.2m to $8.2m, representing an annual $0.8m to $1.0m NPATA contribution to the parent. The Group has exceeded the $3.8m target acquisition for FY21 as per the Group’s 5-year plan. The completed acquisitions are listed in the table below: 7 Kelly Partners Group Holdings Limited Directors' report 30 June 2021 # Acquired 1 Jul-20 2 Nov-20 3 Mar-21 4 Apr-21 5 Jul-21 6 Jul-21 7 Jul-21 Total % of FY20 Revenue ($46.4m) Location Inner West Oran Park Inner West Central Coast Newcastle Sydney CBD Norwest Type Tuck-in Tuck-in Tuck-in Tuck-in Marquee Tuck-in Tuck-in Acquired Revenue $0.1m - $0.1m $0.4m - $0.5m $0.6m - $0.8m $2.1m - $3.0m $0.8m - $1.0m $1.9m - $2.4m $0.3m - $0.4m $6.2m - $8.2m 13% - 18% Acquired businesses generally have lower gross margins and higher operating costs initially. 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 FY21, the Group also benefited from the contribution for the full year from the two acquisitions made in FY20 (Melbourne and Glenbrook). Offices and partners As at 30 June 2021, the Group operates out of 16 offices (30 June 2020: 15). During the year, the Group negotiated renewals of its North Sydney office lease at competitive rates. The Group also undertook a fitout upgrade to its Wollongong and Northern Beaches offices, having relocated both businesses to more modern and aesthetic premises upon the termination of its existing leases. Both new premises are located at street level with excellent exposure and visibility and are ideal locations for the Wollongong and Northern Beaches businesses to operate from in the long run. In January 2021, the Group also launched a new greenfield office in Pittwater with a view to creating a dominant presence in the Northern Beaches region together with the existing Kelly Partners Northern Beaches office in Brookvale. As at 30 June 2021, the total number of equity partners (excluding the CEO, Brett Kelly) was 53 (30 June 2020: 44) with five new partners promoted internally, four new partners recruited externally, and two partners from completed acquisitions. Post balance date, one new partner was promoted internally, taking the total number of equity partners to 54. The Group continues its focus in admitting and recruiting new partners as part of its strategy to retain and motivate key talents and to drive top line revenue growth. Properties As at 30 June 2021, the Group holds controlling interests in two of the properties out of which the Group operates. These properties house the Central Coast and Central Tablelands offices in which the Group acquired controlling interests in August 2019. The properties were acquired for a total consideration of $2.1m, of which the operating partners of the Central Coast and Central Tablelands businesses own a non-controlling interest. Following a review of the property strategy, the Group will look at unlocking its capital tied to these properties and removing the properties from the balance sheet. Revenue Revenue for FY21 increased 7.5% to $48,906,446 (FY20: $45,495,584). A reconciliation of acquisition and organic growth is set out below: FY20 Revenue Complementary business growth Accounting business growth Total organic growth Acquisition revenue Acquisition revenue FY21 Revenue 8 $ Growth rate % 45,495,584 555,648 655,373 1,211,021 2,199,841 2,199,841 48,906,446 - 1.2 1.5 2.7 4.8 4.8 7.5 Kelly Partners Group Holdings Limited Directors' report 30 June 2021 Acquired revenue of $2,199,841 contributed 4.8% of revenue growth, with in year acquisitions completed in FY21 contributing $925,948 and the annualised revenue from two acquisitions completed in FY20 contributing $1,273,893. Organic revenue increased 2.7% compared to the prior period. The Group continues to target annual organic growth of 5%. While the Group has fallen short of this target this year due to limitations to price increases during the COVID-19 period, the Group expects organic revenue to increase post COVID-19 with more opportunities for price and volume increases across the network. Operating expenses Employment and related expenses are the Group’s largest expense. Whilst the expense went up 6.3% to $22,659,311, the increase is in line with the revenue growth of 7.5%. Other expenses have decreased by $548,768 or 6.5% to $7,847,131, and is mainly due to a reduction in parent entity investments, as outlined in the “Additional investments expenditure in the Parent Entity” section below. A target for management has been to continually invest for growth but manage within or close to the Services Fee and IP License Fee received by the parent entity. Underlying EBITDA Underlying EBITDA (which measures EBITDA before one off and non-recurring items) increased 17.2% to $18,653,935 (FY20: $15,922,576). The directors consider underlying EBITDA margin before AASB 16 as a more meaningful measurement of performance. The underlying EBITDA margin before AASB 16 has increased to 32.6% (FY20: 29.6%). The EBITDA margin improvement has come about from significant reductions in the parent entity additional investments expenditure, as outlined in the subsequent section below. The Group continues to target minimum 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 2021 $ 2020 $ 2019 $ 18,653,935 (2,703,699) 15,922,576 (2,456,469) 10,889,236 - Underlying EBITDA before AASB 16 leasing adjustments 15,950,236 13,466,107 10,889,236 As a % of revenue 32.60% 29.60% 27.20% Additional investments expenditure 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. As communicated in prior financial results releases and announcements, the Company undertook a significant review of its cost structures and additional investments expenditure made during the coronavirus outbreak in March 2020 and committed to reducing the ongoing additional investments expenditure spend to be in line with the income it receives from its operating businesses. This focus and review have brought the additional investments expenditure significantly downwards to $371,127 for the year contributing significantly to the uplift in the Underlying attributed NPATA for the year. The Company maintains its strategy to continue to improve operational efficiency impact overtime, unless attractive opportunities arise where the Company sees a benefit in committing additional investments expenditure. Group Revenue Additional investments expenditure 48,906,446 371,127 45,495,584 1,630,905 39,975,031 742,439 39,468,666 371,913 % of Revenue 0.8% 3.6% 1.9% 0.9% 2021 $ 2020 $ 2019 $ 2018 $ 9 Kelly Partners Group Holdings Limited Directors' report 30 June 2021 Non-recurring and one-off items Total non-recurring income for the Group for the year was $1,380,839 (FY20: $1,632,922) and included: 1) $825,368 in one-off government grants in relation to COVID-19. The parent entity’s share of the government grants were used to repay debt attributed to the parent; $447,508 non-cash income relating to a change in fair value of contingent consideration. This relates to completed acquisitions in FY20 where the vendor had not achieved the required targets for the payment of the contingent consideration; and $107,963 in net proceeds received from the settlement of a legal dispute. The legal dispute relates to the vendor of a previously completed transaction who had breached the terms of the acquisition agreement and had agreed on settlement of the dispute upon mediation. The amount shown is net of legal fees incurred in pursuing the dispute. 2) 3) Total non-recurring expenses for the year of $1,147,340 (FY20: $706,071) which included: 1) $321,359 in lease expenses relating to a lease inherited as part of the Central Coast acquisition. On completion of the acquisition, as part of integrating the acquired business, the existing team was relocated to the Kelly Partners Central Coast office, rendering the existing premise vacant and the lease onerous. This cost is not expected to recur post the expiration of the existing lease in April 2022, and hence has been excluded from underlying results; $202,237 in non-cash fair value movements (unwinding of interest) in contingent consideration payable on acquisitions; $197,878 in expenses related to completing the 7 acquisitions this year, including legal expenses, implementation costs, finance costs of establishing debt acquisition funding, non-cash insurance expenses prepaid by the vendor and amortised, and recruitment costs of new partner to lead acquired businesses; $169,246 in start-up expenses to date in excess of revenue relating to non-operating businesses being Kelly Partners Alternative Investments and Kelly Partners General Insurance. The Kelly Partners Alternative Investments business has now been merged into Kelly Partners Private Wealth Wholesale. A new Senior Manager has been placed in the Austbrokers Kelly Partners partnership (of which Kelly Partners General Insurance holds a 50% interest) and will commence immediately post lockdown; $91,306 in restructuring costs; $81,948 in make good costs incurred on termination of the leases in the Wollongong and Northern Beaches premises; and $83,366 in other non-recurring expenses. 2) 3) 4) 5) 6) 7) The Group excludes acquisition costs in determining the non-IFRS profit measures such as Underlying EBITDA, as it provides transparency to look-through to the underlying performance of the Group. Depreciation and amortisation and finance costs Depreciation and Amortisation expense increased to $4,427,456 (FY20: $3,740,900) and includes depreciation expense of $3,352,706 (FY20: $2,816,687) and amortisation expense of $1,074,750 (FY20: $924,213).The increase in amortisation expense is due to recent acquisitions completed creating customer relationship intangible assets that are amortised in accordance with accounting standards. Finance costs of $1,550,839 is in line with the prior year (FY20: $1,535,539). Finance costs include interest on lease liabilities recognised due to the implementation of AASB 16 and the reclassification of rent expense to finance and depreciation costs. Income tax expense The Group’s Income Tax Expense has increased to $1,963,663 (FY20: $1,430,335), mainly due to an increase in taxable income and an increase in the applicable tax rates. The Group’s forecast revenue for FY22 is expected to be greater than $50m, resulting in the Group no longer being eligible as a “base rate entity”. This has led to the deferred tax rates to be updated to 30% (from 26%), such that the proportionate increase in the Income Tax Expense is much higher than the increase in Net Profit Before Tax. Note that 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 2.8% to $53,359,426 (FY20: $51,901,820). Payments to suppliers and employees increased at the same rate of 2.8% to $36,939,488 (FY20: $35,946,225). Operating Cashflow defined as Receipts from Customers less Payments to suppliers and employees) excluding Other Income (which mainly consists of one-off items) was up 2.9% to $16,419,938. 10 Kelly Partners Group Holdings Limited Directors' report 30 June 2021 Cash from investing activities In FY21 the Group spent $2,322,365 on property, plant and equipment capital expenditure. This included $1,977,417 in fitout upgrades completed in the Wollongong, Rozelle, Northern Beaches and Pittwater offices. The remaining $344,948 represents office and computer equipment, new motor vehicles and other capital expenditures. Cash from financing activities In FY21 the Group’s borrowings increased marginally by $127,816 to $16,504,851 (30 Jun 20: $16,377,035). This is despite new borrowings of $3,367,109 taken out during the year for the completion of the FY21 acquisitions. This reflects the Group’s strong and disciplined approach in repaying debt, having repaid $6,426,892 compared to $5,761,572 in the prior period, representing an increase of 11.5%. Proceeds from borrowings of $6,538,544 included $3,367,109 in acquisition funding, $1,494,052 in fitout funding, $1,080,000 relating to the buy in of seven new partners in to the respective operating businesses, and the remaining $597,383 in insurance premium funding and motor vehicle financing. Working capital The Group continues to maintain a disciplined approach to managing its lockup (defined as trade receivables and accrued income less contract liabilities), with lockup of $6,841,427 being in line with the prior year (30 Jun 20: $6,875,094). Lockup days reduced, decreasing by 7.4% to 51.1 days (30 Jun 20: 55.2 days). This continues to be a strong result and has been achieved alongside acquisition and organic growth. Capital structure The business continues to maintain an appropriately conservative capital structure. As at 30 June 2021 the Group’s Gearing Ratio (defined as Net Debt / Underlying EBITDA) reduced to 0.84x (30 Jun 20: 0.96x). Net Debt is a non-IFRS measure and means Total Borrowings less Cash and Cash Equivalents. Dividends Amounts recognised as dividends: During the year ended 30 June 2021: First interim dividend of $0.0133 per ordinary share, paid on 1 October 2020 Second interim dividend of $0.0133 per ordinary share, paid on 4 January 2021 Third interim dividend of $0.0033 per ordinary share, paid on 29 January 2021 Fourth interim dividend of $0.0033 per ordinary share, paid on 26 February 2021 Fifth interim dividend of $0.0033 per ordinary share, paid on 31 March 2021 Sixth interim dividend of $0.0033 per ordinary share, paid on 30 April 2021 Seventh interim dividend of $0.0033 per ordinary share, paid on 31 May 2021 Eighth interim dividend of $0.0033 per ordinary share, paid on 30 June 2021 During 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 Consolidated 2021 $ 2020 $ 602,490 599,831 148,683 148,684 148,684 148,500 148,500 148,500 2,093,872 - - - - - - - - - - - - - - - 249,881 549,737 549,340 549,340 549,340 2,447,638 2,093,872 2,447,638 Final dividend for the year ended 30 June 2021 will be declared and paid prior to November 2021 and will be at a minimum 0.68 cents per share. Total dividends for the year ended 30 June 2021 including the final dividend is expected to be 5.32 cents per share, representing a 10% increase on prior year ordinary dividends. Significant changes in the state of affairs Acquisition During the financial year, the Group completed 4 acquisitions with total annual revenues of $3.2m to $4.4m. Details of the acquisitions can be found in the preceding “Acquisitions and integration” section. 11 Kelly Partners Group Holdings Limited Directors' report 30 June 2021 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 23 September 2020, the Company announced the continuation of its share buy-back program 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 4,530,000 shares at 23 September 2020). During the financial year ended 30 June 2021, the Company bought back 400,000 shares. At 30 June 2021, 4,230,000 shares are authorised for on-market buy-back. COVID-19 The Group had not experienced a decline in revenue or collections due to COVID-19. Various measures were put in to place in FY20 in response to the pandemic as outlined in the preceding “COVID-19” section. 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 Acquisitions On 1 July 2021, Kelly Partners Hunter Region, a subsidiary of Kelly Partners Group Holdings Limited, acquired an accounting firm located in Newcastle, NSW. The acquisition is expected to contribute approximately $0.8m to $1.0m in annual revenues to the consolidated Group and approximately $0.1m NPATA to the Parent. On 12 July 2021, Kelly Partners Sydney, a subsidiary of Kelly Partners Group Holdings Limited, acquired an accounting firm located in Sydney CBD, NSW. The acquisition is expected to contribute approximately $2.2m to $2.4m in annual revenues to the consolidated Group and approximately $0.3m NPATA to the Parent. COVID-19 In July 2021, a renewed COVID-19 outbreak has led to lockdown and extensive restrictions imposed in the Greater Sydney area. In response to this, the Group has recommenced working from home arrangements for its team members. At the date of this report, the Group has not seen a significant impact on its revenue or collections but continues to act with prudence and caution in the current pandemic environment. Further details on managements response and action to the COVID-19 pandemic is included in the preceding “COVID-19” section. Apart from the matters discussed above, no other matter or circumstance has arisen since 30 June 2021 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 2021 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 26 businesses over 17 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 22,701,961 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 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 150,000 ordinary shares None None 13 Kelly Partners Group Holdings Limited Directors' report 30 June 2021 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 Australia since 2012 and served as Group CIO for 7.5 years. In addition to his Australian CIO role, Ryan is also the Group Chief Information Security Officer (CISO) at Laing O’Rourke. Ryan is responsible for all IT functions within Laing O’Rourke with a focus on strategic objectives, global alignment and delivering business value. In his Group Chief Information Security Officer role Ryan is responsible for Cyber Security across the Laing O’Rourke Group. Prior to his current role, he held several senior IT management positions at Woolworths, earlier in his career, Ryan served in various senior IT positions at financial, insurance, construction and retail operations globally. Ryan is currently on the board of thinkproject Australia & New Zealand, and previously held board positions at the Open Data Institute and Advanced Navigation. None Other current directorships: 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 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 over 20 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. None Other current directorships: Former directorships (last 3 years): None None Special responsibilities: 351,227 ordinary shares Interests in shares: None Interests in options: None Interests in rights: 14 Kelly Partners Group Holdings Limited Directors' report 30 June 2021 Company secretary 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 Kelly Partners Corporate Advisory and Kelly Partners 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 has graduated with a first class honours in law. She also holds Masters degrees in Accounting, Tax and Applied Finance. 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 2021, 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 6 7 7 7 7 7 7 7 7 7 2 2 2 - - 2 2 2 - - - 2 2 2 - - 2 2 2 - Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee. Committee membership As at the date of this report, the Company had an Audit and Risk Committee and a Nomination and Remuneration Committee. Members acting on the Committees of the Board during the year were: Audit and Risk Committee Nomination and Remuneration Committee Stephen Rouvray (Chairman) Ryan Macnamee 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 15 Kelly Partners Group Holdings Limited Directors' report 30 June 2021 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. The reward framework is designed to align executive reward to shareholders' interests. The Board has 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 benefits (for example motor vehicle benefits) where it does not create any additional costs to the Group and provides additional value to the executive. 16 Kelly Partners Group Holdings Limited Directors' report 30 June 2021 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 FY2021 the EIP Trust purchased 57,360 shares on market for a total of $104,383 with an average share price of $1.82. As at 30 June 2021, total shares of 67,089 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 2021 there was no link between Group performance and key management personnel remuneration. Use of remuneration consultants During the financial year ended 30 June 2021, the Group engaged Godfrey Remuneration Group (GRG), 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 $49,500 was paid to engage GRG. 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 GRG 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 2020 Annual General Meeting ('AGM') The motion was put to a poll at the AGM and was carried. 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 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 $ 45,662 38,844 338,306 10,959 10,959 444,730 - - - - - - - - 4,338 1,156 - - 44,389 - - 44,389 21,694 1,041 1,041 29,270 54,425 - - 54,425 - - - - - - Total $ 50,000 40,000 458,814 12,000 12,000 572,814 2021 Non-Executive Directors: Stephen Rouvray Ryan Macnamee Executive Directors: Brett Kelly Paul Kuchta Ada Poon 17 Kelly Partners Group Holdings Limited Directors' report 30 June 2021 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** Details of Paul Kuchta and Ada Poon's remuneration are outlined below under 'Service agreements'. * ** 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. 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 Fixed remuneration 2020 2021 At risk - STI At risk - LTI 2021 2020 2021 2020 100% 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: Name: Title: Agreement commenced: Term of agreement: Details: Brett Kelly Chairman, Chief Executive Officer, Executive Director 16 May 2017 No fixed period Base salary of $360,000 p.a. inclusive of superannuation, to be reviewed annually by the Nomination and Remuneration Committee. Terms include a 12 month termination notice by either party, non-solicitation and non-compete clauses. Stephen Rouvray Deputy Chairman, Non-Executive Independent Director 2 May 2017 No fixed period Director fees of $50,000 inclusive of superannuation, to be reviewed annually by the Nomination and Remuneration Committee. 18 Kelly Partners Group Holdings Limited Directors' report 30 June 2021 Name: Title: Agreement commenced: Term of agreement: Details: Name: Title: Agreement commenced: Term of agreement: Details: Name: Title: Agreement commenced: Term of agreement: Details: Ryan Macnamee Non-Executive Independent Director 2 May 2017 No fixed period Director fees of $40,000 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 2021. 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 2021. Additional information The earnings of the Group for the five years to 30 June 2021 are summarised below: 2021 $ 2020 $ 2019 $ 2018 $ 2017 $ Revenue and other gains EBITDA Profit after income tax 50,709,118 18,887,434 10,940,551 47,289,924 16,849,427 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 The factors that are considered to affect total shareholders return ('TSR') are summarised below: 2021 2020 2019 2018 2017 Share price at financial year end ($) Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 3.40 10.24 10.24 0.88 8.84 8.84 0.89 5.35 5.35 1.23 9.63 9.63 1.42 (8.37) (8.37) 19 Kelly Partners Group Holdings Limited Directors' report 30 June 2021 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 Balance at the start of the year 23,400,000 100,000 145,046 164,000 326,398 24,135,444 Additions* Other (698,039) 50,000 - - 24,829 (623,210) Balance at the end of the year 22,701,961 150,000 145,046 164,000 351,227 23,512,234 - - - - - - * There were no shares received as part of remuneration. Loans to/(from) key management personnel and their related parties 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 ('KP(IW)P'), 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. The KW(IW)PT business operates out of the Rozelle Property, under a lease which was in place prior to the sale and purchase of the Rozelle Property. As at 30 June 2020, there was $18,143 owing on this facility. This facility was repaid in the 2021 financial year. On 23 February 2021, an associated entity of Brett Kelly and David Irwin advanced a short term loan facility to Kelly Partners Inner West Partnership to the amount of $72,000. The facility is unsecured, repayable on demand and interest is charged at commercial rates. This loan has subsequently been repaid in July 2021. Loans to/(from) directors: Balance at the beginning of the year - loans advanced - interest on loans - repayment of loans advanced Balance at the end of the year $ 18,143 (72,000) (1,065) (19,004) (73,926) 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 2021 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. 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. 20 Kelly Partners Group Holdings Limited Directors' report 30 June 2021 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 31 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 31 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. 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 9 August 2021 Sydney 21 Corporations Act 2001 22 Kelly Partners Group Holdings Limited Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2021 Revenue from continuing operations 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 from continuing operations Income tax expense Profit after income tax expense from continuing operations (Loss)/profit after income tax (expense)/benefit from discontinued operations Consolidated Note 2021 $ 2020 $ 5 6 7 7 7 8 9 48,906,446 1,802,672 50,709,118 45,495,584 1,794,340 47,289,924 (22,659,311) (145,900) (7,847,131) (1,169,342) (4,427,456) (1,550,839) (37,799,979) (21,308,283) (188,704) (8,395,899) (547,611) (3,740,900) (1,535,539) (35,716,936) 12,909,139 11,572,988 (1,963,663) (1,430,335) 10,945,476 10,142,653 (4,925) 216,653 Profit after income tax (expense)/benefit for the year 10,940,551 10,359,306 Other comprehensive income Items that may be reclassified subsequently to profit or loss Foreign currency translation Other comprehensive income for the year, net of tax (3,788) (3,788) 1,440 1,440 Total comprehensive income for the year 10,936,763 10,360,746 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: Continuing operations Discontinued operations Non-controlling interest Continuing operations Discontinued operations Owners of Kelly Partners Group Holdings Limited 6,318,214 4,622,337 6,344,797 4,014,509 10,940,551 10,359,306 6,316,358 - 6,316,358 6,194,138 151,393 6,345,531 4,625,330 (4,925) 4,620,405 3,949,955 65,260 4,015,215 10,936,763 10,360,746 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 23 Kelly Partners Group Holdings Limited Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2021 Earnings per share for profit from continuing operations attributable to the owners of Kelly Partners Group Holdings Limited Basic earnings per share Diluted earnings per share Earnings per share for profit/(loss) from discontinued operations attributable to the owners of Kelly Partners Group Holdings Limited Basic earnings per share Diluted earnings per share Earnings per share for profit attributable to the owners of Kelly Partners Group Holdings Limited Basic earnings per share Diluted earnings per share 10 10 10 10 10 10 Cents Cents 10.25 10.25 (0.01) (0.01) 10.24 10.24 8.36 8.36 0.14 0.14 8.84 8.84 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 2021 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 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 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 2021 $ 2020 $ 11 12 13 14 18 13 14 15 16 17 18 19 20 21 8 22 23 24 20 21 8 22 23 24 25 4,039,976 6,204,659 51,325 1,953,426 738,200 723,583 13,711,169 3,779,132 5,782,772 92,956 1,656,656 903,610 635,113 12,850,239 128,973 2,927,454 6,332,309 9,485,670 34,474,428 554,551 53,903,385 180,298 2,865,078 5,188,052 5,895,450 30,299,572 453,754 44,882,204 67,614,554 57,732,443 3,028,694 1,316,658 8,290,304 2,383,296 1,051,065 1,993,586 697,682 60,473 18,821,758 2,312,757 564,334 6,291,235 1,742,850 886,105 2,202,475 637,256 10,992 14,648,004 11,477,861 8,663,693 794,503 227,632 1,471,269 969,609 32,083 23,636,650 12,720,608 5,351,024 307,394 237,313 808,544 689,914 46,244 20,161,041 42,458,408 34,809,045 25,156,146 22,923,398 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 2021 Equity Issued capital Reserve Retained profits Equity attributable to the owners of Kelly Partners Group Holdings Limited Non-controlling interest Total equity Consolidated Note 2021 $ 2020 $ 26 27 13,469,960 (418) 4,479,057 17,948,599 7,207,547 14,081,465 1,514 1,812,094 15,895,073 7,028,325 25,156,146 22,923,398 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 2021 Consolidated Issued capital $ Reserve $ Retained profits $ Non- controlling interest $ Total equity $ Balance at 1 July 2019 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 26) Amounts recognised as dividends (note 28) 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 Consolidated Issued capital $ Reserve $ Retained profits $ Non- controlling interest $ Total equity $ Balance at 1 July 2020 14,081,465 1,514 1,812,094 7,028,325 22,923,398 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 26) Equity attributable to acquisitions Sale of equity interests Amounts recognised as dividends (note 28) Distributions to non-controlling interests - - - - 4,622,337 6,318,214 10,940,551 (1,932) - (1,856) (3,788) (1,932) 4,622,337 6,316,358 10,936,763 (611,505) - - - - - - - - - - - 138,498 (2,093,872) - - 279,535 - - (6,416,671) (611,505) 279,535 138,498 (2,093,872) (6,416,671) Balance at 30 June 2021 13,469,960 (418) 4,479,057 7,207,547 25,156,146 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 2021 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Government grants received Other income Finance costs paid Income taxes paid Consolidated Note 2021 $ 2020 $ 53,359,426 (36,939,488) 1,125,254 106,515 (843,579) (1,725,327) 51,901,820 (35,946,225) 776,024 - (822,514) (1,264,883) Net cash from operating activities 38 15,082,801 14,644,222 Cash flows from investing activities Payment for purchase of business Payment for contingent consideration Payments for investments Payments for property, plant and equipment Payments to employee share scheme trust Payments for intangibles Loans to partners - loans advanced Loans to partners - proceeds from repayments Proceeds from fitout contribution 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-back 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 23 38 38 26 38 (2,310,632) (507,275) (41,605) (2,322,365) (110,989) (1,391) (681,504) 1,252,212 233,333 - 37,636 (2,531,000) - - (1,944,240) - (236,438) (305,009) 2,153,985 - 20,000 190,888 (4,452,580) (2,651,814) 6,538,544 (6,426,892) (611,505) (1,945,372) (6,416,671) (2,228,943) 92,956 6,037,413 (5,761,572) (88,136) (2,398,743) (8,087,693) (2,158,946) 180,913 (10,997,883) (12,276,764) (367,662) 1,144,324 (284,356) 1,428,680 Cash and cash equivalents at the end of the financial year 11 776,662 1,144,324 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 2021 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 9 August 2021. 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: Conceptual Framework for Financial Reporting (Conceptual Framework) The Group has adopted the revised Conceptual Framework from 1 July 2020. The Conceptual Framework contains new definition and recognition criteria as well as new guidance on measurement that affects several Accounting Standards, but it has not had a material impact on the Group's financial statements. 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 35. 29 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 2. Significant accounting policies (continued) 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 2021 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 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. 30 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 2. Significant accounting policies (continued) 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 Grants from the government are recognised at their fair value when there is reasonable assurance that the grant will be received and the Group will comply with all attached conditions. 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. An income tax benefit will arise for the financial year where an income tax loss is incurred and, where permitted to do so, is carried-back against a qualifying prior period's tax payable to generate a refundable tax offset. 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. 31 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 2. Significant accounting policies (continued) 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. Discontinued operations A discontinued operation is a component of the Group that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the statement of profit or loss and other comprehensive income. 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. 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. 32 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 2. Significant accounting policies (continued) 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. Property, plant and equipment Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment over their expected useful lives as follows: Land and buildings Leasehold improvements Plant and equipment Motor vehicles 40 years 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. 33 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 2. Significant accounting policies (continued) 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. 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. 34 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 2. Significant accounting policies (continued) 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 2022. 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. 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. 35 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 2. Significant accounting policies (continued) 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. Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. 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 2021 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 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 2021 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 2021. The Group has not yet assessed the impact of these new or amended Accounting Standards and Interpretations. 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. 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 . 38 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 3. Critical accounting judgements, estimates and assumptions (continued) 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. Operating segments The Group is organised into two reportable segments: (1) Accounting and (2) Other services. 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, 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. 39 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 4. Operating segments (continued) Operating reportable segment information Year ended 30 June 2021: Revenue EBITDA Profit before income tax expense Segment assets, liabilities and net assets at 30 June 2021: Current assets Non-current assets Current liabilities Non-current liabilities Net assets 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 Note 5. Professional services revenue Accounting $ Other services $ Total $ 45,874,517 17,928,432 11,986,462 3,031,929 959,002 922,677 48,906,446 18,887,434 12,909,139 11,177,990 53,284,032 (17,243,216) (21,995,145) 25,223,661 2,533,179 619,353 (1,578,542) (1,641,505) (67,515) 13,711,169 53,903,385 (18,821,758) (23,636,650) 25,156,146 Accounting $ Other services $ Total $ 43,396,473 15,801,060 10,549,304 2,099,111 1,048,367 1,023,684 45,495,584 16,849,427 11,572,988 12,076,862 44,837,660 (14,304,010) (20,137,154) 22,473,358 773,377 44,544 (343,994) (23,887) 450,040 12,850,239 44,882,204 (14,648,004) (20,161,041) 22,923,398 Professional services revenue Timing of revenue recognition The revenue from provision of services from contracts with customers is recognised over time. Refer to note 4 for revenue by operating segments. Consolidated 2021 $ 2020 $ 48,906,446 45,495,584 40 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 6. Other income Government grants in relation to COVID-19 Remeasurement of lease liabilities Change in fair value of contingent consideration Proceeds from settlement of legal dispute Commissions Other income Other income Consolidated 2021 $ 2020 $ 825,368 123,395 447,508 300,000 59,708 46,693 1,075,910 557,012 - - 109,238 52,180 1,802,672 1,794,340 Government grants Of the $825,368 (2020: $1,075,910) recognised in government grants relating to the Australian Governments’ supporting measures in response to COVID-19, $825,368 (2020: $776,024) has been received in cash and $nil (2020: $299,886) has been accrued relating to FY21 (2020: FY20) amounts expected to be received in FY22 (2020: FY21). Note 7. Expenses Profit before income tax from continuing operations 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) Short-term lease payments Employment and related expenses Salaries, wages and contractors Superannuation* Other on costs Employee leave Total employment and related expenses Consolidated 2021 $ 2020 $ 2,174,598 1,178,108 1,074,750 2,102,657 714,030 924,213 4,427,456 3,740,900 505,023 843,579 202,237 554,565 822,514 158,460 1,550,839 1,535,539 49,450 20,488 - 55,026 20,494,875 1,351,327 677,683 135,426 19,325,876 1,380,982 870,806 (269,381) 22,659,311 21,308,283 * Superannuation as a percentage of salaries, wages and contractors may vary from year to year due to changes in salary sacrifice arrangements as well as changes to contractor engagements. 41 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 8. Income tax Income tax expense Current tax Origination and reversal of temporary differences Adjustment recognised for prior periods Change in tax rate to 30% Aggregate income tax expense Income tax expense is attributable to: Profit from continuing operations (Loss)/profit from discontinued operations Aggregate income tax expense Numerical reconciliation of income tax expense and tax at the statutory rate Profit before income tax expense from continuing operations (Loss)/profit before income tax (expense)/benefit from discontinued operations Tax at the statutory tax rate of 26% (2020: 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 30% Income tax expense Consolidated 2021 $ 2020 $ 1,891,749 (99,906) 127,794 43,273 1,596,483 (57,578) (65,238) - 1,962,910 1,473,667 1,963,663 (753) 1,430,335 43,332 1,962,910 1,473,667 12,909,139 (5,678) 11,572,988 259,985 12,903,461 11,832,973 3,354,900 3,254,068 8,414 (226,345) 3,363,314 127,794 (1,571,471) 43,273 3,027,723 (65,238) (1,488,818) - 1,962,910 1,473,667 As the majority of operating businesses are structured as partnerships, the income tax expense attributable to the non- controlling 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 non-controlling 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. 42 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 8. Income tax (continued) 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 36) Other movements Closing balance Provision for income tax Provision for income tax Note 9. Discontinued operations Consolidated 2021 $ 2020 $ (532,492) 334,405 382,243 954,858 (78,244) (266,267) (425,655) 297,771 242,097 594,596 (212,015) (189,400) 794,503 307,394 307,394 (99,906) 413,733 173,282 412,468 (57,578) 223,643 (271,139) 794,503 307,394 Consolidated 2021 $ 2020 $ 1,051,065 886,105 Description In August 2020, Kelly Partners Corporate Advisory ceased operating with the exit of its operating business partner. The business’ cashflows and operations can clearly be distinguished operationally and financially from the rest of the Group and hence is disclosed as a discontinued operation. Financial performance information Professional services revenue Employment and related expenses Other expenses Total expenses (Loss)/profit before income tax (expense)/benefit Income tax (expense)/benefit Consolidated 2021 $ 2020 $ - 858,882 - (5,678) (5,678) (5,678) 753 (453,931) (144,966) (598,897) 259,985 (43,332) (Loss)/profit after income tax (expense)/benefit from discontinued operations (4,925) 216,653 43 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 9. Discontinued operations (continued) Cash flow information Net cash (used in)/from operating activities Net cash from investing activities Net cash used in financing activities Consolidated 2021 $ 2020 $ (11,028) 21,500 (3,695) 341,747 30,046 (434,081) Net increase/(decrease) in cash and cash equivalents from discontinued operations 6,777 (62,288) Note 10. Earnings per share Earnings per share for profit from continuing operations Profit after income tax Non-controlling interest Consolidated 2021 $ 2020 $ 10,945,476 (6,318,214) 10,142,653 (6,344,797) Profit after income tax attributable to the owners of Kelly Partners Group Holdings Limited 4,627,262 3,797,856 Weighted average number of ordinary shares used in calculating basic earnings per share 45,142,289 45,418,414 Weighted average number of ordinary shares used in calculating diluted earnings per share 45,142,289 45,418,414 Number Number Basic earnings per share Diluted earnings per share Earnings per share for profit/(loss) from discontinued operations (Loss)/profit after income tax Non-controlling interest (Loss)/profit after income tax attributable to the owners of Kelly Partners Group Holdings Limited Cents Cents 10.25 10.25 8.36 8.36 Consolidated 2021 $ 2020 $ (4,925) - 216,653 (151,393) (4,925) 65,260 Number Number Weighted average number of ordinary shares used in calculating basic earnings per share 45,142,289 45,418,414 Weighted average number of ordinary shares used in calculating diluted earnings per share 45,142,289 45,418,414 Basic earnings per share Diluted earnings per share 44 Cents Cents (0.01) (0.01) 0.14 0.14 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 10. Earnings per share (continued) Earnings per share for profit Profit after income tax Non-controlling interest Consolidated 2021 $ 2020 $ 10,940,551 (6,318,214) 10,359,306 (6,344,797) Profit after income tax attributable to the owners of Kelly Partners Group Holdings Limited 4,622,337 4,014,509 Weighted average number of ordinary shares used in calculating basic earnings per share 45,142,289 45,418,414 Weighted average number of ordinary shares used in calculating diluted earnings per share 45,142,289 45,418,414 Number Number Basic earnings per share Diluted earnings per share Note 11. 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 20) Balance as per statement of cash flows Note 12. Trade and other receivables Current assets Trade receivables Less: Allowance for expected credit losses Other receivables Cents Cents 10.24 10.24 8.84 8.84 Consolidated 2021 $ 2020 $ 4,039,976 3,779,132 4,039,976 (3,263,314) 3,779,132 (2,634,808) 776,662 1,144,324 Consolidated 2021 $ 2020 $ 6,420,216 (215,557) 6,204,659 5,738,538 (253,954) 5,484,584 - 298,188 6,204,659 5,782,772 Allowance for expected credit losses The Group has written off a loss of $140,323 (2020: $60,059) in respect of credit losses during the year ended 30 June 2021. 45 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 12. Trade and other receivables (continued) 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 2021 % 2020 % Carrying amount 2020 $ 2021 $ Allowance for expected credit losses 2021 $ 2020 $ 0.88% 5.77% 37.41% 0.88% 6.17% 43.09% 5,522,598 533,218 364,400 4,939,036 362,767 436,735 48,432 30,791 136,334 43,398 22,376 188,180 6,420,216 5,738,538 215,557 253,954 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 2021 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 2021 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: Consolidated 2021 $ 2020 $ 253,954 101,926 - (140,323) 339,956 - (25,943) (60,059) 215,557 253,954 Consolidated 2021 $ 2020 $ 51,325 92,956 128,973 180,298 180,298 273,254 Opening balance Additional provisions recognised Reductions in provisions recognised Receivables written off during the year as uncollectable Closing balance Note 13. Lease receivables Current assets Lease receivables Non-current assets Lease receivables 46 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 14. Other financial assets Current assets Loans to partners Non-current assets Loans to partners Consolidated 2021 $ 2020 $ 738,200 903,610 2,927,454 2,865,078 3,665,654 3,768,688 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. Property, plant and equipment Non-current assets Land and buildings - at cost Less: Accumulated depreciation Leasehold improvements - at cost Less: Accumulated depreciation Plant and equipment - at cost Less: Accumulated depreciation Motor vehicles - at cost Less: Accumulated depreciation Consolidated 2021 $ 2020 $ 2,085,413 (46,860) 2,038,553 2,085,413 - 2,085,413 4,457,611 (1,780,741) 2,676,870 3,172,594 (1,274,334) 1,898,260 2,621,146 (1,403,303) 1,217,843 2,133,789 (1,326,961) 806,828 648,011 (248,968) 399,043 624,503 (226,952) 397,551 6,332,309 5,188,052 47 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 15. 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 2019 Additions Disposals - written down value Other movements Depreciation expense Balance at 30 June 2020 Additions Disposals - written down value Other movements Depreciation expense Land and buildings $ Leasehold improve- ments $ Plant and equipment $ Motor vehicles $ 625,825 1,459,588 - - - 2,085,413 - - - (46,860) 2,167,170 98,974 (11,554) (1,000) (355,330) 1,898,260 1,375,526 (5,360) - (591,556) 804,913 333,523 (43,852) 702 (288,458) 806,828 892,412 (19,774) (459) (461,164) 359,934 141,546 (37,345) 3,658 (70,242) 397,551 100,001 (19,981) - (78,528) Total $ 3,957,842 2,033,631 (92,751) 3,360 (714,030) 5,188,052 2,367,939 (45,115) (459) (1,178,108) Balance at 30 June 2021 2,038,553 2,676,870 1,217,843 399,043 6,332,309 Note 16. 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 2021 $ 2020 $ 14,379,975 (4,994,496) 9,385,479 13,432,769 (7,597,420) 5,835,349 252,355 (152,164) 100,191 174,247 (114,146) 60,101 9,485,670 5,895,450 The Group leases land and buildings for its offices under agreements of between 2 to 10 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. For other AASB 16 and lease related disclosures refer to the following: Refer to note 7 for details of depreciation on right-of-use assets, interest on lease liabilities and other lease payments; Refer to note 21 for lease liabilities and maturities of lease liabilities; Refer to consolidated statement of cash flow for repayment of lease liabilities. 48 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 16. Right-of-use 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 2019 Recognised on adoption of AASB 16 Additions through business combinations (note 36) Disposals Adjustments as a result of a different treatment of extension and termination options Depreciation Balance at 30 June 2020 Additions through business combinations (note 36) Additions Impairment of assets Adjustments as a result of a different treatment of extension and termination options Depreciation expense Balance at 30 June 2021 Note 17. Intangible assets 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) 5,835,349 367,935 6,066,537 (189,802) 60,101 69,049 - (69,049) 5,895,450 436,984 6,066,537 (258,851) (557,958) (2,136,582) 78,106 (38,016) (479,852) (2,174,598) 9,385,479 100,191 9,485,670 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 Consolidated 2021 $ 2020 $ 25,264,891 22,438,348 3,300,000 3,300,000 11,780,770 (5,949,854) 5,830,916 9,359,097 (4,916,586) 4,442,511 223,376 (144,755) 78,621 221,986 (103,273) 118,713 34,474,428 30,299,572 49 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 17. 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 2019 Additions Additions through business combinations (note 36) Disposals Amortisation expense Balance at 30 June 2020 Additions Additions through business combinations (note 36) Amortisation expense Brand names and intellectual property $ Goodwill $ Customer relationships $ Computer Software $ Total $ 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) 22,438,348 - 3,300,000 - 4,442,511 127,000 118,713 1,390 30,299,572 128,390 2,826,543 - - - 2,294,673 (1,033,268) - (41,482) 5,121,216 (1,074,750) Balance at 30 June 2021 25,264,891 3,300,000 5,830,916 78,621 34,474,428 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: 2021 - Consolidated Kelly Partners (Sydney) Pty Ltd Kelly Partners South West Sydney Partnership Kelly Partners Wollongong Partnership Other partnerships 2020 - Consolidated Kelly Partners (Sydney) Pty Ltd Kelly Partners South West Sydney Partnership Kelly Partners Wollongong Partnership Other partnerships 50 Brand names and intellectual property $ Total $ 462,139 685,295 443,009 1,709,557 4,000,286 5,931,931 3,834,701 14,797,973 Goodwill $ 3,538,147 5,246,636 3,391,692 13,088,416 25,264,891 3,300,000 28,564,891 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 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 17. Intangible assets (continued) 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 2021 % 2020 % 2.5% 8.6% 2.5% 11.3% 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 18. Other assets Current assets Prepayments Non-current assets Deposits Other Consolidated 2021 $ 2020 $ 723,583 635,113 501,309 53,242 442,117 11,637 554,551 453,754 1,278,134 1,088,867 Deposits primarily comprise of amounts used as security for bank guarantees. Refer to note 32 for further information on guarantees. Note 19. Trade and other payables Current liabilities Trade payables GST payable Sundry payables and accrued expenses Refer to note 29 for further information on financial instruments. 51 Consolidated 2021 $ 2020 $ 853,898 932,975 1,241,821 479,951 914,711 918,095 3,028,694 2,312,757 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 20. Borrowings Current liabilities Bank overdrafts Bank loans Non-current liabilities Bank loans Consolidated 2021 $ 2020 $ 3,263,314 5,026,990 2,634,808 3,656,427 8,290,304 6,291,235 11,477,861 12,720,608 19,768,165 19,011,843 Refer to note 29 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 30 June 2021, the additional working capital lines have expired and have not been extended as they were not utilised. In the year ended 30 June 2019, the Group commenced restructuring its debt facilities with Westpac. As at 30 June 2021, 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 subsidiary's 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 2021, the parent has a $2,000,000 revolving line of term credit, as well as a $250,878 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 has 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. 52 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 20. 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 21. Lease liabilities Current liabilities Lease liabilities Non-current liabilities Lease liabilities Consolidated 2021 $ 2020 $ 7,544,000 18,395,150 25,939,150 10,559,000 17,198,702 27,757,702 3,263,314 16,504,851 19,768,165 2,634,808 16,377,035 19,011,843 4,280,686 1,890,299 6,170,985 7,924,192 821,667 8,745,859 Consolidated 2021 $ 2020 $ 2,383,296 1,742,850 8,663,693 5,351,024 11,046,989 7,093,874 Refer to note 29 for further information on financial instruments. Contractual maturities of lease liabilities at 30 June 2021 and 30 June 2020 is set below: Carrying amount $ 1 year or less $ Between 1 and 2 years $ Between 2 and 5 years $ Over 5 years $ Remaining contractual maturities $ 11,046,989 2,383,295 2,077,487 3,438,285 3,147,922 11,046,989 7,093,874 1,742,850 1,301,710 2,924,862 1,124,452 7,093,874 Consolidated - 2021 Lease liabilities Consolidated - 2020 Lease liabilities 53 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 22. Provisions Current liabilities Employee entitlements Dividends Lease make good Non-current liabilities Employee entitlements Consolidated 2021 $ 2020 $ 1,845,086 148,500 - 1,453,135 549,340 200,000 1,993,586 2,202,475 227,632 237,313 2,221,218 2,439,788 Lease make good The provision represents the present value of the estimated costs to make good the premises leased by the Group at the end of the respective lease terms. Movements in provisions Movements in each class of provision during the current financial year, other than employee benefits, are set out below: Consolidated - 2021 Carrying amount at the start of the year Paid during the year Recognised during the year Carrying amount at the end of the year Note 23. Contingent consideration Current liabilities Contingent consideration Non-current liabilities Contingent consideration Lease make good $ Dividends $ 200,000 (225,000) 25,000 549,340 (549,340) 148,500 - 148,500 Consolidated 2021 $ 2020 $ 697,682 637,256 1,471,269 808,544 2,168,951 1,445,800 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). Contingent consideration is classified as Level 3 in the fair value hierarchy and has been estimated using a present value approach. The contingent consideration fair value is estimated by discounting the future cash outflows by the post-tax discount rate disclosed in note 17. The post discount rate is calculated using the weighted average cost of capital ('WACC') of the Group. A reconciliation of the movement in contingent consideration for the financial year is set out below: 54 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 23. Contingent consideration (continued) Opening balance Additions Additions through business combination (note 38) Change in fair value of contingent consideration Settled in cash Fair value movement - unwinding of interest Note 24. 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 25. Other liabilities Non-current liabilities Deposits held Note 26. Issued capital Consolidated 2021 $ 2020 $ 1,445,800 127,000 1,348,697 (447,508) (507,275) 202,237 544,719 - 742,621 - - 158,460 2,168,951 1,445,800 Consolidated 2021 $ 2020 $ 60,473 10,992 969,609 689,914 1,030,082 700,906 Consolidated 2021 $ 2020 $ 32,083 46,244 Ordinary shares - fully paid 45,000,000 45,400,000 13,469,960 14,081,465 Consolidated 2021 Shares 2020 Shares 2021 $ 2020 $ 55 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 26. Issued capital (continued) Movements in ordinary share capital Details 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 Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back 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 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 30 June 2020 25 August 2020 26 August 2020 27 August 2020 15 October 2020 16 October 2020 20 October 2020 26 October 2020 28 October 2020 29 October 2020 30 October 2020 7 December 2020 29 December 2020 30 December 2020 31 December 2020 30 March 2021 7 April 2021 45,495,000 (4,353) (40,647) (1,000) (1,000) (1,000) (14,191) (25,745) (7,064) 45,400,000 (9,882) (63,638) (26,480) (3,670) (6,330) (136,000) (2,497) (1,503) (47,615) (1) (2,384) (11,557) (32,339) (510) (5,594) (50,000) 30 June 2021 45,000,000 $0.83 $0.90 $0.93 $0.88 $0.88 $0.93 $0.97 $1.01 $1.17 $1.23 $1.25 $1.30 $1.36 $1.36 $1.46 $1.54 $1.55 $1.61 $1.68 $1.98 $2.05 $2.08 $2.10 $2.10 14,169,601 (3,613) (36,582) (930) (879) (880) (13,158) (24,960) (7,134) 14,081,465 (11,515) (78,230) (32,968) (4,771) (8,592) (184,996) (3,646) (2,307) (73,908) (2) (4,005) (22,883) (66,252) (1,061) (11,624) (104,745) 13,469,960 Ordinary shares Ordinary shares entitle the holder to participate in any dividends declared 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 23 September 2020, the Company announced the continuation of its share buy-back program 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 4,530,000 shares at 23 September 2020). During the financial year ended 30 June 2021, the Company bought back 400,000 shares. At 30 June 2021, 4,230,000 shares are authorised for on-market buy-back. 56 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 26. Issued capital (continued) 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 20. 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 27. Reserve Foreign currency reserve Consolidated 2021 $ 2020 $ (418) 1,514 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 2019 Foreign currency translation Less: share of non-controlling interest Balance at 30 June 2020 Foreign currency translation Less: share of non-controlling interest Balance at 30 June 2021 Foreign currency $ 808 1,440 (734) 1,514 (3,788) 1,856 (418) 57 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 28. Dividends Amounts recognised as dividends: During the year ended 30 June 2021: First interim dividend of $0.0133 per ordinary share, paid on 1 October 2020 Second interim dividend of $0.0133 per ordinary share, paid on 4 January 2021 Third interim dividend of $0.0033 per ordinary share, paid on 29 January 2021 Fourth interim dividend of $0.0033 per ordinary share, paid on 26 February 2021 Fifth interim dividend of $0.0033 per ordinary share, paid on 31 March 2021 Sixth interim dividend of $0.0033 per ordinary share, paid on 30 April 2021 Seventh interim dividend of $0.0033 per ordinary share, paid on 31 May 2021 Eighth interim dividend of $0.0033 per ordinary share, paid on 30 June 2021 During 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 Consolidated 2021 $ 2020 $ 602,490 599,831 148,683 148,684 148,684 148,500 148,500 148,500 2,093,872 - - - - - - - - - - - - - - - 249,881 549,737 549,340 549,340 549,340 2,447,638 2,093,872 2,447,638 Final dividend for the year ended 30 June 2021 will be declared and paid prior to November 2021 and will be at a minimum 0.68 cents per share. Total dividends for the year ended 30 June 2021 including the final dividend is expected to be 5.32 cents per share, representing a 10% increase on prior year ordinary dividends. Franking credits Consolidated 2021 $ 2020 $ Franking credits available for subsequent financial years 2,796,189 2,293,566 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 29. 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. 58 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 29. Financial instruments (continued) 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% (2020: +1% and -1%), with effect from the beginning of the year. These changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on the financial instruments held at each reporting date. All other variables are held constant. Borrowings Bank overdrafts Bank loans Weighted average interest rate % 2021 +1% $ Weighted average interest rate % -1% $ 2020 +1% $ -1% $ 3.68% 2.92% (32,633) (165,049) 32,633 165,049 4.16% 4.27% (26,348) (163,770) 26,348 163,770 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 2021 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 2021 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. 59 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 29. Financial instruments (continued) 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 financial liabilities have contractual maturities which are summarised below: Consolidated - 2021 Non-derivatives Non-interest bearing Trade payables Other payables 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 $ - - - 853,898 2,174,796 697,682 - - 1,471,269 - - - - - - 853,898 2,174,796 2,168,951 3.68% 2.92% 5.06% 3,263,314 5,026,990 2,383,295 14,399,975 - 6,598,635 2,077,487 10,147,391 - 4,879,226 3,438,285 8,317,511 - - 3,147,922 3,147,922 3,263,314 16,504,851 11,046,989 36,012,799 Lease liabilities of $2,383,295 includes $1,224,528 payable within 6 months. * As at 30 June 2021, bank loans of $3,462,872 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 - 2020 Non-derivatives Non-interest bearing Trade payables Other payables 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 1,832,806 637,256 - - 789,532 - - 19,012 - - - 479,951 1,832,806 1,445,800 4.16% 4.27% 5.05% 2,634,808 3,656,427 1,742,850 10,984,098 - 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 29,864,274 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. 60 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 29. Financial instruments (continued) Fair value of financial instruments The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The carrying value less impairment provision of trade and other receivables and of trade and other payables is a reasonable approximation of their fair values due to the short-term nature of these balances. Note 30. 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 2021 $ 2020 $ 538,671 29,270 4,873 490,486 26,208 4,873 572,814 521,567 Other key management personnel transactions For details of other transactions with key management personnel, refer to note 34. Note 31. 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: Audit services - William Buck Accountants & Advisors Audit or review of the financial statements Other services - William Buck Accountants & Advisors Other services Audit services - unrelated firms (Deloitte Touche Tohmatsu) Audit or review of the financial statements Consolidated 2021 $ 2020 $ 71,150 53,800 6,020 7,900 77,170 61,700 - 60,587 61 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 32. Contingent liabilities Bank guarantees as at 30 June 2021 totalling $778,567 (2020: $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 2021 and 30 June 2020. Note 33. 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: Leasehold improvements Note 34. Related party transactions Parent entity Kelly Partners Group Holdings Limited is the parent entity. Subsidiaries Interests in subsidiaries are set out in note 37. Consolidated 2021 $ 2020 $ - 8,845 229,818 - Key management personnel Disclosures relating to key management personnel are set out in note 30 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. 62 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 34. Related party transactions (continued) Loans (to)/from related parties Key management personnel 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 ('KP(IW)P'), 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. The KW(IW)PT business operates out of the Rozelle Property, under a lease which was in place prior to the sale and purchase of the Rozelle Property. As at 30 June 2020, there was $18,143 owing on this facility. This facility was repaid in the 2021 financial year. On 23 February 2021, an associated entity of Brett Kelly and David Irwin advanced a short term loan facility to Kelly Partners Inner West Partnership to the amount of $72,000. The facility is unsecured, repayable on demand and interest is charged at commercial rates. This loan has subsequently been repaid in July 2021. Loans to directors: Balance at the beginning of the year - loans (from) / advanced - interest on loans - repayment of loans advanced Balance at the end of the year 2021 $ 2020 $ 18,143 (72,000) (1,065) (19,004) - 333,623 11,220 (326,700) (73,926) 18,143 Employee Share trust In FY2021, a number of operating businesses paid amounts to an Employee Share Trust as part of the Employee Share Scheme ('ESS'). The monies received by the Employee Share Trust were used to acquire the shares of Kelly Partners Group Holdings Limited (KPG.ASX). As at 30 June 2021, none of the shares held in trust were allocated to any employees of Kelly Partners. Balance at the beginning of the year - loans advanced - interest on loan Balance at the end of the year 2021 $ 2020 $ - 110,989 6,010 116,999 - - - - Partners Loans (to)/from partners are set out in note 14 and note 24. 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 2021 2020 Interest held Interest held Kelly Partners Norwest Partnership Kelly Partners North Sydney Partnership 25.50% 10.00% 25.50% 10.00% 63 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 35. Parent entity information Set out below is the supplementary information about the parent entity. The following table summarises the standalone financial information of the parent entity and is before inter company eliminations and adjustments on consolidation. Statement of profit or loss and other comprehensive income Profit after income tax Total comprehensive income Statement of financial position Total current assets Total non-current assets Total assets Total current liabilities Total non-current liabilities Total liabilities Net assets 2021 $ 2020 $ 4,713,746 3,537,134 4,713,746 3,537,134 2021 $ 2020 $ 6,051,543 20,769,806 26,821,349 6,752,174 18,402,516 25,154,690 1,851,979 4,669,910 6,521,889 1,832,525 5,169,577 7,002,102 20,299,460 18,152,588 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 2021 and 30 June 2020. Capital commitments - Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2021 and 30 June 2020. 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 36. Business combinations Acquisitions during the year ended 30 June 2021 Kelly Partners Oran Park On 16 November 2020, Kelly Partners (Oran Park) Pty Ltd acquired an accounting business in Camden, NSW. The goodwill is attributable to synergies expected to be achieved from integrating the business in to the Kelly Partners Oran Park business. 64 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 36. Business combinations (continued) The acquired business contributed revenues of $246,434 and a net profit before tax of $71,222 to the Group for the period from 16 November 2020 to 30 June 2021. The profit includes one-off transaction and implementation costs. The revenue and net profit of the acquired business, from 1 July 2020 to the date of acquisition, has not been disclosed due to limitations in the financial information relating to the pre-acquisition period. Details of the acquisition are as follows: Customer relationships Employee benefits Net assets acquired Goodwill Acquisition-date fair value of the total consideration transferred Representing: Cash paid to vendor Contingent consideration Kelly Partners Central Coast Fair value $ 267,887 (35,179) 232,708 159,905 392,613 242,939 149,674 392,613 On 15 March 2021, Kelly Partners (Central Coast) Pty Ltd acquired an accounting business in Central Coast, NSW. The goodwill is attributable to synergies expected to be achieved from integrating the business in to the Kelly Partners Central Coast business. The acquired business contributed revenues of $140,262 and a net profit before tax of $29,275 to the Group for the period from 15 March 2021 to 30 June 2021. The profit includes one-off transaction and implementation costs. The revenue and net profit of the acquired business, from 1 July 2020 to the date of acquisition, has not been disclosed due to limitations in the financial information relating to the pre-acquisition period. Details of the acquisition are as follows: Customer relationships Deferred tax liabilities Net assets acquired Goodwill Acquisition-date fair value of the total consideration transferred Representing: Cash paid to vendor Contingent consideration 65 Fair value $ 243,536 (31,723) 211,813 164,299 376,112 214,661 161,451 376,112 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 36. Business combinations (continued) Kelly Partners Inner West On 1 March 2021, Kelly Partners (Inner West) Pty Ltd acquired an accounting business in Stanmore, NSW. The goodwill is attributable to synergies expected to be achieved from integrating the business in to the Kelly Partners Inner West business. The acquired business contributed revenues of $206,151 and a net profit before tax of $24,929 to the Group for the period from 1 March 2021 to 30 June 2021. The profit includes one-off transaction and implementation costs. The revenue and net profit of the acquired business, from 1 July 2020 to the date of acquisition, has not been disclosed due to limitations in the financial information relating to the pre-acquisition period. 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 $ 330,484 (43,822) (41,571) 245,091 522,861 767,952 553,779 214,173 767,952 66 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 36. Business combinations (continued) Kelly Partners Private Wealth (Central Coast & Hunter Region) Pty Ltd On 23 April 2021, Kelly Partners Group Holdings Limited acquired a 51% interest in a financial planning business in Central Coast, NSW. The acquired business contributed revenues of $380,392 and a net profit before tax of $81,288 to the Group for the period from 23 April 2021 to 30 June 2021. The profit includes one-off transaction and implementation costs. The revenue and net profit of the acquired business, from 1 July 2020 to the date of acquisition, has not been disclosed due to limitations in the financial information relating to the pre-acquisition period. Details of the acquisition are as follows: Fair value $ 124,764 2,832 125,590 1,119,416 436,984 (93,740) (485,432) (338,188) (477,144) (16,164) (35,424) (152,042) 211,452 (103,611) 1,570,038 1,677,879 1,057,256 620,623 1,677,879 1,677,879 (124,764) (620,623) 932,492 Cash and cash equivalents Trade and other receivables Other assets Customer relationships Right of use asset Trade and other payables Lease liability Deferred tax liabilities Contract liabilities Borrowings Other liabilities Employee benefits Net assets acquired Less: non-controlling interests Goodwill Acquisition date fair value of the total consideration transferred Representing: Cash consideration Contingent consideration Cash used to acquire business, net of cash acquired: Acquisition-date fair value of the total consideration transferred Less: cash and cash equivalents Less: contingent consideration Net cash used 67 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 36. Business combinations (continued) Kelly Partners Finance (Central Coast & Hunter Region) Pty Ltd On 23 April 2021, Kelly Partners Group Holdings Limited acquired a 51% interest in a mortgage broking business in Central Coast, NSW. The acquired business contributed revenues of $31,602 and a net loss before tax of ($30,706) to the Group for the period from 23 April 2021 to 30 June 2021. The loss includes one-off transaction and implementation costs. The revenue and net profit of the acquired business, from 1 July 2020 to the date of acquisition, has not been disclosed due to limitations in the financial information relating to the pre-acquisition period. Details of the acquisition are as follows: Cash and cash equivalents Customer relationships Trade and other payables Net assets acquired Less: non-controlling interests Goodwill Acquisition date fair value of the total consideration transferred Representing: Cash consideration Contingent consideration Cash used to acquire business, net of cash acquired: Acquisition-date fair value of the total consideration transferred Less: cash and cash equivalents Less: contingent consideration Fair value $ 4,215 174,301 (311) 178,205 (87,321) 214,082 304,966 198,940 106,026 304,966 304,966 (4,215) (106,026) 194,725 Kelly Partners Insurance Services (Central Coast & Hunter Region) Pty Ltd On 23 April 2021, Kelly Partners Group Holdings Limited acquired a 51% interest in a life insurance broking business in Central Coast, NSW. The acquired business contributed revenues of $57,966 and a net profit before tax of $43,316 to the Group for the period from 23 April 2021 to 30 June 2021. The profit includes one-off transaction and implementation costs. The revenue and net profit of the acquired business, from 1 July 2020 to the date of acquisition, has not been disclosed due to limitations in the financial information relating to the pre-acquisition period. 68 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 36. Business combinations (continued) Details of the acquisition are as follows: Cash and cash equivalents Customer relationships Trade and other receivables Net assets acquired Less: non-controlling interests Goodwill Acquisition date fair value of the total consideration transferred Representing: Cash consideration Contingent consideration Cash used to acquire business, net of cash acquired: Acquisition-date fair value of the total consideration transferred Less: cash and cash equivalents Less: contingent consideration Fair value $ 18,791 159,049 2,980 180,820 (88,602) 195,358 287,576 190,827 96,749 287,576 287,576 (18,791) (96,749) 172,036 69 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 36. Business combinations (continued) 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. The revenue and net profit of the acquired business, from 1 July 2019 to the date of acquisition, has not been disclosed due to limitations in the financial information relating to the pre-acquisition period. Details of the acquisition are as follows: Customer relationships Deferred tax liability Employee benefits Provisions Net assets acquired Goodwill Acquisition-date fair value of the total consideration transferred Representing: Cash paid 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 70 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 36. Business combinations (continued) 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. The revenue and net profit of the acquired business, from 1 July 2019 to the date of acquisition, has not been disclosed due to limitations in the financial information relating to the pre-acquisition period. Details of the acquisition are as follows: Right-of-use assets Customer relationships Deferred tax liability Employee benefits Lease liabilities Net assets acquired Goodwill Acquisition-date fair value of the total consideration transferred Representing: Cash paid to vendor Contingent consideration Note 37. Interests in subsidiaries Fair value $ 596,234 637,910 (109,802) (50,733) (596,234) 477,375 484,933 962,308 719,267 243,041 962,308 (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 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 Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 71 Ownership interest 2020 2021 % % 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% 58.25% 100.00% 50.10% 100.00% 51.00% 100.00% 50.50% 100.00% 100.00% 100.00% 51.00% Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 37. Interests in subsidiaries (continued) Name Country on incorporation KP GH TC Pty Ltd Kelly Partners Tax Consulting Partnership Kelly Partners (Strategy Consulting) Pty Ltd KP GH BM Pty Ltd (formerly KP GH BMCT Pty Ltd) Kelly Partners Blue Mountains Partnership (formerly Kelly Partners Blue Mountains & 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 (deregistered) Kelly Partners Property Group Holdings Pty Ltd Kelly Property Group Pty Ltd Kelly Partners (Central Coast) Property Trust KP GH SYD CBD Pty Ltd Kelly Partners (Sydney) Pty Ltd KP GH IW Pty Ltd Kelly Partners Inner West Partnership Kelly Partners (Tax Legal) Pty Ltd Kelly Partners (Sydney) Audit Partnership Kelly Partners Private Wealth Group Holdings Pty Ltd KP GH MCBD Pty Ltd (formerly KP GH WM MCBD Pty Ltd) KP GH CA Pty Ltd Kelly Partners Corporate Advisory Partnership KP GH NZ Pty Ltd Kelly Partners New Zealand Partnership Kelly Partners SMSF Advisory Pty Ltd KPIO Pty Ltd (formerly Kelly Partners (Investment Office) Pty Ltd) Kelly Partners Legacy Team Pty Ltd (deregistered 24 Feb 2021) Kelly Partners (Sports & Entertainment) Pty Ltd (deregistered 24 Feb 2021) Kelly Partners Private Wealth Pty Ltd KP GH MEL Pty Ltd Kelly Partners Melbourne CBD Partnership Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Hong Kong Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia New Zealand New Zealand Australia Australia Australia Australia Australia Australia Australia 72 Ownership interest 2020 2021 % % 100.00% 51.00% 100.00% 100.00% 51.00% 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% 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% - 100.00% 100.00% 51.00% 100.00% 50.05% 100.00% 51.00% 51.00% 50.04% 100.00% 100.00% 100.00% 51.00% 100.00% 51.00% 100.00% 51.00% 100.00% 100.00% 51.00% 100.00% 50.05% 100.00% 51.00% 51.00% 50.04% 100.00% 100.00% 100.00% 51.00% 100.00% 51.00% 100.00% 75.50% 75.50% 100.00% 100.00% - 100.00% 100.00% 66.00% 100.00% 100.00% 100.00% 66.00% Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 37. Interests in subsidiaries (continued) Name Country on incorporation Australia Australia Australia Australia Kelly Partners (Melbourne CBD) Pty Ltd (formerly Kelly Partners Private Wealth (Melbourne) Pty Ltd) Kelly Partners Private Wealth (International) Pty Ltd Australia (deregistered 4 Feb 2021) Australia Kelly Partners (Estate Office) Pty Ltd KP GH ES Pty Ltd (deregistered 24 Feb 2021) Australia Kelly Partners Private Wealth Wholesale Partnership Australia Kelly Partners Alternative Asset Management Pty Ltd (incorporated in December 2019) Kelly Partners Ancillary Services Pty Ltd Kelly Partners Finance (Central Coast & Hunter Region) Pty Ltd (formerly Moneywise Loan & Leasing Pty Ltd) Australia Kelly Partners Investment Office (Locations) Pty Ltd Australia Kelly Partners (Investment Office) Pty Ltd (incorporated in April 2020) Kelly Partners Life Insurance Services (Central Coast & Hunter Region) Pty Ltd (formerly Moneywise Insurance Services Pty Ltd) Kelly Partners Private Wealth (Central Coast & Hunter Region) Pty Ltd (formerly Moneywise Financial Solutions Pty Ltd) KP GH AI Pty Ltd KP GH Care Pty Ltd KP GH CT Pty Ltd KP GH EL Pty Ltd KP GH FIN CC Pty Ltd KP GH GI Pty Ltd KP GH HR Pty Ltd KP GH IS CC Pty Ltd KP GH PW Pty Ltd KPGH Pty Ltd Cancer Schmancer Movement Limited (public company limited by guarantee – registered charity) Kelly Partners Alternative Investments Partnership Kelly Partners Hunter Region Partnership Kelly Partners Central Tablelands Partnership Kelly Partners Pittwater Partnership KP Care Partnership Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Ownership interest 2020 2021 % % 95.00% 95.00% - 100.00% - 51.00% 100.00% 100.00% 51.00% 100.00% 51.00% 51.00% 51.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 51.00% 51.00% 68.00% 51.00% 51.00% 100.00% 100.00% 100.00% 51.00% - - - - - - - - - - - - - - - - - - - - - - - The percentage of ownership interest held is equivalent to the percentage voting rights for all subsidiaries. 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. 73 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 37. Interests in subsidiaries (continued) (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 2021 $ 2020 $ 23,791,845 6,318,214 6,416,667 8,523,584 14,061,542 (4,839,385) (7,944,082) 9,801,658 22,005,678 6,344,797 8,087,693 6,100,394 12,230,579 (2,606,778) (6,036,802) 9,687,393 (c) Consequences of changes in a parent's ownership in a subsidiary that do not result in a loss of control There were no material changes to the parent entity's ownership in subsidiaries during the current and prior financial year. (d) Significant restrictions There are no significant restrictions on the ability of the holding company or its subsidiaries to access or use the assets and settle the liabilities of the Group. Note 38. Cash flow information Reconciliation of profit after income tax to net cash from operating activities Profit after income tax (expense)/benefit for the year 10,940,551 10,359,306 Consolidated 2021 $ 2020 $ Adjustments for: Depreciation and amortisation Repayment of lease liabilities Fair value movement - unwinding of interest Other non-cash movements Change in operating assets and liabilities: Decrease/(increase) in trade and other receivables Decrease/(increase) in deferred tax assets Increase in trade and other payables Increase in provision for income tax Net cash from operating activities 4,427,456 (2,228,943) 202,237 831,941 3,740,900 (1,978,034) 158,460 785,190 (54,803) 302,027 497,375 164,960 803,348 (105,074) 564,208 315,918 15,082,801 14,644,222 74 Kelly Partners Group Holdings Limited Notes to the consolidated financial statements 30 June 2021 Note 38. Cash flow information (continued) Non-cash investing and financing activities Consolidated 2021 $ 2020 $ Additions to the right-of-use assets Adjustments as a result of a different treatment of extension and termination options 6,299,871 (479,852) 9,413,661 (1,896,904) Changes in liabilities arising from financing activities Consolidated 5,820,019 7,516,757 Bank loans $ Lease liabilities $ Total $ Balance at 1 July 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 16,101,194 - 6,037,413 (5,761,572) - - - (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 Net cash used in financing activities Proceeds from borrowings Repayment of borrowings Acquisition of leases Changes through business combinations (note 36) Adjustments as a result of a different treatment of extension and termination options 16,377,035 - 6,538,544 (6,426,892) - 16,164 7,093,874 (2,228,943) - - 6,299,871 485,432 23,470,909 (2,228,943) 6,538,544 (6,426,892) 6,299,871 501,596 - (603,245) (603,245) Balance at 30 June 2021 16,504,851 11,046,989 27,551,840 Note 39. Events after the reporting period Acquisitions On 1 July 2021, Kelly Partners Hunter Region, a subsidiary of Kelly Partners Group Holdings Limited, acquired an accounting firm located in Newcastle, NSW. The acquisition is expected to contribute approximately $0.8m to $1.0m in annual revenues to the consolidated Group and approximately $0.1m NPATA to the Parent. On 12 July 2021, Kelly Partners Sydney, a subsidiary of Kelly Partners Group Holdings Limited, acquired an accounting firm located in Sydney CBD, NSW. The acquisition is expected to contribute approximately $2.2m to $2.4m in annual revenues to the consolidated Group and approximately $0.3m NPATA to the Parent. COVID-19 In July 2021, a renewed COVID-19 outbreak has led to lockdown and extensive restrictions imposed in the Greater Sydney area. In response to this, the Group has recommenced working from home arrangements for its team members. At the date of this report, the Group has not seen a significant impact on its revenue or collections but continues to act with prudence and caution in the current pandemic environment. Further details on management's response and action to the COVID-19 pandemic is included in the “COVID-19” section within the Directors Report. Apart from the matters discussed above and dividend declared as disclosed in note 28, no other matter or circumstance has arisen since 30 June 2021 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. 75 Kelly Partners Group Holdings Limited Directors' declaration 30 June 2021 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 2021 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 9 August 2021 Sydney 76 Report on the Audit of the Financial Report Corporations Act 2001 2001 Corporations Regulations Responsibilities for the Audit of the Financial Report Auditor’s Corporations Act 2001 (including Independence Standards) Code of Ethics for Professional Accountants Corporations Act 2001 77 78 Corporations Act 2001 Report on the Remuneration Report Corporations Act 2001 Corporations Act 2001 79 Kelly Partners Group Holdings Limited Shareholder information 30 June 2021 The shareholder information set out below was applicable as at 8 July 2021. 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 Ordinary shares Options over ordinary shares Number of holders % of total shares issued Number of holders % of total shares issued 376 287 108 162 43 976 24 0.58 1.72 1.89 10.97 84.84 100.00 - - - - - - - - - - - - - - - The number of shareholders holding less than a marketable parcel of ordinary shares is based on Kelly Partners Group Holdings Limited's closing share price of $3.4 on 30 June 2021. 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 BNP Paribas Noms Pty Ltd DRP Sandhurst Trustees Ltd J P Morgan Nominees Australia Pty Limited BNP Paribas Nominees Pty Ltd IB AU Noms Retail Client DRP Citicorp Nominees Pty Limited Kalumic Pty Ltd HSBC Custody Nominees (Australia) Limited Kristian Garnet Haigh Ackc Super Pty Ltd Eric Golf Pty Ltd Gildale Super Fund Pty Ltd Bullock Superannuation Pty Ltd BNP Paribas Nominees Pty Ltd Hub24 Cust Serv Ltd DRP HSBC Custody Nominees (Australia) Limited Kenneth Ko Mikalu Pty Ltd Sundeep Kalra + Anoop Kalra + Shikha Mohanty BRJT Accounting Pty Ltd Santra SMSF Pty Ltd Unquoted equity securities There are no unquoted equity securities. 81 80 Ordinary shares Number held % of total shares issued 22,500,000 2,720,491 999,970 843,116 777,806 711,792 636,000 571,897 501,500 500,000 491,338 466,420 458,984 425,311 423,043 393,504 364,000 300,199 286,120 273,001 34,644,492 50.00 6.05 2.22 1.87 1.73 1.58 1.41 1.27 1.11 1.11 1.09 1.04 1.02 0.95 0.94 0.87 0.81 0.67 0.64 0.61 76.99 Kelly Partners Group Holdings Limited Shareholder information 30 June 2021 Substantial holders Substantial holders in the Company are set out below: Kelly Investments 1 Pty Ltd BNP Paribas Noms Pty Ltd DRP Voting rights The voting rights attached to ordinary shares are set out below: Ordinary shares Number held % of total shares issued 22,500,000 2,720,491 50.00 6.05 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. 82 81 KELLY PARTNERS GROUP HOLDINGS LIMITED Office - Level 8/32 Walker Street, North Sydney, NSW 2060 83

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