Kelly Partners Group Holdings Limited (KPG) Earnings Call Transcript & Summary

Good morning, and welcome to our FY '23 results presentation. We were just waiting a couple of months. We've got a list of attendees, and we've now got 3 groups of people that have joined us. I hope everyone is having a great morning if you're in Sydney or our international friends from wherever you are. We've got a short presentation in the -- we've had feedback that our presentations were very long. We've tried to give all of the information in the pack. And today, what we plan to do is go through that short presentation and then take questions. I hope everyone has had a chance to review the information. We think that the most interesting about our group is that we have a system that has been able to demonstrate over nearly 20 years that it can double the business generally every 3.2 years on average. We were told almost consistently as we grew the business that as we proceeded, it would become harder to grow the business, that we would have to do larger transactions and that might prove challenging. What we found is that with the programmatic acquisition approach that we can continually grow the business, and we believe that it is now obvious that it's becoming easier to grow. And more predictable, certainly not harder. And so we always try to present our results in the context of a long running consistent way of doing business. And I think that is -- that is, hopefully, at this point, quite easy to understand. Many times, we've had people say, "Hey, Brett, can you tell us about the company in 10 seconds or less", as we've met with investors over the years. So we invented this little screen, KPG in 10 seconds. It looks at the profit and loss, balance sheet and cash flow, simple metrics that I think are easy to understand and that shows clearly the progress of the business. Revenue has grown very strongly again this year. We've done more partnerships than we have in any previous year. And we've grown the revenue very strongly and locked in strong revenue growth for next year. We expect that with 33% revenue growth this year and locked in 30% for next year. We've grown the revenue of about 60% over the last 12 months, which has been a huge effort from the team and certainly appreciate everyone's efforts. You'll notice that the revenue per FTE is still very strong, and we're pleased with the progress of the business revenue level. The EBITDA margin is tight and isn't where we would like it to be. However, in the context of a much large group of businesses joining the group, it is I think, understandable and expected that it just takes a little longer to get those businesses all tied together, and that's proceeding very, very well. We've budgeted for this year, and we're trading into this year, knowing that margins will return to their historical averages. Current NPATA is down as we've made large additional investments above the 9% that we collect from the firms but that pattern of additional investment, I think, should be well understood now, and it has to be a great use of the capital of the business. It's sacrificing short-term profits for long-term value, but not very long term, as it will be very obvious by 31 December, that there's a real return on that investment. Return on equity remains very strong. it's fallen slightly, but I think at 38.4% and ROIC of 20%. I think there's still very strong returns. The gearing of the group remains very moderate. We're at 1.65x net debt to underlying group EBITDA. And you'll note that the lockup days, industry leading at 48 days. Cash flow is very strong. Operating cash flow is up strongly, and the cash conversion is very, very strong. So the underlying cash flow position of the business is terrific. In terms of capital allocation, this little scoreboard we've provided for some time now, I think, is worth looking at. We're trying to improve the earning power of our operating businesses. I understand the compression in that margin in this period, but know that, that won't continue. With number two, we try to increase earnings through acquisitions. We've had very strong years, 2 years in a row and locked in a strong year for next year, which we're really pleased about. We think that the business is materially different at $105 million, $110 million in revenue than it is at $45 million, and that's really a couple of years turnaround of growth, growing our existing subsidiaries, growing complementary businesses are growing strongly, continuing to increase the cadence of our programmatic acquisitions. Staying away from transformational acquisitions. One this year, which is a large acquisition, but not transformational and repurchasing KPG shares when our cash flows arise. We really believe that the additional investment we've made in the future growth of the business is better than alternative uses of that capital, such as repurchasing our shares, notwithstanding that we think the shares are deeply discounted to intrinsic value. Our ROIC is averaging the way we think about, this measure at about 30%. Which is our ROIC plus organic revenue growth. We've always targeted 5% organic revenue growth in years where inflation is 6%. That doesn't look as good as it might but I think it still proves a long-term thesis of what we're trying to do. We've provided a strong information here around how we run our additional investments. In FY '20 we invested $1.6 million above the 9% we collected, which was 3.6% of revenue. This year's $2.4 million is only 2.9% of revenue. We expect that, that will lead to an almost doubling of earnings and the pattern I think is worth understanding is that 1.63 went to 371. We went to 77, it's gone back to 2.49 and you'll see that number drop again strongly. We think buying firms, when good firms present themselves. We're going to resource the group and make sure that we can do a great job of integration notwithstanding the short-term impact on earnings. So our final sort of upfront slide looks at our programmatic acquisition approach. I have been asked many, many times over the last 5 years, "hey Brett, listing the company, do you think that's made sense?" What are the pressures of running a listed company as opposed to a private company. And there's a few things to consider here, but in particular, we've got a nearly 4x increase in the number of firms that we've been able to have joined the group in the 5 years that we've been listed as opposed to 5 years pre being listed. And I think that proves out the thesis of making ourselves more visible and making ourselves more credible counterparty to leading firms. Men and women that have spent much of their like building a firm that they really care about are really a business that has really absorbed a lot of their time and heart and soul and who are looking for a trusted counterparty to take that business forward with a respectful way with their partners and their clients and in their local communities. So I think that has proven to be the right way to play, although different and look at -- many people are looking for differentiation, but are uncomfortable with difference. We know that we can't differentiate the business other than by being different. And on the other side, we provided a look at the way that we are running and have run our acquisition funnel for many, many years. So there's 28,000 firms that we are contacting consistently across the U.S., the U.K. and Australia. There's 138 live leads. We are actively meeting with firms, we expect that we can very materially grow the group over a virtually unlimited runway unless governments decide that they are disinterested in taxing people in the future, we expect that we can continue to grow a business that works with private business owners to manage their tax accounting and multi-generation or potentially family office affairs. So I couldn't be more pleased, frankly, with the improvements we've made in our system around programmatic acquisitions. For the first time, we've got a person working full time on that. We've invested in technology, and we're running, I think, now an even more professional version of what we've done before, which is really, I must say, tremendously excited. I also wanted to share that we will appoint an investment bank to undertake a strategic review. We consider that the market capital business is materially different to the intrinsic value. And so we'll sign an engagement that is later today, to undertake a strategic review to try and work out how to maximize the value of the group for all shareholders. We really think that the business has a way of understanding how to acquire or integrate and improve accounting firms. That is unique to the global market and certainly, the interest from many, many groups approaching us not just firms but private equity, private capital providers and other and excellent quality shareholders, long-term investors. I think there's a growing understanding that's the case. I think it's incumbent on us as management to find the best way to maximize the value of the know-how of the group for the benefit of shareholders. And so we're investigating what is the best way to do that. We are -- and remain committed to our current plans and maximizing the business opportunity over the long term. There's no change in terms of how we're doing what we're doing. But we are in fairness having been approached by a number of groups wanting to get the right advice so that the poll in the business can be really advised in a world-class fashion. And that's pretty exciting because it's just showing us interest in any different ways to think about the business and looking at comps of the business performance versus global peers is quite revealing. In the digital space, we've built a single point of truth that sits over the top of the systems across the group. We're trying to structure the data that we have. We have nearly 20,000 private business owner groups now as clients. They are 90% more than probably 93% of 1 system, 7%, 6% on 1 system, [ no percent ] on 1 other system. That gives us an opportunity to have all the data basically in 1 database structure that data, and be able to provide reviews of that data to our client directors and the clients, that's different than what can happen in other firms to give us the insights for the clients and our directors, that's different than they would otherwise be able to access, which will mean that we can more consistently put a differentiated -- our differentiated client offer to the clients, which is incredibly exciting. We've made now good progress on that project. Yesterday, our app called Kelly Partners Passport, which is your gateway to added value from Kelly-partners. So that way we'll give clients a way to get full value from the Kelly-Partners relationship and the relationships of group. It has been approved by Apple's app store yesterday, which is great. We've still got quite a lot of work to do to get it to where we will consider it really world-class and world-beating, but there's a lot of progress being made in that respect. We've now got nearly 20 people working in our Indian office with 10 more to come. We're making good progress on our investigations and opportunities in the U.S., and we're undertaking with a search group, a thorough investigation of the U.K. market. And so we're feeling between where we've been and where we'd like to be, but very, very excited about what the opportunities are and seriously and working seriously hard to work out the best way forward that keeps us within our circle of confidence. That ensures that we take on no material risk to the group and allows us on the basis of a long march to prosecute the investment thesis that we commenced the group with and have remained relentlessly focused on for a very long time. I'd like to finish the first part of this presentation by just stressing that when I started the group in 2006, I believe that the incumbent players in our industry had a fatal flaw, and that was that they didn't have the depth of mission values and vision. Aligned to good ideas that they would need to prosecute their position for the next 100 years, notwithstanding that they were 150-year-old businesses. Without putting anyone down or passing aspersions as to other people and their behavior. There's enough press today to make clear that those businesses that a moment ago looked shining untouchable are not as strong as they could -- might otherwise have been perceived. We consider those firms incumbents or Big4 in the second tier. And we do believe that a new style of organization with any different mission with different values and a different vision has a genuine opportunity over the next 25 years to build a very significant market position. And so if you look at the book founder's mentality, treat about buying, it's a book that is very close to our heart. It talks about making sure that as an insurgent business, you don't allow people to drag you over to the mission, values and behavior, it's a happening of the incumbents in our industry. So we are determinably different. We are determined to continue prosecuting that position as an insurgent, and we believe that we are starting to accrue the more obvious benefits of that approach. It's taken nearly 20 years. We expect it will take another 30 years to KP Group to be anywhere near what we think is a flourishing of that full vision. But we hope that there's enough green shoots there that our quality shareholders can understand the seriousness with which we're undertaking that process. Now on the back of that, I'd like to call Kenneth and his team, they've done a great job in getting these financials together and getting them out to the market swiftly, which is terrific as always. We could have released on the first of August, but we had other commitments. So we've just pushed it back. We've had the numbers ready for some time. And that team has worked extremely hard to make that happen. I'm going to leave the rest of information to be reviewed in your own time and hardly since this morning when it was released, people had a little bit of time to consider what we've presented. And now we would love to take some questions. Now various people have e-mailed me questions over the last week, and I've refrained from answering those questions because it was so close to release date. But I know a number of you are on this call. And so if you do have questions, pop them in the chat, and we'll get busy now. We've got time to take questions and give people some answers.

I can start, I think, with the first question that I can see, which is hello, Brett, can you tell us more about Indian office? What's the purpose of setting up an office in India. So what we -- we came to the view that we've seen the days to recruit go from 20 days in our group to 24 days, 25 days. However, we've only got 6 open roles in the group at the moment. And what we see is that if your workforce interested in working remotely, then really, it doesn't matter whether they work from 3 suburbs away or from the other side of the world. Often, we would get first-generation Australians from various parts of Asia, South Asia, England, Ireland, wherever they come from, come to Australia and work in the group those same people with the same qualifications and experience can happily work from anywhere. We believe that building a global business will require a global workforce. And so we want to build the muscle to be able to work with people at distance. And so we've taken a very conservative first step under the -- or in partnership with [indiscernible] for a large U.S. space firm to help us build out a facility that can hold 60 people. It's on a 2-year lease. It's a WeWork style, leasing arrangement and start to get our firms to put some team members in there and learn how to lead and manage people at a distance. The great news is that I think we could run 10% more people over the last 5 years and we've been able to access in the market as part of that team. And so we think that these team members can supplement our local teams. Hopefully, that -- that makes some sense. Second question, will you be able to see the expansion in the U.S.? I am spending my time between Australia and the U.S., I conducted investigations with a number of Australian firms that have moved their listing from Australia to the U.S., and other firms, Australian firms that are doing business in the U.S., of which there are a lot -- there are -- I met with the U.S. consulate in LA, who mentioned too -- and there are 60,000 Australian businesses in Las Angeles and there's not a single Australian accounting firm. So that looks like an opportunity. But I've got my feet on the ground. I've got my AICPA. I'm doing my Californian CPA. We are doing tremendous relationships. We've find our first binding term sheet that we can -- we're now negotiating the long forms, and we're learning a ton about that market. The market looks a lot more like Australia than you suspect. Frankly, it looks like a land of opportunity, there's 12,500 firms in California. The market appears without giving the harder and proprietary insight of the group away. Let me just generally say that we're confident that there's an opportunity for us to find a single firm do a good job of it, and grow our business and offer to our people and our clients, it's very unique and very different and I think will ultimately prove to be very valuable. So another question there also firms who join Kelly-Partners prior to 2019 substantially paid down their debt. Yes, we in a very disciplined fashion by the firms, and we paid down the debt every month. they're paid on a fixed payment schedule. So we basically set up the repayments to be a 4-year period or a 5-year period depending on the projections. And then every Monday, those businesses have debited and they paid a bit down. And there's not been any slippage that I am aware of in any of those firms paying their debt down. You'll be able to see that. I think we increased our borrowings this year by $11 million, while we paid down over $9 million of principal repayments. So we have always very disciplinedly, simply acquired an asset, give that asset and paid it down. We don't seem to draw profits from those businesses until they're debt is [ paid off ]. Hi Brett, What exactly does KPG do once an acquisition is closed in terms of getting acquiring margins up to the group standard. Well, Matthew, we can tell you what we do. We've got a very highly developed over nearly [ 85 ] of these transactions being small and in between. We take the P&L of the existing business. We've taken P&L, it's got very detailed proprietary insights around what everything expense line should be in one of these firms. And the benefit of doing the same type of transaction over and over again is we've developed real insight into how these businesses can run, if they run well. And we simply work ahead of the transaction if we have -- if we're given the opportunity and the time and certainly immediately once the transaction closes, to change the margins, which is really, really exciting. It takes a little bit of time. If we do 1 or 2 or 3 years, we can do that very quickly. If we do a few more. It takes a little bit longer. We're now trying to coach the firms to do it more of that themselves. Not under our tutelage rather than being going in and just doing it theirselves. That's working well. It gives you a partnership that have more owner mentality and more understanding, what you're doing and how you're done which I think in the long term is a better partnership, but that's what we do. It works very well. Could you talk more to the strategic review in particular rationale behind a potential privatization, how that could potentially be done? It's a great question. I wouldn't be doing my job in terms of acting in the interest of all shareholders to let the business continue to trade a share price that doesn't reflect the intrinsic value of the group. It takes away the opportunity that we should and could have if the market cap better reflected the strength of the business. There are places around the world where if this business was listed in a different market, the business would naturally trade at a much stronger valuation and would attract the attention and involvement of investors who can play in those markets. Australia is a harder place to invest for many global investors who have said that to me continually for 5 years. That said, I've always said that traditionally, this business would be private, so it would be really hard to invest in, but there it is. So we want to look at -- we have been approached by a stack-out of the U.S. We've been approached about a potential tech private. We've been approached, proposing private equity partnerships. We don't have a fixed view of any of those opportunities. But we just believe that we needed -- we need professional assistance to help the Board consider the best steps to move forward. And so you'll hear more about that imminently, but we will appoint an investment bank later today when we get a chance to sign the engagement, it might have been a little bit busy. Don't fret that there are no significant costs involved in that, in fact, no costs involved in that unless a transaction came out of that review. Another question. Please elaborate on various of the ideas and consideration namely listing U.S. discontinuing to develop, even if you're going to privatize -- given all these strong considerations. I'll just take them one at a time, if the business was listed in the U.S., the business would be material or more valuable, is the information that has been put to us and would also up in the -- the same opportunity that has occurred in Australia where we would be more visible, considered more credible and likely to be a big alternative to the very active private equity involvement in our industry in the U.S. at the moment. So the thesis when we listed in 2017, we said it would make us more visible to our market and it would make us more credible with potential vendors. I think that's been proved out pretty strongly. And I think that may well be the case of [ groups ] listed in the U.S. or the U.K. or potentially Toronto. We think we could attract other vendor firms more easily, and it would be easier to bank, it would be easier to do virtually anything. So that's certainly something we're continuing. In terms of dividend policy, it's been put to me by our best shareholders and investors forever. Hi Brett, it would be much better if you stop paying dividends and reinvested at an ROE of 38%. We think that's obvious. But I paid myself, I think an average salary about $240,000 a year over 17 years. And so I have made no secret that I do live off my dividends. And I also think it's a fair partnership that it's the internal partners are getting a cash dividend and the external partners get a monthly cash dividend, but that was always a theory. There is much more interest from our shareholder base for us to do more. And it would be easier to do more and much more [ capital dividend ] rather than raising equity diluting shareholders through an expensive capital raise to simply use the internal capital being generated to grow the group. And we think that we could probably very materially grow the group if that capital was available. So we are seriously looking at how to make that capital available in an intelligent way. [ The data that is ] private has been put to us by a number of groups, the rationale but we're going to investigate. I want our quality shareholders to share in the long-term compounding opportunity that we think we can provide our investing partners and we don't want anyone to not -- to not be able to participate in that over the next 30 years, it has been always my vision to build the business publicly. We think that there's very strong reasons to be able to be visible, to be a really credible counterparty and an obvious permanent capital Buffet style acquirer as an alternative to private equity. So it is certainly my preference to be public under the right conditions. And yes, they are under consideration and no decision has been made but obviously, we will brief as we go. Hi Brett and team, you recently hinted at a possibility of suspending dividends, what do these process for the acquisition goes to the business, can provide some clarification. Hopefully, I'll provide a little bit. But look, we do get asked as everyone here often around that. We think that there's more opportunity in the capital that we have available to us, and we're just -- we are thinking about innovative ways to do that. We can certainly issue a bond to do that. We could do all sorts of interesting things, and we're getting some, I must say, first class, and really world-class advice on the options around that. And we'll keep everyone, as we're advised as we go along. Further questions, would a delist or go private potentially change the ownership or voting structure. Yes, it may be will potentially change the ownership and voting structure. And I guess that's all I could say to that at the moment because I don't have any more information than that. On dividends, given Australia is likely to be a big portion of turnover at least in the next few years, especially if dividends be implied from time to time. Yes, that's a good observation to reduce level of franking credits, retained earnings, there'd be a cleanup of the balance sheet for sure. And for our franking credit is not an issue. Certainly, long-term franking credits are not an issue, our shareholders are global investors. They are outside Australia. They don't get the benefit of franking credits. We haven't had -- we had Australian institutional investors at the IPO who got a pop and exited. And so our best shareholders are global, high-quality, long-term value investors. And so franking credits are not particularly relevant. The value of a franking credit versus a 38% ROE is kind of miniscule. We're just trying to think about long term what's in the best interest of the group. And ultimately, we wanted a better virtue of accounting. So we think trying to get into a position where we can do what Warren does. That's always been my long-term agenda. Hi Brett, great result, could you clarify how you calculate the intrinsic value of KPG? Look, without giving guidance and telling anyone how to value anything, I have previously published that and previously said that the first book I read on the stock market was a Common stocks and uncommon profits by Phil Fisher, which led me to Robert Hagstrom book, the Warren buffet way. In the back of the first addition of that bold book, he was bold enough to publish a 2-stage dividend discount model that really ask you to make two decisions. What do you think or three decisions, what do you think the 10-year stage growth of the business can be, where do you think the terminal stage growth of the business can be? And what do you think the appropriate discount rate is. So we think the appropriate discount rate for us, so for me as an investor in Kelly-partners that has control, is in my circle of confidence, in buying the same type of business over and over again, for me, the appropriate discount rate is the weighted average cost of capital business. It's always been my agenda based on creating shareholder value by [ appropriate ] before that I [ 89, 90 ], 4, 5, 6, somewhere there, 7, 6, We're seeking to get a return that's way in excess of our weighted cost of capital to create an economic bank. So that's the way I think about my discount rate. You can think about your discount rate, however you like. And the way we have always talked about our growth rate is 5% organic, 5% acquired, but we got a 30% CAGR. So you might think that I'm going to publicly say 5 and 5, which is 10%. And we've delivered 31% CAGR for 7, 8 years, so the number is somewhere between 10 and 30, you can make your own choice about that. And there's probably more 100-year-old accounting firms than there are 100-year-old businesses in any other industry. So we think that the continuing prospects of the business of this nature run prudently is probably some number of years beyond 10 and terminal. So that should get you your number that is different to today's share price. And that's, I guess, all I can say. But I'm often asked, why don't you do more buybacks. I take private is the ultimate buyback. And if the business continues to trade at the levels it's trading, they all be very tempted to buy a lot of that business, and partner with shareholders that want to be long term in the business in that exercise. That's not new shareholders, that would be existing shareholders as well as potential new capital providers. Brett, I appreciate you looking at very long term and think about the group's future, that we're sure we come to -- would come with a view of what you think the key risk challenges and disruptions would be over next 30 years. Can you share your thinking around the same? It's a great question. I'm often asked what are the potential technology impacts of what you do. I have seen our industry over the last 30 years. I've been at this since I was 18, I am 48. I've been doing this for 30 years, I've been focused on this industry, and I've seen a radical change in the industry. I expect there'll be a radical change over the next 30 years. Let's start with the investment thesis. Governments of left and right are going to tax more, not less. There's one thing politicians love and that's taxing people so they are going to tax more. Multinationals seem to get a free pass, individuals that are poor don't pay tax. And so it's really just onshore private business owners with complex affairs that really need a world-class advice. We know that, that's where we position the group for 7, 8 years to excel. We don't believe any technology can adequately deal with the complexities that we find within those groups. We're very, very, very confident about that. And we know that those people are going to need a strong representation around their tax obligations. For certainly the 30-year future. Now most people know that I admire the world's best investors. Many of them have said, if you can't see what world would look like in 20 years, you take a more risk than you might want to take on. I can see over the next 20 years for certain that governments of all stripes will look to take more money off people that work. I also see a lack of respect for people that reset capital and build business. And I don't see that changing. And so with the involvement of digital tools from government around surveillance and carry on, I expect that people are going to need more advice, not less. With the rising level of soft left or authoritarians, the key themes of how do you enforce your rules is you need more lawyers, you need more accountants and you need more soldiers. So there quite good places to invest even if you don't respect some of the political needs of the world. So we're pretty confident that there's a future there. And without calling AI out in particular, I see AI as a -- It's another transformative technology in a long list of transformative technologies that we've harnessed and utilized over the last 30 years to the benefit of the client. Final comment on that really is that if you just paranoid about your client and how to make your client better off, that's kind of helpful because I know that paranoid survives. We're paranoids, so that's helpful. The next question, given you now based in the U.S. and your significant shareholdings of franked credits... I no longer due to personally -- Without commenting on my personal tax status, I'm an Australian taxed resident. I like a franking credit too, but I ultimately want to be the Berkshire Hathaway of the accounting industry or the Constellation Software. Wherever we can find the best use of that capital, we'll use it in the most intelligent way. I wanted to pay monthly dividends so that I could show people the cash flow strength of the business and get people confident with exactly how a dollar flows through our business. I think that we've attracted a high-quality group of shareholders now, they can really understand the nature of our business and the way the dollar flows through the P&L, the way our balance sheet works. And frankly, the awesome returns on capital that we can, I think, continually deliver to shareholders over a period of time. And so the use of those franking credits on those dividends. We've never run the business. We run the business. We don't run the business for a particular financial or tax situation, we're trying to compound the capital efficiently over a very long period of time. So we'll just continue with that mindset and try to find the best way to do that. And I think ultimately, that will create the most value for shareholders and then they can make arrangements to access that value in the most intelligent way. And hopefully, that of course is a mindset of most shareholders. Are you seeing accounts looking for employment with Kelly-partners from the likes of PwC, KPMG, et cetera? Really interesting, just to comment on the employment market 12 months ago, KPMG were phoning our offices, offering our people a 30% pay rise without [ me ], that is completely stopped. The market has changed materially around talent. We've been through the last 2 years, certainly 6 months ago, I think it's stopped now. The most challenging talent times I've ever seen in the industry over the last couple of years. We've done really incredibly well. We've got great people that share our mission and values, which is a differentiator when it comes to attracting the best people. We think things get a lot better over the next few years. And so we're not looking for people from big 4 firms as a typical starting point as to where we look for our people because we're not sure that those firms traditionally have looked for people that share our mission and values. But we're looking at the top 2.5% of people who share our mission values, and we do think that there's probably some of them coming out of all sorts of firms. And so we will continue to look to add talent to the business every time we can find it and every time it presents itself. What would happen? That's a great question. I always get this question. So I'm going to tell you a story. I went at the Berkshire meeting this week, this year, and I loved when Warren got up and pre-meeting, they played this video of every time they have been asked about a succession for about 50 years. I hope to one day be in that position, so touchwood. But look, we did the Board meeting yesterday, the Board has an explicit directive understanding and has undertaken a position that in the event that I am unable to do what I do currently for the business, there would be 2 people who have been nominated in the business to be co-CEOs of the group. They've had a training continually from me, both of them for more than 12 years. They're very close to me and the other partners, that would be accepted by those partners as the leaders of that group. And they've got clear directives on how, in our view is a Board and me as a founder, the business should be led in the absence of me. Every partnership agreement has a documented succession protocol in place and has had for many, many years. That's what would happen in event of me not continuing in my role for whatever reason. And I see -- and I think evidenced by my little investment in the group, no particular risk to that. Now I am spending 75% of my time in the U.S. as of January. I hope people can see that, that reflects my confidence in my partners. I don't know I have employees as owners in this group, unlike the big 4 firms where partners are effectively glorified employees. I have partners and the drivers in our pod model who are genuine owners of the business and have act and do act and have acted as owners and drivers of this business for many, many years. I always -- I feel very passionate about anyone ascribing contribution or influence from me that doesn't take true account of the contribution of -- genuinely and such are committed part owners and drivers in these businesses, they own 49% of the business. They are nearly 10% of the listed stock. They -- most -- or many of them invested in our equity fund -- many of them have bought buildings in partnership with us that the business is trade from. Frankly, all of these people have the majority of their net worth invested in our businesses and they are too a person, exceptional people. We get continually more and more businesses joining the group because when they call me -- Hey Kelly, I say, look, if you like what you hear and we can get the rubrics of the deal together, and you're happy with that. Please just meet our partners and if you like them, and you're likely to hear from them, then join the group. And if you don't, then please don't. It's our partners that are running this business. And I am simply under those partners with our services team, lifting them up and trying to make them better off asking them to make our people better off, so that they can make the clients better off and make a strong impact contribution on the community. Incredibly proud of these people, and I think that they should be accorded due respect for the contribution that they make. What's the impact of rising rates on your acquisition model? There is no impact of rising rates. The first deal I did was at 11.1%. We haven't seen interest rates touch that level yet. I don't really mind if they do. If we can push out to 32%, 35% from the business, then we can finance it at less than that 11%, I'll be very pleased. Can we still -- historical levels of gearing? Can we? Yes. Is it harder to make acquisitions? No. Remember to look left when crossing the street in L.A. Yes. To anticipate the street risks to be Australian tax resident. That was a subject of a meeting this morning and is a subject of ongoing discussion. I don't have that advice at this point because I don't have the clear strategic direction for the way to maximize the value of the group. In the HY '23 call, you had referred to developments in progress, credit market space and customer groups. Any further insight? Yes. We've built a great piece of technology. I now have a team member that worked with us 5 years ago, spent 5 years working at Netwealth and I think clearly on first day when they arrived -- they educated himself in CX design, has come back here and is working with our in-house software development to build it out what we've called our Kelly-Partners Passport. And the idea of the Passport is that we'll give people access to the full value of the group. A very strong part of that value is the incredible relationships that we built across the group. So it will ultimately form part of that offer that we can build a marketplace for all of our clients to share an advanced education and services between each other and build that essentially to a SaaS-based business that charges a monthly fee to access more and more value that I think we can add to the client base and that they can add to each other. So I don't want to put any projections on the dollars that might come from that. But I don't have any doubt that what we build a community of trust, what we do the right thing by our clients and friends and partners, then there's more value long-term in that behavior than I think most people appreciate. I guess I can't see any more questions, but if there's any more questions, I'll just have a look here. There's another question. Hi Brett, How do we fix [ account ] Plus? It's a great question. Look, I never comment on these other businesses. What I would say is that I get often asked what is the moat around Kelly-Partners. And I guess the one of the ways I've come to explain this over the last 6 months is that if you think about a lord in his tower, and you think about what's actually involved in building a moat around the Castle. Somebody has to go out and dig that moat, they need to get a shovel and start digging. And digging -- the foundations of anything a moat, or a castle or any type of business is dark smelly work, where you don't get any pats on the back, no one notices because you're below ground level and then just be, I did that for many, many, many years. And you need to have the courage of your convictions to do that and do that continually. But the real secret is that you have to be able to attract other people that share that mission and believe in that mission and want to dig that, want to dig that moat and want to make it, build it properly and what then put the water in and then check some crocodiles and then get the bridge right, make it all work. You got to attend constantly to the maintenance of that moat. I genuinely believe that when people consider what's the moat around business, people continually fail to ascribe enough value to how important the shared mission, values are of the people that you need, no matter whether it's a technology business or any other business, it takes an unbelievably talented and committed group of people to put their own self-interested aside, while they dig a moat and they do it properly and then they continually to stand over it and protect it and make it a thing. So where I see any business struggling, I typically believe it's that the foundational values of the business aren't deep enough, aren't universal enough and aren't addressing a genuine human need with essentially benevolence towards people in the business and the clients and the community to really want to make other people better off rather than simply being in there, to get some short-term return for themselves. Sounds very Zen. But if you think hard about, hey, you want to be build, a dig -- dig a big moat around your house today, ask yourself how many of your friends would be prepared to come and get a shovel and spend the next 6 months to the exclusion of everything else, potentially under fire, somebody should narrow that moment, digging that moat, and if you can't put that group of people together, you're unlikely to build much. So if you do need -- and to me, the analysis that I've been able to form is that people join people who have a mission and values that resonate with them. and that will sustain and when things get hard because things always get hard at different times. Hey, have you considered partnering from firms [ non-accounting ] such as similar world-class services. We think that there's an opportunity in the business to appoint a partnership executive to build quality partnerships, absolutely. We believe that that's part of the opportunity set that exist within the business, not being the best use of our restricted capital in the short term, but we believe that, that's best done digitally as we start to pull our community of clients together into a digital first relationship, we'll be able to build more of these partnerships, and we think that there's significant value involved in doing that. And frankly, it would reflect the care that we have for clients to make that happen. So we intend to do. Well, it is 10:53am. We have 7 minutes allocated, but I'm prepared to make whatever time people would like to answer further questions. Going once, I did get some -- I'll just answer a few questions that were e-mailed to me by shareholders that I haven't had the chance to answer, but I'll share some of them here. Can you please elaborate on how central services and IP fees are allocated beyond minimum viable investments in the back office and business development functions, in particular, specifically about the brand digital and people investments. Guys we get 9% from the businesses, 6.5% for services, 2.5 for IP. We shared with you that we intelligently invest that, under the businesses to really strengthen the businesses and give them a stronger, more competitive position so the partners have between 25% and 40% more time to be great accountants to their people, their clients and communities. We deliberately have taken a position not to share much more than that because we don't believe that it's in the shareholders' interest for us to share much more of the good stuff that we understand. Number two, can you please elaborate on -- on a comment you made during interview on the Investing with Tom, comment about net selling a significant stake of the business -- but looking to get at some point. I'll try to get better set up, which I think will allow me to lead the business in a different way. I'm running an article at the moment, I'm investigating Warren Buffet's personal financial position. In 1950, 1960, he had a $160,000. He went back to Omaha, bought a house for $31,000, and he left that $130,000 from what I can discover in his own personal portfolio that now represents over $1 billion and pays him between $40 million and $60 million of dividends a year. I can't get much more information than that, but I'm working to do that. What that has meant is that he's never needed to look to virtually to pay him anything in particular, he has been able to run low salary, low run, no dividends and just sit there acquiring assets. That's the position I ultimately seek to put myself in. And I think that, that would allow us to play a more expensive game and build a much, much more significant business over time. Numbers through -- can i see as you explained there... You've spoken about the very important competitive advantage KPG has developed in Australia because for 7, 8 years, you've been building a trusted reputation as a buyer of choice. As a buyer of choice. What are the key factors that give you confidence that KPG can succeed in other geographies at a comparable level to Australia when disadvantage is nonexistent. That's a great question. What I would say is that we have the position we have in Australia because 17 years ago, we started contacting firms in a consistent way, and we just kept doing it metronome like for 17 years. We believe in order to establish that position in the U.S. and U.K., we just need to be contacting firms for the next 17 years. So we don't think that we can create 17 years of value in 17 minutes. But we do believe that we're starting at a much higher level in approaching those markets than we did here, and the inbound interest definitely demonstrates that. So we don't believe that we have a particular advantage in those markets, but we do believe that with consistent effort over a long period of time, we can certainly do in those markets, what we've done here. Again, we're sort of not in a rush to do anything, telling you that, but we believe that if we don't start, we're not going to actually get that done anytime any faster way by not starting. So it's simply a matter of say, in relation to the 5 stages of decline by Jim Collins, we have implemented a specific organization on personal feedback and mechanisms, and we're got to ensure that we don't wander into hubris born of success and possibly an undisciplined pursuit of more. Absolutely, I have the people can see that we are staying within our circle of confidence, doing what we've always done. We'll seek to enter the U.S. market in L.A. with a small acquisition of less than USD 10 million, that is exactly the same providers for the transaction and ultimate partnership. And on the same structure in same terms as we do here. So -- we are certainly not mindlessly looking for more. Frankly, we're not looking for more really all ever. We're simply just trying to work the job of what we're doing, in partner, with people who are partner with us. There's a question, what's the [ Kelly-Partners ] doing to improve debtor days? I think debtor days are 47 days, 46 days and then 42 days. I think those numbers are pretty fantastic on a large number today, and we run genuine discipline and communications in a very unique way with the firm. So we don't really want to share with other people who would love to know how we do that. But I hope that people consider 42 days a pretty good number on a large number. And importantly, nobody would consider the economic situation better today than it was 12 months ago. And by taking out debtor days from 46 days to 42 days, we've achieved about a 10% reduction in those days, in a more difficult economy. So we're getting better and better at that. Apologies if you've already asked about how well potential privatization would be with official long-term shareholders. It's a guest question. I don't know the answer to that. And so we just need a review to try and understand that. And I think the longest of shareholder at the moment is me. I've been in there for 17 years, and I certainly want to continue to share the value that we're creating with any who shares that mindset. Has the business achieved a price rises recently , have you experienced margin pressure on cycle of business? No, we haven't. Look at for our accounts, is very tight. And so if you've got rate, you can price at an appropriate rate. Now sometimes there is a little bit reticent charge, really what we've overcome largely with our partners and continue to try and build their covenants to charge what they're worth, as a number -- a number of accounts that is constricted more and more over the next 5 years, I expect that it's going to cost clients right across, it can be a lot more to deal with their accountants and the accountants will have much more pricing power than they've had in the last 30 years. I'm pretty confident about that. There are reports, I think I read Wall Street Journal article about listed company struggling to get their audits done on time because they're struggling to get people to do the work and so let me answer that, the industry needs to become more attractive to the talent and it's going to have to pay people more, which means it is easier to have to put its prices up, and we're just going to get to that. So we'll see how that goes. Question, Kenny, how do you describe the challenges, financial integrations joining KPG and prepare for growing capacity upcoming group growing figures and costs...

Yes. Thanks for that question. Great question. Obviously, we're consistently looking for technology to do that. But I think as you can see, this year, we had U.S., we've opened a mobile office, both of which operates in different markets and with different currencies. And we still have not experienced any problems with managing all those different financial complexities. And I think the ability to put these laws out, basically, we couldn't put these out. First of all, we showed that we haven't yet and kind of any challenges to integrate these any partnership firms or the jurisdictions into our platform producing those financials that's required. So, some time, there will be challenges. We are constantly looking at technologies that allows us to better integrate or the financials of our firms. And I still think that we're managing quite well in that we're still able to produce the results in basically real time.

It's quite interesting. Probably worth mentioning that we've had Kenneth stay in Hong Kong for 8 years now -- there's 10 people. They're here in Sydney for our awards tonight, which is great. And Ken's been really tremendous top CFO we have with great -- who is very, very committed to the group, every Saturday in July to day, frankly they wanted to get the results done so we could get on to the rest of the year. We've got an uncommon level of commitment by our teams right across the business because we genuinely share values at our group. What I would say is that we have run that Hong Kong for 8 year, I've had many people say to me Hi brett, isn't going any luck, we're really sharing different, it might well, Hong Kong is a lot more different to Australia, than the U.S. is different to Australia. now running an operating business out of the Hong Kong office that does outsource CFO work for a number of our franchise clients that's been very successful, and we've been doing that for nearly 8 years. So committing an office in Hong Kong on short notice, operating a different jurisdiction and running off a team where I use to have meeting on a phone on a touchy apple -- like the apple -- Apple video phone call. Facetime. That's a lot difference to the level of intrusion now that we had with Zoom even 2 years ago. And now, frankly, Microsoft teams is a phenomenal product that's working incredibly well for us across our Microsoft 365 installation across the group. It makes us feel very close to each other and what we're trying to do, I just made a call and I said, Ken, hi, are you going to be in Sydney this week, I will be in Sydney, why don't we just do the results while we're actually sitting in the same room and bring the team down. And so rather do it -- that they will do it today. Just because we thought that would be more fun and better for everyone. But yes, look, we got some history with operating in Hong Kong. It was always a view, always my view that Hong Kong could be a stepping off point to the rest of the world. And interestingly, what we have done is bringing -- is bringing really interesting opportunities to us, opportunities to partner with different jurisdictions to help them fix their earnings and contribute to what they're doing. I think there's a bunch of exciting opportunities that just would not even parts or crossed our mind or have been presented to us if we haven't changed the posture of the group and say to people like, we're prepared to help businesses of this nature in the U.S. and the U.K. if they share our mission, values and I think that we can be a valuable partner with them. So that's what we have to share today. We hope that people have found it very interesting. And we are quietly confident and very determined to continue to prosecute and build a -- make a very positive impact. I wanted to thank all of our quality shareholders for their commitment and partnership in business. We don't take any partner for granted in our business, and of our team, our equity partners, our shareholders, our clients or the communities that they're running these businesses in. And we believe that we operate consistently with our mission, values and the way our business model for a long time with real intensity and a relentless focus and the future remains very bright for the business, frankly, increasing so and with that, there's no more questions. There's just one more. Obviously, juggling many balls at the same time it's going to be trickier. KPG goes, how do you focus on strengthening your personal core is the most... Look, I continually try to make myself less key man. I think that as overstated, I'm a very driven committed person that has the ideas and insights and experience that I'm not sure many other people have. However, I shared that outlook, that mission, that values those insights with many of my people for a long time, I'm incredibly proud and fairly confident in the quality of those people. I really couldn't do more to make myself less within the business and the business less than on itself. And short of -- take a 5-year holiday. And so you should be very confident that the number on role of a CEO is to be the Chief Risk Manager. I share managed and raised wonderful brand of mindset of heads we entail, we don't lose. The #1 for me is don't lose. And I mean by it, not just don't lose money, don't lose reputation, don't do anything that puts our business or our relationships at risk or your health, or your values, take no risk, inform yourself better, create asymmetrical opportunities and relentlessly focus on that. So with that comment, I'd like to thank everyone for their continued involvement with the business. And feel free to be in touch with Kenneth online to ask any questions. We are around and happy we're going to answer any questions of anyone, do the analysis of the numbers. We frankly benefited and the business that benefited from the commitment of our shareholders, are looking at our business and asking us intelligent questions that helps us reflect and think through better how to operate and continue to grow the business. And with that, I'd like to thank everyone. Thank you, my team for organizing today as a bunch of technology happening here, keep everyone together and I just want to believe that that's all worked out. And as I love to say, have a great day.