Terrific! It's always good to start on time. Welcome, everybody, to the Kelly Partners Group Holdings Limited Financial Year 2024 Results. My name is Brett Kelly, the founder and CEO of Kelly Partners, and I'm joined by our Chief Financial Officer, Kenneth Ko. In a break from tradition, we thought that we'd start today with Ken showing the financial results. So no pressure, Kenny. I'm handing over to you.
No worries. Thanks, Brett. Hi, everyone. Great to present results again to everyone. I'll head straight to the financial highlights section of the slide deck, which we released this morning. As usual, we have our financial highlight slide that summarizes our current year results and some key financial metrics compared to the prior year. I won't go through a lot of these because the actual subsequent slides cover a lot of these, so I'll leave this for you guys to have a look at yourselves. I'll start off initially with the income statement. Our revenue for FY 2024 was AUD 108.1 million, and it has grown 29.2% compared to the prior year.
That growth has been driven by organic revenue growth and contributions by acquisitions completed in the prior year and in-year acquisitions completed this year. I just want to note here that the organic revenue growth was impacted by two things, one being the finance broking business's revenue being impacted by macroeconomic environment changes, and also closure and merging in of some of our subscale businesses into our larger and more scaled up and mature businesses. Excluding those impacts, the organic revenue growth for the group was at 5.3%. Our EBITDA margin, after taking into account additional investments in the parent, was at 27.8%, compared to the prior year of 22.7%. Obviously, last year was heavily impacted by the additional investments.
This year, we still did additional investment in the company to accommodate the growth in the business, but our margins have improved significantly from the prior year. Excluding the parent additional investments, the EBITDA margin of our operating businesses was at 29.6%. Our underlying NPAT A, attributable to shareholders, increased by 52.3% to AUD 8 million, compared to AUD 5.3 million in the prior year. I just want to bring everyone's attention to a few highlights on the P&L. The operating expenses increased less than the revenue growth. We continue to have an increased amortization expense because of our acquisition activity, which has led to a much higher customer relationship intangible assets and a higher amortization.
I've put an explanation in the director's report to explain how this works, because we often get asked by shareholders about this, and the explanation in the director's report should give everyone clarity on that. In terms of the finance cost, that has increased as well due to the rise in interest rates, as well as taking on additional debt to finance the acquisitions that we've completed. And the statutory NPAT has reduced, but as I mentioned before, mainly due to an increase in the amortization of customer relationship expenses, and also accounting for non-recurring expenses, which included costs that we've incurred for our strategic review, as well as the costs of the acquisitions that were completed in 2024 .
Going on to the balance sheet, our net debt to underlying EBITDA has decreased to 1.28 times underlying EBITDA, and that's due to a full year's profit contribution from the acquisitions we completed in the prior year, as well as a general increase in the profitability of our operating business in the group. We continue to have very strong ROE across the group and the parent. Our lockup days is at 56 days as at third of June, and I just wanted to highlight that our WIP days was at 3.7 days. I think it's quite good to highlight as well that our net debt increased 13.1% since the prior year, but our revenue increased 29.2%, and our underlying NPAT A increased 52.4%.
And I would also like to just bring your attention to the next slide to have an overview on the debt of the business. So on the right here, comparing our net debt to last year, our net debt grew by AUD 5.2 million, from AUD 39.9 million to AUD 45.2 million. And that's in general due to funding the acquisitions that we completed this year. On the left here, we show you our debt and our available headroom, and as we shared last month, we have secured a AUD 22 million facility from our banking partner in Australia, providing us with that facility for our US expansion and general corporate purposes.
And you can see that our cash and headroom has increased substantially, such that it's at $40.4 million at the 30th June, 2024 . Also our debt, our acquisition term debt is repaid over four to five years, and that brings me to the next slide, to the cash flow slide, where leading on to this, I wanted to you know, take everyone to our debt reduction, which has been $8 million and an additional $2.5 million in additional debt repayments, totaling $10.5 million in debt repayments. And that's why our debt has not increased substantially compared to the prior year, because of our disciplined approach in repaying the debt.
Our cash from operations is AUD 20.2 million and has increased by 30.7% compared to the prior year. Our free cash flow has increased 44.1%, and we continue to convert our cash flow at 85%-100% conversion ratio. For FY 2024, our cash conversion was at 96.9%, compared to 94.4% in the prior year. The final slide that I would like to bring everyone's attention to is the parent and NCI waterfall. We often get asked this question by shareholders, and this year we have changed the representation or that reconciliation to a more graphical presentation, using a waterfall format. And it shares with you how the parent's 51%, reconciles to the statutory NPAT.
So we have here in the first three bars, essentially costs directly relating to the parent, in terms of the parent's tax, the parent's own finance costs relating to its debts or its attributable debts from the operating businesses, and depreciation relating to the parent. We then have the additional investments in the parent, and it's at AUD 1.9 million this year, compared to AUD 2.5 million last year. And we also have non-recurring items, which I shared earlier, including the cost of the strategic review and the cost of the acquisitions. That's it from me. We've prepared a more shortened and concise deck this year. But all the other subsequent slides that we normally release and produce, they're in the appendix for everyone to look at in your own time.
That's it for me. Thanks, Brett.
Thanks, Ken. We had over time some shareholders ask me, "Could Kenny speak more?" So, we're putting Kenny under some pressure to speak more. There you go, KK. Thank you, and great job.
All right.
I hope that all of our partner shareholders can understand the numbers clearly. We don't think that they are complicated, and we do think that they're consistent with a, you know, a long-term approach, that hopefully today, you know, hopefully you've become quite familiar with, so in terms of where the group stands today, the 600 team members, including 100 partners, 37 businesses in four countries, AUD 108 million revenue, at 30th of June, 2024, with a AUD 130 million revenue run rate. There are 45 million shares on issue. It might actually be 44.95 million shares on issue, as you'll note that we bought a few shares back a few weeks ago, months ago. And free cash flow per share, AUD 0.174 per share.
There's 28% return on invested capital plus organic growth, which we think is an appropriate measure to think about over time. So the group is well positioned to execute on our strategic plan to become Australia's global accounting firm for driven private business owners. And I'll just share a little bit of an update. A lot less slides this time, but we'll do our best to sort of explain what we're on about. Mitch Rales, a founder of Danaher, recorded a really tremendous podcast, which I recommend everyone listen to on the Art of Investing podcast, which is really great. And we've sort of got a nice picture here with Jim Collins' Good to Great book in the background. We could have another book in the background, that Jim wrote before that, called Built to Last.
Really, the question for founders is, are you building a business that's built to flip? Or are you building a business built to last? We chose, from inception, to build something that we think is built to last, and I think Mitch makes a great comment here. You know, we think institutions of greatness aren't built quickly. It's hard to be great quickly. It takes time and compounding. So we think it's a 20- to 30-year effort to get a hundred X outcome. We think that the book Hundred Baggers confirms that in its research as well.
The second screen, I think, is good just to underline that everything we share with you, we just share with you in good faith, based on what we know, but also understanding that we don't know a millionth of 1% about anything. So while we believe that, you know, being a hedgehog is the right way to play, and that what we do know about is, you know, building and managing and leading accounting firms, accounting and tax firms, focused on private business owners with two to 10 million of revenue in each case, you know, we think we know quite a lot about that, but we think that that's probably not a millionth of 1% of much. So we don't...
You know, we won't make the mistake to imagine that because we know a lot about very little, that we know a lot about a lot. The next slide just shows clearly that the business's posture in terms of a, you know, a leading business in Australia, growing. You know, Hong Kong, we've been in for over eight years, into India for 12 months and a little bit now, and now into the US. That we're on our way to build out, you know, the next leg of our journey. We're 18 years old, and we're a bit like an 18-year-old. You know, we're, we're building some strength and some enthusiasm... like a teenager, but, we don't, you know, we're not fully grown yet into all of our potential.
On page five, we've got our one page, Kelly Partners, in ten seconds, KPG in ten seconds. We'll just recommend that to you, but, you know, I'd draw your attention to a 40.6% return on equity. High, you know, a high ability to deploy and get a return on capital, and a discipline around capital allocation with a group ROIC of 24.8. Add your organic growth, and these are, you know, ultimately drivers of long-term good numbers. I think everything else is in quite good shape. Onto the next page, we've got industry-leading margins, and you can see where those margins are generated across the various businesses we're operating in. We think that, you know, that long-term, we're not aiming to be big.
You know, I've often said in our industry, the Big Four are called the Big Four, they're not called the Excellent Four. We just wanna be excellent, and we think we can grow as a result of being excellent. On the next slide, there's our summary format of our capital allocation that I hope you can have some familiarity with now. You'll notice in... You know, that we're trying to generate returns on the same capital base. We're not, we haven't issued an additional share or raised any equity since IPO, seven years ago now. And so I think that's looking quite consistent and okay with some improvement to come. On the next slide, it highlights that a little bit more graphically in terms of EPS and free cash flow per share.
And those numbers are, you know, just over five-year periods, I think, solidly growing, as, you know, as we'd hope to see for a long time to come. On the ninth slide, you know, I think the most important thing about the business is that we have a business system, and that system is now quite proven in its ability to double a business, you know, on some type of cadence. People often ask me, "Will that be every three years or five years or four years?" We've always said, "Judge us in five-year periods." We'll, you know, we'll work very diligently to develop the business. We've doubled the business six times in a row. Well, I think the average is about every three point two or so years, or four years, three and a half years.
Take off the best year, the best one and the worst one, and you get somewhere in between. But what's most important is that we do that in a sustainable way, and we do believe it's our business system that allows us to do that. On the next page is just the usual list of, you know, financial measures, and you make up your own mind about which one is most important to you, but I think they're quite good things to consider in each case. On slide eleven, we're just highlighting that in Australia, the U.S., the U.K., these are hard places to pay tax, even if you want to. Most people don't.
Taxpayers pay massive costs of compliance, massive succession challenges across all of those markets, and the tax codes are complex, and they're growing each year, so we think that the structural dynamics of the opportunity that we started on 18 years ago are strengthening rather than diluting. On the next slide, we just outline our strategy. Be top 10 in Australia. If you look at the industry here, that for the first time we've outlined publicly the way that we think about the industry. We think that we're probably the 10th largest accounting firm in Australia, the way we think about it. We don't regard the Big Four as accounting firms. They're global consulting firms that do some accounting. We look at our traditional comp...
You know, alternatives for clients that we look to target, and they look a little bit like that list. But very importantly, our revenue from audit is 5% or less. Audit's likely to be impacted by technology. It's high risk and lower margin. And so we think we're very strongly positioned to compete, not just today, but over the long term in Australia, and we continue to get a lot of interest from firms, and we expect that we will continue to grow at rates at or beyond what we've grown at in the past. In terms of taking our business system global, the best thing we can do for shareholders is prove that our Partner-Owner- Driver model, with our central services team and the different things that we have within our model, will work in other markets.
To the degree that we can do that, we can get a return on that intellectual property of the group for all of you as shareholders. We know this business system and our Partner-Owner-D river central progress team, the way we go about business, is very unique and increasingly well regarded around the world, where we've got a very good following, a very international shareholder base. On the next slide, there's an outline of the USA opportunity across Australia, California and Texas. We started in California, very focused there. We're very excited about the firm we've announced that we're partnering with in Florida and North Carolina. The three largest McDonald's restaurant markets are California, Texas, and Florida. You might see some theme in that.
And from here we are, in my view, a critical mass for our business and we can prove out the model strongly in the US market. I'm very quietly confident of that. On the next slide, we're showing the progress that we're making. If we look at... Kenny, if you could just slide up back to that double slide, the six times doubling, if you would, please. When you read the US progress, I'll draw your attention to the fact that it took us from 2007 to 2015 to get to AUD 20 million revenue in Australia. It's taken us 18 months to do that here in the US.
The mission, values, and vision of our group, combined with a clear strategy focusing on private business owners and our partner-owner driver structure, with our permanent capital holdco, is attractive in this market. I hope that slide makes that clear. It took us 8 years to get to the same place in Australia, but it's taken us 18 months to get to here in the US. On the next slide. Oh, just on this slide. Sorry, Kenny. So the Florida partnership that we announced on Monday is tremendously exciting.
It's a good-sized firm with a really great group of partners and professionals, who I'm extraordinarily humbled have shown the faith in our group that they have by joining us in this way, respecting our model and entering into a partnership that preserves the structure and uniqueness of our Kelly Partners operating system. And all four of the equity partners have made long-term commitments. It's a leading group to McDonald's franchisees for more than thirty-five years in the U.S. We have a leading position in Australia, and we believe that there's a global opportunity, you know, servicing that type of client, which is very, very exciting. On page fifteen, next slide, is a progress in five-year periods, so you know, think about the firm as five-year startup, five years foundation, build and accelerate.
You can think about that as the journey of the group, and you can think about that slide as well, as what we think is possible in a market like the U.S., and you know, 30% revenue CAGR over that period of time is probably not a surprise, although I'm not looking to convince you of that. I occasionally get accused of being a promoter. I have no interest in promoting anything, other than the fact we've got a tremendous team that are very committed to looking after their people and clients, and making a positive impact in their communities, and that are very, very good at what they do, and I must say that I'm humbled and proud to work with those people every day.
So that's kind of the way we're looking at the world right now, and I think we've set up the facility so that we can take questions. You know, over that eighteen years, 30% revenue CAGR, we've maintained our margins, you'll note, at 29%, 30%, 33%, 28% over those periods. We expect that that'll continue for a long time. We think there's a 10% conversion to NPAT over five-year periods. As Ken outlined, interest rates go up, they go down, it impacts our numbers. But we're ultimately in the owner earnings, earnings power business. We're not looking to report a number every quarter or six months that gets anyone excited. But over five-year periods, as you can see there, I think what we can do together is pretty exciting.
So I might hand that back to you, Kenny, and try and work out how... Oh, I can see the Q&A. There it is.
Sure, yeah.
Take a few questions and so I just encourage anyone who's got a question, please just pop it in the question, and we'll come to that. Greetings. Leon is on a flight. Can you share a bit more of your thinking behind the buyback when considering our stock price and intrinsic valuation, the decision to put at least some capital towards buybacks rather than focus on acquiring more firms? So, Leon, just consider our record on buybacks. We're in a unique position that we know an enormous amount about the business and its performance and prospects, and we think we're best placed to buy stock back at appropriate times, at valuations that'll prove to be very deep discounts to intrinsic value. I wouldn't...
We've got plenty of capital for the things we wanna do. And I would emphasize that we're almost always in a blackout period, so it's very, very difficult for the staff to align where we've got the capital, and we're not in a blackout, and we can actually do a buyback. So whenever we can, and it makes sense, we will do that. Can the discrepancy between non-controlling interest and KPG profit be explained predominantly by expenses pointed out on page 31? Ken, can you show me page 31, and I'll give an answer to that.
Sure. That's exactly that slide that I went through just now, but I'll share it.
Yeah
... on screen. Screen three.
To that question, yes, is the answer, and there is the screen. When you get a second to just work through those numbers, that'll completely explain-
Yeah
... what those numbers are. So the NCI, so the non-controlling interest, net profit before tax, that's the 49% partner's interest. That is a partnership distribution before tax, and so we pay tax within the company, because we're a company. The non-controlling interests get their amount distributed. You can assume they're paying similar rates of tax, probably more, but certainly not... You know, there's certainly tax being paid. We pay our interest that we carry interest on head co interest on debt that we carry at the head co or from acquisitions that we've done, for example, and others, and we've got parent depreciation that has grown as we've done some fit outs in the last couple of years. We've refreshed a lot of the offices, including building out an office for the services team.
I think that's hopefully we carry the additional investments, which is the biggest number there. The cost of establishing the U.S., for example, and undertaking the strategic review, there had headcount costs. We've spent over AUD 1 million on legals and other strategic review costs to understand a path towards a U.S. listing, and the business is in a position that if we were to decide to undertake a U.S. listing, we've done all of the work required to do that, and we've incurred all of the expenses, as you can see, and then acquisition costs, and any retention reversals. I hope that's clear. We've tried to make that as clear as possible.
I would regard the business as having AUD 11 million net profit before tax, and you know, in order to continue to grow it at the sort of rates you've seen, we'll continue to invest in those ways, but additional investments have gone up and down over time, so I wouldn't see any drama there. Question: Where businesses have been merged, has there been any loss of customers? Not typically. So when we buy a business, we don't expect to lose a bunch of clients. But from time to time, we will lose some clients in any number of deals. But overwhelmingly, the client churn rate is so low that it's actually not worth the time required to measure it. That's over you know, 80-plus partners that have joined across more than 50 deals over eighteen years.
You've got Kenny and I here, happy to take any questions. I think we've run out at this point. Thank you, Kenneth and Brett. I hope you're both exceptionally well. We are, Brendan, thank you. Please explain the rationale for increasing the facility with Westpac instead of a US-based lender. We could get better pricing in turn from Westpac than we could from a US-based lender. So we were subscale at that point. US lenders want us to give them a global mandate to do all of Australia and everywhere else, which we weren't prepared to do. We think that creates risks it's not worth taking on, when we've got a very long-established and successful relationship with Westpac, and Westpac were prepared to facilitate what's an extraordinary gesture, frankly, on behalf of the business.
So really useful amount of debt at the right price and on the right terms. That's really, there was no contest between what we could, at this stage, do in the U.S., where we were small, much smaller than what we are post the recent announcement. There's an announcement where KPG bought roughly 50k shares, but I did not see that in the financial statements.
I can answer that one, Brett.
What's that, Kenny? Is that because it's in July?
Exactly, exactly. So that's in the subsequent events note in note thirty-nine of the financial statements, and also in the subsequent comment section in the director's report. And that's because, as Brett said, occurred after the end of the financial year-end, which is third of June for us.
Great question. And on that, clarify the rationale of buying back shares at a valuation. Sorry, that got moved. Let me just have a look. But can you please clarify the rationale, considering the stock trades at 100 PE? We might just have a different understanding of how to calculate the valuation of the business. We've recommended Hagstrom sort of two-stage dividend discount model. You need to take a view as to what you think the growth rate of the business will be over time, and what you think is an appropriate discount rate. And to the person that asked that question, if you can answer those two questions, I can give you a better answer. Kenny, 5.878 million in franking credits on the balance sheet.
Does the no dividend policy imply these Franking Credits are stranded? I assume Franking Credits will continue to rise over time along with tax paid in Australia.
Yes, the short answer to that is we will still have those franking credits available to us. That's on a consolidated basis, Edward. So there are a small number of our operating businesses that are structured as a company. So that franking credit is not all relating to the parent. It's a consolidated number. But to answer your question, yes, you know, with a no dividend policy, those franking credits, you know, are those still available to us? You know, they'll just kind of sit there for now.
Look, if we do move towards a US transaction, we will look to sort out those franking credits as part of that situation, if that's possible. Kenny, the current loan facility structured in AUD?
Yep, that is, that the AUD 22 million facility is in Australian dollars. Thanks, Edward.
Can you please talk further on how you're managing the multi-continent acquisition progress with Brett in the US and Kenny in Hong Kong? It's not that complicated. Many of the firms that we're speaking to. We recently visited a firm that we've been speaking to for 11 years, and so when a firm's finally ready to talk to us seriously, they'll say, "Hey, Brett, you know, thanks for talking to me for the last 10 years, and now could we talk?" So we did a conversation. We did a number of conversations like this in Teams, and then we visited that firm on our recent trip to Australia. So, we visited a firm in Scotland in March. We're happy to visit a firm wherever they are, and in the meantime, talk to them on Teams.
It's actually the preference of firms, at least in the initial period, to do a lot of the work on Teams and Zoom. It gives them the flexibility to meet in a private way, wherever they like, and that's worked tremendously well, really since the beginning of COVID. I wouldn't have thought that it was easy, as easy to work remotely on these things as it has actually proved to be, but as it turns out, people actually like that format, so that's how we're managing that. The DD is all done digitally. We've invested significantly in software. That's a system where we can send a, you know, a digital data room and make sure that the partner firm can upload all of their information, and that we can do most due diligence digitally.
So now, obviously you wanna meet people, and you wanna make sure that they're all okay and, you know, can, but, you know, we've been meeting people for more than fifteen years, and so often, you know, we've actually got good relationships with people and they progress from there. Of all the acquisitions we've made in the last twelve months, are there any that have not met initial expectations? I don't think that we have. You know, lest I get accused of quoting my great mentors too extensively, Ed, you know, the key to a successful marriage is low expectations. That's Charlie Munger, and so we don't go into these partnerships, and they are genuine partnerships, with crazy expectations on, you know, on our partner firms.
We go in with very high standards and expectations as to ourselves and what we can bring and what we can deliver. And we're, you know, over a very long period of time, confident that, you know, mostly if you treat people well, they'll act with sincerity and, you know, huge energy to work together. So over time, again, five-year periods, we're very confident that things typically turn out very well. So there's none that come to mind over the last twelve months that haven't met our expectations. We learn something in every deal. I'm a happy partner with all of the firms that we've partnered with. And frankly, you know, I...
Every day, incredibly, encouraged and impressed by the ingenuity of our partners, their commitment to the mission of genuinely helping their people and clients, and making a difference in their communities. I could cite a dozen things I've seen in the last two weeks of really extraordinary contributions from our people. And that gives us a lot of energy every day. So if your question is financially orientated, no, you can see in the numbers that the... I think the businesses financially are doing tremendously well. But, you know, we remain vigilant and, you know, very keen eyed as to what happens in the businesses and the contribution that we make, the quality of our partnerships.
To this question, as per KPG, can you provide more details on the current intrinsic value of the business, and what valuation metric do you use for the same? Well, my friend, without naming you, you mentioned the valuation of the group and your view of the appropriateness of the valuation at 100 times PE versus us undertaking some buybacks. The question I have for you, and there are only two questions you need to think about, is what do you say the likely average growth rate of KPG is gonna be over a two-stage dividend discount model, 10 years and forever? And what do you think is an appropriate discount rate? If you drop that in the chat, I'll give you an answer as to what I think about valuation.
Next question was, can you please speak to what gave you the conviction to move forward with such a relatively large acquisition in the case of Florida? It's a very, very good question. So while that, what we call a partnership, looks like a large partnership, if you understand the scope of their McDonald's business and the fact that McDonald's uses very similar point of sales, software, accounting, a global accounting methodology for their, franchisees and, you know, sells the same product, cheeseburgers and Filet-O-Fish, et cetera, to a, you know, on an eighty/twenty basis to a large degree. Now, myself and a number of our partners have been attending the McDonald's Global Conference for 14, 16 years, every two years in Orlando, and then this year in Barcelona.
It's a business that we are very, very deep in, in and understand, you know, frankly, very, very deeply, and so while that partnership looks large, our confidence comes from the quality of the leadership of that business, quality of the partners and the people, and the fact that it is largely centered on a business that we would consider ourselves very expert in, and so it's actually it feels less complex than businesses that are participating in niches that we just don't have the same depth of understanding. Now, my wily questioner, who's been asking us about the valuation of the business, has answered half the question. I think the company can grow at 20% for the next decade. All right, well, we're two...
You know, one third of the way through this exchange. You need to make three decisions. The first stage, 10 years, we'll assume 20%. Second stage, which is forever, you know, if you can tell me what you think the forever growth rate is likely to be, and then just give me a discount rate that you think is appropriate, and I'll tell you what the valuation is, and you can assume that I've spent much of my adult life thinking about that number. Fundamentally, we believe that the partnerships that we're involving ourselves in, we are not paying beyond intrinsic value. We know we can add an enormous amount of value to those businesses, and we think as a result, we've got a large amount of protection going into those deals, with an asymmetrical level of upside.
Yeah, forever 15%, discount rate, 20%. If you think that an appropriate discount rate for our group is 20%, drop Ken an email, and I'll send you a few more books to read. Yeah, no. The way we think about it is that if we stay in our circle of competence with a deep amount of protection per deal, then we think that what we're doing in investing in something that we deeply understand is not more risky than our weighted average cost of capital. If you look at Columbia's value investing school, they might tell you that that number's cost of capital plus 2% or 3%, you might get to 10% or 11%, but no, you won't get to 20%.
But if you do, you won't buy a single stock on the Australian or U.S. market that's not, that's got anywhere near the growth, prospects that you believe that KPG has. So, you know, there it is. Coming back to the capital structure, you've spoken in the past about a max gearing of two times. So no, the long term, we've talked about two, two and a half times net debt to EBITDA. We recently saw a large PE-backed firm in the U.S. with more than 500 million of revenue that is geared at more than five times net debt to EBITDA. So we would consider it, it's actually higher than that, and I don't want to give away who it is. I don't want to hurt their feelings. So, it's actually geared considerably higher than five times net debt to EBITDA.
So we think that, you know, two and a half times, it's very conservative, and at one point two eight times, it's, you know, extraordinarily lightly geared. And if you think through, in a business that now pays no dividend, that is paying back the level of principal that we're paying back each month, and has the history and the defensive nature of our industry and our business model, we think that's probably very lightly geared. Coming back to the capital structure, yep, two times. Yep. So I hope that's clearer. You know, we could ultimately, I guess, run with no debt, but that probably doesn't make a lot of sense either. Congratulations on the meaningful Florida acquisition.
The multiple is higher than the usual one times revenue, so a higher multiple specific to this acquisition due to the size of the opportunity. We paid 1.25 times revenue. Hopefully, everyone was able to work that out. 78% upfront, 22% in five years' time. We think if you run the DCF on those inputs, Rakesh, you'll find that suitable. 78 times 1.25 and then a five-year sort of second period is very helpful. For a business of this, you know, it's a 40-year-old business, just celebrated its 40th anniversary. It's got a tremendous partner group. Average age, a little over 50. I think I haven't done the number, but it's about the number. 52, 54.
And a tremendously dominant, strong position in a very valuable niche, at least from a Kelly Partners perspective. We think that, you know, that the that our partners in that deal were very fair. They turned up, and they knew what they wanted, and we just agreed and said, "Look, we could do it this way." So that's the, you know, that's our picture on that. We think that that gets us now to a meaningfully sized U.S. business that justifies the investment that we're making here, time and effort. Question, are you waiting to reach a certain size in the U.S. before listing the company's shares on a major share market, such as NYSE? If not, at what point would you consider? So, and on that, listen to the Acquired podcast episode on Starbucks.
They listed two hundred and fifty million market cap, New York Stock Exchange, are too small for Goldman's to handle that, as they were told they were too small. I think that that's a very analogous story of KPG's, you know, plan and opportunity. We don't want to raise any equity capital at a price below intrinsic value, and so we really need to close the gap between between our intrinsic value and our share price. And as we do that, then we're more likely to undertake a US listing. And so, you know, we remain committed to that course of action when it makes sense. If you look at PSC in Australia, just sold out to a large UK-based private equity group in the insurance space. You got AJ Gallagher listed in New York.
We think, you know, we'd rather be AJ Gallagher and grow globally than be PSC and simply sell the business once, you know, albeit at a, you know, strong valuation. So that's really. We do see the insurance broker market as directly comparable to our business. So Austbrokers, Steadfast, PSC in Australia. So PSC, Austbrokers, Steadfast, PSC, number three by size. That's the way I think about it. And then there's AJ Gallagher, large, global, and this large UK-based private equity-backed group that are buying firms globally in the insurance broking space. Can you please talk to the progression of the UK and Canada? We are continuing to meet firms. We've met firms in Ireland and Scotland and a number in the UK. You know, in England.
and we're, you know, we're really keen if we meet the right person, but, you know, I couldn't describe us as being in a rush at all. So there's a tremendous amount of opportunity in Australia and the US, and when the right firm turns up, we'll be the quickest people you know to bring them into the group. And in the meantime, we'll just keep running what is an extensive search and dating process. But no, no rush there at all. We don't wanna spread ourselves too thinly. We think that the US is a very, very chunky opportunity, and I think you can see within what we're pulling together, the opportunity to just tighten it all up and make it work in the way that we envisage is enough currently.
We do consider we've always been pretty measured, so would you consider expanding into non-English speaking countries? It wouldn't be our first preference. We were in Barcelona in March and, you know, we met with twelve leading investors there, and there was a lot of interest and there's a lot of interest in, you know, we've been contacted by people in France, and people in Spain, and other non-English speaking countries. But we're not. You know, why try a, you know, the old why not just step over, you know, a zero-footed hurdle rather than make it more difficult for yourself? I look at the business, Talenom, that's listed in Finland, is working across numerous language and country jurisdictions, and I think that makes it more difficult. Any book recommendations? I do have a couple. That's a very good question.
Kenny, do you want to share the Charlie Munger screens that I haven't
Sure.
- that I haven't talked about? So the Fastenal book that you've recommended there, Brendan, that was on David Senra's Founders Podcast. I give a shout-out to David's podcast. It really is fantastic. I get up every week and go for a long walk listening to that. I'm never anything but inspired. Where's that page, Kenny? Page 24, the Fastenal book. If you haven't seen that book, I think that's really great. I think, you know, a lot of what you see here, I think is tremendous. Listening to that podcast, I would recommend. You know, I think we are a challenger brand. We wanna treat people as equals. You know, I am inspired by Mark Leonard. I'm happy to be the spokesman for our group. I have an ability to do that.
You know, I understand that. I don't need to spend the rest of my life doing that, and at any point where it doesn't make sense to do that, I'll just become a recluse like Mark, quite happily. Share the rewards. You can see our 51-49 model. Eleven percent of the stock is owned by our people. Try and listen rather than speak. See the unique humanness in all people. Develop empathy. Suppress your ego and let people learn. Remember how little you know. You know, these are great universal values that we're, you know, we've called out here, and we'll put in our owner's manual. We'll put it in our list of lists. Why? Because, you know, we wanna remind ourselves as, as learners, to...
That these are, you know, tremendous universal ideas that we should look to adopt every day to the degree that we can, knowing that we've all got our limitations. So that's a great book worth reading, podcast worth listening to as well. I did want to call attention to these two slides I've included on Charlie Munger, just because, you know, Charlie's died, that's very sad, but the best advice I ever got from Warren was to stop practicing law. He thought it was all right as a hobby, but as a business, pretty stupid. And go into investing, which is what we've done with KPG. And on going public, he said, you know, he was asked by Andrew Wilkinson, you know, who said that he's never gonna go public.
Charlie said, "You guys seem smart, but being public has its benefits." "Why?" Chris asked, "Doesn't it create a slew of problems?" "No, no, no," Munger said, "it creates a slew of opportunities." He started to rattle through a long list of reasons why being a public company can be ideal, and he concludes, "Being public is wonderful if you do it right." The key is to avoid thinking about it too much, being honest and diligent, slowly building a reputation, and that's what we're trying to do, build, slowly build a reputation for doing the right thing, and that's working out pretty well. I've included slide 33, just again for our list of lists, because this is probably the best talk from my perspective that Munger ever delivered to a high school group on living well.
And essentially, he said, "If you wanna be miserable, do these things." So I've just included that for your edification. In terms of, you know, the best books of the last little while, I'm looking to my right, where I have my reading chair. I love the book, Accelerating Excellence by James King. I think that's the book that can teach you the most about yourself and getting the best out of yourself and others. It's really a tremendous book. Many of you have probably heard me mention that. I've done a few rereads of it. I think it's really great. Do you have any comments on changes to the TASA Code of Conduct proposed by Stephen Jones, and the general direction of red tape for practitioners in the recent past?
We think when politicians involve themselves in businesses that they don't know that well, and don't consult as broadly as they should with that constituency, the Institute of Chartered Accountants has got a lot to say about this at the moment, and I'll try and stay out of the politics of it. Then I think it just needs a little bit more discussion and reflection. I don't think it's gonna have any negative impact on our business, et cetera, but I think anyone who knows me might have a view that I might have a view about that. But more wise heads in the room thinking through that would be better, I think. And I think it's got some elements that could open it up to abuse, which is not really in anyone's interests.
But I think when you see what happened with PwC, they probably have a view that they needed to do something rather than do nothing. Now, on that theme of listening more, speaking less, we can take a few more questions. We're happy to answer them, aren't we, Kenny? Got any-
Yep.
Any things you want to share, KK?
No.
I'd like to just finish by thanking everyone for their commitment to KPG. We are making real progress. You know, Ken and I are always like, "Okay, we sort of know what we're working on." And we always look at each other, happily surprised at how great things sort of turn out. I wanna, in particular, again, as I have many times, acknowledge the contribution of my wife, who is unseen and often unappreciated.
But we certainly wouldn't be here in the U.S. other than for the fact that Brett had said, "You know, I know that you want to grow a global business, and if you want to, then now is your opportunity, and we should get in there and do that." I think anyone who has been part of an effective partnership knows that it takes more than one person to do anything. And I'm always keen for people to understand that while I may have a verbal ability to explain things, I would hate a situation that you would conclude that, somehow much of what you see happens is the result of one person. We have 600 people. There are a hundred equity partners. Our equity partners are some of the finest people I've ever met in my life.
My wife is the finest business leader I have met. Quiet, incredibly astute with people, and very, very smart, and she's made enormous sacrifices in her own career to allow me to build KPG. And so, you know, on that note, to Beck and our partners in particular, and to all of our team, our clients and our shareholders, what you see in that flywheel is the collective efforts of the shared mission, values, and vision of many, many, many people. And I consider it a singular privilege to be involved with the quality of the people that I get to spend every day of my life with, be that our, you know, family, our partners, our team members, clients, and the numerous community groups that we're involved with.
You know, ultimately, life is about who you become and who you get to spend your time with. I'm quite convinced you can get a financial return doing many things if you've got some smarts and a willingness to work hard. But who you get to spend your time with is foundationally and critically important. And so as I always say, time is limited and death is certain. You know, you want to reflect every day that you're doing the work that you should be, with the people that you should be doing it with, in a way that you know adds value and adds up over the long term. To all of our numerous partners, the way I think of people, I certainly want to say thank you.
I think we've only just begun. We're like an eighteen-year-old child, a man-child, a woman-child, person-child, who is just growing into its capacity. But we're on the right track, and if we stay curious and humble and determined, I think the best is yet to come. And I suspect people will be quite shocked, as they always have been, at what compounding actually looks like. So thanks so much to everyone for their time today. And I look forward to staying in touch, and if you've got any questions off air, please be in touch. I appreciate it. Thank you. And as I love to say, have a great day!