Kelly Partners’ Rising Debt Raises Questions Amid Aggressive Expansion

Strong Financial Momentum

Kelly Partners Group Holdings Limited (ASX, KPG) has delivered a compelling FY25 performance, with revenue climbing 24.5% to $134.6 million and underlying net profit after tax and amortisation (NPATA) rising 13% to $9.1 million. This growth reflects both organic expansion and a series of strategic acquisitions that have broadened the firm’s reach beyond its Australian roots.

The company’s underlying earnings per share increased by 13.2% to 20.2 cents, while cash flow from operations surged 23.3% to $24.9 million, demonstrating strong operational cash conversion. Despite a slight dip in EBITDA margin to 28.3% from 29.6%, the firm attributes this to the integration of newer international businesses, particularly in the US and Ireland.

International Expansion and Acquisitions

FY25 marked a significant step in Kelly Partners’ ambition to become Australia’s global accounting firm for private business owners. The group now operates in Australia, Hong Kong, the USA, and Ireland, with 660 team members including 102 partners. Notably, US operations have grown to represent approximately 17% of total revenue, fueled by marquee partnerships such as the Florida CPA firm acquired in August 2024 and the recent James Howard CPA partnership in Mission Viejo, California.

In total, six acquisitions completed during FY25 contributed between $17.9 million and $21.5 million in annualised revenue, accounting for up to 20% of the previous year’s revenue. These acquisitions have not only expanded geographic coverage but also reinforced Kelly Partners’ unique Partner-Owner-Driver model, which retains original business owners as equity partners with long-term commitments.

Investment in People, Technology, and Brand

Kelly Partners continues to invest heavily in its infrastructure and talent pipeline. The firm launched its inaugural undergraduate program and held an international partners’ retreat, fostering collaboration and leadership development. The rollout of a digital client app enhances service accessibility and client engagement, while the company’s offices consistently rank among the top positions on Google searches, reinforcing its digital presence.

Financially, the group raised $4.1 million in internal equity capital from 41 existing partners, marking its first equity raise since the 2017 IPO. This capital injection supports ongoing investments in central services and digital capabilities, positioning the firm for sustained long-term growth.

Balancing Growth and Financial Discipline

While net debt increased by 29.4% to $58.4 million due to acquisitions and partner buy-ins, Kelly Partners maintains a gearing ratio of 1.42x, reflecting prudent financial management amid expansion. The company ceased dividend payments in February 2024 to reinvest in growth initiatives but has delivered a remarkable total shareholder return of over 1000% since its IPO, underscoring strong shareholder value creation.

Founder and CEO Brett Kelly emphasised the firm’s vision to support private business owners in a globalised economy, highlighting the strategic importance of expanding into the US and UK markets, which host large Australian expatriate communities. He reiterated the firm’s commitment to building a differentiated market position through its acquisition model and operational expertise.