This article first appeared on GuruFocus .
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Revenue:AUD159.2 million, up 18.2% year-over-year, driven by 2.9% organic growth and 15.3% acquired growth.
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Underlying EBITDA:AUD17.9 million, with operating EBITDA margins of 28.4% for operating businesses and 31.9% for Australian businesses.
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Underlying NPATA:AUD10.8 million, up 18.9% from the prior year.
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NPATA:AUD8.4 million, up 18%.
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Free Cash Flow per Share:AUD0.221, up 17.5%.
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Cash from Operations:AUD32.4 million, up 30.1% year-over-year.
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Free Cash Flow to Consolidated Group:AUD18.4 million, up 50.5%.
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Return on Invested Capital:23.2%.
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Return on Equity:35.7% for the parent, up from 31.9% last year; group return on equity at 40.8%.
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Organic Growth:2.9%, or 4.5% excluding effects of consolidating offices and exiting unprofitable clients.
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Gearing:Net debt to EBITDA at 1.52 times, up from 1.42 times in the prior year.
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Lockup Days:52.8 days, comprising 8 WIP days and 45 debtor days.
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Acquisitions:Completed six acquisitions during the year, totaling AUD20.5 million.
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Revenue per Person:Over AUD220,000 in billings per person.
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Shares on Issue:45.2 million, below the 45.5 million at IPO.
Release Date: August 12, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Revenue grew 18.2% to AUD159 million, with a 20-year track record of doubling six times.
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Underlying NPATA increased 18.9% to AUD10.8 million, with EPS up 18%.
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Strong cash generation: operating cash flow up 30.1% to AUD32.4 million, free cash flow up 50.5%.
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High returns: ROIC at 23.2%, return on equity at 35.7%, and book value CAGR of 34.3% over 20 years.
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Moderate leverage at 1.52x net debt to EBITDA, with disciplined debt repayment and no share dilution since IPO.
Negative Points
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Organic growth was only 2.9% (4.5% excluding consolidations and client exits), indicating reliance on acquisitions.
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US operations are less profitable than desired, with profitability expected to take time to mature.
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Share price fell 70% during the year, causing distress for shareholders and the CEO, who faced margin loan issues.
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Acquisition activity slowed in the second half, with one deal falling through due to vendor demands.
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No dividends are planned, as capital is reinvested for growth, which may disappoint income-focused investors.
Q & A Highlights
Q: Can you provide an update on the strategic initiatives, including the international listing, long-term debt funding, and dual-class structure? A: Brett Kelly (Founder, CEO, Executive Chairman) confirmed the company is actively working on three key initiatives: investigating an international exchange listing, securing long-dated debt funding similar to Constellation Software's 15-year debentures, and implementing a dual-class structure for long-term governance. He noted that the company is working with Westpac on the debenture structure and with Stifel in Canada regarding the listing venue, adding that these moves are designed to provide the "architecture" for decades of compounding growth.
Q: Could you explain the recent dilution of your shareholding down to 31%? A: Brett Kelly (Founder, CEO, Executive Chairman) explained that the dilution was a personal decision driven by an emergency. Following a massive fire in Los Angeles, he needed to relocate his family, and his wife's serious heart condition made the share price volatility more stressful for her. He took on margin loans to buy a new home after exhausting other options, which he acknowledged was a bet that went "strongly against" him due to the share price decline. He emphasized that he remains the largest shareholder and that the move diversified the family's financial position.
Q: What is the thinking behind pursuing long-term debt funding when the current low debt-to-EBITDA ratio doesn't seem to limit near-term growth? A: Brett Kelly (Founder, CEO, Executive Chairman) explained that long-term debt at the HoldCo level would enable the company to grow dramatically outside Australia. He cited the example of Constellation Software, which operates in over 100 countries and can move quickly with certainty. The current structure makes it difficult to finance smaller deals in individual countries, and a long-dated debenture would provide the flexible capital needed to scale the acquisition engine globally.
Q: Can you provide an update on acquisitions and partnerships and what you're seeing on the ground? A: Brett Kelly (Founder, CEO, Executive Chairman) stated that there is a "huge amount of activity" in the market, but the company remains disciplined and unanxious about doing deals. He noted that the company completed six or seven deals in the first half of the year. He also highlighted a new opportunity: becoming the "consolidator of consolidators," as private equity groups that have bought and consolidated firms are now looking for a home, and KPG is well-positioned to bring those groups into its model.
Q: At what company performance would you reinstate dividends? A: Brett Kelly (Founder, CEO, Executive Chairman) stated that there is "probably none" in the current plan. As long as the company can generate returns on invested capital (ROIC) that are "miles beyond" its weighted average cost of capital, it will continue to reinvest profits internally. He noted that if the company changes its listing venue, it would likely pay out its large franking credit balance as a special dividend, but there are no plans for a regular dividend.
Q: You mentioned the US is not as profitable as you would like. Is that due to inherent economics or is it taking longer to reach maturity compared to Australia? A: Brett Kelly (Founder, CEO, Executive Chairman) said that US profitability likely looks a lot like Australia did in its early years. It takes time to build relationships and scale operations, with new offices in Woodland Hills and Florida expected to dramatically improve performance. He sees a "very, very big opportunity" in the US market, noting that the margins seen in firms they look to acquire present a significant upside that the broader market doesn't fully appreciate.
Q: How do you intend to scale the acquisition engine if you are able to raise debt? A: Brett Kelly (Founder, CEO, Executive Chairman) outlined a plan to scale teams in various global markets, similar to McDonald's five global markets. He envisions teams in North America, the UK, Australia/Pacific, and potentially Asia, the Middle East, and Africa. He also noted a growing trend of inbound interest from private equity groups that have consolidated firms and are now seeking an exit, positioning KPG as the natural consolidator for these groups.
Q: Is AI giving any noticeable benefits to the business? A: Brett Kelly (Founder, CEO, Executive Chairman) confirmed that AI is providing "very strongly, yes" noticeable benefits, but declined to share specifics, stating the company will not run an "education service" for competitors. He emphasized that the company's unique structurewith over 80% commonality in its software stack and a 51-49 partner modelgives it a significant advantage in implementing technology quickly and effectively compared to other firms.
Q: How is the acquisition price in the USA affected by competition from private equity? A: Brett Kelly (Founder, CEO, Executive Chairman) stated that private equity competition has no impact on the part of the market KPG targets. He described a bifurcation where PE focuses on very large firms, while KPG has a proprietary deal flow built over 20 years. He contrasted KPG's "permanent capital, relationship-based, decade-long view" with "flighted PE capital" that has a three-to-five-year attention span, giving KPG a unique and strong position.
Q: Can you speak to the rationale and performance of the WrkPod acquisition? A: Brett Kelly (Founder, CEO, Executive Chairman) described WrkPod as a "sleeper business" based in the Philippines with over 1,000 seats. The model identifies niches to build virtual teams for clients, and the opportunity is to scale from 1,000 to 10,000 seats. He noted that at today's market cap, WrkPod could be more valuable than KPG if executed well. He framed it as an application of the Partner-Owner-Driver model to a new vertical, leveraging the company's intellectual property.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
