Investment Matters

CML Group - strong growth

CML Group released, as expected, a result showing strong revenue, earnings and dividend growth. 

Revenue increased 16%, driven by the company's Finance (invoice factoring) division.  EBITDA (earnings before interest, tax, depreciation and amortisation) increased from $1.5m (or $0.5m allowing for one-off costs) in FY-15, to $5.3m in FY-16.   A strong net profit of $1m allowed CML to increase the dividend 100%, to 1.0cps.

CML's performance in FY-16 was driven by (and its future performance will also be driven by) the company's factoring division.  Simplistically, factoring is the financing of invoices, so companies can obtain the money due to them sooner and improve their cash flow / working capital position.

The company sold its non-core payroll division during the year, which will free up $3.5m to invest in the growth of the factoring division.   The company acquired companies during the year - Cashflow Advantage and the 180 Group.  These acquisitions contributed to earnings for 3 months and one month respectively.

CML's factoring loan book increased from $21.5m to $69.9m over FY-16.  The above-mentioned acquisitions contributed to this, along with organic growth of ~$14.5m.  The CML Notes (also held in the Equity allocation) helped to facilitate this growth.

CML has released what we consider to be a conservative outlook for FY-17 - EBITDA of greater than $10.6m.  Drivers of this growth will be full year contributions from Cashflow Advantage and the 180 Group (along with cost synergies when their operations are integrated into CML), continued organic growth, and margin improvement (from, for instance, existing clients utilising additional services from CML).