Investment Matters

A positive update from CML

CML Group released a profit upgrade this week.

But before we get to that, we thought it might be useful to provide a refresher in relation to the CML business.


First Samuel initially invested in CML Group in May-16, with additional purchases in Jun-16.  These shares were acquired as part of a capital raising the company conducted, to fund an acquisition.    These shares were acquired at 15 cents. First Samuel had followed the company prior to this time, including owning a small exposure for clients who had a small cap portfolio.

CML's principal business is factoring.

Overview of factoring

Factoring, also known as receivables financing, is a finance service provided to assist companies with management of their cash flow.  Companies such as CML lend a portion of the value (say 70%) of an invoice that a company is yet to receive payment for.  When the company's customer makes payment, CML is repaid the loan value.  It acts as a way for companies to be, in effect, paid earlier than they would otherwise for providing their goods and services.

CML earns revenue from this process by charging a fee (an interest cost in effect) on the loan amount.

Factoring typically involves short term loans.  Credit management, including assessment of the end customer is obviously important in the process.


CML have upgraded their earnings forecast for FY-17 for earnings before interest, tax, depreciation and amortisation (EBITDA) to be above $10.6m, and net profit to exceed $3m. 

This compares to a NPAT for FY-16 of $1m.

Pleasingly, CML is achieving strong organic growth - the figures we are seeing are not based purely on past acquisitions.  This bodes well for the future.

We expect a step up in the dividend to be paid for the period ending 30-June-17, in line with the step up in the profit (0.5cps was paid in the first half year, and we expect more than 0.5cps to be paid for the second half).

Share price performance


This week the company's share price increased 11.5%, as a result of the upgrade mentioned above. 

Good returns have been achieved to date and we are confident that the company can continue to growth its earnings (and thus returns to shareholders) in coming years.