CML Group released its FY15 results on 27 August 2015
Key figures included:
- Revenue up 16% on FY14 to $162.2m
- Underlying EBITDA up 13% to $2.7m
- Reported EBITDA down 62% to $0.9m, due to a $450,000 general credit provision taken for the first time plus $1.35m in one-off costs, including the $900,000 impairment/bad debt taken in 1H15 (as previously flagged)
- Net profit after tax of $17,000 versus $1.1m a year earlier
- Total assets more than doubled to $66.4m due to the CFA acquisition
- Cash and cash equivalents of $14.1m reported (versus $504,000 FY14) - as all of the proceeds of the May 2015 $25m note issue have not yet been fully deployed
- Receivables/loan book of $39.5m (versus $24.3m FY14), predominately due to the CFA acquisition
Revenue and underlying EBITDA were broadly in line with expectations, albeit at the lower end. The general credit provision of $450,000 (~2% of the loan book), is viewed as a sensible and conservative decision that will allow the company to smooth its earnings and build up protection for unexpected impairments/bad debts.
However, as written in our research paper at the time of the $25m note issue in May 2015, “with the structure of this Note issue sharing many features with a securitisation of receivables, a financial analysis of the issuer is of limited use other than the financial capacity of the CML to continue to service the loan book.”
Of greater importance for Note holders is the receivables/loan book which is performing well. In the FY15 results release, the company made the following statement:
Our invoice finance portfolio continues to grow strongly with invoices funded at 30 June 2015 increasing 48%+ and funds deployed increasing 22%+ since June 2014. The improving credit quality of the funds deployed is evidenced by the level of clients in 90-day plus arrears decreasing by almost 50%. This is calculated on a pro-forma basis for the acquisition of CFA.
We will continue to monitor the growth and quality of the loan book as excess funds are deployed but at this early stage the loan book is tracking broadly as expected.
The company did not provide forecasts for FY16 but suggest a positive outlook with the following statement:
CML expects the strong growth momentum achieved in its finance division prior to FY’15 to resume in FY’16, driven by:
- A full year contribution to earnings from the quality acquisition, CFA
- Organic growth of the loan book with sufficient capital now in place
- Leveraging growth in the loan book against a fixed cost base that was put into place prior to obtaining additional capital
- Improved efficiencies from the implementation of industry-leading software
- Improved earnings by generating a return on currently un-deployed interest-bearing funds
Full details of the results can be found on CML’s website
where you can download the report.