CML Group (CML) has released summary unaudited management accounts for 1H16 and details of a new acquisition
The full audited accounts are expected to be released 25 February however CML’s management accounts are summarised below.
| 1H15 | 2H15 | 1H16* |
| Revenue | 45.9 | 39.8 | 43.8 |
| Underlying EBITDA | 1.6 | 0.6 | 2.4 |
| EBITDA | 0.7 | 0.1 | 2.4 |
| NPAT | 0.1 | (0.1) | 0.5 |
*Unaudited management accounts
Source: FIIG Securities, Company report
- The group has performed strongly with underlying EBITDA increasing circa 50% compared 1H15 primarily due to the acquisition of Cashflow Finance Australia (CFA) which completed in May 2015
- Outlook: ‘Growth in the first half is expected to continue in second half of 2016 and, with a full year contribution of the CA acquisition, the growth momentum is expected to continue into 2017’
- Please refer to this note written 3 February which gives details of CML’s loan book and performance to December 2015.Please refer here
for the ASX release
New acquisition
CML has entered into a Binding Heads of Agreement to purchase CashFlow Advantage Pty Ltd (CA) subject to due diligence. CA is a receivables finance company based in Sydney.
- The purchase price is $3m which includes a $10m loan book and goodwill
- The price represents an EBITDA multiple of less than 2.0x
- CA recorded $100m in total invoice funded in FY15
Key statistics of CA’s loan book, compared to CML’s existing Finance division loan book, are shown in the table below.
| CA | CML | CML+CA |
| Book Size | $10m | $25m | $35m |
| Clients | 65 | 167 | 232 |
| Average funds | $154,000 | $152,500 | $153,000 |
| Max exposure | $1.5m | $1.7m | $1.7m |
| LVR | ~70% | ~66% | ~67% |
Source: FIIG Securities, Company report - CA’s loan book of about $10m is of comparable size to that of the previous CFA acquisition, completed in May 2015
- CA’s loan book has comparable metrics to those of CML
- CA uses the same client administration and management software as CML
- On the details available, CA appears to be a suitable target and should be integrated easily
- Synergies similar to those achieved with the CFA integration could therefore be expected. The CFA integration for example reduced headcount across the combined business by 25%
While a relatively small business, CML noteholders are in a senior position secured primarily against the loan receivables portfolio. The portfolio is covered by an insurance policy with an AA- rated insurer covering losses greater than $5,000. As such, recovery in the event of a default would be expected to be high.
The notes continue to offer attractive value given the company has grown significantly and performed within expectations since issue. The notes are indicatively offered with a yield to maturity of 7.25% or ~500bps over BBSW stepping up to 700bps over after May 2020 until the final maturity in May 2021 if not called earlier.