Small business lender CML Group (ASX: CGR) has announced an expected underlying earnings before interest, tax, depreciation and amortisation (EBITDA) for the 2018 financial year of more than A$17 million.
The figure is up A$3.8 million on the 2017 financial year, and reflects an upgrade of A$1.5 million on the company’s previously-announced underlying expected EBITDA for 2018.
The underlying EBITDA excludes a one-off A$1.6 million (before tax) impact of fees in the second half of 2018 incurred on early redemption of FIIG corporate bonds as part of A$2.7 million in costs when CML transitioned to an expanded institutional funding facility.
CML said the upgraded EBITDA reflects continued growth in the company’s core Cashflow Finance division, driven in part by an increase in online applications by business clients in the small-to-medium sector. Cashflow Finance provides clients with invoice, equipment and trade funding solutions to help them improve the consistency of their cash flow.
Other EBITDA contributors were CML’s A$39 million acquisition of Thorn Group’s Trade & Debtor Finance division in February, and the early success of CML’s Equipment Finance arm established in July 2017.
“The earnings upgrade for [the 2018 financial year] reflects the success of organic growth initiatives put in place over recent times, the successful acquisition and smooth integration of the [Thorn] business and the newly-formed Equipment Finance division exceeding our own expectations,” said CML chief executive officer Daniel Riley.
“Higher top line growth and a continued focus on the use of technology and cost containment has resulted in improved margin and substantial growth in underlying earnings.”
Helping clients manage cash flow
CML specialises in factoring or receivables finance, whereby businesses are provided with an advance payment of up to 80% of client invoices to help them overcome the cash pressure of delivering goods or services in advance of payment from customers, which can often exceed 30 days.
It is a flexible line of credit utilised in conjunction with sales volume; however, CML is able to consider additional advances to client where there is adequate security to cover the position.
At mid-morning, CML shares were up 6.78% to A$0.63.