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Funding Circle Holdings PLC

Funding Circle cuts revenue guidance as Brexit uncertainty hurts demand

"The uncertain economic environment has reduced demand from small businesses and led us to proactively tighten lending criteria,” said chief executive and co-founder Samir Desai.

Funding
Revenue increased 30% in the first half

Funding Circle Holdings PLC (LON:FCH) shares slumped as it cut its revenue growth forecast for the year after Brexit uncertainty reduced demand for loans.

The peer-to-peer lender, which is still trading below its initial public offering price of 440p after a lacklustre flotation in October, expects revenue to rise by 20% in the 2019 financial year compared to a previously estimated 40% increase.

In reaction, shares fell 20% to 130p in morning trading. 

"The uncertain economic environment has reduced demand from small businesses and led us to proactively tighten lending criteria,” said chief executive and co-founder Samir Desai.

READ: Funding Circle delivers record loans under management in the first quarter

“As a result, revenue growth will be impacted. We recognise that this is a change from our previous guidance, but we are taking the prudent course of action for the long-term growth and development of our business.”

First-half revenues rise

In the first half of the year, revenue increased 30% as loans under management gained 37% to £3.5mln and new loan originations edged up 14% to £1.2mln.

Funding Circle completed £177mln in net lending to UK small and medium enterprises.

In the US, the company passed US$2bn of loans under management and US$1bn of total originations.

Segment adjusted earnings (EBITDA) was breakeven with the UK recovering. The adjusted EBITDA loss margin was about 25%.

EBITDA loss margin to improve 

For the year, Funding Circle predicts an improved EBITDA loss margin for the year.

It expects net investor returns of 4.4% to 8.4% in 2018 and 5.0% to 8.5% in 2019.

Mark Collings, chief commercial officer of debt finance platform, CODE Investing, said: “Demand from smaller businesses is clearly suffering in the current political and economic climate.

“For smaller firms, it’s hard to commit to the future when you haven’t got the faintest what it holds.

“We’ve known for some time that smaller firms have been avoiding the high street but news that the alternative lenders they relate to are also feeling the squeeze underlines the extent of the doubt in many business owners’ minds."

Quick facts: Funding Circle Holdings PLC

Price: £1.17

Market: LSE
Market Cap: £407.03 m
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