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Losses widen at Funding Circle

The peer-to-peer lender has been spending on growing its market share
March 8, 2019

Funding Circle (FCH) has had no problem attracting businesses looking for a loan, nor investors willing to put up the capital. Loans under management rose 55 per cent to £3.15bn last year, with originations up 40 per cent. Lending by the core UK business was up almost half, while 'developing' markets – Germany and the Netherlands – more than doubled loans under management. That meant revenue growth exceeded the peer-to-peer lender’s 50 per cent target stated at the initial public offering. Management is guiding towards revenue of more than £200m for 2019, or an annual growth rate of 41 per cent.  

IC TIP: Sell at 374p

However, increased spending on marketing – which remained stable at 41 per cent of revenue – and product development costs meant adjusted cash losses widened by 14 per cent to £28.5m. Those losses are expected to narrow in 2019, as central costs fall to 20 per cent of revenue, from 25 per cent in 2018. The negative adjusted cash profit margin also improved to 20 per cent, from 27 per cent in 2017, but that is still some way off management’s 35 per cent longer-term target.

Analysts at Numis expect an adjusted pre-tax loss of £45.8m and loss per share of 16.5p in 2019, compared with losses in 2018 of £44.4m and 18.2p, respectively.

FUNDING CIRCLE HOLDINGS (FCH)  
ORD PRICE:374pMARKET VALUE:£1.29bn
TOUCH:371.6-374p12-MONTH HIGH:460pLOW: 230p
DIVIDEND YIELD:NILPE RATIO:NA
NET ASSET VALUE:116pNET CASH:£333m
Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2015*32.0-39.5nana
2016*50.9-47.2nana
2017*94.5-36.3-14.0nil
2018142-50.7-18.2nil
% change+50---
Ex-div:na   
Payment:na   
*Pre-IPO figures