Funding Circle shares soar as lender swings to unexpected profit
Funding Circle swung to an unexpected profit in the first half of 2024 and raised its guidance for the full year as the small business lender looks to boost its flagging share price.
The news sent its shares up as much as 24 per cent on Thursday to their highest level since November 2021. The stock remains down 72 per cent since Funding Circle listed in London at a valuation of around £1.5bn in 2018.
The fintech posted a pretax profit of £0.5m for the six months, compared to a £7.4m loss in the same period last year – and a £2.5m loss in the second half of 2023.
Funding Circle said it became profitable half a year earlier than it had expected, upgrading its previous guidance to target a full-year profit for 2024, rather than just the second half of the year.
The firm added that it would begin a further share buyback of up to £25m after the conclusion of the existing £25m repurchase it announced in March.
Funding Circle’s total income for the six months jumped 32 per cent year on year to £78.9m, while revenue increased to £79.1m to £59.7m. Interest income rose to £14.1m from £5.1m.
“In March, I set out this plan to simplify the business, make it leaner and profitable,” chief executive Lisa Jacobs told City A.M.
“We’ve delivered really well against that, and whilst also showing strong growth and innovation as we’ve expanded our product set.”
The firm’s UK term loan originations jumped 47 per cent to £692m year on year. Meanwhile, its lend-now pay-later offer Flexipay, launched in 2021, saw a 151 per cent surge in transactions to £226m.
“We’re seeing that we’re making strong inroads into that market, and it really benefits our SMEs overall,” Jacobs said. “It enables us as well to have a much more frequent relationship and interaction with our customers.”
Funding Circle’s loans under management ticked down three per cent to £2.78bn, which it said was driven by continued repayment of government-backed loan schemes. It reported an increase in commercial loans to £1.46bn from £1.3bn over the six months.
After its losses widened to £33.2m in 2023, Funding Circle laid out plans to reduce costs and narrow focus on its UK business, including around 120 expected job cuts. The firm is targeting roughly £15m in annualised cost savings in 2025.
In July, Funding Circle completed the sale of its lossmaking US arm to Florida-based iBusiness Funding for £33m, resulting in a £10m gain. The unit made a £10.2m loss in the first half of 2024.
Jacobs said Funding Circle had “no imminent plans” for another push at international expansion. “We see a big opportunity in the UK,” she added.
The firm on Thursday reaffirmed its medium-term guidance 15 to 20 per cent revenue growth and pretax profit margins of more than 15 per cent.