Funding Circle, the largest P2P lender in the UK and one of the first major European fintechs to list on public markets this week published its first Annual Report giving an extra layer of depth to understanding the firm’s stellar growth story since it launched just under a decade ago in 2010.
The headline numbers for 2018 were actually revealed last month showing a loss of £50.7m in the year, compared to £36.3m the year before with revenues hitting £141.9m and loan originations increasing 40 per cent to £2.3bn.
These figures aside, the 144 page document also gives further flavour to its growth and evolution. In this article we take a look at five key take-aways.
1. Total Cost of IPO
Funding Circle listed back in October, working with Merrill Lynch, Goldman Sachs and Morgan Stanley as joint global coordinators and joint bookrunners, with Numis also acting as a joint bookrunner. BofA Merrill Lynch is acting as sole sponsor on the offer.
The total costs associated with the IPO, it says in the report, were £15m. Of this £5.9m was expensed to the income statement and contributing to the overall loss with the remainder offset against share premium. This is required for costs directly associated with the primary offering.
2. Who is lending and to whom
Funding Circle’s originations rose 32 per cent to £1.5bn in its core UK market with nearly 40 per cent of these originations from loans to existing borrowers. This loan growth delivered revenue of £93.2m - not including property with nearly half (49 per cent) generated from existing customers. In 2017 it was 45 per cent.
Aprroxaimalety 40 per cent of funding last year came from retail investors and the balance from institutions, supranational banks and Funding Circle SME Income fund, which is in the process of now winding down. In 2018 £200m of funding came from its new Innovative Finance ISA.
3. Headcount is increasing rapidly
Average headcount (including contractors) rose to 1,004 in 2018 compared to 2017’s 740 number, representing a 36 per cent rise.
Costs associated with staffing are the largest segment of overall expenditure at Funding Circle and these increased 44 per cent (£27.6m) during the year. This was principally driven by the 36 per cent growth in average headcount as well as increases in the average paycheck, together with growth in share-based payments of £4.2m to £8.8m.
4. Its CEO Samir Desai earned £4m last year
Samir Desai saw his total pay leap up to just over £4m in 2018 as a result of a £210k salary and the rest from cashing in shares in its IPO. Prior to IPO share options awarded to its CEO did not have performance conditions.
5. Funding Circle’s biggest backers
The firm’s investors are no secret of course but the largest investors by total share capital does make for interesting reading.
According to the numbers (from 31 December 2018) Index Ventures has the largest stake at 16.94 per cent. The VC giant has backed Funding Circle through a number of rounds including its $2.5m Series A in 2011 where it was the sole investor through to its $100m Series F in January 2017.
The firm does appear to have trimmed exposure as in its pre-IPO Registration Document it had nearly 20 per cent of total shares.
The private holding company of Danish billionaire Anders Holch Povlsen, has just over 10 per cent and is the second largest shareholder. The ASOS backer agreed to buy the shares in the IPO.
Next up are Accel Partners, another long term VC backer who also appears to have trimmed its stake by 2 percentage points. Merian Global Investors and Invesco Perpetual are two new names on register, owning 7.68 and 6.36 per cent of shares, respectively.
The other largest institutions with a stake include DST Managers, Baillie Gifford and Union Square Ventures. The latter also appearing to have trimmed its exposure.