Funding Circle is still growing fast but has cut its revenue forecast
The peer-to-peer lender says an increasingly uncertain economic outlook has reduced demand for loans.
The UK’s largest peer-to-peer lender Funding Circle has updated its number for the first half of the year showing it has seen strong growth since its IPO last year in lending but is also expecting an increasingly testing environment ahead for its bottom line with growth in revenue expected to fall.
Its loans under management leap up 37 per cent to £3.5bn in the first half of 2019 compared to the same period last year, with new loan originations of £1.2bn, a 14 per cent increase. This has helped revenue growth of c.30 per cent and an expected 2019 adjusted EBITDA loss margin to be better than in 2018.
The SME focused platform, however, also said it is expecting revenue growth to fall to 20 per cent in the second half of the year versus previous guidance of 40 per cent, prompting a near 21 per cent fall in its share price today. At the time of writing the share price stands at 133p, a near 70 per cent fall from its issue price of 440p in October 2018.
Samir Desai, CEO and co-founder of Funding Circle, said an uncertain economic environment has reduced demand from small businesses and led it to proactively tighten lending criteria higher risk band businesses. 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. We remain confident in our aim to become the world's largest small business loans provider, helping millions of businesses to create jobs and support economic growth," he said.
Funding Circle also said it was delaying the launch of its Canada operations expecting for later in the summer. It is currently operating in the UK, US, Germany and the Netherlands.
In the US Funding Circle said it passed $2bn of loans under management with $1bn of total originations in the first half of the year. Funding Circle's loans under management being now one of the 50 largest SME loan portfolios in the US.
The peer-to-peer lender said in a statement that loan performance remains in line with previous projections across all geographies and that by tightening lending it will protect returns
“Investor returns on a net basis are expected to deliver 4.4-8.4 per cent in 2018 and 5.0-8.5 per cent in 2019,” it said in a statement.
Funding Circle is the leading small business loans provider in the UK and in Q1 completed more net lending to UK SMEs (£177m) than the entire UK banking system combined (£61m).