Funding Circle shares dive as it halves revenue growth target
Funding Circle’s shares collapsed today as it slashed revenue growth predictions in half this year, warning that demand for loans is waning amid an “increasing uncertain economic outlook”.
The small business loans firm today warned that 2019 revenue growth will hit 20 per cent, rather than the 40 per cent it originally predicted.
The peer-to-peer lender also tightened its loan criteria for higher risk businesses.
Shares dived in response to the trading update. Funding Circle’s share price fell 20 per cent to 133p on the London Stock Exchange.
Read more: Funding Circle’s loans under management soar to record high
Boss Samir Desai blamed the uncertainty surrounding Brexit for holding firms back from seeking lending.
“The uncertain economic environment has reduced demand from small businesses and led us to proactively tighten lending criteria,” he told investors.
“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.”
Based on last year’s revenue of £142m, Funding Circle is now on track to record revenue of around £170m.
The business has grown revenue 30 per cent for the first half of the year, with an adjusted loss margin of around 25 per cent.
New loan originations grew 14 per cent to £1.2bn, while loans under management rose 37 per cent to £3.5bn.
Shares in the firm fell 15 per cent yesterday to 163p.
The company’s stock has declined from 259p on 10 June.
The drop followed the City watchdog’s announcement of a 10 per cent investment cap on peer-to-peer lending, which is Funding Circle’s business model.
Investors must now pass a test to prove they understand the risks of such investments, the Financial Conduct Authority said last month.
Read more: Funding Circle’s IPO costs leads to widening losses
Funding Circle said its earnings before interest, tax, depreciation and amortisation (Ebitda) loss margin will be better for 2019 than it was in 2018.
In its last financial year Funding Circle recorded a widened operating loss of £51.6m, 40 per cent up from the year before.