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Funding Circle Plc: Half Year 2024 Results
Funding Circle Plc (FCH)
Funding Circle Holdings plc
THIS ANNOUNCEMENT INCLUDES INSIDE INFORMATION AS DEFINED IN ARTICLE 7 OF THE MARKET ABUSE REGULATION NO. 596/2014
STRONG HALF YEAR PERFORMANCE AND DELIVERY AGAINST STRATEGIC OBJECTIVES SIMPLER, LEANER AND PROFITABLE BUSINESS WITH HIGH GROWTH
Funding Circle Holdings plc (“Funding Circle” or the “Group”) today announces results for the six months ended 30 June 2024.
Commenting on the results, Lisa Jacobs, Funding Circle CEO, says: “We are delivering on the plan I laid out in March to be simpler, leaner and profitable whilst continuing to show strong growth. In May, we simplified and streamlined the business to deliver £15m annualised savings in 2025 and in July we completed the sale of our US business for a gain of £10m.
The first half was stronger than our expectations with annual revenue growth of over 30%; 12% up on H2 2023. We were profitable a half earlier than we set out in our guidance in March and are today upgrading our guidance to be profitable for the full year (versus prior guidance of H2 profitable).
We are reaffirming our medium-term guidance of 15-20% revenue growth and PBT margins of more than 15% and continue to be excited about the long-term growth and profitability of the business as we execute against our plan.
We will commence a further share buyback of up to £25m following the conclusion of the existing £25m share buyback.”
Financial Summary:
Operational & Strategic Summary:
1 The comparative financial information has been re-presented to exclude the US business which is presented as discontinued operations. 2 Net income is also referred to as “Revenue”. 3 Unrestricted cash refers to total cash less cash that is restricted in use. The restricted cash is cash that is not available for general use by the company as it is held within investment vehicles and generally payable to third parties. £23.1m of cash at 30 June 2024 relates to the US business and is held in a disposal Group.
Outlook: Attractive, growing and profitable business
1 Pre-exceptional items
Share buyback We announced a share buyback programme of up to £25m in March 2024 which is expected to complete in Q4 2024. We intend to do a further share buyback of up to £25m once the existing programme completes and will announce this programme separately before it commences.
Board changes As we announced in May, Oliver White, Executive Director and CFO, will be standing down from his role. He will begin his transition to Tony Nicol, currently Director of Finance and Investor Relations, today and step down from the Board on 1 January 2025. We are hugely grateful to Oliver for his contribution to Funding Circle and the important role he has played in putting the Company in a strong position to grow in the coming years.
Analyst presentation: Management will host a presentation and conference call for institutional investors and analysts at 9:30am UK time (BST), on Thursday 5 September 2024.
To watch and listen to the webcast, with the opportunity to submit written questions, please use this link to register and gain access to the event.
For conference call access, with the opportunity to ask live questions, please dial +44 33 0551 0200 or +1 786 697 3501. Quote ‘Funding Circle Half Year Results’ when prompted by the operator.
An on-demand replay and transcript will also be available on the Funding Circle website following the presentation.
Investor relations and media relations: Funding Circle Investor Relations Tony Nicol
Funding Circle Media Relations Angeli Everitt (+44 20 3830 1325) press@fundingcircle.com
Headland Consultancy Stephen Malthouse and Jack Gault (+44 20 3805 4822)
Forward looking statements and other important information: This document contains forward looking statements, which are statements that are not historical facts and that reflect Funding Circle’s beliefs and expectations with respect to future events and financial and operational performance. These forward looking statements involve known and unknown risks, uncertainties, assumptions, estimates and other factors, which may be beyond the control of Funding Circle and which may cause actual results or performance to differ materially from those expressed or implied from such forward looking statements. Nothing contained within this document is or should be relied upon as a warranty, promise or representation, express or implied, as to the future performance of Funding Circle or its business. Any historical information contained in this statistical information is not indicative of future performance.
The information contained in this document is provided as of the dates shown. Nothing in this document should be construed as legal, tax, investment, financial, or accounting advice, or solicitation for or an offer to invest in Funding Circle.
Business Review Funding Circle is the UK’s leading SME lending platform. We operate in a large, attractive and growing market, with over £80bn of outstanding debt in the UK SME market and £1.3trn of B2B SME payments each year. In the UK, Funding Circle has extended £13.6bn in credit to c.103,500 businesses.
We provide an unrivalled customer experience, powered by data and technology. This advantage is clear in our credit assessment process, with our models 3x better at discriminating risk than traditional bureau scores. It also delivers superior results for our customers. 76% of applicants receive an instant decision, we have a strong NPS of 75 and see strong repeat usage, especially with FlexiPay.
We are constantly looking at ways to innovate our product offering which enables customers to borrow, pay later and spend with Funding Circle and serve more small business needs. In Q3, we commenced a beta roll out of a new Cashback Credit Card for everyday business spending.
We were pleased with the strong operational and strategic performance in H1 2024, with strong growth from both of our continuing business units compared to H2 2023 and H1 2023. The Group comprises two ongoing trading business units, each at differing stages of maturity. The US business was sold on 1 July 2024 and is therefore treated as discontinued in the period.
Term Loans The Term Loans business originations were progressively up against H1 and H2 2023. We saw growth through our commercial loans, our participation in the third iteration of the Recovery Loan Scheme (“RLS”), as well as more originations through our marketplace of third party lenders where we refer SMEs to other finance providers if we are unable to lend to them directly. Through our suite of products we are able to support as many SMEs as possible by providing access to financing. Originations were £692m in H1 2024, increasing from £471m in H1 2023, and were higher than the £589m in H2 2023. Originations were funded through forward flow agreements with institutional investors and, as at 30 June 2024, we had forward flow agreements in place totalling £1.8bn. In July 2024, we gained accreditation to participate in the longer term government guaranteed programme, the Growth Guarantee Scheme (“GGS”). This will allow us to help provide finance to SMEs in parts of the market we otherwise would not. FlexiPay Our line of credit product, FlexiPay, has demonstrated significant growth to date and we continue to invest in this business unit. Transactions continue to grow, more than doubling since H1 2023 to £226m, and we are experiencing strong customer engagement. FlexiPay customers can choose to pay later via bank transfer or through a FlexiPay card with approximately 90% of transactions via bank transfer. FlexiPay is funded by Funding Circle capital and a senior debt facility of £150m.
Loans under management from continuing operations declined in the period by 3% to £2,777m. This was principally driven by continued repayment on the government loan schemes, CBILS and RLS, offset by growth in loans under management from commercial lending and the participation in the third iteration of RLS. As at 30 June 2024 UK government-guaranteed loans represented £1,315m compared to £1,462m commercial loans (31 December 2023: £1,555m government-guaranteed and £1,298m commercial loans).
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