Funding Circle shares hit new low on revenue warning

Peer-to-peer lender Funding Circle has seen shares slump to record lows after a shock revenue warning as economic uncertainty hit demand for small business loans and sparked a lending crackdown.

Shares plummeted by 22% as the group halved its expected revenue growth for 2019 – to around 20% from 40% previously pencilled in – and said it was tightening its lending to higher risk companies.

It insisted the decision to rein in more risky lending would knock the number of loans made, but would protect investor returns.

Samir Desai, chief executive and co-founder of Funding Circle, said: “The uncertain economic environment has reduced demand from small businesses and led us to proactively tighten lending criteria.

“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.”

The FTSE 250-listed group, which was founded in 2010, also said it was putting its launch into Canada on hold as it focuses on existing markets, given the “uncertain economic environment”.

Funding Circle, which matches lenders to small business borrowers, floated on the London Stock Exchange last September with a valuation of £1.5 billion.

But it has seen a tricky start to life as a listed company and shares are now trading at a fraction of its 440p float price – currently around 124p.

In its latest update, the group said revenues grew by around 30% in its first half, with loans under management up 37% at £3.5 billion and new loans of £1.2 billion – up 14%.

Despite the revenue woes, Funding Circle said it expects to narrow its underlying loss margin for 2019.

Last year the firm posted revenue of £141.9 million for 2018, a 55% increase year on year, which exceeded its 50% guidance.

But pre-tax losses widened to £50.7 million from £36.3 million as it stepped up marketing activities to support its international growth ambitions.