Funding Circle has announced a reorganisation of its German and Dutch businesses as it shifts focus to centralising options at its London headquarters.
The listed peer-to-peer lender revealed in its annual report this morning (12 March) that it had conducted a strategic review of operations in Germany and the Netherlands – known as its developing markets – and would instead focus on originating loans for local lenders it has partnered with in the region rather than through investors.
“We will continue to service the existing portfolio of loans of around €300m (£264m) on behalf of our existing customers,” Funding Circle said.
“Germany and the Netherlands represent only eight per cent of group revenue but around 60 per cent of adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) losses.
“By reorganising both businesses we move to a more efficient model that better serves small businesses in these markets whilst allowing the group to accelerate its plans to deliver profitable growth.”
The lender reported revenues were up across the group by 18 per cent to £167.4m.
Loans under management grew by 19 per cent to reach a record £3.7bn, with originations growing three per cent to £2.3bn.
Funding Circle said its flagship UK business reached profitability in the second half of the year.
However, rising staffing and marketing costs across the group’s operations in the UK, US, Germany and the Netherlands, as well as a £34.3m exceptional write down of its German and Dutch assets, pushed the overall business into a loss for the year.
It posted a pre-tax loss of £49.9m for the year, up from £45m in 2018.
This increased to £84.2m once the £34.3m exceptional write down is taken into account.
Funding Circle also revealed it has been piloting an instant decision lending tool in the UK that has taken on average six minutes from application to approval.
This will be rolled out to around 50 per cent of borrowers by the end of 2020.
”The actions we took in 2019, in response to the uncertain economic outlook, reduced growth but improved investor returns and were the right response for the long-term benefit of the company and our customers,” Samir Desai, chief executive of Funding Circle, said.
“We start the year in a stronger position as a business and confident in delivering an accelerated pathway to profitability targeting adjusted EBITDA break-even for the whole business in the second half of 2020.
“Our UK business was profitable in the second half of 2019 and loans under management in the US continues to follow a similar growth trajectory to the UK
“We are reorganising our developing markets business to deliver a better and more profitable model.
“Our new instant decision lending platform in the UK and the US has begun to roll out and will provide a step-change in the borrowing experience for small – and medium-sized enterprises.”
Funding Circle’s share price opened this morning at 57.5p, well below its initial public offering price of 440p in 2018.
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