Funding Circle Holdings PLC (lon:fch)
Funding Circle – Lots Of New Business Or Lots Of Bad Debt?

Funding Circle Holdings PLC Financials

ItemCurrent PeriodPrevious Period
Year20192018
Period12 Months12 Months
Revenue£167m£142m
Earnings
Adjusted Earnings
EBITDA
Adjusted EBITDA
Statutory Profit(£85m)(£50m)
Adjusted Profit
Total Debt
Net Debt

Commentary History
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Funding Circle Holdings PLC Share Price
Grade:The Orange Grade - Shares That I Think Show Promise With A Few Caveats.
Title: Funding Circle – Lots Of New Business Or Lots Of Bad Debt?
Company: FCH - Funding Circle Holdings PLC
Share Price Then: 25.2p
Author: Ian Smith
Date: Thu 19 Mar 2020
Comments: In the past I have been quite negative about Funding Circle as they keep reporting losses.

Loss for the year 2019 - £84.7m, 2018 - £49.5m and 2017 £35.7m.

In 2019 they had revenue of £167m, staff costs of £90m and marketing costs of £66.5m and to be fair part of the £84m loss was a non-cash exceptional charge of £34.3m for goodwill/ intangible assets related to the Developing Markets.

So the above suggests that if 2020 were to be a normal year the company could make a profit, but COVID-19 has made 2020 an abnormal year.

Given that FCH targets borrowers that the banks have generally turned down there has to be a big worry that loan defaults are going to massively increase. In some cases this could be avoided by extending the loan amount or loan period.

But I would expect that many more cases will simply show the business now to be unviable as it has had to borrow more to cover costs with no revenue. For example, gyms often have a membership list that is far greater than the number of active members, the last thing the gym wants is to remind their non using members that they are still paying.

Deciding whether to make these extensions to the huge volume of loans will also depend upon FCH’s ability to process these requests, something that seems difficult because of a lack of people.

Equally many viable businesses may find reserves used up or loans wanted to avoid using reserves, in other words a whole new stream of business.

Again does FCH have the staffing to be able to process such a volume?

If you are only in it for the short term you can make a strong case for a 100p share price and little drop from the current 50p, but are there shares out there in any quantity, I know there didn’t seem to be at 25p.
Read Count: 108/10118

Buy/No Buy In A Nutshell
NegativesWell established business that seems to be prioritising growth over profitability, they seem to have more money to lend than customers who can borrow and pay it back.
PositivesAs a government backed COVID loans provider these might be a good loan book, but these loans have no repayments due for the first 12 months.
Initial Review Price68p
Last Review Price76.8p
Last Review Date02-Sep-2020
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