REG-Funding Circle Plc Funding Circle Plc: Full Year 2024 Results
06/03/2025 07:15
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Funding Circle Plc (FCH)
Funding Circle Plc: Full Year 2024 Results
06-March-2025 / 07:00 GMT/BST
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Funding Circle Holdings plc
Full Year 2024 Results
STRONG GROWTH WITH PROFIT AHEAD OF EXPECTATIONS
ON TRACK TO DELIVER MEDIUM TERM GUIDENCE
Funding Circle Holdings plc (“Funding Circle” or the “Group”) today announces results for
the twelve months ended 31 December 2024.
Lisa Jacobs, Funding Circle CEO, commented:
“2024 was a transformative year for Funding Circle. We successfully executed our plan to
build a simpler, leaner, and more profitable business while making strong progress in
expanding our Term Loans and FlexiPay offerings. The results we are reporting today show
strong revenue growth of 23% to £160m and FY profit of £3.4m, ahead of market
expectations.
“Strong SME demand drove growth in our Term Loans business, allowing us to support more
borrowers than ever and increase originations by 33%. At the same time, FlexiPay, our
shorter-term lending product, continues to see rapid adoption.
“Our commitment to product expansion, powered by our leading data and technology
capabilities, has strengthened our role in supporting small businesses. The launch of our
Cashback credit card in the second half of the year enhances our offering, enabling
businesses not only to borrow and pay later but also to spend with Funding Circle.
“With strong foundations in place, we are confident in our strategy and the opportunities
ahead. We remain on track to achieve our medium-term target of over £200m in revenue, with
PBT margins exceeding 15%.”
FY 2024 FY 2023 1 1
£m £m
Credit extended2 1,899 1,294
Balances under management2 2,833 2,922
Revenue3 160.1 130.1
Profit/(loss) before taxation (before exceptional items) 3.4 (9.9)
Profit/(loss) before taxation (after exceptional items) 0.8 (9.9)
Unrestricted Cash4 150.5 169.6
Financial Summary:
• For the Continuing Group1, credit extended grew 47% to £1,899m (2023: £1,294m):
◦ Continued momentum in UK Term Loan (“Term Loan”) originations up 33% to £1,407m
(2023: £1,060m).
◦ Strong growth in FlexiPay transactions, more than doubling to £492m (2023:
£234m).
• Balances under management were slightly lower at £2,833m (2023: £2,922m) in line with
expectations:
◦ Term Loan Loans under Management (“LuM”) of £2,714m (2023: £2,853m) reflects the
repayment of legacy Covid government-guaranteed loans and is expected to grow in
2025.
◦ FlexiPay balances, which drive FlexiPay’s revenue, doubled to £119m (2023:
£58m).
• Revenue was £160.1m with 23% growth on 2023 with a strong performance from both Term
Loans and FlexiPay.
• Significant move to profit, with profit before tax (PBT) pre-exceptionals of £3.4m
(2023: Loss before tax £9.9m).
• Term Loans increased profitability with PBT pre-exceptionals of £19.0m (2023: £6.5m)
reflecting strong cost actions and operating leverage, which covers the investment in
FlexiPay and the Cashback credit card.
• Exceptional items of £2.6m, related to the simplification and streamlining of the
business announced in May 2024, led to a profit before tax of £0.8m (2023: £9.9m
loss).
• Unrestricted cash remained healthy at £150.5m (2023: £169.6m), with a decrease due to
the two share buyback programmes in the year, which are anticipated to conclude in Q2
2025. As at 31 December 2024, £33.7m worth of shares (33.5m shares) of the total £50m
of announced buybacks had been purchased.
1 The comparative financial information has been re-presented to exclude the US business
which is presented as discontinued operations. The Continuing Group excludes the US
discontinued operations.
2 Credit extended includes Originations and Transactions and Balances under management
include LuM and Lines of Credit.
3 Net income is also referred to as “Revenue”.
4 Unrestricted cash refers to total cash less cash that is restricted in use.
Operational & Strategic Summary:
• Delivered on our plan for a simpler, leaner and profitable business:
◦ Successful sale of US business to iBusiness Funding for a gain on sale of £10m.
◦ Progressed cost-efficiency actions and on track to deliver c.£15m of annualised
benefit in 2025 and, together with the US sale, reduced total headcount to 726
(Dec 2023: 1,101 including US).
• Continued to drive growth and innovate across all our products to support our
strategic ambitions:
◦ Term Loans: Origination growth of 33% with increasing PBT margins to 13.3%,
driven by product innovation and cost actions. Launched the government’s Growth
Guarantee Scheme (GGS) loans, allowing us to extend credit to a broader set of
the market. Grew the breadth of our Marketplace product set, monetising our
distribution strength, and allowing us to extend credit to businesses that we
can’t help directly get the funding they need.
◦ FlexiPay: Continued strong growth from both new and existing customers, with 70%
of 2024 revenue from existing customers (pre-2024). Transactions doubled and
closing balances grew 105% to £119m.
◦ Cashback credit card: Launched in H2 2024 with steady uptake in users and
borrower usage exceeding expectations.
• Robust and attractive Term Loan returns through the cycle:
◦ Annualised net returns on Term Loans consistently ~5%, above cost of capital, to
institutional investors.
Looking ahead:
• Our refreshed strategic priorities are focused on customer-led profitable growth:
◦ Get to yes: get the right product to the right business, through credit
excellence and product improvements.
◦ Expand our audience: target new segments; deepen and expand our distribution
channels.
◦ Scale our products: capitalise on the large market opportunity by focusing on
refining and scaling our products to drive growth and margin expansion.
◦ Build a seamless lifetime customer experience: deliver an exceptional experience
throughout our customers’ lifetime journey with our expanded product set, as
their trusted financial partner.
We have made a good start to the year, we have attractive growth opportunities and are on
track to deliver our medium term guidance in 2026 of 15-20% revenue CAGR from FY23 and PBT
margins of >15%, equating to:
◦ Revenue of at least £200m
◦ Profit before tax of at least £30m
Board Changes
The Company noted in the FY 2023 Annual Report and Accounts that there would be some
upcoming changes in Board composition in respect of some of its long-tenured Directors.
Geeta Gopalan, Chair of the Audit & Risk Committee and Senior Independent Director, and
Neil Rimer, Non-Executive Director, have both informed the Board of their intention to
step down later this year. To ensure a smooth transition and maintain Board continuity,
they will stand for re-election at the forthcoming Annual General Meeting and, subject to
shareholder approval, intend to continue to serve as Directors until suitable candidates
have been identified and appointed.
With Ken Stannard now in place as Chair Designate, the Nomination Committee has renewed
its search process for independent Non-Executive Directors, with the appropriate skills
and experience to drive the business through the next phase of growth.
Analyst presentation:
Management will host a presentation and conference call for institutional investors and
analysts at 9:30am UK time (BST), on Thursday 6 March 2025.
To watch and listen to the webcast, with the opportunity to submit written questions,
please use 2 this link to register and gain access to the event.
For conference call access, please dial +44 33 0551 0200 or +1 786 697 3501. Quote
‘Funding Circle Full 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.
For further details:
Funding Circle Holdings plc 3 ir@fundingcircle.com
Lisa Jacobs, Chief Executive Officer
Tony Nicol, Chief Financial Officer
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.
About us:
Funding Circle is the UK’s leading SME finance 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 £14.6bn in credit to
c.110,000 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. 77% of applicants receive an instant decision, we have a strong NPS of 79
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 2024, we launched a new Cashback credit card for everyday business spending.
Business Review
2024 was a successful year of change and transformation as we executed against our plan to
deliver a simpler, leaner and profitable business. We have delivered strong revenue growth
and profitability ahead of market expectations. Our business is in a strong position as
the market leader in online SME lending. We have leveraged our data and technology
strengths to expand our product set to serve more of our customers’ needs. We have
delivered robust, attractive loan returns to our institutional investors through the
cycle. We have an attractive go forward plan, driving sustained revenue growth and
expanding our margins.
Borrow, Pay Later and Spend: Our multiproduct transformation
Three years ago we set an ambition to be a multi-product business, one that enabled
businesses to not only borrow for the longer term, but to also pay later and spend,
becoming a more important part of our customers’ lives and providing further growth
opportunities. Over the last three years, we have delivered against this plan. Today,
businesses can borrow with our Term Loan, for longer term investment; pay later, managing
their cash flow through FlexiPay; or spend on our Cashback credit card.
This shift is reaping strong rewards for our business. First, we have seen strong growth.
In 2024, more than a quarter of our credit extended was via FlexiPay and FlexiPay revenue
grew threefold. Secondly, we are seeing an increase in our share of our customers’
financing as over 70% of FlexiPay revenue came from existing Term Loan customers. Finally,
we have increased our interactions and engagement with our customers. Three years ago, we
interacted with a customer approximately every half an hour, today we interact with a
customer every 92 seconds as they take a loan, FlexiPay a supplier or spend on their
business credit card.
Our competitive advantage: data and technology at the heart of everything we do
We’ve delivered this by leveraging our credit, data and technology advantage, delivering
the same great customer experience. SMEs want fast, easy access to credit. We provide that
with a six minute application form, an instant decision for 77% of applicants and funding
in businesses’ accounts in as little as 24 hours. This drives strong customer satisfaction
with an NPS of 79 and enables our busy customers to get back to what they do best, running
their business.
Our AI powered risk models are trained with data from public sources alongside proprietary
data on our hundreds of thousands of loans and transactions and are three times better at
discriminating risk than the bureau scores alone. Despite the challenging macroeconomic
environment of the last several years, our business has delivered well through the cycle.
Loan returns have been robust and attractive, attracting further institutional investor
demand and we have continued to attract and serve SME demand.
Fuelling the nation’s SMEs
We’re passionate about our mission. We provide the fuel to power SMEs up and down the
country. We enable these entrepreneurs to build great businesses that create jobs, bring
economic growth and support their communities. They aren’t the high growth venture-backed
rocket ships, but they are the backbone of the economy - the florists, the manufacturers,
the restauranteurs, the builders and countless others. They have a huge impact on the
economy, but they have historically been underserved. For the last 15 years, we’ve been
changing that with fast, easy finance that backs small businesses.
As we continue to back these businesses, we’re also backing the economy. In 2024, lending
through Funding Circle supported over 87,000 jobs; £7.2bn in GDP contribution and £2.0bn
in tax receipts. We lent to businesses in every one of the country’s 650 constituencies.
2024: A simpler, leaner, high growth, profitable business
In 2024, we executed well. We delivered £3.4m in PBT pre-exceptionals, above market
expectations and up from a loss of £9.9m in 2023. Revenue grew by 23% to £160m. Alongside
this, our credit extended grew 47% to £1.9bn. We have a strong balance sheet and, despite
£33.7m of share buybacks in 2024, we finished the year with a healthy unrestricted cash
position of £151m.
Our core Term Loans business grew strongly with 33% origination growth, reaching £19.0m in
PBT, a margin of 13.3% as we attracted more businesses and enhanced our product offering,
launching government-backed Growth Guarantee Scheme loans and a broader Marketplace
offering.
FlexiPay, our pay later proposition, continued to show strong growth with revenue tripling
over the course of the year. Businesses have now FlexiPaid more than 280,000 times. When
we launched FlexiPay, we had a hypothesis that this would be a product that would attract
both existing and new to Funding Circle customers, and this is the case - with ~30% of our
2024 FlexiPay revenue from new customers. We continue to see strong usage from existing
FlexiPay customers, once a customer starts using FlexiPay it becomes part of their day to
day cash flow management tools. In 2024, over 70% of revenue was from customers who had
opened their FlexiPay account before 2024. In H2 2024, we launched our Cashback credit
card, completing our ‘borrow, pay later and spend’ proposition. It is still early days for
our Cashback credit card but initial metrics are in line with our expectations and we look
forward to seeing further growth in 2025 and beyond.
We sold the US business in July for a gain on sale of £10m and restructured the UK
business, to deliver ~£15m in annualised cost savings from 2025. These were not easy
decisions to make. We said goodbye to some talented Circlers who were vital in our
business’s journey. However, these decisions were essential to position the Group for long
term success - they have placed the business in a strong position to deliver against our
medium-term plan with continued growth and profitability trajectory.
Looking ahead
2024 was a strong year, but we are still just scratching the surface. The market
opportunity is vast, there is over £80bn in SME loans outstanding, over £1trn in SME B2B
payments and over £80bn in SME card transactions. We are in a strong position to
capitalise on this opportunity with high customer satisfaction rates driven by proprietary
and defensible data and technology advantages.
Our four strategic priorities are focused on profitable, customer-led growth:
◦ Get to yes: get the right product to the right business, through credit excellence and
product improvements.
◦ Expand our audience: target new segments; deepen and expand our distribution channels.
◦ Scale our product offering: capitalise on the large market opportunity by focusing on
refining and scaling our products to drive growth and margin expansion.
◦ Build a seamless lifetime customer experience: deliver an exceptional experience
throughout our customers’ lifetime journey with our expanded product set, as their
trusted financial partner.
We have a strong, mission-driven team, a clear vision and plan. As we execute this plan,
we'll become an even more integral part of our customers' lives, fuelling the success
stories of hundreds of thousands more businesses and creating countless jobs. We see a
future where Funding Circle is at the heart of SMEs' financial lives, providing the tools
and resources they need to thrive.
Finance review
Overview of the year ended 31 December 2024
We were pleased with the strong operational and strategic performance in 2024. We saw
significant growth in both of our businesses and improving Group profitability compared to
2023. The Group comprises two continuing Business Units which are at different stages of
maturity: Term Loans (a longer-term financial product offering) and FlexiPay (a
shorter-term working capital product).
In H2 2024 we launched the Cashback credit card. Given its recent launch, its contribution
is relatively minimal. We have therefore included its results, transactions and balances
in the FlexiPay segment.
The US business was sold on 1 July 2024 and is therefore treated as discontinued in the
year.
Originations and transactions Balances under management
FY 2024 FY 2023 31 December 2024 31 December 2023
£m £m £m £m
Continuing operations
UK Term Loans 1,407 1,060 2,714 2,853
Other — — n/a 11
FlexiPay 492 234 119 58
Total 1,899 1,294 2,833 2,922
Term Loans
Term Loans originations increased by 33% to £1,407m (2023: £1,060m). Growth was driven by
increased applications, product innovation and enhancements. We participated in the third
iteration of the Recovery Loan Scheme (“RLS”) (H2 2023 to H1 2024) and the longer-term
government guarantee programme, the Growth Guarantee Scheme (“GGS”) (from H2 2024). These
schemes have enabled us to provide finance to SMEs in parts of the market we would not
have reached otherwise.
Term loan originations were funded in a platform model through forward flow agreements
with institutional investors. As the loans are owned by these institutional investors, the
LuM do not form part of Funding Circle’s balance sheet.
We have also continued to grow originations through our Marketplace network of third party
finance providers, where we refer SMEs if we are unable to lend to them directly, earning
a commission. This allows us to support an even greater number of SMEs access a wide range
of financing options.
Despite strong originations in the year, LuM decreased in 2024 as the amortisation of the
legacy Covid-19 government-guaranteed loans outpaced growth in new lending. As at 31
December 2024, the legacy Covid-19 loans represented £743m (31 December 2023: £1,457m),
c.27% of total LuM. We expect Term Loan LuM to grow in 2025.
As at 31 December 2024, we have c.£2.1bn of forward funding in place for future
originations.
FlexiPay and Cashback credit card
Our line of credit product, FlexiPay, has demonstrated significant growth to date and we
continue to invest in it. We successfully launched our Cashback credit card in H2 2024
with a good uptake from our customers.
Transactions more than doubled since FY 2023, reaching £492m (2023: £234m), demonstrating
strong customer engagement. Drawn lines of credit (“balances”) grew to £119m at 31
December 2024 (2023: £58m), in line with transaction growth.
FlexiPay and the Cashback credit card are funded by Funding Circle capital and a senior
debt facility. The lines of credit are part of Funding Circle’s balance sheet.
Segmental highlights
31 December 20241 31 December 20231
Continuing operations Continuing operations
UK Term FlexiPay Total UK Term FlexiPay Other Total
Loans Loans Term Loan
£m £m £m £m £m £m £m
Transaction fees 84.7 0.6 85.3 65.2 0.1 — 65.3
Servicing fees 37.5 — 37.5 38.8 — 0.2 39.0
Interest income 8.3 22.6 30.9 7.5 7.8 0.1 15.4
Other fees 5.1 0.1 5.2 6.3 — 0.1 6.4
Operating income 135.6 23.3 158.9 117.8 7.9 0.4 126.1
Net investment income 2.8 — 2.8 3.6 — — 3.6
Total income 138.4 23.3 161.7 121.4 7.9 0.4 129.7
Fair value gains 4.2 — 4.2 3.1 — — 3.1
Cost of funds — (5.8) (5.8) — (2.7) — (2.7)
Net income (“revenue”) 142.6 17.5 160.1 124.5 5.2 0.4 130.1
Adjusted EBITDA 37.0 (12.5) 24.5 21.3 (14.4) (0.2) 6.7
Discount unwind on lease (0.6) — (0.6) (0.2) — — (0.2)
liabilities
Depreciation, amortisation,
impairment and modification (11.4) (1.8) (13.2) (11.3) (1.3) — (12.6)
gains/(losses)
Share-based payments and social (6.5) (1.3) (7.8) (3.3) (0.5) — (3.8)
security costs
Exceptional items (2.3) (0.3) (2.6) — — — —
Foreign exchange gains 0.5 — 0.5 — — — —
Profit/(loss) before tax 16.7 (15.9) 0.8 6.5 (16.2) (0.2) (9.9)
1. In the year to 31 December 2024, “Other” Term Loans are presented within the UK Term
Loans segment on the basis that the legacy European operations included within Other are
immaterial. The comparative period has not been re-presented. The segmental results of
the US business are not presented above.
Revenue from continuing operations was £160.1m (2023: £130.1m), a 23% increase. Revenue
consists of total income, fair value movements on SME loans held for sale and investments
in trusts. It is net of cost of funds on the senior debt facility for FlexiPay.
The Group made a profit before tax (before exceptional items) from continuing operations
of £3.4m (2023: loss of £9.9m). The exceptional items of £2.6m related to restructuring
undertaken in the UK, mainly comprising redundancy costs. After exceptional items, the
profit before tax from continuing operations was £0.8m (2023: loss of £9.9m).
Term Loans
The Term Loans business delivered revenue of £142.6m growing 15% on FY 2023. This growth
came principally from the growth in originations and the corresponding transaction fees.
Servicing fees reduced in the year, reflecting the reduction in LuM.
The start of 2024 saw heightened demand from borrowers which normalised in the second
quarter. We did experience more subdued demand over the summer months when businesses were
awaiting the new government’s October Budget, and we then saw demand pick up in the final
quarter.
Term Loans generated AEBITDA of £37.0m in 2024 compared to £21.3m in the prior year, with
AEBITDA margin improvement. This demonstrated the strong operational leverage we are
achieving from the more mature business, where costs above AEBITDA increased by 2.3%
following cost actions, while revenue grew by 15%.
Profit before tax and exceptional items was £19.0m, up from £6.5m in FY 2023, primarily
due to the growth in AEBITDA. After exceptional items, profit before tax was £16.7m,
compared with £6.5m in 2023.
FlexiPay and Cashback credit card
Revenue for FlexiPay was £17.5m in 2024, increasing from £5.2m in 2023 as a result of a
rise in the number of transactions and fee growth.
When the product was initially launched customers were able to draw and repay within a
3-month period. In H1 2024 we expanded repayment options to include 1, 3, 6, 9 and 12
months, with fees varying depending on payback period. As a result, the average fee for
each drawdown grew to 5.8% (2023: 4.6%), reflecting a longer average repayment period of 4
months.
A Cashback credit card was launched in H2 2024. When customers transact using cards, we
earn an interchange fee of 1.75% alongside interest on any revolving balances. The
revenues earned from the Cashback credit card in 2024 were relatively minimal.
FlexiPay is funded through Funding Circle invested capital and a senior debt facility with
Citibank (it was solely funded by Funding Circle until June 2023). The interest payable on
this facility is shown in “cost of funds” and is based on SONIA plus a margin. This
facility is for £150m with the ability to upsize further and is due for renewal in August
2025.
The AEBITDA result was negative £12.5m (2023: negative £14.4m), with continued investment
to support product momentum. The principal costs incurred include staff-related expenses,
marketing costs and expected credit losses which are required to be recognised upfront for
both drawn and undrawn lines of credit.
As the business continues to grow, we anticipate ongoing investment with a resultant
increase in the cost base, principally marketing and expected credit losses. Once
onboarded, we earn repeat revenues as the customer uses the product.
US Term Loans business
As was previously announced, the Group signed an agreement in June 2024 to sell the US
business to iBusiness Funding, LLC. The sale was completed on 1 July 2024, at which point
the US business was deconsolidated. The operations of the US business are presented in a
single line as discontinued operations within the financial statements.
The Group recognised a gain on sale of £9.8m (excluding foreign exchange reserve recycling
through the profit and loss). Further details can be found in the financial statements in
note 4.
Profit and loss
31 December 31 December
Before exceptional Exceptional
items 2024 2023
items
£m Total (re-presented)1
£m
£m £m
Transaction fees 85.3 — 85.3 65.3
Servicing fees 37.5 — 37.5 39.0
Interest income 30.9 — 30.9 15.4
Other fees 5.2 — 5.2 6.4
Operating income 158.9 — 158.9 126.1
Net investment income 2.8 — 2.8 3.6
Total income 161.7 — 161.7 129.7
Fair value gains 4.2 — 4.2 3.1
Cost of funds (5.8) — (5.8) (2.7)
Net income (“revenue”) 160.1 — 160.1 130.1
People costs (68.1) (2.3) (70.4) (65.5)
Marketing costs (45.6) — (45.6) (37.1)
Depreciation, amortisation and (13.2) (0.3) (13.5) (12.6)
impairment
Charge for expected credit (8.6) — (8.6) (4.5)
losses
Other costs (21.2) — (21.2) (20.3)
Operating expenses (156.7) (2.6) (159.3) (140.0)
Profit/(loss) before tax from 3.4 (2.6) 0.8 (9.9)
continuing operations
1 The comparative consolidated statement of comprehensive income has been re-presented to
reflect the results of the US business as a discontinued operation.
Operating income includes transaction fees, servicing fees, interest income from loans
held at amortised cost, interest on cash balances and other fees and was £158.9m (2023:
£126.1m).
• Transaction fees, representing fees earned on originations, increased to £85.3m (2023:
£65.3m), driven by growth in originations as the business continued to expand its Term
Loan offering to more segments of the market, and attract more applications from SMEs.
Average transaction fee yields decreased in the Term Loans business to 6.0% (2023: 6.2%)
due to the mix in government-guaranteed/non-government lending.
• Servicing fees, representing income for servicing LuM, were £37.5m (2023: £39.0m). The
fees move in line with the quantum of LuM which decreased in the Term Loans business as
growth in LuM from new lending was offset by continued repayment on the legacy Covid-19
scheme loans outpacing the impact of new originations.
Servicing fees are not charged on FlexiPay lines of credit. Servicing yields remain
similar to 2023 levels.
• Interest income represents:
i) the fees earned on FlexiPay lines of credit and interest earned on cash and cash
equivalents. FlexiPay interest income is a fee charged on transactions and spread over a
number of months, in line with borrower repayments. It has increased to £21.3m (2023:
£7.6m), driven by transaction levels and the average fees on transactions which were 5.8%
in the year (2023: 4.6%).
ii) interest earned on cash and cash equivalents increased to £9.2m (2023: £7.4m) in line
with higher average base rates. This interest applies to the Group’s unrestricted cash as
well as restricted cash drawn from the Citibank facility in anticipation of future
drawdowns.
• Other fees arose principally from collection fees we recovered on defaulted loans.
Net investment income represents the investment income, less investment expense, on loans
held on balance sheet at fair value. It declined to £2.8m (2023: £3.6m), driven by the
continued amortisation of the remaining loans on balance sheet.
Net income (“revenue”), defined as total income after fair value adjustments and cost of
funds, was £160.1m (2023: £130.1m). The fair value gain in the year of £4.2m (2023: £3.1m)
related primarily to certain investment in trusts and co-investments, which were sold
earlier than originally anticipated thereby accelerating the receipt of future cash flows,
which were valued at a discount. As the on-balance sheet loans continue to amortise, we
would expect fair value gains/losses to decline in future.
Operating expenses
At an overall level, operating expenses increased compared with 2023. However, costs
remain actively and tightly managed with a 12% increase in expenses before exceptional
items compared to a 23% growth in revenue.
The primary drivers of cost growth were the variable expenses associated with marketing
and expected credit losses. Marketing costs increased by 23% to £45.6m and expected credit
losses increased to £8.6m from £4.5m, primarily due to growth in FlexiPay balances.
For the remaining costs, share based payments grew by £4m, driven by the growth in share
price which impacts employers’ national insurance costs. Excluding this, the costs
remained flat year on year with salary expenses decreasing following the restructuring.
Exceptional items – restructuring
As part of its ongoing commitment to profitability, the Group launched a cost efficiency
programme during the year. These actions are on track to deliver an annualised run rate
cash saving of ~£15 million in 2025 and an actual reduction in the overall number of roles
by c.120. This resulted in redundancy costs of £2.3 million and impairment of capitalised
development spend intangible assets of £0.3 million which were treated as exceptional
items.
People costs (including contractors) represent the Group’s largest ongoing operating cost
and include salary-related costs plus share-based payments.
Salary-related costs reduced by 2% in the year with the savings achieved from the
restructuring more than offsetting inflation, new hires and the absorption of global costs
previously allocated to the US business. The average salary per head increased by 5%.
The share-based payment charge for the year, included in people costs, was £7.8m (2023:
£3.8m), largely driven by a higher share price which increases the national insurance
costs associated with the awards.
Following the UK Government’s Budget in October 2024, we expect that the Group’s
employer’s national insurance will increase by c.£2m.
31 December 31 December
Change
Continuing operations 2024 2023
%
£m £m
Salary costs 69.3 70.9 (2)
Less capitalised development spend (“CDS”) (9.0) (9.2) (2)
Salary costs net of CDS 60.3 61.7 (2)
Share-based payments 7.8 3.8 105
Total people costs 68.1 65.5 4
Average headcount (incl. contractors) 788 845 (7)
Year-end headcount (incl. contractors) 726 857 (15)
Marketing costs comprise performance marketing (direct mail and online), brand spend and
commission payments made to brokers. Marketing costs increased in the year to £45.6m
(2023: £37.1m).
Depreciation, amortisation and impairment costs of £13.5m (2023: £12.6m) largely represent
the amortisation of the cost of the Group’s capitalised technology development and the
depreciation of right-of-use assets related to the Group’s office lease. Included within
this charge is £0.3m exceptional impairment of intangible assets related to projects used
for activities deprioritised as a result of our go forward focus.
Expected credit losses principally relate to the IFRS 9 charge for FlexiPay where we
account for actual and future expected credit losses from SMEs defaulting on their lines
of credit. We would expect this charge to increase as FlexiPay and Cashback credit card
grow.
Other operating costs, which consist of loan processing costs, data and technology,
professional fees and staff and office-related costs, have grown as the Group continued to
invest in growth in the FlexiPay business. The increase is driven by inflation, higher
volumes and loan processing costs.
Balance sheet and investments
The Group’s net equity was £217m at 31 December 2024 (31 December 2023: £247m). This
reduction reflects the share buyback by the Group.
The majority of the Group’s balance sheet is represented by cash and invested capital as
shown below. The invested capital is in certain SME loans, either directly or historically
through investment vehicles, and in the FlexiPay lines of credit.
31 31
Operating Investment business December December
business
2024 2023
Legacy
securitisation,
CBILS/RLS/GGS/
Term warehouse Private
Loans commercial co- Total Total
business FlexiPay and other funds
investments £m £m
£m £m loans £m
£m
at fair value
£m
SME loans and
lines of 2.1 97.1 1.2 17.8 0.6 118.8 102.0
credit
Cash and cash
equivalents
Unrestricted 150.2 0.3 — — — 150.5 169.6
Restricted — 32.1 — 5.0 — 37.1 51.8
Other assets — 6.3 — — — 6.3 2.7
Borrowings — (101.9) — — — (101.9) (56.9)
Cash and net 152.3 33.9 1.2 22.8 0.6 210.8 269.2
investments
Other assets 45.3 — — — — 45.3 47.1
Other (34.6) — — (5.0) — (39.6) (69.5)
liabilities
Equity 163.0 33.9 1.2 17.8 0.6 216.5 246.8
The table below provides a summation of Funding Circle’s net invested capital in products
and vehicles:
31 December 31 December
Investment in product/vehicles 2024 2023
£m £m
1. Legacy securitisation, warehouse and other loans at fair value 1 19
2. CBILS/RLS/GGS/commercial co-investments1 18 25
3. Private funds 1 2
Net invested 20 46
FlexiPay1 34 18
Total net invested capital 54 64
1. These vehicles are bankruptcy remote.
Legacy loans at fair value – this relates to the legacy loans previously held in SPVs and
warehouses and reduced through the sale of the US business and ongoing amortisation.
CBILS/RLS/GGS/commercial co-investments – as part of our participation in the CBILS, RLS
and GGS UK government-guaranteed loan schemes, we were required to co-invest c.1%
alongside institutional investors.
Private funds – there are a small amount of other loans, comprising seed investments in
private funds held as associates.
Cash flow
At 31 December 2024, the Group’s cash position was £187.6m (31 December 2023: £221.4m). Of
this balance £150.5m (31 December 2023: £169.6m) is unrestricted in its use with £37.1m
(2023: £51.8m) being restricted.
Restricted cash relates to cash held in the funding vehicle of FlexiPay together with
amounts owed to the British Business Bank (“BBB”) for guarantee fees collected from
institutional investors under the participation of the CBILS, RLS and GGS schemes. Total
cash movements have principally been driven by:
i. trading performance;
ii. timing of working capital movements associated with UK government loan guarantee
payments received from investors still to be paid to the BBB;
iii. monetisation of on-balance sheet SME loans as they have continued to pay down;
iv. ongoing investment in FlexiPay lines of credit with external bank debt; and
v. purchase of shares as part of the share buyback programme.
Free cash flow, excluding the one-off guarantee fee payment, has significantly improved
year on year, and is nearing positive, driven by the disposal of the loss-making US
business and the move to profitability of the continuing UK Group.
Free cash flow, which is an alternative performance measure, represents the net cash flows
from operating activities less the cost of purchasing intangible assets, property, plant
and equipment and lease payments. It excludes the investment vehicle financing and funding
cash flows together with FlexiPay lines of credit and Cashback credit card. The Directors
view this as a key liquidity measure and it is the net amount of cash used or generated to
operate and develop the Group’s platform each year.
The table below shows how the Group’s cash has been utilised:
2024 2023
£m £m
Adjusted EBITDA from continuing operations 24.5 6.7
Adjusted EBITDA from discontinued operations (8.7) (10.6)
Adjusted EBITDA 15.8 (3.9)
Fair value adjustments (6.4) (8.7)
Purchase of tangible and intangible assets (11.9) (12.2)
Payment of lease liabilities (3.2) (6.0)
Working capital/other 4.5 2.9
Free cash flow (excl. restricted cash movement due to guarantee fee (1.2) (27.9)
payment)
Cash movement due to guarantee fee payment (26.1) 23.0
Free cash flow (27.3) (4.9)
Net distributions from associates 0.9 1.2
Net movement in trusts and co-investments 10.5 4.8
Net movement in lines of credit (net of borrowings) (7.5) 15.8
Net movement in SME loans at amortised cost (net of borrowings) 2.2 (3.3)
Net movement in loans at fair value through profit and loss (net of bonds) 13.5 32.7
Share buyback/purchase of own shares (33.7) (1.8)
Net proceeds from sale of US business 7.5 —
Effect of foreign exchange 0.1 (0.8)
Movement in the year (33.8) 43.7
Cash and cash equivalents at the beginning of the year 221.4 177.7
Cash and cash equivalents at the end of the year 187.6 221.4
Share buybacks
During the year, the Group announced two share buybacks totalling up to £50m. As at 31
December 2024, 33.5m shares have been purchased for £33.7m. The shares have been
cancelled, reducing share capital by c.9%.
Principal risks and uncertainties
The principal risks and uncertainties for the Group are as follows:
Strategic risk
Strategic risk is defined as the failure to build a sustainable, diversified and
profitable business that can successfully adapt to environmental changes due to the
inefficient use of Funding Circle’s available resources.
i. Strategic risk
Risk arising from the failure to build a sustainable, diversified and profitable business
that can successfully adapt to environmental changes.
ii) Economic environment
Risk arising from macroeconomic or political factors that may impact funding, credit
performance, and overall financial stability. It encompasses broader considerations,
including demand fluctuations, funding availability, and cost management. This risk
reflects the potential failure to establish a sustainable, diversified, and profitable
business model capable of adapting to evolving economic and regulatory environments.
iii) Environmental, social and governance risk
Environment, social and/or governance events or circumstances could cause an actual or
potential material negative impact on Funding Circle’s financial performance or
reputation.
Funding and balance sheet risk
Funding and balance sheet risks are the risks associated with the funding of our product
set of Term Loans and lines of credit and any exposure that our balance sheet has to this
funding through normal and stress scenarios.
i. Funding risk
The risk that demand from borrowers for credit cannot be met by the providers of that
funding (institutional investors in the case of Term Loans and Funding Circle and Citibank
in the case of lines of credit). This risk varies with the economic attractiveness of
Funding Circle products as an investment, the level of diversification of funding sources
and the level of resilience of these funding sources and their returns through economic
cycles.
ii. Balance sheet risk
The risk that, where Funding Circle has put its balance sheet to use in funding either
Term Loans or lines of credit, investment positions reduce in value or cannot be exited at
an economically viable price; the risk that Funding Circle liabilities cannot be met when
they fall due or can only be met at an uneconomic price. This risk is also associated with
interest rate fluctuations, particularly in the context of levered investments. Balance
sheet risk applies to all products offered, the potential challenges faced in managing
investment positions and meeting obligations under favourable conditions.
Credit risk
Credit risk is the risk of financial loss to an investor including Funding Circle itself,
when lending from its balance sheet should any borrower fail to fulfil their contractual
repayment obligations. Credit risk management is the sum of activities necessary to
deliver a risk profile at portfolio level in line with Funding Circle management’s
expectations, in terms of net credit loss rate, risk-adjusted rate of return and its
volatility through economic cycles.
i. Credit risk
a. Borrower acquisition
Credit performance and returns of new loans can deviate from expectations due to several
factors: changes in credit quality of incoming applications, calibration of risk models or
strategy parameters, and control gaps in processing loan applications.
b. Portfolio risk management
Credit performance and returns of existing portfolio can deviate from expectations due to
several factors: deterioration of credit environment, increased competition driving higher
prepayment rates, effectiveness of portfolio monitoring, collections and recoveries.
Regulatory, reputation and conduct risk
Regulatory, reputation and conduct risk is defined as the risk of engaging in activities
that detract from Funding Circle’s goal of being a trusted and reputable company with
products, services and processes designed for customer success and delivered in a way that
will not cause customer detriment or regulatory censure.
i. Regulatory risk
The risk that Funding Circle’s ability to effectively manage its regulatory relationships
is compromised or diminished, that the Group’s governance and controls framework is not
satisfactory given business growth, or that there is business interruption by reason of
non-compliance with regulation or the introduction of business-impacting regulation.
ii. Reputation risk
Operational or performance failures could lead to negative publicity that could adversely
affect our brand, business, results, operations, financial condition or prospects.
Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal
processes, people and systems or from external events.
i. Client money risk
Failure of Funding Circle to adequately protect and segregate client money may lead to
financial loss, reputational damage and regulatory censure.
ii) Financial crime
Risk of regulatory breach, financial loss or reputational damage arising from a failure to
adequately manage or prevent money laundering, terrorist financing, bribery and
corruption, or to comply with sanctions regulations.
iii) Process risk
Failure to originate and service loans in line with Funding Circle internal policies,
investor guidelines and third party loan guarantees (e.g. the British Business Bank) may
result in Funding Circle repurchasing loans from investors. The risk of operational
incident could impact the ability to originate new loans or the ability to service loans
through collections from borrowers and return of money to investors.
Technology risk
Technology Risk refers to the potential negative consequences that can arise from the use
or implementation of technology, including hardware, software, and data management
systems. Technology risks can arise from a variety of sources, including hardware
failures, software bugs, cyber attacks, data breaches, and user errors. In response to
evolving threats and the rise of Generative Artificial Intelligence (Gen-AI), Technology
risk has been designated a “Principal Risk”, ensuring stringent oversight and proactive
mitigation. We have made significant strides in enhancing our security and data maturity
posture. We are committed to continuous improvement and will continue to mature our
security and data practices.
i. Technology risk
Failure of the technology platform could have a material adverse impact on Funding
Circle’s business, results of operations, financial condition or prospects.
ii. Information security
Failure to protect the confidential information of Funding Circle’s borrowers, investors
and IT systems may lead to financial loss, reputational damage and regulatory censure.
iii. Data risk
Failure in our ability to acquire, use, secure and transform our data assets could result
in adverse material impacts across Funding Circle.
Consolidated statement of comprehensive income
for the year ended 31 December 2024
31 December 31 31 December
Exceptional December
2024 items1 2023
2024
Before (re-presented)2
exceptional
items
Note £m £m
£m £m
Transaction fees 85.3 — 85.3 65.3
Servicing fees 37.5 — 37.5 39.0
Interest income3 30.9 — 30.9 15.4
Other fees 5.2 — 5.2 6.4
Operating income 158.9 — 158.9 126.1
Net investment income 2.8 — 2.8 3.6
Total income 161.7 — 161.7 129.7
Fair value gains 4.2 — 4.2 3.1
Cost of funds (5.8) — (5.8) (2.7)
Net income4 6 160.1 — 160.1 130.1
People costs 5, 7, 8 (68.1) (2.3) (70.4) (65.5)
Marketing costs 7 (45.6) — (45.6) (37.1)
Depreciation, amortisation and 5, 6,
impairment 7, 11, (13.2) (0.3) (13.5) (12.6)
12
Expected credit loss charge 7, 17 (8.6) — (8.6) (4.5)
Other costs 7 (21.2) — (21.2) (20.3)
Operating expenses 7 (156.7) (2.6) (159.3) (140.0)
Profit/(loss) before taxation 3.4 (2.6) 0.8 (9.9)
Income tax (charge)/credit 9 (0.5) — (0.5) 1.7
Profit/(loss) for the year from 2.9 (2.6) 0.3 (8.2)
continuing operations
(Loss)/profit for the year from 4 (10.2) 18.5 8.3 (30.1)
discontinued operations
(Loss)/profit for the year (7.3) 15.9 8.6 (38.3)
Other comprehensive expense
Items that may be reclassified
subsequently to profit and
loss:
Exchange differences on
translation of foreign (0.2) (8.7) (8.9) (2.7)
operations – discontinued 4
operations
Total comprehensive (7.5) 7.2 (0.3) (41.0)
(expense)/income for the year
Total comprehensive
income/(expense) attributable
to:
Owners of the Parent
Income/(expense) from 2.9 (2.6) 0.3 (8.2)
continuing operations
(Expense)/income from 4 (10.4) 9.8 (0.6) (32.8)
discontinued operations
Total comprehensive
(expense)/income attributable (7.5) 7.2 (0.3) (41.0)
to the owners of the parent
Earnings per share
Basic earnings/(loss) per share 10 0.8p 0.1p (2.4)p
from continuing operations
Diluted earnings/(loss) per
share from continuing 10 0.8p 0.1p (2.4)p
operations
Basic (loss)/earnings per share 4, 10 (3.0)p 2.4p (8.7)p
from discontinued operations
Diluted (loss)/earnings per
share from discontinued 4, 10 (3.0)p 2.2p (8.7)p
operations
1. Exceptional items are detailed in note 5.
2. The comparative consolidated statement of comprehensive income has been re-presented to
reflect the results of the US business as a discontinued operation. See note 4.
3. Interest income recognised on assets held at amortised cost under the effective
interest rate method and £7.7 million (2023: £5.3 million) on money market funds held at
fair value through profit and loss.
4. Net income is also referred to as “revenue”.
Consolidated balance sheet
as at 31 December 2024
31 December
31 December
2023
Note 2024
Re-presented1
£m
£m
Non-current assets
Intangible assets 11 21.2 23.0
Property, plant and equipment 12 9.6 5.0
Investment in associates 0.6 1.5
Investment in trusts and co-investments 13, 17 17.8 25.2
SME loans held at amortised cost 13, 17 1.4 5.6
Trade and other receivables 14 — 1.4
50.6 61.7
Current assets
SME loans held at amortised cost 13, 17 0.7 1.1
SME loans held at fair value through profit and loss 13, 17 1.2 18.6
Lines of credit 13, 17 97.1 50.0
Trade and other receivables 14 20.8 20.4
Cash and cash equivalents 18 187.6 221.4
307.4 311.5
Total assets 358.0 373.2
Current liabilities
Trade and other payables 15 27.8 54.3
Bank borrowings 17 101.9 54.7
Short-term provisions and other liabilities 16 3.6 1.5
Lease liabilities 12 1.8 7.2
135.1 117.7
Non-current liabilities
Long-term provisions and other liabilities 16 0.6 1.1
Bank borrowings 17 — 2.2
Lease liabilities 12 5.8 5.4
Total liabilities 141.5 126.4
Equity
Share capital 0.3 0.4
Share premium account 0.1 293.1
Foreign exchange reserve 5.3 14.2
Share options reserve 20.6 24.0
Retained earnings/(accumulated losses) 190.2 (84.9)
Total equity 216.5 246.8
Total equity and liabilities 358.0 373.2
1. SME loans have been presented under aggregated headings and the comparative period
re-presented in order to simplify the presentation of these loans as the balances become
less material. Additionally, the comparative SME loans held at amortised cost have been
re-presented to more accurately reflect the current and non-current split of these loans.
See note 2 for details.
The financial statements were approved by the Board and authorised for issue on 6 March
2025. They were signed on behalf of the Board by:
Tony Nicol
Director
Company registration number 07123934
The notes form part of these financial statements.
Consolidated statement of changes in equity
for the year ended 31 December 2024
Share Foreign Share (Accumulated
Share Total
premium exchange options losses)/ retained
Note capital earnings equity
account reserve reserve
£m £m £m
£m £m £m
Balance at 1 January 2023 0.4 293.1 16.9 22.2 (48.6) 284.0
Loss for the year — — — — (38.3) (38.3)
Other comprehensive expense
Exchange differences on
translation of foreign — — (2.7) — — (2.7)
operations
Total comprehensive expense — — (2.7) — (38.3) (41.0)
Transactions with owners
Transfer of share option — — — (3.8) 3.8 —
costs
Purchase of own shares held — — — — (1.8) (1.8)
in Employee Benefit Trust
Issue of share capital — — — — — —
Employee share schemes – — — — 5.6 — 5.6
value of employee services
Balance at 31 December 2023 0.4 293.1 14.2 24.0 (84.9) 246.8
Profit for the year — — — — 8.6 8.6
Other comprehensive expense
Exchange differences on
translation of foreign — — (8.9) — — (8.9)
operations
Total comprehensive — — (8.9) — 8.6 (0.3)
(expense)/income
Transactions with owners
Transfer of share option — — — (6.6) 6.6 —
costs
Purchase of own shares held — — — — — —
in Employee Benefit Trust
Buyback and cancellation of (0.1) — — — (33.6) (33.7)
own shares
Capital reduction — (293.5) — — 293.5 —
Issue of share capital/ — 0.5 — — — 0.5
exercise of share options
Employee share schemes – — — — 3.2 — 3.2
value of employee services
Balance at 31 December 2024 0.3 0.1 5.3 20.6 190.2 216.5
The notes form part of these financial statements.
Consolidated statement of cash flows
for the year ended 31 December 2024
31 December
31 December
2023
Note 2024
Re-presented1
£m
£m
Net cash outflow from operating activities 18 (67.4) (25.6)
Investing activities
Purchase of intangible assets 11 (9.0) (11.5)
Purchase of property, plant and equipment 12 (2.9) (0.7)
Originations of SME loans held at amortised cost 17 (0.2) (4.7)
Cash receipts from SME loans held at amortised cost 17 3.0 21.2
Originations from SME loans held at fair value through 17 — (11.9)
profit and loss
Cash receipts from SME loans held at fair value through 17 13.5 37.6
profit and loss
Proceeds from sale of SME loans held at fair value through 17 — 30.4
profit and loss
Investment in trusts and co-investments 17 (4.1) (1.8)
Cash receipts from investments in trusts and 17 14.6 6.6
co-investments
Redemption in associates 0.9 1.1
Dividends from associates — 0.1
Proceeds from sale of subsidiary 4 32.6 —
Direct costs of selling subsidiary 4 (2.0) —
Cash disposed of on sale of subsidiary 4 (23.1) —
Net cash inflow from investing activities 23.3 66.4
Financing activities
Proceeds from bank borrowings 18 52.6 55.8
Repayment of bank borrowings 18 (6.0) (20.9)
Payment of bond liabilities 18 — (23.4)
Proceeds from the exercise of share options 0.5 —
Purchase of own shares — (1.8)
Share buyback (33.7) —
Proceeds from subleases 0.4 1.2
Payment of lease liabilities 18 (3.6) (7.2)
Net cash inflow from financing activities 10.2 3.7
Net (decrease)/increase in cash and cash equivalents (33.9) 44.5
Cash and cash equivalents at the beginning of the year 221.4 177.7
Effect of foreign exchange rate changes 0.1 (0.8)
Cash and cash equivalents at the end of the year 18 187.6 221.4
1. SME loan-related cash flows have been presented under aggregated headings and the
comparative period re-presented. See note 2 for details.
The notes form part of these financial statements.
Cash flows from discontinued operations are shown in note 4.
Notes forming part of the consolidated financial statements
for the year ended 31 December 2024
1. Basis of accounting
The consolidated financial statements are prepared under the historical cost basis except
for certain financial instruments that are carried at fair value through profit and loss
(“FVTPL”).
2. Basis of preparation
The financial statements included in this preliminary announcement have been prepared in
accordance with the Disclosure and Transparency Rules of the UK Financial Conduct
Authority, and the principles of UK-adopted international accounting standards, but do not
comply with the full disclosure requirements of these standards. The financial information
for the year ended 31 December 2023 is derived from the statutory financial statements for
that year which have been delivered to the Registrar of Companies. The auditor reported on
those financial statements: their report was unqualified, did not draw attention to any
matters by way of emphasis and did not contain a statement under s498(2) or (3) of the
Companies Act 2006.
The financial information contained in this announcement does not constitute the statutory
financial statements of the Group as at and for the year ended 31 December 2024, but is
derived from those financial statements, which have been prepared in accordance with
UK-adopted international accounting standards. The financial statements themselves have
been approved by the Board of Directors and reported on by the auditor and will be
delivered to the Registrar of Companies in due course.
Going concern
The financial statements are prepared on a going concern basis as the Directors are
satisfied that the Group has the resources to continue in business for the foreseeable
future (which has been taken as at least 12 months from the date of approval of the
financial statements).
The Group made a total comprehensive expense of £0.3 million during the year ended 31
December 2024 (2023: expense of £41.0 million). As at 31 December 2024, the Group had net
assets of £216.5 million (2023: £246.8 million). This includes £187.6 million of cash and
cash equivalents (2023: £221.4 million) of which £37.1 million (2023: £51.8 million) is
held for specific purposes and is restricted in use. Additionally, within the net assets,
the Group holds £53.5 million (2023: £63.5 million) of invested capital, some of which is
capable of being monetised if liquidity needs arise.
The Group has prepared detailed cash flow forecasts for the next 15 months to 30 June 2026
and has updated the going concern assessment to factor in the potential ongoing impact of
inflation and related economic stress.
The base case scenario assumes:
• the economic environment remains as is with no improvement or deterioration in the macro
environment forecast;
• launching and growing short-term lending and non-limited company lending;
• growth in Cashback credit card alongside FlexiPay lines of credit;
• the Group continues to fund the lines of credit through its balance sheet along with the
senior banking facility;
• costs are controlled with any growth driven by marketing, expected credit losses (“ECL”)
and cost of funds. Remaining costs grow but predominantly through inflation. Strict
control of headcount, with limited increases;
• the current share buyback programme concludes in early 2025 with no additional buyback
or dividend assumed; and
• corporation tax begins to be paid alongside utilising brought forward tax losses.
Management prepared a severe but plausible downside scenario in which:
• further macroeconomic volatility continues through the period with elevated inflation
and interest rates reducing originations as borrower demand for loans at higher interest
rates reduces and investor funding appetite reduces;
• investment returns reduce owing to increased funding costs, widening discount rates and
deterioration in loan performance;
• an operational event occurs requiring a cash outlay in 2025;
• a downside loss scenario is applied to Funding Circle’s on-balance sheet investment in
SME loans resulting in higher initial fair value losses and lower cash flows to the
investments it owns combined with the inability to monetise these;
• a reduction in operating interest income from Money Market Funds due to lower cash
balances under stress; and
• a combined credit and liquidity risk stress for FlexiPay.
Management has reviewed its regulatory capital requirements. In the downside scenario, the
risk of capital requirement breach is considered remote. The Group does not currently rely
on committed or uncommitted borrowing facilities, with the exception of a facility for the
purpose of originating FlexiPay lines of credit and does not have undrawn committed
borrowing facilities available to the wider Group.
The Directors have made enquiries of management and considered budgets and cash flow
forecasts for the Group and have, at the time of approving these financial statements, a
reasonable expectation that the Company and the Group have adequate resources to continue
in operational existence for the foreseeable future, specifically assessed for the 15
months to 30 June 2026.
Significant changes in the current reporting year
The financial position and performance of the Group were affected by the following events
and transactions during the year ended 31 December 2024:
i. Sale of the US business
As was previously announced in the 31 December 2023 financial results, the Group sought to
divest of the US business. A competitive bid process was undertaken with interested
parties and a sale agreement was signed on 24 June 2024 to sell the business to iBusiness
Funding, LLC and completion occurred on 1 July 2024. As a result of the sale of the US
Business Unit, the business and assets related to the US were considered to form a
disposal Group under IFRS 5 Non-Current Assets Held For Sale and Discontinued Operations.
The operations of the US business have been disclosed in the consolidated statement of
comprehensive income separately as a discontinued operation, and the comparative period
restated. Details related to the discontinued operations can be found in note 4.
ii. Simplification and streamlining of UK business
As part of its ongoing commitment to profitability, the Group launched a redundancy and
cost efficiency programme during the year. Non-recurring costs to achieve these changes
have been recorded as exceptional items. See note 5.
iii. Launch of share buyback programme
As was previously announced, the Group commenced a share buyback programme in March 2024
to buy and cancel up to £25 million of shares in order to return value to shareholders.
The nominal cost of the shares cancelled reduces the Group’s share capital with an equal
increase in the capital redemption reserve. The full cost of the buyback inclusive of
stamp duty and broker fees is debited to retained earnings. This programme was completed
on 15 October 2024 with the purchase of 27,308,339 ordinary shares, and the programme was
extended to up to a further £25 million of shares. In the year to 31 December 2024, 33.5
million shares were purchased for consideration of £33.7 million inclusive of fees and
expenses under the programme representing 9.3% of the called up share capital. 0.2 million
of the purchased shares were pending cancellation as at 31 December 2024.
iv. Capital reduction
In November 2024, shareholders approved a capital reduction at a general meeting held by
the Company, being the cancellation of the entire amount standing to credit the Company’s
share premium account. The capital reduction process was completed in December 2024 and
resulted in the cancellation of the share premium and creation of accumulated profit
within the statement of changes in equity by £293.5 million. This increased the
distributable reserves of the Company to help facilitate ongoing capital actions and
return of value to shareholders.
v. Modification to UK office lease
During February 2024, the Group signed an agreement to modify the terms of its lease on
the two levels of the UK office previously expiring in March 2025, shortening one to
expire in June 2024 and extending the other to March 2035 with termination options in
March 2030. Both were accounted for as a lease modification. See note 12 for details.
vi. Investment in trust and co-investment transactions
During the year, certain warehouses invested in trusts in which Funding Circle is a
minority co-investor sold their loan assets to a third party and Funding Circle partially
re-invested alongside the purchaser. As a result of the transaction, the net cash flows
from the investment were realised and a net fair value gain of £2.2 million was recognised
through fair value gains in the consolidated statement of comprehensive income. The cash
flows related to the transaction are presented net within “Cash receipts from investment
in trusts and co-investments” in the statement of cash flows, reflecting the net
settlement of the realisation and re-investment.
vii. Launch of Cashback business credit card
During the year the Cashback credit card product was launched offering borrowers the
ability to spend against their credit limit and earn cashback on this spend with an
introductory rate of 2% reducing to 1% after six months. The borrowers qualify for
cashback if they either repay the card spend in full, or make a minimum repayment by their
billing date. Borrowers who repay the balance in full do not incur interest charges,
while any borrowers who do not pay the card spend balance in full will be charged interest
on the drawn balance. The cashback is netted against the borrowers’ card spend balance
due. The Group recognises interchange fee income on the card spend of c.1.75% recognised
within transaction fee income. £0.3 million of interchange fee income (2023: £nil) was
recognised during the year, gross of cashback. The cashback paid to the borrower is
recognised as a reduction in the transaction price under IFRS 15 as it is cash settled in
nature and is presented netted against the interchange fee income, while interest earned
on card balances which revolve is recognised within interest income in the consolidated
statement of comprehensive income.
Summary of new and amended accounting policies
Re-presentation of SME loans:
On the balance sheet ”SME loans (securitised)”, “SME loans (warehouse)” and “SME loans
(other)” held at fair value through profit and loss have been presented under “SME loans
held at fair value through profit and loss” and “SME loans (other)” held at amortised cost
have been presented under “SME loans held at amortised cost” in order to simplify the
presentation of these loans as the balances become less material with the comparative
period re-presented on this basis. Additionally, the current and non-current split of SME
loans held at amortised cost has been re-presented to more accurately reflect when the
cash flows become due. This presentation and re-presentation has been applied to the
applicable notes and cash flow statement throughout these accounts.
Discontinued operations and deconsolidation
When the Group intends to sell assets or Business Units, IFRS 5 Non-current Assets Held
for Sale and Discontinued Operations, is applied. An asset or group of assets is treated
as a discontinued operation if:
- it is available for immediate sale in its present condition;
- the sale is highly probable, with management committed to a plan to sell the asset and
an active programme to locate a buyer initiated; and
- the sale is expected to be completed within 1 year of classification as held for sale.
Where these criteria are met, the assets in the disposal group are measured at the lower
of fair value less cost to sell and their carrying value at the point they are considered
to meet the criteria. The results from the discontinued operations are presented
separately in the consolidated statement of comprehensive income with the comparative
period restated on a like-for-like basis.
Where a Business Unit of the Group is held as a discontinued operation with the intention
of selling it, it will remain consolidated for as long as the criteria for control as
defined by IFRS 10 Consolidated Financial Statements, are met. All three of these
criteria must be met in order to control an entity:
- power over the investee;
- exposure, or rights, to variable returns from its involvement with the investee; and
- the ability to use its power over the investee to affect the amount of the investor’s
returns.
While an agreement might be signed to sell the operation, if the Group continues to meet
the criteria for control between signing and closing the transaction, deconsolidation will
only occur on closing once the criteria are no longer met.
Share buybacks
Shares purchased and cancelled by the Group as part of the share buyback programme reduce
the equity of the Group, but are anti-dilutive and return value to shareholders when
calculating earnings per share. The nominal cost of the shares purchased and cancelled is
treated as a reduction in share capital with an offsetting increase in the capital
redemption reserve. The capital redemption reserve is a non-distributable reserve which
can be used to pay up new shares allotted as fully paid bonus shares. The cost of the
share purchase inclusive of stamp duty and broker fees is debited to retained earnings.
Cashback credit card accounting
Cashback offered on products issued by the Group is considered to fall under IFRS 15 where
it is contractually linked to card spend where an interchange fee is generated at the
point of spend. Where the cashback reward to the borrower is cash settled or netted
against an outstanding balance due from the customer, it is treated as a reduction in the
transaction price under IFRS 15 and there is no ongoing performance obligation beyond the
card transaction with interchange fee income recognised net of the cashback granted. The
cashback rewards programme does not currently offer borrowers the option to exchange their
cashback reward for other non-cash goods or services. Where borrowers do not repay the
full balance due on their card and choose to revolve an element of it, interest income is
recognised under IFRS 9 on the interest charged.
3. Critical accounting judgements and key sources of estimation uncertainty
The preparation of the consolidated financial statements requires the Group to make
estimates and judgements that affect the application of policies and reported amounts.
Critical judgements represent key decisions made by management in the application of the
Group accounting policies. Where a significant risk of materially different outcomes
exists due to management assumptions or sources of estimation uncertainty, this will
represent a key source of estimation uncertainty.
Estimates and judgements are continually evaluated and are based on experience and other
factors, including expectations of future events that are believed to be reasonable under
the circumstances. Although these estimates are based on management’s best knowledge of
the amount, event or actions, actual results ultimately may differ from those estimates.
The significant judgements and estimates applied by the Group in the financial statements
have been applied on a consistent basis with the financial statements for the comparative
year to 31 December 2023.
Critical judgements
Loans originated through the platform
The Group originates SME loans through its platform which have been funded primarily by
banks, asset managers, other institutional investors, funds, national entities, retail
investors or by usage of its own capital. Judgement is required to determine whether these
loans should be recognised on the Group’s balance sheet. Where the Group, its subsidiaries
or SPVs which it consolidates have legal and beneficial ownership to the title of those
SME loans, they are recognised on the Group’s balance sheet. Where this is not the case,
the loans are not recognised at the point of origination.
Recognition of deferred tax
Under IAS 12, a deferred tax asset should be recognised for all deductible temporary
differences and tax losses to the extent that it is probable that taxable profit will be
available against which the deductible temporary difference or tax losses can be
utilised. While the Board-approved forecasts project the UK to be in a taxable profit
position for the year ended 31 December 2025 and beyond, there are risks to achieving this
forecast and as a result it is not considered highly probable. Management has used its
judgement in determining whether there is sufficient certainty to recognise a deferred tax
asset. The “European Securities and Markets Authority (“ESMA”) has previously issued
guidance relating to the recognition of deferred tax assets in response to companies
recognising assets too early only to subsequently write them off. One of the key
indicators suggested by ESMA for the recognition of deferred tax is whether taxable profit
is being recognised from which an entity has begun to offset losses. This is not yet the
case for the UK business for a sustained period and management has determined not to
recognise a deferred tax asset as a result. Had management determined a different level
of certainty regarding the taxable profits of the UK for the year end and beyond, then a
deferred tax asset may have been recognised.
Key sources of estimation uncertainty
The following are the key sources of estimation uncertainty that the Directors have
identified in the process of applying the Group’s accounting policies and have the most
significant effect on the amounts recognised in the financial statements.
Expected credit loss impairment of FlexiPay lines of credit (note 17)
At 31 December 2024, the Group held £110.0 million of drawn FlexiPay lines of credit and
£278.7 million of undrawn lines of credit, gross of expected credit loss impairment
allowances.
While other financial assets of the Group are held at amortised cost, the FlexiPay lines
of credit are the most sensitive to estimation uncertainty due to the higher balance
outstanding and more limited historical data.
An expected credit loss impairment allowance is held against the lines of credit of £15.6
million (£12.9 million related to drawn lines of credit and £2.7 million related to
undrawn).
The Group estimates the expected credit loss allowance following IFRS 9 through modelling
the exposure at default based on observed trends related to the overall line of credit
facility and the proportion drawn at the time of default. The probability of default is
estimated utilising observed trends and combining these with forward-looking information
including different macroeconomic scenarios which are probability weighted. The loss given
default is driven by assumptions regarding the level of recoveries collected after
defaults occur.
The area most sensitive to estimation uncertainty is the probability of default (“PD”)
related to stage 1 lines of credit which is based on actual experience and the probability
weighting of the forward-looking scenarios utilised. Currently a baseline scenario, upside
scenario and downside scenario are utilised which are probability weighted 60% baseline,
10% upside and 30% downside, which provide a blended stage 1 probability of default of
3.6%. It is also noted that the downside scenario has peak unemployment of 6.9% in
December 2027 and upside scenario has a trough unemployment of 3.6% from September 2026
relative to 4.4% in December 2024. Given the stage 1 PD is based on 12 month expected
credit losses, the respective peak and trough of these scenarios has a low impact on the
stage 1 ECL as at 31 December 2024 given the time horizon to reaching the respective peak
and trough.
If 100% probability weighting was to be applied to the upside scenario and the lowest
point of the upside scenario unemployment forecast was solely applied for calculating the
PD, the weighted PD related to stage 1 lines of credit would decrease by 60 bps to 3.0%
and the expected credit loss impairment provision would decrease by £0.8 million (£0.4
million on drawn lines of credit and £0.4 million on undrawn lines of credit).
If a 100% probability weighting was to be applied to the downside scenario and the highest
point of the downside scenario unemployment forecast was solely applied for calculating
the PD, the weighted PD related to stage 1 lines of credit would increase by 120 bps to
4.8% and the expected credit loss impairment would increase by £1.8 million (£0.9 million
on drawn lines of credit and £0.9 million on undrawn lines of credit). It is considered
that the above sensitivities represent the range of reasonably possible outcomes in
relation to the probability of default on stage 1 FlexiPay lines of credit.
The loss given default (“LGD”) of the expected credit loss impairment allowance is
estimated based on observation of the blended portfolio recoveries to date on defaulted
lines of credit projected out into the future using an 84.4% LGD. While the LGD
expectation is based on the trajectory of recoveries to date, the lifetime LGD may differ
from the estimated amount. A +/- 500bps increase/decrease in the estimated lifetime LGD
would increase/decrease the expected credit loss impairment allowance by £0.9
million/(£0.9 million). It is considered that the above sensitivities represent the range
of reasonably possible outcomes in relation to the LGD on FlexiPay lines of credit.
4. Discontinued operations
The Group announced on 7 March 2024 its intention to divest of the US business. As of
this date, the US business was considered to form a disposal group and was reclassified as
a discontinued operation. An agreement was signed on 24 June 2024 to sell the business to
iBusiness Funding, LLC and the transaction completed as of 1 July 2024. As a result, Group
retained control of the US business until 1 July 2024, at which point it was
deconsolidated.
The current and comparative period loss for the year from discontinued operations,
segmental results, cash flows from discontinued operations and component elements of the
gain on disposal are detailed below.
31 December 31 December 31 December
31 December 2024 2024 2024 2023
Discontinued operations Before Exceptional Total
exceptional items
items
Note £m £m £m £m
Transaction fees 10.3 — 10.3 23.4
Servicing fees 2.1 — 2.1 3.4
Interest income 0.7 — 0.7 1.3
Other fees 0.2 — 0.2 0.6
Operating income 13.3 — 13.3 28.7
Investment income 0.7 — 0.7 4.4
Investment expense — — — (0.6)
Net investment income 0.7 — 0.7 3.8
Total income 14.0 — 14.0 32.5
Fair value gains 2.2 — 2.2 5.6
Net income 16.2 — 16.2 38.1
People costs (16.0) 1.7 (14.3) (28.9)
Marketing costs (3.7) — (3.7) (11.3)
Depreciation, amortisation,
impairment and modification 11, 12 (0.3) — (0.3) (10.3)
gains/(losses)
(Charge)/credit for expected 16, 17 (0.1) — (0.1) 0.1
credit losses
Other costs (6.2) — (6.2) (11.0)
Operating expenses (26.3) 1.7 (24.6) (61.4)
Realised FX recycled from
foreign currency translation — 8.7 8.7 —
reserve
Gain on disposal of US — 8.1 8.1 —
business
(Loss)/profit before taxation (10.1) 18.5 8.4 (23.3)
Income tax 9 (0.1) — (0.1) (6.8)
(Loss)/profit for the year (10.2) 18.5 8.3 (30.1)
from discontinued operations
Other comprehensive
income/(expense)
Exchange differences on
translation of foreign (0.2) (8.7) (8.9) (2.7)
operations – discontinued
operations
Total comprehensive
(expense)/income for the year (10.4) 9.8 (0.6) (32.8)
attributable to owners of the
Parent
Earnings per share
Basic (loss)/earnings per
share from discontinued 10 (3.0)p 2.4p (8.7)p
operations
Diluted (loss)/earnings per
share from discontinued 10 (3.0)p 2.2p (8.7)p
operations
Segmental Adjusted EBITDA from discontinued operations
31 December 2024 31 December 2023
£m £m
Adjusted EBITDA (8.7) (10.6)
Discount unwind on lease liabilities (0.2) (0.4)
Depreciation, amortisation, impairment and modification (0.3) (10.3)
gains/(losses)
Exceptional items 18.5 —
Share-based payments and social security costs (1.0) (1.8)
Foreign exchange gains/(losses) 0.1 (0.2)
Profit/(loss) before tax 8.4 (23.3)
Cash flow
31 December 2024 31 December 2023
£m £m
Cash and cash equivalents at the beginning of the year 22.3 13.8
Net cash outflow from operating activities (8.6) (12.3)
Net cash (outflow)/inflow from investing activities (13.3) 64.8
Net cash outflow from financing activities (0.6) (43.2)
Net (decrease)/increase in cash generated (0.2) 23.1
Effect of foreign exchange rate changes 0.2 (0.8)
Cash and cash equivalents at the end of the year — 22.3
Details of the sale of the US business (exceptional items): £m
Consideration received:
Cash consideration at prevailing exchange rate 32.6
Net assets disposed on (including cash and cash equivalents of £23.1m) (22.2)
Gross gain on sale 10.4
Direct transaction costs for legal, advisory and other costs (2.3)
Net impact of (early vesting)/lapsing US share options 1.7
Other disposal related costs (0.6)
Gain on sale 9.8
Reclassification of foreign currency translation reserve 8.7
Total gain as a result of disposal after reclassification of foreign currency 18.5
translation reserve
5. Exceptional items
The Group reflects its underlying financial results in the “before exceptional items”
column of the consolidated statement of comprehensive income in order to provide a clear
and consistent view of trading performance.
As part of its ongoing commitment to profitability, the Group launched a redundancy and
cost efficiency programme during the year. This process will result in a simpler, leaner
and better positioned UK-focused operation. This resulted in redundancy costs of £2.3
million and impairment of capitalised development spend intangible assets of £0.3 million
which were treated as exceptional items.
The Group disposed of its investment in the US business on 1 July 2024, as detailed in
note 4.
6. Segmental information
IFRS 8 Operating Segments requires the Group to determine its operating segments based on
information which is used internally for decision making. Based on the internal reporting
information and management structures within the Group, it has been determined that there
are two continuing business and one discontinued US business operating segments. Reporting
on this basis is reviewed by the Executive Committee (“ExCo”), formerly known as the
Global Leadership Team (“GLT”), which is the chief operating decision maker (“CODM”). The
ExCo is made up of the Executive Directors and other senior management and is responsible
for the strategic decision making of the Group.
The Other segment historically included the Group’s Term Loans businesses in Germany and
the Netherlands. The Other segment has been presented within UK Term Loans for the year
ended 31 December 2024 on the basis it is no longer individually material. The
comparative period to 31 December 2023 has not been re-presented as it is immaterial.
The ExCo measures the performance of each segment primarily by reference to profit before
tax. Additionally, the ExCo utilises a non-GAAP measure, Adjusted EBITDA, which is defined
as profit/loss for the year before finance costs (being the discount unwind on lease
liabilities), taxation, depreciation, amortisation and impairments (“AEBITDA”), and
additionally excludes share-based payment charges and associated social security costs,
foreign exchange and exceptional items. AEBITDA is a measure of Group performance as it
allows better comparability of the underlying performance of the business. The segment
reporting, including AEBITDA, excludes the impact of the Group’s transfer pricing
arrangements as this is not information presented to, or used by, the CODM in decision
making or the allocation of resources.
31 December 20241 31 December 20231
Continuing operations Continuing operations
United Kingdom United Kingdom Other Total
Term FlexiPay Total Term FlexiPay Term Total
Loans Loans Loans
£m £m £m £m £m £m £m
Transaction fees 84.7 0.6 85.3 —
65.2 0.1 65.3
Servicing fees 37.5 — 37.5 —
38.8 0.2 39.0
Interest Income 8.3 22.6 30.9
7.5 7.8 0.1 15.4
Other fees 5.1 0.1 5.2 —
6.3 0.1 6.4
Operating income 135.6 23.3 158.9 117.8 126.1
7.9 0.4
Net investment income 2.8 — 2.8 — —
3.6 3.6
Total income 138.4 23.3 161.7 121.4 129.7
7.9 0.4
Fair value gains 4.2 — 4.2 — —
3.1 3.1
Cost of funds — (5.8) (5.8) — —
(2.7) (2.7)
Net income 142.6 17.5 160.1 124.5 130.1
5.2 0.4
Adjusted EBITDA 37.0 (12.5) 24.5 (14.4)
21.3 (0.2) 6.7
Discount unwind on (0.6) — (0.6) — —
lease liabilities (0.2) (0.2)
Depreciation,
amortisation,
impairment and (11.4) (1.8) (13.2) (11.3) (1.3) — (12.6)
modification
gains/(losses)
Share-based payments
and social security (6.5) (1.3) (7.8) (3.3) (0.5) — (3.8)
costs
Exceptional items (2.3) (0.3) (2.6) — — — —
Foreign exchange gains 0.5 — 0.5 — — — —
Profit/(loss) before 16.7 (15.9) 0.8 (16.2)
tax 6.5 (0.2) (9.9)
1. The segmental results of the US business are not presented above and are presented
within note 4 –discontinued operations.
7. Operating expenses
Before exceptional 31 December 31 December
items Exceptional
Continuing operations items1 2024 2023
£m
£m £m £m
Note
Depreciation 12 3.0 — 3.0 3.5
Amortisation and impairment 5, 11 10.6 0.3 10.9 9.1
Modification gains 12 (0.4) — (0.4) —
Rental income and other — — — (0.2)
recharges
Employment costs (including 8 68.1 2.3 70.4 65.5
contractors)
Marketing costs - (excluding 45.6 — 45.6 37.1
employment costs)
Data and technology 7.2 — 7.2 6.8
Expected credit loss 17, 19 8.6 — 8.6 4.5
impairment charge
Other expenses 14.0 — 14.0 13.7
Total operating expenses 156.7 2.6 159.3 140.0
from continuing operations
1. See note 5 for details on exceptional items.
8. Employees
The average monthly number of employees (including Directors) during the year was:
2024 2023
Number Number
Continuing operations
Term Loans 628 666
FlexiPay 88 81
Other 5 9
Total continuing operations 721 756
Discontinued operations
US1 106 203
Total discontinued operations 106 203
Total 827 959
1. Average monthly numbers are calculated over 12 months and for the 2024 US discontinued
operations includes 6 months following the sale of the US business where the employee
number was nil.
In addition to the employees above, the average monthly number of contractors during the
year was 80 (2023: 115), of which 13 (2023: 26) related to the US.
Employment costs (including Directors’ emoluments) during the year were:
Before exceptional 31 December 31 December
items Exceptional items1 2024
2023
Continuing operations Total
Total
£m £m £m
£m
Wages and salaries 56.0 — 56.0 55.6
Social security costs 6.3 — 6.3 6.0
Pension costs 2.1 — 2.1 2.1
Share-based payments 7.8 — 7.8 3.8
Exceptional costs — 2.3 2.3 —-
72.2 2.3 74.5 67.5
Contractor costs 4.9 — 4.9 7.2
Less: capitalised (9.0) — (9.0) (9.2)
development costs
Employment costs net of
capitalised development 68.1 2.3 70.4 65.5
costs from continuing
operations
1. See note 5 for details of exceptional items.
9. Income tax charge/(credit)
The Group is subject to all taxes applicable to a commercial company in its countries of
operation. The UK (losses)/profits of the Company are subject to UK income tax at the
standard corporation tax rate of 25% (23.5% is applied to the table below for 2023 as a
blended rate for the year, as the increase in the statutory corporation tax rate to 25%
was effective from 1 April 2023).
31 December 31 December
2024 2023
£m £m
Current tax
Continuing operations
UK
Current tax on profits for the year 0.5 0.3
Adjustment in respect of prior years — (2.0)
0.5 (1.7)
Other
Current tax on profits/(losses) for the year — —
Adjustment in respect of prior years — —
— —
Total current tax charge/(credit) from continuing operations 0.5 (1.7)
Discontinued operations
US
Current tax on (losses)/profits for the year 0.1 0.3
Adjustment in respect of prior years — (0.1)
Total current tax charge from discontinued operations 0.1 0.2
Total current tax charge/(credit) 0.6 (1.5)
Deferred tax
Continuing operations
UK
Deferred tax on (losses)/profits for the year — —
Adjustment in respect of prior years — —
— —
Other
Deferred tax on (losses)/profits for the year — —
Adjustments in respect of prior years — —
— —
Total deferred tax charge/(credit) from continuing operations — —
Discontinued operations
US
Deferred tax on profits/(losses) for the year — 6.6
Adjustments in respect of prior years — —
Total deferred tax charge from discontinued operations — 6.6
Total deferred tax charge — 6.6
Total tax charge 0.6 5.1
The above current tax charge/(credit) represents the expected tax on the Research and
Development Expenditure Credit (“RDEC”) receivable for 2024 and US state taxes from 1
January 2024 to the date of disposal of the US business.
In the prior year, the tax charge represents the tax liability on the Group’s taxable
profit, including state taxes, and the amount of tax deducted from the RDEC receivable for
2023.
Based on the Group’s current financial projections, the estimate of the deferred tax asset
in respect of the losses arising in the UK was £nil at 31 December 2024 (December 2023:
£nil).
The US business at 30 December 2024 is represented as discontinued operations.
The Group charge/(credit) for the year can be reconciled to the profit/(loss) before tax
shown per the consolidated statement of comprehensive income as follows.
Factors affecting the tax charge/(credit) for the year
31 December 31 December
2024 2023
£m £m
Profit/(loss) before taxation for the Group 9.2 (33.2)
Taxation on profit/(loss) at 25.0% (2023: 23.5%) 2.3 (7.8)
Effects of:
Research and development 0.4 0.3
Effect of foreign tax rates 0.1 0.3
Non-taxable/non-deductible expenses 0.3 0.7
Unrecognised timing differences (0.1) 1.7
Unrecognised tax losses accumulated 1.1 5.6
Adjustment in respect of prior years — (2.1)
Deferred tax assets derecognised — 6.6
Impairment charge (3.5) (0.2)
Total tax charge 0.6 5.1
Total tax charge/(credit) from continuing operations 0.5 (1.7)
Total tax charge from discontinued operations 0.1 6.8
There was no tax charge/(credit) in the current or prior year related to exchange
differences on translation of foreign operations in other comprehensive income or the
recycling of these into profit and loss.
The Group was taxed at different rates depending on the country in which the profits
arise.
The key applicable tax rates for 2024 include the UK 25%, and the US 21%. The effective
tax rate for the year was 4.87% (2023: -15.4%).
31 December 31 December
2024 2023
£m £m
Property, plant and equipment — (1.5)
Carry forward losses (UK) — 1.5
Carry forward losses (US) — —
Recognised deferred tax — —
Unrecognised deferred tax
31 December 31 December
2024 2023
£m £m
Property, plant and equipment 6.9 22.8
Carry forward losses 125.0 183.4
Deferred stock options 22.5 20.5
US R&D credit — 2.2
US fair value adjustments — 40.7
Other 0.2 0.4
Unrecognised deferred tax1 154.6 270.0
1. Balances presented in the table above are gross timing differences and are not tax
effected.
Based on the temporary differences, there are total unrecognised deferred tax assets of
£38.7 million (2023: £62.2 million). In addition, there is an unrecognised deferred tax
asset in relation to R&D expenditure credit set-off amounts of £2.0 million (2023: £1.7
million).
The Group has unrelieved tax losses of £125.0 million (2023: £183.4 million) that are
available for offset against future taxable profits.
Factors affecting the tax charge in future years
Factors that may affect the Group’s future tax charge include the geographic location of
the Group’s earnings (including changes in transfer pricing arrangements), the tax rates
in those locations, changes in tax legislation and the use of brought-forward tax losses.
The calculation of the Group’s total tax charge involves a degree of estimation and
judgement with respect to the recognition of any deferred tax asset.
10. Earnings/(loss) per share
Basic earnings/(loss) per share amounts are calculated by dividing the profit/(loss) for
the year attributable to ordinary equity holders of the Company by the weighted average
number of ordinary shares outstanding during the year.
For diluted earnings/(loss) per share, the weighted average number of ordinary shares in
issue is adjusted to assume conversion of all dilutive potential ordinary shares. The
dilutive potential ordinary shares include those share options granted to employees under
the Group’s share-based compensation schemes which do not have an exercise price or where
the exercise price is less than the average market price of the Company’s ordinary shares
during the year.
Where loss per share is presented, there is no difference in the weighted average number
of shares used in the calculation of basic and diluted loss per share as the effect of all
potentially dilutive shares outstanding was anti-dilutive.
The following table reflects the profit/(loss) and share data used in the basic and
diluted earnings/(loss) per share computations:
31 December 31 December 31 December
2024 2024 2023
£m £m £m
Total Before exceptional items Total
Profit/(loss) for the year from 0.3 2.9 (8.2)
continuing operations
Basic weighted average number of ordinary 342.4 342.4 344.8
shares in issue (million)
Basic earnings/(loss) per share from 0.1p 0.8p (2.4)p
continuing operations
Profit/(loss) for the year from 0.3 2.9 (8.2)
continuing operations
Diluted weighted average number of 382.2 382.2 344.8
ordinary shares in issue (million)
Diluted earnings/(loss) per share from 0.1p 0.8p (2.4)p
continuing operations
31 December 31 December 31 December
2024 2024 2023
£m £m £m
Total Before exceptional items Total
Profit/(loss) for the year from 8.3 (10.2) (30.1)
discontinued operations
Basic weighted average number of ordinary 342.4 342.4 344.8
shares in issue (million)
Basic earnings/(loss) per share from 2.4p (3.0)p (8.7)p
discontinued operations
Profit/(loss)for the year from 8.3 (10.2) (30.1)
discontinued operations
Diluted weighted average number of 382.2 342.4 344.8
ordinary shares in issue (million)
Diluted earnings/(loss) per share from 2.2p (3.0)p (8.7)p
discontinued operations
11. Intangible assets
Capitalised
Computer Other
development Total
software intangibles
costs £m
£m £m
£m
Cost
At 1 January 2023 54.8 0.8 1.2 56.8
Exchange differences (0.8) — — (0.8)
Additions 11.3 0.2 — 11.5
Disposals (4.1) (0.6) — (4.7)
At 31 December 2023 61.2 0.4 1.2 62.8
At 1 January 2024 61.2 0.4 1.2 62.8
Exchange differences 0.2 — (0.1) 0.1
Additions 9.0 — — 9.0
Disposals (4.4) (0.3) — (4.7)
De-recognition of assets of discontinued (15.7) — — (15.7)
operations
At 31 December 2024 50.3 0.1 1.1 51.5
Accumulated amortisation
At 1 January 2023 26.8 0.6 1.2 28.6
Exchange differences (0.5) 0.1 — (0.4)
Charge for the year 12.3 0.1 — 12.4
Impairment 3.9 — — 3.9
Disposals (4.1) (0.6) — (4.7)
At 31 December 2023 38.4 0.2 1.2 39.8
At 1 January 2024 38.4 0.2 1.2 39.8
Exchange differences 0.1 — (0.1) —
Charge for the year 9.7 0.1 — 9.8
Impairment (exceptional item) 0.3 — — 0.3
Impairment 0.7 0.1 — 0.8
Disposals (4.4) (0.3) — (4.7)
De-recognition of assets of discontinued (15.7) — — (15.7)
operations
At 31 December 2024 29.1 0.1 1.1 30.3
Carrying amount
At 31 December 2024 21.2 — — 21.2
At 31 December 2023 22.8 0.2 — 23.0
During the year ended 31 December 2024 £0.3 million (2023: £nil) of intangible assets were
impaired in the FlexiPay Business Unit related to projects discontinued as a result of the
simplification of the Group. These were treated as an exceptional item (see note 5). A
further £0.8 million of intangibles were impaired in 2024 related to capitalised
development spend and software no longer in use. In the prior year intangible assets of
£3.9 million predominantly related to the US business were fully impaired. This was as a
result of the annual impairment review assessment of each cash-generating unit.
12. Property, plant and equipment, right-of-use assets and lease liabilities
The Group has right-of-use assets which comprise property leases held by the Group.
Information about leases for which the Group is a lessee is presented below.
Analysis of property, plant and equipment between owned and leased assets
31 December 31 December
2024 2023
£m £m
Property, plant and equipment (owned) 2.9 1.7
Right-of-use assets 6.7 3.3
9.6 5.0
Reconciliation of amount recognised in the balance sheet
Right-of-use
Leasehold Computer Furniture
assets Total
improvements equipment and fixtures
(property) £m
£m £m £m
£m
Cost
At 1 January 2023 5.2 3.0 2.1 32.7 43.0
Disposals — (1.1) — — (1.1)
Additions1 — 0.7 — 0.2 0.9
Exchange differences — — — (0.6) (0.6)
At 31 December 2023 5.2 2.6 2.1 32.3 42.2
At 1 January 2024 5.2 2.6 2.1 32.3 42.2
Disposals (3.7) (0.4) (0.7) (9.6) (14.4)
Lease modification — — — 5.7 5.7
Additions1 2.3 0.5 0.1 — 2.9
Exchange differences and other non (0.4) — — 0.1 (0.3)
cash movements
Derecognition of assets of (0.2) (1.0) (0.7) (10.2) (12.1)
discontinued operations
At 31 December 2024 3.2 1.7 0.8 18.3 24.0
Accumulated depreciation
At 1 January 2023 3.9 1.9 1.8 25.4 33.0
Disposals — (1.1) — — (1.1)
Charge for the year 0.7 0.8 0.1 2.7 4.3
Impairment — 0.1 0.1 1.3 1.5
Exchange differences (0.1) — — (0.4) (0.5)
At 31 December 2023 4.5 1.7 2.0 29.0 37.2
At 1 January 2024 4.5 1.7 2.0 29.0 37.2
Disposals (3.7) (0.4) (0.7) (9.6) (14.4)
Charge for the year 0.5 0.6 0.1 2.0 3.2
Impairment — 0.1 — — 0.1
Exchange differences — — — 0.1 0.1
Derecognition of assets of (0.2) (1.0) (0.7) (9.9) (11.8)
discontinued operations
At 31 December 2024 1.1 1.0 0.7 11.6 14.4
Carrying amount
At 31 December 2024 2.1 0.7 0.1 6.7 9.6
At 31 December 2023 0.7 0.9 0.1 3.3 5.0
1. Leasehold improvement and right-of-use asset additions in the year are non-cash in
nature.
In February 2024, the Group signed an amendment to shorten the lease term on one of the UK
office floors to 30 June 2024 and extend the term on the other floor. The modification of
the lease which was shortened resulted in a net modification gain of £0.4 million (with a
£1.1 million reduction in lease liability and £0.7 million reduction in right-of
use-asset), and the lease liability and right of use asset net of accumulated depreciation
were derecognised at 30 June 2024. The extension of the term on the other floor resulted
in an increase to the lease liability of £6.4 million and right of use asset of £6.4
million before depreciation. Leasehold improvement additions associated with re-fitting
the retained floor totalled £1.5 million.
Certain right-of-use assets related to the US San Francisco office had been sublet under
an operating sublease. Due to a further weakening of the San Francisco commercial property
market, the estimated cash flows on the sublet no longer support the carrying value of the
asset. As a result, an impairment of £1.3 million was recognised in the previous year
ended 31 December 2023.
Property, plant and equipment of £0.1 million (2023: £0.2 million) related to the US
business was fully impaired in the year.
Lease liabilities
Amounts recognised on the balance sheet were as follows:
31 December 31 December
2024 2023
£m £m
Current 1.8 7.2
Non-current 5.8 5.4
Total 7.6 12.6
13. SME loans and lines of credit
31 December 31 December
2024 2023
£m £m
Non-current
SME loans– amortised cost 1.4 5.6
Investment in trusts and co-investments – FVTPL 17.8 25.2
Total non-current 19.2 30.8
Current
SME loans– amortised cost 0.7 1.1
Lines of credit – amortised cost1 97.1 50.0
SME loans – FVTPL 1.2 18.6
Total current 99.0 69.7
Total 118.2 100.5
1. Included in Lines of credit are £7.2m related to Cashback credit card balances net of
ECL impairment.
14. Trade and other receivables
31 December 31 December
2024 2023
£m £m
Other receivables — 1.4
Non-current trade and other receivables — 1.4
Trade receivables 0.4 0.4
Other receivables 4.2 2.7
Tax-related receivables 4.8 4.6
Prepayments 4.7 5.2
Accrued income 5.8 5.3
Rent and other deposits 0.9 2.2
Current trade and other receivables 20.8 20.4
20.8 21.8
The maximum exposure to credit risk at the reporting date is the carrying value of each
class of receivables described earlier.
No trade receivables were overdue or impaired.
Included in rent and other deposits are £0.9 million of rental deposits (2023: £1.6
million) in respect of the Group’s property leases which expire over the next five years.
The Directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
15. Trade and other payables
31 December 31 December
2024 2023
£m £m
Trade payables 1.8 2.4
Other taxes and social security costs 7.0 4.2
Other creditors1 6.5 32.6
Accruals and deferred income 12.5 15.1
27.8 54.3
1. Other creditors includes £4.4 million (2023: £30.7 million) due to the British Business
Bank (BBB) primarily related to scheme lender fees collected from investors associated
with government-guaranteed products.
The Directors consider that the carrying amount of trade and other payables approximates
to their fair value.
16. Provisions and other liabilities
Loan ECL on undrawn
Dilapidation Restructuring1 lines of Total
repurchase credit and
£m £m other2 £m
£m
£m
At 1 January 2023 1.1 0.5 — 0.5 2.1
Additional — 0.2 — 1.2 1.4
provision/liability
Amount utilised — (0.4) — (0.3) (0.7)
Amount reversed — (0.2) — — (0.2)
At 31 December 2023 1.1 0.1 — 1.4 2.6
Additional — — 2.3 2.2 4.5
provision/liability
Amount utilised (0.3) (0.1) (2.3) — (2.7)
Amount reversed (0.2) — — — (0.2)
Disposal of provisions
related to discontinued — — — — —
operations
At 31 December 2024 0.6 — — 3.6 4.2
1. The restructuring provision relates to the simplification and streamlining of the Group
and has been treated as an exceptional item. See note 5.
2. ECL on undrawn lines of credit and other provisions includes provisions for operational
buybacks of £0.9 million (2023: £nil) and £2.7 million (2023: £1.4 million) of expected
credit loss impairment allowance related to undrawn FlexiPay lines of credit. See notes 17
and 19.
31 December 31 December
2024 2023
£m £m
Current provisions and other liabilities 3.6 1.5
Non-current provisions and other liabilities 0.6 1.1
4.2 2.6
The dilapidation provision represents an estimated cost for dismantling the customisation
of offices and restoring the leasehold premises to its original state at the end of the
tenancy period. The provision is expected to be utilised by 2030.
17. Financial risk management
The Board of Directors has overall responsibility for the establishment and oversight of
the Group’s risk management framework.
The risk management policies are established to identify and analyse the risks faced by
the Group, to set appropriate risk limits and controls and to monitor risks and ensure any
limits are adhered to. The Group’s activities are reviewed regularly and potential risks
are considered.
Risk factors
The Group has exposure to the following risks from its use of financial instruments:
• credit risk;
• liquidity risk; and
• market risk (including foreign exchange risk, interest rate risk and other price risk).
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument
risk arises, are as follows:
• SME loans;
• investments in trusts and co-investments;
• lines of credit;
• trade and other receivables;
• cash and cash equivalents;
• trade and other payables;
• bank borrowings;
• lease liabilities; and
• loan repurchase liabilities.
Categorisation of financial assets and financial liabilities
The tables show the carrying amounts of financial assets and financial liabilities by
category of financial instrument as at 31 December 2024:
31 December 2024 31 December 2023
Fair value Fair
through Amortised value Amortised
profit cost Other Total through cost Other Total
profit
and loss and loss
Assets £m £m £m £m £m £m £m £m
SME loans held at — 2.1 — 2.1 — 6.7 — 6.7
amortised cost
SME loans held at fair
value through profit 1.2 — — 1.2 18.6 — — 18.6
and loss
Lines of credit — 97.1 — 97.1 — 50.0 — 50.0
Investment in trusts 17.8 — — 17.8 25.2 — — 25.2
and co-investments
Trade and other 0.6 10.7 — 11.3 0.8 11.2 — 12.0
receivables
Cash and cash 136.3 51.3 — 187.6 150.1 71.3 — 221.4
equivalents
155.9 161.2 — 317.1 194.7 139.2 — 333.9
Liabilities
Trade and other — (8.3) — (8.3) — (35.0) — (35.0)
payables
Loan repurchase — - — — — — (0.1) (0.1)
liability
Bank borrowings — (101.9) — (101.9) — (56.9) — (56.9)
Lease liabilities — (7.6) — (7.6) — (12.6) — (12.6)
— (117.8) — (117.8) — (104.5) (0.1) (104.6)
Financial instruments measured at amortised cost
Financial instruments measured at amortised cost, rather than fair value, include cash and
cash equivalents, trade and other receivables, SME loans held at amortised cost, FlexiPay
lines of credit, bank borrowings, lease liabilities and trade and other payables. Due to
their nature, the carrying value of each of the above financial instruments approximates
to their fair value.
Other financial instruments
Loan repurchase liabilities are measured at the amount of loss allowance determined under
IFRS 9.
Financial instruments measured at fair value
IFRS 13 requires certain disclosures which require the classification of financial assets
and financial liabilities measured at fair value using a fair value hierarchy that
reflects the significance of the inputs used in making the fair value measurement.
Disclosure of fair value measurements by level is according to the following fair value
measurement hierarchy:
• level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities that the entity can access at the measurement date;
• level 2 inputs are inputs other than quoted prices included within level 1 that are
observable for the assets or liabilities, either directly or indirectly; and
• level 3 inputs are unobservable inputs for the assets or liabilities.
The fair value of financial instruments that are not traded in an active market (for
example, investments in SME loans) is determined by using valuation techniques. These
valuation techniques maximise the use of observable market data where it is available and
rely as little as possible on entity-specific estimates. If all significant inputs
required to fair value an instrument are observable, the instrument is included in level
2. If one or more of the significant inputs are not based on observable market data, the
instrument is included in level 3. An assessment that the level applied to financial
instruments is appropriate and whether a transfer between levels is required is undertaken
at the end of each accounting period. There were no transfers between levels during the
year or prior year.
The Finance department of the Group performs the valuations of items required for
financial reporting purposes, including level 3 fair values. This team reports to the
Chief Financial Officer (“CFO”). Discussions of valuation processes and results are held
regularly at Balance Sheet Management and Impairment and Valuation Committees along with
regular updates provided to the Audit Committee.
Fair value measurement using
31 December 2024 31 December 2023
Quoted Quoted Significant
prices Significant Significant prices observable Significant
observable unobservable in unobservable
in inputs inputs active Inputs inputs
active markets
markets
(level
(level (level 2) (level 3) 1) (level 2) (level 3)
1)
£m £m £m £m £m £m
Financial assets
SME loans held at fair
value through profit — — 1.2 — — 18.6
and loss
Trade and other 0.6 — — 0.8 — —
receivables
Investment in trusts — — 17.8 — — 25.2
and co-investments
Cash and cash 136.3 — — 150.1 — —
equivalents
136.9 — 19.0 150.9 — 43.8
The fair value of all SME loans held at fair value has been estimated by discounting
future cash flows of the loans using discount rates that reflect the changes in market
interest rates and observed market conditions at the reporting date. The estimated fair
value and carrying amount of the SME loans held at fair value through profit and loss was
£1.2 million at 31 December 2024 (2023: £18.6 million).
Investment in trusts and co-investments represents the Group’s investment in the trusts
and other vehicles used to fund CBILS, RLS GGS and certain commercial loans and is
measured at fair value through profit and loss. The government-owned British Business Bank
will guarantee up to 80% of the balance of CBILS loans in the event of default (and
between 70% and 80% of RLS loans and 70% for GGS loans). The estimated fair value and
carrying amount of the investment in trusts and co-investments was £17.8 million at 31
December 2024 (2023: £25.2 million).
The most relevant significant unobservable inputs relate to the default rate estimate and
discount rates applied to the fair value calculation. However, it was determined that the
reasonably possible range of outcomes from these inputs into the estimates are not
material to the accounts.
Since 31 December 2023, the assumptions related to estimating fair value have been
marginally updated. The expected stress in defaults due to the macro environment of
inflationary cost pressures experienced by SMEs and their customers in the year did not
materialise to the extent expected as base rates peaked, plateaued and began to fall and
borrowers remained largely resilient. This has led to some favourable observed performance
with lower defaults and stable recoveries relative to expectations on many of the
portfolios particularly the legacy SME loans (securitised) in the US prior to their sale
along with the US business. The expectation of a macro stress is now expected to be less
pronounced but last longer. This has led to a lower lifetime cumulative default
expectation and a higher relative estimation of fair value compared to the carrying value
of the loans than at 31 December 2023. However, due to the amortising nature of these
loans and the sale of the US loans, there is less sensitivity to default assumptions given
the lower relative remaining value on the book year on year.
During the year, certain warehouses invested in trusts in which Funding Circle is a
minority co-investor sold their loan assets to a third party and Funding Circle partially
re-invested alongside the purchaser. As a result of the transaction, the net cash flows
from the investment were realised sooner and a net fair value gain of £2.2 million was
recognised through fair value gains in the consolidated statement of comprehensive
income. The cash flows related to the transaction are presented net within “Cash receipts
from investment in trusts and co-investments” in the statement of cash flows, reflecting
the net settlement of the realisation and re-investment.
There has additionally been decreases in discount rates used to discount the estimated
cash flows in the year, primarily driven by decreases in the risk free rate, due to
central bank interest rates falling and expectations of rate cuts priced into swaps. Many
of the investments in leveraged investment in trust structures have experienced a
reduction in discount rates due to de-leveraging of the vehicles as senior lenders debt
has been paid down. The repayment of senior debt and the passage of time has additionally
led to fair value gains as a result of the discount unwind as projected future cash flows
of the investments which tend to be backloaded in the structure become are nearer in time
to the balance sheet date. This, in turn, has led to a higher relative estimation of fair
value in the year.
The result of the various factors outlined above is a £6.4 million net fair value gain
during the year (of which £2.2 million relates to discontinued operations) primarily
driven by favourable performance of legacy securitisation loans relative to expectations
of stressed performance over the year; however, as these loans continue to amortise they
are expected to become less sensitive to estimation uncertainty.
Sensitivities to unobservable assumptions in the valuation of SME loans and money market
funds within cash and cash equivalents are not disclosed as reasonably possible changes in
the current assumptions inclusive of default rates, discount rates and recovery rates
would not be expected to result in material changes in the carrying values.
Fair value movements on SME loans held at fair value through profit and loss and
investments in trusts and co-investments are recognised through the profit and loss
account in fair value gains/(losses).
A reconciliation of the movement in level 3 financial instruments is shown as follows:
SME loans held at fair Investment in trusts and
value through profit co-investments
and loss
£m
£m
Balance as at 1 January 2023 69.1 28.7
Additions 11.9 1.8
Repayments (37.6) (6.6)
Disposal (30.4) —
Net gain on the change in fair value of
financial instruments at fair value 7.4 1.3
through profit or loss
Foreign exchange loss (1.8) —
Balance as at 31 December 2023 18.6 25.2
Additions — 4.1
Repayments (13.5) (14.6)
Net gain on the change in fair value of
financial instruments at fair value 2.6 3.8
through profit or loss
Other non-cash movements (0.7) —
Disposal of discontinued operations (5.8) (0.7)
Balance as at 31 December 2024 1.2 17.8
Financial risk factors
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a
financial instrument fails to meet its contractual obligations, and arises principally
from the Group’s receivables from customers and cash and cash equivalents held at banks.
The Group’s maximum exposure to credit risk by class of financial asset is as follows:
31 December 31 December
2024 2023
£m £m
Non-current
SME loans held at amortised cost 1.4 5.6
Investment in trusts and co-investments 17.8 25.2
Trade and other receivables:
- Other receivables — 1.4
Current
SME loans held at amortised cost 0.7 1.1
SME loans held at fair value through profit and loss 1.2 18.6
Lines of credit 97.1 50.0
Trade and other receivables
- Trade receivables 0.4 0.4
- Other receivables 4.2 2.7
- Accrued income 5.8 5.3
- Rent and other deposits 0.9 2.2
Cash and cash equivalents 187.6 221.4
Total gross credit risk exposure 317.1 333.9
Less bank borrowings1 (101.9) (56.9)
Total net credit risk exposure 215.2 277.0
1. Included within bank borrowings are £nil (2023: £2.2 million) in relation to drawdowns
on the PPPLF and £101.9 million (2023: £54.7 million) related to the FlexiPay warehouse.
In addition, the Group was subject to certain financial guarantees in its legacy European
operations which it had issued to buy back loans. The Group’s maximum exposure to credit
risk on these financial guarantees were every eligible loan required to be bought back
would be £nil (2023: £0.4 million).
An expected credit loss allowance related to undrawn lines of credit on the FlexiPay
product of £2.7 million (2023: £1.4 million) is held within provisions and other
liabilities. The Group’s maximum exposure to credit risk on the undrawn lines of credit if
they were all to be fully drawn would be £278.7 million (2023: £157.3 million). The Group
has the ability to freeze, reduce or withdraw lines of credit as a way of managing
associated credit risk.
Credit risk associates with SME loans held at amortised cost and lines of credit
Under IFRS 9, the Group is required to provide for loans measured at amortised cost under
the expected credit loss (“ECL”) model. The impairment related to each loan is based on
the ECLs associated with the probability of default of that loan in the next 12 months
unless there has been a significant increase in credit risk of that loan since
origination. The below factors are used in estimating the impairment:
Factor Description
The Group has developed PD models tailored to each Term Loan
or line of credit product to assess the likelihood of default
Probability of Default within the next 12 months and over the lifetime. The models
(“PD”) estimate PD based on the latest payment behaviour of the
customers and observed historical trends. The PD model also
includes an estimate of the future macroeconomic effect.
The Group has developed an EAD model for line of credit
products to assess the likely exposure at default. The model
Exposure at Default (“EAD”) calculates estimates of EAD based upon the latest payment
behaviour of the customer, the credit limit utilisation, and
applying a credit conversion factor approach.
The Group has developed LGD models tailored to each Term Loan
or line of credit product to assess the likely financial loss
Loss Given Default (“LGD”) given an account defaults. The models calculate estimates of
LGD based on historical data on observed recoveries against
defaulted accounts.
The Group uses account-level effective interest rate which is
Discount rate calculated based on line of credit amount or loan amount,
interest and fees, expected repayments including pre-payments
and term.
Significant increase in credit risk: The Group assumes there has been a significant
increase in credit risk if the loan or line of credit is overdue, or if the line of credit
has been frozen due to identification of risk from sources such as bureau data indicating
they have become overdue on a third party debt for example, or if the borrower is late on
another FC product. A backstop is applied for any outstanding amounts on the loan
investment exceed 30 days, in line with the rebuttable presumption per IFRS 9.
Forecast period: We estimate PD, EAD and LGD for the duration of the lifetime of the Term
Loan or line of credit. Term Loans utilise the contractual term of the Term Loan. For
lines of credit, the duration of the lifetime is estimated to be five years.
Definition of default: The Group defines a default, classified within non-performing, as a
loan investment with any outstanding amounts exceeding a 90-day due date, which reflects
the point at which the loan is considered to be credit-impaired. In some circumstances
where loans are bought back by the Group, the financial asset associated with the purchase
meets the definition of purchased or originated credit-impaired (“POCI”); this element of
the impairment is therefore based on lifetime ECLs.
Lines of credit utilises the same default definition and probability of default under IFRS
9; however, they are assessed based on 12-month probability of default at the overall
available line of credit level, estimating the expected utilisation of the line of credit
at the estimated point of default. The expected credit loss impairment associated with
undrawn lines of credit is disclosed within other liabilities in note 16 and in note 19.
In the prior year, SME loans held at amortised cost included PPP loans funded by the use
of the PPPLF. The loans were guaranteed by the US government in the event of default and
the loans were anticipated to be forgiven. At the point of default and subsequent
collection of the guarantee or point of forgiveness, the loan and the respective
borrowings under the PPPLF are extinguished.
SME loans held at amortised cost also include loans which have been brought back from
investors with the intention of collecting contractual cash flows.
Lines of credit comprises £97.1 million (2023: £50.0 million) of drawn amounts through the
FlexiPay product net of expected credit loss impairment.
The gross principal value of SME loans held at amortised cost is £11.3 million (2023:
£21.4 million) and drawn lines of credit is £110.0 million (2023: £55.4 million),
totalling £121.3 million (2023: £76.8 million), and an allowance for expected credit
losses of £9.2 million (2023: £14.7 million) and £12.9 million (2023: £5.4 million)
respectively, totalling £22.1 million (2023: £20.1 million), is held against these loans
and drawn lines of credit as detailed below.
An impairment charge of £7.0 million (2023: impairment charge of £3.3 million) was
recognised through the statement of comprehensive income in the year to 31 December 2024
within (provision)/credit for expected credit losses in the income statement related to
drawn lines of credit and SME loans held at amortised cost.
Additionally, an expected credit loss impairment charge was recognised relating to undrawn
FlexiPay lines of credit of £1.3 million (31 December 2023: £1.1 million) and an expected
credit loss impairment charge of £nil (31 December 2023: credit of £0.4 million) related
to the loan repurchase liability and an expected credit loss impairment charge related to
operational buybacks of £0.4 million (2023: £nil) were recognised as detailed in notes 16
and 17.
The Group bands each loan investment at origination using an internal risk rating and
assesses credit losses on a collective portfolio basis by product. Credit risk grades are
not reported to management on an ongoing basis and the only borrower specific information
that is produced and used is past due status. There is no significant concentration of
credit risk to specific industries or geographical regions.
Stage 1 Stage 2 Stage 3
Performing: Underperforming: POCI:
Non-performing:
Reconciliation of opening to 12-month Lifetime Lifetime Total
closing ECL Lifetime
ECL ECL ECL £m
ECL
£m £m £m
£m
At 1 January 2023 1.1 0.3 0.9 14.1 16.4
Impairment against new 12.6 0.1 0.1 0.6 13.4
lending and purchased assets
Exchange differences — — — (0.5) (0.5)
Impairment against loans (0.3) 0.5 2.5 — 2.7
transferred between stages
Loans repaid (10.5) — (0.2) (0.9) (11.6)
Change in probability of
default or loss given default (1.3) 0.1 0.4 0.5 (0.3)
assumptions
At 31 December 2023 1.6 1.0 3.7 13.8 20.1
Impairment against new 12.7 — — — 12.7
lending and purchased assets
Exchange differences — — (0.1) (0.3) (0.4)
Impairment against loans (0.2) 3.9 7.1 — 10.8
transferred between stages
Loans repaid (11.2) (3.3) (0.4) (0.7) (15.6)
Impairment provision
derecognised related to — — — (0.3) (0.3)
written off loans
Change in probability of
default or loss given default (0.1) (0.2) (0.8) 0.6 (0.5)
assumptions
Derecognition of impairment
associated with assets of — — (0.1) (4.6) (4.7)
discontinued operations
At 31 December 2024 2.8 1.4 9.4 8.5 22.1
Expected Basis for Provision Net
credit Gross lines of credit carrying
recognition of and SME loans held at for expected
loss amortised cost amount
coverage expected credit credit loss
£m £m
% loss impairment £m
As at 31 December
2023
Stage 1 – Performing 2.9 12-month ECL 55.8 (1.6) 54.2
Stage 2 – 50.0 Lifetime ECL 2.0 (1.0) 1.0
Underperforming
Stage 3 – 86.0 Lifetime ECL 4.3 (3.7) 0.6
Non-performing
POCI 93.9 Lifetime ECL 14.7 (13.8) 0.9
Total 76.8 (20.1) 56.7
As at 31 December
2024
Stage 1 –- 2.8 12-month ECL 99.1 (2.8) 96.3
Performing
Stage 2 – 43.8 Lifetime ECL 3.2 (1.4) 1.8
Underperforming
Stage 3 – 90.4 Lifetime ECL 10.4 (9.4) 1.0
Non-performing
POCI 98.8 Lifetime ECL 8.6 (8.5) 0.1
Total 121.3 (22.1) 99.2
Expected Basis for Gross Provision
credit lines Net carrying
Of which is drawn FlexiPay recognition of for expected
lines of credit loss of credit amount
coverage expected credit credit loss
£m £m
% loss impairment £m
As at 31 December 2023
Stage 1 – Performing 2.8 12-month ECL 50.3 (1.4) 48.9
Stage 2 – Underperforming 52.6 Lifetime ECL 1.9 (1.0) 0.9
Stage 3 – Non-performing 93.8 Lifetime ECL 3.2 (3.0) 0.2
POCI — Lifetime ECL — — —
Total 55.4 (5.4) 50.0
As at 31 December 2024
Stage 1 – Performing 2.8 12-month ECL 97.0 (2.7) 94.3
Stage 2 – Underperforming 43.8 Lifetime ECL 3.2 (1.4) 1.8
Stage 3 – Non-performing 89.8 Lifetime ECL 9.8 (8.8) 1.0
POCI — Lifetime ECL — — —
Total 110.0 (12.9) 97.1
The risk and finance functions of the Group monitor the performance of the FlexiPay lines
of credit and SME loans held at amortised cost and calculate the ECL estimate required for
financial reporting purposes. These teams report to the Chief Financial Officer (“CFO”)
and Chief Risk Officer (“CRO”). Discussions of estimates processes and results are held
regularly at Balance Sheet Management and Impairment and Valuation Committee meetings
along with regular updates provided to the Audit Committee.
Forward-looking information and scenarios: The allowance for expected credit losses
required estimation to assess individual loans or when applying statistical models for
collective assessments based on the Group’s past experience of historical delinquencies
and loss trends, as well as forward-looking information in the form of macroeconomic
scenarios governed by an impairment committee, which considers macroeconomic forecasts
such as changes in interest rates, GDP and inflation which are considered for
incorporation into scenarios and probability weighted. These scenarios are utilised to
derive a default stress multiplier in the unstressed PD projections established from
historical experience.
Key changes to scenarios used in 2024: During the year, the business moved away from using
macroeconomic scenarios derived from US macroeconomic data (primarily GDP which correlated
well to US charge off rates) toward a focus on the UK macro economic data aligning with
the disposal of the US business.
UK-specific forecast data was obtained from a third party economics provider for three
scenarios; a baseline, upside and downside scenario. A number of data points were
obtained and considered by Funding Circle including GDP, real estate prices, unemployment
rates, among others, however unemployment held the strongest correlation to UK insolvency
rates and was determined to be more suitable under statistical modelling techniques. As a
result unemployment was used as a single factor forecast input for determining scenarios
utilised for PD stress multipliers. The scenarios used were as follows:
Macroeconomic drivers (average for the forecast 2025 2026 2027 2028 2029
year) ECL scenario
% % % % %
Upside 3.97 3.65 3.62 3.63 3.64
Unemployment rates % Base case 4.40 4.31 4.18 4.06 4.00
Downside 5.15 5.98 6.71 6.71 6.48
A sensitivity to these assumptions on the estimated ECL is disclosed within note 3.
The nature of the stress forecasts was lower than those used in the previous year where
there was a shift away from shorter, sharper stress forecast expectations associated with
sharp inflation and supply chain issues to a more “traditional” gradual but longer lasting
stress. In combination with this more muted stress multiplier derived from the scenarios
FC shifted its benchmark weighting from 70% baseline, 20% downside, 10% upside from FY
2023 to 60% baseline, 30% downside and 10% upside in 2024 because in Funding Circle’s
judgement the more subtle downside impact is more probable than the higher stress used
under the prior year’s scenarios having considered possible weightings.
Credit risk associated with other financial assets:
SME loans held at fair value through profit and loss relate to the underlying pool of SME
loans from the legacy warehouses and SPVs that have since been purchased or novated into
other Funding Circle entities, but remain held at FVTPL with the business model of holding
the loans for sale. Additionally, loans originated by the Group with the intention of
selling onwards are included in this category.
Trade receivables represent the invoiced amounts in respect of servicing fees due from
institutional investors. The risk of financial loss is deemed minimal because the
counterparties are well established financial institutions.
Ongoing credit evaluation is performed on the financial condition of other receivables
and, where appropriate, a provision for expected credit losses is recorded in the
financial statements.
Other receivables include net investment in subleases of offices representing the present
value of future sublease payments receivable. Where appropriate, impairment is recorded
where the receivable is in doubt.
Individual risk limits for banks and financial institutions are set by the Group with
reference to external rating agencies. The Group’s treasury policy has set limits and
quantities that the Group must remain within. No credit or counterparty limits were
exceeded during the year. The Group’s cash and cash equivalents split by S&P counterparty
rating were A/A- rated: £51.4 million (2023: £71.3 million), A+ or better rated: £136.3
million (2023: £150.1 million) and below A- rated: £nil (2023: £nil).
Impairment of net investment in subleases:
Certain right-of-use assets related to the US San Francisco office were sublet under a
financing sublease and were represented as net investments in subleases within other
receivables. Due to a reduction in market values since inception of the sublet, the
estimated cash flows expected on expiry of the existing sublet and expectations of further
sublet were lower and as a result an impairment of £0.8 million was recognised in the
prior year ended 31 December 2023. The impairment is disclosed in the consolidated
statement of comprehensive income within depreciation, amortisation and impairment.
18. Notes to the consolidated statement of cash flows
Cash outflow from operating activities
31 December 31 December
2024 2023
£m £m
Profit/(loss) before taxation
Continuing operations 0.8 (9.9)
Discontinued operations 8.4 (23.3)
Total operations 9.2 (33.2)
Adjustments for:
Depreciation of property, plant and equipment 3.2 4.3
Amortisation of intangible assets 9.8 12.4
Modification gain (0.4) —
Impairment of property, plant and equipment, intangible assets, 0.9 6.2
ROU assets and investment in sublease
Impairment of intangibles (exceptional item) 0.3 —
Interest payable 0.8 0.6
Non-cash employee benefits expense – share-based payments and 8.1 5.6
associated social security costs
Fair value adjustments (6.4) (8.7)
Movement in loan repurchase liability (0.1) (0.4)
Movement in other provisions 1.7 0.9
Share of gains of associates — (0.1)
ECL impairment 8.7 4.4
Profit on sale of the US subsidiary (exceptional item) (9.8) —
Recycling of foreign exchange reserve on sale of subsidiary (8.7) —
(exceptional item)
Other non-cash movements (0.2) 0.7
Changes in working capital
Movement in trade and other receivables (3.1) (13.5)
Movement in trade and other payables (26.6) 34.7
Tax paid (0.1) (0.6)
Originations of lines of credit (467.0) (230.4)
Cash receipts from lines of credit 412.3 191.5
Net cash outflow from operating activities (67.4) (25.6)
Cash and cash equivalents
31 December 31 December
2024 2023
£m £m
Cash and cash equivalents 187.6 221.4
The cash and cash equivalents balance is made up of cash and money market funds. The
carrying amount of these assets is approximately equal to their fair value. Included
within cash and cash equivalents above is a total of £37.1 million (2023: £51.8 million)
in cash which is restricted in use. Of this, £nil (2023: £1.1 million) is restricted in
use in the event of rental payment defaults and is therefore restricted in its use. £5.0
million (2023: £31.1 million) of cash is held which is restricted in use to repaying
investors in CBILS and RLS loans and paying CBILS and RLS-related costs to the UK
government. A further £32.1 million (2023: £19.6 million) of cash is held which is
restricted for use in the FlexiPay warehouse.
At 31 December 2024, money market funds totalled £136.3 million (2023: £150.1 million).
Analysis of changes in liabilities from financing activities
1 January Exchange Other non-cash 31 December
Cash flow
2023 movements movements 2023
£m
£m £m £m £m
Bank borrowings (22.6) (34.9) 0.6 — (56.9)
Bonds (23.7) 23.4 0.6 (0.3) —
Lease liabilities (19.8) 7.2 0.6 (0.6) (12.6)
Liabilities from financing (66.1) (4.3) 1.8 (0.9) (69.5)
activities
1 January Exchange Other Derecognition of 31
Cash flow non-cash liabilities related to December
2024 movements discontinued operations
£m movements 2024
£m £m £m
£m £m
Bank borrowings (56.9) (46.6) — — 1.6 (101.9)
Lease (12.6) 3.6 (0.3) (5.8) 7.5 (7.6)
liabilities
Liabilities from
financing (69.5) (43.0) (0.3) (5.8) 9.1 (109.5)
activities
19. Contingent liabilities and commitments
As part of the ongoing business, the Group has operational requirements with its
investors. At any point in time, it is possible that a particular investor may expect the
Group to purchase their loan in the event of a breach of representation or warranty,
operational errors or control issues or where agreed eligibility criteria have not been
complied with. Where a loan is purchased it is presented within SME loans held at
amortised cost on the face of the consolidated balance sheet and held at amortised cost
under IFRS 9.
In common with other businesses, the Group is involved from time to time in disputes in
the ordinary course of business. There are no active cases expected to have a material
adverse financial impact on the Group.
The Group has commitments related to undrawn amounts on issued FlexiPay lines of credit.
At 31 December 2024, there were undrawn commitments of £278.7 million (2023: £157.3
million). An expected credit loss impairment allowance is held within other provisions by
the Group of £2.7 million (2023: £1.4 million) in relation to the estimated credit losses
the Group may be exposed to on these undrawn lines of credit.
20. Subsequent events
There have been no subsequent events since the balance sheet date.
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Dissemination of a Regulatory Announcement that contains inside information in accordance
with the Market Abuse Regulation (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
══════════════════════════════════════════════════════════════════════════════════════════
ISIN: GB00BG0TPX62
Category Code: FR
TIDM: FCH
LEI Code: 2138003EK6UAINBBUS19
OAM Categories: 3.1. Additional regulated information required to be
disclosed under the laws of a Member State
Sequence No.: 378119
EQS News ID: 2096061
End of Announcement EQS News Service
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