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Shares of Funding Circle Holdings PLC (OTC:FDCHF) soared on Thursday following the commercial lender's announcement of significantly improved financial performance, signaling the start of a positive profit trend.
Significant Profit Turnaround
According to Deutsche Bank, Funding Circle reported a pre-tax profit of £0.5 million for the first half of the year, a notable turnaround from the £7.4 million loss in the same period last year. This achievement marks an inflection point for the company, arriving sooner than anticipated.
Future Profitability and Cash Flow
Deutsche Bank indicated that this shift to profitability is expected to continue, with further growth in profits and free cash flow anticipated in the near future. Analysts from Stifel’s KBW had previously forecasted a £5 million loss for the first half, but the firm exceeded these expectations, particularly through better-than-expected fee income from its FlexiPay product.
Surge in Transactions and Revenue Growth
The FlexiPay product saw transactions increase from £90 million to £226 million during the first half of the year, contributing to a 32% rise in revenue, reaching £79.1 million. Additionally, growth in term loan originations contributed to a higher-than-expected unrestricted cash position for Funding Circle.
Share Buyback Program and Shareholder Benefits
Deutsche Bank also highlighted that the company’s new £25 million share buyback program signals a commitment to delivering shareholder value. KBW reaffirmed its ‘outperform’ rating and set a share price target of 115p, reflecting the firm's strong performance and future potential.
