FTSE 250 shares round-up: big losses for these two stocks

The run by Funding Circle Holdings (LSE:FCH) as one of this summer’s hottest mid-cap stocks today hit turbulence after the boss behind its turnaround in fortunes announced she planned to step down.

Lisa Jacobs told investors that the small business lending platform was in the best position it has ever been in but that now was the right time to begin the process of handing over the reins.

She took on the role in 2022 and bought £50,000 of the company’s shares within six months of launching her strategic overhaul, which sought to expand the reach and range of products.

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The investment was made at a price of 36.95p, which compared with 440p when Funding Circle joined the stock market in its £1.5 billion IPO in September 2018.

The shares closed yesterday’s session at 230p, having jumped by 67% over the last three months, to leave Jacobs with a paper profit on those initial dealings of £250,000.

City firm Shore Capital said today that Jacobs had overseen a highly successful turnaround that had transformed Funding Circle into a profitable and cash-generative business.

The company has extended more than £18 billion in credit to over 135,000 UK businesses since 2010, including a 52% increase in the first six months of this year to £1.7 billion.

Shore added: “While the transition timetable is lengthy, Lisa is highly regarded by both us and the market and we expect the announcement to be viewed negatively.”

The shares slumped 25.5p to 204.5p, not far from the 192.8p seen on 16 July after the company issued a strong update in advance of today’s half-year results. They peaked last month at 245p.

The sharp valuation reverse came even though Funding Circle posted a record revenue performance of £138.2 million and fourfold growth in pre-tax profits to £24.1 million.

The company, which connects small and medium enterprise (SME) customers with investors who want to lend, also upgraded its full-year guidance to more than £255 million in revenue and more than £40 million in pre-tax profit.

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Looking further out, it continues to target 2029 revenues of between £300 million and £350 million, and a low-to-mid 20s percentage profit margin compared with today’s reported 17.4% and the 6.5% of a year earlier.

Jacobs said: “The opportunity in front of us remains substantial. Economic growth starts with small businesses - every day, entrepreneurs across the UK are investing, hiring and innovating, and Funding Circle exists to help them do exactly that.

“UK small businesses remain underserved by traditional lenders, and our technology, data capabilities and continued product innovation mean we are well-placed to meet their needs.”

Today’s figures showed Funding Circle’s core Term Loans business grew originations by 43% to £1.05 billion, which as a highly cash-generative operation resulted in increased investment behind its FlexiPay and Card products.

This part of the business lifted transactions by 71% to £640 million in the six months.

Unrestricted cash increased by 35% to £136.5 million, while Funding Circle pledged to launch a fresh share buyback of up to £25 million. This will take the sum since March 2024 to £100 million.

Shore noted that last night’s share price was the equivalent to 22 times forecast 2026 earnings, falling to 12 times by 2029.

With the upgraded guidance broadly in line with existing City expectations and the CEO transition also creating an additional source of uncertainty, Shore placed its Buy recommendation under review.

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Elsewhere on the FTSE 250 fallers board, Johnson Service Group (LSE:JSG) dropped by 9.3p to 134.4p after the textile rental and laundry service reported that the seasonal summer uplift in its hotels, restaurants and catering division had been more modest than originally anticipated.

It expects that softer trading will persist through the remainder of 2026, although it still expects to report another year of overall progress and to achieve its targeted adjusted operating margin of at least 14%.

The hospitality division accounted for about 70% of the company’s broadly flat first-half revenues of £258 million, with the rest from its workwear unit. A continued focus on operational efficiencies and cost management lifted adjusted profits by 1.6% to £25.3 million.

Peel Hunt trimmed its profit forecasts for 2026 and the following two years by a range of 1%-2% but reiterated its Buy rating and 178p target price.

It added: “We believe the business is in decent shape: well invested, with competitive advantages of scale, while retaining significant balance sheet optionality.”

The group intends to pay an interim dividend of 1.8p a share on 6 November, in line with full year cover of 2.5 times earnings and representing a rise of 12.5% on a year earlier.