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Peer2Peer Finance News | August 25, 2019

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Motor acquisitions drive RateSetter further into the red

Motor acquisitions drive RateSetter further into the red
Marc Shoffman

RATESETTER has said it is making progress towards becoming “cash flow positive” after revealing a £26.7m loss in its latest annual results.

The peer-to-peer lender posted a 47 per cent rise in revenues to £34.3m for the year ended 31 March 2018, but its losses widened, due to the fallout from its wholesale lending “interventions” in 2017.

RateSetter recorded a one-off goodwill impairment of £13.5m in its latest annual results, due to the acquisition of two former wholesale lending partners in May 2017 after they fell into financial difficulty.

RateSetter purchased the operating subsidiaries of the Vehicle Trading Group in May 2017 after the company went into administration because it had taken on too much debt.

The companies, Vehicle Credit, which makes loans to consumers to buy cars. and Vehicle Stocking, which makes loans to motor dealerships to buy cars, have been integrated into RateSetter’s motor finance division.

RateSetter said it has “rapidly reduced operating losses” during the current financial year, having recently completed a £15m equity raise that valued the platform at £261m.

The firm said the fundraise reflected the progress being made towards becoming cash flow positive.

Read more: RateSetter backtracks on Rolling Market rate changes

“We will look back on 2017 as a formative year,” Rhydian Lewis (pictured), chief executive of RateSetter, said.

“Building a new asset class and disrupting the status quo was always bound to be a bumpy journey. The key is to emerge stronger, and this is exactly what we have done.

“From a customer perspective, it was another good year and the number of active RateSetter investors has already increased to 50,000 in the current year.

“This number continues to increase as our reputation grows and the RateSetter brand becomes more widely known as a low risk way for people to earn more on their money, including in their ISA.”

Read more: RateSetter hits £100m IFISA milestone

This is the second time that RateSetter’s annual results have been impacted by its wholesale lending interventions. Last year, the firm took a £14m hit from acquiring Adpod, a struggling advertising company that had borrowed from one of RateSetter’s former wholesale lending partners.

RateSetter made the decision to absorb the losses from the loan rather than use the provision fund.