RateSetter sees losses grow after tough year, now eyes return to profitability

By Ryan Weeks on Wednesday 6 December 2017

Alternative Lending

The platform’s revenues and loans under management have seen significant growth.

The platform’s revenues and loans under management have seen significant growth.

RateSetter has published results for the year 2016-17, highlighted by a pre-tax loss of £23.3m, up from a loss of £5.3m in the previous year. A “goodwill impairment” arising from a former £14m wholesale loan gone awry contributed a significant proportion of the company’s losses. Excluding this impairment, the company's operating loss for the year was £9.2m, of which £7.8m relates to the core RateSetter business. The extra £1.4m represents the cost of having run Adpod (the recipient of the £14m loan), which was taken over by RateSetter in 2016. 

The peer-to-peer platform otherwise enjoyed significant growth in the period, with revenues at £23.7m, up 38 per cent from 2015-16. Its loans under management grew 23 per cent, from £581m to £714m, while the platform also saw significant growth in active lender and borrower numbers.

RateSetter faced what might fairly be termed a crisis moment in the summer of this year, when it was forced to offer a free sell-out option to its lenders, following the publication of new information about certain of its former wholesale lending partners. In an exclusive interview with AltFi, RateSetter boss Rhydian Lewis (pictured) spoke of how the platform opted to “lance the boil” after realising its mistake.

Lewis seems to have steadied the ship since then. RateSetter raised another £13m in May from investors Woodford Investment Management and Artemis – a round which valued the company at £195m. Soon after the company appointed City heavyweight Paul Manduca as non-executive chairman, and then received full authorisation in October.

“The last year was an important one for RateSetter: we showed that we are a resilient business, with the strength and maturity to deal with challenges and emerge stronger as a result,” said Lewis, echoing the tone of his earlier interview with AltFi.

“During the year, we decided to focus on higher quality credit. Our view is that durability through a cycle is the key test and, while lower quality credit is still valid, it is clearly more vulnerable in a downturn.”

Lewis further stated his confidence that the investment made in the business over the past two years will provide a strong foundation for growth in 2018. Looking ahead, he forecasted both further growth and profitability.

“We will launch our ISA before the end of the tax year and expect to attract £500m within a year. We expect to return to profitability next year.”

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