A goodwill impairment pushed pre-tax losses for RateSetter down to £23m in the year ending March 2017, despite revenue growth of 38% to £23.7m.
The company, which launched a consumer vehicle and commercial assets HP offer this year, saw a rise of 36% in the number of lenders and 27% of borrowers. However, operating losses of £9.2m were further weighed down by a £14.1m goodwill impairment on a loan to advertising company Adpop.
In 2015 Vehicle Trading Group, a company operating in motor finance for consumers and dealerships, used a wholesale facility from RateSetter to lend £12m to Adpop. Both Vehicle Trading Group and Adpop subsequently went into financial difficulties, and RateSetter then bought the two companies.
In Adpop’s case, however, it said that “lending of this amount to a single business was outside RateSetter’s credit policy and was an exceptional case, [so] we believed it was right for RateSetter as a company to intervene and absorb any losses from this loan.”
RateSetter thus decided to back Adpop’s repayments of third party loans, preventing its provision fund from absorbing the hit, as it normally would in case a borrower defaults.
Rhydian Lewis, RateSetter chief executive officer and co-founder, said: “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.
“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.
“Since March 2017, our core business has continued to grow well. We have passed the milestone of £2bn total lending and returned over £85m in interest to our growing number of lenders. We were also pleased to achieve full authorisation from the Financial Conduct Authority (FCA) in October.
He added that the he was expecting to return to profitability within 2018.