FreeAgent’s maiden results show surge in revenues

FreeAgent chief Ed Molyneux said the second half has 'started positively'. Picture: Contributed
FreeAgent chief Ed Molyneux said the second half has 'started positively'. Picture: Contributed
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Accounting software specialist FreeAgent is planning to ramp up its headcount after revealing a surge in revenues with its first set of results as a listed company.

The Edinburgh-based firm, which floated on London’s Alternative Investment Market (Aim) last month, said revenues for the six months to the end of September jumped 36 per cent to £3.6 million, helping gross profits rise 38 per cent to £3m.

We’ve seen the technology jobs market really flourish over the last couple of years

Ed Molyneux

READ MORE: Edinburgh’s FreeAgent valued at £34.1m in market debut

However, pre-tax losses widened to £1.3m, from £433,000 in the same period last year, which the company said reflected investment in customer acquisition, employees’ share options costs of £512,000 and unrealised losses on a US dollar loan facility of £200,000.

FreeAgent develops accounting software aimed at the UK’s five million “micro-businesses” and has almost 52,000 subscribers, up 18 per cent on a year ago.

The company currently employs more than 100 people, and chief executive Ed Molyneux said it was planning to take on “significantly” more software engineers in Edinburgh during the first half of next year.

He told The Scotsman: “That’s going to be an interesting challenge for us. We’ve seen the technology jobs market really flourish over the last couple of years, with businesses like Skyscanner and FanDuel doing a lot of hiring, but engineers are in short supply.”

Molyneux, a former RAF fighter pilot, said that FreeAgent’s initial public offering (IPO) was a “significant milestone” for the firm, which he co-founded in 2007.

He added: “The acceleration of growth into our accountancy practice channel has continued to progress well for us, and that’s still our fastest-growing market. Accountancy practices are really starting to embrace digital and the cloud as a way of doing business with their clients.”

The company is also launching a commercial collaboration with a high street bank, the name of which is being kept under wraps for now, in a move aimed at winning more sole trader and micro-business customers.

“By focusing on this part of the market we think we’re doing something a bit different,” Molyneux said. “Some 95 per cent of all businesses in the UK are these micro-businesses with fewer than ten employees.”

FreeAgent’s growth to date has all been organic, and Molyneux said that strategy was set to continue, adding: “In the past, we’ve seen companies make acquisitions and glue things together and I think what’s suffered is the customer experience. We’re keen to accelerate our product capability by building things ourselves primarily.”

He added that the second half of the company’s financial year “has started positively and we are confident we will report further significant progress within our full-year results, consistent with market expectations”.

FreeAgent raised £8m through its IPO, with a further £2.7m going to selling shareholders. It used £2.9m of the flotation proceeds to repay its debt facility, leaving net cash of £5m on its balance sheet after paying of the costs of admission to Aim.

“The repayment of the loan facility with the placing proceeds and the new investment from the IPO has significantly strengthened our balance sheet and provides us with the opportunity to further invest in customer acquisition activities and product development to enhance our product offering,” Molyneux said.

“As a newly-listed public company, we are especially pleased to report strong performance in our first set of interim results.”

Analysts at house broker N+1 Singer said: “The group will be driving continued growth by investing in customer acquisition, particularly in the key accountancy practice channel and by investing in product development as it looks forward to be strongly positioned for the Making Tax Digital agenda from HMRC.”

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