FreeAgent eyes '˜positive progress' as revenues soar

FreeAgent chief Ed Molyneux is eyeing 'further positive progress' for the Edinburgh software firm. Picture: ContributedFreeAgent chief Ed Molyneux is eyeing 'further positive progress' for the Edinburgh software firm. Picture: Contributed
FreeAgent chief Ed Molyneux is eyeing 'further positive progress' for the Edinburgh software firm. Picture: Contributed

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Online accounting software developer FreeAgent today revealed a 41 per cent jump in revenues as it posted its first set of full-year figures since floating.

The Edinburgh-based financial technology, or fintech firm, which was set up in 2007 and develops accounting software aimed at the UK’s five million “micro-businesses”, said revenues for the year to the end of March rose to £8 million, up from £5.7m the previous year.

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However, pre-tax losses more than doubled, widening to £3m, compared with £1.3m a year ago, which it attributed to “planned investments in customer acquisition”.

That investment saw the number of FreeAgent’s accounting practice clients swell to more than 33,000, against 16,705 last time, while its direct client base rose by 11 per cent to 17,500.

“Demand for FreeAgent is robust and the environment for micro-businesses in the UK remains attractive,” the company said, adding that it expects “further positive progress to be made in 2018”.

Chief executive and co-founder Ed Molyneux, a former RAF fighter pilot, said “2017 was a very good year” for the company, which joined London’s Alternative Investment Market in November.

He told The Scotsman: “Customer acquisition spend is a great investment for us to be making and putting our money to work, and of course we did raise £8m in new money at the IPO, so you’d expect us to be deploying that money for returns just now, hence the widening losses.”

Under what is described as the biggest change to UK tax administration for a generation, HM Revenue & Customs (HMRC) is set to start implementing its “making tax digital” initiative next year, requiring firms to manage their tax affairs digitally.

Molyneux said: “Everyone will be included by 2020. When we think about our market, those micro-businesses with fewer than ten employees – which make up 95 per cent of all businesses in the UK – over half of them are using either spreadsheets or, slightly worryingly, just paper to manage their finances.

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“The new regime requires them to report to HMRC quarterly and digitally with business updates, so if you’re using paper that just becomes impossible. We’re in the right part of the market to help them meet their obligations.”

FreeAgent has seen its headcount grow to 125, compared with 93 in March 2016, and has taken on extra space at its Fountainbridge head office to accommodate further growth.

House broker N+1 Singer said the company’s results “either met or beat” City expectations and said it was confident of “further value creation”.

It added: “The group’s outlook statement is positive. Activity levels in the early weeks of the new financial year have been positive and the pipeline of new business opportunities remain strong.”

In January, FreeAgent landed a deal to offer its services to customers of Royal Bank of Scotland and its NatWest arm, having fought off competition from more than 30 rivals.

“RBS clearly sees this as a way of providing innovation to their customers as banking and accounting data becomes increasingly integrated,” said N+1 Singer.