Edinburgh accounting firm AIMing to raise £8m with flotation

FreeAgent has developed cloud-based bookkeeping software for micro-businesses and now intents to apply for the admission of its entire issued and to be issued share capital to trading on the junior AIM market.

Pricing of shares is still to be determined, though FreeAgent is reported to be looking to raise around £8 million.

The firm said the listing will raise funds to accelerate product development with a focus on the digital tax agenda and scale-up customer acquisition “with a particular emphasis on large accountancy practice customers”.

The fund raise will also allow FreeAgent to pay down its existing debt.

Andy Roberts, who led The Innovation Group Plc before its £500 million sale to Carlyle Group this year, has joined FreeAgent as non-executive chairman prior to the public offering.

Last month FreeAgent rolled out a soft launch of a new commercial collaboration with a major UK bank, although the lender in question has not been disclosed.

The firm’s latest accounts, covering the 2016 year to March 31, show annual recurring revenue rose 35 per cent in the year to £7 million.

FreeAgent said since the March year end, recurring annual revenues have risen to £7.7 million.

The company noted pre-tax losses of £1.32 million in the 2016 year, up from a loss of £1.23 million in 2015.

The business completed a $5 million (£4.1 million) refinancing deal in February 2015 and ended the 2016 financial year with loans and borrowing totalling $2.47 million (£2.03 million).

Last year FreeAgent raised £1 million from a crowdfunding drive which saw it issue 101,535 new ordinary shares.

FreeAgent said micro-businesses – those with fewer than 10 employees - account for 95 per cent of the UK’s 5.5 million businesses and the addressable market for micro-business financial management software is worth “nearly £500 million annually”.

Its SaaS software allows business users and their accountants to manage invoice and expense management, VAT and payroll as well as self-assessment tax return filings to HM Revenue and Customs.

FreeAgent’s software is offered via subscription, and the company notes as of July 2016 it had 52,000 subscribers, up from 32,000 in July 2013.

Ed Molyneux, founder and chief executive of FreeAgent, said: “We believe that the proposed Placing and Admission to AIM will provide the springboard necessary to help us accelerate our growth and to attract more customers through both our direct and accountancy practice channels, introducing the benefits of FreeAgent to thousands of other businesses.”

Nplus1 Singer Advisory LLP is acting as Nominated Advisor and sole Broker to FreeAgent.