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magazineFreeAgent looks to the small to get bigger
Statistics suggest 90% of the UK’s 5.5m businesses employ less than 10 staff and half of them are still using basic spreadsheets or even paper, pen and mental arithmetic to run their accounting and tax planning functions.
Accounting software and mobile applications provider FreeAgent (FREE:AIM) sees a rich opportunity in targeting business which still use antiquated methods of adding up the numbers.
Having floated on AIM on 16 November at 84p, the company provides micro-businesses with a cloud-based accounting tool kit that provides ‘real-time’ tax liability tracking, video training, call and webchat support and more.
Most of the big accounting software firms concentrate on larger companies, leaving FreeAgent to mop up with its pay-monthly suite.
Using channel partners has been a very successful growth strategy to date. The company is also developing a similar relationship with an undisclosed high street bank.
Half year results to 30 September show strong revenue growth, up 36% to £3.6m, and soaring subscribers, 18% higher at 51,865.
It is investing heavily to power that growth. Administration costs rose two-thirds to £4.2m leaving a £1.1m operating loss.
Analysts at N+1 Singer see positive earnings before interest, tax, depreciation and amortisation (EBITDA) of £0.9m in the year to 31 March 2017, and a maiden pre-tax profit of £1.5m the year after.
The key will be managing costs while feeding the growth engine and keeping customer churn (currently 1.5%) under control. One to watch at 85.5p. (SF)
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