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Software firm FreeAgent to raise £8m in flotation

Ed MolyneuxFreeAgent, the Edinburgh-based accounting software company, has revealed plans to float on the stock market.

It will join the Alternative Investment Market next month through a placing of shares with institutional investors. No values or details of the sum to be raised were given in today’s statement.

However, sources say it is looking to raise £8 million through the flotation which would give it a market capitalisation of between £31m and £35m.

FreeAgent, which was set up in 2007, has raised about £9m privately through a combination of equity and debt. It wants to use the proceeds of the IPO to accelerate the development of its products “with a focus on the digital tax agenda”, grow its customer base and to repay existing debt.

The company is lossmaking, but has a target of moving into profit by the end of 2018.

Chief executive Ed Molyneux (pictured), a former Royal Air Force pilot, has a near-12% stake which will be worth about £4m.

He said: “With five million micro-businesses in the UK, FreeAgent is well positioned to transition micro-businesses away from relying on spreadsheets to manage their finances to taking a more automated and digital approach to their accounting.

“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.”

He said he was confident the company was in a strong position to turn to the public markets.

“We are always alive to what the market conditions are. But there is significant interest from investors. On its own merits, there is a very strong case for us doing an IPO.”

Mr Molyneux, who sits on the board of fellow Edinburgh tech company Administrate, claimed the company was confident that demand for its services would remain strong amid a rapid increase in the number of self-employed Britons.

The company has appointed Andy Roberts as non-executive chairman. Mr Roberts led Innovation Group, the insurance software specialist, from 2009 until its £500m sale to investment group Carlyle earlier this year. N+1 Singer is acting as nominated adviser and sole broker to FreeAgent on its float plans.

FreeAgent targets sold traders and micro-businesses with fewer than ten employees. It has about 52,000 active subscribers, against 32,000 three years ago, and said its revenues have grown at a compound annual rate of 34% over the past two years, with annualised committed monthly recurring revenues standing at £7.7 million at the end of September.

Its plan to float comes less than a week after Misys, the UK financial software group, abandoned plans for an IPO after it failed to convince enough investors to buy in.

Misys blamed the recent market turbulence that has seen a number of floats either pulled or cut in value.

There have been only 41 IPOs in London this year, the lowest number since 2012, and the value of the companies that went ahead with float plans in the third quarter is down 42% compared with last year, according to Henderson Global Investors.

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