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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Freeagent Hdg | LSE:FREE | London | Ordinary Share | GB00BDFVDY36 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 120.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMFREE
RNS Number : 3938Y
FreeAgent Holdings PLC
05 December 2017
FreeAgent Holdings plc
("FreeAgent", the "Company" or the "Group")
Interim results for the six months ended 30 September 2017
FreeAgent Holdings plc, a provider of cloud-based Software-as-a-Service ("SaaS") accounting software solutions and mobile applications designed specifically for UK micro-businesses, today announces its unaudited interim results for the six months ended 30 September 2017.
Financial Highlights
-- Revenue increased by 28% to GBP4.6m (H1 2017: GBP3.6m) -- Gross profit up 22% to GBP3.7m (H1 2017: GBP3.0m) -- Gross profit margin 80% (H1 2017: 84%) -- Adjusted EBITDA loss GBP0.3m (H1 2017: loss GBP0.4m), as expected
-- Net loss of GBP1.0m, reflecting planned growth in further customer acquisition and support costs and increased investment in product development (H1 2017: GBP1.3m)
-- Net cash of GBP3.4m as at 30 September 2017 (H1 2017: GBP0.6m)
-- Residual lifetime value of future subscriptions from existing customer base increased by 15% to GBP44.0m (H1 2017: GBP38.1m)
-- Good revenue visibility maintained with ACMRR up 17% at GBP9.0m (H1 2017: GBP7.7m)
Operational & Strategic Highlights
-- Accounting practice clients increased to 37,600 (H1 2017: 29,485) -- Direct clients increased to 18,247 (H1 2017: 16,724)
-- Strategic partnership with the RBS Group (RBS) building momentum with RBS customer portal activated during September
o Initial RBS monthly subscribers 571 (H1 2017: nil)
o Post period-end: a further c1,200 monthly subscribers were added. Total c1,800 as at 4 December 2017
-- Customer Net Promoter Score (NPS) remained high at 72
Commenting on today's results, Ed Molyneux, Chief Executive, said:
"The first half has seen FreeAgent report continued strong revenue growth with an evolving channel mix. Growth has continued in both our direct sales and practice sale channels and, whilst the rate of growth in our practice sales has been tempered by changes to IR35 'off-payroll' legislation which has affected public sector contractors, the underlying market drivers remain intact as accounting professionals transition towards digital accounting to cater for all their business requirements.
Considerable progress has been made in developing our strategic partnership with the RBS Group, with the Bank's customer portal going live towards the end of the financial period and initial monthly subscriptions by early adopters in line with our expectations. RBS' commitment to the project is evidenced by significant sector and financial support, and the endorsement of senior RBS management. We look forward to reporting further progress with the rollout in the second half."
The glossary on page 5 contains definitions and basis of calculation of SaaS metrics.
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.
FreeAgent Holdings plc via FTI Consulting, LLP Ed Molyneux, CEO Guy Mitchell, Interim CFO N+1 Singer +44 (0) 207 496 3057 Sandy Fraser, Jen Boorer (Corporate Finance) FTI Consulting, LLP +44 (0) 203 727 1000 Matt Dixon, Jamie Ricketts, Emma Hall
Chief Executive's Statement
During the six-months ended 30 September 2017, the Group continued to show strong growth in overall revenue. In H1 2018 revenue was GBP4.6 million, representing a 28% increase compared to H1 2017 (GBP3.6M). Gross margins remained high at over 80% (H1 2017: 84%).
As at 30 September 2017, the Group had a total of 61,037 subscribers, an increase of 18% over H1 2017 (H1 2017: 51,865). The Group's growth in the period was underpinned by continued positive business metrics.
The best measure of financial value created by the business during the period is the movement in the estimated residual lifetime value of future subscriptions from our existing customer base. At the period end this was GBP44.0m (H1 2017: GBP38.1m) which is comprised of GBP21.3m (H1 2017: GBP18.6m) from our direct customer base and GBP22.7m (H1 2017: GBP19.5m) from our accountancy practice channel.
Churn remained low in the direct channel at 1.5% (H1 2017: 1.5%), but increased in the practice channel due to the impact of IR35 legislation. This created a one-off impact for those practices supporting contractors supplying the public sector, which we expect will reduce over time on the assumption that future underlying churn rates will reflect our historic experience. As a result, churn in the practice channel was 2.9% (H1 2017: 2.0%).
Importantly, all SaaS businesses need to demonstrate healthy customer acquisition economics, as measured by LTM/CAC, defined as the customer acquisition cost ("CAC") calculated per customer and compared to the lifetime margin expected to be generated from that customer ("LTM").
Using churn rates to approximate LTM, as we have reported previously, the Group achieved LTM/CAC ratios of 2.8x (H1 2017: 3.8x) for direct customers and 1.9x (H1 2017: 4.6x) for accountancy practice clients, reflecting the one-off spike in practice channel customer churn noted above.
On an alternative basis, using Acquired Residual Lifetime Value, which we are now able to directly calculate, the Group achieved LTM/CAC ratios of 3.2x for direct customers and 3.3x for accountancy practice clients. We believe this calculation more accurately reflects the economics of acquiring new customers and we intend to track both measures going forward.
Annualised Committed Monthly Recurring Revenue ("ACMRR"), which includes committed new customer subscriptions during the next 12 months in accordance with contracts agreed with accountancy practice customers, increased to GBP9.0 million as at 30 September 2017, up 17% on H1 2017 (GBP7.7m).
Average revenue per user ("ARPU"), derived by dividing monthly recurring revenue by the number of active subscribers within the relevant channel at any given point in time, was on average GBP17.96 (H1 2017: GBP17.63) in the direct channel and GBP9.92 in the practice channel (H1 2017: GBP10.86) during the six-month period.
Strategy and New Revenue Channels
FreeAgent's vision is "Making businesses happier and more successful by putting them in control of their finances."
FreeAgent remains well positioned to scale and develop in the following ways:
-- Growing the core business with a strict focus on UK micro-businesses and their banks and accountants
-- Providing a premium, differentiated product experience -- A continued focus on innovation
FreeAgent has made progress in the first half against the strategic levers noted above, as outlined at the time of IPO.
FreeAgent's revenue is generated through direct sales, indirectly through accountancy practices and through the banking channel, including a developing strategic partnership with RBS.
Growth in the direct sales channel remains buoyant and we continue to see a good return on the investments we make in our customer acquisition strategies. A number of tactics are employed, including tried-and-tested digital marketing (pay-per-click advertising, content-driven marketing etc). We are also building on our ability to analyse and segment customer behaviour, thereby seeking to increase conversion rates and further drive the growth of this channel.
Accountancy practice channel revenues continued to grow in the period, although this growth was tempered due to the effect on public sector contractors of changes in the IR35 legislation. This impacted those accountancy practice customers who provide Personal Services Company (PSC) support for contractors supplying public sector organisations. Despite this specific challenge, the practice channel still represents a significant opportunity for the Group to gain market share. It is in this context that we continue to drive thought leadership and awareness of the benefits of digitisation within the accountancy market. FreeAgent remains at the forefront in supporting accounting professionals as they move towards cloud accounting to cater for all of their business finance requirements and we will look to maintain and build our market presence in this important channel.
Our strategic relationship with RBS (incorporating the Royal Bank of Scotland and NatWest) continues to grow from small beginnings earlier in 2017, when FreeAgent was selected ahead of all of our competitors to supply an integrated banking-accounting proposition for RBS customers. Since that time FreeAgent and the Bank have together engaged in wide-ranging activities to integrate systems and create roll-out processes. In the six months ended 30 September 2017, GBP0.26 million of revenues were generated from advanced integration activities specifically for RBS and this revenue stream is expected to continue in 2018 as we enhance our offering for RBS business banking customers.
RBS's positive engagement with FreeAgent is evidenced by significant sector and financial support, and the endorsement of senior RBS management. Although in the early stages of rollout, with the Bank's customer portal activated shortly before the end of the financial period, early customer adoption rates have been very encouraging. 571 monthly subscribers were recognised at 30 September 2017 and more than 1,200 were added post period-end, now totalling c1,800 as at 4 December 2017. Looking ahead, we expect to deepen our partnership with this important customer as FreeAgent is introduced on a progressive basis to the Bank's c 665,000 strong micro-business customer base.
One of the primary drivers of both accounting practice and the wider banking channel's interest in FreeAgent is the forthcoming transition to a digital tax regime - HMRC's Making Tax Digital (MTD) agenda. Despite a softening in the original highly-ambitious timetable for delivery, work continues apace at both HMRC and with software vendors to support the necessary new interfaces and processes. In April 2019 those customers filing VAT returns will do so within the new MTD system, and from 2020 onwards it is highly likely that other areas of business tax will follow suit. FreeAgent is exceptionally well positioned to help businesses manage this transition smoothly, and similarly, despite the delayed timescales, we are seeing accountants and banks alike increasingly keen to support their clients' migration to digital systems.
Even in advance of MTD, our strategy of differentiation drives us to deliver a fully-integrated compliance solution for our customers - everything from time-slips to tax returns, and to continue to invest in simplifying our customers' lives and helping them be more successful with their digital accounting. As the final piece of this compliance solution, during the second half FreeAgent will become the first accounting software provider to launch the integrated digital filing of corporation tax and statutory accounts, which will significantly streamline the compliance process for businesses and their accountants alike.
To maintain this pace of strategic innovation, we have continued to invest in staff, systems and processes during the period. We have successfully attracted talent accordingly and have strengthened our team since IPO: employee headcount (131 employees) has increased by 22% on H1 2017 (H1 2017: 107 employees).
Current Trading and Outlook
FreeAgent is now operating successfully across three complementary market channels (direct, practice and banking) and our cash resources will be deployed across further functionality advances and specific customer acquisition strategies to service these markets, in line with our stated strategy.
The Group will also continue to explore with RBS opportunities for adding further value to the Bank and its customers in terms of additional functionality, particularly around data insights and open banking.
Operating costs have grown in line with management expectations as the Group continues to consolidate and grow market share through a land, expand and retain strategy. Our balance sheet is strong with net cash balances at the period end of GBP3.4m and we anticipate monthly EBITDA break-even towards the end of calendar year 2018.
We expect to report further strategic progress and solid business growth during the second half, building on the achievements of the first six months of the year.
Ed Molyneux
Chief Executive
5 December 2017
Glossary
Subscriber: Subscriber means each unique subscription by an accounting partner, an end user or a financial institution.
ACMRR: Annualised Committed Monthly Recurring Revenue represents actual monthly recurring revenue at 30 September 2017 multiplied by 12, plus any incremental revenue committed from accounting partners within the next 12 months. Accordingly, it provides a 12-month forward view of revenue.
ARPU: Average revenue per user is calculated as monthly revenue at 30 September 2017 divided by subscribers at that time.
Lifetime Value (LTV): LTV is the revenue expected from a subscriber over the lifetime of that subscriber. This is calculated by taking the average subscriber lifetime multiplied by ARPU. The residual LTV is the total LTV to be collected from all existing subscribers across their expected lifetimes.
Lifetime Margin (LTM): LTM is the gross margin expected from a subscriber over the lifetime of that subscriber. This is calculated by taking the average subscriber lifetime multiplied by ARPU multiplied by the gross margin percentage.
CAC: Customer acquisition costs including sales and marketing activities.
H1 2017: Is the six-months ended 30 September 2016
H1 2018: Is the six-months ended 30 September 2017
INDEPENT REVIEW REPORT TO FREEAGENT HOLDINGS PLC
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2017 which comprises the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated statement of cash flows and the notes to the interim financial statements.
We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual financial statements having regard to the accounting standards applicable to such annual financial statements.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the interim financial report based on our review.
Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity", issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial statements for the six months ended 30 September 2017 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.
BDO LLP
Chartered Accountants and Registered Auditors
Edinburgh
United Kingdom
5 December 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Consolidated statement of comprehensive income
For the 6 months ended 30 September 2017
Hot Features
Premium
Unaudited Unaudited
6 months 6 months
ended ended
30 Sep 30 Sep
17 16
GBP'000 GBP'000
Revenue 4,612 3,606
Cost of sales (915) (578)
Gross profit 3,697 3,028
Administrative expenses (4,605) (4,154)
Loss from operations (908) (1,126)
Finance expense (50) (188)
Loss before tax (958) (1,314)
Tax 4 -
Loss for the period (954) (1,314)
Other comprehensive income
Items that will be reclassified
subsequently to profit
or loss:
Exchange differences
on translation of foreign
operations - -
Total other comprehensive
income - -
----------- -----------
Total comprehensive loss
for the period
attributable to shareholders
of the parent (954) (1,314)
=========== ===========
Loss per share attributable
to the ordinary equity
holders of the company Pence Pence
Basic and diluted loss
per share (2) (22)
Consolidated statement of financial position
As at 30 September 2017
Unaudited Unaudited
30 Sep 30 Sep
17 16
GBP'000 GBP'000
Non-current assets
Property, plant and equipment 1,308 675
Intangible assets 1,805 1,924
----------- -----------
3,113 2,599
Current assets
Trade and other receivables 1,111 780
Corporation tax receivable 35 50
Cash and cash equivalents 3,439 631
4,585 1,461
Total assets 7,698 4,060
=========== ===========
Non current liabilities
Bank borrowings - (1,875)
Long term provisions (177) (100)
----------- -----------
(177) (1,975)
Current liabilities
Trade and other payables (2,933) (1,804)
Provisions - (39)
Bank borrowings - (650)
----------- -----------
(2,933) (2,493)
Total liabilities (3,110) (4,469)
NET ASSETS / (LIABILITIES) 4,588 (408)
=========== ===========
Issued capital and reserves
attributable to owners of
the parent
Share capital 407 307
Share premium 13,057 5,883
Share based payment reserve 364 1,112
Foreign exchange reserve (10) (10)
Retained earnings (9,230) (7,700)
TOTAL EQUITY 4,588 (408)
=========== ===========
Consolidated statement of changes in equity
For the 6 months ended 30 September 2017
Share Share Share Foreign Retained Total
capital premium based exchange earnings equity
payment reserve
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
31-Mar-16
(audited) 1 6,189 656 (10) (6,442) 394
Loss for
the period - - - - (1,314) (1,314)
---------- ---------- ---------- ----------- ----------- ----------
Total
comprehensive
income for
the period - - - - (1,314) (1,314)
Share based
payment charge - - 512 - - 512
Issue of
share capital
(bonus issue) 306 (306) - - - -
Transfer
- share option
leavers - - (56) - 56 -
Issue costs - - - - - -
---------- ---------- ---------- ----------- ----------- ----------
30-Sep-16
(unaudited) 307 5,883 1,112 (10) (7,700) (408)
31-Mar-17
(audited) 407 13,048 286 (10) (8,276) 5,455
Loss for
the period - - - - (954) (954)
---------- ---------- ---------- ----------- ----------- ----------
Total
comprehensive
income for
the period - - - - (954) (954)
Share based
payment charge - - 78 - - 78
Issue of
share capital - - - - - -
Exercise
of share
options - 9 - - - 9
---------- ---------- ---------- ----------- ----------- ----------
30-Sep-17
(unaudited) 407 13,057 364 (10) (9,230) 4,588
Reserve Description and purpose
Share capital Nominal value of issued shares
Share premium Amount subscribed for share
capital in excess of nominal
value less associated costs.
Share based payment The share based payment reserve
reserve represents equity settled share
based employee remuneration
until such share options are
exercised.
Foreign exchange reserve The foreign exchange reserve
represents the difference arising
on the translation of the assets
and liabilities of the overseas
subsidiary company into the
presentational currency of
the group.
Retained earnings All other net gains and losses
not recognised elsewhere.
Consolidated statement of cash flows
For the 6 months ended 30 September 2017
Unaudited Unaudited
6 months 6 months
ended ended
30 Sep
30 Sep 17 16
GBP'000 GBP'000
Cash flows from operating
activities
Loss for the period (954) (1,314)
Adjustments for:
Depreciation of property,
plant and equipment 209 105
Amortisation of intangible
fixed assets 318 332
Income tax credit 4 -
(Gain) on disposal of
fixed assets - (2)
Share based payment expense 78 512
Finance costs 50 188
Foreign exchange losses
/ (gains) - 262
----------- -----------
(295) 83
Decrease / (increase)
in trade and other receivables 28 (176)
Increase / (decrease)
in trade and other payables 107 (277)
Increase in provisions 16 -
----------- -----------
Cash (used in) / generated
from operations (144) (370)
Income tax received 178 -
----------- -----------
Net cash flows from operating
activities 34 (370)
Investing activities
Purchase of property,
plant and equipment (333) (68)
Development of intangible
assets (485) (352)
----------- -----------
Net cash used in investing
activities (818) (420)
Financing activities
Issue of ordinary shares,
net of issue costs 9 -
Repayment of debt - (210)
Finance costs (50) (188)
----------- -----------
Net cash (used in) /
generated from financing
activities (41) (398)
Net (decrease) / increase
in cash and cash equivalents (825) (1,188)
Cash and cash equivalents
at beginning of period 4,264 1,819
Cash and cash equivalents
at end of period 3,439 631
=========== ===========
Notes to the financial information for the 6 months ended 30 September 2017
1. Basis of preparation
The financial information presented in this interim results has been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards issued by the International Accounting Standards Board, as adopted by the European Union. The principal accounting policies adopted in the preparation of the financial information in this review are unchanged from those used in the group's financial statements for the year ended 31 March 2017 and are consistent with those that the group expects to apply in its financial statements for the year ending 31 March 2018.
The interim results for the periods ended 30 September 2016 and 30 September 2017 are unaudited but have been reviewed by the group's auditor. Full details of the accounting policies are included in the Report and Financial Statements for the year ended 31 March 2017.
Going concern
The financial information has been prepared on a going concern basis with the net assets of GBP4.6M at 30 September 17 (30 September 2016 net liabilities GBP408k).
The principal risks and uncertainties facing the group have not changed from those set out in the Report and Financial Statements for the year ended 31 March 2017.
The directors are comfortable that committed revenue already booked, current cash held in the bank and the continued growth of the various income streams will allow the business to meet all its obligations and objectives going forward.
Basis of consolidation
The financial information incorporates the results of FreeAgent Holdings plc and all of its subsidiary undertakings as at 30 September 2017. The results of the subsidiary undertakings are included from the date of incorporation.
2. Loss per share
6 months 6 months
ended ended
30 Sep 30 Sep
17 16
Numerator
Loss for the period used
in basic and diluted
LPS (954) (1,314)
Denominator
Weighted average number
of shares used in basic
& diluted LPS 40,714,680 5,934,911
Loss per share - basic
& diluted (pence) (2) (22)
At 30 September 2017, there were 3,161,424 (2016: 1,680,800) share options and 270,000 (2016: 449,330) warrants in issue. In accordance with IAS 33 where there is a loss for the year, there is no dilutive effect of options and warrants in issue.
3. Intangible assets
The group has capitalised GBP485k (2016: GBP352k) in respect of development costs. An amortisation charge of GBP318k (GBP332k) has been recognised in the consolidated statement of profit and loss and other comprehensive income for the 6-month period ended 30 September 2017.
4. Taxation
As at 30 September 2017, the tax credit in respect of qualifying research and development relating to the 31 March 2017 year end is still being considered by the directors who are confident that a valid claim for qualifying expenditure in excess of the GBP35k recognised in the financial statements for the year ended 31 March 2017, will be made. As the outcome is currently unknown, no further adjustment has been made to the credit previously recognised.
As at 30 September 2017, there is a further unrecognised and unquantified potential tax credit available to the group relating to qualifying expenditure on research and development in the six-month period ended 30 September 2017. The directors have not yet calculated the claim in respect of this expenditure which will be made based on the annual results for the year ending 31 March 2018. Accordingly, the directors have not recognised this potential asset at this time. A full assessment of the credit will be made and recognised in the annual financial statements.
5. Share based payments
The group operates a SAYE scheme. 570,804 options were issued during the period with an exercise price of 76 pence.
In addition, a new LTIP scheme for the members of the senior management team was launched in June 2017. 270,122 options were granted with an exercise price of GBP1.015 and will vest in 2020 upon achievement of certain performance criteria.
An expense of GBP78k has been recorded in the consolidated statement of comprehensive income in respect of share based payments for the 6-month period to 30 September 2017 (2016: GBP512k).
6. Related party transactions
There are no related party transactions.
7. Foreign exchange loss
The foreign exchange loss recognised in the period ended 30 September 2016 relates to the impact of currency movements on USD denominated loan funds.
8. Events after the reporting date
There are no events after the reporting date which require adjustment or disclosure.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LIFVRFTLEIID
(END) Dow Jones Newswires
December 05, 2017 02:01 ET (07:01 GMT)
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