UK to see another tech IPO as FreeAgent aims to list in London

Bloomberg

UK software company FreeAgent Holdings Ltd. has said it plans an initial public offering on the London Stock Exchange’s AIM market for small, growth-oriented companies.
Edinburgh, Scotland- based FreeAgent provides cloud-based accounting software for what it calls “micro-businesses,” a term it defines as companies with fewer than 10 employees. Its decision to float bucks strong headwinds in the UK tech IPO market. Last week, financial software developer Misys Ltd. pulled a planned IPO citing adverse market conditions. According to data compiled by Bloomberg there have been seven tech IPOs in the UK in the last 12 months. “Investors are always needing solid, well-run businesses,” FreeAgent Chief Executive Officer Ed Molynex said in an interview. “Whatever the market conditions, we think there is a market out there to sell our shares.”
FreeAgent, founded in 2007, sells its services through a subscription model and said it currently has about 52,000 customers. It said its monthly subscriber revenue, as of the end of September, put it on track for sales of 7.7 million pounds ($9.4 million) annually, up from 6.8 million pounds at the end of its financial year in March. But, despite what it said was a gross profit margin of 80 percent, the company lost 1.3 million pounds in 2016, according to documents filed with British business registry Companies House.
It is hoping to raise about 8 million pounds in its share flotation that would value the entire company at between 31 million pounds and 35 million pounds. The company has plans to be profitable before interest, depreciation, amortization and tax in 2018.
After pricing and an initial lockup period, FreeAgent’s shares should begin trading in mid-to-late November. Nplus1 Singer is acting as adviser and broker for the share offering.
FreeAgent has been financed so far with 9 million pounds of private equity and debt from angel investors, a crowd-funding campaign, London-based venture capital group LocalGlobe and private equity firm Innovation Group Investors.

TRANSPARENT, STABLE
Molynex, who studied computer science at the University of Oxford and flew fighter jets for the Royal Air Force, co-founded FreeAgent after struggling to manage the accounts of his own small defense consulting business. He said becoming a public company was important both to show FreeAgent’s customers that the company was transparent and stable and to attract and retain talented employees, who received stock-based compensation.