Report & Financial Statements‌‌‌‌ Year ended 31 March 2017

"Tax return done @FreeAgent saves the day and my stress levels yet again."

@LivaLittlebakes

"We can run our business in real time, mobile and remote and for busy consultants, it allows us to put more of our time into revenue generation rather than admin."

Jyoti

www.reviews.co.uk

"So easy to use, unbelievably helpful support - can't believe it took me

4 years of freelancing before I finally took the plunge! Thank you FreeAgent."

Phil Close

www.reviews.co.uk

"It's @freeagent all the way for me. Invoicing, tax returns, expenses, banking all really easy."

@Mike_rawlins

"We've freed up the accountants' time and have been able to provide much more value to our clients."

Neil Armitage

Umbrella

Contents

  1. Highlights

  2. Chairman's statement

  3. Strategic report

9 Governance report11 Remuneration report14 Directors' report

16 Independent auditor's report

  1. Consolidated statement of comprehensive income

  2. Consolidated statement of financial position

  3. Consolidated statement of cash flows

  4. Consolidated statement of changes in equity

  5. Notes to the consolidated financial statements

44 Company statement of comprehensive income

  1. Company statement of financial position

  2. Company statement of cash flows

  3. Company statement of changes in equity

  4. Notes to the company financial statements

  5. Company Information

  6. Notice of Annual General Meeting

Highlights

Financial Highlights

  • Revenue increased by 41% to £8.0m (FY 2016: £5.7m)

  • Gross profit increased by 38% to £6.6m (FY 2016: £4.8m)

  • Gross profit margin 82% (FY 2016: 84%)

  • Adjusted* EBITDA £0.7m loss (2016: £0.2m loss)reflects planned investments in customer acquisition, particularly in the practice channel

  • Net loss of £2.9m, including share-based payment expense of £0.8m, as the Group continues to invest in scaling its business (2016: £1.3m)

  • Statement of Financial Position strengthened with £4.3m of net cash at year end

    (31 March 2016: £1.8m)

  • Loss per share of 13p (2016: 43p)

  • Annualised Committed Monthly Recurring Revenue (ACMRR) at period end increased by 26% to £8.6m (Mar 2016: £6.8m)

  • Residual lifetime margin of future subscription payments from the Group's current customer base increased to £34m (31 March 2016: £26m)

    Operational Highlights

  • Accounting Practice Clients strengthened to 33,147 (FY 2016: 16,705)

  • Direct Clients increased to 17,500 (FY 2016: 15,741)

  • High levels of customer satisfaction - Net Promoter Score (NPS) of 72 and low direct customer churn rates averaging 1.6% per month during the year

  • Successful placing of £8m of new equity and admission to "AIM"

(Alternative Investment Market of the London Stock Exchange) in November 2016

*Adjusted for share based payment expenses which are a non-cash cost to the Group (note 24). The Glossary on page 4 contains definitions and basis of calculation of SaaS metrics.

Report & Financial Statements 2017 1

Strategic Report

Chairman's Statement

Andy Roberts

This set of results marks our inaugural year as an AIM quoted Plc. We have established an experienced Board of Directors with a clear focus on delivering the strategy and results that were set out in the Admission Document at the time of our Initial Public Offering ("IPO") in November 2016, whilst also providing timely and clear communications and governance process for our institutional and retail shareholders.

The market for our accounting software and services is the micro business sector, and their accountants and other financial services providers. This is a substantial volume market in the UK, with micro businesses accounting for 95% of the UK's 5.5 million businesses, and we continue to make progress in gaining market share, particularly through the accounting practices that serve this sector. I am pleased with the progress we have made against our stated strategy and with our investment in people, systems and processes we are well placed for further successful progress in the coming year.

All financial metrics are in line with or exceeding market expectations. Revenue for the year was £8.0m (FY 2016: £5.7m) and included strong progress in our accountancy practice sales channel. Annualised Committed Monthly Recurring Revenue (ACMRR) rose 26% to £8.6m (Mar 2016: £6.8m).

Key to our long term success as a SaaS (Software as a Service) business, and the achievement of our transition to profitable growth, is the timely scaling and matching of revenue acquisition and operational investment. The Board will continue to monitor this closely and also ensure we maintain the high levels of customer satisfaction that ensure that we maintain our low levels of customer attrition.

FreeAgent is well positioned in a high growth market, is well funded and has a determined management team, backed up with in- depth subject matter experts, skilled digital software developers and sales and marketing professionals.

Activity levels in the early weeks of the new financial year have been positive, and the pipeline of new business opportunities remains strong. As a result, I expect that the 2018 financial year will see further positive progress for FreeAgent. Furthermore, HMRC's recent update on the timetable for the implementation of its Making Tax Digital ("MTD") agenda has confirmed the positive market drivers underpinning FreeAgent's business model and I am confident that with continued focus we can deliver on the long term value proposition our plan promises.

Andy Roberts

Chairman

5 June 2017

2

FreeAgent Holdings plc published this content on 15 June 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 16 June 2017 13:30:08 UTC.

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