Managing collateralised trading. Enabling regulatory compliance. Interim report 2015
Industry leading risk management and regulatory compliance solutions. Lombard Risk Management plc is a global technology firm with a special focus on Collateral Management and automated Regulatory Reporting. CONTENTS Overview 01 Highlights 02 Executive Chairman s Statement Financial statements 05 Consolidated unaudited interim statement of comprehensive income 06 Consolidated unaudited interim statement of financial position 07 Consolidated unaudited interim statement of changes in equity 09 Consolidated unaudited interim statement of cash flow 10 Notes to the interim report 12 Company information
HIGHLIGHTS Revenue of 10.8m (2014: 9.3m), up 16.1% Order book of contracted revenue at 6.8m (2014: 5.1m) Bookings for the period up 48% on the previous year EBITDA of 0.5m (2014: 0.8m) Loss before tax of 1.8m (2014: profit of 0.01m) Loss per share of 0.66p (2014: earnings per share of 0.00p) Write down of 0.7m (2014: Nil) against carrying value of capitalised research and development Cash at period end of 2.7m (2014: 2.2m) with no debt (2014: 0.3m) Equity placing to raise 4.0m completed in May 2015 Interim dividend of 0.035p (2014: 0.035p) per Ordinary Share Continued investment in European Banking Authority regulatory initiatives, COLLINE and the next generation of REPORTER Major new contract win through alliance partnership Strengthening of Board through appointment of independent Non executive Directors Overview CURRENT TRADING AND OUTLOOK Regulatory change and evolution create further opportunities in H2 and into the following financial year Strong pipeline adds to revenue visibility from contracted or recurring revenue Visit www.lombardrisk.com and follow us on Twitter @LombardRiskM Lombard Risk Management plc Interim report 2015 01
Overview EXECUTIVE CHAIRMAN S STATEMENT A half year of balanced revenue growth Summary The Board is pleased to present our interim report to the end of September 2015. Revenues were 10.8m for the six months ended 30 September 2015, representing growth of 16.1% over the corresponding period last year. Revenue growth has been achieved in both our Regulatory Reporting and Collateral and Clearing business segments, with particularly strong revenue growth in the Americas. Clients and business won We have continued to make good progress in both segments of the business, with particularly strong revenue growth in the Regulatory Compliance division. We are pleased to report the first recognition of revenue from one of our major partner relationships and we are seeing encouraging revenue streams from a major Regulatory Reporting contract in the Far East. The Risk Management and Trading division also delivered growth in revenues with two major new client wins in, respectively, Canada and the UK. We have an encouraging sales pipeline for both the collateral and regulatory sides of the business and are pleased to report that bookings for licences and professional services revenues in the first half of the year are up 48% on the corresponding period last year. This is reflected in an order book of 6.8m, up from 5.9m at the March year end and 5.1m at 30 September 2014. We continue to believe that the market environment favours our product positioning in regulation and risk management and our continued investment in these products reflects this belief. Business improvement and our people There have been a number of changes to our Board during the period. John Wisbey stepped down as Chief Executive Officer in May of this year after 26 years service to the Company and subsequently resigned from the Board in August. John Wisbey continues to serve the Company as Chairman of the newly constituted advisory board and the Board would like to thank him for his service as a Director throughout his time at the Company. The Board is continuing its process of seeking to appoint a new Chief Executive and hopes to announce an appointment in the near future. In September we were pleased to welcome John McCormick and Sandy Broderick to the Board as Non-executive Directors. In addition, Kieran Lees joined the Company as Global Head of Sales and Marketing, effective from August 2015. The Company has completed its move to new offices in both London and New York and we believe that these premises are well suited to support the Company in its next phase of growth. Finance review Recognised revenue rose by 16.1% against the comparable period last year to 10.8m (2014: 9.3m). Annually recurring revenues for the half year totalled 5.0m (2014: 4.3m), representing 46.3% (2014: 46.7%) of total revenues. 02 Lombard Risk Management plc Interim report 2015
Overview Both the Board and the Company have undergone significant changes over the period and we have experienced some increases in the cost base. These result from the positioning of the Company to exploit the substantial opportunities we see in both the regulatory and collateral spaces, some rationalisation of the existing product set and costs associated with staff changes. This has resulted in a loss before tax of 1.8m (2014: profit before tax of 0.01m), stated after recording an impairment charge of 0.7m against the carrying value of two of the Company s product lines. Earnings before interest, taxation, depreciation and amortisation ( EBITDA ) were 0.5m (2014: 0.8m). Bookings for licences and professional services revenues in the first half of the year are up 48% on the corresponding period last year. Philip Crawford Executive Chairman Headcount as at 30 September was 319 (2014: 278) as a result of investing in the teams required to position the Company for further growth. Net cash at 30 September 2015 was 2.7m (2014: 1.8m) following the raising of 4.0m of funds in May 2015 at 10.75p per share. This injection of capital has allowed the Company to continue to invest in its product suite as we pursue some exciting opportunities identified through both our global partner network and through investment in our direct sales function. Early indications are encouraging as the Company has been cash generative in the last two months of the period. Lombard Risk Management plc Interim report 2015 03
Overview EXECUTIVE CHAIRMAN S STATEMENT continued Finance review continued The Company s accounting policies allow for the capitalisation and amortisation of certain software development costs. Capitalised development costs in the period totalled 2.8m (2014: 2.0m), representing 66.5% (2014: 56.5%) of total technology and support costs. The increase in development spending reflects the continued emphasis being placed on the Company s next generation products in both the Risk Management and Regulatory Reporting segments of the business. The capitalisation of development costs has an impact on the interpretation of the financial performance of the Company. Internally, the Company s operating budget and monthly management accounts measure financial performance assuming no such capitalisation. Applying this assumption would result in negative EBITDA for the six-month period of 2.3m (2014: negative 1.2m) and a loss before tax of 2.5m (2014: 1.4m). Investment in software product development As noted above, we have continued to invest significantly in the development of our software products. Major software development initiatives in the period have included continued investment in our COLLINE product to ensure compliance with forthcoming IOSCO requirements, along with significant enhancement of our Regulatory Reporting products across EMEA, the Americas and Asia Pacific. Dividend The Company will pay an interim dividend of 0.035p per share (2014: 0.035p) on 13 November to those shareholders on the register on 30 October 2015. Outlook The Board remains optimistic about the second half of the year, based on record levels of both contracted orders and recurring revenue streams. We recognise the continuing risk to our business of the impact of economic slowdown and the resulting effect on our core client base; however, we believe the continuing emphasis on regulatory change and, indeed, evolution represents a significant opportunity for the Company. I would like to extend my personal thanks to all staff in our offices in London, Shanghai, New York, Hong Kong and Singapore whose continued commitment to both the Company and its products and clients is a credit to them and a priceless asset for the Company. Philip Crawford Executive Chairman 21 October 2015 04 Lombard Risk Management plc Interim report 2015
CONSOLIDATED UNAUDITED INTERIM STATEMENT OF COMPREHENSIVE INCOME For the six months ended 30 September 2015 Note Unaudited Six months ended 30 September 2015 Unaudited Six months ended 30 September 2014 Audited Year ended 31 March 2015 Continuing operations Revenue 10,762 9,269 21,491 Cost of sales (97) (114) (298) Gross profit 10,665 9,155 21,193 Administrative expenses (10,137) (8,374) (16,799) EBITDA 528 781 4,394 Depreciation, amortisation and impairment (2,271) (759) (2,116) Net finance expense (19) (9) (23) (Loss) / profit before taxation (1,762) 13 2,255 Taxation charge 3 (159) (24) (2) (Loss) / profit for the period from continuing operations (1,921) (11) 2,253 (Loss) / profit for the period from continuing operations attributable to: Owners of the Parent (1,921) 4 2,290 Non-controlling interest (15) (37) (1,921) (11) 2,253 Other comprehensive income Exchange differences on translating foreign operations (95) 2 194 Total comprehensive income for the period (2,016) (9) 2,447 Total comprehensive income attributable to: Owners of the Parent (2,016) 6 2,484 Non-controlling interest (15) (37) (2,016) (9) 2,447 (Loss) / earnings per share Basic (pence) 2 (0.66) 0.00 0.87 Diluted (pence) 2 (0.66) 0.00 0.86 Financial statements Lombard Risk Management plc Interim report 2015 05
Financial statements CONSOLIDATED UNAUDITED INTERIM STATEMENT OF FINANCIAL POSITION As at 30 September 2015 Unaudited Six months ended 30 September 2015 Unaudited Six months ended 30 September 2014 Audited Year ended 31 March 2015 Non-current assets Property, plant and equipment 374 196 322 Goodwill 5,841 5,769 5,881 Other intangible assets 15,066 12,433 14,361 Trade and other payables 1,013 974 Deferred tax asset 869 982 1,048 23,163 19,380 22,586 Current assets Trade and other receivables 5,636 5,272 6,791 Cash and cash equivalents 2,733 2,167 2,241 8,369 7,439 9,032 Total assets 31,532 26,819 31,618 Current liabilities Borrowings (333) Trade and other payables (2,482) (2,573) (3,746) Deferred income (6,452) (5,788) (7,222) Total liabilities (8,934) (8,694) (10,968) Net assets 22,598 18,125 20,650 Equity Share capital 1,951 1,747 1,750 Share premium account 13,156 9,375 9,404 Foreign exchange reserves (182) (279) (87) Other reserves 1,831 1,622 1,739 Retained profit 5,842 5,757 7,963 Equity attributable to owners of the Parent 22,598 18,222 20,769 Non-controlling interest (97) (119) Total equity 22,598 18,125 20,650 06 Lombard Risk Management plc Interim report 2015
CONSOLIDATED UNAUDITED INTERIM STATEMENT OF CHANGES IN EQUITY For the six months ended 30 September 2015 Share capital Share premium account Foreign exchange reserves Other reserves Profit and loss account Total attributable to the owners of the Company Noncontrolling interest Total equity Balance at 1 April 2014 1,747 9,375 (281) 1,537 5,865 18,243 (82) 18,161 Share-based payment charge 92 92 92 Share option lapsed or exercised (7) 7 Dividends (119) (119) (119) Transaction with owners directly in equity 85 (112) (27) (27) Profit / (loss) for the period 4 4 (15) (11) Other comprehensive income Exchange differences on translating foreign operations 2 2 2 Total comprehensive income for the period 2 4 6 (15) (9) Balance at 30 September 2014 1,747 9,375 (279) 1,622 5,757 18,222 (97) 18,125 Financial statements Share capital Share premium account Foreign exchange reserves Other reserves Profit and loss account Total attributable to the owners of the Company Noncontrolling interest Total equity Balance at 1 October 2014 1,747 9,375 (279) 1,622 5,757 18,222 (97) 18,125 Issue of share capital 3 29 32 32 Previous R&D adjustments 9 9 9 Share-based payment charge 120 120 120 Share options lapsed or exercised (3) 3 Dividends (92) (92) (92) Transaction with owners directly in equity 3 29 117 (80) 69 69 Profit / (loss) for the period 2,286 2,286 (22) 2,264 Other comprehensive income Exchange differences on translating foreign operations 192 192 192 Total comprehensive income for the period 192 2,286 2,478 (22) 2,456 Balance at 31 March 2015 1,750 9,404 (87) 1,739 7,963 20,769 (119) 20,650 Lombard Risk Management plc Interim report 2015 07
Financial statements CONSOLIDATED UNAUDITED INTERIM STATEMENT OF CHANGES IN EQUITY continued For the six months ended 30 September 2015 Share capital Share premium account Foreign exchange reserves Other reserves Profit and loss account Total attributable to the owners of the Company Noncontrolling interest Total equity Balance at 1 April 2015 1,750 9,404 (87) 1,739 7,963 20,769 (119) 20,650 Issue of share capital 201 3,752 3,953 3,953 Acquisition of minority interest (119) (119) 119 Share-based payment charge 148 148 148 Share options lapsed or exercised (56) 56 Dividends (137) (137) (137) Transaction with owners directly in equity 201 3,752 92 (200) 3,845 119 3,964 Loss for the period (1,921) (1,921) (1,921) Other comprehensive income Exchange differences on translating foreign operations (95) (95) (95) Total comprehensive income for the period (95) (1,921) (2,016) (2,016) Balance at 30 September 2015 1,951 13,156 (182) 1,831 5,842 22,598 22,598 08 Lombard Risk Management plc Interim report 2015
CONSOLIDATED UNAUDITED INTERIM STATEMENT OF CASH FLOW For the six months ended 30 September 2015 Unaudited Six months ended 30 September 2015 Unaudited Six months ended 30 September 2014 Audited Year ended 31 March 2015 Cash flows from operating activities (Loss) / profit for the period (1,921) (11) 2,253 Tax charge 159 24 2 Net finance expense 19 9 23 Operating (loss) / profit (1,743) 22 2,278 Adjustments for: Depreciation 127 98 210 Amortisation and impairment 2,146 661 1,906 Share-based payment charge 148 92 212 Decrease / (increase) in trade and other receivables 1,116 495 (2,107) (Decrease) / increase in trade and other payables (1,264) (122) 1,160 (Decrease) / increase in deferred income (770) 617 2,051 Foreign exchange difference (27) (34) (8) Financial statements Cash generated by operations (267) 1,829 5,702 Tax credit received / (paid) 10 (7) (43) Net cash (used in) / generated by operating activities (257) 1,822 5,659 Cash flows from investing activities Interest received 1 Purchase of property, plant and equipment and computer software (209) (116) (369) Capitalisation of development expenditure (2,840) (2,005) (5,109) Net cash used in investing activities (3,049) (2,121) (5,477) Cash flows from financing activities Shares issued, net of issue costs 3,954 31 Repayment of loans (334) (666) Interest paid (19) (10) (24) Dividends paid (137) (119) (211) Net cash flow generated by / (used in) financing activities 3,798 (463) (870) Net increase / (decrease) in cash and cash equivalents 492 (762) (688) Cash and cash equivalents at beginning of period 2,241 2,929 2,929 Cash and cash equivalents at end of period 2,733 2,167 2,241 Lombard Risk Management plc Interim report 2015 09
Financial statements NOTES TO THE INTERIM REPORT For the six months ended 30 September 2015 1. Basis of preparation This interim report was approved by the Board on 21 October 2015. These consolidated financial statements are for the six months ended 30 September 2015. They have been prepared in accordance with International Financial Reporting Standards ( IFRS ) and International Financial Reporting Interpretation Committee ( IFRIC ) interpretations as at 30 September 2015, as adopted by the European Union. They do not include any of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 March 2015. The preparation of financial statements under IFRS requires the Board to make judgements, estimates and assumptions that affect the application of accounting policies, the reported amounts of statement of financial position items at the period end and the reported amount of revenue and expense during the reporting period. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements that are not readily apparent from other sources. However, the actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. This condensed consolidated financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2015 were approved on 20 May 2015. These accounts, which contain an unqualified audit report under Section 495 of the Companies Act 2006 and which did not make any statements under Section 498 of the Companies Act 2006, have been delivered to the registrar of companies in accordance with Section 441 of the Companies Act 2006. 10 Lombard Risk Management plc Interim report 2015
2. (Loss) / earnings per share Basic (loss) / earnings per share has been calculated by dividing the (loss) / profit on ordinary activities after taxation attributable to the owners of the Parent by the weighted average number of Ordinary Shares in issue during each period. Diluted (loss) / earnings per share is calculated by adjusting the weighted average number of Ordinary Shares in issue on the assumption of conversion of all dilutive potential Ordinary Shares. The Group has only one category of dilutive potential Ordinary Shares, being share options granted under the Enterprise Management Incentive Plan and Unapproved Scheme. Unaudited Six months ended 30 September 2015 Unaudited Six months ended 30 September 2014 Audited Year ended 31 March 2015 (Loss) / profit for the period and basic and diluted (loss) / earnings attributable to Ordinary Shareholders () (1,921) 4 2,290 Weighted average number of Ordinary Shares 291,960,440 263,366,260 263,495,411 (Loss) / earnings per share (pence) (0.66) 0.00 0.87 Effect of dilutive share options: Adjusted weighted average number of Ordinary Shares 294,961,089 266,477,120 266,914,919 Diluted (loss) / earnings per share (pence) (0.66) 0.00 0.86 Financial statements 3. Taxation The taxation charge is based on the effective tax rate expected to apply for the full year, taking into account the anticipated benefit of brought forward tax losses. The effective tax rate is higher than the standard tax rate, principally as a result of movements in the deferred tax asset recognised within the Group. In addition, the charge for this interim period includes 10,000 of current tax received by overseas subsidiaries. Lombard Risk Management plc Interim report 2015 11
Financial statements COMPANY INFORMATION Company registration number 3224870 Directors Philip Crawford Executive Chairman Nigel Gurney Chief Financial Officer Nick Davies Chief Technology Officer Steve Rogers Non-executive Director John McCormick Non-executive Director Company Secretary Nigel Gurney Registered office 7th Floor 60 Gracechurch Street London EC3V 0HR Nominated adviser and broker Panmure Gordon (UK) Limited 1 New Change London EC4M 9AF Auditor Grant Thornton UK LLP Grant Thornton House Melton Street Euston Square London NW1 2EP Corporate solicitors Memery Crystal 44 Southampton Buildings London WC2A 1AP Registrars Computershare Investor Services PLC PO Box 859 The Pavilions Bridgwater Road Bristol BS99 1XZ 12 Lombard Risk Management plc Interim report 2015
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