Lombard Risk Management Share Discussion Threads

[rivaldo] 13/3/2015 09:10

Good summary from Richard Holway's TechMarketView, which reflects my own opinion that this is a temporary mis-step on a generally upward path:



"Thursday 12 March 2015
Regulator and contracts trip up Lombard Risk Management, again

At the half year, see here, the management of Lombard Risk Management, and admittedly TechMarketView, were confident about near term growth for this provider of regulatory and compliance solutions. Unfortunately this optimism has been dented by the news of delays in this week’s Trading Update.

Underlying growth is still strong with a weighting to the second half as usual. However, regulatory delays around IOSCO rules and the consequent postponement of both the signing of contracts and the generation of revenue from recent alliances will drive second half revenues “slightly” short of market forecasts. As Lombard will not have been reimbursed to cover implementation and integration costs for these contracts, this will have a bigger impact on profit. The company warns that second-half EBITDA will be “significantly” lower than the £5.8m needed to meet market expectations. The shares have fallen by 20% on the news.

We should have known better. The company has been hit by regulatory delays before, see here, but had successfully built a business around its increasingly capable platform. As we have seen with several companies, including Gresham Computing, delays and failure to meet “market forecasts” mean a long time on the naughty step and require a consistent and considered approach to rehabilitation.

Nonetheless, the approach of Lombard to this growing and fundamentally important subsector appears sound. It has a large share of the top banks and a growing proportion of annuity-based revenues. It is also broadening the regulatory services it offers at a time when market participants are looking for quick, easy and scale-advantaged solutions to a growing pile of regulatory requirements. This stumble should only be temporary but provides a useful reminder to management, shareholders – and observers – of the difficulty in building growth businesses in this sector."

[igoe104] 12/3/2015 08:11

After a night sleep, a another review of the company, I`ll be staying put with Lom for the time being. hopefully the delays will be put right quickly.

[techno20] 11/3/2015 22:30

Very disappointing and once again poor management of expectations. The spin around the office moves was completely inappropriate given this profit warning was only a matter of a couple of weeks away.

Sounds like a marginal miss on turnover, but significant miss on profit - no clarity provided. Suspect the long term story remains in place, but significant uncertainty short term. Failure to control costs in line with the revenue position looks like the key issue once again. 25 vacancies last time I looked. FD needs to get control!

[igoe104] 11/3/2015 17:26

I`ll get in touch with the company, if I don`t get the right answers to my questions I`ll be selling up ?

One question being how long will certain additional costs keep eating away at profits ?

And what are these costs ?

[igoe104] 11/3/2015 17:06

Very disappointing, trading statement. I`ll have to take a review of the company to see if they are still worth holding.

[rivaldo] 11/3/2015 15:31

LRM is a market leader in its sector, has high recurring income, a reasonable Balance Sheet and has invested heavily in new products over a period of years to match rafts of new legislation. This and coming years should be the time for all of this to come to fruition.

The partnerships with market-leading - and huge m/cap - companies in the USA and elsewhere are likely also about to come to fruition.

As a bonus, I suspect that sector players and competitors' interest will indeed be piqued after this share price drop.

But even without possible takeover interest, I suspect it will only take a little news flow re the contracts and partnerships to get the share price moving upwards given the factors I've highlighted. Hopefully anyway :o))

Company valuations are about balancing a range of factors, not just looking at the past but judging where a company is at present and what is about to come.

[cockerhoop] 11/3/2015 13:47

I'm with EM here, I think it's got away pretty lightly today especially since the step change in profitability since 2010 is primarily down to an accountancy change.

[eezymunny] 11/3/2015 12:40

So we now have pedestrian top line growth and profit warnings to go with the pitiful (if any) cash generation that LRM has always displayed. I'd say 7p was a more reasonable valuation with the caveat that the company may conceivably be of strategic interest to someone.

[2vdm] 11/3/2015 12:31

Has this 20% drop been overdone?

[rivaldo] 11/3/2015 11:27

Disappointing trading update to the 31/3 year end just out. Revenues just behind expectations due to delays, plus some additional costs, means EBITDA will be materially below.

I'm happy to hold as the outlook remains extremely good imo, and the miss seems to be mostly due to time lag rather than anything meaningful, particularly as LRM themselves comment that the next 12 months are both "extremely promising" and "very promising".

Share price-wise LRM are simply back to square one after the steady rise. News flow re the delayed revenues should mean a good year this year and hopefully a rise back to 15p and beyond as regulation and legislation is finally implemented.

[igoe104] 10/3/2015 15:59

The words many new firms have turned to Lombard risk and words The accelerating growth, should be very good news for holders.



Many new firms have turned to Lombard Risk REPORTER to implement a single,
comprehensive EBA Common Reporting solution (which includes COREP, FINREP and ‘LIQREP’) in place of continuing with either in-house, spreadsheet-style reporting, or previous vendor solutions that are no longer able to keep pace with the regulations or the technology platform now required.

Lombard Risk is seeing an increasing demand in the market for a truly modular solution with comprehensive core coverage and functionality, combined with flexibility in terms of multi-source integration, configurable workflow and analytics. The accelerating growth of Lombard Risk’s regulatory market share once more validates our strong solution roadmap

[igoe104] 10/3/2015 14:35

Cheers for that rivaldo, looking good for more good times ahead.

[rivaldo] 10/3/2015 09:34

"Increasing demand" for another of LRM's solutions to new regulatory requirements:



"March 9, 2015

REPORTER actively in use by firms to meet EBA and PRA liquidity coverage reporting

More firms use Lombard Risk REPORTER for end-to-end regulatory reporting in UK than any other solution
European Banking Authority (EBA) Common Reporting: COREP – FINREP – ‘LIQREP’

LONDON, UK – 9th March 2015: Lombard Risk Management plc (LSE: LRM) (“Lombard Risk”), a leading provider of integrated regulatory reporting, collateral management and compliance solutions for the financial services industry, is pleased to announce that REPORTER is actively in use by firms for the creation and submission of regulatory liquidity reporting in line with both the European Banking Authority’s pan-European and local UK regulatory Prudential Regulatory Authority requirements.

As part of the European Banking Authority’s (EBA) harmonisation of European regulatory reporting, local competent authorities are implementing a new expanded liquidity regime at European and ‘local’ levels (Bank of England, PRA in UK), designed to monitor current processes as well as provide insight into future operations. The CO(mmon) REP(orting) framework initially comprised reporting about Capital Adequacy, Large Exposures, IP Losses, Leverage, Liquidity Coverage and Stable Funding and Asset Encumbrance and firms had to dig deep to produce more, and more detailed, calculations and reports for the regulator (electronically in XBRL). COREP was closely followed for many firms by FIN(ancial) REP(orting).....

....At the same time, the UK PRA’s liquidity regime is changing to take account of the changing European landscape. Firms need to realise that, for many, the existing regime continues for some time, at least in part, but other firms, especially certain foreign branches, may be impacted quite significantly.....

....Many new firms have turned to Lombard Risk REPORTER to implement a single, comprehensive EBA Common Reporting solution (which includes COREP, FINREP and ‘LIQREP’) in place of continuing with either in-house, spreadsheet-style reporting, or previous vendor solutions that are no longer able to keep pace with the regulations or the technology platform now required.

Robert Markham, EMEA Sales Director – REPORTER, at Lombard Risk explains: “Lombard Risk is seeing an increasing demand in the market for a truly modular solution with comprehensive core coverage and functionality, combined with flexibility in terms of multi-source integration, configurable workflow and analytics. The accelerating growth of Lombard Risk’s regulatory market share once more validates our strong solution roadmap.”

etc!

[rivaldo] 05/3/2015 12:30

Hardman's monthly newsletter is just out for March and has a nice page on LRM.

They continue to go for 1.8p EPS to March'15, with 2p EPS for the year starting next month, and 0.085p and 0.095p dividends.

LRM should also have £3m net cash, which is building nicely.

Their summary is as follows:



"A trading update is due in a month’s time, followed by full year results likely mid May. LRM by its nature is second half weighted in its profit recognition. The positive level of sales activity H1 resulted in a continued substantial order book/backlog of contracted revenue of £5.1m, supporting our confidence in H2 sales.

LRM entered H2 with a strong and visible short term pipeline. It referred previously to European Banking Authority's Asset Encumbrance and Liquidity Coverage Ratio regulations as creating further opportunities in H2 and into FY16. As at the last interims: “The Company achieved a record first half revenue of £9.3 million, up 27.7% on the previous year, and this bodes well for our full year performance.” We see our top line estimate to be conservative, whilst full year margins should be rising at both EBITDA and PBT levels.

This is all about 1) delivery of current backlogs, 2) expanding the suite
and 3) expanding routes to market via partnerships and ‘organically’ for the more medium term. We note how LRM’s expenditure on product development is high by comparable industry standards.

The product expansion, growth in partnering (expanding the geographical footprint) and the strategic alliances such as Genpact (November 2014) are supportive to medium term growth. H1 growth was driven by COREP, a well established product. This had 121 clients at that stage: far more than originally might have been anticipated.

COLLINE will be boosted in all likelihood with the Genpact roll-out. At the last Interim statement, LRM made the following comment regarding its market positioning. We consider this to be one of the most important features of that Statement:

“The Company is now well into its major investment cycle, prompted by opportunities arising from recent regulatory and market changes. Such changes will in all probability continue and the Company will continue to look carefully at the opportunities that these changes bring.” Non Executive Chairman."

[igoe104] 04/3/2015 14:30

Expanding in New York means business is going well in my eyes, I get the impression there is a hell of a lot more in the tank to come from Lombard.

[rivaldo] 04/3/2015 10:42

Nice 77k buy just shown at 15.1p.

Article on LRM's office expansion/consolidation in New York:

[rivaldo] 03/3/2015 09:58

All four trades today are Buys at 15.15p.

LRM holding a workshop in New York to show how Colline is addressing "significant change" in the collateral market:

[igoe104] 02/3/2015 14:20

I`m expecting big things from Lombard over the next few years, with all these regulations, and with the big partnerships the share price could easily explode.

Certainly one share for the bottom draw and put your feet up and enjoy the ride.

[rivaldo] 02/3/2015 10:31

Looking very strong going into next month's year end trading update - unsurprising considering the fundamentals, the market-leading position and the positive outlook from H1.

[rivaldo] 26/2/2015 12:47

Looking strong. New highs coming?

[rivaldo] 24/2/2015 11:41

That RNS re the relocation has some particularly interesting narrative which the bland RNS title might have put some people off from reading. The 47% increase in staff in the USA for example...

"Through organic growth and strategic acquisitions, we have experienced ongoing success. The Company is now almost 300 strong, operating from 11 centres around the world. It has a market-leading suite of integrated risk, regulatory and compliance software widely used by prominent global financial institutions.

Over the next few years we plan to maintain our position as leaders in the risk and regulatory compliance market, continue to identify and develop solutions to meet the 'new world' challenges and continue to expand. A special thanks to the Lombard Risk team that has enabled this to happen and together we wish to acknowledge and thank all of our customers."

John Groetch, Managing Director of the Americas commented: "From 2013 to 2014, we experienced a 47% increase in US-based staff due to the need to support major account wins in both our collateral and regulatory business areas. To accommodate for staff growth and create overall team synergy, the time is fitting to merge these dynamic teams into one cohesive work environment.""

[igoe104] 20/2/2015 16:33

Office`s relocated.

[rivaldo] 11/2/2015 07:10

News - contract win at a major French bank:



"MAJOR FRENCH BANK SELECTS LOMBARD RISK FOR CANADIAN REGULATORY REPORTING
Bank to automate its regulatory reporting to the OSFI
New York, USA – 10 February 2015:

Lombard Risk International (USA) Inc., a wholly-owned subsidiary of Lombard Risk Management plc (Lombard Risk), a leading provider of integrated regulatory reporting, collateral management and compliance solutions for the financial services industry, is pleased to announce that a major French banking organization has selected Lombard Risk’s automated regulatory reporting solution for its Canadian reporting requirements to the OSFI (Office for the Superintendent of Financial Institutions).

Vincent Raniere, Managing Director, Head of Regulatory – Americas & APAC of Lombard Risk commented: “Improving regulatory reporting is an important issue as more and more regulations are being imposed and closely monitored by various agencies on a global basis. Currently, the burden is placed on the banks to adapt to these changes manually. Banks are searching for an automated solution that is maintained by an outside provider and delivers clear, auditable reports–
our solution meets and exceeds these needs.”

REG-Reporter, Lombard Risk’s US and Canadian automated regulatory reporting solution, provides an efficient, accurate and streamlined regulatory reporting process–enabling users to save time and resources. Designed and maintained by experienced business practitioners for end-to-end financial reporting, REG-Reporter addresses the requirements of both domestic and international banks and financial institutions by automating compliance with mandated reports to the Federal Reserve Bank, OSFI and other regulatory agencies."

[rivaldo] 09/2/2015 15:18

Hardman's monthly review for February is just out, including a page on LRM.

They retain their forecasts of 1.8p EPS to March'15, with a 0.085p dividend:



Most importantly:

"A global business in a growth market:

We anticipate further details of the strategic collaborative agreement announced 21st November.

Genpact Limited ("Genpact"), is to provide the Company's COLLINE® collateral management product for a new product solution. Genpact will integrate its Collateral Agreement and Reference Data Services (CARDS) with Lombard Risk's COLLINE®.

Genpact is big. It is a New York based company with a global client base providing intelligent business operating solutions to many of the world's leading corporations, traded on the NYSE capitalised at approaching US$4bn.

This is a large market. Just taking one bank: HSBC’s compliance and risk bill has been publicly stated as $800m (as of August 2014), up ‘around one-third’ on the previous year (City A.M.). Lombard Risk addresses certain segments but alliances with much larger global operators (Genpact is not the only alliance) are a window on the potential. Lombard Risk, as an established strategy, is investing heavily in its software development."

[igoe104] 06/2/2015 09:47

Thanks rivaldo.

Reading between the lines, it looks like the partnership is going well. (if this was the highlight)