We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for real-time alerts, custom portfolio, and market movers
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Lombard Risk | LSE:LRM | London | Ordinary Share | GB00B030JP46 | ORD 0.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 12.925 | 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
TIDMLRM
RNS Number : 0357G
Lombard Risk Management PLC
24 May 2017
24 May 2017
Lombard Risk Management
("Lombard Risk", the "Company" or the "Group")
Final Results for the year ended 31 March 2017
Lombard Risk Management plc (LSE: LRM), a leading provider of integrated collateral management and regulatory reporting technology solutions for the financial services industry, is pleased to announce its final results for the year to 31 March 2017.
Financial Highlights
-- Revenue increased by 44.8% to GBP34.3m (2016: GBP23.7m)
-- Recurring revenue grew 21.0% to GBP12.4m (2016: GBP10.2m), representing c. 36.0% of revenue (2016: 43.1%)
-- Adjusted EBITDA increased to GBP2.6m (2016: GBP2.1m) -- Loss before tax of GBP1.6m (2016: GBP2.2m) -- Cash and cash equivalents at 31 March 2017 of GBP7.0m (31 March 2016: GBP3.3m) -- Capitalised R&D of GBP7.5m (2016: GBP5.9m) -- Adjusted EBITDA, excluding capitalisation of R&D, of negative GBP4.9m (2016: 3.8m) -- Loss before tax, excluding capitalisation of R&D, of GBP5.6m (2016: GBP4.4m)
Operational Highlights
-- Launched AgileCOLLATERAL(R) to deliver the power of COLLINE(R) as flexible cloud-based solution
-- Announced strategic alliance with Atos -- Opened state-of-the-art technology development centre in Birmingham
-- Raised GBP7.9m (net) through a placing and open offer to invest in our products and technology delivery capabilities
-- Secured GBP4m revolving loan facility agreement with Barclays Bank
Alastair Brown, CEO of Lombard Risk, commented:
"This has been a strong year for Lombard Risk where we have comprehensively delivered on the objectives set out in our fund raising of 2016. We have reported a step change in revenue growth, opened a world class development facility in Birmingham and are successfully executing projects to extend our product capabilities."
Lombard Risk Management will be hosting a webinar for investors where they will present their Final Results and take Q&A on Thursday 25th May at 1.15pm. Please register for this event here: https://www.equitydevelopment.co.uk/2017/05/11/lombard-risk-management-results-webinar-thursday-25th-may-1-15pm/
For further information, please contact:
Lombard Risk Management Tel: 020 7593 6700 plc Alastair Brown, CEO Nigel Gurney, CFO finnCap Tel: 020 7220 0500 Stuart Andrews Carl Holmes Scott Mathieson Newgate Communications Tel: 020 7653 9850 Bob Huxford Email: lombard@newgatecomms.com Charlotte Coulson James Ash WG Partners LLP (Joint Tel: 020 3705 9330 Broker) David Wilson Claes Spång Chris Lee
The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.
About Lombard Risk
Lombard Risk is a leading provider of regulatory reporting and collateral management solutions to the financial services industry. Through intelligent automation and optimisation, Lombard Risk's clients are able to improve their approach to risk management, gaining the agility they need to have a competitive advantage. As well as bringing immediate and urgent solutions to clients' needs, Lombard Risk's global team of experts look beyond today's reporting and collateral management to develop technology solutions that help them adapt as industry challenges evolve.
Counting over 30 of the world's 'Top 50' financial institutions among its clients, Lombard Risk has been a trusted partner for 28 years. Founded in 1989 and headquartered in London, it has offices in Birmingham, New York and Asia Pacific (Hong Kong, Shanghai, Singapore and Tokyo), and service centres in Atlanta, Cape Town and Frankfurt. Find out more at lombardrisk.com
Chairman's statement
I am pleased to report on a year of substantial growth and investment for Lombard Risk Management plc ("Lombard Risk"), underpinned by the injection of new equity through the placing and open offer that we closed in June and July of 2016 and which was well supported by our shareholders.
Results
The Group achieved revenue growth of 44.8%, giving a five-year compound annual growth rate of 21.9%. Recurring revenues grew by 21.0% to GBP12.4m (2016: GBP10.2m) and revenues from new licences and renewals of expiring term licences grew by 113.7% to GBP11.6m (2016: GBP5.4m). The Group raised GBP7.9m net during the year via a placing and open offer to support its plans for increased investment in its products and the launch of a new technology development centre in Birmingham, and as a result of this continued investment, the Group has recorded a loss before tax of GBP1.6m (2016: GBP2.2m). Net cash as at the year end stood at GBP7.0m (2016: GBP3.3m).
Dividend
The Group suspended its progressive dividend policy in the year ended 31 March 2016 and it remains the view of the Board that the Group's resources are best directed towards the exploitation of the considerable opportunities that continue to present themselves in both the regulatory reporting and collateral management software markets. The Board does not therefore recommend the payment of a dividend.
Strategy
The support of our shareholders in both the placing and open offer closed during the year has enabled the Group to accelerate its strategy on a number of fronts. First, we continue to invest in the evolution of AgileREPORTER(R) , which will provide clients with a global platform from which to service their regulatory reporting requirements across multiple jurisdictions. Second, the launch of our cloud-based collateral management product, AgileCOLLATERAL(R) , allows clients of all sizes to access the function-rich capabilities of COLLINE(R) on a module-by-module basis. Third, the opening of our new technology development centre in Birmingham, UK, will introduce new efficiencies to the development, testing and support of our software products. In addition, our alliance partnerships with a number of key partners provides us with both increased bandwidth and a breadth of support in our sales, implementation and support activities.
Employees
The substantial growth experienced by the Group could not have been delivered without the dedication and diligence of the Lombard Risk team across all of our locations and I would like to take this opportunity to thank all of our employees on behalf of the Board for their continued support.
Board of Directors
There have been no changes to the composition of the Board since the Annual General Meeting held in July 2016. I would like to extend my thanks to my fellow Directors for their contributions to the Group over the last year.
Outlook
The Board is very pleased with the progress made in delivering the Group's two-year plan that supported the injection of new equity last year. The investment in both our product suite and our delivery capability, coupled with the strength of our alliance partners and the recent investment in our regional sales leadership teams, puts the Group in an excellent position to continue to deliver this plan. As I stated in our trading statement of 19 April 2017, the year to 31 March 2018 promises to be a pivotal year for Lombard Risk as we continue to liberate our clients from operational and regulatory complexity, and the Board remains confident in our plans and our ability to continue to execute them.
AGM
The Annual General Meeting will be held at the offices of Newgate Communications Limited at 9.30am on Wednesday 19 July 2017. My fellow Directors and I look forward to meeting shareholders at that time.
Philip Crawford
Non-executive Chairman
23 May 2017
Chief Executive Officer's statement
Delivering as planned
During the 2016 placing, completed in June, Lombard Risk presented a two-year plan, setting out some clear objectives in terms of delivery and financial performance. At the halfway point of that two-year plan, we are delighted to be sharing positive news and significant progress on all fronts.
Financial performance
In terms of financial performance, the 44.8% increase in top-line revenue to GBP34.3m validates the Board's belief that a step change was possible. This dramatic increase over the 10.3% achieved last year not only eclipses the 15% compound annual revenue growth from the previous five years, but also maintains the momentum generated during the first half. It is an excellent performance, ahead of market expectations, and one of which we are understandably proud.
We anticipated making a loss in this year, a year of significant investment for the Group, although the loss before tax we are reporting is much less than anticipated at GBP1.6m, with an adjusted EBITDA significantly ahead of market expectations during the year at GBP2.6m. We do capitalise certain of our research and development costs, and stripping out this accounting treatment would show a cash loss before tax of GBP5.6m.
We start the new fiscal year with confidence, with our recurring revenues at GBP12.4m, up 21.0%, and an order book of GBP10.1m against GBP7.5m a year ago, an increase of 35.0%. This is the year that Lombard Risk is targeting a return to cash profitability, and the team is fully focussed on fulfilling this commitment.
Finally, it is also very pleasing to report that following rigorous working capital management the Company's cash balance at the year end stood at GBP7.0m, again significantly stronger than the market anticipated.
Delivering the future
In addition to the expectations we set around our ability to improve the financial performance of Lombard Risk, we set out an important strategic agenda showing how we would use the proceeds from the placing. In addition to critical investments in our core platforms, these included the creation of a new development centre, closer to our London headquarters in Birmingham. The Company has grown a strong offshore capability in Shanghai over the last decade, which has made a crucial contribution to our product development. However, in recent years, rising costs and pressure for talent from both local software firms and giant international brands has increased the pressure on our team, adding to the complexities of managing a remote centre. Supporting our clients and keeping pace with the rapid changes in our key markets demanded a new solution.
After an extensive analysis of the infrastructure and talent availability in cities across Europe and mainland UK, we were delighted to select Birmingham as the centre for future investment in our delivery capacity. With strong communications links to London and a deep talent pool, it is a natural choice for technology companies, as evidenced by the speed we could set it up, opening the doors on 23 November 2016. Our launch has been well received, we have forged strong links with the local business and education communities, and most importantly we have been securing excellent technology talent at the rate we had planned.
Cross product collateral management
Existing and new clients have benefited from the continued expansion of our world class collateral management system. The regulatory release of COLLINE(R) in May supported clients who needed to comply with Dodd Frank and IOSCO guidelines for trading uncleared derivatives, and we were delighted by both the response and take-up across our existing customer base. Our clients continue to strengthen their operations in a period of intensive change, injecting control, reducing both costs and operational risk and complying with the rapidly evolving regulatory framework. As similar regulations are adopted in Asia, and the Dodd Frank and IOSCO framework extends to new waves of market participants, Lombard Risk is well placed to continue this success.
With another major release in January, the addition of exchange-traded derivatives to COLLINE(R) once again underlines the value derived from creating a truly cross-product collateral solution, designed to work across asset classes from the ground up. Attracting new Futures Commission Merchant ("FCM") clients in Europe and North America, as well as presenting an important upgrade to existing customers, its immediate success validates our strategy to offer a comprehensive and up-to-date solution suitable for the biggest Tier 1 organisations.
However, our collateral expertise is equally relevant across the market, to participants of all sizes, and building on our success of hosting COLLINE(R) in the cloud for some clients, we launched AgileCOLLATERAL(R) in November. With a focus on control, combining simplicity of both on-boarding and day-to-day operations, AgileCOLLATERAL(R) offers the power of COLLINE(R) , tailored to the operational model of clients of any size.
Keeping pace with the regulators
Work has continued to deliver our vision to establish AgileREPORTER(R) as the leading regulatory reporting solution across North America, Europe and Asia. Deployed as either an integrated package with our strategic partner Oracle, or implemented directly on top of existing data sources by Lombard Risk, we have clients live on both versions of the platform.
Creating a single platform to meet the future challenges of regulatory reporting whilst maintaining the value of our clients' previous investments is the primary goal of AgileREPORTER(R) . With critical new returns such as the European Central Bank ("ECB") AnaCredit and the Federal Reserve 2052a supported by the new web-based front end, we have comprehensive migration paths for our extensive customer base.
The Basel Committee on Banking Supervision's regulation number 239 continues to dominate our and our clients' thinking alike, with the emphasis on robust, timely, accurate and complete returns driving a step change in both data architecture and requirements for data lineage. AgileREPORTER(R) is designed with all these characteristics in mind, and in addition seeks to offer clients cost savings by reusing core components, with advanced workflow tooling allowing for the optimisation of regulatory reporting resources.
A quality client base
Lombard Risk's extensive client base has always been a huge asset to the Group, both from a commercial perspective and also in terms of the market insights that such a diverse global community brings. Our clients range from some of the largest Tier 1 banks, through our specialism in supporting foreign branches, to some of the smallest buy-side participants in the derivatives markets. This group offered over 200 opportunities for services and additional modules in addition to several long-term renewal extensions on both sides of the business during the year.
In addition to our valued existing client base, we were pleased to add four major collateral customers, close two AgileREPORTER(R) for Oracle Financial Services Analytical Applications ("OFSAA") deals with our partner Oracle, and welcome several other reporting clients, including a major greenfield challenger bank, choosing AgileREPORTER(R) to meet its reporting requirements.
Delivering to such an extensive client community requires a highly skilled professional services organisation, and we pride ourselves on the quality of our implementation support. With a high number of projects being managed to an externally imposed regulatory deadline, and multiple clients having to meet those deadlines simultaneously, we have become adept at leveraging our extensive use of client feedback to provide the highest levels of support.
Critical partnerships
We have continued to work closely with our strategic partner Oracle America Inc., adding the ECB and European Banking Authority ("EBA") reporting schedules to those previously developed for the Federal Reserve. The magnitude of the client investment projects involving an end-to-end solution offered in partnership with Oracle has meant that deal progression has been slower than both parties would have liked, but with five clients signed and a strong pipeline in North America, Europe and Australia we are extremely optimistic about the opportunities being pursued for fiscal year 2018.
In November, we announced an exciting new relationship with Atos, taking our cloud-based collateral management solution to the German market. This important milestone represents critical progress in allowing us to open key geographies with local expertise, and represents a key strategic step. After a year of internal, organic growth, we anticipate partner arrangements such as Atos and Oracle playing a major role in driving our future expansion.
The collateral management landscape continues to evolve at a frenetic pace. As a truly cross-asset-class collateral management system, the key strengths of COLLINE(R) lie in a combination of that asset class breadth, industry standard connectivity, inventory management, and intelligent automation. We continue to work with other partners such as AcadiaSoft and Razor Risk to extend our reach whilst playing to our core competencies. As the market evolves, we continue to look ahead and co-operate with our industry-leading partners for the benefit of all our mutual clients.
Lombard Risk is an innovative software company with an outstanding services organisation supporting our clients. We continue to engage with consulting partners not only to extend our reach, but also to give clients implementation and integration options with some of the world's leading firms including Accenture and PwC.
Leadership and talent
Lombard Risk has continued to invest in talent at all levels of the organisation to support our growth. After major changes to the executive leadership last year, the focus has been on sales leadership, sales executives, product expertise and technology talent, including of course the build-out of our new technology centre in Birmingham.
On a geographic basis, the focus has been on developing and upgrading talent in North America and Europe, with additional strategic hires in Asia. With strong partnerships in Australia and Japan, and well established offices in Hong Kong and Singapore, the Group is well positioned for significant advances in that region.
Investment in our people globally remains a key priority for the firm. Lombard Risk's expertise, a direct consequence of maintaining its talent, remains a long-term differentiator that is extremely hard to replicate. With a focus on employee engagement, training, talent management and development, this is an advantage we intend to keep.
Conclusion
We said we would use the funds raised in June 2016 to develop a world-class development centre in Birmingham, make our category-leading collateral management system cloud-ready, and accelerate the delivery of our vision for the future of regulatory reporting. We justified this short-term investment expenditure with our belief that a step change in revenue growth was achievable and that the opportunity was immediate and had to be exploited immediately. We have delivered on all those commitments and face fiscal year 2018 with excitement and confidence.
Finally, after a turbulent fiscal year 2016, I would like to thank the Board, the Executive Committee, the extended leadership group and the whole Lombard Risk team for their extraordinary efforts in 2017. It is those efforts, applied daily, which have delivered such a strong performance, and it is a privilege to lead such a focussed and committed group of people.
Alastair Brown
Chief Executive Officer
23 May 2017
Financial Review
Group results
Group revenue increased by 44.8% to a record GBP34.3m compared with GBP23.7m in the prior year, with strong growth recorded in the Risk Management and Trading division, which saw revenues increase by 83.1%. Regulatory Reporting revenues grew by 10.6% primarily due to growth in recurring revenues and professional services. Licence revenues for new and renewed term licences increased by 113.7% to GBP11.6m (2016: GBP5.4m), representing 33.7% of revenues (2016: 22.8%). Recurring revenues grew 21.0% to GBP12.4m (2016: GBP10.2m) and represented approximately 36.0% of revenue (2016: 43.1%). Recurring revenues now have a current annualised run rate in excess of GBP12.9m.
Operating profit before share-based payment charges, depreciation and amortisation (adjusted EBITDA) was GBP2.6m (2016: GBP2.1m). The Group recorded a loss before tax of GBP1.6m (2016: GBP2.2m), resulting in a basic loss per share of 0.18p (2016: 0.98p).
The effective rate of tax for the year was negative 56.7% (2016: positive 33.0%). This was driven by both an increase in the deferred tax asset to GBP0.5m (2016: GBP0.3m) and a cash tax reclaim relating to research and development tax credits of GBP0.7m (2016: GBPnil). The unrecognised deferred tax asset was GBP3.0m (2016: GBP3.2m).
Cash flow
Net cash inflow from operating activities was GBP4.1m (2016: GBP3.7m). Balancing working capital requirements with investing in longer-term growth remains an integral part of the Group's financial responsibilities, as is the case for many growth technology companies. The Group produces weekly cash forecasts which are monitored closely. The Group has put in place post year end a GBP4.0m revolving loan facility agreement with Barclays Bank Plc at a margin of LIBOR plus 3.5%. In addition, the Group has an overdraft facility of GBP0.5m, also with Barclays Bank Plc. There were no amounts owing under either the agreement or the overdraft at the end of the financial year.
Investment in development expenditure that was capitalised was GBP7.5m (2016: GBP5.9m).
The Group raised GBP7.9m (net) from the issue of new shares via a placing and open offer with GBP0.001m (2016: GBP0.2m) resulting from the exercise of employee stock options.
Net Group cash, being cash and cash equivalents less borrowings, of GBP7.0m is up on the prior year (2016: GBP3.3m) following the placing and open offer for shares to raise GBP7.9m (net) of new equity in June and July 2016. The improvement was due to the strong focus on debt collection and enhanced working capital management.
Balance sheet
Non-current assets at 31 March 2017 increased to GBP29.7m (2016: GBP23.8m), driven by the continued investment in capitalised development costs of GBP7.5m for the year. This investment was applied across the Group's suite of products and included GBP4.1m of investment in COLLINE(R) , GBP1.9m in global regulatory reporting and GBP1.5m in the software platform to support its regulatory reporting products. The Directors continue to remain confident that this investment will bring future benefits to the business by enabling clients to both continue to meet their regulatory reporting obligations and more effectively manage risk in an increasingly regulated environment and by broadening the reach of the Group's products through both direct and indirect sales channels. The carrying value of non-current assets includes GBP6.0m in respect of goodwill arising on previous acquisitions, GBP8.6m in respect of the written-down value of the Group's investment in its risk management and trading products, GBP7.3m in respect of the Group's regulatory reporting products and GBP4.1m relating to the development of the software platform that supports these products. During the year the Group's technical team incurred costs of GBP7.0m that did not meet the criteria for capitalisation and were therefore recorded as an expense in the statement of comprehensive income.
Net Group cash at 31 March 2017 was GBP7.0m (2016: GBP3.3m). The Group had no borrowings at the balance sheet date (2016: GBPnil).
Trade receivables were 12.1% of revenues as at 31 March 2017, compared to 15.6% and 17.3% for 2016 and 2015 respectively.
Year-on-year trends
The capitalisation of development costs for the last five years has an impact on the interpretation of the financial performance of the Group. Internally the Group's operating budget and monthly management accounts measure financial performance assuming no such capitalisation. The table below allows readers to make a more informed assessment of the financial performance of the Group.
Hot Features
Premium
Year ended 31 March
-------------------------------------- ----------------------------------
2017 2016 2015
-------------------------------------- ---------- ---------- ----------
Revenue GBP34.3m GBP23.7m GBP21.5m
-------------------------------------- ---------- ---------- ----------
Adjusted EBITDA including GBP2.6m GBP2.1m GBP4.6m
capitalisation
-------------------------------------- ---------- ---------- ----------
Adjusted EBITDA with no GBP(4.9)m GBP(3.8)m GBP(0.5)m
capitalisation
-------------------------------------- ---------- ---------- ----------
(Loss) / profit before tax GBP(1.6)m GBP(2.2)m GBP2.3m
including capitalisation
-------------------------------------- ---------- ---------- ----------
Loss before tax with no GBP(5.6)m GBP(4.4)m GBP(1.1)m
capitalisation
-------------------------------------- ---------- ---------- ----------
Net cash inflow from operating GBP4.1m GBP3.7m GBP5.7m
activities including capitalisation*
-------------------------------------- ---------- ---------- ----------
Net cash (outflow) / inflow GBP(3.4)m GBP(2.2)m GBP0.6m
from operating activities
with no capitalisation*
-------------------------------------- ---------- ---------- ----------
Total technology expenditure** GBP14.5m GBP9.1m GBP7.5m
-------------------------------------- ---------- ---------- ----------
* Net cash inflow from operating activities less capitalised development costs.
** Includes research, development, testing, support and product maintenance.
Shareholder information
The Group's website at www.lombardrisk.com contains a wide range of information about our activities and visitors can download copies of the report and accounts in addition to newsletters and other articles of interest.
Nigel Gurney
Chief Financial Officer
23 May 2017
Consolidated statement of comprehensive income
For the year ended 31 March 2017
Year Year
ended ended
31 March 31 March
2017 2016
Note GBP000 GBP000
--------------------------------------------- ---- --------- ---------
Continuing operations
Revenue 2 34,331 23,714
Cost of sales (122) (175)
--------------------------------------------- ---- --------- ---------
Gross profit 34,209 23,539
Administrative expenses (35,897) (25,726)
--------------------------------------------- ---- --------- ---------
Loss from operations 4 (1,688) (2,187)
Finance expense 5 - (37)
Finance income 6 71 18
--------------------------------------------- ---- --------- ---------
Loss before taxation (1,617) (2,206)
Tax credit/ (charge) 7 917 (729)
--------------------------------------------- ---- --------- ---------
Loss for the year from continuing operations (700) (2,935)
--------------------------------------------- ---- --------- ---------
Other comprehensive income
Items that may subsequently be reclassified
to profit and loss
Exchange differences on translating
foreign operations:
Owners of the Parent 103 64
Total comprehensive income for the
year (597) (2,871)
--------------------------------------------- ---- --------- ---------
Loss for the year from continuing operations
attributable to:
Owners of the Parent (700) (2,935)
--------------------------------------------- ---- --------- ---------
Total comprehensive income attributable
to:
Owners of the Parent (597) (2,871)
--------------------------------------------- ---- --------- ---------
Loss per share
Basic (p) 8 (0.18) (0.98)
Diluted (p) 8 (0.18) (0.98)
--------------------------------------------- ---- --------- ---------
The accompanying accounting policies and notes form an integral part of the financial statements.
Consolidated balance sheet
As at 31 March 2017
As at As at
31 March 31 March
2017 2016
Company number: 03224870 Note GBP000 GBP000
------------------------------------- ---- --------- ---------
Non-current assets
Property, plant and equipment 10 942 399
Goodwill 11 6,013 5,910
Other intangible assets 11 20,517 16,551
Trade and other receivables 12 1,758 726
Deferred tax asset 7 493 262
------------------------------------- ---- --------- ---------
29,723 23,848
------------------------------------- ---- --------- ---------
Current assets
Trade and other receivables 12 9,438 6,240
Cash and cash equivalents 7,008 3,342
------------------------------------- ---- --------- ---------
16,446 9,582
------------------------------------- ---- --------- ---------
Total assets 46,169 33,430
------------------------------------- ---- --------- ---------
Current liabilities
Trade and other payables 13 (6,373) (4,363)
Deferred income (10,460) (7,326)
------------------------------------- ---- --------- ---------
(16,833) (11,689)
------------------------------------- ---- --------- ---------
Non-current liabilities
Trade and other payables (122) -
------------------------------------- ---- --------- ---------
Total liabilities (16,955) (11,689)
------------------------------------- ---- --------- ---------
Net assets 29,214 21,741
------------------------------------- ---- --------- ---------
Equity
Share capital 16 2,433 1,958
Share premium account 20,620 13,221
Foreign exchange reserves 80 (23)
Other reserves 1,981 1,800
Profit and loss account 4,100 4,785
------------------------------------- ---- --------- ---------
Equity attributable to owners of the
Parent 29,214 21,741
Non-controlling interest 9 - -
------------------------------------- ---- --------- ---------
Total equity 29,214 21,741
------------------------------------- ---- --------- ---------
The financial statements were approved by the Board and authorised for issue on 23 May 2017 and signed on its behalf by:
Alastair Brown
Chief Executive Officer
The accompanying accounting policies and notes form an integral part of the financial statements.
Consolidated statement of changes in shareholders' equity
For the year ended 31 March 2017
Total
attributable
Profit to the
Share Foreign and owners Non-
Share premium exchange Other loss of the controlling Total
capital account reserves reserves account Company interest equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ -------- -------- --------- --------- -------- ------------- ------------ -------
Balance at 1 April
2016 1,958 13,221 (23) 1,800 4,785 21,741 - 21,741
------------------------ -------- -------- --------- --------- -------- ------------- ------------ -------
Issue of share capital 475 7,399 - - - 7,874 - 7,874
Share-based payment
charge - - - 196 - 196 - 196
Share options lapsed
or exercised - - - (15) 15 - - -
Transactions with
owners 475 7,399 - 181 15 8,070 - 8,070
------------------------ -------- -------- --------- --------- -------- ------------- ------------ -------
Loss for the year - - - - (700) (700) - (700)
Other comprehensive
income
Exchange differences
on translating foreign
operations - - 103 - - 103 - 103
------------------------ -------- -------- --------- --------- -------- ------------- ------------ -------
Total comprehensive
income for the year - - 103 - (700) (597) - (597)
------------------------ -------- -------- --------- --------- -------- ------------- ------------ -------
Balance at 31 March
2017 2,433 20,620 80 1,981 4,100 29,214 - 29,214
------------------------ -------- -------- --------- --------- -------- ------------- ------------ -------
Total
attributable
Profit to the
Share Foreign and owners Non-
Share premium exchange Other loss of the controlling Total
capital account reserves reserves account Company interest equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ -------- -------- --------- --------- -------- ------------- ------------ -------
Balance at 1 April
2015 1,750 9,404 (87) 1,739 7,963 20,769 (119) 20,650
------------------------ -------- -------- --------- --------- -------- ------------- ------------ -------
Issue of share capital 208 3,817 - - - 4,025 - 4,025
Share-based payment
charge - - - 183 - 183 - 183
Share options lapsed
or exercised - - - (122) - (122) - (122)
Dividends - - - - (243) (243) - (243)
------------------------ -------- -------- --------- --------- -------- ------------- ------------ -------
Transactions with
owners 208 3,817 - 61 (243) 3,843 - 3,843
------------------------ -------- -------- --------- --------- -------- ------------- ------------ -------
(Loss) / profit
for the year - - - - (2,935) (2,935) 119 (2,816)
Other comprehensive
income
Exchange differences
on translating foreign
operations - - 64 - - 64 - 64
------------------------ -------- -------- --------- --------- -------- ------------- ------------ -------
Total comprehensive
income for the year - - 64 - (2,935) (2,871) 119 (2,752)
------------------------ -------- -------- --------- --------- -------- ------------- ------------ -------
Balance at 31 March
2016 1,958 13,221 (23) 1,800 4,785 21,741 - 21,741
------------------------ -------- -------- --------- --------- -------- ------------- ------------ -------
The share premium account represents amounts subscribed for shares that are in excess of the nominal value of the shares. Foreign exchange reserves represent accumulated exchange differences arising since the transition to IFRS from the translation of subsidiaries with a functional currency other than Sterling. Other reserves relate to negative goodwill arising on the acquisition of a subsidiary undertaking prior to 1 April 1997, share-based payments and the merger reserve.
The accompanying accounting policies and notes form an integral part of the financial statements.
Consolidated cash flow statement
For the year ended 31 March 2017
Year Year
ended ended
31 March 31 March
2017 2016
GBP000 GBP000
------------------------------------------------ --------- ---------
Cash flows from operating activities
Loss for the year (700) (2,935)
Tax (credit) / charge (917) 729
Finance income (71) (18)
Finance expense - 37
------------------------------------------------ --------- ---------
Operating loss (1,688) (2,187)
Adjustments for:
Depreciation 414 262
Amortisation and impairment 3,647 3,826
Share-based payment charge 196 61
Loss on acquisition of non-controlling interest - 119
(Increase) / decrease in trade and other
receivables (3,528) 799
Increase in trade and other payables 1,949 617
Increase in deferred income 3,134 104
Foreign exchange (gains) / losses (18) 12
------------------------------------------------ --------- ---------
Cash generated from operations 4,106 3,613
Tax credit (paid) / received (14) 57
------------------------------------------------ --------- ---------
Net cash inflow from operating activities 4,092 3,670
------------------------------------------------ --------- ---------
Cash flows from investing activities
Interest received 71 18
Purchase of property, plant and equipment
and computer software (849) (439)
Capitalisation of development costs (7,505) (5,893)
------------------------------------------------ --------- ---------
Net cash used in investing activities (8,283) (6,314)
------------------------------------------------ --------- ---------
Cash flows from financing activities
Interest paid - (37)
Finance lease payments (17) -
Shares issued, net of issue costs 7,874 4,025
Dividend paid - (243)
------------------------------------------------ --------- ---------
Net cash generated by financing activities 7,857 3,745
------------------------------------------------ --------- ---------
Net increase in cash and cash equivalents 3,666 1,101
Cash and cash equivalents at beginning of
year 3,342 2,241
------------------------------------------------ --------- ---------
Cash and cash equivalents at end of year 7,008 3,342
------------------------------------------------ --------- ---------
The accompanying accounting policies and notes form an integral part of the financial statements.
Notes to the consolidated financial statements
For the year ended 31 March 2017
1. Accounting policies
(A) Basis of preparation
These consolidated financial statements are for the year ended 31 March 2017. They have been prepared in accordance with International Financial Reporting Standards ("IFRS") and IFRS Interpretation Committee ("IFRIC") interpretations as at 31 March 2017, as adopted by the European Union and also in accordance with those parts of the Companies Act 2006 relevant to companies which prepare financial statements in accordance with IFRS. They have been prepared under the historical cost convention.
The preparation of financial statements in accordance with IFRS requires the Board to make judgements, estimates and assumptions that affect the application of accounting policies, the reported amounts of balance sheet 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.
The Parent Company financial statements on pages 64 to 71 present information about the Company as a separate entity rather than about the Group, and have been prepared under Financial Reporting Standard 101 "Reduced Disclosure Framework" (FRS 101) as permitted by the Companies Act 2006.
New standards, amendments and interpretations
At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective and have not been adopted early by the Group.
Management anticipates that all of the pronouncements will be adopted by the Group's accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group's financial statements is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group's financial statements, with the exception of IFRS 15 and IFRS 16, where the Group is currently evaluating the impact of the adoption of these standards in future periods.
IFRS 9 "Financial Instruments" (effective date: 1 January 2018)
IFRS 15 "Revenue from Contracts with Customers" (effective: 1 January 2018)
IFRS 16 "Leases" (effective: 1 January 2019)(1)
Disclosure Initiative: Amendments to IAS 7: Statement of Cash Flows (effective: 1 January 2017)(1)
Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses (effective: 1 January 2017)(1)
Clarification to IFRS 15 "Revenue from Contracts with Customers" (effective: 1 January 2018)(1)
Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions (effective: 1 January 2018)(1)
Annual improvements to IFRSs 2014-2016 (effective: 1 January 2017/1 January 2018)(1)
(1) Not adopted by the EU (as at 31 March 2017).
(B) Basis of consolidation
The Group accounts consolidate the financial statements of the Parent Company (Lombard Risk Management plc) and its subsidiary undertakings over which it has control (see note 6 to the Parent Company balance sheet). In accordance with IFRS 10, the Group considers it has control over its subsidiary undertakings on the grounds that it has: existing rights over them that give it the ability to direct their activities; rights to variable returns from its involvement with them; and the ability to use its power over them to affect the amount of the Group's returns. A description of the principal activities and operations of the Group can be found in the Directors' report.
The consolidated financial statements include the financial statements of the Company and its subsidiary undertakings made up to 31 March 2017. The acquisition method of accounting has been adopted. Under this method, the results of subsidiary undertakings acquired or disposed of in the year are included in the consolidated statement of comprehensive income from the date of acquisition or up to the date of disposal. All of the Group's assets and liabilities existing at the date of acquisition are recorded at their fair values reflecting their condition at that date. Profits or losses on intra-group transactions are eliminated in full. Goodwill is capitalised and under IFRS 3 goodwill is not amortised but an impairment test is performed as appropriate, at least annually. The value of goodwill is to be written down according to the outcome of the impairment test.
Non-controlling interests, presented as part of equity, represent the portion of a subsidiary's profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the Parent and the non-controlling interest based on their respective ownership interest.
(C) Segment reporting
In identifying its operating segments, management generally follows the Group's product lines. The Group operates two main operating segments: Regulatory Reporting software and Risk Management and Trading software. Regulatory Reporting software provides regulatory, anti-money laundering and compliance systems to financial markets. Risk Management and Trading software provides trading, valuation and risk management systems to the financial markets. Each of these product lines is managed separately as they each require different technology and other resources as well as marketing approaches. Corporate overheads, assets and liabilities which are not directly attributable to either product line are not allocated to segments.
(D) Going concern
The financial statements have, as in previous years, been prepared on a going concern basis.
In forming an opinion that the Company and the Group is a going concern, the Directors have taken particular note of the trading performance in the year ended 31 March 2017. This shows an increase in the Group's cash balance following the issue of new shares in the year.
The Directors have prepared a cash flow forecast for the period to 30 June 2018, which shows that the Company and Group have sufficient facilities for ongoing operations. Whilst there will always remain some inherent uncertainty within the aforementioned forecasts, the Directors believe the Company and Group have sufficient resources to continue in operational existence for at least twelve months from the date of approval of these financial statements.
Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements for the year ended 31 March 2017.
(E) Revenue
Revenue represents the fair value of goods sold and services provided during the year, stated net of value added tax. Revenue and profit before tax are wholly attributable to the principal activities of the Group.
The recognition of revenue depends on the type of income:
Licence income For long-term projects which do not include the upfront delivery of immediately usable software, revenue is recognised on both the consultancy and initial licence elements in line with the estimated percentage of completion of the project. This estimation is based upon the views of the consultants implementing the projects as to the proportion of the project completed and this is supported by data from a time recording system. Annual licence/usage fees and maintenance revenue invoiced simultaneously with the initial licence, but considered to relate to the period when the licence is deemed to be live, is deferred in its entirety until the live date, following which it is released to profit in equal daily instalments over the duration of the relevant licence or maintenance. For other projects which do include the upfront delivery of immediately usable software, revenue is recognised on a percentage of completion basis. For non-refundable licences, revenue is recognised in full on customer acceptance as there are no ongoing obligations in respect of such sales.
Customisation income Recognised once the customisation has taken place. Maintenance income Recognised evenly over the term of the maintenance contract. Rental income Recognised evenly over the term of the rental contract. Data subscription income Recognised evenly over the term of the data contract. Training income Recognised when the relevant courses are run.
Multiple element transactions are allocated to relevant revenue categories based on typical revenue splits for transactions which are contracted separately and by using industry best practice.
(F) Property, plant and equipment
Property, plant and equipment are stated at cost, net of depreciation and any provision for impairment. No depreciation is charged during the period of construction. Leasehold property is included in property, plant and equipment only where it is held under a finance lease.
The cost of computer hardware, fixtures, fittings and equipment is written down to the residual value and is depreciated in equal annual instalments over the estimated useful lives of the assets. The residual values of assets or groups of like assets and their useful lives are reviewed annually.
The estimated useful lives of the assets are as follows:
Computer hardware two years Fixtures, fittings and equipment four years
(G) Goodwill
Goodwill, representing the excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired, is capitalised and reviewed annually for impairment. Goodwill is carried at cost less accumulated impairment losses. Negative goodwill is recognised immediately after acquisition in the consolidated statement of comprehensive income.
(H) Intangible assets
Research and development
Expenditure on research is recognised as an expense in the period in which it is incurred.
Development costs incurred are capitalised when all of the following conditions are satisfied:
-- completion of the intangible asset is technically feasible so that it will be available for use or sale;
-- the Group intends to complete the intangible asset and use or sell it;
-- the Group has the ability to use or sell the intangible asset;
-- the intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits;
-- there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
-- the expenditure attributable to the intangible asset during its development can be measured reliably.
Development costs not meeting the criteria for capitalisation are expensed as incurred. Capitalised development costs are amortised in equal annual instalments over a period of five years from when the separately identifiable intangible asset is available for use in the manner intended by management. Enhancements to a separately identifiable intangible asset that is already available for use in the manner originally intended by management are expensed as incurred.
Computer software
The cost of computer software, net of estimated residual value and impairment, is depreciated in equal annual instalments over one to three years based on the estimated useful lives of the assets. The residual values of assets or groups of like assets are reviewed annually.
Customer relationships
The cost of customer relationships, net of estimated residual value and impairment, is amortised in equal annual instalments over nineteen years based on the estimated useful lives of the assets. The residual values of assets or groups of like assets are reviewed annually.
Trademarks
The cost of trademarks, net of estimated residual value and impairment, is amortised in equal annual instalments over seven years based on the estimated useful lives of the assets. The residual values of assets or groups of like assets are reviewed annually.
(I) Financial instruments
Financial assets and liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. The Group's financial instruments comprise cash, trade receivables, derivative financial instruments (forward currency contracts) and trade and other payables.
Derivative financial instruments
Derivative financial instruments held by the Group comprise forward foreign currency contracts and are recognised at fair value. The Group has not applied hedge accounting and the gain or loss on remeasurement to fair value is recognised immediately in profit or loss.
Loans and receivables
Loans and receivables are initially stated at their fair value plus transaction costs, then subsequently at amortised cost using the effective interest method, if applicable, less impairment losses. Provisions against trade receivables are made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write down is determined as the difference between the assets' carrying amount and the present value of the estimated future cash flows.
Cash and cash equivalents
The Group manages short-term liquidity through the holding of cash and highly liquid interest-bearing deposits. Only deposits that are readily convertible into cash with maturities of three months or less from inception, with no penalty of lost interest, are shown as cash or cash equivalents.
Trade payables
Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument. All financial liabilities are recorded at amortised cost using the effective interest method, with interest related charges recognised as an expense in finance cost in the statement of comprehensive income.
A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged, cancelled or expires.
(J) Foreign exchange
Transactions in foreign currencies are translated into the functional currency of the individual entity at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.
Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in the profit or loss in the period in which they arise. The assets and liabilities in the financial statements of foreign subsidiaries are translated into the Parent Company's presentation currency at the rate of exchange ruling at the balance sheet date. Income and expenses are translated at the actual rate at the date of transaction. The exchange differences arising from the retranslation of the opening net investment in subsidiaries are recognised in other comprehensive income and taken to the "Foreign exchange reserve" in equity. On disposal of a foreign operation the cumulative translation differences (including, if applicable, gains and losses on related hedges) are transferred to profit or loss as part of the gain or loss on disposal.
(K) Taxation
Current tax is the tax currently payable based on taxable profit for the year using rates and laws enacted/substantively enacted at the reporting date. Current tax credits arise from the UK legislation regarding the treatment of certain qualifying research and development costs, allowing for the surrender of tax losses attributable to such costs in return for a tax rebate.
Deferred taxes are calculated using the liability method on temporary differences using rates and laws enacted/substantively enacted at the reporting date. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the statement of comprehensive income, except where they relate to items that are charged or credited directly to other comprehensive income or equity, in which case the related deferred tax is also charged or credited directly to other comprehensive income or equity.
(L) Leased assets
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Assets held under finance leases are capitalised and the outstanding future lease obligations are shown in liabilities at the fair value of the lease, or if lower at the present value of the lease payments. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the asset's useful life or over the shorter of the asset's useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are regarded as operating leases and the payments made under them are charged to the statement of comprehensive income on a straight line basis over the lease term. Lease incentives are spread over the term of the lease.
(M) Pension costs
The Group operates a number of defined contribution pension schemes. The assets of the schemes are held separately from those of the Group in independently administered funds. The amount charged to profit or loss represents the contributions payable to the schemes in respect of the accounting period.
(N) Share options issued to employees
All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair values of employees' services are determined indirectly by reference to the fair value of the instrument granted to the employee. This fair value is appraised at the grant date using a binomial model, taking into account the terms and conditions upon which the options were granted.
All equity-settled share-based payments are ultimately recognised as an expense in the statement of comprehensive income with a corresponding credit to "other reserves".
If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.
Share options vest no earlier than the second anniversary of issue. The vesting period runs for two to ten years from the date the options first vest. There are no other performance conditions other than the vesting period.
Upon exercise of share options the proceeds received net of attributable transaction costs are credited to share capital and, where appropriate, share premium.
(O) Impairment testing of goodwill, other intangible assets and property, plant and equipment
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating-unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors the related cash flows.
Goodwill, other individual assets or cash-generating units that include goodwill, other intangible assets with an indefinite useful life and those intangible assets not yet available for use are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.
(P) Key judgements in applying the entity's accounting policies and goodwill impairment
The Group's management makes estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a reasonable risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Recognition of revenue
Revenue is recognised according to the accounting policies as stated and is dependent upon the type of income. Where contracts include different elements of revenue, those elements are recognised in line with those policies, with fair values attributed to each component part.
Judgement is used in the recognition of revenue from long-term projects.
If work is contracted on a fixed-cost basis, revenue is recognised in line with an estimation of the percentage of completion of the project. This estimation is based upon the views of the consultants implementing the projects as to the proportion of the project completed and this is supported by data from a time recording system. There is, however, an element of judgement involved that can impact the recognition of revenue. This process and individual project recognition is reviewed regularly to ensure that, whilst still subjective, the reflection of revenue is the best approximation possible.
Where projects include the upfront delivery of immediately usable software, the element of non-refundable licence revenue is recognised on receipt of the software by the customer, with other revenue being recognised in line with the performance of the contracted services. The unbundling of this contract revenue requires management to exercise judgement as to the relative fair values of the component parts of the contract.
Goodwill impairment
An impairment loss is recognised if the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from each cash-generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows. In the process of measuring expected future cash flows, management makes assumptions about future operating results. These assumptions relate to future events and circumstances. The actual results may vary and may cause significant adjustments to the Group's assets within the next financial year.
In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to market risk and the appropriate adjustment to asset-specific risk factors.
Capitalisation of development costs
Development costs are capitalised when all of the criteria (see accounting policy note above) have been met. Employees' time is recorded by product and activity and valued by reference to salaries and directly attributable overheads. Values by product are reviewed with reference to future profitability.
Some judgement is used to determine which activities constitute development that should be capitalised. Likewise, some judgement is required in assessing when a product has reached its intended use and hence when capitalisation of associated costs should cease. In addition, judgement is used to determine future profitability of the products and timing thereof.
Deferred tax assets
The assessment of the probability of future taxable income on which deferred tax assets can be utilised is based on the Group's latest approved budget forecasts, which is adjusted for significant non-taxable income and expense. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit, that deferred tax asset is usually recognised in respect of the period for which future profits can be confidently foreseen. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances.
2. Business segmentation
Management currently identifies the Group's two product lines as operating segments as further described in the accounting policies. These operating segments are monitored and strategic decisions are made on the basis of segment operating results.
Segment information can be analysed as follows for the reporting periods under review:
Year Year
ended ended
31 March 31 March
2017 2016
GBP000 GBP000
------------------------------------------------ --------- ---------
Revenue
Regulatory Reporting 13,866 12,540
Risk Management and Trading 20,465 11,174
Group unallocated - -
------------------------------------------------ --------- ---------
Total revenue 34,331 23,714
------------------------------------------------ --------- ---------
Depreciation, amortisation and impairment
Regulatory Reporting (2,137) (1,979)
Risk Management and Trading (1,924) (2,109)
Group unallocated - -
------------------------------------------------ --------- ---------
Total depreciation, amortisation and impairment (4,061) (4,088)
------------------------------------------------ --------- ---------
Net interest income / (expense)
Regulatory Reporting - -
Risk Management and Trading - -
Group unallocated 71 (19)
------------------------------------------------ --------- ---------
Total interest income / (expense) 71 (19)
------------------------------------------------ --------- ---------
Other costs
Regulatory Reporting (14,549) (10,565)
Risk Management and Trading (17,409) (11,248)
Group unallocated - -
------------------------------------------------ --------- ---------
Total other costs (31,958) (21,813)
------------------------------------------------ --------- ---------
Total costs (35,948) (25,920)
------------------------------------------------ --------- ---------
(Loss) / profit
Regulatory Reporting (2,555) (4)
Risk Management and Trading 867 (2,183)
Group unallocated 71 (19)
------------------------------------------------ --------- ---------
Total loss before taxation and dividend (1,617) (2,206)
------------------------------------------------ --------- ---------
Net assets
Regulatory Reporting 9,845 11,852
Risk Management and Trading 17,552 10,780
Group unallocated 1,817 (891)
------------------------------------------------ --------- ---------
Net assets 29,214 21,741
------------------------------------------------ --------- ---------
The two segments operate independently and inter-segment income or expenditure is cross charged at arm's length.
The Group's revenues from clients and its non-current assets (other than goodwill, trade and other receivables and deferred tax assets) are divided into the following geographical areas:
Year Year
ended ended
31 March 31 March
2017 2016
GBP000 GBP000
------------------------------------------- --------- ---------
Revenue
United Kingdom 11,617 10,186
Rest of Europe, the Middle East and Africa 6,210 2,248
The Americas 12,401 7,069
Asia Pacific 4,103 4,211
------------------------------------------- --------- ---------
Total revenue 34,331 23,714
------------------------------------------- --------- ---------
Non-current assets
United Kingdom 19,538 15,198
Rest of Europe, the Middle East and Africa - -
The Americas 1,674 1,607
Asia Pacific 247 145
------------------------------------------- --------- ---------
Non-current assets 21,459 16,950
------------------------------------------- --------- ---------
In the year ended 31 March 2017 two customers each accounted for 7% (2016: one customer accounted for 8%) of the revenue within the Risk Management and Trading software segment.
3. Directors and employees
2017 2016
Directors GBP000 GBP000
---------------------- ------- -------
Emoluments 943 1,322
Social security costs 130 167
Pension costs 12 50
---------------------- ------- -------
1,085 1,539
---------------------- ------- -------
During the year five Directors accrued benefits under pension schemes (2016: two).
The Directors of the Company are the key management personnel. Details of the remuneration of each Director, pension entitlements and share options are included in the Remuneration report on pages 28 to 29.
2017 2016
Staff costs including Directors GBP000 GBP000
------------------------------------------- ------- -------
Wages and salaries 23,768 18,214
Social security costs 2,952 2,357
Pension costs 422 210
Share-based payments charge (note 17) 196 183
------------------------------------------- ------- -------
Total staff costs 27,338 20,964
Capitalised costs (7,505) (5,893)
------------------------------------------- ------- -------
Total staff costs included in consolidated
statement of comprehensive income 19,833 15,071
------------------------------------------- ------- -------
The average monthly number of employees (excluding Directors) during the year was:
2017 2016
Number Number
-------------------------- ------- -------
Office and administration 34 26
Operational 335 291
-------------------------- ------- -------
Total 369 317
-------------------------- ------- -------
4. Loss from operations
The loss from operations before taxation is stated after charging:
2017 2016
GBP000 GBP000
------------------------------------------- ------- -------
Auditor's remuneration - Company audit fee 29 30
Fees payable to the Company auditor for
other services:
- subsidiary company audit fees 28 29
- tax services 16 15
- other services 5 -
Depreciation 414 262
Amortisation and impairment 3,647 3,826
Foreign exchange gain (560) (273)
Operating leases - land and buildings 1,364 1,296
Research and development expenditure 6,972 3,207
------------------------------------------- ------- -------
Fees payable to the Company's auditor, Grant Thornton UK LLP, and its associates for non-audit services to the Company itself are not disclosed in the individual financial statements of the Company because the Company's Group financial statements are required by the Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) Regulations 2008, Regulation 5(1) to disclose such fees on a consolidated basis.
5. Finance expense
2017 2016
GBP000 GBP000
-------------------------------------- ------- -------
Interest on bank loans and overdrafts - 37
-------------------------------------- ------- -------
6. Finance income
2017 2016
GBP000 GBP000
----------------------------------------- ------- -------
Interest on bank deposits 10 1
Gain on derivative financial instruments 61 17
----------------------------------------- ------- -------
71 18
----------------------------------------- ------- -------
7. Taxation
(A) Analysis of (credit) / charge in the period
2017 2016
GBP000 GBP000
-------------------------------------------------- ------- -------
Current tax:
- prior period adjustment (in respect of
R&D tax credits) (698) -
- foreign tax on loss in the period 12 (46)
-------------------------------------------------- ------- -------
Total current tax credit (686) (46)
-------------------------------------------------- ------- -------
Deferred tax:
- prior period adjustment - (11)
- origination and reversal of timing differences (231) 786
-------------------------------------------------- ------- -------
Total deferred tax (credit) / charge (231) 775
-------------------------------------------------- ------- -------
Taxation (credit) / charge on ordinary activities (917) 729
-------------------------------------------------- ------- -------
(B) Research and development tax credits
The Group has not claimed a R&D tax credit in respect of the year ended 31 March 2017, rather it has carried forward additional losses generated by the enhanced R&D tax relief available on qualifying R&D costs incurred in the year.
In the current year the Group has recorded the GBP698,000 R&D tax credit claimed in the 31 March 2016 tax returns as an adjustment in respect of prior periods. The tax cash benefit was received after the year end.
(C) Tax on loss on ordinary activities
The tax assessed for the year is the standard rate of corporation tax in the UK of 20% (2016: 20%). The difference is explained as follows:
2017 2016
GBP000 GBP000
------------------------------------------- ------- -------
Loss on ordinary activities before tax (1,617) (2,206)
------------------------------------------- ------- -------
Loss on ordinary activities multiplied by
the standard rate of corporation tax in
the UK of 20% (2016: 20%) (323) (441)
Effect of:
- net carry forward of tax losses 753 910
- enhanced R&D relief (823) (491)
- adjustment in respect of prior periods
- current tax (698) -
- adjustment in respect of prior periods
- deferred tax - (11)
- deferred tax (recognised) / derecognised (231) 786
- expenses not deductible for tax purposes 359 79
- adjustment for tax-rate differences in
foreign jurisdictions 34 (57)
- foreign tax charge / (credit) 12 (46)
------------------------------------------- ------- -------
Total tax (credit) / charge for the year (917) 729
------------------------------------------- ------- -------
(D) Unrecognised deferred tax
A deferred tax asset of GBP3.0m (2016: GBP3.2m) is unrecognised and relates principally to trading losses carried forward.
(E) Deferred tax asset
The deferred tax asset included in the balance sheet relates principally to the carry forward of tax losses.
2017 2016
GBP000 GBP000
------------------- ------- -------
Deferred tax asset 493 262
------------------- ------- -------
The Directors have recognised a deferred tax asset in respect of carried forward trading tax losses as, based on current estimates, the Group is forecast to make sufficient trading tax profit in the future against which these losses can be offset. The recognised deferred tax asset is based on expected profits in the next financial year. The movement in the deferred tax asset in the year is recognised in full in the profit for the year; no amount is recognised directly in equity.
The deferred tax asset is expected to crystallise in full in the next financial year.
8. Loss per share
Basic loss per share has been calculated by dividing the loss after taxation by the weighted average number of Ordinary Shares in issue during each period.
Potential Ordinary Shares are treated as dilutive, when, and only when, their conversion to Ordinary Shares would decrease earnings per share or increase loss per share from continuing operations. As potential Ordinary Shares for 2017 would decrease the loss per share, they are therefore not included in diluted earnings per share.
Loss per share
Year ended Year ended
31 March 31 March
2017 2016
--------------------------------------------- ----------- -----------
Loss for the year and basic and diluted
earnings attributable to owners of the
Parent GBP(0.700)m GBP(2.935)m
--------------------------------------------- ----------- -----------
Weighted average number of Ordinary Shares 380,046,607 298,488,801
Loss per share (p) (0.18) (0.98)
--------------------------------------------- ----------- -----------
Adjusted weighted average number of Ordinary
Shares 380,046,607 298,488,801
Diluted loss per share (p) (0.18) (0.98)
--------------------------------------------- ----------- -----------
9. Non-controlling interest
In the prior year the non-controlling interest related to 20% of Lombard Risk Compliance Policies Limited, whose principal place of business is in the United Kingdom, which was owned by a third party. During the year to 31 March 2016 the Group acquired the remaining 20% for GBPnil consideration, resulting in a loss on acquisition of GBP119,000. The proportion of voting rights held by non-controlling interests at the year end is nil (2016: nil).
10. Property, plant and equipment
Fixtures,
fittings
Computer and
hardware equipment Total
Group GBP000 GBP000 GBP000
------------------------ --------- ---------- -------
Cost
At 1 April 2015 1,829 912 2,741
Additions 171 158 329
Foreign exchange effect 6 (2) 4
------------------------ --------- ---------- -------
At 31 March 2016 2,006 1,068 3,074
------------------------ --------- ---------- -------
At 1 April 2016 2,006 1,068 3,074
Additions 575 383 958
Foreign exchange effect - 2 2
------------------------ --------- ---------- -------
At 31 March 2017 2,581 1,453 4,034
------------------------ --------- ---------- -------
Depreciation
At 1 April 2015 1,646 773 2,419
Charge for the year 189 73 262
Foreign exchange effect (4) (2) (6)
------------------------ --------- ---------- -------
At 31 March 2016 1,831 844 2,675
------------------------ --------- ---------- -------
At 1 April 2016 1,831 844 2,675
Charge for the year 287 127 414
Foreign exchange effect 1 2 3
------------------------ --------- ---------- -------
At 31 March 2017 2,119 973 3,092
------------------------ --------- ---------- -------
Net book value
At 31 March 2017 462 480 942
------------------------ --------- ---------- -------
At 31 March 2016 175 224 399
------------------------ --------- ---------- -------
Computer hardware includes assets where the Group is a lessee under a finance lease with a net book value of GBP165,619 (2016: GBPnil).
11. Goodwill and other intangible assets
Goodwill
Goodwill
Group GBP000
------------------------ --------
Cost
At 1 April 2015 5,881
Additions -
Foreign exchange effect 29
------------------------ --------
At 31 March 2016 5,910
------------------------ --------
At 1 April 2016 5,910
Additions -
Foreign exchange effect 103
------------------------ --------
At 31 March 2017 6,013
------------------------ --------
Amortisation
At 1 April 2015 -
Provided in the period -
Foreign exchange effect -
------------------------ --------
At 31 March 2016 -
------------------------ --------
At 1 April 2016 -
Provided in the period -
Foreign exchange effect -
------------------------ --------
At 31 March 2017 -
------------------------ --------
Net book value
At 31 March 2017 6,013
------------------------ --------
At 31 March 2016 5,910
------------------------ --------
The goodwill at 31 March 2017 and 31 March 2016 relates to the acquisition of STB Systems Limited, since renamed Lombard Risk Compliance Limited, which was acquired in 2005 and which constituted the Group's regulatory compliance business, and to goodwill arising in 2011 relating to the acquisition of the regulatory reporting business of SOFGEN. Both these businesses now represent the Group's regulatory compliance business. An impairment review has therefore been carried out on this cash-generating unit.
The cash-generating unit has been assessed by comparing its carrying value to its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation.
For the year ended 31 March 2017, the cash-generating unit recoverable amount was determined based on value-in-use calculations, which are based on detailed five-year discounted forecast cash flows (using a discount rate of 10%). Cash flows for the regulatory compliance business are based on management forecasts, which are approved by the Board and reflect management's expectations of sales growth, operating costs and margin based on past experience as well as the current order book. Management has used a five-year period in the cash flow projections as the regulatory compliance business experiences a low level of customer turnover and the technology is based on regulations which, whilst subject to periodic amendment, are unlikely to be withdrawn.
Sensitivity to changes in key assumptions: impairment testing is dependent on management's estimates and judgements, in particular in relation to the forecasting of future cash flows and the discount rate applied to the cash flows. Management has concluded that no reasonably possible change in the key assumptions would cause the carrying value of goodwill to exceed its recoverable amount.
Other intangible assets
Other Capitalised
intangible development
assets costs Total
Group GBP000 GBP000 GBP000
------------------------ ----------- ------------ -------
Cost
At 1 April 2015 1,334 17,470 18,804
Additions 109 5,893 6,002
Foreign exchange effect 19 - 19
------------------------ ----------- ------------ -------
At 31 March 2016 1,462 23,363 24,825
------------------------ ----------- ------------ -------
At 1 April 2016 1,462 23,363 24,825
Additions 90 7,505 7,595
Foreign exchange effect 12 - 12
------------------------ ----------- ------------ -------
At 31 March 2017 1,564 30,868 32,432
------------------------ ----------- ------------ -------
Amortisation
At 1 April 2015 821 3,622 4,443
Provided in the period 151 2,428 2,579
Impairment - 1,247 1,247
Foreign exchange effect 5 - 5
------------------------ ----------- ------------ -------
At 31 March 2016 977 7,297 8,274
------------------------ ----------- ------------ -------
At 1 April 2016 977 7,297 8,274
Provided in the period 120 3,527 3,647
Foreign exchange effect (6) - (6)
------------------------ ----------- ------------ -------
At 31 March 2017 1,091 10,824 11,915
------------------------ ----------- ------------ -------
Net book value
At 31 March 2017 473 20,044 20,517
------------------------ ----------- ------------ -------
At 31 March 2016 485 16,066 16,551
------------------------ ----------- ------------ -------
Capitalised development costs reflect the expenditure attributable to the development of new technology that will provide economic benefit in future periods as set out in note 1(H). The Group's development costs relate to the Group's products, including COLLINE(R) , Oberon and AgileREPORTER(R) . The COLLINE(R) suite of products is individually significant; the net book value at 31 March 2017 is GBP8,021,000 (2016: GBP5,107,000). Amortisation is over a five-year period from the time when each separately identifiable intangible asset within the suite of products reaches its intended use by management. The remaining amortisation period for the COLLINE(R) suite of products varies accordingly and can be summarised as follows: four to five years - GBP3.1m; two to four years - GBP3.6m; and up to two years - GBP1.3m.
An impairment review was performed in relation to the year ended 31 March 2017 and no impairment was required. The assumptions used within the value-in-use calculations were based on internal forecasts and discount rates that were consistent with the approach adopted in prior years.
Prior year impairment
Four products were identified as impaired following a review of the carrying values of capitalised development costs during the year ended 31 March 2016. Two of the products form part of the Group's Risk Management and Trading software operating segment and two form part of the Group's Regulatory Reporting software operating segment.
The impairment within the Group's Risk Management and Trading software operating segment related to one product that has been brought to the end of its life and the other related to a module within a larger product that had no forecast revenue traction or pipeline. The net carrying value of the above were fully written down, resulting in an impairment charge of GBP469,000, which was included in the Administrative expenses line of the statement of comprehensive income.
The impairment within the Group's Regulatory Reporting software operating segment related to one product where development work has been discontinued and the other related to a product that has been brought to the end of its useful economic life. Both products have been fully written down, resulting in a combined impairment charge of GBP777,000 which was included in the Administrative expenses line of the statement of comprehensive income.
The review was carried out as part of the annual review of the carrying value of all intangible assets. This review involved a consideration of the recoverable amount of the asset, being the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. Where the recoverable amount was considered to be lower than the net carrying value, an impairment charge has been applied. The result of the review identified that future cash flows anticipated from the aforementioned asset are lower than had previously been expected and hence the asset has been written down to its recoverable amount by reference to value-in-use calculations. These calculations were based on discounted cash flows using a discount rate of 10%.
12. Trade and other receivables
2017 2016
GBP000 GBP000
--------------------------------- ------- -------
Current
Trade receivables 4,170 3,704
Other receivables 1,494 344
Prepayments 971 756
Derivative financial instruments - 17
Accrued income 2,803 1,419
--------------------------------- ------- -------
9,438 6,240
--------------------------------- ------- -------
Non-current
Accrued income 1,758 726
--------------------------------- ------- -------
1,758 726
--------------------------------- ------- -------
The current amounts are short term and the Directors consider that the carrying amount of these trade and other receivables approximates to their fair value. The non-current amounts are due within two to five years and are stated at fair value, determined by discounting future receipts at the rate of interest that discounts the nominal amounts receivable to the current cash sales price of the goods sold. All of the Group's trade and other receivables have been reviewed for indications of impairment. As at 31 March 2017, trade receivables of GBP4.2m (2016: GBP3.7m) were fully recoverable. An impairment provision of GBP0.5m (2016: GBP0.3m) has been made against the invoices of eleven clients (2016: nine clients). In addition, some of the unimpaired trade receivables are past due as of the reporting date. Trade receivables past due but not impaired are as follows:
2017 2016
GBP000 GBP000
-------------------------------------------- ------- -------
Not more than three months past due 1,477 345
More than three months but not more than
six months past due 56 71
More than six months but less than one year
past due 71 12
More than one year past due 34 52
-------------------------------------------- ------- -------
1,638 480
-------------------------------------------- ------- -------
All other receivables (non-trade) are not past due.
Movements in Group provisions for impairment of trade receivables, as included in administrative expenses, are as follows:
2017 2016
GBP000 GBP000
-------------------------------------- ------- -------
Opening balance 300 150
Movement in provision for receivables 219 150
-------------------------------------- ------- -------
Closing balance 519 300
-------------------------------------- ------- -------
The Group operates in a global market with income arising in a number of different currencies, principally Sterling, the Euro or the US Dollar. Other than natural opportunities to hedge, the Group does not hedge potential future income, since the existence, quantum and timing of such income cannot be accurately predicted.
13. Trade and other payables
2017 2016
GBP000 GBP000
-------------------------------------- ------- -------
Current
-------------------------------------- ------- -------
Trade payables 1,198 637
Other taxes and social security costs 1,266 1,260
Accruals and other payables 3,850 2,466
Finance lease liabilities 59 -
-------------------------------------- ------- -------
6,373 4,363
-------------------------------------- ------- -------
Non-current
Finance lease liabilities 122 -
-------------------------------------- ------- -------
122 -
-------------------------------------- ------- -------
14. Financial risk management and financial instruments
The Group's multinational operations expose it to financial risks that include market risk, credit risk, operational risk and liquidity risk. The Directors review and agree policies for managing each of these risks and they are summarised below. These policies have remained unchanged from the prior year.
Market risk
Market risk for the Group encompasses all those market risk factors that impact the value of the Group's assets and liabilities and the expected value in base currency of the Group's revenues and costs. The main risk factors are currency risk, inflation risk and interest rate risk. The Group's policies for managing these are as follows:
I) Currency risk
The Group is exposed to translational and transactional foreign exchange risk as it operates in various currencies, including the US Dollar, the Euro, the Chinese Yuan, the Hong Kong Dollar and the Singapore Dollar, which affect the management and levels of working capital.
Mitigation: Although, through its own software, the Group has access to sophisticated models for the management of foreign exchange risk, there has historically been no use of foreign exchange derivatives to manage this position as part of standard operations on the basis that the overall effect on the Group's income statement has not been large enough to warrant the management, costs and margin requirements of this activity. The Group does use natural hedges where the appropriate opportunity arises. In addition, the Group prepares working capital forecasts that incorporate sensitivity analysis on exchange rate fluctuations. The Group's main ongoing transactional exposure is to be long of the Euro and the US Dollar through Euro and US Dollar income exceeding expenditure in those currencies and short of Chinese Yuan through expenditure exceeding income in that currency. In the current and prior year the Group has used forward currency contracts to manage cash flows associated with the Chinese Yuan. Forward exchange contracts are mainly entered into for significant foreign currency exposures that are not expected to be offset by other same-currency transactions.
Foreign currency sensitivity
Foreign currency denominated financial assets and liabilities which expose the Group to currency risk are disclosed below. The amounts shown are those reported to key management translated into Sterling at the closing rate:
USD HKD SGD CNY
As at 31 March 2017 GBP000 GBP000 GBP000 GBP000
---------------------- ------- ------- ------- -------
Financial assets 3,165 817 372 222
Financial liabilities (582) (122) (285) (557)
---------------------- ------- ------- ------- -------
Total exposure 2,583 695 87 (335)
---------------------- ------- ------- ------- -------
USD HKD SGD CNY
As at 31 March 2016 GBP000 GBP000 GBP000 GBP000
---------------------- ------- ------- ------- -------
Financial assets 1,868 478 807 403
Financial liabilities (90) (13) (63) (323)
---------------------- ------- ------- ------- -------
Total exposure 1,778 465 744 80
---------------------- ------- ------- ------- -------
The following tables illustrate the sensitivity of profit and equity in regards to the Group's financial assets and financial liabilities and the USD/GBP exchange rate, HKD/GBP exchange rate, SGD/GBP exchange rate and CNY/GBP exchange rate "all other things being equal". It assumes a +/- 10% change of each of the exchange rates for the year ended 31 March 2017 (2016: 5%). These percentages have been determined based on the average market volatility in exchange rates in the previous twelve months. The sensitivity analysis is based on the Group's foreign currency financial instruments held at each reporting date and also takes into account forward exchange contracts that offset effects from changes in currency exchange rates.
If the GBP had strengthened against the other currencies by 10% (2016: 5%) then this would have had the following impact:
Profit
for the
year Equity
-------------- ------- ------- ------- ---------------- ------- ------- ------- ------- -------
USD HKD SGD CNY Total USD HKD SGD CNY Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
31 March 2017 (235) (63) (8) 30 (276) (235) (63) (8) 30 (276)
31 March 2016 (85) (22) (35) (19) (161) (85) (22) (35) (19) (161)
-------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
If the GBP had weakened against the other currencies by 10% (2016: 5%) then this would have had the following impact:
Profit for the year Equity
-------------- ------------------------------------------------------------------------------- -------
USD HKD SGD CNY Total USD HKD SGD CNY Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
31 March 2017 287 77 10 (37) 337 287 77 10 (37) 337
31 March 2016 94 24 39 21 178 94 24 39 21 178
-------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Group's exposure to currency risk.
II) Inflation risk
The Group has exposure to the inflationary effect in countries in which it operates, offset by its ability to raise prices in those countries in which it sells. This exposure could affect the Group's cost base. The Group's cost base is mainly exposed to the inflation rates and changes in payroll taxes in the UK, the US and China.
Mitigation: The inflation rate for salaries in specialised parts of the financial sector in a financial centre such as London, New York or Shanghai is often different from the relevant country's overall rate of wage inflation. Salary inflation in these markets and internally is monitored. No specific hedging of inflation risk has been carried out.
III) Interest rate risk
Interest rate risk arises primarily on the investment of the Group's cash balances or on its borrowings and the present value of the Group's receivables. In particular, interest on the Group's borrowings is affected by LIBOR.
Mitigation: The Group finances its operations through retained cash reserves and overdraft facilities. The policy of the Group is to monitor exposure to interest rate risk and take into account potential movements in interest rates as well as liquidity considerations when selecting methods of financing.
Interest rate sensitivity
The Group has limited risk to interest rates ("LIBOR") changes as borrowings were repaid by 31 March 2015, with the Group now having in place a revolving loan agreement as outlined below.
The following table illustrates the sensitivity of profit and equity to a reasonably possible change in interest rates ("LIBOR") of +1% or -1%. These changes are considered to be reasonably possible based on observations of current market conditions. These calculations are based on a change in the average market interest rate for each period and the financial instruments held at each reporting date that are sensitive to changes in interest rates. All other variables are held constant.
Profit for
the year Equity
-------------- --------------
GBP000 GBP000 GBP000 GBP000
-------------- ------ ------ ------ ------
LIBOR +1% -1% +1% -1%
-------------- ------ ------ ------ ------
31 March 2017 (722) (689) 29,192 29,225
-------------- ------ ------ ------ ------
Credit risk
Credit risk is the risk that a third party might fail to fulfil its performance obligations under the terms of a financial instrument. For cash and cash equivalents and trade and other receivables, credit risk represents the carrying amount on the balance sheet.
Mitigation: Most of the Group's business is with banks, asset management firms and other high quality companies and the Group's bad debt experience over fifteen years has been negligible. The Group consequently has not considered taking out credit insurance and is not likely to do so in the foreseeable future. Deposits are placed with high quality banks. The Group closely monitors its credit risk.
There has been no use of credit derivatives to mitigate counterparty risk and no such use is contemplated.
The Group's exposure to credit risk is limited to the carrying amount of financial assets recognised at the balance sheet date, as summarised below:
Loans Loans
and and
Held Held for
for trading receivables trading receivables
(amortised (amortised
(FVTPL) cost) Total (FVTPL) cost) Total
2017 2017 2017 2016 2016 2016
Classes of financial
assets - carrying amounts GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------- ------------ ------------- ------- -------- ------------ -------
Cash and cash equivalents - 7,008 7,008 - 3,342 3,342
Derivative financial
instruments - - - 17 - 17
Trade and other receivables - 10,225 10,225 - 6,193 6,193
---------------------------- ------------ ------------- ------- -------- ------------ -------
- 17,233 17,233 17 9,535 9,552
---------------------------- ------------ ------------- ------- -------- ------------ -------
The Group's derivative financial instruments are measured at fair value and are summarised below:
2017 2016
GBP000 GBP000
---------------------------------------- ------- -------
Chinese Yuan forward currency contracts
(held for trading) - 17
---------------------------------------- ------- -------
The Group uses forward foreign exchange contracts to mitigate exchange rate exposure arising from forecast costs in Chinese Yuan. The contracts are considered by management to be part of economic hedge arrangements but have not been formally designated as hedging instruments, so are treated as held for trading in accordance with IAS 39. The above contract as at 31 March 2016 was short term in nature and was settled within twelve months of the 2016 year end.
Operational risk
The Group has numerous operational risks, ranging from control over bank accounts to its processes for delivering and supporting software to a required level of quality and on a timely basis and retention and recruitment of key personnel. A key risk, as for any group, is the reputational risk that might arise from poor execution, non-delivery or late delivery of a high profile project or a breach of client confidentiality for sensitive data. Further risks may arise where late delivery of software or untimely delivery of related services cause a client to miss regulatory deadlines.
Mitigation: The Group's Audit Committee regularly reviews controls over certain aspects of the operations of the Group. In addition, the Audit Committee maintains an operational risk register. Such a detailed operational risk review is outside the scope of this report but the Board attaches importance to maintaining appropriate internal controls to identify and limit these risks; this includes integrated project management across all functions of the business.
Liquidity risk
Liquidity risk is the risk of loss from not having access to sufficient funds to meet both expected and unexpected cash demands.
Mitigation: The Group seeks to manage financial risk by ensuring that sufficient liquidity is available to meet foreseeable needs and by investing cash assets safely as well as profitably. The Group's working capital report, produced each month, shows forecast monthly movements in working capital and cash for the following year. When required the Group has a short-term overdraft facility which at the year end has not been used. At 31 March 2017 the Group's financial liabilities were as follows:
2017 2016
GBP000 GBP000
---------------------------------------------- ------- -------
Current liabilities
Trade and other payables 5,229 3,103
---------------------------------------------- ------- -------
Categorised as financial liabilities measured
at amortised cost 5,229 3,103
---------------------------------------------- ------- -------
Maturity analysis
At 31 March 2017 the Group's financial liabilities have contracted maturities which are summarised below:
2017 2016
------------------ ----------------
One
One to Up to to
Up to five one five
one year years year years
GBP000 GBP000 GBP000 GBP000
------------------------- --------- ------- ------- -------
Trade and other payables 5,107 122 3,103 -
------------------------- --------- ------- ------- -------
Total 5,107 122 3,103 -
------------------------- --------- ------- ------- -------
The above contractual maturities reflect the payment obligations which may differ from the carrying value of the liabilities at the balance sheet date.
Capital management
The Group's capital management objectives are to ensure the Group's ability to continue as a going concern and ultimately to provide a return to shareholders. The Group monitors capital in proportion to risk and makes adjustments in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure the Group may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt. The Group has pursued a progressive dividend policy for a number of years; however, it is the view of the Board that the Group is at a stage in its development where its resources can be best utilised within the business to accelerate the substantial opportunities that the Group is in a position to exploit in the coming months and years.
The Group had bank borrowings of GBPnil as at the year end. During the year ended 31 March 2015 the Group entered into a GBP2.5m revolving loan agreement with Barclays Bank Plc at a margin of 3.85%. This agreement was terminated by the Group during the year. The Group has put in place post year end a GBP4.0m revolving loan facility agreement with Barclays Bank Plc at a margin of LIBOR plus 3.5%.
15. Fair value measurement of financial instruments
Financial assets and financial liabilities measured at fair value are required to be grouped into three Levels of a fair value hierarchy. The three Levels are defined based on the observability of significant inputs to the measurement, as follows:
- Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;
- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and
- Level 3: unobservable inputs for the asset or liability.
The following table shows the levels within the hierarchy of financial assets and liabilities measured at fair value on a recurring basis at 31 March 2017 and 31 March 2016:
Level Level Level Level Level Level
1 2 3 Total 1 2 3 Total
2017 2017 2017 2017 2016 2016 2016 2016
Classes of financial
assets - carrying
amounts GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------- ------- ------- ------- ------- ------- ------- ------- -------
Cash and cash equivalents - - - - - - - -
Derivative financial
instruments - - - - - 17 - 17
Trade and other receivables - - - - - - - -
---------------------------- ------- ------- ------- ------- ------- ------- ------- -------
- - - - - 17 - 17
---------------------------- ------- ------- ------- ------- ------- ------- ------- -------
There were no transfers between Level 1 and Level 2 in 2017 or 2016.
Measurement of fair value of financial instruments
The Group's finance team performs valuations of financial items for financial reporting purposes, with valuation techniques selected based on the characteristics of each instrument, with the overall objective of maximising the use of market-based information. The Group's foreign currency forward contracts (Level 2) are not traded in active markets, so have been fair valued using observable forward exchange rates corresponding to the maturity of the contract. The effects of non-observable inputs are not significant for foreign currency forward contracts.
16. Share capital
2017 2016
GBP000 GBP000
----------------------------------------- ------- -------
Authorised
714,034,085 Ordinary Shares of 0.5p each
(2016: 714,034,085) 3,570 3,570
----------------------------------------- ------- -------
Allotted, called up and fully paid
400,593,920 Ordinary Shares of 0.5p each
(2016: 305,531,260) 2,003 1,528
429,829,575 Deferred Shares of 0.1p each
(2016: 429,829,575) 430 430
----------------------------------------- ------- -------
2,433 1,958
----------------------------------------- ------- -------
The Deferred Shares carry no rights to receive dividends or to participate in any profits of the Company. The shareholders are not entitled to attend any meetings of the Company or have any rights to participate in any return of capital (except on a winding up). The Deferred Shares are not transferable other than with the consent of all the Directors of the Company.
Ordinary Shares of 0.5p each in issue at 1 April 2016 305,531,260 Placing of shares 91,428,572 Open offer of shares 3,434,088 Share options exercised 200,000 -------------------------------------------- ----------- Ordinary Shares of 0.5p each in issue at 31 March 2017 400,593,920 -------------------------------------------- -----------
There was no movement in the number of deferred shares during the year.
Share issue
On 17 June 2016, the Company issued 91,428,572 Ordinary Shares of 0.5p per share as part of a placing. The shares were issued at a premium of 8.25p per share, which has been credited to the share premium account.
On 7 July 2016, the Company issued 3,434,088 Ordinary Shares of 0.5p per share as part of an open offer announced alongside the June 2016 placing. The shares were issued at a premium of 8.25p per share, which has been credited to the share premium account.
On 6 September 2016, the Company issued 200,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 17. The shares were issued at a premium of 5.5p per share, which has been credited to the share premium account.
17. Share options
Employee share options charge
The fair value is based on a number of assumptions as stated below.
In accordance with the accounting policy stated under note 1(N), the expected volatility was determined by reference to historical data of the Company's shares over a period of time since its flotation. For the year under review the volatility ranged between 32.5% to 43.8%, giving a charge to profit and loss for the year ended 31 March 2017 of GBP196,332 (2016: GBP182,745) offset by lapsed share option reversal of GBP15,589, with the same amount being credited to reserves. For details of the volatility used in each individual calculation see the table on page 60.
Equity-settled share-based payments
The Company has three share option schemes for all employees. Options are granted to employees based on the discretion of the Directors to reward performance. The options are settled in equity once exercised. If the options remain unexercised after the end of the exercise period, the options expire. Options are forfeited if the employee leaves the Company.
Under the approved and unapproved option schemes the Remuneration Committee can grant options for employees of the Group. Options are granted with a fixed exercise price which is typically issued at, or at a premium to, the market price. The contractual life is between five and ten years from the date of grant. Options become exercisable after two or three years. The vesting period runs for two to eight years from the date the options first vest. There are no other performance conditions other than the vesting period.
The fair values of the options were calculated using a numerical binomial model assuming the inputs shown below:
Exercise
At start Lapsed/ At end price Exercise Exercise
of year Granted Exercised waived of year (p) date from date to
----------- ---------- --------- --------- ----------- ---------- -------- ------------ ----------
October
2004 EMI 255,000 - (200,000) (55,000) - 6.00 October 2011 2016
Scheme 1,000,000 - - (500,000) 500,000 12.00 April 2015 April 2018
----------- ---------- --------- --------- ----------- ---------- -------- ------------ ----------
Unapproved 500,000 - - - 500,000 12.00 April 2014 April 2017
Scheme 900,000 - - - 900,000 12.00 May 2014 May 2017
300,000 - - - 300,000 13.00 July 2015 July 2018
200,000 - - - 200,000 13.00 July 2016 July 2018
August
500,000 - - - 500,000 13.00 August 2015 2018
August
250,000 - - - 250,000 13.00 August 2016 2018
August
250,000 - - - 250,000 13.00 August 2017 2018
530,422 - - - 530,422 12.00 May 2016 May 2019
265,211 - - - 265,211 12.00 May 2017 May 2019
265,211 - - - 265,211 12.00 May 2018 May 2019
September August
884,615 - - - 884,615 13.00 2016 2019
September August
442,308 - - - 442,308 13.00 2017 2019
September August
442,308 - - - 442,308 13.00 2018 2019
September September
4,437,265 - - (11,793) 4,425,472 14.00 2016 2019
September September
2,218,633 - - (5,896) 2,212,737 14.00 2017 2019
September September
2,218,632 - - (5,896) 2,212,736 14.00 2018 2019
November November
113,637 - - - 113,637 11.00 2017 2022
November November
56,818 - - - 56,818 11.00 2018 2022
November November
56,818 - - - 56,818 11.00 2019 2022
December December
1,369,565 - - - 1,369,565 11.50 2017 2022
December December
684,783 - - - 684,783 11.50 2018 2022
December December
684,783 - - - 684,783 11.50 2019 2022
January
72,341 - - - 72,341 11.75 January 2018 2023
January
36,170 - - - 36,170 11.75 January 2019 2023
January
36,170 - - - 36,170 11.75 January 2020 2023
February January
365,229 - - - 365,229 11.13 2018 2023
February January
182,615 - - - 182,615 11.13 2019 2023
February January
182,615 - - - 182,615 11.13 2020 2023
- 346,154 - - 346,154 9.75 June 2018 May 2023
- 173,077 - - 173,077 9.75 June 2019 May 2023
- 173,077 - - 173,077 9.75 June 2020 May 2023
- 203,571 - (203,571) - 8.75 June 2018 June 2023
- 101,786 - (101,786) - 8.75 June 2019 June 2023
- 101,786 - (101,786) - 8.75 June 2020 June 2023
December November
- 815,499 - (815,499) - 8.13 2018 2023
December November
- 407,749 - (407,749) - 8.13 2019 2023
December November
- 407,749 - (407,749) - 8.13 2020 2023
February January
- 71,003 - - 71,003 8.38 2019 2024
February January
- 35,501 - - 35,501 8.38 2020 2024
February January
- 35,501 - - 35,501 8.38 2021 2024
- 375,000 - - 375,000 8.5 March 2019 March 2024
- 187,500 - - 187,500 8.5 March 2020 March 2024
- 187,500 - - 187,500 8.5 March 2021 March 2024
----------- ---------- --------- --------- ----------- ---------- -------- ------------ ----------
CSOP 2,289,156 - - (150,000) 2,139,156 12.00 March 2017 March 2024
Scheme 300,000 - - - 300,000 12.00 April 2017 April 2024
September August
230,769 - - - 230,769 13.00 2017 2024
September September
775,470 - - (226,415) 549,055 14.00 2017 2024
November November
272,727 - - - 272,727 11.00 2018 2025
December December
260,869 - - - 260,869 11.50 2018 2025
January
255,319 - - - 255,319 11.75 January 2019 2026
February January
269,541 - - - 269,541 11.13 2019 2026
- 307,692 - - 307,692 9.75 June 2019 May 2026
- 342,857 - (342,857) - 8.75 June 2019 June 2026
December November
- 369,003 - (369,003) - 8.13 2019 2026
February January
- 357,995 - - 357,995 8.38 2020 2027
----------- ---------- --------- --------- ----------- ---------- -------- ------------ ----------
24,355,000 5,000,000 (200,000) (3,705,000) 25,450,000
----------- ---------- --------- --------- ----------- ---------- -------- ------------ ----------
Details of share options granted during the year are as follows:
June June June June December December February February
2016 2016 2016 2016 2016 2016 2017 2017
-------------------- ------ ------ ------ ------ -------- -------- -------- --------
Share price
at grant 9.75p 9.75p 8.75p 8.75p 8.13p 8.13p 8.38p 8.38p
Exercise
price 9.75p 9.75p 8.75p 8.75p 8.13p 8.13p 8.38p 8.38p
Contractual
life (years) 5 7 5 7 5 7 5 7
Staff turnover 25% 25% 25% 25% 25% 25% 25% 25%
Risk-free Discount curve used for UK on the day of
rate valuation
Expected
volatility 32.64% 32.64% 32.48% 32.48% 41.41% 41.41% 42.94% 42.94%
Expected
dividend
yield - - - - - - - -
Fair value
of option 3.25p 3.96p 2.88p 3.51p 3.34p 4.01p 3.55p 4.25p
-------------------- ------ ------ ------ ------ -------- -------- -------- --------
March
2017
-------------------- ------
Share price
at grant 8.50p
Exercise price 8.50p
Contractual
life (years) 5
Staff turnover 25%
Risk-free rate
- (as above)
Expected volatility 43.81%
Expected dividend
yield -
Fair value
of option 3.60p
-------------------- ------
Details of the number of share options and the weighted average exercise price ("WAEP") outstanding during the year are as follows:
2017 2017 2016 2016
Number WAEP Number WAEP
-------------------------------- ----------- ------ ------------ ------
Outstanding at beginning of the
year 24,355,000 12.26p 35,283,623 11.96p
Granted during the year 5,000,000 8.63p 6,900,000 11.71p
Exercised during the year (200,000) 6.00p (4,420,000) 5.06p
Lapsed during the year (3,705,000) 9.30p (13,408,623) 12.68p
-------------------------------- ----------- ------ ------------ ------
Outstanding at end of the year 25,450,000 12.50p 24,355,000 12.26p
-------------------------------- ----------- ------ ------------ ------
Exercisable at the year end 11,129,665 2,455,000
-------------------------------- ----------- ------ ------------ ------
The weighted average remaining contractual life of share options outstanding at the year end was 4.0 years (2016: 4.5 years).
18. Operating leases
The Group had commitments under non-cancellable operating leases in respect of land and buildings. The Group's future minimum operating lease payments are as follows:
2017 2016
GBP000 GBP000
------------------------- ------- -------
Within one year or less 1,408 935
Within one to five years 5,249 3,758
More than five years 291 1,424
------------------------- ------- -------
Total 6,948 6,117
------------------------- ------- -------
19. Pensions
A Group company contributes to a defined contribution pension scheme on behalf of a limited number of employees of that subsidiary. The assets of the scheme are administered by trustees in a fund independent of the Company. Under the government's pension auto enrolment legislation, employers must automatically enrol into a "qualifying pension scheme" all qualifying employees not already in a pension scheme as well as all new starters. The legislation also requires that those who have opted out must be reviewed and enrolled again every three years. Other defined contribution pension schemes to which the Group makes contributions on behalf of employees are of the stakeholder variety, again totally independent of the Company.
20. Related party transactions
Other than as stated below, there are no related party transactions in this reporting year or comparative period.
Key management of the Group are the Directors of the Parent Company. The aggregate dividends paid to Directors in the year were GBPnil (2016: GBP52,000). Details of the Directors' remuneration are set out in note 3 and in the Remuneration Committee report.
During the year the Group engaged Broderick Associates Ltd, a company controlled by Sandy Broderick, to provide additional consultancy services outside of his role as a Non-executive Director. The services were performed on an arm's length basis and fees totalled GBP19,200 (2016: GBPnil). There were no balances owing or owed at the year end (2016: GBPnil).
21. Controlling personnel related parties
In the opinion of the Directors, there was no ultimate controlling party at 31 March 2017.
22. Dividends
During 2017, Lombard Risk Management plc paid a dividend of GBPnil (2016: GBP243,321) to its equity shareholders. This represents a payment of nil per share (2016: 0.08p).
It is the view of the Board that the Group is at a stage in its development where its resources can be best utilised within the business to accelerate the substantial opportunities that the Group is in a position to exploit in the coming months and years. The Board does not, therefore, propose to pay a dividend.
23. Report and Accounts
Copies of the annual report and accounts will be sent to shareholders and will be available to the public from the Company's head office, 7th Floor, 60 Gracechurch Street, London, EC3V 0HR. The report and accounts will also be available to download from the investor relations section of the Company's website www.lombardrisk.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SEUFUDFWSEII
(END) Dow Jones Newswires
May 24, 2017 02:01 ET (06:01 GMT)
1 Year Lombard Risk Management Chart |
1 Month Lombard Risk Management Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
