Lombard Risk Management Regulatory News (LRM)

21 May 2015

Lombard Risk Management

("Lombard Risk", the "Company" or the "Group")

Final Results for the year ended 31 March 2015

Lombard Risk Management plc (LSE:LRM), a leading provider of integrated collateral management, regulatory compliance and reporting solutions for the financial services industry, is pleased to announce its final results for the year to 31 March 2015.

Highlights

· Revenue increased by 5.4% to £21.5m (2014: £20.4m)

· Adjusted EBITDA decreased to £4.3m (2014: £6.0m)

· Profit before tax decreased to £2.3m (2014: £4.4m)

· Strong performance from North American Collateral business

· Number of COREP customers rose to 125

· Good progress made with next generation of regulatory product

· Further significant progress with Alliances Programme

· Well placed for future growth

For further information, please contact:

Executive Chairman's Statement

The Board is pleased to report another year of revenue growth for Lombard Risk and a number of significant client wins.

Highlights

The Group recorded revenue growth in both its Regulatory Compliance and Risk Management divisions but the rate of growth declined on previous years and we updated the market to this effect on 11th March 2015. The decline in revenue growth was largely attributable to regulatory delays which have led to the deferral of opportunities rather than their loss. A number of significant contract wins in the second half of the year reaffirms our belief in the value that our technology solutions provide to our clients.

The Group has made substantial progress with its Alliances programme which has delivered revenues in the year and gives us grounds for optimism over the coming months. We consider the support and engagement of our partners to be further validation of our product and service offerings.

The environment of regulatory change continues apace and we have continued to invest strategically in both our products and our infrastructure to ensure that we remain in a position to provide our customers with the highest quality products, implementation and post-sale support. Following the expiry of our office leases in London, New York and New Jersey, we have taken on new premises for our group headquarters in London and have combined our US East Coast teams into a consolidated office in Manhattan, NY.

The investment in the Group's infrastructure is reflected in the profits for the year which are down on the prior year, but this is primarily as a result of increasing resources through the recruitment of additional headcount for both the delivery and support of client projects.

Dividend

We have pursued a progressive dividend policy for a number of years now and on the back of the Group's performance for the year, the Board proposes a final dividend of 0.045p per share which, if approved, will be paid on 27 July 2015 to those shareholders on the register on 10 July 2015. This brings the dividend for the year to 0.08p per share (2014: 0.075p), an increase of 6.7%.

Strategy

We stated last year that the Board intended to replicate the strong performance from its direct sales team in Europe in the Americas and Asia Pacific and we are pleased to say that the Group experienced encouraging growth for its collateral management product, particularly in the North American region. The Board continues to have faith in the direct sales function and, following some initial success in the past financial year, expects to see this complemented by increased sales traction through our global network of partners.

The increase in opportunities through our partner network is providing us with exposure to both a broader range of larger clients and opportunities in new territories. It is the Board's intention to pro-actively invest in these opportunities to serve as a further engine for growth.

Employees

Our employees remain one of our core assets and their specialist knowledge, commitment, diligence and pride in what they do is a credit to both them and the Group as a whole. We remain proud of the diversity that is evident in our workforce and the Board would like to thank all of our employees for their valued contribution.

Board of Directors

Since the Annual General Meeting held in 2014 we have appointed Nigel Gurney as Executive Director and Chief Financial Officer, effective 1 September 2014.

On 18th May 2015 John Wisbey informed the Board of his intention to stand down as Chief Executive of the Company with immediate effect. Previously the Company's Non Executive Chairman, Philip Crawford is now the full time Executive Chairman on an interim basis until such time that the Board is in a position to appoint a new Chief Executive. John Wisbey will continue to serve the Company as a Non Executive Director.

AGM

The Annual General meeting will be held at the Group's London office at 9.30am on Thursday 9 July 2015. The Directors look forward to meeting shareholders at that time.

Business review

The year was another record year for revenues, although revenue growth was not as strong as we had hoped. Revenue increased by 5.4% to £21.5m, giving a five year compound annual revenue growth rate of 19.2%. Annually recurring revenues made up 42% (2014: 42%) of total revenues. Net cash at 31 March was almost unchanged from the level 12 months previously at £2.24m (2014:£2.26m).

In line with the Group's usual trading pattern, second half revenue of £12.2m (2014: £13.1m) was higher than the first half of £9.3m (2014: £7.3m) and accounted for 56.9% of the year's total revenue. This compares with an average for second half revenue in the last five years of 55.3% of the year's total revenue. The previous year 2014 was a clear outlier with second half revenues making up 64.4% of the full year revenues, the only year in 10 years that it had exceeded 60%.

We have continued to invest appreciably during the year, in product development, delivery capability and in further strengthening the sales team, including the appointment of a Managing Director, Americas. Costs were also significantly higher in the second half, reflecting an increase in headcount and this resulted in a fall in EBITDA and also Profit Before Tax. In addition, the proportion of development costs capitalised was lower, which also affected profitability.

Different parts of the business performed with varying degrees of success. The UK regulatory business had an extremely high growth rate in 2014 with the UK regulatory change around the EBA's COREP and despite continued regulatory change it was hard to repeat that performance for two years in a row.

The Risk Management and Trading business performed well, especially in North America and Japan, and we concluded a number of significant contract wins in the financial year for our COLLINE© collateral management software in both North America and Asia, along with the successful deployment of two substantial projects for COLLINE© in Europe. There is appreciable regulatory change affecting the collateral management space, including regulations being agreed by IOSCO (International Organization of Securities Commissioners). However, towards the end of the financial year the key regulatory date for IOSCO slipped by nine months, and this reduced the urgency with which our customers are required to make their buying decisions, with resultant deferral of revenue.

Outlook

The Board looks forward to the forthcoming year with a mix of excitement and optimism. The Group continues to benefit from having a strong market position in two important and growing segments of the financial industry, namely regulation and collateral management. We see the growth in our partner programme as being an important factor in the evolution of the Group over the coming months.

The European Banking Authority's initiatives continue to keep us extremely busy, and revenue from this will continue in the current financial year with more revenue from ALMM and LCR reports expected. We concluded our first contract to deliver the new United States Federal Reserve reports FRY-14, and we expect this to be an important contributor to the current financial year along with the IOSCO changes. We also concluded a contract with a major US bank for its Asian regulatory reporting, and this is strategically important to our Asian strategy. Additional growth can also be expected to come from the Compliance area, for example for the new Senior Managers Regime which comes into effect in March 2016. Our proportion of revenue from Alliances is expected to grow quite appreciably this year. As a result of all the above we remain confident of further growth in the new financial year and beyond.

We enter the new financial year with our recurrent revenues at another all-time high of around £9.5m (2014: £8.6m), our highest ever level of order book at £5.9m and with a good sales pipeline.

We will continue with our planned investments to support our future growth. Current trading is satisfactory and our expectations for the year as a whole remain broadly unchanged.

Philip Crawford

Executive Chairman

20 May 2015

Financial Review

Group Results

Group revenue increased by 5% to a record £21.5m compared with £20.4m in the prior year, with growth recorded in both the Regulatory Compliance and Risk Management and Trading software divisions. Licence revenues increased in the year by 1% to £9.5m (2014: £9.4m), representing 44% of revenues (2014: 46%). Recurring revenues totalled £9.1m compared with £8.6m in the prior year and represented approximately 42% of revenue (2014: 42%). Recurring revenues now have a current annual run rate in excess of £9.5m.

Operating profit before share-based payment charges, depreciation and amortisation (adjusted EBITDA) was £4.6m (2014: £6.0m). Profit before tax fell to £2.3m (2014: £4.4m), resulting in basic earnings per share of 0.87p (2014: 2.07p). The proposed full year dividend per share is an increase of 6.7% to 0.08p in line with the Group's progressive dividend policy, which equates to a dividend cover ratio of 10.9 times.

The effective rate of tax for the year was 0.1% (2014: credit of 16.6%). The deferred tax asset was marginally higher at £1.0m (2014: £1.0m) and the unrecognised deferred tax asset was £1.5m (2014: £2.0m).

Cash flow

Cash generated in operations was £5.7m (2014: £5.2m). 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. During the last financial year the Group entered into a £2.5m Revolving Loan Agreement with Barclays Bank Plc at a margin of 3.85%. There were no amounts owing under this agreement at the end of the financial year.

Investment in development expenditure that was capitalised was £5.1m (2014: £5.3m).

The Group raised £0.03m (2014: £0.4m) resulting from the exercise of employee stock options.

Net group cash, being cash and cash equivalents less borrowings, of £2.2m is marginally down on the prior year (2014: £2.3m) following the repayment of the Sterling bank loan of £2.0m that had been taken out in 2012, against which £0.67m was repaid in the year.

Balance Sheet

Non-current assets at 31 March 2015 increased to £22.6m (2014: £18.0m) primarily as a result of the continued investment in capitalised development costs. This investment was applied across the Group's suite of products and included £1.5m of investment in COLLINE®, £1.3m in European regulatory reporting and £0.9m in the software platform to support its regulatory reporting products. The directors are 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 £5.9m in respect of goodwill arising on previous acquisitions, £4.5m in respect of the written-down value of the Group's investment in COLLINE®, £3.4m in respect of the Group's regulatory reporting products and £1.9m relating to the development of the software platform that supports these products. During the year the Group's technical team incurred costs of £2.4m that did not meet the criteria for capitalisation and were therefore recorded as an expense in the profit and loss account.

Net group cash at 31 March 2015 was £2.2m (2014: £2.3m). The Group had no borrowings at the balance sheet date (2014: £0.7m).

Trade receivables were 17% of revenues as at 31 March 2015, compared to 14% and 13% for 2014 and 2013 respectively.

FRC Review

The Group's financial statements for the year ended 31 March 2013 were subject to a review by the Conduct Committee of the Financial Reporting Council ("FRC"). Further information on the outcome of this review can be found in the report of the Audit committee and in note 23 to the financial statements.

Year on year trends

The capitalisation of development costs for the last four 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 users to make a more informed assessment of the financial performance of the Group. 

* Includes research, development, testing, support and product maintenance.

* Operating profit less capitalised development costs adding back depreciation, amortisation and share-based payment charge.

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

20 May 2015

Consolidated statement ofcomprehensive income

For the year ended 31 March 2015

The accompanying accounting policies and notes form an integral part of the financial statements.

Consolidated balance sheet

As at 31 March 2015

Consolidated statement of changesin shareholders' equity

For the year ended 31 March 2015

Consolidated cash flow statement

For the year ended 31 March 2015

Notes to the consolidatedfinancial statements

For the year ended 31 March 2015

1. Accounting policies

(A) Basis of preparation

These consolidated financial statements are for the year ended 31 March 2015. They have been prepared in accordance with International Financial Reporting Standards ("IFRS") and IFRS Interpretation Committee ("IFRIC") interpretations as at 31 March 2015, 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 on-going basis.

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 periodbeginning 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.

· IFRS 9 "Financial instruments" (effective 1 January 2018)IFRS 9 addresses the classification and measurement of financial assets and will replace IAS 39. The standard is mandatory for accounting periods commencing on or after 1 January 2018, subject to adoption by the European Union.

(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 5 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 2015. 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 mainoperating segments: Regulatory Compliance software and Risk Management and Trading software. Regulatory Compliance software is for 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 2015, both in the signing of new business contracts and in the realised financial results. These show continued profitability and stability in the cash balance at 31 March 2015. The Directors have prepared a cash flow forecast for the period to 30 June 2016, which shows that the Company and Group have sufficient facilities for on-going 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 2015.

(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 up-front 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 up-front delivery of immediately usable software, revenue is recognised on a percentage completion basis. For non-refundable licences, revenue is recognised in full on customer acceptance as there are no on-going 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 group 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 group 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 yearsbased 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, borrowings and trade and other payables. Derivative instruments are not used by the Group and the Group does not enter into speculative derivative contracts.

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

The Group does not hold any finance leases.

All leases referred to 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 up-front 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 limit 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:

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 are divided into the following geographical areas:

In the year ended 31 March 2015 10% (2014: 11%) of the revenue depended on a single customer within the Risk Management and Trading software segment.

3. Directors and employees

During the year two directors accrued benefits under pension schemes (2014: one).

The average monthly number of employees (excluding Directors) during the year was:

4. Profit from operations

The profit from operations before taxation is stated after charging / (crediting):

5. Finance expense

6. Finance income

7. Taxation

(A) Analysis of charge in the period

(B) Research and development tax credits

The Group has received to date research and development tax credits of £1,038,000 (2014: £1,038,000). As for all companies that have received these credits, the amounts are subject to potential future HM Revenue & Customs claw back.

(C) Tax on profit on ordinary activities

The tax assessed for the period is the standard rate of corporation tax in the UK of 21% (2014: 23%). The difference is explained as follows:

 (D) Unrecognised deferred tax

A deferred tax asset of £1.5m (2014: £2.0m) 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.

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. Profit per share

Basic profit per share has been calculated by dividing the profit after taxation by the weighted average number of Ordinary Shares in issue during each period.

For diluted earnings per share, the weighted average number of shares, 263,491,123 (2014: 251,717,005), is adjusted to assume conversion of all dilutive potential Ordinary Shares under the Group's share option plans, being 3,387,680 (2014: 3,051,314), to give the diluted weighted number of shares of 266,878,803 (2014: 254,768,319).

Profit per share

9. Non-controlling interest

The non-controlling interest relates to 20% of Lombard Risk Compliance Policies Limited, whose principal place of business is in the United Kingdom, that is owned by a third party. The proportion of voting rights held by non-controlling interests is 20%. The loss for the year allocated to the non-controlling interests is £38,000 (2014: £45,000). The accumulated non-controlling interest at the end of the year are £120,000. For the year ended 31 March 2015, Lombard Risk Compliance Policies Limited recorded a net loss before tax of £197,000 and had net liabilities of £600,000.

10. Property, plant and equipment

11. Goodwill and other intangible assets

Goodwill

Other Intangible assets

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®, ComplianceASSESSOR, REFORM™, MIS reporting, etc. The COLLINE® suite of products is individually significant; the net book value at 31 March 2015 is £4,502,000 (2014: £3,629,000). 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® suite of products varies accordingly and can be summarised as follows: 4 to 5 years: £3.9m; 2 to 4 years: £0.4m; 0 to 2 years: £0.2m.

One of the Risk Management products was identified as impaired following a review of the carrying values of capitalised development costs during the year ended 31 March 2014. The product forms part of the Group's Risk Management and Trading software operating segment. The net carrying value of the product was therefore written down to £300,000, resulting in an impairment charge of £424,000 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 cashflows 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%.

The restatement of capitalised development costs followed a review by the Conduct Committee of the Financial Reporting Council. Further details of this review are set out in note 23.

12. Trade and other receivables

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 2015, trade receivables of £3.7m (2014: £2.9m) were fully recoverable. An impairment provision of £0.15m (2014: £0.13m) has been made against the invoices of eleven clients (2014: nineteen 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:

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:

The Group operates in a global market with income arising in a number of different currencies, principally Sterling, Euros or US Dollars. 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. Borrowings

All the borrowings were repaid during the financial year under review and there is no outstanding balance at 31 March 2015. Borrowings at 31 March 2014 comprised a Sterling bank loan.

The Sterling bank loan was repayable in equal quarterly instalments over a three-year term with the first repayment in April 2012. The loan principal was £2.0m and interest was payable at the rate of LIBOR + 4%. There is no balance outstanding at 31 March 2015 (2014: £0.7m).

14. Trade and other payables

15.  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.