22 Oct 2015 07:00
22 October 2015
Lombard Risk Management plc
("Lombard Risk" or the "Company")
Interim results for the six months ended 30 September 2015
Lombard Risk Management plc (LSE: LRM), a leading global provider of collateral management, liquidity and regulatory reporting and compliance solutions for the financial services industry, is pleased to announce its interim results for the six months ended 30 September 2015.
Highlights
• Revenue of £10.8m (2014: £9.3m) up 16.1%
• Order book of contracted revenue at £6.8m (2014: £5.1m)
• Bookings for the period up 48% on the previous year
• EBITDA of £0.5m (2014: £0.8m)
• Loss before tax of £1.8m (2014: profit of £0.01m)
• Loss per share of 0.66p (2014: earnings per share of 0.00p)
• Write down of £0.7m (2014: £Nil) against carrying value of capitalised research and development
• Cash at period end of £2.7m (2014: £2.2m) with no debt (2014: £0.3m)
• Equity placing to raise £4.0m completed in May 2015
• Interim dividend of 0.035p (2014: 0.035p) per Ordinary Share
• Continued investment in European Banking Authority regulatory initiatives, COLLINE® and the next generation of REPORTER
• Major new contract win through alliance partnership
• Strengthening of Board through appointment of independent Non-executive Directors
Current trading and outlook
• Regulatory change and evolution create further opportunities in H2 and into the following financial year
• Strong pipeline adds to revenue visibility from contracted or recurring revenue
Philip Crawford, Executive Chairman of Lombard Risk Management, commented: "The Board remains optimistic about the second half of the year, based on record levels of both contracted orders and recurring revenue streams. We recognise the continuing risks to our business of the impact of economic slowdown and the resulting effect on our core client base; however, we believe the continuing emphasis on regulatory change and indeed evolution represents a significant opportunity for the Company."
For further information, please contact:
Lombard Risk Management Philip Crawford, Executive Chairman Nigel Gurney , Finance Director
| 020 7593 6700 |
Panmure Gordon (UK) Limited Nominated Adviser and Broker Russell Cook James Greenwood
| 020 7886 2500 |
Newgate Tim Thompson Bob Huxford Robyn McConnachie | 020 7653 9850
|
Executive Chairman's statement
Summary
The Board is pleased to present our interim report to the end of September 2015.
Revenues were £10.8m for the six months ended 30 September 2015, representing growth of 16.1% over the corresponding period last year. Revenue growth has been achieved in both our Regulatory Reporting and Collateral and Clearing business segments, with particularly strong revenue growth in the Americas.
Clients and business won
We have continued to make good progress in both segments of the business, with particularly strong revenue growth in the Regulatory Compliance division. We are pleased to report the first recognition of revenue from one of our major partner relationships and we are seeing encouraging revenue streams from a major Regulatory Reporting contract in the Far East. The Risk Management and Trading division also delivered growth in revenues with two major new client wins in, respectively, Canada and the UK.
We have an encouraging sales pipeline for both the collateral and regulatory sides of the business and are pleased to report that bookings for licences and professional services revenues in the first half of the year are up 48% on the corresponding period last year. This is reflected in an order book of £6.8m, up from £5.9m at the March year end and £5.1m at 30 September 2014. We continue to believe that the market environment favours our product positioning in regulation and risk management and our continued investment in these products reflects this belief.
Business improvement and our people
There have been a number of changes to our Board during the period. John Wisbey stepped down as Chief Executive Officer in May of this year after 26 years' service to the Company and subsequently resigned from the Board in August. John Wisbey continues to serve the Company as Chairman of the newly constituted advisory board and the Board would like to thank him for his service as a Director throughout his time at the Company. The Board is continuing its process of seeking to appoint a new Chief Executive and hopes to announce an appointment in the near future.
In September we were pleased to welcome John McCormick and Sandy Broderick to the Board as Non-executive Directors. In addition, Kieran Lees joined the Company as Global Head of Sales and Marketing, effective from August 2015.
The Company has completed its move to new offices in both London and New York and we believe that these premises are well suited to support the Company in its next phase of growth.
Finance review
Recognised revenue rose by 16.1% against the comparable period last year to £10.8m (2014: £9.3m). Annually recurring revenues for the half year totalled £5.0m (2014: £4.3m), representing 46.3% (2014: 46.7%) of total revenues.
Both the Board and the Company have undergone significant changes over the period and we have experienced some increases in the cost base. These result from the positioning of the Company to exploit the substantial opportunities we see in both the regulatory and collateral spaces, some rationalisation of the existing product set and costs associated with staff changes. This has resulted in a loss before tax of £1.8m (2014: profit before tax of £0.01m), stated after recording an impairment charge of £0.7m against the carrying value of two of the Company's product lines. Earnings before interest, taxation, depreciation and amortisation ("EBITDA") were £0.5m (2014: £0.8m).
Headcount as at 30 September was 319 (2014: 278) as a result of investing in the teams required to position the Company for further growth.
Net cash at 30 September 2015 was £2.7m (2014: £1.8m) following the raising of £4.0m of funds in May 2015 at 10.75p per share. This injection of capital has allowed the Company to continue to invest in its product suite as we pursue some exciting opportunities identified through both our global partner network and through investment in our direct sales function. Early indications are encouraging as the Company has been cash generative in the last two months of the period.
The Company's accounting policies allow for the capitalisation and amortisation of certain software development costs. Capitalised development costs in the period totalled £2.8m (2014: £2.0m), representing 66.5% (2014: 56.5%) of total technology and support costs. The increase in development spending reflects the continued emphasis being placed on the Company's next-generation products in both the Risk Management and Regulatory Reporting segments of the business.
The capitalisation of development costs has an impact on the interpretation of the financial performance of the Company. Internally, the Company's operating budget and monthly management accounts measure financial performance assuming no such capitalisation. Applying this assumption would result in negative EBITDA for the six-month period of £2.3m (2014: negative £1.2m) and a loss before tax of £2.5m (2014: £1.4m).
Investment in software product development
As noted above, we have continued to invest significantly in the development of our software products. Major software development initiatives in the period have included continued investment in our COLLINE® product to ensure compliance with forthcoming IOSCO requirements, along with significant enhancement of our Regulatory Reporting products across EMEA, the Americas and Asia Pacific.
Dividend
The Company will pay an interim dividend of 0.035p per share (2014: 0.035p per share) on 13 November to those shareholders on the register on 30 October 2015.
Outlook
The Board remains optimistic about the second half of the year, based on record levels of both contracted orders and recurring revenue streams. We recognise the continuing risks to our business of the impact of economic slowdown and the resulting effect on our core client base; however, we believe the continuing emphasis on regulatory change and, indeed, evolution represents a significant opportunity for the Company.
I would like to extend my personal thanks to all staff in our offices in London, Shanghai, New York, Hong Kong and Singapore whose continued commitment to both the Company and its products and clients is a credit to them and a priceless asset for the Company.
Philip Crawford
Executive Chairman
21 October 2015
Consolidated unaudited interim statement of comprehensive income
For the six months ended 30 September 2015
| Note | Unaudited six months ended 30 September 2015 £000 | Unaudited six months ended 30 September 2014 £000 | Audited year ended 31 March 2015 £000 |
Continuing operations |
|
|
|
|
Revenue |
| 10,762 | 9,269 | 21,491 |
Cost of sales |
| (97) | (114) | (298) |
Gross profit |
| 10,665 | 9,155 | 21,193 |
Administrative expenses |
| (10,137) | (8,374) | (16,799) |
EBITDA |
| 528 | 781 | 4,394 |
Depreciation, amortisation and impairment |
| (2,271) | (759) | (2,116) |
Net finance expense |
| (19) | (9) | (23) |
(Loss) / profit before taxation |
| (1,762) | 13 | 2,255 |
Taxation charge | 3 | (159) | (24) | (2) |
(Loss) / profit for the period from continuing operations |
| (1,921) | (11) | 2,253 |
(Loss) / profit for the period from continuing operations attributable to: |
|
|
|
|
Owners of the Parent |
| (1,921) | 4 | 2,290 |
Non-controlling interest |
| - | (15) | (37) |
|
| (1,921) | (11) | 2,253 |
Other comprehensive income |
|
|
|
|
Exchange differences on translating foreign operations |
| (95) | 2 | 194 |
Total comprehensive income for the period |
| (2,016) | (9) | 2,447 |
Total comprehensive income attributable to: |
|
|
|
|
Owners of the Parent |
| (2,016) | 6 | 2,484 |
Non-controlling interest |
| - | (15) | (37) |
|
| (2,016) | (9) | 2,447 |
(Loss) / earnings per share |
|
|
|
|
Basic (pence) | 2 | (0.66) | 0.00 | 0.87 |
Diluted (pence) | 2 | (0.66) | 0.00 | 0.86 |
Consolidated unaudited interim statement of financial position
As at 30 September 2015
|
| Unaudited six months ended 30 September 2015 £000 | Unaudited six months ended 30 September 2014 £000 | Audited year ended 31 March 2015 £000 |
Non-current assets |
|
|
|
|
Property, plant and equipment |
| 374 | 196 | 322 |
Goodwill |
| 5,841 | 5,769 | 5,881 |
Other intangible assets |
| 15,066 | 12,433 | 14,361 |
Trade and other payables |
| 1,013 | - | 974 |
Deferred tax asset |
| 869 | 982 | 1,048 |
|
| 23,163 | 19,380 | 22,586 |
Current assets |
|
|
|
|
Trade and other receivables |
| 5,636 | 5,272 | 6,791 |
Cash and cash equivalents |
| 2,733 | 2,167 | 2,241 |
|
| 8,369 | 7,439 | 9,032 |
Total assets |
| 31,532 | 26,819 | 31,618 |
Current liabilities |
|
|
|
|
Borrowings |
| - | (333) | - |
Trade and other payables |
| (2,482) | (2,573) | (3,746) |
Deferred income |
| (6,452) | (5,788) | (7,222) |
Total liabilities |
| (8,934) | (8,694) | (10,968) |
Net assets |
| 22,598 | 18,125 | 20,650 |
Equity |
|
|
|
|
Share capital |
| 1,951 | 1,747 | 1,750 |
Share premium account |
| 13,156 | 9,375 | 9,404 |
Foreign exchange reserves |
| (182) | (279) | (87) |
Other reserves |
| 1,831 | 1,622 | 1,739 |
Retained profit |
| 5,842 | 5,757 | 7,963 |
Equity attributable to owners of the Parent |
| 22,598 | 18,222 | 20,769 |
Non-controlling interest |
| - | (97) | (119) |
Total equity |
| 22,598 | 18,125 | 20,650 |
Consolidated unaudited interim statement of changes in equity
For the six months ended 30 September 2015
| Share capital £000 | Share premium account £000 | Foreign exchange reserves £000 | Other reserves £000 | Profit and loss account £000 | Total attributable to the owners of the Company £000 | Non- controlling interest £000 | Total equity £000 |
Balance at 1 April 2014 | 1,747 | 9,375 | (281) | 1,537 | 5,865 | 18,243 | (82) | 18,161 |
Share-based payment charge | - | - | - | 92 | - | 92 | - | 92 |
Share option lapsed or exercised | - | - | - | (7) | 7 | - | - | - |
Dividends | - | - | - | - | (119) | (119) | - | (119) |
Transaction with owners directly in equity | - | - | - | 85 | (112) | (27) | - | (27) |
Profit / (loss) for the period | - | - | - | - | 4 | 4 | (15) | (11) |
Other comprehensive income |
|
|
|
|
|
|
|
|
Exchange differences on translating foreign operations | - | - | 2 | - | - | 2 | - | 2 |
Total comprehensive income for the period | - | - | 2 | - | 4 | 6 | (15) | (9) |
Balance at 30 September 2014 | 1,747 | 9,375 | (279) | 1,622 | 5,757 | 18,222 | (97) | 18,125 |
| Share capital £000 | Share premium account £000 | Foreign exchange reserves £000 | Other reserves £000 | Profit and loss account £000 | Total attributable to the owners of the Company £000 | Non- controlling interest £000 | Total equity £000 |
Balance at 1 October 2014 | 1,747 | 9,375 | (279) | 1,622 | 5,757 | 18,222 | (97) | 18,125 |
Issue of share capital | 3 | 29 | - | - | - | 32 | - | 32 |
Previous R&D adjustment | - | - | - | - | 9 | 9 | - | 9 |
Share-based payment charge | - | - | - | 120 | - | 120 | - | 120 |
Share option lapsed or exercised | - | - | - | (3) | 3 | - | - | - |
Dividends | - | - | - | - | (92) | (92) | - | (92) |
Transaction with owners directly in equity | 3 | 29 | - | 117 | (80) | 69 | - | 69 |
Profit / (loss) for the period | - | - | - | - | 2,286 | 2,286 | (22) | 2,264 |
Other comprehensive income |
|
|
|
|
|
|
|
|
Exchange differences on translating foreign operations | - | - | 192 | - | - | 192 | - | 192 |
Total comprehensive income for the period | - | - | 192 | - | - | 192 | - | 192 |
Balance at 31 March 2015 | 1,750 | 9,404 | (87) | 1,739 | 7,963 | 20,769 | (119) | 20,650 |
| Share capital £000 | Share premium account £000 | Foreign exchange reserves £000 | Other reserves £000 | Profit and loss account £000 | Total attributable to the owners of the Company £000 | Non- controlling interest £000 | Total equity £000 |
Balance at 1 April 2015 | 1,750 | 9,404 | (87) | 1,739 | 7,963 | 20,769 | (119) | 20,650 |
Issue of share capital | 201 | 3,752 | - | - | - | 3,953 | - | 3,953 |
Acquisition of minority interest | - | - | - | - | (119) | (119) | 119 | - |
Share-based payment charge | - | - | - | 148 | - | 148 | - | 148 |
Share option lapsed or exercised | - | - | - | (56) | 56 | - | - | - |
Dividends | - | - | - | - | (137) | (137) | - | (137) |
Transaction with owners directly in equity | 201 | 3,752 | - | 92 | (200) | 3,845 | 119 | 3,964 |
Loss for the period | - | - | - | - | (1,921) | (1,921) | - | (1,921) |
Other comprehensive income |
|
|
|
|
|
|
|
|
Exchange differences on translating foreign operations | - | - | (95) | - | - | (95) | - | (95) |
Total comprehensive income for the period | - | - | (95) | - | (1,921) | (2,016) | - | (2,016) |
Balance at 30 September 2015 | 1,951 | 13,156 | (182) | 1,831 | 5,842 | 22,598 | - | 22,598 |
Consolidated unaudited interim statement of cash flow
For the six months ended 30 September 2015
| Unaudited six months ended 30 September 2015 £000 | Unaudited six months ended 30 September 2014 £000 | Audited year ended 31 March 2015 £000 |
Cash flows from operating activities |
|
|
|
(Loss) / profit for the period | (1,921) | (11) | 2,253 |
Tax charge | 159 | 24 | 2 |
Net finance expense | 19 | 9 | 23 |
Operating (loss) / profit | (1,743) | 22 | 2,278 |
Adjustments for: |
|
|
|
Depreciation | 127 | 98 | 210 |
Amortisation and impairment | 2,146 | 661 | 1,906 |
Share-based payment charge | 148 | 92 | 212 |
Decrease / (increase) in trade and other receivables | 1,116 | 495 | (2,107) |
(Decrease) / increase in trade and other payables | (1,264) | (122) | 1,160 |
(Decrease) / increase in deferred income | (770) | 617 | 2,051 |
Foreign exchange difference | (27) | (34) | (8) |
Cash generated by operations | (267) | 1,829 | 5,702 |
Tax credit received / (paid) | 10 | (7) | (43) |
Net cash (used in) / generated by operating activities | (257) | 1,822 | 5,659 |
Cash flows from investing activities |
|
|
|
Interest received | - | - | 1 |
Purchase of property, plant and equipment and computer software | (209) | (116) | (369) |
Capitalisation of development expenditure | (2,840) | (2,005) | (5,109) |
Net cash used in investing activities | (3,049) | (2,121) | (5,477) |
Cash flows from financing activities |
|
|
|
Shares issued, net of issue costs | 3,954 | - | 31 |
Repayment of loans | - | (334) | (666) |
Interest paid | (19) | (10) | (24) |
Dividends paid | (137) | (119) | (211) |
Net cash flow generated by / (used in) financing activities | 3,798 | (463) | (870) |
Net increase / (decrease) in cash and cash equivalents | 492 | (762) | (688) |
Cash and cash equivalents at beginning of period | 2,241 | 2,929 | 2,929 |
Cash and cash equivalents at end of period | 2,733 | 2,167 | 2,241 |
Notes to the interim report
For the six months ended 30 September 2015
1. Basis of preparation
This interim report was approved by the Board on 21 October 2015.
These consolidated financial statements are for the six months ended 30 September 2015. They have been prepared in accordance with International Financial Reporting Standards ("IFRS") and International Financial Reporting Interpretation Committee ("IFRIC") interpretations as at 30 September 2015, as adopted by the European Union. They do not include any of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 March 2015.
The preparation of financial statements under IFRS requires the Board to make judgements, estimates and assumptions that affect the application of accounting policies, the reported amounts of statement of financial position items at the period end and the reported amount of revenue and expense during the reporting period. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements that are not readily apparent from other sources. However, the actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.
This condensed consolidated financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2015 were approved on 20 May 2015. These accounts, which contain an unqualified audit report under Section 495 of the Companies Act 2006 and which did not make any statements under Section 498 of the Companies Act 2006, have been delivered to the registrar of companies in accordance with Section 441 of the Companies Act 2006.
2. (Loss) / earnings per share
Basic (loss) / earnings per share has been calculated by dividing the profit on ordinary activities after taxation attributable to the owners of the Parent by the weighted average number of Ordinary Shares in issue during each period.
Diluted (loss) / earnings per share is calculated by adjusting the weighted average number of Ordinary Shares in issue on the assumption of conversion of all dilutive potential Ordinary Shares. The Group has only one category of dilutive potential Ordinary Shares, being share options granted under the Enterprise Management Incentive Plan and Unapproved Scheme.
| Unaudited six months ended 30 September 2015 | Unaudited six months ended 30 September 2014 | Audited year ended 31 March 2015 |
(Loss) / profit for the period and basic and diluted (loss) / earnings attributable to Ordinary Shareholders (£000) | (1,921) | 4 | 2,290 |
Weighted average number of Ordinary Shares | 291,960,440 | 263,366,260 | 263,495,411 |
(Loss) / earnings per share (pence) | (0.66) | 0.00 | 0.87 |
Effect of dilutive share options: |
|
|
|
Adjusted weighted average number of Ordinary Shares | 294,961,089 | 266,477,120 | 266,914,919 |
Diluted (loss) / earnings per share (pence) | (0.66) | 0.00 | 0.86 |
3. Taxation
The taxation charge is based on the effective tax rate expected to apply for the full year, taking into account the anticipated benefit of brought forward tax losses. The effective tax rate is higher than the standard tax rate, principally as a result of movements in the deferred tax asset recognised within the Group. In addition, the charge for this interim period is stated net of £10,000 of tax credits received by overseas subsidiaries.
4. Report
Copies of this report will be sent to shareholders and will be available to the public from the Company's head office, 7th Floor, 60 Gracechurch Street, London, EC2A 1NT. The report will also be available to download from the investor relations section of the Company's website www.lombardrisk.com.