Lombard Risk Management Plc
9th August 2005

Lombard Risk Management plc, the provider of risk systems and independent valuation services, has today announced its preliminary results for the year to 31 March 2005. Commenting on the results, John Wisbey, Chairman and Chief Executive said "Our first year as a quoted company has gone well, and included a significant investment being made late last year by Putnam Lovell. In addition, the capital raised from the listing has allowed for an increase in the sales team and a strategic review of the business to take place. As a result the company now has a strong base and platform for future growth in its core software and independent valuation businesses."

Enquiries:

Lombard Risk Management plc:
John Wisbey, Chairman and CEO
Tel : +44 (0)20 7384 5000

Click here to email Lombard Risk's Investor Relations team

Noble & Company Ltd:
Alasdair Robinson, Director
Tel: +44 (0)20 7763 2200

Highlights:

• Successful listing on the Alternative Investment Market of the London Stock Exchange
• £2.35 million raised during the year from new and existing shareholders
• Turnover was £4.62 million (2004: £4.53 million). Loss before tax was £1.13 million (2004: £1.21 million)
• Strategic review has created strong platform for future growth and development
• Strengthened market position through additional product functionality, services and new client wins
• Corporate activity to achieve strategic objectives is underway
• Post year end agreement to sell ValuSpread business for up to £6 million will greatly strengthen the company's ability to execute its strategic plan

Chairman's statement

Summary
In trading conditions on par with last year, and with competition remaining strong, Lombard Risk continued to see consistent demand for its products and services over the past year. Customer gains were particularly notable in the business areas of Independent Valuation Services and credit derivatives pricing.

The Company was successfully floated on the AIM section of the London Stock Exchange in September 2004 at 8p per share, and in November 2004 received an additional £1.1 million investment at 9p per share from Putnam Lovell, a subsidiary of National Bank of Canada.

Financial
Revenue increased to £4.62m against £4.53m for the previous year, with a reduced loss before tax of £1.13m, versus a comparable figure of £1.21m for 2004. The loss before interest, tax and exceptional items was £0.78m.

Revenue was impacted by the timing of several large transactions which failed to close by the year end, or which were transacted on a rental/subscription basis rather than a licence basis. The sales mix was different from expectations; software rental and data revenues were at a higher level, while licence sales were at a lower level than expected.

Recurrent revenue was at a higher level than expected and contributed over 75% of total revenue. In addition, the revenue profile remained well dispersed, with no single client accounting for more than 6% of total revenue.

Costs were increased post IPO by the addition of several new members of staff in sales and marketing together with ongoing listing costs and the addition of two non-executive directors. There is a growing sales pipeline owing to the sales team's efforts, but it has taken longer than expected for the new team to reach full productivity.

Oberon, the trading and risk management system, remained profitable for the sixteenth consecutive year and made two key new customer wins during the year, while Firmament's revenue contribution has increased, and the product continues to be expanded and enhanced in the areas of credit trading and collateral management.

The Independent Valuation Service business continues to see demand growth as the marketplace increasingly recognises the importance of independent valuations, and our ValuSpread data business is benefiting from continued growth in the volume of credit derivatives traded.

The Company ended the year with cash and marketable securities of £0.9m. In addition the Company has the ability to reclaim R&D tax credits totalling several hundred thousand pounds; however the Board believes that, as a result of trading and corporate activity, it may be able to make use of a large proportion of its tax losses in the next financial period, and has consequently for the first time in four years not applied to surrender any of its tax losses against payment for R&D tax credits.

Software Products
Oberon continues to provide capital to support the development of other products, as well as gaining new customers. Work has continued to make Oberon a very open system using our OBI utility. Functionally the product has made good progress with new pricing models and support for additional instruments. All Oberon customers are now using Oberon 5, thus streamlining the product support function.

Firmament, the Company’s latest software platform for trading and risk management, continues to gain ground and has benefited particularly this year from a new development partnership with Banca IMI in Milan, Italy. This is for the further enhancement of Firmament Collateral, the software platform for collateral trading and risk management. Client wins for Firmament Credit Trading have included hedge funds and a prominent Fund Administrator.

Managed Services and Data
The continued strong growth in the hedge fund and alternative investment markets have heightened the awareness of, and demand for, independent valuations by both asset managers and their investors. In addition, there has been increasing focus by regulators on independent valuation and the IAS 39 directive on fair value accounting for derivatives, which will be significant drivers for the Independent Valuation Services business. These factors have already been reflected in a healthy growth in sales leads for the business as well as new customers.

The growth in the credit derivatives market has continued at over 40% per annum, and the British Bankers' Association estimated that the total market size as measured by notional amount had reached US$5.5 trillion by the end of 2004. The volume of instruments traded has also continued to rise, and this has been reflected in the significant growth in credits handled by the ValuSpread data business.

Personnel
We welcomed two very experienced directors to the Board in the last year, Brian Crowe and Dan Kochav, both of whom are current practitioners in very relevant businesses. Brian Crowe joined at the time of our IPO, and is Deputy Chief Executive of Royal Bank of Scotland's Corporate Banking and Financial Markets division. Dan Kochav joined our Board following the investment by Putnam Lovell and is Managing Director of Alternative Investments there, having previously been a Managing Director of Toronto Dominion Bank. This association with Putnam Lovell and its network of contacts has already brought significant additional benefits to the Company, particularly as it seeks to expand its North American customer base and activities.

At the beginning of March Ian Hopkins, who had previously founded and headed up the ValuSpread business during a six year tenure with the Company, rejoined as Managing Director of ValuSpread after a two year absence.

Investments
Lombard Risk still holds a stake of 3% (5.6 million shares) in its former subsidiary IDOX plc, which is quoted on AIM. The Board's position remains that it will retain or dispose of this holding based on investment considerations alone.

IDOX is an example of a business bought by Lombard Risk, successfully incubated and then spun out at an appropriate time. This is a model that the Board feels comfortable with, and over the next few years it can be anticipated that the Company will engage in further similar corporate activity.

Prospects
At the time of writing, the Company had just agreed to sell its ValuSpread business. This disposal will substantially improve the balance sheet of the Company and create a very strong cash position for a company of our size. It will also provide additional capability to execute on the Company's strategic plan to be a specialist supplier of risk and valuation products and services to the financial services market place.

The Board believes that the high level of recurrent revenues of the business overall provides a sound foundation for growth. The Board is confident that market demand in our focus areas of credit derivatives and hedge fund management will continue to grow, as will the area of independent valuations. The Board remains positive about the growth story and prospects for the Company over the next few years.

The year in which we made the transition to quoted status was a significant year for the Company. In addition owing to our former head office building being redeveloped by our landlords, the company had to move office in October 2004. Inevitably both the IPO and the office move meant that many of our team had to go the extra mile over and above their normal jobs, and I would like to thank all my colleagues in London and our other offices, as well as our advisors, for their hard work and support.

John Wisbey
Chairman & CEO

The preliminary announcement was approved by the Board on 9 August 2005.

1. ACCOUNTING POLICIES

(a). Basis of preparation

The principal accounting policies of the Group are set out in the Group’s financial statements for the year ended 31 March 2005. The policies have remained unchanged from the previous financial statements.

(b). Going concern

The directors have formally considered the ability of the group to continue its activities in light of the net liabilities of £738,659 in the balance sheet at 31st March 2005 and the losses and cash outflows in the period then ended.

The directors have prepared forecasts for the period to September 2006 and are satisfied that the group will continue to work within its available facilities. The group currently has an agreed banking facility which is due for renewal in December 2005. The directors have not started discussion with the bank in respect of the renewal of this facility but have no reason to believe it will not be renewed.

The directors furthermore take comfort from the fact that the company owns two established cash generative businesses each of which has a value considerably higher than the net liability position, a remaining stake in IDOX plc with a market value at the end of July of approximately £600,000 and that the net liability position is a direct consequence of the company's policy of writing off all investment in software research and development as and when incurred.

2. EXCEPTIONAL COSTS IN RESPECT OF PURCHASE OF A BUSINESS INTEREST

On 6 February 2002 the Company became a party to an agreement entered into by Lombard Risk Systems Ltd to purchase a third party’s interest in one of its operating divisions which is an important business activity of the Group, and for the third party to perform future services to the Group.

The total consideration of £1,054,600 was charged to the profit and loss account in instalments between 1 January 2002 and 31 December 2004, being the period that the Group received benefit from the agreement.

£854,600 of the consideration was paid in monthly instalments from 6 February 2002 to 31 December 2004 and £200,000 is payable in monthly instalments from 31 December 2004 to 31 December 2006. The differences between the charge to the profit and loss account over three years and the payments over five years are accounted for as a deferred creditor, or deferred debtor as appropriate.

Interest is charged on the outstanding balance at 10% per annum.

For the year ended 31 March 2005, a total of £368,481 (2004: £459,211) was charged to the profit and loss account. This comprised £199,416 gross salary (2004: £265,888) and £33,427 employers NIC (2004: £33,442); interest of £71,404 (2004: £74,236) and other operating costs of £64,234 (2004: £85,645).

The Company has guaranteed the performance of the agreement by Lombard Risk Systems Ltd.

3. TAX ON LOSS ON ORDINARY ACTIVITIES

There is no charge to tax for the year (2004: £nil) because of the availability of losses within the Group.

The Company has received to date R&D tax credits of £570,008. As for all companies that have received these credits, the amounts are subject to potential future HM Revenue & Customs clawback.

5. LOSS PER SHARE

The calculation of the loss per share is based on the loss for the financial year after taxation of £1,134,068 (2004: loss £747,859) and on the weighted average of 95,935,032 (2004: 78,962,738) ordinary shares in issue during the year. The options outstanding at 31 March 2005 and 31 March 2004 are considered to be non-dilutive in that their conversion into ordinary shares would not increase the net loss per share. Consequently, there is no diluted earnings per share to report for either year.

10. PUBLICATION OF NON STATUTORY ACCOUNTS

The financial information set out in this announcement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985.

The consolidated balance sheet, the consolidated profit and loss account, the consolidated cash flow statement and associated notes for the year ended 31 March 2005 have been extracted from the group’s statutory accounts upon which the auditor's opinion is unqualified and does not contain any statement under section 237 of the Companies Act 1985. The statutory accounts for the year ended 31 March 2005 will be filed with the Registrar of Companies.