Highlights:

• Revenue up by 8% on last year at £12.8m (2011: £11.8m)
• Profit before tax of £2.5m (2011: £0.6m)
• Profitability achieved by both the Regulatory and the Trading and Risk businesses
• Closed contract for COLLINE with second Tier 1 bank
• Significantly enhanced delivery and execution capability with total staff in excess of 250, 150 of whom are in our Shanghai development and testing centre
• Focus on development of products for new mandatory regulatory reporting requirements
• Acquisition of REG-Reporter business, a leading player in the regulatory reporting Americas market
• Planned integration ahead of schedule; £0.5m (annualised) cost savings from synergies already realised
• Cash at end of period of £0.1m with £2.5m debt (2011: cash of £1.8m)
• Final dividend of 0.035p (2011: 0.030p) recommended for a total of 0.055p per share. The dividend will be payable on 27 July 2012 to shareholders on the register on 20 July 2012

John Wisbey, Chief Executive Officer, commented:  “Given the background of a Eurozone crisis and related budget freezes at many of the banks, together with the lack of regulatory changes in the UK, I believe these results represent a reasonable outcome.  Key highlights of the year included winning a further Tier 1 bank client, Société Générale, for COLLINE and the strategically significant acquisition of REG-Reporter, which transformed our regulatory business in the US, advancing us to number 1 in foreign bank regulatory reporting.

“Turning to the current year we have seen a significant thawing of banks’ budgets since the beginning of 2012 and we entered the current twelve months with a strong order book.  There is a regulatory tailwind behind us in the UK/EU from the European Banking Authority’s COREP reporting requirements; we are expecting additional revenues from several new products and modules and anticipate REFORM™ to take advantage of the Dodd-Frank Act and similar EU and Asian legislation.

“We enter the new financial year with a good level of optimism and our aim is to deliver significant and sustainable turnover and earnings growth over the next five years.”

Annual General Meeting

Lombard Risk will be holding its Annual General Meeting at the Head Office at Ludgate House, 245 Blackfriars Road, London SE1 9UF at 14:00 hours on 13 July 2012.

For further information contact:

Chairman’s Statement

I am pleased to report a year of steady progress for Lombard Risk.  The financial performance has been satisfactory and there have been several exciting developments during the year.

By most measures, the macroeconomic environment during the financial year remained turbulent, both in the EU and globally and a high degree of uncertainty continues to hang over the economy and financial markets, thus directly affecting our core customer base.   This environment continues to bring both challenges and opportunities to the Group.

The trading highlight was the contract for the global application of COLLINE® for Collateral Management, Repo and Clearing at another Tier 1 bank, Société Générale.  COLLINE® continues to be a product of choice for banks and the Clearing module has been purchased by both current customers and new customers alike.  Trading in our Regulatory Compliance products was satisfactory considering the absence of a mandatory spend driver in the UK.

Shortly after the half year, the Board decided to invest in additional products to facilitate growth in future years.  By the year end the Group had progressed well with REFORM™, a transactional event reporting engine that will enable reporting under Title VII of The Dodd Frank Act and other forthcoming legislation, and with its regulatory module for the imminent reporting requirements under the European Banking Authority’s Common Reporting (COREP).  This is consistent with the Group’s strategy of building a high quality business based upon intellectual property.

In December 2011, Lombard Risk acquired SOFGEN’s regulatory reporting business, including REG-Reporter and associated assets, for US$4.3m.  This acquisition made us the largest provider of Regulatory Reporting to foreign banks in the United States. The transaction was primarily funded by a £2.0m term loan from Barclays Bank plc.

Overall, the financial performance of the Group was satisfactory.  Revenues increased by 8% to £12.8m (2011: £11.8m) and the Group has seen a significant increase in profit before tax to £2.5m (2011: £0.6m).  Recurring annual revenues accounted for in excess of 40% of the total.  The Group’s financial performance does require further explanation and greater detail is available in the CEO’s Statement Report and the Finance Review.

Last year, I mentioned that we take nothing for granted.  That has not changed!  We are looking to take maximum advantage of opportunities and manage the challenges of growth. The Board is optimistic about its future prospects, both in the new financial year and the longer term.  The pause in regulatory change in the previous year will not be repeated in the current year ending March 2013 and we should be well positioned to exploit this regulatory change, particularly in the UK and US but also in Asia. We are in a good market with good products and an ever increasing quality customer base.

Philip Crawford

Chairman

Chief Executive Report

Summary

The growth achieved in the year was in hindsight a reasonable result given the Eurozone crisis and related budget freezes at many banks at the end of 2011 and the fact that it was a year of only minor regulatory change in the UK, but there is no hiding that it was less than we had hoped for a year ago.  Against that, a strategically significant positive was that the acquisition we made in December 2011 has advanced the Group to number 1 in foreign bank regulatory reporting in the important United States market and we had not expected this important business to be available.

The Group showed 8% revenue growth while profitability of £2.5m was achieved.  The freeze in budgets seen at the end of calendar year 2011 thawed significantly in early 2012 and the Group closed twelve new deals in the last six weeks of the financial year. Unfortunately the ability to recognise revenue from deals closed so late in the financial year is limited but it has given us the largest contract order position we have ever had going into a new financial year.

A further Tier 1 client was won for COLLINE® with Société Générale as well as several other significant clients in Europe and North America. The Group enters the new financial year well positioned to benefit from regulatory change in the UK and the EU, principally European Common Reporting (COREP) and from further regulatory change in the United States around the Dodd Frank Act. The first few clients have already been signed up for COREP and there are many more which we expect to sign. This boost from COREP products, which did not create any recognised revenue in the year ended March 2012 and which will fall mainly in the financial year ending March 2013, mirrors the boost the Group experienced from the FSA’s new liquidity rules in the financial year ended March 2011.

We made great progress with securing banking facilities, to the extent that we were able to fund a large portion, £2.0, of the REG-Reporter acquisition and related costs with debt. This, together with significant investment in product ahead of this year’s regulatory changes, naturally affected our net cash position and we ended the year with net borrowings of £2.4m versus net cash of £1.8m in the previous year. The market expectation, and that of the Board, is that the Group will resume its previous trend of being cash generative in the current financial year. The Board is recommending a final dividend of 0.035p per share for a total of 0.055p (2011: 0.030p). The dividend will be payable on 27 July 2012 to shareholders on the register on 20 July 2012.

Much progress was made on moving our technology’s look and feel to a new platform and in building components that can work across our various products. Client reaction to the look and feel of the new platform has been extremely positive. Functionally, our products continued to make great progress.

The Board considers that the Group’s products are well placed with an emphasis on risk management, regulatory compliance and on related management reporting.

The valuations of our peer group on the AIM market, as well as the premium trade sale prices achieved by companies in a very comparable space of operation like FRSGlobal or related spaces like Complinet or Sophis, have been at revenue multiples very much higher than the Group’s valuation on AIM, a fact to which I drew attention in my report last year. Our share price has increased since then but the Group’s valuation is still low on a sector relative basis. It also still remains the case that our specialities of risk management and regulation are regarded as the “hottest” areas of financial technology.  Brian Crowe, I and others exercised options in December at 9p per share and did not sell any stock. We hope that the prospects for the Group will result in a further market re-rating in due course for the benefit of all shareholders.

Financial

Revenues for the year increased by 8% to £12.8m (2011: £11.8m). Profit before taxation was £2.5m (2011: £0.6m) and profit after taxation was £2.5m (2011: £1.3m).

The profit before tax included capitalisation of some software development for the first time.  Under IFRS, we now satisfy all of the capitalisation qualifying conditions for many of our products, which results in the creation of an intangible asset. As I mentioned last year, we took soundings from some leading industry analysts on what other companies in the sector report as R&D for capitalisation purposes and it was evident that there is a wide difference between companies, which is relatively opaque in company accounts. We would welcome greater consistency of presentation between companies in this area to make it easier for investors to compare like with like.

Regulatory and Compliance Software Products

Lombard Risk is the market leader for UK Bank Regulatory Reporting with approximately 130 of the 350 banks in the UK using the REPORTER product for regulatory reporting to the FSA.  Following the acquisition during the year of the REG-Reporter business, we also became the largest supplier of regulatory reporting to foreign banks in the US.

Regulatory change is always one of the main revenue drivers for a regulatory business.  In the previous year the major market development for us had been the FSA’s new regulations on Liquidity which allowed us to earn significant initial and annual licence fees as well as implementation revenue.  While a lot of regulatory change was underway in both the UK/EU and US markets, there were few key deadlines in the year ending March 2012 and so we did not have the same tailwind from new regulations resulting in a £2.0m decrease in Liquidity revenues compared with the year ended 31 March 2011.  We expect the forthcoming regulations to benefit our revenues in the year ending March 2013.

During the year we made various breakthroughs outside the UK. Our acquisition in America was transformational for our regulatory business in the US.  We now have over 75 regulatory clients in the US, many of them Tier 1 foreign banks.  In Asia we obtained our first client for Chinese regulatory reporting. We obtained new clients in a number of countries including Ireland, Singapore and Hong Kong and went live with all of the clients in Singapore that we had won away from our main international competitor. We have also been doing work on reporting for a number of other countries including India and Korea.

This year, in the UK, we see considerable opportunities for our core regulatory business. The largest of these relevant to our clients is the COREP which comes into effect at the beginning of 2013. This is the first time that harmonised EU reporting, driven by the European Banking Authority, has applied to the UK; it will be operated by the FSA (and its successor the Prudential Regulation Authority) alongside the existing FSA and Bank of England reporting.  More than forty of our existing UK clients are affected by COREP, of which we have already signed up six, and the changes offer many opportunities to broaden our client base in the UK and other EU countries. Other opportunities for our traditional regulatory business over the next few years will come from Basel 3, with opportunities to expand our client base for Solvency 2.  If the UK also adopts FINREP, the EU’s Financial Reporting, this will give us even more opportunities – the UK’s adoption of FINREP is currently in the balance depending on political developments in the EU.

A major feature in global markets is the development of trade repositories such as the DTCC.  The Dodd-Frank Act in the US, and the EMIR regulations in the EU, as well as similar developments in Hong Kong, Japan and other countries, will compel swap dealers and other market participants to report derivative transactions to trade repositories in minutes. This, together with other event and transaction reporting initiatives, has caused the Group to launch a new platform called REFORM™ to address banks’ issues with complying efficiently with all these regulations.

We have made, and continue to make, some important technology and product enhancements to our REPORTER regulatory product including an exciting Web 2 front end, more performance and resilience at the back end and other features such as REPORTER Trends and REPORTER Variance Analyses designed to make the product more attractive to global Tier 1 banks as well as to our existing client base. Our existing ETL (Extract, Transform and Load) tool is long tried and tested in the regulatory environment and provides a secure foundation for development.

Risk Management and Trading Products

We have made strong progress with COLLINE®, our Collateral, Clearing and Repo platform. We now have some forty clients for COLLINE®.  During the year we signed up another Tier 1 bank,  Société Générale for all of COLLINE®’s modules and, in addition, we signed up a further six clients in the second half, including very prestigious names in Germany, Austria, Sweden and the United States.  We expanded the scope of our business with our leading German Tier 1 bank client to include our Clearing module, launched as COLLINE® CCP Clearing. Several other existing and new clients have taken COLLINE® CCP Clearing.

The focus on Clearing was stimulated by regulatory change, primarily the Dodd-Frank legislation, which mandated derivatives to be transacted with central counterparties and cleared through clearing houses. This regulatory drive continues, and while the transparency that goes with it is to be welcomed, it is having the perverse effect of many countries starting up their own clearing houses as once they did their national airlines – we will respond to this and should profit from it, although it seems that the unintended consequence will be to substitute “too systemically important to fail” clearing houses for “too large to fail” banks.

Other COLLINE® initiatives we are working on include Repo and Securities Lending, inventory management, collateral optimisation and margin messaging plus related workflow, straight through processing and reporting. These should help us achieve higher revenue per client and also have a positive impact on the price per new client that we are able to achieve.

OBERON®, our most established product, which has the ability to value and risk manage many different types of financial instrument, is profitable and continues to move forward with functional and performance enhancements.  Modifications have been made to it to allow it to communicate with Trade Repositories.

Our LISA® product now has several clients in conjunction with our regulatory clients for liquidity.  LISA® will evolve into a risk product which is very complementary to our regulatory products, starting with liquidity risk, and using the most modern technology.  Lombard Risk has always been strong on risk management and the convergence of risk and regulation plays to our strengths.

Technology

We see our technology as an increasingly positive part of our commercial story and a key driver for growth.   Our IP is a major corporate asset. During the year we have invested heavily in developing software, particularly to handle our Clearing and Repo/Securities Lending initiatives for COLLINE®, but also to develop our new REFORM™ product mentioned above and to prepare for our REPORTER COREP module.  Our staff numbers in our Shanghai development and testing centre have increased from just under 100 a year ago to 150 now and we have also increased our UK resources doing the required business analysis.  Our acquisition of the REG-Reporter business has brought further talented technology resource in the United States.  Our model is to do much of the business analysis in London and New York and other financial centres but to do the majority of development and testing in China.

Much progress has continued to be made on moving our technology’s look and feel to a new platform and in building components that can work across our various products.  Several of the liquidity contract wins included licensing of parts of this new technology.  Client reaction to the look and feel of the new platform has been extremely positive.  Functionally, our products continued to make great progress.

COLLINE®’s scalability, resilience and performance is proven at our largest client using active-active clustering in multiple data centres, user locations in three continents and well over 200 users. This means we now have every confidence that our solution is scalable from the smallest collateral user to the largest global bank. Similar technology is being deployed for our other products where performance is a key issue.

Efficiency is very important to us. We have invested in greatly upgrading the software tools which we use ourselves to monitor software project costs, project progress and individual productivity and quality.

Personnel and Premises

During the period we continued to make new hires appropriate to the expected growth of the business. The acquisition of the REG-Reporter business gave us a much stronger and deeper management team in the United States and we have now realised £0.5m of annualised cost savings in the combined US operations. We have continued to grow our Shanghai office to ensure successful and timely delivery of the large amount of new software product being launched this year.  We now have 150 of our group headcount in our development and testing centre in Shanghai.

The expansion we expect to see in the next year will give us the opportunity to streamline our Professional Services Operation and we are currently looking for a new head of this to bring together all our products functionally for the first time.

We moved to larger premises in New York and Singapore as well as acquiring an office in Newark, New Jersey with the REG-Reporter acquisition.  An office was also opened in Tokyo.

Prospects

We enter the new financial year with a good level of optimism about the prospects.  This is based on, first, a regulatory tailwind in the UK/EU from the European Banking Authority’s COREP reporting requirements (with six sales already made in the UK); second, expected new revenues from a number of new modules for COLLINE® such as Clearing, Repo, Securities Lending, Messaging and Optimisation and new products/modules for reporting such as REPORTER MIS, REPORTER Trends and REPORTER Variance Analysis and, thirdly, from REFORM™ to take advantage of the Dodd-Frank Act and similar EU and Asian legislation (with a significant number of prospects).

Many of these new products should allow us to sell more to our current customers while further laying the foundation for roll-out of additional modules in future years.  Our product development strategy has been disciplined with a clear focus on the needs of our customers and our business continues to develop strongly.

Looking ahead, we will continue to expand our core businesses – Regulatory Compliance and Risk Management in the financial services market – by improved product functionality, smarter technology solutions and increased geographic reach.  The aim of this strategy is to deliver significant and sustainable turnover and earnings growth over the next five years.  It is anticipated that this will lead to a positive return to the Group’s investors via both dividend income and capital growth.

I would like to thank all my colleagues as well as our advisors for their hard work and commitment and our customers and investors for their continued support.

John Wisbey

Chief Executive

Finance Review

In conjunction with the Chairman’s statement and the CEO’s review, this report provides further information on the key aspects of the financial performance and the financial position of the Group.

This report sets out to ensure that the Group’s financial results are fully transparent and allow comparisons to results of prior years and peers in the market.  In particular, this report gives information on the acquisition of the REG-Reporter business and the capitalisation of development costs.

Acquisition

On 15 December 2011, the Group acquired from SOFGEN the assets of its REG-Reporter regulatory reporting business.  This business contributed £0.5m revenue and £0.1m operating profit from the acquisition date to 31 March 2012.  In addition, the Group incurred acquisition costs of £0.1m.

Without the acquisition, the Group’s revenue would have been £12.2m, an increase of 4.0%, and the profit before tax would not have been materially different from the results announced.

Capitalisation of development costs

During the year the Group capitalised development costs in accordance with its accounting policy of £3.3m.  In the prior year, no development costs were capitalised as not all of the qualifying conditions of the Group’s accounting policy were satisfied.  The amount capitalised represents 73% of the Group’s total research and development spend of £4.5m.  The total spend increased by 66% from the prior year.  The increase reflects the decision of the Board to invest in REFORM™ and COREP as highlighted in the CEO’s report.

The amortisation period stated in the accounting policy was amended from three years to five years at the start of the year ended 31 March 2012.  This had no prior year implications as no costs had been previously capitalised.

If no costs had been capitalised in the year ended 31 March 2012, the Group would have reported an operating loss before share-based charges, acquisition costs and depreciation and amortisation of £0.2m and a loss before tax of £0.5m.

Revenues

Revenue increased by 8% to a record £12.8m for the year, compared with £11.8m in the prior year. The level of licence revenue increased in the year by 42% to £6.0m (2011: £4.2m). These revenues now represent 51% of total revenues, up from 36% in the prior year.  Recurring annual revenues totalled £5.5m, approximately 43% of revenue, and now have a current run-rate of £6.9m.

Profitability

Operating profit before share-based charges, depreciation and amortisation and acquisition costs increased to £3.1m (2011: £0.7m) predominantly as a result of capitalising development costs as highlighted above.  Overall pre-tax profit increased to £2.5m (2011: £0.6m).  If 73% of development costs had been capitalised in the prior year, the comparative operating profit before share-based charges, depreciation and amortisation and acquisition costs and profit before tax would have been £2.7m and £2.4m respectively.

The effective rate of tax for the year was 0.0% (2011: 0.0%). The UK standard rate of corporation tax for the year was 26%.  The recognised deferred tax asset for the Group is £0.7m (2011: £0.7m) and the unrecognised deferred tax asset is £1.3m (2011: £1.9m).

Cash flow

Cash generated in operations was £1.8m (2011: £1.2m).  As a growth technology business, this is a key measure for the Group.  It is important to balance working capital requirements with the desire to develop software that will enhance shareholder value.  The Group experienced a significant working capital movement in trade and other receivables of £2.5m with billings in the month of March 2012 being significantly higher than in March 2011. This movement will partially reverse post-year end.

Investment in research and development expenditure that was capitalised was £3.3m (2011: £Nil).  In the financial year, the Group has utilised cash on developing products that are towards the early stages of their product lives (eg REFORM™ and COREP) and therefore the research and development charge has increased as a percentage of revenues.

Total cash expenditure on acquisitions in the year was £2.8m (2011: £Nil), predominantly financed by a bank term loan of £2.0m (2011:£Nil) and loan notes of £0.5m.

Overall there was a net cash outflow for the year of £1.7m (2011: inflow of £1.1m) giving a closing net cash balance of £0.1m (2011: £1.8m).

Balance sheet

There has been a considerable increase in intangible assets following the acquisition of REG-Reporter and its associated business. Goodwill has increased by £2.2m and other intangible assets include customer related intangible assets of £0.6m identified on the acquisition.  The acquisition consideration was settled by £2.0m of cash, £0.5m of deferred consideration and £0.3m by the issue of 2.3m new Ordinary Shares.

Deferred revenues have increased by £1.5m to £4.4m.

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 as well as newsletters and matters of interest.

Consolidated statement of comprehensive income

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

Consolidated balance sheet

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

 

Consolidated statement of changes in shareholders’ equity

Other reserves relate to negative goodwill arising on the acquisition of a subsidiary undertaking prior to 1 April 1997, share-based payment and the merger reserve.

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

Consolidated cash flow statement

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

Notes to the consolidated financial statements

1. Accounting policies

(A) Basis of preparation

These consolidated financial statements are for the year ended 31 March 2012. They have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and IFRS Interpretation Committee (“IFRIC”) interpretations as at 31 March 2012, as adopted by the European Union. They have been prepared under the historical cost convention.

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 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 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.

• IFRS 9 “Financial instruments” (effective 1 January 2013)

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 2013, subject to adoption by the European Union

• IAS 24 (revised 2009) “Related party disclosures” (effective 1 January 2011)

The revision to IAS 24 covers various items, including a revised definition of related parties. The revision is mandatory for accounting periods commencing on or after 1 July 2011.

These results are audited, however the financial information does not constitute statutory accounts as defined under section 434 of the Companies Act 2006.  The financial information for the year ended 31 March 2012 has been derived from the Group’s statutory accounts for that year, as filed with the Registrar of Companies.  The auditor’s report on the statutory accounts for the year ended 31 March 2012 was unqualified and did not contain statements under section 498 of the Companies Act 2006.

The accounting policies used in completing this financial information have been consistently applied in all periods shown.  These accounting policies are detailed in the Group’s financial statements for the year ended 31 March 2012 which can be found on the Group’s website.

 (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 full control (see note 5 to the Parent Company balance sheet). 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 2012. 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 arising on consolidation was written off to reserves prior to 1 April 1999. Goodwill arising after this date 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.

(C) Segment reporting

In identifying its operating segments, management generally follows the Group’s product lines. The Group operates two main operating 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 2012, both in the signing of new business contracts and in the realised financial results. These show positive profits, although cash at 31 March 2012 had reduced as a result of investment in product development and a significant increase in year-end receivables, the latter which has a positive effect to future cash flows.

The Directors have prepared a cash flow forecast for the period to 30 June 2013, 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 2012.

(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. 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 in accordance with the invoicing schedule on a percentage completion basis. For non-refundable licences revenue is recognised in full on customer acceptance.

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 have revenue streams 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 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 monthly instalments over a period of five* years from the end of the month in which the costs were incurred. The residual values of the development assets are reviewed annually.

* In the year ended 31 March 2011, the amortisation period was three years.  The effect of the change in accounting policy on the results of the Group is £Nil.

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 years based on the estimated useful lives of the assets. The residual values of assets or Group 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 no penalty of lost interest, are shown as cash or cash equivalent.

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. Financial liabilities categorised as at fair value through profit or loss are recorded initially at fair value; all transaction costs are recognised immediately in the Statement of comprehensive income. All other financial liabilities are recorded initially at fair value, net of direct issue costs.

Financial liabilities categorised as at fair value through profit or loss are re-measured at each reporting date at fair value, with changes in fair value being recognised in the Statement of comprehensive income. All other 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. Where debt has been converted into equity, the liability is extinguished at no gain no loss. The equity is measured at the carrying value of the extinguished debt.

(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. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

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. Exchange differences on non-monetary items are recognised in the Statement of other comprehensive income to the extent that they relate to a gain or loss on that non-monetary item taken to the Statement of changes in shareholders’ equity, otherwise such gains and losses are recognised in the Statement of comprehensive income.

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. Current tax credits arise from theUKlegislation 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. 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 equity (such as the revaluation of land) in which case the related deferred tax is also charged or credited directly to 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.

Where leased buildings are vacated or under-utilised a provision is made for the loss of benefit over the remainder 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 share-based payment arrangements granted after 7 November 2002 that had not vested prior to 1 April 2006 are recognised in the financial statements.

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.

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 assets 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 assets 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 interest 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 have been capitalised in 2012 for the first time on the basis that this is the first year in which all of the criteria (see accounting policy note above) have been met. The key condition which has now been satisfied is the probability of generating future economic benefits. Development costs are capitalised according to the accounting policies as stated.  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.

Judgement is used to determine which activities constitute development that should be capitalised.  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 there is no inter-segment income or expenditure.

The Group’s revenues from customers and its non-current assets are divided into the following geographical areas:

In this year ended 31 March 2012 10% (2011: 9%) of the revenue depended on a single customer.

3. Directors and employees

755,555 share options at an exercise price of 9p were exercised by the Directors.  The aggregate gain made by the Directors on the exercise of share options was £31,000.  555,555 share options at an exercise price of 9p were exercised by the highest paid Director.  The aggregate gain made by the highest paid Director on the exercise of share options was £23,000.  There were no pension contributions made in respect of the highest paid Director.  During the year two Directors accrued benefits under a Company pension scheme (2011: One).

The Directors of the Company are the key management personnel.

Individual Director’s emoluments and compensation

Individual Director’s emoluments and compensation continued

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:

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

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 £816,082 (2011: £816,082) relating to financial years ended 31 March 2002 to 2007. 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 26% (2011: 28%). The difference is explained as follows:

(D) Unrecognised deferred tax

A deferred tax asset of £1.3m (2011: £1.9m) 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, 207,946,235 (2011: 206,926,786), is adjusted to assume conversion of all dilutive potential Ordinary Shares under the Group’s Enterprise Management Incentive Plan, being 7,480,022 (2011: Nil) to give the diluted weighted number of shares of 215,426,257 (2011: 206,926,786).

9.  Acquisition

On 15 December 2011 the Group acquired the assets of the regulatory business of SOFGEN including customers, REG-Reporter software and trademarks together with the on-going business for a consideration of £2.8m primarily to geographically expand its regulatory compliance business.

The main part of the business acquired, which in the past was known in the United States (the “US”) regulatory market as IDOM USA, is the US and Canada regulatory reporting product REG-Reporter®. REG-Reporter has a strong client base in North America.

The acquired business contributed £0.5m revenue and £0.1m operating profit from the acquisition date to 31 March 2012.  In addition, the Group incurred transaction fees of £0.1m which were expensed in the Consolidated statement of comprehensive income.

Had the acquisition taken place on 1 April 2011, it is estimated that the revenue and profit before tax of the combined entity for the year would have been £14.2m and £2.7m respectively.

Goodwill was incurred as the acquisition is expected to create significant cross-selling opportunities, cost synergies and increase the probability of securing global regulatory reporting contracts. The fair value adjustment relating to intangible assets represents computer software, customer relationships, IP and trademarks. They have been included within Other intangible assets per note 11. The goodwill is not expected to be deductible for tax purposes.

The net assets acquired were:

Satisfied by:

10. Property, plant and equipment

11. Intangible assets

The goodwill at 1 April 2011 relates solely to the acquisition of STB Systems Limited, since renamed Lombard Risk Compliance Limited, which was acquired in 2005 and which constitutes the Group’s regulatory compliance business. Additions to goodwill arising during the reporting period relate to the acquisition of the regulatory reporting business of SOFGEN, further details of which are provided in note 9. Both these businesses now represent the Group’s regulatory compliance business.

An impairment review has therefore been carried out on this cash-generating unit.

In accordance with IAS 36 “Impairment of assets” 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 2012, the goodwill 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 12%). 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.

For the years 2014 to 2017 no new business is forecast with retention levels of recurring revenues averaging 90% per annum. In view of this, no sales and marketing or research and development costs are forecast for the years 2014 to 2017.

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 account.

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 table below shows the impairment charge that would be required if the assumptions in the calculation of the goodwill value in use were changed:

12. Trade and other receivables

The amounts are short term and the Directors consider that the carrying amount of these trade and other receivables approximates to their fair value. All of the Group’s trade and other receivables have been reviewed for indications of impairment. As at 31 March 2012, trade receivables of £2.5m (2011: £0.6m) were fully recoverable. An impairment provision of £0.2m (2011: £0.2m) has been made against the invoices of 17 clients (2011: 27 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, principallySterling, Euros or US Dollars. The Group does not hedge potential future income, since the existence, quantum and timing of such income cannot be accurately predicted.

 13. Borrowings

Borrowings comprise a sterling bank loan repayable in equal quarterly instalments over a three year term with the first repayment in April 2012.  Interest is payable at a rate of LIBOR +4%.

14. Trade and other payables

15. 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 previous years.

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 US Dollars, the Euro, Chinese Yuan, Hong Kong Dollars and Singapore Dollars. 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 on the basis that the overall effect on the Group’s income statement has not been large enough to warrant the management, the costs and margin requirements of this activity. As the Group grows this position may change. The Group’s main on-going transactional exposure is to be long of Euro and US Dollars and short of Chinese Yuan.

II) Inflation risk

The Group has exposure to the inflationary effect of operating in countries in which it operates, offset by its ability to raise prices in those countries in which it sells. The Group’s cost base is mainly exposed to the inflation rates and changes in payroll taxes in theUnited Kingdom, theUnited StatesandChina. The inflation rate for salaries in specialised parts of the financial sector in a financial centre such asLondon,New YorkorShanghaiis often different from the relevant country’s overall rate of wage inflation. 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. The Group finances its operations through retained cash reserves and overdraft facility. When the Group is a net depositor of funds, the Group stands to gain if interest rates rise and to lose if interest rates fall, ignoring any possible positive or negative correlation effects with business demand for the firm’s products or inflationary pressures on the firm’s cost base that might arise from changes in interest rates. When the Group is a net borrower of funds, the opposite is the case. Although through its own OBERON^® software the Group has access to sophisticated models for the management of interest rate risk, there has been no use of interest rate derivatives to manage this position on the basis that the amounts are not large enough to warrant this activity. 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.

Credit risk

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 15 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.

Although through its own Firmament^® software the Group has access to sophisticated models for the management of credit spreads and credit derivatives, there has been no use of credit derivatives to mitigate counterparty risk and no such use is contemplated. 15. Financial risk management and financial instruments continued

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:

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 breach of client confidentiality for sensitive data. Further risks may arise where late delivery of software or untimely delivery of related services causes a client to miss regulatory deadlines. 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.

Liquidity risk

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. When required the Group has a short-term overdraft facility of £100,000 which as at the year-end had not been used. At 31 March 2012 the Group financial liabilities were as follows:

Maturity analysis

At 31 March 2012 the Group’s liabilities have contracted maturities which are summarised below:

The above contractual maturities reflect the payment obligations which may differ from the carrying value of the liabilities at the balance sheet date.

Interest rate sensitivity

The Group is exposed to changes in market interest rates (LIBOR) through the bank borrowings obtained during the year at a variable interest rate.

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.

Capital management

The Group’s capital management objectives are to ensure the Group’s ability to continue as a going concern and to provide an adequate return to shareholders. The Group monitors capital on the basis in proportion to risk and makes adjustments in the 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.

Following the acquisition of SOFGEN’s regulatory business, the Group had bank borrowings of £2.0m as at the year-end. In line with the terms of that debt the Group monitors capital on the basis of three covenants in place over the debt, being:

• Total Net Debt to Adjusted EBITDA;
• EBITDA to Net Finance Charge; and
• Cash Flow to Debt Service.

All covenants were satisfied at 31 March 2012.

16. Share capital

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.

Share issue

On 15 December 2011, the Company issued 2,327,556 Ordinary Shares of 0.5p per share in connection with the Group’s acquisition of the SOFGEN business; further details are provided in Note 9 to the group accounts.  The shares were issued at a premium of 12.6p per share, which has been credited to the share premium account.

On 20 December 2011, the Company issued 1,055,555 Ordinary Shares of 0.5p per share as part of the Company’s share option scheme; further details are provided in Note 17 below.  The shares were issued at a premium of 8.5p per share, which has been credited to the share premium account.

On 7 March 2012, the Company issued 500,000 Ordinary Shares at 0.5p per share as part of the Company’s share option scheme; further details are provided in Note 17 below.  The shares were issued at a premium of 8.5p 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 volatility of the Company’s shares for the relevant period has been estimated at 30%, giving a charge to the income statement for the year ended 31 March 2012 of £21,000 (2011: credit £5,000), with the same amount being credited to reserves. The expected volatility has been based on historical volatility, using market prices of Lombard Risk Management plc shares between 4 September 2004 and 31 March 2010.

Equity-settled share-based payments

The Company has a share option scheme 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 exercising period, the options expire. Options are forfeited if the employee leaves the Company.

The fair values of the options were calculated using a numerical binomial model assuming the inputs shown below:

Details of the number of share options and the weighted average exercise price (“WAEP”) outstanding during the year are as follows:

The share options outstanding at the end of the year have the following exercise prices:

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:

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. 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

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.  Details of the Directors’ remuneration are set out in note 3.

21. Controlling personnel related parties

In the opinion of the Directors, there is no ultimate controlling party at 31 March 2012