Final Results

Lombard Risk Management plc

("Lombard Risk" or the "Company")

Final results for the year ended 31 March 2013

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 final results for the year to 31 March 2013.

Highlights

·; Revenues increased by 31% to £16.8m (2012: £12.8m) of which second half £9.0m (2012: £6.4m)

·; Licence revenues £8.2m (2012: £6.0m)

·; EBITDA increased 77% to £5.3m (2012: £3.0m)

·; Profit before tax up 56% to £3.9m (2012: £2.5m)

·; Cash at end of period £1.9m (2012: £0.1m) with net cash of £0.2m (2012: net debt of £2.4m)

·; 33 contracts signed for COREP, of which eleven are new names

·; Significant sale of REFORM® platform to satisfy DFA and EMIR reporting requirements

·; FY 2014 opens with record revenue backlog in place

·; Final dividend 0.040p per share (2012: 0.035p per share) recommended to shareholders

·; The Board continues to view the future with optimism

Chief Executive Officer, John Wisbey, commented on the results:

"The year was a record year both for revenue and profit with 31% headline growth in revenues to £16.8m and a rise of 77% in EBITDA to £5.3m. This growth was achieved despite the European Banking Authority delaying new regulatory reporting requirements in our key EMEA market, which deferred some revenues into the next period.

"We enter the new financial year with our highest level of recurring revenues ever, our highest contractual backlog to date, a healthy sales pipeline and a sound cash position. As a result, the Board views the future with optimism."

For further information, please contact:

Lombard Risk Management plc Tel: 020 7593 6700

John Wisbey, CEO - [email protected]

Paul Tuson, CFO - [email protected]

Charles Stanley Securities Tel: 020 7149 6000

Nominated Adviser and Broker

Russell Cook

Carl Holmes

Newgate Threadneedle Tel: 020 7653 9850

Graham Herring - [email protected]

Robyn McConnachie - [email protected]

Chairman's statement

I am pleased to report a progressive year at Lombard Risk. The financial performance has met our growth expectations. Sales of COREP, our solution for European Banking Authority Common Reporting, and of our transactional reporting platform, REFORM®, have been at the forefront of this growth. As well as recording top line growth in excess of 30% (18% organic), we finished the year with a record revenue backlog and appreciable visibility of future revenues as a result of an improvement in the longevity of contractual commitments.

Last year I highlighted the Group's strategy of building a high-quality business based upon intellectual property. This strategy of continuous innovation and product development within both new regulatory reporting solutions and repeatable platforms ensures that we remain at the forefront of providing regulatory reporting and risk management in our chosen global markets.

Our progress has been achieved against the continuing backdrop of a global economic environment dominated by key economies unable to drag themselves out of recession, worldwide inflationary pressures and the instability of the Euro. On a micro level, financial institutions are seeking to retain cash and either cancelling or postponing many technology initiatives. In addition, regulatory reporting deadlines are regularly being delayed causing delivery difficulties for both our customers and the Group. These challenges also present opportunities, with the increasing waves of regulation in financial markets showing no signs of abating. Our target customer base continues to have many mandatory technology requirements, for which budget remains available. Lombard Risk's technology predominantly satisfies mandatory needs.

The trading highlight was the sale of our REFORM® platform to a major global bank to satisfy its DFA (Dodd-Frank Act) and EMIR (European Market Infrastructure Regulation) transactional reporting requirements.

Operationally, I am delighted that the Group achieved CMMI-D Level 3 accreditation from the CMMI Institute. This is in recognition of its high-quality software design, development and implementation processes. This, together with the ISO 9001 certification, is a prestigious achievement for our technology division. We have defined CMMI-D Level 3 processes which increase delivery efficiency and team effectiveness and are consistent and repeatable across all projects and products. This further enhances our reputation with clients and partners and confirms our ability, if required, to scale-up development work on multiple projects.

The Board continues to review acquisition opportunities where strong synergies exist with the Group and where our development expertise can enhance functionality and profitability to the products acquired.

As the Group's results have indicated, turnover growth has proved to be more than resilient to economic challenges and we remain optimistic for the future.

Chief Executive's statement

Summary

The year was a record both for revenue and profits, with over 30% headline growth and like for like revenue growth of 18% after taking into account the impact of acquisitions. EBITDA increased from £3.0m last year to £5.3m in the current year, a 77% rise. While this rise was expected it was nevertheless pleasing that, at the same time, we were able to build a record revenue backlog going into the new financial year. All this was achieved in spite of the European regulatory deadlines slipping by nine months or more, which inevitably affected our revenue for the year. The second half of the year was especially strong. We have now grown revenues by a compound 20% per annum over the last four years.

The Group continues to benefit from a compelling mix of a growing market, a healthy mix of long-standing and new customers, record recurring and committed revenues, good forward visibility and a leading competitive position. As a result we remain confident of further growth in the new financial year and beyond. At a time when many companies in the software sector are struggling, we believe that in the near future the market will recognise that we not only have a strong positioning in the growing areas of regulation and risk but that we are executing well in those markets. 

We invested appreciably during the year, both in product development and in strengthening the sales team, including the appointment of a Head of Global Alliances. There are significant opportunities in our markets, particularly at present, which demand further investment in product development and which the Board believes will contribute appreciably to future revenues. Indirect sales will become an increasingly important part of our revenue model and again this should contribute to revenue growth.

We enter the new financial year with our recurrent revenues at an all-time high, our highest ever level of contractual backlog, with a boost from the remaining COREP deals that we anticipate would have closed before March 2013 had the regulations not been delayed.

Financial

Revenues for the year increased by 31% to £16.8m (2012: £12.8m). Profit before taxation was £3.9m (2012: £2.5m) and profit after taxation was £3.7m (2012: £2.5m). EBITDA was £5.3m (2012: £3.0m). We built up cash during the year to £1.9m at the same time as repaying debt and ended the year with a positive net cash position of £0.2m versus net debt in the previous year of £2.4m, an improvement of £2.6m.

To put these numbers into full context:

i) We only owned the REG-Reporter® business for three months of the previous financial year. The pro forma revenue number for FY 2012 would have been £14.2m rather than £12.8m had we owned it for the full year. That gives a like for like revenue growth number for the Group of 18%.

ii) We raised equity during the year of £1.5m after costs, so that we were cash positive by £0.8m from our operations post-investing activities, despite heavy investment in our products and in our sales team.

Regulatory and Compliance software products

Lombard Risk is the market leader for UK bank regulatory reporting software in the UK through its REPORTER product. Lombard Risk is also the largest supplier by far of regulatory reporting software to foreign banks in the US.

Regulatory change is always one of the main revenue drivers for a regulatory business. 2014 is now the key deadline for common reporting ("COREP") and common financial reporting ("FINREP") at European Union level to the European Banking Authority ("EBA"). Originally COREP had been expected to come into force by the end of March 2013. We have been successful in the UK in selling REPORTER COREP software to 33 clients (with many more to go). It is very encouraging that so far eleven of these clients have been new names for us. Interesting statistics are that of these eleven, seven were won from competitors, two were start-ups and two had previously used manual systems.

Revenues for Regulatory Compliance in EMEA were inevitably affected by the nine month delay in COREP as there were further delays at European level in finalising the regulations. Banks also saw no need to accelerate implementation projects when it was increasingly apparent that quite a lot of the work might need to be redone when the regulations were finalised. Obviously at the same time as adversely affecting revenues for the year ending March 2013, regulatory delays have been helpful for our opening contractual backlog going into the year ending March 2014 and for our sales pipeline for the year ending March 2014. In addition it was not clear last year whether FINREP would apply in the UK. It now seems most likely that it will and this should bring an additional stream of revenue in the current financial year.

Financial regulation continues much as before at UK level despite European EBA initiatives and the recent split of the FSA into the Prudential Regulatory Authority ("PRA") and the Financial Conduct Authority (FCA) is likely to give a stable UK regulatory environment for the next few years. It will not affect the appreciable regulatory change to be introduced in the next few years, and we expect this to keep us very busy.

Our regulatory reporting acquisition in America has been well integrated. All client contracts were novated and we lost no clients other than a foreign bank branch which closed down in the US. We now have over 75 regulatory clients in the US, many of them Tier 1 foreign banks. In Asia work continued satisfactorily on Chinese regulatory reporting and in finishing a number of regulatory projects in Hong Kong and Singapore. We expect Asia to perform strongly in the new financial year thanks to investment in the past year.

We made strong headway with our REFORM® product in the area around transaction reporting and reporting to trade repositories like the DTCC to comply with US CFTC and SEC requirements derived from the Dodd-Frank Act. A major development in global markets is the development of trade repositories such as the DTCC, REMIT, CME and REGIS. The Dodd-Frank Act in the US, and the EMIR regulations in the EU, as well as similar developments in Hong Kong, Japan, Singapore and other countries, compel Swap Dealers and other market participants to report derivative transactions to trade repositories in minutes in the US and at least daily in other jurisdictions. The technology in REFORM® is highly reusable for message transformation generally and we have also used it for message transformation in the collateral space as described below.

We also launched our ComplianceASSESSOR™ product. This product puts good process around compliance with regulations and creates a clear view and audit trail of how an institution is complying with individual parts of its regulatory environment. At a time when there is increasing focus by UK regulators on conduct, and when some banks have faced very heavy fines for not complying with regulations (eg making payments in US$ to Iranian entities), this product is in the right place at the right time. There should be good upside from this product in the next year.

Other EMEA opportunities for our traditional regulatory business over the next few years after COREP, FINREP and EMIR will come from Basel 3 and MIFID 2, with opportunities to expand our client base for Solvency 2. The need to report transactions to trade repositories should generate additional business for us.

As well as our new REFORM® and ComplianceASSESSOR™ products, we have made, and continue to make, some important technology and product enhancements to our regulatory product set. This will be a focus for investment in the coming year, designed to make our regulatory product set more attractive to global Tier 1 banks at regional or head office level as well as enhancing the experience and providing additional modules to our wider client set. Our REPORTER Analysis Centre was launched during the year and has already generated revenue.

Risk Management and Trading products

We have made strong progress with COLLINE®, our collateral, clearing and repo platform. We now have just under fifty direct clients for COLLINE® and many more indirect clients. During the year we signed up another top German bank, adding to our existing German bank wins and Société Générale in the previous year. Several clients were gained for our COLLINE® CCP clearing and repo modules.

Almost all our clients are affected by either Dodd-Frank or EMIR regulatory requirements. This has been helpful to us by forcing banks and other large market participants to review systems where their legacy system is not built with these regulatory changes in scope. Our COLLINE® clearing module has been built with this in mind and we have made many other changes to COLLINE® to ensure that it is compliant with the new regulations.

Much work has been done on opening up COLLINE® through APIs and allowing even greater automation through connectivity to other infrastructure. We used a combination of our COLLINE® API and our REFORM® platform to create two way real time links with a collateral market messaging system called Marginsphere from AcadiaSoft, Inc. This is now almost in full production at a Tier 1 German bank. Greater automation and Straight Through Processing is important to most large bank clients; we anticipate more initiatives in this regard.

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.

Technology

We continue to 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 / sec lending initiatives for COLLINE® but also to develop our new REFORM® product mentioned above and to prepare for our REPORTER COREP module.

Our model is to do much of the business analysis in London, New York and other financial centres but to handle the majority of development and testing in Shanghai, China. Efficiency and good process is very important to us. During the year our Development and Testing Centre was awarded the CMMI-D Level 3 award. This is a very significant external validation of a well-managed operation with good processes.

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. 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 over 300 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.

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. Headcount increased to 273 at 31 March 2013 from 252 at the prior year end. About 150 of our Group headcount are in our Development and Testing Centre in Shanghai.

Prospects

We enter the new financial year with a good level of optimism. Firstly, our recurrent revenue is well up and we have a record contractual backlog to start the year. Secondly, our product strategy means that we are well placed to benefit from the considerable opportunity in the regulatory and risk areas in which we operate. Thirdly, we have made great headway with our partnership module and see the likelihood of more revenue through third parties than in the past. Finally, COREP is a greater opportunity for this year than we expected as a result of the regulatory delays.

We clearly continue to operate in an environment where there is little discretionary spending and where many major banks and the countries in which they operate are far from financial health. There also remains the risk of high government debt levels leading to inflationary pressures for many G-20 countries including the main ones in which we operate. While no company can be immune to the overall macroeconomic situation, we do believe that Lombard Risk is very well placed in its target markets.

We anticipate a year of further encouraging 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.

Finance review

Key messages

·; Organic revenue growth of 18% (2012: 4%)

·; Organic licence revenue growth of 31% (2012: 42%)

·; Growth is still challenged by difficult macroeconomic market conditions

·; Strong performance in Europe partially offset by underperformance in Americas and Asia Pacific

·; At 31 March 2013, contracted backlog for licence and professional services totals £4.4m (2012: £2.6m)

·; Average committed term of EBA common reporting contracts (annual licence and support and maintenance) signed to 31 March 2013 is 4.7 years

·; Capitalisation of development costs adds £3.2m (2012: £3.0m) to profit for the year

·; US regulatory business acquired in FY2012 met operating expectations

This Finance review expands the information on financial performance contained within the Chairman's statement and the Chief Executive Officer's statement and seeks to give a clear picture of year on year progress.

Users of the annual report should be able to make a candid assessment of the financial performance of the Group. The FY12 acquisition and capitalisation of development costs for the last two years inadvertently reduce the transparency of the financial performance of the Group. The Group's operating budget and monthly management information measures financial performance assuming no capitalisation. The figures below help enable users of the annual report to enjoy the same comparable information:

* Capitalisation assumed at 73% of research and development costs in FY2011.

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

The Group has enjoyed respectable revenue growth, with only professional service revenues falling below expectations, which resulted from clients' implementation delays.

Must-have technology solutions create a much desired compelling sales event but also reduce flexibility on the timing of investment in development, as missing regulatory deadlines is not an option for our customers. We therefore need to remain agile and meet our customers' delivery expectations. This has, in turn, resulted in technology costs increasing year on year by 35% (2012: 66%).

Over the past two years, the Group has focussed on increasing contract longevity. The commitment shown by our customers implies a high level of satisfaction with the Group's products and levels of support and maintenance. In addition, it provides solid foresight and predictability to a strong level of future revenues.

Profit and loss

Revenues increased by 31% to a record £16.8m for the year, compared with £12.8m in the prior year. Licence revenues increased in the year by 37% to £8.2m (2012: £6.0m), representing 49% of revenues (2012: 47%). Recurring annual revenues totalled £7.2m, approximately 43% of revenue (2012: 43%) and now have a current annual run rate of in excess of £8.0m.

Operating profit before share-based charges, depreciation and amortisation and acquisition costs increased to £5.3m (2012: £3.1m). Profit before tax increased to £3.9m (2012: £2.5m).

The effective rate of tax for the year was 4.7% (2012: 0.0%). The recognised deferred tax asset decreased by £0.2m to £0.5m (2012: £0.7m) and the unrealised deferred tax asset is £0.7m (2012: £1.3m).

Cash flow

Cash generated in operations was £5.8m (2012: £1.8m). As for many growth technology companies, the pressure on balancing working capital requirements with investing in longer-term growth continues. The Group produces cash forecasts close to real time which are monitored closely. The decision to raise £1.5m in June 2012 mitigated any risk of delays by regulatory authorities in introducing new reporting requirements causing an extension to the pay back on new product developments.

Investment in research and development expenditure that was capitalised was £4.3m (2012: £3.3m).

The Group raised £1.5m (net) (2012: £0.1m) with £0.1m (2012: £0.1m) resulting from the exercise of employee stock options.

The Group had cash outflows of £1.2m to partially satisfy the debt incurred to finance the FY12 acquisition. In December 2012, the Group settled the loan note for $550,000 due for repayment by 31 December 2013 at a discount of $83,000. This was partially financed by a short-term bank loan of €400,000. The loan was taken in Euros to mitigate foreign exchange exposure on contractual payments due in Euros.

Overall there was a net cash inflow of £1.7m (2012: outflow of £1.7m).

Balance sheet

Non-current assets at 31 March 2013 increased to £13.4m (2012: £10.4m) predominantly caused by the increase in capitalised development costs.

Net cash at 31 March 2013 is £0.2m (2012: net debt £2.4m).

Trade receivables were 13% of revenues at 31 March 2013, compared to 20% and 5% for 2012 and 2011 respectively. The decrease this year partially offset the working capital squeeze caused by the increase at the end of the prior year.

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

For the year ended 31 March 2013

Consolidated balance sheet

As at 31 March 2013

Consolidated statement of changes in shareholders' equity

For the year ended 31 March 2013

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.

Consolidated cash flow statement

For the year ended 31 March 2013

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

Notes to the consolidated financial statements

For the year ended 31 March 2013

1. Accounting policies

(A) Basis of preparation

These consolidated financial statements are for the year ended 31 March 2013. They have been prepared in accordance with International Financial Reporting Standards ("IFRS") and IFRS Interpretation Committee ("IFRIC") interpretations as at 31 March 2013, 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.

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 auditors' report on the statutory accounts for the year ended 31 March 2013 was unqualified and did not contain statements under section 498 of the Companies Act 2006.

New standards, amendments and interpretations

At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective and have not been adopted early by the Group.

Management anticipates that all of the pronouncements will be adopted by the Group's accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group's financial statements is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group's financial statements.

·; IFRS 9 "Financial instruments" (effective 1 January 2015)

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 2015, subject to adoption by the European Union.

(B) Basis of consolidation

The Group accounts consolidate the financial statements of the Parent Company (Lombard Risk Management plc) and its subsidiary undertakings over which it has control (see note 5 to the Parent Company balance sheet). 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 2013. The acquisition method of accounting has been adopted. Under this method, the results of subsidiary undertakings acquired or disposed of in the year are included in the Consolidated statement of comprehensive income from the date of acquisition or up to the date of disposal. All of the Group's assets and liabilities existing at the date of acquisition are recorded at their fair values reflecting their condition at that date. Profits or losses on intra Group transactions are eliminated in full. Goodwill is capitalised and under IFRS 3 goodwill is not amortised but an impairment test is performed as appropriate, at least annually. The value of goodwill is to be written down according to the outcome of the impairment test.

Non-controlling interests, presented as part of equity, represent the portion of a subsidiary's profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the Parent and the non-controlling interest based on their respective ownership interest.

(C) Segment reporting

In identifying its operating segments, management generally follows the Group's product lines. The Group operates two main operating segments: Regulatory 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 2013, both in the signing of new business contracts and in the realised financial results. These show an improvement in profitability and an increase in the cash balance at 31 March 2013. The Directors have prepared a cash flow forecast for the period to 30 June 2014, 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 2013.

(E) Revenue

Revenue represents the fair value of goods sold and services provided during the year, stated net of value added tax. Revenue and profit before tax are wholly attributable to the principal activities of the Group.

The recognition of revenue depends on the type of income:

Licence income For long-term projects which do not include the up-front delivery of immediately usable software, revenue is recognised on both the consultancy and initial licence elements in line with the estimated percentage of completion of the project. This estimation is based upon the views of the consultants implementing the projects as to the proportion of the project completed and this is supported by data from a time recording system. Annual licence/usage fees and maintenance revenue invoiced simultaneously with the initial licence, but considered to relate to the period when the licence is deemed to be live, is deferred in its entirety until the live date, following which it is released to profit in equal daily instalments over the duration of the relevant licence or maintenance. For other projects which do include the up-front delivery of immediately usable software, revenue is recognised on a percentage completion basis. For non-refundable licences, revenue is recognised in full on customer acceptance as there are no on-going obligations in respect of such sales.

Customisation income Recognised once the customisation has taken place.

Maintenance income Recognised evenly over the term of the maintenance contract.

Rental income Recognised evenly over the term of the rental contract.

Data subscription income Recognised evenly over the term of the data contract.

Training income Recognised when the relevant courses are run.

Multiple element transactions are allocated to relevant revenue categories based on typical revenue splits for transactions which are contracted separately and by using industry best practice.

(F) Property, plant and equipment

Property, plant and equipment are stated at cost, net of depreciation and any provision for impairment. No depreciation is charged during the period of construction. Leasehold property is included in property, plant and equipment only where it is held under a finance lease.

The cost of computer hardware, fixtures, fittings and equipment is written down to the residual value and is depreciated in equal annual instalments over the estimated useful lives of the assets. The residual values of assets or groups of like assets and their useful lives are reviewed annually.

The estimated useful lives of the assets are as follows:

Computer hardware two years

Fixtures, fittings and equipment four years

(G) Goodwill

Goodwill, representing the excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired, is capitalised and reviewed annually for impairment. Goodwill is carried at cost less accumulated impairment losses. Negative goodwill is recognised immediately after acquisition in the Consolidated statement of comprehensive income.

(H) Intangible assets

Research and development

Expenditure on research is recognised as an expense in the period in which it is incurred.

Development costs incurred are capitalised when all of the following conditions are satisfied:

·; completion of the intangible asset is technically feasible so that it will be available for use or sale;

·; the Group intends to complete the intangible asset and use or sell it;

·; the Group has the ability to use or sell the intangible asset;

·; the intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits;

·; there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

·; the expenditure attributable to the intangible asset during its development can be measured reliably.

Development costs not meeting the criteria for capitalisation are expensed as incurred. Capitalised development costs are amortised in equal 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.

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.

Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in the profit or loss in the period in which they arise. The assets and liabilities in the financial statements of foreign subsidiaries are translated into the Parent Company's presentation currency at the rate of exchange ruling at the balance sheet date. Income and expenses are translated at the actual rate at the date of transaction. The exchange differences arising from the retranslation of the opening net investment in subsidiaries are recognised in other comprehensive income and taken to the "Foreign exchange reserve" in equity. On disposal of a foreign operation the cumulative translation differences (including, if applicable, gains and losses on related hedges) are transferred to profit or loss as part of the gain or loss on disposal.

(K) Taxation

Current tax is the tax currently payable based on taxable profit for the year. Current tax credits arise from the UK legislation regarding the treatment of certain qualifying research and development costs, allowing for the surrender of tax losses attributable to such costs in return for a tax rebate.

Deferred taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.

Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the statement of comprehensive income, except where they relate to items that are charged or credited directly to other comprehensive income or equity in which case the related deferred tax is also charged or credited directly to other comprehensive income or equity.

(L) Leased assets

The Group does not hold any finance leases.

All leases referred to are regarded as operating leases and the payments made under them are charged to the statement of comprehensive income on a straight line basis over the lease term. Lease incentives are spread over the term of the lease.

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 discount rate in order to calculate the present value of those cash flows. In the process of measuring expected future cash flows, management makes assumptions about future operating results. These assumptions relate to future events and circumstances. The actual results may vary and may cause significant adjustments to the Group's assets within the next financial year.

In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to market risk and the appropriate adjustment to asset-specific risk factors.

Capitalisation of development costs

Development costs are capitalised when all of the criteria (see accounting policy note above) have been met. Employees' time is recorded by product and activity and valued by reference to salaries and directly attributable overheads. Values by product are reviewed with reference to future profitability.

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 inter-segment income or expenditure is cross charged at arm's length.

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

In this year ended 31 March 2013 10% (2012: 10%) of the revenue depended on a single customer.

3. Directors and employees

No share options were exercised by the Directors. 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 (2012: two).

The Directors of the Company are the key management personnel.

Individual Director's emoluments and compensation

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

4. Profit from operations

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

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 (2012: £816,082) relating to financial years ended 31 March 2002 to 2008. 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 24% (2012: 26%). The difference is explained as follows:

(D) Unrecognised deferred tax

A deferred tax asset of £0.7m (2012: £1.3m) 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, 227,991,541 (2012: 207,946,233), is adjusted to assume conversion of all dilutive potential Ordinary Shares under the Group's Enterprise Management Incentive Plan, being 6,755,180 (2012: 7,480,024) to give the diluted weighted number of shares of 234,746,721 (2012: 215,426,257).

Profit per share

9. Minority interest

Swapval Limited, a previously wholly owned subsidiary of the Parent Company, changed its name to Lombard Risk Compliance Policies Limited on 7 August 2012 and the company has since commenced trading. 20% of the issued share capital of the company was transferred to a third party during the year under review for £Nil consideration.

Prior to trading Lombard Risk Compliance Policies Limited had net assets of £2.

10. 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 purchase price for the SOFGEN business included cash of £1.963m, the issue of Ordinary Shares with a fair value of £305,000 and the issue of loan notes, of which £174,000 was due to be settled on 31 December 2012 and £347,000 on 31 December 2013. The loan note due for settlement on 31 December 2013 was settled during the year under review for an adjusted amount of £296,000.Further details of the SOFGEN business acquisition are provided in note 9 to the 2012 Group financial statements, which are publicly available and which are also available on the Lombard Risk Management plc website.

11. Property, plant and equipment

12. Intangible assets

The goodwill at 31 March 2013 relates to the acquisition of STB Systems Limited, since renamed Lombard Risk Compliance Limited, which was acquired in 2005 and which constituted the Group's regulatory compliance business, and to goodwill arising in 2011 relating to the acquisition of the regulatory reporting business of SOFGEN, further details of which are provided in note 10. Both these businesses now represent the Group's regulatory compliance business. An impairment review has therefore been carried out on this cash-generating unit.

The cash-generating unit has been assessed by comparing its carrying value to its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation.

For the year ended 31 March 2013, the cash-generating unit recoverable amount was determined based on value-in-use calculations, which are based on detailed five year discounted forecast cash flows (using a discount rate of 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 2018 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 2018.

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).

13. 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 2013, trade receivables of £2.3m (2012: £2.5m) were fully recoverable. An impairment provision of £0.04m (2012: £0.24m) has been made against the invoices of twelve clients (2012: seventeen clients). In addition, some of the unimpaired trade receivables are past due as of the reporting date. Trade receivables past due but not impaired are as follows:

All other receivables (non-trade) are not past due.

Movements in Group provisions for impairment of trade receivables, as included in administrative expenses, are as follows:

The Group operates in a global market with income arising in a number of different currencies, principally Sterling, Euros or US Dollars. Other than natural opportunities to hedge, the Group does not hedge potential future income, since the existence, quantum and timing of such income cannot be accurately predicted.

14. Borrowings

Borrowings at 31 March 2013 comprise a Sterling bank loan and a Euro bank loan.

The Sterling bank loan is repayable in equal quarterly instalments over a three year term with the first repayment in April 2012. The loan principal is £2.0m and interest is payable at the rate of LIBOR + 4%. The balance outstanding at 31 March 2013 was £1.3m (2012: £2.0m).

The Euro bank loan is repayable in one payment on 30 April 2013. The loan principal is €0.4m and interest is payable at a rate of LIBOR + 4.25%. The balance outstanding at 31 March was £0.3m (2012: £Nil).

15. Trade and other payables

16. 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, which affect the management and levels of working capital. 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. The Group does use natural hedges where the appropriate opportunity arises. In addition, the Group prepares working capital forecasts that incorporate sensitivity analysis on exchange rate fluctuations. The Group's main 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. This exposure could affect the Group's cost base. The Group's cost base is mainly exposed to the inflation rates and changes in payroll taxes in the UK, the US and China. The inflation rate for salaries in specialised parts of the financial sector in a financial centre such as London, New York or Shanghai is often different from the relevant country's overall rate of wage inflation. Salary inflation in these markets and internally is monitored. No specific hedging of inflation risk has been carried out.

III) Interest rate risk

Interest rate risk arises primarily on the investment of the Group's cash balances or on its borrowings and the present value of the Group's receivables. In particular, interest on the Group's borrowings is affected by LIBOR as noted below. The Group finances its operations through retained cash reserves and overdraft facilities. 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 fifteen years has been negligible. The Group consequently has not considered taking out credit insurance and is not likely to do so in the foreseeable future. Deposits are placed with high quality banks. The Group closely monitors its credit risk.

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.

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; this includes integrated project management across all functions of the business. The Group's Audit Committee regularly reviews controls over certain aspects of the operations of the Group.

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. The Group's working capital report, produced each month, shows forecast monthly movements in working capital and cash for the following year. When required the Group has a short-term overdraft facility which at the year end has not been used. At 31 March 2013 the Group's financial liabilities were as follows:

Maturity analysis

At 31 March 2013 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 current and prior 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 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.

The Group had bank borrowings of £1.7m 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 2013.

17. 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 6 June 2012, the Company issued 20,000,000 Ordinary Shares of 0.5p per share in order to accelerate growth, recruit certain key staff and to provide cash for potential acquisition opportunities. The shares were issued at a premium of 7.0p per share, which has been credited to the share premium account, net of issue costs of £69,000.

On 19 July 2012, the Company issued 1,050,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 18 below. The shares were issued at a premium of 4.0p per share, which has been credited to the share premium account.

On 31 January 2012, the Company issued 250,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 18 below. The shares were issued at a premium of 5.0p per share, which has been credited to the share premium account.

On 7 March 2013, the Company issued 300,000 Ordinary Shares at 0.5p per share as part of the Company's share option scheme; further details are provided in note 18 below. The shares were issued at a premium of 5.0p per share, which has been credited to the share premium account.

18. 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 profit and loss account for the year ended 31 March 2013 of £2,445 (2012: charge £21,000), 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 share options granted during the year are as follows:

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:

The weighted average remaining contractual life of share options outstanding at the year end was 2.1 years (2012: 2.8 years).

19. 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:

20. 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.

21. 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 and in the Remuneration Committee report.

22. Controlling personnel related parties

In the opinion of the Directors, there is no ultimate controlling party at 31 March 2013.

23. Dividends

During 2013, Lombard Risk Management plc paid a dividend of £139,000 (2012: £103,000) to its equity shareholders. This represents a payment of 0.05p per share (2012: 0.04p).

Also, during 2013, the directors proposed a dividend of 0.040p per share (2012: 0.035p). As the distribution of the dividends by Lombard Risk Management plc requires the approval at the shareholders' meeting, no liability in this respect is recognised in the 2013 consolidated financial statements. No income tax consequences for Lombard Risk Management are expected to arise as a result of this transaction.