Final Results

26 May 2016

Lombard Risk Management

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

Final Results for the year ended 31 March 2016

Lombard Risk Management plc (LSE:LRM), a leading provider of integrated collateral management, regulatory compliance and reporting solutions for the financial services industry, is pleased to announce its final results for the year to 31 March 2016.

Financial Highlights

· Revenue increased by 10.3% to £23.7m (2015: £21.5m)

· Recurring revenue grew 12.4% to £10.2m (2015: £9.1m), representing c. 43.1% of revenue (2015: 42.3%)

· Adjusted EBITDA decreased to £2.1m (2015: £4.6m)

· Loss before tax of £2.2m (2015: profit £2.3m)

· Cash and cash equivalents at 31 March 2016 of £3.3m (31 March 2015: £2.2m)

Operational Highlights

· Launched AgileREPORTER® for Global Regulatory Reporting

· Signed Technology License Agreement with Oracle America Inc.

· Unveiled new global identity and launched new website

· Refreshed leadership team with appointment of Alastair Brown to the Board as Chief Executive Officer and, post year-end, appointment of Mike Payne as Chief Technology Officer

Alastair Brown, CEO of Lombard Risk commented:

"After a year of significant change, we have great confidence in our plans in both the regulatory reporting and collateral management markets. Significant investment in our products and team, coupled with a key strategic relationship with Oracle, put Lombard Risk in a position of strength. With a leadership team in place that can deliver those plans we look forward to continue helping our clients to reduce the cost, complexity and constraints of trading in today's markets."

For further information, please contact:

About Lombard Risk

Lombard Risk is a leading provider of regulatory reporting and collateral management solutions to the financial services industry. Through intelligent automation and optimisation, Lombard Risk's clients are able to improve their approach to risk management, gaining the agility they need to have a competitive advantage. As well as bringing immediate and urgent solutions to clients' needs, Lombard Risk's global team of experts look beyond today's reporting and collateral management to develop technology solutions that help them adapt as industry challenges evolve.

Counting over 30 of the world's 'Top 50' financial institutions among its clients, Lombard Risk has been a trusted partner for 27 years. Founded in 1989 and headquartered in London, it has offices in New York and Asia Pacific (Hong Kong, Shanghai, Singapore and Tokyo), and service centres in Atlanta, Cape Town and Miami. Find out more at lombardrisk.com

Chairman's Statement

I am pleased to report on a year of considerable development and growth for Lombard Risk. Against a background of substantial change, not least in the executive leadership team, the Group has posted record revenues, albeit alongside a significant increase in costs as this programme of change has been, and continues to be, implemented.

Results

The Group achieved revenue growth of 10.3%, giving a five-year compound annual revenue growth rate of 15.0%. Annually recurring revenues made up 43.1% (2015: 42.3%) of total revenues. Substantial change has come at a cost, which has resulted in the Group recording a loss before tax for the year of £2.2m (2015: profit £2.3m). Net cash at 31 March 2016 was £3.3m (2015: £2.2m), following a successful placing of new shares to raise £3.8m in May 2015.

Dividend

The Group has pursued a progressive dividend policy for a number of years; however, it is the view of the Board that the Group is at a stage in its development where its resources can be best utilised to accelerate the substantial opportunities that the Group is in a position to exploit in the coming months and years. Consequently, the Board does not propose to pay a final dividend. The Board will review its dividend policy in future, with the intention of reinstating its progressive dividend policy when appropriate.

Strategy

The Group recognises the continuing evolution of the regulatory landscape in both of its key business segments and the Board believes the Group is well placed to meet the increasing regulatory obligations its clients are facing which is driving demand for the Group's products. The announcements of the rebranded AgileREPORTER® (7 March 2016) and the Technology License Agreement with Oracle America Inc. (18 March 2016) are clear indicators of the Board's commitment to providing a market-leading regulatory reporting suite. At the same time, the Group continues to invest in the functions and features of its COLLINE® product, to provide a multi-asset collateral management solution for its clients, available both as an installed and cloud-based implementation.

The Group has continued to invest in its direct sales function, and will continue to do so, and sees a highly complementary relationship between this and the Group's global network of partners.

Employees

During the year I have had the opportunity to work closely with many of the Group's valued employees and I continue to be impressed by the excellence I have seen in terms of market knowledge, commitment and desire.

On behalf of the Board, I would like to thank all of our employees for their valued contribution.

Board of Directors

Since the Annual General Meeting held in 2015, there have been a number of changes to the Board. John Wisbey, who had served as Non-executive Director since 18 May 2015, resigned from the Board on 17 August 2015. John McCormick, who had resigned from the Board in May 2015, re-joined the Board as Non-executive Director on 7 September 2015. Sandy Broderick joined the Board as Non-executive Director on 9 September 2015. These appointments bring valuable industry experience to the Group.

I am pleased to say that Alastair Brown joined the Board as Executive Director and Chief Executive Officer with effect from 1 December 2015. Alastair brings a wealth of experience from his career as a senior technology leader within the Royal Bank of Scotland Group and the Board is delighted that he will be leading Lombard Risk through a period of substantial change and development.

In January 2016, Nick Davies, the Group's Chief Technology Officer, resigned from the Board after almost six years of service, during which time he helped guide the Group through some years of substantial change.

Governance

In addition to the Board changes described above, the Group has made changes to its advisory team, with the appointment of finnCap as nominated adviser (Nomad) and broker.

Outlook

The Board believes that the Group is well placed to take advantage of a market landscape that remains highly attractive. The Board does not see any slowdown in the pace of regulatory change and believes that its clients and target customers remain in need of technical solutions to address this rapid change, both in terms of introducing greater efficiency in managing regulatory reporting obligations and in embracing technology-based risk management as a contributor to front office revenue generation, rather than merely a back office tool. The signing of the Group's Technology License Agreement with Oracle Americas Inc. provides significant momentum to deliver the Group's strategy of becoming the regulatory reporting technology of choice both for the Global Systemically Important Banks ("G-SIBs") and also for the wider banking market. At the same time, the successful implementation of the Group's collateral management product to keep abreast of forthcoming regulatory developments gives the Board confidence for the year ahead and beyond. As I commented in our trading statement of 19 April, these initiatives will require continued investment into the new financial year as the Company positions itself to take advantage of these and other opportunities.

AGM

The Annual General Meeting will be held at the offices of Memery Crystal LLP at 9.30am on Wednesday 6 July 2016. My fellow Directors and I look forward to meeting shareholders at that time.

Philip Crawford

Group Non-executive Chairman

25 May 2016

Chief Executive Officer's statement

This has been a year of tremendous development for Lombard Risk with major changes to the leadership team, a strategic review leading to explicit focus on two core product areas, the launch of AgileREPORTER®, a fresh new brand identity and a major strategic addition to our alliance network.

These changes have not been implemented without incurring cost, and we are consequently reporting a loss before tax of £2.2m. This loss is primarily the result of one-off costs which include impairment of software no longer marketed as well as the impact of the changes noted above. On a positive note, revenue did increase by 10.3% to £23.7m and we enter 2016/17 with a record order book of £7.5m and recurring revenues standing at £10.2m.

The revenue of £23.7m means that our compound annual revenue growth rate over the last five years is a healthy 15%. However, in the context of large and growing markets, driven by client and regulator-led demand, this is still less than we should expect. Since I joined the Group in December, I have reviewed the entire business and started to implement the changes that we believe will lead to substantial revenue growth and create a cash-generating business delivering shareholder value. The disciplined focus on two key product areas has allowed us to create credible roadmaps that our clients can build into their own plans. This intense focus and increased understanding of the size of the opportunity required leadership changes and I have made two critical appointments in technology and product to help deliver against our ambitions, along with some reorganisation of the talent already in the organisation.

Notwithstanding the need for these major changes, we are very proud of the support we have given the Group's customers during a turbulent year, with four of our top seven deals involving delivering COLLINE® or AgileREPORTER® to major new clients. The other three underline our ability to extend our products in a rapidly evolving industry, and to retain existing clients at their renewal events. This track record of deepening relationships with longstanding customers, coupled with the ability to attract top-flight financial institutions, has sown the seeds for the Group's long-term success.

Strategic product review

We completed a review and rationalisation of our products, which resulted in the management focusing exclusively on the regulatory reporting (AgileREPORTER®) and collateral management (COLLINE®) needs of our extensive client base. This new strategic focus, coupled with key executive appointments in product and technology, has presented us with an unrivalled opportunity to leverage our expertise across both of our business lines. The implementation of regulations in the collateral management industry has allowed us to draw on our extensive regulatory experience to support our clients. Key functional enhancements for AgileREPORTER® in process automation and workflow have been influenced as a direct result of our long history supporting collateral operations. With many banks moving towards a Group-wide procurement and technology led purchasing process, these connections are increasingly relevant as clients look for consistency across their platforms.

The launch of AgileREPORTER® was a critical milestone for the Group. This new product supports our clients meeting challenges around process automation and data lineage, mandated by the Basel Committee on Banking Supervision ("BCBS") document 239 for the 30 Global Systemically Important Banks ("G-SIBs") and desired by almost all other financial institutions. AgileREPORTER®, as a testament to its flexible integration architecture, was the solution implemented to support our first Oracle Financial Services Analytical Applications ("OFSAA") client. The landmark partnership deal with Oracle America Inc. lays the foundation for a step change in performance for Lombard Risk and propels the Group's regulatory reporting business into the same league as the collateral management business.

With another two contracts signed for OFSAA, and others at advanced stages of negotiation, Lombard Risk has clearly demonstrated an ability to supply regulatory reporting solutions to tier 1 banks. This development is translating into direct sales as well, with conversations underway for new global and regional mandates. The development plan to support this new business will also create exciting upgrade options for clients seeking to move beyond expedient tactical decisions post the Global Financial Crisis ("GFC") and implement a strategic solution to the global regulation challenge.

We have been equally active in the collateral management space, where our COLLINE® product has continued to win new business thanks to its comprehensive asset class coverage and rich feature set. This market has also been affected by the fallout from the GFC as regulators increase their demands for real-time and more granular management of liquidity and risk in the business and we are well placed to support the evolving needs of our clients. As in-house developed solutions come under increased cost scrutiny and some of our competitors struggle to keep pace, our continuous investment, coupled with a close working relationship with our existing clients, has allowed the Group to maintain a delivery flow and future roadmap that is relevant and, indeed, urgently required.

Finally, cloud solutions and revenue from Software as a Service will be increasingly important for software companies in the future. We have already deployed COLLINE® in the cloud for five clients, but for most organisations currently looking for cloud solutions the power of COLLINE® makes the interface overly complex. We are working with a small group of future clients on delivering the power of COLLINE® through a very modern, lightweight system deployed in the cloud. As well as meeting the needs of this key community, this allows us to build in beneficial network effects supporting clients of all sizes as they do business together. In a rapidly evolving market segment, we believe this will keep COLLINE® relevant for the future, and at the top of any platform selection list.

A refreshed leadership team

Lombard Risk has achieved much of its success thanks to the extraordinary efforts and expertise of its employees, but taking the Group to the next level required an additional investment in leadership. I was delighted to be able to create the role of Global Head of Product as well as welcome a new Chief Technology Officer. In conjunction with the sales organisation, these new executives have created a clarity around the product roadmaps which has allowed us to make important delivery commitments to critical current and potential clients, and create alignment with our major partners, ensuring that our joint activities are complementary and additive.

Investment in the sales force and building our brand

Connecting clients with our product suite and enabling them to exploit the benefits we can bring to their organisations requires a skilled sales force with global coverage. We enjoy a physical presence in New York, London, Frankfurt, Singapore, Hong Kong and Tokyo, and support clients across North America, EMEA and Asia Pacific (including India) from these bases. This year we invested heavily in our sales organisation, with new hires across the board, the introduction of more structured processes and sales analytics and a global training programme, bringing colleagues across the organisation together for development, coaching and strategic planning. This work continues as we pursue our aspiration to bring our clients advantage by delivering them our agile solutions.

To reflect the significant transformation that Lombard Risk has undergone, it was important to invest in our brand as a visible mirror of the evolving product suite, the team and our vision. We are a firm focussed on leading in a constantly changing market environment, adapting to our clients' requirements and supporting them as a trusted partner. Our solutions use technology as a tool, rather than as an end, to ensure that the scarce capital and people resources of our clients are optimised. We chose the key words Agile and Advantage to express the flexibility of our problem solving and our style of product delivery and implementation, but always with the same goal in mind - to ensure our clients have a competitive advantage.

Growing through partnerships

We have always believed that product partners are an essential part of the growth story of our business, combining critical complementary features with access to an enlarged client community. Our partnership with Oracle America Inc. not only demonstrates our ability to add value to the largest organisations, but the early execution of three major contracts under this partnership underlines our ability to make strategic commercial agreements a delivered reality to our shared customers. With other product partners already engaged, and further dialogues underway, we remain convinced that partnerships offer us an exciting way of delivering significant extra revenue in addition to our ambitious organic growth plans.

Rapid and professional execution of the flow of new business will always be a key focus for the

Group. Delivering the benefits that Lombard Risk software brings to the heart of a financial services enterprise as rapidly as possible is our primary goal, and we retain a team of highly skilled professional services experts to achieve this. We complement our in-house team with key partners to deliver critical capacity at peak times, which is particularly important given the regulator-driven deadlines that underpin many of our commitments. As well as providing much flexibility and scalability to our in-house experts, these relationships allow us to make sure we are not distracted from our primary business purpose as a financial services software house.

Conclusion

We are very confident in our future plans, with product enhancements scheduled and commitments made to clients to maintain the industry-leading position our collateral management product enjoys and make our new regulatory reporting solution best-in-class. It has been a privilege to join Lombard Risk at such an exciting time, and I would like to thank the Board for their unwavering support during this transition and, in particular, Philip Crawford who led the Group as Executive Chairman prior to my arrival on 1 December 2015.

Alastair Brown

Chief Executive Officer

25 May 2016

Financial Review

Group Results

Group revenue increased by 10.3% to a record £23.7m compared with £21.5m in the prior year, with strong growth recorded in the Regulatory Reporting division, which saw revenues increase by 25.6%. Risk Management revenues were down by 3.0% as a result of declining revenues for the Group's legacy Oberon product. Licence revenues were broadly flat at £9.5m (2015: £9.5m), representing 40% of revenues (2015: 44%). Recurring revenues grew 12.4% to £10.2m (2015: £9.1m) and represented approximately 43.1% of revenue (2015: 42.3%). Recurring revenues now have a current annual run rate in excess of £10.6m.

Operating profit before share-based payment charges, depreciation and amortisation (adjusted EBITDA) was £2.1m (2015: £4.6m). The Group recorded a loss before tax of £2.2m (2015: profit before tax of £2.3m), resulting in a basic loss per share of 0.98p (2015: basic earnings per share of 0.87p).

The effective rate of tax for the year was 33.0% (2015: 0.1%). This was primarily driven by a significant reduction in the deferred tax asset to £0.3m (2015: £1.0m). The unrecognised deferred tax asset was £3.2m (2015: £1.5m).

Cash flow

Cash generated from operations was £3.7m (2015: £5.7m). Balancing working capital requirements with investing in longer-term growth remains an integral part of the Group's financial responsibilities, as is the case for many growth technology companies. The Group produces weekly cash forecasts which are monitored closely. The Group has in place a £2.5m revolving loan agreement with Barclays Bank Plc at a margin of 3.85%. There were no amounts owing under this agreement at the end of the financial year and no amounts drawn under the agreement during the year.

Investment in development expenditure that was capitalised was £5.9m (2015: £5.1m).

The Group raised £4.0m (net) from the issue of new shares (2015: £0.03m) with £0.2m (2015: £0.03m) resulting from the exercise of employee stock options.

Net Group cash, being cash and cash equivalents less borrowings, of £3.3m is up on the prior year (2015: £2.2m) following the placing of shares to raise £3.8m (net) of new equity in May 2015.

Balance Sheet

Non-current assets at 31 March 2016 increased to £23.1m (2015: £22.6m), primarily as a result of the continued investment in capitalised development costs. This investment was applied across the Group's suite of products and included £1.7m of investment in COLLINE®, £2.2m in global regulatory reporting and £1.5m in the software platform to support its regulatory reporting products. The Directors remain confident that this investment will bring future benefits to the business by enabling clients to both continue to meet their regulatory reporting obligations and more effectively manage risk in an increasingly regulated environment and by broadening the reach of the Group's products through both direct and indirect sales channels. The carrying value of non-current assets includes £5.9m in respect of goodwill arising on previous acquisitions, £5.1m in respect of the written-down value of the Group's investment in COLLINE®, £5.5m in respect of the Group's regulatory reporting products and £3.2m relating to the development of the software platform that supports these products. During the year the Group's technical team incurred costs of £3.2m that did not meet the criteria for capitalisation and were therefore recorded as an expense in the profit and loss account.

Net Group cash at 31 March 2016 was £3.3m (2015: £2.2m). The Group had no borrowings at the balance sheet date (2015: £nil).

Trade receivables were 16% of revenues as at 31 March 2016, compared to 17% and 14% for 2015 and 2014 respectively.

Year on year trends

The capitalisation of development costs for the last five years has an impact on the interpretation of the financial performance of the Group. Internally the Group's operating budget and monthly management accounts measure financial performance assuming no such capitalisation. The table below allows users to make a more informed assessment of the financial performance of the Group.

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

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

Shareholder information

The Group's website at www.lombardrisk.com contains a wide range of information about our activities and visitors can download copies of the report and accounts in addition to newsletters and other articles of interest.

Nigel Gurney

Chief Financial Officer

25 May 2016

Consolidated statement of comprehensive income

For the year ended 31 March 2016

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

Consolidated balance sheet

As at 31 March 2016

The financial statements were approved by the Board and authorised for issue on 25 May 2016 and signed on its behalf by:

Alastair Brown

Chief Executive Officer

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

Consolidated statement of changes in shareholders' equity

For the year ended 31 March 2016

The share premium account represents amounts subscribed for shares that are in excess of the nominal value of the shares. Foreign exchange reserves represent accumulated exchange differences arising since the transition to IFRS from the translation of subsidiaries with a functional currency other than Sterling. Other reserves relate to negative goodwill arising on the acquisition of a subsidiary undertaking prior to 1 April 1997, share-based payments and the merger reserve.

(1).An adjustment was made in the financial statements for the year ended 31 March 2015 as a result of a review by the Conduct Committee of the Financial Reporting Council ("FRC"). This has been fully disclosed within the notes to the 31 March 2015 financial statements.

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

Consolidated cash flow statement

For the year ended 31 March 2016

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 2016

1. Accounting policies

(A) Basis of preparation

These consolidated financial statements are for the year ended 31 March 2016. They have been prepared in accordance with International Financial Reporting Standards ("IFRS") and IFRS Interpretation Committee ("IFRIC") interpretations as at 31 March 2016, as adopted by the European Union and also in accordance with those parts of the Companies Act 2006 relevant to companies which prepare financial statements in accordance with IFRS. They have been prepared under the historical cost convention.

The preparation of financial statements in accordance with IFRS requires the Board to make judgements, estimates and assumptions that affect the application of accounting policies, the reported amounts of balance sheet items at the period end and the reported amount of revenue and expense during the reporting period. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements that are not readily apparent from other sources. However, the actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing 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, with the exception of IFRS 15 and IFRS 16, where the Group is currently evaluating the impact of the adoption of these standards in future periods.

IFRS 9 "Financial Instruments" (IASB effective date: 1 January 2018)2

IFRS 14 "Regulatory Deferral Accounts" (effective: 1 January 2016) 2,4

IFRS 15 "Revenue from Contracts with Customers" (effective: 1 January 2018) 2

IFRS 16 "Leases" (effective: 1 January 2019) 2

Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) (IASB effective date: 1 July 2014) 2,5

Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations (IASB effective date: 1 January 2016) 5

Clarification of Acceptable Methods of Depreciation and Amortisation - Amendments to IAS 16 and IAS 38 (IASB effective date: 1 January 2016) 5

Annual Improvements to IFRSs 2010-2012 Cycle (IASB effective date: generally 1 July 2014) 2,5

Annual Improvements to IFRSs 2012-2014 Cycle (effective: 1 January 2016) 5

Amendments to IAS 16 and IAS 41: Bearer Plants (effective: 1 January 2016) 5

Amendments to IAS 27: Equity Method in Separate Financial Statements (effective: 1 January 2016) 5

Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities: Applying the Consolidation Exception (effective: 1 January 2016) 2

Disclosure Initiative: Amendments to IAS 1: Presentation of Financial Statements (effective: 1 January 2016) 5

Disclosure Initiative: Amendments to IAS 7: Statement of Cash Flows (effective: 1 January 2017) 2

Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - Amendments to IFRS 10 and IAS 28 (effective: 1 January 2016) 3

Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses (effective: 1 January 2017) 2

1 Not adopted by the EU (as at 16 February 2016).

2 EU mandatory effective date is financial years starting on or after 1 February 2015.

3 Endorsement postponed indefinitely.

4 It has been decided not to launch the endorsement process - the EC will wait for a completely new standard.

5 Endorsed.

(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. In accordance with IFRS 10, the Group considers it has control over its subsidiary undertakings on the grounds that it has: existing rights over them that give it the ability to direct their activities; rights to variable returns from its involvement with them; and the ability to use its power over them to affect the amount of the Group's returns. A description of the principal activities and operations of the Group can be found in the Directors' report.

The consolidated financial statements include the financial statements of the Company and its subsidiary undertakings made up to 31 March 2016. 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 provides 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 2016. This shows an increase in the Group's cash balance following the issue of new shares in the year.

The Directors have prepared a cash flow forecast for the period to 30 June 2017, which shows that the Company and Group have sufficient facilities for ongoing 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 2016.

(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 ongoing obligations in respect of such sales.

Customisation income Recognised once the customisation has taken place.

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

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

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

Training income Recognised when the relevant courses are run.

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

(F) Property, plant and equipment

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

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

The estimated useful lives of the assets are as follows:

Computer hardware two years

Fixtures, fittings and equipment four years

(G) Goodwill

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

(H) Intangible assets

Research and development

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

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

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

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

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

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

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

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

Development costs not meeting the criteria for capitalisation are expensed as incurred. Capitalised development costs are amortised in equal annual instalments over a period of five years from when the separately identifiable intangible asset is available for use in the manner intended by management. Enhancements to a separately identifiable intangible asset that is already available for use in the manner originally intended by management are expensed as incurred.

Computer software

The cost of computer software, net of estimated residual value and impairment, is depreciated in equal annual instalments over one to three years based on the estimated useful lives of the assets. The residual values of assets or groups 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 groups 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 groups of like assets are reviewed annually.

(I) Financial instruments

Financial assets and liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. The Group's financial instruments comprise cash, trade receivables, derivative financial instruments (forward currency contracts) and trade and other payables.

Derivative financial instrumentsDerivative financial instruments held by the Group comprise forward foreign currency contracts and are recognised at fair value. The Group has not applied hedge accounting and the gain or loss on remeasurement to fair value is recognised immediately in profit or loss.

Loans and receivables

Loans and receivables are initially stated at their fair value plus transaction costs, then subsequently at amortised cost using the effective interest method, if applicable, less impairment losses. Provisions against trade receivables are made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write down is determined as the difference between the assets' carrying amount and the present value of the estimated future cash flows.

Cash and cash equivalents

The Group manages short-term liquidity through the holding of cash and highly liquid interest-bearing deposits. Only deposits that are readily convertible into cash with maturities of three months or less from inception, with no penalty of lost interest, are shown as cash or cash equivalents.

Trade payables

Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument. All financial liabilities are recorded at amortised cost using the effective interest method, with interest-related charges recognised as an expense in finance cost in the statement of comprehensive income.

A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged, cancelled or expires.

(J) Foreign exchange

Transactions in foreign currencies are translated into the functional currency of the individual entity at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.

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

(K) Taxation

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

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

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

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

(L) Leased assets

The Group does not hold any finance leases.

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

(M) Pension costs

The Group operates a number of defined contribution pension schemes. The assets of the schemes are held separately from those of the Group in independently administered funds. The amount charged to profit or loss represents the contributions payable to the schemes in respect of the accounting period.

(N) Share options issued to employees

All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair values of employees' services are determined indirectly by reference to the fair value of the instrument granted to the employee. This fair value is appraised at the grant date using a binomial model, taking into account the terms and conditions upon which the options were granted.

All equity-settled share-based payments are ultimately recognised as an expense in the statement of comprehensive income with a corresponding credit to "other reserves".

If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.

Share options vest no earlier than the second anniversary of issue. The vesting period runs for two to ten years from the date the options first vest. There are no other performance conditions other than the vesting period.

Upon exercise of share options the proceeds received net of attributable transaction costs are credited to share capital and, where appropriate, share premium.

(O) Impairment testing of goodwill, other intangible assets and property, plant and equipment

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors the related cash flows.

Goodwill, other individual assets or cash-generating units that include goodwill, other intangible assets with an indefinite useful life and those intangible assets not yet available for use are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.

(P) Key judgements in applying the entity's accounting policies and goodwill impairment

The Group's management makes estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a reasonable risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Recognition of revenue

Revenue is recognised according to the accounting policies as stated and is dependent upon the type of income. Where contracts include different elements of revenue, those elements are recognised in line with those policies, with fair values attributed to each component part.

Judgement is used in the recognition of revenue from long-term projects.

If work is contracted on a fixed-cost basis, revenue is recognised in line with an estimation of the percentage of completion of the project. This estimation is based upon the views of the consultants implementing the projects as to the proportion of the project completed and this is supported by data from a time recording system. There is, however, an element of judgement involved that can impact the recognition of revenue. This process and individual project recognition is reviewed regularly to ensure that, whilst still subjective, the reflection of revenue is the best approximation possible.

Where projects include the up-front delivery of immediately usable software, the element of non-refundable licence revenue is recognised on receipt of the software by the customer, with other revenue being recognised in line with the performance of the contracted services. The unbundling of this contract revenue requires management to exercise judgement as to the relative fair values of the component parts of the contract.

Goodwill impairment

An impairment loss is recognised if the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from each cash-generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows. In the process of measuring expected future cash flows, management makes assumptions about future operating results. These assumptions relate to future events and circumstances. The actual results may vary and may cause significant adjustments to the Group's assets within the next financial year.

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

Capitalisation of development costs

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

Some judgement is used to determine which activities constitute development that should be capitalised. Likewise, some judgement is required in assessing when a product has reached its intended use and hence when capitalisation of associated costs should cease. In addition, judgement is used to determine future profitability of the products and timing thereof.

Deferred tax assets

The assessment of the probability of future taxable income on which deferred tax assets can be utilised is based on the Group's latest approved budget forecasts, which is adjusted for significant non-taxable income and expense. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit, that deferred tax asset is usually recognised in respect of the period for which future profits can be confidently foreseen. The recognition of deferred tax assets that are subject to certain legal or economic limits 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.

2. Business segmentation (continued)

The Group's revenues from clients and its non-current assets (other than goodwill, trade and other receivables and deferred tax assets) are divided into the following geographical areas:

In the year ended 31 March 2016 8% (2015: 10%) of the revenue depended on a single customer within the Risk Management and Trading software segment.

3. Directors and employees

During the year two Directors accrued benefits under pension schemes (2015: two).

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

4. (Loss) / profit from operations

The (loss) / 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 £1,038,000 (2015: £1,038,000). As for all companies that have received these credits, the amounts are subject to potential future HM Revenue & Customs clawback.

7. Taxation (continued)

(C) Tax on (loss) / profit on ordinary activities

The tax assessed for the year is the standard rate of corporation tax in the UK of 20% (2015: 21%). The difference is explained as follows:

(D) Unrecognised deferred tax

A deferred tax asset of £3.2m (2015: £1.5m) 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. (Loss) / profit per share

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

Potential Ordinary Shares are treated as dilutive, when, and only when, their conversion to Ordinary Shares would decrease earnings per share or increase loss per share from continuing operations. As potential Ordinary Shares for 2016 would decrease the loss per share, they are therefore not included in diluted earnings per share. In the prior year the weighted average number of shares, 263,491,123, is adjusted to assume conversion of all dilutive potential Ordinary Shares under the Group's share option plans, being 3,387,680, to give the diluted weighted number of shares of 266,878,803.

8. (Loss) / profit per share (continued)

 (Loss) / profit per share

9. Non-controlling interest

In the prior year the non-controlling interest related to 20% of Lombard Risk Compliance Policies Limited, whose principal place of business is in the United Kingdom, that was owned by a third party. During the year to 31 March 2016 the Group acquired the remaining 20% for £Nil consideration, resulting in a loss on acquisition of £119,000. The proportion of voting rights held by non-controlling interests is nil (2015: 20%). The loss for the year allocated to the non-controlling interests is £Nil (2015: £38,000). The accumulated non-controlling interest at the end of the year is £Nil (2015: liability of £119,000).

10. Property, plant and equipment

11. Goodwill and other intangible assets

Goodwill

The goodwill at 31 March 2015 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. 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 2016, 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 10%). 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.

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 amount.

11. Goodwill and other intangible assets (continued)

Other intangible assets

Capitalised development costs reflect the expenditure attributable to the development of new technology that will provide economic benefit in future periods as set out in note 1(H). The Group's development costs relate to the Group's products, including COLLINE®, Oberon and AgileREPORTER®. The COLLINE® suite of products is individually significant; the net book value at 31 March 2016 is £5,107,000 (2015: £4,502,000). Amortisation is over a five-year period from the time when each separately identifiable intangible asset within the suite of products reaches its intended use by management. The remaining amortisation period for the COLLINE® suite of products varies accordingly and can be summarised as follows: four to five years: £4.4m; two to four years: £0.45m; up to two years: £0.26m.

Four products were identified as impaired following a review of the carrying values of capitalised development costs during the year ended 31 March 2016. Two of the products form part of the Group's Risk Management and Trading software operating segment and two form part of the Group's Regulatory Reporting software operating segment.

The impairment within the Group's Risk Management and Trading software operating segment related to one product that has been brought to the end of its life and the other related to a module within a larger product that had no forecast revenue traction or pipeline. The net carrying value of the above were fully written down, resulting in an impairment charge of £469,000, which was included in the Administrative expenses line of the statement of comprehensive income.

The impairment within the Group's Regulatory Compliance software operating segment related to one product where development work has been discontinued and the other related to a product that has been brought to the end of its useful economic life. Both products have been fully written down, resulting in a combined impairment charge of £777,000 which was included in the Administrative expenses line of the statement of comprehensive income.

11. Goodwill and other intangible assets (continued)

The review was carried out as part of the annual review of the carrying value of all intangible assets. This review involved a consideration of the recoverable amount of the asset, being the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. Where the recoverable amount was considered to be lower than the net carrying value, an impairment charge has been applied. The result of the review identified that future cash flows anticipated from the aforementioned asset are lower than had previously been expected and hence the asset has been written down to its recoverable amount by reference to value-in-use calculations. These calculations were based on discounted cash flows using a discount rate of 10%.

12. Trade and other receivables

The current amounts are short term and the Directors consider that the carrying amount of these trade and other receivables approximates to their fair value. The non-current amounts are due within two to five years and are stated at fair value, determined by discounting future receipts at the rate of interest that discounts the nominal amounts receivable to the current cash sales price of the goods sold. All of the Group's trade and other receivables have been reviewed for indications of impairment. As at 31 March 2016, trade receivables of £3.7m (2015: £3.7m) were fully recoverable. An impairment provision of £0.3m (2015: £0.15m) has been made against the invoices of nine clients (2015: eleven clients). In addition, some of the unimpaired trade receivables are past due as of the reporting date. Trade receivables past due but not impaired are as follows:

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

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

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

13. Trade and other payables

14. 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, with the exception of currency risk where forward currency contracts have been entered into during the year.

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.

Mitigation: 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, 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 ongoing transactional exposure is to be long of Euro and US Dollars through Euro and US Dollar income exceeding expenditure in those currencies and short of Chinese Yuan through expenditure exceeding income in that currency. In the current year the Group has used forward currency contracts to manage cash flows associated with the Chinese Yuan. Forward exchange contracts are mainly entered into for significant foreign currency exposures that are not expected to be offset by other same-currency transactions.

Foreign currency sensitivity

Foreign currency denominated financial assets and liabilities which expose the Group to currency risk are disclosed below. The amounts shown are those reported to key management translated into Sterling at the closing rate:

14. Financial risk management and financial instruments (continued)

The following tables illustrate the sensitivity of profit and equity in regards to the Group's financial assets and financial liabilities and the USD/GBP exchange rate, HKD/GBP exchange rate, SGD/GBP exchange rate and CYN/GBP exchange rate 'all other things being equal'. It assumes a +/- 5% change of each of the exchange rates for the year ended 31 March 2016 (2015: 5%). These percentages have been determined based on the average market volatility in exchange rates in the previous 12 months. The sensitivity analysis is based on the Group's foreign currency financial instruments held at each reporting date and also takes into account forward exchange contracts that offset effects from changes in currency exchange rates.

If the GBP had strengthened against the other currencies by 5% (2015: 5%) then this would have had the following impact:

If the GBP had weakened against the other currencies by 5% (2015: 5%) then this would have had the following impact:

Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Group's exposure to currency risk.

II) Inflation risk

The Group has exposure to the inflationary effect 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.

Mitigation: 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.

Mitigation: The Group finances its operations through retained cash reserves and overdraft facilities. 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.

14. Financial risk management and financial instruments (continued)

Interest rate sensitivity

The Group has limited risk to interest rate ("LIBOR") changes as borrowings were repaid by 31 March 2015, with the Group now having in place a revolving loan agreement as outlined below.

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.

Credit risk

Credit risk is the risk that a third party might fail to fulfil its performance obligations under the terms of a financial instrument. For cash and cash equivalents and trade and other receivables, credit risk represents the carrying amount on the balance sheet.

Mitigation: 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.

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:

The Group's derivative financial instruments are measured at fair value and are summarised below:

The Group uses forward foreign exchange contracts to mitigate exchange rate exposure arising from forecast costs in Chinese Yuan. The contracts are considered by management to be part of economic hedge arrangements but have not been formally designated as hedging instruments, so are treated as held for trading in accordance with IAS 39. The above contract is short term in nature and is due to be settled within 12 months of the year end.

14. Financial risk management and financial instruments (continued)

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 cause a client to miss regulatory deadlines.

Mitigation: The Group's Audit Committee regularly reviews controls over certain aspects of the operations of the Group. In addition, the Audit Committee maintains an operational risk register. Such 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.

Liquidity risk

Liquidity risk is the risk of loss from not having access to sufficient funds to meet both expected and unexpected cash demands.

Mitigation: 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 2016 the Group's financial liabilities were as follows:

Maturity analysis

At 31 March 2016 the Group's financial 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.

Capital management

The Group's capital management objectives are to ensure the Group's ability to continue as a going concern and ultimately to provide a return to shareholders. The Group monitors capital in proportion to risk and makes adjustments in 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 has pursued a progressive dividend policy for a number of years; however, it is the view of the Board that the Group is at a stage in its development where its resources can be best utilised within the business to accelerate the substantial opportunities that the Group is in a position to exploit in the coming months and years.

The Group had bank borrowings of £Nil as at the year end. During the prior year the Group entered into a £2.5m revolving loan agreement with Barclays Bank Plc at a margin of 3.85%. There were no amounts owing under this agreement at the end of the financial year. In line with the terms of that facility the Group monitors capital on the basis of two covenants in place over the debt, being:

• total net debt to adjusted EBITDA; and

• adjusted EBITDA to net finance charge.

All covenants were satisfied at 31 March 2016.

15. Fair value measurement of financial instruments

Financial assets and financial liabilities measured at fair value are required to be grouped into three Levels of a fair value hierarchy. The three Levels are defined based on the observability of significant inputs to the measurement, as follows:

- Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;

- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

- Level 3: unobservable inputs for the asset or liability.

The following table shows the Levels within the hierarchy of financial assets and liabilities measured at fair value on a recurring basis at 31 March 2016 and 31 March 2015:

There were no transfers between Level 1 and Level 2 in 2016 or 2015.

Measurement of fair value of financial instruments

The Group's finance team performs valuations of financial items for financial reporting purposes, with valuation techniques selected based on the characteristics of each instrument, with the overall objective of maximising the use of market-based information. The Group's foreign currency forward contracts (Level 2) are not traded in active markets, so have been fair valued using observable forward exchange rates corresponding to the maturity of the contract. The effects of non-observable inputs are not significant for foreign currency forward contracts.

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.

There was no movement in the number of deferred shares during the year.

Share issue

On 26 May 2015, the Company issued 37,200,000 Ordinary Shares of 0.5p per share as part of a placing. The shares were issued at a premium of 10.25p per share, which has been credited to the share premium account.

16. Share capital (continued)

On 26 May 2015, the Company issued 2,400,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 17. The shares were issued at a premium of 4.0p per share, which has been credited to the share premium account.

On 28 May 2015, the Company issued 400,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 17. The shares were issued at a premium of 5.5p per share, which has been credited to the share premium account.

On 5 August 2015, the Company issued 200,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 17. The shares were issued at a premium of 5.5p per share, which has been credited to the share premium account.

On 9 September 2015, the Company issued 150,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 17. The shares were issued at a premium of 5.5p per share, which has been credited to the share premium account.

On 28 October 2015, the Company issued 200,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 17. The shares were issued at a premium of 5.5p per share, which has been credited to the share premium account.

On 15 December 2015, the Company issued 600,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 17. The shares were issued at a premium of 5.0p per share, which has been credited to the share premium account.

On 24 December 2015, the Company issued 150,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 17. The shares were issued at a premium of 5.0p per share, which has been credited to the share premium account.

On 5 January 2016, the Company issued 100,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 17. The shares were issued at a premium of 5.0p per share, which has been credited to the share premium account.

On 8 January 2016, the Company issued 120,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 17. The shares were issued at a premium of 5.0p per share, which has been credited to the share premium account.

On 14 January 2016, the Company issued 100,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 17. The shares were issued at a premium of 5.0p 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 expected volatility was determined by reference to historical data of the Company's shares over a period of time since its flotation. For the year under review the volatility ranged between 40.7% to 41.1%, giving a charge to profit and loss for the year ended 31 March 2016 of £182,745 (2015: £211,667) off-set by lapsed share option reversal of £122,000, with the same amount being credited to reserves. For details of the volatility used in each individual calculation see the table below.

Equity-settled share-based payments

The Company has three share option schemes 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 exercise period, the options expire. Options are forfeited if the employee leaves the Company.

Under the approved and unapproved option schemes the Remuneration Committee can grant options for employees of the Group. Options are granted with a fixed exercise price which is typically issued at, or at a premium to, the market price. The contractual life is between five and ten years from the date of grant. Options become exercisable after two or three years. The vesting period runs for two to eight years from the date the options first vest. There are no other performance conditions other than the vesting period.

17. Share options (continued)

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

17. Share options (continued)