24th Sep 2009 17:19
24 September 2009
For immediate release
Lombard Risk Management plc
('LRM' or the 'Company')
Annual Results
The Company announces its final results for the year to 31 March 2009. Copies of the Report and Accounts, together with notice of the Annual General Meeting, are expected to be posted to shareholders shortly.
-ends-
Enquiries:
Lombard Risk Management plc
John Wisbey, Chairman & CEO
Tel: 020 7089 3700
Email: [email protected]
Noble & Company Limited
Brian Stockbridge, Associate Director
Tel: 020 7763 2200
City Profile
William Attwell
Tel: 020 7448 3244
LOMBARD RISK MANAGEMENT PLC
FINANCIAL STATEMENTS
YEAR ENDED 31 MARCH 2009
(Company No. 3224870)
INDEX TO THE FINANCIAL STATEMENTS
Highlights
Chairman's Statement
Board of Directors
Directors' Report
Corporate Governance Report
Report of the Audit Committee
Report of the Independent Auditor - Group Financial Statements
Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Statement of Changes in Shareholders' Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
Report of the Independent Auditor - Parent Company Financial Statement
Company Balance Sheet
Notes to the Financial Statements
Company Information
Highlights
For the year ended 31 March 2009
Financial results for the year ended 31 March 2009 have been delivered in line with Board expectations and are prepared under International Financial Reporting Standards ("IFRS") as adopted by the European Union.
Revenue £8.69m, up 2.8% on same period last year (2008: £8.46m)
Loss after tax £1.10m (2008: Loss £0.67m)
Profitability achieved by Risk management and trading software business, with COLLINE® Collateral Management software breaking through to profitability for first time
Regulatory Compliance business STB Systems Limited restructured and renamed Lombard Risk Compliance Limited in December 2008 and re-branding exercise largely completed
Consolidation of London operations into one building, and continued reductions in London headcount; move to larger premises in Shanghai
Major contract wins for COLLINE® including a Tier 1 Continental European bank
Future prospects
Continued strong demand by banks for collateral management products and likely further changes in bank regulation in 2009 will create ongoing commercial opportunities despite the global downturn
Cost cutting measures implemented in late 2008, including reduction in board size, should ensure that the business is cash generative again during FY 2010
Fund-raising and balance sheet restructuring after the financial year end combined with good commercial prospects leave the Company well placed for growth with a strong set of institutional shareholders capable of funding the Group's future expansion.
Chairman's Statement
For the year ended 31 March 2009
Summary
Although the financial year saw unprecedented turbulence in world financial markets, Lombard Risk continued to win contracts and grow organically. This was especially the case in the collateral management software business, which has excellent forward momentum following a large contract win with a Tier 1 German bank announced in April 2009. The move away from a light touch regulatory regime in the UK beginning with a complete reform of Liquidity Reporting offers considerable opportunity to the firm in the coming year and years ahead. The challenge in FY 2009 at a time that no-one could be sure of the financial outlook for the banking system in the next month let alone the next few years was to steer the right course between reducing costs while not damaging the future prospects of a promising company. We believe we got this balance about right, and that the Group is now well placed to grow significantly over the next few years.
As anticipated, the Group made a loss for the year, most of it in the first half. Revenues for the year ended 31 March 2009 were £8.69m. This is only a modest rise of 2.8% overall from the £8.46m in the previous year. The overall loss of £1.10m was, as already highlighted in the last Interims and explained again below, largely due to various issues in the Regulatory Compliance business which should not affect FY2010 to any material extent. The Trading and Risk business achieved overall profitability in the full year of around £0.87m including full apportionment of central overheads. Within the Trading and Risk division the collateral management software product COLLINE® also broke through to profitability during the year and ended the year ahead of budget, a clear example of how parts of our business are not affected by, and are possibly even benefiting from , the liquidity crunch in markets. We concluded nine contract wins for Colline during the year, a good achievement.
The outlook for our COLLINE® collateral management software remains very positive with strong new business demand expected to continue and revenue growth likely from existing customers. This is due both to the current market focus on counterparty risk and liquidity risk, and to the considerable advances in the product in maturity, scalability and resilience. This now makes COLLINE® an ideal and suitable product for Tier 1 banks, as well as for smaller banks, asset managers and other firms.
Our Oberon® product continued to be our most profitable product and saw the completion of the installation at its first client in China as well as satisfactory product advances.
Given that most of our revenues come from banks and financial services companies, it is hard to see that our products could be much better placed for FY2010 than to have our emphasis on collateral management (as part of risk and liquidity management) and regulatory compliance. We are the Global Number 2 in both collateral management software and bank regulatory reporting software.
On the regulatory compliance side we continued to sign significant contracts in Europe and Asia for STB-Reporter despite the fact that some projects were put on hold due to cuts in bank IT spending or bank mergers. With it now clear that there will be previously unforeseen regulatory change in 2009 and future years in many countries owing to the demand for reform of the financial system, we believe there will continue to be significant opportunities worldwide for our regulatory business. This is particularly significant for us in the UK where new Liquidity Reporting regulations come into effect in early 2010 as part of the new heavier touch regulatory regime.
We have invested heavily in technical resource since the balance sheet date, and more recently have strengthened our board with the appointment of a new Finance Director Keith Butcher, but various cost actions that we took at the end of 2008 should allow us to operate in FY2010 on a similar cost base to that in FY2009 despite increasing revenues.
Financial
Revenue increased to £8.69m against £8.46m in the comparable period last year. Loss before tax was £1.25m against £1.12m in the previous year. Cash at the end of the period was £0.15m and there were no bank borrowings. The Group's balance sheet and cash position will be significantly strengthened in October 2009 when the proceeds of a placing, concluded at the end of September 2009, are received. At the same time £1.03m of the £1.33m director loans outstanding at the year end will be converted to equity and the remaining £0.30m, along with a further £0.30m of director loans received in July/August 2009, will be repaid in full, leaving the Group with a strong cash position and no borrowings. All software development and R&D expenditure during the year was expensed in full when incurred.
The fall in Sterling has clearly helped the Sterling recognition of revenue denominated in foreign currency. This has two conclusions
Given that about £4.0m of our revenue was in USD, EUR and Asian currencies, it might have been expected that the revenue would have risen by more than it did. On a like for like basis, last year's £8.46m would have equated to about £8.8m at the average rates prevailing during the FY2009. The reason revenue did not achieve this level is wholly accounted for by the shortfall in ability to recognize revenues from Regulatory Compliance projects as described below.
We have a higher revenue base for FY 2010 given the fall in Sterling than we did at the beginning of FY 2009 which is helpful to our revenue outlook. Although Sterling has recovered at the time of writing from a low of US$ 1.35 to around US$ 1.64, this range is lower than the average for FY 2009 which was US$ 1.69
Recurrent revenue has historically been a high proportion of revenues at Lombard Risk. Recurrent annual revenues for the Group are running at around £4.4m. In addition, the revenue profile remains fairly well dispersed.
Trading and Risk Software Products
As anticipated this time last year, the credit crisis has been beneficial for our COLLINE® collateral management software product. This product now substantially handles all the key requirements of a collateral business including margining, repo and securities lending, trade reconciliation and inventory management. We secured nine contract wins for COLLINE® in the financial year. These included contracts with Lombard Odier Darier Hentsch & Cie, Jyske Bank A/S, SBAB, Daiwa Securities and SMBC Europe, as well as with a large U.S. East Coast based asset manager and two U.S. hedge funds, and a major contract with a Tier 1 Continental European bank concluded at the end of the financial year. At the same time there has been considerable innovation in the product this year both in functionality, scalability and resilience which now makes COLLINE® a very suitable product for Tier 1 banks with large trading books, as well as for smaller firms. COLLINE® is ahead of budget for this year, and has a large and growing pipeline including opportunities with some of the biggest market participants.
Oberon®, the trading and risk management system, saw the completion of its first installation in China. Oberon® remains our most profitable product and it continues to provide capital to support the development of other products. Functionally the product has made good progress. Support for inflation trades has been much improved which allows inflation based instruments to be managed more effectively in Oberon®. A new yield curve module has been developed that uses a consistent B-Spline methodology for all types of curves and allows users a greater degree of control over the smoothness and accuracy of the curves produced. Finally, performance and scalability of Oberon® has been further improved, with particular emphasis on commonly used functions within Oberon® and on Oberon®'s API.
Overall this division earned revenue for the year in excess of £3.85m and a profit of £0.87m after full allocation of group overhead costs.
Regulatory and Compliance Software Products
There are appreciable opportunities now for this part of our business with the move away from light touch regulation generally and, specifically in the UK, the introduction of new regulatory requirements for Liquidity Reporting and Liquidity Stress Testing. However, during the year, our Regulatory Compliance business underestimated the work effort around the Basel 2 roll-out programme. This caused both increased costs and delayed revenue recognition on a number of fixed price contracts committed in mid-2007 which have consequently in some cases, been significantly loss-making. Most of the impact of this has now worked its way through the accounts, and we expect that substantially all the rest will do so in the Group's current financial year. The Regulatory Compliance business has undergone a reconstruction exercise including a review of management and processes, and the Board now looks forward to the future.
The problems described above in UK Regulatory Compliance contracts committed in 2007 do not apply to UK contracts signed more recently, and we had some notable successes during the year with large institutions including Bank of Scotland Treasury Services and a large German bank. In addition, we successfully handled the move by UK, Irish and other regulators to MER (Mandatory Electronic Reporting).
Lombard Risk is the market leader for U.K. Bank Regulatory Reporting with approximately 130 of the 360 banks and foreign branches, and approximately 15 investment firms in the U.K. using the STB-Reporter product for regulatory reporting to the FSA. This depth of customer base clearly gives opportunities to sell additional functionality to existing customers, and we believe this puts us in a very strong position to roll out our solutions for Liquidity Reporting and Liquidity Stress Testing to many of our customers later in this financial year after the final version of the FSA's new rules are published in October 2009. We already have considerable activity going on in this area in the UK and a number of early engagements. All the current indications are that there will be more regulation in the next year with appreciable extra focus on liquidity reporting and stress testing.
The firm's ability to offer global solutions has been greatly enhanced through it now having regulatory offerings available or under production for several EMEA and Asian countries as well as the United States. Our Singapore office has made a number of worthwhile product wins including business in Singapore won away from our main competitor, and we obtained our first two customers for Japanese reporting. In addition, the AML product STB-Detector has seen more contract wins.
In December 2008 the name of the regulatory compliance business changed from STB Systems Ltd to Lombard Risk Compliance Ltd. We have kept the STB name in the products STB-Reporter and STB-Detector but under the unified brand for the whole firm of Lombard Risk.
Personnel and Premises
During the year we continued to make new hires appropriate to the expected growth of parts of the business, but we also took cost actions designed to establish profitability in the business as a whole, and to allow us to re-allocate resources to those parts of the business where we see the best prospects. Costs should continue to be contained overall and to reduce as a percentage of any revenue rises as more work proportionately is done in Shanghai.
After the Year End we appointed Keith Butcher as Finance Director of the Group. This is an important appointment for us at a time that the Group has broken through to profitability for COLLINE® and sees appreciable opportunity in the regulatory area. Jane Fineman, who has been our CFO for the last two years will be leaving us shortly. Our arrangement with her had been a part time one, and Jane was unable to change this to full time which the board felt it now needed. Our thanks go to her for her work in those two years.
Following the successful fund-raising concluded at the end of September 2009, and my own shareholding reducing to slightly under 50% for the first time, it is entirely appropriate to move towards splitting the roles of Chairman and Chief Executive. We have announced that these roles will be divided in due course, a move that is welcomed by new investors into the Company.
As part of our cost reduction measures the board collectively decided to reduce the size of our non-executive board to two, from its four at the start of the year. Ian Peacock and Brian Crowe have remained on the board, while Christopher Wright and Dan Kochav volunteered to step down in January 2009. In addition Michael Thomas, formerly CEO of STB Systems (renamed Lombard Risk Compliance), has stepped down from the board. He will remain on the boards of our subsidiaries in Asia. I would like personally to thank all of them for their useful contribution to the board over several years.
In Shanghai we moved to larger offices in August 2008, having outgrown the previous office. In London we have consolidated our operations into our Curlew Street premises, made possible by a reduced UK headcount. We were not successful in letting out the Earls Court premises, but thankfully the lease expires at the end of September 2009. All residual rent, rates and service charges of the Earls Court lease were provided for in FY2009, so there will be no further P&L effect in FY2010. This is a saving of around £0.3m p.a.
Prospects
The Group continues to forecast a buoyant sales pipeline for its COLLINE® collateral management software following the major contract win with a top Continental European bank. In addition the Board foresees no end to the increase in bank and securities firm regulation, and is optimistic that this will have a positive effect on the Group's regulatory compliance business. The climate in 2009 is for mandatory spend on bank regulation, and the only issue is what share of this spend the Group can achieve rather than whether it exists. The Board believes that these positive effects well outweigh any residual issues from the 2008 banking crisis and resulting liquidity crunch, although it can be expected that there will continue to be bank mergers and branch closures at a higher rate than in normal times. Quite apart from the increase in bank regulation there are also a number of "Business as Usual" regulatory software projects in the pipeline, and we are winning contracts especially in Europe and Asia.
The fund-raising concluded at the end of September 2009 is a very positive move as it will allow the company to operate aggressively in its chosen areas. With a much strengthened balance sheet we also believe this will have commercial advantages to us in an environment where credit risk is still an important issue to many firms.
In this changing environment, the Board continues to believe that as changes in legislation are adopted and credit risk and liquidity management are ever more tightly controlled, risk and regulatory software will be in demand. Lombard Risk, as the Global Number 2 in both collateral management software and bank regulatory reporting software, should be well positioned to take advantage of this.
I would like to thank all my colleagues, as well as our advisors, for their hard work and support. Many went the extra mile to win new business and provide good service to our customers, and they deserve my special thanks.
John Wisbey
Chairman & CEO
24 September 2009
Board of Directors
Directors
The Group is run by its Board of Directors, which currently has four members, including two Non-executive Directors and meets regularly. The Non-executive Directors make a valuable contribution by bringing a breadth of business and relevant professional experience to the Board. The Board has overall responsibility for the Group and there is a formal schedule of matters specifically reserved for decision by the Board. It is responsible for the overall Group strategy, acquisition and divestment policy, approval of major capital expenditure and consideration of significant capital matters.
Directors' profiles
John Wisbey (b.1956) Chairman and Chief Executive Officer.
John Wisbey founded Lombard Risk in 1989, and has led the company from start-up, when the only product was Oberon, to its current international and multi-product status. He is responsible for the main strategic issues of the Group and plays a major part in the firm's client relationships. He has also led the company's M&A initiatives, including the acquisition of STB Systems, the acquisition and subsequent spin-out on AIM of what is now IDOX plc, and the sale to Fitch Ratings of the ValuSpread business for £6m. John was Chairman of IDOX plc until 2005 and continued as a non-executive director until 2008.
Prior to establishing Lombard Risk, John Wisbey was Head of Option Trading and a Director in the Swap Group at Kleinwort Benson Limited. Before that he spent eight years at Kleinwort Benson in the banking division where he acquired his initial experience in the area of credit risk. This period included several years based in Hong Kong and Singapore.
Keith Butcher (b.1962) Finance Director
Keith is the newest member of the Lombard Risk team, joining in September 2009. He qualified as a Chartered Accountant with KPMG. Prior to Lombard Risk, he was Finance Director of Flomerics Group plc where he managed the successful sale to a NASDAQ listed business for almost triple the pre-bid valuation. Before that, he was Finance Director at DataCash Group plc during which time the market capitalisation grew from £8m to almost £300m. He previously worked for PriceWaterhouseCoopers and Diagonal plc.
Ian Peacock (b.1947) Non-executive Deputy Chairman.
Ian Peacock joined the board of Lombard Risk in 2000. He is also the Chairman of Mothercare plc, a consultant to the Board of the UK bank C.Hoare & Co (founded in 1672), and Chairman of the Family Mosaic Housing Association. Ian Peacock previously held a number of other senior positions including serving on the Barclays Bank Group Credit Committee, and the Group Board of Kleinwort Benson Group plc as well as Chairman of the Kleinwort Benson Credit Committee. He was also Chairman of Galiform plc from 2000-2006, a special advisor to the Bank of England from 1998 - 2000, and was a non-executive director of Norwich and Peterborough Building Society until 2005.
Brian Crowe (b.1957) Non-executive Director.
Brian Crowe joined the board of Lombard Risk in 2004 at the time of its IPO on AIM. He was the Chief Executive of Global Banking & Markets at the Royal Bank of Scotland plc ("RBS") until October 2008. During his tenure at RBS, Brian Crowe was a member of the Group ALCO, Credit and Investment Committees of RBS and a member of the Group Executive Management Committee. He was chairman of the Wholesale Committee of the British Bankers Association from 2006 to 2008, and was a member of the Global Banking Issues Committee of the European Banking Federation (or Fédération Bancaire Européenne) from 2005 to 2008. He was also a member of the City of London EU Strategy Group for 2007/8. Prior to joining RBS, he was Head of Derivatives at Chase Manhattan Bank in London. He is a former board member of the International Swaps and Derivatives Association (ISDA).
Director's report
For the year ended 31 March 2009
The Directors submit their annual report together with the consolidated financial statements for the year ended 31 March 2009.
Directors' responsibilities
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, and parent company financial statements in accordance with UK Generally Accepted Accounting Practice (UK GAAP). The financial statements are required by law to give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the directors are required to:
• Select suitable accounting policies and then apply them consistently;
• Make judgments and estimates that are reasonable and prudent;
• State whether applicable IFRSs and UK GAAP have been followed, subject to any material departures disclosed and explained in the financial statements;
• Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
In so far as each of the directors is aware:
• There is no relevant audit information of which the Company's auditors are unaware; and
• The directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Principal activities and business review
The Company is a holding company. The principal activities of the Group are the provision of trading, valuation and risk management systems and regulatory, anti money laundering and compliance systems to the financial markets. A review of these activities, future developments and financial risk management is provided in the Chairman's statement and Note 14 Financial risk management. This information forms a part of the Directors' Report.
Results and dividends
The audited financial statements for the year ended 31 March 2009 are set out on pages 13 to 32. The Group's loss for the year after taxation amounted to £1,098,937 (2008: loss £672,895). The directors do not propose a dividend for the year (2008: £Nil).
Directors and their interests
The Directors who served during the year and their beneficial interests in the Company's ordinary share capital were as follows:
|
31 March 2009 Number |
31 March 2008 Number |
|
|
John Wisbey1 |
81,889,562 |
81,324,562 |
|
Ian Peacock |
1,088,532 |
1,088,532 |
|
Brian Crowe |
625,000 |
625,000 |
|
Michael Thomas resigned from Board 1 July 2009 |
4,958,360 |
4,958,360 |
|
Dan Kochav resigned from Board 31st January, 2009 |
375,000 |
375,000 |
|
Christopher Wright resigned from board 31st January, 2009 |
1,205,066 |
1,205,066 |
1. 77,939,562 shares are owned directly. In addition John Wisbey is a beneficiary of Advanced Technology Trust which owns a further 3,950,000 shares.
In addition to these shareholdings listed above, the Directors have been granted options over ordinary shares.
In accordance with the articles of association, John Wisbey is due to retire at the forthcoming Annual General Meeting and, being eligible, will offer himself for re-election.
Charitable and political donations
The Group made no charitable donations in the year (2008: Nil) and no political donations (2008: £Nil).
Payment of creditors
It is the Group's practice to agree credit terms with all suppliers and to pay all approved invoices within these agreed terms. The average trade creditor days for the year was 75 days (2008: 71 days).
Substantial shareholdings
As at 31 March 2009 the Company was aware of the following interests in 3% or more of its issued share capital:
|
Number of shares |
% Holding |
|
|
John Wisbey |
81,889,562 |
60.13 |
|
AMF (NBF) Holdings Inc. |
12,222,222 |
8.98 |
|
Merifin Capital NV |
7,525,264 |
5.53 |
|
Royal Bank Ventures Investments Ltd |
5,536,990 |
4.07 |
|
Michael Thomas |
4,958,360 |
3.64 |
|
Anthony Brown |
4,808,360 |
3.53 |
Research and development
Research and development expenditure incurred on the Group's suite of products has all been expensed to the income statement in the relevant period.
Post balance sheet events
The company entered into additional director loans from Brian Crowe, Non-executive Director, for £200,000 and a further £100,000 from John Wisbey, Chairman and Chief Executive Officer. These funds have been used to provide the Company with additional working capital. This raised the overall total of director loans (the 'Loans') to £1,600,000 (excluding the £30,000 loan from Michael Thomas who was a director at year end but stood down in July 2009). The Loans, which bear interest at 1% per month, are on a demand basis from the point of view of the lenders and repayable at any time at the Company's option.
On 23rd September 2009 the Company concluded a fund-raising in which, subject to EGM approval and the meeting of various placing conditions, it will raise £1,800,000 of new money (before expenses) in a placing from institutional investors and other shareholders. At the same time as completion of the placing, there will be conversions of director loans into equity by John Wisbey in the amount of £790,000, £200,000 by Brian Crowe, £10,000 by Ian Peacock and £30,000 by a former director Michael Thomas. There will also be a repayment of the remaining £600,000 of director loans. The proceeds of the fund-raising are being used partly to strengthen the Company's balance sheet and partly to repay in their entirety, the director loans not converted into equity.
As a result of these events the Company will, on completion of the placing, have no external debt including debt due to directors.
Going concern
The financial statements have, as in previous years, been prepared on a going concern basis. The Directors have formally considered this issue in the light of the operating losses and the consequent operating cash outflows in the period.
In forming an opinion that the Company and the Group are going concerns, the Directors have taken into account the Group's strong sales pipeline helped by its contract win earlier this year with a Tier 1 bank for collateral management, the opportunity in the regulatory space for UK Liquidity Reporting in the next year, the fund-raising of £1,800,000 concluded at the end of September 2009, subject to EGM approval and the meeting of various placing conditions (expected to complete in October 2009), and the simultaneous capitalisation of £1,030,000 of loans from directors and a former director and the elimination of all debt from the balance sheet.
The Directors have prepared cashflow forecasts for the period to 31 March 2011. Within these forecasts certain assumptions have been made over the timing of revenues and costs and take into account the £1,800,000 fundraising concluded at the end of September 2009.
The forecasts show that the Company and Group have sufficient facilities for ongoing operations. Whilst there will always remain some inherent uncertainty within the aforementioned cashflow, 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 2009.
Auditors
A resolution to reappoint Grant Thornton UK LLP as auditors and to authorise the Directors to agree their remuneration will be placed before the forthcoming Annual General Meeting of the Company.
|
On behalf of the Board |
Registered Office |
|
India House |
|
|
John Wisbey |
45 Curlew Street |
|
Director |
London |
|
SE1 2ND |
|
|
24 September 2009 |
Corporate Governance Report
For the year ended 31 March 2009
Policy statement
The Board is committed to high standards of integrity and Corporate Governance, consistently seeking to apply the principles set out in the Combined Code ("the Code") although recognizing that as an AIM company the Company is not required to comply with the provisions of the Combined Code and, largely because of its size, does not comply with a number of them. This statement, together with the Directors' Report and the Report of the Board to Shareholders on Directors' Remuneration, explains how the Group has applied the principles set out in the Code.
Internal controls
The Directors are responsible for the systems of internal control. Although no system of internal control can provide absolute assurance against material misstatement or loss, the Group's systems are designed to provide the Directors with reasonable assurance that problems are identified on a timely basis and dealt with appropriately. The Board considers that there have been no substantial weaknesses in internal financial controls resulting in any material losses, contingencies or uncertainties, and thus disclosable in the accounts. The Board has considered the need for an internal audit function and has concluded that there is no current need for such a function within the Company.
Accounting policies
The Board considers the appropriateness of its accounting policies on an annual basis. The Board believes that its accounting policies and estimation techniques are appropriate in particular in relation to income recognition, research and development and deferred expenses.
Board of Directors
The Board, comprising an Executive Chairman, one Executive Director and two Non-Executive Directors is responsible for the overall strategy and direction of Lombard Risk Management plc as well as for approving potential acquisitions, major capital expenditure items and financing matters. The Board has a formal schedule of business reserved to it and meets regularly during the year. Advice from independent sources is available if required. The Board monitors exposure to key business risks, reviews the strategic direction of the Company, the annual budgets and progress against those budgets.
The Board Members and their roles are described on page 5. The Executive Directors have service contracts, which are terminable upon periods between three and twelve months' notice. In accordance with the Company's articles of association, one third of the Directors are required to retire by rotation at the Annual General Meeting.
Shareholder relations
The Company recognises the importance of dialogue with all of its shareholders. The Annual General Meeting is an opportunity to communicate with institutional and other shareholders. Additional information is supplied through the circulation of the interim report and the annual report and accounts. Lombard Risk Management plc maintains up to date information on the investor section of its website www.lombardrisk.com.
Every shareholder receives a full annual report after each year end and has access to an interim report online after each half year end. Care is taken to ensure that any price sensitive information is released to all its shareholders, institutional and private, at the same time in accordance with London Stock Exchange requirements.
Audit Committee
The Audit Committee is a committee of the Board chaired by Ian Peacock and also comprises Brian Crowe and John Wisbey. The report of the Audit Committee can be found on page 11.
Remuneration Committee
The Remuneration Committee is chaired by Brian Crowe and also comprises Ian Peacock and John Wisbey. The Committee reviews the remuneration structures and performance of the Executive Directors and reviews the remuneration policy for senior management. The Remuneration Committee meets as and when necessary and has access to professional advice from inside and outside the Company. No Executive Director may participate in decisions regarding his own remuneration. The Board as a whole determines the remuneration arrangements of the Non-Executive Directors.
Report of the Audit Committee
For the year ended 31 March 2009
Membership and meetings of the Audit Committee
The Audit Committee is a committee of the Board and the majority is composed of Non-executive Directors, whom the Board considers to be independent. The Audit Committee invites the Executive Directors and other senior managers to attend its meetings as appropriate.
During the year the Audit Committee was chaired by Christopher Wright and also Ian Peacock, who adopted this role from 1st February 2009. John Wisbey remained a Committee member, while Brian Crowe became a member on 1st February 2009. The Audit Committee is considered to have sufficient, recent and relevant financial experience to discharge its functions. The Audit Committee invites others, including the external auditors, to attend its meetings as appropriate.
During the period under review, the Audit Committee met four times.
Role, responsibilities and terms of reference
The Audit Committee's role is to assist the Board in the effective discharge of its responsibilities for financial reporting and internal control.
The Audit Committee's responsibilities include:
Reviewing the integrity of the annual and interim financial statements of the Group ensuring they comply with legal requirements, accounting standards and the AIM rules, and any other formal announcements relating to the Group's financial performance
Reviewing the Group's internal financial control and risk management systems
Monitoring and reviewing the requirement for an internal audit function
Overseeing the relationship with the external auditors, including approval of their remuneration, reviewing the scope of the audit engagement, assessing their independence, monitoring the provision of non-audit services, and considering their reports on the Group's financial statements.
Independence of external auditors
The Audit Committee keeps under review the relationship with the external auditors including:
The independence and objectivity of the external auditors, taking into account the relevant UK professional and regulatory requirements and the relationship with the auditor as a whole, including the provision of non-audit services
Recommending to the Board and shareholders the reappointment or otherwise of the external auditors for the following financial period
The consideration of audit fees and any fees for non-audit services.
The Audit Committee develops and recommends to the Board the Company's policy in relation to the provision of non-audit services by the auditors, and ensures that the provision of such services does not impair the external auditor independence.
Ian Peacock
Chairman of the Audit Committee
24 September 2009
Report of the Independent Auditor
To the shareholders of Lombard Risk Management plc
We have audited the group financial statements (the 'financial statements') of Lombard Risk Management plc for the year ended 31 March 2009 which comprise the accounting policies, the consolidated income statement, the consolidated balance sheet, the consolidated statement of changes in shareholders' equity, the consolidated cash flow statement and notes 1 to 22. These financial statements have been prepared under the accounting policies set out therein.
We have reported separately on the parent company financial statements of Lombard Risk Management plc for the year ended 31 March 2009.
This report is made solely to the company's members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body for our audit work, for this report or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the Annual Report and the group financial statements in accordance with United Kingdom law and International Financial Reporting Standards ('IFRS') as adopted by the European Union are set out in the Statement of Directors' Responsibilities. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the group financial statements give a true and fair view and whether the financial statements have been properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the Directors' Report is consistent with the financial statements. The information given in the Directors' Report includes that specific information presented in the Chairman's statement and the Corporate governance report that is cross referred from the Business Review section of the Directors' Report.
In addition we report to you if, in our opinion, the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed.
We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. The other information comprises only the Highlights, the Chairman's Statement, the Board of Directors, the Directors' Report, the Corporate Governance Report and the Report of the Audit Committee. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the group financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the group financial statements and of whether the accounting policies are appropriate to the group's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the group financial statements.
Opinion
In our opinion:
the group financial statements give a true and fair view, in accordance with IFRS as adopted by the European Union, of the state of the group's affairs as at 31 March 2009 and of the group's loss for the year then ended;
the group financial statements have been properly prepared in accordance with the Companies Act 1985;
the information given in the Directors' Report is consistent with the financial statements.
Grant Thornton UK LLPRegistered Auditor, Chartered Accountants
London
24 September 2009
Consolidated Income Statement
For the year ended 31 March 2009
|
Year ended |
Year ended |
||
|
31 March 2009 |
31 March 2008 |
||
|
|
Note |
£ |
£ |
|
Continuing operations |
|
|
|
|
Revenue |
2 |
8,694,450 |
8,460,594 |
|
Cost of sales |
|
(43,936) |
(52,897) |
|
Gross profit |
2 |
8,650,514 |
8,407,697 |
|
|
|
|
|
|
Administrative expenses |
|
(9,769,510) |
(9,458,899) |
|
Loss from operations |
4 |
(1,118,996) |
(1,051,202) |
|
|
|
|
|
|
(Loss) on disposal of quoted investment |
|
- |
(40,788) |
|
Finance expense |
5 |
(139,736) |
(35,218) |
|
Finance income |
6 |
5,000 |
10,652 |
|
(Loss) before taxation |
|
(1,253,732) |
(1,116,556) |
|
|
|
|
|
|
Taxation |
7 |
96,074 |
150,000 |
|
|
|
|
|
|
(Loss) for the year from continuing operations |
|
(1,157,658) |
(966,556) |
|
|
|
|
|
|
Profit for the year from discontinued activities |
8 |
58,721 |
293,661 |
|
|
|
|
|
|
(Loss) for the year |
|
(1,098,937) |
(672,895) |
|
|
|
|
|
|
(Loss) per share |
|
|
|
|
Basic (pence) |
9 |
(0.81) |
(0.50) |
|
Diluted (pence) |
9 |
(0.81) |
(0.50) |
|
(Loss) per share on continuing activities |
|
|
|
|
Basic (pence) |
9 |
(0.85) |
(0.71) |
|
Diluted (pence) |
9 |
(0.85) |
(0.71) |
|
Earnings per share on discontinued activities |
|
|
|
|
Basic (pence) |
9 |
0.04 |
0.22 |
|
Diluted (pence) |
9 |
0.04 |
0.22 |
The accompanying accounting policies and notes form an integral part of financial statements.
Consolidated Balance Sheet
As at 31 March 2009
|
|
As at |
As at |
|
|
|
|
31 March 2009 |
31 March 2008 |
|
|
Note |
£ |
£ |
|
|
|
|
|
|
Non-current assets |
|
|
|
|
Property, plant and equipment |
10 |
239,798 |
143,995 |
|
Goodwill |
11 |
3,632,680 |
3,632,680 |
|
Other intangible assets |
11 |
11,441 |
4,319 |
|
|
|
3,883,919 |
3,780,994 |
|
Current assets |
|
|
|
|
Trade and other receivables |
12 |
2,842,226 |
2,320,672 |
|
Cash and cash equivalents |
|
150,999 |
494,894 |
|
|
|
2,993,225 |
2,815,566 |
|
Total assets |
|
6,877,144 |
6,596,560 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
13 |
(3,847,208) |
(2,406,181) |
|
Provisions |
15 |
(137,664) |
(146,794) |
|
Deferred income |
|
(2,580,502) |
(2,690,195) |
|
|
|
(6,565,374) |
(5,243,170) |
|
Total liabilities |
|
(6,565,374) |
(5,243,170) |
|
|
|
|
|
|
Net assets |
|
311,770 |
1,353,390 |
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
Share capital |
16 |
1,110,715 |
1,108,510 |
|
Share premium account |
|
2,512,904 |
2,490,110 |
|
Foreign exchange reserves |
|
(9,136) |
(30,208) |
|
Other reserves |
|
1,649,152 |
1,637,906 |
|
Profit and loss account |
|
(4,951,865) |
(3,852,928) |
|
Total equity |
|
311,770 |
1,353,390 |
The financial statements were approved by the board on 24 September 2009 and signed on its behalf by:
John Wisbey
Chairman & CEO
The accompanying accounting policies and notes form an integral part of these financial statements.
Consolidated Statement of Changes in Shareholders' Equity
For the year ended 31 March 2009
|
Share capital |
Share premium account |
Foreign exchange reserves |
Other reserves |
Profit and loss account |
Total equity |
|
|
£ |
£ |
£ |
£ |
£ |
£ |
|
|
Balance at 1 April 2008 |
1,108,510 |
2,490,110 |
(30,208) |
1,637,906 |
(3,852,928) |
1,353,390 |
|
Foreign exchange movements on consolidation of foreign operations |
- |
- |
21,072 |
- |
- |
21,072 |
|
Income and expense recognised directly in equity |
- |
- |
21,072 |
- |
- |
21,072 |
|
Loss for the year |
- |
- |
- |
- |
(1,098,937) |
(1,098,937) |
|
Total recognised income and expense for the year |
- |
- |
21,072 |
- |
(1,098,937) |
(1,077,865) |
|
441,176 new ordinary shares issued |
2,205 |
22,794 |
- |
- |
- |
24,999 |
|
Share based payment charge |
- |
- |
- |
11,246 |
- |
11,246 |
|
Balance at 31 March 2009 |
1,110,715 |
2,512,904 |
(9,136) |
1,649,152 |
(4,951,865) |
311,770 |
|
Share capital |
Share premium account |
Foreign exchange reserves |
Other reserves |
Profit and loss account |
Total equity |
|
|
£ |
£ |
£ |
£ |
£ |
£ |
|
|
Balance at 1 April 2007 |
1,103,510 |
2,415,110 |
(4,196) |
1,597,295 |
(3,180,033) |
1,931,686 |
|
Foreign exchange movements on consolidation of foreign operations |
- |
- |
(26,012) |
- |
- |
(26,012) |
|
Income and expense recognised directly in equity |
- |
- |
(26,012) |
- |
- |
(26,012) |
|
Loss for the year |
- |
- |
- |
- |
(672,895) |
(672,895) |
|
Total recognised income and expense for the year |
- |
- |
(26,012) |
- |
(672,895) |
(698,907) |
|
1,000,000 new ordinary shares issued |
5,000 |
75,000 |
- |
- |
- |
80,000 |
|
Share based payment charge |
- |
- |
- |
40,611 |
- |
40,611 |
|
Balance at 31 March 2008 |
1,108,510 |
2,490,110 |
(30,208) |
1,637,906 |
(3,852,928) |
1,353,390 |
Other reserves relate to negative goodwill arising on the acquisition of a subsidiary undertaking prior to 1 April 1997 and the merger reserve.
Consolidated Cash flow Statement
For the year ended 31 March 2009
|
Year ended |
Year ended |
||
|
31 March 2009 |
31 March 2008 |
||
|
|
£ |
£ |
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
Loss for the period excluding discontinued operations |
|
(1,157,658) |
(966,556) |
|
Tax credit |
|
(96,074) |
(150,000) |
|
Finance income |
|
(5,000) |
(10,652) |
|
Finance expense |
|
139,736 |
35,218 |
|
Loss on disposal of quoted investment |
|
- |
40,788 |
|
Operating loss |
|
(1,118,996) |
(1,051,202) |
|
Profit on discontinued activities |
|
(58,721) |
(353,328) |
|
|
|
|
|
|
Adjustments for: |
|
|
|
|
Depreciation |
|
157,032 |
193,908 |
|
Amortisation |
|
13,451 |
20,315 |
|
Share based payment charge |
|
11,246 |
40,611 |
|
Provision for onerous lease |
|
(9,130) |
146,794 |
|
Increase in trade and other receivables |
|
(521,554) |
(874,248) |
|
Increase in trade and other payables |
|
683,059 |
296,170 |
|
Decrease/increase in deferred income |
|
(109,693) |
180,982 |
|
Cash used in operations |
|
(953,306) |
(1,399,998) |
|
|
|
|
|
|
Tax credit received |
|
96,074 |
150,000 |
|
Net cash outflow from operating activities |
|
(857,232) |
(1,249,998) |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Purchase of property, plant and equipment |
|
(235,151) |
(112,945) |
|
Purchase of intangible fixed assets |
|
(20,496) |
(10,195) |
|
Proceeds from sale of IVRS |
|
58,721 |
691,058 |
|
Disposal of IDOX shares |
|
- |
407,212 |
|
Net cash generated (used in)/by investing activities |
|
(196,926) |
975,130 |
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Loans from directors |
|
820,000 |
660,000 |
|
Repayment of directors' loan |
|
- |
(150,000) |
|
Shares issued |
|
24,999 |
- |
|
Interest received |
|
5,000 |
10,652 |
|
Interest paid |
|
(139,736) |
(35,218) |
|
Net cash generated by financing activities |
|
710,263 |
485,434 |
|
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents |
|
(343,895) |
210,566 |
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
494,894 |
284,328 |
|
|
|
|
|
|
Cash and cash equivalents at end of period |
150,999 |
494,894 |
Notes to the Financial Statements
For the year ended 31 March 2009
(a) Basis of preparation
These consolidated financial statements are for the year ended 31 March 2009. They have been prepared in accordance with IFRSs (International Financial Reporting Standards) and International Financial Reporting Interpretation Committee (IFRIC) interpretations as at 31 March 2009, as adopted by the European Union. They have been prepared under the historical cost convention.
The preparation of financial statements under IFRS requires the Board to make judgements, estimates and assumptions that affect the application of accounting policies, the reported amounts of balance sheet items at the period end and the reported amount of revenue and expense during the reporting period. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements that are not readily apparent from other sources. However, the actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis.
New standards and interpretations currently in issue but not effective for accounting periods commencing on 1 April 2008 are:
IAS 1 Presentation of Financial Statements (revised 2007)
IAS 23 Borrowing Costs (revised 2007)
Amendment to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation
IAS 27 Consolidated and Separate Financial Statements (Revised 2008)
Amendment to IFRS 2 Share-based Payment - Vesting Conditions and Cancellations
Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards and IAS 27 Consolidated and Separate Financial Statements - Costs of Investment in a Subsidiary, Jointly Controlled Entity or Associate
Amendment to IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items
Group Cash-settled Share-based Payment Transactions - Amendment to IFRS 2
Amendment to IFRS 7 Financial Instruments: Disclosures - Improving Disclosures About Financial Instruments
Embedded Derivatives - Amendments to IAS 39 and IFRIC 9
Improvements to IFRSs 2008
Improvements to IFRSs 2009
IFRS 3 Business Combinations (Revised 2008)
IFRS 8 Operating Segments
IFRIC 13 Customer Loyalty Programmes
IFRIC 15 Agreements for the Construction of Real Estate
IFRIC 16 Hedges of a Net Investment in a Foreign Operation
IFRIC 17 Distributions of Non-cash Assets to Owners
IFRIC 18 Transfers of Assets from Customers
The Directors do not believe that the implementation of these standards will have a material effect on the reported results.
(b) Basis of consolidation
The Group accounts consolidate the financial statements of the Parent Company (Lombard Risk Management plc) and its subsidiary undertakings over which it has full control (see Note 5 to the Parent Company balance sheet). A description of the principal activities and operations of the group can be found in the Director's Report on page 7.
The consolidated financial statements include the financial statements of the Company and its subsidiary undertakings made up to 31 March 2009. 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 income statement from the date of acquisition or up to the date of disposal. All of the Group's assets and liabilities existing at the date of acquisition are recorded at their fair values reflecting their condition at that date. Profits or losses on intra-group transactions are eliminated in full. Goodwill arising on consolidation was written off to reserves prior to 1 April 1999. Goodwill arising after this date is capitalised and under IFRS 3 goodwill is not amortised, but an impairment test is performed as appropriate, but at least annually. The value of goodwill is to be written down according to the outcome of the impairment test.
(c) Going concern
The financial statements have, as in previous years, been prepared on a going concern basis. The Directors have formally considered this issue in the light of the operating losses and the consequent operating cash outflows in the period.
In forming an opinion that the Company and the Group are going concerns, the Directors have taken into account the Group's strong sales pipeline helped by its contract win earlier this year with a Tier 1 bank for collateral management, the opportunity in the regulatory space for UK Liquidity Reporting in the next year, the fund-raising of £1,800,000 concluded at the end of September 2009, subject to EGM approval and the meeting of various placing conditions (expected to complete in October 2009), and the simultaneous capitalisation of £1,030,000 of loans from directors and a former director and the elimination of all debt from the balance sheet.
The Directors have prepared cashflow forecasts for the period to 31 March 2011. Within these forecasts certain assumptions have been made over the timing of revenues and costs and take into account the £1,800,000 fundraising concluded at the end of September 2009.
The forecasts show that the Company and Group have sufficient facilities for ongoing operations. Whilst there will always remain some inherent uncertainty within the aforementioned cashflow, 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 2009.
(d) Revenue
Revenue represents the value of goods sold and services provided during the year, stated net of Value Added Tax. Revenue and pre-tax profit 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. That part of licence and maintenance revenue invoiced simultaneously with the initial licence but considered to relate to the period when the licence is deemed to be live is deferred in its entirety until the live date, following which it is released to profit in equal daily instalments over the duration of the relevant licence or maintenance. For other projects which do include the up-front delivery of immediately usable software, revenue is recognised in accordance with the invoicing schedule, on a percentage completion basis. For non-refundable licences revenue is recognised in full on customer acceptance. |
|
Customisation income |
Recognised once the customisation has taken place. |
|
Maintenance income |
Recognised evenly over the term of the maintenance contract. |
|
Rental income |
Recognised evenly over the term of the rental contract. |
|
Data subscription income |
Recognised evenly over the term of the data contract. |
|
Training income |
Recognised when the relevant courses are run. |
(e) 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 |
2 years |
|
Fixtures, fittings and equipment |
4 years |
(f) 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 income statement.
(g) Intangible Assets
Research and development
Expenditure on research is recognised as an expense in the period in which it is incurred.
Development costs incurred are capitalised when all the following conditions are satisfied:
Development costs not meeting the criteria for capitalisation 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 two years based on the estimated useful lives of the assets. The residual values of assets or group of like assets are reviewed annually.
(h) 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 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 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 income statement. 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 income statement. 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 income statement.
A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires.
(i) Foreign exchange
Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in the profit or loss in the period in which they arise. Exchange differences on non-monetary items are recognised in the statement of recognised income and expenses to the extent that they relate to a gain or loss on that non-monetary item taken to the statement of recognised income and expenses, otherwise such gains and losses are recognised in the income statement.
The assets and liabilities in the financial statements of foreign subsidiaries are translated 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 taken directly 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 the income statement as part of the gain or loss on disposal.
(j) Taxation
Current tax is the tax currently payable based on taxable profit for the year. The tax credit arises 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 income 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 income statement, except where they relate to items that are charged or credited directly to equity (such as the revaluation of land) in which case the related deferred tax is also charged or credited directly to equity.
(k) 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 income statement 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.
(l) 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 the Income Statement represents the contributions payable to the schemes in respect of the accounting period.
(m) 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 income statement 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.
(n) 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.
(o) Key judgement 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
The goodwill relates to the acquisition of the STB group of companies (renamed Lombard Risk Compliance) that were acquired in 2005. The impairment review has been carried out on that sub-group. The results of this secondary reporting segment are reported as Regulatory compliance software in Note 2.
In accordance with IAS36 "Impairment of assets", the carrying value of goodwill has been assessed comparing its carrying value to its recoverable amount. The recoverable amount has been calculated by the Directors as being the fair value less costs of sale.
To arrive at fair value less costs of sale, the Directors have reviewed observable market information, that being the price to sales ratios of recent transactions in the sector as well as enterprise value/turnover ratios based on recent deals and similar quoted companies.
The value of Lombard Risk Compliance is largely influenced by the expected success of its Liquidity Engine, which is expected to benefit significantly from the FSA's rules on liquidity reporting and stress testing introduced in April 2009.
The directors are of the opinion that this opportunity supports the fair value less costs of sale approach to assessing the carrying value of the Lombard Risk Compliance group and consider this to be a more relevant and reliable methodology, in this instance, than value in use.
On the basis of these assessments the Board considers there is no need to impair the carrying value of goodwill.
The key assumption when using observable information is that the company will be successful in taking advantage of the current regulatory environment and that sales of the Liquidity Engine will significantly increase revenue. Should this not be the case, then direct comparisons to other transactions and other quoted companies would become less relevant and the need for impairment would be assessed.
2. BUSINESS SEGMENTATION
For management purposes only the Group had four operating units during the period; the United Kingdom, Rest of Europe, Middle East and Africa, The Americas and Asia Pacific. These units are the primary segments of the Group. In addition the Group's revenue and loss on ordinary activities are derived from trading in valuation and risk management systems and regulatory, anti money laundering and compliance systems to the finance and banking sector. These are the secondary segments of the Group.
|
Analysis by geographical destination |
Year ended 31 March 2009 |
Year ended 31 March 2008 |
|
|
£ |
£ |
|
Revenue |
|
|
|
United Kingdom |
4,948,005 |
4,451,189 |
|
Rest of Europe, Middle East and Africa |
1,491,944 |
2,324,387 |
|
The Americas |
1,586,906 |
1,030,239 |
|
Asia Pacific |
667,595 |
654,779 |
|
Total revenue |
8,694,450 |
8,460,594 |
|
Costs |
|
|
|
United Kingdom |
(7,933,184) |
(6,028,169) |
|
Rest of Europe, Middle East and Africa |
(152,000) |
(1,534,016) |
|
The Americas |
(723,322) |
(1,176,436) |
|
Asia Pacific |
(984,881) |
(688,529) |
|
Total costs |
(9,793,387) |
(9,427,150) |
|
Profit / (loss) |
|
|
|
United Kingdom |
(2,985,179) |
(1,576,980) |
|
Rest of Europe, Middle East and Africa |
1,339,944 |
790,371 |
|
The Americas |
863,584 |
(146,197) |
|
Asia Pacific |
(317,286) |
(33,750) |
|
Total (loss) |
(1,098,937) |
(966,556) |
|
Net assets |
|
|
|
United Kingdom |
(1,863,675) |
1,087,749 |
|
Rest of Europe, Middle East and Africa |
1,339,944 |
- |
|
The Americas |
898,975 |
26,011 |
|
Asia Pacific |
(63,474) |
239,630 |
|
Net assets |
311,770 |
1,353,390 |
|
Analysis by trading activity |
Year ended 31 March 2009 |
Year ended 31 March 2008 |
|
|
£ |
£ |
|
Revenue |
|
|
|
Regulatory compliance software |
4,840,863 |
5,304,332 |
|
Risk management and trading software |
3,853,587 |
3,153,457 |
|
Software development unallocated |
- |
2,805 |
|
Group unallocated |
- |
- |
|
Total revenue |
8,694,450 |
8,460,594 |
|
Costs |
|
|
|
Regulatory compliance software |
(6,805,675) |
(4,722,762) |
|
Risk management and trading software |
(2,987,712) |
(1,779,776) |
|
Software development unallocated |
- |
(997,740) |
|
Group unallocated |
- |
(1,926,872) |
|
Total costs |
(9,793,387) |
(9,427,150) |
|
Profit / (loss) |
|
|
|
Regulatory compliance software |
(1,964,812) |
581,570 |
|
Risk management and trading software |
865,875 |
1,373,681 |
|
Software development unallocated |
- |
(994,935) |
|
Group unallocated |
|
(1,926,872) |
|
Total (loss) |
(1,098,937) |
(966,556) |
|
Net assets |
- |
|
|
Regulatory compliance software |
(602,309) |
1,362,503 |
|
Risk management and trading software |
2,643,077 |
1,777,202 |
|
Software development unallocated |
(1,540,367) |
(1,540,367) |
|
Group unallocated |
(188,631) |
(245,948) |
|
Net assets |
311,770 |
1,353,390 |
In 2008, neither overhead nor development costs were allocated to the regulatory compliance software or risk management and trading software activities. This year, and henceforth, they will be fully allocated to enable clear visibility of activity profitability.
3. Directors and Employees
|
2009 |
2008 |
|
|
£ |
£ |
|
|
Directors: |
|
|
|
Emoluments |
431,215 |
540,463 |
|
Pension costs |
9,326 |
3,000 |
|
|
440,541 |
543,463 |
|
|
|
|
|
Highest paid director: |
|
|
|
Aggregate emoluments |
200,000 |
198,500 |
No share options were exercised by the highest paid director. Michael Thomas is the only director accruing benefits under a stakeholder pension scheme. There were no pension contributions made in respect of the highest paid director.
|
|
2009 |
2008 |
|
|
£ |
£ |
|
Staff costs including directors: |
|
|
|
Wages and salaries |
5,804,417 |
5,604,766 |
|
Social security costs |
820,099 |
701,822 |
|
Pension costs |
112,357 |
117,714 |
|
Share based payments charge (note 17) |
11,246 |
40,611 |
|
Total staff costs |
6,748,119 |
6,464,913 |
The average monthly number of employees (excluding directors) during the year was:
|
2009 |
2008 |
|
|
|
Number |
Number |
|
Office and administration |
12 |
12 |
|
Operational |
146 |
121 |
|
Total |
158 |
133 |
4. LOSS FROM OPERATIONS
The loss on operations before taxation is stated after charging /(crediting):
|
2009 |
2008 |
|
|
£ |
£ |
|
|
Auditors' remuneration - company audit fee |
25,000 |
22,426 |
|
|
|
|
|
Fees payable to the company auditors for other services |
|
|
|
Subsidiary company audit fees |
67,953 |
60,955 |
|
Tax services |
33,166 |
5,670 |
|
Other services |
20,049 |
26,500 |
|
|
|
|
|
Depreciation |
157,032 |
193,908 |
|
Amortisation |
13,451 |
20,315 |
|
|
|
|
|
Foreign exchange |
(41,610) |
(83,254) |
|
Operating leases |
916,891 |
793,835 |
|
Research and development expenditure |
1,139,528 |
2,441,742 |
5. finance expense
|
2009 |
2008 |
|
|
£ |
£ |
|
|
Interest on bank loans and overdrafts |
1,348 |
3,487 |
|
Other interest payable |
138,388 |
31,731 |
|
|
139,736 |
35,218 |
6. finance income
|
2009 |
2008 |
|
|
£ |
£ |
|
|
Interest on bank deposits |
1,807 |
4,970 |
|
Other interest receivable |
3,193 |
5,682 |
|
|
5,000 |
10,652 |
7. TaxATION
The credit for the year is made up as follows
|
|
2009 |
2008 |
|
Corporate taxation on the results for the year |
£ |
£ |
|
UK |
- |
- |
|
Non-UK |
- |
- |
|
|
- |
- |
|
Research and Development tax credit in respect of prior years |
(96,074) |
(150,000) |
|
Taxation (credit) charge for the year |
(96,074) |
(150,000) |
The Group has received to date R&D tax credits of £816,082 (2008: £720,008) relating to financial years ended 31 March 2002 to 2007. As for all companies that have received these credits, the amounts are subject to potential future HM Revenue & Customs clawback. During the year ended 31 March 2009 no tax losses (2008:£nil) were surrendered in exchange for the research and development tax credit.
The tax assessed for the period is the standard rate of corporation tax in the UK of 28% (2008: 30%). The differences are explained as follows:
|
|
2009 |
2008 |
|
|
£ |
£ |
|
(Loss) on ordinary activities before tax |
(1,253,732) |
(1,116,556) |
|
|
|
|
|
(Loss) on ordinary activities multiplied by standard rate of corporation tax in the UK of 28% (2008: 30%) |
(351,045) |
(334,967) |
|
|
|
|
|
Effect of: |
|
|
|
Capital allowances for the period in excess of depreciation |
12,000 |
3,940 |
|
Increase in tax losses |
309,092 |
274,904 |
|
Expenses not deductible for tax purposes |
29,953 |
56,123 |
|
Subtotal |
- |
- |
|
|
|
|
|
Relief and refund available in respect of R&D expenditure |
(96,074) |
(150,000) |
|
|
|
|
|
Current tax (credit) /charge for the period |
(96,074) |
(150,000) |
The directors have not recognised the deferred tax asset of £1.5m arising primarily on trading losses carried forward.
8. DISCONTINUED OPERATIONS
Independent Valuation and Risk Services Limited (IVRS) was sold by the group on 14 February 2008. In the year to 31st March 2009, the group received the full and final settlement of contingent consideration from the disposal, totalling £58,721. This was recognised in the income statement in the year 31 March 2009.
9. LOss PER SHARE
Basic loss per share has been calculated by dividing the loss after taxation by the weighted average number of ordinary shares in issue during each period.
Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue on the assumption of conversion of all dilutive potential ordinary shares. The Group has only one category of dilutive potential ordinary shares; those share options granted under the Enterprise Management Incentive Plan. When a loss is incurred, since the conversion of potential Ordinary shares to Ordinary shares would decrease the net loss per share, options are not dilutive and therefore diluted and basic losses per share are the same (see note 17).
Loss per share
|
|
Year ended |
Year ended |
|
|
|
31 March 2009 |
31 March 2008 |
|
|
|
|
|
|
|
Loss for the year and basic and diluted earnings attributable to ordinary shareholders |
(1,098,937) |
(672,895) |
|
|
|
|
|
|
|
Weighted average number of ordinary shares |
136,118,768 |
135,363,007 |
|
|
Loss per share (pence) |
(0.81) |
(0.50) |
|
|
|
|
|
|
|
Effect of dilutive share options |
- |
- |
|
|
Adjusted weighted average number of ordinary shares |
136,118,768 |
135,363,007 |
|
|
Diluted loss per share - (pence) |
(0.81) |
(0.50) |
Continuing Operations
|
Year ended |
Year ended |
||
|
|
31 March 2009 |
31 March 2008 |
|
|
|
|
|
|
|
Loss for the year and basic and diluted earnings attributable to ordinary shareholders |
(1,157,658) |
(966,556) |
|
|
|
|
|
|
|
Weighted average number of ordinary shares |
136,118,768 |
135,363,007 |
|
|
Loss per share (pence) |
(0.85) |
(0.71) |
|
|
|
|
|
|
|
Effect of dilutive share options |
- |
- |
|
|
Adjusted weighted average number of ordinary shares |
136,118,768 |
135,363,007 |
|
|
Diluted loss per share - (pence) |
(0.85) |
(0.71) |
Discontinued Operations
|
Year ended |
Year ended |
||||
|
|
31 March 2009 |
31 March 2008 |
|||
|
|
|
|
|||
|
Profit for the year and basic and diluted earnings attributable on discontinued operations |
58,721 |
293,661 |
|||
|
|
|
|
|||
|
Weighted average number of ordinary shares |
136,118,768 |
135,363,007 |
|||
|
Loss per share (pence) |
0.04 |
0.22 |
|||
|
|
|
|
|||
|
Effect of dilutive share options |
- |
- |
|||
|
Adjusted weighted average number of ordinary shares |
136,118,768 |
135,363,007 |
|||
|
Diluted loss per share - (pence) |
0.04 |
0.22 |
|
||
10. property, plant and equipment
|
Computer hardware |
Fixtures, fittings and equipment |
Total |
|
|
The Group |
£ |
£ |
£ |
|
|
|
|
|
|
Cost at 1 April 2007 |
791,362 |
512,534 |
1,303,896 |
|
Additions |
80,609 |
32,336 |
112,945 |
|
Foreign exchange effect |
5,715 |
2,866 |
8,581 |
|
At 31 March 2008 |
877,686 |
547,736 |
1,425,422 |
|
|
|
|
|
|
Cost at 1 April 2008 |
877,686 |
547,736 |
1,425,422 |
|
Additions |
97,066 |
138,085 |
235,151 |
|
Foreign exchange effect |
41,012 |
33,093 |
74,105 |
|
At 31 March 2009 |
1,015,764 |
718,914 |
1,734,678 |
|
|
|
|
|
|
Depreciation at 1 April 2007 |
653,757 |
427,220 |
1,080,977 |
|
Charge for the year |
138,793 |
55,115 |
193,908 |
|
Foreign exchange effect |
5,103 |
1,439 |
6,542 |
|
At 31 March 2008 |
797,653 |
483,774 |
1,281,427 |
|
|
|
|
|
|
Depreciation at 1 April 2008 |
797,653 |
483,774 |
1,281,427 |
|
Charge for the year |
88,049 |
68,983 |
157,032 |
|
Foreign exchange effect |
42,238 |
14,183 |
56,421 |
|
At 31 March 2009 |
927,940 |
566,940 |
1,494,880 |
|
|
|
|
|
|
NBV at 31 March 2009 |
87,824 |
151,974 |
239,798 |
|
NBV at 31 March 2008 |
80,033 |
63,962 |
143,995 |
|
NBV at 31 March 2007 |
137,605 |
85,314 |
222,919 |
11. INTANGIBLE ASSETS
|
Goodwill |
Other Intangible Assets |
Total
|
|
|
The Group |
|
|
£ |
|
Cost |
|
|
|
|
At 1 April 2007 |
3,632,680 |
219,779 |
3,852,459 |
|
Additions |
- |
10,195 |
10,195 |
|
Foreign exchange effect |
- |
526 |
526 |
|
At 31 March 2008 |
3,632,680 |
230,500 |
3,863,180 |
|
|
|
|
|
|
Cost |
|
|
|
|
At 1 April 2008 |
3,632,680 |
230,500 |
3,863,180 |
|
Additions |
- |
20,496 |
20,496 |
|
Foreign exchange effect |
- |
2,475 |
2,475 |
|
At 31 March 2009 |
3,632,680 |
253,471 |
3,886,151 |
|
|
|
|
|
|
Amortisation |
|
|
|
|
At 1 April 2007 |
- |
205,318 |
205,318 |
|
Provided in the year |
- |
20,315 |
20,315 |
|
Foreign exchange effect |
- |
548 |
548 |
|
At 31 March 2008 |
- |
226,181 |
226,181 |
|
|
|
|
|
|
Amortisation |
|
|
|
|
At 1 April 2008 |
- |
226,181 |
226,181 |
|
Provided in the year |
- |
13,451 |
13,451 |
|
Foreign exchange effect |
- |
2,398 |
2,398 |
|
At 31 March 2009 |
- |
242,030 |
242,030 |
|
|
|
|
|
|
NBV at 31 March 2009 |
3,632,680 |
11,441 |
3,644,121 |
|
NBV at 31 March 2008 |
3,632,680 |
4,319 |
3,636,999 |
|
NBV at 31 March 2007 |
3,632,680 |
14,461 |
3,647,141 |
For disclosure on goodwill impairment, refer to note 1 (o).
12. TRADE AND OTHER RECEIVABLES
|
2009 |
2008 |
|
|
£ |
£ |
|
|
Trade receivables |
1,827,243 |
1,833,164 |
|
Other receivables |
511,343 |
191,331 |
|
Prepayments and accrued income |
503,640 |
296,177 |
|
|
2,842,226 |
2,320,672 |
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 2009, trade receivables of £1,827,243 (2008: £1,833,164) were fully performing. An impairment provision of £52,914, (2008: £78,746) has been made against the invoices of four clients, (2008: one client). In addition, some of the unimpaired trade receivables are past due as of the reporting date. Trade receivables past due are as follows:
|
2009 |
2008 |
|
|
£ |
£ |
|
|
Not more than three months |
512,411 |
815,229 |
|
More than three months but not more than six months |
235,224 |
369,596 |
|
More than six months but less than a year |
85,144 |
3,312 |
|
More than one year |
74,475 |
28,440 |
|
|
907,254 |
1,216,577 |
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:
|
|
2009 |
2008 |
|
|
£ |
£ |
|
Opening Balance |
78,746 |
- |
|
Provision for receivables impairment |
- |
78,746 |
|
Receivables written off in the year |
(25,832) |
- |
|
Closing Balance |
52,914 |
78,746 |
The Group operates in a global market with income arising in a number of different currencies, principally Sterling, Euros or US Dollars. The Group does not hedge potential future income, since the existence, quantum and timing of such income cannot be accurately predicted.
Financial assets denominated in foreign currencies translated into sterling at the closing rate were:
|
|
2009 |
2008 |
|
|
£ |
£ |
|
Financial assets denominated in Euros |
224,824 |
605,833 |
|
Financial assets denominated in US Dollars |
458,221 |
162,184 |
|
Total non Sterling financial assets |
683,045 |
768,017 |
The following table illustrates the sensitivity of the net result for the year and the reported financial assets of the Group in regards to the exchange rate for Sterling: Euro and Sterling: US Dollar. The table shows the impact of a fall or strengthening of Sterling against the Euro and US Dollar by 10%.
|
|
2009 As reported |
If Sterling rose 10% |
If Sterling fell 10% |
|
|
£ |
£ |
£ |
|
Group result for the year |
683,045 |
(62,095) |
102,403 |
|
Euro denominated financial assets |
224,824 |
(20,439) |
24,486 |
|
US Dollar denominated financial assets |
458,221 |
(41,656) |
76,165 |
13. trade and other payables
|
2009 |
2008 |
|
|
£ |
£ |
|
|
Trade payables |
519,566 |
587,893 |
|
Other taxes and social security costs |
859,383 |
398,822 |
|
Other payables |
1,138,259 |
909,466 |
|
Shareholder loans (see note 20) |
1,330,000 |
510,000 |
|
|
3,847,208 |
2,406,181 |
14. FINANCIAL RISK MANAGEMENT and financial instruments
The Group's multi-national 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 company's policies for managing these are as follows:
i) Currency risk
The Group is exposed to translational and transactional foreign exchange risk. Overall the firm has receivables in Euros in excess of its payables and has payables in Chinese Yuan, Hong Kong Dollars and Singapore Dollars in excess of its revenues in those currencies. Although through its own software the Group has access to sophisticated models for the management of foreign exchange risk, there has been no use of foreign exchange derivatives to manage this position on the basis that historically the overall effect on the group's Income Statement has not been large enough to warrant this activity. In relation to translation risk, as far as possible the assets held in the foreign currency are matched to expenses in the same currency.
ii) Inflation risk
The Group has exposure to the inflationary effect of operating in countries in which it operates, offset by its ability to raise prices in those countries in which it sells. The Group's cost base is mainly exposed to the inflation rates and changes in payroll taxes in the United Kingdom, the United States and China. The inflation rate for salaries in specialized 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. Most of the Group's software contracts give the Group the ability to raise prices on a formula linked to the inflation rate of the currency of the contract. No specific hedging of inflation risk has been carried out.
iii) Interest rate risk
Interest rate risk arises primarily on the investment of the Group's cash balances or on its borrowings and the present value of the Group's receivables. The Group finances its operations through a mixture of retained cash reserves, and directors' loans at fixed rates. When the Group is a net depositor of funds, the Group stands to gain if interest rates rise and to lose if interest rates fall, ignoring any possible positive or negative correlation effects with business demand for the firm's products or inflationary pressures on the firm's cost base that might arise from changes in interest rates. When the Group is a net borrower of funds, the opposite is the case. Although through its own Oberon software the Group has access to sophisticated models for the management of interest rate risk, there has been no use of interest rate derivatives to manage this position on the basis that the amounts are not large enough to warrant this activity. The policy of the Group is to monitor exposure to interest rate risk and take into account potential movements in interest rates as well as liquidity considerations when selecting methods of financing.
Credit risk
Most of the Group's business is with banks, asset management firms and other high quality companies, and the Group's bad debt experience over 15 years has been negligible. The Group consequently has not considered taking out credit insurance and is not likely to do so in the foreseeable future. Deposits are placed with high quality banks.
Although through its own Firmament software the Group has access to sophisticated models for the management of credit spreads and credit derivatives, there has been no use of credit derivatives to mitigate counterparty risk, and no such use is contemplated.
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 company, is the reputation risk that might arise from poor execution, non delivery or late delivery of a high profile project or breach of client confidentiality for sensitive data. Further risks may arise where late delivery of software or untimely delivery of related services causes a client to miss regulatory deadlines. A detailed operational risk review is outside the scope of this report, but the Board attaches importance to maintaining appropriate internal controls to identify and limit these risks.
Liquidity risk
The Group seeks to manage financial risk by ensuring that sufficient liquidity is available to meet foreseeable needs and by investing cash assets safely as well as profitably. At 31 March 2009 the Group had no financial liabilities other than short term creditors, accruals and director loans. Some adjustments have been made to the Group's processes as a result of the opening of the Shanghai operation since China remains a country with exchange controls, meaning that liquidity cannot be redeployed as quickly there as in other countries in which the Group operates.
15. PROVISIONS
The Group has had office provision surplus to its needs, which it has been unable to re-let because of the current economic conditions. The lease on the office space runs until September 2009 and the Group has made provision for the contracted cost of the surplus space up to the date of expiration of the lease.
|
£ |
||
|
Balance at 31 March 2008 |
|
146,794 |
|
Amount released to income statement |
|
(9,130) |
|
Total provision for future lease costs due within one year |
|
137,664 |
16. Share Capital
|
2009 |
2008 |
|
|
|
£ |
£ |
|
Authorised |
|
|
|
714,034,085 ordinary shares of 0.5p each |
3,570,170 |
3,570,170 |
|
|
|
|
|
Allotted, called up and fully paid |
|
|
|
136,176,786 ordinary shares of 0.5p each (2008: 135,735,610) |
680,884 |
678,679 |
|
429,829,575 deferred shares of 0.1p each |
429,831 |
429,831 |
|
|
1,110,715 |
1,108,510 |
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
During the year the company issued 441,176 0.5p ordinary shares at then market value of 5.6p as a bonus to an employee. The company recorded this transaction as £2,205 issuance of Ordinary Share Capital and recognised £22,794 as Share Premium.
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(m) above, the volatility of the Company's shares for the relevant period has been estimated at 30%, giving rise to a charge to the Income Statement for the year to 31 March 2009 of £11,246, (2008: £40,611), 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 04 September 2004 and 31 March 2008.
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 vesting period is usually 5 years. The options are settled in equity once exercised. If the options remain unexercised after a period of 5 years from the date of grant, the options expire. Options are forfeited if the employee leaves the company.
|
At start of year |
Granted during year |
Exercised
|
Lapsed
|
At end of year |
Exercise price (p) |
Exercise date from |
Exercise date to |
|
|
|
|
|
|
|
|
|
|
2004 EMI Scheme |
|
|
|
|
|
|
|
|
1,320,000 |
- |
- |
(185,000) |
1,135,000 |
9.00 |
Mar-06 |
Mar-11 |
|
2,220,000 |
- |
- |
(170,000) |
2,050,000 |
9.00 |
Apr-08 |
Apr-13 |
|
1,330,000 |
- |
- |
(70,000) |
1,260,000 |
9.00 |
Dec-08 |
Dec-13 |
|
|
|
|
|
|
|
|
|
|
Unapproved Scheme |
|
|
|
|
|
|
|
|
1,520,555 |
- |
- |
- |
1,520,555 |
9.00 |
Dec-06 |
Dec-11 |
|
1,194,445 |
- |
- |
- |
1,194,445 |
11.00 |
Dec-06 |
Dec-11 |
|
935,555 |
- |
- |
(20,000) |
915,555 |
9.00 |
Apr-08 |
Apr-13 |
|
444,445 |
- |
- |
- |
444,445 |
11.00 |
Apr-08 |
Apr-13 |
|
- |
1,600,000 |
- |
- |
1,600,000 |
6.00 |
Jun-10 |
Jun-15 |
|
8,965,000 |
1,600,000 |
- |
(445,000) |
10,120,000 |
|
|
|
The fair values of the options were calculated using a numerical binomial model assuming the inputs shown below:
|
Grant date |
24 Apr 2006
|
24 Apr 2006 |
24 Apr 2006 |
01 Dec 2006 |
20 Jun 2008 |
|
|
Share price at grant |
6.75 |
6.75 |
6.75 |
7.75 |
6.25 |
|
|
Exercise price |
9 |
9 |
11 |
9 |
6 |
|
|
Contractual life (years) |
5 |
5 |
5 |
5 |
5 |
|
|
Staff turnover |
50% |
50% |
50% |
50% |
50% |
|
|
Risk free rate |
Discount curve used for UK on the day of valuation |
|
||||
|
Expected volatility |
30% |
30% |
30% |
30% |
30% |
|
|
Expected dividend yield |
- |
- |
- |
- |
- |
|
|
Fair value of option |
2.09 |
2.09 |
1.65 |
2.20 |
2.55 |
|
Details of the number of share options and the weighted average exercise price (WAEP) outstanding during the year are as follows:
|
|
2009 |
2009 WAEP |
2008 |
2008 WAEP |
|
|
Number |
|
Number |
|
|
|
|
|
|
|
|
Outstanding at beginning of the year |
4,930,000 |
9.18p |
5,940,000 |
9.15p |
|
Granted during the year |
1,600,000 |
6p |
- |
- |
|
Exercised during the year |
- |
- |
- |
- |
|
Forfeited during the year |
(260,000) |
9.00p |
(1,010,000) |
9.00p |
|
Outstanding at end of the year |
6,270,000 |
8.37p |
4,930,000 |
9.18p |
|
Exercisable at the year end |
1,360,000 |
|
Nil |
|
The share options outstanding at the end of the year have the following exercise prices.
|
Expiry Date |
Exercise price |
2009 Number |
2008 Number |
|
|
|
|
|
|
24/04/2013 |
9p |
2,965,555 |
3,155,555 |
|
24/04/2013 |
11p |
444,445 |
444,445 |
|
01/12/2013 |
9p |
1,260,000 |
1,330,000 |
|
20/06/2015 |
6p |
1,600,000 |
- |
|
|
|
6,270,000 |
4,930,000 |
18. Commitments
The Group had commitments under non-cancellable operating leases in respect of land and buildings as follows:
|
|
2009 |
2008 |
|
|
£ |
£ |
|
On leases which expire in 1 year or less |
283,662 |
52,533 |
|
On leases which expire in 1 to 5 years |
1,716,681 |
1,798,867 |
|
On leases which expire over 5 years |
- |
279,497 |
|
Total |
2,000,343 |
2,130,897 |
This includes the lease provision of £137,664. (see note 15).
19. Pensions
A Group company contributes to a defined contribution pension scheme on behalf of a limited number of employees of that subsidiary. The assets of the scheme are administered by trustees in a fund independent of the Company. Other defined contribution pension schemes to which the Group makes contributions on behalf of employees are of the stakeholder variety, again totally independent of the Company.
20. Related parties transactions
John Wisbey made advances to the company of £20,000 and £600,000 on 29 June 2007 and 31 August 2007 respectively. This loan was subject to review on 31 October 2007 and repayable by 29 February 2008. On 18 February 2008, £150,000 was repaid to John Wisbey, leaving a balance outstanding of £470,000 at the end of the financial year to March 2008. In July 2008 John Wisbey made further advances of £200,000 and £420,000 respectively in July and August 2008. The balance outstanding to him at the end of the financial year to March 2009 was therefore £1,090,000. The loan bears interest at 1% per month.
Ian Peacock advanced an amount of £10,000 to the company on the 12 July 2007. Michael Thomas advanced a sum of £30,000 on the 29 June 2007. The loan was interest free until 31 March 2008. Thereafter the loan attracted interest of 1% per month.
In June 2008 Brian Crowe advanced £200,000 to the company. The loan bears interest at 1% per month.
The Directors Loans, totalling £1,330,000 at the end of the financial year, are immediately repayable on demand from the point of view of the lenders and repayable at any time at the Company's option.
21. Controlling related parties
The only group of undertakings for which group accounts have been drawn up is that headed by Lombard Risk Management plc. The Chairman and Chief Executive, John Wisbey, is the majority holder of ordinary shares and is therefore considered to be the ultimate controlling related party of the Group.
22. POST BALANCE SHEET EVENTS
The company entered into additional director loans from Brian Crowe, Non-executive Director, for £200,000 and a further £100,000 from John Wisbey, Chairman and Chief Executive Officer. These funds have been used to provide the Company with additional working capital. This raised the overall total of director loans (the 'Loans') to £1,600,000 (excluding the £30,000 loan from Michael Thomas who was a director at year end but stood down in July 2009). The Loans, which bear interest at 1% per month, are on a demand basis from the point of view of the lenders and repayable at any time at the Company's option.
On 23rd September 2009 the Company concluded a fund-raising in which, subject to EGM approval and the meeting of various placing conditions, it will raise £1,800,000 of new money (before expenses) in a placing from institutional investors and other shareholders. At the same time as completion of the placing, there will be conversions of director loans into equity by John Wisbey in the amount of £790,000, £200,000 by Brian Crowe, £10,000 by Ian Peacock and £30,000 by a former director Michael Thomas. There will also be a repayment of the remaining £600,000 of director loans. The proceeds of the fund-raising are being used partly to strengthen the Company's balance sheet and partly to repay in their entirety, the director loans not converted into equity.
As a result of these events the Company will, on completion of the placing, have no external debt including debt due to directors.
Report of the Independent Auditor
To the members of Lombard Risk Management plc
We have audited the parent company financial statements of Lombard Risk Management Plc for the year ended 31 March 2009, which comprise the balance sheet and notes 1 to 11 to the financial statements. These parent company financial statements have been prepared under the accounting policies set out therein.
We have reported separately on the group financial statements of Lombard Risk Management Plc for the year ended 31 March 2009.
This report is made solely to the company's members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the Annual Report, and the parent company financial statements in accordance with United Kingdom Law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of Directors' Responsibilities.
Our responsibility is to audit the parent company financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the parent company financial statements give a true and fair view and whether the parent company financial statements have been properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the Directors' Report is consistent with the parent company financial statements.
In addition we report to you if, in our opinion, the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed.
We read other information contained in the Annual Report and consider whether it is consistent with the audited parent company financial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the parent company financial statements. Our responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the parent company financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the parent company financial statements, and of whether the accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the parent company financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the parent company financial statements.
Opinion
In our opinion:
the parent company financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the company's affairs as at 31 March 2009;
the parent company financial statements have been properly prepared in accordance with the Companies Act 1985; and
the information given in the Directors' Report is consistent with the financial statements.
Grant Thornton UK LLPRegistered Auditor, Chartered Accountants
London
24 September 2009
Company Balance Sheet
31 March 2009
|
As at |
As at |
||
|
31 March 2009 |
31 March 2008 |
||
|
Note |
£ |
£ |
|
|
|
|
|
|
|
Fixed assets |
|
|
|
|
Tangible assets |
4 |
30,022 |
57,480 |
|
Investments in subsidiaries |
5 |
12,383,529 |
11,911,164 |
|
|
|
12,413,551 |
11,968,644 |
|
|
|
|
|
|
Current assets |
|
|
|
|
Debtors due within one year |
6 |
6,137,683 |
4,095,319 |
|
Cash at bank and in hand |
|
658 |
4,918 |
|
|
|
6,138,341 |
4,100,237 |
|
|
|
|
|
|
Creditors: Amounts falling due within one year |
7 |
(13,455,058) |
(9,267,276) |
|
|
|
|
|
|
Net current liabilities |
|
(7,316,717) |
(5,167,039) |
|
|
|
|
|
|
Total assets less current liabilities |
|
5,096,834 |
6,801,605 |
|
|
|
|
|
|
|
|
|
|
|
Net assets |
|
5,096,834 |
6,801,605 |
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
Called up share capital |
8 |
1,110,715 |
1,108,510 |
|
Share premium |
9 |
2,512,904 |
2,490,110 |
|
Other reserves |
9 |
7,158,957 |
7,153,926 |
|
Profit and loss account |
9 |
(5,685,742) |
(3,950,941) |
|
|
|
|
|
|
Shareholders' funds |
|
5,096,834 |
6,801,605 |
The financial statements were approved by the board on 24 September 2009 and signed on its behalf by:
John Wisbey
Chairman & CEO
The accompanying accounting policies and notes form an integral part of these accounts.
Notes to the Financial Statements
For the year ended 31 March 2009
1. Accounting Policies
(a) Basis of Preparation
The separate financial statements of the Company are presented as required by the Companies Act 1985. As permitted by that Act, the separate financial statements have been prepared in accordance with all applicable United Kingdom accounting standards and on historical cost basis.
(b) Going Concern
The financial statements have, as in previous years, been prepared on a going concern basis. The Directors have formally considered this issue in the light of the operating losses and the consequent operating cash outflows in the period.
In forming an opinion that the Company and the Group are going concerns, the Directors have taken into account the Group's strong sales pipeline helped by its contract win earlier this year with a Tier 1 bank for collateral management, the opportunity in the regulatory space for UK Liquidity Reporting in the next year, the fund-raising of £1,800,000 concluded at the end of September 2009, subject to EGM approval and the meeting of various placing conditions (expected to complete in October 2009), and the simultaneous capitalisation of £1,030,000 of loans from directors and a former director and the elimination of all debt from the balance sheet.
The Directors have prepared cashflow forecasts for the period to 31 March 2011. Within these forecasts certain assumptions have been made over the timing of revenues and costs and take into account the £1,800,000 fundraising concluded at the end of September 2009.
The forecasts show that the Company and Group have sufficient facilities for ongoing operations. Whilst there will always remain some inherent uncertainty within the aforementioned cashflow, 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 2009.
(c) Foreign exchange
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All differences are taken to the profit and loss account.
(d) Deferred taxation
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more, or a right to pay less, tax in the future have occurred at the balance sheet date. Deferred tax assets are recognised when it is more likely than not that they will be recovered. Deferred tax is measured using rates of tax that have been enacted or substantively enacted by the balance sheet date.
(e) Leased assets
All leases held by the company are regarded as operating leases and the payments made under them are charged to the profit and loss account on a straight line basis over the lease term.
(f) Fixed and intangible assets
Depreciation is provided using the following rates and bases so as to write off the cost or valuation of fixed and intangible assets over their useful lives in the Company's business:
Computer software 50% to 100% straight line
Computer hardware 50% straight line
Fixtures, fittings and equipment 25% straight line
(g) Investments in subsidiaries
Investments in subsidiaries are recorded at cost less any provision for permanent diminution in value.
2. Directors and Employees
|
|
2009 |
2008 |
|
Staff costs including directors: |
£ |
£ |
|
Wages and salaries |
713,701 |
614,063 |
|
Social security costs |
96,293 |
111,304 |
|
Pension costs |
2,153 |
11,432 |
|
Share based payments charge (note 18 Consolidated financial statements) |
11,246 |
40,611 |
|
Total staff costs |
823,393 |
777,410 |
The average monthly number of employees (excluding directors) during the year was:
|
|
2009 |
2008 |
|
|
Number |
Number |
|
Office and administration |
10 |
8 |
|
Operational |
- |
- |
|
|
10 |
8 |
3. LOSS for the financial YEAR
The parent Company has taken advantage of Section 230 of the Companies Act 1985 and has not included its own Income Statement in these financial statements. The parent Company's loss for the year was £1,734,801 (2008: loss £2,468,687).
4. Tangible fixed assets
|
|
Computer hardware |
Fixtures, fittings and equipment |
Other intangible assets |
Total |
|
The Company |
£ |
£ |
£ |
£ |
|
Cost at 1 April 2008 |
659,093 |
412,321 |
223,803 |
1,295,217 |
|
Additions |
26,720 |
- |
8,772 |
35,492 |
|
At 31 March 2009 |
685,813 |
412,321 |
232,575 |
1,330,709 |
|
|
|
|
|
|
|
Depreciation at 1 April 2008 |
624,775 |
393,107 |
219,855 |
1,237,737 |
|
Charge for the year |
37,512 |
14,390 |
11,048 |
62,950 |
|
At 31 March 2009 |
662,287 |
407,497 |
230,903 |
1,300,687 |
|
|
|
|
|
|
|
NBV at 31 March 2009 |
23,526 |
4,824 |
1,672 |
30,022 |
|
NBV at 31 March 2008 |
34,318 |
19,214 |
3,948 |
57,480 |
5. Investment in subsidiaries
|
The Company |
2009 |
2008 |
|
Investment in subsidiaries |
£ |
£ |
|
Opening balance at 1 April |
11,911,164 |
11,911,165 |
|
|
|
|
|
Disposal of subsidiary- IVRS |
- |
(1) |
|
New capital investment in Lombard Risk International Limited |
472,365 |
- |
|
Closing balance at 31 March |
12,383,529 |
11,911,164 |
The directors have considered the carrying value of the investments in subsidiaries and have concluded, on the basis of forecast financial performance of the subsidiaries, that no impairment in value has taken place and therefore that no provision is currently required.
At 31 March 2009 the undertakings in which the company held more than 20% of the allotted share capital were as follows:
|
|
Proportion of ordinary share capital held |
|
|
|
|
|
By Parent (%) |
By Group (%) |
Country of incorporation |
Business |
|
Lombard Risk Systems Ltd |
100 |
100 |
UK |
Software |
|
Lombard Risk Compliance Ltd |
100 |
100 |
UK |
Software |
|
Lombard Risk International Ltd |
100 |
100 |
China |
Software |
|
Lombard Risk Systems Inc. |
- |
100 |
USA |
Software |
|
Lombard Risk International (USA) Inc |
- |
100 |
USA |
Software |
|
Lombard Risk International (Hong Kong) Ltd |
- |
100 |
Hong Kong |
Software |
|
Lombard Risk International (Singapore) Ltd |
- |
100 |
Singapore |
Software |
|
Lombard Risk Consultants Ltd |
100 |
100 |
UK |
Training |
|
Lombard Risk Systems (Pty) Ltd |
- |
100 |
South Africa |
Dormant |
|
Lombard Risk Systems (Asia Pacific) Ltd |
- |
100 |
Hong Kong |
Dormant |
|
Swapval Ltd |
100 |
100 |
UK |
Dormant |
All of the subsidiary undertakings have been included in the consolidation.
6. Debtors DUE WITHIN ONE YEAR
|
|
2009 |
2008 |
|
|
£ |
£ |
|
Amounts receivable from subsidiary undertakings |
6,032,812 |
3,979,281 |
|
Prepayments and accrued income |
104,871 |
116,038 |
|
|
6,137,683 |
4,095,319 |
The amounts due from subsidiary companies are due on demand. However, in the opinion of the directors, it is unlikely that these amounts will be fully repaid within the next financial year.
7. CREDITORS DUE WITHIN ONE YEAR
|
|
2009 |
2008 |
|
|
£ |
£ |
|
Trade creditors |
239,819 |
202,001 |
|
Other taxes and social security costs |
7,920 |
2,512 |
|
Other creditors |
11,739,655 |
8,405,969 |
|
Lease provision |
137,664 |
146,794 |
|
Shareholder loans (see note 20 Consolidated financial statements) |
1,330,000 |
510,000 |
|
|
13,455,058 |
9,267,276 |
8. SHARE CAPITAL
|
|
2009 |
2008 |
|
|
£ |
£ |
|
Authorised |
|
|
|
714,034,085 ordinary shares of 0.5p each |
3,570,170 |
3,570,170 |
|
|
|
|
|
Allotted, called up and fully paid |
|
|
|
136,176,786 ordinary shares of 0.5p each (2008: 135,735,610) |
680,884 |
678,679 |
|
429,829,575 deferred shares of 0.1p each |
429,831 |
429,831 |
|
|
1,110,715 |
1,108,510 |
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 Options
|
At start of year |
Granted during year |
Exercised
|
Lapsed
|
At end of year |
Exercise price (p) |
Exercise date from |
Exercise date to |
|
|
|
|
|
|
|
|
|
|
2004 EMI Scheme |
|
|
|
|
|
|
|
|
1,320,000 |
- |
- |
(185,000) |
1,135,000 |
9.00 |
Mar-06 |
Mar-11 |
|
2,220,000 |
- |
- |
(170,000) |
2,050,000 |
9.00 |
Apr-08 |
Apr-13 |
|
1,330,000 |
- |
- |
(70,000) |
1,260,000 |
9.00 |
Dec-08 |
Dec-13 |
|
|
|
|
|
|
|
|
|
|
Unapproved Scheme |
|
|
|
|
|
|
|
|
1,520,555 |
- |
- |
- |
1,520,555 |
9.00 |
Dec-06 |
Dec-11 |
|
1,194,445 |
- |
- |
- |
1,194,445 |
11.00 |
Dec-06 |
Dec-11 |
|
935,555 |
- |
- |
(20,000) |
915,555 |
9.00 |
Apr-08 |
Apr-13 |
|
444,445 |
- |
- |
- |
444,445 |
11.00 |
Apr-08 |
Apr-13 |
|
- |
1,600,000 |
- |
- |
1,600,000 |
6.00 |
Jun-10 |
Jun-15 |
|
8,965,000 |
1,600,000 |
- |
(445,000) |
10,120,000 |
|
|
|
9. Share premium and other reserves
|
|
Share capital |
Share premium account |
Other Reserves |
Profit and Loss Account |
Shareholders' Funds |
|
|
£ |
£ |
£ |
£ |
£ |
|
|
|
|
|
|
|
|
Balance at 1 April 2008 |
1,108,510 |
2,490,110 |
7,153,926 |
(3,950,941) |
6,801,605 |
|
Loss for the year |
- |
- |
- |
(1,734,801) |
(1,734,801) |
|
441,176 new shares issued at 0.5p |
2,205 |
22,794 |
- |
- |
24,999 |
|
Share based payment charge |
- |
- |
11,246 |
- |
11,246 |
|
Foreign exchange movements
|
- |
- |
(6,215) |
- |
(6,215) |
|
Balance at 31 March 2009 |
1,110,715 |
2,512,904 |
7,158,957 |
(5,685,742) |
5,096,834 |
Other reserves relate to negative goodwill arising on the acquisition of a subsidiary undertaking prior to 1 April 1997, merger reserve and net foreign exchange movements in connection with overseas subsidiaries.
10. Related parties transactions
John Wisbey made advances to the company of £20,000 and £600,000 on 29 June 2007 and 31 August 2007 respectively. This loan was subject to review on 31 October 2007 and repayable by 29 February 2008. On 18 February 2008, £150,000 was repaid to John Wisbey, leaving a balance outstanding of £470,000 at the end of the financial year to March 2008. In July 2008 John Wisbey made further advances of £200,000 and £420,000 respectively in July and August 2008. The balance outstanding to him at the end of the financial year to March 2009 was therefore £1,090,000. The loan bears interest at 1% per month.
Ian Peacock advanced an amount of £10,000 to the company on the 12 July 2007. Michael Thomas advanced a sum of £30,000 on the 29 June 2007. The loan was interest free until 31 March 2008. Thereafter the loan attracted interest of 1% per month.
In June 2008 Brian Crowe advanced £200,000 to the company. The loan bears interest at 1% per month.
The Directors Loans, totalling £1,330,000 at the end of the financial year, are immediately repayable on demand from the point of view of the lenders and repayable at any time at the Company's option.
11. POST BALANCE SHEET EVENTS
The company entered into additional director loans from Brian Crowe, Non-executive Director, for £200,000 and a further £100,000 from John Wisbey, Chairman and Chief Executive Officer. These funds have been used to provide the Company with additional working capital. This raised the overall total of director loans (the 'Loans') to £1,600,000 (excluding the £30,000 loan from Michael Thomas who was a director at year end but stood down in July 2009). The Loans, which bear interest at 1% per month, are on a demand basis from the point of view of the lenders and repayable at any time at the Company's option.
On 23rd September 2009 the Company concluded a fund-raising in which, subject to EGM approval and the meeting of various placing conditions, it will raise £1,800,000 of new money (before expenses) in a placing from institutional investors and other shareholders. At the same time as completion of the placing, there will be conversions of director loans into equity by John Wisbey in the amount of £790,000, £200,000 by Brian Crowe, £10,000 by Ian Peacock and £30,000 by a former director Michael Thomas. There will also be a repayment of the remaining £600,000 of director loans. The proceeds of the fund-raising are being used partly to strengthen the Company's balance sheet and partly to repay in their entirety, the director loans not converted into equity.
As a result of these events the Company will, on completion of the placing, have no external debt including debt due to directors.
Company Information
31 March 2009
|
Company registration number: |
3224870 |
|
|
|
|
Directors: |
John Wisbey - Chairman Ian Peacock - Deputy Chairman Brian Crowe Keith Butcher |
|
|
|
|
Company Secretary: |
Jane Fineman |
|
|
|
|
Registered office: |
India House 45 Curlew Street London SE1 2ND |
|
|
|
|
Nominated Advisor and Broker: |
Noble & Company Limited 120 Old Broad Street London EC2N 1AR |
|
|
|
|
Auditors: |
Grant Thornton UK LLP Grant Thornton House Melton Street Euston Square London NW1 2EP |
|
|
|
|
Corporate Solicitors: |
Memery Crystal 44 Southampton Buildings London WC2A 1AP |
|
|
|
|
Registrars: |
Computershare Investor Services PLC PO Box 859 The Pavilions Bridgwater Road Bristol BS99 1XZ |
|
|
|
|
Bankers: |
National Westminster Bank Plc 180 Brompton Road London SW3 1HL |
|
|
|
|
|
HSBC Bank 28 Borough High Street SE1 1YB |
|
|
|
|
Dates: |
Annual General Meeting: 23 October 2009 |
Related Shares:
Lombard Risk Management