Final Results

30th Sep 2008 07:00



Lombard Risk Management plc

30 September 2008

Lombard Risk Management plc (the 'Group' or the 'Company')

Final Results for the Year Ended 31 March 2008

Lombard Risk Management plc (AIM: LRM), a leading risk management, valuation and regulatory reporting software company, has today announced its results for the year to 31 March 2008. Commenting on the results, John Wisbey, Chairman and Chief Executive said "This year continued the trend of substantial revenue growth, the result of new contract wins in all parts of the Group".

The Annual Report will be posted to shareholders before 9 a.m. on Friday, 3 October 2008.

Highlights

Year of major progression including:

Continuing trend of substantial year on year revenue growth, due to new contract wins in all parts of the Group

Maturing of the Shanghai operation to give greater value to the business

Profitable sale of the loss making Independent Valuation subsidiary ("IVRS")

Results for the 2008 financial year show considerable improvement on previous year

Loss for the year £0.67m, including a profit of £0.29m on the sale of IVRS (2007: Loss £2.04m)

Turnover up 26.7% to £8.46m (2007: £6.68m)

Operational breakeven and overall profit achieved in the second half of the financial year

"Must have" nature of some of our products means continued revenue growth forecast, particularly in second half of the 2009 financial year, despite the economic downturn and the fact that most clients are in the banking sector

Cost base expected to be steady owing to continued transfer of capacity to Shanghai

Enquiries:

Lombard Risk Management plc:

John Wisbey, Chairman and CEO

T: +44 (0)20 7384 5000

E: [email protected]

Noble & Company Ltd (Nominated Advisor):

Matthew Hall, Director

Tel: +44 (0)20 7763 2200

  Summary

The year, especially the second half, was a very encouraging one with many of the goals achieved that we had said we expected. There was a considerable forward momentum in our business leading to record revenues and a return to profitability in the second half of the year. We sold the Independent Valuation business in February 2008. In addition the new business won during the period generated an appreciable forward order book and future revenue from projects underway most of which will be recognized in the financial year ending 31 March 2009 ("FY2009"). We have started the new financial year with several contract wins, and are seeing constantly growing demand for our Colline® collateral management software and for our STB-Reporter regulatory reporting software product. There appears to have been little if any net negative impact felt to date from the banking sector downturn. 

Revenues at £8.46m grew by a headline 26.7% against the £6.68m recorded in the previous year; in reality the revenue was higher in both years because IFRS accounting means that the Independent Valuation business's revenue of £0.33m (2007:£0.27m) up to its date of sale is not included. The Group's loss narrowed to £0.67m for the year, or to £0.97m taking into account only continuing operations. Encouragingly there was a profit in the second half of the year of £0.47m on revenues of £4.8m and a break even position from continuing activities. This is an appreciable turn-round from the previous year in which we made a loss of £2.0m in the full year.

Revenues for the year benefited from regulatory change, especially Basel II, although a significant proportion of the related revenues will not be recognized until FY2009. Good progress continues to be made with expanding our software development and implementation capability in Shanghai with corresponding cost savings in the UK. Our investment in Shanghai places us very well to contain costs going forward, and to achieve greater cost synergies from acquisitions.

 

We anticipate overall revenue growth continuing in FY2009, although the timing of revenue recognition will mean that revenues will again be weighted to the second half of the year and there will consequently be a loss in the first half of the year. Clearly the outlook for the second half is subject to conditions in the banking sector not deteriorating significantly further after the collapse of Lehman Brothers and other recent events.

Financial

Revenues at £8.46m grew by 26.7% against the £6.68m recorded in the previous year. Group losses were £0.67m. The Company made a profit of £0.47m in the second half of the financial year. In line with previous years' accounting policies all software development and R&D expenditure was expensed in full when incurred.

Cash at the year end was £0.49m, although loans from directors exceeded that amount. Since the year end loans from directors have risen further. This is clearly not the long term solution for the Group's capital structure, and it is expected that these loans will in due course be replaced by equity funding or refunded from operational cash flow.

Recurrent revenue has historically been a high proportion of revenues at Lombard Risk. Recurrent annual revenues for the Group are running at over £4m. In addition, the revenue profile remains well dispersed, with no single client site last year accounting for more than 6% of total revenue.

Valuation and Risk Management Software Products

Oberon, the trading and risk management system, continued to be our most profitable product although not the highest by revenue. Oberon continues to provide capital to support the development of other products. Work has continued to make Oberon a very open system using our OBI utility, and this work is now being carried out largely in our Shanghai operation. Functionally the product set has made good progress with new pricing models and support for additional instruments such as inflation derivatives, equity variance swaps, more equity derivatives and the introduction of a new yield curve.

Colline, our software for collateral management, enjoyed another promising year although progress was disrupted in the middle of the year by two senior staff departures. The remaining team rose to the challenge and we ended the financial year with a strong management structure for the product and a considerably stronger pipeline both in EMEA and North America than at the beginning of the year both with the sell side and the buy side. Colline is now a well proven technology both for banks and for fund managers and a recent survey by Tower Group of collateral management technology has put the software second in the world by number of clients.

Regulatory and Compliance Software Products

The Group's regulatory compliance software business STB Systems continued and continues to secure good contract wins during the period of the UK Basel II changes. The biggest challenge the company faced was the multiple delivery of over 100 projects in the UK at the same time owing to significant regulatory change such as Basel II and Mandatory Electronic Reporting. Despite our investing considerable money in contract help for this, at times this put a strain on some of our long-standing customer relationships. We are now reverting to more of a "Business as Usual" model, and believe that our customers will come to appreciate the considerable technology advances we made and continue to make at the time of the UK regulatory changes. We have won some prestigious contracts since the introduction of the new technology and have picked up some significant contracts from competitors.

The regulatory compliance business has good penetration of the U.K. banking market with approximately 150 of 350 banks in the U.K. using the STB-Reporter product for regulatory reporting to the FSA. We continue to believe that this offers an excellent opportunity for the Group to expand its business with many of these clients.

The firm's ability to offer global solutions continues to be enhanced through it now having regulatory offerings available or under production for several EMEA and Asian countries as well as the U.K. and United States. 

In addition, the AML product STB-Detector has seen good revenue growth in several countries, but particularly in the United States. This product was recently ranked fourth in the world by IBS Publishing for business obtained in the previous year.

Independent Valuation and Risk Services

In February 2008 we sold the Independent Valuation business to a subsidiary of NYSE Euronext for around £0.7m. This business, while in the right area strategically, had required more investment than the company was prepared or easily able to make, and had been loss-making. With the sale of this business we parted company with Christopher Rose who had been a director of the Company for several years and also some other capable and long-standing employees. I would like to thank them all for their contribution over the years.

Personnel

We have made some significant hires at Group level including a CFO and CTO, and are moving to upgrade many of our processes so as to offer far better joined up delivery and implementation of software to our clients. This will greatly assist us in being able to grow the business both organically and through M&A.

The last year has seen a significant build up in our Shanghai operation, with a headcount there now of over 60. We have been very pleased with the quality of the people that we have recruited so far. The outlook for the Group's costs is now a very favourable one of cost containment as a progressive migration of software development and some other functions to Shanghai continues to take place and we grow the Shanghai operation faster than the UK one. On a 10-15 year view this cost advantage will probably erode as Shanghai catches up with other regional Asian centres such as Hong Kong, but the advantage should nevertheless be considerable for several years.

Investments

Lombard Risk disposed in May 2007 of its remaining £0.4m stake in its former subsidiary IDOX plc. Over time that investment realized over £4m for Lombard Risk based on a total investment of £1.1m.We had already valued the shares at market price in the previous financial year's accounts so there is little profit effect in this year's accounts.

Prospects

The Board clearly has to caution that its own views of prospects will depend to some extent on the macroeconomic situation, particularly that of the banking sector. It would be naïve to imagine that cataclysmic events such as a fortnight in which Lehman Brothers has gone into Chapter 11 and the U.S. Government has assumed control of AIG, Freddie Mac and Fannie Mae will have no effect on the timing of banks' spending, even in areas which are "must have". In our own budgeting we have slightly downgraded or deferred our own revenue expectations for the next 12 months as a result, and have at the same time pruned or deferred some of our intended expenditure.

With that macroeconomic caveat, the board is still seeing very few of banks' and financial institutions' spending plans being cancelled in the company's key growth areas, namely regulatory compliance and risk management. Indeed on the risk management side the firm has seen a higher level of interest in its software for collateral management than in previous years, since collateral management is such an important component of managing counterparty risk. The company is also seeing continued strong interest in its regulatory and compliance software, while the changing regulatory environment in some large markets, including the United States and China, would appear to present significant opportunities over the next two to three years. The Board restates its normal caveat that there will inevitably be some volatility of earnings arising from the exact timing of the Group's larger software licence deals. 

The Shanghai operation, where we now have 60 people and enough office space to expand to over 100, should allow revenues to grow much faster than costs from now on. The Board believes that Shanghai's re-emergence as a major financial centre also presents Lombard Risk with significant local revenue opportunities over coming years in addition to the cost benefits of offshore development. The ability to develop software efficiently and at a reasonable cost in Shanghai will also allow us to achieve greater cost synergies from future acquisitions than would otherwise have been the case.

I would like to thank all my colleagues, as well as our advisors, for their hard work and support.

John Wisbey

Chairman & CEO

Consolidated Income Statement

As at 31 March 2008

		Year ended	Year ended
		31 March 2008	31 March 2007
	Note	£	£
Continuing operations
Revenue	2	8,460,594	6,675,911
Cost of sales		(52,897)	(64,752)
Gross profit		8,407,697	6,611,159
Administrative expenses		(9,458,899)	(7,963,969)
Loss from operations	4	(1,051,202)	(1,352,810)
(Loss) / profit on disposal of quoted investment / business		(40,788)	44,800
Dividend received from current asset investment		-	2,797
Finance expense	5	(35,218)	(2,346)
Finance income	6	10,652	25,981
(Loss) before taxation		(1,116,556)	(1,281,578)
Taxation	7	150,000	(2,790)
(Loss) for the year from continuing operations		(966,556)	(1,284,368)
Profit / (loss) for the year from discontinued activities	8	293,661	(756,871)
(Loss) for the year transferred from reserves		(672,895)	(2,041,239)

(Loss) per share
Basic (pence)	9	(0.50)	(1.54)
Diluted (pence)	9	(0.50)	(1.54)

(Loss) per share on continuing activities
Basic (pence)	9	(0.71)	(0.97)
Diluted (pence)	9	(0.71)	(0.97)

Earnings /(loss) per share on discontinued activities
Basic (pence)	9	0.22	(0.57)
Diluted (pence)	9	0.22	(0.57)

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

Consolidated Balance Sheet

As at 31 March 2008

		As at	As at
		31 March 2008	31 March 2007
	Note	£	£
Non-current assets
Property, plant and equipment	10	143,995	222,919
Goodwill	11	3,632,680	3,632,680
Other intangible assets	11	4,319	14,461
		3,780,994	3,870,060
Current assets
Trade and other receivables	12	2,320,672	1,446,424
Investment	13	-	448,000
Cash and cash equivalents		494,894	284,328
		2,815,566	2,178,752
Total assets		6,596,560	6,048,812
Current liabilities
Trade and other payables	14	(2,406,181)	(1,607,913)
Provisions	16	(146,794)	-
Deferred income		(2,690,195)	(2,509,213)
		(5,243,170)	(4,117,126)
Total liabilities		(5,243,170)	(4,117,126)
Net assets		1,353,390	1,931,686
Equity
Share capital	17	1,108,510	1,103,510
Share premium account		2,490,110	2,415,110
Foreign exchange reserves		(30,208)	(4,196)
Other reserves		1,637,906	1,597,295
Retained deficit		(3,852,928)	(3,180,033)
Total equity		1,353,390	1,931,686

The financial statements were approved by the board on 29 September 2008 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

As at 31 March 2008

	Share capital	Share premium account	Foreign exchange reserves	Other reserves	Profit and loss account	Total equity
	£	£	£	£	£	£
Balance at 1 April 2006	1,082,510	2,415,110	-	1,151,029	(979,150)	3,669,499
Foreign exchange movements	-	-	(4,196)	-	-	(4,196)
Recycling of gains previously recognised in equity	-	-	-	-	(159,644)	(159,644)
Income and expense recognised directly in equity	-	-	(4,196)	-	(159,644)	(163,840)
Loss for the year	-	-	-	-	(2,041,239)	(2,041,239)
Total recognised income and expense for the year	-	-	(4,196)	-	(2,200,883)	(2,205,079)
Premium on new ordinary shares	-	-	-	399,000	-	399,000
Shares issued in the period	21,000	-	-	-	-	21,000
Share based payment charge	-	-	-	47,266	-	47,266
Balance at 31 March 2007	1,103,510	2,415,110	(4,196)	1,597,295	(3,180,033)	1,931,686
	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	-	-	(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, merger reserve and net foreign exchange movements in connection with overseas subsidiaries.

Consolidated Cash flow Statement

For the year ended 31 March 2008		Year ended	Year ended
		31 March 2008	31 March 2007
		£	£
Cash flows from operating activities
Loss for the period excluding discontinued operations		(966,556)	(2,200,883)
Tax (credit) / charge		(150,000)	2,790
Finance income		(10,652)	(26,007)
Finance expense		35,218	2,346
Dividends received			(2,797)
Loss / (profit) on disposal of quoted investment / business		40,788	(44,800)
Operating loss		(1,051,202)	(2,269,351)
Operating loss in discontinued activity		(353,328)	-
Adjustments for:		-
Depreciation		193,908	237,638
Amortisation		20,315	61,851
Share based payment charge		40,611	47,266
Provision for onerous lease		146,794	-
IDOX share revaluation		-	283,002
Increase in trade and other receivables		(874,248)	(242,502)
Increase in trade and other payables		296,170	57,388
Increase in deferred income		180,982	509,217
Cash used in operations		(1,399,998)	(1,315,491)
Tax credit received		150,000	-
Net cash outflow from operating activities		(1,249,998)	(1,315,491)
Cash flows from investing activities
Purchase of property, plant and equipment		(112,945)	(162,289)
Purchase of intangible fixed assets		(10,195)	(29,550)
Proceeds from sale of ValuSpread		-	79,044
Proceeds from sale of IVRS		691,058	-
Disposal of IDOX shares		407,212	-
Net cash generated by / (used in) investing activities		975,130	(112,795)
Cash flows from financing activities
Loans from directors		660,000	-
Repayment of directors' loan		(150,000)	-
Payment of finance lease liabilities		-	(36,879)
Interest received		10,652	26,007
Interest paid		(35,218)	(2,346)
Dividends received		-	2,797
Net cash generated by / (used) in financing activities		485,434	(10,421)
Net increase / (decrease) in cash and cash equivalents		210,566	(1,438,707)
Cash and cash equivalents at beginning of period		284,328	1,723,035
Cash and cash equivalents at end of period		494,894	284,328

1. Accounting Policies

(a) Basis of preparation

These consolidated financial statements are for the year ended 31 March 2008. They have been prepared in accordance with IFRSs (International Financial Reporting Standards) and International Financial Reporting Interpretation Committee (IFRIC) interpretations as at 31 March 2008, as adopted by the European Union. They are the first full financial statements prepared by the Group under IFRS and a full explanation of the transition is set out below. They have been prepared under the historical cost convention with the exception of the investment in IDOX shares, which have been stated at fair value. 

 The financial statements and statutory accounts for the year ended 31 March 2007 were prepared under UK GAAP (Generally Accepted Accounting Practice) and have been filed with the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain any statement under section 237(2) or (3) of the Companies Act 1985.

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.

An explanation of how the transition from UK GAAP to IFRS has affected the Group's financial position, financial performance and cash flows is set out below. Lombard Risk Management plc has historically prepared its Group financial statements under UK GAAP. With effect from 1 April 2007 the Group is required to prepare its financial statements in accordance with IFRS. As stated above, the Group's first annual financial statements under IFRS will be this Annual Report and Accounts for the year ended 31 March 2008. We have already published IFRS results in the interim report produced for the six months ended 30 September 2007. The Group is required to publish one year of comparative information, which results in a date of transition to IFRS of 1 April 2006. The format and terminology of the primary statements included in this document have been presented in accordance with IAS1 (Presentation of financial statements).

IFRS does not affect the underlying business performance of Lombard Risk Management plc and has no impact on the cash generated from operations. There is however a change in presentation and disclosure, along with a restatement of the results as explained in the table below.

IFRS1 (First-time adoption of IFRS) permits companies adopting IFRS for the first time to take certain exemptions from the full requirements of IFRS in the transition period. These financial statements have been prepared on the basis of taking the exemption from restating business combinations occurring before the transition date, 1 April 2006.

New standards and interpretations currently in issue but not effective for accounting periods commencing on 1 April 2007 are:

IAS 1 Presentation of Financial Statements (revised 2007) (effective 1 January 2009)

IAS 23 Borrowing Costs (revised 2007) (effective 1 January 2009)

Amendment to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation (effective 1 January 2009)

IAS 27 Consolidated and Separate Financial Statements (Revised 2008) (effective 1 July 2009)

Amendment to IFRS 2 Share-based Payment - Vesting Conditions and Cancellations (effective 1 January 2009)

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 (effective 1 January 2009)

Amendment to IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items (effective 1 July 2009)

Improvements to IFRSs (effective 1 January 2009 other than certain amendments effective 1 July 2009)

IFRS 3 Business Combinations (Revised 2008) (effective 1 July 2009)

IFRS 8 Operating Segments (effective 1 January 2009)

IFRIC 12 Service Concession Arrangements (effective 1 January 2008)

IFRIC 13 Customer Loyalty Programmes (effective 1 July 2008)

IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (effective 1 January 2008)

IFRIC 15 Agreements for the Construction of Real Estate (effective 1 January 2009)

IFRIC 16 Hedges of a Net Investment in a Foreign Operation (effective 1 October 2008)

In converting its financial statements to IFRS, Lombard Risk Management plc has assessed the impact of IFRS on its reporting and has judged that it has affected the following areas of accounting and disclosure:

IAS 1 Reclassification: The group is required to reclassify their accruals and deferred income as current liabilities rather than non-current liabilities. This is purely a presentational change.

Holiday pay accrual (IAS19): As a result of specific guidance in IAS19, the Group has recognised an additional accrual for holiday pay. The accrual is £68,120 as at 31 March 2007. For the year ended 31 March 2008, £60,987 has been accrued.

IAS 39 Revaluation of shares: The Group has previously valued its IDOX investment according to UK GAAP at cost or directors' valuation less any provision for a permanent diminution in value but under IFRS shares are required to be valued at a 'fair value' which is referred to as the quoted market price. Hence, the IDOX investment has been restated to the market value as at the balance sheet date, with movements in fair value being recorded in equity.

Goodwill: Goodwill recognised by the Group upon the acquisition of STB Systems under UK GAAP was amortised over a period of 20 under UK GAAP. Under IFRS 3 goodwill is not amortised, but an impairment test is performed as appropriate, at least annually. The value of Goodwill is to be written down according to the outcome of the impairment test. IFRS 3 requires that the amortisation charge recognised in accordance with UK GAAP should be written back to the Goodwill value as at 1 April 2006. However, on the 26 September 2006 the final tranche of the consideration for the acquisition of STB Systems was paid. This resulted in a reduction of £80,000 of Goodwill as the actual payment for the final tranche was less than the maximum achievable under the earn out which had been provided for. Hence in the period to 30 September 2006, although the movement in Goodwill for the period is £174,134, only £94,134 is recognised as an IFRS amendment, increasing the restated IFRS by £80,000.

IFRS1: The group has taken advantage of the exemption in IFRS 1 and has deemed cumulative translation differences for all foreign operations to be nil at the date of transition to IFRS.

The following tables present the reconciliation of UK GAAP to IFRS for all adjustments:

Reconciliation as at 1 April 2006

	UK GAAP	IAS 1	IAS 19	IAS39	IFRS 3	Restated
		Reclassification	Holiday Accrual	Valuation of shares	Goodwill	Under IFRS
Reconciliation of equity	£	£	£	£	£	£
Non-current assets
Property, plant and equipment	344,387	-	-	-	-	344,387
Goodwill	3,712,680	-	-	-	-	3,712,680
Other intangible assets	-	-	-	-	-	-
	4,057,067	-	-	-	-	4,057,067
Current assets
Trade and other receivables	1,203,922	-	-	-	-	1,203,922
Investment in IDOX shares	571,358	-	-	159,644	-	731,002
Cash and cash equivalents	1,723,035	-	-	-	-	1,723,035
	3,498,315	-	-	159,644	-	3,657,959
Total Assets	7,555,382	-	-	159,644	-	7,715,026
Current liabilities
Trade and other payables	(1,675,017)	(302,394)	(68,120)	-	-	(2,045,531)
Deferred income	-	(1,999,996)	-	-	-	(1,999,996)
	(1,675,017)	(2,302,390)	(68,120)	-	-	(4,045,527)
Non-current liabilities
Accruals and deferred income	(2,302,390)	2,302,390	-	-	-	-
Total liabilities	(3,977,407)	-	(68,120)	-	-	(4,045,527)
Net assets	3,577,975	-	(68,120)	159,644	-	3,669,499
Equity
Share capital	1,082,510	-	-	-	-	1,082,510
Share premium account	2,415,110	-	-	-	-	2,415,110
Revaluation reserve	170,957	(170,957)	-	-	-	-
Other reserves	1,151,029	-	-	-	-	1,151,029
Profit and loss account	(1,241,631)	170,957	(68,120)	159,644	-	(979,150)
Total equity	3,577,975	-	(68,120)	159,644	-	3,669,499

Reconciliation for the year ended 31 March 2007

	UK GAAP	IAS 1	IAS 19	IAS39	IFRS 3	IFRS 5	Restated
		Reclassification	Holiday Accrual	Valuation of shares	Goodwill	IVRS Reclassification	Under IFRS
Reconciliation of (loss) / profit	£	£	£	£	£	£	£
Revenue	6,942,181	-	-	-	-	(266,270)	6,675,911
Cost of sales	(118,014)	-	-	-	-	53,262	(64,752)
Administrative expenses	(9,162,326)	-	-	40,788	187,664	969,905	(7,963,969)
Operating loss	(2,338,159)	-	-	40,788	187,664	756,897	(1,352,810)
Profit on disposal business	-	44,800	-	-	-	-	44,800
Finance income	26,458	-	-	-	-	(26)	26,432
Taxation	(2,790)	-	-	-	-		(2,790)
Loss from continuing operations	(2,314,491)	44,800	-	40,788	187,664	756,871	(1,284,368)
Profit/(loss) from discontinued activity	44,800	(44,800)	-	-	-	(756,871)	(756,871)
(Loss) / profit for the period	(2,269,691)	-	-	40,788	187,664	-	(2,041,239)
Reconciliation of equity
Non-current assets
Property, plant and equipment	237,380	(14,461)	-	-	-	-	222,919
Goodwill	3,445,016	-	-	-	187,664	-	3,632,680
Other intangible assets		14,461		-	-		14,461
	3,682,396	-	-	-	187,664	-	3,870,060
Current assets
Trade and other receivables	1,446,424	-	-	-	-	-	1,446,424
Investment in IDOX shares	407,212	-	-	40,788	-	-	448,000
Cash and cash equivalents	284,328	-	-	-	-	-	284,328
	2,137,964	-	-	40,788	-	-	2,178,752
Total Assets	5,820,360	-	-	40,788	187,664	-	6,048,812
Current liabilities
Trade and other payables	(1,145,931)	(393,862)	(68,120)	-	-	-	(1,607,913)
Deferred income	-	(2,509,213)	-	-	-	-	(2,509,213)
	(1,145,931)	(2,903,075)	(68,120)	-	-	-	(4,117,126)
Non-current liabilities
Accruals and deferred income	(2,903,075)	2,903,075	-	-	-	-	-
Total liabilities	(4,049,006)	-	(68,120)	-	-	-	(4,117,126)
Net assets	1,771,354	-	(68,120)	40,788	187,664	-	1,931,686
Equity
Share capital	1,103,510	-	-		-	-	1,103,510
Share premium account	2,415,110	-	-		-	-	2,415,110
Other reserves	1,593,099	-	-		-	-	1,593,099
Profit and loss accounts	(3,340,365)		(68,120)	40,788	187,664	-	(3,180,033)
Total equity	1,771,354	-	(68,120)	40,788	187,664	-	1,931,686

(b) Basis of consolidation

The Group accounts consolidate the financial statements of the Company and its subsidiary undertakings over which it has full control (see Note 5 to the Parent Company balance sheet).

The consolidated financial statements include the financial statements of the Company and its subsidiary undertakings made up to 31 March. 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 operating cash outflows in the period. 

The Directors have reviewed forecasts for the remainder of the year to 31 March 2009 and the year ended 31 March 2010 and are confident that the Group will continue to operate within its available facilities (note 23). The first part of the current year saw some delays in signing expected new contracts but these are now coming to fruition. There have also been some delays in the completion of some of the regulatory reporting projects, but these are now well under control and many should see completion by the end of October. This, combined with the costs of an office move in Shanghai and increased investment in the Shanghai operation, have adversely affected cash flow, hence the directors' loans that are in place post balance sheet. It is anticipated however, that these loans will substantially be repaid by the end of the financial year from cash derived from operations based on a strong sales pipeline.

The Directors consider that there is great commercial opportunity in the company's chosen sectors and will be taking active steps to ensure sufficient funding to allow the Group to pursue a plan that recognises that value for its current shareholders. The Directors also take considerable comfort from the valuations in recent M&A transactions in the collateral management and compliance areas, and feel confident that this would be an alternative method of realizing value for the company and its shareholders should such an option be in the interests of shareholder value. The Directors are also satisfied that the Group will have access to sufficient funding should revenue expectations not be met.

 

(d) Revenue

Revenue represents the invoiced amount 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. 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 less residual value written down, of computer hardware, fixtures, fittings and equipment, is depreciated in equal annual instalments over the estimated useful lives of the assets. The residual values of assets or group 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.

Goodwill written off to reserves prior to date of transition to IFRS remains in reserves. There is no reߛinstatement of goodwill that was amortised prior to transition to IFRS. Goodwill previously written off to reserves is not written back to profit or loss on subsequent disposal.

 

(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:

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

the group intends to complete the intangible asset and use or sell it

the group has the ability to use or sell the intangible asset

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

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

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

Development costs not meeting the criteria for capitalisation are expensed as incurred.

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 payables. Derivative instruments are not used by the Group and the Group does not enter into speculative derivative contracts.

Available-for-sale financial assets include non-derivative financial assets that are either designated as such or do not qualify for inclusion in any of the other categories of financial assets. All financial assets within this category are measured subsequently at fair value, with changes in value recognised in equity, through the statement of changes in equity. Gains and losses arising from investments classified as available-for-sale are recognised in the income statement when they are sold or when the investment is impaired.

In the case of impairment of available-for-sale assets, any loss previously recognised in equity is transferred to the income statement. An assessment for impairment is undertaken at least at each balance sheet date.

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 is 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. 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.

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 reserve".

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. The revenue from long term projects which do not include the up front delivery of immediately useable software 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, non-refundable licence revenue is recognised on receipt of the software by the customer, and other revenue is recognised as per the invoicing schedule. Maintenance revenue associated with the licence fee is recognised on a monthly basis. The management believe this to be the most appropriate method of revenue recognition, but it is accepted that there are alternative methods that could be considered and that if implemented could significantly affect the timing of revenue recognition over a number of years.

Trade receivables

Trade receivables are from banks and financials institutions. Past evidence confirms that there is little risk of bad debt, even from those invoices that are overdue. In certain circumstances, however, where there is outstanding negotiation on billable work, the management will provide for any risk to revenue that might, at close of negotiations, not be realised.

Useful lives of intangible assets and property, plant and equipment

Intangible assets and property, plant and equipment are amortised or depreciated over their useful lives. Useful lives are based on the management's estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes to estimates can result in variations to the amounts charged to the income statement.

Goodwill impairment

The carrying value of goodwill can be assessed in a number of ways. In this instance, two tests have been applied (value of future earnings and the sales to price ratio), both of which require some judgement on the part of the Board.

The value of future earnings and the sales to price ratio are dependent upon the financial industry retaining a level of stability that will allow continued spending on regulation and risk software. The wider economic climate is a risk to revenues at this time, but this will be common to the industry as a whole. The discount rate assumption is based upon loan agreements already in place with Directors, however, it is possible that the rates could be revised in line with market rates or to reflect changing risks.

At present, there appears to be no material effect on revenue from the economic downturn and therefore the risk to the value of goodwill is not considered to be significant at this stage.

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 2008	Year ended  31 March 2007
	£	£
Revenue
United Kingdom	4,451,189	3,160,541
Rest of Europe, Middle East and Africa	2,324,387	1,126,014
The Americas	1,030,239	1,437,970
Asia Pacific	654,779	951,386
Total revenue	8,460,594	6,675,911

Costs
United Kingdom	(6,028,169)	(3,183,443)
Rest of Europe, Middle East and Africa	(1,534,016)	(1,290,039)
The Americas	(1,176,436)	(2,289,258)
Asia Pacific	(688,529)	(1,197,539)
Total costs	(9,427,150)	(7,960,279)

Profit / (loss)
United Kingdom	(1,576,980)	(22,902)
Rest of Europe, Middle East and Africa	790,371	(164,025)
The Americas	(146,197)	(851,288)
Asia Pacific	(33,750)	(246,153)
Total (loss)	(966,556)	(1,284,368)

Net assets
United Kingdom	1,087,749	1,837,960
Rest of Europe, Middle East and Africa	-	-
The Americas	26,011	10,126
Asia Pacific	239,630	83,600
Net assets	1,353,390	1,931,686

Analysis by trading activity	Year ended  31 March 2008	Year ended  31 March 2007
	£	£
Revenue
Regulatory compliance software	5,304,332	3,101,031
Risk management and trading software	3,153,457	3,574,880
Software development unallocated	2,805	-
Group unallocated	-	-
Total revenue	8,460,594	6,675,911

Costs
Regulatory compliance software	(4,722,762)	(2,815,961)
Risk management and trading software	(1,779,776)	(3,522,821)
Software development unallocated	(997,740)	(713,610)
Group unallocated	(1,926,872)	(907,887)
Total costs	(9,427,150)	(7,960,279)

Profit / (loss)
Regulatory compliance software	581,570	285,070
Risk management and trading software	1,373,681	52,059
Software development unallocated	(994,935)	(713,610)
Group unallocated	(1,926,872	(907,887)
Total profit / (loss)	(966,556)	(1,248,368)

Net assets
Regulatory compliance software	1,362,503	1,280,699
Risk management and trading software	1,777,202	359,724
Software development unallocated	(1,540,367)	(429,913)
Group unallocated	(245,948)	721,176
Net assets	1,353,390	1,931,686

In 2007, a proportion of centralised costs were allocated to the other Group companies where appropriate. In 2008 however, costs have not been reallocated but remain in the company in which they were incurred. This policy is under review.

3. DIRECTORS AND EMPLOYEES

 

	2008	2007
	£	£
Directors:
Emoluments	540,463	540,805
Pension costs	3,000	7,560
	543,463	548,365
Highest paid director:
Aggregate emoluments	198,500	178,500

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. See summary of emoluments within the Directors' Report.

	2008	2007
	£	£
Staff costs including directors:
Wages and salaries	5,604,766	5,375,002
Social security costs	701,822	753,369
Pension costs	117,714	114,330
Share based payments charge (note 18)	40,611	47,266
Total staff costs	6,464,913	6,289,967

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

	2008	2007
	Number	Number
Office and administration	12	14
Operational	121	85
Total	133	99

4. LOSS FROM OPERATIONS

The loss on operations before taxation is stated after charging /(crediting):

	2008	2007
	£	£
Auditors' remuneration - company audit fee	22,426	27,458
Fees payable to the company auditors for other services
Subsidiary company audit fees	60,955	27,458
Tax services	5,670	37,316
Other services	26,500	50,036
Depreciation	193,908	237,638
Amortisation	20,315	61,851
Foreign exchange	(83,254)	88,045
Operating leases	793,835	439,889
Research and development expenditure	2,441,742	2,359,234

5. finance expense

	2008	2007
	£	£
Interest on bank loans and overdrafts	3,487	48
Other interest payable	31,731	2,298
	35,218	2,346

6. finance income

	2008	2007
	£	£
Interest on bank deposits	4,970	8,832
Other interest receivable	5,682	17,149
	10,652	25,981

7. TaxATION

The credit / (charge) for the year is made up as follows

	2008	2007
Corporate taxation on the results for the year	£	£
UK	-	-
Non-UK	-	2,790
	-	2,790
Research and Development tax credit in respect of prior years	(150,000)	-
Taxation (credit) / charge for the year	(150,000)	2,790

The Group has received to date R&D tax credits of £720,008 (2007: £570,008) relating to financial years ended 31 March 2002 to 2005. 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 2008 no tax losses (2007:£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 30% (2006: 30%). The differences are explained as follows:

	2008	2007
	£	£
(Loss) on ordinary activities before tax	(1,116,556)	(1,281,578)
(Loss) on ordinary activities multiplied by standard rate of corporation tax in the UK of 30%	(334,967)	(680,070)
Effect of:
Capital allowances for the period in excess of depreciation	3,940	33,413
Increase in tax losses	274,904	597,147
Expenses not deductible for tax purposes	56,123	53,510
Effect of overseas tax rate differences	-	(1,210)
Subtotal	-	2,790
Relief and refund available in respect of R&D expenditure	(150,000)	-
Current tax (credit) /charge for the period	(150,000)	2,790

The directors have not recognised the deferred tax asset of £1.2m 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. The results of this discontinued operation are separately identified below. The cash balance of IVRS at the point of sale was £16,144. The group received cash consideration of £750,000 less cash payment for settlement of working capital of £67,247.

Income statement for IVRS 2008

	IVRS
	10 ½ months to
	14 February2008
	£
Revenue	330,476
Cost of sales	(105,614)
Gross Profit	224,862
Administrative expenses	(578,405)
Operating (loss)	(353,543)
Finance expense	(54)
Finance income	269
(Loss) before taxation	(353,328)
Tax credit	-
(Loss) for the period	(353,328)
Net sale proceeds	646,989
Profit for the period from discontinued operations	293,661

Income statement for IVRS 2007

	IVRS
	12 months
	31 March 2007
	£
Revenue	266,270
Cost of sales	(53,262)
Gross Profit	213,008
Administrative expenses	(969,905)
Operating (loss)	(756,897)
Finance income	26
(Loss) / profit before taxation	(756,871)
Tax credit	-
(Loss) for the year	(756,871)

The net cash outflows from discontinued operations are as follows:

	2007
	£
Operating loss	(756,871)
(Increase) in debtors	(23,003)
Increase in creditors	784,997
Net cash outflow from operating activities	5,123

The Group disposed of one of its subsidiaries, Independent Valuation and Risk Services (IVRS), on the 14th February 2008 for a sum of £750,000. The profit on sale is analysed as follows:

	Year ended
	31 March 2008
	£
Sales proceeds	750,000
Direct selling costs	(103,011)
Loss of IVRS for the period	(353,328)
Profit on sale of IVRS	293,661

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 18).

Loss per share

	Year ended	Year ended
	31 March 2008	31 March 2007
Loss for the year and basic and diluted earnings attributable to ordinary shareholders	(672,895)	(2,041,239)
Weighted average number of ordinary shares	135,363,007	132,675,884
Loss per share (pence)	(0.50)	(1.54)
Effect of dilutive share options	-	-
Adjusted weighted average number of ordinary shares	135,363,007	132,675,884
Diluted loss per share - (pence)	(0.50)	(1.54)

Continuing Operations

	Year ended	Year ended
	31 March 2008	31 March 2007
Loss for the year and basic and diluted earnings attributable to ordinary shareholders	(966,556)	(1,284,368)
Weighted average number of ordinary shares	135,363,007	132,675,884
Loss per share (pence)	(0.71)	(0.97)
Effect of dilutive share options	-	-
Adjusted weighted average number of ordinary shares	135,363,007	132,675,884
Diluted loss per share - (pence)	(0.71)	(0.97)

Discontinued Operations

	Year ended		Year ended
	31 March 2008		31 March 2007
Profit / (loss) for the year and basic and diluted earnings attributable on discontinued operations		293,661		(756,871)
Weighted average number of ordinary shares		135,363,007		132,675,884
Loss per share (pence)		0.22		(0.57)
Effect of dilutive share options		-		-
Adjusted weighted average number of ordinary shares		135,363,007		132,675,884
Diluted loss per share - (pence)		0.22		(0.57)

10. property, plant and equipment

	Computer hardware	Fixtures, fittings and equipment	Total
The Group	£	£	£
Cost at 1 April 2006	726,711	431,982	1,158,693
Additions	134,561	27,728	162,289
Adjustment of acquired assets, previously reported net	79,544	48,390	127,934
Disposals	(148,173)	-	(148,173)
Foreign exchange effect	(1,281)	4,434	3,153
At 31 March 2007	791,362	512,534	1,303,896
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
Depreciation at 1 April 2006	536,008	325,060	861,068
Adjustment of acquired assets, previously reported net	79,544	48,390	127,934
Charge for the year	188,722	48,916	237,638
Disposals	(148,173)	-	(148,173)
Foreign exchange effect	(2,344)	4,854	2,510
At 31 March 2007	653,757	427,220	1,080,977
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
NBV at 31 March 2008	80,033	63,962	143,995
NBV at 31 March 2007	137,605	85,314	222,919
NBV at 31 March 2006	190,703	106,922	297,625

11. INTANGIBLE ASSETS

	Goodwill	Other Intangible Assets	Total
The Group			£
Cost
At 1 April 2006	3,712,680	402,971	4,115,651
Additions	-	29,550	29,550
Disposals	-	(212,742)	(212,742)
Adjustment in respect of final consideration for STB Systems group	(80,000)		(80,000)
At 31 March 2007	3,632,680	219,779	3,852,459
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
Amortisation
At 1 April 2006	-	356,209	356,209
Charge for the year	-	61,851	61,851
Disposals	-	(212,742)	(212,742)
At 31 March 2007	-	205,318	205,318
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
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
NBV at 31 March 2006	3,712,680	46,762	3,759,442

The goodwill relates to the acquisition of the STB group of companies that were acquired in 2005. The impairment review has been carried out on that sub-group as a whole. The results of this secondary reporting segment are reported as Regulatory reporting in Note 2.

Two methods were used to determine whether goodwill should be impaired. Firstly, expected future cash flows were discounted. Detailed cash flow forecasts for 2008/09 and 2009/10 were used along with a further three years with an average sales growth rate of 13%. The projections are based upon continued revenue growth whilst keeping operational cost increases to a minimum by transferring, where possible, roles from London to Shanghai. The net present value was calculated using a discount rate of 12% which reflects the interest rate of the Directors' loans presently enjoyed by the Group. This methodology created a value in use equal to the carrying value of goodwill. This methodology does not include any residual value of the underlying trade and assets, which is considered by the Directors to be sizeable.

Secondly, industry comparable price to sales ratios were studied. On the basis of recent transactions in the sector the Directors are comfortable that the carrying value of goodwill would be fully recovered from a sale of the underlying trade and assets.

On the basis of these assessments the Board considers there is no need to impair the value of goodwill.

12. TRADE AND OTHER RECEIVABLES

	2008	2007
	£	£
Trade receivables	1,833,164	1,107,034
Other receivables	191,331	299,808
Prepayments and accrued income	296,177	39,582
	2,320,672	1,446,424

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 2008, trade receivables of £1,833,164 (2007: £1,107,034) were fully performing. An impairment provision of £78,746 has been made against the invoices of 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:

	2008	2007
	£	£
Not more than three months	815,229	325,327
More than three months but not more than six months	369,596	13,366
More than six months but less than a year	3,312	10,164
More than one year	28,440	14,320
	1,216,577	363,177

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

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

	2008	2007
	£	£
Opening Balance	-	-
Provision for receivables impairment	78,746	-
Receivables written off in the year	-	-
Closing Balance	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:

	2008	2007
	£	£
Financial assets denominated in Euros	605,833	78,430
Financial assets denominated in US Dollars	162,184	168,283
Total non Sterling financial assets	768,017	246,713

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%.

	2008 As reported	If Sterling rose 10%	If Sterling fell 10%
	£	£	£
Group result for the year	768,017	(69,819)	87,921
Euro denominated financial assets	605,833	(55,075)	69,698
US Dollar denominated financial assets	162,184	(14,744)	18,223

13. investment

	2008	2007
	£	£
Current asset investment	-	448,000

The current asset investment related to the Company's shareholding in IDOX plc, an AIM listed UK company. On 1 May 2007, the company disposed of its entire shareholding in IDOX plc for £407,212 resulting in a recognised loss on disposal of available for sale financial asset of £40,788. At 31 March 2007 an impairment provision was made to the carrying value of the Company's shareholding in IDOX plc whereby the gains previously recognised in equity of £159,644 were recycled to the Income Statement.

14. trade and other payables

	2008	2007
	£	£
Trade payables	587,893	290,675
Other taxes and social security costs	398,822	347,747
Other payables	909,466	919,491
Shareholder loans (see note 21)	510,000	50,000
	2,406,181	1,607,913

15. 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 or 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. There are times, for example during the current Basel II regulatory changes, where such risks can be higher than others. 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 2008 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.

Debt recovery has been complicated by the Basel II rollout but longer term debts have been eventually realised (see note 12).

16. PROVISIONS

The Group has office provision surplus to its needs, which it is actively seeking to let. The lease on the office space runs until September 2009 and the Group has made provision for the estimated cost of the surplus space up to the date of expiration of the lease. The provision covers from June 2008 when part of the accommodation was vacated to the end of the lease September 2009.

The provision which was made at 31 March 2008 has been allocated between amounts in respect of less than one year and over one year as follows:

	2008 £	2007 £
Amount due within one year - June 2008 to March 2009	79,043	-
Amount due after one year - April 2009 to September 2009	67,751	-
Total provision for future lease costs	146,794	-

17. Share Capital

	2008	2007
	£	£
Authorised
714,034,085 ordinary shares of 0.5p each	3,570,170	3,570,170
Allotted, called up and fully paid
135,735,610 ordinary shares of 0.5p each (2007: 134,735,610)	678,679	673,679
429,829,575 deferred shares of 0.1p each	429,831	429,831
	1,108,510	1,103,510

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-based payment transaction

During the year the company entered into an agreement with a supplier, Firm Economics, for the supply of consultancy services which were valued at a fair market value of £80,000. This liability was settled by the issuance of 1,000,000 0.5p ordinary shares at then market value of 8.0p. The company recorded this transaction as £5,000 issuance of Ordinary Share Capital and recognised £75,000 as Share Premium. The impact on the income statement amounts to an expense of £80,000.

Share Options

No new share options have been issued in the financial year ended 31 March 2008. 

At start  of year	Granted during year	Exercised	Lapsed	At end  of year	Exercise  price (p)	Exercise  date from	Exercise  date to
1997 Revenue Approved Share Option Scheme
156,312	-	-	(156,312)	-	26.92	Jun-05	Jun-07
1997 Unapproved Share Option Scheme
156,000	-	-	(156,000)	-	26.92	Aug-05	Aug-07
2004 EMI Scheme
3,206,110	-	-	(1,886,110)	1,320,000	9.00	Mar-06	Mar-11
2,111,112	-	-	(2,111,112)	-	11.00	Mar-06	Mar-11
2,520,000	-	-	(300,000)	2,220,000	9.00	Apr-08	Apr-13
1,980,000	-	-	(650,000)	1,330,000	9.00	Dec-08	Dec-13
Unapproved Scheme
1,720,555	-	-	(200,000)	1,520,555	9.00	Dec-06	Dec-11
1,722,223	-	-	(527,778)	1,194,445	11.00	Dec-06	Dec-11
935,555	-	-	-	935,555	9.00	Apr-08	Apr-13
444,445	-	-	-	444,445	11.00	Apr-08	Apr-13
14,952,312	-	-	(5,987,312)	8,965,000

18. EMPLOYEE SHARE OPTIONS CHARGE

For share options that had not vested by 31 March 2006 (as detailed in note 17), IFRS2 requires that a charge be calculated representing the cost to the Group of those options.

The fair value is based on a number of assumptions as stated below.

In accordance with the accounting policy stated under note 1(n) 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 2008 of £40,611, with the same amount being credited to reserves (2007: £47,266). The expected volatility has been based on historical volatility, using market prices of Lombard Risk Management Plc shares between 04/09/2004 to 02/10/2006. The result was then adjusted for expected future volatility.

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.

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

Grant date	24/04/2006	24/04/2006	24/04/2006	01/12/2006
Share price at grant	6.75	6.75	6.75	7.75
Exercise price	9	9	11	9
Contractual life (years)	5	5	5	5
Staff turnover	50%	50%	50%	50%
Risk free rate	Discount curve used for UK on the day of valuation
Expected volatility	30%	30%	30%	30%
Expected dividend yield	-	-	-	-
Fair value of option	2.09	2.09	1.65	2.20

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

	2008	2008 WAEP	2007	2007 WAEP
	Number		Number
Outstanding at beginning of the year	5,940,000	9.15p	5,940,000	9.15p
Granted during the year	-	-	-	-
Exercised during the year	-	-	-	-
Forfeited during the year	(1,010,000)	9.00p	(20,000)	9.00p
Outstanding at end of the year	4,930,000	9.18p	5,920,000	9.15p
Exercisable at the year end	Nil		Nil

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

Expiry Date	Exercise price	2008 Number	2007 Number
24/04/2013	9p	3,155,555	3,455,555
24/04/2013	11p	444,445	444,555
01/12/2013	9p	1,330,000	2,020,000
		4,930,000	5,920,110

19. Commitments

The Group had commitments under non-cancellable operating leases in respect of land and buildings as follows:

	2008	2007
	£	£
On leases which expire in 1 year or less	52,533	-
On leases which expire in 1 to 5 years	1,798,867	1,524,204
On leases which expire over 5 years	279,497	326,080
Total	2,130,897	1,850,284

This includes the lease provision of £146,794. (see note 16).

Neither the Group nor the Company had any material capital commitments at 31 March 2008 or 31 March 2007.

20. Pensions

A Group company contributes to a defined contribution pension scheme on behalf of a limited number of employees of that subsidiary. The assets of the scheme are administered by trustees in a fund independent of the Company. Other defined contribution pension schemes to which the Group makes contributions on behalf of employees are of the stakeholder variety, again totally independent of the Company.

21. Related 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 to John Wisbey of £470,000 at the end of the year. 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.

The Loans are immediately repayable on demand from the point of view of the lenders and repayable at any time at the Company's option. It is expected that the Loans will be substantially repaid by the end of March 2009 out of the Group's operating cash flow.

22. 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.

23. POST BALANCE SHEET EVENTS

The company has entered into additional director loans from Brian Crowe, Non-executive Director, for £200,000 and a further £620,000 from John Wisbey, Chairman and Chief Executive Officer. These funds have been used to provide the Company with additional working capital. This has raised the overall total of director loans (the 'Loans') to £1,330,000. 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. 

Company Balance Sheet

31 March 2008

		As at	As at
		31 March 2008	31 March 2007
	Note	£	£
Fixed assets
Tangible assets	4	57,480	156,742
Investments in subsidiaries	5	11,911,164	11,911,165
		11,968,644	12,067,907
Current assets
Debtors due within one year	6	4,095,319	3,252,095
Investment	7	-	407,212
Cash at bank and in hand		4,918	3,906
		4,100,237	3,663,213
Creditors: Amounts falling due within one year	8	(9,267,276)	(6,478,946)
Net current liabilities		(5,167,039)	(2,815,733)
Total assets less current liabilities		6,801,605	9,252,174
Accruals and deferred income		-	(102,493)
Net assets		6,801,605	9,149,681
Capital and reserves
Called up share capital	9	1,108,510	1,103,510
Share premium	10	2,490,110	2,415,110
Other reserves	10	7,153,926	7,113,315
Profit and loss account	10	(3,950,941)	(1,482,254)
Shareholders' funds		6,801,605	9,149,681

The financial statements were approved by the board on 29 September 2008 and signed on its behalf by:

John Wisbey

Chairman & CEO

The accompanying accounting policies and notes form an integral part of these accounts.

 

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.

The principal accounting policy of the Company is that the financial statements have been prepared on the 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 operating cash outflows in the period. 

The Directors have reviewed forecasts for the remainder of the year to 31 March 2009 and the year ended 31 March 2010 and are confident that the Group will continue to operate within its available facilities (note 23). The first part of the current year saw some delays in signing expected new contracts but these are now coming to fruition. There have also been some delays in the completion of some of the regulatory reporting projects, but these are now well under control and many should see completion by the end of October. This, combined with the costs of an office move in Shanghai and increased investment in the Shanghai operation, have adversely affected cash flow, hence the directors' loans that are in place post balance sheet. It is anticipated however, that these loans will substantially be repaid by the end of the financial year from cash derived from operations based on a strong sales pipeline.

The Directors consider that there is great commercial opportunity in the company's chosen sectors and will be taking active steps to ensure sufficient funding to allow the Group to pursue a plan that recognises that value for its current shareholders. The Directors also take considerable comfort from the valuations in recent M&A transactions in the collateral management and compliance areas, and feel confident that this would be an alternative method of realizing value for the company and its shareholders should such an option be in the interests of shareholder value. The Directors are also satisfied that the Group will have access to sufficient funding should revenue expectations not be met.

 

(c) Valuation of investments

Investments held as current assets are stated at directors' valuation.

 

(d) Foreign exchange

Company: 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 Income Statement. 

 

(e) 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.

 

(f) Leased assets

All leases held by the group 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.

(g) 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

(h) Investments in subsidiaries

Investments in subsidiaries are recorded at cost less any provision for permanent diminution in value.

 

2. DIRECTORS AND EMPLOYEES

	2008	2007
Staff costs including directors:	£	£
Wages and salaries	614,063	630,096
Social security costs	111,304	129,265
Pension costs	11,432	4,740
Share based payments charge (note 18 Consolidated financial statements)	40,611	47,266
Total staff costs	777,410	811,367

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

	2008	2007
	Number	Number
Office and administration	8	8
Operational	-	-
	8	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 £2,468,687 (2007: loss £1,150,645).

 

4. TANGIBLE FIXED ASSETS 

	Computer hardware	Fixtures, fittings and equipment	Other Intangible Assets	Total
The Company	£	£		£
Cost at 1 April 2007	630,046	412,321	214,245	1,256,612
Additions	29,047	-	9,558	38,605
At 31 March 2008	659,093	412,321	223,803	1,295,217
Depreciation at 1 April 2007	544,897	353,059	201,914	1,099,870
Charge for the year	79,878	40,048	17,941	137,867
At 31 March 2007	624,775	393,107	219,855	1,237,737
NBV at 31 March 2008	34,318	19,214	3,948	57,480
NBV at 31 March 2007	85,149	59,262	12,331	156,742

 

5. INVESTMENT IN SUBSIDIARIES 

The Company	2008	2007
Investment in subsidiaries	£	£
Opening balance at 1 April	11,911,165	9,814,334
New investment in subsidiaries	-	2,176,831
Disposal of subsidiary- IVRS	(1)	-
Adjustment in respect of final consideration for STB Systems group	-	(80,000)
Closing balance at 31 March	11,911,164	11,911,165

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 2008 the undertakings in which the Group 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
STB Systems 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 (formerly STB Systems Inc.)	-	100	USA	Software
Lombard Risk International (Hong Kong) Ltd (formerly STB Systems (Asia Pacific) Ltd)	-	100	Hong Kong	Software
Lombard Risk International (Singapore) Ltd (formerly STB Systems Solutions Pte 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. 

The Group disposed of its subsidiary Independent Valuation and Risk Services on 14 February 2008 for a sum of £750,000 (note 8 Consolidated financial statements).

 

6. DEBTORS DUE WITHIN ONE YEAR 

	2008	2007
	£	£
Amounts receivable from subsidiary undertakings	3,979,281	3,188,755
Prepayments and accrued income	116,038	63,340
	4,095,319	3,252,095

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. INVESTMENT 

	2008	2007
	£	£
Current asset investment	-	407,212

The stock exchange value of the holding at 31 March 2007 was £448,000 (2006: £731,002) for the company's shareholding in IDOX plc, an AIM listed UK company. On 1 of May 2007, the company disposed of its entire shareholding in IDOX plc for £407,212.

 

8. CREDITORS DUE WITHIN ONE YEAR 

	2008	2007
	£	£
Trade creditors	202,001	159,616
Other taxes and social security costs	2,512	1,022
Other creditors	8,405,969	6,268,308
Lease provision	146,794	-
Shareholder loans (see note 21 Consolidated financial statements)	510,000	50,000
	9,267,276	6,478,946

9. SHARE CAPITAL

	2008	2007
	£	£
Authorised
714,034,085 ordinary shares of 0.5p each	3,570,170	3,570,170
Allotted, called up and fully paid
135,735,610 ordinary shares of 0.5p each (2007: 134,735,610)	678,679	673,679
429,829,575 deferred shares of 0.1p each	429,831	429,831
	1,108,510	1,103,510

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-based payment transaction

During the year the company entered into an agreement with a supplier, Firm Economics, for the supply of consultancy services which were valued at a fair market value of £80,000. This liability was settled by the issuance of 1,000,000 0.5p ordinary shares at then market value of 8.0p. The company recorded this transaction as £5,000 issuance of Ordinary Share Capital and recognised £75,000 as Share Premium.

Share Options

No new share options have been issued in the financial year ended 31 March 2008. 

At start  of year	Granted during year	Exercised	Lapsed	At end  of year	Exercise  price (p)	Exercise  date from	Exercise  date to
1997 Revenue Approved Share Option Scheme
156,312	-	-	(156,312)	-	26.92	Jun-05	Jun-07
1997 Unapproved Share Option Scheme
156,000	-	-	(156,000)	-	26.92	Aug-05	Aug-07
2004 EMI Scheme			-
3,206,110	-	-	(1,886,110)	1,320,000	9.00	Mar-06	Mar-11
2,111,112	-	-	(2,111,112)	-	11.00	Mar-06	Mar-11
2,520,000	-	-	(300,000)	2,220,000	9.00	Apr-08	Apr-13
1,980,000	-	-	(650,000)	1,330,000	9.00	Dec-08	Dec-13
Unapproved Scheme			-
1,720,555	-	-	(200,000)	1,520,555	9.00	Dec-06	Dec-11
1,722,223	-	-	(527,778)	1,194,445	11.00	Dec-06	Dec-11
935,555	-	-	-	935,555	9.00	Apr-08	Apr-13
444,445	-	-	-	444,445	11.00	Apr-08	Apr-13
14,952,312	-	-	(5,987,312)	8,965,000

 

10. SHARE PREMIUM AND OTHER RESERVES

	Share capital	Share premium account	Revaluation reserve	Other Reserves	Profit and Loss Account	Shareholders' Funds
	£	£	£	£	£	£
Balance at 1 April 2006	1,082,510	2,415,110	170,957	6,944,543	(502,566)	10,110,554
Loss for the year	-	-	-	-	(1,150,645)	(1,150,645)
Premium on 4,200,000 new ordinary shares	-	-	-	399,000	-	399,000
Shares issued in the period	21,000	-	-	-	-	21,000
Transfer on impairment of current asset investment	-	-	(170,957)	-	170,957	-
Share based payment charge	-	-	-	47,266		47,266
Foreign exchange movements	-	-	-	(277,494)		(277,494)
Balance at 31 March 2007	1,103,510	2,415,110	-	7,113,315	(1,482,254)	9,149,681
	Share capital	Share premium account	Revaluation reserve	Other Reserves	Profit and Loss Account	Shareholders' Funds
	£	£	£	£	£	£
Balance at 1 April 2007	1,103,510	2,415,110	-	7,113,315	(1,482,254)	9,149,681
Loss for the year	-	-	-	-	(2,468,687)	(2,468,687)
1,000,000 new shares issued at 0.5p	5,000	75,000	-	-	-	80,000
Share based payment charge	-	-	-	40,611	-	40,611
Foreign exchange movements	-	-	-	-	-	-
Balance at 31 March 2008	1,108,510	2,490,110	-	7,153,926	(3,950,941)	6,801,605

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.

 

11. RELATED PARTY 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 to John Wisbey of £470,000 at the end of the year. 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.

The Loans are immediately repayable on demand from the point of view of the lenders and repayable at any time at the Company's option. It is expected that the Loans will be substantially repaid by the end of March 2009 out of the Group's operating cash flow.

 

12. POST BALANCE SHEET EVENTS

The company has entered into additional director loans from Brian Crowe, Non-executive Director, for £200,000 and a further £620,000 from John Wisbey, Chairman and Chief Executive Officer. These funds have been used to provide the Company with additional working capital. This has raised the overall total of director loans (the 'Loans') to £1,330,000. 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.

ENDFR SEFFAUSASESU

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Related Shares:

Lombard Risk Management