Final Results

Lombard Risk Management plc Final results for the year ended 31 March 201131 May 2011

Lombard Risk delivers 32% revenue growth and recommends a maiden dividend

LONDON, UK - 31 May 2011: Lombard Risk Management plc (LSE:LRM) ("Lombard Risk" or "The Company"), a leading global provider of collateral management, liquidity and regulatory reporting and compliance solutions for the financial services industry, is pleased to announce its final results for the year to 31 March 2011.

Financial highlights

·; Good financial results and cash generation:

o Group revenues increased by 32% to £11.8m (2010: £8.9m)

o £2.2m swing into profit at pre-tax level

o Net cash generated from operating activities of £1.2m

·; Improving trading performance throughout 2011

o Regulatory Compliance: more than 30 new UK liquidity customers, global expansion

o Risk Management: significant product enhancements and further Tier 1 interest

·; Revenue growth in both "regulatory compliance" and "risk management" businesses

·; H1 profitability momentum continued through H2

·; Full write-off of development costs in FY2011; however the Company's accounting policy will require capitalisation in the financial year ending 31 March 2012

·; Cash balance of £1.8m (2010: £0.7m) at the year end

·; No debt

·; Recommendation of a maiden dividend of 0.03p per ordinary share of 0.5p

Operational highlights

·; All growth was organic

·; Worldwide growth of regulation looks set to continue with new opportunities for the Company outside Europe

·; Regulatory driven movement of derivatives to clearing houses is a major opportunity

·; New technology platform is very significant driver

·; Colline CCP platform released

·; Significant interest from Tier 1 and Tier 2 prospects

·; No excessive reliance on any individual customer

·; Additional experience added to Board

·; Management team further strengthened

·; Move to new London offices completed and fully expensed

Report of Philip Crawford, Non-executive Chairman

I have now completed my first year at Lombard Risk. It is with pleasure that I am able to state that the momentum reported in the interim results has been sustained throughout the financial year and I am extremely pleased to present an excellent set of results. Revenues have increased by more than 30% to £11.8m (2010: £8.9m) and the Company has enjoyed a £2.9m uplift in profits after tax, from a loss of £1.6m to a profit of £1.3m. This uplift constitutes a £2.2m uplift in profit before tax and additionally the recognition of a £0.7m deferred tax asset.

Costs grew at a rate of one quarter of revenues, emphasising the scalability of the Company's operations.

A key driver for the pleasing financial performance is the ever-growing needs of banks and financial services companies to purchase regulatory compliance and collateral management technology solutions. This has coincided with Lombard Risk delivering enhanced product functionality and extended geographical coverage, all combining to increase customer demand.

On reporting the interim results, I stated that my early impressions were of a company with considerable potential. This view has been cemented in the subsequent period. The Board is optimistic over the future outlook for the Company. The opportunities which are apparent with enhanced regulatory compliance across wider geographical areas, together with short to medium term opportunities arising more locally from Solvency 2 and Basel 3, place the Regulatory Compliance business in an enviable position. Ever stricter risk management requirements over collateral are resulting in an escalation of interest in the Company's Collateral Management product portfolio.

The Company has delivered well but there is much left to do to achieve our goals over the next few years. We will continue to work hard and wisely to take advantage of our excellent market position and the strong market drivers. We take nothing for granted!

Report of John Wisbey, Chief Executive Officer

Summary

The Company has made great progress in the year and is now well positioned, profitable and cash generative. Moreover we believe that there are good opportunities to advance the business performance even further in the coming year which we enter with a strong sales pipeline, leading-edge products, a strengthened management team, an appropriately structured cost base and a strong balance sheet.

Revenues grew at 32%, all of it organic growth, profitability was achieved and we ended the year with cash of £1.8m and no borrowings, an advance of £1.1m on the previous year's cash position. All these numbers were ahead of market expectations. The board is recommending a maiden dividend of 0.03p per share.

The highlights of the year were the success of the UK Liquidity Regulatory programme, prompted by changes in the FSA's new reporting requirements for liquidity risk which resulted in over 30 contract wins, and the go live of a major Tier 1 German bank for our collateral management product COLLINE®. This contract had been announced in April 2009 and we went live in April 2010. We have now proven the scalability and resilience of the COLLINE® product in a leading Tier 1 bank in a global environment and will roll this technology out to other products requiring similar scalability and resilience.

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

We changed our NOMAD to Allenby Capital in mid-April 2010 and shortly afterwards announced several board changes, including the appointment of a new Non-Executive Chairman. It is particularly pleasing that the growth achieved in the year was able to occur during a period of considerable change. Towards the end of the financial year we strengthened the management team further with a number of senior appointments.

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

The valuations of our peer group on the AIM market, as well as the premium trade sale prices achieved by companies in a very comparable space of operation like FRSGlobal or related spaces like Complinet or Sophis, are at revenue multiples very much higher than the Company's current market valuation on AIM. We are continually being told that our specialities of risk management and regulation are regarded as the "hottest" areas of financial technology. The current AIM valuation effectively reduces our ability to make value-enhancing acquisitions. We hope that the results being achieved will result in a market re-rating in due course for the benefit of all shareholders.

Financial

Revenues for the year increased by 32% to £11.8m (2010: £8.9m). Profit before taxation was £0.6m (2010: loss of £1.6m) and profit after taxation was £1.3m (2010: loss of £1.6m). EBITDA was £0.7m, and normalised profit (stripping out one off staff reduction costs and the London office move) was £0.9m. Net cash was £1.8m, a considerable improvement from the previous year's £0.7 m. There were no borrowings.

The profit before tax was achieved without any capitalisation of software development. We have been happy to expense software development costs but under our accounting policy, which is in accordance with IFRS, we now satisfy all of the capitalisation qualifying conditions for many of our products, which consequently will result in the creation of an intangible asset. We have taken soundings from some leading industry analysts on what other companies in the sector report as R&D for capitalization purposes and it is evident that there is a wide difference between companies, which is relatively opaque in company accounts. We will continue to be at the conservative end. In the last year our total expenditure on software development was £2.7m, being 23% of revenue. We would welcome greater consistency of presentation between companies in this area to make it easier for investors to compare like with like.

The strong growth in profit after taxation is partly because of the inclusion of a £0.7m deferred tax asset arising from the likely realisation of some of our tax losses. It should be stressed that this does not recognise the total after tax benefit of our tax losses which still totalled £1.4m at the end of March 2011.

Risk Management and Trading Products

As well as the positive impact from the aftermath of the credit crisis, there has been additional regulatory impetus that helps our business. In the United States the impact of the Dodd-Frank legislation, and how derivatives are transacted with central counterparties and cleared more on exchanges, has given an opportunity to develop our Clearing offerings with the launch of COLLINE® CCP Clearing. The product suite we are now able to market to clients for COLLINE® is a far wider one than three years ago with substantially all the main requirements of a collateral business met including OTC derivative margin management, repo and securities lending, central clearing, trade reconciliation, inventory management and margin messaging plus related workflow, straight through processing and reporting. This broader coverage has a positive impact on the price per customer that we are able to achieve.

In April 2010 COLLINE® went live globally at the major Tier 1 German bank which was announced in April 2009, and by the end of the financial year we had completed a new installation for another prestigious German bank. We won other deals for COLLINE® among banks and asset managers. The sales pipeline is very promising.

COLLINE®'s scalability, resilience and performance has been proven in the Tier 1 German bank environment using active-active clustering in multiple data centres, user locations in three continents and well over 200 users. This means we now have every confidence that our solution is scalable from the smallest collateral user to the largest global bank. Similar technology is being deployed for our other products where performance is a key issue.

OBERONÒ, our most established product, which has the ability to value and risk manage many different types of financial instrument, is profitable and continues to move forward with functional and performance enhancements.

During the year we launched our LISA® product and we have now signed up several customers for it in conjunction with our regulatory success for liquidity. LISA® will evolve into a risk product which is very complementary to our regulatory products, starting with Liquidity Risk, and using the most modern technology. Lombard Risk has always been strong on risk management and the convergence of risk and regulation plays to our strengths.

Regulatory and Compliance Software Products

Lombard Risk is the market leader for UK Bank Regulatory Reporting with approximately 130 of the 350 banks in the UK, and approximately fifteen investment firms in the UK using the STB-Reporter product for regulatory reporting to the FSA.

During the year the major market development was the implementation of the FSA's new regulations on Liquidity which allowed us to earn significant initial and annual licence fees as well as implementation revenue. In all, over thirty clients were won for Liquidity reporting, more than twice as many as a key competitor highlighting our growing market share.

Regulatory change is always one of the main revenue drivers for a regulatory business. This financial year does not see quite the same opportunity in the UK as last year's Liquidity Regulatory Programme but we believe that the opportunities from unified European COREP reporting at the end of 2012 (the first reports which will be identical rather than similar for all EU countries) will provide useful revenue opportunities this year in both the UK and other European countries as well as preparation for Basel 3 and Solvency 2 in 2012/2013. The appreciable regulatory change in other countries, notably in various Asian countries including India, is an opportunity that we will exploit.

The Group's ability to offer global or regional regulatory solutions has been greatly enhanced by having regulatory offerings available or under production for several EMEA and Asian countries as well as the United States. This process continues with product under development for Indian, Chinese and Korean regulatory reporting. Our Asian offices have made a number of worthwhile product wins, including business in Singapore won away from our main competitor, and we went live with our first customer for Japanese reporting.

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

Technology

We see our technology as an increasingly positive part of our commercial story and a key driver for growth. Our IP is a major corporate asset.

Much progress has been made on moving our technology's look and feel to a new platform, and in building components that can work across our various products. Several of the liquidity contract wins included licensing of parts of this new technology. Client reaction to the look and feel of the new platform has been extremely positive. Functionally, our products continued to make great progress with new technology launched for repos, collateral management for centrally cleared derivative transactions and flexible management reporting.

As mentioned earlier, COLLINE®'s scalability, resilience and performance has now been proven to work very effectively in a Tier 1 bank environment using active-active clustering in multiple data centres, user locations in three continents and well over 200 users. Similar technology is being deployed for our other products where performance is a key issue.

Our Shanghai development centre now has almost 100 people in it and our model is to do much of the business analysis in London and New York and other financial centres but the majority of development in China.

We have spent money on appreciably upgrading our equipment and the software tools that we use ourselves in order to achieve efficiency gains for our staff and we have made further progress on automating large parts of our software testing routines.

Personnel and Premises

During the financial year we continued to make new hires appropriate to the expected growth of the business but we also benefited from cost actions taken in the preceding financial year. We continue to build on last year's profitability in all parts of the business and to re-allocate resources to those parts of the business where we see the best prospects. Costs should continue to be contained and to reduce as a percentage of revenue as we achieve greater efficiency gains. We now have more than half of our group headcount in Shanghai.

The board changes at the beginning of the financial year, including the appointment of Philip Crawford as non-executive Chairman, were covered in the Interim announcement. Towards the end of the Financial Year we made three senior hires. Paul Tuson, who had been interim CFO since September 2010, joined our board as CFO. Philip Stanning joined as Group Sales Director, and Rebecca Bond as Group Marketing Director. Together with the existing strong team, these new hires should greatly help our plans to scale up the business further over the next few years.

In July 2011 we moved to high quality premises at Ludgate House, 245 Blackfriars Road in London. We have also recently moved to larger and higher quality premises in New York.

Prospects

With the 32% organic revenue growth achieved in the last year, the Company has attained a profitable position based on a leading product portfolio in a market with an ever greater need to buy regulatory or risk management products. As a result of our disciplined product development strategy and a clear focus on the needs of our customers, our business continues to develop strongly.

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

Consolidated Statement of comprehensive income

For the year ended 31 March 2011

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

Consolidated Balance Sheet Company number: 03224870

As at 31 March 2011

The financial statements were approved by the Board on 27 May 2011 and signed on its behalf by:

John Wisbey Paul tuson

Chief Executive Officer CHIEF FINANCE OFFICER

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

Consolidated Statement of Changes in Shareholders' Equity

for the year ended 31 March 2011

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

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

Consolidated Cash flow Statement

for the year ended 31 March 2011

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

Notes to the Consolidated financial statements

For the year ended 31 March 2011

1. ACCOUNTING POLICIES

(a) Basis of preparation

These consolidated financial statements are for the year ended 31 March 2011. They have been prepared in accordance with International Financial Reporting Standards ("IFRS") and IFRS Interpretation Committee ("IFRIC") interpretations as at 31 March 2011, as adopted by the European Union. They have been prepared under the historical cost convention.

The preparation of financial statements under IFRS requires the Board to make judgements, estimates and assumptions that affect the applicationof accounting policies, the reported amounts of balance sheet items at the period end and the reported amount of revenue and expense during the reporting period. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements that are not readily apparent from other sources. However, the actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis.

New Standards, Amendments and Interpretations

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

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

·; IFRS 9 "Financial Instruments" (effective 1 January 2013)

IFRS 9 addresses the classification and measurement of financial assets and will replace IAS 39. The Standard is mandatory for accounting periods commencing on or after 1 January 2013, subject to adoption by the European Union.

·; IAS 24 (Revised 2009) Related Party Disclosures (effective 1 January 2011)

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

·; IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective 1 July 2010)

IFRIC 19 addresses the accounting by an entity when the terms of a financial liability are renegotiated and result in an entity issuing equity instruments to a creditor to extinguish all or part of a financial liability.

(b) Basis of consolidation

The Group accounts consolidate the financial statements of the Parent Company (Lombard Risk Management plc) and its subsidiary undertakingsover which it has full control (see note 5 to the Parent Company balance sheet). A description of the principal activities and operations of the Group can be found in the Directors' report.

The consolidated financial statements include the financial statements of the Company and its subsidiary undertakings made up to 31 March 2011. The acquisition method of accounting has been adopted. Under this method, the results of subsidiary undertakings acquired or disposed of in the year are included in the Consolidated statement of comprehensive income from the date of acquisition or up to the date of disposal. All of the Group's assets and liabilities existing at the date of acquisition are recorded at their fair values reflecting their condition at that date. Profits or losses on intra group transactions are eliminated in full. Goodwill arising on consolidation was written off to reserves prior to 1 April 1999. Goodwill arising after this date is capitalised and under IFRS 3 goodwill is not amortised, but an impairment test is performed as appropriate, but at least annually. The value of goodwill is to be written down according to the outcome of the impairment test.

(C) Segment Reporting

In identifying its operating segments, management generally follows the Group's product lines. The Group operates two main operating segments: Regulatory compliance software and Risk management and trading software. Regulatory compliance software is for regulatory, anti-money laundering and compliance systems to financial markets. Risk management and trading software provides trading, valuation and risk management systems to the financial markets. Each of these product lines is managed separately as each of these product lines requires different technology and other resources as well as marketing approaches. Corporate overheads, assets and liabilities which are not directly attributable to either product line are not allocated to segments.

 (D) Going concern

The financial statements have, as in previous years, been prepared on a going concern basis.

In forming an opinion that the Company and the Group is a going concern, the Directors have taken particular note of the positive trading performance in the year ended 31 March 2011, both in the signing of new business contracts, and in the realised financial results. These show an up-turn in the Group's performance. The Directors have prepared cash flow forecasts for the period to 30 June 2012, which shows that the Company and Group have sufficient facilities for on-going operations. Whilst there will always remain some inherent uncertainty within the aforementioned forecasts, the Directors believe the Company and Group have sufficient resources to continue in operational existence for at least twelve months from the date of approval of these financial statements.

Accordingly the Directors continue to adopt the going concern basis in preparing the financial statements for the year ended 31 March 2011.

(E) Revenue

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

The recognition of revenue depends on the type of income:

Licence income For long-term projects which do not include the up-front delivery of immediately usable software, revenue is recognised on both the consultancy and initial licence elements in line with the estimated percentage of completion of the project. That part of licence and maintenance revenue invoiced simultaneously with the initial licence but considered to relate to the period when the licence is deemed to be live is deferred in its entirety until the live date, following which it is released to profit in equal daily instalments over the duration of the relevant licence or maintenance. For other projects which do include the up-front delivery of immediately usable software, revenue is recognised in accordance with the invoicing schedule on a percentage completion basis. For non-refundable licences revenue is recognised in full on customer acceptance.

Customisation income Recognised once the customisation has taken place.

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

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

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

Training income Recognised when the relevant courses are run.

(F) Property, plant and equipment

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

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

The estimated useful lives of the assets are as follows:

Computer hardware two years

Fixtures, fittings and equipment four years

(G) Goodwill

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

(H) Intangible Assets

Research and development

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

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

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

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

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

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

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

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

Development costs not meeting the criteria for capitalisation are expensed as incurred. Capitalised development costs are amortised in equal monthly instalments over a period of three years from the end of the month in which the costs were incurred. The residual values of the development are reviewed annually.

Computer Software

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

(I) Financial Instruments

Financial assets and liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. The Group's financial instruments comprise cash, trade receivables and trade and other payables. Derivative instruments are not usedby the Group and the Group does not enter into speculative derivative contracts.

Loans and receivables

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

Cash and cash equivalents

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

Trade payables

Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial liabilities categorised as at fair value through profit or loss are recorded initially at fair value; all transaction costs are recognised immediately in the Statement of comprehensive income. All other financial liabilities are recorded initially at fair value, net of direct issue costs.

Financial liabilities categorised as at fair value through profit or loss are re-measured at each reporting date at fair value, with changes in fair valuebeing recognised in the Statement of comprehensive income. All other financial liabilities are recorded at amortised cost using the effective interest method, with interest related charges recognised as an expense in finance cost in the Statement of comprehensive income.

A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged, cancelled or expires. Where debt has been converted into equity, the liability is extinguished at no gain no loss. The equity is measured at the carrying value of the extinguished debt.

(J) Foreign exchange

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

Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in the profit or loss in the period in which they arise. Exchange differences on non‑monetary items are recognised in the Statement of other comprehensive income to the extent that they relate to a gain or loss on that non‑monetary item taken to the Statement of changes in shareholders' equity, otherwise such gains and losses are recognised in the Statement of comprehensive income.

The assets and liabilities in the financial statements of foreign subsidiaries are translated into the parent's presentation currency at the rate of exchange ruling at the balance sheet date. Income and expenses are translated at the actual rate at the date of transaction. The exchange differences arising from the retranslation of the opening net investment in subsidiaries are recognised in other comprehensive income and taken to the "Foreign exchange reserve" in equity. On disposal of a foreign operation the cumulative translation differences (including, if applicable, gains and losses on related hedges) are transferred to profit or loss as part of the gain or loss on disposal.

(K) Taxation

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

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

1.

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

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

(L) Leased assets

The Group does not hold any finance leases.

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

Where leased buildings are vacated or under-utilised a provision is made for the loss of benefit over the remainder of the lease.

(M) Pension costs

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

(N) Share options issued to employees

All share-based payment arrangements granted after 7 November 2002 that had not vested prior to 1 April 2006 are recognised in the financial statements.

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

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

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

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

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

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

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

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

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

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

Recognition of revenue

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

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

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

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

Goodwill impairment

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

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

Deferred tax assets

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

2. BUSINESS SEGMENTATION

Management currently identifies the Group's two product lines as operating segments as further described in the accounting policies. These operating segments are monitored and strategic decisions are made on the basis of segment operating results.

Segment information can be analysed as follows for the reporting periods under review.

The two segments operate independently and there is no inter-segment income or expenditure.The Group's revenues from customers and its non-current assets are divided into the following geographical areas.

In this year ended 31 March 2011 9% (2010: 13%) of the revenue depended on a single customer.

3. DIRECTORS AND EMPLOYEES

No share options were exercised by the highest paid Director. There were no pension contributions made in respect of the highest paid Director. During the year no director accrued benefit under a Company pension scheme (2010: one).

The Directors of the Company are the key management personnel.

Individual director's emoluments and compensation

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

4. Profit / (LOSS) FROM OPERATIONS

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

Fees payable to the Company's auditor, Grant Thornton UK LLP, and its associates for non-audit services to the Company itself are not disclosed in the individual financial statements of the Company because the Company's Group financial statements are required by the Companies (Disclosure of Auditor Remuneration and Liability Limitations Agreements) Regulations 2008, regulation 5(1) to disclose such fees on a consolidated basis.

5. FINANCE EXPENSE

6. FINANCE INCOME

7. TAXATION

(a).Analysis of charge in the period:

(b). Research and development tax credits

The Group has received to date research and development tax credits of £816,082 (2010: £816,082) relating to financial years ended 31 March 2002 to 2007. As for all companies that have received these credits, the amounts are subject to potential future HM Revenue & Customs claw back.

(c). Tax on profit / (loss) on ordinary activities

The tax assessed for the period is the standard rate of corporation tax in the UK of 28% (2010: 28%). The difference is explained as follows:

(d). Unrecognised deferred tax

A deferred tax asset of £0.7m (2010: £1.8m) is unrecognised and relates principally to trading losses carried forward.

(e). Deferred tax asset

The deferred tax asset included in the balance sheet relates to the carry forward of tax losses.

The directors have recognised a deferred tax asset in respect of carried forward trading tax losses as, based on current estimates, the company is forecast to make sufficient trading tax profit in the future against which these losses can be offset. The movement in the deferred tax asset in the year is recognised in full in the profit for the year, no amount is recognised directly in equity.

The deferred tax asset is not expected to crystallise in full in the next financial year.

8. Profit / (LOSS) PER SHARE

Basic profit (loss) per share has been calculated by dividing the profit / (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 were 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 15). During the report period the fair value of ordinary shares was 3.83 pence. Since none of the share options exercise price is less than average market price there is no potential dilutive effect for ordinary shares.

Profit / (Loss) per share

9. PROPERTY, PLANT AND EQUIPMENT

10. INTANGIBLE ASSETS

The goodwill relates solely to the acquisition of STB Systems Limited, since renamed Lombard Risk Compliance Limited, which was acquired in 2005 and which constitutes the Group's regulatory compliance business. An impairment review has therefore been carried out on this cash‑generating unit.

In accordance with IAS 36 "Impairment of Assets" the cash-generating unit has been assessed by comparing its carrying value to its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation.

For the year ended 31 March 2011, the goodwill recoverable amount was determined based on value-in-use calculations, which are based on detailed five year discounted forecast cash flows (using a discount rate of 12%). Cash flows for the regulatory compliance business are based on management forecasts, which are approved by the board and reflect management's expectations of sales growth, operating costs and margin based on past experience as well as the current order book. Management has used a five year period in the cash flow projections as the regulatory compliance business experiences a low level of customer turnover and the technology is based on regulations which, whilst subject to periodic amendment, are unlikely to be withdrawn.

For the years 2013 to 2016 no new business is forecast with retention levels of recurring revenues averaging 90% per annum. In view of this, no sales and marketing or research and development costs are forecast for the years 2013 to 2016.

Sensitivity to changes in key assumptions: Impairment testing is dependent on management's estimates and judgements, in particular in relation to the forecasting of future cash flows and the discount rate applied to the cash flows. Management has concluded that no reasonably possible change in the key assumptions would cause the carrying value of goodwill to exceed its recoverable account.

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

11. TRADE AND OTHER RECEIVABLES

The amounts are short term and the Directors consider that the carrying amount of these trade and other receivables approximates to their fair value. All of the Group's trade and other receivables have been reviewed for indications of impairment. As at 31 March 2011, trade receivables of £631,422 (2010: £846,224) were fully recoverable. An impairment provision of £201,724 (2010: £224,467) has been made against the invoices of 27 clients (2010: 28 clients). In addition, some of the unimpaired trade receivables are past due as of the reporting date. Trade receivables past due but not impaired are as follows:

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

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

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

12. TRADE AND OTHER PAYABLES

13. 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 Group's policies for managing these are as follows:

i) Currency risk

The Group is exposed to translational and transactional foreign exchange risk as it operates in various currencies, including US Dollars, the Euro, Chinese Yuan, Hong Kong Dollars and Singapore Dollars. Although, through its own software, the Group has access to sophisticated models for the management of foreign exchange risk, there has historically been no use of foreign exchange derivatives to manage this position on the basis that the overall effect on the Group's income statement has not been large enough to warrant the management, the costs and margin requirements of this activity. As the company grows this position may change. The company's main on-going transactional exposure is to be long of Euro and US Dollars and short of Chinese Yuan.

ii) Inflation risk

The Group has exposure to the inflationary effect of operating in countries in which it operates, offset by its ability to raise prices in those countries in which it sells. The Group's cost base is mainly exposed to the inflation rates and changes in payroll taxes in the United Kingdom, the United States and China. The inflation rate for salaries in specialised parts of the financial sector in a financial centre such as London, New York or Shanghai is often different from the relevant country's overall rate of wage inflation. 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 retained cash reserves. 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.

The Group's exposure to credit risk is limited to the carrying amount of financial assets recognised at the balance sheet date, as summarised below:

Operational risk

The Group has numerous operational risks, ranging from control over bank accounts to its processes for delivering and supporting software to a required level of quality and on a timely basis, and retention and recruitment of key personnel. A key risk, as for any company, is the reputation risk that might arise from poor execution, non‑delivery or late delivery of a high profile project or breach of client confidentiality for sensitive data. Further risks may arise where late delivery of software or untimely delivery of related services causes a client to miss regulatory deadlines. A detailed operational risk review is outside the scope of this report, but the Board attaches importance to maintaining appropriate internal controls to identify and limit these risks.

Liquidity risk

The Group seeks to manage financial risk by ensuring that sufficient liquidity is available to meet foreseeable needs and by investing cash assets safely as well as profitably. At 31 March 2011 the Group financial liabilities were as follows:

All amounts are short term and payable in zero to three months.

14. SHARE CAPITAL

The deferred shares carry no rights to receive dividends or to participate in any profits of the Company. The shareholders are not entitled to attend any meetings of the Company or have any rights to participate in any return of capital (except on a winding up). The deferred shares are not transferable other than with the consent of all the Directors of the Company.

Share issue

No shares were issued during the reporting period. In the year ended 31 March 2010 the Company issued 70,750,000 0.5p ordinary shares at the then market value of 4p each. The Company recorded this transaction as £353,750 issuance of Ordinary Share Capital and recognised £2,476,250 as Share Premium, from which was netted of £194,121 of issue costs. Part of the shares issued was to the Company Directors, further details of which are provided in note 18.

15. SHARE OPTIONS

Employee share options charge

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

In accordance with the accounting policy stated under note 1(N), the volatility of the Company's shares for the relevant period has been estimated at 30%, giving a credit to the income statement for the year ended 31 March 2011 of £4,626, (2010: charge £19,771), with the same amount being debited to reserves. The expected volatility has been based on historical volatility, using market prices of Lombard Risk Management plc shares between 4 September 2004 and 31 March 2010.

Equity settled share-based payments

The Company has a share option scheme for all employees. Options are granted to employees based on the discretion of the Directors to reward performance. The options are settled in equity once exercised. If the options remain unexercised after the end of the exercising period, the options expire. Options are forfeited if the employee leaves the Company.

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

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

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

16. OPERATING LEASES

The Group had commitments under non-cancellable operating leases in respect of land and buildings. The Group's future minimum operating lease payments are as follows:

17. 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.

18. RELATED PARTY TRANSACTIONS

There are no related party transactions in this reporting year. However in the comparative period, the following related party transactions occurred:

In August 2009 John Wisbey made an advance to the Company of £100,000, which was added to an existing loan balance of £1,090,000. The total balance outstanding to him of £1,190,000 was settled in October 2009 partially (£790,000) by conversion of 0.5p ordinary shares at 4.0p per share as the same time and price as the institutional placing and partially (£400,000) by cash payment. The loan carried interest at 1% per month during the outstanding periods.

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 and thereafter the loan attracted interest of 1% per month. Outstanding loans of £10,000 and £30,000 repayable to Ian Peacock and Michael Thomas respectively were settled in October 2009 by conversion of the full outstanding balance to 0.5p ordinary shares at 4.0p per share. Both loans carried interest at 1% per month before settlement.

In July 2009 Brian Crowe made an advance to the Company of £200,000, which was added to an existing loan balance of £200,000 The total balance of £400,000 was settled in October 2009, half by conversion to 0.5p ordinary share and half by cash payment. The loan carried interest at 1% per month while outstanding.

There are no outstanding Directors' Loans at the start or end of the financial year.

Key management personnel of the Group are the directors of the parent company. Details of Directors' remuneration are set out in note 3.

19. CONTROLLING PERSONNEL RELATED PARTIES

In the opinion of the Directors, there is no ultimate controlling party at 31 March 2011.

Annual General Meeting

Lombard Risk will be holding its Annual General Meeting at the Head Office at Ludgate House, 245 Blackfriars Road, London SE1 9UF at 14:00 hours on Wednesday, 13 July 2011.

www.lombardrisk.com

About Lombard Risk Management plc

Lombard Risk enables firms in the financial industry significantly to improve their approach to managing the risk in their businesses.

Our award-winning solutions enable the financial industry to improve the management and reporting of counterparty, collateral, trading and liquidity risk; global regulatory compliance reporting, including Basel III.

Founded in 1989 and headquartered in London, Lombard Risk has offices in New York, Shanghai, Hong Kong and Singapore. Our clients include banking businesses - over 20 of the world's "Top 50" financial institutions, almost half of the banks operating in the UK, as well as investment firms, asset managers, hedge funds, fund administrators and large corporations worldwide.

The Lombard Risk solution suite is developed and supported by an extensive team of risk and financial experts and includes:

COLLINE® - a powerful end-to-end collateral management system designed by collateral management experts. Colline provides the ideal solution for mitigating credit risk while satisfying the growing demand for multiple entity, cross-product, global collateral management. Sophisticated, web-enabled design enables Colline to integrate with existing technology permitting secure access anywhere in the world.

LISA® - scenario analysis and stress testing. Built using state-of-the-art technology with a powerful web-based graphical user interface, LISA® is a solution that can satisfy new liquidity risk management requirements and support growing regulator demands for timely and reliable information.

STB-Reporter - regulatory reporting. The ideal solution for all automated regulatory reporting requirements. With full support for key supervisory computations including capital adequacy (Basel II and III), large exposures, and combined with LISA, provides a comprehensive solution for global regulatory reporting with the stress and scenario testing.

The Lombard Risk software solution suite also includes OBERON® trade capture and valuation, Firmament® credit and equity valuation and STB-Detector® AML and customer due diligence.

Cautionary Statement

This report contains certain forward-looking statements with respect to the financial condition, results of operations, and businesses of Lombard Risk Management plc. These statements and forecasts involve risk, uncertainty and assumptions because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are made only as at the date of this announcement. Nothing in this announcement should be construed as a profit forecast. Except as required by law, Lombard Risk Management plc has no obligation to update the forward-looking statements or to correct any inaccuracies therein.