Half Yearly Report

18 October 2010

Lombard Risk Management plc

("Lombard Risk" or the "Company")

Financial results for the six months ended 30 September 2010 prepared under International Financial Reporting Standards ("IFRS") as adopted by the European Union.

·; Revenue up 34% on same period last year at £5.8m (2009: £4.3m)

·; Profit after tax of £0.2m (2009: loss of £0.8m)

·; Cash at end of period £1.3m with no debt (2009: £0.1m overdraft with £1.6m of Director loans)

·; Profitability achieved by both the Regulatory and the Trading and Risk businesses with a particularly strong advance by the Regulatory business

·; Acceptance of COLLINE® at Tier 1 Continental European bank

·; Cost reduction programme implemented with benefits anticipated for second half of the financial year

Current trading and outlook

·; Ongoing demand for COLLINE®: Good progress with implementation of COLLINE® Collateral Management software at a major Tier 1 Continental European bank proves the product's ability to deal with high volume international banks as well as medium sized and smaller clients, while strong demand continues from banks and asset managers for collateral management products.

·; Regulatory market continues to grow: Liquidity Standards regulation changes will continue to have a positive effect on the Company in the second half, as will some other changes on Capital Standards, while significant additional regulatory reform such as Basel 3 and Solvency 2 should benefit the Company appreciably over the next few years.

·; Strengthened balance sheet: The combination of £1.3m cash position, no debt and good recurring revenues is a platform for future organic growth.

John Wisbey, Chief Executive, commented "The 34% rise in revenues, the return to profitability and the strong cash generation in the six month period represent respectable progress and provide us with a solid platform from which we hope to be able to build future success at Lombard Risk. As well as achieving revenue growth, we have made appreciable cost savings during the period, which have allowed us to invest in areas where we see future growth opportunities. The Board sees considerable opportunity within the Company's chosen segments of regulation, risk and reporting and the clear goal is for Lombard Risk, over the next few years, to increase its market share particularly in expanding markets."

Philip Crawford, Chairman, commented "The Company has taken one huge step in the right direction during the period …… it has become profitable. The Board is encouraged by current trading and views the future with optimism and excitement.''

Contacts:

Chief executive officer's statement

Summary

I am pleased to be able to report a 34% rise in revenues, a return to profitability in the period, and a net cash position of over £1.3m at the end of the period. All parts of the business performed well, with the biggest improvement coming from the regulatory business.

In the collateral management software business we continued to win contracts and grow organically, while our COLLINE® software was accepted in April 2010 by the major Tier 1 Continental European bank with which we announced a contract in April 2009. The bank transferred away from another market leading system to use COLLINE® in multiple financial centres as its system of choice for global collateral management.

In the Regulatory Compliance business significant work has been undertaken to allow our customers to comply with the major new UK Financial Services Authority ("FSA") regulations on Liquidity Standards. This has provided a significant revenue opportunity in the first half of this financial year and we anticipate that this will continue into the second half. The opportunity from regulatory change over the next few years appears to be considerable.

We made a change in NOMAD from Execution Noble 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 we achieved significant growth during a period of considerable change.

The Board considers that the Company's products are well placed for the current market, particularly with an emphasis on collateral management, liquidity and regulatory compliance and on related management reporting.

Financial

Revenues for the six month period ended 30 September 2010 increased by 34% to £5.8m (2009: £4.3m). Profit after tax was £0.2m (2009: loss of £0.8m). Costs for the period include the one-off costs associated with the move to our new London premises, and the full cost of all headcount reductions made during the period.

Net cash at the end of the period was £1.3m, up from £0.7m at 31 March 2010 and (£0.1m) at 30 September 2009. Excluding the £1.0m net inflow from fundraising in October 2009, the business has generated cash of around £0.4m in the year since 30 September 2009.

Recurring revenues such as maintenance and annual licence renewals have historically represented a healthy proportion of the Group's revenues. Recurring annual revenues were around £4.4m per annum at the beginning of the period and have continued to grow during the current financial period. Moreover, as a result of contracts already won, the Board expects recurring revenues to continue to grow throughout the remainder of the current financial year. The revenue profile remains fairly well spread with the top customer accounting for 11% of revenues in the period and the top five customers accounting for 22% of revenues.

Trading and Risk Software Products

The financial crisis and its aftermath have been beneficial for our COLLINE® collateral management software product. This product now handles substantially all of the key requirements of a collateral business including margining, repo and securities lending, trade reconciliation, inventory management and reporting including regulatory reporting (e.g. for Fed-15 reports and outputs to regulatory liquidity reporting). Innovation in these markets such as CCP and messaging continues. The contract with a major Tier 1 Continental European bank, which was signed in April 2009 to replace our main historical competitor's system, resulted in significant software development and we achieved "Product Acceptance" in April 2010. This contract has allowed us to demonstrate COLLINE®'s scalability, resilience and performance in the live environment using active-active clustering in multiple data centres, user locations in three continents, and well over 150 users. This means that the Board has every confidence that our solution is scalable from the smallest collateral user to the largest global bank.

Oberon®, our most established product, continues to move forward with functional and performance enhancements and remained profitable in the period.

Towards the end of the previous financial year, we launched LISA®, our new risk product. LISA® is complementary to our regulatory products and uses the most modern technology and we have already signed up several new customers. Lombard Risk has always been strong on risk management and the Board considers that the convergence of risk management 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 15 investment firms in the UK using the STB-Reporter product for regulatory reporting to the FSA.

This depth of customer base gives the Company opportunities to sell additional functionality to existing customers. The FSA's final new regulations on Liquidity Reporting and Liquidity Stress Testing were published in October 2009 and this has been a good development for the Company. The Company has won 33 contracts relating to this initiative for Liquidity Reporting or Liquidity Stress Testing and is rolling out the solution to these customers in the current financial year. The Liquidity Reporting and Stress Testing regulatory regime which comes into effect in the UK in late 2010 seems likely to be followed by new Capital Standards and Stress Testing and there is a timetable for regulatory change including a new "Basel 3" accord and "Solvency 2". This opportunity is by no means confined to the UK, although the Board believes that the weight of our customer base gives us more ability to leverage the opportunity in the UK than elsewhere.

Personnel and Premises

During the period under review we continued to make new hires appropriate to the expected growth of parts of the business, whilst benefiting from cost actions taken during the current financial year and the Board believes these actions will enhance ongoing results. We will continue to allocate resources to those parts of the business where we see the best returns. During the period, we continued to achieve greater efficiency gains as proportionately more work was carried out in Shanghai, where we now have more than half of the Group's headcount.

I agreed to split my combined Chairman & CEO role at the time of the institutional fund-raising, and the Board and I were delighted to welcome Philip Crawford as our new Non-Executive Chairman from 1 May 2010. At the same time Mike Shinya joined as a Non-executive Director. Both Philip and Mike have heavyweight experience as senior executives in the IT industry at large companies such as EDS and Oracle and we believe that their experience will help take the Company forward to the next level.

Current trading and outlook

The Group has seen 34% year-on-year revenue growth in the first half of the current financial year and, taking into account recurring revenue and the contracted revenues which the Board believes should be recognisable by 31 March 2011, the Board is optimistic about the Group's prospects for the remainder of the current financial year. We have already had an encouraging start to the second half of the financial year with new contracts signed in early October. In addition, the Board sees no end to the increase in bank and securities firm regulation and is optimistic that this will have a positive effect on the Group's Regulatory Compliance business, albeit that this benefit will continue to come in waves with peaks and troughs in demand around regulatory deadlines. The Board believes that the climate for the next few years is likely to be for mandatory additional spend on regulation.

We continue to see a healthy sales pipeline for our COLLINE® collateral management software following the go live of a major Tier 1 Continental European bank. In addition, the Board believes that some of the new regulatory driven industry initiatives in the collateral domain on central counterparty and messaging should help us win additional business. The Board considers that the outlook for our COLLINE® collateral management software remains promising with new business demand expected to continue at an encouraging rate, including first time buyers of this type of product and others switching away from competitor systems to COLLINE®, together with potential new revenue growth from existing customers. The Company has now proved the scalability and resilience of the product (i.e. its ability to cope with large volumes and to withstand the loss of individual servers without ceasing to function) through its major Tier 1 Continental European bank deployment.

In the regulatory area, the Board sees appreciable and increasing opportunity for the Company from ongoing regulatory change as there is a move away from a light touch regulatory regime in the UK and in many other countries. In the UK this began with a complete reform of Liquidity Reporting and the Board believes that this trend offers an appreciable opportunity to the Company in the coming years. As well as the new Liquidity Standards announced by the FSA, new FSA policy statements on Stress Testing have been published and FSA consultation papers have been published about Capital Standards which are all likely to lead to more regulatory change in 2011 and 2012. There are considerable regulatory opportunities in all the countries in which the Company operates and further opportunities as the countdown begins to a "Basel 3" capital regime.

In this changing environment, the Board continues to believe that, as changes in legislation are adopted and credit risk and liquidity risk management are ever more tightly controlled, risk and regulatory software will be in demand and, as a result of this, the Board sees the potential for considerable growth in the next few years in the Company's chosen market segments of regulation, risk and reporting. The Board believes that over the next few years Lombard Risk will be operating in growing markets and the clear goal is to win an increasing market share of those growing markets.

John Wisbey

Chief Executive

Consolidated unaudited interim statement of comprehensive income

For the six months ended 30 September 2010

Consolidated unaudited interim statement of financial position

as at 30 September 2010

Consolidated unaudited interim statement of changes in equity

For the six months ended 30 September 2010

Consolidated unaudited interim statement of cash flow

For the six months ended 30 September 2010

notes to the interim report

For the six months ended 30 September 2010

1. BASIS OF PREPARATION

This interim report was approved by the Board on 15 October 2010.

These consolidated financial statements are for the six months ended 30 September 2010. They have been prepared in accordance with International Financial Reporting Standards ("IFRS") and International Financial Reporting Interpretation Committee ("IFRIC") interpretations as at 30 September 2010, as adopted by the European Union. They do not include any of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 March 2010.

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 statement of financial position 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.

This condensed consolidated financial information does not comprise statutory accounts within the meaning of Section 434 of the Company Act 2006. Statutory accounts for the year ended 31 March 2010 were approved on 7 September 2010. These accounts, which contain an unqualified audit report under Section 495 of the Companies Act 2006 and which did not make any statements under Section 498 of the Companies Act 2006, have been delivered to the registrar of companies in accordance with Section 441 of the Companies Act 2006.

2. EARNINGS PER SHARE

Basic earnings per share has been calculated by dividing the profit / (loss) on ordinary activities after taxation by the weighted average number of ordinary shares in issue during each period.

Diluted earnings 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, share options granted under the Enterprise Management Incentive Plan and Unapproved Scheme.

There is no dilutive effect of share options in either 2009 or 2010 as the average price of the Company's shares was below the strike price of the options in issue.

3. TAXATION

UK based companies have not incurred any taxation in the period due to the losses available for relief. The tax paid and tax credit received all relate to overseas companies.