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Lombard Risk Management

  • BY: Andrew Hore |
  • POSTED: 30/10/2011 |

Trading and regulatory risk software provider Lombard Risk Management reported a sharply higher profit in the six months to September 2011.

During the period, Lombard announced a software deal with Société Générale that will be worth more than £2m in the first two years and a further deal with an unnamed German bank. They both contributed in the first half.

However, much of the improvement in pre-tax profit from £154,000 to £1.75m was due to the capitalisation of £1.29m of development costs. Even stripping that out, there was still a significant profit improvement as revenues grew from £5.8m to £6.35m.

The regulatory outlook for the financial sector should mean additional demand for the software that Lombard supplies. New rules introduced through Basel III, Dodd-Frank, Solvency 2 and other new regulatory compliance rules should stimulate sales from the second half of 2012.

Lombard believes that it is gaining market share from the market leader Algo Collateral. Lombard has derivatives clearing software and most of its competitors have yet to release a product in this area.

Lombard has a strong balance sheet with £1.35m in the bank at the end of September 2011. More cash came in after the period end.

A maiden dividend of 0.03p a share was paid earlier in the year. This has been followed by an interim dividend of 0.02p a share.

At 10p a share, Lombard is valued at £20.7m.

Hardman forecasts an underlying profit of £3.26m for the year to March 2012, rising to £3.94m in 2012-13. The shares are trading on less than seven times prospective 2011-12 earnings.

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