News blog

Lombard Risk Management

• BY: Andrew Hore |
• POSTED: 25/10/2012 |

Financial risk and compliance software developer Lombard Risk Management invested significantly more in development in the first half and the benefits should start to show through in the second half. 

Revenues improved by one-fifth to £7.65m in the six months to September 2012 but a higher amortisation charge thanks to the capitalised development spending in recent times. Pre-tax profit fell from £1.75m to £1.33m and there would have been a small loss if all the development spending had been expensed.

Net debt was £148,000 at the end of September 2012 and there is deferred consideration of £347,000. Lombard capitalised £1.91m of development spending, out of a total spend of £2.7m in the period, but positive working capital movements meant that cash generated covered this expense.  There could be net cash by the end of March 2013.

The interim dividend has been increased from 0.02p a share to 0.025p a share. 

Regulatory changes in the global financial sector should provide plenty of demand for Lombard’s software. This year will benefit from reporting and derivatives clearing regulation, as well as the Dodd-Frank Act coming into effect at the end of this year which will also boost demand from reporting software.

At 10.5p a share, Lombard is valued at £24.4m. A much better second half is expected to help Lombard report an increase in underlying full year profit from £2.5m to £3.6m. That puts the shares on seven times prospective 2012-13 earnings.

Download the latest AIM Journal from http://www.hubinvest.com/AIMPDFOctober2012_37.pdf