City of London-based Lombard Risk Management (LRM:AIM) seems to be finally emerging from the new business hiatus that has dogged the company's recent performance, and its share price. In telling the market that it will beat consensus revenue expectations of about £19.5 million for the year to end March, the market mood towards the company has switched quickly, driving the shares more than 8.5% higher today to 11.12p, sharply reversing the largely downward slide since the start of the year.
'Revenues are expected to be slightly ahead of market expectations with strong contributions from the Company's UK regulatory and risk businesses,' the company says. Over all, Lombard expects 'trading for the year ended 31 March 2014 to be in line with current market forecasts,' implying about 1.3p of earnings per share (EPS) on £3.75 million of pre-tax profit.
Shocks to the global financial system over the past few years have upped the ante for financial institutions to install sophisticated software to monitor and manage capital and risk. A swathe of new financial regulations are starting to exert influence on financial markets to police an industry with a reputation for runaway excess and loose controls.
New rules both in Europe and in the US, such Basel III, Dodd-Frank European Market Infrastructure Regulation, and Solvency II, make automated systems a must to meet these new transparency and reporting requirements. Lombard's risk management and compliance reporting tools meet this need.
But the company has suffered 'delays to contracts as regulators extended deadlines and as customers wrestled with economic uncertainty as well as all the regulatory upheaval,' says TechMarketViews' Peter Roe. Shares also recently explained mixed messages stemming from share deals by directors.
Progress on new business for Lombard has been coming in fits and starts for several months. In October 2013 Lombard took the unusual step of pre-announcing the signing of a 'major contract' for its COLLINE collateral product suite with a 'large European bank.' That deal was finally completed on the 20 December, where Lombard was able to reveal its underlying £2 million value.
That's hugely significant considering the scale of Lombard's revenues. Charles Stanley technology analyst Peter McNally remains upbeat on the Lombard story. 'We believe the industry drivers remain firmly intact and will provide growth tailwinds for many years,' he confidently predicts, before adding that 'we maintain our thesis that the company is developing and delivering relevant products in a structural growth market and has likely passed the peak of development as a proportion of sales.
'It looks like the new financial year could be a busy one for the team at Lombard Risk Management,' concludes TechMarketViews' Roe.