When your performance is heavily influenced by waves of regulatory change year on year fluctuations are to be expected and Lombard Risk Management has just demonstrated that with revenue up just 8% (to £12.8m) in the year to March 31 2012, compared to a 32% rise in the prior year (see here). Profit before tax was up from £0.6m to £2.5m.
Although less regulatory change than previous years contributed to the drop in growth rate, it was exacerbated by the Eurozone crisis being deeper than anticipated and a banking sector spending freeze at the end of 2011. The result was a disappointing year. Management is tempering its feelings over its full year performance (to March 31 2012) with optimism about the new year.
There is good reason for its optimism. Its 2011 REG-Reporter acquisition is performing well and helping drive its business in North America (see here). Of Lombard’s 8% revenue growth, 4% was organic. Banks are starting to spend again – although primarily on critical projects and as CEO John Wisbey points out regulatory compliance is critical for banks. Several deals that failed to close in late 2011 came through in early 2012. And 2012 is set for a new wave of regulation, including COREP reporting requirements which will impact UK and the rest of Europe. Wisbey is assured that it will play an important part in reversing the UK position, which saw revenue drop by c£2m during the year.
Although 2011 growth was not a patch on the previous year, an 8% revenue uplift is still a good achievement and the current year looks like it will be better that that. Lombard is unusual in that its performance does not directly reflect the wider economic performance in the UK and elsewhere. Regulatory change is its driver and since the company turned a corner in 2010 (see here), it has been faring well.