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Lombard Risk Management – emphasises ahead of expectations, but what about sustainable cash generation?

By Steve Moore | Wednesday 19 April 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Lombard Risk Management (LRM) has updated that it anticipates exceeding analyst consensus expectations for its year ended 31st March 2017 and “remains confident” looking ahead. What’s that though expected to be “in the region of £2.4m to £2.8m”? “Adjusted EBITDA”. Hmmm.

That is, of course, bullshit earnings. Year-end cash is stated to be £7 million, which compares to £6.9 million at the half-year stage – and this stated to be “due to a strong focus on debt collection and improved working capital management”!

The company does also emphasise that “the year ended 31 March 2017 has been one of substantial growth and investment for the company, following the equity placing in June 2016” - this saw a “two-year plan to achieve cash profitability… predicated on unlocking revenue growth by investing in both product and employees”.

The now current year is described as “a pivotal year for Lombard Risk as we continue to liberate our clients from operational and regulatory complexity, and the board remains confident in our plans and our ability to continue to execute them”.

Hmmm. I’d want somewhat more to justify a current market cap of more than £50 million here - some meaningful and sustainable net cash generation perhaps! With also Phil ‘InterX’ Crawford as Chairman, I’ll currently continue to avoid.

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