Business

Datalex’s new CEO has little room for error as clock ticks on expensive Desmond loans

Corkery is set to finish up in Datalex in a few weeks’ time, having officially handed over the CEO reins to his successor, Jonathan Rockett, early last month

This week saw the special administrative region’s flag carrier, Air Macau, choose Datalex to provide a solution to make it easier and faster for customers to find and book seats. Photograph: iStock

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Joe Brennan
Sat Dec 16 2023 - 06:00

Macau, the Sin City of the East, is on track to be the world’s fastest-growing economy both this year and next as gamblers and tourists flock back to the semi-autonomous Chinese territory after it followed Beijing in dropping its zero-Covid policies 12 months ago.

The International Monetary Fund (IMF) sees the former Portuguese colony’s gross domestic product (GDP) soaring by 123 per cent to almost $49 billion (€44.9 billion) over the course of 24 months to the end of 2024 (though that will still leave the economy off its $55 billion pre-pandemic peak).

Macau also reclaimed its crown as the world’s top gambling hub from Las Vegas this year, culminating in punters, primarily from mainland China and neighbouring Hong Kong, spending $2.4 billion across its six casinos in October during the Chinese “Golden Week” holidays – even if local authorities, under pressure from Beijing, are trying to broaden its appeal from being a destination for vice.

This week saw the special administrative region’s flag carrier, Air Macau, choose Datalex, the Irish travel retail software provider, to provide a solution to make it easier and faster for customers to find and book seats.

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It’s a small contract in the greater scheme of things for Datalex. Air Macau carried a peak of 3.66 million passengers in 2019.

But tech veteran Sean Corkery, parachuted in to run Datalex in 2019 in the wake of an accounting scandal, will be hoping the recent rebound in Macau’s fortunes may rub off on the Dublin-listed company.

Corkery is set to finish up in Datalex in a few weeks’ time, having officially handed over the CEO reins to his successor, Jonathan Rockett, early last month.

There is little room for setbacks if Rockett, the new CEO, is to have a chance at raising equity to repay the Desmond loans before they fall due 12 months from now

He would have liked to have been able to raise equity in his final year at the helm to get rid of very expensive loans from Datalex’s main shareholder, billionaire Dermot Desmond. However, a depressed share price put paid to any such hopes – and resulted in Datalex becoming even more indebted to Desmond in recent months.

Still, there are signs that Corkery’s drip-feeding of generally positive contract news over the past nine months is finally beginning to attract investor interest.

Shares in the company have rallied by about 25 per cent in the past three weeks, to 64 cents. It’s taken them out of a tight range of between 50c and 60c to which they have been bound since the middle of last year, even as global airline traffic rebounded.

Under Corkery, Datalex has gone from being a company that built bespoke, and expensive, systems for airlines to essentially selling six off-the-shelf products.

These include: Datalex Direct, for airlines taking direct bookings; Datalex NDC, which gives carriers more control over sales through online travel aggregators; a pricing system, called Datalex Dynamic, for airfares to baggage that adapts to fluctuating demand; Datalex Merchandiser, which helps airlines flog add-ons at every opportunity to customers; and the China Shopping and Pricing product Air Macau has signed up to.

Datalex – like any tech company trying to market itself these days as cutting edge – has also developed an artificial intelligence (AI) pricing system that, according to its pitch, has “market-leading reasoning, which mimics human decision-making”.

Bryan Porter chief revenue officer at Datalex said this week that a “significant” potential customer – which he declined to identify – had trialled the AI product earlier this year. The hope is that it will sign up as an anchor customer.

The company renewed its contracts in 2023 with key existing customers JetBlue, Air China, Air Transat and Aer Lingus; and signed a deal with LatAm Airlines. However, the announcements failed to result in a mass of stock market investors checking into the company.

Datalex tried in May to whip up market appetite for a second equity raise in two years when it hosted a capital markets day in London and predicted turnover should double to almost $47 million by 2026. Sources said the following month, however, that the company was holding off amid unease among existing investors about its low share price – and how a discounted share sale would heavily dilute them.

The stock was trading at that stage at a few cents over the 50c-per-share price at which it issued €25 million of stock in the summer of 2021, at the height of the pandemic.

The fundraise two years ago was largely to repay emergency loans from Desmond’s Tireragh vehicle, doled out as the company quaked in the wake of the 2019 accounting debacle. Desmond, who owns over 40 per cent of Datalex, has remained the lender of last resort ever since as the company continued to rack up losses.

In April, when the Desmond loans stood at €9 million, the billionaire pushed out the repayment date on the loans by 18 months to the end of 2024. But it came at a cost – with the rate rising from 10 per cent at the time to 18 per cent last month.

There was a fresh sell-off in Datalex shares in mid-September when Virgin Australia, which had signed the company up in 2021 to help overhaul its retail offering, decided to cancel the entire project, affecting the Irish company and others involved.

Datalex confirmed weeks later that it had resorted to taking out an additional €5 million facility from Desmond.

The modest recent share rally was propelled last week by news that part of a major contract secured last year to help Easyjet drive online sales was up and running.

The LatAm partnership is expected to go live in the first quarter of next year.

There is little room for setbacks if Rockett, the new CEO, is to have a chance at raising equity to repay the Desmond loans before they fall due 12 months from now.

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