Datalex eyes €25m-plus summer share sale as Desmond loans loom

Datalex, the travel retail software provider to airlines, is understood to be planning to approach the market for more than €25 million of equity in June, as it seeks to raise funding ahead of a deadline later this year to repay loans from businessman Dermot Desmond.

The company may end up seeking to raise as much as €30 million in a share sale in order to ensure it has enough working capital, according to market sources.

Datalex, whose business was hit by the Covid-19 crisis last year as it sought to get over an accounting scandal that emerged in 2019, saw Mr Desmond extend the term of €11.3 million of loans, extended the previous year, by 12 months to November 2021.

Mr Desmond, operating through his Tireragh vehicle, also agreed last summer to provide an additional €10 million credit line to Datalex, payable on the same date. The Desmond loans carry a 10 per cent interest rate.

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Datalex will be expected this week to outline how much of this line has been drawn down, as the company reports full-year 2020 results. Mr Desmond owns 29.8 per cent of the business.

The company, where Sean Corkery stepped in as chief executive and Niall O'Sullivan became chief financial officer in 2019 as part of a management overhaul, warned last month that its earnings for last year would be lower than expected due to the restructuring of certain airline customers.

The restructuring of Chinese conglomerate HNA Group, which has a number of airline units that are customers of Datalex, has forced the Irish company to rejig the timing of the recognition of revenues from these businesses.

“This means that payments related to services provided in 2020, but received in 2021, will be recognised as revenue in 2021 rather than 2020, assuming the restructuring completes as expected,” it said on March 9th.

As a result, Datalex said that it expected to report adjusted earnings before interest, tax, depreciation and amortisation (ebitda) of between $3 million (€3.6 million) and $3.5 million for 2020, compared to its previous guidance of between $3.75 million to $4.5 million.

"We continue to believe that Datalex is well positioned to benefit from the emerging recovery in travel with products tailored to meet the post-Covid needs of all airlines and which will accelerate their return to growth, including our airline customers in China, " it said.

Datalex expected to benefit as digital sales lead a recovery in airlines’ passenger bookings, carriers seek to promote pricing offers at scale, and they cut back on building their bespoke IT systems to use software companies’ products.