Datalex shares slide 75% as trading suspension is lifted

Datalex, the travel retail software company hit by an accounting scandal last year, saw its shares slide by almost 75 per cent on Tuesday to 22.6 cent as trading resumed in the stock after a near 15-month suspension.

The company’s stock was suspended in May last year after it failed to file full-year results on time, as it dealt with the fallout from accounting irregularities that resulted in its then auditors, EY, refusing to sign off on its 2018 financial statement.

The publication of 2019 results at the end of June paved the way for Datalex to secure the nod from Euronext Dublin and the Central Bank to restore trading in its stock.

"This is another key milestone for Datalex," said chief executive Sean Corkery of the company's permission for a resumption of trading in its stock. "Most importantly, this is an indicator to our customers, and to all our stakeholders, that Datalex is future-focused and primed for a return to growth and profitability."

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The resumption of trading lays the foundations for a potential share sale at some stage before November 2021 in order to repay $12.4 million (€11 million) owed to its largest shareholder, Dermot Desmond, and any other debt he might contribute, and raise working capital.

Mr Desmond pledged last month to provide up to €10 million of additional debt if an equity raise doesn’t take place until well into next year.

Earnings forecast

Datalex said last week it expected its earnings to rise to as much as $1.5 million this year as its new management team moved to stabilise the business amid the Covid-19 crisis.

The company revealed that it posted $500,000 earnings before interest, tax, depreciation and amortisation (ebitda) last year, with the figure weighed down by $8.3 million of exceptional items.

These included costs for redundancies, investigations stemming from the accounting scandal, and a $2.9 million provision against money it says is owed by Lufthansa, with which it is involved in a legal dispute. Datalex now expects its ebitda to come to between $750,000 and $1.5 million this year, it said.

“Over the course of its enforced absence from trading, spanning almost 15 months, Datalex initiated the process of executing significant and required change. A restructuring plan in 2019 materially reduced ongoing expenditure while the new strategic outlook, involving a focus on profitability, will be overseen by a revamped board,” said Davy analyst Ross Harvey.

“Market confidence will take time to rebuild, but the scope of change so far points to the intention to achieve this.”