Desmond extends Datalex loans as equity raise planned

Businessman Dermot Desmond has agreed another extension on €11.3 million on loans to Datalex in order to give the loss-making travel retail software provider sufficient financial headroom as it seeks to sell shares in the coming months to refinance the loans and raise working capital.

The loans, which were originally due last November before the maturity date was pushed out to November 2021, are now not scheduled to be repaid until September 2022, Datalex said in its latest annual report. Adding in interest and arrangement fees, Mr Desmond’s Tireragh vehicle was owed more than €15 million as of the end of 2020.

Datalex said an additional €10 million debt facility granted by Mr Desmond last year has not been drawn down as it “managed cash flow effectively during a difficult year”.

The Irish Times reported on Monday that Datalex is planning to go to the market to raise more than €25 million of equity in June. Group chief executive Sean Corkery declined to comment on the details of the plan on Thursday, but said the publication of full-year figures and a growing pipeline of potential work, as airlines begin to plan for a post-Covid world, give Datalex an opportunity to engage with shareholders on funding options.

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“I think that there’s a real opportunity out there but our customers deserve partners with strong balance sheets,” Mr Corkery said. “We do intend to seriously, materially strengthen our balance sheet for the investments going forward.”

Datalex’s revenues slid by 38 per cent to $28.1 million (€23.2 million) last year, when the company’s airline customers suffered their worst year on record as Covid-19 brought international travel to a virtual standstill. Airlines use Datalex software to manage air fare sales and pricing, clock up set and baggage fees, and make car, hotel and insurance bookings.

Still, the company’s net loss narrowed to $6.5 million from $12.1 million for 2019, a year when the result was hit by $8.3 million of exceptional items. These included redundancy costs, expenses for regulatory investigations stemming from an accounting scandal that erupted that rocked the company and resulted in board and management changes. Mr Corkery and chief financial officer Niall O’Sullivan came on board as part of the overhaul.

Dispute

The 2019 result was also hit by a $2.9 million charge against services to Lufthansa, with which it is locked in a legal dispute after the German airline cancelled a contract to overhaul its ecommerce offering. The dispute is ongoing.

Earnings before interest, tax, depreciation and amortisation (ebitda) rose from $700 million in 2019 to $3.4 million last year.

The International Airline Association’s (Iata) baseline forecast for 2021 is for a 50 per cent improvement on 2020 demand, which would bring the industry to half of 2019 demand levels. Asia has been leading a recovery, followed by the United States, with Europe lagging behind.

Mr Corkery said the company’s business model, with a mix of fixed and variable revenue, “buffered” the group’s exposure to the slump in airline travel last year.

“Covid-19 has been a real catalyst for change, and we see this period – 2021 and beyond – as a strategic inflection point for many airlines,” he said. “Datalex is primed to work with any airline seeking to enhance their digital retailing as travel resumes and we return to growth.”

Mr Corkery said Datalex had seen “a lot” requests for proposals in the market from airlines looking to boost their digital offering and returns.

“There is still a bit of a quantum of indecision, and these things are taking longer. But the homework is definitely getting done at this point and we see that as a prerequisite for some key decisions towards the end of [the second quarter and early in the third quarter],” he said.

Shares in Datalex rose as much as 6.2 per cent to 52 cent on Thursday morning.