Datalex figures are imminent – and they will be ugly
Travel retail group’s shares will have a lot of catching up to do after suspension is lifted
The real mess will be net income level
Datalex shares, suspended since late April after the company failed to publish full-year figures by a regulatory deadline, will have a lot of catching up to do when they are finally tradable again.
News on Wednesday that EY, auditors to the troubled travel retail group, has reported the company to the Registrar for Companies for failing to keep adequate accounts last year are the clearest sign yet that the results are – finally – imminent.
EY’s move is largely procedural. The market has known since mid-January that Datalex’s published sales and earnings for the first half of 2018 were overstated. This was confirmed by a PwC report for the board in May, which identified “significant accounting irregularities”.
Datalex warned in January that it expected its 2018 earnings before interest, tax, depreciation and amortisation (ebitda) would amount to a loss of $4 million (€3.6 million), some $20 million below that the market had expected. However, it revealed last month that the loss would be 50 per cent wider.
The real mess will be net income level. The company’s acting chief executive, Sean Corkery, and recently appointed chief financial officer, Niall O’Sullivan, also told the market last month that they were reviewing the company’s “investment in product development and expect to report a significant exceptional cost”.
Translation: expect most of Datalex’s $26.2 million of research and development costs that had been converted into assets in recent years, rather than taken as an expense against profits, to be written off.
Datalex was forced to resort to a €10 million funding line from its main shareholder, billionaire Dermot Desmond, in March as it burned through cash. Investors will be keeping a close eye on the “post-balance sheet events” section of the annual report to get the latest on its cash position.