Datalex hikes earnings forecast on back of Chinese airline deals

Datalex, the travel retail software provider to airlines, raised its full-year earnings forecast on the back of new contracts with a number of Chinese customers, cost cutting and the freeing up of some provisions for client bad debts.

The company, which saw business hit by the Covid-19 crisis earlier this year as it sought to get over an accounting scandal that emerged in 2019, said on Friday that it now expects to post earnings before interest, tax, depreciation and amortisation (Ebitda) of between $3.75 million (€3.16 million) and $4.5 million in 2020.

It had previously predicted Ebitda would rise to as much as $1.5 million this year from $500,000 in 2019.

"Although the company continues to face significant challenges into 2021, our focused and proactive response to the challenges of Covid has increased expected earnings performance in 2020 and contributed to this revised guidance," said chief executive Sean Corkery, who was hired to help stabilise the company last year.

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Datalex said total revenue so far this year was down on 2019, as airlines seek to cut costs in the short term to help deal with the blow caused by the pandemic to the industry globally.

The company said that one of its European customers and an Asia-Pacific based client recently signalled that they would reduce the scope of – or cease – Datalex services next year as they consolidate their technology.

However, the group said that it has renewed "a significant multiyear contract" with its largest Chinese customer, understood to be AirChina, and had agreed terms with a number of other existing Chinese customers which it expects to execute in 2020. It is believed that these carriers are all part of the Hainan Airlines Group.

“Critically, our efforts are focused on, and we continue to compete strongly for, a number of new sales opportunities to grow revenue with new business,” it said.

Mr Corkery told a shareholder meeting in September that Datalex was well placed 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.

At the meeting shareholders backed a deal to extend the term of €11.3 million of loans secured last year from businessman Dermot Desmond’s Tireragh vehicle by 12 months to November 2021. They also gave the nod for Datalex to borrow up to an additional €10 million from Tireragh, repayable on the same date. Mr Desmond owns 29.8 per cent of the company.

Datalex plans to raise equity by late next year to fund the repayment of the Tireragh loans and make sure it has additional working capital.