Desmond in talks with Datalex over €10m new funding
Dermot Desmond's International Investment and Underwriting (IIU) is in discussions to put €10m into Datalex, the troubled travel-software business where IIU is the biggest single investor.
The €10m would be made up of a €6.1m secured-loan facility, and €3.9m in new shares.
"While discussions are at an advanced stage, there can be no certainty that terms will be agreed with IIU. A further announcement is expected in the coming days," Datalex said.
The software company's shares have plunged since it told the market in January that it may have mis-stated its half-year results. Shares had risen more than 25pc however between a low of 54.8c seen last week and Monday's close of 70c each. In yesterday's announcement Datalex's board said it confirmed the IIU discussions and had noted "recent share price movement".
It's understood the new shares being issued to IIU will not take its stake above the 30pc threshold, whereby it would have to make an offer for the rest of the company unless given a waiver by regulators.
In January Datalex said it expected to report a loss in adjusted earnings before interest, tax, depreciation and amortisation (ebitda) for the full year, because of a shortfall in services revenue relating to a contract with a customer.
It said the potential mis-statement of half-year results had been because of "accelerated recognition of revenue" from that contract.
The customer in question is understood to be Lufthansa.
The €10m in extra funding would provide the company with extra financial resources as it seeks to cope with the fallout from the profit warning.
The shares have plunged from around €2.50 each earlier this year to below 55c at one stage last week.
The stock soared after the announcement of the IIU discussions yesterday afternoon - closing up 15.71pc on the day at 81c each.
After the January profit warning, Datalex told the market in February that it was looking to cut costs, including by reducing headcount.
It also said capital expenditure would be lower in 2019.
"The group's performance in 2018 was materially behind expectations. The group encountered significant difficulties in a number of areas relating to its services business including incurring exceptional delivery costs that are unlikely to be recovered and operating inefficiencies that are currently being addressed," Datalex said.
However, it added that it "anticipates a strong recovery in services revenue in 2019, notwithstanding a continued anticipated shortfall in services revenue compared to deployment costs incurred."
In a separate announcement last month the company said its chief financial officer was to step down in April. Donal Rooney, a former Nama executive, joined the company in December 2018.