Business Irish

Tuesday 17 September 2019

The hits keep coming, and Datalex shareholders carry the can

Datalex’s products help airlines to boost revenue by enabling them to offer additional services and products to passengers when they’re booking their tickets
Datalex’s products help airlines to boost revenue by enabling them to offer additional services and products to passengers when they’re booking their tickets

Shareholders, staff and customers must be simply stunned at what went on in Datalex.

It's bad enough that the shares collapsed when the company revealed accounting irregularities earlier this year, but it turns out the company couldn't even actually afford to pay the near $4m dividend the shareholders received last year.

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Still reeling, it's easy to wonder if customers have lost all faith in the firm.

Notwithstanding the apparent loss of two customers in the past few months - including one that told it this week that it's terminating its contract with the Irish firm - Datalex has insisted in its annual report that it still has a future.

"Datalex has a significant market opportunity and a powerful commercial model," interim chief executive and chairman Sean Corkery told shareholders in the annual report published yesterday.

"It has in the past generated strong free cash flow. The industry is in a time of digital transition and is growing at a significant pace; in this context there is a need for companies such as Datalex," he added.

The company's software helps customers - mostly airlines - sell additional products and services to flyers when they're booking tickets. The platform is widely used, with customers all over the world that include Aer Lingus, Air China, Hainan, JetBlue and Scandinavian Airlines.

But there must already have been some frank conversations between Mr Corkery and Datalex customers. The mess that's been created at Datalex undoubtedly means that customers have fretted about whether the firm would be around to support the platform that for their customers quickly becomes an important and integral part of their revenue and profit-generating ecosystem.

Datalex reckons in its annual report that more than one billion global shoppers (unknowingly) use its platform every year.

Being so integral, the platform becomes sticky for customers: once it's in, it's hard to ditch it.

So Dermot Desmond's financial support for Datalex is certainly playing a key role in persuading customers that Datalex does have a future.

That aside, there's plenty of shadows looming over Datalex before it ever manages to break out into daylight. The firm is liaising closely with the Office of the Director of Corporate Enforcement, which wants a copy of the independent report prepared for Datalex into its accounting irregularities.

Meanwhile, Datalex has been cutting costs and expects to achieve annualised savings of $13m from 2020.

It has a mountain still to climb to emerge from this crisis, and the path to the summit remains strewn with disgruntled shareholders.

Rebuilding trust and regaining a path to profitability will be a real test for its new management.

Irish Independent

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