Corporate watchdog to examine Datalex accounting report

The State's corporate watchdog is to run the rule over a report into accounting irregularities at troubled travel software company Datalex.

Corporate watchdog to examine Datalex accounting report

The State's corporate watchdog is to run the rule over a report into accounting irregularities at troubled travel software company Datalex.

Datalex's long overdue 2018 annual accounts have finally revealed that the company made a net loss of $50m (€45.3m) last year compared to a profit of just over $7m in 2017.

The company has been dogged by an accounting scandal since admitting a potential misstating of figures in January. A subsequent independent review, by PwC, found widespread and significant accounting irregulatiries.

The fallout from the scandal included a management overhaul that saw the exits of chief executive Aidan Brogan and chairman Paschal Taggart and the suspension of trading in the company's shares.

That suspension won't be lifted until the company updates on trading for the first half of this year and can prove to the Irish Stock Exchange that its internal financial controls are in order.

In its annual report, Datalex - which provides e-commerce capabilities for many travel booking firms and airlines like Aer Lingus and Lufthansa - said the Office of the Director of Corporate Enforcement (ODCE) has asked for a copy of the PwC report. The company said it is now fully co-operating with the ODCE in its inquiries.

Datalex added that such a requirement from the ODCE is procedural and doesn't involve any conclusion that there has been a breach of law by the company.

In its annual report, Datalex also said that Ernst & Young (EY) will not seek reappointment as its statutory auditor at Datalex's annual shareholders' meeting later this month.

The travel company also said that EY has been unable to express an audit opinion on its financial statements - something which it described as "extremely disappointing".

Earlier this week, EY reported Datalex to the Registrar of Companies for failing to keep adequate accounts last year.

Datalex said it has initiated a transformation programme and said it is planning an equity fundraising to raise sufficient funds to repay outstanding loans and fund its working capital needs for next year and beyond.

The company agreed to a €6m loan from its major shareholder Dermot Desmond earlier this year. It said Mr Desmond will now provide additional funding of $5.5m to enable Datalex to continue trading for the remainder of 2019 and that he will also support the equity fundraising.

"The group's financial results for 2018 reflect the extent of the issues the business faced and the steps that have been taken to allow the business move forward with confidence. Key to this is the ongoing financial support of our largest shareholder," said Datalex's acting chairman and interim chief executive Sean Corkery.

Mr Corkery expressed confidence in the viability of Datalex's commercial business model and its market opportunity.

"Our focus, now, is to continue our transformation programme to ensure the long-term growth of the business," he said.

The company refused to comment on reports suggesting it is considering taking legal action against former executives.

Datalex said it made an EBITDA loss of $4.7m for 2018, which was within its recently restated guidance of a pre-tax $4m-$6m loss.

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