Datalex to cut jobs amid cost cutting programme

Shares in travel software company Datalex slumped today after it said it is implementing a cost restructuring programme which it said will impact outsourced contractors and employees. 

It did not detail how many jobs would be affected. 

Datalex said in January that it expected to report an adjusted EBITDA loss in the range of $1-4m for 2018 and also said its revenue and profits for the six months to the end of June may have been misstated.

Today the company said its performance in 2018 was “materially behind expectations”. 

It said it had 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.

In a statement today, Datalex said its board has reviewed its 2019 guidance and now expects to report adjusted EBITDA in the range of $3-$3.5m for the full year.

Datalex said that given its high relative cost base caused by the rapid growth of the business in recent years and significant investment in its digital commerce platform, it will undertake a cost restructuring programme.

It said this process is underway and will be completed during the first half of 2019. 

The programme is expected to deliver cost savings in the range of $8-8.5m in FY 2019, while Datalex expects to incur once-off implementation costs in 2019 of less than $2m. 

The company said that 2019 will mark “a year of transition”, adding that it anticipates a strong recovery in services revenue in 2019 notwithstanding a continued anticipated shortfall in services revenue compared to deployment costs incurred.

From 2020, it said it expects to generate annualised cost savings in the range of $9.5m to $10m.

Datalex also said it does not intend to pay a dividend this year.

Aidan Brogan, the CEO of Datalex, said that 2018 was a challenging year for the business following a period of rapid expansion and accelerated product investment.

“A thorough evaluation has highlighted the need for a strategic restructuring of the business which will reduce our cost base while also ensuring that there will be no delay in preparing new customers for deployment to our platform,” Mr Brogan said. 

He said the company has a solid pipeline of customers that will transfer to its platform over the course of 2019 and will have a significant positive impact on revenues and EBITDA from 2020. 

“As a recognised travel industry leader in digital commerce with a large and growing market opportunity, we acknowledge that 2019 will be a year of transition but we remain confident in the future growth of the business,” Mr Brogan added.

Shares in the company were sharply lower in early Dublin trade today.