Datalex shares nosedive on accounting probe
Datalex shares fell by nearly 11% after an independent review confirmed widespread and "significant" accounting irregularities at the travel software company.
The review, by PwC, confirmed Datalex's revenue, adjusted earnings and profit for the first half of last year were misstated.
The PwC review comes just over two months after Datalex - in a January trading update - said it was expecting a full-year loss for 2018 after potentially misstating first half figures. That announcement more than halved the company's market value in one day.
The new independent review also found that the company's recognition of services revenue for the six months in question was not in line with its accounting policy and was "materially overstated".
Furthermore, it found that Datalex failed to adhere to the correct accounting standards and incorrectly recognised $3.5m (€3.1m) worth of services revenue in its accounts. It also identified around $2.9m of other revenue that was incorrectly recognised in the period, of which around $700,000 is not recoverable.
The bulk of the issue has been attributed to a misjudgement of initial service revenue from a technology deal signed with Lufthansa. The PwC review also confirmed that Datalex's board was not made aware of the accounting issues until January of this year. The first half 2018 figures will be restated and presented along with Datalex's results for the first half of this year.
Datalex and PwC will now follow this review with a further one focusing on Datalex's internal controls and processes "in order to identify areas for improvement". Datalex said its internal accounting control processes had largely been manual and dependent on individual judgement and not subject to internal audit oversight.
It is in the process of reorganising its finance function by appointing a head of finance and head of commercial finance; while it is also on the hunt for a new chief financial officer.
The company- which provides retail software services for the likes of Aer Lingus, SAS and Lufthansa - said it will continue to investigate the failings leading to the issues, including with PwC and its external auditor EY.
Datalex said its failures are being addressed. The company said, in January, that it expects to return to profit this year.
Chairman Paschal Taggart said the fundamentals of the business "remain strong".
Earlier this month, Datalex announced the raising of €3.86m from a share placing and a €6.14m loan facility agreed with an investment vehicle of its largest shareholder Dermot Desmond.
