Lo-Q defies downturn in theme park sector with 30% jump in pre-tax profits

Virtual queuing systems provider Lo-Q (AIM: LOQ) reported results for the first ten months of 2009 after changing its reporting date from 31 December to 31 October, yet was still able to report significant performance improvements as both revenues and pre-tax profits rose nearly 30% with further growth projected for 2010.

The company, which designs, installs and operates systems that allow theme park visitors to make ride and show reservations, said revenues for the ten months to 31 October 2009 amounted to £17.3 million, which is a 27.9% improvement over the 12 months of the previous year, when the company raked in £13.52 million. Pre-tax profits were up 29.2% to £2.39 million. However, earnings per share declined to 12.15 pence from 13.21 pence as after-tax profits dropped 5.9% to £1.9 million.

The debt free company had a cash balance of £4.4 million at the year end.

The improvement was achieved in spite of difficult retail trading environment as many sections of the company’s industry - particularly in the US - reported lower earnings with reductions in profitability. The company’s performance in 2009 was helped by new customers wins and cost reductions moves.

New clients secured during the period included several Six Flags theme parks in North America, Dollywood in Texas, Legoland in Windsor, Mirabilandia in Italy and Dreamworld in Australia.

The company has also made progress with the development of both its new and existing products, including the Q-txt phone system, which made its full year debut at Isla Magica and Flamingo Land, and made a positive impact on the results.

Meanwhile, the VQ2020 Q-bot system was extended from 13 to 14 parks and underwent improvements of global messaging service and re-introduction of proximity marketing.

In addition to the existing products, Lo-Q is preparing its new system for trialling in two water parks during the coming year. Patent applications are underway for this system, which the company said will have much wider applications than theme parks than Q-bot, whether attraction or water based.

Lo-Q currently anticipates investing £1 million in the current financial year in development expenditure, which will include the trials, which is £0.6 million more than the expenditure for the previous year.

Due to the increased expense, the growth in profitability is expected to be lower than the growth in turnover in the shorter term.

While the board expects the business to be cash generative in the current financial year, a dividend policy will be introduced once there is a “better understanding” of the company’s likely investment requirements. The existing cash position will be used to reinvest in new and existing products to target a wider variety of leisure parks with Lo-Q projecting 2010 to be “another year of growth in the face of tough trading.”

“Lo-Q has added new customers, grown revenues and profits, and maintained a very strong cash position all in the face of an incredibly tough retail trading environment...we are taking advantage of our secure financial position to re-invest in our existing products but also into new products that can open up whole new growth areas by targeting a wide variety of worldwide leisure parks,” said Chairman of Lo-Q Jeff McManus.

Back in November, the company issued an update, saying that the business was trading in line with market expectations, achieving “quite favourable” performance amid “very mixed” theme park attendance. Prior to that, Lo-Q reported a 44% year on year jump in H1 revenues to £5.89 million.
Shares in the company added nearly 7% on the news.