Lo-Q in line for full-year earnings growth

Lo-Q’s earnings are set to grow this year, its chief executive said on Wednesday, after its virtual theme park queuing systems produced unexpectedly strong revenue in the six months to April.

Lo-Q first-half results to April 30 2011
TurnoverPre-tax profitEarnings per shareDividend
£3.27m(£940,000 loss)(4.46p loss)-
↑33%(£900,000 loss)(4.47p loss)-

Lo-Q earns only a small proportion of its income in the first half of its financial year, which is the off-season for theme parks in the northern hemisphere. Its electronic systems, used in 23 theme parks around the world, alert their customers when it is their turn to board a ride, saving them from having to wait in a queue.

Revenue for the period grew 33 per cent to £3.27m ($5.25m) as the proportion of visitors using “premium products” increased.

“Our customers in North America, who are the main drivers of the business, are feeling chirpier about life and spending more money,” said Tom Burnet, chief executive.

Mr Burnet, who joined Lo-Q last October, said the company could grow rapidly through careful management, arguing that its previous leadership had failed to make the most out of a winning concept.

He has replaced the senior management team except John Alder, the finance director. John Weston, the former head of BAE Systems, became chairman last month. The shares have risen 73 per cent since Mr Burnet’s appointment.

The company signed new contracts during the period with four theme parks – two in Germany, one in Spain and the UK’s Blackpool Pleasure Beach. The company said the financial contribution from these parks would not fully materialise until the second or third year as guests become more familiar with the Lo-Q system.

Mr Burnet said he expected Lo-Q’s pre-tax profit for the full year to be “rather better” than last year’s £2.32m, suggesting that it could top £2.5m “if the strong trading continues”. However, he said the company’s performance was closely linked to wider economic conditions, noting that trading in Spain had been “tough”.

The group was looking at developing a queuing app for smartphones, he added, and was seeking opportunities to sell its systems to museums and art galleries.

Mike Jeremy, an analyst at Daniel Stewart, said Lo-Q’s offering had a “very persuasive logic”, noting that the park can manage people more efficiently and they can use their time more efficiently.

However, he doubts whether the model would be accepted easily by other attractions apart from theme parks. “Museums are generally more free-flowing, so you don’t necessarily see the same requirements. It’s always a good idea to stick with what you know best.”

Lo-Q’s pre-tax loss rose from £900,000 to £940,000, which it traced to increased investment in research and development. It’s basic loss per share slid from 4.47p to 4.46p.

The shares rose 3.2 per cent to 181.17p.

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