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Lo-Q beats expectations as people choose not to queue

Lo-Q shrugged off fewer people visting theme parks last year as more people at the parks chose to use its virtual queuing technology.
Lo-Q beats expectations as people choose not to queue

Lo-Q (LON:LOQ) posted bumper profits last year as more people who visited theme parks used its virtual queuing technology.

The company said the 17 per cent increase in profits to £2.7 million and 20 per cent increase in revenues to £24.5 million exceeded both its own and the market's expectations.

Like-for-like sales rose by 17 per cent, while there was a nine per cent increase to 1.2 million in people at the parks using the company’s virtual queuing products, which mean customers do not have to wait in line to get on a ride.

The increase was despite a 3% drop in the total number of people who attended the theme parks overall.

The company’s main customer is US theme park operator Six Flags, which recently extended its contract with the company for another six years.

Lo-Q’s core offering is Q-bot. This is a handheld unit that park visitors can rent.

After making a reservation with a Q-bot unit, the system registers that person or group into a virtual queue.

Guests are informed via the Q-bot’s display, and with a beep and vibration, that their ride is ready, while the device can also inform users of a ride’s breakdown and allow rescheduling of reservations.

Lo-Q also recently introduced a water resistant product, the Q-band, for water theme parks. Six Flags has already said it will install it in nine of its water parks.

Other customers include Parques Reunidos, Herschend Group and Merlin Entertainments.

In December, Lo-Q also signed a global partnership with MasterCard to develop a new contactless payment solution that combines MasterCard's Tap & Go PayPass payments technology with its software and systems.

In the coming year, the group said it also intends to trial a smartphone–based Q-bot in a North American park, while it has also agreed a 12 week pilot for smartphone based solution with one of London's best known 'single-line' attractions.

Chief executive Tom Burnett added that smartphones are an important development in both its current  geographies and as it focused more on Asia.

“We will also continue to develop our mobile ticketing, payments and scheduling software capability as we look to develop further business in 'single-line' attractions and in adjacent markets,” he added.

“Notwithstanding the challenges of opening 11 new operations around the world, I am confident that we have initiated the momentum that will define our future business,” Burnet said.

Research house Edison said that the growth last year was underpinned by strong demand from customers, which supported management’s plans to widen the group’s end market.

“The new Q-band will be in 10 water parks in the current season following last year’s successful trial.

Meanwhile, the group is developing cashless payments functionality with MasterCard and smartphone apps incorporating Lo-Q’s virtual queuing IP.” 

These initiatives position Lo-Q for potentially strong growth, said Edison, none of which is  yet factored into its forecasts.

Edison expects revenues to grow to £30.4 million in the current year to October with profits of £3.4 million, rising to revenues of £34.1 million and profits of £3.7 million in 2013.

Canaccord said that as Lo-Q’s business model effectively defers the recognition of revenue and earnings from new contracts, the strong contract momentum over the past couple of years, we expect growth to remain in double-digit territory for many years.

The broker added that this long-term growth potential means the shares should trade at a premium and it has raised its price target to 280p from 250p.

Shares rose by 4.5p to 245p.

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