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Why the Adacel Technologies Limited share price is falling today

Credit: Jaan

The Adacel Technologies Limited (ASX: ADA) share price has fallen 12% to $2.25 today after the company downgraded its full year profit guidance to be in the range of $7 million to $7.5 million.

This is a big downgrade from the company’s prior guidance for net profit to be “more than 10% higher than 2016” and the savage share price falls come as no surprise.

The aviation software and training company blamed today’s downgrade on “longer than anticipated contract administration processes on a number of notified awards and delayed decisions on a series of programs, both competitive and sole source.”

As a consequence of the contract delays and other problems the company now expects revenue from its “Systems” business to be 35%-40% below FY 2016’s result. However, the company’s “Services” business is still expected to grow revenues around 10% over FY 2016.

The unpredictable nature of Adacel’s major contract wins means its earnings can be lumpy, but over the long term investors believe they should head higher.

Despite today’s big profit downgrade the good news is that the company expects to be able to maintain FY 2017’s dividends at the same level as those paid out in FY 2016.

A Big, Fat, Fully Franked Dividend

This company's dividend is almost the stuff of legends. Since it started paying dividends in 2007, it has increased its payout to shareholders every single year, a run that includes 21 consecutive dividend increases.

Based on the last 12-months of dividends, its shares are currently offering a fully-franked 4.8% yield, which grosses up to almost 7% when those franking credits are included. And in stark contrast to the likes of Commonwealth Bank and Telstra, this company just increased its dividend by over 13%, and guided for 2017 profits to grow by 20%!

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of Adacel Technologies Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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