Results: Why the Adacel Technologies Limited (ASX:ADA) share price is down 7%

The Adacel Technologies Limited (ASX:ADA) share price fell 7% to $1.68 after the company released its annual results this morning.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Adacel Technologies Limited (ASX: ADA) share price fell 7% to $1.68 after the company released its annual results last week. Revenues grew 25% to $53 million and net profit after tax fell 10% to $8.4 million.

Net profit before tax was up 30%, slightly ahead of revenue growth, however net profit after tax fell this year because the previous year's results were inflated by carried forward tax losses. In simple terms, Adacel paid less tax last year (due to tax credits from historical losses) and paid more tax this year, which is why profits fell.

Management stated that, at current tax rates, Adacel has $11.8 million and $10.1 million in unused tax losses available in Australia and Canada respectively. This will likely reduce the company's tax payable for the next 2-3 years.

Adacel reported 10.64 cents in earnings per share and declared ordinary dividends of 4.5 cents per share during the year, plus an additional special dividend of 5 cents per share. The company ended the year with $12.5 million in cash and no debt.

During the year Adacel announced that it lost part of a supply contract with the US Federal Aviation Administration (FAA) to a small business competitor. Adacel is contesting this contract loss. Elsewhere, Adacel reported encouraging new contract wins and customers in Morocco, Algeria, Sri Lanka, and China.

Management commentary suggested the company has a strong outlook and was sufficiently confident in its financial position and business to declare 5 cents per share in special dividends. Elsewhere, Adacel reported that it expects strong interest from smaller countries which will be looking to upgrade their outdated systems.

Adacel's valuation is undemanding in my opinion, and for a company that is demonstrably winning new customers and displacing competitors in some cases, I think Adacel could be an opportunity at today's prices.

While the contract loss with the FAA is a concern, and business performance is likely to be lumpy due to the timing of sales and purchaser budget constraints, Adacel has a strong financial position and I think the company is worth a closer look.

Motley Fool contributor Sean O'Neill has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended 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 Scott Phillips.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »