Tech turnaround! Adacel Technologies (ADA)

[tommy]

Here is a tech that has bounced back: Adacel Technologies (ADA). I have been topping up on this one due to complete lack of interest despite massive turnaround from last year. Here is the rundown:

Adacel Technologies Limited (ADA) develops advanced simulation and software applications and services for aviation and defense, providing simulators for training air traffic controllers in both civil and defense environments and for research, planning and modeling of air traffic procedures. The company also provides satellite-based air traffic management automation software for Oceanic airspace, as well as intelligent speech-driven systems for cockpit and simulator automation.

PE is only 9, market cap at 47 million. Undervalued probably due to lack of positive earnings history and lumpiness of contracts (timing issue like Senetas, if you know what I mean!) Despite the impressive list of contracts steadily won by ADA, one should however note that margins remain slim, despite improvements.

Strong profits and cash flow:
- Earnings before interest, tax, depreciation and amortisation (EBITDA) of $5.64 million, representing a substantial turnaround from the EBITDA loss of $7.18 million incurred in the previous year

- An after-tax profit of $4.94 million (including a tax benefit of $1.01 million), an improvement on the after-tax loss of $9.84 million in the previous year

- A 40 per cent increase in group operating revenues to $52.39 million, of which recurring revenues account for more than 45%

- Net cash inflow from operations strongly rebounded to $5.91 million for the year from a cash outflow of $3.18 million previously.

- Balance sheet strength with net cash in bank position of $2.15 million and other current financial assets of $2.29 million.

Improved operating focus and continued market leadership
- Group result assisted by continuation of improved sales performance and margins in the June half with further improvements in operational focus, program performance and operating overhead control
- Continued market leadership within key market segments of air traffic control (ATC) simulation and air traffic management (ATM)
- Further progress in addressing closely-associated markets with new products and services based on the group�fs core simulation and voice recognition technologies.

* Reference:
A$2.5 million Tower Simulator order for US Marines
http://sa.iguana2.com/cache/cf4e495e...ADA-252951.pdf

$2.9m contract extension from Lockheed Martin
http://sa.iguana2.com/cache/3312dc9a...ADA-259230.pdf

Preliminary Final Report & News Release
http://sa.iguana2.com/cache/52c2835b...ADA-259931.pdf

A$4.7M US Air Force Simulator Upgrade Contract
http://sa.iguana2.com/cache/b713f4c0...ADA-260104.pdf

Awarded A$4.6 million Portugal ATM support contract
http://sa.iguana2.com/cache/16b22df4...ADA-260317.pdf

[robbo]

Adacel

Good analysis Tommy.[^] Like it much more than when folks sortta, just down load a Web dump, with zero commentarey/analysis....

But, This was great. Thanks. [^][^]

What's the Market Cap?

Regards,

robbo

[tommy]

http://australianit.news.com.au/arti...-15321,00.html

US contracts lift Adacel out of a tailspin
Kevin Andrusiak
SEPTEMBER 20, 2006

ANYTHING to do with the aviation industry is more than just a touch risky at the moment.

High oil prices, the ever-present threat of terrorism and delays to new aircraft technology all make for an industry on unsteady ground.

And that's pretty much the environment that listed aviation technology firm Adacel Technologies found itself in about 12 months ago.

But with billions on offer from lucrative US defence contracts, Adacel was always a chance if could get the business model right. And it now looks to be on the right track.

Adacel listed on the Australian Stock Exchange in 1998, and shareholders endured five years of losses before a turnaround strategy last year saw it post a $4.94 million profit on a 40 per cent jump in revenues to $52.39 million. The Adacel board attributed the improvement to the establishment of a US-based management team, and a focus on core aviation, defence simulation and air traffic control operations based in North America.


"With the introduction of on-site personnel services, as well as annual support and maintenance, and ongoing air traffic management software support programs, recurring revenues have grown to account for more than 45 per cent of group revenues," new chief executive Fred Sheldon said.

"In North America, Adacel's position in the air traffic control simulation market was further consolidated during the period by contract awards from the US Air Force and US Marine Corps, the Federal Aviation Administration and the US aviation college sector.

"The company expects continuation of improved margins to contribute to a December half in excess of the first half of the 2006 financial year, and based on current opportunities and a continued focus on costs and profitability, an improved result in the 2007 financial year. However, group operating performance continues to be dependent on timing of contracts and deliveries, which will need to be closely monitored and managed."

Adacel calls itself a world leader in the development of advanced aviation and defence simulation, and software applications for air traffic controllers and satellite-based air traffic automation software.

The company boasts more than 100 clients in 30 countries, with the USAF chief among them. It is led by Harvard-trained Julian Beale, a former federal Liberal minister.

Adacel's biggest shareholder is Collingwood Football Club vice-president and son-in-law of cardboard billionaire Richard Pratt, Alex Waislitz, who controls a 34 per cent stake via his private company, Thorney Holdings. Mr Waislitz is also a non-executive director of Adacel.

With such luminaries on the board, investors would be right to demand a return to profitability, after the company posted five consecutive losses to kick off the decade.

And the board hasn't let them down.

Adacel's share price is up more than 75 per cent since July 1, 2005, reflecting its ability to switch focus to the North American market, where it established a new executive team and cut costs.

Company managing director Silvio Salom stepped down in June, after the return to profitability, to serve as a director. This paved the way for North American chief executive officer Fred Sheldon to run the company.

Latest results show sales are still just over half of what was reached during the 2002-03 financial year, but more importantly, profit margins are well up.

The financial year just gone was the first time it was profitable in five years, with short-term debt down to a measly $13,000 from $4.8 million in 2004-05.

It came after a horrible 2003-04 nearly wiped out all of Adacel's cash reserves, before a $6.5 million capital-raising saved the day.

In 2004-05, it posted an after-tax loss of $9.83 million on revenues of $37.29 million and earnings per share of minus 13c.

Its operating margin, too, has improved dramatically: 7.1 per cent last

[tommy]

quote:Originally posted by davidrob

Adacel
What's the Market Cap?

Hi robbo,

Market cap is 47 million at the moment... quite cheap IMHO. What's your analysis mate?

[tommy]

mmm, no price movement at ADA, actually quite surprised with the lack of interest. Gonna have to shove this one under the carpet and come back in six months time...

___
http://www.fnarena.com/index2.cfm?ty...0F197E95476783

Adacel Identified As A Turnaround Play
FN Arena News - September 25 2006

By Chris Shaw


Since peaking at more than $4.00 per share in 1999 it has been a tough few years for Adacel Technologies (ADA), as shares in the developer of advanced simulation and control systems for the aviation and defence industries have fallen to around 50c following five consecutive years of losses.

Intersuisse suggests there is now an opportunity in the stock though, as FY06 marked a return to profitability and in the broker's view the potential rewards now outweigh the risks, justifying a Buy rating.

The profit turnaround in FY06 was seen as "impressive", as while revenues increased to $52.4m from $37.3m in FY05, the earnings before interest, tax, depreciation and amortisation turnaround was even better as the company moved from a loss of $7.2m to a profit of $5.6m, with net profit coming in at $4.9m including a $1m tax benefit.

In earnings per share terms the profit result equated to 5.6c, the broker anticipating further gains in coming years. As evidence of this, it notes the company's second half performance was far stronger than the first half, as while revenue was up 5.1% pre-tax profit was more than four times higher, reflecting better margin and cost performance.

The broker points out while a full year performance at a similar rate would represent earnings per share for FY07 of 7.9c, the uncertainty over the timing of contracts and a desire to take a more conservative stance has the broker anticipating an earnings per share result of 6.2c this year.

Such a result should be achievable as the company has enjoyed good recent success in scoring new contracts, the broker noting in the first half of FY06 $30m in new work was won, followed by a further $13m in the second half and more than $12m so far in the current quarter. Importantly the revenue gains appear more sustainable going forward, as the broker notes 45% of group revenue now takes the form of recurring revenues.

The company also stands to benefit from strong growth in its markets, as recent years has seen both an increase in the number of budget carriers entering the global aviation industry as well as strong growth from the Chinese market. This increases the need for air traffic controllers, the broker noting the company's training systems offer cost and time benefits in meeting this need. As a result, the broker is expecting strong earnings growth to continue for several years.

The FN Arena database shows none of the leading brokers or equity researchers cover the company, which is no surprise given its market capitalisation stands at only $44m at the current share price. Assuming solid earnings growth is achieved, and earnings per share of 7.9c this year would represent a price to earnings ratio of only 6.3x on the broker's estimates, it would suggest the stock stands to gain a wider following if it can deliver on its potential.

Adacel shares today are currently untraded, having last changed hands at $0.50.

[tommy]

Annual report out:
http://sa.iguana2.com/cache/40d8bfc5...ADA-263196.pdf

Very upbeat and positive outlook after making a significant turnaround, ADA is still under the radar and is cheaply priced IMHO.

Here is an excerpt:


Outlook

In the 2007 financial year, we expect a continuation of improved margins and will continue to focus on costs and profitability. On
the basis of this and the current opportunities, we expect earnings in the current December half to exceed those in the first half of the 2006
year, with the full 2007 financial year result a further improvement on the 2006 profit. The final 2007 result will be dependent on timing
of contracts and deliveries, which we will closely monitor and manage.
In the following years, we expect further growth in our markets.

In ATC Simulation we expect market growth to be driven in the US by the requirement for a significant increase in new controllers to replace a large number due to retire, and internationally by emerging markets such as China, India and the Middle East.

In ATM, with the FAA ATOP system now in the initial phase of operation in both the Atlantic and Pacific Oceanic flight regions, we
see further opportunities to upgrade the ATM systems of those countries managing adjacent Oceanic airspace.

In our Advanced Programs, our voice activated cockpit technology has significant potential in both military and civil aviation markets, while the market for our Air Traffic Control in a Box could grow quickly, driven by new standards being introduced for pilot training.

For the future, Adacel is strategically well placed, with excellent market position and a growing reputation for producing leading edge
products and services that meet a real market need.

[tommy]

ADA starting to creep up despite low volumes (thinly traded...)

Sell side starting to look thin[]

[tommy]

Intersuisse analyst report released:

http://www.intersuisse.com.au/upload...ADA22Sep06.pdf

Share price also on the rise[:I]
http://asx.netquote.com.au/charts.asp?code=ada&x=0&y=0

[tommy]

ADA finally on fire, up 7%![][] yay

http://bigcharts.marketwatch.com/jav...w.x=0&draw.y=0

[tommy]

Wow, why didn't they release this on ASX??? This is contract has enormous PR value in demonstrating ADA's technological superiority... how many aussie tech firms with market cap of just 55 million and PE of 11 win a contract from NASA?! I'm excited!!!

____________

http://mediaserver.prweb.com/pdfdownload/450011/pr.pdf

Adacel Awarded NASA Contract
Company to Upgrade FutureFlight Central Simulator


Orlando, Florida (PRWEB) October 13, 2006 -- Adacel, an industry leader in software integration, simulation development, and speech recognition technology, announced today that the company was awarded a contract to modernize NASA's FutureFlight Central Air Traffic Control/Air Traffic Management (ATC/ATM) test facility.

Adacel currently supports NASA�fs FutureFlight Central by providing software for its state-of-the-art 360-degree MaxSim Air Traffic Control Tower Simulator.

Under terms of this new contract, Adacel will replace and reconfigure NASA's current 12-channel SGI system with its Vega Prime visual software (VMAX). This upgrade will include two additional Image Generation (IG) channels for independent eye-point views and a three channel IG system for their existing SGI Development Station. This latest upgrade allows NASA to view over 200 moving aircraft models simultaneously in one scene.

The VMAX software is installed in over 50 tower simulator locations throughout the world.

NASA�fs FutureFlight Central is dedicated to solving the present and emerging capacity problems of the nation's airports. The two-story facility offers a 360-degree full scale real-time simulation of an airport, where controllers, pilots and airport personnel collaborate to optimize expansion plans, operating procedures, and evaluate new technologies.

�gWe are very pleased to announce this new agreement and look forward to continuing to support NASA in their effort to modernize our country�fs airspace.�h said Fred Sheldon, Adacel�fs North American CEO. �gNASA�fs FutureFlight Central Facility performs world leading ATC/ATM research and it is without question that this contract represents a tremendous honor and privilege for Adacel.�h

About Adacel
Adacel is a global software technology and systems integration leader. The company is a leading developer of critical aviation (air traffic management), speech recognition, and defense simulation and security systems for government and business entities. Support services are available for all products including full-time, on site maintenance and operation of the systems.

Adacel�fs products can be found in more than 30 countries. The company is committed to innovative research and development and industry leading customer support.

Adacel was established in 1987. The Company�fs U.S. operations are headquartered in Orlando, Florida. Adacel has offices in Washington, D.C., Montreal Canada, and Melbourne Australia.