ADA Share Prices Tumbled Down By 40% After The Announcement Made In The AGM

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The announcement made by the chairman of Adacel Technologies Limited (ASX: ADA) has come as a shock to the investors. The share price tumbled down early this morning by 40%. The investors got shocked when the results were declared that there was a net fall in the profit before tax by 65% to 70% as compared to the previous year.

Earlier a vague idea was given to the investors with respect to the operations in FY19, but no specific idea was shared based on the financial guidance. This has resulted Adacel share price to go down by 40% i.e. low by 90 cents. The software business has also lost more that 2/3rd of its value over the past year. 

The news has sent the Adacel share price 40% lower to a multi-year low of just 90 cents and the software business has now lost more than two thirds of its value over just the past year. However, there is still a little hope that Adacel shareholders may expect a full year profit of 25%-30% lower on the result in posted in 2018.

The main reason of this fall was due to the previously highlighted loss of significant FAA (Federal Aviation Administration) Tower Simulation Support contract that will take a chunk out of revenues and profits.

The group also highlighted that it is following a legal action against Adsync Technologies Inc that took the contract off, for breach of contract and infringement of intellectual property rights. On the other hand, Adacel’s management also protested the decision to switch contract provider. However, their protest got denied. As a result, the company lost the FAA Tower Simulation System contract. Also, the company has excluded any form of revenue generated from FAA Tower Simulation System for its guidance report of FY2019.

Adacel also blames the increase in the investment sales, research, marketing and adverse foreign exchange movement being the other reasons which resulted in the downgrade.

Now the Adacel investors are closely monitoring the outcome of legal proceedings against Adsync Technologies as well as the potential status of its other relationships with the FAA.

As a matter of fear there might a chance that the shareholders might dump the stocks today. It is expected there are more bad news waiting in line. The decision to remove all FAA Tower Simulation System revenue from its FY 2019 guidance report is another threat to the company.

The company is giving a positive performance since its inception. The performance of the company for the entire journey is 362.56%. The 1 year, 5 years and 10 years performance of the company is -45.52%, 211.65% and 439.65% respectively. For the year ended 30 June 2018, there was an increase in the revenue it by 25%. The gross profit increase by 13.2%. EBITDA increased by 23.4%. Profit before tax was increase by 29.8%, however the net profit decreased by 9.5% as compared to the previous financial year results. The net cash available with the company also went down by 23.4%. There was a fall in the EPS by 9.1%.

At present the share price of the company has further gone down by 41.06% and is currently trading at A$0.89. The market capitalization is A$117.73 million and PE ratio is 14.19x.


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