Adacel’s shares are flying high on Thursday…
The post Why the Adacel (ASX:ADA) share price is rocketing 39% today appeared first on The Motley Fool Australia. –
In morning trade, the air traffic management software company’s shares were up as much as 39% to a 52- week high of $1.43.
Adacel share price rockets after doubling its profits
Revenue increased 1.1% to $40.2 million
Gross margin expanded by almost 5 percentage points to 40.1%
Earnings before interest, tax, depreciation and amortisation (EBITDA) up 117.6% to $9.8 million.
Net profit after tax jumped 101.7% to $7.3 million
Final unfranked dividend per share doubled to 3.25 cents, bringing full year dividend to 6 cents per share (up 140% year on year)
FY 2022 guidance: Profit before tax growth of up to 5.2%
What happened in FY 2021 for Adacel?
As you might have guessed from the Adacel share price reaction, FY 2021 was a significant improvement on a difficult prior period. This was thanks to a strong performance from its Systems segment, which offset a slightly weaker performance by its larger Services segment.
During FY 2021, revenues in its Systems segment increased by 25.9% from $9.7 million to $12.3 million. This was driven by a higher number of systems implemented, including the delivery of additional Air Traffic Control Common Simulators (ACS) units to the US Army.
The Services segment, which comprises all recurring revenue, including software maintenance and all aspects of system support, field services, and on-site technical services, saw its revenue fall from $30 million to $28 million. This was driven largely by foreign exchange headwinds. But thanks to improvements in its margins, the impact on its earnings wasn’t as great.
What did management say?
Adacel’s CEO Daniel Verret said: “This was a remarkable year in many regards. Unprecedented unknowns due to COVID-19, major business adjustments to sustain productivity while working remotely, quick development of creative solutions to support our commitments, successful delivery of significant projects, and a remarkably strong business output by the company.”
“We are pleased to report on our strong financial performance for FY2021 and delivered improved financial performance across all major financial indicators,” he added.
What’s next for Adacel?
In FY 2022, the company intends to begin reporting in US dollars. Management believes this will provide a more relevant representation of the company’s financial position in comparison to its peers.
With that in mind, the company is guiding to profit before tax of US$5.7 million to US$6 million in FY 2022. This represents growth of 0% to 5.2% on FY 2021’s profit before tax of US$5.7 million.
Adacel’s Chairman, Michael McConnell, commented: “In late FY 2019, we outlined our strategy to focus on the Company’s core businesses and customers supported by the implementation of a set of management disciplines and metrics to drive operational efficiency and accountability.”
“Today, we reported continued execution against those basic principles and improvement in financial performance.”
“Having solidified Adacel’s operational, product, and financial foundation, this year we will invest in our sales capabilities to drive future growth. Moreover, we will continue to drive shareholder returns through our balanced capital management strategy, including dividends, share buybacks, and potential M&A activity,” he added.
Adacel share price continues to outperform
Following today’s gain, the Adacel share price is now up a whopping 150% over the last 12 months. This compares very favourably to a strong 25% gain by the All Ordinaries over the same period.
Should you invest $1,000 in Adacel right now?
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.