ABN Amro Morgans released another short note on Adacel...

ABN Amro Morgans released another short note on Adacel yesterday.

Tech & Telco Watch

Company contact
Adacel (ADA)
Not formally covered; Share Price: A$0.62; Market Cap: A$55m

We caught up (by phone) with North American CEO, Fred Sheldon this week for a company overview.

Company summary - Adacel provides 1) air traffic simulators and training (for training of air traffic controllers and pilots) 2) air traffic management programs (managing aeroplane flight paths in the Atlantic and Pacific Oceans) and 3) voice recognition software (controlling the cokpit of Joint Strike Fighters and used in air traffic controller simulators).

Financials – ADA delivered 1H07 NPAT of A$3.3m up 121% on pcp. Revenue was down 30% on pcp, however higher margin contracts supported strong NPAT growth and recurring programs now account for 50% of revenue.

Other key points – over the last three years new management have turned ADA back to profitability and look set to continue delivering profitability. The US Federal Aviation Administration faces a major shortage of air traffic controllers as half are expected to retire (in 1981 Ronald Regan retrenched all air traffic controllers following major strikes) and emerging nations such as China and India require training of air traffic controllers.

Adacel has spent A$30m on developing its accent tolerant voice recognition software. This is used in Joint Strike Fighters, can be used by non native English speakers, and allows training more cheaply and effectively than conventional one on one training. Adacel currently has 170 systems installed world wide across a customer base including the US Army, Navy and Air Force, NASA, Federal Aviation Administration and Air Services Australia.