ADA 1.11% 91.0¢ adacel technologies limited

Adacel's FY03 revenue to double

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    In a recent note to the ASX, Adacel's managment said FY03 revenue will double (i.e., increase by 100%+) from current levels. Here is a break down of the numbers from FY01-FY03.

    Adacel's business has two parts, 1) Adavanced Systems (Air Traffic Control systems which are now the standard for the US defence force and an increasing number of civil aviation authorities), and 2) Business solutions.
    In FY01 Advanced systems had revenue of $27mill and Business Solutions had revenue of $27mill = $54mill total. For FY02 ShareAnalysis have forecast total revenue at $77mill ($47mill for Advanced systems and $30 million for business solutions). This figure is in line with management's own projections.
    FY03: Adacel have recently won two important contracts. The first is a 3-4 year contract to supply 94 ATC systems to the US air force. Of this, the revenue of 34 ATC systems will fall in FY03. The second contract is to supply 8 ATC systems to the US Army. While management haven't released figures, it is likely that FY03 will reflect the sale of at least 4 of these systems. This makes a total of 38 ATC systems for FY03. Each system sells for approximately A$1million, so these two contracts are worth $38million for fiscal03. Management have also said that logistical support and training for these two contracts will produce revenue of about $7mill pa. If we are ultra-conservative and assume no growth for Business Solutions and no further contracts, total revenue for FY03 will be at least $122 million (77+38+7). However, management have said that they are presently negotiating a further $110 million worth of contracts in various countries. Since Adacel are the market leaders, it is likely there will be further contract announcements over the next few months. It is also likely that there will be some growth of Business Solutions. Given that management have themselves flaged a 100% increase, I'm betting that the real FY03 will be closer to $150 million. Profit margins for high end software developers can be anywhere from 25% to 60%.
    It seems only a handfull of investors (including Pratt's Thorney Holdings) know about Adacel's stunning prospects. No doubt there will be significant media attention in 03. When word gets out this stock will soar.
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