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Thales confirms targets despite cancelled submarine order

By Angela Barnes

08:41, 16 September 2021

Aerial drone image of a submarine cruising in the sea
Thales was set to supply submarines to Australia – Photo: Shutterstock.

Thales has confirmed its 2021 financial targets – and said its earnings won’t be impacted by the decision of Australian authorities to no longer proceed with the purchase of submarines from the company.

The French business, which designs and builds electrical systems and provides services for the aerospace, defence, transportation and security markets, said the decision to cancel the AFS (Australian Future Submarine) programme was motivated by “accelerating changes to regional security that make conventional submarines unsuited to Australia’s future operational needs”.

Financial targets confirmed

Despite the cancellation, Thales confirmed all its 2021 financial targets announced in August – including sales in the range of €15.8bn–€16.3bn ($18.6bn–$19.2bn).

The company also set a book-to-bill ratio above 1, as in 2019 and 2020 – and an EBIT margin in the range of 9.8% to 10.3%, up 180 to 230 basis points from 2020.

Impact on earnings

Thales said that it had been exposed to the cancelled programme on two levels: as a supplier of subsystems to Lockheed Martin, and as a 35% shareholder of Naval Group. However, it did not expect any material impact from it falling through.

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“At 30 June 2021, the corresponding order book with Lockheed Martin is not material at the scale of Thales, since it amounts to less than €30m, less than 0.1% of the total order book of €34.6bn.

“In addition, Thales does not expect any material impact of this announcement on the group’s 2021 EBIT through Naval Group’s contribution (2019: €65m, 3% of group EBIT; 2020: €22m, 2% of group EBIT),” it said.

Company outlook

Thales also confirmed its medium-term outlook for the defence and security segment of its business, forecasting annual organic sales growth between 4% and 6%, and an EBIT margin between 12% and 13%, as well as for the entire group, targeting a 12% EBIT margin in the medium term.

Shares in Thales were up 1.32% in mid-morning Paris trading following the earnings update.

Read more: Lockdowns drag Australian unemployment to 13-year low

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