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UPDATE 1-French group Thales eyes further earnings growth as 2016 profits rise
February 28, 2017 / 6:16 AM / 9 months ago

UPDATE 1-French group Thales eyes further earnings growth as 2016 profits rise

(Adds CEO quotes)

PARIS, Feb 28 (Reuters) - France’s Thales reported a slightly brisker than expected 11 percent increase in operating earnings for 2016 and predicted further growth in its profits and operating margins this year as its transport business exits the doldrums.

Last year’s profit growth outpaced a 5.8 percent rise in revenues to 14.885 billion euros, or 6.8 percent on an organic basis, led by avionics and in-flight entertainment systems.

The defence and high-tech systems company posted operating earnings of 1.354 billion euros.

That lifted its margin by 50 points to 9.1 percent, as cost cuts enabled its transport division to post profits, even though a series of weak contracts there remains a concern.

“We are going to continue to establish the group’s credibility with investors,” Chief Executive Patrice Caine told reporters.

It took in 13 percent fewer orders, worth 16.5 billion euros, compared with 2015 which had been buoyed by the radar for two French Rafale fighter deals with Egypt and Qatar.

Analysts were on average predicting 2016 operating profit of 1.308 billion euros on revenue of 14.851 billion, according to Thomson Reuters I/B/E/S data.

For 2017, Thales predicted a mid-single digit organic growth in sales and operating profit of 1.48-1.5 billion euros.

“Five percent (revenue growth), if we commit to this, it’s because we think we can achieve it, but I certainly wouldn’t say it’s in the bag,” Caine said.

Further out, Thales confirmed average targets of mid-single-digit organic sales growth in the 2016-2018 period and 9.5-10 percent operating margins in 2017-18.

Caine did not expect Thales to be affected by a slowdown in the aerospace cycle nor the planned merger of fellow French aerospace firms Safran and Zodiac, adding there was little overlap between those companies and Thales.

Thales’ shares are down by around 2.6 percent so far in 2017, having risen 33 percent last year. (Reporting by Tim Hepher and Cyril Altmeyer; Editing by Sudip Kar-Gupta)

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