Profit focus bearing fruit at Thales

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At Thales, aerospace and transport division operating profit surged 37% to €392 million on sales up 5% to €5.95 billion ($7.74 billion).

Much of that rise came with ramping up of deliveries of truck tracking devices for a French road charging system due for implementation this year, but avionics sales are also growing with increased production rates at Airbus, ATR and Sukhoi (SSJ100).

The year also saw first deliveries of avionics suites for the Sikorsky S76D helicopter.

Avionics orders were flat for the year, with increases for production at Airbus, Sukhoi and business jets, along with inflight entertainment systems, offset by an expected decline in military avionics orders. Segment order take fell 4% to €5.71 billion, particularly owing to a decline in spacecraft equipment.

For the group in 2013, sales are expected to hold level, with civil growth offset by "a less favourable situation in defence". However, marking continued recovery from a plunge to loss in 2010, Thales forecasts further improvement in profitability, with earnings before interest and taxes growing 5-8%.

The group turned in a 2010 operating loss of €100 million after taking a remarkable €700 million charge against its troubled supply contracts with the Airbus Military A400M, the Turkish Meltem maritime patrol aircraft and a Danish ticketing project.

Measures taken to avoid further contract disasters appear to be bearing fruit, in particular a strict regime that allies engineering and sales closely in all contract negotiations to ensure delivery is manageable.

Following that 2010 performance, then-chief executive Luc Vigneron also promised a new era of profitability for Thales, which he admitted had spent a decade lagging its European peers. The group has exceeded his forecasts of earnings before interest and taxes of 5% of revenue in 2011 and 6% in 2012 - in fact, Thales achieved 5.7% in 2011 and 6.4% last year.

At that time he also said further improvement should in 2014 bring Thales's EBIT margins into line with those of its peers, a level taken to be in the 9-10% range.

However, despite evident improvement Vigneron resigned in December 2012, "having acknowledged the absence of support of the group's two main shareholders", Dassault Aviation (25.96%) and the French state, through its TSA and Sofivision trading companies (27.08%).

He was replaced as chief executive by former Matra executive Jean-Bernard Lévy, who had been chief executive of French telecoms, music and video games group Vivendi.