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February 20, 2010 12:40 am
Thales said it would be hit by a significant drop in orders this year as its biggest government clients in the UK and France faced budget pressures, while efforts to address huge cost overruns on aerospace projects would take time to bear fruit. “Our environment remains difficult [and] what has affected the group in certain activities is not superficial,” he said as he reported net losses of €128m ($174m), fuelled by heavy provisions and impairment charges, in his first annual results since taking over last May. Last year Thales returned net profits of €650m.
BAe investors took fright at Thales’s comments on the scale of the decline in orders. The group indicated that its book-to-bill ratio – the number of orders taken versus the number fulfilled – would fall to below one. This, said Zafar Khan, aerospace analyst at Société Générale, indicated that profits were likely to be depressed not just in 2010, but 2011 as well.
Thales shares plummeted 12 per cent to close at €29.62 as analysts cut their estimates for profits over the next two years for the second time in little more than a month. The consensus for 2010 is now expected to fall by 10-15 per cent.
Mr Vigneron, who last November unveiled a plan to cut €1.3bn from costs by 2014, said he intended to introduce a new rigour in the management of the group’s contracts.
He painted a picture of a company which in recent years and in certain activities – largely in the aerospace division – had taken unnecessary risks in order to boost growth and win new markets. “The problems were particularly complex in programmes where the group was trying to make a breakthrough,” he said.
But rectifying the problems would require a new way of working, which was likely to come at a cost, particularly amid continuing uncertainty in the air transport sector.
Thales said its restructuring costs for 2010 would rise from 0.9 per cent of sales to 1.5 per cent. Further provisions were also likely on the loss-making contracts. Margins, which came in at 1.2 per cent in 2009 would rise to 3-4 per cent this year, still significantly less than the 6 per cent expected by the market.
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