Thales will incur a second consecutive year of losses after the world’s biggest defence electronics group warned on Monday that it would take a more than €700m ($944m) hit on three troublesome contracts.

Luc Vigneron – the chief executive appointed in 2009 by the group’s two core shareholders, the French state and Dassault Aviation – said Thales would incur an operating loss of close to €100m for 2010.

However, he sought to soften the blow by saying the group would raise its operating margins from 3-4 per cent in 2009 to 5 per cent this year and 6 per cent in 2012.

The announcement confirmed the persistent market fears of a profit warning that have hung over Thales for the past year, ever since the group embarked on an ambitious restructuring programme and incurred a heavy loss along the way.

Relief that the scale of new provisions was finally in the open helped Thales shares to rise 4.6 per cent, after falling 17 per cent over the past 12 months and significantly underperforming the CAC40 index of blue-chip stocks. Nonetheless, analysts said the provisions were significantly higher than had been expected.

Mr Vigneron said he was confident that the latest provisions were the end of the extra costs incurred on the group’s older, higher risk contracts – a maritime patrol deal in Turkey, a Danish ticketing project and the group’s exposure to the hugely over-budget A400M military transport aircraft. In total these contracts have cost the group €1.2bn in extra costs over the past two years, he said.

The latest charges “lift the principal uncertainties on these contracts”, Mr Vigneron said. “We can see the end of the tunnel on these projects and that allows us to be more confident on 2011 and 2012.”

The group will report results on February 24, when Mr Vigneron said more detail might be given on how the provisions were shared out across the contracts.

Thales also announced that turnover for 2010 had advanced by 2 per cent to €13.1bn, largely thanks to favourable exchange rates. Net cash for 2010 came in at €200m, while the order book was ahead of the group’s own expectations at €13.1bn, equivalent to one year’s sales.

Finally, Mr Vigneron dismissed speculation that he was under pressure from his shareholders over the group’s performance and his restructuring plan, which has badly shaken morale and raised questions over his management: “I am supported by my board. I am focusing on the future and I hope the difficulties are behind us.”

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