Since the start of Russia's invasion of Ukraine, Thales shares have been on the rise on the stock market.
The title of the defense and high technology group has gained more than 20% in recent days.
Certainly we are witnessing a catch-up because the action was undervalued.
But it is driven, like the other values of the armaments sector, by the prospects of rising military budgets and deliveries of new generation armaments in Europe and cybersecurity needs, while cyberattacks from Russia are increasing. against Western interests.
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The war in Ukraine has caused an electric shock within the European Union (EU) where few countries devote 2% of their GDP to defence, a minimum level set by NATO.
In 2020, member countries spent 198 billion on their defence, or 1.5% of EU GDP, according to statistics from the European Defense Agency.
Threats in the physical and digital world
Germany has already reacted, as shown by Chancellor Olaf Scholz's historic decision to increase the defense budget to 100 billion euros in 2022, twice as much as in 2021 (47 billion).
And to devote, each year, 2% of German GDP to military spending, compared to 1.53% in 2021. The increase in the German military budget "
should have a positive impact on Thales' defense activity across the Rhine but also on its "cousin", Thales Netherlands, which is close to the German ecosystem.
Alongside its direct effects, other European countries wishing to strengthen their security could follow this movement
,” explains Patrice Caine, CEO of Thales, in an interview with
Le Figaro
.
Read alsoThales launches a “secret-defense” collaborative platform
Another sign of the European turnaround in favor of defence, the decision to no longer exclude from the European social taxonomy (Editor’s note: a system for classifying economic activities from the point of view of sustainability according to “social” criteria), investments in the military .
“
The new report on the subject was written before the outbreak of the Ukrainian crisis.
This dramatic situation reminds us of a simple principle: without stability and security, there can be no prosperity, inclusiveness and sustainable development.
However, it is indeed the defense industries that help democracies to ensure their sovereignty, their security and their stability
”, develops Patrice Caine.
“
We unfortunately live in a dangerous world.
This dangerousness has extended from the physical world to the digital world, with the multiplication of cyberattacks against citizens, States, companies, factories, critical infrastructures and even the media…
”, he adds.
Thales is currently "
overstretched
" by its major customers against whom cyberattacks are multiplying.
“
The demand for cyber solutions is massive
,” assures the CEO.
Parry quantum attacks
In this specific area, Thales is also well placed.
"
The development of our cybersecurity activities (which weigh 1 billion in turnover), makes Thales a world leader in the security and protection of encrypted data
", underlines the CEO of the group.
And with its defense activity, Thales is a "
trusted partner in helping States, businesses and, therefore, citizens to protect themselves, in the physical and digital world.
“, emphasizes Patrice Caine.
This, by continuing to invest, particularly in quantum technologies in order to deploy post-quantum algorithms that will be able to ward off attacks launched by quantum computers, which should be operational in less than ten years.
And who will be able to break the current digital encryption keys.
Alongside its positive outlook, the results published this morning for the 2021 financial year show that Thales is emerging stronger from the health crisis.
The results are in fact marked by a rebound, stronger than expected, in operational and financial performance.
Rebound in space activity
At 19.9 billion euros, order intake reached a historic level, which illustrates the commercial dynamism of defense and space activities.
In the military, the group signed 21 contracts worth more than 100 million each and benefited from the sale of 140 Rafale combat aircraft, to which it supplies its electronic systems.
It also won, for 1.5 billion, the Vassco contract to support aerial surveillance systems for the French armies.
In the space sector, Thales Alenia Space (TAS), its joint subsidiary with the Italian Leonardo, has won more than 3 billion contracts, in particular to supply the satellites for 5 of the next 6 Copernicus missions in Earth observation .
And TAS consolidated its leadership in next-generation reprogrammable satellites,
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The group's net income made a "
spectacular rebound
", increasing by 45% to 1.36 billion.
The operating margin (Ebit) recovered significantly, returning to a level above 10% (to 10.2% precisely), against 8.1% in 2020, based on pro-forma revenue (excluding transport activity sold to Hitachi Rail) up 5%, from 16.2 billion.
“
These results are very satisfactory because they are sound and are the fruit of the mobilization of all the teams.
They are not the result of reversals of provisions, as evidenced by the very good level of cash (free cash-flow) of 2.5 billion euros, generated by the group.
Which is the highest level ever achieved by Thales
,” says Patrice Caine.
11,000 recruitments in 2022
In one year, Thales's business model has gained in clarity.
The strategic decision, announced last August, to sell the signaling activity in transport, allows the group to find a balance between its commercial and military activities, and to focus on three businesses: aerospace, defense and identity-security.
Activities between which there are synergies and which share critical technologies, such as digital, cybersecurity or artificial intelligence.
"
It's a simplification of our business model, now focused on three businesses in which we have world leading positions, which makes our strategy even more clear
," summarizes Patrice Caine.
To consolidate its positions, Thales intends to step up its R&D effort, which was maintained during the Covid-19 crisis.
In 2021, this budget represented 6.3% of turnover (6.1% in 2020), “
i.e. the highest level in the history of the group
”.
"
We will continue to invest in the future by going beyond 6.5% of turnover in the medium term
", announces the CEO.
“
By investing in R&D, we are strengthening our technological leadership;
it is a major lever for winning contracts and developing our business worldwide.
By generating profitable growth, we maintain our ability to invest and attract talent on a massive scale.
It was into this virtuous circle that Thales entered nearly ten years ago
,”
This year, the group, which wants to beef up its R&D and engineering teams, plans to recruit 11,000 people worldwide (including 3,500 in France), ie the highest level ever reached.
However, it had not dried up its recruitments during the crisis with 7,000 hires in 2021 and between 5,000 and 6,000 per year until 2020.
“No negotiation with Atos”
Alongside organic growth, Thales also intends to pursue a policy of acquisitions targeted at medium- or small-sized players, with an enterprise value of up to 500 million euros, which, through their market and their technologies would be in synergy with the activities and the profitable trajectory of the group.
Thales is particularly interested in iXBlue, a French technological nugget with 100 million sales, leader in inertial units, sonars, optical components and artificial intelligence for the commercial and military maritime sector as well as the space sector.
On the other hand Thales reiterates its position publicly expressed on February 2, on Atos while rumors are growing on its possible interest in the Big data and security (BDS) activity,
of the computer group.
"
No negotiations are underway
, ”assures the CEO of Thales.
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The markets believe that Thales is little exposed to the consequences of the sanctions imposed by the European Union against Russia.
The group makes less than 1% of its sales there, by supplying the cockpit of the Sukhoï SuperJet100, a regional aircraft assembled at the rate of 20 to 25 aircraft per year, as well as bank and SIM cards.
“
Our diversified geographic footprint and the variety of our businesses make us resilient and reduce the impact of crises, whether health or geopolitical
,” insists Patrice Caine.
In 2022, the group expects a 2 to 6% increase in its turnover between 16.6 and 17.2 billion and an operating margin (Ebit) of between 10.8 and 11.1%.