(BFM Stock Exchange) – The defense and aerospace group published results above all floors, especially for orders and cash, this Monday, March 4. The company has decided to pay a dividend higher than consensus.

It is an understatement to say that the annual results of Thales, published this Tuesday, March 4, are part of a particular context.

European leaders have realized that with the Trump administration, they should count less on the United States and more on themselves to ensure their security. “The recent interactions between Ukrainian President Zelensky and Donald Trump have sparked alarms on Europe’s vulnerabilities in defense,” noted AlphaValue on Monday.

Europeans have multiplied the august declarations of a jumper of military spending in Europe. French President Emmanuel Macron spoke of a target representing 3% to 3.5% of GDP (against a target around 2% at present for NATO), the United Kingdom has placed an order of 5,000 air defense missiles in Thales for Ukraine. Previously, the president of the European Commission, Ursula von der Leyen had mentioned the possibility of loosening the European budget vice to increase military spending. And a political consensus in Germany emerges to allocate much more means in defense.

This favorable environment led to a leap in the values ​​of defense, especially Thales. The company chaired and managed by Patrice Caine won 16% on Monday and 60% (at the end of Monday) since the start of the year, the highest increase in CAC 40.

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Strong growth in defense at the end of 2024

The title flight continues this Tuesday after the company delivered its results. Thales climbs by 9% around 11:30 am, signing the highest increase in CAC 40 and bearing its increase since the start of the year to 80%. Dassault Aviation, which has 29.9% of the capital of Thales, advances 3.5%.

The other European defense companies increased more modestly (Rheinmetall gains 3.5%, BAE Systems 1.6%, Leonardo 1.4%), which suggests that the rise in Thales has a lot to do with the results communicated on Tuesday.

Thales beat expectations on all floors, whether in order, the growth of the fourth quarter, profitability, cash flow and even the dividend.

Over all of 2024, Thales took 25.3 billion euros in orders, translating an increase of 6% into comparable data over one year, and generated income of 20.58 billion euros, up 8.3% in comparable data. This clearly exceeds analysts’ expectations, housed at 23.8 billion euros for orders and 20.14 billion euros for income, according to a consensus compiled by the company.

Thales ended up the year on the side. Order sockets, certainly, fell 12% in comparable data but they compare to a fourth quarter of 2023 which had been exceptional (growth had then reached 36%), with in particular a mega-contract of 1.8 billion pounds in the United Kingdom. Over the last three months of 2024, Thales has garnered 16 major orders, especially in space.

Income, they have displayed vigorous growth in the fourth quarter, 12.9% in comparable data. Thales especially benefited from a stratospheric increase in its income in the Defense Division (which represents 58% of the total) of 23.9% in comparable data.

The financial director, Pascal Bouchiat, warned that the performance in defense in the fourth quarter was not transposable to the next quarters for a certain number of reasons.

First the company benefited from radios deliveries to the United States which were already ready but awaited a green light from the customer to be given to this same customer. Then, Thales was carried by an unexpected improvement of the logistics chain on the production of one of its flagship products, namely the “Ground Master” radars. Thales had previously been penalized by “stop and go” in this production chain, so that the rise of deliveries in the fourth quarter was brutal, explained Pascal Bouchiat.

The cash surprises

Beyond the turnover and orders, the adjusted operating profit of Thales increased by 5.7% in comparable data, to 2.42 billion euros, while the corresponding margin was 11.8% against 11.6% in 2023. This is a little higher than expectations (2.35 billion euros for the amount and 11.7% for the margin rate).

Net profit jumped 39% to 1.42 billion euros. The operational cash flow remained stable at 2.03 billion euros, but largely exceeded expectations, which were 1.7 billion euros.

For Oddo BHF, this cash performance is “the main surprise of the publication”. This generation of cash was supported by “70 million euros in deposits for Rafale orders in Serbia (Thales equipment represents around 20% to 25% of the value of the fighter plane, editor’s note)” and reflects “the excellent dynamics of orders, the phaseing effect on cash inputs linked to the execution of contracts, and the mobilization of the treasury plan” BHF.

Building on these results, Thales announced that he would offer a dividend of 3.7 euros per share for 2024, surpassing the expectations of consensus, which were 3.47 euros, according to Jefferies.

Regarding its prospects for 2025, the company indicated relying on control of orders above turnover, on growth in comparable data located between 5% and 6%, corresponding to income between 21.7 billion and 21.9 billion euros. The management specified during a conference call with analysts waiting for its sole Division Defense a growth between 6% and 7%. Thales also tables an adjusted operating margin between 12.2% and 12.4%.

These prospects are online or even a little higher than expectations, analysts tabling for 2025 on a turnover of 21.55 billion euros and on an operating margin of 12.3%.

Pending contracts

Oddo BHF judges, however, that the prospects for income are “even more conservative (prudent, editor’s note) than expected”. Jefferies stresses that these income targets “probably not reflect the latest developments on defense”.

During the conference calling with analysts, Thales management was not surprisingly assaulted questions on Europeans’ statements on military spending.

Pascal Bouchiat stressed that the prospects communicated by the company in the medium term, namely growth of 6% to 7% per year over the period 2024-2028, were based on the environment of the time (November 2024). These targets therefore do not include a potential acceleration of military expenditure as formulated recently by European leaders.

The financial director explained that this potential acceleration would “probably not” have a major impact for 2025, the year during which the turnover in the defense will be “essentially” achieved from the company’s order book. But for the future, the company will accelerate provided that the declarations of the leaders actually result in orders.

Patrice Caine, the CEO of Thales, insisted a lot on this point. Thales has in the past demonstrated its ability to increase its production capacities with an increase in demand.

But the company will not continue to increase these same capacities which if the “ambitious declarations” of leaders are reflected in “additional contracts”, he warned.

“This is probably where there is a gap between political statements which ensure that there is a strong desire to spend more,” he said. “When the contracts come we will be ready but it is useless to be ready too much ahead,” added Patrice Caine.

“The proof is in the pudding,” said the leader in English, which can be roughly translated by “we are waiting to judge on pieces”.