• Order Intake: EUR25.3 billion, up 6% organically, with a book-to-bill ratio of 1.23.
• Sales: EUR20.6 billion, representing an 8.3% organic growth.
• Adjusted EBIT: Increased by 13%, with an EBIT margin of 11.8%.
• Adjusted Net Income: EUR1.9 billion, a 7% increase.
• Free Operating Cash Flow: Exceeded EUR2 billion, up 9%.
• Dividend Proposal: EUR3.70 per share, a 9% increase.
• Net Debt: Just over EUR3 billion at the end of 2024.
• Aerospace Orders: EUR6.4 billion, up 14% organically.
• Defence Sales: Close to EUR11 billion, up 13.3% organically.
• Cyber and Digital Sales: EUR4 billion, with a low-single-digit organic growth of 1.4%.
• CO2 Emissions Reduction: Scope 1 and 2 emissions decreased by 56.8% in 2024.

• Warning! GuruFocus has detected 7 Warning Sign with THLEF.

Release Date: March 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Thales (THLEF) achieved a record order intake of EUR 25.3 billion in 2024, with a book-to-bill ratio of 1.23, indicating strong demand across its portfolio.
• The company reported an 8.3% organic sales growth, surpassing the EUR 20 billion mark for the first time, driven by strong performance in the Defense sector.
• Adjusted EBIT grew by 13%, with an improved EBIT margin of 11.8%, reflecting operational efficiency and profitability.
• Thales (THLEF) successfully integrated acquisitions like Imperva and Cobham AeroComms, contributing positively to the company's financial performance.
• The company achieved significant progress in its corporate social responsibility goals, including a 56.8% reduction in Scope 1 and 2 CO2 emissions and increased gender diversity in senior management.

Negative Points

• The Space business posted a negative adjusted EBIT due to ongoing restructuring efforts and market challenges, impacting overall profitability.
• Higher financial expenses were incurred due to increased debt from recent acquisitions, affecting net income growth.
• The Digital identity segment faced challenges, particularly in the banking and payment solutions markets, leading to slower growth.
• Supply chain issues, particularly in PCBs, remain a concern, requiring ongoing management and investment to ensure stability.
• The company's future growth in Defense is contingent on converting political statements into actual contracts, which may take time to materialize.

Q & A Highlights

Q: What enabled the strong Defence performance in Q4, and what are the margin expectations for 2025, particularly in Aerospace? A: Pascal Bouchiat, CFO, explained that the strong Q4 Defence performance was due to delivering equipment that was ready but awaiting client approval, such as radios in the US. Additionally, supply chain improvements allowed for increased radar production. For 2025, Aerospace margins are expected to improve due to Space recovery and full contributions from Cobham AeroComms. Cyber and Digital are also expected to see margin expansion, while Defence margins should remain stable at around 13%.

Q: How does the current increase in Defence spending across Europe affect Thales' targets, and which Defence products can be accelerated to market? A: CFO Pascal Bouchiat noted that the 6%-7% Defence growth target for 2024-2028 was based on existing market conditions. Any increase in Defence spending would not impact 2025 significantly, as growth will come from the backlog. CEO Patrice Caine added that Thales can adapt quickly to demand, with existing products like radars and missiles being easier to accelerate to market compared to new developments.

Q: Are there any shifts in M&A priorities towards Defence assets, and what is the status of discussions with Leonardo and Airbus regarding Space? A: CEO Patrice Caine stated that while deleveraging remains a priority, Defence acquisitions are possible but complex due to government involvement. Discussions with Leonardo and Airbus are preliminary and non-binding, with no clear outcome yet. Thales is focusing on its Space adaptation plan to restore profitability by 2027-2028.

Q: What is the current status of the supply chain, particularly for PCBs, and how is Thales addressing these challenges? A: CFO Pascal Bouchiat acknowledged that while the supply chain situation improved in 2024, challenges remain, especially in Europe for PCBs. Thales is investing in this area, but it will take a few years to fully resolve. Despite these challenges, Thales exceeded expectations in 2024 due to strong team mobilization.

Q: What are the expectations for Defence growth in 2025, and how does Thales manage short versus long cycle products? A: CFO Pascal Bouchiat confirmed that the 6%-7% Defence growth target remains for 2025, driven by backlog and existing Defence spending increases. Thales' Defence business is primarily long cycle, but existing products like radios and radars can be delivered more quickly without new development, allowing for faster response to demand.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.