Thales Raises Cash Flow Guidance on the Back of Positive Defense Spending Outlook

Narrow-moat Thales reported a solid set of results for financial 2021. The group significantly upgraded its medium-term free cash flow conversion guidance to 115%, from 95% previously, as it anticipates strong order flow. Order intake for the year excluding the transport business, which is up for disposal, grew by 18% to EUR 19.9 billion driven by a particularly strong fourth quarter, which includes 12 large orders and growth across mature and emerging markets. EBIT increased by 32% with margins increasing 200 basis points to 10.2%, driven by momentum in the defense segment, a return to profitability in the aerospace segment and cost synergies from the integration of digital identity and security. The group is guiding for 2022 midpoint sales of EUR 17 billion and a margin of 11%, implying midteen growth in EBIT. Growth over the medium term will be underpinned by increases in defense budgets, renewed growth in space and a recovery in the aviation markets.