Not expecting jumbo contracts in 2017
Thales recorded a 7% drop in defence and security orders in 2016, despite securing a number of large military deals, including support for the British Army’s WATCHKEEPER unmanned aerial vehicle (UAV), and work for India’s new Dassault RAFALE fighter.
The company says the drop was expected, and came after a successful “bumper” year for it in 2015, during which a number of large contracts were signed by Thales, including for 24 RAFALEs each for Egypt and Qatar.
In June 2016, the company was awarded an £80 million contract by the British Army to support the WATCHKEEPER UAV to provide technical support and training. This was followed in September by a contract by the Indian MoD for 36 RAFALE multi-role fighters, for which Thales provides the RBE2 active electronically scanned array (AESA) radar, plus the SPECTRA electronic warfare system, optronics, the communication navigation and identification system, a number of cockpit display systems, power generation systems and logistics support.
“There is positive momentum; the order intake has decreased, but [then] 2015 was a bumper year for us,” Pascal Bouchiat, chief financial officer at Thales, told media at a press conference in Paris on 28 February.
He added that there were still “order successes” in 2016, and “profitability is still up and stable”.
Other defence order successes the company secured in 2016 included the provision of improved versions of its SEARCHWATER radar and CERVURUS mission system for the Royal Navy’s Leonardo MERLIN HM Mk2 helicopter, under the UK Ministry of Defence’s Crowsnest programme that is led by Lockheed Martin.
Additionally, Thales sealed deals to provide security for 170 Netherlands ministry of defence sites, to produce a military satellite for a Middle Eastern customer, to modernise military and civilian air traffic management systems in Bolivia, and to carry out work on the Franco-British MMCM autonomous mine countermeasures programme.
In comparison to the recorded orders drop, sales of defence and security equipment on the other hand were up 4.3%, with land and air systems representing the strongest growth, specifically in air defence, radars, optronics and missile electronics.
“The defence mission systems segment delivered vigorous growth in fighter aircraft systems, surface ship systems and in intelligence, surveillance and reconnaissance solutions,” the company says. It added that only the secure communications and information systems segment saw a slowdown in sales, which it contributed to a large success for the French ministry of defence in 2015 that saw it deliver a large military network service.
Of the successes in 2016, emerging market sales were said to be of significance, which the company claims were “sluggish” until 2014. Of the share of the defence and security division, 50% of sales were in Europe, while 40% were in the Asia-Pacific and Middle East.
Although orders were down in 2016, the company does not expect 2017 to provide a boost to the order book through its defence and security business however. “We do not expect any jumbo contracts [in 2017],” Patrice Caine, chief executive of Thales, added, noting that it is nevertheless “pursuing some hot commercial prospects”.