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EUROPEAN MAJORS REPORT RESULTS

EADS
Thales

EADS and Thales reported results this week. EADS showed continued growth driven by Commercial Aircraft sales whilst Thales’s results were bolstered by the inclusion of DCNS figures and the Indian Mirage deal.

EADS

27 Feb 13. The Wall Street Journal reported that European Aeronautic Defence & Space Co. EAD.FR said its 2012 earnings rose 19%, thanks to booming sales in its Airbus commercial-aircraft business. Its defense arm, Cassidian, meanwhile, is stagnating, now contributing just 6.5% of EADS’s earnings before interest and tax.

Yet a key aim of the Franco-German aerospace giant’s foiled merger with BAE Systems BA.LN last year was to help the company eventually achieve a 50:50 split between its civil-aviation and defense businesses, giving it a profile and stock-market rating more like that of rival Boeing BA . The 6.5% rise in EADS’s shares on Wednesday may be partly due to relief that plan now looks firmly in the trash can. The relative performance of EADS’s different divisions isn’t the only reason any defense deal now looks unlikely. EADS Chief Executive Tom Enders made no secret of his desire to use the BAE merger to dilute stakes held by the French, German and Spanish governments: It was German Chancellor Angela Merkel who eventually kiboshed the BAE deal. But an agreement sealed in December for the governments to reduce their collective EADS holdings to 28% from 51% has already achieved one of Mr. Enders’s aims. Meanwhile, EADS’s core aircraft business is surging ahead.

The company delivered a record 588 aircraft last year, including 30 of its giant A380s; EADS has orders for another 4,700 airplanes. Continuing cost reductions mean EADS expects earnings per share to rise another 11.6% next year, while it raised its annual dividend by a third. That has all helped EADS’s shares to rise 45% since falling sharply after the BAE deal was first revealed last September. A merger now with BAE on September’s terms, giving the U.K. company’s shareholders 40% of the combined business, would imply EADS paying a near-30% premium, compared with 11% back then. In turn, EADS already is trading at 14.8 times its expected earnings for 2013, above Boeing at 14.7 times, according to RBC Capital Markets. Mr. Enders has reason to be secretly grateful to Ms. Merkel.

EADS (stock exchange symbol: EAD) achieved strong revenue and underlying profit growth for the full year 2012. Despite a difficult macro-economic environment, EADS saw continued momentum in its
commercial activities while defence revenues were broadly stable. The order intake(5) totalled €102.5bn in 2012 while EADS’ order book(5) increased in value to € 566.5bn at the end of the year. Revenues amounted to €56.5bn. The EBIT* before one-off of around €3.0bn reflected the strong operational performance at Airbus Commercial with positive contributions from Eurocopter and Astrium. The reported EBIT* increased to €2.2bn. The Net Cash position at the end of the year was €12.3bn.

“EADS achieved double-digit revenue and profit growth during 2012 while the order backlog increased further,” said EADS CEO Tom Enders. “A strong focus on deliveries helped to significantly improve cash generation during the fourth quarter. Going-forward, the focus on bottom line growth remains our priority number one as a management team. And there’s still some way to go to meet our profitability targets. If anything, the new governance, the new shareholder structure and the new Board as of end March will further energize the company and its employees on their successful international growth path.”

For the full year 2012, EADS’ revenues increased by 15 percent to
€56.5bn (FY 2011: € 49.1bn). This strong performance was driven mainly by higher volume and more favourable U.S. dollar rates at Airbus Commercial as well as solid increases at Eurocopter and Astrium. Revenues at Eurocopter and Astrium were boosted by the services businesses, including Vector Aerospace and V

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