13 Aug 03. French defense-electronics company Thales SA reported Wednesday a drop of 8.5% in first-half revenue to EUR4.56bn from EUR4.98bn in the same period of 2002. The first-half 2003 figure came in well below analysts’ expectations of EUR4.85bn. Excluding exchange-rate fluctuations and changes in the company’s structure, revenue declined by 3.5%. Thales said currency movements – chiefly the euro’s rise against the U.S. and Australian dollars and sterling – had reduced revenue by EUR218m. As expected, revenue of Thales’ information-technology and services division slumped 20% to EUR980m from EUR1.22bn a year before. Revenue of the company’s defense division fell by 4.7% to EUR2.77bn from EUR2.91n, while Thales’ aerospace business experienced a 6.2% decline to EUR763m from EUR814m.

Comment: At a time when all eyes are looking to the new EUROSSSYSTEMS company set up by BAE and Finmeccanica, Thales needed to please analysts with better results. In the short term there is little on the horizon to expect a huge boost in sales whilst in the medium term the company ahs the UK’s FIST and Watchkeeper programmes to look forward to. However some observers suggest that the FIST programme could never see the light of day in its present form with the possibility of a package of smaller contracts resulting from the study. With EADS also disappointing, could this be the time for the two companies to make it up?