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17 Nov 03. For the first nine months of 2003, Thales group revenues totaled €6,568m, showing a decline of 13 % from €7,561m in the same period in 2002. The 2002 figure included the €460m billing of the first Sawari-2 frigate hull, delivered in Q3 2002 to Saudi Arabia.

On a like-for like basis, and excluding the €460m hull billing in Q3 2002, the decrease in revenues is only 3% for the first nine months. In Q3 2003, group sales declined by only 1%, which shows an improved trend compared to H1 2003 (-3.5%).

Although exchange rate fluctuations have had an important effect over the first nine months, their impact was less visible in Q3 2003. At 30 September, revenues generated by international subsidiaries, primarily in the UK and North-America, were reduced by €286 million after their conversion into euros, compared to a reduction of €218m in H1 2003

The change in the scope of consolidation represented -€68m in sales. This covers mainly the divestments of Thales Microsonics and Thales Contact Solutions in October 2002, as well as Thales Antennas in July 2003. On a like for like basis, revenues fell by 9%.

Aerospace sales remained stable, on a like for like basis, mainly due to the increased revenues in commercial simulation. This favorable trend offset weak sales in air traffic management, which is still affected by the commercial aviation market. In avionics, sales remained at the same level as in the first nine months of 2002 with growth in military avionics and helicopters, but declining sales in commercial avionics.

The most favorable trend was in IT & S activities, with sales declining by only 2% in Q3, on a like for like basis, compared to a decrease of 10% in H1 2003: This means that over the first nine months, IT & S revenues decreased by only 7%. This positive trend is largely explained by the sharp increase in revenues of the Secure Operations businesses.

Comment: These results reflect a trend seen in Thales’ sales seen over the past few months where the company has been tackled in an umber of key markets such as the UK by the U.S. majors for its key digitization products. In addition the fall-out post Iraq between the U.S. and France has dented the company’s image in the U.S. and halted, for the moment, exceptional progress made in such areas as TRS Cluster 2, where the company’s MBITR radio was sole sourced after the company made extensive modifications to bring it up to JTRS standard. Thales’ key combat radio division has not shown any large orders. Some observers suggest that the French Government, keen to dispose of its 30% stake in the company, may swap this for the stake in the soon to be privatized SNECMA, with Thales becoming a shareholder here.

In the long term, the news that EADS has disposed of a majority shareholding in its core HF radio division to Tadiran, (See TADIRAN COMMUNICATIONS NEW MAJORITY SHAREHOLDER IN EADS RACOMS) may indicate that the much mooted merger or some form of JV with EADS is edging closer?

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