Thales (HO) Investor Day 2024 summary

Strategic vision, transformation, and portfolio evolution

• Five-year strategy targets €25B+ revenue by 2028, with 5–7% annual organic growth and 13–14% EBIT margin, driven by a premium, tech-focused portfolio and premiumization of offerings.

• Portfolio reshaped since 2018 through acquisitions (Gemalto, Imperva, Tesserent, Cobham AeroComms) and divestments (transport), focusing on defense, avionics, space, and cyber/digital.

• Premiumization strategy enhances product desirability, pricing power, and market share through innovation, quality, and customer experience.

• R&D investment to remain high (6.5% of sales or €4–5Bn annually), focusing on AI, cybersecurity, quantum, and next-gen technologies, leveraging 33,000 R&D staff.

• ESG priorities include decarbonization, digital inclusion, ethical AI, and new 2030 objectives to be revealed in 2025, with recent inclusion in the CAC 40 ESG index.

Financial guidance, capital allocation, and performance

• Group targets 5–7% annual organic revenue growth, 13–14% EBIT margin, and €25B+ revenue by 2028, with EPS expected to rise 50–60% and free cash flow conversion at 95–105% of net income.

• Capital allocation prioritizes deleveraging (targeting <0.8x net debt/EBITDA), continued R&D and CapEx, selective M&A, and share buybacks as part of the toolkit.

• Book-to-bill expected to remain above 1, with a robust backlog (EUR 45B+), providing multi-year revenue visibility, especially in defense.

• Dividend payout ratio to remain at 40% of net income, growing in line with profits, with potential share buybacks if warranted by valuation.

• 2018–2023: sales grew from €15.9Bn to €19.1Bn, EBIT margin from 10.6% to 11.7%, adjusted EPS up 53%, and FOCF conversion averaged 135%.

Business unit outlooks and growth drivers

• Defense: 6–7% annual growth, 13% EBIT margin, driven by strong backlog, global demand, and premium, combat-proven products; Ukraine-related orders are not material.

• Space: 2% growth, EBIT margin to rise from 1% (2023) to 7%+ (2028) via cost adaptation, normalized R&D, and selective pursuit of new opportunities.

• Avionics: 5–7% growth, EBIT margin to improve from 11.5% (2023) to 13–14% by 2028, leveraging Cobham acquisition, IFE recovery, and digital/green solutions.

• Cyber & Digital: 6–7% growth, 16–17% EBIT margin by 2028, with a focus on recurring cloud-based revenues, integration of Imperva, and a "Rule of 30" (growth + margin).

• Cybersecurity business is 55% recurring revenue, with a shift to subscription models and strong cross-selling potential across a 30,000+ customer base.