Institutional Comment: DCNS blows a €100m hole in Thales’s waterline
Thales announced on 23 January that it will consolidate a €100m share of a likely €300m 2014 net loss from DCNS, the French warship builder in which it holds a 35% stake. The nature of DCNS's problems, especially in submarines, means we have an especially low degree of confidence that this charge will be the last for DCNS. More generally, this announcement highlights the ongoing value destruction of the DCNS investment for Thales' shareholders, made consistently worse by the minority shareholding, and hence worrying lack of management visibility or control. We see a key challenge for new chairman Henri Proglio and CEO Patrice Caine as reversing this, and the damage it has caused.Thales is an electronics and systems group, serving defense, aeronautics, transport, space and security markets. Co.'s operations can be divided into four operating segments: Aerospace (Avionics, Space), Transportation (Ground Transport Systems), Defence & Security (Secure Communications & Information Systems Land and Air Systems, Defence Mission Systems), and DCNS. Co. designs and delivers systems for all four environments: air, land, sea and space. These systems detect and assess threats, manage information, support command decisions and control engagements through to threat neutralization. Co. is active in ground transportation; air transport; navigation systems.
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