October 3, 2019 / 5:24 AM / 14 days ago

UPDATE 1-French group Thales targets higher profit margin of up to 12%

(Adds detail and background)

By Benoit Van Overstraeten

PARIS, Oct 3 (Reuters) - Thales targeted raising its operating profit margin to 11.5%-12% by 2023 following its recent acquisition of chipmaker Gemalto, the defence company said at an investor day.

Thales also forecast annual organic sales growth of 3-5% on average up to 2023 as the integration of Gemalto is expected to offset what it sees as a more “uncertain outlook” in the commercial space market.

Thales, which bought security software company Gemalto in April for 4.8 billion euros ($5.3 billion), had sales of 15.6 billion euros last year. Its operating margin stood at 10.6%.

The group’s chief executive Patrice Caine told reporters that the integration of Gemalto was likely to bring 300-500 million euros of additional revenue by 2023.

He added there was a “significantly higher potential thereafter” on the back of sustained demand for transport and security products, for which Gemalto’s technologies were expected to complement those of Thales.

Companies such as Thales have generally benefited from an overall rise in global military spending and the software security sectors.

A leading defence think-tank said earlier this year that global military expenditure had reached its highest level last year since the end of the Cold War, fueled by increased spending in the United States and China, the world’s two biggest economies. (reut.rs/2H5T6pJ)

Dassault Aviation holds a 24.7% stake in Thales while the French state has a 25.7% stake in the company.

$1 = 0.9125 euros Reporting by Benoit Van Overstraeten; Editing by Sudip Kar-Gupta/Matthias Blamont

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