Safran's (PA:SAF) ambition in the security market appears to have waned, with the company confirming a review of the division’s operations. While long-term guidance to 2020 appears conservative, it still implies recurring profit growth in excess of 5% pa with expanding margins and growing cash flow. The recent share price retrenchment fails to recognise this adequately.
Security operations future under review
With the detection operations up for disposal, centred on the former GE Homeland Security business, the rest of the Security division involved in ID and security is now undergoing a formal strategic review. This will determine the most appropriate route to optimise shareholder value and could result in a complete withdrawal from the segment. The process should be complete by the year end.
Increased focus on core aerospace and defence
The new management team appears set to follow the Airbus Group (PA:AIR) example and focus its capital resources on developing the core Aerospace and Defence capabilities of the group. Propulsion, while transitioning to new engine technologies, appears set for a period of strong growth driven by its large installed base and associated aftermarket. Management also expect to raise margins in Aircraft Equipment, Defence and Security by 1% point per year.
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