Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's Thales full year 2022 results conference call. There will be a presentation followed by a question and answer session. At which time, if you wish to ask a question, you will need to press star one, one on your telephone and wait for your name to be announced. I must advise you that this conference is being recorded today. I would now like to hand the conference over to Mr. Bertrand Delcaire, VP, Head of Investor Relations. Please go ahead, sir.
Yes. Hello. Good morning. Welcome, and thank you for joining us for today's presentation of Thales' 2022 full year results. I'm Bertrand Delcaire, the Head of Investor Relations. With me today are Patrice Caine, Chairman and CEO, and Pascal Bouchiat, our CFO. As usual, the presentation will be in English and followed by a Q&A session. It is webcast live on our website at thalesgroup.com, where the Slides, press release, and consolidated financial statements are also available for download. A replay of the call will be available in a few hours. With that, I would like to turn over the call to Patrice Caine.
Good morning, everyone. As usual, let's start with the highlights of 2022, Slide 2. Starting with the commercial dynamics, which was really strong across the entire portfolio and drove a new record for both order intake and backlog. Our sales growth ended at the top of the guidance range, set in July 2022, plus 3.5% to 5.5% organic. In spite of the various operational headwinds, Russia, supply chain tensions, cost inflation, EBIT margin reached a new high of above the previous peak of 2019. Last but not least, on the results side, and of course Pascal will come back on it, we materially outperformed on free operating cash flow. Three highlights on the strategy side. First, we remained quite active from a portfolio management standpoint.
On top of the disposal of transport, which kept busy many of our teams last year, we announced two disposals representing around 3% of sales, the IoT connectivity module business and the Aeronautical electrical systems. As announced last year, we materially accelerated our capital deployment, which reached almost EUR 1.9 billion in 2022, including EUR 1 billion reinvested in the business through CapEx and acquisitions and almost EUR 900 million in shareholder returns. We continued to implement the ESG action plan that we presented back in October 2021, I will come back on this topic later in the presentation. Let's move now to Slide 3, looking at our financial performance in a few charts. At EUR 23.5 billion, order intake was up 18%.
For the second year in a row, the book-to-bill ratio was significantly above one, reaching 1.34. As mentioned, organic sales growth was at the top of our guidance range, +5.5%. EBIT and EBIT margin continued to improve strongly, respectively up 17% and 80 basis points. At EUR 1,556 million, adjusted net income grew by 14%. This level is 11% above the previous peak, which was achieved in 2019. Free operating cash flow remained very strong, above EUR 2.5 billion. That even after the capital deployment I mentioned, we ended the year almost net cash. Last chart on the side, the dividend.
This new year of strong financial performance is leading our board to propose to the next AGM a 15% increase in the dividend at EUR 2.94 per share. Now turning to Slide 4 and looking at our non-financial performance in 2022. I will come back later on our sustainability priorities going forward, but I wanted to first show you our quantitative progress in 2022 along the four pillars of our action plan. First pillar, our strategy for a low carbon future. You remember that in 2021, our operational CO2 emissions were already behind our 2023 target, but this was partly due to the constraints COVID-19 was then imposing on business travel. In 2022, we managed to offset the partial recovery of business travel, thanks to a further reduction of electricity consumption and an extensive move to renewable energy supply.
Last year, we were again significantly ahead of our 2023 target on this KPI. Turning to the deployment of eco-design at 84% last year, the percentage of new developments incorporating eco-design remained at a high level in line with our ambitious target to reach 100% this year. Second pillar on the right, diversity and inclusion. The percentage of management committees with more than 3 women reached 76% in 2022, meaning that we have already achieved this 2023 target as well. We have already decided to upgrade it by 2026. We aim to have at least 4 women in three-quarters of our management committees. The percentage of women in senior management is well on track to reach our 2023 target at 19.4%. It gained 50 basis points compared to 2021.
Since 2018, this ratio has increased by almost 3 points, equivalent to almost 20% more women among senior managers. Turning to ethics and compliance. On top of the extension of our ISO 37001 certification to the UK and the Netherlands, we again mobilized the teams on anti-corruption training of all exposed employees. With more than 6,100 employees trained in 2022, we achieved this target as well. Finally, on health and safety at work, like on operational CO2 emissions, the challenge was to retain the improvements that were achieved in 2020 and 2021 when COVID-19 drove a high volume of work from home. As you can see on the chart, we were successful on this KPI, which remained 34% below 2018 like in 2021.
All together, as you understand, we are fully on track to deliver on the ambitious sustainability targets we set for 2023. After this, rapid introduction, I would like now to hand over to Pascal, who will comment our financial results in greater details.
Thank you, Patrice. Good morning to everyone. I'm now on Slide 5. Starting with our order intake dynamics. As Patrice mentioned, we achieved again a very strong order intake in 2022. EUR 23.6 billion at 16% organically and a book-to-bill of 1.34 and even 1.43 excluding DIS, with book-to-bill structurally equal to 1. With 29 large orders over EUR 100 million in 2022, we achieved an even better performance in terms of large orders than in 2021. In particular, we booked one jumbo contract, the Rafale order from the UAE for 80 aircraft. Q4 was again a strong quarter with 13 large orders. Both categories of orders with a unit value of less than EUR 100 million were also robust.
Orders between EUR 10 million and EUR 100 million were at 14%, and small orders below EUR 10 million were up by an impressive 15%, driven not just by DIS, but also by aerospace at +9% and also defense and security at +14%. The dynamics were strong in emerging countries at 68% organically and driven by the jumbo contract in the UAE, and also remained strong in mature countries. You remember that in 2021, we booked a jumbo contract in France for the so-called BASCO program. Overall, a very solid performance in 2022 in regards to order intake. Moving now to Slide 6, looking at sales. At +1.7%, the currency effect was significantly weaker in Q4 than Q3, and it represented a 2.3% boost to sales over the full year.
The total scope effect represented a bit less than 1% of sales. Turning to organic growth, over the full year, sales achieved the top of the guidance range at +5.5% with different dynamics across the 3 segments. As Patrice mentioned already, driven by the very strong performance of DIS over the year. I will come back in greater details on the 3 segments in the next Slide. Now moving on to Slide 7, looking at the adjusted P&L from sales to EBIT. As mentioned already, EBIT was up by 17.3% year-on-year with margin progressing from 10.2% in 2021 to 11% in 2022, which is, as Patrice said, a new record EBIT margin for the group.
As I mentioned at H1, we booked two one-off item that almost entirely balance each other. On the one hand, this was recorded in the gross margin, a negative impact coming from the economic and trade sanctions imposed to Russia, which represented EUR 52 million of non-recurring expenses. On the other hand, the EBIT contributions of Naval Group was boosted by the compensations agreements related to the Australian submarines. This item represents an income of EUR 45 million for Thales over the full year. We'll have a look at the drivers of this performance in a minute, looking at the key items of the P&L, let me point out that first, we can see a positive impact on gross margin by 30 basis points, up from 27.2% to 27.5%, despite the Russian one-off.
We can also see that our indirect costs have increased less than our sales by 110 basis points, 4.4% versus 5.5%. As expected, our restructuring costs remain low around EUR 100 million. Finally, the contribution of Naval Group was boosted by the one-off I mentioned earlier. Excluding it was up from EUR 69 million in 2021 to EUR 74 million in 2022. Slide 8. Now looking as usual into greater details of the drivers of the change in our EBIT between 2021 and 2022. The weakening of the euro had a small positive effect on our EBIT. You see the positive currency impact of EUR 25 million.
Our gross margin continued to improve up by EUR 311 million versus 2021 and was impacted for around EUR 50 million by the negative one-off I've just mentioned. Within indirect costs, let me mention that the low increase in R&D expenses doesn't reflect a change of strategy, but simply the impact of recruitment tension which led us to allocate the available resources to project execution. R&D remains a key driver of differentiation for Thales, Patrice will come back on the subject in greater details. On the other hand, the increase in marketing and sales was mainly the results of the outperformance on order intake, which boosted the bonuses for the sales teams. Finally, equity affiliates contributed more to our EBIT than in 2021.
Putting aside the Naval Group positive one-off, the improvement mostly came from the recovery of our aeronautics equity affiliates, including a small negative one-off we had booked in 2021. Now looking briefly at each segment one by one. Now on Slide 9 with aerospace. Orders were up at +3% organically on the back of an exceptional +48% organic growth in 2021. The aeronautics business had robust commercial activity along the year, confirming the rebounds of the different businesses, especially the civil aftermarket orders, up by 32% over the full year. Also with 2 large contracts over EUR 100 million added to the backlog, the first one since 2019 and the COVID crisis. Commercial activity also remains strong in space with 11 large orders over EUR 100 million and a book-to-bill of 1.28.
Sales came at a +2.4% organically with several factors explaining the soft performance. As I mentioned at H1, several contracts in Russia had to be terminated with an overall impact of EUR 80 million to our aerospace business. The wide-body market remained below expectations in term of rebound during the year. Of course, this was related to the slower-than-expected air traffic recovery on international flights and also the delays in aircraft production to convert. Microwave tubes, which normally represent sales around EUR 500 million every years, were down by 11 persons versus a good performance in 2021. Last but not least, of course, the segments had to face ongoing supply chain and recruitment tensions, which of course, didn't help to accelerate the delivery of our program.
Despite all these headwinds, it's important to note that aeronautics sales were up 9% organically over the full year of 2022, driven by the civil aftermarket, up 23% organically. If we look at profitability, EBIT margin continued to increase from 4.5% in 2021 to 5% in 2022. Again, the progressions can appear soft. However, please keep in mind that all the headwinds I've just mentioned also had an impact on the EBIT margin, especially the supply chain tensions, as well as cost inflation and of course, the negative one-off related to Russia. Without this one-off, EBIT margin would have reached 6%. Moving to Slide 10, defense and security. Order intake amounted to almost EUR 14 billion, up by 23% organically, setting for the 4th year in a row, a new record high.
The segment recorded 16 orders above EUR 100 million, including 7 new ones in Q4. Let me point out here that this exceptional performance drives a new record high backlog at EUR 31 billion, which represents 3.4 years of sales. It reinforces our confidence on revenue growth on a midterms perspective. Sales amounted to EUR 9.2 billion, up by 3.8% organically versus 2021. Many business units, which again meet to high single-digit type of organic growth, including underwater system, cybersecurity, and tactical radio communications. The overall business was impacted by ongoing tensions, both in recruitment and supply chain. For the latter, we estimate the headwind to be around EUR 100 million on our 2022 sales. Which means that the organic growth of the segments would have reached 5% without these temporary operational disruptions.
EBIT margin remains strong, once again, in the upper range of the midterms guidance at 12.9%. This is an addition confirmations of the resilience of our defense business, maintaining best-in-class level of margins despite the supply chain tensions and cost inflations it had to face during 2022. Last segment on Slide 11 with DIS, Digital Identity and Security. Sales amounted to EUR 3.6 billion, up by an impressive 14.9% organically versus 2021. The full 9 months performance extended into Q4 at 12% against icons. You remember that sales were already at double-digit in Q4 2021. All this despite the ongoing tensions on supply chains, especially in regard to chips procurements. The performance was robust across the board.
The cybersecurity activities performance, up by more than 15% organically over the full year, was driven by our encryption business, where Thales confirmed again its leadership position. Despite challenging supply chain conditions, the biometrics business continued to recover from the impact of the COVID-19 crisis on passport demands. Finally, smart cards recorded an exceptional year, 2022. In the context of supply chain tensions, the team managed to pass through the high cost inflation to its customers. At EUR 358 million, EBIT was up by almost 38% organically, with an EBIT margin progressing significantly from 11.9% to 13.7%. The segment fully benefited from gross margin improvements compared to 2021, thanks to favorable price and mix effects, in spite of the negative global inflation impacts on materials, labor, energy, and logistic costs.
Also, I mean, the leverage on higher cybersecurity and smart cards sales. As you can see, in spite of the COVID-19 crisis, we have overachieved our midterms targets of an EBIT margin between 12.5% and 13.5% one year earlier than planned. Now, turning to Slide 12, looking at items below the EBIT. First, taxes. As you can see, the effective tax rate is back at a normalized level after the 2021 decrease, which resulted from 2 positive one-off items. We expect the tax rate to remain around 20%-21% in 2023. Second, adjusting net income from discontinued operations. This is, of course, the contribution of transport, which was slightly lower than in 2021. Finally, minorities were down.
The main driver here is the Thales Alenia Space profitability, which was boosted by a tax one off in 2021 and affected by the negative one off related to Russia in 2022. All in all, this draws an adjusted net income group share of EUR 1,656 million and an adjusted EPS of EUR 7.35. 11% above the previous peak that we achieved 2019. Moving now to Slide number 13. Let's have a look at the conversions of EBIT into free operating cash flow. First, a word on the usual recurring items. The biggest change here is on equity affiliate, which corresponds to the gap between our share in their net income and the actual dividends we received from them. This is where you find the positive one off at Naval Group.
After 2 years of strict CapEx control, CapEx moved above D&A, resulting in the global negative balance of EUR 55 million on our cash conversions. Patrice will come back later on our future CapEx plans. As usual, the big swing factor was a change in working capital, which represented EUR 966 million tailwind in 2022, boosted by several factors that I will discuss in greater details on the next Slide. Other cash items, not including the EBIT, such as cash restructuring, hikes or IFRS 16 lease depreciations, amounted to a net positive EUR 96 million. The biggest negative effect here is the cash foreign exchange results. Finally, the contribution of transport became negative by EUR 66 million, EUR 68 million in 2022, including working capital effects and some one-off costs associated with the divestment of the business.
All in all, an exceptionally strong free cash flow performance above EUR 2.5 billion, again, in 2022. What is the impact of this strong 2022 free cash flow performance on our mid-terms guidance? I am now on Slide 14. To answer these questions, we need to look into the drivers of our 2022 outperformance. There were actually mainly three reasons to highlight. First, the better than anticipated order intake of the full year, especially on export market, again. Second, we recorded early payments from customers. Finally, the ongoing outcome of our cash action plan with additional positive impacts on items like on time collection of invoices due and successes controlling the level of stocks despite inflation and the higher level of activity overall.
For 2023, we expect a return to a more normalized level of cash conversions, 90% or slightly above. In euro terms, this is roughly equivalent to EUR 6.5 billion of free operating cash flow over the 3 years period from 2021 to 2023. This represents around EUR 700 million above current consensus. Combined with the already strong performance in recent years and the exceptional performance in 2021 and 2022, this drives a 15 points upgrade to our 2019-2023 cash conversions target from a previous average of 115% to 130% on a reported basis. Moving now to Slide 15, with a quick look at the evolution of our net debt position. As mentioned by Patrice, we materially increased our capital deployment last year.
You can see that EUR 463 million were spent on acquisitions in 2022. The dividend cash out was also materially up 35% above 2021. The cash out related to the share buyback amounted to EUR 329 million. In 2022, we purchased 2.8 million shares over 9 months, which is fully in line with the target to purchase 7.5 million shares over 24 months. At the end of December of 2022, the group almost had a debt-free position at EUR 35 million of net debt. Now I mean to finish, a word on dividends on Slide 16.
This year, I mean, the board has decided to maintain the payout ratio at 40%, which drives a dividend of EUR 2.94 per share, up 15% versus 2021. As you see from the chart, this corresponds to a 7% per year increase in the dividend since 2018, slightly above EPS growth. That's the end of this financial review. I'm now turning over the call to Patrice, who will address our strategic priorities and our guidance.
Thank you, Pascal. I'm now on Slide 18, turning to our strategy and outlook. Here are the four strategic priorities we intend to focus on in the near term. Let me address them briefly one by one. First, considering the dynamics in our markets and the strength of our backlog, our first priority is really to ramp up capacity, which of course means increasing staff and launching engineering and production facilities and making sure our supply chain follows us. I'm now on Slide 19, starting with staff. As you can see on the chart, we initiated a major step-up in our recruitment plans early last year. To achieve it and gain efficiency, we set up a global integrated talent acquisition function and increased its scale by 20% also. We reworked our employee value proposition, which was launched in October last year.
In parallel, we maintained a solid retention performance. Global turnover increased by only 1.5 points. Altogether, in spite of tensions on some labor markets, we managed to recruit 11,500 people last year above the target we had set. Going forward, as announced a few weeks ago, we plan to recruit more than 12,000 people this year. To help us deal with the tension in specific areas, we'll further develop our engineering centers in Romania and India, and we will also rely more on our partnerships with external engineering companies. All in all, ramping up on recruitment is essential to address demand and deliver growth, but this is something we know exactly how to address. Moving to Slide 20, ramping up also means expanding our facilities and investing more in more engineering and industrial tools.
As shown on the chart, we plan to significantly increase our CapEx in 2023 and 2024, and the majority of this increase will serve to extend sites and to buy additional engineering and production tools such as test benches. For example, by 2025, we plan to more than double our radar production capacity in France. Of course, in parallel, we will continue to work with our supply chain in order to secure its ramp-up. Over the past two years, in particular to deal with the tensions on chips, we have developed a broad action plan with our suppliers. Pascal explained how we managed to limit the impact of these disruptions on customers, and we intend to continue doing so in 2023. Second priority, R&D investments, which remains a major driver of competitiveness in our markets. I'm now on Slide 21.
Two weeks ago, Clarivate, the innovation analytics company, named us among the top 100 global innovators for the 10th time. Only two other aerospace and defense companies worldwide have been named that many times. This gives you an idea of the strength of our R&D leadership. To achieve it, we continue to leverage all sources of funding, of course. A good example is R&D grants from the EDF, European Defence Fund. We are involved in 21 of the 60 collaborative projects it decided to fund as part of its first batch of grants. This represents EUR 70 million in additional R&D money for us. Second example, we were also very successful in gaining access to upstream research funding from the French MOD, and our 2022 grants were 25% above the average of the previous five years.
Among the focus areas last year, I have already mentioned quantum technologies, especially quantum sensors and quantum communications and edge computing. These remain at the top of the list. New focus areas include brain-computer interface and 6G, which could find a way in some of our solutions on a 5-10-year horizon. Moving now to Slide 22 to address the third strategic priority, which is sustainability. As a tech company, we know that our biggest contribution to sustainability is through our portfolio of solutions. You remember how we showcased at our ESG event back in October 2021, many of our products that help make the world safer, greener and more inclusive. From that perspective, we were very active in 2022.
December saw the launch of two major environmental observation satellites, Meteosat-12, the first of the six third generation geo-weather satellites Thales Alenia Space is building for Europe, and SWOT, the game-changing NASA/CNES satellite that surveys earth water on which we provide the main instrument. We also booked the next phase of each of the five Copernicus missions we are contributing to. Earlier in the year, Airbus also selected our new FMS flight management system for its core fleet. Its flight path optimization capacity will help reduce the carbon footprint of airline operations. Looking at inclusiveness. We almost finished the assembly of Satria. It's a VHTS satellite we are building to bridge the digital divide in Indonesia, and it is scheduled to be launched in 2023 this year. Our contribution to a safer world was also material in 2022.
In the digital space, we recorded double digits organic growth in cybersecurity, and our sales almost reached EUR 1.5 billion. In the physical space, together with a consortium of small companies, we won the development of PARADE, the system to provide deployable protection for critical infrastructure against drone threats. This system will provide protection for major upcoming events such as the Rugby World Cup or the Paris Olympic Games. Of course, the tragic war in Ukraine made all the more vivid our message on the importance of defense activities to a sustainable future. This is something that European citizens and governments are fully aware of. Against this background, the European Commission recently stressed that its sustainable finance framework does not impose any limitation to the financing of the defense sector.
This is why we remain confident that in the coming years, more and more European investors will relax their defense exclusion policies. Going forward, and I'm now on Slide 23, we have 2 sustainability priorities for this year. First, we'll continue to deliver on our current roadmap. As I showed on Slide 4 earlier, most of our internal targets were set for 2023. With respect to our low carbon strategy behind securing our SBTi certification, we will continue the strong push towards our supply chains. Considering their complexity and their spread in terms of maturity, supply chain emissions are a big challenge for industrial companies, but they are our second-largest source of Scope 3 emissions after the use of sold products, so it is key to address them.
The end game for us on this topic is to align our supply chain with our own emission goal for minus 50% in 2030. Second, on diversity and inclusion, we need to move faster. Today is the International Women's Day, and on this occasion, I've released an op-ed on LinkedIn and in the French newspapers, Les Echos. We all know that women remain underrepresented in engineering and technology. This is a societal challenge which impacts us directly and on which I believe technology companies can and must act. We need to reach out more to young people in their schools and on social media and make them realize that science and technology are collective projects that speak directly to the societal issues of our times.
Second, we are starting to work on our new medium-term sustainability roadmap with 3 very simple ambitions. Number 1, to further embed sustainability in our growth strategy. Number 2, to set ambitious new targets, mostly quantitative. Number 3, more broadly, to drive cultural change across the group. The long-term ambition is simple, extend the leadership we have built from an innovation and financial perspective to the area of sustainability. Final strategic topic, last but not least, of course, capital allocation, I'm on Slide 24. We are naturally sticking to our balanced approach, combining both investments in the business and cash returns to shareholders. I already showed our ambitious CapEx and self-funded R&D plans. Zooming in on our M&A strategy, let me first reaffirm a few principles. First, our focus remains on bottom acquisitions.
Second, we have no intention to diversify into markets other than those we already serve. We target assets that complement any of our businesses, in particular digital solutions and technologies and cybersecurity, and assets that help us expand our geographical footprint. Third, we intend to remain very disciplined on both the financial and strategic assessment of any transaction and of course, on valuation. The only adjustment we are making is that considering the strength of our balance sheet, we are ready to go for acquisitions that are larger than EUR 500 million in EV. At the end of February, we already conducted 45% of our share buyback program, almost EUR 400 million, and we'll implement the remainder over the next 12 months or so. Finally, one capital deployment topic we are starting to investigate as well is pension de-risking.
The current macroeconomic context may represent a good opportunity to de-risk our UK pension obligations. This is an area we are going to investigate over the coming months. Well, cybersecurity provides a good illustration of this disciplined M&A strategy, and I'm now on Slide 25. It is a quite large market, and we are focusing on three specific market segments. First, the light blue part on the chart refers to the data protection and identity and access management products. This business is headquartered in Austin, Texas, and markets its products on a fully global basis, 40% in North America and 30% each in Europe and in the rest of the world. It is consolidated within DIS. Second, the dark blue part on the chart, which refers to sovereign protection products.
Products that analyze sovereign security requirements, such as servers that encrypt data exchanges or systems that detect cyberattacks. By nature, this business is more difficult to scale on a global basis, and in consequence, it has a European focus. Third, products and services. In this large market segment, we focus on critical enterprise customers in Europe and on the vertical markets we serve, such as space or air traffic management. Typical services include threat and risk evaluation, detection and response, and integration projects. By the way, as you understand, military customers only represent a small part of this overall cybersecurity business. To support the development of these positions, we closed on two bottom acquisitions last year.
The first one, OneWelcome, had a best-in-class capability in customer identity and access management to our global product portfolio. We are already starting to offer it to our enterprise customers. The second one, which actually consists of 2 subsidiaries, S21sec and Excellium, strengthen our products and services portfolio by adding more than 500 cyber experts based in 4 European countries. For example, it doubles our revenues related to cybersecurity operation centers. In conclusion on this Slide, when looking at a broad and dynamic field like cybersecurity, clearly selective M&A is an important lever to sustain strong growth and competitiveness. Let me now give some perspective on each of our operating segments, starting with aerospace. I am now on Slide 27. Over the coming 2 years, we clearly expect robust growth in both components of these segments.
Of course, on the aeronautics side, on top of the development of military business, sales will continue to benefit from the rebound of air traffic, which is set to last for several years. The ramp-up of commercial aircraft production may be affected by supply chain challenges. Going forward, production will be materially higher than last year. On the space side, Thales Alenia Space benefits from an increased backlog and its market outlook is really strong. For example, last November, the member countries of ESA, the European Space Agency, committed to a 17% increase in its budget over the coming 3 years. We confirm the target of EUR 2.5 billion in space sales in 2024, which implies an 8% CAGR over 2 years. For the aerospace segment as a whole, these dynamics will support high single-digit organic sales growth over 2023 and 2024.
Turning to profitability, EBIT margin will benefit from the leverage on sales growth. We sit on track to reach 8.5%-9% in 2024, even though aircraft production will still be much lower than before the COVID-19 crisis. Turning to our second business segment, defense and security, and now on Slide 28. No need for me to come back on the geopolitical context, which has durably changed and will drive sustained defense budget growth in our main geographies. The details of the future French military programming law should be made public in a few weeks now, but the overall envelope that has already been announced, EUR 430 billion over the period of 2024 to 2023.
Combined with the 2023 budget, it implies an annual growth of 7% per year over 7 years, a trend that has not been seen for the past 40 years. With our leading position on a structurally faster-growing market segments and our record backlog, no surprise that we are facing a unique demand context. As I explained earlier, since the beginning of 2022, we have been actively addressing all the operational bottlenecks that constrain growth, the ramp-up of recruitments, the expansion of our facilities, and supply chain tensions. We are targeting mid-single digit organic sales growth in 2023, accelerating above mid-single digit in 2024. This growth guidance is significantly above other large defense companies in Europe, UK, and the U.S., as shown on the charts on the bottom right.
From a margin point of view, at this point, we expect to continue to deliver industry-leading margins close to 13%. Now on Slide 29, looking at our third segment, DIS. As Pascal showed earlier, this business delivered a remarkable growth and margin performance last year in spite of the impact of the supply chain challenges it faced. Its margins improved by more than 6 points compared to 2018. The last year it operated as a standalone business, making it now our most profitable operating segment. Going forward, its medium-term growth outlook is robust, thanks to its compelling position on each of its markets. The transition from removable SIM to eSIM will progressively weigh on our sales growth, but cloud-based business models come with higher growth margins.
In addition, of course, we'll continue to seize opportunities to integrate its virtual security technologies in our products, and the table on the right shows our main ongoing revenue synergy areas. Looking at the nearer term, 2023 and 2024, we expect its performance to consolidate at the high level of 2022. Most of DIS businesses are short cycle and the macroeconomic and supply chain context is uncertain. Taking into account the deconsolidation of the IoT connectivity module business, we expect its margin to remain in the 13.5%-14.5% range. Which brings me to our financial objectives for 2023, and considering the strategic priorities and business outlook that I just described. Now on Slide 30. With respect to order intake, we expect another year of strong commercial performance, driving a book-to-bill ratio above one.
We expect sales to grow organically between 4% and 7%. Based on the February 2023 scope and foreign exchange rate, this corresponds to sales between EUR 18 billion and EUR 18.5 billion. Incorporating all the drivers we discussed earlier, we expect a further significant improvement in EBIT margin, reaching between 11.5% and 11.8%. This concludes our presentation. Many thanks for your attention. Now, together with Pascal, we are pleased to take your questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star one one on your telephone and wait for your name to be announced.
We will now take the first question. It comes from the line of Olivier Brochet from Redburn. Please go ahead. Your line is open.
Yes, sir. Good morning to all of you. I would have a couple of questions if I may. The first one is on the order intake, just to see what you have included in your guidance that relates to both order and cash in terms of jumbo order in 2023, if there is any that is in there or that you are feeling could happen. The second question is on DIS and 2022 performance. Are you able to split the volume mix on the one hand and the price on the other in the organic growth for us, please? That will be my questions, please.
Good morning, Olivier. Maybe I will start with, I mean, first question about order intake and jumbo order. As you know, I mean, jumbo order might be quite volatile in term of booking. By definition, we are talking about the large size project on which we've been dealing with potential customers for quite a long period of time, and always a bit difficult, I mean, to anticipate when this can kick in. At this point, I mean, we're of course a bit cautious.
The overall guidance that we provide to you today, in particular in term of cash flow, this is as we see with some quite large size project. At this point, of course, I mean, no jumbo project as the one that we managed to get in 2022. We in particular communicated on this famous 80 aircraft Rafale in 2022. It's quite obvious to share with you that we have not anticipated in our guidance for 2023, this level of order, and despite of project. Second question was about DIS and, I mean, the split of organic growth between price and volume.
I mean, it's probably a bit difficult, I mean, to provide this type of split directionally. What I could share with you is that, probably something like two-third of that is more pricing and one-third is more, is more volume. It's really, I mean, rule of the thumbs. It can vary across our different businesses, but I guess it is probably, I mean, a good, a good high level analysis.
Perfect. Thank you very much.
Thank you. We will now take the next question. It comes from the line of Tristan Sanson from BNP Paribas. Please go ahead. Your line is open.
Yes, good morning, Patrice, Pascal, thanks for taking my questions. I have a few quick questions. The first one is on cost inflation management. Can you help us actually quantify or quantify how cost inflation has been impacting your performance in 2022, and how much a challenge it is for 2023? Do you already have a material growth or net impact that has or will have to be offset over these years? Second question is on the aerospace margin.
Can you give us a feel for the location of margin in 2022 and the recovery trajectory for 2023 between space and the other the analytics bits with and without the Russian one-off would be useful.
Mm-hmm.
Third question. You've been mentioning a number of times the supply chain difficulties that have been faced by Thales throughout 2022 and some of these continue in 2023. If you have any comment about the pace of resolution of the supply chain difficulties and when you think you will be able to execute in a normal environment, that would be really helpful. A final quick one on the staffing efforts and the recruitment effort that you want to make in 2023. If you could make a few comments about which division and which countries will be the focus of your recruitment efforts, that would be also quite useful. Many thanks.
Good morning, Tristan. Thank you for your question. Maybe I will start with the first two ones and Patrice on the supply chain. Of course, I mean, I will start with cost inflation and Patrice will complement. Cost inflations, I mean, there are, you know, Tristan, there are various ways to look at this topic. My view, I mean, the most relevant one is really to look at our way to keep growing our margin despite this overall inflationary environment. Basically, this is what we have done in 2022. The guidance that we provide to you in 2020 and 2023 shows that we are going to keep growing our margin at our key businesses.
Behind that, to give you a bit more granularity, what can we say across our key businesses? I've already mentioned in the past that our defense and security is, in general, pretty well protected against inflation. I mentioned in the past that when we look at our contracts in defense and security, three-fourths of them benefit from a variation of price escalation mechanism that provides the right level of protections.
On the right, it's really up to us, in terms of financial discipline, the way we bid, the level of cautions that we take into account as we bid, to make sure that this overall inflationary environment will not weigh on our margin. The DIS, I think that, what made, I mean, demonstration of 2022 of what pricing power means. In this overall inflationary environment, we managed to keep pricing our margin. Where it was a bit more difficult is in our aerospace business, which is traditionally a more fixed and firm price type of business with in some cases, a specific contract with a variation of price.
In general it's more a fixed and firm price type of environment than an environment where we've got in our contract variation of price clauses. This is where, I mean, we had a bit of impact in 2022. This is also where, I mean, we keep working hard on existing projects with our clients, I mean, to be able to pass increase in selling prices, and also to make sure that in the bid that we submit today, we are cautious enough not to have an impact in the next years. Second question was about, I mean, space and avionics.
We reported in 2022 overall mid-single digit EBIT margin. I mean, the split between space and the more Avionics business is space with low single digits EBIT margin, but that would be mid-single digits if you adjust for this Russian one-off. Overall, I mean, the Avionics business is more in 2022, I mean, let's say 7% overall EBIT margin. It's true that we expect the margin of those two businesses to keep rising in 2023 and 2024, to end up with the overall guidance that we provide to you relative to 2024, which would be between 8% and 8.5% and 9%.
On supply chain, a few words on supply chain, Bruno, Tristan. First, I should say that, let's start perhaps with the reasons or the cause of the supply chain, I would say, changes that we have mentioned from time to time. It's not that we said the state of the supply chain per se. It's the fact that this supply chain, including us, we all face a strong headwind. This is because, and it's a good news by the way, huh, the business is growing. That everybody needs to get organized, invest, recruit, and so on and so forth. The starting point is a positive one, if I may say. It's, it's the business that is really, I would say, booming.
Number 2, to overcome the situation, as I've said during my presentation, we have taken many, I would say, actions to make it, I would say, neutral for own customer. Anticipation, diversification, optimization. Anticipation means that we order far in advance now our long lead items or critical implants. Diversification means that, yes, we have developed as much as possible second source alternative design to overcome any shortage or bottleneck that may occur. Thirdly, we have also optimized our own lead time internally to integrate and qualify our products. All in all, it makes, I would say, quite neutral for the, for our own customers, all these tensions.
Now, on your very precise question, at which pace these tensions or changes will progressively disappear, honestly, it's quite difficult to say. I don't have any crystal ball. What is sure that is the fact that 2023 will remain probably volatile. We need to remain as well vigilant on our side, hence our actions, as I said, in terms of anticipation, diversification and optimization. What lies ahead of us beyond 2023, honestly, I don't know, and we will see. Let's take, I would say, each challenges one after one, and we will see. On the staffing point, the staffing question, Tristan, yes, we have of course, internally a quite precise split between countries and I would say main activities.
I'm not sure that this split will help you to model the, I would say the economics of Thales. Let's keep in mind that, yes, the global figure is 12,000. It's not, by the way, exact science. It's, let's take it as a kind of order of magnitude. Large portion of it is proportional to our already existing footprint. Typically, a large quantity will be in France as our French customers want things to be designed and produced in France. It is the case for other, other countries. Now, in addition to that, let's not forget or let's keep in mind, sorry, that we have flexibility levels on top of recruiting people, which are of twofold.
Our, I would say, own engineering centers in Romania and India, number 1, and also some key partnerships that we have tied with some engineering companies, to which we can offload work packages if we need to do so. Normally this challenge is well under control. It's still a challenge, but well under control at Thales.
By division, it's gonna replicate mostly the.
More or less proportional.
The revenues allocation of the division.
A good rule of thumb is take it as being proportional to the growth of the division.
That's very clear. Thank you so much all of you for your detailed answers.
Welcome.
Thank you. We will now take the next question. It comes from the line of Ian Douglas-Pennant from UBS. Please go ahead. Your line is open.
Yes, thanks for, thanks for taking my question. Again, I have three questions, please. Again, on the supply chain issues that you're alluding to in defense, are there any localized pockets that you're especially concerned about? Is it general across the piece? Have any of those pressures changed, I guess over the last year? Within DIS, same question within DIS, a very bullish outlook there. Is your sense then, firstly that this growth can continue structurally and therefore, any discussions of a cyclical risk here, can be discounted?
Within that is 13.5 to 14.5, the peak potential of this business, that we should expect longer term or is this, or is there potential for further upside from here?
Mm-hmm.
Last question on your ability to expand capacity in the civil aerospace business. If the Chinese recovery is significantly faster than perhaps is expected currently and your customers increase their production plans from here, are you ready to or, you know, will you have trouble meeting any kind of increase in production rates there?
Of the supply chain. I can, yes, I can complement or, yes, complement the supply chain question. I've already given to Tristan and good morning, Ian. Is there any localized pockets of concern? Honestly, it's difficult to give a single answer because we supply many different types of insurance, many different types of goods. Last year is true that we clearly discussed with all of you guys, chips and components because this is something that is widely used at Thales. By the way, on this front, and for DIS, the situation is a little bit less tense than last year, but still volatile. No, I cannot give you any specific area.
We just need to be very vigilant across the board. Sorry, not to be much more precise, but that's the situation we face currently. On the civil aerospace and the China recovery, if I well understood your question, yes, we are ready to serve this market as well if this market accelerates or regrow again. We have taken, I would say, all the appropriate measures to be in position to serve our customers and Chinese airlines or directly Airbus in China if this market picks up again. Basically factored in all our measures that we have that we have taken to serve our customers.
Okay, maybe a good morning, Ian. Maybe I could answer the questions on DIS and overall how we see the situations from a top-line standpoint, but also, as you mentioned, also, in term of, overall margin. What can we say on this matter? I mean, first, 2022 was a bit exceptional in term of, in term of top line goals. Second, I mean, this is, as we all know, a short cycle business and, hence, as opposed to what we said on aerospace and particularly in defense, we are, of course, a bit cautious when it comes to providing guidance on the midterms in term of, in term of revenue for this business.
Now, what we see for 2023, overall, I mean, when we look at the cybersecurity and biometrics sub-segments, I mean, we are quite comfortable in term of in term of growth. We anticipate here, I mean, a level of growth that should be between mid-single digit and double digits. I mean, nothing very special. I mean, the demand is there, and we believe that this will continue. On the smart cards, of course, it's a bit more difficult because here, in particular, in term of time horizons, it's very much a short-cycle business. What we see today is the level of demands being still quite strong.
When anticipate the Q1 that in our view will be pretty positive. Second point, of course, as we compare 2023 against 2022, we need to consider also that as our prices moved up progressively along 2022, we benefit from a positive comparison base in the first half of 2023. In terms of growth against last year, we believe that H1 will continue to be pretty positive. Where, of course, and even though at this point, there is no early signs, we are of course a bit more conservative, a bit more cautious when it comes to the level of demands for the smart card businesses in H2 2023.
Now in terms of, in terms of margin, first, we are very happy with what we delivered in 2022. Reminding all of you that basically, as compared to our initial trajectory that we provided to you back in 2019, we are a year in advance in terms of delivery. Our level of margin, which is above the, and the guidance that we provided to you, above in terms of margin and one year earlier. Now, I mean, we keep seeing quite a good level of margin. We guide you of a level of margins that should be between 13.5% and 14.5%. Is it, I mean, the ceiling in the long term for this business?
The answer is no. No, at this point, it's probably a bit too early. I think it's quite clear that we would like, I mean, to consolidate the level of margin before providing you with maybe one day even more ambitious target. But at this point, it's really, probably a bit too early.
Merci à vous.
Merci.
Thank you. We will now take the next question. It comes from the line of Ben Heelan from Bank of America. Please go ahead. Your line is open.
Yes, morning. Thanks for the question. I wanted to see if there was an update first on the transport disposal to Hitachi, and what is going on there, and if there's any timeline. Second question was on your comments of the defense growth acceleration going from mid-single digit to mid-single digit plus. A couple of your peers have also talked about this inflection of growth in defense in 2024, and the backlog growth that you've seen would really support that. Can you talk a little bit about the visibility and duration of that acceleration? Is this a multi-year trajectory? Is it 3 years, 5 years? Is there any way we can think of that? Final question from me. Thank you for the detail on cyber, splitting that out in the way that you did.
Could you talk a little bit about the growth rates that you're seeing in cyber? I know you talked a little bit there about the bit that's in DIS, but there's obviously other bits in the portfolio. What's the level of kind of through cycle growth that we should be thinking about in terms of your cyber exposure? Thank you.
On transport, perhaps I can start. Well, good morning, Benjamin. On transport disposal, I would say nothing new since last time we discussed this topic. I mean, it's positive and we'll say nothing new. We are on track to close the transaction H2 2023. Working with the antitrust authorities in different countries, in particular in Europe, to get their approval as soon as possible, and in a very good spirit, of course, with Hitachi on their side as well to do their job and to do the part of the job on their side. Nothing to be worried about on this on this particular, I would say, disposal.
It will be closed, H2, this year.
Defense growth acceleration?
Yes, yes. Good morning, Ben. Defense, so I mean, our view is quite simple. I mean, 2023 and mid-single digit and, as early as 2024, we should go for a mid-single digit plus. This is how we see. I guess it's quite clear for everybody that, the challenge for us is not that much, I mean, the overall commercial dynamics, which have been very strong and which we think will continue to be rather strong. It's more about what we discuss in term of supply chain, in particular. Yes, I mean, as we're working quite actively on this matter, we believe that...
Also the fact that, and Patrice made it clear that we are investing and investing, I mean, for us to allow us to ramp up in term of with this internal production capacity. We are quite confident that, as early as 2024, I mean, we will be able, I mean, to deliver on the mid-single digit plus a growth for this overall defense and security business.
On cyber, you want me to complement, Pascal?
Cyber?
Yes.
Yes. Cyber, I made the comments as I was discussing about the DIS. Overall, I mean, cyber and biometrics, we see this business, I mean, between mid-single digit and double digit. Could be, I mean, probably a bit even overall for the cyber components to be more close to double digits. This is overall what we see. I mean, as Patrice presented the splits of cybersecurity, we see, I mean, in particular in the commercial cybersecurity, being overall pretty strong. The acquisitions that we have completed in 2022 will also be a growth booster.
I mean, we bought two businesses where we think that the overall level of growth will be double digits. All in all, high single digit, double digits, for our cybersecurity is probably a good rule of thumb of what we expect in the coming years for this beautiful business.
Okay, great. I really appreciate the color. Thank you.
Thanks.
Thank you. We will now take the next question. It comes from the line of Harry Breach from Stifel. Please go ahead. Your line is open. Harry Breach from Stifel?
Yes. Good morning, Patrice. Good morning, Pascal. Thank you both for taking my question. Can I ask, please, a little bit maybe about the aeronautics business within aerospace? Can you help us to think when do you expect the revenues of the aeronautics business to be back at the pre-COVID level of 2019, both in absolute millions of euros and in the underlying volume? Secondly, the joint ventures there with L3Harris and Diehl looked as if despite the Russian sanction impact, there was about a, I think, Pascal, you said about a EUR 26 million improvement year-on-year in 2022. Are we in 2023, will these joint ventures be back to a sort of normalized level of margin?
Can you give us any sort of feel for the scale of contribution or bridge maybe in 2023? Final one from me, just again on aerospace. Just thinking here, again, Pascal, just a bit about hedging. I know that you said sort of typically you hedge on a sort of rolling three-year basis. Can you give us any idea of what the hedged rate was for aerospace euro dollar in 2022 and what we should expect roughly for 2023 and 2024, please?
Okay. Good morning, Harry. Let's start with your first questions about level of, I mean, when do we expect our pure aeronautics revenue to be back to pre-COVID? My view, it's probably more 2024, 2025. Probably 2025 is probably more what we have in mind. I mean, overall, today, we are still overall for this business, still something like 25% below what it was pre-COVID. We have seen, I mean, this, probably in 2022 in the single aisle, I mean, business.
Second point, our IFC business that keeps suffering a lot in term of revenue. Managed to grow its order intake in 2022. I mean, we're expecting the IFE business to report now, I mean, a bit of recovery as early as 2023. Yes, I mean, my view is that probably 2025 is probably the best guess that we can provide to you for us to get back to this pre-COVID level of revenue. Hedging. Hedging overall, in 2023, I mean our aeronautics business is fully hedged at a level which is quite close to our current to the current spot price.
Overall, it's 1.08, if my memory is correct. I mean, nothing special to report on this matter. I mean, to make a long story short, overall I'm expecting, I mean the US dollar exchange rate to be quite neutral on our avionics business in 2023 versus 2022 overall. Your last questions slipped out of my mind.
The JV company.
Yes, the JV. Yes, I mean, we, our JV in particular in avionics business have restarted to recover as I mentioned. I think, I mean, they will keep improving their overall level of profitability. Here again, can expect, I mean, for them in term of overall contribution to our EBIT to be back to the 2019 level. I mean, this should happen 2024, 2025. Here again.
Pascal, sorry, just the hedged rate in last year in 2022 for the aeronautics business, was it around the same level then, around $1.08?
Yes. It was slightly less positive in my recollection, 1.10. What I suggest, Harry, on these very specific questions, Bertrand and Olivier will come back to you with the exact figure. Overall, my view, I mean from a, from a high level standpoint, that overall it would be quite neutral with the level of hedging, which is today quite close, slightly less positive than the current spot price. Overall, something that overall for our Avionics business is not materials in term of profitability, a change from 2022 to 2023.
Great. The JVs, just when we think about their recovery in 2023, obviously the impact of the Russian sanctions will not repeat and the underlying volume of business should be better. Will there be a sort of significant improvement in their contribution in 2023?
Yes, I mean, there will be a continuous recovery. No, I mean, our aeronautics JV has not been that much impacted by the sanctions in Russia. What has been impacted is our own Thales business in Russia.
Okay.
In term of, exposure in Russia was, pretty limited, not to say more.
Oh, clear. No, my mistake then, Pascal. Thank you for clarifying.
You are welcome, Harry.
Thank you.
Thank you. We will now take the next question. It comes from the line of Zafar Khan from SG CIB. Please go ahead. Your line is open.
Thank you very much. Good morning, everybody. Just wanted to go back to the aerospace margin, please, if I may. If you could help me understand what the margin potential is within this division. If I remember correctly, pre-COVID, the avionics side was doing margins circa 14%-15%, and I know space margin was not particularly good at that time. Can you just please remind us of what the margin potential is within the two segments? Can avionics get back to that teens margin?
Mm-hmm.
Is space structurally a low margin business?
Good morning, Zafar. I mean, when looking back at the pre-COVID level of profitability for these two businesses, avionics was more at 12% EBIT margin, not a 14%, 15%. When I say avionics, the overall avionic business that include both, I mean, line fit, aftermarket, IFE, but also including our microwave tubes with profitability, turning in particular microwave tubes, where, I mean, the overall level of profitability is below the average of this business. Overall, the avionic business back in 2018, 2019 was around 12%. No reason why, I mean, you shouldn't be able to get back to this level.
The space business in the past was more a mid-single to high single EBIT margin. Overall, there's no reason why you shouldn't be able to get back to this level. All what I've just mentioned is consistent with the guidance that we provide to you relative to 2024, which is 8.5%-9%. Showing that in 2024, those two businesses will have probably not got back to the pre-COVID level of profitability. Meaning that there will still be post-2024 a margin expansion potential for us to get back to the pre-COVID level of profitability.
That's very helpful. Thank you.
Thank you. Zafar.
Thank you. We will now take the next question. It comes from the line of David Perry from J.P. Morgan. Please go ahead. Your line is open.
Yes. Hi, Pascal and Patrice. Thanks for getting me on the call. Three questions. Just on DIS, it's a bit confusing to model with the deconsolidation and done some small acquisitions. Just be helpful if you could, well, help me at least with more precise sales and EBIT guidance for 2023, if possible. Second question, I guess it just follows from Zafar's and some of the other questions. I just wondered why today you're choosing to give medium-term targets or 2024 targets. In the past you've been more forward-looking with the medium-term. I get that DIS is short cycle, why not commit to a margin target for 2025 or 2026 for aero and defense? Just wondered what your thinking is there.
The third question is on the defense budget, do you have any view on where the equipment piece will come out? What sort of growth we'll see on equipment spending in the new plan? Thank you very much.
Okay. David, with regard to the change in scope at DIS, I understand that that may be confusing to you. What we are deconsolidating is something like EUR 350 million of revenue, with a level of margin, which is quite small. And with a global effect of around a bit less than 100 basis points on the overall EBIT profitability of our DIS business. Second point, in term of scope, we purchased last year, the OneWelcome product, a cybersecurity business that joins this DIS business.
At this point, this is quite a small-sized business whose revenue is between EUR 10 million and EUR 15 million. Even though, I mean, this is a high speed, high growth type of business. Of course, it will take a bit of time for this business to have a material impact on the overall DIS revenue. Midterms guidance.
Yes, just a few. Hello, David. Yeah, no, it's a very good question. In fact, if you remember well, David, last CMD, Capital Markets Day, we held was in 2019. At that time, yes, we did give some, I would say midterm perspective. We chose 2023 as a time frame for this kind of midterm perspective. Now we are in 2023, so this time frame has disappeared, if I may say, or we have reached the end of this time frame. Yes, you do not have any more, say midterm, I would say, if not guidance, but, let's say, directions for Thales.
Indeed, the good question is when should we or could we organize a new Capital Markets Day to share with you as we did in the past, again, some midterm perspective, both in terms of growth, in terms of profitability for each of our main businesses. The answer is, we do intend to do so, but to do so we need to have a bit more visibility and a bit less volatile environment. Considering all the, I would say, economic environment circumstances, inflation, energy crisis, chips components, war in Ukraine, if I may add this on the list. Honestly, organizing such Capital Markets Day with such volatile economic environment would not be professional, would not be reasonable.
We need to wait a little bit, but yes, we do intend to come back to you guys, to investors, to give you a broader perspective as soon as it is possible. To compensate, if I may say, to compensate this lack of midterm perspectives, we decided quite exceptionally with Pascal to share a little bit of our vision for 2024, if I may say.
The last question was.
Equipment spending as part of the business project.
overall, I mean, we have in particular, I mean, this split in France, where overall, I mean, if I take, I mean, the global 2023 budget in France will grow something like 7%. The underlying equipment or investments will be more like 8%, that's my understanding. overall, I mean, the overall investment capability of the French MOD will be pretty close to the overall defense spendings in France. It will be at least as important as the overall growth of the LPM. For me, probably more a threshold or the bottom of the range, if I may say, than a ceiling, the ceiling point.
We'll know in fact in a few weeks, months ahead of us. Just be a little bit patient. Of course, we'll have all the details once the LPM will be, I would say much more precise. Now we just have the global figure.
Thank you. Can I just ask 1 follow-up if that's okay?
Mm-hmm.
On DIS, Pascal, essentially you're saying last year you just printed EUR 13.4, but pro forma for the IoT deconsolidation, it would be EUR 14.4. Is that the right way to think about it? That's
Yes. I mean, yes. Yes. I mean, yes. You have to take into the consolidations. I mean, we add a bit less than 100 basis points. I mean, the 13.7 is equivalent to 14.5% once we take into the deconsolidations of the IoT connectivity module business.
Okay. Thank you very much.
Thank you.
Thank you. We will now take the next question. One moment, please.
Mm-hmm.
It comes from the line of George Zhao from Bernstein. Please go ahead. Your line is open.
Hi. Good morning, everyone. First, on the deceleration of the defense and security organic growth from Q3 to Q4, you know, did the supply challenges get worse in the quarter? Is that what's kind of causing the deceleration? Secondly, you know, how committed are you to buybacks once the current authorization expires next March, especially, you know, given your comments on potentially looking at some bigger, bolder acquisitions? Thanks.
First, good morning, George. On the share buyback, I mean, we are fully committed, I mean, to execute this 24 months long, I mean, share buyback. There's no issue on this front. Overall, I mean, what we have done in 2022 is very much in line with the overall execution of this program, and it will continue on a quite linear way along 2023, and it should be fully executed by the end of March 2024. No specific point to report on this matter.
The, your first question was about, I mean, In Q4 for DIS, but you know, it's likely looking at quarter, looking at DIS quarter- per- quarter, is not really meaningful. Yes, we do publish or we do communicate because it's mandatory to do so, but it's not really meaningful. For DIS long-term projects, long-term cycle business, what really matters, what really counts is the year-end or the full year figures. Yes. Absolutely.
Thanks. Pascal, on the buyback, I was thinking more beyond the next March, beyond this 24-month. How are you thinking about that?
George, we will see. I mean, at this point, we are executing this share buyback, so it's more, I mean, a matter that will be looked at by our board next year. At this point, I mean, we have not had any additional discussion on this matter with our board. I think that in this call, we have also discussed about other elements of capital deployment. let's see. My comment was very much about no doubt about the full executions of the current share buyback and, I mean, for our potential further share buyback, I mean, it's not the topic of the day.
It's gonna be more tackled by our board, I mean, next year.
Thanks.
Thank you.
Thank you. We will now take the next question. It comes from the line of Victor Allard from Goldman Sachs. Please go ahead. Your line is open.
Good morning, Patrice, Pascal. I guess I only have one question. It's a follow-up on defense and on whether you could please share the underlying assumptions behind the refined top-line growth target into next year. For example, what growth assumption for France does this reflect? And if the mid-single digit plus implies upside risk into next year, or if we should simply see it as being the top end of the 4%-6% range that you have been guiding for the midterm so far. Thank you.
Good morning, Victor. Overall, this guidance for 2023 mid-single digit and for 2024 mid-single digit plus is first, of course, very much consistent with how we see the overall level of demand. In particular, what we expect from the new French. Also having in mind that today, as I mentioned earlier, our key challenge to our top line growth in defense and security, it is more about backlog execution than accounting on a further increase in term of level given from the outside. Now second part of your question was.
Top line risk.
Top line risk.
Above mid-single digit plus.
I mean, as I mentioned, we discussed about, I mean, supply chain and in my view, I mean, probably the key change will be our, the ability of our supply chain in various countries to follow the ramp up in terms of demand. This is where we're, we've been working quite extensively with the supply chain. This is for me more, I mean, what we need to fix in terms of risk. Which by the way, is not that much different from what in particular, I mean, prime contractors on aerospace mentioned a few weeks ago, which is ability to keep pumping up the supply chain in this growing environment.
Thank you very much.
Thank you.
W-we-
Thank you. We will now take the next question.
Mm-hmm.
One moment please. It comes from the line of Christophe Menard from Deutsche Bank. Please go ahead. Your line is open.
Yes, good morning. Thank you very much for taking my question. I had three quick ones, hopefully. The first one was on the cash conversion rate beyond 2023. Thanks for the update on 2021 to 2023. How should we be looking at the cash conversion rate beyond? I mean, I read in your presentation you are looking at safety stocks. Well, some CapEx increased quite obviously, so is 90% still a good metric beyond 2023? That was the first one. Second one is DIS. It's a successful integration, I mean, from the numbers alone. What lessons have you learned from that for future acquisitions? What made it possible?
I don't want to make it too long of an answer, but probably there are some good lessons for you. The last question, very quick on capital allocation, the pension de-risking you mentioned, what does it mean? Do you want to outsource or sell that? I mean, basically, what are the options here at stake that you have in mind?
Okay. Good morning, Christophe. Maybe we start with the first questions, letting Patrice have the second, and saving the third one about pension. First in terms of cash conversions. Well, I think that 90% is a reasonable figure. Of course, I mean, recognizing that, of course, quite an important point of our cash conversions ratio is the level of order intake, and in particular, relative to large size export projects. Of course, I mean, provided that we keep developing large size export project, in particular in defense, I'm quite optimistic about the long-term cash conversions ratio. This is, by the way, what we managed to do pretty well in the last 5 years overall at Thales. Patrice?
On DIS, to make it, bonjour, Christophe. To make it short, of course, beyond the fact that I think all the team has been very professional to put in place, sorry, all the necessary actions in terms of cost synergies to materialize, in terms of revenue synergies and so on and so forth. If I had to give one single, say, answer, is really the human aspect of the dealer. When we buy a tech company, be it big, be it small, be it medium, I'm pretty convinced that at the end of the day, we buy skills, we buy brains.
Having I would say an amicable approach, having a non-hostile approach, a solicited approach, for me, is mandatory. We'll never, you will never see Thales doing something that would be, I would say, hostile or unsolicited vis-a-vis a tech company. Otherwise, you just lose the brain you try to acquire and lose the value of the company, yeah? This is for me, one of the key success of Gemalto, the fact that we've been able to have, I would say, good discussion with the team, a good, I would say DNA fit between Gemalto and Thales or the ex-Thales, to make it a success at the end of the day.
Last question was about pension. I mean, on this matter, we are quite pragmatic.
What do we see today? I mean, we see quite a unique situation as compared to what we have seen in the last 10 years, in particular about, I mean, actuarial assumptions. It's true that we see today a combination of both, as we all know, quite a significant increase in long-term interest rates. This combined with quite a stability in term of long-term inflation rate. The combination of the two has been quite positive overall for pension deficit, in particular in UK. When you look at our overall pension deficit in UK, it dropped 3 times from the end of 2020, where it was EUR 1.5 billion, down to what it was end of December last year, at EUR 0.5 billion.
Because of that, of course, I mean, we challenge ourselves, in particular when we discuss about capital deployment. Would it make sense for us to outsource a part of this of this risk through what we call a buy-in or buys? This is, I mean, the type of things that we would like to investigate in 2023. It's really all about de-risking a pension volatility at a time where we see that the overall actuarial assumptions are pretty, are pretty favorable.
We need to. Sorry, I really know that there are a few more questions, but unfortunately, we need to wrap up as we are awaited by our, I would say, journalist colleagues, just in a while. Let me close with a few words of conclusion. Of course, Bertrand and Olivier are at your disposal to answer all the questions that we have not been able to take this morning. I'm sorry for that. As you understood, 2020 was 2022, sorry, was another year of strong performance for Thales, needless to say. Definitely we are fully focused on the execution of our profitable growth strategy, number one, and of course, this is supported by rigorous capital allocation.
With Pascal, we really look forward to speaking with you in the upcoming investor roadshows or conference or one-on-one. If you have any further questions, please do liaise with Bertrand and Olivier. They are at your disposal to answer all your questions. Thank you very much, and goodbye.
Thank you very much. Bye-bye.
Bye-bye.
Thank you, ladies and gentlemen. If you didn't have a chance to ask your question on today's call, please do not hesitate to send your question to Thales Group investor relations at ir@thalesgroup.com, and we will get back to you as soon as possible. Thank you all for your participation. You may now disconnect.