Paris:  Europe's largest defence electronics group, French firm Thales, reported a 6 per cent dip in first half profits on Tuesday. At 375 million euros the numbers came in just below average market forecasts.

Thales said strong returns from the defence segment helped it offset the negative impact in the aerospace segment of a strong euro.

Operating profit, or earnings before interest and tax (EBIT), rose 10 per cent. The firm reaffirmed its financial forecasts for 2008. According to the company, the defence business is less affected by currency fluctuations than aerospace business, where the US dollar is the benchmark.

Net profit fell 48 per cent, to 289 million euros, even as revenues were up 2 per cent, to 5.668 billion euros. Margins, according to the company, were boosted by higher volumes and the impact of cost cuts as part of a 2005 restructuring plan.

Thales helps make the French Rafale fighter, Franco-Italian FREMM frigates, tactical radios for the US Army and Britain's Watchkeeper surveillance programme using unmanned air vehicles.

The aerospace and space division posted an EBIT of 96 million euros, up 14 per cent. The division makes computer avionics for cockpits, in-flight entertainment for airliners and telecoms, military and weather satellites.

Thales sees 6 per cent organic revenue growth in 2008.

"Thales is holding up well and we are confident on 2008 despite the complex environment," finance director Patrice Durand said.

For the first time, Thales acknowledged problems related to the A400M, the European heavy-lift military aircraft being built by Airbus. It said it took a charge of 20 million euros related to cost overruns on the Flight Management System, which helps with navigation and control.

"We will stick to our (A400M) deadline but it will be more expensive for us," Durand said.

The A400M programme is running 6-12 months behind schedule. So far the delays have been blamed mainly on the engines and the computer which controls them, called the FADEC.