THALES (EPA:HO) - Thales discloses its order intake and sales at 30 Septembre 2019 - Press release - 22 October 2019

Transparency directive : regulatory news

22/10/2019 07:00

PRESS RELEASE
22 October 2019
Paris La Défense, France

        Thales discloses its order intake and sales at 30 September 2019

- Order intake: EUR10.4 billion, up 10% (-6% on an organic basis(1))
- Sales: EUR12.4 billion, up 14.1% (+0.0% on an organic basis)

Thales (Euronext Paris: HO) announced today its order intake and sales for the
period ending 30 September 2019.

Order intake
(in EUR millions)      9 months  9 months       Total       Organic
                         2019      2018        change       change

Aerospace               2,625      3,044        -14%         -15%
Transport                 868      1,267        -32%         -32%
Defence & Security      5,270      4,998         +5%          +7%
Digital Identity &
Security                1,621        134          -            -
Other                      62         24          -            -
Total                  10,445      9,468        +10%          -6%

Sales (in EUR millions)
Aerospace               3,787      4,010       -5.6%        -6.8%
Transport               1,268      1,373       -7.6%        -8.9%
Defence & Security      5,670      5,319       +6.6%        +7.7%
Digital Identity &
Security                1,631        131          -            -
Other                      54         40          -            -
Total                  12,410     10,873      +14.1%        +0.0%
Of which mature
markets(2)              8,869      7,659      +15.8%        +4.2%
Of which emerging
markets(2)              3,541      3,215      +10.2%       -10.0%

"Q3 2019 reflects the same contrasted momentum we experienced in H1 2019: sales
were up slightly at constant scope and currency, with the solid growth in the
Defence & Security segment offsetting both the slowdown in the commercial space
market and a high basis of comparison in Transport.

This trend will show as well in the Full Year 2019 organic sales growth, which
we now expect to be around 1%.

(1) In this press release, "organic" means "at constant scope and currency".
See note on methodology on page 27 of the 2018 registration document and
calculation on page 7 of this press release
(2) Mature markets: Europe, North America, Australia, New Zealand. Emerging
markets: all other countries. See table on page 6

The reduced guidance is explained by the conjunction of two factors: the
massive cyclical downturn of the commercial satellite market in 2017 and 2018,
and the record sales level achieved by our Transport business in 2018.

The mobilization and commitment of the teams all over the world enables us to
confirm our Full Year 2019 EBIT target in spite of the revised organic sales
growth objective.

Across all our markets, the medium-term outlook is solid, driven by growing
needs for security, efficiency, connectivity and digital trust.

The integration of Gemalto and the acceleration of our R&D investments will
uniquely reinforce our positioning, at the heart of our profitable growth
strategy."

Patrice Caine, Chairman & Chief Executive Officer

Order intake

In the first nine months of 2019, order intake stood at EUR10,445m, up 10%
compared with 9m 2018 (-6% at constant scope and currency(3)).
Over the period, Thales received 9 large orders over EUR100m, for a total
amount of EUR1,905m, compared with 10 large orders at 30 September 2018:

* 3 large orders were booked in Q1 2019, covering the acquisition of new mobile
  radars by the Dutch army, a support contract for a European army and the
  provision of equipment for Indian army helicopters;

* 4 large orders were booked in Q2 2019, concerning the construction of the
  ground segment of the Syracuse IV satellite, the delivery of electronic
  systems aboard Belgian Scorpion vehicles (CaMo project), a significant
  long-term maintenance contract for the French air force, and the design of
  2 geostationary satellites for Spain as part of a consortium (SpainSat NG);

* 2 large orders were booked in Q3 2019, both in the Defence & Security
  segment:

  o the supply of combat management systems for two military ships;
  o the modernization of the French army's satellite navigation systems.

At EUR8,539m, orders with a unit value of less than EUR100m rose by 21%
compared to the first nine months of 2018, after the integration of Gemalto.

From a geographical(4) perspective, order intake enjoyed solid growth in
emerging markets, driven by all major geographic areas (+11% organically, +47%
on a reported basis). Orders booked in mature markets declined organically by
10% (+1% on a reported basis), affected by a high basis of comparison.

(3) Taking into account a positive exchange rate effect of EUR62m and a net
positive scope effect of EUR1,449m, relating mainly to Gemalto's consolidation
at 1 April 2019 (Digital Identity & Security segment) and the disposal of the
GP HSM business, effective 1 January 2019 (Defence & Security segment)
(4) See table on page 6

At EUR2,625m compared with EUR3,044m in the first nine months of 2018, order
intake in the Aerospace segment remained affected by the weakness of the
commercial space market. The Group is currently participating in the final
stage of 4 significant commercial satellite tenders, whose conclusion is
expected in the coming weeks. This level of commercial activity confirms the
gradual recovery of the market.

Order intake in the Transport segment stood at EUR868m, down 32% compared to
the first nine months of 2018, when several significant contracts were booked.

Order intake in the Defence & Security segment stood at EUR5,270m, compared
with EUR4,998m in the first nine months of 2018 (+7% on an organic basis)
thanks to the 8 large orders with a unit value of over EUR100m mentioned above.
This segment benefits from strong momentum in many activities: systems for
combat aircraft, systems and services for military ships, radio communications
products, systems and network infrastructures, etc.

At EUR1,621m, order intake in the Digital Identity & Security segment was very
close to sales, with most of the businesses in this segment running on
relatively short cycles.

Sales

9m 2019 sales stood at EUR12,410m, compared to EUR10,873m in 9m 2018, up 14.1%
after the integration of Gemalto. Sales were stable (+0.0%) at constant scope
and currency(5), with the decline in sales in Aerospace and Transport masking
the robust performance in Defence & Security.

From a geographical(6) perspective, this stability in sales is due to
contrasting momentum: sustained growth in mature markets (+4.2%), and a decline
in emerging markets (-10.0%) following several years of robust growth.

Sales in the Aerospace segment totalled EUR3,787m, a 5.6% decline compared to
9m 2018 (-6.8% at constant scope and currency). This decline in sales was
only driven by Space, with all Avionics businesses delivering organic growth.
It reflects the prolonged wait-and-see attitude of customers in the commercial
telecommunications satellite market, combined with the delivery of the last
satellites of the Iridium constellation and the end of a number of military
projects. This trend continued in the 3rd quarter, resulting in a lower than
expected order intake, which will therefore contribute only slightly to Q4
sales. This situation should continue to weigh on Space sales(7) in Q4 2019 and
in 2020. Consequently, Space sales are expected to see a decline of around 13%
over Full Year 2019, and in a lower proportion in 2020.

(5) The calculation of the organic change in sales is shown on page 7
(6) See table on page 6
(7) The Space business generated sales of EUR2.45bn in 2018

In the Transport segment, sales came in at EUR1,268m, down 7.6% compared with
the first nine months of 2018 (after an increase of +21.1% at constant scope
and currency during 9m 2018). This decline resulted mainly from phasing effects
on major urban rail signalling contracts, particularly in Doha (Qatar) and
London.

Sales in the Defence & Security segment stood at EUR5,670m, up 6.6% compared
with the first nine months of 2018 (up +7.7% at constant scope and currency).
This segment continues to benefit from a broad growth basis, led in particular
by airspace protection solutions, optronics systems, missile electronics,
systems for combat aircraft and military ships, and military radio
communications.

At EUR1,631m, sales in the Digital Identity & Security segment were in line
with the Full Year objective (organic growth of 0 to 2%). As was the case in
the second quarter, this level reflects a positive momentum in EMV payment
cards, the negative impact of the reorganisation of the HSM business, and the
continuous slowdown in traditional SIM card sales.

Acquisition of Gemalto

On 17 September 2019, the Chamber of Commerce of the Court of Appeal in
Amsterdam (Netherlands) issued its ruling in connection with the statutory
buy-out proceeedings for Gemalto shares. In consequence, Thales was able early
October to purchase all the outstanding Gemalto shares (2.78 million shares).
This transaction resulted in a cash outflow of EUR143m, and took the percentage
of Gemalto shares held by Thales to 100%.

Outlook

As announced on 17 October 2019, and taking into consideration both the around
13% decline in Space sales(8) expected this year and the very high basis of
comparison in Transport, Thales now expects its organic sales growth to be
around 1% over Full Year 2019(9).

The acceleration of competitiveness initiatives however enables the Group to
maintain its EBIT target for the Full Year: Thales should deliver an EBIT of
between EUR1,980 million and EUR2,000 million, based on September 2019 scope
and currency.

(8) The Space business generated sales of EUR2.45bn in 2018
(9) Previous target: "at the lower end of the 3 to 4% range"

The Group also confirms its Full Year 2019 order intake target, expected to be
slightly above EUR18 billion.

This press release may contain forward-looking statements. Such forward-looking
statements represent trends or objectives, and cannot be construed as
constituting forecasts regarding the Company's results or any other performance
indicator. Actual results may differ significantly from the forward-looking
statements due to various risks and uncertainties, as described in the
Company's Registration Document, which has been filed with the French financial
markets authority (Autorité des marchés financiers - AMF).

About Thales

Thales (Euronext Paris: HO) is a global technology leader shaping the world of
tomorrow today. The Group provides solutions, services and products to
customers in the aeronautics, space, transport, digital identity and security,
and defence markets. With 80,000 employees in 68 countries, Thales generated
Sales of EUR19bn in 2018 (on a pro forma basis including Gemalto).

Thales is investing in particular in digital innovations - connectivity, big
data, artificial intelligence and cybersecurity - technologies that support
businesses, organisations and governments at decisive moments.

CONTACTS

Thales, Media Relations
Group & Innovation
Cédric Leurquin
+33 (0)1 57 77 90 93
cedric.leurquin@thalesgroup.com

Thales, Analysts/Investors
Bertrand Delcaire
+33 (0)1 57 77 89 02
ir@thalesgroup.com

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Order intake by destination - 9 months 2019

In EUR millions
                           9 months  9 months   Total   Organic  9m 2019
                              2019      2018    change  change  weighting
                                                                   in %

France                        2,961     2,614    +13%    +10%      28%
United Kingdom                  749       568    +32%    +20%       7%
Rest of Europe                2,236     2,112     +6%     -8%      21%
Sub-total Europe              5,945     5,294    +12%     +4%      57%
United States and Canada      1,346     1,004    +34%     -5%      13%
Australia and New Zealand       466     1,346    -65%    -67%       4%
Total mature markets          7,757     7,644     +1%    -10%      74%
Asia                          1,467       971    +51%    +22%      14%
Near and Middle East            598       571     +5%    -12%       6%
Rest of the world               623       281   +121%    +20%       6%
Total emerging markets        2,688     1,823    +47%    +11%      26%
Total all markets            10,445     9,468    +10%     -6%     100%

Sales by destination - 9 months 2019

In EUR millions             9 months  9 months   Total   Organic  9m 2019
                              2019      2018    change  change   weighting
                                                                    in %

France                        3,281     2,843   +15.4%   +12.4%    26%
United Kingdom                  887       916    -3.1%   -10.3%     7%
Rest of Europe                2,589     2,266   +14.3%    +0.9%    21%
Sub-total Europe              6,757     6,024   +12.2%    +4.7%    54%
United States and Canada      1,419       998   +42.1%    +0.8%    11%
Australia and New Zealand       693       636    +8.9%    +5.5%     6%
Total mature markets          8,869     7,659   +15.8%    +4.2%    71%
Asia                          1,786     1,486   +20.1%    +0.4%    14%
Near and Middle East            988     1,093    -9.6%   -16.8%     8%
Rest of the world               767       636   +20.7%   -22.6%     6%
Total emerging markets        3,541     3,215   +10.2%   -10.0%    29%
Total all markets            12,410    10,873   +14.1%    +0.0%   100%

Order intake and sales - Q3 2019

                            Q3 2019  Q3 2018   Total     Organic
Order intake                                   change     change
In EUR millions

Aerospace                     866     1,002     -14%      -15%
Transport                     311       433     -28%      -28%
Defence & Security          1,462     1,699     -11%      -11%
Digital Identity & Security   792        50      n.m.      n.m.
Total - operating segments  3,431     3,133     +10%      -15%
Other                          19         4       -         -
Total                       3,450     3,137     +10%      -14%

Sales
In EUR millions
Aerospace                   1,177     1,242    -5.2%     -6.3%
Transport                     433       469    -7.6%     -8.8%
Defence & Security          1,788     1,650    +8.4%     +9.6%
Digital Identity & Security   802        44      n.m.     n.m.
Total - operating segments  4,201     3,404   +23.4%     +0.9%
Other                          19        17       -        -
Total                       4,220     3,421   +23.4%     +0.9%

Organic change in sales by quarter

                2018 Currency  Impact of  2019    Impact of    Total   Organic
               sales  impact   disposals  sales acquisitions  change   change
In EUR millions
Q1             3,412   +37         -25    3,361      +4        -1.5%    -2.0%
Q2             4,040   +23         -26    4,829    +758       +19.5%    +0.8%
H1             7,452   +60         -51    8,190    +763        +9.9%    -0.5%
Q3             3,421   +25         -24    4,220    +766       +23.4%    +0.9%
9 months      10,873   +85         -75   12,410  +1,529       +14.1%    +0.0%

Main scope effects:

- Disposals: deconsolidation and disposal of GP HSM business following the
  acquisition of Gemalto (Defence & Security segment).
- Acquisitions:
  o Gemalto: consolidated from 1 April 2019 (in the new Digital Identity &
    Security segment)
  o Ercom and Suneris: consolidated from 1 January 2019 (Defence & Security
    segment). Sales of around EUR40m in 2018.

COMMUNICATIONS DEPARTMENT - Thales - Tour Carpe Diem - 31 place des Corolles -
92098 Paris La Défense Cedex - France - Tel.: +33 (0)1 57 77 86 26 -
www.thalesgroup.com

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THALES (EPA:HO) - Thales discloses its order intake and sales at 30 Septembre 2019 - Press release - 22 October 2019

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