2015 Half-Year Results 23 July 2015 www.thalesgroup.com
H1 2015 business environment 2 Aerospace Avionics: continued positive dynamics for cockpit avionics and IFEC Space: telecom market remains highly competitive Transport Strong demand in both emerging markets and Europe Defence & Security Elevated geopolitical tensions Improved outlook in mature markets despite ongoing budget pressures Opportunities in emerging markets
H1 2015 highlights Strong order intake driven by emerging markets Return to top line growth Further EBIT improvement Continued focus on profitable growth 3
H1 2015 key figures m Order intake Sales +19% 6,224 m +11% 6,347 5,220 5,695 H1 2014 H1 2015 H1 2014 H1 2015 EBIT (a) m m 473 +18% Free Operating Cash Flow 402-304 -535 H1 2014 (b) H1 2015 H1 2014 H1 2015 4 (a) Non-GAAP measure: see definition in appendix (b) In this presentation, H1 2014 EBIT has been restated to take into account the introduction of IFRIC 21
H1 2015 main orders 5,220m 700m +19% 6,224m 1,733m Orders > 100m Rafale (Egypt) Doha metro signalling and supervision (Qatar) 1,655m 1,206m Scout SV land systems (UK) Hong Kong metro signalling systems CERES (France) 2,865m 3,285m Other orders 5 H1 2014 H1 2015 Unit value > 100m 10m < Unit value < 100m Unit value < 10m IFEC systems (Middle East) Civil security systems (Middle East) Galileo (ESA)
Strong order intake increase in emerging markets Emerging markets 1,651m 32% Middle East 13% RoW 6% France 20% Emerging markets 2,492m 40% Middle East 27% RoW 2% France 20% Asia 13% H1 2014 UK 11% H1 2015 UK 8% Australia/ NZ 7% North America 8% Other European countries 22% Asia 11% Australia/ NZ 6% North America 9% Other European countries 17% Emerging markets: Orders +51% / book-to-bill = 1.48 6
Summary P&L: from sales to EBIT m H1 2015 H1 2014 total change organic Sales 6,347 5,695 +11% +6% Gross margin 1,520 1,399 +9% +4% in % of sales 23.9% 24.6% Indirect costs (1,064) (998) +7% +2% in % of sales 16.8% 17.5% o/w R&D expenses (310) (286) +9% +4% in % of sales 4.9% 5.0% o/w M&S expenses (495) (456) +8% +4% in % of sales 7.8% 8.0% o/w G&A expenses (259) (256) +1% -5% in % of sales 4.1% 4.5% Restructuring costs (43) (53) -19% -19% in % of sales 0.7% 0.9% Return to organic sales growth Continued EBIT improvement Share of net result of equity-accounted affiliates excl. DCNS 50 42 +19% -5% EBIT (a) excl. DCNS 463 391 +18% +11% in % of sales 7.3% 6.9% Share of net result of DCNS 10 10 EBIT (a) 473 402 +18% +10% in % of sales 7.5% 7.1% (a) In this presentation, "organic" means "at constant scope and exchange rates" (b) Non-GAAP measure: see definition in appendix. 7
EBIT bridge m +74 +10-10 -13-19 +29 +18% 473 402 H1 2014 EBIT (a) Scope and FX Organic operational performance Restructuring charges Pension service costs Add'l expensed R&D Add'l expensed M&S H1 2015 EBIT (a) Top line growth and efficiency measures drive EBIT increase 8 (a) Non-GAAP measure: see definition in appendix.
EBIT by segment m H1 2015 H1 2014 total change organic Aerospace 224 8.9% 201 9.1% +11% +3% Transport (39) -6.9% 11 1.9% N/M N/M Defence & Security 301 9.3% 226 7.9% +33% +26% EBIT (a) - operating segments 485 7.7% 438 7.7% +11% +4% Other (22) (46) EBIT (a) - excl. DCNS 463 7.3% 392 6.9% +18% +11% DCNS (35% share of net result) 10 10 EBIT (a) - total 473 7.5% 402 7.1% +18% +10% Strong performance of Aerospace and Defence & Security Project execution issues in Transport 9 (a) Non-GAAP measure: see definition in appendix.
Aerospace: H1 2015 key figures m H1 2015 H1 2014 change total organic Order intake 1,849 2,077-11% -16% Sales 2,511 2,216 +13% +5% EBIT (a) 224 201 +11% +3% in % of sales 8.9% 9.1% Lower orders in Space after strong intake in H1 2014 Top line growth driven by commercial avionics 10 (a) Non-GAAP measure: see definition in appendix.
Transport: H1 2015 key figures m H1 2015 H1 2014 change total organic Order intake 1,197 637 +88% +80% Sales 569 571 0% -6% EBIT (a) (39) 11 N/M N/M in % of sales -6.9% 1.9% Strong order intake momentum Project execution weighs on profitability, action plan underway 11 (a) Non-GAAP measure: see definition in appendix.
Defence & Security: H1 2015 key figures m H1 2015 H1 2014 change total organic Order intake 3,152 2,485 +27% +22% Sales 3,229 2,873 +12% +9% EBIT (a) 301 226 +33% +26% in % of sales 9.3% 7.9% Growing order intake (Rafale/Egypt) Higher profitability driven by top line growth and good project execution 12 (a) Non-GAAP measure: see definition in appendix.
Summary P&L: from EBIT to adjusted net income m H1 2015 H1 2014 EBIT (a) 473 402 Impairment of non-current operating assets 0 0 Cost of net financial debt and other financial results 7 (13) Finance costs on pensions and other employee benefits (35) (38) Income tax (109) (86) Adjusted net income (a) 336 265 Minorities (23) (22) Adjusted net income, Group share (a) 313 243 Adjusted net income, Group share (a), per share (in ) 1.51 1.19 Adjusted net income up 29% on the back of improved EBIT and lower finance charges 13 (a) Non-GAAP measure: see definition in appendix.
Cash flow m H1 2015 H1 2014 Operating cash flows before WCR changes 683 582 Change in WCR & contingency reserves (697) (824) Payment of contributions / pension benefits (60) (56) Financial interest paid 10 (4) Income tax paid (42) (44) Net cash flows from operating activities (106) (347) Net operating investments (198) (188) Free operating cash flow (a) (304) (535) Positive impact of downpayments on export contracts 14 (a) Non-GAAP measure: see definition in appendix.
Movement in net cash +1 036 m -304-81 -88 +102 +104 +23 614-231 53 Net cash 30.06.2014 Free operating cash flow H2 2014 Free operating cash flow H1 2015 Deficit payment UK pensions Disposals/ acquisitions Dividends FX Stock options Other Net cash 30.06.2015 Improved FOCF, strong net cash position 15
2015 priorities: a mid-year review What we said in February Ambition Boost actions across all businesses and countries Fixing issues in Transport Monitoring and supporting DCNS recovery Deliver top line growth Accelerate our globalisation Status Ambition Boost delivers: EBIT (a) up 18% while keeping sustained R&D and commercial efforts Comprehensive contract portfolio review by new management team Recovery plan underway, drawing on resources from Aerospace and Defence & Security DCNS on track to deliver breakeven performance in 2015 Sales up 11% vs. H1 2014 EM orders up 51%, EM sales up 26% vs. H1 2014 16 (a) Non-GAAP measure: see definition in appendix.
2015 objectives Order intake Sales EBIT (a) Growing beyond the high level reached in 2014 Higher emerging markets contribution Low single digit growth 1,130-1,150 m (b) Objectives confirmed 17 (a) Non-GAAP measure: see definition in appendix (b) Based on foreign exchange rates as of February 2015
Appendix
Upcoming events Q3 and 9m 2015 sales 21 October 2015 2015 annual results 24 February 2016 19
H1 2015 sales by destination m H1 2015 H1 2014 total change organic France 1,569 1,610-3% -3% United Kingdom 638 621 +3% -8% Other European countries 1,263 1,232 +2% +1% Europe 3,470 3,463 +0% -2% North America 759 536 +42% +15% Australia/NZ 365 327 +12% +7% Asia 842 784 +7% +2% Middle East 647 377 +71% +61% Rest of the world 265 208 +27% +24% Emerging markets 1,753 1,369 +28% +21% Total 6,347 5,695 +11% +6% Asia 13% Australia/ NZ 6% Middle East 10% N America 12% RoW 4% H1 2015 Other European countries 20% France 25% UK 10% 20
H1 2015 adjusted net result m Consolidated P&L H1 2015 Amortisation of intangible assets (PPA) Disposal of assets and others Change in fair value of derivative FX instruments Actuarial gains/losses on other long term benefits Adjusted P&L H1 2015 Sales 6,347 6,347 Cost of sales (4,827) (4,827) R&D (310) (310) SG&A costs (754) (754) Restructuring costs (43) (43) Amortisation of intangible assets (PPA) (53) 53 0 Income from operations 360 Impairment of non-current operating assets 0 --- (*) Disposal of assets, change in scope and others (3) 3 0 Share in net income (loss) of equity affiliates 47 13 60 Income of operating activities incl. share in net income of equity affiliates 404 EBIT 473 Impairment of non-current operating assets --- (*) 0 Cost of net financial debt 5 5 Other financial income (expense) (13) 15 2 Finance costs on pensions and other employee benefits (25) (10) (35) Income tax (88) (18) (1) (5) 3 (109) Net income (loss) 282 48 2 10 7 335 Minorities (16) (6) (1) 1 (23) Net income (loss), Group share 266 42 2 9 8 313 21 (*) included within "Income of operating activities incl. share in net income of equity affiliates" in the consolidated P&L and within "Net income" in the adjusted P&L
H1 2014 adjusted net result m Consolidated P&L H1 2014 (proforma IFRIC 21) Amortisation of intangible assets (PPA) Disposal of assets and others Change in fair value of derivative FX instruments Actuarial gains/losses on other long term benefits Adjusted P&L H1 2014 (proforma IFRIC 21) Sales 5,695 5,695 Cost of sales (4,295) (4,295) R&D (286) (286) SG&A costs (712) (712) Restructuring costs (53) (53) Amortisation of intangible assets (PPA) (27) 27 0 Income from operations 322 Impairment of non-current operating assets 0 --- (*) Disposal of assets, change in scope and others 225 (225) 0 Share in net income (loss) of equity affiliates 39 13 52 Income of operating activities incl. share in net income of equity affiliates 586 EBIT 401 Impairment of non-current operating assets --- (*) 0 Cost of net financial debt (1) (1) Other financial income (expense) (15) 3 (12) Finance costs on pensions and other employee benefits (43) 6 (38) Income tax (73) (9) (1) (1) (2) (86) Net income (loss) 454 31 (226) 2 4 265 Minorities (21) (1) (22) Net income (loss), Group share 433 30 (226) 2 4 243 22 (*) included within "Income of operating activities incl. share in net income of equity affiliates" in the consolidated P&L and within "Net income" in the adjusted P&L
H1 2014 EBIT by operating segment impact of IFRIC 21 m H1 2014 reported EBIT (a) H1 2014 proforma IFRIC 21 Aerospace 207 9.3% 201 9.1% Transport 11 1.9% 11 1.9% Defence & Security 237 8.2% 226 7.9% Other (33) (37) Total 422 7.4% 402 7.1% (a) Non-GAAP measure: see definition in appendix 23
Q2 2015 order intake by sector m Q2 2015 Q2 2014 total change organic Aerospace 1,067 1,301-18% -22% Transport 735 380 +93% +83% Defence & Security 1,586 1,461 +9% +4% Other 13 3 Total 3,401 3,145 +8% +3% 24
Q2 2015 sales by sector m Q2 2015 Q2 2014 total change organic Aerospace 1,430 1,261 +13% +6% Transport 335 342-2% -7% Defence & Security 1,985 1,608 +23% +19% Other 20 17 Total 3,770 3,228 +17% +11% 25
Thales on board Rafale Thales = about 25% of total aircraft value 26
Main programmes in backlog Amount Programme More than 600m Between 400m and 600m Between 200m and 400m Rafale (Egypt) Rafale (France) Iridium (USA) Contact software defined radio (France) Mirage 2000 upgrade (India) Meteosat (EU) Doha metro (Qatar) FREMM frigates (France/Italy) Defence communication network (France) In-service support of naval sensors SSOP (UK) FalconEye satellite (UAE) Observation satellite (Africa) Hong Kong metro (China) Signalling programme Fbane (Denmark) 27
Thales shareholding structure June 2015 Free float 48.9% o/w Employees 1.9% French State (a) 26.1% Dassault Aviation 25.0% Total share count as of 30 June: 210,162,630 28 (a) French State shares are held directly and indirectly through TSA, a 100% state-owned holding company
Leadership Team Marc Darmon Executive Vice-President Secure Communications and Information Systems Alex Cresswell Executive Vice-President Land & Air Systems Pierre Eric Pommellet Executive Vice-President Defence Mission Systems Gil Michielin Executive Vice-President Avionics Jean-Loïc Galle Executive Vice-President Space Millar Crawford Executive Vice-President Transportation Systems Patrice Caine Chairman and Chief Executive Officer Michel Mathieu Senior Executive Vice-President Chief Operating Officer and Chief Performance Officer Pascale Sourisse Senior Executive Vice-President International Development David Tournadre Senior Executive Vice-President Human Resources Pascal Bouchiat Senior Exective Vice-President Chief Finance Officer Isabelle Simon Group Secretary & General Counsel Hervé Multon Executive Vice-President Strategy Research and Technology 29
Definition of non-gaap measures This presentation contains non-generally Accepted Accounting Principles (GAAP) financial measures. Thales regards such non-gaap financial measures as relevant operating and financial performance indicators for the Group, as they allow non-operating and nonrecurring items to be excluded. Thales definitions for such measures may differ from similarly titled measures used by other companies or analysts. Organic: at constant scope and exchange rates. Book-to-Bill ratio: ratio of orders received to sales. EBIT: income from operations; plus the share of net income or loss of equity affiliates less: amortisation of intangible assets acquired (PPA) Emerging Markets: All countries in Middle East, Asia, Latin America and Africa Adjusted net income: net income, less the following elements, net of the corresponding tax effects: (i) amortisation of intangible assets acquired, (ii) disposal of assets, change in scope of consolidation and other, (iii) change in fair value of derivative foreign exchange instruments (recorded in "other financial results" in the consolidated accounts), (iv) actuarial gains or losses on long-term benefits (accounted within the "finance costs on pensions and employee benefits" in the consolidated accounts). Adjusted EPS: ratio of adjusted net income (as defined above) to average number of shares outstanding. Free Operating Cash Flow: net cash flow from operating activities, less: capital expenditures, less: deficit payments on pensions in the United Kingdom. 30
Thales Tour Carpe Diem 31 Place des Corolles 92098 Paris La Défense France www.thalesgroup.com This presentation may contain forward-looking statements. Such forward-looking statements are trends or objectives, as the case may be, and shall not be construed as constituting forecasts regarding the Company s results or any other performance indicator. These statements are by nature subject to risks and uncertainties as described in the Company s registration document ("Document de référence") filed with Autorité des Marchés Financiers. These statements do not therefore reflect future performance of the Company, which may be materially different.