THALES (EPA:HO) - Thales reports its Q1 2020 order intake and sales - Press release - 28 April 2020

Transparency directive : regulatory news

28/04/2020 07:00

PRESS RELEASE
28 April 2020
Paris La Défense, France

               Thales reports its Q1 2020 order intake and sales

- Order intake: EUR2.7 billion, up 17% (down 15% on an organic basis(1))
- Sales: EUR3.9 billion, up 16% (-4.7% on an organic basis)
- First impacts of the disruptions caused by the Covid-19 crisis
- Implementation of the global crisis adaptation plan announced on 7 April

Thales (Euronext Paris: HO) announces today its order intake and sales for the
first quarter of 2020.

Order intake                                            Total    Organic
in EUR millions                      Q1 2020  Q1 2019   change   change

Aerospace                                778      672     +16%      +15%
Transport                                156      249     -37%      -38%
Defence & Security                       960    1,301     -26%      -26%
Digital Identity & Security              761       34     n.s.      n.s.
Other                                      7       16     n.s.      n.s.
Total                                  2,663    2,273     +17%      -15%
Sales
in EUR millions
Aerospace                              1,083    1,221   -11.3%    -11.9%
Transport                                347      398   -12.9%    -13.1%
Defence & Security                     1,724    1,686    +2.3%     +2.4%
Digital Identity & Security              727       36      n.m.     n.m.
Other                                     18       21      n.m.     n.m.
Total                                  3,899    3,361   +16.0%     -4.7%
Of which mature markets(2)             2,895    2,439   +18.7%     +2.3%
Of which emerging markets(2)           1,004      922    +8.9%    -23.0%

"Q1 2020 order intake and sales are marked by the first impacts of the Covid-19
crisis, hiding the good dynamics of both Defense & Security and Digital
Identity & Security segments.

(1) In this press release, "organic" means "at constant scope and currency".
(2) Mature markets: Europe, North America, Australia, New Zealand. Emerging
markets: all other countries. See table on page 6.

All Thales teams are fully mobilized to implement the global adaptation plan
announced on 7 April.

Coming out of this unprecedented crisis, Thales will benefit from its unique
positioning: a solid and diversified client base, a worldwide footprint and a
portfolio of key technologies at the highest scientific and technical levels,
especially in the digital field. These key structural assets will enable us to
quickly return to a profitable growth trajectory".
Patrice Caine, Chairman and Chief Executive Officer

Order intake

In the first quarter of 2020, order intake amounted  to EUR2,663  million,  up
17% compared  to  Q1 2019, following the integration of Gemalto's businesses
(consolidated from 1st April 2019).  At constant scope and currency,(3) it was
down 15% compared to Q1 2019.
The impact of the disruption related to Covid-19 is estimated at around EUR190
million for the first quarter, of which EUR80 million is related to civil
aeronautics businesses and approximately EUR110 million is related to other
businesses, largely due to delayed orders. Adjusted for this impact, order
intake was down by approximately 8%, reflecting the natural volatility of large
contract signatures.

During the quarter, the Group booked one large order worth more than EUR100
million, namely for an air surveillance system in a Middle Eastern country. By
comparison, the Group booked 3 large orders in Q1 2019.
Orders with a unit value of less than EUR10 million totalled EUR1,462 million,
up 4% from Q1 2019 excluding the impact of the Gemalto consolidation.

From a geographical(4) point of view, order intake was up 5% in mature markets
and up 54% in emerging markets compared to Q1 2019, driven by the integration
of Gemalto. On an organic basis, order intake was down 18% in mature markets
and down 5% in emerging markets, reflecting the geographical mix of large
orders booked in the 2 periods.

Thanks to a strong performance in avionics from January to mid-March 2020,
order intake in the Aerospace segment was up 16%, amounting to EUR778 million
vs EUR672 million in Q1 2019, despite the negative impacts from the Covid-19
crisis. Space order intake was stable compared to Q1 2019.

Compared to a robust Q1 2019, order intake in the Transport segment was down
37% to EUR156 million, impacted by delays in finalising contracts.

(3) Taking into account a positive exchange rate effect of EUR1 million and a
positive scope effect of EUR731 million.
(4) See table on page 6.

Order intake in the Defence & Security segment fell sharply (-26%), totalling
EUR960 million versus EUR1,301 million in Q1 2019. This decline reflects the
natural volatility of large orders and delays caused by the Covid-19 crisis.

Orders in the Digital Identity & Security segment are structurally close to
sales, as the majority of the businesses in this segment operate on short
cycles. The difference between order intake and sales during the first quarter
was due to the booking of two significant biometric orders.

Sales

Q1 2020 sales came in at EUR3,899 million versus EUR3,361 million in Q1 2019,
up 16% on a reported basis and down 4.7% at constant scope and currency.(5)
Adjusted for the estimated impact of disruptions caused by the Covid-19 crisis,
sales were up slightly, in line with expectations.

The impact of the Covid-19 crisis on Q1 sales is estimated at around EUR200
million, of which EUR60 million is related to civil aeronautics businesses and
EUR140 million to other businesses, the latter largely due to the impact of
sanitary measures on productivity.

From a geographical(6) point of view, this decrease was primarily observed in
emerging markets (down 23.0% on an organic basis), while mature markets
recorded an organic growth of 2.3%, driven mainly by the strong performance of
the French market (+9.8%).

In the Aerospace segment, sales totalled EUR1,083 million, down 11.3% compared
to Q1 2019 (-11.9% at constant scope and currency). This decline was notably
due to a EUR60 million impact of Covid-19 related disruptions on civil
aeronautics businesses and to a lesser impact on the rest of the segment,
reflecting the first disruptions in France and Italy. Space sales continued to
decline in line with expectations, reflecting the phasing of institutional
orders and the slowdown in the commercial market that began in 2017.

In the Transport segment, sales came in at EUR347 million, down 12.9% compared
to Q1 2019 (-13.1% at constant scope and currency). Most of this decline was
due to the phasing down of the four major urban rail signalling contracts
signed in 2015 and 2016 (London, Doha, Dubai and Hong Kong). Despite some
difficulties related to on-site deployment, the Covid-19 crisis had only a
moderate impact this quarter, since most teams are based in countries
relatively unaffected by the sanitary measures in the first quarter.

Sales in the Defence & Security segment were EUR1,724 million, up 2.3% compared
to Q1 2019 (+2.4% at constant scope and currency). Growth in the segment was
affected by a high basis of comparison (strong performance in 2019) and by the
first effects of production delays related to Covid-19, particularly on French
sites.

(5) Taking into account a positive scope effect of EUR697 million and no
exchange rate effect. See page 7.
(6) See table on page 6.

Sales in the Digital Identity & Security segment totalled EUR727 million, up 5%
compared to Q1 2019 on a pro forma basis. This growth was driven by another
dynamic quarter for EMV payment cards and a modest decline in SIM card sales.
The Covid-19 crisis mainly affected biometric solutions and IoT modules, with
very little impact in the rest of the segment.

Outlook

As stated in the 7 April 2020 press release, the global environment in the
first half of 2020 has been profoundly changed by the Covid-19 public health
crisis, which is affecting Thales like all companies, thus invalidating the
2020 financial outlook issued in February.

The measures implemented to limit the spread of the virus have a significant
impact on the Group's production, project execution, supply chains and
customers' ability to take delivery of products and systems.

In addition, this crisis is affecting demand across the Group's markets. The
greatest impact is expected to be on civil aeronautics businesses, which
generated sales of approximately EUR2.15 billion in 2019.

In this context, and while keeping as number one priority the health and safety
of its employees, Thales has launched a global adaptation plan(7) in order to
(1) maintain its productive capacities at the service of its customers, (2)
limit the financial impact of this crisis and (3) strengthen its funding
capacity in the event that the crisis persists or worsens.

At this stage, it is impossible to quantify the financial impact of this crisis
on the  Group's financial statements. The impact will depend in particular on
the scope and duration of the sanitary measures imposed in the various
countries where the Group operates.

Considering that a large part of the world is under some form of partial or
full lockdown, the Group expects the crisis to have a very significant impact
on its activity during Q2 2020 and on its H1 2020 financial statements.

As soon as it is able to do so, Thales will provide an update on the financial
impact of this crisis on its financial statements and adjust its financial
outlook.

                                     ****

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).

(7) The key features of this adaptation plan are described in the 7 April 2020
press release.

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 83,000 employees in 68 countries, Thales generated
sales of EUR19 billion in 2019 (on a pro forma basis including Gemalto over 12
months).

Thales is investing in particular in digital innovations - connectivity, Big
Data, artificial intelligence and cybersecurity - technologies that support
businesses, organisations and governments in their decisive moments.

CONTACTS

Thales, Media Relations
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 - Q1 2020

                                                                    Q1 2020
                                                  Total   Organic  weighting
(in EUR millions)               Q1 2020  Q1 2019  change  change     in %

France                              568      481    +18%     +12%     21%
United Kingdom                      139      335    -59%     -68%      5%
Rest of Europe                      581      580     +0%     -25%     22%
Sub-total Europe                  1,289    1,396     -8%     -22%     48%
United States and Canada            446      234    +91%      +8%     17%
Australia and New Zealand            76       89    -15%     -28%      3%
Total mature markets              1,811    1,719     +5%     -18%     68%
Asia                                407      395     +3%     -31%     15%
Near and Middle East                303       82   +271%    +151%     11%
Rest of the world                   142       77    +86%     -38%      5%
Total emerging markets              852      553    +54%      -5%     32%
Total all markets                 2,663    2,273    +17%     -15%    100%

Sales by destination - Q1 2020

                                                                    Q1 2020
                                                  Total   Organic  weighting
(in EUR millions)               Q1 2020  Q1 2019  change  change     in %

France                            1,105      982  +12.5%    +9.8%     28%
United Kingdom                      263      281   -6.3%   -16.6%      7%
Rest of Europe                      823      675  +21.9%    +0.2%     21%
Sub-total Europe                  2,192    1,939  +13.1%    +2.6%     56%
United States and Canada            503      299  +68.5%    +2.8%     13%
Australia and New Zealand           200      202   -1.0%    -2.1%      5%
Total mature markets              2,895    2,439  +18.7%    +2.3%     74%
Asia                                515      469   +9.8%   -21.6%     13%
Near and Middle East                257      304  -15.5%   -28.2%      7%
Rest of the world                   232      149  +55.5%   -16.6%      6%
Total emerging markets            1,004      922   +8.9%   -23.0%     26%
Total all markets                 3,899    3,361  +16.0%    -4.7%    100%

Organic change in sales

(in EUR     2019   Currency  Impact of   2020    Impact of     Total  Organic
millions)   sales   impact   disposals   sales  acquisitions   change  change

Q1          3,361      - 0           -   3,899        +697     -16.0%   -4.7%

Main scope effects:
- Acquisitions: consolidation of Gemalto from 1 April 2019 (Digital Identity &
Security segment).

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 reports its Q1 2020 order intake and sales - Press release - 28 April 2020

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