13 June 2019
Paris La Défense, France
Thales updates its 2019 financial objectives following the integration of
* 2019 objectives for the "Digital Identity and Security" (DIS) operating
- Organic(1) sales growth between 0% and 2%, in line with expectations
- EBIT(2) between EUR240 and EUR260m, corresponding to an underlying margin
of around 10%, comparable to the rest of the Group
* EUR120m of run-rate cost synergies, at the top end of the initially announced
range, after taking into account the disposal of Thales's GP HSM business
* Confirmed outlook for all other businesses
* New 2019 Group objectives:
- Order intake slightly above EUR18bn
- Organic sales growth between 3% and 4% (unchanged)
- EBIT between EUR1,980m and EUR2,000m
Thales (Euronext Paris: HO) published today the update of its 2019 financial
objectives following the integration of Gemalto, completed on 1st April 2019,
and the disposal of its General Purpose Hardware Security Module (GP HSM)
business(3), deconsolidated since 1 January 2019 and finalised on 7 June.
"The update of our 2019 financial objectives announced today is in line with
our plan. The solid momentum in growth businesses, combined with strict cost
control in the more mature businesses, should result in a significant
underlying EBIT increase in the 'Digital Identity and Security' operating
segment, which hosts Gemalto.
Detailed action plans will allow us to generate EUR120m of run-rate cost
Throughout the Group, there is tremendous enthusiasm for what Gemalto brings to
all our businesses. This acquisition represents a powerful accelerator of the
strategy we have been implementing since 2015; by providing a unique range of
digital technologies and skills, it strengthens the differentiation of our
solutions and positions us as partner in the digital transformation of our
customers. At the same time, it allows us to create a global leader in the
digital security market, responding to the needs of the most demanding
customers as they step up to the challenges of identifying people and objects
and keeping data secure."
Patrice Caine, Chairman & Chief Executive Officer
(1) In this press release, "organic" means "at constant scope and currency".
See definition in the 2018 registration document, page 27.
(2) Non-GAAP financial indicator, see definition in the 2018 registration
document, page 27.
(3) This disposal followed the commitment made by Thales to several competition
authorities to divest this business in order to finalise the acquisition of
Outlook for the "Digital Identity and Security" segment
As previously announced, Gemalto has become one of Thales's seven Global
Business Units, called "Digital Identity and Security" (DIS), and is a new
operating segment in the Group's financial statements. This segment also
includes some of the digital businesses previously assigned to the "Defence &
Security" operating segment.
Over the whole of 2019, this segment should deliver organic sales growth of 0%
to 2%, reflecting the solid momentum in most of its businesses, partly offset
by the continued decline in sales of traditional SIM cards(4).
As this segment is mostly exposed to short order cycles, its level of order
intake should be very close to sales.
The detailed review of the cost synergy action plans undertaken over the last
two months leads to an upward revision of the cost synergy target. The Group
now expects EUR120m in run-rate cost synergies, compared with the initial
objective of EUR100 to EUR150m, which included EUR30m in cost synergies related
to the GP HSM business that ultimately had to be divested.
The integration costs to be recorded within EBIT are estimated at EUR60m in
2019 and EUR30 to EUR40m in 2020.
Over the period in which Gemalto is being consolidated (April to December
2019), the EBIT of this segment should reach EUR240 to EUR260m5, benefiting
from the full effect of the transition plan implemented by Gemalto since 2017
and the growth in sales, and including EUR20m in cost synergies and the EUR60m
in integration costs mentioned above.
The setting of the objectives for the "Digital Identity and Security" operating
segment and the disposal of the GP HSM business leads Thales to review its 2019
Order intake is therefore expected to be slightly above EUR18bn, driven by the
favourable orientation of most of the Group's markets, combined with its
differentiated positioning on digital solutions.
Since the acquisition of Gemalto and the disposal of the GP HSM business
represent changes in scope (by nature excluded from the calculation of organic
growth), the organic sales growth objective is unchanged. As such, as announced
on 30 April 2019, sales should achieve organic growth of 3% to 4% compared to
2018, incorporating the normalisation of growth in the Transport segment after
an exceptional performance in 2018, and a 5% to 10% decline in sales in the
Space Global Business Unit, which is affected by a slower than expected
recovery of the commercial satellite market.
(4) Traditional SIM cards accounted for only 13% of the segment's 2018 pro
forma sales (around EUR400m).
(5) Based on the scope and exchange rates of June 2019.
As announced during the June 2018 Capital Markets Day, the Group will continue
to step up its R&D investments, targeting in particular digital technologies.
Self-funded R&D expenses are therefore expected to grow at a slightly faster
rate than sales.
The growth in sales, combined with the impact of the Ambition 10 strategy on
competitiveness and the differentiation of products and services, should result
in Thales delivering an EBIT(6) of between EUR1,980 and EUR2,000m (based on
June 2019 scope and currency), reflecting the outlook described above for the
"Digital Identity and Security" segment and the confirmed outlook for the other
The Group will update its medium-term financial outlook at a Capital Markets
Day that will take place on 3rd October 2019.
Breakdown of updated Group EBIT objective
(in EUR millions)
Objective initially set (February 2019) 1,780 to 1,800
+ EBIT objective set for DIS segment (April-December 2019) 240 to 260
- EBIT of businesses transferred from the Defence & Security
segment to the DIS segment, and disposal of the GP HSM business ~ 50
= New Group EBIT objective 1,980 to 2,000
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).
(6) Since 1 January 2019, the Group has been applying IFRS 16 ("Leases"). Based
on current assessments, this standard is expected to have no material impact on
The people who make the world go round - they rely on Thales. Our customers
come to us with big ambitions: to make life better, to keep us safer.
Combining a unique diversity of expertise, talents and cultures, our architects
design and deliver extraordinary high technology solutions. Solutions that make
tomorrow possible, today. From the bottom of the oceans to the depths of space
and cyberspace, we help our customers think smarter and act faster, mastering
ever greater complexity at every decisive moment along the way.
With 80,000 employees in 68 countries, Thales reported sales of EUR19 billion
in 2018, on a pro forma basis including Gemalto.