Consolidated financial statements at 30 June 2009

CONSOLIDATED
FINANCIAL STATEMENTS
AT 30 JUNE 2009
CONSOLIDATED PROFIT AND LOSS ACCOUNT
(€ Million)
Notes
Revenues
Cost of sales (a)
Research and development expenses
Marketing and selling expenses (a)
General and administrative expenses
Restructuring costs
Amortisation of intangible assets recognised at fair value in
business combination
note 5
Income from operations
Impairment of non current operating assets
Gain (loss) on disposal of assets
2009
2008
2008
First half First half Full year
5,743.6
5,668.0 12,664.8
(4,692.4) (4,419.5) (9,961.6)
(254.9)
(204.8)
(440.2)
(439.7)
(392.2)
(809.6)
(253.6)
(272.5)
(558.7)
(42.2)
(11.4)
(32.5)
(42.2)
(54.9)
(109.8)
note 5
18.6
312.7
752.4
notes 6
note 7
(5.3)
5.6
(45.4)
57.3
(69.1)
35.2
18.9
324.6
718.5
(47.9)
14.8
(33.1)
(45.9)
26.1
(19.8)
(101.4)
49.6
(51.8)
(27.4)
(58.5)
50.0
24.7
(12.2)
(4.7)
(69.7)
25.8
(49.8)
(11.1)
(103.0)
57.6
Net income (loss)
(25.4)
244.0
560.4
Of which :
Net income, Group share
Minority interests
(25.3)
(0.1)
244.1
(0.1)
559.9
0.5
(0.13)
(0.13)
1.25
1.24
2.87
2.85
note 13
Income of operating activities
Financial interest on gross debt
Financial income from cash and equivalents
Cost of net financial debt
Other financial income (expense)
Other components of pension charge
Income tax
Share in net income (loss) of equity affiliates
note 8
note 9
note 10
note 14
Basic earnings per share (in euros)
Diluted earnings per share (in euros)
note 11
note 11
(a) Since January 1, 2009, warranty costs, related to construction contracts or not, are included within cost of sales.
They were included in selling expenses except when directly allocated to contracts.
Consequently, prior periods have been adjusted: € (20.9) million in the first half of 2008 and € (41.6) million in
2008 have been reclassified from selling expenses to cost of sales.
-
2
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(€ Million)
-
2009
First half
2008
First half
2008
Full year
Net income
(25.4)
244.0
560.4
Cumulative translation adjustment
125.5
(104.6)
(259.4)
Financial instruments :
- Cash flow hedge
- Financial assets available for sale
61.1
--
34.1
(1.2)
(26.5)
(0.5)
Other
(1.5)
(3.1)
(5.2)
Deferred tax on other comprehensive income
(18.3)
(7.2)
(3.2)
Total other comprehensive income, net of tax
166.8
(82.0)
(294.8)
Total comprehensive income (loss) for the period
141.4
162.0
265.6
Of which :
Group share
Minority interests
140.8
0.6
162.5
(0.5)
265.6
--
3
CONSOLIDATED BALANCE SHEET
(€ Million)
ASSETS
Notes
Goodwill, net
Other intangible assets, net
Tangible assets, net
Total non current operating assets
note 12
note 13
note 13
2,993.2
1,150.4
1,331.2
5,474.8
2,793.2
1,129.3
1,262.9
5,185.4
Share in net assets of equity affiliates
Available-for-sale investments
Loans and other financial assets
Total non current financial assets
note 14
note 15
note 15
701.6
116.2
159.0
976.8
692.4
175.4
258.8
1,126.6
Fair value of derivatives: interest rate risk management
Pension and other employee benefits
Deferred tax assets
note 18
30.0
46.5
507.6
13.1
44.0
433.5
Non-current assets
7,035.7
6,802.6
Inventories and work in progress
Construction contracts: assets
Advances to suppliers
Accounts, notes and other current receivables
Fair value of derivatives: currency risk management
Total current operating assets
2,532.4
2,599.8
400.8
3,711.2
220.2
9,464.4
2,227.4
2,400.6
548.2
4,064.1
292.4
9,532.7
29.1
13.1
67.6
12.2
1,680.5
1,760.3
65.1
22.4
1,499.8
1,587.3
Current assets
11,253.8
11,133.1
Total assets
18,289.5
17,935.7
30/06/09
31/12/08
4,318.7
(273.3)
(150.2)
3,895.2
4.3
4,497.4
(398.3)
(150.2)
3,948.9
2.9
Current tax receivables
Current accounts with affiliated companies
Marketable securities
Cash at bank and equivalents
Total current financial assets
note 18
note 18
note 18
LIABILITIES AND SHAREHOLDERS’ EQUITY
Notes
Capital, paid-in surplus and other reserves
Cumulative translation adjustment
Treasury shares
Shareholders’ equity
Minority interests
31/12/08
Total shareholders’ equity and minority interests
note 16
3,899.5
3,951.8
Financial debt – long term
Pension and other employee benefits
Deferred tax liabilities
note 18
1,681.8
854.9
269.5
761.3
847.5
268.6
Non-current liabilities
2,806.2
1,877.4
3,889.2
169.8
695.3
974.9
4,629.9
154.1
10,513.2
3,687.4
169.5
578.4
961.5
5,045.9
279.5
10,722.2
76.1
88.9
845.6
148.9
994.5
1,136.3
159.1
1,295.4
Total current liabilities
11,583.8
12,106.5
Total liabilities and shareholders’ equity
18,289.5
17,935.7
Advances received from customers on contracts
Refundable grants
Construction contracts: liabilities
Reserves for contingencies
Accounts, notes and other current payables
Fair value of derivatives: currency risk management
Total current operating liabilities
note 17
Current tax payables
Financial debt – short term
Current accounts with affiliated companies
Total current financial liabilities
-
30/06/09
note 18
note 18
4
CONSOLIDATED STATEMENT OF CASH FLOWS
(€ Million)
Notes
Net income (loss)
Add (deduct) :
Income tax expense (gain)
Share in net (income) loss of equity (net of dividends received)
Depreciation and amortisation of tangible and intangible assets
Provisions for pensions and other employee benefits
Impairment of non current operating assets
Loss (gain) on disposals of assets
Net allowances to restructuring provisions
Other items
Operating cash flows before working capital changes
note 13
note 9
note 6
note 7
Change in working capital requirements and in reserves for contingencies (a)
Payment of pension benefits (defined benefit plans), of which:
- deficit payment in the UK
- scheme settlements in the UK
- future service cash
Income tax (paid) received
(25.4)
244.0
560.4
(50.0)
(13.3)
195.1
87.1
5.3
(5.6)
(7.1)
10.8
196.9
69.7
(23.4)
200.8
34.6
45.4
(57.3)
(48.9)
14.0
478.9
103.0
(29.6)
433.0
70.9
69.1
(35.2)
(85.9)
49.4
1,135.1
42.1
(509.1)
(44.5)
(62.1)
(27.6)
-(34.5)
(102.9)
(40.2)
(32.6)
(30.1)
(189.7)
(45.9)
(46.8)
(80.1)
131.0
(179.9)
820.8
(78.6)
(38.1)
(73.0)
Net cash flows from operating activities
-I-
Capital expenditure
Proceeds from disposal of tangible and intangible assets
Net operating investments
note 19-a
(180.4)
2.1
(178.3)
(261.0)
2.9
(258.1)
(534.6)
11.7
(522.9)
Acquisitions
Disposals
Change in loans
Change in current accounts with affiliated companies
Decrease (increase) in marketable securities
Net financial investment
note 19-b
note 19-b
(141.9)
(6.9)
13.9
(3.6)
10.2
(128.3)
(15.7)
91.2
1.2
10.5
(6.7)
80.5
(173.2)
89.1
(24.7)
(6.8)
(3.3)
(118.9)
Net cash flows from investing activities
- II -
(306.6)
(177.6)
(641.8)
(204.7)
10.3
922.4
(423.9)
(195.3)
(46.0)
111.5
(161.3)
(195.3)
(44.5)
412.8
(184.4)
Dividends paid
Increase (decrease) in shareholders’ equity and minority interests
Increase in debt
Repayment of debt
note 19-c
Net cash flows from financing activities
- III -
304.1
(291.1)
(11.4)
Effect of exchange rate variations
- IV -
52.2
(42.4)
(131.9)
Total increase (decrease) in cash at bank and equivalents
I+II+III+IV
180.7
(691.0)
35.7
1,499.8
1,680.5
1,464.1
773.1
1,464.1
1,499.8
Cash at bank and equivalents at beginning of period
Cash at bank and equivalents at end of period
(a)
-
2008
2008
2009
First half First half Full year
Including changes in proceeds from sale of government non-recourse receivables (€ -58.1 million in the first half of 2009,
€ -102.4 million in the first half of 2008 and € -24.2 million in 2008). Transferred receivables, including notably mature
receivables bearing interest on overdue payments, amounted to € -147.9 million at 30 June 2009 (€ 206.0 million at 31
December 2008 and € 127.9 million at 30 June 2008).
5
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
AND MINORITY INTERESTS
(€ Million)
In the first half of 2009:
At 1 January 2009
First half 2009 comprehensive
income (loss)
Capital increase
Dividends (a)
Share-based payments (note 16-b)
Changes in treasury shares
Changes in scope of consolidation
Total transactions with shareholders’
At 30 June 2009
Number
Share Paid Retained Changes Cumulative Treasury Share- Minority
in
earnings
in fair
translation shares Holders’ interests
of shares capital
equity
surplus
values
adjustment
outstanding
(thousands)
60.3
(398.3)
(150.2)
3,948.9
2.9
194,981
596.2 3,647.8 193.1
Total
3,951.8
--
--
--
(27.0)
42.8
125.0
--
140.8
0.6
141.4
36
--(14)
-22
0.1
---
0.9
---
-0.1
-0.9
-(204.7)
9.6
(0.4)
-(195.5)
-------
-------
-------
1.0
(204.7)
9.6
(0.4)
-(194.5)
----0.8
0.8
1.0
(204.7)
9.6
(0.4)
0.8
(193.7)
(29.4)
103.1
(273.3)
(150.2)
3,895.2
4.3
3,899.5
195,003
596.3 3,648.7
In the first half of 2008:
At 1 January 2008
First half 2008 comprehensive
income (loss)
Capital increase
Dividends (a)
Share-based payments (note 16-b)
Changes in treasury shares
Changes in scope of consolidation
Total transactions with shareholders’
At 30 June 2008
Number
Share Paid Retained Changes Cumulative Treasury Share- Minority
of shares capital
in
earnings
in fair
translation shares Holders’ interests
equity
outstanding
surplus
values
adjustment
(thousands)
195,401
595.0 3,638.2 (173.8)
90.5
(139.4)
(129.6)
3,880.9
3.3
3,884.2
--
--
--
241.0
25.7
(104.2)
--
162.5
(0.5)
162.0
202
--(283)
-(81)
0.6
----0.6
4.8
----4.8
-(195.3)
15.7
(20.2)
-(199.8)
-------
-------
---(2.6)
-(2.6)
5.4
(195.3)
15.7
(22.8)
-(197.0)
----(0.3)
(0.3)
5.4
(195.3)
15.7
(22.8)
(0.3)
(197.3)
116.2
(243.6)
(132.2)
3,846.4
2.5
3,848.9
195,320
595.6 3,643.0 (132.6)
(a) Dividends per share amounted to € 1.05 in 2009 and € 1.00 in 2008.
-
Total
6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts included in these notes are expressed in € million
except for per share data.
On 24 July 2009 the Board of Directors approved, and authorised for issue, Thales’ condensed interim
consolidated financial statements for the period ended 30 June 2009. Thales is a listed French société
anonyme, registered with the Nanterre registrar of companies (Registre du Commerce et des Sociétés de
Nanterre) under the number 552,059,024.
1. ACCOUNTING POLICIES
The condensed interim consolidated financial statements at 30 June 2009 have been prepared in
accordance with IAS 34 “Interim financial reporting” and with IFRS standards as approved by the
European Union at 30 June 2009. The interim condensed consolidated financial statements are prepared
using accounting policies which are identical to those used to prepare the full-year financial statements at
31 December 2008, subject to the clarifications set out in note 1-x, and except for the following changes:
• New financial reporting standards, amendments and interpretations effective in 2009 :
- IFRS 8 (Operating segments), replacing IAS 14 (Segment reporting), requires the Group to report
financial and descriptive information about its operating segments. An operating segment is a Group
component for which specific internal reports are available and for which operating performances are
regularly reviewed by the entity's “chief operating decision maker” in order to allocate resources to the
segment and assess its performance.
Thales’s businesses are organised in three main domains: Aerospace/Space, Defence and Security. The
Aerospace/Space segment includes two divisions : « Aerospace » and « Space » that both develop
onboard systems and solutions for the defence market, civil government and commercial markets. The
Defence segment includes « Land and Joint Systems », « Air Systems » and « Naval » divisions, that
offer information, command and communication systems, weapon systems and mission systems for all
armed forces. The “Security” segment develops civil security solutions for public authorities and security
systems for critical infrastructures (railways, energy grids…) and also includes a wide offer of components
and specific subsystems.
The Chairman and Chief Executive Officer, assisted by the Senior Vice President, Finance and
Administration, reviews regularly operating performances of these three domains and allocate resources
on this basis. Therefore, each of these three domains corresponds to an « operating segment »
according to IFRS 8.
- Amendment to IAS 23 (Borrowing costs), has no impact for the Group since borrowing costs incurred on
the acquisition or during the construction of assets are already included in the cost of such assets.
- Amendment to IAS 1 (Presentation of financial statements) changes the structure of the financial
statements, mostly by limiting items that can be presented in the statement of changes in shareholders’
equity to transactions with shareholders. Other items are presented in a new statement, named
« consolidated statement of comprehensive income ».
Amendment to IFRS 2 (Share-based payment – vesting conditions and cancellations ), to IAS 32
(Financial instruments: presentation) and to IAS 1 (Presentation of financial statements – puttable
financial instruments and obligations arising on liquidation), improvements to IFRSs of May 2008, so as
interpretations IFRIC 11 (Group and treasury share transactions), IFRIC 13 (Customer loyalty
programmes) and IFRIC 14 (The limit on a defined benefit asset, minimum funding requirements and their
interaction) do not have any significant impact on the Group’s accounts at 30 June 2009.
• New financial reporting standards, amendments and interpretations effective after 2009:
The Group did not opt for earlier application of :
- Amendment to IFRS 3 (Business combinations) and to IAS 27 (Consolidated and separate financial
statements)
- IFRIC 12 (Service concession arrangements),
- IFRIC 16 (Hedges of a net investment in a foreign operation).
Besides, the following standards, not yet endorsed by the European Union at 30 June 2009, have not
been applied yet by the Group:
-
7
- Amendment to IAS 39 (Financial instruments : recognition and measurement – embedded derivatives)
- IFRIC 15 (Agreements for the construction of real estate),
- IFRIC 17 (Distributions of non-cash assets to owners),
- Improvements to IFRSs published in April 2009.
Of these new standards and interpretations, only IFRS 3 and IAS 27 could have a material impact on the
future consolidated financial statements of the Group. These new standards will be effective for business
combinations that occur on or after January 1, 2010.
• As a first time adopter of IFRS for the financial year ended 31 December 2005, Thales applied the
specific rules for first time adoption defined in IFRS 1. Any specific options retained are set out in the
following notes.
a) Consolidation
The financial statements of significant subsidiaries directly or indirectly controlled by Thales are fully
consolidated. Companies in which Thales does not have a controlling interest but over which it exercises
significant influence, either directly or indirectly, are accounted for under the equity method. Companies
under joint control are accounted for under the proportionate method.
Financial statements of consolidated companies, prepared in accordance with accounting standards
applicable in the countries in which the companies are incorporated, have been restated for the purposes
of the consolidation in order to comply with IFRS.
Transactions between fully consolidated or proportionately consolidated companies are eliminated, as
well as internal gains and losses related to consolidated companies. Transactions between a fully
consolidated company and a proportionately consolidated company, whether or not they affect
consolidated profit and loss, are eliminated to the extent of the Group’s ownership interest in the
proportionately consolidated company. As an exception to this principle, transactions between a fully
consolidated company and a proportionately consolidated company are fully eliminated when the jointly
controlled company acts simply as an intermediary or performs profit-neutral services on behalf of, or as a
direct extension of the activities of, its different shareholders.
b) Business combinations
Business combinations are accounted using the purchase accounting method. Under this method, all
identifiable assets, liabilities and contingent liabilities acquired are measured at fair value at the date at
which control is obtained. The excess of the cost of acquisition over the fair value of Group’s share in net
assets acquired is recorded as goodwill.
Goodwill can be adjusted within the twelve months following the acquisition date to take into account the
final estimate of the acquired assets and liabilities recognised.
Negative goodwill is immediately recognised in “other operating income (expense)”. Goodwill related to
controlled enterprises is recognised in balance sheet assets under the “intangible assets” caption.
Goodwill related to companies accounted for under the equity method is recognised under the “share in
net assets of equity affiliates” caption.
Goodwill is not amortised but is subject, each year, to impairment (see note 1-f). Goodwill impairment is
booked as an expense in the line “impairment of non current operating assets” and cannot be reversed.
Goodwill impairment related to equity affiliates is accounted for in “share in net income (loss) of equity
affiliates” and can be reversed.
Reminder of policy applied on first time adoption of IFRS:
The Group decided not to restate business combinations that occurred before 1 January 2004.
c) Translation of the financial statements of foreign subsidiaries
The financial statements of companies whose functional currency is different from the Group’s functional
currency are translated using the following methods:
− Balance sheet items are translated at the exchange rates prevailing at balance sheet dates,
− Profit and loss items and the statement of cash flows are translated at the average exchange rates for
the year,
− Translation adjustments are directly recognised in shareholders’ equity within the “cumulative
translation adjustment” account.
-
8
The main closing and average exchange rates used for translation purposes in recent years are
summarised below:
Euros
Australian Dollar
Pound Sterling
U.S. Dollar
30 June 2009
Closing
Average
Rate
Rate
1.7359
1.8733
0.8521
0.8900
1.4134
1.3379
30 June 2008
Closing
Average
Rate
Rate
1.6371
1.6573
0.7923
0.7795
1.5764
1.5444
31 December 2008
Closing
Average
Rate
Rate
2.0274
1.7487
0.9525
0.8026
1.3917
1.4726
Reminder of policy applied on first time adoption of IFRS :
The Group took the option, provided by IFRS 1, of not retrospectively reconstituting cumulative translation
adjustments in shareholders’ equity at 1 January 2004. Translation adjustments that arose prior to the
IFRS transition date will therefore not be taken into account in calculating gains or losses on future
disposals of consolidated subsidiaries or equity affiliates.
d) Accounting for foreign currency transactions
Transactions in foreign currencies are translated at the rate of exchange prevailing at the transaction date.
Foreign currency denominated assets and liabilities are translated into euros at closing exchange rates.
Translation gains and losses are recorded in profit and loss as “Foreign exchange gains (losses)".
Foreign currency exposure is managed by the finance department of Thales which uses foreign currency
derivatives to protect against changes in the value of future cash flows related to commercial flows in
foreign currencies.
In order for a derivative to be eligible for hedge accounting, it is necessary to define and document the
hedging relationship and to demonstrate its effectiveness as from origination and throughout its duration.
When hedge effectiveness is demonstrated, hedge accounting is applied in the following manner:
− the change in the fair value of the hedging instrument is recognised directly in shareholders’ equity for
the effective portion of the hedge until such time as the hedged flows affect profit and loss. The
ineffective portion is recognised in profit and loss,
− the amount of the foreign currency denominated transaction is subsequently translated at the exchange
rate prevailing at the date of the hedge.
Changes in the fair value of premiums or discounts related to forward foreign currency contracts, as well
as the time value of foreign currency options, are recognised in “other financial income (expense)” as they
are excluded from the hedging relationship.
In addition, the Group puts in place hedges of its net investment in foreign subsidiaries. Foreign exchange
gains or losses on foreign currency denominated financial instruments corresponding to such hedges are
recognised through equity under the “cumulative translation adjustment” caption until the date of disposal
of these investments. At this date, these foreign exchange gains or losses are recognised in profit and
loss.
e) Tangible and intangible fixed assets
• Tangible assets
Property, plant and equipment are carried at their acquisition cost, as reduced by accumulated
depreciation and impairment losses recognised. Depreciation of tangible fixed assets is generally
calculated on the basis of the following typical useful lives:
− 20 years for buildings,
− 1 to 10 years for plant and equipment,
− 5 to 10 years for other tangible fixed assets (vehicles, fixtures, etc.).
The depreciable amount takes into account the residual value of the asset. The different components of
tangible fixed assets are recognised separately when their estimated useful lives or patterns of use, and
thus the period over which they are depreciated or the depreciation methods applicable to them, are
materially different.
Borrowing costs that are directly attributable to the acquisition or the construction phase of an asset are
capitalised as part of the cost of that asset.
Assets acquired through finance lease arrangements that transfer substantially all the risks and rewards
associated with ownership of the asset are recognised in the balance sheet at their fair value or, if lower,
at the present value of the minimum lease payments. Such assets are depreciated in accordance with the
methodology described above. The corresponding lease obligation is recognised within the financial debt.
-
9
• Intangible assets
The Group’s intangible assets mainly include:
− goodwill (note 1-b),
− capitalised development costs (note 1-j),
− Assets acquired in business combinations, primarily acquired technologies, customer relationships and
the order backlog. These assets are recognised at fair value and amortised over their useful lives. In
the profit and loss account, the amortisation is classified as “Amortisation of intangible assets
recognised at fair value on business combinations”. The fair value of the assets is based on the market
value. If no active market exists, the Group uses methods based on forecasts of the present value of
the expected future operating cash flows (excess earnings method, royalty method…).
Intangible assets are subject to impairment tests (see note 1-f).
f) Impairment of non-current assets
Each time events or circumstances indicate that a tangible or an intangible asset may be impaired, and
systematically at each annual balance sheet date for goodwill and intangible assets with indefinite useful
lives, impairment tests are performed.
To perform impairment tests, goodwill resulting from business combinations as well as assets that do not
generate independent cash flows are allocated to cash generating units (CGU). The scope of a CGU
cannot be broader than that of an operational division, as defined by IFRS 8.
These tests consist of ensuring that the recoverable amount of each of the Group’s CGU is at least equal
to the corresponding net assets (including goodwill). The recoverable amount of an asset is the higher of
its fair value less costs to sell and its value in use. Value in use is determined on the basis of discounted
future operating cash flows over a three-year period and a terminal value. This calculation is based on
data from the strategic plans prepared in accordance with Group procedures. The discount rate used is
calculated on the basis of the Group’s weighted average cost of capital (8.5% in 2008) adjusted if
necessary for the specific risks attributable to each business sector. Assumptions used concerning growth
in revenues and terminal values are based on a reasonable approach in line with specific data available
for each business sector (generally terminal value is based on the weighted average of the income from
operations from the three-year strategic plans and the growth is limited to 2%).
Impairment tests of capitalised development costs (note 1-j) are performed by project, on the basis of
discounted future operating cash flows related to the project.
g) Investment and marketable securities / financial loans and receivables
Investment and marketable securities are designated as “available-for-sale” assets and measured at fair
value. For listed securities, this value corresponds to their stock market price at the balance sheet date.
For unlisted securities, valuation models are used. If fair value cannot be reliably determined, such
securities are recognised at cost. Changes in fair value are recognised directly in shareholders’ equity. If
an impairment indicator of long-term loss of value is identified, a provision for impairment is recognised in
“other financial income (expense)”. Such provisions for impairment are only reversed to profit and loss at
the date of disposal of the security.
Financial loans and receivables are recognised at amortised cost. They are subject to provisions for
impairment if an impairment indicator of long-term loss of value is identified. Such provisions for
impairment, recognised in the “other financial income (expense)” caption, can subsequently be reversed
through profit and loss if the conditions, which led to the impairment loss previously recognised, cease to
exist.
h) Inventories and work-in-progress
Inventories and work-in-progress are carried at the lower of their production cost (determined using the
FIFO or weighted-average cost method) or their net realisable value. Work-in-progress, semi-finished and
finished goods are stated at direct cost of raw materials, production labour and subcontract costs incurred
during production, plus an appropriate portion of production overhead costs and of any other costs that
can be directly allocated to contracts.
In the consolidated balance sheet, work-in-progress related to construction contracts is included in the
“Construction contracts: assets” caption or the “Construction contracts: liabilities” caption (note 1-i).
i) Revenues
The Group’s revenues can be divided into two main accounting categories: sales of goods and services
and construction contracts. Revenues are measured at the fair value of the consideration received or to
be received. In the case where the deferral of payment has a material effect on the determination of such
fair value, the amount at which revenues are recognised is adjusted to take the financial impact of the
deferral of payment into account.
-
10
Sales of goods and services:
Revenue from the sales of goods and services together with royalty and licence income is recognised
when it is probable that the future economic benefits will flow to the Group and the amount of revenue can
be measured reliably. The following specific criteria must also be satisfied in order for revenue to be
recognised:
− revenues from the sale of goods are recognised when the enterprise has transferred the main risks and
rewards inherent to ownership of the goods to the purchaser,
− revenues related to the rendering of services are recognised on the basis of the percentage-ofcompletion of the transaction.
The costs relating to the service provided (sale of goods or services rendered) are recognised in the
statement of income at the same time as the corresponding revenues.
Construction contracts
A construction contract is a contract specifically negotiated for the construction of an asset or of a group of
assets, which are interrelated in terms of their design, technology, function, purpose or use.
According to its characteristics, a notified construction contract can either be accounted for separately, be
segmented into several components which are each accounted for separately, or be combined with
another construction contract in progress in order to form a single construction contract for accounting
purposes in respect of which revenues and expenses will be recognised.
Revenues and expenses on construction contracts are recognised in accordance with the technical
percentage of completion method. However, where there is no significant timing difference between
technical percentage of completion and contractual dates of transfer of ownership, the percentage of
completion is determined according to the contractual transfer of ownership.
Penalties for late payment or relating to improper performance of a contract are recognised as a
deduction from revenues. In the balance sheet, provisions for penalties are deducted from assets related
to the contract.
Expected losses on contracts, in progress or in the order backlog, are fully recognised as soon as they
are identified.
Selling, administrative and interest expenses are directly charged to the profit and loss account in the
financial year in which they are incurred.
Estimates of work remaining to be completed on contracts do not include revenues from claims made by
the Group, except when it is highly probable that such claims will be accepted by the customer.
Progress payments received on construction contracts are deducted from contract assets as the contract
is completed. Progress payments received before the corresponding work has been performed are
classified in "Advances received from customers on contracts" in balance sheet liabilities.
The cumulative amount of costs incurred and profit recognised, reduced by recognised losses and
progress billings, is determined on a contract-by-contract basis. If this amount is positive it is classified as
“Construction contracts: assets” in balance sheet assets. If it is negative it is classified as “Construction
contracts: liabilities” in balance sheet liabilities.
j) Research and development expenses
Customers and government agencies fund a significant portion of research and development expenses.
Internally funded research and development expenses are charged to the profit and loss account as
incurred as "Research and development expenses", except for project development costs that meet the
following criteria:
− the product or process is clearly defined, and costs are separately identified and reliably measured,
− the technical feasibility of the project is demonstrated,
− adequate resources are available to complete the project sucessfully,
− a potential market for the products exists or their usefulness, in case of internal use, is demonstrated,
− the product will bring future economic benefits to the Group by its sale or by its internal use.
Development costs are capitalised once the above criteria are met. They are then amortised over the
useful life of the product. The method of amortisation is determined by reference to expected future
quantities or revenues over the period in which future economic benefits will be earned. The period of
amortisation depends on the nature of the activity. If the asset becomes impaired, an impairment loss is
recognised.
The Group receives public financing, in the form of reimbursable advances, for the development of certain
projects. Reimbursement of these advances is generally based on the expected future revenues to be
generated by the project. The Group recognises such advances in liabilities taking into account the
-
11
likelihood that they will be reimbursed. Costs incurred in respect of these projects are recognised in the
work-in progress-caption.
The Group benefits from tax credits related to research carried out by its subsidiaries. Such tax credits are
deemed to be equivalent to operating grants and are thus included in income from operations.
k) Income from operations
Income from operations corresponds to income of operating activities before taking account of:
− Gains and losses on disposal of intangible or tangible assets, businesses or operational investments,
− Impairment of non current operating assets,
− Other operating income (expense) resulting from events that are unusual because of their frequency,
their nature and their amount.
l) Deferred taxation
Thales recognises deferred taxes when the tax value of an asset or liability differs from its book value.
The effects of changes in the corporation tax rate are recorded in the profit and loss account for the
financial year in which the change was decided, unless the underlying transactions were recognised
directly through shareholders’ equity.
Deferred tax assets and liabilities are not discounted.
Deferred tax assets are not recognised in the balance sheet if the tax entity concerned does not
reasonably expect to recover the tax asset. To assess its ability to recover deferred tax assets, the Group
takes into account forecasts of future taxable results of the tax entities concerned on a generally five-year
forecast, non-recurring past events and tax strategies specific to each country.
If the potential benefit of the acquiree’s income tax loss carry-forwards or other deferred tax assets does
not satisfy the criteria for separate recognition when a business combination is initially accounted for, but
is subsequently realized, the acquirer will recognize the resulting deferred tax income in profit or loss. In
addition:
- the carrying amount of goodwill is reduced to the amount that would have been recognized if the
deferred tax asset had been recognized as an identifiable asset from the acquisition date; and
- the reduction in the carrying amount of goodwill is recognized as an expense. In the consolidated
financial statements, the expense is accounted for in a specific line under the “income tax” caption.
m) Restructuring
Provisions for restructuring costs are made when restructuring programs have been finalised and
approved by Group management and have been announced before the balance sheet date, resulting in
an obligating event of the Group to the third parties concerned, as long as the Group does not expect
consideration for these costs.
Such costs primarily relate to severance payments, costs for notice periods not worked and other costs
linked to the closure of facilities such as write-offs of fixed assets.
These costs and the costs directly linked to restructuring measures (removal costs, training costs of
transferred employees, etc.) are recognised under the “restructuring costs” caption in the profit and loss
account.
n) Pension and other employee benefits
In accordance with local legislation and practice in the countries in which it operates, the Group grants its
employees post-employment benefits (pensions, retirement awards, medical care, etc.) and other longterm benefits (long-service benefits, long-service awards on departure, etc.).
The Group measures and recognises pension and similar benefits as follows:
− For defined contribution schemes and state plans, contributions paid by the Group are expensed as
incurred.
− For defined benefit schemes, the actuarial method used is the “Projected Unit Credit method” on the
basis of estimated salaries at the date of retirement.
For post-employment benefits, actuarial gains and losses are recognised in income or expense when
cumulative unrecognised actuarial gains and losses for the scheme at the end of the previous financial
year exceed the greater of 10% of the defined benefit obligation or of the fair value of plan assets at that
date. These gains and losses are amortised over the expected average remaining working life of
employees benefiting from the scheme (being the “corridor” method).
Current service cost is recognised in income from operations and other components of the pension and
other employee benefits are included in the “other components of pension charge” caption.
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12
Reminder of policy applied on first time adoption of IFRS :
The Group decided to take the option, provided by IFRS 1, of recording its unamortised actuarial gains
and losses at 1 January 2004 in shareholders’ equity at that date. As from 1 January 2004, the corridor
method has been applied. The new option provided by IAS 19, as revised, of recognising actuarial gains
and losses directly in shareholders’ equity has not been taken.
o) Share based payments
Share options and free shares
Thales grants share options and free shares to its employees. The Group uses a binomial model to
measure the amount of the benefit to employees receiving the shares or/and share options granted.
The corresponding fair value is determined at the grant date. Such amount is recognised in profit and loss
over the vesting period of the rights, not based on a straight-line basis but rather on the specific conditions
under which rights vest under each scheme.
Company savings plans
Employee share offerings with a discount to the market price proposed within Company savings plans
don’t include any vesting period of the rights but are subject to a legal five-years lock-up period.
Valuation of the advantage granted to the employees takes into account the cost of the five-year lock-up
period.
The expense related to share based payments is included in income from operations with a corresponding
credit recognised in retained earnings. It thus has no effect on the overall amount of shareholders’ equity.
Reminder of policy applied on first time adoption of IFRS :
The Group took the option, provided by IFRS 1, of not restating share option plans whose grant date was
prior to 7 November 2002.
p) Earnings per share
Basic earnings per share are calculated by dividing profit attributable to shareholders by the weighted
average number of shares outstanding during the financial year, excluding treasury shares.
Diluted earnings per share (DEPS) take into account instruments that have a dilutive effect on earnings
per share and exclude anti-dilutive instruments. Diluted earnings per share are calculated on the basis of
the weighted average number of shares and equity-equivalent bonds outstanding during the financial
year, less treasury shares. Net income is adjusted for the after-tax interest expense of related convertible
bonds. The dilutive effect of share options is calculated using the treasury stock method, taking into
account the average market price for the share in the period in question.
q) Financial debt – compound instruments
Financial debt is initially recognised at the fair value of the amount received, less directly attributable
transaction costs. Financial debt is subsequently measured at amortised cost, in accordance with the
effective interest method.
Certain financial instruments include both a financial debt component and a shareholders’ equity
component. These two components are separately recognised and have been determined as follows:
− the “debt component” corresponds to the value of future contractual cash-flows (including both interest
coupons and capital repayments) discounted at the market rate (taking account of credit risk at date of
issue) for a similar instrument with the same conditions (maturity, cash flows) but without a conversion
option,
− the “shareholders’ equity component” represents the value of the option to convert the bonds into
shares. Its value is equal to the difference between the amount of the proceeds of issue of the bond
and the amount of the debt component calculated above.
r) Borrowing costs
Borrowing costs incurred during the construction of a qualifying asset are treated as part of the cost of that
asset. The interest rate used is that of the specific loan related to the asset or, if no specific financing
exists, the Group’s marginal financing rate.
s) Cash at bank and equivalents
Cash at bank and equivalents includes cash on hand, demand deposits and cash equivalents (short-term,
liquid investments which can easily be converted into a known amount of cash and which are subject to
an insignificant risk of change in value). It excludes bank overdrafts, which are considered to be financing.
t) Structure of the consolidated balance sheet
A significant portion of the Group’s activities in its different business segments have long-term operating
cycles. Accordingly, assets (liabilities) that are usually realised (settled) within the entities’ operating
cycles (inventory, accounts receivable and payable, advances, reserves, etc.) are classified in the
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13
consolidated balance sheet as current assets and liabilities, without distinction between the amounts due
within one year and those due after one year.
On the other hand, financial assets and liabilities are presented as current items if their maturity date is
within one year after the balance sheet date and as non-current after one year.
u) Derivatives
The Group uses financial instruments to manage and reduce its exposure to risks of changes in interest
rates and foreign exchange rates.
Derivatives are stated at their fair value in the balance sheet.
In order to be eligible for hedge accounting, financial instruments must have the two following
characteristics:
− at the date of origination of the financial instrument, the existence of a hedging relationship must be
formal and documented;
− the hedge must be expected to be effective. Effectiveness must be capable of being measured in a
reliable manner, and must be able to be demonstrated, over the entire period of the hedge relationship
as initially determined.
Accounting policies in respect of foreign exchange derivatives are presented above in note 1-d. Financial
instruments relating to interest rate hedges are hedge-accounted as either fair value hedges or cash flow
hedges:
− a fair value hedge is a hedge of the exposure to changes in the value of assets and liabilities;
− a cash flow hedge is a hedge of the exposure to changes in the value of future cash flows (unknown
future interest flows payable on existing variable rate borrowings or on highly probable future borrowing
issues, for example).
In the case of fair value hedge relationships, the financial liabilities hedged by the interest rate derivatives
are remeasured to the extent of risk hedged. Changes in value of hedged item are recognised in profit
and loss of the period and are offset by symmetrical changes of the interest rate derivatives.
In the case of cash flow hedge relationships, changes in fair value of interest rate derivatives shown in the
balance sheet are recognised directly through shareholders’ equity, for the effective portion thereof, until
such time as the hedged flows affect profit and loss.
v) Derecognition of trade receivables
The Group transfers trade receivables, mainly from the French Direction Générale de l’Armement
(Directorate General of Armaments), notably overdue amounts that bear financial interest on arrears.
As these transfers, which are without recourse in case of payment default by the debtor, involve the
transfer of substantially all risks and rewards of ownership, the corresponding receivables are
derecognised.
w) Main sources of estimates
Preparation of the Group’s consolidated financial statements involves making estimates and assumptions,
which have an impact on the valuation of income, expenses, assets and liabilities. These estimates could
need to be revised if the circumstances on which they were based were to change or if new information or
additional experience were to be obtained.
The main financial statement captions subject to material accounting estimates are as follows:
Construction contracts
Recognition of income and expenses relating to construction contracts is based on estimates of overall
profit or loss on completion of such contracts (see note 1-i). These estimates are performed by project
managers, under the supervision of General Management, in accordance with Group procedures.
Goodwill
Goodwill is subject to impairment tests (see note 1-f). The recoverable amount of goodwill by cash
generating unit is assessed on the basis of forecast data from the strategic plans prepared, in accordance
with Group procedures, for each of the Group’s businesses or divisions.
Development costs
Development costs that meet the criteria for capitalisation (note 1-j) are recognised as intangible assets
and amortised over their useful lives. Assessments of compliance with the criteria and of the recoverable
amount of these assets are carried out on the basis of the forecast revenue and profitability of the
corresponding projects.
Pension and other employee benefits
Benefit obligations in respect of pensions and other employee benefits are estimated on statistical and
actuarial bases in accordance with the policies outlined in note 1-n. Actuarial assumptions made by the
Group (discount rates, expected return on plan assets, future compensation increases, rates of employee
turnover, mortality tables, etc.) are reviewed each year with the Group’s actuaries.
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14
Deferred taxes
Deferred tax assets result from the existence of tax loss carry forwards and of deductible temporary
differences between the book value and the tax value of assets and liabilities. Recovery of these assets is
assessed on the basis of forecast data contained in the strategic plans of each of the tax groups in
question.
Risks and litigation
The Group regularly identifies and reviews litigation in progress and recognizes, depending on the
circumstances, accounting provisions that it considers to be reasonable. Any uncertainties concerning
litigation in progress are described in note 20.
Purchase price allocation in respect of business combinations
Business combinations are accounted for in accordance with the “purchase accounting” method: thus, on
the date that control is obtained over a company, the acquiree’s identifiable assets, liabilities and
contingent liabilities are measured at their fair value. These valuations are performed by independent
experts who base their work on assumptions and estimate the effects of uncertain future events at the
acquisition date.
The fair values of the acquiree’s assets and liabilities can be adjusted during the twelve-month period that
follows the acquisition date. Beyond this time limit, adjustments to fair values are recognised through
profit and loss.
x) Interim accounts
Seasonality of business
In accordance with accounting policies, revenues are recognised, as at year end, over the period of their
realisation.
In previous years the level of business has been highest in the last quarter, particularly in the month of
December. The seasonality of the business has led to revenues and income from operations being
generally lower in the first half of the year. The company has noted that this phenomenon is of a recurring
nature, even if its extent varies from year to year.
Pension provisions
The figures used to determine the pension provisions are based on an extrapolation at 30 June 2009 of
the actuarial valuation performed at 31 December 2008 without any change in the actuarial assumptions.
Income taxes
For interim accounts, the tax charge (current and deferred) is calculated by applying, company by
company, the annual estimated average tax rate for the current tax year.
Impairment of goodwill
For interim accounts, impairment tests performed at the end of the previous year are updated to take
account of changes in recoverable amounts and in net assets at the end of the period. Impairment that
may be recognised in the first half of the year is not reversible.
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15
2. CHANGES IN SCOPE OF CONSOLIDATION
In the first half of 2009:
In February 2009, Thales bought for € 20.3 million, via a tender offer, a 94.6% stake in CMT Medical
Technologies Ltd, an Israeli company specialised in medical imaging. This company will be consolidated
as from 1st July 2009.
In accordance with the contractual agreements, the purchase price of Alcatel Alenia Space shares was
reassessed in 2009 in the context of a procedure involving all the parties. This procedure led Thales to
1
pay an additional purchase consideration of € 129.6 million to Alcatel-Lucent in May 2009. This additional
payment is recorded as a goodwill increase in the financial consolidated statements (see note 12).
The shareholders’ agreement dated 30 January 2007 between the French State and Thales gives Thales
the possibility to increase its stake in DCNS from 25% to 35%, through the exercise of a call option. This
option can be exercised during a three-years period as from 29 March 2009. At this stage, the information
available to the Group doesn’t lead to give a significant value to this option.
In 2008:
In March 2008, Thales sold its electronic payment solutions businesses to the American Group Hypercom
for € 93.7 million.
In March 2008, Thales sold its subsidiary Thales Computers to Kontron Modular Computers GmbH for
€11 million.
In October 2008, Thales purchased for £ 50.7 million the UK company nCipher Plc, specialised in
delivering solutions in the fields of enterprise key management and cryptographic hardware. This
company is consolidated since 1st January 2009.
In October 2008, Thales bought a 49% stake in Airbus’ site of Laupheim, in Germany for € 24.5 million
and financed the acquisition of industrial assets by a loan of € 29.9 million. The new company, Diehl
Aircabin GmbH, jointly owned with Diehl, is consolidated under proportionate method since 1st January
2009.
3. ADJUSTED CONSOLIDATED PROFIT AND LOSS ACCOUNT
In order to monitor and compare the Group’s economic performances, the consolidated profit and loss
account is restated from the adjustment entries related to the Purchase Price Allocation (PPA) recognised
through significant business combinations.
These adjustment entries are mainly related to the 2007 acquisition/contribution transactions: space,
transportation and security activities of Alcatel-Lucent, and acquisition of a 25% stake in DCNS.
The effect of PPA over the three disclosed periods is analysed as follows :
2009
2008
2008
First half First half Full year
Cost of sales
Amortisation of intangible assets acquired
(7.4)
(42.2)
(7.4)
(54.9)
(14.8)
(109.8)
Income from operations
(49.6)
(62.3)
(124.6)
Deferred tax
Share in net income (loss) of equity affiliates
16.8
(4.1)
21.2
(4.1)
42.4
(8.2)
Net Income (Loss)
(36.9)
(45.2)
(90.4)
1
This additional purchase consideration was determined on the basis of a valuation of 67% of Thales Alenia Space shareholders’
equity of € 724.5 million, which represents an additional amount of € 124.5 million in excess of the € 600 million initial fixed price,
plus € 5.1 million financial interests.
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16
The adjusted profit and loss account can be analysed as follows :
2009
Adjusted
First half
2008
Adjusted
First half
2008
Adjusted
Full Year
5,743.6
(4,685.0)
(254.9)
(439.7)
(253.6)
(42.2)
5,668.0
(4,412.1)
(204.8)
(392.2)
(272.5)
(11.4)
12,664.8
(9,946.8)
(440.2)
(809.6)
(558.7)
(32.5)
Income from operations
68.2
375.0
877.0
Impairment of non current operating assets
Gain (loss) on disposal of assets
(5.3)
5.6
(45.4)
57.3
(69.1)
35.2
Income from operating activities
68.5
386.9
843.1
Financial interest on gross debt
Financial income from cash and equivalents
Cost of net financial debt
(47.9)
14.8
(33.1)
(45.9)
26.1
(19.8)
(101.4)
49.6
(51.8)
Other financial income (expense)
Other components of pension charge
Income tax
Share in net income (loss) of equity affiliates
(27.4)
(58.5)
33.2
28.8
(12.2)
(4.7)
(90.9)
29.9
(49.8)
(11.1)
(145.4)
65.8
11.5
289.2
650.8
11.6
(0.1)
289.3
(0.1)
650.3
0.5
Revenues
Cost of sales
Research and development expenses
Marketing and selling expenses
General and administrative expenses
Restructuring costs
Net income (loss)
Of which :
Net income, Group share
Minority interests
4. INFORMATION ON THE BASIS OF COMPARABLE CONSOLIDATION SCOPE AND
FOREIGN EXCHANGE RATES
Adjusted profit and loss account based on comparable scope of consolidation and foreign exchange
rates is presented below:
2009
Less
2008
First
comp.
First half
half
acquired
restated adjusted
adjusted
(a)
Less
comp.
sold
(b)
5,743.6
(95.8)
(20.8)
(96.4)
5,550.8
(4,685.0)
63.0
17.4
78.4
(4,316.3)
(254.9)
(439.7)
(253.6)
(42.2)
11.3
14.4
5.0
--
(243.6)
(425.3)
(248.6)
(42.2)
(204.8)
(392.2)
(272.5)
(11.4)
-0.8
1.3
--
1.5
4.5
3.8
0.2
(203.3)
(386.9)
(267.4)
(11.2)
68.2
(2.1)
66.1
375.0
(1.3)
(8.0)
365.7
2009
First half
Revenues
Cost of sales
Research and development
expenses
Marketing and selling expenses
General and administrative expenses
Restructuring costs
Income from operations
5,647.8
5,668.0
(4,622.0) (4,412.1)
Exchange 2008
First
rate
half
change
restated
(c)
(a) Companies acquired during the first half of 2009 and the second half of 2008 are excluded from the restated
first half 2009 profit and loss.
(b) The accounts of companies sold during the second half of 2008 are excluded from the first half 2008 profit
and loss account. The accounts of companies sold during the first half of 2009 have been restated in order
to impact profit and loss for an identical period in 2009 and in 2008.
(c) First half 2008 results of foreign subsidiaries are translated at first half 2009 average exchange rates. The
effect of changes in currency rates, applied to transactions denominated in a different currency from the
subsidiary’s functional currency is not included.
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17
5. SEGMENT INFORMATION
a) Information by operating segment
For the first time at 30 June 2009, the Group has adopted IFRS 8 (Operating segments) that replaces
IAS 14 (Segment Reporting). This new standard requires the Group to report financial and descriptive
information about its operating segments. An operating segment is a Group component for which
specific internal reports are available and for which operating performances are regularly reviewed by
the entity's “chief operating decision maker” in order to allocate resources to the segment and assess its
performance.
As described in note 1, Thales’s businesses are organised in three main domains: Aerospace/Space,
Defence, and Security. These domains correspond to three operating segments according to IFRS 8.
The Chairman and Chief Executive Officer, assisted by the Senior Vice President, Finance and
Administration, reviews regularly operating performances of these three domains and allocate
resources on this basis. At 30 June 2009, these segments are therefore identical to those presented
under IAS 14.
Information by operating segment reviewed by the Chairman and Chief Executive Officer follow the
same accounting standards as those used in the financial consolidated statements. Only adjustment
entries related to the Purchase Price Allocation (PPA) recognised through significant business
combinations are excluded from income from operations reviewed.
Operating income consequently corresponds to the adjusted consolidated income from operations, as
described in note 3.
Aerospace/
Space (b)
Defence
Other,
Total of
PPA
elim. and non business
Security
segments (note 3)
allocated
amounts (c) and other
Consolidated order backlog at 30/06
Consolidated new orders
7,243.4
1,820.2
10,967.8
2,296.0
5,571.3
1,722.3
38.5
21.8
23,821.0
5,860.3
---
23,821.0
5,860.3
Consolidated revenues
Inter-segment revenues
Total revenues
1,886.9
35.1
1,922.0
2,496.0
73.8
2,569.8
1,327.2
151.1
1,478.3
33.5
(260.0)
(226.5)
5,743.6
-5,743.6
----
5,743.6
-5,743.6
Income from operations (a)
(132.5)
241.3
(22.8)
(17.8)
68.2
(49.6)
18.6
Non current operating assets
1,784.6
1,405.8
1,926.6
357.8
5,474.8
5,474.8
3,532.0
(3,411.2)
120.8
3,473.1
(4,413.9)
(940.8)
2,452.6
(2,339.0)
113.6
6.7
(349.1)
(342.4)
9,464.4
(10,513.2)
(1,048.8)
9,464.4
(10,513.2)
(1,048.8)
18,488
23,630
18,602
3,197
63,917
First half 09
Current operating assets
Current operating liabilities
Net
Consolidated number of employees (end of
period)
--
Thales
63,917
Aerospace/
Space (b)
Defence
Other,
Total of
elim. and non business
PPA
Security
allocated
segments (note 3)
amounts (c) and other
Consolidated order backlog at 30/06
Consolidated new orders
7,299.7
2,002.7
10,465.8
2,579.8
4,781.5
1,415.9
68.4
52.5
22,615.4
6,050.9
---
22,615.4
6,050.9
Consolidated revenues
Inter-segment revenues
Total revenues
1,790.5
30.2
1,820.7
2,461.6
63.7
2,525.3
1,353.3
151.5
1,504.8
62.6
(245.4)
(182.8)
5,668.0
-5,668.0
----
5,668.0
-5,668.0
95.7
239.6
50.4
(10.7)
375.0
(62.3)
5,164.8
9,780.9
(10,483.3)
(702.4)
First half 08 restated
Income from operations (a)
Non current operating assets
Current operating assets
Current operating liabilities
Net
Consolidated number of employees (end of
period)
-
1,604.9
1,334.9
1,914.7
310.3
5,164.8
3,424.0
(3,194.4)
229.6
3,537.0
(4,281.8)
(744.8)
2,593.0
(2,486.5)
106.5
226.9
(520.6)
(293.7)
9,780.9
(10,483.3)
(702.4)
17,848
22,807
19,195
3,056
62,906
18
--
Thales
312.7
62,906
(a) Income from operations of the aerospace business has been mainly impacted by higher estimated development
costs for the A400M flight management system, leading to a further provision of €102m booked in the first half of
2009 to account for the greater complexity of the technical solution finally adopted and contingencies related to
delays and general uncertainties on the A400M programme. Thales remains fully focused on the success of this
programme, while at the same time actively taking steps to claim significant compensation.
Group income from operations includes tax credits related to research expenses amounting to € 70.1 million in the
first half of 2009 and € 74.4 million in the first half of 2008.
(b) • The Space business, created in April 2007 after the acquisition by Thales of Alcatel-Lucent’s space businesses,
contributed as follows to the consolidated accounts:
2009
First half
2008
First half
2,259.7
904.6
2,154.6
696.6
Consolidated revenues
Inter-segment revenues
Total revenues
629.0
13.9
642.9
636.5
11.4
647.9
Income from operations
17.0
23.7
Non current operating assets
801.4
703.7
1,041.9
(1,130.2)
(88.3)
920.6
(986.3)
(65.7)
5,510
5,363
Consolidated order backlog at 30/06
Consolidated new orders
Current operating assets
Current operating liabilities
Net
Consolidated number of employees (end of period)
This segment includes the activity of the companies Thales Alenia Space, held at 67% by Thales, and Telespazio,
held at 33% by Thales. These companies, jointly controlled with Finmeccanica, are consolidated under the
proportionate method since April 1, 2007.
(c) • The "Other, eliminations and non allocated amounts" column corresponds to the elimination of transactions
between the three operating segments and includes figures relating to corporate activities: Group R&D activities,
facilities management, holding companies and businesses sold during the prior year.
Corporate income from operations non allocated to the operating segments includes expenses related to sharebased payments (respectively € -9.6 million and € -15.7 million in the first half of 2009 and in the first half of 2008).
• First half 2008 data have been restated to reflect internal Group reporting figures: in particular, income from
operations relating to holding companies and Group R&D activities are no more allocated to operating segments.
b) Information by geographic area
By country/region of destination
Revenues (direct and indirect) :
France
United Kingdom
Rest of Europe
North America
Middle East
Asia and Pacific
Africa and Latin America
Total
2009
First half
2008
First half
2008
Full year
1,399.2
661.5
1,555.8
545.8
531.8
734.4
315.1
5,743.6
1,424.5
791.4
1,446.8
527.8
474.7
780.0
222.8
5,668.0
3,165.1
1,555.6
3,301.8
1,189.7
1,134.6
1,710.0
608.0
12,664.8
2009
First half
2008
First half
2008
Full year
2,777.9
754.6
1,130.2
1,080.9
5,743.6
2,686.1
858.0
1,112.5
1,011.4
5,668.0
6,101.1
1,704.8
2,567.3
2,291.6
12,664.8
By country/region of origin
Revenues :
France
United Kingdom
Rest of Europe
Rest of the world
Total
-
19
6. IMPAIRMENT ON ASSETS
2009
First half
2008
First half
2008
Full year
Goodwill (a)
Development costs
Other tangible and intangible assets
(5.3)
---
(43.9)
(1.2)
(0.3)
(67.2)
(1.2)
(0.7)
Total
(5.3)
(45.4)
(69.1)
(a) Impairment mainly concerns:
•
•
-
-
in 2009: the Security business
in 2008:
in the Security business, goodwill related to the ticketing and passenger access control activities as a result of
difficulties encountered on certain complex contracts, (€ 42.8 million), and goodwill related to activities of
services in Switzerland (€ 8.7 million in the second half of 2008).
in the Aerospace business, goodwill related to the In-Flight Entertainment activities, due to the delivery timing
difference on the program B787 (€ 13.6 million in the second half of 2008).
The first application of IFRS 8 did not modify the Cash Generating Unit perimeter used for the goodwill impairment
tests.
7. GAIN (LOSS) ON DISPOSAL OF ASSETS
2009
First half
2008
First half
2008
Full year
Disposal of investments:
Thales e Transactions
Thales Computers
Other
4.3
--4.3
55.5
53.3
(4.4)
6.6
46.0
53.6
(3.7)
(3.9)
Disposal of other assets:
Real estate assets
Equipment and other
1.3
-1.3
1.8
-1.8
(10.8)
(1.7)
(9.1)
Total
5.6
57.3
35.2
2009
First half
2008
First half
2008
Full year
Foreign exchange gains (losses)
Change in fair value of foreign currency derivative instruments
Cash flow hedge inefficiency / foreign exchange instruments
Net foreign exchange gain (loss)
(2.6)
(24.7)
(2.1)
(29.4)
(10.7)
(6.1)
0.1
(16.7)
(8.7)
(23.6)
(5.2)
(37.5)
Net interest income (expense) on non-financial receivables and payables
Dividends received
Impairment of available-for-sale investments
Impairment of loans
Other
Total
3.5
3.4
(0.3)
-(4.6)
(27.4)
2.8
0.2
-0.6
0.9
(12.2)
3.3
6.5
(4.8)
(18.7)
1.4
(49.8)
8. OTHER FINANCIAL INCOME (EXPENSE)
-
20
9. PENSIONS AND OTHER EMPLOYEE BENEFITS
2009
First half
2008
First half
2008
Full year
Current service cost
(28.6)
(29.9)
(59.8)
Interest cost
Expected return on plan assets
Schemes amendments, curtailments and settlements
Amortisation of actuarial gains(losses)
(101.6)
72.2
(22.2)
(6.9)
(110.7)
96.3
5.6
4.1
(219.9)
187.8
(3.2)
24.2
Other components of pension charge
(58.5)
(4.7)
(11.1)
Defined benefit plans: total cost
(87.1)
(34.6)
(70.9)
2009
First half
2008
First half
2008
Full year
Net income (loss)
Less: income tax
Less: equity in income of unconsolidated affiliates
Less: Gain on disposal of assets
Profit before tax, unconsolidated affiliates and gain on disposal
Average tax rate
Theoretical tax income (expense)
(25.4)
(50.0)
(24.7)
(5.6)
(105.7)
36.5%
38.6
244.0
69.7
(25.8)
(57.3)
230.6
30.3%
(69.9)
560.4
103.0
(57.6)
(35.2)
570.6
29.0%
(165.5)
Permanent differences
Variation of deferred tax assets non-recognised in the balance sheet
Reduction of goodwill due to the recognition of deferred tax assets
Other
Income tax
23.2
(8.7)
(1.5)
(1.6)
50.0
10.9
(6.1)
-(4.6)
(69.7)
30.9
58.3
(13.4)
(13.3)
(103.0)
2009
First half
2008
First half
2008
Full year
(25.3)
(25.3)
244.1
244.1
559.9
559.9
194,970
429
195,399
195,235
1,554
196,789
195,139
1,107
196,246
(0.13)
(0.13)
1.25
1.24
2.87
2.85
10. INCOME TAX
11. EARNINGS PER SHARE
Numerator (in millions of euros) :
Net income (loss), group share
Diluted net income (loss), group share
(a)
(b)
Denominator (in thousands) :
Average number of shares outstanding
(c)
Share options
Diluted average number of shares outstanding (d)
Earnings per share (in euros)
Diluted earnings per share (in euros)
-
(a) / (c)
(b) / (d)
21
12. GOODWILL
31 Dec. 08
Acquisitions
Net
Aerospace
359.2
-Space
344.1
129.6 (a)
Aerospace/Space business
703.3
129.6
Land and Joint systems
Naval
Air systems
Defence business
Disposals
Impairment
----
----
Exch.rate var. 30 June 09
and other
Net
1.6
360.8
(3.7)
470.0
(2.1)
830.8
492.2
335.3
119.6
947.1
14.9
--14.9
-----
-----
39.0
6.3
0.3
45.6
546.1
341.6
119.9
1,007.6
Transportation and Security
Other
Security business
890.4
247.8
1,138.2
-35.1
35.1
----
-(5.3)
(5.3)
(1.5)
(16.7)
(18.2)
888.9
260.9
1,149.8
Other
Total
4.6
2,793.2
-179.6
---
-(5.3)
0.4
25.7
5.0
2,993.2
(a) Purchase price adjustment paid to Alcatel-Lucent.
13.
TANGIBLE AND INTANGIBLE ASSETS
31 Dec.08 Changes in
Acquisition Disposal Deprec.
Net
scope
Customer relationships: long-term
Customer relationships : backlog
Acquired technologies
Other
Intangible assets acquired in the
context of business combination
339.1
81.0
189.1
-609.2
7.0
-3.2
13.8
24.0
------
Development costs
Other
427.9
92.2
0.2
5.4
Intangible assets (excl. goodwill)
1,129.3
Tangible assets
Total
Exch rate
30 June 09
var. &
Net
other
------
(12.9)
(14.0)
(14.5)
(0.8)
(42.2)
0.8
-0.4
1.6
2.8
334.0
67.0
178.2
14.6
593.8
48.3
8.3
(1.9)
(21.0)
(14.1)
8.8
2.5
464.2
92.4
29.6
56.6
(1.9)
(77.3)
14.1
1,150.4
1,262.9
43.5
123.8
(0.2)
(117.8)
19.0
1,331.2
2,392.2
73.1
180.4
(2.1)
(195.1)
33.1
2,481.6
14. EQUITY IN UNCONSOLIDATED AFFILIATES
Ownership %
Net equity
30 June 31 Dec. 30 June 31 Dec.
2009
2009
2008
2008
Aviation Communications & Surveillance Syst.
Camelot
DCNS
DpiX
Elettronica
Indra Espacio
Other
Total
-
30
20
25
20
33
33
--
22
30
20
25
20
33
33
--
55.3
56.0
507.8
16.5
27.6
17.2
21.2
701.6
57.3
48.9
505.5
15.7
28.1
16.3
20.6
692.4
Income (loss)
2009
2008
2008
First
First
Full
half
half
year
1.6
4.3
11.2
1.1
3.4
1.0
2.1
24.7
2.1
7.1
8.8
1.3
2.5
1.7
2.3
25.8
4.9
13.4
25.1
2.0
5.3
2.6
4.3
57.6
15. OTHER NON CURRENT FINANCIAL ASSETS
a) Available-for-sale investments
30 June 09
31 Dec. 08
nCipher (consolidated since January 1, 2009)
Diehl Air Cabin (consolidated since January 1, 2009)
CMT Medical Technologies Ltd (consolidation starting on July 1, 2009)
Other
--20.3
95.9
53.3
24.5
-97.6
Total
116.2
175.4
30 June 09
31 Dec. 08
13.7
32.6
33.4
93.1
172.8
(13.8)
159.0
55.9
32.2
60.1
138.1
286.3
(27.5)
258.8
b) Loans and other financial assets
Loan to Diehl Air Cabin (a)
Loans to partners
Loans related to disposals
Other
Total loans and other financial assets, gross
Depreciation
Total
st
(a) Consolidated under the proportionate method as from 1 January 2009.
16. SHAREHOLDERS’ EQUITY
a) Share capital
At 30 June 2009, the share capital of Thales is comprised of 198,760,703 shares with a par value of € 3.
The share capital is presented below:
30 June 2009
% voting
Number
%
of shares
capital
rights
Number
of shares
T.S.A. and its subsidiary Sofivision
French State (including one golden share)
Sogepa
52,670,906
2,022
1,081,256
26.51%
-0.54 %
41.67%
-0.86%
52,670,906
2,022
1,081,256
26.51%
-0.54 %
38.64%
-0.79 %
Public sector
53,754,184
27.05 %
42.53 %
53,754,184
27.05 %
39.43 %
Dassault Aviation
51,539,524
25.93 %
20.39 %
--
--
--
Alcatel-Lucent Participations
--
--
--
41,262,481
20.76 %
21.10 %
Groupe Industriel Marcel Dassault (GIMD)
--
--
--
10,277,043
5.17 %
5.12 %
3,758,166
1.89 %
--
3,743,382
1.88 %
--
Thales
31 Dec. 2008
% voting
%
capital
rights
Employees
6,122,918
3.08 %
3.83 %
6,094,287
3.07 %
3.52 %
Other shareholders
83,585,911
42.05 %
33.25 %
83,593,432
42.07 %
30.83 %
Total number of Thales shares
198,760,703
100.00 % 100.00 % 198,724,809
100.00 %
100.00 %
b) Share-based payments
The Group measures the amount of the benefit granted to employees receiving purchase and
subscription stock options and free shares. The fair value of such instruments, measured using a
binomial model, is determined at the grant date. The amounts thus obtained are taken to profit and loss
over the vesting period of the rights and the corresponding expense is included in the income from
operations.
-
23
Expenses related to share-based payments -1-:
Plan date
01/07/03
01/07/04
30/06/05
09/11/06
04/07/07
01/07/08
25/11/08
25/06/09
Total shares
04/07/07
01/07/08
25/06/09
Total free shares
24/04/08
Company Savings Plan
Total
-1-
Initial
Fair value Expense
number of at grant in 1st half
options
date
2008
3,034,200
(21.3)
-2,638,750
(21.4)
0.1
2,201,500
(19.5)
0.8
2,223,950
(23.5)
4.6
1,654,530
(15.6)
3.8
1,688,070
(11.2)
-73,900
(0.3)
-1,680,340
(11.8)
-15,195,240
(124.6)
9.3
Expense
nd
in 2 half
2008
--0.5
2.3
3.9
2.7
--9.4
Expense
st
in 1 half
2009
--0.2
1.6
1.9
2.9
0.1
0.1
6.8
Fair value
at
30 June 09
---(1.8)
(2.8)
(6.0)
(0.2)
(11.7)
(22.5)
312,435
317,705
334,980
965,120
(11.5)
(9.3)
(8.7)
(29.5)
1.4
--1.4
1.6
1.2
-2.8
1.6
1.2
-2.8
(6.0)
(7.1)
(8.7)
(21.8)
2,519,280
2,519,280
18,679,640
(5.0)
(5.0)
(159.1)
5.0
5.0
15.7
--12.2
--9.6
--(44.3)
Plans granted after 7 November 2002 (date of first application of the IFRS 2).
c) Treasury shares
Thales held 3,758,166 of its own shares at 30 June 2009 and 3,743,382 at 31 December 2008. In the
consolidated financial statements, treasury shares are subtracted from consolidated shareholder’s equity
for an amount of € -150.2 million as at 30 June 2009 (as well as at 31 December 2008).
17. RESERVES FOR CONTINGENCIES
31 Dec. 08
Restructuring
Provisions on contracts
- warranty
- litigation
- estimated losses on long-term contracts
- other
Other reserves for contingencies
Total
-
107.5
566.4
223.0
189.1
40.3
114.0
287.6
961.5
24
Changes in
scope, exch.
Var. & other
1.0
26.9
2.9
-5.9
18.1
4.1
32.0
Increase
23.9
105.8
38.1
8.1
23.3
36.3
23.2
152.9
Reversal 30 June 09
(31.0)
(93.4)
(33.8)
(10.4)
(18.2)
(31.0)
(47.1)
(171.5)
101.4
605.7
230.2
186.8
51.3
137.4
267.8
974.9
18. NET FINANCIAL DEBT
30 June 09
31 Dec. 08
Long-term financial debt
Short-term financial debt
Current accounts payable with affiliated companies
Fair value of interest rate derivatives
Total gross financial debt (I)
1,681.8
845.6
148.9
(30.0)
2,646.3
761.3
1,136.3
159.1
(13.1)
2,043.6
Current accounts receivable with affiliated companies
Marketable securities
Cash at bank and equivalents
Cash and other short-term financial assets (II)
67.6
12.2
1,680.5
1,760.3
65.1
22.4
1,499.8
1,587.3
886.0
456.3
Net financial debt (I – II)
Gross financial debt
30 June 09 31 Dec. 08
Borrowings from financial institutions
74.8
38.1
595.5
--
Bond, maturity 2013
(a)
Bond, maturity 2011
(b)
794.9
510.3
Euro Medium Term Notes
(c)
699.6
699.5
Commercial paper
(d)
Capital lease obligations
Project financing debt
(e)
--
329.5
19.8
22.4
228.4
211.5
Other borrowings
41.4
30.4
Current accounts with affiliated companies
148.9
159.1
Bank overdrafts
38.0
41.0
Accrued interest
35.0
14.9
Fair value of interest rate derivatives
Gross financial debt
(30.0)
(13.1)
2,646.3
2,043.6
a) Bond with a par value of € 600 million maturing in April 2013, issued at a 4,375% fixed rate, including € 200
million swapped to floating rate using interest rate swaps. The bond is valued at amortised cost at an effective
rate of 4,5757% adjusted to take into account changes in the fair value of the interest rate hedge.
b) Bond with a par value of € 775 million (€ 500 million plus an additionnal commitment of € 275 million issued in
January 2009) maturing in July 2011, issued at a 4.375% fixed rate. It includes € 575 million swapped to
floating rate using interest rate swaps. The bond is valued at amortised cost at an effective rate, excluding the
effect of hedging, of 4.4776% for the initial commitment, and 5.75% for the additional commitment. The value
of the bond is then adjusted to take into account changes in the fair value of the interest rate hedge.
c) Floating rate (Euribor 3 months +0.125%) bond with a par value of € 700 million, issued in December 2006,
maturing in December 2009. The notes are valued at amortised cost at an effective rate of Euribor 3 months
+0.1864%.
d) Fixed rate loans that include € 75.7 million swapped to floating rate using interest rate swaps. Because of their
short-term maturity, these loans are completely assimilated to floating rate loans.
e) Non-recourse, or limited recourse, debt whose interest costs and repayment is covered by the share of project
revenues which is guaranteed contractually by customers. The debt is made of fixed rate loans maturing in
years up to 2020.
-
25
19. STATEMENT OF CASH FLOWS
a) Capital expenditure
Only capital expenditure paid during the period is presented in the statement of cash flows. It includes
capitalised development costs for an amount of € 48.3 million in the first half of 2009, € 63.5 million in the
first half of 2008 and € 129.0 million in 2008.
b) Net financial investment
Acquisitions
2009
2008
2008
First half First half Full year
Additional purchase consideration / Alcatel Alenia Space (note 2)
CMT Medical technologies Ltd
Ncipher Plc
Diehl Aircabin GmbH
Stesa (acquisition of co-shareholders’ shares)
Acquisition of Thales holding Gmbh minority interests
Transportation and security activities of Alcatel-Lucent : price
adjustment
Other
Acquisitions
- Cash position of companies acquired
Acquisitions, net
(129.6)
(20.3)
-----
----(8.6)
(3.1)
--(63.2)
(54.4)
(8.6)
(3.1)
-3.1
(146.8)
4.9
(141.9)
-(5.3)
(17.0)
1.3
(15.7)
(25.7)
(19.5)
(174.5)
1.3
(173.2)
Disposals
2009
2008
2008
First half First half Full year
Thales e Transactions
Thales Computers
Other
Disposals
- Cash position of companies sold
Disposals, net
--(1.7)
(1.7)
(5.2)
(6.9)
93.7
11.0
(3.4)
101.3
(10.1)
91.2
93.7
11.0
(4.8)
99.9
(10.8)
89.1
c) Increase (decrease) in shareholders’ equity and minority interests
2009
First half
0.4
9.9
10.3
Increase in capital / exercise of stock options
Sale (purchase) of treasury shares
Total
-
26
2008
First half
6.6
(52.6)
(46.0)
2008
Full year
12.3
(56.8)
(44.5)
20. LITIGATION
Due to the nature of its business activities, the Group is exposed to the risk of technical and commercial
litigations. Litigations mentioned in last year’s annual report have evolved as follows:
The request for arbitration submitted by Republic of China Navy (Taiwan) for an amount of
USD 599 million in damages, arising out of the execution of a contract, signed in 1991, for the supply of
equipment and systems executed in conjunction with an industrial partner did not change in a way that
would have a significant influence on the Group’s position.
In June 2005 the adverse party, in the context of this procedure, increased its request to
USD 1,119 million, to which interest for late payment would be added. It reduced its request to USD 882
million in April 2006 (interest for late payment excluded). If an unfavourable judgment were to be issued,
Thales’ share of any amounts due would be limited to approximately 30%, being a proportion
corresponding to its share in the equipment supply contract. Thales, in conjunction with its industrial
partner, has constantly opposed this request.
On the basis of the information available at the balance sheet date for the first half 2009, Thales has
carried out a review of the financial risks to which the Group could be exposed as a result of this
procedure. In the absence of any new significant information relating to risk assessment, Thales has, in
consequence, decided to maintain at June 30, 2009 a reserve for this litigation identical to that recognized
in its 2008 financial statements, an amount in respect of which, in application of paragraph 92 of IAS 37,
no detailed disclosure is provided.
No other significant litigation arose since the start of 2009. To the best of the Thales Group’s knowledge,
there is no other exceptional circumstance or dispute that has had or is likely to have a significant
influence on the Group’s results, financial position or prospects.
21. RELATED PARTY TRANSACTIONS
On 19 May 2009, Dassault Aviation finalised the agreement to buy a 20.8% stake in Thales held by
Alcatel-Lucent for € 1.57 billion (€ 38 by share). At this date, Dassault Aviation became a party to the
shareholders’ agreement signed on 28 December 2006 between Alcatel-Lucent and Public Sector. This
agreement has been amended due to Dassault Aviation replacing Alcatel-Lucent (see www.amffrance.org : décisions et informations n° 209C0770 dated 29 May 2009).
On 20 May 2009, Dassault Aviation bought shares in Thales initially held by GIMD for € 0.39 billion (€ 38
by share).
On 30 June 2009, Dassault Aviation consequently held 51,539,524 shares in Thales representing a
25.9% stake in capital and corresponding to 20.4% of voting rights.
-
27