Thales : 2018 Registration Document

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2018 Registration Document

Including the Annual Financial Report

TABLE OF CONTENTS

CHAIRMAN'S FOREWORD		3
1. THE GROUP'S BUSINESS MODEL		4	6.	COMPANY AND SHARE CAPITAL	150
	Key figures 2018	6	6.1	General information about the Company	152
	Our mission, our values, our strategy	7	6.2	Share capital and shareholders	153
	Our activities	8	6.3	Related-party agreements	165
	Our value creation process	10	6.4	Stock market information and financial communication	167
	Our 5 strategic priorities until 2021	12
	Our medium-term objectives	13	7.	CONSOLIDATED FINANCIAL STATEMENTS	172
2.	BUSINESS REVIEW	14	7.1	Consolidated financial statements	174
			7.2	Parent company management report
2.1	Operating segments	16		and financial statements	222
2.2	Research and innovation	23	7.3	Statutory auditors' report	254
2.3	Report on operations and results	26	7.4	Statutory auditors	260
2.4	Investments	35
2.5	Acquisition of Gemalto	37	8.	APPENDICES	262
2.6	Group structure	38
			8.1	Declaration from the person responsible
3.	RISK FACTORS, INTERNAL CONTROL			for the Registration Document	264
			8.2	Changes made to the structure of the 2018
	AND RISK MANAGEMENT	40
				Registration Document	264
3.1	Operational and strategic risks	43	8.3	Cross-reference table of the annual
3.2	Legal and regulatory risks	52		financial report and management report	265
3.3	Financial risks	55	8.4	Cross-reference table for the report
3.4	Risk control environment	57		on corporate governance	267
			8.5	Cross-reference table
4.	GOVERNANCE AND COMPENSATION	62		(annex 1 of european regulation no. 809/2004)	268
			8.6	Cross-reference table for the non-financial
4.1	Composition of the Board of Directors			performance statement	272
	at 31 December 2018	64
4.2	Corporate Governance	73
4.3	Corporate management and the Executive Committee	85
4.4	Compensation of the Chairman and CEO
	and other Company representatives	86
4.5	Compensation of other executives	98

4.6Summary statement of transactions indicated in Article l. 621-18-2 of the french monetary

and financial code carried out in 2018

99

5.CORPORATE RESPONSIBILITY

AND NON-FINANCIAL PERFORMANCE 100

5.1A corporate responsibility policy geared towards

	sustainable economic performance	102
5.2	Risks selected for the non-financial performance statement	102
5.3	Non-financial performance dashboard	105
5.4	Human resources geared towards company performance	106
5.5	A committed approach to meet environmental challenges	122
5.6	A policy of corporate responsibility
	based on a strong ethical commitment	137
5.7	An organisation that is proactive towards its stakeholders	139
5.8	Report by the independent third party	147

2018 REGISTRATION DOCUMENT

INCLUDING THE ANNUAL

FINANCIAL REPORT

This Registration Document was filed with the French financial markets authority (Autorité des marchés financiers, AMF) on 8 April 2019, in accordance with Article 212-13 of the AMF General Regulations. It may only be used in support of a financial transaction if accompanied by an offering circular authorised by the AMF. It was drawn up by the issuer and its signatories accept liability.

The English language version of this report is a free translation from the original, which was prepared and filed with the AMF in French. All possible care has been taken to ensure that the translation is an accurate presentation of the original. However, in all matters of interpretation, views or opinions expressed in the original language version of the document in French take precedence over the translation.

In accordance with Article 28 of Commission Regulation (EC) No. 809/2004, the following information is incorporated by reference in this Registration Document:

•the consolidated financial statements and corresponding audit reports presented on pages 35 à 83 of the 2017 Registration Document filed with the AMF on 30 March 2018;

•the Group's financial information, key figures and management report, presented respectively on pages 4,5 and 8 to 34 of the 2017 Registration Document filed with the AMF on 30 March 2018;

•the consolidated financial statements and corresponding audit reports presented on pages 27 to 71 of the 2016 Registration Document filed with the AMF on 5 April 2017;

•the Group's financial information, key figures and management report, presented respectively on pages 4, 5 and 8 to 25 of the 2016 Registration Document filed with the AMF on 5 April 2017.

The omitted sections of these documents are either irrelevant to the investor, or addressed elsewhere in this Registration Document.

2018 Registration Document - THALES

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CHAIRMAN'S FOREWORD

Thanks to the commitment of its 66,000 employees, 2018 was an excellent year for Thales.

Patrice Caine

Chairman & Chief Executive Officer

2THALES - 2018 Registration Document

Sales momentum gathered pace over the year, with order intake reaching €16 billion, organicaly up 9% compared to 2017. The Group recorded several commercial successes in transport, with the production of key systems for the future metro lines of the Grand Paris Express, in aeronautics, with OneSKY, Australia's major air traffic control modernisation project, in commercial space, with the construction of a next-generation VHTS satellite system for Eutelsat equipped with the most powerful on-board digital processor ever put in orbit (Konnect VHTS), and institutional space, with a new framework contract to upgrade the mission segment of the Galileo satellite navigation system.

Shifts in defence budgets in Europe resulted in the award of several contracts with a unit value of over €100 million by our key military customers in France, the United Kingdom, Germany and

the Netherlands. These contracts included the development of the new Rafale F4 standard for the French army, including new sensors and communication systems, the design of a next-generation defence system for the Royal Netherlands Navy's future frigates, and the supply of the combat system for five

of the German Navy's new corvettes as part of a consortium.

For the third consecutive year, our organic revenue growth exceeded 5%, driven by an exceptional year in Transport and strong growth in the Defence & Security segment. Our operating profitability across all segments increased to 10.6%, a new level never before achieved by the Group.

In early June, fromework of a Capital Markets Day, we had the opportunity to present the Group's goals, key strategic priorities and financial objectives until 2021. Our action plan is clear: to sustain profitable growth over the long term, we must continue to deploy operational performance initiatives and strengthen our customer culture while stepping up our investments in innovation. This plan will allow us to maintain a steady growth rate

of between 3% and 5% per year for the period 2018-2021 and reach a new milestone in terms of profitability: an operating margin of 11% to 11.5% by 2021.

The year also saw the meticulous preparation of the integration of Gemalto, which was completed in March 2019.

This transformative acquisition, announced in December 2017, is a powerful booster of our strategy. In the next few years,

it will consolidate our leadership position in the digital transformation of our markets and our customers, and will allow us to build a global leader in the digital security market.

In an increasingly digital world, Thales's business model, which is both resilient and balanced, is creating more value than ever.

2018 Registration Document - THALES

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