Thales - Consolidated financial statements at 31 December 2019

CONSOLIDATED FINANCIAL STATEMENTS

AT 31 DECEMBER 2019

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CONTENTS

CONSOLIDATED PROFIT AND LOSS ACCOUNT .................................................................................................................	3
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME............................................................................................	4
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY.....................................................................................................	5
CONSOLIDATED BALANCE SHEET ...................................................................................................................................	6
CONSOLIDATED STATEMENT OF CASH FLOWS..............................................................................................................	67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ................................................................................................	8
1.	ACCOUNTING STANDARDS FRAMEWORK..................................................................................................................	8
1.1	BASIS OF PREPARATION FOR THE 2019 CONSOLIDATED FINANCIAL STATEMENTS .....................................................................	8
1.2	IMPLEMENTATION OF IFRS 16 (LEASE CONTRACTS) .................................................................................................................	8
1.3	NEW MANDATORY STANDARDS EFFECTIVE FROM 31 DECEMBER 2019...................................................................................	10
1.4	TRANSLATION ......................................................................................................................................................................	10
1.5	MAIN SOURCES OF ESTIMATES..............................................................................................................................................	11
2.	SEGMENT INFORMATION......................................................................................................................................	12
2.1	BUSINESS SEGMENT .............................................................................................................................................................	12
2.2	SALES...................................................................................................................................................................................	12
2.3	COMMERCIAL ACTIVITY AND EBIT BY SEGMENT.....................................................................................................................	13
3. IMPACT OF CHANGES IN SCOPE OF CONSOLIDATION ................................................................................................	14
3.1	MAIN CHANGES IN SCOPE OF CONSOLIDATION......................................................................................................................	14
3.2	DISPOSAL OF ASSETS, CHANGES IN SCOPE OF CONSOLIDATION AND OTHER ...........................................................................	15
4. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS ..................................................................................	16
4.1	GOODWILL...........................................................................................................................................................................	16
4.2	PLANT, PROPERTY AND EQUIPMENT AND OTHER INTANGIBLE ASSETS....................................................................................	17
5. INVESTMENTS IN JOINT VENTURES AND ASSOCIATES ...............................................................................................	18
5.1	JOINT VENTURES..................................................................................................................................................................	18
5.2	ASSOCIATES .........................................................................................................................................................................	20
6. FINANCING AND FINANCIAL INSTRUMENTS.............................................................................................................	20
6.1	FINANCIAL INCOME..............................................................................................................................................................	20
6.2	NET CASH (NET DEBT) ...........................................................................................................................................................	21
6.3	NON-CURRENT FINANCIAL ASSETS ........................................................................................................................................	24
6.4	CHANGES IN NET CASH .........................................................................................................................................................	24
6.5	SUMMARY OF FINANCIAL ASSETS AND LIABILITIES.................................................................................................................	25
6.6	FINANCIAL RISK ....................................................................................................................................................................	26
7.	INCOME TAX .......................................................................................................................................................	30
7.1	INCOME TAX EXPENSE ..........................................................................................................................................................	30
7.2	DEFERRED TAX RECOGNISED IN EQUITY.................................................................................................................................	31
7.3	TAX ASSETS AND LIABILITIES PRESENTED ON THE BALANCE SHEET..........................................................................................	31
8. EQUITY AND EARNINGS PER SHARE........................................................................................................................	33
8.1	EQUITY ................................................................................................................................................................................	33
8.2	EARNINGS PER SHARE...........................................................................................................................................................	35
9.	EMPLOYEE BENEFITS ............................................................................................................................................	35
9.1	CONSOLIDATED HEADCOUNT ...............................................................................................................................................	35
9.2	PERSONNEL EXPENSES..........................................................................................................................................................	35
9.3	PROVISIONS FOR PENSIONS AND OTHER EMPLOYEE BENEFITS...............................................................................................	36
9.4	SHARE-BASED PAYMENT.......................................................................................................................................................	39
9.5	COMPENSATION OF DIRECTORS AND SENIOR CORPORATE OFFICERS .....................................................................................	41
10.	CURRENT OPERATING ASSETS AND LIABILITIES ........................................................................................................	41
10.1	INVENTORIES, WORK IN PROGRESS, AND SET-UP COSTS ........................................................................................................	42
10.2	CONTRACT ASSETS AND LIABILITIES.......................................................................................................................................	42
10.3	RESERVES FOR CONTINGENCIES............................................................................................................................................	43
10.4	MATURITY OF CURRENT RECEIVABLES AND PAYABLES ...........................................................................................................	43
10.5	COMMITMENTS LINKED TO COMMERCIAL CONTRACTS .........................................................................................................	44
11.	LITIGATION .........................................................................................................................................................	45
12.	SUBSEQUENT EVENTS...........................................................................................................................................	45
13.	ACCOUNTING POLICIES .........................................................................................................................................	46
14.	FEES PAID TO STATUTORY AUDITORS .............................................................................................................	545453
15.	LIST OF MAIN CONSOLIDATED COMPANIES .............................................................................................................	55
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CONSOLIDATED PROFIT AND LOSS ACCOUNT

(in € millions)	Notes	2019	2018
Sales	note 2	18,401.0	15,854.7
Cost of sales		(13,877.3)	(11,870.3)
Research and development expenses		(1,098.5)	(881.4)
Marketing and selling expenses		(1,382.9)	(1,097.6)
General and administrative expenses		(636.7)	(554.3)
Restructuring costs	note 10.3	(122.2)	(48.3)
Income from operations	note 2	1,283.4	1,402.8
Disposal of assets, changes in scope of consolidation and other	note 3.2	218.6	(73.0)
Impairment on non-current assets			--
Income of operating activities before share in net income of equity		1,502.0	1,329.8
affiliates
Share in net income of equity affiliates		142.0	144.7
Of which, share in net income of joint-ventures	note 5.1	85.8	98.9
Of which, share in net income of associates	note 5.2	56.2	45.8
Income of operating activities after share in net income of equity		1,644.0	1,474.5
affiliates
Interest expense on gross debt		(62.9)	(26.5)
Interest income on cash and cash equivalents		19.6	19.6
Interest income (expenses), net	note 6.1	(43.3)	(6.9)
Other financial income (expenses)	note 6.1	(84.4)	(78.3)
Finance costs on pensions and other employee benefits	note 9.3	(68.9)	(47.2)
Income tax	note 7.1	(301.0)	(314.2)
Net income		1,146.4	1,027.9
Attributable to:
Shareholders of the parent company		1,121.9	981.8
Non-controlling interests		24.5	46.1
Basic earnings per share (in euros)	note 8.2	5.28	4.62
Diluted earnings per share (in euros)	note 8.2	5.26	4.60

Segment information (including EBIT calculation) is detailed in note 2.3.

The Group has adopted theIFRS 16 standard ("Lleases"contracts) on 1st January 2019.

In accordance with the transition method chosen, the comparative information has not been restated (note 1.2).

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

			2019								2018
		Total attributable to:						Total attribuable to:
		Shareholders of	Non-controlling							Shareholders of	Non-controlling
(in € millions)	the parent	interests		Total					the parent	interests		Total
		company								company
Net income	1,121.9	24.5		1,146.4				981.8	46.1		1,027.9
Currency translation adjustment *	35.9	(0.3)		35.6		(11.1)	1.9		(9.2)
Deferred tax (note 7.2) *	--	--		--		--	--		--
Joint-ventures (note 5.1)	0.7	--		0.7		0.3	--		0.3
Associates (note 5.2)		7.8	--		7.8		3.9	--		3.9
Net (note 8.1)		44.4	(0.3)		44.1			(6.9)	1.9		(5.0)
Cash flow hedge *	(65.4)	1.1		(64.3)		(124.1)	1.8		(122.3)
Deferred tax (note 7.2) *	24.6	(0.5)		24.1		36.2	(0.5)		35.7
Joint-ventures (note 5.1)	0.3	--		0.3		11.6	--		11.6
Associates (note 5.2)		(4.9)	--		(4.9)		6.4	--		6.4
Net (note 8.1)		(45.4)	0.6		(44.8)			(69.9)	1.3		(68.6)
Items that may be reclassified to income	(1.0)	0.3		(0.7)		(76.8)	3.2		(73.6)
Actuarial gains (losses) on pensions *	(510.9)	(8.8)		(519.7)		293.9	0.6		294.5
Deferred tax (note 7.2) *	56.7	2.2		58.9		(7.0)	(0.1)		(7.1)
Joint-ventures (note 5.1)	(15.6)	--		(15.6)		(0.8)	--		(0.8)
Associates (note 5.2)		(0.1)	--		(0.1)		(0.2)	--		(0.2)
Net		(469.9)	(6.6)		(476.5)			285.9	0.5		286.4
Financial assets at fair value	(12.4)	--		(12.4)		--	--		--
Items that will not be reclassified to income	(482.3)	(6.6)		(488.9)		285.9	0.5		286.4
Other comprehensive income (loss) for the period net of tax	(483.3)	(6.3)		(489.6)		209.1	3.7		212.8
Total comprehensive income for the period	638.6	18.2		656.8		1,190.9	49.8		1,240.7

* Fully consolidated entities

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Number of		Additional			Cumulative		Total attributable	Non-
	shares	Share	Retained	Cash flow	Treasury	to shareholders
(in € millions)	paid-in	translation	controlling	Total equity
outstanding	capital	earnings *	hedge	shares	of the parent
	capital	adjustment	interests
	(thousands)					company
At 1st January 2018	212,090	638.0	4,053.2	464.8	21.2	(218.2)	(52.5)	4,906.5	216.8	5,123.3
Net income	--	--	--	981.8	--	--	--	981.8	46.1	1,027.9
Other comprehensive income	--	--	--	285.9	(69.9)	(6.9)	--	209.1	3.7	212.8
Total comprehensive income for 2018	--	--	--	1,267.7	(69.9)	(6.9)	--	1,190.9	49.8	1,240.7
Employee share issues	445	1.3	14.9	--	--	--	--	16.2	--	16.2
Parent company dividend distribution (Note 8.1)	--	--	--	(382.1)	--	--	--	(382.1)	--	(382.1)
Third-party share in dividend distribution of subsidiaries	--	--	--	--	--	--	--	--	(41.7)	(41.7)
Share-based payments (note 9.4)	--	--	--	16.3	--	--	--	16.3	--	16.3
Acquisitions/disposals of treasury shares (note 8.1)	(79)	--	--	(21.1)	--	--	(14.8)	(35.9)	--	(35.9)
Other	--	--	--	(12.3)	--	--	--	(12.3)	--	(12.3)
At 31 December 2018	212,456	639.3	4,068.1	1,333.3	(48.7)	(225.1)	(67.3)	5,699.6	224.9	5,924.5
Impact of IFRS 16 standard (note 1.2)	--	--	--	5.7	--	--	--	5.7	--	5.7
At 1st January 2019 restated	212,456	639.3	4,068.1	1,339.0	(48.7)	(225.1)	(67.3)	5,705.3	224.9	5,930.2
Net income	--	--	--	1,121.9	--	--	--	1,121.9	24.5	1,146.4
Other comprehensive income	--	--	--	(482.3)	(45.4)	44.4	0.0	(483.3)	(6.3)	(489.6)
Total comprehensive income for 2019	--	--	--	639.6	(45.4)	44.4	--	638.6	18.2	656.8
Employee share issues	213	0.7	6.2	0.0	--	--	--	6.9	--	6.9
Parent company dividend distribution (Note 8.1)	--	--	--	(463.1)	--	--	--	(463.1)	--	(463.1)
Third-party share in dividend distribution of subsidiaries	--	--	--	0.0	--	--	--	--	(18.3)	(18.3)
Share-based payments (note 9.4)	--	--	--	26.3	--	--	--	26.3	--	26.3
Acquisitions/disposals of treasury shares (note 8.1)	88	0.0	0.0	(40.8)	--	--	10.8	(30.0)	--	(30.0)
Purchase of Gemalto minority interests (note 3.1)	--	--	--	(437.0)	--	--	--	(437.0)	7.2	(429.8)
Other	--	--	--	2.2	--	--	--	2.2	0.9	3.1
At 31 December 2019	212,757	640.0	4,074.3	1,066.2	(94.1)	(180.7)	(56.5)	5,449.2	232.9	5,682.1

• This item includes actuarial gains and losses on net pension obligations, recognised directly in equity and not subsequently reclassified to profit and loss (- €1,621.6 million at end 2018, -€2,132.5 million at end 2019).

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