Thales’s Board of Directors met on 23 July 2020 to review the financial statements for the first half of 2020.
"The results of the first half of 2020 were heavily impacted by the Covid-19 pandemic. The decline in sales and profits was due both to the sharp contraction of the civil aeronautics market and to the impact of public health measures on production and project execution.
On behalf of the Board of Directors, I would like to thank all Group employees who continued to make every effort to serve our customers throughout this unprecedented crisis.
The global adaptation plan that we launched very early on significantly reduced the impact of the crisis on our first-half financial statements. We expect this plan to save around €800 million over the full year.
The first half of the year was also very busy from a commercial point of view, with historical successes in space-based environmental monitoring and military naval systems. As these contracts are being finalised, they should be booked in the upcoming months.
In the second half of the year, based on a stabilising economy and public health situation, we anticipate a significant increase in sales compared to the first half and a recurring operating margin back to a level close to the second half of 2019.
Thanks to its unique positioning focused on key societal issues of tomorrow's world — sustainable mobility, technological autonomy, digital identity and security — Thales has what it takes to return to profitable growth once this crisis is over."
Patrice Caine, Chairman & Chief Executive Officer
H1 2020 order intake amounted to €6,092 million, down 13% compared to H1 2019 (-23% at constant scope and exchange rates), following numerous delays in finalising and signing contracts due to the Covid-19 public health crisis and the collapse in civil aeronautics demand in the second quarter. At 30 June 2020, the consolidated order book remained robust at €31.7 billion, which represents 1.7 years of sales.
Sales stood at €7,751 million, down 5.4% from H1 2019 and down 13.6% at constant scope and exchange rates, including a second quarter that was down 20% at constant scope and exchange rates.
In the first half of 2020, the Group posted EBIT of €348 million (4.5% of sales), compared to €820 million (10.0% of sales) in the first half of 2019, a decline by 57%. The EBIT margin dropped 5.8 points at constant scope and exchange rates.
In early April, Thales launched a global adaptation plan in order to maintain its production capacity at the service of its customers, limit the industrial and financial impact of this crisis and strengthen its funding capacity in the event that the crisis persists or worsens. The plan has generated estimated savings of around €320 million in the first half, or approximately 40% of the crisis's estimated €740 million impact on gross margin. It also drove a 16% reduction in net operating investments at constant scope.
At €232 million, adjusted net income, Group share was down 60%, in line with the decrease in EBIT.
Consolidated net income, Group share came in at €65 million, down 88% compared to H1 2019, which had benefited from a €221 million capital gain on the sale of the GP HSM business.
At -€471 million, free operating cash flow in H1 2020 reflected the usual WCR seasonality as well as the impact of the public health crisis, partially offset by the measures taken under the global adaptation plan. Net debt stood at €3,928 million at 30 June 2020, down €469 million year-on-year.