2002 Results

Thales
13 March 2003

                                                            Paris, 13 March 2003

                                 2002 results
                         Continued growth in revenues
               Improvement of ordinary results from operations *
                                   Net profit
                             Further debt reduction
       * before extraordinary accounting impact of Euromissile litigation

The Board of Directors met 11 March 2003, under the chairmanship of Denis
Ranque, to approve consolidated financial statements for the year ending 31
December 2002.


                                                                  in €m
                                                                  2001                   2002
Consolidated revenues                                           10,268                 11,105
New orders                                                      11,059                 10,677
Ordinary results from operations * :
Operating income                                                   645                    661
EBIT                                                               471                    512
Net income                                                       (366)                    111
Net debt at year-end                                             1,464                  1,320


* before extraordinary accounting impact of Euromissile litigation



Key points

In a difficult global environment in 2002, Thales confirmed the soundness of its
results and businesses , and further improved its balance sheet structure.



•          Thales Group revenues totalled EUR 11,105 million, an increase of
8.2% over 2001. Revenues grew by 7.3% on a like-for-like basis, entirely as a
result of strong growth in defence sales, in particular in naval, military
communications and air defence systems. In spite of the downturn in commercial
aviation, the decline in aerospace revenues was limited, due to growing sales in
military simulation and military avionics. The decrease in IT&S revenues
reflected the general economic slowdown in a number of businesses and the
continuing deterioration in civil telecommunications. However, satellite
positioning recorded sharp sales growth.

•          New orders fell slightly to EUR 10.7 billion from the record level of
EUR 11 billion reached in 2001. New defence orders amounted to EUR 6 billion,
which is slightly lower than the 2001 figure of  EUR 6.1 billion because the
recording in the order book of a few major orders was delayed until 2003. In
Aerospace, new orders also declined only slightly, from EUR 2.3 billion in 2001
to EUR 2.2 billion, with a sharp increase in Simulation and Training orders
almost completely offsetting the drop in activities linked to commercial
aviation. Similarly, the net decrease in IT&S orders, from EUR 2.5 billion in
2001 to EUR 2.4 billion, was very minor because of strong development in the
satellite positioning and information systems businesses.

•       Because of the sharp rise in revenues, the book-to-bill ratio was close
to 1 for the Group as a whole (1.1 in 2001) as well as for the Defence and IT&S
business areas. In Aerospace, the ratio was as high as 1.2. At year-end, the
Group order book stood at EUR 19 billion (EUR 19.7 billion at end-2002), of
which EUR 14 billion in Defence, EUR 3.3 billion in Aerospace and EUR 1.7
billion in IT&S, or the equivalent of 25, 22 and 8 months of billing
respectively.

•       After an extraordinary provision of EUR 65 million in 2002 to cover the
award against Thales in its arbitration with Euromissile, operating income fell
to EUR 597 million from EUR 645 million in 2001.

Excluding this provision, operating income increased 10% to EUR 661 million
compared to 2001, assuming constant exchange rates, unchanged scope of
consolidation and comparable real estate arrangements. The 2001 figure included
the net current impact of ordinary litigation, including an initial provision
for the Euromissile dispute.



The increase in operating income in Defence (from EUR 445m to EUR 482m,
excluding the Euromissile dispute) and Aerospace (from EUR 122m to EUR 126m)
more than offset the decrease in IT&S (from EUR 78m to EUR 54m). The lower
figure in IT&S is partly due to the vulnerability of some of the business area's
activities to the downturn in the general economic environment, and partly
reflects the impact of exchange rate fluctuations and consolidation changes: at
constant exchange rates and on a like-for-like basis, operating income in the IT
&S business area increased.





•       Operating margin was 5.4 per cent of revenues, or 6 per cent excluding
the Euromissile provision, compared to 6.3 per cent in 2001. This slight
decrease was partly due to the inclusion in this year's sales of EUR 430 million
for the first Sawari 2 frigate's hull: under this contract, Thales earns no
margin on the hull purchased from the shipyard. The sale at the end of 2001 of a
large part of the Group's real estate in France resulted in an operating expense
of some EUR 25 million in 2002, corresponding to the excess of rent paid in 2002
over the depreciation accounted for in 2001; this extra expense was offset in
ordinary pre-tax income by a saving of financial expenses of the same amount.
Excluding these two points, ordinary operating margin was slightly higher than
in 2001.

•      Ordinary pre-tax income was EUR 324 million, or EUR 389 million without
the dispute provision, a 13% increase over 2001 (EUR 343 million). This was due
to a reduction in restructuring provisions from EUR 160 million to EUR 147
million, and in financial expenses from EUR 160 million to EUR 152 million.

•      Following a net loss of EUR 366 million in the previous financial year,
which was attributable to an EUR 530 million extraordinary goodwill
amortisation, Thales recorded net income in 2002 of EUR 111 million. This
includes EUR 67 million in capital gains from divestments (compared with EUR 136
 million in 2001), a charge of EUR 194 million for goodwill amortisation
(including an extraordinary charge of EUR 36 million) and a slightly higher
corporation tax charge of EUR 83 million, compared with EUR 73 million in 2001.
The figure also includes an after-tax impact of EUR 43 million from the
Euromissile provision.



Continued refocusing of business portfolio

The Group continued to dispose of non-strategic businesses. At the end of the
year, it finalised the sale of Thales Microsonics, specialising in
telecommunication components, and of most of the assets of Thales Contact
Solutions, a company involved in high-volume financial transactions and
call-centre management. These loss-making businesses were deconsolidated as of
November 2002.

In July 2002, Thales and the French shipbuilder DCN finalised the creation of
Armaris, a jointly owned company combining the partners' marketing and prime
contractorship activities for warships and naval combat systems in France for
export markets and cooperative programmes. This partnership strengthens Thales'
position in this segment of the defence market, which is one of the most
strategically important today.



A stronger balance sheet

In the 2002 financial year, Thales conducted a number of operations that reduced
the level of net debt for the second consecutive year. The Group sold part of
its holdings in the Spanish company Indra Sistemas and a second part of its real
estate portfolio. During H12002, the Group also disposed of EUR 56 million of
its own shares. Total disposals, net of acquisitions, stood at EUR 330 million.
The capital increase made at the end of the year for the employee stock
ownership programme also strengthened the Group balance sheet by EUR 88 million.

At end-2002, net consolidated debt was EUR 1,320 million, compared with EUR
1,460 million a year earlier, and gearing had once again been reduced from 41 to
38 per cent (44 per cent at end 2000)







Proposed dividend

In view of the Group's sound performance and improved financial structure, the
Board of Directors will propose that shareholders at the Annual General Meeting
on 15 May 2003 approve an unchanged net dividend of EUR 0.70 with a maximum tax
credit of EUR 0.35. If approved, this dividend will be payable on 2 June 2003.

Outlook for current financial year

Despite a business environment that is expected to remain difficult in civil
aviation and certain IT&S businesses, revenues and operating income are expected
to increase in 2003, notably as a result of the performance of the Group's
defence business.

Commenting on the 2002 results and outlook for Thales, Chairman Denis Ranque
said, 'This improvement and the soundness of Thales' performance are
attributable to the Group's strategic positioning in high technology, the
advanced skills of its workforce, and its international presence.  Based on the
quality of our order book, particularly in the defence business, and our
dual-technology and multi-domestic positioning, I am confident in Thales'
capacity to withstand the current environment of uncertainty. Our recent
successes, particularly in the United Kingdom, demonstrate the value of our
strategy and underpin my personal conviction that the Thales Group's outlook for
medium-term growth is sound.'



Press contact :

Matt Pothecary

Tel + 33 (0) 1 53 77 86 26




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