2017 Full-Year results

Paris La Défense, 6 March 2018

2017 Full-Year results
” Order intake: €14.9 billion, down 9% on an organic basis1
” Sales: €15.8 billion, up 7.2% on an organic basis
” EBIT2: €1,543 million, up 14% (up 16% on an organic basis)
? All 2017 objectives exceeded
” Adjusted net income, Group share2: €982 million, up 9%
” Consolidated net income, Group share: €822 million, down 13%
” Free operating cash flow2: €1,365 million, 139% of adjusted net income
” Dividend3 up 9% to €1.75
? Gemalto acquisition project on track
? 2018 objectives: organic sales growth between 4% and 5%4
EBIT between €1,620 and €1,660 million

Thales’s Board of Directors (Euronext Paris: HO) met on 5 March 2018 to close the 2017 financial statements5.

Patrice Caine, Chairman & Chief Executive Officer, stated: “2017 was another record-breaking year for Thales. The Group exceeded all its annual financial targets. As expected, order intake remained high. It was comparable to the 2016 level if we remove the exceptional Rafale contract for India that was booked in September 2016. For the second consecutive year, organic sales growth exceeded 5%, driven by a solid performance across all of our businesses. At 9.8% – a level never achieved before by the Group – our operating profitability came in at the upper range of the target set in April 2014.”
“This financial performance was made possible by the dynamism of our commercial actions, the pursuit of our competitiveness improvement plans, the strengthening of our technological leadership, and more generally, by the commitment of our 65,000 employees, all of whom I would like to thank today on behalf of the Board of Directors.”
“At the same time, Thales is continuing to prepare for the future and is stepping up its growth strategy: in 2017, we increased our R&D investments by 9% and further strengthened our expertise in artificial intelligence, with the set up of a new research laboratory in this field, as well as in big data, thanks to the acquisition of Guavus, a pioneer in real-time big data analytics.”

1 In this press release, “organic” means “at constant scope and currency”
2 Non-GAAP measures, see definitions in the Appendices, page 13. The definitions of EBIT and adjusted net income were adjusted as at 1 January 2016 to exclude expenses recognised in income from operations that are directly attributable to business combinations. These adjustments impacted 2017 EBIT in an amount of €18 million, and 2017 adjusted net income in an amount of €12 million (€19 million and €12 million, respectively in 2016).
3 Proposed to the Shareholders’ Meeting on 23 May 2018.
4 Compared to 2017 pro forma IFRS 15 sales.
5 At the date of this press release, the audit procedures have been completed and the Statutory Auditors’ report was in the process of being issued.

“We are actively preparing the acquisition of Gemalto, which is expected to close in the second half of 2018. This project will cement our position as a leader in the digital transformation of our industries and customers, and enable us to build a global leader in digital security.”

Key figures
New orders in 2017 amounted to €14,920 million, down 10% compared to the high level recorded in 2016, which was boosted by the Q3 2016 booking of the 36 Rafale fighter aircraft contract ordered by the Indian government. The Group has therefore exceeded the €14 billion order intake target set at the start of 2017. The strong order momentum in Transport and Defence & Security enabled the Group to offset the slowdown of orders in Space. At 31 December 2017, the Group’s order book stood at
€31,914 million, which represents almost 2 years’ worth of sales.
Sales came in at €15,795 million, up 6.1% on a reported basis, and up 7.2% at constant scope and currency (“organic” change). Sales benefitted from both a high rate of growth in emerging markets1 (organic growth of +10.3%, running at more than 10% for the fourth consecutive year) and a marked upturn in organic growth in mature markets1 (+5.8%, after +3.9% in 2016 and +0.5% in 2015).

In € millions, except earnings per share and dividend (in €) 2017 2016 Total change Organic change
Order intake 14,920 16,514 -10% -9%
Order book at end of period 31,914 33,530 -5% -3%
Sales 15,795 14,885 +6.1% +7.2%
EBIT2 1,543 1,354 +14% +16%
in % of sales 9.8% 9.1% +0.7 pt +0.8 pt
Adjusted net income, Group share2 982 897 +9%
Consolidated net income, Group share 822 946 -13%
Adjusted net income, Group share, per share2 4.64 4.25 +9%
Dividend per share3 1.75 1.60 +9%
Free operating cash flow2 1,365 954 +43%
Net cash at end of period 2,971 2,366 +26%

1 In this press release, “mature markets” include Europe, North America, Australia and New Zealand. “Emerging markets” include all other countries: Asia, Middle East, Latin America and Africa.
2 Non-GAAP measures, see definitions in the Appendices, page 13.
3 Proposed to the Shareholders’ Meeting on 23 May 2018.

In 2017, consolidated EBIT was €1,543 million (9.8% of sales) compared to €1,354 million (9.1% of sales) in 2016, up 14%. All operating segments contributed to this increase and improved their EBIT margin.
As such, the Group noticeably exceeded all the financial objectives it had set for 2017: an order intake of around €14 billion, a mid-single digit organic sales growth, and an EBIT of between €1,480 million and
€1,500 million, up 9% to 11% on 2016, based on February 2017 scope and exchange rates.
At €982 million, adjusted net income, Group share rose 9%. Its increase was held back by one-off items relating to tax reforms in France and the United States.
Consolidated net income, Group share was €822 million. It posted a fall of 13%, affected by the sharp fall in capital gains on disposal of assets.
At €1,365 million compared to €954 million in 2016, free operating cash flow reached a record level, benefiting from the rise in adjusted net income, from a slight reduction in operating investments (€431 million compared to €472 million in 2016) and from a combination of items that improved the change in working capital requirement. At 31 December 2017, net cash was €2,971 million, up more than
€600 million compared to 31 December 2016.
As a result, the Board of Directors decided to propose payment of a dividend of € 1.75 per share, a rise of 9% compared to 2016.

Order intake

(in € millions) 2017 2016 Total change Organic change
Aerospace 5,200 5,872 -11% -11%
Transport 1,780 1,504 +18% +20%
Defence & Security 7,883 9,063 -13% -12%
Total – operating segments 14,863 16,439 -10% -9%
Other 57 75
Total 14,920 16,514 -10% -9%
Of which mature markets1 10,824 10,138 +7% +7%
Of which emerging markets1 4,095 6,376 -36% -35%

2017 order intake amounted to €14,920 million, down 10% on 2016 (-9% at constant scope and currency2). The book-to-bill ratio was 0.94 for the year, compared to 1.11 in 2016 and 1.34 in 2015, both years marked by an exceptional intake of large contracts, notably with the booking of 6 “jumbo” orders3.

1 Mature markets: Europe, North America, Australia, New Zealand. Emerging markets: all other countries. See page 18.
2 Taking into account a negative exchange rate effect of €142 million and a net positive scope effect of €5 million, mainly linked to the consolidation of RUAG’s opto-electronic business as at 1 January 2017 (Aerospace segment), Vormetric as at 16 March 2016 and Guavus as at 12 September 2017 (Defence & Security segment), offset by the disposal of the identity management business, effective as at 9 May 2017 (Defence & Security segment).
3 With a unit value of more than €500 million.

The Group exceeded the €14 billion order intake target set at the start of 2017. The strong order momentum in Transport and Defence & Security enabled to offset the slowdown of orders in Space.
The consolidated order book remained at a high level: €31.91 billion at 31 December 2017, an increase of €7.4 billion (30%) since the launch of Ambition 10 (€24.47 billion at 31 December 2013).
Thales received 19 large orders with a unit value of over €100 million, representing a total amount of
€2,915 million:
” 1 contract booked in Q1 2017, for the provision of a telecommunications satellite to the Russian operator Gazprom Space System;
” 7 large orders booked in Q2 2017:
o The supply of in-flight entertainment (IFE) systems to a major carrier
o The construction for Inmarsat of a very high throughput satellite (V-HTS)
o The operation and maintenance of critical security, information and communication systems at the French Ministry of Defence’s new headquarters
o A contract in the framework of the development and construction of five intermediate-sized frigates (FTIs) for the French Navy
o Thales’s stake in the manufacturing of the first armoured vehicles for the Scorpion programme, for the French Ministry of Defence
o The supply of AREOS reconnaissance pods to a military customer
o The delivery of several systems and sensors to an emerging-market navy
” 3 large orders booked in Q3 2017:
o An additional contract in the framework of the development and construction of the intermediate-sized frigates (FTIs) for the French Navy
o The notification of an additional contract in the framework of the CONTACT tactical digital communications programme for the French Ministry of Defence
o The sale of an integrated air defence system to an Asian country
” 8 large orders booked in Q4 2017:
o A new tranche of the construction programme for 6 meteorological observation satellites “Meteosat Third Generation”, for ESA and EUMETSAT
o The modernisation of the signalling and telecommunication systems for one of the main railways in Egypt
o The extension of a signalling project for one of the world’s largest undergrounds
o A further contract related to the 36 Rafale fighter aircraft ordered by the Indian government
o An operational support contract for the European air defence systems on behalf of OCCAR, to be delivered through the Eurosam joint venture
o The support of the “Voyager” air-tanker programme for the United Kingdom’s air force
o The second part of the SSOP sensor support contract for the United Kingdom’s Royal Navy
o The first tranche of the aerospace consumables logistics programme for the French armed forces (LORCA programme)

Orders with a unit value of less than €100 million grew by 1% compared to 2016.

From a geographical point of view1, order intake was logically down in emerging markets (€4,095 million,
-36%), Asia having benefited in 2016 from the order related to Indian Rafale fighter aircraft and the Middle East, from 2 large orders2. Order intake in mature markets recorded growth (€10,824 million,
+7%), driven especially by France (+28%) and the United Kingdom (+15%).

At €5,200 million compared to €5,872 million in 2016, order intake in the Aerospace segment was down 11%. Avionics, both civil and military, was particularly robust. In-flight entertainment (IFE) maintained a solid commercial performance, in both the fields of traditional multimedia systems and in connectivity. Space order intake was however significantly down, affected by the wait-and-see attitude of telecommunications satellite operators and by a high basis of comparison in the institutional area (observation, exploration, navigation).
Order intake in the Transport segment totalled €1,780 million, up 18% on 2016, driven by robust growth in both urban and mainline signalling.
At €7,883 million, order intake in the Defence & Security segment posted a 13% fall which can be explained by India’s 2016 booking for Rafale fighter aircraft. Excluding this “one-off” item, order intake in this segment was up, benefiting from robust bookings across almost all businesses.

Sales

(in € millions) 2017 2016 Total change Organic change
Aerospace 5,985 5,812 +3.0% +3.6%
Transport 1,761 1,603 +9.9% +11.2%
Defence & Security 7,983 7,390 +8.0% +9.4%
Total – operating segments 15,729 14,805 +6.2% +7.3%
Other 66 80
Total 15,795 14,885 +6.1% +7.2%
Of which mature markets3 10,913 10,395 +5.0% +5.8%
Of which emerging markets3 4,882 4,490 +8.7% +10.3%

1 See table on page 15.
2 In-flight entertainment systems for Emirates’ future Boeing 777X as well as the signalling systems for the Dubai metro extension.
3 Mature markets: Europe, North America, Australia, New Zealand. Emerging markets: all other countries. See table on page 18.

Sales for 2017 stood at €15,795 million, compared to €14,885 million for 2016, up 6.1% on a reported basis, and up 7.2% at constant scope and exchange rates1 (“organic” change), driven by very good momentum across virtually all segments.
As expected, sales saw a marked acceleration in the fourth quarter2 (+12.5% on reported basis, +14.8% in organic terms), driven by a weak basis of comparison and by phasing effects between Q3 and Q4 2017.

From a geographical perspective3, this good performance reflects both continued strong growth in emerging markets, running at more than 10% for the fourth consecutive year (+10.3%), and increased organic growth in mature markets (+5.8%, after +3.9% in 2016 and +0.5% in 2015). Emerging markets accounted for 31% of Group sales, up from 30% in 2016 and 23% in 2013, the year prior to the launch of Ambition 10.

Sales in the Aerospace segment came in at €5,985 million, up 3.0% compared to 2016 (up +3.6% at constant scope and currency). The commercial avionics business remained robust, driven in particular by the growth in deliveries of avionic systems to Airbus. In-Flight Entertainment was affected by a high basis of comparison and posted a slight drop in sales as a result. Space sales experienced strong growth, lifted by the ramp-up of contracts signed in 2014 and 2015 in both observation and telecommunications activities. Sales in other segment businesses fell, as the growth in the training and simulation business was insufficient to offset the declining sales of microwave tubes, affected by the slowdown of the global satellite market.
In the Transport segment, sales totalled €1,761 million, up 9.9% compared to 2016 (up +11.2% at constant scope and currency). This growth reflected the progress on the major urban signalling projects won in 2015 and 2016 (Doha, Dubai, Hong Kong, London). The strong rise in sales in the fourth quarter is not representative of the trend in this business activity; it reflects a low basis of comparison and phasing effects between quarters.
Sales in the Defence & Security segment were €7,983 million, up 8.0% compared to 2016 (up +9.4% at constant scope and currency). Almost all businesses contributed to this momentum. The Land and Air Systems business recorded particularly acute growth in optronics, missile electronics, Air Traffic Management and protected vehicles, with the ramping-up of the Hawkei vehicle supply contract for the Australian Defence Force. The Defence Mission Systems business posted strong growth for combat aircraft systems, driven by the 3 major Rafale contracts in Egypt, Qatar and India. Despite favourable dynamics in cybersecurity and military network and infrastructure systems, the Secure Information Systems and Communication business posted a more modest growth, especially as several major critical infrastructure protection contracts came to an end.

1 Taking into account a negative exchange rate effect of €145 million and a net positive scope effect of €2 million, mainly linked to the consolidation of RUAG’s opto-electronic business as at 1 January 2017 (Aerospace segment), Vormetric as at 16 March 2016 and Guavus as at 12 September 2017 (Defence & Security segment), off-set by the disposal of the identity management business, effective as at 9 May 2017 (Defence & Security segment). The breakdown of these effects by quarter can be found on page 19.
2 See table on page 19.
3 See table on page 18.

As expected, sales in the Defence & Security segment recorded strong growth in the fourth quarter1 (+19.4% based on reported figures, +22.1% on an organic basis), owing to contract phasing effects and a favourable prior-year basis of comparison.

Results

EBIT (in € millions) 2017 2016 Total change Organic change
Aerospace 601 571 +5% +7%
in % of sales 10.0% 9.8% +0.2 pt +0.3 pt
Transport 72 11 x6.3 x6.3
in % of sales 4.1% 0.7% +3.4 pt +3.3 pt
Defence & Security 869 787 +10% +13%
in % of sales 10.9% 10.7% +0.2 pt +0.3 pt
Total – operating segments 1,542 1,370 +13% +15%
in % of sales 9.8% 9.3% +0.5 pt +0.6 pt
Other – excluding Naval Group (47) (49)
Total – excluding Naval Group 1,495 1,321 +13% +15%
in % of sales 9.5% 8.9% +0.6 pt +0.7 pt
Naval Group (35% share) 48 34
Total 1,543 1,354 +14% +16%
in % of sales 9.8% 9.1% +0.7 pt +0.8 pt

In 2017, consolidated EBIT2 was €1,543 million, or 9.8% of sales, compared to €1,354 million (9.1% of revenues) for the same period in 2016. EBIT advanced by 14% based on reported figures, and by 16% on an organic basis. Compared to 2013, the year before the launch of Ambition 10, it is up 53% (+50% on an organic basis).
The Aerospace segment posted EBIT of €601 million (10.0% of sales), versus €571 million (9.8% of sales) in 2016. The EBIT margin rose in particular in the Space and cockpit avionics businesses, even as the Group implemented a sharp upturn in R&D investments. Profitability remained however under pressure within the microwave and imaging systems activities, affected by the slowdown in the global satellite construction market.
EBIT for the Transport segment continued to grow sharply, at €72 million (4.1% of sales), compared to
€11 million (0.7% of sales) in 2016. This improvement is fully in line with the recovery plan that has been implemented since mid-2015, but low or zero margin contracts continued to weigh down on profitability. Ongoing transformation efforts and the gradual phasing-out of low-margin contracts should help this business regain its past profitability levels by 2018/2019.

1 See table on page 19.
2 Non-GAAP measures, see definitions in the Appendices, page 13.

EBIT for the Defence & Security segment was €869 million (10.9% of sales), compared to €787 million (10.7% of sales) in 2016. Just as in 2016, the EBIT margin for this segment improved organically by 0.3 points, driven by sales growth, good cost control and a drop in restructuring costs.
Naval Group’s contribution to EBIT totalled €48 million in 2017, compared to €34 million in 2016, buoyed by the improved operating profitability in naval defence (which nevertheless included a few one-time items), partially offset by the depreciation of some assets in renewable marine energies.

At €5 million in 2017 compared to €6 million in 2016, the amount of net financial interest remained low. Other adjusted financial results (expense)1 amounted to a net expense of – €29 million, compared to a net expense of – €10 million in 2016, primarily due to a less favourable foreign exchange performance. Adjusted finance costs on pensions and other employee benefits1 remained stable (-€63 million, versus -€66 million in 2016), with the rise in pension obligations between 1 January 2016 and 1 January 2017 offset by a decline in discount rates.

Adjusted income tax expense1 amounted to a net of -€403 million in 2017 compared to -€314 million in 2016, representing 31.0% of adjusted net income before tax and Thales’s share in the net income of equity affiliates. This rise in the effective tax rate can be explained by 3 one-off non-cash items representing a negative amount of €66 million:
” the benefit from the cancellation by France of the 3% tax payable on dividends, which was offset in 2017 by the one-off tax contribution implemented by the government,
” the estimated impact of the French parliament approving a gradual reduction of corporate income tax, which will drop from 34.43% in 2018 to 25.83% in 2022, and
” the estimated impact of the drop in the United States federal tax rate, which moves from 35% to 21% as of 1 January 2018, following the approval of the “Tax Cuts and Jobs Act”.
Excluding these 3 one-off items, the effective tax rate would have been 26%, the same rate as in 2016.
Adjusted net income, Group share2 totalled €982 million, compared to €897 million in 2016, up 9%.
Adjusted net income, Group share, per share1 came out at €4.64, also up 9% on 2016 (€4.25). Without the 3 one-off tax items mentioned above, the adjusted net income, Group share, per share would have come out at €4.96, up 14% compared to 2016.
At €822 million versus €946 million in 2016, consolidated net income, Group share posted a 13% fall, affected by changes to the “disposal of assets, changes in scope of consolidation and other” line, which had benefited in 2016 from capital gains on the disposal of shareholdings, totalling €206 million, in Hanwha Thales and Thales-Raytheon Systems LLC.

1 See the tables on pages 15 and 16.
2 Non-GAAP measures, see definitions in the Appendices, page 13, and the table, pages15 and 16

Financial position at 31 December 2017
At €1,365 million versus €954 million in 2016, free operating cash flow1 reached a record level, benefiting from the rise in adjusted net income, from a good control of operating investments (€431 million compared to €472 million in 2016) and from a combination of items that improved the change in working capital requirement (€223 million versus -€63 million in 2016). Some of these items will have a negative effect on changes in working capital requirement in future periods. As a result, the cash conversion rate from adjusted net income into free operating cash flow reached 139%.
The net balance of acquisitions and disposals amounted to -€80 million. It primarily included the net cash outflow of €91 million incurred when finalising the acquisition of Guavus, one of the pioneers in real-time “big data” analytics, and the proceeds from the disposal of the identity management business finalised in May 2017.
At 31 December 2017, net cash totalled €2,971 million compared to €2,366 million at 31 December 2016, after the distribution of €349 million in dividends (€297 million in 2016).
At €5,326 million versus €4,640 million at 31 December 2016, equity, Group share was up, driven by the consolidated net income, Group share, a fall in net pension provisions, and a higher valuation of the currency derivatives portfolio.

Proposed dividend
At the Annual General Meeting on 23 May 2018, the Board of Directors will propose the distribution of a
dividend of € 1.75 per share, an increase of 9% on 2016.
If approved, the ex-dividend date will be 30 May 2018 and the payment date will be 1 June 2018. The dividend will be paid fully in cash and will amount to € 1.30 per share, after deducting the interim dividend of € 0.45 per share paid in December 2017.

IFRS 15 implementation
In 2017, the Group continued to work on the implementation of the IFRS 15 standard “Revenue from contracts with customers”. This standard, the application of which has been mandatory since 1 January 2018, provides for:
? new criteria to demonstrate the continuous transfer of control of goods to the customer and enable the recognition of revenue over time;
? the unbundling of multiple performance obligations within a single contract;
? measurement of progress towards completion of a contract (or performance obligation for unbundled contracts) based on costs incurred.

1 See table on page 17.

Details of this standard’s impact on the key lines of the 2017 adjusted income statement, and on 2017 operating segment sales and EBIT are set out on page 20.
With regard to sales and adjusted gross margin, the differences are primarily due to the change in the percentage-of-completion method for long-term contracts. Currently, contract sales and margins are recognised as and when technical milestones are reached, which attest to the effective stage of completion of a portion of the work or the performance of services provided for in the contract. Under IFRS 15, the percentage-of-completion method used is the cost-to-cost method, whereby revenue is recognised based on costs incurred at a given date divided by total costs expected at completion. For each contract, depending on the stage of completion and the type of milestones reached and costs incurred during the period, this change of method may lead to the recognition of revenue and margins being deferred from one period to another.
To a lesser degree, these differences are due to certain contracts being unbundled into performance obligations with differentiated margins (particularly for contracts combining construction and operation, or the construction and launch of a satellite), which may also lead to the deferral of the recognition of revenue and margins.
Finally, the impact of the requalification of contracts no longer fulfilling over time recognition criteria is very limited. A detailed analysis of the contract portfolio found that this requalification, which could have generated very significant deferrals in the recognition of revenue and margins if it had applied to a large number of contracts, only concerns a small number, the total revenue of which represents less than 1% of the order book at 31 December 2016.
Had this standard been applicable as of 1st January 2017, these impacts taken together would have led to a negative restatement of €568 million on 2017 sales, and of €133 million on 2017 adjusted gross margin, which would in turn amount to 24.4% of sales (+0.0 points). As the new standard affects neither the total revenue nor the overall profitability of each contract, this restatement corresponds solely to timing differences.
The impact of the standard on 2017 adjusted indirect costs would have amounted to -€29 million, corresponding solely to the derecognition of bid costs from costs at completion and their subsequent recognition under indirect costs for the period.
The impact on the 2017 share in net income of equity affiliates would have been negative by €15 million, exclusively linked to Naval Group.
As a result, restated 2017 EBIT would have been €1,365 million, €177 million lower than the EBIT reported for the same period. The fall in EBIT margin (9.0% under IFRS 15 versus 9.8% under current standards) corresponds primarily to the negative operating leverage due to lower sales, with the gross margin remaining stable in percentage, and indirect costs virtually unchanged by the standard.

These amounts reflect the impact on the aggregate sales and margin of several thousand contracts; they are not representative of the standard’s impact on the financial statements of future periods.
After restatement, the adjusted net income, Group share would have amounted to €840 million,
€142 million lower than the reported amount, reflecting the shifts in the timing of sales recognition resulting from the new standard.
The application of the standard would have had a similar negative impact, €142 million, on the
consolidated net income, Group share.

Update on the projected Gemalto acquisition
On 17 December 2017, Thales and Gemalto (Euronext Amsterdam and Paris: GTO) announced the signing of a merger agreement including an all-cash offer for all issued and outstanding ordinary shares of Gemalto, for a price of €51 per share cum dividend1. This offer was unanimously recommended by Gemalto’s Board of Directors.
Preparations for this offer are proceeding as planned. The draft offer document is under review by the Dutch Financial Markets Authority (AFM). The process of obtaining the necessary regulatory authorisations is also underway. The transaction is expected to close shortly after all of the usual regulatory approvals have been secured, which is expected in the second half of 2018.
All charges directly related to this transaction will be excluded from the 2018 EBIT and adjusted net income.

Outlook
As of 1st January 2018, the Group applies the IFRS 15 standard “Revenue from contracts with customers”. To provide a basis for understanding the 2018 financial targets, the 2017 results restated for the application of this standard are presented on page 20.
In 2018, Thales should continue to benefit from positive trends in the majority of its markets. The acceleration of the commercial momentum in the defence businesses should offset the slowdown of the telecom satellite market. In this context, 2018 order intake is expected to be around €15.5 billion.
In spite of a more moderate growth in the aerospace segment, sales should see an organic growth of between 4 and 5% compared to 2017 sales restated for the application of the IFRS 15 standard (€15,228 million).

1 Valuing the equity capital of Gemalto at approximately €4.8 billion.

The Group will continue to significantly increase its R&D investments, particularly in digital technologies. The self-funded R&D expenses should therefore increase by around 10% compared to 2017.
The growth in sales, combined with the impact of the Ambition 10 strategy on product competitiveness and differentiation, should result in Thales delivering an EBIT of between €1,620 and €1,660 million in 2018 (based on February 2018 scope and exchange rates), representing an increase of 19% to 22% compared to 2017 EBIT restated for the application of the IFRS 15 standard (€1,365 million).
Therefore, the Group expects to exceed its two mid-term objectives: the average organic sales growth in the 2016-2018 period should be over 5%, and the 2018 EBIT margin should be above the top end of the range set in April 2014 (9.5% to 10% in 2017/2018).
This outlook does not take into account the projected acquisition of Gemalto. The Group may need to update its outlook depending on the effective conclusion date of this transaction.
The Group will provide a detailed update on its strategy and set medium-term financial targets at a Capital Markets Day to be held on 6th June 2018, at its Gennevilliers site, in the Paris area.

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