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• Revenues grew strongly, increasing by 17 % to 5.6 billion euros, reflecting both the impact of the strategic operations implemented in the first half of the year and brisk growth (+ 6 %) in Thales's historical businesses, with constant exchange rates, thanks to faster growth recorded in the second quarter (+ 10 %).
• Income from operations rose significantly, increasing by 31 % to 415 million euros (1), due to the contribution of new businesses as well as good performance by ongoing businesses (+ 12 %). After restructuring costs, income from operations stood at 399 million euros (+ 45 %), representing 7.1 % of revenues compared with 5.8 % of revenues at 30 June 2006.
• Net income increased very sharply, rising by 195% to 504 million euros, including the capital gain on the sale of Thales's surface naval businesses to DCNS (+308 million euros after tax) and after net impact of purchase accounting for Alcatel-Lucent businesses (-54 million euros).
  
  
  Key Figures

REVENUES

Consolidated revenues for the first half of 2007 reached 5.6 billion euros, compared with 4.8 billion euros at 30 June 2006, an overall increase of 800 million euros (+17%), of which two-thirds are attributable to the net expansion of the scope of consolidation and the remainder to organic growth in the company's historical businesses.

The net expansion of the scope of consolidation accounted for 593 million euros in additional revenues: businesses that were consolidated for the first time in the first half of the year contributed 784 million euros in additional revenues, while divestments since 30 June 2006 represented 191 million euros in revenues, in the first half of 2006.

• The businesses consolidated for the first time in 2007 are the transport and security businesses contributed by Alcatel-Lucent in January (2007 first-half revenues of 467 million euros), and the space businesses acquired from Alcatel-Lucent in April 2007 and conducted by two joint ventures with Finmeccanica, Thales Alenia Space (67%) and Telespazio (33%), which were consolidated under the proportionate method (contribution of 310 million euros in Q2 2007).
  
• The main divestments were the navigation equipment businesses sold in the second half of 2006 (109 million euros of sales in H1 2006) and the France-based naval businesses, which were sold to DCNS at the end of March 2007 (impact: - 66 million euros).
  Exchange rate fluctuations had a limited impact, reducing revenues by 51 million euros and income from operations by 5 million euros.

Breakdown of consolidated revenues by segment

Organic growth in revenues, at 6 % for the first half of the year, is attributable to faster second-quarter growth in all three segments, which had recorded virtually stable revenues on a like-for-like basis in the first quarter.

Revenues of the Aerospace segment, 1.5 billion euros, benefited from a strong recovery in the market for civil telecom satellites, which translated into strong second-quarter sales at Thales Alenia Space. With an equivalent scope of consolidation, the Aerospace division recorded overall revenue growth of 5.9 %, reflecting the contrast between good sales performance by the civil businesses (+17%), particularly in-flight entertainment, and lower military sales (-2%) despite the ramp-up in ISTAR programmes (Intelligence, Surveillance, Target Acquisition, Reconnaissance), particularly for the United Kingdom's Watchkeeper UAV-based tactical surveillance system.

Thales recorded a marked increase in the Defence segment's revenues in the second quarter (+ 9.7 % on a like-for-like basis) contrasting with the virtually stable sales performance (+ 0.7 %) posted for the first quarter. Organic growth for the first half of the year stood at 5.9% overall, with little variation between the major sectors of business contributing to this segment:

• Air Systems, with particularly strong sales momentum in air traffic management systems
• Land & Joint Systems, with good sales performance continuing in France, on both domestic and export markets, and the United States =
• Naval, with the ramp-up of new programmes awarded to the company in the last two years.
• The sharp expansion in Security revenues (close to 50%) reflects both the contribution of the new rail signalling business (11% higher than in the first half of 2006) and solid organic growth (+ 6%) in the company's traditional businesses, particularly cryptography; components, with the upturn in space markets; security systems, with higher billings on the Etisalat contract awarded last year for a secure mobile communications network in Saudi Arabia; and enterprise services.

Thales booked new orders worth 5,331 million euros in the first half of 2007, an increase of 10% over the first half of 2006. On a like-for-like basis, order intake was 4% lower. This reduction is entirely attributable to the fact that only one contract worth more than 100 million euros was booked in the first half of 2007 (a weapon systems contract worth 168 million euros for a Middle East country), compared with six orders of this category booked in the first half of 2006, for a total value over 900 million euros. By contrast, the base of orders worth less than 100 million euros each continued to grow in the first half of 2007, by 31% overall and 14% on a like-for-like basis.

The strong growth in order intake by the Aerospace segment is attributable both to the high level of new orders booked by the recently acquired space businesses and to the very satisfactory increase in orders recorded by the historical aerospace businesses, particularly in civil markets (+30%), while military orders were below the relatively high level recorded in the first half of 2006. On a like-for-like basis, order intake by the Defence and Security segments followed a similar pattern (- 9%), with only one major contract awarded in the first half of 2007 (in Defence) compared with five awarded in the first half of 2006 ( three in Defence, two in Security). In both segments, however, the intake of orders worth less than 100 million euros each remained strong, increasing by + 4% and + 18% respectively.

In the Security segment, the first half of the year was particularly encouraging for the rail signalling business, with several significant contracts in Algeria, Korea, the United Arab Emirates and South Africa.

At 30 June 2007, the order book remained high at 22,516 million euros, an increase of 9 % from 31 December 2006 (20,676 million euros). The new space and rail signalling businesses accounted for 4 billion euros, while the sale of the French naval businesses to DCNS reduced the Thales order book by approximately 1.9 billion euros.

RESULTS

• Income from operations(3) increased 31% to 415 million euros, and 12% on a like-for-like basis. Thales recorded a marked improvement in operating margin, from 6.6% of revenues in the first half of 2006 to 7.4% of revenues in the first half of 2007.
  
  These highly positive developments reflect not only the expansion of the company's scope of operations, but also the significant momentum in its historical businesses and the benefits of the productivity programmes implemented over previous years.
  
  Income from operations in Aerospace increased by 3%, with the contribution of the space businesses in the second quarter. At 6.2% of revenues, operating margin was nevertheless lower than the 7.9% recorded by the historical aerospace businesses in the first half of 2006: Although rising, the operating margin of the space businesses stood at 5% for this first half-year, while the operating margin of the historical aerospace businesses fell to 6.5% due to a lower contribution from military activities and, in particular, the impact of additional development costs recorded on some contracts. By contrast, the civil aerospace businesses improved their operating performance.
  
  The Defence businesses recorded a significant increase in income from operations, which rose by 12% overall and by 24% on a like-for-like basis. Operating margin stood at 8.5% of revenues, compared with 7.7% for the first half of 2006. This highly favourable development is mainly attributable to the high level of activity recorded in the first half of the year.
  
  In Security, income from operations increased by 71% overall, mainly due to the contribution of the transport and security businesses newly consolidated. Excluding this contribution, the security businesses posted a marked increase in income from operations, of close to 11%, compared with the first half of 2006. Overall, the Security operating margin reached 7.6% of revenues in H1 2007, compared with 6.6% in H1 2006.
  
• After restructuring costs of 16 million euros, income from operations (3) stood at 399 million euros (+ 45%), the equivalent of 7.1% of revenues for the first half of the year, compared with 276 million euros and a 5.8% margin for the first half of 2006.
  
  These lower restructuring costs come after two years of particularly high provisions for restructuring, which have made it possible to finance the restructuring measures now translating into improved operating performance.
  
• After a negative impact of (83) million euros of purchase accounting, income of operating activities stood at 612 million euros. This includes a gain of 318 million euros on the sale of the French surface naval businesses to DCNS.
  
• First-half net income, Group share, stood at 504 million euros, almost three times more than at 30 June 2006 (172 million euros). The impact of purchase accounting on net income, i.e., the recording of the fair value of the assets and liabilities acquired from Alcatel-Lucent, stood at (54) million euros, of which (83) million euros corresponds to a reduction in income from operations and 29 million euros,to a reduction in the tax charge.
  
  FINANCIAL SITUATION
  
  At 30 June 2007, shareholders' equity stood at 3,600 million euros, compared with 2,287 million euros at end-2006, an increase of 1,313 million euros mainly resulting from the 1 billion euro capital increase approved by the shareholders on 5 January 2007 as remuneration for the transport and security businesses contributed by Alcatel-Lucent, and net income for the first half of the year, less dividends payed on 31 May in respect of 2006 (169 million euros).
  
  Net debt stood at 1,204 million euros at 30 June 2007, compared with a net positive cash position of 91 million euros at end-2006 and net debt of 676 million euros at 30 June 2006, after taking into account the remaining financing required for acquisitions made during the period, less proceeds from sales of assets, i.e., (731) million euros, and negative operating free cash flow of (327) million euros, compared with (228) million euros in the first half of 2006.

FULL-YEAR OUTLOOK
With these satisfactory first-half results, which reflect the first benefits of the reconfigured portfolio of businesses and confirm the strong momentum and performance of the company's traditional businesses, Thales can confirm its March guidance for the 2007 financial year:

• Consolidated revenues in excess of 12 billion euros, based on both changes in the scope of consolidation and continued organic growth
• Further improvement in operating margin beyond 7.5% of revenues (4)
• Restructuring costs back at more recurring levels of between 0.5% and 0.75% of revenues.

(1) before impact of purchase accounting
(2) at end 2006
(3) before purchase accounting
(4) before purchase accounting

APPENDIX
Quarterly consolidated revenues

Summarised profit and loss account

Summarised statement of cash flows

Information by segment

Order intake

Aerospace

Defence

Security