Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's Thales H1 2021 Half Year Results Conference Call. There will be a presentation followed by a question and answer session, at which time, if you wish to ask a question, you need to press star one on your telephone and wait for your name to be announced. I must advise you that this conference is being recorded today. I'd now like to hand the conference over to Mr. Bertrand Delcaire, VP, Head of Investor Relations. Please go ahead, sir. Yes. Hello. Good morning. Welcome, and thank you for joining us for the presentation of Thales H1 2021 results. I'm Bertrand Delcaire, the Head of Investor Relations at Thales. With me today are Patrice Caine, our Chairman and CEO, and Pascal Bouchiat, our CFO. As usual, the presentation will be in English and followed by a Q and A session. It is webcast live on our website at thalesgroup.com, where the slides, press release, and the consolidated financial statements are also available for download. A replay of the call will be available in a few hours. With that, I would like to turn over the call to Patrice Caine. Good morning, everyone. Let's begin now with slide two. As usual, let me start with the highlights of our H1 2021 results. First, the commercial dynamics were undoubtedly strong. Our order intake was not just significantly above last year, which was of course deeply affected by the COVID-19 crisis. It was also clearly above H1 2019, making it a record first half in terms of order intake. Second, as expected, both sales and EBIT rebounded materially from the heavy COVID-19 disruptions last year. Once again, the teams have delivered an excellent performance in terms of free operating cash flow, significantly ahead of plan, and Pascal will explain it in more details. Considering our sales performance year-to-date, we have decided to upgrade our full-year guidance. Finally, I will come back on this in the second part of the presentation, as we start to talk about the world after the COVID-19 crisis, it is becoming clear that for Thales, the broad range of digital and innovation opportunities are gaining momentum. First, let me comment on a few key figures, and I am now on slide three. At EUR 8.2 billion, order intake was up 35%, with strong performances from Defense & Security and Space. The rebound in sales, plus 9.8% on organic basis, was driven by the recovery in Q2, almost 18% performance. EBIT and adjusted net income recovered massively as well, plus 121% and plus 155%. Let me point out that this EBIT level, EUR 768 million, is actually only 7% below H1 2019. The solid improvement of profitability in transport and at DIS offsets the majority of the decline recorded in [Training and Simulation]. Since the beginning of this unprecedented crisis, we have asked our teams to be very focused on cash management. This led to another excellent performance in terms of free operating cash flow, EUR 420 million. This free operating cash flow level drove our net debt position down to EUR 2.5 billion. The chart at the bottom right of the slide shows the deleveraging sequence since we completed the acquisition of Gemalto. A reduction in net debt of no less than EUR 1.9 billion over the past two years. After this rapid introduction, I now will hand over to Pascal, who will comment our financial results in greater depth. Okay. Thank you, Patrice, and good morning, everyone. I'm now on slide four, looking into details at our order intake. Q2 was again a strong quarter for us in terms of commercial activity, with a reported growth at +41%, which follows an already dynamic first quarter, resulting in H1 order intake 35% above H1 2020, and also strongly up versus H1 2019. Looking at the chart by unit value, it's quite encouraging to note that all categories, small, medium, and large orders progress over the period. The strong growth was driven by both large orders above EUR 100 million, increasing from four last year to seven in H1 2021, and medium orders between EUR 10 million and EUR 100 million, which increased by 55% during the period. You can find the list of large orders in the press release. They were spread across many geographies in Defense & Security, and also in Space. Last one, small orders were also up by 5%, and this despite the ongoing impact on civil aero and biometrics. Turning now to slide five, looking at sales growth. As Patrice mentioned before, we recorded an impressive 9.8% organic growth in H1 2021. Let's not forget that Q2 2020 was heavily impacted by the beginning of the health crisis, hence providing easy comps over the period. Q2 2021 has proven to be strong in term of rebound with an organic growth of 17.8% despite our civil aero and biometric business are still heavily impacted by COVID-19. The biggest drivers behind the positive organic growth were twofold. First, the ongoing recovery of safe and space on the back of the commercial successes we recorded since Q3 last year. Second, a continuous robust scenario in Defense & Security with double-digit organic growth versus the same period of last year. Turning to the geographical perspective, let me just point out that the rebound was stronger in mature markets, which didn't come as a surprise considering the strong impact of the health crisis on emerging countries as well as the continuous phasing down of some major project, notably in transport. Moving on now to slide six. Looking into greater details at the drivers of the change in our EBIT between H1 2020 and H1 2021. Starting with H1 2020, our EBIT amounted to EUR 348 million. The mechanical impact, scope currency, and pensions were not significant over the periods, minus EUR 1 million. Our gross margin recovered strongly from 23.8% last year to 26.3% this year, which drove a EUR 393 million improvement. There were multiple drivers behind it, but the majority comes from the recovering phase. Our global adaptations plan implemented last year, soon after the beginning of the health crisis. On top of all ongoing Ambition 10 initiatives, competitiveness, procurement, value-based marketing, product policy, and so on, which as you can see, continue to deliver. On the other side, we managed to keep indirect costs stable. The small increases in R&D and G&A were offset by savings in marketing and sales. The phasing of restructuring costs represents a small headwind over the period, EUR 12 million versus last year. Let me point out here that we expect our restructuring cost to end up around EUR 160 million over the full year, i.e., to remain slightly above the normalized level. Finally, the contribution of equity affiliate recovered strongly. This is especially true for Naval Group, whose contribution is now back to the 2019 level after a year 2020 also strongly affected by the health crisis. Now, looking briefly at each segment, one by one, and now on slide seven for aerospace. Orders were massively up, as you can see, +80% organically, thanks to a strong momentum for the space business and the additional two large contracts booked during Q2. The second tranche of EUR 650 million on the Galileo order, and also SICRAL. We also noted a progressive recovery of civil aero demand during the second quarter. Sales were up by 20.2% organically, driven by the strong rebound in space, with a Q2 more than 50% above Q2 2020. Similarly to my comment on order intake, we saw a slight recovery in sales coming from the flight avionics business, up by approximately 20% during the second quarter versus Q2 2020, with especially on its aftermarket activity. EBIT is back at a positive EUR 69 million after H1 2020, deeply affected by the health crisis. This recovery is of course driven by the improvement in sales and by the effect of both the global adaptations plan and the civil aero structural cost adaptations program. Let me point out that it also includes a negative one-off of EUR 10 million related to the high income tax rate in the U.K., which affects one of our JVs based there, AirTanker. Coming now to slide eight with Transport. Order intake was up by 32% from EUR 442 million- EUR 579 million, thanks to a strong demand momentum in our mainline business, coming from both mature and emerging countries. Sales were up by 6% organically, thanks to growth in our mainline business, with projects like the Stuttgart digital node contract seen in Q4 2020. This improvement was achieved despite the continuous fading down of large contracts still impacting our urban rail business. EBIT margin continued to progress in line with our transformation plan, reaching 5.2% at the end of June 2021, fully in line with our midterm target of a margin between 8% and 8.5%. Moving to slide nine, Defense & Security. Order intake amounted to EUR 3.4 billion, up by 39% organically after a H1 2020 affected by a weak second quarter due to the beginning of the health crisis. The segment recorded four orders above EUR 100 million versus three in H1 2020, including a new one in Q2 for a modernization and support contract of tactical radars in Canada. The strong rebound in orders confirm again the steady momentum of the growth solutions. At the end of June 2021, the segment had a backlog of close to EUR 23 billion, representing almost three years of sales. Sales amounted to EUR 4.2 billion, strongly up by 14.9% organically versus a weak H1 2020, but also 7% above the already robust H1 2019. Many business units contributed to this solid recovery, including electronic warfare systems, networks and infrastructures, and also sonars. As expected, EBIT margin recovered versus H1 2020, up from 10%- 12%. As you remember, our operation in April and May 2020 were affected by COVID-19-related disruptions. Last segment on slide 10 with DIS, Digital Identity and Security. As usual, I don't comment on orders, as they are structurally in line with sales. Sales amounted to EUR 1.4 billion, down 2.2% organically. The decline resulted from different moving parts. The ongoing impact of the crisis on biometrics, which has been impacted by travel restrictions since Q2 last year. A high basis of comparison in EMV payment cards, which are the particularly strong H1 2020. These two factors are setting the double-digit goals of both cybersecurity and IoT. At EUR 152 million, EBIT was up by 6.6% organically, with an EBIT margin progressing further from 9.5%- 1.1%, despite the ongoing disruptions I just mentioned in biometrics. The segment benefited from the additional cost synergies in line with our plan, together with a tight control on costs and also the leverage of the cyber sales force. Turning now onto slide 11, just one comment on items below the EBIT, regarding taxes. A tax law changes in the U.K., but also in Italy, trigger some non-cash one-off items. I already mentioned the negative one-off recorded in aerospace EBIT. This item show here at two levels. First, our income tax expense includes a EUR 51 million income, which explain this low effective tax rate, 14.7%. Correcting for this one-off item, our effective tax rate would have been slightly above 22%. Second, this tax one-off items also increase the share of minority interests by around EUR 10 million. All in all, this drives an adjusted net income group share of EUR 591 million and an adjusted EPS of EUR 2.78, which are both actually higher than in H1 2019. Finishing up with two slides on cash flow. I'm now on slide 12. As you know, our working capital is usually negative in the first half of the year, mostly due to a strong seasonality. However, during the first six months of 2021, our operational free cash flow has reached a solid EUR 420 million, coming, of course, as you can see on the first line of the table from our higher EBIT, also clearly from a much stronger working capital performance. These positive outcomes result from a strong level of order intake and associated down payments, as well as our permanent efforts that the group places on cash management, and in particular on the reduction of overdue balances, the tight control of our supply chains, also proactive negotiations with both customers and suppliers in order to obtain more favorable payment terms whenever possible. H1 free operating cash flow also benefited from two factors you can see at the bottom of the table. First, income tax, represented an income of the period, EUR 29 million. This due to a positive cut-off effect at the end of last year. The second, CapEx, was still lower than D&A in the periods. However, we expect CapEx to grow in the next few semesters and to come back progressively to a level in line with our D&A. Looking at the full year net, I expect the headwind versus our 95% target conversion ratio to be closer to EUR 50 million compared to around EUR 200 million at the start of the year. Also, keeping in mind that the adjusted net income will benefit from around EUR 40 million of net non-cash one-off items. As usual, this guidance doesn't include the potential benefits from down payments on potential large export defense orders. Moving on to slide 13, with a quick look at the evolutions of our net debt positions. Nothing special to comment on the individual drivers. The more important to measure the intensity of deleveraging was achieved in the past two years from EUR 3.9 billion at the end of 2020 to EUR 2.5 billion at the end of June 2021, i.e., a reduction of more than EUR 1.4 billion over 12 months. This being driven by our cash flow generations, which amounted to close to EUR 2 billion in the last 12 months. With this, I'm handing over to Patrice for our strategy and outlook. Thank you, Pascal. I am now on slide 14, turning to our strategy and outlook. Back in March, I listed three strategic priorities for 2021. First, implementation of the structural cost adaptation plan in civil aero. Second, our continued focus on growth initiatives. Third, our determination to sustain a high level of R&D. This morning, I thought it would be useful to give you an update on these initiatives and also start to discuss the trends and opportunities that will gain momentum in the coming years. Starting with aeronautics, and I am now on slide 15. The adaptation of our aeronautics business to the new context remains a key short-term priority. As Pascal showed earlier, we have already made solid progress on this topic. More than three quarters of the necessary staffing adjustments have already been implemented, around 1,600 people worldwide. Thanks to internal mobility and transfers of work packages, we have been able to maximize the retention of competencies. In parallel, the global service business line I announced in March is now fully operational. As a reminder, it will allow us to consolidate on site, improve customer service, and expand in these higher-margin activities. In terms of near-term market dynamics, let me point out that as shown on the chart on the right, IATA expects that the recovery of air traffic will remain modest in 2021. It is important to remain a bit cautious regarding the second half of the year. On the other hand, the medium-term outlook is very supportive. The updated A320 production plan announced at the end of May by Airbus with the firm rate of 64% by Q2 2023 is, of course, very positive and will provide a strong tailwind for our avionics business in the coming years. On top of this recovery dynamics, we see a multiplication of growth opportunities, especially around digital and green solutions. I'm thinking of our solutions around flight trajectory optimization, virtual training and simulation as well, internet connectivity on board aircraft or UAV. To complete the picture on the aerospace segment, let me provide a quick update on our space business, Thales Alenia Space. Pascal mentioned how our commercial dynamics remain very strong in H1 with the signature of phase two for Galileo and SICRAL 3. These dynamics extend to the commercial exploration market. At the beginning of the month, we have booked the contract for the construction of the first commercial space station, Axiom. Turning to the commercial telecom side, no need for me to come back on our constellation leadership, which was demonstrated by our selection by Telesat for its projects. On top of this, we continue to invest in the development of our new generation of flexible satellites, named Space Inspire. I'm now on slide 16. Turning to the second priority, growth initiatives, we first remain focused on the capture of revenue synergies with Gemalto, which are progressing in line with the plan. You remember how the combination of Thales and Gemalto cybersecurity assets is a major synergy opportunity? Well, in September last year, we launched CipherTrust Data Security Platform, which integrates the best data security technologies from both sides. Many large companies have deployed this platform in H1. For example, four of the top 10 U.S. banks. The success of this product or service drove solid double-digit sales growth for this business over H1. In addition, we announced an expanded partnership with Google and a further integration in Microsoft products. Of course, we continue to leverage our global sales network to sell DI solutions on a global basis. Over H1, we booked projects both with different customers and with civil ones, such as banks or mobile operators. The third area is insertion of Gemalto technology into Thales solutions will naturally occur over a longer timeframe. One emerging opportunity is private 5G networks. Security forces, public services, or companies that manage critical infrastructures are more and more interested in setting up their own private 5G networks, which offers more robust security features than previous generations. Our solutions for this market now include the full range of Gemalto security capabilities from SIM and eSIM to subscription management and of course, HSM. All in all, we won 49 revenue synergy projects in H1 2021. Moving now to slide 17. Taking a slightly longer-term perspective, I wanted to share the whole picture of the solutions that will drive growth in the coming years. Thinking about our digital growth strategy, you remember the framework that we presented back at the CMD in 2018. Our first priority has been to insert digital technologies inside our core products, our green products, as we call them internally. This is the column on the left. Behind these concepts are many of the successes of the past few years. In parallel, it is the column on the right, these investments and the acquisition of Gemalto provided a strong boost to this strategy. These investments have allowed us to target new emerging markets. Many of these emerging markets will gain prominence in the coming years. I'm now on slide 18. Let me take two examples. As the volumes of data explode, even on the theaters of operation and on-board platforms, defense forces want to have access to the benefits of cloud technologies, notably to foster agility and enable collaboration on the battlefield. Depending on the infrastructure, the challenges are quite different. First, at HQ level for the core infrastructure, the key priority is the management of security levels. On theaters of operation, whether it is a [fibe], what we call the [fibes], for soldiers, vehicles, aircraft, platforms in general or simply the edge, what we call the edge or the command post, it is essential to address some of the unique requirements of defense customers. The ability to run offline, ruggedness, form factor, simplicity of deployment, interoperability, including in coalition. In addition, it is important to provide continuity among all these layers. Thanks to the breadth of our expertise in both defense and civil technologies, we are very well-positioned to address this emerging high-growth market. Earlier this year, NATO awarded us the first contract for a theater-level deployable cloud. This solution reduces the time it takes to set up the infrastructure for a rapid response force from a few weeks to a few days. The corresponding product, Nexium, recently received an award from Microsoft. We are starting to incorporate Combat Cloud features in ground vehicles, and it will represent an important product within FCAS, the future combat air system. Now turning to slide 20. 19. Sorry. The second example I wanted to give is the transition from removable to embedded SIM. Market research companies now forecast an even faster adoption of eSIM than they assumed two years ago before the COVID-19 crisis. They now expect that by 2025, 1 billion eSIM-equipped smartphones will be shipped. On top of that, they expect a dramatic increase in the percentage of eSIM actually activated as the main subscription identification. This will generate 2 revenue streams for us. On top of the purchase of eSIMs by smartphone manufacturers, we will receive fees from mobile operators for the remote management of network subscriptions. These subscription services, for which we are the global leader, run on an attractive software and service business model. Altogether, the eSIM market represents for us a €150 million revenue opportunity by 2023, with a further doubling by 2025. Turning now to slide 20. Third key priority, which extends beyond 2021, sustaining high R&D investments. More than ever, technology leadership remains our biggest driver of differentiation and hence pricing power. Over the coming years, while we will remain very selective, we intend to continue to increase R&D faster than sales. On top of the focus areas I've mentioned in the past, cybersecurity, big data analytics, AI, IoT, we will step up our investments in new areas to ensure that we remain at the leading edge of technology in our markets. I'm thinking of edge and far edge computing, for example, the application of quantum physics to sensors and communications, or post-quantum cryptography, just to mention a few. Which brings me to our financial objective for 2021, and I'm now on slide 21. As you understood, considering the strength of sales year to date, we have decided to upgrade our sales guidance. Based on the July 2021 scope and foreign change rates, we expect sales to amount to between EUR 17.5 billion and EUR 18 billion. This concludes our presentation. Many thanks for your attention, and together with Pascal, we are now pleased to take your questions. Thank you. Ladies and gentlemen, we now begin the question and answer session. As a reminder, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Once again, press star one if you wish to ask a question. Your first question comes from the line of George Zhao from Bernstein. Please go ahead. The line now is open. Hi. Yes, good morning, everyone. Your guide implies about EUR 9.3 billion of sales in H2 at the mid-point. That would be down almost 9% versus 2019, and that compares to Q2 essentially flat two years ago. I guess could you talk about what's driving that, given your more positive commentary regarding the growth rebalance? My second question is more on the long term. On DIS, clearly the environment now is very different from back when you provided the 4%-6% revenue growth guide. What will it take to get back to that growth trajectory? If travel takes longer to recover, what will this segment be like, and when can we expect to see the growth acceleration for the segment as a whole? Thanks. Yes. Good morning, George. On your first questions about H2. First, I guess it's important to recall everybody that even though today we have, of course, a better view on the full year 2021 as compared to our initial view beginning of March, when we set our initial target of sales. You have seen probably that we have reduced the range of our guidance with regard our level of revenue for 2021. Initially, we provided you with a EUR 17.1-EUR 17.9. We have decided to have a much narrower range, EUR 17.5 billion-EUR 18 billion, reflecting, of course, a better view, but still recognizing that there's still a number of uncertainties ahead of us. The primary reason behind that is our aerospace business, and in particular, of course, our aeronautics, civil-aeronautics business, where today there's clearly uncertainties, and of course, driven by what we keep hearing, and in particular about travel restrictions. At this point, we are a bit cautious on how we could see our H2 level of revenue for this business. This is the first point. The second point is also, to consider that with regard our DIS business, H2 was also a pretty solid base. You probably have in mind that in H2 2019, but also in H1 2020, we took advantage of this renewal of payment card in the U.S., and hence the fact that in H1 2021, we report a negative growth on this business. We believe that H2 for DIS could be probably slightly negative or one-zero on H2. Here again, travel restrictions. It's clear, a point of concern for us, in particular in our secure documents business line, but also our biometric business line. Third item is Defense & Security. You probably have in mind that H2 last year was especially strong in terms of top line as compared to, of course, to H1 2020, but also quite strong against H2 2019. Overall, even though the dynamics is there on our Defense & Security business, today, after quite a strong growth in H1, but once again, against quite a modest comparisons base. Today, in H2, of course, we will need to compare us against a much stronger base. Last point is transport, where, as we all know, we will see. Yes. Yes. I'm now on, I've told them now, I've got- Sorry. We have a little problem with the phone connection, but I will monitor it. Sorry. Okay. Last point was on transport, where we believe that H2, in term of top-line growth, will be positive against H2 of 2020. Also recognizing that here, again, we take advantage of a strong momentum on mainline, but also the fact that we also are in a more fading down situations and some large-size urban project in our transport business. This is, I mean George, what is behind this guidance for H2. Once again, probably the most important point to have in mind is the level of uncertainties relating to the impact of the sanitary crisis. seven point on the ISS. Patrice? I can start, and I will let Pascal completely. There are points to be added. Yes, we gave, I would say, a midterm growth perspective when we discussed the DIS a while ago. It was in 2018. Yes, it was in 2018. Well, in fact, it's a mix of different business segments. As you know. Clearly, it's composed of fast-growing markets or fast-growing segments like cyber. Cyber, it's data protection, data management, and all the recent, I would say, scandals show and illustrate how strong is the need for more and more data protection in our digital world. It's also the case for what we call identity and access management, which is a very important segment and which would drive growth for the CPL business line and the cybersecurity business line of DIS. I could also add the eSIM activation or subscription I've just talked about. Last but not least, the growing need for digital identity. I don't know if you have noticed that the EU has the commission, sorry, has proposed to modify a EU directive to enable what they call EU digital wallets across all European countries. Clearly this will drive, this will boost the implementation of digital ID across Europe, across EU. On the other hand, we have a market that will be flattish like probably a smart card for banking sectors and our SIM will be even decreasing, of course. This mix led us to foresee this range that you have recalled, 4%-6% on average. Clearly, I see no change or no facts that would make us change our mind in terms of growth rate for DIS in the years to come. Clearly it confirms, in fact, what we said a while ago now. Great, thank you. Thank you. Your next question comes from the line of Celine Fornaro from UBS. Please ask your question. Yes. Good morning, gentlemen. Thank you for taking my question. My first one would be if you could give us a little bit more color on the performance within the aerospace division. A very strong uptake or recovery in the space business and how sustainable this is. We know space is always very cyclical. If you could just give us a little bit of a view over the next six to 12 months on this top line and EBIT performance there. Also the recovery on the civilian avionics, IFE and connectivity businesses in terms of maybe comparing to 2019 levels of sales, but also on the profitability and how you see the recovery path there. My second question would be on the point that you raised, Patrice, regarding R&D, which should grow above the sales level and some of the areas that you mentioned. If you could maybe help us a little bit to understand what is already core and strong in Thales, and where you could actually gain by going and acquiring this externally as maybe you have done with some of your previous smaller acquisition before Gemalto. Thank you. Okay. Good morning, Celine. Maybe I will start maybe with the first two questions and leave the floor to Patrice for the third one. Aerospace, first, I guess it was quite obvious from our presentation that we are taking advantage of quite a strong momentum in our space business. You probably have in mind it was already the case in H2 2020. We made it clear that we were extremely happy to win a number of projects on the observations, explorations, navigation activity. An additional example is that we commented a few weeks ago on this call is in 2021, is the fact that we managed to book this huge Galileo project, in total EUR 750 million. This coming on top of what also a good last year, both on the observation business with this famous Copernicus program and also various exploration mission. By the way, we announced a few days ago, a new success in terms of explorations missions with Thales Alenia Space, a JV with Leonardo, being on the development of the ISS project. This comes on top of a clear strong momentum on the more commercial telco business with, in particular, we see today a number of projects emerging with regards constellations. As we all know, constellations are pretty large, in some cases with jumbo projects. Of course, not all of those projects will go through. Just to recall you that we have been selected by Telesat a few months ago, and this is as a clear jumbo opportunity with potential EUR 3 billion of level of business for Thales Alenia Space. At this point, as you know, I mean, Telesat keep working and putting together its overall financing, and they are making progress on this point. It's also true that in addition to this last science project, there are additional other ongoing projects. Clearly, all of that resulting in a number of opportunities. It's also true that we are seeing in 2021 quite a strong increase in our space business as compared to H1 2020, which has been, as we all know, also affected by production disruptions because of the health crisis. If we take H1 and comparing on one side our avionics business and on the other side the space business, our space business in H1 2021 is up something like almost 40% in terms of level of revenue as compared to H1 2020. On the other side, our avionics business is still down, I mean, between mid-single and more high- single digits drop against H1 2020. Of course, with a profile which is quite different between Q1 and Q2. Q1 2020 was almost not affected by the crisis. It's true that Q1 2021 for our avionics business was significantly down. Q2, on the other side, is showing a bit of a recovery. Going back to your questions against what would be a normative level of activity for our avionics business, if I take one figure, Celine, and considering that pre-COVID level of activity for avionics business would be 100, we have seen in the bottom of the crisis a drop in this business between 40% and 45%. Moving from 100 to something between 55% and 60%. From that, it's true that only Q2 we have seen a recovery, I would say between 15% and 20%. Of course, on the basis of reduced level of business. Overall Q2 2021 in raw figures is probably down between 30% and 35% against what it was in 2019 before the crisis. A recovery in Q2, but a recovery which is still, I would say, quite modest, but showing a bit of recovery, in particular in the after-market. What was your second question, Celine? IFE and connectivity. I have no specific comments on IFE connectivity, but as I mentioned it's more after-market, so IFE is also in Q2 helped in terms of level of business by this after-market slight recovery. Having said that, it's probably more in the cockpit avionic than in IFE that we are seeing in Q2 most of the recovery that I've just mentioned. Patrice? For Celine, on the R&D side, perhaps a few things to illustrate. One, we do think it is so important for us to continue to sustain a high level of R&D and to reach this type of percentage when we say between 6%- 6.5%. In fact, we already do a lot of R&D at Thales, of course. We see additional growth opportunities coming from the mastering of technologies that could allow us to tackle new markets. That's what I've tried to explain shortly because this presentation is always too short, but by mentioning some of them, like quantum. Quantum really is the next revolution in the domain of sensors or communication. Sensors that will, I would say, embed quantum characteristics will see their performance being multiplied by a factor of 100 or 1,000, which is a real revolution. Quantum communication and what is called QKD, so Quantum Key Distribution, will make communication, I would say, impossible to be intercepted, to be breached. This will be a clear revolution for everybody, by the way. Mastering this technology will allow Thales to be in a leading position in this domain. I've also mentioned the far edge and edge computing. One key question of typically different forces is how can we leverage the power of the cloud when we are far from the cloud? You take a command post. The command post, there is a connection to, I would say, back office or headquarter, but it's far from being sufficient. How do we deploy the cloud technologies in a command post or in an even more demanding, I would say, environment like a platform, like a tank, like a vehicle, like a craft. 5G is another area where we see a lot of opportunity for Thales. Typically, Thales, we are not competing against Nokia or Ericsson. We are not a 5G equipment provider. What we do in 5G, we provide brand-new services, again, to highly demanding customers. One of the revolution of 5G is the ability to slice the network to create virtual network within the physical network. Typically, there are already, I would say, large tenders in some European countries from typically police forces or security forces. They need to have their own virtual network with a high quality of service. For that, 5G is a big solution. It's impossible to do so with 4G or 3G standards. The last example to show that we need to expand our R&D exposure is post-quantum cryptology. This is nothing to do with quantum physics. This is how do we design new crypto algorithm. This is math and computer science, it's not quantum. How do we design new crypto algorithm to, I would say, resist against the future arrival of quantum computing? We are one of the two, I would say, consortium that is competing at the NIST. This is an international body that will certify this algorithm against IBM. Showing that Thales is again, a leader in this domain. Once it will be, I would say standardized, we will be able to inject this new crypto algorithm in, for instance, our HSM, hardware security module, in our chips for banking cards, for example, that will, I would say, offer a level of security in terms of crypto, which will be unbreakable even by quantum computers. I take these different examples to show why we need to increase our R&D, because clearly, we see a lot of new opportunities ahead of us, business opportunities ahead of us, by mastering these technologies. We do need probably to activate the two levers. One is organic. We need to develop competencies, hire new talents in these domains. Mastering quantum physics is not an easy task. We need to increase our own internal resources. Of course, we are open to activate M&A levers or to buy small companies, medium companies, almost, I would say large size assets, to complement what we do on an internal, I would say, standpoint. I hope it give colors to this key question of R&D growth at Thales. Thank you. Your next question comes from the line of Tristan Sanson from Exane BNP Paribas. Please ask a question. Yes. Good morning, everyone. It's Tristan here. Thanks for taking my question. I have a few quick questions of clarification, if I may. First will probably be for Pascal, just to get a clearer view on the trajectory for free of free cash flow this year. To be sure I really understand your message. So far you had a guidance which was for about EUR 1 billion of free cash flow for 2021. You say that you're going to get a cut-off effect or headwind from normalization of the effects that will be maybe EUR 150 million better than initially expected. There's a comment also on the non-cash tax in one-off that you're going to have on net income, I'm not sure exactly how we should impact it. If I understand correctly, it would point toward EUR 1.15 billion, EUR 1.2 billion of underlying free cash flow plus the benefit of down payments from extra export contracts. If we take the Rafale orders already announced including Egypt, even though this has not been formalized. What I understand is that you should get towards something like EUR 1.3 billion. Is that the right way to see it? Just according to your official message? That's the first question. The second one is on cost management. Well, we have complex movements in the cost base year on year because we have inefficiencies that disappear. We have temporary savings that are disappearing as well. We have some restructuring benefits. All in all, if I look at the sum of R&D, G&A, and marketing expenses, we have a cost base that is fairly flat year on year. Can you give a bit more granularity on how these elements are offsetting each other? Do we really have significant restructuring benefits already, or are they yet to come? If we look at inefficiencies disappearing, is it a material number to get a better feel? Maybe the third question is on the aerospace momentum to follow up on the previous one. Since the beginning of the year, you had a number of positive developments. We talked about the strong book-to-bill and the continuing strong order intake in space. We had the positive momentum for Rafale on the military part. We have the uptick in the A320 production rate, which is an important program for your avionics [way] business, and you mentioned a good aftermarket momentum. What does it mean for the first yield of the trajectory of the aerospace division over the next few years? We talked about space, but aerospace overall, is it becoming like a mid-to-high single digit or a high-steady single-digit growth business? That would be a helpful view. Thanks. Okay. A number of questions with a lot of details that you're asking us, Tristan. Good morning to you. First, free cash. Your analysis is almost right, with a slight caveat. The first point is, we can really guide you on elements in which we are almost certain to get. It's true that you mentioned Rafale orders. On Rafale orders, there are Rafale orders that we have already booked, and which are, because of that, in terms of down payments, already taken into account in our updated guidance. There are future Rafale orders, which at this point are not booked, and in particular Egypt, which are not part of our guidance with regard 2021. Which means that as opposed to what you mentioned, Tristan, the positive down payments coming from Greece is a factor. In our guidance. In term of guidance, overall, the math that you mentioned are pretty much right. Initially, at the end of 2021, we guided you to a 95% pre one-off conversions ratio. We said that we would face something around EUR 200 million headwinds coming from the reversal of down payments. With all of that, probably a level of free cash that the market considered in around EUR 1 billion, slightly below EUR 1 billion. From that, what do we say? We say first that, net, this EUR 200 million of headwinds will be much lower. It's going to be much more EUR 50 million than EUR 200 million. Overall, EUR 150 million of additional free cash in term of guidance for the full year 2021. On top of that, it is also true that we mentioned a one-off non-cash item on our net adjusted income, which is those EUR 40 million one-off non-cash tax item. This point, this is a non-cash item, which would normally drive a reduction of our conversions ratio. What I keep telling you is that this 95% will still apply to our guidance for 2021. It is 95% on the basis of a higher level of net income because of this one-off non-cash item, and also a much more reduced level of headwinds in terms of one-off cash items. Of course, as I mentioned, this guidance doesn't take into account additional potential large size export contracts that we could book in H2. Of course, we all think about Rafale in Egypt. Second point about cost management. Overall, I think probably a smart line on the smart, but a simple way to look at our cost management is really to see how we see our gross margin moving from H1 2020 to H1 2021, and also considering our level of indirect costs, which are below the gross margin. First, the good thing is that I get that you have seen this quite significant progress of our gross margin from 23.8% H1 2020 to 26.3% in H1 2021, reflecting both a more normalized level of productions, of course, also, the first impact for our global adaptations plan, and in particular in our space, in particular in our unique business. Overall, I get that you have understood that overall, we managed to cut our head count base for our business by something like 1,500 head counts, which is quite significant. Top of that, of course, we keep working on all our competitiveness program that we have already commented in the past. Lastly, on more indirect costs, I guess it's quite obvious from our P&Ls that we are quite cautious in terms of managing our sales, marketing, and G&A expenses. You have seen that overall, despite this almost 10% organic growth on our revenue, overall, if I add up marketing, sales, and G&A, we are slightly less expenses as compared to H1 2020. Where we have decided to go a bit is more handy, and this will continue in the next semesters. This is what I can tell you in a few words. In terms of overall aerospace trajectory in the next year. Basically what we share with you today is consistent with our previous messages, which is that on space, this business, which in 2020 dropped below the EUR 1.9 billion mark, should be around EUR 2.5 billion in 2024. This level of revenues do not take into account the potential impact for Telesat project. On the airline business at this point, and sorry for that, but it's a bit too early. We did welcome, I guess like everybody, the Airbus announcements, with overall getting back to this pre-COVID level of production output as soon as 2023. In 2024, 2025, with the production output, which would be significantly above pre-COVID level. Which is quite a good news. Of course, as everybody else, we'll look very carefully at how the recovery, the normalizations of the situations with regard to travel materialize. From that, of course, we will come back to pre-COVID, based on this overall evolution of the situations in terms of travel. At this point, it's probably too early, Tristan, to be more vocal, as there are still uncertainties in this matter. Thank you, Pascal. That's really helpful. Thank you. Your next question comes from the line of Christophe Menard from Deutsche Bank. Please ask your question. Yes, good morning, everyone. I have three questions on my side. The 1st one was on the order intake guidance, which you left book-to-bill above one. My question is, considering the better sales, the nominal number of orders, considering the very strong performance in H1, are you looking at higher orders than you were initially looking at the start of the year? Still book-to-bill above one, is that above one higher than what you initially thought? The second is on the M&A priorities and the R&D, what you mentioned earlier. We're seeing a number of transactions in defense at the moment, the latest being Ultra this morning, some announcements. I wanted to understand the priorities on your side. Is it more bolt-on on your side, or would you be considering mix of large acquisition and bolt-ons? It's really about acquiring technologies that is the top priority if you do M&A, of course. The last one is on the free cash flow performance in H1, which was, in my knowledge, one of the best performance you've ever done, or at least in several years. How repeatable is it? I understand there are prepayments, but is it the new norm? Do we have a more balanced H1, H2 to come, or is it something exceptional? Good morning, Christophe, and thank you for your questions. I will take the first and the last one, Patrice will take the second one. Order intake, I guess that from our tone, we are quite positive in term of commercial dynamism for Thales overall. I would say that our view today is more positive than it was a few months ago when we released our 2021 guidance. It's true that H1 gave us strong confidence to achieve this book EUR 2 billion over one At this point, we don't want to be more specific. It's true that both what we managed to book in H1 and also our view in terms of potential additional order intake in H2 give us quite a good level of confidence. Question? Christophe, [Foreign language]. On the M&A side, what we intend to do, and you will not be surprised, is of course, to continue to look at bolt-on acquisition as we did in the past. Mainly to complement our technical portfolio and to accelerate what I call our Ambition 10 strategy in terms of growth and competitivity, because these technologies are there to serve growth and competitiveness. It's true that we do not exclude to look to larger ones. By saying so, I've nothing specific in mind. Don't worry, I would say. Quick conclusion on this point, but clearly, this is a possibility. We do not exclude at all because we generate a good level of cash flow, because we have drastically reduced the net debt position of the group in the past years, and so on and so forth. By the way, as usual, but if we do so, we will always keep a very, I would say, strong financial discipline. I think the track record speaks for us. Typically, we'd never, I would say, go for something or look for a target for which the value would be, I would say, at least to our mind, not the right one. That's why, by the way, on the latest transactions you may have in mind, you have not seen Thales. Clearly, our appraisal of the value was clearly not the one that has been, at the end of the day, acquired by some competitors. Financial discipline, value creation, synergies, cost synergy, revenue synergies that will drive, of course, either our bolt-on acquisition or this may happen, larger ones. Okay. Christophe, on free cash, on your last questions. Thank you for that question. It also gives me the opportunity to come back on the drivers behind our H1 very strong level of performance, but also coming back on your question about a more balanced cash flow between H1 and H2. First, I'm coming back on the key drivers behind this level of performance, which is very strong for H1 at Thales. In the past, I remember one year, I guess it was three or four years ago, where we had a positive H1 free cash, but it's something which is quite unusual at Thales, and it's true that we see our working capital going up quite substantially in H1 and then dropping in H2. This is the usual pattern at Thales. Now coming back on our H1 performance, there are various components behind that. First is we had a very solid level of order intake. Of course, we mentioned a record level of order intake, which means that some of those order intake also came in with significant down payments. This is quite simple. Second component is really the impact of our cash optimization program. You probably remember that back in October 2019 at Capital Market Day, I mentioned our desire, our willingness to put in place a strong cash optimization program. At that time, remember, a bit of skepticism from some analysts on this cash program. When I look back at what we have done, I'm quite proud on what we have done. It's true that H1, running full speed on this matter in terms of chasing overages, in terms of putting a bit more pressure on the supply chain and negotiating payment terms, both at customers, but also on some suppliers. We also need to have in mind that once you have put in place those drivers and you get the benefit, now it's from a cash flow perspective, it's from this new base, is to keep at this level that will not generate additional cash flow, but maintaining the level of programs that we managed to get. Third point that we also need to have in mind in H1 is some more of the specific items. I mentioned in particular this tax situations, where I will give you a very simple example. In H1 2020, we pay our interim tax contribution on the basis of the 2019 fiscal exercise. In 2021, we paid this interim tax contributions on the basis for our 2020 level of reserve, which was of course much lower than the year ago. On this matter, we took advantage of what we call in true-up, being the fact that we get reimbursed of a bit of excess of tax cash contributions that we paid in H2 2020 and 2020. I mentioned about also this positive gap between D&A and CapEx that will progressively narrow in the next semesters. Last item that I also would like to comment is that in H1, in particular in June, we also took advantage of advanced payments from some customers, which is more H1 versus H2 kind of cut off. That is true that probably some of our customers were also achieving a good level of free cash and decided to pay us in advance, which is also quite positive. You see a number of drivers behind that, some of them driven by really, the action plan that we have put in place. Some of them more linked to the overall commercial dynamism, and the last more on probably more one-off temporary effects. Having all of that in mind, it's true that we wish to have more balance of cash flow between H1 and H2. It also comes to our order intake pattern and our ability to convince some of our customers to grant awards and or to award contracts, not at the very end of the year, but more on a regular basis throughout the years. It is our wish. It is our wishes. We also need to convince our customers, and I get that it will allow us to have this more balanced view from a cash flow standpoint between H1 and H2. You understand from my comment that, of course, we are not the only one to decide when we discuss about timing for contract awards with our clients. Thank you very much. That's very clear. Thank you. Your next question comes from the line of Andrew Humphrey for Morgan Stanley. Please ask your question. Hi. Thank you very much. I've got a couple about DIS, Gemalto, if I may. One is on the banking wins that you highlighted, four out of 10 of the top U.S. banks. Is that happening in the old SafeNet business? I guess in that, I think that was a business that had been maybe slightly neglected. Are you finding it easier to, I guess, explore new opportunities there with potential customers? Secondly, the eSIM revenue opportunity you put up, I think EUR 150 million in a couple of years' time, and then doubling beyond that. Is that incremental, and how should we view that in the context of your overall SIM revenues that continue to remain under pressure? Okay. I shall perhaps start on this one. Yes, I've mentioned that four out of the top 10 U.S. banks have adopted our new software platform to, I would say, manage their data, encrypt and decrypt their data and so on and so forth. It's a clear synergy coming from the acquisition of Gemalto by Thales. It's what I call, and if you remember, I used this expression, the merger within the merger. It's clearly coming from the merger between Vormetric, which was Thales asset, acquired before the acquisition of Gemalto, which was a Thales asset. The merger with SafeNet, that was the Gemalto asset. This merger within the merger between Vormetric and SafeNet led to a very, I would say, important rationalization in terms of product policy, R&D, go-to-market, leading to brand new successes as the one I've mentioned. This is, I would say, very positive looking ahead. On the second part of your question, when I presented the transition between R-SIM to eSIM, it's not only the eSIM, it's also the fact that we are in the business of activation of eSIM. When you subscribe or when you get a subscription, in fact, behind the telco operator, you find Thales which activates your eSIM. Yes, the figures are impressive. The figures are material. It's clearly something which is visible. There is a slight however, with the fact that partially this will cannibalize the R-SIM business, of course. Partially. All in all, you should, I would say, combine The positive effects that are described during the presentation and in this answer, with the fact that the SIM business is, and we know that's not a scope, it's not a surprise, is a declining business. It's a very smart way, I would say, to compensate the decline by being, I would say, also a player in the eSIM, and not only in the eSIM, but as well in the, what I call, the subscription business. By the way, Thales is in a leading position compared to our competitors on this particular part of the business. Yeah, that's very clear. Thank you. Thank you. Your next question comes from the line of Harry Breach from Stifel. Please ask your question. Yes. Good morning, Patrice, Pascal, Bertrand. Thank you for taking my question. Just three, hopefully very quick ones. All quite different. Space. Clearly the selection by Telesat was a major event. I wonder if you can help us to think about the level of bid and proposal activity that Thales Alenia has underway for its more traditional telecom satellites. I'm thinking about more the fixed satellite services, satellites that were previously the larger part of its telecom satellite business, rather than constellations. Secondly, a completely different area. Just looking over at the Middle East. I think in the slide presentation in the appendix, you mention that orders from the Middle East in the first half, I think, were down 40% organically against the first half of 2020. Are there any particular elements going on there? I know in the past, Patrice, you said that the customers there are still keen, still motivated to buy products. Is there any sort of hesitation? Any drivers you can help us to understand? Whether you see that perhaps rebounding later this year or next? Maybe just finally, guys, if I can. Naval Group seems to have made a good rebound, strong rebound in its first half of 2021. Can you give us some sort of feeling about where Naval Group margins or EBIT might get to for the full year? Should we take the first half results for Naval Group, that EUR 34 million, I think, and double it? Could it be better? Thank you. Okay. Thank you. Good morning, Harry. I will answer your first question and Pascal, the two remaining ones. For space it's important to really to understand or to keep in mind that we need to stay on two legs, on both legs, geostationary satellites and constellations. We are very happy to having being selected by Telesat for this mega constellation. At the same time, we cannot bet all our future on constellations. We need to stay a leading player, by the way, in a geostationary telecommunication, sorry, satellite. Hence the need for investment in our brand-new software design satellites named Space Inspire. The main difference between the two, of course, is the size of the opportunities. When we bid for a constellation, it draws or consumes more, bigger resources than for a geostationary satellite. The reward is higher of course, as well. Looking at the magnitude of typically of a Telesat, I would say, future order intake compared to a classical, quote-unquote, classical geostationary order intake amount. Hope it answer your first question on this front. Yes. Good morning, Harry. On the Middle East, you mentioned that you're absolutely right, I mean, 40% drop in order intake in H1 2021 versus H1 2020. We need really, I mean, to bear in mind that of course, order intake can be a bit volatile in particular. The more you dig and you look at the small parameters, the more it can create volatility. It's true that in Q1 2020, you probably have in mind that we book a large size [Nexium] and much above EUR 1 million, a large size contract in Iraq which was not the case in H1 2021. Now, I mean, to take a bit of higher level of perspective, I mean, we keep seeing in the Middle East, I mean, a number of opportunities. We managed to sign, I mean, a very large size project in Q4 2020. In one key country in the Middle East. We keep working on various opportunities in this geography. Having said that, what would happen in Q3? What would happen in Q4? It can be volatile, please do consider that the level of activity from a commercial standpoint in the Middle East is today pretty high in our businesses. Starting with, of course, Defense & Security. Third question about Naval Group. Yes, I mentioned that Naval Group in H1 2021 came back to what was a normative level of profitability, which is more in the 7% plus EBIT margin overall, which results in the level of contributions from a net income perspective that you have seen in our contributions from JVs. I can say that Naval Group is active on many opportunities with a number of ongoing projects today. Naval Group has been affected by the pandemic, particularly in Q2, with some quite significant production disruptions in Q2 last year. This is over, and they came back to a normalized level of production. Patrice, sorry, I think you cut out for a little moment earlier on. Just on the geostationary satellite side, is there a good level of bid and proposal activity on that front, or does it remain still quite slow? Okay,sorry if I've been cut, sorry for that. Definitely the level of activity is strong in terms of geostationary satellites. We are currently bidding on a number of prospects or RFPs across the small world of satellite operators. Definitely this is an active market currently. We need to win, of course, this is a competition. This is clearly an active one at the moment. That's clear. Thank you very much, all. Thank you. Thank you. Your next question comes from the line of Sean Stewart from JPMorgan. Please ask your question. Hi. Good morning, everyone. Thanks for taking my question. I have two questions, actually, on the DIS business. In 2019, when you first consolidated DIS, you flagged to us that H1 is usually weak for that business. In H1 this year, the margin was very strong. I just wondered if there were any one-off there in H1, or do you think that the DIS business can do a sort of double-digit margin in H1 going forward. The second question, you've spoken a lot about the cyber business in your presentation today. Would you say the strategy going forward, are you looking to do more large deals in that area going forward? Thanks a lot. Good morning, David. First, DIS. First, we think that we can really operate this business with a more balanced level of profitability between H1 and H2 than this business has done in the past. First point. I'm not telling you that the level of margin that was reported in H1, which is above our expectations, ahead of our plan. I do think that overall, and this disconnect that you mentioned, as we consolidate this business for the first time, we think we can probably have a more balanced level of profitability between H1 and H2 going forward. Now, there might be, of course, a bit of gap, but not in the magnitude that we have seen in H1 2019, where at that time, the level of profitability was below 5%. Overall also, which is probably the most important part of the answer, is when you compare our 2019 level of profitability for the full year, then our guidance for 2021, it's a gradual but quite significant improvement in terms of level of margin. This is, in my view, what is most important about. [audio distortion] Cyber. Sorry, cyber. Why not? It's clearly a core business for Thales, doing very well. If we can reinforce this cyber activity through acquisition, we'll look at them. Very simply. We need to stop, sorry, all your questions this morning, which show the interest you pay in Thales. Just a few words in terms of conclusion. As you understood, we are ahead of plan on the first six months of 2021, leading us to upgrade our guidance on sales. We continue to execute on our strategy, especially around digital technologies as underlined during the questions. We see plenty of value creation opportunities in the post-COVID-19 world, which opened up many growth areas for us. Together with Pascal, I look forward to seeing you at the upcoming roadshows and conferences. Finally, as noted on slide 22, please mark your calendars for the 5th of October for our ESG Investor Day. Have a good day. Thank you all, and bye-bye. Bye-bye, everyone. Thank you. Bye-bye, all. Thank you, ladies and gentlemen. If you didn't have a chance to ask a question on today's call, please do not hesitate to send your questions to Thales Group investor relations at ir@thales.com. We'll get back to you as soon as possible. Thank you for all participation. You may now disconnect.