SOURCE: Thomson

July 28, 2005 03:54 ET

Thomson's First Half 2005 IFRS Results

Boulogne -- (MARKET WIRE) -- July 28, 2005 -- Core Business shows growth in revenues and cash-flow at stable margins - in line with Two-Year Plan objectives



- 12 % headline Core Business revenue growth at constant currency



- 11% like-for-like revenue growth, and IFRS EBIT margins for Core Business stable at 6.4% - in line with objectives



- Core Business Free Cash Flow generation at E133m, up strongly on 1H04



- Strong contributions from "growth engines": DVD Services and Set-Top Boxes



- With acquisition of leading in-store digital network operator, PRN, (see separate press release) announced today, key elements of Two-Year Plan in place



- Disposal of Tube business and related charges accelerated into 2Q ahead of schedule, with main activities discontinued. Overall H1 net loss excluding "Discontinued Operations" was E(62) million



Paris, 28 July 2005 - The Board of Directors of Thomson (Euronext Paris: 18453, NYSE :TMS), chaired by Frank Dangeard, met on 26 July 2005 to review and approve the Group's half year 2005 results published today.



"During the first half of 2005, and including the announcements made today, we were able to put in place most of the essential pieces of our Two-Year Plan," said Frank E. Dangeard, Chairman & CEO of Thomson. "In particular, we took the decision to accelerate the exit from Displays and related activities." Commenting specifically on the results, he added: "Our Core Business delivered a strong performance in the first half, with growth in revenues across all Two-Year Plan activities, stable margins and significantly increased free cash-flow. This performance confirms the attractive financial profile of our Core Business."



Full results are disclosed in the unaudited financial statements, which are posted on Thomson's website. All data given in this press release is accounted under IFRS unless otherwise noted, whereas financial information given by Thomson previously was accounted under French GAAP.Differences between the two are material and Thomson has published financial information reconciling previously published French GAAP financial statements to IFRS. References to "EBIT" refer to the IFRS caption of "Profit from Continuing Operations". Since November 2004, Thomson has managed its business between its Core Business Media & Entertainment Divisions and Non-Core Assets in Displays and CE Partnerships. First half results are presented according to this split.



Summary of Core Business consolidated results 1H05 (unaudited(1))


+-------------------------+--------+--------------------+-------+-----------+
|In E million unless      |   1H05 |        1H05        |  1H04 |  % change |
|otherwise stated         |        |                    |       |           |
+-------------------------+--------+--------------------+-------+-----------+
|                         |  Actual|  At cst currency(2)|       |           |
+-------------------------+--------+--------------------+-------+-----------+
|Core Net Sales           |   2,775|            2,852(2)|  2,550|  +11.8%(2)|
+-------------------------+--------+--------------------+-------+-----------+
|o/w Services Division    |   1,069|               1,095|  1,061|   +3.2%(2)|
+-------------------------+--------+--------------------+-------+-----------+
|o/w Systems & Equipment  |   1,427|            1,472(2)|  1,240|  +18.7%(2)|
|Division                 |        |                    |       |           |
+-------------------------+--------+--------------------+-------+-----------+
|o/w Technology Division  |     260|                 266|    246|  + 7.9%(2)|
+-------------------------+--------+--------------------+-------+-----------+
|o/w Corporate Costs      |      19|                  20|      3|         Nm|
+-------------------------+--------+--------------------+-------+-----------+
|Core EBIT                |   176.4|                    |    166|      +6.2%|
+-------------------------+--------+--------------------+-------+-----------+
|Core EBIT Margin (%)     |    6.4%|                    |   6.5%|         Nm|
+-------------------------+--------+--------------------+-------+-----------+
|Pro-forma Net Income (3) |      65|                    |     52|       +25%|
+-------------------------+--------+--------------------+-------+-----------+
|Core Free Cash-Flow (4)  |   132.5|                    |   89.8|     +47.5%|
+-------------------------+--------+--------------------+-------+-----------+
+-------------------------+--------+--------------------+-------+-----------+


(1) 1H05 results are subject to a limited review by Thomson's auditors



(2) At constant currency. The average E/US$ rate for 1H05 was 1.28 (1H04 1.22), with 1H05 Systems & Equipment Division constant currency revenues adjusted for Cable Modems ( E13 million)



(3) Including estimated pro-forma 1H04 financial charges adjusted for first-time application of IAS 32/39 at E75 million



(4) Free Cash-Flow is defined as Cash-Flow from Operations less net capex



Core Business 1H05 highlights



- Revenue growth at constant currency on 2004 base was 11% compared to FY objective of 10%.



- In Services, the strong performance from DVD services, Network Operations Services and good organic growth in Post-production were offset by weaker VHS and film volumes. Cost-cutting and positive mix effect helped improve margins year-on-year (EBIT margin was 6.1% in 1H05 vs 5.3% in 1H04).



- In Systems & Equipment, the solid performance of Set-Top Boxes within Access Platforms & Gateways, and of Broadcast & Networks, was offset by poor performance in Audio/Video products within Connectivity. Margins grew in Set-Top Boxes and were broadly stable in other activities except Audio/Video.



- In Technology, margins for the Division grew nearly 4 pts year-on-year, from 46.0% in 1H04 to 49.9% in 1H05 on the back of an excellent performance in Licensing.



- The Group met its commitment to increase research spending with an additional E20 million invested in Core Research and Product Development within the first half of 2005 (equivalent to 0.7% point of core margin), while maintaining the core margins stable year-on-year.



- Strong cash generation at E133 million, ahead of last year.



- Tax and pro-forma IFRS financial charges were stable.



- Pro-forma net income was E65 million.



Progress on Implementation of the Two-Year Plan



Decision to accelerate the exit from Tubes and related activities (Tubes, Bagneaux and TTE arrangements) in 1H05.



All essential pieces of the Two-Year Plan in place, except in Broadcast. Growth engines, combining DVD & Film Services and Set-Top Boxes, tracking to plan.



New customer wins in Services, for example in DVD and Film, and in Systems & Equipment, leading to increased diversification of clients and activities.



Post-Production, Telecoms and Network Operations Services strategies in place.



Build-up of technology positions in HD-DVD/BD formats and in watermarking. Significant involvement in European programs.



2005 Core Business Outlook



1H05 performance, taken together with new business initiatives and contracts, confirms our Core Business objectives for the Two-Year Plan period. The Group continues to drive for 2005 growth in its Core Business revenues of around 10% at constant currency, compared to the 2004 base level. The mix of growth will change in 2H05 with higher growth coming from the Services Division, given the underlying market dynamics and customer wins. The Systems & Equipment Division will grow more slowly compared to a very strong 2H04 and given the weaker Audio/Video activity. The Core Business is expected to show further progress towards the Two-Year Plan growth objectives and the Group will continue to invest in its R&D for growth in 2006 and beyond.



Closing of Non-Core assets transactions



The sale of Tube plants to Videocon and the TTE transaction are expected to close in 3Q05 and the disposal of Bagneaux in 4Q05. The remaining charges to be booked in 2H05 relate to Bagneaux and are estimated at E30 million.



Group 1H05 results - Group income statement adjusted for 2005 discontinued operations, notably Tubes



Overall Group results reflect previously announced charges for the exit from the Tubes activities, as well as non-cash charges related to the renegotiation of service agreements with TTE. Certain of these activities are classified as "discontinued operations" under IFRS (Anagni and the other assets recently sold to Videocon), whereas some are expected to be treated as discontinued operations on definitive closure of the binding agreements signed in 1H05. However, in order to assist in the assessment of Thomson's Core Business in 1H05, results from all these activities are presented in this press release as part of the Non-Core Business.



Comparison of Non-Core Business sales year-on-year is not meaningful, as some activities are now treated as discontinued operations. Losses from Non-Core Business activities reflect operating losses including those from discontinued operations and exceptional charges related to the exit from these activities.



Financial charges



Thomson applied IAS32/29 for the first time in 2005. Applying IAS32/39 to H104 would have increased H104 financial charges by approximately E50 million. On a like-for-like basis, therefore, financial charges were broadly stable, reflecting the repayment of convertible bonds with a high notional interest rate in January 2005, partially offset by higher interest rates.


+-------------------------+-----------+-------+
|In E million otherwise   |    1H05   |  1H04 |
|stated                   |           |       |
+-------------------------+-----------+-------+
|                         |     Actual|       |
+-------------------------+-----------+-------+
|Reported Group Net Sales |      2,968|  3,376|
+-------------------------+-----------+-------+
|o/w Core Business Net    |      2,775|  2,550|
|Sales                    |           |       |
+-------------------------+-----------+-------+
|o/w Non-Core Business Net|        193|    826|
|Sales                    |           |       |
+-------------------------+-----------+-------+
|Reported EBIT            |         65|     97|
+-------------------------+-----------+-------+
|o/w Non-Core Business    |  (112) (1)|   (70)|
|EBIT(1)                  |           |       |
+-------------------------+-----------+-------+
|Financial Result         |       (71)|   (23)|
+-------------------------+-----------+-------+
|Income Tax               |       (49)|   (39)|
+-------------------------+-----------+-------+
|Profit from continued    |       (62)|     34|
|operations after tax and |           |       |
|financial cost (2)       |           |       |
+-------------------------+-----------+-------+
|Discontinued             |     (400) |  (225)|
|operations(3)            |           |       |
+-------------------------+-----------+-------+
|Group consolidated net   |      (462)|  (191)|
|income(3)                |           |       |
+-------------------------+-----------+-------+


(1) Includes E44 million of restructuring of plants to be discontinued



(2) Includes results from equity consolidated affiliates



(3) Excludes minority interests



CORE BUSINESS DIVISIONAL REVIEW



Adjusted sales at constant currency grew by 12%. Currency movements reduced core business sales during the half by E64 million. Thomson's Core Businesses reported net sales for 1H05 of E2,775 million (1H04, E2,550 million). Acquisitions made in 2005 added E25 million to net sales, all in the Systems & Equipment Division. All divisions reported like-for-like growth in revenues at constant currency.



Cash-Flow from operations before financial charges and tax increased to E219 million in 1H05 versus E176 million in 1H04, predominantly due to a strong increase in operating cash-flow as well as moderate restructuring cash costs compared to the same period last year.



Services



1H05 sales reached E1,069 million (1H04, E1,061 million). Currency movements reduced sales during the quarter by E26 million. Sales excluding currency movements grew by 3%, or 1% including currency movements, reflecting 7.7% growth in 1Q and a 1.3% decline in 2Q.



Home Entertainment Services



The replication of DVD units grew by 48 million units (+9% year-on-year) to approximately 556 million units. 2Q unit growth was 9%, in line with the 1Q level. This positive performance reflects particularly good growth in Europe, some market share gains (Thomson's growth is estimated to have outperformed market growth), and good catalog volumes. DVD releases included National Treasure, Cinderella, Ray in the US, The Incredibles, Shark Tale, Bridget Jones - Edge of Reason in Europe, as well as worldwide. VHS duplication fell 65% year-on-year to approximately 29 million units, which materially reduced the Division's overall growth rate. The split of DVD to VHS units now stands at 95%/5% versus 88%/12% a year ago.



Film Services



Film Services had a weak half. Film footage reached 2.3bn feet in 1H05 against 2.5bn feet in 1H04. Q2 was slightly stronger than Q1. Volumes were impacted by a lower overall number of film releases in the half. Film releases included Batman Begins, War of the Worlds, Kingdom of Heaven, Madagascar, and Cinderella Man.



Post-Production



The Post-Production business grew organically in the first half. The service set offered by the Group broadened to include expansion in broadcast post-production as well as in international versioning, on top of the consolidation of its expertise in Digital Intermediates. Major studio releases supported by Thomson included Kingdom of Heaven, Kinky Boots Factory and The Fantastic Four as well as War of the Worlds. In addition, Thomson targeted a broader Media & Entertainment client base for its post-production activities with a particular emphasis on TV and advertising content. The activity also maintained its growth in the games segment with the first ties being concluded with customers in interactive gaming services. The visual effects activities centered around The Moving Picture Company performed in line with expectations.



Network Operations Services and Electronic Content Distribution Services



The Network Operations Services business unit recorded strong growth in the half. Both Cinema advertising and playout services grew during the half. The US digital cinema advertising roll-out is underway and progressing as planned with over 500 screens equiped at end-June. After the successful integration of Corinthian TV (UK), the Group is expanding geographically in the playout services activity through the recent acquisition of a controlling stake in VCF Thématiques, a leading service provider on the French market.



Profitability and margins



The Services Division 1H05 EBIT reached E65 million, compared to E57 million last year. The EBIT margin increased from 5.3% to 6.1% in 1H05. This positive margin evolution reflects DVD unit growth, higher contribution from post-production and cost-cutting measures, offsetting the weaker volumes in VHS and Film, start-up costs in Electronic Content Distribution Services, and raw materials costs.



Cash-Flow



The Services Division Free Cash-Flow before interest and taxes reached E117 million against E100 million in 1H04, mostly attributable to improved operational performance, the moderate advances paid on contracts and a slight improvement in the net working capital variation.



Systems & Equipment



Adjusted 1H05 sales reached E1,427 million at constant currency (1H04, E1,240 million). Currency movements reduced sales during the quarter by E32 million. Sales excluding currency movements grew by 18%, or 15% including currency movements, reflecting 27% growth in 1Q and over 10% growth in 2Q. The integration of Inventel and Cirpack added E25 million to net sales during the half.



Access Platforms & Gateways



Revenues grew very strongly in the half and were again very strong in 2Q. Overall, Thomson sold approximately 6 million decoders during the half, compared to 3 million last year, including 2.7 million in 2Q05 compared to 1.8 million in 2Q04. This strong growth was underpinned by additional volumes from DirecTV under the supply agreement signed in June 2004. In addition, however, the business unit significantly expanded its footprint on other markets, gaining new customers and market shares in Europe (including in cable and Free-to-Air) and notably in the Asia Pacific region. A more comprehensive range of devices was also available, although still a relatively small component of volumes.



The business unit significantly expanded its offering to telecom operators seeking to broaden their customer offerings particularly to include video services. The acquisitions of Inventel and Cirpack were completed in the second quarter and enable Thomson to offer a range of video, voice and data boxes, related implementation and command and control software, devices and skills. In particular, Thomson further expanded its expertise in Triple-Play and developed the first integrated Triple-Play cable box. These developments enabled Thomson to expand its market shares in these growing markets.



Broadcast & Networks



The business unit continued to gain market shares, notably in networks and systems integration during the half. Revenue trends were slightly slower in 2Q than in 1Q but by contrast the order backlog had significantly increased by the end of the half compared to year-end 2004.



Connectivity



Both Telephony and Home Networking Accessories had satisfactory half years and improving 2Q revenues on a constant currency basis. The business models and product roadmaps in these two activities is being progressively integrated into the operator-led model on which the Systems & Equipment Division is based. By contrast, the Audio/Video activities had a poor 2Q and 1H below expectations and targets.



Profitability and margins



1H05 EBIT for the Systems & Equipment Division reached E23 million, compared to E33 million last year. The contribution from Access Platforms & Gateways increased significantly during the half, with those from Broadcast and Telephony/Home Networking Accessories were stable. The Group invested significantly more in 1H05 in research and development expenses, notably in set-top boxes and telecoms products and services. The contribution from Audio/Video declined given its poor sales performance.



Cash-Flow



The Systems & Equipment Division Free Cash-Flow before interest and taxes reached E83 million against E(6) million in 1H04, mostly driven by a strong contribution of working capital in Access Platforms & Gateways.



Technology



1H05 sales reached E260 million (1H04, E246 million). Currency movements reduced sales during the quarter by E6 million. Sales excluding currency impacts grew by 8%, being (10)% in 1Q and 30% in 2Q (mostly linked to IFRS treatments of 1Q04 and 2Q04 as already highlighted on previous presentations). Perimeter effects were immaterial.



Licensing



Revenues in 1H05 were E212 million (first half 2004 E191 million under IFRS), an increase of 11.5% compared to 1H04. This strong performance reflects resilience in the main core digital licensing programs, as well as success in launching new licensing programs, for example around digital TV.



Software & Technology Solutions / Silicon Solutions



In Software & Technology Solutions, the Group strengthened its position in content security and anti-piracy technologies and intellectual property through complementary investments in Mediasec (key watermarking patents) and Nextamp (video watermarking solutions for applications such as post-production masters, dailies, pre-release material, broadcast, VOD and digital cinema.)



Silicon Solutions recorded internal and external sales of E34 million and continues to invest to strengthen and broaden its silicon design offering to in-house and external customers.



Research



The Group met its commitment to increased spending on research and development in 1H05. Across the Group, R&D spending increased by E20 million of which E4 million in core research within the Technology Division. As a whole, R&D represented 4.4% of total core business sales in 1H05 compared to 4.2% in 1H04.



Profitability and margins



1H05 EBIT reached E130 million, compared to E113 million last year. EBIT margin improved to 49.9% from 46.0% last year despite the significant increase in R&D spend. This improvement is due to a strong performance in licensing.



Cash-Flow



The Technology Division's Free Cash-Flow before interest and taxes reached E87 million in 1H05 versus E150 million in 1H04.



CORPORATE COSTS, FINANCIAL CHARGES AND TAX



Corporate



Although increasing compared to 1H04, Corporate costs were stable, with the last 12 months bearing the costs of compliance with IFRS changeover and Sarbanes Oxley compliance.



Financial charges



Thomson applied IAS32/29 for the first time in 2005. Applying IAS32/39 to 1H04 would have increased 1H04 financial charges by approximately E50 million. On a like-for-like basis, therefore, financial charges were broadly stable, reflecting the repayment of convertible bonds with a high notional interest rate in January 2005, partially offset by higher interest rates.



Tax



Tax charges amounted to E48 million in 1H05 versus E39 million in 1H04.



NON-CORE BUSINESS COMMENTS



Displays process completed



During the period under review, the Group finalized ahead of schedule the execution of one of its strategic priorities, namely the disposal of its Tubes and related activities.



Following the effective transfer of its CRT plant in Italy at Anagni at the end of February 2005, the group further announced on 28 June the sale of its remaining Tube assets covering its four major production sites (Poland, Mexico and in China) and the associated R&D and central functions to the major Indian consumer electronics and energy group, Videocon. Completion of this transaction, as previously stated, is expected within the course of 3Q05.



These activities are classified as "discontinued" under IFRS for 1H05.



Thomson also signed agreements under which the Spanish glass group Rioglass will take over its glass CRT glass activity at Bagneaux-sur-Loing, France. Charges relating to this activity are included in "Activities to be discontinued" within continuing operations in 1H05, while operating results of this activity are also within continuing operations in 1H05. Bagneaux is expected to be classified as a discontinued activity when the related transaction is closed, but is classified as continuing under IFRS for 1H05.



CE partnerships - TTE renegotiation



Thomson signed definitive agreements in July for the transfer of its TV marketing and sales organization to TTE, for changes in the subcontracting arrangements at Angers and for increases to future trademark license revenues. Certain non-cash charges relating to these changes have been taken to the P&L in 1H05.



Non-Core Business results



1H05 revenues are not comparable with prior periods. Reported 1H05 revenues of the Non-Core business were E193 million, but perimeter changes are material, including TV deconsolidation and discontinuation of a substantial part of operations in Tubes. Underlying revenues in Tubes declined, reflecting difficult markets.



Total losses (classified under "discontinued" and "continuing" operations and including exceptional charges related to the exit from these activities) for the Non-Core Business were E517 million. This reflects notably operating losses in Tubes plus exceptional charges relating to the Tubes transactions noted above and the TTE renegotiation as well as deal costs.



Cash costs of the Non-Core Business



Most of the charges recorded in the EBIT losses are of a non-cash nature, reflecting asset write-downs. Non-Core free cash-flow amounted to around E(230) million, whereas cash costs associated with the exit of the Tubes business remained in line with the Group's previously defined estimated cash expectations.



Net Result - pro-forma and as reported



The pro-forma net result for the Core Business on a full-year tax and financed basis is estimated at E65 million. The Group net result before discontinued operations was E(62) million.



The Group consolidated net result, including the negative impact of the Non-Core Business was E(462) million.



GROUP BALANCE SHEET



The Core Business contributed E219 million of Free Cash Flow before Interest and Taxes in 1H05. The Non-Core Business used E229 of Free Cash Flow before Interest and Taxes in the half. Total tax and interest payments used E88 million of cash in the half.



Capex spending on the core business remained stable and is on a downward trend on a like-for- like basis. Capex spending for tangible assets amounted to E108 million in 1H05.



The Group also limited capital expenditures on the Non-Core Business to E29 million compared to E60 million in 1H04.



Acquisitions totaled E240 million in the first half of 2005, compared with E664 million in 2004: the most significant items were the payment of the final Technicolor promissory note, and the acquisitions of Inventel and Cirpack in France, which were acquired partly in cash and partly in shares. The net cash used by investing activities include the impact of Thomson's recapitalization of the Italian Videocolor subsidiary (E103 million).



Share buyback



As of 30 June, Thomson had repurchased a net total of E89 million of shares pursuant to its share buyback programme, which was launched on 16 September 2004.



Debt repayments



During the semester, the group changed significantly its debt profile with the repayment of the majority of the OCEANE 2008 for E587m, the repayment of the Mexicali lease for E174 million as well as the last installment of the Technicolor debt for E86 million. Debt was repaid out of cash and increase in short term borrowings via French commercial paper program. As a consequence the cash balance amounted to E717 million at the end of June 2005 versus E1,906 million at the end of December 2004.



Accordingly, Net Debt amounted to E1,270 million at the end of June 2005 versus E679 million at the end of December 2004.



CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS


+---------------+------------------+--+---------------+--+--------------------+
|               |  Six months ended|  |               |  |                    |
+---------------+------------------+--+---------------+--+--------------------+
|(E in millions)|     June 30, 2005|  |  June 30, 2004|  |Year ended December |
|               |                  |  |               |  |31, 2004            |
+---------------+------------------+--+---------------+--+--------------------+
|               |         unaudited|  |      unaudited|  |             audited|
+---------------+------------------+--+---------------+--+--------------------+
+---------------+------------------+--+---------------+--+--------------------+

+-++
| ||
+-++
| ||
| ||
+-++
| ||
+-++
+-++

+-------------------------+--------------------+----------------+
|Continuing operations:   |                    |                |
+-------------------------+--------------------+----------------+
|Revenues                 |               2,968|                |
+-------------------------+--------------------+----------------+
|Cost of sales            |             (2,281)|                |
+-------------------------+--------------------+----------------+
|Gross margin             |                 687|                |
+-------------------------+--------------------+----------------+
|Selling, general,        |               (451)|                |
|administrative expenses  |                    |                |
|and others               |                    |                |
+-------------------------+--------------------+----------------+
|Research and development |               (127)|                |
|expense                  |                    |                |
+-------------------------+--------------------+----------------+
|Restructuring of plants  |                (44)|                |
|to be discontinued       |                    |                |
+-------------------------+--------------------+----------------+
|Profit from continuing   |                  65|                |
|operations and before tax|                    |                |
|and finance costs        |                    |                |
+-------------------------+--------------------+----------------+
|Interest expense         |                (33)|                |
+-------------------------+--------------------+----------------+
|Other financial income   |                (38)|                |
|(expense)                |                    |                |
+-------------------------+--------------------+----------------+
|Financial costs          |                (71)|                |
+-------------------------+--------------------+----------------+
|Loss from associates     |                 (7)|                |
+-------------------------+--------------------+----------------+
|Income tax               |                (49)|                |
+-------------------------+--------------------+----------------+
|Profit (loss) from       |                (62)|                |
|continuing operations    |                    |                |
+-------------------------+--------------------+----------------+
|Discontinued operations: |                    |                |
+-------------------------+--------------------+----------------+
|Profit (loss) from       |               (409)|                |
|discontinued operations  |                    |                |
+-------------------------+--------------------+----------------+
|Net income (loss)        |               (471)|                |
+-------------------------+--------------------+----------------+
|Attributable to          |                    |                |
+-------------------------+--------------------+----------------+
|Equity Holders           |               (462)|                |
+-------------------------+--------------------+----------------+
|Minority interests       |                 (9)|                |
+-------------------------+--------------------+----------------+
|                         |                    |Six months ended|
+-------------------------+--------------------+----------------+
|                         |                    |                |
+-------------------------+--------------------+----------------+
|                         |                    |Six months ended|
+-------------------------+--------------------+----------------+
|                         |                    |                |
+-------------------------+--------------------+----------------+
|                         |(in euro, except    |                |
|                         |number of shares)   |                |
+-------------------------+--------------------+----------------+
|Weighted average number  |         270,017,384|                |
|of shares outstanding –  |                    |                |
|basic net of treasury    |                    |                |
|stock (*)                |                    |                |
+-------------------------+--------------------+----------------+
|Earnings per share from  |                    |                |
|continuing operations    |                    |                |
|attributable to the      |                    |                |
|equity holders of the    |                    |                |
|Group                    |                    |                |
+-------------------------+--------------------+----------------+
|- basic                  |              (0.23)|                |
+-------------------------+--------------------+----------------+
|- diluted                |              (0.23)|                |
+-------------------------+--------------------+----------------+
|Earnings per share from  |                    |                |
|discontinued operations  |                    |                |
|attributable to the      |                    |                |
|equity holders of the    |                    |                |
|Group                    |                    |                |
+-------------------------+--------------------+----------------+
|- basic                  |              (1.48)|                |
+-------------------------+--------------------+----------------+
|- diluted                |              (1.48)|                |
+-------------------------+--------------------+----------------+

+---------------+--+---------------+
|               |  |               |
+---------------+--+---------------+
|          3,376|  |          6,986|
+---------------+--+---------------+
|        (2,602)|  |        (5,322)|
+---------------+--+---------------+
|            774|  |          1,664|
+---------------+--+---------------+
|          (540)|  |        (1,032)|
|               |  |               |
|               |  |               |
+---------------+--+---------------+
|          (137)|  |          (235)|
|               |  |               |
+---------------+--+---------------+
|              -|  |              -|
|               |  |               |
+---------------+--+---------------+
|             97|  |            397|
|               |  |               |
|               |  |               |
+---------------+--+---------------+
|           (5) |  |           (19)|
+---------------+--+---------------+
|          (18) |  |           (26)|
|               |  |               |
+---------------+--+---------------+
|           (23)|  |           (45)|
+---------------+--+---------------+
|            (1)|  |           (21)|
+---------------+--+---------------+
|           (39)|  |           (86)|
+---------------+--+---------------+
|             34|  |            245|
|               |  |               |
+---------------+--+---------------+
|               |  |               |
+---------------+--+---------------+
|          (224)|  |          (795)|
|               |  |               |
+---------------+--+---------------+
|          (190)|  |          (550)|
+---------------+--+---------------+
|               |  |               |
+---------------+--+---------------+
|          (191)|  |          (551)|
+---------------+--+---------------+
|              1|  |              1|
+---------------+--+---------------+
|  June 30, 2005|  |               |
+---------------+--+---------------+
|     Unaudited |  |               |
+---------------+--+---------------+
|  June 30, 2005|  |               |
+---------------+--+---------------+
|     Unaudited |  |               |
+---------------+--+---------------+
|               |  |               |
|               |  |               |
+---------------+--+---------------+
|    274,240,438|  |    273,646,869|
|               |  |               |
|               |  |               |
|               |  |               |
+---------------+--+---------------+
|               |  |               |
|               |  |               |
|               |  |               |
|               |  |               |
|               |  |               |
+---------------+--+---------------+
|           0.13|  |           0.90|
+---------------+--+---------------+
|           0.13|  |           0.85|
+---------------+--+---------------+
|               |  |               |
|               |  |               |
|               |  |               |
|               |  |               |
|               |  |               |
+---------------+--+---------------+
|         (0.82)|  |         (2.91)|
+---------------+--+---------------+
|         (0.82)|  |         (2.91)|
+---------------+--+---------------+


CONSOLIDATED INTERIM BALANCE SHEETS


+-------------------------+--+--------------------+--+--+--------------------+-+
|(E in millions)          |  | As of June 30, 2005|  |  |As of December 31,  | |
|                         |  |                    |  |  |2004                | |
+-------------------------+--+--------------------+--+--+--------------------+-+
|                         |  |unaudited           |  |  |             Audited| |
+-------------------------+--+--------------------+--+--+--------------------+-+
|ASSETS:                  |  |                    |  |  |                    | |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Non-current assets :     |  |                    |  |  |                    | |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Property, plant and      |  |                 877|  |  |               1,051| |
|equipment                |  |                    |  |  |                    | |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Goodwill                 |  |               1,505|  |  |               1,178| |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Intangible assets        |  |               1,079|  |  |                 924| |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Investment in associates |  |                 283|  |  |                 260| |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Investment in other      |  |                 103|  |  |                  77| |
|companies                |  |                    |  |  |                    | |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Available-for-sale       |  |                  76|  |  |                  36| |
|financial assets         |  |                    |  |  |                    | |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Derivative financial     |  |                   -|  |  |                   -| |
|instruments              |  |                    |  |  |                    | |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Other financial assets   |  |                 145|  |  |                 140| |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Contract advances        |  |                 151|  |  |                 179| |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Deferred tax assets      |  |                 296|  |  |                 306| |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Total non-current assets |  |               4,515|  |  |               4,151| |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Current assets :         |  |                    |  |  |                    | |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Inventories              |  |                 504|  |  |                 568| |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Trade accounts and notes |  |               1,039|  |  |               1,180| |
|receivable               |  |                    |  |  |                    | |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Current accounts with    |  |                 210|  |  |                 183| |
|affiliated companies     |  |                    |  |  |                    | |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Derivative financial     |  |                   9|  |  |                   -| |
|instruments              |  |                    |  |  |                    | |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Other receivables        |  |                 535|  |  |                 615| |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Cash and cash equivalents|  |                 717|  |  |               1,906| |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Total current assets     |  |               3,014|  |  |               4,452| |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Assets classified as held|  |                 438|  |  |                   -| |
|for sale                 |  |                    |  |  |                    | |
+-------------------------+--+--------------------+--+--+--------------------+-+
|Total assets             |  |               7,967|  |  |               8,603| |
+-------------------------+--+--------------------+--+--+--------------------+-+
+-------------------------+--+--------------------+--+--+--------------------+-+

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CONSOLIDATED INTERIM BALANCE SHEETS


+-------------------------+--+--------------------+--+--------------------+-+
|(E in millions)          |  | As of June 30, 2005|  |As of December 31,  | |
|                         |  |                    |  |2004                | |
+-------------------------+--+--------------------+--+--------------------+-+
|                         |  |Unaudited           |  |             Audited| |
+-------------------------+--+--------------------+--+--------------------+-+
|LIABILITIES,             |  |                    |  |                    | |
|SHAREHOLDERS’ EQUITY AND |  |                    |  |                    | |
|MINORITY INTERESTS       |  |                    |  |                    | |
+-------------------------+--+--------------------+--+--------------------+-+
|Shareholders’ equity:    |  |                    |  |                    | |
+-------------------------+--+--------------------+--+--------------------+-+
|Common stock (273,308,032|  |               1,025|  |               1,025| |
|shares, nominal value    |  |                    |  |                    | |
|E3.75 per share at June  |  |                    |  |                    | |
|30, 2005 and December 31,|  |                    |  |                    | |
|2004)                    |  |                    |  |                    | |
+-------------------------+--+--------------------+--+--------------------+-+
|Treasury shares          |  |                (48)|  |                (55)| |
+-------------------------+--+--------------------+--+--------------------+-+
|Additional paid in       |  |               1,765|  |               1,751| |
|capital                  |  |                    |  |                    | |
+-------------------------+--+--------------------+--+--------------------+-+
|Fair value adjustments   |  |                  20|  |                (23)| |
|and other reserves       |  |                    |  |                    | |
+-------------------------+--+--------------------+--+--------------------+-+
|Retained earnings        |  |               (647)|  |               (117)| |
+-------------------------+--+--------------------+--+--------------------+-+
|Cumulative translation   |  |                  60|  |                (98)| |
|adjustment               |  |                    |  |                    | |
+-------------------------+--+--------------------+--+--------------------+-+
|Shareholders’ equity     |  |               2,175|  |               2,483| |
+-------------------------+--+--------------------+--+--------------------+-+
|Minority interests       |  |                   1|  |                  20| |
+-------------------------+--+--------------------+--+--------------------+-+
|Total equity             |  |               2,176|  |               2,503| |
+-------------------------+--+--------------------+--+--------------------+-+
|Non-current liabilities: |  |                    |  |                    | |
+-------------------------+--+--------------------+--+--------------------+-+
|Borrowings               |  |               1,030|  |               1,597| |
+-------------------------+--+--------------------+--+--------------------+-+
|Reserve for              |  |                 805|  |                 785| |
|post-employment benefits |  |                    |  |                    | |
+-------------------------+--+--------------------+--+--------------------+-+
|Other provision          |  |                 154|  |                  55| |
+-------------------------+--+--------------------+--+--------------------+-+
|Deferred tax liabilities |  |                  39|  |                  36| |
+-------------------------+--+--------------------+--+--------------------+-+
|Other non-current        |  |                 129|  |                 129| |
|liabilities              |  |                    |  |                    | |
+-------------------------+--+--------------------+--+--------------------+-+
|Total non-current        |  |               2,157|  |               2,602| |
|liabilities              |  |                    |  |                    | |
+-------------------------+--+--------------------+--+--------------------+-+
|Current liabilities :    |  |                    |  |                    | |
+-------------------------+--+--------------------+--+--------------------+-+
|Borrowings               |  |                 983|  |                 904| |
+-------------------------+--+--------------------+--+--------------------+-+
|Derivative financial     |  |                 109|  |                   -| |
|instruments              |  |                    |  |                    | |
+-------------------------+--+--------------------+--+--------------------+-+
|Reserve for              |  |                  70|  |                  65| |
|post-employment benefits |  |                    |  |                    | |
+-------------------------+--+--------------------+--+--------------------+-+
|Restructuring provisions |  |                  84|  |                  75| |
+-------------------------+--+--------------------+--+--------------------+-+
|Other provision          |  |                 122|  |                 120| |
+-------------------------+--+--------------------+--+--------------------+-+
|Trade accounts and notes |  |               1,047|  |               1,226| |
|payable                  |  |                    |  |                    | |
+-------------------------+--+--------------------+--+--------------------+-+
|Accrued employee expenses|  |                 155|  |                 165| |
+-------------------------+--+--------------------+--+--------------------+-+
|Income tax payable       |  |                  51|  |                  60| |
+-------------------------+--+--------------------+--+--------------------+-+
|Other creditors and      |  |                 732|  |                 799| |
|accrued liabilities      |  |                    |  |                    | |
+-------------------------+--+--------------------+--+--------------------+-+
|Debt related to          |  |                   -|  |                  84| |
|Technicolor acquisition  |  |                    |  |                    | |
+-------------------------+--+--------------------+--+--------------------+-+
|Total current liabilities|  |               3,353|  |               3,498| |
+-------------------------+--+--------------------+--+--------------------+-+
|Liabilities directly     |  |                 281|  |                   -| |
|associated with assets   |  |                    |  |                    | |
|classified as held for   |  |                    |  |                    | |
|sale                     |  |                    |  |                    | |
+-------------------------+--+--------------------+--+--------------------+-+
|Total liabilities,       |  |               7,967|  |               8,603| |
|shareholders’ equity and |  |                    |  |                    | |
|minority interests       |  |                    |  |                    | |
+-------------------------+--+--------------------+--+--------------------+-+
+-------------------------+--+--------------------+--+--------------------+-+


CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(provisional)


+-------------------------+----------------+--+--------------------+
|(E in millions)          |  As of June 30,|  |Year ended December |
|                         |                |  |31, 2004            |
+-------------------------+----------------+--+--------------------+
|                         |            2005|  |           Unaudited|
+-------------------------+----------------+--+--------------------+
|                         |       unaudited|  |                    |
+-------------------------+----------------+--+--------------------+
|Cash flows from operating|                |  |                    |
|activities:              |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Cash generated from      |             172|  |                 591|
|operations               |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Interest paid            |            (53)|  |                (47)|
+-------------------------+----------------+--+--------------------+
|Interest received        |              10|  |                  10|
+-------------------------+----------------+--+--------------------+
|Dividend received        |               -|  |                   -|
+-------------------------+----------------+--+--------------------+
|Income tax paid          |            (49)|  |               (124)|
+-------------------------+----------------+--+--------------------+
|Net cash (used in) /     |              80|  |                 430|
|generated from operating |                |  |                    |
|activities               |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Cash flows from investing|                |  |                    |
|activities:              |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Acquisition of           |           (240)|  |               (664)|
|subsidiaries, associates |                |  |                    |
|and investment, net of   |                |  |                    |
|cash acquired            |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Proceeds from sale of    |           (127)|  |                  61|
|investment in other      |                |  |                    |
|companies                |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Purchases of property,   |           (137)|  |               (309)|
|plant and equipment (PPE)|                |  |                    |
+-------------------------+----------------+--+--------------------+
|Proceeds from sale of PPE|               4|  |                  49|
+-------------------------+----------------+--+--------------------+
|Purchases of intangible  |            (53)|  |                (68)|
|assets                   |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Proceeds from sale of    |               5|  |                   -|
|intangible assets        |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Loans granted to related |            (22)|  |                   -|
|parties                  |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Net cash (used in) /     |           (570)|  |               (931)|
|generated from investing |                |  |                    |
|activities               |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Cash flows from financing|                |  |                    |
|activities:              |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Proceeds from issuance of|               -|  |                   -|
|ordinary shares          |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Purchase of treasury     |            (89)|  |                (58)|
|shares                   |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Proceeds from issuance of|               -|  |                 403|
|convertible bond         |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Proceeds from borrowings |             258|  |                 274|
+-------------------------+----------------+--+--------------------+
|Repayments of borrowings |           (806)|  |               (540)|
+-------------------------+----------------+--+--------------------+
|Dividends paid to        |            (77)|  |                (71)|
|Company’s shareholders   |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Dividends paid to        |             (1)|  |                 (3)|
|minority interests       |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Net cash (used in) /     |           (715)|  |                   5|
|generated from financing |                |  |                    |
|activities               |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Net (decrease)/increase  |         (1,205)|  |               (496)|
|in cash and bank         |                |  |                    |
|overdrafts:              |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Cash and bank overdrafts |           1,906|  |               2,383|
|at beginning of period   |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Exchange gains/(losses)  |              16|  |                  19|
|on cash and bank         |                |  |                    |
|overdrafts               |                |  |                    |
+-------------------------+----------------+--+--------------------+
|Cash and bank overdrafts |             717|  |               1,906|
|at end of period         |                |  |                    |
+-------------------------+----------------+--+--------------------+


******



Certain statements in this press release, including any discussion of management expectations for future periods, constitute "forward-looking statements" within the meaning of the "safe harbor" of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management's current expectations and beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements due to changes in global economic and business conditions and regulatory factors. More detailed information on the potential factors that could affect the financial results of Thomson is contained in Thomson's filings with the U.S. Securities and Exchange Commission.



About Thomson - Partner to the Media & Entertainment Industries



Thomson (Euronext Paris: 18453; NYSE: TMS) provides services, systems and technology to help its Media & Entertainment clients - content creators, content distributors and users of its technology - realize their business goals and optimize their performance in a rapidly changing technology environment. The Group is the preferred partner to the Media & Entertainment Industries through its Technicolor, Grass Valley, RCA and Thomson brands. For more information: www.thomson.net.


+--------------------+-------------------+--------------------+
|   Press Relations  |                   |                    |
+--------------------+-------------------+--------------------+
|  Martine Esquirou  |  +33 1 41 86 58 51|martine.esquirou@tho|
|                    |                   |mson.net            |
+--------------------+-------------------+--------------------+
|  Julie Dardelet    |  +33 1 41 86 65 24|julie.dardelet@thoms|
|                    |                   |on.net              |
+--------------------+-------------------+--------------------+
|  Investor Relations|                   |                    |
+--------------------+-------------------+--------------------+
|  Séverine Camp     |  +33 1 41 86 57 23|severine.camp@thomso|
|                    |                   |n.net               |
+--------------------+-------------------+--------------------+
|  David Schilansky  |  +33 1 41 86 52 38|david.schilansky@tho|
|                    |                   |mson.net            |
+--------------------+-------------------+--------------------+


Attachements to the press release is available on http://www.companynewsgroup.com

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