The German Ministry of Defence announced on 24 June 2026 that it would terminate the contract for the six-ship F126 programme. Dutch shipyard Damen Schelde Naval Shipbuilding was the prime contractor, while Thales was one of the subcontractors.
Thales had been selected by Damen Schelde Naval Shipbuilding in November 2020 for major combat system work on the programme. Its role covered radars, sensors, combat management and fire control systems, as well as integration of the combat platform.
The company described the German decision to completely halt the programme as a total turnaround. It said it was assessing the consequences of the decision with its project partners and the relevant authorities.
Thales said the planned exceptional charge mainly corresponds to costs already paid to ensure progress on the project. It also includes a conservative estimate of the financial compensation expected to be received.
The group said the charge reflected the particularly atypical nature of the contract. It linked the situation to a worsening of execution difficulties encountered by Damen Schelde Naval Shipbuilding in 2025, which had resulted in a recently degraded financing profile.
Thales said the situation was entirely exceptional compared with its wider defence contract portfolio. Because of its exceptional nature, the charge will have no effect on the group’s adjusted EBIT and adjusted net income.
The charge is expected to reduce net income, group share, by about €350 million in Thales’ first-half 2026 consolidated statements. The company said it would not have any material impact on the group’s free operating cash flow.
The termination is expected to have a limited impact on Thales’ sales. The company put the effect at 0.5% of group sales in 2026 and at less than 1% per year in the following years.
Thales said the F126 programme had an operating margin significantly lower than the group margin. As a result, the termination is expected to have a marginally positive effect on the group’s adjusted EBIT margin.
The company said it would claim all its rights to obtain compensation for work carried out under the project and for the prejudice suffered because of the termination. It also said its defence activities continue to benefit from favourable market momentum, strong visibility and a portfolio of differentiated solutions.
Thales raised several of its 2026 objectives despite the termination of the F126 programme. The group now expects a book-to-bill ratio above 1.10, compared with above 1.0 previously, and a cash conversion rate of 100% to 110%, compared with 95% to 100% before.
Thales also confirmed its 2026 sales and profitability targets. It continues to expect organic sales growth of 6% to 7%, corresponding to sales of €23.3 billion to €23.6 billion, and an adjusted EBIT margin of 12.6% to 12.8%.
