Hensoldt Ag Unsp/Adr

Ladies and gentlemen, welcome to the preliminary full year 2024 analyst call. I am Shari, the chorus call operator. I would like to remind you that all participants will be listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Veronica Andres, Head of Investor Relations. Please go ahead.

Good afternoon, everybody, and welcome to Hensoldt's full year 2024 preliminary results call. Thank you all for joining us today. I'm Veronica Andres, Head of Investor Relations at Hensoldt, and with me are our CEO and Oliver Dörre and our CFO, Christian Ladona. Oliver and Christian will guide you through this presentation today, which, as always, is followed by a Q&A session. And with that, I hand over to you, Oliver.

Thank you, Veronika, and a warm and cordial welcome to our valued investors and the analysts covering the hands-on stock. In this first part of the presentation, I will give you an overview of the many business and strategic milestones that we have achieved in 2024 and that have laid the foundation for us to deliver on and above our guidance. Christian will then lead you through the details of the financial section before I will dive deeper into the current strategic and political landscape that will shape our growth for the next decade. But first things first, let's have a look at our financial highlights 2024. Our book to bill has further improved to 1.3 times. Our order intake in 2024 exceeded our expectations and is a testament to a significant and sustained market growth driven by robust demand to enhance defense capabilities in Germany, in Europe, and around the globe. It is important to note that We see structural growth across all divisions, including the business of ESG that we have integrated now into our multi-domain solutions division at the beginning of the year. Revenues came in at 2.24 billion euro due to significant market dynamics, especially in the last quarter of 2024. Profitability continues to be benchmarked, reaching a 19.4% adjusted EBITDA margin before pass-through, underlining the strength of our pure play defense electronics business model. Cash conversion was also excellent with an adjusted free cash flow of €249 million, allowing us to de-lever ahead of guidance. In summary, our 2024 figures show that our investment case remains exceptionally strong. Market growth is significant and sustainable. Our technology stack is ready for the upcoming era of software-defined defense. Political support in Germany remains strong. Internationalization is picking up pace. And the Henselt Management is fully committed to take this company from great to excellent and to continue delivering on our promises. You may remember this slide from our Capital Markets Day last year in December. It charts our key strategic initiatives launched in 2024, and I'm proud to report that we have achieved significant milestones in all of these initiatives. We are making great strides in operational excellence and have significantly ramped up our production both in the sensors and the optronics segment. We are aware that scaling and industrializing production remains a complex undertaking and we put good portions of our management attention to this topic. To further grow with focus, both domestically and internationally, we have adapted our sales and business development setup and will implement a strong key account structure around our main governmental industrial customers by mid of this year. Digitalization stays high up on our agenda with a clear roadmap to become a truly digital company in line with our ambition to pioneer software-defined defense. To this end, we have initiated a number of digital initiatives and we are closely monitoring our ERP transformation which is on track. The integration of ESG was completed only nine months after closing with the rollout of the Henshaw brand to all ESG sites in January of this year. The need to properly integrate the business of ESG triggered our new divisional setup, focusing on the three key pillars of our business, products, solutions, and services. We have completed this reorganization by end of last year and went live on 1st of January 2025, establishing a cornerstone for sustainable and accelerated growth in the years to come. And we have set our sights on the future of Ensold, establishing a new growth formula and four strategic axes of our North Star vision, which we presented to you in detail at our Capital Markets Day in December. In summary, I'm proud to report that we have advanced on all our strategic initiatives in the past 12 months, and I would like to take the opportunity and thank the teams for driving all these initiatives in addition to our ongoing strong operational business. As a result, our path towards Hensel 2.0 is fully on track, and we intend to finalize this transformation in the course of the year. Let me circle back for just a minute to recap on the four strategic axes of our Northstar vision. Northstar has been developed considering the most critical expectations from our Hensoldt customers, shareholders, and employees. Guided by Northstar, Hensoldt is transforming to take on new responsibilities as reliable industrial champion, pioneer of software-defined defense, a mission operations partner, and becoming the German champion and European challenger with global reach. The North Star Strategic Vision guides us through our next stage of growth. It is built around four strategic axes. It starts with our commitment to grow with focus. We will continue to deliver sustainable and profitable growth in Germany, Europe, and selected international markets as the leading platform independent defense electronics partners. The foundation of this focus growth is to deliver at scale. We will sustain our activities to achieve the step change in operational excellence to meet volume and performance requirements. Moving ahead, our ambition is to pioneer software-defined defense. We will digitize and enhance platform-independent core products, become an integrator of multi-domain data-enabled solutions, and expand into new data services. All of this is enabled by our team, which we will lead into the future. As a one-handful team, we will become a unique employer of choice in our sector. Northstar also gives us clear direction to build the critical capabilities that we need to succeed. Industrial and operational excellence, digitalization and data, new business models, agility in our operating model, a structured go-to-market, defense ecosystem leadership as well as enhanced and new partnerships. Dear analysts, ladies and gentlemen, I mentioned on the previous slide that delivering at scale is the foundation of our growth strategy. Achieving a step change in operational excellence to meet volumes and performance requirements of our customers remains key, and we have selected four examples to illustrate our operational achievements in 2024. The Eurofighter Mark I radar, won in 2020 and worth €1.5 billion, is the biggest contract in the history of Hensoldt, and we are progressing in hardware development with a critical design review of the multichannel processor completed last year. We are now entering a phase of intensive testing which will be accelerated by a special testbed aircraft where the nose of a Eurofighter has been fitted to an Airbus A320. Continuing with large contracts, we have successfully completed the first flight of the modified Pegasus aircraft last year, paving the way for integration of the SIGINT mission system over the next years. We are also making great progress in our digital sites development with the delivery of a weapon optronic sensor to KNDS end of last year. A key enabler to ramp up our production capacity to answer the increasing demand of our customers is the new 30,000 square meter logistics center where we centralized logistics operations for our sites in southern Germany. After going live last year, we will ramp up logistics operations from the new center to full capability during the second quarter. In summary, I can state that we have increased the displacement of our operational engine significantly in the past years and even added a few more cylinders. We are now revving up this engine to get all the horsepower on the road. As mentioned earlier, order intake in 2024 exceeded our expectations, and we see structural growth across all divisions and increasing contribution from European customers. Radar continues to drive our growth with significant orders for TRS and TRML4D and SPEXA, reaching together almost 800 million euros. The long-term services business of ESG contributed another 100 million euros to our order intake for the operation of the German Armed Forces' central spare parts logistics. In the optronic segment, growth was mainly driven by ground-based systems for armored vehicles and our periscopes and optronic mask system business. The civil FFM business, where we provide high-end measurement technology for semiconductor manufacturing, continued to be a reliable and significant contributor to our order book. And on this very positive note, I would like to hand over to Christian for a deep dive into our 2024 financials. Christian.