HENSOLDT raises medium-term EBITDA target and presents new growth strategy

Capital Markets Day: HENSOLDT raises medium-term EBITDA target and presents new growth strategy

• Book-to-bill ratio (ratio of order intake to revenues): forecast for 2024 specified as around 1.2x; significantly faster growth in order intake than in revenues expected in the medium term
• Revenue growth: revenues of around EUR 2,300 million expected in 2024; medium-term target of 10% average annual growth
• Adjusted EBITDA margin: 18-19% in 2024 before pass-through business; medium-term target raised to ~20%
• Adjusted free cash flow: Cash conversion of adjusted EBITDA of around 50% expected for 2024 and 50-60% in the medium term
• Dividend distribution: stable at 30-40% of adjusted net income
• ‘North Star’: New corporate strategy for sustainable growth presented

London/UK, December 12, 2024 – The HENSOLDT Group (‘HENSOLDT’) confirmed its outlook for the 2024 financial year and raised parts of its medium-term target at its Capital Markets Day in London. While the company continues to expect an adjusted EBITDA margin before pass through business of ~18-19% in 2024, it is expected to increase to ~20% in the medium term. HENSOLDT continues to successfully convert its high order backlog into profitable revenues – this year expected to be around EUR 2.3 billion. For 2025, the company is targeting a low double-digit percentage revenue growth rate, with a mid-term annual average growth rate of 10%.

Due to the tense security situation in the world, HENSOLDT expects a strong growth in defence spending in the future as well. The demand for defence electronics is likely to increase at an above-average rate in the medium term. With a market growth of around 10% in Germany and around 7% in Europe and the international markets, there is great potential for orders.

Oliver Dörre, CEO of HENSOLDT, said: “We will continue to benefit from significant and sustained market growth driven by the high demand for defence solutions in Germany, Europe and worldwide. As a technology and innovation leader in the field of defence electronics, we are strongly positioned in the market and can count on strong political support with the German government as our anchor shareholder. With our new ‘North Star’ strategic vision, we have a clear plan for transforming our company and making it fit for the future. Our goal is to achieve revenues of around 5 billion euros by 2030 – primarily through organic growth.”

Christian Ladurner, CFO of HENSOLDT, said: “I am confident that we will achieve our guidance for fiscal year 2024 and our medium-term targets. A key factor here is our excellent revenue visibility from existing orders. This gives us planning security and allows us to consistently invest in future-oriented technologies while implementing a sustainable dividend policy. The synergies from the ESG acquisition – around EUR 19 million each in costs and revenues by 2028 – are a further factor supporting our growth and profitability. With this strong financial foundation, we will continuously improve our strategic positioning in the rapidly changing defence environment.”

The forecast for the book-to-bill ratio for the 2024 financial year was already specified at around 1.2x as part of the 9M reporting in November, while the previous assumption was 1.1x-1.2x. In the mid-term, HENSOLDT expects order intake to grow significantly faster than revenues. For adjusted free cash flow, an average cash conversion of adjusted EBITDA of approx. 50% is forecast for 2024 and 50-60% in the mid-term. The company expects net debt to be lower than 2x EBITDA in 2024, with a further decline in the medium term. HENSOLDT continues to target a dividend payout ratio of 30-40% of adjusted net income, both for 2024 and in the medium term.

High revenue visibility for the next years

In the first nine months of fiscal year 2024, the order backlog amounted to EUR 6.5 billion, which is equivalent to a very high level of revenue visibility. For 2025, 86% of the forecast revenues are already covered by the existing order backlog. This includes confirmed orders as well as short-cycle and aftermarket business.

North Star: Strategic vision for sustainable growth

At its Capital Markets Day, HENSOLDT presented its new ‘North Star’ strategy for the first time, which will ensure continuous and robust growth and further strengthen the company's market position as a leading provider of defence and security solutions. North Star forms the basis for the company's transformation into HENSOLDT 2.0 and combines all of the company's initiatives and investments. The overarching goal is to establish a robust growth model that combines innovation, operational excellence and global reach. ‘North Star’ is based on four axes:

• Grow with focus

In order to grow sustainably and purposefully, HENSOLDT is selectively expanding its international presence. The goal is to generate around 50% of revenues in Germany, 30% in Europe and 20% in strategically important global markets by 2030. This will be achieved by setting clear priorities in business development, implementing focused key account management and improving the integration of sales and business development. By investing in regional structures and partnerships, HENSOLDT will tap into new market and customer potential without neglecting its strengths in its home market.

• Deliver at scale

Another central aspect of North Star is the ability to efficiently meet increasing demand. HENSOLDT is focusing on expanding its production capacities, industrial manufacturing of core products and optimising supply chains. At the same time, the internal organisation is being made more agile and efficient, for example by introducing digital tools such as SAP S/4HANA or outsourcing more engineering services. These measures will enable the company to increase its production and delivery capacity, ensure quality and adherence to delivery dates, and guarantee strong margin development in the long term.

• Pioneer Software-defined defence (SDD)

SDD is a decisive factor for the Western alliance in countering the huge number of potential opponents on the battlefield with a new class of networked systems and consistent digitalisation. SDD decouples hardware and software, thereby allowing the rapid and cost-effective adaptation of sensor technology. In addition, SDD increases the scalability and resilience of defence systems and improves their interoperability. To achieve this, data from different platforms must be collected, processed and analysed in real time. As a sensor specialist and system integrator, HENSOLDT has unique capabilities in this area and is ideally positioned to play a key role in the development towards SDD. In doing so, the company will expand its offering to include services based on SaaS subscription fees and expand its portfolio of multi-domain solutions. This will strengthen its market position, broaden its business model and open up new revenue streams.

• Lead our team into the future

Employees are at the heart of the company and the basis for any growth strategy. In order to position HENSOLDT as the employer of choice in the defence industry, the company promotes a culture of innovation and collaboration, offers targeted training programmes and invests in modern working environments. These measures ensure that HENSOLDT will continue to have a highly qualified, motivated team that can achieve its ambitious goals.

With the clear direction of the ‘North Star’ strategy and a strong financial foundation, HENSOLDT is ideally positioned to consistently exploit the opportunities offered by a growing defence market. Through technological innovation, a strong market position and the targeted development of new business areas, the company will achieve sustainable growth and create long-term added value for customers, partners and investors. HENSOLDT remains a key player in the defence sector and a convincing partner for the security challenges of tomorrow.

The Capital Markets Day presentation in London is available on the Investor Relations website of HENSOLDT AG. The preliminary results for the full year 2024 are expected to be published on 27 February 2025.

About HENSOLDT

HENSOLDT is a leading company in the European defence industry with a global reach. Based in Taufkirchen near Munich, the company develops complete sensor solutions for defence and security applications. As a system integrator, HENSOLDT offers platform-independent, networked solutions. Being a technology leader, the company is also driving forward the development of defence electronics and optronics and is continuously expanding its portfolio based on innovative approaches to sensor data fusion, artificial intelligence and cyber security. In 2023, HENSOLDT achieved revenues of 1.85 billion euros. Following the acquisition of ESG Group, the company employs around 8,000 people. HENSOLDT is listed on the Frankfurt Stock Exchange in the MDAX.

www.hensoldt.net

Press contact:

Joachim Schranzhofer  T: +49 (0)89.51518.1823

 M: joachim.schranzhofer@hensoldt.net