Thomas Müller, CEO of HENSOLDT AG: “2022 was a momentous year for the global security order as well as for HENSOLDT as a company. For us in the defence industry, the Russian invasion of Ukraine and the resulting Zeitenwende in German and European security policy give us a new role and special responsibility. We must supply the German armed forces and those of our partners comprehensively, reliably and much quicker to prepare them for the new challenges ahead. HENSOLDT is ready to go. This is also underpinned by our strong results last year, with a record order backlog and double-digit growth in revenue and earnings together with a further increase in profitability. The importance of a capable and innovative defence industry is exemplified by our TRML-4D high-performance radar, which we delivered in record time for Ukraine’s air defence. In response to the war in Ukraine, we have once again accelerated the pace of implementation of our technology roadmap. By further digitalizing our sensor systems, continuing the integration of artificial intelligence and developing integrated end-to-end solutions, we are delivering technologies that are more vital than ever to defending our freedom today and tomorrow.”
Christian Ladurner, CFO of HENSOLDT AG: “In 2022, we once again proved that our consistent focus on implementation is paying off. We have forged ahead at speed with complex major projects such as the next-generation Eurofighter radar and the PEGASUS airborne signals intelligence system and have already translated initial project milestones into revenue and cash flow. We are continuously working on our operational excellence and have a very good handle on macroeconomic risks such as the inflationary trends. All in all, we achieved a very healthy adjusted free cash flow before interest and taxes in 2022. In addition, we significantly reduced our leverage ratio to 1.2x. I am gratified that, as a result of our successful work, we are able to propose – as planned – a significantly higher dividend of € 0.30 per share.”
HENSOLDT and the Zeitenwende
The Russian war of aggression against Ukraine brought the need to actively protect and defend peace and security with capable armed forces and an efficient defence industry back into the political and social spotlight. With its expertise in key technologies, strong market position and dynamic growth over recent years, HENSOLDT is in an excellent position to take on greater responsibility.
In record time, the company delivered to Ukraine the first of an initial four TRML-4D radars for the IRIS-T SLM air defence system in autumn 2022. The radar instantly proved an effective contribution to protecting the Ukrainian population from Russian missile and drone attacks – so much that HENSOLDT already booked in an order for two more TRML-4D radars for Ukraine in early 2023. This high-performance radar can also contribute decisively to the European Sky Shield Initiative, the joint air defence system launched by German Chancellor Olaf Scholz. In order to shorten delivery times to customers, HENSOLDT opted to pre-produce a batch of 30 TRML-4D radars.
HENSOLDT’s ability to support the rapid and comprehensive defence capability upgrade for the German armed forces and their partner forces is based on its international production network and highly qualified workforce. The company has increased its workforce by more than 1,000 employees only in the last three years. Additionally, HENSOLDT significantly expanded its network of strategic partnerships in 2022 – among others with Diehl Defence in the field of ground-based air defence, with THEON SENSORS SA of Greece for the development of night vision systems and with the Israeli company RAFAEL to equip the Eurofighter with electronic warfare capabilities. Most recently, in late 2022, HENSOLDT entered into a strategic alliance with AI specialists 21strategies to drive the development of artificial intelligence for the next generation of defence systems.
The recent visit of German Chancellor Olaf #Scholz at the @HENSOLDT site in #Ulm underlines the role of our company to provide the technology for a safer tomorrow. #bundeskanzler #kanzler #defence #sensors #makethedifference #detectandprotect pic.twitter.com/fw2oKXD7NL
— HENSOLDT (@hensoldt) January 18, 2023
CEO Thomas Müller: “We achieved successful growth in 2022 while further strengthening our role as an innovation driver. With a highly targeted and focused approach, HENSOLDT develops mission-critical technologies for the defence systems of the future. In just the same way, we have selected and are vigorously pursuing clear-cut priorities among the projects under the ‘Sondervermögen’ special defence fund and strengthening of the German armed forces. These include digitalization of the land forces and the Eurofighter’s electronic warfare capabilities.”
Record order backlog
HENSOLDT was able to yet again secure significant national and international orders with its high-tech solutions in 2022. Notable among these were a € 270 million long-term service contract for the Eurofighter and an order worth € 175 million for Mk-1 radars under the Eurofighter Halcon programme. Equipping the F126 multi-purpose frigates with four TRS-4D radars boosted order intake by € 168 million, while orders for laser rangefinders for the US M1 Abrams main battle tank added a further € 29 million. An order of particular strategic importance in 2022 was a € 96 million contract in connection with demonstrator phase 1B for the pan-European Future Combat Air System, a billion-euro programme projected for the coming decades.
HENSOLDT’s total order intake in 2022 amounted to € 1,993 million. In the previous year, the milestone order for delivery of the PEGASUS signal-capturing and airborne reconnaissance system worth around € 1.25 billion had bolstered order intake to € 3,171 million. As a result of the continued high order intake, the order backlog reached a record of € 5,366 million at the end of 2022 (previous year: € 5,092 million).
Substantial revenue and earnings growth with high profitability
HENSOLDT once again very successfully translated orders into revenue and earnings in 2022. Revenue increased in the reporting year by 16% to € 1,707 million (previous year: € 1,474 million). At 1.2, the book-to-bill ratio consequently remained at a high level, although the exceptionally large order intake in the 2021 financial year meant that it was down on the previous year (2.2). Group adjusted EBITDA increased in 2022 by € 31 million to € 292 million (previous year: €R 261 million), mainly due to volume effects and a favourable project mix. The adjusted EBITDA margin excluding business volume with low share of added value came to 20.4%, marking a further increase on the previous year’s 19.4%.
Further reduction in leverage
The HENSOLDT Group’s continued strong operating performance is similarly reflected in its cash flows and finances. Adjusted free cash flow before interest and taxes amounted to € 219 million in 2022 (previous year: € 252 million) and thus exceeded expectations – despite ongoing investment in working capital with a view to the onward growth trajectory as well as to ensuring supplies of components. This enabled a further significant reduction in leverage. At the end of 2022, leverage stood at 1.2x (previous year: 1.6x), while net debt was reduced in 2022 by a further € 89 million.
Increased dividend proposal
In view of the successful business performance, the Management Board of HENSOLDT intends to propose to the Supervisory Board and the Annual General Meeting the distribution of a dividend in the amount of € 0.30 per share. This represents a 20% increase on the previous year.
Systematic implementation of sustainability strategy
Notwithstanding the special circumstances of 2022, HENSOLDT continued to systematically implement the Group-wide ESG strategy adopted in the previous year. Under that strategy, HENSOLDT aims to become the industry leader in ESG and, as a key milestone, to achieve carbon neutrality as a company by 2035. The latest ESG rating from Sustainalytics shows that HENSOLDT’s wide-ranging sustainability initiatives are paying off. HENSOLDT once again holds the top position this year, ahead of the global competition in the aerospace and defence industry. It is the only company in the sector to be listed as “low risk” and has been able to further improve on its very positive overall score from the previous year.
Guidance for 2023
HENSOLDT announced an upward revision of its short and medium-term targets in December 2022. For the 2023 financial year, the company expects to see budget increases and initial orders from the German armed forces special defence fund, and therefore predicts accelerated order intake growth and higher core revenue. Specifically, HENSOLDT anticipates moderate growth in order intake coupled with a moderate increase in consolidated revenue for 2023. The book-to-bill ratio is forecast to be between 1.1 and 1.2 and the adjusted EBITDA margin excluding business volume with low share of added value around 19%. HENSOLDT plans to reduce leverage ratio to below 1.0x in the 2023 financial year.