As a member of the audience at Hensoldt's analyst conference ($HAG (-1,01Â %) ) for the full year 2024, I was able to gain a comprehensive overview of the company's performance and its strategic direction.
Oliver Dorre, the CEO, began by presenting the financial highlights of 2024. Particularly impressive was the improved book-to-bill factor of 1.3x. Order intake exceeded expectations, driven by significant and sustained market growth. The company is benefiting from robust demand for defense technologies in Germany, Europe and worldwide. Dorre emphasized that this growth can be observed structurally across all business areas.
Sales reached 2.24 billion euros, driven by a dynamic market development, especially in the last quarter. Profitability reached a benchmark benchmark of 19.4 % adjusted EBITDA margin before pass-through items, underlining the strength of Hensoldt's business model. Cash flow was also excellent with an adjusted free cash flow of EUR 249 million, which enabled debt reduction above expectations.
Market growth is significant and sustainable, and the technology is technology is ready for the era of software-defined defense. Political support in Germany remains strong and internationalization is gaining momentum. Hensoldt has made significant progress in increasing production in both the sensor and optronics sectors. To further promote growth, the company will implement a strong key account structure.
Digitalization remains a high priority, with a clear roadmap to become a truly digital company. The integration of ESG was completed only nine months after closing, resulting in a new division structure focusing on the three pillars of products, solutions and services.
Dorre explained the four strategic axes of the North Star vision:
- Growth with focus
- scaling
- Pioneering work in the field of software-defined defense
- Building a unique team.
This vision serves as a guide for Hensoldt's next phase of growth and focuses on industrial and operational excellence, digitalization, new business models and agility.
An important point was the Eurofighter Mark 1 Radar contract worth 1.5 billion eurosthe largest in Hensoldt's history. The company is also making progress in the development of digital sites and has commissioned a new logistics center in southern Germany to increase production capacity.
Christian Ladurner, the CFO, presented detailed insights into the preliminary results for the 2024 financial year. Order intake reached a very strong figure of EUR 2.9 billion, an increase of almost 40% compared to the previous year. The order book grew by over EUR 1 billion to a new high of over EUR 6.6 billion. Adjusted EBITDA rose by 23% to EUR 405 million, with an adjusted EBITDA margin of 18.1%. Adjusted free cash flow amounted to 249 million euros, an increase of 26%.
In the sensor segment, Hensoldt recorded a strong order intake with an increase of almost 40% compared to the previous year. Sales rose by 23% to 1.9 billion euros. In Optronics, the company achieved a record order intake of 740 million euros, which corresponds to an increase of 45%. The move to the new Optronics campus in 2025 will further support this growth.
Ladurner also gave an update on net debt, which has been continuously reduced. For 2024, a net debt of around 1.6 times EBITDA was achieved, which is below the target of 2x. As a result, the interest rate on the senior credit agreement was improved. The Executive Board proposes a dividend of EUR 0.50 per share, which corresponds to an increase of 25% compared to the previous year.
Hensoldt continues to expect a strong order intake performance in 2025. Turnover is expected to be between EUR 2.5 and 2.6 billion. The adjusted EBITDA margin is estimated at around 18%. The company expects adjusted free cash flow performance to remain strong with an unchanged cash conversion target of 50% to 60%.
Ladurner pointed out that the coalition-building process in Germany could affect the timing of orders and sales inflows, which would lead to a shift into the second half of the year. Nevertheless, Hensoldt is convinced of sustainable, decade-long growth potential. The company expects average annual organic sales growth of 10% and an adjusted EBITDA margin of around 19%.
The CEO went on to emphasize that Europe must take more responsibility for building a self-sufficient deterrence and defense capability. This requires an increase in defense budgets to at least 3.5% of GDP for all NATO allies. Dorre also analyzed the results of the parliamentary elections in Germany, pointing to a stable coalition that is expected to form a new government around Easter.
The subsequent Q&A session provided additional insights:
Aymeric Poulain (Kepler Cheuvreux) asked about the possibility of increasing the organic growth guidance of 10% given the potential increases in defense budgets in Europe. Dorre replied that the company remains conservative and current planning is based on existing commitments, but will consider reviewing guidance in the second half of the year once the new government in Germany is in place and discussions on additional funding become more concrete. He sees Germany on the path to defense spending of 3% to 3.5% of GDP. When asked if Hensoldt is in a position to increase production, Dorre replied in the affirmative and explained that current investments are aimed at increasing capacity for future growth.
Simon Keller (HAIB) asked whether Hensoldt's sales would increase disproportionately if Germany were to increase its budget by 50%, especially in view of the high demand for air defense. Dorre replied that Hensoldt would benefit from any budget increase as the required capabilities match what Hensoldt delivers. Keller also asked about the potential revenue growth in 2026 and the sustainability of the German optronics division's 30% growth. Ladurner explained that it takes about 1 to 1.5 years for decisions on funds to translate into orders and sales. He considers growth of 20 % to 25 % for the optronics division in 2025 to be realistic and expects margins to improve to 10 %.
Christophe Menard (Deutsche Bank) asked whether the discussions have shifted to the affordability of equipment and whether governments are asking for cheaper alternatives. Dorre replied that quality and delivery time take precedence over price.
Carlos Peris (Bank of America) asked about the impact on margins in 2025. Ladurner replied that the stable margin in the sensor area is due to necessary reinvestment in the new generation of TRML-4D radar.
Sash Tusa (Agency Partners) asked about the opportunities and risks for Hensoldt should the USA no longer be a reliable partner for Europe. Dorre replied that Hensoldt is well positioned to maintain Germany's capabilities created with US technologies. He also mentioned the risks associated with tariffs and dependence on the US market.
Yan Derocles (ODDO BHF) asked whether the new environment ensures higher down payments and government support for reinvestment in sensors. Ladurner replied that he has seen a good balance between increased inventories and prepayments in recent years and expects this to continue in the future.
Simon Keller (HAIB) asked about the M&A strategy. Dorre replied that M&A must be a means to an end and that the focus is on technology, innovation and internationalization. Hensoldt is ready for European consolidation, but will not make acquisitions purely for the sake of growth.
In summary, Hensoldt had a strong year in 2024 and is well positioned to benefit from increasing defense budgets. The company is focused on innovation, operational excellence and strategic acquisitions to ensure long-term growth.
I hope you enjoyed the summary!
