(new: analyst conference, more details, share price development)

TAUFKIRCHEN (dpa-AFX) - The defense electronics group Hensoldt expects further growth in the current year in view of the increasing wars and conflicts in the world. Hensoldt is targeting sales of around two billion euros for 2024, as the MDax group announced in Taufkirchen on Friday. However, analysts had hoped for an average of almost 2.2 billion euros more. Of the revenue, 19 to 20 percent is expected to be retained as adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA). In addition, incoming orders are expected to increase significantly faster than sales. The share price fell by almost nine percent at its peak.

With a recent discount of 7.8 percent to 31.14 euros, the share was the weakest stock in the MDax mid-cap index. Investors cashed in after a good run for the share. Driven by rising global defence spending, Hensoldt has already risen by almost 30 percent so far this year, reaching its highest price since April 2023 at just over EUR 36 in mid-February. The share subsequently gave back some of its gains.

"The demand for defense and security solutions is high worldwide and is expected to increase further in view of the global conflict and crisis situation," said Group CEO Thomas Müller according to the press release. Last year, Hensoldt saw an increase in demand for reconnaissance, surveillance and self-protection systems in particular.

Incoming orders rose from 1.99 to 2.09 billion euros, but Hensoldt landed fewer orders in the sensor business than in the previous year. On the other hand, demand in the smaller optronics division was much higher. The defense electronics group is clearly still having problems processing orders. At the end of 2023, Hensoldt had orders worth 5.53 billion euros on its books, compared to 5.37 billion a year earlier. The ratio of incoming orders to turnover fell from 1.2 to 1.1 last year.

Earnings climbed from 1.71 to 1.85 billion euros and thus to the value most recently targeted by Hensoldt. In the core business, turnover increased by 16 percent. In addition to the Pegasus reconnaissance system and the Eurofighter radar, the main drivers were TRML-4D radars for the Ukraine, the Praetorian self-protection system and the C3 service contract for the Eurofighter. While the Sensors division recorded strong growth, sales in the Optronics segment stagnated. Orders for defense equipment usually run for a long time and only have a delayed and gradual impact on sales.

The adjusted operating result (EBITDA) increased from 292 to 329 million euros last year. With an operating margin of 19.9%, Hensoldt achieved its own forecast. However, in view of the new forecast of between 19 and 20 percent, this figure can only be maintained in the current year in the best case scenario. Hensoldt has also set this range as its new medium-term target. In 2022, the margin was still at 20.4%. Last year, the adjusted operating result in the Optronics division fell significantly due to investments in digitalization, among other things. Here, Hensoldt is switching to S/4 Hana, SAP's core software.

Analyst Christian Cohrs from Warburg Research emphasized that Hensoldt had achieved its financial targets for 2023. However, he added that the result was characterized by extensive one-off effects on the cost side and that the net financial result was much lower than he had hoped. On balance, Hensoldt earned 56 million euros after 80 million in the previous year. Analysts had expected an average of around 113 million. Cohrs therefore misses the positive aspects that could have helped the share price to rise further.

In addition, traders mentioned that Hensoldt's dividend was perhaps somewhat disappointing. Shareholders are to receive a dividend of 40 cents per share, 10 cents higher than the average market expectation of 48 cents. The adjusted free cash inflow before interest and taxes amounted to 259 million euros, 40 million more than in the previous year.

In December, Hensoldt raised around 241 million euros gross through a capital increase for the planned takeover of the Munich-based defense specialist ESG. The federal government had participated via the Kreditanstalt für Wiederaufbau (KfW) and thus continues to hold 25.1 percent of Hensoldt. Hensoldt also intends to take on debt of around 450 million euros for the ESG business, which is worth up to 730 million euros. At the end of 2023, net debt without capital increase amounted to EUR 301 million.

The company now expects the ESG takeover to be completed by the end of the first quarter. In the second quarter of the year, Hensoldt therefore also intends to adjust its forecast, which will then include ESG, as Group CEO Müller said in a conference call with analysts on Friday afternoon. In April, the manager will be replaced by Oliver Dorre as the new CEO, as has been known since March 2023./niw/men/he