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Business Update

Johannes Huth
Chairman of the Supervisory Board, HENSOLDT

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Looking back at the past year, it is only fair to say that 2020 was exceptional in many ways. While we all had to grapple with the new reality of a world beset by a global pandemic, HENSOLDT has held course and reached a significant milestone with the company’s IPO and listing in the Prime Standard of the Frankfurt Stock Exchange. In a year of extraordinary circumstances, the achievement of such a transformational step cannot be overstated. Therefore, I would like to thank all employees on behalf of the Supervisory Board for their dedication and exceptional work.

We started the HENSOLDT journey in 2016, with its partial carve-out from Airbus, reaching the first significant milestone two years later by becoming a fully independent company. From the outset, we had a clear and ambitious growth plan. Our objective was to accelerate HENSOLDT’s growth, to optimize its product portfolio and footprint as well as to transform the company into a stand-alone business with a global brand. Together, we set out to achieve these goals by mobilizing the company’s inventive and entrepreneurial spirit and by leveraging the power of innovation.

We look back at the past three and a half years with pride. Not only has HENSOLDT generated and maintained unparalleled growth momentum, further accelerated by strategic acquisitions, it has also increased the number of employees by more than 30 percent. At the same time, HENSOLDT has substantially enhanced its profitability through driving operational excellence and significantly raised investment, especially in R&D. We have won sizeable orders like the recent contract to develop and produce a new AESA-radar for the German and Spanish Eurofighter fleets. These contract wins underline HENSOLDT’s position as driver of innovation in its industry and pave the way for future growth.

The successful IPO, the subsequent share price development, and the admission to the SDAX are a clear confirmation that we have chosen the right strategy for HENSOLDT. We were able to achieve all these milestones thanks to a very good and close cooperation between the company and KKR: while KKR supported the growth and development of the company with its financial resources, international network, and long-standing expertise in carve-outs and the global industrial sector, HENSOLDT’s management team brought in high-tech know-how, entrepreneurial spirit and broad industry expertise. The collaboration and cooperation in the partnership works exceptionally well and supported HENSOLDT in becoming the leading defence and security sensor solutions provider headquartered in Germany.

With the IPO, the company has laid the foundation for the next phase of growth. It is now ready to take the next step and does not only have ambitious plans to drive future growth, it also aims to further broaden its product portfolio and develop its sales network. Its customers will continue to benefit from cutting-edge technologies for the next generation of defence and security equipment as a publicly listed company.

KKR is looking forward to continue to support HENSOLDT in this endeavour.


Letter to Shareholders

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Letter to Shareholders

2020 was an extremely successful year for HENSOLDT. We achieved all our targets and at the same time unlocked new business opportunities. At around 1.5 billion euros, the order from our German and Spanish customers for the ECRS Mk1 Eurofighter radar is not just the largest in the history of our enterprise – it also positions HENSOLDT as a systems leader in the area of combat aircraft radar systems. Our TRS-4D naval radar systems were selected for the new multi-role warship MKS 180, and we submitted our proposal for the Pegasus signal intelligence system at the end of the year. Our Xpeller counter-UAV system won over new customers and protected major high-profile events. These positive developments – along with many others – made 2020 a superlative year for HENSOLDT.

In an eventful and extremely challenging market environment, we continued to pursue our worldwide growth strategy, strengthened our now globally recognised brand even further, grew our company and its portfolio in all our markets and took HENSOLDT public on the Frankfurt Stock Exchange. I wish to sincerely thank all our employees – all over the world – for these shared successes over the past year and for their commitment under often difficult circumstances during the COVID-19 crisis.

HENSOLDT has demonstrated extraordinary durability throughout the COVID-19 pandemic. Our business model has proved resilient and we started preparing for a global crisis early on – in January 2020. With a wide range of actions coordinated by our dedicate COVID-19-Task Force, we succeeded in safeguarding the health of our employees, customers and partners while astutely maintaining our business operations even during lockdowns. In the course of this process, we made enormous progress in the digitalisation of our enterprise, from which we will also benefit in future. Our international business also remains on track, despite the global pandemic. We opened the door to a key market through our first-ever order from the US armed forces for our laser range finder, and generated additional new business in all regions of the world.

Future sustainability plays a special role at HENSOLDT, and we continually invest in our innovation capabilities and our high-performance portfolio. With our initial public offering on 25 September 2020, we also demonstrated HENSOLDT’s capital-market capability to investors. We achieved this milestone in our development amidst an extremely difficult market environment. The initial public offering of approximately 33 million shares generated proceeds of around 400 million euros, of which around 300 million euros accrued to the company. As of the end of the fiscal year, 32 percent of our shares were in free float and our market capitalisation totalled around 1.5 billion euros.

We are especially proud that the Federal Republic of Germany plans to acquire a strategic shareholding in HENSOLDT, as this emphasises our significance as a key technology partner and strategic supplier to Germany. As a leading supplier of electronic sensor solutions, we develop critical elements for the next generation of security and defence applications. We are looking forward to further expanding our long-standing, trust-based partnership with our most important customer in the years to come.

Thanks to its innovative power and its resilient, crisis-proof business model, HENSOLDT was able to insulate itself from the turbulent market environment in the 2020 fiscal year. The numbers affirm this assertion: In 2020, HENSOLDT increased its revenues to 1.2 billion euros and its EBITDA margin is at a similar level as the year before. In this context, the growth of the adjusted free cash flow before interest and taxes to 196 million euros is particularly gratifying. We can all be extremely satisfied with this performance.

Our growth is driven by the intention of various countries to increase their defence budgets in order to close equipment shortfalls in their armed forces. In line with this trend, HENSOLDT has geared its strategy to focus more on offering complete solutions, with the aim of enhancing the performance capability of new defence systems by intelligently networking electronic and sensor systems. To cite just one example, our colleagues in France have developed LYNCEA DEFEND, an integrated 360-degree, multi-domain self-defence command and control system that comprises a wide range of sensors aboard a naval vessel to identify and combat land-based, air-borne, underwater and surface threats.

The integrated radar system delivered last year for the Philippine naval frigate BRP Jose Rizal, consisting of our multi-mode TRS-3D naval radar, the MSSR2000I secondary radar and a SharpEye Mk11 navigation radar, underscores this approach. HENSOLDT is also actively deploying this networking expertise in Europe’s major future-facing programmes, such as the “Future Combat Air System” (FCAS), the “Maritime Airborne Warfare System” (MAWS) and the “Main Ground Combat System” (MGCS). Together with consortium partners, we have already received orders for studies and demonstrators. As an independent solution provider, we benefit from our direct access to and information-sharing with key customers.

We are also consistently working to enhance and expand our high-performance product portfolio to serve other segments and markets. In doing so, we systematically leverage the advantages of mature HENSOLDT base technologies and modify them in line with new requirements. For example, our new NESIS 4000 identification friend-foe system grants vessels equipped with it a 360-degree view with just a single antenna. The digitalization of our Spectrum Dominance sensors and jammers enables early detection and neutralisation of even state-of-the-art air defence systems. We have equipped our MUSS self-protection system with an expanded sensor suite and significantly more powerful software to protect vehicles on the battlefield even more effectively. This approach has ideally prepared us for our steady evolution to become a provider of integrated sensor solutions.

With a focused and clearly defined M&A strategy, we have acquired a total of seven companies in recent years and integrated them in the HENSOLDT Group. These acquisitions strengthen our product portfolio, open up new markets and secure access to new, disruptive technologies.

To energetically drive this development process forward, we created over 500 new jobs in 2020, and have already filled more than 350 of them – and we will continue to grow. Our employees are highly motivated and proud of their company – as is impressively demonstrated by multiple top rankings on “best places to work” websites.

It is owing to the hard work of our employees that HENSOLDT can continue to innovate throughout our strong organic growth. Their entrepreneurial spirit is a key component in our identity and thus the driver of our innovative capability. I’m incredibly proud of them!

Our French subsidiary NEXEYA is working on developing green off-grid/microgrid hydrogen energy supply systems, opening the door to new markets and applications. HENSOLDT has become a global leader in the area of 3D printing of electronic circuits. Together with our Israeli partner Nano Dimension, last year we debuted the first ten-layer 3D printed PC board, impressively demonstrating the potential of this technology. In our joint venture HENSOLDT Cyber, we concluded development of our RISC-V-based, secure MiG-V processor and the “TRusted ENTity Operating System” (TRENTOS), which equips us with key components for protecting military and civilian systems against the steadily increasing threats in cyberspace.

With the acquisition of Austrian technology company SAIL LABS, we are expanding our existing capabilities in the area of signal intelligence to include the ever more important element of open source intelligence, as well as acquiring pivotal capabilities in the area of artificial intelligence.

At HENSOLDT, we have always taken special pride in our reputation for fulfilling our social responsibilities and safeguarding the well-being of our employees – long-before our first concrete proactive responses to the COVID-19 crisis. Among other efforts, we support the “Initiative Chefsache” of the German Ministry of Defence to promote diversity and a scholarship programme for women in South Africa – as well as the German civil-society initiative “Lachen helfen e.V”, which enables German soldiers to personally support children in war and crisis zones.

In the area of compliance, we continually communicate our zero-tolerance strategy for preventing corruption to our employees through targeted processes and mandatory training seminars. At HENSOLDT, innovation and sustainability go hand in hand. For example, as of last year, we have been using electricity from renewable sources at all our main German facilities, and one of our operations in France is powered 100 percent by renewable hydrogen power. Wildlife protection is especially important to us: besides rhinoceroses, our technology is also used to protect abalones in South Africa against poachers, and we are constantly looking out for new projects that will allow us to use our know-how and commitment to further expand these activities.

Such topics as social commitment, sustainability and compliance are thus nothing new for our Group. However, as a publicly traded corporation, it is important for us to express HENSOLDT’s commitment to sustainable business practices and expand our reporting on our performance in environmental, social and governance matters. This is why, for the first time, this Annual Report also contains a separate chapter devoted wholly to sustainability at HENSOLDT.

Dear shareholders, on behalf of my entire management team, I assure you that, as new arrivals on the stock exchange, we are entirely conscious of this special new responsibility to you. We are fully aware of this responsibility every single day, and we place a high priority on fulfilling it. And we understand that we must earn your trust. Thus, I would like to expressly thank all our shareholders who have placed their trust in us since our IPO. We will do everything in our power to justify your confidence.

Yours truly,

Thomas Müller
Chief Executive Officer


HENSOLDT – Key performance indicators

€ million 2020 2019
Order intake 2,541.3 1,040.0
Sensors 2,238.1 657.5
Optronics 308.3 383.3
Elimination/Transversal/Others -5.1 -0.8
Order backlog 3,424.0 2,202.3
Sensors 2,825.5 1,567.8
Optronics 600.0 634.5
Elimination/Transversal/Others -1.5 -
Revenues 1,206.9 1,114.2
Sensors 923.6 837.1
Optronics 288.1 277.4
Elimination/Transversal/Others -4.8 -0.3
Revenues by region 1,206.9 1,114.2
Europe 920.2 742.8
(of which Germany) 622.8 483.3
Middle East 155.8 164.8
Asia-Pacific 44.2 82.4
North America 53.1 40.9
Africa 48.0 86.3
LATAM 13.3 19.2
Other regions/Consolidation -27.6 -22.3
Adjusted EBIT 167.2 160.8
Sensors 119.7 122.4
Optronics 50.1 39.5
Elimination/Transversal/Others -2.6 -1.2
Adjusted EBITDA 219.3 215.6
Sensors 156.2 162.5
Optronics 65.6 54.3
Elimination/Transversal/Others -2.5 -1.2
Adjusted pre-tax unlevered free cash flow 196.4 74.9