Hensoldt AG (HAG) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the H1 Results 2024 Analyst Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Veronika Endres, Head of Investor Relations. Please go ahead.

Good afternoon, everybody, and welcome to HENSOLDT's H1 2024 Results Call, which we're holding at our ESG site in Fürstenfeldbruck today. Thank you for joining us. I'm Veronika Endres, Head of Investor Relations at HENSOLDT. And with me are our CEO, Oliver Dorre; and our CFO, Christian Ladurner. Oliver and Christian will guide you through this presentation today, which will be followed by a Q&A session. And with that, I hand over to you, Oliver.

Thank you very much, Veronika, and a cordial welcome from my side as well. I'm very excited to lead you into today's presentation after having passed the 100-day mark as CEO and the 200-day mark as a HENSOLDTian 2 weeks ago. When I briefly summarize the first half year at HENSOLDT, I can say with conviction that this company excels in many areas. My 3 key observations are, firstly, our technology is really impressive. For example, we received high praise from the Air Defenders in Ukraine, where our TRML-4D show outstanding detection, performance and high reliability. Secondly, the entire HENSOLDT team is extremely motivated and determined to provide our customers with much-needed capabilities. And thirdly, we enjoy a very solid support by our anchor shareholder, the German government and our stakeholders in the political domain. To drive our company from great to excellent, I've already outlined my 3 focus areas for the medium term, operational excellence, digitization and internationalization in our 3M call. We've defined clear and tangible action plans, which we're now implementing with rigor. So let me outline a few of the measures we're putting in place. In operational excellence, we're focusing on delivery capability in both quantity and quality. We're taking care of the expansion and stabilization of the supply chain, initiating a transformation in engineering and optimizing our approach to bids and project management. Further, synchronization of the ongoing transformational programs is another focus. We're also assessing our international presence with the intent to better align market potential and resource investment. Our clear goal is to do around 50% of our business in Germany, around 30% in Europe and with NATO partners and beyond that 20% in deliberately selected markets. We'll also develop a consistent approach when it comes to sensitive countries and a standardized framework for export regulations, keeping the government to government agenda of the German anchor shareholder in mind. We're also developing a conscious focus on establishing our industrial presence internationally. A first step is an improved governance to better integrate our national entities, South Africa, France and the U.K. And last, but certainly not least, we'll make sure that our portfolio will become smarter, more digital and software enabled. Connectivity, system of system architectures, networking and AI are elements that will support the transformation of HENSOLDT from a hardware-based to a software-defined provider of integrated sensor solutions. All these measures serve as a means to an end, and I'll outline our path towards a HENSOLDT 2.0 at the end of today's presentation. It was very rewarding experience for me to meet some of you, our investors at our U.S. and Canada roadshow in June. The most frequently asked question at all meetings addressed in defense is the defense spending in Germany. So let me give you some color on this topic. The special fund introduced in 2022 mainly served as start-up financing for several important and strategic defense procurement projects. This trend now stabilizes and is reflected in the midterm budget planning of the German government. With the mix of budget increases, finance authorizations and the special fund, the German government has sent a clear signal for its commitment to spend 2% GDP for defense, reaching approximately EUR 80 billion in 2028. And this commitment is underpinned by very concrete procurement plans, for example, the order of 20 additional Eurofighters that Chancellor, Scholz announced at the Berlin Air Show or 2 additional F126 frigates that have recently approved by the parliament as well as 105 additional Leopard tanks also already approved by the parliament. I mentioned this in our 3M analyst call, and I can only repeat defense procurement in Germany is no longer a question of if, but, how. Naturally breaking up the long-established mechanics of the cameralistic system takes some time. And yet I'm confident that we see a continuation of the current dynamics in German defense procurement. And let us not forget that the European market remains favorable as well. Clear shift against Europe, European NATO members plus Austria and Switzerland will spend an additional EUR 700 billion to EUR 800 billion on defense by 2028, and 23 of the 32 NATO nations have reached the 2% GDP defense spend target this year. The alliance reconfirmed its commitment to Ukraine and its recent summit in Washington, authorizing a EUR 40 billion support package and pledging strongly for enhanced air defense capabilities in Ukraine. Let me now have a look at some business highlights. Order remained strong in the second quarter, driving our total order intake for the half year 2024 to more than EUR 1.3 billion, and our order backlog to almost EUR 6.6 billion. We reinforced our excellent position both in the ground-based and naval radar segment, with orders for further TRML-4Ds within the ESSI initiative, Spexer Radar for SkyRanger 30, self-propelled anti-aircraft gun and the additional 2 F126 frigates for the German Navy. ESG also contributed to our strong Q2 order intake with a contract for A400M material management worth EUR 45 million. In the second half of this year, we expect further dynamics in the Armored Vehicle segment, benefiting our Optronics division. Our German customer is preparing to order Boxer infantry fighting vehicles that will be equipped with the Puma turret, featuring HENSOLDT optronics and self protection as well as also the already mentioned 105 additional Leopard 2 tanks, of course, also featuring HENSOLDT digital optronics. The Eurofighter business once again proves to be a solid contributor to our order intake with another capability enhancement of the Mark 1 contract worth almost EUR 300 million. ESG has very recently signed the already eighth installment of its contract to operate the Central German Armed Forces spare parts logistics, at least at 2028 called ZEBEL. Talking about ESG. Let's have a look at the status of the post-merger integration. I can make this quite short. The PMI is a resounding success, and I see a lot of potential. We've achieved all Day 100 milestones and will even advance the integration of central functions from end of the year to October 1. It is important that our central functions from a strong supportive backbone for the new divisional setup, that we communicated a few days ago. As mentioned, I see a huge potential in the integration of ESG, and I'd like to have a quick look at the unique capabilities of ESG that will contribute strongly to our multi-domain solutions offering. ESG supports the German armed forces helicopters from introduction into service to phase out, offering full product life cycle support. The portfolio includes the CH-53, NH90, Tiger, Ceiling, Sea King and the future CH-47 Chinook. In 2023, Germany has ordered 60 CH-47F Chinook helicopters, which will form the heavy lift rotorcraft backbone for the Bundeswehr from '27 onwards. In partnership with Boeing, ESG is in charge for several integration service around these helicopters, guaranteeing their seamless integration into the infrastructure of the German armed forces. And let's not forget, this is only the first phase, where a new platform is introduced into service with the armed forces, with a lifespan of at least 30 years for a platform like the Chinook or the F-35 system support and service business provide us with enormous potential and high visibility of revenues. The strong partnership of ESG with U.S. primes like Boeing, Lockheed Martin is a strong asset for ESG and for HENSOLDT, opening new business potential on different platforms. And with that, I hand over to Christian to guide us through the financials.

Thank you very much, Oliver, and a very warm welcome also from my side. I'm happy to provide you now with our financials for the first 6 months of 2024. To begin with, I'm pleased with our financial performance. The first half year has been very strong and is totally in line with our expectations. As you know, we've successfully closed the acquisition of ESG beginning of April, and I'm happy to report that ESG contributed as planned to our group performance. Group order intake developed strongly with orders summing up to more than EUR 1.3 billion, an increase of 27%. As mentioned by Oliver, main drivers were the NNbs air defence system, TRML-4D and Spexer Radars. And as part of the European Sky Shield Initiative as well as our TRML-4D radars for the F126 frigates. Also, ESG contributed strongly to our order book, for example, with a material management contract for the A400M. Overall, the distribution of incoming orders was again well balanced between our home market Germany and Europe. Revenue reached EUR 849 million in H1, marking an increase of 17%. This development was driven by sensors and especially our TRML-4D radar. ESG delivered as plan too with a contribution of EUR 82 million. The level of pass revenue further declined by 26%, resulting in an improved quality of revenue. With a figure close to EUR 6.6 billion, our order backlog again reached a new record level in our history. This continues to provide us with an excellent business visibility. The strong performance of our top line is also reflected in our profitability. Adjusted EBITDA increased to EUR 103 million, leading to an improvement of the adjusted EBITDA margin of 1 percentage points to 12.2%. Our core margin, excluding pass-through revenues further improved to 13.2%. The increase was driven by the accelerated production in our radar business, leading to further economies of scale. This was partly offset by investments in our growth and into our product portfolio of the Optronics business. Adjusted EBIT also benefited from the increased volume and stand up to EUR 52 million with an adjusted EBIT margin of 6.1%, respectively, 6.6% excluding pass-through business. This increase was partly offset by amortization of capitalized R&D expenses. Cash generation in the first half of 2024 was fully in line with our plan and following our usual seasonal profile with an adjusted free cash flow of minus EUR 145 million. Despite the growing business volume, we were able to realize a year-on-year improvement. And as already teased in our last analyst call, we've received first prepayments of our German customer in April, and we expect more to come. To sum it up, our bottom line further increased and developed as planned. Let's now have a look at our segments. In the Sensors segment, the strong momentum in order intake continued in the second quarter with orders summing up to nearly EUR 1.3 billion exceeding the previous year's figures by 53%. Organically, the year-on-year increase amounted to 33%, driven by TRML-4D and Spexer Radars with an ESSI, as well as our radars for the F126 frigates. As previously mentioned, the contribution from ESG was strong as well with EUR 166 million, which corresponds to a book-to-bill of 2x for ESG. Revenue in the Sensors segment increased significantly by 23% to EUR 745 million. And again, I want to highlight that due to the declining share of pass-through revenue, core revenue increasing stronger by 16%. Key growth drivers were the accelerating dynamics in air defense and our strong baseline business. Revenue of ESG developed as planned and contributed EUR 82 million to group sales. The margin performance of the Sensors segment was again excellent with an increase in adjusted EBITDA of 36% to EUR 117 million. The uplift in absolute margin of 150 basis points was driven by further economies of scale in our radar business, in particular for TRML-4D and the decline of pass-through revenue. In the Optronics segment, order intake developed in line with our expectations and amounted to EUR 139 million. As a reminder, previously including major contracts for armored vehicles as well as for periscopes and optronic mast systems for the Norwegian Ula class submarines. In terms of order intake, we expect to put several key orders for the Leopard and Boxer RCT30 in the second half of the year as outlined by Oliver. Sales came at EUR 108 million. Main revenue drivers were ground-based systems business and high precision optics FFM in Germany. This was offset by the South African entity, where we're currently conducting a technology change and the realignment of its market strategy. Adjusted EBITDA of Optronics stand up to minus EUR 15 million. This development was driven by lower volumes in the South African entity. Let us be clear, we're not yet there where we wanted to be. We've a strong backlog and further orders are expected to come. Nevertheless, in terms of execution, we've to improve, and therefore, we've full management attention on that. First, we're running a monthly steering committee of Optronics leadership team to monitor the progress closely. Second, we're in close communication with our OEMs and the end customer to align on development and production plans. And third, we laid the foundations with our investments in the digitalization of the products as well as internal logistics and sites for further ramp up. We now see first movement in the right direction, and I'll give you some color on this, now backed with concrete facts and figures. We're building the basis for transforming the record order backlog of EUR 900 million into sustainable growth. The production plans are set up, approved and closely monitored. On this slide, you can see the planned increase in production units in our ground-based systems business in Germany for this year. And these are only 3 examples of many. As mentioned, the business is already growing year-on-year per H1. However, the seasonal profile is rather weighted to the second half of the year, where we'll see accelerating growth of the German business. For the full year, we expect a double-digit production increase of our land vehicle sites as well as for the M1 Abrams Laser Rangefinder. And as you can see in the middle chart, we'll also produce and deliver the first batch of our See Through Armour System to our launching customer KNDS, for the Remote-Controlled Howitzer. With the initial integration, we're equipping our first customer with this revolutionary sensor solution, which provides a 360-degree situational awareness picture for every crew member inside the vehicle. My key message on this slide is our existing order book, paired with the current ramp-up of production capacity in Germany, give us visibility and that's a high competence in the business development. And on top of that, the move to the new Optronics site in Oberkochen early next year will further support and accelerate the growth from 2025 onwards. Let's now have a brief look at our net debt development, reflecting the partial funding of the ESG acquisition by new debt of EUR 450 million, net leverage increased to 2.8x in H1 2024 as expected. Excluding the new debt for the acquisition, net leverage would be at 1.5x. This shows that we're operationally on track and that we'll further deleverage to around 2x by year-end June '24 as outlined in our guidance. Let me now come to our guidance for 2024, including the contribution of ESG as introduced in April. First and foremost, we're fully on track to meet our targets and therefore, confirm our guidance for this year as well as our guidance for the midterm for all KPIs. For 2024, we expect a book-to-bill between 1.1% and 1.2%, revenue to grow around EUR 2.3 billion, and please be reminded with the continued stronger growth in core revenue and a smaller share in pass-through sales than in the years before. Adjusted EBITDA margin before pass-through between 18 to 19x. And let me be more specific in this regard. We expect the margin to be at the mid- to upper end of the guidance range. For adjusted free cash flow, we see a cash conversion of around 50%, net leverage at a level of 2x and dividend payout ratio between 30% to 40% of adjusted net income. Coming to a conclusion, let me mention the following key financial takeaways. Our impressive order intake of over EUR 1.3 billion leads to an order backlog at an all-time record level of EUR 6.6 billion. This provides us with an excellent revenue visibility for the years to come. Our efficient project execution supports our excellent profitability. We've received first prepayments from our German customer in April, and there will be more to come. The integration of ESG is fully on track, and we're very pleased with the contribution to our group performance. Therefore, we confirm our guidance for all our KPIs as explained with adjusted EBITDA margin before pass-through expected to be at the mid- to upper end of our guidance range. Our outlook remains promising, and we're strongly positioned for the upcoming growth. We expect further major contracts to be booked in H2 2024 as explained. We've set a strong basis and good visibility in Optronics to execute the order book. And last but not least, all planned synergies for 2024 with ESG have been confirmed. This and the large-scale increase of defense budgets globally will generate long-term sustainable growth for HENSOLDT. Thank you very much. And I'll now hand back to Oliver to give you an update how we move forward to HENSOLDT 2.0.

Thanks, Christian. Dear audience, I mentioned in my introduction that my 3 midterm priorities are: first, stepping stones in a comprehensive, strategic and organizational transformation that will safeguard and prepare our future towards the HENSOLDT 2.0. The midterm priorities lay the foundation for us to deliver capabilities at our customers fast and at scale and develop modular cost-effective products and more integrated and software-defined solutions. Together with our leadership team, we decided to use the addition of ESG to the HENSOLDT family as an opportunity to also evolve our divisional setup. In the future, we'll have 4 divisions focused on our different types of businesses, Radar, Optronics, Multi-Domain Solutions and Services & Training. Our core product divisions, Radar and Optronics will bundle our entire product business, including electromagnetic warfare and continue to focus on developing innovative defense electronic products and drive synergies through optimized cross-project operations. The Services & Training division will mainly maintain its current structure for stability and growth beyond maintenance, repair and overhaul. For example, including training and simulation as well as new service business model. And we'll create a new division to scale solution capabilities as the growth engine, the new growth engine for our company. This clearly signals to our customers the required separation of our product and the manufacturer and platform independent solution business. This Multi-Domain Solutions division will be a docking point for our customers who think across domains, and we'll combine the strength of our spectrum dominance and airborne solutions with ESG. All in all, the changes and challenges in our business environment are nothing but fundamental. And we've launched a project under the name of NorthStar to develop a vision for HENSOLDT beyond 2030 to support our next strategy cycle. As the name suggests, NorthStar will guide us in an increasingly volatile market environment and will prepare us for the next steps in European consolidation that we'll continue to actively drive from a position of strength. Dear ladies and gentlemen, our customers expect us to remain reliable partner, delivering much-needed capabilities. Our political stakeholders expect us to become an even stronger player in the dynamic European defense and security landscape and the capital market expects us to continue and even accelerate our growth. I'm confident that the steps I've outlined today will serve as a transformational road map from a trip from which we'll all emerge even stronger, more agile and better equipped to face these diverse challenges and seize the manifold and huge opportunities ahead. Thank you very much for your attention. We'll now gladly take your questions.

[Operator Instructions] The first question is from Ross Law with Morgan Stanley.

A couple for me, please. The first, just on the German defense budget assumption and your confidence in that base budget going from around 50% to 80% over the medium term? And then secondly, on orders, you flagged some key orders in the pipeline for the second half worth almost EUR 700 million. What's the progress on these? And are awards likely to be front or back-end loaded this year? And then lastly, on Optronics, you provided some information about issues in South Africa. Can you maybe just give us some more color around what the facility does exactly and what these issues have been?

Okay. Thanks, Ross. Of course, glad to answer. So we'll share the answers. Let me start with the German defense budget. So as a matter of fact, as I showed on the slide, I think we're pretty confident going forward because, first, we definitely see that until 2027, where still the extraordinary budget is phasing in, we're on the level of 2% GDP. And coming back to many engagements I've currently with politicians, I'm absolutely confident, as I said before, that it's not about the if that we'll then switch to sustaining this level of EUR 70 million to EUR 80 million over the time. What makes me confident, and I think that is actually what is also resonating with you is, first of all, we see, and that is given also my long experience in the German market that is really a paradigm shift. We see that recently, the German Parliament has approved new programs, and they're about to run for 100 decisions this year, where we don't see actually the budget lines in the plan, but they're willing to really feed the demand that is clearly articulated from the Minister of Defense on behalf of all the stakeholders of the Bundeswehr. So the clear evidence is the F126 additional 2 frigates, which we hadn't planned for this year, but which now came up also with the option deadlines running out. Second evidence is the Eurofighter, which is not yet in the parliament, but with a clear commitment of Chancellor, Scholz at the ILA Exhibition to buy 20 additional ones. And we've more coming up as far as the vehicles are concerned. And I'll come to that with regards to your questions on the orders. The second topic is that -- that fuels my confidence is that, of course, many of the programs that we address, I mean, talking air defense, talking the vehicles for the German armed forces,are clearly priorities, where I'd say the main direction has been set with some of the programs looking at NNbs in Germany, where we've more batches to come in the next years. So I mean, there's no way back on these ones. As a matter of fact, the customer said A, so we'll have to say B, C, D as well. So in that regard, I think the decisions that have been taken entering and prioritize into air defense, into vehicle buildup with regards to ship submarines that the decisions that were taken in the past are normative also on the midterm to walk the talk they're doing. And last is what we should not forget probably, and I introduced that, our clear ambition of internationalization. So we've concluded Phase 1 of our internationalization midterm priority initiatives, entering Phase 2 now, where also we're more systematically within account management, shifting focus to Europe, also selling B2B, B2C. And secondly, we've selected targets in global campaigns where we look for a strong alignment, looking at Singapore, looking at India, looking at the Middle East, looking at Taiwan, for example, where we can secure from the beginning, in line with G2G agenda, that export issues will be -- will not be the case in these ones. So that's my take on the question one, looking more on the orders. So coming to the land market, very clearly, we're in very close discussions with KNDS and of course, also Rheinmetall. But I mean, looking at Leopard, looking at Puma, what I've outlined, the infantry fighting vehicles, we definitely see and the 105 Leopards as the first instance. We've the next to come the Puma Boxer, where we're pretty advanced approaching the decision-making. We've additional batch of Puma, where we've aligned already the schedule of deliveries. We aligned on the specifications we've taken, which, of course, we see our initial preparations in the team on the operational excellence. And I'm pretty sure that in the second half, and that is the progress, the maturity of the discussions, we'll have the orders coming in and probably with that also some first cash milestones, advanced payments. And same applies for the sea. We recently heard on the orders, submarines, Minister Pistorius demanding 4 additional submarines. We've pretty mature discussions now, where we leveraged on a good relation of ESG looking at the F127, where we expect also decisions this year, early next year, where HENSOLDT with the support of ESG could play a major role. And last but not least, also on cyber, maturing, progressing on our deliveries on the PEGASUS program. We've started also with a backup, and that started at ILA Exhibition as well together with the Chief of the Air Force looking at G2G agendas, and we've 3 customers identified, where with one of them, we're already in the RFI stage. So that means also we see that we can multiplicate the PEGASUS on the midterm.

Yes. Last but not the least, Ross, thank you for your question. So first, maybe in terms of structure, we've to understand when you take the Optronics segment, it's 80% Germany and 20% South Africa. And in South Africa, we currently see 2 topics to have a technology change. So the gimbal technology changes in a generation, that means we cannot now do some revenues until that the gimbal is fully developed. And the second one, and we've wrote it and commented, we're currently realigning market strategy. That means we're much more thoroughly than the years before, in which countries we export the gimbals and this is how it behaves in South Africa. Nevertheless, I've to say, when you look at the H1 business and the Optronics German business, and this is a clear driver and Oliver was mentioning, the orders which are coming in, they relate to Optronics, Germany. We see now the first growth. And going forward, with 80% of German Optronics business, we'll see growth from a segment point of view.

The next question is from Carlos Iranzo Peris with Bank of America.

I actually have 2, if I may. The first one on cash flow on PDP. So how should we think about PDPs from Germany in the second half of the year? And then the second one, if you could please remind us the growth outlook for ESG and the midterm margin profile?

Carlos. So first of all, cash flow in second half. So you know that in H1, we're at the deepest level of our cash. So we've guided for 50% cash conversion. So this is quite good in line. So -- and we expect, of course, more advance payment. They should be in the region of what we've seen in H1. So this continues. But with that, of course, we invest further in working capital to prepare now for the orders we've done. So the conversion of the profit into the cash is in the range of the guidance. So this is ongoing. ESG. For this year, we see EUR 300 million for 9 months. That means that with the EUR 82 million with also a very strong Q4, we're very, very good in line. And going forward, we see this 10% on ESG, quite similar to our organic business. And when -- then you recalculate from 9 months to 12 months and plus the 10%, we see next year around EUR 400 million, which we've guided also for next year. So this is on a very good track and well in shape.

The next question is from Aymeric Poulain with Kepler Cheuvreux.

Yes. I just wanted to go back on the German budget initial question and your forecast for 2025, which just slightly increased compared to the EUR 80 billion. And I suppose in early July, there were series of articles suggesting that the budget could be cut, especially the Ukraine part of it, the EUR 8 billion could be cut by half. Just wanted to have your take on that? And is there some offset that you see that were not necessarily put in the draft budget? And indeed, if the Ukraine help is cut, what would be the consequence for the radar business in particular, and the margin outlook? Is there a sensitivity analysis you could give for this type of scenario? That would be the first question. And the second question, I think you gave the sales number for ESG, but you didn't give the EBITDA contribution for the quarter, would it be possible to have that? And looking at the new structure, the 4 divisions that you plan to have, when do you think you'll be able to provide a pro forma? And indeed, what benefit should we assume from this new structure? Is it a commercial clarity benefit? Are there some specific cost to add to build this type of new infrastructure? Just clarify the rationale for the new division plan.

So first question, Aymeric. Firstly, first question on the budget. So we've outlined next year 2025. We still see the EUR 8 billion for Ukraine military support. And when you look at Page 4, the EUR 4 billion are then coming from Germany and the rest of the EUR 4 billion shall be funded by the EU or the G7. There were also some discussions on that, that it will be funded from the frozen funds of Russia. So this -- we still see the EUR 8 billion as quite stable, and I do not see now any impact on air defense. This is still vital and I also expect further batches from the Ukraine in this regard. With that, we're on a good track with the margin. You've seen it now. Last year, we did around 19.9%. We're now 1 percentage ahead, and this is why we're quite confident that we're at the mid to upper range of the guidance. So this develops further, and we'll see how this outlines. So the contribution of ESG at -- for 1 quarter was EUR 9 million EBITDA. So this was fairly in line with our margin. Normally, you see around 14% EBITDA margin. So this is how we -- how you should model the ESG business. And last but not the least, I've -- I think I've understood it right that you asked of -- if the new divisional structure will have some additional costs, but this is not the case. It's just how we approach the markets and how we organize ourselves internally in order to create value out of the multi-domain solution, what is mainly also customer driven with the new focus also on these topics.

The next question is from Sash Tusa with Agency Partners.

Thank you very much indeed. I've really a follow-up to Aymeric's question I think. I don't think I quite understand the new divisional structure and specifically the multi-domain part of it. Should we expect a program like PEGASUS to be in this and so separated out from the core radar business?

Okay. Maybe -- this is Oliver speaking again, and great to have you here, Sash. I'll give you a bit more insight on the new divisional setup, and then we'll -- Christian will focus a bit more on the reporting segments and all of that. So yes, indeed, as you rightfully say, the Multi-Domain Solutions division, I'd say, at that stage. And please maybe as an upfront disclaimer, we're in the middle of sorting that out, that is rather giving the guidelines or guardrails for the future setup. And we actually have kicked that off with our senior leadership meeting, which took place 1 week ago. We're working now with the division heads as very clearly, this new setup is following 3 priorities. First thing is looking at our customers to be closer linked and looking at B2B, B2C customers to have a clear match. And as I outlined already, that is, of course, also reflecting the request of some of the partners of ESG, also growing in solutions where we've to have a stronger interdependency -- independency, sorry, between the product and the solution business. So customer is one thing. Second thing is, of course, the business. And that has, again, 2 elements: business continuity. Of course, we want to sustain the strong business that we've today, but we also want to open the door strategically to develop the business and agilely answer the dynamics that we see on the market. And last, of course, I mean, looking bottom line, it's also about cost efficiency. And that are the guiding principles together with this 4 divisional setup that we've shared with our experts, and we're running that exercise now with a top leadership team in the next week with the ambition to rather start in that direction in next year. So coming back to Multi-domain Solutions, as you rightfully said that there will be, I'd say, 2 sub-pillars in that. One is really looking at the customer where we want to leverage on the very strong conceptual and also system integration-wise capability that we've with ESG in the land, in the air, in the sea, in the cyber and the space domain. So that is also the divisional or in our nomenclature, it will be rather the business unit structure that ESG has today. And that is what we want to bring in the ESG business units with all their know-how into HENSOLDT. That is what we've in this 1 pillar, the very customer-oriented structure, where we look at solutions in the domains. And of course, there will be a bracket around that also how do we work multi-domain to get the understanding to interconnect with all the products that we deliver for the various domains. And indeed, as you said, there will be a second pillar, where we'd bundle our large programs. Together with some transversal elements that we've today, which we'll further cultivate on airworthiness, on cyber, on cloud and IT technologies and all of that, so that we kind of encapsulate that know-how in a very strong structure with, of course, operational mindset on one hand, but also the conceptual and customer mindset in order to deliver solutions in the future effectively.