Yeah, good afternoon, ladies and gentlemen. Welcome, and thank you for joining us for the Hensoldt's presentation of the 2020 preliminary results today. This is the first full-year earnings call after our IPO last September. My name is Veronika Zimmermann, and I'm head of investor relations at Hensoldt. With me today are our CEO, Thomas Müller, and our CFO, Axel Salzmann, who will guide you through the presentation now, and with that, I would like to turn the call over to Thomas.
Yeah, Veronika, thank you very much. A warm welcome to all of you. I'm very happy to present to you our preliminary results and our first analyst investor presentation for the whole year, as Veronika said. Thank you very much for joining us. Before Axel is going to guide you through our strong 2020 financials, I would like to point out some highlights of the past fiscal year and talk about our current developments. 2020 was a challenging year for all of us due to the corona pandemic. However, as of today, we can say that Hensoldt has come through the last year very well. Hensoldt has shown strong momentum and fully delivered on its 2020 guidance.
Thanks to significant order intakes, our order backlog has grown to a record level of EUR 3.4 billion, and we are especially proud to have won the step-changing EUR 1.5 billion contract for the Eurofighter radar, and as we always said, this contract for this Eurofighter radar is one of the most performant fighter radars in the world. Due to our high-tech platform-independent solutions, we remain very confident to win further high-volume projects in the future. We see a national and international order pipeline of around EUR 10 billion within the upcoming three years for our company. At the same time, we are executing our business plan in a highly effective manner with strong cash generation. We were able to significantly reduce our net leverage to 2.6 multiples. As a quick reminder, in the course of our IPO, we guided 3.0-3.5 multiples.
The high order intake is a great sign for our trusted and long-standing relationship with our clients around the world, and another sign of confidence, as you have seen, is the German government's intention to acquire a share of 25.1% in Hensoldt, and by the way, therefore it becomes a key shareholder in Hensoldt, underlining its intent to foster and protect key technologies like sensor solutions as a sovereign technology, as it has been pointed out by the German government in early spring last year in the strategic paper. Now, on the guidance of 2020, we fully delivered it. As I always say, Hensoldt walks the talk. You all know that 2020 was not just another year for us. We became a listed company and entered even into the SDAX only weeks after the IPO.
We are very proud that the trust of our investors in Hensoldt is justified, and we deliver what we promised, as I said. Our order intake grew by 55% to EUR3.4 billion, and this raises our book-to-bill ratio to 2.1 multiples. Top and bottom line show solid curves. Our full year 2020 revenues increased by 8.3% to EUR1.2 billion. Our adjusted EBITDA increased to EUR 219 million, and as I said, despite all the difficulties the corona crisis and pandemic has shown to the world, our adjusted EBITDA margin stands strong at 18.2% despite also ramp-up effects in large projects, and as I already mentioned at the beginning, thanks to our strong cash generation, we continued to deliver Hensoldt to 2.6 multiples. Now, we continue to invest, and we continue to invest significantly into our future.
The delivery on our guidance is a clear confirmation of our strategy to invest into innovations and effectively market them. We will not stop here. On the contrary, we will use our financial leeway to further invest in growth. We invest in our people and in our skills. And ladies and gentlemen, in 2020, we have created more than 500 new highly skilled jobs. And what makes me really proud, our employees are highly, even without exaggeration, absolutely satisfied and have shown outstanding motivation despite the difficult situation caused by the COVID-19 crisis. And we invest in technology. Last year alone, we invested on our own EUR 87 million in applied R&D to strengthen our high-tech portfolio. At the same time, we do not neglect investments into our efficiency.
We have successfully launched the second wave of our Hensoldt Growth Transformation Program, focusing on continuous improvement and supply chain management in order to further strengthen our competitiveness, our innovative strengths, our efficiency, and our customer satisfaction. We invest in our portfolio, and we further invest in our global extension. With the acquisition of Tellumat, completed in December, we do not only strengthen our presence on the African continent. We also expand our technological portfolio, especially in the area of our radio development. Another very interesting add-on acquisition has been the takeover of Sail Labs, a leading provider of artificial intelligence-based open-source intelligence solutions, and with Sail Labs, we now have a kind of virtual sensoring in our portfolio that complements ideally our existing sensor portfolio very, very well.
This is an important step for Hensoldt towards becoming one of the leading data analysis houses in the security and defense sector, not in Germany, because in Germany we are already the one and only, but in Europe and globally. Last but not least, we invest in our sustainability. We are working intensively to anchor sustainability as another core element of our corporate DNA. Today, we already source 100% clean electricity for all our main sites in Germany, and one of our sites in France is already a pilot and runs entirely on renewable hydrogen-based energy, and it is our ambition to extend this pilot to all our sites in Germany globally and therefore significantly positively developing our company in a climate-neutral company. For years, our sensor technology has contributed to the protection of endangered species, and here, we strongly intend to expand our activities in this area.
In addition to safeguarding the rhinos in South Africa and abalone sea snails, we are now actively searching for a global partner to protect polar bears on Svalbard in the future. Dear ladies and gentlemen, thank you for your attention. And before coming to the next steps of our company, I would like to hand over to my colleague Axel Salzmann, who will give you an overview on our financial developments.
Yeah, thank you, Thomas. A warm welcome to this audience call for Hensoldt, also from my side. I'm pleased to provide you with details on our strong preliminary financials for the full year 2020. 2020 was a step-changing year for Hensoldt in terms of our top line. We were able to transfer the very strong momentum of the first nine months of 2020 into the fourth quarter. We received orders worth EUR 2.5 billion and thereby increased our order intake by 144%. With the EUR 1.5 billion fighter contract, Hensoldt received the biggest order in its history. Besides this step-changing contract, the entire business developed as planned. This results in a book-to-bill ratio of 2.1 times, which is slightly above our own guidance. This also reflects our strong revenue visibility. Our revenue is fully in line with our guidance. It increased by more than 8% to EUR 1.2 billion.
This shows how successful we are in transforming contracts into sales. All this results in a firm order backlog at the record level. At the end of the past year, our order backlog was at EUR 3.4 billion and thereby EUR 1.2 billion higher compared to year-end 2019. This covers more than two times our guided revenue. These figures only refer to our firm order backlog. There's an additional soft order backlog of EUR 1.9 billion, which Thomas will talk about later in the presentation. We did not only grow top line. We also deliver on profitability and cash flow. Our adjusted EBITDA increased by 1.7% to EUR 290 million. Our adjusted EBIT grew by 4% compared to full year 2019. With an adjusted EBITDA margin of 18.2%, we are slightly exceeding our guidance. This includes past business and major projects in the early stage development, as expected.
These profitability improvements were not only driven by increased volume. They are, among others, the result of a more efficient project execution. In 2020, especially in the last quarter of the year, we also generated a very strong operational cash flow. The adjusted pre-taxed unlevered free cash flow increased by more than 160% compared to 2019. The key driver of this positive development is the underlying cash flow from operating activity as we further improved our working capital management. Thanks to an increased cash conversion of around 9% based on adjusted EBITDA, we also further strengthened our liquidity position. Looking at our net debt, we were able to further decrease from 4.3 times per fiscal year 2019 to 2.6 times per fiscal year 2020. In doing so, we did not only confirm but even exceed the guided net leverage of three times.
Besides the successful refinancing in the IPO process and reduction of capital costs by 100 basis points, our strong operative cash flow generation supported this positive development. This is another great example that we deliver on what we promised. What does it mean for our dividend proposal? We have guided a payout ratio on a pro rata basis of up to 20% of the adjusted net income. Due to the excellent business development, the management board expects to propose a dividend per share of EUR13 to the supervisory board and the AGM. This corresponds to approximately 20% of the adjusted net income 2020 on a full year basis. 2020 was an excellent year for Hensoldt. Given this great momentum, our operative excellence, our promising pipeline, and the resilience of the market, we confirm our guidance of 2021 and our medium-term target. Let's go through that line by line.
Book-to-bill, we expect the book-to-bill ratio to stay around two times for 2021, thanks to our highly visible order intakes and our strong pipeline. From 2022 on and beyond, we expect this ratio to get back closer to one time. Revenue, for 2021, we are highly confident to generate a revenue of EUR 1.4 - EUR 1.6 billion. This is mainly driven by the step change in order intakes last year. For 2022, we still expect growth in the mid-teens and then mid to high single-digit growing reported by our excellent pipeline. Adjusted EBITDA, as you know, margins in our industry depend on project mix and life cycle. In addition, our revenue will include higher pass-through volumes. This will be approximately EUR 100 million in 2021. Thereafter, in the short term, there will be around EUR 150 million impact on our headline margin.
If you look at our margin, excluding this pass-through business, we expect to keep the level of around 18% in 2021. This is driven by effects of ramping up of major projects in the short term. Medium term, we expect margins return to 2019 levels, excluding the pass-through business. So when you look at our core business over the medium term, we expect to see a sort of enviable margin that we have seen in the past. For the adjusted pre-tax unlevered free cash flow, we strive for cash conversion of around 70% on the adjusted EBITDA in 2021. For 2022, we expect the overall net debt and capital position to stay relatively stable in absolute terms. In the medium term, we expect the net debt and capital to slightly decrease as a percentage of revenue.
Thanks to our tax loss carried forward, we expect our cash tax rate to remain rather low over the next year in the range of 10%-12%. In the medium to longer term, we expect it to tend to our statutory tax rate of 28.3%. Net leverage, we are targeting a net leverage post-IFRS 16 of around 2.25 by year-end 2021 and a net leverage of below two times in the medium term. Dividend, in terms of our dividend policy, we expect to pay out ratio of up to 20% of adjusted net income until 2022. In the medium term, we are targeting a payout ratio of 30%-30% of the adjusted net income. CapEx and intangible investments, as discussed, we have significantly invested in our business over the last four years. Today, we are well positioned for further growth.
Going forward, we see the total investment level stabilize around EUR 85-EUR 90 million per year, EUR 50-EUR 55 million, of which I expect it to be capitalized on R&D. In the medium term, we expect that the capital expenditure will, however, be around 2%-2.5% of revenues. The capitalized portion of R&D will normalize in a range of 2%-3% of our revenues. D&A, we expect our D&A to stay flat at around 4% of our revenue. The capitalized R&D-related D&A will be around 1%-2%. As you can see from the slide, we have a clear vision and a plan for our business in the future. We are confident in our ability to deliver these targets. With that, let me go over to my final slide to wrap it up. Let me summarize the main points for the financial year 2020.
We are fully on track in all KPIs. We have delivered or even exceeded our guidance in all KPIs for 2020, and we confirm the overall short and midterm guidance for all KPIs. Further growth in top line and bottom line. Profitability remains on a high level due to efficient project execution. Further investments in technology leadership. Operative cash generation enables further deleveraging, and dividend policy unchanged. With this, I now would like to hand over to Thomas again.
Yeah, thank you very much, Axel, for providing this in-depth look at our 2020 financials and our guidance for this year 2021. I would like to use the next few minutes to highlight how we are going to achieve our objectives for this year and for sure also in the future. And to keep it short and simple, we will continue our successful strategy of the past years and will further execute on our business plan. Now, you remember we talked very often about our soft order backlog. And what I can clearly pass as a message today, we can very happily say it's continuing further and maturing further. As I mentioned earlier, we are looking at an order pipeline of around EUR 10 billion for the next three years. And we see that our soft order backlog continues, as I said, to mature on a daily basis.
And let me give a quick overview of the latest developments. The contract for 38 Eurofighters in the Quadriga project and the four ships of MKS 180 are already with respective OEMs. Contracts are negotiated, and we expect the downflow in the coming weeks or months. For the Pegasus program, we have submitted our proposal in December to the German MoD. And the contract negotiations are underway as I speak. Unfortunately, I cannot give more details about the positive developments we see there. And we also expect further orders from Spain, as indicated already last year, especially on the Halcon contract, the 24 fighters, which are following the German Quadriga contract, even linked to the German Quadriga contract. And not to mention, at least, the production contract in Spain, as we said, will be expected also for 2021.
So if we take this together, we are clearly, well, we are clear and we are clearly seen being above EUR 2 billion again this year going for the guidance Axel Salzmann presented to you. On the big European programs, some new developments. You may have read in the press that the Future Combat Air System between France and Germany is not smoothly going every day. Ladies and gentlemen, as we know, European programs are never smoothly going from a day-to-day perspective. But it is the key program for Europe for the next decade to come. And we, as Hensoldt, are representing Germany in the middle with our sensor solutions in the midst of the program. And we are looking positively into the future. There will be the demonstrator phase 1B and the phase 2, which are coming up.
We are quite sure that we will have some news in the next couple of months to come. Maritime Airborne Warfare System is a little bit smaller, a little bit less fast, but on a very good way. We received the first studies in the program, and we are happily looking forward into the future. Finally, but really not least, the Main Ground Combat System is on a good way. Our partner in Germany, KNDS, which we discussed yesterday, the MGCS, we are very happy that things are moving here too. The future on a lasting basis is getting also more and more mature. I don't talk about the Eurodrone. I don't talk about the MkIII Tiger helicopter. I don't talk about a couple of other programs like the F123, like the F124 in Germany, and other European programs.
It's really, really promising, the development we see in front of us. And if you'll see at the next page, and you know the page very well. You see that the sensor solutions and defense electronics in platforms are growing exponentially. And the Leopard 2AX, and we talked about it yesterday with Krauss- Maffei in Munich, will be far beyond the 45% of sensor solutions in a lot of areas where we are contributing to it. For example, with our virtual environment, see-through armored systems, which will be a vital part of the next Leopard 2 generation tank. Same for the Eurofighter. The Quadriga already has more than 40%, beyond 50%, significantly beyond 50% electronics aboard.
And we are only starting here to further development the Eurofighter for the radar for Hensoldt, but also for the electronic warfare systems, the self-defense systems on the fighter into the future. Last but not least, to always mention the MKS 180, which is beyond even the F125 class, which is currently in implementation in the German Navy. And here again, we will be far beyond 50%. And not to stop here on the exponential importance of defense electronic solutions in weapon systems. The spending in itself is even strongly growing and growing further despite COVID. I would even say, because COVID has happened, a lot of states are now even more eager to invest in defense because it's a one-to-one immediate creation of high-quality jobs.
And when you have seen or participated in the digital Munich Security Conference of last Friday, where for the very first time the American president laid out his commitment to the North Atlantic Treaty Organization, he required from Germany and Europe to be a vital second pillar in the North Atlantic Treaty Organization and to increase the spending. And the Chancellor, the French President, and Boris Johnson from the UK, they strongly supported this view. So we are happily looking into the future. And especially, as I said, we have this double effect. It's a super cycle we're talking about. We have the exponential growth in defense electronics. And we have, on top of this, the growth in the defense spending in Europe, especially, which is, as you know, our home market based on our unique position in Germany.
Now, what remains for me to say, Hensoldt is in an outstanding position. We are well positioned to benefit from sustainable growth momentum in the defense industry, and before I answer your questions, let me quickly summarize. We will continue our focused M&A strategy, targeting bolt-on acquisitions, which are complementing our technological portfolio and the global enhancement and presence. We will continue to push leading-edge technologies like data analytics, cyber protection, and next-generation fully digital radars and electronic warfare systems. You remember our passive radar, which is not detectable, but detects stealth fighters.
As a provider of sensor solutions, we will continue to benefit from the super cycle, the tailwind in our home countries, and a strong order backlog and a substantial pipeline, and last but not least, we will continue to expand our sustainability and ESG activities. As you have heard what I said, we will set ourselves ambitious goals. We want to set standards in the defense industry in the areas of environment, social, good corporate governance. That's what we are going to do. I invite you to take a look at our first sustainability report, which we will publish in April 2021. Thank you very much for listening. Now the Q&A is open.
The first question we received is from Sebastian Growe of Commerzbank AG. Your line is now open, so please go ahead.
Yes, good afternoon. Thanks for taking my questions, Oliver Dörre, Thomas, Axel. It's a couple of aspects. First one, I would like to start on the EBITDA side. And going back to the quarter four, can you help us better understand the key drivers behind the year-on-year margin decline in quarter four, particularly with regard to mixed effects that we should be aware of? And eventually, if you could also quantify the dilutive impact from the ramp-up of large programs. And related to it, yeah, if you could provide us with certain guidance eventually for the year 2021 in terms of this impact from the ramp-up of large programs. That would be it on EBITDA. If we could start there, that would be much appreciated.
Yeah, thank you for your calling and for your questions, Sebastian. I think that is a normal way how these big projects are executed. And that means you take a very cautious positioning in your calculation when you are starting a big project. That means normally you are well below what you are normally achieving. Simply to share with you an example, I shared that also during our IPO process. When I'm looking through the project which Hensoldt had executed in the last five years, when I'm comparing the entry calculation with the final calculation, you can see, and that is to give you a feeling about the situation in this kind of project, of roughly two percentage points, which is over time then materialized to the P&L.
I think you will understand that we cannot share with you on the specific project, the Eurofighter and K1, the margin dilution, because that is agreed with our customer, the federal governmental structure, the Ministry of Defense, that that is secret and has to be kept secret. I think when you're looking to my total margin, which I have provided to you, we have delivered 18.2 percentage points, which is quite ahead of what we have got for this year. We have grown in absolute terms to a level of EUR 219 million. So that shows the progress. And even for the upcoming year, 2021, we have said, okay, we will be around the 18% excluding pass-through. And that means that we are continuing these high margins in all the projects.
Second, yeah, there was also some pass-through in 2020, which is, let's say, in the neighborhood of EUR 30 million, which has, and that the nature of pass-through has really no margin, which is comparing or at least no margin with them. That is part of our business, which we are right now in. Right now, we are in as a system provider for the radar into the Eurofighter. And that means that for the pass-through parts, we cannot really place our margin besides some handling costs.
Okay, that makes sense. Thanks for that. The second one is then around the cash generation and also the use of cash on working capital. If I may start there, you provide the framework for cash conversion from adjusted EBITDA. However, you have not provided any sort of numeric guidance on the working capital that you are expecting. For that reason, may I ask where working capital has ended in the year 2020? And if I then also might ask for the embedded assumption for the working capital going into the year 2021, that would be helpful.
So as you know, I have placed myself on a, let's say, cautious positioning, saying 70% of cash conversion. I think when you're taking my guidance, doing simply the math, maybe from the midpoint of our revenue guidance, you will then easily achieve to a figure which you should incorporate into your models. I think I would like, if you agree, Sebastian, I would like to stick with the guidance which I have outlined to you during my presentation.
That's fine. And for the year-end level of working capital, can you at least share that number with us? In 2020, I mean.
We are right now on testing, but I think you should assume that we did a very great job, especially in the receivables. You will see that when we are sharing with you the total balance sheet, the full balance sheet. But I have to say, and sorry for that, but I'm very proud about my organization and about the total organization, how they have handled during this year 2020, the cash positioning in all aspects. And that is really something which makes me proud. It gives me the confidence because I have said in each and any conference call, in each and any presentation to the investor, I will keep the net working capital in absolute amount more or less flat. And that is exactly what we are looking for.
And that is exactly why we are seeing contribution to that, besides effects which are related to the seasonality of some projects in the cash interim. But I think that is the, to me personally, the big achievement beside our big contract, beside the revenue development, beside the very positive EBITDA development, the very positive cash development. And out of that, the very positive decrease in our net leverage ratio. That is simply, Sebastian, simply we are following. We are doing what we are saying.
I couldn't agree more. The last one that I have around the cash is on M&A. You said that you are still obviously pushing for bolt-on targets and then deals. Can you talk around the pipeline and then to what extent really this significant improvement in the leverage might have bolstered your confidence in doing even more than eventually what you had planned for three months ago?
First of all, I think the management has taken the positioning, and we will keep with this positioning, so the first focus of our company is by deleveraging company, and that means that we are by the end of 2021 below 2.25 times. Having said that, I think when you're looking to all our acquisitions which we have executed throughout the last four years, we were very rational with our investments. We have followed a clear strategic dimension, and that means product enhancement, geographic enrichment, or technology enhancement, and I have to say that, and I'm very proud about, we are not overpaying a company.
We are very much rational, and we are asking ourselves, is that directly from day number one accretive to our value in the company? And we are looking for that, so we are looking for bolt-on acquisition, as Thomas said. We have a pipeline in place, but we will only do that if that is following our strategic pillars and is following our overall guidance that we were able to deliver the company below 2.25 by year-end.
Okay. And then the last one for Thomas, it's on the order pipeline. I think on the last call, you made a comment around an additional EUR 1.4 billion order potential related to the Corona Fund in Germany. To what extent is this reflected in your book-to-bill target of around two times for the year 2021? And when might we expect first orders coming out of that very pipeline?
Sebastian, as we said last time, we expect the first orders coming out of this additional money this year already, prior to the German elections, as you know, and definitely also next year. So we will see a further increase in the German defense budget. And this is already proven for 2021. The 1.4 is a part of the increase.
Any magnitude eventually around this 21 lot that you might see?
Yeah, I would very much like to get all of the EUR 1.4 billion. But unfortunately, I can't give you any more details currently because we have to wait until we know more precisely what are the programs which will be further, which go ahead, not planned yet. And as you know, we are the only ones in Germany who are participating in the sensor solutions area. So we will anyhow benefit from it. The amount, I can't tell you.
Sounds encouraging. Thanks. I'll go back in line.
The next question we received is from Oliver Dörre of J.P. Morgan. Your line is now open, sir. Please go ahead.
Hi, good afternoon, Thomas, Axel, and Veronika. I have three questions, please. On your leverage guidance of below 2.25 times in 2021, it's quite open-ended. I mean, if we look at your revenue and EBITDA and free cash flow conversion guidance, it implies that net debt could drop by perhaps EUR 100 million in 2021, assuming no M&A. And that would put your leverage below two times. So I was just wondering if this guidance was perhaps on the conservative side and whether you see any chance that leverage could get below two times before 2022. That's my first question. And then secondly, you had other non-operating costs of EUR 13 million in 2020.
It was down EUR 5 million year- on- year. And I wondered if you could just clarify what they relate to and perhaps provide some guidance on how we should think about how those costs evolve in the future. And then thirdly, one for Thomas. I know you said you can't comment on the ongoing progress regarding the Pegasus order, but are you able to comment at all on whether anything has changed with respect to the timing of the signing of that contract compared to what you said at the time of your IPO in September? Thank you very much.
Hi, Dörre. I really love your question concerning the ability to deliver the company. What I say is you are not right. No, I can't. But I think I would like to stick with my calculation, which means that we are guiding the market to 2.25. And again, I have to say congrats to your calculations, but I could not confirm what you have calculated for.
Second, non-recurring cost, it's mainly cost to Hensoldt GO, which is our efficiency program, to some M&A activities, which are related, and some project management integration cost, which means for integration of the companies which we have acquired. So for the future, I think the guidance is right now that we are saying non-recurring cost should be in the neighborhood of EUR 15 million, maybe. We will see how it turns out. That is the nature of non-recurring cost that you cannot really plan it. EUR 15 million is something which you could consider.
Okay. So, thanks for my part of the question. I can really confirm what we said last year. And as I said, especially big programs, the Pegasus program is really mature. How can I say without telling the things which I'm not allowed to tell? We are on a very good track.
Okay. So, I have. Thank you. Thanks very much.
Thanks a lot.
Thank you.
The next question we received is from Christophe Menard of Deutsche Bank. Your line is now open, sir. Please go ahead.
Yes, good afternoon. I had three questions. Sorry. I mean, my line connection was not very good, so I may ask a question that has already been asked. Sorry for that. So the three questions is, can you update us on the Hensoldt Go restructuring plan, and especially the positive impact it had on your net working capital in 2020? What impact it will have on 2021? I understand that you are guiding also to stable net working capital in 2021. So any light on this is interesting. I mean, during the IPO process, you were talking about the gross margin improvement. Can you also update us on this and on variable metrics like on-time delivery and the progress you're making on procurement, cutting cost of procurement? So that was the first question.
Second question is, by division, I mean, you had a very strong performance in Optronics at the margin EBITDA level. What is the sustainability of that margin? And what type of guidance can you give us on that specific segment? I know it's one of your strengths, but you had, I mean, from the limited historical data we have, it was a very strong performance in 2020. And the last question is more on the, I would say, on the programs you've mentioned, Euro MALE, Tiger. Yes, we're hearing some news that it's a bit delayed. Does it change anything in your contract execution planning, or is it still in line with what you laid out back, I mean, when you first presented those programs in your schedule? Thank you.
Hi, Christoph. It's Axel speaking. Nice to hear you again. First of all, concerning the Hensoldt Go, and you asked for more details about the impact out of Hensoldt Go, especially for net working capital in 2020 and 2021. I think we are well on track with these Hensoldt Go projects. We are delivering what we have planned for internally, and we are monitoring that very strictly. And that leads me, and I think you know that, to my guidance on net working capital, that more or less we will stay in actual terms flat in comparison to the previous year. So that is really something which we are proud about.
And obviously, Hensoldt Go is not only a net working capital project. It's also an efficiency program. So we are looking again to further improve our execution on efficiency. And that is something where we are making also good progress. But I have to say, Christoph, I think we will not guide on specific topics. We will not really open up all the specific topics. I think that brings not more insight into that. It's more or less that you are taking these blocks when you are dealing with your models.
Yeah, we do think we can sustain these margins, even if I'm considering that we have to take into account the start of the big projects such like Eurofighter, and if I'm considering that we are receiving this year, as Thomas has said, the next big project. But the normal thing is in these kinds of calculations that you are starting with a careful margin, and afterwards, you will improve that. And we have seen that, as I've said, in the last five years in each and any big project.
And right now, we do assume, and we should assume that we are improving the margin in these kinds of projects. So what I'm taking as a first step is that I'm taking all the risks, and I'm really calculating the gross margin on a very prudent way. And then we'll see after we have walked through the project how the margin will improve. I hope I could give you some more insight to your questions.
Yeah. And Christoph, from my side, Thomas speaking. You know that in defense, very often there is a slight pull or push effect on military programs, especially if they are European programs. But we are always very careful in planning them appropriately. And therefore, a shift in one program and a pull in the other program always balances. And therefore, we still see some even positive effects this year. And you remember the question we answered on the budget increase.
We will again see a budget increase in Germany and further increase in the future. And this will positively have definitely a positive impact on us. And if you go through in detail, we can do it in a Q&A session more in detail for all the programs we mentioned. As far as we can answer it, yes, it's a positive trend. This is really. I can really say it's a positive trend currently in our industry.
Thank you very much. Thank you. Very clear.
Before we take the next question, just a reminder, if you would like to ask a question, please press 01 on your telephone keypad now. And the next question is from Sasha Tusa of Agency Partners London. Your line is now open. Please go ahead.
Thank you very much. Good afternoon. I've got a question about the position and role of the German government as a shareholder in Hensoldt, and a number of questions. I mean, first of all, do you understand that they intend to appoint a director or any other representative? Do they have or will they get a golden share in the company? And do you have any indication of how the government might look at future M&A or share issues? And I suppose the sort of the wrapping question is, what do you think is the benefit, particularly the benefit for other shareholders, of having a government shareholder? Would you expect to get a greater share of orders, better pricing, better payment terms, or more lenient tax treatment? Or is there something else that we should think about as being the benefit of this large shareholder?
Sash, first, warm welcome, and it's a pleasure to talk to you again. I think we first talked to each other 20 years ago, something like this. It's great to hear you again and to talk to you again. Really. It's a pleasure, and now, it's even a bigger pleasure to answer your questions because you remember the old times when we have under Tom Enders. We are different, clearly, and why I'm saying this, I'm absolutely or we are absolutely welcoming the German state's participation in Hensoldt. What the Germans are doing is it's coming back to what I said, that last year in spring, the Germans published a strategic paper where our sensor solutions and defense electronics are of a key sovereignty question for the Germans.
They want to get at the same level as the Italians, the British, the Swedish, and the French and the Spanish to think about minority or whatever in the future of consolidation in Europe first. Second, M&A and operational business. It's a clear conditional sine qua non of the German participation that they are not interfering in the day-to-day business. That's crystal clear. By the way, a golden share, they already have a golden share in Hensoldt. Furthermore, we strongly agree upon with the German government that we will benefit from it. You know that there are two leading ministries in Germany.
The one is the Ministry of Economy, and the other one is the Ministry of Defense, which are strongly supporting Hensoldt due to the fact that they declared and defined the core business of Hensoldt as being of sovereign importance. Therefore, yes, we strongly believe that we will benefit from the participation as an anchor shareholder in Hensoldt. And you may have seen the price which they are prepared to pay. I cannot comment about the price, but it gives you an idea of what they believe due to the fact that they for sure have the best knowledge about future programs in the near time where Hensoldt will benefit from German contracts and European contracts based on the German participation in European contracts.
Great. Thank you very much indeed.
Thanks, Sasha. Looking forward to see you soon, hopefully personally again.
I very much look forward to that. Thank you.
As we receive no further questions, I hand back to Mr. Salzmann for closing remarks.
Thank you all for listening today. Should you have any follow-up questions, the investor relations team is happy to answer today or tomorrow via email or phone. Thanks again. Have a great day and stay healthy.
Thank you.