Earnings Call: Q4 2022

Mar 15, 2023

Much welcome this afternoon. Thanks for your interest in OHB and for joining our annual report 2022 analyst conference. We do it this time only digitally, so we're not having a personal meeting in Frankfurt. I hope you have been able to download the documents. Martina will share the presentation with you, and Kurt and I will answer questions. As always, it's a quick run through the update slides, and then, obviously, I'm sure there will be questions. We have put our results on the website earlier this morning, and again, maybe let's walk quickly through. I think I have Now, okay. This should now work. We have to check. Here we are. Yeah. Here we are. Yeah. Quickly, the business segments, nothing has changed here. This is the chart you all know since our capital market day. No change in the consolidation area other than that we are looking at the Rocket Factory participation as an IFRS 5, so-called discontinued operation company. This has been decided recently that that's the right thing to put it, has been decided in late 22. Kurt can answer a few questions there. Other than that, basically all is similar to what it used to be. Moving onwards quickly just to give you an update on our, let's say, a business model or how we see space-based application becoming more and more important. Starting from our purpose, utilizing space to find answers to complex questions of our times. Of course, it's the quality of life on Earth, climate change, environmental aspect, security aspect, that creates urgency, complexity, and where space provides solutions. Obviously for, as a tool in the digitalization age for resilient and reliable infrastructure availability, that data integrity is also a major mega trend why we believe space solutions will have a good future and solid growth coming up. If we look very briefly at the takeaways of the year 2022. Of course, we had a very good year. Profitability slightly exceeding our guidance. We had an EBITDA of EUR 99 million Euros. We predicted EUR 97 million, so that's good. We had an EBIT of EUR 63 million versus a guidance of EUR 60 million. Total revenue reached EUR 1.001 billion. The guidance we gave at our Capital Market Day for this year was between EUR 950 million and EUR 1 billion. The previous guidance from early 2022 was higher, around EUR 1.2 billion. We reached the reduced guidance that we gave earlier in this year. Again, the profitability was exceeding even the previous long-term guidance. Of course, that had a positive impact on margins. First time since 2009, we're more than 6% overall EBIT margin. The earnings per share are at a historic peak of EUR 1.97. We increased our dividend recommendation to EUR 0.60 per share. That's a 23% EBIT margin plus, and it's a 25% dividend increase. I guess that's summarizing quite well the key numbers of 2022. It was a very good year, and we are happy with what we achieved. If we look at the bigger context over the last 5 years, you see that we are recovering with regard to revenues, after the pandemic, COVID slowdown. Basically, we're at the same level where we were in 2018 with regard to revenues. Obviously, after 2019 and 2020, we had a reduction based on slowdown of deliveries and generally related to supply chain. Of course, let's say shutdown-related influences from the pandemic, and we're recovering from that. Profitability is going well. It was actually a record year with the numbers that we have, so we are quite happy with that. Looking briefly through the 3 business divisions. Same trend here in Space Systems. Overall, slight increases over the last couple of years, returning to the level of 2018. In terms of profitability, record years with EUR 74 million in EBITDA and EUR 48 million in EBIT, doing quite well. Margin increase to 5.9% over the previous year, 4.4%. Going to the next point. Here's aerospace. Very good. Aerospace, of course, at a lower level, same story here. Of course, aerospace has its own set of difficulties. The transition of Ariane 5 to Ariane 6 is an issue. You see at the profitability a recovery here. We are back at positive numbers. Last year, we had a slightly positive EBIT. Now we are up to EUR 6 million. This is at least the right trend. We're not where we want to be in aerospace. I think it's at a recovery. Digital is moving ahead. It's on its growth, EUR 106 million. Profitability is slightly lower than it was in 2021. That's mainly the case because in 2021 we had a profitable one-time project. Overall, we are quite happy with the margin of 10% EBIT margin. Digital is doing good. Again, the summary of it all is positive. We had a good year and within our expectations. Looking to the balance sheet side, in principle, not much has changed. One change that we mentioned briefly is the way how we treat the RFA, the Rocket Factory. It is now part of others under current assets. That's why this number increased significantly. Everything else is basically the same balance sheet structure. Obviously, we're still having a quite significant part in contract assets. We expect a couple of those long-lasting programs to close this year. We're just before closing the Heinrich Hertz program in the near future. Cash was at EUR 106 million. Also we did receive couple of late receivables in 22. Looking to the other side of the balance sheet, the equity and liabilities, what is notable is a significant increase in equity from EUR 252 up to EUR 293. Obviously that's the accumulation of the profits we made in 2022, plus the decrease in provisions for pensions. That has been another effect resulting of an increase in interest rates. Obviously, the provisions have been reduced because there's a higher interest rate reducing that. Other than that, I don't see many specifically points worth mentioning on the balance sheet, but maybe there are some questions in the Q&A session to that. Free cash flow overall was minus EUR 14. The operational cash flow was plus, I think, EUR 8 million-9 million. We did have some cash flow out of investments. It's on the same level as it was last year. That is okay. It's the net debt is still at a high level. It's at EUR 102 million if we exclude the pensions. CapEx was at EUR 20 million, so pretty much the same level. We had a lower rate of own work capitalized in last year, EUR 12 million. It's actually now, if you look at it's decreasing overall as a balance sheet. We amortize more than we capitalize. That's, I guess, shows how prudent we are dealing with this. What I expect on the net debt side is that it will hopefully have a positive impact this year coming from the conclusion of a couple of long-lasting, larger programs, Heinrich Hertz and SARah, which are scheduled to be launched this year. Yeah, this is what I talked about. The overall net debt development was increasing over the last couple of years related to work in progress, as I said, Heinrich Hertz program, SARah project. Investment is at a pretty stable level with EUR 20 million, slightly below where we used to be before. In the, in the past years, we had a significant investment year in IT infrastructure. This was a little bit lower. Their own work capitalized, as I said, a little bit lower than the amortization, because overall this number is slightly going down. That's a, I guess, a healthy level. It basically neutralizes itself. In terms of return on capital employed, we are at 12% as we were in the last year. The free cash flow overall has been slightly negative due to the investments. We have been happy or okay with the positive operating cash flow as we predicted. That's not, I guess, a surprise. We're within our expectations. Looking at the order backlog, this is a chart you all know since many years. With EUR 1.875 billion, this has been slightly higher than it was at the last cycle when the year of the Ministerial Conference. This somehow reflects the Ministerial Conferences. There was one in 2022, there was one in 2019, and there was one in 2016. That's where the decisions are made for new programs from our ESA business. In the following years, it's always a challenge to turn that into contracts, and this is what we are currently working on. We are quite optimistic that in this year, 2023, 2024, it will increase again. We do feel quite comfortable with the work in the backlog of EUR 1.8 million compared to a company that has a turnover of slightly below EUR 1.2 billion this year. That's what you see here. We do expect total revenues of EUR 1.176. We do expect a compound annual growth rate of 11% in the coming couple of years. We will see growth. This is the identical guidance and identical outlook that was given two months ago at the capital marketplace. Nothing has changed here. The significant number I see on the financial results is that the EBIT was developing as planned from EUR 47 million that we had last year, exceeding EUR 60 million, so slightly above our guidance, which was EUR 60 million. That makes us very comfortable that we move on our path into the future, having EUR 70 million EBIT this year. That's why again, we confirm our guidance for this year and we confirm our outlook for the next couple of years that that's what we are planning to achieve. Now there's no specific chart, but it has been mentioned before on the numbers. Our recommendation of EUR 0.60 as a dividend is based on the development and profitability. We believe that now we should increase that number significantly. 25% is a healthy dividend plus. Slowly we're moving in the direction of having a balance between, of course, a space industry high tech growth stock, but also having an aspect of value there that for in the future will hopefully show more and more growing dividend policy. Quickly running through the business segment highlights. We had a couple of successful launches last year. We launched, and this is obviously for a satellite manufacturer, the things that are most important. All have been successful. All satellites work very well. EnMAP was launched in April, and with the MAT launch was done successfully. In December, the Meteosat Third Generation satellite was launched. We're very happy to provide with those satellites, especially with EnMAP and MTG, significant part of, let's say, the databases for climate monitoring, weather monitoring, the whole environmental mapping is a core part of our, let's say, business legacy and our business successes in 2022. Order intake was rather low last year. We had a FORUM payload, which was important. There have been another 4 FlyEye telescopes been, I think that it says delivery of 4 additional, but I think it has been the order of 4 additional FlyEye telescope. It was an order intake. We have the IRIDE constellation was sold by OHB Italia and a prime contractor ship actually also in Italy, OHB Italia for the science, ESA science mission Comet Interceptor. A good year. A big success in terms of public appearance was also the success of the asteroid deflection mission that NASA's component of the AIDA mission, the DART mission was successfully implemented and touching down on the Didymos asteroid. We are working obviously on our Hera mission to be launched next year then. In the segment aerospace, what can I say? Of course, we are moving along with our RFA development, RFA One. That's moving along very well. We had successful engine tests. That's the most important achievement of 2022. There has been a long list of stuff that we achieved. There has also been a, for our, at the aerospace rocket component business, there's been a successful launch of the SLS, where we provide a couple of structural parts we sell to Boeing. Ariane had good order intake with 18 launches sold to the Kuiper constellation of Amazon, that's basically moving on. Obviously, overall, the whole, let's say, Ariane community is waiting for the inaugurational launch of Ariane 6. Ariane 5 will be completed this year with 2 more launches, actually the last one will be in June, the launch with our Heinrich Hertz satellite. Let's see when Ariane 6 will launch for the first time. On the digital business, we had a very successful acquisition with GEOSYSTEMS. We're very happy with that company. It is basically profitable. It makes the numbers that we expected it to make, it expands our downstream competence in terms of data downstream applications. That has been significant, even though it's a small company, but it adds a lot of understanding and knowledge on our side. We had delivered a big telescope. This is just a very specific success that we had as a group, is that we have been on 3 levels with 3 different products, actually from 3 daughter companies of OHB, been successful in the small satellite portfolio. That obviously, OHB is known as a big satellite manufacturer. We build geostationary satellites, weather satellites, photon class, especially on these 3 missions of these 3 product lines. InnoSat, M3 Platform, and Triton-X, we had significant market success. This is the typical class of the new space type of 100 kilo type of satellites. you know, that Swedish product had a couple of successes again, and most notable one is the progress, actually the constellation to be implemented in the so-called Arctic Weather Constellation. Two more satellites have been sold to Satlantis. It's really a standard platform that our Swedish colleagues have been developing over the years, successfully flying with the support of the Swedish Space Agency, now still being a very successful platform also in a very competitive environment. M3 is a very small platform, 30 kilo platform, and we have been selected for a constellation from Italian government funding, IRIDE Earth observation constellation. Twelve satellites have been firmly contracted and twelve more hopefully will be added to that, so it creates a little constellation, for optical, surveillance of the Mediterranean and Northern Africa. We are quite happy that that product range is also well covered in OHB in an industrial format. Triton-X is another success. Has been a competitive tender for the SARah Mission, and we won that, so we are quite happy to complete that satellite now out of bed. The message here is that even though OHB is known for large, more institutional satellites, we are very active also on these smaller satellites. Those of you following OHB know that that has been in our planning and strategy for a long time, but this is now the time where we really deliver and where the first missions are actually successful launching. By the way, last year, the MAVS satellite that I was just mentioning a few slides ago has also been on the InnoSat platform, also, the M3 Platform satellite had a satellite called EAGLET-2 that had been completed. This is not new. Those are established product lines that are now more and more successful. Yes, first observation remains our, let's say, key area of activity. EnMAP, I mentioned it. FORUM, I mentioned it. The IRIDE small satellite constellation, I mentioned it. Also the ESA Ministerial Conference has been very successful in terms of Earth Observation. We have been quite happy with the ESA Ministerial Conference, Earth Observation. Again, this, the biggest budget was EUR 2.7 billion out of the EUR 16.9 billion overall subscription. We have been happy with Germany remaining the largest contributor. This hopefully will be converted into orders this year. This is just to remind you about the overall budget of ESA, around EUR 5 billion annual budget. ESA is increasing its investments and this is the EUR 5 billion is from member states, and then there are about another EUR 2 billion coming from European Union mainly, and a small portion also from EUMETSAT and others. The institutional market, that's the message. The institutional space market is very healthy in Europe, and we are very happy to be a strong part of that on the industrial side. We look at, of course, what has changed in 2022. Obviously, the whole view of sovereignty, European sovereignty, has become a very different view. Our major success here is that we are the leading company for the next phase of the so-called Odin's Eye study. That is an early warning missile defense concept from Europe. It's a big consortium with dozens of companies. Germany is leading. OHB is the leading company. The next study phase is about EUR 70 million. Obviously, we're hoping that Europe will move on to implement a missile defense, space-based missile defense infrastructure under OHB's leadership. Of course, sovereignty is important with regard to access to space. Our Rocket Factory Augsburg is moving along. We will have the integrated system test of the upper stage that's going on now. The other activities around sovereign access to space is our participation in the German Offshore Spaceport Alliance. Of course, that's something that moves along in line with the micro-launcher developments around Europe. Of course, it's Ariane 6. We are hoping that Ariane 6 will soon become available, and our participation through our MT Aerospace work share will play an important role then in the implementation of Ariane 6, but also, of course, in the return to previous profitability that we saw in MT Aerospace in Augsburg. What else is going on? Yes, we are bidding in a strong consortium for SATCOMBw 3. We are very confident that this consortium has a very good chance that we'll win, but it's too early to talk publicly about that. What is another major story that we are aiming for is the participation in the European Commission's IRIS² constellation. That's a constellation of robust and safe telecom satellites that Europe is building, the European Union is building. Basically as the third project after Galileo and Copernicus, now it's IRIS², where after navigation and earth observation, this is now telecommunication that Europe is implementing. That has been decided as a program. Obviously, it will be put to a competitive process, and we'll see if we are able to win a share in that, which is obviously our aim. This is basically the IRIS² infrastructure for resilience, interconnection, and security by satellites. That's what the acronym stands for. It's secured communication capabilities. It's resilient networks. Of course, I don't have to explain that this is in the dawning of what has been realized over the last months, with the external threats that Europe is facing, has been obviously supported by that. Overall, the volume is foreseen in the range of EUR 6 billion. We'll see. There will be operational capabilities fully implemented in 2027. That means with new satellites. The initial services will be based on existing space capabilities, and we'll see if that will be then implemented by European industry. We look at the world, obviously, many things have changed. Everybody has now to deal with inflation. Of course, we have higher energy costs that is a burden on our operating expenses. Of course, wages are increasing faster than what we were used to in the previous years. Of course, this increase of the inflation we see needs to be passed on to the markets. That's something we have to do, which is not always easy, but I guess that's the same for all industries. In terms of the major factor supply chain, we do not have the general delays coming from the supply chain. Yes, in specific incidents, we do see a downturn in timing and speed, and there's a certain unreliability that also occasionally impacts us. In terms of the war in Ukraine, there's no negative financial implication on OHB. So far, there has also not been a big order wave on military customer side. Obviously the whole view of security in space, of global satellite networks, also for military applications, has fundamentally changed. Obviously we are now in a situation where the opponent is also a space power, with all kinds of capabilities, and that obviously changes, of course, the priorities. In order to conclude quickly, after today's annual report and this analyst call, we will have in May 10th, the 3 months report, and we have our annual general meeting, May 25th. By the way, this will be a pretty digital annual report, I mean, annual general meeting. We will have interactive participations. We have a broad digital, let's say, outreach there. We are not doing a presence meeting here in Bremen as it used to be in the past before corona. I guess the rest is pretty much the regular story. In August, we have six months report. In November, then the third quarter. I guess that concludes more or less the slides, if I'm not mistaken. Here it is, the Q&A session. I guess I should return to Martina to coordinate. I see that you have on your screen already a list of questions. Yeah. Maybe even specific questions on your, on the chat line. Martina, I hand it over to you. Thanks. Thank you very much. Yes, we will open the floor for questions now. If you would like to address a topic, please raise your hand, I will allow you as a panelist then, you can ask your question live in this discussion. The other option would be to write the question in the chat. I would then read it out. The first question comes from Alexander Hauenstein. Alexander told me that he has dialed in via telephone, I'm not able to identify the right one, I will allow all the telephone participants to speak now. I hope one of them is Mr. Hauenstein. You should be able to unmute your microphone now. Sure. Yes, hello. Can you hear me now? Yeah. Perfect. Many thanks. Sorry for having some technical difficulties here. I've got three questions, please. First of all, is there anything interesting in terms of an update from the aftermath of the ministerial conference, i.e., from the outcome of the envelope programs which we can discuss here? That means is there? Potential increase from the EUR 16.9 billion in budgets committed, that in reality is becoming maybe EUR 18 billion or even more. That would be my first question, please. Maybe quickly on that one. Yes, we had the 16.9 was the overall story. What is important for us has been the LEO-PNT. LEO-PNT, there was not a commitment from Germany, but there was a significant, let's say, an outreach program or an anticipation. That, that seems that has been confirmed, so we are optimistic on that. Other than that, I don't really have recalled significant fresh money that has been confirmed. I'm looking to Martina and Kurt, have yous, have you more in? I have to apologize, Lutz is not on this call. He's in Washington at the satellite conference, and he, I guess, is in meetings around this time. Yes, at that, this LEO-PNT example has been confirmed, but other than that, I'm not aware of any. Okay, thank you. Maybe I come back to you later on this, the next days or so. The second question is regarding aerospace, please. Can you comment a bit on the, on the outlook regarding Ariane 6? When is the first launch expected as we speak, and how can the earnings progression look like here in terms of timing? Anything that have changed recently? No, I don't think there has been much changes that up to my knowledge from our capital market day 2 months ago. I guess obviously the official announcement from Ariane is that the target date is by the end of this year. Let's say, let's see if that will be achieved. But we don't have. I mean, we are as a supplier, not in these now ongoing critical activities. I'm hopeful that the launch will be as soon as possible. Then, yes, of course, there is a long list of European missions that are ready to launch. I mean, we know from our satellites, from Galileo satellites, from Hera mission, from other satellites, that would be ready to launch in 2024, or even 2023, actually, for Galileo satellites. It depends on the availability of the rockets, or otherwise, some of these satellites might have to be launched somewhere else. The bottom line is, yes, of course, we're still in a critical phase of Ariane transition from 5 to 6. As, as ESA, as Director General of ESA, Josef Aschbacher calls it's the moment of crisis in the European launcher industry, and that has to be turned into an opportunity. Ariane 6 will be a major part of that because I don't think anybody expects Soyuz to return to future. Yes, we need Ariane 6 to come in operation as quick as possible. Okay. Thank you. The third one question is, can you remind us, please, how any contributions from the Rocket Factory Augsburg are treated in your midterm guidance 2026? Kurt, you can- Midterm guidance, there's nothing included from Rocket Factory Augsburg. We have now consolidated Rocket Factory Augsburg for 2022. The first time via this IFRS 5 method, which says the principle we are prepared to sell substantial shares, which we already have, which we have actually, to other investors. That's the way how we translate it. It's just in our PL and in our balance sheet, you see it's directly marked where it's included now. In our guidance, we have not foreseen Rocket Factory Augsburg, which what will be happen in 2023 is that Rocket Factory Augsburg will be no more included via this IFRS 5 method. It will include it via the equity consolidation. That's our expectation for 2023. So it's no major impact for EBIT, EBITDA and top line. The good side, there is an upside in the numbers, right? Let's see. Rocket science is difficult. Yeah, that's right. Okay, thanks for the clarification here. Maybe one last question to you, Mr. Fuchs. Given that you and your family have recently changed the shareholder structure and the holding structure into a foundation, have you somewhat changed your way of thinking regarding the free float here? You know, this is some kind of a consistent point of criticism from some investors in that when we are marketing your story. Any update on this point would be helpful. Thanks. Well, of course, when you transfer a substantial part of your personal wealth into a trust, or into a Stiftung, of course, that changes your view of life. Yes, you look differently because you don't own anything anymore, but you just control assets that are in an independent entity like a Stiftung. Obviously, in many ways, my view on these things have changed in the sense that, yes, I still control it, but I don't own it anymore. It has been obviously tax considerations and many considerations. The fundamental view that has been strengthened by this is to give a solid basis for OHB to prosper as a company. This is independent of the form of ownership. In terms of the free float, I think we always had them. I mean, when we went public 22 years ago, basically, Exactly 22 years ago in these days. We always had the intent to raise more capital and to grow the company also by additional investors, lowering also the ratio of my family's investment, increasing the free float. This is the whole idea of being a listed company. We have not done that because we did not need to. Obviously, it's an easier form of financing growth when the customer pays for it or when you have cheap debt paying for it. This might change, and we are ready. We have always been ready to increase the free float. More likely than not, that will be done if we have specific opportunities where we need, where we need money, and then we raise money. It's not about us as a family disinvesting our shares in OHB in order to balance our private asset allocation. That's not our intent. We want OHB to grow, and we have done as a family very well with OHB as our main asset, and this is what we also continue with the current structure with the Fuchs-Familienstiftung. Okay, thanks all. I understand that you're looking into M&A a bit more closely than during the last couple of years when you were busy with, you know, setting up, for example, the aerospace division again in terms of Ariane 6. Has anything come across in terms of interest for M&A recently that you might go for in a, let's say, reasonable timeframe? Has nothing happened during the last couple of months when on the one hand, the market has somewhat recovered, but on the other hand, some potential disruptive events might have reduced valuation of some of the targets, potential targets. Look, this is exactly what's going on. Obviously, looking at the space industry, you see on the one hand, I think a broad consensus that space is promising, it's growing, it's increasing, it's significant, many opportunities. On the other hand, you have seen in the last 1 or 2 years that certain assets have been devalued as a number of companies have lost value. An exaggeration that was going on maybe 2 years ago has been now normalized. I think opportunities will increase. There will be consolidation in the space industry. Even though the broad trend, the mega trend of the booming space industry based on data, based on many, many services, remains very much intact. I foresee opportunities coming much stronger than they were in the past. I think many of the ventures that were listed in the last years have been very highly valued. This should open up opportunities for companies that are established, that have significant operations and operating cash flows. This is what we are obviously monitoring and trying to make work. We have massively invested in companies like Rocket Factory and obviously in our product range with telecom satellites, in our product range with Earth observation payloads. This investment has been very strong in the last 10 years. On the technical investment, yes, now it comes a time where it might be cheaper to buy technologies than to develop technologies because of the overall adjustment and valuations. Okay, thanks. All the best for this effort to come. Thank you. The next set of questions will come from Torbjørn Wold from Pareto Securities. Yes, hello. Hello. I hope you can hear me. A few questions from my side left. The first one on Rocket Factory Augsburg. You said you're reducing or already reduced the share. How it should be or is expected to be the portion to be reduced in Rocket Factory Augsburg? Probably, you can share your views or with regard to the strategic rationale behind this decision. That would be my first question. Yes. I guess the strategic view that we have on Rocket Factory has been the same over a long period of time. We believe that there is a market for micro launchers, and we believe micro launchers provide a good basis for developing a competitive launcher offering also in Europe. We believe that RFA, for us, is an investment into a product that should be successful in the market for many small satellite missions. Also, of course, in the changing overall rocket environment, we believe that the RFA capabilities will be significant in the long term also in increasing payloads and more significant satellites. We believe in RFA. Our offering obviously is in a separate company. It's very much a startup set up. We have external investors in a significant way now. We obviously want to attract more investors into the company. We have always been open for that. It's just a question of timing. It's just a question of what level of achievement we have. Yes, of course, in the rocket industry, there's one major event in life of every company or every rocket. That's when you really have a rocket that goes to orbit. Many people do tests and many people do wonderful things with rockets. Same with us. But you only become a rocket company when your rocket really reaches orbit, and that has not been done with RFA and many others, and that's the major difference. Yes, we will see if we are continuing to finance it in the current setup. We would invite, obviously, potential investors to join in. We don't want to control RFA. We don't want to consolidate RFA. We do not want to limit RFA in the scope with their customer to OHB. It's not an in-house rocket. It should be a rocket that attracts the whole market because of its price-performance ratio. That's the key thing. We don't want this to be an OHB company. We want this to be a successful rocket company from Augsburg, Germany and Europe. Having said that, our main goal is to develop RFA to the point of successful first flight. That's our main goal for the foreseeable future. Everything else will follow then. The bottom line of the financing is we have to either continue the financing in the current setup with OHB and our existing partners, or we have to find significant investment coming into RFA. What we are not going to do is we are not going to consolidate RFA completely into the OHB set of numbers, even though that did not have a major impact. RFA had a loss in 22 of EUR 1.9 million, so it's not a major loss, but it was a loss. It was a loss-making company in 22, and we don't want to hide that in the overall OHB set of numbers, so we want to keep that separate. Again, it's not a major impact, but we don't want to send the signal to the market that RFA is only an OHB rocket. It should be a European rocket. It should be a German rocket. It should be, or hopefully a successful rocket serving the whole global markets that it might serve. Bottom line is, we're struggling to complete the rocket first, and then we look to what else to do with the company. Okay, got it. I think that was very clear. The second question is regarding your EBIT guidance. Can you please provide us a breakdown of the expected EUR 70 million on segment level? How shall we think about the increase compared to 2022 EBIT? Are you expecting all segments to contribute to that improvement? I mean, if I look at the EBIT in aerospace, I think a further increase looks quite challenging or, am I wrong with my assumption? In principle, we are, have our guidance increased, and, improved profitability figures in each segment. You are completely right. Also as well, we have it in the aerospace segment. Even if in the aerospace segment, the increase, at least for 2022 to 2023, not so significant, but there is an increase. We, we strongly believe that the really weak years are behind us in the aerospace segment and, there are some stabilization in the, also in other activities from, in the aerospace sector, despite Ariane 6. We expect also improvements in the, in steady growth in the digital segment, and we expect steady growth in the space system segment at the end of the day. There's no really substantial deviation from the development we had in segments in 2022. This, in principle, we believe will be continued in the next years. Okay. What is the expected contribution from your acquisition GEOSYSTEMS? I think it was a rather small acquisition, but is there an EBIT contribution expected from this company? Sure. There is already an EBIT contribution in 2022 of a few hundred thousand EUR. This will in principle be improved, obviously or hopefully in the next years. It's a small company at the end of the day, to be very clear. It's just a few hundred thousand EUR per year we have in our guidance, we have in our result of 2022. Okay, thanks. One question left from my side, with regard your at equity results, here we have seen that Aerotech Peissenberg have widened its losses to more than EUR 5 million. What was the reason for that? How do you want to cope with that business in the future and, yeah, go back to profitable results here? Yeah, that's true. That's, that has been a correct observation, yes. Yes, we are waiting for the recovery of the aero engine part industry also for the bigger aircraft. Of course, Aerotech Peissenberg is very much depending on its major customer, Rolls-Royce, and that is the long-haul aero engine part. That, hopefully will see an increase from last year to this year, but it was loss-making in 2022, and it was also loss-making because of significant negative financial results because it's a debt-financed company. This is something we have to solve in 2023. There is a challenge there, what is developing well is the participation that ATP has in Mexico. There's a significant participation, AT Engine Mexico, which is now under production and delivery. We will see. For us, this has been unpleasant burden in the last year. We have to find a solution for that. This is not a strategic participation like our space participation. It's an opportunistic participation in the area of aerospace, we are open to find solutions for that. Yes, we cannot go on and have equity consolidations of losses in the future. Okay. Thank you very much. That is it from my side. Thank you. Thanks. The next speaker will be Henrique Collin from Kepler Cheuvreux. Yes. Good afternoon, thank you for taking my questions. I've got a few. The first one is based on the pipeline of orders that you currently see. What's your best guess of the order intake trend in 2023 as of now? More generally, what could you say about the general financial conditions and liquidity for your customers and how well financed these projects are today in your view? The second question is on the free cash flow. What would be your best guess again on the kind of free cash flow conversion for OHB in 2023 in terms of the translation of profit into cash flow? The sub question is more kind of a sensitivity analysis. What would be your view the biggest catalyst for upside, in terms of your current guidance? At the same time, what would be the main risk in your view, for your EBIT guidance 2023? Thank you. Yes, if you look at your first question, of course, our profile of customers is very much institutional. The institutional customers, of course, we don't see any issues with financing. Yes, we do have financing issues with institutional customers through programmatics. We have seen, for example, the ESA ministerial being very successful, and we have seen the decision now of the European Union to implement the IRIS² project. We are not heavily involved in private commercial biddings. We are not currently planning in our business plan any commercial constellations in a significant manner, I suppose, if I look to Kurt. That obviously is dangerous these days. Yes, we are obviously living at a time when many satellite constellations are not able to finance their plans. Some find obviously at a time when interest rates go up, all the business models look differently. The investments are not what they looked when there was no interest, if you have, I don't know, 4% or 5% interest. That's something that has changed, but our business model being more on the institutional side has been shown to be a pretty robust baseline there. In terms of the cash, Kurt, I leave it to you. Yes. In terms of the cash flow, our forecast for the next 3 years show clearly an improvement in the operative cash flows and free cash flows compared to last year and to previous year. The reason therefore is that the long-running programs like SARah or Heinrich Hertz are come closer to the end and closer to the payment of the final settlements in these programs. These final settlements will lead at least in 2024 to substantial improvements of the cash flow, but also we expect already improvements in 2023. This has to do with pre-financing issues they actually still have in these programs. Only for the SARah program, our actually pre-finance effort is EUR 100 million, and this is exactly the figure which is the final payment in this program. That's the reason why contract assets are pretty high in our balance sheet, and that's the reason why the cash flow figures will be improved in the next years. Have we covered all topics? The last question. Yeah, the last question was on the sensitivity analysis. Perhaps for this year, what are the kind of key risks you can identify that could derail your guidance? Same time, is there any kind of positive catalyst that perhaps is not included in your guidance that could help beat your estimates? At the end of the day, we have an order intake planning with weighted factors. We have addressed certain targets in our order intake planning and have weighted this with a certain factor. This then is reflected in our business plan for the next years. What may happen is that if, for an example, one big contract which may weighted with 50% became to 100% reality, then it is obviously an upside and a further boost for growth potential in the next years and in this year. That is the main issue concerning upside. The same is for downside. From my point of view, if we lose most of the or do not get the contracts of what we expect in our order planning, order intake planning, that really is the risk we have in our guidance, in our growth path. We actually are looking for. This is major issue. At the end of the day, what I would like to say is order intake or not order intake is the main driver of the success story for OHB in the next years. All right. Thank you very much. Okay. I do not see any more raised hands for the moment, and I do not see questions in the chat. I think we wait for maybe two minutes, and if no further questions arise, then we will conclude the call. Let's wait. From my point of view, as CFO, I must say I'm quite happy with this annual report because what has happened is that we have promised a profitability of EUR 60 million EBIT, which was already promising substantial improvement of our profitability, I guess. Now we have delivered EUR 63 million. This is a major success from my point of view, and should give confidence to OHB as the profitability of this company. Okay. I see, there's Alexander Hauenstein again with a topic to discuss. Mr. Hauenstein, you should be able to talk now. In theory. Maybe there's another technical issue. No. Hello? Hello? Can you hear me? We can hear you. Hello? Yeah, perfect. Sorry. It always takes a while to get it into the queue here. Okay. One follow-up question. Apart from the order intake, which is obviously crucial for the guidance going forward, what else are the two, let's say, main triggers that we should look for and what we should closely monitor? Apart from that, can you give us a sense about what your ideas are in order to more, yeah, to more industrialize the way of how you're producing your satellites going forward? I mean, I understand it's always a lot of project and manual work to do and every project is different, is there anything that came across your mind recently how you can kind of standardize more, how you can raise the economies of scale here and also improve further your margin progression? Thank you. Well, I think that in terms of industrialization, of course, the future lies in more satellites of the same kind, and we have been the pioneers with the 31st that have been pretty much optimizing the mass production. Now, I come back to the small satellites that we are building in big series, the 12 and 12 in Italy and also in Sweden and so on. We are in the micro satellite domain, more successful than ever, and that's where the industrialization takes place. Yes, of course, you have a very different view on that when you build thousands of satellites, like mega constellations. That is an interesting case that we are looking at to see what to learn there. At the end of the day, I mean, the satellite is a massive investment, not just because of the production cost, but of the overall system cost, the ground segment, the user interfaces. In that respect, I guess the key thing is that satellites develop or deliver value. We need to keep that in a good balance and not, it's not just about the amount of investment in satellite. I can tell you satellite development is a very dynamic field, and every year there's a lot of innovation, so keeps the industry very agile. We're trying to keep up with the pace of that development, based on our business model with a strong institutional base to start from. What can I say? We have been successful over the years as a satellite manufacturer, and that has been, given proof to the fact that, I guess, our approach to this has been quite good. We have always been able to make money. I mean, there are many, many people that are having big plans in satellite industry that have never made a euro. We are a profitable company since ever. That, I guess, is a significant point coming now into a period where money is more expensive. The cost of capital will become more and more critical. Yes, indeed. That's right. Any comments on the one or two triggers and news points to look for? Yes, of course. You talked about order intake. What is a significant trigger for us are these large institutional programs that are now being implemented, be it for the military purposes, be it the delivery of our reconnaissance program. We do see that many of these products that we have will result in while at the moment they hit the operational phase, will result more demand for further satellites. A satellite where we build 2 of, we hope there will be a 3rd one, a 4th one, a 5th one. Small series of satellites are the key source of profitability in the institutional satellite world. We hope that Germany and Europe are stepping up their investment there. We believe that with the Commercialization moving along, consolidation will hit in and, let's say the reality of real costs, the reality of long-term, every company feeling the urgency to make money or to show that they have to make money, becoming more and more important will help us and will play in our favor. Okay. Thank you. I see one question in the chat. It is from Thomas Effner. He would like to hear our assumptions on wage increases. That's a good question. I don't know. I'm following the news flow every day to see what the wage levels are. I guess the reality of life is we have inflation. Inflation will create wage increases. That will continue further inflation. I guess we don't foresee that that will be just disappearing again. We do see inflation, we do see wage increases. It's a competitive market for the best talent out there. We have that already. Fluctuation in this industry, fluctuation in all high-skilled industries is higher than before COVID. We have to deal with it. We have to be attractive. I guess what we will see, and that's an interesting point, is how this industry in an institutional frame will deal with inflation, what that means in terms of price developments. We see higher salary increases coming in the next years than what we had in the past. I don't know, Kurt, if you are more specific on that. Yes, we have made for sure an assumption in our business plan for this year and for the next years, and obviously the rate will be, or the increase will be higher than we had it in the past. But I believe what may happen this year and the next year will not be an extremely big surprise for us. Good. I do not see any more questions. One moment. I've just received one. It's from Christian Schmidt. Regarding the RFA Rocket Factory Augsburg sale, can you tell me how big a portion was sold? I think the question was asked earlier but not answered. What was the selling price? Just to make it clear, nothing was sold. The RFA shares of OHB have not been sold. They have just been accounted for as ready for sale. This is just an accounting change. Nothing has been sold. The last rounds of capital that have been increased by OHB and others have been at a valuation of EUR 13 per share. We started, I don't know, 4 years ago with 1 EUR a share, now over the last, no, actually it's 4 and a half years, it was in the fall of 2018, 1 EUR, then it increased 1, 2, 4, 8, and so on and so on. The last capital rounds have been at EUR 13, nothing has been actually sold to others. It's just the so-called IFRS 5 accounting, ready for sale, I guess is what it's called. Yeah. Yeah? Yeah. Okay, we have one question from a call in user I cannot identify, but this person should now be able to speak. Hi, Martina. Hello, Marco. Hello, Kurt. It's Harry Breach here from Stifel. Hello. Hello. Just if I can, and please forgive me, I was not able to join the call at the beginning. Can you maybe just help us a little more to think about margins at Digital this year and Space Systems, which had a much stronger fourth quarter margin than I expected? Was there anything unusual at all in terms of program execution at Space Systems in the fourth quarter or in the mix? Should we expect margins at Space Systems to, you know, to be improving year-on-year in 2023 against 2022? Well, maybe I'll start and Kurt can add on. Of course, the margin improvement is part of our overall strategy, and we're making good steps on that, decent steps on that. Of course, when you look at the margins as what you asked first on Digital, it's a double-digit margin on EBIT level. This is what we're aiming for, and it should also be the guideline for this year, certainly. When you look at Space System fourth quarter, yes, there was a also included a one-off effect that had to do with a with a clean out of an insurance claim that had a certain impact there. It was a balanced calculation, so there was effort and there was compensation, but it has been concluded in that year. Overall, of course, you see that more and more projects in the Space System area have higher margins because of the size of the operation, but also because of the maturity of the products. There's less overrun and there's more stability in the projects, you immediately see that changing. Bottom line is overall, it has been a good development. Yeah. Marco. That's the whole idea. I don't know if you wanna add. Yeah. Basically, that's what Marco said is also totally my view. You have to consider that if we become more and more stable in all areas of the group, also in the past, some smaller companies have made losses or we have weak years in the aerospace sector, and we expect that these things are behind us now. We expect also in the aerospace sector a further improvement of margin. We expect also to more stable business in all areas of our group, an improvement of margin. This is automatically the case if everybody make no more losses anymore, and we have no projects in our operative work which make substantial losses. That is just that's very simple, the story, at the end of the day. Got it. Okay. Even Guys, just to be very, very clear with Space Systems, even if in 2022 the margins benefited from this insurance claim, in 2023, should we still expect an improvement on the reported margin even with the benefit in 2022 of the insurance claim? Yes. I guess. I guess. Sure. Yeah, that's what we expect. Yeah. Great. Well, thank you very much, both. Thank you. Very good. No more raised hands for the moment and no further questions in the chat. Very good. No more questions, no more hands. I guess it's 2:10. Thank you very much for your time, for your attention, for the general interest in OHB. Of course, if you have any further questions, do not hesitate to contact Martina or Kurt or myself. Of course, we hope that you will participate in our upcoming annual general meeting in May. Let's see how the space industry evolves. We're very optimistic for 2023, actually, not just for OHB, but for the overall industry, I guess. Again, thank you very much out there to all the participants and thanks to the team here, Martina and her team from OHB in Bremen. Have a good afternoon. Bye-bye. Thank you. Thank you. Bye-bye.