Ladies and gentlemen, welcome to the H1 2026 Interim Report Conference Call. I am Sandra, the Chorus C all operator. I would like to remind you that all participants have been placed on listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Felix Zander, Head of Investor Relations. Please go ahead, sir.
Thank you very much for the introduction, Sandra. Ladies and gentlemen, on behalf of Vincorion, I would like to welcome you to our analyst and investor call today related to the half-yearly figures which we have published this morning. Our CEO, Kajetan, and our CFO, Dieter, will present the latest developments, financials, and forecasts to you. After the presentation, we open the floor for Q&A, and I would like to ask you to limit yourself up to three questions. I would like to hand over to our CEO. Please go ahead.
Thank you very much, Felix, and good afternoon, everybody on the line. It feels really good today talking to you because we have some really good news to share with you. Probably the majority of you have already seen it in the press. We had a very strong first half of the year. The second quarter was as strong as the first quarter, even a little bit more. We continue our growth path and have really some good results. The order entry was also showing in a very good direction. We have multiplied our order entries compared to last year. We will go into these details in a second. It is impressive to see that our strategy works, that we are on the right track, and we continue our track. Our order book remains at EUR 1.2 billion. That is the same figure that you saw last quarter.
However, the fixed order book has significantly increased. We were able to turn soft order book into fixed order book as expected. Our revenues have risen up to EUR 150 million. That is 42% more than last year. That is a very good step, but please bear in mind, we are trying to balance our revenues. Do not multiply it now times four, or take the 42% as granted for the entire year. We are sticking to our guidance. We are just now highlighting that we are very confident to reach the upper end of our guidance, the upper range of our guidance. With regards to EBIT, we are also very happy and confident that we can continue with this path. We are this time at the upper end, this quarter at the upper end of the guidance at 19%, so in the entire first half year.
Our free cash flow was also positive. That is good to see the free cash flow positive this time. We were not positive in the first half year, but at least in the second quarter, which has reduced the deficit a little bit. It is good to also communicate that we have been successfully included in the SDAX, meaning we are now part of this index. Let us look a little bit into the operational topics before we continue going into the finance. If we go to the next page, what do we see? In Vehicle Systems, this is definitely our biggest growth driver. We have a 72% growth year-on-year, first half year last year to first half year this year. It shows that our industrialization efforts show results. Our ramp-up is working, and we deliver to our customers' needs. We have also very strong fixed order entry.
In the end, in the second quarter alone, we had order entries of more than EUR 120 million. That is very strong for this segment in the first half year. Some of you might have visited us during the Eurosatory in Paris. It was a great success for us, this show. We were able to demonstrate with our CS that we are able to charge UGVs. We had a shared presentation in our stand with a startup from the South of Germany, which have placed their UGV on our stand, and we were showing that we, with our tactical power systems, are able to charge it. We are not just supporting the legacy programs, but we are delivering also solutions for modern warfare and unmanned systems. In Power Systems, the ramp-up was very strongly driven by ground-based air defense.
We deliver on our growth, and everything was working according to plan. With regards to Aviation, we have a little bit of a hit with our business, which is in US dollars due to the weak dollar. However, the growth in the heating systems was able to counter the dollar exchange rate headwinds that we were facing. Where are we with our rescue hoist? Let us start with the really good news. We have completed the rescue hoist that is going to be used for the various test campaigns. We have also run test campaigns in labs regarding temperature, altitude, vibration, et c. All of them were successful, and there is nothing that would prevent us now from going into the first test flight. We are currently building up the third unit for the test flight. It is almost done.
However, we have some scheduling constraints due to summer break, et c. We had to shift the first flight to October 26th. We have a fully aligned flight schedule now with Airbus, and we are confident that this is going to be it then. That is going to be the first flight. However, that does not mean that we will see any major impact on our business case. The first deliveries, however, will not be possible this year. We are now expecting the first delivery to happen in half year one. Also here, there is no impact on the business case expected. We had only very few deliveries, so insignificant deliveries planned this year, and we are confident to reach our plan of deliveries next year, although we are only starting in H1. So far from my side, so far for the business update.
I think now, Dieter, you have a lot of topics to talk about, especially regarding our finance. Thank you very much.
Thanks a lot, Kajetan, and good afternoon to everyone. Thank you for joining today's results presentation. Let me now take you through our strong financial performance for the first half of 2026. Let's begin with the financial snapshot of our first half 2026 performance, highlighting the significant transformation in our business and the key financial metrics that underpin it. The slide is structured with Q2 metrics on the left and half year one results on the right. Q2 delivered another strong order intake of EUR 181 million, taking our first half year order intake to a record of EUR 330 million. This demonstrates both the strength of our pipeline and our effective contract converse. Q2 revenue reached an impressive EUR 81 million, up by 44% year-on-year, bringing first half year revenues to EUR 150 million, an increase of 42%.
This strong performance reflects the continued execution of our ramp-up, our ability to translate backlog into revenue growth, and our commitment for delivering to our customers. Adjusted Q2 EBIT reached EUR 16 million, up by 35% compared with Q2 2025, bringing half year one 2026 EBIT to EUR 28 million, an increase of 33% year-on-year. With a strong Q2 EBIT margin of nearly 20%, we achieved a first half 2026 EBIT margin of 19%. The year-on-year margin variance reflects phasing effects in the product mix with higher share of aftermarket revenues in previous years. The adjusted Q2 net income came in at EUR 10 million, bringing half year one 2026 to EUR 17 million and a margin of 11.5%. Turning to free cash flow, we achieved a positive cash flow of EUR 1 million in Q2, bringing our first half year 2026 to EUR -6 million.
This represents an improvement compared with the prior year period, especially considering that the first half of the year typically requires significant cash outflows for stockpiling to secure deliveries for the second half. We consider this as a solid achievement and will take you through the key cash flow drivers in more detail later on in the presentation. Let us now take a look at our order backlog. As of the first half of 2026, our total order backlog stood at EUR 1.2 billion. Compared with Q1 2026, this represents a slight increase of EUR 22 million. The key highlight in Q2 is a significant increase in our fixed order backlog, which went from EUR 560 million at the end of Q1 by nearly EUR 100 million up to EUR 615 million.
Of this increase, about EUR 77 million reflect orders that have progressed from our soft into fixed order backlog, mainly from the Vehicle Systems. As you know, our soft order backlog comprises opportunities supported by public information from OEMs and or government customers, while our frame order backlog is largely underpinned by long-term agreements with major Aviation customers. The total backlog represents 4.2x sales of the last 12 months. If we look at the original equipment isolated, the ratio is even at 8x last 12 months sales. The continued conversion of these opportunities into a firm contract demonstrates our effective execution, strengthens the quality of our backlog, and provides multi-year revenue visibility enabling us to plan our capacity ramp-up and resources allocation well ahead of delivery.
Now, looking at order entry and revenues. Our strong order entry performance with EUR 149 million in Q1 was followed by an even stronger Q2 with EUR 181 million. This brought our half year one 2026 order intake to a record EUR 330 million. It reflects the very robust customer demand and our ability to convert opportunities into firm orders. While we are very pleased with this record order intake, I want to emphasize that our focus is on securing high-quality contracts rather than the timing of order entry postings. Building on the strong revenue performance in Q1, we gained further momentum in Q2, increasing year-over-year revenue growth from 40%- 44%, and delivering 42% growth for the first half of 2026.
The +42% or EUR +45 million increase in half year one revenues compared with the prior year was primarily driven by strong original equipment demand in our Vehicle Systems and Power Systems segments. This performance demonstrates our ability to successfully execute on the planned production ramp-up while meeting strong customer demand. With EUR 330 million in order intake and EUR 150 million in revenue, we delivered a book-to-bill ratio of 2.2, underlining the continued strength of demand. With that, let me move from our top-line performance to our bottom-line results. For half year one, we increased our adjusted gross profit by EUR +11 million to EUR 44 million, or +34% year- over- year. The adjusted gross profit margin was 29%, a 2 percentage points decrease compared with the prior year, mainly reflecting phasing effects in our aftermarket business.
We will provide further detail on this when we discuss the segment performance next. Adjusted EBIT reached EUR 28 million, corresponding to an adjusted EBIT margin of 19%. We delivered EUR +7 million adjusted EBIT year- over- year or +33% growth. In a nutshell, the business fundamentals are intact, and our performance is fully on track to support our full year EBIT guidance. Let me now provide some more detail on the performance of our segments. Our 42% year-over-year revenue growth in half year one was primarily driven by strong momentum in our core defense businesses. Vehicle Systems grew by 72% and Power Systems by 41%, reflecting strong execution and continued demand for original equipment.
The Vehicle Systems segment saw strong demand for weapon stabilization systems, particularly for the Leopard 2, the Puma, and the Panzerhaubitze 2000 platforms, while the Power Systems segment saw high deliveries of power solutions for the Patriot air defense system. Aviation delivered 1.5% growth despite FX headwinds, with underlying growth of 5% at constant currency basis. Turning to the chart on the right. Adjusted gross profit grew 34% for half year one, year- over- year. Gross profit margin was 29%, down by 2 percentage points from the prior year. This was mainly due to a timing effect in the Power Systems segment, with - 3 percentage points. Half year one 2025 included strong aftermarket sales. In this year, these deliveries are expected in half year two 2026. In the Aviation segment, margins declined by - 4 percentage points, equivalent to approximately EUR -1 million.
This was primarily due to adverse FX effects. In the Vehicle Systems segment, margin performance remained consistent year-over-year, with gross profit margin stable at 30%. To sum it up, we continue to see different margin dynamics across our segments. Our operational focus is on driving execution and being competitive while safeguarding an attractive margin profile. Let us now turn to our cash flow performance, which is very important for me as a CFO, as a finance guy, as you can imagine. In the second quarter of 2026, we generated positive free cash flow of EUR +1 million. We see EUR +6 million vs previous year's Q2. It brings our free cash flow for half year one to EUR -6 million and our leverage to 1.9x.
I will now explain the key drivers of our half year one free cash flow. With EUR -6 million free cash flow in the first half of 2026, we are EUR -3 million below the prior year period. Of this year-over-year variance, about EUR 7 million is attributable to tax phasing. Excluding this timing effect, our underlying cash generation improved by EUR 4 million. As discussed during our Q1 call, the first half of 2026 was impacted by catch-up tax payments for the prior years, and we have now transitioned to regular tax prepayments. In comparison, tax payments in the first half of 2025 were very low. Let me point out two further important elements of our cash flow performance.
First, the changes in net working capital have comparable pattern year- on- year at EUR -20 million in half year one 2026, compared with EUR -16 million in the previous year. Our net working capital to sales ratio improved to 45%, down from 57% in the first half of 2025. In essence, the higher working capital outflow reflects our business expansion with a seasonal build-up of inventories ahead of the second half year. A key contributor to our positive Q2 cash performance was our ability to secure customer advance payments on larger orders. Further, I am pleased to report that we have been seeing a very stable monthly revenue profile. We had all months above EUR 20 million in the year- to- date, in average, EUR 25 million per month.
This is very encouraging to me, as this will support a steadier cash conversion as we continue to grow our business. Second, we are executing on the required investment for capacity expansion to enable the ramp-up and continue the capitalization of development costs for the electrical rescue hoist. To wrap up on our cash flow performance, our free cash flow expectation for full year 2026 remains fully intact and unchanged. With that, let me move to my closing remarks and our guidance update, a topic I know is of particular interest to everyone on this call. On revenue, we are targeting the upper end of our EUR 280 million to EUR 320 million guidance range, supported by strong operational execution in half year one that you have just seen, and a continued customer demand in the second half of the year.
On adjusted EBIT margin, we are on track and are maintaining our guidance range of 18%-19%. My CFO's concluding remarks. Vincorion is delivering profitable growth. We have a strong order backlog providing good revenue visibility. We are targeting the full year 2026 revenue towards upper end of the guidance. With that, back to Felix Zander for opening up the line for your questions.
Thank you very much, gentlemen, for the presentation and all the details given. Sandra, now I'd like to hand over to you and we are opening the floor for Q&A, please.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you've entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only hands while asking a question. In the interest of time, please limit yourself to three questions. Anyone with a question may press star and one at this time. Our first question comes from Lasse Stüben from Berenberg. Please go ahead.
Hi, good afternoon. My question would be on the outlook for your OpEx for the second half of the year. My question is coming from the angle that your confirmed guidance implies margins might be slightly softer in the second half, despite revenues being stronger. Just trying to think of the mix here between, I guess, your gross profit margin, but also how you're thinking about OpEx, in the second half of the year, just given that some of the spending, especially on G&A and R&D, is up quite a bit year-on-year in the first half? Thank you.
Yeah. Lasse, for the second half, we see a catch-up for our R&D spending. We see in our OpEx for the first half year that we have some savings compared to our original plan. We see this is somehow delayed, and we will, as I said, catch it up in the second half. Another thing that is clearly also having effect on the second half year is that we further build up our structures for the next year to come, for the next year with significant growth. This clearly will also have an effect on our OpEx. The third thing that I see are, I call it annualization effects, because people that we brought on board in the last few months now have a full effect also on the second half year.
Okay. Thank you. Understood. The second question, roughly similar, but on your top line. You mentioned throughout the last couple of months how you are trying to smooth the revenue development throughout the year so as not to have such a strong reliance on Q4. What does that broadly mean for revenues in Q3 and Q4? Should we still expect a sequential uptick in Q3 as well, or how should we think about that?
Yeah, I would say there is a slight uptake. It still is our pattern that we have the second half year stronger than the first half year. But it will not have that magnitude that we have had in the past. From today's perspective, we see a share of 26% of sales in Q3 and 27% of sales in Q4, but there were times where we had much higher numbers. So from that perspective, I am pleased with the more even allocation of our sales revenues.
Okay, great. My final and third question would just be generally on the outlook for order intake. You had a much better, or you had a big acceleration in orders in the second quarter. Is this how we should be thinking about the revenue, the order intake in the second half of the year? Or what is the seasonality generally for orders? I am guessing there is also strength in Q4, but just to confirm.
Yeah. As you know, we just, Kajetan?
No, please, Dieter, go ahead.
As you know, we are not giving any guidance on the order intake. As I told you also in my presentation, not the timing is that important for us for the order intake, but the quality of the order intake.
Yeah, I wanted to underline this. We are not driven by order entry. We have such a strong firm order book that if it is not coming this quarter, it will come next quarter. That is a little bit how we see it. We do not look at the seasonality of the order entry.
Great. Makes sense. Thank you very much.
The next question comes from Aurélien Sivignon from ODDO BHF. Please go ahead.
Hi, good afternoon. Thank you for taking my question. The first one is on the working capital, and if you could elaborate on your expectation for H2, and, in particular, have inventory levels already peaked, and should we expect them to start declining already from Q3 onwards? The second one on TPS, and if you could provide an update on the current program and when should we expect it to become more a meaningful contributor to the revenue? Thank you.
Let me start with working capital, and then I hand over to Kajetan concerning TPS. Yes, for sure, for the second half year, we have the objective to reduce our working capital. As I told you, we have always that pattern that we have a higher working capital or inventory level in the first half year due to the phased sales that are strong in the second half year. Nevertheless, we have also to face situations, for example, for electronic parts or for rare earth, where we have to increase our security stocks. This is a matter of the geopolitical situation that we have today, and we have to secure our supply chain. Nevertheless, we expect that we will reduce our working capital level until the end of the year, and that we will not have that high level that we have now for end of the first half year.
I am not sure if I got the question regarding TPS. Could you rephrase?
The question was about if you could provide an update on the current TPS programs and when you expect it to be broadly or, let's say, more meaningful contributor to the revenue?
At the moment, the prototypes are delivered, are tested, and are used for training efforts by the German forces. We are ramping up the pre-series, so that will generate first good revenues already next year for the pre-series deliveries. And we are probably going to go through a tender process. That is what we are expecting from the German BAAINBw. We are very well-positioned for this, and I guess that this will take about a year, and then we would be able to start the full-blown ramp-up.
Understood. Thank you.
The next question comes from Sven Sauer from Kepler Cheuvreux. Please go ahead.
Yes. Good afternoon, gentlemen. Thank you for taking my questions. The first one is on the PATRIOT system. How has the, I would say, the Iran war and the bottleneck impacted your midterm outlook in this business, given that the U.S. will probably refill its own inventory before it exports more or increases its exports? My second question would be on the alternatives to the PATRIOT. There are a few that have been named. For example, the deal announced, the IRIS-T SLX. There is a Ukrainian company called Fire Point. Then there was some news regarding French collaboration with Germany and the SAMP/T. I was just wondering where and if Vincorion will be part of these products, these alternatives, especially for the IRIS-T SLX?
Well, that decision is not yet taken, but of course, Vincorion is going to fight to be part of the SLX. You know that we are the supplier for the SLM program, so we think we have good chances to be on board there. But the final decision is not on us. The final decision is on Diehl. However, we think that we are well-positioned. Regarding the additional demand or needs due to the Iran war, I said last time already that this war gives us purpose, but not revenues. I think I would stick to this comment. The Iran war is definitely underlining the need for these kind of systems. There might also be a shift for priorities of who is getting first some additional equipment. If the U.S. are prioritizing towards their own depots, that can very well be.
However, we are depending on the acceleration speed of the OEM, which in this case is Raytheon. We are not the limiting factor. If Raytheon is able to increase their capacity on their final assembly line, we will be able to deliver more. So far, we are delivering according to our plan, which is already considering a very steep ramp-up for ground-based air defense. That's, let's say, on Patriot, and especially the PATRIOT Next Generation program, where we're currently in the development phase, is going to secure for us the future business within this platform, and we might see some major replenishment or exchanges here. That's a big growth factor. But as long as I don't have a contract on hand, I don't want to speculate. With regards to the Ukrainian and the French ground-based air defense systems, we are not yet in talks. No, we're not yet in talks.
Great. Thank you.
As a reminder, if you wish to register for a question, please press star followed by one. The next question comes from David Perry from JP Morgan. Please go ahead.
Hi, Kajetan. Hi, Dieter. Congrats on the good numbers. My three questions. First one, a big picture one, maybe for you, Kajetan. Just there was this link of the German defense budget a few weeks ago and been some questions on some of the other calls about whether there will be slight tweaks, more changes to the demand for some of the German vehicle programs. I just wondered if any of your assumptions for Leopard or Puma or Boxer have changed at all. Then for Dieter, if I may, can you talk a little bit about seasonality of gross profit margins? Because we didn't have last year's interims until today, so now we've got a bit more information, and it was a bit volatile between H1 and H2 in Power Systems and Aviation last year.
Just wondering if anything similar this year or you think they'll be more stable. Then just the last one, can you just comment on the aftermarket share of sales in H1? Apologies if you said it and I missed it. Thanks.
Let me start with the demand and the government budget. First of all, what I want you to have in mind is that a big number of our order entries in the first half of this year was not coming from the German defense budget. Almost 80% of the Vehicle Systems order entry came from European partners. We see a very strong demand, not only from Germany, but also from the European partners on the German systems that we're serving, Leopard, Boxer, et c., Puma, not so much. Puma is German. We haven't changed our assumption with regards to the rates. No, there is a continuous, very high demand on these platforms. Dieter?
Okay. If you talk about seasonality for gross profit, I think it's important that we have one underlying business, and in the underlying business, David, it's more steady what we have as gross profit allocation. However, if you look at 2025 second half year, we have posted on those contracts, and that was somehow a burden on our gross profit margin for the second half year, and this is somehow a special effect. Nevertheless, overall, our margin allocation is rather steady. Yes, we have this effect this year with the delayed aftermarket sales, especially in Power Systems. All in all, it's rather steady what we deliver as a margin.
The aftermarket? Please.
Yeah. Aftermarket, you know, in 2025, and we have also disclosed it was at 55% this year, and we have also signaled that it will go down for a restricted period of time. This year, we will have around 46% in aftermarket.
Thank you very much.
But I think we explained it also many times, it will come back later on. We have now a kind of pipeline filling effect in the original equipment, and only the share of aftermarket is lower. But in total, it's also growing. It's clearly growing. And we expect that later on, we will come back to a 50/50 share.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Felix Zander for any closing remarks.
Perfect. Thank you very much for all the questions and discussions, and I'd like to say goodbye. But first of all, I would like to hand over to you, Kajetan, for your closing remarks. Thank you.
Yeah. Thank you very much for everybody for participating, for your interest. If I could wish for three things you remember from this call is, first, I want you to remember that Vincorion delivers. We have again delivered a stronger growth than the German and the European defense market. That's what we did in the last five years, and that's what we continue to do. Second, we are at the heart of modern warfare. We are at the heart of the storm of the rearmament of Europe, and we are delivering in a very wide spectrum, all different types of weapon systems, be it with loading infrastructure, with power generation systems, with energy, or be it in vehicles where we deliver the stabilization. And we are onboarding great new talent.
If you would come to our sites, you would see there's lots of great, talented new people in our teams. We're growing our headcount in order to continue this growth path. We have a committed team that is filled with purpose and that are ready to go the extra mile every day, and that's why we can show this type of results. If you keep that in mind when you think about Vincorion, then I think you're on the right track. Thank you. Thank you very much.
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.