RENK Group AG (R3NK) Earnings Call Transcript

Okay. Good morning, everyone. Thank you for coming. It's a great honor for the RENK team to have so many of you visit us here in Munich for our very first Capital Markets Day as a newly listed company. On today's agenda, we have a pretty full agenda with -- starting with back-to-back presentations of our Management Board and our 2 Managing Directors, Anja Mänz-Siebje and Emmerich Schiller, followed by a Q&A session later in the morning. The RENK presentations in the morning will be webcast. The webcast will be listen only. So if anyone listening to the webcast would like to ask a question, please send it to me by e-mail. And then in the afternoon, we'll have Ben Hodgers, the retired Lieutenant General, give a presentation on geopolitics and Florian Hohenwarter, Chief Operating Officer of KNDS present to us, followed by a product demonstration. The afternoon part will not be webcast. And without further ado, I'd like to hand it over to Susanne Wiegand to kick it off.

Thank you very much, Ingo. A warm welcome from me to all of you. I hope you survived the evening. Most of you joined. Thank you very much again for this. I think, good dinner, good discussions. We had good dinner speech also from [indiscernible], which I think was worthwhile to listen. Yes, we have to behave we've just learned since everything is recorded and the day-to-day -- yes, the day-to-day -- also you in the audience asking proper questions, obviously. The day-to-day is obviously, first of all, dedicated to you, but also specifically to our 3 colleagues and the Board, whom you have not met too much. So Anja, Alexander and Emmerich are here to provide you with new information, also new phases, and this should be of most interest to you. I think you have met Christian and myself often enough. So we will keep our parts a little bit shorter. Some more slides are probably known to you, some hopefully new. But I would really like you to invite to take advantage of the new phases and the insight to get in technology, also strategic ones presented by Alexander later, the new financial steering model which Anja will introduce to. So this is future and this is explicitly dedicated also to our colleagues. To kick it off and to quote Christian, he said, "Susan, have you ever thought about for what CEO stands for?" And I said, okay, maybe a difficult question. Don't say Chief Executive Officer, I learnt it's Chief Entertainment Officer. So I try to be after that short night professional, but as well also little bit entertaining, and would like to invite you to get it started. Yes, myself is known. I think no need to introduce myself. I would like to start with a slide which you are all well aware of, who is RENK. RENK is providing mission-critical drive solutions for the defense industry but also for energy transition. So we have 2 megatrends which we are serving to strong markets, giving us tailwinds. The defense market is now. That's why the entire presentation which I will give will focus on the defense side of things. And in the last 15, 16 months, we have met on a regular basis. Most of you asked questions about tanks. Some of you asked questions about naval ships. Only very few asked question about ESG or let's talk energy transition. So the big boys and the toys and the tanks seem to matter. This is focus also of today, and I'm also very glad that we have the chance later to see end products and to experience that with Florian and his team. Key message from me is we have not just geopolitical tensions and wars. And I don't want to bring our mood down. I think we had that phase last night during the dinner speech. Are we as Europeans on the Titanic to recall on that picture, which Frank somehow gave us. But for us, 2 things matter. One is our understanding of quality is a different one. So if a tank is standing still and not working, people are dying. So that soldiers survive mobility is of utmost important. So if we are saying our products are robust, reliable and ever working, this means something else then if a car dealer is promising something to you if they sell a car and then you are lucky that there is RDRC or something who can help you out. So reliability is of utmost importance, and we see that with our product specifically in these days. And the second thing is we get interesting feedback for us back into our engineering processes of our product out of the use in intensive use, intensive scenarios, be it out of Ukraine, be it out of Israel at the moment. So we are constantly improving our products and take advantage of the feedback we are getting at the moment out of the experience the end customers do at the moment. The situation in the world, I think, has dramatically changed over time. Frank said last night, maybe we didn't want to hear really or accept that they were signs early on when Putin spoke at the Munich Security Conference back in 2007 and made clear statements of his plans. Nobody really wanted to hear that. However, the question is now how do we get out of that? And we strongly believe in deterrence. So we strongly believe that any country should have sufficient capabilities to defend itself and to contribute to what is relevant in an alliance like NATO and not just rely on the others. And the idea is at the end of the day that you never need your equipment. So we don't want to go into wars. But if we are forced to defend ourselves, we need to be able to do so. And if you have capabilities, if you have your stocks full, and if you also are credible in case you are forced to that you will actually use it, hopefully, nobody is daring to attack you in your territory, in your freedom, piece and democracy. And this is what it's all about. And specifically in Europe, we have lost 90% of the fleet size and track military vehicles, and this is well known to the world that Europe is not in the position to defend itself at the moment. There are some countries who do more. There are many countries who are still not doing enough, and this is something which society has to understand identically and set the right priorities going forward. Not to push too much on the mood, I'm stacking a little bit, but the matter, I think we had incorporated some in a movie, which is not coming in my presentation. However, maybe we can see it at the end of the of the presentation. To remind you, and also this slide is known to many of you. RENK has 2 specifics. One is that we have a portfolio of products, which we're offering to the market. Nobody else in the market is able and capable to do so. So we have not just one type of transmission or few types of transmissions. We are also able to provide a full mobility integrated system with engines, with suspensions, with final drives. So we vary in scope and there's nobody out there in the market who is able and capable of doing so. So there's component sellers out there, but flexibility and scoping, flexibility and interfaces and the adoption to what the customer requirements are for a specific platform, for specific specification is something where we are the only ones doing that. And the second big message is we are agnostic to platforms, to technologies. So the business model of RENK is basically, we are independent, and we are working with all the primes. We are in most of the platforms and that's why whenever there is competition, we are rather relaxed, not arrogant, but rather relaxed because typically we are in various platforms, which compete against each other. So the prime can either win or lose the program. Typically, RENK is always winning the program. And this gives us the competitive edge in our market position. And that's why it was so important to get all your support for the IPO because the IPO actually secured our independency. So there is always the option that a financial sponsor, like private equity owner is selling to somebody, to a strategic player in the market who's just taking the company. Maybe as a most recent example, you might have seen the announcement, Rheinmetall is going to acquire Loc Performance in the U.S. Loc Performance is one of those players dealing with everybody, fully independent. They're not independent anymore. And end customers must ask themselves, do I want to be reliable on somebody who is owned by a competitor? So this was for us as a management team, the name of the game that RENK says independent. That's why we were so convinced that the company belongs back to capital equity capital markets at the stock exchange and we rather happy to have received your support and that we could convince you to believe not just in us, but in RENK. This is the most important one and that we are all here together today. Our pitch, our equity story in very brief, our foundation to build up further growth, further shareholder value for you, for all of us, you are familiarized with our figures. But just to recollect, 13% market growth, and I will dig into that a little bit later, is known. You might remember that we have the 13% compiled out of 14% growth in the Land side and 9% on the Navy side, but I have a market slide to that later. Global #1, you can't hear that probably, not anymore. However, we have to repeat that, and we will further strengthen our position and Alexander will also show from the technological side and some R&D activities, how we do that and ensure that in the future going forward. The locked-in business model is one of the key specific strengths of the company. It's not just about the huge installed base of 180,000 platforms where something from RENK is inside. And this population, this installed base will even grow over time. But as said, we are from agnostic, we are in many, many programs, sole source supplier, and this gives us the stable position going forward also in the market, which is now active. And we obviously also benefit from the fact that armed forces buy, at the moment, what is market available. So the level of, let's say, risk appetite to go for new technologies, to introduce something new is at the moment, limited because everybody is short in capabilities, short in equipment and material and whatever you can get on short notice is just what is market available, what is under construction, what is combat proven, what is already specified, and with our huge installed base and market presence of 75% in tracked military vehicles, we are perfectly positioned to grab this market. The EUR 4.7 billion in order backlog also well known to most of you. This gives us visibility going forward for the next years to come. And this is specifically important for what matters now, delivery. The only thing that matters is that our customers get their products on time, in perfect quality, as promised reliably. And for that, execution is important. Sales is always important, but much more important in these days is to execute orders, to translate order backlog into revenue and to get the product out to the customers. And this is specifically what Emmerich Schiller will focus on later today. How are we doing that? How were we able to improve output to significantly strengthen our ability and efficiency level in the production to perform? And this is what matters and with the backlog, we have all the basis to work in our processes, to work in our operating model and our processes to, let's say, materialize efficiency gains quarter by quarter. The well-invested platform. You obviously can't hear that anymore. I also said that several times during our facility to yesterday. But I think what you have seen is that the company is well invested. We can cope with the growth which we have guided on a midterm basis, which is backed by this order backlog without additional expenditure CapEx. The 3% is on the level of appreciation of the company depreciation. And I think Christian will explain later why we have that strong asset base and why RENK is basically a company which under normal business logic would not even exist in these days, but more to follow from you and your part. Strong financial profile, you have seen that we have narrowed the guidance for this year to the upper end of EUR 175 million to EUR 190 million. Christian will also say something to that and also why we have changed from relative figures of margins to absolute numbers. This has very good reasons. The bottom line is we would like enable growth. We don't want to motivate ourselves and set the impulses to shrink into the high profitable niche. All what we have heard from you and from the investors is, this is a good move, they understand that and that's why also management, by the way, is incentivized on absolute figures. And this was reason enough to go that way, and we feel rather confident that we are ending up at this upper end of the range this year, which I think is also good news. Growth; growth is what matters, what we have to take now from the market. And just to recap and that's why I started on the left side with 2020. So when Triton took over, when I joined the company, this was a EUR 550 million company and we were able in the last 3 years to double it to the EUR 1.1 billion which we have guided as top line revenue number for this year. Such growth doubling the company needs to be digested, needs to be managed. Despite COVID, energy crisis, wars, supply chain challenges, we were able to do so, but there is, and that is the good news, still room for improvement. Not all homeworks done by far, not the entire potential materialized. So the company has a great future in front of it. The last 3 years of growth was a mixture of organic and inorganic growth. As you might recall, so on the top line, we acquired the assets from L3 Harris. So we grew 2/3 by acquisition inorganically and 1/3 was organical growth. On the EBIT line, it was exactly the other way around. We could improve the EBIT margin by 6%, 4% organical improvement in the company, 2% by value accretive acquisition. Looking forward, we want to double the company again with this management team with that market, with the setup we have, I'm super convinced we will do that again in the midterm. So our midterm target is EUR 2 billion. This is also what we have internally communicated as our ambition to grow and the nice thing is with the huge order backlog we have, we can do that just organically. So whatever we do inorganically comes on top, either we achieved the EUR 2 billion earlier or we make more, whatever the case may be, we will also dig a little bit into M&A later in my presentation. But the key message is that our midterm revenue ambition is EUR 2 billion, and this is a round figure which everybody can easily recall, and this is also the ambition which we have set internally into the management team. And Alexander, you will present later how the market is supportive and what is in the pipeline and also the ambition level and how we intend to achieve that at the end of the day. We have 3 buckets with deep dive slides, which we have prepared, so for Land, for Navy and for Aftermarket. So this slide in that order will accompany us in the next slides to come for some deep dive on the market side. So generally, and we touched already on that, and I think no need to repeat that. Geopolitically, we have areas of tension at the moment for us, focused on the 3, obviously, everything which is in Europe and Ukraine. You're familiar that specifically our land business is, let's say, benefiting from 30 years of peace dividend in Europe shrinking fleets of tanks and catch-up need in Europe, is it fast enough, is it, let's say, enough in speed and quantity, probably not. However, this drives our Land business specifically is the need which we have in Europe. We have a Middle East conflict which is honestly driving both sides of the business. It's Land, it's Navy, and we have rising tensions in the Indo-Pacific where we clearly see order intakes more and more from that areas for the Navy. So the Indo-Pacific region is ramping up significantly in Navy orders, and we have seen that already last year, be it from South Korea, Philippines, India, Australia, Japan, Taiwan. So they all have set up big Navy procurement programs, which are of relevance for us. However, the message here is as well, those are the 3 biggest most actual tension. But there is regional conflict in Africa. There is autocrats on the way also in South America. So the entire so-called global South is an issue. They have more than 50% of the global world population. And these countries, these regimes, these systems and people are undecided whether they join the Democratic Western values or whether they join the autocrats, first of all, China, Russia and these systems. And that's why I think we need to understand that we have not a bipolar world anymore of 2 blocks, the East and the West and the cold war, which we are all familiar with and happy that times were over as we thought, but it's a multipolar world, and it's rather complex. And things are linked, and it's not a coincidence that China, Russia, Iran and North Korea are collaborating. They are not, let's say, friends by heart and mind. But opportunistically, they have a joint enemy, which is our way of life, which is the western world of democracy and which makes it rather complicated to get things, let's say, stabilize in the way we think it should be and it's worth to have world to live in. So that's why we clearly see that defense spendings need to be increased. We do not see at all that this is a short-term effect. We see it really a long-term market because it takes time. Defense budgets do not grow overnight. And even if you have additional defense budget, it takes years, to translate that into contract for the industry, industry into hardware, hardware introduced into the armed forces. So this is a function over time. And what we clearly see here is a need for in the long-term trend and nothing which is changing fundamentals by headlines in newspapers, whether there is compromise here or attack there, the fundamentals of what's going on in the world are dictating as a long-term requirement to ramp up for deterrence, and we do not expect things to be over rather soon which is maybe good for our business, but the most important, unfortunately, needed to stabilize the system. How does it look like in figures? To give you a feeling, we have looked at the European market, the U.S. and Canada market,ever since good spenders obviously. And what is for us accessible in the rest of the world, accessible is in our definition of those countries where we are allowed to deliver and to do exports. So we have, in total, almost EUR 600 billion ramp-up in defense budgets from '21 to '27 and we have put the '23 in the middle that you have a feeling. Is it back-end loaded? Is it front-end loaded? Is it more or less linear distributed? So some of that has already been done in the past. However, not all the monies are, let's say, flown to industry. First of all, you need to sign contracts, which takes time, then industry has to deliver. So it's really function over time, as said, but there is also quite a big market in front of us. Those figures are the ones available now. According to the latest planning, it may well be that the one or the other country is even increasing the numbers or also shifting. But as an orientation, I think it's worse to look at. And I touched that very briefly. On the Land side, our accessible and addressable market is growing by 14%. Addressable is then, accessible I just explained, is those countries which we are allowed and able to export and to deliver and addressable is those markets which are, let's say, relevant for our product portfolio. So it doesn't help if there is budget for ammunition or rockets or something else which we are not offering, then it's not addressable for RENK. So -- and the good news here is that in the short term, what is addressable is even outpacing the overall market growth by 5% points. We have this market presence and this high market share already. So the likelihood that we are able to grab this market is good on the Navy side. We see an overall growth of the addressable market of 9% and this translates then combined and altogether to 13% I have shown in the very beginning. To look into the NATO Europe situation of budgets, and we discussed it with you already in the recent past. But just to recall, I think we have 2 messages here. One is there was a peace dividend for more than 30 years with shrinking budgets. So there is a need to catch up? And the second question is which the slide doesn't answer, but might be the hint, what is the right level going forward? And the catch-up need is still huge. So what has been added as spending are the EUR 300 billion to the equipment spend and there is still a gap to the level of outfitting of cold war times of USD 1.6 trillion and the EUR 200 billion if we have had in the last 30 years spent 2%, which we have not done. But I think the more important question is really what is the right level going forward? The 2% just as a recollection of everybody has been invented in 2014. As a reaction of the annexation of Crime, NATO said, okay, we need to all achieve 2%, perceived a fair share of burden for the NATO members, 2%. And what has happened in 2014 is not at all reflecting the situation in which we are now. If we look back to the world map and the level of walls and crisis and intensive war actions which we have, Ukraine is meanwhile ongoing since 2.5 years, the war in Gaza is beginning of October one year old. So this is not at all reflected when NATO invented the commitment of the 2%, whether we need to go back to 3.7%, I don't know. Germany has not in one year, not in one year in cold war time spent less than 3% annually on GDP. This was no problem for the country. We were able to afford it. This was no debate whatsoever. And whether 3% or 3.5% is the right figure, I don't know. If you reflect what China is spending, what Russia is spending, there's a full war economy going on. This is maybe also one of the relevant information we should look at then for sure, 2% is not sufficient to catch up on 30 years underspending, plus reflecting what's going on at the moment in the world. My best guess is somewhere between 3% and 4% for NATO Europe. Some are spending more, Poland, Finland, also the Baltic states. Unfortunately, there's partly very small GDPs only. So in absolute terms, it's not big figures. Germany has the largest economy in Europe, has a responsibility, Germany has a specific role, the hesitance of the German government is not healthy and not the right signal. We cannot expect other Europeans to move to do more, to move faster. It's the largest economy who has clearly a responsibility is not moving and not showing the commitment and the priorities it should do. So I think this is the crucial point where we are in at the moment. However, the market for defense. And many of you asked us several times and then there's cease of fire and then all is over. We think it's structural. We think it's long term because you cannot catch up 30 years underspending and the situation we are in 1 or 2 or 3 years, and this will also not disappear because of the headline in the newspapers. Let's have a look into the fleet size of Germany, and Germany is not different to many of the larger countries in Europe. What has happened since end of cold war, we had tracked vehicles, about 5,000 in the German Bundeswehr and the German Army. We have reduced almost 90% of the fleet, 85% is to the status of today. And we have a little bit catch up already. So we are not at the lowest, let's say, level ever, but almost still. So the right number probably for Germany is maybe not 5,000 anymore, but at least 2,000 main battle tanks and some infantry fighting vehicles mixed in. So at the moment, we are at 700, and this is the sheer number of platforms we have. It doesn't say something about whether those platforms are available for service. They are just there and existing. On the Navy side, it looks a little bit better. We have lost 2/3 of our fleet size after the end of the cold war. The lowest level the German Navy had was 3 or 4 years ago when we had less than 40 ships. So we ramped up a little bit the status of today with 50 ships. Again, doesn't mean they're all able to sell and to be used for missions. However, availability has been improved in the last 2 years, 2.5 years in Germany on the Land side as well as on the Navy side, but this gives you a feeling where we are, whatever the right numbers going forward, definitely not EUR 750 million. Where do we grow? What are the core markets for RENK? Something which gives you [first-ins] where we focus on, not just with organic growth but also looking for inorganic opportunities. The European powerhouses, as we call them, are the 3 countries where we have operations, where we have people, where we have IP, where we have technology, where we produce, which is Germany, the U.K. and France. Obviously, those are home markets as we call them. We continue to grow organically in those markets. We have, I think, later Alexander also has something to announced, which is linked to U.K. You have just seen last week that the new Prime Minister of the U.K. came as one of the first visits to Germany to strengthen specifically the security and defense collaboration between the 2 countries. So U.K. is also a focus for us. We have similarly in Land and the Navy a good installed base and focus on the growth here. But the U.S. and North American market, U.S. and Canada is of utmost important. It's still the largest defense market in the world. So specifically, also for us with the installed base, which we have on the platform side, Land and Navy and also with the factory and the production we are operating in Muskegon in Michigan, the US market and the Canadian market are of utmost importance and one of the focus areas to grow also inorganically. Then there is a rest of world, which is a mixture of some target countries. If you are able to read the flex, I don't know, from the last rows here. But what we try to say is there's some Europeans where we have good chances to grow with focus, which is, for example, Poland or Italy also with announced programs. There is South Korea, where we are active in Land and in Navy ever since. Israel obviously, is a part of our customer base. But to speak the Indo Pacific, our picture is on India. India is growing, India is a little complicated market, and you also need to be patient. However, India is growing for the entire RENK product portfolio, not just defense, but also on the energy side. And on the civilian industrial side, we grow organically at the moment in India. Also building a new facility, which you might have seen and targeted disciplined M&A targets, we also, let's say, focus in India. However, India is complicated, and you always need to have twice a look on certain targets, but this is the areas of growth for us if we look into the overall global market. Coming back to the tanks and the main battle tanks as the core product for RENK. There is 3 messages to be made. One is there is an installed base and existing platforms where we are very well positioned. This is what you see on the top left, where you see Leopards and K2s and Leclercs and Merkavas and the Arjun. And as I said earlier, at the moment, armed forces by whatever is market available, we are well positioned and we are grabbing that market. And this is the actual growth which you see and this is also what you see in pipeline, what you see in the total order backlog. Then there is new platforms under development, whether it's the Panther from Rheinmetall or the MGCS, the main ground combat system as potential successor for whatever comes after Leopard 2 and Leclerc in Europe, there is in Korea potentially a successor for the K2 next generation under development, and we are well positioned for those new platforms. So this is future. And important is that we are not just in legacy and whatever is existing today, but that we also with our latest technology are the partner of choice for the integrators, for the armed forces for next-generation platforms. And then there's a little bit of legacy, and this is okay. And we have picked 3 because there is no more legacy. Where we are today, not in with transmissions. The M1 Abrams is out there in a big number and it's obviously an attractive program. The Challenger is outfitted and equipped with our suspensions, but with an old transmission from another player and the market was more or less, not anymore in the market and also the Alligator MBT which is a homemade own design in Italy as a derivative of the Leopard 1 developed back in the 60s is carrying a transmission of a player which is today not anymore in that market. So for Alligator, I think we have very good chances to clean up also that legacy. There is a plan to repower out of the 115 Alligator 80. And with our collaboration and relationship with Iveco Defence in Italy and links to the Italian government into the forces, I think RENK is more or less set as the sole source to do that. So this is a little bit of cleaning up the past and closing gaps. Challenger might also get, let's say, repowering program over time as far as we know, not yet decided. However, I think we have also good chances to increase the scope of supply beyond the suspensions which are already in the Challenger if there will be a Challenger 3. M1 Abrams is interesting. Basically, the next-gen M1 Abrams is more a next-generation platform, so a layer above than just the repowering. So GD is undergoing at the moment, significant development work to come up with the M1E3 as it's called next-generation Abrams, which will not just get repowering, but obviously completely new vehicle also with a new turret and an entire new technology. We feel that we are very well positioned on the suspension side and probably also in a good position for the transmission. And this is the big chances out there in the market where we have ultimately the chance to even clean up on some legacy platforms, not just delivering wherever we are in, which is great and whatever comes, comes new where we are already in development processes for all those programs, but also on the legacy, there is huge chances to close old gaps and to assume even more market share going forward. I would like to have a look with you now into the aftermarket. Aftermarket share has increased in RENK in the last 2 years from 30% to 37%. Meanwhile, Ingo, is it correct, 37%, right? 38%, even very good. So from 35, 6, 7, 8 Q2 enjoying attractive margins. On the M&A side, you are aware that our product mix is important. So that we have sufficient aftermarket for VMS, it's incremental part of the performance of the segment. And aftermarket will stay on the elevated level for the next years to come. Why is it so? Because Army and Navy make use of their equipment much more than in the last 20, 30 years. There is deployment, there is training. There is exercising. And if you just have a look to this photo on the bottom left, which we included here, this is just 3 or 4 weeks old. And this is the German frigate, Baden-Württemberg, a company but for Eurofighters in the Indo-Pacific. Have you ever seen German Navy and Eurofighters operating in the Indo-Pacific? So this equipment is now used, much more, much often much more intensive in the last -- than in the last 20, 30 years, and this is pushing Aftermarket after this initial push which we have seen as a reaction -- as a direct reaction of the war in Ukraine when all the armed forces did what they could do initially in the first place. You don't get overnight more tanks and more ships. But what you do is, whatever you have you need to bring back into service, you have to repair it, you have to fix it, you have to maintain it, you have to increase the so-called circular reserve, that you have enough spare parts, spare parts in the meaning of tanks is complete power packs, engines and transmissions and not just the pump or something. And this elevated our level from initially about 30% to 38% today. And we see this elevated level of aftermarket share in the next year as stable on an over time growing field population. So the installed base is obviously growing over time and this gives us even more resilience for the business model going forward and that's why how do we expect the population and the fleet sizes to grow over time. We don't have an exact year, but it's something which is well midterm that Navy, which I think is specifically worth to mention, we, let's say, backed and reflected that with our pipeline and our planning installed base will grow from about 220 ships to 300, which is really jumped-up midterm. And on the Land side, we expect the overall field population to grow beyond 200,000 vehicles equipped with RENK, and this is obviously supporting long-term than also our Aftermarket business. Let's have a brief view into the M&A, which is, if you recall my growth slide in the beginning, the piece of inorganic growth which comes on top and beyond our EUR 2 billion ambition. Three areas to look at. One is obviously, and I mentioned that already, the North American market, largest defense market in the world. The move we have done back in '21 with the acquisition of the Combat Propulsion Systems, assets of L3 Harris on the Land side was, as we think, a good move because the U.S. market obviously is not allowing sustainably to be equipped from foreigners. So you cannot just produce something here in Germany and send the transmission in the box until the forces, good luck with that. So they require under Make America Great Again, localization, jobs, technology, sovereignty at the end of the day and independency of supply standing behind that. So you need to be in that market and not just there with the sales office, but with considerable operations to play long term in that market. So the move we have done on the Land side was why strategic good move to consolidate the market and to grab the North American market. On the Navy side, this is something where we have to, let's say, hard words, close strategic gap, which is a white spot. We are ever since so far, a partner for the U.S. Navy and also for the coast guard, but we managed so far to deliver and perform out of Germany. This will midterm not be acceptable for the U.S. end customers. So localizing Navy either by acquisition or on a greenfield organic approach is, at the moment, under review, but it's something we should be able, let's say, to close and to come up with a solution in the next 18 to 24 months. Europe is a rather consolidated market, so it's more opportunistic. Whatever we can grab to further clean up and consolidate, we will do. However, players left in Europe typically do not perform on the margin and profitability level as we do. So you would rightly ask us, why have you acquired a company making 10% or 11% or 12% EBIT margin and mix it into your nice VMS business. So there is some, let's say, remaining smaller players not on the transmission side, but in the adjacent vicinity of the portfolio, some smaller suspension suppliers and others out there. But nothing which we technology-wise need, nothing which is really of strategic relevance for us, it's more opportunistic if it makes sense. And the APAC region, we touched already briefly is an emerging market. It's a growing market. It's an important market for our portfolio and also growing in India inorganically would obviously allow us to at least partly have a supply chain in a more low-cost country to take advantage of that. So India for us is in a first step a market where we build up capabilities to provide solutions local for local so that we are not delivering into India for India and in the next step a local for global approach that we take advantage of Indian capabilities, which we build up over time to also serve export markets out of India and optimizing further specifically in the supply chain on our cost structures. I'm almost coming to an end, but I would like to remind you who is RENK. And I said, Christian will explain later about this company, basically is under normal logic, not even existing. Where are we coming from? A typical corporate carve-out, part of MAN, part of Volkswagen later. Thanks that you've sold us to Volkswagen, Christian. Typical corporate carve-out and managed like this. When I joined, no ambition level, nobody believed in growth, nobody could imagine that you can change the organizational structure or management team or do something else, so a well protected, preserved thing without agility, without vision, without ambition. And I think we have achieved in the 3.5 years with that management team, and specifically in the last 18 months to set up a company which is fully self-sustained and meanwhile, listed and part of the SDAX family. We were completely unknown when I came. So if you ask people on the street, do you know RENK, have you got a clue what we are doing, what is the core business for what RENK stands for? No way. I mean, you could google RENK, you couldn't find anything. And so one of the missions and job source to make RENK known because what we do is of relevance. It makes people proud. It's important, of utmost importance to have an improved and visible employer branding. Otherwise, you do not hire people in the face of growth, and it doesn't go without taking also on additional people onboard and grow the RENK family. And also, if a company has nothing to say and you Google it and you do not find anything, why should you invest in a company who has obviously nothing to say, nobody knows about it, doesn't make any sense. We had a typical, not negatively, but I don't know how to put it more diplomatic in [indiscernible] typical management team. And what we have here in the management team, which you will see in the course of this presentation is top-notch MDAX and better and more experienced management team. And we are very proud that German saying that our suit is a little bit wide. So we can grow into that with that team. And the team is good to go for the next years for EUR 2 billion plus and I'm rather proud that we have set up the team together in the last 12 to 18 months. I found a company which was not an integrated RENK and [ Hammes ] you're sitting in the last row or ever you recall that times when we met the first time back in '21, RENK was a collection of subsidiaries, not consolidated, some yes, some no, not properly managed. And I found, I don't know, 5 or 7 procurement departments just in Germany, not talking to each other. When I introduced myself in the first weeks, I had a -- it was in the middle of COVID. I had a Teams call with HR. And I recognize that HR leaders in Germany and the sites and Rheine and Hanover have never met, the colleague in Augsburg. I couldn't believe it at all and we have integrated that. We take advantage also of central function synergies, which is the backbone of the company. And otherwise, no chance also to have ever achieved capital market readiness and to grow the company in a global setup. And last but not least, silos, very strong. So we had sites like Augsburg is the enemy of Rheine and we are in competition in certain businesses. So we fight it against each other, the one side of the street. And those of you who have joined the tour yesterday have seen that we have this street in the middle of the factory. And there is on the right side, the VMS business; on the left side, M&I, don't think they have spoken to each other. I don't think they have not even shared transportation vehicles on the ground. No way, those are the others. So they also have not helped each other. This has completely changed as well. And there is today a strong culture of entrepreneurship of accountability and taking over responsibility and what really helped us interestingly enough but logic was when Triton set up the management incentive program. And the management team, the top 35 invested in the company. In that very moment, they invested in the company said, now I'm invested and now I would like to understand what you are doing here and why you need so much money for this and that. This was one of the key helpful triggers to change culture. I would like to finalize and give the floor to my colleagues ultimately with the last slide. And the last slide is we are proud of what we have achieved. However, there is homework to do. And we are not at all there where we should be, where we have to be and where we could be. On the finance side, obviously, the financial steering model is under, let's say, redefinition and creation. Value creation is much more on the focus. Anja will explain that to us later and I think you will appreciate the move we intend to do. Net working capital or the last topic when we met the first time, obviously. It's still not there where we want to have it to be. However, in phases of growth, of strong growth is clearly the priority to keep production up and running and to compromise for 2, 3 quarters on net working capital. You'll recall that we took deliberately the decision last year to take for EUR 30 million material on stocks to allow production to produce output accordingly at all. We have a similar effect now in the U.S. So net working capital is still in full focus. We have set up a program in each legal entity and side to optimize that, but we are also in full alignment on the management team side that output has first priority. And if we achieve our target figure 2, 3 quarters later, it's not nice, but it needs to be accepted. On the operations side, Alexander will give you more insight about what's going on in the U.S. You asked many questions since we also triggered you to ask those questions since this is one of the, let's say, situations why the VMS performance in the first 6 months was not there as it should be, and it could be, not according to the potential which we have. We are on the way to bring it back on track. I'm rather confident. And Alexander, I think you give an insight with more details on that and obviously also Q&A is good for that later. Alexander will also give you deep dives and good ideas and, let's say, examples on our moves on the technology side. In the last 15 months, when we met, we have not discussed too much on R&D projects, specifically on digital business models. I think it's worthwhile to get an update here. IT is one of the big topics. We have not even touched it. RENK is a 151-year company. The IT systems, the ERP systems are all grown. We have acquired like the assets in the U.S. companies. They have obviously different systems. So there is legacy. There is room to maneuver and IT has two sides of a coin. One is it's awful, it's expensive, it's painful if you touch it, but once you are through it, you will definitely materialize lots of potential, to get rid of interfaces, to get rid of manual work, to have an up-to-date clean master data, which is one of the important things to stick close to the standard, to have no hazards if you have change to the next release. We have all of these nightmares today. So IT is definitely one of the old untouched worlds in RENK. So in the next years to come, we can't avoid to confront you probably with some IT costs and the adjustments. There is no way around that, but we are looking forward to this unlocked potential once we are through that IT programs typically need 3, 4, 5 years. Production and supply chain. This is Emmerich's chapter at the end of the day. So you still wonder how has this company not just found the miracle of Emmerich, how was he able in a few days and weeks to turn around Augsburg. I think you will solve -- Chief Miracle Officer, Emmerich just said this is his new name exactly. So you will shed some light into that. I think this was absolutely fruitful and valuable to have you on board and that you turned it around so fast. You know you love traveling, so Muskegon is your next hobby in RENK, which you're already working on. And Emmerich will give you a very operational deep insight of what we have achieved already and what is still in front of us. And I'm happy now to pass over to you, Christian, and you continue with the financial part shared with Anja. Thank you very much.

Thank you, Susanne, and I think -- so very good morning from my end and good to see all of you recovered from last night. We're going to share the presentation, Anja and myself. And I'm a little bit more for the past today and she stands for the future as a chief future CFO kind of thing, I don't know. What I would like to do first is have a view on the development of this young listed companies. It's quite an amazing story. What you see there that after a couple of weeks, the share price has peaked already close to EUR 40, quite prominent, big trading volumes on a daily basis by the time that we're even not aware in the SDAX, on MDAX level. And basically, if you look to the peers, coincidentally called PER and the other one, H, you might make your own decision who is that going to be? We outperformed, obviously, the peers in the market. And as you could see with the help of KNDS, as Frank has alluded yesterday. We made the second attempt of the IPO. We entered the SDAX very shortly after listing. We delivered on our '23 guidance. So far, you know us for free. And if you count the Q3 of last year, 4 quarters, we've delivered what we promised. Sometimes, we're a little bit accused of being too conservative but we think it's the right way at the moment since we are new to the market. Obviously, strong momentum in the first half of this year and a strong balance sheet also when we were released to the market, low indebtedness for former PE asset and we continue to manage our growth. When you look to the shareholder base and it includes many of yourself in there, you could see that we started at the listing with a free float of 27% and management holding 4%; KNDS almost 7% and Triton on the level of 62%. Then quite early after 3 months, the lockup was waived by the fellow banks. Many investors participated in the first sell down, not every investor appreciated, let's say, release of the lockup. But at the end of the day, the share recovered quite quickly after the placement at 25% a few days thereafter. And we have now a free float of 37%, Triton is still holding 52%. And the structure of our shareholder base, as you can see, is quite balanced at the moment with a very solid base here in Continental Europe and in the U.K., an increased number Ingo of U.S. shareholders. We spent some time, Susanne and Ingo in the last couple of months also to make RENK more popular in the U.S. And basically, on a good path here, very solid and healthy structure. And I would like to say those that followed us from the beginning, I guess, are also very pleased with the development of the share until today, even if there is, as we all know, a technical overhang that we tend to ignore because as to Susanne's point, this company, even if we have quarterly results and if we have a share price focuses on output because that's what we have as a debt to the armed forces, to our integrators and to Frank's point, from last night, we will continue to enable them to grow. And if we do so, you will have the revenue, you will have the profit, you will have the cash flow. And obviously, Christoph also net working capital will go down over time. Maybe a little view on the Q2 since we just discussed mainly first half of the year when we were in the call, you could see basically that the order intake has continued to be strong. And everything you're going to see later with Alexander is only a fraction in here in the current order backlog, there's more potential to come. But still, with this level, we are able to live on a level of 1.5x when it comes to our book-to-bill. Revenue went up 26% in second quarter. And as you keep in mind, 24.4% for the first half of the year, one could really say that we are through the trough of supply chain challenges. We said in '23, in particular, in Augsburg, where American later part will tell what we did there. And hence, you can also see that the EBIT is, if you take out the EUR 9 million of the provision for Ajax in Q2 last year has year-over-year already improved. Obviously, you don't see the Augsburg effect in full as we have alluded to in our call because we are, let's say, 2, 3 quarters behind Augsburg in the U.S. with the supply chain challenges there. But since this is the more easier business model, we are confident that we in the due course of the next 3 quarters, we'll also achieve similar effects over there with a continued strong Augsburg operation, which was the base and the reason to narrow the guidance on the upper end of EUR 175 million to EUR 190 million. As you can see in here, we've done that and also on the revenue side to EUR 1.1 billion on the revenue side for this year with the growth to 15% CAGR going forward. Basically, to Susanne's point, the EUR 175 million and EUR 190 million, we report now is we had a long discussion in the Board and the Supervisory Board how we're going to manage the company in the future. And you might know from the IPO process that management is incentivized on absolute numbers. So this management here will only get 100% bonus if the EUR 190 million are being achieved. If it is less than EUR 190 million, there is less to no bonus. And we basically said, if we look on the growth of the EUR 4.7 billion. In the order backlog, we basically see that it might make sense to focus on the large of an absolute EBIT, ROCE perspective that Anja will allude later on and a cash focus, which makes U.S. investors more front of a company growing 15% instead of 10% with a senseful ROCE target and also performance today and have this growing instead of saying, let's sell off everything which is below 25% or 20% and focus on Augsburg main transmissions. And with this, we basically from today continue also to go forward with the absolute number in our reports. And Anja later on will explain to you what we will provide to the annual meeting next year in order to have your approval on the compensation part. On the indebtedness, you basically see that the company was levered on a level of 3.8x after the acquisition in the U.S. and the push down acquisition value of Triton when they acquired this, which is a typical PE model. We've quickly delivered, which is owed to the capabilities of the company to generate cash and to quickly delever. Last year in '23, you see that we have spent two amounts to extraordinary items. Obviously, we settled the shareholder loan with Triton, which was EUR 80 million plus accrued interest of EUR 95 million. We paid back EUR 50 million. They contributed EUR 45 million as a contribution in kind into the equity of the company. And basically, also, we acquired straight of our cash in Q1, General Kinetics, which was an add-on to the suspension business in North America. If you now look into this year, 2024 for the half year, we've paid back the high-yield bond premature. Hence, we have had some certain costs. If you would have taken this out, you would see that the continued strong performance of the company would have carried on. And basically, also, you see the Standard & Poor's and both Moody's and the last couple of months have adjusted their view on the company and both with positive outlook because obviously, they see the sponsorship going down over time. We discussed with them Ingo and [ Henrik ] that basically an investment-grade rating would be in reached by the time we grow a little bit bigger than we are today, which to Susanne's point before, is going to happen automatically if you're going to work down our order backlog. Now since I'm departing end of the month, it's time to look back into the mirror. So I'm demand from yesterday, and I would like to take this chart to the point to say a company like RENK would normally not exist. Why is that? If you have a market that is shrinking over 30 years, as you could see in Susanne's presentation with 90% of the land fleet going down with a consolidation in the market with companies exiting the business. There was one company mainly surviving, which was RENK under the umbrella of the Volkswagen Group, very well invested by the time, not only capitalize, but kept up to date as you could see yesterday when you went for the Augsburg factory, which is where you find the same machines that you find with Porsche and Zuffenhausen on the machining. So basically that you have an owner that preserves on a certain level in the company is credit to the former owner, then they didn't sell it to a kind of activist fund, which would have split the civil business and the defense business and sold it in pieces, but they sold it to a Swedish PE fund, which is a grower. So they took money and basically did the decisive step into the U.S. by acquiring the combat propulsion business of L3 Harris, most probably Volkswagen as a big German corporate at the time, wouldn't have grown into defense in the U.S. And by this move, the company consolidated the business on the land side. So there is to the Susanne's presentation before, not much left even on the legacy side, but also going forward. And hence, this, the company has done the decisive step in the biggest defense market in the world. And then at the very same time, to the presentation of last night and our continued discussions, the threat perception, in the light of the geopolitic tightness has arised and put let's say, a big, big expectation on order delivery on to this company. If you see the old RENK before Susanne's point at EUR 500 million revenue would have produced 300 transmissions in Augsburg a year, 150 new and 150 refurbished, then this company couldn't have taken on the challenge. It can take on now. And to your discussion with Frank yesterday, we are not and we will never be in the years to come to critical path for the integrators when it comes to the ramp-up of the fleet. Basically, on the investment side, if you look on this chart, you basically understand why we guide on 3% of our CapEx in regards to revenue because there has been money spent in the last couple of years. If you take it all together, it's around EUR 400 million on the pure CapEx side, and it's around EUR 380 million on M&A already. And this M&A is the base for the track record we have seen. So the acquisition of Magnet Motors, the acquisition of L3 Harris, the Muskegon plant, we have now or general kinetics and their integration show that we -- if we do M&A steps, we are in the position to integrate them. Does it take time? Yes, it does. So if you integrate the U.S. operation into a Bavarian operation, it basically takes 2 years to do so. And now we are on the final track with the alignment of the production system that Emmerich will allude to. Hence, this company, if you look at from a distance, you basically can say, slide bearing is a source of joy, really nice progressing. M&I turned around 2% on the margin side. VMS delivering in Augsburg to the point and now in the U.S. as to Susanne's presentation and later what Alex and Emmerich would say, we will do the same thing. Now comes the time where I have the great pleasure to hand over this machine to Anja, which will be my successor from the 1st of October. I would like to thank very shortly, all of you that supported us in the IPO. It was a great pleasure to fly with you. It's a great company, and I stop here. So otherwise, I will start crying. Anja, over to you.

That's very loud. Thanks, Christian, for the kind words. And many of you asked me yesterday, how do you feel. Honestly, I have mixed feelings because you need to know Christian is a great buzz. So I lose him. On the other hand side, I'm really excited to step into the CFO role starting October 1, 2024. So -- and with that, I have the honor to present our new or basically refined financial steering model. And it's basically made out of 3 pillars. The first pillar really is our absolute adjusted EBIT. The second one, ROCE. And of course, as a third pillar, cash should not be missing. So absolute adjusted EBIT, why did we change? We formally made the change already for half year, with the half year numbers. You know that already. You discussed it already with Christian and Susanne. And it's true. We are seeing the growth already. If you look at our revenue year-over-year, we grew 24%. If we look at a revenue growth quarter-to-quarter, we already grew 26% roughly. So we see it already in the figures. Then you've seen our growth ambition from Susanne. So we want to have the EUR 2 billion in midterm. And we raised our CAGR of 10% to 15%, so we are growing. And in some minutes, you will see Alexander presenting our full potential. So we are facing growth. And that means we had to do a decision. So either we stay as we are, tiny and really high margin or we really grab the growth potential and turn it into revenue. In order to do that, even though we are well invested, we still need to invest in inventories in order to get the growth. And we also, as Emmerich is going to explain to you, we need to actually come up and increase our production efficiency, which we've done already in Augsburg, but which we need to do in the U.S. again. And that means we need to -- we will -- well, -- we don't want to compromise our margin, but we definitely want to take the growth, maybe just a little bit the margin, but not much, not compromise it. This is why we decided to go on absolute adjusted EBIT. And then, of course, as we do not want to compromise the margin and as want to have a value creation for all our investors, and I want to remind everybody, the whole management team has invested. So we have a very big interest for not compromising our margin. We have introduced as the second pillar ROCE. And how do we do this? It's really easy because if you look at the long-term incentive plan, which was approved by the General Annual Meeting in June, ROCE is already one incentive measure for the whole top management. So ROCE is definitely going to be one key performance indicator, which will be monitored and where all the efforts are spot on. And as the third pillar, of course, is cash. For every company, cash is king. So we kind of refined also our cash conversion rate a little bit to do a better steering and which we will see later on. But now let's stick a little bit on the EBIT side, the adjusted EBIT. You have seen Susanne presenting the revenue walk. This basically is the corresponding walk for the EBIT side. So we start out in 2024, as we have guided our adjusted EBIT being between EUR 175 million to EUR 190 million. And then we will end up midterm by the year 2027 by around EUR 300 million adjusted EBIT. How do we get there? If you look at the bottom, we have basically two big topics to tackle. It's one is growth and the other one is operational improvements. So growth really is I don't say it's easy, but it's kind of visible because you all know that our order backlog, total order backlog as of half year '24 is by EUR 2.4 billion. So it's really grabbing these order backlog and turning it into revenue. And then also when you see the full potential of Alexander also seeing and trying to get the new -- increase the new sales. Susanne also elaborated on our aftermarket. Here, we also have high visibility because we have a huge installed base. So basically, here, we will expand the aftermarket share. That is the growth piece. And then obviously, we have operational improvement. Here, we already started with the very first and most important piece. It's really take our U.S. affiliate RENK America up to next level. What are we doing there? We kicked off a project in Q1 already. That project is really covering operational -- the operational model to enhance processes and see that they are faster and better and more communicative, then it's really getting a sustainable supply chain there in place and also leveraging the upcoming growth. And obviously, that is what Emmerich is also going to do getting our production there also on top level and top notch. That is one big piece. It's firm. It's fully on the way. As Christian already mentioned, we still need to have 2 to 3 quarters to have this kind of exercise done. Then we would like to drive operational efficiencies. I don't want to elaborate more on that because Emmerich is going to explain that in more detail to us in a few minutes. This is really because we are going to a small series in Augsburg and that is covered by Emmerich. And last but not least, we have procurement. Since we're growing, we also have a bigger base for our procurement. So we will start negotiating with our suppliers and really getting payment terms, volume rebates and things like that. So we will leverage on that. And all these 5 measures will bring us to an adjusted EBIT of about EUR 300 million by the end of 2027. No, that's one. So we were talking how to convert our huge order backlog what we have by half year EUR 4.7 billion into revenues. And this is basically what we see. This is not a new site to you. You've seen that already in Q2, but it's still important for us because of the growth, so a total order backlog of EUR 2.7 billion is made up for us for half year '24 by EUR 1.9 million of fixed order backlog, meaning signed contracts. Then we have a frame order backlog, which is smaller. It's EUR 0.6 million. These are signed frame contracts. And then this is the most interesting piece. It's a EUR 2.2 million. It's a soft order backlog, and that is basically where we have opportunities, but we are a single source and we have very high visibility. And all these numbers I've been just explaining only cover a time frame of 4 years. So looking at these numbers by half year 2024, we are covering here the years only until June 2028 and nothing more. To give you a little bit of a flavor, we have put out some key orders, which are covered here. So you can see it's basically it's regionally diverse. It's -- we have different products in there. We have naval and defense. And when you look at the soft order backlog, this is mostly driven by defense. Now let's have a look at ROCE. This is our new component, which we are driving and which management is incentivized on. We started out in 2021 with a ROCE of roughly 11%. And if you look at what we have already accomplished until 12 months accumulated June 2024, we are at roughly around 16%. So we are -- if you look at our peers, we are well positioned. We are pretty much there. But we will not stop there because our midterm ambition is to have a ROCE bigger than 20%. So that obviously means we need to look very, very carefully where we spend strategically our money and how we optimize our capital efficiency. That's the third pillar, cash. Our cash conversion rate. So if you look at it, we find it a little bit because the old one wasn't really cash-oriented. So we really narrowed it down to cash. So it's now free cash flow divided by adjusted net income. Now I would like to do a little bit to explain the numbers because you could say, well, they are not really enough favorable development for us. So 2022, we were by EUR 85 million, which is great. And then obviously, in '23, we came out at EUR 28 million. The reason for that being, you all know that because it's the same effect you have been discussing with Susanne and Christian all the times in the quarters. That was due because our negative change in the net working capital was there. We had supply chain topics, and we needed to ramp up our inventory in order to make sure that we were able at the end of 2023 to really deliver and get our revenues. Therefore, it's the EUR 28 million. And now if you look at June '24, we are even negative. But you know the reason already because it's -- we are growing. So we had a slight buildup -- additional buildup in inventory. However, the majority here is really driven by our new financing because we IPO-ed in February this year, we had to come up with a new financing. So we had to terminate early our bond, which forced us to pay penalties. And obviously, all the interests were immediately due. So we had to pay them as well. That was roughly EUR 10 million to EUR 11 million effect. And now we are having a new financing, our super senior security facility which is covering everything like guarantees and revolvers as well as a term loan. So that stays -- and then this is our favorite topic. I would like to elaborate a little bit here because as you can see, our change in net working capital drives our cash conversion rate as well as other figures. And this is really our homework, what we have to do. So we started out in half year '23 with a new net working capital of 23% of revenue. And by half year, it increased slightly to 27% and we expect it for the year-end to be roughly around 25%. So, a slow, a low decrease. Why is that? So remember, for the first half year '24, we definitely grew a lot, and we had to invest in inventory in order to really get the growth delivered. That is one piece. And the supply chain issue is under control, so we don't expect any further buildup there. What we did already in Q1 this year is we set up a net working capital project. We basically, what we're doing is on a monthly basis, we have meetings with all our legal entities, which are consolidated into RENK Group with the CEO and CFOs, and we identify measures on how to decrease our net working capital. And then we track it. Every month, they have to explain to us, why does it change? Why didn't it? Why didn't it work out? Do we need to readjust the measures? And how do we get there to the year-end to get roughly around the 25%. This is really a top -- top task for us. Obviously, we also look at cash. So what we are managing is obviously our spending of money, but as well also because we have a lot of advanced payments, we're making sure that we get them on time. And why did I speak so long about net working capital because it's important to us, and we will not be satisfied to stay at a 25% level. Midterm, we are tasking around 20% for net working capital. We haven't touched the topic allocation yet. So these are our 4 areas where we would like to spend money and where we actually spend it in such a way that we are maximizing shareholder value. The first area is investment in core. There, in a few minutes, Alexander will elaborate on what we look at R&D piece, and obviously, since we're all incentified on that, we will only spend the money into R&D and other topics if they will be optimized. Dividends. We definitely want to be a dividend share. You've seen that already. For 2023, we paid a EUR 30 million dividend already, we will stay at the same topic and so it's between 40% to 50%, and it's based on adjusted net income. As Susanne basically just and also Christian told us strategically, the focus is really on defense and on the U.S. So we are growing EUR 2 billion organically, and then we see. By the financing, as you've seen last year, we were able to do a smaller M&A acquisition by just out of the pocket. So we do not need any new financing. If you want to go bigger, we then also need to talk about financing. And of course, since Susanne laid out our ambition and also Alexander will elaborate on the full potential and the EUR 2 billion organic revenue growth, we would like to deleverage by below 1.5x. And obviously, we also want to have the investment-grade rating. So this really is the 3-minute elevator pitch for RENK. This is what we are up to. This is where it can measure us. It's the task. They are all midterm targets what we have. It's a 15% organic revenue CAGR, which we increased from 10% to 15%. Obviously, based on the EUR 2 billion midterm revenue target, we aim for a EUR 300 million adjusted EBIT by 2023. ROCE, which is included in the incentive scheme of the top management should be above 20%. And net working capital, where we have already implemented measures and have a tight project management on, we are around 20% midterm. CapEx, obviously, we can stay at the 3% of revenue as Christian just elaborated because we are already well invested. So what we still need in order to support the growth, we will manage with the 3% of revenue. And lastly, obviously, the deleveraging below 1.5% and investment-grade rating when we reach the EUR 2 billion revenue. And with that, thank you for having me. I hope you enjoyed it. And now I turn back to Ingo and you're telling us what is coming next.

Absolutely. Thank you so much, Anja for the very clear message. I believe 6 very clear concise numbers, a great basis for coffee break conversation. So I think we take a short break here since I think Susanne and Christian, Anja, made very clear that operations in R&D are very important to us. We would keep it efficient and shorten the break a bit and reconvene at 10 past 10, so that we have enough time for Alexander and Emmerich and of course, also for your questions later on. See you at 10 past 10. [Presentation]

Ladies and gentlemen, it would be good if you would come to the presentation where I am as a starter, maybe. Ladies and gentlemen, after this strong and clear guidance from the management team from Susanne, from Christian and Anja this morning, it's now on Emmerich and myself, to talk a little bit about the operational execution. So for this reason, we have decided to split it up, while Emmerich will talk more about the plant performance of our lead plant in Augsburg, the way towards our RENK production system and procurement. I will touch base more on what is in the market besides the soft order backlog and the frame order backlog. A short update on RAM, but I think there were now 3 speakers in the meantime, and I just heard in a discussion, the update on RAM is more or less done, but I will keep it short. And then I will have a little bit deeper dive into technology, into current R&D projects of RENK and to discuss with you jointly some trends in the market. And very brief what are the main trends, and this is also mentioned this morning, I always say 2 plus 1, and this is just as a short recap. It's the defense super cycle, there's nothing more to add because it was explained in detail perfect before. There's the energy transition on the mid-to-long term and also RENK has recognized that even in this 151-year-old company digitalization will play a more prominent role if it comes to product features and if it comes to services to our customers. I will touch base on this later in the later part of my presentation. Consequently, if you wake up me in the night and I had exactly this statement 3 weeks ago in our group strategy meeting. If you wake up me in the night and you ask me Alexander, the Alexander, at 2:00 in the morning. If you hear all this fantastic move in this next level, we call this, by the way, RENK 2.0 internally. What comes into your mind, what immediately appears, and that's very simple. Three numbers. Number one, it was mentioned before to generate more than EUR 2 billion annual sales. Number two, we have ambitions to relate this to approximately 20% adjusted EBIT margin and to all of you who can do, I'm sure, 100% perfect math, this is a different number to what we have seen before. And last but not least, it's really -- it's key for us to secure our leading position in our core markets and in our core technology fields. These are the ambitions what we have as a team where we are striking for. In the story behind. I mean, the good news is it's not about rocket science, quantum physics or some fairy tale. It's all about execution of clearly defined measures. And the story is very simple. We had pretty much about a strong backwind coming from the market. So we need to leverage this market potential. I will touch a little bit more on this on the next chart. I just see it. We need to convert this into sales. We need to convert this into EBIT. And of course, doing this, it was also mentioned before several times, a world-class production network, including IT, is absolutely mandatory. But not only this, if it comes to margin, it was also mentioned by Susanne before to drive higher-margin business. After sales, it was explored and of course, RAM is a very important enabler for the short to midterm to come back on former profitability levels. But also, we will apply a very disciplined cost and resource management on the bottom line. We have a super top line, we need to work, and we will work on the bottom line on the cost side. Last but not least, we heard before about M&A. It's vital for us in order to improve our position in certain regions and to get access to certain technologies, what we need. And I will also elaborate on this later on. At the very end, we are a technology company. And as a technology company, we need to make sure that also for the future, we have the right products in our pipeline in order to satisfy and meet our customers' requests and of course, the market request. As you can see on this chart, I will touch base on the 3 points, and I'll start first, you need to give me some time now because the next chart is complicated. So on the first chart, on the first view, I'm talking about the market potential. On the first view, it looks complicated. On the second view, it's complicated. But on the third view, I think it's providing you some very interesting information. Let me just try to describe it in an easy way. You see many bubbles. Each of these bubbles is a sum of known customer projects either on the land side or on the sea side, the Navy side, known customer projects. And please, another very important remark, we only talk about new business. So we do not talk about [indiscernible] repair, service, after sales, whatever, only new business. Each of these bubbles is allocated to a certain region. I mean, as we see it here, we have the regions Germany, Europe, the Americas, which basically is North America, and Asia Pacific into a time window. So we made it simple. We have on the left side, a cluster of bubbles between for the time line between '24 and '28, '28 is our current planning and forecast horizon and from '28 to '31. And then we have the third criteria, we call it the maturity level. And if you have, for example, for a certain project, a very high maturity level. We basically talk about our soft order backlog and our frame order backlog. You see them in the chart on the upper left side, they have this oral circle. So what you see here is a soft and frame order backlog in the range of EUR 2.5 billion. New business, no aftermarket, after trades MRO included. And what is also not included later on, I talk about future technologies. I will also share with you some numbers here. These numbers are, of course, not included because they would materialize beyond '28. And I think the most important message is if you add all these bubbles, we talk of more than EUR 12 billion accessible market, EUR 12 billion. If you deduct the soft and the frame order backlog in the range of EUR 2.5 billion, we still have more than EUR 9 billion customer projects in the market and it's on our responsibility to be very clear to get as much as possible in order to gain access to this. If you make a deep dive, I would like just to explore 2 or 3 of these bubbles, if you go on the '28 up to '31 time line and you go in the column for the Americas. You see two big bubbles, one really green bubble, which is actually in the range between EUR 4 billion to EUR 5 billion. And these are two projects in U.S., it's the XM30. It was mentioned before. It's a Bradley successor and we talk about the M1 E3 next generation of the air brands. Huge projects, huge potential for RENK. If you go down, you see a blue bubble. These are basically two important Navy programs, CDG and FFG, also for the second half of this decade. This chart, for example, implies and set some kind of basis for us, that U.S. was, is and will be in the future for us very, very important with all the measures we have heard before by Susanne. Then if you go on the time line left on '24 up to '28, and we go on Europe and we go in the middle, the big cream bubble with the size of approximately EUR 1.7 billion order intake potential, we principally talk about a larger number of ISV programs from -- for different countries like Ukraine, like Romania, like Poland, like Italy, for example, et cetera, et cetera. If you go just north, also staying in Europe, you have a bubble of EUR 1.1 billion, which is part of our soft order and frame order backlog. You heard before, we talk about K2 programs in Poland, the NBT program in Italy, but there's also business included from our development contract, what we signed during the Eurosatory. I think some of you know this, for this new customer when this serious project will start in somewhere in '27. And more and more, again, on the good news, more than EUR 12 billion are in the market and it's on us to get as much as possible. And to be really honest, I really, really like this perspective. It's really good. So much about the order intake, market potential. Again, everything was said before. I don't need to recap everything. But in Q2, indeed, we started a structural program. And indeed, we had three main activities fields. The number #1 focus for us in North America this year is delivery situation. We have contractual obligations. And for this, the #1 task scores to get control over the supply chain because if you don't have parts, you cannot produce. It's very simple. Operating model was mentioned before, more towards more responsibility, entrepreneurship, we cleaned up the processes, the very famous silo acting. We eliminated, and we introduced the [indiscernible] organization. And last but not least, also this was mentioned before, we started to work on the material cost side, what we call our clawback initiatives in order to have also in the future if it comes to profitability also to get some benefit and gains out of here. And this is also no rocket science. We are looking for alternative supplier. We are applying shut cost analysis, target costing, value engineering is really the full spectrum of opportunities. And it was also mentioned. I mean, what is the status today in the beginning of the -- middle and the end of the third quarter, actually. We are on track. We're showing clearly improvements in the RAM operation. And there's 1 criteria, which is very good to reflect our bill rates, and this is the daily transmission build rate. So Susanne said it, I think yesterday, in Q1 this year, we were in the range of 0.5, 0.6 transmissions per day. In the meantime, we are on a level of 3 engines or even above. So we are moving forward. Also some indication on the material cost side, it's not surprising if you are not doing active material cost reductions and supplier development that you do not get again, we see very positive first results by alternative suppliers, which will, in the future, also contribute to profitability improvement. Having said this, it's still a day-by-day hard fight, a full focus of the U.S. team. They are day and night trying to control the supplier base, and this is very positive moving forward. There is support by experts and people from Emmerich. There is top management meetings, performance reviews, et cetera, et cetera. So there is full attention, and we will and need provide to provide this full attention for the entire year. But I think more to come later on the next level of improvement by Emmerich, but it's also clear, it was also mentioned, we are approximately 2 to 3 quarters behind the improvements level, what you see or what we see currently in Augsburg. And we are very, very convinced we will come to the same level of performance improvement. Having said this, so 2 out of 3 points are done. I would like to enter now into R&D and you have seen a movie before. This was on the wrong position because now I have a movie, which should be kind of bridging going from Ram and from market and whatever into new R&D projects, new trends and what we see in the market. But nevertheless, lets go. [Presentation]

I don't know how you feel when you see these pictures, but I can tell you, I get goosebumps because this is really for me, it's very impressive example of extreme mobility under extreme rocketized battlefield conditions. You have seen the 60 tons heavy [indiscernible] driving around full speed, going from full speed into full break. So the entire kinetic energy on in some seconds to stop at 360 degrees turns and even jumping I think this is very, very impressive, and that's why we see that RENK with our mobility systems are providing the needed support in order to support our customers to show this performance, by the way. And mobility, and this is depicted here on the chart, is even more and more important on the battlefield conditions. And you see this, if you take the case of Ukraine. In Ukraine, there are dozens of drones in the air, advanced air survilence system, including fixed wings, rotary wings, ground-based surveillance system. So we talk about a fully transparent battlefield. In Germany, we say [Foreign Language]. So if you do not move, it's independent how large your canon is. You are a vital target and you have a certain high probability to be killed. So mobility is becoming -- besides lethality, so the question about effectors and survivability and the question about protection, even more and more important. And that's exactly where we see our contribution towards the market and our customers. And in order to translate the technological complexity behind our mobility systems, what it means to survive under these ruggedized conditions. I'm a very simple guy. I always need to have some very basic comparison. And I think one fair comparison is to compare a Swiss watch. So some of you might have a Swiss watch or with the Puma transmission. And I think a good criteria is the so-called packaging density. So what does it mean? If you have your watch housing and you include hundreds of fine precise very expensive components and put it inside the [Foreign Language] in Germany. I don't know the English word, by the way. You have a packaging density in the range between 60% to 70%, meaning 60% to 70% of the watch housing are filled with material. Let's go from the watch housing, which is very expensive and very nice watch to a Puma transmission with a weight of 1.8 tons with thousands of parts, 25,000, 30,000 of parts. We talk about a packaging density of around about more than 95%. Just imagine this, 1.8 tons, more than 95% is material. And I think this is a good example, underlying what are the core values of RENK. It's all about reliability, performance and quality. And what this also should show you at least is the technical complexity behind these kind of very, very complex products and decades of engineering excellence, by the way. And when we talk about market entry barriers, this is a very massive market entry barrier. And as I said, overall, if it's -- it's what RENK stands for, and this is independent if you talk about the green part, the land mobility side or if you talk about a blue part, the marine, you have seen yesterday in our plant, the gears with a diameter of 3 meters and you have heard about a super precise manufacturing tolerances for our integrated naval propulsion system of below 3 micron, a fraction of a human hair. All this is all about quality, reliability and performance. And whatever we do in the future in order to think about new developments, new products, there will be no compromises on these 3 key core features, reliability, performance and quality. Having said this, as I said before, for RENK, it's absolutely vital to make sure we have the right products in place for future market requirements and customer requirements. For this, we have allocated or structured our R&D initiatives according to 4 what we call key technology fields. I will just go from left to right side. On the left side, we have the core. And what core means our current product portfolio and the focus of R&D is here, of course, to increase the functional performance. But on the other side, to reduce the cost, a very important asset. Then we go to the orange part. It's a nice color. It's a RENK's color. When we talk about new technologies, you can read it. Electrification, hybridization is very important for us. When it comes to digitalization, and digitalization, we also include technologies such as X-by-Wire drive, steer and [indiscernible], but also autonomous capabilities. Last but not least, we talk about the system engineering, while I will not talk today about system engineering, I'm happy in any break or any comment. I would like to give you now 2, 3 examples on some current projects or some current market trends where we see that RENK could participate and will participate. And I'll start with the first one, talking about the core, and I'm very happy to discuss with you our thoughts about a developing new vehicle segment. We talk about unmanned ground vehicles. In short, it's UGV. And here, especially for tracked UGVs below 20 tons. It's fair to say that there is almost no national or cross national defense organization who is not intensively exploring the concept of operations or to say it in short, the con ops of these new vehicle platforms. And the reason why these new platforms are so interesting for all the MODs and armies is very simple, they are combining 2 important features. First feature is a high flexibility in the use case. You can use them as advanced sensor systems for C4ISTAR for surveillance as a radar system, you have to make reconnaissance, you can use them also as a remote controlled weapon platform by integrating a nice 25-millimeter caliber rocket launcher or even a high-energy laser. So you have a huge span of concept of operations. While on the other side, you do not need to deploy personnel on these platforms. They are unmanned. And this is a strategic advantage. And we see that the market is in development and most likely peaking in from our estimate beyond 2030, but then in high volumes, we do believe that from some of the requirements from these unmanned ground vehicles, especially focused on tracked below 20 tons. They match exactly with our current product portfolio but also what we have in our pipeline R&D. You can read it here. There will be, for sure, a certain component of advanced remote controlled X-by-Wire steering. There will be even some autonomous capabilities required. There will be also a major part for electrification, hybridization. Of course, the transmissions need to be downsized in volume and in rate but still showing the same reliability and performance, as I said before. And for us, from our scenarios, this is one of the most likely use cases, I will touch it later when it comes to digitalization of the battlefield. But I will touch this point later on. So very important for us. We are in discussion with customers. We are also in discussion with partners because RENK, as I said before, is not by nature a digitalized company. So it's always good as part of M&A strategy and cooperation strategy to team up with a partner who has technological and capabilities, what we need on our way to support these kind of segments, but also in a broader context to work on electrification hybridization. And I'm very happy to announce you are the very first in the audience who have this information since 5 minutes. It's out, the press release last night or this morning, actually, we closed the final signature on a strategic cooperation between RENK, of course, yes, and the U.K.-based defense tech company, QinetiQ. And this is, for us, very important as a way forward, not only if we talk about the UGVs below 20 tons and tracked, but it's overall, if you talk about advanced mobility technologies. And this includes, as we see here, in principle, and there is much more detail behind. We cannot explore everything now. But I start with a focus on advanced electrified transmission system, hybrid systems for transmissions, but also if it comes to now we talk about UGVs, advanced steering modes and advanced navigation systems because we do strongly believe that in the combination of our product portfolio from the active dampers from our -- in the future intelligent transmission, we will play a good role in this future market here. So the press release is out. I think more to come. I think the next milestone in order to go into a broader communication and to show more belief and first results will be most likely on the AUSA. So you're all welcome. I think it's in the second week of October, and there is more to disclose. Now I would like to come from really new friendship and cooperation. Okay. So one of our most important -- no, the most important development project, current development project. I talk about our ATREX, it out a dinosaur because ATREX -- it's not a dinosaur, but it's the worldwide first, it's a worldwide first hybrid main battle tank transmission concept. And again, a short movie for introduction. [Presentation]

So [indiscernible] you have seen the transmission in new tank. Okay. Due to the fact that many of you are more or less ATREX experts because we had the pleasure to welcome you on our booth in Paris. I do not need most likely to go into too much detail. But I think let me point out just 2 points. First, a little summary on the technology. ATREX is really a unique concept by combining battle-proven mechanical and transmission competence with 2E engines, e-drives who are deeply integrated in the form in the shape of a given main battle tank. So it's really integrated in the topology of existing main battle tank transmission. And this is providing a list of benefits to our customers. Just to give some highlights, you will have with the ATREX concept, an improved steering performance for the main battle tank from very, very low speed, if you need to maneuver it or for transportation but also up to very high speed. Second, with this electrification, of course, we get advanced technical mobility concepts, like silent watch, silent move. Third of all, these e-drives are providing electric energy. And what is needed desperately in today's main battle tanks, IFV or whatever land platforms due to all this mission systems, sensor system, fire control, whatever high-energy applications of laser, there is a huge demand for electric energy, and this electric energy can be and will be produced out of this transmission by the e-drives. Of course, this is my last word, by the digital interface, we will have full X-by-Wire capability. So remote controlled capabilities to maneuver a 60 or 70 tonne heavy tank steering, driving and braking. This is really the next level and unbeaten in the market. I think those of you who had a chance to walk around the Eurosatory and to go on to other customers unbeaten. This is a unique concept and for us, really relevant because it represents really the next generation of main battle tank transmissions. And Susanne just touched before, 2 main trends. I mean, there are on one side, new platforms, like, for example, [indiscernible] or maybe in the future, the main road compound system. On the other side, we have the repowering activities. No need to explore more. This is exactly at the right moment in time where we started to have discussions with some of our customers to talk about time line of introduction, needed qualification, et cetera, et cetera. And as you see it here, I mean, this is the next generation. So in fact, it's a multibillion market. It of course, depends on the time line, if you go to [indiscernible] but this is really key. And nothing is included of any repowering activities in the bubble chart you have seen before, just for your knowledge. Then an R&D project, which is focused on 100% electrification. But unfortunately, we cannot talk about this because it's simply super classified from the customer. But I can give you some kind of indication. So we're talking about the development of a downside, but still high-performing e-drive, e-engine for applications in the Navy, for example, in submarines. Requirements for the submarines are besides performance and staying long time underwater to be silent, to have a very low acoustic and magnetic signature. So besides the physical condition of the e-drive to be downsized, weight optimized and still performing, to reduce the acoustic signature to a max including the magnetic signature is really the key of this program. We are now entering into Phase II. This program is consisting out of 2 phases. We are going into Phase II. And what we see here in the second half of this decade also here, with this specific customer and only with this customer, also an interesting market potential, which is currently not at all in any bubble chart. No, let's talk at least for the future of RENK. As I said before, even RENK had to recognize that digitalization is nothing bad. It's just the thing you need to have because simply, it opens to us new opportunities to enhance our products, to support our customers in their strategy and to provide maybe new business model. And it's no rocket science what we are showing here, please, we are not a startup, not a software or whatever startup. We are 151 years of German engineering. But you see in principle here the orange field, so fields of activities where we currently are looking forward in order to work more intensively on digitalization. You can read it by yourself. We provide training, education, documentation if our fleet service employees are somewhere and they have, by augmented reality, full transparent picture about where to replace parts, digital sales channel, we have one. We have one, yes. Is this enough? Is it good enough? Are we using this especially for the commercial side, for the industry side enough? I don't believe. Then we go into the classics, what we do also on the Navy side in the meantime. Condition monitoring and predictive maintenance to support our customers to know exactly when this tank, for example, should go into overhaul and to reduce the downtime. And then last but not least, but this is really future software-defined defense mobility. This sounds like a typical digital best word, but there is some real meaning behind. And I would like to introduce 2 use cases because if you talk about digitalization, this is -- you have tons of PowerPoint, but it's always important to have really concrete use cases where you can draw numbers behind the business case. And we have one very concrete. It's a very new one. And I would like to give you an outlook on the future scenario if it comes to Armies. But first, let's start with something very concrete. What you see here is a scribble of a new main battle tank, which is currently in development by an international main battle tank prime. And the task, what we have is to develop a smart damping system. This smart damping system consists out of 3 components. We have an active damper, you have a sensor kit who is exactly tracking and taking the data about the condition of the dampers and you have a canvas and you have a software. All this is going inside the heart of the vehicle into the control center. What are the benefits for the customer? It's very simple. First, I mean, two-fold. First, he knows exactly if the main battle tank at least from this part of the mobility system is ready to go into mission, into training or whatever, I'm talking about condition monitoring and in the next generation about predictive maintenance. And by the data and the data fusion, we can apply and generate by a software, a much more improved active damping by certain algorithm, et cetera, et cetera. And the impact is significant. We cannot share this picture. Otherwise, you would know what this movie, who the customer is, but it makes a significant difference when we talk about mobility on the battlefield. Speed, for example, is key. And the difference between an undamped main battle talk driving over rough terrain and one with this active smart damping system, is incredible, is really incredible. And speed on the battlefield under extreme mobile conditions is one of the best protections for the crew and for the platform. As you can see it here, I mean, this is more a project for the second half of the decade. But just for this customer, for only this customer, we see a potential. I'm always conservative of more than EUR 500 million. To be honest, it's in the range of EUR 600 million to EUR 700 million for the entire program just for this customer, and please keep in mind to retrograde equip existing platforms with active dampers and the sensor kit and to give the software is also possible for legacy platforms, just as a remark. So now it gets complicated and maybe this is too fancy, but I think it's worthwhile talking about it because we're talking about where RENK is going additional to the traditional transmission technology. And I don't like the scribble kind of comics, but it looks good anyway. What you see here is a scenario. And I make this as an example for the term Bundeswehr is going towards the next 5 to 7, 8 years. We talked about the digitalization of land-based operations, DLBO. And the main purpose is in this digitalized battle. So we talk about the digitalization of the battle fleet. And this means that all the platforms in the domain ground land are connected, fully connected and exchanging data, but not only in the domain land as we see it, also connected cross-domain going to the air and even to satellite to space in order to generate the best possible holistic situational awareness of the battlefield. At the very end, a commander or a soldier here, the so-called in Germany [Foreign Language] or the future solder infantryman is jumping out of a boxer going into position, but before he jumps out, he has on his tablet here, all the data he knows on the map, where the red forces are, the enemy, red is always bad. I mean, for forces, of course, and where the blue forces are. Blue forces are our troops and where also the effectors are dislocated. So he has a full situation awareness. And then for example, I just go on the next click, I will explain later. For example, he recognized in a distance of 3 kilometers, there are red forces hidden in a compound, wherever. But you also know, for example, he sees a UGV equipped with a remote-controlled weapon station, 20-millimeter, 25-millimeter, I have a certain history with these weapons so that's the reason why I'm always referring to this. The soldier takes control by remote control steering, navigates the UGV to a certain position in order to engage with the enemy. And this is only possible and will be possible with technologies, as I just explained to you before when we talked about UGVs. But we also do believe that overall, our components and the use case here was the active damping system will support and can support our customers in order to play a wider role when it comes to the digitalization of the battlefield. And the Bundeswehr is trying to develop in the next -- until the end of this decade in this kind of digitalized status. There's 1 army in the world where this is already executed and life, if you want to call it. It's the IDS. It's Israel. They are fully digitalized. They are -- they have full situation awareness. They have the full picture of everything cross domain, very impressive. And the reason for doing this entire digitalization is to save lives because besides the North Korean and the Russians and the China, we do not have human resources to lose. And here, this is all about efficiency on the battle field. Anyway, I stop now because otherwise, I'm drifting too much in this direction. Of course, we have, if it comes to Navy also, we have the condition monitoring. So at the very end, digitalization, and I hope you see it, we take this very, very serious. We already have it now, in the meantime, starting to introduce it in our business model. I'm done. I'm happy to hand over to my dear friend, Emmerich, who is going now more into the operational stuff, but I would like to recap more than EUR 2 billion, approximately 20% adjusted EBITDA margin, secured a leading #1 position. I think we have a very good recipe for this. And for sure, it's key for us as a technology company to have the right products in place. And as you see in the case of QinetiQ, sometimes it's very wise to understand if you have these capabilities or if you need to have a good friend and team up in order to be faster. Having said this, good luck.

Okay. So thank you. Also, welcome from my side. Alexander, thank you. Thank you for all the colleagues to put something on the shoulder of operations. So I think everything is said, there is one little piece is missing. We need just do it, yes just do it. And hopefully, I can explain a little bit how we just to do it. This is what I'm going to do. As not everybody might know me, I -- give me some seconds to just briefly introduce myself. I joined the company in February this year. before I was working in the automotive industry, mainly in the field of operations. This is what I have been doing for the last 20 years. And therefore, I think I have a little bit of background, and it's not a miracle. What is going on. It's -- maybe it's a little bit of experience, and this is what I'm trying to share with the team and I think we made good progress. What I would like to do today is I would give you some more insights of what we have achieved so far on the VMS side in Augsburg because of 2 reasons. So most of you have been there yesterday and have already touched it and have seen it, what is going on there. And I would like to go a little bit into more into detail. And the second reason is what we are developing here is more or less the blueprint for what we are doing in Muskegon and all the other plants as well. So this is the reason for that. In the second half of the presentation, I would like to go a little bit more in what we are going to do, what is -- what are our plans for the future for the operations system at RENK for the next stage. Most of you are familiar with this slide. I do not want to go too much into detail. It is our setup around the world. I think, Susanne, and you already pointed that out, we have a quite strong foundation in Europe and in North America, very close to our customers and close to our end users. And again, all these factories are well equipped. They are well invested and therefore, we think there is no big need for investments in the near future. And this is something which is thinking different from many other companies. So the ambition is clear for operations. There is one central number, 15% annual growth, 15% annual growth means 15% more output year-by-year from operations, from production. And there are 2 possibilities to do so. And I do not even want to talk about the first option. The first option would be to spend money to invest in capacity and to hire additional people. And I think that's not the best option. The best option or the better option is to improve efficiency and by that, gaining capacity. And as you will see in my presentation, and the feedback I got from some of you who have been in Augsburg yesterday and compared what they have seen last year and what they have experienced yesterday. There is an improvement and the potential we see by increasing efficiency is quite significant. So I think that operations can really support the dreams. So from the CPO, Chief Promising Officer, to make it happen. Well, of course, it's not just our own operation and plans that we have to manage. It's the supply chain as well. I just want to go in this briefly. It was already said before. The team has set the right message. We have overcome the weaknesses we have had last year. And therefore, I think we are quite stable. We have set up redundancies for critical parts. This is already -- it's also going on. We increased the flexibility to shift production either in-house between different sites, but also with customers. And we increase some dedicated capabilities to produce special products like battle gears in-house. There was a question about China, even on the tables yesterday. And I would say that -- the sourcing spend for China is less than EUR 1 million, less than EUR 1 million today, and the team is working on even decrease this number in the future. There is 1 thing which is different from where I have been working in the past because a high-value integration of that business is not what is the target there. But I think in the business we are in as a core supplier. It's a real value of the company. So we are very high-value vertical integrated. What that means that we keep the process chain for many production chain for many of the critical parts in-house. And it gives us the capability to produce it by our own. On the back, you see the production steps of gear wheel, but we have almost the same for -- we have almost the same for other -- for most of the other parts and not just for mechanical components with [indiscernible]. We have the same capability for electric parts as well. And it was not just once this year, this was our life insurance when it comes to disruptions in the supply chain. There is one message on this slide. The simple message is we have done our homework. So spoken for VMS and Augsburg, we are more or less back on track. I would say we are on a level of normal day-by-day troubleshooting or what it means to run an operation. So Susanne, you asked me yesterday, if we are covered with parts until the end of the year. I said, well, yes and no because I do not know any company around the world who has ever covered for the next quarter is fighting every single day. But the more you know where you have the problems, the more you can fix them. And I think, Charles, it was where -- or is he already gone? No, not Charles. You asked me yesterday or you asked us how did it work? So how did we make that big progress within 8 to 9 months. What we did as a key measure is we try to keep the order stable. And by that, we dampened the system dramatically. So we defined ourselves kind of approaching where we want to keep the orders stable, even if it would probably lose some units. The advantage of this was that we have a forecast that the suppliers have the forecast and everybody can rely on these targets and work on his homework. And this is one of the key differences we have decided to make and to run in this direction. So just to give you some numbers by increasing the security of the supply, we reduced the number of assembly parts with missing with -- assembly starts with missing parts by almost 50%. We halved it. We increased the -- we increased the on-time delivery by 15 percent points, and we will even increase. And you have seen yesterday that we already have made some significant increase in efficiency at around 20% up to now in Augsburg. This is one thing. And one of the bottlenecks last year was the testing environment, and we solved this in 2 directions. The first is very obvious. We installed another one. So there is more capacity, but the real thing was that we dramatically increased the first pass yield. And increasing the first pass yield means that we decrease dramatically the retesting. And by that, we gained additional capacity. So as we have more or less fixed the situation in Augsburg. We have now the possibility to go the next step to really bring operations to the next level and to work on what we are thinking should be done in the future. It's going into 2 directions. The first is upscaling to what we call serious supply and upscaling to serious production. I like this slide. I think I like it very much because I think it explains quite good what it means to go to the next level of production. So RENK and most of the defense industry in the past was more or less build-to-order operation. It was small units. It was slow. It was low volumes and things like that. And if you want to increase to the next level to a serious production, it is not just that you pump up or doubling -- double or even tripling your system. You have to change the things. You have to change processes. You have to think that things from a different perspective and you have to take almost everything. You have to adjust your steering velocity. I just explained what we call the [indiscernible] principle. You have to focus on every basics. You have to describe the new processes. You have to implement things that are well known in automotive like shop floor management, continuous improvements and things like that. And I have explained to you who have been in the tour with me yesterday, yesterday a so-called line back principle. Line back principle is something that is focusing on the core of value add. So for example, for a final assembly on assembly wake or on mechanical manufacturing on the machine and pushing everything that is not value adding out of these core of production. So for example, if a worker has to pick a material or has some working times, you really try to push it out of his scope. And already mentioned, IT tools is something that needs to be adapted. It's not just the tools. It's the processes behind as well. And I already mentioned continuous improvement and continuous improvement is not just the process. Continuous improvement is even more philosophy. It's how we act and behave. And you have to change the thinking of the people you have to explain what to do, and this is also what we are implementing. The next thing is, as I said, build to order means that almost every single program is a new order. And if you come to a small serious production, you have to really keep the line running and therefore, you need to have a forecast. The better you know what is coming in the next quarters, in the next years, the better you can steer the system and the better the subsuppliers can steer their systems as well. And therefore, we set up a process, which we call [ SNOP ] where we have 3 phases. The first phase is long term. It lasts from 12 to 36 months ahead of production, where we run the forecast together by the colleagues from sales, we make a long-term capacity planning. And this gives us, as Anja already said, the possibility to negotiate framework contracts with the suppliers, which leads to better prices, but it also gives the suppliers the ability to forecast his capacity or even make his parts of their parts in batches so that they can steer their system better as well. Medium term, which is 6 to 12 months. We then convert the forecast into concrete customer orders. We run the program planning for the next month, and we order the supplier parts for the next quarter. And if you have done the first and the second step, right, then the third step is more or less just calling of the parts and running production. So I think this might sound logical to most of you. But honestly, and we already discussed it several times. It was not the way of operating in the defense industry in the past due to many reasons. And if you change this and if you go into the direction, as I just told you, I think there is really a big room for improvement. I would like to go a little bit deeper into how we find improvement measures to increase efficiency. Here, again, 2 examples from Augsburg. It could be the same examples from Muskegon. What we are currently doing is we are sharing this, not just the approach, but even the examples with the colleagues there. You see on the left, worker as it is more an as today, we are already changing is and the worker in the final assembly line, he has to pick the parts, the nuts and bolts by himself. And I think you can imagine the meters or even kilometers, he's walking every single shift. And this is not efficient and we have to change it. And you see on the right, you see on the right, what is the direction you want to go. We make prekitting of these parts. We sought them in the order of the assembly sequence, and we place these bins close to the worker. It has many effects. The first is efficiency because he is not to walk anymore. So this is much faster. He avoids any picking mistakes. So this is a quality issue as well. And by that, in this single example, we reduced the time needed for this operation by almost 15%. A second example on the right, and we have been on this workplace yesterday as well. It's a subassembly workplace there by rearranging the layout of the workplace by adding some equipment by training the person there we increased efficiency by another 20%. And if you sum up these little things, you come to really a big potential of efficiency potential. I like this slide. It's quite a very simple one. And it shows that the increase or the output from Augsburg compared to last year on the level for new transmission is around 50%, which means on new transmissions, we will produce this until the end of the year 50% more than we did last year. This is just the new transmissions on the spare parts. We did the same and by that, we cleaned up the backlog almost up to now. Until the end of the year, we will have cleaned up everything. We gave ourselves targets until the end of the year, which will be then the basis for the start of next year because continuous improvement as Alex said continuous improvement. So we will then again work last and -- next year on the same thing. I already pointed out the 50% of output increasement. We will add some more points on the efficiency increase. So the efficiency increase '23 compared to December 2024 will be 30% on the assembly side. and the efficiencies. It's a very simple KPI. You just take the working hours you have had in special time, for example, in the year and divided by the numbers of transmission build. And so you can easily compare one period with the other compared and the decrease will be 30%. The increase of transmissions per day will be almost 80%. So almost doubled. And I think we will be even ahead of this. I already said something about the first pass yield. So the quality, which is tested at the test bench is already increased by 50%. And if I look on the -- these are the numbers from the first half year. When I look on the numbers for September, it's even more. It's much more. So this goes to as I just dampen everything, smooth in the production helps to increase our quality. And the 75% for the [ OTD ] stands more or less for the message that we will meet all the customer orders at the end of the year. And then we are -- we have cleaned the backlog so far. So there is a saying from the tank forces who [indiscernible]. And this is why we are moving. I was a tank driver in the Army. And I would like to share some of the visions we have for the future. It's not just the vision. Hopefully, when you visit us next year at the same time, this will be implemented in Augsburg, this is the picture it was taken last week. And those of you who have been in output yesterday have seen that. So what you see on this slide, I just want to highlight some things. You see a lot of bins and boxes. For me, it's more or less a logistic area with some assembly in between. You see dedicated lines for a single transmission, which means you cannot easily shift the transmission from one line to the other. So whenever it comes to a change of the product mix, you have an issue. And what you see also is these shelves, it is called combined shelves. And as I just pointed out in this system, the worker has to pick everything, and this is not the best way to gain efficiency. So we are rethinking the system. And this will be the outcome. We are already in the phase where we go more in detail in the planning. We will not have a line production anymore. So we will have dedicated stations. So we will not lose any efficiency by transferring the transmission to the other station. We will have 100% flexibility so that every transmission, whatever time it is, can be produced on this station. So as I said, a mix of the product sector isn't an issue anymore. And you can run the system really flexible. You can run it with mine worker. And you can also run it when it is fully utilized, so you can even react on the needed capacity. You can react on holiday seasons, whatever is needed. And it's much more flexible. We have pre-kitted shopping carts, as we call it. This could be pre-kitted either in-house or with some external suppliers, which could also be a benefit. We have these tools close to the workers, et cetera, et cetera. And if you see this setup, which will be implemented in the next month. I think the increase of efficiency, if you compare 2023 to 2025 then is between 30% and 35% or maybe even going into 40%. There will be some additional efforts in the logistics area. But in logistics, there's also enough room for improvement. So it will not lead to 40% in logistics, in decrease. But the decrease we find there will overcompensate what is needed to pre-pick for example, logistics. So just as a small example -- or a quick example, the next logical step is then to transfer what we have made in Augsburg so far. And as Alexander already pointed out, we are doing the first steps in to Muskegon. We need to roll that out. As I already said, it's necessary to really bring continuous improvement into the mindset of the company. We need -- therefore, we need to educate and improve the capability of the people there. What I'm currently doing, I'm really working many, many hours with my team to really to explain them what to do, to take them by their hand, which is -- it's nothing not blaming them. They do not have the experience. And this is what we are doing and the feedback that I get from the people is, they get fun on working in operations back again. As a global group, we shouldn't invent everything on every single plant. And therefore, we need to standardize it. We will come up with the RENK production system. Production system is something that is well known, for example, in automotive or in other systems. It's -- we do not have one yet. The production system, which describes how we want to work, which are the standards, how we want to improve and what are the measures and things like that. IT solutions as well. And as soon as we have this, we will roll out this to our international organization. But as we are an international organization, we have our production network. We have to think about what is produced, where, what is our share of make or buy. And for sure, as an operations organization, we have to work on our operations culture as well. And especially on the last thing, I think we make a good progress at the moment. So I hope I have shown or presented that there is something going on. The team in Augsburg has really made a great progress. It's really fine looking what they are doing there. So thanks to the team there. I think you see there is still a lot to do. It's not over. It will be hard work, but I'm absolutely sure it will be also have fun. So thanks for listening. It was my pleasure, and I would like to hand over to Ingo again. Thank you.

Yes. Thanks very much, Emmerich. And before we prepare the stage for Q&A, I would like to invite Susanne back on stage for a few closing remarks.

Thanks, Ingo. So from the deep levels of operations and details, I have the pleasure to clean up all these numbers, which you have heard. And I think we got great ambitions from Alexander. He said, I'm a simple guy. I can only recall 3 numbers. So we have some more here, but we try to make it easy, not easy to achieve, but for you as easy as 1, 2, 3 to remember, the message. And obviously, the global #1 market position is easy to remember, also comes with a 15% annual CAGR. Anja is the Mrs. 20 in-house because 20% net working capital, we need to get down to it as fast as we can. Emmerich has to somehow cope also with that challenge. And the ROCE needs to be above 20% as fast as we can. So you're the lady 20. So those are our 2. And then the #3, obviously, stands for the EUR 300 million. Anja qualified that precisely and said in '27, we have achieved that. So please do not make mistakes and link the EUR 2 billion and the EUR 300 million. And then your math says, "Oh, you reduce your margin to 15%. No, no, no, no. This is not what we are saying. Not at all. There's different time lines. And the 3 stands, obviously, also for the 3% CapEx, which we work on the midterm. And really, our ambition and Alexander, I think, perfectly brought this across is to achieve the EUR 2 billion organically working down the order backlog if we are -- if we can do that faster with the support of some M&A., we obviously do this faster. But the EUR 2 billion is the big target and objective for the team internally communicated also to all the employees. So they recall EUR 2 billion, if you ask somebody in our company, where do we stand midterm on the revenue line, you get the answer, EUR 2 billion. We doubled again the company. And together with this ambition level that we obviously also improve our margin. As Alexander said, there is lots of potential in-house. It's not by primitive, let's say, raising the prices. This is not our approach to that. And you heard Frank last night, I already got comments on our pricing, which were nice ones, by the way. However, there is some good potential still and some homework to do, which allows us to work also on the cost base and to improve margins by doing so. So, this is leading then in the midterm. And this is not a new guidance. This is our ambition, which we are sharing with you, the EUR 2 billion at EUR 400 million of adjusted EBIT. And we think this is easy numbers to remember and to recall the 1, 2, 3. The global #1, also by those technology and R&D moves, which we are doing and by not just defending, but even strengthening and building up further on our market share. The lady 20 is also very easy to recall the EUR 300 million, which is in the vicinity to grab and the 3% is all well known. And our ambition clearly is in the entire system to motivate to steer to run the company internally is the EUR 2 billion and the EUR 400 million figure. And with that, I would like to open the floor for Q&A and to also obviously Ingo, I don't know whether I take over your part, but I think Christian and Alexander should come...

You can join me here, if you like, we'll set up a separate table for Alexander and Christian.

Super.

And of course, Emmerich and Anja are also still in the front row. So if you've got any questions, we can also involve Emmerich and Anja answering the questions.

I think we are ready to go. So please raise your hand if you would like to ask a question.

You look so tiered. Have we killed you with too many information, hopefully not, Thanks, Ingo.

Any questions? Yes, let's start with you, Christophe.

I can share my micro -- or how do we do it?

No I think there's a microphone in the back.

I had 2 questions. The first one is on the cash conversion. You were nice to provide us with a very clear definition. Do you have a target actually on that cash conversion midterm? And the second question is on the prepayments. I think you briefly mentioned prepayments as part of working cap. So is it possible to expand a little bit more on the rationale of the prepayments, when do you get them? What is the size? I mean I know it's a difficult topic, but any light, color?

So I might start off with your question on cash conversion, as you have rightly seen we had a big debate that may be the former cash conversion, which was defined PE ownership of EBITDA minus CapEx for EBITDA, doesn't make sense if you keep your CapEx stable and grow. So we decided and looked around for the same definition like [indiscernible] to say we take free cash flow divided by adjusted net income in the target is above 80%. How much above 80% is going to be defined by the net working capital development we discussed last night over dinner, but I would assume midterm north about 80%, like it was in '22, you saw in stable waters before the huge growth aspect and the net working capital incidents. The company also with this definition has had 85%, so it's in reach. The company can do that. And in the mid terms of 3 to 4 years, it's what we have in there. And the details on the prepayments you can see from the half year report. So a big portion also of the working capital we have is also covered by prepayments by building up value and maybe you may add on how we usually deal with prepayments because it's different from customer to customer right.

Thank you, Christian. So basically, we need to differentiate new business and aftermarket business, predominantly the MRO business within aftermarket. So a new business, we regularly get down payments from end customers like governments directly or also from the primes and the industrial partners. And this is valid for the defense business as well as for the civilian Industrial business. So this is commonly seen in all our contracts. Down payments vary between 10% up to 25%, 30%, we can negotiate well. Typically, we try to share being a good partner for our customers. The destiny of the primes. So if the primes have shown a good ability to negotiate themselves, we typically accept certain terms and conditions of the contract and a flow down mechanism to us. This relates also to down payments, but also to, let's say, payment schedule generally, cap on liability, offset obligations and things like that. And we have a typical contracts for the VMS side, a down payment, one milestone payment, which is typically linked just to a date. And not to any other criteria to achieve something. And then we get the rest payment with delivery of the hardware to the customers. similar mechanism on the industrial side. On the Navy side, it's typically more complex because the projects run a little bit longer, that we have typically down payments, milestone payments to delivery. The final payment with delivery shouldn't be more than 10%, maximum 15%, the rest is, so to say, in milestone payments happening before. Typically, it's down payment 3 maximum 4 milestone payments to delivery. So in a proper, let's say, distributed sequence over time. In the aftermarket business, spare parts, you need to produce, you have to deliver customers pay with the delivery of those spare parts, the typical repair, maintenance and overhaul business, obviously, is requiring that you inspect the transmissions first, then you identify the scope of repair, then you fix it. And only afterwards, you know the exact scope of supplies, then you send the invoice, which is typically time and material plus profit. And then we only then also book the order intake on that order. And this goes typically without down payments. In the case of good negotiated frame contracts that may well be that we have a little bit of room to maneuver here, but typically you need to perform and then you get the money, but on all what is new. And it's as I described in the beginning, and this is also reflected in the development of this piece of the net working capital, which is down payments. And we could see that in absolute numbers, it grew quarter-by-quarter quite nicely over the last 3 years.

Yes. Frank?

Could you please outline the schedule for the electrification of the transmission? What's the timetable? And what are the effects on performance compared to traditional transmission and also cost wise, what is the benefit for you and for the customer?

Maybe I'll just take over this answer. Electrification, as I just said before, is a very important part. And if I just take, for example, the Ajax concept, which is for us one of the 2 key hybridization, electrification process -- projects on the land system side. The other one is the development of hybrid system for XM30. We talk about 2 to 3 years until this transmission is ready to go in the final customer qualification. So this is just to give you a little kind of time frame. From the cost side, and I think we got many questions on the Eurosatory because educated people ask exactly this kind of question. So if you have a tank transmission and you put a lot of power electronics on it, which you need and you have 2 E-engines, it gets more expensive. We are quite convinced that we can keep the same weight restrictions for the overall system. And we are -- I'm not telling you the profitability. I'm not telling you about the pricing, but I would say it's important. Yes. Okay. It was good year. But all I can say is that it will not be that the customer says, well, it's a nice transformation superior benefits. I mentioned the superior steering behavior silent works, silent move, it will be affordable. And really this price to be attractive for customers. I hope this answers your questions, a little bit. Okay. Happy to discuss more later.

Yes, let's move on to Sebastian Yes. Go ahead. Sebastian Growe, BNP Paribas, that part for you, and then you can do the question.

I would be interested in some more color on the IT systems. You mentioned that there's a need for investments. I guess you will have a certain budget in mind. So whatever you could give away if that is possible. And as you also alluded to the necessity for preparing the current markets for more special items around these very IT systems, probably you also have a figure in mind in this regard? And then I would have one question more on the round EUR 300 million target, but let's take this one first.

So for figures, obviously, Christian response -- let me just comment on IT. So RENK is not in a specific situation, but in a very typical situation of any company which has that age, which has grown in structure over time. So we are running just that you have a certain picture of what we are talking about if we talk IT systems, in core legal entities on an old SAP R3 system, which will anyhow be not supported forever. So there is a clear move towards S/4HANA, which we have just started to prepare conceptually. We have info systems in the U.S. activities by acquisition. So we will align and, let's say, standardize the system in that respect. We have also in the old SAP system, various versions. So not all legal entities and sites have the same old SAP L3 version. We have also allowed RENK in the past to significantly deviate from standard. And this is, let's say, creating lots of obstacles. On top of that, the quality of the master data are as they are. No further comment on that. What I'm trying to say is once this is cleaned up and future proof there is huge efficiency gains to be expected. There is lots of work today, which people do manually. We don't need these people anymore in the future, once we have an aligned standardized IT system on a disciplined way, which is keeping 2 standards. And also, let's say, the rate of failure, error of manual things will significantly go down. We will also benefit and take advantage of certain, let's say, modularity aspect, which an SAP 4 HANA can provide smaller entities, we were not forced to have an SAP platform, but something which is more suitable for the smaller entities. IT projects of that size and magnitude typically cannot be executed faster than 3 years. Most of them need 5 years somewhere in between is probably a reality. And in reflection of the investments, this is never below EUR 35 million, EUR 40 million and probably not above EUR 60 million and somewhere in that range. And we are at the moment in the conceptual phase, will be the truth. And since you have to allocate to make those projects successful ones, the best people who really understand the processes, the value chain, the organizational structures of the company. we will not take them all out of the daily business where we need these best people as well. So we rather allow, let's say, maybe 6 months longer project execution rather than compromise on the quality or compromise somewhere else in our core business, which we have to do on a daily basis. Christian, correct me, please or add what I've ...

You've said almost everything. The only thing I want to say is back to the suite size. If double a company from EUR 500 million to EUR 1 billion. And if you try to double it again in 4 to 5 years, you need to have a bigger suite on the processes like Emmerich has alluded to and you on the management team as well. So there's nothing special. It's just that we need to lift the business processes and the system. And since you don't do this every time, we declared this that we have this endeavor in front of us to investors in one-on-one talks because they said, are you planning anything on that regard. And I think the assumption of EUR 40 million to EUR 50 million over 3, 4, 5 years. So let's assume 10-ish per year is the right assumption.

Actually, a good segue then to the next question I had. And that is around EUR 300 million as opposed to the EUR 400 million ambition. And coming back to the suite size, coming back to the efficiency gains you're expecting from the IT overall. Would it be fair assumption that it's sort of just a temporary down that you have to swallow in the sense of incremental D&A costs probably for the write-down simply on software stacks? Would it be then also fair to say that you're adding a second shift, and this is kind of -- at this point and holding back efficiency. But at some point, you grow into the right magnitude, suit size and then ...

I don't see any write-offs on old systems or stuff like that I basically would say that this EUR 10-million-ish would burden the operational performance. And the only question is if you put it as a special item, the discussion we had in the break, David and Charles or if you say, this is the result and in there is the EUR 10 million. So I would not see negative operating leverage because, as to Susanne's point, since the project will be done in a way that you don't harm the running operations. with a safety net. So we do not see that. And I think this is the way I would view it. So I would not factor in write-offs or whatever else. We don't see that. This is old stuff. There is not much left.

Yes, Lets continue with Sven.

There was so much information. So sorry if I got something wrong. But did I understand correctly, you have an EBIT guidance for 2027, a new one, but you have a ROCE and net working capital target for the medium term. So it's not the same.

No, medium term is 3 to 5 years and we are guiding on net working capital or ROCE, but we were always very transparent with you where we are, quarter-by-quarter, reported that and also have shared with you what is our midterm ambition to get there. And I think we also shared where we think we will end up with net working capital by the end of the year and a 25-ish area and -- but the midterm target is 20%. And honestly, I think it wouldn't be prudent to fix now a quarter or a year precisely with those figures. I think it's important for you to understand where we put management focus on what is in our book for our homework, what is our ambition on the top line and on the profitability side of things, and we will achieve that if all these KPIs coming together on the cash flow side, on the net working capital side, on the ROCE side, which complements obviously the top line growth and the EBIT line, on absolute terms to create shareholder value appropriately reflected in those KPIs. But Christian, maybe you want to add there.