Kongsberg Gruppen ASA (KOG) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Kongsberg's first ever digital-only Capital Markets Day. Today, you will receive presentations from our CEO, CFO, as well as from the 3 business area presidents. Due to the current situation, the presentations will be given from 2 different locations. After the last presentation, we will have a Q&A session, where all those who have presented will be available to answer questions. Questions may be submitted through the webcast throughout the presentation -- today's presentations. Then to the agenda for today. First, you will receive a presentation from our Chief Executive Officer, Geir Håøy, followed by our Chief Financial Officer, Gyrid Skalleberg Ingerø. At approximately 12:00 p.m. the business area presentations will begin with Kongsberg Maritime and President, Egil Haugsdal; followed by Kongsberg Digital with Hege Skryseth; then finally, Eirik Lie, President of Kongsberg Defence & Aerospace will present his business area. At approximately 1 p.m. -- 1:15 p.m., we will gather all the presenters from their current location to answer whatever questions you have submitted through the presentation. With that, it's showtime. And after a short introduction movie, President and Chief Executive Officer, Geir Håøy, will give you his presentation. [Presentation]

Ladies and gentlemen, good morning or afternoon, depending on where you are located or dialing in from. Hope you are all safe and healthy, and I'm delighted to welcome you to our Capital Market Day. With a waste amount of webinars these days, I really appreciate that you are prioritizing, attending our Capital Market Day. Let me start by saying I'm extremely proud of what the entire organization has achieved so far this year. Despite all the challenges related to the global pandemic, we have delivered 3 solid consecutive quarters. We have reached important milestones and signed many new contracts. Project execution has been strong, and implemented measure have had the desired effect. In addition, we have successfully integrated Commercial Marine. Since the acquisition, we have achieved positive and improved results for its operation due to cost synergies and additional sales from the expanded portfolio. I'm also very pleased that the Board recently decided to distribute an additional dividend and initiated a share buyback program. All in all, 2020 has been an extraordinary year. But thanks to our people, technology and dedication, we have managed to navigate well and created value to our shareholders. Kongsberg is a leading global technology company with more than 200 years of proud history. We are currently located in 40 countries with close to 11,000 employees. We have 3 main business areas: Kongsberg Maritime, Kongsberg Defence & Aerospace and Kongsberg Digital. Kongsberg has grown to be a unified and diversified company with a variety of operations from the deep-sea to the outer space. I think no one could imagine starting a company like this today. But for us, this diversity has become our most valuable asset over the years. Based on our common technology base, we see ourselves as 1 team, transferring technology and innovation from 1 business area to another. And I strongly believe that this explains why we are among the best in the field and able to deliver extreme performance for extreme conditions to our clients and users. For deep sea, we provide technology that allows us to explore the unexplored and investigate the deepest ocean. At sea, we are a complete supplier of efficient and sustainable maritime operation. On land, we provide a wide range of first-class, world-class defense and civilian system to secure national interest, safety and sovereignty. In the air, we take pride in delivering advanced aerospace and missile technology. At the digital frontier, we are at the forefront of digitalization, the energy industry and the maritime operation. In space, we are present in every part of the value chain from launch satellites and space probes to the download and use of satellite data. We see this diversity in combination with deep domain knowledge within our industries has a significant potential. Our goal is to gain even more from this massive resource going forward. And we are going to do so in a sustainable way that can withstand the test of the time. We are living in what many consider to be the most uncertain times we have experienced for several years. Typically, every year has a few defining moments. But the last 10 months have contained more defining moments and paradigm shifts than we have seen for a long, long time. Many of these shifts are caused by the disruptive effect of COVID-19. But in many ways, the pandemic is also accelerating changes that we -- that were already well underway, like the geopolitical tension, increased protectionism, the need for cybersecurity and more focus on sustainability and the ESG. Adapting to changing conditions have always been an important part of Kongsberg business life. We have learned to see challenges as opportunities, always looking for the areas to improve and new positions to take. So just let me reassure you about this: Whatever the global landscape look -- may look like in the future, Kongsberg is prepared and well equipped to maneuver in a changing world. Going forward, we are committed to deliver on our promises. We will continue to proactively adapt whenever needed in order to protect our stakeholders' interest and create shareholders' value. Kongsberg is growing, and we have delivered improved financial results over the past years. As recently reported, at Q3, I'm very pleased with the results. We are maintaining our market share, which I believe is very positive in the current market condition. The EBITDA is growing and project execution is strong, despite the challenges related to the COVID-19. The acquisition of Commercial Marine was a turnaround case, but we have delivered successfully on the value capture program and are now ahead of the schedule in realizing the savings. All-in-all, we continue to carry out our obligation despite the extraordinary times. The global crisis is not over. But the way we have navigated so far makes me confident that Kongsberg has everything it takes to come out stronger and more competitive after the crisis. But as always, we will remain on our guard and not relax. Let me say a few words about our strategic platform. I think what is unique about Kongsberg is that we have many strength to build on. We are financially solid and Gyrid, our CFO, will comment more on this later. We experience that those around us and our key stakeholders have a high level of trust and confidence in us. We have a strong international partnership that gives us continuity, innovation and also access to the markets. We have a presence in 40 countries and are, despite restriction, close to our customer end markets. We have installed equipment on more than 30,000 vessels, which gives us a considerable aftermarket and recurring revenue. We have a world-leading defense product in our niches, and we are continue innovating with our niches at all time. We are one of the world's foremost suppliers of equipment to the maritime industry, from bridge to propeller and strategic important. We are also in the forefront of the industrial digitalization. And we are offering solutions that actually make a difference when it comes to environmental-friendly transport and the management of the ocean resources. So we have many strengths. And we -- and when we act together across the company, including our partners and our entire supply chain, we get a stronger muscle that few other companies can compete with. With our technology base as a starting point, we have, in recent years, actively sought new industrial position in areas where we already have deep domain knowledge. We have prioritized our investments, especially within the ocean space area, green shipping, digitalization, and surveillance and security. These investments have proven to be right, and we have had the pleasure of announced many strategical important breakthroughs recently. In that connection, I would like to mention Remote Towers and Dynamic Digital Twin, which are both perfect examples on how we invest in technology and people and then enter into new domestic and international market with a significant growth potential. I believe the industry will experience the same digital transformation as the consumer market. Kongsberg is committed to be a key driver for us in this transition. Data, software and cybersecurity have for many decades been at the core of our business. And in combination with our new digital tools, I truly believe we can make a difference for our customers and partners. Furthermore, with our domain knowledge, portfolio and digital tools, I am certain we will also be an important contributor to achieve the UN climate goals. And on the next page -- pages, I would like to present some cases which exemplifies some of our achievement and potential going forward. Kongsberg Maritime has a wide range of integrated vessel solutions to meet the current and future demands of customers in the seaborne, offshore and marine marketplace. Our strong position comes from the fact that we are able to integrate complex and separate systems into a unified technology platform, which again optimize our customers' day-to-day performance and long-term asset management. I believe these capabilities are the key to the green transition. The market for the green shipping will grow significantly over the next years, and I see especially 3 important drivers for this. The green technology is now available. This technology is scalable and tailored to meet the demands from both current fleet and also the new-build market. Many countries are committed to reduce greenhouse gas emission by 30% to 40% by 2030. Furthermore, IMO has decided that emissions shall be half by 2050. This will certainly accelerate the green transition. Customer, in a challenging market, will be asking for more cost-efficient emission cuts in order to strengthen their competitiveness and meet these regulations. In order to meet these regulations, the industry need to multiply the rate of which environmentally friendly energy sources and alternative propulsion technologies are introduced in the years to come. And I believe Kongsberg is well positioned to lead the maritime green transition. Technology-wise, we are at the tip of the spear, and we can offer scalable and complete solutions for every vessel type and ship owner in the world. As disruptive as the smartphone, I believe the autonomous ship will revolutionize the landscape of ship design and particularly for the inland waterways and short sea operation. Kongsberg was the first mover in developing self-driving ship control system for autonomous and unmanned ship. We are a key stakeholder in the world's first official autonomous vehicle test bed, and we hold the world's first contract for commercial delivery of an autonomous vessel. The autonomous ships market is still in an early phase, but are projected to grow significantly over the next decade. Some analysts estimates that the market will grow by a CAGR of 7% towards the 2030, representing a total market of almost USD 14 billion at the end of the decade. The European market is expected to witness the highest growth, but we are also see -- but we also see other regions like Asia as very interesting. Key market drivers for shipowners will be cost, safety and sustainability. Kongsberg is driving the development of autonomous ships. We are recognized as the market leader. Also, we were acknowledged by EU earlier this year with receiving more than EUR 20 million from Horizon 2020 to install autonomous technology on 2 vessels in different operational environment. One vessel will operate along the Norwegian Coast carrying fish feed to the fish farms. The other vessel will operate in Europe -- in the European channels, transporting goods from -- to and from larger container ports. In these project, we will demonstrate that it's possible to remotely operate several ships from land and over large geographical areas. And I'm certain that these project will be an eye-opener and open up for new opportunities on the road to commercialize autonomous shipping. Kongsberg Digital was established to become a front-runner in digitalization where we have been focused -- where we have been focusing on our core markets, the maritime market and the energy sector. And after having recently won the global framework agreement with Shell, we have taken an important step in the right direction. We see a large market potential for digitalization and providing software solution to heavy -- asset-heavy industries. As an example, I just read that McKinsey estimates that in 2025, USD 4.3 billion will be invested in digitalization in the oil and gas industry. Many companies are trying to win a share of this growing market. But in my opinion, few companies are better positioned than us at the moment. The fact that we won the Shell agreement in competition with almost 20 other companies proves that we have taken the lead in this area. Our Digital Twin solution, the Kognitwin, works as a complete virtual replica of an industrial asset. Advantages include dynamic simulation as access to monitoring high-quality prediction in real-time and increased automation and remote operation. Typical benefits include up to a 30% reduction in the CapEx, up to 50% reduction in the OpEx and 10% to 15% increase in production. So the improvement potential for operators are huge. We experience that more and more operators understand the benefit and the financial upsides and will again turn to Kongsberg for implementing our digital tools. Last year, we launched Vessel Insight. This is a digital solution for all vessel types. Vessel Insight provides vessel to cloud infrastructure, enabling customer to capture and aggregate data from their fleet in a safe and cost-efficient way. The primary advantage of this solution is that it enabled the digital transformation of vessel fleet handling operations. On an immediate return-of-investment basis, it also includes access to Kongsberg, customer or partner developed application and tools for analytics, instant fleet overview, advanced vessel performance, predictive maintenance and fuel or energy optimalization. In Kongsberg, we have more than 50 years of deep domain knowledge in the maritime market. We are already well positioned with more than 30,000 ships having equipment from Kongsberg installed. And in my view, this gives us a unique advantage and a strong selling point. Out of these 30,000 ships we have in our portfolio, 1/3 have advanced control systems from Kongsberg on board. This gives us direct access to the vessel data. And we are now targeting this base with full strength. Furthermore, we are also targeting ships without our control system installed. For us, it's quite easy to install Vessel Insight when the ship are in dock for maintenance. The benefits from digitalization are great. We believe that the digital vessel market will grow significantly in the coming years. We have today signed up almost 50 ship owners to the Vessel Insight infrastructure, which is representing more than 2,500 vessels. And we also see that the market is getting more mature. We see that more and more shipping companies are exploiting the benefits of the digitalization. And I'm sure that Kongsberg, with our technology base and also the domain knowledge, will capitalize on this in the years to come. Kongsberg Defence & Aerospace is a strong global leader in the defense segment where we operate. And we see significant growth opportunities in the years to come. Besides having a #1 technology position, there are several trends which supports this trend. Defense is high on the international agenda, and it is expected that NATO members will increase their defense budget. Furthermore, geopolitical tension are increasing and more nations will probably invest in modern defense system. And finally, many nations have outdated defense systems already, which will need to be replaced at some point. We expect that air defense systems, remote weapon stations, F-35 and the missile to be the key growth drivers going forward. This is due to our very strong position in these areas and also our strong order backlog. On the slide, you see the picture of the NASAMS Air Defence System and also the U.S. Navy Littoral Combat Ship, which are now being equipped with our Naval Strike Missile. Both are representing huge potential going forward. Although the order intake was low in Q3 2020, we are not too concerned going forward. Orders will typically variate from quarter-to-quarter, and our backlog remains very strong, and we have also a very strong confidence in the ongoing campaigns. Since the first space industry establishment in Tromsø back in 1967, Kongsberg has grown to become a world-leading and global commercial provider of the satellite tracking and control, launch support and data reception. There has been a significant development lately in how we can utilize space for communication and monitoring services. Space-related technology and services have become increasingly important for the world and more recently, also a frontier for commercial operators in the space. The space market is developing rapidly and is growing. We are very well positioned in this market as well. Receiving information from satellites is one thing, but using the information for important services like ship detection, oil spill detection and environmental monitoring are where we see increased interest. These days, the fight against illegal fishing and tropical deforestations are something that we are focusing strongly on. It represent new ways of utilizing data from space, and it is introducing new customer groups like various governmental bodies. Kongsberg's close connection to the sea operation enable us to take full advantage of the opportunities the ocean space provides. The ocean covers 70% of the planet's surface. The vast majority of the world biomass is found in the ocean. But only 2% of the food consumed on the planet comes from the ocean today. For decades, we have pioneered technologies that can teach us more about the ocean. From implementing hydroacoustics to realizing the world's first large-scale offshore fish farm, we have technology and the domain knowledge. Our position is strong, and I also believe that the potential for growth in this area is tremendous going forward. At the Capital Market Day last year, we introduced new growth ambition and profitability targets for 2022. Although the world has changed and we experienced somewhat challenging markets, we are still committed to deliver as promised. I can assure you that Kongsberg will continue to be a growth company. Our ambition is still to grow in line with or preferably faster than the market. And our goal of achieving revenue of NOK 30 billion in 2022 remains and the same applies for the EBITDA margin of at least 14% of -- at the company level, of which KM is to deliver at least 13%, KDA at least 16% and KDI and others at least 14%. KDI will also be measured by the level of recurring business, which I'm confident will develop in the right direction going forward. These goals will, of course, be challenging to achieve. But I'm confident that we will deliver due to our skilled colleagues, the determination, technology and strong industry positions. To achieve our goals and ensure long-term profitability, we will prioritize the following areas in the coming period: At group level, we will continue to focus strongly on cost efficiency. Independent on the market condition, we are committed to continuously strengthen our competitive edge. Furthermore, we will accelerate the digital transformation. We already have a strong momentum in the digital area, and we will continue to invest in the digitalization of the energy and the maritime sector. A strong commitment to ESG framework is continuously of high importance. Our goal is always to be in compliance with the set standard to have a leading sustainable position, to make a difference and to be a company that utilize the new business opportunities which comes along in the wake of the green shift. For KDA, we will focus on delivering on our strong product portfolio, securing the opportunities -- opportunity pipeline and also foster our valuable partnerships. In Kongsberg Maritime, we are committed to lead in the market for integrated maritime green solutions. We will also accelerate the Vessel Insight revolution and further strengthen our footprint within sensors and robotics. In KDI, we will focus on growth through SaaS business model, and further capitalize on our strong position in Dynamic Digital Twins and the Vessel Insight. I believe these priorities constitutes a solid road map to reach our financial targets. We are strongly positioned, and we have a fantastic and agile organization who is determined to deliver on target. So the bottom line is that Kongsberg is here to stay, and we will make a difference. We are committed to create value to our shareholders and shape the future of the industries we operate in. So thank you for your attention. Gyrid, now the floor is yours.

Good morning, everyone, and thanks for listening in to our Capital Markets Day today. I hope you all stay safe and healthy out there, and I hope to see you soon in person. Two weeks ago, we released our 3Q figures. To sum up, despite a decrease in order intake, Kongsberg delivered a solid performance, and our Board of Directors also decided to pay a special dividend, NOK 10 per share that will be paid out today actually, and in addition, we will start a share buyback program of NOK 200 million. Kongsberg is not unaffected by the current turbulence in the world economy and in our markets. Despite this, we have managed to adapt to this. We have also managed to lower the cost and deliver a sound project execution, and this has contributed solid financial performance. In our Maritime division, profit will come from margin expansion rather than top line growth in the near- to medium-term future. In Defence, we expect both growth and strong margin, and I will come back to this. In the aftermath of the oil and offshore crisis in 2014 and '15, revenue from Maritime fell by NOK 2.2 billion or almost 25%. Maritime started to grow again from 2018. And in addition, we acquired Rolls-Royce Commercial Marine, which in itself added approximately NOK 7 billion in revenue. Commercial Marine also opened up for new organic cross-sales and cost synergies -- cost synergy opportunities for Kongsberg Maritime. Today, we can look back and state that Commercial Marine has given us broader scope, relevance in new markets and a new size that actually matters for us now. In the same period, from 2015 to 2018, Defence experienced some growth before significant double-digit growth from 2018 and until today. Going forward, we expect this to continue, while for the maritime market, the COVID-19 situation will make it difficult to predict a top line in the period to come. But with the moves we have made over the past years, it is clear that when the maritime market come back to more normal activity, we are positioned for both scale and growth. Meanwhile, we will continue to deliver services, upgrades and equipment to all our customers in addition to hunt for new market opportunities that Egil will talk about a bit later. Reported as Others, we have NOK 800 million in revenue from Digital, which several -- with several breakthroughs this year, Hege will provide you with expectation on growing figures and increased recurring revenue from this business in her presentation later today. In terms of margins, as you can see, how Maritime struggle after the oil and offshore crisis. Kongsberg has never delivered negative profit, remember that. Focus on efficiency and cost programs slowly lifted the margins in Maritime after bottoming in 2016. But scale was a challenge. The historical scale achieved, especially in the offshore market was gone. Geographic expansion was not an option either as Maritime already was present in 25 countries. The acquisition of Commercial Marine has made it possible to harvest cost synergies, utilize R&D across a larger exposure and positioned for sale on larger committed -- combined packages as well as new products and services. The margin in Maritime is now on a climbing trend. Defence are delivering all-time high margins right now. Two main drivers for that: scale and efficient project execution. Size matters also in this business. Be aware that from 2019, we changed to IFRS 16. Hence, part of the uplift you see from 2018 to 2019 is the margins -- in the margins can be explained by IFRS 16 effects. Our main focus is to generate profitable growth as a group also going forward. On our Capital Markets Day in September last year, I said that we would approach a turning point on the return on capital employed in 2019. The main driver for increased capital employed is -- from 2018 to '19 is the acquisition of Commercial Marine while the main driver for increased return on capital employed is our profitability improvement. A successful turnaround of Commercial Marine, in combination with increased profit in Defence, has lifted Kongsberg's profitability significantly over the last 18 months. A solid order backlog is the key to growth also the next year. As you can see from the presentation here, our order backlog as of the third quarter is of NOK 31.7 billion. Year-to-date, Kongsberg has a top line of NOK 18.5 billion, and NOK 6.3 billion, as you can see on the chart here, will be delivered already in 2020, that will secure growth this year. I also want to bring your attention to 2021 order backlog of NOK 14.8 billion before aftermarket. This is NOK 800 million higher than we had a year ago. Aftermarket, which normally accounts for NOK 7 billion per year is typically not included in the order backlog. On top of that, we also have framework contracts in Defence that normally amounts to between NOK 5 billion and NOK 10 billion. In terms of the order backlog in Defence, we will deliver growth also in 2021, having that said, as long as COVID-19 don't bring up new challenges that we are not aware at the moment. Before COVID and after a very promising release of the fourth quarter last year, some of you have calculated that Kongsberg will report NOK 30 billion in revenue already early in 2022. I could to a certain level agree on that. So it is then a stretched target to give an updated ambition on NOK 30 billion in revenue in 2022 this time? Two things to consider in terms of revenue growth. Compared to the development we saw during 2019, the uncertainty related to COVID has put the growth on hold in Maritime at the moment. The second thing to consider is that in March, we sold Hydroid to Huntington Ingalls in U.S. That has reduced our top line with approximately NOK 800 million that we need to replace. There are also 3 things to consider in terms of margin ambitions. EBITDA target is adjusted up 2 percentage point regarding IFRS 16 for all business areas, and we aim now to deliver an EBITDA margin of 14% in 2022 for the whole group, and you can see the split for the different business areas on the chart. Together -- yes, and to consider -- 3 things to consider in terms of the margins. First is that the EBITDA target is adjusted with the 16 -- IFRS 16% -- IFRS 16, 2% up, then that Hydroid is taken out of the profit and then the associated companies that is also taken out of the EBITDA. Together, Hydroid and the associated companies have contributed with up to NOK 300 million per year in Kongsberg's EBITDA, with 1/3 in Maritime and 2/3 in the Defence. Digital is here reported together with other but will mainly be measured on top line growth and also recurring revenues. Hege will, as I said, provide you with figures on that. Kongsberg is positioned for tomorrow, and we aim to deliver shareholder return. To give you some comfort on this, I will dive into some priorities. If we look at Maritime, the performance during 2020, with COVID-19 that turn all plans upside down in Maritime. And Kongsberg has still been able to adapt to the changing markets. We have been able to focus on the markets where we see demand, needs for new technology and where we have a strong market position. By lowering the costs, both through the integration of Commercial Marine and through COVID initiatives, Maritime is well positioned for increased profitability. In addition, we are developing solutions that will enable the customers to fulfill future regulations such as IMO regulations. Key for Defence will be to continue the journey. They have started and secure large defense contracts that are in pipeline today, combined with solid project execution and delivery on the backlog. To secure profitability, benefit of scale and harvest on future investment will be the focus. Size matters for Defence. And during 2020, this has contributed to a margin uplift. We are still exciting to look into the pipeline ahead of us, and Eirik will walk you through future opportunities in Defence later today. In Kongsberg Digital, I said last year that the key would be to turn investments into growing sale. During 2020, both key contracts and proof of concepts has been delivered. Focus next year will be to continue to roll out applications and systems. Scale and recurring revenue will be on top of the agenda here. Last but not at least, the new normal. The focus on remote operations and efficiency will continue. As you see, our working capital is fluctuating a lot between quarters, years and also between business areas. During COVID, a focus on working capital has been high on the agenda. It has been low during 2020, but increased in Q3 due to project ramp-up, combined with reduced employee-related liabilities. On the Defence side, the fluctuation are linked to payment structure and project time line within the large projects. Cash of NOK 6.1 billion as of third quarter. On top of that, NOK 2 billion, out of which NOK 1.8 billion will be paid out to our shareholders today. When it comes to our capital allocation priorities, you will find a description in the last year's Capital Markets Day deck, but to sum up short: #1 for Kongsberg is to prioritize a solid balance sheet. #2 is that we invest for organic growth, then we aim for a predictable return to our shareholder. And last but not at least, we have an active portfolio management. In our cash balance today, a NOK 2.5 billion is prepayment from customers. And in addition, we still -- we are still working on a full cash flow integration of Commercial Marine. At the moment, some more cash than normal is locked up in the operation. We are working on optimizing that. Just also remember that 82% of all the revenue from Kongsberg is coming outside -- from outside Norway. When we grow, the currency exposure on FX also need a balance to carry fluctuation on this position. Kongsberg has a healthy balance sheet today. Some reasons why a solid balance sheet is important to us: access to funding. Our objective is to continue to be perceived as an investment-grade equivalent credit. This will allow us to access debt capital market at all times, lower our funding costs. At our Capital Markets Day last year, we said that we will aim for a net debt-to-EBITDA of 1 and a range of plus 1, minus 1. You can see the gray shaded area on the screen here now. And we actually started that journey. Then we had a very successful fourth quarter release. We had the sale of the Hydroid in March. And on top of that, we had prepayments from customers at the end of Q1 for almost NOK 3 billion, which now has been reduced to NOK 2.5 billion. The situation now is that in the long run, we will still aim for our capital structure target, but we are, at the moment, comfortable that we have a solid position while we monitor the development of COVID-19. We are dependent on customer confidence. They need to know that we will be there for them in the long run. We execute large projects, which means that our working capital needs will fluctuate and so will our funding needs as a result of our high degree of export sales and associated FX policy. Kongsberg is the world's #1 supplier in several niches, both in Defence, Maritime and in Digital. To compete on the international arena, we need to stay ahead of the curve. To keep the position we have as a technology powerhouse, investments in R&D is of high importance. On the defense side, the majority of the R&D is funded fully or partly by our customers. On the civilian side, we carry a lot of those investments ourselves. Typically, over the last years, there have been examples like Digital Twin, Kognifai and several initiatives, all incremental improvements on innovative solutions in Maritime and Defence. At the moment, we invest 4% to 5% of our revenue in R&D. Out of this, an amount of approximately NOK 200 million each year are capitalized. On top of that, the customer -- on top of that, we have the customer-funded R&D. We also benefit from various civilian support schemes. I will give you some figures and examples on that. Here, you see out of the NOK 351 million in funding that is committed today and going forward, NOK 223 million of those comes from EU initiatives and NOK 128 million from national funding, such as, for example, the Norwegian Research Council, Innovation Norway and Enova. The picture in the upper left corner is named Autoship. The project responds to EU's needs to increase multi-modal transport and relieve road congestion. The key here is to shift from roads to water roads or waterways, boost the digitalization and utilization of inland waterways, improve safety at sea, operation -- operators on shore supporting vessel operations and also lower emission due to more efficient ship operation. Second example here. We are to realize the world's first seagoing, hydrogen-powered RoPax ferry that will influence the transition to 0 carbon maritime transport. Third example, you can see here is Nexus. This is a project where we develop a new service operation vessel designed on business concept to meet the urgent and growing needs of the offshore wind operation and industry. The project aims to reduce the cost of maintaining wind farms and thus securing the growth of offshore wind energy sector. New designs will contribute to 30% reduction of CO2 emission compared to existing vessels. And last, you can see the HullSkater that removes light fouling. If 20% of the vessels that we have in target for this product convert to HullSkater by 2030, the CO2 emission reduction will be 10 million tons per year. So exciting projects that will contribute to a cleaner ocean. I want to bring your attention to the gray line here. That illustrates the previous dividend policy targeting a dividend of 40% to 50% of the net income. As you can see, the payout ratio have been above that policy. Based on an evaluation of the financial position and dependent of successful transaction of the sale of Hydroid this spring, an extraordinary dividend of NOK 10 per share was proposed and is actually being paid out today. As a successful turnaround of the Commercial Marine, 2 years ahead of the plan, has also been important into the discussion on our revised policy. Key from the new policy that we now release is predictably on per share basis and also to do a yearly evaluation of additional dividend and share buyback program. We have invested NOK 8 billion and divested NOK 3.5 billion over the last 4 years. So let's look at some of this. Both Patria and KAMS have been acquired to be part of Kongsberg MRO strategy. We have today 49.9% ownership in Patria. Main owner is the Finnish Ownership Department. In KAMS, we own 50.1% and Patria owns 49.9%, so a small family. KAMS is part of KDI Defence consolidated figures today, while we report Patria as an associated company. Eirik will touch upon our MRO strategy in his presentation. And then you can see the figures from Commercial Marine. First, we want to provide you with underlying figures in our ownership period with Commercial Marine. We will reach more than NOK 500 million in cost synergies this year and consider now the company as fully integrated. We achieved 62 legal entities and 177 financial reporting units 1st of April 2019. To be able to measure 1 cost baseline after merging departments and companies and focus on business and not on back-office reporting, we have been measuring the total cost base for the combined 2 entities, Commercial Marine and Kongsberg Marine, with the combined cost base from 2018. As you can see from the chart to the left here, the light blue on the top shows accumulated cost synergies from Q2 last year up to third quarter this year, adding up to NOK 690 million. But we had a target of annual savings. So if you look at the annual savings, we can add up NOK 135 million in the first quarter, NOK 160 million in the second and NOK 150 million in the third, adding up to NOK 445 million in annual savings as of the third quarter this year. So a new number for you is also sales synergies that we now have started to measure. We have had as of third quarter, NOK 528 million in sales synergies from cross-sales after the acquisition. That adds up the cross-sales and Kongsberg today can benefit from cross-sale between old Kongsberg Maritime business and old Commercial Marine business. On the right-hand side here, you have a chart where you can see the cash flow in the Commercial Marine transaction with a breakdown of all details. As part of the active portfolio management, we have also divested a company this year. Hydroid was in March sold to Huntington Ingalls Industries in U.S. Cash flow from that transaction, you can see on the slide here. Hydroid was acquired back in 2008, and we have achieved a pretax IRR of 15.2% over the holding period. To sum up with some financial -- final remarks. What do we mean by positioned for tomorrow? The combination of solid order backlog and promising pipeline in Defence, and at the same time, well positioned for a returning maritime market. When things are normalizing, we believe in growth. Starting with a challenging, but successful integration of Commercial Marine, followed by a very challenging COVID-19 situation, we have streamlined our operation and have proven once again that we are able to adapt to changing markets. Together, with benefit of scale, both in Defence and in Digital, we believe in solid profitability. Portfolio management have been an active tool to develop Kongsberg. In addition to the portfolio transaction shown here, we have done smaller bolt-ons during the year, and we'll continue to invest to secure number -- our #1 positions, where we believe that we are able to make a difference. Now we are about to move into the presentations from the business area. I wish you all an exciting rest of the day and stay safe. Thank you. [Presentation]

Good afternoon. I'm going to share with you the status of Kongsberg Maritime. Kongsberg Maritime is a truly global company and with the 7,000 employees, 34 countries, and with equipment on more than 30,000 vessels, we have a very strong position in a bit challenging market. We are organized as 5 division with income. We have a lot of other important functions as well as a global sales organization. Deck Machinery & Motion Control is, yes, the smallest of the divisions, but maybe the one we are most proud of this year after being able to really run a significant turnaround. And this -- also this operation is now going in black figures. By the way, all the product divisions is running with black numbers. Propulsion & Engines, a global organization with factories in Norway, Sweden and also 2 in Finland, very significant aftermarket. As you make mechanical products, who is in saltwater and moving parts, it's a very significant market for the aftermarket. It's important for us and our customers that we are capable of supporting that in a good way. It's also contain different products. And just to mention maybe the smallest area, but a very important area is the waterjets. Waterjets is a very interesting, growing, unique products, very positive trend in that area. Sensors & Robotics is maybe the most attractive of our areas as it seems to be very robust for changes. In this area, we have underwater autonomy, fishery, Seatex, and a lot of sensors and solutions. It has shown to be very resistant but -- in relation to the drop of the oil and gas market. And also now with COVID, it has also been able to contain a very good operation, a very attractive operation, very high tech, very special solutions, very strong unit. Integrated Solutions is the unit that all other business areas or all the other divisions are connected to. In this unit, we have very much of the forward-looking technologies, like digitalization, electrification, we have autonomy and ship design, it's quite a mix here. In this unit, we use more than 20% of the revenue, of new sales in product development and technology development, really securing that we also will be the leading company in the future. Global Customer Support is the largest revenue-wise. 2,000 employees and a very important part of our businesses these days, and I will show you that in a slide coming later. We are quite pleased with the situation. Order backlog is increasing. Very, very pleased with that under the conditions that we're operating under now. Revenue up. And if we look at the last 12 months, NOK 7.3 billion (sic) [ NOK 17.3 billion ] we might see a drop by having the fourth quarter with COVID giving us some reduced revenue, yes. EBITDA is growing, and yes, as expected. We've been quite successful integrating Rolls-Royce Commercial Marine. And with the numbers that we are reporting on value capture, I think that we should just expect to see improved profit, which we are seeing. So we are very pleased with that. We are operating in the ocean space, and we are quite diversified. It's all in the ocean space, but we are operating with very different products, and we are operating in a number of different markets. So it's -- many of these markets are cyclic, and these days, some oil and gas and also merchant is quite down on the cycle. But there is other markets with opportunities. So we are -- there will always be a market where we can focus and where we can find growth. Fishery has been quite good lately. LNG is good. Defense, Navy, it's also quite attractive. Research is good. So it's always opportunity for us and our products. That give us a robustness. This strategical objectives, we have shared that earlier and for the last year, we've been very focused on doing the integration of Commercial Marine and make sure that we secure necessary profit and good numbers. And I think we can say that, yes, we have been successful on that. We are also focusing in the next step, which is to develop more integrated product, better solutions, so -- which can be a benefit for customers. And we are in good -- a lot of good work has been done there, and I feel that we will -- are confident that we will deliver also on that. So looking forward, we are really going to shape the future of this industry. We are quite a significant player here now, and we also are a very attractive partner for the companies. And we should, more than anyone else, be able to deliver the best solutions for our customers. Then we had COVID coming in and, of course, gave us a challenge, that we call 1.5 here. It's not what we hope to see, and it has been very challenging for us and our customers. But that said, we are also able to deal with it. And the feedback that we have from the market is that we, better than anyone else, are able to support our customers even under these difficult conditions. And I guess, that is very much our global footprint. The fact that we have a presence more or less everywhere is, of course, helping us. Also modern remote solutions, so we can support and do support our vessels and our systems on remote, yes, solutions. The advantage of being large and leading. We have been on front of the technology for the last 100 years, and the technology is changing. And lately, more than our, there is a lot of new relevant technology coming into this market. To be able to both understand the market and the needs, the domain of the market, the existing products and solutions and to be able to benefit from all the new technologies, you need quite some size. It's clear that there are companies out there doing one product or a few products that are capable of bringing new and good solutions to the market. But as a total supplier to be able to cover the whole range, there's very few company as capable as Kongsberg Maritime, and that is clearly giving us and our customer a benefit. We are diversed. And for the time being, the aftermarket is representing more than 50% of the total. I would like to explain how that could happen. We used to be 25%, 30% earlier. First of all, the new building market is down. So of course, that is in relation to the total -- the aftermarket, have a more important part of it. But also with the product that we are having -- coming in with the Commercial Marine, Rolls-Royce Commercial Marine, is representing a more significant aftermarket than what we were used to. It's also representing a market share which is less than 100%, and in some cases, significantly less than 100%, which is an opportunity for us. So we are growing our market share. We are growing the aftermarket, and we are able to support our customers globally in a way better than ever before, which make this a significant business for us. We can also see from the other illustrations here how we are not necessarily depending on one market. The offshore market and with offshore, the oil and gas offshore market, was very significant for us, close to 50% historical in the good years. We see now that it's significantly less, but we also see that the other market is then growing. So on the naval side, we are growing; LNG side, we are growing; fishery, we have been growing for many years. And we can see the total spread here is giving us a robustness, which is very good to have these days. We're also geographical quite spread. And these days, we can see more or less from 1 month to another, how the activity is changing around the world. As we speak now, Asia is nearly back to normal, even some influence, of course, from the global markets also there. Europe is very much affected these days. But that will change over time. So no matter where the market is strong, we will be there. This is an important slide. We are quite proud of what we have done historical. We are proud of how we are able to always adapt to the market and do the best out of it. And the market has, for sure, changed lately. On the right-hand side here, you can see sort of the temperature of the market. The more red it is, the hotter is the market; and the more blue, the colder is the market. Large cruise is maybe the one who changed the most significant from being very hot to be very cool. We have some pieces of all these markets. Some of them are more important for us than others. Large cruise is not a major market for us. So we can see the competition out there, some of them are a lot more exposed. The autonomous underwater vehicles is a very hot market now. Navy is good. There is -- LNG is good. We also see that the offshore wind, even though it's not very hot, we can see the activity is increasing, and it's increasing for more or less nothing to more. And we have -- we absolutely believe that will be a more and more interesting market going forward, and especially for the installation vessels, we have very relevant products, and it will be an interesting market for us, even though it will never replace the top times for the offshore oil and gas market. But there will always be a market that is possible to approach and which is growing. Left-hand side, I think this is maybe the most interesting slide if we look forward. The graph is telling us that this is over 30 years. And we have not seen a more difficult market than what we are operating in these days. And there is an underlying need for more ships to be built. And the light blue here, which is pointing on the future, it's based on external market information and also of our own experience, and we are always less optimistic on the general market. But even us, we believe that the market is growing going forward, and we've probably seen the weakest year this year. No matter what the market is going to be, we will adapt to it. But we are general positive to -- we look positive on the market. We believe the market will grow, and we believe that we -- or we know that we will have a very strong position into that. We saw also the first quarter of this year that we -- at that time, we also expected the market to slowly improve, and we could see a clear trend of a better market in the first quarter, then COVID came in and pushed this down a bit, and it's hard to predict exactly how long that will last, but we are very, very clear that whenever that is over, the market will pick up, and we will be there. So we are, I would say, more than anyone, ready to capitalize on the future market. By this major acquisition, we are able to now -- we are in a good progress in building an extremely strong organization, and we can build on the strength of both of the company. The global footprint is excellent. The global support that we have is on unbeatable. We are really a strong organization together. We are very pleased with how we are able to get the teams to work together, and we are benefiting from the best of both worlds. We are focused on a profitable operation. We have been able to focus the areas which is -- has been struggling. We have made a necessary turnaround. We have been able now to make black numbers for all our product divisions, including aftermarket. I will share with you some examples on that. This is Deck Machinery & Motion Control. It's a unit with about 700 employees. And historically, the revenue have been sky-high up to the level of NOK 8 billion. But over the last few years, it dropped, and the profit level have been red number and quite significant as well. By doing a number of actions, of course, to align the cost to the level that we're operating on, but also to improve the processes, to improve the sourcing and by -- at the same time, focus new products and growth opportunity in the market, we have been able to -- from last year and until this year, to improve the operating profit in that unit alone with nearly NOK 300 million or approximately NOK 300 million, which I'm very proud of and which I consider to be a good illustration of the capacity and capability that we have to run an operation. Yes, I already said, I'm very impressed. Another area, cross-sales opportunities. When we were communicating how we should do the integration and the synergies, we never really highlighted the market opportunity and the extra sales we could have across the 2 units. But internal, we had quite ambitious targets on this. And what it means, it's so that we have established market, customers, programs and so had the Commercial Marine. So wherever we can bring in more products in our sales one way or another, we count that as a cross-sales, extra sale. And by being able to offer a larger scope. So as a typical -- just an example of a typical Service Operation Vessel, SOV, where we usually have a battery that's more for upgrade, autonomy, DP3 automation systems, if we add on the products from Commercial Marine, we also have propulsion, thrusters, deck machinery, last, that is a lot of more systems, more equipment illustrated in the picture here, we are able to sell more on each vessel, and we are more than meeting our own targets on that. And I can say that so far this year, we have more than NOK 0.5 billion in extra sales based on this effect. So that is promising. And of course, we will do even more of that going forward. There is a lot of upgrade opportunities. We are able to offer new and better solutions that ship owners is prepared to invest in. For some vessels, hybrid solutions is getting very attractive as you are able to reduce the fuel and the operational cost of the vessel. Another example is on propulsion system. We have delivered a new and more modern propulsion solutions, saving vessels 15% to 20% of fuel. Also within trawlers and other vessels, there is a lot of opportunities for upgrades. And a lot of that is pointing in the green direction, clearly giving also a cost reduction for the ship owners. Good investment for them. So we see 2 major trends. And the 2 major trends could be covered by green shipping. It's clear based on future regulation, cost focus and also new technology and new opportunities, a lot of things is going on, and that is good for Kongsberg. Very much digitalization will be an enabler to be able to implement more green solutions. IMO 2050 is aiming to reduce the total greenhouse gas emission with 50% of -- within 2050. And that could be -- for 2050 is a long time, so it could be this feeling of we don't need to do anything today, but we absolutely need to do something today. Due to the total growth of the market, the emission for each ships has to be reduced with 70% to meet these targets. And to do that, you have to meet 40% as early as 2030. And that is -- this vessel, they are designed to last for 20, 30 and even 40 years. So if that should be -- should happen, it has to happen now immediately. So we will see new requirements, we will see new technology, and this will happen over the next few years. To be able to reduce the greenhouse gases, there is 3 main areas that need to be attacked. One of them is the clean energy. And that could be electricity, it could be hydrogen, it could be ammonia and other solutions. The other thing is that you need efficiency when you use the energy to be as good as possible, which is the engines. And then you need to minimize the energy consume of the vessel totally. And there is where Kongsberg really make the big difference. We are involved with engines. We do sensors and a lot of comfort systems around them. But when it comes to energy consume, we can make a difference, and we can do it immediately, and we will continue to invest in that. Kongsberg -- One Kongsberg. Kongsberg is a strong company. I've been with the company now for more than 25 years. When I started here, we were NOX 4 billion in revenue, now we have NOK 24 billion. And I never had a year with a good market. It's really -- we have been able to build this growth in a quite challenging market. And we have been able to do that based on Kongsberg working together. We are, of course, with the defense side, we have a number of technology areas where we are working together and where we help each other and where we really make benefits for the total. We also have Navy program here illustrated with a model of Vanguard, an opportunity that might be a very interesting one coming, we hope. KDI, Kongsberg Digital is also a very important part of our internal partnership, and they are really helping us to be #1 and the leading company when it comes to digitalization for the future, and you will hear more about that later today. So conclusions. We deliver positive results in a challenging market, and we are very well positioned to take the benefit of an improved market, and we very much believe that the market will improve. We have delivered successful values from the integration of Commercial Marine, and we are investing heavily and in a very good position to lead in the integration of green technologies. So we are really making a difference. We are in the best position to capture the future market opportunities. Thank you very much. [Presentation]

We have set up a bold ambition to digitalize the world's industries. With that said, in this first phase, our focus is around energy and maritime industries. KDI is set up with 3 business areas, that's digital ocean, it's digital energy and it’s digital wells. If we go into digital ocean, there's 2 main product offerings in there. One is, of course, to connect ships to cloud and get access to data and build an ecosystem around this. The other part is maritime simulation, which is advanced simulators for training purposes traditionally, but now more and more also focusing on autonomous vessels and the opportunities that lies within operations with Digital Twins with simulators in real time. Digital energy is around operating assets, meaning delivering Digital Twins to both downstream, midstream and upstream facilities. Digital wells is real-time data collection. It's really an IoT solution to connect all wells to systems where it can reuse the data from within. We have a strong focus around industrial and commercial partnerships, and we are working, as I will touch upon during the presentation, on multiple partner structures, both on applications, but also on the substance of the service. And everything is, of course, built in with cybersecurity as this is of essence of everything that we do. So what have we been doing since we were established back in 2016. We have focused on cloud services, and we have focused on productifying whatever we have developed. So we have now a very scalable service, cost-efficient service and also industrial tested called Vessel Insight to bring data to the use of the crew onboard the vessel, but also for the onshore operations. We have a strong position in Kongsberg in this space with more than 30,000 vessels with our equipment on board. And essentially, we have also a very high penetration of automation systems. Then secondly, it's the Kognitwin energy product, which is the Digital Twin. It's a dynamic Digital Twin for asset owners. We are building upon a strong position with process simulators installed on approximately 100 facilities within IOCs and I will give you more content to this as we go along. And then is, of course, SiteCom that I touched upon on the previous slide, we are a market leader in this segment. And have been gaining market share over the past years. Everything that we do is also built upon SaaS business models when it comes to the new services we are developing, and then the focus on the traditional services is, of course, to increase recurring revenue. So we are -- I would say that these 3 areas serves as platforms, each one of them, to host applications, both application developed by a third party, developed by Kongsberg and developed by customers themselves. So everything is based upon open standards and can interact into a complete ecosystem to the benefit of the end customer. If you look at some of the highlights, last year was a good growth year for us. We grew 26%, that's purely organic. Our business is structured in a way where 95% of the business is outside of Kongsberg. So it's really an external-oriented business area. As of last year, we had approximately 70% of the business internationally. And this year, we are at approximately 80% when it comes to international business. So when it comes to recurring revenue, and everyone is well familiar with the fact that this is a key measurement on software businesses. We have, as of today, 35%, and we have a 12% growth on annual recurring revenue so far this year. And if you look at the respective divisions and industries, we are at respectively 37% and 35%. And to bring some more content into this, take a look at this one. So what is our ambition? The ambition is that we should get above 80% or exactly 83% in 2024. And the bridge is as following: We expect that by summertime next year, we will cross 50% in recurring revenue, and by the end of the year, we will be closer to 60% on an annual basis going into the coming years. And then you see that both services has a steady growth in recurring and in SaaS business over the term of the period. So just to take a look at some of the key achievements during this year, and I would say that it's been an exciting year. Of course, it's also been somewhat impacted by what's going on in the surroundings, but despite that being a digital business, it's also, I would say, creating a good engagement from the customer side as they see that they have vulnerabilities without good digital services to be provided. So we have signed a global framework agreement with Shell to deliver what they call the working surface of the future. I'm going to go more specifically into this as this was, of course, an important milestone for us. We have signed the biggest contract ever in KDI's history, and that was announced back during the spring, NOK 250 million contract. We have, of course, matured our positions on both Vessel Insight and Digital Twins and are gaining good traction, I would say, in the market. And we also have several strategic partnerships ongoing in that space. Then we have -- and this hasn't been presented to any of you earlier on. We have been developing in an R&D project, but coming to end I think within months now, it's Kognitwin grid for power grids, Digital Twin. So this is really to ensure flexibility and balancing within the grid in an optimal manner and to support the grid owners also in taking out new services to their customers. Then partnerships is key in the digital area. So to really be successful, you also need to think through which companies to partner with. And we have partnered with ABB and MAN. And that's a partnership that goes into Vessel Insight and that they will use Vessel Insight as they -- their data connectivity clients. And that we will do this in a common manner also in respect to give access to data to the ship owners. We also completed an acquisition of a very interesting start-up based in Copenhagen, which is named COACH Solutions, and they have more than 600 vessels contracted with their applications and are delivering a service that are supporting, amongst others, new reporting and also performance optimization, to some extent, on the vessels. I briefly spoke about autonomous vessels. We are now working on 2 projects on Digital Twins for autonomous purpose, 2 commercial projects. And we are also an important part of the Autoship R&D project that is together with Kongsberg Maritime. And then during COVID, we also launched our K-Sim Connect portal, which allows seafarers to train on simulators online wherever you are, which was, of course, also a good timing in all fairness. So just to touch upon Shell. This is -- it's clearly stated from Shell that this is going to be their working surface of the future. They believe that the Digital Twin can support their digital approaches when it comes to enabling remote operations and give opportunities to also create more, I would say, digital workers and on a sustainability manner. But I'm going to come back to that. We were in fierce competition. We were competing against many companies on an international level. So we're really happy that Shell put their confidence in us and they selected us to deliver this across their asset portfolio. So what is the key focus areas when it comes to the energy industry? They see, of course, the energy transition towards renewables, and they see that coming at a faster speed than some might have anticipated, but they are also focusing, of course, on the carbon footprint to lower that on their existing operations. They are looking towards, I would say, remotely operated near-autonomous and autonomous operated because there are so many opportunities that lies within that space when it comes to how to transform the industry overall. And then it's the digital worker. And that means that everyone should have access to the information. Everyone are set up to be able to collaborate across different expert functions, and they have access not only to documentation and information historically, but also in real-time, so they can monitor and optimize their facility. So if you look at some of the areas that Digital Twin is set to solve, I would say that it's -- some of these areas are also already mentioned. But I think the most important thing is if you look at the analyst firms, what they are stating is that this is the most impactful technology they have seen when it comes to transforming and also when it comes to operate more efficiency and take out cost. So the numbers are somewhat 30% in CapEx, up to 50% reduction in OpEx. They are looking at in between 10% and 15% increase in production. So there are quite big numbers that's in play here. And these are also confirmed by the operators themselves that they see the same potential. So this is really a strong technology base to be in when it comes to transforming the industry. And just a pickup on production. Just to give you a very quick example on that. What we see when we work with operators is that there are a deviation in between 10% and 15% when it comes to production, really just based on the fact how the crew is setting the control room settings for production. And then you can either do it sort of the old-fashioned way where you do then best practice learning and transfer that or you can go in and you can automate the best practice into the control room, and you can add machine learning algorithms on top of that and ensure that you are optimizing to the maximum within the boundaries of a safe operation. If we go back, so the start of this journey, we have done several POCs, proof-of-concepts; we have tested the twin, both in production, together with operators; we have tested the twin for concept selection. So I think there's multiple phases that the twin is supporting the operators there. We signed a contract with Nyhamna in October last year, the twin was up and running in December, so quite speedy, I would say. Now we are down to weeks when it comes to deployment. So the learning curve has developed in a good way here. This contract was signed at NOK 100 million, meaning NOK 20 million a year for 5 years. What we see now is that the increase in the number of users, which has increased from 50 users in the initial contract to now about 250 is actually growing this contract with additional NOK 5 million. And for those of you knowing the SaaS structures in a good way, they also know that there's limited cost connected to these types of add-ons. So now I'll touch upon the Digital Twin, and you haven't got maybe all the contents, but hopefully, you have got some of it. And now we're going to go to an equal interesting area, which, of course, the transformation of the maritime industry. And in all fairness, I think there is a proud tradition for many years, both in Norway and also within Kongsberg in the maritime industry. But it's been operating in a very similar manner over decades. And what we see happening now is a shift. And it's a shift towards digital services, interlinkage in between different parts of the value chain, but it's also definitely a focus on, of course, sustainability and a move towards autonomous operations. We see it happening on nearshore. I think for longhauls, it's going to take some more time. But we're starting to see analysts coming with CAGRs in between 15% -- 5% to 15% in this. So it's going to be an exciting journey, I think. And of course, new regulations are coming, both focusing on sustainability and emissions, but also on the operational side and on safety. And there are decreasing markets overall in the marketplace. So what is it essentially that we are bringing to market here? We are bringing to market a cost-efficient certify industrial clients that you connect onboard the vessel. It's operating in the way that you can then collect data onboard the vessels for operational improvement, but you can also collect data for onshore benchmarking against your own fleet, but also, of course, when it comes to other shipowners' fleet. And then we are opening up a universe of applications, and I'm going to show you that in a minute or so. But there are so many areas where there's developed good applications but common to many of the startups that's done that is that they are not that confident on going onboard the vessel. So that's what we are offering them, an open ecosystem based upon open standards. And here, you can have a sneak peek on the service. It's just part of the service I'm going to show you here today. So what you see is that you get a full view of your fleet. You get a view of where they are at all times, you can dig in and get more data on fuel consumptions and others onboard different vessels. And you can also utilize applications in this framework. So if we look at the software landscape, I would say it's broadened significantly over the past 3 years. We have done this exercise every year now for the past 2 years. The first year was only 150 offerings out there, now there's more than 500 offerings out there, meaning that we want to welcome all of them that, of course, are able to get a certificate on security, onboard our platform and ensure that we create a rich ecosystem for shipowners, where they can utilize the power within digitalization. So on that note, we have set a bold ambition, but I think it's doable. There are some hard work still to done to get there, but what we are saying is that we believe we can reach NOK 3 billion in revenue, that's in NOK and 80% of that being SaaS revenue by 2024. With that, we have set an ambition to get 10% of the world fleet connected, which is approximately 8,000. We have also a target on digital energy of 15% of the assets. There's approximately 1,000 assets out there. So we are not targeting to get it all, but 15% of it. And then it's digital wealth, where we will continue to grow on market share and also upsell on application. And on the last area, we have, as of today, 60% recurring revenue already today. So with this said, I think just a quick summary. We have strong positions in the market. We know the customers already. We have systems out there that they are depending on in their everyday life. We have been focusing on productizing from the beginning. Everything new that we do is based upon SaaS and we have a scalable business model in place. Thank you. [Presentation]

Good afternoon. Happy that you are watching us. Now it's time to give you a situation report on Kongsberg Defence & Aerospace. Last year, at CMD, I stated that we will generate shareholder value through profitable growth and that 2019 is a year when the growth will start, and we are positioned for further growth through our current positions. And as you will see in my description today, but also from -- probably from the previous quarterly reviews, you will see that all these ambitions are fulfilled. And throughout the presentations, we will also see that we will set some details on the next ambition levels. And throughout the presentation, I hope that you will recognize these 3 key takeaways. And I, definitely, will return to each of these topics. But first of all, Kongsberg Defence & Aerospace came into this year with a very good, strong position, and this has not changed. We are growing, we are executing on contracts and we are signing new contracts. And at least, but not least, we are taking strategic steps, especially, I want to mention MRO, maintenance, repair and overhaul, that is an ongoing activity that we are benefiting from now. I think Kongsberg's position, in general, is strong. And this is really the case for KDA. We entered 2020 with a record high order backlog and also order intake. And despite COVID-19, our workload has not changed or decreased. So far this year, we have passed NOK 8 billion in revenue on a 12-month rolling basis. So I would say that we have all-time high activity levels, we have all-time high results, and at the same time, I would state that we have very healthy operations. So KDA is going according to the plan. And therefore, we are ramping up to deliver on major programs, restarting our recruitment campaign. And since we have these major programs, we are expanding our production facilities both for our defense products but also in the space segment. So even though we could say that we are in unusual times and we are able to adapt to these unusual times, business is as usual. Short description of KDA. We have 5 divisions. And I take them in order, starting from at the left, where we see integrated defense systems, where maybe the NASAMS and also combat systems for submarine is the most well-known products. And then we have aerostructure where we also include the MRO business, with F-35 being the biggest business area but also MRO gaining momentum. And on the land systems, you recognize perhaps remote battle stations but also medium turret caliber is there and also all our communication product portfolio. On the lower left where we have the missile systems, Naval Strike Missile and Joint Strike Missile, JSM, is probably the most famous ones. And then we have space and surveillance as the last division. At the same time, we have some daughter companies where we have different ownership. And we can start with Patria, 49% ownership of Patria, and then indirectly, 25% of Nammo. Last year, we bought AIM, now called KAMS, Kongsberg Aviation Maintenance Services. And we also have 50% of KSAT, Kongsberg Satellite Service in Tromsø. Now I would also like to highlight kta, which is a joint venture company between Kongsberg and thyssenkrupp in Germany. This is a company headquartered in Norway and will be responsible for all combat systems to thyssenkrup submarines. This will get momentum when we sign the contract between Norway and Germany for the new submarines and also perhaps others in the future. This slide shows our growth or secures our growth in 2020 and also lays a solid business foundation for the years ahead. And this slide also demonstrates KDA's contribution to ESG. For instance, security and assertion of sovereignty and also surveillance of the ocean space when it comes to space surveillance from satellites but also global deforestation. But let me give you some details to the products that's here. F-35 program, that has been a 10 years buildup, and now we are in a full-rate production. Going forward in this program, we can see, well, not only production but also a sustainment phase, which gives another 30 years of tail to the program, which is of deep interest to us. But also the motor depot at Rygge we just opened is 1 or 2 of its kind in Europe, which will be significant activity for us going forward. We also see a picture of Remote Weapon Station. And this is a Remote Weapon Station in CROWS for the U.S. program, where we have had a framework agreement with U.S. Army that was about USD 500 million for 5 years. And we were able to fulfill all that framework agreement within 2 years. So we are now working on an extension to this agreement, and our ambition is to double the size of the agreement going forward. And also, you see a picture of the NSM, the Naval Strike Missile. And of significant interest is the U.S. Navy program, the OTH program. We are delivering NSM to the LCS class, littoral combat ship class. But also now U.S. Navy has contracted the next future frigates, where we will also deliver NSM. So this is going to be more and more important for us in the next years. NASAMS is probably the most sold air defense systems in the world right now, especially in -- if you look at in this medium-type class. We have 11 countries so far, and we are expecting this to grow. This is going to be a future for us when we look into what's the possibility there. We think that if we look 10 years ahead, the size of what we have sold today will actually be the same going forward. And also, the space and surveillance is of huge interest to us. We are delivering products to the whole cycle of the space segment, from launching to the satellite itself to downloading the data. And we are -- we look at this as very promising because it's a very growing market for us. And JSM, as indicated on the left side, bottom there, I will go back to on the next slide. Just a fact on F-35. You can see the ramp-up on the left side there. These are official numbers and that we have more shipsets produced at Kongsberg in this year. And we see also that there are 8 countries buying directly into this program and that there are 6 FMS, foreign military sales, customers. And if you look at the potential for JSM, the Joint Strike Missile, all of these are candidates for buying into JSM since JSM is the only missile of its class that is integrated into the bomb bay of F-35. And this slide is very interesting. Last year, I was challenged that the KDA could be able to scale margins. And I think here is the answer to it. Figures shows that we have done that, and we will do so going forward as we continue to grow. To make it easy, I think all the figures goes in correct and right direction. Let me be more specific. We have a strong revenue growth, now outpacing peer group. So far, NOK 8 billion on 12 months rolling basis is important. And based on that, since we are producing more of what we have and we can sell more of what we have, we are able to increase profitability, not only because of this revenue growth but also with other efficiency points we have introduced into our business. So now we have a very strong and solid growth with profitability that exceeds the ambition we had set 1 year ago. But I think also some of these profit margins we see for this year is due to some one-offs, I will call. So we can't expect it to be on this level but very close to the ambition level we have set going forward in 2021 and 2022. So what about the long-term defense market and how do we interpret that? Well, last year, I said that the global security landscape is changing and that we have rapid technology developments. And that's still valid. But now if you look what's happening around us, with the U.S. election, with the COVID-19 impact, things are getting more and more difficult to some extent. And I think this will lead to increased uncertainty but at the same time also maybe increased protectionism. So how is KDA offsetting this risk? Well, first of all, I believe that KDA is strongly positioned. We deliver world-class #1 products in the niche segments we are in. And secondly, we are global. Our business model is strong in the sense that we have partnerships with many companies around the world and we have local presence around the world. And this is very important for us to achieve our business. But if we look at the long-term impact on the customer defense budgets, that is more difficult to interpret. A lot of money is poured into handling the COVID-19, and we might foresee that defense budgets around the world are impacted. So maybe we could look at some of the history. For instance, the financial crisis that was back in 2008. What we learned during that period was that yes, the defense budget was cut, but at the same time, we noticed that the cut was performed in procurement of platforms like ships and vehicles. The customers and users, they needed -- still needed to have high-end capabilities and keep up with the technology. And this suits KDA and Kongsberg very well because our main interest is to sell and produce high-end products and electronics to be put on the platforms. So I would say that if you take the experience from the financial crisis time and put it into today's situation, I think we are in a good position. So I'm positive and looking forward based on this. We keep returning to this opportunity slide in updated versions. What's worth noted is that the defense sector and also the budgets in each country is quite visible. So it's quite well-known communicated programs and projects and also most likely customer priorities that we are able to see in the different budgets. So if you look at the graph on the left side, you will see the order backlog and, on top of that, what we call framework agreements. And in average, I would say that framework agreements account for NOK 5 billion to NOK 10 billion. That is a significant part of our business. And then on the right side, you see some of the highlights from our product portfolio. If I'm going to mention some of them, I will highlight NASAMS, which is in a unique position in the air defense market. And as I said, we believe that in the next 10 years, we will double our revenue for NASAMS as we have seen so far. And also, the Qatar vehicle program, which is somewhat impacted by the COVID-19, is of high importance going forward. And then JSM. We are now currently integrating the JSM into the bomb bay of F-35 for the Norwegian program. Japan has also bought into it. And I think this is going to be a significant opportunity for Kongsberg in the next years to come. And then we have NSM, which is already selected by Germany. And hopefully, other will also be using NSM in the future. And submarines, I mentioned this earlier, somewhat impacted by COVID-19, but now it's picking up momentum again. And hopefully, Germany, Norway will then sign a contract in the near future for the new submarines. It's going to be very -- of very high interest to Kongsberg. Medium-caliber turret, we have already been now selected by U.S. Marine Corps for their vehicles. And hopefully, we are also now working with the big U.S. Army to see if they are able to and want medium-caliber turret as part of their vehicle platforms. And also MRO opportunities gives us further opportunities, both for in KAMS but also for the F-35, as I mentioned, for sustainment and motor depot level. This is actually a very important slide for us. I tried to state why because we are saying, staying ahead of the curve, and what do we mean by that? Well, first of all, Kongsberg and Kongsberg's ability to win on the international market is to have what we call product #1. And product #1 means that we must be -- must have the best product in the market. And we need to stay -- and since we are on -- what we say, we are in niches, we sell niche products, we need to continuously upgrade and innovate so that we stay ahead of the competitors. And these 3 pictures that's here are examples on how we do that. If you take NASAMS, it's continuously upgraded and updated. The customer wants longer range, and yes, we are able to plug in different types of weapons and missiles. And yes, the capability for drones and protection against drones is a demand. And yes, so we are able to put in elements to protect that as well. That's just an example. If you look at NSM, that is a different story, where we can put in more software logic to improve both the accuracy but also the distance or we can insert a new engine to really improve the distance and the reach out for the missile. And if you look at the Remote Weapon Station, it's built so that it's very modular. You can put in sensors, different type of sensors. And you can put in other logic like AI to be able to see and detect drones in order to protect different elements and objects. So here, we have the key strategic priorities. It's not changed much since we started this year in spite of the challenges and uncertainty created by COVID. Our potential is still, as we have said, NOK 100 billion over 10 years, and that's only NOK 10 billion annually. And it is actually a very realistic goal. Let me put in some examples of other strategic priorities we have put in. And that is the MRO, I already mentioned that, maintenance, repair and overhaul. We are going to be responsible for maintaining air systems in Norway and for instance, NH90 and P8 and in addition to F-35 and hopefully others that come up. In addition, space is -- that is not new to us. And -- but it's new in the sense that we also see a possibility with space in defense. And that is very attractive and also will fit into our business model. So we are exploring that opportunity, and that's something you will hear more about going forward. And as you have seen, U.S. is a very important market for us. And well, we are in a global -- we must be global, but at the same time, we must be local, with a strong local presence. And this must be balanced between our partnerships in U.S. and how much we are in U.S. working locally. And then as we said, we are in a growing situation, very positive. We need to increase our production facilities, we need to recruit more people, and we need to make sure that we deliver on the contracts we get. And I would also mention as key strategic priorities that the most important market for us is still Norway, that's our home market, where we can't put -- first of all, secure what Norway needs but at the same time create new opportunities to be put on to the international market. This slide makes me very proud. This shows some of the joint efforts in the broad Kongsberg context. I could start with the one on the left side, where we have the remote tower solutions. And in October, I mean we will open the new remote tower center in Bodø. This remote tower center will control up to 15 airports in Norway, and you then have the flight controllers operating in Bodø. And I also believe that, I mean, position is that most of the airports in Norway will actually be remotely controlled in the future. And we have also seen that this technology we have used in this program is of key interest to many countries. And we have then signed the first international contract in Spain. We're going to do the same on one specific airport in Spain. On the Vanguard, I believe Egil told how much we have done together using a civilian platform and combine it with naval and military capabilities. On this picture, you will see NSM located there together with HUGIN as to be put out on the water from the Vanguard. This is a concept, but I still think this is a concept that will be the future in different operations. It will lower the cost, and it's tailored -- it can be tailored to different applications. Well, some of you may remember this slide from our Capital Market Day last year. This was our ambition. And well, that means to realize opportunities valued at NOK 100 billion over the next 10 years. And going into this year, KDA was significantly well positioned. And then increased global uncertainty, increased protectionism and an ongoing pandemic, but also, it's a new normal and new opportunities. So the ambition expressed on this slide, this is still solid, this is still our target. Thank you.

Thank you, Eirik. Then we're back to our main studio here, and we have received several questions throughout the day. We are just about to gather all the presenters in -- both here in the studio and online, and we will begin the online Q&A session in about 1 minute. [Presentation]

Okay. Then we're back with the Q&A session. And I just want to make sure that our online -- the people who are online are hearing us. Eirik, can you hear us?

Yes, I hear very well.

Okay. Thank you. Then the first question goes to Geir Håøy. It's a question from [ Erik Løvstad ]. What does Kongsberg do to obtain the best synergy from the different companies in the group?

I think the business leaders today have given you some examples already. I think Egil mentioned the cooperation of the Autoship together with KDI. He mentioned the vessel inside. The same did Hege, which is a joint effort to deliver that type of product. I think Eirik also mentioned Vanguard, which is a joint project. Remote Tower is another joint project. But I would also like to add that we have what we call the technology advisory board. This is advisory board where we put our main technology leaders together frequently so that they are discussing the different technology platforms that we have and the ongoing initiatives that we have to take -- to utilize both the technology we have today but also what is the coming technology going forward. So in that sense, we try to coordinate ourselves of the opportunities and what's going on in the group overall.

Thank you. The next question is from Christopher Møllerløkken, Carnegie. It goes to Gyrid Ingerø, CFO. The ambition to have about NOK 30 million in revenues in 2022, is that based on organic development? Or does it include potential acquisitions in the future as well?

That's only organic revenue. No M&A is on top of that. So short and sweet.

Okay. Next question for Egil Haugsdal, President, Kongsberg Maritime. Can you confirm -- sorry, say you are growing your market share despite the market is weak. Does this mean that we can assume positive organic sales growth in the business?

Yes. It will be organic sales growth. And if the market improves, it will be even better than it is in the market we have today. And if you look at where we take the market share, we are very much focused on the aftermarket. And what we learned from the market is, yes, price is always important, but it's also the ability to support our customer when needed, how fast you can respond, how you can be close to wherever they need help. And by developing our systems to support our customers, we see that, that is improving our market share in the aftermarket also. In the newbuild market, it's a tough competition, but we have good solutions and good product, and we have a good reputation to support our customers. So yes, we believe that we are also gaining some market share there as well.

Thank you. And a follow-up question on that from David Barker, Bank of America. It goes to both our CFO as well as Egil Haugsdal. When you have your targets, your sales targets, are you still -- are you assuming basically no volume growth and recovery in the maritime newbuild and aftermarkets?

We have a margin guidance on our targets today, but we also have this NOK 30 billion target in 2022 that you are referring to. And in terms of that, to be honest, most of that growth will come from our defense area. But I think it's also fair to give Egil the chance to comment a bit on that.

Yes. I hope to see some growth also from our side. And as I explained earlier today, we are quite diversified, and that is a good thing. So we are into different markets, and newbuild market is one of the key growing opportunities. And I think we will see that as the market is getting more normal, the support on the aftersales market, to support operating ship, that could change from 1 month to the next. When it's come to newbuild market, it's a lag. It's not so that we have the revenue the same as year necessary as the booking of new ships are happening. So that will be a slower development.

Thank you. Then a question for Hege Skryseth, President, Kongsberg Digital. Have you started delivering under the latest agreement with Shell yet?

Yes, we have. We have already delivered multiple assets that's deployed, and we are about to deliver more. So I -- as I mentioned in my presentation, the deployment time has gone down from a couple of months to now a week. So that's a very good sign.

Thank you. And then a question for Eirik Lie, Kongsberg Defence & Aerospace. As far as I can recall, you signed your first NASAMS contract more than 2 decades ago when most people were waiting to install Windows 95 on their computers. In your presentation, you mentioned that NASAMS is still the preferred air defense system. How can a system be relevant for such a long period?

Well, first of all, that's an excellent question because that's the -- part of our strategy is to have and to deliver #1 products in selected niches. So NASAMS is a typical example of that. And in order for us to keep our products to be #1 and in front of competitors, we need to constantly innovate and upgrade and do enhancements to the systems. And then we avoid to end up with what we can call sunset products. And NASAMS is a good example of that. We are constantly -- we have credit and knew from the start when designing NASAMS that we needed an open architecture because we knew that new capabilities will be introduced in the air defense arena. And today, NASAMS is very different from what it used to be in the sense that we have added new capabilities, new sensors, more capable missile systems and also enhancements in the software. So now we have much longer range, we have anti-drone capabilities. And the situation and the awareness for the operators are definitely improved very much. So this is some of the reasons why we keep NASAMS still ahead of competitors and being able to adapt to the situation for the customers.

Thank you. And then a question for CFO, Gyrid Ingerø. You have large levels of prepayments on your balance sheet right now. How should we think about phasing -- the phasing of these unwinding in the next few years?

Yes. And just to sum up, at the end of the first quarter, we had approximately NOK 3 billion in prepayments from our customers. That has been reduced to NOK 2.5 billion at the end of the third quarter, and that's how it fluctuates. We get prepayments from the customers, and then we start to produce on the contracts, and then prepayment go down, and then we actually deliver on the different contracts. And to elaborate a little on what will happen in the next year, so of course, we will sign up new contracts, but there will be negotiations all the time on what kind of prepayment we will get. But typically -- and this is not only for the defense area. It's also for the maritime area and sometimes also for the digital area. We get then prepayments, and then we work on the contracts. So we have to follow what kind of contracts we typically get, and then it's easier to calculate. It's hard to say exactly when the different contracts will be signed. So...

Thank you. And then a question to, I guess, both our CEO as well as Egil Haugsdal in Kongsberg Maritime. Are there any areas you need to expand through M&A to meet the green growth trends? For example, scrubbers, ballast waters, et cetera.

I think it's -- first and foremost, I think we already have technologies that are able to take us into the green transition. I think it's already presented here today, several examples on that. There will always be some -- we will always be looking for opportunities. I would say that ballast and scrubber is maybe not a DNA -- into our DNA. I would more focus on the energy transition. I think we're going to see different solutions coming online on -- for different segments. And I think that suits Kongsberg and Kongsberg Maritime quite well because our expertise is in how to control and do the energy management. So we will see. I think it's both possible to do it organically. But of course, if the right opportunity, M&A opportunity comes, we will definitely consider that as well. Maybe Egil can say a few words more.

Yes. I always agree with my boss. But at the same time, we have -- we just -- to fill in here, we have our own green strategy that we haven't shared in detail here, but we have identified all the area where we can make a difference. And we are very ready to invest in this because it's good for the environment, and we also think it's good for business to be -- have the relevant and good solutions and to really make a difference here. So if there is any area of this that could be strengthened by making acquisition, of course, it will always be considered, but I don't think you should expect to see any big moves. It's more to add on technology to what we already have on that front.

And a follow-up question, Egil. On the green side, you have talked a lot about autonomous vessels the last few years. Can you give some color on what we can expect with regards to contract value as well as what are Kongsberg delivering into these kind of vessels?

Yes. First of all, what really is the business -- the most interesting business coming out of this might not be the full autonomy ships. It will be older technology and older solutions that could be used in large volumes on existing and, let's say, more normal vessels. Our revenue in a ship, it's hard to give you one number because it is -- we don't make the ship. We just provide a technology to it. But if I should make a guess, NOK 100 million, could be NOK 200 million, it could be less, but -- it's significant. But the real money is in all the technology that is building up autonomy, which is relevant for so many other application tools.