Kongsberg Gruppen ASA

OSE:KOG

Earnings Call Transcript 2021-Q4

[Jan Erik Julseth Hoff, Group Vice President of Investor Relations]

Good morning, and welcome to the presentation of Kongsberg's Preliminary Annual Accounts for 2021 and Fourth Quarter Results. Together with me today, I have President and CEO, Geir Haoy, as well as Executive Vice President and CFO, Gyrid Skalleberg Ingero. The presentation today will be given only through webcast and you can submit questions through the webcast frame on your screen. Please also include your name in the question.And with that, I'll leave the floor to Geir Haoy.

[Geir Haoy, President & CEO]

Thank you, Jan Erik. Good morning, and welcome to everyone. Thank you for joining us today for the presentation of the fourth quarter and preliminary full year results for 2021, which I must say I'm very satisfied with. And as you will see today, once again, our results show that we are succeeding in our efforts. We continue to capture new orders, deliver profitable projects and build our backlog to secure the future. So all in all, the financials are solid and the outlook is promising. This is, of course, thanks to our excellent teams working closely together with our partners and customers, laying a strong foundation going forward.So let's have a look at some of the highlights and results for the year and the last quarter. 2021 was categorized by strong operational performance, continued capital discipline, strong earnings, and all-time high order backlog of NOK 50 billion. We still experience some operational impact from the pandemic, but overall, we are very pleased that we have adapted well and maintained business almost as normal.Our cash flow is extremely strong. We have continued to scale up our business. We have on-boarded several hundreds of new colleagues as well as expanded our footprint. So I'm very pleased and I appreciate the confidence that our customers have shown through 2021, leading to a very strong order intake of NOK 41 billion.In maritime and defense, we have seen improvement in almost every KPI and while our digital business is in an investment phase, we have also seen increased momentum in multiple areas here.We have secured contracts and opportunities in all business areas of both significant size and also strategic importance. This spanning from contracts for combat systems, for submarines to Norway and Germany, missile contracts for both NSM and JSM, F-35 fighter jet deliveries, 2 major orders for wind farm installation vessels and AUVs, as well as contract related to our space technology and our digital offering.And then, of course, there are what I like to call our bread and butter contracts, which don't necessarily make the headlines, but are extremely essential to our solid order intake. So with these results, I'm also pleased that Board has proposed to return a total dividends of NOK 15.3 per share in addition to up to NOK 500 million in share buyback. Gyrid, she will come back with more details on this.Also, through the year, we have promoted several green initiatives. We have continued to work with our suppliers regarding our climate footprint. We have received top industry ESG ratings from Sustainalytics, which is a recognition of both the work we are doing in reducing our own climate footprint and our transparency in these matters. And we have launched the world's first full-scale 0 emission drivetrain, which is powered by hydrogen fuel cells and designed for ferries among others. This investment and breakthrough demonstrate that Kongsberg is determined to play a key role in green maritime transformation.Now let's have a look at the fourth quarter, which I will characterize as a very solid and final quarter of the year. In maritime, we see increased activities from both the aftermarket and the new build market, while in defense we see business areas highest ever order intake driven by contracts for both Joint Strike Missiles and Naval Strike Missiles. And in digital, we see we have an increased investment rolled out now 2 new digital twins and signed new contracts, both for fleet and single on the vessel inside.So I can give you some more details on the contracts that we have signed. We have signed several contracts in the quarter. And I just mentioned a few of them here today. Starting with the remote weapon systems to the U.S. Marine Corps. This is a part of the marine air defense integrator system program with a potential value of almost USD 100 million, and which follows a contract from September 2020 contract award from U.S. Marine Corps.Then we have 2 contracts for delivery to the Norwegian Navy. This is delivery of a new batch of Naval Strike Missiles to the Norwegian Navy frigates and corvettes. And we have the life extension of the existing inventory of NSM. This has a value of NOK 1.4 billion with the Norwegian Defence Materiel Agency.Then we have the Joint Strike Missiles to the Norway -- Norway's fleet of F-35, which has a value of almost NOK 4 billion. This is signed with the Norwegian Defense Material Agency. And here, I'd like to mention that the partnership between Kongsberg, the Norwegian armed forces and the Norwegian defense research establishment in the definition development and test of the JSM has been a very critical factor in developing a missile with such advanced capabilities.Looking at our subsea business, Ocean Infinity has decided to expand their fleet, robotic fleet, with additional 6 HUGIN autonomous underwater vehicles. These vehicles are equipped with our latest geophysical sensor suite and also the latest battery technology.We have also signed a digital twin contract with The Metals Company. And here KDI will develop the digital twin of deep-sea mining operating environment. We will adapt and connect our proven digital technology with The Metal Company's [ nodal ] collection and environmental monitoring data system to enable a safe and more sustainable deep-sea operation, collecting marine minerals.So to give you some more details on our maritime business, which continue to develop in a very positive direction, I must say. The aftermarket, which is a driver and a very good indicator of the activity level in a segment, which is extremely important to KM is back on a level we have not seen before the pandemic hit. Also, there are positive sentiments within the new build segment.Although we expect that the total number of contracted vessel to go down in 2022, we believe the mix of contract tonnage will be beneficial to us. This is because we have a very strong position in the -- especially in the high-end vessel markets and this market we expect to develop positively in 2022.One example with our broad portfolio and technology scope, we have taken a leading role in the offshore wind market. This market demands deep domain knowledge, full picture capability and high-end performance, all of which are very core to our business. We are also highly focused, and investing in opportunities within the transfer to a more sustainable maritime industry. We are experiencing growing demand for sustainable solutions and our ambition is to be the preferred partner for environmentally-friendly vessel solutions.So some more business updates on the transport defense and aerospace. For the defense, I have already mentioned that the missile drive the order intake in the fourth quarter. And as you can see, it is a major part of the order intake pie and for the full year and this, of course, will influence also the revenues in the years to come. However, we have a lot going on beside the securing missile contracts. Looking at our MRO business, it continues to expand. We have a contract now with Leonardo for the maintenance service for the Norwegian fleet of search and rescue helicopters.Kongsberg has also become the first authorized maintenance center for Bell helicopters in Norway. And we are also the first global F-16 Falcon MRO depot and are uniquely positioned to capture opportunities as the Norwegian -- Norway is overturning its F-16 fleet. Recently it also announced that Romania is acquiring 32 of the F-16 fighter jets and we are selected as the strategic partner in this process.Throughout 2021, KDI have been ramping up their capacity and this will also continue in 2022. And as a part of this, we are establishing an engineer hub at Rygge, and I think this is a very important initiative. As we already are present at Rygge with our F-35 engine depot and this new engineering hub, we'll add synergies and serve as an attractive location with regards to recruitment in the Greater Oslo region.Furthermore, we are also continuing to advance our space efforts with the now 2 late -- 2 satellite launches, the Inmarsat-6, the world's largest and most technologically advanced commercial communications satellite. And I will spare you for the details, but I just mentioned that it's 150 kilo of highly advanced Kongsberg Electronics installed aboard the Inmarsat-6.Also Europe's Galileo satellite #27 and #28 launched -- is launched with Kongsberg technology on board. Galileo is currently the world's most precise satellite navigation system serving more than 2 billion users around the globe. In addition to our other space achievements throughout the year, we have secured 2 contracts with ArianeGroup to deliver technology to Europe's new Ariane 6 launcher managed and funded by the European Space Agency.So to the Kongsberg Digital, in addition to executing the rollout of both our dynamic digital twin, Kognitwin and Vessel Insight, we are increasing our activity related to development of the application portfolio. We are a leading player within the digital segments that we have ventured into with the opportunities that we see ahead both within maritime and energy. We will continue to increase our capacity going forward.I already mentioned the contract we secured with The Metals Company and we have also added other important agreements to this list. 1 is the REM Offshore and in addition to the quite extensive Kongsberg maritime scope, we have a rollout of the Vessel Insight to collect vital data from their 3 new offshore wind vessels, which is under construction.Then I would like to mention Aker BP collaboration agreement for the SiteCom Enterprise Cloud. Here we're going to provide an enterprise-scale solution for real-time data aggregation and visualization. This will deliver as a software as a service, allowing Aker BP to scale according to their operational requirements. Then we have entered into a digital twin associated partnership with the global energy software company, FutureOn and we have taken a strategic owner position of approximately 11% in FutureOn. And this partnership will bring together the 2 platform support -- platforms supporting a comprehensive approach for conceptual design, planning, building and operating of the digital twins for energy project.We also see that the demand for traditional maritime and cloud-based training solution is picking up. And I think this is demonstrated by our contract with the Northeast Maritime Institute to deliver transformative cloud-based simulation for global maritime training and also the Heerema Marine Contracts, which has renewed its long-term system support program.And by that, I will leave the floor to our CFO, Gyrid and she will take us through the financials, the great financials.

[Gyrid Skalleberg Ingero]

The great financials. Thank you for listening in. Good morning and thank you for listening into our Q4 presentation. To financially summarize the year, we have grown the business. Maybe I should change the slide as well. We -- 3 solid operational performance. We have delivered a solid cash conversion through -- that supports the record high dividend proposed from the Board. And finally, we are entering 2022 with a record high order backlog of close the NOK 50 billion, supporting continued strong operations in years to come.In addition to securing new orders and navigate the COVID situation, the main focus has been to continue scaling our operation in all the 3 business areas. This is particularly visible in the figures from the digital where we have invested substantially in capacity compared to the current size of the business to be able to deliver on both our current rollout plan and compress as well as growing demand from the market.Our 2025 ambition for KDI is NOK 2.8 billion in revenue and to get there, scaling is definitely the key. So we continue to build order backlog. Look at this order backlog uplift. The main driver in Q4 are the 3 missile contracts as Geir mentioned we have signed in Norway amounting for up to more than NOK 5 billion in total. Contracts like this are typically delivered over many years and will secure future deliveries from defense. However, there was a strong growth on 25% in order intake from maritime this quarter compared to last year.Even though maritime had a book-to-bill slightly under 1 in Q4, the absolute order intake was among the strongest quarters we have ever had with regards to volume size and confirms the positive trend we have seen in 2021. There was growth in both new sales and in aftermarket. The large backlog gives Kongsberg strong comfort in the short to medium term compared to what we presented 1 year ago. We do have some NOK 4.5 billion worth of orders more that are to be delivered over the next 2 years.In addition to what is secured in the backlog, we have the aftermarket business in maritime where most of the orders are not reflected in the backlog. In 2021, global customer support delivered revenue of NOK 7.8 billion. As you can see from the chart here, NOK 20 billion are already up for deliveries this year.Kongsberg had another year with growth. 7% in 2021. We have growth in all business areas during last year, but I have to say that I'm especially satisfied that Kongsberg Maritime managed to add some NOK 550 million revenues in the last quarter in 2021. This shows that the maritime market have turned more positive and that we are continuing to deliver on our strong positions as well as building new ones.EBITDA, looking at the EBITDA over the past 3 years, the healthy development consists of some main drivers. From 2019, the value capture program was the main driver, while the development from 2020 to 2021 was the combination of margin uplift, COVID savings and scale of the business.Looking into the development in margins from the last year from 2021 to 2022, the combination of favorable product mix and execution combined with scale and growth have been the key drivers. With NOK 1.156 billion in EBITDA and a 14.3% margin in Q4, Kongsberg ended 2021 with NOK 4.1 billion in EBITDA for the year with a margin of 14.9%. 26% increased EBITDA from a 7% revenue growth shows profitable growth with several large projects in the pipeline, the focus for 2022 will be to scale the organization for further growth.The world now seems to gradually normalize and we expect more physical presence both at our own offices, but also together with customers and partners. This means both more traveling and less use of home office, meaning that we do expect some normalizing of the cost level. That said, we have full focus on utilizing the experience we have gained over the past years and try to keep the positive COVID effects, including the remote way of work.Looking back at Q4. With double-digit growth in orders, revenue and EBITDA gives a promising start for 2022. Order intake in Q4 continued at a high-level NOK 1.1 billion above last year. Defense has started on our missiles journey and continues with order intake of NOK 7.5 billion, while maritime grows 25% on order intake and recurring revenue in digital starting to get traction from a demanding market.We have now 8 active digital twins serving approximately 1,700 users on an increasing trend. Revenues in Q4 with 13% revenue growth, driven by growth in all divisions in all business areas except from business in defense as they have high CROWS deliveries in Q4 last year. EBITDA in Q4 with an increase of 22% or NOK 208 million above last year with growth in both maritime and defense. Higher revenue and increased gross margin, partly offset by higher OpEx due to activity this quarter and from separation of Kongsberg Digital.Cash flow, something happened. Let me come back to the cash flow. The cash flow in 2021 shows a strong cash conversion from operations. The working capital position improved towards the end year, but it is important to notice that parts of this improvement is related to temporary effects. The level of payments from clients in defense was high towards the end of the year and as most of you know, part of this is also counted for as payments for work to be done in the future.In Kongsberg Maritime, the level of accounts payable was extraordinary high by some NOK 300 million that are about to normalize as we speak. We have NOK 8.1 billion in cash at the end of this quarter, out of which NOK 2.5 billion in payments from customers for work to be done in the future.Our share buyback program from August was concluded yesterday. By the end of the year, we have bought back approximately 600,000 shares for a total amount of NOK 153 million.Here you can see the working capital development chart for Kongsberg Maritime and Kongsberg Defense clearly showing the effect of the high level of accounts payables in maritime as well as the increase in milestone payments from defense. It also worth saying that focus on working capital efficiency has been high during COVID and we run separate initiatives where we include working capital efficiency programs.Some comments about investing this time. From maritime, the 3 main priorities within R&D has been development of leading standalone products, harmonization and value through digital autonomy. When it comes to sustainability, reduced energy consumption and increased efficiency are the main cost spending areas.Defense R&D cost in 2021 is a combination of strategic product advancements, as well as enhancing capabilities as part of our product maintenance activities. In addition to report R&D cost, a large part of product development is financed through external financing funding. The development of missiles, such as the Naval and the Joint Strike Missiles are such examples where the majority of the R&D funding has come through development contracts funded by a customer.Digital invests heavily in further growth and R&D spend in 2021 makes up 37% of the revenue. The main areas of product development within new growth areas, such as digital twins and Vessel Insight, thus also within maritime simulation with further development of cloud-based simulators. A major share of property, plant and equipment CapEx is related to production, machinery, and IT modernization.Kongsberg also invests constantly in production facilities. In 2021, a new production facility related to new space facility in Kongsberg started. In Q4 2022, we will look into investments in a new missile factory to prepare for missile delivery volume that we expect to grow significantly. Defense has a strong order backlog and market position for both Naval and Joint Strike Missile. In addition, defense plans to expand its current location at Rygge.As touched upon by Geir in the beginning of the presentation, our Board has decided to propose a record-high dividend through the annual general meeting. The proposal is NOK 15.3 per share, totaling NOK 2.7 billion in addition to another share buyback program up to NOK 500 million. This gives a total remuneration of some NOK 18.1 per share at the moment.In our dividend policy, we state that we aim to have stable growing dividends year-on-year. NOK 3.3 per share are considered under that statement and additional NOK 12 per share are proposed on basis of our current very solid balance sheet and strong cash position. The Board finds the share buyback in combination with dividends a favorable way of benefiting our shareholders and have therefore decided to propose another buyback program of shares for deletion for the Annual General Meeting in May.This slide speaks for itself. The increased EBIT combined with the focus on capital efficiency has increased the return on capital employed with 10% over the last year from 20.8% to 32.7% this year. Be aware that we measure average capital employed calculated on a year-end basis with the low capital employed at the end of this year, the return on capital employed would have been 37.3%.A few comments also on Kongsberg Maritime. NOK 4.8 billion order intake in Q4 and close to NOK 18 billion for the year corresponding to a book-to-bill of 1.09, increased Kongsberg Maritime's backlog to NOK 13 billion unlisted, which is the highest level ever for this business area. Although this approximately NOK 8.5 billion are for the delivery for the current year and with markets gradually improving and aftermarket growing, the prospects for growth are back. After a strong Q4 with NOK 4.9 billion in revenues, up some NOK 550 million and 13% growth from Q4 last year. Kongsberg Maritime managed to grow the business in 2021 as well.The growth is mainly driven by the aftermarket, but from the ordering we have seen especially the past half year in the new building market. We also believe new sales will contribute more going forward. This is, of course, good for the current results, but also remember that new sales today falls aftermarket for the next 20 to 30 years.If you look at the graph to the right, you will see the EBITDA margin development from 2017 until 2021. And as you clearly see the proof of our successful integration and the efficiency improvement from the break point in 2019. Remember that during the period, the markets have also been extremely challenging so the improvement is most driven by internal measures. At 12% EBITDA margin in 2021 shows that we are on track for delivering on our 2022 ambitions.When acquiring Rolls-Royce Commercial Marine back in 2019, the first main focus was to streamline the organization and focus on profit. Another important focus has been to utilize the complementary product portfolio as well as the company's strong position to generate sales synergies or cross-sales.Cross sales are about selling extra compared to what we would have done as 2 separate companies. Kongsberg Maritime has become a major system integrator and this can be seen as a proof of this. Combined in 2020 and 2021, we managed to realize cross-sales of more than NOK 1.8 billion from the new building market. In addition, we do also have cross-sales from the aftermarket increasing the total figures to about NOK 2 billion.We have managed to take out sales synergies both from Commercial Marine and from Kongsberg Maritime as well as the opposite as you can see from the pie chart to the right, all KM divisions selling systems and equipment into the vessel market, have benefit from this.In the middle, you see that we are benefiting from a wide range of vessel segments. Becoming a large system integrator have also strongly helped our position as a leading player within our parts of the existing and relatively new offshore wind segment. Going forward, we will not report these figures separately since the combined maritime business now is fully integrated unit, but this will be an important driver also going forward.Some comments about Kongsberg Defense and Aerospace. Defense has really been through a step change on the most KPIs over the past years. Order intake stayed high also in Q4, driven by missile orders from Norway, leading to a record high NOK 22.2 billion order intake for the year and defense then enters 2022 with a NOK 35.6 billion order backlog. NOK 10.9 billion of this backlog are to be delivered already in 2022, which already has secured growth.Defense passing NOK 10 billion in revenue for the first time with a growth of 18.5%. With the order backlog in place already, revenue growth for 2022, as I said, already secured. Defense has also been through some travel with regards to profitability. The margin levels we see today were unthinkable only a few years ago, but it's important to remember that we are currently delivering a very favorable product mix that will vary over time. That said, the 16% margin target we set for 2022, 2 years ago, will face a solid beat over the cycle margins like we have seen in 2020 and 2021 are probably in the high end, but we aim for solid profitability in defense going forward and the first half of 2022 we will most likely see levels in line with the first half last year.And then a new slide for you, revenue by region. Defense passed NOK 10 billion in revenue last year. 83% of the revenue from this was outside Norway. Here we have provided you with the geographical split. North America reflects our solid partnership with Raytheon on air defense and our production line in Johnstown for remote weapons stations.I also want to bring your attention to Australia where we, at the end of Q4, was awarded NOK 430 million contract to deliver digitalization solutions for new artilery. This award is another confirmation that we are meeting Australian requirements and needs. First, we were awarded an air defense contract in 2019 and now we take a position in the communication area. We will continue to pursue more opportunities in Australia and projects coming up have a perfect fit to Kongsberg. Over the last years, we have been building up our own organization in Australia and now we have 20 employees on ground there.And last, but not at least, some comments on the Kongsberg Digital. Kongsberg has high ambition for digital and digital current business plan aims as I said for a revenue of NOK 2.8 billion in 2025. The growth from the current revenue level of NOK 845 million will mainly come from the product areas Kognitwin and Vessel Insight with associated own and third-party applications.Significant investments are currently being made to roll out new solutions and applications with substantial scaling potential. This has also led to digital increasing the number of employees by more than 25% only in 2021. This scale-up is a key to succeed in both developing and rolling out the platforms and applications and are seen as necessary investment to achieve our ambitions for Kongsberg Digital. This is also the main reason for the negative EBITDA level in 2021 and the reason that we expect to continue into 2022 as well.The current most important KPI we follow up in digital is amount of recurring revenue. The KPI has constantly improved throughout 2021 and in Q4, 42% of the revenue were categorized as recurring. In 2022, we aim to improve this to 50% on top of what we also expect a growth in the absolute revenues. This will be driven by increased number of installations in use as well as we have plans on adapting a SaaS business model on more of the current business like for example SiteCom where the transition started last year. Maritime simulation has been an area struggling during the pandemic, but especially in the second half of this year we have seen solid improvements in order intake also here.And then since it's the year-end, we also have 2 main associated companies in Kongsberg. If you start with KSAT, the book-to-bill above 1 for the year and solid order backlog of NOK 3.6 billion. This is on top of the order backlog that Kongsberg has. This equals 3x the revenue for 2021, 19% growth year-on-year and continued strong margin throughout somewhat lower than in 2020. Normal EBITDA growth of approximately NOK 50 million, but be aware that we reinvest heavily in KSAT.Patria had a good year last year, book-to-bill above 1 for the year supporting further growth. Patria increased revenue with EUR 14 million this time and increased EBITDA with EUR 19 million, which gives a solid increase in the EBITDA margin. Largest contributors to the result in Patria was Millog with 7% growth and increased EBITDA margin. But we also have to mention Nammo. Nammo is 50% owned by Patria and they have a very good year last year. They delivered 22% revenue growth and increased EBITDA margin. That result is accounted for as associated company, according to the equity method in the Patria financial results. So we don't see it in the numbers that I have on the slide here.So with that, some comments on the outlook for Kongsberg for 2022. So then I give the word back to Geir.

[Geir Haoy, President & CEO]

Thank you, Gyrid. Again, I think the financial just presented by Gyrid supports my initial statement. At Kongsberg, we are performing excellent across the company and the business areas and function both through the year, but also through the quarter. And this means that we have a solid foundation entering into 2022 for capturing new opportunities to have sustainable growth going forward.For the Group, we increased our already solid order backlog with NOK 13.6 billion and to almost NOK 50 billion, and out of this, almost NOK 20 billion will be delivered for this year.As I have mentioned in the previous quarters, we expect relevant markets to develop positively going forward. We anticipate that challenges in the supply chain and other uncertainties linked to the pandemic may persist, but so does our confidence and our ability to handle such situation.In maritime, we have experienced challenging market conditions throughout the last years and some of this will continue, but our diversified exposure and extensive portfolio has proven beneficial and I think it will continue to do so as the activity will -- in the maritime segment will steadily returning, which, then, I believe I'm confident will ensure both more contracts, but also larger contracts.In defense, operation has been maintained at almost normal level during the year with a record-high order intake and an order reserve of NOK 36 billion, of which we expect that NOK 11 billion will be delivered during 2022. Our current project mix is an important driver for the profitability and we expect that the project mix -- the favorable project mix will also continue this year.In digital, the demand for our solution is increasing and in 2022, we will continue to significantly invest in the development and the rollout of the -- of our digital system, increasing our revenue -- recurring revenue throughout the year, in line with our high ambition for the business area.So to sum up, I'm very proud of what the company and my skilled colleagues have achieved throughout the quarter and also the entire year. The Group has repeatedly through the quarters delivered strong results and profitable growth. So I have a -- let's say, I have a optimistic view of the road ahead and I expect that our positive journey will continue going forward.So by that, thank you for listening in and I will invite you to join me on the Q&A session.

[Jan Erik Julseth Hoff, Group Vice President of Investor Relations]

Okay. We do have some questions from the viewers. First 2 questions from Mr. Ben Heelan from Bank of America. Could you elaborate a little bit more on the order outlook in 2022 for both Kongsberg Maritime and Defense?

[Geir Haoy, President & CEO]

I think we are, as I say quite positive, looking quite positively on the order or the contract opportunities going forward. The defense side, I think we are in very good positions for all our core areas. So again this is really varied throughout the quarters. These defense contracts are large and difficult to say exactly when they will come in.For the maritime area, as I mentioned, I believe that the outlook is quite positive even though we see that the number of ships will probably go down. That is the forecast. But we believe that it will be a favorable, let's say, type of vessel that will be contracted in 2022 which will be beneficial for Kongsberg. We see that there is a type of vessel, which has a high-end spec and I think that suits Kongsberg quite well.When it comes to digital, we are in a very positive -- I would say a positive position. We are increasing our rollout of the digital twin. We have the Shell agreement, we have now connected also to other customers throughout 2021. So we aim of course to continue to capture new clients for the digital twin.And then for the Vessel Insight, I think we will see also that will increase both for single vessel, but just with the potential we have today, there is almost 3,000 vessels with owners that we already have contracted Vessel Insight. So, I'm optimistic of the order intake for the rest of 2022.

[Gyrid Skalleberg Ingero]

And as we both mentioned as well, it looks very promising for the missile area and also for the offshore wind in maritime area.

[Jan Erik Julseth Hoff, Group Vice President of Investor Relations]

And a follow-on on that -- on the maritime order intake from Hans-Erik Jacobsen from Nordea. With regards to the high-end segments that you mentioned, could you exemplify a little bit on which high -- which kind of high-end segments that you expect growth going forward?

[Geir Haoy, President & CEO]

Yes. I mentioned the offshore wind segment. I think that is a very interesting area for Kongsberg Maritime. We have, I would say, a portfolio and a scope of supply, which fits very well this type of vessel. And then you have the LNG. Of course, we have still great expectation for that coming in 2022 and then it will be also, I would say the type of infrastructure vessels of the type of high-end vessels, which we have some expectation too. We will see, it's difficult to forecast more precise, but I still believe even though, as you said the forecast for tonnage is going down, I still believe that it will be a more beneficial market for Kongsberg's portfolio in 2022.

[Jan Erik Julseth Hoff, Group Vice President of Investor Relations]

And then I'll combine a question from Ben Heelan, Bank of America and [ Kate Swapnil ] With regards to the review you're doing on KDI, could you give an update on that and if it ends up to be an IPO, can you say something about the timeline on that?

[Geir Haoy, President & CEO]

I can take, again we are in -- I think we are in a leading position when it comes to the digital twin segment. We have now 8 digital twins. That is up and running. Their number of users are increasing every day. I think we are in several proof of concept with clients. We have some proof of concept, which was turned over to being full digital twin contracts with other energy companies. And again the Vessel Insight market is maturing. I would say, from the client side. And I have great expectation that we will see increase in the -- in the number of vessel and also that we can capitalize on the positions that we have taken with the number of ship owners so far. Maybe some comments on the IPO?

[Gyrid Skalleberg Ingero]

And then, in terms of the timeline as you asked, we are making KDI IPO ready. And as I said, we have spent OpEx on that separation. So we are constantly having all option open, actually, both on partnering and also on IPO process.

[Jan Erik Julseth Hoff, Group Vice President of Investor Relations]

And then a couple of questions from Kenneth Sivertsen, Pareto. Around the current cost creep or the cost inflation, could you share some thoughts on potential margin impact in 2022 for the business areas?

[Gyrid Skalleberg Ingero]

I think we have -- that we have been calculating a lot on because we try to calculate on the COVID effect on everything. So just to give you 1 kind of number on that, we -- last year we traveled for about NOK 200 million lower -- we have the NOK 200 million lower travel cost than we had in 2019. But of course, we are not coming back to the normal because we are working more and more remote. But I wish I could have the answer on exactly what kind of OpEx that will return back after COVID. But, it's just to monitor. So the margin effect will be -- don't have accurate answer on that actually.

[Geir Haoy, President & CEO]

But maybe just add that, yes, of course, we registered the price increase and of course, that needs to be reflected in our pricing as well and that we are working every day to cut our cost side and to compensate for contract already concluded.

[Jan Erik Julseth Hoff, Group Vice President of Investor Relations]

And a second question from Mr. Sivertsen. Around Kongsberg Maritime lifecycle sales, could you remind us a little bit around the dynamics in -- that works around that. And would it be a fair assumption for 2022 that growth in aftermarket would be in line in growth in installed base?

[Geir Haoy, President & CEO]

Yes, I think I said that. I'm quite optimistic about the aftermarket. I think fourth quarter is, let's say, a good indication of the activities that the activity is picking up in the aftermarket. I believe also that we will see -- at least we received more interest around the upgrades and maintenance on the installed base. So I believe that we will see a healthy aftermarket in 2022, which is a very important part of Kongsberg Maritime revenue stream, of course.

[Jan Erik Julseth Hoff, Group Vice President of Investor Relations]

And final question from Mr. Sivertsen around the dividends. Adjusting for the dividends, leverage ratio should be around 0, if we're removing the prepayments. This compared to a record high order backlog. Any reasons to keep the balance sheet in the low end of the leverage target and hence it being overcapitalized into 2022?

[Gyrid Skalleberg Ingero]

If you're looking into the last year with the last 12 months, we have paid out NOK 4 billion and now we are going to payout NOK 3.2 billion. So we are on our track. But we are moving step by step towards that leverage policy.

[Jan Erik Julseth Hoff, Group Vice President of Investor Relations]

Yes. And then a question from [ Jan Burke ] You delivered a very strong EBITDA margin. Is there room for further improvements and in what divisions, do you see potential to improve the margins further?

[Gyrid Skalleberg Ingero]

And we can say that we will have a Capital Markets Day, the 2nd of June and then we will come back with more guiding on the margins again. So we have the ambitions for 2022 standing out there with 14% margin for the whole company or for the whole group. We have beaten that for last year. But again, we have very strong margins in defense, but again in terms of maritime, which is still a large portion of the company, they have a way to go to reach their 13%.

[Jan Erik Julseth Hoff, Group Vice President of Investor Relations]

Thank you. That concludes the questions from the webcast.

[Geir Haoy, President & CEO]

Okay. So once again thank you for listening in on our presentations. Have a good day. Thank you.