Earnings Call: Q2 2020

Jul 15, 2020

Good morning, everyone, and welcome to the presentation of Kongsberg's results for the second quarter 2020. The results will be presented by our CEO and President, Geir Håøy, as well as Executive Vice President and Chief Financial Officer, Gyrid Skjaldberg Ingerø. Throughout the webcast, you will be able to ask questions, and all the questions will be answered after we have gone through the material. With that, I'll leave the floor to Geir Håøy. Yes, thank you, Jan Erik. Good morning and welcome, everyone on the call, and thank you for joining us today. As you know, COVID-19 is still very much an issue, and that's part of why we are doing this webcast. Here in Norway, we are fortunate that things seem to have become more normalized, allowing us to gradually return to office, of which I'm very glad, of course. But we know that this is not the case for all regions where Kongsberg operates. There is still high uncertainty on the way forward. Unfortunately, we do not know the answer to how the situation will develop. To handle some of the uncertainty, Kongsberg is preparing for different scenarios. As you have seen so far, we are able to adapt and to stay ahead of the curve. This has been a very special first half year, and I would like to use the opportunity to thank all my almost 11,000 colleagues for the way they have handled the situation and their impressive efforts during this ongoing crisis. Every one of them in every part of the business has been doing extraordinary work, and because of this, we have been able to run the business and combat the coronavirus so far in a good way. Let's not forget, Kongsberg, we did this—and let's not forget, we did this as a new Kongsberg after integrating almost 4,000 new colleagues from Commercial Marine and Kongsberg Aviation Maintenance Service. This makes me extremely proud to be part of the Kongsberg team. That said, Kongsberg does not operate on our own. Our partners, our customers have met the situation together with us, with great engagement and focus on finding solutions. We have also, together with our industry partners, been in close dialogue with the governments in several countries, actively promoting relevant projects and other initiatives which can be accelerated and thereby mitigate some of the economic effects of COVID-19. One example, and here I would like to thank the Norwegian government for the funding of a new research vessel to the Norwegian Institute of Marine Research. This is an important project for the maritime cluster, which is badly affected by the situation. Of course, we are hoping for more of the same. That project, which is ready to be put into execution mode, is accelerated for value creation, generate activity, build competence, and secure jobs. Gyrid will come back to the details here, but let me take some key numbers. The order intake of approximately $6 billion in the quarter, I'm extremely proud and happy to be able to report a book to bill of about one. This is mainly driven by the sensors and robotics, remote weapon stations, and our composite production at Arsenal. I think this underlines that Kongsberg is a diversified group, and even without many significant single orders, we are able to deliver a solid order intake in a challenging time and in a challenging market. When it comes to the revenue, as we saw in the first quarter, our defense business is steady, even under these circumstances. With a strong backlog, we are confident that we're going to see growth in KDA going forward. In our maritime business, the aftermarket has been positive the last quarters, but now we see somewhat slowdown in the aftermarket, which is affecting our revenues. Also, we see that certain upgrade projects, the scope is reduced, where customers are settling for must-have only. In general, I would say it's a more challenging maritime market. We deliver a strong quarter. We are delivering EBITDA at close to 13%, and particularly the margin in the defense area was especially high this quarter, especially due to good project execution in KDA, but I would also say, in general, very good operational performance across the entire group. Again, thanks to all our employees for outstanding work. We have continued to have high cost focus. We deliver on our cost initiatives. Some of these cost initiatives are short-term and due to the COVID-19 directly. We have stopped some of the less critical projects internally. We have done some temporary adjustment on the capacity and basically full stop in travel. We also have some more sustainable long-term savings. I think we're going to see change in the travel pattern going forward, and we definitely see also that there will be more remote support and services. I'm also pleased to see that we continue to deliver on the value capture program. Savings of the second quarter here was NOK 160 million. It takes us to year-to-date; we have now delivered NOK 295 million. I'm therefore very confident that we will at least deliver, according to what we have communicated earlier, an annual cost reduction of NOK 500 million. We have also signed some very important strategic agreements, the MOU that we signed with Boeing in the second quarter for the maintenance of the P-8, and we have also signed a teaming agreement with Patria for delivery of the turret motor solutions for future US Army motor programs. We have also done two acquisitions. These are smaller acquisitions, however, not less strategically important: one for KDI and one for KDA. I will come back to this later in the presentation. Last quarter, I said that we are expecting more COVID-19 effects on the vessels going forward, which is true for this quarter. I said Kongsberg is a diversified group with business areas operating in markets which are different from each other. Our defense business came into 2020 with a very strong position, and this is still the case. We have also signed some significant contracts in Q2 despite the current situation. The first one is the RVS to the Canadian Army. We have signed this with General Dynamics, where we're going to deliver the remote protector remote weapon stations at a value of NOK 500 million. We have signed our BIE systems have selected Kongsberg to deliver the MCT turret for the US Marine Corps ACV program. This is a down selection. That means that there is no more competition, but the contract is still not signed. There's a very strong order intake in the F-35 program. The composite components, we have signed a contract with Northrop Grumman for $800 million. We have also signed air-to-air missiles with Marvin Engineering for approximately $140 million. But it was not only the defense signing contracts. Kongsberg also in this quarter strengthened our digital position. KDI concluded a $250 million contract for delivery of the real-time data aggregation and visualization software. This is the largest single contract KDI has signed since the establishment in 2016. There were also many highlights for the maritime business, even in a challenging period. I will here give a special credit to KM, the new KM, for successfully realizing multiple cross-sales opportunities. We have multiple cross-sales in the LNG sector, LNG market, in the shuttle tanker area. We have also had success with cross-sales in the subsea area, where we have sold one particular large system to one good customer. We have signed a Hugin contract, and we also have a significant MMO contract for Heidrun, where we're going to do an upgrade of the fire and gas systems there, approximately $100 million. With the risk of repeating myself, I must say that I'm very impressed with our performance this quarter. Our customers, our partners, and not least my colleagues have demonstrated great adaptability during the period. I think the Q2 shows that we have so far been successful in carrying out our task and dealing with the challenges related to the COVID-19 outbreak. For the maritime business area, despite challenging market and restrictions related to COVID-19, the maritime business area delivered good financial results. With offset by multiple cost initiatives and solid operation, we deliver an EBITDA of $267 million and an almost 8% EBITDA. I think this is better than what we anticipated when we entered into the second quarter. But here we are, of course, monitoring the development in the new building and aftermarket closely. For the digital business area, we are continuing to gain momentum in the energy area, and where we also then signed our largest contract ever for the digital business. For the Dynamic Digital Twin, Cognit Twin, so-called project that we delivered to Shane Nyhamna, the number of user licenses has gone five times from 50 user licenses to 250 user licenses in the quarter. I think that proves that our solution creates value for our customer. On the positive side, we see that our digital solution can provide our clients with significant savings. On the other hand, we see that some have decided to set everything on hold due to the current oil price. KDI have also concluded a bolt-on acquisition and have acquired a coach solution, and this is to broaden our digital portfolio related to the connected vessels. I have already talked about the contract we have signed within the defense area, but I will underline that they are strategically important for us and represent a significant potential going forward. We have also concluded the acquisition of Patria Helicopters in Barbados, and this is to consolidate the helicopter MRO business in KDA and COMS. By this, we can now offer a one-stop MRO support to the NH90 for the Norwegian Army and Air Force. I'm satisfied to see the organization managed to deliver such good results despite the situation. I think it shows the strength in our organization. Although we are maneuvering some rough waters for parts of the business, other parts are doing quite well. Due to the COVID-19 situation, we unfortunately had to temporarily lay off some of our competent colleagues, but lately we have managed to recall a significant number, and for KDA, all employees previously laid off are now back in operation. We are, of course, working every day to continue this trend. We have also restarted our recruiting campaign, which we launched at the end of last year, and this is to continue our planned ramp-up and to be able to deliver on our defense backlog. We are now especially searching for about 100 software developers or engineers among others. I mentioned the acquisitions, and I guess contrary to what many would do during a situation such as the COVID-19 has created, Kongsberg acquired two companies in the quarter, one for our digital business and one for our defense area. Both acquisitions are strategic moves and in line with our ambition to strengthen and expand our digital front-runner position in our core market and also our position within maintenance, repair, and overhaul in the defense segment. The Coast Solution is a software-as-a-service company providing a commercial shipping fleet with an entry-level vessel performance software solution. This allows users to increase fleet performance by reducing consumption of fuel and other consumables, saving cost and time on the operation of their ships. The Coast Coach Solution is complementary to the KDI's Vessel Insight product range, targeting the low-mid-end market, while the current Vessel Insight targets the upper-mid to the high-end market. For the Patria Helicopter acquisition, Kongsberg has systematically taken steps to increase our MRO ability and competence within aviation platforms. With the minority share acquisition of Patria back in 2016, followed by the acquisition of AIM in 2019, which is today known as Kongsberg Aviation Maintenance Service (KAMS), our MRO competence has increased substantially. This is leading to signing of strategically important agreements with the Norwegian Air Force and continue to strongly contribute to support their operational needs and also increase their combat readiness. Since we established our presence in Sparrefors North in Norway last year, we have drawn upon the capability of Patria Helicopters, especially their competence with NH90 helicopters. Patria Helicopters has now been renamed to Kongsberg Aviation Maintenance Services (Bardefoss), and inner Troms and Bardefoss is a key hub for the Norwegian Air Defense Helicopter Operation. It's a great pleasure for me to welcome even more resourceful, competent colleagues to the Kongsberg team. I will not spend too much time on COVID-19 today. Some is already said. Although we in Norway feel a relief of the days becoming more normal, we do not take the seriousness of the global situation lightly. We are paying daily attention to how this is developing. We are unwavering our number one priority. That's the safety and well-being of our employees. This comes first, along with protecting our business and delivering to our customers. Of course, I'm satisfied to see that employees in some regions can gradually return to office and that we can welcome back to work a number of colleagues who have been temporarily laid off. But we are not letting our guard down completely. We are represented in 40 countries, and the circumstances people and businesses must relate to every day vary greatly. We continue to engage proactively with the governments to promote value-creating initiatives and activities, and we have seen positive results coming out of ours and others' efforts. Of course, we continue to hope for more here. While the crisis puts strains on the entire organization, we have also gained proof of our adaptability, determination, and the increasing relevance of our digital offerings. We have learned that we can do many of our tasks in different and even more efficient ways, working remotely and collaborating via digital platforms to a wider extent. I think one good example is a couple of weeks ago, Kongsberg organized its first ever company-wide digital townhall meeting, where we invited all our 11,000 colleagues. I must say that that was a very positive experience, being able to reach out to the entire organization at once. I think this period has shown us that, and we feel that we are even more connected than ever before. At the same time, many of us probably have learned just how much we cherish the discussions you can have with the colleagues next to the coffee machine. However, these are all experiences that we will take with us and learn from when we all are adapting to the new normal. By that, I will invite my excellent CFO, Gyrid, and she will take us through the financial results. Thank you, Geir. Good morning, everyone. I would first like to extend Geir's thank you for the impressive effort all my 11,000 colleagues have put in over the past month's extraordinary situation. To keep up the work remote, to have focused on contract deliveries, and at the same time be able to build financial strength have given us a solid second quarter and also a first half year of 2020. The Q1 figures were only to a limited extent impacted by the COVID-19 situation. In the second quarter figures, we can see some clear patterns on the order intake and revenue in maritime and that some projects have delayed affecting the top line in defense somewhat. At the same time, COVID-19 has helped us to put the spotlight even more on cost efficiency and the new ways to solve challenges. The cost reduction year on year is amazing. On top of the value capture program for integration of commercial marine, Kongsberg has $150 million in cost reductions that can be directly linked to COVID-19 actions that were early put in place. If you look at the financial results for the second quarter, you can see on the slide here if you start with the order intake. This quarter, we had a lower order intake than Q2 last year, down by 35%, but still we deliver a book to bill of one. Second quarter last year, we had some large orders like NASAMS Australia in defense and AVILCO in maritime. Geir has already mentioned important orders, but even without any significant single orders, we are able to deliver a solid order intake of more than $6 billion in a challenging time in a challenging market. Also, we can see that certain upgrade projects that the scope is reduced where customers are settling for must-have only. In general, it is a more challenging maritime market, but while we had $336 million in cancellations in Q1, we had no cancellations this quarter. On top of that, Kongsberg Digital delivered the best quarterly order intake ever on $428 million this quarter, which gives a growth in order intake in digital of 25% with a book to build of two. Moving on to the revenues, Kongsberg delivers flat revenue this quarter, combined with a decrease of 6% in maritime, a minor increase in digital, and a growth of 10% in defense. Even with 10% growth on the top line in defense, the businesses are suffering somewhat on revenue recognition from delays in deliveries, but we expect that to catch up in the third quarter. Regarding our maritime business, the aftermarket has been on a positive trend for the last quarter, but now we have experienced a slowdown, especially on the spare volume. Spare volumes are down by 25% compared to monthly revenue in first quarter, and all divisions in maritime experience some slowdown on the top line except from sensor and robotics. The first half year of 2020, Kongsberg has delivered $12.7 billion in revenues compared to $9.5 billion last year, a growth of 34%. We deliver an EBITDA of $772 million this quarter with a strong margin of 12.9%, up $330 million from last year. In the EBITDA for the second quarter, we have booked $23 million in integration and restructuring costs, while last year we had $85 million on the same items. Several factors have contributed to strong profitability in the second quarter: focus on project execution, operational excellence, and efficiency, as travel restrictions have forced us to find a new way and a more efficient way to work. Assessments have also been made on the remaining costs for deliveries of air defense projects, which have resulted in higher margins in the defense area. Focus on project execution has been number one priority. We entered into 2020 with a record high order backlog, and to be able to deliver on that, project execution will continue to be the key. But the main contribution to uplift the profitability this quarter is the combination of cost control from COVID-19 initiatives in all business areas, combined with the strong ongoing value capture program in maritime. The first half year of 2020, Kongsberg has delivered $1.4 billion in EBITDA compared to $824 million last year, a growth of $600 million year on year, or 72%. $462 million in EBIT, up from $127 million last year. We now have complete comparable figures year on year, as the commercial marine transaction had closing April 1, 2019. No extraordinary items on EBIT this quarter. If you look into the order backlog and the order intake, almost stable order backlog, down with $400 million from last quarter due to currency effects, but still a strong order backlog of $33 billion. Out of the order backlog today, $10.7 billion will be delivered already this year. With focus on project execution, this will be transferred into revenue during 2020. If we add on the revenue from the first half of the year, we have already $12.7 billion. We end up at the year end with a top line of $10.7 billion, added on $12.7 billion with $33.4 billion for 2020. On top of that, you can add on revenue from the aftermarket with a slowdown around $1.5 billion each quarter. That will give you a good guidance. Last year, we had a revenue of $33.3 billion in revenue, excluding Hydroid, so we still see growth in 2020. Cash flow development. We entered this quarter with a cash at bank at $9.54 billion, with proceeds from $3.6 billion after the closing of Hydroid late March. The investments this quarter of $250 million is mainly due to expansion of our aerostructure factory, which is actually one of the main contributors to increased activity for Kongsberg. In digital, we have also closed a bolt-on acquisition and acquired Coach Solution, as Geir mentioned. Cash of $772 million from the second quarter EBITDA and increased working capital of $800 million. But I want to bring to your attention the working capital, which has an underlying reduction in trade receivables, while the increase mainly consists of changes in trade payables and other liabilities. In our cash position as of June 2020 of $8.6 billion, you should also be aware that we have $2.4 billion in prepayments from customers, and the cash also includes almost $1 billion in tax related to the Hydroid sale that has not yet been paid. With uncertain times ahead, we are at the moment comfortable that we have a solid position to meet the next quarters while we monitor the development regarding COVID-19. Working capital. This is probably one of the KPIs that show hard work from the whole organization during COVID-19 months. Since March, we have had focus on measuring three KPIs: daily cash control, outstanding on trade receivables, and quality in order backlog. In maritime this quarter, trade receivable had a reduction of $774 million. We have not seen major challenges with customer payment during the second quarter, but follow-up on payments from customer are still number one priority. The focus from the organization in maritime to deliver on the working capital has, as you can see from the slide, been high on the agenda. In defense, we received several payments from customers throughout the first quarter. NASAMS Qatar was the largest one with $1.4 billion. We still have a negative working capital of 16% at the end of second quarter in defense. Some more details on maritime. Kongsberg Maritime got $3.9 billion in new orders this quarter with a book to build of 1.02. This is a 22% decrease in order intake. Order intake in maritime had cancellations of $336 million first quarter but has no cancellations this quarter. The value of the order backlog is still $12.1 billion. Out of the order backlog, you can see on the right-hand side here, it's 3 out of the order intake of $3.9 billion. Out of the order intake of $3.9 billion this quarter, the aftermarket counted for 43% of the new orders. That is up from 34% in second quarter last year. Out of the order backlog of $12.1 billion at the end of the second quarter, $5.67 billion will be delivered in 2020. In the first half year, maritime has delivered a revenue of $8.3 billion. That gives a run rate so far in 2020 of $14 billion before we add on the aftermarket. Decrease in revenue offset by good operating performance with increased profit and margin is the key in maritime. Maritime had a decrease of 6% on the top line this quarter, and all divisions have seen reduced operating revenue. If you look at the first half year of 2020, maritime has an increase of 40% or 7% increase if we include Q1 proforma revenues from commercial marine. Maritime delivers $267 million in EBITDA this quarter with a margin of 7.1%. In the first half of the year, Maritime has implemented several action plans to reduce the financial and operational effects of COVID-19. Furthermore, costs in relation to travel have been minimal since the start of the pandemic. In total, these savings amounted to more than $100 million, on top of the savings from the value capture program. The EBIT margin is up to 2.2% from a negative EBIT last year. Q2 last year was the first quarter with integration of Commercial Marine, and here you can clearly see the picture of the turnaround case. We have been monitoring the value capture since we did the acquisition of Commercial Marine. As you know, we measure annual effects, and for the first quarter this year, we had an annual effect of $135 million. Positive effect for the second quarter is $160 million, and that gives a total of $295 million in the first half of this year, and Kongsberg is on track to meet its target by delivering $500 million in savings by end of 2020. That's on top of the COVID-19 cost reductions. The most intensive ongoing task in the program now is restructuring of the deck and machinery division. 485 employees have now left Kongsberg in connection with this program, and 18 out of 20 locations are closed, 15 of them through co-location, and three have been exited 100%. There are $17 million left of the integration cost that we had initially a frame on $450 million. This is mainly cost related to legal setups. Some more details on the defense area. Decreased order intake compared to second quarter last year and continued high order backlog. In second quarter last year, we had two large orders for NASAMS Australia and F-35. Order intake for those two last year was in total $2.9 billion. While NASAMS and F-35 orders were main drivers last year, aerostructure together with land system have been main drivers for new orders this quarter. Book to build for the quarter is below one with 0.89. $4.6 billion of the order backlog will be delivered this year. Defense has already booked a top line for the first half year for almost $4 billion. That gives a run rate of $8.6 billion at the moment compared to a revenue of $7.2 billion last year. Delays can occur in deliveries in terms of supply chain, and travel restrictions can influence and delay new negotiations. Otherwise, defense has seen limited financial impact of COVID-19 year to date. Revenue growth of 10% driven by several large programs on air defense system, F-35 programs, and the CROW programs. Defense suffers somewhat on revenue recognition from delays in deliveries, but we expect that to catch up in the third quarter. For the first half year, defense has a revenue growth of 24%. Defense delivered $474 million in EBITDA with a margin of 23.6%, which is extremely strong. $715 million with a margin of 18.1% for the first half year is also very strong. Focus on project execution combined with cost focus related to COVID-19 and focus on efficient and increased deliveries from the large order backlog has given a solid financial performance in this quarter from the defense area. EBIT margin is up compared to second quarter and explained by the same contributors as cost focus and project executions. Let's look at the outlook for the next year. Thank you, Geir Hagan. I think when we look ahead, I think the most certain factor is that there will continue to be uncertainty in all our markets. I think also that Kongsberg's activity and results will continue to be affected by the pandemic. In parts of the world, governments are easing up on the restrictions, while other parts, they are as tough as ever. It's also worrying to see that regions who have opened up are closing down again due to the flourishing of the virus. There is also uncertainty related to the development of the oil price going forward, which will affect the investment level in several segments. But one cannot rule out that this may also provide opportunities in other segments where Kongsberg has strong positions. Good project execution in general, and particularly in one certain air defense project, partly explains the extraordinary good results for KDA this quarter. We expect this to continue and positively impact also the results in the next quarter as well. In the defense, we have maintained operation at a relatively normal level, and although some delays may occur, business is quite steady. In several quarters, we have shown figures of the significant potential ahead related to non-defense programs, and so far, we cannot see that this has lessened significantly as a result of the current situation. The maritime market has been challenging for a longer period, partly due to the low vessel contracting in general. The trend has continued into 2020 with no immediate improvement in sight. However, our maritime business is also exposed to markets not directly affected by vessel contracting, partly offsetting the impact on our maritime order intake. Our digital business has invested significantly in establishing new as well as strengthening existing positions related to the digitalization of core areas. A decline in oil companies' investment level, both due to COVID-19 and the current oil price, may, of course, affect our order intake for the digital business. Nevertheless, consequences of the current situation emphasize the needs for and the strength of the Kongsberg digital and the remote solutions that we are offering. In general, Kongsberg is overall an ocean expert, and we have technology to transfer into a more sustainable future. I firmly believe that we, as a company, have the product, solutions, services, and the technology to stay relevant in this market and to make a difference to people, customers, and the society overall. Finally, I'm very confident that we will come out of this situation as stronger and even a more unified company. By that, thank you for listening in on our presentations, and then I would like to invite Geir Hagrun back on the stage, and we can open up for some questions from the webcast. Yes, we have a few questions from the webcast. First, a question from Sveinung Alvesta, Arctic Securities. You have a substantial amount of cash in the balance sheet, and you delayed an extraordinary dividend of NOK 10 per share. Any news on this or the announced share buyback program? Of course, financial strength is a key in uncertain times. We have ongoing, or our board has ongoing discussions on that one, so we will come with an update when we release the Q3 figures on that one. Thank you. A question from Lars Daniel Vestby, Sparbanken Markeds. You say in your presentation that the aftermarket was impacted by COVID-19 in Q2, and year-to-date revenues from global customer support and services account for 42%, up from 39% in Q1. With increased share of revenue from global customer support and services, and your comments in the report that the aftermarket order intake fell particularly towards the end of the quarter, how could this affect the margins in maritime for the remainder of 2020? If you look at the aftermarket, there was an increase, like I said, from 34% of the total last year to 43% this year in the second quarter. In terms of the slowdown that we see in the aftermarket, it has mainly been on the spare parts at this time. We believe that all our customers still will need services, and they also have a new way of work on the remote services from the aftermarket. In terms of the margin, they are somewhat affected on the currency, which has been quite positive for us. If you see a very much stronger Norwegian krone, it will affect somewhat. But in terms of the margin in total, we try to make efficiency of everything we do, and then we need to have more focus on cost control and how we deliver the services we do. I think maybe I'll add here that we see a decline, as Geir Hagrun said, in the spare parts, but this will also, we have seen it before, that this is also varying throughout the quarters. We see also that customers now going in for dry dock for upgrades. I think in general, as we said, we are changing the way we are supporting our clients, and that should also help us to maintain margins when it comes to support and services by the remote solutions that we have established with many of our customers. A second quarter from Mr. Vestby. How much of the $100 million savings within maritime in Q2 is short-term, and will better project execution in defense and aerospace affect the second half and lead to 20%+ EBITDA margins in the second half as well? I can promise that we have tried to calculate that, how much is short-term and how much is long-term. What we have tried to isolate is how much is related to COVID-19 efficiencies and how much is related to the value capture and also ordinary cost focus. In terms of that, I think that we have to come back to the split on that one. But it's obvious that the spotlight on cost that we have been able to put throughout the months with COVID-19 will have a very positive effect on Kongsberg. Some of that new way, the new normal, as we call it internally, we will have some benefits from that going forward also. You also had one question on the margin in defense? On defense, will the positive effects that you saw in defense lead to these high margins in the second half of the year as well? I should wish, but I think 24% in defense is a bit high. But of course, we will see some increase in the margins from the point that we had on the capital markets day last year, where we have 15% to 16%. We will see a small uplift from that going forward, I think. And then a few more questions. One from Mr. Kenneth Sivertsen, Pareto Securities. Could you please provide an update on the potential Qatar vehicle program? Yeah, the program in Qatar is continuing. Obviously, we had to bring some of our people from Qatar back to Norway when the COVID-19 crisis appeared. We expect that we will have people back on the ground, I would say maybe beginning of September. That is at least the plan. We have continually had a tight dialogue with the clients, and we are continuing working on the program. There is, I would say, no signs that this program will be delayed or even stopped. I would say the dialogue is going very well. Obviously, in this type of program, it's difficult to say exactly what the timing should be for a conclusion of such a program. A question from Christopher Møller Løkken, Carnegie. The margin in defense and aerospace indicates a clean EBITDA margin around 16%. This relates to the question you were asked earlier, Geir Hagrun. Would those 16% be a fair assumption for the margins within KDA going forward? Yes, I think so, at least. Final question from Fredrik Thoresen. Can you provide some more color on the strong order intake at Kongsberg Digital? The type of deliveries, if it's new or existing customers, etc. Obviously, we are not able to say anything about the client here. This is, I would say, an existing customer, and we are providing digital real-time data solutions for some of their assets. It's not so much I can say about it further than that this is truly, I would say, underlined that digital solutions in a current situation is really giving savings to that type of operation. It's also quite interesting here as when you see that all companies have to have focus on investments, our remote services is coming high on the agenda. So we have a lot of dialogues around that. Thank you. That was the final question from the webcast. Thank you. I wish all of you a continuous good summer. Hopefully, the weather will be better also in Norway. Thank you.