Good morning, and welcome to a short operational update for Nekkar. My name is Preben Liltved. I'm the Interim CEO. We will share some operational update to the first quarter, and together with me is our CFO, Kristoffer Lundeland. We are welcoming you to send questions through the webcast. We will have a Q&A session at the end of the presentation. Slide two. Please note our disclaimer. Slide three. Let's start with some highlights related to the first quarter. Not all quarters bring big news to the table. This doesn't mean that activity has been low. Actually, Q1 this year has been exciting and busy related to both Shipyard Solutions and our new business areas. However, working with disruptive solution in new market segments are challenging and take time. As informed during Q4 presentation, we expected Q1 this year to be in line with Q1 last year.
We are nearly there, but due to lack of progress in two project in Syncrolift, we are slightly behind. Two of our customer has asked us to postpone delivery of our scope, and this have resulted in less progress and there was less revenue and profit in the quarter. This is 100% customer related delays due to issues in their infrastructure projects. No cancellations, only site-specific delays where our customer are not ready to receive our equipment. No major project have been signed or lost in the period, apart from a good upgrade project in Egypt and some service income. Slide four. A short recap again just to make sure you are really up to date. First of all, Shipyard Solutions is still our main driver for our financials and are continuing to deliver solid results. The foundation of Nekkar's new business is engineering, electrification, automation and digitalization.
Nekkar are developing competence into disruptive solutions in sustainable sectors like aquaculture and renewable energy. This will benefit customers and reduce environmental footprint and lower operational cost. Slide five. Nekkar consists of three business areas: Shipyard Solutions with our brand Syncrolift, Aquaculture and Renewables. At the core of this business model is our digital solutions business area, Intellilift, which apply world-leading digitalization and automation competence across all Nekkar's business areas. This unique combination of disruptive technology and digital competence are the building blocks for Nekkar. Let's talk about Shipyard Solutions, Syncrolift. Our backlog still remain healthy, and the workload is high. Our sales team have been busy traveling in the quarter, and we have visited all continents and are following new prospects closely.
As earlier informed, we did not expect any big sales project to be closed within the first half of this year, but are quite sure that some will be finalized in the second half. The geopolitical environment will impact our business, probably not only negative, but also higher investment toward navy and defense might give us some new opportunities, and we already see that in the market now. We have no direct business with Russia or Ukraine. However, uncertainties related to supply chain might impact both us and the customer going forward. However, so far we have coped quite well. In Q1, we have commissioned and handed over a project we delivered back in 2019 in Vietnam. This just tells you the timeline of some of our projects. Slide seven. As earlier presented, aftersales and lifecycle focus is important to us.
During 2020 and 2021, we focused a lot to get a better grip on our installed base. This have resulted in several long-term service base. As of today, we have seven ongoing long-term agreements, and we have another five agreements under negotiations related in addition to service contract related to our latest deliveries last year. With an installed base of more than 200 systems, we have potential for more. We are also in discussion for more upgrade projects, which we hope to close rather soon. Gradually, we are moving away from ad hoc service and spares towards inspection agreements and total solutions. This will result in more steady revenue and long-term customer commitment. Slide eight. As announced in February, we have received an order for an upgrade of an existing transfer system in Egypt.
New transfer system with HPU and control system to be delivered in 2023. Egypt is an important market for us, and there are quite a few ship lifts there already which need service and the market are attractive. The new transfer system and trestle will be tailor-made to handle special tugboats operating in the Suez Canal. Slide nine. Kristoffer, can you help me and speak to this slide?
Yes. Thank you for that, Preben. This chart here illustrates the historical figures on a quarterly basis for the last five quarters on our order intake and order backlog. As you can see from the left chart, the order intake in the first quarter was NOK 31 million compared to NOK 16 million in the same period last year and NOK 28 million in the previous quarter. As Preben said, I mean, we are seeing more tender activity in the market, and we are hopeful that the backlog and intake may increase over the coming quarters. Looking at our order backlog, it's still sitting strong at roughly NOK 760 million at the end of the first quarter.
That is something that will keep us busy and secure high activity also in the coming periods. Next slide, then over to you again, Preben.
Yeah. We are at slide 10. We have talked enough about Shipyard Solutions for today. We'll give you some update on our Impact technology projects. Slide 11. Recent global macro trends clearly show that our decision taken back in 2019 related to further growing sustainable market looks to be correct. Smart engineering with less hardware and advanced software will increase efficiency and reduce footprint are needed. Sustainable solution within aquaculture and wind has been the backbone of our development projects from the start. Slide 12. A short update on aquaculture. We are now finishing our testing of the full-scale version of Starfish outside Flekkefjord. After 15 months of testing, we will remove our system from sea within June and our full focus for production of the full-scale version in second half of this year.
Test period have given us important knowledge related to closed production in sea. Sensor data, circulation calculation verification give us confidence going forward with biomass production. Closed farming in open sea is new technology, and market and products will develop as different needs and probably regulation will pop up. Our strategy from the start of our development project has been to fulfill all future requirements and regulations. The short-term market will probably consist of different technology, depending on farmers' need. Therefore, we are considering different versions to make sure that we can take a part of the short-term market, in addition to make sure that we have a system ready for stricter regulations to be reinforced as technology will be available. Slide 13. We are finishing off the last part of the testing now with the testing of the filter unit and the harvesting system.
This will be completed mid-June, and within June, we will take up our system from sea into Flekkefjord. Production planning and procurement of full-size Starfish are ongoing. Long lead items are already ordered. We are targeting to have full-size system in sea within end of this year or early next year. Slide 14. Let me jump to renewables. Recent geopolitical situation, the Paris Agreement, and increased energy prices has shown the need for faster development of sustainable energy. Several countries have already announced increased development projects for both wind and solar energy. It will be essential to develop both land-based and offshore-based wind in a more efficient and environmental way. Our SkyWalkers should be a part of this shift. Slide 15. We have completed internal testing of our model. The remote control system with operating sequences and load balancing works very well.
This is a delicate, advanced, and technically complex machine, replacing tons of steel with intelligent solutions. We have demonstrated the model for major players within the wind energy sectors, in addition to a demonstration to the Norwegian prime minister. Demonstration took place days before the Norwegian government launched the plan to develop 30 GW offshore wind plants for North Sea. In June, we will do verification test in a wind tunnel and demonstrate the model for wind turbine OEMs in Europe. We are evaluating various industrial partnership to ensure commercialization of Starfish. We are also in deeper discussion related to full-scale prototype test in wind farm in 2024, sorry. Slide 16. Let me jump to digital solutions.
Our digital solution have divided resources between the following first quarter: InteliWell simulator testing of InteliWell software. For Shipyard Solutions, we have delivered software for the latest upgrade order in Egypt, in addition to software development for both SkyWalker and Starfish. The key to success for impact technology project like Starfish and SkyWalker is software control system and remote operation. A combination of real time remote monitoring of operations by cameras, sensors and LiDAR make this possible. Intellilift's core competence of remote real time operation is essential to make this happen. Slide 18. As announced last year, we established a joint venture company, Inteliwell, and the business model behind Inteliwell is to offer energy companies and operators a digital system to enable more automated, efficient, remote and safe drilling operations.
The offering will be based on a platform fee and a SaaS model with daily rates towards operator or energy companies. Testing of common developed software has been going on in the quarter and commercialization of the solution is ongoing. Slide 19. We jump to some short update on financials and I leave this for Kristoffer.
Yes, thank you for that, Preben. As we already had covered initially, the first quarter revenue ended at NOK 84 million, which represent roughly 10% decline from the same period last year. As Preben has already covered, the main reason is the postponed delivery of our scope on two new building projects, which again impacted both revenues and profit in the quarter. However, here it's important to note that this is not an unusual event and we have experienced project postponement in the past as well. It's merely a postponement of the revenue being recognized. The first quarter operational EBITDA, which excludes gains and losses on foreign exchange hedging contracts ended at NOK 12 million compared to NOK 17 million in the same period last year.
As you can see from the table, the operational EBITDA margin ended at 14% compared to 18% in 2021. The decline here is a combination of course with the less volume and also a product mix plays into it. We recognized gains from hedging contracts of NOK 2 million, which explains the difference between the operating EBITDA of NOK 12 million and the reported EBITDA of NOK 14 million. We continue our capitalized development costs, which are related to our impact technologies and R&D investments amounted to NOK 9 million in the first quarter. These investments are related to both aquaculture and the Starfish solution and renewables with SkyWalker and also the digital solution and in Inteliwell. At the end of the first quarter, we still had a solid balance.
We had a cash balance of NOK 188 million and a first quarter positive cash flow at around NOK 14 million. The group has no interest-bearing debt, and equity ratio is more than 70%. We are in a good position in going forward. That was a brief look at the financial highlights for the quarter and then I leave it for Preben over to slide number 21.
Thank you, Kristoffer-
Yeah,
...let me try to summarize the quarter and talk a little bit going forward. The headlines for end of quarter one that we delivered a quarter as forecasted, slightly below due to some customer cost delay. We have high tender activity and our backlog are healthy. We see increased activity on the service side, both related to contracts, long-term contracts and upgrade projects. The interest from the market for our impact technologies are growing. If you're looking forward, the Nekkar new business areas are moving from a sort of pure development organization into a commercialization organization, and therefore we have strengthened our organization this year and we'll continue to do that after summer. As informed during Q4 presentation, we have employed new CEO, Ole Falk Hansen, with strong financial and M&A competence, which will join us 1st July.
In addition, we have employed new head of finance, which already started in April, and we have employed new head of business development joining us in September this year. By this move, we have a strong management team enable us to commercialize and grow Nekkar to the next level. Within Shipyard Solutions, we are in negotiation for smaller project and a rather large upgrade project, and we are confident that it will be also bigger new build project to fight for in the second half. Revenue negotiation in first half are traditionally slower than second half for Shipyard Solutions. The interest for our aquaculture projects and wind are growing as we getting closer to products. Our operational role in Nekkar. With this, we open for questions.
Thank you, Preben.
You can jump to slide 23.
Thank you, Preben. A question regarding, you know, tendering activity. What type of new build, large new build projects may be awarded during 2022? Could you add some more flavor to what type of projects we're talking about?
It's always hard to predict the timing of this project because it's a long-term bidding phase and before the customer closes the bids. We have been in a negotiation now for a long time related to bigger contracts both in Australia, Asia, and Europe and Middle East. We are quite confident now that some of these will be closed during second half. We know that there is selection of EPC contractors for this project going on as we speak, and as soon as the EPC contractors are selected, they will place orders for shiplift and transfer system. Of course we are one of the main bidder related to this. This is both navy project, but also commercial and a mix of navy and commercial yards.
Thank you. Question to you, Kristoffer. I know you touched upon the topic already, but could you give information regarding cash flow in the quarter?
Yeah. The cash flow in the quarter was, as I said, positive with NOK 14 million. We have received some prepayments from customers. We still have a solid cash position of NOK 188 million. As we covered in previous quarter, the cash flow is based on milestone payments from the customers. We are still in a position where we normally get the cash from the customers before the revenue is recognized.
Thank you. There are three or four different questions, Preben, about inflation. There's a couple of questions about how much does the rise in inflation affect you? A more detailed question about how much is the input of cost materials, steels, metals, et cetera, out of the full end customer price that you charge at the shipyard?
Mm-hmm.
I don't know, can you give some flavor on how inflation is affecting, well, I guess it's particularly the Shipyard Solutions business at the moment?
I mean, this problem and headache is, I think, facing everyone in these days. It's also difficult to handle for us, especially for Shipyard Solutions as we have a long-term contract. I mean, from the minute we sign a contract until we deliver is 1- 2 years. This is an issue. Of course, as we have seen, this started already second half last year with the high fluctuation of raw material prices. We have been able and we are always discussing this during the contract phase that we need to cap the exposure related to raw material prices.
As all markets are facing the same problem now, we see that this starts to be a sort of acceptable terms for our customer that there is a capping related to raw material prices. I think the other issue which is maybe more difficult for us due to forecasting is the supply chain issues where it's not only the inflation and increased prices but also capability of delivery. We see it now especially on control system and electrical component that it is very challenging.
Thank you. There's also a question, Preben, about InteliWell. Could you share what kind of services you are offering and the benefits to customers? Also, are the rig operators the main customers or are you addressing other parts of the oil and gas industry too for InteliWell?
Yeah. I mean, in what we do in InteliWell it's a joint venture and we work with the other parties into that joint venture to make a layer on top of the control system which are on board the oil rigs today. This is floaters, it's jackups and also maybe later land rigs. Basically all these three market can be covered by InteliWell, but the biggest market and where there is most savings will be on the floaters and probably on the jackup rig. We put a layer on top of the existing system and coordinate and automate interaction between the different machine on the drill floor, combined with data from the oil well.
By this, we are able to do actually the drilling operation faster than before and with the oil rig rates today of $400,000-$500,000 per day, I mean, to save a day or two or three in a drilling operation is a lot of cost savings for the customer. Basically we are in the after market, but probably also this product can be introduced into land rigs. Again, land rigs are more simple equipment and the cost savings will be less. It's a top layer to automate the operation, which save time.
Thank you. Follow-up question on that. Could you give some comments on the leads you have on digital solutions? What kind of contract size can we expect here? Do you expect this to have a material impact on revenues in the future? I know you obviously cannot answer the.
Yeah.
Specifics about, but in general terms.
No. We have a simulator up and running in Houston, where we have been testing the, what we call the minimum viable product, to be offered to the oil companies. In this simulator, we already have visitors for several oil majors which have been testing out our software, and the feedback is very positive. This is, as said before, a software system we put on top. Typically there is a platform fee with installation fee. You pay a small, a relatively small fee to modify the software to fit your rig or your equipment. Then there is a SaaS model. You generate revenue per day or per month the rig is in operation.
It's always difficult to say when we will land the first rig and the first contract, but we have very interesting discussions and meetings as we speak.
Thank you. Question to you, Kristoffer. You lost some revenue due to project delays, customer cost project delays during the first quarter. In what way will this affect the second quarter?
Well, if these projects starts up again, it's always difficult to say because it's large infrastructure projects. If the delay lasts for a certain amount of time, but we are hopeful that the project will start up again. However, if it will impact our second quarter, I'm not sure at the moment. It's a bit early to say.
Thank you. Preben, follow-up on the inflation topic, but this time on the supplier side. Could you elaborate how you work with supplier contracts regarding cost increases? Is the cost fixed from point of order, or is it variable over time, or production? If so, how do you mitigate the topic?
Yeah. I mean, we do major purchases now in Shipyard Solutions and also in Intellilift. As this is project-related business, basically we get sort of pricing from our suppliers when we do the bidding. Of course our suppliers also today, they will have a capping, especially when you're talking about steel production of the fluctuation of the steel prices and material prices. We are always trying to enforce the same clauses into our contracts with our end customers. In case we have a major change, we will be able to make variation orders for this amount, which will be claimed from other sub-suppliers on steel.
On the electrical and control system side, it's slightly more difficult because there is more different smaller suppliers, which basically today we choose more among the suppliers related to delivery time than price, a nd we also have, due to the supply chain issues for Intellilift, we have ordered quite a lot of standard components typically used for Shipyard Solutions and also to be used on Starfish. We have ordered to stock to make sure that we have the parts in stock when we need them for a project. This is relatively low cost, so the danger of delays is more dangerous than keeping these smaller components in stock.
Thank you. Question to you, Kristoffer. Could you specify how much of revenue was aftermarket services revenue in the quarter?
Yeah. The service revenue was around NOK 20 million or so in t he quarter. It was a strong performance from service if you compare it to the same period last year.
Thank you. I think that concludes. I think we covered the other topics. The other question that come in, we covered that during the presentation. I think that concludes today Q&A session.
Yeah.
Thank you everyone for joining.
Thank you.
Thank you.