Good morning, welcome to this operational update from Nekkar. My name is Preben Liltved, and I'm the CEO of the company. Today's presentation will be primarily an operational update. However, we will also share some key financial figures, which our CFO, Kristoffer Lundeland, will present later. In the past years, we have updated the market every six months. Our plan, going forward, is to provide a full financial update every six months, but also some financial figures and operational update every quarter. Please note that after the presentation, you can ask questions through our webcast. All Q&As will be after the presentation. Next slide. Please note the disclaimer. Some highlights from first quarter. We had a revenue of NOK 93 million, which is up 40% compared to first quarter last year.
We had an operational EBITDA of NOK 17 million, a margin of 18%, up from about NOK 5 million first quarter 2020. We still have a healthy and solid backlog of more than NOK 1 billion at the end of the quarter. We also did startup of our ocean test of the prototype of the Starfish closed cage in the quarter, and secured NOK 21 million soft funding from Innovation Norway for our SkyWalker, the turbine installation tools. We have no new build project intake in Syncrolift in the quarter. We secured a five-year service agreement, which we will come back to later. We delivered an environmental friendly ship lift to Skarvik in Norway, which we also will discuss later on in the presentation. Next slide, please. For the benefit of new shareholders watching this presentation, I want to quickly repeat who we are.
In 2020, Nekkar defined a new strategic direction. The foundation of Nekkar's business is superior engineering, electrification, automation, and digitalization, with a heritage from the drilling industry in Kristiansand. Remember, in this competence that helped to convert the global drilling and lifting industry, which relied on huge amount of manpower and manual operations to be fully automated and digitalized and remote controlled, with hardly any manpower left on the drilling deck. In addition to our digital and development projects in Kristiansand, we have the shipyard solution, or Syncrolift here in Vestby, designing and manufacturing complete shiplift and transport system for the global market. Next slide. Nekkar aim to apply this competence to develop disruptive technology that can make high-growth industry sectors, such as aquaculture and renewables, even more sustainable, productive and profitable.
This will benefit farmers, operators of wind farms and others through reduced environmental footprint, as well as significant reduction of operating costs, thereby making these industries and others more sustainable and future-proof. Next slide. Today, Nekkar consists of three business areas: shipyard solution, aquaculture, and renewables. At the core of this business model is our digital solution, including Intellilift which apply world-leading digitalization and automation competence across all Nekkar. This unique combination of disruptive technology, automation and remote control systems will be building block for future SaaS revenues and offerings for Nekkar. Next slide. We jump to our different division and start with some updates on the aquaculture side. The photo you see here is taken from Hidra, and it is the prototype of Starfish, which came into the water early March this year. Next slide. World population are increasing, and so do the need for fish and proteins.
Sustainable growth should be done by innovation new technology. We look at land-based, offshore, and closed systems. All will contribute and develop to increased production of aquaculture. Automation and digitalization will be important for development on all these different technologies in the future. Next slide. Why Starfish? We believe that closed systems in sea will be a major contributor to the growth in the aquaculture industry. To eliminate and minimize lice problem and escape, it's needed to enable further growth for salmon aquaculture in Norway today. Combining this by possibility for waste collection and increased use of digital systems will dramatically reduce OPEX. Also, energy consumption on closed systems, and especially Starfish, are considered significant lower than land-based system. Next slide. Where do we are in the testing? We are still early in the testing of Starfish. We are now testing our engineering approach towards the real environment.
Wind, wave, current, rain, and snow will challenge our systems and components. We are sure we need to prove that we are on the right track. During the first two months of testing, we have seen positive results. Also we have had visitors at site from major aquaculture companies. However, we still have lots of testing to do, and testing will continue all during this year, 2021. Next slide. Development of our new software platform, Aquarius, Nekkar and Intellilift will take a position as an integrator, automation, and visualization of our aquaculture systems. We are basing our technology on proven software from oil, gas, and renewables, and develop this further into aquaculture. This is what we have done for years. By proving this in a mixed reality system, a combination of camera and analytical data, the daily life of farmers will change to the better.
Artificial intelligence and machine learning will enable us to improve efficiency and reduce costs. Next slide. We started Starfish two years ago. We completed a test in SINTEF tank last year, and we are now progressing on the test in Hidra for the prototype. Our plan is to start testing of our full-scale version at the end of the year or early next year. We have positive signals from major aquaculture players as we speak for our technology. Next slide. We jump to our renewables, and in early 2020, we started development of an installation tool for land-based windmills, later named SkyWalker. Next slide. At the start of this project, three main challenges were highlighted from our innovation partners and future possible customers. Crane size and availability limits the development of larger and higher windmills on shore, and to build more efficient turbines and parks.
The environmental footprint should be minimized, and the weather window for installation, due to wind and bad weather, that should be improved. All this was the basis for developing of our installation tool, SkyWalker. Next slide. These photos show you a typical crane solution for installation of windmills approximately 150 meter heights and 5 MW-6 MW. This is the technology used today. As you can see, massive constructions, which need to be transported in pieces and assembled at the different sites. Next slide. This is the number of truck needed to transport one of this crane to the site. In addition to transportation, this crane also need to be partly dismantled in between each installation job on each windmill.
This way of installation start to become a major environmental issue, both when it come to CO2 emissions, but also the footprint this type of machinery needs at the windmill park sites. Up to 80 trucks for one crane. Next slide. This is the need for SkyWalker. When we succeed developing SkyWalker, we need approximately eight to 10 trucks to transport the same tool, which can install the same windmill as the other normal traditional crane will need up to 80 trucks to do. Next slide. As earlier said, we receive a funding of more than NOK 21 million from Innovation Norway to support the design, prototype production, and testing of our first SkyWalker. We are now in good progress of design and planning model test of a downscale model this year, in addition to do proper testing of the software platform, of course.
Full scale production and testing will be next year. We have a video which hopefully make you understand better how SkyWalker will operate than I can do by a presentation. Please start the video. As you see, SkyWalker is a machine and tool mounted on the windmill itself. You need one small crane to erect the first tower, the machine will do the rest of the installation by itself with the help of small cranes supported on the ground. The SkyWalker is a self-contained machine, which means that there is no need of external power at all. As you can see, there is a compensated control lift done with counterweights. SkyWalker in itself has four winches, and everything is done by fiber ropes which is handled in a four-render system, enabling the SkyWalker to climb the windmill as it goes.
It also contain the yellow adapter frames as you have seen, which will be exchanged due to the different diameter and size of towers. Now you can see the yellow adapter frames mounted on and then suitable for different tower size and also suitable for different producers of windmill towers. Assembly of all the towers, it's done by standard adapter frames. When it comes to installing of the nacelle and the blades, there is special adapters tailor-made for each maker of blade or nacelle. This might look as a small tool. However, if you can try to imagine that the diameter of these towers are approximately six meters, and the height of these towers in the example here is about 160 meters. Now you can see we have an adapter for the nacelle, which is different, but, however, fitting on the same frame as the others.
That is the whole concept between SkyWalker, that is a modular design, which is able to install different sizes of windmills and also different makes of windmills. The size of this machine is about 30 meters long and 8.5 meters wide. This is showing the lift of the blades, which are one of the most critical operations during installation due to the effect of the wind. The operation should be completed. I think we can stop the video. If we are back to the presentation, I think we can jump to the next slide. As earlier informed, we have a Sorry. Just need to shift here. We have been making different model to try to prove how SkyWalker will impact the environment and also the efficiency of windmills installation.
Of course, there is variation of sizes of windmills parks, and it's also sizes of windmills, and the nature around different parks are also very different. As you can see from the slides, there is huge benefit of using a tool like SkyWalker compared to a normal crane. There is considerably reduction in footprint on site and CO2 emissions. Even more important, we are able to reduce the time spent on installation by up to 80%. The basis to get full benefit out of SkyWalker will require a solid logistic planning by the installation and logistic companies for the windmills. Next slide. We are now doing the final design of our downscaled model, which will be tested in our wind tunnel later this year. This test will verify our calculation related to control system, but also operation window with different wind scenarios.
We are also working with a zero emission machine, with a hydrogen generator instead of a traditional generator. In addition to that, we look at a service version to enable smoother service operations. Related to offshore products, we want to test out our land-based SkyWalker first, and then of course, we look at the offshore market coming as very interesting and also a place for SkyWalker. Next slide. We jumping to shiplift or shipyard solution. In late March, we moved into this fantastic building, also where I'm sitting today, located in Vestby. Now we have a new state-of-the-art office facility, which give us room for expansion, but also it is a very modern, environmental efficient building. Next slide. In January, we delivered docking solution specially designed for aquaculture support vessels for the north of Norway.
This is an interesting project for us because, as a result of new regulation, these vessels need to be clean and when they relocate from one farm to another, to avoid transferring of viruses, bacteria, and algae from one aquaculture site to another. This has to be done in a fast and smooth way. Water and debris has to be collected, and our fast docking arms make sure various vessels can be docked very quickly and safe. Next slide. We have also done a quite new design of trolleys last year, and they are now under testing here in Norway for dispatch to the customer later this year. This is the first time in many year we do such type of work in Norway, which again, will give us a marginal extra cost.
Due to the risk, especially now in the COVID situation, we decided to take this home and do the assembly here in Norway, and this will enable us to deliver in time. Without this decision, we had struggled a lot to get this order out on time this summer. Next slide, please. We started a service project last year to generate growth and also boost customer interaction. We will move away from more focus on ad hoc service and spare parts, and focus more to be a lifecycle partner for our customers. Already now we see positive results and have secured a long-term service contract first quarter, and have working with more leads now for more long-term sustainable reoccurring business of service.
This project is not done in a year, aggressive sale and good network will enable us to take bigger portion of our install base in the years to come. Next. As a part of our project, we also map our install base and following up leads globally. We have more than 150 shiplifts older than 15 years, which require attention. We have categorized various upgrades and look at these as the lowest hanging fruit now to generate growth in the shipyard solution business. During Q1 and Q2 this year, we are doing comprehensive midlife upgrade in Southeast Asia, supervised by people from both our local Singapore office, engineers from Syncrolift Norway and engineers from Intellilift in Kristiansand. By this, I will give the next slide to be presented by Kristoffer, our CFO. Next slide.
Yeah, just a key look at some financial highlights from the first quarter. As Preben said, we did experience high activity in the first quarter with the revenues of NOK 93 million, compared to NOK 66 million in the first quarter of 2020. Again, the main driver behind the revenue growth is our new building projects within shipyard solutions, where we have experienced good progress in our currently around 50 new building projects. Looking at the operational EBITDA, came in at around NOK 17 million. These are figures which excludes gains and losses on foreign exchange hedging contracts, with an operational EBITDA margin of 18%. As you can see from these figures that represent a significant improvement from 2020, where the margin was 7.2% and operational EBITDA of NOK 5 million.
That was also at the time where the COVID pandemic was getting started with, and we saw increased volatility across the market. That should also be taken into consideration. Looking at the reported EBITDA, you may note that the 2020 figures were quite negative, with the NOK 24 million loss. The main reason for that is that our hedging contracts had a loss of NOK 29 million in the first quarter of 2020 as the US dollar and euro appreciated significantly against the Norwegian kroner. The reported EBITDA in the first quarter of 2021 is around NOK 70 million. If you're going to compare the underlying business, the operational EBITDA figures is where you need to look. The order backlog, as Preben has presented already, is still sitting strong at around NOK 1 billion, which gives us a solid operational foundation for future periods.
Our R&D investments is still a important area for the company and as Preben has already been through the Starfish and SkyWalker, we did have capitalized expenses in the region of NOK 6 million in the first quarter of this year, compared to NOK 2 million in 2020. These capitalized R&D is mainly related to Starfish and SkyWalker. That was a quick overview of some financial highlights in the quarter. Next page, please.
Yeah, thank you, Kristoffer. Let's wrap up and summarize where we are today. We have an unique competence that have automated and digitalized the industry across industry sectors before. As we have explained today, we cooperate strongly with industrial partners to fast-track the adoption of the unique competence in the new energy sectors. We have a flexible business development and financial toolbox available to support us when needed. Next slide. To summarize, we have delivered a strong quarter. Our balance sheets remain strong, and so do our backlog. As we have explained, our development projects are progressing according to plans. The outlook, as you see on the right-hand side here, is identical to the one we showed you after the H2 2020 report. The yellow ticks are partly done or fully completed issues.
Within Syncrolift, we have landed attractive service agreement in the quarter. This is just a start. We will remain focusing on service and service reoccurring business going forward. We are bidding for attractive shiplift contract for the time being. We believe we will have a strong position in this contract. However, we don't expect order intake as we had last year, which was exceptional. Our digital business have still solid leads on oil and gas Software as a Service project. We believe this will be materialized. Exactly when is still uncertain. By then, I thank you for attending the presentation today. We are open for questions from viewers. Thank you.
Thank you, Preben. We have received quite a few questions, so we can start with the first one. Given that 150 Syncrolift systems are older than 15 years, are you expecting?
a considerable replacement/upgrade cycle in next year? Is there a reason why a customer would choose not to sign a service agreement with you when ordering a replacement or upgrade? You are on mute, Preben. I think Preben is having some technical difficulties, so if you can bear with us for two minutes, please. It looks like he lost microphone access or something like that.
Hello?
Yes. There we are. Thank you, Preben.
I heard your question. Yes, all shiplift above 15 years, they need service and they need attendance. However, what we have seen in the past is that not many customers are having service agreements. They are doing more all traditional service work, ad hoc work, and they have been doing quite a lot themselves. However, now we have reinforced our service department and also with the service branches. We're trying to tie up with more customers and convince them that to sign a service agreement will be a good and safe idea going forward.
Thank you. There's a question for Kristoffer. Is any of the grant from Innovation Norway included in the EBITDA numbers in Q1?
No. The grant, you can find further information on this in the annual report where we describe this in more detail. The way we recognize the grants from Innovation Norway with regards to our R&D project is they come in as a reduction of capitalized expense. It's merely a reduction of cost and not something that we recognize as revenue.
Thank you. A question for you, Preben. When do you expect the new initiatives, SkyWalker and Starfish, to be ready for sale?
If you take Starfish first, we are getting closer to something. We are already preparing our sales platform and how to do this. For Starfish, I think we will be open for sale in a way late this year. SkyWalker is too early. We will need next year for testing, but of course, we are working closely with industry both on SkyWalker and Starfish. It's not that we are pushing the button and one day we're ready. This is a continuous dialogue with potential customers. For SkyWalker, even if there is maybe a year or more until we can do some commercial sales, we have weekly meetings with potential customers of our technology, and the same goes for Starfish. As said earlier, we have had some aquaculture companies looking at the prototype Starfish already. There is huge interest, and sales will follow. This is a continuous dialogue.
It's not that we put a date that today we start to sell.
Thank you, Preben. Kristoffer, there are a couple of questions asking for revenue split between shiplift solutions and other business area, EBITDA splits and so on, but I guess you have a fairly generic answer to that question.
Yeah. As Preben said initially, we will release in our first half report further details with regards to the breakdown on segment level. However, as I said in the presentation, the majority of the revenue is generated from shipyard solutions and our new building business. Other areas are below 10%.
Thank you. There is one question again regarding margins for service contracts versus margins for new build contracts. I think that's specifically for Syncrolift. I guess we don't want to be specific on the margins, but maybe we can provide a general comment on the type of margins.
Yeah. Traditionally for business, the split between a new build and service margin are that traditionally service margins are higher than new build. In Syncrolift, we are delivering extremely good margin on new builds. For the service, we are basically building up, which mean that we have added quite some costs last year with support personnel both in Norway and abroad to build the service business. Expect, of course, when we are able to grow the revenue, that our service here will end up in quite healthy margins. We need to spend some money on service before we can collect. We are growing, and we will be growing over the years.
Thank you. Another question on Syncrolift. How do you view the shipyard market in terms of market share and growth? Do you believe Syncrolift will, over time, take over more contracts from dry docking competitors and thus increase revenue and growth through new installations?
This is a bit hard to say. As we have explained earlier, the shipyard market for Syncrolift product is a fluctuating market, but if you look at a broader perspective, maybe the last 20 years, it has been stable. It is not growing, but it is a stable market, and it is impacted by navy activity. Also on the commercial side, especially what we see now on the super and mega-yacht market, which is actually growing despite bad times, also require typically shiplift instead of a more traditional floating or dry dock solution. It is hard to say, but at least what we have seen now that over the last 20 years, it is a stable market. It is not declining, but it is not growing either. Our aim now is to grow Syncrolift by growing the service and after-sales market.
Thank you. Another question on the service side. For the 100 other OEM shiplift systems, how likely is Nekkar to be able to get the service contracts? Is signing of service contract typically contingent on whether you did the installment in the first place or not?
Both yes and no. It is likely that we can get a part of this market, and the main reason for that is that most of the other old OEM shiplifts around the world, these company is non-existing today. Most of them has either closed down the business or gone bankrupt. Therefore, there is a vacuum for services for other OEMs, and we have a potential there. We have done one installation now in the first quarter, with a service operator we got last year, which is for a third party. It's definitely a market we are looking into.
Thank you. Kristoffer, one for you. Is Q1 typically a weak quarter for Nekkar?
Yeah. The underlying business is not a seasonal business itself. Looking at the historical figures, the story shows that normally the first quarter and second quarter are a bit slower than the third and the fourth quarter. If that will be the case this year, a bit early to say, but that's how the historical trend has been as we have finalized more project towards the end of the year.
Thank you. Another question from you, Kristoffer. Well, we actually received a couple of questions regarding R&D costs in general and CapEx needs for SkyWalker and Starfish. I guess instead of listing them all, maybe you can provide a more generic comment on R&D and CapEx requirements for the development projects.
First off, we have received quite a bit of funding for both those projects, with NOK 10 million on Starfish and NOK 21 million for SkyWalker. That funding will take us a bit far, but of course, we need to put in additional R&D investments, which we have also outlined in more details in our annual report. We have increased our R&D budget for 2021. However, going into the details on that, I think that will come in later reports.
Thank you. Question for you, Preben. How scalable is the production of Syncrolift?
It's a very scalable setup we have here. All sales and design engineering and sourcing is done from our office there in Vestby. We are subcontracting all production of hard tech. We are also subcontracting all control system things, that's through ourselves, through Intellilift. We are very flexible here, we have seen with the backlog we have now and the execution going on for the time being, yes, we are busy, we are open to take more. We have a standardized product. We have production in many different countries, we can take more. We have had a peak on engineering Q1, already now we see that we are able now to pick up on new projects.
Thank you. Another slightly different topic about the use of Intellilift competence across the group. The question is, using Intellilift or the digital solutions business area competence through new applications such as SkyWalker and Aquarius, what kind of tweaks and changes in the application is required?
Software is complicated. We have been now working with Syncrolift and with Intellilift for more than three years, and they have developed their own platform through various development projects, also in the past, supported by Innovation Norway to build a platform for integration of machine data and sensor data and visualizing this in a real-time system. It's not a big difference, especially not when you compare what we have done now in the past for renewables and oil and gas into SkyWalker. The technology is very much the same. When you come into Starfish, it's slightly different, but again, it's very much about the same. It is collecting sensor data, collecting machine data, integrate them, sort them, and visualize them.
Basically, we are using the same platform, but of course, there is adjustment and development to be done, especially now with Aquarius, where we're talking about to take in and integrate biomass measurement, lice counting, maybe feeding, maybe stretch. There is lots of work to be done, but the framework for the system is already something we have.
Thank you. Another question on Syncrolift. Which geographical regions or markets has been driving most of the growth in the shipyard solutions business? How is the current sales and commercial activities in shipyard solutions? Specifically, looking at whether new markets are interested or not.
These markets are moving. I think we have shown before the map of where we have installations. We have installations all over the world. What we see now, maybe this year, is that there is activity in U.S. There is high activity in Australia, which had been sort of quiet for some years. These are moving around. There are several projects now in Australia, which is interesting. There is also project both in Europe and U.S.A. It is a global business. There is global project. What we believe we see for the time being is that there is a sort of delay in planning and decision-making due to COVID. This is huge investment. Of course, the Syncrolift is a small part of it. It's normally a development project in a new land area.
This takes time, and it is a global business. Of course, the COVID situation with no traveling, this project looks to be moving slower than normal.
Thank you. A question on SkyWalker. I know that we have covered this in the presentation, but just in case we haven't been very clear on the topic, I will raise the question, Preben. Will you do a partnership similar to Starfish for SkyWalker?
In a way, we have the same type of partnership for SkyWalker as we have for Starfish. We are working closely with Fred. Olsen on this project, and they are, let's say, covering the side of technology which we don't have. We're also working closely with one OEM turbine maker. The nature of these two development projects are very similar.
Thank you. Another question on the sale process for SkyWalker. Are you expecting to sell SkyWalker solutions to OEMs of wind turbines, the utility companies, the wind consultants doing the installment, such as Equinor or Aker, or all of them? Who will be your customer?
Yeah, we are working with different business models for this. SkyWalker is not only disruptive technology of lifting, it's also a disruptive logistic exercise. That's why the whole the end customer will look like, for the time being, it's not 100% clear. Yes, there might be turbine makers, it might be wind park installation companies, or most probably, it might be both.
Thank you. There's a question on the pricing of service contracts, and I guess this is specifically for shiplift solutions. How does the pricing of service contracts work? Do you add a markup on new parts being replaced as well as an hourly rate, or are these long-term contracts where the customer is charged an annual fee regardless of usage or not?
The nature of this contract can also be different, but what we have seen lately, the contracts we have signed lately is a fixed annual fee, normally including a number of inspection days and work days and a list of spares. All ad hoc spare parts needed will be charged additionally. It's a yearly fee.
Thank you. I think we have covered the majority of the topics on the question that we-Have there is one or two final questions, one on Syncrolift. Are you expecting increased fiscal spending to be beneficial for Syncrolift in the coming years?
No, not in a different level than what we have today.
Well, thank you. I think we want to conclude today's session with a question again on the competitive landscape for Syncrolift. How do you see the competitive landscape of Syncrolift developing? Are you gaining market share from your competitors?
As explained earlier, we have a very high market share. I think over the last 20 years, we have about 60% market share. If you take the last five years, I think we are up to 70% market share. The competitive landscape is in a way, yes, it's changing because some players are discontinuing shipping business and some new players are coming up. Yes, for the moment, we can see a sort of shift in the competitive landscape.
Thank you. Just one more question on SkyWalker, Preben. Can you elaborate on the opportunity of onshore and offshore wind for SkyWalker? How large are respective markets? Yeah.
For the onshore market, of course, we know the market is enormous. If you see the plan in Europe, at least over the next 10 years, it's lots of wind parks to be installed. For offshore, it will also be a huge market, I think especially up here in North Sea. There will be many new wind parks, and we see now the tendency that the government wants to move the wind parks from land to offshore. It's slightly more complicated to do it offshore, and the windmills are bigger and more heavy. That's why we have focused now at the beginning with the onshore version. Because there is a big need to achieve the market growth they want to achieve, and then to move offshore later on.
Also, we look at offshore market as maybe a five-year delay than the land-based, because the parks we are talking about now up here is probably to be developed from late 2020s and 2030s.
Thank you, Preben. I think we have covered the large majority of topics that are coming through the Q&A. With that, I think we can say that we will conclude today's session, and we will, Kristoffer, you will confirm that we will provide another update in August. That's right. Which will include a full-scale first half year financial report. Correct?
Yeah, that's correct. That will also include the segment reporting as a part of that.
Thank you very much. Thank you for listening, everyone.
Thank you.