Annual Report and Sustainability Report 2020

DIRECTORS' REPORT & FINANCIAL STATEMENTS

Directors’ Report 2020

2020 was a different year than we had planned for, as large parts of the world practically shut down in Q1 as a result of COVID-19. KONGSBERG took immediate action to safeguard its employees’ health and safety, to maintain operations at as normal a level as possible, as well as measures to ensure value and results for the company. Despite the uncertainty and challenges posed by the pandemic, the company has seen satisfactory operations and the ability to deliver to its customers, secured significant order intake, and completed a number of business transactions. Kongsberg Maritime has been successful with the integration of Commercial Marine, where significant synergies have been realised, and sold the subsidiary Hydroid Inc. with a significant profit. Kongsberg Defence & Aerospace increased its operating revenues by 17 per cent, and a record order backlog provides a good foundation for continued growth. Kongsberg Digital has consolidated its leading position in the dynamic digital twin market with a framework agreement for the digitisation of Shell’s global portfolio of installations. Overall, KONGSBERG has performed well throughout an exceptional year, entering 2021 with a record high order backlog and even stronger positions in comparison with the start of 2020.

Kongsberg Gruppen (KONGSBERG) is an international technology group that delivers advanced and reliable solutions that improve safety, security and performance in complex operations and under extreme conditions. KONGSBERG has customers in the global defence, maritime, oil and gas, fisheries and aerospace sectors.

Sustainable innovation is an integrated part of KONGSBERG’s business strategy. Our most significant contribution to achieving the sustainability goals is the supply of high-tech products and services, which reduce our customers’ emissions of harmful greenhouse gases.

KONGSBERG
KONGSBERG
Headquarter
Headquarter
Kongsberg
Number of employees
Number of employees
10 689
Share of employees outside Norway
Share of employees outside Norway
38%
Number of countries with presence
Number of countries with presence
37
Share of revenues outside Norway
Share of revenues outside Norway
80%

Operating revenues rose by 10 per cent to MNOK 25,612 compared to 2019. Kongsberg Maritime (KM) had operating revenues of MNOK 16,319 and Kongsberg Defence & Aerospace (KDA) had operating revenues of MNOK 8,503. The Group’s order backlog increased from MNOK 32,347 at the end of 2019 to MNOK 35,947 at the end of 2020. The KM order backlog stayed at the same level as last year, while KDA increased its order backlog by more than MNOK 3,000. In total, the Group’s order intake ended at MNOK 28,818 down from MNOK 31,413 in 2019. The book-to-bill ratio was 1.13. EBITDA increased by MNOK 1,137 to MNOK 3,250 in 2020. EBITDA increased for both KM and KDA. For KM, cost reductions achieved through the integration of Commercial Marine (CM) contributed to improved profitability. Good project composition and implementation have contributed to good profitability at KDA.

Profit for the year after tax amounted to MNOK 2,932  (MNOK 717), corresponding to NOK 16.08 per share (NOK 3.89). Profits from continuing operations after tax were MNOK 1,481 (MNOK 596), corresponding to NOK 8.01 (NOK 3.22) per share. The Group had a positive cash flow of MNOK 1,766 in 2020 (negative MNOK 4,384) and had net interest-bearing debt of MNOK -3,949 (MNOK -1,565) at the end of the year. At the end of the year, Group equity was MNOK 13,301 (MNOK 12,810).

Revenues1)

MNOK

1) Figures in the income statement, orderintake and order backlog for 2019 and 2018 are adjusted for discontinued operations. Comparable figures earlier years are not adjusted.
2) Profit share from joint ventures are no longer included in EBITDA and EBIT. Compareable figures are adjusted.



KONGSBERG is in a solid financial position and based on this, the Board will propose to the general meeting on 6 May 2021 a dividend for the 2020 financial year of NOK 8.00 per share (totaling MNOK 1,440), whereof NOK 5.00 is on top of the dividend policy. In addition, a buy-back programme of shares for cancellation, of up to MNOK 400, will be proposed. Total remuneration to shareholders will then amount to approximately MNOK 1,840, which corresponds to just over NOK 10 per share. In comparison, in 2020 an ordinary dividend of NOK 2.50 per share, and an additional dividend of NOK 10.00 per share, a total of MNOK 2,250 was paid out. A buy-back programme for treasury shares for cancellation was also initiated, for up to MNOK 200.

Successful integration of acquired companies and sale of Hydroid Inc.

Integration of Commercial Marine

On 6 July 2018, KONGSBERG signed an agreement with Rolls-Royce Plc. for the acquisition of Rolls-Royce Commercial Marine (CM). The acquisition was completed on 1 April 2019. The final payment for the company, exclusive cash, was MNOK 4,865. As part of the purchase of CM, a comprehensive integration and cost reduction programme was implemented. At the end of 2020, annual savings of MNOK 640 had been achieved through the programme. The savings come from a wide range of initiatives. The original plan for cost savings was MNOK 500 in annual savings by the end of 2022. The programme was completed two years ahead of schedule and with savings of MNOK 140 over the original target. The programme in its original form is complete, but experiences from the programme will continue to contribute to future efficiency processes.

Sale of the American subsidiary Hydroid Inc.

On 4 February 2020, KONGSBERG signed an agreement to sell the underwater technology company Hydroid Inc. in the USA for MUSD 350 to Huntington Ingalls Industries (HII). The parties also entered into a strategic cooperation agreement for underwater technology and maritime solutions. The sale was completed on 26 March 2020. KONGSBERG bought Hydroid for MUSD 80 in 2007. Hydroid Inc. supplies autonomous underwater vessels for both the military and commercial markets, with the U.S. Navy being the largest customer. At the end of 2019, Hydroid had an order backlog of MNOK 813. In 2019, the company had MNOK 836 in revenue, with an EBITDA of MNOK 145. The sale of the company is shown in the accounts as a discontinued  business, with a profit of MNOK 1,451 after tax, of which the actual gain totalled MNOK 1,431.

The business areas

Kongsberg Defence & Aerospace

MNOK
MNOK
2020
2019
Operating revenues
Operating revenues
8 503
7 245
EBITDA
EBITDA
1 656
1 123
EBITDA margin
EBITDA margin
19.5%
15.5%
Order intake
Order intake
11 891
16 060
Order backlog
Order backlog
23 477
20 146


KDA had operating revenues of MNOK 8,503 in 2020, which is MNOK 1,258 greater than in 2019. The Missile Systems, Aerostructures, Land Systems and Integrated Defence Systems divisions all showed good growth in 2020. The EBITDA margin ended at 19.5 per cent, compared to 15.5 per cent in 2019. All divisions improved their EBITDA. The order backlog increased from MNOK 20,146 at the end of 2019 to MNOK 23,477 at the end of 2020, with an export share of over 90 per cent. This provides a good basis for continued growth in operating revenues in the future.

The Missile Systems division increased its operating revenues in 2020. This is the result of the increase in activity linked to both the Naval Strike Missile (NSM) and the Joint Strike Missile (JSM), which are the division’s main products. These long-range high-precision missiles are world-leading with their 5th generation low-signature design. The largest ongoing projects are the contract with Malaysia, the American ”Over the Horizon” programme, and JSM. In December, the division signed a second follow-up contract for the delivery of JSM to Japan, worth MNOK 820. Japan was the first country to order the missile. Over the coming years, further increases in activity levels are anticipated linked to both JSM and NSM as a result of demand for this type of capacity from many countries.

The Land Systems division, which delivers remote weapon stations and communications equipment, also showed good growth in 2020. The business area’s largest customer is the U.S. Army, which placed a number of orders for new remote weapon stations over the year. The framework agreement these were ordered under is now complete and KONGSBERG and the U.S. Army are negotiating an extension. The book-to-bill ratio for the division was 1.40, and order intake was at the same level as last year. The number of nations using remote weapon stations across the world increased to 25 during 2020.

In 2008, KONGSBERG opened a new factory for production of advanced composite and titanium parts for the new F-35 combat aircraft. Since opening, delivery volumes have continued to increase every year. From producing a few parts kits during the early years, production amounted to around 170 parts kits in 2020 and is now running at full capacity. A key objective for KONGSBERG is to deliver on time without any quality deviations in the F-35 programme. This puts us in a strong position on a programme that will generate revenues for the Group over the next 20–30 years. In 2020, the Aerostructures division recorded operating revenues in excess of MNOK 2 billion. Kongsberg Aviation Maintenance Services (KAMS), formerly AIM Norway, is now also part of the Aerostructures division. The company was taken over and integrated in 2019. KAMS is currently undergoing a total restructuring process where major structural changes, staffing adjustments, changes in skills profiles and significant cost-saving measures have been made. This will increase competitiveness and create opportunities in the market. KAMS completed construction of a workshop in Rygge and in 2020 signed the first agreement for maintenance deliveries for the F135 engine (the engine for the F-35). This project is proceeding according to plan and is set for a significant increase in activity in the coming years. KAMS is further developing its strategic cooperation with the Norwegian Armed Forces and is well-positioned for continued growth in the years to come.

Amongst other things, the Integrated Defence Systems area supplies the NASAMS air defence system, combat systems for submarines and digital solutions for vehicles used by the Army. Operating revenues for the division increased to just under MNOK 2,500 in 2020. The increase in turnover was driven by strong order intake in recent years and an increase in ongoing deliveries to Lithuania, Indonesia, Australia and Qatar. In addition, the division signed a new contract for NASAMS with Hungary in 2020, worth MEUR 410. Hungary became the 12th country to acquire NASAMS.

Progress in projects has not seen major impact from the COVID-19 situation.

Through its Space & Surveillance division and the Kongsberg Satellite Services (KSAT) joint venture, KONGSBERG is the Nordic region’s largest supplier of equipment and services to the aerospace industry. The division saw slightly reduced operating revenues in 2020, but activity in KSAT increased. KSAT is a world leader in the download and distribution of satellite data. KSAT also provides services within areas including environmental, security and climate monitoring and in 2020 signed a contract worth MNOK 405 with the Norwegian International Climate and Forest Initiative for the monitoring and control of global deforestation. 

KDA has a high proportion of exports but the majority of the operations are in Norway. Defence operations have only experienced disruptions as a result of COVID-19 to a lesser extent. Individual contract negotiations were somewhat more time-consuming due to travel restrictions and there have been certain challenges with the supply chain. KDA and KSAT have been classed as socially critical companies. As a result of this, the part of the workforce unable to carry out tasks from home has largely been able to go to work to perform its duties more or less as normal, but with the necessary infection measures in place. In addition, shift systems and other precautionary measures were introduced into production to make the environment less exposed to infection transmission. Progress in projects has not seen major impact from the COVID-19 situation. KDA also saw that many of its customers were extremely adaptable in their use of digital platforms, where collaboration was previously based on physical meetings.

KDA is dependent on several hundred subcontractors, both in Norway and abroad, being able to deliver. Additional resources were deployed to ensure the flow of goods, shipments and, where necessary, alternative subcontractors in the event of production stoppages.

KDA has extensive operations in Johnstown, USA. These operations were defined as socially critical by U.S. authorities and were not affected by the COVID-19 restrictions in the U.S. in 2020. Arsenalet, the factory in Kongsberg which, among other things, supplies critical components for the F-35 fighter aircraft, has so far not experienced any delays in production.

The current worldwide COVID-19 situation may delay expected order intake somewhat in the future, and at worst may result in programmes KDA is positioned for being scaled down or cancelled. However, there are no signs of this yet.

Investing in defence programmes is an extensive and time-consuming process. The customers for large defence systems are national authorities in the respective countries. These customers consider national security and domestic economic development as significant factors, in addition to price and performance, when purchasing defence equipment. National budgets and policies will therefore have a strong impact on whether and when any contract can be entered into with KONGSBERG. The market is not subject to international free trade agreements and is often characterised more by national protectionism than is seen in most other industries. Predictability in the export regulations with respect to defence material and the application of the regulations is therefore an important framework condition for KONGSBERG.

It is important for the Norwegian defence industry that the Norwegian authorities’ emphasis is on repurchase agreements and agreements that secure market access in connection with purchase of defence equipment from abroad. When the Norwegian Armed Forces make significant investments through foreign suppliers, this often ties up a significant proportion of the defence budget. To ensure that military supplies are well adapted to Norwegian conditions and to guarantee a sustainable and competitive Norwegian defence industry, we emphasise the importance of Norwegian participation in such programmes. Both the Government and the Parliament have stressed the importance of industrial participation for Norwegian industry, and that this is in line with international practice. KONGSBERG will continue to emphasise partnerships with major defence contractors and continue to support the local industry in the business area’s markets further. KONGSBERG’s position as an attractive defence supplier in the international market will continue to be based on close cooperation with the Norwegian Armed Forces. This cooperation forms the platform for the development of leading products that are essential for any modern defence system. This also means increased activity for many of the business area’s approximately 1,500 Norwegian subcontractors, based all over the country.


Kongsberg Maritime

MNOK
MNOK
2020
2019
Operating revenues
Operating revenues
16 319
15 198
EBITDA
EBITDA
1 532
1 005
EBITDA margin
EBITDA margin
9.4%
6.6%
Order intake
Order intake
15 925
14 427
Order backlog
Order backlog
11 386
11 311


Operating revenues in 2020 were MNOK 16,319, up from MNOK 15,198 in 2019. In 2019 CM was only included for the last three quarters. EBITDA in 2020 amounted to MNOK 1,532, while the EBITDA margin was 9.4 per cent compared with MNOK 1,005 (6.6 per cent) in 2019. In 2020, a total of MNOK 86 in integration and restructuring costs was recognised linked to the integration of CM. In 2019, a gain of MNOK 107 was recorded related to the sale of Kongsberg Evotec, while MNOK 416 was recorded for total integration and restructuring costs. Risk reduction measures were implemented at an early stage to reduce the financial and operational effects of COVID-19. Furthermore, costs related to, among other things, travel and consultants have been minimal since the pandemic occurred. Some of the savings are directly related to COVID-19 and only in the short term, while other efficiency gains will be lasting.

As part of the acquisition of CM, a comprehensive profitability improvement programme was implemented. By the end of 2020, the programme had achieved MNOK 640 in annual savings. KONGSBERG’s original target was annual savings of MNOK 500 from 2022. This means MNOK 140 of additional annual savings in half of the original time. The programme in its original form is complete, but methods and experiences from the programme will continue to contribute to future efficiency processes. The increased savings compared to the original target stem from additional identified measures as well as faster-than-anticipated realisation. The savings will be made through a raft of measures, relating to both organisation and efficiency, including the restructuring of loss-making entities, the merging of locations, consolidation of delivery functions, optimisation of product portfolios and technological initiatives, as well as reductions in overheads.

In February 2020, KONGSBERG announced that Hydroid Inc. would be sold to U.S. company Huntington Ingalls Industries for MUSD 350 on a cash- and debt-free basis. The sale was completed at the end of March with a recognized accounting gain of MNOK 1,431 after tax. In 2019, Hydroid had operating revenues of MNOK 836 and an EBITDA of MNOK 145 in the Sensors & Robotics division.

KM has a well-established aftermarket network supporting more than 30,000 vessels fitted with KM equipment. The aftermarket accounts for almost half of KM’s revenues.

Order intake during 2020 amounted to MNOK 15,925, equivalent to a book-to-bill ratio of 0.98. Order intake is up by MNOK 1,498 from 2019, but in 2019 CM was only included in the last three quarters. The good order intake and profitability level in 2020 confirm once more that KM is able to adjust to demanding market conditions. KM has diversified exposure and delivers equipment and solutions for most maritime vessel segments, such as traditional transport vessels, offshore, fishing, research, passenger ships and marine robotics. This makes the business area less vulnerable to fluctuations in individual segments.

KM has a well-established aftermarket network supporting more than 30,000 vessels fitted with KM equipment. The aftermarket accounts for almost half of KM’s revenues. KM’s aftermarket revenues are largely excluded from the order backlog. There was good activity in this market in 2020 given the circumstances, but at the same time the COVID-19 situation has affected volumes and therefore made it more challenging to complete certain assignments, partly due to travel restrictions.

Contracting of new vessels has been slow in recent years and in 2020 was at a historically low level. This is also apparent within KM, and the order intake from the new-build market was sluggish in most segments in 2020.

KM has extensive international operations and is directly affected by the downturn in the world economy. From Q2 2020, the business area has experienced a decline in activity in the aftermarket and also in individual segments such as cruises and fishing. General uncertainty as a result of the pandemic, along with uncertainty surrounding the development of oil prices has also meant that planned contracts for new vessels and upgrades have been delayed or cancelled.

Due to the spread of COVID-19, a number of measures were quickly implemented to limit infection, maintain as normal a level of operations as possible and ensure that cost levels were adapted to the level of activity. The measures included extensive use of digital solutions for customer support, furloughs and other cost-saving measures, along with significant infection control measures, including the extensive use of working from home. At most, KM had about 750 employees on leave. By the end of 2020, most of these employees had returned to work. Travel restrictions in various countries have particularly affected aspects of service and the aftermarket. The aftermarket for KM mainly consists of three areas: parts sales, projects and service. Out of these, the pure service elements have been the most affected. Service accounts for about half of KM’s aftermarket operations. With offices and service facilities in 34 countries, project deliveries and major aspects of service assignments are performed locally, which has reduced the consequences of the travel restrictions.

Despite the pandemic, KM delivered solid results in 2020. This would not have been possible without the measures that were implemented. The order intake in certain areas, particularly related to new vessels and the aftermarket, is uncertain. There is therefore still uncertainty regarding the future impact on order intake, operating income and profits.

With new regulations related to IMO2020 (International Maritime Organization’s regulation on maximum sulphur content in maritime fuel globally) and a significantly greater focus on sustainability in the market in general, the demand for environmentally friendly solutions is increasing. KM’s system and propulsion deliveries largely comprise systems which contribute to safer and more efficient operations. This reduces both emissions and risk. KM has also noted increased interest in solutions within concepts for, among other things, offshore wind.

The Norwegian maritime and offshore industry is important for the export industry. The Board therefore emphasises the need for a government industrial policy promoting growth and development in this sector, including competitive conditions and financing solutions.

In August 2020, KDI entered into a new strategic agreement with Shell for the delivery of dynamic digital twins for the company’s global portfolio of installations.


Kongsberg Digital

KDI was established in 2016 as an important step for development of the next generation of digitalised products and services within our core areas. Since its establishment, KDI has taken important steps and had a major breakthrough with its dynamic digital twin Kognitwin® in the autumn of 2019, with the agreement for the Shell Nyhamna process plant. The system was developed and delivered in less than 100 days and has been in operation and continuous development since January 2020. After one year of operation, the preliminary cost savings to the customer have been realised in work process improvements, reduced costs, increased efficiency in the execution of work and energy optimisation. In August 2020, KDI entered into a new strategic agreement with Shell for the delivery of dynamic digital twins for the company’s global portfolio of installations.

There has been a negative effect on demand for traditional maritime simulators in today’s market, but at the same time there was increasing interest in the digital distance learning solution K-Sim® Connect throughout 2020. The software service Sitecom, which is used to obtain real-time data from drilling operations, also showed positive developments in 2020. KDI sees a number of interesting opportunities to further develop an already strong market position.

Investment levels at energy companies are lower, both due to the ongoing COVID-19 situation and uncertainty surrounding oil prices. However, there are great opportunities for solutions contributing to more efficient and sustainable operations. This may affect KDI’s growth. The current situation shows the need for and strength of KONGSBERG’s digital and remote controlled solutions, and in 2021 KONGSBERG will further intensify its efforts.

Comments to the financial statements

Operating revenues

The Group’s operating revenues in 2020 amounted to MNOK 25,612, up 10 per cent from MNOK 23,245 in 2019. KM recorded operating revenues of MNOK 16,319, while KDA recorded corresponding revenues of NOK 8,503 in 2020.

Distribution of revenue

Per cent
  • Kongsberg Maritime 64 %
  • Kongsberg Defence & Aerospace 33 %
  • Other activities 3 %

EBITDA development

EBITDA totalled MNOK 3,250 against MNOK 2,113 in 2019, resulting in an EBITDA margin of 12.7 per cent. EBITDA was affected by MNOK 86 in integration and restructuring costs linked to the acquisition of Rolls-Royce Commercial Marine (RRCM). Correspondingly, EBITDA in 2019 was affected by MNOK 416 in integration and restructuring costs as well as a profit of MNOK 107 related to the sale of Kongsberg Evotec. KDA increased its EBITDA from MNOK 1,123 to MNOK 1,656 between 2019 and 2020, while KM increased its EBITDA from MNOK 1,005 to MNOK 1,532.

Distribution of EBITDA

MNOK

Profit

Earnings before tax were MNOK 1,855, compared with MNOK 833 in 2019. Profit from continuing operations after tax was MNOK 1,481, corresponding to NOK 8.01 per share in 2020, against MNOK 596 in 2019. Profit after tax, including divested operations, was MNOK 2,932 in 2020, corresponding to NOK 16.08 per share, against MNOK 717 in 2019. Return on average capital employed (ROACE) was 20.8 per cent in 2020 (10.0 per cent in 2019).

The board will propose to the general meeting on 6 May 2021 a dividend for the 2020 financial year of NOK 8.00 per share (totaling MNOK 1.440), whereof NOK 5.00 is on top of the dividend policy. In addition, a repurchase programme of shares for cancellation, of a total of MNOK 400, will be proposed. Total remuneration  to shareholders will then amount to approximately MNOK 1,840, which corresponds to just over NOK 10 per share. In comparison, in 2020 an ordinary dividend of NOK 2.50 per share and an additional dividend of NOK 10.00 per share, a total of MNOK 2,250, was paid. A buy-back programme for treasury shares for cancellation was also initiated, for up to MNOK 200. As of 31 December 2020, 188,015 of these shares had been bought back for a total of MNOK 32. The number of outstanding shares, including shares owned by KONGSBERG, was 179,990,065 as of 31 December 2020.

Cash flow

KONGSBERG had a positive cash flow from operational activities of MNOK 2,808 (MNOK 1,883) in 2020. This mainly consists of EBITDA of MNOK 3,250, adjusted for changes in current assets and other operating items as well as EBITDA from divested operations.

In 2020, there was a positive cash flow related to investment activities of MNOK 2,392 (negative MNOK 5,051). Out off this, the sale of the American subsidiary Hydroid Inc contributed MNOK 3,040. The largest outgoing cash flows related to investment activities are MNOK 506 related to the purchase/sale of property, plant and equipment, and MNOK 224 related to capitalised development. In 2019, cash flow from investment activities was affected by MNOK 4,464 related to the acquisition and sale of business, mainly settlement for Rolls-Royce Commercial Marine. Cash flow from financing activities was negative by MNOK 3,531 (MNOK 1,258), mainly related to dividends paid, debt repayments and interest expenses. 

Net change in cash and cash equivalents, after the effect of exchange rate changes, was MNOK 1,766 (MNOK -4,384).

Capital structure

The most important priority for capital allocation for KONGSBERG is having a healthy balance through ensuring that net debt is on a par with EBITDA as a long-term mean, subject to the condition that net debt does not exceed twice the EBITDA. This ensures a balance between creditor and shareholder, and offers security for KONGSBERG’s suppliers and customers. This is important because KONGSBERG is involved in deliveries which extend over many years.

The priorities as regards capital allocation also take into account the company’s dividend policy and are explained in more detail in Note 5 in the annual report. As of 31 December 2020, KONGSBERG’s ratio for net debt/EBITDA was -1.22 (including IFRS 16 effects).

The Group’s equity as of 31 December 2020 was MNOK 13,301, which represents 33.9 per cent of total assets. The Group’s net interest-bearing debt (cash less interest-bearing debt) was MNOK -3,949. At the year-end, long-term interest-bearing debt mainly consisted of three long-term bonds totalling MNOK 1,950. In addition, the Group had two bonds, KOG08 of MNOK 1,000 maturing in June 2021 and KOG12 of MNOK 500 maturing in December 2021. As of 2020, the Group’s revolving credit facility of MNOK 2,300 was unused.

KONGSBERG has historically experienced substantial fluctuations in working capital due to different payment structures for major projects in KDA. This situation is expected to continue.

Foreign currency

The Group’s financial policy stipulates that contracts over a certain size must be hedged upon establishment, and these are largely hedged using currency forward exchange contracts (fair value hedges). In special cases, the Group uses forward contracts as cash flow hedges, e.g. in the case of large tenders where there is a high probability of winning the contract. The Group uses hedge accounting for established forward contracts, which means that changes in the value of hedging instruments and objects are capitalised.

At the end of 2020, the balance of forward contracts related to fair value hedges was MNOK 17,904 measured at the agreed rates. These forward contracts had a net fair value of MNOK 629. In addition, the Group had net purchases of currency equivalent to MNOK 722 as cash flow hedges measured at agreed exchange rates, consisting of forward contracts. At the year-end, these forward contracts had a net positive fair value of MNOK 78.


MNOK

MNOK
KONGSBERG
consolidated1)
Kongsberg
Defence &
Aerospace
Kongsberg
Maritime1)
Other/
eliminations

OPERATING REVENUES 

OPERATING REVENUES 
2020
2 020
25 612
8 503
16 319
790
2019
2 019
23 245
7 245
15 198
802

EBITDA2)

EBITDA2)
2020
2 020
3 250
1 656
1 532
62
2019
2 019
2 113
1 123
1 005
(16)

EBITDA MARGIN2)

EBITDA MARGIN2)
2020
2 020
12.7%
19.5%
9.4%
7.8%
2019
2 019
9.1%
15.5%
6.6%
(2.0%)

NEW ORDERS

NEW ORDERS
2020
2 020
28 818
11 891
15 925
1 002
2019
2 019
31 413
16 060
14 427
926
  1. Figures in the income statement, orderintake and order backlog for 2019 and 2018 are adjusted for discontinued operations. Comparable figures earlier years are not adjusted.
  2. Profit share from joint ventures are no longer included in EBITDA and EBIT. Compareable figures are adjusted.

Outlook for 2021

KONGSBERG has a solid balance sheet and an order backlog of MNOK 35,947. The COVID-19 pandemic continues to affect the world, and there is still uncertainty in a number of the markets in which we operate. At the same time, we see a great degree of adaptability. The development in oil prices, combined with the transition to more sustainable solutions and energy sources, will affect investment levels in a number of segments. The development towards more sustainable solutions provides opportunities, both in markets where we already have strong positions, but also in new markets where KONGSBERG technology will be part of the solution.

When the pandemic hit at the start of the year, all parts of the organisation had both their systems and their abilities tested. New working methods and solutions have been established, including the increased digitisation of day-to-day life. Throughout 2020, the company has demonstrated its adaptability, which is important when both the world in general and our markets in particular are unpredictable. The experience gained through the integration of acquired companies forms the basis for further efficiency improvements. This means that the company enters 2021 with ever-ambitious targets. 

KDA has maintained operations at an almost normal level, but we are prepared for delays. For KM, large aspects of the market have been challenging for a long time, with a low level of vessel contracting in general. This trend is also expected to continue into 2021. At the same time, we are experiencing an increased willingness to invest in new sustainable vessel solutions and new segments such as offshore wind. KM also has a high exposure to markets that are not directly affected by the new contracting of vessels. This applies, among other things, to the area of Sensors & Robotics and the aftermarket, where KM supports more than 30,000 vessels. The company’s global presence and digital solutions for remote services enable us to perform service assignments for our customers to a great extent despite the situation.

In recent years, Kongsberg Digital has made significant investments in the establishment of new digital products and services, and improved positions related to the digitisation of existing businesses. The agreement with Shell, signed in 2020, confirms our leading position in the market for dynamic digital twins. Investment levels at energy companies are lower, both due to the ongoing COVID-19 situation and uncertainty surrounding oil prices. However, there are great opportunities for solutions contributing to more efficient and sustainable operations. This may affect KDI’s growth. The current situation shows the need for and strength of KONGSBERG’s digital and remote controlled solutions.

Out of the solid order backlog, approximately NOK 17,900 is expected to be delivered in 2021. The majority of our order intake from the aftermarket, as well as order intake for associates and from framework agreements, is not part of the order backlog. In 2021, it is expected that the growth at KDA will contribute to continued growth for the Group as a whole. For KDI, some growth is expected, while KM expects an activity level approximately on a par with 2020.

Future strategy and priorities in 2021

KONGSBERG is a global technology company that supplies systems and solutions with extreme performance for extreme conditions. KONGSBERG’s deliveries are of strategic importance for our customers and contribute to the satisfaction of important societal needs and development trends within sectors such as safety, energy, transport and climate. Our technology makes critical operations for sustainable future solutions possible.

KONGSBERG’s focus is to ensure increased competitiveness, while also laying the foundations for sustainable and profitable growth. Growth will come through a combination of organic growth and acquisitions. Organic growth is based on development and expansion of existing products, services and market positions as well as developing or putting together new products for new markets. KONGSBERG is continually investing in product and system development and aims to maintain a leading position with regard to innovation and technology development within the Group’s core areas.

KONGSBERG’s strategy has been consistent throughout 2020, despite significant market changes during the COVID-19 pandemic. The company has stuck to its strategic priorities, ambitions and targets throughout the year, and the organisation showed great adaptability in the face of changing conditions and delivered good results in a year of great challenges.

KONGSBERG has world-leading products and systems for the international defence market. The main focus for KDA is to secure strategically important contracts and achieve growth in selected geographical areas, both through our own activities and in collaboration with partners. KONGSBERG is aiming to continue to be a strategic partner for Norway, to become a leading defence supplier in Northern Europe and to strengthen our position in the USA. Through strong alliances with partners in the U.S., KONGSBERG has made important breakthroughs with, among other things, missiles and air defence systems in the U.S. market and internationally. It is important to secure and develop these alliances further. KONGSBERG has a good and long-lasting cooperation with the Norwegian Armed Forces, which is important for continued international success.

KONGSBERG has leading positions in the marine market. KM has delivered on all its synergy targets relating to the integration with Rolls-Royce Commercial Marine in 2020, and the “value capture” programme announced when the company was acquired was completed two years earlier than originally planned. KM has delivered good results in a demanding maritime market and utilised its international sales and service apparatus to exploit business opportunities for additional sales within our leading portfolio of integrated solutions and products from bridge to propeller. KM has identified important focus areas within green shipping and intelligent vessels, where our technologies are global leaders and contribute to more efficient and sustainable solutions for the maritime sector. KM also has a strong focus on efficiency measures to increase profitability and improve ESG indicators for the industry in the coming years.

KDI is well-positioned to become a key player within the digital transformation. In 2020, KDI improved its market positions and entered into important agreements such as the framework agreement with Shell for Kognitwin. KDI has also increased its Vessel Insight customer base with strategic partner agreements with MAN and ABB Turbocharger, and completed the successful acquisition of Coach Solutions. Despite a generally challenging market in maritime simulation, KDI has seen positive developments in innovative digital products for distance learning.

An important area of focus for KONGSBERG in the future is to ensure that KDI has the necessary resources and capacity to further scale up and improve positions within these key sectors.

The business areas’ priorities in 2021

Kongsberg Defence & Aerospace
  • Ensure good implementation of the major ongoing defence programmes.
  • Take up a leading position as a defence supplier in Northern Europe.
  • Further strengthen existing positions in the USA.
  • Consolidate strategically important contracts.
  • Further develop cooperation with Patria, and together with KAMS develop into a strong, international player within military maintenance.
  • Expand our deliveries within aerospace operations (Space), for both the commercial and defence markets.
  • Ensure international market opportunities and industrial co-operation related to Norwegian defence investments.
  • Increased focus on efficiency measures.
Kongsberg Maritime
  • Take advantage of our bridge-to-propeller portfolio and sales and service set-up to maintain our position as a leading supplier to the maritime industry.
  • Continue work on harmonising our product portfolio. 
  • Continue with product innovation along with the development of revolutionary concepts in digitisation, autonomy and green shipping.
  • Improve profitability with an increased focus on efficiency measures.
Kongsberg Digital
  • Continue to invest in digitalisation of the maritime market through “Vessel Insight”.
  • Ensure further development of KDI through order intake from priority areas such as “Dynamic Digital Twin”.
  • Contribute to innovation and digital transformation of the cloud-based platform “Kognifai” through collaboration with partners. 
  • Ensure that KDI has the necessary resources at its disposal to take up strong positions within priority sectors.

KONGSBERG shares and shareholders

By the end of 2020, the price of KONGSBERG shares had gone up from NOK 138.00 at the end of 2019 to NOK 176.20. This gives a market value at the end of 2020 of MNOK 31,714.

KONGSBERG shall provide the equity market with relevant, comprehensive information as the basis for a balanced, correct valuation of the shares. The Group emphasises maintaining an open dialogue with the equity market and media.

By the end of 2020, the price of KONGSBERG shares had gone up from NOK 138.00 at the end of 2019 to NOK 176.20. This gives a market value at the end of 2020 of MNOK 31,714. Including a dividend of NOK 12.50 per share, the return in 2020 amounted to 36.7 per cent. The benchmark index on the Oslo Stock Exchange (OSEBX) rose by 1.8 per cent during the same period. As of 31 December 2020, KONGSBERG had 14,683 shareholders (12,680). The Group had 916 (895) foreign shareholders, who collectively owned 17.76 per cent (19.78 per cent) of the shares. The Norwegian State, represented by the Ministry of Trade, Industry and Fisheries, is the largest shareholder with 50.004 per cent of the shares. At the end of the year, the 10 largest shareholders held a total of 71.99 per cent (70.79) of the shares. The number of shares outstanding is 179.99 million, each with a nominal value of NOK 1.25. By the end of 2020, KONGSBERG held a total of 191,387 (16,779) treasury shares. Of these, 188,015 shares were related to a buy-back programme of up to MNOK 200, half of which were repurchased in the market. The remaining shares, up to MNOK 100, will be purchased from the State from the Ministry of Trade, Industry and Fisheries, in accordance with an agreement between KONGSBERG and the Ministry. The shares were repurchased under the authorisation given to the Board by KONGSBERG’s annual general meeting on 14 May 2020. KONGSBERG will ask the Annual General Meeting in 2021 for approval to cancellation shares repurchased under this programme.

KONGSBERG has paid dividends to its shareholders every year since the company was listed in 1993, except for in 2000 and 2001. The company’s dividend policy was changed in 2020. The new dividend policy reads: “KONGSBERG’s aim is to pay an ordinary dividend per share that is stable or growing from one year to the next. Additional dividends and/or repurchases of own shares can be used to supplement ordinary dividends. All payments to shareholders will be subject to the company’s assessment of future capital requirements.”

In 2020, a total of 66.4 million (30.3 million) KONGSBERG shares were traded in 185,702 (146,762) transactions. The company works actively to promote interest in the share through activities within the investor markets. KONGSBERG is regularly represented at road shows, meetings and conferences both in Norway and abroad. In 2020, this activity was largely digital. The goal for 2021 is to maintain the high activity against the investor market. Investor presentations are held in connection with each quarterly report.

The Board believes that employee share ownership is positive. Employees can buy shares in the company through the annual share programme. During the spring of 2020, the Group’s annual share programme for employees was carried out for the 24th time. Shares were sold to employees with a 20 per cent discount on the market price.

In 2020, employees were offered shares for up to NOK 29,764 after discount. A total of 1,021,326 (875,151) shares were sold at a price of NOK 106.30 (20 per cent discount on the market price). 3,982 (3,225) employees took advantage of the offer.


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Risk factors and risk management

KONGSBERG is exposed to various forms of risk, which the Board monitors by considering individual matters and reporting risk to the Board. The Board is of the opinion that there is a healthy balance between the overall risk and the Group’s capacity to deal with risk. The administration prepares monthly operating reports and quarterly risk reports which are considered by the Board. The administration conducts risk analyses in connection with major investments and customer contacts, strategic initiatives and acquisitions and sales of activity. The Audit Committee is a preparatory body for the Board, dealing with the financial statements and relevant assessment issues, compliance issues, and the evaluation of internal control and risk management within the Group. The Audit Committee meets, as a minimum, in connection with the issue of annual and interim financial statements.

The Group’s activities are international with delivery of high-tech systems and solutions, primarily to customers within the maritime and defence markets. Market risk could therefore vary somewhat within these different segments. A strong international presence and global dependency mean the Group is vulnerable to factors which impact on international trade, currency and the global economy generally.

The effects of the pandemic have affected business areas to varying degrees. KM has seen a more uncertain market and reduced activity in a number of areas, while KDA has been less affected. In particular, KDI has seen a decline in the area of Maritime Simulation.

The COVID-19 outbreak brings great uncertainty for the entire value chain going forward, given travel restrictions, quarantine regulations and other infection control considerations. The effects of the pandemic have affected business areas to varying extent. KM has seen a more uncertain market and reduced activity in a number of areas, while KDA has been less affected. In particular, KDI has seen a decline in the area of Maritime Simulation. There is a more detailed description of this in the sections on the business areas above. As long as the pandemic is ongoing, we must expect continued uncertainty in some markets, and that a resurgence of infection could adversely affect activity levels. A major outbreak at KONGSBERG could also lead to periods of lower activity and delays in deliveries to customers. The Group has implemented and will continue to implement new preventive measures in accordance with the relevant authorities’ applicable guidelines. This is to protect our own employees and business connections and, as far as possible, ensure normal operations.

At KDI, the Maritime Simulation area in particular has been affected due to a drop in demand in the market. This is expected to last as long as the pandemic continues.

When preparing the annual accounts, assessments have been made in relation to possible COVID-19 impacts on the accounting items. Lower activity among customers and suppliers, travel restrictions and an increased risk of delays to projects as a result of temporary closures and a lack of inputs are expected to affect sales, profits and order intake. In addition, there is a greater risk of the cancellation of customer contracts and late or non-payments as a result of large parts of the customer base being affected, which could lead to the increased risk of losses on accounts receivable, goods, project assets and currency futures. In 2020, the Group has had only limited losses and write-downs.

The offshore market comprises exploration, development, production and transport of oil and gas. There are also support functions such as supply services, operational support, as well as maintenance and service on platforms and vessels. KONGSBERG is a supplier of products and services for all these segments. The demand for energy and oil price development will impact the willingness to invest in this market. Investment levels can also vary between the various geographical areas depending on, for example, oil reserves and the level of exploration and production activities. Despite strong development in individual segments such as LNG, there has generally been a negative trend in the oil and gas and offshore markets in recent years. A persistently sluggish environment, in which markets that have been strong over the past year are also being affected, will increase the Group’s risk and may impact on its activity levels. The uncertainty surrounding future developments in oil prices affects investment levels in several segments, while at the same time providing opportunities in other segments where KONGSBERG’s technology can make a difference. Throughout 2020, there has also been a further increase in the focus on sustainability. This affects investors and lenders in their assessments and could further affect KONGSBERG and our customers’ and suppliers’ activities and priorities in the future.

The merchant marine market includes all types of vessels from dry cargo ships to advanced tankers. Passenger ships in cruise and ferry traffic are also an important part of the market. Contracting of new ships is closely linked with the expected development in transport demand. Global economy development influences the demand for water transport of people, energy, raw materials and manufactured products. The type of ship and geographical areas also influence the market. Within a number of segments, the market for new-build vessels is at a low level compared with previous years, and there is considerable uncertainty linked to further development in the short- to mid-term.

Lower shipbuilding activity has led to increased competition. More challenging oil and gas fields, increased sustainability requirements and significant focus on costs in the industry in general create new opportunities in the market, which in turn creates the need for new technological solutions. Through the acquisition and integration of RRCM, the Group has expanded KM’s delivery scope, thus reducing the risk of marginalisation and strengthened its market position.

The acquisition of RRCM in 2019 was a significant transaction for the Group, and it has been crucial to integrate the business into KM successfully and quickly. KONGSBERG has achieved this and we are ahead of schedule as regards the integration and restructuring of the company. In the opinion of the Board, the risks arising from the acquisition have been well-managed.

Products and systems are delivered for land-, air- and sea-based defence in the defence market. Due to strict security requirements and protection of various countries’ own defence industry, it is often difficult for defence suppliers to win defence contracts outside their home country. There is a significant degree of protectionism in Europe and the U.S. as well as for the defence market in general. However, there are still opportunities through long-term relationships and niche products, and this is partially safeguarded through KONGSBERG’s relationships with a number of major foreign defence companies.

KONGSBERGs business is mainly towards markets that to a large degree is influenced by technological developments, ones that may affect KONGSBERG’s leading position with regards to technology. Every year, the Group invests significant funds in developing new and existing products to win new business and maintain our market position. Cyclical fluctuations will also influence the markets to various degrees and at different points in time. Export control regulations and sanctions may result in uncertainty about market opportunities. In 2020, we have seen an increased attention on the restriction of exports of technology products through export control regulations, and combined with the ongoing trade war between the U.S. and China, the risk linked to restrictions on market access and sanctions is somewhat higher than before.

KONGSBERG delivers systems and solutions of high technological complexity, and the deliveries are typically organised as projects. Effective project management is therefore a key success factor in reducing operating risk. KONGSBERG has established project management goals based on internal and external “best practices”, and project managers attend training programmes. The projects’ revenues are largely based on contracts, and the uncertainty is largely related to estimating the remaining costs and determining the percentage of completion, but also counterparty risk and warranty obligations. The Group has established principles for categorising projects in terms of technological complexity and development content. This forms the basis for an assessment of implementation risk and recognition of revenue in the projects.

KONGSBERG is exposed to financial uncertainty through currency risk, interest risk, credit risk and liquidity risk. The aim is to reduce financial risk and through this, improve predictability within the Group. KONGSBERG’s financial risk is managed centrally by guidelines for financial risk management adopted by the Board and included in the Group’s financial policy. The Group’s financial risk management is described in Note 5 to the financial statements, “Management of capital and financial risks”. The Group has a diversified customer base, mainly comprising public sector institutions and larger private companies in numerous countries. Historically, the Group has had low losses on receivables. Measures to limit the risk exposure are implemented continuously where the administration deems it necessary. The Group’s liquidity risk is managed centrally through the refinancing of loans and available capital, as well as the use of liquidity prognoses.

With a high proportion of net income in currencies other than Norwegian kroner, KONGSBERG is exposed to fluctuations in the foreign exchange markets. We seek to reduce currency risk through the exercise of the Group’s financial policy, which states that contracts above a certain size must be hedged upon signing. These are mainly hedged using forward contracts (fair value hedges). In special cases, the Group uses forward contracts as cash flow hedges, e.g. in the case of large tenders where there is a high probability of winning the contract.

KONGSBERG has recognised substantial book values in the balance sheet which are justified by future cash flows. Any reduction in cash flows may affect the value of the assets. In 2016, KONGSBERG purchased 49.9 per cent of the shares in the Finnish company Patria, which had a book value of MNOK 2,841 as of 31 December 2020. Patria’s results were poor in the periods after the acquisition, but showed a clear improvement in 2020. A persistent deterioration in Patria’s results could mean that it will be challenging to defend the book values. Deferred tax benefits have also been reported based on tax losses dependent on future tax earnings in order to be utilised.

KONGSBERG has for several years established and developed its compliance functions. Regulations, as well as monitoring and reporting systems, are established for managing risks related to areas such as anti-corruption, export controls and sanctions, supply chains and whistle-blowing. Training within the area of ethics and compliance is carried out in the entire organisation, both in Norway and abroad.

We conduct periodic evaluations of our compliance and anti-corruption programme. A new external evaluation of KONGSBERG’s anti-corruption programme was carried out in 2020. The evaluation confirmed that the programme complies with national and international laws and expectations. The Board considers KONGSBERG’s compliance programme to be at a very good level.

As a high-tech company, KONGSBERG is constantly exposed to threats associated with data security and is under constant pressure from different external players. In essence, it is at risk of data virus attacks, attempts at hacking, social engineering and phishing scams. Executive management prioritises and focuses on monitoring and other measures to prevent being compromised. To be as well equipped as possible against this type of threat, KONGSBERG has established the Kongsberg Cyber Security Center, and works closely with the National Security Authority and a number of leading competence environments. This, together with providing employees with information and training, helps to ensure that the Group continuously improves its ability to withstand these threats.

Technology, research and development

A significant portion of KONGSBERG’s deliveries consist of developing high-tech solutions for domestic and international markets. KONGSBERG’s technology platform has been systematically built up over many years and is an important factor for our competitiveness. There is significant technology transfer between the different parts of the Group. Future-proof technological expertise within digitalisation is being built up in KDI. We are also working with our main technology partners to further develop our technology platform. KONGSBERG continuously invests in product and system development, both internally financed and through customer-funded programmes. In total, the Group spends about ten per cent of operating revenues on product development.

Sustainability and ESG

KONGSBERG shall represent sustainable development characterised by a sound balance between economic performance, value creation and environmental, social and governance (ESG) aspects. Sustainability and ESG are integrated into the Group’s strategy processes. Sustainable technological innovation is a central element in contributing towards solving the major global challenges the world faces. For KONGSBERG, this means business opportunities in several markets viewed in the light of our broad technological and skills platform. We are conscious of the risk associated with our licence to operate, both in terms of compliance with laws and regulations, as well as development in terms of resource scarcity, world turmoil, developments in global megatrends and similar. KONGSBERG has, and will continue to have, a great focus on anti-corruption and corporate social responsibility in its supplier network, as well as on the follow-up of human and workers’ rights, both in our own organisation and with our business partners. Reference is made to the chapter in the annual report on corporate responsibility for a more detailed description of the Group’s corporate social responsibility efforts.

Our most significant contribution to achieving the sustainability goals is the supply of high-tech products and services, which reduce our customers’ emissions of harmful greenhouse gases.


Climate and environment

The climate and environmental statement provides an overview of KONGSBERG’s consumption of energy, CO2 emissions and waste processing. The Group’s most significant positive contribution to the climate challenges is that an increasing number of our products and solutions are contributing in various ways to reduced emissions. This is central to our business strategy.

A detailed overview of the climate and environmental statement for 2020 can be found in the Group’s 2020 sustainability report (see the chapter on climate).

The Group has had a target of reducing annual CO2 greenhouse gas emissions by 20 per cent relative to turnover by the end of 2020, with the baseline in figures as of 31 December 2015. During these five years, the company has undergone major changes and seen strong growth, both organically and through acquisitions. In 2020, the business was affected by the COVID-19 pandemic, which led to a reduction in travel in particular, while managing to increase our turnover. The target of reduction measured in relation to turnover was achieved by the end of 2020, while the conditions described above have had a major impact on climate effects, making comparisons difficult.

We will implement a new climate strategy with effect from 2021 to 2030, with the aim of being in line with Norway’s climate plan and the EU’s objectives.

No serious incidents related to environmental pollution were reported in 2020.

Health, safety and the environment

The Board believes that health, safety and environment must be managed in a way that promotes job satisfaction and a sound working environment. Health, safety and the environment is important for KONGSBERG and is part of our licence to operate. One basic principle is that HSE work should be preventive, and the importance of this was reinforced during the COVID-19 pandemic.

Work has been ongoing throughout the pandemic to protect lives and health in the Group. The central crisis team and the crisis teams in the business areas have worked closely together, with a tightly knit team of around 20 dedicated employees working on analyses, risk assessments and preventive measures. The main focus has been on creating the right conditions to ensure appropriate operations in the Group. The crisis team has continually prepared status reports and recommendations for the Corporate Executive Management.

The Board is closely monitoring the work by reviewing HSE reports quarterly.

A global HSE campaign was rolled out in 2020 to strengthen the focus on mental health and well-being via the year’s “Global HSE day”. During the year, various training initiatives and campaigns were carried out which, based on risk analyses and incidents that have occurred, are helping to prevent further incidents and promote a strong HSE culture. Extensive use of homeworking has meant various digital learning platforms have been used to provide training at times when attending the workplace in person has not been possible. The number of occupational incidents with and without absence (“TRI”) dropped from 2.3 in 2019 to 1.67 in 2020. The number of registered incidents which resulted in absence decreased from 30 in 2019 to 26 in 2020. Total sick leave in the Group increased from 2.6 per cent in 2019 to 2.9 per cent in 2020. For companies in Norway, sickness absence is 3.2 per cent, compared with 3.1 per cent in 2019. The COVID-19 pandemic has had some effect on sick leave. This applies especially to situations where employees have been required to be quarantined without access to their own work tasks. There is systematic follow-up of employees on sick leave, with particular focus on getting long-term absentees back to work. Further details about key sustainability figures for HSE can be found in the Group’s report on sustainability.

All employees in Norway have access to company health services. This varies in accordance with local practices and legislation in our foreign business activities. At the end of 2020, 38 per cent of KONGSBERG’s employees were based outside Norway. This requires additional attention and insight with respect to HSE issues in the countries in which we operate.

The integration of the new companies within the Group has also been afforded considerable attention. Through the exchange of experience, good, shared knowledge has been established concerning the various HSE risk areas of the entities concerned.

Geographical distribution of revenues

Per cent
  • Africa 2 %
  • Norway 20 %
  • Australia 2 %
  • Rest of Europe 27 %
  • Central and South America 1 %
  • North America 27 %
  • Asia 21 %

Geographical distribution of employees

Per cent
  • Asia 12 %
  • Norway 62 %
  • Central and South America 1 %
  • Rest of Europe 19 %
  • North America 5 %
  • Australia 1 %


Personnel and organisation

Number of employees
Number of employees
31 Dec 20
31 Dec 19

Kongsberg Defence & Aerospace

Kongsberg Defence & Aerospace
3 189
2 917
Kongsberg Maritime
Kongsberg Maritime
6 815
7 212
Other
Other
685
664
Total in the Group
Total in the Group
10 689
10 793
Proportion outside Norway
Proportion outside Norway
38%
40%


KONGSBERG has a unique and strong corporate culture that has been developed over many years.  We have welcomed many new colleagues across the world in recent years. We are entering new markets and facing stronger competition. One of our most important resources in such a situation is the strength that lies in our clear group identity, our vision and our values. Therefore, we launched a process to revitalise our values at the company’s annual strategy meeting in January 2020.

Individuals and teams who comply with our values and demonstrate good behaviour are to be appreciated. This culture will help us to attract people with the right skills and behaviour to address the technical challenges of tomorrow in a sustainable manner.

The value of collaboration is fundamental to our business. The “Collaboration Award” is an award given to recognise groups and projects where collaboration has been crucial to successful results. In 2020, the prize was awarded for the third time, and the winner was the Counter Unmanned Aerial System (C-UAS) project. The project is a collaboration between Kongsberg Defence & Aerospace, Kongsberg Seatex and the Norwegian Defence Research Establishment. The parties developed a solution with significant market potential in both military and civilian domains. The collaboration between the parties has been outstanding on all levels, with open dialogue and exchange of information on agreements, business plans, roadmaps and technology.

Leadership in KONGSBERG is about creating value and achieving results through people. The key to success lies in the combination of good management and dedicated employees. Managers shall exercise their leadership based on our values, the Corporate Code of Ethics and management principles. Our managers must create an environment in which our employees will prosper and succeed in meeting the strategic priorities of customer satisfaction, innovation and operational excellence. On the basis of this, we have implemented a management development programme, Leadership@KONGSBERG, that will contribute to clarifying and quality-assuring processes for goal-setting, follow-up and evaluation. In 2020, a high proportion of our employees worked from home due to COVID-19, and we have therefore prioritised the close follow-up of employees and clear leadership.

An important condition for long-term success is that KONGSBERG properly manages employee competencies. The Group is aiming to increase the exchange of knowledge and staff between the business areas. Good work processes and development opportunities are important incentives in recruiting and retaining good employees. KONGSBERG places emphasis on strengthening competences and is continuously working to develop its employees. 55 per cent of KONGSBERG’s employees have college or university level education.

The Group educates skilled workers within several disciplines in cooperation with the education company Kongsberg Technology Training Centre AS, partly owned by KONGSBERG. For the “Collaboration Award”, 30 candidates were proposed that were good examples of the exchange of skills across the Board. Another example in addition to the aforementioned C-UAS is the marine vessel concept Vanguard, where marine systems from KDA are combined with vessel systems from KM. During 2020, there were 154 apprentices in total. In addition, the company facilitates and stimulates employees to acquire apprenticeship completion certificates as private candidates, known as practice candidates.

Cooperation with employee unions and organisations through established cooperation and representation arrangements is well functioning and constitutes a valuable contribution to meeting the Group’s challenges in a constructive manner.

Diversity

Diversity and gender equality add value and increased competitiveness. They expand the mindset and have a positive influence on the company’s strategy and management. This is why we work systematically and purposefully to recruit and develop people of different ethnic backgrounds, age and gender.

A total of 2,153 (20.1 per cent) of employees are women, and two of five shareholder-elected directors on the Board are women. As of 31 December 2020, there were two women on the corporate management team. The company considers it important to promote gender equality and prevent discrimination in conflict with the Gender Equality Act. Long- and short-term goals have been established to help increase the percentage of women in the Group, both in terms of employment and in terms of management positions. As far as is possible, KONGSBERG tries to adapt working conditions so that individuals with diminished functional abilities can work for the Group. The Board Compensation Committee has a particular responsibility for follow-up on diversity. In the opinion of the Board, the Group complies with current regulations.

See chapter on "Health, Safety and the Environment & Our Employees" in this report for a closer description of the company’s work with regards to diversity.

Corporate governance

KONGSBERG’s objective is to secure and increase stakeholder value through profitable and growth-oriented industrial development with a long-term, sustainable and international perspective. Good corporate governance and corporate management shall reduce business-related risk, while the company’s resources shall be utilised in an effective and sustainable manner. Values created should benefit shareholders, employees, customers and society in general. The Board considers it important to review and update the Group’s corporate governance documents annually to comply with the “Norwegian Code of Practice for Corporate Governance” (NUES).

According to Section 3-3b of the Accounting Act, the company shall prepare a statement on corporate governance. The statement will, pursuant to Section 5-6 of the Public Limited Companies Act, be discussed at the Annual General Meeting. The description in chapter 4 of the annual report is based on the latest revised version of the Norwegian Code of Practice for Corporate Governance of 17 October 2018.

Remuneration to executive management

The Board has a separate Compensation Committee which deals with all significant matters related to remuneration for Executive Management before the formal discussion and decision by the Board. In line with the Norwegian Companies Act, the Board has also prepared a statement on the remuneration of the Group CEO and Executive Management included in Note 29 to the consolidated financial statements.

Profit for the year and allocation

The parent company Kongsberg Gruppen ASA made a net profit of MNOK 3,156 in 2020. The Board proposes the following allocation of profit for the year in Kongsberg Gruppen ASA:

Dividend
Dividend
MNOK
1 440
From equity
From equity
MNOK
1 716
Total available
Total available
MNOK
3 156

The proposed dividend amounts to 49 per cent of the Group’s ordinary annual profits and 97 per cent of profits from continuing operations after tax.

Going concern

In compliance with Section 3-3a of the Norwegian Accounting Act, it is confirmed that the going concern assumptions continue to apply. This is based on forecasts for future profits and the Group’s long-term strategic prognoses. The Group is in a healthy economic and financial position.



Kongsberg, 16 March 2021


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