Kongsberg Gruppen : Financial presentation.

Positioned for

tomorrow

12/11/2020

Gyrid Skalleberg Ingerø,

Group Executive Vice President & CFO

KONGSBERG PROPRIETARY: This document contains KONGSBERG information which is proprietary and confidential. Any disclosure, copying, distribution or use is prohibited if not otherwise explicitly agreed with KONGSBERG in writing. Any authorised reproduction in whole or in pa rt, must include this legend.

© 2020 KONGSBERG - All rights reserved.

DISCLAIMER

This presentation contains certain forward-looking information and statements. Such forward-looking information and statements are based on the current, estimates and projections of the Company or assumptions based on information currently available to the Company. Such forward-looking information and statements reflect current views with respect to future events and are subject to risks, uncertainties and assumptions. The Company cannot give assurance to the correctness of such information and statements. These forward-looking information and statements can generally be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use terminology such as "targets", "believes", "expects", "aims", "assumes", "intends", "plans", "seeks", "will", "may", "anticipates", "would", "could", "continues", "estimate", "milestone" or other words of similar meaning and similar expressions or the negatives thereof.

By their nature, forward-looking information and statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company to differ materially from any future results, performance or achievements that may be expressed or implied by the forward-looking information and statements in this presentation. Should one or more of these risks or uncertainties materialize, or should any underlying assumptions prove to be incorrect, the Company's actual financial condition or results of operations could differ materially from that or those described herein as anticipated, believed, estimated or expected.

Any forward-looking information or statements in this presentation speak only as at the date of this presentation. Except as required by the Oslo Stock Exchange rules or applicable law, the Company does not intend, and expressly disclaims any obligation or undertaking, to publicly update, correct or revise any of the information included in this presentation, including forward-looking information and statements, whether to reflect changes in the Company's expectations with regard thereto or as a result of new information, future events, changes in conditions or circumstances or otherwise on which any statement in this presentation is based.

Given the aforementioned uncertainties, prospective investors are cautioned not to place undue reliance on any of these forward-looking statements.

WORLD CLASS - Through people, technology and dedication

KONGSBERG PROPRIETARY - See Statement of Proprietary information

2

Solid revenue and EBITDA growth

Including acquired -and excluding divested companies

Revenue development 2015 - LTM Q3 2020

BNOK

	26.4
	23.2
	8.4
16.5	7.2
15.3

14.0 13.8

5.8

	6.3	6.3	6.1
			17.3
				15.2
9.2	7.5	6.4	7.0
2015	2016	2017	2018	2019	LTM Q3 2020

EBITDA margin development 2015 - LTM Q3 2020

20%

18%						19.0%
16%
14%
12%						11.8%
10%
8%						8.5%
6%
4%
2%
0%
				20191
2015	2016	2017	2018	LTM Q3
						20201

KONGSBERG MARITIME

KONGSBERG DEFENCE & AEROSPACE

Other

KONGSBERG

KONGSBERG MARITIME

KONGSBERG DEFENCE & AEROSPACE

WORLD CLASS - Through people, technology and dedication

KONGSBERG PROPRIETARY - See Statement of Proprietary information

3

1) Included effects from IFRS16 from 2019

Improved return on capital

ROACE (%) and AVERAGE CAPITAL EMPLOYED (BNOK)
			▪	Patria investment and Commercial Marine
				(CM) acquisition drive capital employed
33.6%
				‒ Acquisition of CM fully reflected in capital
9.9%	14.1%	18.1%		employed as of LTM Q3 2020
10.1%	10.0%		▪	Increased ROACE driven by profitability

improvement

9.710.2

6.5	7.3	6.3

• Turn around & synergies realisation in CM/KM

				2.7							‒ Increased scale and good project execution in
										defence
				2015	2016	2017	2018	2019	LTM Q3 2020
		ROACE %			AVERAGE CAPITAL EMPLOYED (BNOK)
WORLD CLASS - Through people, technology and dedication	KONGSBERG PROPRIETARY - See Statement of Proprietary information	4

Solid backlog

Backlog development (BNOK)

33.3

		31.7
	12.7	10.7
17.0
5.0	14.0	14.8
8.3
3.7	6.6	6.3
Q3 2018	Q3 2019	Q3 2020

Current year Next year Next year +

• Backlog "Next year" increased compared to last year
• Approximately 2/3 of backlog related to defence projects
• Backlog does not include;
• • framework agreements
  • majority of aftermarket in KM
  • associated companies
  • SaaS revenues

WORLD CLASS - Through people, technology and dedication

KONGSBERG PROPRIETARY - See Statement of Proprietary information

5

Updated ambitions towards 2022

Revenue target towards 2022 (BNOK)

> 30

24

2019

2020

2021

2022

Target EBITDA margin 2022 (%)

	> 13%
	KONGSBERG
	MARITIME
> 14%	> 16%
KONGSBERG
KONGSBERG	DEFENCE &
AEROSPACE
	> 14%
	KONGSBERG
	DIGITAL &
	OTHER

Updates compared to CMD 2019

• EBITDA target updated to include IFRS16
• • All target adjusted up with 2%p
• Hydroid sold in March 2020
• Income from associated companies no longer included EBITDA

WORLD CLASS - Through people, technology and dedication

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6

Priorities towards 2022

1.	Key success
	factor
2.	Profitability

KONGSBERG	KONGSBERG
MARITIME	DEFENCE & AEROSPACE

Adapt to changing market

Growth/ramp-up

Efficiency focus

andBenefit on scale and cost focus product harmonisation

New opportunities and execute on

KONGSBERG

DIGITAL

Scale

SaaS business model

Continue to roll out digital applications

3. Growth

Cross sales and green technology

strategic steps

and products

WORLD CLASS - Through people, technology and dedication

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7

Net working capital

KONGSBERG MARITIME

BNOK
2.5		20%
		17%
2.0				13%
1.5					9%	6%	9%
1.0
	1.9	1.4				1.6
0.5			0.9		0.9
			0.7
0.0
	2015	2016	2017	2018	2019	Q3 2020

• Net working capital largely driven by project mix
• Net working capital expected to fluctuate going forward
• Net working capital adjusted for acquired and divested companies

KONGSBERG DEFENCE

BNOK

AEROSPACE&	4.0

8%

2.0
0.0	0.5
-2.0

2015

NWC % OF REVENUE

14%
	(2%)
0.9
(0.1)
				(0.7)
				(1.1)	(1.1)
		(12%)	(15%)	(14%)
2016	2017	2018	2019	Q3 2020
NWC KONGSBERG MARITIME			NWC KONGSBERG DEFENCE & AEROSPACE

• Significant fluctuations in net working capital driven by;
• • Payment structure from customer
  • Project timeline within large projects

WORLD CLASS - Through people, technology and dedication

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8

Cash, debt and bond maturity profile

Cash and Interest bearing debt (BNOK)

BNOK
10.0
										2.0
5.0							10.0
						3.0		5.7	6.1
0.0		1.8	1.9
				4.1	3.3		4.1		3.5
		0.9	4.3
-5.0		2015	2016	2017	2018	2019	Q3 2020

• ~2.5 BNOK of advance payments from customers
• Cash "looked in operation" increased post CM acquisitions
• • Expected to gradually be reduced going forward
• Increased currency exposure as business grow

Bond maturity profile

BNOK

1.50

1.5

KOG12

1.0						1.00
0.5	KOG08		0.45	0.50		KOG09
			KOG11	KOG13
0.0
2021	2022	2023	2024	2025	2026

• Spread maturity profile
• Evenly split between floating and fixed interest rate
• Undrawn committed credit facilities of BNOK 2.8

Cash Interest bearing debt Extraordinanry dividend & SBB

WORLD CLASS - Through people, technology and dedication

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9

Leverage ratio and capital structure target

2.5		2.2
2.0
1.5
1.0											Target
0.5			0.4
0.0
(0.6)					(0.6)
-0.5						(1.1)
(0.6)
-1.0							(0.9)
-1.5						(4.4)
								(1.7)
						(5.1)
-5.5
2015	2016	2017	2018	2019	Q3 2020
Net debt/EBITDA1	Rights issue		EOD		Target range

Net debt/EBITDA of 1.0x +/- 1.0 securing;

• Access to funding
• • Investment grade credit rating equivalent securing access to debt capital markets
• Customer confidence
• • Long-termview in strategy and execution
  • Ability to handle fluctuating working capital
  • Foreign exchange hedging policy
• Financial flexibility

WORLD CLASS - Through people, technology and dedication

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10

1. Ex. IFRS16 and adjusted for Hydroid

Technology development securing our positions

Self-funded R&D ex. Product maintenance by business area 2013 - LTM 2020

5.0%	5.4%	5.0%	6.7%	5.9%	5.6%	4.2%	4.2%
			1.06				1.11
					0.98
			0.18			0.14
	0.90	0.85	0.85		0.14
0.81			0.78	0.23
0.16	0.14		0.17
0.12			0.19
	0.33	0.14
	0.21
0.18	0.20		0.20	0.14

• Invest for the future and secure #1 position
• Benefit from customer funded R&D
• Benefit from various civilian support schemes

						0.65	0.74
0.51	0.53	0.51	0.55
0.48	0.49
2013	2014	2015	2016	2017	2018	2019	LTM Q3 2020

• ~20% of annual R&D capitalized

% SHARE OF REVENUE KONGSBERG MARITIME KONGSBERG DEFENCE & AEROSPACE OTHER

WORLD CLASS - Through people, technology and dedication

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11

Benefiting from civilian R&D support scheme

Committed funding as of 2020…		…results on sustainable products and solutions

WORLD CLASS - Through people, technology and dedication

KONGSBERG PROPRIETARY - See Statement of Proprietary information

12

Aligning dividend policy with financial strategy

			Historical Pay-out Ratio (%)					Shareholder Remuneration (NOK)
	Total dividend	Ordinary dividend
	%							NOK					Increased # of
						276%						shares due to equity	13.61
280							14
	130%											issue	1.11	SBB PS
								12
120
				103%					9.25
							10
100				93%
		81%					8
	57%												10.00	Additional DPS
80									5.00
60%				58%		6	5.25
					55%		4.25
60							1.00		3.75	3.75
47%						4
								2.50
						Policy
40							Range	2	4.25	4.25					2.50	Ordinary DPS
20	2013	2014	2015	2016	2017	2018	2019	0	2013	2014	2015	2016	2017	2018	2019

• Previous dividend policy targeted dividend of 40-50% of net income	• Revised policy provides predictability on a per share basis
• Historical pay-out ratio has been above policy range	•	Targets flat or growing dividend per share
	•	Extraordinary dividends and share buybacks to serve as supplements

13

WORLD CLASS - Through people, technology and dedication

KONGSBERG PROPRIETARY - See Statement of Proprietary information

Active management of business portfolio

20162019

	PATRIA OYJ.		R-R COMMERCIAL MARINE
• Acquired 49.9% from the state of	• Acquired 100% from Rolls Royce
	Finland
	•	EV GBP 500m
•	EV EURm 272 (49.9%)

2019

AIM NORWAY

• Acquired from Norwegian Ministry of Defence (sold 49.9% to Patria)
• EV 151MNOK

2020

HYDROID INC.

• Sold 100% to Huntington Ingalls Industries in March 2020
• Sold at EV USD 350m

WORLD CLASS - Through people, technology and dedication

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14

Patria and AIM Norway

Important part of KONGSBERG's MRO strategy

Patria

• Prime MRO provider for the Finnish Defence Forces
• Supplier of strategically important products and systems to Finland and other nations
• Cooperation's through certain strategical projects e.g. MRO

Revenue and EBIT development (EURm)

				508		527
490		476
467
	75
		35		36		8	24
2016	2017	2018	2019		LTM Q3 2020
			Revenue (EURm)			EBIT (EURm)

AIM Norway

• Premier MRO provider for the Norwegian armed aircrafts and helicopters
• Strengthen KONGSBERGs role as a strategic partner for the
  Norwegian armed force's operative requirements, both as a supplier of equipment and for maintenance

Revenue and EBITDA development (MNOK)

	126			127	125	139
		106
43						25	41
9	20	15	24
Q2 191	Q3 19		Q4 19		Q1 20	Q2 20	Q3 20
			Revenue (MNOK)		EBITDA (MNOK)

WORLD CLASS - Through people, technology and dedication

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15

1) Q2 2019 only included one month

Rolls Royce Commercial Marine

Significant synergies

					Target 500
					MNOK annual
					cost synergies
		508
	375	90	429		422
253	83		135	290	150	690
72		418		160		1 587
181	292		294		272
			130
Q2 2019	Q3 2019	Q4 2019	Q1 2020	Q2 2020	Q3 2020

• Total of MNOK 690 in cost synergies generated from Q2 2019 - Q3 2020
• MNOK 528 in cross sales realised YTD 2020
• Strengthens Kongsberg Maritime as an integrator and technology leader
• Enhanced position to capitalise on industry trends and dynamics

Acquisition and integration costs

														5.439
												61
														130
									194
										444
							4.865
	319										4.865
				130
		189
	Q1 2018 -		1. April	Q2 2019 -	Q1 2020 -	Total
		Q1 2019	2019	Q4 2019	Q3 2020

• Total of MNOK 5.594 cash outflow related to acquisition and integration of Rolls Royce Commercial Marine (RRCM)
• RRCM generated positive FCF pre tax of ~MNOK 230 in 2019 (ex. Integration and restructuring)
• MNOK 260 and 445 generated in synergies in 2019 and YTD 2020 respectively

		KM EBITDA excluding integration & restructuring costs and cost synergies		Synergies		Finance & acquisition cost		Integration cost		Purchase price
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Hydroid

Solid return on investment

• Acquired in 2008 for ~81 USDm
• Sold in March 2020 for ~350 USDm
• • Implied EV/EBITDA multiple of 24x
• Pre tax IRR on investment of 15.2% (estimated ~12.8% including tax)

	Cashflow from Hydroid (USDm)
		350
	40
(81)
2008	Acc. Cf 2009-2019	2020
WORLD CLASS - Through people, technology and dedication	KONGSBERG PROPRIETARY - See Statement of Proprietary information	17

POSITIONED FOR TOMORROW

	Growth			Profitability			Portfolio management
	•	Deliver backlog and			•	Scale and project			• Active management
		secure pipeline				execution			of business portfolio
	•	Frontrunner new			•	Adapt to changing
		technology				markets

WORLD CLASS - Through people, technology and dedication

KONGSBERG PROPRIETARY - See Statement of Proprietary information

18

KONGSBERG PROPRIETARY - See Statement of Proprietary information