Review by the Chairman of the Board

An excellent year for the Group

2017 was the best year ever for Otava Group

Continuous efficiency improvements in supply chains and better prediction of consumer needs and preferences laid the basis for our improved operating results. Competition for the free time of consumers is fierce, and can only be met with competitive content, displayed in an appealing manner in stores and online.

Otava’s strengths in the book market are not only a fiction programme that interests readers, but also our comprehensive offering of children’s and youth literature and non-fiction books. With educational materials – now learning services – Otava has managed to respond well to market changes.

Otavamedia has strong magazine brands and its market position is still robust. Even today, Finland has a lot of magazines in proportion to population and their circulations have been declining. In this environment, Otavamedia’s position as a leading magazine publisher is a significant competitive advantage.

To supplement the daily flow of news, people need magazines to research and explain new topics and phenomena in detail and with insight. Print will endure, but backed up by digital content. A good example of this is Suomen Kuvalehti, which has successfully supplemented its weekly periodical content with daily digital offerings. The Internet also offers a natural platform for popular and reliable tests and comparisons, such as those provided by our Tekniikan Maailma.

Media advertisement revenues from magazines have fallen 50 % over the last ten years, as advertising has shifted to digital form. The growth of digital advertising may now be levelling out. We must be able to offer advertisers more diverse and effective solutions than before. We are experiencing a phase of continuous renewal, which will continue. Change is the only constant in this industry.

Otava’s New Business Functions has grown rapidly and its profit trend has been good. The operations have been expanded over the years with several acquisitions. The services of the business unit are doing well, because we have systematically invested in their technology and content.

The Otava Group has considerable assets in properties, which have been under renovation in the past few years. We have launched a programme for modernising the Uudenmaankatu property and the programme will continue until 2020. The goal is to preserve our traditional environment while modernising the entire property. This programme will allow us to increase the number of workstations at Uudenmaankatu and significantly improve our working environment.

The properties at Pasila no longer met our requirements and the cumulative cost of renovations due was considerable. We decided to sell both Pasila properties and signed a lease with YIT for the new Tripla building, which is being built in Pasila. The move to the new premises in 2020 will reduce our costs. The sale of the properties, in turn, led to a write-down of 10 million in last year’s operating profit.

The Otava Group has operated with success for 127 years. The Group is positioned well to eventually celebrate 150 years. The current pace of change will not permit us to plan this journey for more than five years at a time, and we must react swiftly and continuously to changes in our environment. Operational efficiency must be improved, requiring investments merely to maintain current profitability levels. With its strong financial position, the company has the ability to focus on investing in existing expertise but also on acquiring new expertise through acquisitions.

To show our appreciation for the year’s impressive financial performance, a bonus incentive of EUR 2.1 million including social security fees will be paid to personnel.

 

Henrik Ehrnrooth
Chairman of the Board