CEO's annual report

CEO's annual report

Message from the CEO

(From the 2014 Annual Report)


NHST posted an operating loss of MNOK 10 in 2014 against an operating profit of MNOK 9 in the previous year. This was a disappointing result, poorer than expected. The result can be attributed to trend variations, as well as operating performances below expectations during the year and within the quarters. 

The biggest change in operating result from 2013 was DN’s decline in operating profit of MNOK 37, from a record operating profit of MNOK 94 in 2013 to MNOK 57 this year. This decline was caused by a weak advertising market in Norway, which hit DN especially hard in the second and third quarters, with a particularly steep decrease in the advertisements for job vacancies. 

We still achieve unsatisfactory results in Global, but the operating result improved by MNOK 10 compared with 2013, ending at an operating loss of MNOK 0.6. The reduced operating loss was achieved through both an increase in revenue and underlying cost reductions. The significant weakening of the Norwegian Krone, especially against the Pound Sterling, resulted in a number of negative exchange rate effects in 2014 for the operations with a significant presence in London. 

In Direct Relations, the operating loss increased to MNOK 11 in 2014 against MNOK 7 in 2013. The rising operating loss was caused by rising product development costs and market investments in countries outside the home market in Sweden. There was strong revenue growth in the fourth quarter. 

Nautical Charts posted an operating loss of MNOK 8, much of which was caused by the large increase in the exchange rate of the Pound Sterling against the Norwegian Krone. The company purchases a large part of its goods in Pound Sterling and sells the main part of its goods in other currencies. However, Nautisk was unable to transfer all the exchange rate movements on to its customer contracts during the year. The underlying result for Nautical Charts showed good progress, which is also reflected in the increase in revenues, growth in new digital products and improvements in the gross margin situation where there was no currency exposure. 

It is of decisive importance to NHST that we manage to create better profitability while at the same further develop the Group during this period of largescale digital change. To begin with costs. During 2014, a number of cost-reducing measures were initiated, which – on a comparable basis – totaled a decrease in costs of MNOK 80 for NHST on an annual basis. The effects hereof are seen most clearly in the 4th Quarter Report, which in fact, shows absolute cost reductions. Nearly all the identified cost reductions have been implemented, and most of these reductions will therefore make themselves fully felt in 2015. This applies to the DN, Global and Nautical Charts business areas. In Direct Relations, there will still be an increase in costs as the company is expanding heavily.

As management, we have a responsibility to improve the results of the Group in the future. However, at the same time, we would be wrong not to point out that we believe the value creation in NHST was significantly better in 2014 than reflected in the operating results shown. This applies, in particular, to Direct Relations, which we know represent large values for the Group, values that significantly exceed the book value. The situation is similar for Global and Nautical Charts, but not so clearly for 2014 seen in isolation. DN has generated and continues to generate good operating results. Our realistic ambition is therefore to achieve significantly better results in the future. 



DN is the flagship of the Group. It has an excellent editorial reputation and has achieved good results over many years. DN moved in a digital direction during 2014 further, in particular with increased mobile use. The circulation and advertising departments are regarded as the best in Norway. The prospects for DN are therefore positive going into 2015. The elements of uncertainty are primarily, although not exclusively, connected to advertising. As we saw during 2014, the advertising market fluctuates rapidly, and we expect a decrease in the overall advertising market. But we also see that the fourth quarter last year and the first quarter this year, at the time of writing, show a lower rate of decrease in advertising and more stabilised operating results. 

Global publications. These have been developed over a number of years. The publications are both known and recognised, they are aimed at specific industries, but they generate unsatisfactory operating results. Intrafish was a bright spot in 2014 with a much-improved operating result attaining a profitability level that this operation has never reached before. We expect that the improvement from 2014 will continue. Clearly improved operating margins with increasing revenues. 

Much work is being done also here to increase digitisation. From an overall perspective, we expect that Tradewinds, Upstream and Intrafish will deliver satisfactory operating margins, while, for Recharge, we still expect to absorb minor losses while we continue to build the publication. Global is expected to generate revenues of more than MNOK 300 in the future and with a good basis for further growth, but also here, there will be uncertainty related to the advertising market in the future. The upside is connected to subscription revenue and improved cost-effectiveness. 

Direct Relations is the Group’s youngest – and clearly most rapidly growing – business area. The company operates across the areas of cloud-based software platforms and communication & marketing. The company has a wide range of customers. In 2014, there was an underlying increase in revenues of more than 20 % for the year – and revenues are increasing further. The segment has become significant for the group, it accounts for nearly 10 % of NHST’s total revenues and more than 20 % of the number of employees. After a troubled start in Germany, Direct Relations now achieves revenue growth in all the markets in which it is established, and these are large markets in themselves. In addition, there is the product development dimension and the possibility of gaining a foothold on other markets. Definitely exciting prospects. 

Nautisk Forlag has been part of the Group since 1894. Nautisk has expanded heavily – both geographically and technologically – in recent years, and is now one of the world’s leading suppliers in the commercial shipping-based navigation industry. The company won several large contracts in 2014 – and our internal indicators point towards further growth and improved results for 2015. Nautisk will launch NaviTab in April 2015. This new all-digital product may become an important new revenue source in the coming years. 

NHST’s plan is to remain focused on these four business areas. As the above analysis shows, these are attractive areas, in which NHST has leading market positions. Improvements in operating result are the main objective for the Group – as are continuous improved competence – especially in te digital field. The Group’s consolidated revenues were stable in 2014 and 2013. We expect increasing revenues in 2015 as many of the more recent areas have reached a size at which they are expected to generate growth that will more than offset, for example,the decline in advertising revenue. Management is represented on the Boards of Morgenbladet and Smartcom. NHST has an option to acquire up to 90.1 % of Morgenbladet during the first half of 2016. Both companies reported improved operating results in 2014 – and with an ambition for further improvements in 2015.


Gunnar Bjørkavåg