The race continues

(From the 2010 Annual Report)

I began last year’s report by writing about a speech I heard in Singapore in early January 2010. The speech was intended as a light-hearted relief in a hectic seminar programme and dealt with Chinese astrology. The main thrust was that 2010 was going to be the “Year of the Tiger”, which would be very good for business. And for a lot of companies 2010 was just that – or at least a much better year than the crisis year of 2009. For NHST Media Group it was too. Organic growth in revenue of 10 % to a record NOK 1,115 million says something. Operating profits of NOK 37 million in 2010, from a loss of NOK 43 million in 2009, says more, while a positive cash flow of NOK 52 million says even more. Bank deposits of NOK 196 million at the end of the year and no interest-bearing debt also speak volumes about the group’s strengthened solidity. Readership growth during the year, growth in subscription revenue, 20 % growth in advertising revenue, growth in new digital services and leading market positions say a great deal about the future potential too. NHST is now in a position to work towards exciting, aggressive goals.

In 2011 the strong emphasis on profit-improvement initiatives will remain at the top of the agenda. NHST’s overall earnings in 2010 are still not good enough. The difference from 2009, and the first half of 2010, is that improvement is expected as a result of growth in revenue, as the last two quarters of 2010 indicate. Improvement is expected to be somewhat uneven, depending on the situation for publications or activities in terms of nature of activity, maturity, competition and position. Some activities are still underperforming and need to improve quickly.

Generally speaking, market conditions are expected to be better in 2011. World trade is growing and the Norwegian economy is strong. Most of NHST’s business customers are expected to achieve better profitability this year and it has been noticed that advertising clients are now have a longer planning horizon and have much more stable marketing strategies. The majority of advertising markets are therefore expected to grow. Reader interest in business media is on the increase for several reasons. An ever increasing percentage of the population is going on to higher education, more and more people are having to deal with frontier-busting globalisation, and market economic solutions are being used in a growing number of fields.

NHST’s publications and business activities already boast market-leading positions and good competitiveness. As regards competition there is good visibility for 2011. The greatest commercial uncertainty, not so much in 2011 perhaps, but especially in the slightly longer term, looking ahead two years and beyond, surrounds the consequences of digital development. This awareness is the basis for NHST’s plans. In 2011 there will, of course, be a great deal to do on an everyday basis if we are to succeed, and by all means let us not underestimate these challenges in a year when improved profitability is our top priority. But in a strategic context, 2011 will be even more important in planning and positioning for the next few years, as there are many important questions we need to handle. How will reading habits change? What will people read, when and for how long? How will people read, what medium will they read on and in what context? How will the advertising market change – between different media, in segments, channels, territories? What about related services?

Various structural changes are also taking place. A number of established media companies are being restructured through mergers to exploit economies of scale, while new, digital media companies are experiencing strong growth. Much of this is driven by rapid technological development involving everything from e-readers to editorial systems. What will be the next changes to happen? And how far-reaching will they be?

Our future plans are based on four sub-strategies, which together make up NHST’s long-term strategy:

1. To lead the way and be the best in Norway for business news, on paper and digitally.
2. To be the global leader for shipping, oil/gas, seafood and renewable energy news, on paper and digitally.
3. To meet information needs on the markets in which NHST operates via related activities such as conferences, web TV and new digital information services.
4. To pursue the further development of a global nautical chart business with digital services.

The present group strategy has, with some minor adjustments, been in place for nearly 10 years. This long-term approach is one of the main reasons why NHST has emerged from the financial crisis stronger in market terms. The strategy also prioritises resources. We have made most progress with sub-strategies 1 and 2, but they still offer enormous potential. A lot of development will therefore be required in these areas in the next few years based on strong established market positions, whether in the form of new services, better established services or greater interplay between different publishing platforms. We have not made as much progress with strategic development for sub-strategy 3 and we may increase the pace this year. MyNewsdesk is the foremost example of new services in the group and we are expecting substantial growth from this company. Consideration is also given to launch other related digital services in the global verticals. With regard to sub-strategy 4, NHST and Nautisk Forlag have made good progress with the Neptune product, but much remains to be done. We must handle a complete market change in this area as users switch from paper charts to digital chart services.

With healthier finances and a better balanced portfolio of activities than was the case in the last period of growth in 2003–2008, NHST is ready to meet the challenges in the next few years.

The group’s editorial ambitions are very high. It has leading editorial resources and its publications score highly in reader surveys when it comes to being first, best, unique, credible and stimulating to read. The emphasis on retaining and developing good editorial staff and environments will also remain unchanged. The commercial departments must be leaders in their markets and offer a good, stimulating working environment. These activities need to be supported by good technical infrastructure and capable IT, finance and HR departments at the group level.

NHST’s publications are easy to recognise. They are characterised by exclusive content and, although primarily business oriented, they also provide in-depth coverage of other prioritised areas of interest to our readers, while we realise that visual tools and interaction with readers are becoming increasingly important. Our customers must be able to rely on perseverance and accountability – as both readers and advertisers.

Meanwhile, our publications will continue to develop in line with changes in the media landscape. Dagens Næringsliv will further strengthened as a newspaper that reflects more of the interests of its readers. The interplay between newspaper and Internet will be developed further, there will be more interaction with readers and contributors, and more and better services will be added to our digital DN offering. Business models for digital content are largely decided by the competitive situation in the market. More and more digital content is being password protected with a view to developing a business model in which the group’s main source of revenue is paid content – regardless of whether it is on paper or digital. In line with this, our global services are password-protected paywall solutions and an increasing amount of paid content is being developed in association with the DN/DN.no brand. NHST supports global initiatives to protect copyright of editorial content in digital formats. We also publish digital content that is available to all and financed by advertising. DN.no has achieved the highest revenue in Norway for a business news website based on this model.

Definite progress is expected for the group’s global activities. NHST’s overall growth in Asia is continuing. The Singapore office employs a total of 50 people with TradeWinds, Upstream, Intrafish, Recharge, Nautisk and DN. In the course of 2011 MyNewsdesk and LNG Unlimited will also set up activities there, while activity at the Shanghai office is increasing. Australia is another prospering market and our first journalists are now in place in Perth. We have also established a permanent, solid presence in Brazil, which is a growth market. London is nevertheless our largest base outside Oslo with around 70 employees, while the Houston office, with around 20 employees, is also showing steady, sound growth. The Stockholm-based MyNewsdesk is a growth company with its main base outside Norway.

The infrastructure that has been built up over years means that NHST has excellent possibilities for expansion in its growth markets, whether based on territory or publication type. We are also a long way from exhausting the potential of our largest territorial markets, which are Norway, USA and the UK.

There are still plenty of opportunities. Although it is no longer the Year of the Tiger, the race continues. With good planning, lots of training and enhanced commitment, a demanding race can be run well.

Gunnar Bjørkavåg