Otava’s
Star Moments 2022

OTAVA GROUP’S ANNUAL REPORT 2022

Please join us to see Otava’s star moments 2022. In the diversified media group there were many twinkling stars.

OTAVA IN A NUTSHELL

The Otava Group is Finland’s third-largest diversified media group. We engage in some way with almost all Finns. Our business areas are Books, Otava learning and Media.

REVIEW BY THE CHAIRMAN OF THE BOARD

“Otava’s educational mission is still relevant today.”

Isolation and a lack of face-to-face contact were still part of our daily lives in early 2022. Pandemic anxiety was reflected in consumer behaviour, which impacted our entire operating environment, and the retail trade and book business in particular.

Russia’s war of aggression, which began in February, reminded us Finns of our own history and the importance of culture, education and constitutional government. Finland grew into an independent state on the basis of Enlightenment ideals. These include constitutional government, liberal democracy and freedom of speech: all of the things that now distinguish Finland from Russia.

We are building our future on a long-term basis – with an eye to the next 130 years.

HENRIK EHRNROOTH

When Otava was established in 1890, Finland was still part of Russia. Our independence became a Western success story.

Finnish culture played a major role in this success – a culture that was, above all, built on books and information shared in the Finnish language.

With the outbreak of war in Ukraine, this historical context has become relevant again. Literacy and freedom of expression were key factors in the educational project that led to Finland’s independence.

Otava has played an important role in this project throughout its history, from education and a free critical press to edifying books.

Our educational mission has remained relevant over time, and literature, education and freedom of speech still form the core of Otava’s business. Responsibility is one of Otava’s values, which means that we take responsibility for promoting culture, growth and learning.

In autumn 2022, we were finally able to celebrate Otava’s 130th anniversary with a Group-wide event – albeit two years late due to coronavirus restrictions.

239.6

Meur

Otava’s net sales

Otava’s mission continues, even though our operating environment has not made things easy for us in recent years. We are building our future on a long-term basis – with an eye to the next 130 years.

One aspect of preparing for the future is the Shareholders’ Council, which was established at the beginning of 2023. Its task is to involve a younger generation of owners in Otava’s activities. The Shareholders’ Council aims to intensify dialogue and cooperation between the Group’s owners and personnel.

Working together will enhance our Group’s operations, and I hope that everyone will get actively involved in the discussions.

Henrik Ehrnrooth
Chairman of the Board of Directors

REVIEW BY THE CEO

“Deteriorating operating environment reflected in the result.”

Although the coronavirus pandemic was still limiting everyday life in early 2022, restrictions could finally be lifted during the spring.

The world received a shock in February: Russia invaded Ukraine – an act that also constituted an attack on Western values and freedom of speech. In March, Otava and Suomalainen Kirjakauppa donated EUR 50,000 to the Finnish Red Cross to support victims of the war in Ukraine. Otava also published several books, the proceeds of which were used to support Ukraine.

A clear deterioration in the economic environment began after the summer, when interest rates started to rise and inflation had a significant impact on consumer demand. Otava’s result can be considered unsatisfactory. The company’s high equity ratio and excellent liquidity provide a good foundation for participating in any restructuring within the sector, and even for making major acquisitions.

The result for the book business was weakened by rising costs combined with increased digital investments and the difficulties experienced by bookstores. In terms of total sales, fiction rose and children’s and young adult books remained on par with the previous year, but there was a fall in printed non-fiction books and general literature. Although the digital market increased, growth slowed down noticeably compared to previous years.

Otava Learning invested heavily in the operational reliability of its digital services, as nearly 80 per cent of new sales to upper secondary schools are digital. Investments were also made in developing new teaching content.

Developments also continued at Otava Book Printing, and it achieved a slightly better operating result than in the previous year in spite of the difficult situation.

8.8

Meur

Otava’s EBITA

2022 was a particularly difficult year for the Trade business area. The lifting of coronavirus restrictions contributed to a significant decrease in demand for general literature. Consumer demand for educational materials declined as expected. The impacts of rising fuel prices were seen in rural areas and smaller towns. However, major centres continued to show faint signs of recovery from the pandemic.

The outlook for the Media business weakened towards the end of the year. In early 2022, consumer sales were almost at the same level as in 2021, while media sales were clearly ahead. During the autumn, subscription sales faced increasing challenges, media sales slowed down, and costs increased. However, media sales were more successful than the market in general, and digital media sales overtook print for the first time. Our sales and editorial teams engaged in closer cooperation, and our new operating methods were successful.

In order to bring Otava’s result back to the good level of previous years, we need to streamline our operations and develop new ways of working. Together, we can do this.


Alexander Lindholm
CEO, Otava Ltd

KEY FIGURES 2022

In the book business, sales of general literature remained on par with the previous year. Digital sales rose by 10 per cent.

Read more about Financial Statement:

Net sales (255.3 M€ in 2021)

239.6

M€

EBITA (142.6 M€ in 2021)

8.8

M€

EBITA % (55.9 % in 2021)

3.7

%

Equity ratio % ( 83.9 % in 2021)

87.9

%

Return on Investment (ROI) % 37.6 % in 2021)

4.5

%

Return on Equity (ROE) % (41.9 % in 2021)

4.1

%

Net sales, Books ( 77.9 M€ in 2021)

78.8

M€

Net sales, Trade (102.2 M€ in 2021)

89.9

M€

New digital titles published (2,012 in 2021)

1,864

pcs

Net sales, Media (82.9 M€ in 2021)

80.7

M€

 

Number of magazines
and periodicals (136 in 2021)

123

pcs

STAR MOMENTS 2022

The event that had the most significant impact on the world year 2022 was Russia’s invasion of Ukraine.

Growth in digital book sales

Russia’s invasion of Ukraine, issues with the price and availability of paper, the energy crisis: all these make 2022 stand out from the previous few years, which were strongly marked by the pandemic. The effects of the war in Ukraine changed consumer behaviour in the book business.

Poor demand, the rising price of paper and other cost increases weakened the book business’s result to a quarter of the previous year’s result.

The pandemic years 2020–2021 generated growth in general literature. People spent more time reading than in the preceding years, and sales of printed books picked up after a ten-year downswing. But the war in Ukraine brought about rapid changes.

Sales of general literature remained on par with the previous year. Although digital sales grew by ten per cent, growth had clearly slowed on the past few years. Sales of printed books saw a year-on-year fall of seven per cent. About fifty per cent of net sales in general literature came from digital publications.

After having firmly established themselves in the market, audiobooks have now taken a giant leap forward.

March saw the publication of Samu Haber’s Forever yours deluxe, which contains more than 2,000 audio enrichments and is a perfect example of the direction in which audiobook publishing is heading.

Audio enrichments are sound effects such as music.

However, developing audiobooks does not mean the end of printed books – digital and printed books will complement each other.

In general literature digital sales grew by ten per cent.

Sales of children’s and young adult books remained on par with the previous year, but sales of non-fiction books decreased.

The best-selling author of the year was Enni Mustonen, whose titles sold more than 300,000 copies in all formats.

When Russia invaded Ukraine in late February, President Volodymyr Zelenskyy emerged as the leader of his country’s and continent’s struggle for freedom. In June, Otava quickly published a biography of this charismatic leader in the fight to defend Ukraine. 

After having firmly established themselves in the market, audiobooks have now taken a giant leap forward. March saw the publication of Samu Haber’s Forever yours deluxe, which contains more than 2,000 audio enrichments and is a perfect example of the direction in which audiobook publishing is heading. (Audio enrichments are sound effects such as music.) Haber’s book quickly found an audience, and it became one of the most listened to audiobooks of the year.

There is great potential for the use of audio enrichments in children’s books in particular. For example, music is well suited to nursery rhymes. Otava wants to add music to books and experiment with all kinds of audio enrichments.

However, developing audiobooks does not mean the end of printed books – digital and printed books will complement each other.

Inspiring new generations to take up reading is important for Otava. Otava supported children and young people’s reading by donating EUR 30,000 to the Children and Youth Foundation. The Foundation is using our donation to instill a joy of reading among children and young people, and to organise a variety of workshops at schools and kindergartens. Reading a book allows you to pause for a moment and let your imagination run wild.

Nearly 80 per cent of new sales of educational materials to upper secondary schools are already digital sales. Achieving sales growth required major investments in the operational reliability of digital services.

The expansion of the new curriculum to the second grade generated record-breaking sales for Otava Learning. Nearly 80 per cent of new sales of educational materials to upper secondary schools are already digital sales. Achieving sales growth required major investments in the operational reliability of digital services.

 Investments were also made in developing new teaching content, such as Loikka, a primary-school series for teaching Finnish as a native language that was successfully launched in late 2022. These measures halved Otava Learning’s profitability in comparison to the previous year. Otava Learning also recruited new personnel to ensure digital competence. These systematic measures are all aimed at preparing for the future.

Otava Book Printing Ltd achieved a good result in 2022. This favourable trend has been continuing for some time, and Otava Book Printing has also been able to transfer cost increases to product prices. Locally produced books are now more highly valued as well. 

To improve challenging situation special attention was paid to store selections.

Growing product groups are e.g. children’s, creativity, leisure-time and wellbeing products.

Sales of these growing product groups developed as expected.

A desire to save money was visible in customer numbers

2022 was a challenging year for the Trade business area. Consumers’ confidence in the economy weakened towards the end of 2022, and by early 2023 it was at its lowest since the recession of the 1990s. The negative impacts of the war in Ukraine have been most visible in the form of higher energy prices and rising inflation. Interest rates also increased sharply in the summer. 

According to preliminary data, although euro-denominated sales in the retail trade rose by about four per cent year-on-year, they fell by the same amount in quantitative terms. Christmas retail sales were also disappointing. However, growth in e-commerce has continued.

The number of bookshops continued to fall, and their share of total sales declined at a faster rate than the market in general as a result of free upper-secondary education and dwindling sales of educational materials. Suomalainen Kirjakauppa had 36 stores at the end of 2022.

Customer numbers at bookstores began to pick up slightly in early 2022 after a long period of pandemic isolation, but inflation and a subsequent desire to save money were visible by the summer months. This desire to save money affected both customer numbers and consumer behaviour at bookstores.

Consumers began to use their time differently after coronavirus restrictions ended, which led to a significant decrease in demand for domestic literature in particular.

 The impacts of rising fuel prices were first seen in rural areas and smaller towns, where people tend to live further from stores. Higher prices made customers consider their purchases more carefully, which led to a lower conversion rate, smaller average purchases, and reduced customer numbers in those areas.

Higher prices made customers consider their purchases more carefully.

However, stores in larger centres such as Helsinki, Tampere and Oulu continued their slow recovery from the pandemic.

Suomalainen Kirjakauppa took numerous measures to improve the situation, for example, by paying special attention to in-store selections. Bookstores also invested in customer service and growing product groups. Sales of growing product groups, such as children’s, creativity, leisure-time and wellbeing products, developed as expected.

A rapidly rising interest in English-language literature has made this product group a new focal area.

Fifty per cent of Suomalainen Kirjakauppa’s sales consisted of book products. 

Suomalainen Monitaito, a new service that was launched in the autumn, opened up a new online market. Suomalainen Monitaito makes online courses from a diverse range of top coaches available through a single website. It offers fun, insights and inspiration for everyday life.

The online courses are suitable for anyone who wants to learn new things, and cover topics such as wellbeing, self-development, handicrafts, and other hobbies. New courses are continually being added to the selection.  You can complete courses at your own pace in the privacy of your own home when it best suits you, and the materials can be accessed immediately after purchase.

Closer cooperation bears fruit at Otavamedia

The business environment of media was undergoing continual and major changes throughout 2022. It also affected Otavamedia’s business in many ways. 

Otavamedia continued to perform reasonably well in both consumer and media sales. Consumption of all digital content increased. Media sales were more successful than the market in general, and digital media sales overtook print media sales for the first time.

We enhanced cooperation between the editorial and sales teams, and our new ways of working were successful with regard to sales of digital services in particular. Online services for our magazines Anna and Kotiliesi broke records in terms of page loads, which increased online media sales.

Our new ways of working were successful with regard to sales of digital services in particular.

In its centenary year, Kotiliesi managed to increase subscription sales in terms of both monetary value and volume, by developing its content and engaging in closer cooperation with the consumer sales team.

The number of digital subscriptions to Tekniikan Maailma also increased by almost ten per cent thanks to closer cooperation between the editorial and consumer sales teams.

Working with the editorial team to introduce new marketing sections on websites and improve the paywall helped to increase sales of new subscriptions in our online channels. The number of subscriptions increased by ten per cent on the previous year, and by 20 per cent in monetary value.

We have continued to change the way we work, and the rules we drew up with personnel for multi-location work required updating. Our organisational changes meant that it was also time to make more economical use of our premises in Tripla.

Competence and learning development projects supported the renewal of our operations and strengthened the employee experience.

Updated practices, a greater level of activity and strict cost control helped the media business to exceed its profit forecast.

2023 will be a difficult year in both the consumer and media markets.

Online services for our magazines Anna and Kotiliesi broke records in terms of page loads, which increased online media sales.

     

CORPORATE RESPONSIBILITY

Otava carried out a materiality analysis on the basis of stakeholder interviews and surveys, and this helped us to prioritise our sustainability action.

New sustainability programme approved

Otava launched new sustainability efforts in autumn 2021, and the Group’s Management Team approved the sustainability programme in spring 2022.

Gaia Consulting was our partner in drawing up the sustainability programme, calculating our carbon footprint and creating a foundation for the Group’s sustainability action. People from all across the Group were also involved in this work. We began calculating the Group’s carbon footprint in the spring,and a Group-level sustainability organisation was established in autumn 2022.

The organisation appointed a sustainability owner, a sustainability manager, a sustainability steering group consisting of representatives from different business functions, and business-specific sustainability coordinators.

We began calculating our carbon footprint in spring 2022:

The calculation was done in accordance with GHG protocol and calculated scope 1, 2 and 3 emissions (that is, emissions from both our own and our value chain).

A carbon roadmap was drawn up on the basis of this calculation. For the entire value chain, we set an emissions reduction target of 40 per cent of total emissions in 2021 to be achieved by 2030.

The calculation was validated by Gaia Consulting.

In autumn 2022, we also carried out a materiality analysis on the basis of stakeholder interviews and surveys, and this helped us to prioritise our sustainability action. We used the materiality analysis to identify our key sustainability-related projects and activities, and to describe and schedule them in our sustainability roadmap. This roadmap shows what we are doing both now and in the future with regards to sustainability.

Otava’s codes of conduct for personnel and partners were also updated. Ethical guidelines and training for personnel in each business function were drawn up on the basis of these codes of conduct. 

Otava’s first sustainability report will be published during the first half of 2023, and we will report on our sustainability using the Global Reporting Initiative (GRI) framework.

The Group’s sustainability themes were validated by stakeholders

  • Corporate social responsibility: We promote knowledge, creativity and development, and lay the foundations for a pluralistic and democratic society.
  • Environmental responsibility: We minimise harmful environmental impacts in all of our operations.
  • Financial responsibility: We create economic wellbeing through forward-looking and profitable business activities.
  • Social responsibility: We are a good employer, partner and customer. We promote equality and diversity. 

PERSONNEL

Continuous, systematic and innovative HR development is part of Otava’s strategy.

Number of personnel at the Group

958

persons

Average career length in the Group

7.3

years

 

Employee breakdown by gender: women

76

%

Employee breakdown by gender: men

24

%

 

Average age of employees:

41

years

Mentoring aims to share expertise

Continuous, systematic and innovative HR development is part of Otava’s strategy. Our main ways of developing competence include everyday learning and cooperation with colleagues and partners.

In 2022, we implemented a Group-wide mentoring programme aimed at self-improvement at work. The programme was facilitated by experts from Kulmia Group Oy.

Mentoring is based on confidential interaction between two equals, in which skills and knowledge are transferred through regular, goal-oriented discussions.

Mentoring aims to bring new ideas and insights to everyday work by challenging experts to share their expertise in a practical manner. The programme also sought increased engagement from top professionals.

Participants applied to join the programme as either mentors or mentees. The work itself was largely based on mutual knowledge sharing and peer learning.

Mentoring aims to bring new ideas and insights to everyday work by challenging experts to share their expertise in a practical manner.

Mentors and mentees met once a month over a nine-month period, and there were also three joint meetings with the entire network. Mentoring group members met a total of three times for joint coaching sessions over a nine-month period, and each pair met about once a month according to their own schedules.

Jari Vehola, who originally joined the mentoring programme to find new networks, described his role as a mentor as follows:

 “At the last joint meeting, I said that this had ended up being a lot more than I’d expected. It wasn’t just a case of knowledge passing from mentor to mentee – I also got a lot from my mentee. I learned the art of listening, which was the biggest thing I got out of this. And it won’t end here – my partner and I will be meeting again in the future.”

Jari would definitely encourage his colleagues to participate in a repeat of the programme: although mentoring takes time, its benefits far outweigh the time invested in it.

The focal points of Otava’s HR development strategy are: Investments in continuous, systematic and innovative HR development.

A development plan is drawn up for each employee.

Anticipating competence and recruitment needs, and actively seeking solutions.

Strengthening competence with a partner network.

Enabling career paths in different business areas and sharing existing expertise across organisational boundaries.

Increased cooperation between HR and business functions.

Identifying capabilities and future talent in different business areas, and supporting their development.

More dialogue with students, and experimenting with different internship programmes.