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Dentsu Reports Consolidated Financial Results for the Three Months Ended June 30, 2013 (Japanese GAAP)



  Dentsu Reports Consolidated Financial Results for the Three Months Ended
  June 30, 2013 (Japanese GAAP)

Business Wire

TOKYO -- August 13, 2013

Dentsu Inc. (TOKYO:4324)(ISIN:JP3551520004)(President & CEO: Tadashi Ishii;
Head Office: Tokyo; Capital: 71,204.7 million yen) today convened a meeting of
its Board of Directors at its Head Office in Tokyo at which it finalized its
consolidated and non-consolidated financial results for the three months ended
June 30, 2013 (April 1–June 30, 2013).

The Dentsu Group posted consolidated billings (net sales) of 514,229 million
yen (14.9% year-on-year increase); gross profit of 122,882 million yen (60.7%
increase); operating loss of 717 million yen (operating income of 9,571
million yen was posted for the same period of the previous fiscal year);
operating income before amortization of goodwill and intangible assets of
10,032 million yen (4.9% decrease); ordinary income of 1,450 million yen
(87.4% decrease); and net loss of 3,698 million yen (net income of 5,886
million yen was posted for the same period of the previous fiscal year).

Since the results for the first quarter were generally in line with
expectations, no changes have been made to the forecast of consolidated
financial results for the first half ending September 30, 2013 and fiscal year
ending March 31, 2014, which was announced on May 14, 2013.

Summary of financial results for the three months ended June 30, 2013
During the first quarter of the fiscal year ending March 31, 2014, the global
economy remained uncertain due to concerns about the prolonged European
government debt crisis as well as the slowdown in economic growth seen in
China, although economic recovery is picking up steam in the United States.
With regard to Japan, thanks to economic measures taken by the government
which led to a rapid weakening of the yen and higher stock prices, Japan’s
business and consumer confidence showed signs of improvement.

Under such circumstances, following the completion of the acquisition of Aegis
Group plc (hereinafter “Aegis”) in March 2013, which marked a new beginning
for the expanded Dentsu Group as a truly global player operating in 110
countries across the globe, the Group set a new medium-term management plan
“Dentsu 2017 and Beyond” which starts from FY2013 and goes through to FY2017.
The Group aims to become a next-generation agency network that provides
unparalleled value through its unique capabilities, creating new marketing
communications that go beyond the framework of existing advertising business.
In addition to building a network that supports its clients’ businesses
worldwide, the Group will develop and provide integrated solutions that lead
the digital age, as well as achieve sustainable growth and increase
profitability in the Japanese market, the Group’s strongest base.

From the first quarter of the fiscal year ending March 31, 2014, Aegis’s
results have been included in the Dentsu Group’s Consolidated Statements of
Income. As a result, for the three months ended June 30, 2013, the Group
posted consolidated billings (net sales) of 514,229 million yen, an increase
of 14.9% compared with the same period of the previous fiscal year, and gross
profit of 122,882 million yen, an increase of 60.7%. From a seasonal
perspective, the consolidated billings and gross profit for the first and
third quarters tend to be lower than those for the second and fourth quarters,
and since the amounts assigned to goodwill and intangible assets are amortized
in equal proportions each quarter, for the first quarter the Group posted
operating loss of 717 million yen (operating income of 9,571 million yen was
posted for the same period of the previous fiscal year); ordinary income of
1,450 million yen, a decrease of 87.4%; and net loss of 3,698 million yen (net
income of 5,886 million yen was posted for the same period of the previous
fiscal year). Operating income before amortization of goodwill and intangible
assets came to 10,032 million yen, a decrease of 4.9%. Operating income before
amortization of goodwill and intangible assets comprises the operating income
figure to which has been added the amortization of goodwill incurred through
acquisitions (including the acquisition of Aegis) and other intangible assets.

Since the purchase price allocation relating to the acquisition of Aegis had
not been completed by June 30, the last day of the first quarter, the goodwill
that was amortized for the first quarter was the amount calculated on a
provisional basis using the straight-line method over a period of 20 years.

Looking at the results by business segment, in the Advertising segment net
sales of 501,221 million yen, an increase of 15.3% compared with the same
period of the previous fiscal year; gross profit of 118,595 million yen, an
increase of 68.2%; and segment loss of 652 million yen (segment income of
9,172 million yen was posted for the same period of the previous fiscal year)
were posted. In the Information Services segment, net sales of 14,134 million
yen, an increase of 0.4%; gross profit of 3,948 million yen, a decrease of
5.0%; and segment loss of 742 million yen (segment loss of 486 million yen was
posted for the same period of the previous fiscal year) were posted. In the
Other Business segment, net sales of 3,660 million yen, a decrease of 12.2%;
gross profit of 872 million yen, a decrease of 8.4%; and segment income of 221
million yen, a decrease of 39.0%, were posted.

By geographic area, gross profit of 67,150 million yen, an increase of 6.3%
compared with the same period of the previous fiscal year, and operating
income of 9,507 million yen, an increase of 7.5%, were posted in Japan. In
other countries, gross profit of 56,102 million yen, an increase of 320.1%,
and operating loss of 10,078 million yen (operating income of 590 million yen
was posted for the same period of the previous fiscal year) were posted.

From the 2013 fiscal year onward, gross profit has been specified as one of
the Group’s business management indicators. Accordingly, gross profit figures
will be used in its disclosures of results by business segment and
geographical area from the first quarter onward.

Regarding Dentsu Group companies with a December 31 closing date, including
subsidiaries in countries other than Japan, their financial results for the
three months from January 1 to March 31, 2013 are, as a general rule,
incorporated in the consolidated financial results for the three months ended
June 30, 2013.

Dentsu posted non-consolidated billings (net sales) of 350,246 million yen, an
increase of 4.4% compared with the same period of the previous fiscal year;
gross profit of 47,889 million yen, an increase of 7.2%; operating income of
8,060 million yen, an increase of 3.3%; ordinary income of 15,578 million yen,
an increase of 20.1%; and net income of 10,619 million yen, an increase of
31.5%.

Reference: Scope of Consolidated Financial Results
As of June 30, 2013, the Dentsu Group includes 658 consolidated subsidiary
companies and 56 affiliated companies accounted for by the equity method. 93
of these companies are located in Japan and 621 in countries other than Japan.
By business segment, 692 of these companies fall into the Advertising segment,
16 into the Information Services segment, and 6 into the Other Business
segment.

Outlook for the first half ending September 30, 2013 and the fiscal year
ending March 31, 2014
Since the results for the first quarter were generally in line with
expectations, no changes have been made to the forecast of consolidated
financial results for the first half ending September 30, 2013 and fiscal year
ending March 31, 2014, which was announced on May 14, 2013.

Millions of yen
                                     Forecast              FY2013
FY 2013          Three               for                   forecast
(from April 1,   months     YoY      the six      YoY      (from        YoY
2013             ended      change   months       change   April 1,     change
to               June 30,   (%)      ending       (%)      2013         (%)
March 31,        2013                Sept. 30,             to
2014)                                2013                  March 31,
                                                           2014)
Net sales        514,229    14.9     1,081,400    17.4     2,283,400    17.6
Gross profit     122,882    60.7     266,000      63.5     571,800      65.3
Operating        (717)      –        13,800       (37.6)   58,500       0.1
income (loss)
Ordinary         1,450      (87.4)   12,700       (35.8)   58,700       (0.6)
income
Net income       (3,698)    –        (2,300)      –        19,100       (47.4)
(loss)
 

For reference
Millions of yen
FY 2013               Three months            Forecast for     FY2013 forecast
(from April 1, 2013   ended          YoY      the six months   (from April 1,
to                    June 30,       change   ending           2013
March 31, 2014)       2013           (%)      Sept. 30, 2013   to
                                                               March 31, 2014)
Operating income
before amortization   10,032         (4.9)    34,500           100,100
of goodwill and
intangible assets
 

Cautionary statement with respect to forward-looking statements
These business results forecasts have been made by Dentsu on the basis of
currently available information, and hence involve potential risks and
uncertainties. Consequently, actual business results may differ from the
forecasts due to changes in various factors.

 
Consolidated Financial Results
for the Three Months Ended June 30, 2013
 
1. Summary of Consolidated Balance Sheets
 
                             (Millions of yen: Rounded down to the nearest one
                             million yen)
                             As of               As of
                             March 31,           June 30,           % Change
                             2013                2013
ASSETS
Current assets               1,122,602           1,067,926          (4.9)
Noncurrent assets            1,082,966           1,134,003          4.7
Total assets                 2,205,569           2,201,930          (0.2)
                                                                     
LIABILITIES
Current liabilities          1,317,554           1,167,293          (11.4)
Noncurrent liabilities       279,377             382,151            36.8
Total liabilities            1,596,931           1,549,445          (3.0)
                                                                     
NET ASSETS
Shareholders’ equity         570,419             562,727            (1.3)
Accumulated other
                             14,076              66,368             371.5
comprehensive income
Minority interests           24,141              23,388             (3.1)
Total net assets             608,637             652,484            7.2
Total liabilities and net    2,205,569           2,201,930          (0.2)
assets

 
2. Summary of Consolidated Statements of Income
 
                             (Millions of yen: Rounded down to the nearest one
                             million yen)
                             Three months         Three months
                             ended                ended             % Change
                             June 30, 2012        June 30, 2013
Net sales                    447,469              514,229           14.9
Gross profit                 76,481               122,882           60.7
Operating income (loss)      9,571                (717)             –
Non-operating income         3,001                6,033             101.0
Non-operating expenses       1,076                3,866             259.3
Ordinary income              11,497               1,450             (87.4)
Extraordinary income         21                   18                (16.1)
Extraordinary loss           1,262                1,880             49.0
Income (loss) before
income taxes and minority    10,256               (412)             –
interests
Net income (loss)            5,886                (3,698)           –

 
3. Summary of Consolidated Statements of Comprehensive Income
 
                             (Millions of yen: Rounded down to the nearest one
                             million yen)
                             Three months        Three months
                             ended               ended              % Change
                             June 30, 2012       June 30, 2013
Income (loss) before         5,890               (3,851)            –
minority interests
Other comprehensive income   (434)               52,573             –
Comprehensive income         5,455               48,721             793.0
 

About the Dentsu Group
Led by Dentsu Inc. (TOKYO:4324)(ISIN:JP3551520004), the world's largest
advertising agency brand with a history of 112 years, the Dentsu Group offers
a comprehensive range of client-centric communications and media services in
110 countries across five continents. Its Japan-wide network and London-based
global operating unit Dentsu Aegis Network Ltd., which oversees the operations
of Aegis Media, a leading global media and digital communications specialist,
as well as those of the Dentsu Network, which manages all of Dentsu's other
global business operations outside Japan, together employ more than 37,000
dedicated professionals. The Group is also active in the production and
marketing of sports and entertainment content on a global scale.

Dentsu Inc.: www.dentsu.com
Dentsu Aegis Network Ltd: www.dentsuaegisnetwork.com
Dentsu Network: www.dentsunetwork.com

Contact:

Dentsu Inc.
Shusaku Kannan, (813) 6216-8042
Senior Manager
Corporate Communications Division
s.kannan@dentsu.co.jp
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