Dentsu Reports Consolidated Financial Results for the Nine Months Ended December 31, 2013 (Japanese GAAP)

  Dentsu Reports Consolidated Financial Results for the Nine Months Ended
  December 31, 2013 (Japanese GAAP)

    Posts 1,662.4 Billion Yen in Consolidated Billings (Net Sales) (17.7%
year-on-year increase), 34.7 Billion Yen in Operating Income (8.9% decrease),
 42.9 Billion Yen in Ordinary Income (10.0% increase) and 20.6 Billion Yen in
                          Net Income (3.8% increase)

 -- Posts 414.3 Billion Yen in Gross Profit (66.4% increase) and 66.3 Billion
 Yen in Operating Income before Amortization of Goodwill and Other Intangible
                          Assets (60.4% increase) --

Business Wire

TOKYO -- February 13, 2014

Dentsu Inc. (TOKYO:4324) (ISIN:JP3551520004) (President & CEO: Tadashi Ishii;
Head Office: Tokyo; Capital: 74,609.81 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 nine months
ended December 31, 2013 (April 1–December 31, 2013).

Summary of Financial Results for the Period
During the nine-month period ended December 31, 2013, the Japanese economy
slowly recovered against a backdrop of bold economic policies and monetary
easing measures aimed at overcoming deflation, with signs of an upturn in
capital investment and improved corporate performance, particularly in
export-oriented enterprises. Meanwhile, although a gradual recovery is
continuing in the United States and the European economy has finally started
to show signs of bottoming out, the global economy remained uncertain due to
concerns about the growth slowdown seen in China and other emerging economies.

The completion of the acquisition of Aegis Group plc (hereinafter “Aegis”) and
the establishment of Dentsu Aegis Network Ltd. on March 26, 2013 marked a new
beginning for the expanded Dentsu Group as a truly global player operating in
110 countries around the world. Through its 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.

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 nine months ended December 31, 2013, the Group
posted consolidated billings (net sales) of 1,662,485 million yen, an increase
of 17.7% compared with the same period of the previous fiscal year, and gross
profit of 414,373 million yen, an increase of 66.4%. Amortization of goodwill
and other intangible assets incurred through acquisitions (including the
acquisition of Aegis) was calculated as 19,845 million yen for goodwill and
11,737 million yen for other intangible assets. As a result, the Group posted
operating income of 34,739 million yen, a decrease of 8.9%. Due to factors
including the absence of foreign exchange loss, ordinary income of 42,991
million yen, an increase of 10.0%, and net income of 20,694 million yen, an
increase of 3.8%, were posted for the nine months ended December 31, 2013.
Operating income before amortization of goodwill and other intangible assets
came to 66,322 million yen, an increase of 60.4%. Operating income before
amortization of goodwill and other intangible assets comprises the operating
income figure to which has been added the amortization of goodwill and other
intangible assets incurred through acquisitions (including the acquisition of
Aegis).

Looking at the results by business segment, in the Advertising segment net
sales of 1,619,414 million yen, an increase of 18.3% compared with the same
period of the previous fiscal year; gross profit of 398,795 million yen, an
increase of 71.2%; and segment income of 32,367 million yen, a decrease of
7.8%, were posted. In the Information Services segment, net sales of 49,090
million yen, an increase of 2.0%; gross profit of 14,673 million yen, a
decrease of 1.3%; and segment income of 342 million yen, a decrease of 53.8%,
were posted. All of the companies in the group headed by Information Services
International-Dentsu, Ltd. fall into this segment. In the Other Business
segment, net sales of 11,792 million yen, a decrease of 4.6%; gross profit of
2,738 million yen, a decrease of 3.5%; and segment income of 717 million yen,
a decrease of 12.9%, were posted.

By geographic area, gross profit of 221,534 million yen, an increase of 7.4%
compared with the same period of the previous fiscal year, and operating
income before amortization of goodwill and other intangible assets of 45,274
million yen, an increase of 27.9%, were posted in Japan. In other countries,
gross profit of 194,079 million yen, an increase of 350.2%, and operating
income before amortization of goodwill and other intangible assets of 21,164
million yen, an increase of 268.3%, 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
have been used in its disclosures of results by business segment and
geographic area from the first quarter onward.

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

Dentsu’s non-consolidated financial results had a significant impact on the
Group’s consolidated financial results. For the nine months ended December 31,
2013, the Company posted non-consolidated billings (net sales) of 1,107,536
million yen, an increase of 6.7% compared with the same period of the previous
fiscal year; gross profit of 156,152 million yen, an increase of 9.4%;
operating income of 32,487 million yen, an increase of 31.5%; ordinary income
of 49,681 million yen, an increase of 73.9%; and net income of 36,982 million
yen, an increase of 133.0%.

For more details regarding the consolidated and non-consolidated results for
the nine months ended December 31, 2013, please see the Presentation Materials
section of the Company’s website at: http://www.dentsu.com/ir/.

Reference: Scope of Consolidated Financial Results
As of December 31, 2013, the Dentsu Group includes 671 consolidated subsidiary
companies and 60 affiliated companies accounted for by the equity method. 94
of these companies are located in Japan and 637 in countries other than Japan.
By business segment, 708 of these companies fall into the Advertising segment,
16 into the Information Services segment, and 7 into the Other Business
segment.

Outlook for the Fiscal Year Ending March 31, 2014
There are no revisions to the forecast of consolidated financial results for
the fiscal year ending March 31, 2014 which was announced on November 13, 2013
(see the “Forecast for the Fiscal Year Ending March 31, 2014” chart below).

Trend of Quarterly Consolidated Financial Results and Forecast for the Fiscal
Year Ending March 31, 2014


Trend of Quarterly Consolidated Financial Results
Millions of yen
               Three                Three                Three                Nine
               months      YoY      months      YoY      months      YoY      months      YoY
FY2013*       ended      change  ended      change  ended      change  ended      change
               June 30,    (%)      Sept. 30,   (%)      Dec. 31,    (%)      Dec. 31,    (%)
               2013                 2013                 2013                 2013
               (Apr–Jun)            (Jul–Sep)            (Oct–Dec)            (Apr–Dec)
Net sales      514,229     14.9     568,130     20.0     580,125     18.1     1,662,485   17.7
Gross profit   122,882     60.7     146,311     69.8     145,180     68.2     414,373     66.4
Operating
income         (717)       –        20,001      59.5     15,455      (3.4)    34,739      (8.9)
(loss)
Ordinary       1,450       (87.4)   22,599      172.7    18,942      (2.8)    42,991      10.0
income
Net income    (3,698)    –       13,833     299.5   10,560     (0.3)   20,694     3.8
(loss)

Operating
income
before
amortization  10,032     (4.9)   30,079     119.9   26,210     53.1    66,322     60.4
of goodwill
and other
intangible
assets
* FY2013: April 1, 2013 to March 31, 2014


Forecast for the Fiscal Year Ending March 31, 2014 (consolidated basis)
Millions of yen
                Six                  Forecast
                months               for the               FY2013*
                ended       YoY      six months   YoY      full-year    YoY
FY2013*        Sept. 30,  change  ending      change  forecast**  change
                2013        (%)      March 31,    (%)      (Apr–Mar)    (%)
                (Apr–Sep)            2014**
                                     (Oct–Mar)
Net sales       1,082,360   17.5     1,209,639    18.6     2,292,000    18.1
Gross profit    269,193     65.5     309,306      68.8     578,500      67.2
Operating       19,284      (12.8)   46,315       27.4     65,600       12.2
income
Ordinary        24,049      21.6     48,350       22.7     72,400       22.7
income
Net income     10,134     8.4     22,965      (14.9)  33,100      (8.9)

Operating
income before
amortization
of goodwill    40,111     65.5    67,688      75.3    107,800     71.5
and other
intangible
assets
* FY2013: April 1, 2013 to March     ** Announced on November 13, 2013
31, 2014


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 Nine Months Ended December 31, 2013
(From April 1 to December 31, 2013)

1. Summary of Consolidated Balance Sheets

                            (Millions of yen: Rounded down to the nearest one
                             million yen)
                             As of               As of
                             March 31,         December 31,       % Change
                             2013                2013
ASSETS
Current assets               1,122,602           1,116,429            (0.5)
Noncurrent assets            1,082,966           1,212,323            11.9
Total assets                 2,205,569           2,328,752            5.6
                                                                      
LIABILITIES
Current liabilities          1,317,554           1,017,625            (22.8)
Noncurrent liabilities       279,377             466,351              66.9
Total liabilities            1,596,931           1,483,977            (7.1)
                                                                      
NET ASSETS
Shareholders’ equity         570,419             698,258              22.4
Accumulated other
                             14,076              121,848              765.6
comprehensive income
Minority interests           24,141              24,668               2.2
Total net assets             608,637             844,775              38.8
Total liabilities and net    2,205,569           2,328,752            5.6
assets


2. Summary of Consolidated Statements of Income

                            (Millions of yen: Rounded down to the nearest one
                             million yen)
                             Nine months           Nine months
                             ended               ended            % Change
                             December 31,          December 31,
                             2012                  2013
Net sales                    1,412,195             1,662,485          17.7
Gross profit                 248,963               414,373            66.4
Operating income             38,116                34,739             (8.9)
Non-operating income         7,414                 17,432             135.1
Non-operating expenses       6,433                 9,180              42.7
Ordinary income              39,098                42,991             10.0
Extraordinary income         233                   5,034              2054.8
Extraordinary loss           2,810                 3,579              27.4
Income before income taxes
and                          36,521                44,446             21.7

minority interests
Net income                   19,939                20,694             3.8


3. Summary of Consolidated Statements of Comprehensive Income

                            (Millions of yen: Rounded down to the nearest one
                             million yen)
                             Nine months           Nine months
                             ended               ended            % Change
                             December 31,          December 31,
                             2012                  2013
Income before minority       21,057                21,854             3.8
interests
Other comprehensive income   22,961                108,854            374.1
Comprehensive income         44,018                130,709            196.9


About the Dentsu Group
Dentsu is the world’s largest advertising agency brand. Led by Dentsu Inc.
(TOKYO:4324) (ISIN:JP3551520004), a company with a history of 112 years of
innovation, the Dentsu Group provides a comprehensive range of client-centric
brand, integrated communications, media and digital services through its seven
global network brands—Carat, Dentsu, Dentsu media, iProspect, Isobar,
Posterscope and Vizeum—as well as through its specialist brands including
360i, Amnet, Amplifi, Data2Decisions, mcgarrybowen, Mitchell Communications
(PR) and psLive.

The Dentsu Group has a strong presence in 110 countries across five
continents, and employs more than 37,000 dedicated professionals. Dentsu Aegis
Network Ltd., its global business headquarters in London, oversees Dentsu’s
agency operations outside of Japan. The Group is also active in the production
and marketing of sports and entertainment content on a global scale.
www.dentsu.com

Contact:

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