Dentsu Reports Consolidated Financial Results for the Fiscal Year Ended March 31, 2014 (Japanese GAAP) and Announces Increased

  Dentsu Reports Consolidated Financial Results for the Fiscal Year Ended
  March 31, 2014 (Japanese GAAP) and Announces Increased Dividend

  —Strong results from both the domestic and overseas businesses; net sales,
             gross profit and ordinary income reach record highs—

    Posts 2,309.3 Billion Yen in Consolidated Billings (Net Sales) (19.0%
                           year-on-year increase);
   594.0 Billion Yen in Gross Profit (71.7% increase); 114.1 Billion Yen in
 Operating Income before Amortization of Goodwill and Other Intangible Assets
(81.7% increase); 71.4 Billion Yen in Operating Income (22.3% increase); 82.5
 Billion Yen in Ordinary Income (39.8% increase) and 38.8 Billion Yen in Net
                            Income (6.8% increase)

Business Wire

TOKYO -- May 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 fiscal year
ended March 31, 2014 (April 1, 2013–March 31, 2014; hereinafter “the fiscal
year under review”). The Company also passed a resolution concerning an
increase in the cash dividends applicable to the fiscal year ended March 31,
2014. The resolution is expected to be brought to the General Meeting of
Shareholders which is scheduled to be held on June 27, 2014.

Summary of Financial Results for the Fiscal Year Ended March 31, 2014
During the fiscal year under review, the Japanese economy slowly recovered
against a backdrop of monetary easing measures and bold economic policies,
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 growing economic slowdown seen in
China and other emerging economies.

According to Dentsu’s “Advertising Expenditures in Japan 2013” report,
advertising expenditures in Japan for the 2013 calendar year totaled 5,976.2
billion yen, an increase of 1.4% over the previous year. Spending on
advertising posted year-on-year gains for a second straight year thanks to the
sustained economic recovery brought about by Prime Minister Shinzo Abe’s
“Abenomics” policies and a late surge in demand ahead of the consumption tax
rate increase which came into effect on April 1, 2014. In the March 2014
worldwide advertising expenditure forecasts provided by the Dentsu Group’s
media communications agency Carat, the figures for calendar year 2013 included
a 3.3% year-on-year increase in global advertising expenditures, a 9.9%
increase in Latin America, a 5.0% increase in the Asia-Pacific region, a 4.8%
increase in Central and Eastern Europe, a 3.5% increase in North America, and
a 1.7% decrease in Western Europe.

The completion of the acquisition of major U.K. media and digital
communications agency Aegis Group plc (hereinafter “Aegis”) in March 2013
marked a new beginning for the expanded Dentsu Group as a truly global player.
Post-acquisition integration is proceeding smoothly, and has already led to
several new account wins. In response to growing client needs in the Japanese
market, Dentsu has been providing integrated solutions including the
utilization of big data. Initiatives such as these combined with the
last-minute demand ahead of the April 1, 2014 consumption tax rate increase
resulted in a performance that exceeded the expectations held at the beginning
of the fiscal year under review. Non-consolidated ordinary and net income in
particular reached record highs.

In the fiscal year under review the Group posted consolidated billings (net
sales) of 2,309,359 million yen, an increase of 19.0% compared with the fiscal
year ended March 31, 2013, and gross profit of 594,072 million yen, an
increase of 71.7%. Operating income before amortization of goodwill and other
intangible assets^*1 came to 114,186 million yen, an increase of 81.7%.
Amortization of goodwill and other intangible assets incurred through
acquisitions (including the acquisition of Aegis) was calculated as 27,029
million yen for goodwill and 15,666 million yen for other intangible assets.
As a result, the Group posted operating income of 71,490 million yen, an
increase of 22.3%; ordinary income of 82,538 million yen, an increase of
39.8%; and net income of 38,800 million yen, an increase of 6.8%.

Following the acquisition of Aegis and the change of the company’s registered
name to Dentsu Aegis Network Ltd. on March 26, 2013, Dentsu Aegis Network
Ltd.’s results have been included in the Dentsu Group’s Consolidated
Statements of Income from the first quarter of the fiscal year ended March 31,
2014.

^*1 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.

Actual Results against the New Medium-Term Management Plan Objectives
“Dentsu 2017 and Beyond,” the Group’s new medium-term management plan, was
announced on May 14, 2013. The plan’s numerical targets for fiscal 2017 and
the results for the fiscal year under review are provided below.

-Gross profit organic growth rate CAGR: 3–5%

Results for the fiscal year under review: 7.7%

-Ratio of gross profit generated from markets outside of Japan: 55% or
higher

Results for the fiscal year under review: 48%

-Ratio of gross profit generated from digital businesses: 35% or higher

Results for the fiscal year under review: 28%

-Operating margin before amortization of goodwill and other intangible
assets^*2: 20% or higher

Results for the fiscal year under review: 19.2%

^*2 Operating margin before amortization of goodwill and other intangible
assets = Operating income before amortization of goodwill and other intangible
assets ÷ gross profit

Results by Business Segment
In the Advertising segment, net sales of 2,246,505 million yen, an increase of
19.6% compared with the previous fiscal year; gross profit of 571,315 million
yen, an increase of 76.6%; and segment income of 65,788 million yen, an
increase of 24.5%, were posted.

In the Information Services segment, net sales of 74,865 million yen, an
increase of 5.3%; gross profit of 22,855 million yen, an increase of 4.0%; and
segment income of 4,017 million yen, an increase of 31.5%, 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 15,862 million yen, a decrease of
4.1%; gross profit of 3,512 million yen, a decrease of 5.4%; and segment
income of 792 million yen, a decrease of 14.3%, were posted.

Results by Geographic Area
Gross profit of 311,416 million yen, an increase of 8.9% compared with the
previous fiscal year, and operating income before amortization of goodwill and
other intangible assets of 72,409 million yen, an increase of 33.4%, were
posted in Japan. In other countries, gross profit of 283,630 million yen, an
increase of 369.9%, and operating income before amortization of goodwill and
other intangible assets of 41,434 million yen, an increase of 399.0%, 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 Dentsu Group companies with a December 31 closing date, including
subsidiaries in countries other than Japan, their financial results for the
twelve months from January 1 to December 31, 2013 are, as a general rule,
incorporated in the consolidated financial results for the fiscal year ended
March 31, 2014.

Dentsu posted non-consolidated billings (net sales) of 1,515,062 million yen,
an increase of 7.3% compared with the previous fiscal year; gross profit of
219,393 million yen, an increase of 10.9%; operating income of 50,579 million
yen, an increase of 41.4%; ordinary income of 69,667 million yen, an increase
of 78.2%; and net income of 46,953 million yen, an increase of 66.6%.

For more details regarding the consolidated and non-consolidated results,
please see the presentation slides (will be uploaded on May 16, 2014) in the
Presentation Materials section of the company website at:
http://www.dentsu.com/ir/

Reference: Scope of Consolidated Financial Results
As of March 31, 2014, the Dentsu Group includes 657 consolidated subsidiary
companies and 59 affiliated companies accounted for by the equity method. 94
of these companies are located in Japan and 622 in countries other than Japan.
By business segment, 693 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, 2015
Carat’s latest global advertising expenditure forecast (March 2014) shows
global advertising revenues accelerating by 4.8% in 2014. From a regional
perspective, an increase in advertising expenditure is forecast across all
regions: 12.8% in Latin America, 5.6% in the Asia-Pacific region, 5.0% in
Central and Eastern Europe, 4.3% in North America, and 1.8% in Western Europe.

For the fiscal year ending March 31, 2015, on a consolidated basis, Dentsu
forecasts billings (net sales) of 2,371.2 billion yen, an increase of 2.7%
year on year; gross profit of 623.0 billion yen, an increase of 4.9%;
operating income before amortization of goodwill and other intangible assets
of 115.5 billion yen, an increase of 1.2%; operating income of 72.5 billion
yen, an increase of 1.4%; ordinary income of 77.9 billion yen, a decrease of
5.6%; and net income of 31.1 billion yen, a decrease of 19.8%.

Calculations were made using the average exchange rate of GBP 1 = JPY 152.7
for the January–December 2013 period.

Going forward, Dentsu is considering the voluntary adoption of IFRS for the
fiscal year ending March 2015 in order to increase comparability in
international capital markets.

On a non-consolidated basis, Dentsu forecasts billings (net sales) of 1,567.2
billion yen, an increase of 3.4% year on year; gross profit of 223.1 billion
yen, an increase of 1.7%; operating income of 51.9 billion yen, an increase of
2.6%; ordinary income of 61.0 billion yen, a decrease of 12.4%; and net income
of 35.0 billion yen, a decrease of 25.5%.

Increase in Cash Dividends Applicable to the Fiscal Year Ended March 31, 2014
Based on a comprehensive view of such factors as business results for the
fiscal year under review, the medium- to long-term results outlook and the
Group’s funding situation, cash dividends per share of common stock are
expected to be 33.00 yen, including an interim dividend of 16.00 yen and a
year-end dividend of 17.00 yen, an increase of one yen from the February 13,
2014 forecast of 16.00 yen per share.

Cash dividends per share of common stock applicable to the fiscal year ending
March 31, 2015, are expected to be 34.00 yen, including an interim dividend of
17.00 yen and a year-end dividend of 17.00 yen.

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 Fiscal Year Ended March 31, 2014

1. Summary of Consolidated Balance Sheets

                            (Millions of yen: Rounded down to the nearest one
                             million yen)
                             As of               As of
                             March 31,         March 31,         % Change
                             2013                2014
ASSETS
Current assets               1,122,602           1,368,385           21.9
Noncurrent assets            1,082,966           1,269,933           17.3
Total assets                 2,205,569           2,638,319           19.6
                                                                     
LIABILITIES
Current liabilities          1,317,554           1,253,263           (4.9)
Noncurrent liabilities       279,377             476,560             70.6
Total liabilities            1,596,931           1,729,824           8.3
                                                                     
NET ASSETS
Shareholders’ equity         570,419             715,828             25.5
Accumulated other
                             14,076              167,289             1088.4
comprehensive income
Minority interests           24,141              25,377              5.1
Total net assets             608,637             908,495             49.3
Total liabilities and net    2,205,569           2,638,319           19.6
assets



2. Summary of Consolidated Statements of Income
                           
                             (Millions of yen: Rounded down to the nearest one
                             million yen)
                             Fiscal year            Fiscal year

                             ended                ended           % Change

                             March 31, 2013         March 31,
                                                    2014
Net sales                    1,941,223              2,309,359         19.0
Gross profit                 345,940                594,072           71.7
Operating income             58,466                 71,490            22.3
Non-operating income         10,016                 22,593            125.6
Non-operating expenses       9,455                  11,545            22.1
Ordinary income              59,027                 82,538            39.8
Extraordinary income         13,854                 7,795             (43.7)
Extraordinary loss           9,571                  9,161             (4.3)
Income before income taxes
and                          63,310                 81,172            28.2
minority interests
Net income                   36,336                 38,800            6.8



3. Summary of Consolidated Statements of Comprehensive Income

                            (Millions of yen: Rounded down to the nearest one
                             million yen)
                             Fiscal year          Fiscal year

                             ended              ended            % Change

                             March 31,            March 31,
                             2013                 2014
Income before minority       38,748               41,430             6.9
interests
Other comprehensive income   20,856               163,263            682.8
Comprehensive income         59,605               204,694            243.4



4. Summary of Consolidated Statements of Cash Flows

                           (Millions of yen: Rounded down to the nearest one
                             million yen)
                             Fiscal year                      Fiscal year

                             ended                         ended

                             March 31, 2013                   March 31, 2014
Net cash provided by         83,295                        97,540
operating activities
Net cash used in             (51,236)                         (318,087)
investing activities
Net cash provided by
(used in) financing          (5,349)                          226,526
activities
Effect of exchange rate
change on cash and           3,905                            13,569
cash equivalents
Net increase in cash and     30,616                        19,549
cash equivalents
Cash and cash
equivalents at beginning     175,956                          207,578
of period
Increase in cash and
cash equivalents from        1,006                            –
newly consolidated
subsidiary
Cash and cash
equivalents at end of        207,578                          227,128
period



Non-Consolidated Financial Results
for the Fiscal Year Ended March 31, 2014

1. Summary of Non-Consolidated Balance Sheets

                            (Millions of yen: Rounded down to the nearest one
                             million yen)
                             As of                  As of
                                                                 % Change
                             March 31, 2013         March 31,
                                                    2014
ASSETS
Current assets               538,121                539,204          0.2
Noncurrent assets            871,265                943,456          8.3
Total assets                 1,409,387              1,482,661        5.2
                                                                     
LIABILITIES
Current liabilities          819,679                549,354          (33.0)
Noncurrent liabilities       97,202                 281,676          189.8
Total liabilities            916,881                831,031          (9.4)
                                                                     
NET ASSETS
Shareholders’ equity         478,475                637,762          33.3
Valuation and translation    14,029                 13,867           (1.2)
adjustments
Total net assets             492,505                651,629          32.3
Total liabilities and net    1,409,387              1,482,661        5.2
assets



2. Summary of Non-Consolidated Statements of Income

                            (Millions of yen: Rounded down to the nearest one
                             million yen)
                             Fiscal year           Fiscal year
                             ended               ended           % Change
                             March 31, 2013        March 31,
                                                   2014
Net sales                    1,412,376             1,515,062         7.3
Gross profit                 197,867               219,393           10.9
Operating income             35,766                50,579            41.4
Non-operating income         12,549                26,207            108.8
Non-operating expenses       9,224                 7,118             (22.8)
Ordinary income              39,091                69,667            78.2
Extraordinary income         13,301                5,639             (57.6)
Extraordinary loss           9,903                 6,945             (29.9)
Income before income taxes   42,489                68,361            60.9
Net income                   28,189                46,953            66.6


[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 eight
global network brands—Carat, Dentsu, Dentsu media, iProspect, Isobar,
mcgarrybowen, Posterscope and Vizeum—as well as through its
specialist/multi-market brands including 360i, Amnet, Amplifi, Data2Decisions,
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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