APAC region shines on Dentsu FY 2015 balance sheet as gross profit up 11.4%

Dentsu logoDentsu Group has released its first combined full-year financial results after it acquired British media buyer Aegis Media, with its international arm reporting profit growth of 9.4 per cent in 2015 while the agency giant saw profits rise 3.9 per cent in its home turf of Japan last year.

In Asia Pacific – excluding its home market – Dentsu Aegis Network, the international arm launched last year that includes Carat, iProspect, Vizeum, Posterscope and Synovate as well as Dentsu and Dentsu Media, organic gross profit grew by 11.4 per cent, including double-digit growth in China, DAN’s largest market, India, Thailand, Vietnam and Hong Kong.

Quarterly organic gross profit growth figures for 2014 and 2015 for Dentsu Aegis Network

Quarterly organic gross profit growth figures for 2014 and 2015 for Dentsu Aegis Network

Globally, revenue was up 12.8 per cent to 818,566 million yen (US$7.1 billion), while gross profit grew by 12.6 per cent.

Dentsu Inc's FY2015 consolidated financial results

Dentsu’s FY2015 consolidated financial results

Dentsu’s earnings before interest, tax, depreciation and amortization (EBITDA) – the truest measure of company growth – edged down 1.9 per cent year on year.

In response to Mumbrella’s questions about why EBITDA had declined, Dentsu said that operating profit, and as a result EBITDA, were affected by a gain in the sale of the company’s old headquarters in Tokyo in 2014.

In a statement commenting on the results, Tadashi Ishii, president and CEO of Dentsu Inc., commented: “In 2015, the third year of our medium-term management plan ‘Dentsu 2017 and Beyond,’ we continued to make steady progress in delivering on our strategic objectives, while producing another peer group-leading performance. Looking ahead, in addition to further growth in the Group’s core Japanese market, we will leverage our extensive global network to its fullest potential in order to contribute to the growth of all our clients.”

He continued: “We will continue to invest in our business, particularly in integrating our digital capabilities, to ensure we take advantage of the opportunities that will arise in an increasingly fast-paced digital economy. With this in mind, and supported by our continued focus on our strategic objectives, we expect to continue outperforming the market in the year ahead and beyond.”

Next year, the company said that it wants at least 55 per cent of gross profit to come from its business outside of Japan, and the ratio of gross profit from digital business to be 35 per cent or higher.

Report highlights from the company:

  • Dentsu Group organic gross profit growth of 7.0%
  • Group underlying operating margin was 21.1% (FY2014: 19.7%)
  • Organic gross profit growth of the Group’s business in Japan was 3.9%
  • At Dentsu Aegis Network, the international business, organic gross profit growth was 9.4%, including 8.2% in Q4 FY2015
  • Ratio of gross profit from international (non-Japanese) business reached 54.3% (from 50.7% in FY2014)
  • Ratio of gross profit from digital now stands at 34% (from 30% in FY2014)
  • Impact of strong cost containment across the Group, planned reduction in investment in global functional transformation programs during the year
  • A record number of acquisitions signed during FY2015, around half of which are digital businesses
  • Underlying basic earnings per share were 395.67 yen, a 27.9% increase over the prior year
  • Dividend per share for FY2015 was 75 yen, an increase from 55 yen for the prior year, equating to a dividend payout ratio of 22.7% (based on underlying net profit attributable to owners of the parent)
  • The Dentsu Group expects to continue delivering market outperformance in 2016

Last year was a record one for acquisitions for the group, with the likes of JaymeSyfu and Aspac in the Philippines, and Mangham Gaxiola and B2B agency Band in Singapore joining the family in Southeast Asia. However, Dentsu Aegis Network saw the need to retrench a chunk of its Southeast Asia team last month, which regional boss Nick Waters telling staff in an email that the move was to “eliminate duplicate costs”.

Dentsu acquired Aegis for $5 billion in 2012.


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