Earnings Announcement FY01/02. (for the year ended March 31, 2002)

Transcription

1 Earnings Announcement FY01/02 (for the year ended March 31, 2002) May 16, 2002

2 Cautionary Statement This document contains forward-looking statements regarding the intent, belief or current expectations of Dentsu and its management with respect to the results of operations and financial condition of Dentsu and the Dentsu Group. Such forward-looking statements, based on the current information known to the management as of May 16, 2002, are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those in the forward-looking statements as a result of various factors. Unless otherwise stated, the discussion below is based on the Dentsu Group s consolidated financial statements prepared according to Japanese Generally Accepted Accounting Principles (GAAP).

3 Financial Summary for FY01/02 (the year ended March 31, 2002) and Forecast for FY02/03 (the year ending March 31, 2003 ) Hitoshi Hanatsuka Chief Financial Officer 1

4 Group Structure Subsidiaries and affiliates by service area Advertising services: Nonadvertising services: 136 companies including Dentsu Inc., 5 Regional Dentsu Subsidiaries (Dentsu East Japan etc. ), Dentsu Tec and cyber communications 39 companies including Information Services International-Dentsu (ISID) 2

5 Financial Summary (1) Consolidated Results Net sales 1,814,309 1,789,432 (millions of yen) FY 00/01 FY 01/02 % of Previous Year Total 98.6% Gross Profit 301, , % Operating income 72,500 61, % Operating margin 24.0% 20.8% Ordinary income 71,891 59, % Net income 41,368 27, % 3

6 Financial Summary (2) Highlights Achieved second best results (only after record-setting FY00/01) in Dentsu history : Net sales, gross profit, operating income, ordinary income, net income Achieved operating margin of 20.8% 4

7 Consolidated Net Sales Group company highlights Companies newly consolidated under the Dentsu Group during FY01/02 include: Dentsu China, Beijing Dentsu Advertising Dentsu Asia, Dentsu Holdings (Thailand) Dentsu Fuse, Brainyworks Group companies whose net sales increased include: Information Services International-Dentsu, Dentsu USA Consolidated gross profit rate : 16.4% (16.6% in FY00/01) 5

8 Consolidated Operating Income Personnel expenses and other expenses including operating expenses (millions of yen) FY 00/01 FY 01/02 % of Previous Year Total Personnel Expenses 143, , % Operating Expenses Etc. 85,529 87, % Total 229, , % Consolidated operating income: 61,168(million yen) 84.4% of previous year total 6

9 Consolidated Net Income Non-operating profit/loss and extraordinary expenses Non-operating Profit/Loss Extraordinary Expenses (millions of yen) FY 00/01 FY 01/02 Change , ,500-4,831 Net income 27,457 (million yen) 66.4% of previous year total 7

10 Financial Position Strengthening Dentsu s Financial Position Increase capital base through public offering Decrease asset & liability through repayment of loans and bonds Improve shareholder equity ratio Maintain high credit ratings reflecting Dentsu s strong financial position R&I : Short-term a-1+(highest);long-term AA S&P : Short-term A-1+(highest);Long-term AA 8

11 Key Indicators 30.0% Year Trend Operating margin FY97/98 FY98/99 FY99/00 FY00/01 FY01/02 ROE ROA Key Indicators Operating Margin : 20.8% (24.0% in previous year) ROE(net income / shareholders equity): 6.5% (11.0% in previous year) ROA(operating income / total assets): 5.5% (6.8% in previous year) 9

12 Non-Consolidated Results FY 00/01 FY 01/02 (millions of yen) % of Previous Year Total Net Sales 1, ,433, % Gross profit 222, , % Operating income 54,146 45, % Operating margin 24.3% 22.1% Ordinary income 56,054 46, % Net income 25,030 23, % 10

13 Non-Consolidated Net Sales Breakdown of net sales Newspapers Magazines Radio Television Promotion Other Total FY 00/01 FY 01/02 Change (%) Key events 2002 Winter Olympic Games, 2001 World SwimmingChampionships 2001 World Championships in Athletics, 2002 FIFA World Cup Spirited Away (animated film) Three Expo s ( Japan Expo ) 11

14 Non-Consolidated Net Sales by Sector Net Sales by Sector (% of Previous Year ) Increased: Automobiles and related products (114.6%) Financial and insurance services (103.8%) Decreased: Information, communications (82.4%) Cosmetics, toiletries (89.4%) Breakdown of Net Sales by Sector Other 26.6% Fast food and other service industry 4.5% Pharmaceutical, medical supplies 5.1% Home electronics, audiovisual equipment 5.5% Information, communications 12.8% Drinks, tobacco, luxury foods 12.3% Financial and insurance services 10.8% Automobiles and 6.1% Cosmetics, related products toiletries 8.1% 8.2% Foodstuffs 12

15 Consolidated Earnings Forecast (FY02/03) (1) FY 01/02 FY 02/03 % of Previous Year Total Net Sales 1,789,432 1,735, % Gross profit 293, , % Operating income 61,168 45, % Ordinary income 59,705 46, % Net income 27,457 13, % 13

16 Consolidated Earnings Forecast (FY02/03) (2) Construction of New Headquarters Operating expenses (approx. 5 billion yen) Extraordinary expenses (approx. 12 billion yen) Effects of investment in Publicis Extraordinary income from stock swap expected (not reflected in earnings forecast ) Non-operating income from investment through equity method including goodwill amortization expected (not reflected in earnings forecast ) 14

17 Corporate Strategy of The Dentsu Group Yutaka Narita President 15

18 The Dentsu Group in the 21st Century November 2001 Dentsu lists on the first section of Tokyo Stock Exchange March 2002 Dentsu enters into a strategic alliance with Publicis Groupe SA October 2002 New headquarters to be completed Dentsu to pursue the path of continued growth 16

19 Outlook for Advertising and Related Businesses Clients business becoming increasingly global Asian markets with growth potential, drawing global attention Clients seeking brand building and reinforcement Clients demanding professional know-how and high value-added services Clients demand increasing for more effective and efficient advertising services Achieving growth in a new level of competition 17

20 Projected Growth Growth Rate Dentsu Consolidated Net Sales 3 - yr. Annual Average Growth Rate: 3.1% Japanese Advertising Expenditure 3 - yr. Annual Average Growth Rate: 0.6% Note : Dentsu Consolidated Net Sales figure is on a fiscal year basis. Japanese Total advertising expenditure is on a calendar year basis. Source : Nihon keizai kenkyu center, Dentsu 18

21 Financial Targets (FY02/03 FY04/05 ) Net Sales - 3-year average growth target of 3.1% Gross Profit - 3-year average growth target of 2.0% Operating Income - 3-year average growth target of 4.4% Operating Margin - Maintain 20% + Maintain current ratings - AA ー (S&P), AA (R&I) 19

22 Market Position The largest market share in Japan, the world s second largest advertising market. * Ranked as the No.1 ** advertising agency globally in terms of gross profit. Ranked as the No.5 ** communications group globally in terms of gross profit. * According to Zenith Media December 2001 * * According to Advertising Age April 22,

23 Services Services Domestic Ranking by Net Sales* Dentsu s Corporate Brands Advertising Sales promotion Public relations Marketing & Research Sports Marketing e-solution Services** Shared Services No.1 No.1 No.1 No.3 strong Strong Dentsu Inc., Dentsu Eye, Ad Dentsu, CCI, 5 Regional Dentsu Subsidiaries Dentsu Tec Dentsu Public Relations Dentsu Research Dentsu Information Services International-Dentsu, Dentsu Fuse Dentsu Kosan Service, Dentsu Management Services * Rankings are based on net sales of subsidiaries and affiliates under Dentsu Group * * e-solution services include CRM, e-promotion, system integration, etc. 21

24 Business Profile: Gross Profit Composition* FY 01/02 (ended March 31, 2002) Overseas e-solution Companies 5% Services Companies 7% Others 1% Marketing Contents Services Companies 7% FY04/05 (ending March 31, 2005) estimates Overseas e-solution Companies 5% Services Others 1% Companies 10% Marketing Contents Services Companies 8% Total Advertising Services Companies80% Growth Strategy Total Advertising Services Companies 76% * Combined gross profit of Dentsu Inc. and its consolidated subsidiaries 22

25 Corporate Strategy 1. Increase competitive advantage in the Japanese advertising market 2. Grow complimentary marketing services 3. Expand business globally 4. Improve cost structures 23

26 1.Increase Competitive Advantage in the Japanese Advertising Market (1) Total Advertising Services Advertising services constitute 80% of Dentsu Group s business* (FY01/02) Growth target: To achieve a 3-year average gross profit of 1%+ on a consolidated basis* Dentsu Inc. 5 Regional Dentsu Subsidiaries Ad Dentsu, Dentsu Eye, CCI * Based on combined gross profit of Dentsu Inc. and its consolidated subsidiaries 24

27 1.Increase Competitive Advantage in the Japanese Advertising Market (2) Competitive factors in the advertising industry Increasing demand from clients for brand creation/management Clients seeking more effective and efficient media use in marketing Strengthen brand creation/management power Strengthen media businesses 25

28 2. Grow Complimentary Marketing Services (1) Marketing Services* Gross profit composition of 7%** Development of new markets Growth target: 3-year average gross profit ** growth rate of 7% + Dentsu Tec Dentsu PR Dentsu Research CAL Dentsu Casting & Entertainment Dentsu Music Publishing Dentsu Sports Marketing USA * Inclusive of Dentsu companies specializing in the contents-specific areas. ** Based on combined gross profit of Dentsu s consolidated subsidiaries 26

29 2. Grow Complimentary Marketing Services (2) e-solution Businesses e-solution service companies constitute 7% of Dentsu Group s business* SI (System Integration) market is expected to grow 7-10% annually; further expansion foreseen in CRM services Grow businesses such as CRM services with ISID as the core company Growth target: 3-year average gross profit* organic growth of 15.0% + Information Services International-Dentsu (ISID) Brainyworks Dentsu Fuse * Based on combined gross profit of Dentsu s consolidated subsidiaries 27

30 3. Expand business globally (1) Strategic Alliance with Publicis Platform in Europe Platform in Japan and Asia Platform in US Dentsu s agreement with Publicis Dentsu to obtain 15% of voting rights in Publicis Dentsu granted 2 seats on Publicis Supervisory Board Publicis to become the Dentsu Group s affiliate under the equity method Establish the best global network with powerful presence in Japan, US and Europe. 28

31 3. Expand business globally (2) Strategies Behind the Publicis Alliance Ability to offer the best services globally Opportunities for cooperation and collaboration in the media services business Globalization of the sports marketing business Strengthening of complimentary marketing services 29

32 3. Expand business globally (3) Expanded Services in Asian Markets Enhance Dentsu s own network to increase Japanese and local clients Synergies with Publicis Growth target: 3-year average growth of gross profit * 15% + * Based on combined gross profit of Dentsu s consolidated subsidiaries 30

33 4. Improve Cost Structures Reform human resources management system Increase flexibility of personnel-related management for better cost control Further strengthen the group management structure 31