FY2005 First Half Earnings Announcement (April 1, 2005 to September 30, 2005) November 17, 2005 Dentsu Inc.

Transcription

1 FY2005 First Half Earnings Announcement (April 1, 2005 to September 30, 2005) November 17, 2005 Dentsu Inc.

2 Financial Summary for 1H FY2005 and Dentsu Group Management Strategies Tateo Mataki President & CEO Cautionary Statement This document contains forward-looking statements regarding the intent, belief or current expectations of Dentsu Inc. or its management with respect to the results of operations and financial condition of the Dentsu Group. Such forward-looking statements, based on information known to management as of November 17, 2005, 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 following discussion is based on the Dentsu Group s consolidated financial statements prepared in accordance with Generally Accepted Accounting Principles in Japan. 1 DENTSU INC

3 Review of 1H FY2005 Year-on on-year Performance Increases Aggressive Investment for Further Growth Personnel Training and Enhancement 2 DENTSU INC

4 Consolidated Operating Results 1H FY2005 Consolidated Performance (Millions of yen) 1H FY2004 1H FY2005 Change Comparison with Projected Results (2) Net sales Gross profit Gross profit margin SG&A Operating income Operating margin (1) Ordinary income Net income 923, , % -1.6% 151, , % -1.2% 16.4% 16.5% +0.1 ppts 126, , % -2.3% 24,758 23, % +5.3% 16.3% 15.1% -1.2 ppts 24,693 25, % +16.9% 12,244 9, % -12.8% Notes: (1) Operating margin = operating income gross profit x 100 (2) Comparison is with projections released on May 17, DENTSU INC

5 Growth of Consolidated Gross Profit 1H FY2005 Consolidated Performance Consolidated Gross Profit and Gross Profit Margin Gross Profit Expansion and Level of Contribution by Service Categories (Billions of yen) 200 (%) 17.0 (%) % % +1.5% % % 1H 1H 1H FY2003 FY2004 FY Consolidation adjustment Shared services, other services Overseas advertising services e-solution services Content business Marketing services Advertising services Dentsu (parent company) Y-o-y % change in consolidated gross profit 1H 2H 1H 2H 1H FY 2003 FY 2004 FY 2005 Note: Level of contribution refers to the extent to which a service category contributes to (or reduces) gross profit. (gross profit of service category during current term gross profit of service category during previous term) consolidated gross profit during previous term 4 DENTSU INC

6 Consolidated Operating Income Breakdown of Consolidated Gross Profit from Cost Perspective 1H FY2005 Consolidated Performance Consolidated Operating Income and Operating Margin (Millions of yen) 160, ,000 16,577 (12%) (5%) 7,028 39,581 (29%) (29%) 80,000 24,758 (16%) 6,872 (5%) 45,105 (30%) (30%) 23,235 (13%) (15%) 7,220 (5%) 46,476 (31%) (30%) Operating income Other Operating expenses Personnel costs (Billions of yen) 30 Consolidated operating income (left scale) Consolidated operating margin (right scale) 16.3% 15.1% 12.2% 20 20% 15% 10% 10 40,000 72,323 74,936 77,036 (53%) (53%) (49%) (49%) (51%) (50%) (53%) (49%) (51%) 5% 0 1H FY003 1H FY2004 1H FY H 1H 1H 0% Note: Figures in parentheses are percent of total FY2003 FY2004 FY DENTSU INC

7 FY2005 Consolidated Performance Outlook for FY2005 Consolidated Financial Results (Millions of yen) FY2004 FY2005 Comparison with Change (Results) (Estimated) Projected Results* Net sales 1,910,469 1,940, % -1.0% Gross profit 317, , % -0.9% Gross profit margin 16.6% 16.8% +0.2 ppts SG&A 260, , % -0.8% Operating income 57,603 58, % -1.3% Operating margin 18.1% 17.8% -0.3 ppts Ordinary income 59,265 60, % +2.6% Net income 27,532 28, % -8.4% * Comparison is with projections released on May 17, DENTSU INC

8 Major Components of the Strategy With Dentsu TEC as the core, strengthen services in advertising-related related markets Enhance services in Internet advertising and related fields Create demand through sports marketing operations Expand operations in China 7 DENTSU INC

9 Dentsu Group Management Strategies With DENTSU TEC as the Core, strengthen services in Advertising-Related markets DENTSU TEC Becoming Wholly Owned Subsidiary Advanced integration of advertising and marketing services Expanding Advertising-Related Markets Expanding services in advertising - related markets Strengthening creative works business Maximizing Dentsu Group synergies DENTSU TEC Businesses Sales Promotion Event Promotion Creative Works Interactive Content Market worth approx. 10 trillion Advertising in four traditional mass media Satellite media Advertising- related markets Sales promotion In-store promotion e-promotion Marketing research CRM Field service Contact point management etc. Internet advertising SP OOH Transport DM Inserts POP Exhibits/visuals Phone books Japanese advertising expenditures: 6 trillion market R & D Sources: 2004 Advertising Expenditures in Japan ; Dentsu statistics on advertising-related markets 8 DENTSU INC

10 Enhance Services in Internet Advertising and Related Fields Dentsu Group Revenues from Internet Business (Billions of yen) 40 Internet/mobile media related Production/system configuration/ marketing related 0 1H FY2004 2H FY2004 1H FY2005 Notes: These figures represent the simple total of revenues from external clients of the Dentsu Interactive Communications Division and Dentsu Group companies. The rate of growth is in comparison with the previous term or the corresponding period of the previous year. Forecast Growth of Internet Advertising Market (Billions of yen) % % +16% +18% % Source: Dentsu Communication Institute (July, 2005) Mobile Advertising Advertising Contextual Advertising Search Advertising Web Advertising Dentsu Group Internet Business Structure Internet media cyber communications 24-7 Search Action Click Mobile Media D2 Communications Cross Media Ubiquitous Core Interactive Program Guide Media Business Marketing Solution Business Dentsu e-marketing e One Digital Palette Wunderman Dentsu Information Services International-Dentsu Dentsu Group Management Strategies Dentsu e-link e Invisible Hand Japan Mobile Communications Media Shakers Crossmedia Information Center Video Research Interactive Dentsu Research DENTSU TEC 9 DENTSU INC

11 Dentsu Group Management Strategies Create Demand through Sports Marketing Operations Principal Events in Which Dentsu Is Involved or Has Obtained Rights Olympic Games IOC International Olympic Committee Exclusive rights to sell sponsorships to Japanese companies JOC Japanese Olympic Committee Sponsorship sales rights (Torino 2006, Beijing 2008) OCA Olympic Council of Asia Sponsorship sales rights, global broadcasting rights (15th Asian Games Doha 2006) - - Soccer FIFA Federation Internationale de Football Association Sponsorship sales rights, Japan broadcasting rights, etc. (2006 FIFA World Cup Germany TM, etc.) UEFA The Union of European Football Associations Rights to sell official supply sponsorships to Japanese IT companies (UEFA Champions League, etc.) EAFF East Asian Football Federation Sponsorship sales rights, broadcasting rights (East Asian Football Championship, ) Other MLB Major League Baseball Japan broadcasting rights ( ) IAAF International Association of Athletic Federations Global sponsorship sales rights, global broadcasting rights, ex. Europe and Africa (IAAF World Championships in Athletics 2007, 2009) - FINA Federation Internationale de Natation Amateur Global exclusive marketing agency contract (12th FINA World Championships in Melbourne 2007) - 10 DENTSU INC

12 Expand Operations in China Dentsu Group Management Strategies Dentsu Group Operations in China Brand Agencies Beijing Dentsu Advertising Beijing Oriental Rihai Advertising Shanghai Oriental Partner Advertising Shanghai Shenzhen Beijing Guangzhou Tsingtao Shenzhen Wuhan Guangzhou Shanghai Wuhan Chengdu Media Palette Media Divisions Dentsu China Zhongying Dentsu Tec Advertising: Premium, CM, video and event planning and media rep Marketing Services, Others Clipper MotherAsia: The core of Dentsu s creative planning network for Asia Sinomonit International: Conducts market research on the China market SFS-Dentsu Media & Entertainment: Creates media content for the Chinese market Datong Sales Promotion : Production and inspection of novelty goods 11 DENTSU INC