Summary of Financial Results for the Fiscal Year Ended March 31, 2014

Transcription

1 Summary of Financial Results for the Fiscal Year Ended March 31, Japanese GAAP, Consolidated Results- Name of Listed Company: Dentsu Inc. Code Number: 4324 Stock Exchange Listing: URL: Name of Representative: First Section of the Tokyo Stock Exchange Tadashi Ishii, President & CEO Scheduled date of Ordinary General Meeting of Shareholders: June 27, 2014 Scheduled start date of dividend payment: June 30, 2014 Scheduled date for filing of the Financial Report: June 27, 2014 Supplementary briefing material on annual results: Available Annual results briefing for institutional investors and analysts: Scheduled Contact: Shusaku Kannan Senior Manager Corporate Communications Division Telephone: (813) /46

2 Summary of Consolidated Financial Results for the Fiscal Year Ended March 31, 2014 [Japanese GAAP] 1. Summary of Financial Results for the Fiscal Year Ended March 31, 2014 (from April 1, 2013 to March 31, 2014) (Figures are rounded down to the nearest one million yen) (1) Consolidated Financial Results (Percentages indicate the rate of increase or decrease compared with the previous fiscal year.) Net sales Operating income Ordinary income Net income March 31, 2014 March 31, ,309, % 71, % 82, % 38, % 1,941, % 58, % 59,027 (6.1)% 36, % (Note) Comprehensive income March 31, 2014: 204,694 million yen; 243.4% March 31, 2013: 59,605 million yen; 7.7% (Yen, except percentages) Net income per share (Basic) Net income per share (Diluted) Ratio of net income to equity Ratio of ordinary income to total assets Ratio of operating income to net sales March 31, % 3.4% 3.1% March 31, % 3.5% 3.0% (Reference) Equity in earnings of affiliates March 31, 2014: 3,764 million yen March 31, 2013: 2,202 million yen Gross profit March 31, 2014: 594,072 million yen; 71.7% March 31, 2013: 345,940 million yen; 3.9% Operating income before amortization of goodwill and other intangible assets March 31, 2014: 114,186 million yen; 81.7% March 31, 2013: 62,841 million yen; 13.5% For the definition of operating income before amortization of goodwill and other intangible assets, please refer to page 8 in the Financial Results section. 2/46

3 (2) Consolidated Financial Position (Millions of yen, except percentages and Equity per share figures) Total assets Net assets Equity ratio Equity per share (Yen) As of March 31, 2014 As of March 31, 2013 (Reference) Equity As of March 31, 2014: As of March 31, 2013: 2,638, , % 3, ,205, , % 2, ,118 million yen 584,495 million yen (3) Consolidated Cash Flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities Cash and cash equivalents at end of period March 31, ,540 (318,087) 226, ,128 March 31, ,295 (51,236) (5,349) 207, Dividends First Quarter Cash dividend per share Second Quarter Third Quarter Year-end (Yen, except Total cash dividends figures and percentages) Total Total cash dividends for the year Dividend payout ratio (Consolidated) Ratio of dividends to net assets (Consolidated) March 31, , % 1.4% March 31, 2014 Fiscal year ending March 31, 2015 (forecast) , % 1.2% % 3/46

4 3. Forecast of Consolidated Financial Results for the Fiscal Year Ending March 31, 2015 (from April 1, 2014 to March 31, 2015) (Percentages indicate the rate of increase or decrease compared with the same period of the previous fiscal year.) Six months ending September 30, 2014 (Cumulative) Net sales Operating income Ordinary income Net income 1,130, % 19,000 (1.5)% 21,600 (10.2)% 4,600 (54.6)% Net income per share (Yen) Fiscal year ending March 31, ,371, % 72, % 77,900 (5.6)% 31,100 (19.8)% Gross profit Six months ending September 30, 2014 (Cumulative): 290,300 million yen; 7.8% Fiscal year ending March 31, 2015: 623,000 million yen; 4.9% Operating income before amortization of goodwill and other intangible assets Six months ending September 30, 2014 (Cumulative): 40,700 million yen; 1.5% Fiscal year ending March 31, 2015: 115,500 million yen; 1.2% Notes (1) Changes in Significant Consolidated Subsidiaries during the Fiscal Year (change in specified subsidiaries involving changes in the scope of consolidation): None (2) Changes in Accounting Policies, Changes in Accounting Estimates and Corrections of Errors a. Changes in accounting policies due to revisions of accounting standards: Yes b. Changes in accounting policies due to other reasons: None c. Changes in accounting estimates: None d. Corrections of errors: None (3) Number of issued shares (common stock) a. Total number of issued shares at the end of the period (including treasury stock) As of March 31, 2014 As of March 31, ,410,000 shares 278,184,000 shares b. Number of shares of treasury stock at the end of the period As of March 31, ,703 shares As of March 31, ,035,042 shares 4/46 c. Average number of shares during the period March 31, 2014 March 31, ,405,505 shares 249,150,772 shares

5 (Reference) Summary of Non-consolidated Financial Results 1. Summary of Non-consolidated Financial Results for the Fiscal Year Ended March 31, 2014 (from April 1, 2013 to March 31, 2014) (1) Non-consolidated Financial Results (Percentages indicate the rate of increase or decrease compared with the previous fiscal year.) Net sales Operating income Ordinary income Net income March 31, 2014 March 31, ,515, % 50, % 69, % 46, % 1,412, % 35, % 39,091 (3.8)% 28,189 (33.2)% (Yen) Net income per share (Basic) Net income per share (Diluted) March 31, 2014 March 31, (2) Non-consolidated Financial Position (Millions of yen, except percentages and Equity per share figures) Total assets Net assets Equity ratio Equity per share (Yen) As of March 31, 2014 As of March 31, 2013 (Reference) Equity As of March 31, 2014: As of March 31, 2013: 1,482, , % 2, ,409, , % 1, ,629 million yen 492,505 million yen 5/46

6 2. Forecast of Non-consolidated Financial Results for the Fiscal Year Ending March 31, 2015 (from April 1, 2014 to March 31, 2015) (Percentages indicate the rate of increase or decrease compared with the same period of the previous fiscal year.) Six months ending September 30, 2014 (Cumulative) Net sales Operating income Ordinary income Net income 755, % 21, % 28,900 (2.8)% 17,200 (25.7)% Net income per share (Yen) Fiscal year ending March 31, ,567, % 51, % 61,000 (12.4)% 35,000 (25.5)% Notes Presentation regarding execution status of auditing procedures This summary of consolidated financial results for the fiscal year is not subject to the auditing procedures provided for by the Japanese Financial Instruments and Exchange Law, and the financial statement auditing procedures based on the Law have not been completed at the time of the disclosure of these financial results. Disclaimer regarding appropriate use of forecasts and related points of note Since the forecast of financial results has been prepared based on certain conditions which Dentsu believes to be reasonable at this time, actual financial results may be substantially different from the forecast due to various factors. For information relating to the forecasts above, please refer to Outlook for the fiscal year ending March 31, 2015 on page 12. 6/46

7 1. Financial Results and Financial Position (1) Financial Results 1) Summary of financial results for the fiscal year ended March 31, 2014 During the fiscal year ended March 31, 2014 (hereinafter the fiscal year under review ), the Japanese economy showed a gradual recovery due to such factors as improved corporate performance especially among exporters and renewed capital investment, against a backdrop of monetary easing measures and the government s economic policy. Meanwhile, however, the global economy remained uncertain: although the U.S. continued its gradual recovery, and the European economy also showed signs that it has at last bottomed out, concerns about the slowdown of the Chinese and other emerging economies intensified. According to 2013 Advertising Expenditures in Japan, an estimate for advertising expenditures in Japan for the 2013 calendar year compiled by Dentsu Inc. (hereinafter Dentsu or the Company ), advertising expenditures totaled 5,976.2 billion yen, an increase of 1.4% compared with the 2012 calendar year, and marking the second consecutive year of growth. Growth in the second half of the year under review was strong, due to the effect of continuous economic recovery fueled by the economic policies dubbed Abenomics and the appearance of rush demand ahead of the consumption-tax hike from April 1, Additionally, data compiled by the Dentsu Group s (hereinafter the Group ) Carat, in March 2014 for the 2013 calendar year shows that the growth rate of worldwide advertising expenditures increased 3.3% compared with the 2012 calendar year. By region, the growth rate was 9.9% compared with the 2012 calendar year in Latin America; 5.0% in Asia Pacific; 4.8% in Central and Eastern Europe; and 3.5% in North America, but declined by 1.7% in Western Europe. In March 2013, the Group acquired major U.K. media and digital communications agency Aegis Group plc (hereinafter Aegis ). This acquisition marked a new first step by the Group toward becoming a truly global player. Post-acquisition integration is proceeding smoothly, and has led to winning several new accounts. In Japan, the Group was committed to providing integrated solutions, including the use of Big Data, to meet rising client demand. Initiatives such as these combined with the rush demand ahead of the consumption-tax hike enabled the Group to surpass its initial performance forecast for the fiscal year under review. In particular, the Company s non-consolidated ordinary income and net income were its highest ever. 7/46

8 As a result, for 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 previous fiscal year; gross profit of 594,072 million yen, an increase of 71.7%; operating income before amortization of goodwill and other intangible assets of 114,186 million yen, an increase of 81.7%; 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%. The operating income before amortization of goodwill and other intangible assets comprises the Company s operating income figure to which has been added 27,029 million yen as amortization of goodwill incurred through acquisitions (including the acquisition of Aegis) and 15,666 million yen as amortization of other intangible assets. Following the acquisition of Aegis, the consolidated business performance of Dentsu Aegis Network Ltd. (trade name changed from Aegis Group plc effective March 26, 2013, hereinafter DAN ) is reflected in the consolidated statements of income from the first quarter of the fiscal year under review. The Group has formulated a new medium-term management plan, Dentsu 2017 and Beyond, which began in the fiscal year ended March 31, Below are the numerical targets of the Group s new medium-term management plan in the fiscal year 2017, and the progress toward achieving them. - Gross profit organic growth rate CAGR: Target: 3-5% Actual results in the fiscal year under review: 7.7% - Ratio of gross profit generated from operating markets outside of Japan: Target: 55% or higher Actual results in the fiscal year under review: 48% - Ratio of gross profit generated from the digital sector: Target: 35% or higher Actual results in the fiscal year under review: 28% - Operating margin before amortization of goodwill and other intangible assets*: Target: 20% or higher Actual results in the fiscal year under review: 19.2% * Operating margin before amortization of goodwill and other intangible assets = Operating income before amortization of goodwill and other intangible assets gross profit 8/46

9 Financial results by reportable segment for the fiscal year under review were as follows: a. Advertising 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. b. Information Services In the Information Services segment, net sales of 74,865 million yen, an increase of 5.3% compared with the previous fiscal year, 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. The group companies of Information Services International-Dentsu, Ltd. belong to this segment. c. Other Business In the Other Business segment, net sales of 15,862 million yen, a decrease of 4.1% compared with the previous fiscal year, 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. Financial results by geographic area were as follows: a. Japan In Japan, 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. b. Other Countries In other countries, gross profit of 283,630 million yen, an increase of 369.9% compared with the previous fiscal year, and operating income before amortization of goodwill and other intangible assets of 41,434 million yen, an increase of 399.0%, were posted. Starting in the fiscal year under review, the gross profit has been positioned as one of the management plan indicators of the Group. Accordingly, the gross profit of each segment has been disclosed. 9/46 Regarding Dentsu Group companies with a December 31 closing date, including subsidiaries in countries other than Japan, their financial results for the twelve

10 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, Consolidated financial results are greatly affected by the non-consolidated financial results of Dentsu. Financial results and net sales by business and industry categories for the fiscal year under review were as follows: 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%. <By Business Category> Category Net sales Composition ratio (%) Change (%, compared with the previous year) Newspapers 116, Magazines 34, (3.4) Radio 15, (6.1) Television 700, Time 304, Spot 395, Interactive Media 67, OOH Media 54, Creative 203, Marketing/Promotion 190, Content Services 90, Others 40, Total 1,515, /46

11 (Notes) 1. Major business categories are as follows: Newspapers: Newspaper advertising Magazines: Magazine advertising Radio: Radio advertising Television: Television advertising Television (Time): Television time advertising (program sponsorship) Television (Spot): Television spot advertising (in between programs) Interactive Media: Internet and mobile-related media advertising OOH Media: Out of Home (transit, outdoor and flyers) media-related advertising Creative: Creative planning, production and related services Marketing/Promotion: Strategic planning and implementation of activities such as branding, marketing, communications, sales promotions, events, PR, e-promotions direct marketing, and CRM as well as management consulting Content Services: Licensing sales, planning and production in the sports marketing and entertainment fields and other content services Others: Satellite media, media planning, etc. 2. The composition ratio of each business category is rounded to the nearest tenth. The four mass media posted net sales of 866,634 million yen, an increase of 4.5% compared with the previous fiscal year. For business other than the four mass media, net sales of 648,427 million yen, an increase of 11.1%, were posted. Their net sales composition ratio came to 42.8%, an increase of 1.5 percentage points from the previous fiscal year. 11/46

12 <By Industry Category> Category Net sales Composition ratio (%) Change (%, compared with the previous year) Information/Communications 200, Beverages/Cigarettes 160, Finance/Insurance 119, Cosmetics/Toiletries 116, (2.2) Automobiles/ Related Products 108, Distribution/Retailing 97, (0.2) Foodstuffs 90, Food Services/Other Services 80, Pharmaceuticals/ Medical Supplies 69, Hobbies/Sporting Goods 65, Transportation/Leisure 65, Home Electric Appliances/ AV Equipment 60, Government/Organizations 58, Real Estate/Housing Facilities 46, Apparel/Fashion, Accessories/Personal Items 43, (3.3) Others 131, Total 1,515, (Note) The composition ratio of each industry category is rounded to the nearest tenth. Among the 15 industry categories that account for large proportions of Dentsu s nonconsolidated net sales, net sales increased compared with the previous fiscal year in twelve categories, and decreased only in three. The industry categories where net sales increased included Automobiles/Related Products (up 25.8%), Finance/Insurance (up 20.3%), Hobbies/Sporting Goods (up 17.4%), and Food Services/Other Services (up 13.6%). The industry categories where sales decreased included Cosmetics/Toiletries (down 2.2%) and Apparel/Fashion, Accessories/Personal Items (down 3.3%). 2) Outlook for the fiscal year ending March 31, 2015 Data compiled by Carat in March 2014 for the 2014 calendar year forecasts that the growth rate of worldwide advertising expenditures will increase 4.8% compared with the 2013 calendar year. By region, Carat forecasts growth of 12.8% compared with the 2013 calendar year in Latin America; 5.6% in Asia Pacific; 5.0% in Central and 12/46

13 Eastern Europe; 4.3% in North America; and 1.8% in Western Europe. Against this backdrop, 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 billion yen, an increase of 4.9%; operating income before amortization of goodwill and other intangible assets of 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 during the January December 2013 period. The exchange rate was GBP 1 = JPY Going forward, Dentsu is considering the voluntary adoption of IFRS for the fiscal year ending March 31, 2015 in order to increase comparability in international capital markets. 13/46

14 (2) Financial Position As of March 31, 2014, total assets increased by 432,750 million yen from the end of the previous fiscal year due to the increase in notes and accounts receivable trade. In contrast, total liabilities increased by 132,892 million yen due to the increase in notes and accounts payable trade and long-term loans payable. Total net assets increased by 299,858 million yen primarily due to the increase in foreign currency translation adjustment and the posting of net income. Cash flow status for the fiscal year under review As of March 31, 2014, cash and cash equivalents (hereinafter cash ) amounted to 227,128 million yen from the 207,578 million yen posted at the end of the previous fiscal year. As net cash provided by operating activities and financing activities exceeded net cash used in investing activities, cash at the end of the fiscal year under review increased by 19,549 million yen from the end of the previous fiscal year. Net cash provided by (used in) operating activities Net cash provided by operating activities amounted to 97,540 million yen compared with 83,295 million yen in the previous fiscal year. Net cash provided by operating activities increased by 14,244 million yen from the previous fiscal year primarily due to the increase in income before income taxes and minority interests, depreciation and amortization, and amortization of goodwill. Net cash provided by (used in) investing activities Net cash used in investing activities amounted to 318,087 million yen (51,236 million yen used in the previous fiscal year). Net cash used in investing activities increased by 266,851 million yen primarily due to the increase in purchase of investments in consolidated subsidiaries. Net cash provided by (used in) financing activities Net cash provided by financing activities amounted to 226,526 million yen (5,349 million yen used in the previous fiscal year). Net cash provided by financing activities increased by 231,876 million yen from the previous fiscal year primarily due to the proceeds from long-term loans payable, disposal of treasury shares, and issuance of common shares. 14/46

15 (Reference) Trends in cash flow indicators Fiscal year ended March 31, 2010 Fiscal year ended March 31, 2011 Fiscal year ended March 31, 2012 Fiscal year ended March 31, 2013 Fiscal year ended March 31, 2014 Equity ratio (%) Equity ratio at market value (%) Cash flows/interest-bearing debt ratio (years) Interest coverage ratio (times) (Notes) Equity ratio = Equity/Total assets Equity ratio at market value = Aggregate market value/total assets Cash flows/interest-bearing debt ratio = Interest-bearing debts/operating cash flow Interest coverage ratio = Operating cash flow/interest payment Each indicator is calculated based on the consolidated financial figures. Operating cash flow represents Net cash provided by (used in) operating activities in the consolidated statements of cash flows. Interest-bearing debts refer to all liabilities with obligations to pay interest posted on the consolidated balance sheets. 15/46

16 2. Management Policy (1) Basic Management Policies The global economy is made up of various regions with distinct characteristics that influence each other while undergoing constant changes. Regions include the United States which continues to enjoy stable growth; Asia and emerging economies where growth continues to be relatively high; and Japan and Europe which are maturing economies of significant scale. With the acquisition of Aegis completed in March 2013, the Group has transformed into a truly global network, and the execution of strategies adapted to the business climate in each part of the world is of crucial importance. Additionally, in a society where marketing convergence is progressing, innovation in the digital sector is expected to become an even more significant factor in the success of our clients businesses. In this business climate, the Group aims to become the agency network that continues to contribute on a global basis to the business success of its clients, and furthermore, to maximize their corporate value, in ways that surpass the boundaries of the advertising business to date. In line with this basic policy, the Group has drawn up its new medium-term management plan, Dentsu 2017 and Beyond, which started from FY2013. (2) Targeted Management Indicators The new medium-term management plan includes the following numerical targets for the fiscal year Gross profit organic growth rate CAGR: 3 5% - Ratio of gross profit generated from operating markets outside of Japan: 55% or higher - Ratio of gross profit generated from digital sector: 35% or higher - Operating margin before amortization of goodwill and other intangible assets: 20% or higher 16/46

17 (3) Tasks to Be Addressed by the Group and Its Management Strategy The Group has formulated the following strategies to achieve these numerical targets. 1) To establish a comprehensive global network that supports clients businesses around the globe The Group will use the client base built up by the Company and Aegis as a stepping stone to roll out the Group s strengths in the digital sector and sports-content business on a global scale, while at the same time expanding its competitive global network worldwide through mergers and acquisitions. Looking at the major regions, in the North American market which is maintaining stable growth, the Group will strengthen its partnerships with existing networks that have high growth potential, and create an improved, broader service lineup in order to capture new global clients and to increase billings. Furthermore, in the fastgrowing emerging economies, the Group will lay the foundation for providing topclass solutions in each market through mergers, acquisitions, and aggressive investment in the Group s business. In the Japanese and Western European markets, where the Group already has a solid business base, the Group will pursue the benefits of scale and aim to create and offer new value going beyond the framework of conventional advertising business. 2) To reinforce competitive strengths in the digital space that plays a central role in all client solutions The progress of marketing convergence is transforming clients business processes, and digital solutions have become a key factor in business growth. Taking these factors into consideration, the Group will provide cutting-edge solutions that more directly support the success of its clients businesses. At the same time, the Group will make investments as necessary, share knowledge within the Group, and integrate its R&D capabilities. 3) To make further innovations in the area of business process management so as to enhance profitability The Group is pursuing sustainable growth by carrying out aggressive investments and business expansion worldwide. To this end, a revenue base that generates a stable cash flow is required, and the Group will remain tireless in its commitment to improving the profitability of its core business. In order to restructure its value chain 17/46

18 to maximize profits, the Group will work to control costs on a global basis, and inventory capabilities of the Group s companies including the Company in each area of service to implement necessary reorganization. The Group will also review its asset holdings from the viewpoint of profitability to increase asset efficiency. 4) To reinforce the business platform in Japan, the Group s largest operating market Although the acquisition of Aegis has given the Group a truly global network, the Group s solid business base in Japan remains its greatest strength. The Group will achieve sustainable growth in this market by making even more effort to increase its competitiveness and profitability. Furthermore, Japan is the region where the Company has the most resources for supporting every facet of its clients businesses, and has the strongest relations with its clients. The Company is therefore committed to becoming the Group s role model for building a business for the next generation by expanding its service domain in Japan. 5) CSR initiatives In line with its global expansion, in April 2013 the Group formulated an updated Dentsu Group Code of Conduct, stating the Group s core principles for CSR. The Code of Conduct adopts as its framework ISO 26000, an international standard for corporate social responsibility. Under this framework, the Group uses the following seven core themes to guide its CSR efforts: Corporate governance; Respect for human rights; Ensuring a safe and civilized working environment; Environmental protection; Fair business practices; Addressing consumer issues; and Contributing to the community. In the fiscal year ended March 31, 2014, the Group carried out continued support for recovery following the Great East Japan Earthquake through its cooperation with the Tohoku Rokkonsai (Six Souls Festival) and participation in the Michinoku Recovery Project Partners consortium. In the field of human rights, the Group is committed to raising awareness of human rights that is essential to communication, the core of its business, through initiatives that include continuing to run a Human Rights Slogans program. In the environmental field as well, where the Company received the Eco- First Company certification in 2008, the Group engages in various environmental activities aimed at achieving a sustainable society. Furthermore, in the business field, the Group strives to resolve the issues faced by Japan through measures such as 18/46

19 FOOD ACTION NIPPON, an ongoing campaign aimed at boosting Japan s food selfsufficiency rate. Going forward, by further deepening its collaboration with DAN, which carries out diverse CSR activities worldwide including the 30 Days of Green environmental campaign, the Group will continue its commitment to CSR efforts both in Japan and overseas with the aim of contributing to resolve social issues as a leading global group in communication services. For more information about Dentsu s CSR activities, see the Dentsu CSR Report ( 19/46

20 3. Consolidated Financial Statements (1) Consolidated Balance Sheets As of March 31, 2013 As of March 31, 2014 Assets Current assets Cash and deposits 208, ,129 Notes and accounts receivable trade 816,251 1,033,955 Short-term investment securities Inventories 13,561 14,253 Deferred tax assets 9,857 9,247 Other 76,266 84,028 Allowance for doubtful accounts (1,806) (1,740) Total current assets 1,122,602 1,368,385 Noncurrent assets Property, plant and equipment Buildings and structures, net 77,313 75,162 Land 160, ,272 Other, net 12,419 14,885 Total property, plant and equipment 250, ,320 Intangible assets Software 17,696 23,226 Goodwill 576, ,834 Customer relationships 24, ,446 Other 9,239 52,833 Total intangible assets 627, ,340 Investments and other assets Investment securities 135, ,981 Long-term loans receivable Net defined benefit asset 5,841 Deferred tax assets 29,362 30,157 Other 54,364 49,132 Allowance for doubtful accounts (14,611) (17,252) Total investments and other assets 205, ,273 Total noncurrent assets 1,082,966 1,269,933 Total assets 2,205,569 2,638,319 20/46

21 As of March 31, 2013 As of March 31, 2014 Liabilities Current liabilities Notes and accounts payable trade 785, ,805 Short-term loans payable 21,268 30,328 Current portion of bonds 8,050 Current portion of long-term loans payable 25,869 5,106 Lease obligations 1,273 1,348 Income taxes payable 21,175 28,571 Deferred tax liabilities Provision for directors' bonuses Provision for loss on order received Asset retirement obligations 9 47 Other 461, ,216 Total current liabilities 1,317,554 1,253,263 Noncurrent liabilities Bonds payable 93,931 10,536 Long-term loans payable 71, ,943 Lease obligations 2,164 2,189 Deferred tax liabilities 9,492 50,076 Deferred tax liabilities for land revaluation 9,038 8,501 Provision for retirement benefits 42,316 Net defined benefit liability 56,301 Provision for directors' retirement benefits Asset retirement obligations Other 49,815 62,886 Total noncurrent liabilities 279, ,560 Total liabilities 1,596,931 1,729,824 21/46

22 As of March 31, 2013 As of March 31, 2014 Net assets Shareholders' equity Capital stock 58,967 74,609 Capital surplus 60, ,106 Retained earnings 515, ,216 Treasury stock (65,077) (104) Total shareholders' equity 570, ,828 Accumulated other comprehensive income Valuation difference on available-for-sale securities 13,609 14,635 Deferred gains or losses on hedges 8,173 11,883 Revaluation reserve for land (5,931) (6,885) Foreign currency translation adjustment (1,775) 155,934 Remeasurements of defined benefit plans (8,277) Total accumulated other comprehensive income 14, ,289 Minority interests 24,141 25,377 Total net assets 608, ,495 Total liabilities and net assets 2,205,569 2,638,319 22/46

23 (2) Consolidated Statements of Income and Comprehensive Income Consolidated Statements of Income March 31, 2013 March 31, 2014 Net sales 1,941,223 2,309,359 Cost of sales 1,595,282 1,715,287 Gross profit 345, ,072 Selling, general and administrative expenses Salaries and allowances 158, ,550 Provision for directors' bonuses Provision for retirement benefits 11,500 10,691 Provision for directors' retirement benefits Welfare expenses 21,914 44,857 Depreciation 10,382 29,264 Amortization of goodwill 3,340 27,029 Provision of allowance for doubtful accounts (110) (98) Other 81, ,700 Total selling, general and administrative expenses 287, ,581 Operating income 58,466 71,490 Non-operating income Interest income 413 1,625 Dividends income 1,727 3,043 Purchase discounts 696 4,365 Equity in earnings of affiliates 2,202 3,764 Dividends 2,826 4,585 Other 2,149 5,209 Total non-operating income 10,016 22,593 Non-operating expenses Interest expenses 1,462 6,652 Amortization of long-term prepaid expenses 2,048 2,594 Other 5,945 2,299 Total non-operating expenses 9,455 11,545 Ordinary income 59,027 82,538 23/46

24 March 31, 2013 March 31, 2014 Extraordinary income Gain on sales of noncurrent assets Gain on sales of investment securities 13,270 6,739 Gain on negative goodwill Other Total extraordinary income 13,854 7,795 Extraordinary loss Loss on sales of noncurrent assets Impairment loss 665 2,403 Loss on valuation of investment securities 1,120 3,087 Special retirement expenses 1,777 1,908 Other 5,985 1,579 Total extraordinary losses 9,571 9,161 Income before income taxes and minority interests 63,310 81,172 Income taxes current 25,967 43,395 Income taxes deferred (1,405) (3,653) Total income taxes 24,561 39,741 Income before minority interests 38,748 41,430 Minority interests in income 2,412 2,629 Net income 36,336 38,800 24/46

25 Consolidated Statements of Comprehensive Income March 31, 2013 March 31, 2014 Income before minority interests 38,748 41,430 Other comprehensive income Valuation difference on available-for-sale securities 1,800 (445) Deferred gains or losses on hedges 8,652 3,682 Foreign currency translation adjustment 9, ,056 1,970 Share of other comprehensive income of associates accounted for using equity method 599 1,970 Total other comprehensive income 20, ,263 Comprehensive income 59, ,694 Comprehensive income attributable to Owners of the parent 56, ,246 Minority interests 3,554 3,448 25/46

26 (3) Consolidated Statements of Changes in Net Assets Previous fiscal year (from April 1, 2012 to March 31, 2013) Balance at the beginning of current period Changes of items during the period Capital stock Capital surplus Shareholders' equity Retained earnings Treasury stock Total shareholders' equity 58,967 60, ,133 (65,070) 541,929 Dividends from surplus (7,972) (7,972) Net income 36,336 36,336 Purchase of treasury stock (7) (7) Disposal of treasury stock (0) 0 0 Change of scope of consolidation Change of scope of equity method Transfer to retained earnings from other capital surplus Net changes of items other than shareholders' equity Total changes of items during the period Balance at the end of current period (26) (26) 0 (0) 28,497 (7) 28,490 58,967 60, ,630 (65,077) 570,419 Accumulated other comprehensive income Balance at the beginning of current period Changes of items during the period Dividends from surplus Valuation difference on availablefor-sale securities Deferred gains or losses on hedges Revaluation reserve for land Foreign currency translation adjustment Total accumulated other comprehensive income Minority interests 12,135 (453) (5,931) (11,389) (5,638) 20,598 Net income Purchase of treasury stock Disposal of treasury stock Change of scope of consolidation Change of scope of equity method Transfer to retained earnings from other capital surplus Net changes of items other than shareholders' equity Total changes of items during the period Balance at the end of current period 1,474 8,627 9,613 19,715 3,542 1,474 8,627 9,613 19,715 3,542 13,609 8,173 (5,931) (1,775) 14,076 24,141 26/46

27 Current fiscal year (from April 1, 2013 to March 31, 2014) Balance at the beginning of current period Changes of items during the period Capital stock Capital surplus Shareholders' equity Retained earnings Treasury stock Total shareholders' equity 58,967 60, ,630 (65,077) 570,419 Issuance of new shares 15,642 15,642 31,285 Dividends from surplus (8,600) (8,600) Net income 38,800 38,800 Reversal of revaluation reserve for land Purchase of treasury stock (29) (29) Disposal of treasury stock 23,564 65,002 88,567 Transaction with minority shareholders Net changes of items other than shareholders' equity Total changes of items during the period Balance at the end of current period (5,569) (5,569) 15,642 39,207 25,585 64, ,408 74, , ,216 (104) 715,828 Balance at the beginning of current period Changes of items during the period Issuance of new shares Valuation difference on available-forsale securities Deferred gains or losses on hedges Accumulated other comprehensive income Revaluation reserve for land Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income Minority interests 13,609 8,173 (5,931) (1,775) 14,076 24,141 Dividends from surplus Net income Reversal of revaluation reserve for land Purchase of treasury stock Disposal of treasury stock Transaction with minority shareholders Net changes of items other than shareholders' equity Total changes of items during the period Balance at the end of current period 1,025 3,709 (954) 157,709 (8,277) 153,213 1,235 1,025 3,709 (954) 157,709 (8,277) 153,213 1,235 14,635 11,883 (6,885) 155,934 (8,277) 167,289 25,377 27/46

28 (4) Consolidated Statements of Cash Flows March 31, 2013 March 31, 2014 Net cash provided by (used in) operating activities Income before income taxes and minority interests 63,310 81,172 Depreciation and amortization 12,928 32,298 Impairment loss 665 2,403 Amortization of goodwill 5,625 27,029 Increase (decrease) in allowance for doubtful accounts (879) (424) Increase (decrease) in provision for retirement benefits 3,577 Increase (decrease) in net defined benefit liability 3,591 Interest and dividends income (2,141) (4,668) Interest expenses 1,462 6,652 Foreign exchange losses (gains) 4, Equity in (earnings) losses of affiliates (2,202) (3,764) Decrease (increase) in notes and accounts receivable trade 22,985 (101,318) Decrease (increase) in inventories (1,346) 738 Decrease (increase) in other current assets (5,364) 4,277 Increase (decrease) in notes and accounts payable trade (3,787) 79,419 Increase (decrease) in other current liabilities 12,670 9,576 Other, net (13,313) (9,320) Subtotal 98, ,520 Interest and dividends income received 6,343 13,273 Interest expenses paid (1,517) (6,304) Income taxes paid (19,969) (37,948) Net cash provided by (used in) operating activities 83,295 97,540 28/46

29 March 31, 2013 March 31, 2014 Net cash provided by (used in) investing activities Purchase of property, plant and equipment (3,834) (7,743) Proceeds from sales of property, plant and equipment 568 2,492 Purchase of investment securities (27,577) (3,788) Proceeds from sales of investment securities 26,007 12,038 Purchase of software (7,293) (11,170) Payments of loans receivable (145) (98) Collection of loans receivable Payments for the purchases of consolidated subsidiaries (13,457) (314,321) Payments for investments in subsidiaries resulting in change in scope of consolidation (16,034) (7,407) Proceeds from sales of investments in subsidiaries resulting in change in scope of consolidation 3 16,487 Purchase of long-term prepaid expenses (3,237) (4,501) Other, net (6,464) (707) Net cash provided by (used in) investing activities (51,236) (318,087) Net cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable (960) 4,769 Proceeds from long-term loans payable 30, ,001 Repayment of long-term loans payable (24,356) (32,083) Redemption of bonds (77,688) Repayments of lease obligations (1,545) (1,422) Proceeds from issuance of common shares 31,285 Purchase of treasury stock (7) (29) Proceeds from disposal of treasury shares 2 88,723 Cash dividends paid (7,972) (8,600) Cash dividends paid to minority shareholders (540) (2,195) Other, net 29 (233) Net cash provided by (used in) financing activities (5,349) 226,526 Effect of exchange rate change on cash and cash equivalents 3,905 13,569 Net increase (decrease) in cash and cash equivalents 30,616 19,549 Cash and cash equivalents at beginning of period 175, ,578 Increase in cash and cash equivalents from newly consolidated subsidiary 1,006 Cash and cash equivalents at end of period 207, ,128 29/46

30 (5) Notes on the Consolidated Financial Statements (Notes on Premise of Going Concern) No items to report (Changes in Accounting Policies) From the end of the fiscal year ended March 31, 2014, the Company applied the Accounting Standard for Retirement Benefits (Accounting Standards Board of Japan (ASBJ) Statement No. 26, May 17, 2012, and hereinafter the Accounting Standard ) and the Guidance on Accounting Standard for Retirement Benefits (ASBJ Guidance No. 25, May 17, 2012, and hereinafter the Guidance ), except for the provisions prescribed in Paragraph 35 of the Accounting Standard and Paragraph 67 of the Guidance. The Company changed the accounting method to record the amount calculated by deducting plan assets from retirement benefit obligations as a net defined benefit liability (or as a net defined benefit asset if plan assets exceed retirement benefit obligations), and unrecognized actuarial gains or losses and unrecognized prior service cost were recorded as net defined benefit liability. As for the application of the Accounting Standard, etc., in accordance with the transitional treatment stipulated in Paragraph 37 of the Accounting Standard, the amount of financial impact caused by this change was added to or deducted from remeasurements of defined benefit plans in accumulated other comprehensive income at the end of the fiscal year ended March 31, As a result, a net defined benefit asset of 5,841 million yen and a net defined benefit liability of 56,301 million yen were recorded at the end of the fiscal year ended March 31, Accumulated other comprehensive income decreased by 8,277 million yen. Net assets per share decreased by yen. (Segment and Other Information) <Segment Information> 1. Reportable segments Reportable segments are components of the Group for which separate financial information is available and operating results are regularly reviewed by the Board of 30/46

31 Directors to determine the allocation of management resources and evaluate the business performance. The Group is engaged in the advertising business and other services related to communications. The three reportable segments are "Advertising," "Information Services" and "Other Business." "Advertising" refers to business activities related to the development and execution of advertising via a wide range of media including newspapers, magazines, radio, television, the Internet, sales promotions, movies, outdoor, transit and all other media plus strategy planning, creative, marketing, PR, content and other services. "Information Services" refers to business activities related to the provision of information services and sales of information-related merchandise and others. "Other Business" refers to business activities related to the leasing of office space, building maintenance services, temporary staffing, accounting and other services. 2. Calculation methods of net sales, income or loss, assets, and other items by reportable segment Profits in reportable segments are calculated on the basis of operating income. Net sales or transferred amounts between segments inside the Group are based on current market prices. 31/46

32 3. Net sales, income or loss, assets, and other items by reportable segment Previous fiscal year (from April 1, 2012 to March 31, 2013) Net sales Net sales to clients outside the Group Advertising Information Services Other Business Total Adjustment (Note 1) Amount on consolidated financial statements (Note 2) 1,878,515 56,341 6,365 1,941,223 1,941,223 Net sales or transferred amounts between segments inside the Group ,752 10,181 25,264 (25,264) Total 1,878,846 71,094 16,547 1,966,488 (25,264) 1,941,223 Gross profit 323,596 21,980 3, ,288 (3,347) 345,940 Segment income 52,853 3, ,831 1,634 58,466 Segment assets 2,167,809 61,445 78,267 2,307,522 (101,953) 2,205,569 Other items Depreciation (Note 3) Amortization of goodwill Investment in equity method companies Increase in PP&E and intangible assets 9,957 3, ,528 (599) 12,928 2, ,340 3,340 49, ,414 50,414 49,083 2, ,592 (1,153) 51,438 32/46

33 Current fiscal year (from April 1, 2013 to March 31, 2014) Net sales Net sales to clients outside the Group Advertising Information Services Other Business Total Adjustment (Note 1) Amount on consolidated financial statements (Note 2) 2,246,107 57,221 6,030 2,309,359 2,309,359 Net sales or transferred amounts between segments inside the Group ,643 9,831 27,873 (27,873) Total 2,246,505 74,865 15,862 2,337,233 (27,873) 2,309,359 Gross profit 571,315 22,855 3, ,683 (3,611) 594,072 Segment income 65,788 4, , ,490 Segment assets 2,609,910 61,587 87,228 2,758,727 (120,407) 2,638,319 Other items Depreciation (Note 3) Amortization of goodwill Investment in equity method companies Increase in PP&E and intangible assets 28,873 3, ,793 (494) 32,298 26, ,029 27,029 54, ,956 54,956 18,113 2, ,939 (1,737) 19,201 (Notes) 1. (1) Adjustment of segment income is made by the elimination of intersegment transactions and deduction of unrealized profits. (2) Adjustment of segment assets is made by the elimination of intersegment transactions. (3) Among Other items, adjustment of depreciation, increase in PP&E (Property, plant and equipment) and intangible assets is made by elimination of intersegment transactions. 2. Adjustment is made between segment income and operating income of the consolidated financial statements. 3. Depreciation includes depreciation expense for long-term prepaid expenses. 4. From the fiscal year ended March 31, 2014, the gross profit has been positioned as one of the management plan indicators of the Group. Accordingly, the gross profit of each segment has been disclosed from the first quarter of the fiscal year ended March 31, The change has also been reflected to the segment information of the fiscal year ended March 31, /46

34 <Related Information> Previous fiscal year (from April 1, 2012 to March 31, 2013) 1. Information by product and service Information is omitted since similar information is disclosed in Segment Information. 2. Information by region (1) Net sales Japan Other Countries Total 1,647, ,205 1,941,223 (Notes) 1. Net sales are based on clients locations and classified by country or region. 2. Other Countries consist substantially of the U.S. and China. (2) Property, plant and equipment Information is omitted since the amount of property, plant and equipment located in Japan exceeds 90% of that included on the consolidated balance sheets. 3. Information by major client Information is omitted since none of the clients outside the Group contribute 10% or more to the Group s net sales included in the consolidated statements of income. 34/46

35 Current fiscal year (from April 1, 2013 to March 31, 2014) 1. Information by product and service Information is omitted since similar information is disclosed in Segment Information. 2. Information by region (1) Net sales Japan Other Countries Total 1,739, ,583 2,309,359 (Notes) 1. Net sales are based on clients locations and classified by country or region. 2. Other Countries consist substantially of the U.S. and Europe. (2) Property, plant and equipment Information is omitted since the amount of property, plant and equipment located in Japan exceeds 90% of that included on the consolidated balance sheets. 3. Information by major client Information is omitted since none of the clients outside the Group contribute 10% or more to the Group s net sales included in the consolidated statements of income. <Impairment loss of noncurrent assets by reportable segment> Previous fiscal year (from April 1, 2012 to March 31, 2013) Advertising Information Services Other Business Corporate/ Eliminations Total Impairment loss Current fiscal year (from April 1, 2013 to March 31, 2014) Advertising Information Services Other Business Corporate/ Eliminations Total Impairment loss 1, ,403 35/46

36 <Amortization and unamortized balance of goodwill by reportable segment> Previous fiscal year (from April 1, 2012 to March 31, 2013) Advertising Information Services Other Business Corporate/ Eliminations Total Amortization of goodwill 2, ,340 Balance at the end of the period 571,341 4, ,009 (Notes) 1. Other than above, Dentsu amortized 2,284 million yen in goodwill and posted the charge as an extraordinary loss under the provision of Paragraph 32 of the Practical Guidelines on Accounting Standards for Capital Consolidation Procedures in Preparing Consolidated Financial Statements (Accounting Practice Committee Report No. 7, January 12, 2011). The amortization of the goodwill resulted in a decrease in the Advertising segment. 2. Of the balance at the end of the period for the Advertising segment, 519,076 million yen relating to the acquisition of the shares of Aegis Group plc is a provisional amount, as the purchase price allocation has not been completed. Current fiscal year (from April 1, 2013 to March 31, 2014) Advertising Information Services Other Business Corporate/ Eliminations Total Amortization of goodwill 26, ,029 Balance at the end of the period 554,767 4, ,834 (Note) In the Advertising segment for the fiscal year ended March 31, 2013, the amount of goodwill provisionally calculated had been reported in association with the acquisition of the shares of Aegis Group plc. However, the purchase price allocation has been completed in the fiscal year ended March 31, For details, please refer to Business Combination <Gain on negative goodwill by reportable segment> Previous fiscal year (from April 1, 2012 to March 31, 2013) Information is omitted since it is insignificant in terms of monetary value. Current fiscal year (from April 1, 2013 to March 31, 2014) Information is omitted since it is insignificant in terms of monetary value. 36/46