FY2018 Earnings Presentation 1

FY2018 Earnings Presentation



February 15,2019
DENTSU INC.
FY2018 Annual Results
Yushin Soga
DENTSU INC.
Director and Executive Officer

February 14, 2019

* Please be reminded that the figures shown in this presentation may be different from those shown in the financial statements as this presentation has been
prepared for investors to understand our businesses. Please refer to the annotations in the Appendices for each definition of the indicators.
 Highlight: 12 month figures
- Revenue less cost of sales increased by 6.8% (YoY, constant currency
basis)

- Organic growth: +3.4%
(Japan +2.1% / International +4.3%)

- Underlying operating profit decreased by 6.0% (constant currency basis)

- Underlying operating margin: 16.4%, -220 bps (constant currency basis)

- 2019 dividend expected to increase by 5 yen (YoY) from 2018, to 95 yen
per share

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 Summary
Revenue less cost of sales increase driven by organic growth and international M&A
Underlying operating profit decrease due to investment in the Group’s improvement of corporate
infrastructure and working environment reforms in Japan to support future growth (JPY mn)
Constant Forecast
2018 2017 Forecast
YoY % currency (announced in
Jan–Dec Jan–Dec variance %
basis % Aug 2018)


Turnover 5,357,278 5,187,300 +3.3 - - -

Revenue 1,018,512 949,837 +7.2 - 1,006,900 +1.2
Revenue less cost of sales 932,680 877,622 +6.3 +6.8 954,700 (2.3)
Digital domain ratio 46.1% 43.2% +2.9 +3.0 - -
International business ratio 60.4% 58.8% +1.6 +1.8 61.6% (1.2)
Underlying operating profit 153,229 163,946 (6.5) (6.0) 150,000 +2.2
Operating margin 16.4% 18.7% (2.3) (2.2) 15.7% +0.7
Underlying net profit 97,419 107,874 (9.7) - 99,800 (2.4)
Underlying basic EPS 345.59 yen 381.58 yen (9.4) - 354.03 yen (2.4)

Operating profit 111,638 137,392 (18.7) - 112,900 (1.1)
Net profit 90,316 105,478 (14.4) - 79,500 +13.6
EBITDA 171,406 194,073 (11.7) -
Underlying ROE 9.1% 10.6% (1.5) -

Currency Av. Jan in 2018

JPY/USD 110.4 yen 112.2 yen (1.6) - 110.9 yen (0.4)
JPY/GBP 147.5 yen 144.5 yen +2.1 - 153.4 yen (3.9)

Note: Net profit, underlying net profit and underlying basic EPS… Excluding attribution to non-controlling interests 2
The scope of digital domain ratio is changed from 2018. Please see Appendices “Japan Business Digital Domain” for details.
 Growth of Revenue less cost of sales
Revenue less cost of sales increase driven by M&A and organic growth from both Japan and the
International business, Dentsu Aegis Network
(JPY)

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877.6 bn
Jan–Dec




Currency - 4.2 bn


Organic growth
Acquisitions +28.6 bn +3.4%



Organic +30.6 bn

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932.6 bn
Jan–Dec

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 Regional Information – Japan
12 month organic growth is +2.1%

Cost increase due to investment in working environment reforms and the improvement of
corporate infrastructure to support future growth
(JPY mn)

Constant Organic

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YoY % currency growth
Jan–Dec Jan–Dec
basis % %


Revenue less cost of sales 369,258 361,902 +2.0 +2.0 +2.1
Digital domain ratio 23.9% 22.2% +1.7 +1.7

Underlying operating profit 80,268 88,801 (9.6) (9.6)
Operating margin 21.7% 24.5% (2.8) (2.8)




Note: The scope of digital domain ratio is changed from 2018. Please see Appendices “Japan Business Digital Domain” for 4
details.
 Regional Information – International
12 month organic growth is +4.3%.

Underlying operating profit decrease due to planned investments in global platforms and systems
(JPY mn)

Constant Organic

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YoY % currency growth
Jan–Dec Jan–Dec
basis % %


EMEA 213,029 184,946 +15.2 +13.9 +7.4
Americas 226,257 206,001 +9.8 +12.4 +4.9
APAC 124,573 125,089 (0.4) +0.8 (1.7)
Revenue less cost of sales total 563,852 516,052 +9.3 +10.2 +4.3
Digital domain ratio 60.6% 57.9% +2.7 +2.7


Underlying operating profit 72,963 75,146 (2.9) (1.6)
Operating margin 12.9% 14.6% (1.7) (1.6)

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 Change in Underlying Operating Margin
Underlying operating margin decrease due to investment in Group’s improvement of corporate
infrastructure and working environment reforms in Japan to support future growth

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Jan–Dec 18.7%


Japan
margin change
-1.1%


International
margin change
-0.9%


Currency -0.1%


Consolidation
adjustments, etc. -0.2%

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Jan–Dec 16.4%

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 Operating Margin
Dentsu consolidated Japan International

40.0%




30.0%
26.0% 26.8%
24.5%
21.1% 21.1% 21.7%
20.0% 18.7%

16.9% 16.2% 16.4%
14.6%
10.0% 12.9%



0.0%
Jan–Dec Jan–Dec Jan–Dec Jan–Dec

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 Reconciliation from Underlying OP to Statutory OP
(JPY mn)

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YoY # YoY %
Jan–Dec Jan–Dec


Underlying operating profit 153,229 163,946 (10,717) (6.5)

Adjustment items (41,590) (26,554) (15,035)
Amortization of M&A related intangible assets (35,123) (31,779) (3,343)
Acquisition costs (1,554) (1,795) + 241
Share-based compensation expenses related to acquired companies (4,314) (2,046) (2,268)
One-off items (599) + 9,066 (9,665)
Payment related to working hours - (3,103) + 3,103
Gain (loss) on sales and retirement of non-current assets (252) + 13,168 (13,420)
Impairment loss (27) (1,093) + 1,065
Others (320) + 94 (413)

Operating profit 111,638 137,392 (25,753) (18.7)

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 Statutory Operating Profit to Net Profit
(JPY mn)

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YoY # YoY %
Jan–Dec Jan–Dec


Operating profit 111,638 137,392 (25,753) (18.7)
Share of results of associates 2,699 4,222 (1,523) (36.1)
Gain on sales of shares of associates 52,127 - + 52,127 -
Profit before interest and tax 166,465 141,614 + 24,850 +17.5
Net finance income (costs) (17,713) 8,047 (25,760) -
Finance income 6,839 20,302 (13,462) (66.3)
Finance costs 24,553 12,254 + 12,298 +100.4
Profit before tax 148,751 149,662 (910) (0.6)
Income tax expense 51,250 36,520 + 14,729 +40.3
Net profit 97,501 113,142 (15,640) (13.8)
Attributable to owners of the parent 90,316 105,478 (15,161) (14.4)
Attributable to non-controlling interests 7,185 7,663 (478) (6.2)

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 FY2019 Forecast
(JPY mn)
Constant

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YoY % currency
Jan–Dec Jan–Dec
basis %

Revenue 1,097,900 1,018,512 +7.8 -
Revenue less cost of sales 986,400 932,680 +5.8 +7.9
Underlying operating profit 157,400 153,229 +2.7 +4.3
Operating margin 16.0% 16.4% (0.4) (0.5)
Underlying net profit 95,400 97,419 (2.1) -
Underlying basic EPS 338.42 yen 345.59 yen (2.1) -

Operating profit 122,500 111,638 +9.7 -
Net profit 61,400 90,316 (32.0) -

Currency Av. Jan 2019 Av. Jan–Dec in 2018

JPY/USD 109.0 yen 110.4 yen (1.3) -
JPY/GBP 140.7 yen 147.5 yen (4.6) -

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Notes: Net profit, underlying net profit and underlying basic EPS … Excluding attribution to non-controlling interests
 FY2019 Forecast by Region
(JPY mn)
Constant

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YoY % currency
Jan–Dec Jan–Dec
basis %

Revenue less cost of sales 400,800 369,258 +8.5 +8.5
Japan Underlying operating profit 81,300 80,268 +1.3 +1.3
Operating margin 20.3% 21.7% (1.4) (1.4)

Revenue less cost of sales 585,600 563,852 +3.9 +7.4
International
Underlying operating profit 76,100 72,963 +4.3 +7.5
total
Operating margin 13.0% 12.9% +0.1 +0.1

Currency Av. Jan 2019 Av. Jan–Dec in 2018

JPY/USD 109.0 yen 110.4 yen (1.3) -
JPY/GBP 140.7 yen 147.5 yen (4.6) -

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 Dividend
100 40.0%

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90 (47.5)

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(45) (45)
80 75 (40)
30.0%
70 (35)

60 28.1%
26.0%
50 23.6% 20.0%
21.5%
40 19.0%

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10.0%

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0 0.0%

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Jan–Dec Jan–Dec Jan–Dec Jan–Dec Jan–Dec
actual actual actual actual forecast

Annual dividend per share (JPY) Payout ratio

Notes:
Payout ratio… Based on underlying net profit attributable to owners of the parent 12
( )… Interim dividend per share
 Capital Management Strategy
Objective: to deliver an improvement in Shareholder Value over time


Growth of the business – priority for capital deployment:
n Investing in Japan and globally, and realization of future profit growth




Focus on shareholder return (dividends and share repurchase):
steady improvement
n Combination of stable capital returns and flexible share repurchase




Achieve ROE higher than capital cost in the long term 13
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Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements, which speak
only as of the date hereof.
Risks, uncertainties or other factors that could cause actual results to differ materially from those expressed in any forward-looking
statement include, without limitation

ⅰ Risk related to fluctuations in the economic and business environment
ⅱ Risk related to structural changes in the media
ⅲ Risk related to our ability to realize our financial targets

ⅳ Risk related to common business practices
ⅴ Risk related to competition among advertising agencies
ⅵ Risk related to the development of systems and databases
ⅶ Risk related to legal or regulatory changes
ⅷ Risk of litigation

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