The Dentsu Group today reported a 2015 revenue gain of 12.8% to 818.6 billion Japanese yen, or approximately $7.2 billion at today’s exchange rate. Net profit was up 2.1% to ($725.1 million).
The company noted that for reporting purposes, 2015 is a transitional year — one where the company has consolidated reporting for all units to a calendar-year basis. As a result, the “full-year” 2015 numbers reported today are a one-time-only nine-month period from April 1 to Dec. 31, 2015. Figures for both years are reported on a pro forma basis to enable year-to-year comparisons.
Previously, there were different reporting periods for Dentsu Inc. (the firm’s Japanese operations), which had a fiscal year from April to March, and the Dentsu Aegis Network, which reported on a calendar-year basis.
Those different reporting periods made comparisons difficult. For example, when the company reported half-year results for 2015, the figures included revenues for the company’s Japanese holdings for the six-month period ended September 30 and revenue for its international businesses for the six months ended June 30.
Difficult comparisons were exacerbated when Dentsu acquired London-based Aegis Group in 2013, which reported results on a calendar-year basis and which became the Core of the Dentsu Aegis Network.
The consolidation to a calendar-year reporting period is designed to make comparisons easier, both within the company and to competitors. The next two years (2016 and 2017) will be the first two full calendar-year reporting periods for the company.
That said, there are still some difficulties in making apples-to-apples comparisons among the holding companies. Organic growth is one example.
Dentsu reported 7% organic gross profit growth (defining gross profit as revenue less direct costs) for 2015. None of the other major holding companies reports organic gross profit growth. Interpublic Group, Publicis Groupe and Omnicom report organic revenue growth, while WPP reports both organic revenue growth and organic net sales growth. (All but WPP reported 2015 results last week; WPP is scheduled to report next month).
Dentsu reported organic gross profit growth for its operations outside Japan (overseen by Dentsu Aegis Network) of 9.4% for 2015 and 8.2% for the fourth quarter.
The company attributed that growth to its focus on expanding in faster-growing regions and segments and continuing to build out its digital capabilities. It’s also focused on the top 20 markets, particularly the USA and China.
The company reported double-digit organic growth in Asia-Pacific (excluding Japan) and Europe, Middle East and Africa. In the Americas organic growth for the year was 4.9% and 2.1% for the fourth quarter.
“North America delivered stable growth, with a step-up in performance expected in 2016, as a result of the bolstering of management teams at some of Dentsu Aegis Networks key agencies in the U.S. as well as the impact of key of major media wins in 2015.”
Dentsu Aegis media shop Carat won sizeable portions of the Procter & Gamble and Mondelez media pitches last year. For the year, Dentsu Aegis had net new business wins of $3.6 billion (based on billings) and retained another $4 billion in billings from existing accounts.
For 2016 Dentsu is currently forecasting an increase of 7.2% in gross profit, while underlying operating profit margin is expected to slip 1% due to an increase in investments in both digital capabilities and talent.