Dentsu's FY 2010-201111 net income goes down

Dentsu Inc. President & CEO: Tadashi Ishii convened a meeting of its Board of Directors at its Head Office in Tokyo at which it finalized its consolidated and non-consolidated financial results for the fiscal year ended March 31, 2011 (April 1, 2010–March 31, 2011; hereinafter “the fiscal year under review”). Summary of financial results for the fiscal year ended March 31, 2011

During the fiscal year under review, the Japanese economy showed signs that it was on track to a gradual recovery despite the continued severe employment and income situation. However, there are concerns that the impact of the March 11, 2011 Great East Japan Earthquake, the Fukushima Daiichi Nuclear Power Plant accident and subsequent power shortages will cause a downturn in corporate activities and consumer confidence.

In the advertising industry, Dentsu’s estimate for advertising expenditures in Japan for the 2010 calendar year was 5,842.7 billion yen, a decrease of 1.3% compared with the 2009 calendar year. This marked the third consecutive year of decline. Looking at the breakdown of advertising expenditures by category, spending rose 1.1% in Television but fell in all the other traditional media for the sixth consecutive year, recording a decline of 1.9%. Promotional Media advertising was down 4.4%, marking a third straight year-on-year decline. In contrast, Internet advertising posted a strong gain of 9.6%, while Satellite Media-Related advertising expenditures grew 10.6% due to brisk sales of digital televisions.

The extremely severe business climate continued from the previous year, as clients remained cautious about spending their advertising budgets. Under these difficult market conditions, the Dentsu Group (hereinafter “the Group”) implemented a broad range of tangible measures under its “Dentsu Innovation 2013” medium-term management plan that was announced in July 2009. As a result of leveraging the multifaceted business opportunities provided by major international events including the 2010 FIFA World Cup South Africa tournament held in June and July, and providing “Integrated Communication Design” solutions through collective efforts, the Group achieved an improvement in its business results during the second half of the fiscal year under review.

In the fiscal year under review, the Group posted consolidated billings (net sales) of 1,833,449 million yen, an increase of 9.2% compared with the fiscal year ended March 31, 2010. The Group recorded gross profit of 317,696 million yen, an increase of 7.2%; operating income of 50,937 million yen, an increase of 36.5%; and ordinary income of 54,166 million yen, an increase of 20.9%. However, as the Group posted extraordinary loss including amortization of goodwill and loss on valuation of investment securities, net income for the fiscal year under review amounted to 21,635 million yen, a decrease of 30.5%.

There are concerns that the impact of the Great East Japan Earthquake and subsequent power shortages will cause a downturn in corporate activities and consumer confidence. Against the backdrop of this economic outlook, the Japan Center for Economic Research forecasts advertising expenditures in Japan to decrease 5.1% year on year during the fiscal year ending March 31, 2012 (forecast as of April 2011).

Although difficult operating conditions are expected to continue for some time, the Group will continue to implement a wide range of concrete reforms based on its “Dentsu Innovation 2013” medium-term management plan, and make every effort on diverse fronts toward the nation’s recovery from the Great East Japan Earthquake.

For the fiscal year ending March 31, 2012, on a consolidated basis, Dentsu forecasts billings (net sales) of 1,850.8 billion yen, an increase of 0.9% year on year; operating income of 50.0 billion yen, a decrease of 1.8%; ordinary income of 58.4 billion yen, an increase of 7.8%; and net income of 32.0 billion yen, an increase of 47.9%.

On a non-consolidated basis, for the fiscal year ending March 31, 2012, Dentsu forecasts billings (net sales) of 1,396.8 billion yen (on a par with the fiscal year under review).

operating income of 34.7 billion yen, an increase of 2.7%; ordinary income of 43.3 billion yen, an increase of 7.4%; and net income of 26.4 billion yen, an increase of 51.1%. Cash dividends applicable to the fiscal year ended March 31, 2011.

Based on a comprehensive view of such factors as business results for the fiscal year under review, the medium- to long-term results outlook and the Group’s funding situation, cash dividends per share of common stock are expected to be 29.50 yen, including an interim dividend of 14.50 yen and a year-end dividend of 15.00 yen (the latest dividend forecast was 14.50 yen).

Cash dividends per share of common stock applicable to the fiscal year ending March 31, 2012, are expected to be 30.00 yen, including an interim dividend of 15.00 yen and a year-end dividend of 15.00 yen.

These business results forecasts have been made by Dentsu on the basis of currently available information, and hence involve potential risks and uncertainties. Consequently, actual business results may differ from the forecasts due to changes in various factors.

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