David Blecken
Aug 15, 2016

Dentsu and ADK issue results for H1 2016

Two of Japan’s largest advertising agencies have released their financial results for the first half of the 2016 financial year. Here are the highlights.

Dentsu and ADK issue results for H1 2016

Dentsu Group

Gross profit rose 9.6 percent overall to ¥368.6 billion (US$3.64 billion). Japan operations grew 8.4 percent, while Dentsu Aegis Network (the company’s international business) grew 10.7 percent

Organic gross profit grew 7.2 percent in Japan, which Dentsu attributes to sponsorship sales around the Tokyo 2020 Olympic/Paralympic Games.

Organic gross profit increased 6 percent for Dentsu Aegis Network. In Asia-Pacific, the figure was 11.5 percent, compared to 0.3 percent in the Americas. Dentsu said account losses at creative subsidiary Mcgarrybowen impacted business in the US, but that the impact will be “alleviated” in H2.

Digital businesses played an important role in these increases: Dentsu puts their contribution at 35 percent—19.7 percent for Japan and 50.1 percent for Dentsu Aegis Network. The company made 15 acquisitions and investments during the period and president and CEO Tadashi Ishii said in a statement that Dentsu would “continue to invest in integrating digital capabilities across the organization”

The group’s operating margin stood at 18.6 percent, up from 17.7 percent for the same period last year. It attributes this to margin improvement in Japan.

Dentsu expects gross profit for FY2016 to rise 8.4 percent on the previous year to ¥768.7 billion ($7.58 billion).

ADK

ADK reported a total increase in gross profit of 4.8 percent to ¥25.7 billion ($250 million), while gross billings fell 0.6 percent to ¥174.1 billion ($1.72 billon).

Pre-tax income for the period fell 36 percent to ¥3.5 billion ($34.5 million).

ADK’s advertising business registered a rise in billings of 0.1 percent to ¥173.2 billion ($1.71 billion). The company says it was helped by a resurgence in TV advertising and “a robust performance in a digital subsidiary”.

ADK Tokyo (the company’s domestic business) saw a rise in gross profit of 9.1 percent to ¥18.8 billion ($185.4 million).

Gross billings rose from clients in sectors including food, pharma, real estate, service and transportation/leisure; they declined among clients in the beverage/tobacco, government, cosmetics, household goods and finance/insurance sectors.

Read our assessment of Dentsu's and ADK's performance in 2015 here.

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