Dentsu Inc. has unveiled a plan to significantly boost business from markets outside of Japan, part of a new five-year strategy that comes on the heels of its recently completed acquisition of UK-based Aegis Group.
The company also announced on Tuesday earnings for the financial year ended March 31. Revenue rose 3.9% in yen while net income was up 22 .9%. Converted to U.S. dollars, revenue for the year slipped slightly -- less than 1% -- to $4.2 billion. Net income in dollars rose 17.3% to $439.7 million.
The Tokyo-based company said it was helped domestically by the positive effects of Japan's gradual recovery from the March 2011 massive earthquake and tsunami, along with government eco-car subsidies. The rapid weakening of the yen was also cause for optimism.
But Dentsu warned of economic uncertainties stemming from the prolonged European debt crisis and economic slowdown in China and other developing economies.
The $4.8 billion acquisition of the London-based Aegis, a media and digital network, gives Dentsu Inc. a media presence for the first time in markets outside of Japan and some other parts of Asia where it has traditionally been dominant. Upon closing the deal at the end of March, Dentsu Inc. formed Dentsu Aegis Network, a London-based operating unit that includes Aegis Media and New York-based Dentsu Network, which oversees Dentsu companies outside of Japan.
Under Dentsu's new management plan, dubbed "Dentsu 2017 and Beyond" the company will aim to earn at least 55% of its revenue from markets outside of Japan.
Much of that responsibility will fall to Tim Andree, president and CEO of Dentsu Network. He has oversight for all markets outside of Dentsu's home market. Mr. Andree's been leading the charge when it comes to exporting the agency brands Dentsu has acquired in North America to other parts of the world, including McGarryBowen and digital agency 360i.
Although Dentsu does not break down its revenue by market, markets outside of Japan currently make up only about 14% of its net sales.
Digital will also be a priority in the next few years, with a goal of at least 35% of revenue generated from digital business by 2017, Dentsu said. In that sense, the company will be leaning hard on digital agencies under its umbrella, such as Aegis' Isobar and Dentsu's 360i, to help achieve that goal.
In describing what it ultimately wants the merged company to be, Dentsu said in a statement: It "will create new marketing communications that go beyond the framework of existing advertising business. In addition to building a network that supports its clients' business worldwide, it will develop and provide integrated solutions that lead the digital age, as well as achieve sustainable growth and increase profitability in the Japanese market."
For the financial year ending March 31, 2014, Dentsu predicts revenue will rise 65.3% to 571.8 billion yen, while net income was expected to drop 47.4% to 19.1 billion yen.