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Episode Seven: Man And Machine
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Dentsu Inc. reported organic growth of 7% in 2015, logging strong performances in China and Western Europe and continuing on a path to becoming more international and more digital.
The 115-year-old Tokyo-based company said gross profit, a proxy for revenue, reached 762.0 billion yen ($6.3 billion) in the 2015 calendar year, up 12.6% in yen from 2014.
Organic gross profit growth -- adjusting the numbers to account for acquisitions, divestitures and exchange rates -- was 7.0% at Dentsu Group, which includes the company's historic business in Japan as well as the international agencies it acquired in 2013 with the purchase of the U.K.-based Aegis Group. Dentsu signed 36 acquisitions in 2015, in markets from the Philippines to Israel to the U.K.
The company has dubbed its ad businesses outside Japan the Dentsu Aegis Network, a grouping that includes Carat, iProspect, Isobar, McGarryBowen, 360i and Vizeum. Organic gross profit growth there was 9.4%. For the Japanese business, it was 3.9%.
Dentsu is the world's fifth largest agency company after WPP, Omnicom Group, Publicis Groupe and Interpublic Group of Cos., according to Ad Age's Datacenter. After buying Aegis Group for $5 billion – a purchase that remains the largest ever in the industry -- Dentsu set out on a five-year plan it called "2017 and Beyond" with the goal of becoming more international and more digital.
With two years to go, it's close to hitting its goals of getting at least 55% of its business from outside Japan by 2017, and 35% percent of business from digital. The company had 54.3% of gross profit from outside Japan last year, and 34% from digital.
The company's businesses logged strong performances in most markets, even tough ones. In China, where the economy has softened, Dentsu said it had double-digit organic growth. In Asia-Pacific excluding Japan, organic gross profit growth was 11.4%. In the Americas it was 4.9%.
In Western Europe, all major markets delivered double-digit organic growth, the company said.
The company didn't give numbers on Russia, saying the situation there remains "relatively uncertain, but the Group remains optimistic about its prospects there, given its strong position in that market."
Looking ahead at 2016, Dentsu forecast 7.2% gross profit growth to hit 817.1 billion yen ($7.2 billion).
The company is in the midst of switching from Japanese accounting principles to International Financial Reporting Standards, and because of the transition its 2015 reporting year in Japan was actually a nine-month stretch from April through December. Instead of providing those numbers, Dentsu gave pro-forma figures for both the 2015 and 2014 calendar year to make them easier to understand and compare.