Dentsu Profits Weighed Down By Costs Related to Aegis Acquisition

Company Reports Quarterly Loss After Factoring in Goodwill

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Dentsu Inc.'s bid to become a truly global agency company is showing results, with revenue in yen from markets outside of Japan quadrupling, according to quarterly data that include results of the former Aegis Group for the first time.

Revenue was up 60.7% in yen for the first fiscal quarter ended June 30, the Tokyo-based company said. The Japanese currency significantly weakened during the period, and revenue converted to U.S. dollars rose 30.4% to $1.24 billion.

The company reported a net loss of $37.5 million for the quarter. Dentsu Inc.'s bottom line was affected by costs related to amortization of goodwill related to the Aegis acquisition. For the same period last year, Dentsu reported net income of $78.5 million. In yen, the company reported a net loss of 3.7 billion yen vs. year-ago net income of 5.9 billion yen.

Upon closing the Aegis acquisition at the end of March, Dentsu Inc. formed Dentsu Aegis Network, a London-based operating unit which includes Aegis Media and New York-based Dentsu Network, which oversees Dentsu companies outside of Japan.

Dentsu is aggressively targeting markets outside of its home territory and other Asian countries where it has traditionally dominated. With the Aegis deal complete, Dentsu Inc. now operates in 110 countries and aims to create "new marketing communications that go beyond the framework of existing advertising business," the company said in a statement. Dentsu Inc. ranks as the world's fifth-largest agency company.

Revenue in Japan was up 6.3% in yen over the same period last year and -- reflecting the Aegis acquisition -- up 320.1% in markets outside of Japan.

Dentsu appears to be well on its way to achieving its goal of generating at least 55% of revenue from markets outside of Japan by 2017. On a yen basis, global markets contributed 45.5% of revenue in the quarter ended June 30.

Results were impacted by an uncertain global environment due to the prolonged European debt crisis and economic slowdown in China, Dentsu said. Economic recovery in the U.S. was a bright spot, and Japanese government initiatives that led to a rapid weakening of the yen and higher stock prices indicated improvement in the situation at home.

First quarter results were in line with expectations, and outlook for first half and full-year financial results are unchanged. Dentsu expects revenue in yen to rise 63.5% for the six months ending Sept. 30, and 65.3% for the financial year ending March 31, 2014.

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