Dentsu Group (4324) Q3 2024 earnings summary

Executive summary

• Q3 FY2024 organic growth was 0.3%, with continued improvement but slower overall recovery due to international CXM challenges.

• Japan achieved record nine-month net revenue, driven by strong internet and TV advertising, and is expected to maintain solid growth.

• Major global account wins included eBay, Adobe, Pernod Ricard, Domino's Pizza, AGC, and HALEON, with higher pitch win rates.

• Sustainability targets for greenhouse gas emissions reduction validated by SBTi; launched House of Creators with Roblox and received industry awards including an Emmy.

• Internal investments in data, technology, and talent continue to drive integrated solutions and competitiveness.

Financial highlights

• Q3 organic growth: 0.3%; net revenue rose 2.0% YoY to JPY 284.5bn; operating margin at 12.0%, down 140bp YoY.

• Underlying basic EPS for Q3 was JPY 68.4 (+8.7% YoY); underlying net profit increased 6.8% YoY to JPY 17.8bn.

• Nine-month net revenue: JPY 858.3bn (+6.3% YoY); underlying operating profit: JPY 97.2bn (-1.0% YoY); statutory operating profit: JPY 28.9bn (-40.2% YoY); net profit: JPY 1.5bn (-93.1% YoY), mainly due to Russia exit charges.

• Net debt at end-September: JPY 323.7bn; net debt/underlying EBITDA (LTM): 1.84x.

• Cash flow from operations (9m): -JPY 100.6bn, impacted by working capital changes.

Outlook and guidance

• Full-year organic growth guidance revised from ~1.0% to ~0%; operating margin from ~15% to ~14%; underlying operating profit guidance from JPY 180bn to JPY 167.7bn.

• Underlying net profit guidance revised to JPY 91.6bn; underlying basic EPS to JPY 350.13; statutory operating profit to JPY 92.0bn; net profit attributable to parent to JPY 23.5bn.

• Annual dividend per share forecast maintained at JPY 139.5.

• Next Mid-Term Management Plan to be announced in February 2025, targeting global market outperformance by 2027.