Dentsu Group (4324) Q3 2024 earnings summary

Executive summary

• Q3 FY2024 organic growth was +0.3%, with sequential improvement, but overall recovery is slower than expected due to weak CXM performance in international markets.

• Japan achieved record nine-month net revenue and strong growth, especially in internet and TV advertising, while APAC and Americas faced ongoing CXM challenges and EMEA saw positive momentum.

• Major new business wins included global media for eBay, global creative for Adobe, and regional media for Pernod Ricard, Domino's, AGC, and HALEON.

• Sustainability targets for greenhouse gas reduction validated by SBTi; launched House of Creators with Roblox; employee received an Emmy Award.

• Next Mid-Term Management Plan to be announced in February 2025, aiming to outperform the global market by 2027.

Financial highlights

• Q3 organic growth rate was +0.3%; net revenue rose to JPY 284.5 bn (+2.0% YoY); operating margin fell to 12.0%, down 140 bps YoY.

• Nine-month net revenue was JPY 858.3 bn (+6.3% YoY); underlying operating profit was JPY 97.2 bn (-1.0% YoY); underlying basic EPS for Q3 was JPY 68.4.

• Statutory operating profit dropped 40.2% to JPY 28.9 bn; net profit decreased 93.1% to JPY 1.5 bn, mainly due to one-off expenses from the Russian business exit.

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

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

Outlook and guidance

• Full-year organic growth guidance revised downward from ~1.0% to ~0%; operating margin guidance cut from ~15% to ~14%.

• Underlying operating profit guidance reduced to JPY 167.7 bn; underlying net profit to JPY 91.6 bn; underlying basic EPS guidance lowered to 350.13 yen.

• 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.