Revenue Plunge Drives Down Dentsu Profits

21 August 2007

TOKYO: Dentsu, the world's fifth largest advertising and marketing network, enjoyed a bumper year in fiscal 2006-7, thanks to revenues inflated by the soccer World Cup.

But as Isaac Newton pointed out three hundred and twenty years ago: "For every action there is an equal and opposite reaction."

For Dentsu that reaction kicked-in during Q1 2007-8, resulting in a 32% plunge in operating profits - down from ¥11.13 billion ($97.21m; €72.18m; £49.02m) in the year earlier period to ¥7.54bn.

It was not just the 'reaction factor', admitted the adland Samurai, which cited other causes such as shrinking advertising revenue, mainly from consumer-finance firms; and lower television, newspaper, magazine-related income.

Net profit for the quarter - the first time Dentsu has succumbed to the Wall Street-inspired quirk of quarterly reporting - was ¥2.2bn, equating to 17% of its fiscal first-half net-profit outlook of ¥13.16bn.

Said a company spokesman: "The first quarter's achievement looks low, but we are expecting to book [additional] advertising revenues from the world championships in athletics in the second quarter."

On this basis, the marketing giant is adhering to its earlier outlook guidance of a full year group net profit of ¥37bn.

Dentsu's numbers exclude data from its associate Publicis Groupe, which refuses to pander to Wall Street's fervor for quarterly figures.

Data sourced from Wall Street Journal Online. additional content by WARC staff