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The call highlighted meaningful underlying profit improvement, strong Japan performance, several strategic client wins, accelerated AI adoption and defined cost-reduction measures. However, organic group growth was muted (0.8%), APAC and parts of the Americas and EMEA businesses showed notable declines (APAC -7.5%, Americas -3.0%, Americas Creative -12.4%, APAC CXM -24.2%), and statutory profit strength was materially supported by one-off asset sales. Management reiterated guidance but emphasized macro and geopolitical uncertainty and a continued negative distributable profit position. Overall, positives in profitability, structural actions and technology initiatives are balanced against uneven regional performance and lingering balance-sheet and demand risks.
Dentsu reiterated its full‑year guidance after a Q1 that slightly beat expectations: group organic growth 0.8%, consolidated net revenue JPY295.1bn (+2.7% YoY), underlying operating profit JPY37.8bn (+11.5%) and operating margin 12.8% (+100bps); underlying basic EPS JPY75.43 (+18.4%); statutory operating profit JPY65.0bn (+155.5%) and statutory net profit JPY40.2bn (+540.5%) (including circa JPY30bn operating and circa JPY22bn net gains from the Dentsu Ginza Building sale and other transaction gains). By region Q1 organics were Japan +4.7% (12 consecutive quarters positive; Japan operating margin 30.8%, +180bps), Americas -3% (Media +0.5%, Creative -12.4%; FY guide ~-2%), EMEA +0.8% (Media +5.3%, CXM -5.7%, Creative -5%; FY guide ~+1%) and APAC -7.5% (Media -2.5%, CXM -24.2%, Creative -9.5%; FY guide ~+1%). Cost actions contributed to performance (staff costs down JPY5.9bn, operating expenses down JPY1.8bn), and management announced further savings from an EMEA HQ reorganization (~JPY1.7bn p.a.) and ANZ CRM divestment (~JPY2.5bn p.a. plus several hundred million yen), while expecting distributable profit to improve by JPY70–80bn to around -JPY160bn and non‑consolidated net assets to turn positive at about JPY20bn; the decision to withhold dividends for FY2026 remains unchanged.
Consolidated net revenue increased 2.7% year-on-year to JPY 295.1 billion. Underlying operating profit rose 11.5% year-on-year to JPY 37.8 billion, driving an operating margin of 12.8% (up 100 basis points YoY).
Statutory operating profit increased 155.5% to JPY 65.0 billion and statutory net profit increased 540.5% to JPY 40.2 billion, largely driven by gains from the sale of the Dentsu Ginza Building (circa JPY 30 billion recorded in operating profit and circa JPY 22 billion in net profit) and other one-off disposals.
Japan delivered organic growth of 4.7%, marking 12 consecutive quarters of positive growth and 6 consecutive quarters of mid-single-digit growth. Japan operating margin improved to 30.8% (up 180 basis points YoY). Internet media posted double-digit turnover growth for the ninth consecutive quarter and digital transformation/nearly double-digit growth.
Notable global and regional client wins included Haineken (global media), Farmers Insurance (creative), i-Health (integrated media & creative AOR), MUFG (marketing strategy partner, Japan), Samsung Electronics Europe (CRM transformation across 16 markets), and Tapestry (media across EMEA, APAC and Japan).
Group staff costs were reduced by JPY 5.9 billion; operating expenses reduced by JPY 1.8 billion. Planned structural actions: EMEA consolidation (7 clusters into 3) expected to deliver ~JPY 1.7 billion in annual cost reductions, and ANZ CRM divestiture expected to reduce ~JPY 2.5 billion in annual costs plus additional function-related savings.
Dentsu Japan is using more than 4,500 AI agents and 1,300+ AI applications. Mugen AI Ads rolled out to 200+ companies delivering an average 1.5x improvement in advertising effectiveness. Dentsu.Connect has 1,900+ enrolled clients and Client IQ (chat-based AI agent) launched to speed internal expertise sharing and proposal creation.
Industry recognition continued, including being named Network of the Year at ADFEST for the 10th time (fifth consecutive year), and awards across creative, sports and entertainment disciplines.
Management reiterated full-year guidance despite increased macro uncertainty. Distributable profit expected to improve by JPY 70–80 billion to circa negative JPY 160 billion, and nonconsolidated net assets projected to turn positive to around JPY 20 billion by year-end.
[Interpreted] Good morning, good afternoon, good evening. This is Takeshi Sano speaking. I took office as Global CEO at the end of March, and I'm delighted to welcome you to Dentsu Fiscal Year 2026 First Quarter Earnings Call. Today, Shigeki Endo, our Global CFO, and I will be giving presentations. Following our business and strategic update and Q1 financial update, we will move on to a Q&A session. Before moving on to the financial results, I would first like to speak about the direction our group is aiming for. Our group's goal is to become a growth partner that realizes clients' medium- to long-term growth. The 3 pillars necessary to achieve this are strengthening client centricity, enhancing agility and accelerating collaboration.
At the core of our business is client centricity, a customer-first mindset. The marketing expertise we provide in media, creative and the wider marketing services we offer are not the goal in themselves. They are the means. The true objective is the sustained growth for our clients' businesses and brands. Therefore, it is critical that we go beyond responding only to today's clients' needs to proactively anticipating challenges they have not yet identified and delivering the most relevant solutions at the right time. To realize this client centricity, agility and collaboration are essential. On agility, we are accelerating decision-making and reducing the distance between management, the front line and ultimately, our clients by streamlining management layers and moving to a more agile structure. Success depends on being the right scale, larg...