(The first quarter ended March 31, 2019 – reported on an IFRS basis)

TOKYO–(BUSINESS WIRE)–Dentsu Inc. (TOKYO:4324)(ISIN:JP3551520004):

Executive Summary

• In Q1 FY2019, the Dentsu Group delivered total growth of revenue less
  cost of sales of 2.3% (constant currency basis) and organic growth of
  -1.6%.
• The Japan business delivered -0.8% and -2.7% respectively, mainly due
  to a decrease in traditional media in the Japanese market, partially
  offset by digital-related services and favorable results in
  subsidiaries.
• The international business, Dentsu Aegis Network, delivered 4.8%
  growth of revenue less cost of sales (constant currency basis) and
  -0.7% organic growth, impacted by negative growth in APAC mainly due
  to weakness in the Australian market.
• Despite a soft start to the year, revenue is expected to build as the
  year progresses.
• There is no change to the full-year guidance announced in February
  2019.

*Revenue less cost of sales is the metric by which the Group’s
organic growth is measured. Organic growth represents the constant
currency year-on-year growth after adjusting for the effect of
businesses acquired or disposed of since the beginning of the previous
year.
** See below for definition of “underlying.”
***
See below for definition of “EBITDA.”

Highlights of Q1 FY2019 results

• The Dentsu Group delivered growth of revenue less cost of sales of
  2.3% (constant currency basis) :
  • -0.8% in Japan, and 4.8% at Dentsu Aegis Network driven by
    acquisitions.
  • The breakdown in contribution is: +8.8 billion yen from M&As, -3.7
    billion yen by organic growth, and -3.7 billion yen from foreign
    exchange rates.
• The Group produced organic growth of -1.6% :
  • -2.7% in Japan, and -0.7% at Dentsu Aegis Network. The Japan
    business declined due to a decrease in traditional media in the
    Japanese market, partially offset by digital-related services and
    favorable results in subsidiaries. The international business was
    impacted by negative growth in APAC, due to weakness in the
    Australian market, softer client spend and cycling out of account
    lost in FY2018.
  • Digital business contribution to total revenue less cost of
    sales reached 47.0% (Q1 FY2018: 43.7%), including 27.7% in
    Japan (Q1 FY2018: 23.0%), and 62.5% at Dentsu Aegis Network (Q1
    FY2018: 60.8%).
  • International business contribution to total revenue less cost
    of sales reached 55.5% (Q1 FY2018: 54.9%).
• Group underlying operating profit was 24.4 billion yen (Q1
  FY2018: 32.7 billion yen).
  • 24.6 billion yen in Japan (Q1 FY2018: 30.4 billion yen), and -0.1
    billion yen at Dentsu Aegis Network (Q1 FY2018: 2.3 billion yen).
  • Difference between the underlying operating profit and statutory
    operating profit was mainly due to amortization of M&A related
    intangible assets.
• Group underlying operating margin was 10.7% (Q1 FY2018: 14.4%).
  • 24.3% in Japan (Q1 FY2018: 29.7%), and -0.1% at Dentsu Aegis
    Network (Q1 FY2018: 1.9%).
  • The decline in Japan was mainly due to planned SG&A costs related
    to investments to drive future growth. At Dentsu Aegis Network, a
    softer-than-expected start to the year impacted on the operating
    margin which was seasonally low in the first quarter and was
    within budget.
• Underlying net profit (attributable to owners of the parent) and
  underlying basic EPS decreased by 30.2% and 30.2% respectively,
  mainly due to the decline of underlying operating income and an
  increase of finance costs.
  • Difference between the underlying net profit and statutory net
    profit was mainly due to operating profit adjustments and a loss
    on M&A related put-option liabilities.

Toshihiro Yamamoto, President and CEO, Dentsu Inc., said:

“In Q1 FY2019, Dentsu Group recorded a decline in organic growth of
-1.6%, with -2.7% in Japan and -0.7% at Dentsu Aegis Network.
It
has been a soft start to the year and challenging market conditions
remain, however, we expect to see revenues build through the remainder
of the year. In Japan, a number of world-class, one-off events will
positively impact our results particularly in H2 FY2019. At Dentsu Aegis
Network, the cycling out of accounts lost in FY2018 and the on-boarding
of new business wins will begin to impact results in H2 FY2019.

In Japan, investment has continued to drive sustainable future growth
with key investments in our IT infrastructure and our digital business.
At Dentsu Aegis Network, operational excellence remains a key priority,
with the next stage focusing on client and media operation processes.

At the end of March 2019, our shareholders endorsed our plans to
reorganize the corporate structure of Dentsu Inc. effective January 1,
2020. The holding company ‘Dentsu Group Inc.’ will support all Dentsu
Group companies and our combined 62,000 talented people. The new
structure will allow for greater corporate governance and improved
integration between Dentsu in Japan and Dentsu Aegis Network.
Workstreams are already underway across many of our corporate functions
and business lines to ensure a smooth and seamless transition.

There is much to do in the remainder of the year, but through
maintaining our continued focus on driving innovation and pursuing
excellence in everything we do, I am confident we can continue to
deliver even greater value for our clients.”

Q1 FY2019 Consolidated Financial Results

1. Q1 FY2019 Performance Review

Japan:

The Group’s operations in Japan delivered organic growth of -2.7% in Q1
FY2019. This was mainly due to a decrease in traditional media in the
Japanese market, partially offset by digital-related services and
favorable results in subsidiaries.

Underlying operating margin in Japan declined by 540 bps to 24.3%. This
was mainly due to planned SG&A costs related to investments to drive
future growth.

International:

Dentsu Aegis Network delivered organic growth of -0.7% in Q1 FY2019. The
Americas reported positive organic growth, EMEA was negative but with a
mixed performance across the region and APAC (excluding Japan) was
negative, impacted by weakness in Australia.

The Q1 2019 margin is impacted by the usual seasonality expected in the
first quarter. We continue to control our costs responsibly and still
expect to deliver margin improvement in FY2019 as guided in February
2019.

Total net new business year-to-date for media is significantly ahead of
this stage last year with no major account losses. The pitch pipeline is
healthy with the current opportunities over 80% offensive. The win rate
for digital, creative & experiential is also significantly ahead of last
year’s run rate with a good spread of accounts won across all regions.

International – Regions:

In EMEA, Dentsu Aegis Network reported -0.4% organic growth in Q1
FY2019. There was a mixed performance across the region. Germany, Spain
and Italy posted double-digit growth, while Russia, Switzerland and the
Netherlands performed well. The Nordics experienced some slowdown,
facing tougher comparables after a very strong 2018, while the UK and
France were in negative territory.

In the Americas, Dentsu Aegis Network reported 0.1% organic growth in Q1
FY2019. In the U.S. the slowdown was due to timing of client spend and
the cycling out of several client accounts. Growth in the U.S. is
expected to improve in H2 FY2019 as new business wins impact our
revenues. Canada performed well while challenging macro-economic
conditions in Brazil impacted growth.

In the APAC region (excluding Japan), Dentsu Aegis Network reported
-3.0% organic growth in Q1 FY2019. Australia remains a difficult market.
A combination of macro factors and account losses cycling out will
continue to add pressure until H2 FY2019. New management has recently
joined in Australia and will continue to manage the business to reflect
the challenging operating environment we face. China returned to
positive growth in the quarter, new management has recently been
installed. There has been good growth across other markets within APAC,
including India and Thailand.

Acquisitions:

Acquisitions continue to accelerate the Group strategy by providing
innovation, scale, geographic and capability infill as well as bringing
new entrepreneurial talent into the organization. In Q1 FY2019, a total
of five new acquisitions were signed. Two acquisitions were made in
EMEA, one in the Americas and two in APAC.

In February 2019, we welcomed Happy Marketer, Southeast Asia’s leading
data-driven digital marketing agency. Joining Merkle as Happy Marketer,
a Merkle Company, this acquisition will provide a strategic foundation
for Merkle’s data, analytics and CRM solutions, enabling the delivery of
people-based marketing at scale across the region.

Note:
– IFRS 16 “Leases” is applied from January 1, 2019. Past
results are not restated under IFRS 16.

Further information

Further details of these results, including all related financial
statements, can be found in the Investor Relations section of the Dentsu
Inc. website: http://www.dentsu.com/ir.

Definitions of “underlying” and “EBITDA”

• Underlying operating profit: KPI to measure recurring business
  performance which is calculated as operating profit added with
  amortization of M&A related intangible assets, acquisition costs,
  share-based compensation expenses related to acquired companies and
  one-off items such as gain/loss on sales and retirement of non-current
  assets and impairment loss.
• Operating margin: Underlying operating profit divided by
  Revenue less cost of sales.
• Underlying net profit (attributable to owners of the parent):
  KPI to measure recurring net profit attributable to owners of the
  parent which is calculated as net profit added with adjustment items
  related to operating profit, gain/loss on sales of shares of
  associates, revaluation of earnout liabilities / M&A related
  put-option liabilities, tax-related, NCI profit-related and other
  one-off items.
• Underlying basic EPS: EPS based on underlying net profit
  (attributable to owners of the parent).
• EBITDA: Operating profit before depreciation, amortization and
  impairment losses.

* IFRS 15 “Revenue from Contracts with Customers” is applied on the
FY2017 results and their figures are adjusted.

* IFRS 15 “Revenue from Contracts with Customers” is applied on the
FY2017 results and their figures are adjusted.

* FY2019 forecasts are based on average exchange rates in January
2019. Actual exchange rates in FY2018 actual results are annual average
exchange rates in 2018.
Note: Underlying net profit,
Underlying basic EPS and Net profit: Excluding attribution to
non-controlling interests.

About the Dentsu Group

Dentsu is the world’s largest advertising agency brand. Led by Dentsu
Inc. (Tokyo: 4324; ISIN: JP3551520004), a company with a history of 117
years of innovation, the Dentsu Group provides a comprehensive range of
client-centric brand, integrated communications, media and digital
services through its ten global network brands—Carat, Dentsu, dentsu X,
iProspect, Isobar, mcgarrybowen, Merkle, MKTG, Posterscope and Vizeum—as
well as through its specialist/multi-market brands. The Dentsu Group has
a strong presence in over 145 countries and regions across five
continents, and employs more than 62,000 dedicated professionals. Dentsu
Aegis Network Ltd., its international business headquarters in London,
oversees Dentsu’s agency operations outside of Japan. The Group is also
active in the production and marketing of sports and entertainment
content on a global scale. http://www.dentsu.com/

Contacts

For additional enquiries

Media –
Please contact Corporate Communications:
Tokyo
Dentsu
Inc.
Shusaku Kannan:
+81 3 6216 8042
[email protected]
London
Dentsu
Aegis Network
Dani Jordan:
+44 744 7828
[email protected]

Investors & analysts –
Please contact Investor
Relations:
Tokyo
Dentsu Inc.
Yuji Ito:
+81
3 6216 8015
[email protected]
London
Dentsu
Aegis Network
Kate Stewart:
+44 (0)203 535 8237
[email protected]