On June 28, 2007, former President and CEO Tateo Mataki was appointed to the position of Chairman and CEO, and Tatsuyoshi Takashima stepped up from his former role as Executive Vice President to the position of President and COO. Under this new management structure, we are committed to doing our utmost to enhance the business of the Dentsu Group.
Financial Results for the Fiscal Year Ended March 31, 2007
During the fiscal year ended March 31, 2007, the Japanese economy was characterized by robust corporate performance, which brought about improvements in employment and personal income and rippled outward to affect household spending. Personal consumption continued its gradual growth, centered on private-sector demand.
The advertising market, although slowly, continued to grow for the third consecutive year. According to Dentsu's research, in calendar year 2006 total advertising expenditures in Japan rose 0.6% year on year, to ¥5,995.4 billion. Of this amount, advertising expenditures in the four traditional mass media declined 2.0%, falling for the second consecutive year, whereas Internet advertising expenditures enjoyed a strong 29.3% rate of growth.
In this operating environment, the Dentsu Group strove to truly be “A Partner in Creating Value” for clients, media and content owners, and consumers. Broad-ranging business developments enabled us to achieve steady growth in the domestic advertising market, cultivate advertising-related markets and expand our operations in the content and overseas markets.
The 2006 FIFA World Cup™ Germany in June and the 15th Asian Games Doha 2006 in December provided a base for business expansion efforts, which contributed to operating results.
As a result, during the year consolidated net sales increased 6.7% from the previous year, to ¥2,093,976 million, a new record high and the first time to ever surpass the ¥2 trillion mark. Gross profit grew 6.9%, to ¥348,391 million, operating income was ¥62,834 million, up 6.9%, and ordinary income rose 8.0%, to ¥70,044 million. Net income, however, fell 1.0%, to ¥30,688 million, owing to such factors as the absence of an extraordinary gain on contribution of stock holding trust for retirement benefit plan, which was posted in the previous fiscal year.
Outlook for the Fiscal Year Ending March 31, 2008
A Cabinet Office report issued on January 25, 2007, forecasts that the Japanese economy will continue its self-sustaining expansion in the fiscal year ending March 31, 2008, driven by ongoing improvements in the corporate sector and in the household sector, combined with stable commodity prices. This report predicts a 2.0% increase in real GDP and a 2.2% rise in nominal GDP. Meanwhile, as of March 2007, the Japan Center for Economic Research anticipates a 1.8% year on year rise in total advertising expenditures in Japan for the fiscal year ending March 31, 2008. We believe that the advertising industry serves the vital social mission of sustaining ongoing growth in corporate performance by effectively linking it to stimulating personal consumption.
The fiscal year ending March 31, 2008, will offer such advertising opportunities as the Upper House elections, the IAAF World Championships in Athletics Osaka 2007 and the Tokyo Motor Show. In the upcoming fiscal year, we expect the Dentsu Group to generate consolidated net sales of ¥2,107,073 million, up 0.6%, and operating income of ¥63,842 million, up 1.6%. We anticipate a 4.4% increase in ordinary income, to ¥73,113 million, and net income of ¥37,004 million, up 20.6%.
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