Ahead on margin, behind on gross profit
Hakuhodo DY Holdings has already crossed one of the biggest hurdles in its midterm plan running through March 2027: profitability. On the company's adjusted basis, which excludes the Mercari share-sale gain used in its plan metrics, adjusted operating profit before amortization grew 14.3% in the year ended March 2026 and adjusted operating margin reached 14.1%. Both are already above the plan's targets of at least 10% annual profit growth and a 13% margin. The weaker line is gross profit, which rose 2.3% against a 5%-plus target, while ROE before amortization was 7.6%, below the 10% goal.
Management said the ROE miss reflected temporary restructuring costs in Japan and overseas, and described those costs as one-off. In the company's own framing, structural reform is showing up in profitability faster than it is showing up in capital efficiency or topline growth.
The year to March 2027 depends on selective optimism
For the current year, management is not assuming a booming ad cycle. It said domestic advertising demand is expected to grow in the mid-3% range. Overseas, it described the market as growing in the mid-8% range overall, but said its guidance assumes somewhat lower realized growth because ASEAN is more exposed if Middle East tensions spill over. Regionally, the company is looking for recovery in Greater China, continued strength in India and revenue growth in North America while keeping profitability, though it also warned overseas results can still swing quarter to quarter.
Costs will still move up. SG&A is expected to rise about 6% once Digital Holdings is consolidated, or around 3% excluding that effect, as AI-related systems investment increases depreciation. Base pay hikes are planned to reflect inflation, but management said last year's early retirement program and indirect-function consolidation should help restrain personnel cost growth.
Digital is supposed to close the gap
The gross profit catch-up story is mostly a digital one. Hakuhodo says the integration of Hakuhodo, Hakuhodo DY Media Partners and Hakuhodo DY ONE lifted the win rate on large digital pitches to about 70%, and management later clarified that the figure mainly covers digital-led projects, even if many mandates end up bundled with television and other solutions. The company also says adding Digital Holdings moves the group to No. 2 in domestic digital ad sales share and gives it another lever for cross-selling and gross profit expansion.
Management added that current guidance bakes in only limited synergy from the Digital Holdings combination, leaving upside if execution goes to plan. By media type, it expects television to be roughly flat and internet advertising to grow about 7%, led by video, OTT and retail media. That leaves Hakuhodo DY in a fairly specific spot: margins are already where the March 2027 plan wanted them, but this year still has to prove that better digital positioning can turn into the faster gross profit growth the plan promised.