Dentsu reports decline in organic growth, cuts forecast

Dentsu: has cut its business forecast
Dentsu: has cut its business forecast

The company cited a lack of big events in Japan, plus weakness in Australia and China.

The Dentsu Group has reported a first-half decline of 1.5% in organic growth, which fell 2.1% in Japan, and 1% at Dentsu Aegis Network.

Statutory operating profit fell 55.4%, while the company listed a 26.1% decline in underlying operating profit and a 27.6% drop in underlying net profit.

Dentsu reported revenue growth of 3.2%, while revenue less cost of sales grew 2.6% on a constant-currency basis, from 445.7 billion yen (£3.45bn, US$4.2bn) to 449.2 billion yen. This represented 0.1% growth in Japan and 4.4% for the network.

Based on these results, Dentsu announced changes to its forecast for the full financial year ending 31 December, cutting its expectations for revenue by 4%, revenue less cost of sales by 2.7%, underlying operating profit by 9.2% and underlying net profit by 9.9%. The forecasts for statutory operating profit and net profit fell by 19.6% and 41.7%, respectively.

The Japan business, according to Dentsu, declined due to an absence of large-scale sporting events and a decrease in traditional media in the Japanese market, which was partially offset by digital-related services and favourable results in subsidiaries.

International business suffered due to negative growth in APAC, which the company blamed on weakness in Australia and China markets. Excluding the impact of Australia and China, first-half organic growth for Dentsu Aegis Network would be 0.9%.

Digital business contributed 48.9% of total revenue less cost of sales (28.5% in Japan and 63.3% at Dentsu Aegis Network), up from 45.0% in the first half of 2018.

International business contributed 58.5% of total revenue less cost of sales, compared with 58.2% a year earlier.

Toshihiro Yamamoto, president and CEO at Dentsu, said: "Today, brands are not what they say, they are what they do. They need to go beyond advertising to deliver highly crafted brand moments around the consumer that are inspired by data and insights that use storytelling to resonate, and leverage technology to unlock products and services that deliver value. Experiences, when designed well and powered by digital and creativity, have the potential to build brands, move products and impact people’s lives.

"As we continue to bring the Japanese and International business closer together we can fuse our capabilities and increasingly leverage the diverse and talented 62,000 individuals across the group. This will allow us to anticipate continuous change, drive innovation and offer world-class services to our clients.

"Although our business has expanded beyond advertising and is increasingly diverse in nature, our role and value are crystal clear: to find and execute the best solution for our clients. This is why it is imperative that we discover, connect and develop the diversity that will comprise One Dentsu."

This story first appeared in Campaign Asia

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