Dentsu International organic revenue down 3.5 per cent in ‘encouraging’ start to the year

By Matthew Miller

Overall underlying profit grew 20.8 per cent as margins improved.

Dentsu Group has reported what it calls a “very encouraging start to the year”, with organic revenue declining 2.4 per cent in the first quarter on a year-on-year basis (-0.9 per cent for Dentsu Japan Network and -3.5 per cent for Dentsu International).

The company reported a 1.8 per cent decline in total revenue less cost of sales (LCOS) on a constant-currency basis (0.0 per cent for Japan and -3.1 per cent for Dentsu International). Topline revenue was ¥249bn ($2.28bn; £1.62bn).

The Americas performed worst in organic growth, followed by APAC (excluding Japan), EMEA, and then Japan.

Importantly, the parent company moved back into organic growth with a 2.5 per cent increase in March globally despite the overall decline of 2.4 per cent in Q1.

Internationally, none of Dentsu’s service lines managed organic growth, with creative the worst performer. Both the media and CXM lines managed revenue increases on an LCOS basis.

The month of March was a watershed as the EMEA and APAC regions both moved into growth.

Underlying operating profit increased 20.8 per cent year on year to ¥44.9bn, as underlying operating margins improved by 20.2 per cent. This breaks down to a 12.1 per cent increase to ¥33.9bn for Dentsu’s Japan operations, where the operating margin was 32.8 per cent, and a 41.8 per cent increase to ¥12.2bn for Dentsu International, where the margin was 10.3 per cent.

“Our first quarter results showed a continued progressive improvement in our organic performance despite the pre-Covid-19 comparators facing the Group for most of the quarter,” Toshihiro Yamamoto, president and chief executive of Dentsu Group, said in a release.

“Consumer and client confidence is returning, and this is reflected in the positive momentum in our revenue growth. Profit has been particularly strong, demonstrating our relentless focus on costs and commitment to growing our margins.”

He added that strong progress has been made against the objectives in Dentsu’s comprehensive review to accelerate its transformation.

“We are tracking ahead of many of our internal targets and demonstrating that we are prepared to take unprecedented action to transform our service to clients and give returns to shareholders,” he said. “This includes radical rationalisation of brands and divestment of assets.”

The company said it remains on track for its mid-term targets (through 2024).

This article first appeared on Campaign Asia