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Dentsu Australia is asking its Japan parent for $300 million so it can reset local finances as it continues restructuring, cutting 263 jobs last year.
The company, after more role cuts this year and keeping a tight rein on costs, has narrowed its losses while at the same time is still losing revenue, according to documents lodged with corporate regulator ASIC.
The local business reported a loss of $63.9 million in the year to December 2024, a big improvement from the $483 million red ink the year before.
But the Australian business still has a net asset deficiency of $295 million, and growing, and negative cash flow in “difficult” market conditions.
Accumulated losses have more than doubled since 2022 and now total more than $1.1 billion.
In its latest half year results released publicly, dentsu said Australia was among markets, including the US, UK and China, with negative organic growth in the June quarter.
The global Japan-based advertising group is cutting deep into its international division, shedding 3,400 jobs or 8% of headcount.
The role cutting in Australia can be seen in local numbers lodged with ASIC. These show severance charges of more than $7 million for 2024, down slightly from the $7.5 million of the year before.
And employee pay is down 17% to $187.6 million for 2024, from $226.6 million the year before.
Australian staff numbers have shrunk more than 20% to 1,042 at the end of 2024, down from 1,305 the year before.
This year has seen more local cuts, including the departure of high profile senior media executive Fiona Johnston, dentsu’s chief executive officer, client, media and commercial.
Last year $100 million was added in equity to the Australian company, via Dentsu France. This was used to pay down debt, also reducing interest payment charges. This is on top of $145 million in December 2023, also via Dentsu France.
Dentsu Australia has asked its ultimate parent, Dentsu Group Inc, for $300 million in equity to recapitalise the company.
This would extinguish debt and interest payments -- 2024 net finance expenses were $22.45 million -- and return Australia to a positive net asset position.
Auditors KPMG expect this to happen within 12 months.
Dentsu Australia expects to maintain positive cash balances to the end of the year.
“The director has reasonable grounds to believe that the ongoing financial support by its parent is likely to continue,” according to the papers lodged with ASIC.
“However, should the group not meet its cash flow forecast, the achievement of which is inherently uncertain and highly sensitive to assumptions made in respect of revenue performance, or if ongoing financial support and a recapitalisation from its parent company is not received as required, there is a material uncertainty as to whether the group will be able to continue as a going concern.”
Insiders said the Japan parent had, subsequent to the report being lodged with ASIC, prepared a letter of support for the Australian operations.
The group continues to face “difficult market conditions” particularly within the client experience management (CX) consulting business which experienced a pullback in client spend.
Rob Harvey, who in August this year replaced Patricio De Matteis as CEO dentsu ANZ, said the priority is to restore competitiveness and build a business that can grow sustainably.
"We are strengthening our foundations to set ourselves up for future success,” he said in a statement.
“As part of this, we are stopping activities that don’t support our strategy and are doubling down on our strengths.
“It’s hard to read our historical results in isolation due to internal factors that influence how they are presented. We have already taken action by writing down goodwill from legacy mergers and acquisitions, simplifying our structure, and focusing on what works.
"Above all, we are committed to our clients and our people. Every decision we make is about delivering for our clients—staying responsive, providing connected and innovative solutions, and being the reliable partner they can count on.
“At the same time, we are supporting our people through change and building a culture and environment where they can do their best work."
From annual returns lodged with ASIC:
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