Dentsu, recording extraordinary losses and failing to hit forecasts, has changed CEOs after writing down the value of its international business by billions of dollars.
CEO Hiroshi Igarashi has resigned to be replaced by Takeshi Sano, the CEO of dentsu Japan, where he has delivered growth year after year.
Sano, who said he would move at "speed," foreshadowed a flat structure at dentsu with regional heads reporting directly to him.
The global advertising group told shareholders with deep "regret" that they weren’t getting dividends and that cost cutting will continue.
The total amount of goodwill impairment losses recognised in the year to December amounted to 396.1 billion yen (AUD3.6 billion).
The company as a whole recorded 0.5% growth for 2025 and more of the same is forecast for 2026. Dentsu expects organic growth for 2026 to range from 0% to 1%, with the Japan business to grow by 2% to 3%. The international business is projected to be broadly flat.
“Our growth is to identify the issues of the client ahead of the client, and to help the client resolve those issues,” said incoming CEO Takeshi Sano.
“This is how Japanese business grew, and we have to expand this globally. And as an organisation, we need to be more flat, meaning that each head of the region reports directly to me.”
The group had planned to cut 8% of employees -- 3,400 employees -- in the international business in 2025. By the end of the year, 2,100 employees were gone and the rest will go in 2026.
The company as a whole reported a loss of 289.2 billion yen against a previously forecast profit of 17.6 billion yen, mainly due to the recognition of goodwill impairment losses in the Americas and EMEA.
In Japan, the business delivered 6.2% organic growth, with net revenue reaching a record high for the fifth consecutive year and underlying operating profit setting a new record for the second year in a row.
In the international business, the operating margin improved due to strengthened cost controls and initiatives implemented from 2025 to address underperforming businesses and rebuild the business foundation.
The international business succeeded in turning its operating cash flow positive.
Dentsu has scrapped financial targets and policies while continuing to pursue a strategy of “A network that wins globally by growing locally”.
The company said it is already seeing growth momentum in the US, a key strategic market. Coupled with further profitability initiatives,
Australia, which had been loss-making since 2023, returned to profit on an underlying operating profit basis.
“This turnaround was achieved through rigorous cost efficiency initiatives, including front office optimisation and compensation revisions,” analysts were told in a briefing.
However, Australia ended the year with negative organic growth. Rob Harvey, the new CEO for ANZ, is forecasting the local business will be in positive territory this year
“We will continue to review each market based on recent performance and steadily advance towards our goal to achieve no loss-making markets this fiscal year,” said dentsu CFO Shigeki Endo.
“In addition, for certain underperforming businesses, we have already begun process for downsizing, withdrawal, or divestment.”
Denstu said it was continuing initiatives for standardisation and sophistication of operations through business transformation driven by AI and automation.
“As part of this rebuilding of the business foundation, we have established approximately 750 internal initiatives, more than 80% of which are either already completed or currently in progress,” the CFO said.
In a briefing with market analysts, incoming CEO Sano gave a brief look at what dentsu will look like under his lead.
“There is so much that I’d like to say, but I’d like to keep it simple,” he said.
“First is the rebuilding of the business foundation, transparency, simplification, visualisation, to look at underperforming business, to choose whether to exit or shrink or to improve the profitability. We need to execute with speed.
“That is the most important thing, and as for the organisation, there is going to be a chief transformation officer, which is the first position to be in dentsu, and to rebuild the business foundation and re-evaluate the underperforming business.
“Each media, CXM, creative presidents will be reporting directly to me. So we will remove that layer so that we can identify the issues of the client and enhance our competitiveness in a more swift manner.”
He will also appoint a chief brand officer.
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