Dentsu downgrades profit forecast with Australia 'weaker'

By Chris Pash | 8 August 2019

Dentsu downgraded its revenue forecasts following "weaker than expected" first half results from Australia and China.

The Japan-based company cut organic growth guidance to 1.4% from 6.1%.

"In the international business, organic growth guidance is lowered to reflect the weaker than expected first half performance mainly in the Australian and Chinese markets," the company says.

"Client losses in Australia continue to impact the growth rate and while new management manage the business to reflect the operating environment, we expect it to take some time before growth returns. China was impacted by weaker spend from local and Japanese clients.

It has been a difficult year for the holding group's media division, losing major accounts including Super Retail GroupVirgin AustraliaAsahi Beverages, the AFL and The Good Guys. Medibank also remains out to pitch.

Over the last six months, AdNews estimates DAN's media division has lost close to $275 million in billings

"Restructuring at a regional level continues. South East Asia saw slower growth in the second quarter, but performance is expected to pick up in the second half. India remains a bright spot in the region and continues to perform well due to our strong digital offering," the company added.

Continued structural changes to the holding group have been occurring since the appointment of current DAN ANZ CEO Henry Tajer.

Earlier this year it was revealed Amplifi's media and investment teams would be reintegrated back into DAN's core media agency brands; Carat, Vizeum and Dentsu X.

However, the process will not see the end of the Amplifi name in Australia, with DAN previously confirming that it has plans to keep the division going, appointing former Network Ten executive Michael Bass to the role of chief investment officer.

Bass will replace outgoing CIO Ashley Earnshaw, who was promoted to the role of CEO for Vizeum.

While there have been appointments such as Bass, Earnshaw and recently named Carat CEO Sue Squillace, the business has also seen executives including Simon James-WilliamsAdrian RoelingAlex Pekish, Nick Seckold and Luke Manley depart as part of the restructure.

In the first half, the international business, Dentsu Aegis Network, delivered 4.4% growth of revenue less cost of sales and negative 1% organic growth.

The forecast for the full year is now only stated as "positive". Previously the international side was expected to grow 3%.

Excluding the impact of Australia and China, first half organic growth for Dentsu Aegis Network would have been 0.9%.

For the whole company, organic growth was negative 1.5%

"We still expect to see a ramp up of revenues in the second half driven by new account wins in the US and Europe and the cycling out of accounts lost in the second half of FY2018," the company says.

Toshihiro Yamamoto, President and CEO, Dentsu, says 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," he says.

"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."

The first half results

dentsu first half results

The new forecasts: 

dentsu forecasts

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