Credit: Erik Eastman via Unsplash
Dentsu hasn’t ruled out selling agencies, or taking an investment partner, in its international operations as it looks for ways to fix its underperforming business outside Japan.
The Japan-based part of dentsu's business, making up 42% of net revenue, is doing well, posting 5.3% organic growth in the half year to June.
But the international component, including a -8.9% slide in Asia-Pacific, dragged the company down to negative 0.2%.
Dentsu, following the failure of its strategy to grow via acquisition, is switching to a platform of "dreaming big," concentrating on Japan and the US, and fixing its underperforming international business with a focus on media.
That means cutting 8% of international staff, some 3,400 people, mainly back office and headquarters headcount. The indication is that sales staff will be kept mostly intact.
Dentsu has identified initiatives to hit cost savings of about JPY 52 billion (AUD540 million) for 2027.
And the company has hired consultants to see what else can be done with the international business.
CEO Hiroshi Igarashi, in a briefing with market analysts, said one measure would be a “comprehensive” and strategic partnership.
“Would you be open to selling, merging international with another company?” an analyst asked Igarashi.
“What does the comprehensive and strategic partnership mean? Does it include a potential sale of our international business? I think that was your question,” Igarashi said.
“We have been talking about the rebuilding of our international business. We have been working on enhancing our competitiveness. Well, for this, we are going to rebuild our business foundation. We are going to also re-evaluate our underperforming business, and we are making steady progress on this.
“Now, on that basis, when we look at the current situation, the current structure of the organisation, or the capital structure of what we have right now, we are not going to take those as a given.
“Depending on the environment and the circumstance that we are facing, we need to consider a bold effort.
“In that regard, we are continuing with the study by retaining external advisers who have expertise knowledge. If it is to achieve rebuilding of the business in the early timing, there is an option for us to accelerate business rebuilding through partnership with a third party.
“In regards to divestiture of the international business, we are not at a stage of being able to give any clear response at this point in time, and I'm not in a state of being able to talk about anything specific right now.
“To give you an example of a partnership, in regards to some of the underperforming business, we may accept external capital, or what we are considering right now, the corporate function. This could potentially be subject to quite a bold outsourcing.
“These are the things that are included in the study right now. At this point in time, nothing has been decided as yet, but once we reach a decision, we intend to make disclosure and communication quickly, so I hope you understand.”
A slide from dentsu's presentation to analysts:
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