Japan-based global advertising group Denstu reported a return to organic revenue growth as client confidence and spend returned.
Organic growth fell an expected 2.4% over the first quarter but there was a progressive recovery over the three months. The month of March returned to growth at 2.5%.
Cost cutting and restructuring ensured improved underlying operating profit, which rose by 20.8% to JPY 44.9 billion for the three months. Statutory operating profit increased 16.7% to JPY 28.8 billion.
Denstu joins WPP, Omnicom, IPG and Publicis Groupe in reporting better than expected first quarter numbers.
“Consumer and client confidence is returning, and this is reflected in the positive momentum in our revenue growth,” says Dentsu CEO Toshihiro Yamamoto.
Denstu described the results as “a very encouraging start to the year” with improving trends across the business.
The company maintained its full year goal of delivering positive organic revenue growth.
Dentsu remains confident of hitting organic growth of 3% to 4% a year from 2021 to 2024 with annual improvement in operating margins.
Yamamoto says profit has been particularly strong, demonstrating “relentless focus on costs”.
“Uncertainties remain about the progress of the pandemic, and, in particular, with new waves affecting several countries.
“However, we believe that our momentum will continue to build, underpinning the medium-term commitments we gave in February.
“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.
“This includes radical rationalisation of brands and divestment of assets.
“Dentsu Group remains well positioned to benefit from the cyclical recovery in digital solutions and media spend, combined with our leading position in the structural growth area of Customer Transformation & Technology.
“Client demand for CX Transformation services, commerce and loyalty and B2B services remains strong as our clients adapt to meeting their consumers wherever and however they choose to engage with brands.”
In APAC (excluding Japan) organic revenue fell 3.1% in the three months to March.
But the region also saw continued improvement throughout the quarter, reporting positive organic growth for March.
Dentsu says client confidence is improving across the region with positive growth for the quarter recorded in India, Indonesia, Singapore and Taiwan. China saw a number of new business wins across all three service lines. The Creative in APAC was flat for the quarter as client spend returned, while Media saw improvement throughout the quarter. Pitch activity across the region is increasing.
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