Credit: Tim Umphreys via Unsplash
Dentsu is cutting deep into its international division, shedding 3,400 jobs or 8% of headcount, as the Japan-based advertising group reports more revenue losses.
The cuts are targeted to headquarters and back-office functions outside of Japan, which is still growing as foreign operations slide.
Dentsu, reporting its half year results with organic growth below expectations at -0.2%, downgraded its full year forecast for organic growth to 0% from 1% and suspended dividends.
“I am acutely aware that reforming the international business is an urgent issue,” said CEO Hiroshi Igarashi.
The impact on the local Australian business is unknown. The global advertising group reported negative revenue growth in Australia for the year to December. Insiders said the media side of the business was performing.
In the latest results, dentsu said Australian was among markets, including the US, UK and China, with negative organic growth in the June quarter.
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.
The company has identified annual operating cost reductions of about JPY 52 billion (AUD540 million) for 2027, compared to a target budget of JPY 50 billion.
“We have already identified all necessary measures, including the headcount reduction of approximately 8% (approximately 3,400 people) in the international business,” Igarashi said.
Cuts are "specified so as not to impair growth potential or competitive advantage" with the aim of creating a "lean" corporate structure.
"Moving forward, the company will continue to promote the rebuilding of its business foundation, enhancing business agility and efficiency, while aiming to restore profitability and sustainably enhance corporate value."
The company announced goodwill impairment losses of JPY 86 billion in the Americas and Europe.
In contrast, the Japan business reported record-high net revenue and underlying operating profit in the half year to June.
It grew for the ninth consecutive quarter and achieved an organic growth of over 5% for the third consecutive quarter.
“For the second half, while the Japan business is expected to maintain its growth, the three international regions are expected to continue facing challenges,” Igarashi said.
“While the Media business remains relatively stable with new business wins, the CXM business is recovering more slowly than previously anticipated with continued challenging business environment, and the creative business continues to face a tough performance due to losses in some ongoing projects, mainly caused by shifts in the client's marketing approach.”
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