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Dentsu Aegis Network sees organic revenue declines in full year, fourth quarter

Adage India 2020-02-13 22:48:33

Dentsu Group, the parent of Dentsu Aegis Network, reported an organic revenue decline of 1 percent for the full year on Thursday morning. Dentsu Aegis Network posted organic revenue declines of 1.9 percent for 2019 and 4 percent for the fourth quarter.

Dentsu's stock on the Tokyo Stock Exchange fell 1.1 percent on Thursday.

According to the report, Dentsu Aegis Network reported a revenue less cost of sales increase of 3.5 percent. The organic revenue declines were affected by underperformance in Australia, Brazil, China, France and the U.K., the company said—otherwise international organic revenue would be up 2.5 percent. The Americas region was actually the highest-performing region with organic revenue up 2.4 percent in the full year and 1.5 percent in the fourth quarter. The U.S. specifically delivered 3.8 percent in organic revenue growth in the fourth quarter.

"In 2019, the performance of the Dentsu Group was below expectations for both Japan and the international business," Dentsu President-CEO Toshihiro Yamamoto said in a statement. "The international business suffered from a continuing weak performance in a number of key markets, leading to the decision to announce a restructuring."

He added, "I am confident the restructuring of the international business will deliver the necessary savings and changes to our organizational structure that we need to deliver growth and margin improvement in 2020 and beyond."

As a result of the underperformance in those aforementioned five markets, Dentsu said the company would be simplifying its model around three lines of business: creative, CRM and media. "This simplification ensures the business is set up around our clients' needs—to win, keep and grow their best customers by  being ideas-led, data-driven and tech-enabled," Dentsu said in the report.

That new business model has already been deployed in the U.S., and Dentsu said it reflected in its impressive organic growth. Dentsu Aegis Network reported $4.3 billion in new media billings, and said the Americas was its "fastest growing region," contributing 43 percent to the network's total revenue.

Dentsu forecast in the report a 2.9 percent increase in revenue less cost of sales for 2020.

In conjunction with the release of its third-quarter earnings in November, Dentsu detailed its plans to reemerge as a pure holding company in 2020.

As of January, Dentsu became Dentsu Group, Inc. Dentsu Japan Network was established as a new in-house company that will support and oversee all business operations in Japan. Dentsu Aegis Network, headquartered in London, is now responsible for all international business outside of Japan. Under Dentsu Japan Network there are 116 companies including Tokyo-based Dentsu Inc., which will house all of the operational functions that the original Dentsu managed as an operating holding company.