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Dentsu reports further slide in Q3 growth, with APAC showing “no green shoots of recovery”

SINGAPORE - MARCH 16: Visitors and exhibitors meet at the Dentsu booth during the Sportel Asia Conference on March 16, 2016 in Singapore. (Photo by Sean Lee/Getty Images for Sportel)

Global marketing services group Dentsu, the parent of Dentsu Aegis Network, reported a decline in organic growth of 1.0 per cent, with weakness in the Asia-Pacific markets weighing down its global and regional results.

The Japanese business saw organic growth slip further to 0.9 per cent due to “an absence of large-scale sports events”, but said that the impact from the decline in traditional media in the Japanese market was offset by growth in digital-related services. Dentsu also expects a recovery for its Japanese business in Q4 due to the Rugby World Cup and Tokyo Motor Show.

APAC in particular, continues to trouble Dentsu, with the region reporting -9.7 per cent organic growth in the first nine months of FY 2019 and -12.3% in Q3 FY2019.

In an earnings call yesterday Dentsu said: “There are no green shoots of recovery in the Chinese and Australian markets, both of which continue to severely impact the regional and group performance.”

Changes have recently been made to Dentsu’s APAC regional management team to try to improve the situation, with Ashish Basin promoted to APAC regional chief executive officer, from chief executive officer of South Asia previously.

There was also a one per cent decline in its international Dentsu Aegis Network business.
The Japan-based group are the official marketing agency for the Tokyo 2020 Olympic and Paralympic Games. The agency is also the worldwide marketing partner for the IAAF World Athletic Series, which includes all World Championships and the IAAF World Athletics Final, which allows them to sell the media rights outside Europe (excluding sub-Saharan Africa).

Dentsu president and CEO Toshihiro Yamamoto said: “In the first nine months of FY2019, Dentsu Group recorded a decline in organic growth of -1.0%, with -0.9% in Japan and -1.0% at Dentsu Aegis Network.”

“The Japan business has seen sequential improvement through each quarter of 2019, with the fourth quarter set to benefit from many large scale events, including the successful Rugby World Cup hosted in Japan and the Tokyo Motor Show.

“We continue to see the shift of revenue from traditional media in Japan into digital channels and this is clearly reflected in the performance of our Group companies, such as Dentsu Digital, ISID and other subsidiaries. We continue to capture the transfer of value as marketing shifts from traditional mediums.”

The company is in the middle of a corporate restructure so all operating divisions, including DAN, reports into it. This latest move is part of the group’s “One dentsu” strategy, and Yamamoto revealed a new management team at Dentsu will soon be announced and taking office from January 2020, adding: “This announcement marks the start of the next stage in the evolution of Dentsu Group and the team will be fully committed to our shared vision of ‘One dentsu.'”

“In order to futureproof our [international] business and serve clients more effectively, we have streamlined and consolidated our offering around three lines of business: creative, media and CRM. 2020 is a year of transition and by 2021, we will be operating under these three lines of business and be truly integrated by design.”

Despite these results, there is no further change to Dentsu’s 2019 financial forecast made earlier in August this year.