Dentsu reports decline in organic growth, cuts forecast

The Dentsu Group has reported a first-half decline of 1.5% in organic growth, which fell 2.1% in Japan, and 1% at Dentsu Aegis Network. Statutory operating profit fell 55.4%, while the company listed a 26.1% decline in underlying operating profit and a 27.6% drop in underlying net profit.

Dentsu reported revenue growth of 3.2%, while revenue less cost of sales grew 2.6% on a constant-currency basis, from 445.7 billion yen (US$4.2 billion) to 449.2 billion yen (US$4.23 billion). This represented 0.1% growth in Japan and 4.4% for the network.

Based on these results, Dentsu announced changes to its forecast for the full financial year ending 31 December, cutting its expectations for revenue by 4%, revenue less cost of sales by 2.7%, underlying operating profit by 9.2% and underlying net profit by 9.9%. The forecasts for statutory operating profit and net profit fell by 19.6% and 41.7%, respectively.  

1H results (Source: Dentsu)
 

Forecast revision (Source: Dentsu)

The Japan business, according to Dentsu, declined due to an absence of large-scale sporting events and a decrease in traditional media in the Japanese market, which was partially offset by digital-related services and favourable results in subsidiaries.

International business suffered due to negative growth in APAC, which the company blamed on weakness in Australia and China markets. Excluding the impact of Australia and China, first-half organic growth for Dentsu Aegis Network would be 0.9%.

Digital business contributed 48.9% of total revenue less cost of sales (28.5% in Japan and 63.3% at Dentsu Aegis Network), up from 45.0% in the first half of 2018.

International business contributed 58.5% of total revenue less cost of sales, compared with 58.2% a year earlier.