Dentsu posts US$737 million loss for 2019

Dentsu Group will report a full-year loss of 80.89 billion yen (US$737 million) for 2019, as organic revenue dipped into negative territory globally and plummeted 12.3% in APAC. 

Organic revenue in APAC dropped 17.9% in the fourth quarter, with the company citing China and Australia as particularly challenging markets.

Total revenue less cost of sales for FY2019 came in at 3.3% on a constant currency basis, and overall organic revenue fell 1%. Total revenue grew 3% for the Japan business, which saw 0.4% organic growth. The international business saw total revenue grow 3.5%, but organic revenue fell 1.9%.

Dentsu noted that if Australia, Brazil, China, France and the UK could be excluded, the international business delivered 2.5% organic growth for the full year.

The Americas was a bright spot, delivering 2.4% organic growth for the year and 1.5% in Q4. The company was quick to note that this region saw the first to see deployment of its new business model.

EMEA organic revenue fell 0.7% for the year and 1.8% in Q4. Russia, Spain and Switzerland delivered organic growth above 5% for the year, with Denmark, Germany, Italy and the Netherlands also in positive territory. The overall regional performance deteriorated in the fourth quarter due to challenges in the UK and France, the company said.

As for APAC, Dentsu said Australia continues to be impacted by client losses through FY2019 but is "seeing some stabilization". In what is surely a large understatement, the company said China remains challenging and could see further weakness in 2020. India’s performance slowed during the second half of 2019 but it still finished in positive territory for the full year. Taiwan and Thailand both saw organic revenue decline for the full year.

For fiscal 2020, the group forecasts 2.9% growth in revenue and a 5.8% increase in underlying operating profit. Dentsu cited global events including Tokyo 2020 Olympic and Paralympic Games as positive factors but also noted that impacts due to the coronavirus outbreak have not yet been factored into its forecasts.

"In 2019, the performance of the Dentsu Group was below expectations for both the Japan and the international business," said Toshihiro Yamamoto, president and CEO. "The Japan business did see improvements through the fourth quarter due to the Rugby World Cup and the Tokyo Motor Show and cost measures led to a margin beat. The international business suffered from a continuing weak performance in a number of key markets, leading to the decision to announce a restructuring in December. 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."