Q3 trading update introduces a new squad of international CEOs as the agency group reveals that revenue growth fell in all four of its trading regions.
Holding company Dentsu’s organic revenues declined in the third quarter of 2022 by 4.7%, the firm’s latest trading update reveals. The group attributed the fall to performance at its core Japanese agency network, which saw organic revenue fall over 15% in the third quarter of 2022.
The company’s activities in its home market typically account for around 40% of its turnover, but organic revenues fell 15.1% between July and September.
That means organic revenues across the entire group decreased 4.7% (down to 3.7% including Dentsu’s Russian business, which has finally been sold off), though net revenue itself still rose, relative to the same quarter in 2021.
Dentsu’s president and chief executive Hiroshi Igarashi also unveiled a 36-strong global leadership team, including top executives from across each of the company’s operating regions. Notably, Peter Hujiboom steps up to lead media across every international market, Norihiro Kuretani will lead Dentsu Japan and Dentsu Creative talisman Fred Levron will lead the company’s creative everywhere outside Japan as global chief creative officer.
The new setup marks a more closely integrated relationship between Dentsu International and its core Japanese holdings than under departing Dentsu International chief executive Wendy Clark.
Higarashi said: “Today marks an exciting moment for Dentsu Group as we look to bring all 65,000 dedicated talents together under our One Dentsu structure. Led by one global leadership team, One Dentsu will further simplify our Group, driving integration of our diverse capabilities across the Group to deliver top-line growth for our clients.”
What do the results show?
Dentsu’s overall operating profit for the last three months was ¥40.4bn, around $290m. That’s a 32.8% fall compared with last year. Its operating margin has tumbled from 23.5% to 14.7%, while net profits are down 27.6%.
In a trading update released today, Dentsu attributed this decrease to last year’s huge numbers, when the business was surfing a wave of digital spending in the wake of the pandemic. Igarashi chose to point to the nine-month view: “Despite results impacted by exceptional prior year comparables in Q3 2021… the nine month results delivered a strong performance across all service areas.”
Dentsu International also failed to keep up the momentum of last year. Its organic revenue growth in the Americas was down 15.6% compared with last year’s period, while organic revenue growth fell 3.7% in Europe, Africa and the Middle East and 8.7% across the Asia Pacific region. As a whole, Dentsu International revenues managed just 3.4% organic growth, a 10% decrease on the same period last year. Organic growth in the Americas and APAC has been steadily decreasing since January.
The group still expects to see 4%-5% organic growth for the year overall, with an 18% operating margin; its margin for the nine months to September was 17.7%.
“While the macro-outlook may remain uncertain, our improved revenue mix, our deep client relationships, strong balance sheet underpinned by the transformation the group has undertaken over the past two years positions us well for the future,” commented Igarashi.
Revenues from customer transformation and technology, Dentsu’s in-house term for its digital transformation and CX business, have growth over 20% since the start of the year and now account for 32.6% of the group’s income. Dentsu hopes to draw half its revenue from that area in the future.