Dentsu reports revenue decline in APAC
Organic revenue in APAC market declined by 7% due to client losses in China, India and Singapore
Dentsu Group has reported a decline of 5% YoY net revenue of JPY billion 26.1 for the Q2 FY2023, with organic revenue decline of 7% for the APAC market. For the H1 2023, the group reported 48.3 net revenue JPY billion, a 5.5% decline on YoY basis.
The company in the official statement said that Q2 remains challenging, but reported an improving performance, with growth from Taiwan, Hong Kong and Vietnam. The media spend was lower across the region, but client retention, new wins and growing pipeline point to a more stable H2 performance, it said.
The agency also said that CT&T delivered organic revenue decline due to client losses in China, India and Singapore. The creative reported double digit organic decline due to reduction in client spend in a number of markets, said the agency.
The group reported Q2 FY2023 a decline in net revenues 0.1% year-on-year (yoy), with organic revenue decline of -4.7%, against strong prior year comparables. According to the financial statement, the Q2 performance was impacted by continued conservatism from technology and finance clients plus a one-off financial impact in the DACH cluster within the EMEA region.
The Customer Transformation & Technology (CT&T) revenues grew 0.5% (cc) yoy in the first half, reaching 33% of group revenues. In Japan, CT&T reported double digit organic growth driven by Customer Experience and Digital Transformation offerings.
The US CT&T market continued to be impacted by a lengthening of the sales cycle as previously highlighted, but has seen revenue stabilization. The acquisition of Tag is complete and will contribute to group revenues from July 1.
The company said that Tag will significantly enhance the group’s global digital production capabilities, supporting dentsu’s strategy of offering integrated client solutions at the convergence of marketing, technology, and consulting. Second quarter operating margin 8.7%, 520bp lower yoy as a result of net revenue decline in the Americas and APAC regions, plus the impact of DACH within EMEA.
In Japan, the change in timing of incentive recognition as highlighted in Q12023 also impacted. Swift cost mitigation ensures the Group remains confident of delivering a c.17% margin FY2023. The Group continues to accelerate the shift to One dentsu through removal of silos to drive greater collaboration whilst streamlining costs. One dentsu will further integrate the Group’s diverse capabilities to deliver top line growth for clients, while allowing dentsu to realize sustainable enhancement of corporate value.
Hiroshi Igarashi, President and CEO, Dentsu Group Inc., said, “Our second quarter performance reflects the continued impact of the slowdown in spend from clients in the technology and finance sectors. We expect to see an improving trend in organic growth in the second half with our focus on delivering growth and measurable business results for our clients. We are pleased to welcome 2,800 new colleagues from Tag who officially joined the Group on July 1st. Tag brings AI-driven technology and global content capabilities to add immediate value to dentsu’s clients. Tag will provide high quality content at speed and scale for creative, a scaled personalization engine for customer experience management (CXM), as well as adding power to media with Dynamic Content Optimization (DCO). We consider Tag's capabilities as "the last mile", ensuring dentsu provides an integrated, full-service offering that is, increasingly, desired by our global clients.”
Igarashi further added, “In July we announced the latest milestone in Dentsu’s longstanding partnership with Microsoft, launching enterprise-wide access to advanced Azure OpenAI technologies, further expanding our AI product offerings. As we look forward, we are confident in our positioning at the convergence of marketing, technology and consulting. Client pitches require ever-closer integration of our services and by accelerating our One dentsu philosophy and mindset we will encourage the collaboration required amongst our people to anticipate and exceed our clients’ expectations. The collective strength of our 72,000 employees brings its unique culture. Our ability to generate new ideas and innovate, by bringing together expertise and fostering creativity enables us to deliver integrated solutions that grow our clients’ businesses.”
