Dentsu posts 3.4% organic growth as reforms continue

Dentsu Group posted organic revenue growth of 3.4% for 2018, with Japan growing 2.1% and Dentsu Aegis Network (DAN) growing 4.3%.

Underlying operating profit fell 6.5% to 153.2 billion yen (US$1.38 billion). Total revenue was 1.02 trillion yen (US$9.17 billion), while revenue less cost of sales was 932.68 billion yen (US$8.4 billion).

The results put Dentsu’s growth ahead of Omnicom Group (2.6%) and Publicis Groupe (0.1%) but behind Interpublic Group (5.5%).

Dentsu attributed the profit decline to “planned investments in the working environment reforms” in Japan, and “planned investments in global platforms and systems” across DAN. It said EMEA had been the strongest performing region in the last quarter, posting the best performance for the period in more than three years. Asia-Pacific (excluding Japan) was impacted by tough conditions in China and Australia, it said. Organic growth in the region was down 1.7% for the year and 9.6% for the quarter.

Dentsu said it had achieved the targets set for reform for the year, but that “transformation” would continue.

In a statement, Toshihiro Yamamoto, president and chief executive, said 2019 represented a new stage, with progress in the reform efforts clearing the way for focus on broader changes and growth.

In an interview last year, DAN chief executive Tim Andree hinted at plans to restructure the network to ensure sustainability and competitiveness. In a further sign that change is on the cards, the network recently hired a former banker known for his ability to “transform global organisations” as head of business operations.

The appointment “will ensure consistent ways of working, process simplification and enhancing client delivery through improvements in areas such as client reporting”, Dentsu explained.

Dentsu forecast underlying operating profit to grow by 2.7% in 2019, with Japan growing 1.3% and international business growing 4.3%.

Separately, Dentsu said it appointed a new external director, Etsuko Katsu, who will also serve as an audit and supervisory committee member. Katsu, a professor of political science and economics at Meiji University, will replace Atsuko Toyama in March. Dentsu has previously said that it is increasing the number of external directors as a means of improving transparency and balance.