Ben Bold
May 15, 2024

Dentsu reports 3.7% fall in Q1 organic revenue but eyes better second half

Organic revenue was up 2.4% in Japan.

Dentsu: Predicting 1% growth in 2024
Dentsu: Predicting 1% growth in 2024

Dentsu Group has reported a 3.7% organic decline in net revenue to $1.83 billion (¥286.4 billion) for the first quarter of 2024—a "soft start" to the year, albeit "in line with internal expectations."

The Japanese-owned holding company said that while performance in its homeland was strong— thanks to a recovery in advertising among existing clients and successful new business pitch conversions—Europe fared less well.

But the group is optimistic that organic growth will rally to some extent in the second half of 2024, as new business wins start to bolster revenues and global economic headwinds ease.

Reporting on the first three months of 2024, Dentsu said reported net revenue was up 6.3% year on year. Q1 operating profit was $190.4 million (¥29.8 billion) (with a margin of 10.4%, down by 380 base points year on year).

Dentsu has said it wants to handle more large projects within customer transformation and technology (CT&T) and is ultimately aiming at this generating 50% of revenues. It reported CT&T at 30% of revenues in Q1.

Regional breakdown

In EMEA, organic revenue fell 9.4% in the quarter and net revenue (on a constant currency basis) was down 4.2%, meaning it now accounts for 20% of the group's business. While markets in Eastern and Southern Europe, such as Spain and Italy, performed "well", Northern European in markets including the UK performed less so.

In Japan (43% of Dentsu's business), net revenue was up 2.3% and organic revenue up 2.4%, "a record high in Q1," it said, "with robust growth ahead of expectations."

It added: "Results were boosted by improving pitch win rates and increased client spend due to a strong macro environment."

In the Americas, which accounts for 28% of Dentsu's business, organic revenue fell 6.6%. Momentum in client wins is expected to positively impact its financials in the latter part of 2024.

Looking ahead

The group said it was reiterating its 2024 full-year outlook, with growth guidance of around 1% and margin guidance of about 15%.

Hiroshi Igarashi, Dentsu Group's president and global chief executive, said: "The first quarter delivered an organic revenue decline of -3.7%, in line with our internal forecasts and leaving us on track to deliver our guidance of circa 1% organic growth for the full year 2024.

"Our confidence comes from a stronger outlook in the second half of the year. The group will benefit from momentum in client wins, yet to impact revenues, from cycling out of accounts lost in 2023 and a significant easing of comparables.

"We believe the future of our industry is driven by client demands for greater integration of services. Clients are searching for a marketing transformation partner that can deliver true integration of media, dynamic content and data insights via solutions that seamlessly connect brand potential to business impact. This aligns perfectly with our strategy of growing our clients' businesses through integrated growth solutions.

"Our promise to clients is that we are innovating to impact. By simplifying and integrating our offerings into an ecosystem which makes sense to clients, we can continue to push the boundaries of what's possible through experience and business transformation."

2023 was a challenging year for Dentsu. In February's annual results, it reported an organic revenue growth of 1.6%.

Source:
Campaign UK

Related Articles

Just Published

2 hours ago

Revealed: Uncommon is majority shareholder in ...

Uncommon, now majority owned by Havas, backed former creative director Josh Tenser to launch Calling with Rani Patel.

2 hours ago

Healthcare and offshore betting ads emerge as most ...

With 85% of objectionable ads coming from digital media, the report also found that online safety continues to be a concern.

2 hours ago

Why Tessa Ohlendorf left agency life for artificial ...

The former managing director of MediaMonks started Fabric Folks to help agencies adapt to the new AI era.

3 hours ago

Why the creator economy could take over the ...

There is a distinct possibility the creator economy may be out to eat agencies’ lunch.