Dentsu Q3 2024: APAC sees a decline in revenue, Japan shines

Dentsu Group Inc., in its Q3 2024 (reported on an IFRS basis) earnings report, has highlighted contrasting regional performances, with Japan showing solid growth while the broader Asia-Pacific (APAC) region faced economic headwinds. The report underscores Dentsu’s resilience in its home market, Japan, even as challenging market conditions across APAC impacted overall revenue.

In a constant currency basis, Japan reported 2.7% growth in net revenue in the third quarter, the Americas has a decline of 4.0%, EMEA an increase of 7.1% and APAC a decline of 11.6%.

During Q3 in Japan, organic growth continued to be solid at 2.8% supported by double-digit growth in Internet media. The Americas reported Q3 organic decline of 3.1%, showing continued quarterly recovery since Q4 FY23. CXM remains challenging with reduced client spend. EMEA reported organic growth of 6.9%, mainly due to one-off negative impact of prior year. APAC reported organic revenue decline of 11.6% particularly as Australia continues to face difficult market conditions.

"The decline in operating profit y-o-y was due to increased staff costs in Japan and allowances of trade receivables in the international markets, etc. This was partially mitigated by cost management initiatives,” said the press statement announcing the results. 

While the guidance of FY2024 underlying basic EPS has declined to 350.13 yen, the Group reiterated the forecasted annual dividend of 139.50 yen per share.

“Group statutory operating profit and net profit (attributable to owners of the parent) were respectively JPY 3.2 bn and JPY -4.1 bn. This was mainly due to charges associated with the completion of the Russian disposal recognised in Q3,” said the press statement.

“The year-end targeted range is 1.0x to 1.5x (non IFRS 16 basis). Progress on balance sheet simplification continues with the sale of security assets. Five further stakes were sold in Q3. In August, the Group completed the JPY 20 bn buyback announced in February during Q3, with 4,890,200 shares purchased. In September, we announced the cancellation of 4,365,354 shares, 1.62% of total issued outstanding shares,” the statement added.

“In the third quarter, we continued to see sequential quarterly improvement, with the Group reporting organic growth of 0.3% y-o-y. We have seen notable global new wins in the quarter, higher pitch win rates in Japan and the steady accumulation of net wins in the media business in international markets, which is the result of our continued effort to deliver Integrated Growth Solutions. These are examples that prove the implementation of One dentsu is affecting positive changes within our organization,” said Hiroshi Igarashi, President and Global CEO, dentsu.

“However, business recovery has been slower than expected mainly in CXM where we have seen challenges of reduced client spend, especially in the international markets. Considering the nine months results and forecasts for the fourth quarter, we have revised our full-year guidance of approximately 1% organic growth to broadly flat, and operating margin of c.15% to c.14%,” Igarashi added.

Over the last nine months, Igarashi said they have made internal investments around data and technology, people and culture and business operations to accelerate competitiveness. 

"We are confident in our medium-term direction and prospects of the Group, and these internal investments will strengthen our capabilities to deliver Integrated Growth Solutions and restore our competitive advantage to return to organic growth,” he added.

As CXM pressures persist in international markets, the company is all set to announce its new Mid-Term Management Plan in February 2025, which will focus on strategic priorities across key markets, client partnerships, and investment initiatives.