Dentsu posts sizeable loss for 2019 as international markets underperform
Dentsu, the Japanese advertising giant heavily involved in sport, has posted a considerable loss of Y80.9 billion ($737 million) for 2019, with a notable decline in the Asia-Pacific region.
Dentsu yesterday announced total revenue less cost of sales of Y939 billion, up 0.7 per cent, or 3.3 per cent on a constant currency basis, on the previous year.
However, the large net loss compares with a profit of Y90.3 billion in 2018, reflecting increased impairment charges and restructuring costs.
Across the company organic growth fell by 1 per cent in 2019, but for Asia-Pacific the fall amounted to 12.3 per cent, and 17.9 per cent in the final quarter.
There was organic growth of 0.4 per cent in Japan, boosted by events such as the Rugby World Cup hosted by Japan and the Tokyo Motor Show.
Dentsu was responsible for signing up lower-tier sponsors and suppliers for the World Cup, the first to be held in Asia.
However, there was a decline of 1.9 per cent in organic revenue for the international business where the one shining light was the Americas, with growth of 2.4 per cent, and 1.5 per cent in the fourth quarter.
Dentsu said if underperforming markets in Australia, Brazil, China, France and the UK are excluded then there was 2.5-per-cent organic growth internationally last year.
In December, Dentsu unveiled restructuring plans, which include a new in-house operation, Dentsu Japan Network, to run all 116 domestic businesses, and an 11-per-cent cut in staff across seven key markets.
For 2020, Dentsu is forecasting 2.9-per-cent growth in revenue and a 5.8-per-cent increase in underlying operating profit, with events such as the Tokyo 2020 Olympic and Paralympic Games expected to be a driving force, albeit the company has not factored in potential impacts from the coronavirus outbreak in Asia.
Reflecting on the latest results, Dentsu chief executive Toshihiro Yamamoto said: "The international business suffered from a continuing weak performance in a number of key markets, leading to the decision to announce a restructuring in December. I am confident the restructuring of the international business will deliver the necessary savings and changes to our organisational structure that we need to deliver growth and margin improvement in 2020 and beyond."
Dentsu has been selling domestic sponsorship packages for Tokyo 2020 and holds broadcast distribution rights to the Olympics in 22 Asian territories in a deal that it has extended until 2024.
It also distributes rights to the IAAF World Athletics Series outside Europe and Africa, and handles rights outside Europe to swimming’s FINA World Championships.
Within Japan, it is the official marketing partner of soccer’s top-tier J.League, and is responsible for distributing international media rights to that competition (excluding Japan and China) in a three-year deal taking effect for the 2020 season.