Japanese-based Dentsu Aegis Network (DAN) has revealed its Q2 results to June that showed the holding company’s revenue, less cost of sales, declined by nearly 18 per cent to US$169.5 million, while its operating profit declined by 39.2 per cent YOY to $37.5 million. The pandemic is being blamed on the poor result.
The APAC region – where Australia plays – fared the worst. Australia, India and Thailand all saw organic de-growth of over 20 per cent, the company has revealed.
Only DAN’s operations in Switzerland, Germany, Russia saw growth in the quarter from April through to June.
Of the holding companies to report the quarter, Omnicom was worst with organic growth down 23 per cent, then Dentsu, Publicis next down 13 per cent and IPG down 9.9 per cent. WPP reports on August 27.
Due to cost reductions across the business in the face of CV-19, DAN’s operating profit increased by nearly 15 per cent, even as its revenue less cost of sales dropped by nine per cent.
Furthermore, operating margin increased 270 basis points YOY to 12.9 per cent. The group is tracking ahead of the targeted seven per cent cost reduction against the planned FY2020 consolidated cost base.
Given the ongoing gloomy outlook for its operations globally, DAN declined to make a detailed guidance for FY2020.
Instead, the network noted that “the impact from COVI-19 continues to cause a slowdown in demand for services across the industry. The timing and level of recovery is expected to vary by market – yet the overall macro-economic trend remains uncertain.”
DAN expects the second half of FY2020 to show a modest improvement in the rate of organic revenue decline versus the second quarter. Q2 FY2020 is still expected to have been the weakest quarter, but the decline in revenue will exceed the running rate of cost savings in the second half of FY2020.
Although coy on details, DAN expects to further squeeze costs across the business and expects a slow recovery come 2021. It has announced a comprehensive review and accelerated transformation plan to manage all parts of its operation during the COVID environment but no more details were disclosed.
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