Dentsu To Cut Costs By 7% Globally, Australia Singled Out As Underperformer

Dentsu Aegis Network (DAN) has announced it plans to cut costs globally by seven per cent following a downturn from CV-19 and from its underperforming territories such as Australia and China.

The company has also withdrawn its financial guidance for 2020, due to the level of uncertainty stemming from the global pendemic.

According to a statement released by DAN’s president and CEO Toshihiro Yamamoto, globally the group delivered organic growth of -0.8 per cent. It saw a relatively solid start to the year, but the performance was impacted towards the end of the quarter due to COVID-19.

The 0.8 per cent drop was cushioned by its Japanese operations increasing revenues in the period by 2.1 per cent due to its digital offerings, but globally it saw a drop of revenues by 2.6 per cent.

Its international business particularly struggled in the APAC region with both Australia and China singled out for losing a number of big spending clients.

Here in Australia, DAN’s CEO Henry Tajer was removed from the job last November after just 12 months amid reports the agency’s media operations – namely Carat – had relinquished an astonishing $300 million in business to rival agencies.

In just 12 months, the Australian operation lost the media spends of David Jones, Australia Post, The Good Guys, Virgin Australia, Bega, Asahi, Super Retail Group, and the AFL.

DAN globally has announced it will cut all non-essential travel and discretionary spending, it has reviewed contractor arrangements and paused all M&A activity until at least the end of July. It has also cut personnel costs with reduced working hours, temporary salary reductions and “acceleration of operational efficiency in line with respective market restrictions”.

You can read Toshihiro Yamamoto’s statement in full below:

COVID-19 is causing a slowing in demand across our industry, and we are not immune. This has put pressure on our performance in Japan and the International business. We are therefore anticipating a material decline in revenues across our business in FY2020.

We have taken swift cost actions to mitigate this revenue decline, protect margin and safeguard our people’s jobs. Despite this, given the level of uncertainty caused by COVID-19 we are withdrawing our FY2020 guidance. Our priority throughout the COVID-19 crisis is the health, safety and well-being of our people and their families, as well as that of our clients, their customers, and our communities. This fundamental principle is shaping our response to COVID-19.

With the working life of our people disrupted, the business has reacted at speed. Our teams remain connected through our collaborative work platforms. Our new business teams have quickly adapted to hosting, and winning, pitches virtually. We are supporting our clients to ensure they can emerge even stronger post crisis by providing rich consumer insights and adapting our services to support their evolving needs.

As we look ahead, we continue our journey of transformation. In Japan, we remain focused on transitioning the Group to deliver sustainable, less cyclical revenue growth as we diversify our revenues and broaden client relationships across the Dentsu Japan Network. Strengthening the collaboration among our highly specialized brands, Dentsu Digital, ISID and CARTA HOLDINGS will lead to integrated solutions that allow us to support the digital transformation of our clients.

In the International business, our transformation will simplify our offer delivering world classservices and integrated solutions tailored around the client need. The restructuring announced in December 2019 is progressing as planned and will deliver the previously announced cost savings in 2020 and 2021. The accelerated buyout of the remaining Merkle shares, announced in March, will ensure key talent retention and deliver EPS accretion for 2020. Merkle is a key pillar in the delivery of DAN’s differentiated data-driven and tech-enabled client offering. We also announced the appointment of Wendy Clark as Global CEO of Dentsu Aegis Network and look forward to welcoming her to the Group from September.

The importance of working together, collaborating and integrating the Japan and International business is essential to respond to COVID-19 and support our clients’ transformation, particularly during this period of disruption. The concept of one dentsu has never felt more important, our employees are our greatest asset, and I am proud to lead the 66,000 diverse and talented people we have within the Dentsu Group.