Japanese ad giant Dentsu is reorganising its operations into four operating pillars after deciding to consolidate its brand agencies into six global brands.
This comes after its business was significantly impacted by the Covid-19 pandemic, which was reflected in its third-quarter results. The new plans will be announced in February 2021.
“We simply have too many brands almost, 300 across both Japan and internationally,” stated Toshihiro Yamamoto, president and chief executive officer at Dentsu Group.
“This radical new structure will be more logical and transparent for our clients, enabling us to serve them better.” It will also be operationally more efficient and allow the firm to “reduce costs significantly.”
Dentsu had previously restructured its business in its seven global markets of Australia, China, Singapore (including regional headquarters), UK (including global headquarters), France, Germany and Brazil.
The restructurings saw the Japanese ad giant cut approximately 11% cut of its total headcount in each of the seven markets, which represented about 3% of Dentsu's global headcount.
According to Dentsu, most of the cost of the £179m (24.8bn yen) restructuring was to be recognised in FY 2019 ending December 2019 and expected these moves will save £100m (13.8bn yen) in headcount related costs on an annual basis.
Dentsu had also announced it expected a further 2% revenue drop to its FY results ending 31 December 2019, and more than a 5% cut to underlying operating profit.
This means its net profit for 2019 fell from 35.8 bn Japanese yen (US$327m) to 6.2 bn yen (US$57m).
The group through an upheaval in personnel throughout 2019 after announcing in January it was restructuring its Singapore operations, which saw it lay off around 2% of its workforce. It then made another round of redundancies in July.
The likes Sunil Yadav, the former president for APAC at Amplifi, Kristian Barnes, former chief client officer, and Sean O’Brien, media chairman at DAN and former chief executive of Posterscope and MKTG, all departed after the restructure.
Phil Teeman, the former chief executive of DAN Singapore and South East Asia, Rob Hughes, the former DAN North Asia chief executive, and DAN China chief executive Susana Tsui also all left the agency in quick succession.
DAN executive chairman for the UK and Ireland, Nick Waters, who moved back to the UK after leaving Singapore before the restructuring, left after a decade at the agency.
What do Dentsu’s third-quarter results say?
- Dentsu reported a 14.8% organic revenue decline for the third quarter, with its Japan and international businesses both in line with that result.
- For the total group, that was a slight improvement over Q2, when the drop reached 17.3% with the international business falling 20%. The Japan business experienced a 2% point further decline in Q3.
- In the Americas region, the third-quarter organic decline was 15.3%, a bit better than the 17.1% shortfall in the previous quarter. The EMEA region also improved quarter-to-quarter but was still down nearly 13% in Q3. APAC narrowed its organic decline from 26% in Q2 to 16% in Q3.
- For the first nine months of the year, net revenue was down 10.7% to ¥602 billion ($5.7 billion). The organic decline across the group for the period was 10.9%, 7.9% in Japan and 12.9% across the company’s international business.