Dentsu slashes profit forecast, cuts international jobs as woes deepen

Dentsu Inc. is once again cutting its fiscal forecast in response to chronic underperformance in its international business, pledging sizeable job cuts to stem the losses. 

The Japanese-based holding company is now expecting a further 2% revenue drop to its FY results ending December 31, 2019 and more than a 5% cut to underlying operating profit. As a result, net profit for the year is now forecast to fall from 35.8 billion Japanese yen (US$327 million) to JPY6.2 billion (US$57 million).

Last month Dentsu warned it saw "no green shoots of recovery" in China or Australia. Dentsu Aegis Network, its international arm has been undergoing significant leadership changes all year, including a well-documented series of exits by regional and global leaders in Asia-Pacific and the UK. 

Following a specially convened board meeting on Monday, Dentsu Inc. has decided to restructure their business in seven global markets citing "ongoing underperformance over recent quarters": Australia, China, Singapore (including regional headquarters), UK (including global hequarters), France, Germany and Brazil. 

Dentsu says the restructurings will involve an approximately 11% cut to total headcount in each of these markets, which represents about 3% of Dentsu's global headcount, "as well as property rationalization and other related impacts." 

Most of the cost of the GBP179 million (JPY24.8 billion) restructuring cost will be recognised in FY 2019 ending this December, but Dentsu expects these moves will save GBP100 million (JPY13.8 billion) in headcount related costs on an annual basis.

The company also says it's simplifying its international structure into three lines of business: creative, CRM and media.

While Dentsu says the new 'strategic initiatives' will help deliver sustainable growth in FY2020 and beyond, its shareholders were not cheering future cost savings or efficiencies as its share price in Tokyo fell 5% in morning trade. 

Domestically, Dentsu said its Japan business was still performing in line with expectations, with no changes to its August 7th forecast.