Dentsu plans to cut 7% in costs

UK returned to growth after four quarters of decline.

Dentsu: EMEA business reported 0.4% drop in sales on organic basis
Dentsu: EMEA business reported 0.4% drop in sales on organic basis

Dentsu is looking to make a 7% cut in global costs, the company revealed in its first-quarter financial results today (Wednesday) as the UK business returned to growth for the first time in a year.

The company, which owns agencies including Carat and Dentsu X, reported a 0.4% decline in global revenue and a 0.8% dip in organic revenue.

Dentsu has withdrawn its financial guidance for fiscal 2020, announced in February, due to the level of uncertainty stemming from the Covid-19 pandemic.

It said that it is targeting a 7% overall cost reduction against its planned consolidated costs for the fiscal year.

Starting in February, the company said, it has cut non-essential travel and discretionary spending, reviewed contractor arrangements and paused all merger and acquisition activity until at least the end of the second quarter.

It has also cut personnel costs with reduced working hours, temporary salary reductions and "acceleration of operational efficiency in line with respective market restrictions", according to the earnings release.

Executive officers will see their compensation reduced from the second quarter onwards, Dentsu also announced.

In the UK, Dentsu noted that the region had previously reported four quarters of decline in organic revenue but has returned to growth in the first quarter, although it did not specify the level of growth.

The results noted that its EMEA business reported a 0.4% decline in organic revenue in the three months ended 31 March.

There was growth from Russia, Italy, Sweden, Switzerland, Denmark and Spain. However, France, Germany and the Netherlands posted organic declines "due to a pullback in client spend".

Toshihiro Yamamoto, president and chief executive of Dentsu, said: "As we look ahead, we continue our journey of transformation.

"In the international business, our transformation will simplify our offer delivering world-class services 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 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."

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