Dentsu Group Inc. has reported a decline in organic revenue of -4.7% against strong prior-year comparables, with net revenue also down -0.1% year-on-year (yoy) in Q2 FY2023 results.
The Tokyo-based holding company noted in its report that its performance in Q2 was impacted by continued conservatism from technology and finance clients, plus a one-off financial impact in the DACH cluster within the EMEA region.
Looking ahead, the Group now forecasts FY2023 organic growth of 0% to -2%, with operating margins of 17%.
Hiroshi Igarashi, president and CEO, Dentsu Group Inc., said: “Our second quarter performance reflects the continued impact of the slowdown in spend from clients in the technology and finance sectors. We expect to see an improving trend in organic growth in the second half with our focus on delivering growth and measurable business results for our clients.
Igarashi also highlighted the acquisition of content production firm Tag in July, bringing on 2,800 new people to the group.
“Tag brings AI-driven technology and global content capabilities to add immediate value to dentsu’s clients. Tag will provide high quality content at speed and scale for creative, a scaled personalization engine for customer experience management (CXM), as well as adding power to media with Dynamic Content Optimization (DCO).
“We consider Tag’s capabilities as “the last mile”, ensuring dentsu provides an integrated, full-service offering that is, increasingly, desired by our global clients. In July we announced the latest milestone in dentsu’s longstanding partnership with Microsoft, launching enterprise-wide access to advanced Azure OpenAI technologies, further expanding our AI product offerings.
“As we look forward, we are confident in our positioning at the convergence of marketing, technology and consulting. Client pitches require ever-closer integration of our services and by accelerating our One dentsu philosophy and mindset we will encourage the collaboration required amongst our people to anticipate and exceed our clients’ expectations.
“The collective strength of our 72,000 employees brings dentsu its unique culture. Our ability to generate new ideas and innovate, by bringing together expertise and fostering creativity enables us to deliver integrated solutions that grow our clients’ businesses.”
Elsewehre, The dentsu Group continues to expect performance to be second half weighted, with Q22023 expected to be the trough for organic growth. One-off events such as the Rugby World Cup and Tokyo Mobility Show and easing comparables will support H22023 performance. Underlying basic EPS guidance of 461 yen is re-confirmed, supported by acquisitions and a material reduction in financing costs of JPY 4-5bn in 2023.