Dentsu Group sees significant rebound in its organic revenue in Q2 FY21 with 15% growth

Dentsu Group has reported a significant rebound in its performance, with its organic revenue growth at 15% in the second quarter ending June 30, 2021, with 12% at Dentsu Japan Network and 17% at Dentsu International, showing strong sequential improvement over decline of 2.4% in Q1 FY2021.

In a release issued, Dentsu Group stated that its revenues continue to recover across all regions with strong growth in digital solutions. Client confidence is restoring with spending levels more resilient and predictable. Operating margin improvement continues to exceed expectation, substantially ahead of the prior year, with Q2 improving +370 bp yoy, showing the gearing effect of higher revenue together with cost reductions being implemented.

The Group expects high single digit organic growth for FY2021, with a line of sight to delivering the long held 2022 margin targets of 20% for Dentsu Japan Network and 15% for Dentsu International one year early, implying a Group margin improvement of +160 bp YOY. FY2021 forecasts are made in the context of a variable economic outlook as the effects of the pandemic remain unpredictable in a number of markets.

The acquisition of LiveArea, announced in July, strengthens the Group expertise in the fast growth areas of consumer experience and commerce and aligns with the Group’s ambition of reaching 50% of revenues less cost of sales (LCoS) generated by Customer Transformation & Technology.

The Group remains well positioned to benefit from the recovery in media & digital solutions spend and the structural growth in Customer Transformation & Technology.

H1 FY2021 Performance

Dentsu reported Group revenue (LCoS) of JPY 440.5 billion, a growth of +7.8% YOY and +5.6% on a constant currency basis. H1 FY2021 saw a significant rebound in performance as revenues continued to recover across all regions. The Group’s organic growth stood at 5.4%, while Dentsu Japan Network grew at 4.5% and Dentsu International grew at 6.2%.

The Group’s underlying operating profit increased by 35.8% YOY (35.9% on a constant currency basis) to JPY 71.6 billion. Operating margin improved by 340 bp (360 bp on a constant currency basis) to 16.3%, reflecting operating leverage from higher revenues and the continued focus on costs across the Group.

Commenting on the performance, Toshihiro Yamamoto, President and CEO, Dentsu Group Inc., said, “Dentsu Group delivered a strong second quarter performance, reflecting the growing consumer and client confidence we see across all regions. Underling profit growth continues to be strong, exceeding our expectations, and demonstrates our commitment to our margin targets.”

He further said, “The second quarter saw a return to acquisitions for the Group with the announcement of an agreement to acquire LiveArea, a global customer experience and commerce agency that will join the Merkle brand within Dentsu International. The acquisition perfectly aligns with Dentsu Group’s stated ambition of reaching 50% of revenue LCoS generated through Customer Transformation & Technology, encompassing the fast growth areas of customer experience and commerce.”

“Whilst the future path of the pandemic remains uncertain, our full year guidance confirms our confidence in the outlook for the second half of FY2021, as well as our ability to meet our medium-term targets by 2024,” Yamamoto added.