Dentsu Group, a prominent Japanese advertising and public relations company, experienced a decline in its shares following a reduction in its full-year earnings forecasts. The company attributes this revision to weaker-than-expected business performance and the impact of one-off charges on its underlying operating profit and operating margin.
At present, Dentsu Group’s shares are down 10.0% to 3,972 yen ($26.41), having previously fallen as much as 10.4% on Wednesday. According to FactSet, this decline marks the largest daily price drop since October 2008.
During the third quarter, Dentsu reported a drop in net profit from Y27.6 billion to Y16.6 billion compared to the same period last year. Additionally, operating profit decreased from Y41.9 billion to Y37.5 billion, while net revenue slightly increased from Y274 billion to Y279 billion.
Hiroshi Igarashi, the president and chief executive officer of Dentsu Group, explained that the reduced spending from clients in the technology and finance sectors, as well as project delays within the Customer Transformation & Technology business, played a significant role in the company’s third-quarter performance.
Dentsu Group anticipates one-off charges related to severance and its operations in Germany, Australia, and Switzerland. However, the board considers these expenses to be unique occurrences. The company also expects additional costs in the fourth quarter as it simplifies its business operations.
Consequently, Dentsu Group has lowered its revenue projection for the year 2023 from Y1.28 trillion to Y1.26 trillion, while revising its net-profit forecast from Y69.20 billion to Y33.30 billion.
It remains to be seen how Dentsu Group will address these challenges and adapt to the evolving business landscape. Despite the current setbacks, the company’s legacy and expertise provide a solid foundation for future success.