Dentsu Group said late Monday that it recorded a COVID-19-related $1.37 billion impairment charge for full-year 2020 leading to an operating loss for the year of $1.3 billion.
Part of the impairment charge was attributed to a recalculation of the value of the company’s international operations “with a conservative view.” An impairment loss was also recognized in Japan.
Revenues for the year fell 10.4% to an estimated $8.9 billion with an organic revenue slide of 11.1%. That includes an 8.4% dip for the company’s Japan operations and a 13% drop at Dentsu International. The declines were expected given the impact of the pandemic.
The organic decline at the group’s Americas region was11.3%, while EMEA slid 12.4% and APAC 18%.
The company said it expects to return to organic growth on a full-year basis in 2021 although the first quarter will show a decline.
The firm also announced a restructuring of its Japan operations into four main areas: AX (advertising experience), BX (business transformation), CX (customer experience transformation) and DX (digital transformation). The restructuring will be completed by year’s end.
The total cost of the Japan restructuring is estimated at $473 million, with most of that amount split (for accounting purposes) between 2020 and 2021 and a small portion allocated to future years. Much of the cost is tied to current and future early retirement programs and what the firm called “working environment” expenses.
The restructuring is expected to save the company annual costs of nearly $200 million going forward. International operations are also being restructured but full details have not yet been disclosed.
While there had been reports the company was preparing to sell its Tokyo headquarters building, Dentsu said the property would be updated for the post-pandemic working environment.
Dentsu CEO Toshihiro Yamamoto stated that “our strategy of integrated growth solutions remains the centerpoint of our vision with particular focus on the strongest growing sectors, customer transformation & technology, which we expect to reach 50% of Group revenue over time.”
The company also announced a 2021 stock buyback program of up to 15 million shares (a little more than 5% of outstanding shares) at a cost of up to $284 million.
Also, Wendy Clark, who joined the company last year as global CEO Dentsu International, has been nominated to company’s board of directors. Shareholders will vote on board candidates at a meeting in March.
The firm also said it was creating a sustainable business board.