* Q1 organic growth 3.3 percent, sales 1.6 billion euros
* Omnicom merger set to close in Q3, awaits China approval
* Confirms annual growth, profit goals
* Currency effect drags on emerging markets
* Shares rise 3 pct as analysts call results reassuring
(Adds bullets, shares, analyst)
By Leila Abboud and Gwénaëlle Barzic
PARIS, April 17 Advertising agency Publicis
, which is merging with larger rival Omnicom,
achieved 3.3 percent revenue growth on a comparable basis in the
first quarter, helped by strong digital sales and an uptick in
China and Europe.
Publicis, the first major ad group to post results for the
period, said revenue was 1.6 billion euros ($2.21 billion). The
average estimate of analysts was 1.62 billion and organic growth
of 3 percent, according to company-provided figures.
Chief Executive Maurice Levy said he was optimistic that the
Omnicom deal, which will create the world's biggest ad group
ahead of current leader WPP, would close in the third
quarter once final antitrust approval was secured in China.
Levy also confirmed Publicis' annual goals for organic sales
growth of more than 4 percent and improved operating margins,
adding that first-quarter margins were "slightly better",
without providing a comparable 2013 figure.
"Organic growth will not accelerate in the second quarter
because of tough comparables, but it will in the third quarter,"
he said. "Europe remains fragile in my view, while China should
see mid-single-digit growth, and digital double-digit growth."
Publicis shares rose 3 percent by 0708 GMT, making it the
biggest gainer on France's blue-chip index.
Analysts called the quarter reassuring, and the results
helped boost WPP shares by 0.7 percent as London's FTSE
fell 0.2 percent.
"There had been some concern around weakness in China
therefore we would expect results to be taken well," Tamsin
Garrity, analyst at UBS, wrote in a research note.
Publicis and its peers, which include Japan's Dentsu
and Interpublic Group, are set to benefit from
a global economic recovery this year because big corporations'
spending on marketing correlates with economic growth.
Market researcher Zenith Optimedia, owned by Publicis, has
forecast ad spending will grow 5.5 percent this year, up from
3.9 percent in 2013, helped by the Winter Olympics in Russia,
the soccer World Cup in Brazil, and U.S. mid-term elections.
Much of the growth is coming from advertising online and on
mobile phones - areas where Publicis is strong - while spending
on marketing in magazines and newspapers continues to decline.
Publicis, which had been trailing rivals' growth in recent
quarters because of weak performance in emerging markets, turned
things around in the first quarter after meagre growth of 0.7
percent in the fourth quarter.
China, the third-biggest ad market globally behind the
United States and Japan, swung from a 10.8 percent drop in sales
in the fourth quarter to 0.2 percent growth.
The luxury sector in China - a big market for Publicis - has
been hard hit by a government crackdown on graft and an effort
to curb gift-giving to public officials.
In Europe, organic growth stood at 2.1 percent, with
variations persisting between countries. Germany saw 10 percent
growth, Italy and Spain returned to growth for the first time
since 2011, and Britain slipped 1.6 percent because of what Levy
described as delayed spending by some customers.
North America's organic sales growth was 4.3 percent.
Despite brighter growth prospects, investors have sent
Publicis and WPP shares lower this year over concerns about
profit margins and the impact of currency fluctuations.
In February, WPP lowered its 2014 margin target to 0.3
points of growth, excluding the impact of currency swings, which
could still take a toll on the group if sterling rises against
emerging market currencies.
Levy sought to calm investor concerns by repeating a pledge
to improve operating margins this year and saying he was "not
very worried" about the currency issue because of recent signals
from Mario Draghi, Europe's top central banker.
Draghi said last week that any further strengthening of the
euro would need to be met by looser monetary policy so as to
ward off the threat of deflation.
"Historically, Publicis does not do financial hedging to
protect itself from currency effects because we have local costs
and local revenues," explained Levy.
"I think Draghi has the means to act and that he will do so
if he thinks countries are trying to regain competitive edge
with monetary policy."
Publicis shares closed at 63.05 euros on Wednesday, down 5.2
percent this year, compared with a 5.9 percent increase in the
Omnicom share price. The European media index was down
4.4 percent year-to-date, while WPP was down 9.8 percent.
Omnicom and Interpublic are slated to publish results on
April 22, and WPP on April 25.
($1 = 0.7243 euro)
(Editing by James Regan and Dale Hudson)