February 13, 2014 / 7:00 AM / 4 years ago

UPDATE 2-Publicis posts weak Q4 on emerging markets

* Q4 organic growth 0.7 pct as China, Europe drag

* 2013 organic growth 2.6 pct misses consensus 3 pct

* Improved margins in 2013, aims for more this year

* Predicts rebound to 4 pct organic growth in 2014

* Omnicom merger on track to close by end H1

By Leila Abboud and Gwénaëlle Barzic

PARIS, Feb 13 (Reuters) - Advertising agency Publicis fell short of its annual growth target after a slowdown in emerging markets such as China and India caused the fourth quarter to end with a whimper.

Publicis, which is working to complete a $35 billion merger with U.S. rival Omnicom to create the world’s biggest ad group, said the weakness was temporary and predicted a rebound to 4 percent organic sales growth in 2014.

Publicis also said on Thursday that it aimed to keep improving its operating profit margin this year, which rose to 16.5 percent from 16.1 percent in 2013 despite the “disappointment” on growth.

“This is not a reversal of the market,” said Chief Executive Maurice Levy.

“Based on what we have seen since the beginning of the year, we think this is just a blip. It does not call into question our growth plan for this year.”

Shares were up 1.6 percent to 66.89 euros at 8:28GMT, while the European media index fell 0.25 percent.

“Publicis shares remain robust as investors look through weaker operating momentum towards the potential for cash returns from the Omnicom deal,” wrote UBS analyst Tamsin Garrity.

The Paris-based agency posted organic sales growth of 0.7 percent in the fourth quarter to 1.93 billion euros ($2.6 billion). It did markedly worse than its soon-to-be partner Omnicom, which saw 4.2 percent organic growth, helped by strong demand in Latin America and Asia.

Levy said the weakness stemmed from stagnating demand in Europe and a dip in activity in emerging markets.

In China, where Publicis works for many luxury companies, sales were hit by a government clampdown on gift-giving to public officials that has hurt purveyors of high-end spirits and luxury goods. India slowed, too, ahead of national elections.

Full-year organic growth stood at 2.6 percent for revenue of 6.95 billion euros. Analysts were expecting 3 percent organic growth, according to investment bank UBS.

Operating profit grew nearly 7.8 percent to 1.15 billion euros, while net profit rose 11.5 percent to 816 million.

Publicis, which also competes with WPP Plc and Interpublic Group, said it would pay a dividend of 1.10 euros per share for 2013, up 22 percent from a year earlier.

Publicis shares closed down 2.7 percent at 65.74 euros on Wednesday ahead of the results, giving it a market capitalisation of 14 billion euros.

Levy said the merger with Omnicom was on track to close by the end of the first half of the year, and that the two sides had obtained 14 out of the 15 required national regulatory approvals, with only China outstanding.

“Everything is going fine, although it is taking a bit more time than expected,” he said.

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