UPDATE 2-Publicis sees marked ad industry slowdown in 2009

French advertising group Publicis predicted a "marked slowdown" in the ad industry next year and pledged to grow market share and protect its margins, helped by the digital sector and emerging markets.

Third-quarter revenue fell 1.5 percent to 1.105 billion euros ($1.38 billion), hurt by a 71-million-euro impact from the weakness of the dollar and the pound against the euro, Publicis said in a statement on Tuesday.

Sales rose 5.1 percent at constant exchange rates, with organic growth of 3.9 percent. Publicis was expected to post revenue of 1.113 billion euros, according to the average of forecasts from seven analysts polled by Reuters.

Publicis, whose clients include food group Nestle, energy giant Total and airline Emirates, said the third quarter had ended with higher organic growth than expected given the global financial crisis.

"We believe our industry will face a difficult end of 2008 and a marked slowdown in 2009," Publicis Chairman and Chief Executive Maurice Levy said in the statement.

Publicis said it expected to see weakness in mature markets and traditional sectors and was looking elsewhere for growth.

"Our digital businesses and our investments in high growth economies are continuing to sustain our growth in an economic environment that has become harsher as the worsening financial crisis impacts the real economy," Publicis said.

Levy told journalists he was sticking to the group's forecasts for an operating margin of 16.5 percent this year and organic sales growth higher than the 3.1 percent achieved in 2007. He hoped to maintain the margin at a high level in 2009.

"Clearly slowing growth is not intrinsically positive, but it is no surprise and we believe that these results and comments should prove reassuring relative to some concerns in the market," UBS analyst Alastair Reid wrote in a note.

Shares in Publicis were 5 percent higher at 16.59 euros in early trade. The stock has lost almost two-fifths of its value in the last six months, giving it a market capitalisation of some 3 billion euros.

Publicis said it planned to raise the contribution to its total sales from the digital sector and emerging markets to a quarter each by 2010. Digital represented 18.9 percent of revenue in the first nine months and emerging markets 22.7 percent.

The group added that its liquidity was "satisfactory" at 2.2 billion euros at the end of September and said net debt had fallen 255 million euros from a year earlier to 1.245 billion.

But Publicis did not plan to make any major acquisitions, despite any opportunities arising from the finanical crisis, and would seek to preserve cash and be "very selective" in its investments, Levy said.

Publicis' biggest rivals are Omnicom and WPP

(Editing by Tim Hepher, Marcel Michelson and Simon Jessop) ($1=.8037 Euro) Keywords: PUBLICIS/ tf.TFN-Europe_newsdesk@thomson.com vs

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