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French advertising company Publicis Groupe SA (PUB.FR) Thursday said its results should start to improve in the third quarter after it posted another sharp drop in second-quarter organic revenue, as it forecast the global advertising slump should reach a bottom in August at the latest.

"All figures should be less in decline in the third quarter than in the second quarter," Chief Executive Maurice Levy said, adding that a gradual improvement from the third quarter onwards should result in a return to organic growth for the group mid-2010. Levy still aims for Publicis' organic growth to outperform the overall advertising market decline this year.

Levy is the first head of a major advertising holding company to forecast the bottom of the downturn. Martin Sorrell, chief executive of rival WPP PLC (WPP.LN) has said he doesn't yet see signs of an recovery in the advertising market.

Publicis unit ZenithOptimedia has forecast global advertising spending will decline 8.5% in 2009.

At 1143 GMT, Publicis share were up 3.1% to EUR22.69 as investors welcomed Levy's outlook for the industry.

"The group is well positioned in digital and had good new business in 1H, which is giving the CEO confidence to predict a recovery of the market," said a Paris-based analyst.

New business in the first half was $3.2 billion.

Publicis' share price has gained about 20% since the start of the year as analysts believe the group is more resilient to the downturn than smaller rivals because it has stronger negotiating power on large accounts and a good position in digital advertising. Still, Paris-based Publicis, the owner of Saatchi and Saatchi, said organic revenue, a closely watched metric in the advertising industry that strips out acquisitions, disposals and currency movements, was down 8.6% in the quarter ended June 30.

This figure was greater than an average organic revenue drop of 7.9% forecast by six analysts polled by Dow Jones Newswires.

Revenue for the second quarter was EUR1.13 billion, down from EUR1.17 billion in the same period last year, but slightly above analysts' forecast of EUR1.12 billion.

Organic revenue slid 16% in Europe in the second quarter while North America was down only 3.8%, helped by digital activities, which still grew 5.7% on an organic basis at a group level in the first half.

Without the impact of General Motors' bankruptcy filing, Publicis' organic revenue would have been down 5.4% in the first half, instead of 6.6%, the group also said.

Publicis on Tuesday said it expects a maximum EUR9 million exposure to GM's bankruptcy filing, much lower than its previous estimate of EUR55 million, and that it would continue to work with the new General Motors Co. GM is one of Publicis' biggest clients.

Net profit for the first half fell 13% to EUR167 million, from EUR192 million last year due mainly to the drop in revenue. Analysts had forecast net profit of EUR156 million.

Operating profit in the first half was EUR287 million, down from EUR334 million last year, giving the company an operating margin of 13%, compared with a margin of 15% in the same period last year.

This just about met analysts' expectations, which had forecast operating profit of EUR283 million and a margin of 13%.

The margin decline was mainly due to higher severance costs as the company shed 4% of its workforce since the start of the year.

Levy said Publicis continues to focus on cost-cutting to preserve margins and that the group should return to its record operating margin levels in about two to three years.

Company Web site: www.publicisgroupe.com

-By Ruth Bender, Dow Jones Newswires; +33 1 40 17 17 40; ruth.bender@dowjones.com