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French advertising company Publicis Groupe SA (PUB.FR) Thursday said organic revenue continued to drop sharply in the second quarter as advertisers tightened budgets, but Chief Executive Maurice Levy expects the group's figures to improve in the third quarter as the global advertising market should hit bottom in August at the latest.

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.

In a press briefing with journalists, Levy said he still aims for the company's organic growth to outperform the overall advertising market decline this year and that the company's results should start improving in the next quarter.

"All figures should be less in decline in the third quarter than in the second quarter," he said, adding that a gradual improvement from the third quarter onwards should result in a return to organic growth for the group mid-2010.

Publicis unit ZenithOptimedia currently predicts global advertising spending will decline 8.5% in 2009.

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%.

"The particularly bad 2Q organic revenue decline in Europe is a bit surprising but North America is very good," Kepler Capital Markets analyst Conor O'Shea said. He rates Publicis buy.

Without the impact of General Motors Co.'s 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 GM. 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 the expectations of analysts, who had forecast operating profit of EUR283 million and a margin of 13%.

New business in the first half was $3.2 billion.

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.

Publicis shares closed Wednesday at EUR22.01. The stock 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.

The group, which competes with Martin Sorrell's WPP PLC (WPP.LN), and U.S.-based Omnicom Group Inc. (OMC) and Interpublic Group of Cos. (IPG), is the first of the world's large advertising holding company's to report second-quarter results.

Company Web site: www.publicisgroupe.com

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