April 21 (Bloomberg) -- Publicis Groupe SA, owner of the Leo Burnett and Saatchi & Saatchi advertising agencies, said first-quarter sales rose 11 percent on increased business in North America and Europe and growth in digital operations.
Revenue increased to 1.29 billion euros ($1.9 billion) from 1.16 billion euros a year earlier, the Paris-based company said today. That compared with a 1.28 billion-euro average estimate of three analysts surveyed by Bloomberg. Organic sales, which exclude acquisitions and mergers, rose 8.1 percent in North America, 6.2 percent in Europe and 1.5 percent in the Asia-Pacific region.
Publicis, the world’s third-largest advertising company with clients including Microsoft Corp. and Walt Disney Co., expects to outperform peers and improve operating margins in 2011, Chief Executive Officer Maurice Levy said in an interview. The company plans to double operations in China by 2013 and will continue making “targeted” acquisitions in digital and emerging markets, Levy said.
Organic growth in Asia was weak the company’s performance in the quarter was unusual for not “substantially” beating expectations, said Michael Cunningham, a media analyst at Whitman Howard Ltd. in London.
The company’s shares fell as much as 4 percent to 37.32 euros and traded 3.3 percent lower as of 11:17 a.m. in Paris.
Digital operations and business in emerging markets accounted for 48.3 percent of sales in the quarter. The company has a medium-term target of earning 65 percent of revenue from the two segments.
“Overall, the mood is very good amongst all the various segments of the market,” Levy said, adding there was some concern in the automotive industry, which relies on vehicle parts and components from Japan. Publicis’s presence in Japan is small and the March 11 earthquake will have little effect on the company’s business, he said.
The company will likely outperform peers such as WPP Plc and Omnicom Group Inc. this year because it has strength in digital business and its “U.S. figures are substantial,” Cunningham said. “People should be looking at that U.S. growth number, which is very, very strong.”
Levy, 69, reiterated that he plans to stay on at Publicis after his contract expires at the end of 2011, though he hasn’t yet decided for how long. He had planned to retire at the end of 2010 until the board asked him to stay on during the economic recession.
Though Levy hasn’t named a successor, he expanded the role of Chief Operating Officer Jean-Yves Naouri last month to include the title of executive chairman of Publicis Worldwide, the biggest ad network at Publicis Groupe.
“We are preparing the future,” Levy said, declining to confirm whether Naouri will succeed him. “Mr. Naouri is someone with good experience and he’s been with us for 17 years now and he knows extremely well the internal structure.”
Publicis said it won net new business of $1.9 billion in the first quarter, from clients including Yahoo! Inc., Reckitt Benckiser Group Plc and Dairy Queen.
ZenithOptimedia Group Ltd., a unit of Publicis, earlier this month cut its forecast for global ad sales growth in 2011 to 4.2 percent from 4.6 percent, citing the earthquake in Japan and turmoil in the Middle East.
Those events cut about $2.4 billion from this year’s global ad expenditure, ZenithOptimedia said.
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