* Q2 organic growth 0.5 pct on sales of 1.76 bln euros
* H1 2014 operating margin 13 pct vs 13.7 pct in H1 2013
* CEO says failed Omnicom deal had a negative effect
* Strong euro and European slowdown also weighed
* Publicis shares fall 4.7 pct to lowest since August (Adds detail of Omnicom forecasts, updates Publicis shares)
By Leila Abboud and Gwénaëlle Barzic
PARIS, July 22 (Reuters) - French advertising group Publicis has warned it would be "very difficult" to meet itssales growth target this year after a second-quarter slowdown,caused in part by the failure of its planned merger with Omnicom in May.
Organic or self-generated sales growth fell to 0.5 percentfrom 3.3 percent in the first quarter, the company said onTuesday, below its 4 percent annual target and short ofanalysts' expectations, with growth in North America not enoughto offset weakness in Europe and sluggishness in China andIndia.
Shares in Publicis, whose global advertising brands alsoinclude Leo Burnett and Saatchi & Saatchi, closed down 4.7percent at 56.11 euros on Tuesday, their lowest since Augustlast year, a month after the planned "merger of equals" withOmnicom was unveiled.
Publicis is the world's third-largest advertising groupafter Britain's WPP Plc and its deal with No. 2 Omnicomwas supposed to create the world's largest agency, best-equippedto compete in the Internet era. They called it off in early Mayafter a battle for control and divergent corporate cultures.
Omnicom said separately it remained on track to hit itsfull-year organic revenue growth target of between 4 and 4.5percent, after posting higher-than-expected quarterly revenueand profit.
Publicis Chief Executive Maurice Levy said the strong eurowas also to blame for chipping away at Publicis's growth,currency effects having stripped 148 million euros out ofrevenue in the first half.
Asked why Publicis was trailing rivals such as Interpublic, which posted organic sales growth of 4.7 percent in thesecond quarter, Levy said that trying to rescue the flounderingOmnicom tie-up had taken up a lot of management time.
"There was a negative effect, which we had somewhatunderestimated, from our intense concentration on the merger,"said Levy. "But that's behind us now and we are focused on thefuture."
BUSINESS PLAN
Forced to go it alone, Publicis said it was revising itsbusiness plan, unveiled last year, and would publish a newversion by October.
The group will also have to fight to keep key customers,notably electronics maker Samsung, whosemulti-billion euro contract is under review and may be decidedin September.
Analysts began paring back their expectations for the year,with UBS and Exane BNP Paribas predicting organic growth of 3percent and Jeffries saying it could be as low as 2 percent.
Publicis' second-quarter sales fell to 1.76 billion euros($2.5 billion) from 1.79 billion a year earlier, missing anaverage analysts' forecast of 1.88 billion, according to ThomsonReuters I/B/E/S.
First-half operating profit fell to 435 million euros from460 million a year earlier and the company's operating marginslipped to 13 percent from 13.7 percent.
First-half sales were nearly unchanged at 3.36 billioneuros, while organic growth was 1.8 percent. Stripping out theeffect of the strong euro, Publicis said organic growth wouldhave been 5 percent.
Speaking at a press briefing, Levy said there was littlePublicis could do to blunt currency effects, since foreignexchange hedging tools were less effective in the globaladvertising business than in other industries and agencies couldnot raise prices and remain competitive.
Asked whether Publicis would still be able to deliver itstarget of improving operating margins this year, Levy said thecompany planned to clamp down on costs so as to "come in asclose as we can to our goal".
The share price performance of leading ad agencies hasvaried widely this year. WPP shares are down about 11 percent,hurt by the pound's strength, while Omnicom and Havas have fallen about 2 percent. Interpublic has risen 12 percentlargely because some investors see it as a possible takeovertarget.
The European media sector as a whole has fallen 3percent in the same period. ($1 = 0.7395 Euros) (Additional reporting by Alexandre Boksenbaum-Granier; Editingby Kenneth Maxwell and David Holmes)
WPP (WPP)
