Shares in WPP, the world's second largest advertising agency, have plunged after it gave a gloomy outlook on future market conditions.

The ad firm said it did not expect a full recovery until 2004 and admitted that it would struggle to meet its key operating margin target of 15%.

The statement was one of the bleakest warnings received in the ailing advertising recently.

The shares slid by 10% shortly after the statement, before recovering to 5% down at 1450 GMT.

The advertising industry has suffered particularly badly from the global economic downturn since many firms rein back their marketing spend during hard times.

And it is taking much longer than expected for firms to start spending on advertising again.

Revival hopes

Some industry executives had been hoping for a recovery later this year.

WPP said that its sales had already fallen by 8% so far this year and that it saw few signs of a recovery.

The public relations and public affairs communications business has been the hardest hit, the firm said.

On a brighter note, WPP's long-term targets remain intact.