Yell Group may be by far the worst-performing FTSE 100 media stock this year - down 45 per cent so far - but it is WPP Group that is seen as the sector's most cyclical large-cap constituent.

It is that status which explains why Sir Martin Sorrell's musings on the global economy are so closely tracked, and why shares in the advertising and marketing services behemoth have fallen by a quarter since last year's peak.

So, given Sir Martin's prediction that 2008 should be better than 2007, while 2009 will be worse, studying yesterday's full-year results from WPP is of limited value in divining its near-term fortunes. The numbers were predictably strong, with pre-tax profits up 7 per cent, earnings per share ahead nearly 10 per cent and the dividend raised 20 per cent. Helped by an “unprecedented” run of account wins, the fourth quarter was especially buoyant, while last year's pattern of like-for-like revenue growth of 5 per cent has been sustained in the first two months of this year.

For shareholders whose memories stretch back to the turn of the decade, that more pedestrian growth might provide a source of comfort. Whereas organic growth in the dot-com boom was running at 20percent, and the shares trading at 40 times prospective earnings, growth of 5 per cent and a current-forward earnings multiple of 12 times indicates there is less far to fall this time round.

Further, WPP's variable costs - staff bonuses and payments to freelancers and consultants - now sit at 7.4 per cent of revenues, against 5 per cent in 2001, which means it has considerable scope to tighten its belt. It is that flexibility which underpins Sir Martin's confidence that WPP will be able to improve operating margins to 15.5 per cent this year, and 16 per cent in 2009.

But it is WPP's growth prospects rather than its capacity to scrimp that provides more interest. It now draws a quarter of sales from faster-growing territories outside of America and Western Europe - it is already number one in countries such as Mexico, South Korea and Indonesia - and a similar proportion from digital media, a showing that should rise after recent bolt-on acquisitions such as October's purchase of Canada's Blast Radius.

That breadth of interests, together with WPP's scope to keep buying back shares, makes the shares, at 596p, a less cyclical investment than at any time in the recent past. Hold on.

Capita Group

Judged on its failure to win two of the highest-profile contracts that it had been chasing - retention of the £300million London congestion charge scheme and the one-off award of the BBC's £450million digital switchover plan - Capita might seem to have lost its knack of pulling in new business.

The detail of yesterday's full-year results tells a different story, though. Over the past three months, the back-office outsourcing specialist - a constituent of the Tempus Ten - has won two thirds of the £1.5billion of work for which it had been in contention. Even ignoring December's £722million 15-year life and pensions administration deal with Prudential - the biggest win in the company's 24-year history - that is encouraging.

Equally reassuring is that only one of Capita's big contracts - the Government's £35 million-a-year national strategies scheme for English schools - comes up for grabs in the next four years. Neither is there much in the numbers themselves to concern. Revenues were up an above-consensus 19 per cent, earnings per share were 22 per cent better and the dividend was raised 33percent. An improvement in operating margins - from 12.9 per cent to 13.1 per cent - showed the benefits of scale.

As for the outlook, Capita expects the outsourcing market - of which it has 22 per cent - to carry on growing at an annual 10 per cent over the next three years. Apart from getting bigger in life and pensions - which should account for 18 per cent of sales this year, against 8 per cent two years ago - Capita is eyeing healthcare and defence.

While the shares slipped nearly

4 per cent yesterday, that had more to do with their 10 per cent rise over the past three weeks. At 656p, or 19 times 2008 earnings, Capita remains at a premium to its sector, but a deserved one given the predictability of long-term contracted revenues and double-digit earnings growth. Hold.

Davis Service Group

For a company known for its cautious proclamations, yesterday's outlook from Davis Service Group bordered on the exuberant. The £850million laundry and workwear specialist predicted growth in all three of its regions in 2008 and said that its British operations faced “stronger prospects than for some time”.

That bullishness is partly a reflection of tough trading on its home turf in recent years. Overcapacity in hiring out linen to hotels and restaurants and sharp cost inflation had put pressure on margins. However, with Brooks, its rival, having gone into administration, increases in the minimum wage more subdued and energy costs now fixed, Davis expects margins in the UK to rise from last year's 10.4 per cent.

Elsewhere, it forecasts solid organic growth in Scandinavia, which accounts for 30 per cent of sales and where its Berendsen subsidiary is the market leader, as well as in continental Europe, where it plans to roll out a nationwide workwear business in Germany. The only disappointments came in Davis's healthcare operations. Cutbacks to hospital budgets in Germany have hurt volumes, while in Britain progress in outsourcing the decontamination of surgical instruments for NHS trusts - an attractive market, given the long duration of contracts - has been painfully slow.

Tempus shied away from Davis last July, when the shares sat at 631p, or 16 times earnings. With its prospects now stronger, 501p, or 12 times 2008 earnings, with a 4.2 per cent yield, looks an attractive entry point for long-term investors. Buy.

Explore Markets

• United States

• Europe

• Japan

• China

• Russia

• The Gulf

• India

• Africa

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts