FTSE 100 dogs of the day

A punishing session for spinners and rat catchers - in the shape of WPP and Rentokil Initial - has highlighted the current unforgiving mood of markets, even if the dividend prospects of the two companies in question remain robust.

Shares in advertising and media group WPP slumped 14% to their lowest level in more than three years as boss Sir Martin Sorrell predicted no respite from the current challenging conditions.

The question clearly worrying investors after today's results performance and recent sales warnings is whether WPP's performance is not just cyclical, but more to do with a structurally different landscape driven by the likes of Google and Facebook.

The bigger surprise in terms of share price reaction came from Rentokil Initial, which actually delivered a performance in excess of its own medium-term financial targets, driven by trading in Asia after revenues jumped by more than a third in the region.

Source: interactive investor  Past performance is not a guide to future performance

Chief executive Andy Ransom has done a good job getting the pest control and hygiene services company moving in the right direction since his appointment in 2013, with profits up 13.8% to £286.9 million last year. He's confident of further progress in 2018, although that optimism is tempered by the usual warning about global economic uncertainty.

There's the additional concern over exchange rates as Rentokil generates some 90% of its revenues from outside the UK. If sterling continues to perform as it has done in recent weeks, Rentokil estimates that the negative impact of currency movements on its profits will be in the region of £10 million to £15 million.

That was enough to spark today's sell-off, particularly bearing in mind that shares aren't viewed as cheap on 22 times earnings. Even so, it seems tough on Rentokil after increasing its full year dividend by 15.1% to 3.88p per share, resulting in a yield of around 1.5%.

The positives were harder to find in the WPP results, with even Sir Martin admitting it had "not been a pretty year" after underlying revenues fell 0.3% and adjusted profits edged up 1.9% to £2.1 billion.

Source: interactive investor   Past performance is not a guide to future performance

Analysts at UBS said WPP missed expectations on a number of fronts, with the 6.3% growth in headline EPS to 120.4p below its forecast of 121.3p and the consensus of 120p.

The progressive dividend policy and the potential for share buybacks are supportive, with a current dividend yield of around 4.5%.

There's also the prospect that trading may be lifted by this summer's World Cup and the mid-term elections in the United States. However, Richard Hunter, head of markets at interactive investor, said investors were more concerned by a number of headwinds such as the fierce competition and the fickle nature of advertising budgets.

He added: "Even before today's harsh mauling, the shares had fallen 27% over the last year, as compared to a 2% dip for the wider FTSE 100, and for the moment clouds on the horizon prevail.

"The general view of the shares as a 'buy' has been in place for some time, although this will come under increasing pressure in the absence of some rather more positive prospects."

Shares were as high as £19 in February last year, having risen steadily from 317p in December 2008.