Balfour Beatty’s centenary year began promisingly – the contractor was aptly promoted to the FTSE 100 in January – and it has continued in much the same vein. Yesterday’s full-year results revealed a 27 per cent rise in revenues, a better than expected 24 per cent improvement in pretax profits and an 11 per cent increase in the dividend.

The confidence signalled by the double-digit percentage boost to the payout appears merited, given the accompanying gains in Balfour Beatty’s order book, which was up by 12 per cent to a record £12.8 billion – or £700 million better than at the half-year stage. Reassuringly, orders in all three of the company’s divisions rose by 10 per cent or more. Further, with the financial terms of three of Balfour’s PFI projects – including the M25 widening scheme – expected to be agreed shortly, orders should rise a further £1.5 billion by the end of June.

Not that Balfour has been immune from economic downturn. It draws about 12 per cent of sales from commercial construction and problems with two big contracts in its building division mean that it cannot recognise their revenues until the cash comes in. The company has also flagged up a “considerable slowdown” in Dubai, which it expects to persist this year and next. The comfort must be that Balfour is less exposed to the indebted emirate, which accounts for only 3 per cent of profits, than are many of its UK peers.

Currencies are working in Balfour’s favour. Through its acquisitions of Centex, GSH and Barnhart, it now has a quarter of its revenues coming from America – with the effect that businesses bought at an exchange rate of roughly $2 to the pound are now remitting revenues to their parent at the $1.40 level. Balfour’s recent securing of a five-year contract with National Grid to design and build transmission lines in New England – effectively the first overseas extension of a domestic relationship – also augurs well.

Balfour’s biggest attractions, however, remain a strong balance sheet – bolstered by last year’s opportunistic £186 million fundraising – and 80 per cent of its sales being to government and regulated utilities.

The shares may tread water until there is greater clarity on stimulus measures to bring forward public infrastructure works on both sides of the Atlantic. However, at 325½p, or eight times 2009 earnings, and yielding 4 per cent, Balfour – one of the Tempus Ten – remains a long-term buy.

Aggreko

A FTSE 350 chief executive who is prepared to make a forecast, Rupert Soames is something of a rarity.

That transparency worked in favour of the boss of Aggreko yesterday, when he predicted a strong start but a subdued finish to the year for the provider of temporary power generators – in short, flat year-on-year profits in constant currency terms.

However, given that Aggreko books 70 per cent of its sales in American dollars, recasting last year’s numbers at current exchange rates implies 2009 pre-tax profits of £250 million, or roughly £60 million more than consensus estimates. The shares rose 9 per cent in response.

For now, the credit crunch is aiding Aggreko. Tight lending conditions across the 55 countries in which its operates have curbed the availability of project finance, prompting governments to rent generators as a stop-gap for building permanent plants. That explains why inquiries from potential customers over the past three months are running at higher levels than at this time last year.

But Aggreko’s second half should prove more difficult if for no other reason than last year’s profits were boosted by $70 million of sales relating to the Beijing Olympics and the clean-up after hurricanes Gustav and Ike in the Gulf of Mexico.

In the meantime, fears of defaults by emerging market customers appear overdone: debtor days have crept up modestly from 60 to 63. Aggreko’s return on capital has risen to 29 per cent and new lending facilities of £564 million have removed any refinancing risk.

The short nature of the company’s order book means that it cannot see very far ahead. Even so, at 412½p, up 35¼p, or eight times revised 2009 forecasts, the shares should be held.

Cobham

A weak pound can cut both ways. Ask Cobham, the FTSE 100 defence contractor, which has 90 per cent of its borrowings in US dollars. Although the company has benefited from strong American earnings, the softness of sterling has inflated net debt by £257 million over the past year alone – so that Cobham ended the year owing a record £641 million.

But that figure proved the biggest surprise in yesterday’s full-year figures, which otherwise did much to explain why Cobham’s shares have barely moved on the year and have outperformed the FTSE all-share by nearly 60 per cent in the process.

Sales up 38 per cent – or a solid 10 per cent once the effect of last year’s $1.2 billion of acquisitions is stripped out – earnings per share up 18 per cent and 106 per cent of profits converted into cash. That prowess indicates why Cobham’s debt should not be a concern and why the company has been able to produce double-digit compound growth in its dividend since 1980. In keeping with that tradition, yesterday’s full-year payout was raised 10 per cent.

The 13 per cent of Cobham’s sales to civil aerospace markets have scope to hold back 2009 profits – especially those related to executive jets. But the 4 per cent rise in next year’s US defence budget unveiled by President Obama last week suggests that falling underlying sales are not likely to be a problem until 2012 at least. Even so, spending on defence electronics – Cobham’s niche is complex assemblies and subsystems – tends to be among the last to suffer. At 183½p, or 11 times earnings, hold.

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