2018 results out next Tuesday (9th) could help to re-rate shares in Billington Holdings, argues Mark Watson-Mitchell.
I like the look of the shares of Billington Holdings (LON:BILN) ahead of the structural steel and construction safety solutions group announcing its 2018 results next week. It is not so much about the finals for last year but instead it is the company’s potential for this year and next that attracts me.
Established over 70 years ago, Billington Holdings is today one of the UK’s leading companies in the structural steel and engineering sectors. It is very much focused on pushing its activities throughout both the UK and into the European markets.
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Although the Billington Structures division makes up some 82% of the group revenue, the other subsidiary interests include Marshall Steel Stairs (6%), which is engaged in the design, fabrication and installation of highly engineered steelwork, staircases and balustrade systems; Hoard-It (5%), which produces eco-friendly re-usable temporary hoarding solutions for site-branding purposes; easi-edge (4%), who are developers of protection and on-site safety solutions helping to reduce accident risks; and finally, Shafton Steel (3%), whose state-of-the-art steel processing and profiling facility is a major supplier of profiled plate, bars and fittings.
Billington Structures, the major subsidiary, is a nationally recognised and award-winning steelwork contractor. Its plants in Barnsley and Bristol have the capability to process over 35,000 tonnes of steel per annum. Its very experienced workforce has the capability to tackle a wide range of projects from complex structures of over 12,000 tonnes right down to simple building frames. Part of this division is Tubecon, which handles complex structures for the UK Construction and Rail Infrastructure markets.
The collapse of Carillion early last year has caused headaches across Billington’s various sectors, especially with concern about contractor late-payments. However, I believe that the group is managing to cope with any margin pressures that may have been caused as a result.
In fact, the first half results to end June 2018 saw revenues improve from £34.3m to £39.2m, whilst first-half pre-tax profits were slightly impacted, down from £2.2m to £1.9m. That is not as depressing as may be assumed because the group is picking up a lot of new business.
Last November it announced that it had been awarded three new contracts worth £41m, taking it well into the current year with most of them contributing to the 2019 revenue figures.
The first of those contracts was for a prominent film studio in Slough, the second awarded was for the construction of a data storage facility in Europe, and the third contract was for a commercial office development in London. These contracts and the current solid workload position have given the company a certain confidence for the year to end December 2019.
The 2018 results are due to be announced on Tuesday 9th April and the company’s brokers are estimating sales of some £75m and pre-tax profits of £4.6m, worth 30p per share in earnings. That would handsomely cover a dividend of some 12p per share.
Upon the results, I would expect the brokers to revise upwards their estimates for this current year, they were going for a revenue and profits standstill. The new contracts could hopefully encourage them to see both sales and profits continue to make the steady and consistent growth that the company has shown over the last few years.
The company has some 12.93m shares in issue, of which nearly 68% are in firm hands. I rate the shares of Billington Holdings as an undervalued purchase at around the current 266p level, where they would yield about 4.5%. I am looking for a good statement to help the shares to rise over the next few months or so to break through the previous 314.5p high, which was reached in January 2016.