Billington Holdings – this group continues to demonstrate strong forward momentum and outperformance, while growing its market share, looking for 610p against current 465p

16.12.2024

I just love to see a company announcing that its current year results ‘will be better than market expectations’ – the response just helps to set share prices alight.

And that is what investors like to see, too - a bit of action in their portfolios, helping to wake them up and shake them out of the current market lethargy.

Just such a case has been the massive turnaround in activity in the shares of one of my old favourites – Billington Holdings (LON:BILN).

The Business

The group is one of the UK's leading structural steel and construction safety solutions specialists, focused on structural steel and engineering activities throughout the UK and European markets.

Based in Barnsley, the group was set up in 1989 and was previously known as the Amco Corporation.

It changed its name to Billington Holdings in 2008.

Employing nearly 460 people through its various subsidiaries, the group designs, manufactures, and installs structural steel works in the UK, Europe, and internationally.

The company also designs, fabricates, and installs bespoke steel staircases, balustrade systems, and secondary steelwork.

Additionally, it provides safety solutions and barrier systems to the construction industry; protection and fall prevention systems; complex steel structures primarily for the construction and rail infrastructure markets; and site hoarding solutions.

It provides services to construction projects across various sectors, including defence, commercial, education, health, industrial, infrastructure, leisure, residential, retail, distribution, energy, and data centres.

Recent Guidance

Last Wednesday, 11th December, the group which had previously reported that it had delivered a strong performance across all its business units in the first half of the year, declared that continued strong delivery in the second half now results with the full year being expected to be ahead of current market expectations.

​The group continues to benefit from improved manufacturing efficiencies and from the deployment of its capital investment programme across all the group's production facilities.

The construction of a new building is being undertaken at the Group's Shafton facility to provide extra capacity for Tubecon, as well as enabling it to undertake additional large and complex fabrications.

This is expected to be fully operational in mid-2025. The Billington Structures business located at Shafton has also recently implemented an additional shift, and taken on additional resource, to service the volume of work it has secured.

CEO Mark Smith stated that:

"I am pleased that the strong performance seen in the first half of the year has continued.

We have a solid order book across all of Billington's businesses, and, in addition, a very healthy pipeline of future opportunities that are close to conversion.

Whilst we remain mindful of the widely publicised, challenging market conditions, I am optimistic that Billington will continue to perform robustly in 2025 and beyond."

Record Order Book

The company declares that it has a record orderbook which further supports that Billington is becoming the steelwork contractor of choice for its clients.

That order book spans multiple market sectors, with the group having been successful in securing a number of significant, good-quality contracts for 2025 and into 2026, particularly in sectors that require more complex solutions such as energy from waste, high-tech manufacturing and data centres.

The Equity

There are 12,934,327 shares in issue.

The larger holders include Gutenga Investment (20.00%), Close Brothers (11.35%), Charles Stanley Group (9.99%), GPIM (5.58%), Otus Capital Management (4.97%), IG Markets (3.88%), Canaccord Genuity Wealth (3.11%), Ocorian Trustees Jersey (2.17%), HSBC Global Asset Management (1.18%), Hargreaves Lansdown Asset Management (0.88%), KW Investment Management (0.15%), and Evelyn Partners Investment Management (0.15%).

Broker’s Views

On Thursday 5th December analyst David Buxton, at Cavendish Capital Markets, outlined quite neatly that Billington’s shares had drifted to the then price of 400p, stating that:

“The shares have drifted, despite the potential positive effects on demand in the structural steel market from a lower interest rate environment and the more proactive political attitude to granting planning permission.

The shares remain attractively rated and offer a strong FCF yield at these levels.

The dividend is growing and backed by net cash. Net cash currently represents about half the group’s market capitalisation.

Our 610p target price offers decent upside from current levels.”   

Less than a week later, on Wednesday, 11th December, the group announced its Trading Update, with its shares at 420p.

Buxton commented that:

“The shares have drifted, possibly reflecting on Severfield’s recent disappointing trading update, which clearly looks more company specific and in contrast to Billington’s more robust experience.

The shares now trade on an attractive rating, on a FY26E P/E of 7.6x, while also offering a premium yield of 5.0%.

Our 610p target price now indicates a FY26E P/E of 11.0x and EV/EBITDA of 4.5x, with plenty of upside scope as the group continues to demonstrate strong forward momentum and outperformance, growing its market share.”

His current year estimates are now for the end of this month to show that the year’s revenues, will ease back to £125.0m (£132.5m), while adjusted pre-tax profits could be £10.8m (£13.4m), with earnings of 66.2p (79.3p) and paying a dividend of 20.0p (33.0p) per share.

For the 2025 year he goes for £135.0m sales, £9.5m profits, 55.5p earnings and 21.0p per share in dividend.

My View

Massively in its favour is the point that Billington has a strong order book spanning way ahead into 2026, many of which orders are for more complex projects in the ‘energy from waste,’ data centres, and high-tech manufacturing sectors.

What is wrong with this market when you see companies like Billington being so undervalued?

The group’s shares, after hitting 600p in April, are now at just 465p, where they trade on only 7.02 times current year earnings – that is far too cheap for a £60m-capitalised group, with estimated year-end cash of £22.0m, making £9.5m profits.

(Profile 02.04.19 @ 266p set a Target Price of 314.5p*) 

(Profile 13.06.22 @ 217.5p set a Target Price of 295p*)