- Annual revenue up 53 per cent to £132mn
- Pre-tax profit increased 131 per cent to £13.4mn
- Both EPS and dividend more than double to 84.4p and 33p, respectively
- Net cash up 90 per cent to £22.1mn (181p)
Barnsley-based structural steel and construction specialist Billington (BILN: 535p) delivered annual results ahead of market estimates and that’s after management raised guidance no fewer than three times since the autumn.
The growth was driven by Billington Structures, one of the UK’s leading structural steelwork contractors, which benefited from several high value contracts across high tech manufacturing, data centres, energy from waste, distribution and commercial office developments. The business also reaped the benefits of a capital investment programme and efficiency improvements that increased capacity and led to higher margins.
Moreover, with steel prices softening to near long-term average rates, the market more stable, and Billington recently winning contracts worth £90mn for delivery over the next 24 months, the outlook remains positive. Rightly, shareholders are being rewarded with the board lifting the normal dividend per share by 29 per cent to 20p, and declaring a special pay-out of 13p a share, too. Despite the largesse, this year's closing cash pile should hold steady at £22mn, a reflection of the group’s impressive cash generation.
True, some of the one-off margin gains that boosted earnings last year will not be replicated, hence why house broker Cavendish is factoring in a gross margin of 19.1 per cent, down from 21.7 per cent in 2023. Also, consumption of structural steel in the UK is expected to fall 5 per cent as some market segments (office developments and industrial warehousing) continue to see lower levels of activity from historic levels. So, with annual revenue forecast to decline from £132.5mn to £125mn on a lower margin, Cavendish expects annual pre-tax profit and earnings per share (EPS) to fall back to £8.5mn and 52.1p, respectively. On this basis, the shares trade on a modest forward price/earnings (PE) ratio of 10, offer a 3.7 per cent dividend yield based on a maintained 20p share pay-out, and are rated on 1.4 times book value.
Post-results, Cavendish raised its fair valuation from 540p to 610p, a sensible target given that Billington is still only rated on a 5.2 times operating profit estimate to enterprise valuation even though earnings are expected to bounce back 12 per cent in 2025.
So, having delivered a 156 per cent total return in my 2022 Bargain Shares Portfolio, and a 30 per cent gain after I selected Billington as one of my 2024 takeover targets, I can see the potential for further upside. Buy.
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