Barnsley-based structural steel and construction specialist Billington (BILN: 350p) has raised full-year guidance again, less than two months after analysts pushed through a 24 per cent earnings upgrade in mid-September.
The key drivers have been the successful delivery of high quality contracts, increased capacity and manufacturing efficiencies from the group’s capital investment programme, and positive final determination of contract values. It’s more profitable work, too as the group is winning technically more difficult contracts at higher margins in robust market segments (data centres, renewable energy projects, large industrial warehousing, film studios and stadiums).
House broker Cavendish has taken note, upgrading 2023 revenue forecasts by £10mn to £125mn, up from £86.6mn in 2022. The drop through to profit is even more pronounced, hence why analysts upgraded their full-year pre-tax profit and earnings per share (EPS) estimates by a third to £13.3mn and 83.9p, respectively, or more than double the 2022 result.
Moreover, buoyed by an estimated free cash flow of £6.8mn, closing net cash forecasts have been upgraded from £14.8mn to £16mn (132p) to support a 29 per cent projected hike in the dividend per share to 20p. On this basis, the £42.3mn market capitalisation company is rated on two times operating profit to enterprise valuation, a forward price/earnings (PE) ratio of 4.2 and offers a prospective dividend yield of 5.7 per cent.
The holding is up 67 per cent in my 2022 Bargain Shares Portfolio but the share price has drifted since the interim results, a de-rating completely at odds with the latest upgrade. Buy.
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