Billington Holdings Plc (BILN) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Billington Holdings Plc Interim Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question received in the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to CEO, Mark Smith. Good afternoon to you, sir.

Good afternoon. I'm Mark Smith, Chief Executive Officer of Billington Holdings plc; and my colleague, Trevor Taylor, [Chief Financial Officer], are pleased to present to you our 2025 interim results. Our executive summary provides some of the highlights of the first half of 2025. Reduced revenue in the period as a result of a mix of highly complex, labor-intensive and relatively low steel content projects. PBT of GBP 1.7 million, reflective of continuing difficult economic environment and subdued market conditions. Productive output within the structural steelwork entities was 5.4% higher in H1 '25 than in the same period in 2024. Tubecon has taken longer to gain momentum than previously envisaged, primarily as a result of delayed decision-making related to infrastructure projects. Inquiries and prospects are very encouraging, though. And with the construction of its own dedicated facility being completed in the period, we are optimistic for the future. Billington has significant secured productive hours well into 2026, enabling the company to be able to be selective with its future contracts as it accepts. We are in the last year of a 5-year capital investment program, which has increased quality, efficiency and productivity. However, it is likely the final elements of the program will now be completed in 2026. The transition of Trevor to Chief Operating Officer is an extension of the role that he has increasingly been performing over recent years and is able to have an increased focus on operational excellence, cost optimization and effective project delivery whilst ensuring the resources of the group are aligned with current and projected market conditions. The shareholder register, the first half of 2025 notes stability in the shareholder register, and we thank our loyal shareholders for their support. As at 30th of June 2025, the net asset value per share of the group was GBP 3.84, reflective of the strong asset-backed balance sheet.

2025 now is a continuation of the difficult market environment that has started to be encountered to the latter part of 2024. Consumer and wider economic confidence remains subdued as a result of government policies in the U.K. and overseas, resulting in a stagnation of a number of large construction projects. The group performance in the period was robust in the light of increasing difficult market conditions. The strong cash balance, combined with a 0 debt position has allowed for a dividend of 25p per share to be paid shortly after the period end. Client-led contract delays have deferred project margin recognition into the second half and into 2026. Insolvencies throughout the sector continue as a result of poor market demand, credit insurance, albeit with an enhanced premium continues to be maintained on all principal projects and clients. 2025 notes the anticipated final year of the deployment of the group's capital expenditure modernization program. GBP 2.15 million was spent on capital expenditure in the period with an associated depreciation charge of GBP 1.3 million. Total capital expenditure is anticipated to be circa GBP 3.25 million for 2025 with the remaining element of the program now likely to be incurred in 2026. The surplus of the defined salary pension scheme at 31st December '24 was GBP 1.9 million. During the period, agreement has been reached to cease the salary link with the remaining in-service deferred members of the pension scheme. The scheme is now able to proceed towards a formal buyout for schemes as liabilities with any remaining surplus anticipated to be returned to the employer upon completion of the process. This slide provides some of the highlights of the 2025 trading period. Revenue of GBP 41.8 million was reflective of the mix of projects undertaken in the year. Productive output in the form of productive factory hours increased 5.4% in the period, although with comparably less raw material content per productive hour has reduced in a reduction in turnover relative to 2024. The group delivered a basic earnings per share of 9.8p for H1 '25. In the early part of the year, the group issued 400,000 shares into the employee share ownership trust to enable settlement of future senior management share awards. The issue of shares represented 3.1% of the issued share capital of the group. The group continues with significant cash balance of GBP 18.7 million as of 30 June and maintains a 0 debt position. The reduced level of revenue, notwithstanding the increased output in the period is reflective of the work mix. Timing of margin recognition on some of the company's principal contracts, combined with a continued difficult trading environment has resulted in a profit before tax of GBP 1.7 million for the first half of 2025. This graph summarizes the cash movement over the period. During the period, the balance of GBP 18.7 million at the period end. It is anticipated that a modest increase to the level of work in progress will continue to be encountered in the second half of the year. 2025 notes the anticipated final year of our capital expenditure program. The expansion of the Tubecon business and the want to further increase the structural steel capacity and heavy lifting capabilities notes the construction of a dedicated facility to enable the largest and heaviest structures to be delivered. The Tubecon facility situated at our Shafton site came in on budget at a cost of GBP 1.7 million and became operational in August this year. As previously mentioned, the final 2 machines are now anticipated to be completed in 2026.

The divisional breakdown and this organogram shows the makeup of the Billington Group of companies. It can be seen on the pie chart and noted the increase of revenue for Specialist Protective Coatings, Peter Marshall Steel Stairs and all who have been very busy. Revenue for Billington Structures reduced, as mentioned earlier, partly due to the increased complexity of projects and the consequential reduction in the quantity of raw material content. This spread of work for Billington Structures should be noted the activities in the most buoyant sectors, high-tech food processing, data centers, energy from waste. We're also currently developing a number of film studios in Bedford for Warner Bros., a sector that is promising further growth moving forward again. Looking forward, future work is predominantly in the same sectors, although includes project delivery in the defense sector, education, the return of large-scale retail distribution and processing buildings and sustainable energy generation. Peter Marshall is our steel stair company based out at Leeds. As in previous years, it can be noted here the wide range of clients as well as in-group trading within structures. Peter Marshall continues to benefit from repeat business in the more buoyant sectors, and the company continues to perform well at near full capacity with visibility of workload well into 2026. Easi-Edge, our safety solutions company, as a result of subdued demand in the commercial, education and health sectors is experiencing reduced level of utilization for its principal product. There remains a diverse range of clients still. We have continued to invest in replacing our whole barrier fleet with a new design lightweight version, which we're rolling out over the remainder of '25 through '26. We are hopeful as the market recovers, as will Easi-Edge’s revenue and profit as we have seen previously when the downturn in the market. The company notes pricing pressure in the market as competitors discount stock to maintain utilization. Hoard-it, our environmental holding and Brand-it, its associated graphic branding solutions company has posted another strong performance from the company after a slow start to 2025. This is as a result of poor weather delaying contract starts and project deferments as, again, result of government-led indecision. Operating at near full capacity, we are investing methods to increase capacity within the business. Hoard-it and Brand-it benefit from being able to deliver to all construction sectors, including the residential sector. Shafton Steel Services is one of the largest steel processing businesses in the U.K., servicing internal and external clients with cutting, burning, drilling and processing of heavy plate. We have continued to install and commission new machineries throughout that period that is now in operation. Shafton Steel Services are extremely busy, currently servicing not only internal clients, Billington Structures, Peter Marshall Stairs and Tubecon as the bridge work is secured by this new venture. External contracts continue to be placed from our respective competitors as well as the wider steel sectors. There's a good strong pipeline with internal and external contracts maturing. Specialist Protective Coatings is a specialist facility supporting the group's wider requirements for the application of hi-tech paint treatments and bioprotective coatings for internal group companies as well as the wider construction oil and gas pipeline industries. Again, there's a high workload for internal clients, Billington Structures, Peter Marshalls, which will continue through '25 into '26. There's also been work carried out and continues for respective competitors of Billington Structures as the other group companies are. We have successfully delivered our first project to a cherish client in the water industry. We anticipate good further opportunities in this market. The capabilities and capacities of this facility in Sheffield set it aside from other painting contractors operating in the market. As we've mentioned previously, our new venture, Tubecon specializes in architectural and bridge steel work. Following a slow start to the year, Tubecon has successfully secured a number of principal contracts that are currently being delivered. We view the future for Tubecon to be buoyant following the government's release of funding for infrastructure projects. The new production facility has now been completed and has been in full use from August 2025. The division has a good order book and a strong pipeline that spans through to the end of 2026. ESG commitments. There's been good environmental performance, again, maintaining carbon-neutral status for the group, and we will continue to record and reduce carbon impact. We will maintain social responsibilities supporting local and national charities as well as those charities local to the construction projects through our group charity set up in 2026. We're also identifying local labor and apprenticeships close to our construction projects. We have maintained Gold Member status of The 5% Club, an organization that represents businesses that have 5% or more of their workforce in earn and learn positions. This champions our commitment to modern apprenticeship. We respect the governance required in being a plc listed company, and we will continue to follow the QCA code, implementing changes as the new code comes into effect. And our 5P’s strategy, we launched this initiative in 2023, recognizing the need for constant cost optimization and the drive for manufacturing efficiencies. An increased emphasis is now being dedicated to implementation of broad-reaching margin improvement projects. This will be driven principally and managed by Trevor in his new role as Chief Operating Officer. The component parts of our 5P’s strategy. Respect people, developing, promoting, rewarding and primarily keeping our staff safe. Properties. Optimizing, updating, modernizing, expanding and maximizing the facilities to ensure production is safe, efficient and fit for purpose. Product. Focusing on quality right first time, providing exceptional service to guarantee repeat business that protects our company and clients. Our position, we believe we are the best in the business and aim to maintain this status for our cherish clients, expanding our offering into new markets. Plant. We are committed to ensure that our green initiatives deliver on our commitments, and we as a group play our part on the road to carbon zero. In respect of the wider steel market, the government assumed control of British Steel in April 2025 and has been vocal in its support for maintaining a steelmaking industry in the U.K. Discussions are ongoing for British Steel's future and government's commitment for U.K. steel use for publicly funded contracts. British Steel continues to supply our construction sections and other products in the U.K. and is exporting to other world countries. Steel prices have continued to be stable on the back of stable input costs. We have strong links with the country's biggest stockholders and European suppliers, and the group have managed to negotiate fixed prices or fluctuation clauses for steel material for all of its current commitments. U.K. steel supply continues to be unaffected by U.S. steel tariffs. However, it is noted global steel output has reduced 1.9% during this period. In respect of long-term growth, our strategy is to carry this out organically and to acquire and diversify where the right opportunities are presented and the market environment shows signs of recovery. We will continue to drive margin improvement through optimization, modernization of our efficiencies, continuing to reinvest profit back into the developing businesses. We have a well-established succession plan, developing and promoting the next generation of managers and directors. In the current market, we have strengthened our commercial team, focusing on securing the best contracts in the most promising sectors with fair terms and conditions. We will continue to be acquisitive as the group has been in the past, and we will continue to review all opportunities that present. Looking at Billington Structures order book, this slide shows the Billington Structures historically and the associated level of production hours secured. This workload not only completes 2025, it also spans into 2026 with some elements into 2027 and consists of mainly larger, more complex projects. Some of these projects have been subjected to client-led contract delays and escalation in terms of fabrication content, resulting in margin recognition being later than we had previously anticipated. In summary, with respect to the outlook, where certain sectors are more robust than others, the macroeconomic environment has resulted in reduced opportunities and a more competitive market. It's not helped with government policies and the process of review continues to result in projects being abandoned, delayed and some revised. It is affecting the financial performance of our wider industry. As a result, the structural steelworks sector has contracted in 2024, although it is forecast to return to growth in 2025. We feel this is more likely to be delayed to return to growth in late '26. Our input costs have remained stable with supply readily available and credit insurance, where possible is put in place, which has proved essential given the market instability. However, we still prioritize the most financially robust clients. In summary, the capital investment program, hugely successful and is largely complete. Some elements of investment will be implemented in '26. Continued commitment to local employment and modern apprenticeships, and we have successfully been employing new staff from our resident training provider, Betterweld. We're continuing to focus on manufacturing efficiencies, as I say, factory facility optimization and other margin-enhancing projects. The bespoke fabrication facility for Tubecon commissioned in full use and the order book is robust and the pipeline is encouraging to the end of '26. Our experienced capable management team adheres to our established group policies to ensure strict governance is maintained. Our workload for the remainder of '25 and '26 is dominated by projects in the most robust of sectors, mainly power, health, ongoing education, data and defense. Many of our future opportunities now are of a similar nature. We have successfully delivered a sizable project in the food processing sector in the EU and are now reviewing other opportunities. Finally, financial. This robust interim results reflects a difficult period of client-led project delays and reprogramming, which has resulted in margin deferment into 2026. The group continues to be debt-free and will use its strong cash reserves and robust balance sheet to capitalize on any complementary acquisitions that are presented. And finally, we are confident that margin-focused improvement will mature into increased shareholder value. We thank you for listening to this presentation. I'll throw this back to Alexandra now to control any questions there may be.

Great. Well, Mark, Trevor, thanks very much for your presentation. [Operator Instructions] Just while the company takes a few moments to review the questions that have been submitted today, I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed by our investor dashboards. As you can see, we have received a number of questions, both pre-submitted and throughout today's live presentation. And what I'll do now is I'll just hand back to you to read out those questions, and I'll pick up from you both at the end.

Okay. I'm going to throw this one for you. Trevor, you mentioned output has increased 5.4% in the first half of the year. How has this been achieved?

Mark, you mentioned earlier the continued employment of apprentices, fabricators improvers, principally our Shafton site. We commenced the installation of a night shift at that facility in late '24. We've been establishing increased volumes of resources into that night shift. There's a want and a desire to further increase that to further optimize the resources on that site. That will be one of my projects in my new role moving forward and how can we increase the level of volume and output of our fixed cost assets and how can we maximize the value generated there from. And that's one of the targets to continue to increase the output through the expansion of that night shift at that sites.

Another one for you, I think. Your cash has fallen from GBP 22 million to GBP 19 million in the period. I assume this is before the dividend has been paid.

Yes. Okay. So that's correct. It's fallen from GBP 22 million the year, '24 year-end to GBP 19 million at the half year. That is before the dividend was paid in July. Principal reasons for the fall, capital expenditure associated with the new facility relating to Tubecon in the period and then a modest increase in the level of work in progress and working capital that accounts for the balance. It is likely we'll see another modest increase in working capital towards the end of the year before that unwinds early part of '26.

I have mentioned Trevor is moving over to COO. Can you expand on what will this encompass?

Okay. Another one for me. Yes, so I've moved over to the COO position from to my role. I guess I've increasingly been involved in for a number of years, so increased involvement in the operations and activities of the wider group and businesses. So short term, my focus will be on projects looking internally, how can we generate increased value for shareholders. So there's a number of short-term projects optimizing the facilities, looking at the structure of some of a shifting, the people and other resources within the group. More longer term, as we see a recovery forecast to be in '26, that focus will return to more positive projects and outlook looking at growth, diversification, acquisitions and freeing some of my time and resource to expand upon some of those activities.

Within your presentation, you referred to deferring of profit into 2026. Could you elaborate on why the forecast remains unchanged in 2026? Well, principally, what happened is a number of large -- not just one, but a number of large projects have been subject to client-led delays, some as a result of delay in the installation, securing of M&E equipment that goes in the facility, one of them changes into the process that's necessitated further works below ground, others in expansion. This has meant that our clients have either been led to defer certain phases, which have then knocked back into '26 and also in one instance, a whole project has been delayed by 1 year. So our profit cannot be recognized where we anticipated at the beginning of the year in 2025, and it's been deferred into '26. This profit hasn't disappeared. And so what it has, has been knocked back a year into 2026 and some into 2027. So we are carrying into '26 a strong order book that is a good percentage of the capacity we have of the group in the structural steelwork business. But we still have capacity to fill. Now the market is competitive, and we are subject to competing in that market. And so we're being respectful of the level of competition and what profit we can make to fill that out of the capacity we've yet to fill. So the best one in the world as that work is secured in '26 and that profit potentially is matured, we will review that on an ongoing basis as the company has been seen to do in previous years.

Thank you, Mark. Next question. Given the low valuation, do you think the company is vulnerable to a takeover then? Second time we've been asked this question today. What we can say is we've not received any approach from anyone. Do we expect to? No. Although what we can say is there's very limited, if any, overseas investment in the structural steel market in the U.K. This has been attempted in the past, although not completed. Well, do we foresee it immediately? No, we don't. Next question. As a result of the large drop in profits, it now looks slow. The number of long-term incentive plans may not be achieved in full. Can the Board reassure shareholders that the base P&L targets will not be lowered, making the incentives easier to achieve? I think I can firmly speak on behalf of our Remuneration Committee that the targets set valid at the time and will remain in place in full with no altering to the performance targets that have previously been issued to the market. Okay. Assuming the directors believe the company is too cheap, will there be any direct buying. To you Mark?

To be honest, we have demonstrated by actions today with both myself and Trevor committing to buy and not inconsiderable amount of shares ourselves. I think that's probably been put out in an RNS today. So we believe the company is worth investing in and then put our money where our mouth is. So from that respect, yes, we believe we are good value. That’s alone, you look at our net asset value would lead you to believe that, that stands at GBP 3.84. So at the current rate of GBP [3.85], we believe we're a remarkable value as it is and have committed ourselves personally to demonstrate that.

Thank you. Given the difficulties in the industry generally and the strong group cash position, is the Board looking at any potential acquisitions? I think what we spoke about before, we have an undrawn RCF facility of GBP 6 million, which is there to support any identified acquisitions as they present themselves. A good element of the cash balance is surplus to daily requirements and again, will contribute or likely contribute to any future acquisition. I think as I mentioned earlier, short term, my role will be immediately looking inwards, identifying, implementing improvements within the group, the strategic direction and optimizing some of the cost structures within the group. Acquisitions will be formally picked up and progressed after some of those internal projects have been delivered.

We've got some very long questions here. Just scanning through these [indiscernible]

#1. Now, there's a question here about knowledge of the timing of profit recognition and the impact on the '25 year expectations. Contracts have been fluid. They've been fluid for a little while now. What we can say is contract profitability is largely unaffected. That's it, contract profitability due to some contract escalation in terms of size has improved in a number of cases. We've here the principal reason is the timing of contracts and when the margin recognition will occur. So none of that or very little of that is in our gift to ascertain. We've been trying hard to understand our clients' reprogramming, changes on site, deferment of some element of works. So we are now constantly reassessing the likely timing of some of the profit recognition, which has been constantly evolving over the course of the year. We have mentioned earlier that we've been affected by an ongoing issue with one project that relates to work that is not in our supply. That's almost on a day-to-day, week-by-week basis where we're receiving instructions to delay elements of our work and phases. And so one of them refers to the timing of this. I can tell you and confirm that this is very hand to mouth. A long question here, but I think the top and bottom of this one is, would you consider a share buyback? Again, not the first time we've been asked this question today. We have received conflicting opinions from certain investors and institutions of encouragement to consider a buyback -- all the way to place absolutely [indiscernible] What we have committed to is consider and discuss as a Board, so if a buyback of some or any element of shares may be worth considering in the short term. So it is on the agenda to be considered what the outturn and outcome may be is yet to be resolved. A healthy order book versus value. What we can say is on the graph there, we don't publish the value. We can say substantially a majority of the workload is secured for 2026.

Just to clarify that. There's a question there if any of the group companies are trading at a loss of [indiscernible]

Given the significant revenue reduction, are any divisions operating at a loss? The answer is no. Easi-Edge, as mentioned earlier, as a result of reduced utilization levels associated with a reduction in output of multistory buildings. But is it operating at a loss? No, is part of the role from CFO to COO intended to address the margin decline and/or recognition of a lack of focus previously? Well, the answer is no. The market is tough. The market is subdued. There's evident pricing pressure as a result of lack of demand relative to the level of supply in the industry. You can see that through reduced output in our sector in '24 and a likely further reduction in output in '25. And again, you can see in the global steel output -- global steel output, there is fall of 1.9%. However, the fall is significantly larger than that because China and India have actually seen increases. So Europe and the surrounding Scandic areas have actually seen a significant fall in steelmaking activity. So that's increased pricing pressure and the margin that we're able to win work at. That said, you can always be better. We want to be better. We must be better in an ever increasingly competitive market. So as I mentioned, short term, my role is to look at a number of projects, implement improvements in a number of areas and ensure we are the most efficient we can be, as one, to become more competitive but two, to enable margin that we earn on contracts to be maximized to increase shareholder value.

What are you likely to focus in the M&A trail? Are there any specific sectors or capabilities you need? The answer is there are a number of sectors we have reviewed in the past, and we continue to review. Any sectors, particularly, we can grow organically ourselves in the sectors that we actually supply into. So we're not viewing probably an acquisition for something our company already provides, but we are looking at any other sectors that we feel might be strong and exactly which ones they are well, as I say, we'll review them as and when they come up.

Next question. Do you think the pension buyout payment will be similar to the GBP 1.8 million, GBP 1.9 million surplus on the balance sheet? The short answer is the insurer that we have had indicative quotes from will take in effect an insurance premium through the taking on of the liabilities of the scheme. Therefore, the surplus won't be in the order that is shown on the balance sheet. The quotes we've got will it or do indicate a significant surplus will be returned. However, it's indicative at this point, although it's not the level of the surplus on the balance sheet.

What is Billington’s relationship with Gutenga investments? Gutenga Investments actually are a vehicle that relates back to the original company owner. He was a German gentleman that died leaving his investments in trust for his nephews and leases. It was originally 2 vehicles. His interest has been divested, and he's still a 19% owner and the representative of that trust, Alexander Ospelt actually is a nonexec on our Board. It was an intention to sell his holding down, which we have done over the years. However, we've got to a level now that he is satisfied with his investment. We don't believe that there's an overhang. And so as such, we're very grateful to have him as a stabilizing and helpful influence on the Board as well as an investor.

Okay. Two questions left. Can you get your money back from client delays given it's obviously costing you? In certain instances, the answer is yes. In certain instances, the answer is no. So what you find is often built into the contract is a degree of leeway by which the contract or a client can delay, pushback elements of fabrication works. So you will always have a lesser or greater degree of flexibility built in by the client into some of the contracts. Therefore, what we found is -- what we have done is filled the hole in some of the fabrication that's been left by certain delays that's not claimable to the client with cheaper, lower margin work that has influenced the '25 results but pushed back higher margin work into 2026. Last question. You said you'd be considering share buybacks. How do shareholders make representations in an effort to inform the decision-making process? Well, I guess all opinions are gratefully received while we do discuss and debate the subject. There is an e-mail address on the website to which you can contact. I suspect you could also come through the Investor Meets Platform, but there's definitely an ability to submit information or representations through the website. And as I say, please do pass on your opinion and that will be duly considered.

I think that concludes the questions, Alexander.

Perfect. Well, thank you very much for asking those questions from investors. Of course, the company can review the questions submitted today, and we will publish the response now on the Investor Meet Company Platform. Just before redirecting investors to provide you with their feedback, and it's particularly important to you both. Mark, can I just ask you for a few closing comments.

Sure. Firstly, I'd like to thank all of our shareholders for their loyalty and support. It is a difficult market, but we believe we are trading well. We have set with a few client-led delays that have deferred profit into 2026. The advice of '26 expectations have not been altered. And so hopefully, people can see that we're dealing with these issues. We have maintained in Billington Structures full order books during this period, and we are securing and have a good thread of work that not only supplies good volume for Billington Structures, but for other in group companies. There's still capacity to fill. So hence, we are out in the market looking for the best options to return good shareholder value. So we're in a good place. We're looking optimistically towards the future. We're looking for government support businesses within the next November statement as probably all of our colleagues and businesses and new shareholders are. So on that note, I'm keeping my fingers crossed for government's next review at the Autumn statements, but we're in good order and with a good cash balance and a very solid balance sheet. So hopefully, you'll stay on the order to us and watch as we progress through '25 and into '26. And thank you very much for the interest you've shown today.

That's great. Well, thank you both once again for updating investors today. Can I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order the management team can better understand your views and expectations on behalf of the management team of Billington Holdings plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.