Billington Holdings (LSE:BILN) — Full Year Results

0:01 Good afternoon, and welcome to the BILLINGTON HOLDINGS PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the q and a tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all the 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 Mark Smith, CEO. Good afternoon to you, sir.

0:31 Good afternoon. Good afternoon. I'm Mark Smith, Chief Executive Officer for BILLINGTON HOLDINGS PLC. I and my colleague, Trevor Taylor, Chief Financial Officer, are pleased to present to you our twenty twenty three year end results. Our executive summary provides some of the highlights of 2023. We're pleased to be presenting record results for the company for both profit and revenue. There's been an improvement in trading that reflects the successful delivery of a number of principal projects assisted by an improvement in input costs as material prices equalized during 2023 following the impacts of the Ukraine conflict.

1:17 Projects across all sectors have been successfully completed and the company has benefited from selling construction solutions included from in group divisions. We're pleased to see that the momentum gained primarily in the second half of twenty twenty three has continued into 2024, and we have recently announced contract wins across multiple market sectors. In a market that has been in regression during 2023, we are aware of the macroeconomic headwinds in the industry looking forwards. However, BILLINGTON has achieved an increased share of the market and can boast the largest forward order book on company record. Our strategic capital investment program has a further two years remaining, and we are witnessing the improvements in productivity, efficiency and quality that has assisted in achieving these excellent results.

2:14 Most major pieces of CNC equipment will have been replaced and new technology implemented once this program has been satisfied. We were extremely pleased to have recently opened our new welding academy, BetterWeld in Barnsley, which we will secure a local labor force and assist the future of the business whilst improving local employment opportunities and delivering training to the wider sector. We are pleased to have rewarded our loyal investors with a record company dividend of GBP $3.03 a share to be paid in July 2024. Trading for seventy five years, BILLINGTON is a group of construction related companies. The most significant group company is BILLINGTON Structures, the third biggest UK steelwork contractor, trading for three sites, two in Boulsley and one in Bristol.

3:07 The company designs, manufactures and erects the largest steel frame structures in The UK and Europe. Peter Marshall's, a steel stair and secondary steel manufacturing and construction business based in Leeds, contracts with steel fabricators and main contractors in a wide range of industries. Shaft and Steel Services, trading from a site near Barnsley, offers a comprehensive range of cutting edge steel processing services to steel fabricators, wider engineering and infrastructure markets. HOLDINGS and its associated graphics division branded based in Barnsley offers a unique range of environmental, sustainable and reusable holding solutions to its developer and main contractor client base across all construction sectors.

3:59 Easy Edge trading from Tuxford near Newark, highest of the construction sector, its market leading edge protection systems and related range of safety products. Specialist Protective Coatings located in Sheffield is a specialist paint application business, providing essential fire resistant treatment of building structures, corrosion protective to bead of nostril stairs and paint services to the wider steel sector, including oil, gas and water industries. We will provide further details later in this presentation.

4:37 BILLINGTON HOLDINGS was originally listed in Canada as AMCO Corporation PLC in the 1980s and transferred its listening to The UK upon the formation of the AIM market. In 1982, AMCO acquired BILLINGTON to help with the rapidly growing need for structural steelwork required in the local. The company became a UK listed company in September 1989 before changing its name to BILLINGTON HOLDINGS PLC in 2008. The group was formed by Henry Schnell, a German gentleman who came to The UK after World War two. Although listed on the stock exchange, Henry maintained a significant shareholding in the group until his death in 2003.

5:25 Henry Snell left circa 50% of the shares in the group to a family trust made up of his nephews and nieces and a further 25% of the shares were placed in a charitable foundation by the name of Tarrant. Recognizing the lack of trading liquidity in the shares, Gatanga and Tarrant have divested shares, these being purchased by a number of investors, The major investors on the register being Close Brothers, Otis Capital, Ruffa and GPI. At Coriant Trustees, the other major shareholder on the register is the company's own share scheme. With the current price of roughly £4.95 the share price has increased 100% from 01/01/2022 following the progression of the group's trading results.

6:18 The next slide, prevailing structure, show a range of the projects completed and what sectors. As we've moved on to the group company divisional highlights, it shows those prestigious projects that have been successfully delivered as well as the broad geographical and market sector spread.

6:41 Peter Marshall's have enjoyed an extremely busy 2023 and boasted positive order book. As in previous years, it can be noted here, the wide range of clients as well as in group training with them into the structures.

6:59 Easy Edge has continued to be impacted by the softening of the commercial market, office market. However, trade is now more buoyant and in group companies continue to make a valuable contribution to group revenue and profit.

7:19 HOLDINGS achieved a record turnover in 2023. Positive trading has continued into 2024 with record forward order books. Branded, a division of HOLDINGS provides graphic solutions for the HOLDINGS product as well as third party systems. Brandit is now recognized as a premium branding and marketing company and is significantly contributing to the overall HOLDINGS results. Shafton Steel Services continues to service the most demanding steel processing projects for its wider range of customer base. The division services all sectors of the engineering and infrastructure markets as well as providing its specialist services to building constructions.

8:15 And finally, SPC. This specialist facility supports the wider requirements for the application of high-tech treatments and fire protective coatings. The group is starting to yield benefit from the significant investment in automated equipment and the modernization program during the year. SPC as well as providing in group services has maintained relationships with previous companies' external clients in the oil, gas and pipeline sectors. I'm delighted to say that 2023 has seen a record performance by the group, achieving record results for turnover, profit before tax and return on capital employed. As a measure of our performance and confidence in the future moving forward, the group has declared its highest dividend since the formation of the BILLINGTON Group in 2008.

9:10 We have declared a dividend of 33p, with this being split into an ordinary dividend of 20p a share and an exceptional element of a further 13p a share. Operating profit margins of 10% have been delivered in the year. This is a result of the progression of the group's process improvement projects, further delivery of the capital expenditure program and the gains from the softening in the steel input costs over the course of 2023. BILLINGTON Structures, as of March 24, boasts a record order book that spans a number of market sectors, including energy from waste, retail distribution and education. Pleasingly, the cash generation and position at the year end was positive with a year end position of $22,100,000 Significant working capital position as of the half year unwound during the second half as work in progress was realized into cash.

10:11 The group has historically had an overdraft in place of $4,000,000 as a contingency. To allow confidence to investigate and progress further acquisition opportunities as they arise, the group has now implemented a $6,000,000 RCF facility from March 2024. Historically, the freehold properties have been held in their accounts of their historical cost value and following their revaluation as part of the RCF facility implementation, these have been revalued in the accounts, noting again on revaluation of 5,900,000 The legacy final salary pension scheme remains in significant surplus of $1,900,000 with no further money has been anticipated to be injected into the scheme for the foreseeable future.

11:01 2023, now to the challenging environment for the construction industry with a number of main contractors ceasing to trade. The group's policy is to credit insurance projects and clients where commercially available insurance can be obtained. Credit insurance limits have seen reductions across the board in the year as a result of some high profile company failures. My final point on this slide is to reiterate that following the regular increases in the Bank of England's interest rates, the decision was taken to repay the only remaining debt within the group. It was a mortgage related to the Shaffen facility taken in 2015. And pleasingly, the group is now debt free.

11:49 This slide provides some of the highlights for the 2023 trading period. Record revenue of $132,500,000 an increase of 53% EBITDA of $15,500,000 an increase of 93.8% earnings per share of 84.4%, an increase of 115.9 and a declared dividend, as previously mentioned, of £0.33 per share, reflective of the exceptional trading performance in 2023 and an increase of 112.9% from 2022. Return on capital employed of 57 percent versus 29.7% achieved in 2022.

12:39 The result for 'twenty three has been marginally impact impacted as a result of the revaluation of the group's freehold properties in the year and the strong cash generation in the year and GBP 22,100,000 balance at the end. This slide is a summary of the group's income statement for the year. On top of the record performance, you will note the positive interest generation are as a result of the elements of the cash balance now being placed on deposit. The interest earned on cash deposits is anticipated to increase in 2024. The capital expenditure in the year and the ability to write off the assets in year one against the corporation tax has had the effect of reducing the overall effective corporation tax charge to 22%.

13:31 The further anticipated capital expenditure in 2024 and 2025 will see the expected corporation tax rate to remain at circa 22%.

13:47 Following the implementation of a five year capital investment program, it's pleasing to note that tangible profit margin gains is being noted across the Billings and Structures business. There are two years remaining of the program in which the level of expenditure is expected to remain at circa $3,500,000 for the next two years.

14:11 Following graph gives details of the net cash flow movement in the year with positive cash generation across the group. The manufacturing industry has received more press of late than ever before with the request from Tata British Steel for government support to construct electric arc furnaces to replace existing blast furnaces. This will assist The UK in achieving carbon emission reduction targets and maintain the steel making industry in The UK Despite a mature supply of steel material from Europe and other works, retaining a steel manufacturing industry in The UK will secure home supply and ensure a competitive steel market. The results of 2023 have benefited from a steel input price that has equalized throughout the year being previously at an industry high as a result of the Russia Ukraine prices supply issues.

15:10 We feel that this price has now reached a level that is more conducive with the industry requirement at present. As demand rises, we feel that the price may rise from its current levels. Bearing this in mind, the company has very mature supply relationships and is able to secure fixed prices to ensure that we are not exposed to the potential rises during that any contract. Although the industry is predicting demand to contract during 2024, the group has record order books that should insulate against what is still a very competitive market. Predictions are that volumes should return in 2025. We have a good volume of work secured already for 2025, our intent on building on this order book.

16:01 This slide shows the message that we have presented earlier, which is the magnitude of the current order book in a market that is currently suffering in volume requirement. We're also pleased to have capacity secured into 2025. We have a good number of opportunities that are presenting that give confidence closing our production capacity for 2024 within the next few months and further enhancing volumes into 2025. The specialty sectors in the industry that we are well known to have successfully delivered over the past three years are still buoyant, with good potential for 2025 and beyond. We are very hopeful of securing a good volume of this work with other opportunities in the larger industrial, high-tech manufacturing and film industries.

16:50 With current workload and opportunities, this provides us with the confidence for 2024 and forwards into 2025. A breakdown of the structural steelwork market sectors is contained in the appendix for your information. The company's ESG focus group has flourished during 2023 and realized the ambition set by the Board in delivering carbon neutral status for the group. Our local social activities and charity endeavors have increased during 2023, and we have been able to support and sponsor more local and national causes than ever before. We have also launched our well trading venture, Batterwell, which will benefit the local area and company alike, and we have the ambitions to launch the same venture in Bristol later in 2024.

17:43 We have strengthened the Board dynamic with a new experienced non executive specializing in HR and ESG commitments. We are well positioned to deliver the increasing demands of governance required by the AIM market. We have launched our five piece strategy initiative in 2023 and will commit to deliver this in 2024, 2025 and onwards. We are to focus on people, developing, promoting, rewarding and primarily keeping our staff safe.

18:17 Properties, updating, modernizing, expanding and maximizing the facilities to ensure production is safe, efficient and fit for purpose our product, focusing on quality right first time, providing exceptional service to guarantee repeat business that protects our company and clients.

18:40 Our market position, we believe we are the best in the business and aim to maintain this statement status for our generous clients, expanding our offering into new markets. We are committed to ensure that our green initiatives deliver on our commitments, and we, as a group, play our part in the road to carbon zero.

19:03 The group has a defined strategy to drive long term growth focused on both organic and inorganic development. We continue to focus on margin improvement and driving efficiencies. With our targeted capital expenditure program and other margin improvement project together with increases in direct labor completed from both The UK and overseas. We continue to focus on training and developing skilled labor locally, working in partnership with our number of education providers. Europe presents a further opportunity for growth together with our expanding the markets we serve and focusing on larger, higher margin contracts. The Specialist Protective Coatings acquisition last year has demonstrated the benefits to the group from acquiring complementary businesses that can diversify and increase our offering to our customers.

19:58 We continue to look at further acquisitions and we'll undertake these where appropriate.

20:07 We are in a very good position with record order books delivering our 2024 commitments and furthermore build upon this to achieve better in 2025. We are very well positioned as a successful and recognized supplier to the most robust of sectors that are going to flourish in a challenging market. Our opportunities ahead and commitments to continue to update and improve facilities instill confidence in the future. Working together with our supply partners, we will endure the rigors of the ever changing material supply market and ensure that we are always well placed to supply now. Commitments made to replace and update old machinery through our extensive capital expenditure program is reaping benefits, and we will continue to deliver this through the next two years and beyond.

20:57 We believe in investing in our people, and we are committed to train, promote and provide opportunities for employees and the company to prosper now and in the future. The group has a robust balance sheet underpinned by a strong cash position and property assets. We will continue to protect our cash position, investing wisely and aim to continue to reward our loyal investors with competitive dividends. We both thank you for the time you've taken to listen to us today. The appendix in this presentation provides further information to your perusal. And we, as ever, willing to receive your questions either directly or through our representatives. Perfect. Mark, Trevor thanks very much for your presentation. What I'll do is I'll just bring your cameras up to full screen at this point. Ladies and gentlemen please do continue to submit your questions just by using the Q and A tab which is situated on the top right hand corner of your screen. But just while the company take a few moments to read the questions that have been submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard.

22:05 As you can see we have received a number of questions throughout today's presentation. And Mark, Trevor, if I could just hand back to you just to read out those questions and give responses where it is appropriate to do so. I'll pick up from you both at the end. Okay. Okay. Thank you for the questions. First question, given the recent property revaluations, are you considering selling any properties?

22:32 We've revalued the properties because there was a significant difference between historical cost and the market value, only right and correct to reflect that value in the accounts, hence, the processing of the revaluation. There are no plans currently to sell any of the group's properties. However, as Mark mentioned in the strategy and the five p's, we are committed to deriving the best value out of all our facilities, and they will remain, as always, under constant review. Next question. You have successfully exceeded your £100,000,000 revenue target. Congratulations. What is your next target? We want to consider, and continue to diversify and grow the business.

23:26 And Mark will take you through a recent development in the group's quest for further diversification. Some of you who have been close to the steel industry have sadly witnessed the demise of SH structures from Sherman in Alma. We're saddened by that. We were already reviewing the abilities of a premium architectural and bridge construction company. It's saddened to see that, that fell into administration. We struck early, and we are proud to say that we've secured a good number of the, principal staff. And we are going to reignite an existing brand called Tube Company, which is a tube to tube architectural and bridge company that we have within the group. We will assume the new staff from SA structures into TubeCon and that will now market, champion and deliver the offering that SA structures was able to give as well as the power and abilities that BILLINGTON can provide.

24:40 Also, we are very excited about this, and it's our entry into the breach sector,

24:46 in a more formal way with the skill set and abilities that SA structure gives, as such a premium brand. We're very proud to have still have this in the market as the wider steel industry is onshore. Thank you. Do you have any thoughts about geographical expansion, perhaps into the European market by means of an acquisition question?

25:16 We have been delivering into Europe. And until recently, our largest single contract was delivered in Belgium, a data center. And so we're currently delivering for a UK contractor, be it that they have a European company, to deliver through. We're we're delivering a cold store development through BILLINGTON structures in Holland. And so we only pulled back from, developing in Europe because of Brexit and the implications until we got to know and that market had settled down. We believe we've done that now. And we are looking at a number of European opportunities, be it that they still will be delivered from our UK base.

26:06 We see that as the way forward. We're not saying we won't look and review at European companies. And obviously, if there is a profit enhancing acquisition that is of interest to us, then we will review it. But for the time being, with the new exciting opportunities we set with due kind of the bridge market, we will continue to deliver the European projects from The UK through BILLINGTON Structures and other group companies, until such time as as we have time to review. Okay. Is the company considering a buyout of its defined benefit pension scheme now it is in surplus? The pension scheme has been in surplus for a number of years following significant cash injections for 2008 and 2009.

26:56 We are currently investigating the potential of the buyout. That's not to say we'll proceed with that or investigate all the options. We still maintain the salary link for the in service members, contained within the scheme, and that is the first issue that requires addressing. But we are considering the options about whether that is a viable, and economic way to cease the scheme within the company. And what have we got here? Oh. Okay. You say there's a continued focus on margin improvement.

27:41 This is the highest level ever. How do you improve from here? Well, as we've gone through the strategy there to continue to roll out our capital investment program, invest in our people, our facilities, look at markets, both home and abroad, will hopefully go some way to, keep us on that progression of margin improvement moving forward. The capital expenditure plan that we've had, we've seen great benefit from. That's improving our cost per tonne. It's actually enabling us to fabricate, with greater efficiency and better quality as a byproduct. That's all helping. The more machinery puts in an update, the better that margin is going to be.

28:29 Thank you. And my last question, why is the revenue forecast to decline if the group has the biggest ever order book? We published a number of weeks ago the award of £90,000,000 worth of orders recently secured. That's over a two year horizon period, '24 and '25. We hope and expect to secure some further works for the back end of 2024 that may see the activity levels, restore to something similar to 2023. We have a question about how the return of capital employed calculated by us differs to that reported in the Cavendish brokers now. That will be responded to separately, and we'll explain the two calculations.

29:21 I'm pleased about that. And that is all the questions that I think we can answer live today. Thank you. Perfect. Mark, Trevor, thank you very much for answering those questions from investors. And, of course, the company can review all the questions today, and we'll publish those responses on the Investor Meet company platform. But just before redirecting investors, provide you with their feedback, which is particularly important to the company. Mark, I just wondered if you had any closing comments. I'd just like to thank people for taking the time to review, to join us on this presentation. Obviously, we're we're very proud to deliver these results on behalf of the company. And I'd like to thank the board of directors and all our staff who may be watching this, for their support. We will continue to deliver good results through 'twenty four and 'twenty five in a challenging market.

30:11 Again, we are intent on rewarding our investors with a very competitive return on investment, we'll continue to do so. So thank you very much for the interest shown. If there are any questions, then please reach out to our representatives, and we'll do our best to answer. Thank you very much. Thank you. Perfect. Mark, Trevor, thank you once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, Some should be greatly valued by the company. 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.