Billington Holdings (LSE:BILN) — Interim Results

0:00 Good afternoon, and welcome to the BILLINGTON HOLDINGS PLC interim results investor presentation. Throughout this quarter presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time by the Q and A tab situated in the right 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 received in the meeting itself. Have the company can view the questions for 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 twenty twenty five.

0:50 Reduced revenue in the period as a result of a mix of highly complex labor intensive and relatively low steel content projects, PBT of 1.7 mil reflected a continuing difficult economic environment and subdued market conditions. Productive output within the structural steelwork entities was 5.4% higher in h one twenty five 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.

1:39 BILLINGTON has significant secured productivity hours well into 2026, enabling the company to be able to be selective with its future contract as it accepts. We are in the last year of a five 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.

2:35 The shareholder register. The first half of twenty twenty five notes stability in the shareholder register, and we thank our loyal shareholders for their support. As at 06/30/2025, the net asset value per share of the group was £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 remain subdued as a result of government policies in The UK and overseas, resulting in a stagnation of a number of large construction projects.

3:23 The group performance in the period was robust in the light of increasing difficult market conditions. The strong cash balance, combined with a zero debt position, has allowed for a dividend of £0.25 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.

4:12 2025 notes the anticipated final year of the deployment of the group's capital expenditure modernization program. Dollars 2,150,000 was spent on capital expenditure in the period with an associated depreciation charge of 1,300,000 Total capital expenditure is anticipated to be circa 3,250,000 for 2025, with the remaining element of the program now likely to be incurred in 2026. The surplus of the defined salary pension scheme of 12/31/2024 was 1,900,000. During the period, agreement has been reached to cease the salary link with the remaining in service deferred members of the pension scheme.

5:03 The scheme is now able to proceed towards a formal buyout of 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 at 41,800,000 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, her productive hour was reduced in a reduction in turnover relative to 2024.

5:51 The group delivered a basic earnings per share of 9.8p for h one twenty five. 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 18,700,000 as of June 30 and maintains a zero debt position. The reduced level of revenue, notwithstanding the increased output in the period, is reflective of the work mix. Timing of margin recognition and some of the company's principal contracts, combined with a continued difficult trading environment, has resulted in a profit before tax of 1,700,000 for the first half of twenty twenty five.

6:52 This graph summarizes the cash movement over the period. During the period, the balance of 18,700,000 at the period end. It's anticipated that 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 expand 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 1,700,000 and became operational in August this year.

7:48 As previously mentioned, the final two machines, are now anticipated to be completed in 2026. The divisional breakdown, 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 HOLDINGS, all who've 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 it shouldn't be noted the activities in the most buoyant sectors, high-tech food processing, data centers, energy from waste.

8:43 We're also currently developing a number of film studios in Bedford for Warner Brothers, a sector that is promising further growth moving forwards 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 of Leeds. As in previous years, it can be noted here the wide range of clients as well as in group trading with BILLINGTON 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.

9:38 EasyEdge, 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 are rolling out over the remainder of '25 through '26. We are hopeful as the market recovers as will Easy 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. HOLDIT, our environmental hoarding and BRANDIT, its associated graphic branding solutions company, has posted another strong performance from the company after a slow start to 2025.

10:39 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. Audit and Brandit 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 UK, 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.

11:30 Shaft and steel services are extremely busy, currently servicing not only internal clients, BILLINGTON Structures, Peter Marshall's 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 high-tech paint treatments and fire protective coatings for internal group companies as well as the wider construction oil gas pipeline industries.

12:20 Again, there's a high workload for internal clients, BILLINGTON Structures, Peter Marshall's, which will continue through '25 into '26. There's also been work carried out and continues for respected competitors of BILLINGTON structures as the other group companies are. We have successfully delivered our first project to a cherished 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 steelwork.

13:07 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 had 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 twenty twenty six. 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 project through our group charity set up in 2026.

14:04 We're also identifying local labor and apprenticeships close to our construction projects. We have maintained gold member status of the five percent 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. Our five piece strategy. We launched this initiative in 2023, recognizing the need for constant cost optimization and the drive for manufacturing efficiencies.

14:52 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 operating chief operating officer. The component parts of our five p 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.

15:42 Our position, we believe we are the best in the business and aim to maintain this status for our cherished clients, expanding our offering into new markets. Planned. We are committed to ensure that our green initiatives deliver on our commitment, 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 UK. Discussions are ongoing for British Steel's future and government's commitment for UK steel use for publicly funded contracts. British Steel continues to supply our construction sections and other products in The UK and is exporting to other world countries.

16:35 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. UK steel supply continues to be unaffected by US 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 when the right opportunities are presented, and the market environment shows signs of recovery.

17:25 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, on the associated level of production hours secured.

18:19 This workload not only completes 2025, it also spans into twenty twenty six 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, whereas 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.

19:12 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 twenty twenty six. 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 finally financially robust clients. In summary, the capital investment program, hugely successful and is largely complete.

19:57 Some elements of investment will be implemented in '26. Continued commitment to global employment and modern apprenticeships, and we have successfully been employing new staff from our resident training provider, Better World. 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 twenty six. Our experienced, capable management team adheres to our established group policies 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.

20:57 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 result 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.

21:51 We thank you for listening to this presentation. I'll throw this back to Alexandra now to control the any questions there may be. Right. Well, Mark, Trevor, thanks very much for your presentation. Ladies and gentlemen, please do continue to submit your questions. You can do so just by using the q and a tab that's situated in the top right hand corner of your screen. But just while the company take a few moments to review the questions that been submitted today, I'd like to remind the recording of this presentation along with a copy of the slides and the published q and a can be accessed via your 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 gonna 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?

22:42 Well, Mark, you mentioned earlier the continued employment of apprentices, fabricators, and grovers, principally our shaft and site. We commenced the installation of a night shift at that facility in late twenty four. 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 the resources on that site. That'll be one of, my projects in my new role moving forward in 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 in that night shift of that site.

23:35 Another one for you, I think. Your cash has fallen from 22,000,000 to 19,000,000 in the period. I assume this is before the dividend has been paid? Yes. Okay. So that's correct. It's fallen from 22,000,000 at the year '24 end to 19,000,000 at the half year is before the dividend was paid in July. Principal reasons for the fall, capital expenditure associated with the new facility relating to tube comp 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 twenty six.

24:28 I have mentioned Trevor is moving over to COO. Can you expand on what will this encompass? Okay. Another one for me. Right. So I'll do mine. Yep. So I've moved over to a COO position from tomorrow. A 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 structure of some of the shifting people and other resources within the group.

25:20 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. Good questions. Within your presentation, you referred to deferring a profit into 2026. Could you elaborate on why the forecast remains unchanged in 2026? Well, principally, what's happened is a number of large not 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 and e equipment that goes in a facility.

26:17 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 one 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, it's been knocked back a year, I mean, to 2026 and some into 2027.

27:04 So we are carrying into '26 a strong order book that is a good percentage of, the capacity we have of the group in structural, 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 yet to fill. So with the best will in the world as that work is secured in '26 and that profit potential is matured, we will review that on an ongoing basis as the company has been seen to do in previous years.

27:54 Alright. Thank you, Matt. Next question. Given the low valuation, do you think the company is vulnerable to a takeover bid? Second time we've been asked this question today. What we can say is we've not received any approach for from anyone. Do we expect to? No. Although what we can say is, there's very limited, if any, overseas investment in the structural steelwork market in The UK. This has been attempted in the past, although not completed. But do we foresee it immediately? No. We don't. Next question. As a result of the large drop in profits, it now looks low the number of long term incentive plans may not be achieved in full. Can the board reassure shareholders that the base p and l targets will not be lowered, making the incentives easier to achieve?

28:48 I think I can firmly speak on behalf of our remuneration committee that the target set, valid at the time and will remain in place in full with no altering altering to alter 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 director buying for you, Mark? To be to be honest, we have demonstrated by actions today with both myself and Trevor committing to buy, a not inconsiderable amount of shares ourselves. I think that's probably been put out in an r and s today.

29:36 So we believe the company is worth investing in and then put our money where our mouth is. So, sorry. From that from that respect, yes, we believe we are good value. That alone, you look at our our net asset value, would would lead you to believe that that stands at £3.84. So at the current rate of of £2.85, we believe we're remarkable value as it sees and have committed ourselves personally, to demonstrate that. Right. 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've spoke about before, we have a undrawn RCF facility of £6,000,000, which is there to support any identified acquisitions as they present themselves.

30:32 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 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.

31:28 We've done that one. There was a question here about knowledge of the timing of profit recognition and the impact on the twenty five 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.

32:19 With 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 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.

33:10 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. Got 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 have been asked this question today. We have received conflicting opinions from certain investors and institutions of encouragement to consider a buyback for all the way to, please, absolutely don't.

33:56 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 out and outcome may be is it's yet to be resolved. You have a healthy order book. What is this 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.

34:46 Just to clarify that. There's a question there if any of the group companies are trading at a loss, which they're not. Given the significant revenue reduction, are any divisions operating at a loss? The answer is no. Easy Edge, as I 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. It's Okay. As part of the role from CFO to COO, intended to address the margin decline and our recognition of a lack of focus previously? Well, the answer is no. The the market's tough. The market's subdued. There's evident pricing pressure as a result of a lack of demand relative to the level of supply in the industry.

35:41 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 it in the global steel output global steel output, there has fallen 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 reduced 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.

36:32 So as I've 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. 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 on in the m and 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 they we continue to review. Any sectors particularly, we can grow organically ourselves in the in the sectors that we actually, supply into. So we're not viewing probably an acquisition for something our our company already provides, but we are looking at any other sectors that we feel might be strong.

37:38 Exactly which ones they are well, as I will review them as and when they come up. Next question. Do you think the pension buyout payment will be simpler to the similar to the $18,000,001,900,000 pound surplus on the balance sheet. The short answer is the insurer that we have had indicative quotes from will take in effect a cut and 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 in or do indicate that a significant surplus will be returned.

38:25 However, it's indicative at this point, although it's not to the level of the surplus on the balance sheet. What is the what is BILLINGTON's relationship with Gatenga Investments? Gatenga Investments actually are a vehicle that relates back to the original company owner. He was a German gentleman that that died leaving his investments in trust for his nephews and nieces. It was originally two vehicles. His interest has been divested, and he's still a 19% owner. And the representative of that trust, Alexander Oschfeldt, actually is a nonexec on our board. It was a an intention to sell his holding downs, which we have done over the years. However, we've got to a level now that he's satisfied with his investment. We don't believe that there's an overhang.

39:27 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. K. Two questions left. Can't 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, push back 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 or what we have done is fulfilled 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 or pushed back higher margin work into 2026.

40:35 Last question. You said you'd be considering share buybacks. How 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 email 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 to the website. And as I say, please do pass on your opinion, and that will be duly considered. Thank you. I think that concludes the questions, Alexandra.

41:24 Perfect. Well, thanks very much for answering those questions from investors. Of course, the company can review all the questions submitted today, and we will publish the response out on the investor meet company platform. Just before redirecting investors, provide you with their feedback, Shneur is 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're beset with a few client led delays that have deferred profit into 2026. The advice of 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.

42:29 There's still capacity to fill, so, hence, we are out in the market looking for the best options that return good shareholder value. So, we're in a good place. We're looking optimistically towards the the future. We're looking for government support of 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 at the autumn statements, but we're in good order and with a a good cash balance and a very solid, balance sheet. So, hopefully, you'll stay on the oil to us and, watch as we progress through '25, into '26.

43:19 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, nor 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. Thank you.