MIDAS SHARE TIPS: Get in on the action as steel company Billington Holdings turns blockbuster profits from movie studios
Shepperton Studios is home to some of the UK’s best-known films and TV series, from Downton Abbey to Anatomy Of A Scandal. Shepperton is used by filmmakers around the world, as well as streaming giants such as Netflix and Amazon.
The project highlights Britain’s growing status in high-end film and TV production, an industry worth more than £6bn last year, with further increases expected in the near future.
Steel group Billington Holdings was instrumental in bringing about the Shepperton upgrade. Based in Barnsley, South Yorkshire, Billington turns raw steel into finished products used by top contractors in the UK. Shares are £4.15 and should move higher under no-nonsense CEO Mark Smith.
Billington was founded just after World War II with the opening of a single steel mill. Since then, the company has been known for its technical expertise and high-quality finish, making complex steel structures, as well as specialized coatings, safety barriers and billboards.
The construction industry is a cyclical sector and some areas have been quite down lately. Smith has led Billington into high-growth areas including renewable energy, data centers, online warehouses and media production.
Studio hit: Anatomy Of A Scandal, with Sienna Miller and Rupert Friend, and Shepperton
The company has supplied the steel for Shepperton and is involved in a major new project for manufacturing giant Sunset Studios. Traditionally based in Hollywood, Sunset is spending around £700m on a studio in Broxbourne, Hertfordshire, a site that is expected to bring thousands of jobs to the area – and plenty of work for Billington too.
Other Billington clients include Amazon, Google and Microsoft – American tech giants who all spend a lot of money on state-of-the-art facilities here.
Smith has also tilted Billington in a green direction by building waste-to-energy plants, including Newhurst, a pioneering site near Leicester, which is expected to turn 350,000 tons of household waste per year into energy for some 80,000 households. All of these activities helped Billington deliver sparkling results for 2022, which were revealed last week. Revenues rose 5 per cent to £87 million, but profits more than quadrupled from £1.3 million to £5.8 million, while dividends more than quintupled, from 3 pence to 15.5 pence.
Smith is also optimistic about the future. Billington’s order book has doubled since last year, with the pipeline for 2023 nearly full and the first half of 2024 quickly filling up. Keen to expand even further, Smith has undertaken a £11.5m three-year investment programme, taking full advantage of the government’s super deduction scheme, designed to encourage businesses to invest in growth.
Once the program is complete, Billington will be able to deliver goods faster and more effectively than ever before, with top-notch machinery and equipment. At the same time, the company is expanding its workforce, up from 10 percent last year to 450 people and likely to increase again from now on.
The past few years have been tough for Billington. The pandemic has severely affected business activities. The war in Ukraine drove up costs and turned steel supplies upside down, as much of the British construction industry depended on raw materials from the now Russian-occupied city of Mariupol.
Reputation: Shepperton has just completed a £500m expansion project making it the second largest manufacturing site in the world
Smith and his team met these challenges with a mix of nous, ingenuity and genuine perseverance. Alternative sources of steel have been found, cost pressures have been addressed and a training school is planned to equip young people with the skills Billington needs.
Brokers expect a 30 per cent increase in revenue to £115m by 2023, with profits up to £8m and a hefty increase in dividend to 20p. Further growth should follow and the group is actively seeking acquisitions to complement existing business lines.
Midas verdict: Billington is a well-run, highly regarded company specializing in robust sectors of the economy. At £4.15, the shares should go a long way – and the dividend makes for an attractive income stream too.
Traded on: GOAL ticker: BILN Contact: billington-holdings.plc.uk or 01226 340 666