Home Commercial book Beneficial stocks: on the way to a strong recovery

Beneficial stocks: on the way to a strong recovery

  • Adjusted full year pre-tax profit of £1.3m better than expected by £1.1m
  • Strong earnings recovery expected in 2022, supported by strong and higher-margin backlog

Based in Barnsley Billington (BILN: 220p), a leading UK specialist in structural steel and construction safety solutions, posted annual pre-tax profits well above analysts’ expectations, although the result was lower by £0.4 million to that of 2020 due to the implementation of certain projects. 2022, as previously reported.

More importantly, the group started the new fiscal year with a strong order book which will benefit from higher margin projects. The facilities are operating at full capacity and management has had the foresight to secure contractual margins by forward purchasing steel and stockpiling raw materials. This explains the £7m rise in inventory, a shrewd use of Billington’s heavily asset-backed balance sheet to mitigate the impact of short-term price volatility on some of its key input costs. The group still retains net cash of £9.4m (78p per share), providing financial security for clients.

Administrators report continued improvement in the number and quality of customer inquiries, and a focus on several larger, more complex projects where competition is less intense (both under contract and through competitive bidding). Specifically, these are large retail distribution warehouses, data centres, ‘Gigafactories’, food processing developments, public sector works, rail infrastructure and a return of some development of commercial offices. At the same time, the competitive landscape has improved due to the exit of less well capitalized competitors.

So, with the benefit of higher-margin contracts and lower price volatility, property broker WH Ireland predicts Billington’s structural steel division could boost revenue by 10% to 81.3 million. this year and go from breaking even to an operating profit of £1.6 million. . Analysts also expect the group’s smaller but higher-margin safety solutions business, which offers rental perimeter protection and fall prevention systems to the construction industry, to boost profit. up 9% to £1.4m on slightly higher revenue of £9m, a forecast supported by a strong order book.

Cheap Stock Portfolio 2022
Company Name ITLOS Market Opening Bid Price 11.02.22 Last offer 26.04.22 Dividends Full return
Tavistock Investments TAAVI Goal 4p 5.5p 0p 41.0%
Vector capital VCAP Goal 46.6p 63p 0p 35.3%
Tekcapital TEC Goal 29:15 34p 0p 16.6%
H&T HAT Goal 304p 347p 0p 14.1%
Henry boot STARTUP Main 300p 324p 0p 8.0%
Billington BILN Goal 214p 212p 0p -0.9%
Platinum Sylvania SLP Goal 98.4p 90p 2.25p -6.3%
Conygar CIC Goal 160p 147p 0p -8.1%
Medium 12.5%
FTSE All-Share Total Return Index 8,525 8,278 -2.9%
FTSE AIM All-Share Total Return Index 1,258 1,192 -5.2%

Source: London Stock Exchange

On that basis, expect the group’s pre-tax profit to rebound from £1.3m to £3m on revenue up 9% from £90.3m to £4m on revenue of £100m in 2023 thanks to higher margin trade flows by. Respective earnings per share (EPS) estimates of 19.3p and 25.2p imply that the shares are rated on cash-adjusted PE ratios of 7.3 and 5.6. Although the group has taken a rare write-down on a receivable from a contractor who has gone into administration, the administrators are in dialogue with the promoter to complete the project and recover the outstanding amount of £1.1 million.

Negotiate around the entry point in my Cheap Stock Portfolio 2022, the shares offer a significant advantage over WH Ireland’s 350p fair value target. To buy.

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