Steel firm reports revenue increase
Structural steel firm Billington Holdings has reported a busy first half of the year with revenues rising 15 per cent to Â£39m in the six months to June 30.
However, the Barnsley-based firm said the macro-economic environment and movements in raw material prices led to pressures on margins and pre-tax profits fell 13 per cent to £1.9m.
Analysts said this was a “temporary blip” caused by the collapse of Carillion and rising steel prices.
Billington has managed to restrict its trading with Carillion over recent years, but its demise had a knock-on effect on the whole industry.
Billington’s chief executive Mark Smith said: “At the beginning of the year there was a certain amount of uncertainty. It affected confidence in proceeding with certain commercial projects.
“Carillion had a larger impact than Brexit. There was a feeding frenzy from some of our competitors as their order books fell. The market got very competitive. We noticed that more than Brexit.”
Analyst John Cummins at WH Ireland described the fall in profits as temporary.
“The interim results were impacted by margin pressures with two key influences. Firstly, the implosion of Carillon in January 2018 sent shockwaves through the construction industry,” he said.
“This resulted in a short period of discounting as fabricators attempted to rebuild order books in the wake of lost contracts. Secondly, cost input inflation, notably steel prices, continued to track upwards, touching highs. Although Billington is able to manage such increases, short-term fluctuations can impact contract profitability.
“Set against this is the continued confidence of the construction industry (EU wide) yielding continued demand for steel fabrication.”
Mr Cummins said Billington’s forward order book remains strong and has been built on what Billington would regard as its “normal terms of business” – hence the confidence with respect to the second half margin.
Billington’s finance director Trevor Taylor said: “The contracts were taken on post-Carillion at margins that weren’t at the level seen last year.
“That blip was temporary and margins have recovered somewhat. Margins are at a level that does give us confidence for the second half.”
Talking about the fluctuation in steel prices, Mr Taylor said: “We try to diversify our steel purchasing across a variety of suppliers. We hedge and mitigate those increases as best we can. We do expect stabilisation to come back to the steel price.”
Looking to the future, Mr Smith said the firm has secured work until the end of the year.
“We are confident we have a good order book going forward,” he added.
Alongside the interim results, the company has also announced the appointment of Ian Lawson, the former CEO of rival structural steel firm Severfield, as chairman from October 1.