MIDAS SHARE TIPS: Billington builds 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. Used by film-makers across the globe, as well as streaming giants such as Netflix and Amazon, Shepperton has just completed a £500 million expansion project, transforming it into the second-largest production site in the world.

The project highlights Britain’s growing stature in high-end film and TV production, an industry worth more than £6 billion last year, with further increases projected for some time to come.

Steel group Billington Holdings was instrumental in making the Shepperton upgrade happen. Based in Barnsley, South Yorkshire, Billington turns raw steel into finished products used by top contractors across the UK. The shares are £4.15 and should head higher under no-nonsense chief executive Mark Smith.

Billington was formed just after the Second World War with the opening of a single steel fabrication shop. Since then, the company has become recognised for its engineering expertise and high-quality workmanship, making complex steel structures, as well as specialist coatings, safety barriers and hoardings.

The building trade is a cyclical business and some areas have been pretty depressed of late. Smith has steered Billington into high-growth fields, including renewable energy, data centres, online warehouses and media production.

Studio hit: Anatomy Of A Scandal, with Sienna Miller and Rupert Friend, and Shepperton

Having supplied the steel for Shepperton, the company is involved in a major new project for production giant Sunset Studios. Traditionally based in Hollywood, Sunset is spending around £700 million on a studio in Broxbourne, Hertfordshire, a site expected to bring thousands of jobs to the area – and plenty of work for Billington too.

Other Billington customers include the likes of Amazon, Google and Microsoft – American tech giants all spending heavily on state-of-the-art facilities over here.

Smith has also tilted Billington in a green direction, building energy-from-waste plants, including Newhurst, a pioneering site near Leicester, expected to take 350,000 tons of household waste a year and turn it into energy for some 80,000 homes. All these activities helped Billington deliver sparkling results for 2022, unveiled last week. Revenues rose 5 per cent to £87 million but profits soared more than fourfold from £1.3 million to £5.8 million, while the dividend was increased more than five-fold, from 3p to 15.5p.

Smith is optimistic about the future too. Billington’s order book has doubled since last year, with the pipeline virtually full for 2023 and the first half of 2024 filling up fast. Keen to expand still further, Smith has undertaken an £11.5 million, three-year investment programme, taking full advantage of the Government’s super-deduction tax incentive scheme, designed to encourage businesses to invest in growth. 

Once complete, the programme will allow Billington to deliver goods more speedily and effectively than ever before, with top-notch machinery and equipment. At the same time, the company is expanding its workforce, up 10 per cent last year to 450 people and likely to increase again from here on in.

Recent years have been tough for Billington. The pandemic hit business activity hard. The Ukraine war sent costs soaring and upended steel supplies, as much of the UK construction industry relied on raw material from the now Russian-occupied city of Mariupol.

Reputation: Shepperton has just completed a £500 million expansion project, transforming it into the second-largest production site in the world

Smith and his team have steered through these challenges with a blend of nous, ingenuity and true grit. Alternative sources for steel have been identified, cost pressures have been addressed and a training school is planned to equip young people with the skills that Billington needs.

Brokers expect a 30 per cent increase in sales to £115 million in 2023, with profits up to £8 million and a chunky hike in the dividend to 20p. Further growth should follow and the group is actively looking for acquisitions, to complement existing business lines.

Midas verdict: Billington is a well-run, highly regarded business, specialising in robust sectors of the economy. At £4.15, the shares should go far – and the dividend provides an attractive income stream too.

Traded on: AIM Ticker: BILN Contact: billington-holdings.plc.uk or 01226 340 666

This post first appeared on Dailymail.co.uk