Billington is forward-buying steel to hedge against price rises but this is having an impact on cash resources.
Interim results for the six months of 2021 show that Billington Holdings’ revenue increased by 15% to £37.73m (2020 H1: £32.78m) and pre-tax profit increased nearly 25% to £760,000 (2020 H1: £610,000).
Billington chief executive Mark Smith said that opportunities were on the rise – “but trading conditions, including pressure on margins as a result of raw material price inflation, delays to project starts and supply constraints remain across the industry”.
He said: “Whilst the group operates many fixed price supply contracts and has arrangements in place to mitigate some of the increases, we have suffered escalation in consumables and ancillary products that we have not been able to pass on. Prices appear to be stabilising, however, government infrastructure based stimulus packages across the globe and the development of HS2 in the UK are providing further demand led inflationary pressures and are restricting the supply of certain steel products.”
He said that some stability returned to the UK steel supply market after the takeover of British Steel by China’s Jingye in March 2020. “However, the group continues to face an escalation in the price of steel, although it looks to mitigate the risk associated with price escalation as far as possible using a number of mechanisms, including the forward purchasing of steel where appropriate, this is having an impact on cash usage. The group is also looking at its longer-term steel procurement strategy in order to reduce its reliance on any one supplier.”
However, he said that he remained “confident in the long term prospects for the group" despite the current market challenges.
Mr Smith said: “Whilst the overall market is challenging, the directors believe the outlook for Billington is encouraging. The order book is at a consistently high level, comprising both delayed and new projects and the group has good visibility of significant future prospects. We anticipate a further improvement in group financial performance in the second half of the year, although the precise outturn for the year will be dependent on the timing of certain contracts, combined with any effects from continuing material price inflation and supply constraints.”