AUT-1920_AS1_A_GradeExample_Billington_Holdings_Plc.pdf – Assignment:

Billington Holdings Plc 1
1
UNIVERSITY OF NORTHAMPTON

FACULTY OF BUSINESS AND LAW

FINANCIAL DECISION MAKING
FINM036
ASSIGNMENT

REPORT ANALYZING THE PERFORMANCE
AND OPERATIONS OF BILLINGTON
HOLDINGS PLC

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Table of Contents
Introduction…………………………………….………………………………………………….3
Company Overview………………..……………………………………………………………3-4
Equity Holdings………………………………………………………………………………….4-5
Statement……………………………………………………………………………….………….5
Competitor…………………………………………………………………………………………6
Financial Ratios Analysis………………………………………………………………………….7
Profitability Ratios………………..……………………………………………………………..7-8
Efficiency Ratios……………………………………………………………………………..…8-9
Liquidity ratios…………………………………………………………………………..…….9-10
Gearing Ratios…………………………………………………………….………………….10-11
Corporate Governance Compliance……………………………………………………………..12
Compliance……………………………………………………………………………………12-13
Proposed Financial Strategies…………………………………………………………………….13
References…………………………………………………………..………………………..14-15
Appendix 1……………………………………………………………………………………….16
Appendix 2……………………………………………………………………………………….17

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Introduction
This statement is a financial analysis of the Billington Holdings Plc, the organisation is
listed on the Alternative Investment Market (AIM) in the London Stock Exchange, the ratios for
the past 5 years will be analysed, which will include profitability, efficiency and liquidity.
Moreover, the company will be compared with a competitor within the same industry, namely
Sigmaroc Plc. Therefore, the analysis will inform the development of the company’s vision and
strategic financial goals as it anticipates on becoming a FTSE 100 company in the near future.
Lastly, the company’s corporate governance compliance and brand impact and reputation will be
evaluated. Consequently, the comprehensive report will aim at creating financial strategies for the
company to become a FTSE 100 company and dominate the construction and materials industry
in the UK.
Company Overview
The company is located in South Yorkshire, United Kingdom, and operates within the
construction services, construction equipment, and building subcontractors sector (Lse, 2019).
Billington Holdings was established in 1989, and the stock were listed on the London Stock
Exchange under the ticker BILN on November 3, 2000. The company operates several
subsidiaries, including Billington Structures Limited and Peter Marshall Steel Stairs Limited,
which predominantly focus on the structural steelwork manufacturing and design (Marketline,
2020). In addition, the other subsidiary is Easi-Edge Limited, which provides safety solutions and
barrier systems to the building sector. Notably, the company is also involved in the manufacturing
of underground tunneling, road heading equipment, and the construction of schools and power
stations ((BILN, 2020). In this regard, the organisation has become one of the UK’s leading

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structural steelwork contractors because of its nearly 70 years’ professional experience within the
industry.
The company has a workforce of nearly 379 individuals, and the chief executive officer is
Mark Smith, who has to lead the company since 2015 ((BILN, 2019). Because of this experienced
and skilled labor force, the company is capable of producing complex structures over 12000
tonnes. Moreover, the organization has steel plants in Barnsley and Bristol, which can produce
nearly 35,000 tonnes of fabricated steel per year. The company also can service the UK market
and other strategic markets within the European Union. Additionally, the company has the capacity
and expertise to provide edge protection solutions and safety barriers for its customers’ labor force.
As expected, the company is also a leading fabricator of steel staircase for residential, domestic,
and commercial buildings within the UK. Therefore, due to its presence and vast experience in the
construction sector, the company has a competitive edge against other players in the industry.
Equity Holdings
The Billington top ten shareholdes are summarised in the table below based on the amount
of equities held and percentage of ownership. The top ten shareholders hold 87.16% of the total
equity whereby the instituional stockholders and individual stockholders account for 80.99% and
6.17% respectively.
Name Equities %
Gutenga Foundation 5,942,985 46.2%
Close Asset Management Ltd. 1,245,000 9.68%
Otus Capital Management Ltd. 1,000,000 7.78%
Billington ESOP 893,719 6.95%
GPIM Ltd. 638,020 4.96%
Cavendish Asset Management Ltd. 371,250 2.89%
IG Markets Ltd. 325,000 2.53%
John Stuart Gordon Non-Executive Director 282,270 2.19%
Andrea Jean Hardie 256,000 1.99%
Kathryn Jane Garnett 256,000 1.99%
11,210,244 87.16%

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The Billington equity holding are summarised below.
Votes Quantity of stock Float Company-owned shares Total Float
Stock A 1 12,860,959 4,496,866.0 35% 0 0.0% 34.80%
Stock B 1 73,368 0 0% 0 0.0%

Statement
The Chairman’s statement reveals that Billington achieved impressive performance
evidenced by substantial progress across all divisions regarding the growth in revenues and profit
before tax as well a strong balance sheet (Annual Report, 2019). The CEO statement validates that
the company reported strong performance and presents the operational review of the Billington
Structures, Shafton Steel Services, firm’s commitment to health, safety, sustainability, people as
well as the steel industry and prospects and outlook (BILN, 2020).

Competition
One of the key strategic competitors of Billington Holdings PLC is Sigmaroc PLC. Both
companies operate in the construction material space within the UK and the European Union.
Notably, Sigmaroc PLC is registered in AIM and has a deliberate understanding of the construction
material industry. The company’s Chief executive Chairman is David Barret, who has incorporated
a solid strategy and operational expertise within the sector. As a consequence, the company proves
to be a worthy competitor to Billington holdings PLC (Sigmaroc Annual Report). Both companies
have tapped into their pool of experienced and skilled labor force to remain dynamic and
competitive.

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Theorectical Basis
Billington has been experiencing considerable growth in the financial performance as
evidenced by revenues and high profits. This can be attributed to the firm’s strengths that include
delivery of diverse projects across varied sectors, like distribution, high-end residential, leisure.
Another strength is the strong reputation in the market, which has led to the record order books
that encourage a pipeline of opportunities. In addition, the company’s strengths are the cost savings,
low debt financing, higher efficiency in production, strong liquidity, and capital positions. The
Group is well-positioned delivers higher growth in the future, but the main weaknesses are limited
product offerings, minimal international presence, higher input costs, and other expenses. The
external environment consists of promising prospects of growth in the industry that offer various
opportunities that can drive the company’s growth in the future. They include responsible sourcing
and sustainable supply chains, global trade, pioneering technological advancements, the advent of
the circular economy, and UK Export support mechanisms. Finally, several threats pose a threat
to the company, such as fluctuations and volatility in steel prices as well as the Depletion of high-
grade raw materials (Lambotte et al. 2018). The UK’s departure from the EU leads to interruptions
of supply, pressures on solid waste management, and an increasingly competitive environment that
could hinder the future growth of Billington Holdings.

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Financial Ratios Analysis
Profitability Ratios
These ratios are used to indicate an organisation’s ability to generate profits from existing
operations. Thus, the focus is predominantly on the company’s return on investment from
inventory or assets. The information is critical, especially for investors who seek information on a
company’s profitability capacity. Billington Holdings’ profitability over the past five years will be
analysed using the gross margin, profit margin, return on assets, and return on equity ratios.
2014 2015 2016 2017 2018
Profita
bility
Ratios
Gross
Margin
Billington
Holdings
38.76% 36.26% 38.41% 35.63
%
35.51
% Sigmaroc PLC 66.22% 99.89% 94.51% 21.99
%
27.73
%
Net Margin Billington
Holdings
3.20% 4.31% 4.69% 4.77% 5.24
% Sigmaroc PLC -80.20% -2.80% -6.68% 1.31% 8.78
%
Return on
assets
Billington
Holdings
5.40% 7.48% 8.30% 8.64% 9.09
% Sigmaroc PLC -125.20% -359.61% -706.29% 0.44% 4.31
%
Return on
Equity
Billington
Holdings
10.10% 14.93% 15.80% 15.94
%
17.27
% Sigmaroc PLC -242.97% -404.03% 168.09% 0.70% 6.69
%
Since 2014, Billington has seen a considerable growth in performance owing to consistent
investments and improved business environment, as evidenced by high profitability ratios relative
to the Sigmaroc PLC and industry margin averages. The gross margin declined since growth in
revenues (71.31%) was higher than gross profit (56.94%). The revenues increased primarily due
to the surge in Billington Structures output. At the same time, gross profit declined at a slower rate
due to pricing pressures, the uncertainty of ongoing and uninterrupted supply of products.
Contrastingly, the net margin increased since net profit increased by 180.21%, which was
considerably higher than the 71.31% increase in revenues. In 2018, the revenue raised to £77.3

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million (2014: £45.103 million), and profit increased to £4.05 million (2015: 1.45 million) both
are record values (Annual Report 2018). The ROA and ROE also increased substantially since the
net profit growth surpassed the increase in total assets (66.67%) and owners’ equity (63.95%).
This is attributed mainly to the successful delivery of diverse projects across a significant number
of sectors, like distribution, education, commercial, high-end residential, sports, and leisure. The
firm recorded remarkable performance across all divisions, as evidenced by record order books,
promising pipeline of opportunities, and costs savings. The Group is well-positioned deliver higher
growth in the future.
Efficiency Ratios
Efficiency ratios are used in measuring Billington’s ability to utilize its asset base and
manage short-term liabilities effectively by assessing how efficiently the Group uses its assets in
generating sales revenues while managing assets (McLaney and Atrill, 2018). The Group’s
efficiency will be analyzed using the inventory turnover, asset turnover, and accounts
receivables turnover ratio and compared to its competitor and industry average.
2014 2015 2016 2017 2018
Inventory Turnover Billington Holdings 3.26 3.42 3.95 4.30 4.15
Efficiency
Ratios
Sigmaroc PLC n/a n/a n/a 4.76 6.15
Asset Turnover Billington Holdings 1.69 1.74 1.77 1.81 1.73
Sigmaroc PLC 1.56 0.13 0.11 0.33 0.49
Receivables Turnove
r
Billington Holdings 8.88 10.68 11.35 12.90 10.27
Sigmaroc PLC 5.18 1.36 0.23 5.80 6.38
In the past five years, the Group recorded an increase in efficiency in the management of
the inventory, account receivables, and total assets, as illustrated by the steady rise in all efficiency
ratios. Billington outperformed Sigmaroc PLC and industry in terms of the asset turnover and
accounts receivables turnover but, the inventory turnover was slightly below the peers in the
industry. The inventories, accounts receivables, and total assets increased by 42%, 48%, and 67%

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as the business enjoyed an increase in activity levels in the past five years. Thus, the accounts
receivables turnover increased from 8.9 to 10.27, which means that the Group is now collecting
its receivables more than ten times annually. The upward trend denotes higher efficiency that is
favorable from the cash flow viewpoint since the cash is collected sooner and is used in settling
obligations. Likewise, the increasing inventory turnover means that the Group is efficiently
controlling its merchandise and effectively selling its inventory. But, in 2018, there was a slight
decline in inventory turnover due to the UK’s imminent departure from EU and the allied
uncertainty that has undoubtedly presented challenges in the supply of products since the Group
sources some of its products from Europe through subcontractors and suppliers

Liquidity Ratios
The liquidity ratios are used in the measurement of the Billington’s capacity of meet its
current debt obligations by paying off its current liabilities once they are due (Fridson 2011). The
Group’s liquidity will be appraised using the cash, current, and acid test ratios.
2014 2015 2016 2017 2018
Liquidity
Ratios
Current Ratio Billington 1.43 1.34 1.43 1.49 1.47
Sigmaroc 1.69 0.98 0.19 1.50 1.75
Acid Test Billington 0.74 0.57 0.77 0.83 0.86
Sigmaroc 1.69 0.98 0.19 1.08 1.19
cash ratio Billington 0.32 0.19 0.40 0.48 0.47
Sigmaroc 0.60 0.12 0.10 0.65 0.44
The liquidity analysis demonstrates that the Group’s liquidity increased in the last five
years since the cash, current, and acid-test ratios increased considerably. However, the current and
acid-test ratios are lower than Sigmaroc PLC and industry average. In terms of the cash ratio,
Billington Holding outperformed Sigmaroc PLC and peers in the industry. The increasing liquidity

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rations can be attributed to the fact that the increase in current assets (66%) surpassed the growth
in current liabilities (61%). The 66% increase in current assets included the increase in inventories,
42%, trade, and other receivables 48%, as well as growth in cash balances (140%). Whereas, the
total rise of £7,457, 000 in current liabilities mainly comprised a growth in trade and other payables
following a considerable increase in the activity levels. In 2018, the Group reported net cash
inflows amounting to £1.20 million resultant in gross cash balance worth £9.30 million, meaning
that the company has adequate funds to cover its working capital requirements along with funding
opportunities as soon they arise in the future.
Gearing Ratios
The gearing ratios are used in measuring the financial leverage of the Group by assessing
the degree of the interest-bearing liabilities in the company capital structure (Subramanyam 2014).
2014 2015 2016 2017 2018
Gearing
Ratios
Debt to
equity (D/E)
Billington 1.95% 15.22% 10.67% 8.73% 6.40%
Sigmaroc 40.70
%
123.53% –
123.80%
61.52% 55.24%
Interest
coverage
Billington 82.57 118.62 173.86 260.47 86.22
Sigmaroc 39.61 311.14 210.05 7.82 -10.92
Debt to assets Billington 1.04% 7.63% 5.60% 4.73% 3.37%
Sigmaroc 20.97
%
109.95% 520.18% 38.09% 35.58%
The Group’s debt to equity and debt to assets ratios increased in 2015; since then, the ratio
has declined from 15.22% to 6.40%. The debt to equity and debt to assets metrics are much lower
than the Sigmaroc PLC and industry average, which implies that the company uses less debt
funding relative to peer companies in the industry. In 2018, the debt to equity and debt to assets

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were 6.40% and 3.37%, which implies the liabilities account for only 6.40% of the equity and
4.37% of the total assets. Since 2014, the non-current debt increased by 437.63%, while the
owners’ equity increased by 63.95% (Annual Report 2013). But, the higher interest coverage ratio
proves that Billington can service its debt because the company is making sufficient money to pay
its interest as well as principal payment on existing debt. The interest average ration is too high,
meaning that the company can offset interest on debt with no chances of defaulting. The
conservative funding policy signifies that the company has lower financial risks to debt funding
and higher costs of servicing the debt in comparison to the peers in the industry (Editorial, 2020).
The analysis of the gearing ratios denotes that the company uses investor funding and a modest
level of debt to invest in the Group’s factories and sites to ensure that the company continually
improve its operational and financial performance.

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Corporate Governance Compliance
Good corporate governance is one of the core values upheld as it is a requirement in the
standards of the AIM-listed entities. The Group has undertaken a serious approach in safeguarding
that the Board of directors applies the Quoted Companies Alliances Corporate Governance Code
that is used in the regulation of the Small and Mid-sized Quoted Companies (Quoted Companies
Alliance 2013).
Compliance
The evidence of compliance with the corporate governance standards involves the
separation of the role of the CEO (Mark Smith) and Non-Executive Chairman (Ian Michael
Lawson) (Mallin 2013). The Chairman is accountable for leading the Board, facilitating the
contribution of members, and ensuring that the Board operates in the shareholders’ interest. The
CEO is liable for business leadership and the implementation of the core strategy. The Board
comprises of two (2) Executive and three (3) Non-Executive Directors, and the Board chair is the
Non-Executive Chairman; hence, the representation of the Non-Executive to Executive Directors
in the company’s Board is 60% and 40% respectively. According to Thornton (2018), The Board
meets officially 11 times yearly and on ado basis if necessary. In the past fiscal year, the board
attendance was Mark Smith (11/11-100%), Trevor Taylor 11/11-100%), Peter Hems (11/11-
100%), John Gordon (10/11-91%), Doctor Ospelt (2/11-18%), and Stephen Wardell – 0/0
(appointment January 2019). However, the company does not observe gender and diversity since
the Board consists of 7 with no women representation on the company’s Board. The Non-
Executive Directors are viewed by the Board as independent of the company’s management as
they bring experience welcomed by Executive Directors. Consistent with the corporate governance
structure, the Board has formed an Audit and Remuneration Committees. As a result, Billington

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Holdings’ adherence to corporate governance standards has had a positive impact on the Billington
brand and reputation in the steel industry (Billington Holdings PLC. 2020).
Proposed Financial Strategies
The company should focus on improving the production methods using the latest
technologies and increasing the contributions from in-house manufacturing of its products to
ensure that Billington Structures and Shafton Steel Services are operating at the near-optimal
output. The increased production will support the record order book that has been demonstrated in
recent years while ensuring that the business is well aligned to deliver revenues in the medium and
long-term. The Group should increase its sales efforts by focusing more on securing more
extensive and diversified contracts with partner clients across all segments to generate higher sales.
The company should explore cheaper debt funding options for funding further investments in a
substantial capital expenditure program in Billington’s core products, better utilization, as well as
new customer, wins to maximize opportunities in the industry, and drive growth.
The Group should continue seeking cost savings and improved utilization where suitable
to enhance the sustainability of the company’s gross and net profit margins. There are margin
pressures within the global structural steel markets. However, prospects point towards added
growth driven by growing demand (International Iron and Steel Institute 2017). The Group should
also remain alert to continuously evolving economic and political uncertainties like the Brexit by
aiding in the development and implementation of suitable measures that are aimed at identifying
and addressing the risks presented to each aspect of the business. The company should undertake
projects in other countries in emerging economies to lower the present risks of delay in
construction projects, cost fluctuations of the inputs as well as the uncertainty of quantum of
revenues in the U.K markets. The implementation of these strategies will result in additional years
of growth and progression for the Billington Group in the near and long-term.

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Reference
1. Bilington Holdings PLC.(2020) (n.d.). Retrieved Jan 9, 2020, from Bloomberg:
https://www.bloomberg.com/profile/company/BNGHF:US
2. (BILN), B. (2020). About Billington Holdings PLC (BILN) – Investing.com. [online]
Investing.com. Available at: https://www.investing.com/equities/billington-holdings-plc-
company-profile [Accessed 09 Jan. 2020].
3. Billington Holdings Plc (BILN). (2020). Retrieved Jan 9, 2020, from Market Screener:
https://www.marketscreener.com/BILLINGTON-HOLDINGS-PLC-4001636/company/
4. Billington Holdings Plc (2019). Company Profiles: Billington Holdings Plc. Business
Source Premier.
5. Billington Holdings Plc (BILN). (2019). Report and Finanical Statements for the year
ended 31 December 2018. Retrieved Jan 9, 2020, https://billington-holdings.plc.uk/wp-
content/uploads/2019/11/BH_Report_and_Financial_Statement_Year_Ended_2018_WE
B_SP-2.pdf.
6. Billington Holdings PLC. (2020). Board Profile – Billington Holdings PLC. [online]
Available at: https://billington-holdings.plc.uk/aim-information/board-profile/ [Accessed
10 Jan. 2020].
7. Eddie McLaney and Peter Atrill, (2018), Accounting and Finance: An Introduction 9th
edition.
8. Editorial, R. (2020). BILN.L – Billington Holdings PLC Profile | Reuters. [online]
Uk.reuters.com. Available at: https://uk.reuters.com/companies/BILN.L/profile [Accessed
10 Jan. 2020].

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9. Fridson, S. Fridson and Alvarez Fernando (2011). Financial statement analysis: a
practitioner’s guide.
10. Grant Thornton (2018) An instinct for growth, Corporate Governance Review.
11. International Iron and Steel Institute. (2017). Scrap and the steel industry: trends and
prospects for solid metallics. Brussels, Belgium. The Institute.
12. Lambotte, Guillaume., Lee, Jonghyun., Allanore, Antoine., & Wagstaff, Samuel.
(2018). Materials processing fundamentals 2018.
13. Mallin .A. Christine (2013). Corporate governance. Oxford, Oxford University Press.
14. Marketline-com.ezproxy.northampton.ac.uk. (2020). Sign In. [online] Available at:
https://advantage-marketline-
com.ezproxy.northampton.ac.uk/Company/Summary/billington-holdings-plc [Accessed
10 Jan. 2020].
15. Marketline.https://resolver.ebscohost.com/Redirect/PRL?EPPackageLocationID=166.303
1056.11723140&epcustomerid=s3011414.
16. Quoted Companies Alliance. (2013). Delivering growth: corporate governance code for
small and mid-size quoted companies, 2013. London, Quoted Companies Alliance.
17. Subramanyam, K. R. (2014). Financial statement analysis. New York, NY: McGraw Hill
Education.

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Appendix One: Selected Financial Data
Excerpt Financial Data Billington Holdings Sigmaroc PLC 5-Year Changes
£’000 2014 2015 2016 2017 2018 2018
Revenue 45,103 56,748 63,334 73,518 77,266 41,242 71.31%
Cost of Sales 27,619 36,172 39,005 47,324 49,826 29,805 80.40%
Gross Profit 17,484 20,576 24,329 26,194 27,440 11,437 56.94%
Net Profit 1,445 2,444 2,971 3,504 4,049 5,242 180.21%
Assets 26,735 32,660 35,800 40,564 44,560 84,030 66.67%
Total shareholders’ equity 14,304 16,368 18,799 21,976 23,451 54,129 63.95%
Inventories and work in progress 8,472 10,568 9,865 11,012 12,011 4,844 41.77%
Trade and other receivables 5,080 5,315 5,581 5,700 7,527 6,467 48.17%
Cash and cash equivalents 3,872 2,611 6,033 8,063 9,311 3,772 140.47%
Current Assets 17,424 18,494 21,479 24,775 28,849 15,083 65.57%
Total current liabilities 12,152 13,800 14,996 16,670 19,609 8,600 61.36%
Operating profit 1899 3084 3,825 4,428 5,001 11,436 163.35%
Interest 23 26 22 17 58 1046 152.17%
Borrowings (non-current) 279 2,492 2,005 1,918 1,500 21300 437.63%

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Appendix Two: Formula
Profitability Ratios
Gross Margin Net Margin ROE ROA
Formula Gross profit / Revenue x 100

Profit (loss) for the
year / Revenue x 100

Profit after (loss) tax *
/ Total Owner’s
Equity x 100
Profit after (loss) tax /
Total Assets* x 100
Efficiency Ratios
Asset Turnover Inventory Turnover Accounts Receivable
Turnover
Formula Total Assets /
Revenue
Inventory / Cost of
sales x 365

Trade receivables * /
Revenue
Liquidity Ratios
Current Ratio Acid Test Ratio Cash Ratio
Formula Current assets / Current
liabilities

Current assets
excluding inventory /
Current liabilities

Cash and cash
equivalents / Current
liabilities

Gearing Ratios
Debt to Equity

Net Interest coverage
ratio
Debt to Assets

Formula Borrowings (non-current) /
Total equity x 100

Operating profit (loss)
/ Net Interest
(Finance) expense

Borrowings (non-
current) / Total Assets
x 100

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