There are plenty of companies on the stock market unfamiliar to many investors, despite them having delivered solid capital gains and dividends for shareholders. It’s our job to put these companies on your radar and this week we’ve selected Barnsley-headquartered Billington (BILN:AIM) which we consider to be an unsung hero.

The structural steel specialist is now positioned for growth following a gradual recovery from the financial crisis-driven cyclical downturn nearly a decade ago. Growth plans are underpinned by a robust balance sheet.

The company is boosting capacity by up to 50% as it brings its newly acquired Shafton site up to the mark. The company is also close to ‘materialising’ opportunities for European expansion ‘in the near future’ according to chief executive Mark Smith.

The next catalyst for the share price

We believe first half year results in September could act as a catalyst for a share price which currently looks good value. The stock trades on an undemanding price-to-earnings ratio of 8.7 and yields more than 4%, based on consensus forecasts.

The company is number three in the UK steelwork contracting market behind the leading player Severfield (SFR). The company tells Shares it has around 8% of its addressable market.

Steel companies enjoyed margins of around 10% before the recession almost a decade ago. In 2016 Billington’s margin was 6% and the company says it will not get back to pre-recession levels ‘overnight’, noting it is happier with a ‘slow and steady improvement’ in profitability rather than risking a ‘boom and bust’ scenario.

Managing the risks

The UK construction space has seen some high profile profit warnings this year but Billington’s management is keen to stress that it has kept away from some high profile companies in the industry which have encountered problems, adding they credit insure all their business.

Billington works for around 10 major contractors with none accounting for more than 10% of its overall revenue.

It operates in a cyclical industry and currently faces an escalation in steel material prices. On fixed price contracts it has had to endure some pain although elsewhere it has passed on these costs to its clients.

The latest news flow has been positive. On 4 August it won two contracts worth £14m from two ‘prominent’ contractors working on a large distribution centre in the South West and a facility for a London University.

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