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Post-Carillion 'frenzy' forced Billington to buy work

Billington chief executive Mark Smith said a “feeding frenzy” of bidding in the structural steel sector after Carillion’s collapse forced his company to take loss-making jobs.

The CEO of the structural steel specialist told Construction News that, while Billington had not been delivering any steelwork directly for Carillion, it nevertheless suffered as competitors chased work and forced down prices.

“We found out competitors were working with Carillion and they found that those contracts had fallen away from their order books, so they came to the market having to competitively secure other work,” he said.

“We were competing for the same projects and found there was a bit of a feeding frenzy.”

Mr Smith said the change in the market was “virtually immediate” after Carillion’s collapse and lasted for months.

“That feeding frenzy continued, and after waiting a little while to see if the market price recovered, we had to dip into the marketplace and took the decision to secure a few contracts that were not of a margin that we would have preferred,” he said.

The company ended up taking on three loss-making contracts because “keeping the factories full is paramount”, according to the CEO.

“We need the work to keep the guys employed and cover a very large overhead,” Mr Smith said.

Part of this overhead has been the investment in expanding its Shafton production facility in Barnsley, which will allow the company to do more work in house and increase its margins.

Mr Smith said that, while the losses have already been recognised in the company’s half-year accounts, he hoped that some of this provision could be recovered over the life of the contracts.

Billington’s interim results for the six months to 30 June 2018 revealed the company made a pre-tax profit of £1.9m on revenue of £39.4m.

This was lower than the £2.2m pre-tax profit made in the first half of 2017, due to the losses taken on the post-Carillion contracts and an increase in the price of steel.

Mr Smith said the market had settled down since the post-Carillion upheaval and that margins had improved in recent months.

Finance director Trevor Taylor said Billington expected to perform better in the second half of 2018 to achieve a full year pre-tax profit of £4.6m on revenue of £75m.

The company is currently looking at taking on more work in Europe after securing its first project abroad in the Netherlands at the start of this year.

Billington also announced this week that former Severfield CEO Ian Lawson was joining the company as a non-executive chairman.

Mr Smith said he hoped Mr Lawson’s experience running a larger plc would benefit Billington.

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