Interactive Investor

ii view: Hilton Food names new boss alongside annual results

5th April 2023 12:16

by Keith Bowman from interactive investor

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Suffering a tough 2022, this FTSE 250 company has made progress so far this year. We assess prospects. 

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Full-year results to 1 January

  • Revenue up 17% to £3.8 billion
  • Adjusted operating profit down 3.3% to £71 million
  • Net debt up to £212 million, from 2021’s £85 million
  • Final dividend of 22.6p, 
  • Total dividend for 2022 unchanged at 29.7p per share

Chief executive Philip Heffer said:

"After the challenges we faced last year in our seafood business, we took a series of steps to rebuild profitability and we are now well placed for the year ahead. Meanwhile we have continued to deliver on our strategic priorities and to set the business up for long-term, sustainable growth.”

ii round-up:

Food processing and packing company Hilton Food Group (LSE:HFG) today detailed an already flagged decline in annual profit and also confirmed the appointment of a new chief executive. 

Adjusted operating profit for the full-year 2022 fell 3.3% to £71 million, largely due to challenges at its UK seafood business. Reported pre-tax profit for the year fell 38% to £29.6 million, hindered by exceptional items including costs relating to a fire at its Belgium plant. Meanwhile, CEO for the last five years Philip Heffer has decided to step down, with former food Co Op executive Steve Murrells taking over in early July.

Shares for the FTSE 250 company fell more than 5% in UK trading having gained by almost a quarter during 2023 coming into this latest news, and following a halving in value over 2022. Food producer and owner of Primark Associated British Foods (LSE:ABF) is up by a similar amount in 2023, as are shares for convenience food maker Greencore Group (LSE:GNC). The FTSE All Index is up by just over 2% year-to-date. 

Hilton processes and packages foods from meat and fish to vegetarian meals using automated facilities including robotics across 19 markets from Europe and Asia to North America.

Operating profit margin declined to 1.8% during the year from 2.2% in 2021, hindered by inflationary cost pressures at its UK seafood business and disruption following automation investments. 

A 4.3% increase in product volumes sold made for a 16th consecutive year of growth, helping overall group revenue climb 17% year-over-year to £3.8 billion.  

Investments in acquisitions and joint ventures and further spending on equipment pushed net debt up to £211 million from last year’s £85 million.

A final dividend of 22.6p per share left the total dividend unchanged year-over-year at 29.7p per share, giving a dividend yield of 4.5% at today's share price of 657p. 

ii view:

Started in 1994 to package meat in the UK, Hilton generates more than three-quarters of its sales volumes outside the UK. Employing around 7,000 people, its 24 packing plants globally are each operated on a dedicated basis for its customers. Previous acquisitions have included Fairfax Meadow, the UK’s biggest butcher to the hospitality industry and Dalco, a Dutch vegetarian and vegan company. 

For investors, the rising cost of food given such factors such as higher energy bills in farming or fishing cannot be ignored. Costs generally for businesses remain elevated, operational execution risks such as the fire warrant consideration, as do currency moves and the highly uncertain economic outlook.  

On the upside, food arguably provides some defensiveness as consumers must eat no matter what the economic backdrop. Diversity of both its product offering and geographical regions is positive, continued investment is being made, while the new CEO may inject new vigour into the company’s strategy.   

For now, and while some caution looks sensible, a historic dividend yield of over 4% at least gives reason for income investors to remain patient. 

Positives: 

  • Geographical diversity
  • Attractive dividend yield (not guaranteed)

Negatives:

  • Rising costs
  • Uncertain economic outlook

The average rating of stock market analysts:

Buy

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