ii view: Hilton Food shares sunk by expensive fish

First-half results to 29 June

• Revenue up 7.6% to £2.09 billion
• Pre-tax profit down 4.7% to £24.3 million
• Adjusted pre-tax profit flat at £33.6 million
• Interim dividend up 5.2% to 10.1p per share
• Net bank debt up 54% to £202 million

Guidance:

• Expects full-year adjusted pre-tax profit of between £76.8 million and £81 million

Chief executive Steve Murrells said:

"We have a simple objective: building upon the core strengths that have long defined the business. Our global capabilities and established customer relationships continue to provide a strong foundation for growth and sustainable returns.”

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ii round-up:

Food processing and packaging group Hilton Food Group (LSE:HFG) today maintained profit hopes for the full year, although it warned of challenges at its seafood business where the soaring price of fish is making is harder to achieve growth.

First-half product volumes up 2.5% compared with growth of 4.4% over the last financial year, driving revenues up 7.6% to £2.09 billion. Supply related inflation for white fish hindered consumer demand, with costs to switch production and enable salmon exports to the USA underlying a 4.7% fall in interim pre-tax profit. An adjusted pre-tax profit of £33.6 million is flat versus a year ago.

Shares in the FTSE 250 company plunged by close to a fifth in UK trading having come into these latest results down around a tenth so far in 2025. The FTSE 250 index is up almost 3% year-to-date. Fellow food producer Cranswick (LSE:CWK) has risen 4% over that time. 

Hilton processes and packages food from meat and fish to vegetarian meals using automated facilities and robotics for customers including Tesco (LSE:TSCO) and Dutch Belgian retailer Koninklijke Ahold Delhaize NV (EURONEXT:AD). 

Management moves to address challenges in seafood as well as ongoing momentum for the meat business continue to underpin hopes for annual adjusted pre-tax profit of between £76.8 million and £81 million. That’s potentially up from 2024’s £76 million. 

Group net debt rose to £202 million from £131 million as of late December, pushed by higher-than-anticipated build-phase inflation at its Canada project under an expansion to provide services for Walmart Inc (NYSE:WMT) come early 2027. 

An interim dividend of 10.1p per share is up from last year’s 9.6p and payable to eligible shareholders on 28 November. 

A full-year trading update is likely early January. 

ii view:

Started in 1994 as a meat packager, Hilton has since grown by establishing plants overseas, entering joint ventures and expanding its product range into fish and vegetables. Today, the FTSE 250 company employs over 7,500 people across 24 processing and packaging plants. Geographically, the UK & Ireland and Asia Pacific each generated around 36% of sales during 2024, with Europe largely accounting for the balance. 

For investors, increased prices for white fish have dampened consumer demand, with a required switch to salmon production in the Netherlands from Greece to navigate US regulatory changes increasing costs. Costs to facilitate services to Walmart in Canada have risen given the country's tougher economic backdrop. Execution risks such as a previous fire at its Belgium plant remain a constant, while the generation of around two thirds of sales outside of the UK provides currency risks.   

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On the upside, retail meat and convenience delivered above-market volume growth of 3.1%, with contributions from all regions. Expansion via partnerships in Saudi Arabia and Canada is ongoing. Diversity in both its product offering and geographical region exists, while exposure to food is arguably broadly defensive as consumers must eat no matter what the economic backdrop. 

For now, and while group challenges have increased, a forecast dividend yield of over 4% offers grounds for at least income orientated investors to stay supportive.  

Positives: 

• Geographical diversity
• Attractive dividend yield (not guaranteed)

Negatives:

• Uncertain economic outlook
• Subject to currency movements

The average rating of stock market analysts:

Buy