ii view: Hilton Foods' double-digit dividend hike

by Keith Bowman from interactive investor |

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A pandemic winner as consumers dine from home, this firm is also expanding overseas. 

First-half-results to 12 July  

  • Revenue up 39% to £1.26 billion
  • Adjusted pre-tax profit up 15% to £28 million
  • Net debt up 36% to £132 million
  • Interim dividend up 16.7% to 7p per share

Executive chairman Robert Watson OBE, said:

"Hilton continues to invest in new facilities in Belgium and New Zealand which, together with the further development of our fish and vegetarian categories will ensure future growth. As with all businesses there remain uncertainties concerning the full impact of Covid-19 including potential recessionary risks but our wide geographical spread and the fact we serve the food retail sector make us believe we are well placed to meet any future challenges.”

ii round-up:

UK and overseas food packaging group Hilton Foods (LSE:HFG) has hiked its dividend by 16.7%, underpinned by increased consumption as consumers stayed home under Covid-19 lockdowns.

Its production facilities remained open during the pandemic as it continued to supply its largely retail customer base such as Tesco (LSE:TSCO) and Ocado (LSE:OCDO) with packaged meats and other goods.

Hilton shares rose by just over 1% in UK trading and are up by just over a third since virus induced market lows back in March. Shares for sucralose maker Tate & Lyle (LSE:TATE) are up by a similar amount while shares for food producer and owner of Primark AB Foods (LSE:ABF) have risen by just under a quarter. 

Hilton operates packaging facilities across seven countries - six in Europe and one in Australia. In 2019, the UK accounted for just over half of group sales, with the Netherlands next at 15% and Australia and Ireland at around 5% each. 

European volumes in the period rose by 10% and doubled for its joint venture with Woolworths in Australia as it opened a new plant in Brisbane. A new facility in Belgium facility is due to open in October supplying retailer Delhaize. 

In 2017, the company acquired Seachill, a leading chilled UK based fish processor, and last year commenced a joint venture agreement with Dalco Food, a leading Dutch vegetarian product manufacturer. 

ii view:

Hilton's business was established in 1994 to set up and operate a beef and lamb central meat packing facility in Huntingdon, England. Since then it has grown by establishing plants overseas, entering joint ventures and expanding its product offering. Each of its packing plants are operated on a dedicated basis for its customers.

For investors, despite many precautions, the risk of a Covid-19 outbreak at one of its plants should not be ignored. An estimated price/earnings ratio above both the three- and-10-year averages suggests the shares are not obviously cheap. But a historical dividend yield of just under 2% (not guaranteed) has some attraction when interest rates have stayed ultra-low since 2008, while potential for ongoing international expansion remains. 

Positives: 

  • Geographical diversity
  • Opening new plants

Negatives:

  • Possible hit to operations from Covid outbreak
  • Total dividend stayed unchanged between 2018 and 2019

The average rating of stock market analysts:

Buy

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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