Interactive Investor

ii view: Hilton Foods’ profits boosted by appetite for seafood

Serving major customers such as Tesco and sat on a dividend yield of over 3.5%. Buy, sell, or hold?

3rd April 2024 16:28

Keith Bowman from interactive investor

Full-year results to 31 December

  • Revenue up 3.7% to £3.99 billion
  • Adjusted pre-tax profit up 20% to £66 million
  • Final dividend of 23p per share
  • Total 2023 dividend payment up 7.7% to 32p per share
  • Net debt down 34% to £140 million

Chief executive Steve Murrells said: Over the past year weve remained focused on executing our strategy, which has resulted in a good performance against a challenging market. 

As I set out at our investor day in November, Hilton Foods has the right attributes in place to unlock growth organically and with new customers thanks to our multi-category product offer, industry-leading technology and rigorous sustainability credentials.”

ii round-up:

Food processing and packing company Hilton Food Group (LSE:HFG) today detailed increased profits aided by a faster-than-expected recovery at its seafoods business. 

A 16th consecutive year of increased product volumes helped push full-year 2023 revenues up 3.7% to £3.99 billion, taking adjusted pre-tax profit up by a fifth to £66 million and underpinning a 7.7% increase in the total 2023 dividend payment to 32p per share. 

Shares for the FTSE 250 company rose 1% in UK trading having come into this latest news up by 7% year-to-date. That’s similar to Mr Kipling and Ambrosia brand owner Premier Foods (LSE:PFD) and ahead of a 1% gain for the 250 index itself during 2024. 

Hilton processes and packages foods from meat and fish to vegetarian meals using automated facilities and robotics across various markets in Europe and Asia Pacific, and for customers including Tesco (LSE:TSCO), Koninklijke Ahold Delhaize NV (EURONEXT:AD), and Woolworths in Australia. 

Management flagged a robust performance for its core meat category aided by strong volume growth in Asia Pacific. Moves to assist performance at its vegetarian business included combining it with its vegan operations. 

A cash inflow over the year of £112 million helped group net debt fall by around a third year-over-year to £140 million. 

Accompanying outlook comments flagged both a developing relationship with Walmart in Canada and its lookout for other complementary acquisition opportunities. 

A first-quarter AGM trading update is likely in mid to late May. 

ii view:

Started in 1994, Hilton today employs more than 7,000 people at processing plants run to supply partners such as supermarkets or in joint ventures in local markets. Previous acquisitions have included Dalco, a Dutch vegetarian and vegan company, and smoked salmon business Foppen. Geographically, Asia Pacific generated its biggest slug of sales during 2023 at 40%, followed by the UK at 32% and the Netherlands  at 12%. 

For investors, elevated costs such as those for energy and bank borrowings are not to be forgotten. Its vegetarian/vegan business remains challenged. Execution risks such as a previous fire at its Belgium plant remain a constant, while currency moves can hinder given a sizeable proportion of sales made overseas. 

More favourably, diversity exists in both its product offering and across geographical regions. Its relatively new chief executive is looking to improve performance for its challenged vegetarian business. Potential major new customers such as Walmart in Canada are on the radar, while food arguably provides some defensiveness as consumers must eat no matter the economic backdrop.

In all, and despite ongoing risks, a consensus analyst estimate of fair value sat at over 930p per share looks to offer grounds for continued longer-term hope. 

Positives: 

  • Geographical diversity
  • Attractive dividend yield (not guaranteed)

Negatives:

  • Uncertain economic outlook
  • Elevated costs

The average rating of stock market analysts:

Buy

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