Interactive Investor

ii view: Hilton Foods still hungry for growth

6th April 2022 15:37

Keith Bowman from interactive investor

Customers of this FTSE 250 food packaging company include Tesco. We assess prospects.

Full-year results to 2 January 2022

  • Revenue up 22% to £3.3 billion
  • Adjusted pre-tax profit up 13% to £67.2 million
  • Final dividend of 21.5p per share
  • Total dividend for the year up 14% to 29.7p per share

Chief executive Philip Heffer said:

"This has been a year of delivery and diversification. We have delivered another strong financial performance with volumes and revenue both growing. We have also made strategic progress in diversifying the business.”

ii round-up:

Meat and fish supplier Hilton Food Group (LSE:HFG) today reported a one fifth increase in sales as it grew its business both in the UK and overseas, although it did warn of more challenging conditions ahead. 

Aided by acquisitions, sales for the FTSE 250 company rose to £3.3 billion from the prior year’s £2.77 billion, helping push adjusted pre-tax profit 13% higher to £67.2 million. 

Hilton shares fell by around 2% in UK trading having previously gained by 9% over the last year. Shares for fellow food ingredients maker Tate & Lyle (LSE:TATE) are down around 2% over that time, while the FTSE 250 is down by 4%. 

Hilton, whose customers include Tesco (LSE:TSCO), operates across 24 food processing, packing and logistics facilities across 19 markets in Europe, Asia Pacific, and North America. More than two-thirds of overall revenues are now generated overseas. 

The Huntington, UK headquartered company last year bought Fairfax Meadow, the UK’s biggest butcher to the hospitality industry, a Dutch vegan company, and smoked salmon business Foppen, its first toe into the US.

Volumes for the year grew 7% to 492,588 tonnes, maintaining a record of consecutive annual growth since it came to the stock market in 2007. 

Hilton continues to seek opportunity to expand into new protein products and categories and new international markets. 

The total dividend for the year rose 14% to 29.7p per share. 

ii view:

Established in the UK to package meat, Hilton has subsequently grown by establishing plants overseas, setting up joint ventures and expanding its product offering. Each of its packing plants are operated on a dedicated basis for its customers. Today, Australia and New Zealand now generate its biggest slug of revenues at around 40%, followed by the UK at just over a third, with the balance spread cross Ireland and Europe. 

For investors, rising food costs along with rising business costs in general cannot be ignored. A more uncertain economic outlook as interest rates rise, plus ongoing geopolitical tensions in the wake of the Ukraine war also add to continued supply chain challenges. 

On the upside, potential for more international and product category expansion persists, while a historic and estimated future dividend yield of over 2% must be set in the context of the current ultra-low interest rate environment. In all, and with the consensus analyst estimate of fair value stood at over £14, room for longer-term optimism remains. 

Positives: 

  • Geographical diversity
  • Seeking further growth opportunities

Negatives:

  • Rising costs
  • Total dividend stayed unchanged between 2018 and 2019

The average rating of stock market analysts:

Buy

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