Insider: something fishy about this director deal

The boss of Hilton Food Group (LSE:HFG) has spent £80,000 on his company’s shares after they sank to a two-year low due to concern over the sales impact of higher haddock and cod prices.

The dealings by Steve Murrells were at 659p, some 20% below the price at the start of September and a big gap to the targets of Berenberg and Deutsche Bank near 1,100p.

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Interim results on 3 September triggered the FTSE 250 share price slide as Hilton said reduced availability of white fish led to raw material inflation and therefore softer UK demand.

The seafood challenges were offset by above-market volume growth in retail meat as the food processing and packing business reiterated its aim to deliver an annual adjusted profit within the City’s range of expectations between £76.8 million and £81 million.

Murrells added that the strength of customer partnerships, presence in large growing international markets and efficient facilities provided a strong platform for longer-term growth.

A 5.2% dividend increase to 10.1p a share, equivalent to £9.1 million, backed up his confidence in prospects. It is due to be paid on 28 November.

Hilton, which opened its first factory in Huntingdon in 1994 and joined the stock market in 2007, has partnerships with major retailers including Ahold, Tesco, Waitrose and Walmart Canada. It employs 7,500 people and generated revenues of £4 billion in 2024.

Last week it sold Fairfax Meadow, a supplier of meat to foodservice customers such as Mitchells & Butlers. The deal price of £54 million compared with the £23.8 million paid by Hilton in 2021.

Former Co-op boss Murrells, who replaced Philip Heffer as chief executive in July 2023, purchased his shares the day after announcing the sale of the “high-quality” business.

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Broker Peel Hunt said the disposal sharpened the focus of the group as it reiterated a price target of 1,030p. It earlier lowered its earnings forecast by 1% to reflect the fish price headwinds, which it said had taken the shine off the positive momentum in red meat.

Berenberg believes the issues facing seafood are short term and not the same as the structural ones faced by the division when Hilton issued a profit warning in September 2022.

It said: “Despite the differences, the market has treated them as being the same, in our view.

“We think the strong trading momentum in the retail meat business (which accounts for 80% of group sales), reflected in the delivery of sales volume growth ahead of the market, is being overlooked at current valuation levels.”

House broker Shore Capital nudged down its full-year forecast by 3% following the results, but with strategic investment continuing in future new markets in the Middle East and North America it sees “much to like in Hilton Foods at attractive valuation multiples".

It also highlighted a well-covered income stream, with the current dividend yield above 5%.

Big spending temp 

The stand-in boss of Pets at Home Group (LSE:PETS) has spent £50,000 backing the retailer’s shares in the wake of last month’s profit warning and exit of chief executive Lyssa McGowan.

Ian Burke’s investment took place last week at a price just below 200p, having seen the FTSE 250 stock lose almost a third of its value in the past year.

The shares fell to 192p on 18 September after the group cut current year profit guidance to between £90 million and £100 million, some 17% below the midpoint of the City consensus.

The second downward revision since July was driven by continued soft trading in retail stores, where a 5% like-for-like sales decline contrasted with much stronger online demand.

McGowan, who became chief executive in 2022, left the business with immediate effect. Board chair Burke is running operations until a successor is found.

The former Rank Group chief executive, who joined the board in 2020, last week announced Sarah Pollard as new chief financial officer. She joins from PZ Cussons after Mike Iddon said he intended to leave Pets at Home following nine years in the role.

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Berenberg said the departing team made good progress bolstering the group’s systems and infrastructure, adding that the incoming CEO will need to set out and successfully execute on a clear turnaround plan for the retail division to rebuild the market’s confidence. 

The City bank said: “While we acknowledge the subdued UK pet care market and industry-wide cost pressures that the group has faced, our concern has also been that Pet at Home’s stores have lost their sparkle.

“This is critical as revenue from this channel makes up about 80% of group sales. A strategic reset is now required to refocus on the “retail basics”, including the product offer, to regain the ground lost to competitors and to inspire customers back into the group’s stores.”

Berenberg cut its price target to 220p: “At this stage, we do not see material short-term catalysts, although the group’s balance sheet strength continues to enable a strong dividend and 6.5% yield, providing share price support.”