ii view: Hilton Food flags robust festive trading

Full-year trading update to 29 December

Chief executive Steve Murrells said:

“The final quarter of the year has delivered a strong performance, with the full-year outturn in line with expectations. This success was driven by another solid Christmas trading period and  underpinned by our innovative ranges and the growing popularity of beef as a festive centrepiece.

"Our core year-round product ranges, combined with high-quality new product launches, continue to strengthen our customer relationships, and support our ongoing success."

• Invest with ii: Top UK Shares | Free Regular Investing | Open an investment Account

ii round-up:

Food processing and packaging group Hilton Food Group (LSE:HFG) today flagged strong final quarter trading across all three of its geographical regions, driven by a 4% increase in meat volumes from a year ago.

Adjusted pre-tax profit for the full year to 29 December is expected to match City forecasts of around £76 million, up from 2023’s £66 million, with management confident in the outlook for 2025. 

Shares in the FTSE 250 company were little changed in UK trading having risen by 13% in 2024. That’s ahead of a 4.7% gain for the FTSE 250 index itself and in contrast to a 1.5% decline for food and beverage ingredient maker Tate & Lyle (LSE:TATE).  

Hilton processes and packages foods from meat and fish to vegetarian meals using automated facilities and robotics for customers including Tesco (LSE:TSCO), Koninklijke Ahold Delhaize NV (EURONEXT:AD), and is launching with Walmart Inc (NYSE:WMT) in Canada in 2027. 

Strong final quarter meat volumes helped the UK and Irish business, with the previously troubled seafoods unit enjoying strong festive demand and generating improved annual profits.

In Europe, a recovery plan for the previously acquired Dutch vegetarian and vegan business, Dalco, remained ongoing, while core meats and convenience meals performed strongly.

Finally, in Asia Pacific, falls in raw material prices continued to hinder revenues, although with strong volumes aided by the previous launch of a BBQ range. 

Full-year results are scheduled for 8 April. 

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. The FTSE 250 company employs around 7,000 people, with most of its packing plants operated on a dedicated basis for customers. Asia Pacific, and largely Australasia, accounted for 40% of revenues during 2023. Followed by the UK at just over a third, the Netherlands 12%, and other parts of Europe including Sweden and Ireland, the balance. 

For investors, challenges for the vegetarian/vegan business remain. Heightened costs such as those for banking borrowings and energy are not to be forgotten. Execution risks such as a previous fire at its Belgium plant remain a constant, while the generation of two-thirds of sales outside of the UK provides currency risk.  

• 19 growth shares for 2025
• 20 value stocks for 2025
• Wild’s Winter Portfolios 2024: riskier portfolio outperforms Wall Street

To the upside, exposure to food is arguably broadly defensive as consumers must eat no matter what the economic backdrop. Diversity in both its product offering and geographical region persists. The group’s long-term partnership with supermarket giant Walmart continues to develop, while a forecast dividend yield of close to 4% is not to be overlooked. 

On balance, and while the shares are not without risk, a consensus analyst fair value estimate above £10.50 per share implies optimism in City circles. 

Positives: 

• Geographical diversity
• Attractive dividend yield (not guaranteed)

Negatives:

• Uncertain economic outlook
• Elevated costs

The average rating of stock market analysts:

Buy