Hilton Food Group plc Report Robust Financial and Strong Operational Performance

Hilton Food Group plc (LON:HFG) have provided preliminary results for the 52 weeks ended 31 December 2023 in which they state that current trading is in line with expectations.

Business highlights – operational progress across all aspects of the business

·   Seafood recovery delivered ahead of plan, returning to full year operating profitability and supporting uplift in Group PBT

·   Core Meat category continued to perform well; strong meat volume growth in APAC and a resilient outturn in Europe and UK, achieved against inflationary backdrop

·   Growth of international customer base via new deal with Walmart in Canada; organic growth achieved with existing customers, such as successful launch of Swedish food park

·   Action taken in vegan and vegetarian to successfully consolidate business to single operating facility

·   Industry-leading technology continued to provide competitive edge, underpinning customer partnerships and supporting core business; further headroom for growth

·   Progress in Sustainable Protein Plan, a central foundation to our commercial offer; more ambitious validated SBTi targets in line with 1.5°C pathway

·   Innovation across outstanding food products, supporting customers in response to changing consumer trends. Great value protein ranges and healthy new pre-prepared products launched

Financial overview – growth in revenue and volume; increase in profitability driven by Seafood

·   Revenues up 3.7% to £3.99bn with volume increase of 0.7%; adjusted operating profit increased by 33.5% to £95.0m with statutory operating profit up 59.4%

·   Strong free cash inflow of £112.1m (2022: outflow £79.4m); remaining a highly cash generative core business

·   Net bank debt £139.7m (2022: £211.6m); year end net bank debt as a percentage of adjusted EBITDA reduced to 1.0 times (2022: 1.8 times)

·   Proposed final dividend of 23.0p, taking total dividend for 2023 to 32.0p (2022: 29.7p) reflecting the Board’s confidence

Notes

1    Volume includes 50% share of the Portuguese joint venture activities

2    Adjusted results represent the IFRS results before deduction of acquisition intangibles amortisation, depreciation of fair value adjustments to property, plant & equipment, exceptional items and also IFRS 16 lease adjustments as detailed in the Alternative performance measures note 17. Unless otherwise stated financial metrics in the Chairman’s statement, Chief Executive’s summary and Performance and financial review refer to the Adjusted results

3    Net bank debt represents borrowings less cash and cash equivalents excluding lease liabilities

Outlook and current trading

2024 trading has started in line with Board expectations although markets remain challenging. We are confident the business is well placed, within a large and attractive international market, to continue to deliver its strategy to create long term value for shareholders, through its outstanding protein products, dedicated partnerships, leading technology offer through Greenchain Solutions and a robust sustainability plan.

Growth prospects are underpinned by the strength of our core meat business, the continued recovery in seafood and in the medium term our recent acquisitions and the developing relationship with Walmart in Canada. The Group’s financial position remains strong, with improving leverage and headroom at comfortable levels, and we continue to explore new growth opportunities with existing partners, wider geographic expansion and complementary M&A.

Steve Murrells CBE Hilton Foods Chief Executive Officer, said:

“Over the past year we’ve remained focused on executing our strategy which has resulted in a good performance against a challenging market. I am particularly pleased with the results in our seafood category, returning to full year operating profitability following a successful turnaround. Our core meat category performed strongly and we worked closely with customers to offer the highest quality and most relevant food products to consumers.

“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. I’d like to thank all our teams across our markets for their continued hard work and contribution over the year; we are well-placed as we look to the future.”

Hilton Foods Group is a leading international multi-protein producer, serving customers and retail partners across the world with high quality meat, seafood, vegan and vegetarian foods and meals. We are a business of over 7,000 employees, operating from 24 technologically advanced food processing, packing and logistics facilities across 19 markets in Europe, Asia Pacific and North America. For thirty years, our business has been built on dedicated partnerships with our customers and suppliers, many forged over several decades, and together we target long-term, sustainable growth and shared value. We supply our customers with high quality, traceable, and assured food products, with high standards of technical excellence and expertise.

Darren Shirley, Analyst at Shore Capital said: “Hilton Food Group has confirmed an especially pleasing profit rebuild in its preliminary results for the year ended 31st December 2023. CPTP was £66.0m, ahead by c.19% yoy and a little above our expectations (SC £65.5m).EBIT ROCE increased by 350bp to 18.3%. We leave FY24F expectations unchanged at this still early part of the year, though we have growing confidence in Hilton moving from rebuild into growth mode. DPS growth yoy was 7.7%, a sign of confidence, resulting in a yield of 3.7%, with leverage at a more than comfortable 1.0x after very strong debt reduction. We see FY24F valuations of 13.7x (PER) and 5.8x (EV/EBITDA) as attractive for a high-quality business, with a long-term track record of growth and cash generation, with multi-faceted global potential ahead.”