Graham Jones, Panmure Gordon’s executive director of Equity Research, said: “With household incomes remaining constrained across Europe and meat prices remaining high, we believe conditions remain challenging. However, Hilton benefits from a broad geographic reach, and we expect another year of steady growth, before an acceleration to double-digit earnings per share growth in 2014.”
Commenting on the firm’s interim management statement for the period from December 31 to date, Jones praised Hilton’s “virtually ungeared balance sheet” and strong cash generation. Both factors meant the firm had substantial capacity to finance further expansion.
Panmure Gordon maintained its forecast of 4.8% profit before tax growth to £25.9M and 4.6% earnings per share growth to 26.1p. Earnings per share growth was forecast to accelerate next year to about 14% as the first benefits of the Australian joint venture with Woolworth begin to be realised.
Australian joint venture
Hilton confirmed in its management statement that the development work on the joint venture at Banbury is progressing according to the agreed plan.
Bearing in mind start-up costs, Jones expected the joint venture to be trading at a broadly break-even level for the year, despite some modest losses during the first half of the year. He predicted earnings per share accretion of about 6% from the joint venture in its first full-year of trading next year.
In western Europe, Jones noted that Denmark continues to perform well, with volumes building at the robotic store order picking facility.
Growth is being seen in Sweden and in the Netherlands where Hilton is benefiting from the addition of new product lines.
Central Europe, where Hilton supplies customers in seven countries, has continued to perform well.
UK and Ireland
But in the UK and Ireland, markets have remained challenging in the first quarter of this year due to the tough economic conditions.
Hilton’s shares were attractively priced, trading at just 5.9 x earnings value/ earnings before interest, tax, depreciation and amortisation, said Jones. That was at a significant discount to similar stock with Cranswick shares at 7.9x and Devro at 10.0x.
Panmure Gordon repeated its ‘buy’ advice on Hilton shares.
The firm’s management statement, released today (May 15) ahead of its annual general meeting, confirmed that performance during the quarter was in line with the board’s expectations.
“The group’s financial position remains strong, there being no significant changes to this position since the financial year end. Hilton continues to explore opportunities to grow the business in both domestic and overseas markets,” according to its statement.
In March, City analyst Shore Capital predicted that the group would escape the horsemeat crisis unscathed.
The group will issue a pre-close trading statement on July 18 and its interim results for the 28 weeks to July 14 on September 10.