While earnings before interest, tax and amortisation fell by 0.8% to £25.8M, this reflected £1.8M of start up costs incurred by its Australian venture and in the UK, plus raw material price rises. Volume growth of 2% was driven by new product lines in Holland and growth in Denmark, which offset consumer spending pressures, particularly in Ireland and Central Europe.
Profit before tax rose by 0.6% to £24.9M, while earnings per share rose by 0.4% to 25p.
Panmure Gordon’s executive director of equity research Graham Jones said: “The big story of 2013 was the strategic progress made in both Australia and the UK, which we continue to believe will drive significant earnings growth over the next three years.”
Joint venture with Woolworths
The firm’s joint venture with Woolworths in Australia continued to perform well, he added. Hilton’s investment in the Bunbury plant in Western Australia is mainly complete, and the business has launched new beef, lamb and pork retail pack products. Hilton’s share of the joint venture profits was £0.5M.
The construction of the facility near Melbourne, Victoria was proceeding in line with the plan, with production expected to begin next year. Hilton is also advising Woolworths at its Brismeats facility.
In western Europe, Hilton’s volumes rose by 2.9% with turnover up by 10%. The UK business achieved 12.7% sales growth, with significant improvement in the second half fo the year.
‘Very significant business wins’
“Hilton delivered a solid profit performance, impressive cash generation and very significant business wins in 2013,” concluded Jones. But currency headwinds – from the Australian dollar, Swedish Krona and weaker euro – led the analyst to cut its profit before tax forecast for 2014 from £27.7M to £27.2M.
That still represented “a healthy 10%” earnings per share growth year-on-year, said Jones. “Despite the strong performance of the shares, Hilton remains one of our favourite stocks in the sector.”
Panmure Gordon repeated its ‘buy’ advice on Hilton’s stock.
Hilton’s chief executive Robert Watson said the group had made excellent progress in implementing its strategy, including developing its Australian joint venture and the new UK contract with Tesco.
“The group has maintained a high level of investment in its meat packing facilities across Europe, while realising the available opportunities to progressively and profitably expand its business,” he said.
“The strategic progress made during 2013 illustrates well the continued relevance and international transferability of Hilton’s business model.”