Hilton will benefit from a recovery in Tesco’s fortunes

“We see scope for Hilton Food Group to benefit from the fightback increasingly evident by the UK grocers against the discounters, with growing confidence,”​ said Shore Capital’s Clive Black and Darren Shirley, as the meat packing firm published its results for 2014.

A £22M investment in Hilton’s Huntingdon facility in Cambridgeshire last year would result in a 40% increase in sales volumes with Tesco by the end of 2015, the company announced.

Operational problems ​

Meanwhile, operational problems encountered in the second half of 2014, which hit its deliveries to supermarkets, had been resolved and more of Hilton’s products were now reaching supermarket shelves, Black and Shirley added.

Management at Hilton was “upbeat”​ about 2015, after posting earnings before interest and tax of £26.1M on a turnover of £1.1bn for the year ending December 28 2014, a decline of just 1.1% on the previous year, said Black and Shirley.

However, the weakening of the euro, the Swedish krona and the Danish krone was likely to hit the company’s profitability in 2015 and led Black and Shirley to downgrade Hilton’s 2015 profit forecast by 8% to £25.6M. 

‘Anticipate strong growth’​

“We have also lowered our full-year 2016 forecasts … by 7% to £31.3M, but still anticipate strong growth,”​ they added.

The completion of two capital projects in Australia and Sweden would allow Hilton to return to cash generation and reduce its debt levels from £20.5M, they said.

Despite Black and Shirley’s downgraded forecasts, the company was still expected to deliver a three-year compound annual growth rate of 10.3% and generate £73M of free-cash flow in the years to 2017, they added.

“We forecast Hilton to have £20M of net cash by December 2017, which provides the group with considerable flexibility,”​ said Black and Shirley.