Hilton Food Group is ‘a high quality operator’

08-Sep-2015 - Last updated on 09-Sep-2015 at 13:43 GMT

Hilton is 'a high quality operator': Shore Capital

The Hilton Food Group is “a quality high operator” concluded a leading City analyst, after the business posted operating profit in western Europe up by 4% to £15.4M for the 28 weeks to July 12.

“We view Hilton as a high quality company, with a strong balance sheet, excellent cash generation, very well invested facilities and an ambitious management who continue to look for growth opportunities in new and existing markets,” said Shore Capital analysts Darren Shirley and Clive Black.

Strong underlying progress just offset the foreign exchange headwinds, as volume growth across the group reached 5% to 127,900t. But actual sales dipped 2.2% to £579.2M, due to translation factors.

Overall, operating profit was broadly flat at £13.7M, compared with £13.6M previously. The latest interim results included £1M of start-up costs in the UK and Australia.

Growth in earnings

On a constant currency basis, growth in earnings before interest and tax (EBIT) would have been a strong 11.3%, underpinned by a 10 basis points rise in the group EBIT margin to 2.4%.

Pre-tax profit was also broadly flat at £13.2M, compared with £13.1M in the previous period, leading to a flat year-on-year continuing earnings per share of 13p. Black and Shirley praised the results as: “A robust performance in our view, given the strength of currency headwinds which are said to have increased to about 10% at the operating profit level.”

Against a challenging backdrop, the analysts also praised the proposed 7.9% rise in the interim dividend per share to 4.1p, a move which they said demonstrated Hilton’s confidence about future profit growth and cash generation.

Capital investment

Net debt fell by £5.2M to £2.5M from the £7.7M at the end of the 2014 financial year. Shore Capital continued to forecast an ungeared business at this financial year, with net debt at £0.1M, reflecting partly a return to a maintenance level of capital investment of £15M after investment in the UK and Sweden.

Shore Capital repeated its ‘buy’ advice on Hilton’s stock.

Hilton chief executive Robert Watson said the business had achieved good growth despite challenging market conditions in some countries, with profitability, measured at constant exchange rates, increasing strongly.

“Strategically we continue to make sound progress, with the major capital investments made in the UK and Sweden in 2014 now bedded in and the new facility in Victoria, Australia having commenced production”, said Watson.

“Our aim continues to be to extend the geographic reach of the Hilton model and to explore and evaluate new expansion opportunities as they arise.”