Hilton Food Group Makes ‘Another Strong Step Forward’ – Shore Capital

Hilton Food Group (LON: HFG) reported results for the first half of FY24 last week, which analysts at Shore Capital believe marked significant progress in its ongoing profit recovery. 

Shore Capital, which has Hilton Food Group as a House Stock, said the company's strong core performance, combined with a rebound in UK Seafood, has driven solid financial growth. However, the stock fell over 2% following the release and is down around 5.8% in the last week, with revenue for the 26 weeks ending June 30, 2024, declining 8.4%.

During the period, like-for-like sales increased by 1%, while adjusted pre-tax profit surged by 38% to £33.5 million, exceeding Shore Capital's forecast of £33.0 million.

Shore Capital said Hilton Foods continues to trade on attractive multiples, with a forecast FY24 price-to-earnings ratio (PER) of 16.0x and an EV/EBITDA multiple of just 6.5x. 

Despite currency headwinds, Shore Capital adds that the company's long-term earnings are projected to grow, supported by a 10.7% EPS compound annual growth rate (CAGR) through FY26.

Geographically, the UK and Ireland led the way, with revenue up by 9.3%, driven by “core retail meat” and premium products, while Europe saw a 2.8% increase. 

Although revenues in the Asia-Pacific (APAC) region declined by 6.7% due to protein deflation, Shore Capital highlighted the importance of APAC's volume growth, which is crucial for long-term profitability.

EBIT also demonstrated strong growth, with the UK and Ireland reporting an increase of £8.3 million to £21.1 million, boosted by improved margins and a £2-3 million contribution from UK Seafood. Overall, Hilton's group EBIT margin rose by 40 basis points to 2.4%.

Shore Capital said it remains optimistic about Hilton's future, calling the stock “undemanding” at current levels and labelling the results as “another strong step forward.”