Covid winner Hilton said lockdowns and travel restrictions had resulted in more cooking at home in 2020, creating higher demand for its products, though Panmure Gordon cautioned the impact of any post-Covid normalisation on the business is ‘highly uncertain’.
TASTY FORECAST ‘BEAT’
Results for the 53 weeks ended 3 January comfortably beat market estimates, with adjusted pre-tax profits rising 22.8% year-on-year to £61.1 million, well ahead of Shore Capital’s recently upgraded £56.7 million estimate.
With the pandemic driving increased home consumption, volumes supplied to a global grocery retail customer base that includes Tesco (TSCO), Ahold Delhaize and Australia’s Woolworths received a very tasty boost.
Despite the difficulties engendered by Covid, the red meat, fish and vegan products packer ensured ‘continuous supply’ to customers and delivered record volumes and profits in a year of nigh-on record capital investment.
Total volumes for 2020 increased by 23.8% to 469,110 tonnes, which drove sales growth of 50% to over £2.77 billion. Australia was a significant driver of revenue growth, boosted by a full year of the firm’s new Brisbane facility.
Growth was broad-based with sales and operating profits also rising in Europe and the company continuing to diversify its product offering in the plant-based, seafood and convenience categories.
In a show of confidence, Hilton Food declared a final dividend of 19p, a year on year increase of 23.4% taking the total dividend 21.5% higher to 26p.
‘As with all businesses there remain some uncertainties concerning the full impact of Covid-19, including potential recessionary risks,’ cautioned chairman Robert Watson, though he insisted ‘our robust and sustainable business model and wide geographical spread make us believe we are well placed to meet any future challenges.’
THE ANALYSTS’ VIEW
Following the forecast-beating figures, Panmure Gordon increased its 2021 revenue estimate from £2.8 billion to £3 billion, but the broker adopted ‘a more cautious approach’ to its profit and dividend forecasts, leaving them essentially unchanged. 'The impact of both Covid and any post-Covid normalisation are highly uncertain,’ warned Panmure, also pointing out that ‘input costs are likely to constrain percentage margins’ for Hilton Food.
Shore Capital also left its 2021 pre-tax profit forecast of £65.4 million unchanged ‘given the still relatively early stage of the year, the currency headwind from the strengthening of sterling and ongoing Covid uncertainty’, although it does see upgrade potential ‘as we move though the year assuming current trading momentum can be broadly sustained’.