Shares in Hilton Food (HFG) fattened up 1% to £17.76 on Thursday after the red meat and fish packing specialist confirmed it continues to benefit from consumers eating out less often due to the pandemic.

Despite the uncertainties being created by the global Covid crisis, broker Shore Capital believes its full year estimates could prove conservative and sees scope for upgrades from Hilton Food the other side of Christmas.


For the uninitiated, Hilton Food packs proteins for major retailers including Tesco (TSCO), Ahold Delhaize and Woolworths at state-of-the-art plants using automation and robotics.

The pandemic has emphasised the strength of the geographically-diversified, progressive dividend payer’s ties with major supermarkets, with its proven global sourcing capabilities enabling confidence in the supply chain.

In today’s update covering the third quarter period from 13 July to date, Hilton Food assured investors trading was in-line with management’s expectations. Growth has been underpinned by ‘additional volumes’ driven by the shift to home-consumption combined with ‘close cooperation’ with retail partners.

Not only is UK turnover tracking higher, driven by red meat and fish volumes, but sales have continued to grow in Sweden and Denmark, and in Holland, Hilton has seen higher red meat volumes and benefitted from rising vegetarian and vegan product volumes through Dalco, its vegetarian joint venture business.

Volumes have also ‘remained buoyant’ in Central Europe amid continued growth with both Tesco and Polish retailer Zabka alike. Further afield, the tightening of restrictions in Victoria state during the quarter has led to increased home consumption and strong volume growth from Hilton’s Australia business.


Given these increasingly uncertain times, Shore Capital left its full-year 2020 pre-tax profit forecast unchanged at £54 million which equates to earnings per share (EPS) of 49.3p, implying 8.2% year-on-year EPS growth.

Yet the broker admits management’s guidance and its own forecasts contain 'more than a hint of caution which reflects the increasingly fluid Covid-19 conditions’ and it continues to see ‘the prospect of upgrades at the year-end trading update in early January’.

Shore Capital’s current estimates assume Hilton Food’s profit growth slows from the 14.6% served up in the first half to just 2.9% in the second, a scenario which seems unlikely considering the tasty momentum in the business heading into the important festive season.

Recognising Hilton Food trades on a prospective 2020 price-to-earnings ratio (PE) north of 20 times, the broker believes the premium rating is ‘fully merited for a business that has leading facilities and processes and outstanding customer relationships that underpin growth ambitions across multiple geographies, proteins (meat, fish and meat-free) and categories’.

The broker reiterated its ‘buy’ rating on Hilton on ‘the expectation of upgrades in January (barring any adverse impact from Covid-19 on sites across in multiple markets) and the still strong expectation of further new business wins and/or partnerships to be confirmed over the medium term.’


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Issue Date: 29 Oct 2020