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24 Sep 2021
Hilton Food Group : Increasing forecasts - Buy
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Hilton Food Group : Increasing forecasts - Buy
Hilton Food Group plc (HFG:LON) | 918 27.5 0.3% | Mkt Cap: 822.1m
- Published:
24 Sep 2021 -
Author:
Nicola Mallard -
Pages:
6
Hilton Foods delivered a stronger-than-expected 1H, comfortably beating our forecast (by £4m). PBT was £35.8m, which was a 27% increase on 1H20, with EPS also up 25% at 31.9p (FD). The interim dividend was lifted 17% to 8.2p.
This half the group started to face the tougher comparatives from 2020, with a COVID boost to demand from Q2 onwards. In volume terms, this was apparent in Europe, with volumes down 1.3%, despite some advance in fish, fresh convenience and plant-based ranges. Revenues moved ahead by 3.7% helped by the pass-through of higher raw material prices. However, profits were stronger than expected (+£4m, +13% HoH) with margins up 30bps to 3.3%, assisted by contributions from sous vide, convenience foods, and the Belgian factory coming on stream. This was the larger outperformer vs our forecast as we had also assumed a tough comparative for profits.
The larger boost to revenues came, as anticipated, from Australasia with a full year benefit from the consolidation of the Australian operations and ongoing growth from the Brisbane facility. This flowed through to profits too (+£4.2m). In July, the New Zealand facility opened its doors, although the full product range won’t be available until later in 2021.
With the strong beat to 1H, we have reviewed our FY forecasts. We still remain prudent on a number of fronts – a tough volume comparative in Europe in 2H, disruption in Belgium from a recent factory fire, there will not be the same step change from Australasia in 2H (this was already consolidated last 2H), and some growing FX headwinds. We lift FY21E PBT by just over £1m to £66.3m, EPS 59.5p (£65.2m, 59.0p). In FY22E, we lift PBT by £1.9m to £72.1m, EPS 64.7p (63.9p). Using the latest peer multiples, our TP moves down a shade to 1300p (from 1325p), but our recommendation remains BUY.