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14 Nov 2023
Hilton Food Group : Regaining momentum - Buy
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Hilton Food Group : Regaining momentum - Buy
Hilton Food Group plc (HFG:LON) | 920 36.8 0.4% | Mkt Cap: 824.3m
- Published:
14 Nov 2023 -
Author:
Matthew Webb -
Pages:
12
At last week’s Capital Markets Day (CMD) at its Huntingdon facility, HFG set out its expected returns profile from new investments, its medium-term financial targets, its technology and services offer, its ambitions for margin recovery in UK seafood, and its new product development programme.
HFG expects to achieve a >20% ROCE on its new investments over the course of a contract, with exceptional returns towards the period end (once the initial equipment has been depreciated) and the potential for strong returns in the (likely) event of contracts being renewed. It sees no reason why new contracts in fish should have a different returns profile than in red meat.
The new financial targets appear somewhat modest, but we think that this is due to the difficulty of factoring in periods of particularly strong growth, such as the expansions into Australia (historically) and Canada (prospectively).
The CMD looked in detail at HFG’s technology and services capabilities, including its new “Greenchain Solutions” business which offers a fully integrated end-to-end supply chain solution, and which it believes is unique in the market. As well as supporting its core offer, HFG believes that it has “significant opportunities for commercialisation” and has therefore brought together its various strands in a new, standalone business.
Importantly for underpinning our current forecasts, HFG has not only guided that it expects its UK seafood business to achieve a (small) profit in FY23, but also that it expects it to return to previous levels of profit by FY25. The latter would deliver two-thirds of the group profit growth that we forecast between FY23E and FY25E.