Shares in Hilton Food Group leapt 4% to 516p on Thursday morning after the meat supplier comfortably beat City profit expectations. Pre-tax profits in the year to 3 January increased 11% to £28m as the business benefited from a 53rd week, lower than expected start-up costs, a strong Christmas and incentive payments from retailers.
Hilton shifted an extra 13,000 tonnes of meat in the year - a rise of 5.5% - partly thanks to new business with main UK customer Tesco. Significant cash generation and lower capex also helped the business close the year with net cash of £12.7m compared with a net debt position of £7.7m 12 months previously. Overall revenues fell by 0.4% to £1.09bn despite the volume gains because of currency headwinds (62% of total sales came from outside the UK).
Peel Hunt analyst Charles Hall said the strength of the balance sheet and level of cash generation gave the company “significant firepower” to invest in new opportunities or return cash to shareholders. The firm upgraded its recommendation from ‘add’ to ‘buy’ following recent weakness in the shares, which are down more than 7% since the start of 2016. Charles Pick at Numis added: “With the extra Tesco business set to enjoy its first full year at ‘full-bore’, start-up costs set to decline and the jv’s [with Woolworths in Australia] new Melbourne plant performing well, the omens are highly favourable for 2016.”
Investors also got behind Booker following a mixed fourth quarter trading update to send the stock up 1.1% to 170.7p by Thursday lunchtime. Fourth quarter like-for-like sales dropped 2.5% to take full-year like-for-likes 1.9% lower, but group revenues rose 10.6% in the quarter to drive total sales up 5% to £5bn for the year.
HSBC said the Q4 trading reflected the familiar blend of strong volume growth offset by deflation. “The outlook is positive with growth prospects supported by ongoing share gains, a positive mix and benefits from the Musgrave deal, which we believe could eventually amount to c£60m-70m vs a purchase price of £40m,” the bank added.
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