Hilton Food (HFG) 870p

Market cap: £779 million

A share price pause for breath at Hilton Food (HFG) presents a buying opportunity for investors seeking a high-quality international business with defensive attributes, robust cash generation and a tasty long-term growth runway. This meat and fish packing business is taking market share around the globe and has positive trading momentum, yet the shares trade at a significant discount to pre-Covid levels. That suggests scope for a re-rating so long as the FTSE 250 firm continues to demonstrate resilience despite the uncertain macroeconomic backdrop, delivers profit improvements in its seafood business and the benefits of new contracts feed through to volumes and stoke earnings upgrades.

This could be a year of consolidation following a period of strong recovery and growth, but Shares expects to see growth step up over the next few years as production begins under new long-term contracts with NADEC in Saudi Arabia and in Canada with the world’s number one retailer, Walmart (WMT:NYSE). Although it is geographically diversified, being a global company means Hilton Food isn’t immune from two risks investors should be mindful of, namely Trump’s tariffs and foreign exchange headwinds.

PROTEIN POWER

For the uninitiated, Hilton Food is a top-quality business whose capabilities in the packing and distribution of proteins ranging from red meat and poultry to seafood and meat-free products underpin exciting growth potential across international markets.

Guided by CEO Steve Murrells and blessed with a strong balance sheet, Hilton Food’s customers include Britain’s biggest retailer Tesco (TSCO), not to mention overseas players like Ahold Delhaize (AD:VIE), ICA, Woolworths (WOW:ASX), Zabka (ZAB:WSE) and COOP.

By providing high levels of customer service and operating super-efficient sites, the £779 million cap fosters strong relationships with these retailers and is well positioned to enter new markets and attract new customers. The partnership with Tesco and changes in consumer habits are helping to drive strong volume growth for Hilton Food. Hard-pressed consumers are increasingly switching spend away from quick-service restaurants and towards grocery retailers due to affordability concerns, which is a tailwind for a company which is well placed for a recovery in UK consumer confidence. Berenberg observes that management has increased automation and SKU (stock keeping unit) rationalisation within the seafood business in order to enhance profitability.

GROWTH ON THE MENU

In its latest trading update (20 May), Hilton Food confirmed that all three of its geographic regions - the UK & Ireland, Europe and APAC - have seen volume growth across the year to date. Despite higher levels of raw material inflation, Hilton Food continues to outperform the UK & Ireland market. ‘Given the unseasonally warm weather in the UK,’ observed Panmure Liberum, ‘we expect the BBQ season may have begun ahead of time, while the late Easter has likely also supported volumes.’

In Europe, Hilton’s core meat and easier meals businesses continues to perform well, with volumes and revenues tracking ahead of last year. And while volume growth has slowed somewhat in APAC, this reflects exceptionally tough prior-year comparatives and the region remains in growth.

Encouragingly, progress continues to plan on Hilton’s long-term partnerships with Walmart in Canada and NADEC, a new customer partnership in Saudi Arabia. The latter deal marks the food group’s first foray into the Middle East, which has an estimated red meat market size of 25 million tonnes per annum. Hilton’s long-term partnership with Walmart in Canada, where the company will provide ‘comprehensive multi-protein solutions’ whilst deploying its state-of-the-art sorting capabilities, is on track for launch in early 2027 and should prove highly lucrative.

VALUE MORSEL

For the year to December 2025, Shore Capital forecasts a rise in adjusted pre-tax profit from £76.1 million to £80.1 million, fattening up to £86.5 million and £94.7 million in 2026 and 2027 respectively.

Based on this year’s estimates, Hilton Food trades on a forward price-to-earnings (PE) ratio of 14 times, falling to 12.9 and then 11.8 on the outer year forecasts, a big discount to the price to earnings ratio north of 20 times before the pandemic struck, while Hilton also offers a juicy yield north of 4%. 

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