Hilton Food Group H2 2024 Earnings Report

Hilton Food Group EPS Results

• Actual EPS: GBX 61
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Hilton Food Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Hilton Food Group Announcement Details

• Quarter: H2 2024
• Date: 4/8/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, April 8, 2025
• Conference Call Time: 4:00AM ET

Hilton Food Group (LON:HFG) is a leading international food and supply chain services partner. We partner with leading retailers, brands and food service partners across the world. We offer a unique multi-category proposition of outstanding protein products including meat, seafood, vegan and vegetarian, and easier meals. We also offer a range of supply chain service expertise and solutions through our investment in innovative, leading technology such as Foods Connected, Agito Group and Cellular Agriculture Ltd. We are a business of over 7,000 employees, operating from 24 technologically advanced food processing, packing and logistics facilities across 19 markets in Europe, Asia Pacific and North America. Our business is built on long-term partnerships with our customers, suppliers, and people. Together we target long-term, sustainable growth and shared value. This is all delivered through our ESG strategy, The Sustainable Protein Plan.

Hilton Food Group H2 2024 Earnings Call Transcript

Presentation

[Steve Murrells, Group CEO at Hilton Food Group]

Good morning, and welcome to Hilton Foods Full Year Results for 2024. I'm Steve Morels, the Group Chief Executive, and I'm joined today by our Chief Financial Officer, Matt Osborne. This year's results have driven significant volume growth, reinforcing our strong market position. Our core Retail Meat business has outperformed the market, delivering both volume and revenue growth across all three regions. We continue to unlock new opportunities through our long standing relationships, product innovation and category expansion, while also creating incremental runways for growth with complementary new partners.

[Steve Murrells, Group CEO at Hilton Food Group]

With a strong balance sheet, we are well positioned to support our future pipeline of growth opportunities, ensuring sustained momentum and long term success. Let's take a look at the numbers. We've delivered another strong year growing volumes, revenue and profit. At our interim results, I stood here with a clear message that we were executing a well defined plan and these results are a testament to that with volumes up 4.4%, which has been a key enabler to driving improved operating profit, up 11.9% and profit before tax up 17.1% to £76,100,000 for the year. Our balance sheet is strong with the ability to support our growth pipeline, and I'm pleased to announce a full year dividend of 34.5p, a 7.8% increase on the prior year, fully aligned with our progressive dividend policy.

[Steve Murrells, Group CEO at Hilton Food Group]

Over the year, we've demonstrated strong momentum with Retail Meat being the star performer across all the regions as we continue to outperform overall market trends innovating in the premium tier. Our investments in automation and other technologies are helping us to reduce our reliance on labor, further shielding us from rising costs. These investments, particularly in The UK, are enhancing and unlocking capacity and strengthening our long term operations. Our success this year has been built on even stronger relationships as we've successfully expanded with existing partners like Jabka and Aarhalt Delhaize in Europe, whilst diversifying our offer and introducing new complementary partnerships that align with our strengths, for example, DUNS in Ireland. Looking ahead, we have a secure pipeline of medium term initiatives, our newly announced joint venture in Saudi Arabia launching in the second half of twenty twenty six and Hilton Foods Canada launching early twenty twenty seven.

[Steve Murrells, Group CEO at Hilton Food Group]

We continue to advance across all areas of sustainability, ensuring our operations align with customer priorities and their goals. In summary, we're delivering consistent, sustainable growth, strengthening key partnerships and laying the foundations for continued long term success. I'd now like to take a moment just to remind you of the Hilton Foods investment case. We start by creating and delivering a highly relevant multi category offer through a diverse product mix tailored to meet evolving consumer demands. While meat remains our core category at 80%, we are seeing growing contributions from the adjacent and added value categories that we also operate in, in particular seafood.

[Steve Murrells, Group CEO at Hilton Food Group]

This multi category approach strengthens our partnerships, enhances growth opportunities and boosts our margins. We have successfully expanded our international footprint with 75% of our revenues outside The UK. This gives us a large, attractive, addressable market and combined with our strong reputation, we are well positioned to continue growing our international presence further. Finally, our highly automated facilities continue to drive operational efficiency and insulate us against rising employment costs. Our return on capital employed continued to build to 21.7%.

[Steve Murrells, Group CEO at Hilton Food Group]

This progress is driven by ongoing investments in automation, technology and an optimized supply chain, ensuring we maximize our returns while maintaining a strong balance sheet. Looking ahead, our clear priorities, financial strength and commitment to sustainability will keep us best placed and future ready. By continuing to leverage our multi category offer, which makes our partnerships even sickier, along with market leading tech, we are confident in our ability to drive continued growth in the years to come. Now I'll hand over to Matt for a deeper dive into the numbers.

[Matt Osborne, CFO at Hilton Food Group]

Thanks, Steve, and good morning, everyone. It's a pleasure to be here to walk you through our financial performance, and I'm pleased to say that we have a strong set of results to share with you today. Our performance throughout 2024 reflects the strength of our strategy, the resilience of our business and the dedication of our teams. We've delivered solid growth, maintained financial discipline and capitalized on opportunities in the market, positioning us well for the future. The performance reinforces our commitment to sustainable growth, operational efficiency and value creation for our stakeholders.

[Matt Osborne, CFO at Hilton Food Group]

With that in mind, let's take a closer look at the numbers. As Steve's highlighted, we've delivered strong volume growth of 4.4%, with revenue increasing by 1.9% on a constant currency basis. Our operating profit rose by 11.9% to £104,700,000,000 driven by sustained volume momentum, particularly in The UK and Ireland and with a continued recovery in our UK seafood business. This progress is reflected in our improved operating profit with margins increasing from 2.4% in 2023 to 2.6% in 2024. Profit before tax reached £76,100,000 up 17.1% on a constant currency basis.

[Matt Osborne, CFO at Hilton Food Group]

And factoring in the translational impact of the strengthening pound, this was up 15.3% on a reported basis. Adjusted EPS grew by 17.4% to 61p, with our full year dividend at 34.5p, up 7.8% on last year. On the balance sheet side, capital expenditure for the year stood at £73,500,000 an increase of £15,000,000 versus 2023, and it reflects our strong pipeline of growth opportunities, which I'll come back to you later on. Alongside our strong trading performance, we continue to maintain a solid financial position, ending the year with net bank debt of £131,000,000 a slight reduction from last year, with leverage reducing to a conservative 0.9 times net debt to EBITDA. As we said, overall revenue grew by 1.9 on a constant currency basis.

[Matt Osborne, CFO at Hilton Food Group]

Favorable shifts in our product mix, driven by premiumization, contributed an additional 1.6% of revenue growth. However, this was offset by the net pricing impact of raw material deflation in our APAC region. The strength of sterling remains a headwind, keeping revenue broadly flat to actual FX rates. And for reference, we've included average FX rates in the guidance slides at the back the deck. Now let's turn to regional performance.

[Matt Osborne, CFO at Hilton Food Group]

In The UK and Ireland, volume growth has been particularly strong. The business has also benefited from a favorable shift in product mix with a notable increase in Beefsteak sales, especially within our premium ranges as well as record Christmas trading volumes across both Retail Meats and Seafood. In Europe, our core business continues to perform well. And as Steve highlighted earlier, is outpacing the total market. However, the Vegan and Vegetarian segment remained challenging throughout the year, holding back the region's total performance.

[Matt Osborne, CFO at Hilton Food Group]

Turning to APAC, where the region continued to experience significant raw material deflation, volumes remain resilient, up 4% for the full year and reflecting the continued strength of our core meat category and our ability to drive sustainable volume growth year on year, supported by new product launches. Overall, group operating margins have increased from 2.4% in 2023 to 2.6% in 2024. The key building blocks of these increases are the positive impact from volume growth, mix shifts and the continuing recovery of our UK CV business. In Europe, the upsides we've seen from growth in our core meat ranges and our convenience food ranges in Sweden and Central Europe have been broadly offset by the impact of challenges in the Vegan and Vegetarian business. As a result of these challenges, we've performed a review of our business and are recognizing a noncash impairment charge of £9,800,000 in respect to the goodwill we were carrying.

[Matt Osborne, CFO at Hilton Food Group]

Now while this adjustment reflects the impact of changing market conditions, we remain confident in our turnaround plan. The team at Dalco supported by the wider group remain focused on optimizing our single site facility And since the start of 2025, have won new business and we remain on track to return to run rate operating profitability by the end of this year. In APAC, where we earn an overall cents per kilo fee, the reduced level of interest cost recovery held overall operating profits flatter, but reflecting the continued strong volume growth, profit before tax increased by 6.9%. After allowing for increased central costs and stable interest costs, group PBT for 2024 on a constant currency basis was up 17.1% and up 15.3% at actual FX rates to £76,100,000 in line with market expectations. Our core business continues to deliver outstanding cash generation, supporting our ability to invest and grow.

[Matt Osborne, CFO at Hilton Food Group]

We've maintained a strong and stable working capital position, keeping our operations running smoothly and efficiently. Though with rising tax rates, particularly in The UK and increasing profitability, our tax payments have increased. Our full year operating cash conversion of 2x means that for every pound of profit after tax we've made, we've generated £2 in operating cash flows, a clear sign of a well optimized business model. Our disciplined capital investments remain key. This year, we've invested £55,000,000 in core CapEx.

[Matt Osborne, CFO at Hilton Food Group]

And after site purchases and commencing our expansion in Canada, total capital expenditure reached £73,500,000 We've also received a fine insurance payment of £13,000,000 bringing the total received in respect of the property damage interruption following the fire in Belgium to £23,000,000 And finally, with our progressive dividend policy, we've returned £29,200,000 to shareholders in the year. We remain focused on sustainable growth, operational excellence and delivering value for all stakeholders. Our investment program is key to maintaining our competitive edge and accelerating growth. Our core capital expenditure includes £27,500,000 of maintenance capital spend that continues to protect the core of our operations by maintaining the market leading standards that our customers expect and trust. The remaining £27,700,000 is focused on growth and efficiency, including £16,000,000 dedicated to new product ranges and increasing capacity, which delivers us strong returns and £12,000,000 directed towards efficiency investments benefiting both us and our strategic partners.

[Matt Osborne, CFO at Hilton Food Group]

In addition to our core investments, we spent £80,000,000 of strategic capital expenditure, creating new opportunities for expansion and diversification. Pounds 12,600,000.0 in site purchases has included securing the freehold of our site in Ireland, which supports our expansion efforts and acquiring Fairfax Meadows long leasehold, ensuring flexibility in our asset portfolio. Finally, we started to invest in our facility in Canada spent £5,700,000 during 2024. Our total investment is forecast to be around £60,000,000 with around £35,000,000 being invested this year and the remaining £20,000,000 in 2026. Our disciplined approach to capital allocation ensures that we remain at the forefront of our industry, maintaining our competitive advantage, efficiency and supporting growth, delivering value for our customers, partners and investors alike.

[Matt Osborne, CFO at Hilton Food Group]

Our financial strategy is built on a solid foundation of disciplined leverage and a resilient balance sheet, which positions us well to support sustainable future growth. We've reduced our net debt by around £8,000,000 compared to 2023, with our leverage reducing by 0.1 times versus last year, reflecting our financial stability while supporting our growth ambitions. We strengthened our ability to service debt with interest cover increasing to 5.3 times, up 0.3 times year on year, reinforcing our strong cash flow generation. With our conservative leverage and £108,000,000 of undrawn bank facilities, which run through to January 2027, we have significant capacity to seize growth opportunities as they arise. We have a well structured funding framework.

[Matt Osborne, CFO at Hilton Food Group]

And whilst our average bank interest rate rose to £6,800,000 sorry, 6.8% in 2024 versus 6% in 2023, we've projected a 6.3% rate for 2025. Our bank facilities are enhanced by lease and supply chain financing. Customer supply chain financing provided by some of our strategic retail partners allows us to accelerate receipt of customer payments, and this is a cost effective approach to funding around £150,000,000 of working capital with margins that are between zero point five and one point five percentage points lower than our bank facilities. The group is in a robust financial position, supported by a strong balance sheet with conservative leverage, which gives us both the confidence and ability to invest in future growth. Our commitment to a disciplined approach to capital allocation gives us a framework to ensure that our investments are targeted to protect our core business, maintaining the high standards our customers expect and unlocking sustainable growth opportunities, driving attractive shareholder returns through supporting core business development, enabling geographic expansion and selective complementary M and A.

[Matt Osborne, CFO at Hilton Food Group]

In conclusion, these results underlined our continued progress and the financial strength of our business, which allows us to invest in future growth, delivering sustainable long term returns. I'll now hand you back to Steve to take you through the business update. Thank you.

[Steve Murrells, Group CEO at Hilton Food Group]

Thanks, Matt. Before diving into everything that we've accomplished over the last twelve months, let's take a moment to revisit our strategic priorities. These have guided our efforts throughout the year, shaping the progress that we've made and the impact that we've created. These four areas drove our plans in 2024: growing our global footprint, expanding our multi category offer, building further expertise as a supply chain partner and leveraging tech as a key value driver. Supporting these priorities are our greatest asset, our people.

[Steve Murrells, Group CEO at Hilton Food Group]

And I would like to take a moment to thank them for their contributions and towards our business performance last year. Now, let's take a closer look at what we've achieved and how far we've come, starting with growing our global footprint. Hilton Foods Canada, in partnership with the world's number one retailer, Walmart, is on track to launch early twenty twenty seven. Over the last year, we've taken a thorough and strategic approach, including extensive market and consumer research, which has provided us with deep insights into local preferences, helping us refine our product mix and packaging formats to meet the unique needs of the Canadian market. We've also been working closely with our primary processes in Canada, helping them to step change to the quality that we require in order to delight the Walmart customer.

[Steve Murrells, Group CEO at Hilton Food Group]

In parallel, we fine tuned our manufacturing and automation design to maximize efficiency and productivity at our future Canadian operations. This focus on operational excellence will help us produce great quality products at affordable prices and support long term growth in the region in line with our customers' ambitions. In February, the Walmart team were back on U. K. Soil, and I'm confident that our partnership goes from strength to strength as we get ready for launch.

[Steve Murrells, Group CEO at Hilton Food Group]

In 2027, we expect to make a small low single digit contribution to profit, building thereafter with noticeable impact in 2028. This is a long term deal similar to APAC, which is now firmly in the cash phase generating a return on capital employed over 30% and volume growth over the last two years averaging at just over five percent. At the time of our interim results, I highlighted our ongoing commitment to expanding our global footprint beyond the 10 countries that we currently operate in. I was particularly pleased to announce our latest geographic expansion in March, which makes a major milestone for us, our entry into The Middle East. Saudi Arabia will be our first market in the region, which will launch in the second half of twenty twenty six.

[Steve Murrells, Group CEO at Hilton Food Group]

It is the largest economy in The Middle East with a projected GDP growth of approximately 3% and population forecast to hit 40,000,000 by 2027. The addressable market size is attractive and offers significant growth for us in the future. We have a strong joint venture partner in Nadek, one of the region's leading food and agricultural companies. Nadek have the local expertise, the trusted brand, market access and deliver on the Kingdom's 02/1930 vision. This partnership enables us to play out part our part as the country focuses on food security and positions us as a key player in a rapidly growing region.

[Steve Murrells, Group CEO at Hilton Food Group]

As part of our capital light investment, we are developing a primary butchery facility and a secondary retail packing site, which will allow us to process and supply high quality meat products to a growing number of retailers who we anticipate will remove in store butchery operations over time. During our start up in the second half of next year, we expect to be close to breakeven with volume building over 2027 and 2028. Our projected return on capital meets our hurdle rates and I'm confident that this will deliver healthy returns and a first mover advantage within the market. Moving to our second priority, we continue to unlock new opportunities with our existing retail partners through new product ranges, expanding into new categories and entering new markets, deepening our relationships and partnerships and making them even stickier. In today's fast paced arena, staying ahead of the competition requires more than just quality products.

[Steve Murrells, Group CEO at Hilton Food Group]

It demands innovation that's deeply rooted in consumer insights. To bring this to life, here are some examples of how these strategies are already delivering results. In Australia, the team have worked with Woolworths to revolutionize the barbecue range and in store experience, focusing on enhancing customer offer and driving their sales. A key highlight of this initiative is the relaunch of our new and improved burger range, which has already achieved an impressive double digit like for like sales. By prioritizing quality and innovation, we were able to transform Woolworth as the go to destination for barbecue enthusiasts, ensuring customers enjoy a memorable grilling experience that keeps them coming back for more.

[Steve Murrells, Group CEO at Hilton Food Group]

We've also strategically focused on our top tier offering, tapping into the growing trend of premiumization, combining the appeal of top tier steaks with slow cooked, high quality cuts. Throughout 2024, this was also brought to life in Tesco through their finest steakhouse range, driving double digit revenue growth and enhancing market share performance. We enjoyed a record Christmas in The UK, driven through core roasting joints and supported by new premium tier products that were launched over the festive period as part of their food to order catalogue. These centerpieces are thoughtfully crafted by the Hilton team with added value and special home entertaining in mind, designed to inspire shoppers and make Christmas celebrations easier and more enjoyable. Each item is curated to elevate the experience, combining exceptional quality with convenience.

[Steve Murrells, Group CEO at Hilton Food Group]

We've also continued to innovate to make our products healthier and easier for customers, launching new ranges of mince, burgers and meatballs, where beef is combined with pea protein and chicken, a first to market for our customers in Holland, Denmark and Sweden. Our core strength is how we work with our customers, our new products help win more sales, market share and brand recognition. A great example of this is in Sweden, when I'm excited to announce the next phase of our food park in partnership with Eaker as we launch a frozen burger range this summer. This initiative is a good example how we simply stretch our protein offer into complementary areas. When fully up to speed, we anticipate this could be worth 3,000 tonnes of incremental volume per year.

[Steve Murrells, Group CEO at Hilton Food Group]

Additionally, we have successfully cross sold fish cakes and coated fish products from The U. K. To New Zealand, significantly expanding our seafood offering in the APAC region. This has been well received both by our customer and their consumers. And as a result, we are rolling out this trial into Australia, reinforcing our ability to extend the reach of our catalog of products.

[Steve Murrells, Group CEO at Hilton Food Group]

Another great example of our collaborative success is in Central Europe, where our trusted partnerships with Ahold Delhaize and Jabka have enabled us to enter Romania's fresh meat and fresh food sector. By working closely with these retailers, we are not only extending our market reach, but also delivering innovative, high quality solutions that cater for evolving consumer demands. This drives success for our customers and fuels our own business growth in Romania, nearly doubling our volume with MegaRimage, part of the Al Harholt Delhaize and tripling the weekly volumes that we supply Zabka. As part of our ongoing focus on our core business, we've been thinking smartly and utilizing our capability and capacity in select areas across our existing portfolio where it makes sense. In Ireland, we've strengthened our presence with two retail partners, Tesco and Dunns.

[Steve Murrells, Group CEO at Hilton Food Group]

Supporting this initiative has been the extension at our Drugheda site, which will be completed next month. Ireland's extension was a capital investment of approximately £10,000,000 aligned with our return criteria and expected to pay back within four years. In Denmark, we are evolving our operations, maintaining our strong partnership with Co op, while welcoming a new partner, Salling Group. This approach has successfully optimized available capacity in a complementary way, allowing us to drive efficiency and returns for all. Although we operate in the middle section of the field to fork supply chain, we take end to end leadership, actively managing and influencing every stage to drive efficiency, resilience and value throughout.

[Steve Murrells, Group CEO at Hilton Food Group]

First, we're making significant strides in seafood sustainability in The UK, exploring alternative species, which will help make whitefish more affordable to more customers. Second, on meat, we're focused on optimizing in country beef availability through alternative dairy herd supply chains. This approach ensures that we can provide consistent high quality beef while maintaining flexibility and resilience in our supply chain. Additionally, we are experts in providing high quality imported material ensuring we meet consumer demands promptly even during times of high demand. This additional service helps us maintain our reputation to maximize our partners' market share.

[Steve Murrells, Group CEO at Hilton Food Group]

I am proud to say that we've been recognized by Woolworths in Australia and New Zealand as their Food Supplier of the Year. These awards reflect the value that we bring in providing outstanding availability and innovation. Turning to our final priority, technology is a key enabler of efficiency, cost optimization and drives long term success in our business. In Huntington, we've successfully implemented end of line automation through pick and place robotics, cutting labor by approximately 10%. Meanwhile, our automated white fish processing and water jet cutting technology in Grinsby is enhancing accuracy and efficiency.

[Steve Murrells, Group CEO at Hilton Food Group]

We've extended third party retail supply chain services in Denmark through additional crate washing and produce sortation. In addition, we continue to build momentum in Foods Connected and Agito further strengthening our technological edge. Through these advancements, we're reinforcing our position as an industry leader delivering value, scalability and enabling long term growth through innovation. At Hilton Foods our commitment to sustainability is strategically aligned to our customers' priorities. Our approach is to build around three key pillars: people, planet and product, ensuring that we drive meaningful impact across our operations.

[Steve Murrells, Group CEO at Hilton Food Group]

Starting with people, we're committed to high ethical standards with 100% of our own operations audited under Smetta. We're also taking decisive steps towards greater diversity with a clear ambition to move female representation in our leadership roles from today's 30% to 40% by 02/1935. In Planet, we've made significant progress in reducing our environmental footprint, and this year we published our first transition plan. We've achieved a 32% reduction in Scope one and two emissions, reinforcing our commitment to tackling climate change. When it comes to products, we have removed or offset this year a further sixteen ninety two tonnes of plastic from our packaging, bringing our total packaging reduction to just over 3,600 tonnes since 2020.

[Steve Murrells, Group CEO at Hilton Food Group]

Additionally, we've achieved a 47% reduction in food waste globally. Our Board provide governing oversight through the Sustainability Committee and set related LTIP targets for all senior leaders. Our progress to date demonstrates the strength of our commitment and we will continue to push forward working in partnerships with our customers, our suppliers and communities in which we operate. We remain confident in meeting current market expectations as our core business continues to drive performance, underpinned by our strong capabilities in customer relationships and efficient factory operations. Looking forward, we have secured a medium term growth pipeline across a number of new geographies, further strengthening our market presence.

[Steve Murrells, Group CEO at Hilton Food Group]

With a robust balance sheet that provides significant investment opportunities, combined with large addressable market outside The UK, we are in a unique position to deliver lasting value. At this point, I'll now open to the floor for questions. Before asking your questions, please share your name and institute that you represent. Charles, start with you and then Deirdre, we'll go to you.

[Charles Hall, Head of Research at Peel Hunt]

Charles Wall from Peel Hunt. Steve, could you just talk a little bit about meat and fish pricing, where you think that's going? Obviously, lots of things going on in the world at the moment and what you see that as having an impact on volumes and also the exposure you have to tariffs into The States and your early thoughts on how to deal with those.

[Steve Murrells, Group CEO at Hilton Food Group]

Thanks, Charles. Let me start with fish. So, you may recall when I was here at the interims, I was expecting deflation to come in on fish. Fish, like meat, is price elastic and actually in the second half our UK seafood operations saw volumes grow by over 17% half two twenty twenty four and half two twenty twenty three. So, when prices fall, customers buy more, that model works extremely well for us and it played out.

[Steve Murrells, Group CEO at Hilton Food Group]

On meat, we had various scenarios playing, clearly deflation in the APAC region, but a level of inflation in The UK region. We're skilled in this being a commodity product and we obviously flex the business either way. Fish, interestingly, in 2025, especially in whitefish, is going to see significant inflation coming through. We're doing a lot of work on alternative species that will help customers be able to afford fish going forward. Although, if that does play out, we will see demand slightly dampen in The UK.

[Steve Murrells, Group CEO at Hilton Food Group]

The trend on meat consumption, especially in beef, continues to be strong. We clearly haven't yet hit that point where customers switch off. And so with that on that basis and actually what we're seeing at the start of this year, volumes extreme are continuing to be very strong. On tariffs, it's all of our businesses, with the exception of Fopen, are unaffected. So, from our point of view, this isn't going to affect the performance of the group.

[Steve Murrells, Group CEO at Hilton Food Group]

We were actually in The U. S. Last week with our biggest customer, Costco, and agreeing how together we're going to offset that tariff, but we have quite a unique branded product that goes into The U. S. It's loved by The U.

[Steve Murrells, Group CEO at Hilton Food Group]

S. Market. It sits in the premium sector. And so, don't see tariffs having any meaningful impact on Hilton in the next twelve months going forward.

[Charles Hall, Head of Research at Peel Hunt]

Did Costco give a view on end market pricing for the product just to have a feel on what consumer demand might do?

[Steve Murrells, Group CEO at Hilton Food Group]

I think like many, everybody's just trying to work it through. We don't know how long it's going to play for, but they recognize that the product that we produce for them is a product that their customers want. And they were, I think, very clear that they would find a way with us to make sure that those prices are either carried at the shelf edge or that we'll find a way to jointly absorb them together. Deirdre?

[Deirdre Mullaney, Vice President at Deutsche Bank]

It's Deirdre Milani from Deutsche Numis. The first question just on kind of The U. K. Margins. You had good performance there.

[Deirdre Mullaney, Vice President at Deutsche Bank]

I'm just wondering if you can kind of unpack the drivers of this a little bit, how much of this was driven by kind of improvements in seafood profitability versus other things? And how sustainable do you see this going forward? So that's my first question.

[Matt Osborne, CFO at Hilton Food Group]

So in terms of seafood profitability has driven a good proportion. We've seen continued profit improvement in that business as we've kind of executing that recovery plan. I think as I mentioned, we've got also seeing shifts in mix as well, which is helping drive that margin performance as well. I think how sustainable is it? Well, the CV recovery is clearly sustainable, and we've seen strong trends in premiumization within that the core meat business as well.

[Matt Osborne, CFO at Hilton Food Group]

So for me, Steve says that the demand for the core products we have is as strong as ever. So see it being a sustained position.

[Deirdre Mullaney, Vice President at Deutsche Bank]

Thanks. And then my second question is just around Canada and your comments, Steve, around the consumer research that you've done there. I'm interested to hear if there's kind of anything surprising versus your expectations. You know, how are you tailoring your offering to kind of suit consumer needs there? Are there any big differences versus let's say The UK consumer?

[Steve Murrells, Group CEO at Hilton Food Group]

Yeah, we're taking learnings from The UK, from the APAC region, but recognizing that every region we're in is very different. There is no doubt that there are significant opportunities in premiumization in the Canadian market. And when you visit the Walmart stores, a lot of their packaging is in the old overwrap form. We're now more accustomed here and in our other European countries around the skin pack type of packaging, which we will have done a lot of research on to make sure that the Canadian customer is ready for it. It obviously extends the code life, enhances the quality of the products.

[Steve Murrells, Group CEO at Hilton Food Group]

So, just making sure that we tick up in the right places, but we can see how we can move their offer on considerably.

[Steve Murrells, Group CEO at Hilton Food Group]

Matt?

[Matthew Abraham, Vice President, Equity Research - Consumer at Berenberg]

Matthew Abraham from Berenberg. A follow-up question to the question about The U. K. And Ireland.

[Matthew Abraham, Vice President, Equity Research - Consumer at Berenberg]

A fairly remarkable acceleration in volume growth in that business in the second half given volume was low single digits at H1 and then 9% Have you seen that second half volume growth cadence continue into your current trading that you've touched on in the statement this morning? And then if so, can you just disaggregate the key drivers of that volume acceleration, please?

[Steve Murrells, Group CEO at Hilton Food Group]

To the extent that the trend continues, I think this, again, is we underplay actually the good work we do to pick the right partners. DUNS complement Tesco, Tesco complement Dun's, but both are seeing as being high class quality retailers in that sector. Equally, I think the team has been really smart about not creating a whole new range of products to give DUNS what it needs. What we've been able to do is actually find complementary products that go across both retailers so that we maintain the efficiency. We have seen, however, though, really strong growth in the sectors of bacon rashers, bacon joints, which drives a large part of the D N S performance.

[Steve Murrells, Group CEO at Hilton Food Group]

But that trend continues. And the team did a fantastic job meeting high demand from both of them during Christmas. And as we all know, if retailers have a good Christmas, that momentum stays with them into the following year. So, we're very excited about another strong year in ROI.

[Matthew Abraham, Vice President, Equity Research - Consumer at Berenberg]

Great. And just one more, if I may. This one's in reference to inventory. So a bit of an inventory build year on year, which has impacted free cash flow. Just wondering if that is in any part related to the small impairment inventory that's been put through or if that's normal course of business?

[Matt Osborne, CFO at Hilton Food Group]

No, for me, it's a normal course of business. So if you look in, say, The U. S. With Fopen, that's a frozen product, so we can build inventory. When it makes sense to do so from raw material pricing perspective, we can pull forward manufacturing.

[Matt Osborne, CFO at Hilton Food Group]

And it's a conscious decision to use and optimize market pricing to deliver the right products at the right time for the consumer.

[Matthew Abraham, Vice President, Equity Research - Consumer at Berenberg]

Okay. And that inventory build, how should we think about it in the year ahead? Will that unwind? Or

[Matt Osborne, CFO at Hilton Food Group]

Yes. We would expect to see a lot of that unwind. And it's similar to a position we would have had a couple of years ago where we exactly that, that we were able to take advantage of strong pricing, build inventory and it helps deliver performance into the year ahead.

[Steve Murrells, Group CEO at Hilton Food Group]

I think it would be fair to say that as we've kind of got back to our best over the last two years, cash inventory has been a real focus by the team. Lots more to do, but actually we're managing that muscle much better than we've done in the past. And clearly, you can see that coming through in the numbers.

[Matthew Abraham, Vice President, Equity Research - Consumer at Berenberg]

Great. Thank you, both.

[Steve Murrells, Group CEO at Hilton Food Group]

Darren?

[Darren Shirley, Equity Research Analyst at Shore Capital]

Darren Kelly, Shaw Capital. Apologies. One of the numbers that stood out to me, looking through the P and L, Matt, was the essential costs, which had a bit of a jump year on year. If you could just give us a bit of color.

[Matt Osborne, CFO at Hilton Food Group]

Of course.

[Darren Shirley, Equity Research Analyst at Shore Capital]

If there's any one offs in there and how we should look at that going forward?

[Matt Osborne, CFO at Hilton Food Group]

Yes. So I think a couple of points to call out. I think if we look at the LTIPs that we have, and Steve touched on how the targets and those are linked to sustainability for our key leaders. Now we're seeing those schemes kind of annualize up from the position we would have had in 2022, where they all kind of went underwater effectively. But that those are building back up again.

[Matt Osborne, CFO at Hilton Food Group]

And we'll see that I think next year, you'll see the same thing beyond that, then it's at the run rate cost for those. I think more broadly, and Steve touched on all the opportunities around growth, both with new partners in Canada, with Natick, we're ensuring we've got the right resource to ensure we're delivering those successfully, and that's added to some of those costs as well. Now will we expect to see those continue to increase at that same rate? No, clearly not. We're at a point where resource is getting towards where exactly where we need it to deliver on those growth opportunities.

[Steve Murrells, Group CEO at Hilton Food Group]

I think just building on that point, Darren, you can do one of two things, can't you? You can build it because you know it's coming or you can wait and then put it in. We've tended to take the form of view to effectively give credibility and service. And therefore, we've got ourselves slightly ahead. But as Matt rightfully says, we expect that now to be a kind of a more even keel.

[Darren Shirley, Equity Research Analyst at Shore Capital]

Okay, that's helpful. And then within the strategic CapEx, there was about GBP 15,000,000, 16 million of sort of seemed like opportunistic spend maybe where properties accept and assets become available. Should we be looking at the potential of that going forward? Are there things out there that you'd like to buy?

[Matt Osborne, CFO at Hilton Food Group]

So I think, look, we've got the balance sheet strength to be able to take advantage of those opportunities when they come up. Steve touched on the investment we're making in Ireland as part of the discussions around that, the opportunity to purchase that site. It came up to us and it made economic sense to do it. And similarly with the site in Derby, again, with conversations with the existing landlord, the opportunity arose and it makes economic sense and provides us with flexibility with our portfolio. We've done it in the past.

[Matt Osborne, CFO at Hilton Food Group]

We purchased the site in Denmark some years ago and the same with the food factory in Central Europe. So when the opportunities rise, we've got the strength to do it. And if it makes economic sense, we will.

[Darren Shirley, Equity Research Analyst at Shore Capital]

Just one last one, if you don't mind. On Canada, you signaled to be sort of low single digit millions contribution in 2027. What sort of scale of facility are we looking at when this is up to three years and up and running? Just to give us a

[Steve Murrells, Group CEO at Hilton Food Group]

So it's a facility that will do beyond 20,000 tonnes a year. That's over 400 tonnes a week. Think of it, Darren, as more like New Zealand. But equally remember that we're just on the East Side at this moment. Another provider provides services on the West Side.

[Steve Murrells, Group CEO at Hilton Food Group]

So, I think those numbers I'm giving you are kind of a minimum. Equally, the opportunity for us to help Walmart go for a number, I think four or five in the region in a northerly trajectory is significant. So, we're confident that that kind of base of 400 tonnes is more than achievable. And I think if we do our job well, which we will, then that will start to act as a bit of a catalyst for Walmart's market share growth improvement and we'll clearly benefit from that in volume going forward.

[Matt Osborne, CFO at Hilton Food Group]

It's worth adding in terms of that facility, it processes will process a similar amount to New Zealand, but also has the enhanced sortation and logistics services that are really supporting efficient delivery to Walmart's DCs and stores. So beyond what you'd have seen in New Zealand A Couple Of Years ago, there's the sortation of logistics services too that really kind of drives that stickiness.

[Darren Shirley, Equity Research Analyst at Shore Capital]

So just sort of a half of Brisbane on a New Zealand?

[Matt Osborne, CFO at Hilton Food Group]

Smaller scale Brisbane,

[Darren Shirley, Equity Research Analyst at Shore Capital]

yes. Yes. Okay. That's enough.

[Steve Murrells, Group CEO at Hilton Food Group]

Clive?

[Clive Black, VP & Head - Consumer Research at Shore Capital]

Darren's younger brother from Shore Capital. Two or three, if I may. I mean, first of all, can you say some more about Hilton Services because it was very briefly mentioned in your statement how you see things there and where they're going?

[Steve Murrells, Group CEO at Hilton Food Group]

First question, do you want to do a question at a time, Clive?

[Clive Black, VP & Head - Consumer Research at Shore Capital]

Yes, let's do that way. Otherwise, I'll forget.

[Steve Murrells, Group CEO at Hilton Food Group]

No, look, we the first up, we've now got a dedicated team on it. We did that because we didn't want that to in any way distract us focusing on the core. We expect revenues in Foods Connected to grow by 50% this year. And the team have won some new contracts through Agito with DHL. So, that's in good shape.

[Steve Murrells, Group CEO at Hilton Food Group]

It obviously, its primary purpose is to power the core, but more and more now with a dedicated team, it's starting to revenue generate with outside partners. But I think important for us that we camp it with its own focus so that there's no distraction on where we're going.

[Clive Black, VP & Head - Consumer Research at Shore Capital]

Okay. Thank you. And then I guess two points are linked. Firstly, how do you see your UK business coping with the costs I think might be landing today in terms of NI and labor packaging? And then linked to that, how do you see labor around your global network?

[Clive Black, VP & Head - Consumer Research at Shore Capital]

And then the last part of that is, where do you see yourself in the journey on technology, particularly around labor replacement across the world?

[Steve Murrells, Group CEO at Hilton Food Group]

So, look, I think this is where we're enjoying the fruits of our investments over many years. I think we're in a much better place than many absorbing NICs. And equally we were probably a bit ahead of the curve around national minimum wage. The other thing that automation does for us is in a labor market, a skilled labor market that's quite tight, by having automation to offset some of those other labor pressures, actually it creates headroom for us to go and find the right people that we need into the future. We're now spending a lot of time looking at the next iteration of automation in our factories.

[Steve Murrells, Group CEO at Hilton Food Group]

We actually had a delegate from Tesco very recently, Ashwin, Matthew Barnes, Dominic Morey, and we were taking them through the next generation because everybody's catching up. And so, there's a lot of energy to say, okay, where next? Where can we actually automate? Where can we remove labor, repurpose that elsewhere? And so, that's a real focus for us, Clive, because standing still isn't going to be right.

[Steve Murrells, Group CEO at Hilton Food Group]

Therefore, the team is looking at the next five to ten years out.

[Clive Black, VP & Head - Consumer Research at Shore Capital]

And then just lastly, Saudi Arabia, think, is starting off a beef. Do you see that as a beachhead that could be multi species? And indeed, it's a big country. Is one site enough for that the size of that country?

[Steve Murrells, Group CEO at Hilton Food Group]

So it's a start. I think that's an important point to make. It's a start. Yes, beef will be the dominant protein, but lamb and other protein products, meat products that are more traditional in the area will also come in. We have an exclusive arrangement with NADEC that as they seek to go further, then we will piggyback on the back of that.

[Steve Murrells, Group CEO at Hilton Food Group]

And that obviously would see, I think, further facilities going down in the region. So, very excited about it. We were out there, Matt and I, very recently. We think we've got a great partner in Naddack. They're a similar business to us.

[Steve Murrells, Group CEO at Hilton Food Group]

They're listed, similar size, and they have the relationship with Panda who are the number one retailer in the region who will be retail packing for. Andrew?

[Andrew Ford, Equity Research Analyst at Peel Hunt]

Thanks. It's Andrew Ford from Peel Hunt. I just I noticed this time in the presentation, you didn't have your product and region matrix in there. I wondered how what's that telling us maybe about the way you're thinking about strategy? Clearly, you've added quite a few regions, with Saudi Arabia, you're thinking Romania.

[Andrew Ford, Equity Research Analyst at Peel Hunt]

Is it about expand is the focus more weighted now towards expansion of regions through the core and that product sort of infill becoming less of a weight? And I guess sort of following on from that where those Easy Meals and food services fits into your strategic thinking as well?

[Steve Murrells, Group CEO at Hilton Food Group]

Yes. I think, look, we are in a really good place where we can play a number of different tunes. There is no doubt we really see the right returns when we move into a new region with a new partner on a full cost pass through for a period of time. And as we've said in the past, the world's a big place. There's lots for us to go at.

[Steve Murrells, Group CEO at Hilton Food Group]

It's a high addressable opportunity and nobody else is doing it. But what we've also been able to show both in more mature markets in Europe, but equally as we said in Ireland earlier on, that we can spread ourselves into adjacent countries and ride on the back of our retail partners who equally, more probably so in Europe, have other fascias that stretch into those new countries. And the combination of that and certainly what we've experienced in Poland, our food park there, as we've moved into higher margin, more complementary food products, acts as just as good an important momentum for us. So, combining a number of avenues for growth, I think is a real USP for the group.

[Andrew Ford, Equity Research Analyst at Peel Hunt]

Thank you. And just sort of following off on that, can you remind me how the relative importance of premium for you over and above the sort of more value Is it better margin? Obviously, the volumes will be slightly lower in that category. I know they're accelerating. But what's the how do you think about the overall benefits?

[Andrew Ford, Equity Research Analyst at Peel Hunt]

How important is that into the premium side of things?

[Steve Murrells, Group CEO at Hilton Food Group]

Yes, look, think the both ends of the value chain are growing still entry and premium, and it's actually the squeeze middle that's finding life tough. With all of the food capability in the business today, that we're able to get after that premiumization through innovation and new ranges. But also in just simple areas like steaks, where we've been able to get more supply to fill that hole. Because at the moment, people are eating out less and they're therefore treating themselves more in the home. And that has a big benefit for us in terms of our retail connections.

[Steve Murrells, Group CEO at Hilton Food Group]

And then when it's flipped back the other way, obviously Fairfax Meadow sees the benefit there. Now that I see that continuing for some time ahead. And I think you can see our ability to scale that in a number of countries as the demographics in those countries start to play out. We tend to use The UK as the starter, APAC is quite a quick follower, Europe equally so, and as I was saying earlier on, Canada will again be an iteration on where we're going. So, yes, I think it's a muscle that we've really started to get after.

[Steve Murrells, Group CEO at Hilton Food Group]

I do see it being here for a continued period of time.

[Andrew Ford, Equity Research Analyst at Peel Hunt]

Thanks, Steve. Thank you.

[Steve Murrells, Group CEO at Hilton Food Group]

Matt?

[Matthew Webb, Consumer Analyst at Investec Group]

Good morning. Matthew Webb from Investec. I wonder if I could just ask about your Vegan and Vegetarian business. It sounds like you've done a lot of self help there to get that into a better place. But I just wonder what the medium term outlook is there.

[Matthew Webb, Consumer Analyst at Investec Group]

I mean, if the market remains difficult, can you continue to win more business there and grow regardless? Or are you reliant on that market improving? And do you see the overall market improving at some point?

[Steve Murrells, Group CEO at Hilton Food Group]

So, think first to say we're pleased with the progress going to one site. Importantly, this year we can see new wins by the team. So the volume decline that we were experiencing during 2023 and 2024 is now starting to grow again but I think important to remind everybody it is a very small part of the business. As such, it's not a business that we are going to be investing in going forward, but it's a business that we can see ourselves turning the corner now. And as Matt said, getting back to run rate profitability by the end of this year.

[Matthew Webb, Consumer Analyst at Investec Group]

Thank you.

[Steve Murrells, Group CEO at Hilton Food Group]

Are there any calls on the line?

[Executive]

Yes. Our first question comes from Max Church at HSBC, which also focuses on premiumization. Are you expecting to see a continuation of this trend? Or is there a risk that under tougher economic conditions, see consumers starting to trade down? The latest supermarket data in The UK suggests that discounters have regained popularity in recent months.

[Executive]

How would trading down impact group profitability in the coming years?

[Steve Murrells, Group CEO at Hilton Food Group]

I think as I've just said, I see both entry and upper tier continuing to thrive together. There is no doubt there's a lot more energy in The UK at the moment with a resurgent as to potentially and Morrison's. But our job is actually about being really agile and nimble. And as long as we provide choices and options throughout our offer then we'll be able to get the benefit of any consumer change I think that plays out in the next twelve months.

[Executive]

That concludes questions from the webcast. I'll hand back to Steve for closing remarks.

[Steve Murrells, Group CEO at Hilton Food Group]

Thanks very much, everybody. It's at least sunny in London. We have a long day ahead of us. Thanks very much for your questions this morning.

Participants

Executives

• Steve Murrells, Group CEO
• Matt Osborne, CFO

Analysts

• Charles Hall, Head of Research at Peel Hunt
• Deirdre Mullaney, Vice President at Deutsche Bank
• Matthew Abraham, Vice President, Equity Research - Consumer at Berenberg
• Darren Shirley, Equity Research Analyst at Shore Capital
• Clive Black, VP & Head - Consumer Research at Shore Capital
• Andrew Ford, Equity Research Analyst at Peel Hunt
• Matthew Webb, Consumer Analyst at Investec Group
• Executive