25th Mar 2015 10:06
LONDON (Alliance News) - Hilton Food Group Wednesday reported a higher pretax profit for its last financial year, as lower meat costs offset a decline in revenue that was caused by the strength of sterling and lower prices for its products, and it also raised its dividend despite spending heavily on expanding and revamping its production facilities.
The retail meat packing business said pretax profit in the year ended December 28 grew 1.3% to GBP25.2 million, from GBP24.9 million the year before, as lower meat prices helped push up its operating profit margin to 2.4%, from 2.3%. Its operating profit rose to GBP26.1 million, from GBP25.8 million.
That helped offset a 2.3% decline in revenue to GBP1.10 billion, from GBP1.12 billion, which was mainly caused by the impact of the strength of sterling on revenue earned abroad. It said the strength of the pound wiped 4.6% off its revenue. Its volumes grew 3.5%, but it also passed on some of the lower meat costs to its clients, resulting in lower selling prices.
The group operates in seven countries comprising the UK, Holland, Ireland, Sweden, Poland, Denmark and Australia. It entered into a joint venture with Woolworths Ltd in Australia last year and said plans to construct a retail packed meat facility in Melbourne are on schedule and expected to commence production in the third quarter of 2015.
It is also redeveloping its own facilities in Huntingdon to enable planned UK volume increases for Tesco PLC, and is undertaking a re-investment programme at Vasteras in Sweden to replace production lines at the end of their economic life with equipment designed to achieve higher line speeds, reduced manning requirements and reduced unit packing costs.
That meant total investment rose to GBP43.3 million, from GBP18.4 million in the previous year. It ended the year with a net debt position of GBP7.7 million, compared with a net cash position of GBP4.9 million a year earlier. It reported a free cash outflow of GBP2.1 million, compared with an inflow of GBP17.0 million.
Despite this, it raised its full year dividend to 13.3 pence, from 12.75 pence a year earlier, saying it was appropriate to maintain a progressive dividend given its "strategic progress" in 2014 and its continuing level of cash generation.
"The high level of investment made in our meat packing facilities in 2014 was essential to facilitate the group's planned future growth. We will continue to seek out available opportunities to progressively and profitably expand the scale and scope of our operations, employing a business model that remains resilient, relevant and internationally transferable," Chief Executive Robert Watson said in a statement.
The company added that its operating performance in the early months of 2015 has been in line with its own expectations, and it expects to make continued progress as its business model is proving resilient to the tough trading conditions.
"With the completion of the capacity expansion and site redevelopment investment at Huntingdon in the UK and the planned start of production with our Australian joint venture partner near Melbourne in the third quarter of the year, Hilton's medium term growth prospects remain encouraging. The shorter term economic outlook in our European markets continues, however, to be challenging with consumer spending likely to remain constrained, despite a slightly better overall economic outlook in some countries aided in part by recently reduced oil prices," the company said.
It did note that sterling had risen further in the early months of 2015. The company makes over two thirds of its operating profit in currencies other than the pound.
Shares in Hilton Food Group were trading up 2.3% at 429.75 pence Wednesday morning. The stock has risen 11.6% so far in 2015.
By Karolina Kaminska; [email protected] @KarolinaAllNews
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
Hilton Foods