Hilton Foods has has built up a strong reputation for food safety, quality and service
The company is able to maintain its competitive advantage and pursue new growth opportunities
Its dividend has grown at an average annual rate of 11 per cent since its initial public offering in 2007
David Smith, manager of Henderson High Income Trust (HHI), explains why he invests in Hilton Food (HFG).
“Hilton Food processes, packs and distributes protein products to international food retailers. While this may not sound like the most exciting business, its straightforward and attractive business model has enabled it to deliver superior returns and excellent growth. Since its establishment in 1994 as a provider of red meat packaging to Tesco (TSCO) from its Huntingdon facility, the company has expanded to 18 sites in 16 different countries, partnering with large scale retailers to provide food services across an expanding product range including meat, fish, plant-based proteins and pre-prepared meals.
The company has built up a strong reputation for food safety, quality and best in-class service levels, attributes which were further enhanced through the pandemic and enabled it to successfully deliver on significantly increased volume demand.
Hilton Food’s investment in state-of-the art facilities and its transparency with customers means that the business is not only cost-competitive, but also helps to lower future unit costs for retailers, as operational efficiencies through increased volumes are shared. This, along with the company’s reputation, has driven strong growth with both existing and new overseas customers. With an expanding product mix, and investment in food technology to provide supply chain visibility and management, the business has increased its growth opportunities. It looks well set to develop its partnerships with existing customers alongside the continuation of its established and proven track record of expanding into new geographies.
With high cash generation and a robust balance sheet, Hilton Food can afford to invest to maintain its competitive advantage, pursue new growth opportunities and pay an attractive dividend. It dividend has grown at an average annual rate of 11 per cent since its initial public offering in 2007.”
The company’s revenue increased over 50 per cent in 2020 and it increased its dividend in respect of that year by 21.5 per cent to 26p per share.
Hilton Food accounted for 1.8 per cent of Henderson High Income Trust’s assets at the end of June.
