A Tasty Morsel for Lean Times

05/26/2009 11:23 am EST

Focus: GLOBAL

John Snowden

Contributor, The IRS Report

Hilton Food Group insiders are buying into the fast-growing meatpacker with a beefy yield, writes John Snowden in The IRS Report.

My choice for this month is based on my expectations of a long recession and slow recovery. Hilton Food Group (LSE: HFG.L) is a meat-packing company and though it may not be recession-proof, it is in a sector where steady demand should continue whatever the prevailing conditions. [At London's Tuesday closing price the shares have a trailing annual yield of 4.5%—Editor.]

Set up in Huntingdon in 1994 to operate a beef and lamb packing facility, Hilton has grown and expanded over the years. A recent factory has incorporated an additional six production lines to consolidate a firm and profitable business in England, which has allowed expansion in Europe.

The strategy of the business is to source its meat from a local and global base of quality suppliers. Modern packaging establishments are set up near these suppliers, while third-party haulers are responsible for distribution.

Having established a sound base in Huntingdon, the company acquired a beef- and lamb-packing facility in Zaandam in Holland in 1999. Output has more than doubled over the years. In 2005, the product range was expanded to include packed pork products. The previous year had seen an expansion into the Republic of Ireland as the group set up in Drogheda with a similar beef, lamb, and pork facility. In August last year, the Irish unit expanded to include a new bacon- and sausage-packing business.

Over the years, both turnover and profits have grown, establishing Hilton as a leading meat-packing business supplying major international food retailers such as Tesco, Ahold, Albert Heijn and ICA from state-of-the-art facilities located in five European countries and employing around 1,500 people.

The change in shopping habits over the last decade from the local store to the supermarket has helped the group. Revenues for 2008 grew by 26% to GBP 727.5 million from GBP 577.7 million, while pre-tax profit was GBP 17.3 million against GBP 13.6 million for 2007. Hilton has recommended a final dividend of 5.74 pence to take the total dividend for the year up 10% to 8.14 pence. For shareholders registered on June 5th, the final payment will be made on July 3rd.

It would seem that the directors believe there is good value in the company, as Chairman Gordon Summerfield added a further 30,000 shares at 163 pence to hold 146,666 shares just after the results were released on March 31st. As the new tax year started, chief executive officer Robert Watson bought 200,000 shares at 161 pence to hold 3.159 million shares. Commercial director Colin Patten weighed in towards the end of the month with a purchase of 100,000 shares at 164 pence and a further 50,000 at 166 pence. He now holds nearly 13% of the company.

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