Hilton Food Group plc

Good morning, everyone. Thank you for joining us. We're pleased to present our 2025 full-year results today. Joining me this morning are Matt Osborne, CFO, Mel Chambers, COO for the East Region, Sami Zehu, COO for the West Region, and Martin Epsley, Investor Relations Director. You all know Matt and are getting to know Martin, but I also think it's important that you get to meet more of the wider leadership team, and I'll ask Mel and Sami to say a few words about themselves when they present later. I should mention Hannah Surtees is also with us today. Hannah's handed over the investor relations button to Martin. Going forward, she's going to head up our communications team and work closely with me on our strategy. I'd like to thank Hannah for the sterling job she's done in recent years and say how much I'm enjoying working with her. Over the next 35 minutes, we'll take you through the key highlights of the year, including our financial performance and our refresh strategy. Then there'll be time for questions. Let's start with our 2025 full year. Overall, we delivered solid financial performance in what has been a challenging operating environment. Adjusted profit before tax was 73.2 million, which is down around 3% year on year. This reduction reflects the impact of the disposal of Fairfax Meadow, together with the challenges in our seafood businesses and Dalco. Importantly, performance in our core meat operations in this challenging environment was stable. This demonstrates the resilience of our core business. We made good commercial progress during the year. We secured contract extensions in both the Netherlands and Denmark. This reinforces the strength of our long-standing customer relationships and the value we continue to deliver to our retail partners. In terms of our growth investments, our projects in Canada and Saudi Arabia remain on track. These are important platforms for future expansion. and we continue to expect them to contribute from 2027 onwards. Alongside this, we're planning to invest up to 30 million to expand capacity in Poland. This will enable us to benefit from attractive growth opportunities in fresh prepared foods. It will also strengthen our position in Central Europe. Looking ahead, our 2026 outlook remains unchanged since the January trading update. We expect adjusted profit before tax to be in the range 60 to 65 million. This year-on-year reduction largely reflects continued challenges in our seafood, vegetarian and vegan businesses. Remain cautious on the impact of red meat inflation. Finally, we've refreshed our strategy. Going forward, we'll focus on growth plans and investment on our corn, meat and fresh prepared food activities. We will also implement plans in CTL, FOPEN and DALCO to improve performance and increase strategic optionality. As part of our strategic refresh, we've also updated our financial framework. We have a clear focus on delivering sustainable profit growth, disciplined investment and compelling returns for shareholders. So while 2025 has had its challenges, we've made important changes in several areas and continue to position the business for long-term growth and value creation. I'll now hand you over to Mark to take you through our full year 2025 performance.

Thanks, Mark, and good morning to those of you in the room and those of you listening in. I'll now walk you through our 2025 financial results, highlighting the main drivers of volume, revenue, profit, net debt and cash flow. I'll also touch upon the outlook for 2026 before handing back to Mark. As we saw in the first half of the year, our full year performance was underpinned by continued resilience within our core meat and fresh prepared food businesses, which now account for around 90% of our revenue. This is a testament to the strength of our core business model and the expertise and commitment of our teams. As we've previously highlighted, our seafood, vegetarian and vegan businesses are facing challenges and our strategic review, which Mark will introduce shortly, seeks to address them. Before then though, let's take a closer look at the numbers. First, the headlines. Volumes from our continuing operations, so excluding Fairfax Meadow, which we sold in September last year, were up 0.2% against a highly inflationary environment, which drove revenue up 11.9% on a constant currency basis. Constant currency operating profit fell by 4.4%, reflecting in particular the challenges in the UK seafood business, and I'll cover profit in a little more detail shortly. The resulting operating profit margin was 2.3%, down from 2.6% last year. In line with the guidance we provided last November, profit before tax was £73.2 million, down 2.8%, and from continuing operations, so again, excluding Fairfax Meadow, profit before tax was £69 million, down 1%. Adjusted earnings per share of 56 pence was 7.4% lower, reflecting a slightly higher tax rate of 30% due to the impact of truing up some historic tax allowances. Our strong financial position and confidence in the medium term outlook means we are maintaining our commitment to a progressive dividend policy. With the final dividend flat, the full year dividend per share is up 1.4% to 35 pence. Net debt improved slightly year on year. with significant cash inflows in the second half from divestment proceeds and a partial unwind of working capital. This was despite the planned increase in growth capital, with 2025 being the main year of spend on our Canada project. Moving to revenue. With volumes of mix broadly stable, an 11.9% increase in constant currency revenue was almost entirely down to increases in raw material input costs. On MIGS, we continue to see a shift in the UK, in particular with lower cost products forming a higher proportion of our overall volume. However, multi-buy and promotional activity were a positive for us in Australia. The relative strength of sterling versus the Australian dollar remained a headwind, albeit partially mitigated by strengthening of the euro in the year. Now moving to show volume and revenue by region. I've shown a version of this chart before, but I've split out our seafood, vegetarian and vegan businesses to demonstrate the performance of our core meat businesses. These numbers also exclude Fairfax Meadow. In the UK and Ireland, core meat volumes remained resilient and were only down slightly despite significant inflation in beef of more than 30%. The impact of this inflation can be seen in revenue increases of 23.5%. European volumes were stable overall, including double-digit growth in fresh prepared foods in Central Europe and the benefit of new customer volumes in Denmark. Revenue growth was less material than in the UK, reflecting a more diversified mix of meat products. And APAC again delivered volume growth, despite the re-emergence of raw material inflation. Seafood, vegetarian and vegan volumes were down 2.6%, with price inflation weighing heavily on whitefish volumes in the UK. FOPM volumes were relatively stable as we continued to meet customer demand despite the regulatory restrictions on our facility in Greece. And DALCO volumes were up, albeit from a low base. Revenue was down by more than volume despite the whitefish inflation, with market salmon prices 17% lower in 2025 than in 2024, reducing FOPM revenues. Moving now to profits. Operating profit from our core meat and fresh prepared food businesses was slightly up year on year, with the volume growth in APAC being the main driver, given the cents per kilo fee structure there. Seafood, vegetarian and vegan operating profit was materially down, however, with sea chill moving into a loss-making position, reflecting the pressure that lower volumes puts on gross profit. Floppen's underlying profit was stable, albeit there were material non-underlying costs that I'll cover shortly. We delivered an improved result at Dalco, although the business remains loss-making. Central costs were lower, as were interest costs, reflecting lower market rates. Before the negative impact of FX due to the weaker Australian dollar in particular, Group PVT on a constant currency basis was down 2.8%. After excluding the contribution from Fairfax Meadow, which we sold in September, it was down 1%. Non-underlying and exceptional items excluded from the underlying results represent a net profit of £29.3 million in the period, albeit there were a number of moving parts. The biggest cost related to FOPEN. We incurred cash costs totaling £9.2 million relating to the relocation of production from Greece to the Netherlands to ensure continuity of supply to our customers in the US, while also using air rather than sea freight to ensure an appropriate level of inventory. We expect regulatory restrictions to be in place for at least the first half of 2026 and expect some further FOPRAM-related exceptional costs this year. In addition, we write off inventory that could not be delivered to the US or resold elsewhere, resulting in an £18.4 million charge. We incurred reorganisation and restructuring costs of £9.6 million compared to £4.2 million in 2024. This reflects the ramp up of our transformation activity and group reorganisation in order to support long term efficiency and growth. We expect these costs to continue in the range £5 to £10 million a year over the next few years, and this spend will help underpin our medium-term growth objectives and will provide some more detail on our transformation programme in the strategic update section shortly. Last, but certainly not least, we recognise profits on disposal of £66.5 million relating to the sales of Fairfax Meadow and Foose Connected. Both of these transactions are steps towards simplifying our portfolio whilst also realising significant value for the group. Now moving to net debt and cash flow. Net bank debt improved slightly in the year, despite a free cash outflow. This includes the impact of material cash inflows from the disposals of Fairfax Mellow and Foods Connected, as we realised value through portfolio simplification. Exceptional cash flows relating to FOPN and wider group transformation and restructuring totaled £18.9 million, and we returned £31.5 million to shareholders in 2025, consistent with our progressive dividend policy. Net bank debt of £126.7 million results in net debt to EBITDA of 0.9 times, remaining at very comfortable levels. And in February of this year, we successfully refinanced our bank facility, which now provides an increased £450 million of revolving credit facilities for at least the next five years, providing flexibility to deliver future growth opportunities. In addition, these bank facilities are enhanced by the ongoing benefits of our lease and customer supply chain financing, with margins typically 0.5 to 1.5 percentage points lower than our bank facility. Let me touch on our free cash outflow. The group remains intrinsically cash generative and retains a strong balance sheet. This strength provides flexibility to allocate capital to benefit the group over the longer term. In 2025, this included the investment in inventory to ensure we'd be able to deliver excellent service levels to our customers during peak trading periods in the second half of 2025 and into 2026. It is important we continue with disciplined investment in our existing facilities, ensuring they run efficiently and continue to support growth. Core net capital expenditure of £46.5 million was lower than last year and included spend on capacity increases at Hilton Foods Ireland. It also included further investment in Sweden, where we've installed frozen burger production lines, a new category in our partnership with IKA. 2025 was also the main year of investment in our expansion into Canada. We've now spent £55 million in total on the project, with the remaining project costs being incurred in 2026. The project remains on track for full launch in 2027. Before I hand back to Mark, let me cover the outlook. We've traded in line with our expectations in the year to date and continue to expect 2026 adjusted PBT in the range 60 to 65 million pounds, unchanged from the time of our trading update in January. As we said at the time, the expected production in profit is predominantly due to continuing challenges in Seachill, Foppen and Dalco. Our core meat business continues to prove resilient and volumes over the first part of this year were solid. However, given the economic backdrop, it is right we remain cautious on the impacts there may be on meat demand due to inflation. We are also mindful of any potential direct or indirect impacts of the current situation in the Middle East. We would expect net debt to increase in 2026. Core capex will be 50 to 55 million pounds within our expected range. However, total capex will remain elevated as we complete our project in Canada and expect to commence spend on our planned capacity expansion in Poland. Both of these projects will create value for shareholders and are expected to contribute to earnings in 2027. One of the reasons we remain positive about the medium term and long term outlook for the group. I'll be back later to summarise our refreshed capital allocation framework and medium term financial targets. But for now, let me hand back to Mark.

Thanks, Matt. Mel, Sammy, Matt and I will now take you through a summary of our strategy. This is based on the review we've recently completed. We aim to be the international red meat partner of choice. Aligned with that and certain appropriate geographies, we have a developing fresh prepared food business that we'll invest in whether returns are attractive. What gives us confidence in this ambition is the structural strength of our core meat businesses. We operate long-standing partnerships with leading retailers. We benefit from high barriers to entry in our markets. We have a proven operating model that is delivered consistently over time. However, this strategy is not only about defending what we already have. We also see significant further growth potential, which we will unlock through a combination of portfolio optimization, targeted investment, and evolution of our operating model. Simply put, this is a strategy that builds from a position of strength and our core capabilities. Importantly, we will be very deliberate about where we invest to drive future growth and attractive returns. Before we provide a bit more detail on our growth potential, let me put it in context against our recent track record. As you can see from the chart on the left, operating profit from the group's core activities, excluding Fairfax Meadow, Seachill, Foppen and Dalco, has grown by 4% on average since 2022. This demonstrates the strength and stability of our core meat and fresh prepared food operations. On the right, you'll see the building blocks that underpin future growth. The expected reduction in profit in 2026 compared to 2025 is largely down to the challenges faced by Seachill, Foppen and Dalco. We expect profits from our existing core business to be relatively stable and remain so moving forwards. This will be supplemented from 2027 by our projects in Saudi Arabia and Canada. We expect to realise the full benefits from these in 2029. We also expect to deliver growth from our focus on our fresh prepared food product offering and multi-customer models in certain markets. We'll provide some colour on this shortly. All this results in mid-single-digit average operating profit growth per year, with potential for adding additional growth beyond from value-adding investments. Here are the three levers that will drive this growth over the medium term. The first is maximising the core. Here, our focus is on reinforcing our leadership in retail meat by maintaining the structural advantages we've built over many years. At the same time, we're driving continuous efficiency improvements to maintain margin resilience. This ensures that the core business continues to generate stable and predictable cash flows. The second lever is enhancing the mix. We are actively increasing our exposure to higher margin segments where we have an opportunity to win. This is particularly the case in value-added meat and fresh prepared foods. These categories offer faster growth and attractive returns. They allow us to better serve evolving customer and consumer needs. Mel will talk about expansion plans in our Poland business shortly. The third lever is geographic expansion. We will continue to replicate our partnership model in under-penetrated and high-growth markets. We will work alongside anchor retail partners to leverage our expertise and scale. Taken together, these three levers create a balanced growth profile. They support stable cash flows, high margins and faster overall growth, while reducing our reliance on volume alone. While the framework itself is simple, the value creation potential from executing it well is significant. A key part of enhancing our mix is optimising our portfolio, particularly in seafood and meat alternatives, where performance has been volatile and unsatisfactory. These businesses have limited synergy with our core meat capabilities. We are taking a very focused and disciplined approach and will limit future investment across the three businesses, SeaChill in the UK, Foppen and Dalco. Across these businesses, the overarching objective for the group is consistent, to reduce earnings volatility, improve returns and create greater flexibility and optionality for future value realisation. In Seachill, our priorities are operational recovery, cost reduction and product focus. This should allow us to rebuild margins. In Foppen, we are operating an increasingly consolidating smoke summer market. Our focus here is on driving volume through best-in-class quality, customer service, competitive pricing and continued innovation. We will also address the challenges of the continuing into 2026. We have resumed sea freight shipments to the US and are actively rebuilding the stock pipeline. We continue to engage with US regulators to lift the restrictions on our Greek facility. Encouragingly, underlying retailer demand remains strong. In Valco, the priorities are to improve operational performance and win new business. we're aiming to put the business in a stronger position operationally and financially, giving us greater flexibility in how we create value from it. I will now hand over to Mel, who will then hand over to Sammy to help bring our growth strategy to life with specific examples from our East and West regions.