Hilton Food Group plc

Okay, good morning everyone and thank you for joining us. Matt and I are pleased to present our 26 interim results today. As usual there'll be a chance to ask questions at the end of the presentation of both of us and maybe even Samy, our Chief Operating Officer who's with us today, I'll pass the difficult questions to him. Over the next 25 minutes or so we'll take you through our financial performance and the progress we've made since announcing our updated strategy five months ago. It's early days, but I'm encouraged. I'm pleased by how colleagues across the organisation have supported the strategy and are working on its delivery. Let me start with a first half summary. We're getting on with doing what we said. There's always much more to do, but I'm pleased with what we achieved so far. Profit was up in our core meat businesses. This includes further strong growth in the East region, particularly in Australia, and our fresh prepared foods business serving Central Europe. We're also realising initial benefits from improving plans in the UK at SeaChill. These can't be seen in the numbers yet, but we expect to see visibility in the second half. The challenges at Fopham will continue into the second half, and against this backdrop we will assess all options for the future of this business. Despite this, Group Adjustee profit before tax from continuing operations of £32.8 million was ahead of expectations. and on the back of this the board maintained our dividend in line with our progressive dividend policy. This first half performance gives us confidence in the full year outlook. We now expect PBT from continual operations to be in the range 66 to 71 million pounds. This is despite the ongoing FOP and challenges. This compares to our previous range of 60 to 65 million pounds. It includes the removal of expected losses from Dalco and a foreign currency tailwind. We're also making good commercial and strategic progress. Importantly, in the first half, we extended our commercial meat partnership with Tesco in the UK. This follows previously announced contract extensions in both the Netherlands and Denmark in late 25. The acronym SVV, short for seafood, vegetarian and vegan, will be short-lived. At the end of July, we announced the disposal of our vegetarian and vegan business, Dalco. This is expected to complete in quarter four twenty six. It's a step towards simplifying the organisation and a move towards our core strengths in meat and fresh prepared foods. We continue to invest in projects and develop platforms that will drive the future growth of Hilton Foods and deliver attractive returns. We're updating our plans to further increase capacity in Poland to meet the rapidly growing demand for fresh prepared food products in Central Europe. Canada is set for launch in January 27. Bacon is also planned for later in the year. A joint venture facility in Saudi Arabia is set to go live in quarter four this year. I'm excited by the opportunity these new projects and partnerships bring for Hilton Foods. I'll come back to this but now I'll hand over to Matt who'll take you through our first half performance.

Thanks Mark, good morning everyone it's great to see you all. I'll walk you through our 2026 first half financials as usual highlighting the main drivers of volume, revenue, profit, cash flow and net debt and I'll cover the 2026 full year outlook. The results were underpinned by good performance from our meat and fresh prepared food businesses. This is where our core strengths lie, with our expert, committed teams utilising scalable and automated facilities to produce high quality products for our retail partners. Whilst our seafood, vegetarian and vegan businesses continue to face challenges, we're taking action. We've agreed the sale of Dalco and we're starting to see the results of our performance improvement plans in Seachill. Moving now to the numbers. I'll focus on continuing operations so excluding Dalco and of course Fairfax Meadow which as you know we sold in September last year. Volumes were up 2.1% and with prices still at higher levels than 12 months ago revenue was up 11.5% on a constant currency basis. Operating profit of £45.8 million was 3.4% lower or 6.6% on a constant currency basis, with higher core profit more than offset by the impact of the challenges in Foppen. I'll go through a profit bridge shortly. The resulting operating profit margin was 2% compared to 2.4% last year. Profit before tax of £32.8 million and adjusted earnings per share of 25.7 pence were both down compared to last year, consistent with our lower operating profit but ahead of expectations. As Mark says, we've declared a flat interim dividend of 10.1 pence. And net debt was slightly improved compared to the end of the first half last year. This chart shows volume and constant currency revenue growth in our new regional structure, specifically East which includes Australia, New Zealand, Central Europe and will include Saudi Arabia, West which includes the UK, Ireland, Netherlands, Sweden, Denmark and Portugal and will include Canada, and Seafood which includes SeaChill and Foppen. We've also provided a slide in the appendix of the packs bridging last year's revenue and operating profit comparatives from the old segments to these new ones. In the East, volumes were up in all markets. Growth was particularly strong in Central Europe, where fresh prepared food volumes were up 26%. Higher Australian beef prices were the key driver of revenue growth of 15.3%, with the mix relatively stable between categories. In the West, volumes were slightly up. We saw good performance from the Nordics and our JV in Portugal, which offset lower volumes in the UK and the Netherlands. Although raw material inflation has largely slowed in Europe, prices remain at historically high levels. The impact this had on revenue was partially offset by negative mixed movements, as we saw some customers trading down within beef categories. Overall revenue was up 9%. Seafood volumes were up 6%, inflation continued to weigh on demand for whitefish and sea-chill, but sales of salmon and prawns were up. FOP and volumes were also up as we met customer demand from our facility in the Netherlands. However, we experienced pressure on margins. Moving on to profit. On a constant currency basis, overall core meat and fresh prepared food profit was up compared to last year, with growth in the east region more than offsetting lower profit from the west. In the East, we drove materially increased profit in Central Europe from fresh prepared foods, while Australia and New Zealand again delivered good volume growth. In the West, core profit was down, reflecting competitive pressures in Ireland and unfavourable mix movements in the UK. In response, we are working with our customers to deliver targeted promotions in half two, while constantly reviewing our cost base against current volumes. As expected, seafood operating profit was down. This almost entirely relates to squeeze margins in foppen, resulting from unfavourable movements in salmon pricing and FX, whilst improvement plans in seachill are starting to take effect. Central costs were down, with lower costs relating to share-based incentive plans, and with interest charges similar to last year, group PBT on a constant currency basis was down 8.9%. However, translational FX movements were positive for us in the period, particularly from the strengthening of the Australian dollar, and adjusted PBT on a reported basis was down 5.2%. Our updated four-year guidance reflects the anticipated positive impact of FX rates over the second half of the year. Now moving on to exceptional items which are excluded from our underlying results. We incurred exceptional costs of £7 million relating to Foppen in the first half. Around half of this relates to the relocation of production from Greece to the Netherlands to ensure continuity of supply to our customers in the US. We remain focused on minimising the impact and expect to stop exceptionalising these operational costs in the second half of this year. The remainder of the FOPEN costs relates to the additional cost of air freight, which we stopped in April, and a one-off loss of inventory due to a fire in a third-party warehouse in the US. Across the group we incurred exceptional reorganisation and restructuring costs of £3.2 million, largely related to redundancy. We also incurred transformation costs of £4.6 million as activity ramps up to drive efficiency, strengthen our operational capability and drive growth. We expect exceptional cash transformation costs of around £10 million per year over the next few years. In addition there was a £16.7 million non-cash impairment relating to Dalco which is now classified as held for sale. Moving to cash flow and net debt. EBITDA was down in line with total profit with typical seasonality in working capital resulting in outflows in the period. We didn't repeat last year's first half investment in inventory. However, we have taken the decision to purchase additional inventory in the UK in half two to ensure supply for Christmas 2026 and Easter 2027. We remain disciplined on capital investment in our existing facilities. With fewer new projects, net core capital expenditure of £15.4 million was lower than last year. As a result, adjusted free cash flow was positive. We're into the last year of major investment in our new Canada facility. In total we've now spent 80 million pounds with operations due to commence in January 2027. We expect to spend around 25 million pounds in the second half of the year to complete the core project with capex relating to bacon being spent in 2027. Total capex will be higher than originally assumed a year ago which includes both changes in scope and incremental inflationary pressures on building materials and automation equipment. We expect the project will generate significant value for the group and it provides an important platform for future growth and long-term returns. We've also paid £3.6 million towards the joint venture project in Saudi Arabia in half one with remaining payments expected in the second half. Net bank debt was a little under £200 million at the half year, lower than at the same time last year. This equates to leverage of 1.4 times. Our balance sheet remains strong. As we said in March, we've strengthened our access to funding with £450 million of revolving credit facilities for at least the next five years, providing flexibility to deliver future growth. 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. Before I hand back to Mark, let me cover the outlook. Overall, trading from our core meat and fresh prepared food businesses was strong in the first half of the year. In addition, improvement plans are starting to deliver in situ. However, significant challenges continue in Foppen. As Mark said earlier, we now expect to achieve full year adjusted PBT from continuing operations in the range of £66 to £71 million. This is higher than our previous range of 60 to 65 million despite the ongoing challenges in Foppen and reflects the removal of Dalco losses from continuing operations and the favourable FX movements I talked about earlier. As previously guided, we expect net bank debt to increase over 2026. It will also now include the impact of the additional second half investment inventory, though we expect to remain comfortably within our targeted one to two times leverage range. Four year capex is still expected to be around £100 million. Our core capex is trending to be at or below the lower end of our £50-55 million guidance, alongside further capex in Canada as the project nears completion. Looking on 2026, we expect first positive earnings contributions for our investments in Canada and Saudi Arabia next year. Alongside the resilience and growth potential of our existing core business, this provides a good platform for the future. Thanks for listening. I'll now hand back to Mark.

Thanks Matt. So, an encouraging first half. I'm pleased with our performance. Let me now touch upon our strategic progress. Our vision is to be the global partner of choice built on our world-class red meat capabilities. We believe this is an apt description of what Ilton Foods is, particularly with the high growth potential from fresh prepared foods. Our competitive advantage comes from our strong capabilities and positions in red meat. Moves into adjacent categories with good margins will be aligned to these. Let me remind you of the three growth levers we laid out earlier this year. These will be the cornerstones of our growth plans. The first is maximising the core, essentially continuing to utilise our existing structural advantages as well as driving continuous improvement. The second lever is Enhancing the Mix. We are focused on increasing our exposures to sustainably higher margin and growing segments. We'll do this through scaling in areas where we already have existing relationships and capabilities. For example, in value-added meat and fresh prepared foods. Enhancing the Mix is also about ensuring our portfolio is optimised. This includes resolving challenges in our seafood businesses, particularly in Fopham. The third lever is geographic expansion, replicating our partnership model in new, underdeveloped markets. We'll do this through differentiated quality, efficiency and innovation. We've made good initial progress against each of these growth levers. It's important we continue to focus on maximising the performance of our core meat businesses. This is our heartland and where our inherent strength lies. In March we said we drive further manufacturing excellence throughout the group. We continue to invest in automation to improve efficiency. A good example is the use of our line control technology in our factory in Huntingdon. We've materially reduced mince waste by utilising machine learning to continuously optimise pack weights. This has been rolled out across our product lines and factories. We also said we continue to focus on product innovation and category leadership. This is increasingly a feature of the food supply chain. Food innovation has always been core to what we do. We continue to develop new targeted product ranges for our customers. These respond to the wider economic environment and changing consumer trends. In the first half, we introduced mixed protein mints in Denmark and the Netherlands. This comes with a lower price point. We also introduced a new flavoured mince product in the UK. This provides customers with a differentiated value-add product. We're expanding into adjacent categories. This includes slow cook products, which are increasingly popular with customers. Although still a relatively small percentage of the UK sales, sous vide volumes were up 6% in the first half. This remains an area of potential growth for us. Our focus on quality, efficiency and innovation is the reason why our retail customers choose us. I've already mentioned that we extended our meat partnership with Tesco in the UK in the first half. We also continue to seek new commercial opportunities. We plan to roll out the supply of products to our partner's New Zealand South Island stores in the second half. This is in addition to our existing supply to North Island stores. We're now supplying Burger King Sweden. This follows our investment in frozen burger lines in 25 for our retail partner, Ica. This is an example of how we can use existing capacity to add profitable volume with new customers. These are just some examples of how we're maximising the value of our existing core operations. This helps us deliver volume growth against the backdrop of continued high raw material prices. Moving on to enhancing the mix. A key component of this is optimising our portfolio. We said in March we'd look for solutions to resolve challenges in our seafood and vegan and vegetarian businesses. Our overarching objective is to reduce earnings volatility and improve group returns. That means creating greater flexibility and optionality for future value realisation from these businesses. In July, we announced we'd agreed to sell DowCo to LiveKindly for £5.4 million. The transaction is expected to complete in quarter four. DowCo has good facilities, but the market requires consolidation. I'm pleased that DowCo is going to a buyer whose vision is aligned with this. For our seafood businesses, we're taking a very focused and disciplined approach to investment and performance. In the UK at SeaChill, we've been implementing a range of initiatives. These include improvements focused on increasing yields. We've also restructured some departments to right size the business. There's more to do, but I'm pleased with the progress made to drive this business back to profitability. In FOPEN, we continue our efforts to improve commercial performance. This is key given the poor financial results in the first half of the year. We're also driving operational efficiencies. However, we still await clarity from the FDA on the restart of exports to the United States from our facility in Greece. The outlook for FOPEN continues to look challenging. We recognize the current situation cannot continue indefinitely. As a result, we'll assess all options for the future of the business. Now turning to fresh prepared food. We're also looking to enhance our mix by moving more materially into fresh prepared food categories. These are traditionally higher margin. They also have higher growth rates. The market in Central Europe is forecast to grow at 8% per annum. We continue to develop plans to materially increase capacity and upgrade facilities in Poland. We estimated back in March that investment of around £30 million would roughly double the capacity of our facility. However, we are assessing opportunities with our partners to materially increase the scale of this expansion. This would future-proof our long-term growth ambitions. This may result in higher capital expenditure, but also higher profit expectations. Full scoping of the longer-term project is expected to be completed around the end of 26. Subject to suitable returns, we could start spending capex in 27 and operation could commence as early as the back end of 28. In the meantime, we've implemented capital light plans to meet growing nearer term demand. Geographical expansion is the third growth lever. As you know, we have two current projects in Canada and Saudi Arabia. Both are expected to generate earnings in 27. I recently visited our new state-of-the-art facility in Canada. Fit out is nearly complete and it looks impressive. Once operational it will be our most automated facility. We said it would be operational in 27 and I'm pleased to say we're on track to launch right at the start of the year with production ramping up over the first half. At the same time we will work on installing the bacon production lines and they will come on stream later in 27. The facility in Saudi Arabia, built by our partners NADEC, is expected to commence operations in late Q426. It's an important milestone for the group, and this is for a period of at least 10 years. More broadly, we see further opportunity through our retail partners' international footprints and network. So, as I said at the start, we're doing exactly what we said. Let me close by outlining my confidence in the future. We have a resilient and cash generative core business. This is supported by structural advantages and a strong record of execution. The first off performance of our core meat and fresh prepared food businesses helps demonstrate this. We have well invested sites. We estimate it would cost well over a billion pounds to replicate our manufacturing capability. This strong platform gives us an envious position. We have a clear strategy to drive growth. This is built around maximising the core, enhancing the mix and expanding geographically. I have provided you with some examples of how we are delivering against this growth agenda. We will apply a disciplined approach to capital allocation. We will only invest in opportunities that generate attractive returns and underpin our group return on capital employed target of at least 20%. This positions us to deliver sustainable profit growth, strong cash generation and reduced volatility. We believe this will deliver compelling value for our shareholders as we focus on being the global partner of choice built on world-class red meat capabilities. That concludes the presentation. Thanks for your time and listening. I'll now chair the Q&A. As usual, can you ask questions via me and I will allocate appropriately, as I said before, the difficult ones to Samy. And can I also ask that you introduce yourselves and your institution, particularly for the benefit of those listening to the call. Thank you.