A new CEO and a more bullish outlook was not enough to convince the City Hilton Food Group has fully left last year’s inflation-driven travails in the past.

On Wednesday the group posted a 37.5% fall in group profits in the 52 weeks to 1 January 2023, as soaring input costs battered its fish processing business. Pre-tax profits sank from £47.4m to £29.6m in the year as growth in sales and volumes was overshadowed by “significant” challenges in the UK seafood business.

Hilton blamed “unprecedented” inflation levels in the seafood division, with price recovery taking longer than expected to recover margin. The group added it had taken steps to rebuild profitability in the struggling division and remained confident the category would present growth opportunities in the coming years.

However, the troubles at its seafood division meant group EBIT margins declined by 40bp to 1.8%, which broker Shore Capital noted were the “lowest return on sales in its 15 years as a public company”.

The drop in profits came despite a jump in revenues of 16.5% to £3.8bn, helped by contribution from newly acquired businesses and the first full year of trading in New Zealand, while volumes also rose 4.3% to 513,816 tonnes, with growth in both its core European and APAC regions.

Meanwhile, the group announced well-known industry player and Co-op Group boss Steve Murrells as its new CEO to succeed Philip Heffer, who will stand down after almost 30 years with Hilton.

Murrells’ connection to the business dates back almost 30 years, when he was one of Hilton Foods’ first customers and commercial partners at Tesco before becoming CEO of Tulip and group CEO at Co-op.

Shore Capital welcomed Murrells’ “considerable experience throughout the UK food trade”, while noting the group will retain the “considerable knowledge and experience” of Heffer as he steps into a board advisory role.

It added Hilton’s “perfect storm” of 2022 had now “broadly stabilised” and welcomed management’s insistence that the group remains “well positioned for the year ahead”.

Peel Hunt noted: “2022 was a tough year for Hilton, with the scale of inflation bringing significant short-term challenges. It is encouraging that these now look under control and the attractions of the business model and the long-term growth potential are intact.”

However, despite the positive comments on outlook and its succession plan, the group’s shares fell back 5% in morning trading to 660p. The shares are now down by more than 45% year on year, albeit up 20% so far in 2023.