Preliminary Results
Hilton Food Group PLC
15 April 2008
Hilton Food Group plc
Preliminary results for the year to 31 December 2007
Continued progress across the business
Hilton Food Group plc, the leading specialist meat packing business supplying
major international food retailers in Europe, is pleased to announce its results
for the year to 31 December 2007.
Financial Highlights
Year to Year to
31 December 31 December 2006
2007
Turnover £577.7m £526.7m
Operating profit before significant item* £17.4m £15.7m
Operating profit after significant item* £15.7m £15.7m
Profit before tax £13.7m £15.5m
Cash generated from operations before significant item* £25.4m £26.5m
Cash generated from operations after significant item* £23.6m £26.5m
Basic earnings per share before significant item* 15.0p 14.3p
Basic earnings per share after significant item* 12.7p 14.3p
Final Dividend to be paid in July 2008 5.2p
* the significant item in 2007 relates to costs to the Group associated with the
flotation of Hilton Food Group plc on the London Stock Exchange of £1.8m
Business Highlights
• Volume growth of 16.2% and turnover growth of 9.7%
• Operating profit growth of 11.1%, before flotation costs
• Continued strong cash generation and investment in facilities
• Major new factory at Huntingdon, UK and an extension to the packing
facility in Zaandam, Holland, both completed on time and on budget
• Trial started from plant in Tychy, Poland to supply Tesco stores in
Hungary, Czech Republic, Poland and Slovakia
• Extension of Drogheda, Ireland plant started since the year end to supply
bacon and sausage products
Commenting, Robert Watson, Chief Executive said:
'I am very pleased to report that 2007 has seen continuing progress, in line
with the Board's expectations, with strong volume growth across all territories,
the completion of two key capacity expansion projects, developing opportunities
in Central Europe and continued strong cash generation.'
Enquiries
Hilton Food Group Tel: 01480 387214
Robert Watson, Chief Executive
Nigel Majewski, Finance Director
Citigate Dewe Rogerson Tel: 020 7638 7591
Tom Baldock
Nicola Smith
CHAIRMAN'S STATEMENT
This is our first Annual Report to shareholders since Hilton's flotation on the
main market of the London Stock Exchange in May 2007. I am pleased to be able to
report that the Group has continued to make progress, achieving strong sales and
volume growth throughout 2007 and generating the levels of cash flow required to
fund the Hilton's future development.
FINANCIAL OVERVIEW
During 2007 the Group achieved a continuing increase in volumes of meat packed
for its customers, in excess of 16%. Turnover rose by just under 10% to £577.7m
over the same period, with lower average raw material input prices.
These increases reflected continuing growth across all the territories in which
the Group operates, together with the first full year of our new packing
facility in Central Europe.
Operating profit before flotation costs rose by over 11%, from £15.7m to £17.4m.
Interest cover before flotation costs was 8.8 times.
Basic earnings per share before flotation costs were 15.0p (2006 14.3p).
The Group has a good historical cash generation track record and cash inflow of
£25.4m from operating activities in 2007 reduced net year end borrowings to
£36.2m, from £43.6m prior to flotation. Net capital expenditure of £6.7m
reflected principally the completion of a new factory in the UK and the
extension of our packing facilities in Holland. This continues the Group's
policy of investing in additional capacity sufficiently far in advance to enable
us to service our customers' growth plans.
DIVIDENDS
The Board is proposing a final dividend of 5.2 per ordinary share. Together with
the interim dividend of 2.2p per ordinary share paid in December 2007, this
makes a total dividend for the first year following flotation of 7.4 per
ordinary share. The final dividend, if approved by shareholders, will be paid on
11 July 2008 to shareholders on the register on 13 June 2008 and the shares will
be ex dividend on 11 June 2008.
OUR EMPLOYEES
The transition from a private business to one listed on the main market was a
challenging process and I would like to pay tribute to our managers and
employees who continued to operate the business professionally through this
process. A smooth and efficient transition to public ownership was achieved in
early 2007, with no reduction in customer service levels and no interruption to
the Group's continuing momentum, throughout the year.
STRATEGY
The Group's historical growth has been achieved by geographical expansion and
the subsequent organic growth achieved in each territory. This has been based
both on the marketplace success achieved by the Group's retail partners in each
country and by progressively expanding the range of meat lines packed for those
partners. Such volume growth progressively reaps increased economies of scale,
to the benefit of both parties.
OUTLOOK
Compound annual volume growth over the last four years has been strong, achieved
by both geographical expansion and continuing organic growth, without the
benefit of any acquisitions. Volume growth continues and was over 16% in 2007.
The start to the current year has been encouraging. With a strong business
model, the Board looks to the future with confidence.
Gordon Summerfield CBE
Non Executive Chairman
14 April, 2008
CHIEF EXECUTIVE'S REVIEW
2007 has been a year of real progress for Hilton Food Group, continuing our
growth momentum in all regions. This progress is rooted in Hilton's strong long
term relationships with its retail partners, with whom the Group continues to
work closely to deliver high service levels, consistent and high product
quality, product innovation, high levels of food safety assurance and product
integrity. Consistently meeting these standards allows us to build volumes and
progressively reduce unit packing costs. The strength of these partnerships has
been the key driver of our growth since the Group was formed and will continue
to underpin the Group's success in future.
PERFORMANCE BY SEGMENT
The Group operates in two regions, Western Europe, covering the Group's
established businesses in the UK, Ireland, Holland and Sweden and Other Regions,
which currently comprises Hilton's recently commenced packing business in
Central Europe, supplied from its new packing plant in Tychy, southern Poland.
Western Europe
Operating profit of £16.8 m (2006: £ 15.4m) on turnover of £ 551.8 m (2006:
£517.9m)
Continued progress was made across our Western European operations in the UK,
Ireland, Holland and Sweden, with all our customers continuing to achieve
organic growth. Volume growth was 10.8%, with turnover growth of 6.5%,
reflecting lower average raw material prices. This was achieved despite the
exceptionally adverse summer weather in the UK, which affected sales of barbecue
and other seasonal lines, with the pace of growth accelerating towards the end
of the year.
Other Regions
Operating profit of £0.6 m (2006: £ 0.3m) on turnover of £25.9 m ( 2006: £8.8m )
In Central Europe, as expected, we saw a good first full year contribution from
our new facility in Southern Poland (near to the Czech Republic border),
producing on average approximately 200 tonnes per week. Ahold's divestment of
its Polish stores in early 2007 has been almost offset by continuing volume
growth in Ahold's Czech Republic business and trials are currently being
undertaken with Tesco, which, if successful, could lead to the Tychy plant
supplying Tesco stores in Hungary, Czech Republic, Poland and Slovakia over
time.
OPERATIONAL REVIEW
Modern, well invested facilities give a key competitive advantage to Hilton,
which operates a high volume business where it is imperative to keep unit costs
low and continuously improve product quality. Over the four years to December
2007 capital expenditure on the Group's packing facilities has totalled £62m,
£52m of which has been spent on major capacity expansion projects.
Each packing facility is bespoke and has been tailored specifically to meet the
needs of the Group's customer in the country concerned. Although we use firm
processing and packaging principles and blueprints, we do not simply replicate
our facilities from one country to another. Each of our customers and markets
are different and we believe that our success owes much to the time we have
taken to understand the detailed needs of our customers and the markets in which
they operate.
We are pleased to report that the two most recent capacity expansion projects,
at Huntingdon in the UK and Zaandam in Holland, were completed during the first
half of the year on time, on budget and with minimal disruption to production or
customer service levels, at either site.
In the UK, a new purpose built factory at Huntingdon was completed in early 2007
that will enable Hilton to service its customer's expected growth over the
medium term. The factory is producing packed minced meat, burger, kebab and
other value added products.
In Holland, the completion and commissioning in early 2007 of a factory
extension in Zaandam to service its customers expected growth over the medium
term, will increase capacity by approximately 50%.
In Ireland we are currently extending our Drogheda factory, for bacon and
sausage production.
LOW COST AND ADAPTABLE OPERATING MODEL
The Group's packing plants operate at the high throughput levels necessary to
achieve low unit packing costs and each is involved in a wide range of new
product and packaging developments, which, together with extending the ranges of
products packed, can serve to increase the utilisation of its packing
facilities, to drive unit costs down still further. This can only be achieved by
using very modern high speed packing facilities, combined with an intensive
focus on product quality, food safety and product integrity.
We believe in continuously developing our facilities, not only to grow with our
customers, but to constantly improve our production processes,to maximise
efficiency. We work closely with our customers, to constantly evolve our
production processes in order to produce new product and packaging concepts,
which can, as a multinational company, be shared across all our facilities.
OUR EMPLOYEES
The continued progress made by the Group in 2007, and throughout the flotation
process at the start of the year is attributable to the strength of the
dedicated workforce in each country and, on behalf of the Board, we would like
to thank them for their commitment, enthusiasm and expertise.
Robert Watson OBE
Chief Executive Officer
14 April, 2008
FINANCIAL REVIEW
BASIS OF ACCOUNTS PRESENTATION
The Group is presenting its results for the year to 31 December 2007, with
comparative information for the year to 31 December 2006. The results of the
Group are prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the EU.
TRADING OVERVIEW
Sales Volume and Revenue
Underlying trading performance has been strong, with volumes growing overall by
16.2%. Further details of volume growth by segment are detailed in the Chief
Executive's Report. Total Group turnover rose by 9.7% to £577.7 m, compared to
£526.7 m last year. The increase is below the level of volume gains, as lower
average raw material prices have fed directly into lower average selling prices.
Gross Profit Margin
Gross profit margins were unchanged from last year, at 14.2%.
Operating Profit
Operating profit, at £ 17.4 m (£15.7m after flotation costs of £1.8m), was
11.1% above the operating profit of £15.7m made in 2006. Operating profit
benefited from £0.3m of exchange translation gains towards the end of the year.
Finance Costs
Net finance costs rose from £0.2m to £2.0m. The increase comprises interest on
the new bank borrowings of £47.5m, which were put in place prior to the
flotation, but are now reducing, partly offset by the release of provisions for
interest on overseas taxation exposures, which were put in place before the
flotation and have since been settled.
Profit Before Taxation
Profit before taxation, at £13.7m, was £1.8m lower than in 2006 (£15.5m ),
reflecting the once off charge for flotation costs of £1.8m and the increase in
finance costs of £1.8m detailed above, partially offset by the improvement in
underlying profitability.
TAXATION
The taxation charge for the period was £4.2m. Excluding £1.8m of flotation
costs, for which taxation relief has not in the main been assumed, the effective
underlying rate of tax was lower.
EARNINGS PER SHARE
Basic earnings per share before flotation costs were 15.0p (2006: 14.3p).
CASH FLOW AND NET DEBT
Cash flow continued to be strong, with the Group generating £9.9m of free cash
flow after flotation costs and before dividends to shareholders (2006 £3.2m).
This has enabled the Group to steadily reduce the level of net debt outstanding.
Group borrowings, net of cash balances of £20.8m, stood at £36.2m at 31
December, 2007.
Nigel Majewski
Finance Director
14 April 2008
Consolidated income statement for the year ended 31 December 2007
2007 2006
Continuing operations Notes £'000 £'000
Revenue 3 577,734 526,663
Cost of sales (495,632) (452,047)
Gross profit 82,102 74,616
Distribution costs (6,299) (5,990)
Administrative expenses (58,366) (52,927)
Restructuring and flotation costs 5 (1,780) -
Operating profit 4 15,657 15,699
Finance income 6 1,433 824
Finance costs 6 (3,416) (1,038)
Finance costs - net 6 (1,983) (214)
Profit before income tax 13,674 15,485
Income tax expense 7 (4,158) (4,824)
Profit for the year 9,516 10,661
Attributable to:
Equity holders of the company 8,820 9,986
Minority interest 696 675
9,516 10,661
Earnings per share for profit attributable to the equity holders
of the company during the year
- Basic and diluted (pence) 8 12.7 14.3
The notes form an integral part of these consolidated financial statements.
Consolidated balance sheet as at 31 December 2007
Group Company
2007 2006 2007 2006
Notes £'000 £'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 10 42,286 43,576 - -
Intangible assets 11 3,987 3,947 - -
Investment in subsidiary undertakings 12 - - 102,985 -
Deferred income tax assets 19 1,273 1,219 - -
47,546 48,742 102,985 -
Current assets
Inventories 13 9,654 9,525 - -
Trade and other receivables 14 50,993 41,037 - -
Current income tax assets - - 404 -
Cash and cash equivalents 15 20,792 22,327 1 -
81,439 72,889 405 -
Total assets 128,985 121,631 103,390 -
Capital and reserves attributable to
equity holders of the group
Share capital 20 6,966 200 6,966 -
Other reserves 896 (102) - -
Retained earnings 12,039 29,451 25 -
19,901 29,549 6,991 -
Reverse acquisition reserve (31,700) - - -
Merger reserve 919 - 71,019 -
(10,880) 29,549 78,010 -
Minority interest in equity 367 1,288 - -
Total equity (10,513) 30,837 78,010 -
Liabilities
Non-current liabilities
Borrowings 16 50,302 10,196 - -
Deferred income tax liabilities 19 1,580 1,300 - -
Other non-current liabilities 18 264 1,850 - -
52,146 13,346 - -
Current liabilities
Borrowings 16 6,682 6,065 - -
Trade and other payables 17 78,856 69,740 25,380 -
Current income tax liabilities 1,814 1,643 - -
87,352 77,448 25,380 -
Total liabilities 139,498 90,794 25,380 -
Total equity and liabilities 128,985 121,631 103,390 -
The notes form an integral part of these consolidated financial statements.
The financial statements were approved by the Board on 14 April 2008 and were
signed on its behalf by:
RA Watson, Director N Majewski, Director
Consolidated statement of changes in equity
Attributable to equity holders of the company
Group Notes Sharecapital Other Retained Sub Reverse Merger Total Minority Total
reserves earnings total acquisition reserve interes equity
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1
January 2006 200 -31 23,665 23,834 - - 23,834 1,179 25,013
Currency
translation
differences - -71 - -71 - - -71 -21 -92
Profit for
the year - - 9,986 9,986 - - 9,986 675 10,661
Total recognised
income and expense
for 2006 - -71 9,986 9,915 - - 9,915 654 10,569
Dividends paid 9 - - -4,200 -4,200 - - -4,200 -545 -4,745
Balance at
31 December 2006 200 -102 29,451 29,549 - - 29,549 1,288 30,837
Currency
translation
differences - 998 - 998 - - 998 51 1,049
Profit for
the year - - 8,820 8,820 - - 8,820 696 9,516
Total recognised
income and
expense for 2007 - 998 8,820 9,818 - - 9,818 747 10,565
Dividends paid 9 - - -26,232 -26,232 - - -26,232 -1,519 -27,751
Reverse acquisition
of Hilton Foods
Limited 2 6,700 - - 6,700 -31,700 - -25,000 - -25,000
Acquisition of
minority
shareholding 12 66 - - 66 - 919 985 -149 836
Balance at 31
December 2007 6,966 896 12,039 19,901 -31,700 919 -10,880 367 -10,513
Company
Profit for
the year - - 1,557 1,557 - - 1,557
Total recognised
income and
expense for 2007 - - 1,557 1,557 - - 1,557
Dividends paid 9 - - -1,532 -1,532 - - -1,532
Reverse acquisition
of Hilton Foods
Limited 2 6,900 - - 6,900 - 70,100 77,000
Acquisition
of minority
shareholding 12 66 - - 66 - 919 985
Balance at 31
December 2007 6,966 - 25 6,991 - 71,019 78,010
The notes form an integral part of these consolidated financial statements.
Consolidated cash flow statement for the year ended 31 December 2007
Group Company
2007 2006 2007 2006
Notes £'000 £'000 £'000 £'000
Cash flows from operating activities
Cash generated from operations 21 23,591 26,481 - -
Interest paid (2,548) (490) (968) -
Income tax paid (4,055) (4,380) - -
Net cash generated from/(used in) 16,988 21,611 (968) -
operating activities
Cash flows from investing activities
Purchase of property, plant and (10,853) (20,028) - -
equipment
Proceeds from sale of property, plant 4,473 2,228 - -
and equipment
Purchases of intangible assets (302) (834) - -
Interest received 1,065 764 1 -
Dividends received - - 2,500 -
Net cash (used in)/generated from (5,617) (17,870) 2,501 -
investing activities
Cash flows from financing activities
Proceeds from borrowings 47,546 4,810 - -
Repayments of borrowings (6,678) (3,854) - -
Dividends paid to company shareholders (26,232) (4,200) (1,532) -
Dividends paid to minority interests (1,519) (545) - -
Reverse acquisition of Hilton Foods (25,000) - - -
Limited
Net cash used in financing activities (11,883) (3,789) (1,532) -
Net (decrease)/increase in cash, cash
equivalents and bank overdrafts
(512) (48) 1 -
Cash, cash equivalents and bank
overdrafts at beginning of the year
20,133 20,402 - -
Exchange gains/(losses) on cash, cash
equivalents and bank overdrafts
1,171 (221) - -
Cash, cash equivalents and bank
overdrafts at end of financial year
15 20,792 20,133 1 -
The notes form an integral part of these consolidated financial statements.
Notes to the financial statements for the year ended 31 December 2007
1 Basis of preparation
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies have been
consistently applied to all of the years presented, unless otherwise stated.
The consolidated financial statements of Hilton Food Group plc have been
prepared in accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union, IFRIC interpretations and the Companies Act
1985 applicable to companies reporting under IFRS. The consolidated financial
statements have been prepared on the going concern basis under the historical
cost convention. The principal accounting policies adopted in the preparation of
these financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
The financial statements are presented in sterling and all values are rounded to
the nearest thousand (£'000) except when otherwise indicated.
2 Reverse acquisition
On 30 March 2007 the Company became the holding company of Hilton Foods Limited.
Under IFRS 3, Business Combinations, this group reconstruction has been
accounted for as a reverse acquisition. Although this consolidated financial
information has been issued in the name of the legal parent, the Company, it
represents in substance a continuation of the financial information of the legal
subsidiary Hilton Foods Limited. The following accounting treatment has been
applied in respect of the reverse acquisition.
a) the assets and liabilities of the legal subsidiary, Hilton Foods Limited,
are recognised and measured in the consolidated financial information at the
pre-combination carrying amounts, without restatement to fair value;
b) the retained earnings and other equity balances of Hilton Foods Limited
immediately before the business combination, and the results of the period from
1 January 2007 to the date of the business combination are those of Hilton Foods
Limited as the company did not trade prior to the transaction. However, the
equity structure appearing in the consolidated financial information reflects
the equity structure of the legal parent, Hilton Food Group plc, including the
equity instruments issued to effect the business combination; and
c) comparative numbers presented in the consolidated financial information are
those reported in the consolidated financial information of the legal
subsidiary, Hilton Foods Limited, for the year ended 31 December 2006.
The Company had no significant assets or liabilities immediately prior to the
time of the reverse acquisition. As part of the reverse acquisition, 69,000,000
new 10p shares were issued to the members of Hilton Foods Limited together with
a cash payment of £25m. In the books of the legal parent, Hilton Food Group plc,
a merger reserve of £70.1m has arisen as a premium on the shares issued. On
consolidation this merger reserve has formed part of the reverse acquisition
reserve amounting to £31.7m.
3 Segmental information
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments. A geographical segment is engaged in
providing products or services within a particular economic environment that are
subject to risks and returns that are different from those of segments operating
in other economic environments.
Based on an analysis of risks and returns, the Directors consider that the Group
has only one identifiable business segment, wholesaling of meat. The Directors
consider that no further segmentation is appropriate, as all of the Group's
operations are subject to similar risks and returns and exhibit similar
long-term financial performance.
Based on an analysis of risks and returns, the Directors consider that the Group
has two identifiable geographical segments. The main geographical area in which
the Group's operations are carried out is Western Europe. The other geographical
area that the Group's operations are carried out in does not meet the definition
of a reportable segment in IAS 14 and therefore the revenues, results, assets
and liabilities arising from the operations carried out in this geographical
area have been included in 'Other'.
Consequently the Group's primary reporting format is by geographical
segmentation. Secondary format disclosures are not appropriate. The analyses in
the tables below are based on the location of customers.
The segment results for the year ended 31 December 2007 are as follows:
Western Other Unallocated 2007 Western Other 2006
Europe Total Europe Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Total segment revenue 551,836 25,898 - 577,734 517,915 8,748 526,663
Operating profit/ 16,781 656 (1,780) 15,657 15,411 288 15,699
Segment result
Finance income 1,433 824
Finance costs (3,416) (1,038)
Finance costs - net (1,983) (214)
Profit before income 13,674 15,485
tax
Income tax expense (4,158) (4,824)
Profit for the year 9,516 10,661
Other segment items included in the income statement for the year ended 31
December 2007 are as follows:
Western Other 2007 Western Other 2006 Total
Europe Total Europe
£'000 £'000 £'000 £'000 £'000 £'000
Depreciation 8,802 828 9,630 7,731 289 8,020
Amortisation 1,178 186 1,364 1,056 73 1,129
The segment assets and liabilities at 31 December 2007 and capital expenditure
for the year then ended are as follows:
WesternEurope Other Unallocated 2007 Western Other Unallocated 2006
Total Europe Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Total assets 116,273 11,439 1,273 128,985 108,701 11,711 1,219 121,631
Total liabilities (72,067) (7,053) (60,378) (139,498) (68,626) (2,964) (19,204) (90,794)
Capital expenditure 10,410 745 - 11,155 15,460 5,658 - 21,118
Segment assets consist primarily of property, plant and equipment, intangible
assets, inventories, trade and other receivables and cash and cash equivalents.
Unallocated assets comprise deferred income tax assets.
Segment liabilities comprise operating liabilities. Unallocated liabilities
comprise deferred income tax liabilities, current income tax liabilities and
borrowings.
4 Expenses by nature
2007 2006
£'000 £'000
Changes in inventories of finished goods and work in progress 118 (445)
Raw materials and consumables used 461,726 422,028
Employee benefit expense 36,209 32,832
Depreciation, amortisation and impairment charges - owned assets 10,810 8,989
Depreciation, amortisation and impairment charges - leased assets 184 160
Release of deferred income in respect of government grants (109) (109)
Repairs and maintenance expenditure on property, plant and equipment 7,827 6,970
Trade receivables - impairment / (reversal of impairment) 203 (197)
Hire of plant and machinery 595 618
Transportation expenses 5,758 5,331
Operating lease payments 3,879 3,592
Foreign exchange (gains) / losses (338) 121
Other expenses 33,435 31,074
Total cost of sales, distribution costs and administrative expenses 560,297 510,964
5 Restructuring and flotation costs
During the year to 31 December 2007 costs of £1.8m were incurred in relation to
the restructuring of the Group and admission of the company to the Official
List.
6 Finance income and costs
2007 2006
£'000 £'000
Finance income:
Interest income on short-term bank deposits 837 674
Exchange gains on foreign currency borrowings 160 150
Interest on income taxes 436 -
Finance income 1,433 824
Interest expense:
Bank borrowings (3,131) (334)
Finance leases (198) (186)
Interest on income taxes - (518)
Other interest expense (87) -
Finance costs (3,416) (1,038)
Finance costs - net (1,983) (214)
7 Income tax expense
2007 2006
£'000 £'000
Current income tax
Current year 4,028 4,424
Adjustment to previous years (37) 83
3,991 4,507
Deferred income tax
Current year 185 317
Adjustment to previous years (18) -
167 317
Income tax expense 4,158 4,824
The tax on the Group's profit before income tax differs from the amount that
would arise using the standard rate of UK Corporation Tax of 30% (2006: 30%)
applied to profits of the consolidated entities as follows:
2007 2006
£'000 £'000
Profit before income tax 13,674 15,485
Tax calculated at the standard rate of UK Corporation Tax (30%) (2006: 30%) 4,102 4,646
Expenses not deductible for tax purposes 265 588
Adjustments to tax in respect of previous years (55) 83
Profits taxed at rates other than 30% (154) (493)
Income tax expense 4,158 4,824
8 Earnings per share
Basic and diluted
Basic and diluted earnings per share are calculated by dividing the profit
attributable to equity holders of the Company by the weighted average number of
ordinary shares in issue during the year.
2007 2006
Profit attributable to equity holders of the company (£'000) 8,820 9,986
Weighted average number of ordinary shares in issue (thousands) 69,657 69,657
Basic and diluted earnings per share (pence) 12.7 14.3
Basic and diluted earnings per share before restructuring and flotation
costs of £1,780k less tax relief of £150k (2006: £nil) (pence)
15.0 14.3
9 Dividends
2007 2006
£'000 £'000
Dividends paid on ordinary shares 35.5p per ordinary share (2006: 6.0p) 24,700 4,200
Interim dividend paid 2.2p per ordinary share 1,532 -
Total dividends paid 26,232 4,200
A dividend of £24.7m was paid during the year to shareholders as part of the
restructuring prior to Listing. The directors propose a final dividend of 5.2
pence per share payable on 11 July 2008 to shareholders who are on the register
at 13 June 2008 This final dividend, amounting to £5.2m has not been recognised
as a liability in these consolidated financial statements.
10 Property plant and equipment
Land and buildings Plant and Fixtures Motor vehicles
(including leasehold
improvement) machinery and Total
fittings
Group £'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2006 11,082 47,939 6,114 184 65,319
Exchange adjustments (109) (124) 54 - (179)
Additions 9,633 9,201 1,203 247 20,284
Disposals (256) (861) (1,304) (145) (2,566)
At 31 December 2006 20,350 56,155 6,067 286 82,858
Accumulated depreciation
At 1 January 2006 3,975 25,378 2,334 74 31,761
Exchange adjustments (18) (182) 8 - (192)
Charge for year 865 6,215 863 77 8,020
Disposals - (245) - (62) (307)
At 31 December 2006 4,822 31,166 3,205 89 39,282
Net book amount
At 31 December 2006 15,528 24,989 2,862 197 43,576
Cost
At 1 January 2007 20,350 56,155 6,067 286 82,858
Exchange adjustments 561 3,320 263 10 4,154
Additions 2,641 6,631 1,241 151 10,664
Disposals (4,000) (431) (75) (78) (4,584)
Transfer (2,131) 2,105 26 - -
At 31 December 2007 17,421 67,780 7,522 369 93,092
Accumulated depreciation
At 1 January 2007 4,822 31,166 3,205 89 39,282
Exchange adjustments 139 1,870 146 3 2,158
Charge for year 1,021 7,406 1,110 93 9,630
Disposals - (184) (28) (52) (264)
Transfer 3 (3) - - -
At 31 December 2007 5,985 40,255 4,433 133 50,806
Net book amount
At 31 December 2007 11,436 27,525 3,089 236 42,286
Property, plant and equipment include the following amounts where the group is a
lessee under a finance lease:
2007 2006
£'000 £'000
Cost - capitalised finance leases 3,188 2,845
Accumulated depreciation (667) (394)
Net book amount 2,521 2,451
Included in assets held under finance leases are land and buildings with a net
book amount of £2,437,000
(2006: £2,405,000) and plant & machinery with a net book amount of £84,000
(2006: £46,000).
Land and buildings are held under short leaseholds.
Details of bank borrowings secured on assets of the group are given in note 16.
11 Intangible assets
Product Software Goodwill
licences costs Total
Group £'000 £'000 £'000 £'000
Cost
At 1 January 2006 6,270 1,289 - 7,559
Exchange adjustments (121) 26 - (95)
Additions - 834 834
At 31 December 2006 6,149 2,149 - 8,298
Accumulated amortisation
At 1 January 2006 3,144 144 - 3,288
Exchange adjustments (71) 5 - (66)
Charge for year 868 261 - 1,129
At 31 December 2006 3,941 410 - 4,351
Net book amount
At 31 December 2006 2,208 1,739 - 3,947
Cost
At 1 January 2007 6,149 2,149 - 8,298
Exchange adjustments 584 196 - 780
Additions - 302 836 1,138
At 31 December 2007 6,733 2,647 836 10,216
Accumulated amortisation
At 1 January 2007 3,941 410 - 4,351
Exchange adjustments 451 63 - 514
Charge for year 990 374 - 1,364
At 31 December 2007 5,382 847 - 6,229
Net book amount
At 31 December 2007 1,351 1,800 836 3,987
The net book amount of goodwill relates entirely to the acquisition of the
remaining 2.5% shareholding in Hilton Food Group (Europe) Limited (note 12), the
cash generating unit (CGU). An impairment review of goodwill and other assets
has been carried out in accordance with IAS 36, 'Impairment of assets'.
The recoverable amount of the CGU is determined on value-in-use calculations.
These calculations use pre-tax cash flow projections covering a 5 year period.
The growth rate used is not more than 10%, being representative of the average
growth rate achieved by the group in recent years. The rate used to discount
the future cash flows is the group's internal hurdle rate for capital projects
of 11%. This approximates to applying a pre-tax discount rate to pre-tax cash
flows.
12 Investments in subsidiary undertakings
Company 2007 2006
Shares in Group undertakings £'000 £'000
At 1 January - -
Additions in year:
Reverse acquisition of Hilton Foods Limited - at fair value 102,000 -
Acquisition of minority shareholding in Hilton Food Group (Europe) Limited - -
at fair value
985
At 31 December 102,985 -
Details of the reverse acquisition of Hilton Foods Limited are shown in note 2.
Business combination
On 24 April 2007, the Group acquired 2.5% of the share capital of Hilton Food
Group (Europe) Limited in consideration for 656,667 ordinary shares in the
company at a value of £985,000 bringing its total shareholding to 100%. Details
of net assets acquired and goodwill are as follows:
£'000
Purchase consideration - fair value of equity shares issued 985
Existing minority interest 149
Goodwill (note 11) 836
13 Inventories
2007 2006
Group £'000 £'000
Raw materials and consumables 7,576 7,314
Finished goods and goods for resale 2,078 2,211
9,654 9,525
The cost of inventories recognised as an expense and included in cost of sales
amounted to £461,844,000 (2006: £421,583,000).
The Group reversed £164,000 of a previous inventory write-down in the year ended
31 December 2007 (2006: £110,000). The Group has sold all the goods that were
written down to a third party. The amount reversed has been included in cost of
sales in the income statements.
14 Trade and other receivables
2007 2006
Group £'000 £'000
Trade receivables 46,589 37,883
Less: provision for impairment of receivables (197) (65)
Trade receivables - net 46,392 37,818
Other receivables 1,724 1,800
Prepayments 2,877 1,419
50,993 41,037
The carrying amount of the Group's trade and other receivables are denominated
in the following currencies:
2007 2006
Currency £'000 £'000
UK Pound 8,566 6,368
Swedish Krona 14,320 11,928
Euro 25,466 18,550
Polish Zloty 2,641 4,191
50,993 41,037
The fair values of trade receivables, other receivables and prepayments are the
same as their carrying value. The maximum exposure to credit risk at 31 December
2007 is the fair value of each class of receivable mentioned above.
Trade receivables impaired and the amount of the impairment provision as at 31
December 2007 was £197,000 (2006: £65,000). The individually impaired
receivables mainly relate to invoices which are in dispute. It was assessed
that a portion of the receivables is expected to be recovered. The trade
receivables that were impaired were all overdue by more than 6 months. There
were no other trade receivables which were overdue. The other classes within
trade and other receivables do not contain impaired assets. The trade
receivables which are not impaired or overdue are all less than 30 days old.
Movements on the provision for impairment of trade receivables are as follows:
2007 2006
Group £'000 £'000
At 1 January 65 262
Provision for receivables impairment 203 -
Receivables written off during the year as uncollectable (86) -
Unused amounts reversed - (197)
Exchange differences 15 -
At 31 December 197 65
15 Cash and cash equivalents
Group Company
2007 2006 2007 2006
£'000 £'000 £'000 £'000
Cash at bank and on hand 20,792 22,327 1 -
Cash, cash equivalents and bank overdrafts include the following for the
purposes of the cash flow statement:
Group Company
2007 2006 2007 2006
£'000 £'000 £'000 £'000
Cash at bank and on hand 20,792 22,327 1 -
Bank overdrafts (note 16) - (2,194) - -
20,792 20,133 1 -
16 Borrowings
2007 2006
Group £'000 £'000
Current
Bank overdrafts - 2,194
Bank borrowings 6,577 3,799
Finance lease liabilities 105 72
6,682 6,065
Non-current
Bank borrowings 47,445 7,524
Finance lease liabilities 2,857 2,672
50,302 10,196
Total borrowings 56,984 16,261
Due to the frequent re-pricing dates of the group's loans, the fair value of
current and non-current borrowings is approximate to their carrying amount.
The carrying amounts of the Group's borrowings are denominated in the following
currencies:
2007 2006
Currency £'000 £'000
UK pound 46,935 50
Swedish Krona 3,642 7,845
Euro 6,407 8,366
56,984 16,261
The Group borrowed £47.5m from Ulster Bank during the year to fund group
reorganisation and is repayable in quarterly instalments by 28 February 2013.
Interest is charged at LIBOR plus 0.75% to 1.25% subject to interest rate caps
over £30m of borrowings where LIBOR is capped at 6.5%. Other bank borrowings are
repayable by 2010 to 2013 with interest charged at bank base rate plus 0.7% to
0.75%.
Bank borrowings and overdrafts totalling £54,022,000 (2006: £13,517,000) are
secured by fixed and floating charges over the assets of the individual Group
borrowers and through joint and several guarantees from each active group
undertaking.
The maturity profile of group's borrowings is as follows:
2007 2006
Group £'000 £'000
Less than one year 6,682 6,065
Between one and two years 7,014 2,769
Between two and five years 14,815 5,026
Later than five years 28,473 2,401
56,984 16,261
The minimum lease payments and present value of finance lease liabilities is as
follows:
Minimum lease payments Present value
2007 2006 2007 2006
Group £'000 £'000 £'000 £'000
No later than one year 305 266 105 72
Later than one year and no later than five years 1,128 1,009 362 272
Later than five years 3,867 3,793 2,495 2,400
5,300 5,068 2,962 2,744
Future finance charges on finance leases (2,338) (2,324) - -
Present value of finance lease liabilities 2,962 2,744 2,962 2,744
Lease liabilities are effectively secured as the rights to the leased asset
revert to the lessor in the event of default.
The fair value of the Group's finance lease liabilities is £3,700,000 (2006:
£3,547,000). The fair values are based on cash flows discounted using a rate
based on the borrowing rate of 4% (2006: 3.75%).
17 Trade and other payables
Group Company
2007 2006 2007 2006
£'000 £'000 £'000 '000
Trade payables 54,545 43,171 - -
Amounts owed to group undertakings - - 25,380 -
Amounts owed to related parties 11,079 11,245 - -
Social security and other taxes 406 1,346 - -
Deferred consideration 389 541 - -
Accruals and deferred income 12,437 13,437 - -
78,856 69,740 25,380 -
18 Other non-current liabilities
2007 2006
Group £'000 £'000
Deferred consideration 220 990
Accruals and deferred income 44 860
264 1,850
19 Deferred income tax
The movement in deferred income tax assets and liabilities during the year is as
follows:
Deferred income
tax liabilities:
Accelerated
capital
Deferred allowances
income tax
Accelerated Other timing assets total
capital differences
allowances
Group £'000 £'000 £'000 £'000
At 1 January 2007 1,219 - 1,219 (1,300)
Exchange differences - - - (59)
Income statement charge (38) 92 54 (221)
At 31 December 2007 1,181 92 1,273 (1,580)
Deferred income tax liabilities of £1,096,000 (2006: £1,021,000) have not been
recognised on the unremitted earnings of its overseas subsidiaries. As the
earnings are continually reinvested by the group, no tax is expected to be
payable on them in the foreseeable future.
20 Called up share capital
Group Company
2007 2006 2007 2006
£'000 £'000 £'000 £'000
Authorised £
500,000 'A' ordinary shares of £1 each - 500 - -
500,000 'B' ordinary shares of £1 each - 500 - -
100,000,000 ordinary shares of 10 pence each 10,000 - 10,000 -
10,000 1,000 10,000 -
Allotted and fully paid
100,000 'A' ordinary shares of £1 each - 100 - -
100,000 'B' ordinary shares of £1 each - 100 - -
69,656,667 ordinary shares of 10 pence each 6,966 - 6,966 -
6,966 200 6,966 -
The Company issued 69,000,000 shares to the members of Hilton Foods Limited as
part of the reverse acquisition (see note 2).
The Company issued 656,667 shares in consideration for the acquisition of a 2.5%
stake in Hilton Food Group (Europe) Limited (see note 12).
All ordinary shares of 10 pence each have equal rights in respect of voting,
receipt of dividends, and repayment of capital.
21 Cash generated from operations
2007 2006
Group £'000 £'000
Profit before income tax 13,674 15,485
Adjustments for:
- Depreciation 9,630 8,020
- Amortisation of intangible assets 1,364 1,129
- Loss on disposal of property, plant and equipment 36 31
- Finance costs - net 1,983 214
- Amortisation of government grants (104) (109)
Changes in working capital:
- Inventories 442 (2,011)
- Trade and other receivables (5,490) (7,881)
- Prepaid expenses (1,295) (443)
- Trade and other payables 4,914 4,227
- Accrued expenses (1,563) 7,819
Cash generated from operations 23,591 26,481
This information is provided by RNS
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