Preliminary Results

RNS Number : 5932T

Hilton Food Group PLC

31 March 2016

 

31^st  March 2016

Hilton Food Group plc

Strong progress

Highlights

Hilton Food Group plc, the specialist retail meat packing business supplying major international food retailers in thirteen European countries and Australia, today announces its preliminary results for the 53 weeks ended 3 January 2016.

Financial highlights	2015 53 weeks to 3 January 2016	2014 52 weeks to 28 December 2014	Change
Volume (tonnes)	244,140	231,504	+5.5%
Revenue	£1,094.8m	£1,099.0m	-0.4%
Operating profit	£29.0m	£26.1m	+11.3%
Profit before tax	£28.0m	£25.2m	+11.0%
Basic earnings per share	27.5p	25.0p	+10.0%
Investment expenditure	£13.7m	£43.3m
Closing net cash / (debt)	£12.7m	£(7.7)m
Dividends paid and proposed in respect of the year	14.6 p	13.3 p	+9.8%

Strategic highlights

·	Investment to modernise and expand capacity of UK site in Huntingdon, to service increased volumes for Tesco, completed during 2015. New production facilities are fully bedded in, working well and delivering planned operational efficiencies.
·	Encouraging progress from the Australian joint venture with Woolworths. New dedicated retail packed meat facility, near Melbourne, operated by the joint venture company, commenced production on schedule in September 2015. Store roll out plan covering Victoria and South Australia now completed.

Operating highlights

·	Volume growth of 5.5%, with growth in the UK, Ireland and Holland for Tesco and Albert Heijn with particularly strong Christmas trading partly offset by continuing pressure on consumer spending in Denmark.
·	Revenue reduced by 0.4% despite the volume gains, reflecting strengthening of Sterling, which decreased revenue by 7.4%.
·	Operating profit at £29.0m 11.3% ahead of last year (2014: £26.1m) and 20.9% higher on a constant currency basis.
·	Investment expenditure returning to maintenance levels at £13.7m (2014: £43.3m), following completion of the major re-investment programmes undertaken in the UK and Sweden.
·	Free cash inflow of £31.7m (compared to an outflow of £2.1m in 2014) generating net cash balances of £12.7m at year end, as compared with net debt of £7.7m at end of 2014.
·	Strong ungeared balance sheet providing a firm platform for future expansion.

Commenting on the results Chief Executive Robert Watson OBE said:

"I am pleased to report that during 2015 Hilton made strong progress in pursuing its growth strategy, including the expansion of the Australian joint venture and the completion of the major UK capacity expansion project. We will continue to look for available opportunities to progressively and profitably expand the scale and scope of our operations as they arise using a business model that has over time proved to be successful, resilient, relevant and internationally transferable."

Enquiries

Hilton Food Group	Tel: [phone]
Robert Watson OBE, Chief Executive
Nigel Majewski, Chief Financial Officer
Citigate Dewe Rogerson	Tel: [phone]
Angharad Couch

Chairman's introduction

Strategic delivery

I am pleased to report that continued strong strategic progress was achieved during 2015. A new meat processing facility for Woolworths near Melbourne in Victoria, operated by the joint venture company, commenced production on time in September 2015, with the store roll out plan across Victoria and South Australia now completed.

The major investment program undertaken at the Group's UK facilities in Huntingdon, involving a significant extension of the site's processing and packing capacity, the addition of a further production unit and the streamlining and modernisation of the complete facility has been successfully completed, with the new facilities now bedded in and generating improved operational performances more rapidly than previously expected.

Group performance and shareholder returns

Further volume growth was achieved during 2015, notwithstanding relatively challenging market conditions in some countries. Strong underlying profit progress was achieved despite a material impact on our profitability reported in Sterling from adverse exchange translation movements.

The Group's net income in 2015 at £20.0m was 10.8% ahead of 2014 (£18.1m) and 20.7% higher in constant currency terms. Basic earnings per share at 27.5p were 10% ahead of last year. Hilton continued to generate significant free cash flow during 2015, which enabled the Group to move into a positive £12.7m net cash position by the year end (as compared with net debt of £7.7m at the end of 2014).

Over the last two years we have made major new investments to secure the Group's future growth potential. The principal items of expenditure involved the redevelopment of the Group's facilities in Huntingdon to enable the planned UK volume increases for Tesco and a re-investment programme at Vasteras in Sweden. Both projects were successfully completed in early 2015, providing additional capacity and delivering considerable improvements in operational efficiency.

The Board considers that the Group's progressive dividend policy maintained since flotation remains appropriate, given both the further strategic progress achieved in 2015 and Hilton's continuing strong level of cash generation. With the proposed final dividend of 1.3p per ordinary share for 2015, total dividends paid in respect of 2015 will have increased by 9.8%, as compared to last year.

Our Board

The Board is responsible for the long term success of the Group and to achieve this it contains an appropriate mix of skills and depth and a range of practical business experience, which is available to support and guide our management teams across a wide range of countries.

After nine years valuable service Chris Marsh has stepped down as a Non-Executive Director and I will be stepping down as Non-Executive Chairman following the forthcoming Annual General Meeting, with Colin Smith assuming this role. We are delighted to welcome Christine Cross and John Worby as new Non-Executive Directors, both of whom will bring a wide range of skills and expertise to our business.

I have been privileged to serve on the Board since just before our Company's flotation in 2007, for the last six years as Non-Executive Chairman. I am pleased to confirm that there is well planned succession in the Group. I will continue to assist the Group on agricultural matters and would like to take this opportunity to thank my colleagues on the Board for their support, counsel and expertise over the six years of my chairmanship. I am confident that under the leadership of Colin Smith and Robert Watson the Group will continue to make excellent progress.

Annual General Meeting

This year's AGM will be held at the Old Bridge Hotel, 1 High Street, Huntingdon, Cambridgeshire PE29 3TQ on 25 May 2016 at noon and my colleagues and I very much look forward to seeing those of you who are able to attend.

Sir David Naish DL

Non-Executive Chairman

30 March 2016

Chief Executive's summary

Strategic objectives

Our strategy is focussed on supporting our customers' brands and their development in their local markets, whilst achieving attractive and sustainable rates of growth in value for our shareholders. This straightforward approach has generated growth over an extended period of time and, with a strong reputation, well invested modern facilities and a robust balance sheet, the Group remains well positioned to achieve continuing progress.

Hilton seeks to build long term customer and shareholder value by focusing on:

·	Growing volumes and extending product ranges supplied and services provided to its existing customers;
·	Optimising the use of its assets and investing in new technology and capacity expansion as required;
·	Maintaining a vigilant focus on food safety and integrity and reducing unit costs, while improving product quality and service provision; and
·	Entering new territories either with new customers or in partnership with our existing customers.

We will continue to pursue disciplined geographical expansion, whilst at the same time actively developing, enriching, deepening and expanding the scope of our existing business partnerships, playing a full and proactive role in strongly supporting our customers and the successful development of their brands.

Business model

Our business model is the means by which we deliver on our strategic objectives. The Hilton business model is proven and sustainable, whilst being relatively simple and straightforward. We operate large scale, extensively automated and robotised meat processing and packing facilities for major international multiple retailers on a dedicated basis. The one exception is in Central Europe, where our facility in Poland supplies more multiple retailers in order to achieve critical mass in terms of volumes supplied and the consequent ability to achieve competitive unit packing costs.

Raw material meat is sourced, in close co-operation with our retail partners, from local sources and a wide international base of proven suppliers. It is then processed, packed and delivered to the retailers' distribution centres or stores. Our plants are highly automated and use advanced robotics for the storage of raw materials and finished products. Developing robotics technology has been extended in recent years both in the production environment and to the sorting of finished products by retailer store order, achieving material supply chain efficiencies for our customers.

To ensure our continued competitiveness, we seek to keep ourselves at the forefront of the meat packing industry. We constantly seek to drive further efficiencies, always maintaining a pipeline of clear identifiable cost reduction initiatives and an open minded approach designed to continually challenge the status quo. We consider our modern, very well invested facilities to be a key factor in keeping unit packing costs as low as possible. Over the past twelve years we have invested continuously across all areas of our business, including the sourcing of raw materials, the design of packaging materials, increased efficiency in processing and storage solutions and updating our IT infrastructure. Capital expenditure over this period has totalled over £210m.

In Europe we have facilities in six countries each run by a local management team enhanced by specialist central leadership, expertise, advice and support. These businesses operate under the terms of five to ten year Long Term Supply Agreements with our retail partners, either on a cost plus or agreed packing rate basis. These contractual arrangements, combined with our customer dedication, serve to maximise achievable volume throughput whilst minimising unit packing costs. In Australia our joint venture company receives a volume related management fee in respect of the facilities it operates on behalf of Woolworths.

Under the long term agreements we have in place with our customers the parameters of our revenue are clearly defined. As well as income derived from the supply of retail packed meat products there are also provisions whereby our income can be increased or decreased subject to achievement of certain pre-agreed and pre-defined key performance measures and targets.

We are a committed and loyal partner with a continuing record of delivering value through quality products with the highest levels of food safety, traceability and integrity, whilst providing a range of services which enable our customers to evolve and improve their meat supply chain management. Our customer base comprises high quality multiple retailers and our in-depth understanding of our customers' needs, together with those of their consumers, enables us to play an active role in managing their meat supply chains whilst providing agile solutions to supply chain challenges as they arise. As our customers' markets change and competition increases, we need to keep a constant focus on the challenges they face so as to be able to put forward flexible solutions, together with continuing increases in efficiency and cost competitiveness.

The strength of our long term partnerships with our retail customers has been a key driver of our growth since the Group was formed and will continue to underpin the Group's strategy. Hilton's business model has proved successful across a range of European countries, appropriately adapted in each case by working in close collaboration with its local customers to meet their specific requirements. Our experience to date continues to indicate that our business model, appropriately adapted, can be successfully transferred to a number of new countries.

Geographical spread

The Group's rapid past expansion has been based on its established track record, together with its growing international reputation and experience and the recognised success of the close partnerships it has forged and maintained with successful retail partners. We are an international business and the seven countries in which the Group currently has production facilities, with the dates operations commenced in each country, are set out below:

Year	Country	Location	Customers
1994	UK	Huntingdon	Tesco UK
2000	Holland	Zaandam	Albert Heijn
2004	Ireland	Drogheda	Tesco Ireland
2004	Sweden	Vasteras	ICA
2006	Central Europe	Tychy, Poland	Ahold (2006) Tesco (2007) Rimi (2009)
2011	Denmark	Aarhus	Coop Danmark
2013	Australia	Bunbury and Brisbane (2013), Melbourne (2015)	Woolworths

The facility in Tychy supplies Ahold stores in Czech Republic and Slovakia, Tesco stores in Hungary, Czech Republic, Poland and Slovakia and Rimi stores in Latvia, Lithuania and Estonia. The facility at Zaandam also supplies Albert Heijn stores in Belgium.

The joint venture with Woolworths in Australia involves our joint venture company managing Woolworths' meat processing and packing facilities at Bunbury in Western Australia, Brisbane in Queensland and, from September 2015, a new state of the art meat packing facility near Melbourne, in Victoria.

Currency translation

In 2015 62% of the Group's turnover was earned in countries outside the United Kingdom, together with 73% of the volumes of meat delivered. Although these percentages remain significant they have declined since last year reflecting the increase achieved in sales and volumes in the UK during 2015 and the decline in the Sterling value of overseas sales.

This wide geographical spread increases the Group's resilience by minimising its reliance on the fortunes of any one individual economy, but makes its results reported in Sterling sensitive to changes in the value of Sterling as compared to the range of overseas currencies in which the Group trades. During 2015 the average exchange rates for the various overseas currencies in which the Group trades have all depreciated significantly against Sterling, compared with the corresponding period in 2014, the Euro by 10.0%, the Danish Krone by 10.0%, the Polish Zloty by 10.0%, the Swedish Krona by 12.4% and the Australian Dollar by 10.2%.

Culture and people

To our mind successful businesses are principally about having the right people in the right positions at the right time working together as "one team", with local management teams empowered, encouraged and advised in specialist areas to enable them to support their local customers. The Group benefits from each of its businesses being part of a larger organisation, which enables them to share best practice solutions, including equipment selection, IT solutions and ways of working along with the collaborative sharing of new learnings, ideas and techniques.

We are committed to providing an inclusive working environment where everyone feels valued, respected and able to fulfil their potential. We recognise that people from different backgrounds, countries and experiences can bring benefits to our business. We fully recognise the benefits of gender diversity and details of the gender composition of our staff are set out in our Corporate and social responsibility report.

The Group currently employs 2,833 employees in six European countries. Our business model is largely decentralised, with capable, largely self-sufficient management teams running our businesses in each local country. We consider this devolved structure to be a critical success factor, as it achieves very close working relationships with our customers, who benefit from personal, dedicated, flexible and rapid local support.

The Board fully understands and appreciates just how much our progress relies on the effort, personal commitment, enthusiasm, enterprise and initiative of our employees. I would like to take this opportunity, on behalf of the Board, to personally thank all of them both for their dedicated efforts during 2015 and their continuing commitment to the Group's on-going growth and development.

Performance overview

Our business comprises three separate operating segments:

Western Europe

Operating profit of £32.1m (2014: £27.1m) on turnover of £1,020.7m (2014: £1,016.8m)

This operating segment covers the Group's businesses in the UK, Ireland, Holland, Sweden and Denmark. Volume growth of 5.1% was achieved in 2015, principally reflecting volume growth in the UK, Ireland and Holland, driven mainly by gaining an increased share of our customers' business in the UK, with the recently expanded meat processing capacity, and the introduction of new product lines in each country. Volumes in Denmark were reduced with consumer spending remaining under continuing pressure and in Sweden volumes remained relatively steady. Turnover grew by only 0.4%, but by 7.7% in constant currency terms. The redevelopment of the Huntingdon site was completed in 2015. This was a complex project involving the re-equipping and re-alignment of the site and the addition of a further production area whilst working around a live production environment with the highest customer service levels needing to be maintained throughout the process. The re-equipment of the Vasteras site in Sweden faced similar challenges. Both projects were executed successfully, with improved operational efficiencies being realised in addition to the capacity expansion. In the UK the operational efficiencies were realised somewhat earlier than predicted and with a lower level of start-up costs.

Central Europe

Operating profit of £2.3m (2014: £2.4m) on turnover of £74.1m (2014: £82.2m)

In Central Europe the Group's meat packing business, based at Tychy in Poland, supplies customers across Central Europe, from Hungary to the Baltics. This multi-customer business supplies Ahold stores in Czech Republic and Slovakia, Tesco stores in Hungary, Czech Republic, Poland and Slovakia and Rimi stores in Latvia, Lithuania and Estonia. Volumes increased by 7.8%, but in very competitive market conditions with consumer down-trading, unfavourable exchange rate movements of 10.0% and lower raw material prices, turnover decreased by 9.7%.

Central costs and other

Net operating cost £5.4m (2014: £3.4m)

This segment includes our share of the management fee earned by our joint venture with Woolworths of £1.2m (2014: £1.3m), start-up and support costs in connection with the joint venture of £1.2m (2014: £0.9m) and central costs of £5.4m (2014: £3.8m).

In Australia the Group is involved in a joint venture with Woolworths, under which it earns a fifty per cent share of the agreed management fees charged by the joint venture company to Woolworths for operating certain Woolworths' meat processing and packing plants, based on the volume of retail packed meat delivered to Woolworths' stores. The joint venture company is currently responsible for the operation of Woolworths' Western Australian meat processing centre in Bunbury, its Queensland meat processing centre in Brisbane and the new purpose built retail packing facility near Melbourne in Victoria which started production in September 2015. Start-up costs inevitably peak in the period immediately before a new production facility such as that in Melbourne comes on stream and then subsequently fall away.

Past and future trends

Over recent decades as major retail chains have progressively gained a greater share of the grocery markets in most countries, they have increasingly turned to large scale, centralised meat packing solutions capable of producing private label packed meat products more safely and cost effectively. In doing so, they have rationalised their supply base, achieving lower costs with higher food safety, food integrity, traceability and quality standards. This has allowed supermarket groups to focus on their core business and maximise their return on available retail space whilst addressing consumers' continuing requirement for quality and value.

Grocery retail markets are expected to remain extremely competitive, with continuing pressure on consumer expenditure. The trend towards increased use of centralised meat packing solutions is still continuing, however, albeit at different speeds across the world. This gives rise to a wide range of potential future geographical expansion opportunities for Hilton, but inevitably in a range of different timescales as markets develop and change over time.

Within retail markets patterns are continuing to change fairly rapidly, with increased internet based ordering and a growth in the number of "click and collect" facilities. Following pressures on consumer expenditure over a number of years there has been increased use by cost conscious consumers of local convenience stores and discount outlets, to shop more frequently for a reduced overall basket cost per visit and at a wider range of retail outlets. These developments which appear to be structural rather than cyclical will all tend to reinforce the overall trend towards retail packed meat, as this is the meat offering in all these growth areas.

Outlook and current trading

Hilton's medium term growth outlook remains encouraging following the successful completion of the UK capacity expansion and site redevelopment project in Huntingdon and the start of production with our Australian joint venture partner at Melbourne.

Notwithstanding competitive market conditions, overseas currency fluctuations and pressure on consumer expenditure Hilton is therefore confident of growing its business with continued focus on new product development and range extension.

In the early months of 2016 Hilton's operating performance has been in line with the Board's expectations. The Group will continue to explore further opportunities for geographical expansion in both domestic and overseas markets and is well placed to capture those opportunities as they arise.

Robert Watson OBE

Chief Executive

30 March 2016

Performance and financial review

Group performance

Hilton's financial performance was robust in 2015, despite material headwinds from adverse currency movements, with underlying operating profit 20.9% ahead of last year in constant currency terms. With investment expenditure returning to lower levels, continued strong cash flow generation resulted in a net cash position at the end of the year, compared with a net debt position at the end of 2014.This performance and financial review covers the main highlights of the Group's financial performance and position in 2015.

Basis of preparation

The Group is presenting its results for the 53 week period ended 3 January 2016, with comparative information for the 52 week period ended 28 December 2014. The financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU).

2015 Financial performance

Revenue

Volumes grew overall by 5.5% (4.0% on a 52-week basis) with volume increases in the UK, Ireland, Holland and Central Europe, but lower volumes in Denmark. Further details of volume growth by business segment are set out in the Chief Executive's summary. Revenue fell by 0.4% (1.9% fall on a 52-week basis) to £1,094.8m, as compared to £1,099.0m in 2014, with unfavourable exchange rate movements more than offsetting the volume gains.

Operating profit and margin

Operating profit, at £29.0m was 11.3% (9.0% on a 52-week basis) above the previous year's level (2014: £26.1m) and 20.9% higher on a constant currency basis.  The operating profit margin in 2015 was 2.6%, as compared with 2.4% in 2014, reflecting the higher operating profit level and the operating profit per kilogram of packed meat sold was 11.9p (11.3p in 2014).

Net finance costs

Net finance costs, at £1.1m, were slightly above the previous year's level (2014: £0.9m) with higher borrowings. Interest rates paid have remained at historically low levels, reflecting continuing low LIBOR and other interbank rates, which determine the interest rates on the Group's principal borrowings. Interest cover in 2015 remained high, but decreased marginally to 28 times, as compared with 30 times in 2014.

Taxation

The taxation charge for the period was £6.5m (2014: £5.6m). This represented an effective taxation rate of 23.2% compared with 22.4% last year, with a reduced proportion of profits being earned in the lower taxed regimes in which the Group operates.

Net income

Net income, representing profit for the year attributable to owners of the parent, at £20.0m (2014: £18.1m) was 10.8% (8.4% on a 52-week basis) higher than last year reflecting the increase in operating profit and 20.7% higher in constant currency terms.

Earnings per share

Basic earnings per share at 27.5p (2014: 25.0p) were 10.0% higher than last year (7.7% on a 52-week basis).  Diluted earnings per share were 27.2p (2014: 24.7p).

Earnings before interest, taxation, depreciation and amortisation

EBITDA increased by 16.2% to £48.4m (2014: £41.7m) reflecting the increase in operating profit together with higher depreciation and amortisation charges.

Free cash flow

Cash flow remained strong in 2015, with the Group generating a £31.7m free cash inflow before dividends and financing (2014: free cash outflow £2.1m), after incurring capital expenditure of £13.7m. Group borrowings were £40.1m at the end of 2015 and, with net cash balances of £52.8m, this resulted in a closing net cash position of £12.7m, as compared with a net debt level of £7.7m at the end of 2014. At the end of 2015 the Group had undrawn overdraft and loan facilities of £28.3m (2014: £46.5m).

A strong ungeared balance sheet gives the Group considerable flexibility for potential future expansion.

Dividends

The Board aims to maintain a dividend policy that provides a dividend level that grows broadly in line with the underlying earnings of the Group and has recommended a final dividend of 1.3p per ordinary share in respect of 2015. This, together with the first interim dividend of 4.1p per ordinary share paid in November 2015 and the second interim dividend of 9.2p per ordinary share payable in April 2016, represents a 9.8% increase in the full year dividend, as compared with last year. The final dividend, if approved by shareholders, will be paid on 1 July 2016 to shareholders on the register on 3 June 2016 and the shares will be ex dividend on 2 June 2016.

Key performance indicators

How we measure our performance against our strategic objectives

The Board monitors a range of financial and non-financial key performance indicators "KPIs" to measure the Group's performance over time in building shareholder value and achieving the Group's strategic priorities. The nine headline "KPI" metrics used by the Board for this purpose, together with our performance over the past two years, is set out below:

Financial KPIs	2015 (53 weeks)	2014 (52 weeks)	Definition, method of calculation and analysis
Revenue growth (%)	(0.4%)	(2.3%)	Year on year revenue growth expressed as a percentage. The 2015 decrease reflected volume growth of 5.5%, which was more than offset by the impact of unfavourable exchange translation rate movements.
Operating profit margin (% turnover)	2.6%	2.4%	Operating profit expressed as a percentage of turnover. The increase in 2015 reflected the increased operating profit level.
Operating profit margin (pence per kg)	11.9	11.3	Operating profit per kilogram sold
Earnings before interest, taxation, depreciation and amortisation (EBITDA) (£m)	48.4	41.7	Operating profit before depreciation and amortisation. The increase reflected higher underlying operating profits, together with higher depreciation and amortisation charges following the high level of capital expenditure in 2014.
Free cash flow (£m)	31.7	(2.1)	Cash inflow before minorities, dividends and financing. The improvement reflected growth in operating cash flows together with the reduction in capital expenditure.
Gearing ratio (%)	n/a	18%	Year end net debt as a percentage of EBITDA. The Group was ungeared at the end of 2015, with a net cash position.
Non-financial KPIs	2015 (53 weeks)	2014 (52 weeks)	Definition, method of calculation and analysis
Growth in volume of packed meat sales (%)	5.5%	3.5%	Year on year volume growth, expressed as a percentage.
Employee and labour agency costs (pence per kg)	36.2	39.3	The decrease reflects efficiency gains, continuing low levels of wage inflation and exchange translation rate movements.
Customer service level (%)	99.2%	99.0%	Packs of meat delivered as a % of the orders placed. Little year on year change, with high service levels being maintained throughout the year.

In addition, a much wider range of financial and operating KPIs are continuously tracked at business unit level.

Treasury management

Hilton does not engage in any speculative trading in financial instruments and transacts only in relation to its underlying business requirements. The Group's policy is designed to ensure adequate financial resources are made available as required for the continuing development and growth of its businesses, whilst taking practical steps to reduce exposures to foreign exchange, interest rate fluctuation, credit, pricing and liquidity risks, as described below:

Foreign exchange rate movements and country specific risks

Whilst the presentational currency of the Group is Sterling, most of its revenues are earned in other currencies, principally the Euro, Swedish Krona, Danish Krone and Australian Dollar. The earnings of the Group's overseas subsidiaries are translated into Sterling at the average exchange rates for the year and their assets and liabilities at the year end closing rates. Changes in relevant currency parities are monitored on a continuing basis, with the timing of the repatriation of overseas profits by dividend payments and the repayment of any intra-group loans to UK holding companies paying due regard to actual and forecast exchange rate movements.

The Group has to date decided not to hedge its foreign exchange rate exposures, but this policy is kept under continuing review and may be reappraised over time as the Group's geographic spread continues to widen. The Group's overseas subsidiaries all have natural hedges in place as they, for the most part, buy raw materials, employ people, source services, sell products and arrange funding in their local currencies. As a result the Group's exposure is in the main limited to its equity investment in each overseas subsidiary and its joint venture.

The level of country specific risk currently remains material for many businesses, in terms of the impact of macroeconomic developments, including the impact of austerity programmes and commodity price movements in some countries. The Group sells high quality basic food products, for which there will always be continuing demand, to successful blue chip multiple retailers in developed countries. Hilton has not to date been materially adversely affected by the lengthy recessionary environments seen in some countries, but will keep any future identified country specific risks under continuing review.

Interest rate fluctuation risk

This risk stems from the fact that the interest rates on the Group's borrowings are variable, being at set margins over LIBOR and other interbank rates which fluctuate over time. The Board's policy is to have an interest rate cap on a proportion of this borrowing. The Board will review hedging costs and options should the current low interest rate environment change materially.

Customer credit and pricing risks

As Hilton's customers comprise a small number of successful and credit worthy major multiple retailers, the level of credit risk is considered to be insignificant. Historically the incidence of bad debts has been immaterial. Hilton's pricing is based predominately either on cost plus agreements or agreed packing rates with its customers.

Liquidity risk

This has for many businesses represented an area of concern over recent years, given the continuing difficult and uncertain economic environment in some countries. Hilton Food Group remains strongly cash generative, has a robust balance sheet and has committed banking facilities for the medium term, sufficient to support its existing business. All bank positions are monitored on a daily basis and capital expenditure above set levels, together with decisions on intra-group dividends, are all approved at Board meetings. All long term debt is arranged centrally and is subject to Board approval.

Going concern statement

The Directors have performed a detailed assessment, including a review of the Group's budget for the 2016 financial year and its longer term plans, including consideration of the principal risks faced by the Company. Following this review, the Directors are satisfied that the Company and the Group have adequate resources to continue to operate and meet its liabilities as they fall due for the foreseeable future, a period considered to be at least 12 months from the date of signing these financial statements. For this reason they continue to adopt the going concern basis for preparing the financial statements.

The Group's bank borrowings are detailed in the financial statements and the principal banking facilities, which support the Group's existing and contracted new business, are committed, with no renewal required for three years. The Group is in full compliance with all its banking covenants. Future geographical expansion which is not yet contracted, and which is not built into our internal budgets and forecasts, may require additional or extended banking facilities and such future geographical expansion will depend on our ability to negotiate appropriate additional or extended facilities, as and when they are required.

The Group's internal budgets and forward forecasts, which incorporate all reasonably foreseeable changes in trading performance, are regularly reviewed in detail by the Board and show that it will be able to operate within its current banking facilities, taking into account available cash balances, for the foreseeable future.

Viability statement

In accordance with provision C.2.2 of the 2014 revision of the UK Corporate Governance Code, the Directors confirm that they have a reasonable expectation that the Group will continue to operate and meet its liabilities, as they fall due, for the three years ending in December 2018. A period of three years has been chosen for the purpose of this viability statement as it is aligned with the Group's three year plan, which is based on the Group's current customers and does not incorporate the benefits from any potential new contract gains over this period.

The Directors' assessment has been made with reference to the Group's current position and strategy taking into account the Group's principal risks and how these are managed. The strategy and associated principal risks, which the Directors review at least annually, are incorporated in the three year plan and such related scenario testing as is required. The three year plan makes reasoned assumptions in relation to volume growth based on the position of our customers and expected changes in the macroeconomic environment and retail market conditions, expected changes in raw material meat, packaging and other costs, together with the anticipated level of capital investment required to maintain our facilities at state of the art levels. The achievement of the three year plan is not dependant on any new or expanded financing facilities.

Forward looking statements

This Strategic report contains forward looking statements that are inevitably subject to risk factors associated with, amongst other things, economic, political and business developments which may occur from time to time across the countries in which the Group operates.  It is believed that the expectations reflected in these statements are reasonable based on current knowledge, but all forward looking statements and forecasts are inherently predictive, speculative and involve risk and uncertainty, simply because they relate to events and depend on circumstances that will occur in the future.

Nigel Majewski

Chief Financial Officer

30 March 2016

Risk management and principal risks

Risks and risk management

In accordance with provision C.2.1 of the 2014 revision of the UK Corporate Governance Code the Directors confirm that they have carried out a robust assessment of the principal risks facing the Group, including those which could threaten its business model, future performance, solvency or liquidity. As a leading food processor in a fast moving environment it is critical that the Group identifies, assesses and prioritises its risks. This, together with the adoption of appropriate mitigation actions, enables us to monitor, minimise and control both the probability and potential impact of these risks.

How we manage risk

Responsibility for risk management across the Group, including the appropriate identification of risks and the effective application of actions designed to mitigate those risks, resides with the Board which believes that a successful risk management framework carefully balances risk and reward, and applies reasoned judgement and consideration of potential likelihood and impact in determining its principal risks.  The Group takes a proactive approach to risk management with well-developed structures and range of processes for identifying, assessing, prioritising and mitigating its key risks, as the delivery of our strategy depends on our ability to make sound risk informed decisions.

Risk management process and risk appetite

All types of risk applicable to the business are regularly reviewed and a formal risk assessment is carried out to highlight key risks to the business and to determine actions that can reasonably and cost effectively be taken to mitigate them. The Group's Risk Register is compiled through a combination of business unit risk registers and Board input. The Board believes that in carrying out the Group's businesses it is vital to strike the right balance between an appropriate and comprehensive control environment and encouraging the level of entrepreneurial freedom of action required to seek out and develop new business opportunities, but, however skilfully this balance between risk and reward is struck, the business will always be subject to a number of risks and uncertainties, as illustrated below.

Not all the risks listed below are within the Group's control and others may be unknown or currently considered immaterial, but could turn out to be material in the future. The risks set out in the following table, together with our risk mitigation strategies, should be considered in the context of the Group's risk management and internal control framework, details of which are set out in the Corporate governance statement. It must be recognised that systems of internal control are designed to manage rather than completely eliminate any identified risks.

The most significant risks the Group faces

The six most significant business risks that the Group faces, are, as might be expected with an unchanged and relatively straightforward business model, the same as in previous years. These risks, which will continue to affect the Group's businesses, together with the measures we have adopted to mitigate these risks, are outlined in the table below. This is not intended to constitute an exhaustive analysis of all risks faced by the Group, but rather to highlight those which are the most significant, as viewed from the standpoint of the Group as a whole.

Description of risk	The Group is dependent on a small number of customers who can exercise significant buying power and influence when it comes to contractual renewal terms at 5 to 10 year intervals.
Its potential impact	The Group has a relatively narrow, but expanding, customer base, with sales to subsidiary or associated companies of the Tesco and Ahold groups still comprising the larger part of Hilton's revenue in 2015. The larger retail chains have over many years increased their market share of meat products in many countries, as customers continue to move away from high street butchers towards one stop convenience shopping in supermarkets.  This has increased the buying power of the Group's customers which in turn increases their negotiating power with the Group, which could enable them to seek better terms over time.
Risk mitigation measures and strategies adopted	The Group is progressively widening its customer base and its maintained high level of investment in state of the art facilities, which together with management's continuous focus on reducing costs, allow it to operate very efficiently at very high throughputs and price its products competitively. Hilton operates a decentralised, entrepreneurial business structure, which enables it to work very closely and flexibly with its retail partners in each country, in order to achieve high service levels in terms of orders delivered, delivery times, compliance with product specifications and accuracy of documentation, all backed by an uncompromising focus on food safety, product integrity and traceability assurance. Hilton has long term supply agreements in place with its major customers, with pricing either on a cost plus or agreed packing rate basis.

Description of risk	The Group's growth potential is dependent on the success of its customers and the growth of their packed meat sales.
Its potential impact	The Group's products carry the brand labels of the customer to whom packed meat is supplied and it is accordingly dependent on its customers' success in maintaining or improving consumer perception of their own brand names and packed meat offerings.
Risk mitigation measures and strategies adopted	The Group plays a very pro-active role in enhancing its customers' brand values, through providing high quality, competitively priced products, high service levels, continuing product and packaging innovation and category management support. It recognises that quality and traceability assurance are integral to its customers' brands and works closely with its customers to ensure rigorous quality assurance standards are met. It is continuously measured by its customers across a very wide range of parameters, including delivery time, product specification, product traceability and accuracy of documentation and targets demanding service levels across all these parameters. The Group works closely with its customers to identify continuing improvement opportunities across the supply chain, including enhancing product presentation, extending shelf life and reducing wastage at every stage in the supply chain.

Description of risk	The progress of the Group's business is dependent on the macroeconomic environment and levels of consumer spending in the countries in which it operates.
Its potential impact	No business is immune to difficult economic climates and the consequent pressure on levels of consumer spending, such as those seen over recent years across Europe.
Risk mitigation measures and strategies adopted	With a sound business model, strong retail partners and a single minded focus on minimising unit packing costs, whilst maintaining high levels of product quality and integrity, the Group has made continued progress over recent difficult economic periods. It expects to be able to continue to make progress, even if the current pressures on consumer spending, as expected, persist in some countries.

Description of risk	The Group's business is reliant on a small number of key personnel and its ability to manage growth and change successfully.
Its potential impact	The Group is critically dependent on the skills and experience of a small number of senior managers and specialists and as the business develops and expands, the Group's success will inevitably depend on its ability to attract and retain the necessary calibre of personnel for key positions, both for managing and growing its existing businesses and setting up new ones.
Risk mitigation measures and strategies adopted	To continue to manage growth successfully, the Group will carefully manage its skill resources and continue to invest in on-the-job training and career development, together with the cost effective management of quality information and control systems, whilst recruiting high quality new employees, as required, to facilitate the Group's ongoing growth. The continuing growth of Hilton's business, together with its growing reputation, is facilitating the recruitment of more top class specialists with the key skill sets required both to support our existing individual country business units and manage the Group's future geographical expansion.

Description of risk	The Group's business is dependent on maintaining a wide and flexible global meat supply base operating at standards that can continuously achieve the specifications set by Hilton and its customers.
Its potential impact	The Group is reliant on its suppliers to provide sufficient volume of products, to the agreed specifications, in the very short lead times required by its customers, with efficient supply chain management being a key business attribute.  The Group sources certain of its meat requirements globally. Tariffs, quotas or trade barriers imposed by countries where the Group procures meat, or which they may impose in the future, together with the progress of World Trade Organisation talks and other global trade developments, could materially affect the Group's international procurement ability but has not done so in recent years.
Risk mitigation measures and strategies adopted	The Group maintains a flexible global meat supply base, which is progressively widening as it expands and is continuously audited to ensure standards are maintained, so as to have in place a wide range of options should supply disruptions occur.

Description of risk	Outbreaks of disease and feed contamination affecting livestock and media concerns relating to these and instances of product adulteration can impact the Group's sales.
Its potential impact	Reports in the public domain concerning the risks of consuming meat can cause consumer demand for meat to drop significantly in the short to medium term. A food scare similar to the Bovine Spongiform Encephalopathy ("BSE") scare that took place in 1996 or the much more recent concerns with regard to meat substitution can affect public confidence in red meats.
Risk mitigation measures and strategies adopted	The Group sources its meat from a trusted raw material supply base, all components of which meet stringent national, international and customer standards. The Group is subject to demanding standards which are independently monitored in every country and reliable product traceability and high welfare standards from the farm to the consumer are integral to the Group's business model. The Group ensures full traceability from source to packed product across all suppliers.

Note: References in this preliminary announcement to the Strategic report, the Corporate and social responsibility report, the Directors' report and the Corporate Governance statement are to reports which will be available in the Company's full published accounts.

Responsibility statement of the Directors in respect of the Annual report and financial statements

Each of the Directors whose names and functions are set out below confirms that to the best of their knowledge and belief:

·	the Group and parent company financial statements, prepared in accordance with applicable UK law and in conformity with IFRS, as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group and the Company; and
·	the management reports, which comprise the Strategic report and the Directors' report, include a fair review of the development and performance of the business and the position of the Group and the Company, together with a description of the principal risks and uncertainties they face.

This responsibility statement was approved by the Board of Directors on 30 March 2016 and is signed on its behalf by:

Directors

R Watson, OBE	Chief Executive
N Majewski	Chief Financial Officer

Consolidated income statement

		2015	2014
		53 weeks	52 weeks
	Notes	£'000	£'000
Continuing operations
Revenue	3	1,094,822	1,098,990
Cost of sales		(957,067)	(966,809)
Gross profit		137,755	132,181
Distribution costs		(10,091)	(10,541)
Administrative expenses		(99,887)	(96,462)
Share of profit in joint venture		1,222	884
Operating profit		28,999	26,062
Finance income	4	97	102
Finance costs	4	(1,148)	(976)
Finance costs - net	4	(1,051)	(874)
Profit before income tax		27,948	25,188
Income tax expense	5	(6,489)	(5,638)
Profit for the year		21,459	19,550
Attributable to:
Owners of the parent		20,017	18,071
Non-controlling interests		1,442	1,479
		21,459	19,550
Earnings per share attributable to owners of the parent during the year
Basic (pence)	6	27.5	25.0
Diluted (pence)	6	27.2	24.7

Consolidated statement of comprehensive income
	2015	2014
	53 weeks	52 weeks
	£'000	£'000
Profit for the year	21,459	19,550
Other comprehensive income
Currency translation differences	(2,739)	(4,761)
Other comprehensive income for the year net of tax	(2,739)	(4,761)
Total comprehensive income for the year	18,720	14,789
Total comprehensive income attributable to:
Owners of the parent	17,552	13,625
Non-controlling interests	1,168	1,164
	18,720	14,789
The notes are an integral part of these consolidated financial statements.

Consolidated balance sheet

			Group	Company
		2015	2014	2015	2014
	Notes	£'000	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment	8	67,230	72,642	-	-
Intangible assets	9	10,073	12,547	-	-
Investments		2,396	1,234	102,985	102,985
Deferred income tax assets		1,000	771	-	-
		80,699	87,194	102,985	102,985
Current assets
Inventories		18,272	22,029	-	-
Trade and other receivables		96,095	115,609	470	53
Current income tax assets		-	1,532	11	30
Cash and cash equivalents		52,806	35,586	150	333
		167,173	174,756	631	416
Total assets		247,872	261,950	103,616	103,401
Equity
Equity attributable to owners of the parent
Ordinary shares		7,286	7,259	7,286	7,259
Share premium		8,191	7,235	8,191	7,235
Employee share schemes reserve		901	441	-	-
Foreign currency translation reserve		(4,489)	-2,024	-	-
Retained earnings		82,829	72,717	17,120	13,470
		94,718	85,628	32,597	27,964
Reverse acquisition reserve		(31,700)	(31,700)	-	-
Merger reserve		919	919	71,019	71,019
		63,937	54,847	103,616	98,983
Non-controlling interests		4,938	4,786	-	-
Total equity		68,875	59,633	103,616	98,983
Liabilities
Non-current liabilities
Borrowings	10	28,405	32,573	-	-
Deferred income tax liabilities		1,654	1,875	-	-
		30,059	34,448	-	-
Current liabilities
Borrowings	10	11,728	10,687	-	-
Trade and other payables		136,537	157,182	-	4,418
Current income tax liabilities		673	-	-	-
		148,938	167,869	-	4,418
Total liabilities		178,997	202,317	-	4,418
Total equity and liabilities		247,872	261,950	103,616	103,401
The notes are an integral part of these consolidated financial statements.
The financial statements were approved by the Board on 30 March 2016 and were signed on its behalf by:

R. Watson OBE	N. Majewski
Director	Director

Hilton Food Group plc - Registered number: 06165540

Consolidated statement of changes in equity

		Attributable to owners of the parent
		Share capital	Share premium	Employee share schemes reserve	Foreign currency translation reserve	Retained earnings	Reverse acquisition reserve	Merger  reserve	Total	Non-controlling interests	Total         equity
Group	Notes	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 December 2013		7,216	5,885	857	2,422	63,989	(31,700)	919	49,588	4,670	54,258
Profit for the year		-	-	-	-	18,071	-	-	18,071	1,479	19,550
Other comprehensive income
Currency translation differences		-	-	-	(4,446)	-	-	-	(4,446)	(315)	(4,761)
Total comprehensive income for the year		-	-	-	(4,446)	18,071	-	-	13,625	1,164	14,789
Issue of new shares		43	794	-	-	-	-	-	837	-	837
Adjustment in respect of employee share schemes		-	406	(151)	-	-	-	-	255	-	255
Tax on employee share schemes		-	150	(265)	-	-	-	-	(115)	-	(115)
Dividends paid	7	-	-	-	-	(9,343)	-	-	(9,343)	(1,048)	(10,391)
Total transactions with owners		43	1,350	(416)	-	(9,343)	-	-	(8,366)	(1,048)	(9,414)
Balance at 28 December 2014		7,259	7,235	441	(2,024)	72,717	(31,700)	919	54,847	4,786	59,633
Profit for the year		-	-	-	-	20,017	-	-	20,017	1,442	21,459
Other comprehensive income
Currency translation differences		-	-	-	(2,465)	-	-	-	(2,465)	(274)	(2,739)
Total comprehensive income for the year		-	-	-	(2,465)	20,017	-	-	17,552	1,168	18,720
Issue of new shares		27	516	-	-	-	-	-	543	-	543
Adjustment in respect of employee share schemes		-	408	342	-	-	-	-	750	-	750
Tax on employee share schemes		-	32	118	-	-	-	-	150	-	150
Dividends paid	7	-	-	-	-	(9,905)	-	-	(9,905)	(1,016)	(10,921)
Total transactions with owners		27	956	460	-	(9,905)	-	-	(8,462)	(1,016)	(9,478)
Balance at 3 January 2016		7,286	8,191	901	(4,489)	82,829	(31,700)	919	63,937	4,938	68,875
Company
Balance at 30 December 2013		7,216	5,885	-	-	11,922	-	71,019	96,042
Profit for the year		-	-	-	-	10,891	-	-	10,891
Total comprehensive income for the year		-	-	-	-	10,891	-	-	10,891
Issue of new shares		43	794	-	-	-	-	-	837
Adjustment in respect of employee share schemes		-	406	-	-	-	-	-	406
Tax on employee share schemes		-	150	-	-	-	-	-	150
Dividends paid	7	-	-	-	-	(9,343)	-	-	(9,343)
Total transactions with owners		43	1,350	-	-	(9,343)	-	-	(7,950)
Balance at 28 December 2014		7,259	7,235	-	-	13,470	-	71,019	98,983
Profit for the year		-	-	-	-	13,555	-	-	13,555
Total comprehensive income for the year		-	-	-	-	13,555	-	-	13,555
Issue of new shares		27	516	-	-	-	-	-	543
Adjustment in respect of employee share schemes		-	408	-	-	-	-	-	408
Tax on employee share schemes		-	32	-	-	-	-	-	32
Dividends paid	7	-	-	-	-	(9,905)	-	-	(9,905)
Total transactions with owners		27	956	-	-	(9,905)	-	-	(8,922)
Balance at 3 January 2016		7,286	8,191	-	-	17,120	-	71,019	103,616

The notes are an integral part of these consolidated financial statements.

Consolidated cash flow statement

			Group	Company
		2015	2014	2015	2014
		53 weeks	52 weeks	53 weeks	52 weeks
	Notes	£'000	£'000	£'000	£'000
Cash flows from operating activities
Cash generated from operations	11	50,960	47,626	(386)	-
Interest paid		(1,148)	(976)	(72)	(171)
Income tax (paid)/received		(4,553)	(5,530)	-	87
Net cash generated from/(used in) operating activities		45,259	41,120	(458)	(84)
Cash flows from investing activities
Purchases of property, plant and equipment		(13,676)	(31,830)	-	-
Proceeds from sale of property, plant and equipment		77	129	-	-
Purchases of intangible assets		(54)	(11,599)	-	-
Interest received		97	102	-	-
Dividends received		-	-	13,600	11,000
Net cash (used in)/generated from investing activities		(13,556)	(43,198)	13,600	11,000
Cash flows from financing activities
Proceeds from borrowings		3,336	36,193	-	-
Repayments of borrowings		(6,157)	(21,923)	-	-
Repayment of inter-company loan		-	-	(3,963)	(2,266)
Issue of ordinary shares		543	837	543	837
Dividends paid to owners of the parent		(9,905)	(9,343)	(9,905)	(9,343)
Dividends paid to non-controlling interests		(1,016)	(1,048)	-	-
Net cash (used in)/ generated from financing activities		(13,199)	4,716	(13,325)	(10,772)
Net increase/(decrease) in cash and cash equivalents		18,504	2,638	(183)	144
Cash and cash equivalents at beginning of the year		35,586	34,642	333	189
Exchange losses on cash and cash equivalents		(1,284)	(1,694)	-	-
Cash and cash equivalents at end of the year		52,806	35,586	150	333
The notes are an integral part of these consolidated financial statements.

Notes to the financial statements

1 General information

Hilton Food Group plc ("the Company") and its subsidiaries (together "the Group") is a specialist retail meat packing business supplying major international food retailers in thirteen European countries and Australia. The Company's subsidiaries are listed in a note.

The Company is a public limited company incorporated and domiciled in the UK. The address of the registered office is 2-8 The Interchange, Latham Road, Huntingdon, Cambridgeshire PE29 6YE. The registered number of the Company is 06165540.

The Company maintains a Premium Listing on the London Stock Exchange.

The financial year represents the 53 weeks to 3 January 2016 (prior financial year 52 weeks to 28 December 2014).

This preliminary announcement was approved for issue on 30 March 2016.

2 Summary of significant accounting policies

The accounting policies are consistent with those of the annual financial statements for the year ended 28 December 2014.

Basis of preparation

The consolidated financial statements of Hilton Food Group plc have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.

The consolidated financial statements have been prepared on the going concern basis. The reasons why the Directors consider this basis to be appropriate are set out in the Performance and financial review.

The financial statements are presented in Sterling and all values are rounded to the nearest thousand (£'000) except when otherwise indicated.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in a note.

The financial information included in this preliminary announcement does not constitute statutory accounts of the Group for the years ended 3 January 2016 and 28 December 2014 but is derived from those accounts. Statutory accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

3 Segment information

Management have determined the operating segments based on the reports reviewed by the Executive Directors that are used to make strategic decisions.

The Executive Directors have considered the business from both a geographic and product perspective.

From a geographic perspective, the Executive Directors consider that the Group has seven operating segments: i) United Kingdom; ii) Netherlands; iii) Republic of Ireland; iv) Sweden; v) Denmark,  vi) Central Europe including Poland, Czech Republic, Hungary, Slovakia, Latvia, Lithuania and Estonia and vii) Central costs and other including the share of profit from the joint venture in Australia. The United Kingdom, Netherlands, Republic of Ireland, Sweden and Denmark have been aggregated into one reportable segment 'Western Europe' as they have similar economic characteristics as identified in IFRS 8. Central Europe and Central costs and other comprise the other reportable segments.

From a product perspective the Executive Directors consider that the Group has only one identifiable product, wholesaling of meat. The Executive 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.

The segment information provided to the Executive Directors for the reportable segments is as follows:
			Central				Central
	Western	Central	costs and	2015	Western	Central	costs and	2014
	Europe	Europe	other	Total	Europe	Europe	other	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Total segment revenue	1,020,844	74,165	-	1,095,009	1,018,368	82,156	-	1,100,524
Inter-segment revenue	(187)	-	-	(187)	(1,534)	-	-	(1,534)
Revenue from external customers	1,020,657	74,165	-	1,094,822	1,016,834	82,156	-	1,098,990
Operating profit/(loss)/segment result	32,107	2,255	(5,363)	28,999	27,115	2,426	(3,479)	26,062
Finance income	20	76	1	97	20	81	1	102
Finance costs	(1,066)	-	(82)	(1,148)	(667)	-	(309)	(976)
Income tax expense	(6,959)	(455)	925	(6,489)	(5,902)	(502)	766	(5,638)
Profit/(loss) for the year	24,102	1,876	(4,519)	21,459	20,566	2,005	(3,021)	19,550
Depreciation and amortisation	18,205	1,036	122	19,363	14,354	1,186	96	15,636
Additions to non-current assets	12,905	547	278	13,730	42,492	824	113	43,429
Segment assets	224,739	17,836	4,297	246,872	240,231	15,949	3,467	259,647
Current income tax assets				-				1,532
Deferred income tax assets				1,000				771
Total assets				247,872				261,950
Segment liabilities	165,283	9,411	1,976	176,670	190,316	7,521	1,163	199,000
Borrowings				-				1,442
Current income tax liabilities				673				-
Deferred income tax liabilities				1,654				1,875
Total liabilities				178,997				202,317

Sales between segments are carried out at arm's length. Revenue from external customers reported to the Executive Directors is measured in a manner consistent with that in the income statement.

The Executive Directors assess the performance of each operating segment based on its operating profit. Operating profit is measured in a manner consistent with that in the income statement.

The amounts provided to the Executive Directors with respect to total assets and liabilities are measured in a manner consistent with that of the financial statements. The assets are allocated based on the operations of the segment and their physical location. The liabilities are allocated based on the operations of the segment. The Group interest bearing reorganisation loan is not considered to be a segment liability.

The Group has four principal customers (comprising groups of entities known to be under common control), Tesco, Ahold, Coop Danmark and ICA Gruppen. These customers are located in the United Kingdom, Netherlands, Republic of Ireland, Sweden, Denmark and Central Europe including Poland, Czech Republic, Hungary, Slovakia, Latvia, Lithuania and Estonia.

Analysis of revenues from external customers and non-current assets are as follows:
		Revenues from external customers		Non-current assets excluding deferred tax assets
		2015	2014	2015		2014
		£'000	£'000	£'000		£'000
Analysis by geographical area
United Kingdom - country of domicile		441,673	391,139	39,784		40,200
Netherlands		257,398	266,049	9,445		10,645
Sweden		182,621	197,603	13,752		13,828
Republic of Ireland		55,880	60,289	3,999		4,351
Denmark		83,174	101,754	9,757		13,821
Central Europe		74,076	82,156	2,962		3,578
		1,094,822	1,098,990	79,699		86,423
Analysis by principal customer
Customer 1		513,401	472,883
Customer 2		284,560	299,779
Customer 3		197,608	212,698
Customer 4		81,634	99,996
Other		17,619	13,634
		1,094,822	1,098,990
4 Finance income and costs
				2015		2014
Group				£'000		£'000
Finance income
Interest income on short term bank deposits				90		97
Interest on income taxes				7		5
Finance income				97		102
Finance costs
Bank borrowings				(920)		(765)
Finance leases				(161)		(189)
Exchange (losses)/gains on foreign currency borrowings				(3)		22
Other interest expense				(64)		(44)
Finance costs				(1,148)		(976)
Finance costs - net				(1,051)		(874)

5 Income tax expense
	2015	2014
Group	£'000	£'000
Current income tax
Current tax on profits for the year	6,787	4,795
Adjustments to tax in respect of previous years	(18)	47
Total current tax	6,769	4,842
Deferred income tax
Origination and reversal of temporary differences	(389)	704
Adjustments to tax in respect of previous years	109	92
Total deferred tax	(280)	796
Income tax expense	6,489	5,638

Deferred tax credited directly to equity during the year in respect of employee share schemes amounted to £118,000 (2014: £265,000 charge).

The tax on the Group's profit before income tax differs from the theoretical amount that would arise using the standard rate of UK Corporation Tax of 20.25% (2014: 21.5%) applied to profits of the consolidated entities as follows:

	2015	2014
	£'000	£'000
Profit before income tax	27,948	25,188
Tax calculated at the standard rate of UK Corporation Tax 20.25% (2014: 21.5%)	5,659	5,415
Expenses not deductible/(income not taxable) for tax purposes	371	(37)
Adjustments to tax in respect of previous years	91	139
Profits taxed at rates other than 20.25% (2014: 21.5%)	375	133
Other	(7)	(12)
Income tax expense	6,489	5,638
There is no tax impact relating to components of other comprehensive income.

6 Earnings per share

Basic earnings per share are calculated by dividing the profit attributable to owners of the parent by the weighted average number of ordinary shares in issue during the year.

Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has share options for which a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

			2015		2014
Group		Basic	Diluted	Basic	Diluted
Profit attributable to owners of the parent	(£'000)	20,017	20,017	18,071	18,071
Weighted average number of ordinary shares in issue	(thousands)	72,748	72,748	72,379	72,379
Adjustment for share options	(thousands)	-	970	-	714
Adjusted weighted average number of ordinary shares	(thousands)	72,748	73,718	72,379	73,093
Basic and diluted earnings per share	(pence)	27.5	27.2	25.0	24.7

7 Dividends
	2015	2014
Group and Company	£'000	£'000
Final dividend in respect of 2014 paid 9.5p per ordinary share (2014: 9.1p)	6,919	6,590
Interim dividend in respect of 2015 paid 4.1p per ordinary share (2014: 3.8p)	2,986	2,753
Total dividends paid	9,905	9,343

The Directors declared a second interim dividend of 9.2p which is to be paid on 1 April 2016 and propose a final dividend of 1.3p per share payable on 1 July 2016 to shareholders who are on the register at 3 June 2016. These dividends totalling £7.7m have not been recognised as a liability in these consolidated financial statements.

8 Property, plant and equipment
	Land and buildings (including leasehold improvements)	Plant and machinery	Fixtures and fittings	Motor vehicles	Total
Group	£'000	£'000	£'000	£'000	£'000
Cost
At 30 December 2013	26,162	153,085	11,151	311	190,709
Exchange adjustments	(909)	(9,319)	(636)	(3)	(10,867)
Additions	13,176	17,473	1,165	16	31,830
Reclassification	(754)	3,344	(2,672)	82	-
Disposals	-	(4,368)	(454)	(109)	(4,931)
At 28 December 2014	37,675	160,215	8,554	297	206,741
Accumulated depreciation
At 30 December 2013	16,328	106,567	8,805	133	131,833
Exchange adjustments	(535)	(6,364)	(476)	(1)	(7,376)
Charge for the year	1,966	11,391	1,006	74	14,437
Reclassification	(492)	2,582	(2,090)	-	-
Disposals	-	(4,265)	(443)	(87)	(4,795)
At 28 December 2014	17,267	109,911	6,802	119	134,099
Net book amount
At 30 December 2013	9,834	46,518	2,346	178	58,876
At 28 December 2014	20,408	50,304	1,752	178	72,642
Cost
At 29 December 2014	37,675	160,215	8,554	297	206,741
Exchange adjustments	(724)	(5,167)	(250)	(1)	(6,142)
Additions	3,521	9,391	755	9	13,676
Reclassification	-	(235)	53	-	(182)
Disposals	(1,464)	(561)	(88)	(7)	(2,120)
At 3 January 2016	39,008	163,643	9,024	298	211,973
Accumulated depreciation
At 29 December 2014	17,267	109,911	6,802	119	134,099
Exchange adjustments	(460)	(3,573)	(188)	-	(4,221)
Charge for the year	3,737	12,219	860	68	16,884
Reclassification	-	(72)	21	-	(51)
Disposals	(1,464)	(406)	(91)	(7)	(1,968)
At 3 January 2016	19,080	118,079	7,404	180	144,743
Net book amount
At 3 January 2016	19,928	45,564	1,620	118	67,230

Land and buildings are held under short leaseholds. Details of bank borrowings secured on assets of the Group are given in note 10. Depreciation charges are included within administrative expenses in the income statement.

The cost and net book amount of property plant and equipment in the course of its construction included above comprise plant and machinery £1,654,000 (2014: £1,209,000).

Property, plant and equipment include the following amounts where the Group is a lessee under a finance lease:

	2015	2014
	£'000	£'000
Cost - capitalised finance leases	3,011	3,195
Accumulated depreciation	(1,794)	(1,742)
Net book amount	1,217	1,453
Included in assets held under finance leases are land and buildings with a net book amount of £1,217,000 (2014: £1,453,000).

9 Intangible assets
	Product licences	Computer software	Goodwill	Total
Group	£'000	£'000	£'000	£'000
Cost
At 30 December 2013	8,833	4,441	836	14,110
Exchange adjustments	(977)	(475)	-	(1,452)
Additions	11,449	150	-	11,599
At 28 December 2014	19,305	4,116	836	24,257
Accumulated amortisation
At 30 December 2013	7,789	3,661	-	11,450
Exchange adjustments	(525)	(414)	-	(939)
Charge for the year	892	307	-	1,199
At 28 December 2014	8,156	3,554	-	11,710
Net book amount
At 30 December 2013	1,044	780	836	2,660
At 28 December 2014	11,149	562	836	12,547
Cost
At 29 December 2014	19,305	4,116	836	24,257
Exchange adjustments	(560)	(137)	-	(697)
Additions	-	54	-	54
Reclassifications	-	182	-	182
Disposals	-	(123)	-	(123)
At 3 January 2016	18,745	4,092	836	23,673
Accumulated amortisation
At 29 December 2014	8,156	3,554	-	11,710
Exchange adjustments	(408)	(109)	-	(517)
Charge for the year	2,142	337	-	2,479
Reclassifications	-	51	-	51
Disposals	-	(123)	-	(123)
At 3 January 2016	9,890	3,710	-	13,600
Net book amount
At 3 January 2016	8,855	382	836	10,073

Amortisation charges are included within administrative expenses in the income statement.

10 Borrowings
	2015	2014
Group	£'000	£'000
Current
Bank borrowings	11,562	10,531
Finance lease liabilities	166	156
	11,728	10,687
Non-current
Bank borrowings	26,428	30,304
Finance lease liabilities	1,977	2,269
	28,405	32,573
Total borrowings	40,133	43,260
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:
	2015	2014
Currency	£'000	£'000
UK Pound	25,080	30,737
Euro	2,144	2,425
Swedish Krona	12,909	10,098
	40,133	43,260

Borrowings are repayable in quarterly instalments by 2019. Interest on borrowings in Sterling is charged at LIBOR plus 1.6% subject to interest rate caps over £12m of borrowings where LIBOR is capped at 2.5%. Interest on borrowings in Swedish Krona is charged at STIBOR plus 1.6% subject to interest rate caps over SEK 75m of borrowings where STIBOR is capped at 3%.

Bank borrowings totalling £37,989,000 (2014: £40,835,000) 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 Group has undrawn overdraft and loan borrowing facilities of £28.3m (2014: £46.5m) which expire after one year.

The undiscounted contractual maturity profile of the Group's borrowings is described in a note.

The minimum lease payments and present value of finance lease liabilities is as follows:

	Minimum lease payments		Present value
	2015	2014	2015	2014
Group	£'000	£'000	£'000	£'000
No later than one year	317	329	166	156
Later than one year and no later than five years	1,351	1,398	1,977	2,269
Later than five years	1,282	1,732	-	-
	2,950	3,459	2,143	2,425
Future finance charges on finance leases	(807)	(1,034)	-	-
Present value of finance lease liabilities	2,143	2,425	2,143	2,425

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 £2,843,000 (2014: £3,315,000). The fair values are based on cash flows discounted using the European Central Bank benchmark main refinancing operations fixed interest rate of 0.05% (2014: 0.05%).

11 Cash generated from operations
	2015	2014
Group	£'000	£'000
Profit before income tax	27,948	25,188
Finance costs - net	1,051	874
Operating profit	28,999	26,062
Adjustments for non-cash items:
Share of post tax profits of joint venture	(1,222)	(884)
Depreciation of property, plant and equipment	16,884	14,437
Amortisation of intangible assets	2,479	1,199
Loss on disposal of non-current assets	75	7
Adjustment in respect of employee share schemes	750	255
Changes in working capital:
Inventories	3,126	424
Trade and other receivables	16,283	(112)
Prepaid expenses	(744)	592
Trade and other payables	(15,150)	3,947
Accrued expenses	(520)	1,699
Cash generated from operations	50,960	47,626
The parent company has no operating cash flows.

12 Related party transactions and ultimate controlling party

The Directors do not consider there to be one ultimate controlling party. The companies noted below are all deemed to be related parties by way of common Directors.

Sales made on an arm's length basis on normal credit terms to related parties during the year were as follows:

			2015	2014
Group			£'000	£'000
Woolworths Limited and subsidiaries - recharge of joint venture costs			1,581	1,245
Amounts owing from related parties at the year end were as follows:
			Owed from related parties
			2015	2014
Group			£'000	£'000
Woolworths Limited and subsidiaries			605	33
The Company's related party transactions with other Group companies during the year were as follows:
			2015	2014
Company			£'000	£'000
Hilton Foods Limited - dividend received			13,600	11,000
Hilton Foods Limited - interest expense			56	140
Hilton Foods UK Limited - payment for group relief			30	53
At the year end £439,000 was owed by Hilton Foods Limited (2014: £4,403,000 owed to Hilton Foods Limited) and £31,000 (2014: £53,000) was owed by Hilton Foods UK Limited.
Details of key management compensation are given in a note.

 

END

 

 

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