Preliminary Results

RNS Number : 3854H

Hilton Food Group PLC

06 April 2022

 

  6 April 2022

Hilton Food Group plc

The International Protein Partner of Choice

Hilton Food Group plc, a leading international protein producer, today announces its preliminary results for the 52 weeks ended 2 January 2022.

Financial highlights:

· Group revenue up 21.6%* to £3.3bn (2020: £2.77bn), driven by growth across proteins and geographies

· Volume growth of 7.0%* to 492,588 tonnes (2020: 469,110 tonnes)

· Adjusted profit before tax higher by 13.0%* to £67.2m (2020: £61.1m)

· IFRS profit before tax lower by 12.3% to £47.4m (2020: £54.0) after exceptional items of £8.2m

· Adjusted basic earnings per share up 13.8%* at 61.3p (2020: 55.4p)

· IFRS basic earnings per share down 7.4% at 45.0p (2020: 48.6p)

· Strong cash flows from operating activities £121.3m (2020: £120.8m) with £57.4m capex investment and a strong balance sheet following refinancing

· Proposed final dividend of 21.5p, taking total dividend for 2021 to 29.7p (2020: 26.0p)

* On a 52 week constant currency basis

 

Strategic highlights:

1.  Delivering sustained growth across all protein categories

o Meat and seafood 14.3% volume growth 2019-2021

o Vegan & vegetarian 26.4% volume growth 2019-2021

o Added value easier meals 36.0% volume growth 2019-2021

2.  Growing across international markets

o Over 75% of Group's 2021 volumes produced in countries outside the UK

o Entered new markets across Europe, including acquisition of vegetarian producer Dalco

o Significant growth in Australasia with seafood launch in New Zealand

o Moving into North American market for first time with the acquisition of leading smoked salmon producer, Foppen with £75m equity raise

o Launched in UK food service market through acquisition of Fairfax Meadow

3.  Becoming best-in-class FMCG for technology

o Ongoing transformation of Hilton Seafood with industry leading automation and palletisation

o Growing engineering and technology solutions offer through 2022 JV with Agito Group

o Continued growth of Foods Connected supply chain management services, with contracts in new sectors and geographies

4.  Supporting our Partners to become First Choice for Sustainable Protein

o Launching new ESG strategy, The Sustainable Protein Plan, focused on 3 pillars of People, Planet and Product, with each pillar underpinned by three strategic drivers and new targets and goals

o Planet: Science Based Targets approved for Scopes 1, 2, and 3 during 2021

o Product: 76% average recycled content across entire tray range during 2021

Commenting on the results Chief Executive Philip Heffer said:

"This has been a year of delivery and diversification. We have delivered another strong financial performance with volumes and revenue both growing, maintaining a trend of continuous volume growth every year since Hilton's flotation in 2007. We grew adjusted operating profit by 12.7%*, in line with the 11% compound annual growth rate we have delivered in our fourteen years as a listed business. These results reflect an outstanding team effort as well as the power of our business model, which is rooted in the partnerships we have built with customers across Europe and Asia-Pacific.

"We have also made strategic progress in diversifying the business. Last year, we set ourselves the goal of becoming the protein partner of choice. Put simply, we want to offer all the proteins people want to put on their plates, in home and out of home, not just in Europe and Asia, but in North America too. To reach that goal, we have been transforming our business to expand into new protein products and categories, to enter new international markets, to deepen our technology and engineering capabilities, and to expand our sustainability commitments across all protein categories.

"The acquisitions we have made over the past year will accelerate this. Following the completion of the purchase of Foppen, we are well set to grow further and enter the high growth smoked salmon market. We already now generate more than two-thirds of our revenue, and three-quarters of our volume, outside the UK, and are therefore well placed to create long-term sustainable value, in spite of short-term challenges or market headwinds. While those headwinds persist, our model positions us well to provide nutritious, affordable, and increasingly sustainable protein at scale, fulfilling changing consumer demands."

 

Financial performance - overview:

	2021	2020	Change
	52 weeks to 2 January 2022	53 weeks to  3 January 2021	Reported	One-year 52 week constant currency	Two-year 52 week constant currency
Volume 1 (tonnes)	492,588	469,110	5.0%	7.0%	15.1%
Revenue	£3,302.0m	£2,774.0m	19.0%	21.6%	34.4%
Adjusted results 2
Adjusted operating profit	£73.6m	£67.0m	9.8%	12.7%	15.7%
Adjusted profit before tax	£67.2m	£61.1m	10.0%	13.0%	15.8%
Adjusted basic earnings per share	61.3p	55.4p	10.6%	13.8%
Adjusted EBITDA	£119.5m	£106.0m	12.7%	15.3%	21.8%
IFRS results				Pre-exceptional
Operating profit	£63.4m	£66.9m	-5.1%	5.4% 3
Profit before tax	£47.4m	£54.0m	-12.3%	2.9% 3
Basic earnings per share	45.0p	48.6p	-7.4%	5.3% 3
Cash flows from operating activities	£121.3m	£120.8m	0.4%
Other measures
EBITDA	£139.0m	£126.5m	9.9%
Net bank debt 4	£84.6m	£122.2m
Dividends paid and proposed in respect of the year	29.7p	26.0p	14.2%

Notes

1  Volume includes 50% share of the Australian (2020 H1 only), Dutch (until date of acquisition) and Portuguese joint venture activities

2  Adjusted results represent the IFRS results before deduction of acquisition intangibles amortisation, depreciation of fair value adjustments to property, plant & equipment, exceptional items and also IFRS 16 lease adjustments as detailed in the Alternative performance measures note 18. Unless otherwise stated financial metrics in the Chairman's statement, Chief Executive's summary and Performance and financial review refer to the Adjusted results

3  Exceptional items include acquisition costs, costs of Belgium assets destroyed by fire offset by a gain on the acquisition of 100% of Dalco as detailed in note 4

4  Net bank debt represents borrowings less cash and cash equivalents excluding lease liabilities

 

Enquiries

Hilton Food Group   Tel: [phone]

Philip Heffer, Chief Executive Officer

Nigel Majewski, Chief Financial Officer

Headland Consultancy Limited  Tel: [phone]

Edward Young  Email: [e-mail]

Will Smith

Joanna Clark

This announcement contains inside information.

About Hilton

Hilton Food Group plc is a leading international multi-protein producer, serving customers and retail partners across the world with high quality meat, seafood, vegan and vegetarian foods and meals. We are a business of over 6,000 employees, operating from 24 technologically advanced food processing, packing and logistics facilities across 19 markets in Europe, Asia Pacific and North America. For almost thirty years, our business has been built on dedicated partnerships with our customers and suppliers, many forged over several decades, and together we target long-term, sustainable growth and shared value. We supply our customers with high quality, traceable, and assured food products, with high standards of technical excellence and expertise.

Chairman's introduction

Strategic progress

We have continued to make good progress growing across international markets. We successfully opened our multi-protein facility in New Zealand and there has been continued growth in protein diversification into plant-based, seafood and convenience foods.

The acquisition of Fairfax Meadow further diversifies the business into the UK food service market. We were also able to welcome Dalco fully into the Hilton Group through the purchase of the remaining shares, thereby strengthening our vegan and vegetarian proposition. Our automation, engineering and services arm has developed through the agreement for a joint venture with Agito Group, an Australian automation and technology solutions business, which brings together excellence in automation and food supply chain expertise. We acquired Foppen, a specialist smoked salmon business, with facilities in the Netherlands and Greece, which enhances our existing fish portfolio and is an entry point for us into the North American retail market. We financed the acquisition via an equity raise, and completed post the year end.

We continue to successfully execute our strategy to grow and diversify and we continue to explore opportunities to develop our cross-category business in both domestic and overseas markets as well as applying our state-of-the-art skills and experience to deliver value to our customers.

Group performance

In 2021 we again increased our volumes maintaining a trend of continuous growth achieved in every year since Hilton's flotation in 2007. There was strong growth in adjusted profit and earnings per share despite Covid related costs although IFRS metrics were lower due to exceptional items. We also continued to invest in people and infrastructure to support future growth across the Group. There was an extensive fire at our Belgium facility but we ensured continued supply to our customer and plan to restore our production capability. Our response during the year demonstrates our ability to thrive in the face of these tough challenges.

Hilton generated strong operating cash flows during 2021 with, as expected, further significant investment in our facilities to increase capacity, improve operational efficiency and offer innovative solutions to our retailer partners. Hilton remains financially strong with significant cash balances, undrawn committed bank facilities and operating well within our banking covenants. In January 2022 we successfully renewed our bank facilities for a further five years.

Dividend policy

The Group has maintained a progressive dividend policy since flotation. The Board is satisfied that the Group has adequate headroom under its existing facilities and that it is appropriate to continue to operate this dividend policy. With the proposed final dividend of 21.5p per ordinary share, total dividends in respect of 2021 will be 29.7p per ordinary share, an increase of 14.2% compared to last year.

Our Board, purpose and governance

The Hilton Board is responsible for the long-term success of the Group and establishing its purpose, values and strategy aligned with its desired culture. Our purpose is to create efficiency and flexibility in the food supply chain whilst maintaining high quality through innovative and sustainable food manufacturing and supply chain solutions with the ambition to be the first choice partner for food retailers seeking excellence, insight and growth.

 

To achieve this the Board has an appropriate mix of skills, depth and diversity and a range of practical business experience, which is available to support and guide our management teams across a wide range of countries as well as having in place succession planning and maintaining a talent pipeline. We remain committed to achieving good governance balanced against our desire to preserve an agile and entrepreneurial approach. I would like to thank my colleagues on the Board for their support, counsel and expertise during the year. There are some Board changes for 2022. Patricia Dimond joined the Board and John Worby will step down at the AGM after six years following which Patricia will become Audit Committee chair and Angus Porter will become the Senior Independent Director. We wish John well and thank him for his service. Nigel Majewski also indicated his desire to step down from the Board at the AGM but will continue in a reduced capacity as director of investor relations and strategic development. It is planned that the current Group Financial Controller, Matt Osborne, will be appointed to succeed him as Chief Financial Officer. I am delighted that Matt will become Hilton's new CFO. He has impressed the Board and the wider management team during his time as Group Financial Controller, and he represents the ideal candidate to take over from Nigel Majewski. I would like to thank Nigel for his significant contribution to Hilton's successful journey over the past 15 years. He was a key part of the Group's successful flotation and he has helped oversee Hilton's sustained growth since then.

The Board takes its responsibilities very seriously to promote the success of the Company for the benefit of its stakeholders as a whole. We take the interests of our workforce and other stakeholders fully into account in Board discussions and decision making. Details of the Group's policies and procedures that have been implemented to enhance stakeholder and workforce engagement, which explain how these interests have influenced our decisions, are set out in the governance section of our Annual report.

Sustainability

The vulnerabilities of our food system are becoming ever more apparent highlighting the interdependencies between business, climate and society. We are at a critical juncture in the future of our planet with last year's IPCC report warning of increasingly extreme heatwaves, droughts and flooding, and a key temperature limit being broken in just over a decade. Continuing to perform as a prosperous and resilient business means we must also drive meaningful change for our planet. We recognise that business has a crucial role in translating the COP26 Glasgow Climate Pact commitments into rapid action. That's why we are strengthening our commitment to the Science Based Targets Initiative to achieve a 1.5C trajectory, marking our ambition towards a net negative future.

Outlook and current trading

Against the backdrop of a more challenging environment, with global uncertainties impacting supply chains and inflation, the Hilton Board is confident of making further progress in 2022. We continue to explore opportunities with existing and new customers for further expansion in our domestic and overseas markets.

Our short and medium term growth prospects are underpinned by the Foppen, Dalco and Fairfax Meadow acquisitions as well as further opportunities arising across our markets by the development of our cross-category business and the application of our supply chain management expertise.

Annual General Meeting

This year's AGM will be held at Hilton's offices at 2-8 The Interchange, Latham Road, Huntingdon, Cambridgeshire PE29 6YE in a hybrid format on 24 May 2022 at noon. Please refer to our website at www.hiltonfoodgroupplc.com/en/investors/shareholder-meeting-documents/ for further guidance.

Robert Watson OBE

Chairman

5 April 2022

Chief Executive's summary

Strategic objectives

Our strategy continues to be to support our customers' brands and their development in local markets, thereby achieving long-term sustainable customer and shareholder value through:

· Growing volumes and extending product ranges supplied and services provided to its existing customers;

· Optimising use of assets and investing in new technology to deliver competitive advantage to our customers;

· Maintaining a vigilant focus on food safety and integrity and reducing unit costs, while improving product quality and service provision; and

· Entering new territories and markets either with new customers or in partnership with our existing customers.

This approach combined with a strong reputation, well-invested modern facilities and a robust balance sheet has generated growth over many years. We will continue to pursue both geographical expansion and range extension towards our goal of becoming the protein partner of choice, 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 supporting our customers and the successful development of their brands. We have successfully expanded our product range into new proteins and categories such as seafood, vegetarian, sous vide, food service and fresh convenience foods.

Business model

The Hilton business model is well proven and sustainable, whilst being relatively simple and straightforward. We build and operate large scale, extensively automated and robotised food processing, packing and logistics facilities for major international retailers largely on a dedicated basis. Through economies of scale we are able to secure significant efficiency savings for our customers whilst retaining a competitive margin. Our business is based on a total partnership approach with customers and suppliers forged over many years. The wide geographical spread of the Group's operations is a significant strength of our business model.

In 2021 we operated facilities in eight European countries and four facilities in Australasia, each run by a local management team enhanced by specialist central leadership, expertise, advice and support. A Portuguese facility is operated by a joint venture company in which we share the profits. Products from our facilities are sold in fourteen European countries, Australia and New Zealand.

Our businesses operate under the terms of long-term supply agreements with our retailer partners, either on a cost plus, packing rate or volume-based reward basis. These contractual arrangements, combined with our customer dedication, serve to maximise achievable volume throughput whilst minimising unit packing costs thereby delivering value to our customers.

Under the long-term supply 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 food 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 designed to align our objectives with those of our customers.

Raw materials are sourced, in conjunction with our retail partners, from a combination of 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. 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. We consider that our application of technology delivers competitive advantage to our customers, and with ongoing focus will continue to do so in the future.

 

We seek to keep ourselves at the forefront of the food packing industry, including becoming more sustainable and environmentally friendly, which helps ensure our continued competitiveness. We constantly look to drive 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. We invest continuously across all areas of our business, including raw materials sourcing, packaging materials design, increased processing efficiency and storage solutions and updating our IT infrastructure. Group capital expenditure over the last five years totalled £364m.

We are a committed and trusted 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 food supply chain management. Our customer base comprises high quality 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 food 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 we can put forward flexible solutions, together with continuing increases in efficiency and cost competitiveness. This flexible approach and understanding of our local markets remains one of our core strengths.

As well as our ability to provide excellent execution locally, we also have at our disposal a wide and deep expertise on a number of areas of specialism, such as engineering, new product development, food related IT applications, category management support, logistics and market intelligence. We are able to apply these skills to a number of markets to support our customers in a cost-effective way.

Business development

The Group's expansion is based on its established and proven track record, international reputation and experience and the recognised success of the close partnerships we have forged and maintained with successful retail partners over many years. Hilton's business model has proved successful in Europe and Australasia supplemented by targeted acquisitions. We have demonstrated that this business model is capable of being successfully applied to both new proteins and transferred to new countries, adapted with our local customers to meet their specific requirements.

2021Performance overview

2021 saw continued year-on-year sales and volume growth driven primarily by expansion including from a new facility in New Zealand which opened during the year as well as continued growth in Australia. We delivered growth in our core meat business, innovation, and new ventures despite continuing Covid challenges demonstrating our resilience and flexibility to changing customer demands through the pandemic. There was expansion in added value poultry and innovation in seasonal range development and we saw double digit growth in fresh convenience foods. There was a strong performance in the seafood category despite challenging market conditions and we grew our vegan and vegetarian business through innovation and partnerships with global brands and retailers. Our consumer-led innovation resulted in over 700 new product launches during the year. The Foods Connected joint venture business continues to grow, providing end-to-end supply chain management services and further opportunities for category diversification. During the year we experienced an extensive fire at our Belgium facility and it was pleasing to see a rapid response to ensure continued supply to our customer with plans to restore our production capability under way.

Overall volume increased by 7.0% on a comparable 52 week basis to 492,588 tonnes (2020: 469,110 tonnes) delivering sustained volume growth across all protein categories with 2-year compound annual growth in meat & seafood of 14.3%, vegan & vegetarian 26.4% and added value easier meals 36.0%. In 2021 over 75% of the Group's volumes were produced in countries outside the UK. Adjusted operating profit increased by 12.7% on a comparable 52 week constant currency basis although the overall operating margin decreased to 2.2% (2020: 2.4%) reflecting the Australia post-JV transition arrangements and higher raw material prices. The margin per kg increased to 14.9p (2020: 14.3p) with progress made in added value and convenience foods and from reduced central costs. Our customer service level remains best in class at 96.4% (2020: 95.4%) reflecting an outstanding performance during the challenging period as the economy emerges from Covid.

 

The wide geographical spread of the Group increases its resilience by minimising its reliance on any one individual economy. Hilton's results are reported in Sterling and are therefore sensitive to changes in the value of Sterling compared to the range of overseas currencies in which the Group trades. During 2021 the impact of average exchange rates on our results compared with 2020 was marginal.

Sustainability

We understand the importance of our role in the future of a sustainable food system that protects and restores our planet's resources and enhances the lives of the people and animals that produce it. This year has strengthened our dedication to being a leader in sustainable business to address the concerns that matter most to our stakeholders to secure a better future for all. Sustainability is at the heart of how we do business and this year we are pleased to introduce our new 2025 sustainable protein plan with new robust targets, built around improved transparency and action re-focused to three pillars: people, planet and product. We are aligning our business to deliver long-term benefits to both people and planet, using our scale and reach to drive transformative change.

In 2021 our Science Based Targets were approved and we signed the business ambition to 1.5°C committing us to net zero before 2050. 100% of the paper and board we use comes from certified forests and 76% of our meat trays are made from 100% recycled PET. 98% of our UK seafood was sourced from Marine Stewardship Council certified fisheries and we signed the EU Code of Conduct on Responsible Food Business and Marketing Practices during the year.

Segment performance

Europe

Adjusted operating profit of £61.8m (2020: £61.4m*) on turnover of £1,987.4m (2020: £1,952.1m*)

This operating segment covers the Group's businesses and joint ventures in the UK, Ireland, Holland, Belgium, Sweden, Denmark, Portugal and Central Europe. Our products are sold in 14 countries across Europe. During the year we purchased the remaining shares in the Dalco business and additionally acquired Fairfax Meadow, a UK-based business in the UK food service sector. Our Belgium facility suffered an extensive fire in June 2021. We quickly implemented our contingency plan to ensure continued local supply to our customers and we are working hard to restore our production capability while progressing an insurance claim. At SV Cuisine we have moved sous vide production to Huntingdon to reduce cost and provide additional capacity in a growing segment and we agreed early settlement of the acquisition deferred consideration.

Volumes were 2.0% lower on a 52 week basis following the Covid lockdown boost in the corresponding 2020 period. Over a two year period volumes grew at an average 3.1% per year. Sales on a 52 week constant currency basis grew by 3.1% and operating profit by 2.3% despite the lower volume. Operating margins were unchanged at 3.1% (2020: 3.1%) and operating profit margin per kg increased to 18.5p (2020: 18.0p).

Australasia

Adjusted operating profit of £22.4m (2020: £16.9m*) on turnover of £1,314.6m (2020: £769.6m*)

In Australia the Group previously operated a joint venture with Woolworth earning service fees based on retail packed meat produced at plants in Bunbury, Western Australia and Melbourne, Victoria. In July 2020 these plants transitioned to Hilton's ownership through the purchase of the assets relating to the joint venture. A new Hilton facility in Brisbane, Queensland opened in 2019 and a further new facility in New Zealand opened in July 2021 to supply beef, lamb, pork, chicken, seafood and added-value products.

Volumes for the year 52 week basis, which in the first half of 2020 included 50% of the JV activities, increased by 32.8% through the new facility in New Zealand and the annualisation of the higher volume growth at the Brisbane facility. Constant currency sales on a 52 week basis, which in the first half of 2020 excluded the JV activities, increased by 68.0% which is attributable to the new facility in New Zealand and also the recognition of revenue from the two Australian joint venture facilities following their transition to Hilton ownership. Operating profit increased to £22.4m (2020: £16.9*m) although the operating profit margin per kg was steady at 14.1p (2020: 14.2p).

* on a comparable 52 week basis

Resourcing for growth: culture and people

Our people are at the heart of our success and they have risen tremendously to every opportunity and challenge presented during 2021. In partnership with our customers and against the backdrop of the Covid-19 pandemic our teams have dedicated themselves to feeding our nations' families. At the same time, they have ensured the delivery of our growth agenda through organic growth into new markets and the acquisition of new businesses that compliment and broaden our offering. 

Our teams across the countries we operate in, have worked tirelessly to keep our people safe. We have continually reviewed our policies and procedures through the changing pandemic. We have ensured investment in our facilities, systems and equipment and we have fully engaged our people as we have adjusted our ways of working. I am proud of how we always work as one team sharing best practice across our international operating companies and introducing innovative approaches. 

I am delighted that a record number of colleagues completed our annual engagement survey. We are committed to work safely and with regard to the well-being of our colleagues and this year we added a number of health and safety related questions to our survey. Our surveys provide invaluable feedback on which our operating companies can build plans that continuously improve employee satisfaction. 

We increased the scope of our leadership development programmes with our first emerging leaders programme and overcame the challenges of the pandemic in running this successful international programme virtually. We have also continued to provide all our teams with the training they need to perform their roles safely and effectively.

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 bring huge benefits to our business and each other. This year we became a strategic sponsor of Meat Business Women the global professional networking movement for progressive women working in the meat sector. We also launched our own internal women's network, an inclusive group engaging and enabling those who identify as women in Hilton Food Group and the food sector through support, development and action. 

Our recruitment policies and practices are guided by local legislation in the countries in which we operate. In the UK we give full and fair consideration to candidates with disabilities. We utilise occupational health expertise to assess new recruits' needs and make any required adjustments to the workplace and to provide ongoing support. We also adapt training to meet the needs of disabled employees. In addition, we have established a wellbeing programme which includes a network of mental health first aiders and on-site mental health and wellbeing clinics in partnership with our professional occupational health providers.

The Group currently employs over 6,000 colleagues across Europe and Australasia. We work as "one team" with local empowered leadership teams dedicated to the needs of our customers and their consumers. These teams are equipped with excellent local consumer and market insight. They also provide flexible and rapid support which has been a key strength in these pandemic conditions. Our local teams are supported by our Group capability which delivers specialist expertise and support, enables the sharing of best practice and business growth. 

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 them all for both for their dedication and resilience during 2021 and their continuing commitment to the Group's ongoing growth and development. In addition, I would like to take this opportunity to recognise the significant contribution made by Hilton's CFO Nigel Majewski over the past 15 years. As he decides to step back from heading up the finance function, I would like to thank him for his instrumental role in having helped drive forwards the Group's continued growth, both financially and operationally. I look forward to both welcoming Matt Osborne as our new CFO, and working with Nigel in his new role as director of investor relations and strategic development.

 

Past and future trends

Over recent decades major retailers have progressively rationalised their supply base through large scale, centralised packing solutions capable of producing private label packed fresh food products. This achieves lower costs with consistent high food safety, food integrity, traceability and quality standards allowing supermarket groups to focus on their core retail business whilst addressing consumers' continuing requirement for quality and value. This trend towards increased use of centralised packing solutions is likely to continue, albeit at different speeds across the world, representing potential future geographical expansion opportunities for Hilton.

Consumer buying patterns are evolving with more seafood and vegetarian proteins being eaten. Through Hilton's diversification into these proteins we are well placed to grow our business.

Philip Heffer

Chief Executive Officer

5 April 2022

 

Performance and financial review

Summary of Group performance

This performance and financial review covers the main highlights of the Group's financial performance and position in 2021. Hilton's overall financial performance saw continued strong growth in volumes, sales, profitability and basic earnings per share on an adjusted basis. Cash flow generation was strong, supporting our ongoing significant investment in facilities.

Basis of preparation

The Group is presenting its results for the 52 week period ended 2 January 2022, with comparative information for the 53 week period ended 3 January 2021. The financial statements of the Group are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and UK adopted International Accounting Standards.

Hilton uses Alternative Performance Measures (APMs) to monitor the underlying performance of the Group. Management considers that APMs better reflect business performance and provide useful information in line with how management monitor and manage the business day-to-day. Unless otherwise stated financial metrics in the Financial highlights, Chairman's introduction, Chief Executive's summary and this Performance and financial review refer to the adjusted results.

2021 Financial performance

Volume and revenue

Volumes grew by 5.0% (7.0% on a 52 week basis) in the year driven by growth in Australasia including the new facility in New Zealand. Additional details of volume growth by business segment are set out in the Chief Executive's summary. Revenue increased 19.0% and by 21.6% on a 52 week constant currency basis representing the volume growth and also the recognition of revenue from the two Australian joint venture facilities following their transition to Hilton ownership.

Operating profit and margin

Adjusted operating profit of £73.6m (2020: £67.0m) was 9.8% higher than last year and 12.7% higher on a 52 week constant currency basis driven predominantly by expansion in Australasia. IFRS operating profit was £63.4m (2020: £66.9m) after charging £7.1m in exceptional costs (2020: £nil). The operating profit margin in 2021 declined to 2.2% (2020: 2.4%) mainly due to the recognition of revenue from the two Australian joint venture facilities following their transition to Hilton ownership and higher Australian raw material prices. The operating profit per kilogram of packed food sold increased to 14.9p (2020: 14.3p) reversing the trend of recent years.

Net finance costs

Net finance costs excluding exceptional items and lease interest increased to £6.4m (2020: £5.9m) reflecting higher borrowings that financed our expansion programme. Interest cover in 2021 was unchanged at 11 times (2020: 11 times). IFRS net finance costs were £16.0m (2020: £12.8m).

Taxation

The taxation charge for the period was £14.5m (2020: £13.5m). The effective tax rate was 21.6% (2020: 22.0%). The IFRS taxation charge was £8.1m (2020: £12.0m) with an effective tax rate of 17.1% (2020: 22.2%).

Net income

Net income, representing profit for the year attributable to owners of the parent of £50.5m (2020: £45.3m) was 11.4% higher than last year and 14.5% higher on a 52 week constant currency basis. IFRS net income was £37.1m (2020: £39.7m).

 

Earnings per share

Basic earnings per share 61.3p (2020: 55.4p) was 10.6% higher than last year and 13.8% on a 52 week constant currency basis. IFRS basic earnings per share were 45.0p (2020: 48.6p). Diluted earnings per share were 44.5p (2020: 47.9p).

Earnings before interest, taxation, depreciation and amortisation (EBITDA)

Adjusted EBITDA, which is used by the Group as an indicator of cash generation, increased by 12.7% to £119.5m (2020: £106.0m) reflecting the growth in profitability following significant investment and by 15.8% on a 52 week constant currency basis. IFRS EBITDA was £139.0m (2020: £126.5m).

Free cash flow and net debt position

Operating cash flow was strong in 2021 with cash flows from operating activities of £121.3m (2020: £120.8m). IFRS free cash outflow after capital expenditure of £57.4m and acquisitions £41.6m but before dividends and financing was £11.7m (2020: inflow £0.6m). During the year £75m was raised through issuing equity.

The Group closing net bank debt comprising borrowings less cash and cash equivalents excluding lease liabilities, was £84.6m (2020: £122.2m) reflecting bank borrowings of £224.7m net of cash balances of £140.1m. Net debt including lease liabilities was £328.0m (2020: £367.4m).

At the end of 2021 the Group had undrawn committed bank facilities under its syndicated banking facilities of £96.8m (2020: £51.5m). These banking facilities are subject to covenants comprising minimum tangible net worth, net bank debt to EBITDA and interest cover. Headroom under these covenants at the end of the year was at least 65% for all these metrics. Existing bank facilities were due to expire in October 2022 and consequently all borrowings at the end of the year were classed as current. Since the end of the year the Group renewed its banking facilities with a £424m five year revolving credit and term loan facility agreed with a syndicate of lenders.

The resilience of the Group has been assessed by applying significant downside sensitivities to the Group's cash flow projections. Allowing for these sensitivities and potential mitigating actions the Board is satisfied that the Group has adequate headroom under its existing committed facilities and will be able to continue to operate well within its banking covenants.

Dividends

The Group has maintained a progressive dividend policy since flotation. The Board is satisfied that, given the Group has adequate headroom under its existing facilities, it is appropriate to continue to operate this dividend policy and has therefore recommended a final dividend of 21.5p per ordinary share in respect of 2021. This, together with the interim dividend of 8.2p per ordinary share paid in December 2021, represents a 14.2% increase in the full year dividend, as compared with last year. The final dividend, if approved by shareholders, will be paid on 1 July 2022 to shareholders on the register on 3 June 2022 and the shares will be ex dividend on 2 June 2022.

 

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:

	2021 (52 weeks)	2020 (53 weeks)	Definition, method of calculation and analysis
Financial KPIs
Revenue growth (%)	19.0%	52.9%	Year on year revenue growth expressed as a percentage. The 2021 increase mainly reflected volume growth and the recognition of revenue following the transition of the two Australian JV facilities to Hilton ownership and the new facility in New Zealand.
Adjusted operating profit margin (%)	2.2%	2.4%	Adjusted operating profit expressed as a percentage of turnover. The operating profit margin % in 2021 was lower due mainly to the recognition of revenue following the transition of the two Australian JV facilities to Hilton ownership and higher Australian raw material prices.
Adjusted operating profit margin (pence per kg)	14.9	14.3	Adjusted operating profit per kilogram processed and sold in pence. The increase in 2021 compared with 2020 reflects progress made in added value and convenience foods and from reduced central costs.
Adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) (£m)	119.5	106.0	Adjusted operating profit before depreciation and amortisation. The increase reflected the growth in profitability following significant investments.
Free cash flow (£m)	(11.7)	0.6	IFRS cash (out)/inflow before minorities, dividends and financing. Operating cash flow generation in 2021 increased in line with EBITDA with lower capex spend but impacted by costs of acquisitions of £41.6m during the year.
Net debt / EBITDA ratio (%)	70.9%	115.3%	Year end net bank debt as a percentage of adjusted EBITDA. The decrease is due to the equity raise of £75m and continued strong operating cash generation.
Non-financial KPIs
Growth in sales volumes (%)	5.0%	26.2%	Year on year volume growth. Volume growth was due primarily to opening the new facility in New Zealand in addition to continued growth in Australia.
Employee and labour agency costs (pence per kg)	60.9	57.2	Labour cost of producing food products as a proportion of volume. The increase reflects the Australia JV transition.
Customer service level (%)	96.4%	95.4%	Packs of product delivered as a % of the orders placed. The customer service level remains best in class.

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

 

Going concern statement

The Directors have performed a detailed assessment, including a review of the Group's budget for the 2022 financial year and its longer term plans, including consideration of the principal risks faced by the Group. The resilience of the Group has been assessed by applying significant downside sensitivities to the Group's cash flow projections. Allowing for these sensitivities and potential mitigating actions the Board is satisfied that the Group is able to continue to operate well within its banking covenants and has adequate headroom under its new committed facilities which do not expire until 2027. 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 as detailed in the financial statements and the principal banking facilities, which support the Group's existing and contracted new business, are committed. The Group is in full compliance with all its banking covenants and based on forecasts and sensitised projections is expected to remain in compliance. 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. Since the end of the year the Group renewed its banking facilities with a £424m five year revolving credit and term loan facility.

The Group's internal budgets and forward forecasts, which incorporate all reasonably foreseeable changes in trading performance, are regularly reviewed 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 31 of the 2018 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 2024. 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, including those in relation to Covid-19, 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 food raw material, packaging and other costs, together with the anticipated level of capital investment required to maintain our facilities at state-of-the-art levels.

Cautionary statement

This Strategic report contains forward-looking statements. Such statements are based on current expectations and assumptions and are subject to risk factors and uncertainties which we believe are reasonable. Accordingly Hilton's actual future results may differ materially from the results expressed or implied in these forward-looking statements. We do not undertake to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Nigel Majewski

Chief Financial Officer

5 April 2022

 

Risk management and principal risks

Risks and risk management

In accordance with provision 28 of the 2018 UK Corporate Governance Code the Directors confirm that they have carried out a robust assessment of the emerging and principal risks facing the Group that might impede the achievement of its strategic and operational objectives as well as affect performance or cash position. As a leading food processor in a fast moving environment it is critical that the Group identifies, assesses and prioritises its risks. The result of this assessment is a statement of the principal risks facing the Group together with a description of the main controls and mitigations that reduce the effect of those risks were they to crystallise. 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 a 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

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 outlined below.

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 combining the set of business unit risk registers supplemented by formal interviews with senior executives and Directors of the Group. The Group has a Risk Management Committee which reports regularly to the Audit Committee and Board on the substance of the risk assessment and any changes to the nature of those risks or changes to the likelihood or materiality of the risk in question. The Risk Management Committee also considers the risk appetite and reviews progress in control development and implementation of those key controls related to principal risks listed in this section of the report. The Group's internal audit function derives its risk based assurance plan on the controls after considering the risk assessment and reports its findings to the Audit Committee. The Risk Management Committee also oversees the scenario based business continuity management exercises.

Not all the risks listed 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. These risks, 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.

Risk management during 2021

Brexit

Hilton's exposure is generally mitigated through our predominantly local sourcing and operating model. Impacts are likely to continue through 2022 as the UK and EU regulatory and trade environments evolve. The Group is ensuring compliance through ongoing engagement with the appropriate authorities and regulatory forums. Our dedicated Brexit team continues to monitor policy changes and amend processes and operations as required.

The structure of the UK workforce is changing in response to both reduced access to EU labour markets and Covid-related employment trends. Our recruitment and retention strategies are evolving in line with this changing landscape and our continued focus on technology and automation further reduce risk exposure in this area.

Principal risks

The most significant business risks that the Group faces, 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	Its potential impact	Risk mitigation measures and strategies adopted
Risk 1 The Group strategy focuses on a small number of customers who can exercise significant buying power and influence when it comes to contractual renewal terms at 5 to 15 year intervals.  No movement	The Group has a relatively narrow, but expanding, customer base, with sales to subsidiary or associated companies of the Tesco, Ahold and Woolworths groups still comprising the larger part of Hilton's revenue. The larger retail chains have over many years increased their market share of proteinproducts 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.	The Group is progressively widening its customer base and has maintained a 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.
Risk 2 The Group's growth potential may be affected by the success of its customers and the growth of their packed food sales.  No movement	The Group's products predominantly carry the brand labels of the customer to whom packed food is supplied and it is accordingly dependent on its customers' success in maintaining or improving consumer perception of their own brand names and packed food offerings.	The Group plays a very proactive 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.
Risk 3 The progress of the Group's business is affected by the macroeconomic environment and levels of consumer spending which is influenced by publicity including reports concerning the risks of consuming certain foods.  No movement	Changing consumer purchasing habits may mean little or no overall growth in meat consumption. Consumer demand may drop due to food scares and economic conditions. No business is immune to difficult economic climates and the consequent pressure on levels of consumer spending.	With a sound business model including successful diversification across different proteins, broadening product ranges with our 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.
Risk 4 As Hilton continues to grow there is more reliance on key personnel and their ability to manage growth, change, integration and compliance across new legislative and regulatory environments. This risk increases as the Group continues to expand with new customers and into new territories either organically or through acquisition with potentially greater reliance on stretched skilled resource and execution of simultaneous growth projects.  Increased	The Group may struggle to meet key project objectives and fail to adhere to regulatory and legislative requirements, which in turn detracts from our performance delivery for our customers.	The Group carefully manages its skilled resources including succession planning and maintaining a talent pipeline. The Group is evolving its people capability balanced with an appropriate management structure within the overall organisation. Hilton continues to invest in on-the-job training and career development, whilst recruiting high quality new employees, as required, to facilitate the Group's ongoing growth and in deploying resource to support the growth projects appropriately. Appointment of additional key resources and alignment of structures have supported the enhancement of project management control and oversight. Control systems embedded in project management enable the risks of growth to be appropriately highlighted and managed. To underscore our efforts, we have active relationships with strong industry experts across all areas of business growth.
Risk 5 The Group's business strength is affected by its ability to maintain a wide and flexible global food supply base operating at standards that can continuously achieve the specifications set by Hilton and its customers.  No movement	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 food 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 and therefore potentially impact our ability to meet agreed customer service levels.	The Group maintains a flexible global food 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.
Risk 6 Contamination within the supply chain including outbreaks of disease and feed contaminants affecting livestock and fish.  No movement	This will potentially affect the Group's ability to procure sufficient quantities of safe raw material.	The Group sources its food 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. Within our factories, Global Food Safety Initiative (GFSI) benchmarked food safety standards and our own factory standard assessments drive the enhancement of the processes and controls that are necessary to ensure that the risks of contaminants throughout the processing, packing and distribution stages are mitigated and traceable should a risk ever materialise.
Risk 7 Significant incidents such as fire, flood, pandemic or interruption of supply of key utilities could impact the Group's business continuity. The current Covid-19 pandemic continues to present challenges across the globe.  No movement	Such incidents could result in systems or manufacturing process stoppages with consequent disruption and loss of efficiency which could impact the Group's sales.	The Group has robust business continuity plans in place including sister site support protocols enabling other sites to step in with manufacturing and distribution of key product lines where necessary. Continuity management systems and plans are suitably maintained and adequately tested including building risk assessments and emergency power solutions. There are appropriate insurance arrangements in place to mitigate against any associated financial loss. The new Belgium facility suffered an extensive fire in June 2021. We quickly implemented our contingency plan to ensure continued local supply to our customers and plan to restore our production capability. The Covid-19 mitigation measures that we put in place were effective in navigating throughout the pandemic and are well placed.
Risk 8 The Group's IT systems could be subject to cyber-attacks, including ransomware and fraudulent external email activity. These kinds of attacks are generally increasing in frequency and sophistication.  Increased	The Group's operations are underpinned by a variety of IT systems. Loss or disruption to those IT systems or extended times to recover data or functionality could impact the Group's ability to effectively operate its facilities and affect its sales and reputation.	The Group has a robust IT control framework, minimum operating standards, including working towards National Institute of Technology requirements, all of which are tested frequently by internal staff and by specialist external bodies. This framework is established as the key control to mitigate cyber risk and is applied consistently throughout the Group. The increased prominence of IT risk is mitigated by investments in IT infrastructure and now forms a regular part of the Group Risk Management Committee agenda and presentations to the Board. In accordance with Group strategy IT risk is considered when looking at new ventures and control measures implemented in new sites follow the Group common standards. There is internal training and resources available with emphasis on prevention, user awareness and recovery. Increasingly, IT forms part of site business continuity exercises which test and help develop the capacity to respond to possible crises or incidents. The technical infrastructure to prevent attacks, safeguard data and the resilience to recover are continuously developed including yearly assessments to meet emerging threats. IT systems including financial and banking systems are configured to prevent fraudulent payments. There are monthly IT security reviews to ensure compliance with expected levels of applications updates, and of server and data centres together with yearly penetration testing.
Risk 9 A significant breach of health & safety legislation as complexity increases in managing sites across different product groups and geographies.  No movement	Such breach in health & safety legislation could lead to reputational damage and regulatory penalties, including restrictions on operations, fines or personal litigation claims.	The Group has established robust health & safety processes and procedures across its operations, including a Group oversight function which provides key guidance and support necessary to strengthen monitoring, best practice and compliance. The Group has also rolled out an enhanced standardised safety framework. Health and safety performance is reviewed regularly by the Board.
Risk 10 The Group's business and supply chain is affected by climate change risks comprising both physical and transition risks. Physical risks include long-term rises in temperature and sea levels as well as changes to the frequency and severity of extreme weather events. Transition risks include policy changes, reputational impacts, and shifts in market preferences and technology.  Increased	Potential physical impacts from climate change could include a higher incidence of extreme weather events such as flooding, drought, and forest fires that could disrupt our supply chains and potentially impact production capabilities, increase costs and add complexity. Action taken by societies could reduce the severity of these impacts. Governmental efforts to mitigate climate change may lead to policy and regulatory changes as well as shifts in consumer demand. The potential transitional impacts include additional costs of low greenhouse gas emission farming systems, and the potential of carbon price regulation aimed at shifting consumers to lower carbon foods, which may reduce the profitability of some of our products. Additionally there is increased stakeholder focus on climate change issues. Our reputation could be impacted if we are not active in reducing the climate impacts of our operations and supply chains, resulting in lower demand for our products.	We continue to develop our approach to climate change risk mitigation. We have committed to set a science-based target through the Science Based Targets initiative and signed the Business Ambition for 1.5°C pledge to decarbonise our own operations and supply chains. We have set energy and water efficiency targets for our sites and continue to engage in global collaborative action for decarbonisation of our key raw materials. We are directing our efforts towards a net-zero carbon footprint before 2050. Shifts in consumer demand are an opportunity for growth in our portfolio of plant based and seafood products. Additionally, we are ensuring we have the flexibility to adapt our supply chains over time to mitigate physical disruption. We are conducting an assessment of the key physical and transition risks impacting our business in line with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. We are also, for the first time this year, reporting on our initial assessment of climate risks and opportunities in line with the TCFD framework.

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 Company financial statements, which have been prepared in accordance with UK-adopted international accounting standards, give a true and fair view of the assets, liabilities and financial position of the Group and Company and profit of the Group; 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 that it faces.

This responsibility statement was approved by the Board of Directors on 5 April 2022 and is signed on its behalf by:

Directors

R Watson OBE   Chairman

N Majewski  Chief Financial Officer

Consolidated income statement

		2021	2020
		52 weeks	53 weeks
	Notes	£'000	£'000
Continuing operations
Revenue	3	3,301,970	2,774,036
Cost of sales		(2,935,892)	(2,452,093)
Gross profit		366,078	321,943
Distribution costs		(25,083)	(23,246)
Other administrative expenses		(272,438)	(236,859)
Exceptional items	4, 18	(7,050)	-
Total administrative expenses		(279,488)	(236,859)
Share of profit in joint ventures		1,925	5,029
Operating profit		63,432	66,867
Finance income	5	10	22
Other finance costs		(14,913)	(12,861)
Exceptional finance costs	4, 18	(1,131)	-
Total finance costs	5	(16,044)	(12,861)
Finance costs - net		(16,034)	(12,839)
Profit before income tax		47,398	54,028
Income tax expense	6	(11,232)	(11,988)
Exceptional tax income	4, 18	3,116	-
Total income tax expense		(8,116)	(11,988)
Profit for the period		39,282	42,040
Attributable to:
Owners of the parent		37,143	39,736
Non-controlling interests		2,139	2,304
		39,282	42,040
Earnings per share attributable to owners of the parent during the year
Basic (pence)	7	45.0	48.6
Diluted (pence)	7	44.5	47.9

Consolidated statement of comprehensive income
	2021	2020
	52 weeks	53 weeks
	£'000	£'000
Profit for the period	39,282	42,040
Other comprehensive (expense)/income
Currency translation differences	(7,090)	4,682
Other comprehensive (expense)/income for the year net of tax	(7,090)	4,682
Total comprehensive income for the year	32,192	46,722
Total comprehensive income attributable to:
Owners of the parent	30,417	44,101
Non-controlling interests	1,775	2,621
	32,192	46,722
The notes are an integral part of these consolidated financial statements.

Consolidated and Company Balance sheets

			Group	Company
		2021	2020	2021	2020
	Notes	£'000	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment	9	291,488	290,846	-	-
Intangible assets	10	105,775	70,071	-	-
Lease: right of use assets	11	222,004	235,135	-	-
Investments		5,539	12,622	247,785	157,221
Trade and other receivables		2,239	-	-	-
Deferred income tax assets		6,952	6,219	-	-
		633,997	614,893	247,785	157,221
Current assets
Inventories		156,517	116,941	-	-
Trade and other receivables		230,388	199,642	2,874	14,272
Current tax assets		5,212	-	-	-
Other financial asset		1,140	-	-	-
Cash and cash equivalents		140,170	123,816	151	190
		533,427	440,399	3,025	14,462
Total assets		1,167,424	1,055,292	250,810	171,683
Equity
Equity attributable to owners of the parent
Ordinary shares		8,893	8,194	8,893	8,194
Share premium		142,043	65,619	142,043	65,619
Own shares		(87)	-	-	-
Employee share schemes reserve		6,990	6,123	-	-
Foreign currency translation reserve		(2,106)	4,620	-	-
Retained earnings		176,449	161,607	28,850	26,851
Reverse acquisition reserve		(31,700)	(31,700)	-	-
Merger reserve		919	919	71,019	71,019
		301,401	215,382	250,805	171,683
Non-controlling interests		6,548	6,556	-	-
Total equity		307,949	221,938	250,805	171,683
Liabilities
Non-current liabilities
Borrowings	13	-	206,228	-	-
Lease liabilities	11	228,977	238,995	-	-
Deferred consideration		-	3,318	-	-
Deferred income tax liabilities		4,132	2,384	-	-
		233,109	450,925	-	-
Current liabilities
Borrowings	13	224,732	39,759	-	-
Lease liabilities	11	14,419	6,250	-	-
Trade and other payables		387,215	332,354	5	-
Current tax liabilities		-	4,066	-	-
		626,366	382,429	5	-
Total liabilities		859,475	833,354	5	-
Total equity and liabilities		1,167,424	1,055,292	250,810	171,683
The notes are an integral part of these consolidated financial statements.
The financial statements were approved by the Board on 5 April 2022 and were signed on its behalf by:

R. Watson  N. Majewski 

Director  Director 

Hilton Food Group plc - Registered number: 06165540

The Company has taken advantage of the exemption in Section 408 Companies Act 2006 not to publish its individual income statement, statement of comprehensive income and related notes. Profit for the year dealt with in the income statement of Hilton Food Group plc amounted to £24,301,000 (2020: £21,000,000).

Consolidated and Company Statement of changes in equity

		Attributable to owners of the parent
		Share capital	Share premium	Own shares	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	£'000
Balance at 30 December 2019		8,173	64,251	-	4,139	255	140,192	(31,700)	919	186,229	5,711	191,940
Profit for the year		-	-	-	-	-	39,736	-	-	39,736	2,304	42,040
Other comprehensive income
Currency translation differences		-	-	-	-	4,365	-	-	-	4,365	317	4,682
Total comprehensive income for the year		-	-	-	-	4,365	39,736	-	-	44,101	2,621	46,722
Issue of new shares		21	1,368	-	-	-	-	-	-	1,389	-	1,389
Adjustment in respect of employee share schemes		-	-	-	2,120	-	-	-	-	2,120	-	2,120
Tax on employee share schemes		-	-	-	(136)	-	-	-	-	(136)	-	(136)
Dividends paid	8	-	-	-	-	-	(18,321)	-	-	(18,321)	(1,776)	(20,097)
Total transactions with owners		21	1,368	-	1,984	-	(18,321)	-	-	(14,948)	(1,776)	(16,724)
Balance at 3 January 2021		8,194	65,619	-	6,123	4,620	161,607	(31,700)	919	215,382	6,556	221,938
Profit for the year		-	-	-	-	-	37,143	-	-	37,143	2,139	39,282
Other comprehensive expense
Currency translation differences		-	-	-	-	(6,726)	-	-	-	(6,726)	(364)	(7,090)
Total comprehensive income for the year		-	-	-	-	(6,726)	37,143	-	-	30,417	1,775	32,192
Issue of new shares		699	76,424	-	-	-	-	-	-	77,123	-	77,123
Purchase of own shares		-	-	(2,278)	-	-	-	-	-	(2,278)	-	(2,278)
Adjustment in respect of employee share schemes		-	-	-	2,725	-	-	-	-	2,725	-	2,725
Settlement of employee share scheme		-	-	2,191	(2,191)	-	-	-	-	-	-	-
Tax on employee share schemes		-	-	-	333	-	-	-	-	333	-	333
Dividends paid	8	-	-	-	-	-	(22,301)	-	-	(22,301)	(1,783)	(24,084)
Total transactions with owners		699	76,424	(87)	867	-	(22,301)	-	-	55,602	(1,783)	53,819
Balance at 2 January 2022		8,893	142,043	(87)	6,990	(2,106)	176,449	(31,700)	919	301,401	6,548	307,949
Company
Balance at 30 December 2019		8,173	64,251	-	-	-	24,172	-	71,019	167,615
Profit for the year		-	-	-	-	-	21,000	-	-	21,000
Total comprehensive income for the year		-	-	-	-	-	21,000	-	-	21,000
Issue of new shares		21	1,368	-	-	-	-	-	-	1,389
Dividends paid	8	-	-	-	-	-	(18,321)	-	-	(18,321)
Total transactions with owners		21	1,368	-	-	-	(18,321)	-	-	(16,932)
Balance at 3 January 2021		8,194	65,619	-	-	-	26,851	-	71,019	171,683
Profit for the year		-	-	-	-	-	24,300	-	-	24,300
Total comprehensive income for the year		-	-	-	-	-	24,300	-	-	24,300
Issue of new shares		699	76,424	-	-	-	-	-	-	77,123
Dividends paid	8	-	-	-	-	-	(22,301)	-	-	(22,301)
Total transactions with owners		699	76,424	-	-	-	(22,301)	-	-	54,822
Balance at 2 January 2022		8,893	142,043	-	-	-	28,850	-	71,019	250,805

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

Consolidated and Company Cash flow statements

			Group	Company
		2021	2020	2021	2020
		52 weeks	53 weeks	52 weeks	53 weeks
	Notes	£'000	£'000	£'000	£'000
Cash flows from operating activities
Cash generated from operations	14	121,259	120,771	-	-
Interest paid		(16,044)	(12,861)	-	-
Income tax paid		(19,210)	(16,254)	-	-
Net cash generated from operating activities		86,005	91,656	-	-
Cash flows from investing activities
Acquisition of subsidiary, net of debt acquired		(39,062)	-	-	-
Other financial asset - restricted cash		(1,140)	-	-	-
Settlement of deferred consideration		(2,500)	-	-	-
Issue of inter-company loan		-	-	(77,377)	(4,000)
Purchases of property, plant and equipment		(56,251)	(92,803)	-	-
Proceeds from sale of property, plant and equipment		114	134	-	-
Purchases of intangible assets		(1,115)	(2,703)	-	-
Interest received		10	22	-	-
Dividends received		-	-	24,300	21,000
Dividends received from joint venture		2,273	4,271	-	-
Net cash (used in)/generated from investing activities		(97,671)	(91,079)	(53,077)	17,000
Cash flows from financing activities
Proceeds from borrowings		67,062	92,563	-	-
Repayments of borrowings		(79,819)	(48,908)	-	-
Payment of lease liability		(6,588)	(15,044)	-	-
Issue of ordinary shares		77,123	1,389	75,339	1,389
Purchase of own shares		(2,278)	-	-	-
Dividends paid to owners of the parent		(22,301)	(18,321)	(22,301)	(18,321)
Dividends paid to non-controlling interests		(1,783)	(1,776)	-	-
Net cash generated from/(used in) financing activities		31,416	9,903	53,038	(16,932)
Net increase/(decrease) in cash and cash equivalents		19,750	10,480	(39)	68
Cash and cash equivalents at beginning of the year		123,816	110,514	190	122
Exchange (losses)/gains on cash and cash equivalents		(3,396)	2,822	-	-
Cash and cash equivalents at end of the year		140,170	123,816	151	190
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 leading specialist international food packing business supplying major international food retailers in fourteen European countries, Australia and New Zealand. The Company's subsidiaries are listed in a note to the full financial statements.

The Company is a public company limited by shares incorporated and domiciled in the UK and registered in England. 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 52 weeks to 2 January 2022 (prior financial year 53 weeks to 3 January 2021).

This preliminary announcement was approved for issue on 5 April 2022.

2 Summary of significant accounting policies

The accounting policies are consistent with those of the annual financial statements for the year ended 3 January 2021.

Basis of preparation

The consolidated and company financial statements of Hilton Food Group plc have been prepared under the historical cost convention as modified by financial liabilities at fair value through profit or loss and in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.

The consolidated and company 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 financial information included in this preliminary announcement does not constitute statutory accounts of the Group for the years ended 2 January 2022 and 3 January 2021 but is derived from those accounts. Statutory accounts for 2020 have been delivered to the Registrar of Companies and those for 2021 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 nine operating segments: i) United Kingdom; ii) Netherlands; iii) Belgium; iv) Republic of Ireland; v) Sweden; vi) Denmark; vii) Central Europe including Poland, Czech Republic, Hungary, Slovakia, Latvia, Lithuania and Estonia; viii) Portugal; ix) Australasia and x) Central costs. The United Kingdom, Netherlands, Belgium, Republic of Ireland, Sweden, Denmark, Central Europe and Portugal have been aggregated into one reportable segment 'Europe' as they have similar economic characteristics as identified in IFRS 8. Australasia and Central costs comprise the other reportable segments.

From a product perspective the Executive Directors consider that the Group has only one identifiable product, wholesaling of food protein products including meat, seafood and vegetarian. 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:
	Europe	Australasia	Central costs		Europe	Australasia	Central costs
				2021				2020
				Total				Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Total revenue	2,040,618	1,314,602	-	3,355,220	2,044,190	784,455	-	2,828,645
Inter-co revenue	(53,250)	-	-	(53,250)	(54,609)	-	-	(54,609)
Third party revenue	1,987,368	1,314,602	-	3,301,970	1,989,581	784,455	-	2,774,036
Adjusted operating profit/(loss) segment result (see note 18)	61,788	22,370	(10,591)	73,567	62,581	17,209	(12,762)	67,028
Amortisation of acquired intangibles	(2,778)	-	-	(2,778)	(2,449)	-	-	(2,449)
Exceptional items	(6,994)	-	-	(6,994)	-	-	-	-
Impact of IFRS 16	291	(654)	-	(363)	406	1,882	-	2,288
Operating profit/(loss) segment result	52,307	21,716	(10,591)	63,432	60,538	19,091	(12,762)	66,867
Finance income	10	-	-	10	22	-	-	22
Finance costs	(2,881)	(10,017)	(3,146)	(16,044)	(3,243)	(8,140)	(1,478)	(12,861)
Income tax (expense)/credit	(7,965)	(1,761)	1,610	(8,116)	(11,165)	(2,568)	1,745	(11,988)
Profit/(loss) for the year	41,471	9,938	(12,127)	39,282	46,152	8,383	(12,495)	42,040
Depreciation and amortisation	33,039	33,604	140	66,783	32,433	25,877	91	58,401
Additions to non-current assets	29,587	27,528	662	57,777	24,459	70,733	314	95,506
Segment assets	643,157	462,556	49,547	1,155,260	568,638	453,143	27,292	1,049,073
Current income tax assets				5,212				-
Deferred income tax assets				6,952				6,219
Total assets				1,167,424				1,055,292
Segment liabilities	346,403	419,611	89,329	855,343	324,582	427,050	75,272	826,904
Current income tax liabilities				-				4,066
Deferred income tax liabilities				4,132				2,384
Total liabilities				859,475				833,354

Sales between segments are carried out at arm's length.

The Executive Directors assess the performance of each operating segment based on its operating profit before exceptional items and amortisation of acquired intangibles and also before the impact of IFRS 16 (see note 18). 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 has five principal customers (comprising groups of entities known to be under common control), Tesco, Ahold Delhaize, Coop Danmark, ICA Gruppen and Woolworths. These customers are located in the United Kingdom, Netherlands, Belgium, Republic of Ireland, Sweden, Denmark and Central Europe including Poland, Czech Republic, Hungary, Slovakia, Latvia, Lithuania and Estonia and Australasia.

 

Analysis of revenues from external customers and non-current assets are as follows:
	Revenues from external customers		Non-current assets excluding deferred tax assets
	2021	2020	2021	2020
	£'000	£'000	£'000	£'000
Analysis by geographical area
United Kingdom - country of domicile	1,122,047	1,125,955	196,857	165,564
Netherlands	298,535	301,537	34,857	7,545
Belgium	25,687	6,617	1,327	10,381
Sweden	220,065	221,886	12,814	18,060
Republic of Ireland	95,349	102,460	4,711	6,025
Denmark	116,156	122,643	16,046	18,444
Central Europe	109,529	108,483	22,297	25,164
Australasia	1,314,602	784,455	338,136	357,491
	3,301,970	2,774,036	627,045	608,674
Analysis by principal customer
Customer 1	1,156,771	1,168,179
Customer 2	327,293	330,644
Customer 3	231,492	232,022
Customer 4	113,555	117,197
Customer 5	1,314,602	784,455
Other	158,257	141,539
	3,301,970	2,774,036

4 Exceptional items
	Operating profit	Finance costs	Tax	Profit after tax
	2021	2021	2021	2021
Group	£'000	£'000	£'000	£'000
Fire in Belgium	11,661	-	(2,901)	8,760
Impact of acquisition of Dalco	(6,837)	-	-	(6,837)
Acquisition costs	2,226	1,131	(215)	3,142
Total exceptional costs	7,050	1,131	(3,116)	5,065

Fire in Belgium

In June 2021 the Group's facility in Belgium suffered an extensive fire and as a result exceptional costs totalling £11,661,000 have been recognised. The costs include the impairment of tangible fixed assets and leased assets destroyed of £6,377,000 and £2,239,000 respectively, the cost of inventory that was destroyed as a result of the fire of £1,344,000 and other related additional costs of £3,884,000, offset by a gain of £2,183,000 arising from the early settlement of related lease liabilities.

An exceptional tax credit has been of £2,901,000 has been recognised in respect of these costs.

The Group continues to work closely with its insurers to progress the related claims. The results for the period to 2 January 2022 do not include potential income that may be received in respect of these claims with the insurance proceeds therefore considered to be contingent assets; at this stage in the claims process the value of the contingent asset has yet to be determined. Legal claims have been made against the Group in connection with the fire, however at this stage the Group considers the likelihood of incurring financial liabilities as a result of them is remote.

Impact of acquisition of Dalco

On 1 October 2021 the Group acquired the remaining 50% interest in Dalco Food BV (see note 12) and the financial position and performance of the business was fully consolidated from this date. The Group's joint venture interest was effectively disposed of at this date with an exceptional gain of £6,837,000, being the difference between the carrying value and fair value of the joint venture interest, recognised.

 

Acquisition Costs

During the year the Group has recognised exceptional acquisition costs in respect legal and professional fees and other related costs of £2,226,000. A further £1,131,000 of exceptional finance costs have been recognised related to the agreement of short term acquisition bridge financing.

An exceptional tax credit of £215,000 has been recognised in respect of exceptional finance costs that are allowable for deductible for tax purposes.

5 Finance income and costs
	2021	2020
Group	£'000	£'000
Finance income
Other interest income	10	22
Finance income	10	22
Finance costs
Bank borrowings	(5,132)	(4,483)
Interest on lease liabilities	(8,536)	(6,919)
Exceptional finance costs (note 4)	(1,131)	-
Other interest expense	(1,245)	(1,459)
Finance costs	(16,044)	(12,861)
Finance costs - net	(16,034)	(12,839)

6 Income tax expense
	2021	2020
Group	£'000	£'000
Current income tax
Current tax on profits for the year	12,646	17,878
Adjustments to tax in respect of previous years	(2,322)	(273)
Total current tax	10,324	17,605
Deferred income tax
Origination and reversal of temporary differences	(3,342)	(5,721)
Adjustments to tax in respect of previous years	1,134	104
Total deferred tax	(2,208)	(5,617)
Income tax expense	8,116	11,988

Deferred tax charged directly to equity during the year in respect of employee share schemes amounted to £333,000 (2020: charge £136,000).

Factors affecting future tax charges 

The Group operates in numerous tax jurisdictions around the world and is subject to factors that may affect future tax charges including transfer pricing, tax rate changes and tax legislation changes. 

The Government made a number of budget announcements on 3 March 2021. These include confirming that the rate of corporation tax will increase to 25% from 1 April 2023. This new law was substantively enacted on 24 May 2021. Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements. 

 

The tax on the Group's profit before income tax differs (2020: differs) from the theoretical amount that would arise using the standard rate of UK Corporation Tax of 19% (2020: 19%) applied to profits of the consolidated entities as follows:

	2021	2020
	£'000	£'000
Profit before income tax	47,398	54,028
Tax calculated at the standard rate of UK Corporation Tax 19% (2020: 19%)	9,006	10,265
(Income)/expense not deductible for tax purposes	(15)	834
Joint venture received net of tax	(471)	(1,364)
Adjustments to tax in respect of previous periods	(1,188)	(169)
Profits taxed at rates other than 19% (2020: 19%)	2,746	2,501
Deferred tax on IFRS 16	(1,047)	(87)
Impact of changes in tax rates	414	-
Non-taxable gain on acquisition of JV	(1,299)	-
Other	(30)	8
Income tax expense	8,116	11,988
There is no tax impact relating to components of other comprehensive income.
Adjustments to tax in respect of prior periods have resulted from changes in assumptions in respect of deductible expenses and the application of capital allowances.

7 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.

			2021		2020
Group		Basic	Diluted	Basic	Diluted
Profit attributable to owners of the parent	(£'000)	37,143	37,143	39,736	39,736
Weighted average number of ordinary shares in issue	(thousands)	82,456	82,456	81,835	81,835
Adjustment for share options	(thousands)	-	1,098	-	1,084
Adjusted weighted average number of ordinary shares	(thousands)	82,456	83,554	81,835	82,919
Basic and diluted earnings per share	(pence)	45.0	44.5	48.6	47.9

8 Dividends
	2021	2020
Group and Company	£'000	£'000
Final dividend in respect of 2020 paid 19.0p per ordinary share (2019: 15.4p)	15,561	12,586
Interim dividend in respect of 2021 paid 8.2p per ordinary share (2020: 7.0p)	6,740	5,735
Total dividends paid	22,301	18,321

The Directors propose a final dividend of 21.5p per share payable on 1 July 2022 to shareholders who are on the register at 3 June 2022. This dividend totalling £19.1m has not been recognised as a liability in these consolidated financial statements.

9 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 2019	93,510	342,541	16,043	274	452,368
Exchange adjustments	1,250	15,655	820	(1)	17,724
Additions	2,793	49,040	3,637	110	55,580
Additions: Transfer from Right-of-Use Asset	-	37,223	-	-	37,223
Transfer to intangible assets	-	(566)	-	-	(566)
Disposals	(30)	(650)	(2)	(211)	(893)
At 3 January 2021	97,523	443,243	20,498	172	561,436
Accumulated depreciation
At 30 December 2019	25,684	187,666	12,379	77	225,806
Exchange adjustments	528	7,245	473	(1)	8,245
Charge for the year	4,168	30,609	2,483	38	37,298
Disposals	(30)	(615)	(2)	(112)	(759)
At 3 January 2021	30,350	224,905	15,333	2	270,590
Net book amount
At 30 December 2019	67,826	154,875	3,664	197	226,562
At 3 January 2021	67,173	218,338	5,165	170	290,846
Cost
At 4 January 2021	97,523	443,243	20,498	172	561,436
Exchange adjustments	(3,248)	(19,497)	(1,136)	(8)	(23,889)
Acquisition (note 12)	2,315	7,843	548	123	10,829
Additions	15,125	37,487	3,606	33	56,251
Exceptional impairment (note 4)	-	(7,049)	-	-	(7,049)
Transfer to intangible assets	430	(769)	(4,165)	3	(4,501)
Disposals	(469)	(260)	(735)	(15)	(1,479)
At 2 January 2022	111,676	460,998	18,616	308	591,598
Accumulated depreciation
At 4 January 2021	30,350	224,905	15,333	2	270,590
Exchange adjustments	(924)	(10,560)	(781)	(7)	(12,272)
Charge for the year	4,440	37,384	2,297	65	44,186
Exceptional impairment (note 4)	-	(672)	-	-	(672)
Transfer to intangible assets	-	-	(553)	-	(553)
Disposals	(87)	(192)	(878)	(12)	(1,169)
At 2 January 2022	33,779	250,865	15,418	48	300,110
Net book amount
At 2 January 2022	77,897	210,133	3,198	260	291,488

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 £13,025,000 (2020: £20,318,000).

Additions to property, plant and equipment include capitalised interest costs of £725,000 (2020: £409,000).

 

10 Intangible assets
	Computer software	Brand and customer relationships	Goodwill	Total
Group	£'000	£'000	£'000	£'000
Cost
At 30 December 2019	7,858	22,560	47,582	78,000
Exchange adjustments	41	-	-	41
Additions	2,703	-	-	2,703
Transfer from property, plant and equipment	566	-	-	566
Disposals	(188)	-	-	(188)
At 3 January 2021	10,980	22,560	47,582	81,122
Accumulated amortisation
At 30 December 2019	3,279	5,182	-	8,461
Exchange adjustments	25	-	-	25
Charge for the year	304	2,449	-	2,753
Disposals	(188)	-	-	(188)
At 3 January 2021	3,420	7,631	-	11,051
Net book amount
At 30 December 2019	4,579	17,378	47,582	69,539
At 3 January 2021	7,560	14,929	47,582	70,071
Cost
At 4 January 2021	10,980	22,560	47,582	81,122
Exchange adjustments	(411)	-	-	(411)
Acquisition (note 12)	158	12,519	21,900	34,577
Additions	1,526	-	-	1,526
Transfer from property, plant & equipment	4,501	-	-	4,501
Disposals	(3)	-	-	(3)
At 2 January 2022	16,751	35,079	69,482	121,312
Accumulated amortisation
At 4 January 2021	3,420	7,631	-	11,051
Exchange adjustments	(235)	-	-	(235)
Charge for the year	1,468	2,702	-	4,170
Transfer from property, plant & equipment	553	-	-	553
Disposals	(2)	-	-	(2)
At 2 January 2022	5,204	10,333	-	15,537
Net book amount
At 2 January 2022	11,547	24,746	69,482	105,775

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

Goodwill Impairment Testing

Goodwill includes £44,793,000 relating to the acquisition of the Seachill business (now trading as Hilton Seafood UK) in 2017 and £2,789,000 recognised in 2019 following the acquisition of SV Cuisine Limited. Hilton Seafood UK and SV Cuisine are each considered to be separate cash generating units. The recoverable amount of the Seachill cash generating unit was based on its fair value less costs of disposal after allowing for the impact of planned investment and the recoverable amount of SV Cuisine was determined on a value-in-use basis based, in both cases using a discounted cash flow model. For each cash generating unit the recoverable amounts calculated exceeded their carrying value.

The key assumptions used in the calculations are projected EBITDA, projected profit after tax, the pre-tax and post-tax discount rates and the growth rates used to extrapolate cash flows beyond the projected period. EBITDA and profit after tax are based on one-year budgets approved by the Board and longer term, three year, projections based on past experience adjusted to take account of the impact of expected changes to sales prices, volumes, business mix and margin. Cash flows are discounted at a pre-tax discount rate of 10% (2020: 10%) or a post-tax discount rate of 8% (2020: 8%) with a growth rate of 2% (2020: 2%) used to extrapolate cash flows.  Discount rates and growth rates are calculated with reference to external benchmarks and where relevant past experience.

Sensitivity to changes in assumptions

The calculation is most sensitive to changes in the assumptions used for projected cash flow, the pre-tax discount rate and the growth rate. Management considers that reasonably possible changes in assumptions would be an increase in discount rate of one percentage point, a reduction in growth rate of 1 percentage point or a 10% reduction in budgeted cash flow. As an indication of sensitivity, when applied to the value-in-use calculation neither a 1% reduction in growth rate, a 10% reduction in budgeted cash flow, nor a 1% increase in the pre-tax discount rate would have resulted in an impairment of goodwill in the year.

No indicators of impairment were identified in respect of other, amortised, intangible assets and therefore no impairment review has been undertaken.

Goodwill acquired in the year

Goodwill and other intangible assets totalling £34,577,000 have been provisionally recognised following the acquisitions of Dalco Food BV and Fairfax Meadow Europe Limited in the year (see note 12). Dalco and Fairfax Meadow will each form separate cash generating units for impairment testing purposes and impairment testing will begin before the end of the current financial year.

11 Leases
(i) Amounts recognised in the balance sheet
The balance sheet includes the following amounts relating to leases:
Lease: right of use assets	Land & Buildings	Equipment	Vehicles	Total
Group	£'000	£'000	£'000	£'000
Opening net book amount as at 29 December 2019	132,940	42,679	2,674	178,293
Exchange Adjustments	10,469	295	83	10,847
Additions	98,427	195	1,303	99,925
Transfer to tangible fixed assets	-	(37,223)	-	(37,223)
Remeasurements, reclassification and scope changes	2,592	(586)	(363)	1,643
Depreciation	(13,008)	(4,254)	(1,088)	(18,350)
Closing net book amount at 3 January 2021	231,420	1,106	2,609	235,135
Exchange Adjustments	(9,945)	(147)	(108)	(10,200)
Additions	2,739	2,418	420	5,577
Acquisition (note 12)	6,066	5,139	1,289	12,494
Remeasurements, reclassification and scope changes	-	(336)	-	(336)
Depreciation	(16,339)	(927)	(1,161)	(18,427)
Disposal of leased assets destroyed by fire (note 4)	(2,168)	(19)	(52)	(2,239)
Closing net book amount at 2 January 2022	211,773	7,234	2,997	222,004
Lease liabilities			2021	2020
Group			£'000	£'000
Current			14,419	6,250
Non-current			228,977	238,995
			243,396	245,245
Maturity analysis - contractual undiscounted cash flows			2021	2020
Group			£'000	£'000
Less than one year			22,716	15,010
One to five years			79,010	77,822
More than five years			233,673	255,619
Total lease liabilities			335,399	348,451

 

(ii) Amounts recognised in the consolidated income statement
The income statement shows the following amounts related to leases:
Depreciation charge on right-of-use assets			2021	2020
Group			£'000	£'000
Buildings			16,339	13,008
Plant & equipment			927	4,254
Vehicles			1,161	1,088
			18,427	18,350
Interest expenses (included in finance costs)			8,536	6,919
Expenses relating to short-term leases (included in costs of goods sold and administrative expenses)			136	278
Expenses relating to leases of low-value assets that have not been shown above as short-term (included in costs of goods sold and administrative expenses)			3	24
The total cash outflow for leases in 2021 was £17,307,000 (2020: £59,488,000).
Variable Lease Payments
Leases with liabilities recognised of £9,824,000 (2020: £10,163,000), accounting for 4.0% (2020: 4.1%) of total lease liabilities, are subject to five yearly RPI linked rent reviews. These rent reviews are subject to a minimum collar, the impact of which is included in the calculation of lease liabilities and a maximum cap. If the impact of these variable lease payments had been recognised, applying index levels as at 2 January 2021, lease liabilities would have increased by 2021: £1,895,000 (2020: £633,000).
In addition, leases with liabilities recognised totalling £6,408,000 (2020: £11,063,000), accounting for 2.6% (2020: 4.5%) of total lease liabilities, are subject to annual CPI linked rent increases. If the impact of these variable lease payments had been recognised, applying index levels as at 2 January 2022, lease liabilities would have increased by £278,000 (2020: £44,000).

 

12 Business combinations

On 1 October 2021 the Group completed the purchase of the remaining 50% of Dalco Food BV (Dalco) taking its interest from 50% to 100%. Dalco is a leading producer of vegetarian and vegan proteins supplying both retail and food service customers from its facilities in the Netherlands.

On 28 October 2021 the Group acquired 100% of the share capital of Fairfax Meadow Europe Limited (Fairfax Meadow) a leading meat supplier to the UK foodservice sector.

	Dalco Food BV	Fairfax Meadow Europe Limited
Group	£'000	£'000
Property, plant and equipment	4,393	6,436
Intangibles - Software	113	45
Brand and customer relationship intangibles	-	12,519
Lease: Right-of-use asset	5,303	7,191
Inventories	8,143	7,982
Trade and other receivables	5,992	13,643
Trade and other payables	(8,767)	(16,781)
Borrowings	(1,824)	(8,504)
Lease liabilities	(5,303)	(7,094)
Deferred tax	(242)	(3,024)
Goodwill	18,967	2,933
Fair value of assets acquired	26,775	15,346
Consideration:
Paid on completion	13,388	15,346
Deemed fair value of existing 50% interest	13,387	-
	26,775	15,346

Dalco Food BV

The acquisition of the remaining 50% of Dalco allows the Group to take full control of the business enabling it to further diversify and strengthen its protein offering in the fast-growing vegan and vegetarian market.

Consideration for the acquisition of the 50% interest in Dalco totalled £13,388,000 and comprised cash of £11,603,000, and Hilton Food Group plc shares with a market value at the date of issue of £1,785,000.

As a result of the acquisition, and to allow full consolidation of Dalco as a subsidiary the group has recognised an exceptional gain of £6,837,000 (see note 4) being the difference between the carrying value of its joint venture interest at the date of acquisition and its fair value.

Due to the timing of completion of the acquisition and the timing of other acquisition activity undertaken by the group in 2021, the exercise to assess the fair values of assets and liabilities acquired is on-going and therefore amounts presented above are provisional and expected to change.

The provisional fair value of property, plant and equipment acquired, disclosed above, is the book value recognised by Dalco at the date of acquisition. A review of acquired property, plant and equipment is currently being undertaken by qualified surveyors and once concluded is expected to give rise to adjustments to the fair value recognised.

An exercise is also underway to establish the fair value of Dalco's customer relationships and long term supply agreements, the fair value of brands used within the Dalco business and to identify and value any other intangible assets acquired as part of the business combination.

Goodwill of £18.8m has provisionally been recognised, however the conclusion of the on-going work in respect of the valuation of tangible and intangible fixed assets acquired is expected to result in an overall reduction in the level recognised. Residual goodwill is expected to mainly relating to the strategic benefits for Hilton of diversifying its product portfolio into the vegan and vegetarian protein market.

The value of other assets and liabilities reflect the amounts expected to be realised or paid respectively.

Fairfax Meadow Europe Limited

The acquisition of Fairfax Meadow improves the access for Hilton to the out-of-home channel, providing an opportunity for the Group to diversify into the foodservice sector and contribute to the group sustainable growth.

Consideration for the acquisition of Fairfax Meadow totalled £15,346,000 paid entirely in cash.

Goodwill has arisen and mainly relates to the strategic benefits for Hilton of diversifying its product portfolio into the food service sector.

The fair value of property, plant and equipment acquired was established following a review undertaken by qualified surveyors and reflect their existing use value.

Customer relationship intangibles have been recognised and relate to the supply agreements and long standing relationships that Fairfax Meadow has with its customers. Brand intangibles have been recognised in respect of the Fairfax Meadow trading name and other brands employed by the business. The fair value of these intangible assets of £12,519,000 have been aggregated as they are considered to be linked with their value each dependent on the other and will be amortised over their useful economic lives of 5-9 years.

The value of other assets and liabilities reflect the amounts expected to be realised or paid respectively.

As a result of the timing of completion of the acquisition and the timing of other acquisition activity undertaken by the group in 2021, fair values presented for the Fairfax Meadow acquisition reflect the initial assessment of fair value and remains subjected to amendment for one year from the date of acquisition.

Since the date of acquisition Dalco has contributed revenue of £14.8m to the Group and has realised an adjusted loss before exceptional items and tax of £0.1m; Fairfax Meadow has contributed revenue of £23.4m and realised adjusted profit before tax and exceptional items of £0.5m.

If the acquisitions of the 50% interest in Dalco and Fairfax Meadow had taken place at the start of the year the group would have recognised revenue £3,405.1m and adjusted profit before tax and exceptional items of £66.5m.

In the year the group has recognised exceptional acquisition related costs of £2,226,000 in respect of legal and professional and other related activities associated with acquisition activity alongside exceptional finance costs of £1,131,000 relating to acquisition specific bank financing. See note 4.

Deferred Consideration

At 3 January 2021 a deferred consideration liability of £3,318,000 in respect of the acquisition of SV Cuisine Limited had been recognised. During the period the Group settled this liability making a payment of £2,500,000.

 

13 Borrowings
	2021	2020
Group	£'000	£'000
Current
Bank borrowings	224,732	39,759
Non-current
Bank borrowings	-	206,228
Total borrowings	224,732	245,987
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:
	2021	2020
Currency	£'000	£'000
UK Pound	65,198	66,142
Euro	18,277	21,217
Danish Kroner	1,118	851
Polish Zloty	5,384	6,560
Australian Dollar	106,903	120,667
New Zealand Dollar	27,852	30,550
	224,732	245,987

Bank borrowings are repayable in quarterly instalments from 2019 - 2022 with interest charged at LIBOR (or equivalent benchmark rates) plus 1.3% - 1.6%. Bank borrowings are subject to joint and several guarantees from each active Group undertaking.

The Group's bank borrowings have been classified as current liabilities as the bank facility agreements were due to mature in October 2022. Since the year end the Group has refinanced these facilities (see note 16).

The Group has undrawn committed loan facilities of £96.8m (2020: £51.5m).

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

Group net debt of £85,571,000 (2020: net debt of £123,366,000) comprises borrowings, noted above, of £224,732,000 (2020: £245,987,000) cash and cash equivalents of £140,014,000 (2020: £123,816,000), and finance leases previously recognised under IAS 17 of £853,000 (2020: £1,195,000). Including total lease liabilities Group net debt is £328,114,000 (2020: £367,416,000).

 

14 Cash generated from operations
	2021	2020
Group	£'000	£'000
Profit before income tax	47,398	54,028
Finance costs - Net	16,034	12,839
Operating profit	63,432	66,867
Adjustments for non-cash items:
Share of post tax profits of joint venture	(1,925)	(5,029)
Depreciation of property, plant and equipment	44,186	37,298
Depreciation of leased assets	18,427	18,350
Impairment of property, plant and equipment	6,377	-
Disposal of leased assets destroyed by fire	2,239	-
Gain on early settlement of Belgium lease liabilities	(2,183)	-
Amortisation of intangible assets	4,170	2,753
Amortisation of contract assets - charged to revenue	-	1,197
Gain on 100% acquisition of Dalco BV	(6,837)	-
Loss/(gain) on disposal of non-current assets	195	(40)
Adjustment in respect of employee share schemes	2,725	2,120
Changes in working capital:
Inventories	(26,656)	(23,212)
Trade and other receivables	(23,116)	22,995
Trade and other payables	40,225	(2,528)
Cash generated from operations	121,259	120,771
The parent company has no operating cash flows.

 

15 Analysis and movement in net debt
This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.
				2021	2020
				£'000	£'000
Cash and cash equivalents				140,170	123,816
Borrowings (including overdrafts)				(224,732)	(245,987)
Net bank debt				(84,562)	(122,171)
Lease liabilities				(243,396)	(245,245)
Net debt				(327,958)	(367,416)
	Cash/other financial assets	Borrowings  (including overdrafts)	Net bank debt	Lease liabilities	Net debt
Net debt reconciliation	£'000	£'000	£'000	£'000	£'000
At 30 December 2019	110,514	(197,339)	(86,825)	(184,633)	(271,458)
Cash flows	10,480	48,908	59,388	52,267	111,655
Lease additions	-	-	-	(99,925)	(99,925)
New borrowings	-	(92,563)	(92,563)	-	(92,563)
Exchange adjustments	2,822	(4,993)	(2,171)	(11,309)	(13,480)
Other changes	-	-	-	(1,645)	(1,645)
At 3 January 2021	123,816	(245,987)	(122,171)	(245,245)	(367,416)
Cash flows	19,750	79,819	99,569	6,588	106,157
Lease additions	-	-	-	(5,549)	(5,549)
Acquisition	-	-	-	(12,397)	(12,397)
New borrowings	-	(67,062)	(67,062)	-	(67,062)
Exchange adjustments	(3,396)	8,498	5,102	10,652	15,754
Other changes	-	-	-	2,555	2,555
At 2 January 2022	140,170	(224,732)	(84,562)	(243,396)	(327,958)

16 Events after the reporting period

The following non-adjusting events occurred after the reporting period:

Acquisition of Dutch Seafood Company BV

On 16th March 2022 the Group acquired 100% of the share capital of Dutch Seafood Company BV, which trades as Foppen. Foppen is a leading international smoked salmon producer with customers in Europe and US. The acquisition provides Hilton with the opportunity to diversify into a complementary protein category and enhance its customer base whilst also entering a new strategic market in the US. Consideration for the acquisition totalled £25.0m paid entirely in cash with the Group also repaying £54.7m of Foppen's bank and other borrowings immediately following completion of the acquisition.

The timing of completion of this transaction and its proximity to the date of these financial statements has meant that initial accounting for the business combination has not been completed and therefore it is impractical to provide the disclosures required by IFRS 3, Appendix B, Paragraph 64 (e) or (h)-(q).

Agito Group Pty Limited - Joint Venture Investment

On 6 January 2022 the Group acquired a 50% joint venture interest in Agito Group Pty Limited, a provider of automation and software controls used in food processing and other manufacturing facilities based in Australia, for consideration of £1.1m.

Bank facility agreement

On 21 January the Group agreed a £424m revolving credit and term loan facility with a syndicate of lenders. The facility refinanced the Group's existing bank facilities including undrawn acquisition bridge financing put in place to fund the Foppen acquisition that matured in January 2022. The Group's new bank facility matures in January 2027 with the term loans, totalling £134m, repayable in quarterly instalments beginning in April 2022.

 

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

Group							2021		2020
Sales							£'000		£'000
Sohi Meat Solutions Distribuicao de Carnes SA - fee for services							3,175		3,351
Sohi Meat Solutions Distribuicao de Carnes SA - recharge of joint venture costs							331		368
Dalco BV							438		313
Foods Connected Limited							-		3
Group							2021		2020
Purchases							£'000		£'000
Foods Connected Limited							568		351
Amounts owing from related parties at the year end were as follows:
							Owed from related parties
							2021		2020
Group							£'000		£'000
Foods Connected Limited							4		15
Sohi Meat Solutions Distribuicao de Carnes SA							561		393
Dalco BV							-		282
							565		690
Amounts owing to related parties at the year end were as follows:
							Owed to related parties
							2021		2020
Group							£'000		£'000
Foods Connected Limited							127		85
Sohi Meat Solutions Distribuicao de Carnes SA							9		-
Dalco BV							-		123
							136		208
During the period the group settled the deferred consideration liability recognised in respect of the acquisition of SV Cuisine Limited, making a payment of £2.5m. The acquisition of SV Cuisine Limited was considered to be a related party transaction as prior to acquisition Philip Heffer, the Hilton Food Group CEO, Graham Heffer and Robert Heffer, both directors of the Group's subsidiary Hilton Food Solutions Limited, had each held a 30% shareholding in SV Cuisine Limited.
18 Alternative Performance Measures
The Group's performance is assessed using a number of alternative performance measures (APMs).
The Group's alternative profitability measures are presented before exceptional items, amortisation of certain intangible assets and depreciation of fair value adjustments made to property plant and equipment acquired through business combinations and the impact of IFRS 16 - Leases.
The measures are presented on this basis, as management believe they provide useful additional information about the Group's performance and aids a more effective comparison of the Group's trading performance from one period to the next.

 

Adjusted profitability measures are reconciled to unadjusted IFRS results on the face of the income statement below.
	Reported	Add back: IFRS 16 Depreciation and interest	Less: IAS 17 Lease accounting costs	Reported excluding IFRS 16	Exceptional items	Add back: Amort & depn of acquisition fair value adjustments	Adjusted
52 weeks ended 2 January 2022	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Operating profit - excluding exceptional items	70,482	18,214	(17,907)	70,789	-	2,778	73,567
Exceptional items	(7,050)	56	-	(6,994)	6,994	-	-
Operating profit	63,432	18,270	(17,907)	63,795	6,994	2,778	73,567
Net finance costs	(16,034)	8,498	-	(7,536)	1,131	-	(6,405)
Profit before income tax	47,398	26,768	(17,907)	56,259	8,125	2,778	67,162
Profit for the period	39,282	24,037	(17,907)	45,412	5,009	2,250	52,671
Less non-controlling interest	(2,139)	(7)	-	(2,146)	-	-	(2,146)
Profit attributable to members of the parent	37,143	24,030	(17,907)	43,266	5,009	2,250	50,525
Depreciation and amortisation	75,596	(20,489)	-	55,107	(6,377)	(2,778)	45,952
EBITDA	139,028	(2,219)	(17,907)	118,902	617	-	119,519
Earnings per share	pence			pence			pence
Basic	45.0			52.5			61.3
Diluted	44.5			51.8			60.5
	Reported	Add back: IFRS 16 Depreciation and interest	Less: IAS 17 Lease accounting costs	Reported excluding IFRS 16		Add back: Amort & depn of acquisition fair value adjustments	Adjusted
53 weeks ended 3 January 2021	£'000	£'000	£'000	£'000		£'000	£'000
Operating profit	66,867	18,163	(20,451)	64,579		2,449	67,028
Net finance costs	(12,839)	6,874	-	(5,965)		-	(5,965)
Profit before income tax	54,028	25,037	(20,451)	58,614		2,449	61,063
Profit for the period	42,040	24,074	(20,451)	45,663		1,984	47,647
Less non-controlling interest	(2,304)	(382)	387	(2,299)		-	(2,299)
Profit attributable to members of the parent	39,736	23,692	(20,064)	43,364		1,984	45,348
Depreciation and amortisation	59,558	(18,163)	-	41,395		(2,449)	38,946
EBITDA	126,425	-	(20,451)	105,974		-	105,974
Earnings per share	pence			pence			pence
Basic	48.6			53.0			55.4
Diluted	47.9			52.3			54.7
The depreciation and amortisation figure includes £nil (2020: £1,197,000) amortisation of contract assets charged to revenue and adds back a loss on disposal of £195,000 (2020: gain £40,000).

 

Segmental operating profit reconciles to adjusted segmental operating profit as follows:
	Reported	Add back: IFRS 16 Depreciation and interest	Less: IAS 17 Lease accounting costs	Reported excluding IFRS 16	Exceptional items	Add back: Amort & depn of acquisition fair value adjustments	Adjusted
52 weeks ended 2 January 2022	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Europe	52,307	6,393	(6,684)	52,016	6,994	2,778	61,788
Australasia	21,716	11,877	(11,223)	22,370	-	-	22,370
Central costs	(10,591)	-	-	(10,591)	-	-	(10,591)
Total	63,432	18,270	(17,907)	63,795	6,994	2,778	73,567
	Reported	Add back: IFRS 16 Depreciation and interest	Less: IAS 17 Lease accounting costs	Reported excluding IFRS 16		Add back: Amort & depn of acquisition fair value adjustments	Adjusted
53 weeks ended 3 January 2021	£'000	£'000	£'000	£'000		£'000	£'000
Europe	60,538	5,757	(6,163)	60,132		2,449	62,581
Australasia	19,091	12,406	(14,288)	17,209		-	17,209
Central costs	(12,762)	-	-	(12,762)		-	(12,762)
Total	66,867	18,163	(20,451)	64,579		2,449	67,028

 

END

 

 

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