REG - Hilton Food Grp Plc - Interim Results
15/09/2022 07:00
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RNS Number : 5099Z Hilton Food Group PLC 15 September 2022
15 September 2022
Hilton Food Group plc
Interim results for the 28 weeks to 17 July 2022
Driving long-term value during challenging times
Hilton Food Group plc, a leading international protein producer, is pleased to
announce its interim results for the 28 weeks to 17 July 2022.
Financial highlights:
· Volumes 3.6% higher at 271,708 tonnes (2021: 262,222 tonnes)
· Revenue up 20.4%(1) to £2.0bn (2021: £1.7bn) driven by volume growth
and raw material price inflation
· Adjusted operating profit up 7.3%(1) to £41.2m (2021: £39.0m)
· IFRS operating profit up 5.6% to £30.8m (2021: £29.2m)
· Adjusted profit before tax 3.9% lower to £34.4m (2021: £35.8m)
impacted by higher interest costs
· IFRS profit before tax 9.7% lower to £19.6m (2021: £21.7m)
· Adjusted basic earnings per share down 12.0%(1) to 28.0p (2021: 32.4p)
· IFRS basic earnings per share down 23.0% to 15.1p (2021: 19.6p)
· Net bank debt increased to £221.0m (2021: £134.9m) following Foppen
acquisition
· Interim dividend of 7.1p (2021: 8.2p)
(1) On a constant currency basis
Strategic highlights:
1. Outstanding protein products
o Meat and seafood 3-year volume growth +10% per annum
o Vegan & vegetarian 3-year volume growth +40% per annum
o Added value easier meals 3-year volume growth +72% per annum
2. Growing across international markets
o One year anniversary of new food park in New Zealand; facility progressing
well and production ramping up
o Rollout of food park prototype via agreement for new food park in Sweden
o Growth in international scale through Foppen acquisition entering US;
integration progressing well
3. Prioritising industry-leading technology
o Investment in one of the leading UK cultured meat technology ventures,
Cellular Agriculture Ltd
o Growth and geographical diversification of Agito partnership into Europe
o Increased ownership of Foods Connected to 65% further strengthening
technology and automation leadership
4. Delivered through the sustainable protein plan
o Continued progress made against all pillars in our ESG strategy particularly
through increased recycled content within our packaging materials
Commenting on the results Chief Executive Philip Heffer said:
"In the first half of the year Hilton has further strengthened its position as
the international protein partner of choice. We have continued to focus on our
strategy of diversification and differentiation, driving a further increase in
volumes, sales and operating profit.
"At a time when inflationary headwinds have become more pronounced, we have
made further progress in broadening and deepening our protein offer, while
expanding our footprint across international markets. At the same time, we
have made ongoing investment to ensure we lead in technology and automation,
with sustainability central to everything we do.
"Our acquisition of smoked salmon producer Foppen has taken us into the US for
the first time, and its integration into the Group continues to progress well.
Meanwhile, the success of our Food Park in New Zealand has led to us agreeing
to a new concept facility in Sweden.
"Elsewhere, we are pleased to be investing in Cellular Agriculture, a market
leader in cultured meat, at a time when interest in the category is gaining
traction, not least given its environmental benefits.
"In the current macroeconomic environment, Hilton has not been immune from the
impact of heightened inflation. While we remain watchful of any near-term
changes in consumer sentiment, we believe that our international scale, strong
customer relationships, and diversified protein offer leaves us well-placed
within a growing global market."
Financial performance - overview:
2022 2021 Change
28 weeks to 28 weeks to Reported 1-year constant currency 3-year constant currency
17 July 2022 18 July 2021
Volume (1) (tonnes) 271,708 262,222 3.6% 3.6% 12.0%
Revenue £2,038.7m £1,710.7m 19.2% 20.4% 31.0%
Adjusted results (2)
Adjusted operating profit £41.2m £39.0m 5.6% 7.3%
Adjusted profit before tax £34.4m £35.8m -3.9% -2.5%
Adjusted basic earnings per share 28.0p 32.4p -13.6% -12.0%
Adjusted EBITDA £66.6m £63.9m 4.3% 5.7%
IFRS results
Operating profit £30.8m £29.2m 5.6%
Profit before tax £19.6m £21.7m -9.7%
Basic earnings per share 15.1p 19.6p -23.0%
Other measures
EBITDA £71.9m £71.7m 0.3%
Net bank debt (3) £221.0m £134.9m
Interim dividend 7.1p 8.2p -13.4%
Notes
1 Volume includes 50% share of the Dutch (2021 only) and Portuguese
joint venture activities
2 Adjusted results represent the IFRS results before deduction of
acquisition intangibles amortisation and exceptional items and also IFRS 16
lease adjustments as detailed in the Alternative performance measures note 16.
Unless otherwise stated financial metrics in the Financial and strategic
highlights, Review of operations and Financial review refer to the adjusted
results
3 Net bank debt represents borrowings less cash and cash equivalents
excluding lease liabilities
Enquiries:
Hilton Food Group
Tel: +44 (0) 1480 387214
Philip Heffer, Chief Executive Officer
Matt Osborne, Chief Financial Officer
Headland Consultancy
Limited Tel: +44
(0) 20 3805 4822
Edward
Young
Email: hiltonfood@headlandconsultancy.com
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.
Cautionary statement
This interim management 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.
Alternative performance measures (APMs)
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.
Review of operations
The Group is presenting its interim results for the 28 week period to 17 July
2022, together with comparative information for the 28 weeks to 18 July 2021.
These interim results are prepared in accordance with UK-adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority. Unless
otherwise stated the financial metrics refer to the adjusted results.
Performance overview
During the period, Hilton made continued progress against its stated ambition
of becoming the international protein partner of choice. This was achieved by
the Group utilising its scale and expertise to deepen existing customer
relationships while creating new partnerships with leading international
retailers and food service providers.
In the half the Group worked closely with its customers to pursue both
geographical expansion and range extension, underpinned by continued
investment in best-in-class technology and automation.
Against the current macroeconomic backdrop, Hilton's position was strengthened
by its differentiated business model and diversified product set across the
proteins - in meat, seafood, vegetarian, vegan, and easier meals.
Performance in the period saw revenue grow by 19.2% with volumes 3.6% higher
including the new acquisitions Foppen, Dalco and Fairfax Meadow as well as the
new facility in New Zealand. Revenues reflect significant raw material price
inflation. Over a three-year period revenue and volumes grew at an average
12.0% at constant currency and 31.0% per year respectively. The operating
margin was 2.0% (2021: 2.3%) impacted by the raw material price inflation
although the operating margin per kg increased to 15.2p per kg (2021: 14.9p
per kg).
Hilton's results, reported in Sterling, are sensitive to changes in the value
of Sterling compared to the range of overseas currencies in which the Group
trades. Over the 28 weeks to 17 July 2022 Sterling strengthened slightly on
average compared with the corresponding period in 2021 which has the effect of
decreasing revenues by 1.3%.
Europe
Operating profit of £31.6m (2021: £35.3m) on revenue of £1,211.0m (2021:
£1,076.1m)
This operating segment covers the Group's meat, fish and vegetarian businesses
and joint ventures in the UK, Holland, Belgium, Ireland, Sweden, Denmark,
Central Europe and Portugal. Our products are sold in 14 countries across
Europe.
Volumes were 1.7% higher including continued fresh food growth, expansion into
new geographies and new customer partnerships in channels. Revenue increased
by 14.7% on a constant currency basis mainly due to raw material price
inflation. Operating margins fell to 2.6% (2021: 3.3%) with our Seafood
business significantly impacted by effects of the Ukraine conflict and wider
inflationary pressures as well as a short-term investment in price.
During the period Hilton increased its ownership of Hilton Food Solutions from
55% to 65% which also made a 25% investment in A Turner & Sons Sausage
Ltd, a butcher products supplier.
In June 2021 the Group's facility in Belgium suffered an extensive fire and we
continue to work closely with insurers to progress the related claims.
APAC
Operating profit of £13.0m (2021: £11.7m) on revenue of £827.7m (2021:
£634.6m)
In Australia, the Group operates plants in Bunbury, Western Australia,
Melbourne, Victoria and Brisbane, Queensland. A new facility in New Zealand
opened in July 2021.
Volumes during the period increased by 7.9% reflecting the New Zealand
start-up which continues to ramp up its operations. Revenues were 30.1% higher
on a constant currency basis reflecting raw material inflation in addition to
the higher volumes. Operating margins were 1.6% (2021: 1.8%).
Strategic progress
We completed the acquisition of Foppen, a specialist smoked salmon business
with facilities in the Netherlands and Greece, in March 2022 which enhances
our existing fish portfolio and is an entry point for us into the North
American retail market.
We continue to develop and apply automation, robotics and technology services
and during the period Hilton's investment in Foods Connected increased from
50% to 65%. Its software platform offers end-to-end transparency in supply
chains enabling more effective and more agile decisions. Foods Connected
continues to grow and develop internationally is also diversifying into
non-food categories. We have also agreed a joint venture with Agito, an
Australian automation and technology solutions business, which brings together
excellence in automation and food service supply chain expertise.
We are pleased to announce an agreement to invest in a leading UK cultured
meat technology venture, Cellular Agriculture Limited ("CellAg"). CellAg has
pioneered the development of new technology for the production of cultured
meat at commercial scale and low unit cost. This investment from Hilton will
help CellAg develop commercially scalable technology for cultured meat and
gives Hilton the right to subscribe to a majority shareholding. CellAg's core
technology sits at a footprint some 300 times smaller than alternative
bioprocess techniques and with a forecast 70% reduction in operational cost.
CellAg's ambition is to cement themselves as the global technology solutions
lead for the cultured meat industry. Hilton's investment will be conditional
on achieving certain milestones in its technological development process.
CellAg's founders, CEO Illtud Dunsford and Chief Technology Officer Professor
Marianne Ellis, will continue to lead the company and will retain material
shareholdings.
We continue to make good progress through our sustainable protein plan
including the introduction of film with 30% recycled content and pad-less
liquid retaining packaging. We have also introduced ESG performance metrics
into our LTIP Scheme including targets for Scope 1 & 2 energy efficiency,
packaging recycled content and food waste.
Investments in our facilities
Hilton continues to invest in all its facilities maintaining state of the art
levels required to service our customers' growth, extend the range of products
supplied to those customers and deliver both first class service levels and
further increases in production efficiency. This investment ensures we can
achieve low unit costs and competitive selling prices at increasingly higher
levels of production throughput. Capital expenditure during the period was
£26.0m (2021: £27.0m) which included ongoing investment technology and
automation to drive processing efficiency at our Seafood business and the
commissioning of an air bridge in Australia.
Outlook
While we benefit from the strength of our diversified business model and
continue to grow volumes internationally, Hilton has not been immune from the
impact of macroeconomic headwinds. Across our markets, we have seen volumes
come under pressure with the cost of living increasing and consumers becoming
ever more cost-conscious. In our Seafood business these trends have been
exacerbated with world events leading to unprecedented raw material price
increases.
Given these factors, and combined with the impact of start-up costs and rising
interest rates, the Board now anticipates that profitability for the year will
be below expectations. However despite these short-term challenges Hilton's
well-invested business, the recent acquisitions of Foppen, Dalco and Fairfax
Meadow and our investments in Agito, Foods Connected and Hilton Food Solutions
provide a strong platform for medium-term growth. We continue to explore
opportunities for both geographic expansion and growth in our existing markets
across the five pillars of our proposition.
Financial review
Adjusted results represent the IFRS results before deduction of acquisition
intangibles amortisation, exceptional items and IFRS 16 lease adjustments.
These adjustments are detailed in the Alternative performance measures note
16. Unless otherwise stated the financial metrics refer to the adjusted
results.
Revenue increased by 19.2% to £2,038.7m (2021: £1,710.7m) and by 20.4% on a
constant currency basis reflecting higher volumes and significant raw material
price inflation. Further details of revenue and volume growth by segment are
detailed in the Review of operations above.
Operating profit for the first 28 weeks of 2022 was £41.2m, 5.6% higher than
in the previous year (2021: £39.0m) and 7.3% higher on a constant currency
basis including contributions from the new acquisitions. The operating profit
margin reduced to 2.0% (2021: 2.3%) mainly due the significant raw material
price inflation as well as the impact of start-up costs. IFRS operating profit
for the first 28 weeks of 2022 was £30.8m (2021: £29.2m) after charging
exceptional costs of £3.2m (2021: £9.7m).
Net finance costs excluding exceptional items and lease interest increased to
£6.8m (2021: £3.2m) reflecting higher borrowings following the Foppen
acquisition and higher benchmark rates. Interest cover was 6 times (2021: 12
times). IFRS net finance costs were £11.2m (2021: £7.5m).
The taxation charge for the period was £8.4m (2021: £8.3m) representing an
effective underlying tax rate of 24.3%, compared with 23.0% last year, which
is due to the relatively higher profits in the APAC region. The IFRS taxation
charge was £5.0m (2021: £4.6m) representing an effective underlying tax rate
of 25.7% (2021: 21.1%).
Net income, representing profit for the year attributable to owners of the
parent, of £25.0m was 6.0% lower than last year (2021: £26.5m) reflecting
increased operating profit but with higher interest costs. IFRS net income was
£13.5m (2021: £16.1m).
Basic earnings per share of 28.0p in the first 28 weeks of 2022 were 12.0%
below 32.4p last year at constant currency reflecting the lower net income
growth in operating profit and a higher average number of issued shares. IFRS
basic earnings per share was similarly lower at 15.1p (2021: 19.6p).
EBITDA increased to £66.6m for the period (2021: £63.9m) reflecting higher
operating profit and depreciation. IFRS EBITDA was £71.9m (2021: £71.7m).
In the first 28 weeks the Group absorbed £17.4m of cash outflow before
acquisitions and financing activities (2021: cash inflow £0.7m). Net cash
generated from operations of £8.5m (2021: £28.3m) was impacted by the
build-up of working capital following the recent acquisitions.
Cash balances at 17 July 2022 were £96.9m, which net of borrowings of
£317.9m, resulted in higher net bank debt of £221.0m (£134.9m at 18 July
2021 and £84.6m at 2 January 2022) following the Foppen acquisition. At 17
July 2022 the Group had undrawn committed facilities under its syndicated
banking facilities of £99.8m (£96.8m at 2 January 2022). These banking
facilities are subject to covenants comprising net bank debt to EBITDA and
interest cover. The Group had significant headroom under these covenants at 17
July 2022 of at least 75% for all these metrics.
The Group has maintained a progressive dividend policy since flotation. Hilton
remains financially strong with significant cash balances and undrawn loan
facilities, and we continue to operate well within our banking covenants. The
Board is satisfied that the Group has adequate headroom under its existing
facilities, that it is appropriate to continue to operate and to maintain this
dividend policy and have approved the payment of an interim dividend of 7.1p
per ordinary share (2021: 8.2p). This interim dividend amounting to £6.4m
will be paid on 2 December 2022 to shareholders on the register at close of
business on 4 November 2022.
Going concern
The Directors have performed a detailed assessment, including a review of the
Group's budget and forecasts for the 2022 financial year and its longer term
plans, including consideration of the principal risks faced by the Group. The
Group established business continuity plans and flexible supply models in
order to continue to meet this increased demand. The resilience of the Group
in the face of challenges presented by the current economic uncertainty 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 existing 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 interim financial statements.
The Group's borrowings are detailed in note 12 to this report 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 sensitized projections is
expected to remain in compliance. Future geographical expansion, which is not
yet contracted for, and which is not built into 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 required.
The financial position of the Group including its cash flows, liquidity
position and borrowings are described above, with its business activities and
the factors likely to affect its future development, performance and position
being covered in the Review of operations. As at the date of this report the
Directors have a reasonable expectation that the Group has adequate resources
and, having reassessed the principal risks, consider it appropriate to adopt
the going concern basis of accounting in preparing the interim financial
statements.
The principal risks and uncertainties facing the Group's businesses
Hilton has well developed processes and structures for identifying and
subsequently mitigating the key risks which the Group faces. The most
significant risks and uncertainties faced by the Group, together with the
Group's risk management processes are detailed in the review of Risk
management and principal risks on pages 24 to 27 of the Hilton Food Group plc
2021 Annual report. The principal risks and uncertainties identified in that
report were:
· 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;
· The Group's growth potential may be affected by the success of its
customers and the growth of their packed food sales;
· 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 risk of consuming certain foods;
· 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;
· 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;
· Contamination within the supply chain including outbreaks of disease
and feed contaminants affecting livestock and fish;
· Significant incidents such as fire, flood, pandemic or interruption
of supply of key utilities could impact the Group's business continuity;
· 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;
· A significant breach of health & safety legislation as complexity
increases in managing sites across different product groups and geographies;
and
· 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.
Macroeconomic volatility
Increasing geopolitical and economic uncertainty has the potential to impact
our risk profile. We continue to monitor events including the conflict in
Ukraine and its impact on energy availability and costs and on supply chains.
This together with other inflationary pressures are likely to influence
political developments including trade policy, interest rates and industrial
unrest. Hilton's Board and risk management structures provide resilient and
adaptable strategies to mitigate any potential impact from these evolving
risks.
Brexit
The UK and EU regulatory and trade environments continue to evolve and our
operational processes develop as required particularly in relation to
recruitment and retention strategies and focus on technology and automation to
reduce our risk exposure.
The risks and uncertainties outlined above had no material adverse impact on
the results for the 28 weeks to 17 July 2022 and are expected to remain
virtually unchanged for the remainder of the 2022 financial year.
Philip Heffer
Chief Executive Officer
Matt Osborne
Chief Financial Officer
14 September 2022
Statement of Directors' responsibilities
The Directors confirm that the condensed consolidated interim financial
statements (the "interim financial statements") have been prepared in
accordance with UK-adopted International Accounting Standard 34, 'Interim
Financial Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority and that the
interim management report includes a fair review of the information required
by DTR 4.2.7 and DTR 4.2.8, namely:
(a) an indication of important events that have occurred during the first 28
weeks and their impact on the interim financial statements, and a description
of principal risks and uncertainties for the remaining 24 weeks of the
financial year; and
(b) material related party transactions in the first 28 weeks and any material
changes in related party transactions described in the last annual report.
The Directors of Hilton Food Group plc are listed in the 2021 Hilton Food
Group plc Annual report and financial statements. Patricia Dimond joined the
Board on 1 April 2022. On 24 May 2022 Nigel Majewski and John Worby stepped
down from the Board and Matt Osborne joined the Board. There have been no
other changes in Directors since 2 January 2022. A list of current Directors
is maintained on the Hilton Food Group plc website at
www.hiltonfoodgroupplc.com (http://www.hiltonfoodgroupplc.com) .
On behalf of the Board
Robert Watson OBE
Chairman
Matt Osborne
Chief Financial Officer
Condensed Consolidated Income statement
28 weeks ended 28 weeks ended
17 July 2022 18 July 2021
Restated (note 2)
Continuing operations Note £'000 £'000
Revenue 4 2,038,674 1,710,672
Cost of sales (1,851,250) (1,546,046)
Gross profit 187,424 164,626
Distribution costs (18,314) (12,986)
Administrative expenses (135,849) (113,711)
Exceptional items 5 (3,183) (9,721)
Total administrative expenses (139,032) (123,432)
Share of profit in joint venture 721 952
Operating profit 4 30,799 29,160
Finance income 19 11
Finance costs (11,191) (7,519)
Exceptional finance costs 5 (75) -
Total finance costs (11,266) (7,519)
Finance costs - net (11,247) (7,508)
Profit before income tax 19,552 21,652
Income tax expense (6,526) (6,997)
Exceptional tax credit 5 1,502 2,430
Total income tax expense 6 (5,024) (4,567)
Profit for the period 14,528 17,085
Profit attributable to:
Owners of the parent 13,455 16,076
Non-controlling interests 1,073 1,009
14,528 17,085
Earnings per share for profit attributable to owners of the parent
- Basic (pence) 8 15.1 19.6
- Diluted (pence) 8 14.9 19.3
Condensed Consolidated Statement of comprehensive income
28 weeks ended 28 weeks ended
17 July 2022 18 July 2021
£'000 £'000
Profit for the period 14,528 17,085
Other comprehensive income/(expense)
Currency translation differences (714) (5,567)
Gain on cash flow hedges 1,756 -
Other comprehensive income/(expense) for the period net of tax 1,042 (5,567)
Total comprehensive income for the period 15,570 11,518
Total comprehensive income attributable to:
Owners of the parent 14,421 10,749
Non-controlling interests 1,149 769
15,570 11,518
The notes form an integral part of these interim financial statements.
Condensed Consolidated Balance sheet
17 July 2022 18 July 2021 2 January 2022
Note £'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 9 316,743 276,040 291,488
Lease: Right-of-use asset 9 222,218 218,530 222,004
Intangible assets 9 153,732 69,272 105,775
Investments 10 5,723 11,628 5,539
Trade and other receivables - - 2,239
Deferred income tax assets 12,224 6,345 6,952
710,640 581,815 633,997
Current assets
Inventories 176,259 112,767 156,517
Trade and other receivables 260,079 225,700 230,388
Current income tax assets 6,484 2,982 5,212
Other financial asset - - 1,140
Derivative financial instruments 15 4,540 - -
Cash and cash equivalents 96,864 96,126 140,170
544,226 437,575 533,427
Total assets 1,254,866 1,019,390 1,167,424
Equity and liabilities
Equity
Ordinary Share capital 13 8,938 8,215 8,893
Share premium 143,714 67,335 142,043
Employee share schemes reserve 6,405 7,175 6,990
Foreign currency translation reserve (2,896) (707) (2,106)
Retained earnings 170,761 162,122 176,449
Reverse acquisition reserve (31,700) (31,700) (31,700)
Merger reserve 919 919 919
Cashflow hedge reserve 1,756 - -
Own shares - (1,527) (87)
Equity attributable to owners of the parent 297,897 211,832 301,401
Non-controlling interests 6,157 6,126 6,548
Total equity 304,054 217,958 307,949
Liabilities
Non-current liabilities
Borrowings 12 287,460 190,153 -
Lease liabilities 236,202 226,085 228,977
Deferred income tax liabilities 12,939 1,446 4,132
536,601 417,684 233,109
Current liabilities
Borrowings 12 30,389 40,829 224,732
Lease liabilities 12,647 10,679 14,419
Trade and other payables 371,175 332,240 387,215
414,211 383,748 626,366
Total liabilities 950,812 801,432 859,475
Total equity and liabilities 1,254,866 1,019,390 1,167,424
The notes form an integral part of these interim financial statements.
Condensed Consolidated Statement of changes in equity
Attributable to owners of the parent
Share capital Share premium Employee share schemes reserve Foreign currency translation reserve Retained earnings Reverse acquisition reserve Merger reserve Cashflow hedge reserve Own shares Total Non-controlling interests Total equity
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 4 January 2021 8,194 65,619 6,123 4,620 161,607 (31,700) 919 - - 215,382 6,556 221,938
Comprehensive income
Profit for the period - - - - 16,076 - - - - 16,076 1,009 17,085
Other comprehensive income
Currency translation differences - - - (5,327) - - - - - (5,327) (240) (5,567)
Total comprehensive income - - - (5,327) 16,076 - - - - 10,749 769 11,518
Transactions with owners
Issue of new shares 13 21 1,716 - - - - - - - 1,737 - 1,737
Purchase of shares for employee share plans - - - - - - - - (2,278) (2,278) - (2,278)
Adjustment in respect of employee share schemes - - 1,803 - - - - - - 1,803 - 1,803
Settlement of employee share schemes - - (751) - - - - - 751 - - -
Dividends paid 7 - - - - (15,561) - - - - (15,561) (1,199) (16,760)
Total transactions with owners, recognised directly in equity 21 1,716 1,052 - (15,561) - - - (1,527) (14,299) (1,199) (15,498)
Balance at 18 July 2021 8,215 67,335 7,175 (707) 162,122 (31,700) 919 - (1,527) 211,832 6,126 217,958
Balance at 3 January 2022 8,893 142,043 6,990 (2,106) 176,449 (31,700) 919 - (87) 301,401 6,548 307,949
Comprehensive income
Profit for the period - - - - 13,455 - - - - 13,455 1,073 14,528
Other comprehensive income
Currency translation differences - - - (790) - - - - - (790) 76 (714)
Gain on cash flow hedging - - - - - - - 1,756 - 1,756 - 1,756
Total comprehensive income - - - (790) 13,455 - - 1,756 - 14,421 1,149 15,570
Transactions with non-controlling interests - - - - - - - - - - (349) (349)
Issue of new shares 13 17 1,671 - - - - - - - 1,688 - 1,688
Adjustment in respect of employee share schemes - - (470) - - - - - - (470) - (470)
Settlement of employee share schemes 28 - (115) - - - - - 87 - - -
Dividends paid 7 - - - - (19,143) - - - - (19,143) (1,191) (20,334)
Total transactions with owners, recognised directly in equity 45 1,671 (585) - (19,143) - - - 87 (17,925) (1,540) (19,465)
Balance at 17 July 2022 8,938 143,714 6,405 (2,896) 170,761 (31,700) 919 1,756 - 297,897 6,157 304,054
The notes form an integral part of these interim financial statements.
Condensed Consolidated Cash flow statement
28 weeks ended 28 weeks ended
17 July 2022 18 July 2021
£'000 £'000
Cash flows from operating activities
Cash generated from operations 27,975 48,596
Interest paid (11,249) (7,508)
Income tax paid (8,359) (12,768)
Net cash generated from operating activities 8,367 28,320
Cash flows from investing activities
Acquisition of subsidiary, net of cash and debt (81,821) -
Purchase of non-controlling interest (1,207) -
Settlement of deferred consideration - (2,500)
Purchases of property, plant and equipment (25,494) (26,237)
Proceeds from sale of property, plant and equipment 48 41
Purchases of intangible assets (447) (785)
Dividends received from joint venture - 1,823
Interest received 2 -
Net cash used in investing activities (108,919) (27,658)
Cash flows from financing activities
Proceeds from borrowings 313,618 16,815
Repayments of borrowings (228,565) (24,030)
Payment of lease liabilities (7,651) (1,290)
Issue of ordinary shares - 1,737
Purchase of own shares - (2,278)
Dividends paid to owners of the parent (19,143) (15,561)
Dividends paid to non-controlling interests (1,191) (1,199)
Net cash generated from/(used in) financing activities 57,068 (25,806)
Net decrease in cash and cash equivalents (43,484) (25,144)
Cash and cash equivalents at beginning of the period 140,170 123,816
Exchange gains/(losses) on cash and cash equivalents 178 (2,546)
Cash and cash equivalents at end of the period 96,864 96,126
The notes form an integral part of these interim financial statements.
Notes to the interim financial statements
1 General information
Hilton Food Group plc ("the Company") and its subsidiaries (together "the
Group") is a leading international multi-protein food business.
The Company is a public company limited by shares incorporated and domiciled
in the UK. The address of the registered office is 2-8 The Interchange, Latham
Road, Huntingdon, Cambridgeshire PE29 6YE. The registered number of the
Company is 06165540.
The Company maintains a Premium Listing on the London Stock Exchange.
These interim financial statements were approved for issue on 14 September
2022.
These interim financial statements do not comprise statutory accounts within
the meaning of Section 434 of the Companies Act 2006. Statutory accounts for
the 52 weeks ended 2 January 2022 were approved by the Board of Directors on 5
April 2022 and delivered to the Registrar of Companies. The report of the
auditors on those accounts was unqualified, did not contain an emphasis of
matter paragraph and did not contain any statement under Section 498 of the
Companies Act 2006.
These interim financial statements have been reviewed, not audited.
2 Basis of preparation
This consolidated interim financial report for the 28 weeks ended 17 July 2022
have been prepared in accordance with the UK-adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
Going concern
The consolidated interim financial statements have been prepared on the going
concern basis. The Group has undertaken a detailed going concern assessment,
including a review of its budget and forecasts 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 in the face of uncertain challenges has
then 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 existing committed facilities. The Directors are satisfied that the Group
has adequate resources to continue to operate and meet its liabilities as they
fall due for a period of at least 12 months from the date of signing these
interim financial statements and therefore consider it appropriate to adopt
the going concern basis of accounting in preparing the consolidated interim
financial statements.
Estimates
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates.
In preparing these interim financial statements, the significant judgements
made by management in applying the Group's accounting policies and the key
sources of estimation uncertainty were, the same as those that applied to the
consolidated financial statements for the 52 weeks ended 2 January 2022.
New and amended standards adopted by the Group
A number of new or amended standards became applicable for the current
reporting period. The Group did not have to change its accounting policies or
make retrospective adjustments as a result of adopting these standards.
Prior year restatement
Following a review of expense classification, the Group has reclassified
depreciation relating to buildings, plant and machinery from administration
expenses to cost of sales as these assets are directly involved in production.
As a result, the Group has restated the comparative figures for this
reclassification. The restatement has no impact on operating profit and
results in gross margin decreasing in PY by £28,553,000.
3 Accounting policies
The accounting policies adopted in the preparation of these interim results
are consistent with those applied in the preparation of the Group's annual
report for the year ended 2 January 2022 and corresponding interim reporting
period.
The Group has recognised exceptional items during the period, the accounting
policies in respect of these is summarised below.
Exceptional items
Exceptional items are not defined under IFRS. However, the Group classifies
Exceptional Items as those that are separately identifiable by virtue of their
size, nature or expected frequency and that therefore warrant separate
presentation.
As detailed in note 5 during the period to 17 July 2022 the Group has
recognised exceptional items in respect of costs associated with the fire at
its facility in Belgium, acquisition related costs, cost of re-organisation
programs and the gain recognised following the acquisition of a further 15%
interest in its Foods Connected joint venture. The income statement
separately shows the impact of the exceptional items on reported operating
profit with further reconciliations between statutory and adjusted measures
used by the Group presented in note 16. Presentation of these exceptional
items and the reconciliations between adjusted and statutory measures is not
intended to be a substitute for or intended to promote the adjusted measures
above statutory measures.
Current income tax
Taxes on income in the interim periods are accrued using the tax rate that
would be applicable to expected total annual earnings.
FX Instruments
The Group holds a number of foreign currency options/forwards which are
carried at fair value.
4 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 eight operating segments: i) United Kingdom; ii) Netherlands; iii)
Republic of Ireland; iv) Sweden; v) Denmark; vi) Central Europe including
Poland, Czech Republic, Hungary, Slovakia, Latvia, Lithuania and Estonia; vii)
Portugal and viii) Australasia (has been renamed to APAC) and ix) Central
costs. The United Kingdom, Netherlands, 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. APAC 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, fish 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:
Operating
Total segment profit/(loss)
revenue segment result
£'000 £'000
28 weeks ended 17 July 2022
Europe 1,211,004 17,380
APAC 827,670 14,176
Central costs - (757)
Total 2,038,674 30,799
28 weeks ended 18 July 2021
Europe 1,076,072 24,687
APAC 634,600 12,452
Central costs - (7,979)
Total 1,710,672 29,160
The Group uses a number of alternative performance measures to assess
underlying performance, these are explained and reconciled to the segmental
results presented above in note 16. There is no inter-segment revenue included
in the figures above
17 July 18 July 3 January
2022 2021 2022
£'000 £'000 £'000
Total assets
Europe 738,247 561,288 643,157
APAC 481,656 427,255 462,556
Central costs 16,255 21,520 49,547
Total segment assets 1,236,158 1,010,063 1,155,260
Current income tax assets 6,484 2,982 5,212
Deferred income tax assets 12,224 6,345 6,952
Total assets per balance sheet 1,254,866 1,019,390 1,167,424
17 July 18 July 3 January
2022 2021 2022
£'000 £'000 £'000
Total liabilities
Europe 337,725 309,009 346,403
APAC 427,508 398,945 419,611
Central costs 172,640 92,032 89,329
Total segment liabilities 937,873 799,986 855,343
Deferred income tax liabilities 12,939 1,446 4,132
Total Liabilities per balance sheet 950,812 801,432 859,475
There are no significant seasonal fluctuations.
5 Exceptional items
28 weeks ended 17 July 2022 28 weeks ended 18 July 2021
Operating profit Finance costs Tax Profit Operating profit Tax Profit
after tax after tax
Group £'000 £'000 £'000 £'000 £'000 £'000 £'000
Belgium fire 3,815 - (954) 2,861 9,721 (2,430) 7,291
Acquisition of Foods Connected (3,876) - - (3,876) - - -
Acquisition related costs 1,204 75 (229) 1,050 - - -
Reorganisation costs 2,040 - (319) 1,721 - - -
Total exceptional costs 3,183 75 (1,502) 1,756 9,721 (2,430) 7,291
Fire in Belgium
In June 2021 the Group's facility in Belgium suffered an extensive fire. The
Group continues to work closely with its insurers to progress related
insurance claims. The results for the period to 17 July 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.
Exceptional costs totalling £3,815,000 have been recognised in the period
relating to additional costs incurred in continuing to operate in Belgium and
in connection with the insurance claim and legal claims. An exceptional tax
credit of £954,000 has been recognised in respect of these costs.
In the prior period an exceptional impairment totalling £9,721,000 was
recognised in respect of assets that were destroyed by the fire. The
impairment recognised included £6,443,000 recognised in respect of property,
plant and equipment, £2,260,000 recognised in respect of leased right-of use
assets and £1,018,000 of costs relating, primarily, to the inventory that was
destroyed.
Impact of acquisition of Foods Connected Limited
On 7 July 2022 the Group acquired a further 15% interest in Foods Connected
Limited taking its total holding to 65% (see note 11) and the financial
position and performance of the business was fully consolidated from this
date. The Group's existing joint venture interest was effectively disposed of
at this date with an exceptional gain of £3,876,000, being the difference
between the carrying value and fair value of the joint venture interest,
recognised.
Reorganisation Costs
During the period exceptional reorganisation costs of £2,040,000 have been
recognised by the Group. These costs resulted from on-going efficiency and
restructuring programs resulting in redundancies at a number of facilities
operated by the Group. An exceptional tax credit of £319,000 has been
recognised in respect of these costs.
Acquisition Costs
During the year the Group has recognised exceptional acquisition costs for
Foppen in respect legal and professional fees and other related costs of
£1,204,000. A further £75,000 of exceptional finance costs have been
recognised related to short term acquisition bridge financing. An exceptional
tax credit of £229,000 has been recognised in respect of these costs.
6 Income tax expense
Income tax expense is recognised based on management's best estimate of the
weighted average annual income tax rate expected for the full financial year.
The estimated average annual tax rate used for the 28 weeks to 17 July 2022 is
25.7%. The estimated average annual effective tax rate for the 28 weeks ended
18 July 2021 was 21.1%.
7 Dividends
28 weeks ended 28 weeks ended
17 July 2022 18 July 2021
£'000 £'000
Final dividend paid 21.5p per ordinary share (2021: 19.0p) 19,143 15,561
Total dividends paid 19,143 15,561
The Directors have approved the payment of an interim dividend of 7.1p per
share payable on 2 December 2022 to shareholders who are on the register at 4
November 2022. This interim dividend, amounting to £6.4m has not been
recognised as a liability in these interim financial statements. It will be
recognised in shareholders' equity in the 52 weeks to 1 January 2023.
8 Earnings per share
Basic earnings per share are calculated by dividing the profit attributable to
equity holders of the Company by the weighted average number of ordinary
shares in issue during the period.
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
below is compared with the number of shares that would have been issued
assuming the exercise of the share options.
28 weeks ended 28 weeks ended
17 July 2022 18 July 2021
Basic Diluted Basic Diluted
Profit attributable to equity holders of the Company (£'000) 13,455 13,455 16,076 16,076
Weighted average number of ordinary shares in issue (thousands) 89,002 89,002 81,830 81,830
Adjustment for share options (thousands) - 1,221 - 1,447
Adjusted weighted average number of ordinary shares (thousands) 89,002 90,223 81,830 83,277
Basic and diluted earnings per share (pence) 15.1 14.9 19.6 19.3
9 Property, plant and equipment, right-of-use and intangible assets
Property, plant and equipment Lease: Right-of-use asset Intangible assets
£'000 £'000 £'000
28 weeks ended 18 July 2021
Opening net book amount as at 4 January 2021 290,846 235,135 70,071
Exchange adjustments (10,088) (9,272) 23
Additions 26,237 2,928 785
Disposals (41) - -
Lease modifications - (293) -
Depreciation and amortization (24,471) (7,708) (1,607)
Exceptional item (6,443) (2,260) -
Closing net book amount as at 18 July 2021 276,040 218,530 69,272
28 weeks ended 17 July 2022
Opening net book amount as at 3 January 2022 291,488 222,004 105,775
Exchange adjustments 7,996 2,994 175
Acquisition of subsidiaries 16,992 3,214 50,851
Additions 25,494 4,376 447
Disposals (109) - -
Lease modifications - 38 -
Fair value adjustments (note 11) 1,841 - 1,392
Depreciation and amortisation (26,959) (10,408) (4,908)
Closing net book amount as at 17 July 2022 316,743 222,218 153,732
The Group has commitments to purchase property, plant and equipment of
£11,557,000.
10 Investments
Investments in joint ventures
28 weeks ended 28 weeks ended 52 weeks ended
17 July 18 July 2 January
2022 2021 2022
£'000 £'000 £'000
At the beginning of the period 5,539 12,622 12,622
Acquisitions 1,190 - -
Profit for the period 721 952 1,925
Disposal of investment (note 11) (1,750) - (6,551)
Dividends received - (1,823) (2,273)
Effect of movements in foreign exchange 23 (123) (184)
At the end of the period 5,723 11,628 5,539
On 6 January 2022 the Group acquired a 50% interest in Agito Group Pty Ltd for
a consideration of £1.2m. Agito is an automation solutions provider based in
Australia.
On 7 July 2022 the Group acquired a further 15% interest in Foods Connected
Limited, taking its total holding to 65%, (see note 16). From this date the
financial position and performance of Foods Connected was fully consolidated
and the joint venture interest was effectively disposed of resulting in a gain
of £3,876,000.
11 Business combinations
Foppen Group B.V. Foods Connected Limited
Group £'000 £'000
Property, plant and equipment 16,921 71
Intangibles - 2,285
Brand and customer relationship intangibles 30,992 -
Lease: Right-of-use asset 3,214 -
Inventories 22,580 -
Trade and other receivables 13,555 1,231
Derivative financial instruments 2,785 -
Cash and cash equivalents - 230
Trade and other payables (16,542) (1,496)
Borrowings (56,937) -
Lease liabilities (3,214) -
Deferred tax - (14)
Goodwill 11,760 5,814
Fair value of assets acquired 25,114 8,121
Consideration:
Paid on completion 25,114 -
Issue of shares - 1,688
Non-controlling interest - 807
Deemed fair value of existing 50% interest - 5,626
25,114 8,121
2022
On 16 March 2022 the Group acquired 100% of the share capital of Dutch Seafood
Company BV (Foppen Group BV), a leading international producer of speciality
smoked salmon products.
On 7 July 2022 the Group completed the purchase of an additional 15% of Foods
Connected taking its interest from 50% to 65%. Foods connected provides
Software Solutions for Supply Chain, Procurement, Food Safety, Quality and
CSR.
Foppen Group BV
The acquisition of Foppen Group BV improves the access for Hilton to the
specialised smoked salmon market with a presence in the USA, Canada,
Netherlands and Greece. The additional markets provide an opportunity for the
Group to diversify its geographic presence whilst leveraging best practices
and cost savings with the existing UK Seafood business.
Consideration for the acquisition of Foppen totalled £25,114,000 paid
entirely in cash.
Customer relationship intangibles have been recognised and relate to the
supply agreements and long-standing relationships that Foppen has with its
customers. Brand intangibles have been recognised in respect of the Foppen
trading name and other brands employed by the business. The provisional fair
value of these intangible assets of £30,992,000 has 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 5-10 years.
The value of other assets and liabilities reflect the amounts expected to be
realised or paid respectively.
Goodwill of £11,760,000 has provisionally been recognised however, the
conclusion of the ongoing work in respect of the valuation of tangible and
intangible fixed assets acquired is expected to result in an additional
adjustment to the value currently being recognised. Residual goodwill is
expected to mainly relate to the strategic benefits for Hilton of diversifying
its product and geographic portfolio.
As a result of the timing of completion of the acquisition, fair values
presented for the Foppen acquisition reflect the initial assessment of fair
value and remain subject to amendment for one year from the date of
acquisition.
In the year the Group has recognised exceptional acquisition-related costs of
£1,204,000 in respect of legal and professional and other related activities
associated with acquisition activity.
Foods Connected Ltd
Consideration for the acquisition of the 15% interest in Foods Connected
totalled £1,688,000 comprised of Hilton Food Group plc shares. The
acquisition of Foods Connected provides an opportunity to deliver growth
through new customer agreements with retailers and manufacturers across Europe
and Australia and provides HFG control over the business.
As a result of the acquisition, and to allow full consolidation of Foods
Connected as a subsidiary the Group has recognised an exceptional gain of
£3,876,000 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, the exercise to assess the
fair values of assets and liabilities acquired is ongoing and therefore
amounts presented above are provisional and expected to change.
The provisional fair values of intangible assets disclosed above is the book
value recognised by Foods Connected at the date of acquisition. A review of
the value of intellectual property is currently being undertaken by qualified
valuers 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 Foods Connected
customer relationships.
Goodwill of £5,814,000 has provisionally been recognised in H1 2022, however,
the conclusion of the ongoing work in respect of the valuation of intangible
fixed assets acquired is expected to result in an additional adjustment to the
value currently being recognised. Residual goodwill is expected to mainly
relate to the strategic benefits for Hilton of diversifying its business and
the know-how of Foods Connected's employees.
The value of other assets and liabilities reflect the amounts expected to be
realised or paid, respectively.
Dalco Food BV Fairfax Meadow Europe Limited
Group £'000 £'000
Property, plant and equipment 5,933 6,782
Intangibles 113 -
Brand and customer relationship intangibles 10,192 11,766
Lease: Right-of-use asset 5,303 7,191
Inventories 8,143 7,982
Trade and other receivables 5,992 13,343
Trade and other payables (8,766) (16,782)
Borrowings (1,824) (8,504)
Lease liabilities (5,303) (7,094)
Deferred tax (627) (3,023)
Goodwill 7,619 3,685
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
2021
During 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 retail and food service
customers from its facilities in the Netherlands. The Group also 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
The acquisition of the remaining 50% of Dalco allowed the Group to take full
control of the business enabling it to diversify further 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.
Due to the timing of completion of the acquisition and the timing of other
acquisition activity undertaken by the Group in 2021, the assessment of the
fair values of assets and liabilities acquired was ongoing when the Group
reported its 2021 annual results and were therefore provisional.
Updated fair values are presented above and whilst they remain provisional,
they are not expected to change significantly before being finalised.
The fair value of property, plant and equipment acquired was established
following a review undertaken by qualified surveyors and reflects their
existing use value.
Customer relationship intangibles have been recognised and relate to the
supply agreements and long-standing relationships that Dalco has with its
customers. Brand intangibles have been recognised in respect of the Dalco
trading name. The fair value of these intangible assets of £10,192,000 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 5-10 years.
Goodwill of £7,619,000 has provisionally been recognised in H1 2022 compared
to £18,810,000 recognised in 2021 and relates 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's 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 reflects 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 £11,766,000 (£12,519,000 recognised
in FY 2021 accounts) 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.
Fair values presented for the Fairfax Meadow acquisition remain provisional
though are not expected to change significantly before being finalised.
12 Borrowings
17 July 18 July 2 January
2022 2021 2022
£'000 £'000 £'000
Current 30,389 40,829 224,732
Non-current 287,460 190,153 -
Total borrowings 317,849 230,982 224,732
Movements in borrowings is analysed as follows:
28 weeks ended 28 weeks ended 52 weeks ended
17 July 18 July 2 January
2022 2021 2022
£'000 £'000 £'000
Opening amount 224,732 245,987 245,987
Exchange adjustments 8,064 (7,790) (8,498)
New borrowings 313,618 16,815 67,062
Repayment of borrowings (228,565) (24,030) (79,819)
Closing amount 317,849 230,982 224,732
13 Ordinary shares
Number of Ordinary
shares shares Total
(thousands) £'000 £'000
At 4 January 2021 81,939 8,194 8,194
Issue of new shares on exercise of employee share options 211 21 21
At 18 July 2021 82,150 8,215 8,215
At 3 January 2022 88,935 8,893 8,893
Issue of new shares on exercise of employee share options 275 28 28
Issue of new shares relating to purchase of additional 15% interest in Foods 170 17 17
Connected
At 17 July 2022 89,380 8,938 8,938
On 7 July 2022 the Company issued 170,000 ordinary shares with a total market
value at the date set of issue of £1,687,723, equal to £9.91 per share, as
part of the consideration for the additional 15% interest in Foods Connected
(see note 11).
14 Related party transactions
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.
Transactions between related parties on an arm's length basis were as follows:
28 weeks ended 28 weeks ended 53 weeks ended
17 July 18 July 2 January
2022 2021 2022
Group sales: £'000 £'000 £'000
Dalco Food B.V. - 167 438
Sohi Meat Solutions Distribuicao de Carnes SA -
Fee for services 1,708 1,978 3,175
Sohi Meat Solutions Distribuicao de Carnes SA -
Recharge of joint venture costs 129 350 331
Group purchases: £'000 £'000 £'000
Foods Connected Limited 108 300 568
Amounts owing from related parties were as follows:
17 July 18 July 2 January
2022 2021 2022
£'000 £'000 £'000
Foods Connected Limited 56 134 4
Sohi Meat Solutions Distribuicao de Carnes SA 240 605 561
On 5 July 2022 the Group acquired a further 10% interest in its subsidiary
Hilton Foods Solutions Limited from Group CEO Philip Heffer, the consideration
for this acquisition was £1,150,000 and takes the Group's interest in Hilton
Foods Solutions Limited to 65%.
In the prior 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
Foods 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.
15 Financial instruments
The Group holds a number of financial instruments which are carried at cost
which is the equivalent of their fair value unless otherwise stated below.
The Group has derivative financial instruments amounting to £4,540,000 (2021:
£Nil). The derivative financial instruments are plain vanilla derivatives
including foreign currency options/forwards. The instruments that have a fair
value where specific valuation techniques are used to arrive at the carrying
value which include for foreign currency forwards - present value of future
cash flows based on the forward exchange rates at the balance sheet date and
for foreign currency options - option pricing models. These derivative
financial instruments are classified as Level 2
The fair values have been classified into three categories depending on the
inputs used in the valuation technique. The categories used are as follows:
The categories are as follows:
Level 1: quoted prices for identical instruments;
Level 2: directly or indirectly observable market inputs, other than Level 1
inputs; and
Level 3: inputs which are not based on observable market data.
16 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 underlying 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: Amortisation of intangibles & fair value adjustments Adjusted
28 weeks ended 17 July 2022 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Operating profit - excl. exceptional items 33,982 10,314 (8,414) 35,882 - 5,308 41,190
Exceptional items (3,183) - - (3,183) 3,183 - -
Operating profit 30,799 10,314 (8,414) 32,699 3,183 5,308 41,190
Net finance costs (11,247) 4,372 - (6,875) 75 - (6,800)
Profit before income tax 19,552 14,686 (8,414) 25,824 3,258 5,308 34,390
Profit for the period 14,528 14,033 (8,414) 20,147 1,756 4,142 26,045
Less non-controlling interest (1,073) (12) - (1,085) - - (1,085)
Profit attributable to members of the parent 13,455 14,021 (8,414) 19,062 1,756 4,142 24,960
Depreciation and amortisation 41,054 (10,314) - 30,740 - (5,308) 25,432
EBITDA 71,853 - (8,414) 63,439 3,183 - 66,622
Earnings per share pence pence pence
Basic 15.1 21.4 28.0
Diluted 14.9 21.1 27.7
Reported Add back: IFRS 16 depreciation and interest Less: IAS 17 lease accounting costs Reported excluding IFRS 16 Exceptional items Add back: Amortisation of intangibles & fair value adjustments Adjusted
28 weeks ended 18 July 2021 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Operating profit - excl. exceptional items 38,881 7,587 (8,764) 37,704 - 1,318 39,022
Exceptional items (9,721) 2,260 - (7,461) 7,461 - -
Operating profit 29,160 9,847 (8,764) 30,243 7,461 1,318 39,022
Net finance costs (7,508) 4,287 - (3,221) - - (3,221)
Profit before income tax 21,652 14,134 (8,764) 27,022 7,461 1,318 35,801
Profit for the period 17,085 12,566 (8,764) 20,887 5,596 1,067 27,550
Less non-controlling interest (1,009) - - (1,009) - - (1,009)
Profit attributable to members of the parent 16,076 12,566 (8,764) 19,878 5,596 1,067 26,541
Depreciation, amortisation and impairment 42,496 (9,870) - 32,626 (6,445) (1,318) 24,863
EBITDA 71,656 (23) (8,764) 62,869 1,016 - 63,885
Earnings per share pence pence pence
Basic 19.6 24.3 32.4
Diluted 19.3 23.9 31.9
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: Amortisation of intangibles & fair value adjustments Adjusted
28 weeks ended 17 July 2022 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Europe - excl. exceptional item 23,234 4,244 (1,151) 26,327 - 5,308 31,635
Exceptional items (5,855) - - (5,855) 5,855 - -
Europe 17,379 4,244 (1,151) 20,472 5,855 5,308 31,635
Australasia 14,177 6,070 (7,263) 12,984 - - 12,984
Central costs (757) - - (757) (2,672) - (3,429)
Total 30,799 10,314 (8,414) 32,699 3,183 5,308 41,190
Reported Add back: IFRS 16 depreciation and interest Less: IAS 17 lease accounting costs Reported excluding IFRS 16 Exceptional items Add back: Amortisation of intangibles & fair value adjustments Adjusted
28 weeks ended 18 July 2021 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Europe - excl. exceptional item 34,408 3,024 (3,421) 34,011 - 1,318 35,329
Exceptional items (9,721) 2,260 - (7,461) 7,461 - -
Europe 24,687 5,284 (3,421) 26,550 7,461 1,318 35,329
Australasia 12,452 4,563 (5,343) 11,672 - - 11,672
Central costs (7,979) - - (7,979) - - (7,979)
Total 29,160 9,847 (8,764) 30,243 7,461 1,318 39,022
Independent review report to Hilton Food Group plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Hilton Food Group plc's condensed consolidated interim
financial statements (the "interim financial statements") in the condensed
consolidated interim financial statements of Hilton Food Group plc for the 28
week period ended 17 July 2022 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Condensed Consolidated Balance sheet as at 17 July 2022;
· the Condensed Consolidated Income statement and the Condensed
Consolidated Statement of comprehensive income for the period then ended;
· the Condensed Consolidated Cash flow statement for the period
then ended;
· the Condensed Consolidated Statement of changes in equity for the
period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the condensed consolidated
interim financial statements of Hilton Food Group plc have been prepared in
accordance with UK adopted International Accounting Standard 34, 'Interim
Financial Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the condensed consolidated
interim financial statements and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the interim
financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with this ISRE. However, future events or
conditions may cause the group to
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The condensed consolidated interim financial statements, including the interim
financial statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the condensed
consolidated interim financial statements in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. In preparing the condensed consolidated interim financial
statements, including the interim financial statements, the directors are
responsible for assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the group or to cease operations, or have no realistic alternative
but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the condensed consolidated interim financial statements based on
our review. Our conclusion, including our Conclusions relating to going
concern, is based on procedures that are less extensive than audit procedures,
as described in the Basis for conclusion paragraph of this report. This
report, including the conclusion, has been prepared for and only for the
company for the purpose of complying with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority and for no other purpose. We do not, in giving this conclusion,
accept or assume responsibility for any other purpose or to any other person
to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Belfast
14 September 2022
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involve consideration of these matters and, accordingly, the auditors accept
no responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the website. Legislation in
the United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
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