REG - Hilton Food Grp Plc - Preliminary Results
03/04/2024 07:00
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RNS Number : 0608J Hilton Food Group PLC 03 April 2024
3 April 2024
Hilton Food Group plc Preliminary results
for the 52 weeks ended 31 December 2023
Robust financial and strong operational performance in 2023
Current trading in line with expectations
Business highlights - operational progress across all aspects of the business
· Seafood recovery delivered ahead of plan, returning to full year
operating profitability and supporting uplift in Group PBT
· Core Meat category continued to perform well; strong meat volume growth
in APAC and a resilient outturn in Europe and UK, achieved against
inflationary backdrop
· Growth of international customer base via new deal with Walmart in
Canada; organic growth achieved with existing customers, such as successful
launch of Swedish food park
· Action taken in vegan and vegetarian to successfully consolidate
business to single operating facility
· Industry-leading technology continued to provide competitive edge,
underpinning customer partnerships and supporting core business; further
headroom for growth
· Progress in Sustainable Protein Plan, a central foundation to our
commercial offer; more ambitious validated SBTi targets in line with 1.5°C
pathway
· Innovation across outstanding food products, supporting customers in
response to changing consumer trends. Great value protein ranges and healthy
new pre-prepared products launched
Financial overview - growth in revenue and volume; increase in profitability
driven by Seafood
· Revenues up 3.7% to £3.99bn with volume increase of 0.7%; adjusted
operating profit increased by 33.5% to £95.0m with statutory operating profit
up 59.4%
· Strong free cash inflow of £112.1m (2022: outflow £79.4m); remaining
a highly cash generative core business
· Net bank debt £139.7m (2022: £211.6m); year end net bank debt as a
percentage of adjusted EBITDA reduced to 1.0 times (2022: 1.8 times)
· Proposed final dividend of 23.0p, taking total dividend for 2023 to
32.0p (2022: 29.7p) reflecting the Board's confidence
2023 2022 Change
52 weeks to 31 December 2023 52 weeks to 1 January 2023 Reported Constant currency
Volume (tonnes) (1) 517,347 513,816 0.7% 0.7%
Revenue £3,989.5m £3,847.6m 3.7% 5.7%
Adjusted operating profit £95.0m £71.1m 33.5% 34.7%
Adjusted profit before tax £66.0m £55.5m 19.0% 20.3%
Adjusted basic earnings per share 52.8p 45.1p 17.1% 17.9%
Statutory operating profit £86.1m £54.0m 59.4%
Statutory profit before tax £48.6m £29.6m 64.2%
Statutory basic earnings per share 40.6p 19.8p 105.1%
Free cash flow £112.1m £-79.4m
Net bank debt (3) £139.7m £211.6m
Dividends paid and proposed in respect of the year 32.0p 29.7p 7.7%
Notes
1 Volume includes 50% share of the 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 17.
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 Net bank debt represents borrowings less cash and cash equivalents
excluding lease liabilities
Outlook and current trading
2024 trading has started in line with Board expectations although markets
remain challenging. We are confident the business is well placed, within a
large and attractive international market, to continue to deliver its strategy
to create long term value for shareholders, through its outstanding protein
products, dedicated partnerships, leading technology offer through Greenchain
Solutions and a robust sustainability plan.
Growth prospects are underpinned by the strength of our core meat business,
the continued recovery in seafood and in the medium term our recent
acquisitions and the developing relationship with Walmart in Canada. The
Group's financial position remains strong, with improving leverage and
headroom at comfortable levels, and we continue to explore new growth
opportunities with existing partners, wider geographic expansion and
complementary M&A.
Steve Murrells CBE Hilton Foods Chief Executive Officer, said:
"Over the past year we've remained focused on executing our strategy which has
resulted in a good performance against a challenging market. I am particularly
pleased with the results in our seafood category, returning to full year
operating profitability following a successful turnaround. Our core meat
category performed strongly and we worked closely with customers to offer the
highest quality and most relevant food products to consumers.
"As I set out at our investor day in November, Hilton Foods has the right
attributes in place to unlock growth organically and with new customers thanks
to our multi-category product offer, industry leading technology and rigorous
sustainability credentials. I'd like to thank all our teams across our markets
for their continued hard work and contribution over the year; we are
well-placed as we look to the future."
A presentation for analysts and investors will be held this morning at
09.00am, which will also be webcast. For access to the live webcast, please
register at the following link:
https://stream.brrmedia.co.uk/broadcast/65d774a3994661e3abf8ada5
(https://stream.brrmedia.co.uk/broadcast/65d774a3994661e3abf8ada5)
Enquiries
Hilton Foods
Tel: +44 (0) 1480 387214
Steve Murrells CBE, Chief Executive Officer
Matt Osborne, Chief Financial Officer
Headland Consultancy
Limited Tel: +44
(0) 20 3805 4822
Susanna
Voyle
Email: hiltonfood@headlandconsultancy.com
Will Smith
Joanna Clark
This announcement contains inside information.
About Hilton Foods
Hilton Foods 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 7,000
employees, operating from 24 technologically advanced food processing, packing
and logistics facilities across 19 markets in Europe, Asia Pacific and North
America. For 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
Hilton Foods has continued to make good strategic progress in a year of
continuing global and economic challenges. We have become a multi-category and
multichannel business, constantly and rapidly building our expertise, breadth
and scale in all four food categories and in our supply chain services offer
and we remain on the journey to our ambition to be the international food and
supply chain services partner of choice.
We have deep retailer partnerships with leading automation and processes
including physical automated conveyor air bridges installed in facilities in
Australia and New Zealand that link our processing facilities directly to our
customers' distribution centres to optimise the supply chain process bringing
significant logistics efficiency savings with lower carbon emissions.
During the year we signed a long term supply agreement with Walmart, a new
customer, and will build a green field facility in Eastern Canada to supply a
range of protein products to include beef, lamb, pork, seafood as well as some
added-value products. This new Hilton Foods facility will provide robotised
store order picking into Walmart's distribution centres.
We have also worked to develop our Greenchain Solutions business which offers
an integrated tech stack proposition combining our existing end-to-end supply
chain, manufacturing control and automation software expertise together with a
specialist flexible factory wide ERP system.
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
2023 saw a recovery in profitability with sales and volumes increasing which
continues a trend of continuous volume growth achieved in every year since
Hilton's flotation in 2007. Our UK Seafood business recovered strongly during
the year although market challenges in our vegetarian/vegan business remain.
We have taken steps to consolidate this business into a single operating
facility and we are confident in the opportunities that the category will
present for Hilton Foods over the coming years.
Hilton Foods generated strong operating cash flows during 2023 enabling
further significant investment in our facilities to increase capacity, improve
operational efficiency and offer innovative solutions to our retailer
partners. Hilton Foods has a robust balance sheet and operating well within
our banking covenants. This enables us to continue to invest to support the
growth of the business.
Dividend policy
The Group has maintained a progressive dividend policy since flotation and
remain confident that this continues to be appropriate. With the proposed
final dividend of 23.0p per ordinary share, total dividends in respect of 2023
will be 32.0p per ordinary share, an increase of 7.7% 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 partner with leading retail and foodservice
customers to produce high quality food products at scale that consumers
desire. Our principle of partnership extends to our suppliers, colleagues and
the communities in which we operate. We enable success through our passion for
innovation, improving supply chains, processes and packaging, and continually
developing our product ranges to best meet consumer needs. By creating
efficiency and flexibility in the food supply chain as an international food
processor and a supply chain service specialist we deliver growth for our
stakeholders.
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,
continuing to address succession planning and maintain 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. During the year Steve Murrells joined the Board as CEO replacing Philip
Heffer who has remained in the business as co-founder and Board advisor in a
part time capacity. Sarah Perry joined the Board as an independent
Non-Executive Director replacing Christine Cross.
The Board takes its responsibilities to promote the success of the Company for
the benefit of its stakeholders as a whole very seriously. 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
Our 2025 Sustainable Protein Plan remains at the heart of Hilton Foods and we
are encouraged by the progress being reported across the Group. When we
developed the Plan in 2021, we agreed a series of challenging targets, many of
them industry leading, such as our Science-Based Targets, to halve food waste
by 2030 and having 30% of women in leadership positions. It is a reflection of
the Hilton Foods culture and the commitment of management that many of these
targets have now been met. Additionally our updated, more challenging,
Science-Based Targets were approved in March 2024.
The starting point for the Plan was our point of difference as a company.
Hilton Foods operates in a privileged position, serving customers across
multiple markets and working in partnership with experts and leaders across
the food industry from farm to fork and beyond. This gives us the opportunity
to help drive targeted, practical changes and help tackle some of the biggest
problems facing the world.
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 Monday
20 May 2024 at noon. Please refer to our website at
www.hiltonfoods.com/investors/agm/ (http://www.hiltonfoods.com/investors/agm/)
for further guidance.
Robert Watson OBE
Chairman
2 April 2024
Chief Executive's summary
Strong performance in line with expectations
We have delivered a strong performance in a challenging environment through
focus on our core business and getting back to basics. Revenue has grown 5.7%
on a constant currency basis (up 3.7% at actual fx rates) whilst volume has
remained robust up 0.7% and adjusted profit before tax has recovered strongly,
up 19.0% from delivery of the turnaround plan in our seafood business.
Segment performance
UK and Ireland
Adjusted operating profit of £35.5m (2022: £13.6m) on revenue of £1,329.3m
(2022: £1,282.1m)
This operating segment covers the Hilton Foods businesses and joint ventures
in the UK and Ireland including meat processing facilities in the UK in
Huntingdon, seafood facilities in Grimsby, our food service business Fairfax
Meadow and our ROI meat facility in Drogheda.
Volumes were 3.0% lower with revenue increasing by 3.5% on a constant currency
basis (up 3.7% at actual fx rates) due to raw material price inflation.
Operating margins increased to 2.7% (2022: 1.1%) reflecting a strong
performance from the core meat businesses as well as improved profitability of
UK Seafood.
The turnaround of our UK Seafood business recovery has been delivered ahead of
plan, returning to full year operating profit and supporting the increase in
adjusted operating profit. I am very proud of the performance that the team
have delivered within our UK Seafood business over the last year, which has
been delivered through consolidating and driving the core offer, effective
inflation recovery and profitable new business wins supported by a sustainable
cost out plan. The foundations are strong and momentum now builds into 2024
and beyond.
Fairfax Meadow continues to grow revenues and win new business. They are
strategically well-placed, with a multi-category offer to capitalise on
further opportunities.
Europe
Adjusted operating profit of £40.9m (2022: £36.0m) on revenue of £1,045.3m
(2022: £972.6m)
This operating segment covers the Group's meat, easier meals, seafood, vegan
and vegetarian businesses and joint ventures in Holland, Sweden, Denmark,
Central Europe, Greece and Portugal.
Volumes were 2.0% lower with revenue increasing by 6.8% on a constant currency
basis (up 7.5% at actual fx rates) reflecting a full year of Foppen following
its acquisition in 2022 and raw material price inflation. Operating margins
were 3.9% (2022: 3.7%). We have delivered strong growth in the easier meals
category as shoppers sought quicker and easier meal solutions in Central
Europe and Scandinavia. We launched our fresh, convenience food park in Sweden
in the second half of the year serving our local partner there as well as in
Denmark where we provide highly localised pre-prepared products, which are in
great demand.
The business has taken decisive and timely action consolidating Dalco, our
vegan and vegetarian business, into a single operating facility right sizing
it in response to the structural market reset that has taken place in this
sector.
APAC
Adjusted operating profit of £30.3m (2022: £26.7m) on revenue of £1,615.0m
(2022: £1,592.9m)
In Australia, the Group operates three plants in Bunbury in Western Australia,
Melbourne and Brisbane. We also have a multi protein food park facility in
Auckland, New Zealand.
Volumes during the period increased strongly by 7.2%. Revenues were 6.7%
higher on a constant currency basis (up 1.4% at actual fx rates). Operating
margins increased to 1.9% (2022: 1.7%) largely attributable to the recovery of
higher interest costs under our cost plus contract. We continue to see strong
performance in the APAC region delivered through our partnership with
Woolworths. Across all our regions including APAC, we have supported our
customers to ensure they have relevant product ranges at affordable prices to
meet the changing needs of consumers at a time of economic uncertainty.
Outstanding food products
Hilton Foods is a business built on a passion for food. The food skills within
our innovation teams have supported our customers to have the right product
ranges on the shelf to successfully meet the needs of their consumers.
Combined with our insight experts we have driven growth across categories and
regions.
In Hilton Foods Australia, we have grown sales through developing great value
products in beef, pork, lamb and poultry including bigger, better value packs.
In the UK we have launched premium, award winning, Christmas centre piece
products and a new range of convenient ready to cook meals and within Europe
we have relaunched our new and improved sandwiches and wraps, and new,
healthier, ready meals.
Throughout 2023 we have continued to trial and roll out flow wrap packaging
for mince products in Holland, Sweden, Central Europe, UK and Ireland. Through
working in collaboration with our strategic supplier partners 70% of our
packaging is now recyclable, and we have reduced overall packaging weight by
1,200t*.
* versus base of 2020
Growing across international markets
Hilton Foods is uniquely placed to grow its product catalogue by region and
this is a key focus for the business as we seek to grow in our existing
markets. We have started with launching the fresh food park in partnership
with ICA in Sweden and began working with a new retail partner in Ireland.
Work is now underway, exploring the opportunity to increase our presence in
seafood products across the APAC region.
In September 2023 we announced that we have signed a new long-term partnership
with Walmart in Canada and will be serving their needs across meat and seafood
products alongside sortation services from our first facility in North
America.
Our primary focus remains on organic growth given the significant
opportunities we have. However we will continue to selectively explore any
complementary M&A, with strong returns and synergies, that arise.
Industry leading technology and facilities
Our industry-leading technology is a key element of our competitive edge,
facing into macro market trends including labour availability and cost, and
supply chain traceability and transparency. We provide highly efficient supply
chains to our partners through scalable robotics and cloud-based
infrastructure, allowing retailers to manage their full end-to-end value
chain, from specification to product quality and cost of production mapping.
The Foods Connected platform supports both our business and our customers'
businesses and their supply chains, optimising data-led decisions, driving
cost efficiency and enabling visibility of supply chain risks.
Our integrated technology offer supports our core food business and we have
further improved our highly automated food processing facilities, through our
joint venture with Agito. This year we have made investments in end of line
robotic automation in our UK meat and seafood facilities improving efficiency
and reduced reliance on labour.
As well as supporting our core food business, each of our technology
businesses are unlocking opportunities to commercialise their products and
services outside of Hilton Foods. In the year both Foods Connected and Agito
have won new customers in new geographies, and looking forward to 2024, our
food focused ERP system Evolve 4 will start to be rolled out to Hilton Foods
facilities.
The Sustainable Protein Plan
The Sustainable Protein Plan underpins everything we do and our sustainability
commitments are crucial to our teams, our customers and their customers. Our
principle of operating through partnership extends into sustainability where
we deliver positive change by collaborating throughout the supply chain. This
year we have continued to make progress on our commitments, with a reduction
of 13%* in scope 1 and 2 emissions, achieving ISO 50001 accreditation for our
energy management system across 10 of our facilities, and reducing our food
waste by 42%*. We have maintained our CDP rating of A- with improvements in
both categories of soy and timber. We continue to raise our standards with
more ambitious science based targets, in line with a 1.5̊ C pathway, which
were validated in March 2024.
* versus base of 2020
Looking forwards
Through our principle of being consumer led we are well placed to grow. The
strength and the longevity of our partnerships underpins everything that we
do. We can expand both with existing partners and into new territories. Our
strong financial position allows us to continue to invest in the future. In
November, we shared our medium-term financial ambitions and strategic capital
allocation framework to support our investment for long-term success. I
believe that Hilton Foods has all the right ingredients to deliver long-term
success.
Steve Murrells CBE
Chief Executive Officer
2 April 2024
Performance and financial review
Summary of Group performance
This performance and financial review covers the Group's financial performance
and position in 2023. Hilton Foods overall financial performance saw strong
profit growth reflecting the recovery in our UK Seafood business combined with
volumes and sales growth. 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 31 December
2023, with comparative information for the 52 week period ended 1 January
2023. 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 use these APMs to monitor and manage the
business's performance day-to-day and therefore believe they provide useful
additional information to shareholders and wider users of the financial
statements.
2023 Financial performance
Volume and revenue
Volumes grew by 0.7% in the year reflecting growth in APAC and full year
volumes at Foppen acquired in 2022. Additional details of volume growth by
business segment are set out in the Chief Executive's summary. Revenue
increased 3.7% (5.7% on a constant currency basis) reflecting higher raw
material prices and volume growth.
Operating profit and margin
Adjusted operating profit of £95.0m (2022: £71.1m) was 33.5% higher than
last year and 34.7% higher on a constant currency basis reflecting the
recovery in our Seafood business. IFRS operating profit was £86.1m (2022:
£54.0m) after charging £3.9m in exceptional costs (2022: £11.9m). The
operating profit margin in 2023 increased to 2.4% (2022: 1.8%) and the
operating profit per kilogram of packed food sold increased to 18.4p (2022:
13.8p) mainly reflecting the recovery in our Seafood business.
Net finance costs
Adjusted net finance costs, excluding exceptional items and lease interest,
increased to £28.9m (2022: £15.7m) reflecting the impact of higher market
interest rates and supply chain financing costs. Interest cover as a
proportion of adjusted operating profit in 2023 reduced to 2.3 times (2022:
4.5 times). IFRS net finance costs were £37.5m (2022: £24.4m).
Taxation
The adjusted taxation charge for the period was £17.2m (2022: £13.5m). The
effective tax rate was 26.0% (2022: 24.3%). The IFRS taxation charge was
£10.6m (2022: £10.1m) with an effective tax rate of 21.9% (2022: 34.2%).
Net income
Adjusted net income, representing profit for the year attributable to owners
of the parent, of £47.2m (2022: £40.2m) was 17.4% higher than last year and
18.3% higher on a constant currency basis. IFRS net income was £36.4m (2022:
£17.7m).
Earnings per share
Adjusted basic earnings per share 52.8p (2022: 45.1p) was 17.1% higher than
last year and 17.9% on a constant currency basis. IFRS basic earnings per
share were 40.6p (2022: 19.8p). Diluted earnings per share were 40.2p (2022:
19.7p).
Earnings before interest, taxation, depreciation and amortisation (EBITDA)
Adjusted EBITDA, which is used by the Group as an indicator of cash
generation, increased to £144.0m (2022: £119.9m). IFRS EBITDA was £165.6m
(2022: £131.8m).
Return on capital employed (ROCE)
ROCE, calculated as adjusted operating profit divided by average of opening
and closing capital employed representing total equity adjusted for net bank
cash/debt, leases, derivatives and deferred tax, was 18.3% (2022: 14.8%).
Free cash flow and net debt position
Operating cash flow was strong in 2023 with cash flows from operating
activities of £216.1m (2022: £98.3m) reflecting higher profits and
favourable working capital movements. IFRS free cash inflow, after capital
expenditure of £58.6m but before dividends and financing, was £112.1m (2022:
outflow £79.4m).
The Group closing net bank debt comprising borrowings less cash and cash
equivalents excluding lease liabilities, reduced to £139.7m (2022: £211.6m)
reflecting bank borrowings of £266.4m net of cash balances of £126.7m. Net
debt including lease liabilities was £366.6m (2022: £457.7m). Year end net
bank debt as a ratio of adjusted EBITDA reduced to 1.0 times (2022: 1.8
times).
At the end of 2023 the Group had undrawn committed bank facilities under its
syndicated banking facilities of £108.7m (2022: £106.4m). These banking
facilities are subject to covenants comprising net bank debt to EBITDA and
EBITDA interest cover. There was comfortable headroom under these covenants at
the end of the year for these metrics.
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 and has
recommended a final dividend of 23.0p per ordinary share in respect of 2023.
This, together with the interim dividend of 9.0p per ordinary share paid in
December 2023, represents an increase of 7.7% compared to last year at 29.7p
per ordinary share. The final dividend, if approved by shareholders, will be
paid on 28 June 2024 to shareholders on the register on 31 May 2024 and the
shares will be ex dividend on 30 May 2024.
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:
2023 2022 Definition, method of calculation and analysis
52 weeks 52 weeks
Financial KPIs
Revenue growth (%) 3.7% 16.5% Year on year revenue growth expressed as a percentage. The 2023 increase
reflects volume growth and higher raw material prices.
Adjusted operating profit margin (%) 2.4% 1.8% Adjusted operating profit expressed as a percentage of turnover. The
improvement in 2023 mainly reflects the recovery in our Seafood business.
Adjusted operating profit margin (pence per kg) 18.4 13.8 Adjusted operating profit per kilogram processed and sold in pence. The
increase in 2023 mainly reflects the recovery in our Seafood business.
Adjusted earnings before interest, taxation, depreciation and amortisation 144.0 119.9 Adjusted operating profit before depreciation and amortisation. The increase
(EBITDA) (£m) in 2023 mainly reflects the recovery in our Seafood business.
Return on capital employed (ROCE) (%) 18.3% 14.8% Adjusted operating profit divided by average of opening and closing capital
employed representing total equity adjusted for net bank cash/debt, leases,
derivatives and deferred tax. The increase in 2023 is primarily driven by
higher profitability.
Free cash flow (£m) 112.1 (79.4) IFRS cash inflow/(outflow) before minorities, dividends and financing. The
increase in 2023 is primarily attributable to i) improved operating cash flows
driven by higher profits and favourable working capital movements and ii) the
absence of acquisitions.
Net debt / EBITDA ratio (times) 1.0 1.8 Year end net bank debt as a percentage of adjusted EBITDA. The improvement in
2023 is due to strong profit and cash generation.
Non-financial KPIs
Growth in sales volumes (%) 0.7% 4.3% Year on year volume growth. Lower volume growth in 2023 reflected growth in
APAC and full year volumes at Foppen acquired in 2022.
Customer service level (%) 94.1% 95.9% 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 2024 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 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.
The Group renewed its banking facilities in 2022 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 2026. 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 the changing geopolitical and macroeconomic
environment, 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 the Group'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.
Matt Osborne
Chief Financial Officer
2 April 2024
Risk management and principal risks
Overview
Effective risk management at Hilton Foods is essential to the delivery of our
strategic objectives and aims to safeguard the interests of all our
stakeholders in an increasingly complex world. Our proactive approach to risk
management ensures the long term sustainable growth of all aspects of our
business and is integrated into everything we do.
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 Hilton Foods that might impede the
achievement of its strategic and operational objectives or affect performance
and cash position. As a leading international food and supply chain services
provider in a fast-moving environment it is critical that Hilton Foods
identifies, assesses and prioritises its risks. The result of this assessment
is a statement of principal risks 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 mitigating
actions, enables us to monitor, minimise and control both the probability and
potential impact of these risks.
How we manage risk
Hilton Foods 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. The internal audit function
provides independent assurance that Hilton Foods risk management, governance
and internal control processes are operating effectively. The Audit Committee
are regularly updated on the risk based assurance plan by the internal audit
function who maintain and review processes for risk identification and
assessment, measurement, control, monitoring and reporting.
Risk management process and risk appetite
The Board believes that 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.
At Hilton Foods we nurture a culture where everyone is required to be aware of
the risks facing the business and their responsibilities for managing them. To
support this we maintain and create an environment where employees feel
comfortable speaking up. Our processes for identifying existing and emerging
risks and responding collaboratively to them is managed by the Internal Audit
function. Identified risks are measured and assessed for likelihood and impact
allowing for the correct risk responses to be developed. Policies, procedures,
controls and other measures are put in place to mitigate risks. We use a suite
of preventative, detective and corrective controls.
Risk ownership is assigned to key leaders. This ownership is reviewed as part
of the ongoing risk management process. Mitigation plans and controls are
agreed in conjunction with the risk owner.
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 our 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 2023
Increasing geopolitical uncertainty
Escalating tensions in the Middle East, the ongoing conflict in Ukraine and
the prospect of disruption resulting from major political elections in 2024
increase the risk impacting our supply chains and operations. Disruption to
energy markets, global shipping and international trade can have far-reaching
impacts. Learnings from the Covid-19 pandemic have helped us to build
resilience in our supply chains and operations.
The macroeconomic environment
Although we expect energy price volatility and the acute cost of living crisis
to ease as the rate of food price inflation slows, consumer spending and
eating habits have been impacted. We recognise the effect of increasing
interest costs on all businesses and we continue to focus on ways of reducing
our exposure such as the use of cash pooling and exploring working capital
financing.
Our continued focus on cost control, innovation and factory efficiency is
enabling us to manage the inflationary pressures the industry is currently
facing. Through our strong customer relationships we are able to support
consumers to navigate through these challenging times.
Post-Brexit trade and regulatory landscape
We continue to monitor the UK and EU regulatory and trade environments as they
evolve and amend processes and operations as required. We are working closely
with our customers and supply chains to ensure preparation for the
implementation of changes to the UK Border processes through 2024. Our focus
on technology and automation further reduces our risk exposure in this area.
Principal risks
The most significant business risks that Hilton Foods 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 Hilton Foods, but rather to highlight those which are the most
significant.
Description of risk Its potential impact Risk mitigation measures and strategies adopted
Risk 1
The progress of Hilton Foods business is affected by the macroeconomic and No business is immune to difficult economic climates. The macroeconomic and Our strong growth model, based on successful diversification across different
geopolitical environment and levels of consumer spending. geopolitical landscape, exacerbated by the Ukrainian war, geopolitical tension proteins and expanding as a technology-led supply chain partner is built on
in the Red Sea region and current interest rates, is placing extraordinary our strong ESG credentials which underpin our business resilience.
financial pressures on our supply chains, operations, consumers and customers.
No movement
We continue to broaden product ranges with our strong retail partners,
The risk of energy price volatility and the ongoing cost of living crisis is maintaining a single-minded focus on minimising unit packing costs, whilst
impacting consumer spending and eating habits. As a result, our retail continuing to deliver high levels of product quality and integrity.
customers are under immense pressure to deliver value and are sharing that
pressure with supplier partners.
Hilton Foods is able to harness its innovative and agile approach with its
class-leading technology and systems to respond quickly and effectively to
macroeconomic challenges and opportunities.
We recognise the impact of increasing interest costs on all businesses and we
continue to focus on ways of reducing our exposure such as the use of cash
pooling and exploring working capital financing.
Risk 2
Hilton Foods growth potential may be affected by the success of our customers Hilton Foods products predominantly carry the brand labels of our customers so Hilton Foods plays a very proactive role in enhancing its customers' brand
and the growth of their packed food sales. our sales are dependent on the success of our customers and their consumer values, by providing high quality, competitively priced products, high service
perception which is increasingly influenced by environmental, social and levels, ongoing product and packaging innovation and category management
No movement governance (ESG) considerations. support. We recognise that quality and traceability assurance are integral to
our customers' brands and we work closely with customers to ensure rigorous
quality assurance standards are met. Our customers continuously measure
performance across a very wide range of parameters, including delivery time,
product specification, product traceability and accuracy of documentation. We
work closely with our customers to identify continuing improvement
opportunities across the supply chain, including enhanced product
presentation, extended shelf life and reduced wastage at every stage in the
supply chain.
Our ESG strategy underpins the growth of our product sectors for our customers
and supports them to reach their goals. Our ambitious 2025 Sustainable Protein
Plan is in partnership with our customers and suppliers as we engage in the
key collaborative initiatives that drive sustainability for our sectors and
raise the bar together.
We have set stretching goals that drive impactful actions that become
integrated into our core business practices. Our data collection platform,
Foods Connected, demonstrates the assurance of standards across our supply
chains, and allows us to measure progress towards our 2025 targets.
Risk 3
Hilton Foods strategy focuses on a small number of customers who can exercise Although Hilton Foods has historically relied on a few, influential retailers Hilton Foods is progressively widening its customer base, with the recent
significant buying power and influence when it comes to contractual renewal for a larger part of our revenue, this has diversified in recent years. The announcement of a partnership with Walmart Canada bringing further
terms at 1 to 15-year intervals. larger retail chains continue to focus on strengthening their market share of diversification to the customer portfolio. We maintain a high level of
protein products in the countries in which we operate, creating an investment in state-of-the-art facilities, which together with management's
No movement increasingly competitive retail environment. This has increased the buying and continuous focus on reducing costs, allows us to operate very efficiently at
negotiating power of our customers, which could enable them to seek better very high throughputs and price our products competitively.
terms over time.
Hilton Foods operates an entrepreneurial business structure, which enables us
During periods of unprecedented inflationary pressure, misalignment between to work very closely and flexibly with retail partners, in order to achieve
production costs and agreed operational packing rates may occur, potentially high service levels in terms of orders delivered, delivery times, compliance
impacting profitability. with product specifications and accuracy of documentation, all backed by an
uncompromising focus on food safety, product integrity and traceability
assurance.
Hilton Foods has long-term supply agreements in place with its major
customers, with pricing either on a cost plus or agreed packing rate basis.
The Group maintains an ongoing focus on cost control, innovation and factory
efficiency to manage inflationary pressures. Hilton continues to evolve and
respond to changing market conditions.
The provision of added value services in distribution and logistics deepens
the relationships we have with our retailer partners. Greenchain Solutions,
our technology and services business, offers an industry-leading technology
platform providing end-to-end supply chain and integrated automation
solutions. Investment in these services means that we are able to develop and
maintain a technology advantage within our industry.
Risk 4
As Hilton Foods continues to grow there is more reliance on key personnel and The Group may struggle to meet key strategic objectives and projects and fail The Group carefully manages its skilled resources including succession
their ability to manage growth, change, integration and compliance across new to adhere to regulatory and legislative requirements, which in turn detracts planning and maintaining a talent pipeline. The Group is evolving its people
legislative and regulatory environments. This risk increases as the Group from our performance delivery for our customers. capability balanced with an appropriate management structure within the
continues to expand with new customers and into new territories either
overall organisation. Hilton Foods continues to invest in on-the-job training
organically or through acquisition with potentially greater reliance on and career development, whilst recruiting high quality new employees, as
stretched skilled resource and execution of simultaneous growth projects.
required to facilitate the Group's ongoing growth. 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
movement
managed. To underscore our efforts, we have active relationships with strong
industry experts across all areas of business growth.
In the current climate, strong partnership and proximity to our customers are
fundamental. Hilton Foods leadership continues to develop its organisational
structures to ensure as close a relationship with our retail partners as
possible.
Risk 5
Hilton Foods business strength is affected by our ability to maintain a wide Hilton Foods is reliant on its suppliers to provide sufficient volume of Hilton Foods maintains a flexible global and local food supply base, which is
and flexible global food supply base operating at standards that can products, to the agreed specifications, in the very short lead times required progressively widening as it expands and is continuously audited to ensure
continuously achieve the specifications set by ourselves and our customers. by customers, with efficient supply chain management being a key business standards are maintained, so as to have in place a wide range of options
Increasing geopolitical tension has heightened this risk exposure into 2024. attribute. The Group has both local and global sourcing models. Current or should supply disruptions occur.
future tariffs, quotas or trade barriers imposed by supplier countries and
movement 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. We have also developed partnerships with key strategic suppliers who share our
commitment to quality, food safety, animal welfare and sustainability.
We engage with our suppliers through our supplier management platform, Foods
Connected where we track supply chain compliance, internal quality procedures
and manage the buying, planning and selling of our raw materials. This
provides further assurance through strengthening supply chain robustness and
transparency.
Risk 6
Contamination within the supply chain including outbreaks of disease and feed This will potentially affect Hilton Foods ability to procure sufficient Hilton Foods sources its food from a trusted raw material supply base, all
contaminants affecting livestock and fish. quantities of safe raw material. components of which meet stringent national, international and customer
standards. We are subject to demanding standards which are independently
No movement monitored in every country and reliable product traceability and high welfare
standards from the farm to the consumer are integral to our business model.
Full traceability from source to packed product is ensured across our
suppliers, supported by a comprehensive ongoing audit programme. 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 Such incidents could result in systems or manufacturing process stoppages with Hilton Foods has robust business continuity plans in place including sister
of key utilities could impact the Group's business continuity. consequent disruption and loss of efficiency which could impact the Group's site support protocols enabling other sites to step in with manufacturing and
sales. distribution of key product lines where necessary. Continuity management
No movement 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.
Risk 8
Hilton Foods IT systems could be subject to cyber-attacks, including Hilton Foods operations are underpinned by a variety of IT systems. Loss or Our robust IT control framework, including our Information Security Program is
ransomware and fraudulent external email activity. Such attacks are rapidly disruption to those IT systems or extended times to recover data or aligned with the National Institute of Standards and Technology (NIST)
increasing in frequency and sophistication, especially with the progression of functionality could disrupt our operations and affect our sales and Cybersecurity and ISO Frameworks. We proactively identify and assess
artificial intelligence. reputation. vulnerabilities in our systems through simulated attacks, annual penetration
testing and weekly vulnerability scans. Remediation procedures allow us to
correct potential weaknesses promptly. Testing is conducted by both internal
staff and specialist external bodies. We continuously improve our IT control
movement Unauthorised access to systems, both within our own network and in our supply framework which is applied consistently throughout the business and ensures
chains, could lead to loss of sensitive information. that our defences remain resilient in the face of evolving cyber threats.
The risk of cyber attack is exacerbated by increasing geopolitical Our Information Security Program places a strong emphasis on Incident
uncertainties. Reporting and Response. We are establishing a process for employees to
promptly report any potential security incidents, fostering a culture of
transparency and accountability. In the event of an incident, our response
protocols enable us to swiftly and effectively contain, eradicate, and recover
from security breaches.
Cyber awareness training plays a vital role in empowering our workforce to
recognise and report potential incidents. Frequent testing and simulations
help bolster the resilience of the organisation.
The Board and Risk Management Committee are regularly updated on cyber
security risk and mitigations. IT risk is considered when assessing new
ventures, new sites are required to comply with our minimum standards and
operating models. IT forms part of site business continuity exercises which
test and help develop the capacity to respond to possible crises or incidents.
There are regular IT security reviews to ensure compliance with expected
levels of updates to applications, servers and data centres.
Risk 9
A significant breach of health and safety legislation or accident resulting Such a situation could lead to reputational damage and regulatory penalties, Hilton Foods has established robust health and safety processes and procedures
from negligence or management oversight. The complexity of this risk increases including restrictions on operations, fines or personal litigation claims, or across its operations, including a Group oversight function which provides key
as the Group expands both geographically and into new product groups. worst case a fatality. guidance and support necessary to strengthen monitoring, best practice and
compliance. The Group has also rolled out an enhanced standardised safety
No movement framework. Health and safety performance is reviewed regularly by the Board.
We are in the process of rolling out a health and safety auditing platform to
support the strengthening of our current health and safety framework.
Risk 10
Hilton Foods business and supply chain is affected by climate change risks Potential physical impacts from climate change could include a higher We continue to develop our approach to climate change risk mitigation. We have
comprising both physical and transition risks. Physical risks include incidence of extreme weather events such as flooding, drought, and forest submitted more ambitious Science Based Targets across Scope 1, 2 and 3
long-term rises in temperature and sea levels as well as changes to the fires that could disrupt our supply chains and potentially impact production emissions aligned to the 1.5 ̊C pathway, to decarbonise our own operations
frequency and severity of extreme weather events. Transition risks include capabilities, increase costs and add complexity. Action taken by societies and supply chains. We have set energy and water efficiency targets for our
policy changes, reputational impacts, and shifts in market preferences and could reduce the severity of these impacts. sites and continue to engage in global collaborative action for
technology.
decarbonisation of our key raw materials. We have targets in place to deliver
net zero emissions from our operations and supply chain before 2050.
Governmental efforts to mitigate climate change may lead to policy and
No movement regulatory changes as well as shifts in consumer demand. The potential
transitional impacts include additional costs of low greenhouse gas emission Shifts in consumer demand are an opportunity for growth in our portfolio of
farming systems, and the potential of carbon price regulation aimed at plant based and seafood products. Additionally, we are ensuring we have the
shifting consumers to lower carbon foods, which may reduce the profitability flexibility to adapt our supply chains over time to mitigate physical
of some of our products. Additionally there is increased stakeholder focus on disruption.
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 We continue to review and develop our assessment of the key physical and
in lower demand for our products. transition risks impacting our business in line with the Task Force on
Climate-related Financial Disclosures (TCFD) recommendations.
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 2
April 2024 and is signed on its behalf by:
Directors
R Watson OBE Chairman
M Osborne Chief
Financial Officer
Consolidated statement of comprehensive income
2023 2022
52 weeks 52 weeks
Notes £'000 £'000
Continuing operations
Revenue 3 3,989,547 3,847,600
Cost of sales (3,559,185) (3,464,837)
Gross profit 430,362 382,763
Distribution costs (47,655) (42,028)
Other administrative expenses (293,288) (276,048)
Exceptional income - Insurance proceeds 4 9,776 -
Exceptional costs 4 (13,651) (11,896)
Total administrative expenses (297,163) (287,944)
Share of profit in joint ventures 585 1,235
Operating profit 86,129 54,026
Finance income 5 571 356
Finance costs 5 (38,062) (24,768)
Finance costs - net (37,491) (24,412)
Profit before income tax 48,638 29,614
Income tax expense (11,863) (10,267)
Exceptional tax income 4 1,221 145
Total income tax expense 6 (10,642) (10,122)
Profit for the period 37,996 19,492
Attributable to:
Owners of the parent 36,380 17,706
Non-controlling interests 1,616 1,786
37,996 19,492
Earnings per share attributable to owners of the parent during the year
Basic (pence) 7 40.6 19.8
Diluted (pence) 7 40.2 19.7
2023 2022
52 weeks 52 weeks
£'000 £'000
Profit for the period 37,996 19,492
Other comprehensive (expense)/income
Items that may be reclassified to profit or loss
Currency translation differences (745) 29
Gain on cash flow hedges 6,778 786
Other comprehensive income for the year net of tax 6,033 815
Total comprehensive income for the year 44,029 20,307
Total comprehensive income attributable to:
Owners of the parent 42,423 18,219
Non-controlling interests 1,606 2,088
44,029 20,307
The notes are an integral part of these consolidated financial statements.
Consolidated and Company Balance sheets
Group Company
2023 2022 2023 2022
Notes £'000 £'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 9 324,135 327,611 - -
Intangible assets 10 156,122 160,480 - -
Lease: right of use assets 11 194,083 216,578 - -
Investments 7,939 6,208 247,785 247,785
Deferred income tax assets 19,136 13,801 - -
701,415 724,678 247,785 247,785
Current assets
Inventories 179,741 206,729 - -
Trade and other receivables 277,754 271,160 5,667 5,875
Current tax assets - 5,995 - -
Financial assets at fair value through OCI 3,625 - - -
Cash and cash equivalents 126,715 87,224 416 186
587,835 571,108 6,083 6,061
Total assets 1,289,250 1,295,786 253,868 253,846
Equity
Equity attributable to owners of the parent
Ordinary shares 8,960 8,943 8,960 8,943
Share premium 144,926 144,926 144,926 144,926
Employee share schemes reserve 6,793 5,004 - -
Foreign currency translation reserve (2,992) (2,379) - -
Cashflow hedging reserve 7,442 786 - -
Other reserves (30,781) (30,781) 71,019 71,019
Retained earnings 175,963 167,862 28,961 28,958
310,311 294,361 253,866 28,958
Non-controlling interests 11,167 10,956 - -
Total equity 321,478 305,317 253,866 28,958
Liabilities
Non-current liabilities
Borrowings 13 237,792 270,510 - -
Lease liabilities 11 211,585 230,152 - -
Deferred income tax liabilities 14,743 15,921 - -
464,120 516,583 - -
Current liabilities
Borrowings 13 28,641 28,279 - -
Lease liabilities 11 15,276 16,006 - -
Trade and other payables 458,787 426,203 2 -
Financial liabilities at fair value through OCI 244 3,398 - -
Current tax liabilities 704 - - -
503,652 473,886 2 -
Total liabilities 967,772 990,469 2 -
Total equity and liabilities 1,289,250 1,295,786 253,868 28,958
The notes are an integral part of these consolidated financial statements.
R. Watson OBE M.
Osborne
Director
Director
Hilton Food Group plc - Registered number: 06165540
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 Cashflow hedge reserve Other reserves Retained earnings Total Non-controlling interests Total equity
Group Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 3 January 2022 8,893 142,043 (87) 6,990 (2,106) - (30,781) 176,449 301,401 6,548 307,949
Profit for the period - - - - - - - 17,706 17,706 1,786 19,492
Other comprehensive (expense)/income
Currency translation differences - - - - (273) - - - (273) 302 29
Gain/(Loss) on cash flow hedging - - - - - 786 - - 786 - 786
Total comprehensive income for the period - - - - (273) 786 - 17,706 18,219 2,088 20,307
Transactions with non-controlling interests - - - - - - - (801) (801) 3,584 2,783
Issue of new shares 50 2,883 - - - - - - 2,933 - 2,933
Adjustment in respect of employee share schemes - - - (655) - - - - (655) - (655)
Settlement of employee share scheme - - 87 (300) - - - - (213) - (213)
Tax on employee share schemes - - - (1,031) - - - - (1,031) - (1,031)
Dividends paid 8 - - - - - - - (25,492) (25,492) (1,264) (26,756)
Total transactions with owners 50 2,883 87 (1,986) - - - (26,293) (25,259) 2,320 (22,939)
Balance at 1 January 2023 8,943 144,926 - 5,004 (2,379) 786 (30,781) 167,862 294,361 10,956 305,317
Profit for the period - - - - - - - 36,380 36,380 1,616 37,996
Other comprehensive (expense)/income
Currency translation differences - - - - (613) - - - (613) (132) (745)
Gain on cash flow hedging - - - - - 6,656 - - 6,656 122 6,778
Total comprehensive income for the period - - - - (613) 6,656 - 36,380 42,423 1,606 44,029
Transactions with non-controlling interests - - - - - - - - - 150 150
Issue of new shares 17 - - - - - - - 17 - 17
Adjustment in respect of employee share schemes - - - 1,815 - - - - 1,815 - 1,815
Tax on employee share schemes - - (26) - - - - (26) - (26)
Dividends paid 8 - - - - - - - (28,279) (28,279) (1,545) (29,824)
Total transactions with owners 17 - - 1,789 - - - (28,279) (26,473) (1,395) (27,868)
Balance at 31 December 2023 8,960 144,926 - 6,793 (2,992) 7,442 (30,781) 175,963 310,311 11,167 321,478
Company
Balance at 3 January 2022 8,893 142,043 - - - - 71,019 28,850 250,805 - 250,805
Profit for the period - - - - - - - 25,600 25,600 - 25,600
Total comprehensive income for the year - - - - - - - 25,600 25,600 - 25,600
Issue of new shares 50 2,883 - - - - - - 2,933 - 2,933
Dividends paid 8 - - - - - - - (25,492) (25,492) - (25,492)
Total transactions with owners 50 2,883 - - - - - (25,492) (22,559) - (22,559)
Balance at 1 January 2023 8,943 144,926 - - - - 71,019 28,958 253,846 - 253,846
Profit for the period - - - - - - - 28,282 28,282 - 28,282
Total comprehensive income for the period - - - - - - - 28,282 28,282 - 28,282
Issue of new shares 17 - - - - - - - 17 - 17
Dividends paid 8 - - - - - - - (28,279) (28,279) - (28,279)
Total transactions with owners 17 - - - - - - (28,279) (28,262) - (28,262)
Balance at 31 December 2023 8,960 144,926 - - - - 71,019 28,961 253,866 - 253,866
The notes are an integral part of these consolidated financial statements.
Consolidated and Company Cash flow statements
Group Company
2023 2022 2023 2022
52 weeks 52 weeks 52 weeks 52 weeks
Notes £'000 £'000 £'000 £'000
Cash flows from operating activities
Cash generated from operations 14 216,125 98,312 - -
Interest paid (38,062) (24,768) - -
Income tax paid (11,129) (13,881) - -
Net cash generated from operating activities 166,934 59,663 - -
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired (413) (81,822) - -
Acquisition investments in associates (1,685) (1,764) - -
Issue/(repayment) of inter-company loan - - 227 (1,206)
Purchases of property, plant and equipment (55,428) (55,140) - -
Proceeds from sale of property, plant and equipment 975 261 - -
Purchases of intangible assets (4,190) (1,622) - -
Interest received 571 356 - -
Dividends received - - 28,282 25,600
Dividends received from joint venture 468 672 - -
Insurance proceeds for property, plant, and equipment 4,906 - - -
Net cash (used in)/generated from investing activities (54,796) (139,059) 28,509 24,394
Cash flows from financing activities
Purchase of non-controlling interest - (1,151) - -
Proceeds from borrowings 15 11,372 295,790 - -
Repayments of borrowings (38,313) (228,565) - -
Payment of lease liability (14,585) (15,631) - -
Issue of ordinary shares - 1,133 - 1,133
Dividends paid to owners of the parent (28,279) (25,492) (28,279) (25,492)
Dividends paid to non-controlling interests (1,545) (1,264) - -
Net cash (used in)/generated from financing activities (71,350) 24,820 (28,279) (24,359)
Net increase/(decrease) in cash and cash equivalents 40,788 (54,576) 230 35
Cash and cash equivalents at beginning of the year 87,224 140,170 186 151
Exchange (losses)/gains on cash and cash equivalents 15 (1,297) 1,630 - -
Cash and cash equivalents at end of the year 126,715 87,224 416 186
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 period represents the 52 weeks to 31 December 2023 (prior
financial period 52 weeks to 1 January 2023).
This preliminary announcement was approved for issue on 2 April 2024.
2 Summary of significant accounting policies
The accounting policies are consistent with those of the annual financial
statements for the year ended 1 January 2023.
Basis of preparation
The consolidated and company financial statements of Hilton Food Group plc
have been prepared under the historical cost convention except for certain
financial assets and liabilities measured at fair value 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 31 December
2023 and 1 January 2023 but is derived from those accounts. Statutory accounts
for 2022 have been delivered to the Registrar of Companies and those for 2023
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 four operating segments: i) UK & Ireland which comprises the Group's
operations in United Kingdom and Republic of Ireland; ii) Europe which
includes the Group's operations in the Netherlands, Sweden, Denmark, Central
Europe and Portugal; iii) APAC comprising the Group's operations in Australia
and New Zealand; and iv) Central costs. Previously, the UK & Ireland and
Europe segments were reported on a combined basis as "Europe" but following
the changes to the Group's organisational structure have now been shown
separately. The restated segments are shown in the tables below.
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:
UK & Ireland Europe APAC Central costs UK & Ireland Europe APAC Central costs
2023 2022
Total Total
Group £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Total revenue 1,389,095 1,061,406 1,614,975 - 4,065,476 1,349,055 999,300 1,592,946 - 3,941,301
Inter-co revenue (59,827) (16,102) - - (75,929) (66,969) (26,732) - - (93,701)
Third party revenue 1,329,268 1,045,304 1,614,975 - 3,989,547 1,282,086 972,568 1,592,946 - 3,847,600
Adjusted operating profit/(loss) segment result (see note 17) 35,492 40,851 30,277 (11,639) 94,981 13,629 36,043 26,705 (5,233) 71,144
Amortisation of acquired intangibles (5,084) (4,432) - - (9,516) (2,449) (5,808) - - (8,257)
Exceptional items (1,778) (1,950) - (147) (3,875) (2,214) (6,800) - (2,882) (11,896)
Impact of IFRS 16 553 662 3,282 42 4,539 487 428 2,120 - 3,035
Operating profit/(loss) segment result 29,183 35,131 33,559 (11,744) 86,129 9,453 23,863 28,825 (8,115) 54,026
Finance income 35 137 399 - 571 6 350 - - 356
Finance costs (9,107) (10,512) (13,817) (4,626) (38,062) (2,829) (5,265) (5,336) (11,338) (24,768)
Income tax (expense)/credit (2,725) (4,822) (6,087) 2,992 (10,642) 771 (4,240) (7,505) 852 (10,122)
Profit/(loss) for the period 17,386 19,934 14,054 (13,378) 37,996 7,401 14,708 15,984 (18,601) 19,492
Depreciation, amortisation and impairment 23,341 19,559 35,974 555 79,429 26,787 12,989 37,640 353 77,769
Additions to non-current assets 29,565 21,078 8,260 715 59,618 33,408 12,789 9,643 1,167 57,007
Segment assets 404,751 397,551 431,684 36,128 1,270,114 412,651 357,285 481,229 24,825 1,275,990
Current income tax assets - 5,995
Deferred income tax assets 19,136 13,801
Total assets 1,289,250 1,295,786
Segment liabilities 187,225 199,881 380,598 184,621 952,325 184,209 202,694 466,492 121,153 974,548
Current income tax liabilities 704 -
Deferred income tax liabilities 14,743 15,921
Total liabilities 967,772 990,469
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 17). 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
APAC.
Analysis of revenues from external customers and non-current assets are as
follows:
Revenues from external customers Non-current assets excluding deferred tax assets
2023 2022 2023 2022
Group £'000 £'000 £'000 £'000
Analysis by geographical area
United Kingdom - country of domicile 1,265,333 1,184,006 223,058 257,481
Netherlands 475,790 446,387 117,829 56,671
Belgium 18,994 26,915 94 883
Sweden 245,202 237,438 24,392 9,119
Republic of Ireland 89,054 83,686 5,184 3,008
Denmark 123,098 131,845 16,207 16,468
Central Europe 154,722 142,905 23,735 23,717
APAC 1,617,354 1,594,418 271,780 343,530
3,989,547 3,847,600 682,279 710,877
Analysis by principal customer
Customer 1 1,107,282 1,100,571
Customer 2 337,832 341,289
Customer 3 243,501 230,716
Customer 4 120,770 124,506
Customer 5 1,447,520 1,430,806
Other 732,642 619,712
3,989,547 3,847,600
4 Exceptional items
Operating profit Tax Profit
after tax
2023 2023 2023
Group £'000 £'000 £'000
Fire in Belgium 7,711 - 7,711
Insurance proceeds (9,776) - (9,776)
Impairment 1,955 (282) 1,673
Reorganisation costs 3,985 (939) 3,046
Total exceptional costs/(income) 3,875 (1,221) 2,654
Operating profit Tax Profit
after tax
2022 2022 2022
Group £'000 £'000 £'000
Fire in Belgium 9,500 - 9,500
Acquisition of Foods Connected Ltd (2,701) - (2,701)
Acquisition related costs 1,204 - 1,204
Reorganisation costs 3,893 (145) 3,748
Total exceptional costs/(income) 11,896 (145) 11,751
Fire in Belgium
In June 2021 the Group's facility in Belgium suffered an extensive fire.
Exceptional costs totalling £7,711,000 (2022 cost £9,500,000) have been
recognised in the period relating to additional costs incurred in continuing
to operate in Belgium including the ongoing insurance and legal claim.
Insurance Proceeds.
The Group received an interim insurance payment of £9,776,000 related to the
Fire Insurance claims in Belgium with further insurance claims pending. The
results for the period to 31 December 2023 do not include potential additional
income that may be received in respect of these claims. The balance of
insurance proceeds are considered to be contingent assets. 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 these claims to be remote.
Impairment
Dalco announced the closure of one of its sites during the year. This closure
allows us to optimise production and drive efficiencies at a single site
creating a centre of excellence for our vegan and vegetarian production. An
exceptional impairment charge of £1,200,000 has been recognised in respect of
property, plant, and equipment. An additional impairment of £755,000 has been
taken in respect of computer software in Belgium. An exceptional tax credit of
£282,000 has been recognised in respect of these costs.
Reorganisation Costs
During the period exceptional reorganisation costs of £3,985,000 have been
recognised by the Group. These costs resulted from on-going efficiency and
restructuring programs which led to redundancies at a number of facilities
operated by the Group. An exceptional tax credit of £939,000 has been
recognised in respect of these costs.
5 Finance income and finance costs
2023 2022
Group £'000 £'000
Finance income
Interest income on short term bank deposits 565 63
Other interest income 6 293
Finance income 571 356
Finance costs
Bank borrowings (20,056) (12,241)
Interest on lease liabilities (8,556) (8,758)
Supply chain finance interest (8,248) (2,721)
Other interest expense (1,202) (1,048)
Finance costs (38,062) (24,768)
Finance costs - net (37,491) (24,412)
6 Income tax expense
2023 2022
Group £'000 £'000
Current income tax
Current tax on profits for the period 17,088 13,697
Adjustments to tax in respect of previous periods (160) 195
Total current tax 16,928 13,892
Deferred income tax
Origination and reversal of temporary differences (5,769) (3,753)
Adjustments to tax in respect of previous periods (517) (17)
Total deferred tax (6,286) (3,770)
Income tax expense 10,642 10,122
Deferred tax charged directly to equity during the period in respect of
employee share schemes amounted to £26,000 (2022: charge £1,031,000).
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 tax on the Group's profit before income tax differs from the theoretical
amount that would arise using the standard rate of UK Corporation Tax of 23.5%
(2022: 19%) applied to profits of the consolidated entities as follows:
2023 2022
£'000 £'000
Profit before income tax 48,638 29,614
Tax calculated at the standard rate of UK Corporation Tax 23.5% (2022: 19%) 11,430 5,627
Effects of:
Expense/(income) not deductible for tax purposes (202) 1,074
Joint venture received net of tax (137) (238)
Adjustments to tax in respect of previous periods (677) 178
Profits taxed at rates other than 23.5% (2022: 19%) 1,310 5,867
Impact of change in tax rates 59 (398)
Non-taxable gain on acquisition of JV - (513)
Unrecognised losses carried forward/(brought forward) 566 (444)
Deferred tax recognised in reserves (26) (1,031)
Accelerated capital allowances (1,681) -
Income tax expense 10,642 10,122
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 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 Group 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 Group'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.
2023 2022
Group Basic Diluted Basic Diluted
Profit attributable to owners of the parent (£'000) 36,380 36,380 17,706 17,706
Weighted average number of ordinary shares in issue (thousands) 89,544 89,544 89,234 89,234
Adjustment for share options (thousands) - 895 - 690
Adjusted weighted average number of ordinary shares (thousands) 89,544 90,439 89,234 89,924
Basic and diluted earnings per share (pence) 40.6 40.2 19.8 19.7
8 Dividends
2023 2022
Group and Company £'000 £'000
Final dividend in respect of 2022 paid Final dividend paid in year pence per 20,221 19,143
share 22.6p per ordinary share (2022: 21.5p)
Interim dividend in respect of 2023 paid Interim Dividend paid pence per share 8,058 6,349
9p per ordinary share (2022: 7.1p)
Total dividends paid 28,279 25,492
The Directors propose a final dividend of 23.0p (2022: 22.6p) per share
payable on 28 June 2024 to shareholders who are on the register at 31 May
2024. This dividend totalling £20.6m (2022: £20.2m) 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 3 January 2022 111,676 460,998 18,616 308 591,598
Exchange adjustments 3,313 15,110 654 25 19,102
Acquisition (note 12) 6,040 11,443 1,263 81 18,827
Additions 6,484 44,946 3,591 119 55,140
Transfer - 496 100 - 596
Disposals (7) (1,171) (47) - (1,225)
At 1 January 2023 127,506 531,822 24,177 533 684,038
Accumulated depreciation
At 3 January 2022 33,779 250,865 15,418 48 300,110
Exchange adjustments 1,122 7,960 406 17 9,505
Charge for the period 7,623 36,529 2,712 121 46,985
Transfer - 496 100 - 596
Disposals (7) (717) (45) - (769)
At 1 January 2023 42,517 295,133 18,591 186 356,427
Net book amount
At 3 January 2022 77,897 210,133 3,198 260 291,488
At 1 January 2023 84,989 236,689 5,586 347 327,611
Cost
At 2 January 2023 127,506 531,822 24,177 533 684,038
Exchange adjustments (491) (12,570) (309) (9) (13,379)
Acquisition (note 12) - - 5 - 5
Additions 3,016 51,882 451 79 55,428
Transfer 400 (9,561) 7,624 2 (1,535)
Disposals (881) (31,043) (1,939) (91) (33,954)
At 31 December 2023 129,550 530,530 30,009 514 690,603
Accumulated depreciation and impairment
At 2 January 2023 42,517 295,133 18,591 186 356,427
Exchange adjustments (550) (5,523) (209) (5) (6,287)
Charge for the period 7,018 37,264 3,264 82 47,628
Exceptional impairment (note 4) - 1,200 - - 1,200
Disposals (803) (29,667) (1,939) (91) (32,500)
At 31 December 2023 48,182 298,407 19,707 172 366,468
Net book amount
At 31 December 2023 81,368 232,123 10,302 342 324,135
The cost and net book amount of property plant and equipment in the course of
its construction included above comprise plant and machinery £32,357,000
(2022: £26,877,000).
10 Intangible assets
Computer software Brand and customer relationships Goodwill Total
Group £'000 £'000 £'000 £'000
Cost
At 3 January 2022 16,751 35,079 69,482 121,312
Exchange adjustments 19 - - 19
Acquisition (note 12) 2,849 37,452 21,105 61,406
Impact of finalising fair value of prior year acquisitions (note 12) - 9,440 (8,053) 1,387
Additions 1,867 - - 1,867
Transfer (596) - - (596)
At 1 January 2023 20,890 81,971 82,534 185,395
Accumulated amortisation
At 3 January 2022 5,204 10,333 - 15,537
Charge for the period 2,019 7,955 - 9,974
Transfer (596) - - (596)
At 1 January 2023 6,627 18,288 - 24,915
Net book amount
At 3 January 2022 11,547 24,746 69,482 105,775
At 1 January 2023 14,263 63,683 82,534 160,480
Cost
At 2 January 2023 20,890 81,971 82,534 185,395
Exchange adjustments (419) - - (419)
Acquisition (note 12) 1 343 1,325 1,669
Additions 4,190 - - 4,190
Transfer 1,535 - - 1,535
Disposals (22) - - (22)
At 31 December 2023 26,175 82,314 83,859 192,348
Accumulated amortisation and impairment
At 2 January 2023 6,627 18,288 - 24,915
Exchange adjustments (274) - - (274)
Charge for the period 2,538 8,314 - 10,852
Exceptional impairment (note 4) 755 - - 755
Disposals (22) - - (22)
At 31 December 2023 9,624 26,602 - 36,226
Net book amount
At 31 December 2023 16,551 55,712 83,859 156,122
Amortisation charges are included within administrative expenses in the income
statement.
Goodwill Impairment Testing
Goodwill includes Seachill UK Limited £44,000,000 (purchased 2017), SV
Cuisine Limited £2,789,000 (purchased 2021), Dalco £10,168,000 (purchased in
2021), Fairfax Meadow Limited £3,685,000 (purchased in 2021), Dutch Seafood
Company BV (Foppen) £17,805,000 (purchased in 2022), Foods Connected Ltd
£3,300,000 (controlling interest purchased in 2022) and Evolve 4 Group
£1,325,000 (purchased 2023). Each business is considered to be a separate
cash generating units. The recoverable amount of the cash generating units was
calculated based on a value-in-use 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 9.3%-13.4%
(2022: 9.6%-10%) based on the country and cash generating unit with a growth
rate of 2%-8% (2022: 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 cash generating unit most sensitive to changes in assumptions, given the
current challenges in the alternative proteins market is Dalco. The
recoverable amount of the Dalco cash generating unit, calculated on a value in
use basis, exceeded its carrying value and therefore no impairment was
required. Key assumptions applied in the calculations of the recoverable
amount were forecast EBITDA, a pre-tax discount rate of 9.3% and a growth rate
of 2%.
The calculations are sensitive to changes in these assumptions with reasonable
possible changes in assumptions being an increase in the discount rate of
0.5%pts, a reduction in growth rate of 0.5%pts or a reduction in budgeted
cashflows of 5%. However, applying these reasonable sensitivities individually
would not give rise to an impairment.
The impact in running reasonable sensitivities did not result in a material
impairment in any of the other CGU's subject to impairment testing.
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 period
Goodwill and other intangible assets totalling £1,325,000 has been
provisionally recognised following the acquisition of Evolve 4 Group forming a
separate cash generating unit in the period (see note 12). The individual cash
generating units have been tested for impairment in the 2023 financial period.
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 3 January 2022 211,773 7,234 2,997 222,004
Exchange Adjustments 5,946 230 80 6,256
Additions 2,462 2,272 1,101 5,835
Acquisition (note 12) 3,106 - 108 3,214
Remeasurements, reclassification and scope changes 120 - (71) 49
Depreciation (17,105) (1,945) (1,730) (20,780)
Closing net book amount at 1 January 2023 and 2 January 2023 206,302 7,791 2,485 216,578
Exchange Adjustments (9,703) (105) (17) (9,825)
Additions - 4,123 996 5,119
Reclassification 3,990 (2,584) (1,406) -
Remeasurements, reclassification and scope changes 1,012 175 18 1,205
Depreciation (16,086) (2,225) (683) (18,994)
Closing net book amount at 31 December 2023 185,515 7,175 1,393 194,083
Lease liabilities 2023 2022
Group £'000 £'000
Current 15,276 16,006
Non-current 211,585 230,152
226,861 246,158
Maturity analysis - contractual undiscounted cash flows 2023 2022
Group £'000 £'000
Less than one year 22,945 22,645
One to five years 80,502 86,449
More than five years 198,430 220,081
Total lease liabilities 301,877 329,175
(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 2023 2022
Group £'000 £'000
Buildings 16,086 17,105
Plant & equipment 2,225 1,945
Vehicles 683 1,730
18,994 20,780
Interest expenses (included in finance costs) 8,556 8,758
Expenses relating to short-term leases (included in costs of goods sold and 1,130 748
administrative expenses)
The total cash outflow for leases in 2023 was £22,699,00 (2022:
£24,387,000).
Variable Lease Payments
Leases with liabilities recognised of £9,014,000 (2022: £9,476,000),
accounting for 3.7% (2022: 3.8%) 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 2023, lease
liabilities would have increased by 2023: £5,588,000 (2022: £4,536,000).
In addition, leases with liabilities recognised totalling £3,606,000 (2022:
£5,021,000), accounting for 1.5% (2022: 2.0%) 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 31 December
2023, lease liabilities would have increased by £338,000 (2022: £1,054,000).
12 Business combinations
2023
On 29 August 2023 the Group acquired 80% of the share capital of Evolve 4
Group Limited a software provider of ERP systems for the food and drink
manufacturing industry.
Evolve 4 Group Limited
Group £'000
Property, plant and equipment 5
Intangibles-Computer Software 1
Brand and customer relationship intangibles 343
Trade and other receivables 294
Cash and cash equivalents 42
Trade and other payables (1,315)
Deferred tax 53
Goodwill 1,325
Fair value of assets acquired 748
Consideration
Paid on completion 455
Deferred Payment 143
Non-controlling interest 150
748
Evolve 4 Group Limited
Consideration for the acquisition the 80% interest in Evolve 4 Group Limited
totalled £598,000. The acquisition of Evolve 4 Group provides an opportunity
to deliver growth through new agreements with manufacturers in the foods and
drinks industry across Europe and Australia, but also provides HFG a flexible
and tailored ERP system to support increasing efficiencies of the core HFG
operations.
Due to the timing of the acquisition by the Group in 2023, the assessment of
the fair value of assets and liabilities acquired, and Goodwill was treated as
provisional and is subject to further valuation by the Group.
Goodwill of £1,325,000 has provisionally been recognised in 2023. Residual
goodwill relates to the strategic benefits for Hilton of diversifying its
business and the know-how of Evolve 4 employees.
The value of other assets and liabilities reflect the amounts expected to be
realised or paid, respectively.
The acquired business contributed revenues of £453,000 and operating profit
of £123,000 to the group for the period from 29 August to 31 December 2023.
13 Borrowings
2023 2022
Group £'000 £'000
Current
Bank borrowings 28,641 28,279
Non-current
Bank borrowings 237,792 270,510
Total borrowings 266,433 298,789
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:
2023 2022
Currency £'000 £'000
UK Pound 83,228 79,878
Euro 82,550 88,432
Danish Kroner - 837
Polish Zloty 7,780 9,666
Australian Dollar 73,504 93,162
New Zealand Dollar 19,371 26,814
266,433 298,789
Bank borrowings are repayable in quarterly instalments from 2022 - 2027 with
interest charged at SONIA (or equivalent benchmark rates) plus 1.95% - 2.10%.
Bank borrowings are subject to joint and several guarantees from each active
Group undertaking.
The Group has undrawn committed loan facilities of £109m (2022: £106m).
The undiscounted contractual maturity profile of the Group's borrowings is
described in a note to the full financial statements.
Group net debt is analysed as per note 15.
14 Cash generated from operations
2023 2022
Group £'000 £'000
Profit before income tax 48,638 29,614
Finance costs - net 37,491 24,412
Operating profit 86,129 54,026
Adjustments for non-cash items:
Share of post-tax profits of joint venture (585) (1,235)
Depreciation of property, plant and equipment 47,628 46,985
Depreciation of leased assets 18,994 20,780
Impairment of property, plant and equipment 1,200 -
Impairment of intangible asset 755 -
Insurance proceeds adjustments for property, plant, and equipment (4,906) -
Amortisation of intangible assets 10,852 9,974
Gain on acquisition of Foods Connected Ltd (2022) - (2,701)
Loss/(gain) on disposal of fixed assets (76) -
Adjustment in respect of employee share schemes 1,855 (655)
Changes in working capital:
Inventories 22,769 (23,741)
Trade and other receivables (14,865) (14,443)
Trade and other payables 46,375 9,322
Cash generated from operations 216,125 98,312
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.
2023 2022
Group £'000 £'000
Cash and cash equivalents 126,715 87,224
Borrowings (including overdrafts) (266,433) (298,789)
Net bank debt (139,718) (211,565)
Lease liabilities (226,861) (246,158)
Net debt (366,579) (457,723)
Cash/other financial assets Borrowings (including overdrafts) Net bank debt Lease liabilities Net debt
Net debt reconciliation £'000 £'000 £'000 £'000 £'000
At 2 January 2022 140,170 (224,732) (84,562) (243,396) (327,958)
Cash flows (54,576) 228,565 173,989 15,631 189,620
Lease additions - - - (5,835) (5,835)
Acquisition - (56,938) (56,938) (3,214) (60,152)
Repaid on acquisition - 56,938 56,938 - 56,938
New borrowings - (295,790) (295,790) - (295,790)
Exchange adjustments 1,630 (6,832) (5,202) (9,306) (14,508)
Other changes - - - (38) (38)
At 1 January 2023 87,224 (298,789) (211,565) (246,158) (457,723)
Cash flows 40,746 38,313 79,059 14,585 93,644
Lease additions - - - (5,119) (5,119)
Acquisition 42 - 42 - 42
New borrowings - (11,372) (11,372) - (11,372)
Exchange adjustments (1,297) 5,415 4,118 9,831 13,949
At 31 December 2023 126,715 (266,433) (139,718) (226,861) (366,579)
16 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 period were as follows:
Group 2023 2022
Sales £'000 £'000
Sohi Meat Solutions Distribuicao de Carnes SA - fee for services 3,426 3,190
Sohi Meat Solutions Distribuicao de Carnes SA - recharge of joint venture 467 409
costs
Agito Holdings Limited 211 464
Group 2023 2022
Purchases £'000 £'000
Agito Holdings Limited 6,203 259
Amounts owing from related parties at the year end were as follows:
Owed from related parties
2023 2022
Group £'000 £'000
Agito Holdings Limited 1,855 464
Sohi Meat Solutions Distribuicao de Carnes SA 1,631 374
Sphere Design Limited 189 -
Cellular Agriculture Ltd 406 -
4,081 838
Amounts owing to related parties at the year end were as follows:
Owed to related parties
2023 2022
Group £'000 £'000
Agito Holdings Limited 401 259
Sohi Meat Solutions Distribuicao de Carnes SA 117 55
518 314
17 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 uses these measures to
assess business performance internally and therefore believe they provide
useful additional information about the Group's performance and aids a more
effective comparison of the Group's underlying 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 31 December 2023 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Operating profit - excluding exceptional items 90,004 18,910 (23,449) 85,465 - 9,516 94,981
Exceptional items (3,875) - - (3,875) 3,875 - -
Operating profit 86,129 18,910 (23,449) 81,590 3,875 9,516 94,981
Net finance costs (37,491) 8,556 - (28,935) - - (28,935)
Profit before income tax 48,638 27,466 (23,449) 52,655 3,875 9,516 66,046
Profit for the period 37,996 24,521 (23,449) 39,068 2,654 7,133 48,855
Less non-controlling interest (1,616) - - (1,616) - - (1,616)
Profit attributable to members of the parent 36,380 24,521 (23,449) 37,452 2,654 7,133 47,239
Depreciation, amortisation and impairment 79,429 (18,903) - 60,526 (1,955) (9,516) 49,055
EBITDA 165,558 7 (23,449) 142,116 1,921 - 144,037
Earnings per share pence pence pence
Basic 40.6 41.8 52.8
Diluted 40.2 41.4 52.2
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 1 January 2023 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Operating profit - excluding exceptional items 65,922 20,780 (23,815) 62,887 - 8,257 71,144
Exceptional items (11,896) - - (11,896) 11,896 - -
Operating profit 54,026 20,780 (23,815) 50,991 11,896 8,257 71,144
Net finance costs (24,412) 8,758 - (15,654) - - (15,654)
Profit before income tax 29,614 29,538 (23,815) 35,337 11,896 8,257 55,490
Profit for the period 19,492 28,215 (23,815) 23,892 11,751 6,370 42,013
Less non-controlling interest (1,786) (3) - (1,789) - - (1,789)
Profit attributable to members of the parent 17,706 28,212 (23,815) 22,103 11,751 6,370 40,224
Depreciation and amortisation 77,769 (20,780) - 56,989 - (8,257) 48,732
EBITDA 131,795 - (23,815) 107,980 11,896 - 119,876
Earnings per share pence pence pence
Basic 19.8 24.8 45.1
Diluted 19.7 24.6 44.7
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 31 December 2023 £'000 £'000 £'000 £'000 £'000 £'000 £'000
UK & Ireland 29,183 3,242 (3,795) 28,630 1,778 5,084 35,492
Europe 35,131 4,021 (4,683) 34,469 1,950 4,432 40,851
APAC 33,559 11,530 (14,812) 30,277 - - 30,277
Central costs (11,744) 117 (159) (11,786) 147 - (11,639)
Total 86,129 18,910 (23,449) 81,590 3,875 9,516 94,981
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 1 January 2023 £'000 £'000 £'000 £'000 £'000 £'000 £'000
UK & Ireland 9,453 3,202 (3,689) 8,966 2,214 2,449 13,629
Europe 23,863 5,467 (5,895) 23,435 6,800 5,808 36,043
APAC 28,825 12,111 (14,231) 26,705 - - 26,705
Central costs (8,115) - - (8,115) 2,882 - (5,233)
Total 54,026 20,780 (23,815) 50,991 11,896 8,257 71,144
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