Interim Results

RNS Number : 2182Z

Hilton Food Group PLC

17 September 2020

 

17 September 2020

Hilton Food Group plc

Interim results for the 28 weeks to 12 July 2020

Strong execution and growth during challenging circumstances

Hilton Food Group plc, the leading specialist international food packing business, is pleased to announce its interim results for the 28 weeks to 12 July 2020.

Financial and strategic highlights

	2020	2019	Change
	28 weeks to 12 July 2020	28 weeks to 14 July 2019	Reported	Constant currency
Volume 1 (tonnes)	237,340	193,608	22.6%
Revenue	£1,264.2m	£912.1m	38.6%	40.0%
Adjusted results 2
Adjusted operating profit	£31.5m	£26.7m	17.9%	19.6%
Adjusted profit before tax	£28.1m	£24.5m	14.6%	16.1%
Adjusted basic earnings per share	25.9p	22.8p	13.6%	15.4%
IFRS results
Operating profit	£31.3m	£26.2m	19.6%
Profit before tax	£24.0m	£19.9m	21.0%
Basic earnings per share	22.3p	17.4p	28.2%
Cash flows from operating activities	£35.4m	£8.1m
Net bank debt 3	£131.7m	£97.3m
Interim dividend	7.0p	6.0p	16.7%

Notes

1.	Volume includes 50% share of the Australian, Portuguese and Dutch joint venture activities
2.	Adjusted results represent the IFRS results before deduction of acquisition intangibles amortisation £1.3m (2019: £1.3m) and IFRS 16 lease adjustments as detailed in the Alternative performance measures note 14. Unless otherwise stated financial metrics in the Financial and strategic highlights, Review of operations and Financial review refer to the adjusted results
3.	Net bank debt represents borrowings less cash and cash equivalents and other financial asset

●	Higher demand due to increased consumption at home due to Covid-19
●	Strong volume and revenue growth in Australia and UK alongside higher raw material prices
●	Supply to customers resilient with all facilities remaining fully operational, although with increased Covid mitigation costs
●	Operating profit up 19.6%* to £31.5m and basic earnings per share up 15.4%* to 25.9p
●	Agreement with Delhaize for a new facility in Belgium due to open in October 2020
●	Australia joint venture transition period concluded with purchase of assets relating to the joint venture
●	Interim dividend increased from 6.0p to 7.0p, an increase of 16.7%

* On a constant currency basis

Commenting on the results, Executive Chairman Robert Watson OBE, said:

"I am extremely proud of the commitment and resilience shown by the entire Hilton team to step up and adapt quickly to the challenges caused by Covid-19 in order to safeguard our people, keep our facilities open and support our customers. This response underpinned a strong performance with volume and profit growth demonstrating the robustness and sustainability of our business.

"Hilton continues to invest in new facilities in Belgium and New Zealand which, together with the further development of our fish and vegetarian categories will ensure future growth. As with all businesses there remain uncertainties concerning the full impact of Covid-19 including potential recessionary risks but our wide geographical spread and the fact we serve the food retail sector make us believe we are well placed to meet any future challenges.

"Our financial position remains strong and we continue to explore opportunities to invest and grow the business both domestically and in overseas markets with both new and existing customers. Our full year results are expected to be in line with the Board's expectations."

Enquiries:

Hilton Food Group	Tel: [phone]
Robert Watson OBE , Executive Chairman
Philip Heffer, Chief Executive Officer
Nigel Majewski, Chief Financial Officer

Citigate Dewe Rogerson	Tel: [phone]
Angharad Couch
Ellen Wilton

This announcement contains inside information.

Cautionary statement

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

Review of operations

The Group is presenting its interim results for the 28 week period to 12 July 2020, together with comparative information for the 28 weeks to 14 July 2019. These interim results are prepared in accordance with IAS 34 as adopted by the European Union (EU).

Global pandemic

The Covid-19 outbreak continues to present major challenges across the globe with ongoing uncertainty over its longevity and impact. As part of the global food supply chain we were tasked with keeping our facilities open, protecting our people and supporting our retailer partners. All of our facilities have remained fully operational and without interruption. Lockdown and travel restrictions have resulted in more cooking at home thereby creating higher demand for our products. Hilton's performance has therefore been a continuation of our business growth albeit at an increased level of activity together with specific measures introduced to manage our exposure to the virus. There has been communication with key suppliers to ensure the continued supply of goods and services and also alignment with our customers in our response. We are extremely proud of the commitment and resilience shown by the entire Hilton team to step up and adapt quickly to the challenges caused by Covid-19 in order to safeguard our people, keep our facilities open and support our customers.

The health and wellbeing of our people is paramount and we established all necessary protocols to protect them and minimise contact, prioritising those that are most susceptible to Covid-19 including those with underlying health conditions. Our mitigation actions have included extensive cleaning regimes, hand-sanitising stations and social distancing together with the use of face masks, visors, screens, temperature monitoring and track and trace procedures. We have also invested in air purification units and introduced Covid marshals together with an employee pre-arrival screening questionnaire via our app. Travel by our colleagues is strictly managed and visitors minimised as are all movements within our facilities. Our office-based staff were able to quickly switch to effective remote working from home and are being supported as required including use of virtual meeting software with minimal business disruption. The introduction of the measures outlined above have increased our costs accordingly, partly offset by lower travel costs.

We have not sought or received any governmental assistance or support including no use of furlough in our production facilities. There have been no Covid-related changes to employee pay and conditions and no redundancies. Employees having to isolate due to the virus have remained on full pay. In addition, there have been no commercial changes in trading with our suppliers and customers.

Hilton remains financially strong with significant cash balances and undrawn loan facilities and we continue to operate well within our banking covenants. The Board is satisfied that the Group has adequate headroom under its existing facilities to continue to operate and to maintain its dividend policy.

Performance overview

Hilton's business is based on a total partnership approach with its customers and suppliers forged over many years. We operate production facilities in seven countries across Europe and Australia and also work with a number of joint venture partners. The wide geographical spread of the Group's operations is a significant strength of our business model. Hilton is well placed in the current Covid climate as it almost exclusively serves the retail sector.

Performance in the period saw volume growth of 22.6% attributable to our new Australian facility, UK and increased home consumption driven by Covid. Revenue and profit also increased the latter despite increased Covid-related costs. Operating margin was lower at 13.2p per kg (2019: 13.8p per kg) and the margin % was 2.5% (2019: 2.9%) mainly due to higher Australia unit revenues, more resourcing and also Covid-related costs.

Hilton's results, reported in Sterling, are sensitive to changes in the value of Sterling compared to the range of overseas currencies in which the Group trades. Over the 28 weeks to 12 July 2020 the average exchange rates for these overseas currencies generally weakened slightly against Sterling compared with the corresponding period in 2019 which has the effect of reducing revenues by 1.4%.

Europe

Operating profit of £31.3m (2019: £27.9m) on turnover of £1,036.1m (2019: £904.5m)

This operating segment covers the Group's meat, fish and vegetarian businesses and joint ventures in the UK, Holland, Ireland, Sweden, Denmark, Poland and Portugal. Our products are sold in 13 countries across Europe.

Volumes increased by 10.2% largely reflecting higher demand due to increased UK participation with Tesco UK following the increase in retail packed red meat to 100% from mid-2019 and increased home consumption driven by Covid. There was also growth across the region particularly at Dalco, our vegetarian joint venture business, although the impact of Covid on the food service sector has adversely affected our trading business. Turnover increased by 14.9% on a constant currency basis reflecting the higher volumes and also increases in raw material prices. Operating margins were steady at 3.0% (2019: 3.1%).

During the period we began preparing our new Belgium facility which is due to open in October 2020.

Australasia

Operating profit of £7.5m (2019: £4.7m) on turnover of £228.1m (2019: £7.6m)

In Australia, the Group has operated a joint venture with Woolworths since 2013 earning service fees based on retail packed meat produced at plants in Bunbury, Western Australia and Melbourne, Victoria. We took full operational control of these plants from July 2018 and additionally opened a new facility in Brisbane, Queensland in July 2019.

Volumes, including our share of the JV, increased by 100.6% during the period driven by the opening of the new Brisbane facility and increased demand. Sales, which excludes the JV activities, increased to £228.1m (2019: £7.6m) and operating profit increased to £7.5m (2019: £4.7m) reflecting the higher volumes.

The joint venture transition period concluded during the period with the purchase of the assets, on 30 June 2020, for A$69.3m (£36.1m) of the Bunbury, Western Australia and Melbourne, Victoria facilities. Completion of our new meat and fish facility in New Zealand has been delayed due to the Covid travel restrictions and this facility is now expected to open during Q3 2021.

Strategic progress

During the period we reached agreement with Delhaize, a leading retailer in Belgium, to pack all its red meat requirements from a site in Belgium covering beef, pork and lamb which is due to open in October 2020. Delhaize operates approximately 800 stores in Belgium and Luxembourg and this represents a further extension of our working relationship with Ahold Delhaize.

In Australia our working relationship with Woolworths has further evolved with the end of the joint venture transition period and purchase of the JV assets.

Investments in our facilities

Hilton continues to invest in all its facilities maintaining state of the art levels required to service our customers' growth, extend the range of products supplied to those customers and deliver both first class service levels and further increases in production efficiency. This investment ensures we can achieve low unit costs and competitive selling prices at increasingly higher levels of production throughput. Capital expenditure during the period was £60.7m (2019: £56.8m) which included the purchase of the Australia joint venture assets, investment in the new facility in New Zealand and also further investments across the Group to increase operational efficiency and automation.

Outlook

Hilton continues to invest in new facilities in Belgium and New Zealand which, together with the further development of our fish and vegetarian categories will ensure future growth. As with all businesses, there remain uncertainties concerning the full impact of Covid-19 including potential recessionary risks but our wide geographical spread and the fact we serve the food retail sector make us believe we are well placed to meet any future challenges.

Our financial position remains strong and we continue to explore opportunities to invest and grow the business both domestically and in overseas markets with both new and existing customers. Our full year results are expected to be in line with the Board's expectations.

Financial review

The Board uses adjusted profit before IFRS 16, acquired intangibles amortisation and exceptional items to measure performance and considers this metric better reflects the underlying performance of the business. The adjustment for acquisition intangibles amortisation of £1.3m (2019: £1.3m) is mainly in connection with the 2017 Seachill acquisition. Unless otherwise stated financial metrics refer to the adjusted results.

Hilton's underlying financial performance was strong. Turnover increased by 38.6% to £1,264.2m (2019: £912.1m) and by 40.0% on a constant currency basis driven by higher volumes. Further details of turnover and volume growth by segment are detailed in the Review of operations above.

Operating profit for the first 28 weeks of 2020 was £31.5m, 17.9% higher than in the previous year (2019: £26.7m) and 19.6% higher on a constant currency basis in line with volume growth. The operating profit margin reduced to 2.5% (2019: 2.9%) mainly due to higher Australia unit revenues, more resourcing and also Covid-related costs.  IFRS operating profit for the first 28 weeks of 2020 was £31.3m (2019: £26.2m).

Net finance costs increased to £3.5m (2019: £2.3m) mainly reflecting higher borrowings relating to capital expenditure. Interest cover was 9 times (2019: 12 times). IFRS net finance costs were £7.3m (2019: £6.3m).

The taxation charge for the period was £6.0m (2019: £4.8m) representing an effective underlying tax rate of 21.5%, an increase on last year (2019: 19.5%) including a higher level of income in Australia which is taxed at higher rates. The IFRS taxation charge was £5.0m (2019: £4.5m) representing an effective underlying tax rate of 20.7% (2019: 22.8%).

Net income, representing profit for the year attributable to owners of the parent, of £21.2m was 14.0% above last year (2019: £18.6m) reflecting higher operating profit partially offset by higher interest and taxation charges. IFRS net income was £18.2m (2019: £14.2m).

Basic earnings per share in the first 28 weeks of 2020, at 25.9p, were 13.6% above last year's level reflecting the growth in operating profit. IFRS basic earnings per share were 22.3p (2019: 17.4p).

EBITDA increased to £49.0m for the period (2019: £39.2m) reflecting the increase in operating profits together with higher depreciation charges. IFRS EBITDA was £61.3m (2019: £49.2m).

In the first 28 weeks the Group absorbed £22.9m of cash outflow, before minorities, dividends and financing (2019: cash outflow £51.2m) which included significant capital expenditure comprising investments in new facilities in New Zealand together with the purchase of the Australia joint venture assets thereby increasing our borrowings. Net cash generated from operations at £35.4m (2019: £8.1m) returned to more normalised higher levels.

Cash balances at 12 July 2020 were £111.1m, which together with the other financial asset and net of borrowings of £242.8m, resulted in net bank debt of £131.7m (£97.3m at 14 July 2019 and £86.8m at 29 December 2019). At 12 July 2020 the Group had undrawn committed loan facilities of £62.3m (£71.1m at 29 December 2019).

The Directors consider that, given the Group's strong financial position, it is appropriate to maintain its dividend policy and have approved the payment of an interim dividend of 7.0p per ordinary share (2019: 6.0p). This interim dividend amounting to £5.7m will be paid on 27 November 2020 to shareholders on the register at close of business on 30 October 2020.

Going concern

The Directors have performed a detailed assessment, including a review of the Group's budget and forecasts for the 2020 financial year and its longer term plans, including consideration of the principal risks faced by the Group. The evolving Covid-19 outbreak has led to an increased demand for protein-based products produced by the Group and the Group's facilities remain fully operational. The Group has established business continuity plans and flexible supply models in order to continue to meet this increased demand. The resilience of the Group in the face of the uncertain challenges presented by Covid-19 has been assessed by applying significant downside sensitivities to the Group's cash flow projections. Allowing for these sensitivities and potential mitigating actions the Board is satisfied that the Group is able to continue to operate well within its banking covenants and has adequate headroom under its existing committed facilities. The Directors are satisfied that the Company and the Group have adequate resources to continue to operate and meet its liabilities as they fall due for the foreseeable future, a period considered to be at least 12 months from the date of signing these interim financial statements.

The Group's borrowings are detailed in note 10 to this report and the principal banking facilities which support the Group's existing and contracted new business are committed, with no renewal required until 2022. The Group continues to be in compliance with all its banking covenants. Future expansion which is not yet contracted for, and which is not built into internal budgets and forecasts, may require additional or extended banking facilities and such future expansion will depend on our ability to negotiate appropriate additional or extended facilities as and when required.

The financial position of the Group including its cash flows, liquidity position and borrowings are described above, with its business activities and the factors likely to affect its future development, performance and position being covered in the Review of operations. As at the date of this report the Directors have a reasonable expectation that the Group has adequate resources and, having reassessed the principal risks, consider it appropriate to adopt the going concern basis of accounting in preparing the interim financial statements.

The principal risks and uncertainties facing the Group's businesses

Hilton has well developed processes and structures for identifying and subsequently mitigating the key risks which the Group faces. The most significant risks and uncertainties faced by the Group, together with the Group's risk management processes are detailed in the review of Risk management and principal risks on pages 24 to 27 of the Hilton Food Group plc 2019 Annual report. The principal risks and uncertainties identified in that report were:

●	The Group strategy focuses on a small number of customers who can exercise significant buying power and influence when it comes to contractual renewal terms at 5 to 15 year intervals;
●	The Group's growth potential may be affected by the success of its customers and the growth of their packed food sales;
●	The progress of the Group's business is affected by the macroeconomic environment and levels of consumer spending which is influenced by publicity and the decline in the consumption of meat in the countries in which it operates;
●	Under growth conditions the Group's business is reliant on a small number of key personnel and its ability to manage growth and change successfully. This risk has increased with the Group's continued expansion with new customers and into new territories with potentially greater reliance on stretched skilled resource and execution of simultaneous growth projects;
●	The Group's current rate of global growth places significant demands on the effectiveness of integration and compliance across new political, legislative and regulatory environments. This risk is further compounded due to the enormity of the change and programme management activities;
●	The Group's business strength is affected by its ability to maintain a wide and flexible global food supply base operating at standards that can continuously achieve the specifications set by Hilton and its customers;
●	Contamination within the supply chain including outbreaks of disease and feed contaminants affecting livestock and fish and media concerns relating to these and instances of product adulteration can impact the Group's sales;
●	Significant incidents such as fire, flood or interruption of supply of key utilities could impact the Group's business continuity; and
●	The Group's IT systems could be subject to cyber-attacks including ransomware and fraudulent external email activity. These kinds of attacks are generally increasing in frequency and sophistication.

The Covid-19 outbreak continues to present major challenges across the globe that we recognise is a significant risk for our business. There is uncertainty over i) whether continued governmental efforts to suppress the infection peak and ultimately eliminate the virus can be sustained and ii) the timing and effectiveness of any vaccine. Therefore the necessary measures we have introduced to manage our exposure to, and mitigate the impact of, this pandemic are likely to be required for some time. To date all of our facilities have remained fully operational and without interruption. Potential risks, impacts and risk mitigation measures and strategies include:

Potential Risk	Potential impact	Risk mitigation measures and strategies adopted
Rise in Covid-19 positive cases within the workforce	o Reduction in available skilled operatives o Production limitation	o  Controlled entry to all sites o  Temperature monitoring o  Extensive cleaning regimes and hand-sanitising stations o  Use of face masks, visors and screens o  Track and trace procedures following all positive cases o  Restriction on all travel and remote working from home o  Virtual meeting software o  Isolation of vulnerable employees o  Enhanced communication to all employees via app, posters and briefings o  Executive leadership focus and direction o  Business continuity plans including sister site support
Key suppliers affected by rate of Covid-19 transmission	o  Interruption in supply chain	o  Critical assessment of key supplies o  Timely communication with key suppliers to agree strategy to ensure the continued supply of goods and services
Local authority intervention	o Regional lockdown measures reintroduced o Potential closure of site due to rise in positive cases o Mass testing requirement	o  Continuation of Covid-19 protective measures o  Partnership arrangement with local authorities to share best practice

The risks and uncertainties outlined above had no material adverse impact on the results for the 28 weeks to 12 July 2020 and are expected to remain unchanged for the remainder of the 2020 financial year.

The Hilton Food Group plc 2019 Annual report also identified emerging risks including Brexit and climate changes. We continue to monitor post Brexit negotiations on a trade deal and future co-operation with the EU as the end of the transition period approaches. Potential impacts on the Group include our ability to hire employees, increased trade tariffs on imported goods, possible border delays, currency volatility and dis-harmonisation of UK and EU regulatory standards in a range of areas. Our exposure is somewhat mitigated through our predominantly local sourcing and operating model. Additionally we meet regularly with relevant industry bodies and have put in place a range of contingency measures including rebalancing supply lines to minimise border crossings, flexible buy models and ongoing communication with suppliers to increase stock holdings. Overall, we still believe that the Hilton business is sufficiently resilient to withstand these uncertainties whilst minimising disruption.

Philip Heffer

Chief Executive Officer

Nigel Majewski

Chief Financial Officer

16 September 2020

Statement of Directors' responsibilities

The Directors confirm that the condensed consolidated interim financial statements (the "interim financial statements") have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

(a) an indication of important events during the first 28 weeks and their impact on the interim financial statements, and a description of principal risks and uncertainties for the remaining 25 weeks of the financial year; and

(b) material related party transactions in the first 28 weeks and any material changes in related party transactions described in the last annual report.

The Directors of Hilton Food Group plc were listed in the 2019 Hilton Food Group plc Annual report and financial statements. The only change in Directors since 29 December 2019 has been the appointment of Rebecca Shelley. A list of current Directors is maintained on the Hilton Food Group plc website at www.hiltonfoodgroupplc.com .

On behalf of the Board

Robert Watson OBE

Executive Chairman

Nigel Majewski

Chief Financial Officer

Income statement

		28 weeks ended	28 weeks ended
		12 July 2020	14 July 2019
Continuing operations	Notes	£'000	£'000
Revenue	4	1,264,155	912,067
Cost of sales		(1,112,825)	(791,391)
Gross profit		151,330	120,676
Distribution costs		(12,064)	(10,538)
Administrative expenses		(111,361)	(87,321)
Share of profit in joint venture		3,403	3,361
Operating profit	4	31,308	26,178
Finance income		1	78
Finance costs		(7,272)	(6,393)
Finance costs - net		(7,271)	(6,315)
Profit before income tax		24,037	19,863
Income tax expense	5	(4,969)	(4,527)
Profit for the period		19,068	15,336
Profit attributable to:
Owners of the parent		18,218	14,202
Non-controlling interests		850	1,134
		19,068	15,336
Earnings per share for profit attributable to owners of the parent
- Basic (pence)	7	22.3	17.4
- Diluted (pence)	7	22.1	17.2

Statement of comprehensive income
		28 weeks ended	28 weeks ended
		12 July 2020	14 July 2019
		£'000	£'000
Profit for the period		19,068	15,336
Other comprehensive income
Currency translation differences		4,152	(700)
Other comprehensive income for the period net of tax		4,152	(700)
Total comprehensive income for the period		23,220	14,636
Total comprehensive income attributable to:
Owners of the parent		22,129	13,545
Non-controlling interests		1,091	1,091
		23,220	14,636
The notes form an integral part of these interim financial statements.

Balance sheet

		12 July 2020	14 July 2019	29 December 2019
	Notes	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment	8	276,463	203,784	226,562
Lease: Right-of-use asset	8	144,434	202,083	178,293
Intangible assets	8	68,578	69,771	69,539
Investments	9	13,179	11,833	11,758
Trade and other receivables		176	809	662
Deferred income tax assets		2,467	1,485	2,270
		505,297	489,765	489,084
Current assets
Inventories		107,433	91,331	91,337
Trade and other receivables		251,894	192,950	214,611
Current income tax assets		1,973	1,354	-
Other financial asset		-	4,377	-
Cash and cash equivalents		111,064	79,186	110,514
		472,364	369,198	416,462
Total assets		977,661	858,963	905,546
Equity and liabilities
Equity
Share capital	11	8,191	8,170	8,173
Share premium		65,397	63,880	64,251
Employee share schemes reserve		3,362	4,205	4,139
Foreign currency translation reserve		4,166	3,477	255
Retained earnings		145,824	126,232	140,192
Reverse acquisition reserve		(31,700)	(31,700)	(31,700)
Merger reserve		919	919	919
Equity attributable to owners of the parent		196,159	175,183	186,229
Non-controlling interests		5,640	4,974	5,711
Total equity		201,799	180,157	191,940
Liabilities
Non-current liabilities
Borrowings	10	215,383	160,747	175,370
Lease liability		142,646	137,256	132,790
Trade and other payables		3,318	-	3,318
Deferred income tax liabilities		3,125	5,752	4,116
		364,472	303,755	315,594
Current liabilities
Borrowings	10	27,372	20,112	21,969
Lease liability		11,077	70,394	51,843
Trade and other payables		372,941	284,545	321,771
Current income tax liabilities		-	-	2,429
		411,390	375,051	398,012
Total liabilities		775,862	678,806	713,606
Total equity and liabilities		977,661	858,963	905,546
The notes form an integral part of these interim financial statements.

Statement of changes in equity

		Attributable to owners of the parent
		Share capital	Share premium	Employee share schemes reserve	Foreign currency translation reserve	Retained earnings	Reverse acquisition reserve	Merger  reserve	Total	Non-controlling interests	Total  equity
	Note	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 December 2018		8,160	63,628	5,505	4,134	124,923	(31,700)	919	175,569	5,677	181,246
Comprehensive income
Profit for the period		-	-	-	-	14,202	-	-	14,202	1,134	15,336
Other comprehensive income
Currency translation differences		-	-	-	(657)	-	-	-	(657)	(43)	(700)
Total comprehensive income		-	-	-	(657)	14,202	-	-	13,545	1,091	14,636
Transactions with owners
Issue of new shares	11	10	252	-	-	-	-	-	262	-	262
Adjustment in respect of employee share schemes		-	-	(1,300)	-	-	-	-	(1,300)	-	(1,300)
Dividends paid	6	-	-	-	-	(12,893)	-	-	(12,893)	(1,794)	(14,687)
Total transactions with owners, recognised directly in equity		10	252	(1,300)	-	(12,893)	-	-	(13,931)	(1,794)	(15,725)
Balance at 14 July 2019		8,170	63,880	4,205	3,477	126,232	(31,700)	919	175,183	4,974	180,157
Balance at 30 December 2019		8,173	64,251	4,139	255	140,192	(31,700)	919	186,229	5,711	191,940
Comprehensive income
Profit for the period		-	-	-	-	18,218	-	-	18,218	850	19,068
Other comprehensive income
Currency translation differences		-	-	-	3,911	-	-	-	3,911	241	4,152
Total comprehensive income		-	-	-	3,911	18,218	-	-	22,129	1,091	23,220
Transactions with owners
Issue of new shares	11	18	1,146	-	-	-	-	-	1,164	-	1,164
Adjustment in respect of employee share schemes		-	-	(777)	-	-	-	-	(777)	-	(777)
Dividends paid	6	-	-	-	-	(12,586)	-	-	(12,586)	(1,162)	(13,748)
Total transactions with owners, recognised directly in equity		18	1,146	(777)	-	(12,586)	-	-	(12,199)	(1,162)	(13,361)
Balance at 12 July 2020		8,191	65,397	3,362	4,166	145,824	(31,700)	919	196,159	5,640	201,799

The notes form an integral part of these interim financial statements .

Cash flow statement

		28 weeks ended	28 weeks ended
		12 July 2020	14 July 2019
		£'000	£'000
Cash flows from operating activities
Cash generated from operations		53,234	19,522
Interest paid		(7,271)	(6,393)
Income tax paid		(10,568)	(4,981)
Net cash generated from operating activities		35,395	8,148
Cash flows from investing activities
Dividends received from joint venture		2,133	2,103
Investment in joint venture		-	(5,246)
Acquisition of subsidiary net of cash acquired		-	591
Purchases of property, plant and equipment		(60,277)	(56,172)
Proceeds from sale of property, plant and equipment		261	22
Purchases of intangible assets		(373)	(677)
Interest received		-	78
Net cash used in investing activities		(58,256)	(59,301)
Cash flows from financing activities
Proceeds from borrowings		71,563	73,257
Repayments of borrowings		(29,506)	(5,582)
Payment of lease liability		(8,290)	(6,190)
Issue of new shares		1,164	262
Other financial asset		-	3,478
Dividends paid to owners of the parent		(12,586)	(12,893)
Dividends paid to non-controlling interests		(1,162)	(1,794)
Net cash generated from financing activities		21,183	50,538
Net decrease in cash and cash equivalents		(1,678)	(615)
Cash and cash equivalents at beginning of the period		110,514	80,234
Exchange gains/(losses) on cash and cash equivalents		2,228	(433)
Cash and cash equivalents at end of the period		111,064	79,186
The notes form an integral part of these interim financial statements.

Notes to the interim financial statements

1 General information

Hilton Food Group plc ("the Company") and its subsidiaries (together "the Group") is the leading specialist international food packing business.

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

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

These interim financial statements were approved for issue on 16 September 2020.

These interim financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the 52 weeks ended 29 December 2019 were approved by the Board of Directors on 6 April 2020 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

These interim financial statements have been reviewed, not audited.

2 Basis of preparation

These interim financial statements for the 28 weeks ended 12 July 2020 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union.  The interim financial statements should be read in conjunction with the annual report and financial statements for the 52 weeks ended 29 December 2019 which have been prepared in accordance with IFRS as adopted by the European Union.

Estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were, the same as those that applied to the consolidated financial statements for the 52 weeks ended 29 December 2019.

3 Accounting policies

The accounting policies adopted in the preparation of these interim results are consistent with those applied in the preparation of the Group's annual report for the year ended 29 December 2019.

Current income tax

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings

4 Segment information

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

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

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

In the prior year, Western and Central Europe was presented as a separate segments, however these have now been combined into a single European segment.  2019 segmental information has been restated to show the combined segment.

From a product perspective the Executive Directors consider that the Group has only one identifiable product, wholesaling of food protein products including meat, fish and vegetarian. The Executive Directors consider that no further segmentation is appropriate, as all of the Group's operations are subject to similar risks and returns and exhibit similar long term financial performance.

The segment information provided to the Executive Directors for the reportable segments is as follows:
				Operating
			Total segment	profit/(loss)
			revenue	segment result
			£'000	£'000
28 weeks ended 12 July 2020
Europe			1,036,084	30,091
Australasia			228,071	8,526
Central and other			-	(7,309)
Total			1,264,155	31,308
28 weeks ended 14 July 2019
Europe			904,516	26,694
Australasia			7,551	5,405
Central and other			-	(5,921)
Total			912,067	26,178
The Group uses a number of alternative performance measures to asses underlying performance, these are explained
and reconciled to the segmental results presented above in note 14.

		12 July	14 July	29 December
		2020	2019	2019
		£'000	£'000	£'000
Total assets
Europe		561,299	530,116	541,582
Australasia		394,401	309,662	348,293
Central and other		17,521	16,346	13,401
Total segment assets		973,221	856,124	903,276
Current income tax assets		1,973	1,354	-
Deferred income tax assets		2,467	1,485	2,270
Total assets per balance sheet		977,661	858,963	905,546
There are no significant seasonal fluctuations.

5 Income tax expense

Income tax expense is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the 53 weeks to 3 January 2021 is 20.7%. The estimated average annual effective tax rate for the 28 weeks ended 14 July 2019 was 22.8%.

6 Dividends
	28 weeks ended	28 weeks ended
	12 July 2020	14 July 2019
	£'000	£'000
Final dividend paid 15.4p per ordinary share (2019: 15.8p)	12,586	12,893
Total dividends paid	12,586	12,893

The Directors have approved the payment of an interim dividend of 7.0p per share payable on 27 November 2020 to shareholders who are on the register at 30 October 2020. This interim dividend, amounting to £5.7m has not been recognised as a liability in these interim financial statements. It will be recognised in shareholders' equity in the 53 weeks to 3 January 2021.

7 Earnings per share

Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

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

		28 weeks ended		28 weeks ended
		12 July 2020		14 July 2019
		Basic	Diluted	Basic	Diluted
Profit attributable to equity holders of the Company	(£'000)	18,218	18,218	14,202	14,202
Weighted average number of ordinary shares in issue	(thousands)	81,756	81,756	81,619	81,619
Adjustment for share options	(thousands)	-	827	-	991
Adjusted weighted average number of ordinary shares	(thousands)	81,756	82,583	81,619	82,610
Basic and diluted earnings per share	(pence)	22.3	22.1	17.4	17.2

8 Property, plant and equipment, right-of-use and intangible assets
	Property, plant	Right-of-use	Intangible
	and equipment	asset	assets
	£'000	£'000	£'000
28 weeks ended 14 July 2019
Opening net book amount as at 31 December 2018	157,619	140,647	66,960
Exchange adjustments	642	1,721	7
Acquisition of subsidiary	850	232	3,318
Additions	56,172	68,957	677
Disposals	(20)	(29)	-
Transfer	(181)	-	181
Depreciation and amortisation	(11,298)	(9,445)	(1,372)
Closing net book amount as at 14 July 2019	203,784	202,083	69,771
28 weeks ended 12 July 2020
Opening net book amount as at 30 December 2019	226,562	178,293	69,539
Exchange adjustments	6,916	2,957	14
Additions	24,149	7,891	373
Disposals	(235)	-	-
Revaluation	(22)	2,628	-
Transfer	36,038	(36,128)	90
Depreciation and amortisation	(16,945)	(11,207)	(1,438)
Closing net book amount as at 12 July 2020	276,463	144,434	68,578

9 Investments
Investments in joint ventures
	28 weeks ended	28 weeks ended	52 weeks ended
	12 July	14 July	31 December
	2020	2019	2019
	£'000	£'000	£'000
At the beginning of the year	11,758	5,209	5,209
Acquisitions	-	5,246	5,246
Profit for the period	3,403	3,361	6,406
Dividends received	(2,133)	(2,103)	(4,995)
Effect of movements in foreign exchange	151	120	(108)
At the end of the year	13,179	11,833	11,758

10 Borrowings
	12 July		14 July	29 December
	2020		2019	2019
	£'000		£'000	£'000
Current	27,372		20,112	21,969
Non-current	215,383		160,747	175,370
Total borrowings	242,755		180,859	197,339
Movements in borrowings is analysed as follows:
	28 weeks ended		28 weeks ended	52 weeks ended
	12 July		14 July	29 December
	2020		2019	2019
	£'000		£'000	£'000
Opening amount	197,339		114,834	114,834
Exchange adjustments	3,359		132	(3,077)
New borrowings	71,563		72,909	95,596
Increase in bank overdrafts	-		348	-
Repayment of borrowings	(29,506)		(5,582)	(8,311)
Reclassification to lease liability	-		(1,782)	(1,703)
Closing amount	242,755		180,859	197,339
11 Ordinary shares
		Number of	Ordinary
		shares	shares	Total
		(thousands)	£'000	£'000
At 31 December 2018		81,598	8,160	8,160
Issue of new shares on exercise of employee share options		106	10	10
At 14 July 2019		81,704	8,170	8,170
At 30 December 2019		81,725	8,173	8,173
Issue of new shares on exercise of employee share options		181	18	18
At 12 July 2020		81,906	8,191	8,191

12 Related party transactions

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

Transactions between related parties on an arm's length basis were as follows:

	28 weeks ended	28 weeks ended	52 weeks ended
	12 July	14 July	29 December
	2020	2019	2019
	£'000	£'000	£'000
Dalco Food B.V.	3	-	117
Sohi Meat Solutions Distribuicao de Carnes SA -
Fee for services	2,209	1,719	3,246
Sohi Meat Solutions Distribuicao de Carnes SA -
Recharge of joint venture costs	310	874	352
Amounts owing from related parties were as follows:
	12 July	14 July	29 December
	2020	2019	2019
	£'000	£'000	£'000
Dalco Food B.V.	-	-	117
Sohi Meat Solutions Distribuicao de Carnes SA	35	311	348

13 Financial instruments

The fair value of the financial assets and liabilities approximate to their carrying amounts.

14 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 acquired through business combinations and the impact of IFRS 16.

The measures are presented on this basis, as management believe they provide useful additional information about the Group's performance and aids a more effective comparison of the Group's underlying trading performance.

Adjusted profitability measures are reconciled to unadjusted IFRS results on the face of the income statement below.

28 weeks ended 12 July 2020
	Reported		Add back: IFRS 16 Impact		Less: IAS 17 Lease accounting costs		Reported - excl IFRS 16		Add back: Amortisation of acquisition intangibles		Adjusted
	£'000		£'000		£'000		£'000		£'000		£'000
Operating profit	31,308		10,986		(12,101)		30,193		1,319		31,512
Net finance costs	(7,271)		3,818		-		(3,453)		-		(3,453)
Profit before income tax	24,037		14,804		(12,101)		26,740		1,319		28,059
Profit for the period	19,068		14,002		(12,101)		20,969		1,068		22,037
Less non-controlling interests	(850)		(198)		185		(863)		-		(863)
Profit attributable to members of the parent	18,218		13,804		(11,916)		20,106		1,068		21,174
Depreciation and amortisation*	29,962		(11,108)		-		18,854		(1,319)		17,535
EBITDA	61,270		(122)		(12,101)		49,047		-		49,047
Earnings Per Share	Pence						pence				pence
Basic	22.3						24.6				25.9
Diluted	22.1						24.3				25.6

*Includes £372,000 amortisation of contract assets charged to revenue.

28 weeks ended 14 July 2019
	Reported		Add back: IFRS 16 Impact		Less: IAS 17 Lease accounting costs		Reported - excl IFRS 16		Add back: Amortisation of acquisition intangibles		Adjusted
	£'000		£'000		£'000		£'000		£'000		£'000
Operating profit	26,178		9,340		(10,071)		25,447		1,283		26,730
Net finance costs	(6,315)		4,064		-		(2,251)		-		(2,251)
Profit before income tax	19,863		13,404		(10,071)		23,196		1,283		24,479
Profit for the period	15,336		13,404		(10,071)		18,669		1,039		19,708
Less non-controlling interests	(1,134)		(189)		187		(1,136)		-		(1,136)
Profit attributable to members of the parent	14,202		13,215		(9,884)		17,533		1,039		18,572
Depreciation and amortisation*	23,063		(9,340)		-		13,723		(1,283)		12,440
EBITDA	49,241		-		(10,071)		39,170		-		39,170
Earnings Per Share	pence						pence				pence
Basic	17.4						21.5				22.8
Diluted	17.2						21.2				22.5

*Includes £950,000 amortisation of contract assets charged to revenue.

Segmental operating profit reconciles to adjusted segmental operating profit as follows:

28 weeks ended 12 July 2020
	Reported	Add back: IFRS 16 Impact	Less: IAS 17 Lease accounting costs		Reported - excl IFRS 16	Add back: Amortisation of acquisition intangibles		Adjusted
	£'000	£'000	£'000		£'000	£'000		£'000
Europe	30,091	3,015	(3,099)		30,007	1,319		31,326
Australasia	8,526	7,971	(9,002)		7,495	-		7,495
Central costs	(7,309)	-	-		(7,309)	-		(7,309)
Total	31,308	10,986	(12,101)		30,193	1,319		31,512

28 weeks ended 14 July 2019
	Reported	Add back: IFRS 16 Impact	Less: IAS 17 Lease accounting costs		Reported - excl IFRS 16	Add back: Amortisation of acquisition intangibles		Adjusted
	£'000	£'000	£'000		£'000	£'000		£'000
Europe	26,694	3,137	(3,176)		26,655	1,283		27,938
Australasia	5,405	6,203	(6,895)		4,713	-		4,713
Central costs	(5,921)	-	-		(5,921)	-		(5,921)
Total	26,178	9,340	(10,071)		25,447	1,283		26,730

 Independent review report

Independent review report to Hilton Food Group plc

Report on the condensed consolidated interim financial statements

Our conclusion

We have reviewed Hilton Food Group plc's condensed consolidated interim financial statements (the "interim financial statements") in the half year report of Hilton Food Group plc for the 28 week period ended 12 July 2020. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

●	the Balance sheet as at 12 July 2020;
●	the Income statement and Statement of comprehensive income for the period then ended;
●	the Cash flow statementfor the period then ended;
●	the Statement of changes in equity for the period then ended; and
●	the explanatory notes to the interim financial statements.

The interim financial statements included in the interim results have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the Directors

The interim results, including the interim financial statements, is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the interim results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the interim results based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose.  We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the interim results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

Belfast

16 September 2020

The maintenance and integrity of the Hilton Food Group website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

END

 

 

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