Preliminary Results

Hilton Food Group PLC 15 April 2008 Hilton Food Group plc Preliminary results for the year to 31 December 2007 Continued progress across the business Hilton Food Group plc, the leading specialist meat packing business supplying major international food retailers in Europe, is pleased to announce its results for the year to 31 December 2007. Financial Highlights Year to Year to 31 December 31 December 2006 2007 Turnover Â£577.7m Â£526.7m Operating profit before significant item* Â£17.4m Â£15.7m Operating profit after significant item* Â£15.7m Â£15.7m Profit before tax Â£13.7m Â£15.5m Cash generated from operations before significant item* Â£25.4m Â£26.5m Cash generated from operations after significant item* Â£23.6m Â£26.5m Basic earnings per share before significant item* 15.0p 14.3p Basic earnings per share after significant item* 12.7p 14.3p Final Dividend to be paid in July 2008 5.2p * the significant item in 2007 relates to costs to the Group associated with the flotation of Hilton Food Group plc on the London Stock Exchange of Â£1.8m Business Highlights â€¢ Volume growth of 16.2% and turnover growth of 9.7% â€¢ Operating profit growth of 11.1%, before flotation costs â€¢ Continued strong cash generation and investment in facilities â€¢ Major new factory at Huntingdon, UK and an extension to the packing facility in Zaandam, Holland, both completed on time and on budget â€¢ Trial started from plant in Tychy, Poland to supply Tesco stores in Hungary, Czech Republic, Poland and Slovakia â€¢ Extension of Drogheda, Ireland plant started since the year end to supply bacon and sausage products Commenting, Robert Watson, Chief Executive said: 'I am very pleased to report that 2007 has seen continuing progress, in line with the Board's expectations, with strong volume growth across all territories, the completion of two key capacity expansion projects, developing opportunities in Central Europe and continued strong cash generation.' Enquiries Hilton Food Group Tel: 01480 387214 Robert Watson, Chief Executive Nigel Majewski, Finance Director Citigate Dewe Rogerson Tel: 020 7638 7591 Tom Baldock Nicola Smith CHAIRMAN'S STATEMENT This is our first Annual Report to shareholders since Hilton's flotation on the main market of the London Stock Exchange in May 2007. I am pleased to be able to report that the Group has continued to make progress, achieving strong sales and volume growth throughout 2007 and generating the levels of cash flow required to fund the Hilton's future development. FINANCIAL OVERVIEW During 2007 the Group achieved a continuing increase in volumes of meat packed for its customers, in excess of 16%. Turnover rose by just under 10% to Â£577.7m over the same period, with lower average raw material input prices. These increases reflected continuing growth across all the territories in which the Group operates, together with the first full year of our new packing facility in Central Europe. Operating profit before flotation costs rose by over 11%, from Â£15.7m to Â£17.4m. Interest cover before flotation costs was 8.8 times. Basic earnings per share before flotation costs were 15.0p (2006 14.3p). The Group has a good historical cash generation track record and cash inflow of Â£25.4m from operating activities in 2007 reduced net year end borrowings to Â£36.2m, from Â£43.6m prior to flotation. Net capital expenditure of Â£6.7m reflected principally the completion of a new factory in the UK and the extension of our packing facilities in Holland. This continues the Group's policy of investing in additional capacity sufficiently far in advance to enable us to service our customers' growth plans. DIVIDENDS The Board is proposing a final dividend of 5.2 per ordinary share. Together with the interim dividend of 2.2p per ordinary share paid in December 2007, this makes a total dividend for the first year following flotation of 7.4 per ordinary share. The final dividend, if approved by shareholders, will be paid on 11 July 2008 to shareholders on the register on 13 June 2008 and the shares will be ex dividend on 11 June 2008. OUR EMPLOYEES The transition from a private business to one listed on the main market was a challenging process and I would like to pay tribute to our managers and employees who continued to operate the business professionally through this process. A smooth and efficient transition to public ownership was achieved in early 2007, with no reduction in customer service levels and no interruption to the Group's continuing momentum, throughout the year. STRATEGY The Group's historical growth has been achieved by geographical expansion and the subsequent organic growth achieved in each territory. This has been based both on the marketplace success achieved by the Group's retail partners in each country and by progressively expanding the range of meat lines packed for those partners. Such volume growth progressively reaps increased economies of scale, to the benefit of both parties. OUTLOOK Compound annual volume growth over the last four years has been strong, achieved by both geographical expansion and continuing organic growth, without the benefit of any acquisitions. Volume growth continues and was over 16% in 2007. The start to the current year has been encouraging. With a strong business model, the Board looks to the future with confidence. Gordon Summerfield CBE Non Executive Chairman 14 April, 2008 CHIEF EXECUTIVE'S REVIEW 2007 has been a year of real progress for Hilton Food Group, continuing our growth momentum in all regions. This progress is rooted in Hilton's strong long term relationships with its retail partners, with whom the Group continues to work closely to deliver high service levels, consistent and high product quality, product innovation, high levels of food safety assurance and product integrity. Consistently meeting these standards allows us to build volumes and progressively reduce unit packing costs. The strength of these partnerships has been the key driver of our growth since the Group was formed and will continue to underpin the Group's success in future. PERFORMANCE BY SEGMENT The Group operates in two regions, Western Europe, covering the Group's established businesses in the UK, Ireland, Holland and Sweden and Other Regions, which currently comprises Hilton's recently commenced packing business in Central Europe, supplied from its new packing plant in Tychy, southern Poland. Western Europe Operating profit of Â£16.8 m (2006: Â£ 15.4m) on turnover of Â£ 551.8 m (2006: Â£517.9m) Continued progress was made across our Western European operations in the UK, Ireland, Holland and Sweden, with all our customers continuing to achieve organic growth. Volume growth was 10.8%, with turnover growth of 6.5%, reflecting lower average raw material prices. This was achieved despite the exceptionally adverse summer weather in the UK, which affected sales of barbecue and other seasonal lines, with the pace of growth accelerating towards the end of the year. Other Regions Operating profit of Â£0.6 m (2006: Â£ 0.3m) on turnover of Â£25.9 m ( 2006: Â£8.8m ) In Central Europe, as expected, we saw a good first full year contribution from our new facility in Southern Poland (near to the Czech Republic border), producing on average approximately 200 tonnes per week. Ahold's divestment of its Polish stores in early 2007 has been almost offset by continuing volume growth in Ahold's Czech Republic business and trials are currently being undertaken with Tesco, which, if successful, could lead to the Tychy plant supplying Tesco stores in Hungary, Czech Republic, Poland and Slovakia over time. OPERATIONAL REVIEW Modern, well invested facilities give a key competitive advantage to Hilton, which operates a high volume business where it is imperative to keep unit costs low and continuously improve product quality. Over the four years to December 2007 capital expenditure on the Group's packing facilities has totalled Â£62m, Â£52m of which has been spent on major capacity expansion projects. Each packing facility is bespoke and has been tailored specifically to meet the needs of the Group's customer in the country concerned. Although we use firm processing and packaging principles and blueprints, we do not simply replicate our facilities from one country to another. Each of our customers and markets are different and we believe that our success owes much to the time we have taken to understand the detailed needs of our customers and the markets in which they operate. We are pleased to report that the two most recent capacity expansion projects, at Huntingdon in the UK and Zaandam in Holland, were completed during the first half of the year on time, on budget and with minimal disruption to production or customer service levels, at either site. In the UK, a new purpose built factory at Huntingdon was completed in early 2007 that will enable Hilton to service its customer's expected growth over the medium term. The factory is producing packed minced meat, burger, kebab and other value added products. In Holland, the completion and commissioning in early 2007 of a factory extension in Zaandam to service its customers expected growth over the medium term, will increase capacity by approximately 50%. In Ireland we are currently extending our Drogheda factory, for bacon and sausage production. LOW COST AND ADAPTABLE OPERATING MODEL The Group's packing plants operate at the high throughput levels necessary to achieve low unit packing costs and each is involved in a wide range of new product and packaging developments, which, together with extending the ranges of products packed, can serve to increase the utilisation of its packing facilities, to drive unit costs down still further. This can only be achieved by using very modern high speed packing facilities, combined with an intensive focus on product quality, food safety and product integrity. We believe in continuously developing our facilities, not only to grow with our customers, but to constantly improve our production processes,to maximise efficiency. We work closely with our customers, to constantly evolve our production processes in order to produce new product and packaging concepts, which can, as a multinational company, be shared across all our facilities. OUR EMPLOYEES The continued progress made by the Group in 2007, and throughout the flotation process at the start of the year is attributable to the strength of the dedicated workforce in each country and, on behalf of the Board, we would like to thank them for their commitment, enthusiasm and expertise. Robert Watson OBE Chief Executive Officer 14 April, 2008 FINANCIAL REVIEW BASIS OF ACCOUNTS PRESENTATION The Group is presenting its results for the year to 31 December 2007, with comparative information for the year to 31 December 2006. The results of the Group are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. TRADING OVERVIEW Sales Volume and Revenue Underlying trading performance has been strong, with volumes growing overall by 16.2%. Further details of volume growth by segment are detailed in the Chief Executive's Report. Total Group turnover rose by 9.7% to Â£577.7 m, compared to Â£526.7 m last year. The increase is below the level of volume gains, as lower average raw material prices have fed directly into lower average selling prices. Gross Profit Margin Gross profit margins were unchanged from last year, at 14.2%. Operating Profit Operating profit, at Â£ 17.4 m (Â£15.7m after flotation costs of Â£1.8m), was 11.1% above the operating profit of Â£15.7m made in 2006. Operating profit benefited from Â£0.3m of exchange translation gains towards the end of the year. Finance Costs Net finance costs rose from Â£0.2m to Â£2.0m. The increase comprises interest on the new bank borrowings of Â£47.5m, which were put in place prior to the flotation, but are now reducing, partly offset by the release of provisions for interest on overseas taxation exposures, which were put in place before the flotation and have since been settled. Profit Before Taxation Profit before taxation, at Â£13.7m, was Â£1.8m lower than in 2006 (Â£15.5m ), reflecting the once off charge for flotation costs of Â£1.8m and the increase in finance costs of Â£1.8m detailed above, partially offset by the improvement in underlying profitability. TAXATION The taxation charge for the period was Â£4.2m. Excluding Â£1.8m of flotation costs, for which taxation relief has not in the main been assumed, the effective underlying rate of tax was lower. EARNINGS PER SHARE Basic earnings per share before flotation costs were 15.0p (2006: 14.3p). CASH FLOW AND NET DEBT Cash flow continued to be strong, with the Group generating Â£9.9m of free cash flow after flotation costs and before dividends to shareholders (2006 Â£3.2m). This has enabled the Group to steadily reduce the level of net debt outstanding. Group borrowings, net of cash balances of Â£20.8m, stood at Â£36.2m at 31 December, 2007. Nigel Majewski Finance Director 14 April 2008 Consolidated income statement for the year ended 31 December 2007 2007 2006 Continuing operations Notes Â£'000 Â£'000 Revenue 3 577,734 526,663 Cost of sales (495,632) (452,047) Gross profit 82,102 74,616 Distribution costs (6,299) (5,990) Administrative expenses (58,366) (52,927) Restructuring and flotation costs 5 (1,780) - Operating profit 4 15,657 15,699 Finance income 6 1,433 824 Finance costs 6 (3,416) (1,038) Finance costs - net 6 (1,983) (214) Profit before income tax 13,674 15,485 Income tax expense 7 (4,158) (4,824) Profit for the year 9,516 10,661 Attributable to: Equity holders of the company 8,820 9,986 Minority interest 696 675 9,516 10,661 Earnings per share for profit attributable to the equity holders of the company during the year - Basic and diluted (pence) 8 12.7 14.3 The notes form an integral part of these consolidated financial statements. Consolidated balance sheet as at 31 December 2007 Group Company 2007 2006 2007 2006 Notes Â£'000 Â£'000 Â£'000 Â£'000 Assets Non-current assets Property, plant and equipment 10 42,286 43,576 - - Intangible assets 11 3,987 3,947 - - Investment in subsidiary undertakings 12 - - 102,985 - Deferred income tax assets 19 1,273 1,219 - - 47,546 48,742 102,985 - Current assets Inventories 13 9,654 9,525 - - Trade and other receivables 14 50,993 41,037 - - Current income tax assets - - 404 - Cash and cash equivalents 15 20,792 22,327 1 - 81,439 72,889 405 - Total assets 128,985 121,631 103,390 - Capital and reserves attributable to equity holders of the group Share capital 20 6,966 200 6,966 - Other reserves 896 (102) - - Retained earnings 12,039 29,451 25 - 19,901 29,549 6,991 - Reverse acquisition reserve (31,700) - - - Merger reserve 919 - 71,019 - (10,880) 29,549 78,010 - Minority interest in equity 367 1,288 - - Total equity (10,513) 30,837 78,010 - Liabilities Non-current liabilities Borrowings 16 50,302 10,196 - - Deferred income tax liabilities 19 1,580 1,300 - - Other non-current liabilities 18 264 1,850 - - 52,146 13,346 - - Current liabilities Borrowings 16 6,682 6,065 - - Trade and other payables 17 78,856 69,740 25,380 - Current income tax liabilities 1,814 1,643 - - 87,352 77,448 25,380 - Total liabilities 139,498 90,794 25,380 - Total equity and liabilities 128,985 121,631 103,390 - The notes form an integral part of these consolidated financial statements. The financial statements were approved by the Board on 14 April 2008 and were signed on its behalf by: RA Watson, Director N Majewski, Director Consolidated statement of changes in equity Attributable to equity holders of the company Group Notes Sharecapital Other Retained Sub Reverse Merger Total Minority Total reserves earnings total acquisition reserve interes equity reserve Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Balance at 1 January 2006 200 -31 23,665 23,834 - - 23,834 1,179 25,013 Currency translation differences - -71 - -71 - - -71 -21 -92 Profit for the year - - 9,986 9,986 - - 9,986 675 10,661 Total recognised income and expense for 2006 - -71 9,986 9,915 - - 9,915 654 10,569 Dividends paid 9 - - -4,200 -4,200 - - -4,200 -545 -4,745 Balance at 31 December 2006 200 -102 29,451 29,549 - - 29,549 1,288 30,837 Currency translation differences - 998 - 998 - - 998 51 1,049 Profit for the year - - 8,820 8,820 - - 8,820 696 9,516 Total recognised income and expense for 2007 - 998 8,820 9,818 - - 9,818 747 10,565 Dividends paid 9 - - -26,232 -26,232 - - -26,232 -1,519 -27,751 Reverse acquisition of Hilton Foods Limited 2 6,700 - - 6,700 -31,700 - -25,000 - -25,000 Acquisition of minority shareholding 12 66 - - 66 - 919 985 -149 836 Balance at 31 December 2007 6,966 896 12,039 19,901 -31,700 919 -10,880 367 -10,513 Company Profit for the year - - 1,557 1,557 - - 1,557 Total recognised income and expense for 2007 - - 1,557 1,557 - - 1,557 Dividends paid 9 - - -1,532 -1,532 - - -1,532 Reverse acquisition of Hilton Foods Limited 2 6,900 - - 6,900 - 70,100 77,000 Acquisition of minority shareholding 12 66 - - 66 - 919 985 Balance at 31 December 2007 6,966 - 25 6,991 - 71,019 78,010 The notes form an integral part of these consolidated financial statements. Consolidated cash flow statement for the year ended 31 December 2007 Group Company 2007 2006 2007 2006 Notes Â£'000 Â£'000 Â£'000 Â£'000 Cash flows from operating activities Cash generated from operations 21 23,591 26,481 - - Interest paid (2,548) (490) (968) - Income tax paid (4,055) (4,380) - - Net cash generated from/(used in) 16,988 21,611 (968) - operating activities Cash flows from investing activities Purchase of property, plant and (10,853) (20,028) - - equipment Proceeds from sale of property, plant 4,473 2,228 - - and equipment Purchases of intangible assets (302) (834) - - Interest received 1,065 764 1 - Dividends received - - 2,500 - Net cash (used in)/generated from (5,617) (17,870) 2,501 - investing activities Cash flows from financing activities Proceeds from borrowings 47,546 4,810 - - Repayments of borrowings (6,678) (3,854) - - Dividends paid to company shareholders (26,232) (4,200) (1,532) - Dividends paid to minority interests (1,519) (545) - - Reverse acquisition of Hilton Foods (25,000) - - - Limited Net cash used in financing activities (11,883) (3,789) (1,532) - Net (decrease)/increase in cash, cash equivalents and bank overdrafts (512) (48) 1 - Cash, cash equivalents and bank overdrafts at beginning of the year 20,133 20,402 - - Exchange gains/(losses) on cash, cash equivalents and bank overdrafts 1,171 (221) - - Cash, cash equivalents and bank overdrafts at end of financial year 15 20,792 20,133 1 - The notes form an integral part of these consolidated financial statements. Notes to the financial statements for the year ended 31 December 2007 1 Basis of preparation The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all of the years presented, unless otherwise stated. The consolidated financial statements of Hilton Food Group plc have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, IFRIC interpretations and the Companies Act 1985 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared on the going concern basis under the historical cost convention. The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are presented in sterling and all values are rounded to the nearest thousand (Â£'000) except when otherwise indicated. 2 Reverse acquisition On 30 March 2007 the Company became the holding company of Hilton Foods Limited. Under IFRS 3, Business Combinations, this group reconstruction has been accounted for as a reverse acquisition. Although this consolidated financial information has been issued in the name of the legal parent, the Company, it represents in substance a continuation of the financial information of the legal subsidiary Hilton Foods Limited. The following accounting treatment has been applied in respect of the reverse acquisition. a) the assets and liabilities of the legal subsidiary, Hilton Foods Limited, are recognised and measured in the consolidated financial information at the pre-combination carrying amounts, without restatement to fair value; b) the retained earnings and other equity balances of Hilton Foods Limited immediately before the business combination, and the results of the period from 1 January 2007 to the date of the business combination are those of Hilton Foods Limited as the company did not trade prior to the transaction. However, the equity structure appearing in the consolidated financial information reflects the equity structure of the legal parent, Hilton Food Group plc, including the equity instruments issued to effect the business combination; and c) comparative numbers presented in the consolidated financial information are those reported in the consolidated financial information of the legal subsidiary, Hilton Foods Limited, for the year ended 31 December 2006. The Company had no significant assets or liabilities immediately prior to the time of the reverse acquisition. As part of the reverse acquisition, 69,000,000 new 10p shares were issued to the members of Hilton Foods Limited together with a cash payment of Â£25m. In the books of the legal parent, Hilton Food Group plc, a merger reserve of Â£70.1m has arisen as a premium on the shares issued. On consolidation this merger reserve has formed part of the reverse acquisition reserve amounting to Â£31.7m. 3 Segmental information A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments. Based on an analysis of risks and returns, the Directors consider that the Group has only one identifiable business segment, wholesaling of meat. The 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. Based on an analysis of risks and returns, the Directors consider that the Group has two identifiable geographical segments. The main geographical area in which the Group's operations are carried out is Western Europe. The other geographical area that the Group's operations are carried out in does not meet the definition of a reportable segment in IAS 14 and therefore the revenues, results, assets and liabilities arising from the operations carried out in this geographical area have been included in 'Other'. Consequently the Group's primary reporting format is by geographical segmentation. Secondary format disclosures are not appropriate. The analyses in the tables below are based on the location of customers. The segment results for the year ended 31 December 2007 are as follows: Western Other Unallocated 2007 Western Other 2006 Europe Total Europe Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Total segment revenue 551,836 25,898 - 577,734 517,915 8,748 526,663 Operating profit/ 16,781 656 (1,780) 15,657 15,411 288 15,699 Segment result Finance income 1,433 824 Finance costs (3,416) (1,038) Finance costs - net (1,983) (214) Profit before income 13,674 15,485 tax Income tax expense (4,158) (4,824) Profit for the year 9,516 10,661 Other segment items included in the income statement for the year ended 31 December 2007 are as follows: Western Other 2007 Western Other 2006 Total Europe Total Europe Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Depreciation 8,802 828 9,630 7,731 289 8,020 Amortisation 1,178 186 1,364 1,056 73 1,129 The segment assets and liabilities at 31 December 2007 and capital expenditure for the year then ended are as follows: WesternEurope Other Unallocated 2007 Western Other Unallocated 2006 Total Europe Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Total assets 116,273 11,439 1,273 128,985 108,701 11,711 1,219 121,631 Total liabilities (72,067) (7,053) (60,378) (139,498) (68,626) (2,964) (19,204) (90,794) Capital expenditure 10,410 745 - 11,155 15,460 5,658 - 21,118 Segment assets consist primarily of property, plant and equipment, intangible assets, inventories, trade and other receivables and cash and cash equivalents. Unallocated assets comprise deferred income tax assets. Segment liabilities comprise operating liabilities. Unallocated liabilities comprise deferred income tax liabilities, current income tax liabilities and borrowings. 4 Expenses by nature 2007 2006 Â£'000 Â£'000 Changes in inventories of finished goods and work in progress 118 (445) Raw materials and consumables used 461,726 422,028 Employee benefit expense 36,209 32,832 Depreciation, amortisation and impairment charges - owned assets 10,810 8,989 Depreciation, amortisation and impairment charges - leased assets 184 160 Release of deferred income in respect of government grants (109) (109) Repairs and maintenance expenditure on property, plant and equipment 7,827 6,970 Trade receivables - impairment / (reversal of impairment) 203 (197) Hire of plant and machinery 595 618 Transportation expenses 5,758 5,331 Operating lease payments 3,879 3,592 Foreign exchange (gains) / losses (338) 121 Other expenses 33,435 31,074 Total cost of sales, distribution costs and administrative expenses 560,297 510,964 5 Restructuring and flotation costs During the year to 31 December 2007 costs of Â£1.8m were incurred in relation to the restructuring of the Group and admission of the company to the Official List. 6 Finance income and costs 2007 2006 Â£'000 Â£'000 Finance income: Interest income on short-term bank deposits 837 674 Exchange gains on foreign currency borrowings 160 150 Interest on income taxes 436 - Finance income 1,433 824 Interest expense: Bank borrowings (3,131) (334) Finance leases (198) (186) Interest on income taxes - (518) Other interest expense (87) - Finance costs (3,416) (1,038) Finance costs - net (1,983) (214) 7 Income tax expense 2007 2006 Â£'000 Â£'000 Current income tax Current year 4,028 4,424 Adjustment to previous years (37) 83 3,991 4,507 Deferred income tax Current year 185 317 Adjustment to previous years (18) - 167 317 Income tax expense 4,158 4,824 The tax on the Group's profit before income tax differs from the amount that would arise using the standard rate of UK Corporation Tax of 30% (2006: 30%) applied to profits of the consolidated entities as follows: 2007 2006 Â£'000 Â£'000 Profit before income tax 13,674 15,485 Tax calculated at the standard rate of UK Corporation Tax (30%) (2006: 30%) 4,102 4,646 Expenses not deductible for tax purposes 265 588 Adjustments to tax in respect of previous years (55) 83 Profits taxed at rates other than 30% (154) (493) Income tax expense 4,158 4,824 8 Earnings per share Basic and diluted Basic and diluted 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 year. 2007 2006 Profit attributable to equity holders of the company (Â£'000) 8,820 9,986 Weighted average number of ordinary shares in issue (thousands) 69,657 69,657 Basic and diluted earnings per share (pence) 12.7 14.3 Basic and diluted earnings per share before restructuring and flotation costs of Â£1,780k less tax relief of Â£150k (2006: Â£nil) (pence) 15.0 14.3 9 Dividends 2007 2006 Â£'000 Â£'000 Dividends paid on ordinary shares 35.5p per ordinary share (2006: 6.0p) 24,700 4,200 Interim dividend paid 2.2p per ordinary share 1,532 - Total dividends paid 26,232 4,200 A dividend of Â£24.7m was paid during the year to shareholders as part of the restructuring prior to Listing. The directors propose a final dividend of 5.2 pence per share payable on 11 July 2008 to shareholders who are on the register at 13 June 2008 This final dividend, amounting to Â£5.2m has not been recognised as a liability in these consolidated financial statements. 10 Property plant and equipment Land and buildings Plant and Fixtures Motor vehicles (including leasehold improvement) machinery and Total fittings Group Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Cost At 1 January 2006 11,082 47,939 6,114 184 65,319 Exchange adjustments (109) (124) 54 - (179) Additions 9,633 9,201 1,203 247 20,284 Disposals (256) (861) (1,304) (145) (2,566) At 31 December 2006 20,350 56,155 6,067 286 82,858 Accumulated depreciation At 1 January 2006 3,975 25,378 2,334 74 31,761 Exchange adjustments (18) (182) 8 - (192) Charge for year 865 6,215 863 77 8,020 Disposals - (245) - (62) (307) At 31 December 2006 4,822 31,166 3,205 89 39,282 Net book amount At 31 December 2006 15,528 24,989 2,862 197 43,576 Cost At 1 January 2007 20,350 56,155 6,067 286 82,858 Exchange adjustments 561 3,320 263 10 4,154 Additions 2,641 6,631 1,241 151 10,664 Disposals (4,000) (431) (75) (78) (4,584) Transfer (2,131) 2,105 26 - - At 31 December 2007 17,421 67,780 7,522 369 93,092 Accumulated depreciation At 1 January 2007 4,822 31,166 3,205 89 39,282 Exchange adjustments 139 1,870 146 3 2,158 Charge for year 1,021 7,406 1,110 93 9,630 Disposals - (184) (28) (52) (264) Transfer 3 (3) - - - At 31 December 2007 5,985 40,255 4,433 133 50,806 Net book amount At 31 December 2007 11,436 27,525 3,089 236 42,286 Property, plant and equipment include the following amounts where the group is a lessee under a finance lease: 2007 2006 Â£'000 Â£'000 Cost - capitalised finance leases 3,188 2,845 Accumulated depreciation (667) (394) Net book amount 2,521 2,451 Included in assets held under finance leases are land and buildings with a net book amount of Â£2,437,000 (2006: Â£2,405,000) and plant & machinery with a net book amount of Â£84,000 (2006: Â£46,000). Land and buildings are held under short leaseholds. Details of bank borrowings secured on assets of the group are given in note 16. 11 Intangible assets Product Software Goodwill licences costs Total Group Â£'000 Â£'000 Â£'000 Â£'000 Cost At 1 January 2006 6,270 1,289 - 7,559 Exchange adjustments (121) 26 - (95) Additions - 834 834 At 31 December 2006 6,149 2,149 - 8,298 Accumulated amortisation At 1 January 2006 3,144 144 - 3,288 Exchange adjustments (71) 5 - (66) Charge for year 868 261 - 1,129 At 31 December 2006 3,941 410 - 4,351 Net book amount At 31 December 2006 2,208 1,739 - 3,947 Cost At 1 January 2007 6,149 2,149 - 8,298 Exchange adjustments 584 196 - 780 Additions - 302 836 1,138 At 31 December 2007 6,733 2,647 836 10,216 Accumulated amortisation At 1 January 2007 3,941 410 - 4,351 Exchange adjustments 451 63 - 514 Charge for year 990 374 - 1,364 At 31 December 2007 5,382 847 - 6,229 Net book amount At 31 December 2007 1,351 1,800 836 3,987 The net book amount of goodwill relates entirely to the acquisition of the remaining 2.5% shareholding in Hilton Food Group (Europe) Limited (note 12), the cash generating unit (CGU). An impairment review of goodwill and other assets has been carried out in accordance with IAS 36, 'Impairment of assets'. The recoverable amount of the CGU is determined on value-in-use calculations. These calculations use pre-tax cash flow projections covering a 5 year period. The growth rate used is not more than 10%, being representative of the average growth rate achieved by the group in recent years. The rate used to discount the future cash flows is the group's internal hurdle rate for capital projects of 11%. This approximates to applying a pre-tax discount rate to pre-tax cash flows. 12 Investments in subsidiary undertakings Company 2007 2006 Shares in Group undertakings Â£'000 Â£'000 At 1 January - - Additions in year: Reverse acquisition of Hilton Foods Limited - at fair value 102,000 - Acquisition of minority shareholding in Hilton Food Group (Europe) Limited - - at fair value 985 At 31 December 102,985 - Details of the reverse acquisition of Hilton Foods Limited are shown in note 2. Business combination On 24 April 2007, the Group acquired 2.5% of the share capital of Hilton Food Group (Europe) Limited in consideration for 656,667 ordinary shares in the company at a value of Â£985,000 bringing its total shareholding to 100%. Details of net assets acquired and goodwill are as follows: Â£'000 Purchase consideration - fair value of equity shares issued 985 Existing minority interest 149 Goodwill (note 11) 836 13 Inventories 2007 2006 Group Â£'000 Â£'000 Raw materials and consumables 7,576 7,314 Finished goods and goods for resale 2,078 2,211 9,654 9,525 The cost of inventories recognised as an expense and included in cost of sales amounted to Â£461,844,000 (2006: Â£421,583,000). The Group reversed Â£164,000 of a previous inventory write-down in the year ended 31 December 2007 (2006: Â£110,000). The Group has sold all the goods that were written down to a third party. The amount reversed has been included in cost of sales in the income statements. 14 Trade and other receivables 2007 2006 Group Â£'000 Â£'000 Trade receivables 46,589 37,883 Less: provision for impairment of receivables (197) (65) Trade receivables - net 46,392 37,818 Other receivables 1,724 1,800 Prepayments 2,877 1,419 50,993 41,037 The carrying amount of the Group's trade and other receivables are denominated in the following currencies: 2007 2006 Currency Â£'000 Â£'000 UK Pound 8,566 6,368 Swedish Krona 14,320 11,928 Euro 25,466 18,550 Polish Zloty 2,641 4,191 50,993 41,037 The fair values of trade receivables, other receivables and prepayments are the same as their carrying value. The maximum exposure to credit risk at 31 December 2007 is the fair value of each class of receivable mentioned above. Trade receivables impaired and the amount of the impairment provision as at 31 December 2007 was Â£197,000 (2006: Â£65,000). The individually impaired receivables mainly relate to invoices which are in dispute. It was assessed that a portion of the receivables is expected to be recovered. The trade receivables that were impaired were all overdue by more than 6 months. There were no other trade receivables which were overdue. The other classes within trade and other receivables do not contain impaired assets. The trade receivables which are not impaired or overdue are all less than 30 days old. Movements on the provision for impairment of trade receivables are as follows: 2007 2006 Group Â£'000 Â£'000 At 1 January 65 262 Provision for receivables impairment 203 - Receivables written off during the year as uncollectable (86) - Unused amounts reversed - (197) Exchange differences 15 - At 31 December 197 65 15 Cash and cash equivalents Group Company 2007 2006 2007 2006 Â£'000 Â£'000 Â£'000 Â£'000 Cash at bank and on hand 20,792 22,327 1 - Cash, cash equivalents and bank overdrafts include the following for the purposes of the cash flow statement: Group Company 2007 2006 2007 2006 Â£'000 Â£'000 Â£'000 Â£'000 Cash at bank and on hand 20,792 22,327 1 - Bank overdrafts (note 16) - (2,194) - - 20,792 20,133 1 - 16 Borrowings 2007 2006 Group Â£'000 Â£'000 Current Bank overdrafts - 2,194 Bank borrowings 6,577 3,799 Finance lease liabilities 105 72 6,682 6,065 Non-current Bank borrowings 47,445 7,524 Finance lease liabilities 2,857 2,672 50,302 10,196 Total borrowings 56,984 16,261 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: 2007 2006 Currency Â£'000 Â£'000 UK pound 46,935 50 Swedish Krona 3,642 7,845 Euro 6,407 8,366 56,984 16,261 The Group borrowed Â£47.5m from Ulster Bank during the year to fund group reorganisation and is repayable in quarterly instalments by 28 February 2013. Interest is charged at LIBOR plus 0.75% to 1.25% subject to interest rate caps over Â£30m of borrowings where LIBOR is capped at 6.5%. Other bank borrowings are repayable by 2010 to 2013 with interest charged at bank base rate plus 0.7% to 0.75%. Bank borrowings and overdrafts totalling Â£54,022,000 (2006: Â£13,517,000) are secured by fixed and floating charges over the assets of the individual Group borrowers and through joint and several guarantees from each active group undertaking. The maturity profile of group's borrowings is as follows: 2007 2006 Group Â£'000 Â£'000 Less than one year 6,682 6,065 Between one and two years 7,014 2,769 Between two and five years 14,815 5,026 Later than five years 28,473 2,401 56,984 16,261 The minimum lease payments and present value of finance lease liabilities is as follows: Minimum lease payments Present value 2007 2006 2007 2006 Group Â£'000 Â£'000 Â£'000 Â£'000 No later than one year 305 266 105 72 Later than one year and no later than five years 1,128 1,009 362 272 Later than five years 3,867 3,793 2,495 2,400 5,300 5,068 2,962 2,744 Future finance charges on finance leases (2,338) (2,324) - - Present value of finance lease liabilities 2,962 2,744 2,962 2,744 Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default. The fair value of the Group's finance lease liabilities is Â£3,700,000 (2006: Â£3,547,000). The fair values are based on cash flows discounted using a rate based on the borrowing rate of 4% (2006: 3.75%). 17 Trade and other payables Group Company 2007 2006 2007 2006 Â£'000 Â£'000 Â£'000 '000 Trade payables 54,545 43,171 - - Amounts owed to group undertakings - - 25,380 - Amounts owed to related parties 11,079 11,245 - - Social security and other taxes 406 1,346 - - Deferred consideration 389 541 - - Accruals and deferred income 12,437 13,437 - - 78,856 69,740 25,380 - 18 Other non-current liabilities 2007 2006 Group Â£'000 Â£'000 Deferred consideration 220 990 Accruals and deferred income 44 860 264 1,850 19 Deferred income tax The movement in deferred income tax assets and liabilities during the year is as follows: Deferred income tax liabilities: Accelerated capital Deferred allowances income tax Accelerated Other timing assets total capital differences allowances Group Â£'000 Â£'000 Â£'000 Â£'000 At 1 January 2007 1,219 - 1,219 (1,300) Exchange differences - - - (59) Income statement charge (38) 92 54 (221) At 31 December 2007 1,181 92 1,273 (1,580) Deferred income tax liabilities of Â£1,096,000 (2006: Â£1,021,000) have not been recognised on the unremitted earnings of its overseas subsidiaries. As the earnings are continually reinvested by the group, no tax is expected to be payable on them in the foreseeable future. 20 Called up share capital Group Company 2007 2006 2007 2006 Â£'000 Â£'000 Â£'000 Â£'000 Authorised Â£ 500,000 'A' ordinary shares of Â£1 each - 500 - - 500,000 'B' ordinary shares of Â£1 each - 500 - - 100,000,000 ordinary shares of 10 pence each 10,000 - 10,000 - 10,000 1,000 10,000 - Allotted and fully paid 100,000 'A' ordinary shares of Â£1 each - 100 - - 100,000 'B' ordinary shares of Â£1 each - 100 - - 69,656,667 ordinary shares of 10 pence each 6,966 - 6,966 - 6,966 200 6,966 - The Company issued 69,000,000 shares to the members of Hilton Foods Limited as part of the reverse acquisition (see note 2). The Company issued 656,667 shares in consideration for the acquisition of a 2.5% stake in Hilton Food Group (Europe) Limited (see note 12). All ordinary shares of 10 pence each have equal rights in respect of voting, receipt of dividends, and repayment of capital. 21 Cash generated from operations 2007 2006 Group Â£'000 Â£'000 Profit before income tax 13,674 15,485 Adjustments for: - Depreciation 9,630 8,020 - Amortisation of intangible assets 1,364 1,129 - Loss on disposal of property, plant and equipment 36 31 - Finance costs - net 1,983 214 - Amortisation of government grants (104) (109) Changes in working capital: - Inventories 442 (2,011) - Trade and other receivables (5,490) (7,881) - Prepaid expenses (1,295) (443) - Trade and other payables 4,914 4,227 - Accrued expenses (1,563) 7,819 Cash generated from operations 23,591 26,481 This information is provided by RNS The company news service from the London Stock Exchange

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