Hilton Foods Regulatory News (HFG)

Hilton Food Group plc

Preliminary results for 2010

Delivering continuing growth in line with our strategy

Hilton Food Group plc, Europe's leading specialist retail meat packing business supplying major international food retailers in eleven countries, is today announcing its results for 2010.

Please note that the results for 2010 comprise 52 weeks as compared to 53 weeks in the previous year, the percentage changes in key figures on a comparable 52 week basis are noted below in the following table.

Financial Highlights

Business Highlights

·; Volume growth of 8%, despite economic conditions remaining subdued across Europe (representing an increase of more than 9% on a comparable 52 week basis).

·; Further strong revenue and volume growth achieved in Central Europe with Ahold, Tesco and Rimi.

·; Continued strong cash generation enabling a continuing high level of investment in equipment and facilities, designed to underpin the longer term growth of the business.

·; Capital expenditure of £17.8m including £9.4m on our new Danish facility.

·; Strong balance sheet with net debt level further reduced; no bank re-financing requirement until 2015.

·; Building work completed at the new facility at Hasselager in Denmark, with equipment installation and recruitment fully on schedule for the start of production in April 2011.

·; Contract with Coop Danmark A/S extended to include the operation of a robotic store order picking facility.

Note: The results for 2010 comprised 52 weeks, as compared to 53 weeks in the previous year. Where appropriate overall growth rates for the Group are provided on a comparable 52 week basis.

Commenting, Robert Watson OBE, Chief Executive said:

"I am pleased to report that 2010 has been another successful year for the Group, building on its strong historical track record. Trading was strong, with good volume growth being achieved at all our facilities and across the range of territories in which Hilton operates. During 2010 we achieved further success with new product initiatives and maintained a continuing high level of investment in our modern state of the art facilities across Europe".

Enquiries

Chairman's statement

CONTINUED STRONG GROWTH

I am pleased to report to Shareholders that, in my first full year as Non-Executive Chairman, the Group has performed well. We made good progress against our key strategic objectives of growing our business whilst progressively extending our service and product offering to our customers. We delivered yet another strong trading performance across the board, with 2010 seeing our expansion into Estonia, supplied from our facility in southern Poland. New product initiatives have performed well over 2010 and the new contract recently gained to operate a robotised store order picking facility alongside our meat packing operation in Denmark is in line with our strategy of expanding the range of our service offering to customers as and when opportunities to add value are jointly identified with them.

The Group supplies customers in eleven countries across Europe and has achieved continuing sales and volume growth. It has also continued to generate the cash flow required both to maintain high levels of investment and a progressive dividend policy for its shareholders.

OVERVIEW OF GROUP RESULTS

In 2010 volumes of meat packed for Hilton's customers increased by over 9% on a comparable 52 week basis, with revenue rising on a comparable basis by over 6% to £864.2m. Revenue growth reflected the volume gains made, offset by the impact of an increased percentage of total sales in Central Europe and a slightly higher percentage of lower priced pork products. The increases reflected turnover and volume growth across all the territories in which the Group operates. The strongest volume growth was achieved at our businesses in Central Europe, Ireland and Holland, reflecting both the success of new product initiatives and new customer gains.

Profit before taxation rose by over 10%, from £20.1m to £22.2m, and by nearly 13% on a comparable 52 week basis. Interest cover was 21 times (2009: 13 times). Basic earnings per share were 22.6p in 2010 (2009: 20.1p), the increase of 12% (15% on a comparable 52 week basis) reflecting increased operating profit, reduced interest costs and an unchanged effective rate of taxation.

Cash generated from operating activities in 2010 was £34.1m, which enabled net year end borrowings to be reduced to £18.0m, compared with £20.6m at the end of 2009, despite £9.4m of capital expenditure on the new facility in Denmark. This level of cash generation enables us to continuously improve and develop our facilities, whilst being able to finance geographical and product and service range expansion on competitive terms. Capital expenditure of £17.8m during the year included the investment required to facilitate the continued expansion of our existing businesses and the required initial investment for our new business in Denmark. There was also continued investment at all our existing sites, taking advantage of the latest advances in packing technology to drive efficiency gains and increase volumes, in line with our customers' growth plans.

The Group's results are considered in greater detail in the Chief Executive's summary and the Financial review sections.

HILTON'S GEOGRAPHICAL COVERAGE

70% of our revenue is now earned outside the United Kingdom, with 75% of our total volume of meat packed outside the UK. Well considered geographic expansion, as opportunities arise, remains a key element in Hilton's strategy. The broad spread of the Group's businesses across Europe represents a significant strength, in terms of reducing Hilton's dependence on the fortunes of any one European economy.

OUR MANAGEMENT AND EMPLOYEES

Hilton has robust values and good people and is operated on a decentralised basis, with strong management teams in each country. Throughout 2010 our 1,909 full time employees in six separate country business units displayed a continuing high level of dedication, conviction and professionalism. The Board understands and appreciates just how much our progress owes to their effort, personal commitment, enthusiasm, enterprise and initiative and I would like to take this opportunity on behalf of the entire Board to personally thank all our employees across Europe for their hard work during 2010 and their continuing commitment.

BOARD CHANGES

Following the unexpected and sad death of our previous Non-Executive Chairman Gordon Summerfield on 15 March 2010, I assumed the role of Non-Executive Chairman on 22 March 2010. On 1 October 2010 Colin Smith, the former Chief Executive of Safeway plc, joined our Board as a Non-Executive Director. Colin brings a wealth of relevant experience to the Board.

There have been no other changes in the composition of the Board since the Company's flotation in early 2007. The Board continues to benefit from a wide range of skills and depth of practical experience, which is available to support our management teams across Europe. Here I would like to thank my Board colleagues for their continued enthusiasm and support.

PROGRESSIVE DIVIDEND POLICY

We seek to maintain a progressive dividend policy that provides both an appropriate return to shareholders and a dividend level that grows broadly in line with the underlying earnings of the Group. I am pleased to report that, in line with this policy, the Board has recommended a final dividend of 7.4p per ordinary share in respect of 2010. This, together with the interim dividend of 2.8p per ordinary share paid in December 2010, represents a 9.0% increase over last year. The final dividend, if approved by shareholders, will be paid on 1 July 2011 to shareholders on the register on 3 June 2011 and the shares will be ex dividend on 1 June 2011.

OUR BUSINESS STRATEGY

Hilton has a strong vision and a clear, well defined strategy and continues to pursue its key strategic goal of progressive geographical expansion. In 2010 Rimi in Estonia was added as a new customer, serviced from our facility in Poland, and in February 2011 the operation of a robotised store order picking facility was added to the contract signed in Denmark last year. Further volume growth in 2010, driven by new product initiatives and customer gains, has secured increased economies of scale, directly benefiting both the Group and its customers. A constant and rigorous focus on reducing unit packing costs and improving operational efficiencies has enabled the Group to play a continuing proactive role in strongly supporting its customers and their brands.

2011 OUTLOOK

The Group's past growth has been achieved by a combination of steady geographical expansion and continuing progress achieved within each country in which the Group operates. We expect volume growth to continue but the pace of economic recovery will differ across the twelve countries in which the Group's customers are located. We remain well placed to benefit from any improvements in economic conditions.

We have built a solid foundation for future expansion, but the future economic and competitive climate prevailing in the countries in which each of our customers operate, is a factor which our business can never be wholly insulated from or be predicted with certainty. The Board expects, nevertheless, that with a sound and proven business model, prudent financing arrangements, a growing reputation, a well invested asset base and successful customers, Hilton will achieve further progress in 2011. The Group has commenced the new financial year in line with the Board's expectations and remains well positioned to build further on its strong historical track record.

Sir David Naish DL

Non-Executive Chairman

30 March 2011

Chief Executive's summary

CONTINUED INVESTMENT AND INNOVATION

2010 has seen another successful year for Hilton Food Group over which it has achieved continuing growth across all the countries in which it currently operates. The progress achieved was both a credit to our management and employees and a direct reflection of the continued success of our retail partners.

In terms both of sales and profit growth our performance remained strong over a year which, in terms of the subdued European economic backdrop, has remained relatively challenging. We have continued to invest to improve the operational efficiency of our packing plants, expand and develop our product ranges and put in place the required capacity for anticipated future growth. In Denmark our new factory has now been built, with all the required equipment and machinery ordered and its installation and commissioning, together with required staff recruitment, fully on schedule for a planned start of operations in April 2011.

OVERVIEW OF OPERATING PERFORMANCE BY BUSINESS SEGMENT

Western Europe

Operating profit of £20.8m (2009: £19.4m) on turnover of £776.6m (2009: £755.7m)

Western Europe covers the Group's existing businesses in the UK, Ireland, Holland and Sweden and the new business in Denmark. Continued progress was made across all the four existing business units during 2010, with the Group continuing to achieve growth in all the markets it supplies, despite a mixed economic background. On a comparable 52 week basis, volume growth was 5.8%, with turnover growth of 4.6%, reflecting the volume growth offset by the negative effect on unit selling prices of a slightly higher proportion of lower priced pork products. The volume gains were accentuated as in previous years by new product development initiatives, with sales of spreadable meats progressing well in Holland.

The new facility for Denmark is expected to commence production in April 2011. The building has been completed and equipment installation and commissioning, together with staff recruitment, are fully on track to meet the projected start date. In relation to this project £0.3m of non-recoverable start up costs were charged in 2010.

Central Europe

Operating profit of £2.5m (2009: £2.3m) on turnover of £87.6m (2009: £70.4m)

Central Europe comprises the Group's rapidly expanding meat packing business, based at its packing plant in Tychy, in southern Poland. On a comparable 52 week basis, volume growth of 32.7% was achieved in 2010 with turnover growth of 24.5% reflecting the volume growth offset by a higher proportion of lower priced pork and mince lines. This business supplies Ahold stores in Czech Republic and Slovakia, Tesco stores in Hungary, Czech Republic, Poland and Slovakia and Rimi stores in Latvia, Lithuania and Estonia.

Volumes grew strongly over the year but profitability was temporarily restrained by one off costs, incurred whilst new investments in product lines and robotic storage were commissioned and installed, in order to cope with the increased volumes and expanded product range. The continuing strong volume growth achieved in this relatively complex multi-customer business remains the key to achieving the very low levels of unit packing costs, which are an essential requirement for our customers to be able to compete strongly and grow in these developing markets.

INNOVATION

Innovation is core to Hilton's strategic approach both in terms of new product development and the range of services we offer to our customers. The broadening of our product ranges, together with continued innovation, is required both to ensure we can meet changing consumer needs and to adapt our businesses to reduce costs and increase efficiencies and capacities. Our product teams at each site are always involved in a wide range of new product and packaging developments, which, together with extending and adapting the ranges of products packed for our customers, can increase the volumetric utilisation of these packing facilities, thus achieving lower unit packing costs for our customers.

INVESTMENT IN FACILITIES, AUTOMATION AND TECHNOLOGY

Hilton aims to be "Best in Class" in every area of its business and its modern, well invested, state of the art facilities are a key factor in keeping unit packing costs as low as possible. Harnessing continuing advances in packing technology and robotic storage solutions enable both increasing volumes of meat to be packed within a given factory footprint and continuous improvements in product quality. Hilton is able to underpin the longer term success of the business by being able to operate its packing plants at highest achievable levels of volumetric utilisation, whilst continuously improving product quality. Over the seven years to December 2010, capital expenditure on the Group's packing and storage facilities has totalled over £110m.

PARTNERS

Hilton has a strong customer base, comprising growing and successful multiple retailers. The Group's growth has been generated historically by its strong long term relationships with its retail partners, with whom it continues to work very closely to deliver high service levels, consistent and high product quality, product innovation, high levels of food safety and product integrity assurance. These partnerships, combined with our customers' success have enabled the Group to continue increasing volumes and progressively reduce unit packing costs, which is vital for our customers facing very competitive markets. The strength of these long term partnerships has been a key driver of our growth since the Group was formed and will continue to underpin the Group's strategy going forward.

Our current expansion into Denmark, which is with a new customer Coop Danmark A/S, is in line with past geographical expansion, in that we have the potential to deliver major benefits for our partner, whilst building a strong, dependable and growing business for the Group. As with our other partnerships, we have taken the time to gain an in depth knowledge of our customer's needs, together with the specific requirements of their local market, so as to ensure our production configuration has been optimised to meet their needs.

COLLEAGUES

Our dedicated employees have once again made a significant contribution to our continued progress, against a difficult economic backdrop. I would like to personally thank them for their hard work, loyalty and professionalism. Hilton is very much a people business and we are committed to attracting and developing the best talent to drive our future growth. The Group's businesses operate on the basis of providing very high customer service levels with the performance of our employees being vital to their delivery. The quality and depth of our management teams and workforces is a key driver of our successful growth and development, as is the way in which they routinely share best practice on a structured basis, in order to deliver the best attainable outcomes for all our customers.

STRATEGIC PRIORITIES

Hilton has a clear, simple and well defined strategy, with its principal strategic objectives being strongly to support its customers' brands and their development in their local markets, whilst achieving attractive and sustainable rates of growth and returns for its shareholders. The Group's business development strategy focuses on the following four key elements:

● Building volumes with and extending product ranges for existing customers;

● Partnering with existing customers in new territories;

● Gaining new customers in new territories; and

● Maintaining an uncompromising focus on unit costs, quality and product development.

This strategic approach which we have pursued since the Group was established has generated continuing strong sales and profit growth over an extended period and laid firm foundations for future growth. We have a proven business model, but will nevertheless, remain both open minded and flexible, so as to be able to take advantage of any new growth opportunities which may emerge with existing or new customers.

Robert Watson OBE

Chief Executive

30 March 2011

Financial review

SOUND FINANCES

The Group has delivered another strong set of results in 2010. This Financial review covers the main highlights of the Group's financial performance and position in 2010, together with key features of the Group's treasury risk management policies, as well as certain normal cautionary statements.

BASIS OF PREPARATION

The Group is presenting its results for the 52 week period ended 2 January 2011, with comparative information for the 53 week period ended 3 January 2010. All growth figures are reported on a 52 compared to a 53 week basis, unless stated otherwise. The financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU).

2010 FINANCIAL PERFORMANCE

Revenue

The Group's trading performance has once again been strong. Volumes grew overall by 7.8% (and by 9.5% on a comparable 52 week basis). Further details of volume growth by business segment are set out in the Chief Executive's summary. Turnover rose by 4.6% to £864.2m, as compared to £826.1m in 2009 (an increase of 6.3% on a comparable 52 week basis). The turnover increase is below the level of volume gains, reflecting a slightly higher percentage of lower priced pork products and an increased percentage of total sales in Central Europe.

Operating profit margin

Our operating profit margin in 2010 was 2.7%, as compared with 2.6% in 2009.

Operating profit

Operating profit, at £23.3m was 7.3% above the operating profit of £21.7m made in 2009 (representing a 9.4% increase on a comparable 52 week basis).

Finance Costs

Net finance costs reduced from £1.7m to £1.1m. This reflected the continuing low United Kingdom London Inter-bank Offered Rate (LIBOR) levels seen over 2010, which determine the interest rates on the Group's main sterling borrowings. The movement also reflected the reduction achieved in average net debt levels over 2010, with the new financing facility for the machinery and equipment for Denmark starting to be drawn down towards the end of the year.

Profit before taxation

Reported profit before taxation, at £22.2m, was £2.1m and 10.7% higher than in 2009 (£20.1m), reflecting the operating profit improvement of £1.6m, and the reduction in finance costs of £0.6m detailed above. The increase on a comparable 52 week basis was £2.5m representing 12.7% growth.

Taxation

The taxation charge for the period was £5.3m (2009: £4.8m).This represented an effective taxation rate of 24%, in line with that in the previous year.

Earnings per share

Basic and diluted earnings per share were 22.6p (2009: 20.1p) an increase of 12.4%, reflecting the combination of the increased level of operating profit and reduced finance charges, with an unchanged effective taxation rate. On a comparable 52 week basis, earnings per share increased by 14.7%.

Free cash flow and net borrowing levels

Hilton is a soundly financed business with dependable underlying cash flows. Cash flow continued to be strong in 2010, with the Group generating £9.9m of free cash flow before dividends and financing, after capital expenditure of £9.4m on the new Danish facility. The underlying free cash flow, excluding the new Danish investment, was £19.3m (2009: £14.8m). This has enabled the Group to reduce its net debt level, despite the continued investment in geographical expansion. Group borrowings, net of cash balances of £26.1m, stood at £18.0m at the end of 2010. Interest cover in 2010 was 21 times, reflecting reduced finance costs and increased operating profit, as compared with 13 times in 2009.

BUSINESS PERFORMANCE MEASUREMENT

The Board uses a wide range of financial and non-financial Key Performance Indicators "KPIs", reported to the Board each four week period, to measure progress achieved in building shareholder value and achieving the Group's objectives. Our performance against the key "KPIs" used for this purpose over the last two years is set out below:

TREASURY RISK MANAGEMENT POLICIES

The Group's policy is structured to ensure adequate financial resources are made available for the continuing development of its business, whilst safely managing the areas of treasury risk covered below:

Foreign exchange rate movements

The presentational currency of the Group is sterling. The earnings of the Group's overseas subsidiaries are translated into sterling at the average exchange rates for the year and their assets and liabilities at the year end closing rates. The timing of the repatriation of overseas profits to the UK and the repayment of any intra group loans due to UK holding companies have regard to actual and forecast exchange rates. Changes in relevant currency parities are monitored on a day to day basis. The Group has to date decided not to hedge its foreign exchange rate exposures, the impact of which has been broadly favourable overall over recent years, but this policy is kept under continuing review. The Group's overseas subsidiaries have natural hedges in place as they, for the most part, buy raw materials, employ people, source services, sell products and arrange funding in their local currencies. As a result the Group's exposure is principally limited to its equity investment in each overseas subsidiary.

Interest rate fluctuation risk

The risk arises from the fact that the interest rates on the Group's borrowings are variable, being at agreed margins over LIBOR for sterling borrowings or EURIBOR for euro borrowings, which fluctuate. The Group's principal borrowing is in sterling, with interest at an agreed margin over LIBOR. The Board's policy is to have an interest rate cap on a proportion of this borrowing and the Group currently has in place a four year cap at 4.5% on 56% of its sterling term loan from Ulster Bank. The Board would review hedging costs and options should the interest rate environment change materially.

Customer credit and pricing risks

As Hilton's customers comprise a small number of very successful and eminently credit worthy major multiple retailers, the level of credit risk is considered to be insignificant. Historically the incidence of bad debts has been immaterial. Hilton's pricing is based predominantly either on cost plus agreements or agreed packing rates with its customers.

Liquidity risk

This is an area which for many businesses represents a material concern, given the continuing difficult economic environment and liquidity constraints across banking systems in Europe. Hilton Food Group remains strongly cash generative, has a robust balance sheet and has committed banking facilities for the medium term, sufficient to support its existing business. All bank positions are monitored on a daily basis and capital expenditure above set levels, together with decisions on intra group dividends, are all approved at Board meetings. All long term debt is arranged centrally and is subject to Board approval.

GOING CONCERN BASIS

The Group's bank borrowings are detailed in note 19 to the financial statements and the principal banking facilities which support the Group's existing and contracted new business are committed, with no renewal required for four years. The Group is in full compliance with all its banking covenants. Future geographical expansion which is not yet contracted, and which is not built into internal budgets and forecasts, may require additional or extended banking facilities and such future geographical expansion will depend on our ability to negotiate appropriate additional or extended facilities.

The Group's internal budgets and forecasts, which incorporate all reasonably foreseeable changes in trading performance, show the Board that it will be able to operate within its current banking facilities, taking into account available cash balances, for the foreseeable future. The going concern basis is, accordingly, adopted by the Board in preparing the financial statements.

FORWARD LOOKING STATEMENTS

The Chairman's statement, the Chief Executive's summary, the Financial review and the Business review together with the other reports which together comprise the Enhanced Business Review contain forward looking statements that are inevitably subject to risk factors associated with, amongst other things, economic, political and business developments which may occur from time to time across the countries in which the Group operates. It is believed that the expectations reflected in these statements are reasonable, but all forward looking statements and forecasts involve risk and uncertainty, because they, self evidently, relate to events and depend on circumstances that will occur in the future.

On behalf of the Board

Nigel Majewski

Finance Director

30 March 2011

Business review

A SOUND PLATFORM FOR FUTURE GROWTH

The Business review covers sequentially the key resources and relationships of the business, the main trends and factors likely to affect the future development of the Group's businesses and the principal risks and uncertainties which face our businesses, together with the measures we have adopted to minimise these risks.

THE KEY RESOURCES AND RELATIONSHIPS OF THE BUSINESS

The resources and relationships which we consider are critical to our business are detailed below:

THE MAIN TRENDS AND FACTORS LIKELY TO AFFECT THE FUTURE DEVELOPMENT, PERFORMANCE AND POSITION OF THE GROUP'S BUSINESSES

The Group's progressive geographical expansion

Hilton's expansion has been based on its established track record, together with its growing international reputation and experience and the close partnerships for mutual benefit it has established and maintained with successful retail partners. The five European countries in which the Group currently operates meat packing plants, its retail partners served from those plants (all of whom are subsidiary or associated companies of the Tesco or Ahold groups) and the chronological order in which each facility commenced operations is set out below:

The Group is continuing to achieve growth in all these countries, driven by its retail partners' success, new product and packaging development and the extension of the range of meat products packed for its customers. The Group's sixth plant, in Denmark, is scheduled to start production in April 2011 for Coop Danmark A/S.

The key trends and factors which have affected the Group's growth and development

Hilton's past growth has been accentuated by the consumer trend in most European markets towards convenience and one stop shopping which has led to the rapid growth of the large food retailer chains, together with these retailers' focus on private label, which the Group supplies exclusively. The consumer search for the best achievable value for money and the apparent increase in the levels of meals being eaten in the home, seen during the recent subdued economic period across Europe, has served to benefit retailer's private label sales.

As the larger retail chains have gained a greater share of the grocery markets, these retail chains are increasingly turning to large scale meat packing plants capable of producing packed meat products more hygienically and cost efficiently. By moving to larger suppliers of pre-packed meat from the optimum logistical locations the retailers have effectively chosen to rationalise their supply base, so as to deliver lower costs and higher food safety, food integrity and quality standards. This has allowed the retailers to focus on their core business and maximise their return on available retail space.

These trends and factors which have underpinned the past growth of the Group's business are expected to continue, albeit that the pace of recovery from the recent economic recessions in each of the eleven markets in which the Group currently operates cannot be predicted with any certainty.

THE PRINCIPAL RISKS AND UNCERTAINTIES FACING THE GROUP'S BUSINESSES

The Group has a well developed structure and set of processes for identifying and mitigating the key business risks it faces. As with any public company, there are risks and uncertainties inherent in the Group's operations which could have a significant impact on its business, results and financial position, which we manage, in order to help us achieve our strategic objectives and protect our reputation. The most significant business risks faced, which are unchanged from last year and which will continue to affect the group's businesses, together with the measures we have adopted to mitigate these risks, are set out in the table below. This is not intended to constitute an exhaustive analysis of all risks faced by the Group.

The Audit Committee is responsible for the oversight of the Group's risk management processes and the Board is responsible for the appropriate identification of risks and the effective application of actions to mitigate those risks.

The Group is dependent on the quality and effectiveness of its risk management strategy and procedures. All types of risk applicable to the business are regularly reviewed and a formal risk assessment review is carried out to highlight key risks to the business and to consider action that can reasonably and cost effectively be taken to mitigate them. The Group's risk register is compiled through a combination of business unit risk registers and Board input. The Board believes that in managing the Group's businesses it is vital to strike the right balance between an appropriate and comprehensive control environment and encouraging the level of entrepreneurial freedom of action required to seek out and develop new opportunities, but, however skilfully this balance is struck, the business will always be subject to a number of risks and uncertainties, as illustrated above.

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. The risks set out in the above table, together with our risk mitigation strategies, should be considered in the context of the Group's risk management and internal control framework, details of which are set out in the Corporate Governance statement and the cautionary statement regarding forward looking statements in the Financial review.

Note: References in this preliminary announcement to the Directors' report, the Remuneration report, the Corporate Governance statement and the Corporate Social Responsibility report 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 Accounts

Each of the Directors whose names and functions are set out below confirm that to the best of their knowledge and belief:

·; the Group and parent company financial statements, prepared in accordance with applicable UK law and in conformity with IFRS, as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group and the Company; and

·; the management reports (which comprise the Chairman's statement, the Chief Executive's summary, the Financial review, the Business review 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 they face.

This responsibility statement was approved by the Board of Directors on 30 March 2011.

Directors

R Watson, OBE - Chief Executive

N Majewski - Finance Director

C Patten - Commercial Director

T Bergman - European Business Director

P Heffer - UK and Ireland Business Director

Sir D Naish, DL - Non-Executive Chairman

C Marsh - Non-Executive Director

C Smith, OBE - Non-Executive Director

Consolidated income statement

Consolidated statement of comprehensive income

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

Consolidated balance sheet

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

The financial statements were approved by the Board on 30 March 2011 and were signed on its behalf by:

Hilton Food Group plc - Registered number: 6165540

Consolidated statement of changes in equity

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

Consolidated cash flow statement

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 specialist retail meat packing business supplying major international food retailers in eleven European countries. The Company's subsidiaries are listed in note 26.

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 6165540.

The Company has its primary listing on the London Stock Exchange.

The financial year represents the 52 weeks to 2 January 2011 (prior financial year 53 weeks to 3 January 2010).

These consolidated financial statements were approved for issue on 30 March 2011.

The Company has taken advantage of the exemption in Section 408 Companies Act 2006 not to publish its individual income statement and related notes. Profit for the year dealt with in the income statement of Hilton Food Group plc amounted to £14,452,000 (2009: £5,999,000).

2 Summary of significant accounting policies

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.

Basis of preparation

The consolidated financial statements of Hilton Food Group plc have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared on the going concern basis under the historical cost convention.

The financial statements are presented in Sterling and all values are rounded to the nearest thousand (£'000) except when otherwise indicated.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.

This preliminary announcement does not comprise the Company's statutory accounts for the years to 2 January 2011 and 3 January 2010. The statutory accounts for the year to 3 January 2010 have been delivered to the Registrar of Companies, whereas those for the year to 2 January 2011 will be delivered following the Company's Annual General Meeting. The Company's auditors have issued an unqualified audit opinion in respect of the years ended 2 January 2011 and 3 January 2010.

Basis of consolidation

These consolidated financial statements comprise the financial statements of Hilton Food Group plc ("the Company") and its subsidiaries, together, ("the Group") drawn up to 2 January 2011. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

A subsidiary is an entity controlled, either directly or indirectly, by the Company, where control is the power to govern the financial and operating policies of the entity.

All inter-company balances and transactions, including unrealised profits arising from inter-group transactions, are eliminated on consolidation.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.

International Financial Reporting Standards

(a) Standards, amendments and interpretations effective in 2010

IAS 27 (revised), 'Consolidated and separate financial statements' (effective 1 July 2009). This revised standard requires transactions with non-controlling interests to be recorded in equity if there is no change in control. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value and a gain or loss is recognised in profit or loss.

IFRS 2 (amendment), 'Share based payments - Group cash-settled share-based payment transactions' (effective 1 January 2010). These amendments determine the classification of share based payment awards. Amended definitions remove previous inconsistencies.

IFRS 3 (revised), 'Business combinations' (effective 1 July 2009). The standard continues to apply the acquisition method to business combinations with some significant changes. All payments to purchase a business are to be recorded at fair value at the acquisition date with some contingent payments subsequently re-measured at fair value through income. Goodwill and non-controlling interests may be calculated on a gross or net basis. Transaction costs will be expensed.

IFRIC 17, 'Distributions of non cash assets to owners' (effective 1 July 2009). This interpretation clarifies how an entity should measure distributions of assets other than cash when it pays dividends to its owners. The interpretation states that (a) a dividend payable should be recognised when appropriately authorised, (b) it should be measured at the fair value of the net assets to be distributed, and (c) the difference between the fair value of the dividend paid and the carrying amount of the net assets distributed should be recognised in profit or loss.

(b) Standards, amendments and interpretations effective in 2010 but not relevant to the Group or Company's operations

IAS 39 (amendment), 'Financial instruments: Recognition and measurement', on Eligible hedged items (effective 1 July 2009)

IFRS 1 (amendment), 'First time adoption of IFRS additional exemptions' (effective 1 January 2010)

IFRIC 12,'Service concession arrangements' (effective 30 March 2009)

IFRIC 18, 'Transfer of assets from customers' (effective 1 July 2009)

(c) Standards, amendments and interpretations to existing standards that are not yet effective, are subject to EU endorsement and have not been early adopted by the Group

IFRS 9, 'Financial instruments' (effective 1 January 2013). This standard concerns the classification and measurement of financial assets that will replace IAS 39. Equity instruments are to be measured at fair value. Debt instruments may be measured at fair value or amortised cost. This standard is not expected to have an impact on the Group or Company.

IFRIC 19, 'Extinguishing financial liabilities with equity instruments' (effective 1 July 2010). This IFRIC clarifies the accounting when an entity renegotiates the terms of its debt with the result that the liability is extinguished through the debtor issuing its own equity instruments to the creditor. The Group and Company will apply this IFRIC to any renegotiation of debt terms in future periods.

(d) Standards, amendments and interpretations to existing standards that are not yet effective and not relevant for the Group's operations

IFRIC 14 (amendment), 'IAS 19 - Prepayments of a minimum funding requirement' (effective 1 January 2011)

IAS 24 (revised), 'Related party disclosures' (effective 1 January 2011)

IAS 32 (amendment), 'Financial Instruments: Presentation' and IAS 1: 'Presentation on classification of rights issue' (effective 1 February 2010)

IFRS 1 (amendment), 'First time adoption of IFRS' (effective 1 July 2011)

IFRS 7 (amendment), 'Financial instruments: Disclosures on derecognition' (effective 1 July 2011)

Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods in the ordinary course of the Group's activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group and the criteria set out in the following paragraph have been met.

The Group sells meat in the wholesale market. Sales of goods are recognised when a Group entity has delivered products to the customer and there is no unfulfilled obligation that could affect the customer's acceptance of the products. Delivery does not occur until the products have been shipped to the location specified by the customer, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of operating segments, has been identified as the Group's Executive Directors.

Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated financial statements are presented in Sterling, which is the Company's functional and the Group's presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

(c) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

·; assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

·; income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

·; all resulting currency translation differences are recognised as a separate component of equity in a foreign currency translation reserve.

When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and any impairment in value. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Depreciation is calculated using the straight-line method to allocate the cost of property, plant and equipment to their residual values over their estimated useful lives, as follows:

Land is not depreciated. Assets in the course of construction are not depreciated until commissioned.

The residual value and useful lives of property, plant and equipment are reviewed, and adjusted if appropriate, at each balance sheet date. An asset's carrying value is written down to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. These impairment losses are recognised in the income statement. Following the recognition of an impairment loss, the depreciation charge applicable to the asset is adjusted prospectively in order to systematically allocate the revised carrying amount, net of any residual value, over the remaining useful life.

Intangible assets

(a) Goodwill

Goodwill on acquisitions of subsidiaries and purchase of minority interests is included in 'intangible assets', tested annually for impairment and carried at cost less accumulated impairment losses. Goodwill represents the excess of the cost of the acquisition or purchase over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary or minority interest at the date of acquisition.

(b) Computer software

Acquired software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on a straight-line basis over their useful economic lives of three to seven years.

Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred.

(c) Product licences

The costs of acquiring product licences are capitalised and amortised on a straight-line basis over their expected useful economic lives of five to ten years.

Impairment of non-financial assets

Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment.

Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell, and value in use. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows (cash generating units). Non-financial assets other than goodwill that have suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

Financial assets

(a) Classification

The Group classifies all of its financial assets as loans and receivables. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group's loans and receivables comprise 'trade and other receivables' and cash and cash equivalents in the balance sheet.

(b) Recognition and measurement

Loans and receivables are recognised initially at fair value and subsequently carried at amortised cost using the effective interest method.

(c) Impairment of financial assets

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is either determined on the first in first out basis or by the 'retail method' depending on the subsidiary. The 'retail method' computes cost on the basis of selling price less the appropriate trading margin. Cost comprises material costs, direct wages and other direct production costs together with a proportion of production overheads relevant to the stage of completion of work in progress and finished goods and excludes borrowing costs. Net realisable value represents the estimated selling price less costs to completion and appropriate selling and distribution costs. Provision is made, where necessary, for slow moving, obsolete and defective inventories.

Trade and other receivables

Trade receivables represent amounts due from customers for goods sold or services performed in the ordinary course of business. If collection is expected in one year or less they are classified as current assets. If not, they are presented as non-current assets.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. Bank overdrafts are shown on the balance sheet within borrowings in current liabilities.

Share capital and reserves

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

The employee share schemes reserve represents the cumulative fair value of share options granted recognised as an expense in the income statement.

The foreign currency translation reserve arises on the consolidation of the Group's overseas subsidiaries representing the difference between assets and liabilities translated at the closing exchange rate and income and expenses translated at average exchange rate.

The merger and reverse acquisition reserves arose during 2007 following the restructuring of the Group.

Trade and other payables

Trade payables represent obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year. If not, they are presented as non-current liabilities.

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Borrowings

All borrowings are recognised initially at fair value net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Borrowing costs directly attributable to an acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset.

Leases

Assets acquired under a lease which transfers substantially all of the risks and rewards of ownership to the Group, are capitalised as property, plant and equipment at their fair value and are depreciated over the shorter of their useful economic lives and their lease term with any impairment being recognised in accumulated depreciation. Amounts payable under such leases (finance leases), net of transaction costs, are classified as current and non-current liabilities based on the lease payment dates. Lease payments are treated as consisting of capital and interest elements and the interest is charged to the income statement in proportion to the reducing capital element outstanding.

Leases where the lessor retains substantially all of the risks and rewards of ownership are classified as operating leases. The annual rentals under operating leases are charged to the income statement as incurred.

Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge represents the expected tax payable or recoverable on the taxable profit for the year using tax laws enacted or substantively enacted at the balance sheet date.

Deferred income tax is recognised, using the liability method, on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Pensions and other post-employment benefits

The Group operates defined contribution schemes for certain employees in the UK, the Republic of Ireland and the Netherlands and contributes to a state administered money purchase scheme in Poland. The Group pays contributions to publicly or privately administered pension insurance plans and has no further payment obligations once the contributions have been made. The contributions are recognised as an employee benefit expense when they are due.

In the Netherlands and Sweden the Group contributes to industry-wide pension schemes for its employees. Although having some defined benefit features the Group's liability to these schemes is limited to the fixed contributions which are recognised as an expense when they are due. Accordingly the Group has accounted for these schemes as defined contribution schemes.

Share-based compensation

The Group operates share-based compensation plans. The fair value of the employee services received in exchange for the grant of options is recognised as an expense with a corresponding adjustment to equity. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each balance sheet date, the entity revises its estimates of the number of options that are expected to vest based on non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. All adjustments to equity are recognised as a separate component of equity in an employee share scheme reserve.

Grants

Grants are recognised at their fair value when there is a reasonable assurance that the grant will be received and all attaching conditions have been complied with.

Capital grants received and receivable by the Group are credited to deferred income and are amortised to the income statement on a straight-line basis over the expected useful economic lives of the assets to which they relate.

Revenue grants are recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate.

Dividend distribution

Dividend distribution to the Company's shareholders is recognised as a liability in the consolidated financial statements in the period in which the dividends are approved by the Company's shareholders.

Comparative information

Certain comparative information has been restated to reflect a fairer comparison with the current information. These restatements relate to a reclassification in note 5 of hire of plant and machinery costs to operating lease costs and have not affected the results of the group for the period ended 3 January 2010 or shareholders' funds as at 3 January 2010.

3 Financial risk management

Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk (price risk, foreign exchange risk and cash flow interest rate risk), credit risk and liquidity risk. The Group has in place a risk management programme that seeks to limit the adverse effects on the financial performance of the Group by monitoring the foregoing risks.

(a) Market risk

(i) Price risk

The Group is not exposed to equity securities price risk as it holds no listed or other equity investments. Hilton is exposed to commodity price risk which is significantly mitigated through its customer agreements which are on a cost plus or agreed packing rate basis.

(ii) Foreign exchange risk

The Group is exposed to foreign exchange risk in the normal course of business in its overseas operations, principally on transactions in Euros, Swedish Krona, Danish Krone and the Polish Zloty although such risk is mitigated as natural hedges exist in each operation through matching local currency cash flows. The Group regularly monitors foreign exchange exposure and to date has deemed it not appropriate to hedge its foreign exchange position.

(iii) Cash flow interest rate risk

The Group's interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk.

The Group seeks to manage exposure to interest rate risk through interest rate caps over the majority of its long term borrowings.

 (iv) Sensitivity analysis

(b) Credit risk

The Group is exposed to credit risk in respect of credit exposures to its retail customer partners and banking arrangements. The Group has implemented policies that require appropriate credit checks on potential customers before sales are made and in relation to its banking partners. The Group's maximum exposure to credit risk from retail customer partners is £76.1m (2009: £68.2m) as stated in note 17.

(c) Liquidity risk

The Group monitors regular cash forecasts to ensure that it has sufficient cash to meet operational needs whilst maintaining sufficient headroom on its undrawn committed borrowing facilities and without breaching its banking covenants. The Group held significant cash and cash equivalents of £26.1m (2009: £24.1m) and maintains a mix of long-term and short-term debt finance.

The Group's financial liabilities measured as the contractual undiscounted cash flows mature as follows:

Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group monitors capital on the basis of a gearing ratio. This ratio is calculated as net debt divided by EBITDA. Net debt is calculated as total borrowings (including 'current and non-current borrowings' as shown on the consolidated balance sheet) less cash and cash equivalents. EBITDA is calculated as operating profit before significant non-recurring items, interest, tax, depreciation and amortisation. The gearing ratio continues to improve ending the year at 0.5 (2009: 0.6) such that no further action has been required.

Fair value estimation

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. The Directors consider that there is a single level of fair value measurement hierarchy.

4 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

During 2010 and 2009 there were no critical accounting estimates or judgements in relation to the application of the Group's accounting policies.

5 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 six operating segments: i) United Kingdom; ii) Netherlands; iii) Republic of Ireland; iv) Sweden; v) Denmark and vi) Central Europe including Poland, Czech Republic, Hungary, Slovakia, Latvia, Lithuania and Estonia. The United Kingdom, Netherlands, Republic of Ireland, Sweden and Denmark have been aggregated into one reportable segment 'Western Europe' as they have similar economic characteristics as identified in IFRS 8. Central Europe comprises the other reportable segment.

From a product perspective the Executive Directors consider that the Group has only one identifiable product, wholesaling of meat. 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:

Sales between segments are carried out at arm's length. Revenue from external customers reported to the Executive Directors is measured in a manner consistent with that in the income statement.

The Executive Directors assess the performance of each operating segment based on its operating profit. 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 interest bearing reorganisation loan is not considered to be a segment liability.

The Group has two principal customers (comprising groups of entities known to be under common control), Tesco and Ahold. These customers are located in the United Kingdom, Netherlands, Republic of Ireland, Sweden and Central Europe including Poland, Czech Republic, Hungary, Slovakia, Latvia, Lithuania and Estonia.

Analysis of revenues from external customers and non-current assets are as follows:

6 Auditor's remuneration

Services provided by the Company's auditor and its associates

During the year the Group (including its overseas subsidiaries) obtained the following services from the Company's auditor and its associates:

7 Expenses by nature

8 Employee benefit expense

Further details of Directors' emoluments and share interests are given in the Remuneration report.

There are no other employees of the Company other than the Directors. Employee expense of the Company amounted to £nil (2009: £nil).

9 Finance income and costs

10 Income tax expense

Deferred tax charged directly to equity during the year in respect of employee share schemes amounted to £194,000 (2009: £nil).

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 28% (2009: 28%) applied to profits of the consolidated entities as follows:

There is no tax impact relating to components of other comprehensive income.

11 Earnings per share

Basic and diluted

Basic and diluted earnings per share are calculated by dividing the profit attributable to owners of the parent by the weighted average number of ordinary shares in issue during the year.

12 Dividends

The Directors propose a final dividend of 7.4p per share payable on 1 July 2011 to shareholders who are on the register at 3 June 2011. This dividend totalling £5.2m has not been recognised as a liability in these consolidated financial statements.

At its Annual General Meeting held on 26 May 2010 the Company passed a special resolution authorising new dividends to replace dividends paid during the period from incorporation to 3 July 2009 which were subject to a technical infringement of the Companies Act 2006.

13 Property, plant and equipment