Hilton Foods Regulatory News (HFG)

Hilton Food Group plc

Preliminary results for 2011

Good progress despite difficult economic conditions

Hilton Food Group plc, Europe's leading specialist retail meat packing business supplying major international food retailers in twelve countries, is today announcing its results for 2011.

2011 FINANCIAL HIGHLIGHTS

2011 BUSINESS HIGHLIGHTS

·; Revenue growth of 13.6%, driven by the new facility in Denmark and the recovery of higher raw material meat prices, despite economic conditions remaining difficult and uncertain across many regions of Europe.

·; Volume growth of 6.0%, reflecting the new business in Denmark, with underlying volumes slightly reduced, due to pressure on consumer spending levels in the face of increased meat prices.

·; Volume build up in Denmark in line with our expectations, with investment continuing on the new robotic store order picking facility, due to start operations in the second quarter of 2012.

·; Continued strong cash generation, enabling the Group to maintain a high level of investment in equipment and facilities, to underpin the growth of our businesses over the longer term.

·; Strong balance sheet, with net debt level at £18.7m only marginally increased, despite capital expenditure of £25.2m in 2011, which included £14.6m on our new Danish facilities.

·; 74% of the Group's revenue now arising outside the United Kingdom, with 77% of the volume of meat packed outside the UK, in Northern and Central European countries.

Commenting, Robert Watson OBE, Chief Executive said:

"Once again I am pleased to report that during 2011 Hilton has delivered a good performance, continuing to demonstrate the resilience of the Group's business model. Revenue growth was strong in 2011 and further success was achieved with new product and packaging initiatives. We have been able to maintain a high level of investment in our modern meat packing facilities across Europe, designed to keep them at state of the art levels."

Enquiries

Hilton Food Group Tel: 01480 387214

Robert Watson OBE, Chief Executive

Nigel Majewski, Finance Director

Citigate Dewe Rogerson Tel: 020 7638 9571

Tom Baldock

Claire Simonds

Chairman's statement

DELIVERING AGAINST OUR STRATEGY

Our strategy is designed to improve and grow our business on a sustainable and consistent basis, to deliver long term value for both our retail partners and shareholders. The Group now supplies customers in twelve countries across Europe. It has achieved continuing progress during 2011, despite the impact of higher raw material meat prices on consumer spending. The Group has also continued to generate the levels of cash flow required to maintain high levels of investment, enabling it to drive efficiencies and extend capacities to underpin its future growth, whilst being able both to maintain a strong balance sheet and a dependable progressive dividend policy for its shareholders.

SUMMARY OF GROUP RESULTS

In 2011 volumes of meat packed for Hilton's customers increased by 6%, with revenue rising by 14% to £981.3m. Revenue growth reflected the start-up of our new business in Denmark and comparatively strong economic conditions in Sweden and Central Europe.

Profit before taxation rose by over 10%, from £22.2m to £24.5m. Interest cover was 19 times (2010: 21 times). Basic earnings per share were 24.7p in 2011 (2010: 22.6p), the increase of over 9% reflecting the increased operating profit, slightly higher interest costs and an unchanged effective rate of taxation.

Cash generated from operating activities in 2011 was £41.7m (2010: £34.1m). Net year end borrowings rose by less than 4% to £18.7m, compared with £18.0m at the end of 2010, despite £25.2m of capital expenditure, including £14.6m on the new facilities in Denmark. This level of cash generation enables us to continuously improve and develop our facilities, whilst being able to finance competitive geographical, service and product range expansion. Capital expenditure during the year included continued investment at all our existing sites, designed to drive efficiency gains, to take advantage of available advances in packing technology and to facilitate continued volume growth, in line with our customers' plans.

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

MANAGEMENT AND EMPLOYEES

I would like to pay a particular tribute to our people. Hilton operates a decentralised business model, with strong, largely self-sufficient, management teams in place in each country, which we consider to be important so that we can ensure very close working relationships with and rapid pro-active support for our customers. Throughout 2011 our 2,181 full time employees in six separate country business units displayed a continuing high level of dedication, conviction and professionalism. The Board fully understands and appreciates just how much our progress relies on their effort, personal commitment, enthusiasm, enterprise and initiative and I would like to take this opportunity, on behalf of the Board, to personally thank all our employees across Europe both for their hard work during 2011 and their continuing commitment to the Group's on-going growth and development.

OUR BOARD

We have a traditional governance structure with a separate Non-Executive Chairman and Chief Executive, under which the Chief Executive Robert Watson runs the Group's businesses, whilst I oversee the functioning of the Board.

After a long and distinguished career with Hilton, Colin Patten intends to stand down from his Board role in due course and will not be seeking re-election at the forthcoming Annual General Meeting. Colin will be available to assist the Group to achieve an orderly transition and at the end of that period will be leaving to pursue his family and private business interests. We would like to thank Colin for his tremendous contribution to the Group over many years and to wish him all the very best in his retirement.

The Board continues to benefit from a wide range of skills and depth of practical experience that is made available to closely support our management teams across Europe. I would like to take this opportunity to thank my colleagues on the Board for their wise counsel and continued enthusiasm, dedication and support.

DIVIDEND POLICY

The Board recognises the importance of dividend payments to shareholders and we aim to maintain a dividend policy that provides a dividend level that grows broadly in line with the underlying earnings of the Group. I am pleased to report that the Board has recommended a final dividend of 8.0p per ordinary share in respect of 2011. This, together with the interim dividend of 3.1p per ordinary share paid in December 2011, represents an 8.8% increase in the full year dividend, as compared with last year. The final dividend, if approved by shareholders, will be paid on 29 June 2012 to shareholders on the register on 1 June 2012 and the shares will be ex dividend on 30 May 2012.

OUR STRATEGY

Hilton has a simple, clear and well defined strategy focussing 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.

We will continue to pursue progressive geographical expansion, whilst very actively developing, enriching and expanding the scope of our existing business partnerships. 2011 saw the start-up of Hilton's new business in Denmark and the Group continued in every country to drive forward new product initiatives, whilst maintaining a constant and rigorous focus on reducing unit packing costs and improving operational efficiencies. This enables us to play a full and proactive role in strongly supporting our customers and the development of their brands.

GEOGRAPHICAL REACH

Twelve years ago all our sales were made within the UK, but today 74% of our revenue now arises outside the United Kingdom, with 77% of our total volume of meat packed outside the UK, in Northern and Central European countries. These percentages have risen continuously over the last decade, reflecting Hilton's growing international reputation and footprint. The broad spread of the Group's businesses across Continental Europe serves to reduce Hilton's dependence on the fortunes of any one European economy, during these less certain economic times and continued geographical expansion, as opportunities arise, remains a key element in Hilton's strategic approach.

The Group also has relationships with suppliers of high quality meat around the world, sourcing product from over 40 different suppliers. This gives Hilton a high degree of flexibility and our customers the knowledge that Hilton can secure supply at competitive rates.

2012 OUTLOOK

The Group's past growth has been achieved through a combination of carefully considered geographical expansion together with the achievement of continuing progress within each country in which it operates. Currently, short term economic trends across Europe are very difficult to forecast, but the Group's business model has proved resilient and we remain well placed to benefit from any improvements in economic conditions when these eventually come through.

In 2012 we expect similar trading conditions featuring comparatively high prices for meat and other commodities and constrained consumer spending. The Board considers, however, that Hilton is well placed to deliver continued growth and meet the Board's expectations for 2012.

Sir David Naish DL

Non-Executive Chairman

28 March 2012

Chief Executive's summary

CONTINUED INVESTMENT IN SUSTAINABLE GROWTH

Good results and especially those achieved in difficult trading conditions are not achieved by chance. They represent both a credit to the efforts of our managers and employees and are a direct reflection both of the continued success of our long term retail partners, over a difficult and uncertain economic period, and our continued investment in top class operating facilities.

We aim to be the best specialist meat packing company in Europe and 2011 has seen another successful year for the Hilton Food Group, over which it has achieved continuing profitable growth, building on the solid progress achieved over previous years.

In terms both of sales and profit growth, our performance has remained robust. 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 meat packing facility commenced production in late March 2011, with volumes subsequently building up in line with our plans and expectations.

PERFORMANCE BY BUSINESS SEGMENT

Our business comprises two distinct business segments:

Western Europe

Operating profit of £23.2m (2010: £20.8m) on turnover of £888.7m (2010: £776.6m)

Western Europe covers the Group's businesses in the UK, Ireland, Holland, Sweden and Demark. Volume growth was 6.5%, with turnover growth of 14.4% representing significant progress in this segment. This reflected the new business start-up in Denmark and the recovery of higher raw material prices, partly offset by the effect of reduced consumer demand in the face of those higher raw material meat prices.

The new facility for Denmark commenced production in late March 2011 with volumes building up in line with our expectations. The investment in the robotic store order picking facility for Coop Danmark A/S is well advanced, with the start-up of operations scheduled for the second quarter of 2012.

Central Europe

Operating profit of £2.7m (2010: £2.5m) on turnover of £92.6m (2010: £87.6m)

Central Europe comprises the Group's meat packing business supplying three customers across Central Europe from its meat packing plant at Tychy in southern Poland. Volume growth of 4.0% was achieved in 2011, with turnover growth of 5.7%. 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.

Volume growth in this 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 very competitive developing markets.

CONTINUED INVESTMENT TO DRIVE EFFICIENCY

For us to succeed our customers need to view us as being at the forefront of the meat packing industry and as a committed partner with an established record of delivering value through innovative products and services, whilst relentlessly driving further efficiencies. Hilton aims to be "State of the Art" in every area of its business and its modern, well invested, facilities are considered a key factor in keeping unit packing costs as low as possible.

We constantly look for new and better ways of doing things and harnessing continuing advances in packing technology and robotic storage solutions enables us to increase volumes of meat which can be packed within a given factory footprint, thereby increasing asset utilisation. Hilton looks to build a business with strong longer-term prospects by being able to operate its packing plants at highest achievable levels of volumetric utilisation, whilst continuously improving product quality, presentation and yields. Over the eight years to December 2011, we have invested continuously, with capital expenditure on the Group's packing and storage facilities totalling over £140m.

OUR RETAIL PARTNERS

Our customer base comprises only successful blue chip multiple retailers and understanding our customers' needs and those of their consumers drives all that we do. The Group's growth has been generated historically by its strong long term relationships with its retail partners, with whom the Group continues to work very closely to deliver high service levels, consistent and dependable product quality, product innovation and reliable levels of food safety and product integrity assurance. These partnerships, combined with our customers' success have enabled the Group to continue to increase volumes whilst maintaining an unrelenting focus on reducing unit packing costs, which is essential for our customers who need competitive prices. 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.

OUR PEOPLE

I have always been impressed by the passion and commitment of our people and our dedicated and hard-working employees have once again made a major contribution to Hilton's continued progress, against a difficult and uncertain economic backdrop. I would like to personally thank them for their hard work, loyalty, dedication and professionalism.

Hilton is very much a people oriented business and we are committed to attracting, retaining and developing the best available talent pool to drive our future growth, whilst providing staff with an inclusive working culture in which everyone feels valued and respected and works together across the businesses and functions as one team. The Group's businesses operate on the basis of providing very high customer service levels, with the individual performance of our employees on an every-day basis 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, and we continue to increase the extent to which they routinely share best practice on a structured basis across the Group, in order to learn from each other, so as to be able to deliver the best achievable outcomes for all our customers.

I would also like to welcome all of the new employees that became part of the Hilton Food Group in 2011.

DIVERSITY

We recognise the benefits of diversity throughout the business, including gender diversity, and we employ a number of female senior managers across the group, importantly, in some key operational areas.

PRODUCT AND PACKAGING INNOVATION

Developing new products will always be one of the keys to success in any business and driving continuing innovation remains 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 continuously 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 serve to further increase the volumetric utilisation of these packing facilities, thus achieving lower unit packing costs for our customers.

OUR STRATEGY

Hilton has a clear, simple and well defined strategy, with its principal objectives being to strongly support its customers' brands and their development in their local markets, whilst achieving attractive and sustainable rates of growth and returns for its shareholders.

This approach which we have pursued rigorously since the Group's inception has generated both continuing strong sales and profit growth over an extended period and laid sound foundations for our future growth. We have a proven business model which will enable us to take advantage of any new growth opportunities which may emerge.

Robert Watson OBE

Chief Executive

28 March 2012

Financial review

SOUNDLY BASED FINANCES

Hilton Food Group delivered another strong trading performance in the 52 weeks ending 1 January 2012, despite the difficult economic conditions prevailing in some of the countries in which it operates. This Financial review covers the main highlights of the Group's financial performance and position in 2011, together with the key features of the Group's treasury risk management policies, as well as certain required cautionary statements.

BASIS OF PREPARATION

The Group is presenting its results for the 52 week period ended 1 January 2012, with comparative information for the 52 week period ended 2 January 2011. The financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU).

2011 FINANCIAL PERFORMANCE

Revenue

Volumes grew overall by 6.0% and further details of volume growth by business segment are set out in the Chief Executive's summary. Turnover rose by 13.6% to £981.3m, as compared to £864.2m in 2010, with 8.0% of the increase being attributable to new business start-up in Denmark. The volume increase is below the level of revenue gains, reflecting continuing pressure on consumer spending, in the face of the higher raw material meat prices.

Operating profit and margin

Operating profit, at £25.9m was 11.0% above the operating profit of £23.3m made in 2010. The operating profit margin in 2011 was 2.6%, as compared with 2.7% in 2010, reflecting the impact of higher raw material meat prices, which were recovered in selling prices, but do not under all our pricing arrangements give rise to a corresponding margin gain. Operating profit per kilogram of packed meat sold improved from 11.8p in 2010 to 12.4p in 2011.

Finance Costs

Net finance costs increased from £1.1m to £1.4m, reflecting the borrowings made to finance the investment in Denmark. Overall interest costs have, however, remained low, reflecting the continuing low United Kingdom LIBOR rate levels seen over 2011, which determine the interest rates on the Group's main sterling borrowings.

Profit before taxation

Profit before taxation, at £24.5m, was £2.3m (10.4%) higher than in 2010 (£22.2m), reflecting the operating profit improvement of £2.6m less the increase in finance costs of £0.3m detailed above.

Taxation

The taxation charge for the period was £5.9m (2010: £5.3m). This represented an effective taxation rate of 24%, in line with that of the previous year.

Earnings per share

Basic earnings per share were 24.7p (2010: 22.6p) an increase of 9.3%, reflecting the increased level of profit before taxation, an increased minority interest and an unchanged effective taxation rate. Diluted earnings per share increased by 8.5%, from 22.4p to 24.3p.

Free Cash Flow and Net Borrowing Levels

Cash flow continued to be strong in 2011, with the Group generating £6.8m of free cash flow before dividends and financing, despite capital expenditure of £25.2m of which £14.6m was incurred on our new Danish facilities. The underlying free cash flow, excluding the new Danish investment, was £21.4m (2010: £19.3m). This has enabled the Group to keep its borrowings close to last year's level, despite the continued investment in geographical expansion. Group borrowings, net of cash balances of £27.3m, stood at £18.7m at the end of 2011. Interest cover in 2011 was 19 times, as compared with 21 times in 2010. Our gearing ratio, represented by net debt divided by earnings before interest, tax, depreciation and amortisation, reduced to 0.4 times EBITDA (as compared to 0.5 times in 2010), with increased profitability and only a slightly higher year end net debt level. At the end of 2011 the Group had undrawn overdraft and loan facilities of £19.8m (2010: £21.7m).

BUSINESS PERFORMANCE MEASUREMENT

We have a strong vision and robust values for the business. We support these with a wide range of financial and non-financial Key Performance Indicators "KPI's", chosen by and reported to the Board each month, to measure progress we have made in building shareholder value and achieving the Group's strategic objectives. Our performance against the ten "KPI's" used by the Board 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 and growth of its business, whilst safely managing the areas of treasury risk below:

Foreign exchange rate movements and country specific risks

The presentational currency of the Group is sterling, but the majority of its revenues are now earned in other currencies, principally the Euro, Swedish Krona and Danish Krone. 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 all 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.

In these more difficult and uncertain times the level of country specific risk has risen for many businesses, in terms of the impact of macroeconomic developments, including the impact of austerity programmes in countries currently facing difficulties with their levels of debt. The Group sells high quality basic food products, for which there will always be continuing demand, to blue chip multiple retailers in developed countries. Hilton has not to date been materially adversely affected by the recessionary environments experienced over recent times in some countries, but will keep any future identified country specific risks under continuing review.

Interest rate fluctuation risk

This 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 3 year cap at 4.5% on 69% of its sterling term loan from Ulster Bank. The Board would review hedging costs and options should the current low interest rate environment change materially.

Customer credit and pricing risks

As Hilton's customers comprise a small number of very successful and 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 predominately 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 which, in the light of current developments, may not resolve themselves rapidly. The 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.

KEY JUDGEMENTS AND ASSUMPTIONS

Judgements and assumptions made in the financial statements and incorporated into the accounting policies are continually reviewed, but remain in all material respects consistent with those made in 2010.

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 are inherently predictive, speculative and involve risk and uncertainty, simply because they relate to events and depend on circumstances that will occur in the future.

GOING CONCERN BASIS

The Group's bank borrowings are detailed in 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 three 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 in the timescales required.

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

On behalf of the Board

Nigel Majewski

Finance Director

28 March 2012

Business review

WELL POSITIONED FOR FUTURE GROWTH

We hope this Annual Report and Accounts, which explains who we are, what services we provide and how we performed in 2011, gives shareholders and other stakeholders the information they require in relation to our company and the steps we are taking to cement our reputation as Europe's leading specialist meat packing company. This business review covers in turn the key resources and relationships of the business, the main trends and factors considered likely to impact 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 and contain these risks.

THE KEY RESOURCES AND RELATIONSHIPS OF THE BUSINESS

The Group aims to safeguard the resources and relationships which are vital to its successful development.

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

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

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 retailers, together with these retailers' focus on private label, which the Group supplies exclusively.

As the larger retail chains have gained a greater share of the grocery markets, these retail chains are increasingly turning to large scale, centralised 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 twelve markets in which the Group currently operates cannot be predicted with any certainty.

The Group's historical geographical expansion

Hilton's past expansion has been based on its established track record, together with its growing international reputation and experience and the close partnerships for joint benefit it has established and maintained with successful retail partners. The six European countries in which the Group currently operates meat packing plants, its retail partners served from those plants (all of whom, with the exception of Coop Danmark, 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:

1994 UK - Huntingdon (Tesco)

2000 Holland - Zaandam (Albert Heijn)

2004 Ireland - Drogheda (Tesco)

2004 Sweden - Vasteras (ICA)

2006 Poland - Tychy (Ahold, Tesco and Rimi)

2011 Denmark - Hasselager (Coop Danmark)

The Group is continuing to achieve growth, driven by its retail partners' success, new product and packaging development and the extension of the range of meat products packed for its customers.

RISK MANAGEMENT

The management of the business and the execution of the Group's strategy are subject to a number of risks and the Group has a well-developed structure and range of processes for identifying and mitigating the key business risks it faces.

As with any business, there are risks and uncertainties inherent in the Group's operations which could have a significant impact on its business, reputation, operating 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 outlined in the table below. This is not intended to constitute an exhaustive analysis of all risks faced by the Group, just those which are most significant from the standpoint of the Group as a whole.

The Board is responsible for the oversight of the Group's risk management processes and also 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 carrying out 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 confirms 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 28 March 2012 and is signed on its behalf by:

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 balance sheet

The financial statements were approved by the Board on 28 March 2012 and were signed on its behalf by:

R Watson N Majewski

Director Director

Hilton Food Group plc - Registered number: 06165540

Consolidated statement of changes in equity

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

Consolidated cash flow statement

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 twelve European countries. The Company's subsidiaries are listed in a note.

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

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

The financial year represents the 52 weeks to 1 January 2012 (prior financial year 52 weeks to 2 January 2011).

This preliminary announcement was approved for issue on 28 March 2012.

2 Summary of significant accounting policies

The accounting policies are consistent with those of the annual financial statements for the year ended 2 January 2011.

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 a note.

The financial information included in this preliminary announcement does not constitute statutory accounts of the Group for the years ended 1 January 2012 and 2 January 2011 but is derived from those accounts. Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

3 Segment information

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

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

From a geographic perspective, the Executive Directors consider that the Group has 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:

Deferred tax credited directly to equity during the year in respect of employee share schemes amounted to £79,000 (2010: £194,000).

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 26.5% (2010: 28%) applied to profits of the consolidated entities as follows:

6 Earnings per share

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

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

The Directors propose a final dividend of 8.0 p per share payable on 29 June 2012 to shareholders who are on the register at 1 June 2012. This dividend totalling £5.6m has not been recognised as a liability in these consolidated financial statements.

Land and buildings are held under short leaseholds. Details of bank borrowings secured on assets of the Group are given in note 10. Depreciation charges are included within administrative expenses in the income statement.

The cost and net book amount of property plant and equipment in the course of its construction included above comprise land and buildings £nil (2010: £2,905,000) and plant and machinery £3,668,000 (2010: £11,440,000).

Property, plant and equipment include the following amounts where the Group is a lessee under a finance lease: