Hilton Foods Regulatory News (HFG)

3 April 2024

Hilton Food Group plc Preliminary results

for the 52 weeks ended 31 December 2023

Robust financial and strong operational performance in 2023

Current trading in line with expectations

Business highlights - operational progress across all aspects of the business

· Seafood recovery delivered ahead of plan, returning to full year operating profitability and supporting uplift in Group PBT

· Core Meat category continued to perform well; strong meat volume growth in APAC and a resilient outturn in Europe and UK, achieved against inflationary backdrop

· Growth of international customer base via new deal with Walmart in Canada; organic growth achieved with existing customers, such as successful launch of Swedish food park

· Action taken in vegan and vegetarian to successfully consolidate business to single operating facility

· Industry-leading technology continued to provide competitive edge, underpinning customer partnerships and supporting core business; further headroom for growth

· Progress in Sustainable Protein Plan, a central foundation to our commercial offer; more ambitious validated SBTi targets in line with 1.5°C pathway

· Innovation across outstanding food products, supporting customers in response to changing consumer trends. Great value protein ranges and healthy new pre-prepared products launched

Financial overview - growth in revenue and volume; increase in profitability driven by Seafood

· Revenues up 3.7% to £3.99bn with volume increase of 0.7%; adjusted operating profit increased by 33.5% to £95.0m with statutory operating profit up 59.4%

· Strong free cash inflow of £112.1m (2022: outflow £79.4m); remaining a highly cash generative core business

· Net bank debt £139.7m (2022: £211.6m); year end net bank debt as a percentage of adjusted EBITDA reduced to 1.0 times (2022: 1.8 times)

· Proposed final dividend of 23.0p, taking total dividend for 2023 to 32.0p (2022: 29.7p) reflecting the Board's confidence

Notes

1 Volume includes 50% share of the Portuguese joint venture activities

2 Adjusted results represent the IFRS results before deduction of acquisition intangibles amortisation, depreciation of fair value adjustments to property, plant & equipment, exceptional items and also IFRS 16 lease adjustments as detailed in the Alternative performance measures note 17. Unless otherwise stated financial metrics in the Chairman's statement, Chief Executive's summary and Performance and financial review refer to the Adjusted results

3 Net bank debt represents borrowings less cash and cash equivalents excluding lease liabilities

Outlook and current trading

2024 trading has started in line with Board expectations although markets remain challenging. We are confident the business is well placed, within a large and attractive international market, to continue to deliver its strategy to create long term value for shareholders, through its outstanding protein products, dedicated partnerships, leading technology offer through Greenchain Solutions and a robust sustainability plan.

Growth prospects are underpinned by the strength of our core meat business, the continued recovery in seafood and in the medium term our recent acquisitions and the developing relationship with Walmart in Canada. The Group's financial position remains strong, with improving leverage and headroom at comfortable levels, and we continue to explore new growth opportunities with existing partners, wider geographic expansion and complementary M&A.

Steve Murrells CBE Hilton Foods Chief Executive Officer, said:

"Over the past year we've remained focused on executing our strategy which has resulted in a good performance against a challenging market. I am particularly pleased with the results in our seafood category, returning to full year operating profitability following a successful turnaround. Our core meat category performed strongly and we worked closely with customers to offer the highest quality and most relevant food products to consumers.

"As I set out at our investor day in November, Hilton Foods has the right attributes in place to unlock growth organically and with new customers thanks to our multi-category product offer, industry leading technology and rigorous sustainability credentials. I'd like to thank all our teams across our markets for their continued hard work and contribution over the year; we are well-placed as we look to the future."

A presentation for analysts and investors will be held this morning at 09.00am, which will also be webcast. For access to the live webcast, please register at the following link:

https://stream.brrmedia.co.uk/broadcast/65d774a3994661e3abf8ada5

Enquiries

Hilton Foods  Tel: +44 (0) 1480 387214

Steve Murrells CBE, Chief Executive Officer

Matt Osborne, Chief Financial Officer

Headland Consultancy Limited Tel: +44 (0) 20 3805 4822

Susanna Voyle Email: hiltonfood@headlandconsultancy.com

Will Smith

Joanna Clark

This announcement contains inside information.

About Hilton Foods

Hilton Foods is a leading international multi-protein producer, serving customers and retail partners across the world with high quality meat, seafood, vegan and vegetarian foods and meals. We are a business of over 7,000 employees, operating from 24 technologically advanced food processing, packing and logistics facilities across 19 markets in Europe, Asia Pacific and North America. For thirty years, our business has been built on dedicated partnerships with our customers and suppliers, many forged over several decades, and together we target long-term, sustainable growth and shared value. We supply our customers with high quality, traceable, and assured food products, with high standards of technical excellence and expertise.

Chairman's introduction

Strategic progress

Hilton Foods has continued to make good strategic progress in a year of continuing global and economic challenges. We have become a multi-category and multichannel business, constantly and rapidly building our expertise, breadth and scale in all four food categories and in our supply chain services offer and we remain on the journey to our ambition to be the international food and supply chain services partner of choice.

We have deep retailer partnerships with leading automation and processes including physical automated conveyor air bridges installed in facilities in Australia and New Zealand that link our processing facilities directly to our customers' distribution centres to optimise the supply chain process bringing significant logistics efficiency savings with lower carbon emissions.

During the year we signed a long term supply agreement with Walmart, a new customer, and will build a green field facility in Eastern Canada to supply a range of protein products to include beef, lamb, pork, seafood as well as some added-value products. This new Hilton Foods facility will provide robotised store order picking into Walmart's distribution centres.

We have also worked to develop our Greenchain Solutions business which offers an integrated tech stack proposition combining our existing end-to-end supply chain, manufacturing control and automation software expertise together with a specialist flexible factory wide ERP system.

We continue to explore opportunities to develop our cross-category business in both domestic and overseas markets as well as applying our state-of-the-art skills and experience to deliver value to our customers.

Group performance

2023 saw a recovery in profitability with sales and volumes increasing which continues a trend of continuous volume growth achieved in every year since Hilton's flotation in 2007. Our UK Seafood business recovered strongly during the year although market challenges in our vegetarian/vegan business remain. We have taken steps to consolidate this business into a single operating facility and we are confident in the opportunities that the category will present for Hilton Foods over the coming years.

Hilton Foods generated strong operating cash flows during 2023 enabling further significant investment in our facilities to increase capacity, improve operational efficiency and offer innovative solutions to our retailer partners. Hilton Foods has a robust balance sheet and operating well within our banking covenants. This enables us to continue to invest to support the growth of the business.

Dividend policy

The Group has maintained a progressive dividend policy since flotation and remain confident that this continues to be appropriate. With the proposed final dividend of 23.0p per ordinary share, total dividends in respect of 2023 will be 32.0p per ordinary share, an increase of 7.7% compared to last year.

Our Board, purpose and governance

The Hilton Board is responsible for the long-term success of the Group and establishing its purpose, values and strategy aligned with its desired culture. Our purpose is to partner with leading retail and foodservice customers to produce high quality food products at scale that consumers desire. Our principle of partnership extends to our suppliers, colleagues and the communities in which we operate. We enable success through our passion for innovation, improving supply chains, processes and packaging, and continually developing our product ranges to best meet consumer needs. By creating efficiency and flexibility in the food supply chain as an international food processor and a supply chain service specialist we deliver growth for our stakeholders.

To achieve this the Board has an appropriate mix of skills, depth and diversity and a range of practical business experience, which is available to support and guide our management teams across a wide range of countries, continuing to address succession planning and maintain a talent pipeline. We remain committed to achieving good governance balanced against our desire to preserve an agile and entrepreneurial approach. I would like to thank my colleagues on the Board for their support, counsel and expertise during the year. During the year Steve Murrells joined the Board as CEO replacing Philip Heffer who has remained in the business as co-founder and Board advisor in a part time capacity. Sarah Perry joined the Board as an independent Non-Executive Director replacing Christine Cross.

The Board takes its responsibilities to promote the success of the Company for the benefit of its stakeholders as a whole very seriously. We take the interests of our workforce and other stakeholders fully into account in Board discussions and decision making. Details of the Group's policies and procedures that have been implemented to enhance stakeholder and workforce engagement, which explain how these interests have influenced our decisions, are set out in the governance section of our Annual report.

Sustainability

Annual General Meeting

This year's AGM will be held at Hilton's offices at 2-8 The Interchange, Latham Road, Huntingdon, Cambridgeshire PE29 6YE in a hybrid format on Monday 20 May 2024 at noon. Please refer to our website at www.hiltonfoods.com/investors/agm/ for further guidance.

Robert Watson OBE

Chairman

2 April 2024

Chief Executive's summary

Strong performance in line with expectations

We have delivered a strong performance in a challenging environment through focus on our core business and getting back to basics. Revenue has grown 5.7% on a constant currency basis (up 3.7% at actual fx rates) whilst volume has remained robust up 0.7% and adjusted profit before tax has recovered strongly, up 19.0% from delivery of the turnaround plan in our seafood business.

Segment performance

UK and Ireland

Adjusted operating profit of £35.5m (2022: £13.6m) on revenue of £1,329.3m (2022: £1,282.1m)

This operating segment covers the Hilton Foods businesses and joint ventures in the UK and Ireland including meat processing facilities in the UK in Huntingdon, seafood facilities in Grimsby, our food service business Fairfax Meadow and our ROI meat facility in Drogheda.

Volumes were 3.0% lower with revenue increasing by 3.5% on a constant currency basis (up 3.7% at actual fx rates) due to raw material price inflation. Operating margins increased to 2.7% (2022: 1.1%) reflecting a strong performance from the core meat businesses as well as improved profitability of UK Seafood.

The turnaround of our UK Seafood business recovery has been delivered ahead of plan, returning to full year operating profit and supporting the increase in adjusted operating profit. I am very proud of the performance that the team have delivered within our UK Seafood business over the last year, which has been delivered through consolidating and driving the core offer, effective inflation recovery and profitable new business wins supported by a sustainable cost out plan. The foundations are strong and momentum now builds into 2024 and beyond.

Fairfax Meadow continues to grow revenues and win new business. They are strategically well-placed, with a multi-category offer to capitalise on further opportunities.

Europe

Adjusted operating profit of £40.9m (2022: £36.0m) on revenue of £1,045.3m (2022: £972.6m)

This operating segment covers the Group's meat, easier meals, seafood, vegan and vegetarian businesses and joint ventures in Holland, Sweden, Denmark, Central Europe, Greece and Portugal.

Volumes were 2.0% lower with revenue increasing by 6.8% on a constant currency basis (up 7.5% at actual fx rates) reflecting a full year of Foppen following its acquisition in 2022 and raw material price inflation. Operating margins were 3.9% (2022: 3.7%). We have delivered strong growth in the easier meals category as shoppers sought quicker and easier meal solutions in Central Europe and Scandinavia. We launched our fresh, convenience food park in Sweden in the second half of the year serving our local partner there as well as in Denmark where we provide highly localised pre-prepared products, which are in great demand.

The business has taken decisive and timely action consolidating Dalco, our vegan and vegetarian business, into a single operating facility right sizing it in response to the structural market reset that has taken place in this sector.

APAC

Adjusted operating profit of £30.3m (2022: £26.7m) on revenue of £1,615.0m (2022: £1,592.9m)

In Australia, the Group operates three plants in Bunbury in Western Australia, Melbourne and Brisbane. We also have a multi protein food park facility in Auckland, New Zealand.

Volumes during the period increased strongly by 7.2%. Revenues were 6.7% higher on a constant currency basis (up 1.4% at actual fx rates). Operating margins increased to 1.9% (2022: 1.7%) largely attributable to the recovery of higher interest costs under our cost plus contract. We continue to see strong performance in the APAC region delivered through our partnership with Woolworths. Across all our regions including APAC, we have supported our customers to ensure they have relevant product ranges at affordable prices to meet the changing needs of consumers at a time of economic uncertainty.

Outstanding food products

Hilton Foods is a business built on a passion for food. The food skills within our innovation teams have supported our customers to have the right product ranges on the shelf to successfully meet the needs of their consumers. Combined with our insight experts we have driven growth across categories and regions.

In Hilton Foods Australia, we have grown sales through developing great value products in beef, pork, lamb and poultry including bigger, better value packs. In the UK we have launched premium, award winning, Christmas centre piece products and a new range of convenient ready to cook meals and within Europe we have relaunched our new and improved sandwiches and wraps, and new, healthier, ready meals.

Throughout 2023 we have continued to trial and roll out flow wrap packaging for mince products in Holland, Sweden, Central Europe, UK and Ireland. Through working in collaboration with our strategic supplier partners 70% of our packaging is now recyclable, and we have reduced overall packaging weight by 1,200t*.

* versus base of 2020

Growing across international markets

Hilton Foods is uniquely placed to grow its product catalogue by region and this is a key focus for the business as we seek to grow in our existing markets. We have started with launching the fresh food park in partnership with ICA in Sweden and began working with a new retail partner in Ireland. Work is now underway, exploring the opportunity to increase our presence in seafood products across the APAC region.

In September 2023 we announced that we have signed a new long-term partnership with Walmart in Canada and will be serving their needs across meat and seafood products alongside sortation services from our first facility in North America.

Our primary focus remains on organic growth given the significant opportunities we have. However we will continue to selectively explore any complementary M&A, with strong returns and synergies, that arise.

Industry leading technology and facilities

Our industry-leading technology is a key element of our competitive edge, facing into macro market trends including labour availability and cost, and supply chain traceability and transparency. We provide highly efficient supply chains to our partners through scalable robotics and cloud-based infrastructure, allowing retailers to manage their full end-to-end value chain, from specification to product quality and cost of production mapping.

The Foods Connected platform supports both our business and our customers' businesses and their supply chains, optimising data-led decisions, driving cost efficiency and enabling visibility of supply chain risks.

Our integrated technology offer supports our core food business and we have further improved our highly automated food processing facilities, through our joint venture with Agito. This year we have made investments in end of line robotic automation in our UK meat and seafood facilities improving efficiency and reduced reliance on labour.

As well as supporting our core food business, each of our technology businesses are unlocking opportunities to commercialise their products and services outside of Hilton Foods. In the year both Foods Connected and Agito have won new customers in new geographies, and looking forward to 2024, our food focused ERP system Evolve 4 will start to be rolled out to Hilton Foods facilities.

The Sustainable Protein Plan

The Sustainable Protein Plan underpins everything we do and our sustainability commitments are crucial to our teams, our customers and their customers. Our principle of operating through partnership extends into sustainability where we deliver positive change by collaborating throughout the supply chain. This year we have continued to make progress on our commitments, with a reduction of 13%* in scope 1 and 2 emissions, achieving ISO 50001 accreditation for our energy management system across 10 of our facilities, and reducing our food waste by 42%*. We have maintained our CDP rating of A- with improvements in both categories of soy and timber. We continue to raise our standards with more ambitious science based targets, in line with a 1.5̊ C pathway, which were validated in March 2024.

* versus base of 2020

Looking forwards

Through our principle of being consumer led we are well placed to grow. The strength and the longevity of our partnerships underpins everything that we do. We can expand both with existing partners and into new territories. Our strong financial position allows us to continue to invest in the future. In November, we shared our medium-term financial ambitions and strategic capital allocation framework to support our investment for long-term success. I believe that Hilton Foods has all the right ingredients to deliver long-term success.

Steve Murrells CBE

Chief Executive Officer

2 April 2024

Performance and financial review

Summary of Group performance

This performance and financial review covers the Group's financial performance and position in 2023. Hilton Foods overall financial performance saw strong profit growth reflecting the recovery in our UK Seafood business combined with volumes and sales growth. Cash flow generation was strong, supporting our ongoing significant investment in facilities.

Basis of preparation

The Group is presenting its results for the 52 week period ended 31 December 2023, with comparative information for the 52 week period ended 1 January 2023. The financial statements of the Group are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and UK adopted International Accounting Standards.

Hilton uses Alternative Performance Measures (APMs) to monitor the underlying performance of the Group. Management use these APMs to monitor and manage the business's performance day-to-day and therefore believe they provide useful additional information to shareholders and wider users of the financial statements.

2023 Financial performance

Volume and revenue

Volumes grew by 0.7% in the year reflecting growth in APAC and full year volumes at Foppen acquired in 2022. Additional details of volume growth by business segment are set out in the Chief Executive's summary. Revenue increased 3.7% (5.7% on a constant currency basis) reflecting higher raw material prices and volume growth.

Operating profit and margin

Adjusted operating profit of £95.0m (2022: £71.1m) was 33.5% higher than last year and 34.7% higher on a constant currency basis reflecting the recovery in our Seafood business. IFRS operating profit was £86.1m (2022: £54.0m) after charging £3.9m in exceptional costs (2022: £11.9m). The operating profit margin in 2023 increased to 2.4% (2022: 1.8%) and the operating profit per kilogram of packed food sold increased to 18.4p (2022: 13.8p) mainly reflecting the recovery in our Seafood business.

Net finance costs

Adjusted net finance costs, excluding exceptional items and lease interest, increased to £28.9m (2022: £15.7m) reflecting the impact of higher market interest rates and supply chain financing costs. Interest cover as a proportion of adjusted operating profit in 2023 reduced to 2.3 times (2022: 4.5 times). IFRS net finance costs were £37.5m (2022: £24.4m).

Taxation

The adjusted taxation charge for the period was £17.2m (2022: £13.5m). The effective tax rate was 26.0% (2022: 24.3%). The IFRS taxation charge was £10.6m (2022: £10.1m) with an effective tax rate of 21.9% (2022: 34.2%).

Net income

Adjusted net income, representing profit for the year attributable to owners of the parent, of £47.2m (2022: £40.2m) was 17.4% higher than last year and 18.3% higher on a constant currency basis. IFRS net income was £36.4m (2022: £17.7m).

Earnings per share

Adjusted basic earnings per share 52.8p (2022: 45.1p) was 17.1% higher than last year and 17.9% on a constant currency basis. IFRS basic earnings per share were 40.6p (2022: 19.8p). Diluted earnings per share were 40.2p (2022: 19.7p).

Earnings before interest, taxation, depreciation and amortisation (EBITDA)

Adjusted EBITDA, which is used by the Group as an indicator of cash generation, increased to £144.0m (2022: £119.9m). IFRS EBITDA was £165.6m (2022: £131.8m).

Return on capital employed (ROCE)

ROCE, calculated as adjusted operating profit divided by average of opening and closing capital employed representing total equity adjusted for net bank cash/debt, leases, derivatives and deferred tax, was 18.3% (2022: 14.8%).

Free cash flow and net debt position

Operating cash flow was strong in 2023 with cash flows from operating activities of £216.1m (2022: £98.3m) reflecting higher profits and favourable working capital movements. IFRS free cash inflow, after capital expenditure of £58.6m but before dividends and financing, was £112.1m (2022: outflow £79.4m).

The Group closing net bank debt comprising borrowings less cash and cash equivalents excluding lease liabilities, reduced to £139.7m (2022: £211.6m) reflecting bank borrowings of £266.4m net of cash balances of £126.7m. Net debt including lease liabilities was £366.6m (2022: £457.7m). Year end net bank debt as a ratio of adjusted EBITDA reduced to 1.0 times (2022: 1.8 times).

At the end of 2023 the Group had undrawn committed bank facilities under its syndicated banking facilities of £108.7m (2022: £106.4m). These banking facilities are subject to covenants comprising net bank debt to EBITDA and EBITDA interest cover. There was comfortable headroom under these covenants at the end of the year for these metrics.

The resilience of the Group has been assessed by applying significant downside sensitivities to the Group's cash flow projections. Allowing for these sensitivities and potential mitigating actions, the Board is satisfied that the Group has adequate headroom under its existing committed facilities and will be able to continue to operate well within its banking covenants.

Dividends

The Group has maintained a progressive dividend policy since flotation and has recommended a final dividend of 23.0p per ordinary share in respect of 2023. This, together with the interim dividend of 9.0p per ordinary share paid in December 2023, represents an increase of 7.7% compared to last year at 29.7p per ordinary share. The final dividend, if approved by shareholders, will be paid on 28 June 2024 to shareholders on the register on 31 May 2024 and the shares will be ex dividend on 30 May 2024.

Key performance indicators

How we measure our performance against our strategic objectives

The Board monitors a range of financial and non-financial key performance indicators (KPIs) to measure the Group's performance over time in building shareholder value and achieving the Group's strategic priorities. The nine headline KPI metrics used by the Board for this purpose, together with our performance over the past two years, is set out below:

In addition, a much wider range of financial and operating KPIs are continuously tracked at business unit level.

Going concern statement

The Directors have performed a detailed assessment, including a review of the Group's budget for the 2024 financial year and its longer term plans, including consideration of the principal risks faced by the Group. The resilience of the Group has been assessed by applying significant downside sensitivities to the Group's cash flow projections. Allowing for these sensitivities and potential mitigating actions the Board is satisfied that the Group is able to continue to operate well within its banking covenants and has adequate headroom under its committed facilities which do not expire until 2027. The Directors are satisfied that the Company and the Group have adequate resources to continue to operate and meet its liabilities as they fall due for the foreseeable future, a period considered to be at least 12 months from the date of signing these financial statements. For this reason, they continue to adopt the going concern basis for preparing the financial statements.

The Group's bank borrowings as detailed in the financial statements and the principal banking facilities, which support the Group's existing and contracted new business, are committed. The Group is in full compliance with all its banking covenants and based on forecasts and sensitised projections is expected to remain in compliance. Future geographical expansion which is not yet contracted, and which is not built into our internal budgets and forecasts, may require additional or extended banking facilities and such future geographical expansion will depend on our ability to negotiate appropriate additional or extended facilities, as and when they are required. The Group renewed its banking facilities in 2022 with a £424m five year revolving credit and term loan facility.

The Group's internal budgets and forward forecasts, which incorporate all reasonably foreseeable changes in trading performance, are regularly reviewed by the Board and show that it will be able to operate within its current banking facilities, taking into account available cash balances, for the foreseeable future.

Viability statement

In accordance with provision 31 of the 2018 UK Corporate Governance Code, the Directors confirm that they have a reasonable expectation that the Group will continue to operate and meet its liabilities, as they fall due, for the three years ending in December 2026. A period of three years has been chosen for the purpose of this viability statement as it is aligned with the Group's three year plan, which is based on the Group's current customers and does not incorporate the benefits from any potential new contract gains over this period.

The Directors' assessment has been made with reference to the Group's current position and strategy taking into account the Group's principal risks, including those in relation to the changing geopolitical and macroeconomic environment, and how these are managed. The strategy and associated principal risks, which the Directors review at least annually, are incorporated in the three year plan and such related scenario testing as is required. The three year plan makes reasoned assumptions in relation to volume growth based on the position of our customers and expected changes in the macroeconomic environment and retail market conditions, expected changes in food raw material, packaging and other costs, together with the anticipated level of capital investment required to maintain our facilities at state-of-the-art levels.

Cautionary statement

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

Matt Osborne

Chief Financial Officer

2 April 2024

Risk management and principal risks

Overview

Effective risk management at Hilton Foods is essential to the delivery of our strategic objectives and aims to safeguard the interests of all our stakeholders in an increasingly complex world. Our proactive approach to risk management ensures the long term sustainable growth of all aspects of our business and is integrated into everything we do.

Risks and risk management

In accordance with provision 28 of the 2018 UK Corporate Governance Code, the Directors confirm that they have carried out a robust assessment of the emerging and principal risks facing Hilton Foods that might impede the achievement of its strategic and operational objectives or affect performance and cash position. As a leading international food and supply chain services provider in a fast-moving environment it is critical that Hilton Foods identifies, assesses and prioritises its risks. The result of this assessment is a statement of principal risks together with a description of the main controls and mitigations that reduce the effect of those risks were they to crystallise. This, together with the adoption of appropriate mitigating actions, enables us to monitor, minimise and control both the probability and potential impact of these risks.

How we manage risk

Hilton Foods takes a proactive approach to risk management with well-developed structures and a range of processes for identifying, assessing, prioritising and mitigating its key risks, as the delivery of our strategy depends on our ability to make sound risk informed decisions. The internal audit function provides independent assurance that Hilton Foods risk management, governance and internal control processes are operating effectively. The Audit Committee are regularly updated on the risk based assurance plan by the internal audit function who maintain and review processes for risk identification and assessment, measurement, control, monitoring and reporting.

Risk management process and risk appetite

The Board believes that it is vital to strike the right balance between an appropriate and comprehensive control environment and encouraging the level of entrepreneurial freedom of action required to seek out and develop new business opportunities; but, however skilfully this balance between risk and reward is struck, the business will always be subject to a number of risks and uncertainties, as outlined below.

At Hilton Foods we nurture a culture where everyone is required to be aware of the risks facing the business and their responsibilities for managing them. To support this we maintain and create an environment where employees feel comfortable speaking up. Our processes for identifying existing and emerging risks and responding collaboratively to them is managed by the Internal Audit function. Identified risks are measured and assessed for likelihood and impact allowing for the correct risk responses to be developed. Policies, procedures, controls and other measures are put in place to mitigate risks. We use a suite of preventative, detective and corrective controls.

Risk ownership is assigned to key leaders. This ownership is reviewed as part of the ongoing risk management process. Mitigation plans and controls are agreed in conjunction with the risk owner.

Not all the risks listed are within the Group's control and others may be unknown or currently considered immaterial but could turn out to be material in the future. These risks, together with our risk mitigation strategies, should be considered in the context of our risk management and internal control framework, details of which are set out in the Corporate governance statement. It must be recognised that systems of internal control are designed to manage rather than completely eliminate any identified risks.

Risk management during 2023

Increasing geopolitical uncertainty

Escalating tensions in the Middle East, the ongoing conflict in Ukraine and the prospect of disruption resulting from major political elections in 2024 increase the risk impacting our supply chains and operations. Disruption to energy markets, global shipping and international trade can have far-reaching impacts. Learnings from the Covid-19 pandemic have helped us to build resilience in our supply chains and operations.

The macroeconomic environment

Although we expect energy price volatility and the acute cost of living crisis to ease as the rate of food price inflation slows, consumer spending and eating habits have been impacted. We recognise the effect of increasing interest costs on all businesses and we continue to focus on ways of reducing our exposure such as the use of cash pooling and exploring working capital financing.

Our continued focus on cost control, innovation and factory efficiency is enabling us to manage the inflationary pressures the industry is currently facing. Through our strong customer relationships we are able to support consumers to navigate through these challenging times.

Post-Brexit trade and regulatory landscape

We continue to monitor the UK and EU regulatory and trade environments as they evolve and amend processes and operations as required. We are working closely with our customers and supply chains to ensure preparation for the implementation of changes to the UK Border processes through 2024. Our focus on technology and automation further reduces our risk exposure in this area.

Principal risks

The most significant business risks that Hilton Foods faces, together with the measures we have adopted to mitigate these risks, are outlined in the table below. This is not intended to constitute an exhaustive analysis of all risks faced by Hilton Foods, but rather to highlight those which are the most significant.

Note: References in this preliminary announcement to the Strategic report, the Corporate and social responsibility report, the Directors' report and the Corporate Governance statement are to reports which will be available in the Company's full published accounts.

Responsibility statement of the Directors in respect of the Annual report and financial statements

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

· the Group and Company financial statements, which have been prepared in accordance with UK-adopted international accounting standards, give a true and fair view of the assets, liabilities and financial position of the Group and Company and profit of the Group; and

· the management reports, which comprise the Strategic report and the Directors' report, include a fair review of the development and performance of the business and the position of the Group and the Company, together with a description of the principal risks and uncertainties that it faces.

This responsibility statement was approved by the Board of Directors on 2 April 2024 and is signed on its behalf by:

Directors

R Watson OBE Chairman

M Osborne Chief Financial Officer

Consolidated statement of comprehensive income

Consolidated and Company Balance sheets

R. Watson OBE M. Osborne

Director Director

Hilton Food Group plc - Registered number: 06165540

Consolidated and Company Statement of changes in equity

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

Consolidated and Company Cash flow statements

Notes to the financial statements

1 General information

Hilton Food Group plc ('the Company') and its subsidiaries (together 'the Group') is a leading specialist international food packing business supplying major international food retailers in fourteen European countries, Australia and New Zealand. The Company's subsidiaries are listed in a note to the full financial statements.

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

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

The financial period represents the 52 weeks to 31 December 2023 (prior financial period 52 weeks to 1 January 2023).

This preliminary announcement was approved for issue on 2 April 2024.

2 Summary of significant accounting policies

The accounting policies are consistent with those of the annual financial statements for the year ended 1 January 2023.

Basis of preparation

The consolidated and company financial statements of Hilton Food Group plc have been prepared under the historical cost convention except for certain financial assets and liabilities measured at fair value and in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.

The consolidated and company financial statements have been prepared on the going concern basis. The reasons why the Directors consider this basis to be appropriate are set out in the Performance and financial review.

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

The financial information included in this preliminary announcement does not constitute statutory accounts of the Group for the years ended 31 December 2023 and 1 January 2023 but is derived from those accounts. Statutory accounts for 2022 have been delivered to the Registrar of Companies and those for 2023 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

3 Segment information

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

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

From a geographic perspective, the Executive Directors consider that the Group has four operating segments: i) UK & Ireland which comprises the Group's operations in United Kingdom and Republic of Ireland; ii) Europe which includes the Group's operations in the Netherlands, Sweden, Denmark, Central Europe and Portugal; iii) APAC comprising the Group's operations in Australia and New Zealand; and iv) Central costs. Previously, the UK & Ireland and Europe segments were reported on a combined basis as "Europe" but following the changes to the Group's organisational structure have now been shown separately. The restated segments are shown in the tables below.

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

Sales between segments are carried out at arm's length.

The Executive Directors assess the performance of each operating segment based on its operating profit before exceptional items and amortisation of acquired intangibles and also before the impact of IFRS 16 (see note 17). Operating profit is measured in a manner consistent with that in the income statement.

The amounts provided to the Executive Directors with respect to total assets and liabilities are measured in a manner consistent with that of the financial statements. The assets are allocated based on the operations of the segment and their physical location. The liabilities are allocated based on the operations of the segment.

The Group has five principal customers (comprising groups of entities known to be under common control), Tesco, Ahold Delhaize, Coop Danmark, ICA Gruppen and Woolworths. These customers are located in the United Kingdom, Netherlands, Belgium, Republic of Ireland, Sweden, Denmark and Central Europe including Poland, Czech Republic, Hungary, Slovakia, Latvia, Lithuania and Estonia and APAC.