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The international
protein partner
ofchoice
HILTON FOOD GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS
2021
Overview 1
2021 highlights 2
Where we operate 4
Strategic report 6
Chairman’s introduction 8
Chief Executive’s summary 10
Performance and financialreview 18
Risk management and principal risks 24
Sustainability report 28
Approval of Strategic report 77
Governance 78
Board of Directors 80
Directors’ report 82
Corporate governance statement 84
Report of the Audit Committee 90
Report of the Nomination Committee 94
Directors’ remuneration report 96
Directors’ remuneration policy 99
Annual report on remuneration 104
Statement of Directors’ responsibilities 111
Independent auditors’ report 112
Financial statements 118
Consolidated income statement 120
Consolidated statement
of comprehensive income 120
Consolidated and Company balance sheet 121
Consolidated and Company statement
of changes in equity 122
Consolidated and Company cash flow statement 123
Notes to the financial statements 124
Additional information 156
Registered office and advisors 156
Contents
This has been a year of
delivery anddiversification.
We have delivered another strong
financialperformance with volumes
andrevenue both growing, maintaining
a trend of continuous volume growth
every year since Hilton’s flotation in 2007.
We grew adjusted operating profit by
12.7%, in line with the 11% compound
annual growth rate we have delivered
inour fourteen years as a listed business.
These results reflect an outstanding
teameffort as wellas the power of
our business model, which is rooted
in the partnerships we have built with
customersacross Europe and Asia-Pacific.
We have also made strategic progress
indiversifying the business. Last year,
weset ourselves the goal of becoming
theprotein partner of choice.Put simply,
we want to offer all the proteins people
want to put on their plates, inhome
andout of home, not just in Europe and
Asia, butacross North America too.
To reach that goal, we have been
transformingour business to expand
intonewprotein products and
categories, to enter new international
markets, to deepen ourtechnology and
engineering capabilities, andto expand
our sustainability commitmentsacross
allprotein categories.
The acquisitions we have made over the
past year will accelerate this. Following
the completion of the purchase of Foppen
within thepast month, we are well set
togrow furtherand enter the high growth
smoked salmon market. We already now
generate more than two thirds of our
revenue, and threequarters of our volume,
outside the UK, and this breadth means
the business is increasingly well placed
to create long-term sustainable value, in
spite of short-term challenges or market
headwinds. While those headwinds
persist, our model positions uswell
to provide nutritious, affordable and
increasingly sustainable protein at scale,
fulfilling changing consumer demands.
HILTON FOOD GROUP PLC, THE LEADING SPECIALIST INTERNATIONAL FOOD PACKING
BUSINESS, ANNOUNCES ITS RESULTS FOR THE 52 WEEKS TO 2 JANUARY 2022.
1
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
* On a 52 week constant currency basis.
** Excluding lease liabilities.
Adjusted results represent the IFRS results before deduction of acquisition intangibles amortisation
and exceptional items and also IFRS 16 lease adjustments as detailed in the Alternative performance
measuresnote 34.
£67.2m
Adjusted profit before tax
higher by 13.0%* to £67.2m
(2020: £61.1m)
61.3p
Adjusted basic earnings
per share up 13.8%* at 61.3p
(2020: 55.4p)
21.5p
Proposed final dividend of
21.5p, taking total dividend
for 2021 to 29.7p
(2020: 26.0p)
£121.3m
Strong cash flows from
operating activities £121.3m
with £57.4m capex investment
and a strong balance sheet
following refinancing
(2020: £120.8m)
£47.4m
IFRS profit before tax lower
by 12.3% to £47.4m, after
exceptional items of £8.2m
(2020: £54.0m)
45.0p
IFRS basic earnings per
sharedown 7.4% at 45.0p
(2020: 48.6p)
Financial
highlights
£3.30bn
Group revenue up 21.6%*
to£3.3bn, driven by
growthacross proteins
and geographies
(2020: £2.77bn)
492,588 t
Volume growth of
7.0%* to 492,588 tonnes
(2020: 469,110 tonnes)
REVENUE (£M)
£3,302m
‘17
‘18
‘19
‘20
‘21
1,357.2
1,649.6
1,814.7
2,774.0
3,302
ADJUSTED OPERATING PROFIT (£M)
£73.6m
‘17
‘18
‘19
‘20
‘21
38.3
48.7
54.7
67.0
73.6
NET BANK CASH/(DEBT)** (£M)
£(84.6)m
‘17
‘18
‘19
‘20
‘21
27.6
(25.0)
(86.8)
(122.2)
(84.6)
Financial
performance
overview
2
2021 highlights
Strategic
highlights
26.4%
Vegan and vegetarian
volume growth 2019-2021
Growing across global markets
Over 75% of Group’s 2021 volumes
produced in countries outside the UK
Entered new markets across Europe,
including acquisition of vegetarian
producer Dalco
Moving into North American market
forfirst time with the acquisition of
leading smoked salmon producer,
Foppen with £75m equity raise
Delivering sustained growth
across all protein categories
14.3%
Meat and fish
volume growth
2019-2021
36.0%
Added value easier
meals volume growth
2019-2021
Supporting our Partners to become
First Choice for Sustainable Protein
Launching new ESG strategy, The Sustainable
Protein Plan, focused on three pillars of People,
Planet and Product, with each pillar underpinned by
threestrategic drivers and new targets and goals
PLANET Science Based Targets approved
for Scope 1, 2 and 3 during 2021
PRODUCT 76% average recycled content
across entire tray range during 2021
UK
Launched in UK
food service market
through acquisition
ofFairfax Meadow
NEW ZEALAND
Significant
Australia growth
with fish launch
in New Zealand
Becoming best-in-class
FMCG for technology
Ongoing transformation of Hilton
Seafood with industry leading automation
and palletisation
Growing engineering solutions offer
through 2022 JV with Agito Group
Continued growth of Foods Connected
supply chain management services, with
contracts in new sectors and geographies
Page 32
3
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Where we operate
United Kingdom
34%
Australasia
40%
The Netherlands
9%
Sweden
7%
Denmark
3%
Central Europe
3%
Ireland
3%
Belgium
1%
Total employees
6,000+
Annual Turnover
£3.3m
Production facilities
24
Revenue by location
UNITED KINGDOM
Location: HUNTINGDON
Op Co: Hilton Food Group plc
Incorporated: 2007
Op Co: Hilton Foods UK
Commenced production: 1994
Op Co: SV Cuisine
Acquired: 2019
Op Co: Hilton Food Solutions
Commenced trading: 2016
Location: GRIMSBY
Op Co: Hilton Seafood UK
Acquired: 2017
Locations: DERBY, ENFIELD,
EASTLEIGH & MILTON KEYNES
Op Co: Fairfax Meadow
Acquired: 2021
Locations: LONDONDERRY
& AUSTRALIA
Op Co: Foods Connected
Commenced joint venture: 2017
1
BELGIUM
Location: GHENT
Op Co: Hilton Foods Belgium
Commenced production: 2020
3
IRELAND
Location: DROGHEDA
Op Co: Hilton Foods Ireland
Commenced production: 2004
4
NEW ZEALAND
Location: AUCKLAND
Op Co: Hilton Foods New Zealand
Commenced production: 2021
11
AUSTRALIA
Locations: BUNBURY & MELBOURNE
Op Co: Hilton Foods Australia
Joint venture: 2013
Transitioned: 2020
Location: BRISBANE
Op Co: Hilton Foods Australia
Commenced production: 2019
Locations: PERTH & SYDNEY
Op Co: AGITO
Commenced joint venture: 2022
10
NETHERLANDS
Location: ZAANDAM
Op Co: Hilton Foods Holland
Commenced production: 1994
Location: OOSTERHOUT & OSS
Op Co: Dalco
Joint venture: 2019
Acquired: 2021
Location: HARDERWIJK
Op Co: Foppen
Acquired: 2022
2
DENMARK
Location: AARHUS
Op Co: Hilton Foods Danmark
Commenced production: 2011
5
CENTRAL EUROPE
Location: TYCHY, POLAND
Op Co: Hilton Foods Poland
Commenced production: 2006
7
SWEDEN
Location: VASTERAS
Op Co: Hilton Foods Sverige
Commenced production: 2004
6
PORTUGAL
Location: SANTAREM
Op Co: SoHi Meat Solutions
Commenced joint venture: 2017
8
GREECE
Location: PREVEZA
Op Co: Foppen
Acquired: 2022
9
4
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
4
AUSTRALASIA
EUROPE
11
1
2
6
7
8
9
3
4
5
10
5
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Chairman’s introduction 8
Outlook and current trading 9
Chief Executive’s summary 10
Strategic objectives 10
Business model 12
Business development 14
2021 Performance overview 14
Segment performance 15
Resourcing for growth: culture and people 16
Past and future trends 17
Performance and financial review 18
2021 Financial performance 19
Key performance indicators 20
Treasury management 22
Going concern statement 22
Viability statement 23
Cautionary statement 23
Risk management andprincipal risks 24
Sustainability report 28
Approval of the Strategic report 77
Strategic
report
6
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
MEAT
For more information visit
www.hiltonfoodgroupplc.com
Hilton Food Group’s strategy is to
support our customers’ brands and
their development in local markets,
leading to sustainable growth.
ѱ Delivering sustained growth in
meat sector through core business
growth, innovation, and new
ventures.
ѱ Diversifying into food service
market through acquisition of
Fairfax Meadow.
7
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
Strategic progress
We have continued to make good
progress growing across international
markets. We successfully opened our
multi-protein facility in New Zealand
and there has been continued growth
inprotein diversification into plant-based,
seafood and convenience foods.
The acquisition of Fairfax Meadow
further diversifies the business into the
UK food service market. We were also
able to welcome Dalco fully into the
Hilton Group through the purchase of the
remaining shares, thereby strengthening
our vegan and vegetarian proposition.
Our automation, engineering and
services arm has developed through the
agreement for a joint venture with Agito
Group, an Australian automation and
technology solutions business, which
brings together excellence in automation
and food supply chain expertise.
We acquired Foppen, a specialist
smokedsalmon business, with facilities
in the Netherlands and Greece, which
enhances our existing fish portfolio and
is an entry point for us into the North
American retail market. We financed
the acquisition via an equity raise, and
completed post the year end.
We continue to successfully execute
our strategy to grow and diversify and
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
In 2021 we again increased our volumes
maintaining a trend of continuous growth
achieved in every year since Hilton’s
flotation in 2007. There was strong growth
in adjusted profit and earnings per share
despite Covid related costs although IFRS
metrics were lower due to exceptional
items. We also continued to invest in
people and infrastructure to support future
growth across the Group. There was
an extensive fire at our Belgium facility
but we ensured continued supply to
our customers and plan to restore our
production capability. Our response during
the year demonstrates our ability to thrive
in the face of these tough challenges.
Hilton generated strong operating cash
flows during 2021 with, as expected,
further significant investment in our
facilities to increase capacity, improve
operational efficiency and offer innovative
solutions to our retailer partners.
Chairman’s introduction
Our response during the year
demonstrates our ability to thrive
inthe face of tough challenges.”
ROBERT WATSON, OBE
CHAIRMAN
8
Hilton remains financially strong with
significant cash balances, undrawn
committed bank facilities and operating
well within our banking covenants.
In January 2022 we successfully
renewed our bank facilities for a further
five years.
Dividend policy
The Group has maintained a progressive
dividend policy since flotation. The Board
is satisfied that the Group has adequate
headroom under its existing facilities and
that it is appropriate to continue to operate
this dividend policy. With the proposed
final dividend of 21.5p per ordinary share,
total dividends in respect of 2021 will
be29.7p per ordinary share, an increase
of14.2% 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 create efficiency
and flexibility in the food supply
chain whilst maintaining high quality
through innovative and sustainable
food manufacturing and supply chain
solutions with the ambition to be the first
choice partner for food retailers seeking
excellence, insight and growth.
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 as well as
having in place succession planning and
maintaining 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.
There are some Board changes for
2022. Patricia Dimond joined the Board
and John Worby will step down at the
AGM after six years. We wish John
well and thank him for hisservice.
Nigel Majewski also indicated his desire
to step down from the Board at the AGM
but will continue in areduced capacity
as director of investor relations and
strategic development. It is planned that
the current Group Financial Controller,
Matt Osborne, willbe appointed to
succeed him as ChiefFinancial Officer.
I am delighted that Matt will become
Hilton’snew CFO.
He has impressed the Board and the
wider management team during his time
as Group Financial Controller, and he
represents the ideal candidate to take
over from Nigel Majewski. I would like to
thank Nigel for his significant contribution
to Hilton’s successful journey over the
past 15 years. He was a key part of the
Group’s successful flotation and he
has helped oversee Hilton’s sustained
growthsince then.
The Board takes its responsibilities very
seriously to promote the success of the
Company for the benefit of its stakeholders
as a whole. 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
The vulnerabilities of our food system
arebecoming ever more apparent
highlighting the interdependencies
between business, climate and society.
We are at a critical juncture in the future
of our planet with last year’s IPCC
report warning of increasingly extreme
heatwaves, droughts and flooding, and
a key temperature limit being broken in
just over a decade. Continuing to perform
as a prosperous and resilient business
means we must also drive meaningful
change for our planet. We recognise
thatbusiness has a crucial role in
translating the COP26 Glasgow Climate
Pact commitments into rapid action.
That’s why we are strengthening our
commitment to the Science Based
Targets Initiative to achieve a 1.5° C
trajectory, marking our ambition
towardsa net negative future.
Outlook and current trading
Against the backdrop of a more challenging
environment, with global uncertainties
impacting supply chains and inflation,
the Hilton Board is confident of making
further progress in 2022. We continue
toexplore opportunities with existing and
new customers for further expansion in
ourdomestic and overseas markets.
Our short and medium term growth
prospects are underpinned by the Foppen,
Dalco and Fairfax Meadow acquisitions
as well as further opportunities arising
across our markets by the development
of our cross-category business and
the application of our supply chain
management expertise.
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 24 May
2022 at noon.
Robert Watson OBE
Chairman
5 April 2022
Please refer to our website at
www.hiltonfoodgroupplc.com/
en/investors/shareholder-
meeting-documents/
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
9
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Strategic objectives
Our strategy continues to be to support
our customers’ brands and their
development in local markets, thereby
achieving long-term sustainable customer
and shareholder value through:
– Growing volumes and extending product
ranges supplied and services provided
toits existing customers;
– Optimising use of assets and investing
in new technology to deliver competitive
advantage to our customers;
– Maintaining a vigilant focus on food
safety and integrity and reducing unit
costs, while improving product quality
and service provision; and
– Entering new territories and markets
either with new customers or in
partnership with our existing customers.
This approach combined with a strong
reputation, well-invested modern facilities
and a robust balance sheet has generated
growth over many years. We will continue
to pursue both geographical expansion
and range extension towards our goal
of becoming the protein partner of
choice, whilst at the same time actively
developing, enriching, deepening and
expanding the scope of our existing
business partnerships, playing a full and
proactive role in supporting our customers
and the successful development of their
brands. We have successfully expanded
our product range into new proteins and
categories such as seafood, vegetarian,
sous vide, food service and fresh
convenience foods.
This year has strengthened
ourdedication to being a leader
insustainable business to secure
abetter future for all.”
PHILIP HEFFER
CHIEF EXECUTIVE OFFICER
Chief Executive’s summary
10
Business model
The Hilton business model is well proven
and sustainable, whilst being relatively
simple and straightforward. We build
and operate large scale, extensively
automated and robotised food processing,
packing and logistics facilities for major
international retailers largely on a dedicated
basis. Through economies of scale we
are able to secure significant efficiency
savings for our customers whilst retaining
a competitive margin. Our business is
based on a total partnership approach
withcustomers and suppliers forged over
many years. The wide geographical spread
of the Group’s operations is a significant
strength of our business model.
In 2021 we operated facilities in eight
European countries and four facilities
in Australasia, each run by a local
management team enhanced by specialist
central leadership, expertise, advice and
support. A Portuguese facility is operated
by a joint venture company in which
we share the profits. Products from our
facilities are sold in fourteen European
countries, Australia and New Zealand.
Our businesses operate under the terms
of long-term supply agreements with
ourretailer partners, either on a cost plus,
packing rate or volume-based reward
basis. These contractual arrangements,
combined with our customer dedication,
serve to maximise achievable volume
throughput whilst minimising unit
packing costs thereby delivering value
toour customers.
Under the long-term supply agreements
we have in place with our customers,
the parameters of our revenue are clearly
defined. As well as income derived from
the supply of retail packed food products,
there are also provisions whereby our
income can be increased or decreased
subject to achievement of certain pre-
agreed and pre-defined key performance
measures and targets designed to align
our objectives with those of our customers.
Our four key
strategic objectives
For more information visit
www.hiltonfoodgroupplc.com
Growing volumes
andextending product
ranges supplied and
services provided to
itsexisting customers;
Optimising use of assets
andinvesting in new
technology to deliver
competitive advantage
toour customers;
Maintaining a vigilant
focuson food safety and
integrity and reducing unit
costs, while improving
product quality and
serviceprovision; and
Entering new territories
andmarkets either
withnewcustomers
orinpartnership with
ourexisting customers.
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
11
WE SUPPLY
WE PRODUCEWE PARTNER
UNITED KINGDOM
IRELAND
NETHERLANDS
DENMARK
SWEDEN
BELGIUM
POLAND
HUNGARY
CZECH REPUBLIC
SLOVAKIA
LATVIA
ESTONIA
LITHUANIA
AUSTRALIA
STEAK ROAST SAUSAGES BURGERS MEATBALLS
TRADING COMPANY
STEAK ROAST CHOPS
STRIPS MINCE PULLED SAUSAGES BURGERS BALLS SCHNITZEL
SANDWICHES WRAPS BAGUETTES
BURGERS PIZZA GARLIC BREAD
CSR
SUPPLY CHAIN
INSIGHT
RETAIL
PACKS
FOODSERVICE
QUALITY
CLOUD BASED PROCUREMENT
PLATFORM
PROCUREMENT
ANIMAL WELFARE
CONSUMER
INSIGHT
LEADING
SOLUTIONS
MEATLOAF
SHANKS
GAMMON SCHNITZEL
STEAK SAUSAGES CHOPS BACONMINCE
ROAST DICED
MINCE
DICED
CHICKEN
KEBAB
CHICKEN
DRUMSTICKS
CHICKEN
THIGH
CHICKEN
WINGS
HALF
CHICKEN
DUCK
LEG
DUCK
HALF
HUMMUS
SOUP
READY
MEALS
PASTA
SAUCE
MEAL
KITS
MEAL
SOLUTIONS
READY TO
COOK
SALAD
SALMON WHITE FISH
NUGGETS
FOOD FOR
LATER
FOOD FOR
NOW
DICED
PRAWNSCOATED
WHOLE/HALF/
QUARTER
CARCASS
MINCEDICED
RIBS
PULLED BELLY RIB RACK SMOKED LOINMEATBALLS MEATLOAF
WE SOURCE
SUSTAINABLY
PORTUGAL
ECONOMICS OF SCALE
LOW MARGIN OPERATION
HIGH VOLUME
PROCESS & PACKING
FACILITIES
FULL TRACEABILITY
STORE ORDER
PICKING
DEPOT
NEW ZEALAND
Our business model
The Hilton business model
is provenand sustainable,
whilst beingrelatively simple
and straightforward.
– A total partnership approach
withcustomer and suppliers
– Raw materials sourced locally and
internationally from proven suppliers
– Processed and packed in large scale,
highly automated facilities using
advanced robotics
– Delivered to retailers’ distribution
centres or direct to stores
Chief Executive’s summary
continued
12
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
WE SUPPLY
WE PRODUCEWE PARTNER
UNITED KINGDOM
IRELAND
NETHERLANDS
DENMARK
SWEDEN
BELGIUM
POLAND
HUNGARY
CZECH REPUBLIC
SLOVAKIA
LATVIA
ESTONIA
LITHUANIA
AUSTRALIA
STEAK ROAST SAUSAGES BURGERS MEATBALLS
TRADING COMPANY
STEAK ROAST CHOPS
STRIPS MINCE PULLED SAUSAGES BURGERS BALLS SCHNITZEL
SANDWICHES WRAPS BAGUETTES
BURGERS PIZZA GARLIC BREAD
CSR
SUPPLY CHAIN
INSIGHT
RETAIL
PACKS
FOODSERVICE
QUALITY
CLOUD BASED PROCUREMENT
PLATFORM
PROCUREMENT
ANIMAL WELFARE
CONSUMER
INSIGHT
LEADING
SOLUTIONS
MEATLOAF
SHANKS
GAMMON SCHNITZEL
STEAK SAUSAGES CHOPS BACONMINCE
ROAST DICED
MINCE
DICED
CHICKEN
KEBAB
CHICKEN
DRUMSTICKS
CHICKEN
THIGH
CHICKEN
WINGS
HALF
CHICKEN
DUCK
LEG
DUCK
HALF
HUMMUS
SOUP
READY
MEALS
PASTA
SAUCE
MEAL
KITS
MEAL
SOLUTIONS
READY TO
COOK
SALAD
SALMON WHITE FISH
NUGGETS
FOOD FOR
LATER
FOOD FOR
NOW
DICED
PRAWNSCOATED
WHOLE/HALF/
QUARTER
CARCASS
MINCEDICED
RIBS
PULLED BELLY RIB RACK SMOKED LOINMEATBALLS MEATLOAF
WE SOURCE
SUSTAINABLY
PORTUGAL
ECONOMICS OF SCALE
LOW MARGIN OPERATION
HIGH VOLUME
PROCESS & PACKING
FACILITIES
FULL TRACEABILITY
STORE ORDER
PICKING
DEPOT
NEW ZEALAND
13
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Chief Executive’s summary
continued
As well as our ability to provide excellent
execution locally, we also have at our
disposal a wide and deep expertise on
anumber of areas of specialism, such as
engineering, new product development,
food related IT applications, category
management support, logistics and market
intelligence. We are able to apply these
skills to a number of markets to support
our customers in a cost-effective way.
Business development
The Group’s expansion is based on
itsestablished and proven track record,
international reputation and experience
and the recognised success of the
close partnerships we have forged and
maintained with successful retail partners
over many years. Hilton’s business model
has proved successful in Europe and
Australasia supplemented by targeted
acquisitions. We have demonstrated that
this business model is capable of being
successfully transferred into new countries,
adapted with our local customers to meet
their specific requirements.
2021 Performance overview
2021 saw continued year-on-year sales
and volume growth driven primarily by
expansion including from a new facility
in New Zealand which opened during
the year as well as continued growth
inAustralia. We delivered growth in our
core meat business, innovation, and
new ventures despite continuing Covid
challenges. There was expansion in added
value poultry and innovation in seasonal
range development and we saw double
digit growth in fresh convenience foods.
There was a strong performance in the
seafood category despite challenging
market conditions and we grew our vegan
and vegetarian business through innovation
and partnerships with global brands and
retailers. Our consumer-led innovation
resulted in over 700 new product launches
during the year. The Foods Connected
joint venture business continues to
grow, providing end-to-end supply
chain management services and further
opportunities for category diversification.
During the year we experienced an
extensive fire at our Belgium facility and
it was pleasing to see a rapid response to
ensure continued supply to our customer
with plans to restore our production
capability under way.
Overall volume increased by 7.0% on
acomparable 52 week basis to 492,588
tonnes (2020: 469,110 tonnes) delivering
sustained volume growth across all protein
categories with two-year compound
annual growth in meat & seafood of
14.3%, vegan & vegetarian 26.4% and
added value easier meals 36.0%. In 2021
over 75% of the Group’s volumes were
produced in countries outside the UK.
Adjusted operating profit increased by
12.7% on a comparable 52 week constant
currency basis although the overall
operating margin decreased to 2.2%
(2020: 2.4%) reflecting the Australia post-
JV transition arrangements and higher raw
material prices. The margin per kg increased
to 14.9p (2020: 14.3p) with progress made
in added value and convenience foods and
from reduced central costs. Our customer
service level remains best in class at 96.4%
(2020: 95.4%) reflecting an outstanding
performance during the challenging period
as the economy emerges from Covid.
The wide geographical spread of the Group
increases its resilience by minimising its
reliance on any one individual economy.
Hilton’s results are reported in Sterling and
are therefore sensitive to changes in the
value of Sterling compared to the range
ofoverseas currencies in which the Group
trades. During 2021 the impact of average
exchange rates on our results compared
with 2020 was marginal.
Sustainability
We understand the importance of our
role in the future of a sustainable food
system that protects and restores our
planet’s resources and enhances the lives
of the people and animals that produce it.
This year has strengthened our dedication
to being a leader in sustainable business
to address the concerns that matter most
to our stakeholders to secure a better
future for all. Sustainability is at the heart
of how we do business and this year we
are pleased to introduce our new 2025
Sustainable Protein Plan with new robust
targets, built around improved transparency
and action re-focused to three pillars:
People, Planet and Product. We are aligning
our business to deliver long-term benefits
to both people and planet, using our scale
and reach to drive transformative change.
In 2021 our Science Based Targets were
approved and we signed the business
ambition to 1.5°C committing us to net
zero before 2050. 100% of the paper
and board we use comes from certified
forests and 76% of our meat trays are
made from 100% recycled PET. 98% of
our UK seafood was sourced from Marine
Stewardship Council certified fisheries and
we signed the EU Code of Conduct on
Responsible Food Business and Marketing
Practices during the year.
Raw materials are sourced, in conjunction
with our retail partners, from a combination
of local sources and a wide international
base of proven suppliers. It is then
processed, packed and delivered to the
retailers’ distribution centres or stores.
Our plants are highly automated and
use advanced robotics for the storage
of raw materials and finished products.
Robotics technology has been extended
in recent years both in the production
environment and to the sorting of finished
products by retailer store order, achieving
material supply chain efficiencies for
our customers. We consider that our
application of technology will enable
us to deliver competitive advantage
toour customers.
We seek to keep ourselves at the
forefront of the food packing industry,
including becoming more sustainable
and environmentally friendly, which helps
ensure our continued competitiveness.
We constantly look to drive efficiencies,
always maintaining a pipeline of clear
identifiable cost reduction initiatives
and an open minded approach designed
tocontinually challenge the status quo.
We consider our modern, very well-
invested facilities to be a key factor in
keeping unit packing costs as low as
possible. We invest continuously across
all areas of our business, including raw
materials sourcing, packaging materials
design, increased processing efficiency
and storage solutions and updating our IT
infrastructure. Group capital expenditure
over the last five years totalled £364m.
We are a committed and loyal partner
with a continuing record of delivering
value through quality products with the
highest levels of food safety, traceability
and integrity, whilst providing a range
ofservices which enable our customers
to evolve and improve their food supply
chain management. Our customer
base comprises high quality retailers
and our in-depth understanding of our
customers’ needs, together with those
of their consumers, enables us to play
an active role in managing their food
supply chains whilst providing agile
solutions to supply chain challenges as
they arise. As our customers’ markets
change and competition increases, we
need to keep aconstant focus on the
challenges they face so we can put
forward flexible solutions, together with
continuing increases in efficiency and cost
competitiveness. This flexible approach
and understanding of our local markets
remains one of our core strengths.
14
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Progress in 2021 against our strategic objectives
Volume growth
with existing
customers
Investment
inassets &
capacity
Focus on food,
cost, quality
& service
New territories
and markets
Fairfax Meadow acquisition expansion
intofoodservice
Dalco purchase of remaining shares
New facility opened in New Zealand
Foppen acquisition completed since the year end
Protein expansion
AUSTRALASIA
Adjusted operating profit of £22.4m
(2020: £16.9m*) on turnover of
£1,314.6m (2020: £769.6m*)
In Australia the Group previously operated
a joint venture with Woolworths earning
service fees based on retail packed meat
produced at plants in Bunbury, Western
Australia and Melbourne, Victoria. In July
2020 these plants transitioned to Hilton’s
ownership through the purchase of the
assets relating to the joint venture. A new
Hilton facility in Brisbane, Queensland
opened in 2019 and a further new facility
in New Zealand opened in July 2021 to
supply beef, lamb, pork, chicken, seafood
and added-value products.
Volumes for the year 52 week basis,
which in the first half of 2020 included
50% of the JV activities, increased
by32.8% through the new facility in
New Zealand and the annualisation of
thehigher volume growth at the Brisbane
facility. Constant currency sales on a
52week basis, which in the first half of
2020 excluded the JV activities, increased
by 68.0% which is attributable to the
new facility in New Zealand and also
the recognition of revenue from the two
Australian joint venture facilities following
their transition to Hilton ownership.
Operating profit increased to £22.4m
(2020: £16.9m*) although the operating
profit margin per kg was steady at 14.1p
(2020: 14.2p).
Segment performance
EUROPE
Adjusted operating profit of £61.8m
(2020: £61.4m*) on turnover of
£1,987.4m(2020: £1,952.1m*)
This operating segment covers the Group’s
businesses and joint ventures in the
UK, Ireland, Holland, Belgium, Sweden,
Denmark, Portugal and Central Europe.
Our products are sold in 14 countries
across Europe. During the year we
purchased the remaining shares in the
Dalco business and additionally acquired
Fairfax Meadow, a UK-based business in
the UK food service sector. Our Belgium
facility suffered an extensive fire in June
2021. We quickly implemented our
contingency plan to ensure continued
local supply to our customers and we are
working hard to restore our production
capability while progressing an insurance
claim. At SV Cuisine we have moved
sous vide production to Huntingdon
to reduce cost and provide additional
capacity in a growing segment and we
agreed early settlement of the acquisition
deferred consideration.
Volumes were 2.0% lower on a 52 week
basis following the Covid lockdown
boost in the corresponding 2020 period.
Over a two year period volumes grew
at an average 3.1% per year. Sales on a
52week constant currency basis grew by
3.1% and operating profit by 2.3% despite
the lower volume. Operating margins
were unchanged at 3.1% (2020: 3.1%) and
operating profit margin per kg increased
to18.5p (2020: 18.0p).
Progressive new build in New Zealand.
* On a comparable 52 week basis.
15
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Resourcing for growth:
cultureandpeople
Our people are at the heart of
our successand they have risen
tremendouslyto every opportunity
and challenge presented during 2021.
In partnership with our customers and
against the backdrop of the Covid-19
pandemic our teams have dedicated
themselves to feeding our nations’
families. At the same time, they have
ensured the delivery of our growth
agendathrough organic growth into
new markets and the acquisition of
newbusinesses that complement
andbroaden our offering.
Our teams across the countries
weoperate have worked tirelessly
to keepour people safe. We have
continuallyreviewed our policies
and procedures through the changing
pandemic. We haveensured investment
in our facilities, systems and equipment
and we have fully engaged our people
aswe have adjusted our ways of working.
I am proud of how we always work
asone team sharing best practice across
ourinternational operating companies
andintroducing innovative approaches.
I am delighted that a record number
of colleagues completed our annual
engagement survey. We are committed
to work safely and with regard to the
well-being of our colleagues and this
year we added a number of health and
safety related questions to our survey.
Our surveys provide invaluable feedback
on which our operating companies can
build plans that continuously improve
employee satisfaction.
We increased the scope of our leadership
development programmes with our
first emerging leaders programme and
overcame the challenges of the pandemic
in running this successful international
programme virtually. We have also
continued to provide all our teams with
thetraining they need to perform their
roles safely and effectively.
We are committed to providing an
inclusiveworking environment where
everyone feels valued, respected and
able to fulfil their potential. We recognise
that people from different backgrounds,
countries and experiences bring huge
benefits to our business and each other.
This year we became a strategic sponsor
of Meat Business Women the global
professional networking movement for
progressive women working in the meat
sector. We alsolaunched our own internal
women’s network, an inclusive group
engaging and enabling those who identify
as women in Hilton Food Group and the
food sector through support, development
and action.
Our recruitment policies and practices are
guided by local legislation in the countries
in which we operate. In the UK we give
fulland fair consideration to candidates
with disabilities. We utilise occupational
health expertise to assess new recruits’
needs and make any required adjustments
to the workplace and to provide ongoing
support. We also adapt training to
meetthe needs of disabled employees.
In addition, we have established a
wellbeing programme which includes
a network of mental health first aiders
and on-site mental health and wellbeing
clinics in partnership with our professional
occupational health providers.
Chief Executive’s summary
continued
Hilton’s expansion is based on its established and proven track record
Western Australia
Joint Venture
with Woolworths
Portugal Joint Venture
with Sonae
Acquire SV
Cuisine
UK
Partner
with Tesco
Central Europe
Partner with
Ahold, Tesco
and Rimi
Hilton Food
Solutions UK
Acquire 100%
of Joint Venture Assets
Investment in
Foods Connected
Netherlands
Partner
with Albert Heijn
Denmark
Partner with
Coop Danmark
Acquire
Seachill UK
Investment
in Dalco
Food Park opens in
Foods New Zealand
Acquire
100% share
Acquire
Fairfax Meadow
Victoria
Joint Venture
with Woolworths
High tech facility
opens in Queensland
Acquire
Foppen
Agito
Joint Venture
Belgium
Partner with Delhaize
1994 2000
Ireland
Partner
with Tesco
Sweden
Partner
with ICA
2004 2006 2011 2013
2015
2016 2019 2020 2021 20222017
16
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
The Group currently employs over 6,000
colleagues across Europe and Australasia.
We work as “one team” with local
empowered leadership teams dedicated
to the needs of our customers and their
consumers. These teams are equipped
with excellent local consumer and market
insight. They also provide flexible and
rapid support which has been a key
strength in these pandemic conditions.
Our local teams are supported by our
Group capability which delivers specialist
expertise and support, enables the sharing
of best practice and business growth.
The Board fully understands and
appreciates just how much our progress
relies on the effort, personal commitment,
enthusiasm, enterprise and initiative
ofour employees. I would like to take
this opportunity, on behalf of the Board,
to personally thank them all for both
fortheirdedication and resilience during
2021and their continuing commitment
to the Group’s ongoing growth and
development. In addition, I would like
totake this opportunity to recognise the
significant contribution made by Hilton’s
CFO Nigel Majewski over the past
15years. As he decides to step back from
heading up the finance function, I would
like to to thank him for his instrumental
role in having helped drive forwards the
Group’s continued growth, both financially
and operationally. I look forward to both
welcoming Matt Osborne as our new CFO,
and continue working with Nigel in his new
role as director of investor relations and
strategic development.
Past and future trends
Over recent decades major retailers
haveprogressively rationalised their
supplybase through large scale,
centralised packing solutions capable of
producing private label packed fresh food
products. This achieves lower costs with
consistent high food safety, food integrity,
traceability and quality standards allowing
supermarket groups to focus on their
core retail business whilst addressing
consumers’ continuing requirement for
quality and value. This trendtowards
increased use of centralised packing
solutions is likely to continue, albeit
at different speeds across the world,
representing potential future geographical
expansion opportunities for Hilton.
Consumer buying patterns are evolving
withmore seafood and vegetarian
proteins being eaten. Through Hilton’s
diversification into these proteins we
arewell placed to grow our business.
Philip Heffer
Chief Executive Officer
5 April 2022
SENIOR MANAGERS
Male
28
Female
11
DIRECTORS
Male
5
Female
3
EMPLOYEES
Male
3,395
Female
2,386
For more information visit
www.hiltonfoodgroupplc.com
17
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Strong cash flow generation
supporting our ongoing significant
investment in facilities.”
NIGEL MAJEWSKI
CHIEF FINANCIAL OFFICER
Volume
+7.0%
Revenue
+21.6%
Operating profit
+12.7%
Performance and financial review
For more information visit
www.hiltonfoodgroupplc.com
18
Summary of Group performance
This performance and financial review
covers the main highlights of the Group’s
financial performance and position in 2021.
Hilton’s overall financial performance saw
continued strong growth in volumes, sales,
profitability and basic earnings per share
on an adjusted basis. 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 2 January 2022,
with comparative information for the
53 week period ended 3 January 2021.
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 considers that APMs
better reflect business performance and
provide useful information in line with how
management monitor and manage the
business day-to-day. Unless otherwise
stated financial metrics in the Financial
highlights, Chairman’s introduction,
Chief Executive’s summary and this
Performance and financial review refer
tothe adjusted results.
2021 Financial performance
Volume and revenue
Volumes grew by 5.0% (7.0% on a 52
week basis) in the year driven by growth
in Australasia including the new facility
in New Zealand. Additional details of
volume growth by business segment are
set out in the Chief Executive’s summary.
Revenue increased 19.0% and by 21.6%
on a 52 week constant currency basis
representing the volume growth and also
the recognition of revenue from the two
Australian joint venture facilities following
their transition to Hilton ownership.
Operating profit and margin
Adjusted operating profit of £73.6m
(2020: £67.0m) was 9.8% higher
than last year and 12.7% higher on
a 52 week constant currency basis
driven predominantly by expansion
inAustralasia. IFRS operating profit was
£63.4m (2020: £66.9m) after charging
£7.1m in exceptional costs (2020: £nil).
The operating profit margin in 2021
declined to 2.2% (2020: 2.4%) mainly
dueto the recognition of revenue from
the two Australian joint venture facilities
following their transition to Hilton
ownership and higher Australian raw
material prices. The operating profit per
kilogram of packedfood sold increased
to14.9p (2020: 14.3p) reversing the
trendof recent years.
Net finance costs
Net finance costs excluding exceptional
items and lease interest increased to
£6.4m (2020: £5.9m) reflecting higher
borrowings that financed our expansion
programme. Interest cover in 2021 was
unchanged at 11 times (2020: 11 times).
IFRS net finance costs were £16.0m
(2020: £12.8m).
Taxation
The taxation charge for the period was
£14.5m (2020: £13.5m). The effective tax
rate was 21.6% (2020: 22.0%). The IFRS
taxation charge was £8.1m (2020: £12.0m)
with an effective tax rate of 17.1%
(2020: 22.2%).
Net income
Net income, representing profit for the
year attributable to owners of the parent
of £50.5m (2020: £45.3m) was 11.4%
higher than last year and 14.5% higher on
a 52week constant currency basis. IFRS
net income was £37.1m (2020: £39.7m).
Earnings per share
Basic earnings per share 61.3p
(2020: 55.4p) was 10.6% higher than last
year and 13.8% on a 52 week constant
currency basis. IFRS basic earnings
per share were 45.0p (2020: 48.6p).
Diluted earnings per share were 44.8p
(2020: 47.9p).
Earnings before interest, taxation,
depreciation and amortisation (EBITDA)
Adjusted EBITDA, which is used
bythe Group as an indicator of cash
generation, increased by 12.7% to
£119.5m (2020: £106.0m) reflecting the
growth in profitability following significant
investment and by 15.8% on a 52 week
constant currency basis. IFRS EBITDA
was£139.0m (2020: £126.5m).
Free cash flow and net debt position
Operating cash flow was strong in 2021
with cash flows from operating activities
of £121.3m (2020: £120.8m). IFRS free
cash outflow after capital expenditure
of £57.4m and acquisitions £41.6m but
before dividends and financing was £11.7m
(2020:inflow £0.6m). During the year
£75m was raised through issuing equity.
The Group closing net bank debt
comprising borrowings less cash and
cash equivalents excluding lease liabilities,
was £84.6m (2020: £122.2m) reflecting
bank borrowings of £224.7m net of
cash balances of £140.0m. Net debt
including lease liabilities was £328.0m
(2020: £367.4m).
19
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Financial KPIs
Revenue growth
(%)
19.0%
2020: 52.9%
Year on year revenue growth expressed
as a percentage. The 2021 increase
mainly reflected volume growth and
the recognition of revenue following the
transition of the two Australian JV facilities
to Hilton ownership and the new facility
inNew Zealand.
Adjusted operating
profit margin
(%)
2.2%
2020: 2.4%
Adjusted operating profit expressed as a
percentage of turnover. The operating profit
margin % in 2021 was lower due mainly
to the recognition of revenue following the
transition of the two Australian JV facilities
to Hilton ownership and higher Australian
raw material prices.
Adjusted operating
profit margin
(pence per kg)
1 4 . 9 p
2020: 14.3p
Adjusted operating profit per kilogram
processed and sold in pence. The increase
in 2021 compared with 2020 reflects
progress made in added value and
convenience foods and from reduced
central costs.
At the end of 2021 the Group had
undrawncommitted bank facilities under
its syndicated banking facilities of £96.8m
(2020: £51.5m). These banking facilities
are subject to covenants comprising
minimum tangible net worth, net bank
debt to EBITDA and interest cover.
Headroom under these covenants at
theend of the year was at least 65%
for all these metrics. Existing bank
facilities were due to expire in October
2022 and consequently all borrowings
at the end ofthe year were classed as
current. Since the end of the year the
Group renewed its banking facilities with
a £424mfive year revolving credit and
term loan facility agreed with a syndicate
of lenders.
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. The Board
is satisfied that, given the Group has
adequate headroom under its existing
facilities, it is appropriate to continue
to operate this dividend policy and has
therefore recommended a final dividend
of 21.5p per ordinary share in respect
of 2021. This, together with the interim
dividend of 8.2p per ordinary share
paid in December 2021, represents a
14.2% increase in the full year dividend,
as compared with last year. The final
dividend,if approved by shareholders,
willbe paid on 1 July 2022 to shareholders
on the register on 6 June 2022 and the
shares will be ex dividend on 1 June 2022.
Performance and financial review
continued
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 opposite.
In addition, a much wider range
of financial and operating KPIs are
continuously tracked at business
unit level.
20
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Non-financial KPIs
Growth in sales volumes
(%)
5.0%
2020: 26.2%
Year on year volume growth.
Volume growth was due primarily
toopening the new facility in
NewZealandinaddition to
continuedgrowth in Australia.
Employee and labour
agencycosts
(pence per kg)
60.9p
2020: 57.2p
Labour cost of producing food products
as a proportion of volume. The increase
reflects the Australia JV transition.
Adjusted earnings before
interest,taxation, depreciation
andamortisation (EBITDA)
(£m)
£119.5m
2020: £106.0m
Adjusted operating profit before
depreciation and amortisation.
The increasereflected the growth
in profitability following significant
investments.
Free cash flow
(£m)
£(11.7)m
2020: £0.6m
IFRS cash (out)/inflow before minorities,
dividends and financing. Operating cash
flow generation in 2021 increased in line
with EBITDA with lower capex spend
but impacted by costs of acquisitions
of£41.6m during the year.
Customer
service level
(%)
96.4%
2020: 95.4%
Packs of product delivered as a %
oftheorders placed. The customer
servicelevel remains best in class.
Net debt/
EBITDA ratio
(%)
70.9%
2020: 115.3%
Year end net bank debt as a percentage
ofadjusted EBITDA. The decrease is due
to the equity raise of £75m and continued
strong operating cash generation.
21
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Liquidity risk
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 statement
The Directors have performed a detailed
assessment, including a review of the
Group’s budget for the 2022 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 new
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.
Treasury management
Hilton does not engage in any speculative
trading in financial instruments and
transacts only in relation to its underlying
business requirements. The Group’s
policy is designed to ensure adequate
financial resources are made available as
required for the continuing development
and growth of its businesses, whilst taking
practical steps to reduce exposures to
foreign exchange, interest rate fluctuation,
credit, pricing and liquidity risks, as
described below.
Foreign exchange rate movements
and country specific risks
Whilst the presentational currency of
theGroup is Sterling, most of its earnings
are generated in other currencies,
principally the Euro and Australian Dollar.
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. Changes in relevant
currency parities are monitored on a
continuing basis, with the timing of the
repatriation of overseas profits by dividend
payments and the repayment of any intra
group loans to UK holding companies
paying due regard to actual and forecast
exchange rate movements.
The Group has to date decided not to
hedge its foreign exchange rate exposures,
but this policy is kept under continuing
review and may be reappraised over
time as the Group’s geographic spread
continues to widen. 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 in the main limited to its equity
investment in each overseas subsidiary
and its joint ventures, and in the translation
of overseas earnings.
The level of country specific risk currently
remains material for many businesses,
interms of the impact of macroeconomic
developments and commodity price
movements. The Group sells high
quality basic food products, for which
there will always be continuing demand,
to successful blue chip retailers in
developed countries.
Interest rate fluctuation risk
This risk stems from the fact that the
interest rates on the Group’s borrowings
are variable, being at set margins over
SONIA and other interbank rates which
fluctuate over time. The Board’s policy is
to have an interest rate cap on a proportion
of this borrowing. The Board will 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 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 either on a cost plus, packing
rate or volume based reward basis with
its customers.
Performance and financial review
continued
22
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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. Since the
end of the year the Group renewed its
banking facilities 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 2024. 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 Covid-19, 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 Hilton’s actual
future results may differ materially from
the results expressed or implied in these
forward-looking statements. We do
notundertake to update or revise any
forward-looking statements, whether
asaresult of new information, future
events or otherwise.
Nigel Majewski
Chief Financial Officer
5 April 2022
23
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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 the Group that might impede
the achievement of its strategic and
operational objectives as well as
affect performance or cash position.
As a leading food processor in a fast
moving environment it is critical
that the Group identifies, assesses
and prioritises its risks. The result
of this assessment is astatement of
the principal risks facing the Group
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
mitigation actions, enables us to
monitor, minimise and control both
the probability and potential impact
ofthese risks.
How we manage risk
Responsibility for risk management
acrossthe Group, including the
appropriateidentification of risks and the
effective application of actions designed
to mitigate those risks, resides with the
Board which believes that a successful
riskmanagement framework carefully
balances risk and reward, and applies
reasoned judgement and consideration
of potential likelihood andimpact in
determining its principal risks. The Group
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.
Risk management process
andriskappetite
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
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.
All types of risk applicable to the business
are regularly reviewed and a formal risk
assessment is carried out to highlight key
risks to the business and to determine
actions that can reasonably and cost
effectively be taken to mitigate them.
The Group’s risk register is compiled
through combining the set of business
unit risk registers supplemented by
formal interviews with senior executives
and Directors of the Group. The Group
has a Risk Management Committee
which reports regularly to the Audit
Committee and Board on the substance
of the risk assessment and any changes
to the nature of those risks or changes
to the likelihood or materiality of the
risk in question. The Risk Management
Committee also reviews progress in
control development and implementation
of those key controls related to principal
risks listed in this section of the report.
The Group’s internal audit function
derives its risk based assurance plan
onthe controls after considering the risk
assessment and reports its findings to the
Audit Committee. The Risk Management
Committee also considers the risk appetite
and oversees the scenario based business
continuity management exercises.
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
the Group’s 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 2021
Brexit
Hilton’s exposure is generally mitigated
through our predominantly local sourcing
and operating model. Impacts are likely to
continue through 2022 as the UK and EU
regulatory and trade environments evolve.
The Group is ensuring compliance through
ongoing engagement with the appropriate
authorities and regulatory forums.
Our dedicated Brexit team continues
to monitor policy changes and amend
processes and operations as required.
The structure of the UK workforce is
changing in response to both reduced
access to EU labour markets and
Covid-related employment trends.
Our recruitment and retention strategies
are evolving in line with this changing
landscape and our continued focus
ontechnology and automation further
reduce risk exposure in this area.
Principal risks
The most significant business risks
that the Group 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 the
Group, but rather to highlight those which
are the most significant, as viewed from
the standpoint of the Group as a whole.
24
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Risk management and principal risks
Description of risk Its potential impact Risk mitigation measures andstrategies adopted
Strategic risks
Risk 1
The Group strategy focuses on a small
number of customers who can exercise
significant buying power and influence
when it comes to contractual renewal
terms at 5 to 15 year intervals.
No movement
The Group has a relatively narrow, but expanding,
customer base, with sales to subsidiary or
associated companies of the Tesco, Ahold and
Woolworths groups still comprising the larger part
of Hilton’s revenue. The larger retail chains have
over many years increased their market share of
protein products in many countries, as customers
continue to move away from high street butchers
towards one stop convenience shopping in
supermarkets. This has increased the buying power
of the Group’s customers which in turn increases
their negotiating power with the Group, which
could enable them to seek better terms over time.
The Group is progressively widening its customer
base and has maintained a high level of investment
in state-of-the-art facilities, which together with
management’s continuous focus on reducing
costs, allow it to operate very efficiently at
very high throughputs and price its products
competitively. Hilton operates a decentralised,
entrepreneurial business structure, which enables
it to work very closely and flexibly with its retail
partners in each country, in order to achieve high
service levels in terms of orders delivered, delivery
times, compliance with product specifications
and accuracy of documentation, all backed by an
uncompromising focus on food safety, product
integrity and traceability assurance. Hilton has long
term supply agreements in place with its major
customers, with pricing either on a cost plus or
agreed packing rate basis.
Risk 2
The Group’s growth potential may
beaffected by the success of its
customers and the growth of their
packed food sales.
No movement
The Group’s products predominantly carry the
brand labels of the customer to whom packed food
is supplied and it is accordingly dependent on its
customers’ success in maintaining or improving
consumer perception of their own brand names
andpacked food offerings.
The Group plays a very proactive role in enhancing
its customers’ brand values, through providing
high quality, competitively priced products,
high service levels, continuing product and
packaging innovation and category management
support. It recognises that quality and traceability
assurance are integral to its customers’ brands
and works closely with its customers to ensure
rigorous quality assurance standards are met. It is
continuously measured by its customers across
avery wide range ofparameters, including delivery
time, product specification, product traceability and
accuracy ofdocumentation and targets demanding
service levels across all these parameters. The
Group works closely with its customers to identify
continuing improvement opportunities across
the supply chain, including enhancing product
presentation, extending shelf life and reducing
wastage at every stage in the supply chain.
Risk 3
The progress of the Group’s business
is affected by the macroeconomic
environment and levels of consumer
spending which is influenced by
publicity including reports concerning
the risks of consuming certain foods.
No movement
Changing consumer purchasing habits may mean
little or no overall growth in meat consumption.
Consumer demand may drop due to food scares
and economic conditions. No business is immune
to difficult economic climates and the consequent
pressure on levels of consumer spending.
With a sound business model including
successful diversification across different
proteins, broadening product ranges with
ourstrong retail partners and a single-minded
focus on minimising unit packing costs, whilst
maintaining high levels of product quality and
integrity, the Group has made continued progress
over recent difficult economic periods. It expects
to be able to continue to make progress.
Risk 4
As Hilton continues to grow there
is more reliance on key personnel
and their ability to manage growth,
change, integration and compliance
across new legislative and regulatory
environments. This risk increases as
the Group continues to expand with
new customers and into new territories
either organically or through acquisition
with potentially greater reliance on
stretched skilled resource and execution
of simultaneous growth projects.
Increased
The Group may struggle to meet key project
objectives and fail to adhere to regulatory and
legislative requirements, which in turn detracts
from our performance delivery for our customers.
The Group carefully manages its skilled
resources including succession planning and
maintaining a talent pipeline. The Group is
evolving its people capability balanced with
anappropriate management structure within
theoverall organisation. Hilton continues to invest
in on-the-job training and career development,
whilst recruiting high quality new employees,
as required, to facilitate the Group’s ongoing
growth and in deploying resource to support
the growth projects appropriately. Appointment
of additional key resources and alignment of
structures have supported the enhancement of
project management control and oversight. Control
systems embedded in project management enable
the risks of growth to be appropriately highlighted
and managed. To underscore our efforts, we have
active relationships with strong industry experts
across all areas of business growth.
25
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Description of risk Its potential impact Risk mitigation measures andstrategies adopted
Strategic risks continued
Risk 5
The Group’s business strength
isaffected by its ability to maintain
awide and flexible global food supply
base operating at standards that can
continuously achieve the specifications
set by Hilton and its customers.
No movement
The Group is reliant on its suppliers to provide
sufficient volume of products, to the agreed
specifications, in the very short lead times
requiredby its customers, with efficient supply
chain management being a key business attribute.
TheGroup sources certain of its food requirements
globally. Tariffs, quotas or trade barriers imposed
by countries where the Group procures meat, or
which they may impose in the future, together with
the progress of World Trade Organisation talks and
other global trade developments, could materially
affect the Group’s international procurement ability
and therefore potentially impact our ability to meet
agreed customer service levels.
The Group maintains a flexible global food
supplybase, which is progressively widening
as it expands and is continuously audited to
ensure standards are maintained, so as to have
in placeawide range of options should supply
disruptions occur.
Risk 6
Contamination within the supply
chainincluding outbreaks of disease
and feed contaminants affecting
livestock and fish.
No movement
This will potentially affect the Group’s ability to
procure sufficient quantities of safe raw material.
The Group sources its food from a trusted raw
material supply base, all components of which
meet stringent national, international and customer
standards. The Group is subject to demanding
standards which are independently monitored
in every country and reliable product traceability
and high welfare standards from the farm to the
consumer are integral to the Group’s business
model. The Group ensures full traceability from
source to packed product across all suppliers.
Within our factories, Global Food Safety Initiative
(GFSI) benchmarked food safety standards
and our own factory standard assessments
drive the enhancement of the processes and
controls that are necessary to ensure that the
risks of contaminants throughout the processing,
packingand distribution stages are mitigated
andtraceable should a risk ever materialise.
Risk 7
Significant incidents such as fire,
flood,pandemic or interruption
ofsupply of key utilities could impact
theGroup’s business continuity.
The current Covid-19 pandemic
continues to present challenges
acrossthe globe.
No movement
Such incidents could result in systems
ormanufacturing process stoppages with
consequentdisruption and loss of efficiency
whichcould impact the Group’s sales.
The Group has robust business continuity plans
in place including sister site support protocols
enabling other sites to step in with manufacturing
and distribution of key product lines where
necessary. Continuity management systems
and plans are suitably maintained and adequately
tested including building risk assessments
and emergency power solutions. There are
appropriate insurance arrangements in place
tomitigate against any associated financial loss.
The new Belgium facility suffered an extensive
fire in June 2021. We quickly implemented
our contingency plan to ensure continued local
supplyto our customers and plan to restore
ourproduction capability.
The Covid-19 mitigation measures that we put
inplace were effective in navigating throughout
the pandemic and are well placed.
26
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Risk management and principal risks
continued
Description of risk Its potential impact Risk mitigation measures andstrategies adopted
Operational risks
Risk 8
The Group’s IT systems could be
subject to cyber-attacks, including
ransomware and fraudulent external
email activity. These kinds of attacks
are generally increasing in frequency
and sophistication.
Increased
The Group’s operations are underpinned by a
varietyof IT systems. Loss or disruption to those
IT systems or extended times to recover data
or functionality could impact the Group’s ability
to effectively operate its facilities and affect
itssalesand reputation.
The Group has a robust IT control framework,
minimum operating standards, including working
towards National Institute of Technology
requirements, all of which are tested frequently
by internal staff and by specialist external
bodies. This framework is established as
the key control to mitigate cyber risk and is
applied consistently throughout the Group. The
increased prominence of IT risk is mitigated by
investments in IT infrastructure and now forms
a regular part of the Group Risk Management
Committee agenda and presentations to the
Board. In accordance with Group strategy IT
risk is considered when looking at new ventures
and control measures implemented in new sites
follow the Group common standards. There is
internal training and resources available with
emphasis on prevention, user awareness and
recovery. Increasingly, IT forms part of site
business continuity exercises which test and
help develop the capacity to respond to possible
crises or incidents. The technical infrastructure
to prevent attacks, safeguard data and the
resilience to recover are continuously developed
including yearly assessments to meet emerging
threats. ITsystems including financial and banking
systems are configured to prevent fraudulent
payments. There are monthly IT security reviews
to ensure compliance with expected levels of
applications updates, and of server and data
centres together with yearly penetration testing.
Risk 9
A significant breach of health & safety
legislation as complexity increases in
managing sites across different product
groups and geographies.
No movement
Such breach in health & safety legislation could
lead to reputational damage and regulatory
penalties, including restrictions on operations,
finesor personal litigation claims.
The Group has established robust health & safety
processes and procedures across its operations,
including a Group oversight function which provides
key guidance and support necessary to strengthen
monitoring, best practice and compliance. The
Group has also rolled out an enhanced standardised
safety framework. Health and safety performance
isreviewed regularly by the Board.
Risk 10
The Group’s business and supply
chain is affected by climate change
risks comprising both physical and
transition risks. Physical risks include
long-term rises in temperature and
sea levels as well as changes to the
frequency and severity of extreme
weather events. Transition risks
include policy changes, reputational
impacts, and shifts in market
preferences and technology.
Increased
Potential physical impacts from climate change
could include a higher incidence of extreme
weather events such as flooding, drought, and
forest fires that could disrupt our supply chains
andpotentially impact production capabilities,
increase costs and add complexity. Action
takenbysocieties could reduce the severity
ofthese impacts.
Governmental efforts to mitigate climate change
may lead to policy and regulatory changes as
well as shifts in consumer demand. The potential
transitional impacts include additional costs of
low greenhouse gas emission farming systems,
and thepotential of carbon price regulation
aimed at shifting consumers to lower carbon
foods, which may reduce the profitability of
some ofour products. Additionally there is
increased stakeholder focus on climate change
issues. Ourreputation could be impacted if we
are notactive in reducing the climate impacts
ofouroperations and supply chains, resulting
inlower demand for our products.
We continue to develop our approach to climate
change risk mitigation. We have committed to
set a science-based target through the Science
Based Targets initiative and signed the Business
Ambition for 1.5°C pledge to decarbonise our own
operations and supply chains. We have set energy
and water efficiency targets for our sites and
continue to engage in global collaborative action
for decarbonisation of our key raw materials.
Weare directing our efforts towards a net-zero
carbon footprint before 2050.
Shifts in consumer demand are an opportunity for
growth in our portfolio of plant based and seafood
products. Additionally, we are ensuring we have
the flexibility to adapt our supply chains over time
to mitigate physical disruption.
We are conducting an assessment of the key
physical and transition risks impacting our business
in line with the Task Force on Climate-related
Financial Disclosures (TCFD) recommendations.
We are also, for the first time this year, reporting
on our initial assessment of climate risks and
opportunities in line with the TCFD framework.
27
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Delivering afuture-ready
food system means we must
think critically to address
the complex interconnected
issues; from climate and
biodiversity, to resource use,
and human rights.”
PHILIP HEFFER
CHIEF EXECUTIVE OFFICER
CEO Introduction 28
Sustainability Committee Chair’s
Introduction 30
Highlights 31
2025 Sustainable Protein Plan 32
Materiality matrix 34
Governance 35
Value chain influence 36
People 38
Valuing our people 40
Respecting human rights 42
Developing potential 44
Planet 46
Reducing emissions 48
Enhancing animal wellbeing 50
Nature positive 52
Product 54
Balanced healthy diets 56
Circular packaging 58
Resource efficiency 60
Food safety and quality 62
Supply Chain Integrity, Environmental
Impact Assessment and Traceability 63
Climate risk and impact report
(Task Force on Climate-related
FinancialDisclosures) 64
Climate-related metrics and targets 73
Non-financial disclosure and SASB 74
Sustainability report
28
I am more convinced than ever
of the profound responsibility of
Hilton Foods to provide affordable,
nutritious, and sustainable food
in the many markets in which
we operate. 2021 was marked by
continued disruption to our global
food systems and 2022 brings the
tragedy of war in Europe.
We are thankful to all our people, who
have worked tirelessly producing essential
food, a testament to their resilience and
resourcefulness. Our thoughts are with
thefamilies and friends of the colleagues
we lost during last year.
We have a renewed understanding of
how human health is inextricably linked
to the health of our planet. Business has
a powerful role to play in society, both
bymanaging our impact and performance
and by galvanising positive change.
Delivering afuture-ready food system
means we must think critically to address
the complex interconnected issues, from
climate and biodiversity, to resource use,
and human rights.
As we have grown and diversified in
2021, we have increased our sustainability
ambitions. I am pleased to announce
that we are launching our new ‘2025
Sustainable Protein Plan’ delivering
arefocused strategy under the pillars of
People, Planet and Product. Our renewed
strategy will embed sustainability into our
daily actions, our decision-making and
governance. Our strategy is to use our
business capabilities and scale to support
the UN Sustainable Development Goals.
We became full participants in the UN
Global Compact in 2021, and I am pleased
to formally renew our continued support
and commitment to the initiative and
its principles.
My personal commitment is to ensure
the2025 Sustainable Protein Plan
isusedas a powerful catalyst for action,
within our business but also across our
supply chains. The task is daunting, but
can be achieved through collective action.
We signed the EU Code ofConduct
on Responsible Food Business and
Marketing Practices in 2021, which was
one of the first deliverables of the EUFarm
toFork Strategy.
Last year we reported our intention
toset Science Based Targets (SBTs),
which have now been approved by the
Science Based Targets initiative (SBTi).
We also announced that we have signed
the Business Ambition for 1.5°C pledge,
committing us to reach net zero before
2050. We plan to submit even more
ambitious targets to SBTi, aligned to the
1.5 degree track for our operations and
their FLAG pathway for our supply chains.
We’re delighted to be recognised by CDP
as a 2021 Supplier Engagement Leader,
recognising our efforts to mitigate climate
risk within our supply chain. We’re rolling
out tailored decarbonisation plans across
our own operations, employing technology
for maximum heat recovery and efficiency.
Hilton Foods Ireland has made significant
strides, already halving their gas use
across their operations since 2019.
Striving toward a more sustainable food
system requires a holistic evaluation
ofhow business engages with society,
ensuring equitable access to the ‘table’
for all. I am thrilled to announce our
commitment to advance the voice and
impact of women, with a target of 30%
of Hilton Foods leadership roles filled by
women by 2025. We’re committed to
building a sustainable future together,
ensuring all have the opportunity to thrive.
In 2021, we made a renewed commitment
to the implementation of the United
Nations Guiding Principles on Business
and Human Rights (UNGPs) in our
Human Rights and Supply Chain Social
Responsibility Policies. This includes all
agency, temporary and migrant workers.
Our teams have delivered impressive
projects in 2021. Hilton Seafood UK
received the Innovation in Animal
Welfare Award by Compassion in World
Farming for the world’s first electrical
humane stunner for warm water prawns.
Huge progress has been made on
delivering sustainable and circular packing
solutions, with the replacement of plastic
trays for beef mince with Flow-Wrap
in the Netherlands and PaperSeal trays
in Australia.
We are passionate about putting impactful
climate and social actions at the heart of
what we do, delivering for our employees,
our customers, and shareholders alike.
I hope the following report makes clear the
commitment and energy Hilton Foods has
delivering positive adaptions for society.
Philip Heffer
Chief Executive Officer
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Reflecting on another year
markedby continued disruption
from the Covid-19 pandemic, the
vulnerabilities of our food system
have become ever more apparent.
We are at a critical juncture in the
future of our planet, where the
interdependencies between business,
climate and society are unmistakably
clear. The Intergovernmental
Panel on Climate Change (IPCC)
signalled a ‘code red for humanity’
in its report earlier this year,
asobering statement for all of us
who understand the urgency of
the task at hand. Continuing to
perform as a prosperous and resilient
business means we must also drive
meaningfulchange for our planet.
This year we have responded with
speed and agility to protect lives and
livelihoods, whilst growing our business.
Finding afuture that is sustainable for
everyone on our planet demands that
weintensify our capacity to create
positiveadaptations both for both society
and the environment, and look critically
atreducing negative impacts.
The COP26 summit in November
2021 achieved the Glasgow Climate
Pact, aresult of negotiations from
almost 200nations. We recognise that
business has a crucial role in translating
these commitments into rapid action.
That’s whywe are strengthening our
commitment to the Science Based
Targetsinitiative to achieve a 1.5°C
trajectory, marking our ambition towards
anet negative future.
However, we are aware that as we
expedite climate action, it is of utmost
importance that we secure a ‘just
transition’ for society, making sure
theevolution towards a climate-neutral
economy happens in a fair way, leaving
noone behind.
Respecting human rights, enabling
theprovision of fair and safe workplaces,
and ensuring employees’ voices are heard
throughout our value chains is essential to
building back better. Momentum is building
toward the EU Sustainable Corporate
Governance Directive, whilst mandatory
human rights due diligence legislation has
already been achieved at a national level in
a number of member states. We recognise
the responsibility of businesses to identify
and act to protect human rights in their
supply chains, that’s why we advocated
for similar human rights due diligence
legislation to be introduced in the UK
this year.
Consumption of soy for agricultural
use isone of the primary causes
ofdeforestation and biodiversity loss
globally. This is why we have increased
our advocacy both within the UK and
EUfor robust deforestation due diligence
legislation, and have worked with EFECA
to support Defra in the implementation
ofUK legislation.
Sustainability considerations also
influencewhere consumers want
toshop,and where individuals want
towork. The growing prominence of the
eco-conscious consumer who wants to
make purchases that align with their values
and have a positive impact on the planet
must be addressed. We are expanding our
expertise by bringing innovative solutions
to deliver sustainable protein choices that
perform in taste, quality and affordability
for our customers.
We are committed to taking a leadership
position to address the concerns that
matter most to our stakeholders, whether
they be our investors, our customers,
our suppliers, or our own employees.
Above all, this year has strengthened our
dedication to being a leader in sustainable
business. I hope the following report
makes clear that we are an organisation
which is passionate about achieving
theseaims for a better future for all.
Continuing to perform
as a prosperous and
resilient business means
we must also drive
meaningful change
forour planet.”
REBECCA SHELLEY
SUSTAINABILITY COMMITTEE CHAIR
Sustainability report
Sustainability Committee Chair’s introduction
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
1 0 0 %
of the paper and
board we use
comes from
certified forests
>2.4GWh
In 2021, we generated
2.4GWh of solar electricity
atour Heathwood,
Huntingdon and
Grimsby sites
30%
We have committed
to women filling
30% of leadership
roles by 2025
PEOPLE
PLANET
We signed the
EU Code ofConduct
on Responsible Food
Business and Marketing
Practices in 2021
Launched our
Women’s Network
supporting women
to progress at alllevels
of our business
We published our
first Group Human
Rights Policy and
recommitted to the
UN Guiding Principles
of our UK seafood was sourced
from Marine Stewardship
Council certified fisheries
98%
Highlights
Using more robust
methodology, we have
recalculated our Scope3
emissions at 15.5 million
tonnes CO
2
e, inanticipation
of setting more ambitious
targets in 2022
76%
of our meat trays
are made from 100%
recycled PET
82%
We have reduced the
weightofplastic in our
mince packaging by up to
82% at HiltonFoods Holland
by implementing flow
wrap technology
Hilton Seafood
UK received the
Compassion in
World Farming
Award for Innovation
in Animal Welfare
in 2021
1.5°C
In 2021, our Science Based
Targets were approved and we
signed the Business Ambition
to 1.5°C, committing us to
Net Zero before 2050
PRODUCT
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Sustainability is at the heart of
how we do business. This year we
are pleased to introduce our new
strategy, the 2025 Sustainable
Protein Plan. This amalgamates
the workstreams ofour previous
‘Quality Naturally’ strategy in
an improved clearer format, with
new robust targets built around
improved transparency and action.
We understand the importance of
ourrole in the future of a sustainable
food system that protects and restores
our planet’s resources and enhances
the lives of the people and animals that
produce it. This report sets out the work
currently being undertaken by Hilton
Foods, andour plans to enhance and
improve. We are aligning our business to
deliver long-term benefits to both people
and planet, using our scale and reach
todrivetransformative change.
Transparency is crucial to meeting
our targets, but through leveraging
technological solutions to drive change
within our value chains, we have been
ableto progress data accessibility.
Our data collection platform can
demonstrate where our raw materials
come from, assurance of standards
acrossour supply chains, and measure
progress made towards shared goals
andour 2025 targets.
The 2025 Sustainable Protein Plan is
ambitious, but we’re confident we can
achieve our goals in partnership with our
customers and suppliers as we raise the
bar together.
Business as usual is changing
and consumers’ expectations
have shifted considerably.
Thereis a danger in setting
easytargets and meeting them
– we want to set stretching
goals that drive impactful
actions that become integrated
into our core business practices.
It’s so much more than just
reporting.”
NIGEL EDWARDS
GROUP CSR DIRECTOR
Sustainability report
Our 2025 Sustainable Protein Plan
Innovating through partnership to make nutritious protein more sustainable
VALUING
PEOPLE
REDUCING
EMISSIONS
BALANCED
HE A LTHY DIETS
RESPECTING
HUMAN RIGHTS
ENHANCING
ANIMAL WELLBEING
CIRCULAR
PACKAGING
DEVELOPING
POTENTIAL
NATURE
POSITIVE
RESOURCE
EFFICIENCY
PEOPLE PLANET PRODUCT
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
PEOPLE PLANET PRODUCT
Valuing
people
Being a fair, safe and inclusive
employer by engaging and
empowering our people while
supporting our local communities.
Our people are at the core of how
wedo business and they bring our
culture to life within our factories,
offices and communities.
Respecting
human rights
Safeguarding the welfare and
just treatment of all people and
communities engaged with our
business and supply chains.
We have a responsibility to protect
the internationally recognised human
rights of workers both within our
business and our global supply chains.
Building strong ethical standards
to embed respect for human rights
across our value chain is an essential
step toward a fairer food system.
Developing
potential
Growing and developing our people
tobe thebest they can be, ensuring
our business is ready for the future.
We’re committed to building
a sustainable future together,
ensuring all our employees
have the opportunity to thrive.
Ensuring our business is fit for the
future means wehave to create a
visible frameworkfor our employees
to access and understand their
careerand training opportunities.
Balanced
healthy diets
Efficient regenerative food
systemsproducing more accessible
and nutritious proteins.
By combining innovation and
responsible sourcing, weensure
our consumers canmakebalanced
choices thatarehealthy forthem
andfortheplanet.
Circular
packaging
Developing a circular economy
forpackaging and actively bringing
waste materials back into use
acrossour fullvalue chain.
We are using innovation and our
scaleto drive transformational
development ofsustainable packaging
andmovetowards a circular economy
across our value chain.
Resource
efficiency
Reducing food waste and
optimisinguse of energy and
wateracross sites, supply chains,
andin consumers’ homes.
We are constantly reducing our
environmental impact by eliminating
waste and driving resource efficiency.
Reducing
emissions
Going further than addressing our
footprint by achieving net negative
emissions across our sites and
value chains.
With over 30% of global emissions
comingfrom the food system and the
impacts of climate change becoming
more acute, we are working to make
this complex topic actionable across
oursupply chain on our journey
tonetnegative emissions.
Enhancing
animal wellbeing
Driving standards and innovation
inthecare of animals that enhances
their lives and reduces antibiotic use.
We are actively encouraging
uptakeofinnovationand developing
standards that advance welfare
and reduce theneed for antibiotics
throughout our global supply chains.
Nature
positive
Collaborating to improve our
stewardship of land and sea;
promoting biodiversity, addressing
deforestation, and protecting
waterand soils.
We are leading collaborative action
toaddress the key environmental
challenges, shapingand guiding
agendasanddriving uptake of
innovation atscale.
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Impact on our business
Importance to external stakeholders
As part of the development of
ournew strategy we have updated
our materiality matrix to effectively
prioritise initiatives and ensure
our focus is on addressing the most
material issues toour business.
In the process of developing the
materiality matrix, a consultation was
carried out with both a cross-section
of internal and external stakeholders
(including NGOs, consultancies, centres
of excellence, customers, retailers and
partners in our agricultural, ingredient and
packaging supply chains) with recognised
expertise across our key risk areas.
This ensures materiality is assessed
against: Hilton Foods strategy, broader
societal expectations, legislation, policy
and the business’ influence on other
entities in ourvalue chain. A thorough
statistical analysis was performed on
the consultation’s results to ensure
the views of each stakeholder group
were appropriately reflected, taking into
accountthe geographic and operational
diversity of our business.
Our material issues were identified as:
•
Product safety, quality and integrity
Ensuring all food is safe to eat is of
paramount importance to us, our
products must also meet our quality
specifications and be labelled correctly,
covering important issues such as the
allergens they contain, the country
oforigin and the nutritional content
ofthe products.
•
Sustainability and biodiversity of
agriculture, fisheries and aquaculture
This encompasses the management
ofinputs and output of agriculture,
fisheries and aquaculture at a level
thatmay allow its continuation in
the long term in harmony with the
ecosystems with which it interfaces.
•
Greenhouse gases
Greenhouse gas emissions occurring
in our value chain, from farm, through
processing, distribution and retail to
consumption, and their contribution
toclimate change.
•
Human rights
Respecting human rights by
safeguarding the welfare and ensuring
just treatment of all workers and
communities engaged with our
businessand our supply chain.
•
Health & safety
Safeguarding the health & safety
ofpeople in the workplace and
ensuringa safety-first culture
acrossourvalue chain.
These most material risks are under
active management and are subjects of
engagement by Hilton. These processes
are under constant review and subject
toongoing improvement to ensure
robust,comprehensive monitoring
tobestmitigate their impact.
Our 2025 Sustainable Protein Plan was
builtto mitigate our material issues.
Sustainability report
Materiality matrix
ACCESSIBLE, HEALTHY
& NUTRITIOUS FOOD
HUMAN
RIGHTS
HE A LTH &
SAFETY
PRODUCT SAFETY,
QUALITY & INTEGRIT Y
SUSTAINABILITY AND BIODIVERSIT Y OF
AGRICULTURE, FISHERIES & AQUACULTURE
PACKAGING CIRCULARITY
& PLASTIC REDUCTION
ENERGY & WATER
EFFICIENCY IN FACTORIES
ANTIMICROBIAL
RESISTANCE
EFFLUENT & GENERAL
WASTE MANAGEMENT
FOOD WASTE ACROSS
VALUE CHAIN
TALENT DEVELOPMENT
& AVAILABILITY
WELLBEING, DIVERSITY
& INCLUSION
TRANSPARENT
SUPPLY CHAINS
GREENHOUSE
GASES
ANIMAL HEALTH
& WELFARE
SUPPORTING OUR
COMMUNITIES
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
At Hilton we have embedded
sustainability throughout our
governance structure and decision
making processes, so that we remain
accountable and ensure we apply
ourinfluence for benefit of both
people and planet.
The Board ensures the ongoing success
of the business, overseeing and engaging
with both the Sustainability Committee
and Executive Leadership Team on the
direction and values of the company,
including the integration of corporate
socialresponsibility objectives. The Board
is updated onsustainability objectives and
strategy progress every six months.
The Sustainability Committee, chaired
byNon-Executive Director Rebecca Shelley,
oversees the delivery of our long-term
corporate sustainability strategy and
performance. The Committee approves
formal reporting on corporate sustainability
and provides integral support to the Senior
Management Team, while evaluating
both opportunities and risks alongside
the Audit and Risk Committee in order
toensure aclimate resilient business.
The Executive Leadership Team are
updated monthly alongside the CEO
on customer and corporate social
responsibility targets and objectives.
The CSR team (led by the Chief Quality
and Sustainability Officer and the
CSRDirector) coordinate our supply
chain engagement and global reporting.
The team acts as stewards over the
sustainability strategy, assuming full
responsibility for achieving targets and
meeting reporting requirements.
MAIN BOARD
Set the ambition for long term CSR programme,
embedding this in the business culture
SUSTAINABILITY COMMITTEE and AUDIT AND RISK COMMITTEE
EXECUTIVE LEADERSHIP TEAM
Agree and oversee delivery of targets
SENIOR MANAGEMENT TEAM
Set global strategy and oversee Group
and local implementation plans
CHAIRMAN
NON-EXECUTIVE DIRECTOR
CHIEF TECHNOLOGY OFFICER
MANAGING DIRECTORS
HR LEADS
CEO
CEO
CHIEF QUALITY AND
SUSTAINABILITY OFFICER
REGIONAL CHIEF
OPERATING OFFICERS
GROUP HEAD OF ENERGY
MANAGEMENT & FACILITIES
PROCUREMENT LEADS
CHIEF FINANCIAL OFFICER
REPRESENTATIVES FROM
EXECUTIVE LEADERSHIP TEAM
CHIEF PEOPLE AND
CULTURE OFFICER
CSR DIRECTOR
GROUP CENTRAL
CSR TEAM
SITE CSR COORDINATORS
NON-EXECUTIVE DIRECTORS
CSR DIRECTOR
CHIEF MANUFACTURING AND
PROCUREMENT OFFICER
CHIEF COMMERCIAL OFFICER
GROUP HEAD OF PROCUREMENT
(NON-PROTEIN)
OPERATIONAL
LEADS
Integrate CSR strategy into their areas of responsibility
Responsible for CSR projects and reporting
Direct responsibility for CSR, including climate
Shared responsibility
Who is responsible for CSR at Hilton
Governance
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
How we work through
thevaluechain
Hilton Foods engages the
whole valuechain to incentivise
investmentin step change
improvements, whichare
economically sustainable
at scale.
We do not own farms, fishing vessels
orabattoirs, which gives us the freedom
to work with the leaders in innovation
andsustainability. The diagram shows
howwe guide and influence at each
stageof the chain.
Foods Connected ensures we partner
with suppliers that share our commitment
to quality, safety, animal welfare, human
rights andsustainability. The system
helpsus manage supplier performance
andrisk assessment to make sure we
deliver our customer priorities.
Ensuring the sustainability of
foodrequirestransparency across
the value chain toprevent negative
environmental and human rights
impacts.New technologies and tracing
methods will inform consumers about
theorigin andmethods ofproduction
andhow human rights are protected.
Sustainability report
Value chain influence
HOW WE WORK THROUGH THE VALUE CHAIN
Hilton and Foods Connected – supply chain transparency
BASE TRACEABILITY
The movement and transformation of a product across different parties in the supply chain
VALUE ADDED TRACEABILITY
Additional information that can be captured at different stages in the base traceability process
PESTICIDE
USAGE
ANIMAL
WELFARE
ETHICAL
SOURCING
ANTIBIOTIC
USAGE
CARBON
EMISSIONS
PACKAGING
RECYCLABILITY
FOOD SAFET Y
& QUALITY
SUSTAINABLE
SOURCING
AUDIT
GUIDE
INFLUENCE INFLUENCE
GUIDE
CONTROL
1
RAW
MATERIAL S
RAW
MATERIAL S
RAW
MATERIAL S
FINISHED
GOODS
FINISHED
GOODS
CONSUMERRETAIL
CUSTOMER
HILTON
FOOD GROUP
ABATTOIRFARM/VESSELFEED
2 3 4 5 6
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Working with Foods Connected
ontransparency
We continue to work with Foods
Connected to enhance transparency
through digitisation of data capture
withinour facilities and throughout our
supply chain. Some examples include
rejection recording to allow comparison
of supplier performance across our
sites, customer complaints recording to
report on trending issues, and group risk
assessments which are completed by each
site to inform audit scheduling based on
risk. Having an aligned approach allows
us to create powerful reports to manage
performance, identify opportunities for
continuous improvement and showcase
best practice.
Hilton Foods continue to
work with Foods Connected
on an Innovate UK funded
traceability project, to
demonstrate how state-of-
the-art technology can be
implemented in a commercial
environment to deliver a
transparent supply chain
where data is accurate and
accessible in real-time.
Hilton Foods Huntingdon have
conducted a current and future
state analysis and completed
a full digital gap analysis of
product movement throughout
the facility for a beef primal cut.
This has allowed us to identify
where Foods Connected
and other existing systems
can digitise data capture.
Mapping and understanding
our digital landscape is an
important first step towards
real time access and integration
with the centralised traceability
solution, Trace Connected.
Throughout this year
wehaverefined our value
propositions and used them
to inform thekey events
and associated data that are
required for afull and complete
trace. These include but are
not limited to, base traceability
(product movement), alongside
value-added traceability data,
such as,product quality and
inventory metrics, the scope
ofwhich can be broadened
based on reporting needs.
Foods Connected have
continued to design and build
Trace Connected in line with
our requirements, ensuring
the solution is fit for purpose
for the Food Industry, reducing
risk, cost, waste, and ensuring
product integrity throughout.
We are collaborating with one
of our suppliers to capture data
one step back in the supply
chain to achieve interoperable
traceability between multiple
stakeholders and systems.
Centralising traceability
information end to end is both
innovative, and a significant step
change for the food industry.
A DIGITALLY CONNECTED FOOD SUPPLY
CHAIN TO DELIVER TRANSPARENCY,
SUSTAINABILITY AND EFFICIENCY
Hilton Foods Huntingdon
have completed a full
analysis of product
movement throughout the
facility for a beef primal cut
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
At Hilton Foods we employ over
6,000 people, dedicated to serving
our customers and themillions
ofconsumers across 14countries.
Our people are at the heart of our
success and their health, safety and
wellbeing is our first priority. We are
aninclusive organisation built on respect,
with equal opportunities for skills and
career development. We work together
to keep our business resilient for the
future, bringing the diversity, creativity
andentrepreneurial skills of our people
tothe fore.
It is essential that every person in our
supply chains is treated fairly and rewarded
appropriately for their work, whether
on farm or fishing vessel, abattoir or
distribution centre. Protecting human
rightsis about building a fairer society
andfood system forall.
Alignment with the UN SDGs
5.5 Ensure women’s full and
effective participation and
equal opportunities for
leadership at all levels of
decision-making in political,
economic and public life
8.8 Protect labour rights and
promote safe and secure
working environments for
allworkers, including migrant
workers, in particular women
migrants, and those in
precarious employment
PEOPLE
Sustainability report
38
Valuing
our people
Being a fair, safe and
inclusive employer by
engaging and empowering
our people and supporting
our local communities
2025 Targets
– Reduce Lost Time Incidents (LTIs)
by10% against a 2020 baseline
across Hilton Foods.
– Establish a Global Wellbeing
Framework to support employee
wellbeing, inspiring our employees
tomake informed decisions
about their mental, physical
andfinancial health.
– 30% of our leadership roles filled
by women.
– A commitment to equal opportunity
and development forall within
Hilton Foods.
– Promote growth of our Women’s
Network, aimed at providing
support, development and action
to those who identify as women
within Hilton Foods.
– Employee consultative forums
orworks councils operational
atallHilton Foods sites.
Respecting
human rights
Safeguarding the welfare
and just treatment of all
workers andcommunities
engaged with our business
and supply chains
2025 Targets
– Have a functioning governance
structure in place which addresses
human rights risks and opportunities.
– Train all Hilton Foods employees
onhuman rights.
– Modern slavery awareness training
extended to managerial colleagues.
– Development and roll-out of core
HFG Agency Labour Standards.
– 100% of labour and service
providers audited to HFG Agency
Labour Standard.
– 100% of primary suppliers agreed
to HFG Supplier Social Code
of Conduct.
– 100% of new primary suppliers
screened using social criteria.
– 100% of high risk primary
suppliers audited.
Developing
potential
Growing and developing
our people to be thebest
they can be, ensuring
our business is ready
forthe future
2025 Targets
– All production colleagues will
be offered the opportunity to
participate in ‘work conversations’
with their manager to discuss
performance, development career
aspirations, wellbeing and sharing
ideas and feedback.
– Provide development opportunities
for all management talent that
has been identified as ready for
succession through the annual
review of leadership capability and
succession. By end of 2025, there
will be have been 150 through
the programmes.
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
2025 Strategic Goals
Continue to put the health, safety,
andwellbeing of our employees
attheheart of what we do
Driving a more inclusive
anddiverseworkforce, where
allhaveanopportunity to thrive
Engaging and empowering
our people
Our people are at the core of how
we do business and they bring our
culture to life within our factories,
offices and communities.
Health, safety and wellbeing is the
cornerstone of our strategy, facilitated
through good leadership, safe behaviour
and the continuous improvement of our
Global Safety Framework. 92% of our
employees reported that they understand
how to apply our health and safety
rules intheir day-to-day work. This is
evidence of our strong health and safety
management system.
We’re working towards an ambitious
future, one we want to build together
withall our employees. Creating spaces
where our employees can speak freely
about contributing to that future and
howto participate in it is vital.
– We have stepped up our focus on
mental health and wellbeing. A number
of our factories now have ‘mental
health first aiders.’ The pandemic has
had aprofound impact on all our lives,
it’simportant to us as a business that
we look after our employees holistically.
– Many of our sites supported our
employees to have their Covid-19
and flu vaccinations whilst at work.
It’s important to us that we make it
aseasy as possible for our employees
tostay safe.
– Supporting our communities is
avaluable part of who we are. Many
ofour sites have worked to fundraise
for causes important to them: from
MakeaWish Foundation to Parkinson’s
and East Anglia Children’s Hospices.
– We achieved an increase in the response
rate to our annual engagement survey,
rising to 77% of our global business.
The first step to inclusion is to listen
to our people to understand how we
can improve.
We are driving an even more inclusive
and diverse business through our people
strategy. We believe that no one should
miss out on opportunities because of
their age, gender, race, social background,
sexual orientation, belief, political opinion,
trade union membership, disability, family
responsibility (i.e. pregnancy), mental
health, sensitive medical condition or
anyother characteristic that forms part
ofwhothey are.
In 2021, we asked our employees whether
‘I feel I can be myself at work’ resonated
with them. 74% of our employees
responded that they were able to be
themselves at Hilton. This is the first
time we have included a diversity and
inclusion metric in our annual engagement
survey, and wewill use this as a way of
understanding the impacts of our Inclusion
and Diversity activities going forward.
Highlights:
– In 2021, we successfully ran a Health
and Safety Awareness week across
all our European sites. Our employees
found creative ways to bring our
healthand safety culture to life,
fromvideos, to quizzes and posters.
It’simportant tous that everyone has
anopportunity to engage positively.
Valuing
our people
Being a fair, safe and
inclusiveemployer by
engaging and empowering
ourpeople while supporting
our localcommunities
PEOPLE
Sustainability report
40
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
At Hilton Foods we are passionate
about supporting women and those
who identify as women in their careers.
Improving ourgender balance is critical
tous, that is why we are setting a target
onwomen inleadership for the first time.
We want to take action on progressing
the careers of women within Hilton, that
is why 30% of our leadership roles will
befilled by women by 2025. In this context,
a‘leadership role’ will mean any job roles
atfunctional lead or senior specialist level.
We will continue to be a sponsor of Meat
Business Women, finding innovative ways
to achieve better female representation
within senior management.
Looking forward
In 2022, we will establish a Global
Wellbeing Framework to further support
employee wellbeing, inspiring our
employees to make informed decisions
about their mental, physical and financial
health. This will allow our sites to address
the wellbeing needs that matter to their
employees: from morning workouts in
Denmark to our Your Voice and Wellbeing
Committee in Ireland.
We’ve made a commitment to equal
opportunity and development for all
withinHilton Foods. In APAC we have
established a Learning Management
system to support our employees’
development and we will build further
onthis in 2022 and beyond.
WOMEN’S NETWORK
2021 LAUNCH
Last year we launched
ourWomen’s Network,
aimed at providing support,
development and action to
those who identify as women
at Hilton Foods. Over 100
colleagues from across our
global business have already
joined the network.
Achieving gender equality and
promoting the value of careers in
food production for women goes
beyond targets to addressing
systemic issues. We have thought
critically about how toengage
those in our workforce that
identify as women and have
created space for networking
andskills development.
We plan to run four global virtual
development events per year
open to all, focusing on topics
raised by individuals participating
in our forum. The development
of this forum has been informed
by colleagues across our Group,
it is important to us that we are
led by what is important to our
employees and how we work
isshaped by them.
30%
By 2025, 30% of our leadership
roles will be filled by women
Diverse and inclusive
teams are key to delivering
our ambitious growth
plans. It is essential
that we do all that we
can to demonstrate the
opportunities for diverse
talent that exists within
our business.”
JACKIE LANHAM
CHIEF PEOPLE AND CULTURE OFFICER
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
The global food system is a complex
web of activities, ranging from
agricultural cultivation, production
and processing to transport and
consumption, upon which many
livelihoods depend.
We have a responsibility to protect the
internationally recognised human rights
of workers both within our business and
our global supply chains. This includes
their labour rights; for example access
toeffective grievance procedures,
workerrepresentation, and a safe
workingenvironment. Building strong
ethical standards to embed respect for
human rights across our value chain is an
essential step toward a fairer food system.
As we better understand the profound
impact of Covid-19 and the tremendous
shift in our society that will be required
toreach Net Zero, it is essential that
wework to make this a ‘just transition’.
At Hilton Foods we see business
donewell as a vital element of ensuring
ajust transition: creating good jobs and
opportunities for people and communities
across our value chain. We have both
anopportunity and a responsibility
toprovide a better future for all.
In 2021, we made a renewed commitment
to the implementation of the United
Nations Guiding Principles on Business
and Human Rights (UNGPs) through the
publication of our Human Rights Policy
and Supply Chain Social Responsibility
Policy. This sets our commitments to
all workers engaged across our own
operations and value chain. This includes
all agency, temporary or migrant workers.
The purpose of these policies is to embed
respect for labour rights and improve
working conditions throughout our
business and supply chain.
Highlights:
– Alongside our new policies, our human
rights strategy has been refreshed and
endorsed by senior management within
Hilton Foods. We plan to accelerate
the work we’re doing on human rights
to 2025, by extending its scope and
enhancing our commitments.
– We have created a new Supplier
Ethical Approval & Risk Assessment
process which is housed on our supplier
management system, Foods Connected.
We piloted this system in 2021, and
will launch across our business in 2022.
In addition, we have developed a new
Supplier Social Code of Conduct, which
sets out the behaviours and standards
we expect from our suppliers. This Code
of Conduct will launch in 2022.
– In 2021, we extended our in-house
modern slavery and human rights
standards training to our Group auditors.
We see the value in empowering
those working with our suppliers most
frequently with the tools to speak up
when they see something amiss.
– We have continued to support
the outcomes of the independent
Human Rights Impact Assessment,
in collaboration with Tesco and local
supply chain partners in our Vietnamese
prawn supply chain. We are committed
to understanding theimpacts of
our business activities onrights-
holders, and working to address
andenhance livelihoods.
2025 Strategic Goals
Assess and address human rights
impacts across our business activities
Extend our modern slavery strategy
and awareness training to colleagues
to all Hilton Foods sites
Improving access to grievance
procedures across Hilton Foods
Establishing future-ready
standardsfor agency and service
staffon our sites
Hold robust due diligence on
ourprimary (protein, ingredients
andindirect) suppliers
Respecting
human rights
Safeguarding the welfare
andjust treatment of all
people and communities
engaged with our business
and supplychains
PEOPLE
Sustainability report
42
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Advocacy for a better future
The European Commission’s legislative
proposal on Sustainable Corporate
Governance will be published in
early 2022, which is anticipated to
deliver mandatory human rights and
environmental due diligence expectations
for businesses operating in the EU. It is
vitally important that similar legislation
is implemented in the UK; this is not
only to ensure a ‘level playing field’,
buta reflection of high human rights
and environmental standards within the
UK, and appropriate access to justice
for victims.
To this end, we signed a letter advocating
for the introduction of this legislation in the
UK, alongside a number of our investors
and customers.
COLLABORATION
AND GOVERNANCE
At Hilton Foods we recognise the importance of
collective action to deliver a future ready food system.
We work with a number of third parties, including
NGOs to deliver thischange; working to address
both our own impact and wider industry issues
that impact our suppliers. This collaborative work
enables us to safeguard labour rights and improve
working conditions.
We are a founding member of the Seafood Ethics Action
Alliance (SEAA), a pre-competitive collaboration platform
that works to ensure human rights in wild-capture fish
supply chains are respected. We sit on the steering group
of the SEAA, and have participated in the development
of a risk assessment tool in 2021, with the purpose of
enabling businesses to identify potential human rights
risks in their supply chains (based on an agreed set of
indices and criteria).
The Food Network for Ethical Trade (FNET), in
which weactively participate, provides valuable due
diligence and horizon-scanning for our risk assessment
processes. In 2021, we participated in their Recruitment
Fees WorkingGroup, we are using these learnings to
enhanceour own internal procedures.
In 2021, we have held governance roles within Global
Seafood Assurances, working to improve working
conditions on vessels through the creation of robust
health and safety and employment standards through
theResponsible Fishing Vessel Scheme.
Hilton Foods supports the work of Stronger Together,
aleading initiative working to provide practical solutions
to business in the eradication of modern slavery and
hidden exploitation. We use their training across our
UKbusinesses, and spoke at an Australian webinar
supporting their work in APAC.
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We’re committed to building
a sustainable future together,
ensuring all our employees have
theopportunity to thrive.
The culture of our business is derived
fromour people, that’s why we
arecommitted to developing them.
The innovation, resourcefulness and
dedication of our employees is what
makes Hilton a great place to work.
Ensuring our business is fit for
thefuture means we have to create
avisibleframework for our employees
toaccess and understand their career
andtraining opportunities.
This is about creating value for every
employee who works with us.
As part of our capability and succession
review in 2021, we worked to identify
andgrow talent to fill future leadership
and business-critical positions. Our vision
for a business ready for the future means
working with our employees to identify
their strengths, and making our business
resilient with a strong talent pipeline.
Nurturing internal talent is important
tous, that’s why we run our Accelerated
Development Programmes. We want to
ensure everyone knows they have aplace
at Hilton, and support is at hand for them
to become the best they can be.
In 2021, we were proud to launch our
Emerging Leaders Programme, developing
participants to lead and toimplement
change. We want to grow our future
leaders to be self-aware and empathetic
leaders, who are able to work across
cultures and deliver our growth strategy.
Highlights
– In 2021, our employees accessed
atotal of 8444 training hours.
– We are passionate about the unique
perspectives and skills ouremployees
bring to the table. That’s why in
2021 we created reversementoring
relationships between our executive
leadership team and our shop
floor employees. We hope this
will encourage even better cross-
pollination of ideas within our
business, and ensure all levels of
leadership understand what matters
to employees.
– We’ve extended the number
ofemployees receiving individual
performance appraisals. We focus
on holistic conversations from
objectives to work responsibilities
and from development plans to career
aspirations. we believe we engage
best with our employees by working
transparently with them.
– We know the value of training for
our employees and our customers.
Along with upskilling, training offers
important opportunities to enhance
employee satisfaction, improve
our internal processes and retain
valuable employees.
Our factories have conducted
training covering:
– Lean Manufacturing
– Food Safety and Allergens
– Chemical Handling
– First Aid
– Electrical Safety
– Manufacturer Training for Equipment
– Manual Handling Training
– Personal Development Review Training
– Apprenticeships Across Functions
– Modern Slavery and Human Rights
2025 Strategic Goals
Enhance learning and development
opportunities for our employees
Developing
potential
Growing and developing
ourpeople to be thebest
theycan be, ensuring
our business is ready for
the future
PEOPLE
Sustainability report
44
Looking forward
At Hilton Foods, we want everyone
to have an opportunity to have their
achievements recognised and the
chance to discuss their ambitions
andjob progression.
This is why we’re launching ‘workplace
conversations’ across our business.
This new initiative will give every Hilton
Foods employee the chance to discuss
their experience at work, development
and future ambitions at least twice a year.
This forms part of our 2025 Sustainable
Protein Plan.
Having quality conversations is a vital
element of maintaining and improving
employee engagement and to achieve
thisfor our hourly paid colleagues,
theapproach is intentionally informal
and positively focused, coming from
abelief in respect and inclusion. It gives
the opportunity for a straightforward
conversation carried out with a genuine
interest and intent and focused on what
matters toour colleagues.
An update on our Accelerated
Development Programmes
Last year we announced the extension of
our Accelerated Development Programme
to Emerging Leaders. Despite the
challenges of Covid we successfully
took 18 participants from seven of our
businesses on a five-month leadership
development journey. They worked on live
Corporate Social Responsibility projects of
critical significance to Hilton Foods. We are
passionate about our developing leaders
building powerful futures with us.
CAREERS AT HILTON FOOD GROUP
The Emerging Leaders programme gave me the
headspace to really think about what I wanted
from my career within HFG, the perspectives
of different colleagues across Europe, and the
opportunity to understand new areas of our
business was invaluable.
The cross-functional working enabled by the
Emerging Leaders programme through project
teams was brilliant, giving me an opportunity
to take myself out of my comfort zone, build
my network within the business, and work with
colleagues I wouldn’t normally work with on an
unfamiliar topic. This brought lots of interesting
shared learnings and broaden my knowledge
within a new field.
CAREERS AT HILTON FOOD GROUP
The Emerging Leaders programme was
agreatopportunity to get myself out of my
comfort zone. This allowed me to enhance
myskills and improve how I addressed and
coped with more complex situations.
1 8
participants in our leadership
development programme
Hilton Food Group is being
increasingly diversified, competitive,
agile and technologically advanced
and, more than ever, I feel ready
forthechallenge!”
GROUP PROCESS IMPROVEMENT LEADER
The course helped me to see the
different opportunities available
acrossthe Group. It feels like
acreative way of approaching
personaldevelopment.”
COMMERCIAL MANAGER
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
We believe we have a responsibility
as a business to play our part in
ensuring we move towards a food
system that is operating within
planetary boundaries. For this reason
we have committed to being a net zero
business by 2050. We recognise that
this is a major undertaking for our
supply chain and have committed to
Science Based Targets to demonstrate
our progress on this journey.
To reach our ambitious targets we
haveput in place robust decarbonisation
plans for our own operations. Hilton
Foods is rolling out tailored reduction
andimprovement plans on all sites, using
low carbon technology for heat recovery
and efficiency.
We have also built decarbonisation
plans for our supply chains working
incollaboration with our suppliers, retail
partners and key industry stakeholders.
PLANET
Sustainability report
Alignment with the UN SDGs
2.4 By 2030, ensure sustainable
food production systems
and implement resilient
agricultural practices that
increase productivity
and production, that help
maintain ecosystems
14.4 By 2020, effectively
regulate harvesting and
end overfishing, illegal,
unreported and unregulated
fishing and destructive
fishing practices and
implement science-based
management plans
15.2 By 2020, promote the
implementation of sustainable
management of all types
offorests, haltdeforestation,
restore degraded forests
and substantially increase
afforestation and reforestation
globally
4646
Reducing
emissions
Going further than
addressing our footprint
by achieving NetNegative
emissions across our sites
and value chains
2025 Targets
– 100% renewable electricity across
allour own operations in Europe
byend of 2025 and globally
by 2027.
– Achieve our Science Based Targets
across scope 1, 2 and 3 and publish
updated ambitions.
– An intensity reduction of 15%
in emissions of cattle in Europe
by 2025, aligned to the ERBS
Sustainability objectives.
Enhancing
animal wellbeing
Driving standards and
innovation in the care
ofanimals that enhances
their lives and reduces
antibiotic use
2025 Targets
– To achieve more than 90% of
livestock from farms in assurance
schemes and engage intheir
development.
– 100% humane slaughter of
animals across all our products
including aquaculture.
– Ensure responsible antibiotic
usethroughout our supply chain.
Nature
positive
Collaborating to improve
our stewardship of land and
sea, promoting biodiversity,
addressing deforestation, and
protecting water and soils
2025 Targets
– Enable farmers to reduce their
emissions and improve biodiversity,
to promote more regenerative
farming, by providing planning
andreporting tools.
– 100% of seafood responsibly
sourced to HFG standards (aligned
to the Sustainable Seafood Coalition
code and PAS 1550), actively
engaging in fishery improvement
projects and aquaculture standards
development, and openly reporting
our supply chains and their status
inthe Ocean Disclosure Program.
– Hilton Seafood UK directly sourced
wild caught seafood 100% certified
to the MSC standard or equivalent
by 2025.
– We have signed up to the UK
Courtauld Commitment 2030
Water Ambition to improve the
quality and availability of water
atcatchment scale.
– Eliminate deforestation from the
conversion of natural forests to
agriculture or livestock production
inour supply chains.
– Promoting novel proteins and
oils in aquaculture feed to enable
sustainable growth.
– Maintain 100% of paper and board
from certified sources.
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47
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
With 30% of global emissions
comingfrom the food system
andtheimpacts of climate change
becoming more acute, we are
workingto make this complex
topic actionable across our supply
chain onour journey to net
negative emissions.
The first stage of this journey is
buildingthe measurement infrastructure
tounderstand our emissions in more
detail and monitor improvements.
We arebuilding an internal lifecycle
assessment team and are working
withFoods Connected to build tools
thatestablish an ongoing reporting
dialogue with our supply chain partners.
By building a toolset which gives a
transparent view of our full value chain,
we can target our resources where they
will have the greatest impact and provide
consumers with the clear evidence they
need to make informed choices.
We are actively working with industry
associations, suppliers and government
to accelerate emission reductions.
We recognise that the land sector has
aunique opportunity in mitigating climate
change. As custodians of the land, our
supply chain has the capacity to sequester
carbon, offsetting residual emissions from
other sectors and providing long-term
revenue streams.
Highlights
– The Science Based Target initiative
approved our targets to reduce absolute
scope 1 and 2 GHG emissions 25% by
2030 from a 2020 base year and reduce
our absolute scope 3 GHG emissions
from purchased agricultural products
12.3% within the same timeframe.
– We signed up to the UN Race to Zero,
announcing our commitment to achieve
net zero emissions globally before 2050.
– We have brought in a dedicated LCA
specialist to improve our carbon
accounting infrastructure and develop
our decarbonisation strategy. This has
begun with work to re-baseline our
scope 3 emissions in anticipation of
setting more ambitious targets in 2022.
– We have solidified our commitment
to lower carbon proteins by taking full
ownership of vegetarian and vegan
protein producer, Dalco Foods.
– We are building tools to allow us
to integrate consideration of carbon
emissions into new product
development.
– We have reduced business travel
emissions by 84% compared to 2019
by making teleconferencing the primary
business technology.
– We have partnered with WRAP in the
development of their Scope 3 Guidance
for the Food Sector and with the
UNGC in the development of guidance
for seafood.
– We have worked through UK CSP to
deliver common industry KPIs to enable
farmers to implement reductions at
farm level.
Reduce
emissions
Going further than
addressing our footprint
by achieving netnegative
emissions across our sites
andvalue chains
2025 Strategic Goals
Achieve net negative emissions
acrossour value chain to limit the
impacts of climate change
Sustainability report
PLANET
48
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
TARGETING OUR
DECARBONISATION
ACTIVITIES
As part of our commitment to embedding
lifecycle assessment within our business
andthe growing importance of environmental
topics more broadly, we have expanded
ourteam to include an experienced LCA
practitioner.
They have conducted a detailed assessment
of our full business carbon footprint across
our agricultural and industrial supply chains,
improving upon our previous indicative
methodology based on financial spend data
tousephysical entities.
This updated methodology estimates our total
global carbon footprint at 15.5 million tonnes
CO
2
e with 80% of that coming from thebeef
we pack.
This work is allowing us to better target our
decarbonisation activities where they have the
greatest impact, accurately assess reductions
andset more ambitious targets with confidence.
For example, whilst it is small overall, we
found that 90% of emissions from upstream
and downstream transport occurin Australia,
soimproving logistics in thatregion will be
apriority for 2022.
ENVIRONMENTAL IMPACT
IN VIETNAM
Environmental assessment of
aquatic supply chains is often made
challenging by a lack of transparent
geographic or system specific data.
This can make it difficult to target
resources to the elements of the
supply chain where theycan have
thegreatest impact.
This is the case with many agricultural
systems, due to the challenges
associated with monitoring biogenic
systems which are not present in most
industrial systems.
Working with Tesco, IDH and Blonk,
wehave begun a project to build
abetter picture of the environmental
impact of ourVietnamese aquaculture
supply chain.
This project is focused on climate
change, eutrophication and water
consumption down to the level of
thefarm in Basa (Pangasius) and both
intensive and extensive prawn systems,
including the feed and hatcheries.
The learnings will be presented at the
Seafood Expo Global in Barcelona in
April 2022, enhancing capability across
the industry.
2020
14.4 14.6 14.8 15.0 15.2 15.4 15.6 15.8
Scope 3 Emissions (tCO
2
e)
2021
Proteins* Waste
Ingredients* Business travel
Packaging* Employee commuting
Capital goods Downstream transportation
& distribution
Fuel & energy related activities Use of sold products
Upstream transportation
&distribution
End-of-life treatment
of sold products
* Purchased goods and services.
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
At Hilton Foods, animal welfare is
important to us, our retail partners
and their consumers. The science
andunderstanding of animal welfare
is continually improving, and we
work to adopt new innovations
to improve the lives of animals.
Society is demanding more
transparency and stakeholders such
as NGOs, investors and consumers
increasingly have a heightened
interest in the provision of animal
welfare. We actively promote and
engage in standards development
to deliver transparency and address
welfare improvements inour
supply chains.
We have increased the transparency
ofthe animal welfare standards within
our supply chains. This year we revised
our animal welfare policy and issued our
animalwelfare statement which can be
found on our website and will be updated
annually. Our animal welfare statement
details our approach and implementation
ofanimal welfare; it includes our eight
animal health and welfare objectives and
our progress against them. We are also
increasing our contribution toindustry
working groups to improve thelives
of animals in our supply chain andthe
markets we operate in.
Alongside our focus on the sustainability
of our products, we will ensure there is no
compromise in animal welfare. We will do
this by driving standards and innovation
in the care of animals that enhances
theirlives and reduces antibiotic use.
As part of our annual audit of suppliers
all our supplying abattoirs are audited for
animal welfare. We have developed a
further standard that gives our customers
the option of a more in depth animal
welfare standard at audit.
Highlights
– Hilton Seafood received the award for
Innovation in Animal Welfare in 2021
by Compassion in World Farming
for progressing humane stunning
inwarm water prawns by adopting
the worlds first commerical use of
anelectrical stunner.
– We achieved tier 3 in the Business
Benchmark in Farm Animal Welfare,
demonstrating that we have an
established approach to farm animal
welfare.
– We are involved in a number of
industry working groups to influence
the progression of animal welfare
including the European Roundtable
on Sustainable Beef and Global GAP
standards committee.
– We were on the development group for
the animal welfare goals for the Global
Roundtable on Sustainable Beef.
– We supported the Hilton Foods auditors
through providing internal and external
training in animal welfare assessments,
both to upskill their general knowledge
and audit specific training on this topic.
– Our Aquaculture & Fisheries Manager
is Co-Chair of Global GAP Aquaculture
Committee, which we have been part
ofsince its inception.
Enhancing
animal
wellbeing
Driving standards and
innovation in the care
ofanimals that enhances
theirlives and reduces
antibiotic use
Sustainability report
PLANET
2025 Strategic Goals
Further animal welfare throughout
oursupply chains by raising
the baseline and increasing the
percentage of animals that are
rearedto a higher welfare standard
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Hilton Foods seek to ensure
that all animals and farmed fish
are effectively stunned prior to
slaughter. All animals in all markets
are routinely stunned prior to
slaughter across the group.
Hilton Seafoods has made significant
progress working with our suppliers
to drive improved standards
ofhumane slaughter.
A good example of this was a project
that has helped to step change the
humane slaughter of warm water
prawns using a technology we previously
introduced for stunning seabass and
seabream in Turkey. This was a two-
year project which resulted in the first
commercial trial and the adoption of an
electric stunner in warm water prawns
(P. Vannamei). The electric stunner for
finfish had to be modified to fit prawn
production, and the stunner had to be
fitted on a moving platform to allow the
transfer of the stunner to the many ponds
ina farm.
The evaluation concluded that the
use of the stunner presented several
benefits including:
– Faster method to render prawns
unconscious and insensible to pain
thanthe widely used ice slurry
– Reduced handling
– Better consistency of stun delivery
– Greater efficiency and reduction
inlabour during the harvest process
– Not detrimental to product quality
This work has been recognised by
Compassion in World Farming when
HiltonSeafood was awarded its award
forInnovation in Animal Welfare in 2021.
Our Fisheries, Aquaculture and Supply
Chain Manager presented this project
atthe Animal Welfare Research Network
to share the learnings with the scientific
community who may be able to adapt
the technology to meet the needs of
other species.
AWARD-WINNING
ELECTRIC STUNNER
INNOVATION
The sentience of
crustaceans is often
overlooked and in the
absence of any legislation
or standards, this electric
stunner for shrimp,
pioneered by Hilton
Seafood, has the potential
to benefit billions
ofanimals if adopted
more widely across
theindustry.”
TRACEY JONES
DIRECTOR OF FOOD BUSINESS,
COMPASSION IN WORLD FARMING
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INFORMATION
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
We understand that we have to
enhance the resilience of our planet
to not just halt nature loss but reverse
it. We need to take action now to
reduce and remove the drivers that
lead to the degradation of nature
across our global supply chains.
We will do this by: collaborating
toimprove our stewardship of land
and sea; promoting biodiversity;
addressing deforestation; and
protecting water and soils.
We will enhance biodiversity on land by:
– Eliminating deforestation in our
supply chains.
– Maintaining 100% of paper and board
sourcing from certified sources.
– Enabling farmers to reduce their
emissions and improve biodiversity by
providing planning and reporting tools.
We will enhance aquatic biodiversity by:
– Ensuring 100% of seafood is
responsibly sourced to Hilton Foods
standards which are aligned to the
Sustainable Seafood Coalition code
and PAS 1550.
– Hilton Seafoods UK directly sourced
wild caught seafood 100% certified
to the MSC standard or equivalent
by 2025.
– We will continue to engage in fishery
improvement and aquaculture
standards.
– We will continue to report our progress
in the Ocean Disclosure Program.
– Promoting novel proteins and
oils in aquaculture feed to enable
sustainable growth.
– We have committed in the UK to
theCourtauld 2030 Water Ambition
toimprove water catchments.
Highlights
– We are signatories of the UK
Soy Manifesto.
– We are founder members of the Soy
Transparency Coalition and sponsored
the first trader benchmarking report
in 2021.
– Building on the success of the 2020
deforestation cut-off date set by the
soyprotein concentrate traders in
Brazilfor use in salmon.
– Focusing on beef, wehave aligned
aUKcattle industry soyplan in UK
CattleSustainability Platform.
– We have achieved that 98% of our
UK direct supply of wild caught fish
iscertified tothe MSC Standard.
– We fund and actively participate
inProject UK Fishery Improvement
Projects (FIPs) to bring the remainder
into certification.
Nature
positive
Collaborating to improve
our stewardship of land and
sea; promoting biodiversity;
addressing deforestation; and
protecting water and soils
Sustainability report
PLANET
2025 Strategic Goals
Enhance biodiversity
on land
Enhance aquatic biodiversity
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Through this we are committed to:
– Collectively verifying that the
supplying farms used by the
traders are free from deforestation
and conversion with a cut-off date
of January 2020
– Ask direct suppliers to adopt and
cascade the same commitment
– Build this requirement into
contractual requirements through
the supply chains
– Publicly disclose progress
– Support harmonised monitoring,
verification and reporting
COLLABORATING
FOR CHANGE
We are signatories of the
UK Soy Manifesto which is a
collective industry commitment
to ensure that all of the soy
imported to the UK or used in
feed for animals is from farms
that are deforestation and
conversion free by 2025.
INFLUENCING AND
RESPONDING TO LEGISLATION
ON DEFORESTATION
We supported the successful
advocacy for UK and European
regulations to require traders of
forest risk commodities to apply
deforestation due diligence.
We are now actively working to
supportDefra with the design of
thenew UKregulation and to support
BordBia to align the soy supply into
Ireland with both the forthcoming UK
and European requirements.
Trees and forests are true allies in the fight
against the climate and biodiversity crises.
Treespurify our air, cool our cities, and
takeup CO
2
. We need to be their allies too.
Our deforestation regulation answers citizens’
calls to minimize theEuropean contribution
to deforestation and topromote sustainable
consumption.”
FRANS TIMMERMANS
EXECUTIVE VICE-PRESIDENT
FOR THE EUROPEAN GREEN DEAL
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INFORMATION
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Each year we provide an estimated
150million people access to high
quality nutrition and we are committed
to continuing to help each of them
make better choices; better for their
health, better for people and better
forthe environment.
Last year we processed 492,588 tonnes
ofprotein, using 29,036 tonnes of packaging,
957,084,000 litres of water and 196,086,756
kWh of energy. The2025 Sustainable
Protein Plan will guaranteewe can continue
to provideaccess to nutritious, high quality
products while ensuring we are good
stewards ofthe Earth’s resources.
PRODUCT
Sustainability report
Alignment with the UN SDGs
7. 2 By 2030, increase
substantially the share
ofrenewable energy in
theglobal energy mix
12.3 By 2030, halve per capita
global food waste at the retail
and consumer levels and
reduce food losses along
production and supply chains,
including post-harvest losses
12.5 By 2030, substantially reduce
waste generation through
prevention, reduction,
recycling and reuse
54
Balanced
healthy diets
Efficient regenerative
foodsystems producing
more accessible and
nutritious proteins
2025 Targets
– Doubling in sales of plant
based, vegetarian and flexitarian
(vegetables added to products
that were previously 100% meat
or fish) products compared to
a2020 baseline
– Assess health and sustainability
attributes of all of our proteins to
provide consumers with the facts
on their role in a diet that ishealthy
for us and the planet
Circular
packaging
Developing a circular
economy for packaging
and actively bringing waste
materials back into use
across our full value chain
2025 Targets
– Reduce direct packaging waste
by30% compared to a 2020
baseline
– Drive demand for circular tray-to-
trayrecycling and actively prioritise
the use of circular material
– All our retail packaging will be fully
reusable, recyclable or compostable
– Achieve a minimum of 50%
average recycled content across
allplastic packaging
– Reduce the weight of our plastic
packaging while ensuring itremains
fit for purpose
Resource
efficiency
Optimising food waste
and use of packaging,
energy and water across
sites, supply chains, and
inconsumers’ homes
2025 Targets
– Improve energy efficiency
in our facilities by at least 10%
compared toa 2018 baseline
– Improve water efficiency
in our facilities by at least 10%
compared toa 2018 baseline
– Halve our factory generated
foodwaste by 2030compared
to2019 in line with the Champions
12.3 commitment todeliver UN
SDG 12.3
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
At Hilton we believe we have
aresponsibility to make it easier
for consumers to identify the most
healthy and sustainable option to
enable them to make better choices.
We want to help consumers make
ethical and sustainable choices
forboth their health and the
healthofthe planet.
Through our principle approach of
consumer-led and customer-focussed,
insight has shown that health and
sustainability aspirations are becoming of
increasing importance to consumers.
We are usinginnovation to provide
consumers with healthy food choices
in line with dietary recommendations.
We promote healthy choices and provide
ranges of affordable products with lower
fat and salt content to help people to
reduce these in their diets.
We continued to build our science-based
knowledge on the positive role of each of
the proteins we produce in a balanced diet,
to inform our product development.
Highlights
– We invited Professor Alice Stanton to
meet with senior colleagues across our
businesses to both upskill and enable
us to have practical conversations on
how we can ensure consumers have
access to the correct information and
enable them to make better choices.
Professor Stanton also gave us the tools
to be able to better interpret the science
enabling us to have more educated
conversations with our retail partners.
– Our blended meat and vegetable range
in the UKhas been redeveloped to
achieve a new improved heath score.
This makes it easier for consumers to
increase the amount of vegetables that
they eat allowing them tomake healthier
meal choices. This has been achieved by
using cuts of beef with more lean muscle
and less fat.
– Reducing sugar and salt has been
afocus area for our developers over the
last 12 months. Proactively improving
the nutritional value of our products.
Practical examples of this have been;
reducing the salt content ofthe Tesco
Piri Piri Chicken Wings and within
our Heat and Enjoy Garlic Prawns
byintroducing anew batter system.
Balanced
healthy diets
Efficient regenerative
food systems producing
more accessible and
nutritious proteins
2025 Strategic Goals
Enable consumers to make choices
that are healthier for themselves
andthe planet
Increase the health scores of our
current products and prioritise
healthin new product development
Sustainability report
PRODUCT
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
ENABLING CONSUMERS
TO MAKE BETTER CHOICES
Working with Tesco we undertook
a review of their meat and vegetable
inclusion range, which was first
launched in 2019.
Our consumer insight research told
us that consumers found the meat
and vegetable inclusion range helped
them to make healthier choices, but
that it was sometimes difficult to find
in store and therefore could be more
clearly communicated.
Taking learnings from the success of Plant
Based in Tesco, the range was relaunched
as a destination in store with both brands
and own-label products to help build trust
and appeal with customers.
Retaining familiar product formats has
enabled consumers to make simple swaps
within meals they already cook regularly
at home.
The range has had strong appeal with
families, and we have increasingly seen
customers making repeat purchases
oftheproducts.
DEVELOPING AND
UTILISING BETTER TOOLS
In partnership with Foods Connected
we have built a tool for NPD
workflow. This is a critical manager
workflow and this supports us in
collaboration with our colleagues
across all the functions.
Getting a product from a concept
tolaunch involves teams across
everyfunction in our business.
Workflow gives everybody clear
visibility of what they have to do and
when they have to do it. Which gives
clarity to our colleagues.
We’re working to enable
consumers to increase
theamount of vegetables
intheir diet
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Packaging is essential to ensuring
our consumer receives safe, high
quality products and preventing
food waste throughout the
valuechain. We are committed
to building acircular economy,
working with our partners to
reduce the impact packaging
has on the environment. We are
working to support the development
oflowerimpact polymer grades,
introducing new fibre packaging
options, and accelerating the
development of global recycling
infrastructure through our use
ofrecycled content.
As part of our journey to circularity, we are
ensuring we embed the waste hierarchy
in every product decision we make.
Reducing the amount of packaging we
use is our first priority, before exploring
reusable solutions and then striving for
the highest quality recycling route. This is
implemented through a set of sustainable
design principles, using systems-
thinking to ensure we are providing
the best packaging solution whilst
considering any second life the product
might have. These strategies ensure
weare able to reduce the environmental
impact of our packaging throughout the
fullproduct lifecycle.
Highlights
– 76% of our meat trays are made from
100% recycled PET.
– We have reduced the weight of our
mince packaging by 74% and the plastic
content by 73% at Hilton Foods Holland
by implementing flow wrap technology.
– We are maintaining leadership in natural
fibre packaging by ensuring 100% of the
paper and board we use comes from
certified forests.
– We are a signatory to the UK Plastic
Pactand the European Plastics Pact
anda member of the Australian
Packaging Covenant Organisation.
– We have continued our work to
ensureall our packaging is reusable,
recyclable or compostable.
– We have continued to transition
ourmodified atmosphere packaging
(MAP) from mixed PE/PET to mono-
material PET.
– Our packaging contains an average
of57% recycled plastic.
– We continue to use our Carbon Trust
packaging footprint and circularity
assessment tools to make the
right choices.
– We have removed 10 million pads
fromsalmon fillets, and are now
testingpadless meat trays.
– We have reduced the thickness
ofourvacuum sealed trays by 25%,
delivering an estimated annual
reductionof 400tonnes of plastic.
Circular
packaging
Developing a circular
economy for packaging
and actively bringing waste
materials back into use
acrossour full value chain
Waste hierarchy
Sustainability report
PRODUCT
2025 Strategic Goals
Eliminate as much of the plastic
waste within our own operations
aspossible
Achieve our commitments in the
Plastics Pacts globally to drive the
circular recycling of our packaging
and reduce our use of virgin
plasticmaterials
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
70%
reduction in the weight
of our mince packaging
2,231 
tonnes of plastic diverted
from landfill and incineration
each year
JAZZ PROJECT REDUCES
WASTE TO LANDFILL
We have rolled out the
Jazz project across our
UK meat andfish lines.
This novel technology
convertsdifficult-to-recycle
colouredplastics intofood
gradepackaging, which
isitselfrecyclable, creating
acirculareconomy.
Using this technology
wewere able to divert
2,231tonnes of plastic from
landfill and incineration each
year, equivalent to over
100 million individual items.
FLOW WRAP TECHNOLOGY
SAVES 200+ TONNES
OF PLASTIC EACH YEAR
We have reduced the weight
of ourmince packaging by
70% at Hilton Foods Holland
bytransitioning from traditional
traysto flow wrap technology.
This innovation will save over
200tonnes of plastic each year
withnoreduction in the product’s
qualityorshelf life.
This has also allowed us to print
product information directly onto
the pack, avoiding the production
of200,000 paper labels every week.
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Hilton recognises the Earth’s
resources are finite; and is
committed tominimising the
resources that we do use, and
working toeliminate waste
throughout our value chain.
Optimising our own operations will
alwaysremain our first priority, but we
are also working with our value chain
partners to ensure effective monitoring
and reduction of waste through the
wholefood system.
– We are working with our retail partners
toprovide product choices to consumers
that help them to reduce food waste,
and the useof energy and water in
their homes. As part of this we are
ensuring we address our key water
management risks,including: drought
or extreme flood events in areas
which supply both core proteins and
non-protein ingredients. This is a fairly
material risk which is primarily mitigated
through our distributed supply strategy,
which reduces our dependence on any
specific geography.
– Disruption to water supplies in our
facilities, most likely due to a pollution
event or damaged infrastructure, is
mitigated by most sites having onsite
stores of water capable of lasting at
leastone day.
– Water pollution events from our sites
are mitigated by grease traps on
effluent pipes.
Highlights
– In 2021 we generated 2,466,759kWh
of solar electricity at our Heathwood
andHuntingdon sites.
– We have continued our programme
totransition our refrigeration systems
away from fluorinated gases.
– We have implemented intelligent
energymonitoring across all our global
sites, allowing us to effectively manage
energy use across our portfolio.
– At Hilton Foods Poland we have
saved25,727kWh by optimising
ouruseofair compressors.
– At Hilton Foods Ireland we have saved
in excess of 11,000 litres per day by
shutting down one of the site’s cooling
towers during the cold winter months.
This also allows us to implement more
thorough, less disruptive maintenance,
improving efficiency all year and
extending the life of our assets.
– We have installed charging stations
across our estate to help our employees
transition to electric vehicles.
– We have saved 65,151kWh at our
Polish site and 14,551 at our Irish site
byupgrading all our lights to LEDs.
– We have saved 89,846kWh
byoptimising refrigeration at our
Huntingdon plant.
– We have saved 103,617kWh by
optimising our use of vacuum systems
at Hilton Foods Ireland and a further
74,760kWh at our SoHi joint venture
in Portugal.
– We have saved 110,000kWh per year
by replacing our liquid nitrogen freezing
tunnels at Hilton Foods Poland with
acompressor cooling system.
– We have initiated a project to implement
ISO 50001 across our global sites.
Resource
efficiency
Optimising food waste
anduse of packaging,
energyandwater across
sites, supply chains and
inconsumers’ homes
Sustainability report
PRODUCT
2025 Strategic Goals
Improve resource efficiency
acrossour global operations
Reduce waste across our
full value chain
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
400,000kWh
annual savings across the business
due to resource efficiencies
We have implemented processes
toensure we only heat the water
weneed and reduced the amount
weare using by auditing our cleaning
processes, ensuring at all times we
were not compromising hygiene.
Through this process we then
changed the nozzles on the cleaning
lances to halve the flow rate, changed
the cleaning cycle to use cold water
where it did not detrimentally
affect hygiene and turned off the
airhandling units during cleaning
toprevent overrun.
Overall the site has cut its annual
consumption by 5.5 million litres
of water and halved its gas use
since 2019.
WATER HEATING AUDIT
CUTS GAS USE BY 50%
At Hilton Foods Ireland we
havehalved our gas use in the
lasttwoyears by optimising
ouruseofhot water.
EFFICIENCY FROM
THE BOARDROOM TO THE
SHOP FLOOR AT SOHI
From the boardroom to the shop
floor, at our Portuguese Joint
venture SoHi, we have implemented
the principle that ‘efficiency is
everyone’s job’.
Over the last year we have introduced
a project to reduce our energy use
during down time by turning off
vacuum systems and other production
equipment when they are not in use.
We have optimised our refrigeration
systems by; changing temperature
set points in different rooms,
automating door operation, isolating
temperatures between rooms, and
switching compressors across the
site to best match the load and
reduce consumption.
This is an ongoing process that will
continue in the coming years, we
have already identified opportunities
to optimise the compressed air
system by eliminating losses and
reducing the pressure.
By embedding a resource efficiency
mindset across the site, we have
already been able to implement over
400,000kWh of annual savings across
the business.
1,666.132019
1,396.16
2020
834.5
2021
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Food safety and quality
Hilton Foods is committed to working
in an ethical, open and honest manner
to produce products of the highest food
safety and quality. This is underpinned
by our Group Quality Policy which outlines
our commitment across theGroup to:
– Food safety, product quality, legality
and integrity;
– The achievement of customer
satisfaction by adherence to product
specifications and service requirements;
– Adequate resources in the pursuit
of continuous improvement for our
products, processes and our people; and
– A programme to develop a food safety
culture. Our commitment to food
safety and quality combined with our
first-class manufacturing facilities and
our customer focus makes us the first
choice for our retail partners.
Managerial responsibility and
accountability for our product safety
andquality policy sits with the Chief
Quality & Sustainability Officer.
Factory standards
andqualitysystems
We are proud of our modern, specialised
processing and packing facilities which
use state-of-the-art production equipment,
including a high degree of automation
and the use of robotic equipment
which minimises handling. We are also
automating our quality checks and by doing
so removing paper and reducing the risk
of errors. This, combined with our high
standards of hygiene and temperature
controls, ensure we meet our customers’
expectations for quality throughout each
product’s shelf life.
Our well-trained production operatives
are responsible for the quality of our retail
partners’ products and they are supported
by highly qualified and experienced quality
assurance and technical teams at each
site. We have developed our own HFG
Factory Standards to ensure both our
new and existing facilities are set up and
operate to the highest standards. All our
sites are audited against these standards
by our group audit team. In addition
each of our sites undergo independent
third-party accreditation to a Global
Food Safety Initiative (GFSI) recognised
certification scheme.
Our retail customers make frequent
visits to our sites, which in some cases
includes unannounced audits and visits
aspart of their own surveillance. This level
of attention is a valuable part of our
partnership with our retail customers and
gives consumers confidence that Hilton
can consistently meet their expectations.
All of our sites received the highest levels
of third-party and customer audit results
in 2021.
We maintain strong links with academia
and technological advances, working
alongside Campden BRI, Danish Meat
Research Institute and Teagasc Ireland.
We are also active members of a number
of trade associations such as British Meat
Processors Association, Food and Drink
Federation and Seafish.
Product standards and
responsibility
The quality of the raw materials used in
our products contributes significantly to
the achievement of consistent finished
product quality. We work closely with our
suppliers to set clear specifications for the
products they supply. Monitoring incoming
raw material quality combined with close
control of the processes we follow in our
manufacturing operations ensures we are
able to consistently meet the best in class
specifications our retail partners set for
our products.
Our product innovation capability is
industry leading with local and regional
centres of excellence for each of the
food categories we produce. We have
specialist teams at each of the sites
and we share expertise in product and
process development across the Group.
Our creative team includes many qualified
chefs who utilise the market insight teams
and consumer focus groups to ensure our
new product launches have ahigh degree
of success.
Hilton’s approach is to only use ingredients
and additives where required to increase
food safety and ensure product stability
and quality. We comply with our
customers’ lists of prohibited additives,
and actively reformulate where we
can to remove artificial ingredients and
unnecessary additives.
We are also supporting the reformulation
of products to reduce the total salt and
fat in food, and increase fibre in line with
customer health targets and following
FSA/EFSA guidance. Where possible
weeliminate known allergens and clearly
labelthem when present.
All of our sites have in-house testing
facilities for raw material and finished
products including organoleptic and
physical assessment. We operate
laboratory facilities in a number of our
sites which carry out microbiological and
chemical testing. These are operated
by fully trained personnel and have
appropriate local accreditation.
We have a comprehensive product
recall policy and mechanism, that
isverified by simulated tests, and is
integrated into our wider business
crisismanagement systems.
All of our sites received
thehighest levels of third
party and customer audit
results in 2021.”
Our product innovation
capability is industry
leading with local
and regional centres
of excellence for each
ofthe food categories
weproduce.”
Sustainability report
Food safety and quality
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We partner with the best suppliers that
share our commitment to quality, food
safety, animal welfare and sustainability.
We are committed to ensuring the integrity
and traceability of the raw materials we
use in our products, which includes the
meat, fish, ingredients and packaging.
We have developed our own supplier
standards foreach raw material group
whichclearly state the standards we
expect our suppliersto operate to.
Audit frequency is determined by risk
assessment which looks at a combination
of raw material and supply chain threat and
vulnerability, horizon scanning and supplier
history. We have full traceability back to
the farms and fishing vessels that supply
the slaughter operations and primary
processing factories in our supply chains.
Audits are carried out by our own team
of qualified auditors or second party
auditors against the Hilton Food Group
Supplier standards. In addition, the
majority of our suppliers are certified
against GFSI benchmarked standards
by independent audit bodies. For new
suppliers our policy isto take from only
GFSI certified suppliers. The current GFSI
certification status of oursupply chains
is93%. These audit processes have been
inplacefor more thanthree fiscal years.
All UK Seafood is environmentally
risk assessedin accordance with the
Sustainable Seafood Coalition Codes
which we helped develop as the first
founding member. Currently over 98% of
our wild capture volume is from certified
fisheries and over 99% of our farmed fish
and shellfish are from certified farms (ASC,
GlobalGAP, or BAP).
All other fisheries are risk assessed
against the most relevant data sources
such as ICES stock assessments,
Seafish RASS, Sustainable Fisheries
Partnership Fish Sources, and Marine
Conservation Society. We do not source
from any high risk fisheries where there
is no data available or there isproven
poor fishery status, prevalence of illegal
fishing, lack of management, or very
highenvironmental impact.
We also buy directly from many fishing
vessels that freeze their catch at sea
givingus direct relationships with the
majorfishing quota owners.
We exercise due diligence in establishing
the legal origin of seafood products and
marine ingredients used in the feed for
our farmed fish, and base our systems on
the BSI PAS 1550 standard (for eliminating
illegal unreported or unregulated
fisheries) which we helped to develop.
This includes audits of the feed producers
and for the highest risk supply chains
the fishmeal plants that supply them.
Hilton Seafood has signed to support
theEnvironmental Justice Foundation
Charter for Transparency.
We hold Group Marine Stewardship
Councilcertification for all of our
manufacturing facilities that use fish,
with annual compliance audits by the
certification body. Hilton Seafood is
founding, funding and active participants
in multiple Fishery Improvement Projects
to bring the remainder of our supply to
certification or to develop new sources
of supply. Hilton Seafood discloses all
of our source species, fisheries and fish
farming areas on the Ocean Disclosure
Program website.
All farms, livestock facilities and slaughter
facilities for farm animals, and >99%
of farmed fish supplying Hilton Food
Group UK, Ireland and Sweden, and
the majority supplying to the other
European and Australian markets are
certified to independent farm assurance
schemes. Where required assurance
may be to higher welfare schemes or
organic standards.
We have developed livestock farming and
abattoir welfare standards in partnership
with our retail customers. 100% of our
livestock slaughter facilities are audited
by a welfare qualified auditor, either to
the Hilton Group Supplier Standard by
our own team of welfare trained auditors,
independently using a dedicated second
party, or by auditors employed by our
retail partners.
Hilton Seafood UK directly employs farmed
fish welfare officers to audit all farmed
fish slaughter facilities globally and the fish
farmsand hatcheries that supply them.
Our supplier approval process gives us
full transparency on the safety, quality,
traceability and provenance of the raw
materials we use. This ensures our product
labels correctly describe the provenance
ofthe product, including its species and
country of origin so that consumers can
trust in the products we produce.
Our Seafood Standard includes additional
requirements on fishery management,
andenvironmental impact mitigation
infisheries and aquaculture.
Hilton actively review and engage in the
sustainable development of our agriculture
supply chains. We work alongside our
suppliers to address the footprint of
our supply chains including factories,
abattoirs and farms, and we are building
decarbonisation and water stewardship
plans for each sector with our key
suppliers. This includes addressing the
GHG footprint of animal feed and other
environmental risk areas.
We engage in the leadership of
collaborative action to address the footprint
of soy and cattle farming with the Soy
Transparency Coalition, European Round
Table in Beef Sustainability and UK Cattle
Sustainability Platform. Our engagement is
described in more detail in the Planet pillar.
Hilton additionally reviews welfare and
environmental risks by using external data
sources (for example lice counts, benthic
scores and mortality in farmed salmon).
For our aquaculture supply we are working
with low stocking density farms where
the environmental outputs are lower than
standard with additional welfare benefits.
Hilton continually develops and refines
testing methods, data collection and
reporting. Samples collected from raw
material deliveries are assessed for
compliance to microbiological standards
and agreed quality specifications.
Results are used to assess the
performance of suppliers and achieve
continuous improvement. We conduct
a wide range of authenticity testing
to evaluate new supply chains and to
monitor existing ones. The tests include
speciation and screening for adulteration
using chemical and DNA methodologies
ataccredited specialist laboratories.
We are members of the FoodIndustry
Intelligence Network where we compile
industry-wide compliance statistics and
share intelligence on suspectedfood fraud.
Supply chain integrity, environmental
impactassessment and traceability
We have developed our
own supplier standards
foreach raw material group
whichclearly state the
standards we expect our
suppliersto operate to.”
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Introduction
In 2020, we made our first TCFD
disclosure that explained how our climate
risk and opportunity assessments were
being conducted, and how they fitted
into our broader ESG strategy. This year
we have made climate-related financial
disclosures consistent with the TCFD’s
recommendations and recommended
disclosures with the following exception:
– We have included details of our scenario
analysis work in this report. However,
Hilton is currently enhancing the number
of scenarios it runs to ensure we further
understand the financial impact of
climate-related risk on the business.
We plan to build more details into
future disclosures.
We recognise that global warming
is driving climate change and that
governments, industry and wider society
need to act together to mitigate the
effects. We have identified potential
risks and opportunities for our global
food business and value chains and have
explained the actions we are taking and
plan to take in the future to mitigate the
risks and maximise the opportunities.
Governance
The governance structure is detailed
inthediagram on page 35.
The Board’s oversight of climate-
related risks and opportunities
The Board, led by our Chair, Robert
Watson, has ultimate responsibility for
sustainability, provides rigorous challenge
to management on progress against
goals and targets, and ensures the Group
maintains an effective risk management
and internal control system, including over
climate-related risks and opportunities.
The Board members also have a range
of experience that is relevant to risk
assessment and mitigation strategy
including leading financial, supply
chain, sustainability, and general
governance roles within global retailers
andtheir suppliers.
The Board convenes eight times a year and
where appropriate climate-related issues
form part of the Board agenda. The Board
has oversight of the progress against our
Sustainability strategy. The Board has full
responsibility to ensure the effectiveness
of the risk management systems in place,
and undertakes an annual review of the
principal risks that include climate change.
The Board delegates certain sustainability
oversight matters to its principal
committees who work in synergy with
overlapping membership utilising and
ensuring a broad reach of skills and
expertise across the business.
Corporate Sustainability
Committee
Climate-related issues are discussed
within the Hilton Sustainability Committee,
which includes the CEO as a member,
andis chaired by a Non-Executive Director,
Rebecca Shelley, who has relevant
experience in ESG derived from four
years leading Tesco’s CSR strategy and
delivery programme internationally, as well
as establishing and running sustainability
programmes for large financial services
companies including Prudential.
This Committee meets at least three
times a year. The role of the Sustainability
Committee is to review the strategy to
address climate risks and opportunities,
and to monitor progress in reducing our
climate footprint and the footprint of our
supply chains. The Committee Chair
subsequently informs the Board of our
strategy and progress.
Audit and Risk Committees
Climate-related risks and the mitigation
strategies are also reviewed within
theinternal audit and risk management
function and the Risk Management
Committee. The purpose is to ensure that
the risks are identified and appropriately
monitored and reported to the Audit
Committee which recommends the risk
categorisation and agrees mitigation
measures for final approval by the Board.
This process provides assurance to the
Board that climate-related risks are fully
integrated into the risk management
framework. Progress against the
sustainability strategy is considered within
the Audit Committee’s review ofthe
effectiveness of both the internal controls
and risk management systems. This is
the responsibility of the Sustainability
team and enables the Board to receive
assurance on the management and
mitigations of our climate opportunities
and risks.
The Risk Management Committee
and theAudit Committee both meet
four timesa year. As climate change is
one of our principal risks, it is reviewed
and monitored at all Audit Committee
meetings. A special focus workshop
meeting on climate risks was held where
the two committees worked together
toholistically consider risk.
Managements role in assessing
andmanaging climate-related
risksandopportunities
Our Chief Executive, Philip Heffer has
overall responsibility for climate change,
and environmental matters. As part of our
commitment to sustainability, he leads our
positive response to addressing climate
risk and opportunities.
The CSR team, led by the Chief Quality
and Sustainability Officer and the CSR
Director, is responsible for climate risks
mitigation across our supply chains.
The operations teams, led by the Chief
Manufacturing and Procurement Officer,
are responsible for climate risks mitigation
at site levels. These teams oversee carbon
reduction projects in partnership with
customers and suppliers, and members
of the team hold governance roles within
industry collaborative forums.
Sustainability report
Climate risk and impact report
Task Force on Climate-related Financial Disclosures
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We recognize that global
warming is driving
climate change and that
governments, industry
andwider society need
toact together to mitigate
theeffects.”
Climate-related issues are monitored
by the group CSR team and mitigation
strategies are developed for approval
by the Executive Leadership Team and
reported to the Sustainability Committee
by the CSR Director.
The Group Head of Internal Audit and Risk
executes a key role, supported by the CSR
Director, in ensuring that management
are identifying, mitigating, monitoring,
and reporting on all key risks including
the principal risk of climate change.
Through this process they coordinate
the agenda for the Risk Management
Committee that allows management
to present their activities to mitigate
the risks. They are then able to assess
the effectiveness of these activities
independently to report to the Audit
Committee and subsequently to the Board.
This provides key assurance to the Board.
The Executive Leadership Team oversees
the strategy to meet our climate targets
and align our product portfolio to shifts
in demand.
Processes by which management is
informed about climate-related issues
Management are advised by our
internal experts in energy procurement,
sustainable agriculture, sustainable
fisheries & aquaculture, sustainable
packaging, consumer insight, and supply
chain insight. Management take external
advice from specialist consultants
including South Pole, Schneider Electric
and IMS who advise on climate risk and
mitigation options. The management
team are directly engaged in national,
regional, andglobal associations and
forums that inform us about the latest
science on both the risks and potential
mitigations. Hilton has also directly
employed aspecialist inlife cycle analysis
and modelling ofdecarbonisation plans
toadvance our mitigation activities.
Hilton has directly engaged with a number
of organisations to understand the climate
risks and mitigation options during 2021.
A selection are listed below.
– WWF – Engaged with the UK team
to contribute to the development of
their Protein Disclosure guidance and
Sustainable Food Basket measure
– UN Global Compact (UNGC) –
Sponsored the UNGC Ocean
Stewardship Coalition and contributed
extensively to their guidance on
achieving Science Based Targets
in Seafood
– Direct engagement with national bodies
that coordinate programmes to reduce
the footprint of the livestock sectors
including Meat and Livestock Australia,
Beef and Lamb New Zealand, Bord Bia,
and The Agricultural and Horticultural
Development Board in the UK
– Soy Transparency Coalition – Founder
sponsor to ensure open reporting of
progress by traders in South America
Risk management
Our processes for identifying
andassessing climate risks
Climate risks (physical and transition),
their severity, impacts and mitigation
are considered within the Hilton Risk
Management Committee and reported to
the Hilton Audit Committee as described
in the Governance section above.
These assessments are a collaborative
effort across business functions and
are an opportunity to identify emerging
risk, review existing risks and provide
appropriate mitigation measures to reduce
or manage the risk. The Committee
considers the risk in terms of likelihood
of occurrence, timescale and scale of
potential impacts, alongside other types
ofrisk. These determine the categorisation
of principal and emerging risks that are
submitted for final approval by the Board.
This assessment is where Hilton’s own
response to climate change is noted,
with the appropriate action to deliver
improvements detailed.
Existing and proposed regulatory
requirements in each of our operating
countries are considered, to determine
compliance requirements. These include
emissions and deforestation controls
and product environmental labelling.
Hilton actively engages in the consultation
over proposed regulations and support
the development of effective regulation
that ensures common high standards
of environmental management. We are
currently supporting the development of
the UK regulation to prevent the sale of
products linked to illegal deforestation.
For more details of our risk management
process and principal risks see page 24.
Our processes for managing
climate risks and opportunities
Our process to determine material issues
was to consult with a cross-section of
both internal and external stakeholders
(including NGOs, consultancies, centres
of excellence, customers, retailers and
partners in our agricultural, ingredient
and packaging supply chains) with
recognised expertise across our key risk
areas. This ensures that materiality is
assessed against legislation, policy and
the business’s influence on other entities
in our value chain. The resulting matrix
isshown on page 34 in this report.
The climate risks prioritised in our
materiality assessment formed the basis
of our risk and opportunity assessment.
This is detailed in the strategy section
below that considered the potential impact
on our sites and supply chains from climate
change and Hilton’s strategy in preparing
its transition to a low carbon economy.
We have considered how each of these
risks can be mitigated (for supply chain
and consumer risks) or controlled (for risks
related to our own operations). All of the
climate-related risks have documented
action plans to address them and likewise
the opportunities have action plans to
enable Hilton to maximise the benefits.
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Climate-related risks
Risk
Description Type
Area
of impact
Time
horizon Likelihood
Potential positive
financial impact Response
Relevant
Targets
Reduced
revenue
fromhigher
emissionfood
ifconsumers
changetheir
purchasing
preferences to
loweremission
food
Transition
(Market)
Downstream
consumer
shifts in
demand
Short–
Medium
Likely Reduced revenues
of higheremission
foods
We are investing
in acquisitionsand
diversificationto gain
marketshare in lower
emissionproteins.
(Shortterm)
Our work to decarbonise our
factories and both agricultural
and industrial supply chains
will give consumers a choice
of lower emission proteins
inall product sectors.
(Medium term)
We have approved
Science Based Targets
for scope 1, 2, and 3.
Improve energy
emissions and water
efficiency in ourfacilities
by at least 10% before
the end of2025,
compared toa2018
baseline
Storm and
flood disruption
inoursupply
chains leading
tochallenges
sourcing raw
materials
Physical
(Severe
Weather)
Upstream
supply chain
Medium–
Long
Likely locally
in at least
onesupply
chain
Disruptions in local
supply affecting
regionalavailability
and/or pricing
Maintaining spread and
flexibility in regional and
global supply chains
reduces the impacts
oflocaldisruptions.
(Short to Long term)
Reduced revenues
from products
with higher
emissions,
ifcarbon pricing
is introduced
to incentivise
consumers to
purchase lower
carbon foods
Transition
(Emerging
Regulation)
Downstream
consumer
shifts in
demand
Medium–
Long
Likely Price increases
ofhigheremission
products affecting
the balance of
consumer demand.
Consumers
movingawayfrom
proteinswhere
the footprints have
not been mitigated
to lower emission
proteins and/
orsupply chains
We are working towards
our target of net zero by
reducing emissions from our
factories and, in partnership
with suppliers, to incentivise
innovation in lower footprint
farming and fishing.
(Mediumto Long term)
We have committed
to the UN Race to
Zerothrough signing the
Business Ambition for
1.5°C.
An intensity reduction
of 15% in emissions of
cattle in Europe by 2025,
aligned to the ERBS
Sustainability objectives.
100% renewable
electricity across all
ourown operations in
Europe by end of 2025
and globally by 2027.
Sustainability report
Climate risk and impact report
Task Force on Climate-related Financial Disclosures
Strategy
The impact of climate-related risks
and opportunities on the business’s
strategy and financial planning.
Last year we introduced climate change
as a new principal risk – “The Group’s
business is affected by climate change
risks comprising both physical and
transition risks. Physical risks include long-
term rises in temperature and sea levels
as well as changes to the frequency and
severity of extreme weather events, which
pose a threat to the sourcing of our raw
materials. Transition risks include policy
changes, reputational impacts, and shifts
in market preferences and technology.”
In 2021, we conducted an exercise
tofurther identify the specific climate
changerisks and opportunities that may
potentially arise in each time horizon
in ouroperations and value chains,
asshownin the tables below:
This builds on the initial assessment that
we conducted during 2020, and is a more
detailed analysis with input from expert
consultants. This analysis considers our
exposure to physical impacts from climate
change and the potential impacts and
opportunities from the transition to a
lowcarbon economy.
An external review was carried out of the
risks of flooding and wildfires for our sites.
The locations of our sites were geocoded,
and overlaid with data provided by Swiss
Re’s CatNet
®
geo-spatial tool, including
the major types of flooding (river, pluvial,
and coastal storm surge) and wildfire risks.
There is only one site that is in an area at
risk, from a coastal storm surge, inthe
Netherlands. All other sites are in areas
oflow or very low risk of flooding. None of
our sites are in high risk areas for wildfires.
We will continue to monitor the potential
for physical risks from climate change and
its impact on severe weather events.
For the purposes of this disclosure
wehave categorised risk as:
– Short term (likely to manifest in the
next year) addressed by immediate
inyear actions
– Medium term (likely to manifest in the
next five years) addressed by current
business strategy
– Long term (likely to manifest in the
next five to 50 years) addressed by
incremental actions that contribute
toachieving our net zero strategy
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Climate-related opportunities
Opportunity Type
Area
of impact
Time
horizon Likelihood
Potential positive
financial impact Response
Relevant
Targets
Reduced energy
costs through
decarbonisation
ofour operations
and supply chains
Decarbonisation
and Energy
Sources
Own
Operations
Short–
Medium
Very likely Reduced cost from
investment in self-
generation (solar/
wind) and long-term
contracts for renewable
energy sources.
Potential for revenues
from participation in
carbon markets within
our supply chains.
Investment in self-generation
of electricity. Securing long-
term lowest cost contracts
for renewable energy.
Seeking opportunities for
carbon sequestration in
the supply chains to inset
residual emissions and
potentially to create revenue.
Improve energy and
water efficiency in our
facilities by at least 10%
before the end of 2025,
compared to a 2018
baseline.
100% renewable
electricity across all our
own operations in Europe
by end of 2025 and
globally by 2027.
Growth in
revenue from our
ability to provide
market-leading
supply chain
management
systems and
environmental
data collection
across multi-tier
supply chains
Products
&Services
Upstream Medium Very likely Revenue from supply
chain management
services and data
provision. Revenue
from increased sales
of existing products
with lower footprints.
Lower costs from more
efficient and resilient
supply chains. Reduced
exposure to potential
carbon taxes and the
potential for revenue
from generated carbon
credits.
Utilising our IT solutions for
supply chain management
to lead in environmental data
collection and traceability
across multi-tier supply
chains. Work with customers
and suppliers to incentivise
uptake. Utilising supply chain
data to facilitate development
of lower footprint versions of
existing products and provide
consumer messaging on the
lower footprints and higher
environmental standards.
Enable farmers to reduce
their emissions and
improve biodiversity,
to promote more
regenerative farming,
byproviding planning
and reporting tools.
Growth in revenue
from meeting
consumer demand
for foods with
demonstrably
lower footprints
Markets Downstream Medium Very likely Increased revenues
from sales of profitable
low climate impact
products aligned to
shifts in consumer
demand.
We are leading innovation in
vegetarian, vegan, blended
meat and vegetable products
for the flexitarian consumer,
and in seafood. These are
profitable sectors where we
have established expertise.
Acquisitions and extension
/ adaption of existing sites
to broaden our portfolio and
range in low impact proteins.
Assess health and
sustainability attributes
of all of our proteins to
provide consumers with
the facts on their role in a
diet that is healthy for us
and the planet.
Doubling in sales of
vegan, vegetarian and
flexitarian (vegetables
added to products that
were previously 100%
meat or fish) products
compared to a 2020
baseline.
Reduced costs
from improving
theenergy and
water efficiency
of our sites, and
reducing waste of
food and packaging
Material
Efficiency
Own
Operations
Medium Very likely Reduced energy
and water costs by
improved efficiency.
Improved yields, lower
packaging costs, and
lower input costs.
Investment in heat and
water recovery, investment
in systems to measure and
manage energy, water,
and waste reduction.
Improving packaging
recyclability and reducing
its weight. Accessing
grants and subsidies to
facilitate investment across
our sitesas they become
increasingly available.
Improve energy and
water efficiency in our
facilities by at least 10%
before the end of 2025,
compared to a 2018
baseline.
Achieve a minimum of
50% average recycled
content across all plastic
packaging by 2025.
All our retail packaging
will be fully reusable,
recyclable or
compostable by 2025.
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Our approach to climate
scenarioanalysis
Introduction to scenario analysis
Hilton’s primary revenue base is currently
derived from meat proteins, and according
to the OECD-FAO Agricultural Outlook
2021-2030, global meat consumption is
expected to increase 14% by 2030 with
population growth being the primary driver.
While growth in meat consumption differs
within different regions, Hilton operates
on a global scale and is continually looking
to enter into new markets. With agile
operations that enable rapid change in
response to market shifts, we are well
placed to respond to changes in demand
for protein. Through our forward looking
risk assessment approach we are well
aware of changes to the market which
may drive shifts in demand for proteins.
This could include a trend toward lower
carbon or healthier alternatives, and
may incorporate market disruptors such
as lab-based proteins. With our lean
operating chains and an ability to rapidly
alter operations to suit a dynamic market,
we are well placed to respond to market
demands as and when they arise.
We have strong strategies to reduce
our scope 1 and 2 emissions so we are
confident of meeting our targets for the
emissions related to our operations.
Hilton does not directly own or operate
the farms or abattoirs from which we
source our protein products where the
more significant impact comes from, ie
our scope 3 emissions. We have therefore
focused our scenario analysis on the
impact that policy changes or consumer
purchasing behaviours are likely to have on
the Group’s businesses and strategy.
Many of our supply chain partners are
within the agricultural sector, which
both contributes to climate change and
is affected by climate change. Many of
the jurisdictions in which we operate are
aiming to reduce their greenhouse gas
emissions from agriculture and adapt
theirfood-production systems to cope
withclimate change.
To achieve the emissions reductions
required, there are calls by the UK
Climate Change Committee and others
to change consumers eating habits
to lessen meat consumption and
increase other protein sources in their
diet. Policy changes may therefore be
implemented to drive down emissions
in the agricultural sector and to shift
consumer behaviours toward lower
carbon options. Changes in carbon
policy could be realised as a carbon tax
or levy on food producers or retailers,
inclusion ofagricultural activities
withinexisting cap and tradeschemes,
or through adjustments toexisting
agricultural subsidies.
Policy mechanisms will, however,
needto balance emissions reductions
with the needs of a growing population
and ensure continued levels of
food security which contribute to
abalancedand healthy diet. As such,
there may be an increase in incentives
for carbon offsetting schemes on
agricultural land, or increased R&D
incentives forlow carbon agricultural
techniques. The situation is currently
unclear and islikely to be implemented
in different ways across different
political landscapes.
While future policy is uncertain, as part
of our initial climate-related scenario
analysis, Hilton sought to deepen
understanding of how changes to carbon
tax could impact upon our supply chain
and impact upon pricing strategies
adopted for different protein products.
We are aware that consumer purchasing
is heavily dependent on fluctuations in
the price of protein products. As such,
we sought to understand how a change
in carbon cost throughout the supply
chain could result in a shift to consumer
behaviour. Our internal scenario analysis
is continually developing and improving
and future disclosures will build on the
work carried out so far for 2021.
The scenario analysis we have completed
looks at the likely impact on relative
product cost as a result of carbon pricing
and the likely changes in demand that
will induce.
Assumptions and uncertainties
The outputs of our scenario analysis
are highly sensitive to the assumptions
used for modelling and are outlined as
the potential impact we could face as
a business before taking any mitigating
actions into account. The modelling is not
intended to be a forecast of the impacts
on our business, but an illustration of how
changes to policy could impact upon our
key product portfolios.
Scenario modelling has many limitations
and the studied scenarios are not
forecasts, but are useful to evaluate
a range of hypothetical outcomes
within a plausible range under specific
assumptions. Longer timeframes entail
greater uncertainty and thus it is more
challenging to model these outcomes.
All results should be considered in light
ofthese limitations.
Key inputs for our scenario analysis
Regional protein consumption
To develop a baseline understanding of
consumption data for different protein
sources in different geographical regions,
we have considered the OECD-FAO
Agricultural Outlook 2021-2030 which
provides a baseline projection for protein
consumption based on expectations of
regional demand.
We have considered ourthree key
operating regions: the UK andIreland,
Europe and Australia. Our Dalco operations
and SoHi joint venture operations are
included in the modelling but Fairfax
Meadow is not included in this year’s
modelling as it was acquired too late in the
process. Weconsider impacts to a range
of proteinproducts, primarily pork, beef,
lamb, fish and vegetarian proteins.
Additional factors such as significant
and unexpected inflation, efficiencies
infarming practices, changes in the cost
of agricultural production and changes in
policy may further impact upon regional
supply and demand and this would
impactupon our analysis.
Sustainability report
Climate risk and impact report
Task Force on Climate-related Financial Disclosures
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Carbon emissions
At Hilton, we have an in-depth
understanding of the emissions associated
with the products we produce. The bulk
of our emissions arise from farming
activities, feed provided to livestock and
enteric fermentation, with smaller amounts
attributable to processing, transport,
packaging and retail. We are in the process
of aligning our carbon reduction trajectory
with the Science Based Targets initiative’s
Forest, Land and Agriculture standard,
which sets out ambitious reductions
trajectories to prevent the worst impacts
of global warming and have applied the
relevant emissions reductions to our
portfolio emissions. It should be noted
that any deviations from this emissions
reduction pathway by either Hilton or its
suppliers would result in a higher level of
emissions and a more significant impact
toour cost base, in the event of a change
in carbon policy.
Carbon policy
It is currently unclear where and how
changes to carbon policy could impact
upon the supply chain. We have therefore
assessed the impact of changes to
acarbon price across the supply chain,
to assess how this could impact upon
the retail value of our produce, and
consequently on consumer behaviour.
The carbon prices considered are derived
from IEA’s Stated Policies Scenario
(STEPS) and the IEA’s Sustainable
Development Scenario and are
outlined below.
Our modelling is highly sensitive to
changes in carbon price.
IEA
Stated
Policies
IEA
Sustainable
Development
Warming alignment
by 2100 2.6°C
Well below
2°C
Carbon price 2030
(US$2020 per
tonne CO
2
e) $65 $100
Impact of carbon policy on sales values
Our assessment considered the impact
ofa change in carbon policy within the
supply chain and how that could impact
upon the potential for increased costs
throughout that supply chain. While it
iscurrently unclear the extent to which
a change in carbon policy would result
inincreased costs for Hilton, it is possible
that this would result in a change to the
cost base of our proteins and would
therefore impact upon the pricing of our
products. As can be seen from the table
below, beef and lamb products would
receive the largest increase in pricing.
Fish and plant products do not increase as
significantly in price when applying either
the stated policies scenario carbon price,
or the sustainable development scenario
carbon price.
There are a number of differences in
the price differential for products within
different regions and across different
scenarios. Beef, for example, displays
a medium impact within the STEPS
scenario in the UK and Ireland, but
ahighimpact elsewhere.
Similarly, lamb displays a medium impact
in the STEPS scenarios, and a high impact
in the SDS scenarios, apart from Europe,
where the impact for the SDS scenario
is also medium. The impact of carbon
pricing on the cost of pork has a medium
impact within the UK and Ireland for both
scenarios, but only in the SDS scenario
for Europe.
These differences are largely a result of
the distribution of GHG emissions across
the product portfolio when compared
to the original cost of the product.
Beef inthe UK and Ireland, for example,
has a lower carbon impact when looking
at the carbon impact relative to the cost
of product, whereas pork within the UK
and Ireland has a higher carbon impact
when looking at the impact relative to the
cost of product. These differences result
in regional variations when looking across
different products and regions.
Indication of how a change in carbon price
could impact upon pricing in 2030
Australia UK and Ireland Mainland Europe
STEPS 2030 SDS STEPS SDS STEPS SDS
Pork
Beef
Lamb
Fish
*
*
Plant
* In 2020 Hilton had no operations outside of the UK and Ireland relating to fish products, this will change in 2022 and is
expected to change significantly by 2030. An assumption has been made that a change in carbon policy would result
inalow impact on pricing in 2030, in line with expectations for Australia, UK and Ireland.
STEPS = IEA’s Stated Policies Scenario
SDS = IEA’s Sustainable Development Scenario
Low impact
Medium impact
High impact
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Impact of carbon policy on
salesvolumes
Past trends in consumer behaviour have
shown us that changing the pricing of a
product is likely to impact upon consumer
behaviour and as such, where carbon
policy changes result in an increase in our
pricing strategy, this may result in a shift
in sales volumes for certain products.
However, it is not just the percentage
change in price that matters, but the
grosschange. As an illustrative example,
a10% increase in the cost of a lamb
joint is likely to have a more significant
impact inconsumer behaviour due to
the significant gross cost increase in that
product. A 10% increase in the cost of
pork mince, however, may not have such
a significant impact as the gross change
in cost does not have such a significant
impact on household spend.
Reducing the consumption of one protein
source may also impact upon the demand
for other protein sources, as consumers
switch to alternative sources of protein.
A shift away from high-cost lamb could
result in an increase in demand for lower-
cost pork, for example, and is a pattern
we have witnessed within historic sales
trends. There is, however uncertainty
around future trends for vegetarian and
plant-based options which are fast-
growingareas within the protein industry.
In order to assess how carbon
policy couldimpact upon consumer
behaviour wehave considered baseline
trajectories for protein consumption
(derived from OECD-FAO forecasts)
and overlaid the impact of a change
in carbon policy and pricing strategies
in driving consumer behaviour, based
on our historic understanding of how
pricing shifts impactupon consumer
behaviour. It shouldbe noted that due to
data limitations of the OECD-FAO data
forecasts (which looks solely at a limited
set of plant proteins), we have assessed
the expected potential growth in the
alternative protein market, which better
represents Hilton’s operations.
The table below sets out how consumer
behaviour may change, based on a change
in product pricing arising from potential
changes to carbon policy.
From our analysis it is possible that
changes to carbon policy may result
inrebalancing of protein sales from
beef andlamb toward lower carbon
and healthier alternatives such as plant.
This may benefit fish and seafood to a
lesser extent, given that minor changes in
price fluctuations can impact significantly
on gross price changes, though a strong
desire for healthier options is expected
to continue to drive underlying growth.
In addition, itisour expectation that
changing consumer trends will result
in increased demand for alternative
emerging proteins.
Our approach to scenario analysis
– further developments
Using the work undertaken in 2021
and 2022, Hilton is in the process of
understanding how a change in carbon
policy could impact upon our overall
revenues and costs. This work will
progress over the course of 2022.
Potential significant modelled increase
Potential for no significant modelled change
Potential significant modelled decrease
Indication of how a change in carbon policy
could impact upon consumption trends
Australia UK and Ireland Mainland Europe
STEPS SDS STEPS SDS STEPS SDS
Pork
Beef
Lamb
Fish
*
*
Plant
* In 2020 Hilton had no operations outside of the UK and Ireland relating to fish products, this will change in 2022
andisexpected to change significantly by 2030. An assumption has been made that a change in carbon policy
wouldresult in a low impact on pricing in 2030, in line with expectations for Australia, UK and Ireland.
STEPS = IEA’s Stated Policies Scenario
SDS = IEA’s Sustainable Development Scenario
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The resilience of our
strategyagainst different
climate-related scenarios
Protein mix and diversification
Hilton has long been aware of the trends
toward healthier and more sustainable
eating. Social consciousness is of growing
importance to consumers when making
decisions about their lives and the food
they eat. We want to help customers
make ethical and sustainable choices
for both their health and the planet.
Shifting tosustainable food consumption
was a key pillar for the UN 2021 Food
Summit and the EU farm-to-fork strategy.
During 2021 we reached an agreement
to acquire the remaining 50% of our
joint venture partner Dalco Food B.V. –
aleading vegan and vegetarian product
manufacturer. This acquisition is in line
with Hilton’s strategy to further diversify
and strengthen its protein offering within
the fast-growing and attractive vegan
and vegetarian market. The agreement
will build on the success of the
existing partnership and will see Hilton
commit ongoing investment in order
to significantlyincrease its capacity to
customers, grow its ranges and develop
new, innovative, plant-based products.
In early 2022 we took a further active
step to diversify into fish, a lower carbon
protein, by the acquisition of Foppen.
For Tesco UK, we launched several
veganChristmas items in the Wicked
Kitchen Brand with the Wicked Kitchen
NoTurkey Crown being the top-selling
meat alternative Christmas product.
We have introduced a range of products
globally, incorporating vegetables into
products that were originally 100% meat.
This enables consumers to balance
theirmeat and vegetable consumption
without changing their favourite meals.
We recognise, however, that protein
demand is expected to double by
2050 and a balance of food sources
will be needed that can meet the full
nutritional requirements of a growing
population. We are also, therefore
focusing on the resilience of our supply
chain within a sustainable economy
(seeourdecarbonisation strategy below).
Hilton’s role is to enable consumers
tochoose from a range of sustainable
andhealthy proteins and to provide
themwith the information to make
thesechoices. To do this we are
measuring andaddressing the
footprintsofthe foodswe make
anddiversifying our rangeinto fast-
growinglow impact sectors.
Hilton will provide its partners with
a balanced portfolio of meat and
fishproducts that have significantly
reduced environmental impacts,
alongsidegrowing its sales of vegetarian
and vegan plant-based alternatives.
There will also be opportunities for
premium retail and food service products
across all proteins, especially linked to
seasonal celebrations. For example, there
has been double-digit percentage growth
across the premium own label Christmas
products over the last two years in the UK.
Agility of operating structure
Hilton operates an agile business
model which enables a fast response
to changing market demands, such as
those that may arise in a population that
moves quickly toward lower carbon
food options. We donot own or operate
abattoirs or farms directly, and as
such are able to continually assess our
relationships with suppliers to ensure
thatour supplier relationships are the
most effective in contributing to our
widercorporate strategy.
Hilton’s Response to Mitigate Potential Impacts
Tackling Emissions Ambitious decarbonisation
plans for each of our key
supplychains supported
byexpert external advisors
Engagement in the governance
of key global and local forums
toreduce the emissions of
cattle and aquaculture
Investment in renewable energy
and self-generation, alongside
industry-leading efficiency for
our own sites
Supporting Consumers
toTransition their Diets
Investing in acquisitions and
organic growth that diversifies
our protein portfolio and aligns
to the future market balance
Developing tools to integrate
lifecycle assessment into
product and packaging
development, in a holistic
approach to circular food
systems
Leading in the development
andmarketing of plant-based
and vegetarian products
Influencing Nature
Positive Policies
Advocacy for industry
wide commitments
toenddeforestation
intheCerrado
Actively supporting the
introduction of regulations
thatban trading in products
sourced from illegally
deforested farms
Engaging in Fishery
Improvement Projects to
establish fish stock governance
based on science and ensure
the sustainability of our
supplychains
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Our consumer and market insight teams
map emerging consumer behaviour
and follow developing regulation,
supported by our membership of trade
associations such as the Food and Drink
Federation. Our continual stakeholder
consultation enables us to identify trends
in consumption, whether this be toward
lower carbon alternatives, healthier
alternatives, or where there is increased
interest in as yet untested technologies
such as lab-based proteins. This enables
us to continually assess whether our
product portfolio is resilient against a
changing consumer market.
Our agile operating supply chain also
enables us to make adaptations to product
options to increase affordability and ensure
access to protein in the event of significant
changes to pricing. This could result in
increased levels of mixed meat proteins,
or mixed vegetable and meat products,
to ensure that a growing population is not
priced out of a healthy diet.
Decarbonisation
Our climate risk mitigation strategy
for our own sites starts with securing
renewable energy contracts with support
from Schneider Electric. We are reducing
our operational climate change impact
through investment in energy and water
efficiency measures such as heat pumps,
solar self-generation, and lower energy use
equipment. We have invested in line-by-
line energy monitoring to determine and
act on efficiency improvement savings.
Hilton is aware that the protein needs
of a growing population mean that it is
important to work with supply chains
to decarbonise. At Hilton, with support
from independent experts such as South
Pole, we actively review and engage
in the sustainable development of our
agricultural supply chains. We work
alongside our suppliers to address the
footprint of our supply chains including
factories, abattoirs and farms, and we
are building decarbonisation and water
stewardship plans for each sector with our
key suppliers. This includes partnering to
address the GHG footprint of animal feed
and other environmental risk areas.
– We are vice chair of the European
Roundtable for Beef Sustainability
(ERBS). The ERBS has set a target to
reduce cattle emissions by 15% by 2025
and has established national platforms,
including the UK Cattle Sustainability
Platform, where Hilton is coordinating
the actions to deliver the emissions
reduction target.
– In the Netherlands, we have collaborated
with a dairy company to take ex-dairy
cows and finish them to produce
beef with an independently verified
significantly lower climate footprint than
dedicated beef cattle.
– We are evaluating the impact on
methane production in the rumen of
cattle from novel feeds and optimised
feed formulations. The most effective
mitigations will be promoted across our
supply chains with support from our
suppliers and the collaborative platforms
that we engage in.
– We are full participants in the UNGC
and the Action Platform for Sustainable
Ocean Business. We contributed to
their report ‘Accelerating Sustainable
Seafood’ that explains the key enablers
for seafood to transition to net zero
carbon and other SDG objectives, and
their forthcoming guidance on Science
Based Targets for ocean businesses.
– Hilton is engaging in advocacy to end
deforestation associated with soy and
cattle in Brazil as one of the Signatories
of Support for the Cerrado Manifesto.
We took part in the successful
negotiations, to set a 2020 cut-off date,
with the traders supplying salmon
feed companies. We are also founding
members of the Soy Transparency
Coalition that benchmarks soy traders on
their programmes to halt deforestation.
Adaption to physical impacts of
climatechange
To address the risk of extreme weather
events in our supply chains we maintain
flexible and diverse supply partnerships
toensure we can rebalance supplies when
one supplier or area is affected.
As part of our work to achieve water
efficiency and risk mitigation we utilise
water supply buffer tanks to ensure we
have access to peak water requirements
when water supply is reduced.
Where required we incorporate flood
mitigation including run-off water capture
tanks to protect the local water systems.
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The metrics we use to assess climate-
related risks and opportunities
The key metrics that Hilton uses to
measure its climate-related impacts are
scope 1, 2 and 3 emissions combined
with total consumption and usage of
electricity, gas, water and refrigerants.
Our GHG emissions inventory data is
independently verified. We also monitor
the split between renewable and non-
renewable energy as we seek to move
towards more renewable sources.
Our targets used to manage climate-
related risks and opportunities
The sustainability strategy includes
the following climate-related goals and
objectives that are monitored against
annual KPIs and our progress is reported
to and reviewed by the Board.
Our scope 1, 2 and 3 emissions
In 2021 we have measured our own scope
1 and 2 emission sources and conducted
a review of our scope 3 emissions with
support from the consultancy South Pole.
This confirmed that the largest impact is
from our scope 3 purchased goods and
services, with cattle being the single
largest sector.
In our assessing and reporting of scope
1, 2 and 3 emissions we follow the GHG
corporate protocol. We consider both
location and market-based emissions, and
utilise the most appropriate public data for
our supply chains combined with supplier-
specific emission factors. Our scope
1, 2 and 3 emissions are validated and
verified by GEP Environmental to a ‘limited
level of assurance’, which is in line with
ISO14064:3. The emissions are detailed
on page 74.
Our Science Based Targets
To address our climate footprint the
decision was taken to set Science Based
Targets for our own operations and
our supply chains. These targets were
approved by the Science Based Target
initiative during 2021. We also committed
to the Business Ambition for 1.5°C to align
our long-term targets against a track to
achieve net zero before 2050.
To achieve these targets, we have built
decarbonisation plans for each of our
operations in line with the path required
to meet interim and final targets. This has
been supported by Schneider Electric and
includes identifying specific opportunities
for heat recovery and efficiency projects
and obtaining ISO 50001 energy
management certification globally. We are
also seeking opportunities for investment
and grant support for low carbon
technology for both heat generation using
renewable energy, and water capture and
treatment, which we plan to introduce in
due course.
We are working with our key suppliers to
build decarbonisation plans for our supply
chains. For our livestock supply chains our
decarbonisation plans are being aligned
to the Science Based Target initiative,
Forestry, Land and Agriculture (SBTi FLAG)
pathways. These are being determined for
each type of livestock and will be agreed
with the suppliers concerned.
Once these decarbonisation plans are
all in place, we plan to submit new more
ambitious targets to the SBTi for approval.
Our approved targets
Percentage reduction
targets
Target year
2025
Target year
2030
Scope 1* (WB2C) 12.5% 25%
Scope 2* (WB2C) 12.5% 25%
Scope 3** (2C) 6.5% 12.3%
* Well below 2°C pathway.
** 2°C pathway.
Goals Targets
Improve resource
efficiency across
our global operations
Improve energy and water efficiency in our facilities by at least
10% before the end of 2025, compared to a 2018 baseline.
We report on total water withdrawn and total water consumed,
in regions with high water stress.
Reduce waste across
our full value chain
Halve our own food waste by 2030 compared to 2019 and
continue to publish food waste annually, in line with the
Champions 12.3 commitment to deliver UNSDG 12.3.
Achieve net negative
emissions across
our valuechain to
limit theimpacts
ofclimatechange
Achieve our Science Based Targets across Scope 1, 2 and 3
andpublish updated ambitions. See details below this table.
An intensity reduction of 15% in emissions of cattle in Europe
by 2025, aligned to the ERBS Sustainability objectives.
100% renewable electricity across all our own operations
inEurope by end of 2025 and globally by 2027.
Enhance biodiversity
onland
Eliminate deforestation from the conversion of natural forests
to agriculture or livestock production in our supply chains by
the end of 2025.
Enable farmers to reduce their emissions and improve
biodiversity, to promote more regenerative farming, by providing
planning and reporting tools.
Transition
consumerdiets
Assess health and sustainability attributes of all of ourproteins
to provide consumers with the facts on theirrolein a diet that
is healthy for us and the planet.
Doubling in sales of vegan, vegetarian and flexitarian (vegetables
added to products that were previously 100% meat or fish)
products compared to a 2020 baseline.
Circular packaging Achieve a minimum of 50% average recycled content across
all plastic packaging by 2025.
All our retail packaging will be fully reusable, recyclable
orcompostable by 2025.
Climate-related metrics and targets
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Sustainability report
Non-financial KPIs
2021 2020 (SBT base year) 2019
Carbon Footprint UK
Global
(excl. UK) Total UK
Global
(excl. UK) Total UK
Global
(excl. UK) Total
Scope 1 (tCO
2
e) 5,999 9,562 15,561 4,503 6,136 10,639 6,832 4,720 11,5 52
Scope 2 – location based (tCO
2
e) 8,900 48,349 57,249 8,607 49,069 57,675 7,609 44,609 52,218
Scope 2 – market based (tCO
2
e) 1,182 40,822 42,004 0 47,10 3 47,103
Scope 3 – 01. Purchased goods and services 3,250,823 11,867,23 3 15,136,440 3,890,451 11,395, 565 15,286,016
Scope 3 – 02. Capital goods 2,004 5,950 7,95 4 3,578 102,644 106,221
Scope 3 – 03. Fuel and energy related activities 1,649 8,019 9,668 1,535 9,799 11,334
Scope 3 – 04. Upstream transportation
anddistribution 2,478 75,189 77,666 3,040 75,673 78,713
Scope 3 – 05. Waste 18,004 11,195 29,19 9 6,062 6,970 13,032
Scope 3 – 06. Business travel 39 141 180 2 3 5
Scope 3 – 07. Employee commuting 898 1,425 2,323 917 1,081 1,998
Scope 3 – 08. Upstream leased assets – – – – – –
Scope 3 – 09. Downstream transportation
anddistribution 4,961 114,599 119,560 4,240 118 ,841 123,082
Scope 3 – 10. Processing of sold products – – – – – –
Scope 3 – 11. Use of sold products 7,911 84,093 92,004 8,19 9 104,641 112,8 4 0
Scope 3 – 12. End-of-life treatment of
soldproducts 6,357 17,0 32 23,389 6,432 23,471 29,904
Scope 3 – 13. Downstream leased assets – – – – – –
Scope 3 – 14. Franchises – – – – – –
Scope 3 – 15. Investments – – – – – –
Scope 3 – Forestry, Land and Agriculture (FLAG)
(tCO
2
e) 3,241,797 11,802,691 15,044,488 3,860,330 11,340,601 15,200,931
Scope 3 Upstream (tCO
2
e) 3,275,894 11,969,151 15,263,431 3,905,585 11,591,734 15,497,320
Scope 3 Downstream (tCO
2
e) 19,229 215,724 234,953 18,872 246,954 265,825
Scope 3 – Non-FLAG (tCO
2
e) 53,327 382,18 4 453,895 6 4,127 498,087 562,214
Total Scope 3 (tCO
2
e)* 3,29 5,123 12,184,875 15,498,383 3,924,457 11,838,6 8 8 15,763,145
Total Scope 1, 2 and 3 – location based (tCO
2
e) 3,310,022 12,242,786 15,571,193 3,9 37,5 67 11,893,893 15,831,459
Intensity ratio SC1&2 (tonnes CO
2
pertonneof
product produced) 0.03 0.19 0.12 0.03 0.12 0.15 0.04 0.13 0.17
* Scope 3 emissions reported in this year’s report differ from those reported in 2020 due to significant methodological change from financial screening to detailed LCA. This is described in
Reducing Emissions (page 48).
2020 scope 1 and scope 2 (location and market based) reported emissions and 2021 scope 1, 2 and 3 emissions have been externally verified with limited assurance by anindependent third party
(GEPEnv) in accordance with ISO 14064:3.
UK scope 2 (Market) emissions in 2021 are not zero due to the purchase of Fairfax Meadow, all other UK sites continue to use 100% renewable electricity.
All 2021 UK data includes full year data for Fairfax Meadow, in addition to Hilton Foods UK (incorporating Hilton Foods Solutions), SVC and Hilton Seafood sites. Likewise, Global data includes full
year data for Dalco. We follow the GHG corporate protocol to calculate our scope 1 and 2 emissions, using IEA emissions factors for our location based emissions and supplier specific factors to
calculate our market based emissions.
2021 2020 2019
Energy, kWh UK
Global
(excl. UK) Total UK
Global
(excl. UK) Total UK
Global
(excl. UK) Total
Total renewable fuel consumption 0 0 0 0 0 0 0 0 0
Coal 0 0 0 0 0 0 0 0 0
Heavy Oil 0 0 0 0 0 0 0 0 0
Transport Fuel 5,584,948 1,044,790 6,629,737
LPG 0 87,0 42 87,0 42 0 1,981,079 1,981,079
Natural Gas 15,537,123 24,876,987 4 0,414,110 21,332,658 30,218,747 51,551,406
Total non-renewable fuel consumption 21,122,071 26,008,819 47,130,889 21,332,658 32,199,827 53,532,485
Solar electricity generation 223,291 2,926,408 3,149,699 243,000 2,260,000 2,503,000 0 0 0
Total renewable electricity consumption 38,510,862 35,573,856 74,084,718 243,000 25,984,033 26,227,0 3 3
Total non-renewable electricity consumption 3,784,729 63,979,808 67,764,537 37,526,233 71,445,071 108,971,304
Proportion of renewable electricity 91% 36% 52%
Total renewable other energy consumption 0 0 0 0 0 0
Non-renewable other energy consumption
(district heating) 0 7,10 6,611 7,10 6,611 0 1, 392,196 1, 392,196
Total renewable energy consumption 38,510,862 35,573,856 74,084,718 243,000 25,984,033 26,227,0 3 3
Total non-renewable energy consumption 24,906,799 97,095,238 122,002,037 58,858,892 105,037,093 163,895,985
Total energy consumption 63,417,662 132,669,094 196,086,756 59,101,892 131,021,126 190,123,018
Energy consumption (kWh used pertonneof
product produced) 293 513 806 447 397 411
* Details of efficiency measures are included in Resource Efficiency, on page 60.
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Freshwater (m
3
) UK*
The
Netherlands Ireland Sweden Portugal^ Denmark Poland Australia
Total
freshwater
use
Total
freshwater
withdrawals
Intensity (m
3
per tonne
of product
produced)
2019 297,500 169,000 49,000 59,000 35,000 45,000 74,000 47,000 775,500
2020 329,600 164,700 45,000 58,300 31,950 46,000 96,000 249,300 1,020,850
2021 290,064 173,478 39,231 61,830 28,953 44,945 89,366 268,447 9 57,084 941,743 1.91
* Fairfax Meadow not included.
^ Adjusted to JV holding.
Sites in areas of water stress (defined by World Resources Institute).
Data from New Zealand is not included for this year as the site was not fully operational and data is impacted by construction use.
Very high = 0
High = 1 Truganina
Packaging
Total weight of packaging 29,036
Percentage from recycled materials 57%
Percentage that is recyclable, reusable, and/or compostable 75%
Workforce 2021 2020 2019 2018 2017
Gender Male Female Total Male Female Total Male Female Total Male Female Total Male Female Total
Board 5 2 7 5 2 7 5 1 6 5 1 6 5 1 6
Executive Management 7 3 10 8 2 10 8 2 10 8 2 10 8 2 10
Senior management* 28 11 39 47 11 58 39 11 50 39 11 50 40 8 48
Employees 3,395 2,386 5,781 3,18 5 2,206 5,391 2,981 1,963 4,944 2,878 1,840 4,718 2,483 1,18 8 3,671
Board 71% 29% 71% 29% 83% 17% 83% 17% 83% 17%
Executive Management 70% 30% 80% 20% 80% 20% 80% 20% 80% 20%
Senior management 72% 28% 81% 19% 78% 22% 78% 22% 83% 17%
Employees 59% 41% 59% 41% 60% 40% 61% 39% 68% 32%
Soft skills training 8,444 6,554 4,523
% of employees covered
by collective bargaining
agreements 41% 33%
Total staff turnover 24.91% 17.10% 21.90% 22.50% 30.60%
Total fatality rate 0 0 0 0 0
Health and Safety 2021 2020 2019
% Change
(2021 vs
2020)
Hours Worked 9,559,280 9,143,579 9,717,405 4.5%
First Aid Incidents 586 677 573 -13.4%
Lost Time** Incidents 138 87 147 58.6%
Lost Time Incident Frequency Rate 14.44 9.51 15.13 51.8%
Number of Days Lost 3514 2,198 2,012 59.9%
Lost time incident severity rate 367.6 3 240.33 207.05 53.0%
Non injury incidents/hazards 5,191 4,993 85* 4.0%
* This data was not recorded on a Group basis in this format in 2019.
** The definition use of a ‘lost time incident’ is when the injured person does not attend work for the start of their next shift not including the day of the incident.
Lost-time incident rate for current and last 2 fiscal years covers 100% of directly employed Hilton employees.
Nutritional Context, for growing areas in healthier products % of total sales
Total sales
2021
Products with a high source of Omega 3 1%
Low fat products (<3%) 3%
Lower fat products (<5%) 16%
Products containing E Numbers 21%
Low salt products (less than 0.12g/100g) 15%
Other information
Charitable donations in 2021 £72,629
Total site waste (tonnes) 47,405
We have received no human rights/quality violations for the past three years
No Hilton Foods staff have been disciplined or dismissed due to non-compliance with anti-corruption policy/policies in the current and last 2 fiscal years
Customer service level (%) 96.44%
Product produced 492,588
75
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Sustainability report
SASB Processed Foods
ReportingRecommendations
SASB Code Sub-category 2nd sub-category Disclosure Unit of measure Direct Response
FB-FR-130a.1
Energy
Management
Measurement (1) Total energy consumed,
(2)percentage grid electricity,
(3)percentage renewable
Gigajoules (GJ),
Percentage (%)
Total energy consumption, proportion
fromthe grid and proportion from
renewable sources are detailed in the
'Resource Efficiency' disclosure on
page60of this document.
FB-PF-140a.1
Water
Management
Measurement (1) Total water withdrawn,
(2)totalwater consumed,
percentageofeach in regions
withHighor Extremely
HighBaselineWater Stress
Thousand cubic
meters (m³),
Percentage (%)
Total water withdrawals and total water
consumption are detailed in the 'Resource
Efficiency' disclosure on page 60 of this
document. All data is adjusted to reflect
ourholding in our SoHi joint venture.
The difference between the two can be
accounted for by rainwater harvesting
operations at our SoHi JV. 12% of water
isabstracted in high stress areas, as
defined by WRI, all at our Truganina plant.
FB-PF-140a.2
Water
Management
Measurement Number of incidents of non-
complianceassociated with water
quantity and/or quality permits,
standards, and regulations
Number There has been one issue of non-
compliance associated with water quantity
and/or quality permits, standards, and
regulations in 2021, with our trade waste
permit at our Truganina plant. We have
worked with the local regulator to resolve
this and municipal system was not
impairedas a result of this non-compliance.
FB-PF-140a.3
Water
Management
Description Description of water management
risks and discussion of strategies
andpractices to mitigate those risks
N/A See 'Resource Efficiency' disclosure
onpage 60 of this document.
FB-PF-250a.1
Food
Safety
Measurement Global Food Safety Initiative
(GFSI) audit (1) non-conformance
rate and(2)associated corrective
actionratefor (a) major and
(b)minornon-conformances
Rate We have 17 sites which are all GFSI
certified, one site which is currently
not operational and one that is newly
constructed and is preparing for GSFI
certification in 2023.
14 sites are certified against the BRC
standard, 7 sites are AA grade (<5 minors),
7 sites are A grade (6-10 minors).
3 sites are certified against the FSSC
22000 standard all of which have a been
graded as Pass.
We have 1 joint venture which is certified
against the FSSC22000 standard, which
has been graded as Pass.
FB-PF-250a.2
Food
Safety
Measurement Percentage of ingredients sourced
from Tier 1 supplier facilities certified
to a Global Food Safety Initiative
(GFSI)recognised food safety
certification program
Percentage (%)
by cost
In FY21, 93% of our ingredients sourced
from Tier 1 supplier facilities certified
to a Global Food Safety Initiative (GFSI)
recognised food safety certification
program.
FB-PF-250a.3
Food
Safety
Measurement (1) Total number of notices of
foodsafety violation received,
(2)percentage corrected
Number,
Percentage (%)
In FY21 we received no notices of food
safety violations.
FB-PF-250a.4
Food
Safety
Measurement (1) Number of recalls issued and
(2)totalamount of food product recalled
Number,
Metrictons (t)
In FY21 we had no product recalls.
FB-PF-260a.1
Health &
Nutrition
Measurement Revenue from products labelled and/
or marketed to promote health and
nutrition attributes
Reporting
currency
Hilton Foods is a predominantly own
labelprovider to our customers' brands.
We work with our customers to enhance
the health and nutrition attributes of our
products. We do not currently gather data
on the revenue of sales from products
labelled and/or marketed to promote health
and nutrition attributes. We are working
to develop an internal database to be able
to gather and share data on the nutritional
attributes of our products across our
different markets.
76
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
SASB Code Sub-category 2nd sub-category Disclosure Unit of measure Direct Response
FB-PF-260a.2
Health &
Nutrition
Description Discussion of the process to identify
and manage products and ingredients
related to nutritional and health
concerns among consumers
N/A Hilton Foods is actively engaged in
reformulating products to reduce the
salt, sugar, calories and fat levels, where
appropriate, across our global product
range.
We actively promote the adoption of
Omega 3 products among our customers,
and engaging the salmon industry to
increase the Omega 3 contentof salmon
feed and therefore thelevels in the finished
product.
As a predominately private label
supplier, we work in partnership with our
customers to deliver health benefits to
their consumers, please refer to 'Balanced
healthy diets' on page 56 of this document
for further information.
FB-PF-270a.1
Product
Labeling &
Marketing
Measurement Percentage of advertising impressions
(1) made on children and (2) made on
children promoting products that meet
dietary guidelines
Percentage (%) Hilton Foods is a predominantly own
label provider to our customers' brands,
so we do not conduct any consumer
facing marketing – whether to children
orotherwise.
FB-PF-270a.2
Product
Labeling &
Marketing
Measurement Revenue from products labeled as
(1) containing genetically modified
organisms (GMOs) and (2) non-GMO
Reporting
currency
Hilton Foods does not generate revenue
from products labelled as (1) containing
genetically modified organisms (GMOs)
and (2) non-GMO.
FB-PF-270a.3
Product
Labeling &
Marketing
Measurement Number of incidents of non-compliance
with industry or regulatory labeling and/
or marketing codes
Number Hilton Foods has not received any incidents
of non-compliance with industry or
regulatory labeling and/or marketing codes
in FY21.
FB-PF-270a.4
Product
Labeling &
Marketing
Measurement Total amount of monetary losses as a
result of legal proceedings associated
with labeling and/or marketing practices
Reporting
currency
Hilton Foods has not been a party to any
legal proceedings in FY21 in relation to
branding/ product labelling.
FB-PF-410a.1
Packaging
Lifecycle
Management
Measurement (1) Total weight of packaging,
(2)percentage made from recycled
and/or renewable materials, and
(3)percentage that is recyclable,
reusable, and/or compostable
Metric tons (t),
Percentage (%)
Total weight of packaging, the proportion
ofthat from recycled and renewable
sources and the proportion that is
recyclable, reusable or compostable
are detailed in the packaging section
onpage58.
FB-PF-410a.2
Packaging
Lifecycle
Management
Description Discussion of strategies to reduce the
environmental impact of packaging
throughout its lifecycle
N/A See 'Circular Packaging' disclosure
onpage58 of this document.
Activity Metrics
FB-PF-000.A
N/A Measurement Weight of products sold Metric tons (t) 492,355
FB-PF-000.B
N/A Measurement Number of production facilities Number Hilton Food Group has 18 production
siteswhich are wholly-owned, and one
jointventure.
Pages 6 to 77 of this Annual report
comprises a Strategic report which
has been drawn up and presented
inaccordance with applicable English
company law, in particular Chapter 4A
ofthe Companies Act 2006, and the
liabilities of directors in connection
with this report shall be subject
to thelimitations and restrictions
providedbysuch law.
It should be noted that the Strategic
report has been prepared for the Group
as a whole, and therefore gives greater
emphasis to the Company and its
subsidiaries when viewed in its entirety.
Approved by order of the Board
of Directors
Neil George
Company Secretary
5 April 2022
Approval of the
Strategic report
77
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Governance
Board of Directors 80
Directors’ report 82
Corporate governance statement 84
Report of the AuditCommittee 90
Report of the NominationCommittee 94
Directors’ remuneration report 96
Directors’ remuneration policy 99
Annual report on remuneration 104
Statement of Directors’ responsibilities 111
Independent auditors’report 112
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
78
For more information visit
www.hiltonfoodgroupplc.com
To fuel growth, we constantly
seek out new opportunities and
inspiration. We explore swiftly and
innovate with focus, delivering new
ideas and commercial advantage
forour partners.
ѱ Operational and strategic progress
inseafood category despite
challenging market conditions.
ѱ Completed acquisition of smoked
salmon specialists, Foppen, to
complement and grow our seafood
portfolio into 2022.
SEAFOOD
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
79
Non-Executive Chairman Executive Directors
ROBERT WATSON OBE
NON-EXECUTIVE CHAIRMAN
Tenure: 19 years
Robert joined Hilton as Chief Executive
in 2002 and was appointed as Executive
Chairman in 2018. He transitioned to a
non-executive capacity on 1 January 2021.
Robert is Chairman of the Board and is also
Chairman of the Nomination Committee.
Key skills and competencies: Robert
has over 40 years’ experience in the meat
industry, has proven himself as an industry
leader and has overseen the successful
growth of the Hilton Food Group to date.
Robert brings this wealth of experience and
valuable skills as Chairman of the Group.
Current external appointments:
WhitworthsHoldings Ltd.
Previous experience: A founder of the
FoyleFood Group in 1977 and previously
a board member of the Livestock Meat
Commission and Food For Britain.
PHILIP HEFFER
CHIEF EXECUTIVE OFFICER
Tenure: 27 years
Philip joined Hilton at its inception in 1994,
as Managing Director of the Group’s UK
subsidiary and from 2012 to 2018, served
as Hilton’s Chief Operating Officer. He was
promoted to Chief Executive Officer on
1 July 2018.
Key skills and competencies: Philip
attendedSmithfield College and is an
associate member of the Institute of
Meat. Philip is responsible for developing
Hilton’sbusinesses with its major customers.
His in-depth knowledge and experience
of themeat industry provides valuable
contribution to the Board.
Current external appointments: None.
Previous experience: Senior positions
withinthe RWM Food Group.
NIGEL MAJEWSKI
CHIEF FINANCIAL OFFICER
Tenure: 15 years
Nigel was appointed Chief Financial Officer
of Hilton in 2006, following 11 years in senior
finance roles with PepsiCo.
Key skills and competencies: Nigel
has extensive financial and commercial
experience within UK and European meat
and other food markets. He is a qualified
Chartered Accountant and has a first class
honours degree in accountancy.
Current external appointments: None.
Previous experience: Senior finance and
commercial roles with Bernard Matthews
plc, Royal Dutch Shell and Whitbread and
Co. More recently Nigel was CFO of the
company’s European business, and prior
to this, as Finance Director for Pepsi-Cola
General Bottlers, Poland.
Board of Directors
COMMITTEES KEY
Audit Committee
Remuneration Committee
Nomination Committee
John Worby, Christine Cross,AngusPorter,
Rebecca Shelley and Patricia Dimond are
allconsidered to be independent.
80
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Non-Executive Directors
Company Secretary
1. JOHN WORBY
A R N
NON-EXECUTIVE DIRECTOR &
SENIOR INDEPENDENT DIRECTOR
Tenure: 6 years
John joined Hilton as an independent
Non-Executive Director in 2016. He is Chair
of the Audit Committee and is the Senior
Independent Director.
Key skills and competencies: John is a
Chartered Accountant and as well as financial
andaccounting skills has a wealth of experience
of working in public companies and the
food sector.
Current external appointments: Non-Executive
Director and Audit Committee chair at Carr’s
Group plc.
Previous experience: John was Group
FinanceDirector at Genus plc and Group
Finance Director and Deputy Chairman of Uniq
plc. He was Non-Executive Director at Fidessa
Group plc, Cranswick plc, and Connect Group
plc and amember of the Financial Reporting
Review Panel.
2. CHRISTINE CROSS
A R N
NON-EXECUTIVE DIRECTOR
Tenure: 6 years
Christine joined Hilton as an independent
Non-Executive Director in 2016. She is Chair
ofthe Remuneration Committee.
Key skills and competencies: Christine was
originally a food scientist before devoting 14
years to 2003 with Tesco in senior roles focusing
on own brand, non-food and global sourcing.
She brings a wealth of global experience with
a wide range of food and non-food retailing
businesses to the Board.
Current external appointments: Non-Executive
Directorships with Coca-Cola Europacific
Partners plc, Clipper Logistics plc and several
private companies as well as numerous
advisory roles.
Previous experience: Christine was
Non-Executive Director at zooplus AG
(Germany), Sonae SGPS SA (Portugal),
Nextplc,WoolworthsLimited (Australia),
Brambles Limited (Australia) and Kathmandu
Holdings Limited (New Zealand).
3. ANGUS PORTER
A R N
NON-EXECUTIVE DIRECTOR
Tenure: 3 years
Angus joined Hilton as an independent
Non-Executive Director in 2018. He is the
designated NED for workforce engagement.
Key skills and competencies: Angus’ extensive
knowledge and experience in public companies
and the food and retail sectors are valuable
tothe decisions of the Board. He has an MA
innatural sciences and PhD from the University
of Cambridge.
Current external appointments: Non-Executive
Chairman at McColl’s Retail Group plc and
Co-Chairman of Direct Wines Ltd.
Previous experience: Angus has held numerous
executive and non-executive roles including
Mars, BT, Abbey National and WPP. He was
Chief Executive of the Professional Cricketers’
Association, Non-Executive Director and Senior
Independent Director of Punch Taverns plc and
Non-Executive Director of TDC A/S (Denmark).
4. REBECCA SHELLEY
A R N
NON-EXECUTIVE DIRECTOR
Tenure: 2 years
Rebecca joined Hilton in 2020 as an independent
Non-Executive Director. She chairs the executive
sustainability committee.
Key skills and competencies: Rebecca has held
market-facing investor relations and corporate
communications roles at a number of listed
companies. She has a BA (Hons) in Philosophy
and Literature from the University of Warwick
and an MBA in International Business and
Marketing from Cass Business School.
Current external appointments: Non-Executive
Director at Sabre Insurance Group plc, Liontrust
Asset Management plc and Arraco Global
Markets Ltd.
Previous experience: Rebecca was Group
Communications Director and a member of the
Executive Committee at Tesco plc and Global
Corporate Affairs Director at TP ICAP plc.
Other roles include Norwich Union plc, Prudential
plc and as a partner at Brunswick LLP. She was also
on the Board of the British Retail Consortium and
aTrustee of the Institute of Grocery Distribution.
5. PATRICIA DIMOND
A R N
NON-EXECUTIVE DIRECTOR
Tenure: appointed 1 April 2022
Patricia joined Hilton in 2022 as an independent
Non-Executive Director.
Key skills and competencies: Patricia qualified
as a Chartered Accountant working with Deloitte
in Canada and the UK, is a CFA charter holder
and holds an MBA from IMD Switzerland with
a 30 year international career inconsumer, retail
and financial markets.
Current external appointments: Non-Executive
Director at Foresight VCT plc, LXi REIT plc,
Aberforth Smaller Companies plc, English
National Operaand the National Academy
forSocial Prescribing.
Previous experience: Executive roles with
Storehouse, Mothercare and Value Retail plc and
a management consultant with McKinsey & Co.
NEIL GEORGE
COMPANY SECRETARY
Neil joined Hilton in 2007
andisaChartered Accountant.
54
3
2
1
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
81
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Directors’ report
The Directors present their
report together with the audited
consolidated financial statements
for the 52 weeks ended 2 January
2022. Reference to other relevant
information incorporated into
thisreport is below.
Strategic report
The Strategic report on pages 4 to 77 sets
out the development and performance of
the Group’s business during the financial
year, the position of the Group at the
end of the year, future developments
and a description of the principal risks
and uncertainties facing the Group.
The Group’s financial instruments risk
management objectives and policy are
discussed in the treasury risk management
policies section of the Performance and
financial review on page 22.
This Strategic report also includes the
Sustainability report on pages 28 to 77
which contains details of the Group’s
employment practices and greenhouse
gas emissions.
A statement which sets out how the
Directors have had regard to the matters
under Section 172 of the Companies
Act 2006 is also included in the
Strategic report.
Corporate governance and
otherstatutory disclosures
The Corporate governance statement,
Board Committee reports and Directors’
remuneration report on pages 84 to 110
includes information required by DTR 7.2.
All necessary disclosures required under
LR 9.8.4 have been made.
Non-Financial Reporting Directive
The EU Non-Financial Reporting Directive
has been implemented into English law
and requires companies to disclose non-
financial information necessary to provide
investors and other stakeholders with
a better understanding of a company’s
development, performance, position
andimpact of its activity.
The table below sets out where stakeholders can find information in our Strategic report
relating to non-financial matters.
Information requirement Where to read more Page
Business Model Our business model 11 to 14
Principal risks Risk management and principal risks 24 to 27
Non-financial KPIs Key performance indicators 20 to 21
Environment Sustainability report 28 to 77
Employees 28 to 77
Human rights 28 to 77
Social matters 28 to 77
Anti-bribery and corruption Corporate governance statement 84 to 89
Principal activities
The Group is a leading international
protein producer.
Results and dividends
The profit before income tax is £47.4m
(2020: £54.0m).
An interim dividend of 8.2p per ordinary
share was paid in November 2021.
The Directors recommend the payment
ofa final dividend for the period which is
not reflected in these financial statements,
of 21.5p per ordinary share totalling
£19.1m, which, together with the interim
dividend, represents 29.7p per ordinary
share for theyear. Subject to approval
at the AnnualGeneral Meeting, the final
dividend will be paid on 1 July 2022 to
members on the register at the close
ofbusiness on 6 June 2022. Shares will
beexdividend on1 June 2022.
Directors and their interests
The Directors of the Company in office
throughout 2021, together with their
biographical details, are set out on pages
80 and 81. All the Directors served for the
whole of the year under review except
Patricia Dimond who joined the Board on
1 April 2022. Details of Directors’ interests
in shares are provided in the Directors’
remuneration report on page 107.
Directors are subject to reappointment
atthe Company’s AGM following the year
in which they are appointed. Under its
Articles all Directors will retire and stand
for election or re-election, as appropriate,
at each Annual General Meeting.
Directors’ indemnities
As permitted by law and its Articles of
Association the Company has in place
appropriate directors’ and officers’ liability
insurance cover during the year and up
tothe date of signing this report.
82
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Substantial shareholdings
As at the date of this report, the Company is aware or has been notified of the following
interests of 3% or more of the voting rights of the Company:
Group
Number
of ordinary
shares
Percentage of
issued share
capital
Nature
of holding
abrdn 9,843,027 11.07% Indirect
Capital Group 5,985,063 6.73% Indirect
Schroder Investment Management 4,108,235 4.62% Indirect
BlackRock 3,291,802 3.70% Indirect
Montanaro Investment Managers 2,854,000 3.21% Indirect
Invesco 2,783,638 3.13% Indirect
Vanguard Asset Management 2,695,025 3.03% Indirect
R. Heffer 2,677,233 3.01% Direct
Polar Capital 2,66 9,911 3.00% Indirect
Additionally Directors’ interests in shares total 7.01% and details are given on page 107.
There are robust safeguard controls in place to monitor transactions between major shareholders of the Company.
These include share register analysis on at least a quarterly basis and weekly share transaction reporting.
As a policy Hilton does not have any devices which would limit the ability to perform a takeover of Hilton Food Group plc.
This includes devices which would limit share ownership and/or issue new capital for the purpose of limiting or stopping
a takeover.
Political donations
No donations for political purposes
were made during the year (2020: £nil).
The practice of making political donations
would require authority from shareholders
and Hilton has never sought such authority.
Share capital and control
The following information is given
pursuant to Section 992 of the Companies
Act 2006:
– the Company has one class of share
being ordinary shares of 10p each which
have no special rights. The holders
of ordinary shares rank equally and
are entitled to receive dividends and
return of capital as declared and to
vote at general meetings. With minor
exceptions, there are no restrictions
ontransfers of ordinary shares.
– there are no restrictions on voting
rightsof ordinary shares.
– rights over ordinary shares issued
under employee share schemes are
exercisable directly by the employees.
The Company is not aware of any
agreements between shareholders that
may result in restrictions on the transfer
of its shares or on voting rights.
– the Company may appoint or remove
aDirector by an ordinary resolution of
the shareholders. Additionally the Board
may appoint a Director who must retire
from office at the following Annual
General Meeting and if eligible then
stand for re-election.
– the Company’s Articles may be
amended by a special resolution
ofthe shareholders.
– the Directors have general powers to
manage the business and affairs of the
Company. Additionally the following
specific authorities were passed as
resolutions at the Company’s Annual
General Meeting held on 24 May 2021:
– Directors have authority to resolve
that the Company shall purchase
upto10% of its own shares subject
tocertain conditions.
– Directors have authority, within
limits, to exercise the powers
of theCompany to allot shares
and limited authority to disapply
shareholder pre-emption rights.
Both these authorities expire on
theearlier of the date of 24 August
2022 or the next Annual General
Meeting atwhich renewal of these
authorities will be sought.
– the Company has significant long term
supply agreements with customers
which the customer may terminate
in the event that ownership of the
Company, following a takeover, passes
to a third party which is not reasonably
acceptable to that customer. There are
no agreements between the Company
and its Directors or employees providing
for compensation for loss of office
oremployment that occurs because
ofatakeover bid.
The Companies Act 2006 also allows
that Hilton Food Group plc shareholders
representing at least 5% of paid-up capital
with voting rights of the Company can
require that the Directors call a general
meeting to include the text of a resolution
that may properly be moved at that
meeting. Additionally shareholders have
the right under the Company’s Articles
to vote on resolutions to re-appoint
every director annually at each Annual
General Meeting.
Directors’ statement as to disclosure
of information to auditors
The Directors who were members of
the Board at the time of approving the
Directors’ report are listed on pages 80
and 81. Having made enquiries of fellow
Directors and the Company’s auditors,
each of these Directors confirm that:
– to the best of each Director’s knowledge
and belief, there is no information
relevant to the audit of which the
Company’s auditors are unaware; and
– each Director has taken all the steps
aDirector might reasonably be expected
to have taken to be aware of any relevant
audit information and to establish that
the Company’s auditors are aware
ofthat information.
Independent auditors
PricewaterhouseCoopers LLP have
expressed their willingness to continue
in office and a resolution proposing their
reappointment will be submitted at the
Annual General Meeting.
Annual General Meeting
The Notice convening the Annual General
Meeting can be found in theseparate
Notice of Annual General Meeting
accompanying this Annual report and
financial statements, and can also
be found on the Company’s website
at www.hiltonfoodgroupplc.com/
en/investors/shareholder-meeting-
documents/.
By order of the Board
Neil George
Company Secretary
5 April 2022
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
83
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Corporate governance statement
Introduction
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.
Company purpose, values
andculture
Our purpose is to create efficiency and
flexibility in the food supply chain without
compromising quality through innovative
and sustainable food manufacturing and
supply chain solutions with the ambition
to be the first choice partner for food
retailers seeking excellence, insight
and growth. Hilton’s model of ‘growth
through total partnership’ creates value
for its stakeholders as well as contributing
towider society.
Hilton has developed its strategic compass
through which desired values include
being dedicated, ambitious, curious,
entrepreneurial and resilient. We remain
committed to achieving good governance
balanced against our desire to preserve
an agile and entrepreneurial culture with
astrong client and talent focus.
Governance framework
The Board heads the Group’s governance
structure and is collectively responsible
for promoting the long-term sustainable
success of the Group, within a framework
of prudent and effective controls
that enable risk to be assessed and
appropriately managed. It is responsible
for setting and approving the strategy
and key policies of the Group and
monitoring the progress towards achieving
these objectives. The Board aims to
enhance shareholder value by providing
entrepreneurial leadership for the Group
whilst ensuring there is an appropriate
framework of checks and balances
in place.
The Board has delegated certain
responsibilities to formal Board sub-
committees which comprise an Audit
Committee, Remuneration Committee
andNomination Committee.
These Committees operate under
defined terms of reference that are
approved by the Board which ensures
that each Committee has sufficient
resources to undertake their duties.
Each Committee reports regularly to the
Board. Executive Committees include
a Risk Management Committee which
reports tothe Audit Committee and a
Sustainability Committee which is chaired
by an Independent Non-Executive Director.
During the year an additional Board
sub-committee was formed to oversee
the finalisation of the SV Cuisine
acquisition deferred consideration.
Given Philip Heffer’s conflict of interest
in this transaction the Board considered
it appropriate to establish this new
committee chaired by John Worby, the
Senior Independent Director, with other
members comprising Christine Cross
and Robert Watson. All parties agreed
to reduce the length of the deferred
consideration period with complicating
factors including proposed capex
investment in the business and a
proposedmove of the SV Cuisine
businessto Huntingdon. The Committee
liaised withexternal advisors and
negotiated afairconsideration agreed
withall partieswhich was endorsed by
Hilton’s other Non-Executive Directors.
Governance code and compliance
We evaluate our governance against
principles and provisions contained in
the2018 UK Corporate Governance
Code issued by the Financial Reporting
Council which can be obtained from
www.frc.org.uk/corporate/ukcgcode.cfm.
This Corporate governance statement
together with the Board Committee
reports and the Directors’ remuneration
report on pages 84 to 110 detail how
the Board applies the principles of good
governance and best practice as set out
inthis Code.
The Directors consider that the Company
has complied with the provisions of
the Code during 2021 except for two
provisions relating to Hilton’s Chairman.
Robert Watson is one of Hilton’s founders,
joining its Board as Chief Executive in
2002. In 2018 he transitioned to Executive
Chairman and from 1 January 2021 moved
into a non-executive capacity.
Provision 9 of the Code states that
achairman should be independent on
appointment and that a chief executive
should not go on to become chair
of the same company although the
Code does recognise that this can
happen in exceptional circumstances.
Additionally Provision 19 of the Code
states that the chair should not remain
in post beyond nine years from the date
of their first appointment to the board.
Whilst Robert’s position does not comply
with these provisions the Directors are
of the strong view that there are valid
exceptional circumstances which are in
the best interests of the Company and
itsstakeholders and these are detailed on
page 85.
The Board
Board responsibilities
The Board has specific powers reserved
to it contained in a schedule of matters
reserved for decision by the Board.
These powers include changes to capital
structure, acquisitions and disposals,
major trading agreements, major capital
expenditure projects, dividends, treasury
and risk management policies, approval
of budgets and financial reports, and
the giving of any guarantees or letters of
comfort. The Board also has responsibility
for setting policy and monitoring matters
including financial and risk control, health
and safety policy, management succession
and planning and environmental issues.
There is a clear written division of
responsibilities between the Chairman
and the Chief Executive, agreed by the
Board, split between running the Board
and the business. They maintain a close
working relationship, speaking regularly
between Board meetings to ensure a
fullunderstanding of evolving issues
andtofacilitate swift decision making.
Implementation of the agreed strategy and
budget and the day-to-day management
ofthe Group’s operations is delegated
to an executive leadership team led by
the CEO.
84
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Membership
At the date of this report the Board
consists of the Chairman, two Executive
Directors and five Non-Executive Directors
whose names, responsibilities, brief
biographies and membership of Board
Committees are set out on pages 80 and
81. The Directors bring strong judgment
and expertise to the Board’s deliberations
and with diversity achieves a balance of
skills and experience appropriate for the
requirements of the business.
On 1 April 2022 Patricia Dimond joined the
Board as an independent Non-Executive
Director. Patricia brings a wealth of
experience including a 30 year international
career in consumer, retail and financial
markets workings with FTSE 100, Private
Equity and owner managed companies.
More information on Patricia’s experience
can be found on page 81. John Worby
has advised the Board that he will not be
seeking re-election at Hilton’s AGM and
therefore will step down from the Hilton
Board on 24 May 2022.
Nigel Majewski also indicated his desire
to step down from the Board at the AGM
but continue in a reduced capacity as
director of investor relations and strategic
development. It is proposed that the
current Group Financial Controller, Matt
Osborne, be appointed to the Board as
Chief Financial Officer.
All Directors are reappointed annually
under the Company’s Articles and for FTSE
350 companies under the Code. All new
Directors are subject to reappointment
by shareholders at the first opportunity
following their appointment.
Chairman
Robert Watson is one of Hilton’s founders
and as such has an intimate knowledge
of the business as well as having
relationships with key decision makers at
supermarket retailing businesses around
the world. He has held senior Hilton Board
positions since 2002 and during that
time has guided the Group to significant
continuous and sustainable growth
including a successful flotation in 2007.
This success is illustrated by the graph
on page 109 which charts Hilton’s total
shareholder return over the past ten years
showing average compound annual growth
of 18.2% which compares with 11.6%
achieved by the FTSE 250 Index. A further
indicator of Hilton’s enduring success
isthe average compound annual growth
inHilton’s adjusted operating profit which,
inthe 15 years since flotation, is 11.0%.
Robert joined Hilton initially as Chief
Executive, transitioning during 2018 to
Executive Chairman, and on 1 January
2021 he moved into a non-executive
capacity. This transition path has been
discussed with Hilton’s major shareholders
over a number of years to ensure both
openness and transparency and to gauge
their views. They have been supportive
of these changes to date and Hilton will
continue to engage with them in the
futureto ensure that this remains the case.
Robert has been instrumental in
Hilton’ssuccess over a prolonged period
and Hilton’s other Directors are of the
strong view that Robert’s knowledge
and experience within the business
can contribute to our further growth
and success in the future. The Board
believes that he has demonstrated, and
will continue to demonstrate, objective
judgment that is in the best interests of
the Company. The 2019 external board
evaluation supported the Board’s view
concluding that the retention of Robert
Watson has not only sustained shareholder
value but proved an effective learning
environment for the CEO.
Whilst Robert cannot be designated as
independent under the Code the Board
believes that he has, since moving to
Non-Executive Chairman, distinguished
himself by critically scrutinising decisions
purely on the basis of his extensive
knowledge of the Company, its history,
the industry in which it operates and its
stakeholders. He has shown that he is
able to chair and monitor the Company
without prejudice and that he is impartial
in his judgement and voting behaviour.
He is also supported in this by astrong
SeniorIndependent Director.
In view of the above, the Board
believes that there are valid exceptional
circumstances envisaged by the Code
which are in the best interests of the
Company and its stakeholders for
Robertto continue as Hilton’s Chairman.
We do also appreciate stakeholder
concerns to ensure appropriate
governance, and specifically with
regardtothe balance of the Hilton Board,
which comprises a majority of independent
Non-Executive Directors. The Board
maintain an ongoing focus on appropriate
successionplanning arrangements and it
is anticipated that Robert will step down
in2023 or 2024.
Non-Executive Directors
The Non-Executive Directors, excluding
the Chairman but including the Senior
Independent Director, are considered
to be independent all having served on
the Board for six years or less. Whilst all
the Non-Executive Directors hold other
directorships outside Hilton it is considered
that they are all able to devote sufficient
time to meet their board responsibilities.
The Non-Executive Directors do not
participate in any of the Group’s pension
arrangements or in any of the Group’s
bonus or share option schemes.
The Non-Executive Directors met once
during the year specifically to scrutinise
the performance of the executive
management. A further meeting was
heldwithout the Chairman present
toassess his performance.
Senior Independent Director
John Worby, the Senior Independent
Director, is available to shareholders as an
alternative to the Chairman, CEO and CFO.
Following all conversations or meetings he
reports any relevant findings to the Board.
When John steps down from the Hilton
Board in May Angus Porter will become
the Senior Independent Director.
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
85
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Board balance and diversity
During the year the balance of independent
Non-Executive Directors on the Board
was 57% and female representation
on the Board was 29%. Following the
appointment of Patricia Dimond and
upcoming departure of John Worby female
representation on the Board will increase
to 43%.
Hilton is committed to diversity on its
Board, executive committee and its direct
reports including implementing targets
for female representation and persons of
colour. We will look to increase diversity
within the Group at every opportunity
albeit that there are no further planned
changes to the Board’s size or composition
in the coming year.
Directors’ conflicts of interest
Under the Companies Act 2006, the
Group’s Directors have an obligation to
avoid any situation where they have a
conflict of interest. The Group has in place
procedures that require all Directors to
notify the Group of any conflicts of interest
and, for any such conflicts of interest to
be authorised by non-interested Directors,
which is permitted under the Company’s
Articles. The Board considers that the
Directors’ powers of authorisation of
conflicts have operated effectively and
thatthe procedures set out above have
been followed properly.
There was a continuing conflict of interest
involving Hilton’s CEO, Philip Heffer,
in relation to SV Cuisine Limited, a UK
based sous vide manufacturer acquired
in 2019. Prior to the acquisition, Philip
was ashareholder in SV Cuisine and
was also adirector, an office he resigned
immediately following the acquisition.
The transaction involved deferred
consideration which was agreed and paid
during the year. Philip did not participate
in the decision to agree this deferred
consideration and his conflict of interest
thereafter ceased.
Information and support provided
toBoard members
Members of the Board and its Committees
are given appropriate documentation in
advance of each Board and Committee
meeting. For regular Board meetings these
include a detailed period report on current
and forecast trading, with comparisons
against both budget and prior years. For all
meetings appropriate explanatory papers
are circulated well in advance on matters
which the Board or Committee will be
required to approve or provide responses.
The Board operates both formally through
Board and Committee meetings and
informally through regular contact between
Directors. To assist them in carrying out
their responsibilities the Directors have,
in addition to full and timely access to all
relevant information from management
inadvance of Board meetings, the right
to obtain independent professional
advice atthe Company’s expense and
the advice and services of the Company
Secretary to enable them to perform
their duties as Directors. The Company
Secretary is responsible to the Board,
through theChairman, for all governance
matters. The appointment and removal
of the Company Secretary is determined
bytheBoard as a whole.
Attendance at Board meetings
The Board meets not less than eight times
a year to direct and control the strategy
and operating performance of the Group.
The following table sets out the Board
meeting attendance by Board members
together with the percentage attended.
Attendance at Board Committee meetings
is set out in each Committee report.
Number
attended
Percentage
attended
Robert Watson 8 100%
Philip Heffer 8 100%
Nigel Majewski 8 100%
John Worby 8 100%
Christine Cross 8 100%
Angus Porter 8 100%
Rebecca Shelley 8 100%
Other Governance
Performance evaluation
An external evaluation of the Board
andits Committees was last performed
in 2019. An internal evaluation was
performed during 2021 whereby each
Director completed a detailed written
questionnaire with the opportunity to
comment on any issue not directly covered
by the questionnaire. The responses
were analysed and considered by the
Board who have concluded that the
individual Directors, the Board and its
standing Committees continue to perform
effectively. The next external evaluation
isdue during 2022.
Annual General Meeting
Our 2022 AGM will continue in a hybrid
format at which shareholders will be asked
to vote on 20 resolutions dealing with
key governance matters, including the
reappointment of all Directors, approval
of the Directors’ remuneration report
and policy, and the reappointment of
the auditor.
Risk management and internal control
The Board of Directors has overall
responsibility for the Group’s systems
of internal control including financial,
operational and compliance controls
and risk management which operate to
safeguard the shareholders’ investments
and the Group’s assets and for reviewing
their continuing effectiveness. Such an
internal control system can only provide
reasonable and not absolute assurance
against material misstatement or loss
as it is designed to manage rather
than eliminate risk and failure to meet
business objectives.
The Board has carried out a robust
assessment of the principal risks facing
the Company, including those that would
threaten its business model, future
performance, solvency or liquidity, which
are summarised in the Risk management
section on pages 24 to 27.
The Group operates within a clearly
defined organisational structure with
established responsibilities, authorities
and reporting lines to the Board.
The organisational structure is designed
to plan, execute, monitor and control the
Group’s objectives effectively and ensure
internal control becomes integral to all the
Group’s operations.
Corporate governance statement
continued
86
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
The Board confirms that the Group’s
internal risk based control systems have
been fully operative up to the date of the
Annual report being approved, key ongoing
processes and features of which are set
out below:
– appropriate mechanisms to identify
andevaluate business risk;
– a Group internal audit function which
isinvolved in the review and testing
ofthe internal control systems and of
key risks across the Group in accordance
with an annual programme agreed
withthe Audit Committee;
– a strong control environment;
– an information and communication
process; and
– a monitoring system and regular Board
reviews for effectiveness.
The Group’s planning and financial
reporting procedures include detailed
budgets and a three year strategic
plan which are approved by the Board.
Periodic management accounts report
performance compared to the budget
and additionally forecasts are updated
through the year. These management
accounts together with half-yearly
and annual accounts are reviewed.
All financial information published by
the Group is approved by the Board
andAudit Committee.
The Chief Financial Officer and Group
Financial Controller are responsible for
overseeing the Group’s internal controls.
The management of the Group’s
businesses have identified the key
business risks within their operations.
These have been reviewed and discussed
through the Risk Management Committee
and by the Audit Committee and their
financial implications and the effectiveness
of the control processes in place to
mitigate these risks have been assessed.
The Board has reviewed a summary
ofthese findings and this, together with
itsdirect involvement in the strategies
ofthe business, investment appraisal
andbudgeting processes, has enabled
theBoard to report on the effectiveness
oftheGroup’s internal control systems.
Whistleblowing policy
Hilton is committed to a free and open
culture in dealings between its officers,
employees, customers, suppliers
and all people with whom the Group
engages in business relations. We seek
to conduct our business honestly and
with integrity at all times. The Board has
therefore established a whistleblowing
policy which covers all our employees
and operations so that any suspected
business misconduct can be reported.
The policy allows anonymised reporting
and that reports are treated confidentially.
More information on this policy can be
found on our website. The Board reviewed
and updated this policy during the year
to comply with the common minimum
internal reporting standards contained in
the EU Whistle Blower Directive and to
introduce a 24/7/365 telephone and web-
based reporting service available in all local
languages. The Audit Committee receives
reports on any communications reported
via this mechanism.
Anti-bribery and anti-corruption policy
Hilton has a zero tolerance approach to
bribery and corruption and accordingly the
Board has established an anti-bribery and
anti-corruption policy. This policy, which
is available in local languages, covers all
our employees and operations and also
applies to third parties such as suppliers,
contractors and other business partners.
The policy defines and prohibits bribes
and facilitation payments and covers
all corporate hospitality including gifts,
entertaining and charitable donations
which must be authorised. Hilton does
not make contributions to political
parties. Regular training is provided
toallcolleagues to maintain awareness
ofthese policies and processes.
Directors’ duties and
stakeholderengagement
Section 172 of the Companies Act 2006
requires company directors to act in the
way he or she considers, in good faith,
would be most likely to promote the
long-term success of the company for
thebenefit of its members as a whole
andother stakeholders.
The Directors ensure that the views
of the Company’s key stakeholders
are known and fully considered during
their discussions and decision-making.
Proposals submitted to the Board on
allsignificant decisions include a section
that assesses the potential impact on our
stakeholders and their interests. This is
intended to guide Board discussions to
ensure that these interests are adequately
considered when decisions are made
to approve business projects and the
Company’s strategy.
During 2021 the key decisions for the
Board related to the continuing response
to Covid and proposals to expand the
business including Fairfax Meadow and
Foppen acquisitions, Dalco purchase
of remaining shares and a joint venture.
Additionally Board oversaw the opening
of the new facility in New Zealand, other
significant capital expenditure investment
proposals and also the relocation of
SV Cuisine.
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
87
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Case study – business relocation
In 2019 Hilton acquired SV Cuisine, a
standalone business based at Wednesbury
located north-west of Birmingham with
approximately 200 employees and agency
workers in a variety of skilled and unskilled
roles producing slow cooked sous vide
products. In March 2021 we announced
the intention to relocate the business to
our Hilton Foods UK facility in Huntingdon,
some 88 miles away. The reasoning for
the move was that retaining Wednesbury
as a standalone facility could not maintain
market competitiveness and as such was
not fit for the long-term sustainability of
the business. There was a need to become
more cost-efficient in an increasingly
competitive market which could only
be achieved through synergies from
combining with another larger facility.
Whilst we wanted to keep all our staff
we recognised that the distance may be
too great to expect them to move with
the business and of course we respected
their wishes. Hilton therefore put in place
a range of measures, including offering
retention bonuses ensuring continued
production, to support our people.
– Relocation support
– Financial including relocation
expenses and staff loans
– Information comprising open days
atthe Huntingdon facility and
information about the local area
including accommodation, schools,
community and council support
– Details of vacancies at Hilton’s
otherUK facilities
– Redundancy support
– Outplacement support including
CVwriting guidance, career
workshops and interview training
– Redeployment workshops including
partnering with local businesses,
agencies and jobcentres
– Free financial information and
aconfidential helpline
Up to the time that production
ceasedatWednesbury in August 2021
we sustained good overall factory
performance and a high customer service
level whilst employee turnover remained
low. A positive culture was maintained
throughout the process which resulted
inno redundancy appeals or grievances.
Our shareholders
The Board promotes open communication
with its shareholders. We aim to
provide transparent, clear and balanced
communications so that they understand
our business strategy and how we deliver
long term shareholder value through
earnings and capital growth. The Chief
Executive Officer and Chief Financial
Officer meet regularly and have dialogue
with institutional shareholders both
to discuss the Group’s performance
and prospects and to develop an
understandingof their views which are
relayed back to the Board. The Board’s
current assessment of the Group’s position
and prospects are set out in the Strategic
report on pages 6 to77. Twice a year
general presentations are given to analysts
covering the annual and half year results.
Additionally other reports and forecasts,
together with relevant articles in the
financial press, are circulated to the Board.
The Executive Directors are available to
meet the Company’s major shareholders
if required and, together with the
Chairman and Senior Independent
Director, are available to listen to the
views of shareholders, should they
have concerns which have not been
previously resolved or which it was
inappropriate to voice at prior meetings.
All shareholders have the opportunity to
ask questions at the Company’s Annual
General Meeting, which all Directors
and the Chair of every Board Committee
usually attend. In addition the Group’s
website containing published information
and press releases can be found at
www.hiltonfoodgroupplc.com.
During 2021 the pandemic continued
to disrupt our ability to hold physical
meetings. Instead an increased frequency
of virtual presentations and meetings were
offered to keep shareholders up to date.
Our customers and suppliers
The Board and senior management
engage with our customers and suppliers
through an established total partnership
strategy todiscuss and reach agreements
on product quality and payment terms,
address concerns, identify risks, suggest
solutions and demonstrate best practice.
Our customers comprise high quality food
retailers based in Europe and Australasia.
We create long-term partnerships with
these retailers which are key drivers of
the Company’s growth and continued
success. Through these established
partnership arrangements we are
able to successfully deliver safe, high
quality products, competitively priced
ensuring the highest level of customer
satisfaction. We communicate with
our customers every day to gain an in
depth understanding of their, and their
consumers’, needs and expectations,
andthe markets within which they operate.
We work closely with local and
international suppliers, as part of an
integrated food supply chain, which
enables us to create effective partnerships
that combines our knowledge of industrial-
scale food production and consumer
needsand expectations with their
expertise in the supply of sustainable
andinnovative raw materials.
Our products are governed by national
legislation and food safety standards
throughout the supply chain. We hold
regular dialogue with our suppliers on
governance and compliance matters,
including human rights and modern
slavery. Further details on how we
engageour suppliers on these matters
can be found in the Sustainability report
onpages 28 to 77.
Corporate governance statement
continued
88
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Our people, including workforce
engagement
The Board recognises the value its
employees contribute to the Company’s
sustainable long-term success, which
is why the Group is committed to
engaging with its workforce to discuss
employee interests and concerns, as
well as to identify and develop talent
within the Group. Some of the workforce
engagement mechanisms established
to date, enabling employees to raise any
matters of concern, are as follows:
– Angus Porter is the designated Non-
Executive Director appointed by the
Board to head the Group’s workforce
engagement procedures. Angus works
closely with the Group key personnel
to ensure the Group’s engagement
practices in relation to its employees
areappropriately monitored and
reporting back to the Board on his
findings and interactions;
– An annual workforce engagement
survey to capture the views and
opinionsof the workforce regarding
howthey feel about working in the
Group, and the support they receive;
– Induction programmes for
new employees;
– Internal communications App,
“MyHFG”, which is an information
and communication resource that
provides aplatform for employees to
receive news, participate in the annual
engagement survey and a number
of other activities. “MyHFG” proved
to be an invaluable resource during
the pandemic;
– Hosting of virtual leadership conferences
and town halls during the year to ensure
our employees are fully engaged in
strategy and progress and know how
they can personally contribute;
– Values rewards programmes, such
as “Hilton Heroes” across the Group
to identify and reward dedication
andtalentwithin the workforce;
– Employee forums with a view to
strengthening the ‘employee voice’
within the Group;
– Continuation of our accelerated
leadership development programmes
utilising virtual technology during
the pandemic;
– Development of a people analytics
dashboard to ensure continuous
development in relation to
our workforce;
– Development of an inclusion and
diversity strategy including strategic
sponsorship of the Meat Business
Women network and the launch
oftheHFG Women’s Network;
– A remote working toolkit to support
home workers and their leaders
duringthe pandemic;
– Implementation of global health
andsafety standards and KPIs; and
– A whistle-blowing mechanism
throughwhich employees and others
can raise concerns about suspected
business misconduct, wrongdoing
including infinancial reporting or
othermatters ordangers at work.
Further measures include understanding
reasoning behind emotive employee
survey responses, establishing better
communication and information flow
locally amongst the business divisions
andimproving teams’ working together
and manager feedback.
The Board has assessed the above
engagement mechanisms and corrective
actions and is satisfied that these are
aligned with the Company’s purpose,
values and strategy.
Community & environment
Hilton seeks to be a good neighbour
in all its locations and is committed
to social responsibility built through
the relationships we have with our
communities and legitimate public interest
groups. Further details on how we engage
with the community and on environmental
matters can be found in the Sustainability
report on pages 28 to 77.
With regard to tax we recognise the
importance of the tax contribution that
wemake and consider the needs of all our
stakeholders. Hilton is committed to paying
the right amount of tax at the right time.
We have a low risk appetite with a simple
corporate structure based around our
commercial operations. We do not engage
in planning schemes or arrangements that
could be considered aggressive or artificial
in nature. Consistent with this, the Group’s
approach to transfer pricing is to ensure
that transactions reflect the underlying
commercial arrangements, and therefore
the use of transfer pricing as a means
toartificially avoid tax is prohibited.
By order of the Board
Neil George
Company Secretary
5 April 2022
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
89
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Key areas of focus included
reviewing acquisition
accounting and the new
TCFDdisclosures.”
JOHN WORBY
CHAIRMAN OF THE AUDIT COMMITTEE
Role of the Committee
The Audit Committee is established
by the Board of Directors. Terms of
reference formalise the roles, tasks
and responsibilities of the Committee
to comply with the UK Corporate
Governance Code and to achieve
best practice. The Committee terms
of reference are available and can be
found on the Company’s website at
www.hiltonfoodgroupplc.com.
The Committee meets at least three
times per year.
Membership of the Committee
Members of the Committee are appointed
by the Board on the recommendation
ofthe Nomination Committee. In 2021
theCommittee comprised the Chairman
oftheCommittee, John Worby, and
the other Independent Non-Executive
Directors, Christine Cross, Angus Porter
and Rebecca Shelley. Patricia Dimond
joined the Committee on 1 April 2022.
At least one member has recent and
relevant financial experience and between
them they have awide experience of the
food industry and commerce in general.
Other individuals such as the Chairman,
Chief Executive Officer, Chief Financial
Officer, Internal Auditor and the external
auditors are invited to attend meetings as
appropriate. The external auditors and the
Internal Auditor have the opportunity for
direct access to the Committee without
the Executive Directors being present.
Attendance at meetings ofthe
AuditCommittee
Number attended Percentage attended
John Worby 4 100%
Christine Cross 4 100%
Angus Porter 4 100%
Rebecca Shelley 4 100%
Report of the
Audit Committee
90
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Responsibilities of the Committee
The main responsibilities of the Audit
Committee, which are contained in the
UKCorporate Governance Code and also
in the Committee’s terms of reference,
arethe review and monitoring of:
– the integrity of the financial statements
of the Company and any formal
announcements relating to the
Company’s financial performance,
reviewing significant financial reporting
judgements contained in them;
– whether the annual report and accounts,
taken as a whole, is fair, balanced
and understandable, and provides the
information necessary for shareholders
to assess the company’s position
and performance, business model
and strategy;
– the Company’s internal financial
controls and internal control and
risk management systems and
their effectiveness;
– the work done and the effectiveness
ofthe Company’s internal audit function;
– the scope and effectiveness of the
external auditors including making
recommendations to the Board, about
the appointment, reappointment and
removal of the external auditor, and
approving their remuneration and terms
of engagement;
– the external auditor’s independence
and objectivity including the policy
on the engagement of the external
auditor to supply non-audit services,
considering the impact this may have
on independence;
– the effectiveness of the external
auditprocess, taking into consideration
relevant UK professional and regulatory
requirements; and
– the adequacy of the Company’s
whistleblowing and anti-
bribery arrangements.
As part of its responsibilities the
Committee meets with the external
auditors and the head of internal audit at
least once a year without management
being present. In addition it reports to
the Board on how it has discharged
its responsibilities.
How the Committee has
discharged its responsibilities
During 2021 the Committee met four
times at appropriate intervals in the
financial reporting and audit cycles.
The work of the Committee during
the year focused on the key areas set
out below.
Monitoring the integrity of the
financial statements including
significant judgements
The Committee reviewed the half
andfull year financial reports including
the application of accounting policies,
estimates and judgements in their
preparation and, the clarity and
completeness of the disclosures.
The Committee also held discussions
withmanagement and the external
auditorand reviewed supporting papers
inrespect of these matters.
The key areas of focus and significant
issues considered during the year were:
– a review of revenue recognised on the
Group’s major contracts. The external
auditor identified complex customer
arrangements as an area of audit focus
and the Committee fully considered
these issues, including a review
of customer balances in relation
to these contracts at the year end.
The Committee concurred with these
balances. As Hilton’s contracts with
its customers include pre-agreed
and pre-defined revenue parameters,
performance measures and targets
there were no significant estimates
or judgements involved in relation
tothese contracts;
– a review of the accounting for the
acquisition of Fairfax Meadow and
the remaining shareholding in Dalco,
including the allocation of the purchase
price, including intangible assets and
goodwill. The Committee considered
papers prepared by management
and concurred with the preliminary
accounting treatment and disclosures
made in the Annual report;
– a review of accounting developments.
The Committee reviewed the impact
ofnew IFRS standards effective in the
year and their adoption by the UK;
– an assessment of the Group’s cost
plus contracts in relation to IFRS 16
to determine whether they contain
a lease. The Committee particularly
focused on new contracts entered into
during the year. As in previous years
the Committee remains comfortable
that there are no such implied
lease arrangements;
– reviewing the SV Cuisine acquisition
deferred consideration;
– reviewing the impacts and insurance
claim status from the fire at Hilton’s
facility in Belgium and reviewing and
agreeing the treatment of asset write
offs and related disclosures;
– the Committee held a separate
workshop with key executives to review
the work done and proposed disclosures
to meet the disclosure requirements
under the Task Force on Climate-related
Financial Disclosure (TCFD) framework
including the reasonableness of the
metrics and targets disclosed in the
Annual report. The Committee was
satisfied with the disclosures made
(pages 64 to 72); and
– a review of the continuing impact
of Covid-19 on the business and its
projected cash flows. The Committee
considered the impact of potential
sensitivities on the Group’s cash flows
and concurred that the statements made
in relation to going concern and the
Group’s viability were appropriate.
The Committee was satisfied that the
Annual report and financial statements
were, taken as a whole, considered to
be fair, balanced and understandable
and provide the information necessary
for shareholders to assess the Group
and Company’s performance, business
modeland strategy.
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Report of the Audit Committee
continued
The Committee reviewed a paper prepared
by the Chief Financial Officer relating to
going concern and the Group’s longer term
viability and concluded that the Group
should be considered as a going concern.
The proposed disclosures relating to the
Group’s longer term viability were agreed.
Thereafter the Committee recommended
that the Board approve these financial
reports for publication and that the letter
of representation to the external auditor
be signed.
Internal audit, risk management
and internal controls
During the year the Internal Auditor
reported to the Committee on the internal
audit work performed and on key focus
areas for future work. There was ongoing
focus on the continuing challenges
from the Covid-19 pandemic including a
roadmap out of lockdown. Additional work
included risk assurance mapping, climate
change including TCFD and business
continuity following the Belgium fire.
The Committee also reviewed the Group’s
cyber security and preparedness against
cyber attacks. The Committee noted the
findings from this and other work done
and agreed the internal audit plan for the
year ahead. The Committee was satisfied
that the internal audit function had been
effective in its work during the year.
The Committee received regular updates
on risk management including changes to
the assessments of risks and consideration
of emerging risks. The Committee also
reviewed the work done by the Risk
Management Committee and an updated
Principal Risks Register. At the end of the
year, the Committee considered a report
from the Head of Internal Audit on the
effectiveness of the risk management and
internal control systems. Based on the
report and the work done by internal audit
during the year, the Committee concluded
that the Group’s internal control and risk
management systems were operating
effectively and reported accordingly
tothe Board.
The Committee also receives updates
on any allegations of whistle-blowing,
bribery and fraud in the business at every
meeting together with individual updates
as required. The Committee was satisfied
with management actions in respect
ofsuch allegations.
External audit
The Committee oversees the relationship
with, and the performance of, the external
auditor. UK law sets the maximum duration
for an audit firm to conduct the statutory
audit of a public interest entity as 10 years
although can be extended to up to 20
years where a public tendering process is
conducted every 10 years. The Committee
has complied with the Competition
and Markets Authority ‘The Statutory
Audit Services for Large Companies
Market Investigation (Mandatory Use of
Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014’.
The current external auditor,
PricewaterhouseCoopers LLP (PwC),
were appointed in 2007 and reappointed
in 2016 following a public audit tender
process. As a result new external auditors
are required to be appointed by 2026.
However, it is the Audit Committee’s
current intention to undertake an audit
tender at an earlier date so that new
external auditors are appointed for the
2024 audit.
The current audit partner took over
responsibility for the audit in 2019 in
accordance with PwC’s policy that the
lead partner is rotated every five years
to ensure continued objectivity and
independence. The next rotation is due in
2024. The engagement partners on key
components are also required to rotate
every five years.
Meetings were held with the external
auditor before the audit to agree their
audit plan and fees and after their half
year review and year end audit work to
discuss their key findings. The Committee
considered issues raised by PwC in their
audit management letter ensuring that
they were discussed locally with an action
plan to resolve.
PwC annually confirm their compliance
with UK regulatory and professional
requirements including ethical standards
and that their objectivity is not
compromised. Their audit work is subject
to independent partner and periodic quality
control reviews. Potential independence
threats through the provision of non-audit
services are mitigated through various
safeguards. During 2021 the Committee
were advised that the Financial Reporting
Council’s (FRC) Audit Quality Review
team had selected the Hilton Food
Group plc 2020 audit for specific review.
PwC discussed a summary of the findings
from this review with the Audit Committee
in February 2022. There were no key
findings arising from the review.
After the conclusion of the audit, the
Committee reviewed the effectiveness
of the audit including PwC’s performance
based on a questionnaire completed
bymembers of the Committee and key
finance staff. The conclusion was that
theaudit had been effective.
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The Committee continues to be satisfied
with the independence and performance
of PwC and have therefore recommended
to the Board that they should be
reappointed as the Group’s auditor at the
forthcoming Annual General Meeting.
Non-audit services and fees
Hilton’s policy on the use of the external
auditor for non-audit services designed to
preserve the independence of the external
auditor was reviewed and updated during
the year. This policy categorises non-
audit services into (i) continuing services
which the Committee permits the external
auditor to undertake subject to a price cap;
(ii) irregular or significant services requiring
Committee approval on a case by case
basis; and (iii) non-permitted services.
The level of non-audit fees was reviewed
which in 2021 at £74,000 (including
£49,000 for work in connection with the
half year review) represents 10% of audit
fees in the year and an average of 12%
over three years which compares with
a 70% cap. Excluding items required by
EU or national legislation, the three year
average of non-audit fees was 4% of audit
fees. Further details of audit and non-audit
costs can be found in note 6 on page
134. The Committee considers that the
level of non-audit fees does not affect the
independence of the external auditor.
Other
The whistle-blowing policy was updated
to comply with the common minimum
internal reporting standards contained in
the EU Whistle Blower Directive and the
introduction of a 24/7/365 telephone and
web-based reporting service available in
all local languages. Meetings were held
with both the external and internal auditors
without management present.
Conclusion
The Committee considers that the work
performed as detailed above demonstrates
that the Committee continues to
operate effectively and discharges
its responsibilities.
I will be available to shareholders at the
forthcoming Annual General Meeting to
respond to any questions relating to the
work of the Committee.
On behalf of the Audit Committee
John Worby
Chairman of the Audit Committee
5 April 2022
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
The Committee considered
the continuing evolution
ofastrong, well-balanced
anddiverse Board.”
ROBERT WATSON OBE
CHAIRMAN OF THE NOMINATION COMMITTEE
Attendance at meetings ofthe
Nomination Committee
Number attended Percentage attended
Robert Watson OBE 2 100%
John Worby 2 100%
Christine Cross 2 100%
Angus Porter 2 100%
Rebecca Shelley 2 100%
Role of the Committee
The Nomination Committee is
established by the Board of Directors.
Terms of reference formalise the
roles, tasks and responsibilities
of the Committee to comply with
the UK Corporate Governance
Code and to achieve best practice.
The Committee terms of reference
are available and can be found
on the Company’s website at
www.hiltonfoodgroupplc.com.
The Nomination Committee leads
the process for Board appointments.
The Committee meets on an as
required basis.
Membership of the Committee
The Committee is chaired by the Chairman
of the Board. The independent Non-
Executive Directors are the other members
of the Committee who therefore comprise
the majority. Patricia Dimond joined the
Committee following her appointment as
aNon-Executive Director on 1 April 2022.
Responsibilities of the Committee
The main responsibilities of the Nomination
Committee which are contained in the UK
Corporate Governance Code and also in
the Committee’s terms of reference are:
– to review the structure, size and
composition of the Board and its
Committees which should have
acombination of skills, experience
and knowledge;
– to promote diversity of gender, social
and ethnic backgrounds, cognitive and
personal strengths;
– to give consideration to succession
planning for Directors and other senior
executives and identify appropriate
candidates for the approval of the Board;
– to make recommendations to the Board
with regard to any changes and oversee
new appointments to the Board;
– to review the results of the Board
performance evaluation relating to
thecomposition of the Board; and
– to review the time requirements
of Non-Executive Directors.
Report of the
Nomination Committee
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How the Committee has
discharged itsresponsibilities
During 2021 the Committee met twice
and considered a range of topics including
resource, succession planning and
reviewing time commitments.
The Committee considered the continuing
evolution and composition of the Board
inorder to maintain a strong, well-balanced
and diverse Board with particular focus in
the year on the Chairman, Non-Executive
Director and CFO positions.
The Committee gave further consideration
to the Chairman position and planning
for the time when I step down which
is anticipated to be in 2023 or 2024.
Plans fora process to appoint my
successor are being developed.
The Committee noted that John
Worby had advised the Board that
he will not be seeking re-election at
Hilton’s AGM. Therefore the need for
a further Independent Non-Executive
Director was identified to replace
John. Desirable attributes for potential
candidates included financial expertise
as well as experience in the food, retail
and international sectors and having
the capacity to give the necessary time
commitment. Hilton engaged Sam Allen
Associates, who have no connection
with the Company or individual directors,
to lead the search. They identified and
approached potential candidates leading
to the development of a shortlist who
were interviewed, and references
taken, following which the Committee
recommended to the Board that Patricia
Dimond be appointed. Following her
commencement on 1 April 2022 and
John’s departure in May the balance
oftheBoard independence will be
maintained at 57% and Board gender
diversity from 29% to 43%.
Nigel Majewski indicated his desire to
step down from the Board in a reduced
capacity. I am delighted that he has agreed
to stay with Hilton as director of investor
relations and strategic development.
Through the Group’s talent pipeline
aninternal candidate was identified as
the replacement Chief Financial Officer.
The Committee recommended to the
Board that Matt Osborne, the current
Group Financial Controller, be appointed
and he will take up the position following
the AGM in May.
Hilton is an inclusive business and we
ensure that we give equal access to all
opportunities. Our approach supports
diversity which is overseen by the
Committee. The gender balance of
those in senior management and their
direct reports continues to improve
increasing from 24% in 2020 to 28%
in 2021. We continue to develop
management structures to promote our
talent pipeline as part of a succession
planning process covering the Directors
and senior management positions to
enable, where possible, recruitment of
vacant positions from internal candidates.
Accordingly processes are in place
to assess the current management
population against criteria for larger
management roles they could potentially
fill in the future and put in place individual
development plans. Given the growth
inbusiness categories and geographies,
the Committee continues to monitor
the planning of resource implications.
The Chairman has discussions with
eachDirector to review and agree their
training and development needs.
Conclusion
The Committee considers that the work
performed as detailed above demonstrates
that the Committee continues to
operate effectively and discharges
its responsibilities.
I will be available to shareholders at the
forthcoming Annual General Meeting to
respond to any questions relating to the
work of the Committee.
On behalf of the Nomination Committee
Robert Watson OBE
Chairman of the Nomination Committee
5 April 2022
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Annual bonus and LTIP
outcomes are reflective of
strong Group and individual
performance.”
CHRISTINE CROSS
CHAIRMAN OF THE REMUNERATION COMMITTEE
Attendance at meetings ofthe
Remuneration Committee
Number attended Percentage attended
Christine Cross 2 100%
John Worby 2 100%
Angus Porter 2 100%
Rebecca Shelley 2 100%
Annual Statement
Dear Shareholder,
On behalf of the Board I am
pleased to present the Directors’
remuneration report for the 52 weeks
ended 2 January 2022. This report
sets out the Company’s policy on
Directors’ remuneration as well
as information on remuneration
paid to Directors during the year.
The report complies with the
requirements of The Large and
Medium-sized Companies and
Groups (Accounts and Reports)
(Amendment) Regulations 2013
and has been prepared in line with
the recommendations of the 2018
UKCorporate Governance Code
(the ‘Code’) and the Financial
Conduct Authority Listing Rules
(the‘Listing Rules’).
2021 saw continued disruption due to
the Covid pandemic combined with the
rapid organic and inorganic growth of the
Group. We continued to keep our factories
open and ensure that supermarket shelves
were stocked with fresh food products
whilst safeguarding our workforce. We did
not seek or receive any governmental
assistance or support including no use
offurlough in our production facilities
and noredundancies and our progressive
dividend policy was maintained.
A new facility in New Zealand opened
during the year. We also acquired Fairfax
Meadow and bought the remaining stake
in Dalco, both elements of our continued
diversification by product and route to
market. Amidst this, the Group delivered
significant adjusted operating profit
and earnings per share (EPS) growth of
over9%.
Directors’ remuneration
report
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Directors’ remuneration major
decisions and substantial changes
2021 pay outcomes
The Company continues to successfully
implement its strategy with a wide
spread of the Group’s operations across
Europe and the Asia Pacific region
which represents a material strength.
The financial results for 2021 were strong
reflecting ongoing efforts by management
to overcome significant challenges in our
response to Covid. The remuneration
policy operated as intended in terms of
Company performance and quantum and
accordingly no changes were considered
to be necessary and no discretion
exercised. The annual bonus will pay out
at 68% of the maximum and LTIP awards
will vest at 70.4% of the maximum.
There were no payments to Directors
during the year outside of the approved
Policy and there were no changes made
to the terms of the bonus or outstanding
share awards.
Annual bonus
The financial element of the annual bonus
was based on the Group’s underlying
adjusted profit before tax. The actual
performance exceeded the target by 1.4%
resulting in a financial element bonus of
65.0% of salary being awarded.
This is augmented by the personal element
of the bonus for the Executive Directors
which was based on performance
objectives set in respect of delivering the
strategy, planning for the future, leading
the food quality, health and safety and
environmental agenda, ensuring a culture
and talent pipeline and building positive
relationships with investors. Managing the
ongoing Covid situation was an additional
task to these objectives.
The Committee’s assessment of
performance was that both Executive
Directors should receive 20% of salary for
above target performance.
In aggregate a total bonus of 85.0% of
salary is payable to each Executive Director
in respect of 2021 performance out of a
maximum of 125% of salary.
Long Term Incentive Plan
The LTIP award granted in 2019 and due to
vest in 2022 was subject to performance
against stretching target metrics including
EPS with a weighting of 70% and TSR
with a weighting of 30%. Threshold EPS
performance was set at growth of 6% per
annum whereby 10% of the awards would
vest, rising to EPS growth of at least 15%
per annum whereby 100% of the awards
would vest. Threshold TSR performance
was median whereby 10% of the awards
would vest rising to upper quartile
whereby 100% of the awards would vest.
Following the end of the three year
performance period ended 2 January
2022, compound annual EPS growth
was 13.15% with 81.5% vesting and
TSR performance was 66th out of 163
constituents with 44.4% vesting meaning
that overall 70.4% of these awards
will vest.
The Committee believes the annual bonus
and LTIP outcomes are reflective of Group
and individual performance over the
relevant one and three year performance
periods. An outstanding performance that
demonstrated the strength and motivation
of the management team in operating
through taxing times.
New LTIP awards were granted in 2021
which are subject to EPS and TSR
performance conditions. The EPS 6%
threshold and 13% maximum compound
annual growth targets reflect Hilton’s
business cycle. The Committee considers
that these targets are robustly challenging
given the geographic expansion and
market dynamics.
2022 implementation
The current remuneration policy will
soon reach the end of its three year
term. Consequently a new policy will be
submitted at the forthcoming AGM for
approval by shareholders. The proposed
changes to the policy are summarised
below with the detailed policy wording
in the policy section of this Directors’
remuneration report together with
an illustration of future application of
remuneration policy. We have consulted
with major shareholders and the main
representative bodies to ensure that we
are implementing the policy in a way that
is aligned with good governance and
commercial best practice whilst motivating
the management team to continue
delivering for all stakeholders.
Base salaries
Our broad principle for base salary is
to align any increases for the Executive
and Non-Executive team with the wider
workforce and this principle has been in
place for two years for the CEO post his
succession to the role. The Committee
recognised Hilton’s continuing significant
growth, international breadth and
complexity achieved during 2021 and
also the Foppen and Agito acquisitions
completed since the end of the year.
This rapid expansion, designed to
deliver long-term sustainable value to
shareholders, is set to continue through
2022 and into 2023. This results in a
business where the production facilities
have increased by 61%, the number of
countries with operations by 33% and
the number of employees by over 50%
since 2018. Given the above, the CEO role
is significantly larger, more complex and
with more global demands and accordingly
the Committee approved an increase in
Philip’s base salary by 12.6% to £570k
from 1 January 2022 and with a further
realignment in January 2023.
Pension and benefits
Pension contributions for the CEO and
CFO, and all future Executive Director
appointments, will be workforce aligned,
as required by the Code. Contributions will
be reduced from 15% to 7% of salary,
following the approval of the triennial
remuneration policy at the 2022 AGM
bringing the Company into compliance
with the Code.
Variable pay
For 2022 the maximum annual bonus
opportunity will continue to be capped at
125% of base salary for Executive Directors
which has remained unchanged for the
past eight years. The financial element
of up to 105% of salary will be measured
by comparing targeted performance
against the underlying adjusted profit
before acquisition intangible amortisation,
depreciation of fair value adjustments to
property, plant & equipment, exceptional
items and tax removing any tax implications
which are largely out of management’s
control. In addition 20% of salary will be
available based on individual performance
against personal and strategic objectives
aggregating to a 125% of salary maximum
bonus opportunity for the Executive
Directors. The annual bonus targets are
considered to be commercially sensitive
at this point although full disclosure of the
targets and performance against them will
be provided on a retrospective basis in next
year’s Directors’ remuneration report.
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Under the new policy the maximum annual
bonus opportunity to be operated from
2023 will increase to 150% of salary for
which a bonus deferral mechanism will be
introduced whereby one third of any bonus
over 50% of salary will be deferred into
Hilton shares for two years.
The 2022 LTIP awards for Executive
Directors are expected to be granted
over shares equal to 175% of salary with
vesting determined by stretching EPS
and relative TSR performance targets.
Under the new policy this limit will remain
unchanged. Given the considerable focus
on ESG and in particular climate-based
measures linked to science-based targets,
wastage and carbon neutrality, we have
developed robust quantitative measures
over the last year and plan to introduce
them from the 2023 LTIP onwards once
the Committee is comfortable with the
calibration of the targets.
Other policy changes
Annual bonus and LTIP malus and
clawback provisions will be updated
toalign with the Code.
The CFO shareholding guideline will
increase from 175% of salary to 200%
of salary. No change will be made
to theCEO’s shareholding guideline
(300%of salary).
Post cessation shareholding guidelines
will increase to 100% of the relevant
in-employment guideline for two years
post cessation (from 50% for one
year currently).
Activities of the Committee
The Committee’s main activities during
2021 are summarised below and full
details are set out in the relevant sections
of this report.
– Agreeing Executive Director base
salaryincreases for 2022;
– Agreeing annual bonus award levels for
2020 and setting the targets for 2022;
– Reviewing the EPS performance targets
and determining the percentage vesting
for the 2018 LTIP awards which vested
in 2021;
– Approving the LTIP awards granted
in 2021;
– Approving the issue of the Sharesave
scheme for 2021;
– Reviewing the CEO pay ratio disclosures;
– Reviewing pensions across the Group
in order to approve a pension alignment
strategy; and
– Performing an annual evaluation of
theCommittee’s performance and
reviewing its terms of reference.
In addition, the Committee considered
how the remuneration policy and practices
are consistent with the six factors set out
in Provision 40 of the Code:
Clarity – Our policy (current and proposed)
approved by shareholders in 2019 is
understood by our senior executive team
and has been clearly articulated to our
shareholders and representative bodies
(both on an ongoing basis and when
changes are proposed). This includes
appropriate two way dialogue with staff,
and consideration of their views in respect
of remuneration within the Group.
Simplicity – The Committee is mindful
of the need to avoid overly complex
remuneration structures which can be
misunderstood and deliver unintended
outcomes. Therefore, a key objective
of the Committee is to ensure that
our executive remuneration policies
and practices are straightforward to
communicate and operate.
Risk – Our policy (current and proposed)
has been designed to ensure that
inappropriate risk-taking is discouraged
and will not be rewarded through (i) the
balanced use of annual and long-term pay
which employ a blend of financial, non-
financial and shareholder return targets;
(ii) the significant role played by equity
in our incentive plans; and (iii) malus/
clawback provisions.
Predictability – Our incentive plans are
subject to individual caps, with our share
plans also subject to market standard
dilution limits.
Proportionality – There is a clear link
between individual awards, delivery of
strategy and our long-term performance.
In addition, the significant role played by
performance-related pay, together with
the structure of the executive directors’
service contracts, ensures that poor
performance is not rewarded.
Alignment to culture – Our executive pay
policies are fully aligned to our culture
through the use of metrics in both the
annual bonus and LTIP.
Use of discretion
Under the Code and its terms of reference,
the Committee has the right to exercise
independent judgment and discretion in
itsassessment of Directors’ remuneration,
taking account of the performance
of the Company, Directors’ individual
performances and wider circumstances.
The Committee was satisfied that no
discretion needed to be exercised in
respect of the policy or its operation for
the52 weeks ended 2 January 2022.
Looking ahead
The Remuneration Committee is
committed to ensuring that the policy and
its implementation remains compliant with
all legislative requirements as they come
into force, and is aligned with evolving best
practice, while continuing to take account
of our overarching remuneration philosophy
and delivering value to shareholders.
Transparency and equality of pay across all
grades, gender and geographies remains
akey focus of the business and is a regular
item on the Committee’s agenda.
Shareholder consultation
andAGMapprovals
Every year all shareholders have the right
to vote on the executive remuneration as
proposed by the Board. At our forthcoming
2022 AGM an advisory resolution in
respect of the Directors’ remuneration
report (excluding the policy) together
with a binding resolution on the proposed
new remuneration policy will be put
to shareholders. I would like to thank
investors and the representative bodies
for their positive feedback on the new
policy proposals which the Committee
considered in detail.
I hope we continue to receive your
supportin respect of our Annual report
atour forthcoming AGM.
Christine Cross
Chair of the Remuneration Committee
Directors’ remuneration report
continued
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Directors’ remuneration policy
Introduction
The current remuneration policy was
passed by a binding shareholder vote
at the Company’s 2019 Annual General
Meeting and became effective from the
date of that meeting. Following its three
year term a new policy, as set out below,
will be proposed as a resolution subject
to a binding shareholder vote at the
Company’s 2022 Annual General Meeting.
The new policy takes into account the
provisions of the 2018 UK Corporate
Governance Code and other good practice
guidelines from institutional shareholders
and shareholder bodies. Subject to
approval by shareholders it will become
effective from the 2022 AGM date and
shall be in place for the next three year
period unless a new policy is presented
toshareholders before then. All payments
to Directors during the policy period will
beconsistent with the approved policy.
Policy scope
The Policy applies to the Chairman,
Executive Directors and Non-
Executive Directors.
Overview of remuneration policy
The Committee considers that the Group’s
remuneration policies should encourage a
strong performance culture and emphasise
long term shareholder value creation in order
to be aligned with shareholders’ interests.
The policy, developed following a
comprehensive remuneration review,
hasthe following objectives:
– To develop a remuneration structure
which supports the Company’s strong
performance culture and our key objective
of creating long term shareholder value;
– To enable the Company to recruit and
retain executives with the capability
to lead the Company on its ambitious
growth path;
– To ensure our remuneration structures
are transparent and easily understood
both internally and externally;
– To align the interests of all our stakeholders;
the HFG team, our customers, the
communities and environment in which
weoperate andour shareholders; and
– To reflect principles of best practice.
A summary of the key changes proposed
for inclusion in the new remuneration
policy are as follows:
– Annual bonus potential for the CEO and
CFO to increase from 125% to 150%
of salary from the next bonus year
commencing on 1 January 2023;
– The introduction of a bonus deferral
mechanism such that one third of
anybonus over 50% of salary to be
deferred into HFG shares for two years;
– Pension contributions for the CEO and
CFO, and all future Executive Director
appointments, to be workforce aligned,
reducing from 15% to 7% of salary,
totake effect from the date of 2022
AGM Policy approval;
– Annual bonus and LTIP malus and
clawback provisions to be updated
to align with the 2018 UK Corporate
Governance Code;
– CFO shareholding guideline to increase
from 175% of salary to 200% of salary.
No change will be made to the CEO’s
shareholding guideline (300% of salary);
– Post cessation shareholding guidelines
increased to 100% of the relevant
in-employment guideline for 2 years
post cessation (from 50% for 1 year
currently). The increased guideline
will only include shares from share
awards granted post the 2022 AGM (i.e.
own shares purchased and shares from
past awards will be excluded); and
– No change to the current 175% of salary
LTIP potential albeit the Committee
intends to supplement the EPS and
relative TSR performance measures
with ESG performance measure(s)
from2023 onwards.
Remuneration policy table
The following table summarises all elements of pay which make up the total remuneration opportunity for Directors, and details how
each element is operated and links to the Company’s strategy.
Element Purpose and link to strategy Operation Maximum opportunity
Base salary
To recruit and reward
executives of a suitable
calibre for the role and
duties required.
Normally reviewed annually by the Committee with effect from 1
January, taking account of Company size and structural changes,
performance, individual performance, changes in responsibility
and levels of increase for the broader employee population.
Reference is also made to levels within relevant FTSE and
industry comparators on a periodic basis although this is only
one factor that is taken into account when determining pay
levels and increases.
The Committee considers the impact of any base salary
increase on the total remuneration package.
Pay levels throughout the organisation are also taken into account
in order to ensure adequate provision for timely succession.
Normally capped by the increases
made to the general workforce.
On occasion it may be appropriate for
a new director to be positioned on a
below market base salary but then to
provide above market increases as the
executive gains experience in the role.
Benefits
To provide market
competitive benefits
toensure the retention
ofemployees.
The Company typically provides:
– Company car and fuel;
– Private healthcare; and
– Other ancillary benefits, including relocation expenses
(asrequired).
Any reasonable business related expenses (including
taxthereon) may be reimbursed.
Executive Directors are eligible for other benefits which are
introduced for the wider workforce on broadly similar terms.
The value of traditional benefits is
based on the cost to the Company
andis not pre-determined.
Relocation expenses or benefits will
take into account the nature of the
relocation and will be provided on
afairand reasonable basis.
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ADDITIONAL
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Element Purpose and link to strategy Operation Maximum opportunity
Pension
To provide adequate
retirement benefits.
Employer contributions are made to money purchase pension
schemes or in certain circumstances a salary supplement may
be paid in lieu of such pension contributions.
Up to 7% of basic salary to align
withthe broader workforce.
Annual bonus
To encourage and reward
delivery of the Company’s
short term financial and/or
strategic objectives.
The Committee will review performance metrics at the
start ofthe year. Performance criteria will be aligned to the
Company’s strategic objectives at that time.
The majority of the bonus will be linked to challenging financial
metrics, which will typically include a measure of profit.
Strategic or other individual targets may be used to determine
aminority of the bonus outcome.
For financial measures, typically a sliding scale of targets will
beset. Where operated, no more than 20% of that element
shall be payable for threshold performance. It may not be
possible toset sliding scale targets for individual or strategic
measures but full disclosure on the objectives and performance
against these will be provided on a retrospective basis.
One third of any bonus over 50% of salary will be deferred
intoshares for two years.
Dividend equivalents may be paid on the value of dividends
paid during the vesting period on any deferred bonus shares.
The payment may be in the form of additional shares and
mayassume reinvestment.
Bonuses are subject to malus and claw-back provisions in
circumstances of misstatement, error or gross misconduct,
reputational damage and insolvency/corporate failure.
Up to 150% of base salary (125%
ofbase salary for 2022).
Long term
incentives
To encourage and
reward delivery of the
Company’s medium term
objectives. Toprovide
a way of building up a
meaningful shareholding
in the Company and
providing alignment with
shareholders’ interests.
Under its Long Term Incentive Plan (LTIP) Hilton makes annual
awards of conditional shares or nil cost options to selected
senior executives.
Awards vest subject to continued employment and satisfaction
of challenging performance conditions measured over three
years to be satisfied by the issue of new shares or through
purchasing shares in the market.
The performance measures will be based on financial
(e.g.EPS),share-price related (e.g. relative TSR) and, when
appropriate, ESG performance targets.
Performance targets will be determined at the date of
grant withup to 10% vesting at threshold performance.
The Committee may introduce new, or reweight existing,
performance measures so that they are aligned with
the Company’s strategic objectives at the start of each
performanceperiod. Quantitative ESG measures aligned
withCompany strategic objectives may alsobe added
cappedat 15% of the total award.
Awards are subject to malus and claw-back provisions for
three years following vesting in circumstances of material
misstatement, error or misconduct, reputational damage
andinsolvency/corporate failure.
A two-year post-vesting holding period will operate for LTIP
awards granted to Executive Directors.
Dividend equivalents may be paid on the value of dividends
paidduring the vesting period or any holding period (if
applicable). The payment may be in the form of additional
shares and may assume reinvestment.
Up to 175% of salary for
allExecutiveDirectors.
All employee
share schemes
To encourage employee
share ownership
and thereby increase
their alignment with
shareholders.
All employees are eligible to join any permissible all employee
scheme. Executive Directors will be eligible to participate in
anyall employee share plan operated by the Company on the
same terms as other eligible employees.
Under Hilton’s Sharesave Scheme (HMRC approved for the
UKand Ireland) regular savings over three years is followed
byasix month period to exercise the options granted.
No performance conditions attach to options granted
undertheScheme.
The maximum level of participation
is subject to the limits imposed
byHMRC from time to time (or
alowercap set by the Company).
Directors’ remuneration report
continued
100
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Element Purpose and link to strategy Operation Maximum opportunity
Shareholding and
post cessation
guidelines
To further align Executive
Directors’ interests
with those of long term
shareholders and other
stakeholders.
Executive Directors are expected to build a holding in the
Company’s shares equal to a minimum value of 300% of
basesalary for the Chief Executive Officer and 200% of
basesalary for all other Executive Directors.
To the extent that this guideline has not been achieved,
executives are normally required to retain 50% of any
vested share awards (after the sale to meet tax obligations).
Shareholdings for new executive Board members can be
builtover a five year period.
N/A
Post cessation shareholding guidelines will increase to 100%
of the relevant in-employment guideline for two years post
cessation (from 50% for one year currently). However the
increased guideline will only include shares from share awards
granted post the 2022 AGM (i.e. own shares purchased and
shares from past awards will be excluded). The previous policy
post cessation guideline will continue to apply until sufficient
shares under the new policy have been acquired.
N/A
Non-Executive
Director fees
To attract and retain
a high-calibre Non-
Executive Chairman and
Non-Executive Directors
by offering a market
competitive fee level.
The Non-Executive Directors receive fees for carrying out
theirduties.
Fees are reviewed annually. A base fee is augmented for
Committee Chairmanship or membership to take into
accountthe additional time commitment and responsibilities
associated with those committees. Neither the Chairman
northe Non-Executive Directors are eligible for any
performance related remuneration.
Non-Executive Director remuneration is determined by
the Chairman and the Executive Directors. The Executive
Chairman’s remuneration is determined by the Remuneration
Committee. If there is a temporary yet material increase
inthetime commitments for Non-Executive Directors,
theBoard may pay extra fees on a pro-rata basis to
recognisetheadditional workload.
Additional fees may be payable in relation to extra
responsibilities undertaken such as chairing a Board
Committeeand/or a Senior Independent Director role
orbeingamember of a committee.
Any reasonable business-related expenses (including
taxthereon) can be reimbursed if determined to be
ataxablebenefit.
As for the Executive Directors,
thereisno prescribed maximum
annual increase, although will normally
align to the workforce pay increase.
Any increases to fee levels will
take into account the general
salary increase for the broader
UKemployee population, the level
of timecommitment required to
undertake the role and the level
offeespaid in the general market.
1. As Hilton operates in a number of geographies, remuneration practices vary across the Group. However, employee remuneration policies are based on the same broad principles and the
remuneration policy for the Executive Directors is designed with regard to the policy for employees as a whole. For example, the Committee takes into account the general base salary
increase for the broader UK employee population when determining the annual salary review for the Executive Directors. There are some differences in the structure of the remuneration
policy for the Executive Directors and other senior employees, which the Remuneration Committee believes are necessary to reflect the different levels of responsibility of employees
across the Company. The key differences in remuneration policy between the Executive Directors and employees across the Group are the increased emphasis on performance
related pay and the inclusion of a share based long term incentive plan for Executive Directors. There is a lower aggregate incentive quantum at below executive level with levels driven
by market comparatives and the impact of the role. Long term incentives are not provided outside of the most senior executives as they are reserved for those viewed as having the
greatestpotential to influence Group levels of performance.
2. Long term incentive and Sharesave schemes are operated in accordance with their respective Scheme and other rules under which the Committee has some discretion relating to their
administration which is consistent with market practice. Under the LTIP such discretion covers:
– participation;
– the timing of the grant of award and/or payment;
– treatment of awards in the event of good leavers (including determination of good leaver status), death and intervening events (including variations in capital and change of control)
whichaddress vesting date, exercise period and reduction in number of vesting options;
– minor alterations to benefit the plan administration, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment; and
– where an event has occurred such that it would be appropriate to amend the performance condition so long as the altered performance condition is not materially less difficult to satisfy;
andadjusting the long term incentive vesting outcome if the level of vesting is not considered to be commensurate with performance over the period. The Committee, in using its
discretion, would act fairly and reasonably and would seek to consult with shareholders prior to the use of any upwards discretion.
OVERVIEW STRATEGIC
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ADDITIONAL
INFORMATION
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Other policy information
Element Description
Non-UK based
Directors and
foreign currency
translation
Directors may be employed who are based outside of the UK and therefore subject to the employment laws and accepted practice
for that country which may be different to those in the UK. The Committee will ensure that any future overseas based Directors are
remunerated on an equivalent basis as in the UK albeit that it may be necessary to satisfy local statutory requirements.
Approach to
recruitment
The remuneration package for a new Executive Director would be set in accordance with the terms of the Company’s approved
remuneration policy in force at the time of appointment. For the appointment of a new Chairman or Non-Executive Director, the
feearrangement would be set in accordance with the approved remuneration policy in force at that time.
The salary for a new Executive Director shall take into account the experience and calibre of the individual and the market rate required
for recruiting him or her. The initial salary may be set below the normal market rate, with phased increases over the first few years as
theExecutive Director gains experience in their new role. Pension provision will be workforce aligned.
Depending on the timing of the appointment, the Committee may deem it appropriate to set different annual bonus performance
criteria for the remainder of the first performance year of appointment. The bonus would be pro-rated to reflect the portion of the
yearinemployment. In addition, an LTIP award can be made shortly following an appointment (providing that the Company is not
inaclosed period). The maximum bonus and LTIP grant level will be in accordance with the maxima outlined in the policy table.
If an individual is forfeiting remuneration from his or her previous employer, the Committee may offer additional cash and/or share-based
elements when it considers these to be in the best interests of the Company and its shareholders. Such payments would reflectand
be limited to remuneration relinquished when leaving the former employer and would reflect (as far as possible) the nature and time
horizons attaching to that remuneration and the impact of any performance conditions. The aim of any such award would be to ensure
that so far as possible, the expected value and structure of the award will be no more generous than the amount being forfeited.
Shareholders will be informed of any such payments in the remuneration report.
For an internal Executive Director appointment, any variable pay element awarded in respect of the prior role will be allowed to pay
outaccording to its terms. In addition, any other ongoing remuneration obligations existing prior to appointment may continue.
For external and internal Executive Director appointments the Committee has the discretion to pay ongoing relocation costs for
areasonable period, as well as one-off payments (assuming they are fair and reasonable).
Any share-based awards referred to in this section will be granted as far as possible under the Company’s existing share plans.
Ifnecessary, awards may be granted outside of these plans as permitted under the Listing Rules.
Payment for
lossof office
Payments for loss of office are made in accordance with the terms of the Directors’ service contracts as below.
On termination no bonus is payable unless the Committee determines good leaver circumstances apply where, subject to performance
conditions, a pro-rata bonus may be payable at the Company’s discretion.
LTIP awards will generally lapse on cessation although they may be capable of vesting in certain good leaver situations. For good leavers,
outstanding share awards may vest at the original vesting date, or on the date of cessation if the Committee decides, subject to time
pro-rating and the performance conditions being satisfied.
In accordance with its terms of reference the Committee ensures that contractual terms on termination, and any payments made, are
fair to the individual, and the Company, that failure is not rewarded and that the duty to mitigate loss is fully recognised. The Committee
may pay reasonable outplacement and legal fees where considered appropriate. In addition, the Committee may pay any statutory
entitlements or settle or compromise claims in connection with a termination of employment, where considered in the best interests
ofthe Company.
Consideration
ofshareholder
views
The Committee is always interested in shareholder views and is committed to an open dialogue. Accordingly, the Committee will seek to
engage with major shareholders on any proposed significant changes to its remuneration policies or in the event of a significant exercise
of discretion. The Committee considers shareholder feedback received in relation to each AGM alongside views expressed during the
year. In addition, we engage actively with our largest shareholders and consider the range of views expressed.
Consideration
of employment
conditions
elsewhere in
theGroup
The Committee takes into account the general employment reward packages of employees across the Group when setting policy
forExecutive Director remuneration and is kept informed of changes in pay across the Group. Employees have not previously been
actively consulted on Director remuneration policies but this may be considered in future where appropriate.
102
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Directors’ remuneration report
continued
Director service contract and other relevant information
Provision Executive Directors Non-Executive Directors
Term
Philip Heffer and Nigel Majewski appointed on 24 April 2007
withno fixed term
Robert Watson – from 1 January 2021
John Worby – from 23 March 2019
Christine Cross – from 23 March 2019
Angus Porter – from 1 July 2018
Rebecca Shelley – from 1 April 2020
Re-election
atAGM
Annually under the Company’s Articles and for FTSE 350
companies under the UK Corporate Governance Code
Annually under the Company’s Articles and for FTSE 350
companies under the UK Corporate Governance Code
Notice
period
Up to 12 months for both the Company and the Director.
Theservice contract policy for new appointments will be
onsimilarterms as existing Directors
Six months for both the Company and the Director
Termination
payment/
payments in
lieu of notice
Up to 12 months’ salary in lieu of notice.
If a claim is made against the Company in relation to a termination
(e.g. for unfair dismissal), the Committee retains the right to make
an appropriate payment in settlement of such claims as considered
in the best interests of the Company. Additional payments in
connection with any statutory entitlements (e.g. in relation to
redundancy) may be made as required
None
Change
of control
There are no enhanced terms in relation to a change of control There are no enhanced terms in relation to a change of control
External
appointments
External appointments can be held and earnings retained
fromsuch appointments with the Company’s permission
N/A
Inspection
Executive Director service agreements and Non-Executive Director appointment letters are available for inspection at the Company’s
registered office.
Illustration of future application of remuneration policy
The chart below illustrates 2022 Executive Directors’ remuneration at different levels of performance under the remuneration policy.
2022 DIRECTOR REMUNERATION ILLUSTRATION £’000
Minimum
630 100%
Philip Heffer
On target
1,34247%
Maximum
31% 2,055
Maximum*
27%
32% 21%
41% 28%
37% 36% 2,340
Minimum 459100%
On target 98247%
Maximum 30% 1,504
Maximum* 27%
32% 21%
42% 28%
37% 36%
1,713
Nigel Majewski
Fixed One year targets Multiple year targets
* With 50% share price growth
Notes
1. Fixed elements of pay comprise salary and fees, benefits and pension. Salary and fees include known increases and benefits are included at 2021 levels. Pension is included at 7%.
2. One year targets represent the annual bonus under the updated remuneration policy even though it will not apply until 2023. The minimum scenario assumes no bonus on the basis
thatthreshold is not reached, the on target scenario assumes aggregate 75% of salary bonus, and the maximum scenario assumes the full 150% bonus.
3. Multiple year targets comprise long term incentives. The minimum scenario assumes that threshold performance is not reached with no awards vesting, the on target scenario
isbasedon 50% of the awards vesting and the maximum scenario reflects the maximum performance with 100% of the awards vesting.
4. The basis of the calculation of the share price appreciation is that the share price embedded in the calculation for the ‘maximum’ bar chart is assumed to increase by 50% across
theperformance period.
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Annual report on remuneration
Role of the Committee
Remuneration policy is delegated by the
Board to the Remuneration Committee
established by the Board of Directors.
Terms of reference formalise the
roles, tasks and responsibilities of the
Committee to comply with the Code and
to achieve best practice. The Committee’s
terms of reference are available and can
be found on the Company’s website at
www.hiltonfoodgroupplc.com.
The Committee meets at least twice
per year.
Membership of the Committee
Members of the Committee are appointed
by the Board on the recommendation
of the Nomination Committee and
in consultation with the Chair of the
Remuneration Committee. In 2021 the
Committee comprised the independent
Non-Executive Directors Christine Cross,
John Worby, Angus Porter and Rebecca
Shelley. Patricia Dimond joined the
Committee following her appointment as
a Non-Executive Director on 1 April 2022.
The Committee is chaired by Christine
Cross who had extensive experience of
serving on remuneration committees
prior to her appointment tochair
the Committee.
Other individuals such as the Chairman,
Chief Executive and external advisors
may be invited by the Committee to
attend meetings as and when required.
The Company Secretary is in attendance
atall meetings.
Responsibilities of the Committee
The main responsibilities of the
Remuneration Committee which are
contained in the Code and also in the
Committee’s terms of reference are:
– setting the remuneration policy and
agreeing payments for the Company’s
Non-Executive Chairman, the Executive
Directors and Senior Leadership Team;
– approving the design of, and determining
the targets for, any performance-related
pay schemes operated by the Company
and approving the aggregate annual
payments made under such schemes;
– reviewing the design of all share
incentive plans for approval by the
Boardand shareholders; and
– reviewing all elements of workforce
remuneration and associated policies.
External advisors
The Committee appointed and is advised
by FIT Remuneration Consultants LLP
on remuneration matters. FIT’s fees,
on a time and expense basis, for advice
provided to the Remuneration Committee
during the year were £12,750. FIT does
not provide any other services to the
Group and the Committee is satisfied
that it provides independent and objective
remuneration advice. FIT is a signatory to
the Code of Conduct for Remuneration
Consultants in the UK, details of which
can be found on the Remuneration
Consultants Group’s website at
www.remunerationconsultantsgroup.com.
Share scheme dilution limits
The Company applies established good
governance restrictions over the issue of
new shares under all its share schemes
of 10% in 10 years and 5% in 10 years for
discretionary schemes. As at 2 January
2022 the headroom available under these
limits was 1.9% and 0% respectively.
Statement of voting at Annual
GeneralMeeting
The following table shows the voting
results in respect of the 2020 Directors’
remuneration report (other than the
Directors’ remuneration policy) at the 2021
AGM and the last time the remuneration
policy was approved by shareholders
atthe2019 AGM:
Approve
Directors’
remuneration
report
Approve
Directors’
remuneration
policy
AGM year 2021 2019
Resolution type Advisory Binding
Votes for % 64,582,070 59,981,468
97.79% 86.35%
Votes against % 1,456,835 9,482,939
2.21% 13.65%
Votes withheld 814,022 844,433
The remainder of this section is subject
to audit.
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Directors’ remuneration report
continued
Single total figure table of remuneration
The remuneration of individual Directors is set out below.
52 weeks to 2 January 2022
Salary
and fees
(note 1)
£’000
Benefits
(note 2)
£’000
Pension
(note 3)
£’000
Total
fixed pay
£’000
Annual
bonus
(note 4)
£’000
Long term
incentive
(note 5)
£’000
Total
variable pay
£’000
Total
£’000
Executive Directors
Philip Heffer 506 20 76 602 430 654 1,084 1,686
Nigel Majewski 410 12 62 484 349 530 879 1,363
Non-Executive Directors
Robert Watson 265 – – 265 – 282 282 547
John Worby 60 – – 60 – – – 60
Christine Cross 60 – – 60 – – – 60
Angus Porter 55 – – 55 – – – 55
Rebecca Shelley 55 – – 55 – – – 55
Total 1,411 32 138 1,581 779 1,466 2,245 3,826
53 weeks to 3 January 2021
Salary
and fees
(note 1)
£’000
Benefits
(note 2)
£’000
Pension
(note 3)
£’000
Total
fixed pay
£’000
Annual
bonus
(note 4)
£’000
Long term
incentive
(note 5)
£’000
Total
variable pay
£’000
Total
£’000
Executive Directors
Robert Watson 397 24 60 481 497 387 884 1,365
Philip Heffer 496 28 74 598 620 547 116 7 1,765
Nigel Majewski 402 19 60 481 502 454 956 1,437
Non-Executive Directors
John Worby 59 – – 59 – – – 59
Christine Cross 59 – – 59 – – – 59
Angus Porter 51 – – 51 – – – 51
Rebecca Shelley
(appointed 1 April 2020) 38 – – 38 – – – 38
Total 1,502 71 194 1,767 1,619 1,388 3,007 4,774
Notes
1. Salary and fees
Reflects salaries/fees paid to Directors in respect of 2021 (with 2020 comparatives).
2. Benefits
Benefits provided comprised company car and fuel and private healthcare.
3. Pension
Payments were made during 2021 to money purchase pension schemes or in lieu as a salary supplement at the rate of 15% of base salary for all Executive Directors.
4. Annual bonus
The 2021 annual bonus had two elements. The financial element bonus was based on adjusted profit before tax performance against a sliding scale of targets. A strategic element bonus
was available based on achievement of personal objectives. The bonus outcome for 2021 for all Executive Directors is summarised below.
Bonus element Metric Threshold performance Target performance Maximum stretch target 2021 achieved
Financial Adjusted profit before tax £61.1m £66.3m £69.6m £67.2m
% against target 92% 100% 105% 101.4%
% of base salary 20% 50% 105% 65.0%
Strategic % of base salary 20% 20.0%
Total % of base salary 125% 85.0%
The Executive Directors were given a number of different personal and strategic objectives individually tailored to their role and the needs of the business in the year now under review.
The achievements against these objectives were considered carefully by the Committee. A summary of these objectives and achievements for the Executive Directors is set out below
together with the assessment and overall outcome. Covid 19 added an additional task to all objectives, not envisaged when these were written, but the performance of the Group through
the pandemic is testament to efforts in maintaining supply to customers whilst protecting the workforce. In a year of exceptional performance both Executive Directors were deemed
tohave achieved a full 20% on their strategic objectives.
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
105
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Philip Heffer
Objectives Detailed Targets Remuneration Committee Assessment
1. Driving growth & financial performance
– Implement the strategic plan with
investment choices
1.1 Secure major retailer contracts in all markets
formeatand fish with scope for range expansion
1.2 Ensure expansion of continental European
andAustralasiafactory projects
1.4 Make substantial progress towards an additional
major market
1.5 Proactively develop the non-meat elements of
thebusiness through organic growth and M&A
1.6 Grow share in new categories with existing
&new customers
1.7 Manage the implications of Brexit and Covid-19
Met in full Various meat, including fresh food, and fish contracts agreed.
Expansion of Hilton Seafoods has commenced. The New Zealand
facility opened in July 2021. Fish and poultry supplies in Denmark
have commenced. Potential new projects are being negotiated.
Acquisitions of Fairfax Meadow and the remaining shares in
Dalco were completed and agreement reached on Foppen.
Strong plant-based market share growth. All factories kept
openthrough Covid.
2. Customer experience
– Ensure that our customers are assured
ofthe leading market proposition in
thefresh protein sector
2.1 Continue to develop HFG record on food safety,
provenance & quality
2.2 Develop a comprehensive ESG policy whilst
proactivelysupporting our customers’ CSR agendas
2.3 Focus on customer and end consumer sales data
toinform a structured plan for product innovation
Met in full Quality and food safety culture significantly improved across the
Group. ESG ratings have improved and our CSR credentials with
our customers are seen as a USP of Hilton. Insights significantly
improved and innovation of over 400 new products in 2021.
3. Continuous improvement
– Maintain & develop efficiency
of operations
3.1 Oversee the strategic plan, review all existing plant
and planned capex investment to align operating
costsand efficiency
3.2 Support our lead on quality & health & safety
through a focus on quantitative KPIs & metrics
tomonitor performance
3.3 Fully utilise & develop technology expertise within
theGroup to maintain competitive advantage
3.4 Leverage the central function & local business units
tofoster shared learnings and continue improvement
Met in full Strategic plan is on track. Capex proposed for 3 years for cost
reduction programme, but delayed due to recent M&A activity.
Full health & safety and quality KPI metrics implemented
across all regions. Technical capability improved within the
Hilton teams. Foods Connected is gaining new business
wins. Consulting services arm is expanding boosted by
Agito JV investment. Cyber security improved across the
Group. There areongoing shared learnings which will be
developed further.
4. Culture, talent, succession
planningand diversity
– Maintain & develop efficiency
of operations
4.1 Annually review succession plans for the
executiveleadership team
4.2 Oversee the development of a clear job banding
plusaninclusion policy for the Group
4.3 Oversee the employee engagement plan
&followup actions
Met in full Succession and capability plan reviewed and updated during
the year. Job banding and inclusion policy implemented.
Engagement survey completed and action plan implemented.
Outcome of strategic personal objectives, Remuneration Committee assessment: After considering the performance against the targets set out above,
theCommittee awarded a 20% bonus against the strategic objectives.
Nigel Majewski
Objectives Detailed Targets Remuneration Committee Assessment
1. Financing strategy
– Support the growth agenda
1.1 Overall approach to next stage of renewal
offacilities,new builds & acquisitions
1.2 Growth agenda items of key capital market
andinvestor focus
1.3 Support for ongoing customer contract
developmenttoalign with strategic goals
Met in full Screening and management of all investments to meet long-term
financial plans and operational needs. Raised £75m equity to
ensure HFG growth can be funded within the stated net debt
to EBITDA limit. Strategy accepted by funds and analysts as
evidenced during roadshow for acquisition of Foppen, Fairfax
and Dalco.
2. Investor relations
– In existing & potential new markets
2.1 Continue to build relationships. Extend and
onboardnewinvestors as required
Met in full Ongoing positive relationships. A number of new investors
introduced as part of the equity raise. Supported introduction
of more effective PR support. Upgraded broker support team
through selection and execution of agreement with a new broker.
3. Continued growth & financing
– Appropriate to support
strategy&operations
3.1 Update long term financial plans as a basis
fordemonstrating growth
3.2 Put in place financing as required
3.3 Execute acquisitions to support growth
3.4 Support commercial discussions for organic growth
Met in full Long term plans regarded as credible when presented to
enlarged bank consortium. Raised £424m through expanded
bankconsortium. Discussions continue to move forward
onorganic growth projects. Successfully completed four
acquisitions and JV transactions.
4. Succession planning
– Financial support, talent
development&succession
4.1 Continue the development of the Finance Team
&Financial Reports in line with business needs
Met in full Successor identified, endorsed and underway to ensure
asmoothtransition in which relationships are kept positive
Outcome of strategic personal objectives, Remuneration Committee assessment: After considering the performance against the targets set out above,
theCommittee awarded a 20% bonus against thestrategic objectives.
5. Long term incentive
Long term incentives comprise the number of share awards under the Company’s share plans where the achievement of performance targets ended in the year multiplied by the difference
between the share price on the date of vesting and the exercise price.
Awards were granted in 2019 under the Long Term Incentive Plan which are due to vest in 2022 subject to performance conditions covering the three financial years 2019-2021 with
a70%weighting given to an EPS metric and a 30% weighting to a TSR metric. The share price at the date the awards were granted was £10.66. The expected long term incentive
outcomeissummarised below.
EPS metric Threshold performance Maximum performance 2021 achieved
2019-21 adjusted basic EPS % annual growth 6% 15% 13.15%
Vesting % 10% 100% 81.5%
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Directors’ remuneration report
continued
TSR metric Threshold performance Maximum performance 2021 achieved
2019-21 adjusted TSR growth Median Upper quartile 66th out of 163 constituents
Vesting % 10% 100% 44.4%
The overall expected vesting is 70.4% which is not affected by any assumptions over acquisitions.
Director
Awards granted
No.
Awards expected
to vest 70.4%
No.
Average share
price of £11.63
£’000
Amount attributable to
share price appreciation
£’000
Robert Watson* 34,434 24,242 282 24
Philip Heffer 79,873 56,231 654 55
Nigel Majewski 64,697 45,547 530 44
* The award to Robert Watson was granted when in an executive capacity and adjusted pro rata following his transition to a non-executive capacity.
The long term incentive values for 2020 have been restated based on the actual share price at vesting (£11.20 instead of the 2020 year end share price of £11.14).
6. Payments to past directors
There were no other payments made to former directors in 2021.
7. Payments for loss of office
There were no payments for loss of office made in 2021.
Director shareholding and share interests
Details of Director shareholdings and changes in outstanding share awards were as follows:
Director Type
At 3 January
2021
Granted
(note 4) Exercised Lapsed
At 2 January
2022
Exercise
price
(pence)
Earliest
exercise
date
Latest
exercise
date Notes
Robert Watson Shares 2,304,814 2,317,292 1
Share options 1,394 – (1,394) – – 645.50 01.06.20 01.12.20 2
Share options 1,084 – (1,084) – – 830.00 01.06.21 01.12.21 2
Total share options 2,478 – (2,478) – –
Nil cost options 34,568 – (34,568) – – nil 03.07.21 0 3.07. 28 3
Nil cost options 34,434 – – – 34,434 nil 21.05.22 21.05.29 3
Nil cost options 5,017 – – – 5,017 nil 28.09.23 28.09.30 3
Total nil cost options 74,019 – (34,568) – 39,451
Philip Heffer Shares 3,823,172 3,824,566 1
Share options 1,394 – (1,394) – – 645.50 01.06.20 01.12.20 2
Total share options 1,394 – (1,394) – –
Nil cost options 48,873 – – – 48,873 nil 03.07.21 0 3.07. 28 3
Nil cost options 79,873 – – 79,873 nil 21.05.22 21.05.29 3
Nil cost options 72,981 – – – 72,981 nil 28.09.23 28.09.30 3
Nil cost options – 73,089 – – 73,089 nil 11.05.24 11.05.31 3
Total nil cost options 201,727 73,089 – – 274,816
Nigel Majewski Shares 103,829 103,829 1
Share options 732 – – – 732 1228.00 01.08.23 01.02.24 2
Total share options 732 – – – 732
Nil cost options 50,365 – – – 50,365 nil 20.04.18 20.04.25 3
Nil cost options 50,296 – – – 50,296 nil 25.04.19 25.04.26 3
Nil cost options 32,287 – – – 32,287 nil 24.04.20 24.04.27 3
Nil cost options 40,528 – – – 40,528 nil 03.07.21 0 3.07.28 3
Nil cost options 64,697 – – – 64,697 nil 21.05.22 21.05.29 3
Nil cost options 59,115 – – – 5 9,115 nil 28.09.23 28.09.30 3
Nil cost options – 59,202 – – 59,202 nil 11.05. 24 11.0 5.31 3
Total nil cost options 297,288 59,202 – – 356,490
John Worby Shares 9,000 9,719 1
Christine Cross Shares 15,000 25,000 1
Angus Porter Shares 1,000 2,877 1
Rebecca Shelley Shares 1,966 3,281 1
Notes
1. All shares are beneficially owned with the exception of 1,316,917 shares held by various family trusts of which Robert Watson is a trustee. Since the end of the year Robert Watson sold
50,000 shares. There have been no other changes in the interests of Directors between 2 January 2022 and the date of this report.
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
107
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
The Company’s remuneration policy includes a shareholding guideline such that Executive Directors are expected to build a holding in the Company’s shares at least equal to a minimum
value as a percentage of base salary. At 2 January 2022 the guideline and actual share holdings were as follows:
Director
Guideline minimum
holding value as a % of salary
Actual holding value
as a % of salary Guideline met?
Philip Heffer 300% 8,613% Yes
Nigel Majewski 175% 289% Yes
2. Share options granted under Hilton’s all employee Sharesave Scheme.
3. Nil cost options granted under the Long Term Incentive Plan which are subject to the performance conditions and compound earnings per share growth below on a sliding scale over the
performance period.
Grant year
Performance
basis
Performance
period
Threshold
vesting
Compound annual growth
at threshold vesting
Maximum
vesting
Compound annual growth
at maximum vesting
2018 EPS 100% 2018–2020 10% 6% 100% 14%
2019 EPS 70% 2019–2021 10% 6% 100% 15%
TSR 30% 2019–2021 10% Median 100% Upper quartile
2020 EPS 70% 2020–2022 10% 6% 100% 12%
TSR 30% 2020–2022 10% Median 100% Upper quartile
2021 EPS 70% 2021–2023 10% 6% 100% 13%
TSR 30% 2021–2023 10% Median 100% Upper quartile
4. Grant of nil cost option awards in the year were as follows:
Director
Face
value
Number of shares under
2021 LTIP award
Proportion
of salary
Share price
date
Closing share
price
Philip Heffer £885,843 73,089 175% 10 May 2021 1212p
Nigel Majewski £717,5 32 59,202 175% 10 May 2021 1212p
Further information
Statement of implementation of remuneration policy in the 2022 financial year
Base salaries, benefits and pension
For 2022 the salary for Philip Heffer has been increased to reflect the larger, more complex and more global demands of the CEO role
as explained in the Chair’s annual statement on page 97. Nigel Majewski’s salary has increased by 2% in line with the increases of the
general workforce.
2021
£’000
2022
£’000
Philip Heffer 506 570
Nigel Majewski 410 418
There are no changes in benefits. However pensions will decrease to 7%of salary at the 2022 AGM.
Annual bonus
The maximum annual bonus in 2022 will continue to be set at 125% of salary. This bonus will be payable subject to stretching
targets around the adjusted profit before tax metric (up to 105% of salary) and personal and strategic targets (up to 20% of
salary). Both financial targets, set with reference to the budget, and the personal and strategic targets (covering responsible
customer, category and geographic growth with financial and people resource to support) are considered commercially sensitive.
The Committee will therefore disclose targets on a retrospective basis.
2022 LTIP awards
The Committee will make a decision to grant LTIP awards to Executive Directors over shares equal to 175% of salary in 2022
followingthe Annual report approval date.
EPS – 70% of awards – stretching yet motivational targets to be measured over the three financial years commencing with the year
of grant.
TSR – 30% of awards – 10% of this part of an award will vest for median performance against the constituents of the FTSE 250
(excluding investment trusts) increasing pro rata to full vesting for this part of an award for upper quartile performance measured
over the three financial years commencing with the year of grant. In addition, no part of this award may vest unless the Committee
issatisfied with the underlying performance of the Company.
Details of the 2022 grant and EPS performance targets noted above will be published immediately following the grant via a
RegulatoryInformation Service.
Non-Executive Directors
Fees for the Chairman and all the independent Non-Executive Directors will increase by 2% in line with the increases of the general
workforce. These pay elements will be operated in line with the approved policy.
108
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Directors’ remuneration report
continued
TSR performance graph
The graph below shows the Total Shareholder Return performance (TSR) (share price movements plus reinvested dividends) of the
Company compared against the FTSE 250 Index covering the ten years from 2012 to 2021. The FTSE 250 Index is, in the opinion of
the Directors, the most appropriate index against which the TSR of the Company should be measured as it is a broad equity index
ofwhich Hilton Food Group plc is a constituent.
Hilton Food Group
FTSE 250 (ex IT)
20122011
600
500
400
300
200
100
0
2013 2014 2015 2016 2017
2020 2021
2018 2019
Chief Executive Officer remuneration ten year trend
2012 2013 2014 2015 2016 2017 2018
2
2019 2020 2021
Total remuneration (£’000) 593 610 626 784 1,235 1,570 1,627 1,562 1,765 1,686
Annual bonus (as a percentage of the maximum) 10% 42% 32% 60% 69% 80% 78% 100% 100% 68%
Long term incentive vesting
(as a percentage of the maximum) 100% n/a
1
0% 0% 61% 73% 88% 66% 100% 70%
Notes
1 There were no long term incentive awards that were due to vest dependent on a performance period ending in 2013.
2 Robert Watson was CEO until 30 June 2018 when the current CEO Philip Heffer was appointed. Data for the 2018 year comprises the remuneration of Robert Watson from
1 January2018 to 30 June 2018 and that of Philip Heffer from 1 July 2018 to 30 December 2018.
Director remuneration percentage change
2021 percentage increase over 2020 2020 percentage increase over 2019
Salary/fees
% change
Benefits
% change
Annual bonus
% change
Salary/fees
% change
Benefits
% change
Annual bonus
% change
Executive Directors
Philip Heffer 2.0% -29.0% -30.6% 2.0% -31.6% 2.0%
Nigel Majewski 2.0% -39.9% -30.6% 2.0% 18.2% 2.0%
Non-Executive Directors
Robert Watson
(Executive Director in 2020) -33.3% -100.0% -100.0% 2.0% 21.9% 2.0%
John Worby 2.0% n/a n/a 2.0% n/a n/a
Christine Cross 2.0% n/a n/a 2.0% n/a n/a
Angus Porter 7.9% n/a n/a 2.0% n/a n/a
Rebecca Shelley (appointed during 2020) 7.9% n/a n/a n/a n/a n/a
Company average - 0.1% -23.1% -43.0% 2.8% -1.9% 4.5%
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
109
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
CEO pay ratio
CEO pay ratio
Year Method
25th percentile
pay ratio
Median – 50th percentile
pay ratio
75th percentile
pay ratio
2019 Option B 83 79 51
2020 Option B 87 78 48
2021 Option B 73 65 48
Option B was adopted so that it could be linked with existing processes generating gender pay gap or similar information.
This information, comprising basic pay since the majority of employees do not receive benefits or annual bonuses, as at April 2021
was used as a starting point to identify those UK employees as the best equivalents of P25, P50 and P75. There was no reliance
onestimates or judgements. The information for these employees was then updated to represent total pay and benefits for the
2021financial year.
CEO
£’000
25th percentile employee
£’000
50th percentile employee
£’000
75th percentile employee
£’000
Salary component 506 23 26 33
Total pay and benefits 1,686 23 26 35
The CEO’s remuneration is weighted more heavily towards variable pay than that of the wider workforce so that it is aligned with
the Group performance. This will inevitably cause the pay ratios to fluctuate over time. The increase in the P25 pay ratio is due
toanincrease in the number of our factory employees.
The Committee has considered the pay data for the three employees identified and believes that it fairly reflects pay at the relevant
quartiles amongst the UK workforce. The Committee is satisfied that the median pay ratio for the year is consistent with the pay,
reward and progression policies for the Group’s UK employees who have the same pay and reward policies and opportunities.
Gender pay gap
We report information about the difference in average pay for its male and female employees as required by gender pay gap
legislation. Gender pay gap metrics are submitted by the Group’s main three UK employing entities. The headline gender pay metric
is the difference in the median hourly pay received by men and women. In their most recent reports. This metric for 2021 was 9.8%
at Hilton Foods UK and 11.1% at Hilton Seafood UK both favouring men which is broadly similar to, or an improvement on, previous
years. The metric at Fairfax Meadow is 0.0%.
Hilton’s gender pay gap arises as more males than females are employed at a senior level and additionally there is a history of our
sector being male dominated. We will continue to take action to address the gender pay gap and focus on ensuring equal opportunity
for all. Pay is identical in all cases for men and women doing the same job. We are raising the profile of inclusion and diversity
internally across the Group. We will continue to encourage active membership and participation of women’s networking groups
andmentoring programmes.
For more information and to view the full metrics see the gender pay gap portal or our website www.hiltonfoodgroup.com.
Relative importance of spend on pay
The following table sets out for the comparison total spend on pay with dividends.
2021
£’000
2020
£’000
%
change
Staff costs (note 8 to the financial statements) 211,8 66 190,859 11%
Dividends payable 25,862 21,305 21%
Note
Dividends payable comprises any interim dividends paid in respect of the year plus the final dividend proposed for the year but not yet paid.
On behalf of the Board
Christine Cross
Chair of the Remuneration Committee
5 April 2022
Directors’ remuneration report
continued
110
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Statement of Directors’ responsibilities
Directors’ responsibilities in
respect of the Annual report
andfinancial statements
The Directors are responsible for
preparingthe Annual report and the
financial statements in accordance
withapplicable law and regulations.
Company law requires the Directors
to prepare financial statements for
each financial year. Under that law the
Directors have prepared the Group and
parent company financial statements in
accordance with international accounting
standards in conformity with the
requirements of the Companies Act 2006.
Under company law the Directors must
notapprove the financial statements
unless they are satisfied that they give
atrue and fair view of the state of affairs
ofthe Group and the Company and the
profit or loss of the Group for that period.
In preparing these financial statements
theDirectors are required to:
– select suitable accounting policies
andthen apply them consistently;
– make judgements and accounting
estimates that are reasonable
and prudent;
– state whether applicable IFRS as
adopted by the European Union have
been followed, subject to any material
departures disclosed and explained
inthe financial statements; and
– prepare the financial statements
on the going concern basis, unless
it isinappropriate to presume that
the Group and the Company will
continuein business.
They are also responsible for safeguarding
the assets of the Group and Company and
hence for taking reasonable steps forthe
prevention and detection of fraud and
other irregularities.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Group’s
and the Company’s transactions and
which disclose with reasonable accuracy
at any time the financial position of the
Group and Company and to enable them
to ensure that the financial statements and
the Directors’ remuneration report comply
with the Companies Act 2006.
The Directors are responsible for the
maintenance and integrity of the Company’s
website. Legislation in the United
Kingdom governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the Annual
report and financial statements, taken
as a whole, are fair, balanced and
understandable and provide the information
necessary for shareholders to assess
the Group’s and Company’s position and
performance, business model and strategy.
Each of the current Directors whose
names and functions are set out on pages
80 and 81, confirm that to the best of their
knowledge and belief:
– the Group and Company financial
statements, which have been prepared
inaccordance with international
accounting standards in conformity
withthe requirements of the
CompaniesAct 2006, give a true
and fairview of the assets, liabilities,
financialposition and profit of the
Groupand profit of the Company; 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
5 April 2022 and is signed on its behalf by:
Robert Watson OBE
Non-Executive Chairman
Nigel Majewski
Chief Financial Officer
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
111
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Report on the audit of the
financialstatements
Opinion
In our opinion, Hilton Food Group
plc’s group financial statements and
company financial statements (the
“financial statements”):
– give a true and fair view of the state of
the group’s and of the company’s affairs
as at 2 January 2022 and of the group’s
profit and the group’s and company’s
cash flows for the 52 week period
then ended;
– have been properly prepared in
accordance with UK-adopted
international accounting standards; and
– have been prepared in accordance with
the requirements of the Companies
Act 2006.
We have audited the financial
statements, included within the Annual
Report and Financial Statements (the
“Annual Report”), which comprise: the
consolidated and company balance sheets
as at 2 January 2022; the consolidated
income statement, the consolidated
statement of comprehensive income,
the consolidated and company cash
flow statement, the consolidated and
company statements of changes in
equity for the period then ended; and the
notes to the financial statements, which
include a description of the significant
accounting policies.
Our opinion is consistent with our
reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance
with International Standards on Auditing
(UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK)
are further described in the Auditors’
responsibilities for the audit of the
financial statements section of our report.
We believe that the audit evidence we
have obtained is sufficient and appropriate
to provide a basis for our opinion.
Independence
We remained independent of the group in
accordance with the ethical requirements
that are relevant to our audit of the financial
statements in the UK, which includes the
FRC’s Ethical Standard, as applicable to
listed public interest entities, and we have
fulfilled our other ethical responsibilities in
accordance with these requirements.
To the best of our knowledge and belief,
we declare that non-audit services
prohibited by the FRC’s Ethical Standard
were not provided.
Other than those disclosed in note 6, we
have provided no non-audit services to the
company or its controlled undertakings in
the period under audit.
Our audit approach
Overview
Audit scope
– Nine trading subsidiaries, together with
four intermediate holding companies
require local statutory audits and
were in-scope for group reporting.
This accounted for 95% of the total
Group revenue and 94% of profit before
tax and exceptional items.
– Six trading subsidiaries, including the
newly acquired Fairfax Meadow Europe
Limited and Dalco Food BV, were not
subject to full scope reporting audits.
Two joint venture companies were
subject to specified audit procedures.
– In scoping our audit, we held discussions
with management in order to understand
their assessment of the impact of
climate change on the business and in
the context of the Annual Report and
Financial Statements. We confirmed
that climate change did not represent a
significant risk of material misstatement
to the financial statements for the period
ended 2 January 2022.
– In reaching this conclusion,
we considered:
– the key physical and transitional
risks at both a company and
subsidiary level;
– the commitments made by the group
referred to in the Sustainability Report
within the Annual report e.g.science
based targets to reduce their
emissions, how those targets will be
achieved and the costs of doing so;
– the impact of climate change on
any estimates or judgements made
by management;
– the nature of the group’s customer
contracts which in the majority
of cases are under a cost
plus arrangement;
– and the consistency of the climate
related disclosures made by the group
with the financial statements and our
knowledge of the group obtained from
our audit.
Key audit matters
– Complex customer arrangements
(group)
– Accounting for the impact of the
Belgium fire (group)
– Accounting for material acquisitions
(group)
Materiality
– Overall group materiality: £2,795,000
(2020: £2,700,000) based on 5% of
profit before tax and exceptional items.
– Overall company materiality: £2,500,000
(2020: £1,700,000) based on 1% of
total assets.
– Performance materiality: £2,096,250
(2020: £2,025,000) (group) and
£1,875,000 (2020: £1,275,000) (company).
The scope of our audit
As part of designing our audit, we
determined materiality and assessed
the risks of material misstatement in the
financial statements.
Key audit matters
Key audit matters are those matters that,
in the auditors’ professional judgement,
were of most significance in the audit of
the financial statements of the current
period and include the most significant
assessed risks of material misstatement
(whether or not due to fraud) identified by
the auditors, including those which had
the greatest effect on: the overall audit
strategy; the allocation of resources in
the audit; and directing the efforts of the
engagement team. These matters, and
any comments we make on the results of
our procedures thereon, were addressed
in the context of our audit of the financial
statements as a whole, and in forming our
opinion thereon, and we do not provide a
separate opinion on these matters.
This is not a complete list of all risks
identified by our audit.
Accounting for the impact of the Belgium
fire and accounting for material acquisitions
are new key audit matters this year.
Covid-19, which was a key audit matter
last year, is no longer included because
of the insignificant impact of Covid-19
on business performance and control
environment, and the audit process due to
well established ways of remote working.
Otherwise, the key audit matters below
are consistent with last year.
112
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Independent auditors’ report
to the members of Hilton Food Group plc
Key audit matter How our audit addressed the key audit matter
Complex customer arrangements (group)
The group has entered into a number of rebate and incentive arrangements
with its customers. Rebates and incentives are calculated based on agreed
contracted rates and volumes of sales to customers over the term of the
contracts. Furthermore, the Group occasionally agrees variations to these
arrangements with its customers during the term of the contract. This can
result in a change in agreed rates applied in the calculation of the rebate and
incentive amounts, resulting in an increased risk of errors in the calculations.
As the arrangements are mainly based on contracted rates and known sales
volumes, there is limited judgement required around the accurate recognition
of these amounts and in the appropriate accounting period. However,
owing to the number of agreements in place and the range of contractual
terms included within those agreements there is a heightened risk that the
application of those terms might be calculated inaccurately, omitted from the
calculation or included in the incorrect accounting period.
Furthermore, the Group occasionally agrees variations to these arrangements
with its customers during the term of the contract. This can result in a change
in agreed rates applied in the calculation of the rebate and incentive amounts,
resulting in an increased risk of errors in the calculations.
We updated our understanding of customer supply arrangements in order to
understand the impact of these on the financial statements;
We held discussions with the Directors and management;
We inspected minutes of the Board to determine whether the list of contracts
management had provided was complete;
We selected a sample of rebate and incentive accruals and agreed the inputs
to the calculations to the contracts and the sales amounts in the accounting
ledgers (which we had audited) to test the accuracy and timing of the
recognition of the rebates;
We selected rebate and incentive payments made after the period end and
checked that they were appropriately recognised in the correct period. Where
settlement was made during the year or following the year end, we compared
these to the amounts accrued; and
We performed look back procedures in relation to the liability held at 3
January 2021 and tested those that were settled in the financial period. No
issues were identified through the procedures we performed.
No issues were identified through the procedures we performed.
Accounting for the impact of the Belgium fire (group)
On 13 June 2021, Hilton Foods Belgium experienced a fire at its meat product
packaging facility in Ghent, Belgium. Both Hilton and the landlord’s own
occupied part of the property (incorporating a large meat cold store) were
severely damaged, as were adjoining Hilton offices.
As a result of the fire, exceptional costs totalling £11,661,000 have been
recognised. The costs include the impairment of tangible fixed assets and
leased assets destroyed of £6,377,000 and £2,239,000 respectively, the
costof inventory that was destroyed as a result of the fire of £1,344,000
andother related additional costs of £3,844,000, offset by a gain of
£2,183,000 arising from the early settlement of related lease liabilities.
At the time of the fire the variance fund with Delhaize had risen to £7.1m
duefrom Delhaize.
We focused on this balance given the level of judgment in recognising an
insurance receivable and variance fund receivable and given the material
values involved.
We held discussions with the Directors, management and management’s
specialists along with obtaining management’s insurance policy;
We reviewed correspondence between management, the insurers and
management’s claims advocate;
We obtained independent confirmation from the group’s legal representatives
to consider any claims made against the group;
We reviewed correspondence between management and Delhaize to
ascertain the recoverability of the variance fund balance; and
We have reviewed management’s accounting and disclosures within the
financial statements and consider these to be reasonable. No issues were
identified through the procedures we performed.
Accounting for material acquisitions (group)
During the period the Group acquired the remaining 50% shareholding of
Dalco Food BV “Dalco” for consideration of £13.4m in addition to acquiring
Fairfax Meadow Europe Limited “Fairfax” for consideration of £15.3m.
In respect of Dalco, the fair value acquisition work is underway and is
expected to result in the recognition of identifiable intangibles such as
customer relationships and brands. As this work has not yet been completed,
provisional goodwill of £18.8m has been recognised which may change
following the completion of work by the Group’s third party valuation
specialists.
We focused on this area because there is a level of judgement involved in
identifying the intangibles upon acquisition and given the material values
involved.
In respect of Fairfax, the fair values presented reflect management’s initial
assessment and has resulted in customer relationship and brand intangibles
of£12.5m being recognised alongside £2.9m of goodwill.
The accounting for these acquisitions remains provisional and subject
toamendment for one year from the date of the acquisitions.
In performing our audit of the provisional acquisition accounting:
We verified the consideration paid under the terms of the transaction to the
Share Purchase Agreements, which included cash consideration for Fairfax
and cash consideration and amounts settled in shares in respect of Dalco;
We understood the methodology applied by the third party valuation
specialists in determining the provisional accounting;
We engaged valuation experts to support us in assessing the methodology
and considering the reasonableness of certain assumptions utilised;
We assessed underlying forecasts supporting the valuation of intangible
assets in respect of Fairfax;
The intangibles useful economic lives have been evaluated based on our
understanding of the business and similar historical acquisitions;
We verified the recognition and measurement of the provisional fair value
adjustments; and
We reviewed the disclosures for compliance with IFRS 3 ‘Business
Combinations’.
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
113
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
How we tailored the audit scope
We tailored the scope of our audit to
ensure that we performed enough
work tobe able to give an opinion on
the financial statements as a whole,
taking intoaccount the structure of the
group andthe company, the accounting
processes and controls, and the industry
inwhich they operate.
The Group is structured as a parent
company with twenty-five subsidiary
undertakings. There are fifteen trading
subsidiaries located in the United
Kingdom, the Republic of Ireland, the
Netherlands, Poland, Denmark, Sweden,
New Zealand and Australia; all of these
entities are required to have statutory
audits under local legislation. There are
four intermediary holding companies, all
located in the United Kingdom, which
are all required to have statutory audits.
All of these entities are audited by PwC
network firms. The remaining six entities
are dormant entities. In addition to these
twenty-five entities the Group has a 50%
interest in three joint venture companies
which are located in Australia, Portugal
andthe United Kingdom.
The key protocols we adopted in
respect ofworking with all component
auditors were: issuing formal Group
reporting instructions, which set out
our requirements for the component
auditors, together with our assessment of
audit risks in the Group; holding planning
discussions with all component auditors
in order to agree those requirements;
discussing the Group audit risks to
identify any component specific risks;
high level analysis of the financial
information of the component by the
Group engagement team to identify any
unusual transactions or balances for
discussion with component auditors;
ongoing communication and interaction
throughout the audit with the component
audit teams; attending, with Group
management, the component clearance
meetings held between the component
auditors and local management; and
obtaining signed interoffice opinions that
the component financial information was
properly prepared in accordance with the
group’saccounting policies.
There are two significant components
in the Group whose statutory audit
opinions are not signed by the Group
engagement partner which are located in
the Netherlands and Australia. The Group
engagement partner reviewed the
component auditors’ working papers
that support their interoffice opinions for
these significant components. This review
included assessing their work over the
three significant risk areas applicable
to these components: i) management
override of controls; ii) the risk of fraud
in revenue recognition; and iii) complex
customer arrangements. In addition, on
a rotational basis the Group engagement
team reviews the audit working papers
for a non-significant component. For the
current year, this related to the Poland
and Denmark audit file. Following these
reviews, meetings were held with each
component to discuss findings from the
engagement partner’s review.
Materiality
The scope of our audit was influenced
by our application of materiality.
We set certain quantitative thresholds for
materiality. These, together with qualitative
considerations, helped us to determine the
scope of our audit and the nature, timing
and extent of our audit procedures on the
individual financial statement line items
and disclosures and in evaluating the effect
of misstatements, both individually and
inaggregate on the financial statements
asa whole.
Based on our professional judgement,
wedetermined materiality for the financial
statements as a whole as follows:
Financial statements – group Financial statements – company
Overall
materiality
£2,795,000 (2020: £2,700,000). £2,500,000 (2020: £1,700,000).
How we
determined it
5% of profit before tax and
exceptional items
1% of total assets
Rationale for
benchmark
applied
The basis of determining
materiality has changed from
profit before tax to profit before
tax and exceptional items given
the group has incurred material
exceptional items with respect to
the Belgium fire and acquisition
costs. Given that the group’s
businesses are profit oriented
and the directors use profit
based measures to assess the
performance of the group, we
believe that change to the profit
before tax and exceptional items
benchmark provides us with a
consistent year on year basis for
determining materiality.
We believe that total assets
is the primary measure
used by the shareholders in
assessing the performance of
the entity and is a generally
accepted auditing benchmark
for a holding company with no
trading operations.
114
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Independent auditors’ report
continued
For each component in the scope of our
group audit, we allocated a materiality that
is less than our overall group materiality.
The range of materiality allocated across
components was between £100,000
and£2,750,000. Certain components
wereaudited to a local statutory audit
materiality that was also less than our
overall group materiality.
We use performance materiality to reduce
to an appropriately low level the probability
that the aggregate of uncorrected and
undetected misstatements exceeds
overall materiality. Specifically, we use
performance materiality in determining
the scope of our audit and the nature and
extent of our testing of account balances,
classes of transactions and disclosures,
for example in determining sample sizes.
Our performance materiality was 75%
(2020: 75%) of overall materiality, amounting
to £2,096,250 (2020: £2,025,000) for the
group financial statements and £1,875,000
(2020: £1,275,000) for the company
financial statements.
In determining the performance materiality,
we considered a number of factors – the
history of misstatements, risk assessment
and aggregation risk and the effectiveness
of controls – and concluded that an amount
at the upper end of our normal range
was appropriate.
We agreed with the Audit Committee that
we would report to them misstatements
identified during our audit above £100,000
(group audit) (2020: £100,000) and £100,000
(company audit) (2020: £100,000) as well
asmisstatements below those amounts
that, inour view, warranted reporting for
qualitative reasons.
Conclusions relating to
goingconcern
Our evaluation of the directors’
assessment of the group’s and the
company’s ability to continue to
adopt the going concern basis of
accounting included:
– Performing a risk assessment to identify
factors that could impact the going
concern basis of accounting, including
the ongoing impact of Covid 19 and
impact of rising inflation;
– Understanding and evaluating the
group’s financial forecasts including
severe, but plausible downside
scenarios that could arise;
– Obtaining and reviewing the group’s
new financing arrangements entered
into in January 2022;
– Critically assessing the assumptions
used within the forecasts, including
consideration of alternative views, and
their impact on the group’s liquidity and
covenant compliance (with current and
new facilities);
– Comparing the group’s financial
forecasts to historical performance to
assess management’s ability to forecast
as well as assessing the financial year
2022 year to date performance against
budget; and
– Reading and evaluating the adequacy
of the disclosures made in the financial
statements in relation to going concern.
Based on the work we have performed,
we have not identified any material
uncertainties relating to events or
conditions that, individually or collectively,
may cast significant doubt on the group’s
and the company’s ability to continue as
a going concern for a period of at least
twelve months from when the financial
statements are authorised for issue.
In auditing the financial statements, we
have concluded that the directors’ use of
the going concern basis of accounting in
the preparation of the financial statements
is appropriate.
However, because not all future events
or conditions can be predicted, this
conclusion is not a guarantee as to the
group’s and the company’s ability to
continue as a going concern.
In relation to the directors’ reporting on
how they have applied the UK Corporate
Governance Code, we have nothing
material to add or draw attention to in
relation to the directors’ statement in the
financial statements about whether the
directors considered it appropriate to adopt
the going concern basis of accounting.
Our responsibilities and the responsibilities
of the directors with respect to going
concern are described in the relevant
sections of this report.
Reporting on other information
The other information comprises all of the
information in the Annual Report other
than the financial statements and our
auditors’ report thereon. The directors
are responsible for the other information,
which includes reporting based on the
Task Force on Climate-related Financial
Disclosures (TCFD) recommendations.
Our opinion on the financial statements
does not cover the other information and,
accordingly, we do not express an audit
opinion or, except to the extent otherwise
explicitly stated in this report, any form of
assurance thereon.
In connection with our audit of the financial
statements, our responsibility is to read
the other information and, in doing so,
consider whether the other information is
materially inconsistent with the financial
statements or our knowledge obtained
in the audit, or otherwise appears to be
materially misstated. If we identify an
apparent material inconsistency or material
misstatement, we are required to perform
procedures to conclude whether there is
a material misstatement of the financial
statements or a material misstatement
of the other information. If, based on the
work we have performed, we conclude
that there is a material misstatement of
this other information, we are required to
report that fact. We have nothing to report
based on these responsibilities.
With respect to the Strategic report and
Directors’ report, we also considered
whether the disclosures required by
the UK Companies Act 2006 have
been included.
Based on our work undertaken in the
course of the audit, the Companies Act
2006 requires us also to report certain
opinions and matters as described below.
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
115
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Strategic report and Directors’ report
In our opinion, based on the work
undertaken in the course of the audit,
the information given in the Strategic
report and Directors’ report for the period
ended 2 January 2022 is consistent with
the financial statements and has been
prepared in accordance with applicable
legal requirements.
In light of the knowledge and
understanding of the group and company
and their environment obtained in the
course of the audit, we did not identify any
material misstatements in the Strategic
report and Directors’ report.
Directors’ Remuneration
In our opinion, the part of the Directors’
Remuneration Report to be audited has
been properly prepared in accordance with
the Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the
directors’ statements in relation to going
concern, longer-term viability and that part
of the corporate governance statement
relating to the company’s compliance
with the provisions of the UK Corporate
Governance Code specified for our review.
Our additional responsibilities with respect
to the corporate governance statement
as other information are described in the
Reporting on other information section of
this report.
Based on the work undertaken as part of
our audit, we have concluded that each of
the following elements of the corporate
governance statement is materially
consistent with the financial statements
and our knowledge obtained during the
audit, and we have nothing material to add
or draw attention to in relation to:
– The directors’ confirmation that they
have carried out a robust assessment of
the emerging and principal risks;
– The disclosures in the Annual Report
that describe those principal risks,
what procedures are in place to identify
emerging risks and an explanation
of how these are being managed
or mitigated;
– The directors’ statement in the financial
statements about whether they
considered it appropriate to adopt the
going concern basis of accounting in
preparing them, and their identification
of any material uncertainties to the
group’s and company’s ability to
continue to do so over a period of at
least twelve months from the date of
approval of the financial statements;
– The directors’ explanation as to
their assessment of the group’s and
company’s prospects, the period this
assessment covers and why the period
is appropriate; and
– The directors’ statement as to whether
they have a reasonable expectation that
the company will be able to continue
in operation and meet its liabilities
as they fall due over the period of its
assessment, including any related
disclosures drawing attention to any
necessary qualifications or assumptions.
Our review of the directors’ statement
regarding the longer-term viability of
the group was substantially less in
scope than an audit and only consisted
of making inquiries and considering
the directors’ process supporting their
statement; checking that the statement is
in alignment with the relevant provisions
of the UK Corporate Governance Code;
and considering whether the statement is
consistent with the financial statements
and our knowledge and understanding
of the group and company and their
environment obtained in the course of
the audit.
In addition, based on the work undertaken
as part of our audit, we have concluded
that each of the following elements of
the corporate governance statement is
materially consistent with the financial
statements and our knowledge obtained
during the audit:
– The directors’ statement that they
consider the Annual Report, taken
as a whole, is fair, balanced and
understandable, and provides the
information necessary for the members
to assess the group’s and company’s
position, performance, business model
and strategy;
– The section of the Annual Report that
describes the review of effectiveness
of risk management and internal control
systems; and
– The section of the Annual Report
describing the work of the
Audit Committee.
We have nothing to report in respect
of our responsibility to report when
the directors’ statement relating to the
company’s compliance with the Code does
not properly disclose a departure from a
relevant provision of the Code specified
under the Listing Rules for review by
the auditors.
Responsibilities for the financial
statements and the audit
Responsibilities of the directors for
thefinancial statements
As explained more fully in the Directors’
responsibilities in respect of the
Annual report and financial statements,
the directors are responsible for the
preparation of the financial statements in
accordance with the applicable framework
and for being satisfied that they give a
true and fair view. The directors are also
responsible for such internal control as
they determine is necessary to enable the
preparation of financial statements that are
free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the
directors are responsible for assessing
the group’s and the company’s ability to
continue as a going concern, disclosing,
as applicable, matters related to going
concern and using the going concern
basis of accounting unless the directors
either intend to liquidate the group or the
company or to cease operations, or have
no realistic alternative but to do so.
Auditors’ responsibilities for the audit
of the financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditors’
report that includes our opinion.
Reasonable assurance is a high level
of assurance, but is not a guarantee
that an audit conducted in accordance
with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud
or error and are considered material if,
individually or in the aggregate, they could
reasonably be expected to influence the
economic decisions of users taken on the
basis of these financial statements.
Irregularities, including fraud, are instances
of non-compliance with laws and
regulations. We design procedures in line
with our responsibilities, outlined above, to
detect material misstatements in respect
of irregularities, including fraud. The extent
to which our procedures are capable of
detecting irregularities, including fraud, is
detailed below.
116
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Independent auditors’ report
continued
Based on our understanding of the group
and industry, we identified that the
principal risks of non-compliance with
laws and regulations related to UK Listing
Rules, UK and international tax legislation,
health and safety requirements and other
legislation specific to the industry in which
the group operates (including food safety
legislation), and we considered the extent
to which non-compliance might have a
material effect on the financial statements.
We also considered those laws and
regulations that have a direct impact on the
financial statements such as Companies
Act 2006. We evaluated management’s
incentives and opportunities for fraudulent
manipulation of the financial statements
(including the risk of override of controls),
and determined that the principal risks
were related to posting inappropriate
journal entries to manipulate financial
results, including revenue recognition and
manipulation of EBITDA, and management
bias through judgements and assumptions
in significant accounting estimates
and significant one-off or unusual
transactions. The group engagement
team shared this risk assessment with
the component auditors so that they could
include appropriate audit procedures
in response to such risks in their work.
Audit procedures performed by the group
engagement team and/or component
auditors included:
– Discussions with internal audit,
management and those charged with
governance including consideration of
known or suspected instances of non-
compliance with laws and regulations
and fraud;
– Evaluation, and where relevant,
testing of the operating effectiveness
of management’s controls designed
to prevent and detect fraud in
financial reporting;
– Identified and tested unusual journal
entries, in particular, journal entries
posted to manipulate financial results,
including revenue recognition and
manipulation of EBITDA;
– Challenging assumptions and
judgements made by management in
their significant accounting estimates,
in particular in relation to complex
customer accruals, acquisition
accounting balances and the Belgium
fire impairments (see related key audit
matters above);
– Confirmation that there have been
no matters reported on the group’s
whistleblowing helpline;
– Review of minutes from board
and other committee meetings
e.g. audit committee or
remuneration committee;
– Reading any key correspondence with
regulatory authorities received in the
year; and
– Obtaining an understanding of the legal
and regulatory framework applicable
to the group and how the group is
complying with that framework.
There are inherent limitations in the audit
procedures described above. We are less
likely to become aware of instances of
non-compliance with laws and regulations
that are not closely related to events and
transactions reflected in the financial
statements. Also, the risk of not detecting
a material misstatement due to fraud is
higher than the risk of not detecting one
resulting from error, as fraud may involve
deliberate concealment by, for example,
forgery or intentional misrepresentations,
or through collusion.
Our audit testing might include testing
complete populations of certain
transactions and balances, possibly using
data auditing techniques. However, it
typically involves selecting a limited
number of items for testing, rather than
testing complete populations. We will
often seek to target particular items
for testing based on their size or risk
characteristics. In other cases, we will
use audit sampling to enable us to draw
a conclusion about the population from
which the sample is selected.
A further description of our responsibilities
for the audit of the financial statements
is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditors’
report.
Use of this report
This report, including the opinions,
has been prepared for and only for
the company’s members as a body in
accordance with Chapter 3 of Part 16
of the Companies Act 2006 and for no
other purpose. We do not, in giving these
opinions, accept or assume responsibility
for any other purpose or to any other
person to whom this report is shown or
into whose hands it may come save where
expressly agreed by our prior consent
in writing.
Other required reporting
Companies Act 2006
exceptionreporting
Under the Companies Act 2006 we are
required to report to you if, in our opinion:
– we have not obtained all the information
and explanations we require for our
audit; or
– adequate accounting records have not
been kept by the company, or returns
adequate for our audit have not been
received from branches not visited by
us; or
– certain disclosures of directors’
remuneration specified by law are not
made; or
– the company financial statements and
the part of the Directors’ Remuneration
Report to be audited are not in
agreement with the accounting records
and returns.
We have no exceptions to report arising
from this responsibility.
Appointment
Following the recommendation of the
Audit Committee, we were appointed
by the directors on 1 October 2007 to
audit the financial statements for the year
ended 31 December 2007 and subsequent
financial periods. The period of total
uninterrupted engagement is 15 years,
covering the years ended 31 December
2007 to 2 January 2022.
Other matter
In due course, as required by the Financial
Conduct Authority Disclosure Guidance
and Transparency Rule 4.1.14R, these
financial statements will form part of the
ESEF-prepared annual financial report filed
on the National Storage Mechanism of the
Financial Conduct Authority in accordance
with the ESEF Regulatory Technical
Standard (‘ESEF RTS’). This auditors’
report provides no assurance over whether
the annual financial report will be prepared
using the single electronic format specified
in the ESEF RTS.
Martin Cowie (Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and
Statutory Auditors
Belfast
5 April 2022
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
117
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Financial
statements
Consolidated income statement 120
Consolidated statement
of comprehensive income 120
Consolidated and Company
balance sheet 121
Consolidated and Company
statement of changes in equity 122
Consolidated and Company
cash flow statement 123
Notes to the financial statements 124
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
118
For more information visit
www.hiltonfoodgroupplc.com
VEGAN &
VEGETARIAN
We are an ambitious, entrepreneurial
business with strong values and
principles. Our reputation for
excellence is what attracts people
tostay and want to work with us.
ѱ Growing vegan and vegetarian
business through innovation and
partnerships with global brands
and retailers.
ѱ Completed 100% acquisition
ofDalco, strengthening our
vegan and vegetarian proposition
in market with strong growth
forecasts.
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
119
Notes
2021
52 weeks
£’000
2020
53 weeks
£’000
Continuing operations
Revenue 5 3 , 3 01, 9 7 0 2, 7 74 , 0 3 6
Cost of sales 7 (2,9 35 ,8 92) (2, 452,0 9 3)
Gross profit 36 6 ,078 3 21, 9 4 3
Distribution costs 7 (25 ,0 8 3) (2 3, 24 6)
Other administrative expenses 7 (272, 4 38) (236,8 59)
Exceptional items 7, 9, 34
(7,050)
–
Total administrative expenses (279, 48 8) (236,859)
Share of profit in joint ventures 1, 9 2 5 5,0 29
Operating profit 63,4 32 66,8 67
Finance income 10 10 22
Other finance costs (14 , 913) (12 , 8 6 1)
Exceptional finance costs 9, 34 (1 ,1 3 1) –
Total finance costs 10 (16 , 0 4 4) (12 , 8 6 1)
Finance costs – net (16 , 0 3 4) (1 2,839)
Profit before income tax 47, 3 9 8 5 4,0 28
Income tax expense 11 (11, 2 3 2) (1 1 ,988)
Exceptional tax income 9, 34 3 ,11 6 –
Total income tax expense (8 ,11 6) (1 1 ,988)
Profit for the period 39, 282 42,0 4 0
Attributable to:
Owners of the parent 3 7,14 3 39, 736
Non-controlling interests 2,139 2,30 4
39, 282 42,0 4 0
Earnings per share attributable to owners of the parent during the year
Basic (pence) 12 4 5.0 4 8.6
Diluted (pence) 12 4 4.5 4 7. 9
2021
52 weeks
£’000
2020
53 weeks
£’000
Profit for the period 39, 282 42,0 4 0
Other comprehensive (expense)/income
Currency translation differences
(7,090)
4,6 82
Other comprehensive (expense)/income for the year net of tax
(7,090)
4,6 82
Total comprehensive income for the year 3 2 ,19 2 4 6 ,7 2 2
Total comprehensive income attributable to:
Owners of the parent 3 0 , 417 4 4 ,1 0 1
Non-controlling interests 1,7 7 5 2, 6 21
3 2 ,19 2 4 6 ,7 2 2
The notes on pages 124 to 155 are an integral part of these consolidated financial statements.
120
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Consolidated income statement
Consolidated statement of comprehensive income
Group Company
Notes
2021
£’000
2020
£’000
2021
£’000
2020
£’000
Assets
Non-current assets
Property, plant and equipment 14 2 9 1, 4 8 8 29 0,8 4 6 – –
Intangible assets 15 10 5 ,7 75 7 0, 071 – –
Lease: right of use assets 16 222,004 235, 1 35 – –
Investments 17 5,5 39 12 , 6 2 2 247,785 157,2 21
Trade and other receivables 20 2, 23 9 – – –
Deferred income tax assets 25 6 ,952 6 , 219 – –
6 33, 9 97 6 14 , 8 9 3 247,785 157,221
Current assets
Inventories 19 15 6 , 517 11 6 , 9 4 1 – –
Trade and other receivables 20 23 0,3 88 19 9 ,6 4 2 2,874 14,272
Current tax assets 5 , 2 12 – – –
Other financial asset 22
1,140
– – –
Cash and cash equivalents 21 1 4 0 ,17 0 1 23,81 6 151 190
5 33 ,427 4 4 0,3 99 3,025 14,462
Total assets 1 ,1 6 7, 4 2 4 1 ,055,292 250,810 171,683
Equity
Equity attributable to owners of the parent
Ordinary shares 26 8,8 93 8 ,1 9 4 8,893 8,19 4
Share premium 14 2 , 0 4 3 6 5, 6 19 142,043 65,619
Own shares (87) – – –
Employee share schemes reserve 6,99 0 6 ,1 2 3 – –
Foreign currency translation reserve
(2,106)
4,620 – –
Retained earnings 17 6 , 4 4 9 16 1, 6 0 7 28,850 26,851
Reverse acquisition reserve (3 1,7 0 0) (3 1,7 0 0) – –
Merger reserve 919 9 19 71,019 71,019
3 01 , 4 01 215 , 3 8 2 250,805 171,683
Non-controlling interests 6,54 8 6,5 56 – –
Total equity 3 0 7, 9 4 9 2 2 1, 9 3 8 250,805 171,683
Liabilities
Non-current liabilities
Borrowings 23 – 20 6,22 8 – –
Lease liabilities 16 228 ,97 7 238,9 95 – –
Deferred consideration 18 – 3 , 318 – –
Deferred income tax liabilities 25 4 ,1 3 2 2,3 8 4 – –
2 3 3 ,1 0 9 4 5 0,9 25 – –
Current liabilities
Borrowings 23 2 24 ,7 3 2 3 9 ,7 5 9 – –
Lease liabilities 16 14 , 419 6 ,25 0 – –
Trade and other payables 24
387,215
33 2,3 5 4 5 –
Current tax liabilities – 4,0 6 6 – –
626, 36 6 382, 429 5 –
Total liabilities 8 5 9 ,47 5 8 33,3 54 5 –
Total equity and liabilities 1 ,1 6 7, 4 2 4 1 ,055,292 250,810 171,683
The notes on pages 124 to 155 are an integral part of these consolidated financial statements.
The financial statements on pages 120 to 155 were approved by the Board on 5 April 2022 and were signed on its behalf by:
R. Watson N. Majewski
Director Director
Hilton Food Group plc – Registered number: 06165540
The Company has taken advantage of the exemption in Section 408 Companies Act 2006 not to publish its individual income statement, statement of comprehensive income and related
notes. Profit for the year dealt with in the income statement of Hilton Food Group plc amounted to £24,301,000 (2020: £21,000,000).
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Consolidated and Company balance sheet
Attributable to owners of the parent
Group Notes
Share
capital
£’000
Share
premium
£’000
Own
shares
£’000
Employee
share
schemes
reserve
£’000
Foreign
currency
translation
reserve
£’000
Retained
earnings
£’000
Reverse
acquisition
reserve
£’000
Merger
reserve
£’000
Total
£’000
Non-
controlling
interests
£’000
Total
equity
£’000
Balance at 30 December 2019 8 ,17 3 6 4 , 2 51
– 4,139
255 1 4 0 ,1 9 2 (3 1,7 0 0) 9 19 186,229 5 , 7 11 19 1, 9 4 0
Profit for the year – – – – – 39, 736 – – 39, 736 2, 30 4 42,0 4 0
Other comprehensive income
Currency translation
differences – – – – 4,3 65 – – – 4, 365 3 17 4 ,68 2
Total comprehensive
incomefor the year – – – – 4, 365 39, 736 – – 4 4 ,1 0 1 2 ,6 21 4 6,7 2 2
Issue of new shares 21 1, 3 6 8 – – – – – – 1, 3 8 9 – 1, 3 8 9
Adjustment in respect of
employee share schemes – – – 2 ,12 0 – – – – 2 ,12 0 – 2 ,12 0
Tax on employee
shareschemes – – – (13 6) – – – – (13 6) – (13 6)
Dividends paid 13 – – – – – (18 , 3 21) – – (1 8 , 3 2 1) (1,7 7 6) (20,0 97)
Total transactions with owners 21 1, 3 6 8 – 1, 9 8 4 – (18 , 3 2 1) – – (14 , 9 4 8) (1,7 7 6) (16 ,7 24)
Balance at 3 January 2021 8 ,1 9 4 6 5 , 6 19 – 6 ,1 2 3 4,6 20 16 1, 6 0 7 (31, 7 0 0) 919 215 , 3 8 2 6,5 56 2 2 1, 9 3 8
Profit for the year – – – –
– 37,143
– –
37,143 2,139 39,282
Other comprehensive expense
Currency translation
differences – – – – (6, 726) – – – (6, 726)
(364) (7,090)
Total comprehensive
incomefor the year – – – –
(6,726) 37,143
– – 3 0 , 417 1, 7 7 5 3 2 ,1 9 2
Issue of new shares 699 76 ,424 – – – – – – 7 7,1 2 3 – 7 7,1 2 3
Purchase of own shares – – (2, 278) – – – – – (2,278) – (2, 278)
Adjustment in respect of
employee share schemes – – – 2,7 2 5 – – – – 2 ,7 25 – 2 ,72 5
Settlement of employee
sharescheme – – 2 ,1 9 1 (2 ,1 9 1) – – – – – – –
Tax on employee
shareschemes – – – 333 – – – – 333 – 333
Dividends paid 13 – – – – – (2 2 , 3 0 1) – – (2 2 , 3 0 1) (1,7 8 3) (24,0 8 4)
Total transactions with owners 699 76 ,424 (87) 867 – (2 2 , 3 01) – – 5 5,6 02 (1,7 8 3) 5 3, 819
Balance at 2 January 2022 8,89 3 14 2 , 0 4 3
(87) 6,990
(2,106) 176,449 (31,700) 919 301,401 6,548 307,949
Company
Balance at 30 December 2019 8,173 64,251 – – – 24,172 – 71,019 167,615
Profit for the year – – – – – 21,000 – – 21,000
Total comprehensive
incomefor the year – – – – – 21,000 – – 21,000
Issue of new shares 21 1,368 – – – – – – 1,389
Dividends paid 13 – – – – – (18,321) – – (18,321)
Total transactions with owners 21 1,368 – – – (18,321) – – (16,932)
Balance at 3 January 2021 8,194 65,619 – – – 26,851 – 71,019 171,683
Profit for the year – – – – – 24,300 – – 24,300
Total comprehensive
incomefor the year – – – – – 24,300 –
– 24,300
Issue of new shares 699 76,424 – – – – – – 77,123
Dividends paid 13 – – – – – (22,301) – – (22,301)
Total transactions with owners 699 76,424 – – – (22,301) – – 54,822
Balance at 2 January 2022 8,893 142,043 – – – 28,850 – 71,019 250,805
The notes on pages 124 to 155 are an integral part of these consolidated financial statements.
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Consolidated and Company statement of changes in equity
Group Company
Notes
2021
52 weeks
£’000
2020
53 weeks
£’000
2021
52 weeks
£’000
2020
53 weeks
£’000
Cash flows from operating activities
Cash generated from operations 28 12 1, 2 5 9 1 20,77 1 – –
Interest paid (16 , 0 4 4) (12 , 8 61) – –
Income tax paid (19 , 2 10) (16 , 2 5 4) – –
Net cash generated from operating activities 86,0 0 5 9 1, 6 5 6 – –
Cash flows from investing activities
Acquisition of subsidiary, net of debt acquired (39,0 62) – – –
Other financial asset -– restricted cash (1 ,1 4 0) – – –
Settlement of deferred consideration (2,5 0 0) – – –
Issue of inter-company loan – – (77,377) (4,000)
Purchases of property, plant and equipment (5 6 , 2 51) (92, 80 3) – –
Proceeds from sale of property, plant and equipment 114 13 4 – –
Purchases of intangible assets (1 ,11 5) (2 ,7 0 3) – –
Interest received 10 22 – –
Dividends received – – 24,300 21,000
Dividends received from joint venture 2, 273 4 ,2 71 – –
Net cash (used in)/generated from investing activities (9 7, 6 7 1) (91, 07 9) (53,077) 17,000
Cash flows from financing activities
Proceeds from borrowings 6 7, 0 6 2 9 2,56 3 – –
Repayments of borrowings (79,8 1 9) (48, 90 8) – –
Payment of lease liability (6,58 8) (15 , 0 4 4) – –
Issue of ordinary shares 7 7,1 2 3 1, 3 8 9 75,339 1,389
Purchase of own shares (2, 278) – – –
Dividends paid to owners of the parent (2 2 , 3 0 1) (18 , 3 21) (22,301) (18,321)
Dividends paid to non-controlling interests (1, 7 8 3) (1,7 76) – –
Net cash generated from/(used in) financing activities 3 1, 416 9,9 0 3 53,038 (16,932)
Net increase/(decrease) in cash and cash equivalents 19 ,7 5 0 10 , 4 8 0 (39) 68
Cash and cash equivalents at beginning of the year 1 23,81 6 11 0 , 5 1 4 190 122
Exchange (losses)/gains on cash and cash equivalents (3,39 6) 2,822 – –
Cash and cash equivalents at end of the year 21 1 4 0 ,1 7 0 1 23,81 6 151 190
The notes on pages 124 to 155 are an integral part of these consolidated financial statements.
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ADDITIONAL
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123
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Consolidated and Company cash flow statement
1 General information
Hilton Food Group plc (‘the Company’) and its subsidiaries (together ‘the Group’) is a leading international protein producer supplying
major international food retailers in fourteen European countries, Australia and New Zealand. The Company’s subsidiaries are listed in
note 17.
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 year represents the 52 weeks to 2 January 2022 (prior financial year 53 weeks to 3 January 2021).
These consolidated financial statements were approved for issue on 5 April 2022.
The Company has taken advantage of the exemption in Section 408 Companies Act 2006 not to publish its individual income
statement, statement of comprehensive income and related notes. Profit for the year dealt with in the income statement of Hilton
Food Group plc amounted to £24,301,000 (2020: £21,000,000).
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 and company financial statements of Hilton Food Group plc have been prepared under the historical cost convention
as modified by financial liabilities at fair value through profit or loss 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 on page 22.
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.
Basis of consolidation
These consolidated financial statements comprise the financial statements of Hilton Food Group plc (‘the Company’), its subsidiaries
and its share of profit in joint ventures, together, (‘the Group’) drawn up to 2 January 2022. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with the policies adopted by the Group.
(i) Subsidiaries
Subsidiaries are all entities over which the Group has control. The Group controls an entity where the Group is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct
the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group (see note 18).
Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses
are also eliminated, unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss,
statement of comprehensive income, statement of changes in equity and balance sheet respectively.
(ii) Joint ventures
Joint ventures are all entities over which the Group exercises joint control and has an interest in the net assets of that entity.
Interests injoint ventures are accounted for using the equity method, after initially being recognised at cost in the consolidated
balance sheet.
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the
Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Group’s share of movements in other
comprehensive income of the investee in other comprehensive income. Dividends received or receivable from joint ventures are
recognised as a reduction in the carrying amount of the investment.
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s
interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the
policies adopted by the Group.
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Notestothefinancialstatements
International Financial Reporting Standards
a) New standards, amendments and interpretations effective in 2021
The following standards and amendments are applicable for accounting periods beginning on or after 1 January 2021.
These amendments have had no impact on the Group’s financial position or performance in the current or prior years.
Covid-19-Related Rent Concessions – amendments to IFRS 16, and
Amendments to IFRS 7, IFRS 4 and IFRS 16 – Interest Rate Benchmark Reform Phase 2
b) New standard, amendments and interpretations issued but not yet effective
The following standard and amendments have been issued but are not yet effective. These standards, amendments or
interpretations are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable
future transactions.
IFRS 17, ‘Insurance Contracts’* (effective 1 January 2023)
Amendments to IAS 1 – Classification of Liabilities as Current or Non-current (effective 1 January 2023)
Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies (effective 1 January 2023)
Amendments to IAS 16 – Property, Plant and Equipment: Proceeds before intended use (effective 1 January 2022)
Amendments to IFRS 3 – Reference to the Conceptual Framework (effective 1 January 2022)
Amendments to IAS 37 – Onerous Contracts – Cost of Fulfilling a Contract (effective 1 January 2022)
Annual Improvements to IFRS Standards 2018-2020 (effective 1 January 2022)
Amendments to IAS 8 – Definition of Accounting Estimates (effective 1 January 2023)
Amendments to IAS 12 – Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Effective 1 January 2023)
* Not yet endorsed by the UK.
Group leasing activities and accounting treatment
The Group’s leases relate to property leases for a number of food processing facilities, leases of plant and equipment and leases
ofmotor vehicles. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by
the Group. Each lease payment is allocated between the repayment of the lease liability and finance cost. The finance cost is charged
to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for
each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight line basis.
The depreciation is being charged to administration expenses in the Group’s Income Statement, in line with where depreciation has
previously been recorded.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value
of the following lease payments:
– fixed payments (including in-substance fixed payments), less any lease incentives receivable;
– variable lease payments that are based on an index or a rate;
– the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and,
– payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s
incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain
anassetof similar value in a similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
– the amount of the initial measurement of lease liability;
– any lease payments made at or before the commencement date less any lease incentives received; and
– any initial direct costs.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense
inprofit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT-equipment
andsmall items of office equipment.
Extension and termination options
Extension and termination options are included in a number of property leases across the Group. The majority of extension and
termination options held are exercisable only by the Group and not by the respective lessor.
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
2 Summaryofsignificantaccountingpoliciescontinued
Revenue recognition
The Group sources raw material food proteins often in conjunction with its customers. The raw materials are then processed, packed
and delivered to customers. Revenue is recognised at a point in time when control of the products has transferred, that is when the
products have been delivered to the customer’s specified location or have been collected by the customer from the Group’s facilities.
At that point the customers have obtained all the benefits of the products and have full discretion over the channel and price to sell
the products, and the Group has no unfulfilled obligation that could affect the customers’ acceptance of the products. Delivery occurs
when the products have been shipped to the specific location or have been collected 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.
The products are sold with discounts and rebates which are based on contractual arrangements. Revenue from these sales is
recognised based on the price specified in the contract, net of the estimated discounts or rebate. Accumulated experience is used to
estimate and provide for the discounts and rebates, using the expected value method, and revenue is only recognised to the extent
that it is highly probable that a significant reversal will not occur. A payable is recognised for expected rebates and discounts are
deducted from the amount receivable from the customer.
A receivable is recognised when the goods are delivered to the customer’s specified location or collected by the customer, since this
is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.
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 in other comprehensive income and disclosed 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.
Business combinations
Business combinations are accounted for using the acquisition method.
The consideration transferred for the acquisition of a subsidiary or business comprises the fair value of the assets transferred, the
liabilities incurred to the former owners of the acquired businesses, the equity interests issued by the Group. The consideration
transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity
interest in the subsidiary at the acquisition date.
Acquisition-related costs are expensed as incurred.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions,
measured initially at their fair values at the acquisition date.
The excess of (a) the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair
value of any previous equity interest in the acquiree over the (b) fair value of the identifiable net assets acquired is recorded as goodwill.
If control of a subsidiary is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the
acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in
profit or loss. Transactions with non-controlling interests that result in changes to the ownership interest of a subsidiary do not result
ina fair value re-measurement but are instead accounting for as adjustments to equity attributed to the owners of the parent.
126
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Notestothefinancialstatements
continued
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 economic lives, as follows:
Annual rate
Buildings (including leasehold improvements) 4%–14%
Plant and machinery 14%–33%
Fixtures and fittings 14%–33%
Motor vehicles 25%
Land is not depreciated. Assets in the course of construction are not depreciated until commissioned.
The residual value and useful economic 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 economic life.
Intangible assets
(a) Goodwill
Goodwill on acquisitions of subsidiaries and purchase of non-controlling 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 non-controlling interest at
the date of acquisition (note 15).
(b) Other intangibles
Other intangibles include acquired software licences, customer relationships and brands and are stated at cost or acquisition fair value
less accumulated amortisation. Software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the
specific software. Amortisation is charged on a straight line basis over the assets’ useful economic lives of three to ten years.
Investments
Investments in subsidiary undertakings and joint ventures are carried at cost less provision for impairment.
Impairment of non-financial assets
Assets that have an indefinite useful economic 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 its financial assets at amortised cost only if both of the following criteria are met:
– the asset is held within a business model whose objective is to collect the contractual cash flows; and
– the contractual terms give rise to cash flows that are solely payments of principal and interest.
These items 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.
Such assets include, ‘trade and other receivables’, ‘cash and cash equivalents’ and ‘other financial assets’ in the balance sheet.
b) Recognition and measurement
Purchases and sales of financial assets are recognised on trade date being the date on which the Group commits to purchase or sell
the asset. Financial assets are recognised initially at the amount of consideration that is unconditional, unless they contain a significant
financing component, in which case they are recognised at fair value. These assets are held with the objective of collecting the
contractual cash flows, and so it measures them subsequently at amortised cost using the effective interest method.
Financial assets are derecognised when (a) the contractual rights to the cash flows from the asset expire or are settled, or (b)
substantially all the risks and rewards of the ownership of the asset are transferred to another party or (c) despite having retained
some significant risks and rewards of ownership, control of the asset has been transferred to another party who has the practical
ability to unilaterally sell the asset to an unrelated third party without imposing additional restrictions.
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127
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
2 Summaryofsignificantaccountingpoliciescontinued
c) Impairment of financial assets
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance
for all financial assets.
Once the expected credit loss has been determined, this is deducted from the carrying value of the asset and recognised in the
consolidated income statement.
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 are 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 the amount of consideration that is unconditional, unless they contain significant financing
components, in which case they are recognised at fair value. The Group holds the trade receivables with the objective of collecting the
contractual cash flows, and so it measures them subsequently at amortised cost using the effective interest method. Details about
the Group’s impairment policies and the calculation of the loss allowance are provided in note 20.
The Group applies the IFRS 9 simplified approach to measuring expected credit loss which uses a lifetime expected loss allowance
forall trade receivables and contract assets.
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.
Other financial assets – Restricted cash
Where cash is held for a specific purpose and is therefore not available for immediate or general business use it is recognised as
restricted cash and classified as an other financial asset.
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 share premium and employee share schemes reserve represents the premium on new shares issued in connection with and
thefair value of share options outstanding under the Group’s share schemes respectively.
The foreign currency translation reserve represents the cumulative currency differences arising on the translation of the Group’s
overseas subsidiaries.
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. All other borrowing costs are recognised in the income statement in the period in which they are incurred.
128
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Notestothefinancialstatements
continued
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 substantively 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.
Employment benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave that are expected to
be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in
respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the
liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
Pensions and other post-employment benefits
The Group operates defined contribution schemes for certain employees in the UK, Ireland, the Netherlands, Belgium, Denmark,
Australia and New Zealand 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 payments
The Group operates a number of share-based compensation plans that have been accounted for as equity settled schemes. 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. When the options are exercised, the Company issues new shares. The proceeds received
net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.
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.
Exceptional Items
Exceptional items are not defined under IFRS. However, the Group classifies Exceptional Items as those that are separately
identifiable by virtue of their size, nature or expected frequency and that therefore warrant separate presentation.
The Group has previously treated acquisition costs, including legal and professional fees and stamp duty costs, as exceptional.
As detailed in note 9 during the period to 2 January 2022 the Group has recognised exceptional items in respect of the fire at its facility in
Belgium, in respect of acquisition related costs incurred in the period and in respect of a gain made on accounting for the acquisition of a
50% share of its Dalco joint venture.
The income statement separately shows the impact of the exceptional items on reported operating profit with further reconciliations
between statutory and adjusted measures used by the Group presented in note 34.
Presentation of these exceptional items and the reconciliations between adjusted and statutory measures is not intended to be a
substitute for or intended to promote the adjusted measures above statutory measures.
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
129
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
3 Financialriskmanagement
Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk including 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. The Group 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, Polish Zloty, Australian Dollar and New Zealand Dollar 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.
(iv) Sensitivity analysis
Group
Income
statement
£’000
2021
Equity
£’000
Income
statement
£’000
2020
Equity
£’000
Annual effect of a change in Group-wide interest rates by 0.5% 885 885 572 572
(885) (885) (572) (572)
Annual effect of a change in exchange rates to the GBP £ by 10% 3,913 14,715 2,625 9,494
(3,202) (12,040) (2,147) ( 7,768)
(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,
whose only customers comprise blue chip international supermarket retailers, 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 is £227.1m (2020: £187.8m) as stated in note 33.
(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 £140.2m (2020: £123.8m) 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:
2021 2020
Borrowings
£’000
Leases
£’000
Trade and
other payables
£’000
Borrowings
£’000
Leases
£’000
Trade and
other payables
£’000
Less than one year 227,98 6 22,717 378,258 42,473 15,010 324,858
Between one and two years – 20,873 – 208,058 19,595 –
Between two and five years – 5 8,137 – – 58,227 –
Over five years – 233,672 – – 255,619 –
The Group’s bank borrowings have been classified as current liabilities as the bank facility agreements were due to mature in October 2022.
Since the year end the Group has refinanced these facilities (see note 31).
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 bank debt as per note 29 divided by EBITDA
as shown in note 34. Net bank 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 interest, tax,
depreciation and amortisation, excluding the impact of IFRS 16. The gearing of the Company was 69.5% as at the year end (2020: 115.3%).
130
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Notestothefinancialstatements
continued
Fair value estimation
The carrying value of trade receivables (less impairment provisions) and trade 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 for disclosure purposes.
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.
Critical accounting judgements
Leases
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an
extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the
lease term if the lease is reasonably certain to be extended (or not terminated). For leases of buildings and equipment, the following
factors are normally the most relevant:
– If there are significant penalties to terminate (or not extend), the Group is typically reasonably certain to extend (or not terminate).
– If any leasehold improvements are expected to have a significant remaining value, the Group is typically reasonably certain to extend
(or not terminate).
– Otherwise, the Group considers other factors including historical lease durations and the costs and business disruption required to
replace the leased asset.
Extension options in vehicles leases have not been included in the lease liability, because the Group could replace the assets without
significant cost or business disruption.
The lease term is reassessed if an option is actually exercised (or not exercised) or the Group becomes obliged to exercise (or not exercise)
it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects
this assessment, and that is within the control of the lessee.
Long term supply contracts
On adoption of IFRS 16 the Group elected not to reassess whether a contract is or contains a lease at the date of initial application.
Instead, for contracts entered into before the transition date the Group relied on its assessments made applying IAS 17 and IFRIC 4
“Determining whether an Arrangement contains a Lease”.
Some of Hilton’s long term supply contracts are on a cost plus basis. These cost plus arrangements typically contain benchmarking
clauses which allow our customers to obtain competitive pricing or to source supply from a competitor. Additional product inputs and
packaging are traded in active markets which are monitored by our customers and furthermore product selling prices are updated
on a frequent basis thereby resulting in pricing that is, in substance, market price. On this basis the criteria in IFRIC 4 for determining
whether these agreements contained a lease were not met.
Under IFRS 16 the assessment of whether a contract is or contains a lease will be determined based on whether the contract conveys
the right to control the use of an identified asset for a period of time in exchange for consideration.
To assess whether a contracts conveys the right to control the use of an asset judgement is required in the assessment of a
customer’s right to:
– obtain substantially all of the economic benefits from the use of the identified asset throughout the period of use; and
– direct the use of the identified asset.
Although a number of the Group’s supply contracts are fulfilled from dedicated manufacturing facilities, and therefore customers will
obtain a significant proportion of the economic benefits from their use, the Group believes that future Long Term Supply contracts
should not be assessed as containing leases as the Group considers it has the right to direct the use of the identified assets.
In making this assessment, the Group has considered that the Group controls the raw materials including the timing and amount of
purchases and has discretion as to how and when such materials are processed to fulfil customer orders. Therefore, the Group obtains
the economic benefits from processing the inventory, has the right to direct the use of the identified assets and the customer rights
are limited to placing orders. This consideration is particularly judgmental given orders are typically produced on a real-time basis.
However, it is the Group’s view that this real-time production is inherent in the context of producing perishable goods with a short
shelf life and not indicative of the customer having the right to control the use of the facilities.
Woolworths Meat Co. Pty Limited Joint Venture
(i) Assessment of Control
In July 2018 the Group took day-to-day operational responsibility for the joint venture (JV) meat processing facilities operated in
Australia and following the conclusion of a two year transition period took full control of these facilities in June 2020.
During the two-year transition period these processing facilities continued to be owned by the Group’s JV partner, Woolworths, and
continued to be operated under the oversight of the JV Board which had control over key business and strategic decisions.
The JV continued to earn a processing fee based on the volume of retail packed meat produced at the facilities over which it had oversight.
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
131
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
4 Criticalaccountingestimatesandjudgementscontinued
Both Hilton and its JV partner had equal representation on the JV Board with the JV partner able to appoint the Chairman of the Board.
All decisions of the JV Board needed to be unanimous though in the event of unresolved deadlock Hilton’s JV partner would have had
the right to purchase Hilton’s interest in the JV at net book value.
Although the Group had day-to-day operational responsibility for the processing facilities during the transition period, the oversight
provided by the JV Board meant that in in the Group’s judgement it did not control the JV. Therefore, during the transition period the
Group continued to account for its 50% interest in the JV using the equity method of accounting.
At the end of the transition period in June 2020 the JV Board’s role overseeing the key business and strategic decision of the
processing facilities ended.
From this point, the facilities were fully controlled by the Group and have been fully consolidated within the Group’s financial statements.
(ii) Revenue Recognition
Throughout the two-year transition period referred to above the costs of production of this meat, other raw materials and indirect and
direct overheads, at the JV controlled facilities were administered by the Group and then recharged to its customer.
The assessment of whether the Group should recognise the costs and related recharges on a net basis or gross basis, with revenue
and equal costs recognised separately, required the exercise of significant judgement.
These activities did not directly affect the Group’s primary return from the JV facilities, which continued to be derived from its 50%
interest in Woolworths Meat Co. Pty Limited.
The Group concluded that during the transition period it was acting as an agent on behalf of the JV rather than as principal fully
responsible for the processing activities of the facilities and therefore recognised revenue from the facilities on a net basis.
This conclusion was reached following consideration of the following factors:
– During the transition period the JV rather than the Group was primarily responsible for ensuring processed products were provided
to its customer.
– The cost recovery mechanism during the transition period resulted in the majority of the inventory risk associated with the
operations remaining with the JV’s customer rather than with the Group.
– The Group was not exposed to significant pricing risk.
Following the end of the transition period, on 30 June 2020, the JV arrangements ended and the Group took full control of and
responsibility for the inputs and outputs of these facilities.
Accordingly, the Group became entitled to earn income directly from these facilities and was exposed to the full risk and rewards
of ownership and control of their operations. From this point onwards when consolidating the result of its subsidiary the Group
has recognised the income and expenses of these meat processing operations on a gross basis with revenue of £319.5m being
recognised since 30 June 2020.
Share Based Payments
The Group operates a Long Term Incentive Plan (LTIP) and an employee Sharesave scheme both of which have been accounted for as
equity-settled share based payment schemes under IFRS 2.
Upon exercise, awards under the LTIP scheme may be settled either through issuing new shares to participants, or by issuing shares
that have been purchased in the market.
Awards under the LTIP scheme first began to vest during the 2017 financial year and options exercised were settled either by
providing plan participants with shares purchased in the market by the Group or the cash equivalent to the market value of the shares.
The Group ended its practice of settling LTIP exercises with cash alternatives during 2020 and communicated this to plan participants.
Therefore there is no constructive obligation to settle share based payments in cash and the schemes concerned are considered to be
equity settled.
Critical accounting estimates
Goodwill impairment
Goodwill is reviewed for impairment on at least an annual basis. Details of the tests and carrying value of the assets are shown in note 15.
An impairment review requires an estimation of the recoverable amount of the cash-generating units to which the goodwill is allocated using
either value-in-use or fair value less costs of disposal calculations. Value-in-use calculations require assumptions to be made regarding the
expected future cash flows from the cash generating unit and choice of a suitable discount rate in order to calculate the present value of
those cash flows. Fair value less costs of disposal calculations can be based on transaction prices observed in the market for comparable
assets or if these are not available using a discounted cash flow model, requiring assumptions in respect of cash flows and suitable after-tax
discount rates to be made. If the actual cash flows are lower than estimated, future impairments may be necessary. Sensitivities are applied
to the key assumptions used in the impairment assessment and as explained in note 15 the impact of these sensitivities would not result in
an impairment in the next twelve months.
Share based payments
Note 27 describes the key assumptions and valuation model inputs used in the determination of the fair values of awards made under
the Group’s share based payment plans.
132
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Notestothefinancialstatements
continued
In addition, estimates are made as to the number of awards that will ultimately vest based on the Group’s projected future financial
performance, in relation to the probability of meeting non-market-based performance conditions and the continuing participation of
employees in the plans.
Of these estimates, future outcomes are likely to be most significantly impacted by changes to expectations of the Group’s adjusted
earnings per share performance. If projected performance was to increase by 10% above expectations, expected share based
payment charges would increase by approximately £0.7m in the next year, however were projected results to fall by 10% compared to
expectations share based payment charges would be expected to reduce by approximately £1.8m.
Business combinations
For business combinations the assets acquired, liabilities assumed and consideration payable are all valued at fair value. This requires
a number of estimates and judgements to be applied notably when assessing the fair value of acquired property, plant and equipment,
identifiable intangible assets and acquired leased assets and liabilities. Note 18 describes the business combinations that took place in
the year and the Group’s approach to assessing fair values of acquired assets and liabilities.
During 2021 and 2020 there were no other critical accounting estimates or judgements in relation to the application of the Group or
Company’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 nine operating segments: i) United Kingdom; ii)
Netherlands; iii) Belgium; iv) Republic of Ireland; v) Sweden; vi) Denmark; vii) Central Europe including Poland, Czech Republic, Hungary,
Slovakia, Latvia, Lithuania and Estonia; viii) Portugal; ix) Australasia and x) Central costs. The United Kingdom, Netherlands, Belgium,
Republic of Ireland, Sweden, Denmark, Central Europe and Portugal have been aggregated into one reportable segment ‘Europe’ as they
have similar economic characteristics as identified in IFRS 8. Australasia and Central costs comprise the other reportable segments.
From a product perspective the Executive Directors consider that the Group has only one identifiable product, wholesaling of food protein
products including meat, seafood and vegetarian. The Executive Directors consider that no further segmentation is appropriate, as all of
the Group’s operations are subject to similar risks and returns and exhibit similar long term financial performance.
The segment information provided to the Executive Directors for the reportable segments is as follows:
Europe
£’000
Australasia
£’000
Central
costs
£’000
2021
Total
£’000
Europe
£’000
Australasia
£’000
Central
costs
£’000
2020
Total
£’000
Total revenue 2,040,618 1,314,602 – 3,355,220 2,04 4,19 0 784,455 – 2,828,645
Inter-co revenue (53,250) – – (53,250) (54,609) – – (54,609)
Third party revenue 1,9 87,3 68 1,314,602 – 3,301,970 1,989,581 784,455 – 2,774,036
Adjusted operating profit/(loss) segment
result (see note 34) 61,788 22,370 (10,591) 73,567 62,581 17,209 (12,762) 67,028
Amortisation of acquired intangibles (2,778) – – (2,778) (2,449) – – (2,449)
Exceptional items (6,994) – – (6,994) – – – –
Impact of IFRS 16 291 (654) – (363) 406 1,882 – 2,288
Operating profit/(loss) segment result 52,307 21,716 (10,591) 63,432 60,538 19,091 (12,762) 66,867
Finance income 10 – – 10 22 – – 22
Finance costs (2,881) (10,017) (3,146) (16,044) (3,243) (8,140) (1,478) (12,861)
Income tax (expense)/credit (7,96 5) (1,761) 1,610 ( 8,116) (11,165) (2,568) 1,745 (11,988)
Profit/(loss) for the year 41,471 9,938 (12,127) 39,282 46,152 8,383 (12,495) 42,040
Depreciation and amortisation 33,039 33,604 140 66,783 32,433 25,877 91 58,401
Additions to non-current assets 29,587 27,528 662 57,777 24,459 70,733 314 95,506
Segment assets 643,157 462,556 49,547 1,155,260 568,638 45 3,14 3 27,29 2 1,049,073
Current income tax assets 5,212 –
Deferred income tax assets 6,952 6,219
Total assets 1,167,424 1,055,292
Segment liabilities 346,403 419,611 89,329 855,343 324,582 427,05 0 75,272 826,904
Current income tax liabilities – 4,066
Deferred income tax liabilities 4,132 2,384
Total liabilities 859,475 833,354
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
133
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
5 Segment information continued
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 34). 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 Australasia.
Analysis of revenues from external customers and non-current assets are as follows:
Revenues from
external customers
Non-current assets excluding
deferred tax assets
2021
£’000
2020
£’000
2021
£’000
2020
£’000
Analysis by geographical area
United Kingdom – country of domicile 1,122,047 1,125,955 196,857 165,564
Netherlands 298,535 301,537 34,857 7,5 45
Belgium 25,687 6,617 1,327 10,381
Sweden 220,065 221,886 12,814 18,060
Republic of Ireland 95,349 102,460 4,711 6,025
Denmark 116,15 6 122,643 16,046 18,444
Central Europe 109,529 108,483 22,297 25,16 4
Australasia 1,314,602 784,455 3 38,136 357,491
3,301,970 2,774,036 627,0 45 608,674
Analysis by principal customer
Customer 1 1,15 6,771 1,168,179
Customer 2 327,293 330,644
Customer 3 231,492 232,022
Customer 4 113,555 117,197
Customer 5 1,314,602 784,455
Other 158,257 141,539
3,301,970 2,774,036
6 Auditors’remuneration
Services provided by the Company’s auditors and its associates
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditors
andits associates:
Group
2021
£’000
2020
£’000
Fees payable to the Company’s auditors for the audit of the parent company and consolidated
financialstatements 168 160
Fees payable to the Company’s auditors and its associates for other services:
– The audit of the Company's subsidiaries pursuant to legislation 544 450
– Other services pursuant to legislation 49 47
– All other services including regulatory acquisition work 25 25
Total fees payable to the Company’s auditors and its associates 786 682
134
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Notestothefinancialstatements
continued
7 Expensesbynature
Group
2021
£’000
2020
£’000
Changes in inventories of finished goods and goods for resale 3,503 (690)
Raw materials and consumables used 2,718,685 2,264,608
Employee benefit expense (note 8) 211,8 66 190,859
Depreciation and amortisation – owned assets 48,356 40,051
Depreciation and amortisation – leased assets 18,427 18,350
Repairs and maintenance expenditure on property, plant and equipment 24,101 21,305
Transportation expenses 24,721 22,058
Gain on impact of acquisition of Dalco BV (note 9) (6,837) –
Foreign exchange losses 1,180 1,750
Other expenses 196,461 153,907
Total cost of sales, distribution costs and administrative expenses 3,240,463 2,712,198
8 Employeebenefitexpense
Group
2021
£’000
2020
£’000
Staff costs during the year
Wages and salaries 182,736 161,986
Social security costs 16,855 16,462
Share options granted to Directors and employees 2,725 4,372
Other pension costs 9,550 8,039
211,8 66 190,859
Group
2021
Number
2020
Number
Average number of persons employed (including Executive Directors) during the year by activity
Production 4,755 4,305
Administration 1,270 1,136
6,025 5,441
Group
2021
£’000
2020
£’000
Key management compensation (including Directors)
Salaries and short term employee benefits, including termination benefits 8,423 8,062
Post-employment benefits 314 4 41
Share-based payments 3,074 3,081
11,811 11,58 4
Group
2021
£’000
2020
£’000
Directors’ emoluments
Aggregate emoluments 3,658 4,572
Company contribution to money purchase pension scheme 138 194
3,796 4,766
Further details of Directors’ emoluments and share interests, including the highest paid Director, are given in the Directors’
remuneration report.
The Company has no employees and Directors do not receive emoluments from the Company. Employee expenses of the Company
amounted to £nil (2020: £nil).
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
9 Exceptionalitems
Group
Operating profit
2021
£’000
Finance costs
2021
£’000
Tax
2021
£’000
Profit after tax
2021
£’000
Fire in Belgium 11,661 – (2,901) 8,760
Impact of acquisition of Dalco (6,837) – – (6,837)
Acquisition costs 2,226 1,131 (215) 3,142
Total exceptional costs 7,050 1,131 (3,116 ) 5,065
Fire in Belgium
In June 2021 the Group’s facility in Belgium suffered an extensive fire and as a result exceptional costs totalling £11,661,000 have been
recognised. The costs include the impairment of tangible fixed assets and leased assets destroyed of £6,377,000 and £2,239,000
respectively, the cost of inventory that was destroyed as a result of the fire of £1,344,000 and other related additional costs of £3,884,000,
offset by a gain of £2,183,000 arising from the early settlement of related lease liabilities.
An exceptional tax credit has been of £2,901,000 has been recognised in respect of these costs.
The Group continues to work closely with its insurers to progress the related claims. The results for the period to 2 January 2022 do not include
potential income that may be received in respect of these claims with the insurance proceeds therefore considered to be contingent assets; at
this stage in the claims process the value of the contingent asset has yet to be determined. Legal claims have been made against the Group in
connection with the fire, however at this stage the Group considers the likelihood of incurring financial liabilities as a result of them is remote.
Impact of acquisition of Dalco
On 1 October 2021 the Group acquired the remaining 50% interest in Dalco Food BV (see note 18) and the financial position and performance
of the business was fully consolidated from this date. The Group’s joint venture interest was effectively disposed of at this date with an
exceptional gain of £6,837,000, being the difference between the carrying value and fair value of the joint venture interest, recognised.
Acquisition Costs
During the year the Group has recognised exceptional acquisition costs in respect legal and professional fees and other related costs
of £2,226,000. A further £1,131,000 of exceptional finance costs have been recognised related to the agreement of short term
acquisition bridge financing.
An exceptional tax credit of £215,000 has been recognised in respect of exceptional finance costs that are allowable for deductible for
tax purposes.
10Financeincomeandcosts
Group
2021
£’000
2020
£’000
Finance income
Other interest income 10 22
Finance income 10 22
Finance costs
Bank borrowings (5,132) (4,483)
Interest on lease liabilities (8,536) (6,919)
Exceptional finance costs (note 9) (1,131) –
Other interest expense (1,245) (1,459)
Finance costs (16,044) (12,861)
Finance costs – net (16,034) (12,839)
136
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Notestothefinancialstatements
continued
11Incometaxexpense
Group
2021
£’000
2020
£’000
Current income tax
Current tax on profits for the year 12,646 17,878
Adjustments to tax in respect of previous years (2,322) (273)
Total current tax 10,324 17,6 05
Deferred income tax
Origination and reversal of temporary differences (3,342) (5,721)
Adjustments to tax in respect of previous years 1,134 104
Total deferred tax (2,208) (5,617)
Income tax expense 8,116 11,988
Deferred tax charged directly to equity during the year in respect of employee share schemes amounted to £333,000 (2020: charge £136,000).
Factors affecting future tax charges
The Group operates in numerous tax jurisdictions around the world and is subject to factors that may affect future tax charges
including transfer pricing, tax rate changes and tax legislation changes.
The UK government made a number of budget announcements on 3 March 2021. These include confirming that the rate of
corporation tax will increase to 25% from 1 April 2023. This new law was substantively enacted on 24 May 2021. Deferred taxes at
the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements.
The tax on the Group’s profit before income tax differs (2020: differs) from the theoretical amount that would arise using the standard
rate of UK Corporation Tax of 19% (2020: 19%) applied to profits of the consolidated entities as follows:
2021
£’000
2020
£’000
Profit before income tax 47, 398 54,028
Tax calculated at the standard rate of UK Corporation Tax 19% (2020: 19%) 9,006 10,265
(Income)/expense not deductible for tax purposes (15) 834
Joint venture received net of tax (471) (1,364)
Adjustments to tax in respect of previous periods (1,188) (169)
Profits taxed at rates other than 19% (2020: 19%) 2,746 2,501
Deferred tax on IFRS 16 (1,047) (87)
Impact of changes in tax rates 414 –
Non-taxable gain on acquisition of JV (1,299) –
Other (30) 8
Income tax expense 8,116 11,988
There is no tax impact relating to components of other comprehensive income.
Adjustments to tax in respect of prior periods have resulted from changes in assumptions in respect of deductible expenses and the
application of capital allowances.
12Earningspershare
Basic 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.
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.
Group Basic
2021
Diluted Basic
2020
Diluted
Profit attributable to owners of the parent (£’000) 37,14 3 37,143 39,736 39,736
Weighted average number of ordinary shares in issue (thousands) 82,456 82,456 81,835 81,835
Adjustment for share options (thousands) – 1,098 – 1,084
Adjusted weighted average number of ordinary shares (thousands) 82,456 83,554 81,835 82,919
Basic and diluted earnings per share (pence) 45.0 44.5 48.6 47.9
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
13 Dividends
Group and Company
2021
£’000
2020
£’000
Final dividend in respect of 2020 paid 19.0p per ordinary share (2019: 15.4p) 15,561 12,586
Interim dividend in respect of 2021 paid 8.2p per ordinary share (2020: 7.0p) 6,740 5,735
Total dividends paid 22,301 18,321
The Directors propose a final dividend of 21.5p per share payable on 1 July 2022 to shareholders who are on the register at 6 June 2022.
This dividend totalling £19.1m has not been recognised as a liability in these consolidated financial statements.
Dividends paid to non-controlling interests in the year totalled £1,783,000 (2020: £1,776,000).
14 Property, plant and equipment
Group
Land and buildings
(including leasehold
improvements)
£’000
Plant and
machinery
£’000
Fixtures
and fittings
£’000
Motor
vehicles
£’000
Total
£’000
Cost
At 30 December 2019 93,510 342,541 16,043 274 452,368
Exchange adjustments 1,250 15,655 820 (1) 17,724
Additions 2,793 49,040 3,637 110 55,580
Additions: Transfer from Right-of-Use Asset – 37,223 – – 37,223
Transfer to intangible assets – (566) – – (566)
Disposals (30) (650) (2) (211) (893)
At 3 January 2021 97,523 443,243 20,498 172 561,436
Accumulated depreciation
At 30 December 2019 25,684 187,666 12,379 77 225,806
Exchange adjustments 528 7,245 473 (1) 8,245
Charge for the year 4,168 30,609 2,483 38 37,29 8
Disposals (30) (615) (2) (112) (759)
At 3 January 2021 30,350 224,905 15,333 2 270,590
Net book amount
At 30 December 2019 67,826 154,875 3,664 197 226,562
At 3 January 2021 67,173 218,338 5,165 170 290,846
Cost
At 4 January 2021 97,523 443,243 20,498 172 561,436
Exchange adjustments (3,248) (19,497) (1,136) (8) (23,889)
Acquisition (note 18) 2,315 7,843 548 123 10,829
Additions 15,125 37,487 3,606 33 56,251
Exceptional impairment (note 9) – (7,0 49) – – (7,049)
Transfer to intangible assets 430 (769) (4,165) 3 (4,501)
Disposals (469) (260) (735) (15) (1,479)
At 2 January 2022 111,676 460,998 18,616 308 591,598
Accumulated depreciation
At 4 January 2021 30,350 224,905 15,333 2 270,590
Exchange adjustments (924) (10,560) (781) (7) (12,272)
Charge for the year 4,440 37,38 4 2,297 65 4 4,18 6
Exceptional impairment (note 9) – (672) – – (672)
Transfer to intangible assets – – (553) – (553)
Disposals (87) (192) (878) (12) (1,16 9)
At 2 January 2022 33,779 250,865 15,418 48 30 0,110
Net book amount
At 2 January 2022 77,8 97 210,133 3,198 260 291,488
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 plant and
machinery £13,025,000 (2020: £20,318,000).
Additions to property, plant and equipment include capitalised interest costs of £725,000 (2020: £409,000).
138
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Notes to the financial statements
continued
15 Intangible assets
Group
Computer
software
£’000
Brand and
customer
relationships
£’000
Goodwill
£’000
Total
£’000
Cost
At 30 December 2019 7,85 8 22,560 47,5 82 78,000
Exchange adjustments 41 – – 41
Additions 2,703 – – 2,703
Transfer from property, plant and equipment 566 – – 566
Disposals (188) – – (188)
At 3 January 2021 10,980 22,560 47,582 81,122
Accumulated amortisation
At 30 December 2019 3,279 5,182 – 8,461
Exchange adjustments 25 – – 25
Charge for the year 304 2,449 – 2,753
Disposals (188) – – (188)
At 3 January 2021 3,420 7,6 31 – 11,051
Net book amount
At 30 December 2019 4,579 17,378 47,5 82 69,539
At 3 January 2021 7,5 60 14,929 47,582 70,071
Cost
At 4 January 2021 10,980 22,560 47,582 81,122
Exchange adjustments (411) – – (411)
Acquisition (note 18) 158 12,519 21,900 34,577
Additions 1,115 – – 1,115
Transfer from property, plant & equipment 4,501 – – 4,501
Disposals (3) – – (3)
At 2 January 2022 16,751 35,079 69,482 121,312
Accumulated amortisation
At 4 January 2021 3,420 7,6 31 – 11,051
Exchange adjustments (235) – – (235)
Charge for the year 1,468 2,702 – 4,170
Transfer from property, plant & equipment 553 – – 553
Disposals (2) – – (2)
At 2 January 2022 5,204 10,333 – 15,537
Net book amount
At 2 January 2022 11,5 47 24,746 69,482 105,775
Amortisation charges are included within administrative expenses in the income statement.
Goodwill Impairment Testing
Goodwill includes £44,793,000 relating to the acquisition of the Seachill business (now trading as Hilton Seafood UK) in 2017 and
£2,789,000 recognised in 2019 following the acquisition of SV Cuisine Limited. Hilton Seafood UK and SV Cuisine are each considered
to be separate cash generating units. The recoverable amount of the Seachill cash generating unit was based on its fair value less
costs of disposal after allowing for the impact of planned investment and the recoverable amount of SV Cuisine was determined on a
value-in-use basis based, in both cases using a discounted cash flow model. For each cash generating unit the recoverable amounts
calculated exceeded their carrying value.
The key assumptions used in the calculations are projected EBITDA, projected profit after tax, the pre-tax and post-tax discount rates
and the growth rates used to extrapolate cash flows beyond the projected period. EBITDA and profit after tax are based on one-year
budgets approved by the Board and longer term, three year, projections based on past experience adjusted to take account of the
impact of expected changes to sales prices, volumes, business mix and margin. Cash flows are discounted at a pre-tax discount rate
of 10% (2020: 10%) or a post-tax discount rate of 8% (2020: 8%) with a growth rate of 2% (2020: 2%) used to extrapolate cash flows.
Discount rates and growth rates are calculated with reference to external benchmarks and where relevant past experience.
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139
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
15 Intangible assets continued
Sensitivity to changes in assumptions
The calculation is most sensitive to changes in the assumptions used for projected cash flow, the pre-tax discount rate and the
growth rate. Management considers that reasonably possible changes in assumptions would be an increase in discount rate of one
percentage point, a reduction in growth rate of 1 percentage point or a 10% reduction in budgeted cash flow. As an indication of
sensitivity, when applied to the value-in-use calculation neither a 1% reduction in growth rate, a 10% reduction in budgeted cash flow,
nor a 1% increase in the pre-tax discount rate would have resulted in an impairment of goodwill in the year.
No indicators of impairment were identified in respect of other, amortised, intangible assets and therefore no impairment review has
been undertaken.
Goodwill acquired in the year
Goodwill and other intangible assets totalling £34,577,000 have been provisionally recognised following the acquisitions of Dalco Food
BV and Fairfax Meadow Europe Limited in the year (see note 18). Dalco and Fairfax Meadow will each form separate cash generating
units for impairment testing purposes and impairment testing will begin before the end of the current financial year.
16 Leases
(i) Amounts recognised in the balance sheet
The balance sheet includes the following amounts relating to leases:
Lease: right of use assets
Group
Land & Buildings
£’000
Equipment
£’000
Vehicles
£’000
Total
£’000
Opening net book amount as at 29 December 2019 132,940 42,679 2,674 178,293
Exchange Adjustments 10,469 295 83 10,847
Additions 98,427 195 1,303 99,925
Transfer to tangible fixed assets – (37,223) – (37,223)
Remeasurements, reclassification and scope changes 2,592 (586) (363) 1,643
Depreciation (13,008) (4,254) (1,088) (18,350)
Closing net book amount at 3 January 2021 231,420 1,106 2,609 235,135
Exchange Adjustments (9,945) (147) (108) (10,200)
Additions 2,739 2,418 420 5,577
Acquisition (note 18) 6,066 5,139 1,289 12,494
Remeasurements, reclassification and scope changes – (336) – (336)
Depreciation (16,339) (927) (1,161) (18,427)
Disposal of leased assets destroyed by fire (note 9) (2,168) (19) (52) (2,239)
Closing net book amount at 2 January 2022 211,773 7,23 4 2,997 222,004
Lease liabilities
Group
2021
£’000
2020
£’000
Current 14,419 6,250
Non-current 228,977 238,995
243,396 245,245
Maturity analysis – contractual undiscounted cash flows
Group
2021
£’000
2020
£’000
Less than one year 22,716 15,010
One to five years 79,010 77,822
More than five years 233,673 255,619
Total lease liabilities 335,399 348,451
140
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Notes to the financial statements
continued
16 Leases continued
(ii) Amounts recognised in the consolidated income statement
The income statement shows the following amounts related to leases:
Depreciation charge on right-of-use assets
Group
2021
£’000
2020
£’000
Buildings 16,339 13,008
Plant & equipment 927 4,254
Vehicles 1,161 1,088
18,427 18,350
Interest expenses (included in finance costs) 8,536 6,919
Expenses relating to short-term leases (included in costs of goods sold and administrative expenses) 136 278
Expenses relating to leases of low-value assets that have not been shown above as short-term
(included in costs of goods sold and administrative expenses) 3 24
The total cash outflow for leases in 2021 was £17,307,000 (2020: £59,488,000).
Variable Lease Payments
Leases with liabilities recognised of £9,824,000 (2020: £10,163,000), accounting for 4.0% (2020: 4.1%) of total lease liabilities, are
subject to five yearly RPI linked rent reviews. These rent reviews are subject to a minimum collar, the impact of which is included in
the calculation of lease liabilities and a maximum cap. If the impact of these variable lease payments had been recognised, applying
index levels as at 2 January 2021, lease liabilities would have increased by 2021: £1,895,000 (2020: £633,000).
In addition, leases with liabilities recognised totalling £6,408,000 (2020: £11,063,000), accounting for 2.6% (2020: 4.5%) of total lease
liabilities, are subject to annual CPI linked rent increases. If the impact of these variable lease payments had been recognised, applying
index levels as at 2 January 2022, lease liabilities would have increased by £278,000 (2020: £44,000).
17 Investments
Investments in joint ventures
The Group uses the equity method of accounting for its interest in joint ventures. The aggregate movement in the Group’s
investments in joint ventures is as follows:
Group
2021
£’000
2020
£’000
At the beginning of the year 12,622 11,758
Profit for the year 1,925 5,029
Disposal of investment (6,551) –
Dividends received (2,273) (4,271)
Effect of movements in foreign exchange (184) 106
At the end of the year 5,539 12,622
Where relevant, management accounts for the joint venture have been used to include the results up to 2 January 2022. The Group’s
share of the net assets, income and expenses of the joint venture are detailed below:
Set out below are the joint ventures of the Group as at 2 January 2022.
(%) Proportion of
ordinary shares held by
Joint venture Registered address Country Share class Parent Group
SoHi Meat Solutions – Distribuicao
deCarnes SA
Zona Industrial de Santarem – Quinta de
Mocho District, Santarem, 2005 002 Varzea
Portugal €5 Ordinary – 50
Foods Connected Limited Ground Floor, Old City Factory, Patrick Street,
Londonderry, Northern Ireland, BT48 7EL
UK £1 Ordinary – 50
Foods Connected Australia Pty Limited 62 Burwood Road, Burwood, NSW 2134 Australia AUD 1
Ordinary
– 50
At 3 January 2021 the Group held 50% interests in Woolworths Meat Co. Pty Limited and Dalco Food BV. As noted below during the
period the Group acquired the remaining 50% interest in Dalco Food BV taking its interest to 100%. Following the end of Woolworths
Meat Co. Pty Limited’s oversight role in respect of the former joint venture meat processing facilities in Australia the company ceased
trading in 2020 and it was subsequently dissolved in the period.
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17 Investments continued
The tables below provide summarised financial information for those joint ventures that are material to the Group. The information
disclosed reflects the amounts presented in the financial statements of the relevant joint ventures and not the Group’s share of
those amounts.
SoHi Meat Solutions Woolworths Meat Co. Pty Limited Dalco Food BV
Summarised balance sheet
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
Current assets
Cash and cash equivalents 301 417 – – – 3,934
Other current assets 35,675 41,987 – – – 17,14 5
Total current assets 35,976 42,404 – – – 21,079
Non-current assets 19,023 22,708 – – – 5,439
Total current liabilities (42,377) (52,290) – – – (9,640)
Total non-current liabilities (6,920) (7,14 4) – – – (1,906)
Net assets 5,702 5,678 – – – 14,972
Reconciliation to carrying amounts
Opening net assets 5,678 5,534 – 2,412 14,972 12,090
Acquisitions 1,086 1,128 – 5,034 1,982 2,782
Profit for the period – – – – (13,102) –
Dividends paid (956) (1,060) – (7,4 82) (3,602) –
Exchange adjustments (106) 76 – 36 (250) 100
Closing net assets 5,702 5,678 – – – 14,972
Group’s share – % 50% 50% 0% 50% 0% 50%
Group’s share – £k 2,851 2,839 – – – 7,4 86
Summarised statement ofcomprehensiveincome
Revenue 254,949 254,948 – 7,561 56,039 54,997
Depreciation and amortisation (4,020) (4,675) – – (1,293) (1,299)
Net finance costs (634) (296) – – (167) (145)
Income tax expense (417) (343) – (2,266) (612) (917)
Profit for the period 1,086 1,128 – 5,034 1,982 2,782
Dividends received from joint venture entity 478 530 – 3,741 1,801 –
On 1 October 2021 the Group acquired the remaining 50% interest in Dalco Food BV (see note 18) and the financial position and
performance of the business was fully consolidated from this date. The Group’s joint venture interest was effectively disposed of at
this date with an exceptional gain of £6,837,000, being the difference between the carrying value and fair value of the joint venture
interest, recognised. During the year the Woolworths Meat Co. Pty Limited was dissolved.
The Group also has an interest in one other individually immaterial joint venture.
Individually immaterial joint ventures:
2021
£’000
2020
£’000
Aggregate carrying amount of individually immaterial joint venture 2,688 2,297
Aggregate Group share of profit for the year 391 557
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Notes to the financial statements
continued
17 Investments continued
Non-controlling interests
Set out below is summarised financial information for Hilton Foods Holland BV, the only Group subsidiary with a non-controlling
interest that is considered to be material to the Group. The amounts disclosed are before inter-company eliminations.
Hilton Meats Holland BV
Summarised balance sheet
2021
£’000
2020
£’000
Current assets 70,246 75,994
Current liabilities (49,314) (54,525)
Current net assets 20,932 21,469
Non-current assets 5,310 5,319
Non-current liabilities (274) (436)
Non-current net assets 5,036 4,883
Net assets 25,968 26,352
Accumulated non-controlling interests 5,194 5,270
Summarised statement of comprehensive income
Revenue 288,347 301,677
Profit for the period 7,301 7,68 5
Other comprehensive (expense)/income (1,806) 1,587
Total comprehensive income 5,495 9,272
Profit allocated to non-controlling interests 1,460 1,537
Dividends paid to non-controlling interests 1,175 1,164
Summarised cash flows
Cash flows from operating activities 9,065 13,371
Cash flows from investing activities (5,646) (9,213)
Cash flows from financing activities (5,919) (7,752)
Impact of foreign exchange (1,443) 1,268
Net decrease in cash and cash equivalents (3,943) (2,326)
There were no transactions with non-controlling interest in the current or prior year.
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17 Investments continued
Investments in subsidiaries
Investments in subsidiary undertakings are recorded at cost, which is the fair value of consideration paid.
Company
2021
£’000
2020
£’000
At the beginning of the year 157,221 157,221
Additions 90,564 –
At 3 January 2021 and 2 January 2022 247,785 157,2 21
During the year the Company invested £90,564,000 in its subsidiary Hilton Foods Limited.
The subsidiary undertakings of the Group are:
(%) Proportion of shares held by
Subsidiary undertakings Registered address Country Share class Parent Group
Hilton Foods Asia Pacific Limited
2-8 The Interchange Latham Road,
HuntingdonPE29 6YE
UK £1 Ordinary – 100
Hilton Food Solutions Limited £1 Ordinary – 55
Agito Holdings Limited
(formerly Hilton Alternative
Protein UK Limited)
£1 Ordinary – 100
Seachill UK Limited trading
asHiltonSeafood UK
£1 Ordinary – 100
Coldwater Seafood UK Limited £1 Ordinary – 100
Icelandic UK Limited £1 Ordinary – 100
Fairfax Meadow Europe Limited £1 Ordinary –
100
(2020:
0)
Fairfax London Limited
£1 Ordinary –
100
(2020:
0)
£1 Preference – 100
Hilton Foods Limited
Carson McDowell LLP, Murray House,
MurrayStreet, Belfast, Northern Ireland,
BT16DN
UK £1 Ordinary 100 100
Hilton Foods UK Limited £1 Ordinary – 100
Hilton Meats Holland Limited £1 Ordinary – 80
Hilton Food Group (Europe) Limited £1 Ordinary – 100
Hilton Food.com Limited £1 Ordinary – 100
Hilton Foods Holland BV
Grote Tocht 31, 1507
CG Zaandam
Netherlands €1,000 Ordinary – 80
Hilton Food Solutions Holland BV €1 Ordinary – 55
Dalco Food BV Sweelinckstraat 8, 5344 AE Oss €45.38 Ordinary –
100
(2020:
50)
Hilton Foods (Ireland) Limited Termonfeckin Road, Drogheda, Co Louth Ireland €1 Ordinary – 100
Hilton Foods Sverige AB
(formerlyHFG Sverige AB)
Saltangsvagen 53, 721 32
Vasteras
Sweden SEK 2,500
Ordinary
– 100
Hilton Foods Danmark A/S Brunagervej 4, Kolt, 8361 Hasselager Denmark DKK 100 Ordinary – 100
Hilton Foods Ltd Sp z o.o. Ul Strefowa 31, 43-100 Tychy Poland PLN 500 Ordinary – 100
Hilton Foods Belgium BV Guldensporenpark 120, Stratenplan,
9820Merelbeke
Belgium €1 Ordinary – 100
Hilton Foods Australia Pty Limited 267 Dohertys Road, Truganina, VIC 3029 Australia AUD 1 Ordinary – 100
Hilton Foods New Zealand Limited 11 Puaki Drive, Wiri, Auckland 2104 New Zealand NZD 1 Ordinary – 100
All subsidiary undertakings are included in the consolidation. The Company’s voting rights in its subsidiary undertakings are the same
as its effective interest in its subsidiary undertakings.
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Notes to the financial statements
continued
18 Business combinations
On 1 October 2021 the Group completed the purchase of the remaining 50% of Dalco Food BV (Dalco) taking its interest from 50% to
100%. Dalco is a leading producer of vegetarian and vegan proteins supplying both retail and food service customers from its facilities
in the Netherlands.
On 28 October 2021 the Group acquired 100% of the share capital of Fairfax Meadow Europe Limited (Fairfax Meadow) a leading
meat supplier to the UK food service sector.
Group
Dalco Food BV
£’000
Fairfax Meadow
Europe Limited
£’000
Property, plant and equipment 4,393 6,436
Intangibles – Software 113 45
Brand and customer relationship intangibles – 12,519
Lease: Right-of-use asset 5,303 7,191
Inventories 8,14 3 7, 982
Trade and other receivables 5,992 13,643
Trade and other payables (8,767) (16,781)
Borrowings (1,824) (8,504)
Lease liabilities (5,303) (7,09 4)
Deferred tax (242) (3,024)
Goodwill 18,967 2,933
Fair value of assets acquired 26,775 15,346
Consideration:
Payable on completion 13,388 15,346
Deemed fair value of existing 50% interest 13,387 –
26,775 15,346
Dalco Food BV
The acquisition of the remaining 50% of Dalco allows the Group to take full control of the business enabling it to further diversify and
strengthen its protein offering in the fast-growing vegan and vegetarian market.
Consideration for the acquisition of the 50% interest in Dalco totalled £13,388,000 and comprised cash of £11,603,000, and Hilton
Food Group plc shares with a market value at the date of issue of £1,785,000.
As a result of the acquisition, and to allow full consolidation of Dalco as a subsidiary the Group has recognised an exceptional gain of
£6,837,000 (see note 9) being the difference between the carrying value of its joint venture interest at the date of acquisition and its
fair value.
Due to the timing of completion of the acquisition and the timing of other acquisition activity undertaken by the Group in 2021, the
exercise to assess the fair values of assets and liabilities acquired is ongoing and therefore amounts presented above are provisional
and expected to change.
The provisional fair value of property, plant and equipment acquired, disclosed above, is the book value recognised by Dalco at the
date of acquisition. A review of acquired property, plant and equipment is currently being undertaken by qualified surveyors and once
concluded is expected to give rise to adjustments to the fair value recognised.
An exercise is also underway to establish the fair value of Dalco’s customer relationships and long term supply agreements, the
fair value of brands used within the Dalco business and to identify and value any other intangible assets acquired as part of the
business combination.
Goodwill of £18.8m has provisionally been recognised, however the conclusion of the ongoing work in respect of the valuation of
tangible and intangible fixed assets acquired is expected to result in an overall reduction in the level recognised. Residual goodwill
is expected to mainly relating to the strategic benefits for Hilton of diversifying its product portfolio into the vegan and vegetarian
protein market.
The value of other assets and liabilities reflect the amounts expected to be realised or paid respectively.
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145
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
18 Business combinations continued
Fairfax Meadow Europe Limited
The acquisition of Fairfax Meadow improves the access for Hilton to the out-of-home channel, providing an opportunity for the Group
to diversify into the food service sector and contribute to the group sustainable growth.
Consideration for the acquisition of Fairfax Meadow totalled £15,346,000 paid entirely in cash.
Goodwill has arisen and mainly relates to the strategic benefits for Hilton of diversifying its product portfolio into the food
service sector.
The fair value of property, plant and equipment acquired was established following a review undertaken by qualified surveyors and
reflect their existing use value.
Customer relationship intangibles have been recognised and relate to the supply agreements and long standing relationships that
Fairfax Meadow has with its customers. Brand intangibles have been recognised in respect of the Fairfax Meadow trading name and
other brands employed by the business. The fair value of these intangible assets of £12,519,000 have been aggregated as they are
considered to be linked with their value each dependent on the other and will be amortised over their useful economic lives of 5 to
9 years.
The value of other assets and liabilities reflect the amounts expected to be realised or paid respectively.
As a result of the timing of completion of the acquisition and the timing of other acquisition activity undertaken by the Group in
2021, fair values presented for the Fairfax Meadow acquisition reflect the initial assessment of fair value and remains subjected to
amendment for one year from the date of acquisition.
Since the date of acquisition Dalco has contributed revenue of £14.8m to the Group and has realised an adjusted loss before
exceptional items and tax of £0.1m; Fairfax Meadow has contributed revenue of £23.4m and realised adjusted profit before tax and
exceptional items of £0.5m.
If the acquisitions of the 50% interest in Dalco and Fairfax Meadow had taken place at the start of the year the Group would have
recognised revenue £3,405.1m and adjusted profit before tax and exceptional items of £66.5m.
In the year the Group has recognised exceptional acquisition related costs of £2,226,000 in respect of legal and professional and other
related activities associated with acquisition activity alongside exceptional finance costs of £1,131,000 relating to acquisition specific
bank financing. See note 9.
Deferred Consideration
At 3 January 2021 a deferred consideration liability of £3,318,000 in respect of the acquisition of SV Cuisine Limited had been
recognised. During the period the Group settled this liability making a payment of £2,500,000.
19 Inventories
Group
2021
£’000
2020
£’000
Raw materials and consumables 136,926 99,495
Finished goods and goods for resale 19,591 17,446
156,517 116,941
The cost of inventories recognised as an expense and included in cost of sales amounted to £2,722,188,000 (2020: £2,263,918,000).
The Group charged £1,106,000 in respect of inventory write-downs (2020: £2,904,000). The amount charged has been included in
cost of sales in the income statement.
146
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Notes to the financial statements
continued
20 Trade and other receivables
Group Company
2021
£’000
2020
£’000
2021
£’000
2020
£’000
Trade receivables 201,377 170,534 – –
Less: provision for impairment of trade receivables (699) (369) – –
Trade receivables – net 200,678 170,165 – –
Amounts owed by Group undertakings – – 2,874 14,272
Amounts owed by related parties (see note 32) 565 690 – –
Other receivables 25,868 16,924 – –
Prepayments 5,516 11,86 3 – –
232,627 199,642 2,874 14,272
Less: Non-current other receivables (2,239) – – –
230,388 199,642 2,874 14,272
Amounts owed by Group undertaking to the Company are unsecured interest free and repayable on demand.
The carrying amounts of trade and other receivables are denominated in the following currencies:
Group Company
Currency
2021
£’000
2020
£’000
2021
£’000
2020
£’000
UK Pound 66,066 38,426 2,874 14,272
Euro 51,597 57,422 – –
Swedish Krona 16,943 21,640 – –
Danish Krone 25,204 27,077 – –
Polish Zloty 4,313 4,530 – –
Australian Dollar 49,092 46,403 – –
New Zealand Dollar 19,412 4,14 4 – –
232,627 199,642 2,874 14,272
The Group have performed an assessment of the expected credit losses across the portfolio of trade receivables and contract assets.
In determining the expected credit loss, the Group has given due consideration to the historic credit losses arising in prior years and
ofcurrent and forward looking information on macroeconomic factors affecting the ability of the customers to settle the receivables.
To measure the expected credit loss, trade receivables and contract assets have been grouped based on shared credit risk
characteristics and the days past due. The Group has concluded that the expected credit loss results in a provision being
recognisedof £699,000 (2020: £369,000).
Trade receivables and contract assets are written off where there is no reasonable expectation of recovery.
Impairment losses on trade receivables and contract assets are presented as net impairment losses within operating profit.
Subsequent recoveries of amounts previously written off are credited against the same line item.
Movements on the provision for impairment of trade receivables are as follows:
Group
2021
£’000
2020
£’000
At the beginning of the year 369 569
Provision for receivables impairment 401 53
Receivables impairment released – (8)
Receivables written off during the year as uncollectable (67) (245)
Exchange differences (4) –
At the end of year 699 369
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
21 Cash and cash equivalents
Group Company
2021
£’000
2020
£’000
2021
£’000
2020
£’000
Cash at bank and on hand 140,170 123,816 151 190
22 Other financial asset – restricted cash
On 6 January 2022 the Group acquired a 50% joint venture interest in Agito Group Pty Limited (see note 31). Consideration for this
investment was held in escrow by the Group lawyer’s at the year end and has therefore been recognised as restricted cash.
23 Borrowings
Group
2021
£’000
2020
£’000
Current
Bank borrowings 224,732 39,759
Non-current
Bank borrowings – 206,228
Total borrowings 224,732 245,987
Due to the frequent re-pricing dates of the Group’s loans, the fair value of current and non-current borrowings is approximate to their
carrying amount.
The carrying amounts of the Group’s borrowings are denominated in the following currencies:
Currency
2021
£’000
2020
£’000
UK Pound 65,198 6 6,142
Euro 18,277 21,217
Danish Kroner 1,118 851
Polish Zloty 5,384 6,560
Australian Dollar 106,903 120,667
New Zealand Dollar 27,852 30,550
224,732 245,987
Bank borrowings are repayable in quarterly instalments from 2019 – 2022 with interest charged at LIBOR (or equivalent benchmark
rates) plus 1.3% – 1.6%. Bank borrowings are subject to joint and several guarantees from each active Group undertaking.
The Group’s bank borrowings have been classified as current liabilities as the bank facility agreements were due to mature in October
2022. Since the year end the Group has refinanced these facilities (see note 31).
The Group has undrawn committed loan facilities of £96.8m (2020: £51.5m).
The undiscounted contractual maturity profile of the Group’s borrowings is described in note 3.
Group net debt of £85,571,000 (2020: net debt of £123,366,000) comprises borrowings, noted above, of £224,732,000
(2020: £245,987,000) cash and cash equivalents of £140,014,000 (2020: £123,816,000), and finance leases previously recognised
under IAS 17 of £853,000 (2020: £1,195,000). Including total lease liabilities Group net debt is £328,114,000 (2020: £367,416,000).
24 Trade and other payables
Group Company
2021
£’000
2020
£’000
2021
£’000
2020
£’000
Trade payables 324,673 263,938 – –
Amounts owed to related parties (see note 32) 136 208 – –
Social security and other taxes 8,956 7,496 – –
Accruals 53,450 60,712 5 –
387,215 332,354 5 –
The fair value of trade and other payables are the same as their carrying value.
148
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Notes to the financial statements
continued
25 Deferred income tax
Group
Accelerated
capital
allowances
£’000
Acquired
intangible
assets
£’000
IFRS 16
Leases
£’000
Other
timing
differences
£’000
Total
£’000
At 30 December 2019 (1,085) (3,302) 1,612 929 (1,846)
Exchange differences 200 – – – 200
Income statement credit 4,18 9 465 963 – 5,617
Adjustment in respect of employee share schemes – – – (136) (136)
At 3 January 2021 3,304 (2,837) 2,575 793 3,835
Exchange differences (290) – – – (290)
Acquisition (note 18) (3,266) – – – (3,266)
Income statement credit (988) 465 2,731 – 2,208
Adjustment in respect of employee share schemes – – – 333 333
At 2 January 2022 (1,240) (2,372) 5,306 1,126 2,820
The following is the reconciliation of the deferred tax balances in the balance sheet:
Group
2021
£’000
2020
£’000
Deferred tax liabilities (4,132) (2,384)
Deferred tax assets 6,952 6,219
2,820 3,835
Other timing differences principally relate to share-based payments. The deferred income tax liability above includes £281,324
(2020: £253,000) which is estimated to reverse within 12 months. The deferred income tax asset above is not expected to reverse
within 12 months.
26 Ordinary shares
Group Company
Number
of shares
(thousands)
2021
£’000
2020
£’000
2021
£’000
2020
£’000
Authorised, issued and fully paid ordinary shares of 10p each
At 4 January 2021/30 December 2019 81,939 8,194 8,173 8,19 4 8,173
Issue of new shares relating to employee incentive schemes 263 26 21 26 21
Issue of new shares relating to Dalco acquisition 154 15 – 15 –
Issue of new shares relating to equity placing 6,579 658 – 658 –
At 2 January 2022/3 January 2021 88,935 8,893 8,19 4 8,893 8,194
All ordinary shares of 10p each have equal rights in respect of voting, receipt of dividends and repayment of capital.
On 1 October 2021 the Company issued 154,000 ordinary shares with a total market value at the date of issue of £1,785,000, equal
to£11.59 per share, as part of the consideration for the acquisition of the remaining 50% interest in Dalco (see note 18).
On 10 December 2021 the Company successfully placed 6,578,000 ordinary shares at a price of £11.40 per share raising total gross
proceeds of £75,000,000. After share issues costs of £1,833,000, which have been deducted from equity, net proceeds of the
placing were £73,167,000.
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149
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
27 Share-based payment
All employee sharesave scheme
These schemes are open to all eligible employees of the Group (including the Executive Directors) who make regular savings
over a three year period. The exercise price of the granted options is equal to the market price of the shares on the date of the
grant. The options are exercisable starting three years from the grant date and must be exercised within six months thereafter.
No performance conditions are attached to the options granted under the scheme.
Long Term Incentive Plan (LTIP)
Under the Group’s Long Term Incentive Plan nil cost share options are granted to Executive Directors and to selected senior
employees. The options are exercisable starting three years from the grant date subject to the Group achieving a minimum earnings
per share (EPS) compound growth target. An additional performance measure for total shareholder return (TSR) was introduced during
the year, whereby 70% of the award is based on EPS performance and 30% is based on TSR.
Awards will vest on a sliding scale as follows:
– EPS – 10% of the maximum award applied at the minimum EPS growth target of 6% per year with the full award vesting where
EPS growth is at least 12%-15% per year
– TSR – 10% median performance against the constituents of the FTSE 250 (excluding investment trusts) increasing to full vesting for
this part of an award for upper quartile performance
The options have a contractual option term of 10 years. The Group has no legal or constructive obligation to repurchase or settle the
options in cash.
Movements in the number of share options outstanding and their related weighted exercise price are as follows:
Sharesave Long Term Incentive
Options
(’000)
Exercise price
(pence)
Options
(’000)
Exercise price
(pence)
At 30 December 2019 750 813.56 1,473 –
Granted 260 1,228.00 419 –
Exercised (214) 648.25 (192) –
Lapsed (56) 918.00 (250) –
At 3 January 2021 740 998.99 1,450 –
Granted 226 1,200.00 370 –
Exercised (263) 829.04 (212) –
Lapsed (102) 1,121.39 (20) –
At 2 January 2022 601 1,128.69 1,588 –
Share options outstanding at the end of the year have the following expiry date and exercise prices:
Number options
Expiry date Type of scheme Status
Exercise
price
(pence)
2021
(‘000)
2020
(‘000)
December 2021 Sharesave Exercisable 830.00 – 267
February 2023 Sharesave Not exercisable 950.00 194 221
February 2024 Sharesave Not exercisable 1228.00 201 249
February 2025 Sharesave Not exercisable 1200.00 209 –
April 2024 Long Term Incentive Plan Exercisable nil cost 2 21
April 2025 Long Term Incentive Plan Exercisable nil cost 60 88
April 2026 Long Term Incentive Plan Exercisable nil cost 66 99
April 2027 Long Term Incentive Plan Exercisable nil cost 92 113
May/July 2028 Long Term Incentive Plan Exercisable nil cost 246 359
May 2029 Long Term Incentive Plan Not exercisable nil cost 399 404
Sep 2030 Long Term Incentive Plan Not exercisable nil cost 355 366
May 2031 Long Term Incentive Plan Not exercisable nil cost 367 –
Total 2,191 2,19 0
The fair value of options granted during 2021 determined using the Black-Scholes valuation model ranged from 218p to 1145p per
option. The significant inputs into the model were the exercise price shown above, volatility of 33% based on a comparison of
similar listed companies, dividend yield of 2.14%, an expected option life of 2.64 years, and an annual risk-free interest rate of 0.11%.
See note 8 for the total expense recognised in the income statement for share options granted to Directors and employees.
150
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Notes to the financial statements
continued
28 Cash generated from operations
Group
2021
£’000
2020
£’000
Profit before income tax 47, 398 54,028
Finance costs – Net 16,034 12,839
Operating profit 63,432 66,867
Adjustments for non-cash items:
Share of post tax profits of joint venture (1,925) (5,029)
Depreciation of property, plant and equipment 4 4,18 6 37,298
Depreciation of leased assets 18,427 18,350
Impairment of property, plant and equipment 6,377 –
Disposal of leased assets destroyed by fire 2,239 –
Gain on early settlement of Belgium lease liabilities (2,18 3) –
Amortisation of intangible assets 4,170 2,753
Amortisation of contract assets – charged to revenue – 1,197
Gain on 100% acquisition of Dalco BV (6,837) –
Loss/(gain) on disposal of non-current assets 195 (40)
Adjustment in respect of employee share schemes 2,725 2,120
Changes in working capital:
Inventories (26,656) (23,212)
Trade and other receivables (23,116) 22,995
Trade and other payables 40,225 (2,528)
Cash generated from operations 121,259 120,771
The parent company has no operating cash flows.
29 Analysis and movement in net debt
This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.
2021
£’000
2020
£’000
Cash and cash equivalents 140,170 123,816
Borrowings (including overdrafts) (224,732) (245,987)
Net bank debt (84,562) (122,171)
Lease liabilities (243,396) (245,245)
Net debt (327,958) (367,416)
Net debt reconciliation
Cash/other
financial assets
£’000
Borrowings (including
overdrafts)
£’000
Net bank debt
£’000
Lease liabilities
£’000
Net debt
£’000
At 30 December 2019 110,514 (197, 339) (86,825) (184,633) (271,458)
Cash flows 10,480 48,908 59,388 52,267 111,655
Lease additions – – – (99,925) (99,925)
New borrowings – (92,563) (92,563) – (92,563)
Exchange adjustments 2,822 (4,993) (2,171) (11, 309 ) (13,480)
Other changes – – – (1,645) (1,645)
At 3 January 2021 123,816 (245,987) (122,171) (245,245) (367,416)
Cash flows 19,750 79,819 99,569 6,588 10 6,157
Lease additions – – – (5,549) (5,549)
Acquisition – – – (12,397) (12,397)
New borrowings – (67,062) (67,062) – (67,062)
Exchange adjustments (3,396) 8,498 5,102 10,652 15,754
Other changes – – – 2,555 2,555
At 2 January 2022 140,170 (224,732) (84,562) (243,396) (327,958)
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151
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
30 Commitments
Capital commitments
Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:
Group Company
2021
£’000
2020
£’000
2021
£’000
2020
£’000
Property, plant and equipment 12,268 32,340 – –
31 Events after the reporting period
The following non-adjusting events occurred after the reporting period:
Acquisition of Dutch Seafood Company BV
On 16 March 2022 the Group acquired 100% of the share capital of Dutch Seafood Company BV, which trades as Foppen. Foppen is a
leading international smoked salmon producer with customers in Europe and US. The acquisition provides Hilton with the opportunity
to diversify into a complementary protein category and enhance its customer base whilst also entering a new strategic market in the
US. Consideration for the acquisition totalled £25.0m paid entirely in cash with the Group also repaying £54.7m of Foppen’s bank and
other borrowings immediately following completion of the acquisition.
The timing of completion of this transaction and its proximity to the date of these financial statements has meant that initial accounting
for the business combination has not been completed and therefore it is impractical to provide the disclosures required by IFRS 3,
Appendix B, Paragraph 64 (e) or (h)-(q).
Agito Group Pty Limited – Joint Venture Investment
On 6 January 2022 the Group acquired a 50% joint venture interest in Agito Group Pty Limited, a provider of automation and software
controls used in food processing and other manufacturing facilities based in Australia, for consideration of £1.1m.
Bank facility agreement
On 21 January the Group agreed a £424m revolving credit and term loan facility with a syndicate of lenders. The facility refinanced the
Group’s existing bank facilities including undrawn acquisition bridge financing put in place to fund the Foppen acquisition that matured
in January 2022. The Group’s new bank facility matures in January 2027 with the term loans, totalling £134m, repayable in quarterly
instalments beginning in April 2022.
32 Related party transactions and ultimate controlling party
The Directors do not consider there to be one ultimate controlling party. The companies noted below are all deemed to be related
parties by way of common Directors.
Sales and purchases made on an arm’s length basis on normal credit terms to related parties during the year were as follows:
Group sales
2021
£’000
2020
£’000
SoHi Meat Solutions Distribuicao de Carnes SA – fee for services 3,175 3,351
SoHi Meat Solutions Distribuicao de Carnes SA – recharge of joint venture costs 331 368
Dalco BV 438 313
Foods Connected Limited – 3
Group purchases
2021
£’000
2020
£’000
Foods Connected Limited 568 351
Amounts owing from related parties at the year end were as follows:
Owed from related parties
Group
2021
£’000
2020
£’000
Foods Connected Limited 4 15
SoHi Meat Solutions Distribuicao de Carnes SA 561 393
Dalco BV – 282
565 690
152
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Notes to the financial statements
continued
Amounts owing to related parties at the year end were as follows:
Owed to related parties
2021
£’000
2020
£’000
Foods Connected Limited 127 85
SoHi Meat Solutions Distribuicao de Carnes SA 9 –
Dalco BV – 123
136 208
During the period the group settled the deferred consideration liability recognised in respect of the acquisition of SV Cuisine Limited,
making a payment of £2.5m. The acquisition of SV Cuisine Limited was considered to be a related party transaction as prior to
acquisition Philip Heffer, the Hilton Food Group CEO, Graham Heffer and Robert Heffer, both directors of the Group’s subsidiary Hilton
Food Solutions Limited, had each held a 30% shareholding in SV Cuisine Limited.
33 Financial instruments by category
The accounting policies for financial instruments have been applied to the line items below:
Financial assets at amortised cost
Group
2021
£’000
2020
£’000
Assets as per balance sheet
Trade and other receivables 227,111 187,779
Financial liabilities at amortised cost
Group
2021
£’000
2020
£’000
Liabilities as per balance sheet
Trade and other payables 378,259 324,858
Borrowings 224,732 245,987
Lease liabilities 243,396 245,245
846,387 816,090
In addition to the above, amounts owed to the Company by Group undertakings of £2,874,000 (2020: £14,272,000) are classified as
‘financial assets at amortised cost’.
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153
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
34 Alternative performance measures
The Group’s performance is assessed using a number of alternative performance measures (APMs).
The Group’s alternative profitability measures are presented before exceptional items, amortisation of certain intangible assets and
depreciation of fair value adjustments made to property plant and equipment acquired through business combinations and the impact
of IFRS 16 – Leases.
The measures are presented on this basis, as management believe they provide useful additional information about the Group’s
performance and aids a more effective comparison of the Group’s trading performance from one period to the next.
Adjusted profitability measures are reconciled to unadjusted IFRS results on the face of the income statement below.
52 weeks ended 3 January 2022
Reported
£’000
Add back:
IFRS 16
Depreciation
and interest
£’000
Less:
IAS 17 Lease
accounting
costs
£’000
Reported
– excl
IFRS 16
£’000
Exceptional
items
£’000
Add back:
Amortisation
of acquisition
intangibles
£’000
Adjusted
£’000
Operating profit – excluding
exceptional items 70,482 18,214 (17,9 07) 70,789 – 2,778 73,567
Exceptional items (7,05 0) 56 – (6,994) 6,994 – –
Operating profit 63,432 18,270 (17,907) 63,795 6,994 2,778 73,567
Net finance costs (16,034) 8,498 – (7,5 36) 1,131 – (6,405)
Profit before income tax 47, 398 26,768 (17,907) 56,259 8,125 2,778 67,162
Profit for the period 39,282 24,037 (17,9 07) 45,412 5,009 2,250 52,671
Less non-controlling interest (2,139) (7) – (2,146) – – (2,146)
Profit attributable to
members of the parent 37,143 24,030 (17,9 07) 43,266 5,009 2,250 50,525
Depreciation
andamortisation 75,596 (20,489) – 55,107 (6,377) (2,778) 45,952
EBITDA 139,028 (2,219) (17,9 07) 118,902 617 – 119,519
Earnings per share pence pence pence
Basic 45.0 52.5 61.3
Diluted 44.5 51.8 60.5
53 weeks ended 3 January 2021
Reported
£’000
Add back:
IFRS 16
Depreciation
and interest
£’000
Less:
IAS 17 Lease
accounting
costs
£’000
Reported
– excl
IFRS 16
£’000
Add back:
Amortisation
of acquisition
intangibles
£’000
Adjusted
£’000
Operating profit 66,867 18,16 3 (20,451) 64,579 2,449 67,028
Net finance costs (12,839) 6,874 – (5,965) – (5,965)
Profit before income tax 54,028 25,037 (20,451) 58,614 2,449 61,063
Profit for the period 42,040 24,074 (20,451) 45,663 1,984 47,647
Less non-controlling interest (2,304) (382) 387 (2,299) – (2,299)
Profit attributable to
members of the parent 39,736 23,692 (20,064) 43,364 1,984 45,348
Depreciation
andamortisation 59,558 (18,163) – 41,395 (2,449) 38,946
EBITDA 126,425 – (20,451) 105,974 – 105,974
Earnings per share pence pence pence
Basic 48.6 53.0 55.4
Diluted 47.9 52.3 54.7
The depreciation and amortisation figure includes £nil (2020: £1,197,000) amortisation of contract assets charged to revenue and adds
back a loss on disposal of £195,000 (2020: gain £40,000).
154
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
Notes to the financial statements
continued
Segmental operating profit reconciles to adjusted segmental operating profit as follows:
52 weeks ended 3 January 2022
Reported
£’000
Add back:
IFRS 16
Depreciation
and interest
£’000
Less:
IAS 17 Lease
accounting
costs
£’000
Reported
– excl
IFRS 16
£’000
Exceptional
items
£’000
Add back:
Amortisation
of acquisition
intangibles
£’000
Adjusted
£’000
Europe 52,307 6,393 (6,684) 52,016 6,994 2,778 61,788
Australasia 21,716 11,877 (11,223) 22,370 – – 22,370
Central costs (10,591) – – (10,591) – – (10,591)
Total 63,432 18,270 (17,9 07) 63,795 6,994 2,778 73,567
53 weeks ended 3 January 2021
Reported
£’000
Add back:
IFRS 16
Depreciation
and interest
£’000
Less:
IAS 17 Lease
accounting
costs
£’000
Reported
– excl
IFRS 16
£’000
Add back:
Amortisation
of acquisition
intangibles
£’000
Adjusted
£’000
Europe 60,538 5,757 (6,163) 6 0,132 2,449 62,581
Australasia 19,091 12,406 (14,288) 17,20 9 – 17,20 9
Central costs (12,762) – – (12,762) – (12,762)
Total 66,867 18,16 3 (20,451) 64,579 2,449 67,028
OVERVIEW STRATEGIC
REPORT
GOVERNANCE FINANCIAL
STATEMENTS
ADDITIONAL
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155
HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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2-8 The Interchange
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Cambridgeshire
PE29 6YE
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HILTON FOOD GROUP PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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OVERVIEW STRATEGIC
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