EXPERTISE
PARTNERSHIP
INNOVATION
Driving sustainable long-term value
through partnership
ANNUAL REPORT AND
FINANCIAL STATEMENTS 2022
CONTENTS
LONG-TERM SUSTAINABLE GROWTH
Expertise, Partnership,
Innovation. These are just
some of the ingredients
that make us who we are.
They help to drive our
long-term sustainable
growth, making us
the international food and
supply chain services
partner of choice.
For more information on
our key ingredients for success,
see the case studies throughout
the report
OVERVIEW
Hilton Foods at a glance
2022 overview
STRATEGIC REPORT
Chairman’s introduction
Chief Executive’s summary
Our business model
Our value chain
Our strategy
Performance and financial review
Risk management and principal risks
Stakeholder engagement
Sustainability report
GOVERNANCE
Board of Directors
Governance at a glance
Corporate governance statement
Directors’ report
Report of the Audit Committee
1
2
4
6
8
10
12
14
16
22
26
32
36
92
94
96
98
104
106
Report of the Nomination Committee
109
Directors’ remuneration report
111
Statement of Directors’ responsibilities 129
Independent auditors’ report
FINANCIAL STATEMENTS
Consolidated income statement
Consolidated statement
of comprehensive income
Consolidated and Company
balance sheet
Consolidated and Company
statement of changes in equity
Consolidated and Company
cash flow statement
Notes to the financial statements
130
138
140
140
141
142
143
144
ADDITIONAL INFORMATION 180
Registered office and advisors
180
2
OUR INGREDIENTS FOR SUCCESS
ACTION
ETHICS
COLLABORATION
TRANSPARENCY
INNOVATION
PARTNERSHIP
PASSION
LEADERSHIP
EXPERTISE
QUALITY
AGILITY
DEVELOPMENT
Hilton Food Group PLC Annual Report and Financial Statements 2022
1
STRATEGIC REPORTGOVERNANCEADDITIONAL INFORMATIONOVERVIEWFINANCIAL STATEMENTS HILTON FOODS AT A GLANCE
Our diversified food and supply
chain services business…
We were founded by entrepreneurs, way back when that
word was rare. The families at the root of our history operated
primary processing slaughter and deboning facilities dating
back to the 1960s. And today we have 24 facilities – and
increasing – with a turnover of over £3bn. Today, our unique
partnerships, processes and focus on innovation position
us as the international protein partner of choice.
OUR PEOPLE
OPERATING ACROSS
CAPITAL INVESTMENT
WE OPERATE FROM
7,000
(2021: 6,000+)
19
MARKETS
INTERNATIONALLY
£56.8
(2021: £57.4m)
24
HIGH PERFORMANCE
FACILITIES
The Five Pillars of Hilton Foods:
A multi-category proposition focused on quality and innovation.
HIGH QUALIT Y,
EFFICIENTLY
PROCESSED,
EXPERTLY PACKED
RESPONSIBLY
AND SUSTAINABLY
SOURCED
MEAT SUBSTITUTE
PRODUCTS
RANGING FROM
CUTLETS TO KIEVS
SLOW COOK ,
READY TO COOK
OR READY TO EAT
CONVENIENCE
CONSULTANCY
IN SUPPLY
CHAIN LOGISTICS,
AUTOMATION AND
DIGITALISATION
MEAT SALES
OF OVER
400k
tonnes in 2022
OUR SEAFOOD
SALES GROWTH
AT DALCO
FRESH FOODS
VOLUME GROWTH
NUMBER OF AIR
BRIDGE LINKS
100%
responsibly sourced
by 2025
17%
in 2022
47%
in 2022
3
with customers
Page
14
Page
55
Page
11
Page
15
Page
8
2
Hilton Food Group PLC Annual Report and Financial Statements 2022
…well-placed to meet our
international consumer needs.
Local specialists supported by an international
perspective to deliver growth.
EUROPE
UNITED KINGDOM
IREL AND
PORTUGAL
APAC
AGILITY
PASSION
The Foppen acquisition brings
two well-invested, dedicated
smoked salmon facilities
in Harderwijk, the Netherlands
and Preveza, Greece, and an
experienced management team
and workforce.
For more information see
page 17
SWEDEN
DENMARK
BELGIUM
NETHERL ANDS
CENTR AL EUROPE
GREECE
AUSTR ALIA
EXPERTISE
PARTNERSHIP
Working in partnership with
Countdown stores we launched
our first food park concept in
New Zealand in July 2021.
NE W ZE AL AND
For more information see
page 20
Hilton Food Group PLC Annual Report and Financial Statements 2022
3
STRATEGIC REPORTGOVERNANCEADDITIONAL INFORMATIONOVERVIEWFINANCIAL STATEMENTS
2022 OVERVIEW
Financial
overview
£3.8bn
Group revenue up 16.5%
to £3.8bn, underpinned
by contribution from newly
acquired businesses, first full
year of trading in New Zealand
and inflationary impact
(2021: £3.3bn)
£71.1m
Adjusted operating profit
down 3.3% to £71.1m
(2021: £73.6m)
45.1p
Adjusted basic earnings per
share down 26.4% at 45.1p
(2021: 61.3p)
£98.3m
Strong cash flows from
operating activities of £98.3m
513,816 t
Volume growth of 4.3%
to 513,816 tonnes
(2021: 492,588 tonnes)
£54.0m
IFRS operating profit down
14.8% to 54.0m (2021: £63.4m)
after exceptional items of £11.9m
relating predominantly to 2021
fire at Belgium site
(2021: £63.4m)
19.8p
IFRS basic earnings per share
down 56% at 19.8p
(2021: 45.0p)
22.6p
Proposed final dividend of 22.6p,
taking total dividend for 2022
to 29.7p
(2021: £121.3m)
(2021: 29.7p)
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 33.
£211.6m
Net bank debt £211.6m with £83.6m
investments in acquisitions/JVs
and £56.8m capex investment
with a strong balance sheet
following refinancing
(2021: £84.6m)
“ This has been a year of
unprecedented global and
economic challenges, but
Hilton Foods has continued to
make good strategic progress.”
Robert Watson, OBE
Chairman
Read more in the Chairman’s introduction
page 8
4
Hilton Food Group PLC Annual Report and Financial Statements 2022
Financial
performance
overview
Revenue (£m)
£3,847.6m
’18
’19
’20
’21
’22
1,649.6
1,814.7
2,774.0
3,302
3,847.6
Adjusted operating profit (£m)
£71.1m
’18
’19
’20
’21
’22
48.7
54.7
67.0
73.6
71.1
Net bank debt (£m)
£211.6m*
25.0
86.8
84.6
122.2
’18
’19
’20
’21
’22
*Excluding lease liabilities
211.6
Strategic
highlights
Sustainability
highlights
OUR FOUR KEY
STR ATEGIC OBJEC TIVES
SUPPORTING OUR PARTNERS TO BECOME
FIRST CHOICE FOR SUSTAINABLE PROTEIN
Outstanding
protein products
– Strength and resilience in core
meat category, underpinned by
strong commercial partnerships
– Challenging seafood
performance, with robust
recovery plans in place to
restore profitability
– Further vegan and vegetarian
growth through branded
partnerships and private label
expansion
– Double digit growth in easier
meals, with launch of award-
winning new products
Growing across
international markets
– Strong performance in APAC
including first full year of trading
in New Zealand
– New partnership formed in
Singapore with Country Foods,
a wholly owned subsidiary of
SATS, Asia’s leading provider
of food solutions and gateway
services
– Growth through geographical
diversification with Foppen
acquisition
Industry-leading
technology
– Increased ownership of
Foods Connected supply chain
management platform to 65%
– Agito joint venture reinforcing
automation and engineering
capabilities
Delivered through
the Sustainable
Protein Plan
– Introduction of stretching
ESG performance metrics into
our LTIP Scheme including
targets for Scope 1 and 2 energy
efficiency, packaging recycled
content and food waste
– Progress across people, planet
and product pillars, including
exceeding 2025 target for
women in leadership positions
and A- rating from CDP on
Climate Change
PEOPLE
PL ANET
A-
Achieved A- rating from
CDP for Climate Change
14%
reduction in absolute
Scope 3 Emissions
Launched global
Supplier Social Responsibility
Code of Conduct and
Compliance requirements
33%
Achieved 33% of
women in leadership,
on track to meet
our 2025 target
PRODUC T
Published our UK Commitment
to Sourcing Deforestation
and Conversion Free Soy
70%
recycled content across
all plastic packaging
62%
of electricity
Hilton Foods purchased
in 2022 came from
renewable sources
48.5%
increase in sales of vegetarian
and vegan products
For more information see
our sustainability report on
pages 36 to 91
Hilton Food Group PLC Annual Report and Financial Statements 2022
5
STRATEGIC REPORTGOVERNANCEADDITIONAL INFORMATIONOVERVIEWFINANCIAL STATEMENTS
ACTION
ETHICS
6
Hilton Food Group PLC Annual Report and Financial Statements 2022
SEAFOOD PROCUREMENT
IS COMPLEX. WE MAKE IT
RESPONSIBLE.
We’re well known for our
commitment to ESG, but
also for delivering what
consumers want: a healthy,
natural product that tastes
great and is easy to prepare
and cook.
STRATEGIC
REPORT
CHAIRMAN’S INTRODUCTION
CHIEF EXECUTIVE’S STATEMENT
Business development
2022 Performance overview
Sustainability
Segment performance
Past and future trends
OUR BUSINESS MODEL
OUR VALUE CHAIN
OUR STRATEGY
PERFORMANCE AND
FINANCIAL REVIEW
RISK MANAGEMENT
AND PRINCIPAL RISKS
STAKEHOLDER ENGAGEMENT
SUSTAINABILITY REPORT
People
Planet
Product
8
10
10
10
10
11
11
12
14
16
22
26
32
36
46
54
62
Hilton Food Group PLC Annual Report and Financial Statements 2022
7
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW CHAIRMAN’S INTRODUCTION
Driving long term value
during challenging times.
Hilton continues to make
good strategic progress.
We manufacture high
quality multi-protein
products utilising industry
leading technology in our
highly automated facilities,
including advanced robotics.
Together with leveraging
our expertise we can offer
improved supply chain
efficiencies to our customers
whilst committed to our
sustainable protein plan.
Robert Watson, OBE
Chairman
STRATEGIC PROGRESS
GROUP PERFORMANCE
This has been a year of unprecedented
global and economic challenges, but
Hilton Foods has continued to make
strategic progress. We manufacture high
quality multi-protein products utilising
industry leading technology in our highly
automated facilities, including advanced
robotics. Together with leveraging our
expertise we can offer improved supply
chain efficiencies to our customers whilst
committed to our sustainable protein
plan. The depth of our partnerships is
illustrated through physical air bridges
installed in facilities in Australia and
New Zealand that link our processing
facilities directly to our customers’
distribution centres. Use of these fully
automated conveyor air bridges further
optimises the supply chain process
bringing significant logistics efficiency
savings with lower carbon emissions.
During the year 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
into the North American retail market.
We also agreed a joint venture with
Agito, an Australian automation and
technology solutions business with
ambitions for European expansion, which
brings together excellence in automation
and food supply chain expertise. This JV,
together with an increased stake in
Foods Connected, fits neatly into a newly
created Hilton Food Services division to
leverage supply chain solutions to meet
our customers’ needs. Additionally we
invested in Cellular Agriculture, a leading
cultivated protein tech business and
formed a new partnership with Country
Foods in Singapore.
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 customer.
In 2022 we increased our overall volumes
maintaining a trend of continuous growth
achieved in every year since Hilton’s
flotation in 2007. However this was
overshadowed by significant challenges
in our UK Seafood business including
the impact of unprecedented inflation
levels with price recovery taking longer
than anticipated. There was also
further disruption through automation
investments which will deliver longer
term efficiency benefits.
We have taken steps to rebuild sustainable
profitability in this business and we remain
confident in the opportunities which the
seafood category will present for Hilton
Foods over the coming years, serving
a range of domestic and international
customers with market-leading salmon,
white fish, shellfish, coated fish, prawn
cocktails and other added value
fish products.
Hilton Foods generated strong operating
cash flows during 2022 enabling further
significant investment in our facilities to
increase capacity, improve operational
efficiency and offer innovative solutions
to our retailer partners. Hilton Foods
remains financially strong with significant
cash balances, undrawn committed bank
facilities and operating well within our
banking covenants.
DIVIDEND POLICY
The Group has maintained a progressive
dividend policy since flotation and
despite the impact of the challenges
faced in 2022 remain confident that this
approach continues to be appropriate.
With the proposed final dividend of
22.6p per ordinary share, total dividends
in respect of 2022 will be 29.7p per ordinary
share, maintaining the dividend compared
to last year.
8
Hilton Food Group PLC Annual Report and Financial Statements 2022
Philip Heffer advised the Board that
he wished to step down from his role
as CEO in 2023. I am delighted that Steve
Murrells, CBE has accepted our invitation
to join Hilton as its next CEO and that
Philip will remain in the business in a new
role of Co-Founder and Board Advisor.
Steve has an outstanding record as a
leader within the food industry working
in senior positions with Tesco plc and
more recently at Tulip Ltd 2009 - 2012
as CEO and Co-operative Group Ltd 2012 -
2022 as CEO Retail and from 2017 as Group
CEO. Steve was appointed Commander
of the Order of the British Empire
(CBE) in the 2022 New Year Honours
for services to the food supply chain.
Steve will join the Board in July 2023.
Philip has spent almost 30 years with
Hilton Foods, including the last five years
as Group CEO and will support Steve
ensuring a smooth transition. I would
like to thank Philip for everything he
has contributed to Hilton Foods. He has
been instrumental to the growth of the
business we founded together in 1994
and I am extremely pleased that we will
continue to benefit from his experience
and expertise in his new advisory role.
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
2022 marks the first full year of our
new Sustainable Protein Plan strategy.
This gives added focus and energy to the
work we are doing to make our business
more sustainable and become a core
part of the wider growth strategy for
the business. This Plan includes a range
of stretching targets aligned closely
with the UN Sustainable Development
Goals including setting Science Based
Targets on the way to achieving net zero
emissions before 2050 and net negative
thereafter.
Our position in the food supply chain
means that we have opportunities
working with partners from farm
to fork to make a positive difference
and innovate across the value chain.
We recognise the commercial benefits
of highly traceable, sustainably sourced
proteins. For us, growing our business
and supporting the planet go hand in
hand. During the year we introduced
ESG performance metrics into our
Long Term Incentive Plan including
emissions, packaging recycling and food
waste targets to align our senior leaders
with supporting the delivery of the
Sustainable Protein Plan.
OUTLOOK AND
CURRENT TRADING
Against the backdrop of a challenging
environment, with global uncertainties
impacting supply chains and inflation,
Hilton’s trading performance since
the beginning of 2023 has been in line
with the Board’s expectations and
the business is well positioned for the
year ahead. 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
acquisitions of Foppen, Dalco and
Fairfax Meadow, the new partnership
in Singapore and recovery in our UK
Seafood business 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 Tuesday
23 May 2023 at noon. Please refer to
our website at www.hiltonfoods.com/
investors/agm/ for further guidance.
Robert Watson OBE
Chairman
4 April 2023
9%
In 2022, we saw a nine point
increase in the number of
employees who felt that
training opportunities
provided had helped them
to do their work well
For more information see
page 46
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. During the year
Patricia Dimond joined the Board as an
independent Non-Executive Director and
subsequently became Audit Committee
chair when John Worby stepped down.
Angus Porter then became the Senior
Independent Director. Nigel Majewski
also stepped down as CFO and was
replaced by Matt Osborne, formerly the
Group Financial Controller, who has made
a strong start in the role.
Hilton Food Group PLC Annual Report and Financial Statements 2022
9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW CHIEF EXECUTIVE’S SUMMARY
2022 has been a year of
strength and resilience.
Hilton Foods today is a
completely different business
from the company we started
in 1994. Over 75% of our sales
volumes are now outside
the UK; we offer a wide range
of protein products and
categories; and we have built
a technology services offer
which is best-in-class in the
industry. The global economy
today is more uncertain than
at any time in the past thirty
years, but Hilton Foods is well
set for long-term success.
Philip Heffer
Chief Executive Officer
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 APAC supplemented
by targeted acquisitions. We have
demonstrated that this business
model is capable of being successfully
applied to both new proteins and
transferred to new countries, adapted
with our local customers to meet their
specific requirements.
2022 PERFORMANCE
OVERVIEW
After the challenges we faced last
year in our seafood business, we took
a series of steps to rebuild profitability
and we are now well placed for the year
ahead. Meanwhile we have continued
to deliver on our strategic priorities and
to set the business up for long-term,
sustainable growth.
Despite the significant macro-economic
challenges, we have continued our record
of growing our volumes every year since
Hilton Foods became a publicly listed
company in 2007.
2022 saw continued year-on-year sales
growth driven by higher raw material
prices and volume growth including
through the acquisition of Foppen, full year
volumes from Fairfax Meadow and Dalco
acquired in 2021 and the New Zealand
facility which opened in 2021 where
there was strong trading. We have
demonstrated strength and resilience
in our core meat category with award
winning products across the categories in
which we operate. We continue to remain
focused on responding to consumer needs
in our development of new products and
leveraging our industry leading technology
to support our core protein business.
Overall volume increased by 4.3% to
513,816 tonnes (2021: 492,588 tonnes).
In 2022 over 75% of the Group’s volumes
were produced in countries outside
the UK. Adjusted operating profit fell by
3.3% and the overall operating margin
decreased to 1.8% (2021: 2.2%) due to
challenges in our UK Seafood business
including the impact of unprecedented
inflation levels with price recovery taking
longer than anticipated. There was also
further disruption through automation
investments which will deliver longer
term efficiency benefits.
A new leadership team is in place
in our UK Seafood business which is
performing well to implement a series
of steps to rebuild profitability in this
category. We are working in partnership
with our customers to recover inflation,
reduce costs and optimise the ranges
we produce as well as leveraging
the benefits which will come through
our investment in industry-leading
automation and other initiatives.
The margin per kg decreased to 13.8p
(2021: 14.9p). Our customer service
level remains best in class at 95.9%
(2021: 96.4%).
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 2022 the impact
of average exchange rates on our results
compared with 2021 was marginal.
SUSTAINABILITY
Despite the current global instability
we have maintained our focus on
sustainability. Our strategy is to build
a platform to create sustainable value
over the long term, part of which is
our Sustainable Protein Plan which is
a blueprint for social and environmental
progress across three pillars being product,
planet and people. Through partnerships,
we can help to create a more circular and
sustainable food system that provides
healthy and affordable proteins for
consumers who have seen the cost
of cooking double, and who worry about
the health of their families and the future
of our planet.
10
Hilton Food Group PLC Annual Report and Financial Statements 2022
COMMITMENT
RESPONSIBILITY
It’s our mission to make
nutritious protein more
sustainable. And to create
value for customers in a way
that supports people, ethics,
equity and science-led
environmental impacts.
For more information see
our Sustainable Protein Plan on
pages 38 to 45
£49.7m
Europe 2022 adjusted operating profit
£26.7m
APAC 2022 adjusted operating profit
APAC
Adjusted operating profit of
£26.7m (2021: £22.4m) on turnover
of £1,592.9m (2021: £1,314.6m)
In Australia the Group operates facilities
in Bunbury, Western Australia, Melbourne,
Victoria and Brisbane, Queensland. A new
food park facility in New Zealand opened
in July 2021 to supply beef, lamb, pork,
chicken, seafood and added-value products.
Volumes for the year increased by 4.7%
through the full year of trading at the
New Zealand facility. Sales increased
by 21.2% driven by inflation in Australia
and the new facility in New Zealand.
Adjusted operating profit increased
by 19.4% given the higher volumes as well
as benefiting from recovery of increased
interest costs. Operating margins were
steady at 1.7% (2021: 1.7%) and the operating
profit margin per kg increased to 16.1p
(2021: 14.1p).
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. In addition 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
4 April 2023
Through product innovation, we are
working to decarbonise cattle, deliver
zero emission factories and eliminate
deforestation. We are committed to
achieving fully recyclable retail plastic
packaging and have achieved 70%
recycled content plastic packaging
across the Group. The investment in
the meat technology business Cellular
Agriculture can help Hilton become
a leader in the emerging market
for cultured meat. I am pleased with
our progress on our planet targets.
Hilton Foods was awarded a score of
A- in this year’s climate assessment by
the Carbon Disclosure Project, achieving
recognition as a Supplier Engagement
Leader. However we need to go further.
We will, during 2023, submit even more
ambitious targets to the Science Based
Targets initiative. These will be consistent
with achieving 1.5°C and see us commit to
reach net zero well before our current 2050
target. The third part of our plan is about
our people. Our commitment is to protect
human rights, employee wellbeing and
support career development and we are
participants in the UN Global Compact.
SEGMENT PERFORMANCE
Europe
Adjusted operating profit of
£49.7m (2021: £61.8m) on turnover
of £2,254.7m (2021: £1,987.4m)
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. Our food
service business Fairfax Meadow and
our vegan/vegetarian business Dalco
were acquired in 2021. During 2022 we
acquired Foppen which completed in
March as well as increasing our stake in
Foods Connected from 50% to 65% and
in Hilton Food Solutions from 55% to 65%.
Volumes increased by 4.1% attributable
to the newly acquired businesses and
there was good growth in convenience
volumes in Central Europe and at Dalco.
Sales grew by 13.4% due to raw material
price inflation and the higher volumes.
However adjusted operating profit
fell by 19.6% due to the impact of the
performance in our UK Seafood business.
Operating margins decreased to 2.2%
(2021: 3.1%) and operating profit margin
per kg decreased to 13.4p (2021: 18.5p).
Hilton Food Group PLC Annual Report and Financial Statements 2022
11
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW OUR BUSINESS MODEL
The Hilton Foods business model
is well proven and sustainable.
Why
we do it
Our resources
and relationships
Our purpose
Growth and
success through
partnership
Our values
Collaborative
Innovative
Agile
Ambitious
Responsible
Our ambition
To be the
international
food and supply
chain services
partner of choice
7,000+
passionate and skilled people
24
well-invested, state-of-the-art facilities
19
markets internationally, operating
across diverse cultures
£56.8m
capital invested in 2022
Long-standing partnerships
with market-leading customers operating
in an open book, transparent model, with
our people and with the communities in
which we operate
For more information see our strategy on
pages 16-21
Consumer and the customer
at the heart
of decision making underpinned by
an insight-driven approach which is
consumer-led and customer focused
We build and operate large scale,
highly automated food processing,
manufacturing and logistics services
for leading international retail and food
service customers through long-term
partnership agreements in transparent
open-book models. These contractual
arrangements combined with our
long-term partnership, and total
category management approach
serve to maximise achievable volume
throughout whilst maintaining market
competitive unit packing costs and
thereby delivering value to our customers
and their consumers. Under the long-
term supply and service agreements
we have in place with our customers,
the parameters of our revenue are clearly
defined within our transparent open-
book costing models.
The Hilton Foods business model has
been proven in many geographies and
partnerships across Europe and APAC.
We also have a joint venture partnership
in Portugal in which we share the profits.
This has been supplemented by strategic
acquisitions in diversified food categories
and further integration in the supply
chain service sector.
Within our supply chain services
pillar we own 65% of Foods Connected,
an award-winning end to end supply
chain management software platform,
a joint venture with Agito Group offering
automation solutions and investment
in Cellular Agriculture Ltd, developing
next generation, scalable solutions to
alternative protein production.
We have demonstrated our business
model is capable of being successfully
transferred into new countries as an
approach which is then tailored to
best meet the local customers’ specific
requirements. Our operating facilities
are run by a local management team
which is enhanced by a regional and
central strategic leadership, expertise,
and governance.
Our business is based on a partnership
approach with customers and suppliers
which are forged over many years.
The international spread of our business
operations are a significant strength,
creating scale, a network of expertise
and opportunity to accelerate innovation
principles from market to market with
a local best fit placement applied for
our customers.
12
Hilton Food Group PLC Annual Report and Financial Statements 2022
What
we do
How we create
long-term
sustainable value
The value we
create for our
stakeholders
1. We leverage innovation
and expertise to bring
new food products and
supply chain solutions
to market to meet our
customers and their
consumers’ needs.
2. In partnership we
responsibly source high
quality raw materials at
scale with industry leading
standards and traceability.
3. We manufacture high
quality food products
every day, treating our
customer’s brand as our
own through transparent,
open-book models.
4. Our supply chain services
and products support
effective business
decision making and
improved efficiency
through technology and
automation solutions.
Outstanding
protein products
Award winning food products across
our four categories of meat, seafood,
vegan and vegetarian, and easier meals.
Our expert multi-category food business
is agile and responsive to consumer
trends with a focus on quality, value
and innovation at scale.
Growing across
international markets
A diverse, well-resourced, international
business with expertise, operating as local
specialists in the markets we serve. We
have an ambition for growth and success
in all our current and future markets.
Industry leading technology
An end-to-end approach enabling
effective business decision making through
technology platforms. Highly automated
facilities unlocking efficiency and optimised
supply chain services better meeting our
customers’ needs.
For more information see our strategy
on pages 16 to 21
Delivered through the
Sustainable Protein Plan
We are committed to make progress
through our pillars of people, planet
and product.
For more information
see pages 38-45
Consumers
Launched 334 new products and
improved 966 products to better
meet consumer needs in 2022.
Our customers
Serving our customers with high
quality products every day.
Our suppliers
Working collaboratively to deliver
consumer and customer expectations,
we have removed 240tns of plastic
and 9m absorbent pads from our
packaging through innovation.
Our people
Being safe and inclusive employers
by empowering our people, we saw
a 6% increase in employees ‘feeling
I can be myself at work’.
Communities
Many of our employees have been
impacted by events in Ukraine.
Employees across our European
sites have fundraised, collected goods,
and provided practical support to
refugees.
Environment
Recognised as a supplier engagement
leader for Climate Change for the
second year running by the Climate
Disclosure Project (CDP).
Our investors
We want our shareholders to believe
in our purpose, values and strategy.
We believe in engaging with our
shareholders to help create value
and ensure the long-term success
of our business strategy.
For more information on
stakeholder engagement
see pages 32-35
Hilton Food Group PLC Annual Report and Financial Statements 2022
13
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW OUR VALUE CHAIN
Hilton Foods operate through partnership in an industry leading value chain
which is underpinned by traceability and standards from farm to fork through
an approach of control, audit, guide and influence.
Raw materials are
sourced both locally and
internationally from trusted
suppliers. They are then
processed and packed
in large scale, highly
automated facilities using
advanced robotics, before
being delivered either
to retailers’ distribution
centres or direct to stores.
We partner
We produce
We supply
We source
responsibly
Supply chain
Insight
Cloud-based end-to-end
supply chain management platform
CSR
Traceability
Specifications
and NPD
Food safety
and quality
Supplier
compliance
Procurement
and supply chain
Reporting
and analytics
Trading company
Economics
of scale
Consumer
insight
Food service channel
Chicken
Kebab
Chicken
Drumsticks
Chicken
Thigh
Chicken
Wings
Half
Chicken
Duck
Leg
Duck
Half
Well invested,
highly automated,
efficient facilities
Leading
solutions
Low margin
operation
Retail packing
Supply chain
services including
software and
automation solutions
Beef
Pork
Lamb
Poultry
Seafood
Vegan &
vegetarian
Easier
meals
Steak
Roast
Diced
Mince
Meatloaf
Sausages
Burgers
Meatballs
Ribs
Steak
Roast
Diced
Mince
Sausages
Chops
Bacon
Gammon
Schnitzel
Pulled belly
Meatballs
Rib rack
Meatloaf
Smoked loin
Steak
Roast
Diced
Mince
Shanks
Chops
Whole/half/
quarter carcass
Coated
Salmon
White fish
Shellfish
Fish cakes
Smoked salmon
Strips
Nuggets
Diced
Mince
Pulled
Sausages
Burgers
Balls
Schnitzel
Sandwiches
Wraps
Baguettes
Hummus
Salad
Burgers
Pizza
Garlic bread
Soup
Ready
meals
Pasta
sauce
Meal
kits
Slow
cooked
Ready to
cook
Food for now
Food for later
Full traceability
CSR
Depot
Store
order
picking
United
Kingdom
Ireland
Netherlands
Denmark
Sweden
Portugal
Belgium
Poland
Hungary
Czech
Republic
Slovakia
Latvia
Estonia
Lithuania
Australia
New Zealand
USA
Canada
We also supply
to countries
throughout Asia
14
Hilton Food Group PLC Annual Report and Financial Statements 2022
We partner
We produce
We supply
We source
responsibly
Supply chain
Insight
Cloud-based end-to-end
supply chain management platform
CSR
Traceability
Specifications
and NPD
Food safety
and quality
Supplier
Procurement
compliance
and supply chain
Reporting
and analytics
Consumer
insight
Food service channel
Trading company
Economics
of scale
Well invested,
highly automated,
efficient facilities
Leading
solutions
Low margin
operation
Retail packing
Supply chain
services including
software and
automation solutions
Beef
Pork
Lamb
Poultry
Seafood
Vegan &
vegetarian
Easier
meals
Steak
Roast
Diced
Mince
Meatloaf
Sausages
Burgers
Meatballs
Ribs
Steak
Roast
Diced
Mince
Sausages
Chops
Bacon
Gammon
Schnitzel
Pulled belly
Meatballs
Rib rack
Meatloaf
Smoked loin
Steak
Roast
Diced
Mince
Shanks
Chops
Whole/half/
quarter carcass
Chicken
Kebab
Chicken
Drumsticks
Chicken
Thigh
Chicken
Wings
Half
Chicken
Duck
Leg
Duck
Half
Coated
Salmon
White fish
Shellfish
Fish cakes
Smoked salmon
Depot
Store
order
picking
Strips
Nuggets
Diced
Mince
Pulled
Sausages
Burgers
Balls
Schnitzel
Food for now
Sandwiches
Wraps
Baguettes
Hummus
Salad
Food for later
Burgers
Pizza
Garlic bread
Soup
Ready
meals
Pasta
sauce
Meal
kits
Slow
cooked
Ready to
cook
United
Kingdom
Ireland
Netherlands
Denmark
Sweden
Portugal
Belgium
Poland
Hungary
Czech
Republic
Slovakia
Latvia
Estonia
Lithuania
Australia
New Zealand
USA
Canada
We also supply
to countries
throughout Asia
Full traceability
CSR
Hilton Food Group PLC Annual Report and Financial Statements 2022
15
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW
OUR STRATEGY
We are defined
by our purpose.
Our purpose: ‘growth and success through partnership’ clearly states what
drives us. It impacts the way we interact and operate with all our partners: our
customers, our suppliers, our people and the communities in which we operate.
Through our partnership approach we have built our business to the success
and scale that it is today. As a business we offer the opportunity for growth
and success for all our partners.
WE ARE AMBITIOUS
OUR STRATEGIC OBJECTIVES
We are on the journey to our ambition
‘to be the international food and supply
chain services partner of choice’. We have
grown into a multi-category and multi-
channel business, constantly and rapidly
building our expertise, breadth and scale
in all four food categories and in our
supply chain services offer.
For more information see
our Five Pillars on page 2
We have operating businesses across
Europe and Australasia who serve our
partners across 19 markets internationally.
We remain focused on achieving our
ambition through all our partnerships.
Our strategy continues to be to support our customers’ brands and their development
through our unique category offer in their local markets. This approach combined
with a strong reputation, well-invested modern facilities and a robust balance sheet
has generated growth over many years.
We are achieving long-term sustainable customer and shareholder value through:
Growing volumes and extending product
ranges supplied – and services provided to
our 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
Entering new territories and markets either
with new customers or in partnership with
our existing customers
16
Hilton Food Group PLC Annual Report and Financial Statements 2022
AGILITY
PASSION
FOPPEN – OUTSTANDING
PROTEIN PRODUCTS
In the first half of 2022 Hilton Foods
acquired smoked salmon producer
Foppen, bringing an exciting range
of new products to our portfolio.
Foppen started out in 1918 selling
smoked eel in the Dutch town of
Harderwijk. Today it is a market leader
in premium smoked salmon and
specialty value added smoked salmon
products. It maintains a leading
position in markets in both the USA
and Europe. This position is based
on longstanding relationships with
key customers, built on quality
and service.
Progress against our strategic objectives
EXPERTS IN SMOKED SALMON
Foppen only use the very best wood for smoking their
fish: a special Foppen blend of oak and beech wood.
The result is a delicious characteristic smoky taste
and texture.
Unique Foppen products include both hot smoked
and cold smoked salmon processes. The traditional
hot-smoked salmon is smoked at higher temperatures
(66°C to 85°C) using oak and beech wood smoke
giving the salmon a rich, yet subtle and refined
smoky flavour.
Exciting flavour twists to enhance the traditional
flavours of smoked salmon are popular products with
customers in both hot and cold dishes.
QUALITY
Foppen’s number one focus is always on quality.
Foppen’s craftsmanship and expertise, combined with
the latest state-of-the-art technology, ensure that every
product is made to the highest quality standards.
Only the very best salmon is used in Foppen products.
They search the best locations worldwide, from the
cold waters of Norway to Alaska.
SUSTAINABILITY
Foppen are committed to preventing the depletion
of resources and protecting marine life. All their fish
is sourced from either ASC certified farms or MSC
certified fisheries in Norway and Alaska.
GLOBAL EXPANSION
The inclusion of Foppen into the Hilton Foods
business opens up new customers and markets to the
Group. With customer partners in North and Central
America, Asia and Europe this brings exciting new
opportunities to Hilton Foods. Foppen’s ambition is to
continue expanding its strong position in Europe and
the United States and to gain market share in Asia,
the Middle East and South America.
Foppen is planning further global expansion for 2023,
establishing a sales and marketing office in Japan and
partnerships with retailers in South Korea and Taiwan.
In 2023 we will start an e-commerce project in China
with team Foppen Shanghai and plan for market
entry into Australia.
THE FUTURE
The Foppen acquisition creates a complete seafood
product portfolio for Hilton Foods, ranging across
six categories. We are excited about the opportunities
from cross sales and geographical expansion through
the Foppen product portfolio.
Hilton Food Group PLC Annual Report and Financial Statements 2022
17
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW AUTOMATION
TRANSPARENCY
Progress against our strategic objectives
UNLOCKING TECHNOLOGY
“A single robot can move
POTENTIAL AT OUR
the same maximum
HILTON SEAFOOD SITE
pallet weight as our
IN GRIMSBY
existing pallet trucks, but
with route optimisation,
Our partnership with Agito brings
reduced downtime and
industry leading expertise in supply chain
automation to our Hilton Seafood site
software integration we
in Grimsby, UK.
will be able to economise
processes throughout
the cold-store and
production facilities.”
This project introduces the latest in warehouse
logistics and automation to the warehousing
and dispatch areas of our Grimsby site.
The new technology is transforming our
operations in Grimsby, boosting their value,
sustainability and capability whilst
demonstrating how Autonomous Mobile
Robots (AMR) technology can revolutionise
food manufacture.
STREAMLINING OPERATIONS
The new system separates inbound and outbound
logistic processes, improving workflows and boosting
site capacity. It uses a customised warehouse control
system to integrate automated multi-depth warehouse
racking systems with end of line stacking and start
of line unstacking systems. Automated palletising
and depalletising robots streamline the process from
delivery of raw materials to the start of production
all the way through to the end of the production
line systems which pack pallets of finished products.
Operations are further streamlined by the automation
of the pallet wrapping, label printing and application
processes.
The robots facilitate the pallet transfer process to
our on-site 4,000 pallet storage facility. The project
integrates technology platforms and systems
across the intake, dispatch, warehouse storage and
production areas.
Integrating AMRs with the warehouse system means
that product picking, auto replenishment and storage
sortation can occur simultaneously, significantly
improving the overall efficiency of our operations.
It also reduces the risk of accident by limiting the
movement of personnel operated pallet trucks within
the confined space of the warehouse.
BENEFITS
The project is a showcase of how the technology and
automation solutions provided by Hilton Services can
increase site capability, boost efficiency and deliver
savings to our customers through:
– Increased capacity
– Improved operating efficiencies
– Labour retention and optimisation
– Better availability and application of higher quality
data to drive continuous improvements
– Improved workplace safety
– High return on investment
– Increased energy efficiency
– Part of our transition to net zero emissions by 2050
A GREEN FUTURE
58,792 kg
of CO2e* saved every year by using
AMRs as opposed to a traditional
conveyor system
18
Hilton Food Group PLC Annual Report and Financial Statements 2022
* Based on 0.233KG of CO2e for each kWh.
A single robot can move
the same maximum pallet
weight as our existing
pallet trucks, but with
route optimisation, reduced
downtime and software
integration we will be able
to economise processes
throughout the cold-store
and production facilities.
DRIVING OPERATIONAL EFFICIENCY
Moving from a manual pallet handling system to
the robot system drives efficiency and enhances
processing capacity as it allows for 24/7 operation of
the warehousing. It reduces factory downtime as the
use of multiple robots allows operations to continue
throughout the factory and warehousing facilities
during maintenance periods.
We have researched how AMRs can optimise the
movement of goods within our warehouse, to make
the system as efficient as possible. Machine learning
will use the latest in software and technology so
that the product finds the most efficient route from
A to B. As the system gets older it can develop neural
pathways from monitoring trends and patterns in the
data, learning what is the most optimised route for
certain tasks. This means that the system will continue
to evolve after implementation, driving further
efficiencies within our operations into the future.
PLANNING FOR THE FUTURE
The transition to automation and robot technology
in our warehousing and production processes enables
us to future-proof the system for subsequent growth
in capacity and changes to production methods.
This new infrastructure means that our Hilton Seafood
site will continue to deliver the highest service level
to our customers, long into the future.
This is a success story for all stakeholders – putting
Hilton Foods at the forefront of the automation
curve, and delivering significant savings for us
and our customers.
Looking forward to 2023, the summer will see the
project go live.
Hilton Food Group PLC Annual Report and Financial Statements 2022
19
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW EXPERTISE
PARTNERSHIP
ACTION
RESPONSIBILITY
GROWING ACROSS INTERNATIONAL
MARKETS – OUR FIRST FULL YEAR
IN NEW ZEALAND
Working in partnership with Countdown stores we
launched our first food park concept in New Zealand
in July 2021. The purpose-built site in Auckland is the first
and largest of its kind in New Zealand. This partnership
leverages the latest automation technology to deliver
a multi-category solution.
2022 was the first full year of production at this state-of-
the-art facility, which is now running at full speed supplying
Countdown customers and their families with the highest
quality protein products.
The New Zealand site is a showcase for the Hilton Foods
food park concept. Hilton Foods New Zealand harnesses
our cross-category expertise, supplying a complete set of
product ranges that demonstrate our high quality poultry,
seafood and red meat products.
The Hilton Foods New Zealand site combines supply chain
management platforms with Hilton’s manufacturing and
operational expertise and Agito Group’s highly automated
logistics solutions to deliver the best possible and most
efficient solution for our retail partners.
Our Auckland facility demonstrates our expertise in
the latest technology and automation, and the solutions
our Hilton Services team deliver. It has a fully automated
warehouse system and is connected via a state of the
art conveyor air bridge to an adjacent Countdown
distribution centre.
The site delivers efficiencies for our retail partner through
manufacturing, logistics and services solutions. Hilton Foods
New Zealand optimises the entire supply chain process from
the sourcing of raw material, to the manufacture of great
consumer products and efficient distribution through to
our customers and consumers.
Our automated store order picking is increasing
the efficiency of our customer supply chain logistics through
delivery of protein products on the same vehicle, reducing
labour requirements and the number of deliveries to store.
The New Zealand food park is a great example of the
automation and technology solutions that Hilton Services
can offer to our retailers and the wider supply chain.
It demonstrates our expertise in designing and bringing
online food packaging solutions to meet retail partners’
needs in new territories.
4 million
crates dispatched in Year 1
Progress against our strategic objectives
20
FOODS CONNECTED –
LEADING TECHNOLOGY
In 2022 Hilton Foods increased its
ownership of Foods Connected, taking
a 65% share in the cloud based data
analytics and supply chain management
platform. It is part of our Hilton
Services division.
Winners of the Food and Drink Federation
Award for Digital Transformation 2022
CSR Management
Animal welfare
Supplier sustainability ranking
Packaging management
Scope 3 emissions
Sustainable farming groups
Responsible and
sustainable sourcing
Hilton Food Group PLC Annual Report and Financial Statements 202220 Progress against our strategic objectives
END-TO-END SUPPLY CHAIN
DIGITALISATION
The Foods Connected platform is a cloud-
based solution that gives a 360° view
over supply chains, including compliance,
procurement, food safety, quality, NPD and
CSR. Real-time data enables agile decision
making to minimise risks and maximise
profitability. Over 300 manufacturing
facilities and several leading retailers
globally already rely on it.
TRANSPARENCY
The software platform offers customers
effective real-time traceability. The Foods
Connected Traceability solution combines
blockchain style traceability, recall
management, real-time farm to fork
data and traceability testing to connect
all parties in the supply chain. It enables
companies to map back to farm or
trawler within minutes, helping them to
quickly identify risk and make evidence-
based decisions.
COMPLETE CSR MANAGEMENT
Foods Connected offers a CSR
Management solution for companies
to control CSR initiatives both internally
within their own business and externally
within their supply chain. It centralises CSR
activities in a single platform making it
easier for users to streamline management
and monitor results.
The platform enables users to manage
CSR-based questionnaires and audits
by gathering data from the supply chain
via an offline audit app or the remote audit
tool. This improves the speed and quality
of data capture.
It enables the ability to connect data
from multiple points across the supply
chain through their Supply Chain
Mapping capability.
Users are able to link supplier data with
third party information in areas such
as packaging, Scope 3 emissions, waste
management and certification bodies.
The reports and analysis generated
help users to accurately track figures,
benchmark performance and minimise
the need for manual data capture.
SUPPLIER COMPLIANCE
The Foods Connected Supplier
Compliance solution simplifies supplier
data capture and compliance checks
through a clear and user-friendly
format. The solution centralises supplier
approval lists, questionnaires, approval
and compliancy tracking and supplier
documentation. In one central location,
users can manage supplier compliance
through supply chain mapping and
risk assessments, supplier ranking and
KPIs. The platform provides dashboard
reporting, audit schedules and automated
notifications to help users manage the
supplier compliance process.
GROWTH
Foods Connected are continuing to
expand into new territories and sectors.
In 2022 they added 20 new customers
across Europe, APAC and the USA with
customers now ranging across protein,
fresh produce, ready meals, tea, dairy,
bakery, cereals, pet food and much more,
with this across mainstream retailers,
manufacturers, restaurant chains and
online meal delivery providers.
They recently expanded their supply chain
offering to include a Recipe Manager that
complements the Specification & New
Product Development Workflow modules
which help customers with their product
development activity.
In 2022 they launched Racing Connected
with their first customer in the UK and
commenced their first customer project
on the Clothing Connected platform
highlighting the cross-industry capability
of the platform.
In 2023 Foods Connected will complete the
first phase of their system modernisation,
launching several new tools with updated
infrastructure and UI/UX interfacing to
ensure future business scalability.
A new Scheduling Manager will also be
launched in 2023 which will help customers
better plan product inspections and internal
and supplier audits with increased efficiency
and risk focus.
Hilton Food Group PLC Annual Report and Financial Statements 2022
21
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW PERFORMANCE AND FINANCIAL REVIEW
Higher revenues reflect
volume growth and inflation.
Volumes grew by 4.3% in the
year reflecting the acquisition
of Foppen, full year volumes
from Fairfax Meadow and
Dalco which were acquired
in 2021 and the New Zealand
facility which opened in 2021.
Matt Osborne
Chief Financial Officer
VOLUME
+4.3%
REVENUE
+16.5%
OPERATING PROFIT
-3.3%
The operating profit margin in 2022 declined
to 1.8% (2021: 2.2%) and the operating profit
per kilogram of packed food sold fell to 13.8p
(2021: 14.9p) attributable to the Seafood
business challenges.
Net finance costs
Adjusted net finance costs excluding
exceptional items and lease interest
increased to £15.7m (2021: £6.4m)
reflecting higher borrowings that financed
our acquisition and expansion programme
and the impact of higher market interest
rates. Interest cover as a proportion of
adjusted operating profit in 2022 reduced
to 4.5 times (2021: 11 times). IFRS net finance
costs were £24.4m (2021: £16.0m).
Taxation
The adjusted taxation charge for the
period was £13.5m (2021: £14.5m). The
effective tax rate was 24.3.% (2021: 21.6%).
The IFRS taxation charge was £10.1m
(2021: £8.1m) with an effective tax rate
of 34.2% (2021: 17.1%).
Net income
Adjusted net income, representing profit
for the year attributable to owners of the
parent, of £40.2m (2021: £50.5m) was 20.4%
lower than last year and 20.0% lower on
a constant currency basis. IFRS net income
was £17.7m (2021: £37.1m).
Earnings per share
Adjusted basic earnings per share 45.1p
(2021: 61.3p) was 26.4% lower than last year
and 26.3% on a constant currency basis.
IFRS basic earnings per share were 19.8p
(2021: 45.0p). Diluted earnings per share
were 19.7p (2021: 44.5p).
Earnings before interest, taxation,
depreciation and amortisation
(EBITDA)
Adjusted EBITDA, which is used by the Group
as an indicator of cash generation, increased
marginally to £119.9m (2021: £119.5m).
IFRS EBITDA was £131.8m (2021: £139.0m).
Free cash flow and net debt position
Operating cash flow was strong in 2022
with cash flows from operating activities
of £98.3m (2021: £121.3m) reflecting
planned inventory increases. IFRS free
cash outflow, after capital expenditure
of £56.8m and investments in acquisitions
and joint ventures £83.6m but before
dividends and financing, was £79.4m
(2021: outflow £8.1m restated).
SUMMARY OF GROUP
PERFORMANCE
This performance and financial review
covers the Group’s financial performance
and position in 2022. Hilton’s overall
financial performance saw continued
strong growth in volumes and sales
although profitability and basic earnings
per share on an adjusted basis were
adversely impacted by the challenges
faced in our UK Seafood business.
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 1 January 2023,
with comparative information for the
52 week period ended 2 January 2022.
The financial statements of the Group are
prepared in accordance with international
accounting standards in conformity
with the requirements of the Companies
Act 2006 and UK adopted International
Accounting Standards.
Hilton uses Alternative Performance
Measures (APMs) to monitor the
underlying performance of the Group.
Management use these APMs to monitor
and manage the business’s performance
day-to-day and therefore believe they
provide useful additional information
to shareholders and wider users of the
financial statements.
2022 FINANCIAL
PERFORMANCE
Volume and revenue
Volumes grew by 4.3% in the year
reflecting the acquisition of Foppen, full
year volumes from Fairfax Meadow and
Dalco which were acquired in 2021 and the
New Zealand facility which opened in 2021.
Additional details of volume growth by
business segment are set out in the Chief
Executive’s summary. Revenue increased
16.5% and by 16.0% on a constant currency
basis reflecting higher raw material prices
and volume growth.
Operating profit and margin
Adjusted operating profit of £71.1m
(2021: £73.6m) was 3.3% lower than
last year and 3.2% lower on a constant
currency basis due to challenges in our
Seafood business. IFRS operating profit
was £54.0m (2021: £63.4m) after charging
£11.9m in exceptional costs (2021: £7.1m)
reflecting costs relating to the Belgium
fire, acquisition and reorganisation costs
offset by a gain on the acquisition of 100%
of Foods Connected.
22
Hilton Food Group PLC Annual Report and Financial Statements 2022
PERFORMANCE AND FINANCIAL REVIEW
The Group closing net bank debt
comprising borrowings less cash
and cash equivalents excluding lease
liabilities, was £211.6m (2021: £84.6m)
reflecting bank borrowings of £298.8m
net of cash balances of £87.2m. Net bank
debt increased following investments
in acquisitions/JVs £83.6m and capex
investment £56.8m. Net debt including
lease liabilities was £457.7m (2021: £328.0m).
At the end of 2022 the Group had
undrawn committed bank facilities under
its syndicated banking facilities of £106.4m
(2021: £96.8m). These banking facilities are
subject to covenants comprising net bank
debt to EBITDA and EBITDA interest cover.
Headroom under these covenants at the
end of the year was at least 66% for these
metrics. During 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 which
is due to expire in January 2027.
The resilience of the Group has been
assessed by applying significant downside
sensitivities to the Group’s cash flow
projections. Allowing for these sensitivities
and potential mitigating actions the Board
is satisfied that the Group has adequate
headroom under its existing committed
facilities and will be able to continue to
operate well within its banking covenants.
Dividends
The Group has maintained a progressive
dividend policy since flotation and has
recommended a final dividend of 22.6p
per ordinary share in respect of 2022.
This, together with the interim dividend
of 7.1p per ordinary share paid in December
2022, maintains the full year dividend,
as compared with last year at 29.7p
per ordinary share. The final dividend,
if approved by shareholders, will be paid
on 30 June 2023 to shareholders on the
register on 2 June 2023 and the shares
will be ex dividend on 1 June 2023.
KEY PERFORMANCE
INDICATORS
See our KPIs on the following spread.
TREASURY MANAGEMENT
Hilton Foods does not engage in
any speculative trading in financial
instruments and transacts only in relation
to its underlying business requirements.
The Group’s treasury 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’s policy is only to use forward
currency exchange rate contracts for the
purpose of mitigating commodity risk
occurring in the normal course of business.
At no time will the Group take positions
in derivative instruments for the purpose
of earning a stand-alone profit from such
instruments. The majority of Hilton Foods’
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, Hilton
Foods main foreign exchange exposure
is in the main limited to its equity/major
capital expenditure 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 will
continue reviewing hedging costs and
options as it is expected global interest
rates may increase materially beyond
current levels.
CUSTOMER CREDIT
AND PRICING RISKS
As Hilton Foods’ 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.
LIQUIDITY RISK
Hilton Foods 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.
TAX STRATEGY
Hilton Foods is committed to paying
the right amount of tax at the right time
and complying with all relevant laws
and regulations.
We have a low-risk appetite toward
tax planning, 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.
We recognise the importance of the
tax contributions that we make in the
countries in which our profits originate,
and we consider the needs of all
our stakeholders.
The Group’s approach to transfer pricing
is to ensure that transactions reflect the
underlying commercial arrangements,
and therefore the use of transfer pricing
to artificially avoid tax is prohibited.
We also fully endorse the aims of the
OECD/G20 Inclusive Framework on Base
Erosion and Profit Shifting (BEPS) and its
related package of Actions www.oecd.org/
tax/beps/about/
Our tax strategy can be found on our
website www.hiltonfoods.com/media/
dyrlgni3/hilton-tax-strategy-2022.pdf
Hilton Food Group PLC Annual Report and Financial Statements 2022
23
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW 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 on the right:
Financial KPIs
Revenue growth
(%)
16.5%
2021: 19.0%
Year on year revenue growth
expressed as a percentage. The 2022
increase reflected higher raw material
prices and volume growth.
Adjusted earnings before
interest, taxation, depreciation
and amortisation (EBITDA) (£m)
£119.9m
2021: £119.5m
Adjusted operating profit before
depreciation and amortisation which
increased marginally year on year.
Adjusted operating profit margin
(%)
Free cash flow
(£m)
1.8%
2021: 2.2%
Adjusted operating profit expressed
as a percentage of turnover. The
operating profit margin % in 2022
was lower due to challenges in our
Seafood business.
£(79.4)m
2021: £(8.1)m restated
IFRS cash (outflow) before
minorities, dividends and financing.
Operating cash flow generation
in 2022 was higher due to increased
investments in acquisitions and
joint ventures, adverse working
capital movements and higher
interest payments.
Adjusted operating profit margin
(pence per kg)
Net debt/EBITDA ratio
(times)
13.8p
2021: 14.9p
Adjusted operating profit
per kilogram processed and sold
in pence. The decrease in 2022
compared with 2021 reflects the
challenges in our Seafood business.
1.8
2021: 0.7
Year end net bank debt as a
percentage of adjusted EBITDA.
The increase is due to the Foppen
acquisition which completed during
the year and the distorting impact
of the related equity raise £75m
in 2021.
In addition, a much wider range of financial
and operating KPIs are continuously tracked
at business unit level.
24 Hilton Food Group PLC Annual Report and Financial Statements 2022
PERFORMANCE AND FINANCIAL REVIEW continued
Non-Financial KPIs
Growth in sales volumes
(%)
4.3%
2021: 5.0%
Year on year volume growth.
Volume growth in 2022 comprised
Foppen acquired in the year and
full year volumes from Fairfax
Meadow and Dalco acquired in
2021 and the New Zealand facility
opened in 2021.
Employee and labour
agency costs (pence per kg)
65.7p
2021: 60.9p
Labour cost of producing food
products as a proportion of volume.
The increase reflects relatively
greater labour complexity in
the recently acquired businesses
including Foppen, Fairfax Meadow
and Dalco.
Customer service level
(%)
95.9%
2021: 96.4%
Packs of product delivered as a %
of the orders placed. The customer
service level remains best in class.
GOING CONCERN STATEMENT
VIABILITY STATEMENT
The Directors have performed a detailed
assessment, including a review of the
Group’s budget for the 2023 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.
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. During 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.
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 2025. 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.
Matt Osborne
Chief Financial Officer
4 April 2023
Hilton Food Group PLC Annual Report and Financial Statements 2022
25
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW
RISK MANAGEMENT AND PRINCIPAL RISKS
WHO IS RESPONSIBLE FOR RISK AT HILTON
Board
Responsibility for risk management including the appropriate identification of risks and the effective
application of actions designed to mitigate those risks, resides with the Board. The Board also sets
the risk appetite and considers how best to minimise and control the probability and potential
impact of identified risks if they were to crystallise.
Chairman, Non-Executive Directors
Chief Executive Officer
Chief Financial Officer
Audit Committee
The Audit Committee reports to the Board on the substance of the risk assessment and any changes
to the nature, likelihood or materiality of those risks. The Group Internal Audit & Risk Director presents
at every Audit Committee meeting on the internal controls and risk management systems.
Risk Management Committee
The Risk Management Committee reports regularly to the Audit Committee on the risk assessment and
any changes to the nature, likelihood or materiality of those risks. The Risk Management Committee
also considers the risk appetite and reviews in progress in the development of internal controls and their
implementation aligned to principal risks. The Chair of the Risk Management Committee also oversees
the scenario-based business continuity management exercises.
Group Internal
Audit& Risk Director
Representatives from
Executive Leadership Team
Key international leaders
across the business
Business unit risk registers
Business units and functions manage and monitor their own key risks through regular review, ensuring
the risk registers and risk mitigations are accurate. The Group’s risk register is compiled through
combining the set of of business unit risk registers supplemented by formal interviews with senior
executives and Directors of the Group.
Group Internal Audit & Risk Director and Site Managing Directors
1st Line of Defence
2nd Line of Defence
3rd Line of Defence
4th Line of Defence
Business operations
“Management
Controls”
Local business units
carry out effective risk
management activities
in order to identify,
monitor, mitigate and
report on risks that
impact on operations.
Oversight functions
Provided by functions
including Finance,
Quality, People and
Culture, IT, Health
and Safety, Risk and
Compliance. These
functions provide
the tools, systems
and internal controls
necessary to support
the identification,
management and
monitoring of risk.
This includes policies,
procedures and training.
Internal Audit,
consultants
Provide independent
review over the
completeness and
effectiveness of our
internal controls and
risk management
systems.
External Audit,
regulators
Provide third party and
independent review
of all business units.
Review of the viability
and going concern
of the business.
We believe 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.
26
Hilton Food Group PLC Annual Report and Financial Statements 2022
RISK MANAGEMENT AND PRINCIPAL RISKS
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
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.
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. For more detail please
see Who is responsible for risk at Hilton?
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.
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 2022
Cost of living crisis and the
Russia-Ukraine War
The macroeconomic and geopolitical
landscape, exacerbated by the Ukrainian
war, is having an unprecedented impact on
our supply chains, operations, consumers
and customers. Energy price volatility and
an acute cost of living crisis is impacting
consumer spending and eating habits.
This has resulted in high- profile food price
inflation and extreme cost volatility.
Our continued focus on cost control,
innovation and factory efficiency is
enabling us to manage the inflationary
pressures the industry is currently facing.
Through our strong customer relationships
we are able to support consumers to
navigate through these challenging times.
Brexit
Hilton’s exposure is generally mitigated
through our predominantly local sourcing
and operating model. Impacts are likely
to continue through 2023 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. We continue to monitor policy
changes and amend processes and
operations as required. Our labour
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.
Hilton Food Group PLC Annual Report and Financial Statements 2022
27
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW RISK MANAGEMENT AND PRINCIPAL RISKS continued
Description of risk
Its potential impact
Risk mitigation measures and strategies adopted
Risk 1
The progress of the
Group’s business
is affected by the
macroeconomic
and geopolitical
environment and
levels of consumer
spending.
Movement
No business is immune to difficult
economic climates. The current
macroeconomic environment is placing
extraordinary financial pressures on
businesses and consumers. The inflationary
pressures resulting from the Covid-19
pandemic, the Ukrainian war and wider
economic and political instability are
exacerbating the challenging market
conditions.
Consumers are changing their shopping
and eating habits and our retail customers
are under immense pressure to deliver
value and are therefore sharing that
pressure with supplier partners.
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. Consumer
perception is increasingly influenced
by environmental, social and governance
(ESG) considerations.
Our strong and diversifying growth model, based
on successful diversification across different proteins,
expanding as a technology-led supply chain partner and
built on our strong ESG credentials underpins our business
resilience.
We continue to broaden product ranges with our strong
retail partners, maintaining a single-minded focus on
minimising unit packing costs, whilst continuing to deliver
high levels of product quality and integrity.
The Group is able to harness its innovative and agile
approach with its class-leading technology and systems
to respond quickly and effectively to macroeconomic
challenges and opportunities.
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.
Our ESG strategy underpins the growth of our product
sectors for our customers, and supports them to reach
their goals. Our ambitious 2025 Sustainable Protein Plan
is in partnership with our customers and suppliers as
we engage in the key collaborative initiatives that drive
sustainability for our sectors and raise the bar together.
We have set stretching goals that drive impactful
actions that become integrated into our core business
practices. Our data collection platform, Foods Connected,
demonstrates the assurance of standards across our
supply chains, and allows us to measure progress towards
our 2025 targets.
The detail of our strategy and its impact are described
within the Sustainability section of this report.
28 Hilton Food Group PLC Annual Report and Financial Statements 2022
RISK MANAGEMENT AND PRINCIPAL RISKS continued
Description of risk
Its potential impact
Risk mitigation measures and strategies adopted
Risk 3
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.
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 continue
to focus on strengthening their market
share of protein products in the countries in
which we operate, creating an increasingly
competitive retail environment. 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.
During periods of unprecedented
inflationary pressure, misalignment
between production costs and agreed
operational packing rates may occur,
potentially impacting profitability.
The Group may struggle to meet key
strategic objectives and projects and fail
to adhere to regulatory and legislative
requirements, which in turn detracts from
our performance delivery for our customers.
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.
No movement
The Group is progressively widening its customer base
and maintaining 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.
The Group maintains an ongoing focus on cost control,
innovation and factory efficiency to manage inflationary
pressures. Hilton continues to evolve and respond to
changing market conditions.
The provision of added value services deepens the
relationships Hilton has with its retailer partners and
investment in these services means that we are able
to develop and maintain a technology advantage within
our industry.
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. 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.
In the current climate, strong partnership and proximity
to our customers are fundamental. Hilton’s leadership
continues to develop its organisational structures to
ensure as close a relationship with our retail partners
as possible.
Hilton Food Group PLC Annual Report and Financial Statements 2022
29
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW RISK MANAGEMENT AND PRINCIPAL RISKS continued
Description of risk
Its potential impact
Risk mitigation measures and strategies adopted
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 has
both local and global sourcing models.
Current or future tariffs, quotas or trade
barriers imposed by supplier countries 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.
This will potentially affect the Group’s
ability to procure sufficient quantities
of safe raw material.
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 maintains a flexible global and local 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.
Further assurance is provided through the supply chain
control and transparency the Group has enabled by its
supplier management platform, Foods Connected, which
facilitates robust supplier relationships.
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, supported by a
comprehensive ongoing audit programme. 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.
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.
We continue to mitigate against the legacy impact of the
Covid-19 pandemic.
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
Risk 6
Contamination
within the supply
chain including
outbreaks of
disease and feed
contaminants
affecting livestock
and fish.
No movement
Risk 7
Significant incidents
such as fire, flood,
pandemic or
interruption of supply
of key utilities could
impact the Group’s
business continuity.
The legacy of the
Covid-19 pandemic
continues to present
challenges across
the globe.
No movement
30 Hilton Food Group PLC Annual Report and Financial Statements 2022
RISK MANAGEMENT AND PRINCIPAL RISKS continued
Description of risk
Its potential impact
Risk mitigation measures and strategies adopted
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.
No movement
Risk 9
A significant
breach of health and
safety legislation as
complexity increases
in managing sites
across different
product groups
and geographies.
No movement
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.
No movement
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.
Such breach in health and safety
legislation could lead to reputational
damage and regulatory penalties, including
restrictions on operations, fines or personal
litigation claims.
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.
The Group has established robust health and 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.
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 continue to review and develop our assessment of the
key physical and transition risks impacting our business
in line with the Task Force on Climate-related Financial
Disclosures (TCFD) recommendations. Our full assessment
of climate risks and opportunities in line with the TCFD
framework is described within the Sustainability section
of this report.
Hilton Food Group PLC Annual Report and Financial Statements 2022
31
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW STAKEHOLDER ENGAGEMENT
The following disclosure describes how the directors of the company have had
regard to the matters under Section 172 of the Companies Act 2006 which requires
company directors to act in the way they consider, 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.
Our People
Why we engage
How we engage
Our people are at the heart
of our success and the
delivery of our strategy.
– In 2022 we launched a new ‘Speak Up’ Policy at Hilton Foods UK. In line with the UN Guiding Principles on
– Engagement – the opportunity
– The Board recognises the value its employees contribute to
Business and Human Rights, we redesigned how our employees discuss their concerns and raise grievances
through a series of workshops, where the design process is led by the employees who will use the new
policy and procedure.
– We have grown our Women’s Network with sessions such as: Being Yourself at Work, How to Network,
Building Your Confidence at Work and Dealing with Change.
– Our employees experience of work is important to us, that’s why we use annual surveys where all sites
respond to employee feedback through tailored action plans. In 2022, 91% of our employees contributed
to the annual survey.
– Employees took part in mental health and wellbeing awareness campaigns in 2022 and the majority
of our sites have at least two mental health first aiders.
– Our Global Health and Safety Framework was successfully extended to all sites in 2022, with our new
acquisition Foppen transitioning in January 2023.
– This year we have developed a new set of ‘core behaviours’ alongside our refreshed Strategic Compass
which brings a new focus on development and inclusion. The core behaviours inform the actions, attitude,
and care all our employees bring to work, to ensure that everyone feels a sense of belonging and inclusion
and are based on the output from 18 focus groups across our worldwide geographies.
– We are accelerating the progress of our diversity, equity and inclusion agenda. In 2022, 80% of our
employees agreed with the statement ‘I feel I can be myself at work’, a 6% increase on the previous year.
– Through employee representative groups such as “Your Voice Committees,” our colleagues can engage
and contribute meaningfully to the operation of our business.
– A whistleblowing 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.
– Our Accelerated Development Programmes nurture internal talent through personalised training
programmes that include development modules, individual coaching sessions, and two live Executive
sponsored business projects.
– We reviewed and transformed our Target Operating Model through collaboration and engagement with
our senior leaders, ELT and Board to ensure that we are fully set to deliver our ambition.
– We launched our ‘work conversations’ programme in 2022 as we believe that everyone in every role deserves
the chance to have a good quality ‘Work Conversation’ about themselves and their work with their manager
or someone else who can support them.
– Our Industry Recognised Qualifications programme in APAC gives colleagues the opportunity to develop
their careers by gaining industry recognised qualifications. This gives our employees who may not previously
have had access to formal qualifications the opportunity to complete training during work time.
– We continue to invest in learning and development as we roll out Learning Management Systems across
our operations. Since the introduction of the system to our APAC sites, our engagement scores have risen
significantly.
Our Communities
Why we engage
How we engage
We believe in supporting
our local communities
as their long-term success
is linked to our long-term
success. We believe in
building a fairer society
and food system for all and
seek to be a good neighbour
in all of our locations.
– We are actively involved in all of our local communities. We recruit local people and support local charities
and community groups. In 2022 we donated £153,327 to charities.
– Employees across our European sites have fundraised, collected goods, and provided practical support
to refugees impacted by the war in Ukraine through 2022.
– We are part-funding a PhD at Heriot-Watt University, which aims to map the social responsibility tools
available to the fishing industry and improve its human rights performance.
– We are sponsoring a DPhil with Oxford University looking at sustainability metrics and policy in agriculture.
– Hilton has a commitment to responsibly package all of its products which is why we have a target to reduce
the weight of plastic packaging whilst ensuring it is fully reusable, recyclable or compostable. In 2022 we
launched fish packaging made from coastal recovered plastic, removing 240 tonnes of plastic from the
environment.
– We are full participants in the UN Global Compact, a global initiative that aligns companies with universal
principles on environment, society and governance.
– We have committed to being a net zero business by 2050, and are now implementing detailed
decarbonisation plans for our own operations.
– We believe in our responsibility to protect the internationally recognised human rights of workers both
within our business and our global supply chains. In 2022 we established a multi-function Modern Slavery
Working Group for our businesses in the UK and the Republic of Ireland. The focus of this group is to
facilitate candid conversations about the challenges of detecting and disrupting modern slavery and offer
opportunities to drive best practice through the creation and provision of shared resources.
32
Hilton Food Group PLC Annual Report and Financial Statements 2022
Areas of focus for our stakeholders How the Board has oversight
Find out more
to share ideas and opinions
the Company’s sustainable long-term success, which is why the
Further detail on how we
engage with our people
can be found on pages 46-53
– Recognition and reward
– Opportunity for skills
and career development
– Wellbeing
– Health and safety
– Equity and respect
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.
– Angus Porter is the designated Non-Executive Director appointed
by the Board to head the Group’s workforce engagement
procedures. Angus works closely with key Group personnel to
ensure our employee engagement practices are appropriately
monitored. Angus reports back to the Board on his findings
and interactions. This year, Angus attended the Hilton Foods
management conference where he presented. He also has
regular meetings with our Chief People and Culture Officer.
Angus also contributed to and attended one of our Accelerated
Development Programmes in 2022.
– All reports to our whistleblower service are reviewed by the Board.
– The Board oversees the continued investment and prioritisation
of employee training and development.
– The Board travelled to Hilton Foods sites in Australia and New
Zealand in 2022 where they had the opportunity to meet with
employees and see our operations first hand.
– Townhall meetings and presentations were held at all Hilton
sites in 2022 and attended by members of the Executive team
to update colleagues on Group strategy and performance and
provide engagement opportunities through Q&A sessions.
Areas of focus for our stakeholders How the Board has oversight
Find out more
– Sustainability
– Social value
– The Board works to build relationships with our communities
and legitimate public interest groups.
– Opportunities and careers
for local people
– The Board is kept informed of our engagement with our local
communities through regular updates from the Sustainability
Committee and local site updates.
More detail available in
our Sustainability Report
on pages 36-91
STAKEHOLDER ENGAGEMENT
of our success and the
delivery of our strategy.
Business and Human Rights, we redesigned how our employees discuss their concerns and raise grievances
through a series of workshops, where the design process is led by the employees who will use the new
policy and procedure.
– We have grown our Women’s Network with sessions such as: Being Yourself at Work, How to Network,
Building Your Confidence at Work and Dealing with Change.
– Our employees experience of work is important to us, that’s why we use annual surveys where all sites
respond to employee feedback through tailored action plans. In 2022, 91% of our employees contributed
to the annual survey.
– Employees took part in mental health and wellbeing awareness campaigns in 2022 and the majority
of our sites have at least two mental health first aiders.
– Our Global Health and Safety Framework was successfully extended to all sites in 2022, with our new
acquisition Foppen transitioning in January 2023.
– This year we have developed a new set of ‘core behaviours’ alongside our refreshed Strategic Compass
which brings a new focus on development and inclusion. The core behaviours inform the actions, attitude,
and care all our employees bring to work, to ensure that everyone feels a sense of belonging and inclusion
and are based on the output from 18 focus groups across our worldwide geographies.
– We are accelerating the progress of our diversity, equity and inclusion agenda. In 2022, 80% of our
employees agreed with the statement ‘I feel I can be myself at work’, a 6% increase on the previous year.
– Through employee representative groups such as “Your Voice Committees,” our colleagues can engage
and contribute meaningfully to the operation of our business.
– A whistleblowing 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.
– Our Accelerated Development Programmes nurture internal talent through personalised training
programmes that include development modules, individual coaching sessions, and two live Executive
sponsored business projects.
– We reviewed and transformed our Target Operating Model through collaboration and engagement with
our senior leaders, ELT and Board to ensure that we are fully set to deliver our ambition.
– We launched our ‘work conversations’ programme in 2022 as we believe that everyone in every role deserves
the chance to have a good quality ‘Work Conversation’ about themselves and their work with their manager
or someone else who can support them.
– Our Industry Recognised Qualifications programme in APAC gives colleagues the opportunity to develop
their careers by gaining industry recognised qualifications. This gives our employees who may not previously
have had access to formal qualifications the opportunity to complete training during work time.
– We continue to invest in learning and development as we roll out Learning Management Systems across
our operations. Since the introduction of the system to our APAC sites, our engagement scores have risen
significantly.
Our Communities
Why we engage
How we engage
We believe in supporting
our local communities
as their long-term success
is linked to our long-term
success. We believe in
building a fairer society
and food system for all and
seek to be a good neighbour
in all of our locations.
– We are actively involved in all of our local communities. We recruit local people and support local charities
and community groups. In 2022 we donated £153,327 to charities.
– Employees across our European sites have fundraised, collected goods, and provided practical support
to refugees impacted by the war in Ukraine through 2022.
– We are part-funding a PhD at Heriot-Watt University, which aims to map the social responsibility tools
available to the fishing industry and improve its human rights performance.
– We are sponsoring a DPhil with Oxford University looking at sustainability metrics and policy in agriculture.
– Hilton has a commitment to responsibly package all of its products which is why we have a target to reduce
the weight of plastic packaging whilst ensuring it is fully reusable, recyclable or compostable. In 2022 we
launched fish packaging made from coastal recovered plastic, removing 240 tonnes of plastic from the
environment.
– We are full participants in the UN Global Compact, a global initiative that aligns companies with universal
principles on environment, society and governance.
– We have committed to being a net zero business by 2050, and are now implementing detailed
decarbonisation plans for our own operations.
– We believe in our responsibility to protect the internationally recognised human rights of workers both
within our business and our global supply chains. In 2022 we established a multi-function Modern Slavery
Working Group for our businesses in the UK and the Republic of Ireland. The focus of this group is to
facilitate candid conversations about the challenges of detecting and disrupting modern slavery and offer
opportunities to drive best practice through the creation and provision of shared resources.
Our People
Why we engage
How we engage
Areas of focus for our stakeholders How the Board has oversight
Find out more
Our people are at the heart
– In 2022 we launched a new ‘Speak Up’ Policy at Hilton Foods UK. In line with the UN Guiding Principles on
– Engagement – the opportunity
– The Board recognises the value its employees contribute to
to share ideas and opinions
– Recognition and reward
– Opportunity for skills
and career development
– Wellbeing
– Health and safety
– Equity and respect
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.
– Angus Porter is the designated Non-Executive Director appointed
by the Board to head the Group’s workforce engagement
procedures. Angus works closely with key Group personnel to
ensure our employee engagement practices are appropriately
monitored. Angus reports back to the Board on his findings
and interactions. This year, Angus attended the Hilton Foods
management conference where he presented. He also has
regular meetings with our Chief People and Culture Officer.
Angus also contributed to and attended one of our Accelerated
Development Programmes in 2022.
– All reports to our whistleblower service are reviewed by the Board.
– The Board oversees the continued investment and prioritisation
of employee training and development.
– The Board travelled to Hilton Foods sites in Australia and New
Zealand in 2022 where they had the opportunity to meet with
employees and see our operations first hand.
– Townhall meetings and presentations were held at all Hilton
sites in 2022 and attended by members of the Executive team
to update colleagues on Group strategy and performance and
provide engagement opportunities through Q&A sessions.
Further detail on how we
engage with our people
can be found on pages 46-53
Areas of focus for our stakeholders How the Board has oversight
Find out more
– Sustainability
– Social value
– Opportunities and careers
for local people
– The Board works to build relationships with our communities
and legitimate public interest groups.
– The Board is kept informed of our engagement with our local
communities through regular updates from the Sustainability
Committee and local site updates.
More detail available in
our Sustainability Report
on pages 36-91
Hilton Food Group PLC Annual Report and Financial Statements 2022
33
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW STAKEHOLDER ENGAGEMENT continued
Our Customers and Consumers
Why we engage
How we engage
Our customers and
consumers expect us to
deliver safe, high quality,
competitively priced
products. We want to help
consumers make ethical
and sustainable choices
for both their health and
the health of the planet.
Our Suppliers
Why we engage
Our integrated food supply
chain enables us to deliver
consumer and customer
expectations supported by
the supply of high quality,
safe, sustainable and
innovative raw materials.
– We create long-term partnerships with our retailers which enable us to deliver the highest level
– Product quality
– The Board and senior management engage with our customers
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.
– 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.
– Hilton believes in helping our consumers to make healthy dietary choices. We are using innovation
to provide consumers with healthy food choices in line with dietary recommendations, including 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.
– Our Sustainable Protein Plan underpins our strategy to become the first choice for sustainable protein for
our customers and consumers. The plan has targets under our three pillars of protein, product and planet.
– By maintaining a high level of transparency through our supply chains we are able to inform our consumers
about the origin, production methods and human rights credentials of our products.
– We continue to diversify the range of healthy, delicious proteins we offer to our customers and consumers.
Our recent partnership with Cellular Agriculture and acquisition of Foppen demonstrates our continued
commitment to diversify our range of sustainable products.
– Our Nature Positive plan promotes biodiversity through setting stretching targets to eliminate deforestation
and protect water and soils across our value chain.
How we engage
Areas of focus for our stakeholders How the Board has oversight
Find out more
– We partner with suppliers that share our commitment to quality, food safety, animal welfare and sustainability.
– Quality
– The Board and senior management engage with our suppliers
– We engage with our suppliers through the Foods Connected platform where we track supply chain
compliance, internal quality procedures and manage the buying, planning and selling of our raw materials.
– We are working closely with our supply chains to deliver on the ambitious targets within our 2025 Sustainable
Protein Plan. 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 with our key suppliers.
– In 2022 we rolled out our Hilton Foods Animal Welfare Supplier Standard and an ambitious auditing
programme.
– We are in the process of rolling out increased ethical due diligence in the supply chain – with the aim
of auditing 100% of labour and service providers against our own Agency Labour Standard.
– We also launched a Supplier Social Responsibility Code of Conduct in 2022 setting out the behaviours and
standards expected from suppliers. Further targets include screening 100% of new primary suppliers using
social criteria and auditing 100% of high-risk primary suppliers by 2025.
– We hold regular dialogue with our suppliers on governance and compliance matters including food safety
standards, human rights and modern slavery.
– Our seafood sourcing standards are aligned to the Sustainable Seafood Coalition code and PAS 1550.
– We have partnered with the University of Stirling, CIEL and IDH to collect primary data from our partner farms
on direct methane emissions from Pangasius farming.
– 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.
– Our supplier approval process gives us full transparency on the safety, quality, and provenance of the raw
materials we use against the Hilton Foods Supplier standards. We audit suppliers at a frequency determined
by risk assessment.
Our Shareholders
Why we engage
How we engage
We want our shareholders
to believe in our purpose,
values and strategy. We
believe in engaging with
our shareholders to help
create value and ensure the
long- term success of our
business strategy.
– We provide clear, transparent and balanced communications on our business strategy and how we deliver
– ESG matters
– The CEO and CFO meet regularly and have dialogue with
long-term shareholder value through earnings and capital growth.
– We deliver twice yearly investor presentations on our annual and half year results. Additionally other reports
and forecasts, together with relevant articles in the financial press, are circulated to the Board.
– We arrange visits to our facilities for key shareholders and analysts.
– All shareholders have the opportunity to ask questions at the Company’s AGM, which all Directors and the
Chair of every Board Committee usually attend.
– Our Committee Chairs are available to engage with major shareholders regarding their areas of responsibility.
– The Company Secretary provides a key point of contact throughout the year for communications on corporate
governance matters and particularly around shareholder meetings.
– We also engage with the Company’s brokers and market analysts to ensure their feedback is harnessed
by the business.
– Our website has a dedicated investors section and can be found at www.hiltonfoods.com
34 Hilton Food Group PLC Annual Report and Financial Statements 2022
Areas of focus for our stakeholders How the Board has oversight
Find out more
– Business performance
– Business strategy and
development
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 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.
The Board’s current
assessment of the Group’s
position and prospects are set
out in the Strategic report on
pages 22 to 25
Areas of focus for our stakeholders How the Board has oversight
Find out more
For more detail on our
Sustainable Protein Plan
see pages 36-45
– Product sustainability
– Social responsibility
– Health and balanced diets
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.
– Understanding what is important to our customers and
consumers is essential to our business strategy, so the Board
receives regular updates on market developments, trends and
opportunities. These are reported to the Board by the Executive
team through reports and presentations.
– The Board also receives updates on Hilton’s customer and
consumer engagement on sustainability issues via the
Sustainability and Risk committees.
– Continuous improvement
through our established total partnership strategy.
– Partnership
– Transparency and efficiency
and payment terms.
– We have regular dialogue with suppliers on product quality
Further details on how we
engage with suppliers can
be found in the Sustainability
report on pages 36 to 91
– The Board and senior management collaborate with suppliers
to address any concerns, to identify supply chain risks and work
together to find solutions, mitigate risks and demonstrate
best practice.
– The Board is updated on supply chain risks, initiatives and
opportunities through regional updates and reports from the
Risk and Sustainability committees.
STAKEHOLDER ENGAGEMENT continued
products. We want to help
– Hilton Foods is committed to working in an ethical, open and honest manner to produce products
Our Customers and Consumers
Why we engage
How we engage
Our customers and
consumers expect us to
deliver safe, high quality,
competitively priced
consumers make ethical
and sustainable choices
for both their health and
the health of the planet.
– We create long-term partnerships with our retailers which enable us to deliver 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.
of the highest food safety and quality. This is underpinned by our Group Quality Policy.
– Hilton believes in helping our consumers to make healthy dietary choices. We are using innovation
to provide consumers with healthy food choices in line with dietary recommendations, including 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.
– Our Sustainable Protein Plan underpins our strategy to become the first choice for sustainable protein for
our customers and consumers. The plan has targets under our three pillars of protein, product and planet.
– By maintaining a high level of transparency through our supply chains we are able to inform our consumers
about the origin, production methods and human rights credentials of our products.
– We continue to diversify the range of healthy, delicious proteins we offer to our customers and consumers.
Our recent partnership with Cellular Agriculture and acquisition of Foppen demonstrates our continued
commitment to diversify our range of sustainable products.
– Our Nature Positive plan promotes biodiversity through setting stretching targets to eliminate deforestation
and protect water and soils across our value chain.
Our Suppliers
Why we engage
Our integrated food supply
chain enables us to deliver
consumer and customer
expectations supported by
the supply of high quality,
safe, sustainable and
innovative raw materials.
– We engage with our suppliers through the Foods Connected platform where we track supply chain
compliance, internal quality procedures and manage the buying, planning and selling of our raw materials.
– We are working closely with our supply chains to deliver on the ambitious targets within our 2025 Sustainable
Protein Plan. 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 with our key suppliers.
– In 2022 we rolled out our Hilton Foods Animal Welfare Supplier Standard and an ambitious auditing
programme.
– We are in the process of rolling out increased ethical due diligence in the supply chain – with the aim
of auditing 100% of labour and service providers against our own Agency Labour Standard.
– We also launched a Supplier Social Responsibility Code of Conduct in 2022 setting out the behaviours and
standards expected from suppliers. Further targets include screening 100% of new primary suppliers using
social criteria and auditing 100% of high-risk primary suppliers by 2025.
– We hold regular dialogue with our suppliers on governance and compliance matters including food safety
standards, human rights and modern slavery.
– Our seafood sourcing standards are aligned to the Sustainable Seafood Coalition code and PAS 1550.
– We have partnered with the University of Stirling, CIEL and IDH to collect primary data from our partner farms
on direct methane emissions from Pangasius farming.
– 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.
– Our supplier approval process gives us full transparency on the safety, quality, and provenance of the raw
materials we use against the Hilton Foods Supplier standards. We audit suppliers at a frequency determined
by risk assessment.
Areas of focus for our stakeholders How the Board has oversight
Find out more
– Product quality
– Product sustainability
– Social responsibility
– Health and balanced diets
– The Board and senior management engage with our customers
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.
– Understanding what is important to our customers and
consumers is essential to our business strategy, so the Board
receives regular updates on market developments, trends and
opportunities. These are reported to the Board by the Executive
team through reports and presentations.
– The Board also receives updates on Hilton’s customer and
consumer engagement on sustainability issues via the
Sustainability and Risk committees.
For more detail on our
Sustainable Protein Plan
see pages 36-45
How we engage
Areas of focus for our stakeholders How the Board has oversight
Find out more
– We partner with suppliers that share our commitment to quality, food safety, animal welfare and sustainability.
– Quality
– The Board and senior management engage with our suppliers
– Continuous improvement
through our established total partnership strategy.
– Partnership
– Transparency and efficiency
– We have regular dialogue with suppliers on product quality
and payment terms.
– The Board and senior management collaborate with suppliers
to address any concerns, to identify supply chain risks and work
together to find solutions, mitigate risks and demonstrate
best practice.
– The Board is updated on supply chain risks, initiatives and
opportunities through regional updates and reports from the
Risk and Sustainability committees.
Further details on how we
engage with suppliers can
be found in the Sustainability
report on pages 36 to 91
Our Shareholders
Why we engage
How we engage
We want our shareholders
– We provide clear, transparent and balanced communications on our business strategy and how we deliver
to believe in our purpose,
values and strategy. We
believe in engaging with
our shareholders to help
create value and ensure the
long- term success of our
business strategy.
long-term shareholder value through earnings and capital growth.
– We deliver twice yearly investor presentations on our annual and half year results. Additionally other reports
and forecasts, together with relevant articles in the financial press, are circulated to the Board.
– We arrange visits to our facilities for key shareholders and analysts.
– All shareholders have the opportunity to ask questions at the Company’s AGM, which all Directors and the
Chair of every Board Committee usually attend.
– Our Committee Chairs are available to engage with major shareholders regarding their areas of responsibility.
– The Company Secretary provides a key point of contact throughout the year for communications on corporate
governance matters and particularly around shareholder meetings.
– We also engage with the Company’s brokers and market analysts to ensure their feedback is harnessed
by the business.
– Our website has a dedicated investors section and can be found at www.hiltonfoods.com
Areas of focus for our stakeholders How the Board has oversight
Find out more
– ESG matters
– Business performance
– Business strategy and
development
– The CEO and CFO 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 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.
The Board’s current
assessment of the Group’s
position and prospects are set
out in the Strategic report on
pages 22 to 25
Hilton Food Group PLC Annual Report and Financial Statements 2022
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW SUSTAINABILITY REPORT
CHIEF EXECUTIVE’S INTRODUCTION
This year is my 30th with Hilton
Foods. Like many businesses, we have
experienced more global instability in
the past three years than in the previous
30 combined. War in Europe, rising
inflation, plus the ongoing impact of
Covid-19 have come together to make
this a year of uncertainty for food
businesses across the world.
“ This is a blueprint for social
and environmental progress,
which harnesses the expertise
of our business.”
Philip Heffer
Chief Executive Officer
36
Hilton Food Group PLC Annual Report and Financial Statements 2022
It would have been tempting in these
circumstances to reduce our focus on
sustainability. This would have been a
mistake. The whole focus of our strategy
over the past five years has been to
diversify our business and build a platform
for Hilton Foods to create sustainable
value over the long-term. The 2025
Sustainable Protein Plan is a key part of
that work. This is a blueprint for social and
environmental progress, which harnesses
the expertise of our business.
Even with inflation rising, the importance
of social and environmental challenges
is increasing. When we consider our
commercial priorities, the demand for
more sustainable, but affordable, protein
is continuing to grow. Meanwhile, investing
now to address major risks and challenges
will reduce costs and exposure over the
longer term.
Above all, the Sustainable Protein Plan
reflects the values which have been at the
core of Hilton Foods since 1994. We believe
that all businesses should be a force
for good.
This report sets out our progress. It is
rooted in the partnerships which have
made Hilton Foods the business it is
today. Through partnerships, we can help
to create a more circular and sustainable
food system that provides healthy and
affordable proteins for consumers who
have seen the cost of cooking double,
and who worry about the health of their
families and the future of our planet.
We have delivered across all parts of the
plan this year. Through product innovation,
we are working to decarbonise cattle,
deliver zero emission factories and
eliminate deforestation. We are committed
to achieving fully recyclable retail plastic
packaging and now have 70% recycled
content across our plastic packaging,
Group-wide.
I am particularly encouraged by the
investment we have made in the meat
technology company, Cellular Agriculture
Limited (CellAg). With the right backing,
CellAg can help Hilton Foods become
a leader in the emerging market for
cultured meat.
SUSTAINABILITY REPORT
CHIEF EXECUTIVE’S INTRODUCTION
Even with these innovations, in future
the majority of meat and fish will need
to be produced by sustainable farming
and fishing.
I am pleased with our progress on
our planet targets. Hilton Foods was
awarded a score of A- in this year’s climate
assessment by the Carbon Disclosure
Project (CDP), achieving recognition as
a Supplier Engagement Leader. However,
we need to go further. This year we will
submit even more ambitious targets
to the Science Based Targets initiative.
These will be consistent with achieving
1.5°C and see us commit to reach net zero
well before our current 2050 target.
The first pillar of our plan is about our
people. Our commitment to protect
human rights, employee wellbeing
and support career development is one
of the reasons why we are participants
in the UN Global Compact. I am pleased
to renew here our continued support
and commitment to the initiative and
its principles.
We hope this report is helpful in updating
those we work with on our progress, and
also on the areas where we need to do
far more. We will continue to develop our
approach, and listen to the feedback from
all our partners, as we act on the areas
where we can have the biggest impact.
As we embark on Hilton Foods’ fourth
decade, our commitment to the
Sustainable Protein Plan is steadfast.
Not only is it the right thing to do, but it
is also a critical part of how Hilton Foods
will become the International Protein
Partner of Choice.
Philip Heffer
Chief Executive Officer
THE 2025 SUSTAINABLE
PROTEIN PLAN
Sustainability Committee
Chair’s Introduction
The Plan – at a glance
How we deliver across the
value chain
Areas of biggest impact & risks
Governance & leadership targets
PILLAR 1: PEOPLE
Valuing our People
Respecting Human Rights
Developing Potential
PILLAR 2: PLANET
Reducing Emissions
Enhancing Animal Welfare
Nature Positive
PILLAR 3: PRODUCT
Balanced Healthy Diets
Circular Packaging
Resource Efficiency
Food Safety and Quality
Supply Chain Integrity and
Traceability
DISCLOSURES
AND REPORTING
Climate risk and impact report
(TCFD)
Non-Financial Disclosures
SASB Disclosures
GRI Disclosures
36
38
39
42
43
44
46
48
50
52
54
56
58
60
62
64
66
68
70
71
72
72
84
89
91
Hilton Food Group PLC Annual Report and Financial Statements 2022
37
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW SUSTAINABILITY REPORT
SUSTAINABILITY COMMITTEE CHAIR’S INTRODUCTION
Delivering on our environmental
and social objectives
Hilton Foods has a long record of
partnership and innovation to address
sustainability challenges. Our position
within the food system, working with
partners from farm to fork, gives us
significant opportunities to make
a positive difference. The Sustainable
Protein Plan is a step forward in the
contribution we can make.
We do not see the Sustainable Protein
Plan as something which simply
adds cost to our business. We have
long seen the commercial benefits
of our reputation for highly traceable,
sustainably sourced proteins. For us,
growing our business and supporting
the planet go hand in hand. That is why
we are proud to have published long-
term incentives for all senior leaders to
support the delivery of the Sustainable
Protein Plan.
The Plan includes a range of stretching,
and in some cases market leading,
targets. All are aligned closely with the
UN Sustainable Development Goals.
On the following pages, we have set
out these targets in detail. We were one
of the first in our sector to set Science
Based Targets across Scopes 1, 2 and
3 and are on the way to achieving net
zero emissions before 2050 and net
negative thereafter.
The three pillars of our plan revolve
around topics which are material to our
business and reflect core Hilton Foods
values. With a plan of this scale, the pace
of progress will always vary across each
pillar, each year. However, the Committee
is pleased with the overall delivery we
have seen this year.
We were particularly impressed by
the innovation we are continuing to see
on packaging. This year the business
has launched padless meat trays, film
packaging with 30% recycled content
and seafood packaging made from
recovered coastal plastics, significantly
reducing the footprint of that packaging.
Meanwhile, within our APAC business, 95%
of packaging materials are now recyclable
and the business is using 70% recycled
content in plastic packaging across group.
There remains a long way to go.
We are aware that the targets we have
set are ambitious. However, the business
continues to benefit from the strength
of our relationships with retail partners,
and the ability this gives us to innovate
across the value chain.
The project we have established with
Future By Insects, Greencore and FERA
to develop potentially carbon negative
insect meal, supported by Tesco and
the WWF, is a case in point. It will help
to drive the adoption of sustainable feed
more generally.
The Sustainability Committee will continue
to monitor the delivery of the Sustainable
Protein Plan closely. Reaching our goals
will depend not on the actions of a few,
but the involvement of colleagues across
the business. I hope this report is a credit
to all those who have contributed, and
an inspiration to even more colleagues
to get involved in 2023.
Rebecca Shelley
Non-Executive Director and
Chair of Sustainability Committee
2022 marks the first full
year of our new strategy:
the 2025 Sustainable Protein
Plan. It’s a plan we developed
to give added focus, and
even more energy, to the
work we are doing to make
our products more sustainable.
I am delighted that the Plan
has become a core part of
the wider growth strategy
for the business.
“ Growing our business
and supporting the
planet go hand in hand.
That is why we have
long-term incentives
for senior leaders to
support the delivery
of the Sustainable
Protein Plan.”
Rebecca Shelley
Non-Executive Director and
Chair of Sustainability Committee
38 Hilton Food Group PLC Annual Report and Financial Statements 2022
OUR 2025 SUSTAINABLE PROTEIN PLAN – AT A GLANCE
Last year we set ambitious targets across the three core pillars of our 2025 Sustainable Protein Plan.
An update on our progress so far can be seen below:
PILLAR
2025 TARGETS
2022 DELIVERY
P
E
O
P
L
E
VALUING
PEOPLE
Being a fair, safe
and inclusive employer
by engaging and
empowering our people
and supporting our
local communities
– Reduce Lost Time Incidents (LTIs) by 10%
(against 2020 baseline across Hilton Foods)
– Establish Global Wellbeing Framework
to support employee wellbeing
– 30% of all leadership roles filled by women
– Employee consultative forums or works
councils at all Hilton Foods sites
– Achieved 33% of women in leadership
across Hilton Foods, supported by growth
of Women’s Network
– Established Group Wellbeing Framework,
and extended Mental Health First Aider
training to more colleagues
– Integrated sustainability objectives into
our Long Term Incentive Plans (LTIPs)
for senior leaders
RESPECTING
HUMAN RIGHTS
Safeguarding the welfare
and just treatment of all
workers and communities
engaged with our
business and supply
chains
– Functioning governance structure
– Launched new global Supplier Social
Responsibility Code of Conduct
and accompanying Compliance
Requirements. Implementation and
onboarding has begun for suppliers
– Creation of cross-functional Modern
Slavery Working Group and development
of site-level action plans
– Implemented best-practice grievance
procedure at Hilton Foods UK, and
guidance for all sites
in place
– Train all Hilton Foods employees
on human rights
– Modern slavery awareness training
extended to all managerial colleagues
– 100% of labour and service providers
audited to Hilton Foods Agency Labour
Standard
– 100% of primary suppliers signed up
to Hilton Foods Supplier Social Code
of Conduct
– 100% of new primary suppliers screened
using Hilton Foods 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
– All production colleagues offered the
opportunity to participate in career
discussions with their manager to discuss
performance, development career
aspirations, wellbeing, ideas and feedback
– Development opportunities for all
management talent identified as ready
for succession through annual review
of leadership capability and succession
– 150 colleagues to go through leadership
development programmes (by 2025)
– 9% increase in employees who felt Hilton
Foods training opportunities had helped
them to do their work well
– Increased the diversity of our
apprenticeship programmes to include
Engineering, Accounting, Quality and
People and Culture within the UK
– 700 new enrolments in 2022 in Industry
Recognised Qualifications across quality,
meat boning and distribution
Hilton Food Group PLC Annual Report and Financial Statements 2022
39
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW SUSTAINABILITY REPORT
OUR SUSTAINABLE PROTEIN PLAN – AT A GLANCE continued
PILLAR
2025 TARGETS
2022 DELIVERY
P
L
A
N
E
T
REDUCING
EMISSIONS
Going further than
addressing our footprint
by achieving NetNegative
emissions across our
sites and value chains
ENHANCING
ANIMAL WELLBEING
Driving standards and
innovation in the care
of animals that enhances
their lives and reduces
antibiotic use
NATURE
POSITIVE
Collaborating to improve
our stewardship or land
and sea, promoting
biodiversity, addressing
deforestation and
protecting water and
soils
– 100% renewable electricity across all 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
– Achieved A- rating from CDP for Climate
Change
– 14% reduction in Scope 3 emissions,
meaning we are on track to meet our
SBT target and will be submitting targets
aligned to a 1.5°C pathway
– Intensity reduction of 15% in emissions
– Partnered with the Universities of Lincoln,
of cattle in Europe by 2025 (aligned to the
ERBS Sustainability objectives)
Stirling and Oxford on three projects
exploring: emissions reductions from
manure, direct emissions from Pangasius
farming and how sustainability metrics
can influence policy
– More than 90% of livestock from farms
in assurance schemes
– Achieved tier 3 in the last Business
Benchmark in Farm Animal Welfare
– 100% humane slaughter of animals across
all our products including aquaculture
– Responsible antibiotic use throughout
our supply chain
– Member of Stakeholder Advisory Board
for the Animal Welfare Research Network
allowing us to input into the wider
research agenda
– Completed first annual cycle of our
dedicated animal welfare audit and
collated welfare-based outcome data
from across our value chain
– Eliminate deforestation from the
– Published our UK Commitment to
conversion of natural forests to agriculture
or livestock production in our supply
chains
Sourcing Deforestation and Conversion
Free Soy
– 100% of paper and board from certified
– Maintain 100% of paper and board from
sources
– Over 98% of Hilton Seafood UK directly
sourced wild caught seafood certified
to the MSC standard
certified sources
– Planning and reporting tools provided
to all farmers to support regenerative
farming
– 100% of seafood responsibly sourced
to Hilton Foods standards (aligned to the
Sustainable Seafood Coalition code and
PAS 1550), and openly reporting supply
chains through Ocean Disclosure Project
– Hilton Seafood UK directly sourced wild
caught seafood 100% certified to the
MSC standard or equivalent (by 2025)
40 Hilton Food Group PLC Annual Report and Financial Statements 2022
SUSTAINABILITY REPORT
OUR SUSTAINABLE PROTEIN PLAN – AT A GLANCE continued
PILLAR
2025 TARGETS
2022 DELIVERY
BALANCED
HEALTHY DIETS
Efficient regenerative
food systems producing
more accessible and
nutritious proteins
– Double sales of plant based, vegetarian
and flexitarian products (compared to
a 2020 baseline)
– Launched 60 new vegetarian and vegan
products, including vegan bacon with
Tesco
– Assess health and sustainability attributes
of all Hilton Foods proteins to provide
consumers with information on their role
in healthy, sustainable diets
– 48.5% increase in sales of vegetarian
and vegan products since 2021
– Milestone investment in CellAg, cultured
meat producer in the UK
P
R
O
D
U
C
T
CIRCULAR
PACKAGING
Developing a circular
economy for packaging
and actively bringing
waste materials back
into use across our full
value chain
RESOURCE
EFFICIENCY
Optimising food waste
and use of packaging,
energy and water across
sites, supply chains and
in consumers’ homes
– Reduce direct packaging waste by 30%
– Across Hilton Foods APAC business, 95%
(compared to 2020 baseline)
of packaging materials are now recyclable
– Drive demand for circular tray-to-tray
recycling and actively prioritise the use
of circular material
– All Hilton Foods retail packaging fully
reusable, recyclable or compostable
– Achieve minimum of 50% average
recycled content across all plastic
packaging
– Reduce the weight of plastic packaging
while ensuring it remains fit for purpose
– Launch of preformed trays supplied at
Hilton Foods Sweden and Hilton Foods
Denmark which are made of 100%
recycled plastic including 10% tray to tray
content
– Launch of products at Hilton Seafood
UK with 30% recycled coastal plastics,
removing 240 tonnes of plastic from
the environment
– Improve energy efficiency in Hilton Foods
facilities by at least 10% (compared to 2020
baseline)
– Improve water efficiency in Hilton Foods
facilities by at least 10% (compared to
a 2020 baseline)
– Halve Hilton Foods factory generated
food waste by 2030 compared to 2019
(in line with the Champions 12.3
commitment to deliver UN SDG 12.3)
– 100% of purchased electricity at Hilton
Foods UK, Hilton Seafood UK, Hilton
Foods Ireland, Hilton Foods Central
Europe, Dalco and Fairfax Meadow is from
renewable sources
– Installed 1.5MWp of additional solar
generation at SoHi, expected to generate
2 GWh of clean energy every year
– 600 tonnes of waste diverted from landfill
by doubling the recycling rate of non-food
waste across Hilton Foods APAC, versus
2021
Hilton Food Group PLC Annual Report and Financial Statements 2022
41
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW SUSTAINABILITY REPORT
PARTNERING ACROSS THE VALUE CHAIN
How we deliver across the
food system: To deliver the
2025 Sustainable Protein Plan,
we have to be clear about how,
and where, Hilton Foods can
make the biggest difference.
Our partnerships hold the key
to our impact.
We do not own farms, fishing vessels
or abattoirs, but we do have a crucial
position at the centre of the food value
chain. As this diagram shows, we have the
freedom to influence and innovate across
each stage of the supply chain. The depth
of our commercial partnerships helps to
maximise our impact.
We also partner with Foods Connected,
a supply chain software company, to share
our commitments on quality, safety, animal
welfare, human rights and sustainability
with our suppliers. This system helps
us manage our suppliers’ performance
to make sure we deliver both our own
and our customers’ priorities.
Transparency is the starting point for
greater sustainability within our food
system. By using this technology to its full
potential we can inform consumers about
product origin, methods of production and
how human rights are protected in the
supply chain.
HILTON FOODS AND FOODS CONNECTED – SUPPLY CHAIN TRANSPARENCY
The movement and transformation of a product across different parties in the supply chain
Base traceability
Raw
materials
Raw
materials
Raw
materials
Finished
goods
Finished
goods
1
2
3
4
5
6
Value added traceability
Additional information that can be captured at different stages in the base traceability process
pesticide
usage
animal
welfare
human
rights
antibiotic
usage
carbon
emissions
packaging
recyclability
food safety
& quality
sustainable
sourcing
How we work through the value chain
Feed
Farm/Vessel
Abattoir
Hilton Foods
Retail customer
Consumer
Audit
Control
Guide
Guide
Influence
Influence
42 Hilton Food Group PLC Annual Report and Financial Statements 2022
AREAS OF BIGGEST IMPACT AND RISKS
The world around us continues
to change quickly, so when
it comes to contributing to
more sustainable and healthier
communities, we know that
we can never stand still.
That is why our Sustainable Protein Plan
is the product of ongoing engagement with
our stakeholders, internally and externally,
to understand where our business can
have the biggest impact.
Our most material issues remain:
Product safety, quality and integrity
Ensuring the safety of our products is
our first priority. All the food we produce
meets our quality specifications and must
be labelled correctly, with the allergens
they contain, the country of origin and the
nutritional content of the products.
The materiality of this issue has increased
slightly due to our greater exposure in the
food service sector and the increased focus
on these issues in Poland and Australia.
An important part of that engagement
is our materiality assessment – an
exercise to identify the issues and risks
which are most relevant to Hilton Foods,
through consultation with a broad group
of stakeholders who have recognised
sustainability expertise.
The output of this is our materiality
matrix, which is reviewed in full every
three years. An in-depth review of
our materiality matrix was completed
in 2021. Minor updates in 2022 have
been completed by a smaller group
of specialists. All material risks are under
active management and the subject
of engagement across our value chain.
Sustainability and biodiversity of
agriculture, fisheries and aquaculture
The stewardship of resources to facilitate
the production of animal proteins is
critical to our business, in both aquatic
and terrestrial ecosystems.
The materiality of this issue has
increased this year, as biodiversity
reporting requirements have become
more stringent as a result of the renewed
focus on nature, including through the
COP15 UN Biodiversity Conference.
Greenhouse gases
Measuring, managing and reducing
emissions is a strategic priority for Hilton
Foods throughout our value chain.
Across the world, there is now a
growing focus on methane emissions.
New Zealand’s move towards carbon
pricing in the agricultural sector has also
increased the urgency to act.
Human rights
Ensuring communities and workers
across our value chain receive fair treatment
and are safeguarded is a moral, regulatory
and strategic imperative.
Around the world, governments
are introducing additional legislation
to protect these rights; complying with,
and where possible, exceeding these
legal requirements is a core part of the
Sustainable Protein Plan.
Health & safety
We are duty bound to instil a safety-
first culture across our operations and
supply chain.
Adherence to strong health and safety
standards is essential across all sites
and for our value chain partners. We are
committed to reducing health and safety
accidents and their severity through
ensuring employees’ awareness of
health & safety issues.
Sustainability and biodiversity of agriculture,
f isheries & aquaculture
Product safety,
quality & integrity
I
m
p
o
r
t
a
n
c
e
t
o
e
x
t
e
r
n
a
l
s
t
a
k
e
h
o
d
e
r
s
l
Accessible, healthy & nutritious food
Greenhouse
gases
Animal health
& welfare
Human
rights
Health
& safety
Energy & water ef f iciency in factories
Packaging circularity & plastic reduction
Food waste across value chain
Ef fluent & general waste management
Antimicrobial resistance
Suppor ting our
communities
Responsible
recruitment
Acting with integrity
Transparent supply chains
Wellbeing, diversity & inclusion
Emergence of
new products
& competitors
Contamination &
bioaccumulation
in the food system
Talent development
& availability
Impact on our business
Hilton Food Group PLC Annual Report and Financial Statements 2022
43
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW
SUSTAINABILITY REPORT
GOVERNANCE AND LEADERSHIP TARGETS
At Hilton Foods, we are
delivering our Sustainable
Protein Plan by embedding
sustainability within the
overarching business strategy
and governance of the
business. Our governance
structure drives the delivery
of the goals and targets in our
plan and includes oversight
at all levels of the business,
right up to the Board.
Main Board
The Board is formally updated on the
progress of the 2025 Sustainable Protein
Plan every six months and together
with the Sustainability Committee have
oversight over the implementation
of Hilton Food’s sustainability strategy
throughout the business.
Sustainability Committee
The Committee is accountable for
the delivery of our long-term social and
environmental strategy and progress.
It approves formal corporate sustainability
reporting and supports the Senior
Management Team in its delivery.
It is formally updated on progress every
three months and to ensure the ongoing
resilience of Hilton Foods, it assesses
climate-related risks and opportunities
in collaboration with the Audit and Risk
Management Committees. The Committee
is chaired by Non-Executive Director
Rebecca Shelley.
Executive Leadership Team
The Executive Leadership Team is updated
monthly, alongside the CEO, on the
progress of our 2025 Sustainable Protein
Plan, and relevant collaborative projects
and customer requirements.
Senior Management Team
The CSR team is led by the Chief Quality
and Sustainability Officer. It supports our
site-level senior management teams
to achieve our targets, supply chain
engagement and progress global reporting.
Progress against our sustainability targets
is shared across different functional areas,
from People and Culture, to Quality,
Operations, Finance and Procurement.
The CSR team lead the implementation
of our strategy alongside the Site
CSR Leads.
Leadership targets and LTIPs
The 2025 Sustainable Protein Plan is a
fundamental part of our plan to generate
sustainable value for all our stakeholders.
This year, we have therefore further
embedded sustainability as a driver of how
we do business by announcing specific
ESG targets in the Hilton Foods Long-Term
Incentive Plan (LTIP).
This is the first time the LTIP contains
a significant ESG element. The changes
are designed to demonstrate in practice
the importance of the 2025 Sustainable
Protein Plan to the business, and ensure
leadership are held accountable to the
progress we strive to make.
The performance conditions covering
the three financial years 2022-2024 are
as follows:
Metric
EPS
Relative TSR compared
with the constituents of
the FTSE 250 (excluding
investment trusts)
ESG
i)
Scope 1 & 2
energy efficiency
ii)
Packaging recycled
content
iii) Food waste
Threshold
Weighting
10% vesting
60%
5% growth
per annum
Maximum 100%
vesting
12% growth
per annum
25%
Median
Upper quartile
5%
5%
5%
6.5% reduction
over 3 years
43.9% reduction
over 3 years
11.7% increase
over 3 years
28.3% increase
over 3 years
15.0% reduction
over 3 years
30.0% reduction
over 3 years
44 Hilton Food Group PLC Annual Report and Financial Statements 2022
SUSTAINABILITY REPORT
GOVERNANCE AND LEADERSHIP TARGETS
WHO IS RESPONSIBLE FOR THE SUSTAINABLE PROTEIN PLAN AT HILTON FOODS
Set the ambition for long-term CSR programme, embedding this in the business culture
Main Board
Chairman
CEO
Chief Financial Officer
Non-Executive Directors
Sustainability Committee
Audit and Risk Management Committees
Non-Executive Director
Non-Executive Directors
Key international leaders
across the business
Representatives from
Executive Leadership Team
Group Sustainability
Director
Group Internal
Audit & Risk Director
Executive Leadership Team
Agree and oversee delivery of targets
Find out more about the Executive Team:
www.hiltonfoods.com/who-we-are/executive-leadership-team
Senior Management Team
Set global strategy and oversee Group and local implementation plans
Managing Directors
Head of Departments
Group Sustainability Director
Commercial functions
Responsible for CSR projects and reporting
Group CSR Team
Site CSR Leads
Integrate CSR strategy into their areas of responsibility
People & Culture
Procurement
Quality
Operations
Direct responsibility for CSR, including climate
Shared responsibility
Hilton Food Group PLC Annual Report and Financial Statements 2022
45
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW
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
Read more about how we are
prioritising mental health
page 49
SUSTAINABILITY REPORT
PEOPLE
At Hilton Foods we employ over
7,000 people, dedicated to serving
our customers and their 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 equity
and respect, ensuring opportunities for skills
and career development are open to all. We work
together to keep our business resilient for the
future, bringing the diversity, creativity and 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. The following chapter highlights the work
of our teams in these areas.
ALIGNMENT WITH THE UN SDGs
5.5
8.8
Ensure women’s full and effective
participation and equal opportunities
for leadership at all levels of decision-
making in political, economic and
public life
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
46 Hilton Food Group PLC Annual Report and Financial Statements 2022
RESPECTING
HUMAN RIGHTS
Safeguarding the welfare and
just treatment of all workers
and communities engaged with
our business and supply chains
DEVELOPING
POTENTIAL
Growing and developing our
people to be the best they
can be, ensuring our business
is ready for the future
2025 Targets
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
100% of labour and service providers
audited to Hilton Foods Agency
Labour Standard
100% of primary suppliers agreed to Hilton
Foods Supplier Social Code of Conduct
100% of new primary suppliers screened
using social criteria
100% of high risk primary suppliers audited
Read more about how we
assess human rights impacts
page 50
All colleagues will be offered the opportunity
to participate in ‘work conversations’ or
performance development reviews with
their manager to discuss performance,
development career aspirations, wellbeing
and share 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, 150 colleagues will have
experienced the programmes
Read more about how we are helping
our people to develop their skills
page 52
Hilton Food Group PLC Annual Report and Financial Statements 2022
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PEOPLE continued
VALUING
OUR PEOPLE
Our people are at the
core of how we do business.
They bring our culture
to life within our factories,
offices and communities.
Through our 2025 Sustainable
Protein Plan, we want to
create an ambitious future,
built together, with all our
employees.
Providing the space and culture in
which all employees can speak freely
is an important part of the work we
do. This is why we do an annual survey
to give employees the opportunity to
feedback, which helps us understand
what’s important to them. We were
pleased with engagement levels in 2022,
when 91% of our employees contributed
to the survey – a 14-point increase on
2021. Enhancing employee wellbeing is
important to us; we will always strive to
do better through best-practice sharing
amongst our global sites.
As a growing international organisation,
it’s important that the different values,
cultures and nationalities across our
business are included in the way we do
business. Our new core behaviours inform
the actions, attitudes, and care all our
employees bring to work.
We developed these core behaviours
following 18 focus groups across our
worldwide geographies. Employees across
a variety of job levels and nationalities were
provided with the opportunity to outline
what behaviours within Hilton Foods
ensure that they feel included.
Health, safety and wellbeing are absolutely
essential for our people agenda. These are
facilitated through good leadership, safe
behaviour, the continuous improvement
of our Global Safety Framework and our
core behaviours.
We continue to make strides in this area.
Our Global Health and Safety Framework
was extended to all sites in 2022, with
94% of employees reporting that they
understand how to apply our health
and safety rules in their day-to-day work.
We are committed to the continuous
improvement of health and safety
performance and ensure employees’
awareness of health and safety issues.
In the aftermath of the pandemic,
supporting and improving mental
wellbeing is more important than ever.
We made progress here too, as set out
in the case study on the following page.
Finally, part of who we are as a business
is how we care for our communities.
Many of our employees have been
impacted by events in Ukraine, motivated
by family connections or humanitarian
concerns. Employees across our European
sites have fundraised, collected goods,
and provided practical support to refugees.
Hilton Foods UK collected a remarkable
33 pallets of donations over a period
of five days, partnering with other local
businesses in Cambridgeshire to deliver
this safely to Ukraine.
We’re open and honest
We value each other
We’re respectful
OUR CORE BEHAVIOURS
– We share knowledge
and information
– We recognise efforts of others
– We never discriminate
and say thank you
against others
– We are clear on expectations
– We listen to and value the voices
– We treat others how we wish
– We value honesty
and ideas of others
to be treated
– We value others for who they are
– We respect others’ time,
workload and commitments
We’re friendly
and inclusive
We’re understanding
and supportive
We’re responsible
– We are welcoming and patient
– We care and support the wellbeing
– We proactively ask for and
– We celebrate and embrace
our differences
– We say ‘hello’ and know the
of others
give help to others
– We support training and career
– We take personal responsibility
development
for our actions
value of a smile
– We listen and give supportive
– We trust, support and hold
feedback
each other to account
48 Hilton Food Group PLC Annual Report and Financial Statements 2022
SUSTAINABILITY REPORT
PEOPLE continued
80%
of employees say ‘I feel
I can be myself at work’
(results of 2022 staff survey:
vs 74% in 2021)
Senior Management
Male 67%
Female 33%
SPOTLIGHT ON DIVERSITY,
EQUITY AND INCLUSION
We want everyone to feel themselves
at work. Our 2022 staff survey revealed
80% of employees say ‘I feel I can be
myself at work’ – a six-point increase
on 2021.
We made important strides towards our
commitment of supporting women in the
workplace with the launch of our Women’s
Network. We ran a number of successful
workshops, open to all employees within
Hilton Foods and covering a range of topics
including Being Yourself at Work, How
to Network, Building Your Confidence
at Work and Dealing with Change.
In 2022, we continued to be a Strategic
Partner to the ‘Meat Business Women’
network – offering networking opportunities,
mentoring and workshops to women across
our business.
We are proud to announce that we have
already exceeded our target for 30% of
women in leadership across our business.
In 2022, 33% of our senior leadership roles*
were held by women; this is a testament to
the hard work of our teams to achieve equity
across our business. We are committed
to anti-discrimination and will continue to
support women to achieve their potential
within Hilton Foods.
* In this context, a ‘leadership role’ will mean any
job roles at functional lead or senior specialist level.
SPOTLIGHT ON MENTAL
WELLBEING FOR HILTON FOODS
EMPLOYEES
At Hilton Foods, health and safety
extends beyond physical safety to
encompass mental and emotional
wellbeing. We believe that wellbeing
is the responsibility of everyone,
and ensure that all employees are given
time to talk about how they are feeling
through either ‘work conversations’
or their performance development
reviews.
In 2022, we increased our focus on wellbeing
across our production sites and established
a Group Wellbeing Framework, supported
by our European Wellbeing Working Group.
Our framework is designed to deliver a
holistic vision for wellbeing across our sites,
covering five core areas: physical wellness,
education and health promotion, the
provision of wellbeing support, financial
literacy, and community engagement.
Our European sites also took part in
awareness campaigns around mental
health and wellbeing. The majority of our
sites have also met or exceeded having two
mental health first aiders on site, meaning
employees are able to access the support
they need at work quickly and from a variety
of trusted colleagues.
“ One of my goals was to delve
more into the topic of mental
health, where there is still a
stigma and there shouldn’t be.
The training has equipped me
with skills and knowledge to
enable me to act as a helping
hand to anyone who may have
concerns about wellbeing.”
Safety and Wellbeing Coordinator
Hilton Foods UK
Hilton Food Group PLC Annual Report and Financial Statements 2022
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TO HUMAN RIGHTS
Our Human Rights Policy helps to ensure that
Hilton Foods incorporates the careful evaluation
of human rights principles into our decision
making and actions.
We actively assess human rights impacts that may
be indirectly linked to Hilton Foods, take appropriate
action, monitor implementation and report annually.
During 2022, we:
– Operationalised our Modern Slavery Strategy
in APAC and established a multi-function Modern
Slavery Working Group for our businesses in the
UK and the Republic of Ireland. This enables candid
conversations about the challenges of detecting
and disrupting modern slavery.
– Developed and implemented a Hilton Foods
Accommodation Standard, so that whenever housing
is provided by one of our businesses we can be
assured of the quality.
– Launched a new Children’s Rights and Child Labour
Remediation Policy in consultation with our local
People and Culture Managers. We are working to
ensure that all staff understand their statutory
obligations with respect to children and young
people at all times, from apprentices to work
experience.
– In response to well-evidenced academic reports
regarding labour abuses and restrictive visas in UK
fisheries, we worked collaboratively via the Seafood
Ethics Action Alliance to develop an action plan
with Producing Organisations, representatives of
UK vessel owners, and key welfare organisations to
address and remedy the issues faced by UK fishers.
SUSTAINABILITY REPORT
PEOPLE continued
RESPECTING
HUMAN RIGHTS
Building strong ethical
standards to embed respect
for human rights across our
value chain is an essential step
toward a fairer food system.
Our approach is informed by Principle 15 of
the UN Guiding Principles on Business and
Human Rights (UNGPs), which makes clear
that companies must “know and show”
that they respect human rights.
We do this by working to protect the
human rights of workers, both within our
business and our network of global supply
chains. This includes establishing fair
remuneration, respect for all employees’
right to freedom of association and
collective bargaining, high health and
safety standards, workplaces free from
discrimination, and consistent access to
effective grievance procedures and remedy.
We have continued to integrate our
Human Rights Policy into our core business
functions, through the implementation
of our global Supplier Social Responsibility
Code of Conduct and accompanying
Compliance Requirements. We are
delivering a globally agreed appraisal of
human rights and labour risk, linking this
to our supplier approval process. We use
the internationally recognised supply chain
transparency platform, Sedex, to monitor
labour standards and gain in-depth insight
into working conditions in supplier sites.
We always seek to work collaboratively with
our suppliers, providing resources, training,
and developing shared workstreams to
align within the supply chain, through our
Food Network for Ethical Trade and Seafood
Ethics Action Alliance memberships.
Where suppliers are found to be high-risk,
they are required to provide additional
due diligence, up to and including an
independent ethical audit. Our preferred
methodology for ethical audits is the Sedex
Members Ethical Trade Audit (SMETA).
If a supplier is unwilling to engage on
corrective actions or provide remediation
to workers, Hilton Foods will re-audit,
re-train and if we have to, end the contract
in question. Hilton Foods has committed
to engage in remedy where workers have
been adversely affected.
50 Hilton Food Group PLC Annual Report and Financial Statements 2022
COLLABORATION
TRANSPARENCY
PARTNERING FOR CHANGE
We know that more can be achieved
together, which is why we collaborate
with a number of different organisations
to safeguard human rights and improve
working conditions.
This includes working with the Red
Tractor Technical Working Group on
the development of their Worker
Welfare Module, and strengthening our
commitment to the Food Network for
Ethical Trade through engaging in its
governance by becoming an elected Board
Member. We are a founding member
and Chair of the Seafood Ethics Action
Alliance, a collaborative forum for ensuring
human rights are respected in seafood
supply chains.
Some of our strongest work came in the
form of Speak Up!, a new grievance policy
and procedure. Speak Up! was developed
in partnership with our customer Tesco,
Reckitt, and the Oxfam Business Advisory
Service. It was also driven by the work and
input of our employees.
The project focused on implementing
an operational-level grievance mechanism
aligned with the United National Guiding
Principles (UNGPs) key effectiveness criteria.
At Hilton Foods UK, an employee taskforce
was formed to analyse the user experience
of raising concerns, complaints and new ideas.
This taskforce rebuilt the site’s grievance
policy, producing a new procedure making
clearer the routes to engaging meaningfully
with site management.
Disaggregated data is now shared both
with the site’s senior management team
and their Your Voice Committee, to deliver
transparency and drive accountability on
response times from the business.
Since implementing this project,
HFUK have seen a positive increase in
employees speaking candidly about their
experience of work. This coincides with an
overall decrease in employees raising formal
grievances. Our business functions at its
best when everyone has a voice.
Impact of ‘SpeakUp!’ Policy
Number of informal grievances raised
‘21
0
‘22
50
Number of formal grievances raised
‘21
‘22
16
8
Total grievances raised
‘21
‘22
16
58
Hilton Food Group PLC Annual Report and Financial Statements 2022
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PEOPLE continued
DEVELOPING
POTENTIAL
Ensuring our business is ready
for the future means giving
all our people the opportunity
to thrive and develop
professionally.
At Hilton Foods, that is about creating an
inclusive culture, where everyone is able
to fulfil their potential, no matter who they
are, or where they are from.
We believe that everyone in every role
deserves the chance to have a good quality
conversation about themselves and their
work with their manager, or someone else
who can support them.
Good quality conversations are those in
which employees:
– are recognised as an individual with
unique talents;
– know what is expected of them within
their role;
– feel their views and ideas are valued; and
– have a chance to discuss their ambitions
and job progression.
To make conversations like these an
everyday part of how we do business, in
2022 we launched our ‘work conversations’
initiative and then saw a seven-point
increase in those reporting they were
given opportunities to talk about their
performance at work.
We have also created a development
framework for our employees to access,
so they can identify and realise the career
and training opportunities that are right
for them. We work hard to increase our
internal hire ratio and invest in learning
and development, both structured and
on-the-job learning.
SPOTLIGHT ON LEARNING &
DEVELOPMENT AT HILTON FOODS
In 2022, we saw a nine-point increase in
the number of employees who felt that
training opportunities provided had helped
them to do their work well.
Areas covered in training received by our
production employees in 2022 included:
Internal Auditing; Quality Assessments;
Pest Awareness; Manual Handling; Accident
Investigations; First Aid at Work; Confined
Spaces; Fire Marshalling; and Control of
Substances Hazardous to Health.
We aim to motivate our people by recognising
and rewarding their talent and by nurturing
our leaders so that they can lead by example,
and truly care about and invest in our people.
This year, one of our sites delivered a full
day programme on ‘Leading a Team’ to a
new cohort of team managers and leaders.
This will continue into 2023.
In Hilton Foods APAC, the Seed Framework
enables our people to develop and grow.
Learning is interactive, practical and aligns
with our values. It is broken into induction,
compliance training and technical sections,
to develop world-class leaders. Every team
member has the opportunity to complete
training, either for their role or to opt in for
personal growth learning
Since introduction, our engagement scores
have risen significantly, demonstrating our
people feel confident in how to do their role
and are satisfied with learning opportunities
on offer.
52
Hilton Food Group PLC Annual Report and Financial Statements 2022
SPOTLIGHT ON STRUCTURED LEARNING
AND DEVELOPMENT AT HILTON FOODS
We believe in the importance for professional
development opportunities across all levels of the
business and experience.
In the UK, our apprenticeship programmes have grown in 2022
across our UK sites to include engineering, accounting, technical
and People & Culture functions. In 2023, our apprenticeships
will also extend to placements within our Learning and
Development teams.
We continue to roll-out our Manufacturing Excellence Programme,
based at our Hilton Foods UK site. Colleagues across all functions
attend the intensive 2 week lean-training programme, where we
train our teams to use the best improvement tools and techniques
in the world, and combine this with their passion, work ethic and
experience to create true excellence.
In Hilton Foods APAC, our people are given the opportunity to
develop their careers by gaining industry recognised qualifications.
In Australia this covers the Certificate 3 in Meat Manufacturing,
Certificate 4 in Quality, and Certificate 4 in Leadership. Within New
Zealand the qualifications include Distribution, Meat Boning and
Seafood. There are 703 active enrolments in these qualifications.
Our Strategic Accelerated Development Programme takes a
personalised approach to the development of those with potential
for the most senior roles within Hilton Foods. This year, a new
cohort completed the ‘Exploring’ leadership course, which focuses
on potential successors to senior management roles. It is a seven-
month programme run every two years, including development
modules, individual coaching sessions, and two live Executive
sponsored business projects.
703
active enrolments in distribution,
meat boning and seafood qualifications
“ My biggest takeaway
was the access to
the knowledge of our
international colleagues;
it deepens the Hilton
Foods spirit and
family-feel.”
Operations Manager
Hilton Foods Holland
“ One of the key highlights
of the course for me
was getting to build
relationships across
the other Hilton Foods
sites. The opportunity
to have time to focus on
my career and be given
tailored guidance on how
to improve how I operate
and help my team was
great.”
Supply Chain Manager
Hilton Foods UK
“ I have been fortunate
to have completed the
Hilton Foods Exploring
Leadership Programme
this year which gave me
a platform to really focus
on refining my leadership
skills, build a really
strong network with my
international colleagues,
with one to one mentoring
and coaching support.”
Strategy and Planning Director
Hilton Foods UK & Ireland
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PLANET
Our Sustainable Protein Plan sets out
our ambition to contribute positively
to the future of life on our planet by
managing and reducing our emissions,
enhancing animal welfare and
progressing a Nature Positive agenda.
As part of a sector responsible for 30% of global
emissions, we have a responsibility to transition
to a circular food system, in line with best practice
in sustainable food production. At Hilton Foods
we recognise the integral role we play, which
is why we have committed to being a net zero
business by 2050.
To back this ambition, we have created and are
now implementing detailed decarbonisation
plans for our own operations and our key supply
chains, in line with our continued progress
towards our verified Science Based Targets.
In addition, embedding high standards of
animal welfare throughout our supply chain
is integral to Hilton Foods, values and as nature
rises up the agenda for regulators and businesses
alike, we are working hard to improve our
stewardship of land and sea.
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
54 Hilton Food Group PLC Annual Report and Financial Statements 2022
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 the end of 2025
and globally by 2027
Achieve our Science Based Targets
to reduce absolute scope 1 and 2 GHG
emissions 25% by 2030 from a 2020 base
year and reduce absolute Scope 3 GHG
emissions from purchased agricultural
products by 12.3% within the same
timeframe. We are committed to publish
updated ambitions in 2023
An intensity reduction of 15% in emissions
of cattle in Europe by 2025, aligned to the
ERBS Sustainability objectives
Read more about how insects are
helping to reduce carbon emissions
page 57
Read more about how we are
helping to protect ecosystems
page 61
ENHANCING
ANIMAL WELLBEING
Driving standards and
innovation in the care of animals
that enhances their lives and
reduces antibiotic use
NATURE
POSITIVE
Collaborating to improve
our stewardship of land and
sea, promoting biodiversity,
addressing deforestation,
and protecting water and soils
2025 Targets
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
Read more about our
animal welfare initiatives
page 58
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 Hilton
Foods standards (aligned to the Sustainable
Seafood Coalition code and PAS 1550),
actively engaging in fishery improvement
projects (FIPs) and aquaculture standards
development, and openly reporting our
supply chains and their status in the Ocean
Disclosure Project
Hilton Seafood UK directly sourced wild
caught seafood will be 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
Hilton Food Group PLC Annual Report and Financial Statements 2022
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PLANET continued
REDUCING
EMISSIONS
Every business in every sector
has a responsibility to reduce
emissions and play their part
in helping the world address
the climate emergency. This
is particularly important in the
food sector. Without significant
changes to operating models,
the agriculture industry is set to
be disproportionately impacted
by increased extreme weather
events caused by climatic
change.
Our Sustainable Protein Plan commits us
to achieve net zero emissions before 2050
and net negative emissions beyond that to
demonstrate our commitment to emissions
reductions and the way we do business.
This year we’re proud to announce that
we have made 14% reduction in like for like
Scope 3 emissions and achieved an A- rating
from CDP for Climate Change, who recognised
us as a Supplier Engagement Leader.
Our agricultural value chain has a unique
role to play in global emissions reduction,
with the land we use having the capacity
to store carbon, above and below ground,
offsetting surplus emissions in other parts
of the economy.
The starting point for sustained progress is
clear and accurate data for informed decision-
making. This data will help us to develop tools
to ensure everyone understands the role
they have to play, working with a wide set of
partners and experts to accelerate emissions
reductions across the value chain.
Scope 1 and 2 emissions by region
Scope 1 UK
Scope 1 EU
Scope 1 APAC
Scope 2
(market) UK
Scope 2
(market) EU
8%
11%
5%
0%
26%
Scope 2
(market) APAC
50%
OXFORD DOCTOR
OF PHILOSOPHY
PROGRAMME
To accelerate the transition
to net negative emissions
throughout our supply
chain, we’re partnering
with scientists at the
University of Oxford and
World Resource Institute
(WRI).
This partnership involves
supporting a Doctor of
Philosophy (DPhil) project,
focused initially on UK beef
production, but with wider
applications. The research will
explore how measuring gases
based on their contribution
to warming (rather than total
emissions) and using different
methods of measuring the
impact of land use, might
influence decision making
at a farm, corporate and
national level.
The DPhil is also helping
us to develop our own
decarbonisation strategy,
considering how agricultural
policy may incentivise
emissions mitigation without
impacting food production.
Unlike most industrial sectors,
emissions from agriculture
are not dominated by
CO2; methane and nitrous
oxide are more significant.
Methane in particular is shorter
lived in the atmosphere, but
has a stronger warming effect
during its lifetime compared
to CO2. This research will
consider how that allows
policymakers to make
decisions that best reduce
warming while considering
use of land for producing food
and for storing carbon.
SPOTLIGHT ON OUR
EMISSIONS REDUCTION
INITIATIVES
Using our in-house expertise,
we partner with academics,
our supply chain, NGOs and
government partners to explore
a variety of initiatives and
innovations for emissions
reduction.
For livestock and farming we:
– Partnered with the University
of Stirling, Centre for Innovation
Excellence in Livestock (CIEL)
and The Sustainable Trade Initiative
(IDH) to collect primary data on
direct emissions from Pangasius
farming, on partner farms.
This cutting-edge primary research
will allow us to better target our
decarbonisation activities by
providing the whole sector with
a clearer understanding of the
factors that lead to greenhouse gas
emissions in tropical aquaculture.
– Began a project with the University
of Lincoln to understand how
farm emissions from manure
can be reduced.
In terms of infrastructure and
production, this year we:
– Continued to phase out the use of
diesel and petrol-powered fork-lift
trucks, and began to phase out
F-gas emissions at our sites.
– Continued work to move away
from direct vented CO2 coolant
systems in our mince production,
reducing direct emissions.
– Piloted the use of a rapid recipe
lifecycle assessment in our new
product development process,
allowing us to consider the
environmental impact of new
products.
– Worked with Foods Connected
to build the infrastructure to
allow us to target our resources
on the most material areas
of our footprint and effectively
monitor improvements.
– Our engagement this year
included with WRAP in the
development of measurement
standards for the food industry
which will enable data reporting
through the supply chain.
We also supported Defra’s
work on Comparative Life Cycle
Assessment of Food Commodity
Production project, which aims
to improve the underlying data
used to calculate emissions.
56 Hilton Food Group PLC Annual Report and Financial Statements 2022
SUSTAINABILITY REPORT
PLANET continued
INNOVATION
PARTNERSHIP
FUTURE BY INSECTS
Hilton Foods has partnered with Future by Insects,
Fera and Greencore to accelerate the development
of carbon negative aquaculture feed.
Funded by Tesco-WWF Innovation Connections
accelerator fund, the project combines food industry
by-products and microalgae to create nutritious food
for insect larvae. The project is designed to use captured
CO2 emissions and factory wastewater to feed the
microalgae in future as part of a carbon negative system.
The larvae are being raised in Fera’s newly
commissioned insect rearing facility and can be
used to produce feed for fish in aquaculture systems.
The microalgae are grown at Future By Insects’ lab
simulating CO2 capture and food processing wastewater
treatment. The projects’ aim is to confirm that insect
larvae can be used as a sustainable alternative to soy
and wild-caught fish meal.
It is also hoped that the project’s use of captured
CO2 may deliver long-term carbon storage. This will be
validated in the lifecycle assessment which the Hilton
Foods team will carry out later in 2023.
Above Larvae of the black solider fly (shown)
are being investigated as a potential source
of sustainable protein.
Right Algae growing at Future by Insects’ facility,
ready to be fed to the insect larvae.
CO2 emission
Microalgae
Food industry
Wastewater
Harvested
microalgae
Insect
Bioreactor
Protein
meal
Lipids
By-products &
unvalorised residues
Chitin
Frass
Hilton Food Group PLC Annual Report and Financial Statements 2022
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PLANET continued
ENHANCING
ANIMAL WELFARE
Ensuring that there is no
compromise when it comes to
animal welfare is a central part
of our sustainability ambitions.
The science and understanding of animal
welfare is continually developing and we
consistently work to adopt new innovations
to improve the lives of animals. This year
we published our updated animal welfare
standard, including nine animal health
and welfare objectives and our progress
against them.
Stakeholders’ interest in animal welfare
continues to rise. In response, we have
been actively promoting and engaging
the development of standards to deliver
transparency and address welfare
improvements in our supply chains.
This includes increasing our contribution
to industry working groups focused on
improving the lives of animals in our supply
chain and the markets we operate in, as well
as driving standards and innovation in the
care of animals.
Through our partnerships we continue
to explore innovations and accelerate
our impact, and that of the wider industry.
This year we joined the Stakeholder Advisory
Board for the Animal Welfare Research
Network to support identification and
prioritising of research areas. We also hold
the Vice-Chair of the European Roundtable
for Sustainable Beef, are founding
members of the Food Industry Initiative
on Antimicrobials, and our Aquaculture
& Fisheries Senior Manager is Co-Chair of
Global GAP Aquaculture Committee, which
we have been part of since its inception.
SPOTLIGHT ON OUR ANIMAL
WELFARE INITIATIVES
We’re undertaking a wide variety of
initiatives and partnerships which continue
to drive standards and innovation in the
care of animals to enhances their lives.
Progress this year included:
– 80% of our prawns destined for the UK
market were stunned using the electric
stunner that we received the Compassion
in World Farming Innovation Award for
implementing in 2021.
– ‘We supported the Hilton Foods auditors
by providing internal and external training
in animal welfare assessments, both to
upskill their general knowledge and to
give audit specific training on this topic.
Species specific experts also carried out
shadow audits with the auditors to enhance
their learning.
– Foods Connected found new ways to use
existing tools to meet the growing needs
of their clients, including using biosecurity
surveillance mapping to understand the
impact of avian Influenza protection zones,
and using multiple tools to digitise access
of company policy and procedure at farm
level. This allows producers to live-capture
traditional flock card data.
58 Hilton Food Group PLC Annual Report and Financial Statements 2022
ENHANCED ANIMAL
WELFARE PROGRAMME
AND OUTCOME SYSTEM
In 2021, we developed the Hilton
Foods Animal Welfare Supplier
Standard for cattle, sheep and pigs
so that we could help our retail and
food service customers enhance
their animal welfare due diligence.
We completed seven trial audits
to ensure the standard was fit for
purpose, and that our auditors and
suppliers understood what was
expected for all elements.
We began to roll this out and have
completed 58 audits altogether; 48 cattle
audits, four pig audits and six lamb audits.
Of this, 40 achieved a green rating, we
worked with all of our suppliers to close
their non-conformances and have
successfully closed out all of our audits
ensuring continuous improvement.
Building on auditor training completed
in 2021 to enhance the expertise of our
auditors, we had species-specific experts
shadowing audits, in addition to online
and specialised training in areas that
the auditors found challenging, such
as animal handling.
We continue to utilise Foods Connected to
build our Animal Welfare Outcome system
across cattle, sheep and pigs that enter our
supply chains. Foods Connected allows
us to develop efficiencies in the reporting
processes we use with our suppliers.
The adjacent table gives some examples
of the data we collect.
What
Why
Average
Transport
Time
Animal
Handling
(Slips and
Falls)
Casualty/
Detained
Animals
There is considerable
evidence that animal
welfare may be
compromised by
excessive transport
times, and for this
reason we have
oversight of all transport
times.
Slips and falls can
directly impact the
health of the animal,
causing physical injury
and stress.
It is essential to animal
wellbeing that any
animal displaying
physical injury does
not undergo travel,
a significant stressor.
Species
Cattle,
Sheep,
Pigs
Cattle,
Sheep,
Pigs
Cattle,
Sheep,
Pigs
Goad Use The limited use of
Cattle
handling aids is a key
welfare objective;
excessive use can
be indicative of poor
handling design
or poor employee
understanding.
40/58
40 of a total of 58 audits
achieved a green rating
Hilton Food Group PLC Annual Report and Financial Statements 2022
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PLANET continued
NATURE POSITIVE
2022 saw the protection and
restoration of nature become
a leading sustainability topic.
The COP15 UN Biodiversity
Conference in Montreal
delivered a landmark global
framework for nature recovery
and included a requirement that
all large companies assess and
disclose their risks, impacts,
and dependencies on nature
by 2030.
Meanwhile, the Taskforce on Nature-related
Financial Disclosures (TNFD) is working
to provide a framework for organisations
to report risks from biodiversity loss and
ecosystem degradation, and the Science
Based Target Initiative has added nature
to its target-setting framework.
All of this, as well as the links we have to
nature as a business, means we are acting
now to reduce and remove the drivers that
lead to the degradation of nature.
That means taking a holistic approach to
protecting and restoring nature, working
with partners to improve our stewardship
of land and sea; promoting biodiversity;
and addressing deforestation, where
we’ve scored a B- with CDP Forests; and
working together with industry to set
better standards.
30
sites across Devon
and County Down
have had Chirrup
boxes installed
SPOTLIGHT ON SOY
Our Sustainable Protein Plan
commits us to eliminating
deforestation from the conversion
of natural forest to agriculture
or livestock production.
We recognise this is a significant
challenge and that we need to work
collaboratively with all stakeholders
to ensure this transition.
It is for this reason that we are
founding members and board
members of the UK Soy Manifesto
and the Soy Transparency Coalition,
who bring together stakeholders
in the food system around common
commitments to agree industry-wide
implementation plans.
Great progress has been made in the
agreement of the joint transition plan
to enable our farmers to purchase
100% deforestation and conversion free
(DCF) soy in the UK. We have aligned
our UK commitment to the manifesto
requirements and publish progress
annually. This year we published
our UK Commitment to Sourcing
Deforestation and Conversion Free Soy
which details our commitment and
implementation roadmap.
We’ve already made progress. All of our
salmon comes from segregated DCF
sources. In 2022 a significant proportion
of our warm water prawn supply chains
sourced from segregated sources and
we are working towards 100%.
In 2023 the group has committed to
produce a quarterly soy deforestation
risk register for UK soy imports, tracking
the UK’s progress in the importation
of deforestation and conversion free
soy. We also agreed to a joint transition
plan, coordinated by a high-level
cross-supply chain governance group,
with support of expert stakeholders
to monitor and review the transition,
ensuring the risk and responsibilities
are shared.
For beef, we have aligned a UK cattle
industry soy commitment in the UK
Cattle Sustainability Platform. We have
also developed a working group to
focus on how to enable our farmers
to responsibly source soy.
60 Hilton Food Group PLC Annual Report and Financial Statements 2022
PROTECTING ECOSYSTEMS
WITH CHIRRUP.AI
Hilton Foods has partnered with
technology start-up Chirrup.ai, through
the Tesco-WWF Sustainability
Innovation Fund.
Chirrup.ai uses cost-effective technology
to monitor birdsong as a biodiversity
indicator for grassland-based farming.
Acting like a robot ecologist, a Chirrup box
is placed in an appropriate place on the
farm, where ambient sound is recorded and
used by artificial intelligence to identify the
population of each of the species it detects.
This allows us to assess the ecosystems,
health, measure natural productivity and
build improvement plans for the farms
where Chirrup boxes are deployed.
Chirrup boxes have been deployed
to 30 sites across dairy, beef and sheep
systems in Devon and County Down.
Over the winter the team have been
focused on refining the physical monitoring
process. Throughout spring 2023, we will
support Chirrup with revalidation and the
building of a standard for the use of this
new technology.
LEMON SOLE AND PLAICE
FISHERY IMPROVEMENT
PROJECT
Hilton Seafood UK is an active
collaborator in fishery improvement
projects (FIPs). Sourcing from
environmentally sustainable sources
is an important part of our seafood
strategy.
Over 98% of our wild-caught fish is
being certified to the MSC Standard,
with the remainder actively being
brought up to certification standards
through further FIP activity. The MSC
Standard is considered to be one of the
most comprehensive environmental
standards for responsible sourcing
in wild capture fisheries. FIPs enable
fisheries to develop actionable plans to
work toward MSC certification, through
collaborative engagement.
In 2022 we were involved in the FIPs
for lemon sole and plaice, both led by
Project UK.
Project UK has provided a platform
to collaborate with the fishing industry,
scientists and NGOs, to achieve an
environmentally sustainable future
for UK fisheries.
A Marine Stewardship Council (MSC)
pre-assessment was commissioned
to develop an action plan for each
fishery, which identifies actionable
improvements. Since 2017, Project UK
for lemon sole and plaice has achieved
21 of the 28 MSC Principles, which any
fishery needs to achieve certification.
Over the next year Project UK members
will focus on improving the management
strategy for the fishery, influenced by
re-negotiations post-Brexit.
Hilton Food Group PLC Annual Report and Financial Statements 2022
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PRODUCT
Our aim is to provide the high quality,
nutritious and affordable proteins that
society needs, in a way which limits
impacts on the environment.
This year alone, our protein products reached an
estimated 160 million people and we continued
to seek out new ways to provide consumers with
a broader range of healthy, delicious proteins
and sustainable alternatives.
We are working with our suppliers in the UK
and Europe to limit our environmental impact,
including reducing the amount of packaging
in our products and increasing the amount of
recyclable material we use, as we work towards
a circular economy.
Our efficiency programmes at all sites have
continued to minimise food waste and reduce
our consumption of energy and water, sharing
best practice across our company and making
the most of our global network.
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
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
62
Hilton Food Group PLC Annual Report and Financial Statements 2022
Read more about how we are
innovating to provide consumers
with healthy food choices
page 65
CIRCULAR
PACKAGING
Developing a circular economy
for packaging and actively
bringing waste materials back
into use across our full value chain
RESOURCE
EFFICIENCY
Optimising food waste and
use of packaging, energy and
water across sites, supply chains,
and in consumers’ homes
2025 Targets
2025 Targets
Reduce direct packaging waste by 30%
compared to a 2020 baseline
Improve energy efficiency in our facilities
by at least 10% 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
Improve water efficiency in our facilities
by at least 10% compared to a 2020 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
Read about how we are helping
to tackle plastic pollution in
our oceans
page 67
Read more about what we
are doing to conserve water
page 68
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW 23 of 31
of our products in Poland supplied to
our customer Zabka have Nutriscore
labelling with either an A or B score
SUSTAINABILITY REPORT
PRODUCT continued
BALANCED
HEALTHY DIETS
Our Sustainable Protein Plan
was developed around the idea
that we have a responsibility to
make it easier for consumers to
identify healthy and sustainable
protein options.
To do this, we have continued to build our
science-based knowledge on the positive role
of each protein we produce, within a balanced
diet, to inform our product development.
This year, the rise in cost of living has put
pressure on consumer and household spend.
According to consumer research completed
by GlobalData, 58% of global consumers
now follow a stricter budget when grocery
shopping, up 5% on last year. Beef and
lamb have been amongst the top eight
items impacted by ‘till shock’, which means
consumers have continued to be surprised
by prices for these products.
In this context, it is all the more essential that
we offer a range of healthy and affordable
protein options to consumers. With this in
mind, this year we continued to produce
innovative new products like ‘Facon’, a plant-
based ‘bacon’ and the high-fibre products in
Poland, providing consumers with a broader
range of healthy, delicious proteins.
With our investment in Cellular Agriculture
Limited, we have continued this commitment
to diversify into sustainable alternatives.
We are working to better understand the
positive environmental impacts and therefore
the opportunity cultured meat presents.
64 Hilton Food Group PLC Annual Report and Financial Statements 2022
AGILITY
DEVELOPMENT
SPOTLIGHT ON HEALTHIER CHOICES
IN DIFFERENT GEOGRAPHIES
We are innovating to provide consumers with
healthy food choices in line with the dietary
recommendations in each of the markets
in which we operate. This includes ranges
of affordable products with lower fat and salt.
All our products in Hilton Foods UK and Hilton
Seafood have been benchmarked against High Fat,
Salt and Sugar (HFSS) guidelines and we have been
reformulating products to make them healthier.
In addition, all new products are being developed
with HFSS compliance in mind within the UK.
In Poland, we have partnered with Żabka, to
benchmark all our products against Nutriscore,
a nutritional label that aims to help consumers make
healthy choices by assigning products a rating of A to E,
with A representing the most nutritious product, and
E the least. Products with high content of fruit and
vegetables, fibre, protein and healthy oils such as,
rapeseed, walnut and olive oils, contribute to positive
scores. In contrast, ingredients with a high sugar,
saturated fat and sodium, promote a poor score.
Of our 31 products in Poland with Nutriscore labelling,
we have nine products with A score; 14 products
with B score; five products with C score; and three
products with D score.
Hilton Foods Sweden partnered with ICA to use
more local Swedish ingredients in our vegetarian
and vegan products, and alongside Hilton Foods
Dalco, developed new recipes using a Swedish pea
protein. This product has now launched in-store
in Sweden, and is our first step towards providing
consumers with more locally grown vegan and
vegetarian products.
At Hilton Foods Denmark, 39.1% of our products
carry the Keyhole mark, the Scandic markets’ label
for healthier foods. This product label demonstrates
to the consumer that the product contains less
sugar and salt, has more fibre and wholegrains, and
has either healthier or less fat than other products
of a similar type. At Hilton Foods Sweden, 30.4% of
products hold the Keyhole mark.
SPOTLIGHT ON CONSUMER
INSIGHTS FOR NPD
Despite the rising cost of living, our
research this year continued to show that
health and sustainability continue to be
increasingly important to consumers.
In 2022 energy prices rose across many of
our markets and consumers became more
acutely aware of the cost of cooking food
and a desire to reduce energy consumption.
Consumer behaviours to mitigate increased
energy costs are translating into more
sustainable behaviours, such as reducing
energy consumption. We have responded
to this in the slow cooked category by
innovating to reduce cooking times.
We have also seen an increase in home-
cooking. Our chefs and product developers
have been focused on creating quick
and convenient solutions to aid home-
cooking, for example, in the UK, introducing
curry and beef stir fry strips and chicken
shawarma pieces.
Our Sustainable Protein Plan commits
us to increasing the sales of our vegetarian
and vegan product range. In 2022, we
launched 60 new vegetarian and vegan
products. In the UK, our research identified
an opportunity with Tesco for a new vegan
bacon product.
Our aim was to have the best tasting product
and with a nutritional profile beyond that
of the best-selling competitor on the market.
After 15 months of innovation from teams
at Hilton Foods UK and Hilton Foods Dalco,
we invested in an extrusion line for producing
the vegan bacon. Launched in January 2022
as part of Tesco’s Veganuary campaign, the
product is now one of our top-five selling
plant-based products in the UK.
We were delighted that Tesco consumer
research has demonstrated that it was the
best plant-based alternative to bacon in the
market when compared to own label and
branded alternatives.
Hilton Food Group PLC Annual Report and Financial Statements 2022
65
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW BUILDING A CIRCULAR
PACKAGING SYSTEM IN
AUSTRALIA AND NEW ZEALAND
In 2022, the transition to single material
packaging at our APAC operations was
classified as 100% recyclable by local
recycling services. This classification will
stop up to 3,515 tonnes of plastic trays
going to waste every year.
By collaborating with our Australian and
New Zealand packaging suppliers, we have
been able to develop new opportunities
to better recycle plastic packaging and
incorporate recycled materials into packaging.
During the project, we validated that plastic
trays can be recycled with the plastic films still
attached, an industry-first, which encourages
consumers to use kerbside recycling services.
This supports the diversion of 3,245 tonnes
of plastic film from landfill each year.
Across our APAC business, 96% of the packaging
materials used are now recyclable and we use
up to 90% recycled content in our packaging
trays. Our efforts have been recognised
by the Australian Packaging Covenant
Organisation (APCO), who awarded the APAC
operations with the APCO Annual Award
2022 for Highest Performing New Member.
This award recognises outstanding actions and
contributions made by organisations against
the packaging circularity targets set by the
Australian government.
3,245
tonnes of plastic film can
be diverted from landfill
96%
of the packaging materials
used across our APAC business
are now recyclable
SUSTAINABILITY REPORT
PRODUCT continued
CIRCULAR
PACKAGING
At Hilton Foods we are committed
to reducing the amount of
packaging material we use while
continuing to deliver safe, high-
quality products. Packaging is
essential in reducing food waste
but we recognise how important
it is to balance this against the
negative impact it can have
on the environment.
To enable the best use of resources we are
actively implementing circular principles
across our value chains. Through a systems-
approach, aligned to sustainable design
principles, we consider the product’s primary
use alongside its secondary life. To maintain
leadership in natural fibre packaging, we also
ensure that 100% of the paper and board we
use comes from certified sources.
On plastics, we work with partners to explore:
reduction, reuse and recycling options for all
packaging material we use, reducing plastics
leakage into the environment and addressing
the impacts of micro and nano plastics on the
marine environment.
Our plastic packaging contains more than
70% recycled content. This includes 30%
recycled content film in Hilton Foods UK
and Fairfax Meadow products, reducing
our virgin plastic use by 74 tonnes each year.
We also launched padless meat trays in the
UK, the first product of its kind to market for
red meat, which will improve the recyclability
of 10 million trays annually and reduce
emissions from disposal of used pads.
This year, Hilton Foods UK and SoHi
introduced new trays containing 24% less
plastic, which will reduce the amount of
plastic we use by 274 tonnes per annum.
We have also progressed on the journey
to circularity with the launch of preformed
trays supplied at Hilton Foods Sweden
and Hilton Foods Denmark which are made
of 100% recycled plastic including a 10% tray
to tray content.
A partnership approach is essential and we
continue to engage with others to find new
solutions to old problems. We contributed this
year to the work being undertaken at Heriot-
Watt University, which seeks to understand
the prevalence of microplastics across
the marine environment, the implications
for humans, and actions we can deliver in
our value chain to reduce this. We are also
a signatory to the UK Plastic Pact and the
European Plastics Pact and a member of the
Australian Packaging Covenant Organisation.
66 Hilton Food Group PLC Annual Report and Financial Statements 2022
UPCYCLING OCEAN
PLASTIC POLLUTION
INTO OUR PACKAGING
During 2022, we worked with one of our
strategic packaging suppliers, Klochner
Pentaplast, and charity, Keep Sea Blue,
to upcycle discarded plastic collected
from beaches, coastlines and coastal
communities around the Greek
Mediterranean islands. Discarded plastic
waste such as drinks bottles that pollute
the oceans are collected and recycled
for use in Tesco’s fresh fish packaging.
The discarded material is collected by
a network of 56 collectors and eco-service
providers as well as volunteer organisations
involved in beach clean-ups. Quantities,
dates and locations of the collected plastic
waste are recorded in detail through a
blockchain platform by each of the collectors
and ensures full traceability.
The PET share of the waste is carefully
sorted, grinded, washed and recycled
and goes back into food-grade packaging
materials. By supporting this initiative and
the collecting companies to collect this
waste, we can avoid leakage into the sea and
reduce the potential harmful impact on local
ecosystems. The packaging was launched
in November 2022 and contains at least 30%
recycled coastal plastic. This is expected to
remove around 240 metric tonnes of plastic
from the environment each year.
30%
Selected fresh fish packaging
at Tesco will contain at least 30%
recycled coastal plastic
Above Keep Sea Blue people/volunteers collect discarded
plastic from coastal areas for use in recycled packaging.
Hilton Food Group PLC Annual Report and Financial Statements 2022
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW 10%
We are committed
to delivering our 2025
targets of improving
water efficiency in
our facilities by at least
10% from a 2020 baseline
WATER CONSERVATION
IN AUSTRALIA
We are committed to delivering
our 2025 targets of improving water
efficiency in our facilities by at least
10% from a 2020 baseline, in line with
our resource stewardship principles.
We aim to set an industry benchmark in
water efficiency and continue to challenge
ourselves to reduce the water intensity
of our operations.
Australia is a country prone to drought,
so water is a precious resource. We are
working to reduce the water intensity of
our operations and strive to achieve best
practice in wastewater management.
Weekly monitoring and reporting of
the water used per kg of product in daily
operational reviews has embedded the
consideration of water consumption in
our operational culture. This has helped
us identify inefficiencies with equipment
so these can be rectified. The rollout and
ongoing improvement of our submetering
programme continues, which will provide
us with more detailed information on the
efficiency of our manufacturing processes.
We have identified our most water-
intense processes and we have plans
in place to reduce the intensity of those
processes, which will also reduce the
quantity of wastewater generated. We are
also investigating rainwater harvesting
opportunities for non-potable water use
in our operations during 2023.
SUSTAINABILITY REPORT
PRODUCT continued
RESOURCE
EFFICIENCY
We are committed to reducing
the resources used to create
our products, by minimising
food loss and waste and using
energy as efficiently as possible.
To deliver against our 2025 Sustainable
Protein Plan, we work with partners
across our value chain to reduce waste
and ensure water resources are managed
in a responsible and equitable way.
To target food waste hotspots in our
factories, we are running projects on sites
at Hilton Foods Ireland, Fairfax Meadow
and Hilton Seafood UK, to distribute surplus
stock to local charities. Working with Foods
Connected and other partners, we are also
effectively monitoring waste, energy and
water consumption across our sites, to allow
us to target action accurately.
A central focus for optimising resource
use is embedding an efficiency-first culture
across all our facilities. We are rolling out
energy efficiency programmes aligned to
ISO50001:2018, providing our factory teams
with a structured framework to achieve
reductions and share knowledge. In the long
term, we have developed capital investment
and energy procurement plans to provide
a clear roadmap to net zero for all Hilton
Foods sites.
In 2022, we made strong progress.
62% of our electricity came from renewable
sources. This includes the installation
of a new 1.5 MW solar array at our SoHi
site, in addition to existing arrays at Hilton
Foods UK, Hilton Seafood UK and Hilton
Foods APAC - Heathwood, which together
generated 2,714,295 kWh of clean electricity,
enough to power almost 250 homes for
a year.
Processes within our factories are also
generating significant energy efficiencies.
We are optimising washing facilities and
procedures, optimising our compressed
air systems, improving our vacuum packing
facilities, reutilising waste heat, improving
refrigeration and implementing efficient
door controls. This has allowed us to save
2,756,000 kWh of gas and 1,072,000 kWh
of electricity across sites. We continue to
learn and implement these solutions across
more and more sites, generating additional
energy savings.
68 Hilton Food Group PLC Annual Report and Financial Statements 2022
SUSTAINABILITY REPORT
PRODUCT continued
Our waste hierarchy
REDUCING OUR WASTE
Reduce
Reuse
Recycle
Recover
Disposal
<1%
Our APAC operations target <1% of
total volume handled and distributed
to be wasted
600t
We have doubled the recycling
rate of non-food waste compared
to 2021 levels, diverting 600 tonnes
of waste from landfill
As one of the largest protein processors in
Australia, we know animal protein is a precious
commodity and we have built a culture of respect
for the product we handle, process and distribute.
We have set ourselves a target to halve our food waste
across global operations this decade. Our Hilton Foods
APAC operations target <1% of total volume handled
and distributed to be wasted, as part of a region-wide
approach to lead in resource efficiency. We have been
able to achieve this target by engaging employees
at all levels, identifying the root causes for food waste
generation and working flexibly to adapt our processes.
We have implemented processes to recover product
packed as part of new product development trials rather
than disposing of the product as waste.
We have also focused on applying the waste hierarchy
to reduce the total waste in our sites and increasing
site-based recycling rates. A project at our Hilton Foods
APAC facilities increased waste recycling rates through
improved waste segregation practices, improved
signage and training. We worked closely with our service
providers to identify and engage local recyclers with the
capability to process packaging waste. As a consequence,
we have doubled the recycling rate of non-food waste
compared to 2021 levels, diverting 600 tonnes of waste
from landfill. We are now working to share the learnings
from APAC across all operations to ensure a global
approach to best practice in resource efficiency.
Above Clearly labelled segregated recycling bins across our
Australian sites to increase recycling rates and reduce total
site waste.
Hilton Food Group PLC Annual Report and Financial Statements 2022
69
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW PRODUCT STANDARDS
Our innovation teams include qualified
chefs covering each of the food categories
we produce, and we share expertise in
product and process development across
the Group. They utilise our market insight
teams and consumer focus groups to
ensure our new product launches have
a high degree of success.
We 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. Where possible we eliminate
known allergens and clearly label them
when present.
We are reformulating products to reduce
the total salt and fat in food, and increase
fibre in line with customer health targets.
SUSTAINABILITY REPORT
FOOD SAFETY AND QUALITY
All of our sites have achieved certification
to a Global Food Safety Initiative (GFSI)
recognised scheme and are also
benchmarked by our central audit team
to our own standards to ensure excellence
across the Group. Our customers
frequently visit and audit the sites that
supply them and we value the opportunity
to demonstrate that Hilton Foods
consistently meets their expectations.
Our sites have facilities for organoleptic
and physical assessment, and many have
laboratory facilities for microbiological and
chemical testing, all with trained personnel
and appropriate local accreditation.
We set clear specifications and monitor
the raw materials used in our products.
Samples are assessed based on risk
assessment for microbiological standards,
and a range of authenticity tests including
speciation testing and screening for
adulteration using chemical and DNA
methodologies. These tests are used
to evaluate new supply chains and
to monitor existing ones. These tests
at accredited laboratories are used to
assess the performance of suppliers
and achieve continuous improvement.
We are members of the Food Industry
Intelligence Network where we compile
industry-wide compliance statistics and
share intelligence on suspected food fraud.
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.
To ensure we have access to the latest
food science, we are members of Campden
BRI, the Danish Meat Research Institute
and Teagasc Ireland. We are also engaged
with developing regulations and trade
rules through our trade association
membership, the British Meat Processors
Association and Food and Drink Federation,
with further sector support from the UK
Seafish Industry Authority.
OUR QUALITY POLICY
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 ensure:
– 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, a member of the
Executive Leadership Team (ELT).
FACTORY STANDARDS AND
QUALITY SYSTEMS
Our specialised processing and packing
facilities are designed with a focus
on hygiene and temperature control,
including a high degree of automation
and robotics which drives efficiency
and minimises handling. This means we
have industry leading food safety and
ensure the quality throughout shelf life
for our customers.
Our people are our most important
asset to ensure high quality and safety,
and our focus is on training everyone
to be responsible for the quality of our
products, assisted by highly qualified
and experienced quality assurance teams.
By automating our quality assessment and
labelling systems; we ensure consistent
adherence to customer specifications
and reduce the risk of label errors.
70 Hilton Food Group PLC Annual Report and Financial Statements 2022
SUSTAINABILITY REPORT
SUPPLY CHAIN INTEGRITY, ENVIRONMENTAL
IMPACT ASSESSMENT AND TRACEABILITY
Over 98% of Hilton Seafood UK wild
capture volume is from certified fisheries
and we help fund and actively participate in
fishery improvement projects to bring the
remainder of our supply to certification.
We hold Group Marine Stewardship Council
certification for all of our manufacturing
facilities that use fish.
Over 99% of our farmed fish and shellfish
are from certified farms (ASC, GlobalGAP,
or BAP). Hilton Seafood UK carry out
additional audits by its qualified fish
welfare officers.
We partner with suppliers that share our
commitment to quality, food safety, animal
welfare and sustainability and we clearly
state the standards we expect. We have
full traceability back to the farms and
fishing vessels that supply the slaughter
operations and primary processing
factories. This ensures that consumers
can trust the products we produce.
Our supplier approval process gives us
full transparency on the safety, quality,
and the provenance of the raw materials
we use against the Hilton Foods Supplier
Standards. We audit suppliers at a
frequency determined by risk assessment
which looks at a combination of raw
material and supply chain threat and
vulnerability, horizon scanning and supplier
history. The majority of our suppliers are
certified against GFSI benchmarked
standards by independent audit bodies.
For new suppliers, our policy is to take
GFSI-certified suppliers and audit them
against our standard. Where we use smaller,
local suppliers, we sometimes take from
non-GFSI certified sites, but we monitor
these using a combination of a Hilton
Foods Supplier Standards audit and self-
assessment questionnaires. The current
GFSI certification status of our meat and
seafood supply chains is 89% and for
ingredient suppliers is 90%. These audit
processes have been in place for more than
four fiscal years.
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.
All farms, livestock facilities and
slaughter facilities for farm animals,
supplying Hilton Foods UK, Ireland and
Sweden, and the majority supplying
to the other European and Australian
markets are certified to independent farm
assurance schemes. In some instances,
a higher standard of farm assurance
is required such as 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. This can be to
the Hilton Foods Supplier Standard using
our own team of welfare-trained auditors;
an independent audit using a dedicated
second party; or by auditors employed by
our retail partners.
We disclose all of the fisheries and fish
farming areas that we buy from on the
Ocean Disclosure Project website. We have
built our own fisheries risk assessment
tool in accordance with the Sustainable
Seafood Coalition Codes and BSI PAS
1550 standard, both of which we helped
to develop. It combines data sources
for fishery stock assessments, fishing
effort, impact of fishing gear, and risk
of illegal fishing (for eliminating illegal
unreported or unregulated fisheries).
Hilton Seafood UK has signed to support the
Environmental Justice Foundation Charter
for Transparency.
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INTRODUCTION
Hilton Foods recognises that
anthropogenic emissions are driving
climate change and that governments,
industry and wider society need to
act together to mitigate the effects.
We have already set Science Based
Targets verified by the Science Based
Targets initiative (SBTi) which are
aligned to a ‘well below 2°C’ pathway
for our Scope 1 and 2 emissions and
those related to Scope 3 purchased
goods and services category. These
include near-term targets for 2030
and a target for net zero for our own
operations and our supply chains
by 2050.
In 2023, we are revising our near term
Science Based Targets to align with
the SBTi’s new minimum ambition
for corporate targets of ‘1.5°C’ above pre-
industrial levels and will reaffirm our long-
term target of net zero across our value
chain by 2050 or earlier. Once finalised
and approved by the Board and verified
by the SBTi, we will disclose our new
targets and details of our transition plan,
which will outline the initiatives, timing,
and strategy to achieve this ambition.
The development of our planned
mitigation activities in this area is already
advanced. Following a lifecycle analysis
and decarbonisation modelling of our
operations and key supply chains, site-
level pathways have been developed
and roadmaps for emissions reduction
related to the animal protein we handle
are being developed at a species level.
We expect to submit new targets to
the SBTi for verification during 2023.
Further details of our planned key
emissions reduction drivers can be
found in Strategy: Transition Risks.
In line with the ‘Task Force on Climate-
related Financial Disclosures’ (TCFD)
recommendations and Listing Rule
LR 9.8.6R(8), Hilton Foods has provided
information to stakeholders on the
potential climate-related risks and
opportunities for our global food
business and value chains, and our
relevant governance structures related
to our net zero ambition, in turn helping
them to make informed decisions.
We set out below our climate-related
financial disclosures consistent with
the TCFD recommendations and
recommended disclosures as detailed
in ‘Recommendations of the Task Force
on Climate-Related Financial Disclosures’,
2017, with use of additional guidance from
‘Implementing the Recommendations
of the Task Force on Climate-Related
Financial Disclosures’, 2021. This year,
we have enhanced our analysis of our
physical risks, as detailed below. Detail
on the 11 recommended disclosures can
be found on the following pages:
Recommendation
Reference
Governance
Disclose the organisation’s
governance around
climate-related risks
and opportunities
Page 45 and
72 - 73
Strategy
Page 74 - 82
Disclose the actual
and potential impacts
of climate-related risks
and opportunities on the
organisation’s businesses,
strategy, and financial
planning where such
information is material
Risk Management
Page 73
Disclose how the
organisation identifies,
assesses, and manages
climate-related risks
Metrics and Targets
Page 83
Disclose the metrics and
targets used to assess
and manage relevant
climate-related risks and
opportunities where such
information is material
GOVERNANCE
Our CSR governance structure, which
covers climate change is outlined in
detail on page 45.
The Board’s oversight of climate-
related risks and opportunities
The Board, led by our Chair, Robert
Watson, is responsible for the long-term
success of the Group and has ultimate
responsibility for climate-related risks
and opportunities. The Board meets no
less than eight times a year and 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 has
an ongoing review process for principal
risks, including climate change (p.45).
This is supported by a further in-depth
annual assessment. Climate-related
issues form part of the Board agenda
when appropriate. Oversight of certain
sustainability matters are delegated to
principal committees: the Sustainability
Committee has oversight of climate
related strategy and the Audit Committee
supports the Board in relation to
climate- related risks. Individual Board
members have experience relevant to
climate risk management, including
financial, supply chain, sustainability,
and general governance roles across a
range of industry sectors including global
retailers and their suppliers (see Board
of Directors, biographies on page 94-95).
In addition, the Board received training
on the Group’s climate challenge, key and
upcoming legislation, trends and how
we are responding as a business. For more
details of how climate change is considered
in executive pay please see page 44 in the
Sustainability report.
Sustainability Committee
From a strategic perspective, climate-
related issues are discussed within
the Sustainability Committee, which
is chaired by Non-Executive Director,
Rebecca Shelley, who has substantial ESG
experience to inform Board discussions
having led Tesco’s CSR strategy and
delivery programme internationally for
four years and established sustainability
programmes for financial services
companies including Prudential.
72
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The Committee meets at least three times
per year and monitors the progress and
performance of the Group’s sustainability
strategy and key initiatives for reducing
Hilton Foods, climate footprint and that
of our supply chains. The Committee also
reviews our reported KPIs as outlined in
Metrics and Targets below. The Committee
Chair informs the Board of our strategy
and progress every three months.
Management’s role in assessing
and managing climate-related
risks and opportunities
Our Chief Executive, Philip Heffer, has
responsibility at the management level
for climate change and environmental
issues. As part of our commitment
to sustainability, he leads our positive
response to addressing climate risk and
opportunities. Day-to-day governance
of climate-related issues are delegated
to the Executive Leadership Team, which
oversees the strategy to meet climate
targets, and aligns our product portfolio
to shifts in demand.
Divisional CEOs are responsible for
climate-risk identification and mitigation
at site level, while the CSR team led
by the Chief Quality and Sustainability
Officer is responsible for climate risk
mitigation across our supply chains.
These teams oversee carbon reduction
projects in partnership with customers
and suppliers, and members of the team
hold governance roles within industry
collaborative forums.
Climate-related issues are monitored
by the Group CSR team and mitigation
strategies are developed for approval
by the Executive Leadership Team and
reported by the Group Sustainability
Director to the Sustainability Committee.
Processes by which management
is informed about climate-related
issues
In addition to the above information
flow, management is also advised by our
internal experts in areas such as energy
procurement, sustainable agriculture,
and supply chain insight. Additionally,
management takes external advice from
specialist consultants, who advise on
climate risk and appropriate mitigations.
Management is involved in national,
regional and global associations and
forums, providing scientific information
on relevant risks and mitigations; more
detail on our collaboration may be found
on (pp. 56-69).
Hilton Foods considers climate-related
risks and opportunities in all physical and
transition risk categories, both current
and emerging, and whether they occur
upstream, within, or downstream of the
Group’s operations. Existing and proposed
legislation and regulatory requirements are
continually monitored in order to determine
changing compliance requirements, such
as controls on emissions and deforestation,
or product environmental labelling.
In combination, this information helps
in the determination of the management
treatment of risks and helps prioritise
resources in managing the most material
climate-related risks. Risks are subject to
continual refinement and quantification
over time, which assists in any required
incorporation of climate-related risks into
the Group’s overall budgeting, strategy
and financial statements.
Climate risk assessment
We assess the relative magnitude of
climate-related risks and opportunities
using the below scale. This is distinct
from the quantifiable indicators used
to define our principal risks. This scale
accommodates the larger potential impact
of climate-related risks on the Group,
allows for a greater delineation between
climate-related risks that would otherwise
all be classified as being at ‘High’ risk
under our principal risk matrix and allows
for their relative significance in relation
to other Group risks to be better reflected.
RISK MANAGEMENT
Audit and Risk Committees
Climate-related risks are identified,
monitored and their mitigation strategies
are reviewed within the internal audit and
risk management function, which ensures
the full integration of climate-related
risks into the Group’s risk management
framework. The Group Internal Audit
and Risk Director executes a key role,
supported by the Group Sustainability
Director, in ensuring that management
are identifying, mitigating, monitoring
and reporting on all key risks including
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 then assess
the effectiveness of these activities
independently to report to the Audit
Committee and Board. The Audit
Committee determines risk categorisation
and mitigation measures before final
Board approval. The Risk Management
Committee and the Audit Committee
both meet four times per year, and climate
change is discussed and monitored at all
Audit Committee meetings as one of our
principal risks.
Our processes to identify, assess
and monitor climate-related risks
The assessment of climate-related risks
is a collaborative effort across business
functions and allows for consideration of
a risk’s likelihood of occurrence, timescale,
and magnitude of potential impacts.
This process determines the categorisation
of principal and emerging risks for final
approval by the Board. For magnitude,
climate-related risks and opportunities
are assessed using the criteria below.
Magnitude
Low
Medium
High
Impact
– No regulatory impact
– Immaterial financial
loss with limited
impact on business
operations or key
customers
– Minor adverse
comment in local
media
– Moderate regulatory
or legal obligation
– Moderate impact
on relationships
with customers
with minimal effect
on the strategic
and financial health
of the business
– High potential for
disclosure to market,
resulting in significant
penalties and high
likelihood for a fall in
share price
– Loss of key customers
as well as very
significant contracts
– Unfavourable
– Widespread critical
coverage in national
media
coverage in national/
international media
– Minor disruption
to services
– Closure or suspension
of business operations
– High staff turnover
or departure of key
personnel
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STRATEGY: APPROACH
Hilton Foods recognises that climate
change presents both risks and
opportunities to our business, and in
2020 we introduced climate change as
a principal risk. The Group is impacted
by both physical and transition risks
which are outlined in detail below.
For the purposes of this disclosure, we
have defined the time horizons for our
climate risk analysis in the following tables.
These are updated to reflect the Group’s
climate horizons as opposed to our normal
financial horizons. The short-term horizon
covers our immediate in-year actions, the
medium-term horizon includes our near-
term business strategy, and the long-term
time horizon encompasses our actions
that contribute to achieving our net zero
strategy, our asset life and sufficient
time period for climate-related risks to
manifest. Certain climate-related risks,
especially some physical risks, are unlikely
to materialise before the medium or long-
term horizon, or may have a high degree
of unpredictability both in occurrence
and severity (e.g., cyclones). Our long-
term modelling includes forecasting risk
impacts in 2030, 2050, and for physical
risks only, 2100.
Time-horizon
From (years)
To (years)
Short
Medium
Long
0
3
10+
3
10
Our approach to climate
scenario analysis
In accordance with the TCFD
recommendations, a review was
undertaken of the behaviour of certain
risks under different climate outcomes.
We used three public scenarios to better
understand our resilience to climate
change. (See the table below.)
The scenario analysis conducted this
year builds on that completed in 2021,
in which we looked at the likely impact
on relative product cost as a result of
carbon pricing and the likely changes in
demand that would induce. More detail
on that assessment may be found on
pages 68-69 of the 2021 Annual report.
We incorporate use of the more ambitious
NZE scenario (from the SDS scenario
used last year) as it forms an input into the
1.5°C pathway used by the SBTi against
which we plan to align. Within the physical
risk assessment tool used, RCP 2.6 and
RCP 4.5 are used in alignment with
NZE and STEPS respectively, but the
approximate temperature pathways
are consistent. Whilst the IEA and IPCC
scenarios are not exactly aligned, there
is sufficient degree of comparability that
they can be considered analogous for
modelling purposes. Scenarios have been
supplemented with additional internal
and external sources specific to each risk
to inform our assumptions.
Our overall assessment is that the business
remains resilient to climate-related
risks in all three scenarios, especially in
consideration of our awareness of the risks
and our existing and planned mitigation
strategies, as such there are no effects
of climate-related matters reflected
in judgements and estimates applied
to our financial statements. The process
of accommodating climate change risks
and opportunities is evolutionary, not
revolutionary for the business. Therefore it
is incorporated into strategy and reviewed
as it evolves.
Change in
global mean
surface
temperature
(°C) by 2100 Notes
Scenario
Net Zero Emissions
by 2050 Scenario
(NZE) / RCP2.6
Source
IEA
IPCC
1.5
Stated Policies
(STEPS) / RCP4.5
2.5
IEA
IPCC
RCP 8.5
IPCC
4.1-4.8
Greenhouse gas (GHG) emissions are
strongly reduced, resulting in a trajectory
consistent with limiting the temperature
increase to less than 1.5°C in 2100
compared to the pre-industrial period.
This provides a below 2°C scenario.
A combination of physical and transition
risk impacts as temperatures rise by
around 2.5°C by 2100 with 50% probability.
This scenario is used as it represents a base
case scenario with the trajectory implied
by today’s policy settings.
GHG emissions continue to grow
unmitigated, leading to a best estimate
global average temperature rise of 4.3°C
by 2100. This scenario is included for its
extreme physical climate risk impacts.
1.
IEA (2022), World Energy Outlook 2022, IEA, Paris
2. IPCC (2014), Climate Change 2014: AR5 Synthesis Report. Contribution of Working Groups I, II and III to the
Fifth Assessment Report of the Intergovernmental Panel on Climate Change
74 Hilton Food Group PLC Annual Report and Financial Statements 2022
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STRATEGY: PHYSICAL RISKS
This year we have we enhanced our
physical risk assessment alongside
further development of our risk
disclosure. With 24 facilities across
the world, Hilton Foods maintains
a large and diverse geographical
footprint. We have used geospatial
risk modelling software to analyse
the Group’s exposure to natural
hazards such as heat stress, sea
level rise, storms and drought, and
how these risks may change in the
future under various scenarios for
global temperature rise by 2030,
2050, and 2100.
Note this software exclusively uses IPCC
scenarios. The temperature outcomes for
RCP 2.6 and RCP 4.5 and NZE and STEPS
respectively, are broadly comparable.
All of our sites are located in zones
of low or no wildfire risk currently.
Weather conditions related to increased
wildfire stress may slightly increase at
some sites under our base case and worst
case scenarios relative to the current
period, but the location of our sites in
industrial zones away from vegetation
mitigates direct impact from fires.
Two of our sites, in Greece and Grimsby,
are determined to be at a current high
risk of river flooding, net of flood defences.
Our exposure is not projected to increase
materially across our estate under any
scenarios or by any of the studied time
horizons, so is not considered to be
climate-related.
Our most pertinent physical risk
exposure is global sea level rise, which
under a baseline scenario presents a high
or extreme risk to approximately a third
of our total estate by 2100, concentrated
in Grimsby and the Netherlands. The
parameters of our modelling software
mean that we are only able to model
this risk to 2100, but modelling to 2100
gives some indication of what the most
severe outcomes may be, which helps
contextualise our response in our defined
time horizons.
The Grimsby area is historically susceptible
to tidal flooding from the sea, in addition
to fluvial flooding from the river Freshney
and New Cut Drain. Indeed, the northeast
Lincolnshire area was affected by a
large tidal surge in 2013. The potential
for property damage to these facilities
from coastal flooding is projected to
increase under a baseline and severe
climate scenario. Most of our sites in
the Netherlands are assessed to be in
‘Extreme’ risk zones from storm surge,
but this is a widespread regional risk
and most of these sites benefit from
extremely robust standards of national
flood protection, reflecting the Dutch
governments’ significant expenditure
on maintenance and reinforcement
programmes. The Delta Programme
to protect the Netherlands from flooding
and climate-induced sea level rises
has an annual budget of EUR1.25bn
per annum up to 2032, with more than
55% earmarked for investment in new
measures. While our two Foppen sites in
Harderwijk are assessed to have less flood
protection than our other Netherlands
sites, we anticipate continued works by
the government to mitigate risks to the
Flevoland region and its surroundings.
We have explored other physical risks to
our direct operations and their behaviour
under various modelled scenarios and
time horizons, in particular the risk of
storms and drought. Recognising the
significant economic and societal impact
of Cyclone Gabrielle on New Zealand’s North
Island in February 2023, we modelled how
tropical storms may affect our Auckland
facility. Gabrielle had no direct impact
on our site but highlighted the potential
for disruption to supply. The complexity,
infrequency and variability of cyclones
makes them especially challenging
phenomena to model, but we are able to
assess that our Auckland site is at medium
exposure to flash floods at present, and
while exposure to cyclones with stronger
wind speeds is not expected we project
the maximum five-day precipitation
to increase under a baseline scenario.
We have additionally modelled how two
of our Australian sites are projected to be
increasingly exposed to drought risk, and
considered how these plants may mitigate
these risks especially given the relatively
high water consumption at the Truganina
plant which is already in a high water
stress area.
Base case scenario – % of sites at risk
of sea level rise by 2100
Extreme
High
Medium
Low
No hazard
RCP 2.6
RCP 4.5
RCP 8.5
Time-horizon
Extreme
High
Medium
Low
Number of sites
per risk zone
RCP
2.6
RCP
4.5
RCP
8.5
Risk
Index3
4
1
4
0
4
4
1
0
4 35-450
16-34
6-15
0-5
4
1
0
15
No hazard
15
15
3. These risk scores are derived from normalising
the average annual loss rates for property
damage for a standard industrial business within
each hazard zone, allowing for comparison of
average loss potential across different locations.
Locations in zones with a Risk Index value of 40
are on average expected to experience twice
as high annual losses as in zones with a value
of 20. However, it is important to note that as
risk zones increase in severity so too do the risk
bands become increasingly broad, such that an
‘extreme’ risk captures a much greater diversity
of potential property damage than a low risk zone.
Therefore, several sites in extreme zones may be
at significantly variable levels of risk. Additionally,
a property that moves for instance from ‘medium’
to ‘high’ risk may have experienced a slight or
a large change in its risk profile.
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Climate-related Physical risks
1. Extreme weather impacts on upstream supply chains
Type
Area
Primary potential
financial impact
Description
Time horizon
Likelihood
Impact
Areas impacted
Response
Physical (rising mean temperatures)
Upstream
Disruptions in local supply affecting regional availability and/or pricing
Hilton Foods sources its products from around the world and recognises that extreme weather
and the effects of changing temperature and precipitation may impact the growth of produce
used in our vegetarian/flexitarian ranges, in addition to detrimental impacts on livestock through
degradation of pasture, volatility in supply of animal feed, and potential impacts on welfare
of livestock.
For example, our detailed study on Australia indicates increased irregularity of precipitation
and increased daily maximum temperatures may negatively impact supply of livestock, with
projected declines in feed intake by 3-5% per additional 1°C above cattle’s comfort zone.4 Studies
also indicate declining productivity of Australian rangelands of 17% under 2°C of warming, with
negative impacts on livestock stocking rates.5 Declines in productivity of cattle stations, and in
particular sudden regional shocks to supply may increase volatility in food prices on international
markets.
Equally, climate change may affect the reliable supply of plant products; we note the shortages
in early 2023 of certain vegetables in Europe as a consequence of poor weather in Spain and
North Africa and anticipate that such disruption may be more frequent and prolonged with
climate change.
Medium-long
Likely locally in at least one supply chain
Low-Medium
Global
It is hard to quantify our direct impact or the extent by which global prices may be impacted
by long-term regional impacts resulting from climate change, which would be industry wide.
We assign a low-medium risk based on the potential for higher priced inputs and we continue
to monitor our supply chains for potential disruption.
We maintain flexibility in regional and global supply chains, and by not being integrated at the
farm level like some of our peers, have reduced exposure to local disruptions. A large proportion
of the Group’s purchased meat products are sourced from northern Europe, where temperature
rises are likely to be ameliorated by an increase in rainfall.
2. Risk of rising sea levels to Grimsby and Netherlands sites
Type
Area
Primary potential
financial impact
Description
Time horizon
Likelihood
Impact
Areas impacted
Response
Physical (rising sea levels)
Own operations
Disruption to production, increased insurance premiums, destruction of products
Eight coastal or low-lying sites are determined to be at high or extreme risk from rising sea levels
and coastal storm surges under our base case scenario by 2100, representing a third of our total
estate. Sites in the Netherlands are at extreme risk under all time horizons, but the level of national
protection is high. The risk score at our Grimsby sites is projected to increase from medium to
high under baseline and severe climate scenarios, which highlights risk of flood-related property
damage, destruction of products, and increased insurance premiums.
Long term
As likely as not
High
UK, Netherlands
With the exception of the Harderwijk sites, our Netherlands sites are assessed to be protected
by very strong standards of flood protection, reflecting proactive government management
of coastal flood risks in the Netherlands. Specifically, our Oosterhout, Oss and Zaandam sites
are protected against a 1-in-2,000, 1-in-1,250 and 1-in-10,000 year flood respectively. While the
standard of protection is lower at our Grimsby and Harderwijk sites, we note that climate-related
coastal flooding events are a long-term risk. We note continuous planned investment by the
Dutch government on maintenance and reinforcement of flood protections, and therefore assume
standards of protection will continually improve at these sites. Likewise, bodies such as the UK
Environment Agency oversee flood defences on the port of Grimsby, such as concrete wave walls
installed between 2013 and 2016.
76
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3. Storm risk to Auckland site
Type
Area
Primary potential
financial impact
Description
Time horizon
Likelihood
Impact
Areas impacted
Response
Physical (severe weather)
Own operations
Disruption to production, increased insurance premiums, destruction of protections
Flooding in February 2023 in New Zealand has heightened awareness of the potential risk to our
Auckland facility from storms and flooding. At present our Auckland facility is categorised as being
at medium exposure to flash floods, and our modelling suggests increases in maximum five-day
precipitation at the site by 11% and 14% under 1.5°C and 2.6°C scenarios respectively (by 2030).
When measuring severity by wind speed, the site is at a low exposure (142-184km/h) to tropical
cyclones, and medium exposure (121-160km/h) to extratropical cyclones. Tropical wind speeds are
not projected to increase at the facility under any modelled scenario or time horizon.
Increased frequency or severity of severe weather events may increase insurance premiums,
supply chain disruption, or damage to the facility or stock losses. At the extreme, potential
downtime may present supply disruption to our New Zealand based customers.
Short term
Likely locally in at least one supply chain
Medium-High
Auckland
While we project increased precipitation at our Auckland facility, and no increased wind speeds
from tropical cyclones, we note that such storms are challenging to model given their infrequency,
high degree of random variability and complex interrelation of underlying small-scale physical
processes.6 We will continue to proactively monitor projected changes to this risk and our business
continuity plans at the site, which will include planning and carrying out validation scenario
exercises.
4. Drought impacting Australian facilities
Type
Area
Primary potential
financial impact
Description
Time horizon
Likelihood
Impact
Areas impacted
Response
Changes in precipitation patterns; rising mean temperatures (water scarcity)
Own operations
Disruption to production
Our sites in Australia operate in locations where the risk of water scarcity is expected to rise, with
more infrequent precipitation events and increased annual maximum temperatures under all
scenarios. Analysis indicates our Melbourne (10% of our global abstracted freshwater) and Bunbury
(3%) facilities are respectively at high and very high exposure to increased drought stress under
warming scenarios.
Short term
Very likely
Medium
Melbourne, Bunbury
Water scarcity is already a feature of operating in Australia, and the Group has developed
policies to minimise water consumption and promote efficient water usage. We have a number
of conservation/efficiency measures in place at our affected site. Local water restrictions may
be mitigated in the short term through import of water by tanker. We continue to investigate
opportunities to reduce reliance on municipal water. The execution of our business continuity
response will enable rationalisation of production to redirect all available water to critical
equipment.
Targets/KPIs
We are targeting improved water efficiency by 10% compared to a 2018 baseline KPIs:
1. Total water withdrawn
2. Total water consumed, percentage of each in regions with High or Extremely High Baseline
Water Stress
4. Mbow, C., et al, 2019: Food Security. In: Climate Change and Land: an IPCC special report on climate change, desertification, land degradation, sustainable land
management, food security, and greenhouse gas fluxes in terrestrial ecosystems P.R. Shukla, J. Skea, E. Calvo Buendia, V. Masson-Delmotte, H.-O. Pörtner, D.C. Roberts,
P. Zhai, R. Slade, S. Connors, R. van Diemen, M. Ferrat, E. Haughey, S. Luz, S. Neogi, M. Pathak, J. Petzold, J. Portugal Pereira, P. Vyas, E. Huntley, K. Kissick, M. Belkacemi,
J. Malley, (eds.). p. 455-458
5. Mbow, C. Food Security, p. 457
6. Seneviratne, S.I., X. Zhang, M. Adnan, W. Badi, C. Dereczynski, A. Di Luca, S. Ghosh, I. Iskandar, J. Kossin, S. Lewis, F. Otto, I. Pinto, M. Satoh, S.M. Vicente-Serrano,
M. Wehner, and B. Zhou, 2021: Weather and Climate Extreme Events in a Changing Climate. In Climate Change 2021: The Physical Science Basis. Contribution of
Working Group I to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change Masson-Delmotte, V., P. Zhai, A. Pirani, S.L. Connors, C. Péan,
S. Berger, N. Caud, Y. Chen, L. Goldfarb, M.I. Gomis, M. Huang, K. Leitzell, E. Lonnoy, J.B.R. Matthews, T.K. Maycock, T. Waterfield, O. Yelekçi, R. Yu, and B. Zhou (eds.).
Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA, pp. 1583-1594
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STRATEGY: TRANSITION RISKS
Our key emissions reduction drivers
Our net zero plan and emissions
reductions initiatives are being
developed to mitigate our exposure
to transition risks. During the year,
our expert internal team developed
models of the transition pathways
for our production sites and key
supply chains. A literature review was
conducted to assess the technologies
and interventions that could be
deployed, and we evaluated the
emissions reductions that could be
delivered over time and the likely
financial costs and savings.
Scope 1
– Energy efficiency programme
– Replacing natural gas-powered heating with biogas and
heat pumps
– Electrification of cooking applications
– Conversion of our entire fleet to zero emissions vehicles
– Phasing out fluorinated gas refrigerants and use of lower
warming potential gases in short term
– Expanding the phase out CO2 as a cooling gas in production
Scope 2
– Energy efficiency programme
– Onsite renewables in addition to the existing installations
at Brisbane, SoHi, Huntingdon and Grimsby
– Power purchase agreements for renewable electricity
– Decarbonisation of global electricity grids
– Conversion of district heat to a zero-carbon sources
(e.g., biomass, geothermal)
Scope 37
– Engagement with retailers and internationally with
governments, suppliers and industry bodies to shape policy
and drive decarbonisation of our supply chains
– Follow our species-specific decarbonisation plans for beef, lamb,
pork and salmon, via:
– Improved feed conversion rates via nutrition, genetics
and health
– Reduced on-farm energy use
– Lowering the footprint of animal feed via uptake of green
fertilisers and improved application methods; increased
inclusion of waste crops
– Reduced enteric emissions via changes in feed types
and additives
– Improved manure management
– Developing infrastructure with Foods Connected to help us focus
our resources on the most material areas of our footprint
– Continue programmes to reduce use of packaging and improve
its circularity without compromising food waste
– Diversify further towards lower-carbon proteins, as per our recent
investment in Cellular Agriculture and Foppen
7. The Group does not directly farm or slaughter animals. A partnership approach to reducing our upstream
Scope 3 (Purchased goods & services) is required.
We have developed site-level pathways
based on the above drivers as appropriate,
to address our Scope 1 and Scope 2
emissions and reduce our exposure to
potential carbon price impacts on our own
operations over time. The Group does not
directly farm or slaughter animals, but we
are exposed to upstream climate change
risks associated with our agricultural
supply chain, so we need to take a
partnership approach to reducing our
upstream Scope 3 (Purchased goods
and services).
As beef makes up a significant proportion
of our total emissions footprint, we have
developed an initial transition plan for
beef, which has some applicability to
lamb and other ruminants although
bespoke pathways will be developed for
these. We then plan to expand our work
to encompass pork, salmon and other
aquatic species. This will encompass
the decarbonisation of feed crops which
accounts for a significant proportion of
the footprint of those species. Actions to
deliver against this are further detailed
in Reducing emissions (pg 56-57).
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Climate-related Transition risks
1. Changing consumer purchasing preferences to lower emission alternatives
Type
Area
Primary potential
financial impact
Description
Time horizon
Likelihood
Impact
Areas impacted
Response
Targets
Transition (Market)
Downstream
Reduced revenues of higher emission foods
There is a risk that we fail to take advantage of changing purchasing preferences for lower-
emission proteins. Our exposure to this risk is Medium based on our internal assessment,
assuming no mitigation from the transition to lower-carbon intensity proteins produced by the
Group outlined below. We conducted detailed modelling of a potential reduction in demand for
beef and lamb in the UK market, which is considered to be among the most impacted by changes
in consumer behaviour as our research shows how health and sustainability are rapidly growing
in importance as drivers of diet choices. In summary, we determined that beef and lamb products
would receive the largest increase in pricing, albeit with some regional variation, and that the price
of fish or plant-based products are unlikely to increase significantly. More information on this work
may be found on pages 68-69 of the 2021 Annual report.
Short-medium
Likely
Medium
Developed markets
Our mitigation strategy includes achieving significant reductions in the emission intensity of beef
and lamb supplied to Hilton Foods and creating a diversified portfolio of proteins that aligns with
consumer demand.
We are committed to doubling production of plant-based proteins by 2025 and are actively
expanding our plant-based facilities at several sites including a dedicated facility in the UK.
We are investing in acquisitions to gain market share in lower emission proteins, such as the
outright purchase of Dalco, a producer of meat-alternative protein products, Foppen, a large
producer of salmon products, or our investment in Cellular Agriculture.
Hilton Foods has aligned its objectives for mitigating the greenhouse gas emissions of cattle
in the UK and Ireland to the European Round Table for Beef Sustainability (ERBS) objectives of
an intensity reduction of 15% in emissions of cattle by 2025.
Our net zero plans for Scope 3 include decarbonisation roadmaps for emissions reduction related
to the animal protein we handle.
Doubling in sales of plant based, vegetarian and flexitarian products compared to a 2020 baseline.
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Climate-related Transition risks continued
2. Carbon pricing introduced to incentivise purchase of lower-carbon foods
Type
Area
Primary potential
financial impact
Description
Time horizon
Likelihood
Impact
Areas impacted
Response
Transition (Emerging Regulation)
Downstream
Price increases of higher emission products affecting balance of consumer demand
If product pricing is adjusted to reflect its carbon footprint there may be a reduction in consumer
demand, leading to reduced profits from foods where the footprints have not been mitigated.
The timing and methodology by which carbon pricing is imposed is uncertain, but the UK Alliance
on Climate Change recommends the food industry sets a climate tax on food products with
a high footprint to align with UK decarbonisation targets. In New Zealand, plans to integrate the
agricultural sector within the country’s greenhouse gas emissions cap and trade system from
2025 have been proposed.
Medium-long
Likely
Medium
Global
Hilton Foods continues to be actively involved in supply chain carbon reduction programmes
in collaboration with other industry stakeholders and are targeting net zero emissions by 2050.
To progress our objective for reducing the emissions intensity of cattle by 15% by 2025, we have
engaged in leadership of collaborative action to address the footprint of cattle farming with the
European Round Table in Beef Sustainability (ERBS) and UK Cattle Sustainability Platform (UKCSP).
We are in the process of developing a detailed decarbonisation plans for key species to responsibly
reduce our footprint and reduce our exposure to this risk.
Targets
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.
3. Reliance on third parties for achievement of emissions targets
Type
Area
Primary potential
financial impact
Description
Time horizon
Likelihood
Impact
Areas impacted
Response
Targets
Transition (Market and Reputation)
Upstream/own operations
Higher costs, higher cost of capital
Delivery against the Group’s existing and draft updated net zero plan is in part reliant on third
parties, and/or technologies that are not yet available. Failure to meet the Group’s defined targets
may cause reputational damage, dissuade potential investors, or result in greater costs due to
the introduction of carbon pricing. The level of assumption increases in the long term, especially
around the control of our Scope 3 emissions, where we may be limited by our ability to influence
our supply chain. A significant proportion of our footprint derives from the production of beef, and
given we are not integrated at the farm level we rely on farmers and other stakeholders to ensure
the continued minimisation of beef-related emissions.
The largest source of operational emissions are within Scope 2, where the ability to decarbonise
electricity supply may be hindered by the rate of grid decarbonisation in the countries we
operate in and the ability of local grids to support renewable energy tariffs. Additionally, technical
developments are required beyond our immediate scope of control, such as the development
of zero emission commercial vehicles to fully decarbonise our fleet.
Long term
Unlikely
High
Global
We seek as far as possible to influence third parties and promote their decarbonisation progress,
whether through working collaboratively with retailers or engaging with governmental, farm
assurance and industry bodies to shape supply chain decarbonisation policy. We continue to work
with Foods Connected to develop the tools to effectively monitor and accelerate this transition,
and are involved in academic research to better understand our upstream emissions.
We have approved Science Based Targets for Scope 1, 2, and 3. We are revising our near-term
Science Based Targets to align with the SBTi’s new minimum ambition for corporate targets
of 1.5°C above pre-industrial levels.
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OPPORTUNITIES
1. Decarbonisation
Type
Area
Primary potential
financial impact
Description
Time horizon
Likelihood
Impact
Response
Areas impacted
Targets/KPIs
Energy Source, Resource Efficiency
Own operations
Reduced cost and lower price volatility from self-generation, reduced energy use, packaging
and water efficiency.
In our operations, electrification, energy efficiencies, investment in self-generation (solar/wind)
and long-term contracts for renewable electricity sources may reduce outgoing costs, improve
resilience and mitigate against the cost of future carbon pricing.
Improved packaging recyclability, reducing plastic content and reductions in weight may result
in lower packaging costs and less waste.
Short-medium
Very likely
Medium-High
See key emissions reduction drivers above. Further details will be outlined in our transition plan.
We continue to seek grants and subsidies to facilitate facility upgrades as they become increasingly
available.
Global
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.
2. Carbon pricing introduced to incentivise purchase of lower-carbon foods
Type
Area
Primary potential
financial impact
Description
Time horizon
Likelihood
Impact
Response
Areas impacted
Targets/KPIs
Products & Services
Upstream
Increased revenue
By leveraging our IT and automation solutions for supply chain management, we have an
opportunity to add a strategic growth driver in the sale of technology and services to other
companies to enable them to become more efficient and reduce operating emissions.
Through Hilton Services, the Group is at the forefront of technology and physical architecture
design, which improves internal logistics.
Medium
Very likely
High
We continue to work with customers and suppliers to incentivise uptake of our technology
and supply chain solutions, incorporating robotics and warehouse automation systems. Since
our investment in Foods Connected, this subsidiary has continued to grow, providing end-to-
end supply chain management services and further opportunities for category diversification.
We use Foods Connected to both give us the data we need around our business and supply chains,
but also share that data up and downstream, helping farmers and suppliers to consider what
the particular carbon footprint of their part in the supply chain is. Our joint venture with the Agito
Group facilitates our development of highly automated logistics solutions for our supply chain
and retail partners.
We can also lead in environmental data collection and traceability across multi-tier supply chains
and capitalise on growing requirements for transparency across value chains to prevent negative
environmental impacts.
Global
Enable farmers to reduce their emissions and improve biodiversity, to promote more regenerative
farming, by providing planning and reporting tools.
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OPPORTUNITIES continued
3. Meeting consumer demand for foods with demonstrably lower footprints
Type
Area
Primary potential
financial impact
Description
Time horizon
Likelihood
Impact
Response
Areas impacted
Targets/KPIs
Markets
Downstream
Increased revenues from sales of profitable low climate-impact products
Demand is growing not only for vegan and vegetarian food products, but also for a balanced
portfolio of meat and fish products that have significantly reduced environmental impacts. Overall
protein demand is expected to double by 2050, presenting a significant opportunity for increased
revenue if we successfully anticipate changing consumer preferences.
Medium-term
More likely than not
Medium
Hilton Foods has pursued key acquisitions to diversify and strengthen its offering within the vegan/
vegetarian and seafood markets. In 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,
and in 2022 completed the purchase of Foppen to enter the high growth smoked salmon market.
As we do not farm or slaughter animals our infrastructure can react quickly to emerging consumer
behaviour. Hilton Foods is well-placed to respond to changing consumer preferences through the
adaptability of our factories and operations, which would for instance allow us to quickly upscale
production of lower-carbon products such as fish or plant-based as required.
We stay abreast of market demands through our consumer and market insight teams, and
membership of trade bodies and industry associations.
Global
Doubling in sales of vegan, vegetarian and flexitarian products compared to a 2020 baseline,
by 2025.
4. Demonstrated ESG credentials
Type
Area
Primary potential
financial impact
Description
Time horizon
Likelihood
Impact
Response
Markets
Downstream
Increased access to capital, commercial opportunities
Enhancing Hilton Food’s ESG reputation through improved practices and transparency of reporting
may lead to new revenue opportunities from environmentally conscious partners. Investors and
banks increasingly incorporate sustainability criteria into their assessments, with climate change
being a primary concern. Many banks actively take non-financial data into account from providers
such as MSCI and Sustainalytics. Additionally, investors are aligning their portfolios to net zero and
companies may face disinvestment if their plans are deemed insufficient.
Medium
More likely than not
Medium
With an ambition to be a leader in sustainable business, we consider Hilton Foods to be in a very
strong position to satisfy changing stakeholder expectations. As outlined in this report we have
a strong governance structure to manage sustainability issues and maintain appropriate internal
controls to ensure timely and accurate reporting of non-financial information, and progression
against ESG-related targets. Our commitment to sustainable business is reflected by our A- score
from CDP, and strong scores from other rating agencies.
Areas impacted
Targets/KPIs
Global
External ESG ratings
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METRICS AND TARGETS
Climate-related metrics and targets
Hilton Foods reports carbon dioxide
equivalent (CO2e) emissions across a 100-
year timescale (GWP100) aligned to the
IPCC’s sixth Assessment Report and the
recommendations of the Greenhouse Gas
Protocol and the Science Based Targets
initiative. These emissions are reported,
in alignment with the Greenhouse Gas
Protocol, across scope 1, 2 (both location-
and market-based) and all relevant scope
3 categories. This data is independently
verified by GEP Environmental across
all three scopes to a ‘limited level of
assurance’, which is in line with ISO 14064:3
2019. In addition, emissions intensity, total
consumption of electricity and energy
intensity, renewable electricity, gas and
water, as well as emissions from fluorinated
gases are monitored.
When calculating our scope 1, 2 and 3
emissions 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 where available.
We have taken a financial control
approach, with any holding less than
50% of shares excluded, however these
are assessed as minor. Following our
acquisition of Foppen in 2022, this has
been added to scope, just as Fairfax
Meadow and Dalco were added in 2021.
Agito has not been included in any
non-financial disclosure in 2022, as non-
financial data integration is still ongoing;
nonetheless, a screening assessment
has indicated it would not increase our
footprint significantly. GEP Environmental
have verified our scope 1, 2 and 3 emissions
to a limited level of assurance for 2022,
as they did in 2021 and 2020.
Category 1 Purchased Goods and Services
account for 99% of Hilton Foods’ scope
3 footprint, with 98% from purchased
agricultural products. Categories 8, 13,
14 and 15 are not applicable to Hilton
Foods and Categories 2, 3, 4, 5, 6, 7, 9, 10,
11 and 12 are calculated but not material.
Following the acquisition of Fairfax
Meadow we have reappraised our scope
for 2022 to include Category 10 Processing
of Sold Products, as this was not material
it was not backward calculated. To reflect
the increased number of colleagues
working from home, we have included
emissions from homeworking in Category 7
Employee Commuting for 2022.
At Hilton Foods we are constantly working
to improve how we measure and report
our scope 3 emissions. In 2021, we moved
from a financial accounting approach to
an inventory approach. In 2022, we have
refined this to use more regional and
supply chain specific data. This has led
to a change in our estimated emissions
compared to what was reported in
prior years. For clarity and to enable
comparability, we have applied the
updated methodology to calculate our
estimated scope 3 emissions for 2021 and
2020 as well as 2022. Updated scope 3
estimates for prior years are not included
in GEP Environmental’s verification of our
scope 3.
Building on our partnership with
the University of Oxford, we will also
be reporting an estimate of our scope 3
emissions by greenhouse gas for the last
three years. Understanding this will allow
us to better understand our warming
impacts in the future. These are not
included in GEP Environmental’s
verification of our scope 3.
Through our Foods Connected joint
venture, support of the Chirrup.ai project
and sponsorship of a DPhil at Oxford
University, Hilton Foods is actively engaged
in work to improve understanding and
deployment of climate metrics.
Climate-related targets
All our climate-related goals and
objectives, detailed below, are monitored
as KPIs through the year, and reported
to and reviewed by the Board.
In order to begin our work to address
the carbon footprint of both our business
and supply chain, Hilton Foods has set
Science Based Targets covering our scope
1, 2 and 3 emissions and committed to the
Business Ambition for 1.5°C, demonstrating
our long-term goal to achieve net zero
emissions across our value chain before
2050. Our existing ‘well-below 2°C’ targets
are to reduce absolute scope 1 and 2 GHG
emissions 25% by 2030 from a 2020 base
year and to reduce absolute scope 3 GHG
emissions from purchased agricultural
products by 12.3% within the same
timeframe. As well as our ongoing work
to achieve these targets we are actively
engaged in work to update targets to
increase our level of ambition to the ‘1.5°C’
pathway and to align to the new Forestry,
Land and Agriculture (FLAG) guidance.
To ensure we meet these targets,
we have developed detailed site level
decarbonisation plans for each of
our operations, to ensure efficiency
(in line with ISO 50001), purchasing
and capital expenditure decisions are
aligned to our decarbonisation targets.
We are actively seeking opportunities for
investment and grant support to expedite
the implementation of low-carbon
technologies across heating, cooling
and electricity. We are working with key
suppliers and other partners to develop
and implement decarbonisation plans
for our supply chain.
Further details of our climate-related
targets can be found in the Product and
Planet sections of this report. Details of
executive remuneration linked to climate
change are outlined on page 44.
Hilton Food Group PLC Annual Report and Financial Statements 2022
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NON-FINANCIAL DISCLOSURES
Carbon footprint
Scope 1 (tCO2e)
Scope 2 location based
(tCO2e)
Scope 2 market based
(tCO2e)
Scope 3 01. Purchased
goods and services*
Scope 3 02. Capital goods
Scope 3 03. Fuel and
energy-related activities
Scope 3 04. Upstream
transportation and
distribution
Scope 3 05. Waste
Scope 3 06. Business travel
Scope 3 07. Employee
commuting
Scope 3 08. Upstream
leased assets
Scope 3 09. Downstream
transportation and
distribution
Scope 3 10. Processing
of sold products
Scope 3 11. Use of sold
products
Scope 3 12. End-of-life
treatment of sold products
Scope 3 13. Downstream
leased assets
Scope 3 14. Franchises
Scope 3 15. Investments
Scope 3 Forestry, Land
Use and Agriculture (FLAG)
(tCO2e)
2022
Global
(excl. UK)
11,030
47,866
UK
6,437
6,599
Total
17,467
54,465
UK
5,999
8,900
2021
Global
(excl. UK)
9,562
48,349
Total
15,562
57,249
2020 (SBT base year)
UK
4,503
8,607
Global
(excl. UK)
6,136
49,069
Total
10,639
57,675
3
41,586
41,589
1,182
40,822
42,004
0
47,103
47,103
3,138,700 9,423,085 12,561,785
3,011,947
10,199,534
13,299,866
3,653,411
10,720,381
14,392, 177
2,253
3,134
7,583
13,824
9,835
16,958
2,004
1,649
5,950
8,019
7,954
9,668
3,578
1,535
102,644
106,221
9,799
11,334
3,250,823
11,867,233
15,136,440
3,890,451
11,395,565
15,286,016
3,526
33,426
36,952
2,478
75,189
77,666
3,040
75,673
78,713
2,764
322
1,354
7,581
609
1,985
10,345
18,004
931
3,339
39
898
11,195
141
1,425
29,199
180
2,323
6,062
6,970
13,032
2
917
3
1,081
5
1,998
Out of Scope
Out of Scope
Out of Scope
3,523
15,302
18,825
4,961
114,599
119,560
4,240
118,841
123,082
438
0
438
Out of Scope
Out of Scope
2,561
27,714
30,274
7,911
84,093
92,004
8,199
104,641
112,840
7,384
54,651
62,035
6,357
17,032
23,389
6,432
23,471
29,904
Out of Scope
Out of Scope
Out of Scope
Out of Scope
Out of Scope
Out of Scope
Out of Scope
Out of Scope
Out of Scope
3,088,629 9,376,063 12,464,692
3,241,797
11,802,691 15,044,488 3,860,330 11,340,601
15,200,931
Scope 3 Upstream (tCO2e)
3,152,054 9,488,091
12,640,145
3,275, 894
11,969,151
15,263,431 3,905,585
11,591,734 15,497,320
Scope 3 Downstream
(tCO2e)
13,905
97,666
111,571
19,229
215,724
234,953
18,872
246,954
265,825
Scope 3 non-FLAG (tCO2e)
48,259
209,694
287,025
53,327
382,184
453,895
64,127
498,087
562,214
Scope 3 CO2 (tCO2)^
684,707
1,736,586
2,421,293
641,837
1,091,373
2,543,210
724,673
1,882,355
2,607,028
Scope 3 CH4 (tCH4)^
Scope 3 N2O (tN2O)^
51,696
3,524
173,232
224,928
47,559
189,819
237,378
62,185
205,014
267,198
10,246
13,770
3,614
11,392
15,005
4,272
11,781
16,053
Scope 3 Unallocated (tCO2e)^
109,271
464,736
602,859
148,519
475,614
642,518
134,931
635,414
788,730
Total Scope 3 (tCO2e)*
3,165,959
9,585,757
12,751,716
3,056,248
10,517,176
13,591,808
3,689,416
11,163,504
14,869,306
Total Scope 1, 2 & 3
location based (tCO2e)
Intensity ratio scope 1 & 2
– market based (tonnes CO2e
per tonne produced)
3,178,995 9,644,653 12,823,648
3,310,022
12,242,786
15,571,193
3,937,567
11,893,893
15,831,459
3,295,123
12,184,875
15,498,383
3,924,457
11,838,688
15,763,145
0.05
0.15
0.12
0.03
0.19
0.12
0.03
0.12
0.10
2020 Scope 1 and Scope 2 (location and market based) reported emissions and Scope 1, 2 and 3 emissions for 2021 and 2022 have been externally verified with limited
assurance by an independent third party (GEP Environmental Ltd) in accordance with ISO14064:3 2019
* Data for 2020 and 2021 is provided as reported in 2021, above is recalculated to align to the 2022 dataset and methodology
^
Data based on recalculated scope 3 emissions using same dataset as 2022 where relevant, it has not been possible in all calculations to split emissions by gas,
where this is not available data has been reported as CO2e
84 Hilton Food Group PLC Annual Report and Financial Statements 2022
SUSTAINABILITY REPORT
NON-FINANCIAL DISCLOSURES
Energy, kWh
Total renewable
fuel consumption
Coal
Heavy oil
2022
Global
(excl. UK)
0
0
0
UK
0
0
0
Total
UK
0
0
0
0
0
0
2021
Global
(excl. UK)
0
0
0
Total
UK
0
0
0
2020
Global
(excl. UK)
0
0
0
Total
0
0
0
1,981,079
1,981,079
0
0
0
0
Transport fuel
8,417,671
4,456,096
12,873,767 5,584,948
1,044,790
6,627,737
LPG
172,210
6,461,190
6,633,400
0
3,717,606
3,717,606
Natural gas
15,513,205
32,454,081
47,967,286 15,537,123
24,876,987
40,414,110 21,332,658
30,218,747
51,551,406
16,513,934
38,191,001
54,704,935
21,122,071
29,639,383
50,761,453 21,332,658
32,199,827 53,532,485
34,131,367 112,454,749
146,586,116 42,295,591 99,553,665 141,849,256 37,769,233
97,429,104 135,198,337
303,297
2,410,998
2,714,295
223,291
2,926,408
3,149,699
243,000
2,260,000
2,503,000
34,120,813
56,412,858
90,533,671 38,510,862
35,573,856
74,084,718
243,000 25,984,033
26,227,033
10,554
56,041,891
56,052,445
3,784,729 63,979,808
67,764,537 37,526,233
71,445,071
108,971,304
100%
50%
62%
91%
36%
52%
0
5,345,664
5,345,664
0
2,000,553
2,000,553
0
0
0
0
7,106,611
7,106,611
0
0
0
0
1,392,196
1,392,196
34,120,813
61,758,522
95,879,335 38,510,862
35,573,856
74,084,718
243,000 25,984,033
26,227,033
24,113,640
101,413,813
125,527,452 24,906,799 100,725,802 125,632,601 58,858,892 105,037,093 163,895,985
58,234,453 163,172,334 221,406,787 63,417,662 136,299,658 199,717,320 59,101,892
131,021,126 190,123,018
486
450
459
293
513
405
447
397
411
Total non-
renewable fuel
consumption
Total electricity
consumption
Solar electricity
generation
Total renewable
electricity
consumption
Total non-
renewable
electricity
consumption
Proportion
of renewable
electricity
Total renewable
other energy
consumption
Non-renewable
other energy
consumption
(district heating)
Total renewable
energy
consumption
Total non-
renewable energy
consumption
Total energy
consumption
Energy
consumption
(kWh used per
tonne of volume
produced)
Hilton Food Group PLC Annual Report and Financial Statements 2022
85
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW SUSTAINABILITY REPORT
NON-FINANCIAL DISCLOSURES continued
Fresh-water (m3)
UK*
Ireland
The Netherlands**
Sweden
Denmark
Poland
Greece***
Portugal^
Australia
New Zealand
Total Fresh-water Use
Total Fresh-water Withdrawals
Intensity (m3 per tonne of product produced)
2022
391,453
26,506
284,899
57,069
48,048
98,147
96,500
31,959
254,381
105,996
1,394,957
1,379,145
2.90
2021
290,064
39,231
173,478
61,830
44,945
89,366
28,953
264,544
21,218
1,013,629
998,288
2.03
2020
329,600
45,000
164,700
58,300
46,000
96,000
31,950
249,300
2019
297,500
49,000
169,000
59,000
45,000
74,000
35,000
47,000
1,020,850
775,500
* Fairfax Meadow sites included in UK number from 2022, due to water meter failure, 2022 usage at Laforey Road is based on estimated billing.
** Inclusion of 100% of Dalco from 2021 and Foppen from 2022.
*** Inclusion of Foppen from 2022.
^ Adjusted to JV holding.
Sites in areas of water stress (defined by World Resources Institute)
Very high = 0 High = 2 - Hilton Foods Australia site in Truganina and Foppen site in Greece
86 Hilton Food Group PLC Annual Report and Financial Statements 2022
SUSTAINABILITY REPORT
NON-FINANCIAL DISCLOSURES continued
Workforce
Male Female
Total Male Female
Total Male Female
Total
Male Female
Total
Male Female
Total
2022
2021
2020
2019
2018
Board
Executive
Leadership
Team
Senior
Leadership*
4
9
3
3
7
12
5
7
2
3
7
10
5
8
2
2
7
10
5
8
1
2
6
10
5
8
1
2
6
10
28
13
41
28
11
39
47
11
58
39
11
50
39
11
50
Senior
Management**
201
97
298
Employees
4,256
2,825
7,081 3,395 2,386
5,781
3,185 2,206
5,391
2,981
1,963 4,944
2,878
1,840
4,718
Executive
Leadership
Team
Senior
Management
(SSP)
Average
training time
(hours)
Number of
employees
who
completed soft
skills training
Average
training
expense per
employee
Number of
employees
who have
been trained
on ethical
standards
(i.e. anti bribery
and corruption)
% of employees
covered by
collective
bargaining
agreements
Total staff
turnover
Total fatality
rate
75%
25%
70%
30%
80%
20%
80%
20%
80%
20%
8,444
6,554
4,523
67%
33%
12,007
2,669
£550
3,047
27%
41%
33%
31%
0
24.91%
0
17.10%
0
21.90%
22.50%
0
0
We have received no human rights/quality violations for the past three years.
* Senior Leadership is defined in line with the FTSE Women Leaders Index, direct reports to Executive Leadership Team.
** Senior Management is defined in line with Hilton Foods Sustainable Protein Plan (SSP) ‘30% of women in leadership’ target. This is defined as all those who identify as
women as Functional Lead, Head of Department or Job Level 5.
The decline of employees covered by collective bargaining agreements is representative of Hilton Foods new acquisitions in 2022.
Board of Directors
Senior Leadership
Employees
Male 57%
Female 43%
Male 68%
Female 32%
Male 60%
Female 40%
Hilton Food Group PLC Annual Report and Financial Statements 2022
87
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW
SUSTAINABILITY REPORT
NON-FINANCIAL DISCLOSURES continued
Health and safety
Hours Worked
First Aid Incidents
Lost Time** Incidents
Lost Time Incident Frequency Rate
Number of Days Lost
Lost time incident severity rate
Non-injury incidents/hazards
2022
2021
10,238,356
9,559,280
2020
9,143,579
2019
9,717,405
645
138
13
4,867
475
6,046
586
138
14.44
3,514
367.63
5,191
677
87
9.51
2,198
240.33
4,993
573
147
15.13
2,012
207.05
85*
% Change
(2022 vs 2021)
7%
10%
0%
7%
39%
29%
16%
* 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 two fiscal years covers 100% of directly employed Hilton Foods employees (this number
excludes contractors).
Nutritional context, for growing areas in healthier products % of total sales
Products with a high source of Omega 3
Low fat products (<3%)
Lower fat products (<5%)
Products containing E Numbers
Low salt products (less than 0.12g/100g)
Other information
Total site waste (tonnes)
Customer service level (%)
Product produced (tonnes)
Charitable donations
2022
1%
3%
9%
18%
15%
2022
27,456
95.86%
481,831
£153,327
2021
1%
3%
16%
21%
15%
2021
47,405
96.44%
492,588
£72,629
No Hilton Foods staff have been disciplined or dismissed due to non-compliance with anti-corruption policy/policies in the current
and last two fiscal years.
Hilton Foods has no redundancies or job cuts affecting more than 5% of the total workforce for the current and last two fiscal years.
88 Hilton Food Group PLC Annual Report and Financial Statements 2022
SUSTAINABILITY REPORT
SASB PROCESSED FOODS REPORT
SASB Code
Sub-Category
FB-FR-130a.1
Energy
Management
2nd Sub-
category
Measurement
FB-PF-140a.1 Water
Measurement
Management
Disclosure
Unit of Measure
2022 Response
Gigajoules (GJ),
Percentage (%)
See page 85 of this report.
(1) Total energy consumed,
(2) percentage grid
electricity, (3) percentage
renewable
(1) Total water withdrawn,
(2) total water consumed,
percentage of each in
regions with High or
Extremely High Baseline
Water Stress
Thousand cubic
metres (m³),
Percentage (%)
FB-PF-140a.2 Water
Measurement Number of incidents
Number
Management
of non-compliance
associated with water
quantity and/or quality
permits, standards, and
regulations
1) 1,379,145
2) 1,394,957
3) 11% of sites are in High water stressed
areas; these are our Hilton Foods
Australia site in Truganina and the newly
acquired Foppen site in Greece.
Two incidents of non-compliance in
2022. The first at Hilton Foods Holland
due to the lack of system in place with
a lay-out of all the backlash valves;
this non-conformance has been
resolved. The second in the Hilton
Foods APAC Truganina site due to
the exceedance of the trade waste
pH limit. An investigative report was
submitted to Greater Western Water
(GWW) outlining the root cause
and the actions to rectify the issues
identified. GWW were satisfied with
the corrective actions and closed out
the non-conformance.
See 'Resource Efficiency' disclosure
on page 68 of this report.
20 sites are GFSI certified. 14 sites
are certified against BRC standard,
11 sites are AA (>5 minors), three sites
are A grade (6-10 minors). Four sites
are FSCC22000, all of which have been
graded as Pass. Two sites are certified
IFS standard, both rated 96% to high
level grade.
In FY22, 90% of our ingredients
sourced from Tier 1 supplier facilities
certified to a Global Food Safety
Initiative (GFSI) recognized food safety
certification program.
Number,
Percentage (%)
In FY22, we received no notices
of food safety violations.
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.
Hilton Food Group PLC Annual Report and Financial Statements 2022
89
N/A
Rate
Percentage (%)
by cost
FB-PF-140a.3 Water
Description
Management
FB-PF-250a.1
Food Safety
Measurement
FB-PF-250a.2 Food Safety
Measurement
FB-PF-250a.3 Food Safety
Measurement
FB-PF-260a.1 Health &
Nutrition
Measurement
Description of water
management risks and
discussion of strategies
and practices to
mitigate those risks
Global Food Safety
Initiative (GFSI) audit
(1) non-conformance
rate and (2) associated
corrective action rate for
(a) major and (b) minor
non-conformances
Percentage of ingredients
sourced from Tier 1
supplier facilities certified
to a Global Food Safety
Initiative (GFSI) recognized
food safety certification
program
(1) Total number of
notices of food safety
violation received,
(2) percentage corrected
Revenue from products
labelled and/or marketed
to promote health and
nutrition attributes
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW SUSTAINABILITY REPORT
SASB PROCESSED FOODS REPORT continued
SASB Code
Sub-Category
FB-PF-260a.2 Health &
Nutrition
2nd Sub-
category
Description
Disclosure
Unit of Measure
2022 Response
N/A
Discussion of the process
to identify and manage
products and ingredients
related to nutritional and
health concerns among
consumers
Hilton Foods is actively engaged
in reformulating products to reduce
the fat, salt, sugar and calories, where
appropriate, across our global product
range.
We actively promote the adoption
of Omega 3 products amongst our
customers, engaging with the salmon
industry to increase the Omega 3
content.
As a predominantly private label
supplier, we work in partnership
with our customers to deliver health
benefits to their consumers; please
refer to 'Balanced healthy diets'
disclosure on pages 64-65 of this
report.
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.
Hilton Foods does not generate
revenue from products labelled as
(1) containing genetically modified
organisms (GMOs) and (2) non-GMO.
Hilton Foods has not received any
incidents of non-compliance with
industry or regulatory labelling and/or
marketing codes in FY22.
Reporting
currency
Hilton Foods has not been a party
to any legal proceedings in FY22 in
relation to branding/product labelling.
N/A
See 'Circular Packaging' disclosure
on pages 66-67 of this report.
FB-PF-270a.1 Product
Measurement Percentage of
Percentage (%)
Labelling &
Marketing
advertising impressions
(1) made on children and
(2) made on children
promoting products that
meet dietary guidelines
FB-PF-270a.2 Product
Labelling &
Marketing
Measurement Revenue from products
labeled as (1) containing
genetically modified
organisms (GMOs) and
(2) non-GMO
Reporting
currency
FB-PF-270a.3 Product
Measurement Number of incidents
Number
Labelling &
Marketing
FB-PF-270a.4 Product
Measurement
Labelling &
Marketing
FB-PF-410a.2 Packaging
Description
Lifecycle
Management
of non-compliance with
industry or regulatory
labelling and/or
marketing codes
Total amount of
monetary losses
as a result of legal
proceedings associated
with labelling and/or
marketing practices
Discussion of strategies
to reduce the
environmental impact
of packaging throughout
its lifecycle
FB-PF-430a.1 Environmental
Measurement Percentage of food
& Social
Impacts of
Ingredient
Supply Chain
ingredients sourced that
are certified to third-
party environmental
and/or social standards,
and percentages by
standard
Percentage (%)
by cost
In FY22, 90% of our ingredients
sourced from Tier 1 supplier facilities
certified to a Global Food Safety
Initiative (GFSI) recognised food safety
certification programme.
Activity Metrics Sub-Category
2nd Sub-
Category
Disclosure
Unit of Measure
2022 Response
FB-PF-000.A N/A
FB-PF-000.B N/A
Measurement Weight of products sold Metric tons (t)
481,831
Measurement Number of production
facilities
Number
Hilton Foods has 24 production
facilities
90 Hilton Food Group PLC Annual Report and Financial Statements 2022
SUSTAINABILITY REPORT
GRI INDEX 2022
Statement of use
Hilton Food Group plc has reported in accordance with the GRI
Standards for the period 31 December 2021 until 31 December 2022.
GRI 1 used
GRI 1: Foundation 2021
Applicable GRI Sector Standard(s)
N/A
GRI Standard
GRI 2: General Disclosures 2021
2-1 Organisational details
Annual report page 144
2-2 Entities included in the organisation’s sustainability reporting
Annual report page 83
2-3 Reporting period, frequency and contact point
2-4 Restatements of information
2-5 External assurance
Material Topics
GRI 3: Material Topics 2021
3-1 Process to determine material topics
3-2 List of material topics
The Annual report is
published annually in
April, the reporting period
is 31 December 2021 to
31 December 2022. This is
in alignment with financial
reporting. Publication date
and point of contact are
detailed on page 91.
Annual report page 83
Annual report page 83
Annual report page 43,
details our double
materiality process.
Annual report page 43
APPROVAL OF THE
STRATEGIC REPORT
Pages 6 to 91 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
4 April 2023
Hilton Food Group PLC Annual Report and Financial Statements 2022
91
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEW PASSION
LEADERSHIP
92
Hilton Food Group PLC Annual Report and Financial Statements 2022
PIONEERS OF PLANT-
BASED PRODUCTS.
Today, vegan and
vegetarian food is an
essential part of everyday
eating, and we operate
dedicated meat-free
facilities to develop
insight-driven products
that consumers desire.
GOVERNANCE
BOARD OF DIRECTORS
GOVERNANCE AT A GLANCE
CORPORATE GOVERNANCE
STATEMENT
DIRECTORS’ REPORT
REPORT OF THE AUDIT
COMMITTEE
REPORT OF THE NOMINATION
COMMITTEE
DIRECTORS’ REMUNERATION
REPORT
Directors’ remuneration policy
Annual report on remuneration
STATEMENT OF DIRECTORS’
RESPONSIBILITIES
INDEPENDENT AUDITORS’
REPORT
94
96
98
104
106
109
111
114
120
129
130
Hilton Food Group PLC Annual Report and Financial Statements 2022
93
STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTSADDITIONAL INFORMATION BOARD OF DIRECTORS
Non-Executive Chairman
Executive Directors
Robert Watson, OBE
Non-Executive Chairman
Tenure: 20 years
Independent: No
Biography: 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: 30 years
Independent: No
Biography: 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.
Matt Osborne
Chief Financial Officer
Tenure: 1 year as a Director
Independent: No
Biography: Matt joined Hilton Foods in 2018 and from 2018 to 2022 served as the Hilton Foods
Group Financial Controller. He was promoted to Chief Financial Officer in May 2022.
Key skills and competencies: Matt has a degree in chemistry and is a qualified
Chartered Accountant.
Current external appointments: None.
Previous experience: Matt trained with Grant Thornton and joined Greene King in 2007
reaching the position of Group Financial Controller.
Company Secretary
Neil George
Company Secretary
Neil joined Hilton Foods in 2007 as Group
Financial Controller and Company Secretary.
He began his career in finance qualifying
as a Chartered Accountant having trained
within a regional practice. Since moving
into industry he has worked in finance and
company secretarial roles across a variety of
international publicly listed manufacturing
businesses including in the packaging
machinery and medical device sectors.
Committees key
Audit Committee
Remuneration Committee
Nomination Committee
S Executive Sustainability Committee
Underline denotes Committee Chair.
94 Hilton Food Group PLC Annual Report and Financial Statements 2022
BOARD OF DIRECTORS
Non-Executive Directors
Angus Porter
Non-Executive Director &
Senior Independent Director
Tenure: 4 years
Independent: Yes
Biography: Angus joined Hilton as
an independent Non-Executive Director
in 2018. He is the Senior Independent
Director and 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
Christine Cross
Non-Executive Director
Tenure: 7 years
Independent: Yes
Biography: 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
Rebecca Shelley
Non-Executive Director
S
Tenure: 3 years
Independent: Yes
Biography: Rebecca joined Hilton in
2020 as an independent Non-Executive
Director. She is Chair of 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.
Patricia Dimond
Non-Executive Director
Tenure: 1 year
Independent: Yes
Biography: Patricia joined Hilton in 2022
as an independent Non-Executive Director.
She is Chair of the Audit Committee.
Key skills and competencies: Patty 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.
Board. He has an MA in natural sciences
and PhD from the University of Cambridge.
Current external appointments:
Non-Executive Co-Chairman of Direct Wines
Ltd. and Non-Executive Director at McColl’s
Retail Group.
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, Non-Executive Director
of TDC A/S (Denmark).
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 and several
private companies as well as numerous
advisory roles.
Previous experience: Christine was Non-
Executive Director at Clipper Logistics plc.
zooplus AG (Germany), Sonae SGPS SA
(Portugal), Next plc, Woolworths Limited
(Australia), Brambles Limited (Australia) and
Kathmandu Holdings Limited (New Zealand).
Current external appointments:
Non-Executive Director at Sabre
Insurance Group plc and Liontrust Asset
Management plc.
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, a Trustee of the
Institute of Grocery Distribution and formerly
Non-Executive Director at Arraco Global
Markets Ltd.
Current external appointments:
Non-Executive Director at Foresight VCT
plc, Aberforth Smaller Companies Trust plc,
English National Opera and the National
Academy for Social Prescribing.
Previous experience: Executive roles with
Storehouse, Mothercare and Value Retail plc,
a management consultant with McKinsey
& Co and formerly Non-Executive Director
at LXi REIT plc.
Hilton Food Group PLC Annual Report and Financial Statements 2022
95
STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTSADDITIONAL INFORMATION
GOVERNANCE AT A GLANCE
OUR PURPOSE
Growth and success through partnership.
Through the creation of efficient, innovative and responsible food manufacturing
and supply chain solutions with the ambition to be the international food and
supply chain partner of choice.
2022/23 HIGHLIGHTS
91%
of employees contributed to
the annual engagement survey
in 2022
(2021: 77%)
43%
57%
Board female representation
(2021: 29%)
Independent Non-Executive
Directors on the Board
(2021: 57%)
For more information
see page 48
For more information
see page 102
For more information
see pages 94-95
BOARD COMPOSITION AS AT 1 JANUARY 2023
Board gender balance
Chair and Non-Executive Director tenure
57%
71%
71%
43%
29%
29%
2022
2021
2020
Male
Female
Board independence
Robert Watson
Christine Cross
7
Angus Porter
4
Rebecca Shelley
3
Patricia Dimond
1
20
Years:
5
10
15
20
HIGHLIGHTS
– Successful transition of new CFO & SID
– Board female representation increased
above the 40% FCA target
– Positive external Board evaluation
– Continuing low level of whistleblowing
reports
Executive Directors
Independent Non-Executive Directors
Non-Executive Chair
2
4
1
96 Hilton Food Group PLC Annual Report and Financial Statements 2022
GOVERNANCE AT A GLANCE
OUR GOVERNANCE FRAMEWORK
Shareholders
The Board
Leads the Group’s governance structure and is collectively responsible for promoting the
long-term sustainable success of the Group. Sets and approves the strategy and key policies
and monitors progress towards achieving these objectives
Chairman
Leads the Board.
Responsible for ensuring the
Board’s overall effectiveness
in directing the Company.
Ensures Board meeting agendas
are aligned with the business
strategy, in collaboration with the
CEO and Company Secretary.
Promotes a culture of openness
and debate.
Senior Independent Director
Works closely with the Chair,
acting as a sounding board and
as an intermediary for the other
Directors and shareholders.
They are available for shareholders
to raise concerns that normal
channels have failed to resolve.
Chief Executive Officer
Chief Financial Officer
Responsible for the day-to-day
management of the business.
Develops the strategic direction
and promotes our culture
and values.
Responsible for all financial related
activities including risk, treasury,
and finance strategy.
In collaboration with the CEO
oversees strategic planning, deal
analysis and negotiations, and
investor relations.
Independent
Non-Executive Directors
Responsible for holding
management and Executive
Directors to account against the
agreed performance objectives.
They apply independent judgement,
expertise and oversight to critically
challenge management and to
support strategy development.
They scrutinise the robustness and
effectiveness of financial controls
and risk management processes.
Committees
Company Secretary
Responsible for advising the Board
on all governance matters and
ensuring compliance with Board
procedures.
Supports the Chairman in
ensuring that the Directors
receive timely, accurate and clear
information.
All Directors have access to the
advice of the Company Secretary.
The Board has delegated certain responsibilities to formal Board subcommittees
Audit
Committee
Read more
see page 106
Remuneration
Committee
Read more
see page 111
Executive Team
Nomination
Committee
Read more
see page 109
Implementation of the agreed strategy and budget and the day-to-day management
of the Group’s operations is delegated to the Executive Leadership Team, led by the CEO
Find out more about the Executive Team
www.hiltonfoods.com/who-we-are/executive-leadership-team
The Executive Team has delegated certain responsibilities to executive subcommittees
Executive Committees
Risk Management Committee
Sustainability Committee
Reports to the
Audit Committee
Chaired by an Independent
Non-Executive Director
Hilton Food Group PLC Annual Report and Financial Statements 2022
97
STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTSADDITIONAL INFORMATION CORPORATE GOVERNANCE STATEMENT
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.
Our core values, shown opposite, guide
us in delivering a sustainable future
for all our stakeholders. These values
are integral to our strategic compass,
which navigates us. Our strong values-
based culture supports us in achieving
good governance.
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.
Further information including our business
model can be found on pages 12-21.
GOVERNANCE CODE AND
COMPLIANCE
We evaluate our governance against
principles and provisions contained in
the 2018 UK Corporate Governance Code
(“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 111 to 128 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 2022 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 below.
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.
Membership
At the date of this report the Board
consists of the Chairman, two Executive
Directors and four Non-Executive Directors
whose names, responsibilities, brief
biographies and membership of Board
Committees are set out on pages 94 and
95. The Directors bring strong judgement
and expertise to the Board’s deliberations
and with diversity achieves a balance of
skills and experience appropriate for the
requirements of the business.
During the year Patricia Dimond joined
the Board 1 April 2022 as an independent
Non-Executive Director. At Hilton’s 2022
AGM John Worby did not seek re-election
and therefore stepped down as an
independent Non-Executive Director.
Nigel Majewski also stepped down at
the AGM as CFO and was replaced by
Matt Osborne, previously Hilton’s Group
Financial Controller.
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 127 which
charts Hilton’s total shareholder return
over the past ten years showing average
compound annual growth of 10.1% despite
the challenges experienced during 2022
which compares with 6.6% 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, over
the 16 years since flotation, is 10.0%.
98 Hilton Food Group PLC Annual Report and Financial Statements 2022
CORPORATE GOVERNANCE STATEMENT
Robert joined Hilton initially as Chief
Executive, transitioning during 2018
to Executive Chairman and in 2021 he
moved into a non-executive capacity.
This transition path had 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 continue to have
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 judgement that is in the
best interests of the Group. The 2022
external Board evaluation supported the
Board’s view that under the leadership
of Robert Watson Hilton has grown
to be a successful FTSE 250 company.
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 Group, its history,
the industry in which it operates and
its stakeholders. He has shown that he
is able to chair and monitor the Group
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
Group 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 2024.
Non-Executive Directors
The Non-Executive Directors, excluding
the Chairman but including the Senior
Independent Director, are considered to be
independent as none of the circumstances
detailed in the UK Corporate Governance
Code apply and that no other relevant
circumstances apply all having served
on the Board for seven 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
Hilton 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
Angus Porter replaced John Worby
as Hilton’s Senior Independent Director
during the year. He 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.
OUR VALUES
Collaborative
Working together
across functions and
geographies is core
to our DNA, driving us
forward as a business.
We believe passionately
in the power of the team
and diverse viewpoints
on a given challenge.
We collaborate internally,
as well as with our
network of external
partners, advisors
and suppliers to deliver
rigorous solutions that
work.
Innovative
Our innovative
approach keeps us
ahead of our competitors.
The desire for better
ways of doing things lies
behind all that we do,
across all functions of the
business. Our production,
logistics and technology
systems are in a state
of constant development
and improvement. Our
appetite for innovation
fuels our partners’
growth.
Agile
We take it as a
given that the world,
the market, and the
needs of customers,
consumers and our
people are constantly
changing. We therefore
build facilities, systems
and processes with
agility top of mind. We
react quickly to change
to keep us, and our
partners, ahead of
the pack.
Ambitious
We are never content
with the status quo or
with how we are doing
today. If something is
going well, we ask: how
can we make it better?
We set challenging
goals for ourselves
as individuals and for
the services that we
offer our customers.
And we achieve these
goals together.
Responsible
We do what’s right
because it’s right, not
because we are obliged
to. We go way beyond
what regulations
and the law demand,
because we believe that
all businesses should
be a force for good
in their communities
and beyond. We care
about each other, about
the planet and about
the generations yet
to come.
Hilton Food Group PLC Annual Report and Financial Statements 2022
99
STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTSADDITIONAL INFORMATION CORPORATE GOVERNANCE STATEMENT continued
This timeline sets out an overview of key Board activities throughout 2022.
Trading update
The January trading
update was reviewed
by the Board
Agito joint venture
Announcement of
a joint venture with
Agito, automation and
technology solutions
business
Board changes
Patricia Dimond appointed as an
Independent Non-Executive Director
2021 Full year results
The Board approved the 2021
full year results
JANUARY
MARCH
APRIL
MAY
JULY
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
Foppen acquisition
Completion of the acquisition of the
smoked salmon producer, Foppen
Board changes
Matt Osborne appointed
as Chief Financial Officer
John Worby and Nigel Majewski
retired from the Board
Angus Porter replaced John Worby
as the Senior Independent Director
AGM
Hybrid AGM held from the Hilton
Foods offices in Huntingdon, UK
Trading update
The AGM trading update was
reviewed by the Board
100 Hilton Food Group PLC Annual Report and Financial Statements 2022
CORPORATE GOVERNANCE STATEMENT continued
Final dividend
A full year dividend of
21.5p per ordinary share
was paid to shareholders
21.5p
Foods Connected
Hilton’s investment
in Foods Connected
increased from
50% to 65%
2022 interim dividend
An interim dividend of
7.1p per ordinary share
was paid to shareholders
7.1p
Strategic partnership
The Company
announced the
formation of a long-term
strategic collaboration in
Singapore with Country
Foods Pte Ltd
External Board
evaluation
Questionnaires
and interviews
JULY
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
Cellular Agriculture
Hilton announced an agreement to invest
in a leading UK cultured meat technology
venture, Cellular Agriculture Limited
Strategy Day
The Board met to
review strategy
Trading update
The November
trading update was
reviewed by the
Board
Interim Results
The Board approved the 2022
Half Year results
APAC Visit
The Board visited our facilities in Brisbane,
Australia and Auckland, New Zealand
Hilton Food Group PLC Annual Report and Financial Statements 2022
101
STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTSADDITIONAL INFORMATION CORPORATE GOVERNANCE STATEMENT continued
Board balance and diversity
Tables for reporting on gender identity or
sex and ethnic background as at 1 January
2023 are set out below.
Hilton is committed to diversity on its
Board, Executive Committee and its direct
reports including implementing targets
for female representation and persons
of colour. Further diversity information
on Executive Committee direct reports
and all employees can be found in the
Sustainability report on page 87. We will
look to increase diversity within the Group
at every opportunity in the future.
During the year the balance of
independent Non-Executive Directors
on the Board was 57.1% and female
representation on the Board was initially
28.6%. Following the appointment of
Patricia Dimond and departure of John
Worby, female representation on the
Board increased to 42.9%, thereby meeting
the Board female FCA target. Other FCA
targets relating to senior positions on the
Board held by women and Board positions
held by those from a minority ethnic
background have not yet been met.
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 conflict of interest during
2022 involving Hilton’s CEO, Philip Heffer,
in relation to its trading company Hilton
Food Solutions Limited. Philip owned
10% of the shares in this company and
during the year exercised an option to sell
these shares to Hilton. Under a formula
contained in the shareholders’ agreement
the consideration was calculated at
£1,151,000. The transaction was included
as a resolution for approval at Hilton’s 2022
AGM and was passed by shareholders
following which the transaction completed
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.
Number
of Board
members
Percentage
of the
Board
Number
of senior
positions on
the Board
(CEO, CFO,
SID and Chair)
Number in
executive
management
Percentage
of executive
management
Table for reporting on gender identity or sex
Men
Women
4
3
57.1%
42.9%
Table for reporting on ethnic background
White British
or other White
(including minority-
white groups)
Other ethnic groups
7
0
100.0%
0.0%
4
0
4
0
9
3
11
1
75.0%
25.0%
91.7%
8.3%
102 Hilton Food Group PLC Annual Report and Financial Statements 2022
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
Philip Heffer
Matt Osborne
(appointed
24 May 2022)
Nigel Majewski
(resigned
24 May 2022)
Christine Cross
Angus Porter
Rebecca Shelley
Patricia Dimond
(appointed
1 April 2022)
John Worby
(resigned
24 May 2022)
9
9
5
4
9
9
9
8
4
100%
100%
83%
100%
100%
100%
100%
100%
100%
OTHER GOVERNANCE
Training
Training is available to the Board to develop
their knowledge and understanding of the
business and to enable them to perform
their duties as Directors. Regular updates
on regulatory, governance and legal
matters is provided as part of the Board
pack prior to each meeting and where
relevant throughout the year. The Directors
have access to the Board portal which
is used as a source of reference materials
including a range of articles and reports
on relevant topics. Expert internal and
external speakers deliver tailored training
as required.
During the year the Board received
specialist sessions to update on Company
strategy and organisational transformation
and training to prepare for the possible
event of a takeover bid. The Board also
received training from external experts
on sustainability matters including
Climate related Financial Disclosures,
climate change and human rights.
They also received an update on energy
market dynamics.
CORPORATE GOVERNANCE STATEMENT continued
The Board visited our facilities in Brisbane,
Australia and Auckland, New Zealand
which included factory tours, meetings
with colleagues and an opportunity to
see the new Hilton food park concept.
Performance evaluation
An external performance evaluation
of the Board was performed during the
year. Following a formal selection process
Constal Limited was chosen to carry out
the review who were verified as being
independent. The process comprised
an initial short questionnaire followed
by an interview with each Director and
the Company Secretary.
Constal’s report concludes that the Board
and the Board Committees continue to
operate effectively and in particular:
– Under the leadership of Robert
Watson and Philip Heffer, together
with experienced NEDs and a strong
executive team, Hilton has grown to
be a successful FTSE 250 company but
is now bigger and more complex having
to navigate new and major challenge
– Following work on corporate
governance procedures, the next
stage of development is to create the
environment where this Board can bring
its experience and external perspectives
to bear on longer-term, more strategic
issues too
– There is a strong culture and mutual
respect but there is scope for more
interaction in the boardroom
– The strategy is clear and well
understood by the Board and
management
– There is general satisfaction with
how risks are identified, prioritised
and managed but with room for
improvement
The main areas for Board development
comprise adding value around strategy
and long-term value creation including:
i) succession planning, ii) improving
agendas, Board papers and timelines,
iii) increasing opportunities to align as a
team and iv) considering lessons learned.
Annual General Meeting
Our 2023 AGM will continue in a hybrid
format at which shareholders will be
asked to vote on 17 resolutions dealing
with key governance matters, including
the reappointment of all Directors,
approval of the Directors’ remuneration
report and the reappointment of
the auditors.
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 26 to 31.
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. 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 has identified the key business
risks within its 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 via a 24/7/365
telephone and web-based reporting
service available in all local languages.
The policy allows anonymised reporting
and that reports are treated confidentially.
More information on this policy can be
found on our website. The Board receives
reports on any communications reported
via this mechanism. During the year one
whistleblowing report was received related
to a human resource matter.
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. The recently
updated 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.
By order of the Board
Neil George
Company Secretary
4 April 2023
Hilton Food Group PLC Annual Report and Financial Statements 2022
103
STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTSADDITIONAL INFORMATION DIRECTORS’ REPORT
The Directors present their
report together with the
audited consolidated financial
statements for the 52 weeks
ended 1 January 2023.
Reference to other relevant
information incorporated into
this report is below.
STRATEGIC REPORT
The Strategic report on pages 8 to 91
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 23.
This Strategic report also includes the
Sustainability report on pages 36 to 91.
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.
PRINCIPAL ACTIVITIES
The Group is the international food and
supply chain services partner of choice.
RESULTS AND DIVIDENDS
The profit before income tax is £29.6m
(2021: £47.4m).
An interim dividend of 7.1p per ordinary
share was paid in December 2022.
The Directors recommend the payment
of a final dividend for the period which is
not reflected in these financial statements,
of 22.6p per ordinary share totalling
£20.2m, 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 30 June 2023
to members on the register at the close
of business on 2 June 2023. Shares will be
ex dividend on 1 June 2023.
DIRECTORS AND THEIR
INTERESTS
The Directors of the Company in office
throughout 2022, together with their
biographical details, are set out on pages
94 to 95. All the Directors served for the
whole of the year under review except
Patricia Dimond who joined the Board on
1 April 2022, Matt Osborne who joined the
Board on 24 May 2022 and John Worby
and Nigel Majewski who left the Board on
24 May 2022. Details of Directors’ interests
in shares are provided in the Directors’
remuneration report on page 124.
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.
CORPORATE GOVERNANCE
AND OTHER STATUTORY
DISCLOSURES
The Corporate governance statement,
Board Committee reports and Directors’
remuneration report on pages 98 to 128
includes information required by DTR 7.2.
Details of Hilton’s Long Term Incentive Plan
is included in the Directors’ Remuneration
Report on pages 111 to 128. The Hilton
Food Group plc Employee Benefit Trust,
which operates in connection with that
Plan, elected to waive its right to receive
dividends on shares held by it. During the
year the value of dividends waived was
£21,877 (2021: £39,085). There is no further
information required to be disclosed under
LR 9.8.4R.
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
Business
model
and future
developments
Where to read more Page
Our business
model
12-21
Principal risks Risk management
and principal risks
26-31
Financial risk
management
Performance and
financial review
22-23
Non-financial
KPIs
Key performance
indicators
24-25
Environment
Employees
including
disabilities
Human rights
Social matters
Anti-bribery
and corruption
Sustainability
report
36-91
Corporate
governance
statement
98-103
104 Hilton Food Group PLC Annual Report and Financial Statements 2022
DIRECTORS’ REPORT
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:
Number of
ordinary shares
Percentage
of issued
share capital
Nature
of holding
9,196,341
10.27%
5,980,000
3,255,000
3,207,136
3,113,310
2,943,832
2,818,730
6.68%
3.64%
3.58%
3.48%
3.29%
3.15%
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
– 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 2022:
– 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 2023
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.
abrdn
Quantum Partners LP
Montanaro Investment Managers
Vanguard Asset Managements
R. Heffer
Liontrust Asset Management
Invesco
Additionally Directors’ interests in shares
total 7.11% and details are given on page
124. All the Non-Executive Directors’
interests (including the Chairman) are
each less than 5%.
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 (2021: £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 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 reappoint
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 94
and 95. 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.hiltonfoods.com/investors/
shareholder-information/.
By order of the Board
Neil George
Company Secretary
4 April 2023
Hilton Food Group PLC Annual Report and Financial Statements 2022
105
STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTSADDITIONAL INFORMATION REPORT OF THE
AUDIT COMMITTEE
“ Key areas of focus included
reviewing acquisition accounting,
an impairment review and the
external audit tender.”
Patricia Dimond
Chair
Highlights
– Review of acquisition accounting for Foppen
and increased stake in Foods Connected
– Review of the fair values of intangible assets for 2021
acquisitions of Fairfax Meadow and Dalco
– Intangible assets impairment review with no
impairments identified
– Successful external audit tender outcome, Deloitte
LLP will become the external independent auditors
for the FY 2024 audit
Attendance at meetings of the Audit Committee
Patricia Dimond
(appointed 1 April 2022)
John Worby
(resigned 24 May 2022)
Christine Cross
Angus Porter
Rebecca Shelley
Number
attended
Percentage
attended
3
2
4
4
4
100%
100%
100%
100%
100%
106 Hilton Food Group PLC Annual Report and Financial Statements 2022
CHAIR’S INTRODUCTION
I am pleased to report on the activities
of the Audit Committee for the 52 weeks
ended 1 January 2023.
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.hiltonfoods.com.
The Committee meets no less than 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 2022
the Committee initially comprised the
former Chairman of the Committee,
John Worby, and the other Independent
Non-Executive Directors, Christine Cross,
Angus Porter and Rebecca Shelley.
I joined the Committee on 1 April 2022
and became its Chair when John stepped
down on 24 May 2022. The Committee
is comprised 100% of independent Non-
Executive Directors.
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.
I have recent and relevant financial
experience and, together with other
Committee members, have a wide
experience of the food industry and
commerce in general.
The external auditors and the Internal
Auditor have the opportunity for direct
access to the Committee without the
Executive Directors being present.
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, any formal announcements
relating to the Company’s financial
performance, and significant financial
reporting judgements contained in them;
– whether the Annual report and financial
statements, 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 completed and the effectiveness
of the Company’s internal audit function;
– the scope and effectiveness of the external
auditors including recommendations
to the Board about the appointment,
reappointment and removal of the
external auditors, and approving their
remuneration and terms of engagement;
– the external auditor’s independence
and objectivity including the policy
on engagement of the external auditors
to supply non-audit services, giving
consideration to the impact this may
have on their 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 2022 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 auditors and reviewed supporting
papers in respect of these matters.
The key areas of focus and significant
issues considered during the year were:
– revenue recognised on the Group’s
major contracts.
– the accounting for the acquisition
of Foppen and a further investment
in Foods Connected, including the
allocation of the purchase price,
intangible assets and goodwill
together with a review of updated
fair values of intangible assets for
the 2021 acquisitions Fairfax Meadow
and Dalco. The Committee considered
papers prepared by management
and concurred with the accounting
treatment and disclosures made in
the Annual report;
– acquired intangible assets reviewed
for impairment with no impairments
identified;
– accounting developments.
The Committee reviewed the impact
of new IFRS standards effective in the
year and their adoption by the UK;
– the impacts and insurance claim
status from the fire at Hilton’s facility
in Belgium during 2021 and the
related disclosures;
– the matters arising from the review
of the Group’s 2021 Annual report
by the Financial Reporting Council
(as discussed more fully below);
– 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
(see pages 72 to 83); and
– 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 position and performance,
business model and strategy.
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 auditors
be signed.
FRC REVIEW
During the year the Financial Reporting
Council (FRC) undertook a thematic
review of companies’ disclosures relating
to business combinations which included
a limited scope review of Hilton’s 2021
Annual report. There were inherent
limitations in their review which did not
benefit from a detailed knowledge of
the Hilton business or an understanding
of the underlying transactions entered
into. Additionally their review provides
no assurance that Annual report and
financial statements are correct in all
material respects
Following observations made by the
FRC a number of areas of disclosures have
been reviewed and amended within this
2022 Annual report to provide additional
information for the users of the financial
statements. In particular this involved
the restatement of the comparative
consolidated cash flow statement to
remove non-cash transactions totalling
£3.6m from investing and financing
activities. The Audit Committee was
involved in reviewing and agreeing
the Company’s response to the matters
raised by the FRC and, where relevant,
how they are dealt with in the 2022
financial statements.
Hilton Food Group PLC Annual Report and Financial Statements 2022
107
STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTSADDITIONAL INFORMATION REPORT OF THE AUDIT COMMITTEE continued
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 focus
on fire safety and key financial controls
within new and acquired businesses.
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. Other key focus
areas included geopolitical risks including
labour and supply chain shortages, cost
of living, inflation and energy markets.
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 whistleblowing,
bribery and fraud in the business at every
meeting together with individual updates
as required to be able to be satisfied that
the arrangements are adequate.
EXTERNAL AUDIT
The Committee oversees the relationship
with, and the performance of, the external
indepdendent auditors. 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 audit partner, Martin Cowie,
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.
The current external independent
auditors, PricewaterhouseCoopers LLP
(PwC), were appointed in 2007 and
reappointed in 2016 following a public
audit tender process. During 2022
a further audit tender process was
conducted which saw invitation letters
sent to two big 4 audit firms, excluding the
incumbent, and also one challenger audit
firm which set out the process, defined
selection criteria and the timetable.
Selection criteria included a global
presence, technical expertise, sector
and public company experience, culture
and fit. All candidates were given access
to relevant information and additionally
management were made available for
meetings and discussions as necessary.
Each invitee was given the opportunity
to present to an Audit panel chaired by
the Chair of the Audit Committee and
the entire committee following which the
Committee made a recommendation to
the Board. Thereafter the Board accepted
the Committee’s recommendation and
accordingly Deloitte LLP was selected as
external auditors and will shadow the work
of the existing auditors during the FY 2023
audit and will formally be appointed as
the external auditors for the FY 2024 audit.
During the year meetings were held with
the external auditors 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.
After the conclusion of the audit, the
Committee reviewed the effectiveness
of the audit including PwC’s performance
and concluded that the audit had
been effective.
108 Hilton Food Group PLC Annual Report and Financial Statements 2022
The Committee continues to be satisfied
with the independence and performance
of PwC and has therefore recommended to
the Board that PwC should be reappointed
as the Group’s auditors at the forthcoming
Annual General Meeting.
NON-AUDIT SERVICES
AND FEES
Hilton’s policy on the use of the external
auditors for non-audit services designed to
preserve the independence of the external
auditors was reviewed and updated
during the year. This policy categorises
non-audit services into (i) continuing
services which the Committee permits
the external auditors 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.
In 2022 the fees were £78,000 (including
£53,000 for work in connection with
the half year review) which represent 7%
of audit fees in the year compared with
a 70% cap and an average of 10% over
three years. Excluding items required by
EU or national legislation, the three year
average of non-audit fees was 3% of audit
fees. Further details of audit and non-audit
costs can be found in note 6 on page 155.
The Committee considers that the level
of non-audit fees does not affect the
independence of the external auditors.
OTHER
The anti-bribery and anti-corruption
policy was updated during the annual
cycle. 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
Patricia Dimond
Chair
4 April 2023
REPORT OF THE
NOMINATION COMMITTEE
“ The Committee continues to
consider the evolution of a strong,
well-balanced and diverse Board.”
Robert Watson OBE
Chairman
Highlights
– CFO appointment of Matt Osborne and
transition management
– New Independent Non-Executive Director
Patricia Dimond appointed. New Audit
Committee Chair & SID
– Development of Chair succession plans
Attendance at meetings of the
Nomination Committee
Robert Watson
Christine Cross
Angus Porter
Rebecca Shelley
Patricia Dimond
(appointed 1 April 2022)
John Worby
(resigned 24 May 2022)
Number
attended
Percentage
attended
2
2
2
2
1
1
100%
100%
100%
100%
100%
100%
CHAIRMAN’S INTRODUCTION
I am pleased to report on the activities
of the Nomination Committee for the
52 weeks ended 1 January 2023.
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.hiltonfoods.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
a majority of 80%. Patricia Dimond joined
the Committee following her appointment
as a Non-Executive Director on 1 April 2022
and John Worby left the Committee on
24 May 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.
Hilton Food Group PLC Annual Report and Financial Statements 2022
109
STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTSADDITIONAL INFORMATION REPORT OF THE NOMINATION COMMITTEE continued
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
4 April 2023
The Committee agreed that Steve was
an excellent candidate such that no other
candidates needed to be considered and
recommended to the Board that he be
offered the CEO position. Steve will join
the Board in July 2023. Philip will step
back into a part time Co-Founder and
Board Advisor role and will support Steve
ensuring a smooth transition.
The Committee gave further consideration
to the Chairman position and planning
for the time when I step down, which
is now anticipated to be in 2024.
Plans for a process to appoint my
successor are ongoing.
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 28% in 2021 to over 30% in 2022.
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.
HOW THE COMMITTEE
HAS DISCHARGED
ITS RESPONSIBILITIES
During 2022 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, CEO, Non-
Executive Director and CFO positions.
Patricia Dimond was appointed as an
Independent Non-Executive Director,
completing a process that commenced
during 2021, in anticipation of John Worby,
who did not seek re-election at Hilton’s
AGM, stepping down from the Board.
Following his departure Patricia was
appointed Chair of the Audit Committee
and Angus Porter became the Senior
Independent Director. An induction
programme was arranged for Patricia.
Following these changes the balance of
the Board’s independence was maintained
at 57% and Board gender diversity
increased from 29% to 43%.
Nigel Majewski stepped down from the
Board in a reduced capacity with Hilton
as Director of Investor Relations and
Strategic Development. Matt Osborne
was appointed as Chief Financial Officer
at the AGM in May 2022. The transition
to Matt was managed, including ensuring
that he had access to sufficient training
to help him fulfil his new role.
The Committee noted that Philip Heffer
had advised the Board that he wished
to step down from the Board in 2023
and step back after almost 30 years with
Hilton Foods, including the last five years
as Group CEO. A potential new CEO was
identified in Steve Murrells, CBE who had
recently stepped down from his previous
CEO role. Steve is an exceptional business
leader with a wealth of experience in the
retail and food supply chain sectors in large
national and multinational businesses.
He was appointed Commander of the
Order of the British Empire (CBE) in the
2022 New Year Honours for services to the
food supply chain.
110 Hilton Food Group PLC Annual Report and Financial Statements 2022
DIRECTORS’ REMUNERATION
REPORT
“ Remuneration reflects the wide
spread of operations across Europe,
Asia Pacific and North America.”
Christine Cross
Chair of the Remuneration Committee
Highlights
– New remuneration policy approved at the 2022 AGM
and applied from 24 May 2022
– ESG emissions, packaging recycling and food waste
targets introduced into LTIP performance conditions
– Appointment of new CFO and further
market alignment of CEO remuneration as
previously communicated
– Challenges in our seafood business including
macroeconomic headwinds and an unprecedented
increase in the cost of living significantly reduced
performance-related remuneration
– Executive Directors elected to waive the personal
element of their annual bonuses
Attendance at meetings of the
Remuneration Committee
Christine Cross
Angus Porter
Rebecca Shelley
Patricia Dimond
(appointed 1 April 2022)
John Worby
(resigned 24 May 2022)
Number
attended
Percentage
attended
4
4
4
2
3
100%
100%
100%
100%
100%
Annual Statement
Dear Shareholder,
On behalf of the Board I am pleased
to present the Directors’ remuneration
report for the 52 weeks ended
1 January 2023. 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’).
2022 saw continued volume growth
across the Group including the first full
year of trading at our New Zealand food
park and strong trading in Central Europe
as well as the integration of the Fairfax
Meadow and Dalco businesses acquired
in 2021. We completed the acquisition of
the Foppen fish business thereby entering
the North American market, increased the
stake in Foods Connected, formed a joint
venture with Agito, commenced a new
strategic relationship with Country Foods
in Singapore and invested in a cultured
meat technical venture with Cellular
Agriculture. There were, though, significant
challenges in our seafood business
including macroeconomic headwinds
and unprecedented inflationary cost
increases which, although there are robust
recovery plans in place, impacted adjusted
profit and EPS metrics for the year.
Hilton Food Group PLC Annual Report and Financial Statements 2022
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Annual Statement continued
DIRECTORS’ REMUNERATION
– MAJOR DECISIONS AND
SUBSTANTIAL CHANGES
2022 pay outcomes
The Company continues to implement its
strategy with a wide spread of operations
across Europe and the Asia Pacific region,
which represents a material strength and,
through the Foppen acquisition, entry
into North America. Although trading
volumes increased the financial results
for 2022, the share price was impacted by
the challenges in our UK Seafood business.
Accordingly, there is no annual bonus pay
out and no LTIP awards will vest.
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. 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.
CFO pay
As per the announcements on 6 April
2022 and 23 May 2022, Matt Osborne was
promoted to CFO during the year with the
former CFO remaining within the business,
as Director of Investor Relations and
Strategic Development, to facilitate the
handover. Reflecting this, the Committee
set Matt’s remuneration package below
that of his predecessor with an intention
to increase it over time as his experience
in the role grows. Accordingly, the main
elements of his remuneration package
on appointment were a base salary of
£270,000k, an annual bonus of up to 65%
of salary for 2022 (increasing to 100% of
salary for 2023) and a 2023 LTIP award
of 125% of salary.
Annual bonus
The financial element of the annual
bonus was based on the Group’s
underlying adjusted profit before tax.
The actual performance was below the
target resulting in no financial element
bonus 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
shareholder value and platform for
growth, being fit for the future, key
retail partnerships, a green and digital
automated future, brand and culture.
The Committee assessed the performance
of the Executive Directors, which is detailed
on pages 122-123. Although significant
progress was made on each of these
objectives the Executive Directors
decided to waive this part of the annual
bonus given the failure to meet financial
objectives and the consequent impact
on share price.
Long Term Incentive Plan
The LTIP award granted in 2020 is due
to vest in 2023 based on EPS with a
weighting of 70% and relative TSR with
a weighting of 30%.
Following the end of the three year
performance period to 1 January 2023,
compound annual EPS growth was below
threshold and relative TSR was below
median. Accordingly, the 2020 LTIP awards
will lapse in September 2023.
New LTIP awards were granted in 2022
which are subject to EPS, TSR and
ESG-based performance conditions.
The threshold EPS growth target (5% p.a.)
and maximum target (12% p.a.) were set
to reflect Hilton’s business cycle and are
considered to be appropriately challenging
given the geographic expansion and
current market dynamics.
2023 implementation
Details of how the Committee intends
to operate the policy during 2023 are set
out below.
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 three 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 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 more international and
accordingly the Committee consulted
major shareholders at the start of 2021
and following strong levels of support,
awarded an increase of 12.6% to Philip’s
base salary by to £570k from 1 January
2022. Reflecting continued growth and
increasing international breadth and
complexity, a further increase of 8.8% to
£620k was awarded from 1 January 2023.
Reflecting his progress in the role to date,
Matt Osborne’s salary was increased
from £270k to £320k from 1 January 2023,
which remains significantly below that
of his predecessor. The Committee intends
to move the salary (and bonus and LTIP
potential) to market levels over time as
his experience in the role grows.
Pension and benefits
Pension contributions for Executive
Directors, which reduced from 15%
to 7% of salary to align with workforce
provision following the 2022 AGM,
will remain unchanged.
112 Hilton Food Group PLC Annual Report and Financial Statements 2022
DIRECTORS’ REMUNERATION REPORT continued
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 approved by
shareholders in 2022 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/claw-
back 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 1 January 2023.
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 2023 AGM an advisory
resolution in respect of the Directors’
remuneration report (excluding the 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
Variable pay
The maximum annual bonus potential
for Philip Heffer will be set at 150% of salary
(increased from 125% following shareholder
approval of the new policy at the 2022
AGM) and 100% of salary for Matt Osborne.
Performance targets will be based on
financial metrics (130% of the bonus
for the CEO and 80% for the CFO) and
personal and strategic targets (20% of the
bonus). Financial metrics include adjusted
profit before tax targets (80% weighting)
and a new free cash flow target (20%
weighting). As the financial targets, based
on sliding scales and set with reference
to the 2023 budget, and the personal
and strategic targets are considered
commercially sensitive, the Committee
will disclose targets on a retrospective
basis in next year’s report.
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.
Under the new policy one third of any
bonus awarded over 50% of salary will be
deferred into Hilton shares for two years.
The 2023 LTIP awards will be capped at
175% of salary (although Matt Osborne’s
2023 award will be capped at 125% of
salary reflecting his recent appointment
to the Board) with vesting, once again,
determined by stretching EPS, relative
TSR and ESG targets.
Activities of the Committee
The Committee’s main activities during
2022 are summarised below and full
details are set out in the relevant sections
of this report.
– Agreeing the new CFO remuneration
package for 2022 and Executive Director
base salary increases for 2023;
– Agreeing annual bonus award levels
for 2021 and setting the targets for 2022;
– Reviewing the EPS performance
targets and vesting levels for the 2019
LTIP awards which vested in 2022;
– Approving the LTIP awards granted
in 2022;
– Approving the issue of the Sharesave
scheme for 2022;
– 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.
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Directors’ remuneration policy
INTRODUCTION
This part of the remuneration report sets out a summary of our remuneration policy which was approved by shareholders at, and took
effect from, the AGM held on 24 May 2022. The full policy approved by shareholders at the 2022 AGM is presented in the annual report
and financial statements 2021. No changes to the policy are proposed for 2023.
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.
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.
Base salary
Purpose and link to strategy Operation
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.
Benefits
Purpose and link to strategy Operation
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.
Pension
Maximum opportunity
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.
Maximum opportunity
The value of traditional
benefits is based on the
cost to the Company and is
not predetermined.
Relocation expenses or
benefits will take into account
the nature of the relocation
and will be provided on a fair
and reasonable basis.
Purpose and link to strategy Operation
Maximum opportunity
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 base salary
to align with the broader
workforce.
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DIRECTORS’ REMUNERATION REPORT continued
Maximum opportunity
Up to 150% of base salary
(125% of base salary for 2022).
Maximum opportunity
Up to 175% of salary for
all Executive Directors.
Annual bonus
Purpose and link to strategy Operation
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
will 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.
Long-term incentives
Purpose and link to strategy Operation
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 will 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.
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Directors’ remuneration policy continued
All-employee share schemes
Purpose and link to strategy Operation
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),
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.
Maximum opportunity
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).
Shareholding guidelines
Purpose and link to strategy Operation
Maximum opportunity
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.
N/A
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.
Post-cessation guidelines
Purpose and link to strategy Operation
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.
Maximum opportunity
N/A
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DIRECTORS’ REMUNERATION REPORT continued
Non-Executive Director fees
Purpose and link to strategy Operation
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.
Maximum opportunity
As for the Executive Directors,
there is no prescribed
maximum annual increase,
although it 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.
Notes
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;
– 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.
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Directors’ remuneration policy continued
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. Non-Executive Directors engage with employees on a number of areas including Group wide
remuneration. These discussions ensure that all employees’ views are taken on board.
118 Hilton Food Group PLC Annual Report and Financial Statements 2022
DIRECTORS’ REMUNERATION REPORT continued
DIRECTOR SERVICE CONTRACT AND OTHER RELEVANT INFORMATION
Provision
Executive Directors
Non-Executive Directors
Term
Philip Heffer appointed on 24 April 2007 with no
fixed term. Matt Osborne appointed on 24 May 2022
with no fixed term.
Robert Watson – from 1 January 2021
Christine Cross – from 23 March 2019
Angus Porter – from 1 July 2018
Rebecca Shelley – from 1 April 2020
Patricia Dimond – from 1 April 2022
Re-election
at AGM
Notice period
Termination
payment/
payments
in lieu of notice
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.
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.
Up to 12 months’ salary in lieu of notice.
None.
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.
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.
Hilton Food Group PLC Annual Report and Financial Statements 2022
119
STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTSADDITIONAL INFORMATION DIRECTORS’ REMUNERATION REPORT continued
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.hiltonfoods.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 2022
the Committee initially 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 and John Worby left the
Committee on 24 May 2002 following
his resignation from the Hilton Board.
The Committee members comprise 100%
of independent Non-Executive Directors.
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
SHARE SCHEME
DILUTION LIMITS
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.
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 1 January
2023 the headroom available under these
limits was 2.6% and 0% respectively.
STATEMENT OF VOTING AT
ANNUAL GENERAL MEETING
The following table shows the voting
results in respect of the 2021 Directors’
remuneration report (other than the
Directors’ remuneration policy) and the
Directors’ remuneration policy which were
both approved by shareholders at the
2022 AGM:
Approve
Directors’
remuneration
report
Approve
Directors’
remuneration
policy
2022
2022
Advisory
Binding
ATTENDANCE AT MEETINGS
OF THE REMUNERATION
COMMITTEE
AGM year
Resolution
type
Number
attended
Percentage
attended
4
4
4
2
3
100%
100%
100%
100%
100%
Votes for
75,694,907
76,038,800
%
98.60%
Votes against
1,076,932
%
Votes
withheld
1.40%
3,750
99.05%
733,039
0.95%
3,750
The remainder of this section is subject
to audit.
Christine Cross
Angus Porter
Rebecca Shelley
Patricia Dimond
(appointed
1 April 2022)
John Worby
(resigned
24 May 2022
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 £23,637 which
included advising on remuneration policy,
new international Sharesave Scheme
rules and extending Hilton’s Sharesave
Scheme to the APAC region. 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.
120 Hilton Food Group PLC Annual Report and Financial Statements 2022
DIRECTORS’ REMUNERATION REPORT continued
SINGLE TOTAL FIGURE TABLE OF REMUNERATION
The remuneration of individual Directors is set out below:
52 weeks to 1 January 2023
Executive Directors
Philip Heffer
Matt Osborne
(appointed 24 May 2022)
Non-Executive Directors
Robert Watson
Christine Cross
Angus Porter
Rebecca Shelley
Patricia Dimond
(appointed 1 April 2022)
Former Directors
Nigel Majewski
(resigned 24 May 2022)
John Worby
(resigned 24 May 2022)
52 weeks to 2 January 2022
Executive Directors
Philip Heffer
Nigel Majewski
Non-Executive Directors
Robert Watson
Christine Cross
Angus Porter
Rebecca Shelley
John Worby
Total
Notes
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
570
163
270
62
56
56
45
165
26
3
7
–
–
–
–
–
5
–
58
11
–
–
–
–
–
25
–
94
631
181
270
62
56
56
45
195
26
1,522
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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
506
410
265
60
55
55
60
1,411
20
12
–
–
–
–
–
76
62
–
–
–
–
–
602
484
265
60
55
55
60
430
349
–
–
–
–
–
646
524
279
–
–
–
–
1,076
873
279
544
–
–
–
–
60
55
55
60
32
138
1,581
779
1,449
2,228
3,809
631
181
270
62
56
56
45
195
26
1,522
Total
£’000
1,678
1,357
Total
1,413
15
1. Salary and fees
Reflects salaries/fees paid to Directors in respect of 2022 (with 2021 comparatives).
2. Benefits
Benefits provided comprised company car and fuel and private healthcare.
3. Pension
Payments were made during 2022 to money purchase pension schemes or in lieu as a salary supplement at the rate of 15% of base salary until May 2022 and thereafter
at 7% of salary for all Executive Directors.
4. Annual bonus
The 2022 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 2022 for all Executive Directors is summarised below.
Bonus element
Metric
Financial
Adjusted profit before tax
Strategic
Total
% of base salary
% of base salary
% of base salary
Threshold
performance
£65.0m
Target
performance
£68.6m
Maximum
stretch target
£74.3m
105%
20%
125%
2022
achieved
£55.5m
0.0%
0.0%
0.0%
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.
Hilton Food Group PLC Annual Report and Financial Statements 2022
121
STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTSADDITIONAL INFORMATION
DIRECTORS’ REMUNERATION REPORT continued
Annual report on remuneration continued
Philip Heffer
Objectives
Detailed targets
Remuneration Committee assessment
1. Delivering shareholder value/
– Review and develop the five-year strategic plan for the core business;
Met in part Strategic plan developed and
platform for growth
plus new countries (min. one addition); proteins/added value extensions
and enablers
– Develop the thematic storyline through capital markets day, broker
leverage and new shareholder relationships to convert brand
perception from a meat processing group to a tech credentialed
protein company
– Finalise the integration of Foppen and an optimisation programme
for both our seafood and vegetarian businesses
– Close the Cellular Agriculture deal
progress made on two key country
entries although agreements not
signed. The capital markets day
was deferred as a result of the above
delays, plus the need to clearly
demonstrate that seafood was back
on track. Optimisation programmes
for Seafood and Dalco continue
into 2023. The Foppen integration
was finalised and the CellAg
deal confirmed.
2. Fit for the future
– Organisational design implementation complete
– Efficiency and competitiveness KPIs built into each BU plan to
encourage continuous improvement
– Mix of central process control v BU autonomy clearly defined
Met in part
Implementation complete.
Roles were redefined and built
into business unit KPIs and
individual objectives.
3. Key retail partnerships
– Revisit and stabilise major customer contracts to extend contract
Met in full Major supplier contracts were
length and leverage business growth across proteins
– Develop minimum one new retailer contractual partnership
4. Green & Digital
automated Future
– Accelerate progress on the People : Product : Planet plan to ensure 2025
goals achieved. Focus especially on waste, energy and water utilisation.
Roll out forward commitments on Scope 1-3 emissions
– Approve plan to replace legacy systems
– Drive automation in HFG to become a sector leader and offset labour
pressures in the core business
5. Brand & Culture
– An engaged and safe workforce as measured through pulse surveys
Met in full
and health and safety metrics
– Demonstrate personal inclusion leadership action aligned to the diversity
and inclusion plan, targeting 30% women in senior management roles
by end of 2022
– Assess the impact of Covid on future ways of working to embed resilience
Outcome of strategic personal objectives, Remuneration Committee assessment:
15% bonus achieved from a total of 20%.
In consideration of the financial performance
of the business in 2022, Philip decided to waive
any entitlement to a personal bonus.
Matt Osborne – from 24 May 2022
Objectives
Detailed targets
Remuneration Committee assessment
1. Financing strategy
– Plan next phase of Group financing strategy to support continued
Met in full
renewed with diversified business
areas added. A contractual
partnership with Costco was
established.
Met in part People : Product : Planet plan
embedded across the business and
Scope 1-3 emission commitments
detailed in the Sustainability report.
Decision on legacy systems plan
signed off in part. Automation
plans on track in line with
designated capex.
Engagement surveys and H&S
reports both showed positive
improvement.
31.7% women in senior management.
Resilience viz labour impacts built
into risk assessment.
Group financing plan complete.
ESG measures included in LTIP.
Significant work on customer
contract development with
successful conclusions. Capital
investments reprioritised as a
result of changes at both Seafood
and Dalco.
Met in part Good relationships built although
capital markets day deferred.
Met in part Good relationships built although
capital markets day deferred.
2. Investor relations
3. Risk management
growth and investment by December 2022
– Prepare plans for introducing measurable ESG links into the Group’s
wider financing strategy aligned to annual bonus plans and LTIPs
– Support for ongoing customer contract development to align with
strategic goals
– Screen and prioritise capital investments to maximise returns whilst
implementing HFG strategy
– Build positive relationships with investors and analysts
– Work closely with Director of Investor Relations and Strategic
Development to transition primary relationships with key analysts
and investors
– Take lead in preparation and delivery of H1 2022 results and
investor presentations
– Lead H1 2022 roadshows with support from the previous CFO
– Build positive relationships with investors and analysts
– Work closely with Director of Investor Relations and Strategic
Development to transition primary relationships with key analysts
and investors
– Take lead in preparation and delivery of H1 2022 results and investor
presentations
– Lead H1 2022 roadshows with support from the previous CFO
4. Team leadership
– Support the continued growth of HFG plc through financial support
Met in full
and direction, centrally and regionally
– Focus reporting enhancements and on standardisation of
reporting structures
– Build strong relationships with ELT/plc Board
– Successful CFO handover with support from the previous CFO
and wider coaching as required
– Play a key role in the successful implementation of the new
organisational design and cost reduction programme
Central and regional support
structures modified as a result
of organisational design changes.
Strong ELT, Audit Committee, Board
links established with a successful
handover both from the previous
CEO and induction for the new
Audit Chair.
Outcome of strategic personal objectives, Remuneration Committee assessment:
15% bonus achieved from a total of 20%.
In consideration of the financial performance
of the business in 2022, Matt decided to waive
any entitlement to a personal bonus.
122 Hilton Food Group PLC Annual Report and Financial Statements 2022
DIRECTORS’ REMUNERATION REPORT continued
Nigel Majewski – to 24 May 2022
Objectives
Detailed targets
1. Financing strategy
– Complete bank refinancing exercise
– Provide headroom for new projects
– Support for ongoing customer contract development to align
with strategic goal
– Plan next phase to support continued significant growth
Remuneration Committee assessment
Met in full
All refinancing completed,
giving headroom for 2022
planned investments.
Supported CFO in new contract
development.
2. Investor relations
– Continue to build on positive relationships
– Extend/onboard new investors with particular focus on US markets
– Direct and manage all IR and capital market activities
Met in full
Full support for IR activities in
preparation for the handover to
Matt Osborne in May.
3. Risk management
– Chair the Risk Management Committee, with a renewed post-Brexit
Met in full
focus on risk assurance
– Plan for more post-Brexit field-based activities
In addition to post-Brexit activities,
addressed post-Covid and price
inflationary pressures.
4. Team leadership
– Support the continued growth of HFG plc through financial support
Met in full
Full handover completed.
and direction
– Initiate CFO handover through work-withs, coaching and participation
in key meetings
Outcome of strategic personal objectives, Remuneration Committee assessment:
15% bonus achieved from a total of 20%.
In consideration of the financial performance
of the business in 2022, Nigel decided to waive
any entitlement to a personal bonus.
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 2020 under the Long Term Incentive Plan which are due to vest in 2023 subject to performance conditions covering the three financial
years 2020-2022 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 £11.90.
The long-term incentive vesting outcome is summarised below.
EPS metric
Threshold performance
Maximum performance
2022 achieved
2020-22 adjusted basic EPS % annual growth
Vesting %
TSR metric
2020-22 adjusted TSR growth
Vesting %
6%
10%
12%
100%
-0.66%
0.0%
Threshold performance
Maximum performance
2022 achieved
Median
10%
Upper quartile
118th out of 160 constituents
100%
0.0%
The overall vesting is 0% which is not affected by any assumptions over acquisitions.
Director
Robert Watson*
Philip Heffer
Nigel Majewski
Matt Osborne
Awards
granted
No.
5,017
72,981
59,115
4,485
Awards
expected to vest
0.0%
No.
Average
share price
£5.425
£’000
Amount attributable
to share price
appreciation
£’000
–
–
–
–
–
–
–
–
–
–
–
–
* 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 2021 have been restated based on the actual share price at vesting (£11.494 instead of the 2021 year end share price of £11.63).
6. Payments to past Directors
There were no other payments made to former Directors in 2022. Nigel Majewski stepped down from the Board on 24 May 2022 but continued to be employed
as Director of Investor Relations and Strategic Development.
7. Payments for loss of office
There were no payments for loss of office made in 2022.
Hilton Food Group PLC Annual Report and Financial Statements 2022
123
STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTSADDITIONAL INFORMATION DIRECTORS’ REMUNERATION REPORT continued
Annual report on remuneration continued
DIRECTOR SHAREHOLDING AND SHARE INTERESTS
Details of Director shareholdings and changes in outstanding share awards were as follows:
Director
Type
Robert Watson Shares
Nil cost options
Nil cost options
Total nil cost options
At 2
January
2022
2,317,292
34,434
5,017
39,451
Philip Heffer
Shares
3,824,566
Nil cost options
Nil cost options
Nil cost options
Nil cost options
Nil cost options
48,873
79,873
72,981
73,089
–
82,849
Granted
(note 4) Exercised
Lapsed
At 1
January
2023
Exercise
price
(pence)
Earliest
exercise
Latest
exercise
date
date Notes
–
–
–
–
–
–
–
2,067,292
–
–
–
(10,193)
24,241
–
5,017
(10,193)
29,258
3,824,566
(48,873)
–
–
–
–
–
–
(23,643)
56,230
–
–
–
72,981
73,089
82,849
nil
nil
nil
nil
nil
nil
nil
21.05.22
21.05.29
28.09.23 28.09.30
03.07.21 03.07.28
21.05.22
21.05.29
28.09.23 28.09.30
11.05.24
11.05.31
16.05.25
16.05.32
Total nil cost options
274,816
82,849
(48,873)
(23,643)
285,149
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
103,829
732
732
50,365
50,296
32,287
40,528
–
–
–
–
–
–
(19,151)
45,546
–
–
–
59,115
59,202
19,030
(19,151)
356,369
1228.00 01.08.23
01.02.24
nil
nil
20.04.18 20.04.25
25.04.19 25.04.26
nil 24.04.20 24.04.27
nil
nil
nil
nil
nil
03.07.21 03.07.28
21.05.22
21.05.29
28.09.23 28.09.30
11.05.24
11.05.31
16.05.25
16.05.32
–
–
–
(1,454)
–
–
–
216
947
950.00 01.08.22
01.02.23
1,495
1204.00 01.08.25
01.02.26
2,442
3,455
4,485
4,492
24,033
nil
nil
nil
nil
21.05.22
21.05.29
28.09.23 28.09.30
11.05.24
11.05.31
16.05.25
16.05.32
(1,454)
36,465
25,000
2,877
3,281
5,650
Nigel Majewski
Shares
Share options
Total share options
Nil cost options
Nil cost options
Nil cost options
Nil cost options
Nil cost options
Nil cost options
Nil cost options
Nil cost options
103,829
732
732
50,365
50,296
32,287
40,528
64,697
59,115
59,202
–
Total nil cost options
356,490
Matt Osborne
Shares
Share options
Share options
Total share options
Nil cost options
Nil cost options
Nil cost options
Nil cost options
947
–
947
4,909
4,485
4,492
–
–
–
–
–
–
–
–
–
19,030
19,030
–
1,495
1,495
–
–
–
–
24,033
Total nil cost options
13,886
24,033
John Worby
Shares
Christine Cross
Shares
Angus Porter
Shares
Rebecca Shelley Shares
Patricia Dimond Shares
9,719
25,000
2,877
3,281
124 Hilton Food Group PLC Annual Report and Financial Statements 2022
1
3
3
1
3
3
3
3
3
1
2
3
3
3
3
3
3
3
3
2
2
3
3
3
3
1
1
1
1
1
DIRECTORS’ REMUNERATION REPORT continued
Notes
1.
All shares are beneficially owned with the exception of 1,216,917 shares held by various family trusts of which Robert Watson is a trustee. Since the end of the year
Philip Heffer’s holding increased by 430,450 shares. There have been no other changes in the interests of Directors between 1 January 2023 and the date of this report.
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 1 January 2023 the guideline and actual share holdings were as follows:
Director
Philip Heffer
Matt Osborne
Guideline minimum
holding value as a %
of salary
Actual holding value
as a % of salary
300%
200%
3,737%
0.4%
Guideline met?
Yes
No
In accordance with the remuneration policy Matt Osborne, as a new Director, will retain at least 50% of any vested share awards (after the sale to meet tax obligations)
to build up his shareholding over a period of no more than five years to meet the guideline.
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
2019
2020
2021
2022
EPS 70%
TSR 30%
EPS 70%
TSR 30%
EPS 70%
TSR 30%
EPS 60%
TSR 25%
ESG – Scope 1&2 energy 5%
2019 – 2021
2019 – 2021
2020 – 2022
2020 – 2022
2021 – 2023
2021 – 2023
2022 – 2024
2022 – 2024
2022 – 2024
ESG – Recycled packaging 5%
2022 – 2024
ESG – Food waste 5%
2022 – 2024
10%
10%
10%
10%
6%
Median
6%
Median
6%
Median
5%
Median
6.5% reduction
over period
11.7% increase
over period
15.0% reduction
over period
100%
100%
100%
100%
15%
Upper quartile
12%
Upper quartile
13%
Upper quartile
12%
Upper quartile
43.9% reduction
over period
28.3% increase
over period
30.0% reduction
over period
4. Grant of LTIP awards in the year, pro rated from/to the date of Director appointment/resignation, were as follows:
Director
Philip Heffer
Matt Osborne
Nigel Majewski
Face value
£997,500
£289,358
£229,125
Number of shares
under 2022 LTIP
award
82,849
24,033
19,030
Proportion
of salary
175%
125% pro rata
175% pro rata
Share
price date
13 May 2022
13 May 2022
13 May 2022
Closing
share price
1204 p
1204 p
1204 p
Hilton Food Group PLC Annual Report and Financial Statements 2022
125
STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTSADDITIONAL INFORMATION
DIRECTORS’ REMUNERATION REPORT continued
Further information – not subject to audit
STATEMENT OF IMPLEMENTATION OF REMUNERATION POLICY IN THE 2023 FINANCIAL YEAR
Base salaries, benefits and pension
Executive Director salary levels from 1 January 2023, with prior year comparatives, are set out below. The rationale for the above
workforce increases is set out in the annual statement.
Director
Philip Heffer
Matt Osborne
2022
£’000
570
270
2023
£’000
620
320
There are no changes in benefits. Pension contribution rates decreased to 7% of salary following Hilton’s 2022 AGM.
ANNUAL BONUS
Following the adoption of the new remuneration policy at the 2022 AGM the maximum annual CEO bonus opportunity for 2023
will increase from 125% to 150% of salary. The maximum bonus opportunity for the new CFO will be set at of 100% of salary for 2023.
Performance targets will be based on financial metrics (130% of the bonus for CEO and 80% for CFO) and personal and strategic
targets (20% of the bonus). A bonus deferral mechanism will apply whereby one third of any bonus over 50% of salary will be deferred
into Hilton shares for two years.
Financial metrics include adjusted profit before tax targets (80% weighting) and a new free cash flow target (20% weighting).
As the financial targets, based on sliding scales and set with reference to the 2023 budget, and the personal and strategic targets
are considered commercially sensitive, the Committee will disclose targets on a retrospective basis in next year’s report.
2023 LTIP AWARDS
The 2023 LTIP awards will be capped at 175% of salary (although Matt Osborne’s 2023 award will be capped at 125% of salary) with
vesting, once again, determined by stretching EPS (60% weighting), relative TSR (25% weighting) and ESG targets (15% weighting).
The EPS and ESG targets will be set following the Annual report approval date.
Stretching yet motivational EPS and ESG targets will be set following the Annual report approval date. In respect of the TSR targets
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. In addition, no part of this award may vest
unless the Committee is satisfied with the underlying performance of the Company.
Details of the 2023 grant and performance targets 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 increased by 3.6% in line with the increases of the UK general
workforce from 1 January 2023.
126 Hilton Food Group PLC Annual Report and Financial Statements 2022
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 10 years from 2013 to 2022. The FTSE 250 Index (excluding Investment
Trusts) 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)
)
0
0
1
=
2
1
0
2
/
2
1
/
1
3
d
e
s
a
b
e
r
(
x
e
d
n
i
n
r
u
t
e
r
l
a
t
o
T
600
500
400
300
200
100
0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
CHIEF EXECUTIVE OFFICER REMUNERATION 10-YEAR TREND
Total remuneration (£'000)
Annual bonus
(as a percentage of the maximum)
Long-term incentive vesting
(as a percentage of the maximum)
Notes
2013
610
42%
2014
626
32%
2015
784
60%
2016
1,235
69%
2017
1,570
80%
2018
1,627
78%
2019
1,562
100%
2020
1,765
100%
2021
1,686
68%
2022
631
0%
n/a
0%
0%
61%
73%
88%
66%
100%
70%
0%
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
2022 percentage increase
over 2021
2021 percentage increase
over 2020
2020 percentage increase
over 2019
Salary
/fees
Benefits
Annual
bonus
Salary
/fees
Benefits
Annual
bonus
Salary
/fees
Benefits
Annual
bonus
% change % change % change
% change % change % change
% change % change % change
12.6%
2.0%
-83.2% -100.0%
-59.7% -100.0%
2.0%
2.0%
-29.0%
-30.6%
-39.9%
-30.6%
2.0%
2.0%
2.0%
2.0%
2.0%
4.6%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-28.7% -100.0%
-33.3% -100.0% -100.0%
2.0%
7.9%
7.9%
2.0%
-0.1%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-23.1%
-43.0%
2.0%
2.0%
2.0%
2.0%
2.0%
n/a
2.0%
2.8%
-31.6%
18.2%
2.0%
2.0%
21.9%
2.0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-1.9%
4.5%
Executive Directors
Philip Heffer
Nigel Majewski1
Non-Executive Directors
Robert Watson2
Christine Cross
Angus Porter
Rebecca Shelley3
John Worby1
Company average
Notes
1. Nigel Majewski and John Worby left the Board on 24 May 2022. The percentage changes are based on annualised numbers.
2. Robert Watson was an Executive Director in 2020 moving to a Non-Executive role from 2021 onwards.
3. Rebecca Shelley was appointed on 1 April 2020.
4. The table above excludes Matt Osborne and Patricia Dimond who joined the Board during 2022.
Hilton Food Group PLC Annual Report and Financial Statements 2022
127
STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTSADDITIONAL INFORMATION
DIRECTORS’ REMUNERATION REPORT continued
Further information continued
CEO PAY RATIO
Year
2019
2020
2021
2022
Method
Option B
Option B
Option B
Option B
25th percentile pay ratio
Median – 50th percentile
pay ratio
75th percentile pay ratio
CEO pay ratio
83
87
73
30
79
78
65
25
51
48
48
16
Option B was adopted so that it could be linked with other reward-based activity collecting similar information. This information,
comprising basic pay since the majority of employees do not receive benefits or annual bonuses, as at April 2022 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 2022 financial year.
Salary component
Total pay and benefits
CEO
£’000
25th percentile employee
£’000
50th percentile employee
£’000
75th percentile employee
£’000
570
631
20
21
24
25
40
41
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. Pay ratios for the year are lower due to the drop in
the CEO’s variable pay. The P25, P50 and P75 pay ratios decreased due to lower CEO pay.
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 three main UK employing entities. The headline gender pay metric is the
difference in the median hourly pay received by men and women. These metrics are set out below, which generally show an
improving trend and compare favourable with the UK average.
2022
2021
Hilton Foods UK
Hilton Seafood UK
Fairfax Meadow
UK average
4.6%
9.8%
4.0%
11.1%
4.0%
0.0%
15.4%
Note: A positive % metric favours men and a negative % metric favours women.
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. On an ongoing basis, we monitor our pay rates to ensure that they are aligned to the market and are equitable
internally. 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.hiltonfoods.com.
RELATIVE IMPORTANCE OF SPEND ON PAY
The following table sets out for the comparison total spend on pay with dividends.
Staff costs (note 8 to the financial statements)
Dividends payable
2022
£’000
239,692
26,578
2021
£’000
211,866
25,862
% change
13%
3%
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
4 April 2023
128 Hilton Food Group PLC Annual Report and Financial Statements 2022
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 Company financial statements in accordance with UK-adopted international accounting standards.
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;
– state whether applicable UK-adopted international accounting standards have been followed, subject to any material departures
disclosed and explained in the financial statements;
– make judgements and accounting estimates that are reasonable and prudent; 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, is 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 94 and 95, confirm that to the best of their knowledge
and belief:
– the Group and Company financial statements, which have been prepared in accordance with UK-adopted international accounting
standards, give a true and fair view of the assets, liabilities and financial position of the Group and Company and profit of the Group;
and
– the management reports, which comprise the Strategic report and the Directors’ report, include a fair review of the development
and performance of the business and the position of the Group and the Company, together with a description of the principal risks
and uncertainties that it faces.
This responsibility statement was approved by the Board of Directors on 4 April 2023 and is signed on its behalf by:
Robert Watson OBE
Chairman
Matt Osborne
Chief Financial Officer
Hilton Food Group PLC Annual Report and Financial Statements 2022
129
STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTSADDITIONAL INFORMATION
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF HILTON FOOD GROUP PLC
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.
Carry value of goodwill (group) and
carrying value of investments (company)
are new key audit matters this year.
Complex customer arrangements (group),
which was a key audit matter last year,
is no longer included because of the level
of estimation in determining the balances
in respect of the group’s customer
arrangements is low and driven by the
terms and conditions included within the
underlying contractual arrangements in
place. Otherwise, the key audit matters
below are consistent with last year.
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 1 January 2023 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
as applied in accordance with the
provisions of the Companies Act 2006;
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
1 January 2023; the consolidated income
statement, the consolidated statement of
comprehensive income, the consolidated
and company statements of changes in
equity and the consolidated and company
cash flow statements 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
– Five trading subsidiaries, together
with the parent company and four
intermediate holding companies, were
in-scope for full scope group reporting.
In addition, audit procedures were
performed over specific balances in
three other components. This accounted
for 75% of the total group revenue
and 66% of profit before tax and
exceptional items.
Key audit matters
– Accounting for the impact of the
Belgium fire (group).
– Accounting for material acquisitions
(group).
– Carrying value of goodwill (group).
– Carrying value of investments
(company).
Materiality
– Overall group materiality: £2,500,000
(2021: £2,795,000) based on 5% of
three-year average profit before tax
and exceptional items (2021: profit
before tax and exceptional items).
– Overall company materiality: £250,000
(2021: £2,500,000) based on 1% of total
assets, however, capped at £250,000
for group reporting.
– Performance materiality: £1,875,000
(2021: £2,096,250) (group) and £187,500
(2021: £1,875,000) (company).
130 Hilton Food Group PLC Annual Report and Financial Statements 2022
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF HILTON FOOD GROUP PLC
Key audit matter
How our audit addressed the key audit matter
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 discussed the accounting treatment for insurance proceeds with our
internal accounting technical team;
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 during
the financial period and post period end to ascertain the recoverability
of the variance fund balance; and
We tested a sample of the exceptional costs recognised and reviewed
the disclosures within the financial statements and consider these to be
reasonable.
No issues were identified through the procedures we performed.
We verified the consideration paid under the terms of the transaction
to the Share Purchase Agreements, which included cash consideration
for Dutch Seafood Company BV and Foods Connected Limited;
We have audited and challenged management on the finalisation of the
Dalco and Fairfax acquisition accounting;
We understood the methodology applied by the third party valuation
specialists in determining the purchase price accounting;
We engaged PwC 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 each acquisition;
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 fair value
adjustments; and
We reviewed the disclosures for compliance with the requirements
of IFRS 3 ‘Business Combinations’.
No issues were identified through the procedures 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 were severely
damaged, as were adjoining Hilton offices.
As a result of the fire, exceptional costs totalling
£9,500,000 (2021: £11,661,000) have been recognised
in the year related to the incremental cost of fulfilling
the Delhaize contract and associated legal and
insurance costs.
At the time of the fire there was a variance fund of
£6.6m due from Delhaize. At the balance sheet date
this has increased to £7.2m as a result of on-going
trading.
We focused on this area given the level of judgement
in not recognising an insurance receivable, potential
claims against the group and the variance fund
receivable.
Note 9 in the financial statements.
Accounting for material acquisitions (group)
During the period the Group acquired 100% of the
issued share capital of Dutch Seafood Company BV
(Foppen Group BV) for a consideration of £25.1m.
The group also acquired a further 15% interest
in Foods Connected for £1.7m, giving the Group
a controlling interest in Foods Connected.
The prior year acquisition accounting in relation
to Fairfax Meadow Limited and Dalco acquisitions
was finalised in the current year.
We focused on this area because each of the
acquisitions is material to the group and performing
the required acquisition accounting involves
the application of management judgement and
estimation in determining the fair value of the assets
and liabilities acquired. Further, this may result in the
identification and recognition of intangible assets
e.g. goodwill, brands or customer relationships.
In respect of Dutch Seafood Company BV, customer
relationship and brand intangibles of £30.5m have
been recognised alongside £17.8m of goodwill.
In respect of Foods Connected Limited, brand and
customer relationships and technology of £9.8m
have been recognised alongside £3.3m of goodwill.
Following the finalisation of the purchase price
accounting in respect of Fairfax Meadow Europe
Limited, the final customer relationships and brand
intangibles recognised were £11.8m, alongside
£3.7m of goodwill.
The purchase price accounting for Dalco Food
BV was also finalised, resulting in final customer
relationships and brand intangibles of £10.2m being
recognised and £10.2m of goodwill.
Note 18 in the financial statements.
Hilton Food Group PLC Annual Report and Financial Statements 2022
131
STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTSADDITIONAL INFORMATION INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF HILTON FOOD GROUP PLC continued
Key audit matter
How our audit addressed the key audit matter
We have reviewed management’s year end impairment assessments and
we have considered the existence of impairment triggers at the reporting
date and concurred with management’s view that there were triggers in
respect of the UK Seafood business given its trading during the financial
period. There were no impairment indicators in respect of the group’s other
cash generating units (‘CGUs’);
We obtained management’s impairment models for each of the group
CGUs;
We tested the construct of the models to validate that they were in
accordance with the requirements of a value in use model, as defined
by accounting standards;
We tested the mathematical accuracy of the impairment models and
related calculations;
We involved PwC valuation experts to assist us in evaluating and
challenging management on the underlying assumptions and estimates
applied in performing their assessments, particularly in respect of the
cash flow forecasts, discount rate and terminal growth rate;
We agreed year one cash flows within each of the models to the board
approved budgets and;
We assessed the Group’s disclosures in respect of impairment review
in accordance with IAS 36.
No issues were identified through the procedures performed.
We obtained management’s assessment of impairment trigger indicators,
as set out in IAS 36, for subsidiaries along with details of year to date results
and compared them to the prior year which demonstrated significant
growth across the Company’s subsidiaries; and
We considered the view of management and the performance of the
group as a whole (including individual subsidiaries) and concluded that
management’s trigger assessment is fair and there are no indicators of
impairment.
We also consider the disclosures made in the financial statements
to be appropriate.
Carrying value of goodwill (group)
The value of goodwill at the balance sheet date
amounts to £82.5m (2021: £69.5m).
The carrying value of goodwill is a key audit
matter because of its magnitude alongside the
level of judgement and estimation involved in
determining its recoverability. In the current year
this was particularly due to the adverse trading
performance of the UK Seafood business. Therefore
the recoverability of goodwill within the UK Seafood
business and across the group was subject to greater
levels of audit focus and challenge.
The estimation includes the preparation of cash flow
forecasts, growth rates applied to these cash flows,
the terminal growth rate and the rate at which cash
flows have been discounted.
Note 15 in the financial statements.
Carrying value of investments (company)
The value of investments in the company balance
sheet is £247.8m as at 1 January 2023 representing
98% of the total assets and 98% of equity. This
investment is held in Hilton Foods Limited which
is the holding company with direct or indirect
ownership of all entities within the group.
Given the nature of the activities of the parent, the
carrying value of investments represents the most
significant balances within the parent’s financial
statements. Therefore it is considered of greatest
importance to users of the financial statements and
from an audit perspective. Given the historic trading
performance of the group this is considered to be
an area of normal audit risk.
Management performed an assessment of the
impairment trigger indicators as set out in IAS
36 as at year end date and concluded there were
no indicators present hence an assessment of
impairment was not required for any subsidiaries.
Note 17 in the financial statements.
132 Hilton Food Group PLC Annual Report and Financial Statements 2022
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF HILTON FOOD GROUP PLC continued
There are two financially significant
components in the Group whose
statutory audit opinions are not signed
by the Group engagement partner.
Those are Hilton Foods Holland and
Hilton Foods 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 two significant risk
areas applicable to these components:
i) management override of controls; and
ii) the risk of fraud in revenue recognition.
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 Sweden audit
file. Following these reviews, meetings
were held with each component to
discuss findings from the engagement
partner’s review. In addition to the UK
entities, the Group engagement partner
visited the Group’s operations in the
Netherlands, Australia and New Zealand.
This included meeting with local PwC
audit teams, local management and
touring the facilities.
The impact of climate risk on
our audit
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
1 January 2023. 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 such as
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; 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.
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 thirty-seven subsidiary
undertakings. There are twenty-six
trading subsidiaries located in the United
Kingdom, the Republic of Ireland, the
Netherlands, Poland, Denmark, Sweden,
New Zealand, Australia, Canada, USA,
China, Greece and Hong Kong. There
are six intermediary holding companies,
located in the United Kingdom and
Netherlands, which are all required to
have statutory audits. The remaining five
entities are dormant entities. In addition
to these thirty-seven entities, the Group
has a 50% interest in six joint venture
companies which are located in Australia,
Portugal, Ireland 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.
Hilton Food Group PLC Annual Report and Financial Statements 2022
133
STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTSADDITIONAL INFORMATION INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF HILTON FOOD GROUP PLC continued
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.
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:
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
£2,500,000 (2021: £2,795,000).
£250,000 (2021: £2,500,000).
How we
determined it
Rationale for
benchmark
applied
1% of total assets, however,
capped at £250,000 for group
reporting.
We believe that total assets is
the primary measure used by
the shareholders in assessing
the performance of the
company and is a generally
accepted auditing benchmark
for a holding company with
no trading operations. The
statutory materiality for the
company was £2,250,000
(2021: £2,500,000), however,
this was capped at £250,000
(2021: £150,000) for the
purposes of group reporting.
5% of three year average profit
before tax and exceptional
items (2021: profit before tax
and exceptional items).
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 using a three
year average profit before
tax and exceptional items
benchmark provides us with
a consistent year on year basis
for determining materiality.
We used an average
benchmark for the first time
this year to reflect the impact
of the challenging UK Seafood
business on the consolidated
profit before tax when
compared to the underlying
base businesses across the
other entities in the group.
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 £3,200 and £1,900,000. 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% (2021: 75%) of overall materiality, amounting to £1,875,000
(2021: £2,096,250) for the group financial statements and £187,500 (2021: £1,875,000)
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) (2021: £100,000) and £12,500
(company audit) (2021: £100,000) as well as misstatements below those amounts that,
in our view, warranted reporting for qualitative reasons.
– Performing a risk assessment to identify
factors that could impact the going
concern basis of accounting;
– Understanding and evaluating the
group’s financial forecasts including
severe, but plausible downside scenarios
that could arise;
– Critically assessing the assumptions
used within the forecasts, including
consideration of alternative views, and
their impact on the group’s liquidity
and covenant compliance;
– Obtaining and reviewing the group’s
financing arrangements, including
an audit of bank covenant compliance
and the classification of debt between
current and non-current;
– Comparing the group’s financial
forecasts to historical performance to
assess management’s ability to forecast
as well as assessing the year to date
performance against budget for the
2023 financial year; and
– Reviewing 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.
134 Hilton Food Group PLC Annual Report and Financial Statements 2022
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF HILTON FOOD GROUP PLC continued
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.
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 1 January 2023 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 and company 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.
Hilton Food Group PLC Annual Report and Financial Statements 2022
135
STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTSADDITIONAL INFORMATION INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF HILTON FOOD GROUP PLC continued
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.
Based on our understanding of the
group and industry, we identified that
the principal risks of non-compliance
with laws and regulations related
to 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, UK Listing
Rules and UK and international tax
legislation. 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, management bias
through judgements and assumptions
in significant accounting estimates and
the accounting for 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 improve financial results,
including revenue recognition;
– Challenging assumptions and
judgements made by management,
in particular in relation to acquisition
accounting balances, goodwill
impairment assessments and the
accounting for the Belgium fire
(see related key audit matters above);
– Confirmation that there have been
no material matters reported on
the group’s whistleblowing helpline;
– Review of minutes from board
and other committee meetings
e.g. audit committee or remuneration
committee; 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.
136 Hilton Food Group PLC Annual Report and Financial Statements 2022
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF HILTON FOOD GROUP PLC continued
OTHER REQUIRED REPORTING
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
4 April 2023
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 members 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 16 years,
covering the years ended 31 December
2007 to 1 January 2023.
Hilton Food Group PLC Annual Report and Financial Statements 2022
137
STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTSADDITIONAL INFORMATION EXPERTISE
QUALIT Y
138 Hilton Food Group PLC Annual Report and Financial Statements 2022
OUR BUSINESS
BEGAN WITH MEAT,
AND WE’VE DEVELOPED
MARKET-LEADING
EXPERTISE GLOBALLY.
Customers trust the quality
we bring. We’re always
investing in new technology
to deliver more value,
efficiency and consumer-
led innovative solutions.
FINANCIAL
STATEMENTS
CONSOLIDATED
INCOME STATEMENT
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
CONSOLIDATED AND
COMPANY BALANCE SHEET
CONSOLIDATED AND
COMPANY STATEMENT
OF CHANGES IN EQUITY
140
140
141
142
CONSOLIDATED AND COMPANY
CASH FLOW STATEMENT
143
NOTES TO THE FINANCIAL
STATEMENTS
144
Hilton Food Group PLC Annual Report and Financial Statements 2022
139
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT
Continuing operations
Revenue
Cost of sales*
Gross profit
Distribution costs
Other administrative expenses
Exceptional items
Total administrative expenses*
Share of profit in joint ventures and associates
Operating profit
Finance income
Other finance costs
Exceptional finance costs
Total finance costs
Finance costs – net
Profit before income tax
Income tax expense
Exceptional tax income
Total income tax expense
Profit for the period
Attributable to:
Owners of the parent
Non–controlling interests
Earnings per share attributable to owners of the parent during the period
Basic (pence)
Diluted (pence)
Note(s)
2022
52 weeks
£’000
2021
52 weeks
£’000
Restated
(note 2)*
5
7
7
7
7, 9
17
10
9
10
9
11
12
12
3,847,600
3,301,970
(3,464,837)
(2,982,155)
382,763
(42,028)
(276,048)
(11,896)
319,815
(25,083)
(226,175)
(7,050)
(287,944)
(233,225)
1,235
54,026
356
(24,768)
–
(24,768)
(24,412)
29,614
(10,267)
145
(10,122)
19,492
17,706
1,786
19,492
19.8
19.7
1,925
63,432
10
(14,913)
(1,131)
(16,044)
(16,034)
47,398
(11,232)
3,116
(8,116)
39,282
37,143
2,139
39,282
45.0
44.5
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Profit for the period
Other comprehensive income/(expense)
Items that may be reclassified to profit or loss
Currency translation differences
Gain on cash flow hedges
Other comprehensive expense for the period net of tax
Total comprehensive income for the period
Total comprehensive income attributable to:
Owners of the parent
Non–controlling interests
The notes on pages 144 to 178 are an integral part of these consolidated financial statements.
140 Hilton Food Group PLC Annual Report and Financial Statements 2022
2022
52 weeks
£’000
19,492
2021
52 weeks
£’000
39,282
29
786
815
20,307
18,219
2,088
20,307
(7,090)
–
(7,090)
32,192
30,417
1,775
32,192
CONSOLIDATED AND COMPANY BALANCE SHEET
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Lease: right of use assets
Investments
Trade and other receivables
Deferred income tax assets
Current assets
Inventories
Trade and other receivables
Current tax assets
Other financial assets
Cash and cash equivalents
Total assets
Equity
Equity attributable to owners of the parent
Ordinary shares
Share premium
Own shares
Employee share schemes reserve
Foreign currency translation reserve
Cash flow hedging reserve
Retained earnings
Reverse acquisition reserve
Merger reserve
Non-controlling interests
Total equity
Liabilities
Non-current liabilities
Borrowings
Lease liabilities
Deferred income tax liabilities
Current liabilities
Borrowings
Lease liabilities
Trade and other payables
Financial liabilities at fair value through OCI
Total liabilities
Total equity and liabilities
Notes
2022
£’000
Group
2021
£’000
2022
£’000
Company
2021
£’000
14
15
16
17
20
25
19
20
22
21
26
23
16
25
23
16
24
32
327,611
160,480
216,578
6,208
–
13,801
724,678
206,729
271,160
5,995
–
87,224
571,108
291,488
105,775
222,004
5,539
2,239
6,952
–
–
–
–
–
–
247,785
247,785
–
–
–
–
633,997
247,785
247,785
156,517
230,388
5,212
1,140
140,170
533,427
–
5,875
–
–
186
6,061
–
2,874
–
–
151
3,025
1,295,786
1,167,424
253,846
250,810
8,943
144,926
–
5,004
(2,379)
786
167,862
(31,700)
919
294,361
10,956
305,317
270,510
230,152
15,921
516,583
28,279
16,006
426,203
3,398
473,886
990,469
1,295,786
8,893
142,043
(87)
6,990
(2,106)
–
176,449
(31,700)
919
301,401
6,548
307,949
–
228,977
4,132
233,109
224,732
14,419
387,215
–
626,366
859,475
1,167,424
8,943
144,926
8,893
142,043
–
–
–
–
–
–
–
–
28,958
–
71,019
28,850
–
71,019
253,846
250,805
–
–
253,846
250,805
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5
–
5
5
253,846
250,810
The notes on pages 144 to 178 are an integral part of these consolidated financial statements.
The financial statements on pages 140 to 178 were approved by the Board on 4 April 2023 and were signed on its behalf by:
R. Watson
Director
M. Osborne
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 period dealt with in the income statement of Hilton Food Group plc amounted to £25,600,000 (2021: £24,300,000).
Hilton Food Group PLC Annual Report and Financial Statements 2022
141
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS CONSOLIDATED AND COMPANY STATEMENT
OF CHANGES IN EQUITY
Group
Share
capital
£’000
Share
premium
£’000
Own
shares
£’000
Notes
Balance at 4 January 2021
8,194
65,619
Attributable to owners of the parent
Employee
share
schemes
reserve
£’000
Foreign
currency
tran-
slation
reserve
£’000
Cash
flow
hedge
reserve
£’000
Retained
earnings
£’000
Reverse
acquisition
reserve
£’000
Merger
reserve
£’000
Non-
controlling
interests
£’000
Total
£’000
Total
equity
£’000
6,123
4,620
– 161,607
(31,700)
919 215,382
6,556 221,938
–
–
–
–
–
–
699
76,424
–
–
–
–
–
–
–
–
–
–
– (2,278)
–
–
–
–
–
2,725
2,191
(2,191)
–
–
333
–
699
76,424
(87)
867
–
–
–
–
–
–
–
37,143
(6,726)
(6,726)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
37,143
–
–
–
–
–
(22,301)
(22,301)
–
–
–
–
–
–
–
–
–
–
–
37,143
2,139
39,282
–
–
–
–
–
–
–
–
–
(6,726)
(364)
(7,090)
30,417
1,775
32,192
77,123
(2,278)
2,725
–
333
–
–
–
–
–
77,123
(2,278)
2,725
–
333
(22,301)
(1,783) (24,084)
55,602
(1,783)
53,819
Profit for the period
Other comprehensive
income
Currency translation
differences
Total comprehensive
income for the period
Issue of new shares
Purchase of own shares
Adjustment in respect of
employee share schemes
Settlement of employee
share scheme
Tax on employee share
schemes
Dividends paid
13
Total transactions with
owners
Balance at 2 January 2022
8,893 142,043
(87)
6,990
(2,106)
– 176,449
(31,700)
919 301,401
6,548 307,949
Profit for the period
Other comprehensive
expense
Currency translation
differences
Gain on cash flow hedging
Total comprehensive
income for the period
Transactions with non-
controlling interests
–
–
–
–
–
–
–
–
–
–
Issue of new shares
50
2,883
Adjustment in respect of
employee share schemes
Settlement of employee
share scheme
Tax on employee share
schemes
Dividends paid
13
Total transactions with
owners
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(655)
87
(300)
(1,031)
–
–
–
–
17,706
–
–
17,706
1,786
19,492
(273)
–
–
786
–
–
(273)
786
17,706
–
–
–
–
–
–
–
–
–
–
–
–
(801)
–
–
–
–
– (25,492)
– (26,293)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(273)
302
786
–
29
786
18,219
2,088 20,307
(801)
3,584
2,783
2,933
(655)
(213)
(1,031)
–
–
–
–
2,933
(655)
(213)
(1,031)
(25,492)
(1,264)
(26,756)
(25,259)
2,320 (22,939)
50
2,883
87
(1,986)
Balance at 1 January 2023
8,943 144,926
Company
Balance at 4 January 2021
8,194
65,619
Profit for the period
Total comprehensive
income for the year
Issue of new shares
–
–
–
–
699
76,424
Dividends paid
13
–
–
Total transactions with
owners
699
76,424
Balance at 2 January 2022
8,893 142,043
Profit for the period
Total comprehensive
income for the period
Issue of new shares
Dividends paid
13
Total transactions with
owners
–
–
50
–
50
–
–
2,883
–
2,883
Balance at 1 January 2023
8,943 144,926
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,004 (2,379)
786 167,862
(31,700)
919 294,361
10,956 305,317
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
26,851
– 24,300
– 24,300
–
–
–
–
(22,301)
(22,301)
– 28,850
– 25,600
– 25,600
–
–
– (25,492)
– (25,492)
– 71,019 171,683
–
–
–
–
–
–
–
–
–
–
24,300
24,300
77,123
(22,301)
54,822
–
–
–
–
–
–
171,683
24,300
24,300
77,123
(22,301)
54,822
– 71,019 250,805
– 250,805
–
–
–
–
–
–
–
–
–
–
25,600
25,600
2,933
(25,492)
(22,559)
–
–
–
–
–
25,600
25,600
2,933
(25,492)
(22,559)
– 28,958
– 71,019 253,846
– 253,846
The notes on pages 144 to 178 are an integral part of these consolidated financial statements.
142 Hilton Food Group PLC Annual Report and Financial Statements 2022
CONSOLIDATED AND COMPANY CASH FLOW STATEMENT
Cash flows from operating activities
Cash generated from operations
Interest paid
Income tax paid
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of subsidiary*
Acquisition of investments
Other financial asset – restricted cash
Settlement of deferred consideration
Issue of inter–company loan
Notes
28
Group
2021
52 weeks
Restated
(note 2)*
£’000
121,259
(16,044)
(19,210)
86,005
(35,453)
–
(1,140)
(2,500)
Company
2022
53 weeks
£’000
2021
52 weeks
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,206)
(77,377)
2022
53 weeks
£’000
98,312
(24,768)
(13,881)
59,663
(81,822)
(1,764)
–
–
–
Purchases of property, plant and equipment
(55,140)
(56,251)
Proceeds from sale of property, plant and equipment
Purchases of intangible assets
Interest received
Dividends received
Dividends received from joint venture
261
(1,622)
356
–
672
114
(1,115)
10
–
2,273
–
–
–
–
–
–
–
–
25,600
24,300
–
–
Net cash (used in)/generated from investing activities
(139,059)
(94,062)
24,394
(53,077)
Cash flows from financing activities
Purchase of non–controlling interest
Proceeds from borrowings*
Repayments of borrowings
Payment of lease liability
Issue of ordinary shares*
Purchase of own shares
Dividends paid to owners of the parent
Dividends paid to non–controlling interests
Net cash generated from/(used in) financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at end of the period
21
(1,151)
295,790
(228,565)
(15,631)
1,133
–
(25,492)
(1,264)
24,820
(54,576)
140,170
1,630
87,224
–
65,237
(79,819)
(6,588)
75,339
(2,278)
(22,301)
(1,783)
27,807
19,750
123,816
(3,396)
140,170
–
–
–
–
1,133
–
–
–
–
–
75,339
–
(25,492)
(22,301)
–
–
(24,359)
53,038
35
151
–
186
(39)
190
–
151
The notes on pages 144 to 178 are an integral part of these consolidated financial statements.
Hilton Food Group PLC Annual Report and Financial Statements 2022
143
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS
1 GENERAL INFORMATION
Hilton Food Group plc (‘the Company’) and its subsidiaries (together ‘the Group’) is a leading specialist international food packing
business supplying major international food retailers in 14 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 period represents the 52 weeks to 1 January 2023 (prior financial period 52 weeks to 2 January 2022).
These consolidated financial statements were approved for issue on 4 April 2023.
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 period dealt with in the income statement of
Hilton Food Group plc amounted to £25,600,000 (2021: £24,300,000).
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 periods 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 except for certain financial assets and liabilities measured at fair value and in accordance with UK-adopted International
Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under
those standards.
The consolidated and company financial statements have been prepared on the going concern basis. The reasons why the Directors
consider this basis to be appropriate are set out in the Performance and financial review on page 25.
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.
The financial information included in this preliminary announcement does not constitute statutory accounts of the Group for the
years ended 1 January 2023 and 2 January 2022 but is derived from those accounts. Statutory accounts for 2021 have been delivered to
the Registrar of Companies and those for 2022 will be delivered following the Company’s Annual General Meeting. The auditors have
reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the
Companies Act 2006.
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 1 January 2023. 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 income statement, 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.
144 Hilton Food Group PLC Annual Report and Financial Statements 2022
NOTES TO THE FINANCIAL STATEMENTS
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.
Prior period adjustments
Following discussions with the FRC in connection with their limited scope review of the 2021 Annual report, that was focused on
disclosures relating to business combinations, prior period adjustments have been made to restate the Consolidated cash flow
statement, Deferred tax disclosures (note 25) and the disclosures of the Analysis and movement in net debt (note 29).
Presentation of cash outflow for the acquisition of subsidiary
The 2021 Consolidated cash flow statement recognised a £39,062,000 cash outflow within investing activities for the acquisition
of subsidiary.
This figure included:
– £8,504,000 of debt acquired as part of the acquisition of Fairfax Meadow Europe Limited (‘Fairfax Meadow’) that was immediately
repaid as a result of the requirements of change of control clauses within related bank facility agreements
– £1,825,000 of debt acquired as part of the Dalco acquisition
– £1,785,000 in respect of the fair value of shares transferred to the vendors as part of the consideration for the acquisition of Dalco.
This amount was offset by a corresponding cash inflow recognised within the total £77,123,000 cash inflow from the issue of
ordinary shares included within financing activities
(i) Acquisition of Fairfax Meadow
The repayment of the loans acquired with Fairfax Meadow was triggered by pre-existing change of control clauses requiring the debt
to be repaid and therefore, in accordance with IAS 7, the repayment of the acquired debt was classified within the cash outflow from
the acquisition of a subsidiary.
However, as the cash flows were not between the Group and the vendors of Fairfax Meadow the fair value of the acquired debt has
been included within the fair value of assets and liabilities acquired rather than as part of the consideration.
As a result of this classification the £8,504,000 debt acquired and subsequently repaid should have been recognised as separate line
items with the movements in net debt note. The movement in net debt detailed in note 29 for the 2021 financial period has therefore
been restated to reflect this.
(ii) Acquisition of Dalco
The £1,825,000 of debt acquired as part of the acquisition of Dalco was not repaid at the point of acquisition and the £1,785,000
consideration paid in shares to the vendors was a non-cash item and therefore neither item should have been recognised as part
of the cash outflow for the acquisition of a subsidiary.
To correct this, the 2021 comparative cash flow statement has been restated as follows:
– the cash outflow for the acquisition of subsidiary has been reduced by £3,609,000 to £35,453,000 with a corresponding £3,609,000
reduction in the net cash outflow from investing activities to £94,062,000.
– Proceeds from borrowings reduced by £1,825,000 to £65,237,000.
– Issue of ordinary shares reduced by £1,785,000 to £75,339,000.
– With a corresponding overall reduction of £3,609,000 in net cash generated from financing activities reduced to £27,807,000.
An adjustment has also been made to restate the movement in net debt for 2021 in note 29 to show £1,825,000 of further debt
acquired with a corresponding reduction to £65,237,000 in the proceeds of new borrowings.
Deferred tax
The provisional fair value assessment of the assets and liabilities acquired through business combinations recognised in the 2021
Annual report included total deferred tax liabilities of £3,266,000.
In 2021’s financial statement disclosures the total deferred tax amount recognised was included within the movement of deferred tax
as a result of accelerated capital allowances.
However, included within this total figure was £3,001,000 recognised in respect of acquired brand and customer relationship
intangible assets.
The prior period deferred tax movements explained in note 25 have therefore been restated to correctly classify the movement that
related to the valuation of acquired brand and customer relationship intangible assets.
Depreciation
Following a review of expense classification, the Group has reclassified depreciation relating to buildings, plant and machinery from
administration expenses to cost of sales as these assets are directly involved in production. As a result, the Group has restated the
comparative figures for this reclassification. The restatement has no impact on operating profit and results in cost of sales increasing
by £46,263,000 in the prior period with a corresponding reduction in gross profit. Other Administrative expenses have also therefore
reduced by £46,263,000.
Hilton Food Group PLC Annual Report and Financial Statements 2022
145
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
International Financial Reporting Standards
(a) New standards, amendments and interpretations effective in 2022
The Group has applied the following amendments for the first time for their annual reporting period commencing 3 January 2022:
– Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16;
– Onerous contracts – Cost of Fulfilling a Contract – Amendments to IAS 37;
– Annual Improvements to IFRS Standards 2018-2020; and
– Reference to the Conceptual Framework – Amendments to IFRS 3.
The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected
to significantly affect the current or future periods.
(b) New standard, amendments and interpretations issued but not yet effective
Certain new accounting standards, amendments to accounting standards and interpretations have been published that are not
mandatory for 31 December 2022 reporting periods and have not been early adopted by the Group. These standards, amendments
or interpretations are not expected to have a material impact on the entity in the current or future reporting periods an on foreseeable
future transactions.
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 and cost of sales expenses in the Group’s income statement.
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;
– payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option; and,
– only leases of a value above £1,000 have been considered.
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.
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 customer’s 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 receivable/payable is recognised for expected rebates and discounts
are deducted from the amount receivable from the customer.
146 Hilton Food Group PLC Annual Report and Financial Statements 2022
NOTES TO THE FINANCIAL STATEMENTS continued
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 period
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. The profit and loss of designated cash flow hedges goes through
other comprehensive income and cash flow hedging 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 and 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 remeasurement but are instead accounted for as adjustments to equity attributed to the owners of the parent.
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:
Buildings (including leasehold improvements)
Plant and machinery
Fixtures and fittings
Motor vehicles
Land is not depreciated. Assets in the course of construction are not depreciated until commissioned.
Annual rate
4% - 14%
14% - 33%
14% - 33%
25%
Hilton Food Group PLC Annual Report and Financial Statements 2022
147
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
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. All business units acquired in the period are also tested
for goodwill. 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 (See 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 3 to 22 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.
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.
Derivative financial instruments and hedging activities
The Group’s policy is only to use forward currency exchange rate contracts for the purpose of mitigating commodity risk occurring
in the normal course of business. At no time will the Group take positions in derivative instruments for the purpose of earning
a stand-alone profit from such instruments.
A derivative financial instrument is initially recognised at its fair value on the date the contract is entered into and is subsequently
carried at its fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as
a hedging instrument, and if so, the nature of the item being hedged. The Group designates each hedge as either: (a) fair value hedge
or (b) cash flow hedge.
Fair value changes on derivatives that are not designated or do not qualify for hedge accounting are recognised in profit or loss when
the changes arise.
148 Hilton Food Group PLC Annual Report and Financial Statements 2022
NOTES TO THE FINANCIAL STATEMENTS continued
The Group documents at the inception of the transaction the relationship between the hedging instruments and hedged items,
as well as its risk management objective and strategies for undertaking various hedge transactions. The Group also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives designated as hedging instruments are
highly effective in offsetting changes in fair value or cash flows of the hedged items.
The carrying amount of a derivative designated as a hedge is presented as a non-current asset or liability if the remaining expected
life of the hedged item is more than 12 months, and as a current asset or liability if the remaining expected life of the hedged item
is less than 12 months. The fair value of a trading derivative is presented as a current asset or liability.
a) Fair value hedge
The Group has entered into currency forwards that are fair value hedges for currency risk arising from its firm commitments for
purchases and sales denominated in foreign currencies (“hedged item”). The fair value changes on the hedged item resulting from
currency risk are recognised in profit or loss. The fair value changes on the effective portion of currency forwards designated as fair
value hedges are recognised in profit or loss within the same line item as the fair value changes from the hedged item. The fair value
changes on the ineffective portion of currency forwards are recognised separately in profit or loss.
b) Cash flow hedge
Currency forwards
The Group has entered into currency forwards that qualify as cash flow hedges against highly probable forecasted transactions
in foreign currencies. The fair value changes on the effective portion of the currency forwards designated as cash flow hedges are
recognised in the hedging reserve and transferred to either the cost of a hedged non-monetary asset upon acquisition or profit
or loss when the hedged forecast transactions are recognised.
The fair value changes on the ineffective portion are recognised immediately in profit or loss. When a forecasted transaction is
no longer expected to occur, the gains and losses that were previously recognised in the hedging reserve are reclassified to profit
or loss immediately.
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. They are subsequently measured at amortised cost using the
effective interest method, less loss allowance. 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 another 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.
Hilton Food Group PLC Annual Report and Financial Statements 2022
149
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
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.
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 period 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. The Group 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.
150 Hilton Food Group PLC Annual Report and Financial Statements 2022
NOTES TO THE FINANCIAL STATEMENTS continued
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 treated acquisition costs, including legal and professional fees and stamp duty costs, as exceptional due to the
size and expected frequency of acquisitions. As detailed in note 9 during the period to 1 January 2023 the Group has recognised
exceptional items in respect of the fire at its facility in Belgium, as a consequence of acquisition-related costs incurred in the period,
business restructuring costs and in respect of a gain made on accounting for the acquisition of a 15% share of its Foods Connected Ltd
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 33.
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.
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, US Dollars, Australian Dollars and New Zealand Dollars 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 is exposed to foreign exchange risk where some of its sales and purchases are denominated in US Dollars.
The policy is to hedge material foreign exchange risk associated with highly probable forecast transactions with its key US customers
based on firm commitments and monetary items denominated in foreign currencies.
(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
Annual effect of a change in Group-wide interest rates by - 0.5%
Annual effect of a change in Group-wide interest rates by +0.5%
Annual effect of a change in exchange rates to the GBP £ by +10%
Annual effect of a change in exchange rates to the GBP £ by -10%
Income
statement
£’000
1,495
(1,495)
2,639
(2,159)
2022
Equity
£’000
1,495
(1,495)
23,434
(19,173)
Income
statement
£’000
885
(885)
3,913
(3,202)
2021
Equity
£’000
885
(885)
14,715
(12,040)
(b) Credit risk
The Group is exposed to credit risk in respect of credit exposures to its retail customer partners and banking arrangements.
The majority of the Group’s customers are comprised of blue chip international supermarket retailers, and the Group has implemented
policies that require appropriate credit checks on potential customers before sales are made and in relation to its banking partners.
The Group’s maximum exposure to credit risk is £252.0m (2021: £227.1m) as stated in note 32.
Hilton Food Group PLC Annual Report and Financial Statements 2022
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STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS continued
3 FINANCIAL RISK MANAGEMENT continued
(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 £87.2m (2021: £140.2m) 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:
Less than one year
Between one and two years
Between two and five years
Over five years
Borrowings
£’000
28,279
27,188
54,375
Leases
£’000
22,645
22,793
63,656
188,947
220,081
2022
Trade and
other payables
£’000
Borrowings
£’000
418,794
224,732
–
–
–
–
–
–
2021
Trade and
other payables
£’000
378,258
–
–
–
Leases
£’000
22,716
20,873
58,137
233,673
Capital risk management
The Group’s and Company’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 33. 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 less interest, tax, depreciation
and amortisation, excluding the impact of IFRS 16. The gearing of the Group was 177% as at the period end (2021: 69.5%).
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.
152 Hilton Food Group PLC Annual Report and Financial Statements 2022
NOTES TO THE FINANCIAL STATEMENTS continued
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 judgemental 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.
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 period 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.
Critical accounting estimates
Goodwill impairment
Goodwill is reviewed for impairment at least on 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 in running reasonable sensitivities did not result in a material impairment in any of the CGUs subject to
impairment testing.
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.
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.
If projected performance was to increase or decrease by 10% compared to expectations there would be no impact to the share-based
change to the share-based payments.
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 period and the Group’s approach to assessing fair values of acquired assets and liabilities.
During 2022 and 2021 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 ten 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) APAC 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. APAC 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.
Hilton Food Group PLC Annual Report and Financial Statements 2022
153
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued
5 SEGMENT INFORMATION continued
The segment information provided to the Executive Directors for the reportable segments is as follows:
Total revenue
Inter-co revenue
Europe
£’000
APAC
£’000
2,348,355
1,592,946
(93,701)
–
Central
costs
£’000
–
–
2022
Total
£’000
Europe
£’000
APAC
£’000
Central
costs
£’000
2021
Total
£’000
3,941,301
2,040,618
1,314,602
(93,701)
(53,250)
–
– 3,355,220
–
–
(53,250)
3,301,970
Third party revenue
2,254,654 1,592,946
– 3,847,600
1,987,368
1,314,602
Adjusted operating profit/(loss)
segment result (see note 33)
Amortisation of acquired intangibles
Exceptional items
Impact of IFRS 16
49,672
26,705
(5,233)
71,144
61,788
22,370
(10,591)
73,567
(8,257)
(9,014)
–
–
–
(8,257)
(2,882)
(11,896)
(2,778)
(6,994)
–
–
915
2,120
–
3,035
291
(654)
–
–
–
(2,778)
(6,994)
(363)
Operating profit/(loss) segment result
33,316
28,825
(8,115)
54,026
52,307
21,716
(10,591)
63,432
Finance income
Finance costs
Income tax (expense)/credit
356
(8,094)
(3,469)
–
(5,336)
(7,505)
–
356
(11,338)
(24,768)
852
(10,122)
Profit/(loss) for the period
22,109
15,984
(18,601)
19,492
10
(2,881)
(7,965)
41,471
–
–
10
(10,017)
(3,146)
(16,044)
(1,761)
9,938
1,610
(8,116)
(12,127)
39,282
Depreciation and amortisation
Additions to non-current assets
39,776
46,197
37,640
9,643
353
1,167
77,769
57,007
33,039
29,587
33,604
27,528
140
662
66,783
57,777
Segment assets
769,936
481,229
24,825
1,275,990
643,157
462,556
49,547
1,155,260
Current income tax assets
Deferred income tax assets
Total assets
5,995
13,801
1,295,786
5,212
6,952
1,167,424
Segment liabilities
386,903
466,492
121,153
974,548
346,403
419,611
89,329
855,343
Deferred income tax liabilities
Total liabilities
15,921
990,469
4,132
859,475
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 33). 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, Estonia
and APAC.
154 Hilton Food Group PLC Annual Report and Financial Statements 2022
NOTES TO THE FINANCIAL STATEMENTS continued
Analysis of revenues from external customers and non-current assets are as follows:
Analysis by geographical area
United Kingdom – country of domicile
Netherlands
Belgium
Sweden
Republic of Ireland
Denmark
Central Europe
APAC
Analysis by principal customer
Customer 1
Customer 2
Customer 3
Customer 4
Customer 5
Other
Revenues from
external customers
Non-current assets excluding
deferred tax assets
2022
£’000
2021
£’000
2022
£’000
2021
£’000
257,481
56,671
883
9,119
3,008
16,468
23,717
343,530
710,877
196,857
34,857
1,327
12,814
4,711
16,046
22,297
338,136
627,045
1,184,006
446,387
26,915
237,438
83,686
131,845
142,905
1,594,418
3,847,600
1,122,047
298,535
25,687
220,065
95,349
116,156
109,529
1,314,602
3,301,970
1,100,571
1,156,771
341,289
230,716
124,506
327,293
231,492
113,555
1,430,806
1,314,602
619,712
158,257
3,847,600
3,301,970
6 AUDITORS’ REMUNERATION
Services provided by the Group’s auditors and their associates
During the period the Group (including its overseas subsidiaries) obtained the following services from the Group’s auditors and
their associates:
Group
Fees payable to the Group’s auditors for the audit of the parent Group and consolidated financial
statements
Fees payable to the Group’s auditors and their associates for other services:
– The audit of the Group's subsidiaries pursuant to legislation
– Other services pursuant to legislation
– All other services including regulatory acquisition work
Total fees payable to the Group’s auditors and its associates
2022
£’000
244
801
53
25
1,123
2021
£’000
168
544
49
25
786
Hilton Food Group PLC Annual Report and Financial Statements 2022
155
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued
7 EXPENSES BY NATURE
Group
Changes in inventories of finished goods and goods for resale
Raw materials and consumables used
Employee benefit expense (note 8)
Depreciation and amortisation – owned assets
Depreciation and amortisation – leased assets
Repairs and maintenance expenditure on property, plant and equipment
Transportation expenses
Gain on impact of acquisition of Dalco BV (note 9)
Gain on impact of acquisition of Foods Connected Ltd (note 9)
Foreign exchange gain/(losses)
Other expenses
Total cost of sales, distribution costs and administrative expenses
Cost of sales
Distribution costs
Administrative expenses
Total cost of sales, distribution costs and administrative expenses
8 EMPLOYEE BENEFIT EXPENSE
Group
Staff costs during the period
Wages and salaries
Social security costs
Share options granted to Directors and employees
Pension costs -defined contribution plan
Group
Average number of monthly persons employed (including Executive Directors) during the period by activity
Production
Administration
Group
Key management compensation (including Directors)
Salaries and short-term employee benefits, including termination benefits
Post-employment benefits
Share-based payments
Group
Directors’ emoluments
Aggregate emoluments
Group contribution to money purchase pension scheme
2022
£’000
3,620
2021
£’000
3,503
3,175,358
2,718,685
239,692
56,959
20,780
30,861
42,254
–
(2,702)
(391)
211,866
48,356
18,427
24,101
24,721
(6,837)
–
1,180
228,378
196,461
3,794,809
3,240,463
3,464,837
2,982,155
42,028
287,944
25,083
233,225
3,794,809
3,240,463
2022
£’000
2021
£’000
211,054
17,274
(655)
12,019
182,736
16,855
2,725
9,550
239,692
211,866
2022
Number
2021
Number
5,137
1,551
6,688
2022
£’000
10,059
94
3,074
13,227
2022
£’000
1,414
94
1,508
4,755
1,270
6,025
2021
£’000
8,423
314
3,074
11,811
2021
£’000
3,658
138
3,796
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 (2021: £nil).
156 Hilton Food Group PLC Annual Report and Financial Statements 2022
NOTES TO THE FINANCIAL STATEMENTS continued
9 EXCEPTIONAL ITEMS
Group
Fire in Belgium
Impact of acquisition of Foods Connected Ltd
Acquisition related costs
Reorganisation costs
Total exceptional costs
Group
Fire in Belgium
Impact of acquisition of Dalco
Acquisition related costs
Total exceptional costs
Operating
profit
2022
£’000
Finance
costs
2022
£’000
9,500
(2,701)
1,204
3,893
11,896
Operating
profit
2021
£’000
11,661
(6,837)
2,226
7,050
–
–
–
–
–
Finance
costs
2021
£’000
–
–
1,131
1,131
Tax
2022
£’000
–
–
–
(145)
(145)
Tax
2021
£’000
(2,901)
–
(215)
(3,116)
Profit
after tax
2022
£’000
9,500
(2,701)
1,204
3,748
11,751
Profit
after tax
2021
£’000
8,760
(6,837)
3,142
5,065
Fire in Belgium
In June 2021 the Group’s facility in Belgium suffered an extensive fire. The Group continues to work closely with its insurers to progress
related insurance claims. The results for the period to 1 January 2023 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.
Exceptional costs totalling £9,500,000 have been recognised in the period relating to additional costs incurred in continuing
to operate in Belgium including the ongoing insurance and legal claim.
In the prior period an exceptional impairment totalling £11,661,000 was recognised in respect of assets that were destroyed by the fire,
alongside additional costs incurred in continuing to operate in Belgium including insurance and legal claims.
Acquisition of Foods Connected Ltd
On 7 July 2022 the Group acquired a further 15% interest in Foods Connected Ltd, taking its total holding to 65% (see note 18) and the
financial position and performance of the business was fully consolidated from this date. The Group’s existing joint venture interest
was effectively disposed of at this date with an exceptional gain of £2,701,000, being the difference between the carrying value and
fair value of the joint venture interest, recognised.
In 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.
Reorganisation costs
During the period exceptional reorganisation costs of £3,893,000 have been recognised by the Group. These costs resulted from
on-going efficiency and restructuring programmes resulting in redundancies at a number of facilities operated by the Group.
An exceptional tax credit of £145,000 has been recognised in respect of these costs.
Acquisition costs
During the period the Group has recognised exceptional acquisition costs relating primarily to the acquisition of Foppen in respect
of legal and professional fees and other related costs of £1,204,000. In 2021 the business recognised £2,226,000 of exceptional
acquisition costs in respect of legal and professional fees and £1,131,000 of exceptional finance costs related to the agreement of short-
term acquisition bridge finance.
Hilton Food Group PLC Annual Report and Financial Statements 2022
157
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued
10 FINANCE INCOME AND COSTS
Group
Finance income
Other interest income
Finance income
Finance costs
Bank borrowings
Interest on lease liabilities
Exceptional finance costs (note 9)
Other interest expense
Finance costs
Finance costs – net
11 INCOME TAX EXPENSE
Group
Current income tax
Current tax on profits for the period
Adjustments to tax in respect of previous periods
Total current tax
Deferred income tax
Origination and reversal of temporary differences
Adjustments to tax in respect of previous periods
Total deferred tax
Income tax expense
2022
£’000
2021
£’000
356
356
(12,241)
(8,758)
–
(3,769)
(24,768)
(24,412)
10
10
(5,132)
(8,536)
(1,131)
(1,245)
(16,044)
(16,034)
2022
£’000
2021
£’000
13,697
195
13,892
(3,753)
(17)
(3,770)
10,122
12,646
(2,322)
10,324
(3,342)
1,134
(2,208)
8,116
Deferred tax charged directly to equity during the period in respect of employee share schemes amounted to £1,031,409
(2021: charge £333,000).
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 (2021: differs) from the theoretical amount that would arise using the standard
rate of UK corporation tax of 19% (2021: 19%) applied to profits of the consolidated entities as follows:
Profit before income tax
Tax calculated at the standard rate of UK corporation tax 19% (2021: 19%)
Effects of:
Expense/(income) not deductible for tax purposes
Joint venture received net of tax
Adjustments to tax in respect of previous periods
Profits taxed at rates other than 19% (2021: 19%)
Impact of change in tax rates
Non-taxable gain on acquisition of JV
Unrelieved losses carried forward
Deferred tax recognised in reserves
Other
Income tax expense
2022
£’000
29,614
5,627
1,074
(238)
178
5,867
(398)
(513)
(444)
(1,031)
–
10,122
2021
£’000
47,398
9,006
(15)
(471)
(1,188)
2,746
(633)
(1,299)
–
–
(30)
8,116
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.
158 Hilton Food Group PLC Annual Report and Financial Statements 2022
NOTES TO THE FINANCIAL STATEMENTS continued
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 period.
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 Group 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 Group’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
Profit attributable to owners of the parent
(£'000)
Weighted average number of ordinary shares in issue
(thousands)
Adjustment for share options
(thousands)
Adjusted weighted average number of ordinary shares
(thousands)
Basic and diluted earnings per share
(pence)
Basic
17,706
89,234
–
89,234
19.8
2022
Diluted
17,706
89,234
690
89,924
19.7
13 DIVIDENDS
Group and Company
Final dividend in respect of 2021 paid 21.5p per ordinary share (2020: 19.0p)
Interim dividend in respect of 2022 paid 7.1p per ordinary share (2021: 8.2p)
Total dividends paid
Basic
37,143
82,456
–
82,456
45.0
2022
£’000
19,143
6,349
25,492
2021
Diluted
37,143
82,456
1,098
83,554
44.5
2021
£’000
15,561
6,740
22,301
The Directors propose a final dividend of 22.6p (2021: 21.5p) per share payable on 30 June 2023 to shareholders who are on the
register at 2 June 2023. This dividend totalling £20.2m (2021: £19.1m) has not been recognised as a liability in these consolidated
financial statements.
Dividends paid to non-controlling interests in the period totalled £1,264,000 (2021: £1,783,000).
Hilton Food Group PLC Annual Report and Financial Statements 2022
159
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued
14 PROPERTY, PLANT AND EQUIPMENT
Group
Cost
At 4 January 2021
Exchange adjustments
Acquisition (note 18)
Additions
Exceptional impairment (note 9)
Transfer
Disposals
At 2 January 2022
Accumulated depreciation
At 4 January 2021
Exchange adjustments
Charge for the period
Exceptional impairment (note 9)
Transfer
Disposals
At 2 January 2022
Net book amount
At 4 January 2021
At 2 January 2022
Cost
At 3 January 2022
Exchange adjustments
Acquisition (note 18)
Additions
Transfer
Disposals
At 1 January 2023
Accumulated depreciation
At 3 January 2022
Exchange adjustments
Charge for the period
Transfer
Disposals
At 1 January 2023
Net book amount
At 1 January 2023
Plant and
machinery
£’000
Fixtures and
fittings
£’000
Motor vehicles
£’000
443,243
20,498
Land and
buildings
(including
leasehold
improvements)
£’000
97,523
(3,248)
2,315
15,125
–
430
(469)
(19,497)
7,843
37,487
(7,049)
(769)
(260)
111,676
460,998
30,350
224,905
(924)
4,440
–
–
(87)
(10,560)
37,384
(672)
–
(192)
(1,136)
548
3,606
–
(4,165)
(735)
18,616
15,333
(781)
2,297
–
(553)
(878)
Total
£’000
561,436
(23,889)
10,829
56,251
(7,049)
(4,501)
(1,479)
591,598
270,590
(12,272)
44,186
(672)
(553)
(1,169)
300,110
172
(8)
123
33
–
3
(15)
308
2
(7)
65
–
–
(12)
48
33,779
250,865
15,418
67,173
77,897
218,338
210,133
5,165
3,198
170
260
290,846
291,488
111,676
3,313
6,040
6,484
–
(7)
460,998
15,110
11,443
44,946
496
(1,171)
18,616
654
1,263
3,591
100
(47)
308
591,598
25
81
119
–
–
19,102
18,827
55,140
596
(1,225)
127,506
531,822
24,177
533
684,038
33,779
250,865
1,122
7,623
–
(7)
7,960
36,529
496
(717)
15,418
406
2,712
100
(45)
42,517
295,133
18,591
48
17
121
–
–
186
300,110
9,505
46,985
596
(769)
356,427
84,989
236,689
5,586
347
327,611
The cost and net book amount of property plant and equipment in the course of its construction included above comprise plant and
machinery £26,877,000 (2021: £13,025,000).
Additions to property, plant and equipment include capitalised interest costs of £Nil (2021: £725,000).
160 Hilton Food Group PLC Annual Report and Financial Statements 2022
NOTES TO THE FINANCIAL STATEMENTS continued
15 INTANGIBLE ASSETS
Group
Cost
At 4 January 2021
Exchange adjustments
Acquisition (note 18)
Additions
Transfer
Disposals
At 2 January 2022
Accumulated amortisation
At 4 January 2021
Exchange adjustments
Charge for the period
Transfer
Disposals
At 2 January 2022
Net book amount
At 4 January 2021
At 2 January 2022
Cost
At 3 January 2022
Exchange adjustments
Acquisition (note 18)
Impact of finalising fair value of prior year acquisitions (note 18)
Additions
Transfer
At 1 January 2023
Accumulated amortisation
At 3 January 2022
Charge for the period
Transfer
At 1 January 2023
Net book amount
At 1 January 2023
Computer
software
£’000
Brand and
customer
relationships
£’000
10,980
(411)
158
1,526
4,501
(3)
22,560
–
12,519
–
–
–
Goodwill
£’000
47,582
–
Total
£’000
81,122
(411)
21,900
34,577
–
–
–
1,526
4,501
(3)
16,751
35,079
69,482
121,312
3,420
(235)
1,468
553
(2)
5,204
7,560
11,547
16,751
19
2,849
–
1,867
(596)
7,631
–
2,702
–
–
10,333
14,929
24,746
–
–
–
–
–
–
11,051
(235)
4,170
553
(2)
15,537
47,582
69,482
70,071
105,775
35,079
69,482
–
37,452
9,440
–
–
–
21,105
(8,053)
–
–
121,312
19
61,406
1,387
1,867
(596)
20,890
81,971
82,534
185,395
5,204
2,019
(596)
6,627
10,333
7,955
–
18,288
–
–
–
–
15,537
9,974
(596)
24,915
14,263
63,683
82,534
160,480
Amortisation charges are included within administrative expenses in the income statement.
Goodwill impairment testing
Goodwill includes Seachill UK Limited £44,000,000 (purchased 2017), SV Cuisine Limited £2,789,000 (purchased 2021), Dalco
£10,168,000 (purchased in 2021), Fairfax Meadow Europe Limited £3,685,000 (purchased in 2021), Dutch Seafood Company
BV (Foppen) £17,805,000 (purchased in 2022) and Foods Connected Ltd £3,300,000 (controlling interest purchased in 2022).
Each business is considered to be a separate cash generating unit. The recoverable amount of the cash generating units was based
on a value-in-use basis 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
9.6%-10% (2021: 10%) based on the country and cash generating unit with a growth rate of 2% (2021: 2%) used to extrapolate cash flows.
Discount rates and growth rates are calculated with reference to external benchmarks and where relevant past experience.
Hilton Food Group PLC Annual Report and Financial Statements 2022
161
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued
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 0.5%, a reduction
in growth rate of 0.5% percentage point or a 5% reduction in budgeted cash flow. The impact in running reasonable sensitivities did
not result in a material impairment in any of the CGUs subject to impairment testing.
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 period
Goodwill and other intangible assets totalling £21,105,000 has been provisionally recognised following the acquisitions of Foods
Connected Ltd and final numbers for Foppen Group with each forming separate cash generating units in the period (see note 18).
The individual cash generating units have been tested for impairment in the 2022 financial period.
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
Opening net book amount as at 4 January 2021
Exchange adjustments
Additions
Acquisition (note 18)
Remeasurements, reclassification and scope changes
Depreciation
Disposal of leased assets destroyed by fire (note 9)
Closing net book amount at 2 January 2022
Exchange adjustments
Additions
Acquisition (note 18)
Remeasurements, reclassification and scope changes
Depreciation
Closing net book amount at 1 January 2023
Lease liabilities
Group
Current
Non-current
Maturity analysis - contractual undiscounted cash flows
Group
Less than one year
One to five years
More than five years
Total lease liabilities
Land and
Buildings
£’000
231,420
(9,945)
2,739
6,066
–
(16,339)
(2,168)
211,773
5,946
2,462
3,106
120
(17,105)
206,302
Equipment
£’000
Vehicles
£’000
1,106
(147)
2,418
5,139
(336)
(927)
(19)
7,234
230
2,272
–
–
(1,945)
7,791
2,609
(108)
420
1,289
–
(1,161)
(52)
2,997
80
1,101
108
(71)
(1,730)
2,485
2022
£’000
16,006
230,152
246,158
2022
£’000
22,645
86,449
220,081
329,175
Total
£’000
235,135
(10,200)
5,577
12,494
(336)
(18,427)
(2,239)
222,004
6,256
5,835
3,214
49
(20,780)
216,578
2021
£’000
14,419
228,977
243,396
2021
£’000
22,716
79,010
233,673
335,399
162 Hilton Food Group PLC Annual Report and Financial Statements 2022
NOTES TO THE FINANCIAL STATEMENTS 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
Buildings
Plant and equipment
Vehicles
Interest expenses (included in finance costs)
Expenses relating to short-term leases (included in costs of goods sold and administrative expenses)
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)
2022
£’000
17,105
1,945
1,730
20,780
8,758
748
–
2021
£’000
16,339
927
1,161
18,427
8,536
136
3
The total cash outflow for leases in 2022 was £24,387,000 (2021: £17,307,000).
Variable lease payments
Leases with liabilities recognised of £9,476,000 (2021: £9,824,000), accounting for 3.8% (2021: 4.0%) 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 1 January 2023, lease liabilities would have increased by 2022: £4,536,000 (2021: £1,895,000).
In addition, leases with liabilities recognised totalling £5,021,000 (2021: £6,408,000), accounting for 2.0% (2021: 2.6%) 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 1 January 2023, lease liabilities would have increased by £1,054,000 (2021: £278,000).
17 INVESTMENTS
The Group uses the equity method of accounting for its interest in joint ventures and associates. The aggregate movement in the
Group’s investments in joint ventures and associates is as follows:
Group
At the beginning of the period
Acquisitions
Profit for the period
Disposal of investment
Dividends received
Effect of movements in foreign exchange
At the end of the period
2022
Joint ventures
£’000
2022
Associates
£’000
2022
Total
£’000
2021
Joint ventures
£’000
5,539
1,139
1,235
(2,925)
(672)
127
4,443
–
1,765
–
–
–
–
1,765
5,539
2,904
1,235
(2,925)
(672)
127
6,208
12,622
–
1,925
(6,551)
(2,273)
(184)
5,539
Hilton Food Group PLC Annual Report and Financial Statements 2022
163
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS continued
17 INVESTMENTS continued
Where relevant, management accounts for the joint venture have been used to include the results up to 1 January 2023.
The Group’s share of the net assets, income and expenses of the joint venture and associates are detailed below:
Set out below are the joint ventures and associates of the Group as at 1 January 2023. Unless otherwise stated there has been no
change to the holding.
(%) 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
Agito Global, Unipessoal LDA
nº 249 - 1º, Avenida da Liberdade, Lisboa
Concelho, Santo António, Lisboa, 1250 143
LISBOA
Portugal
€5 Ordinary
€1 Ordinary
Agito Group Pty Limited
C/O PwC, Level 15, 125 St Georges Terrace,
Perth, Western Australia, 6000
Australia
AUD 1
Ordinary
Agito Global Limited
Agito Holdings Limited
Agito Global Limited
5th Floor, Beaux Lane House, Mercer Street
Lower, Dublin 2, Dublin, D02 DH60
2-8 Interchange Latham Road, Huntingdon
PE29 6YE
First Floor Offices, Unit 6b, Vantage Park,
Huntingdon, Cambridgeshire, PE29 6SR
Ireland
€1 Ordinary
UK
£1 Ordinary
£1 Ordinary
–
–
–
–
–
–
50
50
50
50
50
(2021:100)
50
Associates
Registered address
Country
Share class
Parent
Group
Cellular Agriculture Limited
A Turner and Sons Sausage
Limited
Felin Y Glyn, Pontnewydd, Llanelli, SA15 5TL
205 North Lane, Aldershot, Hants, GU12 4SY
UK
£0.000002
Series A-1
Ordinary
£1 Ordinary
–
–
17.45
16.25
As noted below, during the period the Group acquired an additional 15% interest in Foods Connected Ltd taking its interest to 65%.
In addition the Group acquired a 17.45% interest in Cellular Agriculture Ltd for consideration of £1,715,000 and a 16.25% interest in
A Turner and Sons Sausage Limited for consideration of £50,000.
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
Summarised balance sheet
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Non-current assets
Total current liabilities
Total non-current liabilities
Net assets
Reconciliation to carrying amounts
Opening net assets
Profit for the period
Dividends paid
Exchange adjustments
Closing net assets
Group’s share – %
Group’s share – £k
164 Hilton Food Group PLC Annual Report and Financial Statements 2022
2022
£’000
2021
£’000
320
44,850
45,170
20,700
(54,504)
(5,987)
5,379
5,702
1,224
(1,344)
(203)
5,379
50%
2,690
301
35,675
35,976
19,023
(42,377)
(6,920)
5,702
5,678
1,086
(956)
(106)
5,702
50%
2,851
NOTES TO THE FINANCIAL STATEMENTS continued
Summarised statement of comprehensive income
Revenue
Depreciation and amortisation
Net finance costs
Income tax expense
Profit for the period
Dividends received from joint venture entity
2022
£’000
2021
£’000
306,007
254,949
(4,338)
(4,020)
(709)
(275)
1,224
(634)
(417)
1,086
672
478
On 7 July 2022 the Group acquired an additional 15% interest in Foods Connected Ltd taking its shareholding to 65% (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 £2,701,000, being the difference between the carrying value and
fair value of the joint venture interest, recognised.
The Group also has an interest in one other individually immaterial joint venture.
Individually immaterial joint ventures:
Aggregate carrying amount of individually immaterial joint venture
Aggregate Group share of profit for the year
2022
£’000
1,549
2021
£’000
2,688
409
391
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 Foods Holland BV
Summarised balance sheet
Current assets
Current liabilities
Current net assets
Non-current assets
Non-current liabilities
Non-current net assets
Net assets
Accumulated non-controlling interests
Summarised statement of comprehensive income
Revenue
Profit for the period
Other comprehensive (expense)/income
Total comprehensive income
Profit allocated to non-controlling interests
Dividends paid to non-controlling interests
Summarised cash flows
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Impact of foreign exchange
Net decrease in cash and cash equivalents
2022
£’000
79,441
(55,132)
24,309
4,668
(361)
4,307
2021
£’000
70,246
(49,314)
20,932
5,310
(274)
5,036
28,616
25,968
5,722
5,194
329,934
288,347
7,083
1,519
8,602
1,417
1,193
385
(1,538)
(5,965)
1,096
(6,022)
7,301
(1,806)
5,495
1,460
1,175
9,065
(5,646)
(5,919)
(1,443)
(3,943)
Hilton Food Group PLC Annual Report and Financial Statements 2022
165
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued
17 INVESTMENTS continued
Investments in subsidiaries
Investments in subsidiary undertakings are recorded at cost, which is the fair value of consideration paid.
Company
At the beginning of the period
Additions
At 2 January 2022 and 1 January 2023
2022
£’000
247,785
–
247,785
2021
£’000
157,221
90,564
247,785
During the prior period the Company invested £90,564,000 in its subsidiary Hilton Foods Limited undertaking a swap of intercompany
debt for equity.
The subsidiary undertakings of the Group are as follows for 2 January 2022 and 1 January 2023 unless otherwise stated:
Subsidiary undertakings
Registered address
Country
Share class
Parent
Group
(%) Proportion of shares
held by
Hilton Foods Asia Pacific Limited
Hilton Food Solutions Limited
Seachill UK Limited trading as
Hilton Seafood UK
Coldwater Seafood UK Limited
Icelandic UK Limited
Seachill Limited
Fairfax Meadow Europe Limited
Fairfax London Limited
SV Cuisine Limited
Foods Connected Limited
Hilton Foods Limited
Hilton Foods UK Limited
Hilton Meats Holland Limited
Hilton Food Group (Europe) Limited
Hilton Food.com Limited
Hilton Foods Holland BV
Hilton Food Solutions Holland BV
Dutch Seafood Company BV
Paling En Zalmfileerderij J. Foppen
Jzn. BV
Foppen Eel & Salmon BV
Foppen Groep BV
2-8 Interchange Latham Road,
Huntingdon PE29 6YE
UK
City Factory, 100 Patrick Street,
Lower Ground Floor, Londonderry,
BT48 7EL, Northern Ireland
Carson McDowell LLP, Murray House,
Murray Street, Belfast, BT1 6DN,
Northern Ireland
St George’s Building, 3rd Floor,
37-41 High Street, Belfast, BT1 2AB,
Northern Ireland
Grote Tocht 31, 1507 CG Zaandam
82, Fahrenheitstraat, Harderwijk,
3846 CC
Netherlands
24-26, Daltonstraat, Harderwijk,
3846 BX
Dalco Food BV
Sweelinckstraat 8, 5344 AE Oss
Hilton Foods (Ireland) Limited
Hilton Foods Sverige AB
(formerly HFG Sverige AB)
Termonfeckin Road, Drogheda,
Co Louth
Ireland
€1 Ordinary
Saltangsvagen 53, 721 32 Vasteras
Sweden
Hilton Foods Danmark A/S
Brunagervej 2, Kolt, 8361 Hasselager
Denmark
Hilton Foods Ltd Sp z o.o.
Ul Strefowa 31, 43-100 Tychy
Poland
Hilton Foods Belgium BV
Guldensporenpark 120, Stratenplan,
9820 Merelbeke
Belgium
€1 Ordinary
166 Hilton Food Group PLC Annual Report and Financial Statements 2022
£1 Ordinary
£1 Ordinary
£1 Ordinary
£1 Ordinary
£1 Ordinary
£1 Ordinary
£1 Ordinary
£1 Ordinary
£1 Ordinary
£1
Preference
£0.01
Ordinary
–
–
–
–
–
–
–
–
–
–
–
£1 Ordinary
100
£1 Ordinary
£1 Ordinary
£1 Ordinary
£1 Ordinary
€1,000
Ordinary
€1 Ordinary
€0.01
Ordinary
€45
Ordinary
€10 Ordinary
€450
Ordinary
€45.38
Ordinary
SEK 2,500
Ordinary
DKK 100
Ordinary
PLN 500
Ordinary
100
65
(2021:55)
100
100
100
100
100
100
100
100
65
(2021:50)
100
100
80
100
100
80
65
(2021:55)
100
100
100
100
100
100
100
100
100
100
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
NOTES TO THE FINANCIAL STATEMENTS continued
Subsidiary undertakings
Registered address
Country
Share class
Parent
Group
(%) Proportion of shares
held by
Hilton Foods Australia Pty Limited
267 Dohertys Road, Truganina, VIC 3029
Foods Connected Australia
Pty Limited
Moore Stephens, 62-64, Burwood Road,
Burwood, NSW, 2134
Australia
Hilton Foods New Zealand Limited
11 Puaki Drive, Wiri, Auckland 2104
New Zealand
Foppen USA Inc
Foods Connected America Inc.
Hong Kong Fu-Peng Co Limited
Shanghai Fu Peng Food
Trading Co Limited
Foppen Seafood Canada Inc
Olympic Eel & Salmon Industry SA
4th Floor, 374, Milburn Ave, Milburn,
New Jersey, 07041
National Registered Agents, Inc.,
1209, Orange Street, Wilmington,
New Castle County, Delaware, 19081
Room 1001, 10/F Boss Commercial
Centre, 28, Ferry Street, Kowloon,
Hong Kong
Room 710, Tower A, Building 2, 555,
Lansong Road, Pudong New Area,
Shanghai
Suite 1000, Brunswick House,
44, Chipman Hill, Saint John,
New Brunswick, E2L 2A9
Industrial Area of Preveza, Preveza,
481 00
USA
China
Canada
Greece
AUD 1
Ordinary
AUD 1
Ordinary
NZD 1
Ordinary
$1 Ordinary
$0.001
Ordinary
HKD 1
Ordinary
CNY 1
Ordinary
CAD 10
Ordinary
€30
Ordinary
–
–
–
–
–
–
–
–
–
100
65
100
100
65
100
100
100
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.
18 BUSINESS COMBINATIONS
On 16 March 2022 the Group acquired 100% of the share capital of Dutch Seafood Company BV (Foppen Group BV), a leading
international producer of speciality smoked salmon products.
On 7 July 2022 the Group completed the purchase of an additional 15% of Foods Connected Ltd, taking its interest from 50% to 65%.
Foods Connected Ltd provides software solutions for supply chain, procurement, food safety, quality and CSR.
2022
Group
Property, plant and equipment
Intangibles-Technology
Brand and customer relationship intangibles
Lease: Right-of-use asset
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Borrowings
Lease liabilities
Deferred tax
Derivative financial instruments
Goodwill
Fair value of assets acquired
Consideration
Paid on completion
Issue of shares
Non-controlling interest
Deemed fair value of existing 50% interest
Dutch Seafood
Company BV
(Foppen)
£’000
Foods
Connected Ltd
£’000
16,792
–
30,488
3,214
22,580
13,556
–
(13,334)
(56,938)
(3,214)
(3,050)
(2,785)
17,805
25,114
25,114
–
–
–
25,114
71
2,849
6,964
–
–
1,231
230
(1,509)
–
–
(1,882)
–
3,300
11,254
–
1,688
3,939
5,627
11,254
Hilton Food Group PLC Annual Report and Financial Statements 2022
167
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued
18 BUSINESS COMBINATIONS continued
Dutch Seafood Company BV (Foppen)
The acquisition of Foppen improves the access for the Group to the specialised smoked salmon market, with a presence in the USA,
Canada, Netherlands and Greece. The additional markets provide an opportunity for the Group to diversify its geographic presence
whilst leveraging best practices and cost savings with the existing UK Seafood business.
Consideration for the acquisition of Foppen totalled £25,114,000 paid entirely in cash.
Customer relationship intangibles have been recognised and relate to the supply agreements and long-standing relationships that
Foppen has with its customers. Brand intangibles have been recognised in respect of the Foppen trading name and other brands
employed by the business. The fair value of these intangible assets of £30,488,000 has 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 five to 10 years.
The value of other assets and liabilities reflect the amounts expected to be realised or paid respectively.
Goodwill of £17,805,000 has been recognised and mainly relates to the strategic benefits for the Group of diversifying its product
and geographic portfolio.
In the period the Group has recognised exceptional acquisition-related costs of £1,204,000 in respect of legal and professional
and other related activities associated with acquisition activity.
The consolidated cash flow statement recognises a £82,052,000 for cash outflow within investing activities for the acquisition
of subsidiary. This figure comprises £56,938,000 of debt repaid immediately on completion of the acquisition as a result of the
requirements of change of control clauses within related bank facility agreements and the £25,114,000 cash consideration paid
to the vendors.
The acquired business contributed revenues of £86,073,000 and operating profit of £4,300,000 to the Group for the period from
16 March to 1 January 2023.
Foods Connected Ltd
Consideration for the acquisition of the 15% interest in Foods Connected Ltd totalled £1,688,000 comprised of 170,305 Hilton Food
Group plc shares at Market Value taking the holding of Foods Connected to 65%. The acquisition of Foods Connected provides an
opportunity to deliver growth through new customer agreements with retailers and manufacturers across Europe and Australia
and provides the Group control over the business.
As a result of the acquisition, and to allow full consolidation of Foods Connected Ltd as a subsidiary, the Group has recognised an
exceptional gain of £2,701,000, being the difference between the carrying value of its joint venture interest at the date of acquisition
and its fair value.
The fair value of the technology acquired was established following a review undertaken by qualified personnel and reflects their
existing use value.
The value of intangible assets technology used in the company’s operations have been reviewed and valued at £2,849,000.
The value of customer relationships have also been assessed with the support of competent professionals. Customer relationships
have been assessed to have a fair value of £6,964,000 and a useful economic life of 22 years. The value of other assets and liabilities
reflect the amounts expected to be realised or paid respectively.
Goodwill of £3,300,000 has provisionally been recognised in 2022. Residual goodwill relates to the strategic benefits for the Group
of diversifying its business and the know-how of Foods Connected Ltd’s employees.
The value of other assets and liabilities reflect the amounts expected to be realised or paid, respectively.
The acquired business contributed revenues of £2,876,000 and operating profit of £262,000 to the Group for the period from
7 July to 1 January 2023.
2021
Group
Property, plant and equipment
Brand and customer relationship intangibles
Lease: Right-of-use asset
Inventories
Trade and other receivables
Trade and other payables
Borrowings
Lease liabilities
Deferred tax
Goodwill
Fair value of assets acquired
168 Hilton Food Group PLC Annual Report and Financial Statements 2022
Dalco Food BV
£’000
Fairfax
Meadow
Europe Limited
£’000
6,047
10,193
5,303
8,142
5,992
(8,767)
(1,825)
(5,303)
(3,175)
10,168
26,775
6,782
11,766
7,191
7,982
13,343
(16,782)
(8,504)
(7,094)
(3,023)
3,685
15,346
NOTES TO THE FINANCIAL STATEMENTS continued
2021
Group
Consideration
Paid on completion
Deemed fair value of existing 50% interest
Dalco Food BV
£’000
Fairfax
Meadow
Europe Limited
£’000
13,388
13,387
26,775
15,346
–
15,346
During 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 retail and food service customers from its facilities in the
Netherlands. The Group also acquired 100% of the share capital of Fairfax Meadow Europe Limited (Fairfax Meadow), a leading meat
supplier to the UK food service sector.
Due to the timing of completion of the acquisition and the timing of other acquisition activity undertaken by the Group in 2021,
the assessment of the fair values of assets and liabilities acquired was ongoing when the Group reported its 2021 annual results
and were therefore provisional.
Dalco Food BV
The acquisition of the remaining 50% of Dalco allowed the Group to take full control of the business, enabling it to diversify further
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.
Updated fair values are presented above and have now been finalised.
Goodwill of £10,168,000 has been recognised in 2022 compared to £18,967,000 recognised in 2021 and relates to the strategic benefits
for the Group of diversifying its product portfolio into the vegan and vegetarian protein market. The adjustment in Goodwill has gone
to recognising Customer and Brand relationship, uplifting the fair value of fixed assets and recognising a deferred tax liability.
The fair value of property, plant and equipment acquired was established following a review undertaken by qualified surveyors and
reflects their existing use value uplifting their fair value by £1,540,000 an increase of £1,654,000 compared to the amount reported
in 2021.
Customer relationship intangibles have been recognised and relate to the supply agreements and long-standing relationships that
Dalco has with its customers. Brand intangibles have been recognised in respect of the Dalco trading name. The fair value of these
intangible assets of £10,193,000 (2021:£Nil) has 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 five to 10 years. As part of the transaction a deferred tax liability
of £2,933,000 has been recognised.
The value of other assets and liabilities reflect the amounts expected to be realised or paid respectively.
Fairfax Meadow Europe Limited
The acquisition of Fairfax Meadow improves the access for the Group to the out-of-home channel, providing an opportunity to
diversify into the food service sector and contribute to the Group’s sustainable growth.
Consideration for the acquisition of Fairfax Meadow totalled £15,346,000 paid entirely in cash. This figure included £8,504,000 of debt
acquired as part of the acquisition of Fairfax Meadow Europe Limited that was immediately repaid as a result of the requirements of
change of control clauses within related bank facility agreements.
Goodwill has arisen and mainly relates to the strategic benefits for the Group 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 reflects 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 £11,766,000 (£12,519,000 recognised in FY
2021 accounts) 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 five to nine years. A corresponding increase in Goodwill has been recognised.
The value of other assets and liabilities reflect the amounts expected to be realised or paid respectively.
Hilton Food Group PLC Annual Report and Financial Statements 2022
169
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued
19 INVENTORIES
Group
Raw materials and consumables
Finished goods and goods for resale
2022
£’000
162,216
44,513
206,729
2021
£’000
136,926
19,591
156,517
The cost of inventories recognised as an expense and included in cost of sales amounted to £3,178,978,000 (2021: £2,722,188,000).
The Group charged £1,012,000 in respect of inventory write-downs (2021: £1,106,000). The amount charged has been included in cost
of sales in the income statement.
20 TRADE AND OTHER RECEIVABLES
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net
Amounts owed by Group undertakings
Amounts owed by related parties (see note 31)
Other receivables
Prepayments
Less: Non-current other receivables
2022
£’000
218,175
(1,137)
Group
2021
£’000
201,377
(699)
217,038
200,678
–
838
34,090
19,194
271,160
–
565
25,868
5,516
232,627
2022
£’000
–
–
–
Company
2021
£’000
–
–
–
5,875
2,874
–
–
–
–
–
–
5,875
2,874
–
(2,239)
271,160
230,388
–
5,875
–
2,874
Amounts owed by Group undertakings 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:
Currency
UK Pound
Euro
Swedish Krona
Danish Krone
Polish Zloty
Australian Dollar
New Zealand Dollar
US Dollar
Chinese Renminbi
2022
£’000
94,093
54,327
17,230
33,646
4,397
50,035
12,317
4,602
513
Group
2021
£’000
66,066
51,597
16,943
25,204
4,313
49,092
19,412
–
–
2022
£’000
5,875
Company
2021
£’000
2,874
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
271,160
232,627
5,875
2,874
The Group has 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 periods 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 £1,137,000 (2021: £699,000).
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.
170 Hilton Food Group PLC Annual Report and Financial Statements 2022
NOTES TO THE FINANCIAL STATEMENTS continued
Movements on the provision for impairment of trade receivables are as follows:
Group
At the beginning of the period
Acquisition
Provision for receivables impairment
Receivables impairment released
Receivables written off during the period as uncollectable
Exchange differences
At the end of the period
21 CASH AND CASH EQUIVALENTS
Cash at bank and on hand
22 OTHER FINANCIAL ASSET – RESTRICTED CASH
2022
£’000
699
328
467
(216)
(143)
2
1,137
2021
£’000
369
–
401
–
(67)
(4)
699
2022
£’000
87,224
Group
2021
£’000
140,170
2022
£’000
186
Company
2021
£’000
151
On 6 January 2022 the Group acquired a 50% joint venture interest in Agito Group Pty. Prior to completion consideration for this
investment was held in escrow by the Group’s lawyers and was recognised in the 2021 accounts as restricted cash. Restricted cash
as at 1 January 2023 was £Nil.
23 BORROWINGS
Group
Current
Bank borrowings
Non-current
Bank borrowings
Total borrowings
2022
£’000
2021
£’000
28,279
224,732
270,510
298,789
–
224,732
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
UK Pound
Euro
Danish Kroner
Polish Zloty
Australian Dollar
New Zealand Dollar
2022
£’000
79,878
88,432
837
9,666
93,162
26,814
298,789
2021
£’000
65,198
18,277
1,118
5,384
106,903
27,852
224,732
Bank borrowings are repayable in quarterly instalments from 2022 – 2027 with interest charged at SONIA (or equivalent benchmark
rates) plus 1.95% - 2.10%. Bank borrowings are subject to joint and several guarantees from each active Group undertaking.
The Group has undrawn committed loan facilities of £106m (2021: £96.8m).
The undiscounted contractual maturity profile of the Group’s borrowings is described in note 3.
Group net debt is analysed as per note 29.
Hilton Food Group PLC Annual Report and Financial Statements 2022
171
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued
–
–
–
5
5
Total
£’000
3,835
(290)
(3,266)
2,208
333
2,820
(2,932)
185
(4,932)
3,770
(1,031)
(2,120)
2021
£’000
(4,132)
6,952
2,820
24 TRADE AND OTHER PAYABLES
Trade payables
Amounts owed to related parties (see note 31)
Social security and other taxes
Accruals
The fair value of trade and other payables are the same as their carrying value.
25 DEFERRED INCOME TAX
2022
£’000
Group
2021
£’000
2022
£’000
Company
2021
£’000
366,222
324,673
314
7,409
52,258
426,203
136
8,956
53,450
387,215
–
–
–
–
–
Group
At 4 January 2021
Exchange differences
Acquisition (note 18) (Restated, note 2)
Income statement credit/(charge)
Adjustment in respect of employee share schemes
At 2 January 2022
Deferred tax on fair value uplift
Exchange differences
Acquisition (note 18)
Income statement credit
Tax charged directly to equity
At 1 January 2023
Accelerated
capital
allowances
£’000
Acquired
intangible
assets
£’000
IFRS 16 Leases
£’000
Other timing
differences
£’000
3,304
(2,837)
2,575
793
(290)
(265)
(988)
–
1,761
–
(71)
3,993
587
–
6,270
–
(3,001)
465
–
(5,373)
(2,932)
–
(8,925)
1,309
–
(15,921)
–
–
2,731
–
5,306
–
216
–
1,323
–
6,845
The following is the reconciliation of the deferred tax balances in the balance sheet:
Group
Deferred tax liabilities
Deferred tax assets
–
–
–
333
1,126
–
40
–
551
(1,031)
686
2022
£’000
(15,921)
13,801
(2,120)
Other timing differences principally relate to share-based payments. The deferred income tax liability above includes £1,989,000
(2021: £281,000) 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
Number of
shares
(thousands)
2022
£’000
Group
2021
£’000
2022
£’000
Company
2021
£’000
Authorised, issued and fully paid ordinary shares of 10p each
At 3 January 2022/4 January 2021
88,935
8,893
8,194
8,893
8,194
Issue of new shares relating to employee incentive
schemes
Issue of new shares relating to Dalco acquisition
Issue of new shares relating to equity placing
498
–
–
50
–
–
At 1 January 2023/2 January 2022
89,433
8,943
26
15
658
8,893
50
–
–
8,943
26
15
658
8,893
All ordinary shares of 10p each have equal rights in respect of voting, receipt of dividends and repayment of capital.
172 Hilton Food Group PLC Annual Report and Financial Statements 2022
NOTES TO THE FINANCIAL STATEMENTS continued
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 achievement of performance
targets comprising minimum earnings per share (EPS), compound growth target and total shareholder return (TSR). Awards granted
during the period introduced three new ESG performance metrics.
Awards will vest on a sliding scale, with 10% vesting at threshold and 100% vesting at maximum, as follows:
Performance basis
EPS
Threshold vesting
Maximum vesting
5%-6% compound per year
12%–15% compound per year
TSR – performance against the constituents
of the FTSE 250 (excluding investment
trusts)
Median
Upper quartile
ESG – Scope 1 and 2 energy
6.5% reduction over period
43.9% reduction over period
ESG – Recycled packaging
11.7% increase over period
28.3% increase over period
ESG – Food waste
15.0% reduction over period
30.0% reduction over period
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:
Group
At 4 January 2021
Granted
Exercised
Lapsed
At 2 January 2022
Granted
Exercised
Lapsed
At 1 January 2023
Sharesave
Long-term incentive
Options
(’000)
Exercise price
(pence)
Options
(’000)
Exercise price
(pence)
740
226
(263)
(102)
601
231
(117)
(210)
505
998.99
1,200.00
829.04
1,121.39
1,128.69
1,204.00
950.00
1,198.80
1,174.95
1,450
370
(212)
(20)
1,588
366
(219)
(156)
1,579
–
–
–
–
–
–
–
–
–
Hilton Food Group PLC Annual Report and Financial Statements 2022
173
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued
27 SHARE-BASED PAYMENT continued
Share options outstanding at the end of the period have the following expiry date and exercise prices:
Group
Expiry date
February 2023
February 2024
February 2025
February 2026
April 2024
April 2025
April 2026
April 2027
Type of scheme
Sharesave
Sharesave
Sharesave
Sharesave
Status
Exercisable
Not exercisable
Not exercisable
Not exercisable
Long Term Incentive Plan
Exercisable
Long Term Incentive Plan
Exercisable
Long Term Incentive Plan
Exercisable
Long Term Incentive Plan
Exercisable
May/July 2028
Long Term Incentive Plan
Exercisable
May 2029
Sep 2030
May 2031
May 2032
Total
Long Term Incentive Plan
Exercisable
Long Term Incentive Plan
Not exercisable
Long Term Incentive Plan
Not exercisable
Long Term Incentive Plan
Not exercisable
Exercise price
(pence)
2022
(‘000)
2021
(‘000)
Number of options
950.00
1228.00
1200.00
1204.00
nil cost
nil cost
nil cost
nil cost
nil cost
nil cost
nil cost
nil cost
nil cost
68
128
126
183
2
55
63
55
129
217
342
356
360
2,084
194
201
209
–
2
60
66
92
246
399
355
367
–
2,191
The fair value of options granted during 2022 determined using the Black-Scholes valuation model ranged from 1018p to 1108p
per option. The significant inputs into the model were the exercise price shown above, volatility of 32-33% based on a comparison
of similar listed companies, dividend yield of 2.14-2.44%, an expected option life of 3.0 years, and an annual risk-free interest rate of 0.11-
1.28%. See note 8 for the total expense recognised in the income statement for share options granted to Directors and employees.
28 CASH GENERATED FROM OPERATIONS
Group
Profit before income tax
Finance costs – net
Operating profit
Adjustments for non-cash items:
Share of post-tax profits of joint venture
Depreciation of property, plant and equipment
Depreciation of leased assets
Impairment of property, plant and equipment
Disposal of leased assets destroyed by fire
Gain on early settlement of Belgium lease liabilities
Amortisation of intangible assets
Gain on acquisition of Foods Connected Ltd (2022)/Dalco BV (2021)
Loss/(gain) on disposal of non-current assets
Adjustment in respect of employee share schemes
Changes in working capital:
Inventories
Trade and other receivables
Trade and other payables
Cash generated from operations
The parent company has no operating cash flows.
174 Hilton Food Group PLC Annual Report and Financial Statements 2022
2022
£’000
29,614
24,412
54,026
(1,235)
46,985
20,780
–
–
–
9,974
(2,701)
–
(655)
(23,741)
(14,443)
9,322
98,312
2021
£’000
47,398
16,034
63,432
(1,925)
44,186
18,427
6,377
2,239
(2,183)
4,170
(6,837)
195
2,725
(26,656)
(23,116)
40,225
121,259
NOTES TO THE FINANCIAL STATEMENTS continued
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.
Group
Cash and cash equivalents
Borrowings (including overdrafts)
Net bank debt
Lease liabilities
Net debt
Net debt reconciliation
At 4 January 2021
Cash flows
Lease additions
Acquisition*
Repaid on acquisition*
New borrowings*
Exchange adjustments
Other changes
At 2 January 2022
Cash flows
Lease additions
Acquisition
Repaid on acquisition
New borrowings
Exchange adjustments
Other changes
At 1 January 2023
* Restated (see note 2).
30 COMMITMENTS
2022
£’000
87,224
2021
£’000
140,170
(298,789)
(224,732)
(211,565)
(84,562)
(246,158)
(457,723)
(243,396)
(327,958)
Lease
liabilities
£’000
(245,245)
6,588
(5,549)
(12,397)
–
–
10,652
2,555
Net
debt
£’000
(367,416)
106,157
(5,549)
(22,725)
8,504
(65,237)
15,753
2,555
Cash/other
financial
assets
£’000
123,816
19,750
Borrowings
(including
overdrafts)
£’000
(245,987)
79,819
–
–
–
(3,396)
–
–
(10,328)
8,504
(65,237)
8,497
–
Net
bank
debt
£’000
(122,171)
99,569
–
(10,328)
8,504
(65,237)
5,101
–
140,170
(224,732)
(84,562)
(243,396)
(327,958)
(54,576)
228,565
173,989
–
–
–
–
1,630
–
–
(56,938)
56,938
–
(56,938)
56,938
(295,790)
(295,790)
(6,832)
(5,202)
–
–
15,631
(5,835)
(3,214)
–
–
(9,306)
(38)
189,620
(5,835)
(60,152)
56,938
(295,790)
(14,508)
(38)
87,224
(298,789)
(211,565)
(246,158)
(457,723)
Capital commitments
Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:
Property, plant and equipment
2022
£’000
20,309
Group
2021
£’000
12,268
2022
£’000
–
Company
2021
£’000
–
Hilton Food Group PLC Annual Report and Financial Statements 2022
175
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued
31 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 period were as follows:
Group
Sales
Sohi Meat Solutions Distribuicao de Carnes SA - fee for services
Sohi Meat Solutions Distribuicao de Carnes SA - recharge of joint venture costs
Dalco BV
Agito Holdings Limited
Group
Purchases
Agito Holdings Limited
Foods Connected Ltd
Amounts owing from related parties at the year end were as follows:
Group
Foods Connected Ltd
Agito Holdings Limited
Sohi Meat Solutions Distribuicao de Carnes SA
Amounts owing to related parties at the period end were as follows:
Group
Foods Connected Ltd
Agito Holdings Limited
Sohi Meat Solutions Distribuicao de Carnes SA
2022
£’000
3,190
409
–
464
2022
£’000
259
–
2021
£’000
3,175
331
438
–
2021
£’000
–
568
Owed from related parties
2022
£’000
–
464
374
838
2021
£’000
4
–
561
565
Owed to related parties
2022
£’000
–
259
55
314
2021
£’000
127
–
9
136
Transactions with Directors
On 5 July 2022 the Group acquired a further 10% interest in its subsidiary Hilton Foods Solutions Limited from Group CEO Philip Heffer.
The consideration for this acquisition was £1,151,000 and takes the Group’s interest in Hilton Foods Solutions Limited to 65%. See note
8 on directors emoluments.
In the prior 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 Plc’s 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.
32 FINANCIAL INSTRUMENTS BY CATEGORY
The accounting policies for financial instruments have been applied to the line items below:
Group
Assets
Trade and other receivables
2022
Total
£’000
251,966
251,966
2021
Total
£’000
227,111
227,111
176 Hilton Food Group PLC Annual Report and Financial Statements 2022
NOTES TO THE FINANCIAL STATEMENTS continued
Group
Liabilities
Trade and other payables
Financial liabilities at fair value through OCI
Borrowings
Lease liabilities
Financial
Liabilities at
Fair Value
£’000
Financial
Liabilities at
Amortised
Cost
£’000
–
418,794
3,398
–
–
3,398
–
298,789
246,158
963,741
2021
Financial
Liabilities at
Amortised
Cost
£’000
378,259
–
224,732
243,396
846,387
2022
Total
£’000
418,794
3,398
298,789
246,158
967,139
In addition to the above, amounts owed to the Company by Group undertakings of £5,875,000 (2021: £2,874,000) are classified
as ‘financial assets at amortised cost’.
33 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 uses these measures to assess business performance internally and
therefore believes they provide useful additional information about the Group’s performance and aids a more effective comparison
of the Group’s underlying 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
1 January 2023
Reported
£’000
Add back:
IFRS 16
Depreciation
and interest
£’000
Less: IAS
17 Lease
accounting
costs
£’000
Reported
excluding
IFRS 16
£’000
Exceptional
items
£’000
Add back:
Amort & depn
of acquisition
fair value
adjustments
£’000
Adjusted
£’000
Operating profit -
excluding exceptional
items
Exceptional items
Operating profit
Net finance costs
Profit before income tax
Profit for the period
Less non-controlling
interest
Profit attributable to
members of the parent
Depreciation and
amortisation
EBITDA
Earnings per share
Basic
Diluted
65,922
20,780
(23,815)
62,887
–
8,257
71,144
(11,896)
54,026
(24,412)
29,614
–
20,780
8,758
29,538
–
(23,815)
–
(23,815)
(11,896)
50,991
(15,654)
35,337
11,896
11,896
–
11,896
–
8,257
–
8,257
–
71,144
(15,654)
55,490
19,492
28,215
(23,815)
23,892
11,751
6,370
42,013
(1,786)
(3)
–
(1,789)
–
–
(1,789)
17,706
28,212
(23,815)
22,103
11,751
6,370
40,224
77,769
(20,780)
–
56,989
–
(8,257)
48,732
131,795
–
(23,815)
107,980
11,896
–
119,876
pence
19.8
19.7
pence
24.8
24.6
pence
45.1
44.7
Hilton Food Group PLC Annual Report and Financial Statements 2022
177
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS continued
33 ALTERNATIVE PERFORMANCE MEASURES continued
52 weeks ended
2 January 2022
Reported
£’000
Add back:
IFRS 16
Depreciation
and interest
£’000
Less: IAS
17 Lease
accounting
costs
£’000
Reported
excluding
IFRS 16
£’000
Exceptional
items
£’000
Add back:
Amort & depn
of acquisition
fair value
adjustments
£’000
Adjusted
£’000
Operating profit –
excluding exceptional
items
Exceptional items
Operating profit
Net finance costs
Profit before income tax
Profit for the period
Less non-controlling
interest
Profit attributable to
members of the parent
Depreciation and
amortisation
EBITDA
Earnings per share
Basic
Diluted
70,482
18,214
(17,907)
70,789
–
2,778
73,567
(7,050)
63,432
(16,034)
47,398
56
18,270
8,498
26,768
–
(17,907)
–
(17,907)
(6,994)
63,795
(7,536)
56,259
6,994
6,994
1,131
8,125
–
2,778
–
2,778
–
73,567
(6,405)
67,162
39,282
24,037
(17,907)
45,412
5,009
2,250
52,671
(2,139)
(7)
–
(2,146)
–
–
(2,146)
37,143
24,030
(17,907)
43,266
5,009
2,250
50,525
75,596
(20,489)
–
55,107
(6,377)
(2,778)
45,952
139,028
(2,219)
(17,907)
118,902
617
–
119,519
pence
45.0
44.5
pence
52.5
51.8
pence
61.3
60.5
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).
Segmental operating profit reconciles to adjusted segmental operating profit as follows:
52 weeks ended
1 January 2023
Reported
£’000
Add back:
IFRS 16
Depreciation
and interest
£’000
Less: IAS
17 Lease
accounting
costs
£’000
Reported
excluding
IFRS 16
£’000
Exceptional
items
£’000
Add back:
Amort & depn
of acquisition
fair value
adjustments
£’000
Europe
APAC
Central costs
Total
33,316
28,825
(8,115)
54,026
8,669
12,111
–
(9,584)
(14,231)
–
20,780
(23,815)
32,401
26,705
(8,115)
50,991
9,014
–
2,882
11,896
8,257
–
–
8,257
52 weeks ended
2 January 2022
Reported
£’000
Add back:
IFRS 16
Depreciation
and interest
£’000
Less: IAS
17 Lease
accounting
costs
£’000
Reported
excluding
IFRS 16
£’000
Exceptional
items
£’000
Add back:
Amort & depn
of acquisition
fair value
adjustments
£’000
Europe
APAC
Central costs
Total
52,307
21,716
(10,591)
63,432
6,393
11,877
–
18,270
(6,684)
(11,223)
–
(17,907)
52,016
22,370
(10,591)
63,795
6,994
2,778
–
–
–
–
6,994
2,778
Adjusted
£’000
49,672
26,705
(5,233)
71,144
Adjusted
£’000
61,788
22,370
(10,591)
73,567
178 Hilton Food Group PLC Annual Report and Financial Statements 2022
REGISTERED OFFICE AND ADVISORS
REGISTERED OFFICE
ADVISORS
2–8 The Interchange
Latham Road
Huntingdon
Cambridgeshire
PE29 6YE
Corporate brokers
Numis Securities Limited
45 Gresham Street
London
EC2V 7BF
Shore Capital and
Corporate Limited
& Shore Capital
Stockbrokers Limited
Cassini House
57 St James’s Street
London
SW1A 1LD
Legal advisor
Taylor Wessing LLP
5 New Street Square
London
EC4A 3TW
Independent auditors
PricewaterhouseCoopers LLP
Chartered Accountants and
Statutory Auditors
Merchant Square
20-22 Wellington Place
Belfast
BT1 6GE
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Financial Public Relations
Headland Consultancy Limited
Cannon Green
1 Suffolk Lane
London
EC4R 0AX
Hilton Food Group PLC Annual Report and Financial Statements 2022
179
STRATEGIC REPORTADDITIONAL INFORMATIONOVERVIEWGOVERNANCEFINANCIAL STATEMENTS NOTES
180 Hilton Food Group PLC Annual Report and Financial Statements 2022
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HILTON FOODS PLC
2-8 The Interchange
Latham Road
Huntingdon
Cambridgeshire
PE29 6YE
www.hiltonfoods.com