Half-year Results

Current trading in line with expectations

Hilton Foods today announces its interim results for the 26 weeks to 30 June 2024. The business has also published a separate announcement this morning regarding a Board appointment.

Business highlights

• Core meat category delivering strong retail volume growth across all operating regions
• Seafood business continues to improve, underpinning profit growth in UK & Ireland
• Good progress in developing cross-sell opportunities
• Hilton Foods Canada remains on track for 2027 with Walmart
• Vegan and vegetarian now in single operating site
• Foods Connected wins new global contract with McDonald's
• Commitment to sustainability and progress continues across all areas, especially packaging

Financial overview

H1 2024 represents a 26 week period and is compared with a 28 week period in H1 2023. Variances below are presented on a reported basis and for a comparable like-for-like 26 week constant currency basis 2.

• Volume increase of 3.2% with revenue up by 1.0% on a like-for-like basis with volume growth offset by raw material price deflation in the APAC region. On a statutory basis revenue down 8.4% to £1.94bn
• Adjusted operating profit 2 increased by 23.2% on a like-for-like basis and by 12.2% on a reported basis to £46.9m. Statutory operating profit up 42.3%
• Strong free cash flow 2 of £34.7m (2023: £18.9m); remaining a highly cash generative business
• Net bank debt 2 of £137.0m (£139.7m at 2023 year-end) (£216.5m at 16 July 2023); period end net bank debt as a proportion of adjusted EBITDA 2 0.9x (2023 year-end: 1.0x)
• Interim dividend of 9.6p (2023: 9.0p)

Outlook

Hilton Foods is well-positioned and continues to trade in line with expectations for the full year. The Group maintains a strong financial position and we continue to be well placed in a large, attractive marketplace, underpinned by long-standing customer partnerships. Hilton Foods continues to invest in its clear strategic priorities while exploring further growth opportunities and wider geographic expansion with existing and new customers.

Steve Murrells CBE Hilton Foods Chief Executive Officer, said:

"These results represent another step forward as Hilton Foods further improves business performance and profitability. Our core meat category performed particularly well, driving volume growth, while the continued positive momentum in our seafood business has helped to underpin profit performance. Our core product ranges remain highly attractive to both our customers and their consumers, while the breadth of our offering make us well placed to win across every meal, in both retail and food service.

"The hard work of all our teams, coupled with our proprietary technology and market-leading innovation, has underpinned the strength of our relationships with customers during the period. I would like to take this opportunity to thank all my colleagues for their ongoing commitment.

"As I look ahead, Hilton Foods has all the right attributes in place. Our strong financial platform, unique multi-category offer, and market-leading technology adds to my confidence in the Group's ability to achieve further international growth."

Notes

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

2 Hilton uses Alternative Performance Measures (APMs) to monitor the underlying performance of the Group which are detailed in note 16 and the Glossary. Management considers that APMs, in addition to statutory metrics, provide useful information on business performance which enables management to monitor and manage the business day-to-day. Unless otherwise stated financial metrics in the Business highlights, Financial overview, Review of operations and Financial review refer to the Adjusted results.

A presentation for analysts and investors will be held this morning at 09.00, which will also be webcast. For access to the live webcast, please register at the following link: https://stream.brrmedia.co.uk/broadcast/66a8dad227d380a9b7f0c665.

Alternative performance measures (APMs)

Hilton uses Alternative Performance Measures (APMs) to monitor the underlying performance of the Group which are detailed in note 16. Management considers that APMs, in addition to statutory metrics, provide useful information on business performance which enables management to monitor and manage the business day-to-day.

Review of operations

The Group is presenting its interim results for the 26 weeks 30 June 2024, together with comparative information for the 28 weeks to 16 July 2023. These interim results are prepared in accordance with UK-adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules sourcebook of the UK Financial Conduct Authority.

Performance overview

A strong business performance in the period saw volumes increase by 3.2% on a like-for-like basis*. Revenue decreased by 8.4% to £1.94bn but was up by 1.0% on a like-for-like basis* with the benefits of strong volume growth in the UK & Ireland offset by the impact of raw material price deflation in the APAC region. The adjusted operating margin increased to 2.4% (2023: 2.0%) and the adjusted operating margin per kg increased to 18.0p per kg (2023: 15.3p per kg).

UK and Ireland

Adjusted operating profit of £21.1m (2023: £12.8m) on revenue of £709.6m (2023: £701.1m)

This operating segment covers the Hilton Foods businesses and joint ventures in the UK and Ireland including meat processing facilities in Huntingdon, fish facilities in Grimsby as well as the Fairfax Meadow food service business.

Volumes were 2.1% higher and revenue increased by 9.3% on a like-for-like basis* driven through core retail meat and strong performing premium tier products. Adjusted operating margins increased to 3.0% (2023: 1.8%) reflecting the performance of our improving seafood business and our strong core meat category performance including positive shifts in product mix.

Europe

Adjusted operating profit of £19.2m (2023: £20.4m) on revenue of £519.7m (2023: £553.8m)

This operating segment covers the Hilton Foods meat, fish, vegan and vegetarian businesses and joint ventures in Holland, Belgium, Sweden, Denmark, Central Europe, Greece and Portugal.

Volumes were 0.8% higher and revenue increased by 2.8% on a like-for-like basis*. Adjusted operating margins were maintained at 3.7% (2023: 3.7%) with operating profit up 1.9% on a like-for-like* basis. The results reflect expansion in localised convenience foods across Sweden and Central Europe although a structural market reset in vegan and vegetarian remains challenging and we are continuing to optimise vegan and vegetarian single operating site performance.

The property damage and business interruption insurance claim in connection with a fire at our facility in Belgium in 2021 has been concluded with a final payment of £13m received since the period end. In line with accounting standards this has not been recognised in the interim financial statements and will be recognised in the second half of the year.

APAC

Adjusted operating profit of £14.5m (2023: £16.5m) on revenue of £714.5m (2023: £868.2m)

In Australia, the Group operates plants in Bunbury, Western Australia, Melbourne, Victoria and Brisbane, Queensland. We also have a facility in Auckland, New Zealand.

Volumes during the period increased by 6.8% through strong trade and best fit product range although revenues were 6.7% lower on a like-for-like basis* primarily due to raw material price deflation. Adjusted operating margins increased slightly to 2.0% (2023: 1.9%) with operating profit 0.3% lower on a like-for-like basis*, after adjusting for the impact of a weaker Australian Dollar and reduced interest cost recovery under our cost plus contract.

* 26 week constant currency like-for-like basis

Strategic progress

Our growth strategy will be delivered through a focus on the following four strategic priorities;

• We will grow our international footprint
• We will expand our multi-category offer
• We will build further expertise as a supply chain partner
• We will leverage technology as a driver of value

Throughout the first half of the year, we have made significant progress across all four of our strategic priorities.

• Growing our international footprint: The team has been working closely in partnership with our new customer Walmart to finalise product ranges. We have employed our first resource in the country for closer everyday working relations and we remain on track to launch Hilton Foods Canada in 2027, our first operating facility in North America. In addition to this, we have put in place an international trading team who will target expanding the reach of our existing product portfolio into the Asian market.
• Expanding our multi-category offer: We have unlocked growth opportunities through cross-selling, harnessing the international reach of our business and the opportunity within our multi-category offer, working across our markets to sell products from one to another. For example, we have launched coated seafood products into the New Zealand market and slow-cooked meat products in Ireland, both produced at our facilities in the UK. The team continues to work on a pipeline of future opportunities of a similar nature, increasing our share of business in existing categories and entering new categories across the markets we operate.
• Building further expertise as a supply chain partner: Although we specialise in the middle section of the farm-to-fork supply chain we influence and guide throughout. Our customer teams have worked with their retail and supplier partners to review end-to-end opportunities which has unlocked growth opportunities in beef steaks in the UK market. Within the APAC region, we have become further integrated into our customers in all aspects of supply chain planning, including procurement demand planning.
• Leveraging technology as a driver of value: Technology has supported our improving seafood business through automation and most recently a new white fish processing line which has been installed in the first half of the year, improving efficiency and reducing labour reliance. We have continued in the first half of the year with our UK automation programme in our meat facilities, roll-out of flow wrap packaging technology for our mince products into more European countries and Foods Connected continues to support our business and our customers to best manage a complex supply chain. We have also made progress in commercialising our tech stack including a global contract between McDonald's and Foods Connected, and Agito was chosen as a supplier partner for an automation project with Coca-Cola Europacific Partners.

These strategic priorities are underpinned by our rigorous approach to sustainability across people, the planet and product, and our financial ambitions. We have achieved 36% of positions of leadership held by women, surpassing our target of 30% by the end of 2025. We have supported the development of a standardised carbon measurement tool enabling targeted decarbonisation of the seafood supply chain and installed Solar PV arrays at our processing facilities in Truganina, Australia. In addition to this, in Australia, 91% of our packaging is now recyclable, and in May we completed a project that will remove 23 million pads from our meat trays annually. Furthermore we will save 390 tonnes of plastic annually from our mince packaging through further roll-out of flow wrap packaging to Denmark, Ireland and Central Europe. We have also continued to make progress versus our financial ambitions, notably an improvement in ROCE to 20.2% (see Glossary for definition).

Investments in our facilities

Hilton continues to invest in all its facilities maintaining state of the art levels required to service our customers' growth, extend the range of products supplied to those customers and deliver both first class service levels and further increases in production efficiency. These focused investment target strong growth. Capital expenditure during the period was £27.1m (2023: £27.8m) which included investment in UK factory automation, smoked salmon efficiency improvements and the consolidation of the vegan and vegetarian operations into a single facility.

Financial review

Adjusted results represent the IFRS results before deduction of acquisition intangibles amortisation, other adjusting/exceptional items and IFRS 16 lease adjustments. These adjustments are detailed in the Alternative performance measures note 16.

Group results

Revenue reduced by 8.4% to £1,943.8m (2023: £2,123.1m) but was up 1.0% on a like-for-like basis* reflecting higher volumes but lower raw material prices. Further details of revenue and volume growth by segment are detailed in the Review of operations above.

Adjusted operating profit for the first 26 weeks of 2024 was £46.9m, 12.2% higher than in the previous year (2023: £41.8m) and 23.2% higher on a like-for-like basis*. The adjusted operating profit margin increased to 2.4% (2023: 2.0%). IFRS operating profit for the first 26 weeks of 2024 was £43.6m (2023: £30.6m) after charging exceptional costs of £0.4m (2023: £7.7m).

Adjusted net finance costs excluding exceptional items and lease interest decreased to £13.3m (2023: £15.0m) reflecting lower benchmark rates as well as lower borrowings. Interest cover was 3.5 times (2023: 2.8 times). Similarly IFRS net finance costs decreased to £18.1m (2023: £19.3m).

The adjusted taxation charge for the period was £9.3m (2023: £6.8m) representing an effective adjusted tax rate of 27.9%, compared with 25.2% last year. The IFRS taxation charge was £7.6m (2023: £3.8m) representing a lower effective tax rate of 29.8% (2023: 34.0%) attributable to the lower exceptional costs.

Net income represents profit for the year attributable to owners of the parent. Adjusted net income of £23.2m was 19.8% higher than last year (2023: £19.3m) primarily reflecting the higher operating profit and lower interest costs. IFRS net income was £16.8m (2023: £6.8m) also reflecting lower exceptional costs.

Adjusted basic earnings per share of 25.8p in the first 26 weeks of 2024 were 19.4% above 21.6p last year reflecting the higher net income. Similarly IFRS basic earnings per share was higher at 18.8p (2023: 7.6p).

Adjusted EBITDA increased to £70.7m for the period (2023: £67.5m) and EBITDA was £81.5m (2023: £72.3m).

Balance sheet, cash flow and funding

In the first 26 weeks the Group generated £34.7m of free cash flow (2023: £18.9m). Net cash generated from operating activities was £64.2m (2023: £48.1m). During the period a further £4.4m was invested in Cellular Agriculture Ltd following the achievement of development milestones.

Return on capital employed (ROCE), calculated as adjusted operating profit divided by average of opening and closing capital employed representing total equity adjusted for net bank debt, leases, derivatives and deferred tax, was 20.2% (18.3% for the 2023 financial year).

Cash balances at 30 June 2024 were £95.3m (2023: £79.7m) which, net of bank borrowings of £232.3m (2023: £296.1m), resulted in net bank debt of £137.0m (£216.5m at 16 July 2023 and £139.7m at 31 December 2023). Net bank debt at the end of the period as a proportion of annualised adjusted EBITDA was 0.9 times (2023 year-end: 1.0 times). Net debt including lease liabilities was £355.2m (£442.4m at 16 July 2023 and £366.6m at 31 December 2023).

At 30 June 2024 the Group had undrawn committed facilities under its syndicated banking facilities of £138.3m (£108.7m at 31 December 2023). These banking facilities are subject to covenants comprising net bank debt to EBITDA and EBITDA interest cover. There was comfortable headroom under these covenants at 30 June 2024 for these metrics.

Dividends

The Group has maintained a progressive dividend policy since flotation. Hilton Foods remains financially strong with significant cash balances and undrawn loan facilities, and we continue to operate well within our banking covenants. The Board is satisfied that the Group has adequate headroom under its existing facilities, that it is appropriate to continue to operate and to maintain this dividend policy and has approved the payment of an interim dividend of 9.6p per ordinary share (2023: 9.0p). The interim dividend, representing an increase of 6.7% on the interim dividend declared in the prior year, amounting to £8.6m will be paid on 29 November 2024 to shareholders on the register at close of business on 1 November 2024.

* 26 week constant currency like-for-like basis

Going concern

The Directors have performed a detailed assessment, including a review of the Group's budget and forecasts for the 12 months from the date of this report and its longer term plans, including consideration of the principal risks faced by the Group. The resilience of the Group in the face of uncertain challenges has then 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 existing committed facilities which do not expire until 2027. The Directors are satisfied that the Group has adequate resources to continue to operate and meet its liabilities as they fall due for a period of at least 12 months from the date of signing these interim financial statements and therefore consider it appropriate to adopt the going concern basis of accounting in preparing the consolidated interim financial statements.

The Group's borrowings are detailed in note 11 to this report 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 will depend on our ability to negotiate appropriate additional or extended facilities, as and when they are required.

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.

The principal risks and uncertainties facing the Group's businesses

Effective risk management at Hilton Foods is essential to the delivery of our strategic objectives and aims to safeguard the interests of all our stakeholders in an increasingly complex world. Our proactive approach to risk management ensures the long-term sustainable growth of all aspects of our business and is integrated into everything we do. The most significant business risks that Hilton Foods faces, together with the measures we have adopted to mitigate these risks, are outlined on pages 28 to 34 of the Hilton Food Group plc 2023 Annual report. The principal risks and uncertainties identified in that report were:

• The progress of the Hilton Foods business is affected by the macroeconomic and geopolitical environment and levels of consumer spending;
• The Hilton Foods growth potential may be affected by the success of our customers and the growth of their packed foods sales;
• Hilton Foods strategy focuses on a small number of customers who can exercise significant buying power and influence when it comes to contractual renewal terms at 1 to 15-year intervals;
• As Hilton Foods 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;
• Hilton Foods business strength is affected by our ability to maintain a wide and flexible global food supply base operating at standards that can continuously achieve the specifications set by ourselves and our customers. Increasing geopolitical tension has heightened this risk exposure into 2024.
• Contamination within the supply chain including outbreaks of disease and feed contaminants affecting livestock and fish;
• Significant incidents such as fire, flood, pandemic or interruption of supply of key utilities could impact the Group's business continuity;
• Hilton Foods IT systems could be subject to cyber-attacks, including ransomware and fraudulent external email activity. Such attacks are rapidly increasing in frequency and sophistication, especially with the progression of artificial intelligence;
• A significant breach of health & safety legislation or accident resulting from negligence or management oversight. The complexity of this risk increases as the Group expands both geographically and into new product groups; and
• Hilton Foods 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.

Geopolitical Uncertainty

Geopolitical uncertainty and increasing levels of active hostilities in multiple regions is a significant concern and increases the risk impacting our supply chains and operations. Disruption to energy markets, global shipping and international trade can also have far-reaching impacts. However, our continued review of mitigations enables us to maintain resilience in our supply chains and operations.

The macroeconomic environment

Cost-of-living pressures and economic uncertainty continue in much of the world, amidst persistently elevated inflation and interest rates. As the level of inflation and interest rates start to ease we expect consumer spending and eating habits to recover but remain cautious. We recognise the effect of higher interest costs on all businesses and we continue to focus on ways of reducing our exposure such as the use of cash pooling and exploring working capital financing.

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

Changing regulatory landscape and post-Brexit trade

Hilton Foods has a strong basis of environmental, social and governance policies and strategy. We recognise the potential disruption from growing environmental regulations and the resourcing requirements to meet upcoming disclosure requirements. We are actively enhancing our mitigations, including third party risk management and supply chain due diligence.

We continue to monitor the UK and EU regulatory and trade environments as they evolve and amend processes and operations as required. We work closely with our customers and supply chains to adapt to further revisions to Border processes.

Cyber Risk

The risk of cyber attacks a are an increasing threat to businesses and we are aware that specific sectors including manufacturing and logistics are increasingly a focus of such attacks. We continue to enhance our risk mitigation activities focussing on both the direct threat to our operations and the wider supply chain.

The risks and uncertainties outlined above had no material adverse impact on the results for the 26 weeks to 30 June 2024 and are expected to remain virtually unchanged for the remainder of the 2024 financial year.

Steve Murrells CBE

Chief Executive Officer

Matt Osborne

Chief Financial Officer

Statement of Directors' responsibilities

The Directors confirm that the condensed consolidated interim financial statements have been prepared in accordance with UK-adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

• an indication of important events that have occurred during the first 26 weeks and their impact on the condensed set of financial statements, and a description of principal risks and uncertainties for the remaining 26 weeks of the financial year; and
• material related party transactions in the first 26 weeks and any material changes in the related party transactions described in the last annual report.

The maintenance and integrity of the Hilton Food Group plc website is the responsibility of the Directors; the work carried out by the authors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that might have occurred to the interim financial statements since they were initially presented on the website.

The Directors of Hilton Food Group plc are listed in the 2023 Hilton Food Group plc Annual report and financial statements. There have been no changes in Directors since 31 December 2023. A list of current Directors is maintained on the Hilton Food Group plc website at https://www.hiltonfoods.com/.

On behalf of the Board

Robert Watson OBE

Chairman

Matt Osborne

Chief Financial Officer

Condensed Consolidated Income statement

Earnings per share for profit attributable to owners of the parent

The above condensed consolidated income statement should be read in conjunction with the accompanying notes.

Condensed Consolidated Statement of comprehensive income

Other comprehensive expense

Items that may be subsequently reclassified to the income statement

Notes to the interim financial statements

1 General information

Hilton Food Group plc ("the Company") and its subsidiaries (together "the Group") is a leading international multi-protein food business.

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

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

These interim financial statements were approved for issue on 3 September 2024.

These interim financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the 52 weeks ended 31 December 2023 were approved by the Board of Directors on 2 April 2024 delivered to the Registrar of Companies. The report of the predecessor auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

These interim financial statements have been reviewed, not audited.

2 Basis of preparation

This consolidated interim financial report for the 26 weeks ended 30 June 2024 (prior financial period 28 weeks ended 16 July 2023) has been prepared in accordance with the UK-adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the UK Financial Conduct Authority. In 2024, the Group changed its accounting period to harmonise its subsidiaries with parent company reporting cycle.

Going concern

The consolidated interim financial statements have been prepared on the going concern basis as the Directors consider that adequate resources exist for the Company to continue in operation for the foreseeable future, being 12 months from the date of this report (the relevant period). There is significant liquidity/financing headroom on 30 June 2024 (£138.3m) and throughout the going concern forecast period. Forecast covenant compliance is considered further below.

The Group's banking facility has two financial covenants being a net debt to adjusted EBITDA (leverage) covenant and interest cover covenant, both of which are tested half yearly in June and December.

The financial covenants for the going concern period as follows:

The Group has undertaken a detailed going concern assessment, including a review of its budget and forecasts for the 2024 financial year and its longer-term plans, including consideration of the principal risks faced by the Group. The resilience of the Group in the face of uncertain challenges has then 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 existing committed facilities. The Directors are satisfied that the Group has adequate resources to continue to operate and meet its liabilities as they fall due for a period of at least 12 months from the date of signing these interim financial statements and therefore consider it appropriate to adopt the going concern basis of accounting in preparing the consolidated interim financial statements.

Estimates and judgements

New and amended standards adopted by the Group

3 Accounting policies

The accounting policies adopted in the preparation of these interim results are consistent with those applied in the preparation of the Group's annual report for the year ended 31 December 2023 and corresponding interim reporting period.

The Group has recognised exceptional items during the period, the accounting policy in respect of these is summarised below.

Alternative performance measure

The Group's performance is assessed using a number of alternative performance measures (APMs).

The Group's alternative profitability measures are presented before other adjusting/exceptional items, amortisation of certain intangible assets and depreciation of fair value adjustments made to property, plant and equipment acquired through business combinations and the impact of IFRS 16 - Leases.

The measures are presented on this basis, as management believe they provide useful additional information about the Group's performance and aids a more effective comparison of the underlying Group's trading performance from one period to the next.

Other adjusting/exceptional items are not defined under IFRS. However, the Group classifies other adjusting/exceptional items as those that are separately identifiable by virtue of their size, nature or expected frequency and that therefore warrant separate presentation.

As detailed in note 16 during the period to 30 June 2024 the Group has recognised other adjusting/exceptional items in respect of costs associated with the fire at its facility in Belgium and re-organisation programs. The operating profit reconciliations between statutory and adjusted measures used by the Group is presented in note 16. Presentation of these other adjusting/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.

Current income tax

4 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 are considered to be the Chief Operating Decisions Makers in the Group.

From a geographic perspective, the Executive Directors consider that the Group has four operating segments: i) UK & Ireland which comprises the Group's operations in United Kingdom and Republic of Ireland; ii) Europe which includes the Group's operations in the Netherlands, Sweden, Denmark, Central Europe and Portugal; iii) APAC comprising the Group's operations in Australia and New Zealand; and iv) Central costs.

Operating

The Group uses a number of alternative performance measures to assess underlying performance, these are explained and reconciled to the segmental results presented above in note 16. There is no inter-segment revenue included in the figures above.

5 Income tax expense

Income tax expense is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the 26 weeks to 30 June 2024 is 29.8%. The estimated average annual effective tax rate for the 28 weeks ended 16 July 2023 was 34.0%.

6 Dividends

The Directors have approved the payment of an interim dividend of 9.6p per share payable on 29 November 2024 to shareholders who are on the register at 1 November 2024. This interim dividend, amounting to £8.6m has not been recognised as a liability in these interim financial statements. It will be recognised in shareholders' equity in the 52 weeks to 29 December 2024.

Dividends paid to non-controlling interests in the period totalled £1,496,000 (2023: £1,554,000).

7 Earnings per share

Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the 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 Company has share options for which a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as below is compared with the number of shares that would have been issued assuming the exercise of the share options.

The Group has commitments to purchase property, plant and equipment of £16,042,000 (2023: £5,555,000).

Goodwill impairment testing

Given the current challenges in the alternative proteins market impacting volumes, an indicator of impairment was considered to exist at the interim balance sheet date, and therefore, an impairment assessment was performed in respect of the carrying value of the Dalco cash-generating unit. The assessment included a review of Dalco's goodwill, recognised at £10,168,000, as well as its customer and brand relationships, recognised at £7,585,000. The assumptions used to derive operating profit margins takes into account an increase from returning sale volumes in addition to normal cost saving activities and a significant contribution from committed reorganisation activity. The combination of these results in operating margins aligned to business plans for the medium-term, albeit risk adjusted in the discounted cash flow models.

The recoverable amount of the Dalco cash generating unit, calculated on a value in use basis, exceeded its carrying value by £3,900,000 and therefore no impairment was required. Key assumptions applied in the calculations of the recoverable amount were forecast EBITDA, a pre-tax discount rate of 11.2% and a long-term growth rate of 2%.

Sensitivity analysis has been carried out on Dalco and a reasonably possible change in key assumptions in isolation or in combination may lead to a material impairment. A change in the pre-tax discount rate and long-term growth rate from 11.2% to 11.95% or from 2% to 1% respectively would reduce headroom to £nil. A reduction in the risk adjusted terminal operating margin of 1.0 ppts would also reduce headroom to £nil. A 5% reduction in volume growth rate would give rise to an impairment of goodwill.

No indicators for impairment of any of the other CGUs have been identified. As a result, management has not updated any other impairment assessments at the interim date.

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9 Investments

Investments in joint ventures and associates

The Group made additional investments of £4,374,000 (2023: £1,635,000) in Cellular Agriculture Limited.

10 Business Combinations

2024

On 29th August 2023 the Group acquired 80% of the share capital of Evolve 4 Group Limited a software provider of ERP systems for the food and drink manufacturing industry. Due to the timing of the acquisition by the Group in 2023, the assessment of the fair value of assets and liabilities acquired, and Goodwill was treated as provisional in the 2023 accounts.

Evolve 4 Group Limited

Consideration for the acquisition of the 80% interest in Evolve 4 Group Limited totalled £598,000. The acquisition of Evolve 4 Group provides an opportunity to deliver growth through new agreements with manufacturers in the foods and drinks industry across Europe and Australia, but also provides HFG a flexible and tailored ERP system to support increasing efficiencies of the core HFG operations.

Goodwill of £857,000 has been recognised in 2024 compared to £1,325,000 in 2023. Residual goodwill relates to the strategic benefits for Hilton of diversifying its business and the know-how of Evolve 4 employees.

The fair value of the technology acquired was established at £812,000. We have utilised the income approach based on the Relief from Royalty method, with the value derived reflecting the present value of future royalty savings due to owning the assets.

The value of other assets and liabilities reflect the amounts expected to be realised or paid, respectively.

Evolve 4 Group Limited

All ordinary shares of 10p each have equal rights in respect of voting, receipt of dividends and repayment of capital.

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13 Related party transactions

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.

Transactions between related parties made on an arm's length basis were as follows:

14 Financial instruments

The Group holds a number of financial instruments which are carried at cost which is the equivalent of their fair value unless otherwise stated below.

The Group has derivative financial instruments amounting to £212,000 liability and £762,000 asset (16 July 2023: £6,649,000 liability). The derivative financial instruments are plain vanilla derivatives including foreign currency options/forwards. The instruments that have a fair value where specific valuation techniques are used to arrive at the carrying value which include for foreign currency forwards - present value of future cash flows based on the forward exchange rates at the balance sheet date and for foreign currency options - option pricing models. These derivative financial instruments are classified as Level 2.

The fair values have been classified into three categories depending on the inputs used in the valuation technique.

The categories are as follows:

Level 1: quoted prices for identical instruments;

Level 2: directly or indirectly observable market inputs, other than Level 1 inputs; and

Level 3: inputs which are not based on observable market data.

Specific valuation techniques used to value financial instruments include:

• the use of quoted market prices or dealer quotes for similar instruments
• for foreign currency forwards - the present value of future cash flows based on the forward exchange rates at the reporting date
• for foreign currency options - option pricing models (e.g. Black-Scholes model), and
• for other financial instruments - discounted cash flow analysis.

15 Post balance sheet event

Since the half-year end the Group has received a final insurance payment of £13m in respect of property damage and business interruption following the fire at its facility in Belgium in 2021. 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 these claims to be remote.

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16 Alternative Performance Measures

The Group's alternative profitability measures are presented before other adjusting/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.

Adjusted profitability measures are reconciled to unadjusted IFRS results on the face of the income statement below with other APMs used by the Group defined in the subsequent glossary.

Segmental operating profit reconciles to adjusted segmental operating profit as follows:

Other adjusting/exceptional items

1Fire in Belgium

In June 2021, the Group's facility in Belgium suffered an extensive fire. The results for the period to 30 June 2024 do not include potential income that may be received in respect of the insurance claims. Finance Costs of £678,000 and cost related to the insurance claim of £148,000 have been recognised in the period relating to additional costs incurred in continuing to operate in Belgium pending receipt of the insurance proceeds.

In the prior period other adjusting/exceptional items totalling £5,239,000 were recognised relating to additional costs incurred in continuing to operate in Belgium.

In December 2023 the Group received an interim insurance payment of £9,776,000 related to the fire insurance claim. Post half-year end the Group has received a final insurance payment of £13,000,000 in respect of property damage and business interruption. The additional insurance payment of £13,000,000 has not been recognised in the results for the period to 30 June 2024.

2Reorganisation Costs

During the period other adjusting/exceptional reorganisation costs of £239,000 (2023: £1,304,000) have been recognised by the Group. These costs resulted from on-going efficiency and restructuring programs resulting in redundancies at a number of facilities operated by the Group.

3Dalco Impairment of Property, Plant and Equipment

The closure of one of the sites operated by our Dalco business allows us to optimise production and drive efficiencies at a single site centre of excellence for our vegan and vegetarian products. In 2023, an exceptional impairment charge of £1.2m has been recognised in respect of property, plant and equipment that the Group does not expect to be able to re-purpose for use in its other facilities.

Glossary

Alternative Performance Measures

Independent review report to Hilton Food Group plc

Report on the condensed consolidated interim financial statements

Conclusion

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2024 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, Condensed Consolidated Balance Sheet, the Condensed Consolidated Statement of changes in equity, the Condensed Consolidated Cash Flow Statement, and related notes 1 to 16.

Basis for Conclusion

Conclusion Relating to Going Concern

Responsibilities of the directors

Auditor's Responsibilities for the review of the financial information

Use of our report

Deloitte LLP

Statutory Auditor

Cambridge, United Kingdom