Final Results

15 September 2011

SNACKTIME plc

("SnackTime", the "Company" or the "Group")

FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2011

SnackTime plc, one of the UK's largest national operators of snack and chilled drink vending machines, is pleased to announce its audited results for the year ended 31 March 2011.

Financial Highlights

·; Revenues increased by 126%

·; Profits before exceptional items, amortisation & share option charges and tax of £1,022,667 (2010 - £314,547 loss) 

·; Loss before taxation of £2,185,486 (2010 - £1,311,806 profit)

·; Net assets of £18,535,756 (2010 - £11,572,720)

·; Operating cash inflow before exceptional items of £2,359,397 (2010 - £863,766)

Operational Highlights

·; Post acquisition restructuring proceeding to plan

·; Previous six businesses rationalised into 4 companies operating in distinct market segments, namely:

o Operated vending

o Franchising

o Direct marketing/ecommerce

·; Further growth with unique brand relationships

Blair Jenkins, CEO of SnackTime plc, commented:

"The Group has continued to make significant progress in the period under review. Given the unforeseen levels of cost input inflation experienced throughout the year, we are pleased with the performance of Snacktime in the 12 months to March 2011. Following the acquisitions of Snack-in-the-Box in 2009 and The Vendia Group in September of last year, a major focus of this year has been on restructuring the business to fully integrate the different operations, take advantage of economies of scale and position the Group to maintain its growth profile.

"Trading conditions remain challenging, yet the majority of the business continues to perform strongly, underlining the robust nature of the Group. With a clearly focused business we remain confident of continued success."

For further information:

SnackTime PLC

Blair Jenkins, Chief Executive 0118 977 3344

Arbuthnot Securities Limited

Tom Griffiths 020 7012 2000

Threadneedle Communications

 Josh Royston 020 7653 9850

SNACKTIME PLC

FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2011

Financial Highlights

·; Revenues increased by 126%

·; Profits before exceptional items, amortisation & share option charges and tax of £1,022,667 (2010 - £314,547 loss) 

·; Loss before taxation of £2,185,486 (2010 - £1,311,806 profit)

·; Net assets of £18,535,756 (2010 - £11,572,720)

·; Operating cash inflow before exceptional items of £2,359,397 (2010 - £863,766)

·; Operating cash outflow after exceptional items of £431,174 (2010 - inflow of £2,668,832)

Chairman's Statement

2010-11 was another successful year for SnackTime where financial performance improved - turnover increased by 126%, profits before exceptional items, amortisation & share option charges before taxation increased by £1,337,214 and cashflow from operations before exceptional items amounted to £2,359,397. In addition, SnackTime took a major step forward last year, with the acquisition in September 2010 of Vendia UK. Furthermore, SnackTime's first acquisition - Snack in the Box (acquired in September 2009) had a successful first full year of ownership with revenue growth of £2,282,869 and delivered a profit after tax of £421,128.

Following the acquisition of Vendia UK in September 2010 SnackTime became the UK's 4th largest vending business with over 33,000 customers. Whilst this acquisition was a mainly share based deal, it was accepted that the subsequent integration, rationalisation and streamlining of the SnackTime structure would create a significant level of non-recurring costs that would have tobe borne from the Group's cash reserves.

SnackTime was required to fully provide for the costs of the acquisition of Vendia and the consequent restructuring of the business as an exceptional non-recurring item in this financial year as the restructuring plan was committed to before 31 March 2011.

On acquisition, Vendia UK had three stand-alone operating vending companies being, namely Simply Drinks, Integer and VMI along with a fourth specialist drinks company Drinkmaster. The Vendia group employed 162 people and when combined with SnackTime's original structure, this created a group with 282 employees and associates and anticipated combined full year revenues of £26,739,345. Following the acquisition, management immediately set about restructuring and rationalising the 6 businesses (SnackTime UK, VMI, Simply Drinks, Integer, Drinkmaster and Snack in The Box) into four companies occupying three distinct market segments. These are, operated vending (VMI and Simply Drinks) franchising and a direct marketing/ecommerce business.

The four operating vending businesses of VMI, Integer, Simply Drinks and SnackTime UK have now been merged into two operating businesses, VMI - operating in the Midlands and the North, and Simply Drinks operating in the South. These enlarged units have absorbed the operations of SnackTime UK and Integer. 

The operated vending division now specialises in large sites which typically employ more than 50 to 100 staff. The first phase of rationalisation which involved back office, warehouse, installation, sales and management has seen staff numbers reduce by 74, generating annual savings of £1,640,000. This operated vending division is now undergoing further evolution, with the route systems now under review and the planned implementation of a common operating and Finance IT system by the close of FY2012. It is anticipated that these will generate further efficiency savings.

Trading conditions in the operated vending sector are challenging:

First, cost input inflation stemming from commodity and associated increases in FY 2010-11 was 19% where only 5% had been budgeted - this equates to approximately £1,600,000 per year in unbudgeted cost input. We expect this input cost inflation to abate slightly this year but not significantly as a number of suppliers are reported to be planning further price rises.

Secondly, consumer household budgets are being progressively squeezed as a result of low wage increases, high inflation and high energy price increases. Consequently, there is a high resistance to product price rises. Indications are that the price increases that VMI and Simply Drinks have implemented through the machines this year have merely resulted in an equivalent drop in unit sales.

Thirdly, this sector is very competitive and consolidation continues at a pace - recently Autobar announced that it had acquired Bunzl Vending and as a result Autobar became the UK's largest vending operator and SnackTime the UK's 3rd largest.

Fourthly, the financial outlook means that our customers continue to rationalise staff and look for value in all their administration services - resulting in price and margin pressure on this division. SnackTime is determined that the operated vending division (VMI and Simply Drinks) will become the most efficient operator in the industry whilst still delivering excellent customer service.

SnackTime's second largest division is the Snack in The Box franchise business, which efficiently serves organisations of less than 50 staff. Snack in The Box is the UK's only vending franchise and therefore occupies a unique market position. Snack in The Box continues to receive a strong level of business enquiry from both potential franchisees and customers alike. Snack in The Box had a very successful year in FY2011 and is currently experiencing strong trading growth.

The third division is that of Drinkmaster which is a direct marketing/ecommerce business. Drinkmaster manufactures and distributes specialist drinks to the travel, betting and CTN trades. Drinkmaster is one of the few producers of specialist in-cup drinks in the UK. Drinkmaster had a strong performance last year and is experiencing strong trading this year.

SnackTime continues to grow its unique brand relationships with Mars, Britvic and PepsiCo; we are delighted that this year, GSK, Blakemore's and ARN have also become strong supporters of the SnackTime businesses.

Michael Jackson

Chairman

RESULTS AND DIVIDENDS

The Group revenue for the year was £17,329,745 which represents an increase of 126% compared to last year. Normalised profits* were £1,022,667 (2010 - loss of £314,547). The Group's operating loss was £1,904,764 (2010 - profit £1,582,989). Losses after tax were £2,156,886 (2010 - profit £1,427,825) and the loss per share was 15.90p (2010 earnings per share of 17.12p).

The Directors do not recommend payment of a dividend in respect of the year ended 31 March 2011 (2010: nil).

*Normalised profits are defined as the statutory profit before interest, tax, amortisation, exceptional items and share option charges.

GOING CONCERN

Accounting standards require the Directors to consider the appropriateness of the going concern basis when preparing the financial statements. The Directors confirm that they consider that the going concern basis remains appropriate based upon forecasts which have been reviewed by the Board. The Directors have taken notice of the Financial Reporting Council guidance 'Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2010' which requires the reasons for this decision to be explained. The Directors regard the going concern basis as remaining appropriate as the Group has adequate resources to continue in operational existence for the foreseeable future. There are considerable cash reserves along with adequate financing arrangements which can be utilised by the Group as required. Thus the Directors continue to adopt the going concern basis of accounting in preparing the annual financial statements. 

capital

The capital structure of the Group consists of debt, which includes the borrowings and convertible loan notes disclosed in Note 19, cash and cash equivalents, and equity attributable to equity holders of the parent, comprising issued capital, warrant reserve, merger reserve, capital redemption reserve and retained earnings as disclosed in Notes 23.

During the year 5,447,855 new ordinary shares of 2p each in the Company were issued, representing 33.3% of SnackTime's enlarged share capital following completion of the acquisition of the Vendia UK Limited as disclosed in note 30. The new ordinary shares are the subject of lock-in arrangements for 24 months from issue, and Vendia UK's major shareholder has agreed to a lock in of a further 12 months. In addition, as part of the acquisition, 1,816,557 million warrants exercisable into new ordinary shares of 2p each in the Company, exercisable at a price of 2p per share, were issued.

The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. 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.

RISKS AND UNCERTAINTIES

The operation of a public listed company involves a series of inherent risks and uncertainties across a range of strategic, commercial, operational and financial areas. The Board has outlined their perception of particular risks and uncertainties facing the Group below. These risks and uncertainties could cause the actual results to vary from those experienced previously or described in forward looking statements within the annual report:

·; Changing consumer trends

Since the acquisition of Vendia UK Limited the emphasis of SnackTime's sales has shifted towards hot drinks. This has reduced our exposure to the snack market which could be subject to future regulation relating to healthier eating. It is in the interests of the brands whose products we stock to develop either healthier snacks or to amend the recipe of its existing items to, for example, reduce fat and salt content as consumer tastes and trends change towards healthier products SnackTime's offering will evolve to meet that demand.

·; Litigation and dispute risk

From time to time, the Group may be involved in litigation. This litigation may include, but is not limited to, contractual claims, personal injury claims, employee claims and environmental claims. If a successful claim is pursued against the Group, the litigation may adversely impact the sales, profits or financial performance of the Group. Any claim, whether successful or not, may adversely impact on the Company's share price. There is a risk that should the Group seek redress against another party to its contracts by way of litigation or other dispute resolution processes, these processes may incur significant Group resources, the cost of pursuing such actions may be prohibitive and a successful result is not assured.

·; General economic conditions

Changes in the general economic climate in which the Group operates may adversely affect the financial performance of the Group. Factors which may contribute to that general economic climate include the level of direct and indirect competition against the Group, industrial disruption, the rate of growth of the Group's sectors, interest rates and the rate of inflation.

The Group's exposure to interest rate risk, credit risk and liquidity risk are detailed in the Financial Instruments section of the Directors' report.

All operations are continuing.

Consolidated STATEMENT OF Changes in equity

 year ended 31 March 2011

consolidated STATEMENT OF FINANCIAL POSITION

31 March 2011

These financial statements were approved by the Board of Directors and authorised for issue on

They were signed on its behalf by:

Director Director

CONSOLIDATED statement OF cash flowS

Year ended 31 March 2011

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 March 2011

1 presentation of financial statements

General information

SnackTime plc is a public limited company incorporated in England and Wales under the Companies Act (registered number 06135746). The Company is domiciled in the United Kingdom and its registered address is 2nd Floor, West Forest Gate, Wellington Road, Wokingham, Berkshire, RG40 2AQ. The Company's shares are traded on the AIM market of the London Stock Exchange.

Basis of preparation

The financial information set out in this release does not constitute the Company's full statutory accounts for the year ended 31 March 2011 for the purposes of section 435 of the Companies Act 2006, but it is derived from those accounts that have been audited. Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered after the forthcoming AGM. The auditors have reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006 in either 2011 or 2010.

While the financial information for the year ended 31 March 2011 is prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards (IFRSs) as endorsed by the European Union and implemented in the UK, this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs later in September 2011. These financial statements have also been prepared in accordance with the accounting policies set out in the 2011 Annual Report and Financial Statements. The adoption of the interpretations, standards or amendment to standards were either not relevant for the Group or have not led to any significant impact on the Group's financial statements.

These consolidated financial statements have been prepared in accordance with the accounting policies set out in note 2 and under the historical cost convention, except where modified by the revaluation of certain financial instruments and commodities.

All companies in the Group use sterling as presentational and functional currency.

Accounting standards require the Directors to consider the appropriateness of the going concern basis when preparing the financial statements. The Directors confirm that they consider that the going concern basis remains appropriate. The Directors have taken notice of the Financial Reporting Council guidance 'Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2010' which requires the reasons for this decision to be explained. The Directors regard the going concern basis as remaining appropriate as the Group has adequate resources to continue in operational existence for the foreseeable future based upon the Group's forecasts. The Group has adequate financing arrangements which can be utilised by the Group as required. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

Changes in accounting policies

a) New standards, interpretations and amendments effective from 1 April 2010. The following new standards, interpretations and amendments, applied for the first time from 1 April 2010, have had an effect on the financial statements:

Revised IFRS 3 'Business combinations':Much of the basic approach to business combination accounting required under the previous version of IFRS 3 'Business Combinations' has been retained in this revised version of the standard. However, in some respects the revised standard may result in very significant changes to the account treatments previously adopted, including: The requirement to write off all acquisition costs to profit or loss instead of including them in the cost of investment (which will have a consequent effect on the value of goodwill recognised); the requirement to recognise an intangible asset even if it cannot be reliably measured; and, an option to gross up the balance sheet for goodwill attributable to non-controlling interests (known formerly as minority interests) on a combination-by-combination basis. There are also some significant changes in the disclosure requirements of the revised standard.

Contingent consideration in an IFRS 3(R) business combination will also now fall within the scope of IAS 39 and be measured initially and subsequently at fair value with remeasurement differences being recognised in profit or loss. Changes in the value of contingent consideration in a business combination falling with the scope of the old IFRS 3 continue to be treated as adjustments to goodwill.

The revised standard does not require the restatement of previous business combinations and, in consequence, the group's acquisition of a 100% interest in Vendia UK Limited is the first business combination to fall within the scope IFRS 3(R). The principal effect of the adoption of IFRS 3(R) on that acquisition is the recognition of £208,177 of acquisition expenses in the exceptional costs within the statement of comprehensive income this has had an immaterial effect on the EPS calculation for the year.

The following new standards, amendments and interpretations are also effective for the first time in these financial statements but none have had a material effect on the group so have not been listed.

·; Amendment to IAS 39 Financial Instruments: Recognition and Measurement: Eligible Hedged Items

·; IFRIC 17 Distributions of Non-cash Assets to Owners

·; Revised IFRS 1 First-time Adoption of international Financial Reporting Standards

·; IFRIC 18 Transfer of Assets from Customers

·; Improvements to IFRSs

·; Group Cash-settled Share-based Payment Transactions (Amendments to IFRS 2)

·; Additional Exemptions for First-time Adopters (Amendments to IFRS 1)

b) There are certain new standards, amendments and interpretations of existing standards that have been published and are effective for the Company's accounting periods beginning on or after 1 April 2010 and which are applicable to the Company, but which have not been adopted early. These are:

·; Amendments to IAS 12 Deferred tax: Recovery of Underlying Assets - effective 01/01/2012

·; IFRS 9 Financial Instruments - effective 01/01/2013

·; Presentation of Items of Other Comprehensive Income (Amendments to IAS1) - effective 01/07/2012

·; IFRS 10 Consolidated Financial Statements - effective 01/01/2013

·; IFRS 13 Fair Value Measurement - effective 01/01/2013

·; IAS19 Employee Benefits - effective 01/01/2013

·; IAS 24 Related Party Disclosures - effective 01/01/2011

The adoption of these standards, amendments and interpretations is not expected to have a material impact on the Company's loss for the year or equity. Application of these standards may result in some changes in presentation of information within the Company's financial statements.

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. The Group makes estimates and assumptions concerning the future. The principal areas where judgement was exercised are as follows:

§ As detailed in note 30 Snacktime Plc acquired Vendia UK Limited during the year. In accordance with IFRS 3 'Business Combinations' the directors have had to fair value the assets and liabilities acquired. This requires the Directors to estimate the fair value of the acquired assets and liabilities at the date of acquisition, including intangible assets.

§ Property, plant and equipment includes the value of the vending machine estate. The Directors annually assess both the residual value of these assets and the expected useful life of such assets.

§ The Directors have estimated the useful economic lives of intangible assets. The economic lives and the amortisation rates are reviewed annually by the directors.

§ The Group receives branding fees to contribute to the installation and refurbishment of vending machines. The Directors are required to assess the amounts receivable at each reporting date and whether all the conditions have been met to enable these to be recognised.

§ Sales from vending machines are recognised at the point of sale to the customer. At each year end, the Directors are required to make an estimate of sales where the vending machine has not been emptied or inspected at the year end date.

§ The convertible loan notes disclosed in note 19 have been split between the debt and equity element in accordance with IAS 32. This requires calculating the present value of the debt element using an effective interest rate. 12% was assumed to be an effective interest rate that would be charged on a similar loan by a third party.

§ Share based payment and warrant valuations are based upon a Black-Scholes based model which requires various assumptions to be made as set out in note 24.

§ Dilapidation provisions are included within exceptional costs and are calculated as a percentage of annual rents plus specific costs.

Critical accounting estimates and judgements (continued)

§ An impairment of goodwill has the potential to significantly impact upon the Group's statement of comprehensive income for the year. In order to determine whether impairments are required the Directors estimate the recoverable amount of the goodwill. This calculation is based on the cash flow forecasts applicable to the Group of cash-generating units for the following financial year extrapolated over a five year period assuming growth rates in the region of 1-3%. A terminal value has been included which extrapolates the growth of the year 5 cash flow at 2.3% in perpetuity. A discount factor, based upon the Group's weighted average cost of capital is applied to obtain a current value ('value in use'). The fair value less costs to sell of the cash generating unit is used if this results in an amount in excess of value in use.

Estimated future cash flows for impairment calculations are based on management's expectations of future volumes and margins based on plans and best estimates of the productivity of the income generating unit in their current condition. Future cash flows therefore exclude benefits from major expansion projects requiring future capital expenditure.

Future cash flows are discounted using a discount rate based on the Group's weighted average cost of capital. The weighted average cost of capital is impacted by estimates of interest rates, equity returns and market related risks. The Group's weighted average cost of capital is reviewed on an annual basis.

Further details are set out in note 15.

2. significant ACCOUNTING POLICIES

The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group's financial statements.

a) Basis of consolidation

The Group financial statements consolidate the financial statements of the Company and its subsidiary undertakings. The merger method of accounting has been adopted as detailed in note 1, following a group reconstruction involving Snacktime Plc and Snacktime UK Limited. The acquisition of Snack in a Box Limited was accounted for using acquisition accounting in accordance with IFRS 3 "Business Combinations". A gain on bargain acquisition of £1,805,067 arose, which was separately reported in the Statement of Comprehensive Income in accordance with IFRS 3 and IAS 1 in the year of acquisition. The acquisition of Vendia UK Limited in the year was accounted for using acquisition accounting in accordance with IFRS 3 "Business Combinations".

Intra-group revenues and profits are eliminated on consolidation and all revenue and profit figures relate to external transactions only.

b) Revenue recognition

Revenue is measured by reference to the fair value of consideration received or receivable by the group for goods and services supplied, excluding VAT and trade discounts. Revenue for goods sold from vending machines is recognised at the date of sale. Revenue in respect of installation and refurbishment of branded vending machines (branding fees) is recognised at the date of installation or refurbishment. Franchising fees are recognised when the franchisee starts trading. Managed estate sales are recognised in full once the customer has taken over operation of the machine.

c) Income tax

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year.  

Deferred tax is recognised on all temporary differences. This involves comparison of the carrying amount of assets and liabilities in the consolidated financial statements with their respective tax bases. However, deferred tax is not provided on the initial recognition of goodwill, or on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. 

Deferred tax liabilities are provided for in full. Deferred tax assets and liabilities are calculated without discounting, at tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (tax laws) that have been enacted or substantively enacted by the balance sheet date. All changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity. 

Tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets. Deferred tax assets are only recognised to the extent that it is probable that future taxable profits will be available against which the asset can be recognised and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

d) Cost of sales

Cost of sales represents amounts payable for supplies of products for resale.

e) Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment provisions.

Depreciation is provided to write off the cost, less the estimated residual value of property, plant and equipment by equal instalments over their estimated useful economic lives as follows:

Leasehold improvements - over the term of the lease

Plant & machinery - 10 - 25% straight line basis

Fixtures, fittings & equipment - 25% straight line basis

Motor vehicles - 25% straight line basis

Material residual value estimates are updated as required, but at least annually, whether or not the asset is revalued.

Impairment reviews of property, plant and equipment are undertaken if there are indications that the carrying values may not be recoverable or that the recoverable amounts may be less than the asset's carrying value.

f) Intangible assets

In accordance with IFRS 3 Business Combinations, an intangible asset acquired in a business combination is deemed to have a cost to the Group of its fair value at the acquisition date.

After initial recognition, intangible assets are carried at deemed cost less any accumulated amortisation and any accumulated impairment losses. Impairment reviews are conducted annually from the first anniversary following acquisition, where indicators of impairment arise.

Brands are amortised to the income statement over their estimated economic life on a reducing balance basis. The average useful economic life of brands has been estimated at 10-15 years. The customer relationships are amortised on a straight line basis over its 15 year useful economic life.

g) Goodwill

Goodwill is calculated as the difference between the fair value of the consideration exchanged, including directly attributable acquisition costs, and the net fair value of the identifiable assets and liabilities acquired and is capitalised. Goodwill is tested for impairment annually and whenever there is an indication of impairment. Goodwill is carried at cost less accumulated impairment losses.

When the acquired interest in the net fair value of the identifiable assets and liabilities exceeds the cost of the business combination, the excess is recognised immediately in the income statement.

Gains and losses on the disposal of a business combination include the carrying amount of goodwill relating to the entity sold.  

h) Leases

Where a lease is entered into which entails taking substantially all the risks and rewards of ownership of an asset, the lease is treated as a finance lease. The asset is recorded in the balance sheet as an item of property, plant and equipment and is depreciated over the shorter of its estimated useful life or the term of the lease.

Future instalments under such leases, net of finance charges, are included within payables. Rentals payable are apportioned between the finance element, which is charged to the income statement, and the capital element, which reduces the outstanding obligation for future instalments. Land and building elements of lease agreements are separately assessed in accordance with IAS 17.

All other leases are treated as operating leases and the rentals payable are charged on a straight line basis to the income statement over the lease term.

i) Inventories

Inventories are stated at the lower of purchase cost from third parties and net realisable value on a first in first out basis. Costs of ordinarily interchangeable items are assigned using the first in, first out cost formula.

j) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

k) Share-based payments

The Group has applied the requirements of IFRS 2 'Share-based payment', as amended by IFRIC Interpretation 2 - IFRS 2 Group and Treasury share transactions.

The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. Where services are from employees fair value is determined indirectly by reference to the fair value of the instrument granted. The fair value determined at the grant date of the equity settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting. 

Upon exercise of share options the proceeds received net of attributable transaction costs are credited to share capital.

Fair value is measured based upon a Black-Scholes pricing model.

l) Financial instruments

Financial liabilities are obligations to pay cash or other financial assets and are recognised when the group becomes a party to the contractual provisions of the instrument. Financial liabilities are recorded initially at fair value, net of direct issue costs as an expense in the income statement with a corresponding credit to equity.

Financial liabilities are subsequently recorded at amortised cost using the effective interest method, with interest-related charges recognised as an expense in finance costs in the income statement. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the income statement on an accruals basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires.

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual terms of the instrument. 

All financial assets are classified as loans and receivables.

Bank borrowings

Bank loans and overdrafts are initially recorded at fair value net of transaction costs. Finance charges including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis to the income statement using the effective interest method and are added to the carrying value of the instrument to the extent that they are not settled in the period in which they arise.

Convertible Loan

Convertible loan notes, as disclosed in note 19, have been split between debt and equity elements in accordance with IAS 32.

Trade payables

Trade payables are not interest bearing and are stated at their fair value on initial recognition. They are then accounted for using the effective interest rate method.

m) Equity instruments

Equity instruments, which are detailed below, issued by the Group are recorded at the proceeds received, net of direct costs except for warrants, share options and convertible loans which are recorded at fair value at the time of issue.

Equity comprises the following:

·; "Share capital" represents the nominal value of equity shares.

·; "Share premium" represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.

·; "Merger reserve" represents an amount arising on the consolidation which was accounted for in accordance with FRS 6 as detailed in note 1.

·; "Capital redemption reserve" which arose on the redemption of shares.

·; "Retained earnings" represents retained profits.

·; "Share option reserve" relates to the company's share option scheme detailed in note 24

·; "Equity element of compound financial instruments" represents the equity element of the convertible loan notes (note 19).

·; "Warrants reserve" represents the fair value at the time the warrants were issued

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

n) Pensions

The Group contributes to personal pension plans of one of the directors as detailed in note 9 and defined contribution pension schemes for certain employees. The amount charged to the Income Statement in the year represents the amount payable in respect of that year.

o) 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 has been identified as the management team including the Chief Executive Officer and Chief Financial Officer.

p) Exceptional Costs

It is the Group's policy to show items that it considers are of a significant nature separately on the face of the Consolidated Statement of Comprehensive Income in order to assist the reader to understand the accounts. The Group defines exceptional costs as items that are material in respect of their size and nature, for example, a major restructuring of the activities of the Group. Summary details of exceptional costs are shown in note 5.

q) Provisions

The Group recognises a provision where a legal or constructive obligation exists at the balance sheet date and a reliable estimate can be made of the likely outcome.

3. REVENUE

The Company operates wholly within the United Kingdom.

4. AUDITOR'S REMUNERATION

The analysis of auditor's remuneration is as follows:

5. PROFIT from operations

Exceptional costs/(income) comprise of:

Exceptional costs in 2011 represent items arising primarily from the acquisition of Vendia UK Limited and its subsidiaries on 22 September 2010 and the essential restructuring of the group following the acquisition to streamline operations and align the acquired businesses. This represents a major change to group structure with two of the newly acquired entities now heading up the Vending operations, being VMI in the North and Midlands and Simply Drinks in London and the South. Snack in the Box remains as our national franchise operation and the newly acquired Drinkmaster producing and marketing 'in cup' solutions. Included in the item are professional and other fees relating to the acquisition which are expensed in line with IFRS 3, Business Combinations.

An exceptional interest charge arose in the year on the convertible loan note which related to interest that should have been charged for the period to 31 March 2010. 

6. FINANCE income

7. Finance CoSTS

8. dIRECTORS' REMUNERATION

The emoluments of the Directors for the year were as follows:

Key management personnel are considered to be only the Company's Directors.

Details of the EBT loan are disclosed in note 27.

During the year ended 2011 pension contributions of £Nil (2010: £Nil) were paid in respect of the then highest paid director.

None of the other directors received any payments in respect of pension contributions in 2011 & 2010.

*Salary includes a bonus of £26,838. **Stepped down as an executive director during the year..

8. dIRECTORS' REMUNERATION (CONTINUED)

Directors' interests in share options

267,836 options were granted to Directors during the year to 31 March 2011. Options have been granted to Directors whose performance and potential contribution were judged to be important to the operations of the Group, as incentives to maximise their performance and contribution.

The mid-market price of the ordinary shares on 31 March 2011 was 104.0p and the range during the year was 100.0p to 173.0p.

During the current year retirement benefits were accruing to 1 Director (2010 - 1) in respect of money purchase pension schemes.

No Directors exercised any options during the year.

9. Staff numbers and costs

The average monthly number of people employed by the Group (including Executive Directors) during the year, analysed by category, were as follows:

10 segment information

The Group has three main reportable segments:

§ Specialist drinks - The manufacture and sale of single portion beverages called 'Drinkpacs' together with the sale of associated food and drink products.

§ Franchising - The marketing and franchising of operations in the provision of snack solutions.

§ Vending - Vending activities.

Factors that management used to identify the Group's reportable segments

The Group's reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies.

Measurement of operating segment profit or loss, assets and liabilities

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.

The Group evaluates performance on the basis of profit or loss from operations but excluding non-recurring profits/losses, such as goodwill impairment, and the effects of share-based payments.

Inter-segment sales are priced on the same basis as sales to external customers, with an appropriate discount being applied to encourage use of group resources at a rate acceptable to local tax authorities. This policy was applied consistently throughout the period.

Segment assets exclude tax assets and assets used primarily for corporate purposes. Segment liabilities exclude tax liabilities. Loans and borrowings are allocated to the segments based on relevant factors (e.g. funding requirements). Details are provided in the reconciliation from segment assets and liabilities to the group position.

10 segment information (continued)

10 segment information (continued)

10 segment information (continued)

As at 31 March 2011 there were no non-current assets held outside of the United Kingdom (2010: £Nil).

11 Taxation

Factors affecting tax charge for the year:

The tax assessed for the year is lower than the standard rate of corporation tax in the UK of 28% (2010: 28%). The differences are explained below:-

In addition to the changes in rates of corporation tax announced in The Emergency Budget on 22 June 2010, a number of further changes to the UK corporation tax system were announced in the 2011 Budget on 23 March 2011.

A reduction in the main rate of corporation tax to 26% from 1 April 2011 was substantively enacted on 29 March 2011. The inclusion of legislation to reduce the main rate of corporation tax from 26% to 25% from 1 April 2012 was substantively enacted on 5 July 2011. Further reductions to the main rate are proposed to reduce the rate by 1% per annum to 23% by 1 April 2014.

For the purposes of deferred tax, the rate change from 27% to 26% had been substantively enacted before the balance sheet date. The other proposed rate changes were not substantively enacted on or before the balance sheet date and it is not yet possible to quantify the full anticipated effect of the announced further rate reduction, although this will further reduce the company's future current tax charge and reduce the company's deferred tax assets accordingly.

12 (Loss)/EARNINGS per share

The calculation of basic (loss)/earnings per share is calculated on the basis of the result for the year after tax, divided by the weighted average number of shares in issue for the year ended 31 March 2011 of 13,625,087 (2010 - 8,340,059).

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potential dilutive ordinary shares (8,907,777 shares). Potential dilutive ordinary shares arise from share options and convertible loans. For these, 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 exercise price attached to outstanding share options. Thus the dilutive weighted average number of shares considers the number of shares that would have been issued assuming the exercise of the share options. If these are proved to be anti-dilutive (increase the potential earnings per share) they are omitted from the calculation, as the group has made a loss in the current year the options, warrants and convertible loan notes are therefore anti-dilutive and diluted earnings per share are therefore not provided for the current year.

* The incremental shares from assumed conversion are not included in the current year's calculation of diluted earnings per share as their inclusion would increase earnings per share and the effect would be anti-dilutive as explained above. 

13 Property Plant and equipment

13 Property Plant and equipment (CONTINUED)

The net book value of assets held under finance leases or hire purchase contracts, included above, are as follows:

14 INTANGIBLE ASSETS

14 INTANGIBLE ASSETS (continued)

Current estimates of useful economic lives of intangible assets are as follows:

Goodwill Indefinite

Customer relationships Amortised over 15 years

Snack In The Box brands Amortised over 15 years

Vendia brands Amortised over 10 years

15 Goodwill and impairment

Goodwill acquired in a business combination is allocated at acquisition to the cash generating units (CGUs) that are expected to benefit from that business combination as follows:

The group tests annually for impairment or more frequently if there are indications that goodwill may be impaired. The recoverable amounts of all the above CGUs have been determined from value in use calculations based on cash flow projections from formally approved budgets for 2012, which are then extrapolated over 5 years and a terminal value applied to the year 5 cashflow. The major assumptions are as follows:

15 Goodwill and impairment (Continued)

Operating margins have been based on past experience and future expectations in the light of anticipated economic and market conditions. Discount rates are based on the Group, this is then adjusted to reflect management's assessment of specific risks related to the cash generating unit. Growth rates beyond the first five years are based on economic data pertaining to the region concerned.

The recoverable amount for the CGU is set out below:

·; Specialist drinks exceeds its carrying amount by £1,953,000.

·; Vending exceeds its carrying amount by £7,573,000.

If any one of the following changes were made to the above key assumptions, the carrying amount and recoverable amount would be equal. The cashflows are not sensitive to large variations in the terminal value percentage.

16 deferred taxation

The gross movements on the deferred tax account are as follows:

deferred tax assets

The deferred tax balances arise from temporary differences in respect of the following: