Final Results

SNACKTIME PLC

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

FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2013

SnackTime plc, the third largest vending business in the UK, is pleased to announce its audited final results for the year ended 31 March 2013.

Financial Highlights

·; Revenues decreased by 7.6% (2012 - increased by 28%)

·; Profit before depreciation, exceptional items, amortisation & share option charges and tax of £0.384m (2012 - profit of £1.123m)*

·; Loss before taxation of £8.255m (2012 - Loss of £0.732m)

·; Net assets of £10.249m following goodwill impairment of £5.440m (2012 - £18.516m)

·; Net cash outflow from operating activities of £0.203m after exceptional items. (2012 - Inflow of £0.241m)

·; Administration expenses, before exceptional items, amortisation and share option expenses but including depreciation reduced by 7.3% to £11.755m (2012 - £12.689m) cash outflow after exceptional items of £0.332m (2012 - inflow of £1.558m)**

* - Arrived at from taking the Loss before tax, exceptional items, amortisation and share option charges of £1.396m from the Statement of Comprehensive Income and adding back depreciation of £1.780m.

** - As set out on the Statement of Comprehensive Income

Jeremy Hamer, Chairman, commented:

"Trading in the new financial year has started in line with our expectations. The second half of the financial year should benefit from new product sales at Drinkmaster and an expectation that our enlarged sales team and lead generation activities are delivering some improvement in overall activity. On top of the progress made in FY13, continued improvements in customer service and tighter financial controls underpin our optimism of a significant step towards recovery in FY14."

A copy of the Company's 2013 Report and Accounts will be posted to shareholders and will be made available on the Company's website: www.snacktime.com

For further information:

CHAIRMAN'S STATEMENT

I have pleasure in presenting the results for the year ended 31 March 2013, which has been my first period as your Chairman having joined in June 2012. It has been a year in which the refinancing of the Group and the re-setting of our bank facilities which were completed in April 2013 was the key focus. While that was being completed, considerable progress was made in stabilising the Group with a number of new senior appointments being made and significant reductions in administrative costs which are expected to be lower again in FY14.

Financials

Turnover was down 7.6% to £20.506m (2012: £22.191m) producing an operating loss before amortisation, share option charges and exceptional costs of £1.13m (2012: Loss £0.14m)*. EBITDA before exceptional items and share option charges for the year was a profit of £0.65m (2012: £1.392m)**. Following exceptional costs of £6.391m, including a non cash goodwill impairment charge of £5.440m, the pre-tax loss was £8.255m (2012: loss £0.73m) and loss after tax attributable to the shareholders was £8.312m (2012: loss £0.05m). Gross margins reduced by 4% to 52% (2012: 56%) while our distribution and administration costs before exceptional items, amortisation and share option charges dropped by 7.4% to £11.754m (2012: £12.688m)*. Net finance charges before exceptional items remained largely flat at £0.299m (2012: £0.268m)* and net borrowings at 31 March 2013 had risen to £3.845m (2012: £2.718m). 

The directors anticipate that the Company will deliver an improved result in FY14. FY13's results were impacted by our impairment review of the carrying value of the goodwill acquired with the acquisition of Vendia Limited in September 2010. This has resulted in a charge to the consolidated statement of comprehensive income of £5.440m (2012: nil), a non-cash item. During the year, other exceptional charges of £0.951m (2012: profit £0.0168m) were expensed of which £0.244m (2012: nil) were non-cash items. These exceptional charges related to re-organisation costs in various parts of the Group, which have contributed to annualised cost savings of £1.3m.

*As set out in the Consolidated Statement of Comprehensive Income

**As set out in the Consolidated Statement of Cash Flows and arrived at by taking the Operating cash inflow/(outflow) pre-exceptional costs and subtracting the Loss/(profit) on disposal of fixed assets

Operations

SnackTime comprises of two traditional vending operations, VMI based in Blackburn with operating centres in Corby and Newport, and Simply Drinks based in London. Complementing these operations are a franchise network trading as Snack in the Box from Wokingham and Drinkmaster, a specialist supplier of 'in cup' solutions, based in Liskeard. It has taken another year to tidy up the integration of the Vendia business, which during the year included closing a depot in Warrington and the Group's head office in Wokingham.

During 2012, new General Managers/Managing Director have been appointed at each of VMI, Simply Drinks and Snack in the Box and together with the Managing Director of Drinkmaster and the two Group executive Directors, there has been a marked improvement in the collaboration within the Group, which will continue.

Operated Vending

Cost savings have been necessary in the operated vending businesses to bring the operator and engineering support in line with the lower revenue levels and smaller machine estate. During the year, the operated estate reduced in size by 477 machines, an 8% decline. Considerable cost savings have also been achieved at head office, which combined with operating businesses savings has reduced overheads by an annualised £1.3m, £0.350m of which will be visible first in FY14.

The market overall, whilst remaining very competitive, is also creating opportunities as some of our larger vending competitors withdraw from the smaller end of the market. Downward pressure on sales remains both through corporate customers continuing to look for ever better deals and because personal disposable income is declining. To counteract this, we have doubled our sales team in London from 2 to 4, worked upon our lead generation activities and are improving our controls over renewals and pipeline management. The benefits of these activities are expected to become evident in the second half of FY14.

Another key operated vending focus, for VMI in particular, has been the improvement of customer service. The lead times on new installations and service calls have reduced dramatically; routes have been significantly re-organised and considerable amounts of training undertaken particularly in relation to hot drinks. A portion of the estate involving 400 machines covering the south was transferred from VMI to Simply Drinks and efforts are on-going to tidy-up area boundaries.

The implementation of the Vendman operating system for capturing sales data is progressing and the benefits to be gained in management information and control are becoming real. 'Intelligent machines' and 'cloud' based solutions are gathering momentum, offering significant future opportunities for operating cost reductions and additional income streams.

Franchise Network

Snack in the Box ended the year with 84 active franchise areas (2012: 86). The franchise network operates 11,600 sites through a mix of honesty boxes and snack machines, with almost no hot drink activity. The franchise network plays a significant role in supporting our national account customers. Re-organisation of the operations centre and team has been taking place to improve the support given to the franchisees.

'In Cup' solutions

Drinkmaster has had another good year although it too had to cut operating costs when its largest customer William Hill took the decision to move to central distribution from individual shop drops. The development of the next generation of 'In Cup' product has been a priority and by July 2014 Drinkmaster will be in full production of this new product following a capital spend of £0.330m. This will open new markets to us in the second half of FY14.

Finished goods and goods for resale

Although raw material and operating cost increases can always be overcome by increasing vending prices, such moves need to be handled carefully if volume falls are to be avoided. There is undoubtedly inflationary pressure in all areas of the business and gross margins fell in FY13 to 52% (FY12: 56%) which was in part due to the sales mix and reduced numbers of new franchises sold.

Re-financing

On 5 April 2013, we announced the successful completion of a £1.01m fundraising by way of loan notes and the re-negotiation of our banking facilities. The loan notes comprise £0.50m of 7% convertible loan stock and £0.505m of 12% 5 year redeemable loan stock. The banking facilities are made up of a £3.4m two year term loan and a £0.750m overdraft facility. The principal terms and conditions of the Loan Notes are as follows:

·; the nominal amount of the Loan Notes shall be £1;

·; one half of each Loan Note will be convertible at any time during the period of five years and one day from the date of issue into new ordinary shares of 2p each in SnackTime ("Shares") at a conversion price of 10p per Share (a 25% premium to the Company's share price at the time terms were agreed). Interest on this portion of the Loan Note shall accrue at 7% per annum, before conversion, and shall be paid semi-annually;

·; the other half of each Loan Note will have no right of conversion and will be redeemed with a 30% redemption premium five years and one day from the date of issue. Interest on this portion of the Loan Note shall accrue at 12% per annum, and shall be paid semi-annually;

·; subscribers will only be allotted Loan Notes with an equal portion of the redeemable and convertible elements ; and

·; the Loan Notes will not be listed or traded on any stock exchange.

In satisfaction of a further condition of the new banking facilities detailed below, Unicorn AIM VCT plc and Elderstreet VCT plc, holders of £0.55m and £0.050m, respectively, of the Company's £0.6m 2008 convertible loan notes ("2008 CLS"), which were due for redemption on 16 December 2013, have agreed to defer the redemption date for 2 years, until 15 December 2015 ("Extension Period"). Interest shall continue to accrue at 8% per annum during the Extension Period, and be paid semi-annually. However, a redemption premium of 6% per annum of the principal amount of the loan notes will now be paid on redemption up to a maximum of 12%. The 2008 CLS are now specifically redeemable or convertible at the option of the holders on a change of control of the Company. All other material terms of the 2008 CLS remain unchanged.

The banking facilities comprise a £3.4m two year term loan and a £0.750m overdraft facility. The revised loan repayments schedule has established a minimum loan repayment of £0.180m in the financial year ending 31 March 2014, and £0.890m in the financial year ending 31 March 2015. The repayments required to be made by the Company will increase if the Company outperforms its projections. £2.0m of the loan attracts an interest rate of 6% over LIBOR, plus mandatory costs (expected to add approximately 0.04%). The amount subject to this rate may reduce at the Bank's discretion by reference to the Company's net asset position. Loan repayments first reduce this segment of the borrowings. The balance of the term loan will attract interest at either 5.35% or 4% over LIBOR plus mandatory costs. The new overdraft facility has an interest rate of 3.25% above the Bank's base rate (currently 0.5%).

Strategy

Throughout FY13 the focus has been on stabilising sales, reducing costs and refinancing the business, combined with a much needed improvement in service levels in the operated vending business outside of London. On all counts, considerable progress has been made but, given our high depreciation and amortisation charges, this alone whilst resulting in positive cash generation will not be enough to generate a pre-tax profit. Going forward the priorities are:-

• Lower cost operations - higher yielding routes, optimal machine allocation and improved buying are all areas that can improve our productivity and financial performance and remain the business priorities at the operations level. To achieve this, there is increased emphasis upon the sales teams, lead generation and management of the sales pipeline.

• More use of technology - when we last reported, the introduction of handheld data capture technology was our immediate priority and the completion of that initiative is very close. The manufacturers of vending equipment in partnership with the telco and software companies, the arrival of 4G and the increasing sophistication of telemetry are offering the industry huge efficiencies going forward as well as additional profit streams.

• A growing Franchise network -which with the support of our key brand partners Mars, Walkers and Britvic offers an attractive franchise proposition with strong development potential. Our increasingly professional franchise support team should allow us to expand our network for several years to come by attracting franchisees who themselves are committed to growing their own business.

• New product development - in our operating businesses we are dependent upon the innovation of our brand partners and the innovation we can bring to merchandising. At Drinkmaster, we are about to launch an 'In Cup' drink concept that is attracting interest from both manufacturers and retailers.

With limited access to new funding it would be unrealistic for us to launch an acquisition-based strategy, but it is clear that many of the objectives above would be more easily achieved by a company with more throughput and as a result relatively lower fixed costs.

People

Firstly I would like to thank Steven Garner for his important contribution to the Board during a difficult period. Steven resigned as a non-executive director in April 2013 to take up an executive role with a competitor.

I should like to welcome Sue Sproston, Dennis Ward and Clive Smith who have taken up the senior roles at VMI, Simply Drinks and Snack in the Box respectively during this financial year. As a senior team, together with Tim James (CFO) and Paul Vickers (Drinkmaster), we have made considerable progress in creating a common understanding of the Group's objectives. Their effort and support has been greatly appreciated.

I would also like to thank all of our staff, who have supported us through a period of intense change and I look forward to working with them as we continue to develop the business and its operations.

Current Trading & prospects

Trading in the new financial year has started in line with our expectations. The second half of the financial year should benefit from new product sales at Drinkmaster and an expectation that our enlarged sales team and lead generation activities are delivering some improvement in overall activity. With no improvement in consumer spending likely in the short-term, the onus is very much on us internally to kick-start our own recovery. On top of the progress made in FY13, the appointment of a group buyer, continued improvements in customer service and tighter financial controls are all underpinning our optimism of a significant step towards recovery in FY14.

Jeremy Hamer

Chairman

Date: 2 July 2013

RESULTS AND DIVIDENDS

The Group revenue for the year was £20.506m (2012 - £22.191m). Normalised profit* was £0.655m (2012 - £1.392m). The Group's operating loss was £7.874m (2012 - loss of £0.464m). Losses after tax were £8.312m (2012 - £0.051m) and the loss per share was 50.84p (2012 - loss per share of 0.31p).

The Directors do not recommend payment of a dividend in respect of the year ended 31 March 2013 (2012: £nil).

*Normalised profit is defined as the statutory profit before interest, tax, amortisation, depreciation, exceptional items and share option charges. Normalised profit is arrived as set out in the Consolidated Statement of Cash Flows by taking the Operating cash inflow/(outflow) pre-exceptional costs and subtracting the Loss/(profit) on disposal of fixed assets.

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 cash reserves along with adequate financing arrangements which were renewed and renegotiated in March 2013 and can be utilised by the Group as required. See post balance sheet Note 30. 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, finance leases 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 Note 23.

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 their 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.

·; Covenants compliance

The Group's borrowing facilities at the year end date included a requirement to comply with certain specified covenants in relation to the level of debt service cover, interest cover, capital expenditure and minimum tangible net worth. The group breached their December 2012 covenant for which they obtained a waiver. The Directors entered into discussions with the bank during Q4 regarding refinancing their banking facilities, they received an offer for a new financing agreement on 28 March 2013, which therefore rendered the March 2013 covenant test date as non applicable given completion took place in early April 2013, before the March 2013 compliance certificate was due. Forward looking covenants under the refinanced borrowings in April 2013 include the following:

- Rolling quarterly EBITDA; and

- Asset cover.

A breach of these covenants could result in a significant proportion of the Group's borrowings becoming repayable immediately.

The Group expects to comply with the forward looking covenants and manages compliance through regular monitoring of cash flows and forecasts. Sensitivity analysis using various scenarios is applied to forecasts to assess their impact on covenants.

·; Product price changes 

The purchase price of products distributed by the Group can fluctuate from time to time, thereby potentially affecting the results of operations. Adverse economic conditions resulting and rising input prices may impact the Group's revenue and, as a result, its results.

The Group endeavours, whenever possible, to pass on price increases from its suppliers to its customers. The Group mitigates against the risk of holding overvalued inventory in a deflationary environment by managing stock levels efficiently and ensuring they are kept to a minimum.

·; Integration of acquisitions

A significant portion of the Group's historical growth has been achieved through acquisition. The process of integrating the Group's acquisitions could prove to be more complex, costly and time consuming.

The Group endeavours to maximise the performance of an acquisition through the recruitment and retention of high quality management combined with effective strategic planning, investment in resources and infrastructure.

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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

year ended 31 March 2013

All operations are continuing.

Consolidated STATEMENT OF Changes in equity

 year ended 31 March 2013

consolidated STATEMENT OF FINANCIAL POSITION

31 March 2013

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

on 2 July 2013.They were signed on its behalf by:

Jeremy Hamer Tim James

Director Director

CONSOLIDATED statement OF cash flowS

Year ended 31 March 2013

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 March 2013

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 17 Rufus Business Centre, Ravensbury Terrace, London, SW18 4RL. 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 2013 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 2012 have been delivered to the Registrar of Companies and those for 2013 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 2013 or 2012.

While the financial information for the year ended 31 March 2013 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. These financial statements have also been prepared in accordance with the accounting policies set out in the 2013 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

Certain new standards, amendments and interpretations of existing standards that have been published and which are effective for the Company's accounting periods beginning on or after 1 April 2012 and which are applicable to the Company, but which have not been adopted early, are:

• IAS 1 (Amendment) "Presentation of Items of Other Comprehensive Income" effective July 2012

• IAS 19 (Amendment) "Employee Benefits" effective January 2013

• IAS 27 "Separate Financial Statements" effective January 2013

• IAS 28 "Investments in Associates and Joint Ventures" effective January 2013

• IFRS 10 "Consolidated Financial Statements" effective January 2013

• IFRS 12 "Disclosure of Interests in Other Entities" effective January 2013

• IFRS 13 "Fair Value Measurement" effective January 2013

• IFRS 9 "Financial Instruments" effective January 2013

The directors anticipate that the adoption of these standards, amendments and interpretations is not expected to have a material impact on the Company's profit 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:

§ Acquisitions are accounted for in accordance with IFRS 3 'Business Combinations', the directors fair valued 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 in Note 14. 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.

§ The sales from vending machines disclosed in Note 10 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.

§ The dilapidation provisions set out in Note 21 are calculated as a percentage of annual rents plus specific costs.

§ 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 disclosed in Note 15. This calculation is based on the cash flow forecasts applicable to the Group of cash-generating units for the following financial year extrapolated over an eight year period assuming growth rates in the region of 2-3%. A terminal value has been included which extrapolates the growth of the year 8 cash flow at 2.0% 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 was adopted in respect of the group reconstruction involving Snacktime Plc and Snacktime UK Limited. The acquisitions of Snack in a Box Limited and Vendia UK Limited were accounted for using acquisition accounting in accordance with IFRS 3 "Business Combinations (Revised)".

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

Land and buildings - 2 - 4% 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(Revised)', 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 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) Impairment of assets 

Assets that have a finite useful life but that are not yet in use and are therefore not subject to amortisation or depreciation are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment annually and when events or circumstances suggest that the carrying amount may not be recoverable, an impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.

Goodwill is allocated to cash-generating units ('CGU') for the purpose of impairment testing to the extent that it is possible to allocate goodwill to a CGU on a non-arbitrary basis. A CGU is identified at the lowest aggregation of assets that generate largely independent cash inflows, and that which is looked at by management for monitoring and managing the business.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in the statement of comprehensive income, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss is recognised immediately in the statement of comprehensive income, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. Impairment losses on goodwill are not reversed.

The gain or loss arising on the disposal of an asset is determined as the difference between the disposal proceeds and the carrying amount of the asset and is recognised in the income statement.

i) 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.

j) 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.

k) 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.

l) 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.

m) 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.

n) 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.

·; "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.

o) Pensions

The Group contributed to personal pension plans of one of the directors as detailed in note 9 and defined contribution pension schemes for certain employees in 2012. The amount charged to the Income Statement in the year represents the amount payable in respect of that year.

p) 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 Executive Chairman and Chief Financial Officer.

q) 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.

r) 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. Loss from operations

Exceptional costs/(income) comprise of:

Exceptional costs in 2013 denoted as restructuring and redundancy, onerous lease provisions, dilapidation provisons, professional fees on restructuring and reorganisation of national accounts represent further essential restructuring of the group.

The impairment of intangible assets relates to an impairment charge over of the goodwill in the Vending division which has arisen due to a difficult 12 months of trading. As such upon the annual impairment review it was recognised that the value in use did not support the carrying value of goodwill, see note 15.

On 30 May 2012, Blair Jenkins stepped down as Chief Executive Officer. Included within exceptional costs in 2013 are settlement costs in respect of his compensation for loss of office and the write off of £223k of his EBT balance.

Exceptional finance expenses have arisen in respect of accelerated arrangement fees and legal and professional fees not capitalised on the refinance of the bank loans, loan notes and overdraft facilities.

Exceptional costs in 2012 represented items arising primarily from the acquisition of Vendia UK Limited and its subsidiaries on 22 September 2011 and the essential restructuring of the group following the acquisition to streamline operations and align the acquired businesses. This represents a major change to the 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 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.

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 loans and payments to other related parties are disclosed in Note 27.

During the year ended 31 March 2013 pension contributions of £Nil (2012 - £133,992) were paid in respect of the then highest paid director.

Directors' interests in share options

1,000,000 (2012 - 60,000) options were granted to Directors during the year to 31 March 2013. 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 2013 was 8p and the range during the year was 6.5p to 50p.

During the current year retirement benefits were accruing to 1 Director (2012 - 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.

As at 31 March 2013 there were no non-current assets held outside of the United Kingdom (2012: £Nil).

11 Taxation

Factors affecting tax charge/(credit) for the year:

The tax assessed for the year differs from the standard rate of corporation tax in the UK of 24% (2012: 26%). The differences are explained below:

The rate change from 24% to 23% had been substantively enacted by the balance sheet date, so deferred tax is provided for at a rate of 23%. 

The other proposed changes had not been substantively enacted by the balance sheet date and it is not yet possible to quantify the full effect of the announced further 1% rate reduction, per year until it reaches 20% from 1 April 2015. This will further reduce the company's future current tax charges and reduce the deferred tax assets accordingly. 

12 Loss per share

The calculation of basic loss 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 2013 of 16,349,014 (2012 - 16,349,014).

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 (16,349,014 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.

13 Property Plant and equipment