19th Dec 2007 08:00
Snacktime PLC19 December 2007 SnackTime plc ("SnackTime" or "the Company" or "the Group") Admission to AIM Shares in SnackTime, the national operator of snack and chilled drink vendingmachines, begin trading on AIM today with the trading symbol SNAK.L. The Company has placed 2,083,333 New Ordinary Shares at 144p per share to raiseapproximately £3.0 million, the net proceeds of which will be used to fund thenext stage of growth for the business. • SnackTime is one of the UK's largest national operators of snack and chilled drink vending machines and has installed approximately 5,500 SEQs throughout the UK. • Arbuthnot Securities Limited is acting as the Group's Nominated Adviser and Broker. • At the Placing Price, SnackTime's market capitalisation will be approximately £10.0 million. • Founded in 2001, the core element of the Group's business model is that it retains ownership of the vending machines, which are sited free on loan and at no cost to the site owner or occupier. • The Group works exclusively with four Brand Owners: Mars Snacks, Britvic, PepsiCo (Walkers Crisps) and Coca-Cola. • The Group provides its vending machines to a number of national retailers, including Matalan, Argos, Currys, PC World, Homebase and Staples. • The Group generates cash through sales of products from its vending machines and also contributions from its Brand Owners. For the twelve months ended 31 March 2007, SnackTime generated audited revenue of approximately £3.0 million and a profit before tax of approximately £0.2 million. • SnackTime is seeking to accelerate sales of its vending machines both in the UK and potentially overseas. PLACING STATISTICS Placing Price 144pNumber of New Ordinary Shares being placed on behalf of 2,083,333the CompanyNumber of Ordinary Shares in issue immediately following 6,944,573AdmissionGross proceeds of the Placing £3.0 millionEstimated net proceeds of the Placing receivable by the Company £2.3 millionPercentage of Enlarged Share Capital being placed pursuant to the Placing 30.0 per centMarket capitalisation of the Company at the Placing Price on Admission £10.0 million Blair Jenkins, Chief Executive of SnackTime, commented,"We are delighted that SnackTime has now successfully listed on AIM and welcomeall our new shareholders to the Group. The funds raised will enable SnackTime to continue to roll out our business model and make considerable inroads into our current order backlog. We look forward to the coming year with confidence." Enquiries: SnackTime plc Blair Jenkins, Chief Executive T: 01189 773 344 Julia Brand, Finance Director Arbuthnot Securities Tom Griffiths/Alasdair Younie T: 020 7012 2000 College Hill Kate Rock/Anthony Parker/ T: 020 7457 2020 Anna Czerny Introduction SnackTime UK is one of the UK's largest national operators of snack and chilleddrink vending machines. The Group has approximately 5,500 installed SEQs locatedthroughout the UK, which are serviced by its five main depots located inCumbernauld (near Glasgow), Manchester, Alcester, Wokingham and Belfast. Eachmain depot is responsible through a team of area managers, merchandisers andengineers for installing, maintaining and restocking all of the Group's vendingmachines. The core element of the Group's business model is that it retains ownership ofthe vending machines, which are sited free on loan and at no cost to the siteowner or occupier. The Group generates cash through sales of products from itsvending machines and also from contributions from its Brand Owners, Mars Snacks,Britvic, PepsiCo (Walkers Crisps) and Coca-Cola. The Group has generated a salesCAGR of 69 per cent. since incorporation in 2001 and as at the end of November2007 had an outstanding order book of approximately 1,700 SEQs. SnackTime UK has four main types of vending machines. The Group decides on theappropriate style and size of vending machine which is installed in eachcustomer's site so as to deliver a high level of customer service to maximisesales. The Group's customers include national retailers, such as Matalan, Argos,Homebase and Currys, as well as a large number of offices and factories. The Directors believe that the Group is well positioned to take advantage of theanticipated growth in the vending machine market. The Directors believe that thePlacing and Admission will provide funds to enable the Group to purchaseadditional vending machines to meet customer demand, reduce the Group's debt andexpand into new sectors. History and Background SnackTime UK has its head office in Wokingham, Berkshire and was founded inSeptember 2001 by Blair Jenkins, the Company's Chief Executive, and Ian Forde,the Company's Commercial Director. SnackTime UK was founded because BlairJenkins and Ian Forde realised that a large number of organisations with lessthan 250 employees on site did not have canteens or in-house catering facilitiesand, therefore, only offered their staff basic tea and coffee facilities instaff rooms. They believed that this was particularly the case in the retailsector where the provision of facilities was considered to be prohibitivelyexpensive for retailers with a large number of sites. Blair Jenkins and IanForde therefore identified an opportunity to introduce a low-cost model into thevending machine market and formed SnackTime UK to meet the demand for snack andfood facilities mainly in the workplace. By 2003, SnackTime UK had grown rapidlyand had established national coverage. As at the end of November 2007, therewere approximately 5,500 SnackTime UK installed SEQs in the UK. The Group's first vending machines were Slimline chocolate and crisp machineswhich were mainly sited in retailers' staff rooms. As the business grew, demandemerged for cold drinks to be sold in the Group's vending machines as well assnacks. In addition, demand has recently increased for the Group's vendingmachines to be placed in the public areas of retailers' sites to serve theretailers' customers as well as their own staff. Whilst SnackTime UK has to datespecialised in providing vending machines to the retail sector, it now has morethan 1,000 non-retail customers in both the private and public sectors. SnackTime UK was initially funded privately. However, in July 2003, Elderstreetfirst invested approximately £1 million in SnackTime UK to enable the Group to fund expansionof the business by acquiring further vending machines to meet customer demand.Elderstreet made a further investment of approximately £0.35 million in 2006.Elderstreet subsequently invested approximately £0.1 million as part of anaggregate fund raising of approximately £1.2 million earlier this year, theproceeds of which were used by SnackTime UK to acquire more vending machines tosatisfy the demand from its growing order book. As at the end of November 2007,the Group employed 40 people in sales, marketing and installations, operations,management and administration. Business Operations SnackTime UK is a specialist national vending company operating in the UK. Thecore element of the Group's business model is that it retains ownership of thevending machines which are sited free on loan and at no cost to the site owneror occupier. Typically, the only cost to the Group's customers for using aSnackTime UK vending machine is the electricity which the machine uses. However,the customer is responsible for any damage to a vending machine or any stolengoods. Currently in Great Britain, SnackTime UK works exclusively with three ofits Brand Owners, Mars Snacks (confectionery), Britvic (soft drinks) and PepsiCo(Walkers crisps), to stock their products in the Group's vending machines. The Group's income is generated from two sources. First, the proceeds from thesnacks sold in the Group's vending machines less a commission paid toapproximately 130 self-employed merchandisers who are responsible for servicingthe vending machine, which involves replacing stock and collecting the cashgenerated by the vending machine. Secondly, there is a contribution from itsBrand Owners. This contribution is paid in the first year after a machine isdeployed and then further contributions are made during the life of the vendingmachine. As well as the initial contribution on deployment of a vending machine,the Brand Owners also provide additional support via machine graphics and jointsales and marketing initiatives. The Group retains ownership of the vending machine and decides which type ofmachine is installed in each site, when it is merchandised and generally when itis removed from a site. The Group determines how often a vending machine shouldbe serviced and its merchandisers are responsible for ensuring that the vendingmachines are fully stocked in order to maximise sales and their own earnings. The Group purchases all the products to be sold in its vending machines from theBrand Owners. The products are delivered to its five main depots located acrossthe UK in Cumbernauld (near Glasgow), Manchester, Alcester, Wokingham andBelfast while the Group also has smaller distribution centres in Newcastle andBristol. The recent addition of the depot in Belfast has presented the Groupwith an opportunity to access markets in both Northern Ireland and Eire. TheGroup has recently signed an agreement with Coca-Cola to stock its products inthe Group's vending machines in Northern Ireland. The Group currently has four main types of vending machine, each of which isbriefly described below: • Slimline - the Slimline was the first machine deployed by the Group in 2001. It is suitable for companies with less than 100 employees, small staff rooms and can also be sited in corridors. The Slimline can only be located indoors, but can be powered by both mains electricity and battery. It holds 14 lines of snacks with a mix of confectionery and crisps. • Combo - the Combo snack and cold can vending machine is ideal for companies with up to 250 employees, and companies with employees working shifts, evenings and weekends who need food or drinks at any time. In addition to the 20 lines of snacks, the Combo contains canned drinks. The Combo has a full change dispenser, runs on mains electricity and generates more revenue than the Slimline due to its larger capacity. • Vendo - the Vendo is the Group's highest product capacity vending machine and holds approximately 500 confectionery bars. The Vendo specifically holds confectionery from Mars Snacks and is robust enough to be deployed indoors or outdoors. It runs on mains electricity and is larger than the Slimline. • Snakky - the Snakky is the most recent addition to the Group's range of vending machines. It stocks snacks, confectionery, chilled cans and bottles. This wide range of merchandise makes the machine ideal for environments with high staff numbers and/or consumer usage. The machine is glass fronted, runs on mains electricity, and provides a full change dispenser. SnackTime UK buys its vending machines from 5 different suppliers located inIndia, US, UK and Italy. The Directors believe that by sourcing vending machinesfrom multiple suppliers, the Group is able to ensure that it can purchasevending machines whenever they are required and at prices which are advantageousto the Group. The Market According to Key Note Publications ("Key Note"), there were an estimated 1.3million vending machines in operation in the UK during 2006, an increase of 3.1per cent. compared to 2005. Refreshment machines dominate the market withapproximately 0.6 million units. An estimated 65 per cent. of refreshmentmachines are either hot beverage and/or cold beverage machines, whilst theremaining 35 per cent. serve confectionery and snacks. According to data fromMars Snacks and Key Note, the total spend on snack food and drinks in the UK wasapproximately £13 billion in 2006, an increase of 1.6 per cent. compared to2005. Key Note estimates that the sale of refreshments, cigarettes and other productsin the UK through vending machines generated revenues of approximately £3.5billion in 2006. This represents a 2.8 per cent. increase from 2005 and a 13.5per cent. increase from 2002. Furthermore, refreshment vending machines (hot andcold beverages, snacks, confectionery, sandwiches and hot and cold meals) werethe largest sector with sales of approximately £2.2 billion in 2006. Key Note forecasts 11.2 per cent. growth in sales through vending machinesbetween 2007 to 2011 to over £4 billion per annum. Refreshment sales areforecast to increase 16.9 per cent. over the same period and are forecast toaccount for an estimated 66 per cent. of total annual sales through vendingmachines. The Directors consider that the three largest vending companies operating in theUK are Autobar Group Limited ("Autobar"), Bunzl Vending Services Limited("Bunzl") and Selecta Management AG ("Selecta"). Like SnackTime UK thesecompanies operate a national service. However, there are a number of smallervending operators who serve specialised or local markets. Recent consolidationin the industry includes Bunzl's acquisition of Coffee Point Group Limited foran undisclosed amount, Autobar's acquisition of 24Seven for an undisclosedamount and Allianz Capital Partners' acquisition of Selecta for £773 million. Strategy The Group has secured a leading position in its supply of snack vending machinesto the out-of-town retail sector on which it has focused since SnackTime UK wasfounded. Historically, SnackTime UK has provided vending machines for retailcompanies' staff rooms. However, during the last 2 years, SnackTime UK hassuccessfully started to install its vending machines in the public area ofretailers' sites, making them available for retailers' customers rather thanjust their employees. In addition, the Group has installed a large number ofvending machines in small businesses, offices and in factories. SnackTime UK does not deploy its vending machines in unprotected publicenvironments such as underground, bus, train or coach stations, or shoppingcentres. SnackTime UK also has a small but growing presence in each of thefollowing business sectors: • high street retailers;• hotel and leisure companies; and• the public sector (such as police and fire stations, hospitals, courts, local government offices and emergency call centres). The Group has achieved a sales CAGR of 69 per cent. since SnackTime UK wasincorporated in 2001 relying principally on one sales person and minimalexpenditure on marketing. The Directors believe that there are a number ofsignificant opportunities for the Group's vending machines in both the publicand private sectors to be exploited. In addition, the Group is intending toexpand further in Northern Ireland and into Eire and mainland Europe. Sales and Marketing As at the end of November 2007, SnackTime UK had a sales department of sevenpeople. It is headed by Ian Forde, the Commercial Director, and consists of anational account manager, four sales managers and a customer services manager. To date, a number of customers have been attracted by the Group's offering as aresult of a recommendation or the networking of existing contacts. SnackTime UKundertakes a small level of cold calling but specifically targets businessparks. One of the reasons why SnackTime UK has been able to win large nationalcontract business is that in many cases SnackTime UK jointly tenders with itsmajor brand partners. The Directors believe that these joint tenderssignificantly increase the likelihood of SnackTime UK winning new business ascustomers are more likely to want to work with a snack machine vending companythat is closely supported by a number of multi-national brand partners. Customers The Group has a strong UK customer base, which includes several blue chiporganisations and sector leading companies. As at the end of November 2007, theGroup's vending machines were deployed in over 3,000 customer sites. Itscustomer base can be split into two principal areas, retail customers and othercustomers. For the year ended 31 March 2007, SnackTime UK derived 38 per cent. of its revenue from its vending machines sitedat its 5 largest customers, which are all retailers. SnackTime UK currentlyprovides its vending machines to a number of national retailers, includingMatalan, Argos, Currys, PC World, Homebase, Staples, Wickes/Travis Perkins andDunelm Mills. The Group has in most cases exclusive arrangements with all ofthese retailers to install its snack vending machines in staff rooms and, in anumber of cases, SnackTime UK has also installed its machines in the public areaof retailers' sites, which increases the number of people using the snackvending machines as they are available to the general public. Most nationalcontracts are multi-year contracts and provide the Group with exclusivity tovend snacks and confectionery in the customers' sites. Competition The Directors are not aware of another national snack vending company, or onewhich offers a broad-scale solution similar to the Group's free on loan model.The Directors believe that its competitors primarily operate along traditionalvending lines whereby vending machines are rented to the customer who also paysfor the maintenance and re-stocking of the vending machine. The Directorsbelieve that on limited occasions traditional vending companies will issuevending machines free on loan, but this is not normal practice and usually makesup only a small percentage of their business. Companies engaged in non-store retail activities are largely concentrated in theSouth East, the South West and the North West of England, with a smaller numberof companies operating in the North East and Northern Ireland. In addition to in-store retail sales of branded products, the Directors believethat the Group's competitors are companies which operate and maintain vendingmachines. This includes companies such as: • Bunzl, a subsidiary of Bunzl plc, has 15 offices across the UK with more than 1,000 field engineers maintaining approximately 40,000 machines. In 2006, Bunzl acquired The Midshires Group (a seller of vending machines and associated services), and more recently acquired Coffee Point Group Limited (concerned with the sales and operations of vending machines), which has approximately 14,000 machines supplying hot drinks, snacks and food. • Until its recent purchase by Allianz Capital Partners for approximately £773 million, Selecta was part of Compass Group plc and is one of Europe's leading vending companies, selling over 4 million drinks from approximately 130,000 machines across Europe each day. It has 11 offices in the UK and Northern Ireland. • Autobar UK is part of the Autobar Group. It is present in seven countries across Europe, with over 225,000 vending machines. It recently acquired Absolute Vending, Springbank Industries, Vendserve Limited and 24Seven, a business with over 14,000 vending machines. Summary Financial Information Set out below is a summary of the Group's audited financial information for thethree financial periods ended 31 March 2007, which has been extracted from theaudited historical financial information on SnackTime UK set out in theAdmission Document. Year ended Eighteen months Year ended 30 September ended 31 March 31 March 2004 2006 2007 £000 £000 £000Revenue 1,572 3,605 2,999Gross profit 1,447 2,566 2,432Profit/(loss) before tax 58 (223) 189Net (liabilities)/assets (225) 794 946 The financial information set out above for the three financial periods ended 31 March 2007 is stated under IFRS. Revenue for the year ended 31 March 2007 was approximately £2.9 million(eighteen months ended 31 March 2006: £3.6 million) and gross profit wasapproximately £2.4 million (eighteen months ended 31 March 2006: £2.6 million).SnackTime UK reported a profit before tax for the year ended 31 March 2007 ofapproximately £0.2 million (eighteen months ended 31 March 2006: loss of £0.2million). The increased level of revenue and profit reported by the Group for the threefinancial periods ended 31 March 2007 has been a direct result of SnackTime UKwinning more business and investing in the necessary number of snack vendingmachines to satisfy the increased level of demand. The loss for the 18 monthsended 31 March 2006 was due principally to the increased investment made by theGroup in both personnel and the snack vending machines. The impact of thisinvestment began to have a positive effect on the Group's results during theyear ended 31 March 2007. Current Trading and Prospects Trading to date in the current financial year has exceeded the Directors'expectations. The Directors believe that the Group is well placed to increaseits revenues and to exploit the current market opportunities that exist.Consequently, the Board views the Group's future with confidence. The Directorsare encouraged by the trading prospects of the Group both for the currentfinancial year and for the foreseeable future. The Board is confident that,following Admission, the Group will be better positioned to take advantage ofthe business opportunities that exist in its markets. The Placing and Admissionshould provide the funds necessary to enable the Group to continue to expand. Reasons for Admission and Use of Proceeds The Company is seeking admission of its Ordinary Shares to trading on AIM toenable it to fund the next growth phase of the business. The Group is dependenton capital expenditure through the purchase of new vending machines and the netproceeds of the Placing will be used primarily to fund the purchase of theexisting style of vending machines and to roll out new styles of vendingmachines in order to expand the Group's offering. Admission is also intended to raise the Group's profile, enhance its credibilityin the market and increase its brand awareness, all of which the Directorsbelieve will be beneficial when SnackTime UK is tendering for new business.Furthermore, the net proceeds from the Placing will also enable the Group toreduce its debt, strengthen its balance sheet and increase free cash flow,giving the Group increased flexibility to finance future growth. In addition,Admission will provide the Group's employees with the opportunity to participatein the future success of the Group and should help to attract and retain highcalibre staff. Details of the Placing The Company has raised approximately £3.0 million (before expenses) through aconditional placing by Arbuthnot Securities of 2,083,333 New Ordinary Shares at144 pence per share. The New Ordinary Shares will represent approximately 30.0per cent. of the Enlarged Share Capital following Admission. On Admission, atthe Placing Price, the Company is expected to have a market capitalisation ofapproximately £10.0 million. Following the Placing, the interests, in aggregate, of the Directors will amountto approximately 31.8 per cent. of the Enlarged Share Capital. Directors The Board comprises three executive Directors and two non-executive Directors(including the non-executive Chairman). Directors Michael Jackson, Non-executive Chairman, aged 56, MA, FCA. Michael foundedElderstreet Investments Limited in 1990 and is its executive Chairman. For thepast 20 years, he has specialised in raising finance and investing in thesmaller companies sector. Michael is Chairman of PartyGaming plc and untilAugust 2006 was Chairman of FTSE 100 company, Sage Group plc. He is also adirector and investor in many other quoted and unquoted companies, includingNetstore plc and Sky High plc. Michael studied law at Cambridge University, andqualified as a chartered accountant with Coopers and Lybrand before spendingfive years in marketing for various US multinational technology companies.Michael was appointed non-executive Chairman of SnackTime UK in April 2006 andis chairman of the Audit Committee. Blair Jenkins, Chief Executive, aged 48, BSc, MBA. Blair is one of the foundersof SnackTime UK and along with Ian Forde has been responsible for buildingSnackTime UK through his extensive sales and marketing background. Blair haspreviously worked as a senior sales and marketing manager for Procter & Gambleand GlaxoSmithKline plc. Following that, he had managing director roles withAssociated British Foods plc, Catalina Marketing Corporation Inc and InterActSystems Inc. Julia Brand, Finance Director, aged 35, BSc, CIMA. Julia joined SnackTime UK asfinancial controller in October 2003. She was appointed Finance Director in June2007. Previously she was financial controller with WickHill plc and QDSEnvironmental Limited. Julia qualified as a management accountant in 2003. Ian Forde, Commercial Director, aged 54. Ian co-founded SnackTime UK with BlairJenkins in 2001, and has served as Commercial Director of the Group since thattime. Ian was a senior sales and marketing manager of Procter & Gamble.Subsequently, Ian was European sales director for Barilla, then Gucci, beforebecoming worldwide commercial director of InterAct Systems Inc. David Lowe, Non-executive Director, aged 53, FCA. David has been a director ofmany small and medium sized companies over the last 25 years. He is anon-executive director of Sky High plc and APT Controls Limited, and is amajority shareholder and the chairman of Garran Lockers Limited. He representsElderstreet as non-executive Chairman of Halifax Industrial Limited. David waspreviously a majority shareholder and director of several businesses in thegravel, transport, engineering and print sectors. David qualified as an FCA in1977. David was appointed a non-executive Director of SnackTime UK in April2006. David is a director of Elderstreet Investments Limited, ElderstreetPrivate Equity Limited, Elderstreet Holdings Limited and ARC Growth Company VCTplc. DEFINITIONS The following definitions apply throughout this announcement, unless the contextrequires otherwise: "Admission" the admission of the Ordinary Shares to trading on AIM becoming effective in accordance with the AIM Rules "AIM" the market of that name operated by London Stock Exchange plc "Arbuthnot Securities" Arbuthnot Securities Limited, the Company's nominated adviser and broker "Argos" Argos Limited "Board" or "Directors" the directors of the Company, whose names are set out above "Brand Owners" Mars Snacks, Britvic, PepsiCo and Coca-Cola "Britvic" Britvic plc "CAGR" compound annual growth rate "Coca-Cola" Coca-Cola Bottlers (Ulster) Limited "Company" SnackTime plc, the holding company of the Group "Currys" Currys Group Limited, a wholly owned subsidiary of DSG International plc "Dunelm Mills" Dunelm (Soft Furnishings) Limited "Elderstreet" Elderstreet VCT plc and/or Elderstreet Millenium VCT plc, as the context requires "Enlarged Share the 6,944,573 Ordinary Shares in issueCapital" immediately following Admission "Group" the Company and all or any of its subsidiaries or in the period to 29 November 2007, SnackTime UK "Homebase" Homebase Limited "IFRS" International Financial Reporting Standards "Mars Snacks" Mars Snackfoods UK "Matalan" Matalan Retail Limited "New Ordinary Shares" the 2,083,333 new Ordinary Shares subscribed for by Placees under the Placing "Ordinary Shares" the ordinary shares of 2p each in the capital of the Company and "Ordinary Share" shall be construed accordingly "PC World" PC World UK Limited, a wholly owned subsidiary of DSH International plc "PepsiCo" PepsiCo UK & Ireland "Placees" the subscribers or purchasers of Placing Shares pursuant to the Placing "Placing" the conditional placing by Arbuthnot Securities on behalf of the Company of the New Ordinary Shares "Placing Price" 144p per Placing Share "SEQs" Slimline equivalents, the Group's measurement of numbers of machines "SnackTime UK" SnackTime UK Limited, a wholly owned subsidiary of the Company "Staples" Staples UK retail Limited "Subsidiary" as defined in section 736 and 736A of the Companies Act "UK" the United Kingdom of Great Britain and Northern Ireland "UK GAAP" United Kingdom Generally Accepted Accounting Principles "US", "USA" or United States of America, its territories and"United States" possessions and any state of the US or the District of Columbia and all other areas subject to its jurisdictions END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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