Half Yearly Report

SNACKTIME PLC

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

INTERIM RESULTS

FOR SIX MONTHS endED 30 september 2012

SnackTime PLC today announces interim results for the six month period ended 30 September 2012.

FINANCIAL HIGHLIGHTS

·; Turnover decreased by 13% to £10.15 million (H1 2011: to £11.72 million) - £330k below the H2 2012 level of £10.48m

·; Gross Profit down 16% to £5.58 million (H1 2011: £6.69 million)

·; Operating profit before depreciation, amortisation and exceptionals down 72% to £332k (H1 2011: profit £1.17 million) and operating loss before amortisation of £368k (H1 2011 profit £430k).

·; Operating loss showed a £207k improvement on the H2 2012 loss of £575k

·; Exceptional items of £845k include redundancy and other costs relating to reorganisation, release of EBT debtor, rebates and bad debts arising from the review and reorganisation of national accounts and costs relating to legal matters

OPERATIONAL HIGHLIGHTS

·; A series of senior management changes since April 2012 and the management of the operating subsidiaries is stabilised

·; Annualised cost savings initiated since June 2012 amounting to £1m. The full impact of these will come through in FY14

·; Markets remain tough particularly in the North and Midlands, where the recession has hit hardest

·; Operated estate size stabilising, with evidence of growth from sales starting to show through

·; Service levels and lead-times continue to improve

Jeremy Hamer, Executive Chairman comments:

"With early signs of the operated estate numbers beginning to increase, we are optimistic that our operating losses will reduce significantly in the second half."

For further information:

SnackTime PLC

Jeremy Hamer, Chairman

Tim James, Finance Director 0208 879 8300

Westhouse Securities

Tom Griffiths 020 7601 6100

CHAIRMAN'S STATEMENT

Introduction

I am pleased to announce the unaudited results for the six months ended 30 September 2012. The speed of monthly decline in sales has slowed to a trickle whilst cost savings are gaining pace. The economic backdrop remains challenging although evidence of an increase in part-time employment is encouraging.

Financial

Turnover in the period was down 13% to £10.15m (2011: £11.72m), gross profit decreased by 16% to £5.58m (2011: £6.69m) producing an operating loss before amortisation of £368k (2011: profit £430k). The loss before exceptional items and finance costs was £612k (2011: profit £198k) resulting in loss before tax of £1.56m (2011: profit £111k). In the period we have taken an exceptional charge of £845k, covering reorganisation costs, the EBT balance sheet debtor, rebates and bad debts and legal costs. The future combined cash impact of these items is £172k, with £367k having been paid in the current year and the balance of £307k representing non-cash items.

The sharp drop off in performance compared with H1 2012 resulted largely from the decline in managed estate during 2011 and a reduction in brand fee income. This arose from integration difficulties and the loss of customers. The comparison with H2 2012 however demonstrates the stabilisation that is being achieved. Turnover H1 2013 was £10.15m (H2 2012 £10.48m) and operating losses £368k (H2 2012 loss £575k).

The operated vending estate continued to decline during the period although there was evidence in September 2012 of growth for the first time since the acquisition of Vendia in September 2010. Our gross margins tightened 2% to 55% (2011: 57%) while our distribution and administration costs dropped to £5.2m (2011: £5.5m).

Net borrowings rose by £1.2m in the 6 months to 30 September 2012 to £3.9m (31 March 2012: £2.7m). Fixed asset expenditure was of £246k, expenditure on non-recurring items was £295k and negative working capital movements were £387k. As at 30th September the Company had headroom on its banking facilities of £915k and was operating within its covenants.

Strategy

As stated in our preliminary announcement released on 16 July 2012, the core strategy of combining an operated vending model with a franchise network that supports smaller customers remains the essence of our vending strategy.

Operational Changes

During 2012, we have invested a lot of effort into reducing cost. This has been achieved through a detailed review of routes and operator practices which has resulted in a significant downsizing in our operated vending division, the cost benefits of which will become fully visible from January 2013. We have also reduced our head office and central costs significantly both in Directors' remuneration and office costs with the closure of Wokingham scheduled for the end of January 2013. On an annualised basis, these together will have reduced Group costs going forward by in excess of £1m net.

The roll-out of handheld technology to capture and track our operator and machine performance has progressed significantly in the last 6 months, although this project is on-going. The captured data is providing the Company with a more accurate understanding of machine performance and allowing tighter reconciliation of stock usage and cash receipts. As confidence in, and accuracy of, this data grows, it will hugely enhance the quality of our operational knowledge and decision making.

The key challenges now are sales and margin and this is our key focus. The H1 2013 sales reported here are £2.2m lower than the first half-year period after the acquisition of Vendia. That said the rate of sales decline has been slowing and our sales in H1 2013 were only £194k below H2 2012. Over the 2 year period we have lost customers altogether for several reasons including matters outside of our control, through competitive pricing we could or would not match and through the service issues experienced during the integration of Vendia. Where customers have been retained throughout the period we have seen tighter consumer spending although this has been compensated for in part by higher prices. We have also seen significant changes in our sales teams and their management throughout this 2 year period resulting in a distinct lack of new customers.

There are a number of opportunities to increase the revenue we are deriving from our operated estate, including addressing the issue of poor performing machines, continual review of merchandising and pricing, improved operator performance and training, faster turnaround of the 'idle' estate, tighter management of the sales pipeline and continual improvement in contract negotiation. These will be our focus in the second half of the year.

All but one of our 4 subsidiary business managers is new since April 2012 which has been a catalyst for a change of emphasis. The group is working more closely as a team and the business heads meet now on a monthly basis. The benefits of this are beginning to show, including the first ever sale of a Drinkmaster hot drink solution by a Simply Drinks sales man in recent days. The Group has more to offer together than it has yet demonstrated.

Drinkmaster has had another good half year, including handling a significant operational change when in September its largest customer, William Hill, moved to central distribution, from 2,200 individual weekly shop drops,. We are investing in increased 'in cup' packing capacity at Drinkmaster and are encouraged by an increase in sales interest across its product range, although none of this had been won in the first half.

Snack in the Box has sold 6 new franchises in the first 6 months but has remained flat at 84 franchisees overall. It has performed well financially but under new management the emphasis is changing. Improved support from centre will be combined with the encouragement of compliance from the franchisees. This combination will lead to a closer relationship between franchisees and ourselves and ultimately lead to growth for both parties.

Board Changes

We announced at the end of September that Steven Garner had joined the Board as a Non-Executive Director. His broad experience of the vending industry will be invaluable as we continue our efforts to turn around the financial and operational performance of the business and I wish him a very warm welcome.

Current Trading

There is still a lot to do before we will be satisfied with the performance of the SnackTime Group. All the major areas of cost cutting have now been addressed and the benefits of this are becoming more visible. The focus must now move to sales where regionally the North and Midlands are having a tougher time in this long recession than the South, which we see reflected in our figures. With early signs of the operated estate numbers beginning to increase, we are optimistic that our operating losses will reduce significantly in the second half.

SNACKTIME PLC

consolidated Statement of comprehensive income

period ended 30 September 2012

All of the activities of the company are classed as continuing.

The company has no recognised gains or losses other than the results for the period as set out above.

Both the profit and the total comprehensive income for the above periods are attributable in totality to the Equity holders of the Company.

SNACKTIME PLC

consolidated balance sheet

At 30 September 2012

SNACKTIME PLC

consolidated cashflow statement

period ended 30 September 2012

SNACKTIME PLC

consolidated statement of changes in equity

period ended 30 September 2012

SNACKTIME PLC

consolidated statement of changes in equity

period ended 30 September 2012

SNACKTIME PLC

NOTES TO THE interim FINANCIAL STATEMENTS

period ended 30 september 2012

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.

The principal activities of the Group is the sale and operation of hot drink and snack vending machines, the operation of free on loan vending machines via a franchise division and the production and supply of "in-cup" drinks and associated equipment.

Basis of accounting

These interim financial statements for the period ended 30 September 2012 have been prepared in accordance with International Financial Reporting Standards (IFRS). The Group financial statements consolidate the financial statements of the Company and its subsidiary undertakings. The merger method of accounting has been adopted, 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".

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

The information presented within these interim financial statements is in compliance with IAS 34 'Interim Financial Reporting'. This requires the use of certain accounting estimates and requires that management exercise judgement in the process of applying the Company's accounting policies. The areas involving a high degree of judgement or complexity, or areas where the assumptions and estimates are significant to the interim financial statements are disclosed below.

SnackTime UK Limited has elected not to apply IFRS 3, Business Combinations retrospectively to past business combinations prior to the date of transition.

The financial information contained in this report, which has not been audited, does not constitute statutory accounts as defined by Section 434 of the Companies Act 2006. The Company's statutory financial statements for the year ended 31 March 2012, prepared under IFRS have been filed with the Registrar of Companies. The auditors' report for the 2011 and 2012 financial statements was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. 

 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 is as follows:

·; 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 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.

·; Dilapidation provisions are included within exceptional costs and 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. 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 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 2.3% 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.

The Directors have considered the annual impairment review conducted for the year end 31 March 2012 and believe that goodwill remains unimpaired.

REVENUE

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.

1.) Loss/EARNINGS PER SHARE

Earnings per share is calculated on the basis of profit for the period after tax, divided by the weighted average number of shares in issue for the period ended 30 September 2012 of 16,349,014 (30 September 2011 - 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. Potential dilutive ordinary shares arise from share options and warrants. 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.

* 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.

2.) PROVISIONS

Leasehold dilapidations - Provision is made for the estimated cost of refurbishing properties in line with the requirements of the various leases, prior to returning them to the landlord. The exact amount may vary as final necessary repairs are determined. Provisions are also made for related professional fees.

Onerous contracts - Provision is made for the onerous element of property lease rentals in respect of vacated premises. The exact amount may vary should the group secure a sublet for the properties or utilise them in the business

Other - Provision is made in relation to redundancy, bad debt and employee benefit costs in relation to group reorganisation.

 3.) 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.

 4.) EXCEPTIONAL COSTS

Copies of this half yearly financial report are available on the Company's website www.snacktimeplc.com