Trading Statement

SnackTime plc ("SnackTime" or "the Company")

Trading and operational update

SnackTime, the 4th largest vending company in the British Isles, is pleased to provide the following update on trading and also announce a reorganisation of its structure following the acquisitions of Snack-in-the-Box in 2009 and of The Vendia Group in September of last year.

Trading Update

For the year ended 31 March 2011, the Company expects results (adjusted PBT after acquisition and restructuring costs) to be in line with market expectations.

Following the two acquisitions referred to above the Company has also reorganised its structure in order to fully integrate operations and to take advantage of economies of scale. As a result of this restructuring process, which is nearing completion, there has been an aggregate headcount reduction of 50 people, out of a total combined workforce of 368, as well as a reduction of warehousing space of almost 50%, which we forecast will deliver annualised savings of approximately £1.2 million. This has all been achieved without any impact on customer service. Conversely in FY 2011 there have been significant raw material inflation costs (coffee, ingredients, snacks, ancillaries and fuel) which have exceeded inflation by approx £900k in real terms.

New Group Structure

SnackTime has streamlined its operating companies into 3 distinct divisions, each focusing on separate sectors within the vending market. The SnackTime group is unique in the vending industry in that it competes in all sectors of the market through these specialist divisions. The Company offers customers a range of machines and services from high quality hot beverages, through to snacks, cans, bottles, water coolers and desktop machines. Each division operates a different business model and is dedicated to developing its own sector.

The largest division in the Group is the Vending division which now comprises two companies, VMI and Simply Drinks, rather than the previous four, and concentrates almost wholly on annuity based contracts. It services approximately 8,000 customers which are almost exclusively medium and large sized sites in the public, private and hospitality sectors. Most customers have multiple machines and the majority of the business in this division is high quality hot beverage machines.

The Franchise division, Snack-In-The-Box with approximately 13,000 sites, now operates wholly on a Free on Loan basis having taken over most of the original Free on Loan SnackTime machines. Franchisees contract with SnackTime on a 5 year basis and pay the group a fixed fee per machine per week. Snack-In-The-Box focuses on serving small site and national retailers with smaller machines, chillers and boxes. The business is primarily snack and chilled drink focused.

The third division is Drinkmaster, which is a specialist pod and in-cup drinks provider. Drinkmaster has approximately 12,000 customers and specialises in serving betting shops, the travel industry and convenience store sectors. All these sites are self-filled with Drinkmaster delivering supplies through third party carriers on a direct marketing basis.

SnackTime believes that it continues to be the lowest cost operator in the industry as a result of its satellite and merchandiser based working practices.

Market Conditions

The vending industry contracted by 4% in each of 2009 and 2010. It is apparent that many customers are scaling back staff facilities and seeking more cost effective ways to provide vending to their staff. Many in the industry expect the market to contract by a similar amount in 2011. Raw material inflation is still running well in excess of headline inflation mainly due to the weakness of sterling and commodity market speculation. Input inflation to SnackTime for the first quarter of 2011 was 12% (48% on an annualised basis) against the UK CPI of 4%. SnackTime expects this input inflation rate to slow to somewhere between 15% and 30% for the full year.

SnackTime's Vending division has increased prices twice inside the last nine months in order to maintain margins in the face of this excessive input inflation. In present market conditions, SnackTime does not believe any more price increases will be possible this year.

Outlook

The Company is well placed to continue to increase market share in the current market conditions. SnackTime's Vending division has a unique low cost operating structure which gives it competitive advantage; particularly in a market place where its three larger competitors are offering below-cost contracts to some customers in order to retain their business. Despite this, during the past six months the Company has gained a number of large contracts, including Telent, PepsiCo and North East Fire and Rescue. The Vending division is anticipating strong growth in 2011-12.

In addition, Snack-In-The-Box is the only franchise based vending business in the UK and also the only business offering genuinely free on loan services to customers. This Franchise division is also anticipating strong growth in 2011-12.

In the Drinkmaster division, while the Company is pursuing several opportunities the Board expects the outturn for the current financial year to be similar to the year ended 31 March 2011. 

SnackTime continues to invest heavily in sales and marketing, the budgeted spend in this area is expected to remain at approximately £900k for the coming year. The Group continues to seek acquisition opportunities as the market continues to consolidate as many regional independent owners seek to retire or exit from the industry. In anticipation of possible acquisitions later this year, SnackTime has secured a new, improved £5 million banking facility with the Co-Operative Bank.

Excluding any new acquisitions the Group expects to show strong growth in the current financial year, subject to cost input inflation being within the lower end of expectations referred to above.

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