(SNAK) SnackTime

NOTES TO THE INTERIM FINANCIAL STATEMENTS

period ended 30 September 2011

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 are 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 2011 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 2011, prepared under IFRS have been filed with the Registrar of Companies. The auditors' report for the 2010 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 period. In order to determine whether impairments are required the Directors estimate the recoverable amount of the goodwill. This calculation is based on the cash flow forecasts applicable to the Group of cash-generating units for the following financial year extrapolated over a five year period assuming growth rates in the region of 1-3%.  A terminal value has been included which extrapolates the growth of the year 5 cash flow at 2.3% in perpetuity.  A discount factor, based upon the Group's weighted average cost of capital is applied to obtain a current value ('value in use'). The fair value less costs to sell of the cash generating unit is used if this results in an amount in excess of value in use.

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

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

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.

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 2011 of 16,349,014 (30 September 2010 - 10,901,159).

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.

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.

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