MPAY.L Regulatory News (MPAY)

Issued by Citigate Dewe Rogerson Ltd, Birmingham

Date: Wednesday, 31 August 2011

Autoclenz Holdings Plc

Results for the 6 months to 30 June 2011

Autoclenz Holdings Plc, the UK's leading provider of outsourced Vehicle Valeting and Specialist Cleaning Services, announces its interim results for the 6 months to 30 June 2011.

Highlights:

·; Automotive - sales down 3.3% despite 7.1% decline in new car sales

·; Specialist Cleaning - sales up 21.9%

·; Slight profit declines due to new business launches, improvement expected as this new business settles down

·; React Property Services challenging, but taken to new market areas

·; Successful renewal of two major contracts

·; Pinnacle brand - now servicing accounts in new geographic areas

STATEMENT BY THE CHAIRMAN, JAMES LEEK

Results

We are reporting first half sales for 2011 of £13.0 million, broadly similar to last year (2010:£13.3 million), but with underlying operating profit after interest and before tax (before the amortisation of intangibles and share option related charges) slightly lower at £0.58 million (2010: £0.68 million).Underlying earnings per share (using an assumed notional tax rate of 28%) are 3.99p (2010: 4.74p)

Segmental Analysis and Reconciliation of Profit

The table below analyses sales and profit margins in our two business sectors and reconciles underlying profit to the consolidated income statement.

Automotive Services

Within this sector trading remains difficult with new car sales down by 7.1% in the first half 2011 and a consequent impact on used car sales. In most cases we are seeing a number of our customers reporting sales lower than in the same period last year. However during the first half of 2011 we have renegotiated contracts with two of our major valeting customers, one within the Auction Sector and the other within our Pinnacle Brand. Both of these renegotiations entailed some reduction in gross margin.

However the renegotiation within the Pinnacle Brand brought with it new business in both the Midlands and the North West of England which will allow us to grow this brand outside of its current South East operational base

Also during the first half of this year we gained further new business in addition to that already mentioned which has had a slight negative impact on our overall profitability as we settle down these accounts and achieve operational efficiencies.

As the recession continues to impact we continue to work on initiatives to improve our performance and market awareness. To that end we commissioned an independent Market Research Report which included surveying our customers and those of our competitors. This report has given us a clearer insight into the market's expectations and has helped us develop new strategic initiatives and plans The report is comprehensive and clearly shows that the level of service provided by us is above that of all of our competitors.

Included in our Automotive Segmental Analysis is Rental, Movements collection and delivery and SMART repair business. Sales within Rental are down year on year due to the recession but we are pleased to report that our Movements North business has now recovered from the problems of last year and the overall business has grown both in terms of profit and sales.

AC SMART although seeing a small decline in sales due to the slowdown in used car volumes has improved its margin and contribution due to tighter management control.

Specialist Cleaning

Our REACT Rapid Response business has seen its sales remain fairly static which in view of the cut backs within Local Authorities and the Police etc is a commendable performance and is due to increased sales/management focus. This has also improved overall profitability which is exceeding our internal margin expectations and those of last year.

The new venture started late last year, React Property Services, from which we provide Sparkle Cleans and Property Clear and Cleans for void properties owned by Housing Associations and Local Authorities has grown in sales but still lacks the critical mass to be achieving our own internal plan. We will however persevere with this initiative as it operates in a large market and has brought us Approved Supplier status with some of the larger Housing Associations and the major Facility Management Organisations.

We are applying the same strategy and management practices to this business that we utilised in the successful turnaround of Movements North.

Finance and Outlook

We are continuing with good cash generation and net debt has reduced to £909,000 at the half year (£1,124,000 June 2010). As stated in the 2010 Annual Report our credit facilities of £3 million have been renewed with HSBC until May 2014.

As announced on 27th July 2011 the Supreme Court handed down its verdict on the long running Belcher case and disappointingly found against us in deciding that the individual claimants were employees. Details of the full judgement can be found at www.supremecourt.gov.uk

We are now in discussions with the individuals concerned and HMRC regarding this new change of status. As previously stated we believe that throughout this process we have been making appropriate accruals within our income and expenditure to cover the expenditure involved.

Our search for acquisition opportunities in the Specialist Cleaning area continues although we have within the period expensed £35,000 of professional costs re an acquisition which unfortunately could not proceed.

Whilst trading continues to be difficult we continue to monitor all aspects of our business to improve performance for the long term. We continue to pursue a cautious dividend policy reflecting profitability and cash generation. At this stage of the year, and assuming our full annual results are similar to the previous year, we would expect to pay the same annual final dividend as 2010.

I look forward to reporting more fully after our year end on the prospects for sales and operational progress as we focus on the medium term of task of growing our business.

Consolidated statement of comprehensive income and expenditure

For the period from 1 January to 30 June 2011

The results for the period are derived from continuing operations.

Consolidated statement of financial position

As at 30 June 2011

Consolidated statement of changes in equity

For the period from 1 January to 30 June 2011

Consolidated cash flow statement

For the period from 1 January to 30 June 2011

Notes to the Financial Accounting Statements

1 Accounting Policies

Basis of preparation

The unaudited consolidated financial statements have been prepared in accordance with International Accounting Standard 34 (Interim Financial Reporting).

The unaudited consolidated income statement for each of the six month periods and the unaudited consolidated balance sheet as at 30 June 2011 do not amount to full accounts within the meaning of section 434 of the Companies Act 2006 and have not been delivered to the Registrar of Companies. The interim report was approved by the Board of Directors on 30 August 2011. The unaudited comparative figures for the six months to 30 June 2010, and the balance sheet as at 31 December 2010 have been prepared using accounting policies consistent with IFRS. They do not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The unqualified audited accounts for the year ended 31 December 2010 have been filed with the Registrar of Companies and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

Accounting convention

The financial statements have been prepared under the historical cost convention. This has been applied consistently throughout the year and the preceding year.

Basis of consolidation

The accounts consolidate the accounts of the company, Autoclenz Limited and Autoclenz Services Limited.

Going concern

The group meets its day to day working capital requirements through a revolving credit facility of £3 million. The facility was renewed on 23rd May 2011 and extended for a further 3 years until May 2014. The Group has forecasts and projections to the end of 2013 and these indicate that the Group will operate within these facilities throughout that period.

The legal case of Autoclenz Ltd v Belcher & others regarding the employment status of 20 valeters was heard in the Supreme Court on 11 May 2011. The Supreme Court handed down its verdict on the 27 July 2011 and found that the claimants were employees. Discussions with the individuals and HMRC are ongoing regarding their new status. Prudent accruals are in place to cover expected costs of this decision.

After making enquiries, the Directors have a reasonable expectation that the company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the interim report and accounts.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed.

The purchased goodwill of the Group is regarded as having an indefinite useful economic life and, in accordance with IAS36 Impairment of Assets, is not amortised but is subject to annual tests for impairment. In reviewing the carrying value of goodwill of the various businesses, the board has considered the separate plans and cash flows of these businesses consistent with the requirements of IAS36, and is satisfied that these demonstrate that no impairment has occurred.

Employee benefits

The Group offers all employees membership of the Group personal pension plan after 3 months' service. Since 1 September 2009 the Scheme has operated on a salary-sacrifice basis with members given the option to opt out of this arrangement. The company makes contributions at varying levels from 4% to 10%, dependent on the level of contribution made by the employee. Amounts charged to the consolidated income statement in respect of pension costs is the contribution payable in the year. Differences between contributions payable and paid in the year are shown as either accruals or prepayments on the statement of financial position.

Under IAS19 the Group recognises the monetary value of employee benefits accruing to employees but not yet settled; typically holiday pay. There is a requirement to present the value of the liability for employee benefits to be paid in the future for services provided up to the reporting date.

Intangible assets

For the acquisition of Autoclenz Limited on 7 December 2005, the Group recognised separately from goodwill intangible assets that were separable or arose from contractual or other legal rights and whose fair value could be measured reliably. These intangible assets have finite lives and are amortised on a straight-line basis over those lives, which range from 7-10 years.

At each balance sheet date, the Group reviews the carrying amounts of its intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss.

Recoverable amount is the higher of fair value and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) 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 (cash-generating unit). In prior years a reversal of impairment loss is recognised as income immediately.

Revenue

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of value added tax and trade discounts.

Sale of goods

Revenue from the sale of goods is recognised when all the following conditions are satisfied:

- the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

- the amount of revenue can be measured reliably;

Rendering of services

- Revenue from a contract to provide services is recognised as each individual clean or movement is completed.

Leasing

Assets held under finance leases which confer rights and obligations similar to those attached to owned assets, are capiltalised as tangible fixed assets and are depreciated over the shorter of the lease terms and their useful lives. The capital elements of future lease obligations are recorded as liabilities, while the interest elements are charged to the profit and loss account over the period of the leases to produce a constant rate of charge on the balance of capital repayments outstanding.

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date.

Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax- assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Property, Plant and Equipment

Tangible non-current assets are stated at cost, net of depreciation and are tested for impairment. The cost of tangible non-current assets is depreciated using a straight-line basis over their expected useful lives as follows:

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. For inventories that are ordinarily interchangeable, cost is calculated using the weighted average method. Net realisable value represents the expected selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution.

Financial instruments

Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Finance Costs

Finance costs of debt are recognised in the profit and loss account over the term of such instruments at a constant periodic rate on the carrying amount.

Share-based payments

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 the grant. 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 shares that will eventually vest and adjusted for the effect of non market-based vesting conditions.

Fair value is measured by use of the Black Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

Derivative Transactions

The Group enters into derivative transactions to manage the interest rate risk arising from its operations and sources of finance.

The Group does not hold or issue derivative financial instruments for speculative purposes.

Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in equity and the gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the 'finance cost' of the income statement.

Period Covered

All notes below detail costs and statistics relating to the period 1 January 2011 to 30 June 2011 for Autoclenz Limited, Autoclenz Holdings Plc and for Autoclenz Services Limited. The comparative period being the period from 1 January 2010 to 30 June 2010.

2 Segmental analysis

The Group has applied IFRS 8 Operating Segments. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Executive to allocate resources to the segments and to assess their performance.

The identification and analysis of the reportable segments under IFRS 8 are as below.

The Group does not allocate all operating costs to the segments identified above, and these unallocated costs are separately identified above.

Assets and liabilities are not split by segment. The nature of the services provided is such that the return on capital is not a useful measure. The low value assets are not apportioned across the various businesses and the ledgers for payables and receivables are not segmented. Geographically, the group operates solely in the UK and as such revenue, costs, assets and liabilities all originate and are held in the UK.

3 Earnings per share

There is no dilutive effect on the earnings per share in respect of share options as the exercise price is higher than the share price achieved.

4 Other intangible assets

5 Property, plant and equipment

6 Trade and other receivables

7 Current Liabilities

8 Obligations under finance leases

It is the Group's policy to lease certain of its fixtures and equipment under finance leases. The average lease term is 3 years. For the period ended 30 June 2011, the average effective borrowing rate was 8 per cent. Interest rates are fixed at the contract date. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent payments.

The fair value of the Group's lease obligations approximates their carrying amount.

The Group's obligations under finance leases are secured by the lessors' rights over the leased assets.

8a Obligations under operating leases

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Operating lease payments represent rentals payable by the Group for certain of its motor vehicles. Leases are negotiated for an average term of 3 years with an option to purchase at the end of the term.

9 Cash Flow

Reconciliation of operating profit to net cash inflow from operating activities

10 Reconciliation of net debt

Net debt increased by £159,000 (2010: decrease of £352,000).

11 Dividends paid and proposed

12 Share premium account

The Articles of Association for Autoclenz Holdings Plc (the Company) provided at Article 53 that subject to the provisions of the Acts, the Company could by special resolution reduce its share capital, any capital redemption reserve and any share premium account or other undistributable reserve in any way. As at 1 January 2010 the Share Premium Account of the Company stood in credit to the value of £11,383,244.30.

By a special resolution of the Company duly passed in accordance with Section 283 of the Companies Act 2006 at the AGM of the Company held on 19 May 2010, it was resolved that the amount standing to the Share Premium Account of the Company was cancelled.

The purpose of the cancellation of the Share Premium Account was to create distributable reserves within the Company Balance Sheet so as to enable the Company to pay dividends and/or buyback shares when authorised to do so by the Shareholders of the Company.

13 Related party transactions

Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the company and its subsidiaries are disclosed in the company's separate financial statements.

14 General notes

Autoclenz Holdings plc is incorporated in Great Britain and registered in England and Wales under the Companies Act 2006. The address of the registered office is Autoclenz Holdings Plc, Stanhope Road, Swadlincote, Derbyshire, DE11 9BE.

This interim report will be posted to all shareholders of the company, and will be available on the Company's website (www.autoclenz.co.uk). The report will also be available for inspection by the public at the registered office of the company during normal business hours on any weekday.