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Autoclenz Holdings Plc

Results for the 6 months to 30 June 2012

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 2012.

Highlights:

·; Underlying operating profit maintained at £0.61m

·; Automotive - sales up 7%, despite new cars sales increase of only 3.5%

• Specialist Cleaning - sales down 9.0% - Focus back on traditional REACT Rapid Response Service

• Net Debt at £0.51 million

• Liabilities for Measham case substantially agreed and being settled

·; Focus on maintaining current financial performance levels

STATEMENT BY THE CHAIRMAN, JAMES LEEK

Results

We are pleased to report that first half sales at £13.8 million show a 6% increase over last year (2011: £13.0 million). This has resulted in underlying operating profit before interest and tax, and before the amortisation of intangibles, being similar at £0.62 million (2011: £0.61 million). Underlying earnings per share using an assumed notional tax rate of 26% (2011: 28%) are 4.21p (2011: 3.99p).

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

UK car sales have risen, despite the continued recession, by 3.5% compared to the same period in 2011. This, together with the beneficial impact of new contract wins late last year and some sales successes this year, has enabled us to grow automotive sales by 7%. It is particularly pleasing that our efforts to grow our SMART and MOVEMENTS products are more than balancing the decline in the Rental market. Given the continued highly competitive nature of our industry, some of the new sales contracts have lowered margins and start-up costs reflecting the gross margin decline of 0.7%.

Specialist Cleaning

This sector shows a decline in sales but a small rise in gross margin as we finally exited the unprofitable property cleaning contracts. Attention is now keenly focused back on growth targets for the traditional REACT Rapid Response Service

Finance and outlook

In our Annual Report and AGM statement we referred to the final chapter of the Measham Case and I am pleased to say that all liabilities have now been substantially agreed and are being settled within the amounts accrued in the 2011 accounts.

We continue to have positive net cash flow from operating activities, although net debt of £0.51m at the half year increased by £0.24million over the year end figure - this reflects the payment out of £0.3m of the accrued Measham liabilities with a further £0.1m to be paid in the second half of this year.

We also referred in our Annual Report to the deliberations regarding the advantages and disadvantages of being an AIM listed company and we continue to keep this under review.

All in all it has been a satisfactory first half to the year and despite the flat economy and relentless competitor activity we remain focused on maintaining the current financial performance levels and therefore we expect the full year underlying operating profit to be similar to last year.

Consolidated statement of comprehensive income and expenditure

For the period from 1 January to 30 June 2012

The results for the period are derived from continuing operations.

Consolidated statement of financial position

As at 30 June 2012

Consolidated statement of changes in equity

For the period from 1 January to 30 June 2012

Consolidated cash flow statement

For the period from 1 January to 30 June 2012

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 2012 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 15 August 2012. The unaudited comparative figures for the six months to 30 June 2011, and the balance sheet as at 31 December 2011 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 2011 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 which was renewed for a period of 3 years ending 30 June 2014.

In July 2011 the Supreme Court directed that the 20 valeters engaged at one specific site should be granted employment status. This was implemented from 1 August 2011 for all of the original 20 claimants who were still operating at that site. Agreement has been reached with those valeters to settle their back claims for various payments including holiday pay. Payment has been made in part during the first half of 2012 and full settlement has been reached within the levels accrued as at 31 December 2011. The balance of payments is likely to be made in the remaining months of 2012. In tandem with the legal case the HMRC has conducted an assessment of the employment tax status of all Autoclenz Ltd operators. The HMRC have concluded their enquiry and their finding was that only the 20 Measham claimants were considered to be employees of Autoclenz. The 2011 and 2012 accounts include a full accrual for taxation and national insurance for the 20 claimants

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).

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.

Interest income

- Interest income is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases which confer rights and obligations similar to those attached to owned assets, are capitalised 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.

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.

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all its liabilities. Financial liabilities and equity are recognised initially at fair value.

Period Covered

All notes below detail costs and statistics relating to the period 1 January 2012 to 30 June 2012 for Autoclenz Limited, Autoclenz Holdings Plc and for Autoclenz Services Limited. The comparative period being the period from 1 January 2011 to 30 June 2011.

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 2012, 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 £235,000 (2011: increase of £159,000).

11 Dividends paid and proposed

12 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.

13 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 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.