Trading and Legal Update

AUTOCLENZ HOLDINGS PLC ("Autoclenz" or the "Company")

Trading and legal update

In our interim report for the 6 months to 30 June 2011 we reported that trading remained difficult in certain sectors. Since this trend has continued the Board wish to update shareholders on the outlook for the full year and the latest legal situation following the Supreme Court case judgement.

Trading

In our Automotive business, most areas are continuing to perform to plan and it is particularly pleasing that expansion of the northern Movements business, which proved so costly last year, has continued its profitable recovery. However within our rental business we have seen a decline in sales, margin and contribution which has impacted our profitability by in excess of £100,000 since our last statement. Profitability has also suffered in the auction sector following re-negotiated pricing earlier this year and the need, following the Supreme Court judgment, to employ a small number of valeters at one of our auction sites.

In our Specialist Cleaning business, REACT Rapid Response services are contributing at a significantly higher rate, despite government cutbacks, following our restructuring last year and increased market focus. However, as referred to in our interim report, the situation is much less satisfactory with REACT Property Services which provides cleaning and clearance for housing associations and local authorities. These activities have lost around £120,000 in the last 4 months alone and, given the margin and operational pressures and its financial performance, we are no longer prepared to go on subsidising this activity. We have therefore taken the decision to curtail all unprofitable contracts and re-merge the remaining profitable business back into REACT Rapid Response. We obviously regret that whilst the decision taken some time ago to try and build a separate property cleaning business appeared correct at the time, the current economic climate and cost pressures have made it unviable. The merging of the businesses will also enable us to focus more on our traditional decontamination type business.

Outlook

The difficulties outlined above, together with the potentially higher legal fees referred to below, mean that although we expect overall trading in the second half to be profitable, it will be significantly lower than the same period last year and therefore we expect underlying operating profit for the full year to also be significantly lower than the previous year.

A number of these factors are hopefully from their nature relevant to the current year only and management is determined to build a stronger profit base for the future.

Legal Update

Following the Supreme Court case judgement we referred in our interim report, to the ongoing discussions with the claimant valeters and HMRC regarding both their past and future employment status. These negotiations are becoming protracted. We believe we have made appropriate accruals for any past liability to the claimants, and are giving evidence to HMRC to demonstrate that the court decision is relevant only to a very small segment of our auction business and does not vitiate previous tax clearances on which we have relied. In addition, the claimants' legal fees which we are currently accruing for (albeit disputing) and which are included in our outlook view of the year's results above are in our view unreasonably high.

We will update shareholders with any further developments as appropriate.