I. Table of Contents - ISS

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tatiana\Bank Book\Public Bank Book\FINAL ISS PUBLIC Bank IM - Press Release to EMTN_1.doc 9 Nov 2005 10:32 40/91 B. European Facility Services Market 40 Industry Overview According to the independent market survey, the European facility services market had an overall market size of approximately EUR 230 billion in 2004 and it has had average revenue growth of approximately 3% per year between 2000 and 2004. The primary segments of the European facility services market are further described below: � Cleaning services. Includes cleaning of offices and facilities, including window cleaning and washroom services, and specialized cleaning, including services for food producers and processors. The European cleaning services market in 2004 was approximately EUR 41 billion and its historical annual revenue growth was in the range of 2% to 4% from 2000 to 2004. Although growth varied by country and period, certain local markets experienced lower or higher growth and certain mature markets experienced lower or even negative growth. � Property services. Includes property maintenance, security, waste management, landscaping, ventilation, car-park services, pest control, sewage and damage control services. Damage control services relate to the remediation of damage caused to property by extraordinary events, such as fires, floods, storms and vandalism. The European market for property services in 2004 was approximately EUR 160 billion to EUR 167 billion and historical annual revenue growth was in the range of 1% to 4% from 2000 to 2004. The primary property services market segments are: — Building maintenance and general property services. The value of the European building maintenance and general property services market in 2004 was approximately EUR 65 billion and historical annual revenue growth was approximately 3% from 2000 to 2003. — Security services. The value of the European security services market in 2004 was approximately EUR 30 billion and historical annual revenue growth was approximately 4% from 2000 to 2004. — Waste management. The value of the European waste management market in 2004 was approximately EUR 38 billion and historical annual revenue growth was approximately 2% from 2000 to 2003 — Damage control. The value of the European damage control services market in 2004 was approximately EUR 12 billion to EUR 16 billion and historical annual revenue growth was approximately 1% from 2000 to 2002. — Landscaping. The value of the European landscaping market in 2004 was approximately EUR 7 to EUR 10 billion and historical annual revenue growth was in the range of 2% to 4% from 2000 to 2003. — Pest control. The value of the European pest control market in 2004 was approximately EUR 1 billion and historical annual revenue growth was approximately 1% from 2000 to 2003. � Office support services. Includes the operation of call centers, reception and mail room services within customer facilities, but excludes temporary staffing services where the provider does not manage the temporary staff. The European market for office support services in 2004 was approximately EUR 6 billion and historical annual revenue growth was approximately 4% from 2000 to 2004, with higher growth in certain local markets particularly within emerging markets. Catering services. Includes the operation of canteens within customer facilities, but excludes concessions to operate catering facilities and vending machine operations. The value of the European catering services market in 2004 was approximately EUR 19 billion and historical annual revenue growth was approximately 4% from 2000 to 2004.
tatiana\Bank Book\Public Bank Book\FINAL ISS PUBLIC Bank IM - Press Release to EMTN_1.doc 9 Nov 2005 10:32 41/91 C. Demand Drivers ISS believes that the key drivers of the demand for facility services are, amongst others: 41 Industry Overview � Macroeconomics. Within a particular country, the demand for facility services generally correlates with economic conditions, including growth in that country’s gross domestic product. However, the facility services industry is normally considered to be less sensitive to economic cycles than certain other industries as there is a basic demand among customers for cleaning and other facility services in order to maintain their facilities and operate their businesses. In addition to being resilient in economic downturns, economic trends tend to affect facility services providers later in a macroeconomic cycle. � Outsourcing. There is a general trend toward outsourcing of facility service functions, which has in the past been a driver of demand for these services. The decision to outsource is dependent upon customer perceptions regarding the price and quality of outsourced services. Focused facility services companies seek to improve service quality and reduce customer costs by creating skill, scale and scope benefits across the various services delivered. Within the public sector, the decision to outsource is also based on price and quality considerations. However, decision making in the public sector is additionally influenced by political considerations, which will vary from country to country. D. Industry Characteristics Fragmented industry. The market among small and medium sized customers for basic facility services is highly fragmented, and there are believed to be more than 75,000 operators in this market. The independent market survey concluded that about two-thirds of these operators employ fewer than ten people. Basic facility services, including general cleaning services, can be provided with very limited resources and, as a result of these low barriers to entry, it is likely that the market for basic facility services will continue to include a large number of smaller operators. However, within each market there are generally only a few providers that have sufficient resources to provide customers with a full-range of facility services and to service larger, multi-location customers. E. Industry Trends � Professionalisation of the facility services industry. Facility services have historically been delivered on a local basis and, due to the fragmented nature of the market, users have in the past tended to view these services as a commoditized service. However, as part of the industry consolidation and emergence of integrated facility services, facility services providers like ISS are increasingly able to differentiate their services and leverage their scope and scale to establish reputations and brand identities. As a result, there is an increasing division between the larger facility services companies with integrated facility services capabilities and providers of basic services to smaller customers. � Industry consolidation. The facility services market is undergoing consolidation as larger facility services providers seek to achieve economic benefits associated with the creation of operational scale and scope at the local, national and international level. Local benefits include the crossutilization of resources between sites, leveraging of overhead costs and sharing of best practices. At the national level, benefits accrue mainly in the form of increased credibility as a contract provider and more efficient management and administrative functions. At the international level, the service provider is able to leverage existing customer relationships across regions to gain further contracts, purchasing benefits and further share best practices and management capabilities. � Service integration. ISS believes that there is increasing demand for integrated facility services, which the independent market survey defines as the provision of multiple facility services managed on-site by the provider through a single point of contact. The independent market survey concluded that the market for integrated facility services had revenue growth of approximately 12% from 2000 to 2003. As integrated facility services is a relatively new trend, its penetration rate remains low and projected revenue growth rates are higher than the growth rate of the general facility services market.
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