I. Table of Contents - ISS

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:
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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.