tatiana\Bank Book\Public Bank Book\FINAL <strong>ISS</strong> PUBLIC Bank IM - Press Release to EMTN_1.doc 9 Nov 2005 10:32 58/91 A. Strategy 58 Business Strategy In April 2005 <strong>ISS</strong> announced its current business strategy, named "Route 101" which sets out the objective <strong>of</strong> achieving revenues <strong>of</strong> DKK 101 billion. Route 101 comprises a number <strong>of</strong> initiatives aimed at developing the Company, i.e. continue to train staff and continue to invest in group-wide systems and tools to support, whilst adhering to certain operational objectives. The plan does not contain a defined period <strong>of</strong> time for achieving DKK 101 billion revenue target. Consistent with this strategy, <strong>ISS</strong> intends to: (i) continue to focus on operational efficiency to maintain or improve its competitive position; (ii) increase its ability to deliver integrated facility services throughout its operations; (iii) continue to make selective acquisitions; and (iv) focus on reducing the Group’s financial leverage on a multiple basis. The principal elements <strong>of</strong> this strategy include the following: � Continue to focus on operational efficiency. <strong>ISS</strong> will seek to maintain and enhance operational efficiency by continuing its focus on three well-established and prioritized operational objectives for its local managers: (i) cash flow; (ii) operating margin; and (iii) pr<strong>of</strong>itable organic growth. — Cash flow. <strong>ISS</strong>’s first operational objective is to continue to maintain a relatively high rate <strong>of</strong> cash conversion 8 by operating in a manner that optimizes working capital. Through this approach, <strong>ISS</strong> expects to continue to generate positive Free Operating Cash Flow and <strong>ISS</strong> believes that, in a typical year, it should be able to achieve a target cash conversion ratio <strong>of</strong> between 90% and 95%. — Operating margin. <strong>ISS</strong>’s second operational objective is to maintain or increase its operating margin through continuous focus on costs. To reduce costs, <strong>ISS</strong> will seek to generate operational efficiencies by increasing its local market shares and operational densities, as well as through the implementation <strong>of</strong> company-wide best practices. Consistent with this approach, <strong>ISS</strong> has increased its operating margin, which <strong>ISS</strong> defines as operating pr<strong>of</strong>it before other income and expenses and income from associates divided by revenue, from 5.1% in 2000 to 5.6% in 2004. — Pr<strong>of</strong>itable organic growth. <strong>ISS</strong>’s third operational objective is to continue to leverage its international market position and service <strong>of</strong>fering in order to increase its local market positions and drive organic growth. To do this, <strong>ISS</strong> has introduced a wide range <strong>of</strong> initiatives, including dedicated management <strong>of</strong> key accounts and additional training <strong>of</strong> sales staff, to increase customer retention rates. <strong>ISS</strong> will also continue to focus on the cross-selling <strong>of</strong> related services, such as pest control and washroom services, to existing customers. Additionally, <strong>ISS</strong> has established a market presence and operating platforms in, and will seek to leverage the growth potential <strong>of</strong>, selected high-growth economies, such as Brazil, Russia, India and China. � Increase integrated facility services capabilities. <strong>ISS</strong> also intends to continue to broaden its service <strong>of</strong>fering in order to eventually <strong>of</strong>fer a full range <strong>of</strong> facility services in each <strong>of</strong> its markets, primarily through the introduction <strong>of</strong> additional services and by acquiring companies with additional competencies. <strong>ISS</strong> believes that integrated facility services strengthen customer relationships through <strong>ISS</strong>’s on-site management. In addition, integrated facility services <strong>of</strong>fer the opportunity to reduce customers’ overhead costs and for <strong>ISS</strong> to leverage operational synergies. � Continue disciplined acquisition process. <strong>ISS</strong> expects to continue its well-established acquisition process to facilitate its strategy <strong>of</strong> increasing local scale, broadening its local service <strong>of</strong>fering and accessing new markets. <strong>ISS</strong> will continue to focus primarily on smaller acquisitions, which it believes will reduce the integration risks relating to individual acquisitions and enable it to leverage the experience <strong>of</strong> local management teams throughout its countries <strong>of</strong> operation. To access new geographic markets, <strong>ISS</strong> intends to establish operating platforms in higher growth markets, including through acquisitions. � Reduce financial leverage on a multiple basis. The Group intends to reduce the financial leverage, in terms <strong>of</strong> debt to EBITDA, resulting from the acquisition financing, primarily through growth in operating pr<strong>of</strong>it. The Group intends to increase its operating pr<strong>of</strong>it through its continued focus on operational efficiency, organic growth and acquisitions. 8 The cash conversion ratio, as calculated by <strong>ISS</strong>, represents Free Operating Cash Flow as a percentage <strong>of</strong> pr<strong>of</strong>it before goodwill amortisation under Danish GAAP, or pr<strong>of</strong>it before goodwill impairment and write-down and amortisation <strong>of</strong> customer contracts under IFRS.
tatiana\Bank Book\Public Bank Book\FINAL <strong>ISS</strong> PUBLIC Bank IM - Press Release to EMTN_1.doc 9 Nov 2005 10:32 59/91 VII. Legal Issues 59 Legal Issues