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 76/91 Capex and Operating Leases 76 Historical Financial Information As illustrated in Figure 20, capital expenditures have averaged 1.3% of Revenues between 2000 and 2004. Figure 20: Capex 2000-2004 DKK million 700 600 500 400 300 200 100 0 Source: ISS 1.4% 391 1.3% 452 1.4% 525 1.1% 403 1.4% 2000 2001 2002 2003 2004 Capex Capex as % of Revenues Please see below for a summary of operating leasing payments and maintenance Capex from 2000- 2004. ISS has certain off-balance sheet liabilities, primarily contingent liabilities relating to operating leases, which consist of leases and rentals of properties, vehicles (primarily cars) 15 and other equipment. On January 1, 2005 ISS entered into a new global car fleet lease framework agreement for three years, including an option for extension for a subsequent three-year term. The framework agreement contains an option for ISS to terminate the underlying country agreement or the entire global commitment upon four weeks’ notice prior to the end of a calendar quarter and subject to ISS’s payment of a termination fee. The majority of the underlying agreements have a duration of three to five years. The disclosed contingent liability includes ISS’s total leasing commitment assuming no early termination of the agreement. The total expenses under operating leases in the income statement amounted to DKK 1,272 million in 2004 compared to DKK 1,154 million in 2003. Table 34: Historical Overview of Operational Leases DKK million 2000 2001 2002 2003 2004 Operational Leasing Expenses 503 768 1,121 1,154 1,272 Operational Leasing as % of Revenue 1.8% 2.2% 3.0% 3.2% 3.2% Capex 391 452 525 403 583 Capex as % of Revenue 1.4% 1.3% 1.4% 1.1% 1.4% Source: ISS Working Capital In recent years, there has been an increased focus on the optimisation of working capital with particular emphasis on the reduction of outstanding debtors as expressed in average receivable days for a given period and reporting entity. The Company has been and will continue to be focused on creating a faster and more effective process in all of its operations; from the time the initial contact with the customer is established until the customer's payment is registered in the Group's bank account. This is achieved through the improvement of internal paper-flows, the use of information technology and the optimisation of procedures for following up on outstanding debtors. This has resulted in a reduction in receivable days for the Group as a whole every fiscal year since the end of fiscal year 2001 which has been the key driver behind the Cash Conversion reaching consistently more than 15 The company has the ability to terminate its vehicle leases with six months notice in each individual country. 583 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% % of Net Revenues
tatiana\Bank Book\Public Bank Book\FINAL ISS PUBLIC Bank IM - Press Release to EMTN_1.doc 9 Nov 2005 10:32 77/91 77 Historical Financial Information 100% in recent years. However, this reduction in working capital requirements is to some extent offset by the growth of the Company in Continental European and International markets where average receivable days are typically less favourable than in Northern Europe. In September 2005 average receivable days were 62 days in Continental Europe, while in Northern Europe the average receivable days were 32 days. When comparing September 2005 average receivable days of individual countries within Europe the range varies from 16 days in Finland to 94 days in Italy. Figure 21: Development in Receivable Days Outstanding, 2000-2004 Note: Receivables Days Outstanding 45 49 47 2000 2001 2002 2003 2004 (1) Defined as (Accounts Receivable) divided by ((Revenue for the total number of months plus VAT) divided by 30 days) Source: ISS E. Seasonality The demand for traditional facility services is generally stable and there appears to be limited seasonality in the quarterly revenue development over the historical period. However, some of the services ISS provides experience seasonality. In particular, demand for the landscaping and pest control services of property services segment are significantly higher in the summer months than in the fall and winter, which may cause Revenues to be higher in the second and third quarter of the year and lower in the first and fourth quarters. However, given the impact by the timing of acquisitions in particular 2000 and 2001, makes it very difficult to compare quarterly revenue development, hence no direct conclusions can be drawn. Figure 22: ISS Revenues, 2001-Q3 2005, by Quarter DKK million 25,000 20,000 15,000 10,000 Source: ISS 5,000 0 Q1 Q2 Q3 Q4 8,153 8,559 8,804 9,336 9,300 9,683 9,521 9,480 8,917 9,013 8,931 9,304 45 9,244 9,743 10,411 10,957 FY01 FY02 FY03 FY04 FY05 10,845 44 11,677 11,635
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I. Table of Contents - ISS

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