2006 Annual Report Index - Service Point · 2019-11-05 · Page 2Annual Report SPS S.A. ‘06 Letter from the Chairman • A record year in Serce Point Solutions history • Organic

Service Point Solutions S.A.

2006 Annual Report

Index2 Chairman’s Letter

4 Chief Executive Officer’s Letter

6 Investor Executive Summary

8 Service Point Solutions

8 Group Overview 10 Services and Channels 12 Markets and Customers14 International Leadership

16 Growth Strategy

16 Organically and via acquisitions18 Innovations

20 Shareholders and Investors

20 Results of 200622 Equity Performance 24 Corporate Governance26 Corporate Responsibility

30 Individual Annual AccountsAudit report-Service Point Soultions, S.A

58 Consolidated Annual AccountsAudit report-Consolidated

Page 2 Annual Report SPS S.A. ‘06

Letter from the Chairman• A record year in Serce Point Solutions history

• Organic growth over 7%

• Double size of the company compared to 2005

• Contracted revenues of 55%

• 68% share revaluation in 12 months

Shareholder Remuneration

2006 marked a turning point in the history of Service Point. TheCompany made very significant progress on all fronts. Westarted to see reap the rewards of all the hard restructuringwork undertaken in the last few years, setting the stage for themanifold benefits that have begun to materialise, such as ourfirst dividend payment among others that should proveongoing.

Before getting into them in detail, I would like to highlight the efforts ofService Point's human resources across the five countries in which wecurrently operate and of the management team, all under the ablemanagement of our CEO. I would like to dedicate my praise to them inthis letter.

The fact that the merits and achievements of Service Point can berecounted and analysed in this our 2006 annual report is the result ofthe tireless work and unflagging enthusiasm of our 2,309 strong team.I hereby extend my deepest gratitude to each and every member ofour team for a job well done.

The company doubled in size in 2006. This significant progress wasthe result of the Company's strategy of pursuing both organic andexpansion growth. In terms of Expansion activity, all the businessesalready existing in 2005 increased their scale through acquisitions,entering new market segments or acquiring products or services thatour customers were requesting and that we were not in a position toprovide. Within this context, the Company made acquisitions in the UK(DocScan and Imagetek), in Spain (MIC) and in the US (Open Archive).All these acquisitions brought greater scale, boosted earnings andcreated new service and development opportunities vis-à-vis ourcustomers as well as new human resources with which to continue toenrich the group's diversity and development.

The Company made a significant acquisition to enter the Germanmarket with the purchase of a majority stake in Koebcke, a digitalreprographics company based in Berlin. Koebcke's attributes include apresence in the biggest German cities and very close customer careand relations. Noteworthy among its customers is the GermanParliament. Germany is a strategic priority for Service Point, a marketin which it plans to continue to grow both organically and throughacquisitions. The last major acquisition was Cendris DocumentManagement, B.V. in the Netherlands, an acquisition which made thecompany the indisputable leader in reprographics, mail room anddocument management, with a very broad customer base.

All these acquisitions, our new scale and our commitment to grow inline with our customers' needs translate into a unique opportunity for

an increasing number of customers to communicate with a singleservice provider across five countries. We intend to continue to expandabroad and to further increase the scale of our operations in existingmarkets by leveraging value added services.

However, our enhanced scale is not only acquisition driven but is alsothe result of fast organic growth. While the size of the companyvirtually doubled with the six acquisitions closed, like-for-like growthwas over 7% in 2006, a rate which, as you are well aware, is wellabove GDP growth and inflation in our operating markets.

Revenue quality continues to strengthen, not just because of thereputation of our customers, but also thanks to contract-tied revenues,which now represent 55% of the total. We expect to reinforce thispercentage going forward and to maintain our operating margins aswe continue to develop the facilities management and documentmanagement channels.

I would like to share a number of other related initiatives with you: therefinancing of all our debt, bringing it under a single syndicated loanled by a first class international bank, the underwriting of the February2007 capital increase in its entirety by a leading Spanish bankinginstitution, and lastly, available cash financing of almost Euro 45 million.This funding, together with the scope to increase leverage gives uscurrent funding capacity of almost Euro 90 million.

As proven in 2006 and with the acquisitions announced to date in2007, we only acquire money-making companies with strong EBITDAmargins, paying around six times EBITDA. As a result, our liquidity willenable us to quickly build a company that is not only significantlybigger, but, more importantly, one that is more profitable.

There is no doubt in my mind that being a larger company will bringgreater growth opportunities and new and improved prospects forService Point. Our growth will be the product of two factors that occursimultaneously and that can be expressed in a single word: execution.Execution in managing our operations in order to generate high singledigit growth and execution in identifying, negotiating and closingcompelling acquisition opportunities in order to continue to expand ourservices and markets. Believe me when I say that an exciting and veryattractive future lies in store for this company.

During 2006 and year-to-date our share price has rallied, a testamentto our improved balance sheet strength, acquisitions and earningsmomentum. Service Point's shares have risen 68% in the last twelvemonths (through 31 May 2007), outperforming both the Ibex 35 (up35.2%) and a Ibex Small Cap (+54.9%).

Juan José NietoChairman

Annual Report SPS S.A. ‘06 Page 3

OpportunityCollaboration with our customers to ensureongoing adaptation to new businessmodels. A strategy for tomorrow that is asuccess today.

ResultsProfitable organic and Expansion growthoutpacing the sector average, boostingearnings per share.

StrategyPositioning and resources to continue tospearhead sector consolidation, addingnew services and customer segments.

LeadershipLocal and international presence. We areone of the leading players in the sector,capable of satisfying any need with ourunstoppable ambition to be leaders.

DiversityNot only because we are different, but alsobecause we add value to our customers.Value which opens the door to new marketsand opportunities.

InnovationInnovation defines what we do, how we doit and why we do it. Innovation is our team'sdaily challenge: off-site, on-site and online

Perhaps what gratifies me most as Chairman is our shareholderretribution. Years ago, when Service Point was working against theclock to guarantee its survival and viability we sought to satisfy twocontrasting needs: keeping our shareholders committed to our storywhile generating the financial results necessary to provide the bankswith the guarantees they needed that we would comply with the strictcovenants imposed.

In this review, we want to share our vision with you, but moreimportantly, we want to underscore the fact that the cash flowgenerated in 2006 was sufficient not only to service our debt, but alsoto compensate you, our shareholders.

For the first time in its history, Service Point is going to pay itsshareholders a gross dividend (against share premium) of 2 euro centsper share, to be paid out in the third quarter of 2007, in addition to ascrip issue (one new share for every 30 shares held), to be undertakenin the first quarter of 2008. This remuneration means we are now in aposition to offer you not only an investment vision and opportunity forthe future, but also a return on your investment.

All this good news has had a knock-on effect in the equity investorand analyst communities. At the date of writing this letter, all theresearch houses covering us have a buy recommendation on thestock. Investor and analyst interest in our story is currently very high.We have been dedicating a significant amount of time to thesecommunities. If our recent stock price performance tells us anything, itis that we are beginning to see the results of these efforts, in line withour targets.

Here at Service Point we have always fought for a more stablepresence by institutional shareholders with a long-term investmenthorizon.

In terms of corporate governance, both the daily tasks of the Auditand Control, Compensation and Development Committees andcommunication with the market have been performed in strictcompliance with the transparency guidelines of the Spanish securitiesregulator. Over the past six months the number of shareholder andinvestor presentations and one-on-ones has increased significantly.

To finish up I would like to outline my vision for Service Point: Ienvisage a company that will continue to grow with, and for, itscustomers, managing all our resources in a more integrated manner,complementing our international vocation with the determination andambition to post double digit annual growth through organic expansionand the acquisition of new companies. All this will translate into

increasingly remarkable earnings and have a decisive impact on ourmarket cap.

We know we can do it. And we will do our utmost to realise this vision,deploying all our resources to position the company as the top playerin Europe and in the markets where we operate in the US.

"Service Point combines the two key attributesfor any company seeking to lead a growthventure together with its shareholders: capacityto invest and discipline to remunerate.Investing to continue to grow and cementleadership in its operating markets andremuneration by increasing our operatingprofitability which translates into greater visibilityfor our stock and its dividends”.

Many thanks,


Letter from theChief Executive Officer• Revenue growth of 34%

• 6 acquisitions completed in 2006

• Market leaders in 4 of our 5 counties

• Diversified offer trough 3 channels

• Bigest sector Group in Europe

Execution and Growth

Dear shareholder,

We are delighted to present you with our 2006 Annual Reportwhich is addressed to our current shareholders and potentialinvestors alike. We urge you to analyse the Company'sperformance during the past year and to assess for yourselves theoutstanding progress made, not only in financial terms, but moreimportantly in positioning the business for the future.

All that is absolutely consistent with our communicated strategy, ourcommitments to our shareholders and the path for creating value we setourselves.

Our goal remains clear: to become the international leader in business tobusiness document, print and information management. Our focus andinvestments are being directed towards extending our service offering andpresence in existing and new markets.

As planned, we are executing this strategy with a mix of organic growthand selective acquisitions. In 2006, revenue growth was almost 34%;Like-for-like organic growth was 7%, while the remaining 27% year-over-year growth came from acquired businesses. Pro-forma revenues would have jumped 86% on 2005, since the sixacquisitions made during 2006 were spaced out throughout the year andthe most significant one (Cendris Document Management in theNetherlands) closed in October. In fact, revenues jumped 92% in 4Q06over 4Q05.

Our goal is not growth for the sake of growth if it doesn't generate profitsand cash. When pursuing acquisitions, a 'target company' must be wellestablished, have a repeat customer portfolio that can be synergisedacross geographies and services and contribute to the Group's bottomline from day one.

I am pleased to announce that the six acquisitions undertaken in 2006have been successfully integrated and have made a clear contribution toprofitability during the year.

We will continue this strategy. We believe the market of document, printand information services offers a significant number of attractiveopportunities, and we will continue to work towards realising profitableacquisitive growth.

Service Point has also made significant progress in its positioning. Thiscan be clearly seen on the following pages of this annual report. We haveadded two significant markets to our portfolio: Germany and theNetherlands. Both represent an excellent platform from which to growfrom or achieve market leadership. In the Netherlands we are alreadymarket leader.

Our customer segment portfolio has become significantly broader andalso much stronger with more blue chip global players that offer an

Rafael López-AparicioChief Executive Officer

Service Point UK Central OfficeLondon - United Kingdom


opportunity for greater cross-national accounts. Witness as an examplethe recently announced Shell Facilities Management contract for UnitedKingdom and the Netherlands. We are increasingly focusing our teams todevelop and tap into these kinds of global accounts.

We have also made significant progress on our services and revenuestructure; target revenues from document management services currentlyrepresent 8% of total revenues or 13% of pro forma revenues, i.e.assuming the acquisitions had been consolidated on 1 January, 2006, upfrom 6% in 2005. The information and document management servicesportfolio is on a solid path with many new applications in new customersegments.

Facilities management services (including digital reprographics and otheron-site customer services) grew from 24% in 2005 to 26% in 2006, or39% on a pro-forma basis. This is underpinning the fact that 55% of total revenues now stem frommulti annual customer contracts. A very desirable position that furtherenhances business stability and visibility.

2006 was also marked by strong financial performance; operating profitgrew 67% and net profit reached Euro 4.8 million. This is the result ofeconomies of scale and the consolidation of profitable new businesses in2006.

In addition to continued strong margins, cash flow is benefiting from theenhanced business mix and from reduced capex and depreciation indocument management and mail room on-site services.

The balance sheet is stronger, with a better debt structure, lower debtservice costs and a net cash position to fuel business investments goingforward. In July 2006 the company entered into a new syndicated facilitywith Lloyds TSB Bank, repaying in full all other outstanding debt facilities.This new syndicated loan will be repaid in a single instalment at maturity,hence freeing up cash flow to reinvest in the business. Of the total Euro60 million available under the facility, Euro 15.2 million had not been drawndown by the end of 1Q07.

The acquisition of Cendris Document Management was financed initiallywith a Euro 35 million bridge loan provided by Ahorro CorporaciónFiananciera, which has been subsequently repaid with the proceeds fromthe successful Euro 54.3 million capital increase completed in 1Q07 (theissue was over-subscribed by 57% in a further display of shareholdersupport). Post capital increase, Service Point had pro forma (year-end2006) cash resources of approx Euro 45 million, in addition of the Euro15.2 million not yet drawn down from the syndicated facility.

Net debt was a significant Euro 25.3 million lower at the end of 1Q07.This means that the 2006 pro-forma net debt/EBITDA ratio, i.e. assumingthat the acquisitions were fully consolidated from 1/1/2006, stood ataround 1x (in my letter in the 2005 Annual Report I spoke of the

impressive progress made in bringing this ratio down from 5.17x to 2.3x!).Considering that the Company's financial covenants permit indebtedness(net debt/EBITDA) of up to 3.25x, if we add existing available cashresources to the scope for additional leverage (2.25x EBITDA generated),Service Point could tap over Euro 90 million of additional funds to invest inthe business and further acquisitions.

We commit to executing our strategic plan and investing to create valuefor our shareholders.

Lastly I wouldn't want to finish up without mentioning our global team.The key to generating value is the ability to execute, not strategy orfunding in of themselves.

Service Point's team is fully committed and motivated. What wassignificantly reinforced in 2006, both centrally and from an operationalstandpoint. We welcome the managers and employees from the acquiredbusinesses. One of the essential criteria in any potential acquisition is theability to retain, motivate and get the best from the management teamand its staff. I am very pleased with the enthusiasm, agility and engagement with whichthe whole Service Point team serves our customers, contributing to ourcentral mission to deliver value to our shareholders.

The team I am honoured to lead will deploy this commitment in redoublingits efforts to bring your company to new heights.

Many thanks,

MissionTo be the global leader in document, print and information management services through the provision of high valueadded services.

VisionService Point is a leader in B2B. We provide our customers with tangible benefits in meeting their documentmanagement and digital reprographic requirements, based on sustainable environmental strategies. We aim to lead thesector by developing off-site, on-site (facilities management) and online solutions, underpinned by a strong team andsolid technology.


InvestorExecutive Summary

Investment opportunity

Total RevenuesGross MarginEBITDAEBITNet Profit

Net DebtEquityNet Debt / EBITDA

Gross Margin %EBITDA %EBIT %

2005

99,53173,57914,6235,092

188

35,38588,039

2.4 x

73.9 %14.7 %5.1 %

2006

133,16697,26619,3868,4934,842

70,59896,364

3.6 x

73.0 %14.6 %6.4 %

Variation

33.8 %32.2 %32.6 %66.8 %-

99.5 %9.5 %

---

Pro-forma2006 (1)

185,229135,56124,06512,1878,367

19,298144,756

0.8 x

73.2 %13.0 %6.6 %

(1) Pro-forma: SPS + 6 acquisitions 2006 considered from January 1st.

Results 2006 (‘000 Euros)

Quarterly EBITDA Evolution in 2006 (‘000 Euros)

By country

United KingdomUnited StatesNetherlandsSpainGermany

By service

Digital ReprographicsFacilities ManagementDocument ManagementOther

2006

47%25%12%11%5%

2006

60%26%8%6%


Sales distribution

Pro-forma2006 (1)

34%18%34%

9%5%

Pro-forma2006 (1)

38%39%13%10%

0

2,000

4,000

6,000

8,000

10,000

Q4Q3Q2Q1

2005

2006

0

1

2

3

4

5

6

Pro-forma 2006200620052004

Net Debt /EBITDA Evolution in 2006 (‘000 Euros)

5.2

2.4

3.6

0.8

(1) Net debt includes Euro 35 million contracted to Ahorro Corporación Financiera for theacquisition of Cendris Document Management in October 2006. The above mentioned debt was cancelled with a Euro 54.3 million capital increase whichfinished on February 2007.

(1)

Sales by country 2006 Sales by country pro-forma 2006

Sales by service 2006 Sales by service pro-forma 2006

Germany5%

Spain11%

Netherlands12%

UnitedStates25%

UnitedKingdom

47%

Germany5%

Spain9%

Netherlands34%

UnitedStates18%

UnitedKingdom

34%

Other6%

DigitalReprographics

60%

FacilitiesManagement

26%

DocumentManagement

8%

Other10%


38%


39%

DocumentManagement

13%


1.651.852.052.252.452.652.853.053.253.45

1

Dec 06Nov 06Oct 06Sep 06Aug 06Jul 06Jun 06May 06Apr 06Mar 06Feb 06Jan 06 May 07Apr 07Mar 07Feb 07Jan 07

23

45

6

7 8

1

2

3

45

6

1 2

3

54

6

12

3

45

6

(Euros)

Highlights since 1 January, 2006

1 Highlights since 1 January, 2006 1. 27.02.2006: Presentation of 2H05 earnings.2. 08.05.2006: Presentation of 1Q06 earnings.3. 28.07.2006: Presentation of 1H06 earnings.4. 27.10.2006: Presentation of 3Q06 earnings.5. 27.02.2007: Presentation of 2H06 earnings.6. 06.05.2007: Presentation of 1Q07 earnings.

2 Acquisition-led growth1. 08.03.2006: SPS acquires Imagetek, entrenching its document management service offering.2. 16.03.2006: SPS reinforces its presence in the document management market with the acquisition of DocScan.3. 18.05.2006: Service Point acquires MIC Print, a digital reprographics and document management firm, cementing its leadership in Spain.4. 19.05.2006: SPS continues its expansion with the acquisition of Open Archive in the US.5. 22.06.2006: SPS acquires 51% of Koebcke GmbH, Germany's leading document management player.6. 07.11.2006: SPS successfully completes the acquisition of 100% of Cendris Document Management B.V.

3 Equity issuance1. 24.03.2006: Admission to trading of 1,534,612 SPS shares issued pursuant to a 1x40 scrip issue in the amount of Euro 920,767.20.

2. 07.06.2006: Admission to trading of 1,221,833 shares, issued at Euro 2.14 per share, pursuant to a Euro 2,614,722.62 capital increase to cover the SPS2003 stock option plan.

3. 22.06.2006: Admission to trading of the 928,730 shares issued to convert 8,637,189 bonds in the May conversion period. The convertible bonds wereissued in April 2005. With this, 93.4% of the total bonds issued have been converted.

4. 13.12.2006: Admission to trading of the 774,890 shares to convert 7,206,777 bonds in the November conversion period for the April 2005 issue(conversion ratio of 10 new shares for every 93 bonds converted).

5. 07.02.2007: Euro 54,315,607.50 capital increase through the issuance of 31,037,490 shares at Euro 1.75 per share. The number of shares outstandingfollowing the transaction rose to 96,882,071.

6. 02.04.2007: 1x30 scrip issue to bring total shares outstanding to 100,111,473.

4 Organic growth1. 20.02.2006: SPS wins document management contract from Washington DC Port (bringing in around Euro 400,000/year).2. 23.06.2006: Service Point lands two-year document management contract at US utility Pennsylvania Power & Light (worth around $170,000/year).3. 04.09.2006: SPS wins four-year facilities management contract for UK-based infrastructure projects at Skanska.4. 05.10.2006: SPS renews two-year digital reprographics contract with Repsol YPF.5. 19.12.2006: SPS extends contract with German Parliament (deutscher Bundestag) and Federal Council (Bundesrat) running until August 2007 for another

one more years.6. 09.03.2007: SPS signs a 5-year contract with DSM, a Cendris Document Management customer (revenues of $1.1 million/year).7. 21.03.2007: SPS lands document management contract with Amtrak, the US national railway company.8. 29.03.2007: Shell awards SPS a multinational 3-year document management services contract, extendable to five years. The contract is estimated to

generate Euro 2 million per year.


Service Point SolutionsGroup Description

Dimension

Service Point US

Providing document management technologies,software and printing services for 25yrs into 450Onsite services (un-manned & manned) programs

across the USA (16 Service connected Centres including 4Hybrids ie those serving a contracted host client plus externallocal accounts, 3 dedicated scanning units and online services.

Our structure supports in-house software developers, IT managementand specialist sales teams/client facing consultants working hard todeploy our offers into the fields of Transportation, Power/Utilities,Health Care. Universities and large commercial Owner/Operators. The acquisition ofOpen Archive Systems in '06, a software development and distributioncompany, was a key development to the future of not only ours butthe Group’s growth in terms of service/product integration and clientsupport.

Service Point UK

Market leaders with 25% share the UK's No1 -Celebrating our 90th year Service Point UK maintainterritorial leadership being: Twice the size, sales and

reach of our nearest competitor through continual evolution,the widest integrated global portfolio of services delivered by aconnected team of 650 experts nationally.

The UK region still benefits from a strong economy driving urbandevelopment, corporate organisations seeking to outsource non-coreactivity and the growing need to support infrastructure - specificallyrail, utilities and international transport hubs - all serving as visible,long-term targets of revenue growth. Operationally our networkcomprises: 4 dedicated 24hr Centres, 26 prestigious on site mannedmanaged services (FM's including: Shell, ExxonMobil, The UK NationalHealth Services and Jaguar/Land Rover - embracing Aston Martin),150 un-manned production solutions and 4 dedicated electronicdocument management centres all framed by a 40 dedicated digitalreprographics production units.

Regards to sustainability we are delighted to have achieved ISO14001- which deamands ongoing environmental managementsystems. ISO 14001 is respected as the corner stone standard of theISO 14000 series. However, it is not only the most well known, but isthe only ISO 14000 standard against which it is currently possible tobe certified by an external certification authority. But more importantlywe measure sustainability in a far more human dimension with ouraverage management position being held for 15yrs and the churn ofteam the lowest within our sector. Part of the reason is our robustcentral support structure: Knowledge Management, Research &Development, Design and Marketing that extend their expertise acrossour entire international operation.

Service Point SP

Service Point is the biggest Spanish companyexclusively dedicated to provide services of DigitalReprographics, Facilities Management and

Documentary management to companies, with special attentionto services with a high added value. The increasing demand forthese services as well as the ever greater importance onsecurity and reliability of information is facilitating the processof expansion towards new client segments.

Service Point, guaranteed by a solid growing trajectory is, with morethan 3,000 clients and its 14.5 million euros of sales, the leadingcompany in its sector, with a 15% national market share. It providesservices to its clients through its 4 distributed centers of highproduction in Madrid and Barcelona, as well as with the servicecenters within the facilities (FM's) of 7 of its clients, in addition to themanagement of equipments (OSS's) in other 8 clients.

We have a team of 190 professionals specialized in the different area'sof technology necessary for us to be the specialized in each one of ourtarget markets: AEC (Architecture, Engineerings and Constructors),Education, Information and communication, Fast Moving ConsumerGoods, among others. This allows us to provide the best service withthe maximum reliability and for that reason we have the certificationISO 9001:2000 from year 2000.

In 2006 the income of Service Point Spain represented 10.9% of theincome of the group, rising to 14.5 million euros. At the pro-forma2006 level the percentage of contribution to the total sales on the partof Service Point Spain would be 8.8%.

Javier RigalGeneral ManagerService Point Spain


Service Point Holland

Service Point entered the Dutch market through theacquisition of Cendris Document Management (a TNTsubsidiary) in October 2006, which led to the

incorporation of Service Point Holland, the sector leader. Withrevenues of around euro 70mn in 2005 SPS Holland operates inthree main segments:

1 Facilities management, primarily comprising the provision of mailroomand reprographics services

2 Document management3 Other services

SPS Holland's workforce totals 900 and it has 11 service centres, ofwhich seven perform document management services and four,reprographics services. The bulk of revenues is tied to recurring contractsincluding 190 facilities management contracts and 150 in-housemailroom services contracts. Its client portfolio, made up primarily ofrecurring medium and long-term contract customers, includes top classcompanies and institutions such as Philips, ING, ABN Amro Bank, KPNand the Dutch Ministry for Housing and the Environment.

In 2006 SPS Holland contributed euro 16.7mn to consolidated Grouprevenues, or 12.5 % of the total. On a pro-forma basis (2006), factoring inall the acquisitions made since January, Holland accounted for 34.3 % oftotal Group revenues.

Service Point Germany

With revenues of around euro 8mn, Koebcke is sectorleader in its operating region. This company - with atrack record dating back over 40 years - has broad

coverage of the German market. Its presence is especiallystrong in the North East. It is leader in the Berlin market whereit operates four centres.

In recent years the company began to expand nationwideopening 6 additional centres (Hamburg, Dusseldorf, Essen,Dresden, Leipzig and Frankfurt). Koebcke also has a presencein the Middle East through a joint venture in Dubai. Thecompany's customer base is over 1,100 strong and a verysignificant portion of its revenues are tied to contracts. Itscontract customer base includes the German Parliament(Bundestag & Bundesrat), where it operates on-site. Thisfacilities management centre generates 1.5 million copiesper day, distributing them to over 2,000 points within 2hours. Other noteworthy clients include Fraport (thecompany that manages the Frankfurt airport, which ispending full remodelling) and Winterthur. Koebcke's business

model is similar to that of Service Point's other subsidiaries, providingdocument management, digital reprographics and on-site facilitiesmanagement services. Around 42% of the customer base comes fromthe public, services and pharmaceuticals sectors, while the remaining58% is made up of companies from the infrastructure, energy,construction and engineering sectors. In the document managementsegment, the company has developed innovative solutions such asKoebcke Exploro® and Koebcke Regeo® which have been very well taken up by the market since being launched in 2005. In 2006 Koebcke GmbH contributed revenues of euro 6mn, 4.7% of consolidated Grouprevenues. On a pro-forma basis (2006) this contribution rises to 5.2%.

04 1,100 Employees • Countries: UK, Spain, Germany, USA• FM/OSS conracts: 400• Revenues: Euro 95.9 million• EBIT Margin: 4.5 %

05 1,089 Employees • Countries: UK, Spain, Germany, USA• FM/OSS conracts: 640• Revenues: Euro 99.5 million• EBIT Margin: 5.1 %

06 2,309 Employees • Countries: UK, Spain, Germany, Netherlands, USA• FM/OSS conracts: 714• Revenues: Euro 133.2 million• EBIT Margin: 6.4 %

Service Point Germany team (Koebcke)


Service Point SolutionsServices and Channels

Service

What sets Service Point apart from its peers is its fully integratedapproach to digital reprographics, document management andfacilities management services. Our ambition to lead a highlyfragmented market is shared by our customers, often leadingcompanies in their own industries who seek to bring theircomplex document management, print and information needstogether under single, comprehensive service provider.

Service-oriented approach

Service Point is highly focused on raising its customers' performance andefficiency. Our overall approach is to use the consultancy process to dissectthe ways in which an organisation interacts with its documents and itsinformation value chain; then we devise simple solutions to make theseroutines work better.

Business goals

Our key goal is to introduce change not for its own sake but to free upour customers to focus on optimal performance in their core business.Everything we do springs from our philosophy that there is an increasinglyurgent need for the many parties involved in the document process towork together and make the best use of documents as information-bearing tools. The process often requires a document to move fromhardcopy to electronic form and back again. “Environments” that supportthese transitions are thus needed at every stage of the interaction.

Triple-channel service

At Service Point this capability bears the name "triple-channel service”.Our digital reprographics teams generates hardcopy documents andhandles the logistics from off-site (i.e., non-client) production centres. Ourfacilities management teams provide the same services on-site - at thecustomer's own premises - to ensure security, provide on-demandservice, level out peaks and troughs in production and manageinformation-flow activities such as mailroom support, digitisation ofdocuments in a dynamic/interactive database system, and more. Thesesystems are underpinned by customised services bundled under the term“document management”. Document management and on-site and off-site document services use an online platform to track customer needs.This means Service Point offers document, print and informationmanagement as a comprehensive package that has yet to find a rival inthe industry. Document management is our specialised value-addedservice that fully supports document creation, design, distribution,revision, format conversion, collaborative work, search and securestorage.

Service Point Operational CenterGerman Parliament ProjectBerlin

German ParliamentBerlin


Digital Reprographics serviceThe business-to-business process of receiving,printing or reproducing documents in any format -black/white & colour by laser, inkjet, traditionallithography or photographically - a core offer forover 90 years. Key proposition is the digital deliveryand output at the point of need for on-demandrequirements be they large or small format, near orremote. Our network exceeds 81 sophisticatedproduction centres, each driven by highly skilledteams deploying the most appropriate technology.These facilities drive 61% of group sales withEBITDA sales margins/targets set across thenetwork of 15%-20%. Sales are immediate (short-term) as well as planned (long-term strategicNational & Internal relationships) delivering constantpotential for incremental business.

Offsite channel • Large & Small Format• Digital Printing • Tenders & Bid Logistics / Production• Document conversion• Predictable Cash-Flow• Break-even point 12/18 months• EBITDA margin of 15%-25%

Document Management serviceA true synergy with our offer of DigitalReprographics. Document Management seeks tocapture content/information (in the majoritydocument based - past & present) and effectivelymakes it available for: print on demand,automated sharing, amending/collaboration,transfer between people or entities and securestorage. We effectively manage our clients needsby understanding how their business usesinformation, classifies data and needs to securelymanage this asset - potentially any organisationsmost important asset. Our service isconsultatively driven at key strategic decisionmaking levels resulting in a medium to long-termcontractual relationship. Systems deployed areclient bespoke and formed in the most from 'in-house proprietry solutions' locking in to existinghost customer supply/information-chainmanagement processes.

Online channel• Document Control Consultancy• Document Capture to Digital Archive• Document Collaboration• Document Ordering• Contract length 1-5 years• Project based Euro 50k - Euro 100k • EBITDA margin of 20%-25%

Facilities Management serviceA combination of Digital Reprographics &Document Management delivered onsite at theclients premises - typically as part of an'outsourcing' strategy. The majority (95%) ofcontracts extend +2yrs beyond the initial 3yr to5yr period. Our strategy is to integrate all relatedactivities: Mailroom, Large Format Colour, Officeconsumables/electronic supplies and PrintManagement as part of the head agreementlocking out competitors. As a further reliancefactor - client to Service Point - exiting customerhead-count and technology can be embraced bythe contract greatly improving the service levelsthat ensue. Combined with use of allied ServicePoint centres with local geography the clientbenefits from an unparalled level of capacity,ability and reliability. The 'Onsite Facilities' modelseeks to drive a long-term relationship by offering3 models: Un-manned - machine/technologybased only, Manned - machine/technology andmailroom or hybrid serving both host and externalclients, this option delivering a % revenue back tothe host.

Onsite channel• Document Production (manned)• Document Machinery (un-manned)• Document Capture to Digital Archive• Mailroom • Predictable Cash-Flow• Average solution Euro 20k - Euro 1m• EBITDA margin of 20%-25%

Document & Content• Services lifecycle• Service Point Solutions spans its • Service offer across the entire• Document & content lifecycle, • From creation to archive,• Generating constant revenues.

Operation Service Structure Integrated Offer

• 90 year’s heritage• Independent• Local & Global• In-house R&D• 24/7 Operations• Onsite, Offsite, Online• Capacity• Quality• ISO 9001 / 14001*

• Any- Commercial Sector- Private & Public Project- Size & Capacity- Timeline• At any- Place locally & globally- Time locally & globally- Innovation locally & globally

• Connecting- People- Communication- Projects- Operations- Capacity- Technology- Platforms- Delivery

• Offsite- Document Production Centres- Document Management Centres• Onsite- Document Production Centres- Document/Mail Management Centres• Online- Document: Print & Logistics Management- Information: Collaboration & Storage


Service Point SolutionsMarkets and Customers

Presence

Off-site channel

Document, print and information management from our 85 sitesin the United Kingdom (45), the United States (16), theNetherlands (11), Germany (9) and Spain (4).

Examples of how the off-site channel works:

Infrastructure: Fraport expansion project, Germany

Service Point created a special-purpose 10,000 m2 site to providesupport for Europe's second-largest airport project, Frankfurt Airport.The company also undertook to meet all the just-in-time supplyrequirements for various services to Fraport. 39,000 files containingover 11 million pages and 520,000 drawings were delivered within 42days, on-time and error-free. Koebcke’s and Service Point UK's abilityto accommodate the commercial requirements associated withinformation management, digital printing and intelligent archiving wasthe deciding factor that won the contract.

Construction: Bluestone, United Kingdom

Bluestone is a nationwide construction firm that operates over anetwork of regional offices that make up the parent company, theMorgan Sindall Group, one of the UK's ten leading constructiongroups (Morgan Sindall Group: Bluestone / Morgan Est plc / Overbury/ Morgan Lovell / Lovell). In 2006, Service Point implemented anationwide digital reprographics contract guaranteeing a specifiedstandard of service throughout the United Kingdom for large projects;this setup provides hardcopy printing where required.

The arrangement was then laid down in a broader-ranging serviceagreement for off-site and online electronic document management.Bluestone, the group's construction subsidiary, now has the benefit ofonline support for large project management and electronic printing. Atthe group level, Morgan Sindall also uses our systems to manage andcirculate documents across its five core businesses. For smallerprojects, we provide Bluestone with on-demand document scanningto create dynamic intelligent archives. We provide information captureservices to Bluestone's accounts team, which comprise dailyscanning, indexing and hosting of invoices. Service Point plays acentral role in the group's strategy to implement robust and scalabledocument management.

On-site document, print and information management channel:at the customer's own facilities, using Service Point staff(facilities management) or customer staff (on-site service). 714contracts are now up and running across the two servicemodes.

Examples of how the on-site channel works:

Government / public sector: Deutscherm Bundestag/Bundesrat,Germany

In 2006, Service Point's subsidiary Koebcke GmbH signed an earlyextension of its original three-year contract with the GermanBundestag and Bundesrat for one more year, to August 2008.Koebcke GmbH has handled document and print management for theBundestag and Bundesrat -the Parliament and the Council of theGerman Federal States since 2004. Koebcke produces, binds andcirculates most of the print materials.

The central print unit of 40 machines occupies 700m2 in theBundesrat complex itself. The site is connected to Koebcke's headoffice over a direct data line. The facility in the parliamentary buildingcan produce up to 5.2 million pages per day in 50 different documenttypes.

The terms of the agreement required management of the peaks andtroughs typical of work cycles at the Bundestag and Bundesrat. Printmaterial requirements fluctuated sharply over the period; this called fora specially designed approach. When parliament is in session, ServicePoint processes an average of 350,000 printed pages a day, and up to700,000 pages a day at peak periods. The stipulated delivery time isjust two hours, orders at times being placed 24 hours a day. Thispattern of work requires flexibility, speed and accuracy; swiftprocessing and sophisticated automated systems are the mainstays ofelectronic document management. Print orders are received by emailor on conventional printed forms.

Our staff are highly qualified and work flexible hours. The high servicecapability offered by our printing systems and other machinery ensures100% service reliability, underpinned by Koebcke's ISO 9001certification.

Frankfurt Airport (Fraport)Germany


Customers can track the production process step by step using thedocument management system.

Automotive: Jaguar & Land Rover, United Kingdom

Service Point's on-site centralised document production anddistribution services at Jaguar's design and engineering site at Whitleywas one of our greatest successes in 2006. Jaguar's supportrequirements have evolved constantly, from image production for large-format technical documentation originally to today's full portfolio ofservices, encompassing high-end print management, digital printing,information capture and graphics for large-format display. In parallel,Service Point's involvement with this account grew rapidly, with newfacilities at Jaguar/Land Rover's Gaydon and Solihull sites, supportedoff-site by strategic business units operating 24 hours a day.

Telecommunications: KPN, The Netherlands

KPN provides telephony, internet and television services to individualsand corporate clients over its fixed telephony network in theNetherlands, which caters to 6.9 million telephone landlinesubscribers, 2.2 million internet users and 20.8 million mobiletelephony clients in Germany, the Netherlands and Belgium. ServicePoint runs centralised document production and distribution, printmanagement (including web-based) and information capture in supportof KPN's call centre operations. KPN required high flexibility in thecontract structure to streamline services and cut costs by over 40%.The arrangement led to Service Point taking on KPN employees whoare now part of Service Point's team.

Online channel

LAN-based web and document, print and informationmanagement from Service Point sites and over theGlobalgrafixnet international network, in which Service Pointholds a 50% stake and is partnered with digital reprographicsfirms in 24 countries operating a combined total of 165facilities.

Examples of how the online channel works:

Finance: ING Nationale Nederlanden, The Netherlands

ING Nationale Nederlanden, the Netherlands-based global financialservices group with 150 years' experience of providing a wide range ofbanking, insurance and asset management services in over 50countries, commissioned Service Point to digitise 1.2 million currentand historic hardcopy insurance documents. The brief involvedchronological ordering, categorisation, logistics, quality control andindexing, geared towards providing real-time online managementreports. Over a period of nine months, the initial project generatedearnings of over Euro 4.4 million. ING Nationale Nederlanden is one ofthe twenty largest financial institutions worldwide, and stands among

the top ten in Europe.

Infrastructure: Network Rail, United Kingdom

Network Rail owns and operates the UK's rail infrastructure. Thearchiving team was selected to implement a review of best practicesand a pilot programme to enhance the archival document process.Service Point and Network Rail's archiving team created an agile,accurate and cost-saving method to scan and electronically send over2 million commercial documents to the customer's IT platform within a7-week period.

Food and beverages: Panrico, Spain

Panrico, the leading bakery goods manufacturer in Spain and Portugal,owns a stable of household name brands, and has started to use oursupport services for electronic commerce. Panrico's logistics workflowis the backbone of the company's operations. Its twelve majordistribution sites are in real-time contact with head office and requireconsiderable communications support to record, manage and auditthe thousands of deliveries they complete every day.

Service Point collates close to 35,000 hardcopy delivery notes per day(over one million documents a month), captures and validates thecontents and finally converts the files scattered across the group'svarious divisions into electronic format. Service Point's opticalcharacter recognition (OCR) is a key capability that automates 90% ofthe entire process. This lets the customer focus on its core activity -business development. This service is provided to many other high-profile companies, such as Eden Springs, the Damm Group, CadburySchweppes, Europastry and Weber & Coats, attesting to ServicePoint's ability to extend its presence into a wide spectrum of potentialmarkets.

Public sectorWe cater to organisations of any size, nomatter the location, now and in future, andwhether public or private. (GermanBundestag/Bundesrat Project).

IndustryIntelligent document, print and informationmanagement to streamline distributionprocesses. (Siemens, Corus).

InfrastructureOur goal is to bring together people,projects and processes wherever needed.(Ferrovial, Fraport AG, Network Rail,Amtrak).

TelecommunicationsSecure distribution of high-value documents forcompanies with sophisticated communicationsystems. (Vodafone, KPN).

FinanceKey information requires a dedicated focus on theprocesses of capture, production, access,distribution and storage. (ING, London StockExchange, Morgan Stanley, Aegon, KPMG).

CarsEngineering accuracy. We work with leading-edgetechnology to achieve the highest standards indocument quality, volume and dispatch. (Jaguar,Land Rover, Lotus, Aston Martin, Cummins Engines).


Service Point SolutionsInternational leadership

Collaboration

Service Point's strategy uses a unique integrated globalplatform that deploys the same operating capability across allterritories, the right level of specialisation, informationmanagement systems (customer relationship management,CRM, and account support management), a robusttechnological infrastructure and presence in the key cities andbusiness hubs.

The company's core competence is its ability to offer solutions toservice the needs inherent to multinational contracts. This sectionoutlines the fields in which Service Point operates and provides a casestudy.

Multinational contract case study

Energy and petrochemicals: Shell, Netherlands/United Kingdom

Global agreement: Centralised document services

In 2006, Shell selected Service Point to provide centralised on-sitedocument production and management services under a three-yearmultinational contract - extendable to five years - originally covering theNetherlands and the United Kingdom.

Shell is an international group of energy and petrochemicalscompanies with a presence in over 130 countries and 108,000employees. Energy companies need to take the long-term view morethan other companies. Shell has therefore constructed globalscenarios for over thirty years. Scenarios differ from forecasts in thatthey enable the company to explore the complex businessenvironments in which it operates and the driving forces behind eventsand change.

Service Point works with Shell to design an integrated global resourcethat fits in with this customer's complex environments andcommunications and content management needs. In a highlycompetitive market, Service Point strives to provide 'responsible'document management solutions fully aligned with the customer's andour own corporate responsibility guidelines.

Service Point provides on-site services at facilities in the Netherlandsand the United Kingdom. The contract encompasses an integratedrange of colour and black and white print solutions and finishingservices for small and large formats. Service Point's team of 24employees is supported by the company's own network of productionsites and global document management experts, covering IT, contentand risk management, logistics and other requirements. At eachimplementation site Service Point's knowledge management teamdevelops and implements a tailored, centralised web-based system torun the information management capability. Hosted in the UnitedKingdom, the system captures information and data and generatesreports on production activities; this lets the customer track tasks,handle records and manage accounts. The agreement is a genuine

Shell Central OfficeLondon - United Kindom

Shell Wind Power CenterW. Virginia - United States


example of Service Point's unique positioning in the field of globaloutsourcing. We began a complex process of negotiations with thenumerous existing corporate suppliers to implement a documentstrategy underpinned by high security in the storage and handling ofShell content.

The originally estimated value of the deal, which generates annualrevenues of over 2 million euros, is being exceeded in practicethrough cross-selling opportunities: digital mailroom management,information capture, intelligent archiving and online documentmanagement throughout Shell's entire organisation.

According to Rafael López-Aparicio,

Chief Executive Officer of Service Point Solutions:

“This contract is a clear example of our ability toprovide service to a global organisation likeShell. We are very pleased that Shell has selectedSPS in such a competitive environment, and areexcited about the opportunity to fully leverage thepotential of this important customer through ourdocument management solutions.

This is the first contract partially executed in theNetherlands since the acquisition of CendrisDocument Management in October 2006(formally Service Point NL since April 2007). It fitsin perfectly with Service Point's strategic goal towin, grow and develop high-profile internationalcustomers and build on marketing andproduction synergies in the countries where wedecide to operate.”

Owners, Developers & InfrastructureContracted customers include:

Public & AdministrationContracted customers include:

TelecommunicationsContracted customers include:

Corporate, Financial & EnergyContracted customers include:

AutomotiveContracted customers include:

NationalHealthService


Growth strategyOrganic and Expansion

Development

With the balance sheet shored up, the Company is focused oncreating value through organic and Expansion growth.

Service Point's growth strategy is underpinned by four drivers:

1. To expand vertical customer segments

The Company plans to increase its presence in certain sectors such asthe public, financial, legal, services and education sectors and tomaintain its strong positioning in the AEC segment (architects,engineers and contractors) where it is the leading provider of technicaldocument management. This process is being accelerated by thediversification of our engineering and contractor customers into privateand public infrastructure projects and into service sectors. ServicePoint has successfully diversified vertically into new segments of thedocument lifecycle market, developing projects for customers such asLand Rover, Lotus, Jaguar, Brooks, McDonalds, Shell, ExxonMobil andRepsol, among others. This comes on top of the customer portfoliosadded in the six acquisitions made in 2006.

2. To increase the range of services offered within document lifecycle management

Traditionally the Company has served the production and distributionportions of the document lifecycle. The knowledge of customer needs,experience and know-how acquired in the last few years are enablingthe Company to expand its services into the areas of informationcreation, design, storage, access and update through its documentmanagement services.

3. To enhance the revenue mix

The Company plans to increase the percentage of revenuesaccounted by facilities and document management, a more profitablelines of business. In 2006 the percentage of revenues accounted byboth these services increased, with facilities management accountingfor 26% of the total and document management for 8%.

4. To increase recurring revenues

Service Point's business is primarily targeted at companies (B2B). TheCompany's goal is to achieve a high level of recurring revenuesthrough the provision of high value added services and servicesprovided under contract. At the end of 2006, 55% of revenues weregenerated under contracts ranging from one to five years. The rate ofrenewal on these contracts stands at over 90%.

40th AniversaryKoebckeBerlin - Germany

Innovation Center Service Point NetherlandsAlphen aan den Rijn - Netherlands


The six acquisitions undertaken in 2006have enabled Service Point to:

• Double in size • Enter new geographic markets (Germany and the Netherlands). • Diversify its sector presence and expand its service range.

The acquisitions to be undertaken by Service Point must results in:

• A stronger document management business and expanded service range.• Expansion into new customer segments.• A broader geographic footprint.• Higher market shares in current markets.• A greater weight of contract revenues.• Scope for cross-selling.

Acquisition candidates must:

• Be profitable market leaders.• Be bought at a maximum multiple of 6x EBITDA.• Enable retention of the management team.• Enable creation of synergies with Service Point, synergies that are not

reflected in the acquisition price.• Contemplate payment in Service Point shares.

Client sector diversfication

Market segments

PublicSector Industry AEC ServicesEducation

Outsourcing servicesNew revenues New revenues

Financial /Legal

Management TeamService Point Netherlands

Organic

Acquisitions

2009

2009

2006

2006

4 drivers of growth are achivedthrough both organic growth andacquisitions:

1 Diversified client sector 2 Service offer3 Revenue profitability 4 Revenue recurrency

Service offer along document cycle inrease

Document life cycle

DesignCreaion Producion ArchiveAccess & UpdateDistribution

Outsourcing servicesNew revenues New revenues

DocumentManagement


DocumentManagement


Growth StrategyInnovation

Document Management

Innovation is key to success for Service Point. To this end, theCompany is developing a broad range of electronic servicesand solutions for use by the document management division.

These solutions lead to enhanced information managementinfrastructure at any organisation and also enable firms to accelerateand manage critical information flows under any circumstances. In lightof the fact that corporate initiatives are guided by business investmentstrategies, we develop flexible and creative solutions designed to helpour customers cut costs. Accordingly the range of services andsolutions spans the capture, storage, delivery and printing of ourcustomers' information assets, including hard copies, conventionalmail, e-mail, drawings, technical documentation and all kinds ofunstructured electronic information.

The use and operational unification of existing investments inmultifunctional peripheral (MFP) and scanning equipment through ad-hoc platforms and portals provide our customers with a direct interfacewith Service Point or a third party using data management systemsand products.

• Customers can monitor order flows with an automated e-mailsystem implemented across all our work centres. This systemsimultaneously guarantees the delivery of work orders on time andon budget.

• The project file, e-mail correspondence and any other kind ofdocumentation can all be accessed in a flexible and efficient mannerthrough our local area network (LAN) or our web-based solutions.

• Our customers can manage all the drawings, maps and documentsrelated to the lifecycle of a construction project using specialised in-house project management solutions developed by Service Point forthe AEC sector.

• Our innovation strategy has enabled us to leverage our track recordand software and workflow design skills to tailor new solutionscatered to the specific needs of the public healthcare sector, publicinstitutions and financial services sectors, among others.

SP

Risk/D

isaste

r

Man

agem

ent

Acces

sibilit

y

&Com

plian

ce

Space/Storage

Managem

ent

Workflow

&

Process

IntelligentScanning

Paper, Mocroilm& Microfiche

IntelligentArchiving

Capture, Index& Store

Hosting &Securing

Document, Print& Information

Project &CollaborationDocument, Print

& Information


Our order monitoring tools, which are compatible with all operatingsystems and software environments, connected MFP equipment andweb-based service platforms accelerate the flow of documents tocentral services: in sum, an extensive, complete range of services andoptions designed to facilitate customer communications:

• Database extraction, analysis and management for multipleapplications and uses from marketing to administration, accountingand document management for customers from a broad selection ofsectors.

• Storage of the images and data from any kind of documentation onan ASP platform on the customer's LAN or via the web.

• Tailoring of software applications, developed either in-house or withthe help of specialised partners, and document consultancy servicesin order to fully satisfy our customers.

Customers using Scanning and Intelligent Archive Services (IAS)benefit from a range of solutions and tools that form the technologicalbasis of the document management business: our increasing use ofweb based solutions is facilitating global idea- and application-sharing,consolidating a service offering that is building on a rapidly expandingtrack record, enriched by a greater component of knowledge andskills.

Service Point's consulting oriented and personalised approach isunderpinned by a range of services supported by in-house solutionsand others developed by partners with extensive experience in thedocument management sector. Our global knowledge base hascontributed significantly to the abandonment by our customers ofobsolete processes and their adoption of digital technology systems,thereby helping them to update their IT systems and improve theirdocument management.

Capture Search Print Order Collaborate Manage Track Secure Store

New revenues On-Line Services New revenues

Innovation TeamService Point Germany Service Point USA


Q4Q3Q2Q1

2005

2006

0

1,000

2,000

3,000

4,000

Shareholders and InvestorsResults 2006

Resources

• Organic and acquisition growth• Focus on FM / Contracted revenues• Net profit improvement• Quarterly results positive evolution• Euro 60 million refinancing (Euro 15.2 milion available on 03.31.07) with

Lloyds TSB cancel all debt instruments• Positive impact on pro-forma basis of Cendris integration

Quarterly EBIT Evolution in 2006 (‘000 Euros)

Total RevenuesGross MarginEBITDAEBITNet Profit

Net DebtEquityNet Debt / EBITDA

Gross Margin %EBITDA %EBIT %

2005

99,53173,57914,6235,092

188

35,38588,039

2.4 x

73.9 %14.7 %5.1 %

2006

133,16697,26619,3868,4934,842

70,59896,364

3.6 x

73.0 %14.6 %6.4 %

Variation

33.8 %32.2 %32.6 %66.8 %-

99.5 %9.5 %

---

Pro-forma2006 (1)

185,229135,56124,06512,187

8,367

19,298144,756

0.8 x

73.2 %13.0 %

6.6 %


Results 2006 (‘000 Euros)

Quarterly EBITDA Evolution in 2006 (‘000 Euros)

0

2,000

4,000

6,000

8,000

10,000

Q4Q3Q2Q1

2005

2006


2005 2006 2005 2006

Cash and equivalents

Other short term Assets

Long term Assets

Non financial liabilities

Financial Debt

Equity

0

50,000

100,000

150,000

200,000

250,000

300,000

0

50,000

100,000

150,000

200,000

250,000

300,000

Balance Sheet 2006 (‘000 Euros)

In February 2007 SPS did a capital increase of Euro 54.3 million underwritten by AhorroCorporación Financiera resulting:

1. A 57.1% oversubscription

2 . The following application of funds:

• Euro 35 million to cancel the bridge loan lended by Ahorro Corporación Financierato finance 100% of Cendris Document Management B.V acquisition in October2006. Once cancelled, Net Debt /EBITDA level pro-forma 2006, considering the 6acquisitions from January the 1st, was significantly reduced to less than 1 time.

• Euro 19.3 million to reinforce the Balance Sheet

Total Assets Total Liabilities

By country

United KingdomUnited StatesNetherlandsSpainGermany

By service

Digital ReprographicsFacilities ManagementDocument ManagementOther

2006

47%25%12%11%5%

2006

60%26%8%6%


Sales distribution

Pro-forma2006 (1)

34%18%34%9%5%

Pro-forma2006 (1)

38%39%13%10%

0

1

2

3

4

5

6

Pro-forma 2006200620052004

Net Debt /EBITDA Evolution in 2006 (‘000 Euros)

5.2

2.4

3.6

0.8

(1) Net debt includes Euro 35 million contracted to Ahorro Corporación Financiera for theacquisition of Cendris Document Management in October 2006. The above mentioned debt was cancelled with a Euro 54.3 million capital increase whichfinished in February 2007.

(1)

Sales by country 2006 Sales by country pro-forma 2006

Sales by service 2006 Sales by service pro-forma 2006

Germany5%

Spain11%

Netherlands12%

UnitedStates25%

UnitedKingdom

47%

Germany5%

Spain9%

Netherlands34%

UnitedStates18%

UnitedKingdom

34%

Other6%


60%


26%

DocumentManagement

8%

Other10% Digital

Reprographics38%


39%

DocumentManagement

13%


Shareholders and InvestorsStock Market

Profitability

Shares and rights on SPS capital at 31st December 2006

Nº of Shares

Nº of Convertible Bonds

Nº of Options

Nº of Warrants

65,844,581

18,508,979

3,414,428

61,893,333

Values issued by Service Point Solutions

SPS shares

Service Point Solutions' shares are traded on the Madrid and Barcelona stockexchanges under ticker SPS.MC and ISIN code, ES0143421G11. The shares areordinary shares with a nominal value of Euro 0.60 per share. At 31 May 2007, thenumber of shares outstanding stood at 100,111,473 following the Euro 54.3 millioncapital increase undertaken on 27 February, which led to the issuance on 30 March,2007 of 31,037,490 shares and a subsequent 1x30 bonus issue which closed on 24April 2007 and resulted in the admission to trading of 3,229,402 additional shares.

Convertible bonds

The Company's convertible bonds (convertible into SPS shares) are traded on the AIAFmarket under ISIN code number ES0343421006. The bonds were issued in March2005, due March 2010, with a coupon of 5.25% payable semi-annually. The Companyhas convened an Extraordinary Bondholders' Meeting for 22 June 2007 on second call.At the meeting, the Company will propose that the last conversion period be scheduledfor the second half of November 2007, since at 31 May 2007, 96.3% of the 386.8 millionbonds issued had been converted. The conversion ratio in December 2006 was 10shares for every 93 bonds held. The conversion ratio in May 2007 was 1 share for every9 bonds held.

Stock options

The Company has two employee stock option plans in effect. The first was approved atthe General Shareholders' Meeting in June 2003 and the second at the GeneralShareholders' Meeting of June 2005. In 2006 employees exercised 1,221,833 optionspursuant to the 2003 stock option plan, generating additional resources of Euro 2.6million. In March 2007 options were allocated pursuant to the 2005 stock option plan.

Warrants

SPS' warrants were granted to Deutsche Bank London AG and Archie S.a.r.l. as part ofthe compensation paid for their commitment to underwrite the convertible bond issue ofMarch 2005. These securities are freely transferable. The exercise of the warrants over afive-year period would entail an increase in SPS' equity of approximately Euro 25 million.

-0 10

39

49

25

73

38

40

20 30 40 50 60 70 80

01/02/2006 - 02/13/2006

02/14/2006 - 03/13/2006

03/14/2006 - 05/09/2006

05/10/2006 - 08/18/2006

08/21/2006 - 10/26/2006

10/27/2006 - 12/20/2006

0%

5%

10%

15%

20%

25%

12/0611/0610/0609/0608/0607/0606/0605/0604/0603/0602/0601/06


50

100

150

200

05/0704/0703/0702/0701/0712/0611/0610/0609/0608/0607/0606/0605/0604/0603/0602/0601/06

IBEX IBEXC IBEXSSPS

Earning per Share Evolution (Euro / share)

Daily average rotation (negotiated shares / total shares)

0.003

0.074

-0.021-0.050

0.000

0.050

0.100

2004 2005 2006

SPS share internal rate of return in 2006

January 2006

100.0

135.8

January 20070

30

60

90

120

150 IRR:36%

SPS share evolution vs. Spanish Stock Indexes(base 100)

• SPS share liquidity has permited to rotate 100% of the shares in an average of 44 days (with 6times full rotation during 2006), which means once each two months.

Source: Bloomberg

Source: Bloomberg

Source Bloomberg, CNMV

• Service Point EPS has a significant improvement in 2006.

• Investing 100 Euros on January 2nd, considering the 1x40 bonus issue of February,it will result in a 36% IRR on December 31st 2006, subscribing the bonus issue.

• General Shareholder’s Meeting on 28th June 2007 will be proposed the following:- First SPS dividend in its history ( Euro 0.02/share) to be distributed in July.- A bonus issue of 1x30 which would be executed on the first semester 2008.

Nº of shares and convertible bond evolution in 2006

• On 31st December SPS capital is represented by 65,844,581 non nominee shares ofEuro 0.60 nominal value each, all listed in Madrid and Bercelona Stock andExchange, trading at the continuous market trough the SIBE.

• Changes in SPS shares across 2006 are due to the two conversion periods of theconvertible bonds (in May and November) and for the bonus issue of 1x40 done inFebrurary.

Average rotation: 2.8%

Average trading days: 44

31/03/06

62.919.128 65.069.691 65.069.691 65.844.581

34.352.64525.715.456 25.715.456

18.508.979

31/06/06 31/09/06 31/12/060

10M

20M

30M

40M

50M

60M

70M

80M

Number of trading days to rotate 100% of the shares


Shareholders and InvestorsCorporate Governance

Transparency

Board of Directors

Mr. Juan José Nieto Bueso (40): Chairman (executive)Mr. Juan Antonio Samaranch Salisachs (47): Vice-Chairman (external)Mr. Rafael López-Aparicio Areilza (53): CEO (executive)Mr. Álvaro de Remedios Salabert (42): Independent Director Mrs. Aurora Catá Sala (43): Independent Director Mr. Pedro Navarro Martínez (58): Independent Director Mr. Eduardo Paraja Quiroz (46): Independent Director Mr. Ignacio López-Balcells Romero (45): Non-member secretary(external)

The by-law stipulated minimum and maximum number of directorships is 3 and 8, respectively. Atthe Extraordinary and Ordinary General Shareholders' Meeting on 30 June 2004, the number ofDirectors was set at seven, which is the current number of Board members. On 26 June 2006 theshareholders unanimously approved in general meeting the appointment of Aurora Catá Sala,General Manager of the Recoletos Group in Barcelona, Pedro Navarro Martínez, Vice-Chairman ofESADE and Eduardo Paraja Quiroz, CEO of Prosegur S.A. as Directors following the resignationsfrom the Board presented by Ugo Giorcelli on 29 July 2005, and by Robin Holland Martín andIgnacio López-Balcells Romero on 26 June 2006 in order to embark on new professionalchallenges.

Audit Committee

In March 1998 the Board of Directors incorporated the Company's AuditCommittee and appointed its members. Its main function is to assist theBoard in evaluating the Company's internal audit function and to overseethe independence of the external auditor.

The Committee meets at least four times a year. At 31 December 2006 itwas made up of the following members:

D. Álvaro de Remedios Salabert: ChairD. Juan José Nieto Bueso: MemberD. Juan Antonio Samaranch Salisachs: MemberD. Eduardo Paraja Quiroz: Member

Service Point Group Annual Meeting Bundesrat - Berlin

Service Point Group Annual Meeting Bundesrat - Berlin


(1) The number of shares held by Juan José Nieto and Rafael López-Aparicio differ from the figures disclosed in the Registration Statement dated 6 February 2007, due to thesubsequent return in May 2006 of 300,000 held by Juan José Nieto and 313,528 shares held by Rafael López-Aparicio in connection with a share loan associated with theexercise of the 2003 stock option plan. (2) Pre-assigned, allocated in March 2007. (3) The conversion ratios used to calculate the total share figures: 93 bonds = 10 shares and 1 option = 1 share.

Board Members

Mr. Juan José Nieto BuesoMr. Juan Antonio Samaranch Salisachs Mr. Rafael López-Aparicio Areilza Mr. Álvaro De Remedios SalabertMrs. Aurora Catá SalaMr. Pedro Navarro MartínezMr. Eduardo Paraja Quiroz

Total

Shares (1)

360,6401,0763,945

12,850

00

368,512

Convertible Bonds

00

211,1150000

211,115

Options (2)

795,3110

663,5670000

1,458,878

Shares, options and bonds held by the members of the Board at 31 December, 2006

Appointments and Compensation Committee

SPS' Compensation Committee was incorporated in December 1999and is charged with assisting the Board with all matters related toDirector and management appointments and compensation, as well assetting compensation policy.

The Committee meets at least four times a year. At 31 December2006 it was made up of the following members:

Mr. Juan Antonio Samaranch Salisachs: ChairMr. Juan José Nieto Bueso: MemberMr. Pedro Navarro Martínez: MemberMrs. Aurora Catá Sala: Member

Strategy and Business Development Committee

In July 2005, the Board of Directors set up a Strategy and BusinessDevelopment Committee to boost and strengthen the Company'sstrategic and business development. Its main duty is to evaluate theCompany's growth and business strategy.

At year-end 2006 the Strategy and Business Development Committeewas made up of the following Board members:

Mr. Pedro Navarro Martínez: ChairMr. Rafael López-Aparicio Areilza: MemberMr. Juan Antonio Samaranch Salisachs: MemberMr. Juan José Nieto Bueso: Member

Total shares (3)

1,155,9511,076

690,2121

2,85000

1,850,090


Strategy

SPS is strongly committed to sustainable development of long-termvalue creation for all stakeholders: shareholders, journalists,employees, clients, suppliers as well as the community and theenvironment, not just in the countries in which it operates, and beyondthe established legal framework.

Principles

The principles on which this strategy is built are:

1) Sound policy of corporate responsibility with transparentcommunication

The company communicates its corporate responsibility strategy toshareholders, investors, journalists, employees, clients, suppliers andinstitutions through printed and electronic media (website, e-mail) orverbal presentations and also acts on suggestions of ways to improvethe content or transmission of this information.

2) Corporate Governance practices

Service Point strongly believes in the principles that form the basis ofCorporate Governance best practices and our actions are governed bytransparency, business ethics and professionalism.

Service Point has adopted a series of internal policies that define thecommon principles by which its subsidiary companies should act aswell as the structure and composition of their managementcommittees, regulating the relationships between them and ensuringcoordinated action and the necessary influence of the inherent powersof the majority shareholder, Service Point Solutions S.A., as parentcompany.

Service Point is at the forefront in applying these standards and it isadopting the measures presented by Law 44/2002, of 22 December,Law 26/2003, of 17 July and Ministerial Order 3722/2003 of 26November, within the legally established period.

Of particular note, the following measures have been adoptedduring 2006:

• Preparation of the Annual Corporate Governance Report for 2006 inline with the format established by Circular 1/2004 of the ComisiónNacional del Mercado de Valores (Spanish Securities Commission).

• New design of the corporate website (www.servicepoint.net) with agreater information and easier way of navigation. The financialinformation and Corporate Governance information on the Companywebsite in the section “Information for shareholders and investors”)meets the content and structural requirements established byCircular 1/2004 of the Comisión Nacional del Mercado de Valoressince 2004. The visibility and accessibility to this information hasbeen improved in 2006.

• Increase in subscribers to the electronic bulletin (shareholders,investors, journalists) and number of visitors to the website, with atotal xxxxx visitors in 2006.

• More pro active in carrying out investor relations activities withpresentations made in the Madrid and Barcelona Stock Exchanges,meetings with investors and analysts as well as with the media inBarcelona, Madrid and London.

3)Policy on privacy and security of information

The SPS policy on privacy and security of information sets out theprocedures and internal controls with the purpose of protecting anyinformation of a personal nature from inappropriate use. This policy isapplied in all areas of the company in which information containinginformation of any type about clients, employees, suppliers,shareholders, etc. is processed.

The nature of the information entrusted to us by our clients is suchthat the systems must adapt constantly to ensure privacy. Theinformation provided is held in a secure location with the requiredsegregation of activities and processes to provide the maximumprotection when the information is used, shared or stored.

Depending on the use or process that the information is subject to at agiven moment, it can be stored in computers, transmitted acrossnetworks, printed on paper or even transmitted verbally. As far assecurity is concerned, our function is to provide systems with theappropriate protection regardless of the medium involved and theformat that they contain.

The internal rules stipulate that:

• The company adheres to the regulations regarding the managementof privacy and/or confidentiality of information established in thecountries in which it operates.

Shareholders and InvestorsCorporate Responsibility

Sustainability

The company's communicationchannels are as follows:

Shareholders' [email protected]: 902 999 203

Investor Relations & Analyst [email protected] Telephone: 93 508 24 00

Media [email protected] Telephone: 93 508 24 00

Address:Edificio Sarriá ForumAv. Sarriá 102-106, 8ª planta08017 Barcelona (España)


• All the service points must comply with the legal regulations regardingdocuments under copyright, including all type of material that can becopied.

• All the service points must take adequate precautionary measures toprotect the information deposited against possible loss, destruction,falsification or misappropriation.

• Compliance with these security rules is monitored by an internalcontrol system and is complemented with technical training andsecurity training programs for all employees.

4)Client satisfaction.

Our efforts are focused on the following areas:

• Quality assurance supported by ISO 9001 certification and the use ofthe Service Level Agreements (SLA) which allow service quality andthe contract performance to be measured objectively.

• Achievement of continuous improvement in client satisfaction levels

The tools used to measure the level of satisfaction include:

- Client suggestion box at the head office of Service Point in eachcountry

- Communication Committee and informative sessions that enableemployees to resolve difficulties and in turn improve services

- Quarterly client reviews and planning meetings, in which performanceover recent months is evaluated, as well as the strategy to strengthenthe partnership with the client in the future

- Monthly evaluation of the client using a cost and expense savingsreport, compliance with deadlines and service quality, amongstothers.

- Client Satisfaction Survey (CSS) with a quantitative evaluation thatprovides indicators of the service satisfaction levels.

5)Attract and motivate the best human resources

The success of Service Point depends on harnessing the best resultsfrom its employees. Our efforts are focused on encouragingcommunication between employees and management, which isachieved through the following activities:

• Development and training programs.• Progress towards achieving the company's objectives is recognised

through a component of variable remuneration and stock optionplans. In addition, commercial activity is rewarded through monthly,quarterly and annual prizes.

6)Protection of the environment

Environmental Management Standard

In 2006 Service Point UK spearheaded the roll-out of ISO accreditationacross the SPS group feeding a task force of experts internationally todeliver full registration. Having achieved ISO 14001 (at UK Head Officeand key account level) we are encouraged that owning the accreditationfully supports the demands of our customer base.

This international environmental management standard controlling andimproving a company's performance is central to our ongoing ambitionto retain our minimum impact on the environment. Service Pointcontinues to drive consistent and acknowledged ways to mergeenvironmental considerations into our day to day activities and strategicplanning processes.

The 'Taskforce' focus:• Gap Analysis - identifying our current status in relation to the EMS

(environmental management system)• Team Workshops - Driving commitment and ownership of EMS• Awareness - providing education and gaining commitment from the

team

7)Economic and social development in the environment

Through the course of 2006, Service Point has undertaken a largenumber of activities aimed at the economic and social improvement ofits community as well as in countries outside its operating area. Someexamples of these activities are: • Donations of cash or technical and graphic material for charitable

works• Sponsorship of activities related to the sectors in which Service Point

is involved• Supporting research and the treatment of diseases

Documents

2006 Annual Report Index - Service Point · 2019-11-05 · Page 2Annual Report SPS S.A. ‘06 Letter from the Chairman • A record year in Serce Point Solutions history • Organic