lsg annual report 2002 eng - ku leuven

The Banking and Finance Commission has authorized LSG on April 2 2003 to use

the present annual report as reference document each time it solicits funds from the

public in the context of title II of the Royal Decree n° 185 of July 9, 1935 by means

of the procedure of dissociated information, and such until publication of its next

annual report.

In the context of this procedure, a transaction note needs to be attached to the

annual report. The annual report together with the transaction note constitute the

issue prospectus in the sense of article 29 of the Royal Decree n° 185 of July 9, 1935.

In accordance with article 29ter, §1, par. 1, of the Royal Decree n° 185 of July 9,

1935, this prospectus must be submitted to the Banking and Finance Commission.

Only the Dutch version

of the annual report has legal force,

the English version representing

a translation of the original in Dutch.

The correspondence between

the different language versions

has been verified by LSG under

its own responsibility.

LAUNDRY SYSTEMS GROUP

ANNUAL REPORT 2002

ANNUAL REPORT 20022

MESSAGE TO THE SHAREHOLDERS

The year 2002 did not bring the turnaround in profitability LSG had expected. A

number of external factors such as the global slowdown in the economy and the

strengthening of the euro versus the dollar have had their impact on LSG’s results. The

LSG turnover decreased by 6 % compared to 2001. Nevertheless, we were able to keep

our internal financial objectives, which we had set in relation to EBIT, EBITDA, working

capital reduction as well as debt reduction. Our EBIT improved by 22 % and our

EBITDA by 65 % compared to 2001.

The Commercial Laundry Division returned to normal profitability levels after a weak

2001 performance. The turn-around was mainly due to the solid return in US sales as

well as the restructuring of our two US manufacturing units. The Commercial Laundry

Division has shown to be more resistant to the overall economic climate as the

investment threshold is lower. Furthermore, Coin Laundries are anticyclical and

therefore less affected in periods of recession.

The Heavy-Duty Laundry Division suffered from the deterioration of the investment

climate in 2002, especially in the US. Our customers postponed investment decisions

and the difficult banking environment made it hard for medium sized laundries to

obtain financing for their projects. The Heavy-Duty Division was also hit by the

bankruptcy of a large Austrian customer as well as provisions against our investments

in South America.

In light of these adverse developments, we revised our plans in the course of the

year. Capital expenditures were cut in order to improve our cash flow. We reduced the

number of employees by further 10 % to 1290 (at yearend) in order to adapt our

capacity to the current market conditions. The reductions were implemented without

sacrificing service or product development initiatives.

LSG has ended the year 2002 with a better operating result on a lower turnover, and

this is fully attributable to the continuous effort in aligning the production capacity to

the market conditions and deploying cost awareness throughout all levels of the

organization.

Our successful capital increase of 21,4 million euro in May 2002 which was fully

subscribed as well as the reduction in working capital reduced our net financial debt

by 27,6 million euro compared to last year.

Our financial result was negatively affected by the expenses associated with the bank

debt restructuring and capital increase as well as the negative effect of the USD

translation on intercompany loans. The financial charges and the extraordinary results

related to the restructuring of D’hooge resulted in a net loss of 2 million euro.

The business climate for 2003 is highly uncertain. The economy is weak in most

countries and only few positive signals suggest a pick-up shortly. The markets lack

direction; consumer and investor confidence is expected to remain low.

ANNUAL REPORT 20023

Jesper M. Jensen, Chief Executive Officer

Raf Decaluwé, Chairman of the Board of Directors

During 2003 we will further invest in our markets in order to fully cater for

our laundry customers needs by maintaining our investments in sales, service &

maintenance as well as in product development. We will enhance our operational

excellence by further focusing on cost and cash. In light of our actions we do expect to

be able to reach a net profit in 2003.

We would like to thank our staff for their day-to-day commitment and we look forward

to another challenging year together.

On behalf of the Board of Directors, we would like to thank our customers for their

confidence in our products and services as well as shareholder for their confidence

in the company, which was undoubtedly confirmed through the successful

capital increase.

ANNUAL REPORT 20024

Mission statement

Organization

Divisional sales figures

Manufacturing

Distribution

Competitive advantage

Markets

PROFILE OF THE GROUP

“We will be the preferred supplier in the laundry industry by leveraging our broad

laundry expertise to design and supply single machines, systems and integrated

solutions.

We will grow by continuously extending our offer and bringing innovative products and

services addressing specific customer needs.

Our success will come from combining our global skills with local presence.”

LSG is organized in three divisions: the Heavy-Duty Laundry Division (HDLD), the

Commercial Laundry Division (CLD) and LSG North America (LSG NA).

LSG NA is the US Sales and Marketing organization for both Heavy-Duty and

Commercial Laundry products. Therefore, the results of this division are split over both

activities and the result of each activity is included in the Heavy-Duty Laundry Division

and the Commercial Laundry Division respectively.

Million euro CLD HDLD

2002* 69,6 125,6

2001* 73,9 133,2

2000* 77,9 138,1

* Restated for D’hooge; used to be part of HDLD, now included in CLD

LSG has a manufacturing platform of 10 companies in 8 countries. Some companies

(e.g. Ipso USA and Jensen Netherlands) supply products to different divisions.

The most important market, the US, is served through the LSG North America division

for both Heavy-Duty and Commercial Laundry products. In other markets, distribution

is organized through own sales and service companies or independent distributors.

The Heavy-Duty Laundry Division realizes most of its turnover through own sales

companies, whereas in the Commercial Laundry Division, most of the turnover is

realized through independent distributors.

Our market coverage and our large know how are unique for the laundry market.

Markets LSG realizes its turnover geographically as follows:

Million euro Europe North America Em. Markets

2002 111 66,1 18,1

2001 112,1 75 20

2000 115 75 26

ANNUAL REPORT 20025

COMMERCIAL LAUNDRY DIVISION (CLD)

The Commercial Laundry Division is managed out of Wevelgem (Belgium). It contains

four companies: Ipso-LSG (Belgium), Ipso USA (USA), Cissell Manufacturing (USA) and

D’hooge (Belgium). As a division it markets laundry and finishing equipment for the

commercial laundry, the on premise laundry and the dry-cleaning markets, worldwide.

To do so, it has two brand names: Ipso and Cissell.

Although the D’hooge equipment is produced within the Commercial Laundry Division,

it is mainly commercialized through the Heavy-Duty Laundry Division network

(Jensen). The reason for having D’hooge within the Commercial Laundry Division is to

realize the production and engineering synergies with Ipso-LSG on washer extractors.

Ipso has the strongest commercial brand name in Europe within the division. It is

estimated to have acquired a 15% market-share in the commercial laundry market

worldwide. Part of the sales is done through group sales companies in South East Asia,

North America and South Africa. In the rest of the world, sales are organized through

a very close relation with a local distributor.

The other commercial brand name in the group, Cissell, has established a strong

reputation in the dry-cleaning segment of the Laundry market with its commercial

finishing equipment and dryer line. As such it positions itself independently from

Ipso and is being managed out of Louisville, Kentucky, USA.

Profile Commerial Laundry Division

Wevelgem (Bel.)

Ipso-LSG

Wevelgem (Bel.)

Cissell Manufacturing

Louisville (USA)

D’hooge

Ghent (Bel.)

Ipso USA

Panama-City (USA)

Cissell

Louisville (USA)

D’hooge

Ghent (Bel.)

LSG North America

Fort Mill (USA)

Jensen Asia

LSG South-Africa

Production

Ipso-Rent

Sales

Ipso-LSG

Wevelgem (Bel.)

ANNUAL REPORT 20026

The product range of the CLD contains the following products:

• Washer-Extractors with a capacity of 5,5kg up to 125 kg, including medical applications

• Dryers with a capacity of 9 kg to 86 kg

• Ironers in the capacity range of 1,4m till 2,6m wide

• Commercial finishing equipment (dry cleaning equipment), being different kinds of

presses, ironers and ironing boards, form finishers, vacuum spotting boards, steam

finishing boards, pant toppers, etc.

The washer-extractors and dryers are developed and produced within the CLD, more

precisely in the following production plants:

• Ipso-LSG in Wevelgem, Belgium

• Ipso USA in Panama City, Florida (US)

• Cissell (dryer production) in Louisville, Kentucky (US)

• D’hooge in Ghent, Belgium

The ironers are produced at Jensen Netherlands, a company of the Heavy-Duty Laundry

Division. After the planned closure of this plant, the production will be integrated

within Ipso-LSG.

The commercial finishing equipment is produced in the Portland division of Cissell.

Other products are sourced outside the group. These are mostly less strategic or low

volume products that complete the internal product range, or because of cost

considerations.

2002 2001

Turnover, mio euro 69,6 73,9 *

EBIT, mio euro 3,1 -1,6

Investments, mio euro 0,7 0,8

Number of employees 423 486

* Restated for D’hooge

The US Dollar decrease and the low activity in the tourism related countries have

negative affected the total CLD sales figures.

As expected one year ago, the cost reduction measures taken at Cissell and Ipso USA

in 2001 and further implemented during 2002 have resulted in much stronger

profitability figures for the Commercial Laundry Division. On top of that, the activity

level in the USA picked up considerably, which helped Ipso-LSG regain its strong

position. Only D’hooge suffered from a severe regression of the heavy-duty washer

extractor and ironer market in its traditionally strong markets.

In Cissell the volume reduction has been halted in 2002, and severe measures were

implemented in order to restore profitability. In total, headcount at Cissell has been

reduced by over 100 FTE’s since. From now on, Cissell concentrates on the most

profitable part of its product mix and downsized the loss making products. Therefore a

new line of small dryers has been launched and the range of larger capacity dryers has

been expanded. This has resulted in a complete turn-around for this factory.

Activities 2002

ANNUAL REPORT 2002

Ipso USA has also reached its break-even level both through volume increases and cost

reductions. We estimate the market share of the IPH machines produced at Ipso USA

to be around 5%. This trend-setting machine is gradually acquiring a strong reputation

on the US market, and more established distributors are starting to sell the product.

An important volume increase was realized on this typical On-Premise-Laundry

machine in difficult market conditions.

Also Ipso-LSG has further increased its market share. In the USA a considerable amount

of coin projects were realized, also thanks to the low interest rates. The position in the

UK, France, Spain, Denmark, Belgium and Asia further improved. Other European

markets were suffering somewhat more from the difficult economical conditions.

The integration between D’hooge and Ipso-LSG was further implemented. D’hooge will

concentrate on the production of large heavy-duty washer extractors and the smaller

commercial ironers for Ipso-LSG. D’hooge will need to concentrate solely on

manufacturing activities, while for the other functions synergies will be realized with

Ipso-LSG, from which D’hooge is now a division. In this respect a restructuring

was carried out in September 2002. By the end of 2004 the manufacturing activities

will leave the old rented site in Ghent. An appropriate new location will need to be

identified by the end of 2003.

The positive downward trend of the working capital at the Commercial Laundry

Division continued over 2002. In the last two years the working capital was reduced

by almost 50%.

A 73kg washer extractor and a 170# dryer were launched during the course of 2002,

together with a private label product range. A lot of important product enhancements

were also realized. The list of product development projects that are currently running

in CLD is high.

As expected, the results of all the measures taken in the course of 2001, started to

manifest themselves clearly in 2002. If the sales activity remains at the actual level,

the effects will be even more accentuated in 2003, since most measures have now

completely been implemented.

The major markets remain positive about the future degree of activity so that a

further improvement of the results for 2003 is expected. In the US, the coin store

investment sector is expected to continue improving. Only a long-term conflict in the

Middle East involving several Western countries and the USA might negatively

influence this trend.

Although continued attention will be given to the working capital evolution, a similar

reduction as the one realized in the last two years will not be achievable.

Outlook 2003

7

HEAVY-DUTY LAUNDRY DIVISION (HDLD)

The Heavy Duty Laundry Division, known in the market as the Jensen Group, has as

purpose to assist heavy-duty laundries worldwide to produce quality textile and gar-

ment services. As a global network organization, the Jensen Group develops and pro-

duces innovative, reliable equipment, system solutions and services – from single

machines to total laundry process engineering.

Profile

ANNUAL REPORT 20028

BU - Washroom Technology

Jensen-Senking

BU - Materials

Handling Technology

Jensen UK

Jensen Sweden

Sales and Service Centers Business Units

SSC - FranceFrance Jensen

SSC - UKJensen UK

SSC - AsiaJensen Asia

SSC - SALSG South-Africa

Jensen ProjectsLSG

BU - Finishing Technology

BU - Jensen

Information Technology

Jensen Denmark

Jensen Switzerland

Jensen Netherlands

Heavy-Duty Laundry DivisionBrussels (Bel.)

SSC - GermanyJensen-Senking

SSC - SwitzerlandJensen AG

LSG North America

The Division commercializes its equipment

and solutions under the following major brand names:

• Senking® washroom, tunnels

• L-Tron® washroom, washer-extractors

• Futurail® washroom, monorails

• Jensen® Finishing equipment

• Metricon® Garment handling equipment

We produce the equipment and solutions in the following plants:

• Jensen Senking in Harsum, Germany

• Jensen Netherlands in Kerkdriel, The Netherlands

• Jensen Denmark in Rønne, Denmark

• Jensen AG in Burgdorf, Switzerland

• Jensen UK in Banbury, United Kingdom

• Jensen Sweden in Borås, Sweden

Washer extractors and ironers for HD Laundries are also produced in the CLD plants

D’hooge in Ghent, Belgium and in Ipso USA in Panama City, USA.

We sell our equipment and solutions through our own sales and service centers (SSC’s)

and through distributors. The relative share of our sales through our own SSC’s has

increased over the last years since these are operating in the most important heavy

duty markets like Germany, United Kingdom, France, Singapore, Switzerland, South

Africa and North America, and are becoming critical in their coordination role for

the increasing number of complex installations involving many of our production

companies.

ANNUAL REPORT 20029

We think globally and act locally

A world of competence in total

laundry process engineering

Activities 2002 2002 2001

Sales, mio euro 125,6 133,2 *

EBIT, mio euro 2,8 6,4

Investments, mio euro 2,1 9,5

Employees, mio euro 838 988

* Restated for D’hooge

The turnover in 2002 was affected by the world recession and especially the effect of

the September 11 event influenced the turnover in equipment related to the tourism

and traveling sector, especially the Flatwork Finishing activity.

The garment finishing area showed continued growth supported by new product

introductions.

Within Washroom equipment and solutions, we increased our sales in our major

markets. Our own sales and service companies reached their overall sales objectives

(except in USA), resulting in a considerable growth in these markets, with however

lower margins due to price pressure and complex project execution.

In the US, 2002 started up with activities that were under way from 2001, however

the slowing economy affected the HDL activities in the 2nd and 3rd quarters of 2002.

In particular, due to reduced airline and tourist travel, activities in the hospitality

sector decreased significantly. Projects as well as orders were postponed or even

cancelled. Also other countries with a traditionally high activity in tourism experienced

a downturn in activity.

The profitability has also been influenced by increased write-offs of bad debtors

related to the downturn in the economy.

The Division continued to focus on providing single machines as well as integrated

laundry solutions to our diverse customer segments, at competitive prices.

We do not expect that market conditions in 2003 will be better than 2002, and

therefore focus on internal efficiencies and on enlarged product offering to the

existing customer base.

In the US, the hospitality and food & beverage market sector is expected to remain flat,

however the health care sector is investing in several new plants and LSG-NA has

received significant orders for turnkey projects in this sector.

Due to the lower turnover in flatwork equipment, it was decided to investigate and

negotiate the closing of the Jensen Netherlands plant and to move the production to

Jensen Denmark and Ipso-LSG in Wevelgem. The plan has subsequently been

approved by all social parties and will be implemented with a final closing on April 1,

2003. It is foreseen that this will improve significantly the profitability of the flatwork

business unit.

Continued attention will also go out to the further reduction of working capital.

Product Developments are ongoing within our technology competences and the

international Texcare Exhibition in Las Vegas in August 2003 will be the occasion to

show new developments especially to the American market.

Outlook 2003

ANNUAL REPORT 200210

CORPORATE GOVERNANCE CONSIDERATIONS

COMPOSITION OF THE BOARD OF DIRECTORS

According to the articles of association the Board of Directors must be composed of at

least three and no more than eleven members. The articles do not contain any

specific provisions for the composition of the Board of Directors, the age of the

directors or the terms on which people can become director.

However, in the spirit of Corporate Governance an effort is being made within

the Board of Directors to achieve a balance in the profile of the different members

(executive members versus independent directors and representatives of

shareholders; industrial versus financial background). Furthermore, in the context of

the merger with JENSEN, agreements have been concluded regarding the composition

of the Board up to the General Assembly of May 2003.

In the course of 2002, the independent director and chairman to the Board, Jan

Brantjes resigned. Raf Decaluwé succeeded Jan Brantjes as Chairman of the Board.

Another change that took place is that the mandate of Geert Duyck, that became

vacant in 2001, was taken over by Hans Werdelin in 2002.

The Board of Directors of LSG is now composed as follows:

Name Function End term of

office

1. Representatives of the majority shareholders (non-executive directors)

Jørn Munch Jensen (Jensen Invest A/S) Director 2003

Guy Mampaey (GIMV) Director 2003

Christian Frigast (Axcel IndustriInvestor A/S) Director 2003

Niels Olav Johannesson Director 2003

2. Independent Directors (non-executive directors)

Jan Brantjes Chairman (until 10/09/2002) 10/09/2002

Luc Van Nevel Director 2003

Hans Werdelin Director 2003

Raf Decaluwé Chairman (as from 10/09/2002) 2003

3. Representatives of the management

Jesper Munch Jensen Man. Director 2003



From left to right sitting : Raf Decaluwé, Jørn Munch Jensen, Jesper Munch Jensen

From left to right standing : Niels Olav Johannesson, Guy Mampaey,

Hans Werdelin, Christian Frigast, Luc Van Nevel

Jorn Munch Jensen is founder of the Jensen Group. He is member of the Board of the

European Textile Services Association and Kansas Wenaas A/S.

Guy Mampaey is Vice-President of Corporate Investment of GIMV and is part of the

executive committee of GIMV since 1994. He is a member of the Board of several

companies.

Christian Frigast is the Managing Director of Axcel IndustriInvestor A/S. He is

Chairman of the Board and Board member of several companies.

Niels Olav Johannesson is the Managing Director and CEO of Icopal A/S. He is

Chairman of IAA (large employer’s association in Denmark) and member of the Board

of several companies.

Luc Van Nevel is the president and CEO of Samsonite Corporation. He is a Board

member of several companies, including VRT (Flemish State Radio and Television).

Hans Werdelin is the former CEO of Sophus Berendsen A/S and is Chairman and Board

member of various companies.

Raf Decaluwé is the former CEO of Bekaert S.A. He held senior positions at Black &

Decker and Fisher Price Toys prior to joining Bekaert S.A. He is director in different

companies.

Statutory auditor:

PriceWaterhouseCoopers Bedrijfsrevisoren, represented by Mr. Jan van den Bulck.

The Board of Directors acts independently but on the proposal of the Management

Team in determining the strategy of the group, and supervises its day-to-day manage-

ment. The Board is regularly informed through management reports, rolling forecasts,

strategic and operational plans and presentations by the Management Team.

The Board of Directors met four times during the past year and had telephone confer-

ence calls at several occasions. Topics of discussion included:

• LSG’s overall strategy

• Economic and market developments

• LSG’s financial structure and performance

• Restructuring measures

• Major investment projects, acquisitions and divestments

Remuneration Committee

The Remuneration Committee consists of Raf Decaluwé, Hans Werdelin and Christian

Frigast.

The Committee meets at least once a year and makes recommendations to the Board

of Directors regarding the remuneration of the Management Team and the senior man-

agement.

Audit Committee

The Audit Committee is composed Raf Decaluwé, Luc Van Nevel and Christian Frigast

The purpose of the Committee is to assist the Board in its supervisory function and,

more specifically, in the supervision of:

• The financial information which is intended both for the shareholders and other

interested parties;

• The system of internal control which the Board and the management have set up;

• The audit process.

The Audit Committee meets at least twice a year in the presence of the statutory auditor.

Appointments Committee

The Appointments Committee is composed of two directors (Christian Frigast and Guy

Mampaey).

The task of the Appointments Committee is to evaluate candidates for the Board.

The Appointments Committee only meets when necessary.


Functioning of the Board of Directors

Committees established by the Board

The non-executive directors receive a fixed fee. Total remuneration paid to the

non-executive directors amounted in 2002 to 399.975 euro. No performance-related

remuneration or other benefits have been attributed to the directors in the year 2002.

No loans have been granted to the members of the Board. No unusual transactions

have taken place in which the Board members of the company were involved. Total

number of shares owned by the Board members and the Management amounts to

7.955. No warrants were owned.

Next to his mandate, the statutory auditor received over the year 2002 no additional

fees. The statutory auditor received fees of 20.800 euro (excl. VAT) for the execution

of his mandate on the statutory and consolidated accounts of LSG.

The day-to-day management is entrusted to the Management Team. The Management

Team ensures that the strategic policy lines are translated into everyday management.

The Management Team meets every month. The members of the Management Team

are invited to participate in the meetings of the Board of Directors and can give advice.

The Management Committee is composed as follows:

• Jesper Munch Jensen, Chief Executive Officer

• Steen Nielsen, President Heavy-Duty Laundry Division

• Jean-Marc Vandoorne, President Commercial Laundry Division

• Jens Voldbaek, President LSG North America

• Erik Vanderhaegen, Chief Financial Officer

Jesper Munch Jensen (37) started his career at Swiss Bank Corporation and worked as

a stockbroker on the Swiss Stock Exchange (1984-1987). After obtaining an MBA

degree of Business School Lausanne, he joined the Jensen Group as an assistant

general manager of Jensen Holding (1991). He became CEO of the Jensen Group in

1996 and CEO of LSG in September 2000.

Steen Nielsen (51) holds a degree in civil engineering and a Bachelor of Commerce &

Finance. In the period 1978-1987, he worked for F.L. Smidth & Co. as a sales and

divisional manager. He joined the Jensen Group in 1987 as sales and marketing

director. He is now president of the Heavy-Duty Laundry Division.

Remuneration

Day-to-day management


From left to right: Erik Vanderhaegen, Jesper Munch Jensen, Jean-Marc Vandoorne, Jens Voldbaek, Steen Nielsen

Jean-Marc Vandoorne (34) holds a degree in commercial engineering from the Ecole

de Commerce Solvay. After his studies, he joined Arthur Andersen as an audit senior

and consultant (1992-1998). Afterwards, he worked for Mobil Plastics as a supply chain

manager (1998). He joined Ipso-ILG in 1999 as a COO, became managing director of

Ipso-LSG in 2000 and is president of the Commercial Laundry Division since July 1,

2001.

Jens Voldbaek (57) holds a Master of Science-degree from Portland State University.

He started his career as a high school mathematics instructor (1968-1974). Afterwards

he worked for Oregon Portland Cement (1975-1977) as a divisional manager. He held

various sales and administrative positions with F.L. Smidth & Co. (1977-1987) and

became president of Jensen USA (1987). He is now president of LSG North America.

Erik Vanderhaegen (39) obtained a commercial engineering-degree from the Catholic

University of Leuven. He started his career at Arthur Andersen where he worked for

nine years as CPA and consultant in various financial and non-financial projects. He

then joined N.V Bekaert S.A., world’s largest producer of steel wires as corporate tax,

audit and mergers and acquisitions manager. He joined LSG in 2001 as CFO.

Over the year 2002, total remuneration paid to the management team amounted to

1,194,500 euro. The remuneration of the CEO is included in this amount and not

included in the Board fees since he receives no board fee.

No specific policy exists. However, the Board strives to provide the shareholders with

a reasonable return.

To prevent privileged information from being used unlawfully by directors or members

of the Management Team, all the members involved have signed a protocol to prevent

insider trading. All trading needs to be authorized by the Compliance Officer before it

can take place.

In order not to harm the autonomous character of LSG NV and to protect the sharehold-

ers’ interests, a shareholders’ agreement between GIMV and Jensen Invest A/S has

been concluded for a period of 3 years, starting from February 28, 2000 (date of the

merger between Ipso-ILG and Jensen Industrial Group). This agreement contains rules

for the composition of and conditions for changes in the Board of Directors and the

Management Committee as well as a number of limitations relating to the transfer of

shares by GIMV and by Jensen Invest A/S. The shareholder agreement came to an end

in February 2003 and was not renewed. No agreement was made between GIMV and

Jensen Invest A/S with respect to the capital increase of 2002.

During the general assembly of shareholders of May 9, 2003, many changes to the

bylaws of the company will be presented. These changes primarily relate to the

alignment of the existing bylaws to the new corporate governance legislation, as well

as to allow electronic means of communication and voting for Board and Shareholder

issues.


Policy relating to the appropriation of the result

Protocol to prevent insider trading

Relationship with the shareholders

Changes in bylaws with respect to corporate governance

Stock price evolution

Communication strategy

Change in shareholdings

INFORMATION FOR THE SHAREHOLDERS

The LSG share is quoted on the Euronext Stock Exchange (Reuters: IPSO.BR; Bloomberg

LSG BB) since June 1997. The price of LSG shares can be found online on the following

websites:

• LSG: http://www.LSG.be

• Euronext: http://www.Euronext.be

The LSG stock price declined from 8 euro at the end of 2001 to 3,24 euro at the end of

2002, with an average daily trading volume of 2.152 shares (see graph 1). The LSG

share outperformed or moved in line the Belgian All Shares return index and the

Belgian Small caps index until the moment the capital increase (at 5,17 euro per

share) was announced (see graph 2).

Since January 2, 2002 LSG has been admitted to the NextPrime segment of Euronext.

LSG will maintain its communication strategy, based on the following principles:

• Organize 2 analysts’ meetings per year (after half year and full year results).

• Distribute its press releases towards professional and private investors and make it

available on its own corporate website.

• All communication, including the corporate website, is available in English and

Dutch. Half year and full year results are also communicated in French.

• Information on shareholdings, financial calendar and share transactions by Board

members and management is available on the corporate website.

• Be present on at least 1 event for private investors.

In May 2002, LSG organized a capital increase in the framework of its bank debt

restructuring. 4.132.421 new shares were issued at a price of 5,17 euro per share. As

a result of this transaction, GIMV increased its stake from 10,52% to 16,32%, Jensen

Invest A/S maintained its stake of 48,64% and the free float decreased from 40,84%

to 35,04%.

Jensen Invest

GIMV

Free float

LSG SHAREHOLDERS

10,5 %

41 %48,5 %

16,5 %

35 %48,5 %

Before capital increase After capital increase

Graph 1: LSG Share price and volume

02-0

1-20

02

01-0

2-20

02

05-0

3-20

02

08-0

4-20

02

09-0

5-20

02

10-0

6-20

02

11-0

7-20

02

12-0

8-20

02

11-0

9-2

002

15-1

0-2

002

14-1

1-20

02

20-1

2-20

02

25.000

22.500

20.000

17.500

15.000

12.000

10.000

7.500

5.000

2.500

0

16,00

10,00

8,00

6,00

4,00

2,00

0,00

Volume Share price

LSG B.A.S. Return Smallcaps

Graph 2: Relative price performance

160,00

140,00

120,00

100,00

80,00

60,00

40,00

20,00

0,00

02-0

1-20

02

16-0

1-20

02

30-0

1-20

02

13-0

2-20

02

27-0

2-20

02

13-0

3-20

02

27-0

3-20

02

10-0

4-20

02

24-0

4-20

02

08-0

5-20

02

22-0

5-20

02

05-0

6-20

02

19-0

6-20

02

03-0

7-20

02

17-0

7-20

02

31-0

7-20

02

14-0

8-20

02

28-0

8-20

02

11-0

9-2

002

25-0

9-2

002

09-1

0-2

002

23-1

0-2

002

06-1

1-20

02

20-1

1-20

02

• May 9, 2003: 10 AM: General Assembly at the LSG Headquarters, Brussels

• May 27, 2003: 1st quarter results 2003

• August 27, 2003: half year results 2003 (Analysts’ meeting)

• November 26, 2003: 3rd quarter results 2003

• March 2004: full year results 2003 (Analysts’ meeting)

Furthermore, the Investor Relations Manager is available to individual shareholders,

analysts, specialized journalists and institutional investors for meeting them and

enabling them to see LSG’s short- and long-term potential both as a whole and

relating to specific activities. Lectures, meetings and site visits can be organized on

request.

LSG’s Annual Report, press releases and other information are available on the

corporate website (http://www.LSG.be).

Shareholders and investors who want to receive the Annual Report, detailed Annual

Accounts of LSG N.V., press releases or other information concerning LSG, can contact:

Laundry Systems Group N.V.

Gunter Vanden Neucker

Investor Relations Manager

‘t Hofveld 6 F2

1702 Groot-Bijgaarden

Tel. +32.2.482.33.80

E-mail : [email protected]


Shareholders’ diary

Turnover

Operating profit

Operational cash flow (EBITDA) (1)

Profit from ordinary operating activities

Net profit (share of the group)

Net cash flow

Current profit after taxes (2)

Capital and reserves

Net financial indebtedness

Total assets

CONSOLIDATED KEY FIGURES 2002 2001 2000

(in millions of euro) (12 months) (12 months) (12 months)

195,2 207,1 216,0

5,9 4,8 10,3

12,9 7,8 20,8

-1,9 -1,9 5,5

-2,0 0,0 -4,3

6,3 4,3 7,4

-0,3 1,3 5,0

48,4 31,2 30,5

44,1 71,7 74,4

151,7 166,4 170,5

Operating profit

Operational cash flow (EBITDA) (1)


Net profit (share of the group)

Net cash flow


Gross dividend

Number of shares outstanding (average) (3)

Number of shares outstanding (yearend) (4)

CONSOLIDATED KEY FIGURES PER SHARE 2002 2001 2000

(in euro) (12 months) (12 months) (12 months)

0,90 1,16 2,48

1,97 1,88 5,03

-0,05 0,32 1,21

-0,30 0,00 -1,04

0,96 1,03 1,80

5,86 7,55 7,39

0,00 0,00 0,00

6.543.000 4.132.421 4.132.421

8.264.842 4.132.421 4.132.421

(1) EBITDA : Earnings before depreciation, interest, taxes and amortization. Operating profit plus

depreciation, amounts written down on stocks, trade debtors and provisions for liabilities and charges.

(2) The current profit after tax is the same as the net profit excluding extraordinary gains and losses

(both adjusted for taxes) and including the amortization of consolidation differences.

(3) The average number of shares outstanding is the weighted average of the number of shares before

and after the capital increase of May 2002 (4.132.421 and 8.264.842 shares respectively).

(4) Through the capital increase of May 2002, the number of shares was doubled.

Litigation

Human resources

All legal claims that represent a genuine threat based on fair judgment have been

provided for. Pending issues per major category are:

Customer claim:

• Warranty claim against Jensen Netherlands, part against D’hooge was dropped

Product liability claim:

• One large product liability claim in the US

Transport claim:

• One transport claim in the US

Patent claim:

• One patent claim in the US

• One patent claim in the EU

Employment claims:

• One claim in the US

Environmental risk:

• One audit in the EU

The management does not expect these claims to have a significant impact on the

Group’s profitability, except for the product liability claim in the US. As is often the case

in the US, the amounts claimed are high but chances of having to pay an indemnity

have been judged remote.

The average number of employees has known the following evolution

2000: Commercial Laundry Division: 544

Heavy-Duty Laundry Division: 1,012

LSG Holding: 6

Total: 1,562


Heavy-Duty Laundry Division: 908

LSG North America: 80

LSG Holding: 8

Total: 1,482


Heavy-Duty Laundry Division: 838

LSG North America: 87

LSG Holding: 7

Total: 1,355


Laundry Systems Group’s key technologies are based on laundry process technology

spanning from the Washroom, over the logistics of transporting the linen and textiles,

Finishing the textiles by feeders, ironers and folders as well as Software technology to

control the overall process. Hence, a number of different technologies which serve the

process of recycling dirty linen and textiles into clean linen.

As various technologies are needed to cater for the needs of our customer base we do

not get involved with primary research and development. Our tasks are to take

existing technologies and adapt it to our industry for both commercial and heavy-duty

purposes.

In the last years we have invested in further upgrading our product program as well

as investing heavily into new soft ware applications for our industry. Soft ware for the

process control as well as production monitoring are crucial for offering our customer

base a total solution from one supplier.

Our group has various patents on features of our machinery and our product

development teams in our various competence centers look into the possibility of

protecting our developments continuously.

Patents are used primarily to prove prior art. We protect our patents on a case-by-case

basis and primarily in the larger markets.

Laundry Systems Group invests 3 –5 % in Product Development per year. We expect

this figure to be slightly above the industry average.

Contrary to the previous years, the year 2002 has been a year with investments and

capital expenditures on the low side because the group’s objective was to use to free

cash flow mainly for debt reduction.

Year 2002:

• Various replacement investments for a total amount of 2,8 million euro and

investment in the fixed assets of two coin laundries for 1,2 million euro

Year 2001 :

• Acquisition of Swiss distributor Rosal for an amount of 0,5 million euro

• Construction of new production facility for Jensen-Senking for an amount

of 7,9 million euro

• Various investments in plant, machinery and equipment for 0,8 million euro

Year 2000 :

• Acquisition of Jensen Group : 80,1 million euro (capital increase)

• Acquisition of Polymark Jensen : 2,5 million euro

• Various investments in plant, machinery and equipment (at Ipso LSG, Ipso USA and

Jensen Denmark) and in land and buildings (at Jensen Netherlands) for a total

amount of 4,8 million euro

Outlook 2003

No major investments are planned for the year 2003.


Research and Development

Investments and Capital expenditures

LAUNDRY SYSTEMS GROUP

FINANCIAL REPORT 2002

27 Introduction

28 Report of the Board of Directors

32 Report of the Statutory Auditor

34 Consolidated balance sheets

36 Consolidated income statements

38 Consolidated statements of cash flows

39 Comments to the consolidated financial statements

44 Legal structure

45 Notes to the consolidated financial statements

Consolidation scope

Consolidation criteria

Valuation rules

Notes

55 Summary balance sheet

and income statements of LSG N.V.

CONTENTS OF THE FINANCIAL REPORT

INTRODUCTION

In order to understand the financial statements evolution over the years, the

following has to be taken into account :

On February 28, 2000 the Extraordinary Shareholders’ Meeting of LSG N.V. approved

the merger between the former ‘IPSO-ILG’ and the Danish group ‘JENSEN Industrial

Group’ to form ‘Laundry Systems Group’. Since then, consolidated financial statements

have been made.

The year 2000 accounts have been specifically affected by the Board of Director’s

decision to no longer capitalize expenses for Research & Development and to write-off

all historically capitalized R&D costs. As a consequence, exceptional charges of the year

2000 include the write-off of the R&D expenses that have been capitalized until

December 31, 1999. The R&D expenses of the year 2000 have been treated as

operational charges. The valuation rule not to capitalize Research and Development

expense has been applied consistently since 2000.

The consolidated income statement for the year ended December 31, 2002 has been

positively impacted for 1,3 million euro due to the change in valuation rule for revenue

recognition from completed contract to percentage of completion method.

In May 2002 the Company successfully completed a capital increase for 21,4 million

euro through the issuance of new capital to existing shareholders. The consolidated

balance sheet as of December 31, 2002 has also been affected by the change in

consolidation scope with the addition of Naicom Technologies ApS, through a purchase

of the shares from the majority shareholders for an insignificant amount. Total assets

which have now been fully consolidated are 1,5 million euro. The net impact on the

balance sheet related to Naicom is the addition of intangible assets and debt for

approximately similar amounts of the shares. No goodwill was paid on the purchase.

The consolidated balance sheet as of December 31, 2002 has also been affected by the

change in consolidation scope due to the purchase of assets of two coin laundries via

the Group’s wholly owned subsidiary, Global Fox for an amount of 1,2 million euro. This

purchase was done to safeguard the receivable on those coin laundries in Global Fox

and did not lead to an additional cash disbursement since the existing receivable

equals consisted of leaschold improvements. We have taken a witoff of

0,2 million euro on them, bringing the net balance of the assets of the coin laundries

to 1,0 million euro.


REPORT OF THE BOARD OF DIRECTORS

The year 2002 was characterized by difficult market conditions. Nevertheless, LSG

demonstrated the ability to increase its operating profit. Non-recurring expenses,

unrealized currency losses and extraordinary charges caused the bottom line to

be negative.

HDLD was strongly affected by the bad investment climate, especially in the US, as

well as in countries where tourism is an important part of the Gross Domestic Product.

The main markets in Europe were less affected due to obtaining some large project

orders. As there has been a clear overcapacity in the heavy-duty market, prices were

under pressure. Furthermore, the large and complex projects require more m

anagement and infrastructure as we offer turnkey solutions to our customer base.

In CLD, the activity levels were good after a year of turmoil in 2001. Especially

the increased sales of washer extractors in the US had a positive effect on the

profitability of the division.

As a Group, all measures were taken to adapt the direct expenses to the lower sales

levels. In order to maintain our product development capacity, our sales and service

presence and an improved financial follow-up, we have chosen not to reduce our

overheads in the short run. However, in the absence of indications that a short-term

revival of the sales could be expected, different scenarios to remedy the situation were

taken into consideration. This resulted in the decision to close down Jensen

Netherlands B.V. (effective April 2003) and move its production to Jensen Denmark and

IPSO Belgium and to restructure D’hooge. The restructurings of IPSO USA and Cissell

have been successfully implemented in 2002.

The number of employees decreased by another 130, bringing it from 1.420 at the end

of 2001 to 1.290 at the end of 2002. As mentioned before, an important part of the

reduction was related to direct labor, less to overheads.

In May 2002, we proceeded with a capital increase. In total, 4.132.421 new shares

were issued at a price of 5,17 euro a share, representing a total capital increase of

21,4 million euro (or 100% of the outstanding shares before the capital increase).

The indebtedness of LSG decreased by 27,6 million euro over 2002, financed by the

capital increase, the operating profit as well as further reductions in working capital of

7,3 million euro.

During 2002 an agreement was reached with the main bankers of the Group, under

which the Group needs to comply with a debt reduction in the aggregate of 30 million

euro between 2002 and 2004. LSG is ahead of the objectives and is in full compliance

with its covenants.


With respect to turnover, we have had a decrease of 6% compared to the year 2001

(207 million euro) and 10% compared to the record level of sales in the year 2000

(216 million euro). The decrease in absolute figures was most visible in the HDLD

where the drop versus the 2001 turnover represents 6% (on the basis of 133,2 million

euro in 2001). We also noted a shift in the mix of the turnover, which had a negative

impact on the overall profitability of HDLD.

In CLD, turnover decreased 6% in total (on the basis of 73,9 million euro in 2001). The

relative share of each division in the consolidated turnover remained stable: 36% for

CLD and 64% for HDLD. In the geographic split, sales in the US have dropped 1% to

34% of the total, and the importance of Western Europe increased 4% to 57% of our

turnover. The remainder of the turnover was realized in the emerging markets, in

which some shifts took place from the Middle East to the Far East.

The decrease in the turnover and a less attractive product mix in HDLD on the one

hand, and the fact that CLD returned to pre-2001 levels of profitability on the other

hand, resulted in an increase of the operating result from 4,8 to 5,9 million euro. The

change in valuation rules for work in process from completed contract method to

percentage of completion, improved the operating profit by 1,3 million euro. On the

other hand, compared to 2001, write-offs on inventories and accounts receivables

were 2 million euro higher and negative currency impacts were 1,3 million euro

higher. We therefore can conclude that the operating result of 2002 improved versus

2001 despite the drop in turnover. This was achieved by our restructuring efforts.

The financial result has deteriorated for a third year in a row from -4,7 million in 2000,

to -6,7 million in 2001 and to -7,8 million euro in 2002 primarily due to 1,4 million

capital increase expenses and 1,2 million negative currency results on intercompany

loans especially on the US Dollar. The overall decrease in interest rates and LSG’s

indebtedness, have had a favorable impact on the interest charges.

The restructuring in D’hooge was recorded as an extraordinary expense for

0,6 million euro and this explains the main part of the extraordinary result. The use of

extraordinary provision for an amount of 1,4 million euro offsets the extraordinary

charges related to the Cissell restructuring.

This resulted in a loss before taxes of 2,5 million euro, and after the set-up of

0,5 million euro deferred tax assets, the net loss is 2 million euro.

Based on our current order backlogs of the first months of 2003, there is some room

for optimism. However, due to the macro-economic uncertainties we are confronted

with, any reliable projection is hard to make.

The appreciation of the euro versus the dollar has a negative effect on the

profitability. All production of the HDLD is done in Europe. In CLD, this risk is smaller

since an important part of the US sales is produced locally.

Assuming a similar economic environment as in 2002, the outlook per division would

look as follows:

HDLD should improve as a result of its restructuring efforts. No major increase in

turnover to be expected.


Results

Outlook 2003

CLD profitability would continue to improve in 2003. Turnover is expected to grow due

to new product introductions.

Below operating profit, the decreased indebtedness, the low interest rates, as well as

the absence of one-time expenses, would result in a strong decrease in financial

charges.

In summary, we do not expect a quantum –leap improvement in operational results

but should see a strong improvement in the bottom-line.

We will continue to decrease the debts of the Group through the operating cash flows

and our continued effort to decrease the working capital .

After the construction of our plant in Germany during 2001, there were no reasons for

further increases in the production capacity. The net investments in tangible fixed

assets decreased from 10,5 million to 1,3 million euro.

With respect to intangibles, where 1,6 million euro investments were recorded,

we have acquired one new item through the first time consolidation of Naicom

technologies, a software company whose balance sheet primarily includes capitalized

software.

LSG makes continuous efforts to improve and develop next-generation products.

We are not involved in any blue-sky or fundamental research. In total, our expenses in

research and development amounted to 4,9 million euro. We do not capitalize any of

these expenses since 2000.

LSG N.V., the parent company, has closed the year 2002 with a loss of 8,8 million euro,

primarily as a result of the non-recurring costs for capital increase and debt

restructuring and the write-off of its shares in Jensen Netherlands B.V. for an amount

of 6,9 million euro. This write-off relates to the closing of that plant.

As a result of this loss, which we propose to appropriate to retained earnings, cumu-

lative retained earnings become negative. In compliance with Art 96 6° of the

Company Code, the Board decided unanimously to continue the use of the present val-

uation rules under the assumption of going concern because the loss is attributable to

non-recurring write-offs. These have no impact on the cash position of the company

and as such do not jeopardize the future cash flows and therefore the going concern

of the company.

The consolidated result of the Group, a loss of 2,0 million euro, will also be

appropriated to retained earnings, reducing them from 7,0 million to 5,0 million euro.


Investments and capital expenditures

Research and development

Appropriation of the result

The most important post balance sheet event is the final agreement that was reached

with the Unions and the final decision in court terminating the employment

agreements of the personnel in Jensen Netherlands per April 1, 2003. The cost related

to the redundancy pays and the transfer of production from Jensen Netherlands B.V. to

other Group companies, is covered by a provision at Group level. As part of the Cissell

restructuring provision was no longer required, it was re-allocated to cover the

restructuring expenses in Jensen Netherlands B.V. We therefore do not expect any

significant impact of the restructuring of Jensen Netherlands B.V. on the results

of 2003.

No other significant post balance sheet events occurred.

In view of the negative results of LSG N.V., we propose not to distribute any dividend.

Wevelgem, March 4, 2003.


Significant post balance sheet events

Dividend proposal

STATUTORY AUDITOR’S REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 TO THE SHAREHOLDERS' MEETING OF THE COMPANY LSG N.V.

In accordance with legal and regulatory requirements, we are pleased to report to you

on the performance of the audit mandate which you have entrusted to us.

We have audited the consolidated financial statements as of and for the year ended

31 December 2002 which have been prepared under the responsibility of the board of

directors and which show a balance sheet total of EUR ‘000’ 151.708 and a loss for the

year of EUR ‘000’ 1.982. We have also examined the directors’ report.

We conducted our audit in accordance with Belgian auditing standards, as issued by

the "Institut des Reviseurs d'Entreprises/Instituut der Bedrijfsrevisoren". Those

standards require that we plan and perform the audit to obtain reasonable assurance

about whether the consolidated financial statements are free of material

misstatement, taking into account the legal and regulatory requirements applicable to

consolidated financial statements in Belgium.

In accordance with those standards, we considered the group’s administrative and

accounting organisation, as well as its internal control procedures. We have obtained

all explanations and information required for our audit. We examined, on a test basis,

evidence supporting the amounts in the consolidated financial statements. We

assessed the accounting principles used, the basis of consolidation and significant esti-

mates made by the enterprise, as well as the overall presentation of the consolidated

financial statements. We believe that our audit provides a reasonable basis for our

opinion.

In our opinion the consolidated financial statements present fairly the company’s net

worth and consolidated financial position as of 31 December 2002 and the consolidat-

ed results of its operations for the year then ended, in accordance with the applicable

legal and regulatory requirements in Belgium and the information given in the notes

to the consolidated financial statements is properly presented.

32 ANNUAL REPORT 2002

Unqualified audit opinion on the consolidated financial statements

33 ANNUAL REPORT 2002

Other certification and information We supplement our report with the following certification and information which do

not modify our audit opinion on the consolidated financial statements:

· The consolidated directors' report contains the information required by law and is

consistent with the consolidated financial statements.

· As indicated in the notes to the consolidated financial statements, the accounting

principles applied in preparing these consolidated fina ncial statements have been

modified compared to previous year. In particular, the valuation rules for work in

process have been changed from the “completed contract” method to the “percent-

age of completion” method. This change positively affected the operating profit of

the year for an amount of EUR ‘000’ 1.303.

1 April 2003

The statutory auditor

PricewaterhouseCoopers Reviseurs d’Entreprises/Bedrijfsrevisoren

represented by

Jan Van den Bulck

Bedrijfsrevisor

CONSOLIDATED BALANCE SHEETS (in thousands of euro)

Fixed assets

I. Formation expenses

II. Intangible assets

III. Consolidation differences

IV. Tangible fixed assets

A. Land and buildings

B. Plant, machinery and equipment

C. Furniture and vehicles

D. Leasing and other similar rights

E. Other tangible fixed assets

F. Assets under construction and advance payments

V. Financial assets

A. Companies accounted for using the equity method

1. Investments

2. Amounts receivable

B. Other companies

1. Investments

2. Amounts receivable and cash guarantees

Current assets

VI. Amounts receivable after one year

A. Trade debtors

B. Other amounts receivable

C. Deferred taxes

VII. Stocks and contracts-in-progress

A. Stocks

1. Raw materials and consumables

2. Work-in-progress

3. Finished goods

4. Goods purchased for resale

6. Advance payments

VIII. Amounts receivable within one year

A. Trade debtors

B. Other amounts receivable

IX. Investments

B. Other investments and deposits

X. Cash at bank and in hand

XI. Deferred charges and accrued income

TOTAL ASSETS

ASSETS AS AT 31 December 2002 31 December 2001 31 December 2000

42.343 45.846 41.857

48 119 167

1.813 219 171

5.783 7.051 8.317

34.539 38.241 32.981

22.895 25.083 18.463

9.877 11.762 12.413

988 1.028 730

169 298 360

604 66

6 4 1.015

160 216 221

160 216 221

98 80 81

62 136 140

109.365 120.566 128.628

10.943 11.964 8.624

776 285 79

534 3.983 3.816

9.633 7.696 4.729

41.528 44.855 53.098

41.528 44.855 53.098

16.380 18.639 19.921

7.774 7.571 10.462

5.141 7.510 11.237

11.975 11.135 9.798

258 0 1.680

47.143 55.587 58.510

44.272 51.700 54.221

2.871 3.887 4.289

0 1 1

0 1 1

8.577 6.655 5.776

1.174 1.504 2.619

151.708 166.412 170.485


I. Capital

A. Issued capital

II. Share premium account

IV. Retained earnings

- Carried forward from previous years

- Profit / loss of the year

V. Consolidation differences

Vbis. Imputation of positive consolidation differences

VI. Translation differences

VII. Investment grants

Provisions and deferred taxes

IX. A. Provisions for liabilities and charges

1. Pensions and similar obligations

2. Taxation

3. Major repairs and maintenance

4. Other liabilities and charges

B. Deferred taxes

Debts

X. Amounts payable after one year

A. Financial debts

1. Subordinated loans

2. Unsubordinated loans

3. Leasing and other similar obligations

4. Credit institutions

XI. Amounts payable within one year

A. Current portion of amounts payable after one year

B. Financial debts

1. Credit institutions

C. Trade debts

1. Suppliers

D. Advances received on contracts-in-progress

E. Taxes, remuneration and social security

1. Taxes

2. Remuneration and social security

F. Other amounts payable

XII. Accrued charges and deferred income

TOTAL LIABILITIES

LIABILITIES AS AT 31 December 2002 31 December 2001 31 December 2000

48.402 31.213 30.521

42.715 21.350 21.350

42.715 21.350 21.350

71.140 71.140 71.161

5.021 7.003 6.956

7.003 6.956 11.240

(1.982) 47 (4.284)

2.002 2.002 2.002

(73.190) (73.190) (73.190)

701 2.889 2.179

13 19 63

16.471 18.598 22.481

14.844 17.543 20.396

7.550 7.170 7.319

24 25 232

1.996 2.371 2.282

5.274 7.977 10.563

1.627 1.055 2.085

86.835 116.601 117.483

22.900 32.328 45.370

22.900 32.328 45.370

7.437 9.916 10.156

2.329 3.047 5.256

676 133 195

12.458 19.232 29.763

58.386 79.789 66.910

6.213 6.455 5.943

23.584 39.533 28.879

23.584 39.533 28.879

18.206 19.924 17.053

18.206 19.924 17.053

1.453 3.400 3.015

5.790 6.340 6.980

2.137 2.515 2.946

3.653 3.825 4.034

3.140 4.137 5.040

5.549 4.484 5.203

151.708 166.412 170.485

CONSOLIDATED INCOME STATEMENTS (in thousands of euro)

I. Operating income

A. Turnover

B. Increase (+), decrease (-) in stocks, finished goods,

work- and contracts-in-progress

C. Fixed assets - own construction

D. Other operating income

II. Operating charges

A. Raw materials, consumables and goods for resale

1. Purchases

2. Increase (-) , decrease (+) in stocks

B. Services and other goods

C. Remuneration, social security and pensions

D. Depreciation and other amounts

written off formation expenses,

intangible and tangible fixed assets

E. Increase (+) ; decrease (-) in amounts written off

stocks, contracts-in-progress and trade debtors

F. Increase (+) ; decrease (-) in provisions for

liabilities and charges

G. Other operating charges

III. Operating profit

IV. Financial income

A. Income from financial fixed assets

B. Income from current assets

C. Other financial income

V. Financial charges

A. Interest and other debt charges

B. Amortization of positive consolidation differences

D. Other financial charges

FINANCIAL YEAR ENDED 31 December 2002 31 December 2001 31 December 2000

198.874 202.109 221.675

195.247 207.056 216.041

2.087 (8.078) (572)

83 222 142

1.457 2.909 6.064

(193.010) (197.297) (211.414)

94.428 95.224 105.639

91.266 94.128 110.531

3.162 1.096 (4.892)

23.917 28.222 23.928

66.270 68.856 65.865

5.140 5.367 5.198

2.317 359 4.546

(408) (2.788) 783

1.346 2.057 5.455

5.864 4.812 10.261

3.749 2.781 2.578

443 572 899

3.306 2.209 1.679

(11.562) (9.514) (7.298)

3.833 5.836 3.745

1.268 1.266 1.201

6.461 2.412 2.352

VI. Profit on ordinary activities before taxes

VII. Extraordinary income

D. Reversal of provision for extraordinary charges

E. Gain on disposal of fixed assets

F. Other extraordinary income

VIII. Extraordinary charges

A. Extraordinary depreciation of and amounts

written down off on formation expenses,

tangible and intangible fixed assets

D. Provisions for extraordinary liabilities and charges

F. Other extraordinary charges

IX. Profit for year before taxes

X. Transfer from/to deferred taxes

XI. Income taxes

A. Taxes

B. Adjustment of income taxes and write-back

of tax provisions

XIV.Consolidated profit

B. Group share in the profit


(1.949) (1.921) 5.541

1.380 69

1.380

35

34

(2.028) (13.601)

199 5.846

502 6.741

1.327 1.014

(2.597) (1.921) (7.991)

1.404 3.997 8.160

(789) (2.029) (4.453)

(789) (2.029) (4.453)

(1.982) 47 (4.284)

(1.982) 47 (4.284)

CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of euro)

Cash flows from operating activities

Operating profit

Depreciation and amortization

Amounts written off

Changes in provisions

Changes in working capital

Changes in stocks

Changes in long- and short-term amounts receivable

Changes in amounts payable to suppliers, social amounts

payable and deferral and accrual accounts

Reclassification of provision as accrual

Cash flows from investing activities

Net investment in intangible assets

Net investment in tangible assets

Cash flow from participating interests

Changes in guarantees

Acquisitions - Polymark

Acquisitions - Jensen Group

Acquisitions - Naicom

Cashflow from financing transactions

Financial result

including amortization of the consolidation difference

Changes in long-term debt

Changes in short-term debt

Changes in equity (including warrants)

Dividends

Other transactions

Extraordinary result

including extraordinary provisions amortisation of intangibles

including restructuring provisions

Income taxes

including deferred taxes

Changes in provisions

Movement in translation differences

Net changes in cash equivalents

Opening balances

Closing balances

Exchange difference on the opening balance

Cash acquired through acquisitions


12.913 7.750 20.788

5.864 4.812 10.261

5.140 5.367 5.198

2.317 359 4.546

-408 (2.788) 783

7.324 12.543 (25.513)

2.327 7.884 (9.225)*

10.415 3.665 (16.853)*

-4.147 994 565 *

-1.271

(2.966) (10.627) (5.865)

-1.629 (112) (385)*

-1.337 (10.515) (5.480)*

56 5 (84.251)

74 5 53*

(2.592)

(81.631)

-18 (81)

(10.799) (7.343) 92.437

-7.813 (6.733) (4.720)

1.268 1.266 1.201

-9.670 (13.042) (99)*

-15.949 11.166 19.974*

21.365 80.111

(4.030)

(4.606) (1.449) 874

-648 (13.532)

5.846

-1.020 6.741

615 1.968 3.706

-1.365 (3.997) (8.160)

(65) 6.392*

-2.188 645 (119)

1.922 879 (1.530)

6.655 5.776 3.803

8.577 6.655 5.776

3.503

* LSG closing position as at December 31, 2000 adjusted for balances included through acquisitions

(i.e. January 1, 2000 with respect to the Jensen Group and September 1, 2000 with respect to Jensen France)

COMMENTS ON THE CONSOLIDATED FINANCIAL STATEMENTS

Before 2000, intangible assets consisted mainly of capitalized costs for Research and

Development. During 2000, the Board of Directors decided to write off all historically

capitalized Research and Development costs (as extraordinary charges) and to take

into profit and loss all the R&D costs that have been incurred during the year 2000 and

beyond. During the years 2001 and 2002, LSG has incurred 6,1 million euro and

4,9 million euro, respectively, as product development expenses. Part of these could

be considered as research and development expenses.

During 2001, an asset deal in Jensen Switzerland, whereby the business of our former

distributor “ROSAL” was taken over, resulted in additional goodwill for an amount of

0,2 million euro.

In 2002, Jensen Denmark purchased the remaining stock in Naicom Technologies ApS,

in which it used to have a minority stake, and began fully consolidating its assets and

liabilities as of December 20, 2002. The main asset purchased was software

development costs of 1,6 million euro, which is being capitalized until completion,

in 2003.

The positive consolidation differences arise from goodwill on the acquisition of

D’Hooge ILG N.V. in a gross amount of 2,8 million euro, Cissell Manufacturing Company

in a gross amount of 2,4 million euro, Jensen Netherlands in a gross amount of

6,6 million euro and. Jensen France in a gross amount of 1,0 million euro. Of the

5,8 million euro net consolidation differences, 3,7 million euro is related to Jensen

Netherlands. No additional amortization of this amount, in the light of the closure of

that legal entity, needed to be recorded sonce the activities of Jensen Netherlands will

be transferred within the group to Ipso-LSG and Jensen Denmark.

All of these consolidation differences are being amortized over a period of 10 years.

The decrease of 1,3 million euro corresponds to the depreciation charge taken.

The goodwill that has been created as a result of the merger between LSG and Jensen

Group has not been capitalized and amortized, but visibly deducted from the equity

instead. The Banking and Finance Commission gave its approval for this accounting

method on December 1, 1999. If this goodwill was, like all the other goodwill, amor-

tized over 10 years, amortizations on consolidation differences (included under finan-

cial charges) would increase by 7,3 million euro.

The negative consolidation differences relate to the acquisition of IPSO Finance N.V. in

1996, for an amount of 2,0 million euro.

During 2002, tangible fixed assets decreased in net value by 3,7 million euro.

Excluding depreciation changes in the income statement of 5,0 million euro, the net

increase in tangible fixed assets was 1,3 million euro. This increase is mainly due to

the purchase of the coin laundry assets of 1,0 million euro and capital expenditures of

2,8 million which were offset with sales and disposals of 0,3 million euro, translation

adjustments of 2,3 million euro and other movements for 0,1 million euro.

Intangible assets

Consolidation differences

Tangible fixed assets


During 2001, working capital has decreased by 12,5 million euro. During 2002,

working capital has further decreased by 7,3 million euro. Of the total decrease,

4,9 million euro relates to the impact of the devaluation of the USD. The remaining

reductions are in response to a special internal program, which has been set up in

order to decrease the working capital by at least 25 million euro between June 30,

2001 and December 31, 2004. This will bring our working capital on sales ratio in-line

with the industry. Actions that are being taken are standardization, more regular inter-

im billing on projects, alignment of sales terms, more just-in-time deliveries by our

suppliers, etc. This working capital reduction program has been labeled “W-Care” and

has reached all levels in the organization.

The line ‘Reclassification of provision as accrual’ is explained by an inconsistency that

occured in the books of one of the subsudiaries. The fact that accruals by nature used

to be reported as provisions, and this was corrected this year, needs to be shown sepa-

rately since the effect thereoff should not be considered an improvement in working

capital, nor does it constitute a use of the provision.

The share capital as at December 31, 2001 was 21,3 million euro and was

represented by 4.132.421 ordinary shares without nominal value. In May 2002, the

Company completed a capital increase for 21,4 million euro through the issuance of

4.132.421 shares to existing shareholders. At December 31, 2002, share capital was

42,7 million euro and was represented by 8.264.842 ordinary shares without nominal

value.

The share premium, resulting primarily from the merger with the Jensen Group,

amounts to 71,1 million euro as at December 31, 2002. Furthermore, the share

premium account contains both the amounts which the company has received as a

price for the warrants it has issued in the framework of a share option plan for the

management and a share premium of 1,3 million euro created through an increase

in capital.

The retained earnings of the year 2002 figures take into account the net result of the

year. The movements in the retained earnings are as follows:

(in thousands of euro) 2002

Consolidated reserve as at December 31, 2001 7.003

Results for the financial year (1.982)

Consolidated reserves as at December 31, 2002 5.021

The translation differences include differences arising from the conversion of the

financial statements of the currencies of the companies that are not based in the euro-

zone to euro. The exchange rates used for the conversion were as follows:

currency Average rate (per euro) Closing rate (per euro)

2002 2001 2000 2002 2001 2000

USD 0,9418 0,8954 0,9241 1,0483 0,8842 0,9305

DKK 7,4305 7,4523 7,4537 7,4243 7,4357 7,4632

GBP 0,6285 0,6228 0,6095 0,6513 0,6102 0,6241

SEK 9,1576 9,2472 8,4441 9,1942 9,3074 8,8314

SGD 1,6876 1,6044 1,5924 1,8206 1,6324 1,6126

SAR 9,8652 7,6059 6,3921 9,0259 10,6856 7,0391

CHF 1,4672 1,5103 1,5581 1,4538 1,4823 1,5232

Working capital



The provisions for pensions and similar rights are mainly provisions for pensions in

Jensen-Senking and provisions for pre-pension in D’Hooge and Ipso-LSG. The pension

provisions are based on actuarial calculations of the expected amounts to be paid. Total

Group provisions were only impacted by 0,1 million euro decrease due to translation

differences. The decrease in provisions for other liabilities and charges compared to

last year is mainly caused by the use of provisions on consolidated level for restructur-

ing costs in Cissell for 1,4 million euro and a reclassification of certain provisions as

accruals for an amount of 1,3 million euro. The cost related to the redundancy pays

and the transfer of production from Jensen Netherlands B.V. to other Group companies

is also covered by a provision at Group level. As part of the Cissell restructuring provi-

sion was no longer required, it was re-allocated to cover the restructuring expenses in

Jensen Netherlands B.V.

The deferred tax liabilities are presented under the caption “Provisions

and Deferred Taxes” of the liabilities’ side of the balance sheet and amount to

1,6 million euro.

The deferred tax assets are presented under the caption “Amounts receivable after one

year” of the assets’ side of the balance sheet and amount to 9,6 million euro. The

deferred tax assets are presented under this caption of the balance sheet, because the

Management and the Board are convinced that, in accordance with the Company’s

valuation rules, the asset can be realized within a reasonable time frame.

The increase in deferred tax assets is due to losses that were incurred in IPSO USA,

Jensen Netherlands B.V. and Jensen USA. Management has taken measures in order to

facilitate the realization of the deferred tax assets. As such, IPSO USA has been

merged from a legal and tax point of view with JENSEN USA per January 1, 2002.

The net financial indebtedness (long- and short-term financial debt less investments

and cash) decreased from 71,7 million euro as at December 31, 2001 to 44,1 million

euro as at December 31, 2002. Of the total decrease, 3,1 million euro is due to cur-

rency impact on the USD denominated loans. The remaining decrease compared to

2001 is primarily due to the reimbursement of loans from the proceeds of the capital

increase of 21,4 million euro and reductions in working capital.

Financial indebtedness in the Group is primarily located in Jensen USA (7,7 million

euro), LSG N.V. (9,9 million euro), Cissell Manufacturing Company (5,9 million and

Jensen-Senking GmbH (6,2 million euro).

The financial debt in JENSEN USA is 57% revolving and short term and the remainder

needs to be reimbursed in 2004. The facilities are used for financing of the working

capital, since JENSEN USA has known an exponential increase in its turnover.

At LSG N.V., the debt corresponds to subordinated bonds issued to NIB Capital Bank

(75%) and GIMV (25%). The bond of NIB Capital Bank carries an interest of EURIBOR

3 months + 650 bp. It expires in November 2005. The bond of GIMV carries an

interest of EURIBOR 3 months + 650 bp and expires in November 2003. Attached to

these bonds are 135,600 warrants at a price of 73.13 euro per warrant. Each warrant

corresponds to the right to buy one share.

Provisions for liabilities and charges

Deferred taxes

Net financial indebtedness


At Cissell Manufacturing Company, the majority of the loans are with Rabo/BBL. Of

these, 3,4 million euro are revolving and are related to the financing of the working

capital. The remainder are term loans associated to the building and machinery in

Louisville.

The loans in Jensen-Senking GmbH are related to the construction of the building and

related equipment. This construction in 2001 was necessary since the lease in the old

premises expired and was not renewed. As of balance sheet date, the loans in Jensen-

Senking GmbH are short term, but will be replaced, to a large extent, by a mortgage.

The financial liabilities can be summarized as follows:

Outstanding amount Average Character

(in thousands of euro) interest rate of interest rate

Long term :

Investment loans and term loans 11.693 3,0%-6,5% Fixed/Floating

Mortgage 3.943 4,2%-4,75% Fixed

Subordinated bond 9.916 9,9% Fixed

Industrial bond GE Capital 2.807 5,76% Fixed

Leasing 754 Incl. Fixed

29.113

Outstanding amount Average Character

(in thousands of euro) interest rate of interest rate

Short term :

Revolving and straight loan 23.584 Floating

23.584

Of these loans, 36% are US Dollar denominated.


The consolidated statements of cash flows are presented on a consistent basis. As

such, they do not isolate the effect of currencies on individual line items but only in

total via the ‘Movement on opening retained earnings’. With respect to the evolution,

the following comments can be made:

The cash flow from operating activities improved due to a better operating profit, even

after one-time write-offs of 1,5 million euro and a negative currency impact of

1,2 million euro which have been slightly offset by a positive impact from first-time

application of the percentage of completion method of accounting for sales contracts

of 1,3 million euro. The one-time write-offs consist of a customer write-off of

0,8 million euro, write-off of 0,2 million euro for the coin laundry assets, exceptional

write-off on stocks of 0,3 million euro, and correction related to prior years of

0,2 million euro.

The working capital decrease results from the W-Care program that started in the

middle of 2001. In total, 19,8 million euro working capital reductions were realized.

Of the 7,3 million euro decrease in 2002, 4,9 million euro is related to currency impact

of the USD. The plan is to reach 25 million euro in working capital reductions by end

2004.

Cash flows from investing activities decreased since there were no needs to increase

our production capacity. The amount of 2001 included the investment in a new

production facility in Germany for an amount of 7,5 million euro.

The increase in financial result is made up of a decrease in interest charges of

1,9 million euro offset by increases of 1,2 million euro in negative currency results,

1,0 million euro for the expenses related to the capital increase, 0,5 million euro bank

commitment fees, and 0,2 million euro write-offs on financial receivables. The most

important movement of the financing transactions is the debt reduction of

25,6 million euro (including reduction due to currency impact of 3,1 million euro).

Most of this was financed through the capital increase and the remainder through the

decrease in working capital.


Statement of cash flows

OVERVIEW OF THE LEGAL STRUCTURE AS AT DECEMBER 31, 2002

LSG South-Africa Pty.

(South-Africa)

100%

IPSO-LSG nv

(Belgium)

100%

D’Hooge

ILG N.V.

(Belgium)

100%

IPSO Rent N.V.

(Belgium)

50%

WMC Holding

Inc.

(USA)

Jensen Sweden AB

(Sweden)

100%

Jensen AG Burgdorf

(Switzerland)

100%

Jensen Asia Pte

(Singapore)

100%

Scantag Systems

(Denmark)

100%

Intermax

(Japan)

15%

Naicom Techn.

(Denmark)

100%

Jensen-Senking GmbH

(Germany)

100%

Jensen Holding AG

(Switzerland)

100%

Jensen UK Ltd.

(United Kingdom)

100%

Jensen France SA

(France)

100%

Jensen Industrial

Group A/S

(Denmark)

100%

Jensen

Netherlands BV

(Netherlands)

100%

Jensen Denmark A/S

(Denmark)

100%

IPSO USA

Inc.

(USA)

Global Fox

Financial

(USA)

100%

Cissell

Manufacturing

Company (USA)

100%

Jensen USA

(USA)

Division of legal entity

4,89%

95,11%

41% 59%

Cissell

Distribution

(USA)

NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTSConsolidation scope as at December 31, 2002

Belgium

LSG N.V. Nieuwstraat 146 BE 440.449.284 Parent Company

8560 Wevelgem

Ipso-LSG N.V. Nieuwstraat 146 BE 453.859.040 100%

8560 Wevelgem

D’Hooge – ILG N.V. G. Crommenlaan 2 BE 450.666.750 100%

9050 Ghent

The Netherlands

Jensen Netherlands B.V Kerkstraat 108 NL007.324.546.BO1 100%

5331 CJ Kerkdriel

O.G. De Kerkstraat B.V. Kerkstraat 108 100%

5331 CJ Kerkdriel

USA

WMC Holdings Inc. Corporation Trust Center 100%

Orange Street 1209

Wilmington - Delaware

Cissell Manufacturing Company South First Street 831, 100%

KY 40203 Louisville

Cissell Distribution Center Corp. Davis Street 130 100%

37148 Portland Tennessee

Global Fox Financial Inc. Aberdeen Loop 99 100%

FL 32405 Panama City

Jensen USA 4211 Pleasant Road 100%

Fort Mill, SC 29715

South-Africa

LSG South-Africa Pty. Vanguard Rigging 100%

Drostdy St, The Gables Cleveland

Johannesburg

Fully consolidated Registered office VAT or national Participatingenterprises number percentage

UK

Jensen UK 6a Thorpe Way 100%

Banbury

Oxfordshire OX 16 8 XL

Singapore

Jensen Asia PTE 12 Devonshire Road 100%

Singapore 239847

Denmark

Jensen Industrial Group A/S Industrivej 2 100%

3700 Rønne

Jensen Denmark A/S Industrivej 2 100%

3700 Rønne

Scantag Systems Aps Industrivej 2 100%

3700 Rønne

Naicom Technologies Aps Ejnar Jensens Vej 1 100%

3700 Rønne

Switzerland

Jensen AG Burgdorf Buchmattstraße 8 100%

3400 Burgdorf

Jensen AG Holding Buchmattstraße 8 100%

3400 Burgdorf

Sweden

Jensen Sweden AB Företagsgatan 68 100%

504 94 Borås

France

Jensen France 2 “Village d’entreprises” 100%

Avenue de la Mauldre

ZA de la Couronne des Près

78680 Epone

Germany

Jensen-Senking GmbH Jorn Jensenstrasse 1 100%

31177 Harsum

Companies accounted for Registered office Participating

at cost Percentage

Japan

Intermax Gotanda I.S. Building 15%

5-1-11, Ohsaki, Shinagawa-ku

Tokyo 141

Belgium

IPSO RENT N.V. Nieuwstraat 146 50%

BE 479.135.260 8560 Wevelgem

Scope of application

The consolidating company, LSG N.V., and all the subsidiaries that it controls are includ-

ed in the consolidation.

Closing date and length of accounting year

All accounting years presented represent 12 months of operations starting on January

1st of each year.

Consolidation method

The full consolidation method is applied for all companies in which LSG is

holding 100%. For Intermax and IPSO RENT N.V., the cost method is applied.

IPSO RENT N.V. started in December 2002 and will close its first accounting year on

December 31, 2003.

Valuation rules

The consolidated accounts are prepared on the basis of the valuation rules of the

Group. If the application of these valuation rules differs from the local valuation rules

then restatements have been done locally. All intercompany accounts and transactions

have been eliminated.

Translation of the financial statements in foreign companies

In this annual report the consolidated financial statements are expressed in thousands

of euro.

All balance sheet captions of foreign companies are translated into euro using closing

rates at the end of the accounting year, except for capital and reserves, which are

translated at historical rates. The income statement is translated at average rates for

the year. The resulting translation difference, arising from the translation of capital and

reserves and the income statement, is shown separately on the liabilities side of the

balance sheet under the caption – translation differences.

Formation expenses

The costs relating to the issue of loans are capitalized and amortized over the term of

the loan. Costs relating to an increase in the capital are directly included in the result

via other financial charges. The costs related to the capital increase in May 2002 were

1,0 million euro.

Intangible fixed assets

Research and development expenses

Research and Development costs are charged to the income statement in the year in

which they are incurred.

Concessions, patents, licences, etc.

Investments in licenses, trademarks, etc. are capitalized and amortized over 5 years.

Goodwill on asset deal

The goodwill on the acquisition of the assets of Rosal is amortized over 10 years.

Consolidation criteria

Valuation rules


Consolidation differences

On the acquisition of a new participating interest, the difference between the acquisi-

tion price and the group share of the net assets of the consolidated subsidiary, after

adjustments to reflect fair value, is recorded in the consolidated balance sheet. If that

difference is negative, it is recorded on the liabilities side of the balance sheet under

the caption – Consolidation Differences. Where, however, the difference is positive, it

is recorded under assets as a consolidation difference, and is amortized using a rate

decided upon by the Board of Directors in function of the expected economic life of the

asset. The maximum amortization period is 20 years. In practice, all consolidation

differences are being amortized over 10 years. This amortization period is considered

by the Board of Directors as being the recovery period for the goodwill acquired.

With respect to the goodwill created by the merger of LSG with Jensen Industrial Group

in February 2000, the “Commission for Banking and Financing” gave permission on

December 1, 1999 not to capitalize and amortize this positive consolidation difference,

but instead to visibly deduct it from the consolidated reserves and/or share premiums.


The tangible fixed assets are recorded at their acquisition value or construction cost

increased, where appropriate, by ancillary costs.

Tangible fixed assets are depreciated on a straight-line basis over their estimated use-

ful life from the month of acquisition onwards.

The annual depreciation percentages are as follows:

Buildings 3,3 - 10 %

Installations, plant and machinery 6,7 - 33 %

Office equipment and furnishings 10,0 - 20 %

Vehicles 20,0 - 33 %

Stocks and contracts in progress

Inventories are valued at the lower of cost or net realizable value. Cost is determined

by the first-in, first-out (FIFO) method. For processed stocks, cost means full cost

including all direct and indirect production costs required to bring the inventory items

to the stage of completion at the balance sheet date. Net realizable value is the esti-

mated selling price in the ordinary course of business, less the costs of completion and

selling expenses.

During 2002, the Company changed from completed contract method to the percent-

age of completion method for recognizing revenue on firm orders, which take more

than a short time to complete. Contracts in progress are valued according to the full

cost method. Profits are recorded as the contracts progress, based on the degree of

completion, taking into consideration the contractual, technical and commercial risks

of each individual contract. If the profit on a contract cannot be reasonably estimat-

ed, no profit is accounted for. If a contract is expected to end with a loss, the loss is

fully provided for without applying the percentage of completion method. The impact

on the profit for the year ended December 31, 2002 was an increase of 1,3 million euro

using the percentage of completion method.


Amounts receivables (after one year and within one year)

Trade amounts receivable and other amounts receivable are carried at nominal value.

Allowances are made to amounts receivable where uncertainty exists as to the receipt

or payment dates of the whole or a part of the balance. Supplementary write-offs are

also recorded where the realizable value at the balance sheet date is lower than the

carrying value.

Investments and cash at bank and in hand

Deposits with financial institutions are carried at nominal value. Write-downs are

applied where the realizable value at the balance sheet date is lower than the

historical cost.


Provisions for liabilities and charges are assessed on an individual basis to address the

risks, which they are intended to cover. They are only maintained to the extent that

they are required following an actual judgment relating to the liabilities and charges

for which they were created.

Provisions for deferred taxes

Deferred taxes are computed on the entire amount of timing differences that are

existing between the tax records of the companies and the financial statements in

accordance with the Group’s valuation rules. Deferred taxes are always computed on

the basis of the actual tax rates in the country of the subsidiary. Where, for specific

Group companies, deferred tax assets exceed deferred tax liabilities, a net deferred tax

asset is shown in the balance sheet. Deferred tax assets are only recorded if there is

reasonable assurance that the assets will be realized in the foreseeable future.

Amounts payable (after one year and within one year)

Amounts payable are carried at nominal value at the balance sheet date.

The only elements, which are recorded in the accrued charges and deferred income

accounts are charges to be paid at the balance sheet date which relate to the past or

prior years.

Foreign currencies

The conversion of assets, liabilities and commitments, which are denominated in

foreign currencies, is carried out on the basis of the following guidelines:

Monetary asset and liability balances, which are denominated in foreign currencies,

are converted at closing rates;

Transactions in foreign currencies are converted at the rate in force at the date of

the transaction;

Foreign exchange differences are recorded in the income statement; and

Conversion differences are also recorded in the income statement.


NOTES TO THE ACCOUNTS (in thousands of euro)

VI.B. DEFERRED TAXES

Deferred tax assets 9.633

Deferred tax liabilities -1.627

of which : deferred taxes -1.618

beneficial deferred tax amounts -9

Net deferred taxes 8.006*

* Subsidiaries with largest deferred tax assets

Company Reason Amount

Ipso USA ** Start-up losses 2.977

Jensen USA Losses from before 2001 1.190

Jensen Netherlands BV Operating losses 714

LSG N.V. Operating losses and restructuring provisions 2.423

7.304

** On January 1, 2002, IPSO USA merged with Jensen USA whereby all tax loss carry forwards can be used by the merged company.

VII. SCHEDULE OF FORMATION EXPENSES

Net book value at the end of the preceding period 119

Movements during the period

New expenses incurred 0

Amortization -59

Other movements

Translation differences -12

Net book value at the end of the period 48

whereof expenses of formation or capital increase, loan

issue expenses, discounts and other formation expenses 48

VIII. SCHEDULE OF INTANGIBLE ASSETS

Research and Concessions, Goodwill Advances

development patents,

expenses licences, etc.

Acquisition costAt the end of the preceding period 1.115 205


Acquisitions, including produced fixed assets 37

Additions 1.615

Sales and disposals

Transfers from one heading to another -12

Translation adjustments -32 2

Other movements -828 -17

At the end of the period 1.895 190

Research and Concessions, Goodwill Advances

development patents,

expenses licences, etc.

Depreciation and amounts written down

At the end of the preceding year 1.051 50


Recorded 20 22

Written down following sales and disposals

Transfer from one heading to another -4

Translation adjustments -27 -2

Other movements -828 -17

At the end of the period 212 60

Net book value at the end of the period 1.683 130

IX. STATEMENT OF TANGIBLE FIXED ASSETS

Land & Plant Furniture & Leasing Other Assets under

Buildings Machinery & Vehicles & Similar tangible construction

Equipment Rights assets and advance

payments

36.431 36.407 3.872 810 204 4

567 2.234 421 781 70

-169 -611 -308 -55 -68

-271

-1.452 -2.029 -268 -13 -20

-1.053 -580 -19 -49 -118

34.324 35.421 3.698 693 847 6

11.348 24.645 2.844 512 138 0

1.127 3.223 354 101 234

-15 -614 -294 -32

-216 -1.130 -157 -8 -11

-815 -580 -37 -49 -118

11.429 25.544 2.710 524 243 0

22.895 9.877 988 169 604 6

Acquisition cost

At the end of the preceding period


Acquisitions, including produced fixed assets

Additions

Sales and disposals

Transfers from one heading to another

Translation adjustments

Other movements

At the end of the period

Depreciations and amounts written down



Recorded

Written down following sales and disposals

Transfers from one heading to another

Translation adjustments

Other movements


Net book value at the end of the period

X. STATEMENT OF FINANCIAL FIXED ASSETS

Other companies

80

40

-25

3

98

136

8

-94

12

62

7.003

-1.982

0

5.021

Participations

Net book value at the end of the preceding period

Movements during the year

Additions

Reimbursements

Translation adjustment


Amounts receivable



Additions

Reimbursements

Other movements


XI. STATEMENT OF CONSOLIDATED RETAINED EARNINGS



Group share in the consolidated result

Other movement


XII. STATEMENT OF CONSOLIDATION DIFFERENCES

Positive Negative

differences differences

7.051 2.002

0

-1.268

5.783 2.002



As the result of an increase in equity stake

As the result of a decrease in equity stake

Amortization


XIII. STATEMENT OF AMOUNTS PAYABLE

XIV.A2. TOTAL TURNOVER OF THE GROUP IN BELGIUM 7.870

Analysis by current portions of amounts initially Not more Between 1 Over

payable after more than one year than 1 year and 5 years 5 years

2.479 7.437

478 2.236 93

78 676

3.178 11.048 1.410

6.213 21.397 1.503

20.230

17.185

18.514

55.929

Financial debts

Subordinated loans

Unsubordinated loans

Leasing and other similar obligations

Credit institutions

Total

Debts covered by real guarantees

Financial debts

Mortgages

Pledges on assets

Guarantee by parent company

Total

XIV.B AVERAGE PERSONNEL AND BREAKDOWN OF PERSONNEL CHARGES

Fully consolidated

enterprises

1.355

735

600

20

64.836

1.434

253

Average personnel (number)

Hourly-paid employees

Monthly-paid employees

Management

Personnel charges

Remuneration and social benefits

Pensions

Average number of staff employed in Belgium

by group enterprises

XIV.C EXTRAORDINARY RESULTS

Fully consolidated

enterprises

Other extraordinary charges

Represents inventory writeoffs and termination fees with respect to the restructuring of Cissell

and D'hooge

XIV.D INCOME TAXES ON THE RESULT

Differences between taxes calculated on the consolidated income statement of the financial year

and the previous financial years, and taxes paid, or to be paid, for these financial years, in so far

as the difference is material with respect to taxes payable in the future

XV. OFF-BALANCE SHEET RIGHTS AND COMMITMENTS

Real guarantees given or irrevocably promised by the enterprises included in the consolidation

on their own assets as guarantees for liabilities and commitments of enterprises included in

the consolidation

Other significant commitments :

Currency hedging

Per December 31, 2002, currency hedges existed for the following amounts (in thousands of euro) :

Currency bought forward (buy SEK/sell USD)

Currency sold forward (sell USD/buy DKK)

It is the Group's policy only to sell or buy forward for existing orders. No speculative transactions are done.

Hedging is merely used to secure the margins on sales.

Obligation to repurchase

Under certain leasing schemes, some companies of the Group have committed to taking back machinery

sold if and when the final customer should not meet its lease obligations.

XVII. FINANCIAL RELATIONSHIPS WITH DIRECTORS AND MANAGERS

The amount of direct and indirect remuneration and pensions, included in the income statement as

long as this disclosure does not concern exclusively or mainly, the situation of a single identifiable

person

- to the directors

1.327

-1.404

55.929

1.370

10.015

2.184

400

SUMMARY BALANCE LSG N.V. (in thousands of euro)

Fixed assets

Formation expenses

Intangible assets


Financial assets

Current assets

Amounts receivable after one year

Stocks and contracts-in-progress

Amounts receivable within one year

Investments

Cash at bank and on hand

Deferred charges and accrued income

TOTAL ASSETS

ASSETS AS AT 31 December 2002 31 December 2001 31 December 2000

117.907 120.699 124.504

3 11 14

30 19 24

81 112 100

117.793 120.557 124.366

5.656 483 2.039

0 0 0

0 0 0

4.652 316 2.002

0 0 0

736 77 32

268 90 5

123.563 121.182 126.542


Capital

Share premium account

Reserves

Accumulated profits

Investment grants

Provisions and deferred taxes


Deferred taxes

Amounts payable

Amounts payable after one year

Amounts payable within one year

Accrued charges and deferred income

TOTAL LIABILITIES

LIABILITIES AS AT 31 December 2002 31 December 2001 31 December 2000

110.773 98.204 101.283

42.715 21.350 21.350

71.140 71.140 71.161

702 702 702

(3.784) 5.012 8.070

0 0 0

0 0 0

0 0 0

0 0 0

12.790 22.978 25.259

7.437 15.751 18.756

5.124 6.587 6.241

229 640 262

123.563 121.182 126.542

SUMMARY INCOME STATEMENT LSG N.V. (in thousands of euro)

Operating income

Turnover

Increase (+), decrease (-) in stocks finished goods,

work- and contracts-in-progress

Fixed assets- own construction

Other operating income

Operating charges

Raw materials, consumables and goods for resale

Services and other goods

Remuneration, social security and pensions

Depreciation

Write-downs


Other operating charges

Operating profit

Financial result

Financial income

Financial charges

Profit on ordinary activities for the year

before taxes

Extraordinary result

Extraordinary income

Extraordinary charges

Profit for year before taxes

Taxes

Transfer from deferred taxes

Income taxes

Profit for the year


4.025 2.039 1.609

3.995 2.020 1.598

0 0 0

0 0 0

30 19 11

(3.780) (2.202) (1.522)

0 0 0

2.970 1.488 823

715 672 674

69 32 11

0 0 0

0 0 0

26 10 14

245 (163) 87

(2.062) (597) (361)

736 454 52

(2.798) (1.051) (413)

(1.817) (760) (274)

(6.945) (2.304) (822)

0 0 0

(6.945) (2.304) (822)

(8.762) (3.064) (1.096)

(34) 6 0

0 0 0

(34) 6 0

(8.796) (3.058) (1.096)

APPROPRIATION ACCOUNT OF LSG N.V. (in thousands of euro)

PPrrooffiitt ttoo bbee aapppprroopprriiaatteedd

Profit for the period available for appropriation

Profit brought forward

AApppprroopprriiaattiioonnss ttoo ccaappiittaall aanndd rreesseerrvveess

to legal reserves

RReessuulltt ttoo bbee ccaarrrriieedd ffoorrwwaarrdd

Profit to be carried forward

DDiissttrriibbuuttiioonn ooff pprrooffiitt

Dividends


((33..778844)) 55..001122 88..007700

(8.796) (3.058) (1.096)

5.012 8.070 9.166

00 00 00

0 0 0

((33..778844)) 55..001122 88..007700

3.784 (5.012) (8.070)

00 00 00

0 0 0


Number of shares outstanding (average) (2)

Number of shares outstanding (yearend) (3)

Key figures per share LSG N.V. 2002 2001 2000

(in euro) (12 months) (12 months) (12 months)

-0,28 -0,18 -0,14

6.543.000 4.132.421 4.132.421

8.264.842 4.132.421 4.132.421

(1) The current profit after tax is the same as the net profit excluding extraordinary gains and losses

(both adjusted for taxes) and including the amortization of consolidation differences.

(2) The average number of shares outstanding is the weighted average of the number of shares before

and after the capital increase of May 2002 (4.132.421 and 8.264.842 shares respectively).

(3) Through the capital increase of May 2002, the number of shares was doubled.

In accordance with article 105 of the Belgian Company Law, a summary version of the

statutory financial statements of LSG N.V. is presented. The management report and

statutory financial statements of LSG N.V. and the report of the statutory auditor there-

on are filed with the appropriate authorities, and are also available at the company’s

registered offices. The statutory auditor has issued an opinion without any reservation

on the statutory financial statements of LSG N.V.

The valuation rules used for the statutory financial statements of LSG N.V. are the same

as the rules used for the consolidated financial statements, with the exception of the

depreciations on tangible fixed assets.

In the statutory financial statements an accelerated depreciation plan is used in accor-

dance with the fiscal provisions in this matter. The following depreciation percentages

have been used:

Caption Method Rate

Buildings Reducing balance 10%

Plant, equipment and machinery Reducing balance 40%

Office equipment and furniture Reducing balance 40%

Vehicles Straight line 20%


Statutory financial statements of LSG N.V.

Valuation rules

CAPITAL STATEMENT (position as at December 31, 2002)

A. Capital

1. Issued capital

- At the end of the previous year

- Changes during the year

- At the end of this year

2. Capital representation

2.1 Shares without par value

2.2 Registered or bearer shares

- Registered

- Bearer

C. Own shares held by

- The company

- Its subsidiairies

D. Commitments to issue shares

1. As a result of the exercise of CONVERSION RIGHTS

Amount of the current convertible loans

Amount of capital to be issued

Maximum number of shares to be issued

2. As a result of the exercise of WARRANTS

Number of warrants in circulation

Number of warrants not attributed

Amount of capital to be issued

Maximum number of shares to be issued

E. Authorized capital not issued

In application of article 4 the Law of March 2, 1989, the

following declarations have been received of holdings

in the company's share capital :

Declarer : GIMV N.V. Jensen Invest A/S

Karel Oomsstraat 37 Sankt Anna Plads 10

2018 Antwerpen DK - 1250 Copenhagen

GIMV and subsidiairies

- number of shares

- number of shares through warrants

- total of shares + warrants

Jensen Invest A/S

- number of shares



GIMV & Jensen Invest A/S, acting in concert

- number of shares



Amounts (in thousand of euro) Number of shares

21.350

21.365

42.715

42.715 8.264.842

4.011.317

4.253.525

0

0

- 135.600

0

9.916

- 135.600

21.350 -

Total %

1.348.777 8.264.842 16,32%

33.900 159.400 21,27%

1.382.677 8.400.442 16,46%

Total %

4.020.076 8.264.842 48,64%

0 159.400 0,00%

4.020.076 8.400.442 47,86%

Total %

5.368.853 8.264.842 64,96%

33.900 159.400 21,27%

5.402.753 8.400.442 64,32%

Of the total number of warrants, 23.800 have expired in the meantime.


GENERAL INFORMATION

• Name: Laundry Systems Group N.V.

• Registered office: Nieuwstraat 146, 8560 Wevelgem

• Administrative office: ’t Hofveld 6F2, 1702 Groot-Bijgaarden

• The company was founded on April 23, 1990 and exists for an unlimited period

of time

• The company has the legal form of a “naamloze vennootschap/société anonyme”

and operates under the Belgian Company Law

• Purpose: The purpose of the company consists in the following, both in Belgium and

abroad, on its own behalf or in the name of third parties, for its own account or for

the account of third parties:

1. Any and all operations related directly or indirectly or connected with the

engineering, production, purchase and sale, distribution, import, export and

representation of laundry machines and systems and the manufacture thereof;

2. Providing technical, commercial, financial and other services for affiliated

businesses, including commercial and industrial activities in support;

3. Obtaining an interest, in any manner, in any and all businesses that pursue the

same, a similar or related purpose or that are likely to further its own business of

facilitate the sale of its products or services, also cooperating or merging with

these businesses and, in general, investing, subscribing, purchasing, selling and

negotiating financial instruments issued by Belgian or foreign businesses;

4. Managing investments and participations in Belgian or foreign businesses,

including the standing of sureties, guaranteeing bills, payments in advance,

loans, personal or material sureties for the benefit of these businesses and

acting as their proxy holder or representative;

5. Acting in the capacity of director, providing advice, management and other

services for the benefit of the management and other services for the benefit of

other Belgian of foreign businesses, by virtue of contractual relations or

statutory appointment and in the capacity of external consultant or governing

body of any such business.

The company may materialize both in Belgium and abroad, any and all industrial,

trade, financial, bonds and stocks and real property transactions, that are likely to

extend or further its business directly or indirectly or that are related therewith. It

may acquire any and all movable and real property items, even if these are related

neither directly nor indirectly with the Purpose of the company.

It may obtain, in any manner, an interest in any and all associations, ventures, busi-

ness or companies that pursue the same, a similar or related purpose or that are

likely to further its business or facilitate the sale of its products or services, and it

may cooperate or merge therewith.

1. Identification

• The company is registered in the Commercial Register of Kortrijk under the number

121.188 and is submitted to VAT under the number BE 440.449.284

• The articles of association of the company can be consulted at the registered office

of the company. The annual accounts are submitted with the National Bank of

Belgium. Financial reports of the company are published in the financial press.

Other documents that are publicly available and that are mentioned in the

reference document can be consulted at the registered office of the company. The

annual report of the company is sent every year to the holders of registered shares

as well as to the holders of bearer shares who wishes to receive it.

• The Company did not acquire own shares during the year 2002.

• The registered capital amounts to 42.714.559,83 euro and is represented by

8,264,842 shares without nominal value. There are no shares that do not represent

the share capital. All shares are ordinary shares; there are no preferential shares.

The shares are bearer or registered shares, depending on the shareholder’s

preference. The company may issue dematerialized shares, either by way of an

increase of capital or by exchanging existing registered or bearer shares for

dematerialized shares. Each shareholder may request the exchange, either into

bearer shares or into registered shares or into dematerialized shares. A bearer share

will be signed by two directors, at least, the signatures may be replaced by

signature stamps.

• Within Laundry System Group N.V., a private bond loan of 9.9 million euro exists

with 135,600 warrants attached without preferential subscription rights. Each war-

rants gives the right to subscribe to a new share. The warrants can be exercised

between the 1st and 20th day of the months June and December, for the first time

on December 1, 2001. Exercise price of the warrants amounts up to 73,13 euro.

• In the course of 2002, the share capital has been increased in two parts. On May

13, 2002 3.505.165 new shares were issued for a total amount of 18.121.703,05

euro and on May 24, 627.256 new shares have been created for a total amount of

3.242.913,52 euro. In this way, the number of shares has been doubled, bringing it

to 8.264.842.

• Evolution of the share capital:

Date Share Capital Currency Number of shares

23/04/1990 35,000,000 BEF 100,000

31/07/1997 440,024,000 BEF 2,111,129

31/07/1998 440,024,000 BEF 2,111,129

31/12/1999 10,998,000 euro 2,128,197

31/12/2000 21,349,943 euro 4,132,421

31/12/2001 21,349,943 euro 4,132,421

31/12/2002 42,714,560 euro 8,264,842


2. Share capital

LSG OVER T

JENSEN USA(LSG NORTH AMERICA)

IPSO USA

CISSELLMANUFACTURING

JENSEN UK

D’HOOGE

IPSO-LSG

POLYMARKJENSEN

LSGSOUTH AFRICA

THE WORLD

JENSEN NETHERLANDS

JENSEN SENKING

JENSEN SWEDEN

JENSEN DENMARK

JENSEN SWITZERLAND

JENSENASIA

Layout and printing Van de Maele - Geraardsbergen

Phone +32 54 41 66 13 - www.drukkerijvandemaele.be

lsg annual report 2002 eng - ku leuven

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