laundry systems group

LAUNDRY SYSTEMS GROUP

On April 5, 2004 the Banking, Finance and Insurance Commission authorized LSG to use the present 2003 annual report as a reference document

each time it publicly offers securities pursuant to the law of April 22, 2003 relating to public offerings of securities, by means of the procedure

of dissociated information, and this 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 Chapter IV of the law of April 22, 2003.

In accordance with article 14 of the law of April 22, 2003,this prospectus must be submitted to

the Banking, Finance and Insurance Commission for its approval.

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 4

MESSAGE TO THE SHAREHOLDERS

LSG has been able to improve the operations and has shown an increase in turnover of 3%

and operating profits of 56% thanks to an improved investment climate, strategic focus, the

measures taken in sales & marketing as well as improving our cost base. After two years of

declining sales we have had a significant growth and have reached a turnover equivalent

to 2000, which was our record year. The rapid depreciation of the US dollar reduced

operating profit by 3,4 mio euro. We have been able to exceed our targets for EBITDA, EBIT

and working capital reductions. We are pleased to announce a return to a positive net result

of 1,1 mio euro.

The Commercial Laundry Division has further improved its results due to the increased

sales in the US and Europe. We have been able to penetrate the US market with our soft-

mount Washer Extractor, which was not sold in the US before. The objective to produce

larger Washer Extractors up to 125 kg capacity has proven beneficial for both turnover and

profitability. The integration of our 2 Washer Extractor plants in Belgium is making progress

and is on target. The synergies in production, product development and administration are

contributing to the improvement of the results.

The order intake in the Heavy-Duty Laundry Division has improved remarkably by 25% which

can be attributed to the overall recovery in demand for investment goods as well as our

ability to gain large turn-key projects in the US, Europe and Asia. Offering the heavy-duty

customer base the full product line as well as integrating our full product mix comprising

Washroom, Washer Extractors and Dryers, Finishing and Material Handling Technology has

contributed to improved customer penetration. We have also been able to regain specific

market segments by introducing new products adapted to local requirements.

The closing of Jensen Netherlands as well as the transfer of production to our Danish and

Belgian plant were slightly behind target but were executed without disturbance in the

market place. The closing has contributed to 1,8 mio euro savings in overhead in 2003 and

2,2 mio euro on an ongoing basis.

During 2003 we have started our strategic process, which will be further implemented

during 2004. Our new strategy is addressing:

• Our future plant configuration

• New Products & Services

• New Market opportunities

• A uniform product development process

• Introduction of performance measurement

• Role of the LSG headquarters

The LSG strategy, leading to a further integration of the Commercial and Heavy-Duty

Laundry Division, is expected to be fully implemented by 2006/7. LSG is catering for the

total laundry market through our 3 brands (IPSO, Jensen and Cissell), each addressing their

individual segment. We have also adopted a procedure to look at what is in common

through-out the company and identified areas were combining skills and operations make

sense in order to improve the profitability as well as market penetration and customer

satisfaction.

LAUNDRY SYSTEMS GROUP5 ANNUAL REPORT

A number of critical issues have been identified each addressing either offensive strategies,

where we expect to increase sales or defensive strategies which focus on improving our

cost base. We are positive that the LSG strategy will contribute to make LSG a unique

supplier in our industry by leveraging our know-how and adapting our product mix to local

market needs.

Our financial result was positively affected by the lower interest rates. Unfortunately, the

USD also decreased our net profit as our US profit and loss statement and balance sheet

had to be translated at significantly lower exchange rates. We have gradually changed our

USD hedging policy during 2003 and are in the process of reducing our short term

exchange rate sensitivity through more extensive hedging.

We will continue to invest in our sales & service systems as well as new products.

Furthermore, our staff and employees are highly motivated to implement our strategy and

is ready to face the challenges ahead.

The business environment has improved during 2003 and we expect the investment

climate to remain at the current levels. In our opinion the weakness in the USD will

continue in the short term. The measures taken in 2003 will also have their full effect for

2004, which should improve profitability in 2004.

We thank our customers for their continued trust in LSG’s ability to deliver higher standards

in laundry automation and productivity. Our gratitude also goes to our staff and

employees who accept change and constantly seek for improvements.

Last but not least we thank our shareholders for supporting the board and management in

the new LSG strategy.

Jesper M. Jensen, Chief Executive Officer

Raf Decaluwé, Chairman of the Board of Directors


PROFILE OF THE GROUP

MISSION STATEMENT

“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.”

ORGANIZATION

LSG is organized in two divisions: the Heavy-Duty Laundry Division (HDLD) and the

Commercial Laundry Division (CLD). Both divisions share a common US sales platform,

called LSGNA. The results of LSGNA 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.

DIVISIONAL SALES FIGURES

Mio euro CLD HDLD

2003 72,5 128,0

2002 69,6 125,6

2001* 73,9 133,2

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

MANUFACTURING

LSG has a manufacturing platform of 9 companies in 7 countries. Each manufacturing site

addresses a specific technology for the laundry machinery industry.

DISTRIBUTION

LSG sells its products and services through 3 distribution systems based on our 3 brands:

Jensen, Ipso and Cissell. Distribution is structured through own sales and service compa-

nies (in Heavy-Duty Laundry Division) and/or independent distributors worldwide.

COMPETITIVE ADVANTAGE

Our market coverage, our large know-how and the range of our products from commercial

machines to heavy duty machines and systems, are unique for the laundry market.

MARKETS

LSG realizes its turnover geographically as follows:

Mio euro Europe North America Em. Markets

2003 119 61,7 19,8

2002 111 66,1 18,1

2001 112,1 75 20

COMMERCIAL LAUNDRY DIVISION (CLD)

PROFILE

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

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

Also, the heavy duty washer extractors and some dryers are produced within the

Commercial Laundry Division in order 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.


Commerial Laundry Division

Wevelgem (Bel.)

Cissell Manufacturing

Louisville (USA)

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.)

D’hooge

Ipso-LSG

Wevelgem (Bel.)


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.

The product range of the CLD contains the following products:

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

• Dryers with a capacity of 9 kg to 86 kg

• Ironers in the capacity range from 1,4 m to 2,6 m 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, in the

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

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

volume products that complete the internal product range.

ACTIVITIES 2003

2003 2002 2001

Turnover, mio euro 72,5 69,6 73,9*

EBIT, mio euro 5,0 3,1 -1,6

Investments, mio euro 1,0 0,7 0,8

Number of employees 403 423 486

* Restated for D’hooge

CLD has been able to increase sales by introducing the soft-mount washer extractor to the

US market. Other markets, especially Europe grew according to expectations and we were

able to realize some special projects in the emerging markets. We have seen growth in both

washer-extractor and dryer sales.

Unfortunately, we were not able to grow in the Asian markets as planned due to the SARS

situation, however, sales have remained stable.

The dry-cleaning market, which is catered for by our Cissell brand has seen a further decline

in sales due to less traveling and the overall trend to casual wear. It is unclear when the

dry-cleaning market is going to recover.

However, in August Cissell assumed all billing and sales and marketing activities for Pantex

products worldwide. Prior to that, Cissell was a private-label customer of Pantex, a manu-

facturer of finishing equipment in the Netherlands. Since the 4th quarter of 2003, there has

been a significant impact on Cissell’s order intake of finishing equipment.


Our lean manufacturing at IPSO-LSG as well as the restructuring of our US plants and

D’hooge during 2001/2002 have paid off and CLD is showing a further healthy increase in

EBIT of 61%. The integration of technology and administration between our 2 Belgian

plants IPSO-LSG and D’hooge are close to completion. The sharing of technology has been

beneficial in updating the D’hooge product range. CLD is less vulnerable to fluctuations in

the USD exchange rate.

OUTLOOK 2004

We expect to be able to leverage further on the integration of our CLD Washer Extractor

and Dryer technology and to introduce a number of new products. Furthermore, we are in

the process of renewing the Cissell product range, which should increase our sales.

As we entered into a new distribution in the US, our sales of washer extractors were at

historically high levels in 2003, because of distributors building up initial inventory.

We believe this inventory build-up by distributors is completed by this time and therefore,

we do expect slightly lower sales of washer extractors in 2004.


HEAVY-DUTY LAUNDRY DIVISION (HDLD)

PROFILE

The Heavy-Duty Laundry Division markets its products and services under the JENSEN

brand and is the leading supplier to the Heavy Duty market. JENSEN assists heavy-duty

laundries world wide to produce quality textile and garment services. JENSEN produces

single equipment, system solutions up to total laundry process engineering.

We offer 4 different technologies to the heavy-duty customers:

• Washroom Technology

• Washer Extractor & Dryer Technology (produced by CLD)

• Finishing Technology (Flatwork and Garment)

• Material Handling Technology

BU - Washroom Technology

Jensen-Senking

BU - Materials

Handling Technology

Jensen UK

Jensen Sweden

Sales and Service Centers Business Units

SSC - FranceJensen France

SSC - UKJensen UK

SSC - AsiaJensen Asia

SSC - SALSG South-Africa

Jensen ProjectsLSG

BU - Finishing Technology

Jensen Denmark

Jensen Switzerland

Heavy-Duty Laundry DivisionBrussels (Bel.)

SSC - GermanyJensen-Senking

SSC - SwitzerlandJensen AG

LSG North America


A WORLD OF COMPETENCE IN TOTAL LAUNDRY PROCESS ENGINEERING

The Division commercializes its equipment and solutions

under the following major trademarks:

• 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 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 heavy-duty laundries are also produced in the CLD plants

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

WE THINK GLOBALLY AND ACT LOCALLY

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 simultaneously.


ACTIVITIES 2003

2003 2002 2001

Sales, mio euro 128 125,6 133,2*

EBIT, mio euro 4,2 2,8 6,4

Investments, mio euro 1,1 2,1 9,5

Employees, mio euro 780 838 988

* Restated for D’hooge

The overall investment climate improved in 2003 after a weak 2002. All Business Units

showed healthy growth even after having closed the production in Jensen Netherlands.

A large part of the growth is due to a number of large turn-key projects in the US, UK,

Germany, France, Sweden, Spain as well as Singapore. The large textile rental groups have

also increased their investment in laundry automation. Our own Sales and Service

Companies (SSC) showed further growth, which is a clear evidence of increased market

penetration.

The profitability of HDLD also improved considerably due to the higher volume as well as

the reduction in our cost base by closing Jensen NL and the initial re-organization of

Jensen-Senking in Germany. The USD had a negative effect on our operational result of

2,8 mio euro.

OUTLOOK 2004

We expect the market conditions to be similar to 2003. Our strong order-backlog is likely to

remain at the current high level as the demand continues to be important in all markets.

Our main concern is a potential further decline of the USD.

Our operational objectives for 2004 are to improve project co-ordination and execution as

well as further reduction of working capital.


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. Their mandate is for maximum 6 years.

However, in the spirit of Corporate Governance, Board members have been selected to

achieve a balance in the profile of the different members (executive members versus

independent directors and representatives of shareholders; industrial versus financial

background).

The Board of Directors of LSG is 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 2009

Guy Mampaey (GIMV) Director 2009

Christian Frigast (Axcel IndustriInvestor A/S) Director 2009

Niels Olav Johannesson Director 2009

2. Independent Directors (non-executive directors)

Raf Decaluwé Chairman 2009

Luc Van Nevel Director 2009

Hans Werdelin Director 2009

3. Representatives of the management

Jesper Munch Jensen Man. Director 2009


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 com-

panies.

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

of several companies, including Picanol.

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 N.V. Bekaert S.A. He held senior positions at Black &

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

companies, throughout the world.


Statutory auditor:

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

FUNCTIONING OF THE BOARD OF DIRECTORS

The Board of Directors acts independently and on the basis of proposals by the

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

management. The Board is regularly informed through management reports, rolling fore-

casts, strategic and operational plans and presentations by the Management Team.

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

calls at several occasions. A significant number of Board members participated in the work-

shops that lead to the definition of our new strategy. Topics of discussion included:

• LSG’s overall strategy for the coming 3 to 5 years

• Economic and market developments

• LSG’s financial structure and performance

• Worldwide plant configuration

• Performance measurement for management

• Major investment projects, acquisitions and divestments

COMMITTEES ESTABLISHED BY THE BOARD

Remuneration and Appointment Committee

The Remuneration and Appointment 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 total remuneration of the Management Team and the senior

management. The Committee also evaluates candidates for the Board.

Audit Committee

The Audit Committee is composed of 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.


REMUNERATION

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

tive directors amounted in 2003 to 194.750 euro. No performance-related remuneration or

other benefits have been attributed to the directors in the year 2003. 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 (excluding the CEO) amounts to 5.000 and the number of shares owned

by the Management amounts to 10.055. No warrants were owned.

Next to his mandate, the statutory auditor received over the year 2003 additional fees of

52.193,55 euro especially related to tax consulting. The statutory auditor received world-

wide fees of 311.950 euro (excl. VAT) for the execution of his mandate on the different statu-

tory accounts of legal entities of the Group and consolidated accounts of LSG. LSG has

appointed one audit firm for the whole Group.

DAY-TO-DAY MANAGEMENT

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

Team ensures that the strategy as approved by the Board is translated into concrete action

plans.

The Management Team meets at least every quarter. Depending on the topics, 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

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


Jesper Munch Jensen (38) 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 (52) 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.

Jean-Marc Vandoorne (35) holds a degree in commercial engineering from the Ecole de

Commerce Solvay. After his studies, he joined Arthur Andersen as an audit senior and con-

sultant (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 (58) 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 (40) 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 2003, total remuneration paid to the management (fixed gross salaries and

bonuses) team amounted to 1.602.685 euro. The remuneration of the CEO is included in

this amount and not included in the Board fees since he receives no board fee.

POLICY RELATING TO THE APPROPRIATION OF THE RESULT

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

sonable return.

POLICY TO PREVENT INSIDER TRADING

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

Management Team, all the members involved have signed a policy to prevent insider trading.

All trading needs to be authorized by the Compliance Officer before it can take place.

RELATIONSHIP WITH THE SHAREHOLDERS

On February 28, 2003, the agreement between the reference shareholders ended and was

not renewed.

CHANGES IN BYLAWS WITH RESPECT TO CORPORATE GOVERNANCE

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

Company were made. 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.


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

STOCK PRICE EVOLUTION

The LSG stock price increased from 3,24 euro at the end of 2002 to 5,75 euro at the end of

2003, with an average daily trading volume of 3.474 compared to 2.152 in 2002) shares (see

cover graph).

In compliance with Euronext’s recommendations and in order to increase liquidity of its

shares, LSG has entered into a liquidity-providing contract. As a result of the increased

investor relations effort, in combination with this liquidity-providing agreement, the liquid-

ity of the LSG shares has increased with more than 50%.

COMMUNICATION STRATEGY

Since January 2, 2002 LSG has been admitted to the Next Prime 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 avail-

able 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 mem-

bers and management is available on the corporate website.

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

As from 2004, LSG will no longer issue full quarterly reports. The increased requirements for

IFRS-compliant reporting would force LSG into too many disclosures that could harm its

competitive position. Instead, a quarterly business update will be given to the financial

markets. The content of this quarterly business update has not been decided yet

CHANGE IN SHAREHOLDINGS

No changes in shareholdings have been reported in 2003. 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 SHAREHOLDERS16,5 %

35 %48,5 %


Relative price performance

160,00

180,00

200,00

140,00

120,00

100,00

80,00

60,00

40,00

20,00

0,00

02-0

1-20

03

16-0

1-20

03

30-0

1-20

03

13-0

2-20

03

27-0

2-20

03

13-0

3-20

03

27-0

3-20

03

10-0

4-20

03

24-0

4-20

03

08-0

5-20

03

22-0

5-20

03

05-0

6-20

03

19-0

6-20

03

03-0

7-20

03

17-0

7-20

03

31-0

7-20

03

14-0

8-20

03

28-0

8-20

03

11-0

9-20

03

25-0

9-20

03

09-1

0-20

03

23-1

0-20

03

06-1

1-20

03

20-1

1-20

03

04-1

2-20

03

18-1

2-20

03

SHAREHOLDERS’ DIARY

• May 18, 2004: 10 AM: General Assembly at the LSG Headquarters, Brussels

• August 26, 2004: half year results 2004 (Analysts’ meeting)

• March 2005: full year results 2004 (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. Presentations, 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 wishing to convert from bearer shares to registered shares or vice-versa can

contact the Investor Relations Manager.

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 also contact

the Investor Relations Manager.

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]


LITIGATIONS

All legal claims that, based on prudent judgment, are reasonably founded, have been

provided for. We keep track of all potential litigation and pending legal cases on a central

level. In this Chapter we only cover legal cases against the Company.

Pending issues per major category are:

Customer claim:

• One claim with respect to equipment take-back clauses from a customer in Brasil

Product liability claim:

• 3 product liability claims in the US

• One product liability case in Italy where the customer of our former distributor wants to

involve LSG as party to the claim.

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, based on advise from our legal councils involved, that

these claims could have a significant impact on the Group's profitability.

HUMAN RESOURCES

The average number of employees has known the following evolution

2001: Commercial Laundry Division: 486

Heavy-Duty Laundry Division: 908

LSGNA: 80

LSG Holding: 8

Total: 1.482



LSGNA: 87

LSG Holding: 7

Total: 1.355



LSGNA: 79

LSG Holding: 6

Total: 1.268


RESEARCH AND DEVELOPMENT

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

spanning from the Washroom, over the logistics of moving 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 fundamental research and development. Our task is 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 software applications for our industry. Software for the process

control as well as production monitoring are crucial for offering our customer base a total

solution for the operation of a laundry 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 and notarial depositions 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 around 3% in Product Development per year. We expect

this figure to be the industry average.

INVESTMENTS AND CAPITAL EXPENDITURES

The years 2002 and 2003 have been years with investments and capital expenditures were

strictly prioritized as the group’s objective is to use free cash flow mainly for debt reduction.

This strategy should not affect the competitiveness of our facilities.

During 2003, we invested 2,1 mio euro, most of it for machinery and equipment.

In 2002 we made various replacement investments for a total amount of 2,8 mio euro and

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

In 2001 we had :

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

• Construction of new production facility for Jensen-Senking

for an amount of 7,9 mio euro

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

Outlook 2004

Given the current order backlog situation, additional capital expenditures in production

capacity might be necessary.

Cissell has acquired the necessary rights to assure continuity in delivery and maintenance

of the entire Pantex product line. This might result in a small amount of extra capital

expenditures in 2004.

LAUNDRY SYSTEMS GROUP

FINANCIAL REPORT 2003

29 Introduction

30 Report of the Board of Directors

34 Report of the Statutory Auditor

36 Consolidated balance sheets

38 Consolidated income statements

40 Consolidated statements of cash flows

41 Comments to the consolidated financial statements

46 Legal structure

47 Notes to the consolidated financial statements

Consolidation scope

Consolidation criteria

Valuation rules

Notes

57 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:

Since accounting year 2000, the Group has expensed all Research and Development

expenses.

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

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

recognition from completed contract to percentage of completion method. During 2003,

this effect increased to 1,5 mio euro compared to 2001.

In May 2002 the Company successfully completed a capital increase for 21,4 mio 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. In 2003, we have fully written-

off the value of Naicom for 1,6 mio euro. We have introduced a claim against the provider

of the mathematical engine behind the software.

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 mio euro. This purchase

was done to safeguard the receivable from those coin laundries in Global Fox and did not

lead to an additional cash disbursement since the existing receivable was equivalent to the

leasehold improvements. In 2003 the net asset value of the coin laundries is reduced to 0,7

mio euro.

The consolidated income statement for the year ended December 31, 2003 has been

negatively impacted by 1,1 mio euro due to the change in valuation rule for the valuation

of strategic spare parts. The new valuation rule is described on page 46.

During 2003, the joint venture, IPSO RENT, became operational. Its purpose is to offer

flexible renting formulas for laundry equipment to our customers in Belgium. Therefore the

Group has entered into an indirect partnership with LDL Equipment NV, the Belgian

distributor of Ipso equipment. The part of the equity belonging to the Group has been

valued according to the equity method.


REPORT OF THE BOARD OF DIRECTORS

The year 2003 has been a year of return to profit for LSG. This has been achieved due to the

higher activity levels in CLD as well as in HDLD, reduction in overheads through the closing

of our plant in the Netherlands and increased overall cost awareness. Many of our cost

reduction efforts have been neutralized by the adverse change in the USD rate. Using a

parity rate between USD and euro, our pre-tax profit would have been 4,3 mio euro

higher. We have also incurred some non-cash extraordinary losses, which decreased our

bottom-line result.

Balance sheet wise, we have been able to further decrease our working capital, and our net

debt. LSG has amply respected the covenants agreed with its principal group of bankers

that are part of the bank commitment agreement concluded in the first half of 2002.

In CLD, we benefited from the increased turnover that was realized in the US. Contrary to

HDLD, CLD has production in the US and therefore, CLD was less affected by the USD. CLD

has also done extensive restructuring in 2001 and 2002, which results in lean factories

realizing important economies of scale whenever the turnover increases.

In HDLD, the activity has been very strong. Order backlogs have been steadily increasing

and we have been able to successfully install large turnkey projects of 2 mio euro and more.

These projects require an integration of all LSG technologies into a single turnkey

installation. Our experience in this area has increased and, through improved project

management, projects of this magnitude are enhancing to our profitability. HDLD suffered

most from the decline in the USD rate because nearly all its production is made in Europe.

As a Group we have continued our reduction of overheads. In April 2003, we have closed

our factory in the Netherlands, and several overhead reductions were implemented

throughout LSG. On the other hand, we have continued to invest in our sales and

marketing organizations as well as in new product developments. We have also started to

centralize technical expertise in treasury and risk management in our headquarter in order

to have more effective cash management, interest rate hedging, currency hedging and

insurance coverage.

Our headcount has continued to decrease from an average of 1.355 in 2002 to 1.268 in

2003, and this in a year of higher activity. This decrease is related to overheads.

RESULTS

Although our turnover increased by only 3%, our operating profits increased by 56% com-

pared to 2002. In order to understand the important increase in EBIT compared to turnover,

three factors need to be taken into account : firstly turnover in HDLD is not a good

measure for its activity : all production is made to order and therefore turnover and increase

in work-in-progress and finished goods need to be considered for the profitability since

percentage-of-completion is used; secondly the adverse effect of the USD on the

translation of the turnover: at the rates of 2002, our activity level of the Group would be

14,6 mio euro higher than in 2002;finally the fact that we have produced more in fewer

locations leads to better overhead absorption.


In CLD, the increase in turnover and EBIT compared to 2002 are 4% and 61% respectively.

CLD does not apply percentage-of-completion. Their increase in profitability is due to

restructuring efforts from the years before, that had their full impact in 2003, as well as the

economies of scale resulting from higher turnover in Ipso-LSG. CLD suffered less from the

USD rate.

In HDLD, the increase in turnover and EBIT compared to 2002 are 2% and 50%

respectively. The reasons have been explained above. The increase in turnover in HDLD has

been spread over our different business units. Due to hedging of major contracts at the

moment the order was received, the profitability on the projects was safeguarded. Our

sales through our own sales and service centers have increased compared to last year (from

50% to 55%). The closure of our plant in the Netherlands and overhead reductions across

the different entities have also contributed to the increase in profitability. These benefits

have only been realized later in the year 2003, and will reach their full effect in 2004.

In order to make the comparison between the operating result of 2002 and the one of 2003

complete, one should exclude from the 2003 result the negative currency impact on the

USD (3,4 mio euro negative impact compared to parity) and the one time-effect of the

change of valuation of spare parts (1,1 mio euro negative impact). On the other hand, the

2002 operating result included more write-offs on inventories and bad debtors for 0,5 mio

euro.

Our financial expenses decreased compared to 2002, which included 1,4 mio euro

expenses linked to the capital increase and debt restructuring. This years’ financial

expenses include 1 mio euro currency losses. Excluding this effect, financial expenses

decreased due to the overall lower net financial debt of the Group.

The extraordinary charges of 0,7 mio euro are the result of two opposite effects. First one is

the fact that the closing of Jensen Netherlands turned-out to be 0,9 mio euro less

expensive than we had accrued for. Second one is the full write-off of the capitalized

software of Naicom Technologies for 1,6 mio euro. This write-off was taken after it became

apparent that the mathematical engine, provided by a third party, is not performing

according to specifications.

All the above leads to the fact that LSG has improved its net result by 3,1 mio euro

compared to 2002 (from a loss of 2 mio euro to a profit of 1,1 mio euro).


OUTLOOK 2004

In order to formulate our outlook for 2004, we have to make abstraction of some macro-

economic factors that could have an important impact on our profitability, primarily the

exchange rate of the USD. We take measures to reduce the impact of a weakening dollar

through a more extensive hedging of our foreign currencies and interest rates, but a further

drop in value of the dollar will negatively impact our results

Based on the current trend of order intake and the status of the order book, we do not

expect any slow-down in the HDLD activities. In CLD, the trend that started in August 2003,

being that the external distributors decrease their stocks, is still continuing. We therefore

are less certain about the sales outlook for CLD.

Overall, we know that whatever the future brings, our organization is more streamlined and

responsive than ever before. We will continue our efforts to make the organization less

vulnerable to changes in turnover during 2004 and the years thereafter. Some of the

measures that will need to be taken to achieve this goal might have one-time effects on

the overall profitability of the coming years.

INVESTMENTS AND CAPITAL EXPENDITURES

During 2003, we have completely written-off our investment in the software of Naicom

Technologies (1,6 mio euro).

Our capital expenditures amounted to 2,1 mio euro, consisting primarily of machinery and

equipment upgrades. LSG has sufficient state of the art production capacity for this

activity level. If the increase continues, some additional production space will need

to be built.

The building and machinery of our plant in the Netherlands have been disposed of,

resulting in some plus values. This is also part of the reason that the net closure cost was

lower than originally foreseen.

CHANGE IN VALUATION RULE

During 2003, the company changed its valuation rule on strategic spare parts as follows: all

spare parts, being one or more of the same type, that have not moved for one year, have

to be written off for 25%. If they have not moved for two years, they have to be written off

for 50%, spare parts not moved for three years, have to be written off for 75% and if they

have not moved for four years, they have to be fully written off.

If there is a usage in the meantime, they can be valued at their original value, unless it is

clear that the number of spare parts is excessive. In that case, the excess of spare parts is

written off. This new valuation rule is more conservative and resulted in a profit and loss

charge of 1,1 mio euro.

Previously, strategic spare parts were valued at their original value, unless there was no

usage or no installed base available that would justify the number of spare parts. In that

case, the excess number of spare parts would be written off.


RESEARCH AND DEVELOPMENT

LSG does not perform fundamental research, but continuously makes product develop-

ment efforts. These expenses amounted to 4,8 mio euro in 2003 (4,9 mio euro in 2002).

APPROPRIATION OF RESULTS

LSG N.V., the parent company, ended the year with a net profit of 4.212.549.08 euro. The

Board proposes to appropriate this result as follows:

To retained earnings 4.187.859,00

To legal reserve 21.390,08

To non-distributable reserves 3.300,00

Total 4.212.549,08

This brings the total of retained earnings to 403.111,04. The non-distributable reserve

corresponds to 600 own shares that were acquired.

ACQUISITION OF OWN SHARES

The Company acquired 600 own shares during the year 2003. These shares have been

bought in order to distribute them under the share option plan that could be started at the

discretion of the board of directors as it is foreseen in the bylaws of the Company. The aver-

age price at which these shares were acquired was 5,5 euro per share, their fractional value

is 5,17 euro per share. The number of own shares acquired represents 0,007% of the total

share capital of the Company.

SIGNIFICANT POST BALANCE SHEET EVENTS

On 20 January 2004, Cissell’s supplier of finishing equipment, Pantex 2000 BV, based in

Windschoten, The Netherlands, has been declared bankrupt. Cissell has acquired the nec-

essary rights to assure continuity in delivery and maintenance of the entire Pantex product

line. It is estimated that this will have a positive impact on Cissell’s turnover of finishing

equipment. Pantex 2000 BV realized approximately 1 mio euro sales in finishing equip-

ment.

DIVIDEND PROPOSAL

The Board proposes not to distribute any dividend on the results of 2003.

Wevelgem, March 2, 2004


STATUTORY AUDITOR’S REPORT ON THECONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003TO 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 2003 which have been prepared under the responsibility of the board of

directors and which show a balance sheet total of EUR ‘000’141.156 and a profit for the year

of EUR ‘000’ 1.112. We have also examined the directors’ report.

UNQUALIFIED AUDIT OPINION ON THE CONSOLIDATED FINANCIAL STATEMENTS

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 con-

solidated 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, evi-

dence supporting the amounts in the consolidated financial statements. We assessed the

accounting principles used, the basis of consolidation and significant estimates 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 2003 and the consolidated results

of its operations for the year then ended, in accordance with the applicable legal and reg-

ulatory requirements in Belgium and the information given in the notes to the consolidat-

ed financial statements is properly presented.


Other certification

We supplement our report with the following certification which does 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.

1 april 2004

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 2003 31 December 2002 31 December 2001

33.150 42.343 45.846

0 48 119

226 1.813 219

4.527 5.783 7.051

28.225 34.539 38.241

19.238 22.895 25.083

7.363 9.877 11.762

971 988 1.028

74 169 298

452 604 66

127 6 4

172 160 216

40 0 0

40

132 160 216

54 98 80

78 62 136

108.006 109.365 120.566

10.276 10.943 11.964

120 776 285

1.293 534 3.983

8.863 9.633 7.696

40.919 41.528 44.855

40.919 41.528 44.855

13.709 16.380 18.639

8.836 7.774 7.571

16.127 5.141 7.510

1.771 11.975 11.135

476 258 0

44.455 47.143 55.587

40.955 44.272 51.700

3.500 2.871 3.887

2 0 1

2 0 1

10.753 8.577 6.655

1.601 1.174 1.504

141.156 151.708 166.412

Capital and reserves

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

V bis. 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 2003 31 December 2002 31 December 2001

46.900 48.402 31.213

42.715 42.715 21.350

42.715 42.715 21.350

71.140 71.140 71.140

6.133 5.021 7.003

5.021 7.003 6.956

1.112 (1.982) 47

2.002 2.002 2.002

(73.190) (73.190) (73.190)

(1.910) 701 2.889

10 13 19

12.786 16.471 18.598

11.663 14.844 17.543

7.536 7.550 7.170

12 24 25

2.079 1.996 2.371

2.036 5.274 7.977

1.123 1.627 1.055

81.470 86.835 116.601

18.411 22.900 32.328

18.411 22.900 32.328

7.437 7.437 9.916

- 2.329 3.047

537 676 133

10.437 12.458 19.232

58.798 58.386 79.789

8.439 6.213 6.455

15.807 23.584 39.533

15.807 23.584 39.533

18.459 18.206 19.924

18.459 18.206 19.924

4.325 1.453 3.400

7.923 5.790 6.340

3.655 2.137 2.515

4.268 3.653 3.825

3.845 3.140 4.137

4.261 5.549 4.484

141.156 151.708 166.412

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 2003 31 December 2002 31 December 2001

207.128 198.874 202.109

200.547 195.247 207.056

5.367 2.087 (8.078)

95 83 222

1.119 1.457 2.909

(197.949) (193.010) (197.297)

99.021 94.428 95.224

100.516 91.266 94.128

(1.495) 3.162 1.096

25.089 23.917 28.222

62.469 66.270 68.856

4.367 5.140 5.367

2.781 2.317 359

406 (408) (2.788)

3.816 1.346 2.057

9.179 5.864 4.812

1.510 3.749 2.781

421 443 572

1.089 3.306 2.209

(7.552) (11.562) (9.514)

2.760 3.833 5.836

1.256 1.268 1.266

3.536 6.461 2.412

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

XII. Profit of the year

XIII. Share in result of companies accounted for using the equity method

XIV. Consolidated profit

B. Group share in the profit


3.137 (1.949) (1.921)

4.492 1.380

3.587 1.380

905

(5.168) (2.028)

1.600 199

- 502

3.568 1.327

2.461 (2.597) (1.921)

618 1.404 3.997

(1.967) (789) (2.029)

(1.967) (789) (2.029)

1.112 (1.982) 47

- - -

1.112 (1.982) 47

1.112 (1.982) 47

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


16.733 12.913 7.750

9.179 5.864 4.812

4.367 5.140 5.367

2.781 2.317 359

406 (408) (2.788)

4.661 7.324 12.543

-1.319 2.327 7.884

1.305 10.415 3.665

4.675 (4.147) 994

(1.271)

1.982 (2.966) (10.627)

35 (1.629) (112)

1.947 (1.337) (10.515)

(12) 56 5

(12) 74 5

(18)

(14.826) (10.799) (7.343)

(6.042) (7.813) (6.733)

1.256 1.268 1.266

(2.263) (9.670) (13.042)

(7.777) (15.949) 11.166

21.365

(6.360) (4.606) (1.449)

(676) (648)

1.600

(3.587) (1.020)

(1.349) 615 1.968

263 (1.365) (3.997)

(65)

(2.611) (2.188) 645

2.178 1.922 879

8.577 6.655 5.776

10.755 8.577 6.655


COMMENTS ON THE CONSOLIDATEDFINANCIAL STATEMENTS

INTANGIBLE ASSETS

Before the accounting year 2000, Research and Development expenses were capitalized.

From that year onwards, they have been taken into expenses. During the years 2001, 2002

and 2003, LSG has incurred 6,1 mio euro, 4,9 mio euro and 4,8 mio 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 mio 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 Naicom Technologies

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

development of 1,6 mio euro, which is being capitalized until completion, in 2003. In 2003,

we have written-off this capitalized software development cost entirely through

extraordinary charges.

CONSOLIDATION DIFFERENCES

The positive consolidation differences arise from goodwill on the acquisition of

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

gross amount of 2,4 mio euro, Jensen Netherlands in a gross amount of 6,6 mio euro and

Jensen France in a gross amount of 1,0 mio euro. Of the 5,8 mio euro net consolidation

differences, 3,7 mio 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 since the

activities of Jensen Netherlands were 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 annual amortization charge of 1,3 mio euro is recorded under the financial charges.

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

Group has not been capitalized and amortized, but deducted from equity. The Banking and

Finance Commission gave its approval for this accounting method on December 1, 1999. If

this goodwill were, like all the other goodwill, amortized over 10 years, amortizations

on consolidation differences (included under financial charges) would increase by

7,3 mio euro.

The negative consolidation differences relate to the acquisition of IPSO Finance N.V. in 1996,

for an amount of 2,0 mio euro.


TANGIBLE FIXED ASSETS

During 2003, tangible fixed assets decreased in net value by 6,3 mio euro. Excluding

depreciation changes in the income statement of 4,4 mio euro, the net decrease in tangi-

ble fixed assets was 1,9 mio euro. This decrease is the net effect of the translation of fixed

assets in USD denominated companies for 2,0 mio euro, the disposal of the fixed assets in

Jensen Netherlands B.V. for 1,9 mio euro and capital expenditures for a total of 2,0 mio euro.

WORKING CAPITAL

During 2001 and 2002, working capital has decreased by 12,5 mio euro and 7,3 mio euro

respectively. During 2003, working capital has further decreased by 4,6 mio euro. Of the

total decrease, 4,2 mio euro relates to the impact of the devaluation of the USD. The

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

in order to decrease the working capital by at least 25 mio euro between June 30, 2001 and

December 31, 2004. In absolute terms, the target was reached, in relative terms (expressed

as working capital on sales), taking into consideration the increased activity in 2003, it was

exceeded. The working capital reductions will remain a priority in the years to come. This

will bring our working capital on sales ratio in-line with the industry. Actions that are being

taken are standardization, more regular interim 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.

CAPITAL AND RESERVES

The share capital as at December 31, 2001 was 21,3 mio 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 mio euro through the issuance of 4.132.421 shares to existing

shareholders. At December 31, 2002, share capital was 42,7 mio euro and was represented

by 8.264.842 ordinary shares without nominal value. No changes occurred in 2003, except

for the acquisition of 600 own shares by LSG N.V. in the framework of starting up a share

option plan.

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

to 71,1 mio euro as at December 31, 2003. 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 mio euro created through an increase in capital.

The retained earnings of the year 2003 figures take into account the net result of the year.

The movements in the retained earnings are as follows:

(in thousands of euro) 2003

Retained earnings as at December 31, 2002 5.021

Results for the financial year 1.112

Retained earnings as at December 31, 2003 6.133


The translation differences include differences arising from the translation of the financial

statements of the companies that are not based in the euro-zone to euro. The exchange

rates used for the translation were as follows:

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

2003 2002 2001 2003 2002 2001

USD 1,1275 0,9418 0,8954 1,2495 1,0483 0,8842

DKK 7,4294 7,4305 7,4523 7,4460 7,4243 7,4357

GBP 0,6915 0,6285 0,6228 0,7036 0,6513 0,6102

SEK 9,1241 9,1576 9,2472 9,0744 9,1942 9,3074

SGD 1,9658 1,6876 1,6044 2,1277 1,8206 1,6324

SAR 7,5075 9,8652 7,6059 8,2102 9,0259 10,6856

CHF 1,5198 1,4672 1,5103 1,5593 1,4538 1,4823

PROVISIONS FOR LIABILITIES AND CHARGES

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

Jensen-Senking Germany and provisions for pre-pension plans in D’hooge and Ipso-LSG.

The pension provisions are based on actuarial calculations of the expected amounts to be

paid. These provisions remained stable over 2003.

The decrease in provisions for other liabilities and charges compared to last year is mainly

due to the use of provisions for restructuring costs of Jensen Netherlands for an amount of

3,6 mio euro. The reversal of this provision was done through extraordinary income, since

it was originally set-up as extraordinary. The net cost of closing Jensen Netherlands

amounted to 2,7 mio euro, resulting in an overprovision reversed in extraordinary income

of 0,9 mio euro. During 2003, 0,3 mio euro additional provisions were recorded for

potential legal cases.

DEFERRED TAXES

The deferred tax liabilities are presented under the caption “Provisions and Deferred Taxes”

of the liabilities’ side of the balance sheet and amount to 1,1 mio 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 8,9 mio euro. Deferred tax assets

have been recorded because 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

USA and Jensen Senking (Germany). Management has taken measures to ensure 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. Furthermore, one of the reasons for

the deferred tax assets in the USA in 2003, has been the deterioration of the USD. Our sales

Offices in the US (Jensen USA) needed to absorb the difference between their purchase

price in euro and their sales price in the USD. From 2004 onwards, we have decided to bill

all our sales of machines produced in Europe to the US company in USD. This will improve

the predictability of the profits in Jensen USA.


NET FINANCIAL INDEBTEDNESS

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

cash) decreased from 71,7 mio euro in 2001 to 44,1 mio euro in 2002 and to 31,9 mio euro

in 2003. Of the total decrease in 2003, 2,5 mio euro is due to currency impact on the USD

denominated loans. The remaining decrease compared to 2001 and 2002 is primarily due

to the reimbursement of loans from the proceeds of the capital increase of 21,4 mio euro

for 2002 and increased EBITDA and reductions in working capital for 2003.

Financial indebtedness in the Group is primarily located in Jensen USA (6,8 mio euro), LSG

N.V. (7,4 mio euro), Jensen-Senking GmbH (6,7 mio euro), Ipso-LSG N.V. (5,9 mio euro) and

Cissell Manufacturing Company (4,2 mio euro).

The financial debt in JENSEN USA is 78% revolving and short term. The facilities are used

for financing of the working capital, since JENSEN USA plays an important role as our

distributor in the US.

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

notes of NIB Capital Bank carry an interest of EURIBOR 3 months + 650 bp. It expires in

November 2005. The bond of GIMV, that was reimbursed in November 2003, carried the

same interest rate as the one of NIB Capital Bank. Attached to the bond of NIB Capital Bank

are 101.700 warrants at a price of 73.13 euro per warrant. Each warrant corresponds to the

right to buy one share.

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. Therefore 3,4 mio euro of the debt is a mortgage.

The remainder of the debt consists of leasing obligations for 0,5 mio euro and overdraft

facilities for 2,8 mio euro.

At IPSO-LSG N.V., 1,0 mio euro is related to investment loans and the remainder essentially

consists of overdraft facilities. These have been used for dividend financing and hedging

purposes (some 1,0 mio euro are USD denominated).

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

these, 2,9 mio euro are revolving and are related to the financing of the working capital.

The remainder is term loans and mortgages associated to the building and machinery in

Louisville and Portland.


The financial liabilities can be summarized as follows:

Outstanding amount Average Character

(in thousands of euro) interest rate in 2003 of interest rate

Long term :

Investment loans and term loans 9.388 2,25%-5,5% Fixed/Floating

Mortgage 7.486 2,35%-7,25% Fixed

Subordinated notes 7.437 8,6% Floating

Industrial bond GE Capital 1.954 5,76% Fixed

Leasing 585 Incl. Fixed

26.850

Outstanding amount Average Character

(in thousands of euro) interest rate in 2003 of interest rate

Short term :

Revolving and straight loan 15.807 3% Floating

15.807

Of these loans, 33% are US Dollar denominated.

STATEMENT OF CASH FLOWS

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 flows from operating activities improved due to a better operating profit. They

include one-time write-offs of 1,1 mio euro, related to the change in valuation rule on spare

parts that was disclosed previously.

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

of 2001. In total, 24,5 mio euro working capital reductions were realized between 2001 and

2003. Of the 4,6 mio euro decrease in 2003, 4,2 mio euro is related to currency impact of

the USD. However, seen the increased activity in 2003, the ratio of working capital on sales

has improved from 36% in 2002 to 31% in 2003.

Cash flows from investing activities decreased due to the translation-effect on

USD-denominated fixed assets. In total we have invested 2,1 mio euro in the Group. These

primarily consisted of machinery to improve production efficiency. We had also disposals

of fixed assets with the closure of Jensen Netherlands, for an amount of 1,9 mio euro. The

2,0 mio income from investing activities is attributable to the effect of Cumulative

Translation Adjustments.

The decrease in financial result is because 2002 included 1,0 mio euro for the expenses

related to the capital increase and 0,5 mio euro bank commitment fees. Furthermore, our

net interest expense decreased from 3,4 mio euro in 2002 to 2,3 mio euro in 2003, and this

in-line with the decrease in financial debt. On the other hand, our financial charges in 2003

were penalized by an extra 0,3 mio euro in net currency losses in 2003 compared to 2002,

as well as the negative results on the interest rate swaps for an amount of 0,4 mio euro.

The origin of the extraordinary charges is explained before. Of the total extraordinary

expenses, 1,7 mio euro are cash items.

OVERVIEW OF THE LEGAL STRUCTURE AS AT DECEMBER 31, 2003

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%

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)

OG De Kerkstraat BV

(Netherlands)

100%

IPSO USA

Inc.

(USA)

Laundromats

(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

UK

Jensen UK 6a Thorpe Way 100%

Banbury

Oxfordshire OX 16 8 XL

Fully consolidated Registered office VAT or national Participatingcompanies number percentage

Singapore

Jensen Asia PTE No. 6 Jalan Kilang #02-01 100%

Dadlani Industrial House

Singapore 159406

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

Companies accounted for Registered office Participating

under the equity method Percentage

Belgium

IPSO RENT N.V. Nieuwstraat 146 50%

BE 479.135.260 8560 Wevelgem


CONSOLIDATION CRITERIA

Scope of application

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

in the consolidation, except Ipso Rent.

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, the cost method is applied.

Because of immateriality and because of the widely divergent activity, Ipso Rent NV has not

been included in the consolidation. In this respect we refer to Art. 107,1° and Art. 108 of the

Royal Decree 30.01.2001. The part of the equity that is belonging to the Group, is valued

according to the equity method and the share of LSG in the result is recorded in the income

statement of the Group.

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.

VALUATION RULES

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.

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 differences

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

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. However, where 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.

Tangible fixed assets

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 useful 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 estimated selling price in

the ordinary course of business, less the costs of completion and selling expenses.

The Company uses the percentage of completion method for recognizing revenue on firm

orders, which take a longer period 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

estimated, no profit is recorded for. If a contract is expected to end with a loss, the loss is

immediately fully provided for without applying the percentage of completion method.

During 2003, the company changed its valuation rule on strategic spare parts as follows: all

spare parts, being one or more of the same type, that have not moved for one year, have

to be written off for 25%. If they have not moved for two years, they have to be written off

for 50%, spar parts not moved for three years, have to be written off for 75% and if they have

not moved for four years, they have to be fully written off.

If there is a usage in the meantime, they can be valued at their original value, unless it is

clear that the number of spare parts is excessive. In that case, the excess of spare parts is

written off. The impact on the profit of the year ended December 31, 2003 was a decrease

of 1,1 mio euro.


Previously, strategic spare parts were valued at their original value, unless there was no

usage or no installed base available that would justify the number of spare parts. In that

case, the excess number of spare parts would be written off.

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

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

and future costs, 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 assets and liabilities are translated at closing rates;

• Transactions in foreign currencies are converted at the foreign exchange rate prevailing

at the date of the transaction;

• Gains and losses resulting from the settlement of foreign currency transactions and from

the translation of monetary assets and liabilities denominated in foreign currencies are

recognized in the income statement;

• Non-monetary assets and liabilities are translated at the foreign exchange rate

prevailing at the date of the transaction

The company uses derivative financial instruments to reduce the exposure to adverse fluc-

tuations in interest rates and foreign exchange rates. It is the company’s policy not to hold

derivative instruments for speculative or trading purposes. Derivative financial instruments

are recognized initially at cost, their report/deport is amortized pro rata temporis.

NOTES TO THE ACCOUNTS (in thousands of euro)

VI.B. DEFERRED TAXES

Deferred tax assets 8.863

Deferred tax liabilities -1.123

of which : deferred taxes -1.120

beneficial deferred tax amounts -3

Net deferred taxes 7.740*

* Subsidiaries with largest deferred tax assets

Company Reason Amount

Ipso USA ** Start-up losses 2.634

Jensen USA Losses from before 2001 2.150

LSG N.V. Deferred taxes on tax losses 1.364

6.148

** 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 48

Movements during the period

New expenses incurred 0

Amortization -46

Other movements

Translation differences -2

Net book value at the end of the period 0

whereof expenses of formation or capital increase, loan

issue expenses, discounts and other formation expenses 0

VIII. SCHEDULE OF INTANGIBLE ASSETS

Research and Concessions, Goodwill Advances

development patents,

expenses licences, etc.

Acquisition costAt the end of the preceding period 1.895 190


Acquisitions, including produced fixed assets 110

Additions

Sales and disposals

Transfers from one heading to another 0

Translation adjustments -56 -15

Other movements 0 0

At the end of the period 1.949 175

Research and Concessions, Goodwill Advances

development patents,

expenses licences, etc.

Depreciation and amounts written down

At the end of the preceding year 212 60


Recorded 19 47

Written down following sales and disposals 1.600 0

Transfer from one heading to another 0

Translation adjustments -35 -5

Other movements 0 0

At the end of the period 1.796 102

Net book value at the end of the period 153 73

IX. STATEMENT OF TANGIBLE FIXED ASSETS

34.324 35.421 3.698 693 847 6

229 1.198 478 3 121

-2.105 -1.165 -99 -40 0

0

-1.603 -2.113 -293 -12 -103

96 -1.340 112 -301 0

30.941 32.001 3.896 343 744 127

11.429 25.544 2.710 524 243 0

1.147 2.131 871 46 60

-443 -978 -57 0

0

-430 -1.442 -202 -17 -11

0 -617 -397 -284 0

11.703 24.638 2.925 269 292 0

19.238 7.363 971 74 452 127

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

Land & Plant Furniture & Leasing Other Assets under

Buildings Machinery & Vehicles & Similar tangible construction

Equipment Rights assets and advance

payments

* Mutations that relate to changes in the scope of consolidation (art 11 R.D. December 3 1993) and writeoff of fully depreciated items.

X. STATEMENT OF FINANCIAL FIXED ASSETS

Companies

Equity method Other companies

Participations

Net book value at the end of the preceding period

Movements during the year

Additions

Transfers

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 Imputation of

differences differences positive differences

5.783 2.002 73.190

0 0

-1.256 0

4.527 2.002 73.190



As the result of an increase in equity stake

As the result of a decrease in equity stake

Amortization


* Mutations that relate to changes in the scope of consolidation (art 11 R.D. December 3 1993)

0 98

40

0 -40

0

0 -4

40 54

62

16

0

0

78

5.021

1.112

0

6.133

XIII. STATEMENT OF AMOUNTS PAYABLE

XIV.A2. TOTAL TURNOVER OF THE GROUP IN BELGIUM 3.837

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

0 7.437

0 0 0

48 537 0

8.391 6.310 4.127

8.439 14.284 4.127

10.459

12.129

22.086

44.674

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

1.268

730

518

20

60.874

1.595

251

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 restructuring charges and writeoff on fixed assets.

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, 2003, currency hedges existed for the following amounts (in thousands of euro) :

Currency bought forward

Currency sold forward

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.

Gains and losses resulting from the translation at closing rate of intercompany loans, even if these are of a permanent

nature, are recognized in the income statement. For the year ended 31 December 2003 this amounts to 1,2 mio euro.

As at 31 December 2003, the company had entered into forward exchange contracts for an amount

equivalent to 20,2 mio euro (foreign currencies sold forward) and for an amount equivalent

to 9,1 mio euro (foreign currencies bought forward).

The company did not value foreign exchange hedging contracts at market value per 31 December 2003.

Valuing the contracts at market value would have increased the operating result by 0,3 mio euro.

As at 31 December 2003, the company had concluded Interest Rate Swaps (IRS)

for 15 mio euro, 5 mio US dollar, 16,3 mio DKK and 10 mio DKK with maturities in 2010 and fixed rates

ranging from 2,24% to 4,71%. The financial result coming from the IRS amounts to –0,4 mio euro.

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

3.568

-618

16.263

9.122

20.214

2.236

195

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

Fixed assets

Formation expenses

Intangible assets

Tangible fixed 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 2003 31 December 2002 31 December 2001

121.290 117.907 120.699

0 3 11

21 30 19

138 81 112

121.131 117.793 120.557

5.038 5.656 483

0 0 0

0 0 0

3.696 4.652 316

3 0 0

768 736 77

571 268 90

126.328 123.563 121.182

Capital and reserves

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 2003 31 December 2002 31 December 2001

114.985 110.773 98.204

42.715 42.715 21.350

71.140 71.140 71.140

727 702 702

403 (3.784) 5.012

0 0 0

0 0 0

0 0 0

0 0 0

11.343 12.790 22.978

7.437 7.437 15.751

3.829 5.124 6.587

77 229 640

126.328 123.563 121.182

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


5.668 4.025 2.039

5.192 3.995 2.020

0 0 0

0 0 0

476 30 19

(4.488) (3.780) (2.202)

0 0 0

3.440 2.970 1.488

974 715 672

42 69 32

0 0 0

0 0 0

32 26 10

1.180 245 (163)

3.033 (2.062) (597)

4.562 736 454

(1.529) (2.798) (1.051)

4.213 (1.817) (760)

0 (6.945) (2.304)

0 0 0

0 (6.945) (2.304)

4.213 (8.762) (3.064)

(1) (34) 6

0 0 0

(1) (34) 6

4.212 (8.796) (3.058)

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

Profit to be appropriated

Profit for the period available for appropriation

Profit brought forward

Appropriations to capital and reserves

to legal reserves

Result to be carried forward

Profit to be carried forward

Distribution of profit

Dividends


428 -3.784 5.012

4.212 -8.796 -3.058

-3.784 5.012 8.070

-25 0 0

25 0

-403 -3.784 5.012

403 3.784 -5.012

0 0 0

0 0 0

Current profit after taxes (1)

Number of shares outstanding (average) (2)

Number of shares outstanding (yearend) (3)

Key figures per share LSG N.V. 2003 2002 2001

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

0,51 -0,28 -0,18

8.264.842 6.543.000 4.132.421

8.264.842 8.264.842 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.


STATUTORY FINANCIAL STATEMENTS OF LSG N.V.

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 thereon

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 full version of the statutory financial statements of LSG N.V. is available on the

corporate website www.lsg.be.

The financial income of the accounting year 2003 includes a dividend of 4 mio euro, that

LSG N.V. received from its subsidiary Ipso-LSG.

VALUATION RULES

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 specific

consolidation related valuation rules with respect to the consolidation differences and

provisions for deferred taxes.

Since LSG N.V. primarily has a holding function, we emphasize that, in accordance with our

valuation rules and accounting legislation in Belgium, financial fixed assets are valued at

their initial acquisition price or paid-in capital. Write-offs on the financial fixed assets are

taken when they are deemed to be of a permanent nature. If it appears that write-offs taken

previously are no longer needed, they are reversed. The financial fixed assets are never

valued above acquisition price or paid-in capital.

On tangible fixed assets, the depreciation rules are:

Caption Method Rate

Buildings straight line 10%

Installations, machinery and equipment straight line 20%

Office equipment and furniture straight line 20%

Vehicles straight line 20%

CAPITAL STATEMENT (position as at December 31, 2003)

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 : (as of February 28, 2003)

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

Karel Oomsstraat 37 Sankt Anna Plads 10

2018 Antwerpen DK - 1250 Copenhagen

GIMV and subsidiaries

- number of shares

- number of shares through warrants

- total of shares + warrants

Jensen Invest A/S

- number of shares

- number of shares through warrants

- total of shares + warrants

Amounts (in thousand of euro) Number of shares

42.715

0

42.715

42.715 8.264.842

4.011.317

4.253.525

0

0

- 101.700

0

7.437

- 101.700

21.350 -

Total %

1.348.777 8.264.842 16,32%

33.900 135.600 25,00%

1.382.677 8.400.442 16,46%

Total %

4.020.076 8.264.842 48,64%

0 135.600 0,00%

4.020.076 8.400.442 47,86%

Of the total number of warrants, 33.900 have expired in the meantime (owned by GIMV)

The remaining 101.700 warrants expire in November 2005.


GENERAL INFORMATION

1. IDENTIFICATION

• 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 undertake 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

to the Purpose of the company.

It may obtain, in any manner, an interest in any and all associations, ventures, business 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.

• 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 wish to receive it.

• The Company did acquired 600 own shares during the year 2003. These shares have

been bought in order to distribute them under the share option plan that could be

started at the discretion of the board of directors as it is foreseen in the bylaws of the

Company. The average price at which these shares were acquired was 5,5 euro per share,

their fractional value is 5,17 euro per share. The number of own shares acquired repre-

sents 0,007% of the total share of the Company.

2. SHARE CAPITAL

• 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 note loan of 7,4 mio euro exists with 101.700

warrants attached without preferential subscription rights. Each warrant 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

31/12/2003 42.714.560 euro 8.264.842

Layout and printing Van de Maele - Geraardsbergen

Phone +32 54 41 66 13 - www.drukkerijvandemaele.be

laundry systems group

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