Jose L Melero London 23/07/03 European Commercial and Industrial Security Market © 2003 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.

Today’s presentation 01: Market highlights 02: Revenue forecast 03: Percentage of market revenues by region 04: Industry challenges 05: Strategic analysis 06: Take-home comments

Market Highlights The market for industrial and commercial security in Europe was estimated at $7.11 billion in The market includes Fire Detection Systems, Intrusion Systems, Access Control Systems, CCTV applications and associated services. The market for industrial and commercial security in Europe has been fuelled by demand for CCTV applications and services. Growth rates for this industry are expected to be around 5 per cent per year. 6 major companies dominate a third of the total European Commercial and Industrial security market.

Market Highlights In terms or relative importance Intrusion Detection Systems in 2001 generated 19.0 per cent of the total revenues, while Security Services generated 43.7 per cent of the total. Only CCTV applications and Security Services are expected to increase their relative importance in terms of revenue generation over the forecast period. Germany, France and UK-Republic of Ireland markets accounted in 2001 for 66.0 per cent of the total European market revenues. The Iberian market and the Benelux are expected to gain relative weight over the forecast period.

Revenue Forecast ( ) $2b $6b $10b $12b $4b $8b

Percentage of Market Revenues by Region

“The market will not meet some early predictions pointing to growth rates of 15% per year. However, the market will outperform GDP growth rates expected for Europe.” ZVEI Germany, April 2003

Industry challenges Falling margins will squeeze manufacturers Mature markets will require rejuvenation End-user and installer education is a priority Integration of industries will blur boundaries between markets Increasing trend towards consolidation in the long run will put pressure on small manufacturers

Strategic Analysis “Bells and whistles” will not suffice to attract prospective clients or convince current ones to up-date their security systems. Companies should concentrate on improving: false alarm rates create user friendly systems adopt standard communication protocols improve system integration offer strong guarantees for the installed system. As the market adjusts to new structural dynamics, companies will need to focus on becoming service providers.

Strategic Analysis Equipment Manufacturers System Installation and Maintenance Services Remote Monitoring- Prompt Response Units “This strategy is meant to complete the business cycle, from production to maintenance and operation of the systems installed. Only those companies with the capacity to undertake this change in culture will be successful in this industry in the long term”

Take-Home Comments CCTV and security services will be the main areas of growth in the security industry Growth rates are expected to be 5% per year, bringing down some predictions that forecast growth rates of 15% or more per year The Iberian and the Benelux markets will offer the greatest possibilities for growth Consolidation will continue within the security sector in coming years as the market matures Companies covering the whole security business cycle will be those with the greater chances for success Security equipment will have to favor greater integration properties, a higher degree of user friendliness and better reliability to reduce false alarms

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