CHG-MERIDIAN in 2005

The CHG-MERIDIAN Group generated lease origination totalling €561.8 million in the financial year ending 31 December 2005. This figure is €54.8 million down on 2004. The trend is more positive in international markets, which represented a significant proportion of lease origination accounting for 26.8 per cent of income.

The principal cause of the downturn was the drop in lease origination in the Germany and United Kingdom core markets. In 2005, lease origination in the German company amounted to €411.1 million compared to €507.4 million in 2004. One of the reasons for the contraction of business in Germany is that 2004 featured one-off big-ticket transactions that led to a strong upsurge in activity. However, transactions on this scale were not in evidence in 2005. Another reason is the continuing downward movement in IT hardware prices. Jürgen Mossakowski, Chairman of the Management Board of CHG-MERIDIAN Deutsche Computer Leasing AG, explained: "Although we leased more equipment than in previous years in terms of units, the cost of equipment was significantly lower.“ The total number of assets leased out in 2005 amounted to 1.5 million units, an increase of 50 per cent. This constitutes a total leased assets portfolio of €2.1 billion compared to €2 billion in 2004.

In the United Kingdom on the other hand, the IT leasing market is subject to cut-throat competition and this does not make it very easy for us to position ourselves in the marketplace. In May 2005, we opened a new sales office in Leeds to improve our geographical distribution and help us gain customers from all parts of the UK.

The trend in other regional companies is, however, exceedingly positive. The best results were in France, Belgium, Italy and Switzerland, where earnings more than doubled in some instances. The proportion of new business generated by the subsidiaries located outside Germany rose from 17.7 per cent in 2004 to 26.8 per cent in 2005. According to Peter Horne, a member of the Management Board of CHG-MERIDIAN Deutsche Computer Leasing AG, "The strategic decision to grow into Europe with our customers has been more than vindicated."

An example of this has been the establishment in the last year of a new company, CHG-MERIDIAN Computer Leasing Polska sp. z o.o., in Warsaw, Poland. Although the company is still in the start-up phase, it was able to originate its first leases in 2005. The same applies to the Spanish company, CHG-MERIDIAN Computer Spain S.L., established in April 2005 with a head office in Barcelona.

Brokerage and logistics centres
Our brokerage and logistics centres in Egham, near London, and Mörfelden, near Frankfurt am Main, processed and remarketed a total of 193,000 items of equipment in 2005, an increase of 29.5 per cent on the previous year. Revenues rose accordingly in 2005 from €15.2 million to €17.2 million. We have benefited from the fact that the drop in prices has been slower to filter through for used IT equipment than has been the case for new assets. As in 2004, the main sales drivers continue to be desktop computers (including monitors) and notebooks. A total of 130,000 PCs and monitors (2004: 92,000) and 27,000 notebooks (2004: 21,000) were sold in 2005.

The fully certified secure data erasure service provided by the logistics centre in Mörfelden is seeing increasingly heavy demand. In 2005, data was securely wiped from a total of 18,000 machines. This is more than double the figure of 7,500 machines in 2004.

Employees
The number of employees at CHG-MERIDIAN also continued to rise in 2005. At 31 December 2005, 365 persons (2004: 332) were employed by the group across Europe, 252 of these employees being based in Germany.

Summary and outlook
One of the principal objectives in 2006 is to continue to expand our European regional companies with an associated increase in our share of the European leasing market. According to research carried out by the ifo-Institut in Munich on behalf of the German Association of Leasing Companies (BDL), Bonn, and published in February 2006, lease-based investment accounted for €4.14 billion of total investment volume in 2005. This equates to a market share for the German company of just under 10 per cent. To improve our market share, we are continuing to expand our range of services based on IT leasing so that we can offer our customers a complete leasing service.

In spite of the downturn in 2005, all our expectations are that further growth in lease origination will be re-established during the course of 2006.

Established in 1979, CHG-MERIDIAN is one of Europe's leading independent leasing companies specialising in information technology. It offers a full range of services that include flexible financing, services solutions and the remarketing of second-user IT hardware. The Group has subsidiaries in 14 countries throughout Europe. It has two offices in the UK, five in France, seven in Germany, two in Spain and also operates in Austria, Belgium, the Czech Republic, the Netherlands, Ireland, Italy, Poland, Russia, Slovakia and Switzerland.