Training

Outside Denmark, substantial growth is expected in the years ahead, mainly in the Nordic area. Specifically the recent restructuring in Sweden has created a much better basis for expansion in the area of healthcare services.¹⁰⁵ In Poland revenues are expected to increase in 2011 due to the new acquisition, but growth rates are also expected to increase in the future in both Poland and Slovakia as a result of the growing public expenditure in the healthcare sector.¹⁰⁶ Finally, Falck recently opened a healthcare clinic in combination with the training facilities in Malaysia and opened a healthcare clinic in India as well which will contribute to revenues in 2011.

The healthcare activities primarily consist of subscriptions and long term contracts and are therefore expected to provide stable revenues from year to year. Still, as mentioned, extensive growth is expected in the future and adding that earnings have been positive throughout the years the healthcare business has the characteristics of a star according to the Boston- model.

with.¹¹⁰ Falck has been operating training centers in Trinidad and Tobago, Brazil and Malaysia for some years now and has established a very strong presence in these countries.

More recently Falck acquired operations in USA, opened large facilities in Nigeria with a great deal of success and a facility in the UAE with minor success. Falck has also established itself with facilities in Singapore, Vietnam and Thailand while a representative office has been opened in Russia. The market for safety training in Denmark is limited however the world market is huge and still increasing as the offshore sector develops and as Falck expands services to additional industries. It has not been possible to come up with a good estimate of the total worldwide worth of training services but no less than DKK 10 bn. is probably a cautious estimate.¹¹¹

The market for rescue and safety training is characterized by high capital requirements: the startup costs include investments in expensive facilities such as windmill replicas, cranes and other advanced technological equipment used in real life at oil rigs etc. Adding to this there are high costs associated with complying with ever increasing requirements for providers of training. For the Danish market there are natural barriers in the small size market – it is simply not profitable to enter the market from scratch because the startup costs exceed the potential earnings. One attractive feature about the training business, however, is the earnings margin which historically has been high. This high margin alone is likely to attract new competitors in the long run.

The customers are mainly within the offshore, maritime and windmill industry all around the world.¹¹² Rescue and safety training is not well suited for export because training facilities have to be locally rooted and close to customers. The customers are generally large

corporations such as ship-owners, producers of windmills and oil companies and their bargaining power is considered high, although offset by the lack of serious large scale

competitors to Falck. Most competitors are small and lack both the breadth of services as well as the legally required standards and certificates to perform certain training activities at the highest level. Thus customers are dependent on Falck to a higher degree and as a result less price sensitive which explains the high earnings margin in the industry.

110 Falck A/S prospectus 2004 p. 32

111 From the prospectus from 2004 it is estimated that training services to the maritime sector is worth DKK 5 bn. and to the offshore sector (disregarding China and North America) 1 bn. Taking into account industry growth rates, and that Falck has moved into the aviation, windmill and chemical industries since then as well as entered the North American marked for offshore services, a minimum worth of DKK 10 bn. is justifiable.

112 Falck.com – Business areas / Training

Overall, Falck is considered to be in a relatively strong bargaining position to its customers in the training industry, which is characterized by a low degree of competition on the overall global market and a medium level of competition on the local markets. The large costs associated with building training facilities and strict legal requirements are significant deterrents of new competitors which mean the training industry seem to be favorably structured for Falck for the next few years. In the long run the large earnings margin is expected to attract new companies.

Future growth:

In Europe relatively high growth rates are expected in the training business for 2011. The main reason for this is the newly established height training center in Denmark and the newly implemented training facility in Germany. In the long run revenues are expected to be partly organic, partly acquisitive and partly through extending training activities to the current customers and to other industries such as construction and manufacturing.¹¹³

Globally Falck is the main provider of training services to the offshore industry and

consequently growth is very much related to developments in this industry.¹¹⁴ Many of the oil producing countries are undergoing rapid economic development and the global

expenditure on offshore drilling is forecasted to grow at an annual average growth rate of about 6.6% until 2015.¹¹⁵ One country looking especially lucrative is Brazil whose potential is just beginning to emerge after the discovery of huge reserves in the offshore regions.¹¹⁶ With Falck`s firm establishment in this country and with high growth rates expected, Falck is in a great position to take advantage of this. Further Falck has recently established training centers in a number of Asian countries, and large revenue increases are expected from this area in the coming years. In the long run it is Falck`s ambition to be established in all oil and gas producing regions of the world¹¹⁷ and to accomplish this, significant acquisitive growth must be expected in the future. The Training business much resembles the characteristics of a star in the Boston-model, with high growth rates, strong earnings and a large market share.

113 E.g. HJÆLP – September 2010 p. 21

114 Covers oil companies, Oil and drilling contractors, maritime contractors and service contractors offshore

115 GBI Research (February 2010)

116 GBI Research (February 2010)

117 Falck News - Falck officially opens two new training centres 21-01-2010