CITYSERV (CTS): Changes in Management Board as CEO leaves City Service SE, following petition for bankruptcy of Concentra - raport 17

UNI - EN REPORT No17/2016

Supervisory Board of City Service SE calls for extraordinary meeting of shareholders of the company, with agenda to approve expansion of Management Board from 1 member to 7.

Supervisory Board will propose appointment of Edvinas Paulauskas, Executive Manager of City Service SE, Vytautas Turonis, Executive Manager for Lithuania, and Tomas Kleiva, Financial Director, as a new Members of the Board.

T. Kleiva will act as Member of the Board instead of Jonas Janukėnas until extraordinary meeting of shareholders of the company. J. Janukėnas, who also acted as CEO of City Service SE, left the group of companies on February 23.

On February 23, subsidiary of City Service SE, active in Spain, Concentra Servicios y Mantenimiento S.A., enterprise code A-84659614, headquarters registered at Avenida Leganés 56, Alcorcón 28923, Madrid (further – Concentra), has submitted a petition for bankruptcy to official institutions in Spain, authorized to initiate the bankruptcy procedure. According to Spanish law, procedure of bankruptcy starts no longer than in 4 months after petition is received. City Service SE will issue a separate announcement after actual start of bankruptcy procedure of Concentra.

Concentra has been operating as part of City Service group since its acquisition on September 25, 2013.

The decision to ask for initiation of bankruptcy of Concentra has been made after evaluation of commercial property administration and cleaning sector prospects in Spain. Since 2015, market conditions in these sectors remain largely unfavorable, dominated by further market shrinking trends, inflexible employment regulations and delayed settlements from clients. Economy in Spain, though having shown signs of recovery in 2013, remains stagnated. Under these conditions, Concentra has been operating with increasing loss. Accordingly, City Service SE decided to withdraw from loss-generating activities by freezing all active operations of Concentra and thus minimizing all costs.

The revenue of Concentra in 2016 amounted to EUR 38.1 million. In 2016, Concentra operations constituted 22% of the Group’s total revenue.

Direct effect of bankruptcy of Concentra on City Service SE stand-alone data will result in impairment of loans provided and investment in a subsidiary amounting to EUR 4.8 million. Furthermore, there is a potential risk that EUR 1.2 million of City Service SE guarantees provided to Concentra may be realized.

City Service SE will continue operations in Spain through Grupo Aresi de Inversiones (SPAIN) S.L., a subsidiary in residential facilities market. In 2016, City Service SE expanded area of managed residential facilities in Spain to 3.1 million sq. meters. Active expansion took place in regions of Alicante, Murcia and Madrid. For 2017, expansion of residential facility management activities to cities of Barcelona and Zaragoza is planned.

Vilius Mackonis,

Director of Marketing and Communication Department

+370 5 239 4900