* Turnover: EUR 326 million (half year 2008: EUR 375 million)
* EBITDA (1) excluding restructuring expenses: EUR 22.2 million
(half year 2008: EUR 43.8 million)
* Net group result excluding restructuring expenses and impairment:
EUR -11.8 million
(half year 2008: EUR 15.9 million)
* Restructuring expenses: EUR 9.8 million (half year 2008: EUR 0.4
* Impairment: EUR 32.9 million (half year 2008: nil)
* The net group result: EUR -53.3 million (half year 2008: EUR 15.6
* Operational personnel and other operating expenses EUR 13.2
* Improved financing agreement
Half-year report of the Executive Board
Trading conditions remained exceptionally difficult for Gamma Holding
in the first six months of 2009. In that context the programme of
cost savings and restructurings is being accelerated. Compared with
the first six months of 2008, operational personnel and other
operating expenses were EUR 13.2 million lower in spite of increased
expenditure at Exotic Fabrics.
Group turnover in the first half of 2009 came to EUR 326 million
(half year 2008: EUR 375 million). This includes a positive effect of
EUR 2.5 million arising from currency movements.
EBITDA1 of the group excluding restructuring expenses was EUR 22.2
million (half year 2008: EUR 43.8 million). Currency movements had a
positive effect of EUR 2.4 million. The lower EBITDA was due to the
decline in turnover and the consequent under-utilisation of capacity
in the factories. Furthermore, added value decreased as a consequence
of downward price pressure and the reduction of inventories.
The net group result excluding restructuring expenses and impairment
came to EUR -11.8 million (half year 2008: EUR 15.9 million).
Restructuring expenses in the first six months totalled EUR 9.8
million (half year 2008: EUR 0.4 million).
As a result of the deterioration in market conditions, the test
against the value-in-use calculations resulted in an impairment of
intangible assets and property, plant and equipment of EUR 32.9
million at Filtration and Coating & Composites (half year 2008: nil).
The net group result came to EUR -53.3 million (half year 2008: EUR
15.6 million), mainly due to the lower EBITDA and an impairment of
intangible assets and property, plant and equipment.
The turnover of Industrial Solutions in the first six months of 2009
came to EUR 185 million (half year 2008: EUR 231 million). Currency
movements had a positive effect of EUR 4.6 million.
EBITDA1 excluding restructuring expenses of the sector totalled EUR
4.1 million (half year 2008: EUR 24.3 million). Currency movements
had a positive effect of EUR 2.4 million.
Turnover of Belting came to EUR 112 million (half year 2008: EUR 135
million). Worldwide, customers postponed orders, while major projects
at Original Equipment Manufacturers (OEMs) suffered delays. This
applied to all types of belting, especially in the construction and
textile sectors and in the chemical, metalworking, woodworking and
automobile industries. The replacement market was also badly affected
by the recession, mainly because customers sought to save on
maintenance expenses. The food industry, on the other hand, was less
sensitive to the recession. The business unit developed for this
sector a new generation of modular radius belts for resting, cooling
and freezing of food. In addition, a flexible squeezing belt was
launched on the market which is particularly suitable for separation
machines used for meat and poultry.
Turnover of Filtration amounted to EUR 46 million (half year 2008:
EUR 58 million). There was falling demand for filtration products
throughout the world, particularly in mining, the chemical and the
automobile industries. OEMs operating in various sectors of industry
deferred their spending. Sales to the food industry remained stable,
however. Filtration launched several new and improved products,
including thermoplastic-welded, seamless and hence non-leaking filter
bags, metal-ribbed belting for the production of corrugated board and
specially sewed filtration belts for horizontal and rotating vacuum
Turnover of Coating & Composites came to EUR 27 million (half year
2008: EUR 38 million). Because of cutbacks on advertising budgets
there was a sharp fall in demand, notably for seemeeÂ® (printable
media fabric). Turnover of duraskinÂ® (tent and roof structure fabric)
also lagged behind, though this was partly offset by the supplying of
coated fabric for the 2010 World Cup football tournament in South
In that connection more than 60,000 m2 of fabric was supplied for the
stadium roofing of 'Soccer City' in Johannesburg, while both the roof
structure and the frontage were provided for 'Green Point' in Cape
Town. Coating & Composites previously supplied the roof structure for
the new Rhein Neckar Arena, the stadium of the successful German
football club Hoffenheim.
Turnover of Lifestyle Fabrics totalled EUR 141 million (half year
2008: EUR 144 million). Currency movements had a negative effect of
EUR 2.1 million.
EBITDA(1) excluding restructuring expenses came to EUR 18.6 million
(half year 2008: EUR 20.3 million). Currency movements did not have
Turnover of Sleep Care Fabrics amounted to EUR 61 million (half year
2008: EUR 70 million). Mattress manufacturers produced less in the
first six months, while existing stocks were further reduced. The
U.S. market, however, showed a slight recovery. The business unit was
again able to introduce a new product at Interzum, the international
furniture and interiors industry show in Cologne: PurotexÂ®, a
patented, revolutionary technology for creating a healthy and clean
sleeping environment. This new mattress fabric contains natural,
probiotic microflora which neutralise bed lice allergens and inhibit
the development of harmful bacteria. The business unit received for
this ecological innovation an Interzum Award for Intelligent Material
& Design in the top category 'Best of the Best'.
Exotic Fabrics held its own. The business unit's turnover increased
by 8% in the first six months from EUR 74 million in 2008 to EUR 80
million in 2009 as a result of extra sales efforts. This growth was
achieved in the first quarter. Turnover in the second quarter was at
last year's level. The top brand Vlisco opened a third flagship store
in Abidjan (CÃ´te d'Ivoire) and successfully launched its new
collection 'Ã‰clat de Nature'. There was also success in Ghana, where
a special Obama design was made for a customer to mark the state
visit by the U.S. President on 12 July 2009.
Turnover of Discontinued Operations amounted to EUR 36 million (half
year 2008: EUR 40 million).
Compared with other units within the group, Verseidag Ballistic
Protection was less affected by the recession. Turnover increased in
the first six months, partly thanks to the supplying of bullet-proof
material to European and U.S. army and police forces and armouring
for military vehicles. The unit also developed automatic weapon
protection for use on ships.
This is a special protective system along the ship rails, including
mobile protective shields at the gun turret, to protect ships against
close-range threats. The German navy has now equiped various ships
with this new system.
Sailcloth had to contend with a slow start to the sailing season.
Moreover, notably in Europe, the production of sailing yachts was
postponed and there was a worldwide sharp decline in the wind surfing
segment. However, demand for the top segment membrane sails remained
high in comparison with last year. Sailcloth is working on new
products in response to the economic downturn. For instance, the
business unit launched at an event for super yachts D4Â® sailcloth
with DyneemaÂ®, the world's strongest, most lightweight and lasting
yarn. Furthermore, more sail-makers are prepared to affix the brand
name DP (Dimension-Polyant) to their sails, which will increase the
brand familiarity. In addition, the first sails from the new
production location in Sri Lanka are to be supplied this year.
The balance of financial income and expense rose to EUR -17.5 million
(half year 2008: EUR -7.1 million) as a consequence of higher
(re-)financing expenses of EUR -6.1 million, higher interest margins
and a slightly higher balance of interest-bearing liabilities. The
balance of interest-bearing liabilities at the end of the reporting
period increased to EUR 312.6 million (half year 2008: EUR 306.2
million). The first half of the year includes a negative currency
effect of EUR 2.0 million due to changes in exchange rates.
The share in results of associates was nil (half year 2008: nil).
The effective tax rate fell to nil on a loss before income tax (half
year 2008: 30.3% on a gain before income tax), mainly because most of
the losses are incurred in countries where they can no longer be
Net investments in property, plant and equipment in the first half of
2009 totalled EUR 7.9 million (half year 2008: EUR 10.8 million) and
were mainly in Belting, Filtration and Exotic Fabrics. They were thus
significantly below the level of depreciation of EUR 15.2 million
(half year 2008: EUR 16.5 million).
Net working capital as a percentage of turnover came to 31.5% (half
year 2008: 31.0%). This increase was caused by slight pressure on the
terms of payment of debtors and a decline in accounts payable. This
is partly due to the reduced coverage provided by credit insurers,
which results in pressure on payments.
Cost savings and restructurings
The programme of further cost savings and restructurings announced on
20 February 2009 is being accelerated throughout the group. In 2009
this will yield cost savings of approximately EUR 30 million.
Ultimately the programme should yield annual savings of approximately
EUR 45 million from 2010.
As a consequence of the measures that have been taken, 378 employees
at Industrial Solutions and 282 employees at Sleep Care Fabrics left
the group in the first six months of 2009. Expansion resulted in an
increase of 62 in the number of employees at Sleep Care Fabrics in
Turkey and Mexico and 72 at Exotic Fabrics, mainly in Africa. The
number of temporary employees through agencies fell in the first six
months by 151. Moreover, a reduction of working time has been
implemented in various group companies. On top of that, as part of a
stringent financial policy, investments have been reduced and the
company is being managed very much in terms of working capital.
Debt reduction and financing
On 18 February 2009, Gamma Holding reached agreement with the banks
on new financing arrangements until March 2010, thus bringing the
total facilities made available by the syndicate of banks to EUR 390
million. Improved financing conditions were agreed in mid-July 2009.
The main group companies are parties to the financing agreement and
have provided extensive collateral in that connection.
In the new agreement the financial covenants have been eased and
account has been taken of the difficult market conditions with which
Gamma Holding has to contend. Moreover, an extension of the financing
until mid-July 2011 is possible. This gives the company time to put
into effect its programme of cost savings, divestments and
restructurings. One of the conditions for this extension is the
granting of a conversion right to the syndicate of banks. This right
permits the banks to convert a portion of the loan facilities
amounting to EUR 30 million into newly issued cumulative preference
shares. The banks can only exercise this option if (i) the available
credit under the new credit agreements is less than EUR 5 million, or
(ii) the net interest-bearing debt in relation to the EBITDA is
greater than 7.5. The dividend on the cumulative preference shares is
12% of the amount paid on those shares. In this way the syndicate of
banks can jointly obtain at least 50.1% of the voting rights in Gamma
Holding's increased issued share capital. At 30 June 2009 the net
interest-bearing debt in relation to the EBITDA was 5.8 and is thus
within the parameters presently agreed with the syndicate of banks.
The granting of the conversion right and the amendment of Gamma
Holding's articles of association which this necessitates have to be
approved by the shareholders. A motion to that effect will be dealt
with at the Extraordinary General Meeting of Shareholders to be held
on Thursday 30 July 2009.
To reduce the company's debt, the process of disposing of companies
at a reasonable price has been continued. In present market
conditions, however, this is still very difficult because of the low
valuation levels and the limited availability of acquisition finance.
Against this background Gamma Holding will continue to focus
primarily on further implementation of the programme of cost savings
and restructurings already announced. Furthermore, Gamma Holding is
still open to a public-to-private transaction.
Gamma Holding attaches great importance to risk control. To increase
risk awareness within the group, to gain a better understanding of
the existing risks and to control identified risks more effectively,
Gamma Holding has a structured system for risk management. This
system, as well as the risk profile and the main risks, have been
described in the annual report for 2008. The nature and possible
scale of these risks are also applicable to the second half of 2009.
The following should be noted in this connection:
* Market conditions in the second half of 2009 are expected to
continue to be difficult. If these conditions deteriorate
further, this could potentially have a major effect on the
markets in which Gamma Holding and its companies operate, the
position in these markets and hence the expected future cash
* The worsened economic conditions imply greater uncertainty
regarding the collectability of debts, partly due to the risk of
a larger number of bankruptcies.
* Accelerating the reduction of the number of employees may have an
effect on the speed of execution of the measures to be taken.
* Gamma Holding continually monitors the identified risks and will
continually follow developments where new risks can arise and
identified risks can change in the second half of 2009.
Changes to the Executive Board
After the General Meeting of Shareholders of Gamma Holding N.V. held
on 23 April 2009, the Supervisory Board appointed Mr L. (Leendert)
van Reeuwijk (44) as a member of the Executive Board and Chief
Financial Officer. Leendert van Reeuwijk has been employed by Gamma
Holding as Group Controller since 2 August 2005.
In June Mr Meint Veninga decided, in agreement with the Supervisory
Board, to step down as chairman of the Executive Board and CEO of
Gamma Holding as of 1 August 2009. The Supervisory Board intends to
appoint Mr J.H.L. (Jan) Albers (57) as his successor after the
Extraordinary General Meeting of Shareholders.
In spite of a few positive signals, Gamma Holding does not anticipate
an improvement in the current relevant market conditions in the
second half of 2009. The second six months will continue to be
Gamma Holding will therefore continue to closely monitor market
conditions and make changes to the organisation as necessary.
With the aforementioned measures Gamma Holding expects to remain
within the newly agreed bank covenants and to post better results
(EBITDA (1)) in the second half of the year than in the first.
Gamma Holding will publish its trading update on the third quarter
before the opening of the stock exchange on Friday 23 October 2009.
On that occasion it will, as well as reviewing the figures, provide
further insight into relevant developments.
Statement by the Executive Board
The Executive Board hereby declares that, to the best of its
* the consolidated interim financial statements, which have been
prepared in accordance with IAS 34, Interim Financial Reporting,
give a true and fair view of Gamma Holding's assets and
liabilities, its financial position and the results for Gamma
Holding and the consolidated companies; and
* the half-year report of the Executive Board includes a fair
review of the information required pursuant to section 5:25d,
subsections 8 and 9 of the Dutch Financial Markets Supervision
Act (Wet op het financieel toezicht).
Helmond, 28 July 2009
Executive Board of Gamma Holding N.V.
Meint Veninga, chairman
Leendert van Reeuwijk, CFO
Consolidated interim financial statements for first half-year 2009
(1) Group result before income tax, interest, depreciation,
amortisation and impairment of property, plant and equipment and
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