Net group result Gamma Holding increases by 18%
- Turnover up 1% to EUR 779 million
- Operating result (excluding restructuring expenses) grows by 3% to EUR 63.4 million
- Net group result increases by 18% to EUR 33.0 million
- Successful completion of transformation process and repositioning of Exotic Fabrics
- Acquisition of Kirin (Filtration) and uni-chains (Belting)
- New strategic plan ‛Towards leadership 2010' for the coming three years
- Proposed dividend: EUR 2.00
Gamma Holding consisted of two sectors in 2007: Gamma Technologies and Gamma Comfort & Style. With the adoption of the new strategy ‛Towards leadership 2010', presented on 31 January 2008, it has been decided to rearrange the business units into two new sectors: Industrial Solutions and Lifestyle Fabrics. The annual results are presented in this press release in accordance with the sectoral classification that was used in 2007.
Results
The year 2007 was a satisfactory one for Gamma Holding. In spite of the lower exchange rate of the dollar, the weakness of the US economy and higher energy prices, Gamma Holding saw an increase in its turnover and earnings.
Group turnover totalled EUR 779 million (2006: EUR 774 million). This includes a net positive effect of 1% arising from acquisitions and disposals. Currency movements had an average effect of -4% over the year. Organic growth of turnover was 4%.
The operating result excluding restructuring expenses rose by 3% to EUR 63.4 million (2006: EUR 61.6 million). Acquisitions and disposals had a net positive effect of 3% and currency movements a net negative effect of -9%. The operating result excluding restructuring expenses showed organic growth of 9%.
Restructuring expenses in 2007 totalled EUR 4.0 million compared with EUR 7.0 million in 2006. The operating result including restructuring expenses increased by 9% to EUR 59.4 million (2006: EUR 54.6 million).
The balance of financial income and expense improved from EUR -12.5 million in 2006 to EUR -12.2 million in 2007, mainly due to lower average debt and higher interest rates. At 30.3%, the effective tax rate was lower than in 2006, when it was 31.0%.
The net group result increased by 18% to EUR 33.0 million (2006: EUR 28.0 million). Excluding currency movements of -10%, the net group result rose by 28%.
Earnings per share were EUR 4.39 (2006: EUR 3.71).
Dividend proposal
In fixing the dividend on ordinary shares, the aim is a long-term average dividend of approximately 40% of the net group result attributable to equity holders. In 2007 the balance sheet ratios were strengthened by the upward trend in income. The proposal is to declare a dividend on EUR 2.00 per share on the ordinary shares, to be charged to retained earnings. This dividend is 47% of the net group result attributable to equity holders.
Gamma Technologies
Gamma Technologies consisted of Belting, Filtration, Coating & Composite, and Sailcloth Technology. These business units again brought various innovative products onto the market in 2007. Belting, for example, developed an endless, heat-resistant felt belt for the aluminium industry. Filtration launched Dual-TexTM, a double-layer woven filter cloth for filter belts that enables solids to be separated from liquids more easily and more quickly. Coating & Composite supplied energy-saving cloth for an innovative double-walled facade of a building of the Directorate-General for Public Works and Water Management in Utrecht. In collaboration with DSM, Sailcloth Technology brought onto the market an innovative D4® membrane sailcloth, using for the first time in this top segment the super-strong fabric Dyneema®, which greatly improves the shape retention of the sailcloth.
Results
Gamma Technologies' turnover was EUR 490 million (2006: EUR 492 million). This includes a positive effect of 1% arising from acquisitions. Currency movements had an effect of -3%. Organic growth of turnover was 2%. Belting saw rising demand in almost all product groups, particularly in the field of synthetic belts and high-performance flat belts. Sailcloth maintained its tradition of good performances. Filtration's turnover was virtually the same as in 2006. The business unit saw the first effects of the new organisational set-up that is designed to bring about an improvement in the cost structure. Partly because of the weak dollar and disappointing trends in two of the four product groups, Coating & Composite Technology was unable to equal the high level of sales posted in 2006, when the business unit benefited from the World Cup soccer tournament in Germany.
The operating result excluding restructuring expenses improved by 6% from EUR 33.2 million in 2006 to EUR 35.1 million in 2007. Currency movements had an effect of -12% and acquisitions an effect of 2%. The operating result excluding restructuring expenses showed organic growth of 16%.
Restructuring expenses came to EUR 2.9 million, compared with EUR 6.0 million in 2006. They related to Filtration Technology and Coating & Composite Technology. The operating result including restructuring expenses increased by 19% from EUR 27.2 million in 2006 to EUR 32.2 million in 2007.
Improved cost position
Belting expanded the new central assembly centre EuroFab in the Czech Republic to make it the business unit's largest assembly centre. This facility, which serves the European market, is used for the assembly of both modular and PVC and polyurethane conveyor belts. Filtration completed the first construction phase of a central assembly plant in Poland and started the first activities there. The Polish facility will come fully on stream in the course of 2008. Assembly work that hitherto was spread over Western Europe will be moved to Poland. In Mexico the organisation was strengthened in order to be able to meet the growing demand in Central and South America. Coating & Composite Technology concentrated the production of bullet-proof vests in Finland and the production of armoured vehicle materials in Germany. At the same time, efficiency measures were implemented in the product group PTFE-coated glass woven fabrics for industrial customers.
Growth
In the last month of 2007, Belting reached agreement on the takeover of uni-chains A/S. This Danish family-owned company specialises in modular plastic belts for industries such as the automotive, food, paper and print sector. As well as in Denmark, the business operates in Germany, the UK, France, the USA and Japan. As a result of the takeover, Belting will obtain access to a very competitive technology, enabling the business unit to expand its product range. The takeover will give uni-chains A/S access to Belting's extensive distribution network.
With a view to the growing market in South-East Asia, Filtration purchased Kirin, a company specializing in filter products for wet and dry filtration processes. Kirin has facilities in Singapore and Malaysia. In addition, the business unit strengthened its own marketing and sales organisation. Coating & Composite Technology likewise invested in the sales organisation, which is now designed around the four product groups. In December the business unit also opened a sales office in India, which will serve the Asian market, with the exception of China, which has its own sales point.
Gamma Comfort & Style
The Gamma Comfort & Style sector comprised the business units Sleep Care and Exotic Fabrics. In 2007, Sleep Care Fabrics received the Interzum award at the sector's most important trade show. The business unit won this prize in the category of smart materials and design for Cairfull, a new three-dimensional mattress fabric with a layer of air that makes it easier to regulate temperature and humidity levels.
Results
Turnover in this sector rose by 2% from EUR 282 million in 2006 to EUR 289 million in 2007. Currency movements had an effect of -4% and disposals an effect of -1%. Organic growth of turnover was 7%. The turnover of Exotic Fabrics increased as a result of an upturn in demand for all brands. Sales of Sleep Care Fabrics showed lower volumes and on average lower prices.
The operating result excluding restructuring expenses came to EUR 28.3 million (2006: EUR 28.4 million). Currency movements had an effect of -7% and disposals an effect of 4%. The operating result excluding restructuring expenses showed organic growth of 2%. The changes to the level of costs in all the production facilities of Exotic Fabrics led to improved earnings. Costs arising from the relocation process that has been launched have put earnings under further pressure in the business unit Sleep Care Fabrics.
Restructuring expenses in this sector totalled EUR 1.1 million, compared with EUR 1.0 million in 2006. The operating result including restructuring expenses came to EUR 27.2 million (2006: EUR 27.4 million).
Improved cost position
In 2007 Sleep Care Fabrics closed down the last of the two Belgian facilities that were to be discontinued. Of the original three factories, there is now one left in Belgium. Output of woven mattress ticking, in particular, has been increased in the new factory in Turkey. The same applies to knitted mattress ticking in the Czech Republic.
Growth
Good progress has been made, particularly at Exotic Fabrics, in the repositioning process designed to change the business unit from a distribution-orientated to a consumer-driven organisation. The brands Vlisco, GTP, Uniwax and Woodin have each been given their own market focus, not only on fabrics, but also on clothing and accessories. Two seasonal collections of fabrics of the top brand Vlisco have now been presented. This brand has also been given its own flagship stores in Benin, Togo and Nigeria, where customers can see examples of contemporary clothing they can make from the fabrics. Bags, belts and shoes are also available in these stores. The trendier brand Woodin expanded its distribution network with stores in Nigeria, Ghana and South Africa. The brand GTP is successfully reconquering the middle segment of the African market with the launch of the less expensive GTP Nustyle. Uniwax strengthened its distribution network.
Sleep Care Fabrics was able to achieve higher volumes in the United States through a sharper focus on the middle segment. In Mexico the capacity of the production facility was enlarged.
Investments and financing
Investments in property, plant and equipment totalled EUR 35.6 million in 2007, 16% less than in 2006 (EUR 42.4 million). Investments were mainly in Sleep Care Fabrics (Turkish and Mexican production locations), Filtration (new facility in Poland) and Coating & Composite Technology (replacement investments). At the same time there were disposals totalling EUR 8.4 million, principally in Sleep Care Fabrics, above all as the result of the sale of real estate in Belgium (2006: EUR 8.8 million arising from the sale of real estate as a consequence of the transfer of production). Net investments came to EUR 27.2 million (2006: EUR 33.6 million) and were thus 11% less than depreciation (2006: 8% more than depreciation). In 2007, depreciation totalled EUR 30.6 million (2006: EUR 31.3 million).
Net investments in subsidiaries were EUR 1.3 million in 2007, compared with EUR 2.8 million in 2006. This related to the acquisition of the filter production company Kirin in South-East Asia. The proceeds of the sale of discontinued operations were EUR 22.1 million.
Net working capital increased from EUR 224.7 million in 2006 to EUR 235.3 million, partly due to the various transformation processes taking place in the business units. As a percentage of turnover, net working capital increased from 29% in 2006 to 30% in 2007. Currency movements caused net working capital to decrease by EUR 8.7 million, while acquisitions and disposals caused it to decrease by EUR 3.3 million. The organic increase in net working capital was EUR 22.6 million.
The cash flow, the net group result attributable to equity holders and before depreciation and amortisation, came to EUR 65.0 million (2006: EUR 64.8 million).
The balance of interest-bearing liabilities fell by EUR 15.5 million to EUR 207.6 million (2006: EUR 223.1 million). This includes a currency effect of EUR 8.8 million as a consequence of the decline in the exchange rate of the US dollar.
Total equity rose by EUR 11.7 million to EUR 201.2 million (2006: EUR 189.5 million). Total equity as a percentage of the balance sheet total was 31.8% at year-end 2007 (year-end 2006: 28.2%).
Employees
In 2007 the total number of employees showed a net increase of 4%, rising from 6,710 at year-end 2006 to 7,007 at year-end 2007. However, total personnel costs did not increase compared to 2006. The number of employees at Gamma Technologies at year-end 2007 was 3,713 (2006: 3,494). Acquisitions resulted in an increase of 66. There was a net increase of 153 as a consequence of the strengthening of the sales organisation and the starting of assembly centres in the Czech Republic and Poland in Belting and Filtration Technology.
The number of employees in the sector Gamma Comfort & Style at year-end 2007 was 3,294 (2006: 3,216). As a consequence of the closure of the second Belgian facility, the creation of the Turkish facility and efficiency measures, the number of employees at Sleep Care Fabrics showed a net decrease of 53. The number of persons employed by Exotic Fabrics increased by 131 as a result of the sharp rise in demand for all brands.
Outlook
Gamma Holding has successfully completed its transformation process and has thus created a solid foundation for further growth.
The strategy ‛Towards leadership 2010' is designed to provide Gamma Holding with leading market positions. In order to achieve or consolidate such positions, the focus in the coming three years will be on portfolio optimisation, growth and operational excellence. In this connection Gamma Holding has set itself a target of annual organic growth of turnover of 3 - 5% and a return on sales (EBITA/net turnover) of 8 - 10%. At the same time it should be possible to achieve a return on capital employed (EBITA/average capital employed) of 15 - 20%. The company aims for an annual increase of 8 - 10% in earnings per share.
Barring any unforeseen circumstances Gamma Holding expects to realise these targets in 2008.
Executive Board, Gamma Holding N.V.
Helmond, 22 February 2008
This press release is based on the annual accounts prepared by the Executive Board. The annual accounts will be submitted to the General Meeting of Shareholders of 24 April 2008 for adoption. The auditor has issued an unqualified opinion on these accounts.
Appendices
Consolidated statement of changes in equity
Consolidated cash flow statement
A presentation regarding the annual results 2007 can be downloaded from the site under Investor relations/Financials/Presentations.
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