Third quarter Gamma Holding
- Turnover: EUR 167 million (third quarter 2008: EUR 179 million)
- EBITDA1 excluding restructuring expenses: EUR 18.6 million
(third quarter 2008: EUR 16.7 million) - Sale of Coating & Composites
- Term of financing extended to mid-July 2011
Gamma Holding intends to sell virtually the whole business unit Coating & Composites, including Verseidag Ballistic Protection, for a sum of EUR 37.5 million to a German industrial company. The units to be sold represent anticipated annual turnover of EUR 76 million and EBITDA1 of EUR 2.5 million. The number of employees involved is 271. The transaction is expected to be completed in the coming weeks. The units concerned are included in this trading update as discontinued operations.
The product group PTFE-coated glass woven fabrics for industrial applications, which formed part of Coating & Composites, will be transferred to Belting. PTFE represents anticipated annual turnover of EUR 13 million and makes a limited contribution to EBITDA1. The unit employs 134 people. It has also been decided to recognise the business unit Sailcloth as a continuing operation once again with effect from 30 September 2009.
Gamma Holding has decided to abandon the sectoral breakdown into Industrial Solutions and Lifestyle Fabrics. With effect from this trading update the Company reports separately on each business unit in line with the half-year report.
Developments in the third quarter
In the third quarter Gamma Holding benefited from the accelerated programmes of cost savings, restructurings and working capital improvement. Earnings showed a recovery as a consequence of these measures, notably at Belting and Sleep Care Fabrics.
Group turnover in the third quarter of 2009 totalled EUR 167 million (2008: EUR 179 million). This includes a positive effect of EUR 1.3 million arising from currency movements.
Group EBITDA1 excluding restructuring expenses was EUR 18.6 million (2008: EUR 16.7 million). Currency movements had a positive effect of EUR 0.5 million.
In the third quarter the net interest-bearing debt fell by EUR 8.0 million to EUR 305 million.
The turnover of Belting (including PTFE) came to EUR 61 million (2008: EUR 68 million). EBITDA1 excluding restructuring expenses was EUR 5.1 million (2008: EUR 4.6 million). The business unit has to contend with fewer orders in spite of signs of recovery in Asia and America. The economic stagnation is making itself felt mainly in sales of modular belts and in markets such as the construction and textile sectors and in the chemical, metalworking, woodworking and automotive industries. Belting was less affected, however, as regards belts for the food industry, the print and packaging industry, airbags and treadmills. In order to save on costs, more and more fabrication activities are being transferred from Western to Eastern Europe and further personnel reductions have been undertaken.
Turnover of Filtration was EUR 22 million (2008: EUR 28 million). EBITDA1 excluding restructuring expenses came to EUR 1.0 million (2008: EUR 2.1 million). In Europe and among Original Equipment Manufacturers in particular there was a fall in demand for filter products, notably in mining and the chemical and automotive industries. Moreover, replacement orders were deferred. In the food industry, demand was less sensitive to the economic cycle. Furthermore, sales of ceramic filter elements showed an upward trend. The business unit will further adapt the organisation to the lower level of turnover.
Turnover of Sailcloth came to EUR 7 million (2008: EUR 7 million). EBITDA1 excluding restructuring expenses was EUR -0.2 million (2008: EUR -0.4 million). The business unit is being adversely affected above all by an extremely weak OEM market and a declining wind- and kite-surfing segment. Demand for the top-segment D4-membrane sails remained high, however, while the first high-quality Dimension-Polyant sails from the new production location in Sri Lanka have now been manufactured and sold.
Turnover of Sleep Care Fabrics totalled EUR 34 million (2008: EUR 34 million), with market share gains principally in America. EBITDA1 excluding restructuring expenses showed a strong improvement in the third quarter as a result of higher turnover and cost savings and came to EUR 5.6 million (2008: EUR 1.4 million). The last production facility in Belgium has in the meantime been closed down, with the machinery transferred to other units. Furthermore, the logistics and storage of mattress fabrics for the European market will be outsourced before the end of this year.
Turnover of Exotic Fabrics held its own and came to EUR 43 million (2008: EUR 42 million), mainly due to Vlisco and Uniwax. EBITDA1 excluding restructuring expenses was EUR 7.2 million (2008: EUR 8.7 million). In August the top brand Vlisco again successfully launched a new collection called 'Touch of Sculpture'.
Discontinued Operations
Turnover of Discontinued Operations amounted to EUR 17 million in the third quarter (2008: EUR 21 million).
Compared with other units within the Group, Verseidag Ballistic Protection was less affected by the recession. The business unit supplies body armour to European and US army and police forces and composite armoured material solutions to several armed forces.
Turnover of Coating & Composites (excluding PTFE) was down. In particular, the seemee® product group (printable media fabric), which is linked with the economically sensitive advertising sector, saw an appreciable fall in demand. Duraskin® also showed a decline, but was able to grow in the area of tent fabric and coated fabric for roof structures.
Developments in the first nine months
Group turnover in the first nine months of 2009 totalled EUR 489 million (2008: EUR 546 million). This includes a positive effect of EUR 3.8 million arising from currency movements.
The operational personnel and other operating expenses were EUR 23.3 million lower than in the first nine months of 2008. Group EBITDA1 excluding restructuring expenses came to EUR 44.2 million (2008: EUR 61.2 million). Currency movements had a positive effect of EUR 2.9 million.
EBITA2 was EUR 9.1 million (2008: EUR 36.9 million).
The balance of financial income and expenses rose to EUR -31.5 million (2008: EUR -11.1 million) as a consequence of higher (re-)financing expenses of EUR -14.3 million, higher interest charges and a slightly higher balance of interest-bearing liabilities.
The net group result excluding restructuring expenses and impairment came to EUR -17.8 million (2008: EUR 18.7 million).
Restructuring expenses in the first nine months totalled EUR 11.1 million (2008: EUR 0.4 million).
In the first six months of the year the test against the value-in-use calculations resulted in impairment of intangible assets and property, plant and equipment of EUR 32.9 million at Filtration and Coating & Composites (2008: nil).
The net group result amounted to EUR -60.8 million (2008: EUR 18.4 million), principally due to lower EBITDA1, impairment of intangible assets and property, plant and equipment, restructuring expenses, and higher financial income and expenses.
Financing
On 18 February 2009, Gamma Holding reached agreement with the banks on new financing arrangements of EUR 390 million until March 2010. Improved conditions were agreed in mid-July 2009, with the possibility of an extension of the financing subject to certain conditions.
Gamma Holding has now met all the conditions and hence has financing available until mid-July 2011. The exercising of the extension option has meant a further easing of the covenants. As of 30 September 2009 the net interest-bearing debt was EUR 305 million. The net interest-bearing debt in relation to EBITDA was 5.6 and is therefore within the level of 7.0 agreed with the syndicate of banks. The other covenants were also fulfilled.
Strengthening of market positions and cost savings
Gamma Holding will continue to focus on further strengthening its market positions and on implementation of the programme of cost savings. The programme is already bearing fruit. In the first nine months of 2009 there has been a net reduction of 536 in the workforce. The number of temporary employees through agencies fell by 106. In addition, a reduction of working time has been introduced in several enterprises, investments have been reduced as part of a stringent financial policy, and the Company is constantly striving to improve working capital.
Outlook
In spite of some positive developments, Gamma Holding does not anticipate an improvement in the current market conditions in the fourth quarter. The rest of 2009 will continue to pose a challenge. The Company will therefore continue to closely monitor market conditions and make changes to the organisation as necessary.
Gamma Holding expects to remain within the newly agreed bank covenants.
Executive Board of Gamma Holding N.V.
Helmond, 23 October 2009
The figures contained in this trading update have not been audited.
1 Group result before income tax, interest, depreciation, amortisation and impairment of property, plant and equipment and intangible assets
2 Group result before income tax, interest and amortisation/impairment of goodwill and acquired intangible assets
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