Sharp improvement in Gamma Holding earnings
- Turnover: € 582 million (2009: € 490 million)
- EBITDA1 excluding restructuring expenses: € 68.6 million (2009: € 35.0 million)
- Operating result: € 32.9 million (2009: € -31.5 million)
- Sale of Vlisco Group with a book profit of € 65 million
- Net group result: € 73.8 million (2009: € -69.0 million)
‛Following two difficult years, in 2010 Gamma Holding was able to further turn the corner towards recovery. Contributing factors included the improvement in the economic climate, with particularly favourable developments in Asia and America. We also stabilised our cost level, which had been substantially reduced by robust measures taken in preceding years. Partly as a result of this, all business units reported growth of turnover and profits. This positive trend is expected to continue in 2011.'
Jan Albers, CEO
The tentative recovery of the economy and the spread of activities in many different markets have helped Gamma Holding to weather the crisis. In addition, in 2010 there was no slackening of efforts to further optimise business processes and strengthen market positions, with the aim of creating a more flexible cost structure and generating additional turnover. This was successfully accomplished by each individual business unit, in the conviction that the strength of the business lies not in the group but in its four individual operating units. In that context, the business units are consistently promoted with their own brand names and have been organised in such a way that they will be better able to absorb the effects of an economic downturn in the future.
Improved financial position
Partly with a view to increasing the company's financial strength, in September Gamma Holding sold Vlisco Group to Actis, a British private equity investor in emerging markets, for a sum of € 116 million. With its strong local presence in Africa, Actis is in a good position to successfully pursue Vlisco Group's growth strategy. The transaction yielded a book profit of € 65 million and the proceeds could immediately be used to repay part of the debt.
The divestment of Vlisco Group strengthened the balance sheet. The solvency ratio more than doubled from 13.8% as of 31 December 2009 to 31.1% at the end of 2010. The sale of the business unit also strengthened Gamma Holding's position for further negotiations on renewal of the agreement on financing that ran until mid-July 2011. In November, agreement was reached with three banks on improved facilities until March 2014. In addition, the option was also given to extend the financing, with the consent of the banks, by up to two periods of a year to March 2015 and March 2016 respectively.
Public offer
In June, Gamma Holding was strengthened by the arrival of Gilde Buy Out Partners ('Gilde') as a new major shareholder. The private equity company bought the shares from ASR, Delta Lloyd and Allianz and further expanded its stake in the course of 2010. In December, Gilde and Parcom Capital Management ('Parcom') announced that they wanted to combine their shareholdings in Gamma Holding, and were accordingly obliged to make a public offer for all of the outstanding shares. The offer was then made in January 2011 by Go Acquisition, a special-purpose vehicle established by Gilde. The offer price was € 29.00 per ordinary share and € 3.50 per ordinary participating preference share. The Supervisory Board and Executive Board have unconditionally supported the offer and unanimously recommended it. A fairness opinion issued by ABN AMRO Bank N.V. for the Supervisory Board also supports that recommendation from a financial perspective. Meanwhile, Go Acquisition has acquired 96.8% of the ordinary shares and 86.4% of the ordinary participating preference shares. After payment and delivery Go Acquisition will hold 96.6% of the shares in Gamma Holding (and 98.2% excluding the shares held by Gamma Holding itself). Go Acquisition and Gamma Holding will consult NYSE Euronext Amsterdam regarding the termination of the listing of the shares in Gamma Holding.
Future composition of the Executive Board and Supervisory Board
The Executive Board will remain unchanged. Go Acquisition will have appropriate representation in the Supervisory Board. Mr (René) Van der Bruggen will stand down during the General Meeting of Shareholders on 28 April 2011 and Mr (Boudewijn) Molenaar (Gilde) and Mr (Erik) Westerink (Parcom) will be nominated for appointment as new members of the Supervisory Board. Accordingly, the Supervisory Board will have five members, three of whom will be independent.
Turnover and results
In 2010 there was an increase in both turnover and income of Gamma Holding. Group turnover came to € 582 million (2009: € 490 million), which includes a positive effect of € 27 million arising from currency movements.
EBITDA1 of the group excluding restructuring expenses rose by 96% to € 68.6 million (2009: € 35.0 million). Currency movements had a positive effect of € 3.8 million. The increase in EBITDA1 was the result of a modest increase in the operating expenses in relation to the higher turnover.
EBITA2 excluding restructuring expenses and impairment came to € 43.3 million (2009: € 7.5 million).
Restructuring expenses in 2010 totalled € 5.1 million (2009: € 18.3 million).
Testing of calculations of value in use resulted in net impairment charges in 2010 for intangible assets and property, plant and equipment of € -0.7 million (2009: € 22.4 million). In 2010 the impairment charges at Dimension-Polyant totalled € 2.7 million and their reversal at Ammeraal Beltech totalled € 3.4 million (2009: € 15.5 million at Clear Edge Filtration, € 8.7 million at Ammeraal Beltech and a reversal of the charges at Bekaert Textiles of € 1.8 million).
The operating result was € 32.9 million (2009: € -31.5 million).
The balance of financial income and expense fell to € -29.8 million (2009: € -36.0 million), mainly due to lower (re)financing expenses of € -6.0 million. The effective tax rate was 30.3% (2009: 2.6%), whereby a negative effect of unrecognised losses was on balance compensated by a positive effect arising from being able to avail of tax facilities (including so-called 'tax holidays') in various countries and the reversal of impairments on which no tax charge was applied. In 2009 the group result was negative and only a small tax benefit could be recognised on it.
The net group result excluding restructuring expenses and impairment came to € 79.2 million (2009: € -20.2 million).
The net group result was € 73.8 million (2009: € -69.0 million).
Earnings per share came to € 9.90 (2009: € -9.43). In view of the company's financial position, together with the obligations under the amended financing agreement, no dividend will be paid in respect of the financial year 2010.
Developments by business unit
The turnover of Ammeraal Beltech (including PTFE) came to € 278.9 million (2009: € 239.7 million). EBITDA1 excluding restructuring expenses totalled € 27.4 million (2009: € 14.8 million). In 2010 Ammeraal Beltech bounced back from the recession year of 2009. The business unit profited from the recovery in America and Asia, as well as from the slightly improving European market from the second quarter onwards. With the exception of the print and packaging industry and agriculture and horticulture, there was growth again in the most important market segments, including the textile, leather, food, automotive and metal industries. This had a positive effect on sales of all types of belts. Particularly in the Middle East and Asia, impressive orders were secured for airport baggage handling systems. There was also strong growth in sales of modular belts, demonstrating the success of Ammeraal Beltech in selling this relatively new product group through its extensive network.
The turnover of Clear Edge Filtration was € 111.3 million (2009: € 91.1 million). EBITDA1 excluding restructuring expenses came to € 11.8 million (2009: € 2.7 million). Compared to the weak year of 2009, Clear Edge Filtration recovered well in 2010. The special focus on original equipment manufacturers (OEMs) and targeted end users, as well as the benefit of lower operating expenses, contributed to the positive result. The business unit also benefited from the improvement in the economic climate, which prompted increased demand for filtration products in every region, but particularly in Asia, Oceania and America. OEMs and end-users in mining, waste water purification and the chemical and food industries accounted for most of the increase in sales. Sales of filter cloth and products for filter belts, core products within the Clear Edge Filtration range, grew particularly strongly.
The turnover of Dimension-Polyant came to € 36.7 million (2009: € 31.0 million). EBITDA1 excluding restructuring expenses totalled € 4.0 million (2009: € 2.1 million). For Dimension-Polyant, 2010 was a year of tentative progress. The business unit initially continued to suffer from the aftermath of the recession year of 2009, but as the year progressed it managed to benefit from a modest recovery of the market, as well as the positive effects arising from efficiency improvements that had been implemented and intensified sales efforts. The demand for top-quality sailcloth increased and the OEM market and the cruising and windsurfing segments picked up. Sales of D4-Multi Panel membranes, designed for racing, also increased. The replacement market remained stable.
The turnover of Bekaert Textiles amounted to € 155.1 million (2009: € 128.4 million). EBITDA1 excluding restructuring expenses improved strongly and came to € 27.4 million (2009: € 16.1 million). Bekaert Textiles performed well in 2010 and profited from improved economic conditions in North and South America and Australia in particular. The business unit was even able to increase its market share, particularly in Europe and America, despite tougher competition from a growing number of small suppliers of woven mattress materials.
The business unit clearly benefited from the rigorous cost-cutting measures taken in the preceding years. Successful new products also contributed to the positive results.
Cash flow and investments
The balance of interest-bearing liabilities was reduced from € 259.5 million to € 173.8 million in the year under review. This includes a negative currency effect of € 10.4 million. The net interest-bearing debt in relation to EBITDA came to 2.59 and therefore remains below the level of 3.50 agreed with the syndicate of banks. The other bank covenants have also been complied with.
Purchases of property, plant and equipment totalled € 27.0 million (2009: € 16.9 million) and were made mainly in Bekaert Textiles, Ammeraal Beltech and Clear Edge Filtration. On the other hand, there were divestments of € 9.8 million (2009: € 2.8 million), mainly involving the sale of real estate. Net purchases came to € 17.2 million (2009: € 14.1 million) and remained below the level of depreciation of € 23.5 million (2009: € 25.7 million).
Net working capital declined from € 180.0 million in 2009 to € 175.0 million in 2010. With the sale of Vlisco Group, net working capital declined by € 26.8 million. Currency movements caused net working capital to rise by € 10.3 million. The organic increase in net working capital came to € 11.5 million. As a percentage of turnover, net working capital declined to 30.1% (2009: 31.5%).
Total equity amounted to € 159.6 million (2009: € 73.9 million). At the end of 2010, total equity as a percentage of the balance sheet total was 31.1% (2009: 13.8%).
Employees
Due to increased volumes, there was a net increase of 5% in the total number of employees, from 4,349 at the end of 2009 to 4,569 at the end of 2010. All business units contributed to the increase.
Of the total workforce, 94% are employed outside the Netherlands and 47% are employed outside Europe. The number of temporary employees rose by 70, from 80 in 2009 to 150 in 2010.
Outlook
Barring unforeseen circumstances, Gamma Holding expects the positive trend to continue in 2011, though ongoing uncertainty surrounding the economic climate and rising energy and raw material prices should be taken into account.
Helmond, 25 February 2011
Executive Board of Gamma Holding N.V.
Jan Albers, CEO
Leendert van Reeuwijk, CFO
This press release is based on the financial statements prepared by the Executive Board. The financial statements will be submitted to the General Meeting of Shareholders of 28 April 2011 for adoption.
Appendices
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Consolidated statement of cash flows
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, depreciation/amortisation and impairment of property, plant and equipment and intangible assets
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