Net profit Gamma Holding EUR 18.0 million

In the first half of 2003 Gamma Holding achieved, under difficult market conditions, a net profit of EUR 18.0 million (EUR 17.5 million in the corresponding period of last year). Turnover fell by 6% from EUR 495.5 million in the first half of 2002 to EUR 463.9 million in 2003. The operating result totalled EUR 38.0 million (2002: EUR 38.5 million).

Earnings per share rose by 3% from EUR 2.32 to EUR 2.39. Before amortisation of goodwill earnings per share increased by 4% from EUR 2.37 to EUR 2.47.

Gamma Holding generates a significant proportion of its turnover in the United States. In the period under review the average exchange rate of the US dollar against the euro fell by 19% compared with the first half of 2002. Compared with last year, currency movements had a negative effect of 5% on turnover and 11% on the operating result.

In a departure from practice thus far, Gamma Holding intends to purchase shares in the course of 2003 in order to cover the total outstanding personnel options. This policy will be continued in the future in the event of new personnel options being issued. A total of 163,900 ordinary shares will be purchased, which represents 2.1% of the issued share capital.

The course of business in the first half of 2003

In order to make the management of Gamma Holding more effective, the organisational structure has been simplified. Instead of 3 sectors, 5 segments and 8 core activities, Gamma Holding now comprises 2 sectors, viz. Gamma Technologies and Gamma Comfort & Style, and 7 business units, which will be managed directly by the Board of Managing Directors. This will ensure that Gamma Holding is better placed to exploit the synergy between the business units.

Gamma Technologies

As industrial suppliers, the business units in this sector have had to contend with generally difficult market conditions. The turnover of the sector fell by 7% to EUR 228 million (2002: EUR 245 million), partly due to currency effects. The operating result decreased by 22% to EUR 14.5 million (2002: EUR 18.6 million), mainly due to lower levels of turnover, the negative effect of the US dollar and restructuring costs incurred at Ames Europe.

Belting Technology had to contend with overcapacity in the markets in which it operates. Lower levels of turnover in the initial market were compensated by an increase in the turnover of Belting's own service organisation, which had a positive effect on the margins. The negative effect of the lower US dollar was partly offset by the fact that a large proportion of this business unit's costs are related to the US dollar. The operating result of Belting Technology was stable.

Filtration Technology also encountered difficult market conditions, which put pressure on the operating result. In the first half of 2003 the business was expanded with the acquisition of the US company Crosible, strengthening the position on the US market. Effective 1 September,  a new management team has been appointed for this business unit, which comprises the companies Techfab/IFC, Madison Filter and Crosible. This management team will have to capture the potential synergies within this business unit.

Coating & Composite Technology comprises the companies Indutex and Ames Europe.  Indutex had a stable first half of 2003. Demand for Duraskin (coated textile) compensated for the downturn in demand for Seemee (billboards). Coating & Composite Technology was expanded in May 2003 with the addition of Green Belting Industries (PTFE-coated woven glass-fibre products). In order to achieve a structural improvement in the operating result, Ames Europe, a manufacturer of industrial woven products for in particular the coating industry, is being reorganised. The operating result of Coating & Composite Technology as a whole was down.

Sailcloth Technology made progress, particularly in the United States. The operating result of this business unit was stable.

Gamma Comfort & Style

The business units within this sector posted varying results. Partly as a result of currency effects the turnover of the sector decreased by 6% to EUR 236 million (2002: EUR 250 million). Despite the negative effect of the US dollar, the operating result rose by 18% to EUR 23.5 million (2002: EUR 19.9 million), due to an improvement in the operating result at both Exotic and Car Fabrics.

Sleep Care Fabrics is a major player in the top segment of the American mattress-ticking market. In the first half of 2003 the business unit expanded its activities to the mid segment of the American market. Sales of woven mattress ticking for the higher segments also developed favourably. In Europe, Sleep Care Fabrics had to contend with continued price pressure and declining volumes. Partly as a result of this, the operating result of this business unit was down. With a view to geographical growth, a start has been made in China on the construction of a new mattress-ticking factory, which is expected to be operational by the end of 2003.

Car Fabrics was able, despite ongoing difficult market conditions, to transform the loss into a small operating profit in the first half of the year. Lower levels of turnover, particularly sales to the French automobile industry, and further price pressure were compensated by positive effects of the restructurings carried out in 2002. Additional restructurings will be necessary to further improve the profitability of Car Fabrics.

Exotic Fabrics posted a slight decrease in turnover. An increase in turnover of the leading brand Vlisco was offset by a decline in turnover of products manufactured in the Ivory Coast (Uniwax). In Ghana, Exotic Fabrics was able to benefit from the positive effects of the restructurings carried out in the past. Exotic Fabrics also benefited from lower costs of raw materials thanks to favourable purchasing contracts. The operating result of Exotic Fabrics improved.

The results in the first half of 2003

The turnover of Gamma Holding fell in the first half of 2003 by 6% from EUR 495 million in 2002 to EUR 464 million. This includes a positive effect of 2% attributable to acquisitions. Currency movements had a negative effect of 5%. In organic terms, turnover fell by 3%.

The operating result fell by 2% from EUR 38.5 million in the first half of 2002 to EUR 38.0 million in 2003. This includes a negative effect of 5% due to restructuring measures and a positive effect of 2% attributable to acquisitions. Currency movements had a negative effect of 11%. In organic terms, the operating result rose by 12%.

The deficit on the balance of financial income and expense decreased to EUR 9.1 million (2002: EUR 9.5 million), mainly due to a decrease in the balance of interest-bearing debt to EUR 259 million (year-end 2002: EUR 275 million). The net cash flow from operational activities totalled EUR 35.2 million (2002: EUR 66.7 million).

As part of a restructuring carried out in the United States at the end of 2002, the share of USD-denominated interest-bearing debt was increased, in line with the capital employed. Partly as a result of this, the decline in the value of the US dollar against the euro had a favourable effect on interest-bearing debt and the financial expense.

The effective tax rate fell from 38.9% to 37.2%, mainly as a result of a lower natural tax rate.

Net profit rose by 3% to EUR 18.0 million (2002: EUR 17.5 million).

Investments and acquisitions

Investments in the first half of 2003 totalled EUR 11.1 million (2002: EUR 8.8 million) and mainly centred on Belting Technology (efficiency), Sleep Care Fabrics (new building for production facility in China) and Exotic Fabrics (optimisation of production process). Thus, investments remained below the level of depreciation of EUR 20.7 million (2002: EUR 24.0 million).

Filtration Technology has been expanded with the acquisition of Crosible. Coating & Composite Technology has been expanded with the acquisition of Green Belting Industries, and the competition authorities recently granted permission for the acquisition of the Burgmann Protection Group (bullet-proof materials).

Divestments and restructurings

In the period under review no businesses were divested. However, restructurings were carried out, particularly at Technologies, which had a negative effect of EUR 1.7 million on the operating result (1^st half of 2002: nil).

Outlook

Barring unforeseen circumstances, income for 2003 on a per annum basis is expected to be in the same order of magnitude as in 2002.

Board of Managing Directors, Gamma Holding N.V.

Helmond, 5 September 2003