Net profit of Gamma Holding 6% higher in 2002

• Proposed dividend rises by 12.5%

Gamma Holding N.V., which is active in the sectors Gamma Technologies, Gamma Industrial Textiles and Gamma Exotic Fabrics, achieved a 6% increase in net profit in 2002. The profit rose from EUR 30.4 million in 2001 to EUR 32.1 million in 2002. Turnover in 2002 increased by 5% to EUR 954 million (2001: EUR 906 million). The profit per share rose by 6% to EUR 4.26 (2001: EUR 4.03).

For 2002 it will be proposed to pay a cash dividend of EUR 1.80, an increase of 12.5% compared with the EUR 1.60 in 2001. The dividend will be payable as of 20 May.

The course of business in 2002

The developments in the three sectors can be summarised as follows:

Gamma Technologies comprises the activities Process and Conveyor Belts and Specialties (filter technology, coatings, sailcloth and industrial knitted products). The net turnover of this sector rose by 16% from EUR 398 million in 2001 to EUR 463 million in 2002. The operating result fell by 4% from EUR 31.4 million in 2001 to EUR 30.1 million in 2002.

Despite the deteriorating economic climate and increased competition, Pro­cess and Conveyor Belts managed to increase its turnover in 2002. Price pressure and changes in the product mix, which resulted in lower utilisation of production capacity especially in the United States, led to lower margins.

Thanks in part to the acquisition of Madison, the turnover in the Specialties seg­ment rose substantially. The operating result also increased, though not as fast turnover, mainly due to the negative developments within Industrial Fabrics and to price pressure and a changed product mix within Screen and Filter Technology.

Gamma Industrial Textiles comprises activities in the field of Automotive and Industrial Applications. Turnover in this sector fell by 7%, from EUR 339 million in 2001 to EUR 316 million in 2002. The operating result decreased by 1%, from EUR 20.3 million to EUR 20.0 million.

At Automotive, disappointing market conditions resulted in a substantial decline in turnover and operating result. The latter showed a loss, mainly due to restructuring costs.

At Industrial Applications the positive trend of recent years was resumed. Positive developments in the United States in particular led to a sharp rise in the operating result.

The turnover of Gamma Exotic Fabrics rose by 3% in 2002 to EUR 175 million (2001: EUR 169 million). The sector had to contend with an economic downturn in Ghana and political instability in the Ivory Coast, although developments in other African countries were excellent. The operating result rose by 22% to EUR 22.6 million (2001: EUR 18.5 million).  This improvement was primarily due to increased efficiency, an increase in turnover with relatively high margins, and lower raw material costs.

Results in 2002

In 2002 the turnover of Gamma Holding rose by 5%, from EUR 906 million in 2001 to EUR 954 million. Included in this is a 7% positive effect of acquisitions. Exchange rate movements had a negative effect of 1%. In organic terms, turnover fell by 1%.

The operating result rose by 3%, from EUR 70.2 million in 2001 to EUR 72.7 million in 2002. Excluding the effect of exchange rate movements, the operating result increased by 9%.

Interest-bearing debt fell by EUR 81.6 million. The average interest rate also decreased. The deficit on the balance of financial income and expense decreased to EUR 19.4 million in 2002, compared with EUR 20.5 million in 2001. This includes a lower result from investments. At 38.9%, the effective tax rate remained the same as in 2001. 

The net profit totalled EUR 32.1 million in 2002, which represented a 6 % rise compared with 2001. The profit per share rose by 6% to EUR 4.26. The profit per share before amortisation of goodwill amounted to EUR 4.37, an 8% increase compared with 2001.

Investments in tangible fixed assets in 2002 totalled EUR 23.2 million, 58% lower than in 2001 (EUR 55.4 million). Because of the economic uncertainty, where possible a number of investments were put on hold, without endangering the growth strategy. Depreciation amounted to EUR 44.7 million, compared with EUR 45.4 million in 2001. Net investments in group companies totalled EUR 6.3 million in 2002, compared with EUR 28.3 million in 2001. Stocks and trade debtors fell by 10% to EUR 326.3 million (2001: EUR 364.4 million).

The measures that were introduced in mid 2001 to optimise the cash flow were continued in 2002. Despite expenditure of EUR 16.5 million in connection with acquisitions, a reduction of the working capital combined with a relatively low investment level meant that the balance of interest-bearing debt fell by EUR 81.6 million, from EUR 357.1 million in 2001 to EUR 275.5 million in 2002.

Group equity amounted to EUR 197.1 million at the end of the year under review, compared with EUR 197.2 million in 2001. Group equity amounted to 28.6% of the balance sheet total at year-end 2002 (2001: 25.7 %). With effect from this reporting year, the portion of the dividend that is subject to a decision of the General Meeting of Shareholders is not charged to shareholders' funds. The comparative figures have been restated accordingly.

Investments and acquisitions

Although the level of investment was lower than in previous reporting periods, the necessary investments did go ahead. Amongst others, the capacity of Coated Fabrics/Composite Materials in the Specialities segment was expanded, strengthening Gamma Holding's position in this market. The production of mattress ticking in the Czech Republic was also given new impetus, and in 2002 a decision was also made to commence production in China in 2003. This represents a progression from the sales and service activities that are already carried out there. Other investments were put on hold as a result of the uncertain economic situation, but this will in no way jeopardise the company's vitality in the longer term.

In 2002 the stake in Verseidag AG, which was acquired by Gamma Holding in 1999, was expanded by 1.2 % to 100%. This was made possible by a change in the law in Germany.

Having already strengthened its position in the Specialties segment at the end of 2001 with the acquisition of the Madison Filter Group, in 2002 Gamma Holding made preparations to take over the American company Crosible. This takeover took place on 1 January 2003. Crosible manufactures and sells filters for both wet and dry filtration. Furthermore, in 2002 the international distribution network of the Process and Conveyor Belts segment was expanded by the purchase of the English company Foulds.

Divestments and restructuring

During the year under review the Helmond-based company Parabeam, which is active in the development, manufacture and distribution of three-dimensional glass-fibre fabrics for the composites market, was sold to the Canadian ZCL Composites Inc.

For Gamma Holding 2002 was a year in which the company responded swiftly to changing market conditions. In circumstances that were often difficult, the management was able to react quickly and, where necessary, to intervene effectively. Restructuring measures were implemented in a number of countries and regions in order to adapt production capacity to market demand. These measures led to a headcount reduction of 480.

In Germany and Austria service centres were merged at Ammeraal Beltech in the Process and Conveyor Belts segment. In England a production site was closed at Ames Europe in the Specialties segment. Ames Europe now only carries out production activities in the Netherlands and France.

In Belgium and France cost-saving measures were implemented in response to the decline in market demand in the Automotive segment. As a result of these measures, considerable reductions in personnel were made in 2002 at De Witte Lietaer in Belgium and at Delcar in France.

Within the Vlisco Group market demand was under pressure in Ghana as a result of the decline in purchasing power in that country. During the year under review the production capacity and the organisational structure were adjusted to bring them into line with these factors.

Outlook

Positive developments can be expected in the Gamma Technologies sector, thanks to the efficiency measures introduced and the expansion of the filter activities.

The outlook for the Gamma Industrial Textiles sector varies according to the segment. Despite the positive effect of the restructuring measures implemented, there continues to be uncertainty in the Automotive market. The Industrial Applications segment is expected to be stable.

The results of Gamma Exotic Fabrics are expected to continue to improve. The short-term results will, however, always be dependent on the developments in local purchasing power and on economic and political stability in the respective African countries.

Investments are not expected to exceed depreciation.

In view of the uncertainty surrounding the global economy, it is difficult, at this stage, to make specific forecasts regarding Gamma Holding's results in 2003. Nevertheless, we remain confident that the various sectors and segments will continue to develop positively.

Board of Managing Directors, Gamma Holding N.V.

Helmond, 14 March 2003