Positive first half year Gamma Holding

• Turnover: EUR 393 million (2005: EUR 365 million)
• Operating result (excluding restructuring costs): EUR 32.3 million (2005: EUR 27.8 million)
• Net group result: EUR 15.8 million (2005: EUR 9.7 million)
• Good progress ‘Planning for Growth'
• Execution of Sleep Care Fabrics restructuring program on track
• New perspective Exotic Fabrics
• Expected growth operating result excluding restructuring for full year 2006: 5-10%

The positive trend in the first quarter was continued in the second quarter of 2006. Compared to the first half-year of 2005, turnover increased by 8%. The sectors Gamma Technologies and Gamma Comfort & Style both developed favourably due to the growth-oriented transformation process that had been launched earlier and an improved cost structure. In the first half of 2006 Gamma Holding's turnover amounted to EUR 393 million (2005: EUR 365 million), including a positive effect of 2% due to acquisitions and a 2% positive effect of currency movements. On a comparable basis, turnover increased by 4%.

In the first half year, the operating result increased by 40% to EUR 30.9 million (2005: EUR 22.0 million). Restructuring costs amounted to EUR 1.4 million (2005: EUR 5.8 million) and were related to Sleep Care Fabrics. The operating result excluding restructuring costs increased by 16% to EUR 32.3 million (2005: EUR 27.8 million), including a 2% effect due to acquisitions and a 4% effect due to currency movements. On a comparable basis operating result increased by 10%.

The net group result was EUR 15.8 million (2005: EUR 9.7 million).

Gamma Technologies

Gamma Technologies' turnover rose by 10% to EUR 253 million (2005: EUR 230 million) due to increased demand in all business units. The sector is starting to reap the fruits of the ‘Planning for Growth' project, which started in 2004 and has laid the foundations for accelerated growth and improving results over the coming years.

Despite higher raw material and energy prices, the operating result (excluding restructuring costs) improved by 12% to EUR 19.2 million (2005: EUR 17.2 million). Nearly all business units contributed to this improvement, which was driven by higher volumes, cost reductions and efficiency improvements.

Belting Technology was able to take advantage of a high demand for modular, timing and synthetic belts. Growth was realised in all continents, particularly in Asia, where the business unit operates through a joint venture in China. Belting Technology developed various types of belts for the timber industry, simplifying the processes of sawing, polishing and finishing. A special line for the production of car tyres was launched at the Tyre Expo in Germany. The first positive effects of the ‘Planning for Growth' program also became visible in the first half year. For instance, efficiency has improved at production locations in the Netherlands, Spain, Switzerland and the United States. Costs have also been reduced by relocating assembly activities for modular belts from Western Europe to the Czech Republic. With this relocation the first steps towards a central assembly centre for the European market have been taken in the Czech Republic. In the American market similar steps are taking place in Pennsylvania.

Compared to last year, Filtration Technology's turnover increased in this first half year in Europe, the United States, South Africa and Australia. In the latter, the business unit developed a water purification system for the coal industry together with Australian Water Filter. Through this system the cost of washing coal is reduced considerably and up to 85% of the waste water can be re-used in the production process. In order to strengthen its position in growth markets, Filtration Technology acquired Barimex B in Poland and Filtaflo in South Africa, two small companies that specialise in both wet and dry filtration products. In order to improve competitiveness, Filtration has optimised production at several locations. In Australia, Filtration integrated its weaving activities with those of Sleep Care Fabrics. In the United States several manufacturing activities were transferred to Sweden and in the course of the second half-year the new facility in Poland will take over part of the Western European production. At the same time several weaving activities will be moved from Germany to Sweden.

Coating & Composite Technology showed an upward trend, with the exception of the ballistic protection product group. Turnover increased significantly in almost all product groups, partly due to the football world championships in host country Germany, for which the business unit produced FIFA flags, as well as coated material for tents that were set up around nearly all twelve stadiums. Furthermore banners were produced for the American Super Bowl and roofing material was supplied for Terminal 5 of London Heathrow Airport. There was also an increase in sales activities in, among others, France, Mexico, the United States, the Middle East and China. In the area of personal protection materials, turnover lagged significantly due to a delay in delivery of bullet-proof vests, in particular to the French police force. This delay, together with the initial expenses in setting up an American facility and in expanding the European organisation, has put the result under considerable pressure. The PTFE-coated glass fibre product group has been able to realise considerable growth in turnover in the first half year. In order to utilise synergy benefits in various countries, several improvements were carried out in the organisation.

Turnover at Sailcloth Technology showed only a slight increase. An upward trend in the United States was offset by price pressure in Europe. The new product FLEX was well received at important boat shows in Hamburg, Düsseldorf, Paris and London. FLEX stands for a new range of high-quality sailcloth for both racing and cruising yachts.

Gamma Comfort & Style

Within the Gamma Comfort & Style sector, turnover increased by 4% to EUR 140 million (2005: EUR 135 million).

The operating result (excluding restructuring costs) increased by 22% to EUR 13.1 million (2005: EUR 10.6 million), due to an improved cost position in Exotic Fabrics.

The Gamma Comfort & Style companies were involved in a number of noteworthy projects. Sleep Care Fabrics, for instance, introduced innovative mattress fabrics that can absorb temperature fluctuations. Exotic Fabrics delivered African-design fabrics for a non-recurring, limited edition of Maxi-Cosi children's seats.

Sleep Care Fabrics' turnover increased due to a more favourable economic environment in Europe and higher volumes in Mexico, in particular. In the United States a shift took place from the top to the middle segment. Demand for knitted mattress fabrics increased and production locations in both Argentina and China performed well. In China production will therefore be further expanded in the coming half-year. However, the business unit is still faced with fierce competition and price pressure. In order to retain its competitiveness, Sleep Care Fabrics is reducing its capacity in Western Europe, increasingly shifting production to low(er) wage countries. The first of two factories in Belgium has now been closed, and part of its production activities have been relocated to the Czech Republic, together with the production of knitted mattress fabrics from Germany. On top of that, an entirely new factory for woven and knitted fabrics is being built in Turkey, which is expected to produce the first yards of mattress fabrics in the second half of this year.

Turnover of Exotic Fabrics was marginally lower compared to the first half year of 2005. The business unit saw the turnover of the Woodin brand increase, whereas sales of the local brands GTP (Ghana) and Uniwax (Côte d'Ivoire) declined. Turnover of top brand Vlisco remained stable.

New perspective for Exotic Fabrics

Gamma Holding has concluded research into the competitiveness and brand positioning of Exotic Fabrics. The results show that the exotic fabrics market has grown considerably in the past five years and that almost 75% of West African consumers still favours ethnic clothing. The buying and wearing behaviour of these consumers differs greatly, however, meaning that all brands will have to be repositioned. In order to achieve this, the current organisation will be divided into brand-oriented business units, each with its own market focus and approach.

• Top brand Vlisco will be positioned as a multi-faceted clothing and beauty concept for women. In order to strengthen the trend-setting image and to clearly distinguish the product from the rest of the market, so-called flag-ship stores will be set up, in combination with an expanded sales network. The emphasis will be on creative designs, supported by intensive marketing campaigns. No significant investments are needed for this strategy.

• The local brands Uniwax and GTP will compete with the cheaper Chinese fabrics in the middle segment, possibly with a partner. The strong reputation of both brands will be enhanced through a further expansion of the product portfolio. Apart from self-designed fabrics the collection will also consist of clothing that will only be made available through wholesale outlets.

• The successful Woodin brand will be marketed with a clearer identity of its own as the first pan-African fashion brand. This will be done by gradually expanding the current chain of stores in which trendy fabrics, clothing and accessories will be on offer.

The transfer from a distribution to a customer-oriented organisation will begin in the second half-year.

Discontinued operations

In February the house linen activities of the Car Fabrics business unit were sold to the French HDM-Finance, a large European textile company. Turnover of the house linen activities amounted to approximately EUR 25 million. The takeover of the (car fabrics) activities of the business unit is currently under discussion. Gamma Holding anticipates concluding this transaction in the second half of 2006.

In May the intention was announced to sell Ames Europe to a Dutch private investor with interests in, among others, a printing and a logistical company. The ambition is to conclude the transaction in the second half of the year.

Financial data

Interest charges increased to EUR 6.1 million (2005: EUR 5.4 million), due to a higher interest rate and a higher average total of interest-bearing liabilities. Total liabilities at the end of the period decreased to EUR 255.8 million (2005: EUR 267.5 million). The result of associates amounted to EUR -1.4 million (2005: EUR 0.7 million) due to an impairment in 2006.

The effective tax rate increased from 27.2% to 31.2%, mainly due to incidental windfalls in 2005.

The net group result from discontinued operations improved and arrived at EUR -0.3 million (2005: EUR -2.9 million).

The net group result amounted to EUR 15.8 million (2005: EUR 9.7 million). Earnings per share amounted to EUR 2.10 (2005: EUR 1.28).

In the first half year of 2006 investments totalled EUR 14.6 million (2005: EUR 9.5 million), appreciably below the level of depreciation of EUR 16.0 million (2005: EUR 14.3 million).

Working capital as a percentage of turnover improved to 31.6% (2005: 34.9%), mainly through the positive effects of working capital improvement programs.

Outlook

Compared to the relatively weak first half of 2005, the first six months of 2006 showed positive results.

Within the Gamma Technologies sector the outlook is favourable and the ‘Planning for Growth' program is on track. All the measures taken are also bearing fruit within Gamma Comfort & Style.

Over the full year Gamma Holding expects the operating result (excluding restructuring costs) to grow by 5 to 10% compared to 2005, barring any unforeseen circumstances.

Executive Board Gamma Holding N.V.

Helmond, The Netherlands, 25 August 2006

Basis on which this half-year report is drawn up

The overviews, figures and explanatory notes in this half-year report have been drawn up based on International Financial Reporting Standards (IFRS). For the accounting principles, please refer to the explanatory notes included in the Financial Statements 2005. Application of these principles was unamended.

Gamma Holding has opted not to draw up this half-year report based on IAS 34, Interim financial reporting.

The new IFRS standards and amendments in standards and interpretations, of which application is mandatory in 2006, have no effect on the figures reported.

The figures in this half-year report have not been audited.

Profile

Gamma Holding develops, manufactures and sells innovative, high-quality textile-based products throughout the world. In 39 countries, approximately 7,300 employees are active. Its headquarters are located in Helmond (The Netherlands) and its shares are listed on Euronext Amsterdam.

Gamma Holding comprises two sectors, Gamma Technologies and Gamma Comfort & Style, with activities in the field of transport and conveyor belts, filter products, coated fabrics and composites, sailcloth, mattress ticking and exotic fabrics. With these products the company is a leading global player in its selected niche markets.