Annual results 2004 in accordance with previously announced expectations

• Gamma Holding generated turnover of EUR 861 million in 2004 (2003: EUR 904 million) and a net profit of EUR 20.5 million (2003: EUR 34.1 million). This result is mainly due to disappointing developments at the Exotic Fabrics business unit and the currency effect of a weak US dollar.
• At Exotic Fabrics, measures have been taken to adjust capacity and costs to the lower level of sales.
• In the Gamma Technologies sector, ‛Planning for growth' has laid a new foundation for growth and improved profitability. Acquisitions were made in Coating & Composite Technology (Biscor), Filtration Technology (Goodman) and Sailcloth Technology (Fraser).
• At Belting Technology and Sleep Care Fabrics, production in China was expanded.
• The proposed dividend is again EUR 1.90 (2003: EUR 1.90) and is payable from 12 May 2005.

Results

In 2004, turnover and operating result were again affected by the decline of the US dollar against the euro (on average -10%). Furthermore, the company was severely affected by the disappointing developments at Exotic Fabrics.

Group turnover totalled EUR 861 million in 2004 (2003: EUR 904 million). This includes a 2% positive effect of acquisitions. Currency movements had a negative effect of 2%. On a comparable basis, turnover fell by 5%.

The operating result amounted to EUR 44.1 million (2003: EUR 70.3 million). Currency movements had a negative effect of 8%. The operating result rose by 1% as a result of acquisitions and decreased by 14% as a result of restructuring costs. On a comparable basis, the operating result fell by 16%, which was virtually entirely attributable to Exotic Fabrics.

The deficit on the balance of financial income and expense improved from EUR 15.4 million in 2003 to EUR 11.6 million in 2004 due to a lower level of interest-bearing liabilities and a better result from participating interests. At 35.8%, the effective tax rate remained below the level of 2003 (37.2%).

The net profit in 2004 amounted to EUR 20.5 million (2003: EUR 34.1 million). Earnings per share amounted to EUR 2.78 (2003: EUR 4.56).

Gamma Technologies

The Gamma Technologies sector, which accounts for 53% of turnover, is an important element of Gamma Holding's growth strategy. To strengthen its market leadership positions, Coating & Composite was expanded with the acquisition of Biscor, Filtration took over the US company Goodman, and Sailcloth acquired the activities of the Australian firm Fraser.

The business units in this sector were involved in major projects throughout the world. For instance, Belting developed a new check-in belt for airports, Filtration introduced a new technology in ceramic filter elements, Coating & Composite supplied materials for the roof of the new Olympic Stadium in Berlin and bullet-proof vests to the Italian carabinieri, and Sailcloth supplied more than half the Olympic medal winners in Greece.

Turnover increased by 1% from EUR 446 million in 2003 to EUR 452 million. This includes a 4% positive effect of acquisitions. Currency movements had a negative effect of 3%. On a comparable basis, turnover remained unchanged.

The business units in this sector had to contend with difficult market conditions. The market in the United States did grow, but in Europe the picture was varied. In addition, prices of raw materials rose.

The operating result increased by 5% from EUR 24.1 million in 2003 to EUR 25.4 million in 2004. This includes a 2% positive effect of acquisitions and a 4% positive effect of lower restructuring costs. Currency movements had a negative effect of 13%. On a comparable basis, the operating result increased by 12%.

Total restructuring costs within this sector amounted to EUR 0.7 million, compared with EUR 1.7 million in 2003.

Planning for growth

Although the sector as a whole performed well, given the currency movements, the results fell short of expectations. Accordingly, in 2004 Gamma Holding launched ‛Planning for growth', a project that is designed to accelerate growth and improve the results of the Belting, Filtration and Coating & Composite business units.

Growth is being pursued through expansion of market share in existing markets and rising economies, by means of both organic growth and selective acquisitions. In addition, Gamma Holding wants to improve the profitability of the sector by shifting production and manufacturing to countries with low(er) wage costs. Gamma Holding expects to be able to reap the benefits of ‛Planning for growth' from 2006.

Partly as a result of the ‛Planning for growth' project, Gamma Holding has adjusted its medium-term target for the period 2005 - 2009 upwards. During this period, both sectors are striving for an improvement in return on capital employed of at least 15% and an average increase of earnings per share of at least 10%.

Gamma Comfort & Style

The Comfort & Style sector generated 47% of Gamma Holding's turnover in 2004.

The business units in this sector were involved in a number of major projects. For example, Sleep Care Fabrics expanded production capacity in China, enabling jacquard mattress ticking to be delivered directly to this important growth market. Car Fabrics supplied high-quality car upholstery for a new monospace concept car of Renault, which was presented at the Geneva Motorshow. Exotic Fabrics won a prize for the best TV commercial with the ‛Timeless' advertising campaign for its GTP brand in Ghana.

The turnover of the sector totalled EUR 409 million in 2004 (2003: EUR 458 million). Currency movements had a negative effect of 1%. On a comparable basis, turnover fell by 10%.

The sector benefited from volume growth in both the United States and the rest of the world (Sleep Care Fabrics), but also had to contend with difficult markets in Europe (Sleep Care Fabrics and Car Fabrics). Moreover, the sector was severely impacted by disappointing developments in West Africa (Exotic Fabrics). For instance, protectionist measures were introduced in Nigeria, Ivory Coast was plunged into crisis, and consumer purchasing power continued to decline.

The operating result amounted to EUR 18.7 million (2003: EUR 46.2 million). This includes a 23% negative effect of higher restructuring costs. Currency movements had a negative effect of 1%. On a comparable basis, the operating result decreased by 35%.

Due to changing market conditions in West Africa, restructuring measures were taken in this sector in 2004; these were in excess of any in the past and led to, among other things, a reduction in headcount. At Exotic Fabrics the organisation had to be adjusted to the lower level of sales. At Car Fabrics too, additional cost-cutting measures were taken in response to the intense price pressure. Total restructuring costs within this sector amounted to EUR 11.0 million, compared with EUR 0.4 million in 2003.

Investments and financing

Gamma Holding is constantly exploring ways to grow and to improve its strategic cost base, e.g. by increasing production in growth markets such as China, where the Belting Technology and Sleep Care Fabrics business units have expanded their production units, and in Central and Eastern Europe. This makes it possible to serve the customers in these regions more effectively, and the lower wage costs are important for a healthy future. Investments have also been made to optimise existing production centres.

Investments in tangible fixed assets in 2004 totalled EUR 33.5 million, 6.6% less than in 2003 (EUR 35.9 million). The level of investment in 2004 was exceeded by depreciation. Depreciation amounted to EUR 37.0 million, compared with EUR 38.9 million in 2003. Net investments in group companies totalled  EUR 7.4 million in 2004, compared with EUR 17.3 million in 2003.

Net working capital improved by EUR 14.1 million to EUR 263.6 million. Exchange rate movements reduced net working capital by EUR 5.1 million, while new acquisitions caused it to increase by EUR 1.5 million. On a comparable basis, net working capital fell by EUR 10.5 million (3.8%).

The cash flow (the result after taxation and before depreciation and amortisation) amounted to EUR 59.5 million, compared with EUR 74.4 million in 2003. Total interest-bearing liabilities fell by EUR 12.2 million from EUR 244.2 million in 2003 to EUR 232.0 million in 2004.

Group equity amounted to EUR 219.1 million at the end of the year under review, compared with EUR 212.3 million in 2003, an improvement of EUR 6.8 million. Group equity amounted to 32.6% of the balance sheet total at year-end 2004 (2003: 31.2%).

International Financial Reporting Standards (IFRS)

International Financial Reporting Standards (IFRS) will be applied with effect from the financial year 2005.

As things stand at present, their main impact on the balance sheet will be in the form of increased provisions for pension obligations and deferred taxation. The overall effect on shareholders' funds amounts to approximately -10%. In the profit and loss account, the discontinuation of the systematic amortisation of goodwill will have a structurally positive impact on the result after taxation of 5% - 10%.

As significant amendments were made to the IFRS regulations in 2004 and the standards for financial instruments have only been in force since 1 January 2005, the first detailed reporting on the basis of IFRS will be in the half-yearly report for 2005, which will include an analysis of differences with the figures for 2004 reported on the basis of Dutch accounting principles.

Outlook

Within the Gamma Comfort & Style sector, the Exotic Fabrics business unit is still being adversely affected by the difficult political and economic situation in West Africa. Gamma Holding does not expect to see a recovery in this region in the short term.

For the Gamma Technologies sector, 2005 is seen as a year of transition, in which growth will be initiated and restructuring will play a role.

In view of the above developments and the uncertainty regarding the dollar/euro exchange rate, it is too early to make specific forecasts regarding Gamma Holding's results in 2005.

Helmond, 24 February 2005

Executive Board

Profile

Gamma Holding develops, manufactures and sells innovative, high-quality textile-based products throughout the world. The company has 9,072 employees spread over 36 countries. 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. These are made up of seven business units specialising in belting, filtration, coatings and composites, and sailcloth technology, as well as sleep care, car and exotic fabrics. The company is a leading global player in its selected niche markets.