Positive year of transition Gamma Holding

• 4% growth in turnover to EUR 774 million
• 9% growth in operating result (excluding restructuring costs) to EUR 61.6 million
• Net group result: EUR 28 million (2005: EUR -15 million)
• Sale of Car Fabrics concluded
• Confidence that transformation process can be concluded successfully in 2007
• Proposed dividend: EUR 2.00 (2005: EUR 1.00), payable with effect from 10 May 2007.

Turnover and results

For Gamma Holding, 2006 proved to be a year in which both turnover and results developed favourably. This was a result of both the upturn in the global economy and the transformation process launched earlier, which focuses on four areas: portfolio, strategic cost position, growth and leveraging of synergy opportunities.

Group turnover amounted to EUR 774 million in 2006 (2005: EUR 743 million), including a 1% positive effect of acquisitions. Averaged over the year, currency movements had no effect. On a comparable basis, turnover increased by 3%.

Despite start-up costs for new production locations and higher raw material and energy prices, the operating result excluding restructuring costs amounted to EUR 61.6 million (2005: EUR 56.5 million). On a comparable basis, the operating result rose by 8%. Acquisitions caused an increase of 1%, while average currency movements had no effect. Restructuring charges amounted to EUR 7.0 million (2005: EUR 39.9 million). The operating result was EUR 54.6 million (2005: EUR 16.6 million).

The deficit on the balance of financial income and expense increased from EUR -11.3 million in 2005 to EUR -12.5 million in 2006, mainly as a result of a higher average interest rate. At 31.0%, the effective tax rate was lower than in 2005 (95.3%). The high tax rate of 2005 was primarily attributable to non-offsetable losses relating to Africa and a relatively low group result before taxes.

The net group result amounted to EUR 28.0 million (2005: EUR -15.0 million).

The net group result before restructuring totalled EUR 32.8 million in 2006 (2005: EUR 31.1 million).

Earnings per share amounted to EUR 3.71 (2005: EUR -2.15).

In 2006 the balance sheet ratios improved due to the improved results and the sale of parts of discontinued operations. To express Gamma Holding's confidence in the future, the proposed dividend on ordinary shares is EUR 2.00 (2005: EUR 1.00), to be charged to retained earnings. This amounts to 55% of the 2006 net group result attributable to equity holders. Excluding restructuring costs it amounts to 47% of the result. The dividend is payable with effect from 10 May 2007.

Gamma Technologies

The Gamma Technologies sector consists of companies active within the Belting, Filtration, Coating & Composite and Sailcloth Technology business units.

Belting Technology brought belts onto the market specifically for the timber industry, which are suitable for all stages of timber-processing. The business unit also worked together with Filtration Technology to develop the ZipLink, an easy-to-fit belt without any welded or metal joints. Coating & Composite Technology developed new printable media fabrics which can also be used indoors, for instance in malls and hotels. Sailcloth Technology brought the new Flex® sailcloth onto the market; this is a sailcloth that holds its shape and is suitable for both racing and cruising yachts.

Results

Turnover of the Gamma Technologies sector rose. Overall, the sector's turnover increased by 6% from EUR 463 million in 2005 to EUR 492 million. This includes a 1% positive effect of acquisitions. Currency movements had no effect. Turnover improved, primarily at Belting Technology and nearly all product groups of Coating & Composite Technology.

The operating result excluding restructuring costs improved by 10% from EUR 30.3 million in 2005 to EUR 33.2 million in 2006. This improvement was mainly driven by the Belting and Sailcloth Technology business units. Start-up costs resulting from the ongoing transformation process put the results at Filtration Technology under pressure. At Coating & Composite Technology the delay in delivery of bullet-proof vests and the construction of an American branch caused a downturn in the result.

In the year under review, restructuring charges related to Belting and Filtration Technology amounted to EUR 6.0 million (2005: EUR 5.8 million). The operating result increased by 10% from EUR 24.5 million in 2005 to EUR 27.2 million in 2006.

Progress transformation process

The sector is starting to reap the benefits of the Planning for Growth project started in 2004, which has laid the foundation for accelerated growth and improved results in the coming years. Planned relocations of production or assembly activities have been completed or prepared, sales networks have been extended, and the focus on interesting market segments has been tightened.

Improved cost position

In order to lower costs, several efficiency measures were taken in 2006 and certain production and assembly activities were relocated from high-to low-wage countries. At Belting Technology, for instance, a central assembly centre for the European market was opened in the Czech Republic. Furthermore, good progress has been made with efficiency improvements in the Netherlands, Spain, Switzerland and the United States, where the four production locations are located. Filtration Technology optimised production at several locations in order to improve its competitive position. Preparations have been made to relocate assembly activities that were spread across Europe to a new facility in Poland. At the same time, several weaving activities were relocated from Germany to Sweden. For the American market, a new assembly centre was opened in Mexico.

Growth

Further efforts were made to improve the position in emerging markets such as Asia, Eastern Europe and South America in 2006. In China, for instance, Belting Technology expanded production and Filtration Technology opened both a sales office and an assembly plant. The position on the Eastern European market was strengthened by the acquisition of the Polish company Barimex B by Filtration Technology. This business unit also acquired Filtaflo in South Africa. The position on the American continent was consolidated by Belting Technology's acquisition of Goodyear Rubber Supply & Co. Coating & Composite Technology strengthened its sales network in Europe, Mexico, the United States, China and the Middle East.

As well as strengthening its position in emerging markets, Gamma Holding also focused on potential growth markets in 2006. For Belting Technology, the tobacco industry in particular offers many opportunities, primarily in China, as do the food and beverage industry, the print and paper industry and the car tyre sector. Filtration Technology mainly focused on growth opportunities in the chemical and pharmaceutical industries. Coating & Composite Technology successfully expanded its position, primarily in the areas of tent cloth and media fabrics.

Gamma Comfort & Style

The Gamma Comfort & Style sector consists of companies active within the Sleep Care and Exotic Fabrics business units.

In 2006, Sleep Care Fabrics introduced Sensapole and Outlast®, mattress fabrics that can absorb changes in temperature, as well as Eucalyss, a mosquito-repellant mattress fabric. Exotic Fabrics worked together with Maxi-Cosi in developing fabrics for baby car seats. Additionally the business unit launched seasonal collections using the latest international fashion colours, which are presented in the Vlisco Fashion Palette.

Results

The sector's turnover rose by 1% from EUR 280 million in 2005 to EUR 282 million in 2006. Turnover at Exotic Fabrics increased due to higher demand for the Vlisco top brand and the Woodin fashion brand. At Sleep Care Fabrics, sales volumes were higher, but the lower average prices led to a marginal decrease in turnover. Currency movements had no effect.

The operating result excluding restructuring costs increased by 8% from EUR 26.2 million in 2005 to EUR 28.4 million in 2006. Currency movements had no effect. At Exotic Fabrics the increased demand and the adjusted cost level led to improved results at all production locations. At the Sleep Care Fabrics business unit the result was under pressure due to both start-up costs stemming from the transformation process and the lower average prices.

Total restructuring charges within this sector amounted to EUR 1.0 million, compared to EUR 34.1 million in 2005. The operating result increased from EUR -7.9 million in 2005 to EUR 27.4 million in 2006.

Progress transformation process

For this sector, 2006 was clearly a year of transition. Sleep Care Fabrics' market position was strengthened by an expansion of activities, primarily in Turkey. A start was made on the closure of two factories in Belgium, as announced in 2005. The business unit's activities in the area of curtain fabrics and wall coverings were sold to the Belgian company Escofin N.V., which is specialised in decorative textiles, in February 2007. The business unit Exotic Fabrics initiated a transformation process from a distribution-to a customer-oriented organisation, in which the brands Vlisco, GTP, Uniwax and Woodin are each positioned with their own market focus and approach.

Improved cost position

In order to achieve the best possible cost position at Sleep Care Fabrics, part of the production is being relocated to countries with low wage costs. In that regard, in 2006 the business unit shut down the first of two Belgian locations that are to be closed. The other location will close in 2007. Of the original three Belgian factories, only one will remain. The first woven and knitted fabrics have been delivered from the new factory in Turkey. A significant part of the production of mattress fabrics has been relocated from Germany to the Czech Republic.

Growth

This sector also pursued a further improvement of the position in emerging markets such as Asia, Eastern Europe and South America. In China, Sleep Care Fabrics expanded its production capacity. In addition, the business unit strengthened its position on the Eastern European market by setting up a new production facility in Turkey. The position on the American continent was also consolidated by expanding the production location in Mexico.

Discontinued operations

At the end of 2005 Gamma Holding announced its intention to sell the activities of the Car Fabrics business unit and of its subsidiary Ames Europe in the course of 2006. In that regard the household linen business of Car Fabrics was sold to the French company HDM-Finance, a large European textile company, in February 2006. In December, Ames Europe was purchased by a Dutch private investor. The sale of the car upholstery activities of the Car Fabrics business unit was finalised this week and the subsidiaries De Witte Lietaer in Belgium and Delcar in France were sold to the German company AUNDE Achter & Ebels GmbH. AUNDE is an important supplier of car fabrics. The business unit's 50% stake in the Indian joint venture has also been sold. This marks the successful completion of the divestment of the discontinued operations.

Employees

The measures taken also had an effect on the number of employees in 2006. In particular, the closing of a Belgian factory of Sleep Care Fabrics had a significant impact. The number of employees within the group fell by 630 due to restructuring and efficiency measures, but rose by 347, primarily due to the relocation of activities to low-wage countries. Acquisitions caused a rise of 118 employees. At the end of the year under review the total number of employees had fallen by 2% from 6,875 in 2005 to 6,710 (including discontinued operations from 7,521 in 2005 to 7,128).

At the end of 2006 the number of employees within Gamma Technologies amounted to 3,494 (2005: 3,264) and within Gamma Comfort & Style 3,216 (2005: 3,611).

Investments and financing

Purchases of property, plant and equipment in 2006 totalled EUR 42.4 million, 58% more than in 2005 (EUR 26.9 million) and 36% above the level of depreciation. In 2006, depreciation on property, plant and equipment amounted to EUR 31.3 million, compared with EUR 31.4 million in 2005. Investments primarily occurred at Belting Technology, which set up a central assembly facility in the Czech Republic and at Sleep Care Fabrics, which opened new production locations in Turkey and the Czech Republic. On the other hand, divestments occurred due to the sale of real estate following the relocation of several production activities. Additionally, Filtration Technology, Coating & Composite Technology, Sailcloth Technology and Exotic Fabrics invested in more productive machinery.

Net investments in subsidiaries in 2006 totalled EUR 2.8 million, compared to EUR 15.9 million in 2005. These investments related primarily to the acquisition of the American Goodyear Rubber Supply & Co, the Polish company Barimex B and the South African firm Filtaflo.

As a result of a much stronger focus on working capital management, trade working capital fell by EUR 10.8 million to EUR 224.7 million, despite a 4% increase in turnover. As a percentage of turnover, trade working capital fell from 32% in 2005 to 29% in 2006. Due to currency movements, trade working capital decreased by EUR 8.7 million, but increased by EUR 1.4 million due to acquisitions. On a comparable basis, trade working capital fell by EUR 3.5 million.

The cash flow, the result after taxation and before depreciation and amortisation, amounted to EUR 64.8 million (2005: EUR 42.8 million).

The balance of interest-bearing liabilities decreased by EUR 33.9 million to EUR 223.0 million (2005: EUR 256.9 million), including a currency effect of EUR 9.4 million caused by the lower exchange rate of the American dollar. The syndicated loan of EUR 265 million concluded in 2005 has been extended from 2010 until 2011 for an amount of EUR 150 million.

At the end of the year under review total equity amounted to EUR 189.5 million (2005: EUR 169.5 million, increasing group equity by EUR 20.0 million. Total equity amounted to 28.2% of the balance-sheet total at year-end (2005: EUR 24.2%).

Outlook

The transformation process is going according to plan. Gamma Technologies is starting to reap the benefits of the Planning for Growth project. In order to stay competitive, Sleep Care Fabrics is slashing capacity in Western Europe and is increasingly moving production to low-wage countries such as Turkey, the Czech Republic and Mexico. To promote growth, Exotic Fabrics will be transformed from a distribution-to a customer-oriented organisation, with each of its four brands having its own unique market focus.

In 2006, restructuring costs were lower than estimated. In order to finalise the transformation process, restructuring costs of approximately EUR 3 million may have to be incurred in 2007. In addition, a new strategic plan for the future will be developed.

Gamma Holding strives for an operating result of at least 8% of turnover for the Gamma Technologies sector and at least 9% for the Gamma Comfort & Style sector. For each of these sectors Gamma Holding strives for a return on capital employed of at least 15%. Gamma Holding is well on its way to achieving its growth and profitability targets in 2007.

Executive Board

Helmond, Netherlands, 23 February 2007

This press release is based on the financial statements as drawn up by the Executive Board and only relates to part of these statements. The financial statements as drawn up will be submitted for approval to the General Meeting of Shareholders of 26 April 2007. As a result, the financial statements have not been officially published yet. The auditor has issued an unqualified opinion with regard to these financial statements.

Attachments

Consolidated balance sheet
Consolidated income statement
Consolidated statement of changes in equity
Consolidated statement of cash flows
Sector information