Half-year results Gamma Holding
(Thomson Reuters ONE) - * Turnover: EUR 326 million (half year 2008: EUR 375 million) * EBITDA (1) excluding restructuring expenses: EUR 22.2 million (half year 2008: EUR 43.8 million) * Net group result excluding restructuring expenses and impairment: EUR -11.8 million (half year 2008: EUR 15.9 million) * Restructuring expenses: EUR 9.8 million (half year 2008: EUR 0.4 million) * Impairment: EUR 32.9 million (half year 2008: nil) * The net group result: EUR -53.3 million (half year 2008: EUR 15.6 million) * Operational personnel and other operating expenses EUR 13.2 million lower * Improved financing agreementHalf-year report of the Executive BoardTrading conditions remained exceptionally difficult for Gamma Holdingin the first six months of 2009. In that context the programme ofcost savings and restructurings is being accelerated. Compared withthe first six months of 2008, operational personnel and otheroperating expenses were EUR 13.2 million lower in spite of increasedexpenditure at Exotic Fabrics.Group turnover in the first half of 2009 came to EUR 326 million(half year 2008: EUR 375 million). This includes a positive effect ofEUR 2.5 million arising from currency movements.EBITDA1 of the group excluding restructuring expenses was EUR 22.2million (half year 2008: EUR 43.8 million). Currency movements had apositive effect of EUR 2.4 million. The lower EBITDA was due to thedecline in turnover and the consequent under-utilisation of capacityin the factories. Furthermore, added value decreased as a consequenceof downward price pressure and the reduction of inventories.The net group result excluding restructuring expenses and impairmentcame to EUR -11.8 million (half year 2008: EUR 15.9 million).Restructuring expenses in the first six months totalled EUR 9.8million (half year 2008: EUR 0.4 million).As a result of the deterioration in market conditions, the testagainst the value-in-use calculations resulted in an impairment ofintangible assets and property, plant and equipment of EUR 32.9million at Filtration and Coating & Composites (half year 2008: nil).The net group result came to EUR -53.3 million (half year 2008: EUR15.6 million), mainly due to the lower EBITDA[1] and an impairment ofintangible assets and property, plant and equipment.Industrial SolutionsThe turnover of Industrial Solutions in the first six months of 2009came to EUR 185 million (half year 2008: EUR 231 million). Currencymovements had a positive effect of EUR 4.6 million.EBITDA1 excluding restructuring expenses of the sector totalled EUR4.1 million (half year 2008: EUR 24.3 million). Currency movementshad a positive effect of EUR 2.4 million.Turnover of Belting came to EUR 112 million (half year 2008: EUR 135million). Worldwide, customers postponed orders, while major projectsat Original Equipment Manufacturers (OEMs) suffered delays. Thisapplied to all types of belting, especially in the construction andtextile sectors and in the chemical, metalworking, woodworking andautomobile industries. The replacement market was also badly affectedby the recession, mainly because customers sought to save onmaintenance expenses. The food industry, on the other hand, was lesssensitive to the recession. The business unit developed for thissector a new generation of modular radius belts for resting, coolingand freezing of food. In addition, a flexible squeezing belt waslaunched on the market which is particularly suitable for separationmachines used for meat and poultry.Turnover of Filtration amounted to EUR 46 million (half year 2008:EUR 58 million). There was falling demand for filtration productsthroughout the world, particularly in mining, the chemical and theautomobile industries. OEMs operating in various sectors of industrydeferred their spending. Sales to the food industry remained stable,however. Filtration launched several new and improved products,including thermoplastic-welded, seamless and hence non-leaking filterbags, metal-ribbed belting for the production of corrugated board andspecially sewed filtration belts for horizontal and rotating vacuumfilters.Turnover of Coating & Composites came to EUR 27 million (half year2008: EUR 38 million). Because of cutbacks on advertising budgetsthere was a sharp fall in demand, notably for seemee® (printablemedia fabric). Turnover of duraskin® (tent and roof structure fabric)also lagged behind, though this was partly offset by the supplying ofcoated fabric for the 2010 World Cup football tournament in SouthAfrica.In that connection more than 60,000 m2 of fabric was supplied for thestadium roofing of 'Soccer City' in Johannesburg, while both the roofstructure and the frontage were provided for 'Green Point' in CapeTown. Coating & Composites previously supplied the roof structure forthe new Rhein Neckar Arena, the stadium of the successful Germanfootball club Hoffenheim.Lifestyle FabricsTurnover of Lifestyle Fabrics totalled EUR 141 million (half year2008: EUR 144 million). Currency movements had a negative effect ofEUR 2.1 million.EBITDA(1) excluding restructuring expenses came to EUR 18.6 million(half year 2008: EUR 20.3 million). Currency movements did not haveany effect.Turnover of Sleep Care Fabrics amounted to EUR 61 million (half year2008: EUR 70 million). Mattress manufacturers produced less in thefirst six months, while existing stocks were further reduced. TheU.S. market, however, showed a slight recovery. The business unit wasagain able to introduce a new product at Interzum, the internationalfurniture and interiors industry show in Cologne: Purotex®, apatented, revolutionary technology for creating a healthy and cleansleeping environment. This new mattress fabric contains natural,probiotic microflora which neutralise bed lice allergens and inhibitthe development of harmful bacteria. The business unit received forthis ecological innovation an Interzum Award for Intelligent Material& Design in the top category 'Best of the Best'.Exotic Fabrics held its own. The business unit's turnover increasedby 8% in the first six months from EUR 74 million in 2008 to EUR 80million in 2009 as a result of extra sales efforts. This growth wasachieved in the first quarter. Turnover in the second quarter was atlast year's level. The top brand Vlisco opened a third flagship storein Abidjan (Côte d'Ivoire) and successfully launched its newcollection 'ÿclat de Nature'. There was also success in Ghana, wherea special Obama design was made for a customer to mark the statevisit by the U.S. President on 12 July 2009.Discontinued OperationsTurnover of Discontinued Operations amounted to EUR 36 million (halfyear 2008: EUR 40 million).Compared with other units within the group, Verseidag BallisticProtection was less affected by the recession. Turnover increased inthe first six months, partly thanks to the supplying of bullet-proofmaterial to European and U.S. army and police forces and armouringfor military vehicles. The unit also developed automatic weaponprotection for use on ships.This is a special protective system along the ship rails, includingmobile protective shields at the gun turret, to protect ships againstclose-range threats. The German navy has now equiped various shipswith this new system.Sailcloth had to contend with a slow start to the sailing season.Moreover, notably in Europe, the production of sailing yachts waspostponed and there was a worldwide sharp decline in the wind surfingsegment. However, demand for the top segment membrane sails remainedhigh in comparison with last year. Sailcloth is working on newproducts in response to the economic downturn. For instance, thebusiness unit launched at an event for super yachts D4® sailclothwith Dyneema®, the world's strongest, most lightweight and lastingyarn. Furthermore, more sail-makers are prepared to affix the brandname DP (Dimension-Polyant) to their sails, which will increase thebrand familiarity. In addition, the first sails from the newproduction location in Sri Lanka are to be supplied this year.Financial informationThe balance of financial income and expense rose to EUR -17.5 million(half year 2008: EUR -7.1 million) as a consequence of higher(re-)financing expenses of EUR -6.1 million, higher interest marginsand a slightly higher balance of interest-bearing liabilities. Thebalance of interest-bearing liabilities at the end of the reportingperiod increased to EUR 312.6 million (half year 2008: EUR 306.2million). The first half of the year includes a negative currencyeffect of EUR 2.0 million due to changes in exchange rates.The share in results of associates was nil (half year 2008: nil).The effective tax rate fell to nil on a loss before income tax (halfyear 2008: 30.3% on a gain before income tax), mainly because most ofthe losses are incurred in countries where they can no longer bevalued.Net investments in property, plant and equipment in the first half of2009 totalled EUR 7.9 million (half year 2008: EUR 10.8 million) andwere mainly in Belting, Filtration and Exotic Fabrics. They were thussignificantly below the level of depreciation of EUR 15.2 million(half year 2008: EUR 16.5 million).Net working capital as a percentage of turnover came to 31.5% (halfyear 2008: 31.0%). This increase was caused by slight pressure on theterms of payment of debtors and a decline in accounts payable. Thisis partly due to the reduced coverage provided by credit insurers,which results in pressure on payments.Cost savings and restructuringsThe programme of further cost savings and restructurings announced on20 February 2009 is being accelerated throughout the group. In 2009this will yield cost savings of approximately EUR 30 million.Ultimately the programme should yield annual savings of approximatelyEUR 45 million from 2010.As a consequence of the measures that have been taken, 378 employeesat Industrial Solutions and 282 employees at Sleep Care Fabrics leftthe group in the first six months of 2009. Expansion resulted in anincrease of 62 in the number of employees at Sleep Care Fabrics inTurkey and Mexico and 72 at Exotic Fabrics, mainly in Africa. Thenumber of temporary employees through agencies fell in the first sixmonths by 151. Moreover, a reduction of working time has beenimplemented in various group companies. On top of that, as part of astringent financial policy, investments have been reduced and thecompany is being managed very much in terms of working capital.Debt reduction and financingOn 18 February 2009, Gamma Holding reached agreement with the bankson new financing arrangements until March 2010, thus bringing thetotal facilities made available by the syndicate of banks to EUR 390million. Improved financing conditions were agreed in mid-July 2009.The main group companies are parties to the financing agreement andhave provided extensive collateral in that connection.In the new agreement the financial covenants have been eased andaccount has been taken of the difficult market conditions with whichGamma Holding has to contend. Moreover, an extension of the financinguntil mid-July 2011 is possible. This gives the company time to putinto effect its programme of cost savings, divestments andrestructurings. One of the conditions for this extension is thegranting of a conversion right to the syndicate of banks. This rightpermits the banks to convert a portion of the loan facilitiesamounting to EUR 30 million into newly issued cumulative preferenceshares. The banks can only exercise this option if (i) the availablecredit under the new credit agreements is less than EUR 5 million, or(ii) the net interest-bearing debt in relation to the EBITDA isgreater than 7.5. The dividend on the cumulative preference shares is12% of the amount paid on those shares. In this way the syndicate ofbanks can jointly obtain at least 50.1% of the voting rights in GammaHolding's increased issued share capital. At 30 June 2009 the netinterest-bearing debt in relation to the EBITDA was 5.8 and is thuswithin the parameters presently agreed with the syndicate of banks.The granting of the conversion right and the amendment of GammaHolding's articles of association which this necessitates have to beapproved by the shareholders. A motion to that effect will be dealtwith at the Extraordinary General Meeting of Shareholders to be heldon Thursday 30 July 2009.To reduce the company's debt, the process of disposing of companiesat a reasonable price has been continued. In present marketconditions, however, this is still very difficult because of the lowvaluation levels and the limited availability of acquisition finance.Against this background Gamma Holding will continue to focusprimarily on further implementation of the programme of cost savingsand restructurings already announced. Furthermore, Gamma Holding isstill open to a public-to-private transaction.Risk managementGamma Holding attaches great importance to risk control. To increaserisk awareness within the group, to gain a better understanding ofthe existing risks and to control identified risks more effectively,Gamma Holding has a structured system for risk management. Thissystem, as well as the risk profile and the main risks, have beendescribed in the annual report for 2008. The nature and possiblescale of these risks are also applicable to the second half of 2009.The following should be noted in this connection: * Market conditions in the second half of 2009 are expected to continue to be difficult. If these conditions deteriorate further, this could potentially have a major effect on the markets in which Gamma Holding and its companies operate, the position in these markets and hence the expected future cash flows. * The worsened economic conditions imply greater uncertainty regarding the collectability of debts, partly due to the risk of a larger number of bankruptcies. * Accelerating the reduction of the number of employees may have an effect on the speed of execution of the measures to be taken. * Gamma Holding continually monitors the identified risks and will continually follow developments where new risks can arise and identified risks can change in the second half of 2009.Changes to the Executive BoardAfter the General Meeting of Shareholders of Gamma Holding N.V. heldon 23 April 2009, the Supervisory Board appointed Mr L. (Leendert)van Reeuwijk (44) as a member of the Executive Board and ChiefFinancial Officer. Leendert van Reeuwijk has been employed by GammaHolding as Group Controller since 2 August 2005.In June Mr Meint Veninga decided, in agreement with the SupervisoryBoard, to step down as chairman of the Executive Board and CEO ofGamma Holding as of 1 August 2009. The Supervisory Board intends toappoint Mr J.H.L. (Jan) Albers (57) as his successor after theExtraordinary General Meeting of Shareholders.OutlookIn spite of a few positive signals, Gamma Holding does not anticipatean improvement in the current relevant market conditions in thesecond half of 2009. The second six months will continue to bedifficult.Gamma Holding will therefore continue to closely monitor marketconditions and make changes to the organisation as necessary.With the aforementioned measures Gamma Holding expects to remainwithin the newly agreed bank covenants and to post better results(EBITDA (1)) in the second half of the year than in the first.Gamma Holding will publish its trading update on the third quarterbefore the opening of the stock exchange on Friday 23 October 2009.On that occasion it will, as well as reviewing the figures, providefurther insight into relevant developments.Statement by the Executive BoardThe Executive Board hereby declares that, to the best of itsknowledge: * the consolidated interim financial statements, which have been prepared in accordance with IAS 34, Interim Financial Reporting, give a true and fair view of Gamma Holding's assets and liabilities, its financial position and the results for Gamma Holding and the consolidated companies; and * the half-year report of the Executive Board includes a fair review of the information required pursuant to section 5:25d, subsections 8 and 9 of the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht).Helmond, 28 July 2009Executive Board of Gamma Holding N.V.Meint Veninga, chairmanLeendert van Reeuwijk, CFOAppendixConsolidated interim financial statements for first half-year 2009(1) Group result before income tax, interest, depreciation,amortisation and impairment of property, plant and equipment andintangible assets.http://hugin.info/130740/R/1331364/314988.pdfThis announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
Datum: 29.07.2009 - 08:26 Uhr
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