2007 was a momentous year for SHL in which the groundwork was laid for solid expansion of the company’s activities in the coming years by expanding the service bases and telemedicine applications in all markets.This position has been reached after much preparation and effort and gives SHL a tremendous opportunity to realize these benefits as we move forward.
Highlights for the year:
- Philips, an 18.6% shareholder, within the framework of its development of consumer healthcare medical services in the US, acquired Raytel, SHL’s US cardiac monitoring services company, for USD110 million and entered into a long term agreement with SHL for SHL’s participation in future revenues from current and future products expected to be introduced into the North American market in the coming years.
- SHL’s German operations continued to develop very well with a top line growth of more than 85% as a result of the expansion of PHTS’s client base and increased recruitment rates from existing customers and the signing of new contracts with several new health insurers covering over a further 1.5 million insured members.
- The Israeli business continued its steady progress to provide sustained profitability and cash flow.
- SHL introduced a next generation of personal ECG devices and, in addition, received FDA clearance for a new proprietary cardiac looping recorder and transmitter, first in a new family of wireless, cellular-based devices developed by SHL.
Erez Alroy, Co-CEO of SHL Telemedicine, commenting on the results stated: “2007 was a very exciting year for SHL with the sale of Raytel to Philips for USD 110 million, and the significant growth of the German telemedicine operation, PHTS Telemedizin. These events position SHL for growth and profitability in 2008 and beyond.”
Mr. Alroy continued: “We are glad to announce, for the first time, a special dividend of USD 4.0 million. We believe this is the way to show our appreciation to our shareholders and enable them to enjoy SHL’s successful sale of Raytel.”
Financial results:
Results for the year include those of Raytel up to its divesture at November 30, 2007.
SHL’s continuing operations do not include the medical services business segment which is presented in discontinued operations.
Revenues for the year amounted to USD 62.1 million compared to revenues of USD 62.8 million in 2006 with gross margins remaining steady at 52% bringing gross profit to USD 32.6 million in 2007 compared with USD 32.7 million in 2006. Revenues and gross profit from SHL’s German operation increased significantly compared to the previous year offsetting the decrease in Raytel’s contribution to SHL’s financial results.
LBITDA for the year amounted to USD 1.6 million compared to an EBITDA of USD 7.6 million in 2006 with operating loss amounting to USD 10.1 million compared to an operating profit of USD 0.3 million. The decrease in SHL’s results of operations is due to significant one time costs and the write-offs of old trade receivables at Raytel connected with the sale, as well as impairment of development costs and inventory.
Capital gain, net of taxes, from the sale of Raytel amounted to USD 39.3 million bringing net income from continuing operations to USD 23.6 million compared to a net loss from continuing operations of USD 3.4 million in 2006.
Net income for the year amounted to USD 27.6 million after the inclusion of the positive contribution of the discontinued medical services business segment operations in the US of USD 4.0 million, compared to a net loss of USD 7.1 million in 2006,
As a result of the divesture of Raytel, SHL’s balance sheet has improved considerably.
Total balance sheet as of December 31, 2007 was USD 144.2 million, compared with USD 128.3 million as of December 31, 2006. Shareholders’ equity as of December 31, 2007 has doubled to over USD 60 million compared to around USD 30 million at December 31, 2006. Current assets as of December 31, 2007, reflecting the cash received from the Raytel transaction, improved by approximately USD 54 million while the total liabilities declined by USD 14 million compared with December 31, 2006.
Cash flow used in operations amounted to USD 1.8 million compared to a positive cash flow from operations of USD 1.8 million in 2006. The decrease in operating cash flow results from one time payments related to the Raytel sale.
Special dividend and share buyback:
The Board of Directors is pleased to announce that it approved on March 25, 2008 the distribution of a special cash dividend in the amount of USD 0.37 per share, totalling approximately USD 4 million payable on April 15, 2008 to shareholders of record on April 14, 2008. The Board of Directors also approved to re-purchase ordinary shares of SHL for an amount of up to an equivalent of USD 2 million, from time to time, until June 30, 2008 whereby SHL has no obligation to buy ordinary shares. Any re-purchases made thereafter up to said amount are subject to the prior confirmation of the Board of Directors that the relevant legal requirements are still met.
Outlook for 2008:
Proceeds from the US transaction will mainly be used to finance growth in SHL’s German and Israeli businesses. SHL expects that in 2008 PHTS will, for the first time contribute to SHL’s overall financial results by reaching profitability and generating positive operating cash flow. The Israeli business is expected to show steady growth with high profitability. Further revenues are expected to be generated by the agreement with Philips in the US.
Based on the continued operations (excluding the operations of Raytel and the medical services business segment), management expects a significant improvement in overall financial performance:
- Organic top line growth for 2008 to be between 35% and 45%, generating revenues of USD 38 to USD 41 million.
- EBITDA is expected at USD 7 – 8 million with margins in the range of 17% -20%.
- Operating cash flow is expected to be positive.
Next events
Annual general meeting May 14, 2008
Q1 Results May 15, 2008
Q2 Results August 13, 2008
Q3 Results November 11, 2008
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