February 27, 2008

Leading Australian based medical diagnostics devices company, Compumedics Limited (ASX: CMP), is pleased to announce that it achieved record first half-year profitability for the six months ended 31 December 2007.

Melbourne Australia, Wednesday, 27 February, 2008

Leading Australian based medical diagnostics devices company, Compumedics Limited (ASX: CMP), is pleased to announce that it achieved record first half-year profitability for the six months ended 31 December 2007.

Highlights and achievements for the period

  • RECORD first half-year profit-after-tax of $1.6 million (UP 250%)
  • RECORD first half-year revenues of $20.1 million (UP 2%)
  • Operating cash more than DOUBLED to $1.0m (UP 147%)
  • Results achieved following restructuring in 2005-2006 that removed approximately $5 million in annual expenses from the business
  • Profitability restored in 2006-2007, continues to grow
  • New global banking and financing relationship established with HSBC Australia
  • Compumedics well-positioned for new opportunities and accelerated growth over the next few years
  • Compumedics entered into an agreement to expand its product range into the multi-million dollar global electromyography (EMG), nerve conduction studies (NCS), evoked potential (EP) and intra-operative monitoring (IOM) markets in the second half of calendar year 2007
  • Other major new product releases and upgrades planned for 2008

Profitable Trading Results for first half-year to 31 December 2007

Compumedics achieved a record profit-after-tax for the half-year to 31 December 2007 of $1.6 million, some three times the $0.5 million profit-after-tax achieved in the prior corresponding half-year. Revenues were slightly higher at $20.1m compared to $19.7 million for the prior corresponding half-year. Revenues would have been approximately $23 million for the half-year to 31 December 2007 had exchange rates not moved adversely in the period and had the Company been able to ship the orders that it had on hand at 31 December 2007. All key financial metrics continued to improve in the six months of trading to 31 December 2007 including:

  • gross margins were up from 59% at 30 June 2007 to 62% at 31 December 2007 despite adverse currency movements;
  • cash expense reductions already made have been locked in with over $5 million in expense reductions over the past two years. The company benefited further in this half-year due to the sub-leasing of space not needed in the Melbourne office and the relocation of the US office to less expensive facilities in Charlotte, North Carolina;
  • EBITDA more than doubled to $2.1 million compared to $1.0 million for the prior corresponding half-year;
  • operating cash flow more than doubled to $1.0 million from $0.4 million in the prior corresponding half-year;
  • borrowings were substantially reduced to $3.1 million at 31 December 2007 from $5.6 million at 31 December 2006, a 5-year low for borrowings;
  • borrowing costs reduced to $0.3 million from $0.5 million in the prior corresponding half-year; and
  • revenues in Japan, Asia and Australia were higher for the half-year at 263%, 165% and 101% higher, respectively, over the prior corresponding half-year. Europe in general and the USA sleep businesses disappointed by both posting declines compared to the prior corresponding half-year. The declines related more to issues within the business rather than market or other external factors. The appropriate actions are being taken to the restore growth in these two critical markets for the Company.

Concerted and targeted efforts since 2005 have resulted in a turnaround of the core business, which has not only returned to profitability during 2006/2007 but is now increasing profitability.

Compumedics restructured its management team in 2005 and put in place systems to ensure costs were carefully controlled and monitored. These initiatives have resulted in an approximate $5 million reduction in operating costs notwithstanding a high priority to maintain research and development efforts.
Sales have also started to grow again achieving underlying growth of approximately 10% excluding the adverse impact of exchange rate movements and the inability to ship all orders on hand at 31 December 2007 that could have shipped had more flexible working capital arrangements been in place in late calendar 2007.
Despite the significant restructuring undertaken, the Company has maintained its R&D program. The Company’s Somte™ PSG home monitoring device has gained strong global sales traction and was recently awarded the Frost and Sullivan Technology Award. The Company is about to release its innovative long-term neurological-monitoring product, Neuvo™, which will take the business into new and much larger markets. In June 2007 a contract was executed for the new SomniLink® SPAP®, an integrated positive airway-pressure system for the treatment of sleep apnoea.

David Burton, CEO, said about Compumedics’ results, “The record profit for the half-year in the core business is a testament to the resolve and hard work of all Compumedics employees around the world to restore Compumedics to be a financially strong, world leading medical device company.”
“The key challenge for the Company and all our employees is to build on these results and further strengthen the financial capability of the Company so we can aggressively, where necessary, pursue market opportunities for our existing and future products and technologies.”
“I am pleased that, in the face of the constraints on working capital and adverse currency movements, the Compumedics team was able to maintain the level of revenue of recent half-years, with significantly reduced costs, and working capital. The Company continues to strengthen its position so that it can return to its traditional growth outlook, whilst restoring our cash reserves”

All core business divisions of the Group improve

Compumedics’ businesses include its core sleep-diagnostics products and consumables from its Sleep Division, Doppler ultrasound blood-flow scanning products from its DWL Division, and brain function research and clinical neurology products from its Neuroscan Division. Each of these divisions demonstrated continued improvement over the past half-year, and despite the pressure on working capital and adverse currency movements each division maintained on-going research and development programs to supply a pipeline of new products.
Compumedics continues to complement its robust direct-sales sleep-diagnostics business in Australia and the United States with a series of distribution agreements with partners in Europe and the Middle East, which should result in incremental revenue of at least $10 million over the next three years.
Compumedics will continue to pursue opportunities in each of the divisions of the group that will add profitable and sustainable growth and stand out growth where this is possible.

Affirmation of Compumedics’ Sleep-Treatment Strategy

Compumedics’ long-term strategy of complementing is suite of products for sleep diagnostics with new and innovative sleep-treatment products reached a significant milestone in June 2007 with the completion of binding letter of intent with a major international partner in the medical devices market. The relationship commenced with Medigas Italia, a member of the global Praxair, Inc. group of companies, to commercialise Compumedics’ SomniLink® SPAP® system in Italy and eastern European countries. The sleep-treatment market is in the order of ten-fold greater in magnitude than the sleep-diagnostics market in which Compumedics’ current suite of products competes. Compumedics has progressed negotiations to exploit the greater global sleep-treatment market with a number of large organizations considering global distribution rights. Compumedics expects to be able to update the market on outcomes of these negotiations when they reach material outcomes.

Outlook for remainder of FY2008

Compumedics expects the business to grow overall in FY2008 and for profitability to be enhanced through this growth and a continuing focus on cost control and on-going identification and implementation of more efficient ways to run the Company.

David Burton
Executive Chairman, CEO
Compumedics Limited

For Further information:

Mr David Burton
Executive Chairman, CEO
Phone: + 61 3 8420 7300
Fax: +61 3 8420 7399

Mr David Lawson
Chief Financial Officer
Phone: + 61 3 8420 7300
Fax: +61 3 8420 7399

Investor Relations & Media Enquires:

Mr Rod North
Executive Director
Bourse Communications Pty Ltd
Phone: +61 3 9510 8309
Mobile: +61 (0) 408 670 706

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About Compumedics:

Compumedics Limited, founded in 1987, is a global leader in the design and manufacture of diagnostic technologies for sleep disorders, neurophysiology and cardiology. In 1987 Compumedics established Asia Pacific’s first fully computerised sleep laboratory. Compumedics holds an 80% share of the Australian sleep-diagnostic market, and has a major and rapidly growing presence in the US, European and Asian markets for its sleep, neurological, and Doppler blood-flow diagnostic monitoring devices.
Compumedics has grown to become a global medical diagnostic company with world leadership in three of the most exciting high-growth sectors and some 12,000 systems installed. Compumedics’ businesses now include core and pioneering sleep-diagnostics (Sleep Division), neuro-diagnostics (Neuroscan and Neuroscience Divisions), and non-invasive blood-flow diagnostics (DWL Division). All of these fields were pioneered or discovered in the 1980s, validated in the 1990s and are only now undergoing rapid commercialisation into the rapidly expanding $1 billion plus global market.

Disclaimer: This document was prepared by Compumedics Limited. This document contains forward-looking statements that involve risks and uncertainties. These forward-looking statements are not guarantees of Compumedics’ future performance and involve a number of risks and uncertainties that may cause actual results to differ materially from the results discussed in these statements. This document only contains information required for a preliminary evaluation of the Company and in particular only discloses information by way of summary within the knowledge of the Company and its Directors. An investor should seek its own independent professional advice in relation to the technical, financial, taxation, legal and commercial matters relating to any investment in Compumedics Limited. Other than to the extent required by law (and only to that extent) the Company and its officers, employees and professional advisers make no representation, guarantee or warranty (expressed or implied) as to, and assume no responsibility or liability for, the contents of this presentation.