FINANCIAL RESULTS FOR HALF YEAR ENDING 31 DECEMBER 2005

Medical diagnostics company, Compumedics Ltd (ASX: CMP) today reported financial results for the half year ended December 31, 2005.

Melbourne Australia, Thursday 16 March, 2006.

Medical diagnostics company, Compumedics Ltd (ASX: CMP) today reported financial results for the half year ended December 31, 2005.
Revenues for the half year ended December 31, 2005 were $18.1 million, a 6% decrease over the half year ended December 31, 2004, and a loss after tax of $3.0m, compared to a loss of $0.4m for the previous corresponding period. The trading result was affected primarily by the slower turnaround in the US business, and one-off costs associated with a legal dispute ($0.8m) that has now been resolved satisfactorily.
As has been previously announced to market, the business is moving through a turnaround structure which commenced in the middle of calendar 2005. During the 6 months to December 31, 2005 the company’s, Australian, European and Asian (excluding Japan) businesses performed very well growing revenues over the same period last year by 10%, 30% and 67% respectively. The DWL business also grew revenues by 7% over the prior year.
Whilst changes in the US business were also implemented at this time, these changes are taking longer to return the business to growth and as a consequence the US business declined 31% over the same period last year.

Compumedics’ Executive Chairman and CEO, David Burton, said: “The first half of this year has seen the initial evidence that the changes undertaken last year were correct and will lead to sustained growth over the coming years. The US business is the primary area where the changes are still to be evidenced in actual sales. We expect the US business to perform better in the second half based on the current sales pipelines.”
Losses for the half year were $3.0m compared to $0.4m for the same time last year.
During the six month period to December 31, 2005 the company implemented cost reductions amounting to approximately $4m on an annualised basis. The company expects a $1.4m benefit to the profitability of the business in the second half of the financial year on account of these changes.
Research and development (R&D) expenses, at $3.7m for the half year ended December 31, 2005, were 20% of revenues. “This high level of investment in R&D reflects Compumedics’ continued strategic commitment to sleep- and brain-function technology. Compumedics expects that, as growth returns, R&D expenses will level out to around 12% of revenues on an on-going basis within 3 years, while also serving to underpin many years of sustainable growth,” said Mr. Burton. Mr. Burton also noted that approximately $1.5m of the annualised cost reductions implemented in the first half have come from R&D activities.
Net cash for the half year ended December 31, 2005 decreased by $1.4m. This compares to a $1.5m decrease in cash for the half year ended December 31, 2004. The decrease in cash was primarily due to the operating performance of the business, which as noted above is being addressed.
During the half year the company breached certain covenants in relation to its banking facilities. The bank has as part of its annual review renewed the company’s facilities and has put in place new covenants.

The half year results are summarised below:

Regional Performance

All geographic areas except for the US grew sales for the six months period ended December 31, 2005. Specific details are as follows:

• The Australian business grew sales by 10% from $2.4m to $2.6m for the six month period ended December 31, 2005.
• The Asian business, excluding Japan, grew sales by 67% from $1.9m to $3.2m for the six month period ended December 31, 2005.
• The European business grew sales by 30% from $1.8m to $2.4m for the six month period ended December 31, 2005.

Each of these markets is demonstrating initial signs that the changes implemented in calendar 2005 are having the desired outcomes.
The US business however declined by 30% from $8.8m to $6.1m for the six month period ended December 31, 2005, reflecting the slower turnaround in this market since changes were implemented.

Outlook

The company expects to reduce its losses in the second half as a consequence of the reduction in costs and an improved US performance and return to profitability during calendar 2006.
The company advises that it now expects operating revenues for the full year to June 30, 2006 to be about $36m. The company will also book other revenue of $2m in the second half as a consequence of the settlement of its legal dispute with its former European distributor. Therefore, the company expects total revenues for the year ended June 30, 2006 to be about $38m.

New Products

Compumedics continues to build a strong pipeline of new products and technologies across its sleep-diagnostics, neuro-diagnostics and brain-research markets.

Expected product releases in the second half of financial year 2006 are:

• Maglink version 2 – the next generation of brain-research technology for recording EEG in the MRI (magnetic resonance imaging).
• Profusion 3.0 – a completely new version of Compumedics’ core sleep-diagnostic software
• Neuvo EEG- a new generation EEG-monitoring system
• Stim RT – the next generation of brain-research stimulatory hardware.

For further information:

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

David Lawson
CFO/Company Secretary
Phone: +0011 1 915 225 0319
Fax: +0011 1 915 845 2965

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 80% share of the Australian sleep-diagnostic market, and has a major and rapidly growing presence in the US, European and Asian marketplaces for its sleep, neurological, and Doppler blood-flow diagnostic monitoring devices.

In 1995 the company was selected to supply equipment to the US Sleep Heart Health Study, the world’s largest sleep study of its kind, currently exceeding 12,000 studies with 20,000 patients scheduled by 2008.
The company has corporate headquarters in Melbourne, Australia and offices in the United States, Asia and Europe.
In 1998 Compumedics was awarded the overall Australian Exporter of the Year.
In 2000 Compumedics was listed on the Australian Stock Exchange.
In 2002, Compumedics acquired US-based Neuroscan – the world’s leading supplier of instruments for brain-research.
In the US – the world’s largest medical device market – Neuroscan hold around 90% of the market for brain-research products. This acquisition has enabled Compumedics to take advantage of the synergies between research and clinical-based Neuro Diagnostic technologies, re-affirming our commitment as a world-class developer of both sleep and neuro-diagnostic systems.
In 2003 Compumedics was awarded the Frost & Sullivan Award for Market Expansion Strategy.
In 2004, Compumedics acquired German-based DWL Elektronishe GmbH, enabling Compumedics to expand its global operations into the neurovascular and cardio-vascular diagnostic fields.

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 their 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.
The company has increased its sales more than 4 fold from $9 million (1999) to $38 million (2005), reflecting its continued commitment to an effective sales and R&D organisation.

www.compumedics.com