Continued growth in Germany in 3rd quarter

improvement in financial results and operating cash flow
SHL’s revenues for the third quarter increased to USD 21.6 million from USD 20.9 million in Q3 of 2005 with revenues for the quarter from the telemedicine segment showing an increase of 6% to USD 15.4 million from USD 14.5 million in Q3 of 2005.

Revenues for the nine months totaled USD 65.6 million against revenues of USD 70.4 million for the same period of 2005, which included USD 6.9 million from the Israeli medical services operation divested in the third quarter of 2005. Revenues from the telemedicine segment also increased by 6% to USD 46.5 million from USD 43.8 million in the nine months of 2005.

EBITDA for the quarter improved by 67% to USD 2.5 million up from USD 1.5 million in Q3 of 2005 due to the significant increase in EBITDA from the telemedicine segment which contributed USD 3.0 million against only USD 1.8 million in Q3 of 2005.

EBITDA for the nine months amounted to USD 7.6 million an increase of 21% from USD 6.3 million in the corresponding period of 2005 again due to the increase of 75% in EBITDA from the telemedicine segment which contributed USD 8.2 million compared to USD 4.7 million in the comparable period of 2005.

EBIT for the quarter amounted to USD 0.6 million compared to the LBIT of 0.3 million for the comparable period of 2005 with EBIT for the nine months increasing by 122% to reach USD 2.0 million against USD 0.9 million for the nine months ended September 30, 2005.

This improvement was due to the increased EBIT from the telemedicine segment which grew significantly to USD 1.2 million up from USD 0.1 million in Q3 of 2005. This brought the EBIT from this segment for the nine months to USD 3.0 million compared to the LBIT of USD 0.3 million in the nine months of 2005.

Net loss for the quarter decreased significantly to USD 1.2 million from USD 2.4 million in the previous quarter, of which USD 1.1 million relates to continuing operations and USD 0.1 million to discontinued operations. For the nine months, net loss amounted to USD 5.0 million, of which USD 3.0 million relates to continuing operations and USD 2.0 million to discontinued operations.

Germany – Continued Expansion
The high rate of recruitment of subscribers has continued with the service being adopted by additional health insurers continuing the trend of double digit quarterly revenues growth with the company’s revenue in 2006 expected to exceed that of 2005 by over 200%. In addition an agreement has been signed with St. Jude Medical, the
world’s leading mechanical heart valve company, following similar agreements signed by SHL’s US telemedicine operation, to provide telemedicine services to their Implanted Cardioverter Defibrillator (ICD) patients in Germany.

This continuing growth in the German market is proceeding at a faster rate than anticipated although the company is not yet making a contribution to SHL’s profit.

US telemedicine operations- Continued advancement in telemedicine operations The US telemedicine operations showed improved results in Q3 as a result of the integration of new IT platforms and efficiency measures instituted during the year. EBIT for the quarter was more than double the EBIT in Q3 of 2005.

US medical services operation – divestures and closing of loss making medical imaging centers The restructuring and geographic realignment of the medical imaging services operations is progressing with the closing or divesture of 5 centers and the concentration of these activities around the mid Atlantic region bringing, already in Q3,
to a significant reduction in this division’s losses. During the quarter SHL received USD 1.65 million from the sale of these centers. As a result of this realignment, these imaging centers have been categorized as Discontinued Operations in the financial

SHL’s Israeli operations experienced a good third quarter with EBITDA growing by over 10 % compared to Q3 of 2005.
Cash Flow Cash generated from SHL’s operations in Q3 continued to improve and amounted to USD 1.9 million, up from USD 1.2 million in Q3 of 2005. This brought the cash generated from SHL’s operations for the nine months to USD 1.7 million up from a negative USD (0.3) million in the corresponding period of 2005.

At September 30, 2006, SHL held USD 20.8 million in cash, cash equivalents, marketable securities and deposits up from USD 13.8 million at June 30, 2006.

The increase is due to improved operating cash flow, cash received from the divestment of certain medical imaging centers and the receipt of additional long-term loans.

Appointment of Mr. Haim Brosh, Executive Vice President Finance
During the quarter Mr. Haim Brosh joined the SHL management team as Executive Vice President of Finance. Prior to joining SHL, Mr. Brosh held several senior finance and operations positions with Amdocs (NYSE: DOX), both in Israel and in US. Mr. Brosh is a certified public accountant (CPA) in Israel and has a B.A. in accounting and
economics from Tel Aviv University. Mr. Brosh will be replacing Mr. Erez Termechy, SHL’s present CFO. Mr. Termechy will continue to work with SHL as an advisor to the company for the next coming months together with Mr. Brosh.

Looking ahead
SHL expects satisfactory results in Q4 which should result in EBITDA being within the previously announced range of USD 8 -10 million.

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