Q1 2006 operating and financial performance

in line with expectations with revenues reaching USD 23.0 million and EBITDA of USD 1.8 million.

SHL revenues for the first quarter of 2006 amounted to USD 23.0 million with revenues from international markets now comprising 81 % of the Company’s total revenues.

Gross profit for the quarter amounted to USD 10.6 million resulting in a gross margin of 46.1%. Revenues for the first quarter of 2005 which included the results of the Israeli medical services operation that was divested in the third quarter of 2005,and are therefore not comparable to the 2006 results, amounted to USD 27.0 million giving a gross profit for the quarter of USD 12.2 million. Of the 2006 revenues, USD 15.5 million is related to SHL’s telemedicine activities compared to USD 14.6 million for the same period in 2005.

EBITDA for the period amounted to USD 1.8 million – 8.0% of revenues against USD 2.4 million and 8.9 % of revenues in the first quarter of 2005. Results of operations for the quarter were breakeven compared to an EBIT of USD 0.6 million in the first quarter of 2005.

The EBITDA for the quarter relating to telemedicine activities totaled
USD 2.0 million, some 82% above the EBITDA of USD 1.1 million for the comparable quarter of 2005 with EBIT from the telemedicine activities amounting to USD 0.4 million compared to a LBIT of USD 0.4 million in 2005.

The net loss for the quarter totaled USD 1.5 million compared to USD 0.4 million in the first quarter of 2005. Loss per share attributable to the shareholders’ of SHL amounted to USD 0.17 compared to USD 0.09 in 2005.

Germany – Growth in Revenues
During the first quarter of the year SHL’s German operations continued to expand and it is now anticipated that revenues in the first half of 2006 will already surpass the revenues for the whole of 2005.The growth in this market is being achieved through the
increasing rate of recruitment of subscribers’ and health insurers who are making the SHL telemedicine platform available to their insured.

Two prominent figures in the German marketplace have joined SHL’s German Operations Advisory Board – Dr. Roland Delbos, previously a Board member at Deutsche Krankenversicherung AG as active Chairman of the Board of Advisors and Dr. Carl Herman Schleifer, a former State Secretary of the Ministry of Finance of Schleswig-Holstein, and Chief Executive of Damp Group in Germany for several years
as an Advisory Board member.

US – Progress in telemedicine operations, divesture of loss making medical imaging centers in progress.

The cardiac telemedicine operations in the US experienced a good quarter and reported results in accordance with expectations. However, the U.S. medical imaging services operations continued to produce disappointing results. The restructuring program adopted at the beginning of the year is being implemented, and it is now
expected that those medical centers forming the bulk of the division’s losses will be divested by the end of the second quarter. As a result SHL expects that the negative impact of the medical services operations will be significantly reduced in the second
half of 2006.

Cash Resources
The cash flow for the three months used in operations amounted to USD 0.5 million compared with USD 1.9 million in the first quarter of 2005. Although SHL’s activities in the US and Israel are generating positive operating cash flow, the German operations
require and will continue to require funding as this business activity expands.

At March 31, 2006 SHL had USD 20.3 million in cash, cash equivalents, marketable securities and deposits compared to USD 21.4 million at March 31, 2005.

The Company is presently exploring the possibilities of strengthening its financial resources through a placement of debentures with institutions in the Israeli market.

Proposed election to SHL’s Board of Directors At SHL’s Annual General Meeting on June 29, 2006, Mr. Monty Hilkowitz will be nominated to be elected as a non-executive member of the Board of Directors. Monty Hilkowitz is an Israeli citizen and has 46 years of actuarial experience Since 2002 he has been a non-executive director of Discovery Health and Discovery Life in South Africa and is also a founding member of Dublin Network, a financial services company.
Looking ahead SHL expects the continuation of its 2006 operations in accordance with its plans with EBITDA expected to be in the range of USD 8 -10 million.

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