Results continue the positive operational trends

SHL’s revenues for the second quarter amounted to USD 22.1 million with EBITDA amounting to USD 2.4 million and EBIT to USD 0.5 million.

Revenues for the half year totaled USD 44.0 million against revenues of USD 49.5 million for the same period of 2005. In spite of the lower revenues SHL’s EBITDA for the half year increased to USD 5.1 million from USD 4.8 million in H1 2005 and EBIT for the half year increased to USD 1.4 million from USD 1.2 million in H1 05. It should be recalled that the 2005 results included the results of the Israeli medical services operation that was divested in the third quarter 2005, and are therefore not directly comparable to the 2006 results.

The telemedicine segment revenues for the second quarter increased to USD 15.6 million against USD 14.7 million in Q2 of 2005 and for the half year to USD 31.1 million from USD 29.3 million for H1 of 2005.

EBITDA of the telemedicine segment for the second quarter continued to increase and amounted to USD 2.4 million compared to USD 1.5 million in Q2 2005. This resulted in an increased EBITDA of 82% for the half year of USD 5.3 million over the EBITDA of USD 2.9 million in 2005.

EBIT of the telemedicine segment for the second quarter improved to USD 0.6 million bringing the EBIT for the half year to USD 1.8 million compared to a LBIT of USD 0.3 million and USD 0.4 million in the second quarter and half year of 2005, respectively.

Net loss from continuing operations for the quarter amounted to USD 1.3 million and for the half year to USD 1.9 million. The net loss from the discontinued operations from 5 medical imaging centers closed or divested in the US amounted to USD 1.1 million in Q2 and USD 2.0 million for the half year bringing the total loss of the Company for the
quarter to USD 2.4 million and for the half year to USD 3.9 million.

Germany – Growth in Revenues
One of the key drivers for growing revenues were SHL’s German operations which┬ácontinued to expand during the first half of 2006. Revenues in the first half have already surpassed the revenues for the whole of 2005. The increase in this company’s growth 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. This continuing growth in the German market is proceeding at a faster rate than anticipated although the company is not yet making a positive contribution to
SHL’s profit.

US – Progress in telemedicine operations, divestures and closing of loss making medical imaging centers in progress.
The telemedicine operations in the US experienced a good first half year with EBITDA improving by over 20% compared with the first half of 2005. Revenues from new telemedicine services introduced, such as INR@home, more than doubled compared with the first half of 2005.

The restructuring and geographic realignment of the medical imaging services operations continued with the closing or divesture of 5 centers and the concentration of these activities around the mid Atlantic region. As a result of this realignment, these imaging centers are now categorized as Discontinued Operations in the financial
statements.

Israel
SHL’s Israel operations experienced a satisfactory half year. The outbreak of hostilities in Northern Israel at the beginning of July caused some disruption to operations which, at this stage, are not expected to have a material affect on the Company’s results.
Cash Flow The cash generated from SHL’s continued operations in Q2 amounted to USD 1.2 million compared with USD 0.3 million in Q2 2005. Total cash generated from SHL’s operations in the quarter amounted to USD 0.7 million compared with USD 0.3 million
in Q2 2005. SHL’s improvements in cash flow were recorded in both the US and Germany during the second quarter and this trend is expected to be maintained.

At June 30, 2006 SHL had USD 13.8 million in cash, cash equivalents, marketable securities and deposits compared to USD 25.3 million at December 31, 2005. The major reason for the decline in this amount was the repayment of loans to banks in the
amount of USD 11.3 million.

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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