Contracts in Germany and US

and divesture of Bikurofe in Israel which will result in around USD 9 million capital gain in Q3. Financial results for the period in line with expectations.

Tel Aviv/Zurich, August 23, 2005 – SHL’s revenues for the second quarter and half-year of 2005 amounted to USD 26.1 million and USD 52.3 million, respectively compared with USD 26.4 million and USD 53.0 million for the second quarter and half-year of 2004. Revenues from international operations for the half-year amounted to 73 % of total revenues.

Gross profit for Q2 and the first half of 2005 totaled USD 11.5 million and USD 23.3 million, respectively compared with USD 11.8 million and USD 23.9 million in Q2 and H1 of 2004, while EBITDA amounted to USD 1.7 million and USD 3.4 million, respectively compared with USD 2.1 million and USD 4.3 million in Q2 and H1 of 2004.

From January 2005, following the application of IFRS 3 “Business Combinations” SHL ceased amortizing its goodwill and negative goodwill. The major effect of this change is that the costs of
the German operations that were previously netted against negative goodwill are now recorded directly in the income statement and have thus caused a significant decrease in SHL’s operating profit (EBIT) which amounted for Q2 and H1 of 2005 to USD 0.1 million and USD 0.4 million, respectively compared with an EBIT for Q2 and H1 of 2004 of USD 1.0 million and USD 2.6 million, respectively.

As a result the net loss for Q2 and H1 of 2005 amounted to USD 0.3 million and USD 1.1 million, respectively compared to a net income in Q2 and H1 of 2004 of USD 0.7 million and USD 1.3 million, respectively. LPS in Q2 and H1 of 2005 amounted to USD 0.08 and USD 0.2, respectively compared with an EPS in Q2 and H1 of 2004 of USD 0.02 and USD 0.05, respectively.

International operations – significant milestones achieved During this period SHL completed the signing of agreements with two major German health insurers – Taunus Betriebskrankenkasse and Deutsche Betriebskrankenkasse, with collectively
over 1.9 million insured- for the procurement of the SHL telemedicine solution for their members with chronic heart diseases, including congestive heart failure (CHF). These cooperations mark an important milestone in the development of PHTS Germany and further
underpin PHTS’s position as the leading German telemedicine provider as well as potentially leading to additional contracts with other health insurers and bodies in the field.

In the US SHL’s strong presence in the North American marketplace has been enhanced through an exclusive marketing alliance with St. Jude Medical, the world’s leading mechanical heart valve company, for the promotion of an anticoagulation blood monitoring system –

These milestones are important steps in the development of telemedicine activities in the CHF market in Germany and the INR market in the US, which should contribute to significant growth
in revenues and earnings in the coming years.

Israel – divesture of non-core business In July, SHL completed the sale of Bikurofe Ltd., its Israeli outpatient clinics and doctor visit
services company to IEL Israel Equity Ltd. for USD 14.7 million and also received USD 4.3 million in previously announced dividends and other debts. SHL will continue to render various services to Bikurofe for a total amount of USD 1.5 million. SHL will record in the third quarter of 2005 a capital gain of around USD 9 million from the divesture.

Cash flow
The Company’s operating cash flow improved considerably this quarter resulting in a positive operating cash flow of USD 0.2 million compared with a negative operating cash flow of USD
1.9 million in Q1 2005 and negative USD 0.6 million in Q2 2004. For the half-year negative operating cash flow amounted to USD 1.7 million compared with a negative USD 2.0 million in
H1 2004.

The Company’s cash position will improve considerably in Q3 as a consequence of the divestment of Bikurofe.

Looking ahead
SHL continues to invest the necessary resources in developing its international telemedicine activities that should lead to significant growth in the coming years.

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