COMPUMEDICS (ASX:CMP) MOVES INTO POSITIVE TERRITORY – FULL YEAR RESULTS

Medical diagnostics company, Compumedics Ltd (ASX: CMP) today reported record earnings and revenue results for the year ended June 30, 2004.

Financial Results for Year Ending June 30, 2004

RECORD NET PROFIT AFTER TAX (NPAT) OF $2.4 MILLION
RECORD REVENUE OF $34 MILLION (USA GREW 35% AND EUROPE UP 20% IN USD TERMS)
POSITIVE OPERATING AND NET CASH AT $2.6 MILLION AND $1.0 MILLION

Melbourne Australia, Tuesday 24th August 2004
Medical diagnostics company, Compumedics Ltd (ASX: CMP) today reported record earnings and revenue results for the year ended June 30, 2004.
Record earnings after tax were achieved during the year ended June 30, 2004 at $2.4m in spite of R & D expensed amounting to 19% of revenue. This compares to earnings after tax for the year ended June 30, 2003 at a loss of $18.6m.
Revenues for the year ended 30 June 2004 were $34 million a 6% increase over the year ended June 30, 2004. Underlying revenue growth was 23% for the year if the effects of the AUD/USD exchange rate movements are eliminated. Based on 2003 FX rates, the revenues equate to $39.4 million (being a growth of 23%) and earnings at $3.5 million.

Compumedics’ Executive Chairman & CEO David Burton said: “The achievement of record results by the company as it returned to profits and cash generation is a reflection of the hard work and focus by all the people at Compumedics over the last couple of years, and most importantly the patience and support of our shareholders. Whilst the appreciation of the Australian dollar against the US dollar during the year somewhat dampened the result, we had anticipated this. The company must continue on its growth trajectory to increase the value of our company. Our technology and market development is on target and we expect strong revenue growth with profits and cash generation to continue.”
Earnings before interest, tax, depreciation and amortization (EBITDA) grew to $2.9m for the year ended June 30, 2004 a 55% increase over the year ended June 30, 2003. Basic earnings per share for the year ended June 30, 2004 were 1.7 cents per share. Earnings per share based on EBITDA were 2.1 cents per share for the year ended June 30, 2004.
Sales, marketing and administrative expenses at $10.3m for the year ended June 30, 2004 were 30% of revenues for the year ended June 30, 2004 and were 2% lower in dollar terms than the year ended June 30, 2003.

Research and development expenses at $6.5m for the year ended June 30, 2004 were 19% of revenues for the year ended June 30, 2004 and were 3% lower in dollar terms than the year ended June 30,2003. “This high level of investment in R&D reflects Compumedics continued strategic commitment to sleep and brain function technology, along with our thriving pipeline of new products and technology. Compumedics expects that as it continues to grow, R&D expenses will level out to around 12% of revenues on an on-going basis, while also serving to underpin many years of sustainable growth.”, said Mr. Burton.
Net cash for the year ended June 30, 2004 increased by $1.0m for the year ended June 30, 2004. This compares to a $3.2m decline in cash for the year ended June 30, 2003.
The increase in cash was driven by the improved operating performance of the business as well as improvements in cash collections and inventory management. Inventories for the year ended June 30, 2004 were $6.5m compared to $8.4m for the year ended June 30, 2003. Debtors days were 110 for the year ended June 30, 2004 compared to 90 days at June 30, 2003. Debtor days did not improve at balance date; however, this decline in debtor days was primarily driven by an increase in June sales and not a deterioration in collection activities.

The full year results are summarised below:

Other highlights for the year included:

• Strengthened focus on profitable growth together with the restructuring of the business, resulting in positive earnings and cash for the period.
• Neuroscan acquisition continues to delivers profits, and evidence of reinforced USA sleep and EEG sales growth. Synamps2, which was completed after the Neuroscan acquisition, continues to generate profits after the recent release into US and “Rest of World” Markets (in June 2003 generated $8.0m in sales in twelve months, or 20% growth on the prior year).
• Continued focus on margin improvements through the period leading to a 3% improvement in margins over the prior year despite the strong Australian Dollar.
• Key European installation completed at University Hospital Mannheim, second largest sleep laboratory in Germany.
• In the USA the pre eminent American Academy of Sleep Medicine is currently reviewing a possible new sleep scoring protocol. Out of the 11 committee chairmen reviewing the new sleep scoring protocol 6 use Compumedics equipment.

Regional Performance

USA

The US business grew by 35% over the year ended June 30, 2003 in US dollar terms.
This was driven by growth in Sleep, Neuroscan and Neuro Medical Supplies. . In particular the US sleep business now has over 400 customers, with 1,200 installed beds of Compumedics equipment. The US business recently appointed a Sales Manager for its Western Region to further accelerate growth in the 6 active sales territories in this half of the country. There are a total of 11 active sales territories in the USA at present for the sleep business.

Asia Pacific

The Asia Pacific business at $11.4 million was less then the same period last year by 10%. This reflects a primarily a slow down in sales by Japan following the strong revenue growth there in 2003, as a result of the train incident in February 2003. The Japanese market remains a key market for growth of the business and will be complemented by China and other countries in the region as sleep medicine further develops in these latent markets.

Europe

European growth at 20% was good but less than expected. The European growth outlook is still evident. The Company will be looking closely at strengthening its Europe market activities with the intent to replicate Compumedics USA success.

Outlook

The focus will clearly be on profitable growth, to further capitalise on the larger and growing customer base of the company.
Product margins and earnings should continue to improve as growth continues. The company expects that revenues for the year ended June 30, 2005 will be between $38 million and $42 million and profits after tax will be between $3 million dollars and $4 million dollars.

New Products

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

During 2005 the following products will be released:

• Siesta II – Featuring new generation wireless technology enabling WiFi capability in the sleep laboratory.
• NEMO – a completely new 128 channel long term monitoring EEG device to further expand our Neuro diagnostic offering.
• COMPERIO DQ – a revised EMG product acquired with the Neuroscan business that will further broaden the companies neuro diagnostic offering.
• CURRY 5.0 – a completely new release of Neuroscan’s high end brain research software to maintain Neuroscan’s pre eminent technological position in this market.
• NEXUS Scheduler – a new module to be added to the already released Nexus software to add greater administrative functionality for the sleep laboratory.

Growth Platforms

The company re-organised its management last year to allow a greater focus on the growth platforms and to keep the operational business focused on performance and profitability. As a result, a number of patents have been secured on sleep treatment technology during the course of the year, along with the advancement of other new break-out technologies and product opportunities.

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 technology for sleep disorders, neurophysiology and cardiology. Compumedics was listed on the Australian Stock Exchange in December 2000.
The company has corporate headquarters in Melbourne, Australia and offices in the United States, Asia and Europe.
Compumedics holds 70% share of the Australian sleep diagnostic market, and is a major presence in the US, European and Asian marketplaces for both its sleep diagnostic and neuro-diagnostic products.
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. Compumedics was awarded the 2003 Frost and Sullivan Award for Market Expansion Strategy and was the 1998 Australian Exporter of the Year.

www.compumedics.com