Annual Report SHL TeleMedicine Ltd.

Transcription

1 Annual Report 2001 SHL TeleMedicine Ltd.

2 Corporate Statement SHL TeleMedicine Ltd. specializes in developing and marketing advanced personal telemedicine systems and in the provision of medical call center services to subscribers. Personal telemedicine is the transmission of medical data by individual subscribers from a remote location to a medical call center via standard telephone networks. With the help of sophisticated computer systems, call center medical staff use this data to diagnose and monitor subscribers health, following proprietary guidance protocols to respond fast and effectively to their needs. SHL s personal telemedicine systems are designed to improve quality of care and lifestyle for people suffering from various health conditions ranging from the high-risk and chronically ill to ordinary users of healthcare products and services who wish to take a more active role in managing their own health. In particular, the company s telemedicine systems can be used to reduce emergency care response times for sufferers of potentially fatal cardiac episodes. Key Figures (December 31) All financial units in USD 1, E m p l o y e e s S a l e s 30,615 19, 537 E B I T 9,032 4, 374 E B I T D A 10, 830 5, 716 Net profit 12,056 1, 180 Total assets 136, , 716 Shareholder equity 95,073 91, 773 Working capital 48,305 66, 595 Details per share Net profit per share in USD Return on equity 12.7% 1. 3 %

3 Contents 3 Editorial Exporting peace of mind 4 Report/Outlook Review 2001: forging ahead, at home and abroad 6 Strategy Putting experience to work 10 Products in Use What is telemedicine? Open for business in Europe 16 Who s Who Board of Directors and management 2 18 Investors Information for investors 1 19 Consolidated 2001 Contents

4 2

5 Exporting peace of mind With telemedicine now accepted more and more as an integral, vital part of effective healthcare, I am proud to reflect on the part SHL TeleMedicine has played in the industry over the past year. During 2001 not only did we strengthen our expanding home-market operations but, through our joint venture with strategic partner Royal Philips Electronics, we also embarked on an ambitious mission to export our own brand of peace of mind throughout Europe and beyond. During the past 14 years, the satisfaction of knowing we are saving lives and helping many chronically ill subscribers cope with the constant daily threats they face has remained paramount in driving our business forward. Our innovative quality products and unique service concepts lead the field in modern healthcare: we put advanced technology to work in order to provide simple yet effective healthcare monitoring services a real solution for many thousands of people. SHL s strong financial performance during 2001 exceeded expectations: overall sales expanded to USD 30.6 million and generated operating profits of USD 9.0 million. This reflected a steady growth in our business both at home and abroad, lifting earnings per share to USD At home, already serving the needs of around 60,000 subscribers from our flagship Tel Aviv medical call center, we strengthened our market leadership with a cash purchase of Bikurofe Ltd., an established Israeli company operating a 24-hour medical house-call service for patients across the country. The acquisition of Bikurofe with its extensive customer base brings excellent opportunities to expand our product offering across new areas of telemedicine as well as fresh marketing opportunities. Internationally, we made great strides during the year as our new European joint venture with Philips Medical Systems geared up for business. Philips Telemedicine opened its first monitor centers in Switzerland and Germany, offering subscribers a full range of cardiology monitoring. Philips Telemedicine will begin operations in Italy in early This exciting start in Europe complements our UK business partnership with Nestor Healthcare Group. Having crossed the European threshold in 2001, we stand on the brink of a new, North American, challenge. The USA represents a vast telemedicine market this is the new market that we have in our sights for We are now aiming across the Atlantic, implementing our tried and tested expansion strategy in order to create telemedicine systems and services second to none in quality and efficiency. During the coming year we will continue to strive for the excellence in quality that has set us apart in telemedicine provision, justifying the trust and confidence shown in us by our partners and shareholders alike at SHL, we value and appreciate such important backing. We will continue to run our business with a clear and simple focus: cutting through the bounds of traditional healthcare provision to enhance quality of life and provide peace of mind saving lives worldwide. Yours sincerely, Yoram Alroy, Chairman and CEO 3 Editorial

6 Review 2001: forging ahead, at home and abroad 4 During the company s fourth consecutive year of operating profit and growth, SHL TeleMedicine successfully advanced ambitious growth plans, expanding at home and abroad through increased sales and the formation of prestigious partnerships. Strengthening the foundations SHL TeleMedicine performed particularly well in 2001 during the year the company exceeded market expectations with strong financial results against a solid cash balance in hand. Capitalizing on 14 years of experience as Israel s largest telemedicine operator and on its successful market leadership at home, the company was able to export its high-tech user-friendly telemedicine internationally across Europe. Overall revenue up 56.7% at USD 30.6 million gave rise to operating profits of USD 9.0 million, representing a 106.5% increase compared with the previous year. In 2001 the company boosted full-year net income to USD 12.1 million, bringing improved EBITDA margins of 35.4% and EBIT margins of 29.5%. At USD 1.13, earnings per share were 527.8% higher than during the previous full year. International sales grew as a percentage of total revenue to account for 22% of overall income in 2001, while device sales also continued to expand, constituting 45% of total revenue compared with service revenues 55%. At home, the Israeli medical monitor center continued to operate efficiently and profitably: by the end of the year it was serving the needs of around 60,000 subscribers. In December 2001 SHL acquired Bikurofe Ltd. for approximately USD 7.8 million in an all-cash transaction. Bikurofe is a leading Israeli operator of a 24/7 medical call center providing medical consultations and house calls: more than 220 doctors maintain a country-wide 24-hour homevisit call-out service. In line with SHL s strategy of sustained home-market growth, Bikurofe will be integrated into existing Israeli operations to improve SHL s competitive position and provide new opportunities for service enhancement and cross marketing to an enlarged combined customer base. International highlights The company exceeded market expectations with strong financial results against a solid cash balance in hand. Building on the strong links with Ne t h e r l a n d s - b a s e d Royal Philips Electronics initiated during 2000, the past year saw the establishment of an exciting new joint venture. Philips Telemedicine launched a major drive to offer personal telemedicine services throughout mainland Europe, opening two medical monitor centers during the year in Zurich, Switzerland, and Dusseldorf, Germany with a third scheduled to open in Milan, Italy, during the first half of The company intends to continue its European expansion throughout the year. Philips Telemedicine utilizes SHL s fully integrated and userfriendly monitoring devices linked to monitor centers built on the successful SHL model, facilitating healthcare support and emergency services as required. SHL expects to earn income from the joint venture mainly through device sales, royalties, and dividends. Meanwhile SHL s profitable relationship with Nestor Healthcare Group, one of the largest publicly quoted healthcare companies in the UK, continued well throughout the year. Nestor, which operates a first-of-its-kind UK medical monitor center using SHL technology, has completed a line of successful pilot tests with major clients and is now set to concentrate on the institutional market to attract large corporate customers. R e p o r t / O u t l o o k

7 60,000 50,000 40,000 30,000 20,000 10, Number of customers Product progression Continued research and development throughout the year helped SHL retain its valuable technological lead and brought international ratification for SHL products. The US Federal Drug Administration (FDA) granted approval of the TelePress TM III blood pressure monitor introduced in 2000, and marketing clearance for the Cardio mc Vision 7 TM data management software, the Home Care Center TM comm u n i c a- tions link, and a multi-channel ECG receiver. SHL is committed to ongoing research to ensure its extensive range of innovative and technologically advanced products and systems remains ahead of the field in combining maximum benefi t to patients with ease and convenience of use. Several new products are in the pipeline due for launch in A stylish upgraded Swiss-made version of S H L s multifunctional wristwatch emergency c o m m u n i c a t o r, the Wa t c h Ma n T M II, was launched in early During the coming year the company intends to reinvest up to 2.8% of total revenue in R&D, and remains committed to providing state-of-the-art good practice solutions for the medical profession. Looking ahead 2002 and beyond Continued research and development helped SHL retain its valuable technological lead, and brought international ratification for its products. SHL faces the future perfectly poised to tap a huge potential for further growth. Maintaining and expanding market leadership at home remains a top priority as SHL builds on the Tel Aviv call center s steady success both as a proven business model ripe for international replication and as an effective beta site to test new initiatives. The company s strong balance sheet leaves SHL well positioned to selected acquisition opportunities at home and abroad. During 2002 the company has its sights set on the North American market through carefully planned expansion into the USA. Bringing tangible benefits to people who will be long-term users of personal telemedicine systems, SHL is well on course for international expansion while increasing its lead at home. The coming year will see SHL strive to support and strengthen existing European partnerships while forging strong new international links in new territories. SHL remains firmly committed to expanding its product range through technical innovation, offering excellence in cutting-edge technology and creating the best possible telemedicine services globally. 5 R e p o r t / O u t l o o k

8 Putting experience to work 6 During the year 2001 SHL TeleMedicine Ltd. boosted business to post pre-tax profits of USD 12.1 million on full-year sales of USD 30.6 million. Co-Presidents Erez and Yariv Alroy discuss the reasons for their company s success and outline a path for the future. What were the highlights of 2001 for SHL? Yariv Alroy: The year 2001 was very important for SHL, both at home and internationally, particularly in Europe. At home, our flagship medical monitor center continued to perform strongly and in December SHL finalized the purchase of Bikurofe Ltd., a leading provider of round-the-clock home visits by doctors and 24-hour medical telephone consultation services. Once integrated into SHL s existing operations in Israel, Bikurofe is expected to bring new opportunities for SHL to improve its market position. Erez Alroy: Against this background of strengthening the company s market position at home, SHL also made good progress internationally. Philips Telemedicine, the joint venture with Netherlandsbased Philips Medical Systems, successfully launched two new European medical monitor centers to offer remote monitoring and diagnostic cardiac services in Switzerland and Germany based on SHL s existing model. The UK s first remote monitor center, operated by Nestor Healthcare Group using state-of-the-art SHL technology, continued to operate throughout What advantages does personal telemedicine offer subscribers? Erez Alroy: SHL believes that personal telemedicine, the transmission to a medical monitor center of personal medical data from a remote location, perhaps the subscriber s home, can offer great advantages to many people. Personal medical data, which can be transferred easily on a real-time basis thanks to SHL s Internet connectivity, is used to record, monitor, and diagnose a subscriber s condition fast and accurately. The data is compiled over time to provide a valuable bank of historical medical information that can also be made available to hospital doctors at the push of a button. This can save valuable time and ultimately lives during a medical emergency. With SHL s systems, cardiac emergency response time can be reduced by more than three-and-a-half hours, vastly improving the chances of survival and recovery. Another important advantage is the peace of mind telemedicine can bring. The sense of security generated by an effective telemedicine service can transform the way people live, reducing worry and stress for subscribers and their families and offering a greatly improved quality of life. It is a real solution for long-term sufferers of chronic diseases and people in good health who are concerned to remain so, as well as for the elderly or infirm population who would find comfort in an emergency communications system. What makes your business model successful? Yariv Alroy: It is SHL s wealth of consumer-oriented experience both in operating successful and profitable telemedicine services and in designing integrated high-tech, user-friendly telemedicine systems and devices which sets the company apart. As a springboard model, the company s original call center in Tel Aviv has been in operation for more than 14 years, building a long-term client base to provide a reliable stream of recurring revenue. The unique experience gained in equipping and running this center successfully has placed SHL at the forefront of the fast-developing telemedicine industry: our technologically advanced products and their benefits touch the basic needs of human beings. S t r a t e g y

9 Erez Alroy: With the backing of strong strategic partners to bolster SHL s skills and expertise, the company has embarked on an international expansion program utilizing its extensive experience as a firm foundation for future growth. As the global healthcare industry turns increasingly towards products enabling quality care to be delivered at a lower cost, SHL is perfectly positioned to offer fresh solutions. SHL will continue to examine potential strategic alliances and acquisitions, including expansion into the USA. Yariv Alroy, Co-President What is SHL s business strategy in its home market of Israel? Erez Alroy: The company s home market strategy is clearly focussed on maintaining and extending market leadership in the field of telemedicine. To this end, SHL aims to maximize its advantages of size and cross-selling capabilities throughout its business operations, and leverage the company s technological lead to optimize marketing success. This year s acquisition of Bikurofe makes perfect strategic sense within these parameters. 7 During 2001, SHL s European business grew significantly. What is your strategy for future expansion abroad? Yariv Alroy: The company s international strategy is based on re-creating the tried and tested Israeli monitor center model, equipped with SHL telemedicine technology, through a series of strategic alliances with strong partners. In addition to the joint venture with Philips targeting Europe and the company s cooperation with Nestor in the UK, SHL will continue to examine potential strategic alliances and acquisitions, including expansion into the USA. Erez Alroy: Typically, SHL seeks to forge links with strong partners in a Erez and Yariv Alroy: SHL TeleMedicine s Co-Presidents Strategy

10 position to offer tangible help in creating systems that employ SHL technology to service tens or hundreds of thousands of subscribers. Many attributes are important, including successful management, strong market position, sound financial capabilities, good access to potential subscribers, excellent marketing expertise, and an extensive network. 8 The sense of security generated by an effective telemedicine service can transform the way people live, offering a greatly improved quality of life. Erez Alroy, Co-President Were there any developments in SHL s product range during 2001? Erez Alroy: Yes, this year brought several product achievements including international recognition for the company s remote blood pressure monitoring device. The TelePress TM III received FDA approval: it is one of several SHL products to have earned FDA approval in addition to the European CE Mark. FDA marketing clearance was also obtained during 2001 for a multi-channel ECG receiver and three other products. Launched this year, the CardioBeeper CB 12/12 is capable of transmitting a real-time 12-lead ECG from patient to monitor center in 12 seconds, simply at the push of a button. Reducing data transmission time by two thirds, the new device represents a significant improvement over its predecessor, the CardioBeeper CB-12L. The Cardio mc Vision 7 TM is an updated integrated modular data-management software package pivotal to a remote emergency cardiac diagnostic service. The Home Care Center TM, designed as a home-based telephone interface for medical diagnostic instruments, also functions as a personal emergency response system. During 2001 the company also introduced the TeleBreather TM, a new, user-friendly remote spirometric monitor for patients with asthma and chronic pulmonary disease. Strategy

11 What is the significance of telemedicine within the healthcare market? Yariv Alroy: Certainly it represents a significant slice of the global healthcare industry. In the year 2000, it was estimated that telemedicine was worth USD 2.3bn globally and this figure is expected to increase by 20% annually. Independent research has suggested telemedicine will maintain an annual growth rate of 35% in the USA for several years to come and that by 2005 Europe will be spending between USD 2.5bn and USD 3.5bn on telemedicine. As the number of old people increases worldwide, so the market for telemedicine will continue to grow. Which aspect of the market most interests SHL? Erez Alroy: Initially, SHL has identified chronic disease as its primary target, with particular focus on cardiovascular disease. This market includes coronary heart disease, congestive heart failure, hypertension, arrhythmia, and stroke, which altogether affect about 57 million Europeans and 60 million Americans. Heart disease has been identified as the leading single cause of death in the USA, costing more than USD 105bn during the year Congestive heart failure, which afflicts 4.6 million people in the USA, costs USD 21bn every year. Yariv Alroy: This market offers great scope for SHL products and services to continue to improve the quality of healthcare and cut hospitalization costs. In the USA alone there are 1.1 million new and recurrent cases of heart attack every year, a third of which are fatal. Remote monitoring can shorten considerably the time-to-treatment and reduce irreversible damage to the heart muscle, greatly improving a patient s chances of survival. Do you see opportunities to extend the market for telemedicine? Yariv Alroy: Yes, potentially telemedicine has very wide applications ranging from cardiovascular, hypertension and pulmonary chronic diseases, to personal emergency response systems and services for the worried well: those people currently in good health and concerned to stay that way. Currently, SHL products and services are designed to combat medical conditions in the fields of cardiology and congestive heart failure, hypertension and respiratory disorders. Future market opportunities lie in applying our technology to an extended range of health issues, including Yariv Alroy, Co-President therapeutic monitoring, obesity, diabetes and many others. Concentrating on new applications, we can widen the focus of existing telemedicine systems and services built around the medical monitor center model. Our technologically advanced products and their benefits touch the basic needs of human beings. Does telemedicine bring cost benefits? Erez Alroy: Yes, telemedicine can save lives it also saves money for whoever pays the healthcare bill, whether it is the patient, an insurer or a third party. Personal telemedicine systems cost about 30% of a home nursing visit, and about one thirtieth of inpatient care. Although many post-acute congestive heart failure patients are discharged from hospitals, roughly half of these are readmitted within 30 days. Remote monitoring treatment programs have been shown to reduce these rates by up to 74%, saving more than USD 8,000 per patient. Yariv Alroy: The world s population is aging at an increasing pace: inevitably the healthcare industry faces a severe need to contain costs while maintaining a high quality of service. Modern, inexpensive and efficient medical technologies such as telemedicine are essential to meet the needs of this fast-changing global industry, and rapid growth is expected in the remote monitoring market in particular. SHL intends to play a long-term leading part in telemedicine provision, making a real difference to the quality of modern healthcare for those who need it most. 9 Strategy

12 What is telemedicine? 0 Compared with traditional healthcare methods, telemedicine provides a higher level of care at a lower cost, empowers subscribers to become more actively involved in looking after their own health and saves lives. So how does it work? Telemedicine is the transmission of medical data via telecommunication networks by an individual patient from a remote location to a medical monitor center for the purposes of monitoring and diagnosis. It is particularly effective when emergency timeto-treatment means life or death. It can substantially reduce emergency response times for sufferers of potentially fatal cardiac episodes in many cases by as much as three and a half hours preventing a great deal of irreversible damage to the heart muscle, and saving lives. Statistically, telemedicine subscribers fare better than patients who go to hospital, partly because on many occasions they can be diagnosed and treated without leaving home. Telemedicine offers added advantages in the early detection of problems, and helps to take the stress out of coping with chronic life-threatening diseases. By providing a wealth of medical data it can also reduce the occurrence of healthcare mistakes. SHL Te l e Medicine specializes in designing userfriendly devices and integrated high-tech systems that create a complete, modular telemedicine system easily adapted to meet the needs of many medical conditions including heart and respiratory problems. The devices are technologically advanced, capable of measuring and transmitting complex physiological parameters. Ho w e v e r, modern design techniques ensure they are convenient and easy to use, creating minimal disruption to normal daily life so that even the chronically ill can lead active, independent lives with peace of mind, knowing they can get medical assistance at the push of a button. Making telemedicine work Many of SHL s cardiac, pulmonary and blood pressure remote monitoring devices are linked to a remote medical call center by the Home Care Center ( H C C ). A desktop unit, it acts as a home-based telephone interface for medical diagnostic instruments as well as an emergency response system. The HCC dials automatically and in times of distress it can be activated simply by pressing an emergency button that will immediately connect the patient with a call center nurse. The Wa t c h Ma n is a waterproof, multifunctional wristwatch fitted with an integral distress button and microphone for instant communication with the monitor center via the HCC. Subscribers can talk to monitor center staff from any room in the house even from the shower. In emergencies, the Te l e D o o r mechanism enables monitor center staff to unlock a subscriber s front door, allowing medical or security personnel to reach them in a crisis. Cardio patients can use the FDA-approved Ca r d i o B e e p e r 12 / 12, a compact hand-held device facilitating the transmission of a full 12-lead ECG to the monitor center in 12 seconds. The Ca r d i o Po c k e t, a sophisticated leather wallet containing a 1-lead rhythm strip ECG transmitter, is a useful alternative for subscribers at times when they are not carrying the Ca r d i o B e e p e r. Launched during 2001, the Te l e B r e a t h e r is a comprehensive system for continuous remote monitoring of asthma and chronic obstructive pulmonary disease. Specially designed for easy use by children and adults, it consists of a compact hand-held measurement device into which the patient breathes to perform the automatic spirometric test simply and easily. S H L s product range also features instruments to check other important medical indicators, including blood pressure, weight, and bloodstream oxygen levels. The recently FDA-approved TelePress III can read and transmit blood pressure and pulse rates from two users in the same household. Products in Use

13 For us, telemedicine is the future we are fortunate to be able to reap its benefits. Béatrice Rüetschli, 50, self-employed real-estate agent Products: CardioPocket, CardioBeeper 12/12 With a history of serious heart problems, Béatrice Rüetschli is reassured by telemedicine, leaving her free to concentrate her energies on business. The monitor center is open 24/7 so she and her husband, who shares her CardioBeeper 12/12, are relaxed about calling familiar medical professionals at any time of night or day.

14 Open for business in Europe 12 One of SHL TeleMedicine s European joint venture operations is now open for business in Zurich, Switzerland. With the successful Israeli monitor center as an operational model, Philips Telemedicine offers Swiss subscribers their first chance to benefit from SHL s unique personal telemedicine service concept. The Zurich medical monitor center is already fully operational and making use of SHL devices and know-how to focus on cardiology. The center s services currently reach subscribers in the Zurich region the Managing Director of Philips Telemedicine in Zurich, Dr. Jacques Weidmann, expects further commercial rollout across Switzerland in the coming period. Our goal is to help all our subscribers improve their quality of life, whether or not they are at risk from heart problems. It s not only about saving lives; it s also about improving quality of life before those lives need to be saved offering the comfort of real peace of mind. Many people are reluctant to consult their family doctor every time they feel a slight discomfort by using SHL monitoring devices they can continue life with less worry, secure in the knowledge they can contact the medical monitor center at any time and be sure of an instant response and feedback. Since our launch last year, it looks as though the services we offer have been very well received by patients, doctors and cardiologists alike they can see the benefits, explains Dr. Weidmann. Carving a cardiology niche The center has very close links with leading heart specialists at the city s University Hospital, a link that provides added expertise in diagnosing and treating the conditions faced by subscribers. Philips Telemedicine medical personnel are able to train with some of Europe s leading cardiologists. Subscribers also benefit from detailed informationsharing between the monitor center and local hospitals a real two-way line of communication that significantly improves the quality of patient care. The Zurich medical monitor center offers subscribers a comprehensive heart monitoring service built around SHL s medical monitor center model and the use of SHL cardio devices. The service aims at the early detection of potentially fatal cardiac events. According to Philips Telemedicine Chief Medical Doctor Dr. med. Urs Schneider, diabetics MANAGING HUMAN HEALTH: Medical information sent by subscribers to the Zurich monitor center is analyzed to detect heart problems, then stored to create personal history data banks. and heart transplant patients are among those who could get full benefit from personal telemedicine services as these medical conditions can delay timely cardiac diagnosis. Personal telemedicine helps us to help the medical community, as well as our subscribers, as it brings together pieces of information to give an accurate view of the whole picture. Used in the right way, it effectively removes much of the stress associated with the constant threat posed by heart problems. Diabetes dulls sufferers nerve endings so pain is hidden from them and personal performance indicators are often misinterpreted. Many heart trans- Products in Use

15 Used in the right way, personal telemedicine services can remove the constant stress associated with heart problems. Dr. med. Urs Schneider, Chief Medical Doctor Dr. med. Urs Schneider, Chief Medical Doctor for Philips Telemedicine in Zurich, manages medical affairs in Switzerland s monitor center.

16 plant patients have similar problems in detecting changes in their condition because inevitably some central nerves are damaged by the transplant process. For these reasons, many early signs of a heart problem are often missed. Monitoring using our devices can be a great help in providing a definite and instantaneous signal when a patient s condition demands attention. Because people call us regularly, we can make a difference when it is needed. explains Dr. Schneider. At these times, patients are understandably more reluctant to call their family doctors even if they feel unwell. Because medical advice is available 24 hours a day, 7 days a week, they can easily make a call at any time knowing that our help can reach them fast wherever they are, thanks to our communication networks with emergency services. This can prove to be an enormous benefit in serious cases when every hour saved can reduce the damage done to the heart. 14 Tracing a telephone call New Philips Telemedicine subscribers visit the Zurich medical monitor center for a thorough health assessment and ECG testing, the results of which are diagnosed in consultation with cardiology experts at Zurich s University Hospital. This detailed medical information constitutes a baseline against which the patient s future ECG data can be matched and analyzed. The information is stored electronically at the monitor center and updated each time a subscriber makes a call to the monitor center s medical staff. When a subscriber makes a call, the medical staff will locate and identify the caller in emergency cases, giving accurate access instructions to the ambulance crew may prove crucial. The medical staff then retrieves the relevant personal medical file on-screen, and the patient can begin transmission of his ECG data. The results are analyzed instantly and feedback is provided to the subscriber. According to SHL s Israeli market experience, about 85% of calls require no further medical action: in these cases the nurse will be able to reassure the caller and update his records with the incoming data. But on average 15% of calls require prompt action, ranging from treatment advice or consulting a doctor to, in an emergency, sending an ambulance. Personal telemedicine services are particularly effective for patients who feel uncomfortable during the night and in the early hours of the morning, THE CARING FACE OF TECHNOLOGY: experienced and qualified cardio-specialist nurses are always on duty at the Zurich monitor center to answer subscribers calls personally. SHL s on-screen technology helps to identify accurately what is wrong, and where, to help provide the attending ambulance crew with vital time-saving information even before they reach the patient. In these cases, saving time means saving lives. Primarily addressing cardiology needs, the Zurich medical monitor center offers cardiac-specific services based on proven products from SHL s highly successful range. The CardioBeeper 12/12 is a compact hand-held device which allows one or two users to conduct a full 12-lead ECG in 12 seconds and transmit the results to the monitor center via a phone. The CardioPocket is a leather wallet designed to be carried easily. It features a completely sealed 1-lead rhythm strip ECG transmitter that is activated by placing the unit against the chest and using a telephone to transmit medical data. Products in Use

17 Telemedicine gives me security I feel a real improvement in the quality of my life. Werner Steinemann, 60, church caretaker Products: CardioPocket When Werner Steinemann s heart rhythm faltered, telemedicine s fast and accurate diagnosis allowed hospital doctors to operate immediately and save his life. Freed from worrying about his health he now enjoys his work in the grounds of two city-center churches and is again able to take pleasure in life.

18 Board of Directors and management Clear and focussed management experience, strengthened by groundbreaking technological know-how and high-quality medical expertise has brought SHL to the forefront of international telemedicine service provision. Here we profile members of the company s Board of Directors and key management personnel. 6 Board of Directors Yoram Alroy, Founder, Chairman, and CEO Yoram Alroy founded SHL in Since then he has served as CEO and Chairman on SHL s Board of Directors. Prior to founding SHL, Mr. Alroy was Executive Vice President of IBM Israel and was for 17 years a member of IBM s Israeli executive committee. Elon Shalev, Director Elon Shalev has served as a Director of SHL since From 1990 to 1993, he was also SHL s Chief Operating Officer after which he served three years as Chief Executive Officer for an Israeli TV News company. From 1996 to 1999, he was chief editor of Yediot Aharonot, the largest daily newspaper in Israel, and until recently he was a Senior Vice President of Discount Investment Corporation Ltd., one of the largest investment and holding companies in Israel. Yariv Alroy, Director and Co-President Yariv Alroy has been on the Board of Directors since He is also Co-President of SHL. He has been Managing Director of SHL TeleMedicine International since its incorporation in 1997, and prior to that was Chief Operating Officer of SHL Israel. Before joining SHL, he served as a senior partner in a large Israeli law firm. James Nolan, Director James Nolan joined the Board of SHL as a Director in September 2000 he is also a Vice President, Co r p o- rate finance, of Royal Philips Electronics N.V. He holds an MA in law from Oxford University, England, and an MBA from INSEAD, Fr a n c e. Uzi de Haan, Director Uzi de Haan became a Director of SHL in September He is also a CEO of Philips Israel. Mr. de Haan holds an IR M.Sc. in Aeronautical Engineering from the University of Delft, Holland, and a D.Sc. in Industrial and Management Engineering from Technion in Haifa, Israel. Colin Schachat, Director Colin Schachat was appointed Director of SHL during He is also Managing Director of Stonehage (Israel) Financial Services Limited, and a senior executive director of the holding Stonehage Group. A qualified lawyer with financial services experience, he holds a BA and an LL B from the University of Witwatersrand, South Africa. Ziv Carthy, Director Ziv Carthy serves as a Director of SHL. Between 1994 and 1997 he also served as a member of SHL s management team; since 1997 he has been acting as CEO of GZ. He holds a B.Sc. in Information Systems Engineering from Technion in Haifa, Israel, and an MBA from Harvard University. Dvora Kimhi, Director Dvora Kimhi joined the board as a Director of SHL in A member of the Israeli Bar Association, she holds an LL B from Tel Aviv University and has specialized in contract law, communication regulation and legislative representation for television, satellite, and communications companies. Who s Who

19 Nissim Zvili, Director Nissim Zvili became a Director of SHL during 2001 former member of the Israeli parliament, his extensive experience encompasses politics, regional and cultural development, and agricultural issues. Mr. Zvili is the chairman of the international Center for Peace in the Mid-East and has held several other public positions with various areas of responsibility including foreign affairs and combating drug abuse. Management Erez Alroy, Co-President Erez Alroy has been an executive Director of SHL since its inception. Prior to holding his current position of Co-President, he served with SHL Israel as Sales Manager, Vice President of Marketing and, most recently, Managing Director. Yariv Alroy, Co-President Yariv Alroy, who holds a degree in law from the University of Tel Aviv, is Co-President of SHL and also a member of the Board of Directors. He has been Managing Director of SHL TeleMedicine International since its incorporation in 1997, and prior to that was Chief Operating Officer of SHL Israel. Before joining SHL, he served as a senior partner in a large Israeli law firm. Erez Termechy, Chief Financial Officer Erez Termechy has served as SHL s CFO since He is a certified public accountant (CPA) in Israel, and holds a BA in economics and accounting from Ben-Gurion University. Prior to joining SHL he worked as a CPA and controller in various fields. Irit Alroy, Executive Vice-President of Technology and Development Irit Alroy has served as Director of Information Technology for SHL since Before that she held different positions in the field of IT development. She has a B.Sc. from the Hebrew University in Jerusalem. Erez Nachtomy, Executive Vice-President Erez Nachtomy joined SHL TeleMedicine in March 2001 as an Executive Vice President. Before joining SHL Mr. Nachtomy served as a senior partner (Corporate and M&A) in one of the leading law firms in Israel. Erez Nachtomy holds an LL B from Tel Aviv University. Ronen Elad, Managing Director SHL Israel Ronen Elad was appointed Managing Director of SHL Israel in February Previously he founded and acted as General Manager of Rom-Phone, an Israeli emergency systems manufacturer and development company. Mr. Elad has also served as CEO of Marlam Medical Services for four years. Professor Arie Roth, MD, Chief Medical Ma n a g e r Arie Roth, a senior member of the department of cardiology at the Tel Aviv Sourasky Medical Center, has served as SHL s Medical Director since Michal Golovner, MD, Manager of Medical Affairs Michal Golovner has served as SHL s Manager of Medical Affairs since 1997; she has been a member of SHL s medical team since joining the company in Dr. Golovner holds an MD from Tel Aviv University. Arnon Volovski, Vice-President Arnon Volovski joined SHL Israel in 1999 and has served as Sales Manager and Branch Manager and later as Vice President of Sales. Previously Mr. Volovski led several entrepreneurial ventures as a self-employed businessman. Eli Oren, Manager of Product Development Eli Oren joined SHL as Director of Product Research and Development in 2000, having served 15 years in representative, engineering, and managerial positions in the Israeli Defense Force. Mr. Oren holds an M.Sc. in Management and Industrial Science from Ben-Gurion University. 17 Who s Who

20 Information for investors Capital structure The issued share capital is divided into 10,663,373 registered shares with a par value of NIS 0.01 each. Distribution of profits SHL TeleMedicine Ltd. currently intends to retain any future earnings to finance the development of its business and does not anticipate paying any cash dividends in the foreseeable future. Major shareholders Shareholders with more than 5% of all shares may be registered. There are no restrictions on voting rights. Share price development SHL TeleMedicine share price in CHF Swiss New Market (rebased) 8 Royal Philips Electronics % Alroy Group % Tower Holdings B.V % G.Z. Assets and Management Ltd % P u b l i c % Lock-up agreement Number of shares Expiration date of lock-up agreement 1, 256, 145 November 15, 2002 Statistics on SHL TeleMedicine shares as at December 31, 2001 Registered shares with a par value of NIS 0.01 each Securities number Number of shares 10, 663, 373 Market price high/low (CHF) 48/10. 2 Market capitalization high/low (CHF million) 511.8/ Market capitalization 12/31/01 (CHF million) Share capital nominal value (NIS) 106, 633 Majority interests % Key figures per share as at December 31, 2001 Net profit per share (USD) Return on equity 12. 7% L i s t i n g All SHL shares are listed on SWX New Market. Ticker symbol: SHLTN Currency: CHF Listing date: November 15, 2000 Investor Relations SHL TeleMedicine Ltd. Erez Alroy, Co-President Erez Termechy, Vice President & CFO 90 Igal Alon St., Tel Aviv 67891, Israel Tel Fax erez@shl-telemedicine.com erezt@shl-telemedicine.com Annual general meeting April 23, 2002 Next publications Q 1 report: May 16, 2002 Q 2 report: August 20, 2002 Q 3 report: November 20, 2002 I n v e s t o r s

21 Consolidated 2001

22

23 Contents 22 Financial Overview 25 Auditors Report 26 Consolidated Balance Sheets 28 Consolidated Statements of Operations 29 Statements of Changes in Shareholders Equity (Deficiency) 30 Consolidated Statements of Cash Flows 33 Notes to Consolidated 21

24 Financial Overview General 2001 was another very successful year for SHL Tele- Medicine. It was characterized by significant revenue growth both in the local and in the international markets and by improved margins. During the year the joint venture with Philips Medical Systems commenced operations, and at the end of the year we acquired all the shares of Bikurofe an Israeli company that operates medical call center services. In addition, in February 2002 we entered into an agreement to acquire Raytel Medical Corporation, a US publicly traded company which when implemented will provide a platform for SHL s expansion into the US market. Again, we achieved our best operating performance in our history. Revenues totaled USD 30.6 million, EBITDA totaled USD 10.8 million and net profit amounted to USD 12.1 million compared to USD 19.5 million, USD 5.7 million and USD 1.2 million respectively in These results have been achieved due to the continuing demand for telemedicine services and devices in the local market, and from the growth in service income from the international operations. 2. Results of Operations Revenues in 2001 totaled USD 30.6 million, a 56.7% increase over the revenues for 2000 of USD 19.5 million. The increase in revenues resulted mainly from a growth in sales in devices and services in the local market, as well as from the growth in international operations. The revenues breakdown is shown below: The revenues from sale of devices amounted to USD 13.8 million in 2001, compared to USD 8.4 million in 2000, an increase of 63.2%, and revenues from services amounted to USD 16.8 million in 2001, compared to USD 11.1 million in 2000, an increase of 51.8%. The revenues from the local market amounted to USD 23.9 million in 2001, compared to USD 18.2 million in 2000, an increase of 31.0%, and the revenues from the international market amounted to USD 6.7 million in 2001, compared to USD 1.3 million in 2000, an increase of 414.4%. Gross Profit Gross profit in 2001 totaled USD 20.0 million compared to USD 11.9 million in 2000, representing a 67.8% increase. Gross margin for 2001 increased to 65.3% compared to 60.9% in This increase in the level of gross margin is attributed primarily to the change in the overall sales mix (growth in the relative weight of device sales to service sales), and from the effect of the increase in the international operations. Research and Development The research and development expenditure for the year totaled USD 1.1 million, 3.7% of revenues, compared to USD 0.85 million, 4.4% of revenues, in The amount of research and development charged to the statement of operations for 2001, which reflects the capitalization, and amortization of the research and development investment over the years amounted to USD 0.47 million, 1.55% of revenues, compared to USD 0.24 million, 1.24% of revenues, in % Services 45 % Devices 78 % Israel 22 % International Selling and Marketing Expenses Selling and marketing expenses totaled USD 4.1 million in 2001, compared to USD 2.3 million in The increase in selling and marketing

25 expenses is attributed primarily to increased commissions and salaries incurred in generating the increased revenues. General and Administration Expenses General and administration expenses totaled USD 6.4 million, 20.8% of revenues, in 2001, compared to USD 5.0 million, 25.6% of revenues, in The increase in the amount of general and administration expenses is attributed mainly to the effects of the amortization of the goodwill of a subsidiary acquired during the previous year, and to the increases in consultants fees and salaries. Earnings before Income Tax, Depreciation and Amortization (EBITDA), Earnings before Income Tax (EBIT) EBITDA for the year increased by 89.5% to USD 10.8 million, 35.4% of revenues, compared to USD 5.7 million, 29.3% of revenues, in 2000, while our EBIT increased by 106.5% to USD 9 million, 29.5% of revenues, compared to USD 4.4 million, 22.4% of revenues, in As explained above, these increases resulted from the increased revenues and higher gross margins which were achieved during the year. Financial Income The cash resources from the company s equity issues were placed on deposit after repaying certain bank loans. This enabled us to benefit from financial income that amounted in 2001 to USD 8.4 million. Of this amount, USD 5.2 million is attributed to exchange rate differences of cash deposits in banks, USD 1.6 million to specific short term deposits designed to reduce the company s exposure to the dollar, and a net USD 1.7 million to interest derived from deposits in banks. In 2000 the Company incurred financial expenses on its current operations of USD 2.2 million. Taxes on Income The taxes on income amounted to USD 2.6 million compared to USD 1.1 million in Of this amount USD 1.0 million is due to the effect of the amortization related to carryforward tax losses for which deferred tax benefits were not recorded in prior years. In addition, the provision for taxes also reflects the utilization of prior years losses of subsidiaries of the company. Share in Losses and Provision against Shareholders Loan to an Affiliated Company The Company amortized its basic investment in the equity of the joint venture, Philips HeartCare Tele- Medicine Services. The company also made a provision of USD 2.5 million against its loan to Philips HeartCare TeleMedicine Services, which represents the extent of the Company s share in the losses associated with the start-up operations of the joint venture in Net Profit As a result of the events outlined above, net profit for the year amounted to USD 12.1 million, 39.4% of revenues, compared to USD 1.2 million in Earnings per share totaled USD 1.13 compared to USD 0.18 in Deferred Revenues Revenues from services are recognized ratably over customers service contracts. As at the end of December 2001, we have around USD 84 million of signed services contracts that will be recognized as revenues in future years and which do not appear in the balance sheet. 23

26 24 4. Major Changes in Assets, Liabilities and Equity At December 31, 2001, our current assets stood at USD 75.7 million compared to USD 73.5 million at year-end 2000, of which USD 60.1 million represents our cash balance. Our long-term assets totaled USD 35.3 million compared to USD 21.3 million at the end of the previous year. The main reasons for this increase are the investments and acquisition made during the year, and the increase in post dated notes derived from the increase of sales of devices. In addition, other assets increased to USD 22.5 million from USD 17.6 million at the end of 2000, mainly due to the increase of goodwill resulting from the acquisition of Bikurofe. As a result our total assets at the end of December 2001 totaled USD million compared to USD million at year-end Our current liabilities at December 31, 2001, amounted to USD 27.4 million compared to USD 6.9 million at year-end Of this amount bank credits utilized at the end of the year amounted to USD 20.1 million compared to USD 3.1 million in The increase in current liabilities was mainly to finance investments including the acquisition of Bikurofe. Our equity at the end of 2001 amounted to USD 95.1 million compared to USD 91.8 million at the end of At December 31, 2001, equity represents some 69.8% of the total assets of the company. 5. Cash Flow Movement Due to the increased profitability of the company, cash used in operating activities amounted to only USD 1.1 million compared to USD 4.0 million in The company invested USD 12.3 million in the joint venture with Philips and in the acquisition of Bikurofe and an amount of USD 3.1 in capital expenditure and other assets. In addition, USD 4.8 million was eroded by the devaluation of the shekel to the dollar. These amounts were financed by bank credits. At year-end 2001 we held USD 60.2 million in cash and short term deposits and had outstanding credit from our banks of USD 20.1 million. In 2000 cash deposits were USD 63.4 million with bank credits of USD 3.1 million. Erez Termechy Vice President and Chief Financial Officer