DGAP-Adhoc

LifeWatch achieves volume growth of 13.1% in the first half of 2014

LifeWatch AG / Key word(s): Half Year Results

20.08.2014 07:05

Release of an ad hoc announcement pursuant to Art. 53 KR
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Press Release

LifeWatch achieves volume growth of 13.1% in the first half of 2014

LifeWatch continued to expand as sales reached USD 48.12 million in H1
2014, an increase of 10.2% versus H1 2013. Higher expenses resulted in a
net loss of USD 4.72 million in H1 2014. Based on the on-going operational
improvements and a more focused sales approach a turnover in excess of USD
100 million and a positive operating result for FY 2014 is targeted.

In total, revenues surged by 10.2% to USD 48.12 million in the first six
months of 2014, compared to USD 43.68 million in the first half of 2013.
99% of revenues were generated by our US-based subsidiary. The volume
increase was higher than the revenue increase as a result of an 8% price
decrease by Medicare. Gross profit margin amounted to 52.1% versus 59.3% a
year earlier. The margin drop is attributable to one-off costs of USD 1.84
million. Adjusted for these one-time effects, a gross margin of 56.0% would
have resulted. Furthermore, the initiated optimization process together
with increased Sales and Marketing and General and Administration costs had
an impact on profitability and resulted in an operating loss of USD 4.13
million compared to an EBIT of USD 2.71 million in H1 2013. As a result of
the corrective action taken we expect this reduction in profits to be
temporary.

On-going operational improvements
We expect that the various streamlining activities initiated thus far will
bear fruit as of the second half of this year and especially next year. The
objectives being addressed include the broadening of the product and
service offering, the expansion of the current technology globally, the
assessment of developing a mHealth accessory device as well as the move
towards becoming a fully-integrated biomedical informatics provider.
The following measures and strategies have already been implemented:

a) restructuring and redefinition of the Israeli R&D operation,
b) realignment of US sales territories and regions to improve efficiency
as well as refocusing of the sales commission plan,
c) implementation of a global Governance, Risk and Compliance program,
d) structural changes including realigning the business along global lines
and
e) establishment of a senior management leadership and training program.

In addition we are in the process of updating and standardizing our