Half-year Financial Report as of June 30, 2008

Transcription

1 Half-year Financial Report as of June 30, 2008 PULSION Half-year Financial Report as of June 30, 2008

2 PULSION at a glance PULSION (Group) according to IFRS H1 H1 Deviation in % Revenues KEUR 14,333 12,952 11% Gross profit KEUR 9,816 9,467 4% Operating expenses KEUR 8,860 8,307 7% EBIT KEUR 881 1,211-27% Group net profit KEUR % Cash flow from operating activities KEUR 305 1,191 Shareholders' Equity (as of June 30) KEUR 17,177 15,687 9% Shareholders' Equity percentage (as of June 30) % 65% 66% Total assets (as of June 30) KEUR 26,410 23,898 11% Employees (average) Number % Revenue per employee (H1) KEUR % PiCCO2 PULSION Half-year Financial Report as of June 30, 2008

3 Interim Management Report The first half year in summary PULSION Medical Systems AG (PULSION) increased its revenues in the first half of 2008 by 11% compared with the first half of the previous year to EUR 14.3 million. The company is still on the growth track, but through the lower growth in the first half year, PULSION is expecting for the whole year a growth rate of about 12%. Overall, the company s activities in the first six months of the year were strongly focused on an increase of the installed base of PiCCO - monitors and modules of the strategic partners. Therefore represented by PULSION s flagship product, PiCCO 2. Indeed, demand from the market for PULSION s patient monitor has been good since its launch slightly over a year ago. Compared with the first six months of 2007, 12% more monitors with PiCCO technology could be placed and the revenues raised by as much as 43.5% compared with the prior year period. Therefore the sales numbers of disposable articles are behind the expectations. The sales efforts in the remaining months of the year will therefore be directed to the sale of the disposable products as well as the ICG-PULSION diagnostic product. The strong concentration on the sale of monitors had a negative impact on the gross margin. Thus, this key indicator amounted in the first half-year to only 68% instead of the 73% recorded in the first half of The reduced gross margin results from a larger share in sales of the monitors in connection with a larger share of sales via distributors resulting in higher sales reductions. From today s point of view, the gross margin will however already improve perceptively in the second half of the year due to the focusing in the sales force on the disposable products. Furthermore, PULSION invested strongly of the first half of the year. Thus, capital expenditure totalled EUR 2.7 million and therefore amounted to 19% in relation to the revenues (2007: 8%). In addition, the company continued in the first half of 2008 with expenditure of EUR 1 million to spend heavily on R&D. The consequences of these costs are accepted consciously, in order to guarantee the company s competitive lead, also in the future. Finally, additional one-off costs were incurred in the first half-year for the move to the new administrative and production building. EBIT in the first half-year of KEUR 881 was accordingly 27% below the prior year figure of EUR 1.2 million. The group net profit (after minority interests) fell for tax reasons by 90% from KEUR 847 to KEUR 81. PULSION Half-year Financial Report as of June 30,

4 Business report Organisation and management PULSION s successful business model always resulted in past years in strong organic growth. As a consequence, the company s organisation is subject to continuous transformation, in order to follow stringently the aim of global market leadership in haemodynamic monitoring in the intensive care at a time of a changing market situation and customer demands. Following the successful launch of PiCCO 2, attention in the current year is now mainly being directed to optimising the processes and structures in sales and marketing in the Critical Care and Pharma sectors, in order firstly to exploit the market potential of PiCCO 2 in combination with disposable products in the best possible way. Secondly, PULSION also in the first half-year created a sales area of its own for the pharmaceutical product, ICG - PULSION, for which the company sees good potential for an increase in the sales. Management is currently strengthening the sales forces overall selectively not only in all countries of Western Europe but also in other parts of the world with new personnel. For instance, new management was appointed at a subsidiary in the second quarter of the year. In order to stabilise the expansionary course, management once again invested a great deal of energy and resources in the first half-year in the development of the company s own production. The declared objective here is to be able to supply the products on increasing sales at a consistent high quality level, exploiting economies of scale. It is also important in this connection that the position of the CFO could be filled. This position is now occupied by Frank Posnanski, who has many years of experience in the management of a globally operating company. The 41 yearold actuary was among other things the head of Controlling Europe at Johnson Electrics, an industrial company domiciled in Hong Kong and Switzerland. Development of the revenues In the Critical Care line of business, in particular the PiCCO product series developed divergently. Thus, on the one hand, sales of monitors increased by a gratifying 43.5% compared with the previous year, because a large number of clinics converted to the new PiCCO 2 technology. A total of 5,481 PiCCO monitors were placed worldwide as of June 30, 2008, or 12% more than in the first half of However, as a consequence of the concentration of the sales force on positioning the PiCCO 2 technology as broadly and as well as possible, sales of disposable articles did not develop as positively as expected. Revenues after the first six months were only 5% higher than in the previous year. The revenues however already rallied in the second quarter of the current year and PULSION Half-year Financial Report as of June 30,

5 were 9.6% up on the first quarter of The efforts of the sales force in the second half-year will be directed once more to a greater degree towards the sale of disposables, in order to deliberately exploit the now broader monitor base. Moreover, in the second half of the year the measures initiated to strengthen the sales, which include the development of a group of highly qualified applications specialists, who support the sales process clinically in the respective countries to increase the usage and thereby the sales of disposables. Segments Revenues in the Pharma line of business improved by 6% compared with the prior year period and despite this were considerably below the expectations. PULSION has however recognized that the market potential of ICG - PULSION can be exploited even better in the future by building up a purposeful sales organisation and focused marketing or new application areas. Indeed, the company was able to record its first successes from the restructuring in the second quarter. Thus the revenues could be increased by 10% compared with the second quarter of The sales situation in the USA is also a further cause for optimism. Apart from PULSION, only one further competitor holding an approval to supply the diagnostic medium exists in this market. Since it only entered the US market just over six months ago, PULSION sees a large sales potential here as an alternative supplier. KEUR H1 H1 Deviation * in % Monitors Critical Care 3,524 2,677 32% Pharma % Disposables Critical Care 8,820 8,406 5% Pharma 1,985 1,861 7% Subtotal Critical Care 12,344 11,083 11% Subtotal Pharma 1,988 1,869 6% Total 14,333 12,952 11% *The prior year figures were adjusted retrospectively to those in the current management reporting. PULSION Half-year Financial Report as of June 30,

6 Regions PULSION continues to record by far the majority of its revenues in Europe, which accounts for 92% of total revenues. Thereby the DACH region (Germany, Austria and Switzerland) developed very positively. Revenues here grew by 19% compared with the previous year. This also means that the stability of a sales force is very crucial for the success. The other European countries however failed to match this positive development. Revenue growth here was around 5% compared with the first half of 2007, amongst others due to the fact that the recruiting of sales staff took longer than planned. Business in the USA is picking up more slowly than expected. At a low level, the revenues here could be increased by 14% compared with the same period last year. Accordingly, PULSION is here expending the greatest energy outside Europe in successively exploiting the considerable market potential offered by the US market. Finally, the development in the Australia-Pacific region is gratifying. We succeeded here in increasing the revenues compared with the previous year by 18%. KEUR H1 H1 Deviation in % DACH* 6,906 5,828 19% Europe (non DACH) 6,262 5,969 5% US % Australia-Pacific % Other % Total 14,333 12,952 11% * Germany, Austria, Switzerland Earnings performance Gross profit increased compared with the prior year period from EUR 9.5 million to EUR 9.8 million. The gross margin however fell from 73% to 68%. Two factors were mainly responsible for this development. Firstly, the gross margin of monitors are general lower than the average of PULSION and secondly sales of monitors were made to a greater degree than in the previous year via distributors. PULSION Half-year Financial Report as of June 30,

7 Through the development of series production, we intend to achieve volume effects in the future, especially in the case of disposable products, which will also bring about the desired compensating effect on the gross margin. A positive aspect is that the costs could be reduced in relation to revenues compared with the first six months of 2007 from 64% to 62%. Thus, the selling and marketing costs were only 3.2% higher than in the same period last year. The largest portion of this amount was spent on employees in the sales companies who were missing until then. R&D costs at EUR 1 million were at a similar high level to the previous year. On the other hand, the general and administrative costs went up slightly, mainly as a result of the move to the new premises at the Munich Trade Fair site and the production plant in Feldkirchen near Munich. Other operating expenses and income were slightly lower than last year. Overall, however, EBIT at EUR 0.9 Mio. was 27% lower than the EBIT for the first half of 2007, due in particular to the negative effects on the gross margin. Finally, group net profit (after minority interests) fell as in the first quarter of 2008 by 90% from KEUR 847 to KEUR 81, due to deferred and current taxes. The total tax expense as of June 30, 2008 includes current taxes of KEUR 194 (28%). Without the deferred taxes, group net profit (after minority interests) would have fallen by 28% to KEUR 653. Assets, liabilities and financial position On the assets side of the balance sheet, non-current assets increased in the first half of the year from EUR 9.4 million to EUR 10.0 million as of June 30, 2008 (+6%). While intangible assets, mainly comprising approvals, patents and capitalized product development costs, were almost unchanged at EUR 3.5 million, property, plant and equipment went up from EUR 4.9 million to EUR 5.9 million as of June 30, The real estate held as investment property and trade accounts receivable continue to total EUR 0.5 million. Deferred taxes fell by EUR 0.4 million mainly as a result of the utilization of capitalized tax losses. Current trade accounts receivables declined slightly in the first half of 2008 by 0.5% to EUR 5.5 million. Inventories increased over the same period from EUR 4.2 million to EUR 5.7 million or by 36%, on account of a nonrecurring concentration of purchase obligations under delivery contracts, especially from the pharmaceutical production, and the stockpiling of products for countries in which plant qualification for new production facilities takes slightly longer. The company assumes that the inventories will return to a normal level by the end of the year. Cash and cash equivalents (including available-for-sale assets) fell from EUR 7.0 million to EUR 4.5 million as of June 30, 2008, a decline of 36%. The available-for-sale assets, comprising a money market fund, were sold in the second quarter of As of the reporting date, EUR 0.2 million (June 30, 2007: EUR 0.3 million) of the cash and cash equivalents held in accounts of group companies were pledged. PULSION Half-year Financial Report as of June 30,

8 These pledges relate to guarantees for leased buildings and for the Spanish subsidiary. Other assets increased by EUR 0.1 million to EUR 0.8 million. On the equity and liabilities side of the balance sheet, the total liabilities of EUR 9.8 million at the end of 2007 fell slightly by EUR 0.6 million to EUR 9.2 million as of June 30, 2008 (-6%). While lease liabilities and other liabilities fell respectively by EUR 0.2 million and EUR 0.8 million, trade accounts payable and liabilities to banks went up by altogether EUR 0.5 million. In addition, the tax payables increased from EUR 0.6 million to EUR 0.8 million as of June 30, The provisions and financial liabilities went down by altogether EUR 0.3 million. Minority interests increased in the first half of 2008 by EUR 0.1 million to EUR 0.4 million. The equity ratio amounts on equity of EUR 17.2 million (December 31, 2007: EUR 17.1 million) to 65%. The variance in the overall net financial indebtedness changes from EUR -2.6 million as of June 30, 2007 to EUR -1.8 as of June 30, Cash flow from operating activities, fell in the first half of 2008 by EUR 0.9 million or 74% to EUR 0.3 million compared with the corresponding prior year period. This was due in particular to the lower group earnings and the increase in the inventories. The cash outflow for investing activities declined in the first half-year by EUR 0.4 million to EUR 0.5 million. This was significantly influenced by the sale of the money market fund (available-for-sale financial assets). The cash outflow for financing activities increased in the first half-year from EUR 0.1 million to EUR 0.7 million. Total cash funds declined from EUR 7.0 million to EUR 4.5 million. Cash and cash equivalents include pledged funds and, as of December 31, 2007, available-for-sale financial assets (money market funds), which were sold in the second quarter of Capital expenditure Total capital expenditure in the first half-year amounted to EUR 2.7 million and therefore continued to be at a high level. Capital expenditure related to the following: EUR 1.3 million was invested in the placement of loaned equipment in the market. In addition to demonstration, research and test equipment, clinics in regions with weak investment are also given the opportunity, in return for purchase agreements for disposable products, to introduce our technologies. In the first half year of 2007 the corresponding amount was EUR 0.5 million. EUR 0.2 million was invested in intangible assets. This mainly comprised expenditure on the extension of the approvals for ICG-PULSION, in the obtaining of patents and in the development of products and software. EUR 1.2 million was invested in technical equipment and in furniture and fittings, especially for the development of the production facility in Feldkirchen. PULSION Half-year Financial Report as of June 30,

9 Thus, the investment ratio (capital expenditure divided by revenues) in the first half of 2008 amounted to 19% (2007: 8%). Start-up of new production facilities in Feldkirchen Our new production is fully operational and has since the first quarter of 2008 been supplying goods and services, with only a few exceptions. The entire requirements to bridge the period until receipt of the plant certification in this small number of exceptional regions were produced in advance and placed in the warehouse. It is expected that the certificates that have currently not yet been received for our new plant will have been granted by the end of the year. The added value from our disposable articles, which should reach the provisionally planned first expansion level, will be increased in the second half of With the increase of our own depth of production and the proximity of the innovations to the production, the company will be in a position to optimize the production costs and at the same time to insure the high quality of the products also on a high level of production. USA The US market is a central growth field for PULSION and has high strategic importance for the achievement of the most important corporate objective, that of market leadership in advanced haemodynamic monitoring in the intensive care. A key lighthouse customer, which will significantly boost the reputation of PICCO technology in den USA, has been gained with Stanford University in California. The university clinic is renowned in the USA for setting new standards in medical technology. In addition, further important tests and studies are running at clinics, which could soon result in the sale of PiCCO 2 monitors. In addition to the direct sales activities, it is just as pleasing that PULSION is now listed by Premiere, the largest US wholesaler for hospital supplies. Finally, PULSION s exclusive distributor for ICG - PULSION, HUB, has concluded delivery agreements with the most important pharmaceutical wholesalers in the USA, which will boost future purchases of PULSION products. Personnel PULSION had 150 employees worldwide at June 30, 2008 (December 31, 2007: 138), of whom 113 (December 31, 2007: 107) worked at the group headquarters and production facilities of PULSION AG in Munich and Feldkirchen. At group level, this represents an increase of 6 persons or 4% (June 30, 2007: 144). In particular sales, marketing and production were further expanded. PULSION Half-year Financial Report as of June 30,

10 Research and development report Research and development activities PULSION has a very strong R&D area at the present time, which is in addition broken down into separate departments. In a special department, SCIENCE, the R component of this area, the foundations are laid for the coming technological leaps in the haemodynamic monitoring of critically ill patients. Such projects normally take several years, and require a great deal of special know-how, especially in the field of medical fundamentals, endurance and naturally financial resources. These projects can only be brought or handed over to the classical development area following a successful proof of concept. The SCIENCE department has already been working very successfully since 2007, and the coming years will be able to show comprehensive new projects for development and approval. In the meantime, the international network, in which SCIENCE is incorporated, is also very extensive. Questions are answered in association with universities and research laboratories in Europe as well as overseas. The DEVELOPMENT area, i.e. the D component of the R&D sector, succeeded in the last few months in developing further OEM products for series production and presenting them for worldwide approval. Parallel to this, large number of product amendments in the disposables field are being driven ahead, in order to organise the newly developed production even more efficiently. The foundations have been laid for large numbers of new products in 2009 / 2010 and are being driven ahead purposively according to the project schedules. Worthy of mention in addition are the successful transposition by the development department of international product standards on system safety and ergonomics. Much larger companies are in the meantime enquiring about cooperation agreements or licenses, in order to participate in the results. Expenditure in this area, in addition to the capital expenditure, remained almost constant at EUR 1.0 million. Patents and approvals PULSION had at its disposal altogether 158 national patents in various countries in the middle of 2008 (2007: 168), of which 123 (2007: 120) patents were held by PULSION and 35 were patent rights licensed to PULSION., PULSION Half-year Financial Report as of June 30,

11 Subsequent events report In a decision dated July 2, 2008 promulgated by District Court I of Munich, the suit filed by Dr. Pfeiffer was rejected as unfounded, in accordance with the company s legal opinion. The decision is not yet final and absolute. Risk report No further risks are foreseeable in the corporate activities of PULSION Medical Systems AG in addition to those described in the Annual Report Please refer to the detailed risk report in the group management report on pages 37 to 40 of the Annual Report Further comments are provided on risk management in the notes to the consolidated financial statements on page 77 et seq. of the same Annual Report. Forward-looking report The business strategies and the associated opportunities have not changed significantly in the first half of 2008 (see Annual Report 2007). Outlook As announced in the quarterly report on the first quarter, PULSION s main focus in the past months was on the successful completion of the restructuring of the sales force by the end of the first half-year. On the other hand we had the not very encouraging sales development in Europe ex DACH and the USA. The focus for the sales force in the second half of the year in Europe will now be on exploiting the monitor base for higher sales of disposable articles. With the further expansion of the production capacities, the company will additionally in the coming months achieve economies of scale in the production costs for disposable articles. Finally, PULSION believes that it is on the right track with its market entry to the USA, even if the growth tempo will have to increase perceptively in the foreseeable future. Due to the unpleasant growth of sales in Europe ex DACH and the USA PULSION expected sales growth of 12% in comparison to previous year and also the EBIT expectation of EUR 5.1 Mio. has to be revised. The reasons for this lie in particular in the strong focus on sales of PiCCO 2 monitors at the same time as lower sales of higher margin disposable products in the first half of Even if there is a change in the product and sales channel mix in the second half of the year and as a consequence an increase in the gross margin, PULSION Half-year Financial Report as of June 30,

12 this will not suffice to achieve the EBIT target of EUR 5.1 million. On the contrary, PULSION now expects an EBIT in the range of previous year. Munich, August 6, 2008 PULSION Medical System AG Bradley P. Gould Matthias Bohn Frank Posnanski Chairman of the Member of the Member of the Management Board Management Board Management Board PULSION Half-year Financial Report as of June 30,

13 Consolidated Balance Sheet of PULSION Medical Systems AG as of June 30, 2008 IFRS ASSETS June 30, 2008 Dec. 31, 2007 KEUR Non-current assets 9,955 9,420 Intangible assets 3,501 3,513 Property, plant and equipment 5,919 4,919 Investment property Trade accounts receivables Deferred taxes Current assets 16,455 17,413 Inventories 5,679 4,209 Trade accounts receivables 5,488 5,515 Other current assets Available-for-sale financial assets 0 1,555 Cash and cash equivalents* 4,481 5,429 Total assets 26,410 26,833 IFRS EQUITY AND LIABILITIES June 30, 2008 Dec. 31, 2007 KEUR Equity 17,177 17,054 Subscribed capital 9,577 9,577 Additional paid-in capital 20,506 20,407 Other reserves Accumulated deficit -12,862-12,943 Minority interests Non-current liabilities 2,581 2,920 Provisions Liabilities to bank 1,947 2,017 Lease liabilities Other liabilities Deferred taxes 61 0 Current liabilities 6,651 6,859 Provisions Liabilities to banks Financial liabilities Trade accounts payables 2,560 1,735 Lease liabilities Tax payables Other liabilities 2,726 3,306 Total equity and liabilities 26,410 26,833 * including fixed term deposits of KEUR 205 (Dec. 31, 2007 KEUR 300) pledged as security PULSION Half-year Financial Report as of June 30,

14 Consolidated Income Statement of PULSION Medical Systems AG for the six-month period ended June 30, 2008 IFRS Q2 Q2 Jan-June Jan-June KEUR Sales 7,505 6,594 14,333 12,952 Cost of sales -2,527-1,800-4,517-3,484 Gross profit 4,977 4,792 9,816 9,467 in % of sales 66% 73% 68% 73% Selling and marketing expenses -3,154-3,011-6,298-6,102 Research and development expenses ,033-1,014 General and administrative expenses ,882-1,623 Other operating expenses Other operating income Operating profit ,160 Exchange losses Exchange gains Earnings before interest and taxes (EBIT) ,211 in % of sales 5% 10% 6% 9% Interest expenses Interest income Earnings before taxes (EBT) ,145 Income taxes Group net profit (before minority interests) of which attributable to shareholders of the group parent company of which attributable to minority interests Earnings per share Earnings per share after minority interests (undiluted) Earnings per share after minority interests (diluted) Average number of shares in circulation (undiluted) 9,577,302 9,554,302 9,577,302 9,554,302 Average number of shares in circulation (diluted) 9,580,118 9,591,069 9,580,266 9,588,320 PULSION Half-year Financial Report as of June 30,

15 Statement of Changes in Equity of PULSION Medical Systems AG as of June 30, 2008 IFRS KEUR Subscribed capital Additional paid-in capital Accumulated deficit Other reserves Minority interests Total Balances at January 1, ,526 20,104-15, ,626 Exchange differences Group net profit Total result for the period Employee share option programs Valuation of financial assets held-for-sale Total items directly recognised in equity Total ,060 Balances at June 30, ,554 20,268-14, ,687 Balances at January 1, ,577 20,407-12, ,054 Exchange differences Group net profit Total result for the period Employee share option programs Valuation of financial assets held-for-sale Total items directly recognised in equity Total Balances at June 30, ,577 20,506-12, ,177 PULSION Half-year Financial Report as of June 30,

16 Consolidated Cash Flow Statement of PULSION Medical Systems AG for the six-month period ended June 30, 2008 IFRS H1 H1 KEUR Group net profit Minority interests Amortization and depreciation of intangible assets and property, plant and equipment Changes in receivables Changes in inventories -1, Interests received Interests paid Income taxes received 0 26 Income taxes paid Changes in other assets and liabilities Other non-cash income and expenses Cash Flow from operating activities 305 1,191 Purchase of intangible assets and property, plant and equipment -2,700-1,055 Purchase of available-for-sale financial assets (money market fund) 0-28 Proceeds of available-for-sale financial assets (money market fund) 1,548 0 Proceeds from disposal of intangible assets and property, plant and equipment Cash Flow from investing activities Payments into equity capital Proceeds from raising current and non-current loans Repayments of bank borrowings Repayments of financial liabilities Repayments of finance leases Cash Flow from financing activities Decrease / increase in cash funds Cash funds at the beginning of the period* 5,129 3,404 Cash funds at the end of the period* 4,276 3,548 * excluding pledged fixed term deposits of KEUR 205 (January 1, 2007: KEUR 300) The previous year's figures have been reclassified to reflect the presentation of IAS 7. PULSION Half-year Financial Report as of June 30,

17 Explanatory notes 1. Accounting principles PULSION Medical Systems AG s half-yearly report as of June 30, 2008 complies with the currently valid International Financial Reporting Standards (IFRSs) issued by the International Accounting Standard Boards (IASB) and the Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC). Furthermore, the same consolidation, accounting, computational methods and estimates have been applied as in the consolidated financial statements for the financial year The interim report has been prepared in accordance with IAS 34 (Interim Financial Reporting). A description of the Group s accounting policies is provided in the notes to the financial statements for the financial year 2007 (see Annual Report 2007). The interim financial statements and the interim management report have neither been audited in accordance with 317 HGB nor subjected to a review by an auditor. The auditors have only performed a small number of audit steps. 2. Group reporting entity The group reporting entity as of June 30, 2008 corresponds with the group reporting entity for the consolidated financial statements as of December 31, This is presented on pages 53 and 54 of the Annual Report Balance sheet items Intangible assets: Intangible assets remained unchanged in the first six months of the financial year at EUR 3.5 million: Intangible Assets June 30, 2008 Dec. 31, 2007 KEUR KEUR Historical costs 4,495 4,310 Accumulated amortization Carrying amount 3,501 3,513 Intangible assets comprise approvals, patents, capitalized product development costs and software. PULSION Half-year Financial Report as of June 30,

18 Property, plant and equipment: Capital expenditure on property, plant and equipment relates primarily to monitors loaned out to customers. The carrying amount of property, plant and equipment increased from EUR 4.9 million to EUR 5.9 million in the first six months of the current financial year and was made up as follows: Property, plant and equipment June 30, 2008 Dec. 31, 2007 KEUR KEUR Historical costs 10,947 10,527 Accumulated depreciation -5,028-5,608 Carrying amount 5,919 4,919 Inventories: Inventories as of June 30, 2008 and December 31, 2007 were made up as follows: Inventories June 30, 2008 Dec. 31, 2007 KEUR KEUR Raw materials and supplies 2,585 2,349 Work in progress 1, Finished goods and goods for resale 1,559 1,525 Total inventories 5,679 4, Segment reporting In accordance with IFRS 8, PULSION reports on its business segments based on the way information is reported internally to the chief operating decision maker and in line with the way that the chief operating decision maker in each operating segment checks that information. Information on operating segments is presented on the basis of geographical regions (management approach). Items are allocated to geographical segments on the basis of the location of the relevant legal entities. Inter-segment transactions are based on a cost-plus model. PULSION Half-year Financial Report as of June 30,

19 Segment information as of June 30, 2008 is analyzed as follows: KEUR Germany Rest of Europe USA Australia Reconciliations Group Sales - 3rd parties 10,010 3, ,333 thereof equipment 2, ,269 thereof disposables 5,705 2, ,634 thereof indication / diagnosis 1, ,181 thereof service and other Sales - intercompany 2, ,772 0 Depreciation and amortization Impairments Non-cash income and expenses Operating segment result before 1, , interest and taxes Interest expenses Interest income Income taxes Minority interests Group net profit (after Minority interests) 81 Segment assets 40,071 5, ,223 26,410 Segment liabilities 9,807 7,034 4,336 2,650-14,595 9,232 Segment capital expenditure 2, ,700 Segment information as of June 30, 2007 is analyzed as follows: KEUR Germany Rest of Europe USA Australia Reconciliations Group Sales - 3rd parties 8,493 3, ,952 thereof equipment 1, ,304 thereof disposables 5,280 2, ,503 thereof indication / diagnosis 1, ,059 thereof service and other Sales - intercompany 2, ,000 0 Depreciation and amortization Impairments Non-cash income and expenses Operating segment result before 1, ,211 interest and taxes Interest expenses Interest income Income taxes Minority interests Group net profit (after Minority interests) 847 Segment assets 32,876 5, ,101 23,898 Segment liabilities 8,276 6,268 3,083 2,133-11,549 8,211 Segment capital expenditure ,055 PULSION Half-year Financial Report as of June 30,

20 5. Stock option plans No stock options were issued to employees during the first six months of 2008 and no stock options were exercised by employees or members of the Management Board. As of June 30, 2008, 153,000 stock options were held by employees and 130,000 stock options by members of the Management Board. As in the previous year, the expense of granting stock options in conjunction with stock option plans of KEUR 88 (H1 2007: KEUR 59) is reported within personnel expense. Stock and stock options were held by members of the Supervisory Board and Management Board as follows: Balances as per June 30, 2008 Shares Options Management Board 70, ,000 thereof Bradley Gould 28, ,000 thereof Matthias Bohn 42,313 10,000 Supervisory board 1,749, Earnings per share Earnings per share are calculated in accordance with IAS 33 on the basis of the consolidated earnings for the first six months and the weighted average number of shares and exercisable option rights in circulation during the reporting period. H H Weighted average number of shares (undiluted) Number 9,577,302 9,554,302 Dilutive effect of options Number 2,964 34,018 Weighted average number of shares (diluted) Number 9,580,266 9,588,320 Group net profit (after minority interests) KEUR Earnings per share (undiluted) EUR Earnings per share (diluted) EUR PULSION Half-year Financial Report as of June 30,

21 7. Dividends No dividends were paid during the period under report. 8. Order book and price trends Since PULSION processes customer orders within a few days, it has virtually no order backlog. Due to the unique features of its products and the potential cost savings to be gained compared to traditional and alternative methods, PULSION does not currently face any particular pressures from competitors which could affect the level of pricing. 9. Seasonal and cyclical influences As a group with worldwide operations, PULSION is exposed to various economic trends. As a result of its innovative and cost-saving technologies, the impact of cyclical economic factors on the business model is not currently significant. 10. Legal disputes The company continues to be involved in several lawsuits with the former Chairman of the company s Management Board, Dr. Ulrich Pfeiffer. In these proceedings, Dr. Pfeiffer is claiming the transfer of patents, for which he is the inventor or co-inventor. No new decisions were promulgated during the second quarter of 2008 in the pending proceedings. The company s legal counsel is of the opinion that all claims are unfounded, since the patents claimed belong to the company and Dr. Pfeiffer has no rights to these patents. As with all legal proceedings, however, it cannot be ruled out that the responsible court will not have a difference legal opinion. In the worst scenario, it is possible that it might be necessary to discontinue the production and/or the sale of important products, because PULSION would then no longer have any rights to these patents. The probability of this happening is considered by the legal counsel to be low and it is expected that the company will win the proceedings. Neither the parent company nor any of its subsidiaries are involved in any further legal disputes or arbitration or similar proceedings, which could have a significant impact on the financial position of the group. 11. Events after the balance sheet date In a decision dated July 2, 2008 promulgated by District Court I of Munich, the suit filed by Dr. Pfeiffer was rejected as unfounded, in accordance with the company s legal opinion. The decision is not yet final and absolute. PULSION Half-year Financial Report as of June 30,

22 There were no further significant events after the balance sheet date. 12. Related parties Transactions with related parties are conducted on an arm s length basis. There have been no significant changes compared with the disclosures made in the Annual Report 2007 and no new related party relationships have arisen. 13. Contingent assets and liabilities There were no contingent assets and liabilities at the balance sheet date. 14. Unusual items No items that are unusual because of their nature, size or incidence existed at the balance sheet date. Munich, August 6, 2008 PULSION Medical System AG Bradley P. Gould Matthias Bohn Frank Posnanski Chairman of the Member of the Member of the Management Board Management Board Management Board PULSION Half-year Financial Report as of June 30,

23 Responsibility statement by management To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the interim consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the interim management report of the Group includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group for the remaining months of the financial year. Munich, August 6, 2008 PULSION Medical System AG Bradley P. Gould Matthias Bohn Frank Posnanski Chairman of the Member of the Member of the Management Board Management Board Management Board PULSION Half-year Financial Report as of June 30,

24 Timetable and contacts Events Report on 1st 9 Months November 11, 2008 German Equity Forum November 12, 2008 Frankfurt Contacts Silvia Klaus Investor Relations Tel: investor@pulsion.com This interim report contains forward-looking statements. These forward-looking statements represent the judgement of PULSION Medical Systems AG at the date of publication of this interim report. The actual results achieved by PULSION Medical Systems AG may diverge significantly from the comments made in the forward-looking statements. PULSION Medical Systems AG disclaims any obligation to update any of these forward-looking statements. PULSION Half-year Financial Report as of June 30,