COMPUMEDICS LIMITED — Annual Report 2011

Aug 30, 2011

COMPUMEDICS LIMITED

(ACN 006 854 897)

– ASX final report 30 June 2011 Lodged with the ASX under Listing Rule 4.3A

Contents

Results for Announcement to the Market (Appendix 4E item 2)

Consolidated income statement

(Appendix 4E item 3)

Consolidated balance sheet (Appendix 4E item 4)

Consolidated statement of changes in equity (Appendix 4E item 4)

Consolidated cash flows (Appendix 4E item 5)

Notes to the consolidated financial information (Appendix 4E)

Other Appendix 4E Information (Appendix 4E items 6 to 17)

Compumedics Limited Financial Report Year ended 30 June 2011 Results for Announcement to the Market

					$’000
Revenue from ordinary activities (Appendix 4E item 2.1)		Decreased	4.7%	to	30,857
Profits before interest, tax, depreciation and amortisation		Decreased	(53.3)%	to	698
Profits from ordinary activities after tax attributable to members (Appendix 4E item 2.2)		Decreased	(80.4)%	to	81
Net profits for the period attributable to members (Appendix 4E item 2.3)		Decreased	(80.4)%	to	81
Dividends/distributions (Appendix 4E item 2.4)		Amount per security		Franked amount per security
Final dividend (Prior Year)		n/a		n/a
Record date for determining entitlements to the
				n/a

Record date for determining entitlements to the dividend (Appendix 4E item 2.5) Explanation of Revenue (Appendix 4E item 2.6)

Group revenues at $31.0m for the year ended 30 June 2011 were 4.7% lower than the prior year, largely impacted by the high Australian dollar compared to the US dollar and the Euro. On a constant currency basis revenues increased 5.6% over the prior year.

Total US revenues were USD9.4m (AUD9.7m) for the year ended 30 June 2011 compared to USD10.0m (AUD11.4m) for the prior year. Importantly sleep and neuro diagnostic sales increased by 19% over the prior year, largely driven by the release of the Company’s new Neuvo® long-term EEG monitoring (LTEM) system. Offsetting this was a decline in sales in brain research (Neuroscan) business. This was largely a result of reduced grant funding due to the economic conditions there. On the other hand technical service revenues increased again in the current year to USD1.3m over the prior year.

European revenues for the year ended 30 June 2011 were €7.2m (AUD9.9m) compared to €4.3m (AUD6.8m) for the prior year reflecting better trading conditions generally in Europe and particularly in Germany, where the Company continued to booked large sleep diagnostic sales.

Compumedics Limited

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Final Report Year ended 30 June 2011

Results for Announcement to the Market

Australian and Asia Pacific revenues for the year ended 30 June 2011 were $11.4m compared to $14.2m for the prior year. Revenues in this region were primarily impacted by lower sales in Australia, whilst Asia-based sales were broadly in line with the prior year, reflecting consistent trading conditions yearon-year in those markets but as those sales were denominated in US dollars they were impacted by the appreciation of the Australian dollar over the course of the year.

Explanation of Earnings before interest, tax, depreciation and amortisation (EBITDA) (Appendix 4E item 2.6)

EBITDA at $0.7 m for the year ended 30 June 2011 was lower than the prior year EBITDA result of $1.2m, reflecting the strong appreciation of the Australian dollar relative to the US dollar and the Euro, particularly during the first half of the financial year. Positively, it also reflects continuing tight management of the cost base of the business as it adapts to the higher Australian dollar relative to the US dollar and the Euro.

The solid EBITDA result for the year, despite the lower Australian dollar reported sales, reflects the on-going focus of the Company’s performance transition program and underlying sales growth in some parts of the Company.

Net foreign exchange losses of $1.8m were primarily related to the restatement of intergroup loans held by the Australian legal entity and owed to it by its US and German based subsidiaries. During the year the Company reviewed its accounting policy in relation to the translation of intergroup loans held by its offshore entities and as a consequence movements in the values of these assets have been taken to the Foreign Currency Translation Reserve (FCTR), effective from 1[st] January 2011.

During the year ended 30 June 2011 the Company capitalised development costs of $0.7m associated with its SomniLink® SPAP® sleep treatment technology. The intangible asset carrying value at 30 June 2011 was $4.2m. As the Company has continued to ship small commercial quantities of the SomniLink® SPAP® the Company has continued to amortise the intangible asset during the 2011 financial year, booking a $0.6m charge in the financial year.

Compumedics Limited Final Report

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Year ended 30 June 2011

Results for Announcement to the Market

Explanation of Profit from ordinary activities after tax (Appendix 4E item 2.6)

Profits from ordinary activities after tax at $0.1m for the year ended 30 June 2011 were a $0.3m decrease from the $0.4m profit recorded for the prior year.

The above explanation for the improvement in EBITDA reflects the underlying operational impacts on earnings for the full year over the prior year.

Additionally the Company booked a deferred tax asset related of $928k. The deferred tax asset relates to prior period losses that had not previously been bought to account in the amount of $776k and timing differences between tax and accounting treatment of various matters in the amount of $152k.

Explanation of Dividends (Appendix 4E item 2.6 )

No dividends have been declared or paid in the period.

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Compumedics Limited Consolidated statement of comprehensive income for the year ended 30 June 2011

	2011	2010
	$’000	$’000
Revenue from continuing operations	30,857	32,365
Other income	408	246
Cost of sales	(13,168)	(13,274)
Administration	(4,485)	(4,253)
Sales & Marketing	(7,432)	(8,010)
Research & Development	(4,702)	(4,876)
Finance costs	(414)	(572)
Net foreign exchange gain / (loss)	(1,831)	(1,211)
Profit / (Loss) before income tax	(767)	414
Income tax (expense)/benefit	848	-
Profit for the full year	81	414
Profit attributable to members of
Compumedics Limited	81	414
Net profit for the period	81	414
Other comprehensive income
Foreign currency translation	478	19
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD	559	433
Earnings per share for profit
from continuing operations
attributable to the ordinary
equity holders of the company
(cents):
Basic earnings per share	0.001	0.01
Diluted earnings per share	0.001	0.01

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

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Compumedics Limited Consolidated statement of financial position as at 30 June 2011

	as at 30 June 20
	2011 $’000 2010 $’000
ASSETS Current assets Cash and cash equivalents Receivables Inventories Total current assets	1,149 1,836 10,247 9,708 5,734 4,982
	17,130 16,526
Non current assets Property, plant and equipment Intangible assets Deferred tax asset Non current assets	815 920 4,234 4,177 928 188
	5,977 5,285
Total assets	23,107 21,811
LIABILITIES Current liabilities Payables Borrowings Provisions Income tax payable Deferred revenue Total current liabilities	4,580 4,514 2,751 1,064 2,101 1,843 - 188 790 957
	10,222 8,566
Non-current liabilities Borrowings Provisions Deferred revenues	- 882 16 34 114 133
Total non-current liabilities	130 1,049
Total liabilities	10,352 9,615
Net assets	12,755 12,196
EQUITY Contributed equity Reserves Retained losses Total equity	31,019 31,019 (261) (739) (18,003) (18,084)
	12,755 12,196

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

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Compumedics Limited Consolidated statement of changes in equity for the full year as at 30 June 2011

	Contributed equity $,000 Reserves $,000 Retained Earnings $,000 Total $’000
Balance at 1 July 2009	31,007 (1,216) (18,312) 11,479
Profit for the period Other comprehensive income Total comprehensive income / (loss) for the year Transactions with owners in their capacity as owners: New shares issued	- - 414 414 - 19 - 19
	- 19 414 433
	284 - - 284
Value of conversion rights RCNs	(272) - 272 -
Shares issued in lieu of interest payable on RCNs	- 458 (458) -
Balance at 30 June 2010	31,019 (739) (18,084) 12,196
Balance at 1 July 2010	31,019 (739) (18,084) 12,196
Profit for the period Other comprehensive income Total comprehensive income / (loss) for the year Transactions with owners in their capacity as owners: New shares issued	- - 81 81 - 478 - 478
	- 478 81 559
	- - - -
Balance at 30 June 2011	31,019 (261) (18,003) 12,755

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

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Compumedics Limited Consolidated statement of cash-flows for the year ended 30 June 2011

		2011	2010
		$’000	$’000
Cash flow from operating
activities
Receipts from customers		31,032	34,099
(inclusive of goods and services tax)
Payments to suppliers and		(31,200)	(33,362)
employees (inclusive of goods and
services tax)
Interest and other costs of finance		(414)	(533)
paid
Interest received		3	4
Receipts from grants and other		408	246
income
Net cash inflow/(outflow) from	5	(171)	454
operating activities
Cash flows from investing
activities
Payments for property, plant and		(399)	(455)
equipment
Payments for intangible assets		(680)	(808)
Net cash inflow/(outflow) from		(1,079)	(1,263)
investing activities
Cash Flows from financial
activities
Proceeds from borrowings		492	1,939
Repayment of borrowings		(375)	(2,239)
Net cash inflow/(outflow) from		117	(300)
financing activities
Net decrease in cash and cash		(1,133)	(1,109)
equivalents
Cash and cash equivalents at the		1,281	2,607
beginning of the year
Effects of exchange rate changes on		(235)	(217)
cash
Cash and cash equivalents at the		(87)	1,281
end of the financialyear
This is represented by:
Cash Assets		1,149	1,836
Bank Overdraft (Interest bearing liabilities)		(1,236)	(555)
Net Cash		(87)	1,281

The above consolidated cash flows statement should be read in conjunction with the accompanying notes.

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Compumedics Limited Notes to the consolidated financial statements for the year ended 30 June 2011

1 Summary of significant accounting policies

The principal accounting policies adopted in the preparation of the financial report are set out below.

These policies have been consistently applied to all the periods presented, unless otherwise stated.

(a) Basis of preparation of consolidated financial report

This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.

This preliminary consolidated financial report for the year ended 30 June 2011 does not include all the notes of the type normally included in an annual financial report. Accordingly, this report should be read in conjunction with the annual report for the year ended 30 June 2010 and any public announcements made by Compumedics Limited during the year in accordance with the continuous disclosure requirements of the Corporations Act 2001.

Compliance with IFRS

Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the consolidated financial statements and notes of Compumedics Limited comply with International Financial Reporting Standards (IFRS).

Historical cost convention

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available for sale financial assets, financial assets and liabilities (including derivative instruments) at fair value through profit or loss, certain classes of property, plant and equipment and investment property.

Critical accounting estimates

The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies.

This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.

Bank Facilities

During the period to 30 June 2011 the Company met all of its financial covenants relating to the facilities provided to the Company by its bankers.

Compumedics Limited

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Notes to the consolidated financial statements for the year ended 30 June 2011

(a) Basis of preparation of consolidated financial report (cont’d)

The Company did not however meet one of its financial undertakings, the result of which leads to a review event. The Company is currently working with the bank to obtain a waiver relating to the non-compliance and expects to receive this prior to the statutory accounts being finalised before the end of September 2011. Consequently the full amount of borrowings is shown in current interest-bearing liabilities, even though $500k of those borrowings is not due for repayment until FY2013.

Note 2. Operating segment

Identification of reportable segments

The Group has identified its operating segments based on the internal reports, which are produced by geographical segment and are reviewed and used by the chief operating decision maker in assessing performance and in determining the allocation of resources.

The operating segments are identified by management based on the country of origin and the senior managers who are responsible for the performance of the business in that geographic territory, the type of product and service provided and whether the product is sold directly to end-user customers or via distributors.

The reportable segments are based on the product lines sold in that particular geographic territory as these are the sources of the Group’s major risks and have the most effect on rates of return.

Geographic locations

America’s

The Group’s America’s based business includes the United States, Canada and Latin America. The Group sells all of its product offerings in this region including sleep diagnostic systems, clinical EEG systems, brain monitoring systems, ultra sonic blood-flow systems, supplies and technical service and support. The US business also includes that sleep diagnostic services business. Sales in the America’s are predominantly direct sales to end-user customers. The US office is based in Charlotte, North Carolina.

Australia and Asia Pacific

The Group’s head office is based in Melbourne, Australia and the Australia and Asia Pacific territory includes all countries in the Asia Pacific region with major countries for the territory including Japan and China. The Group sells all of its product offerings in this region including sleep diagnostic systems, clinical EEG systems, brain monitoring systems, ultra sonic blood-flow systems, supplies

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Notes to the consolidated financial statements for the year ended 30 June 2011

Note 2. Operating segment (continued)

and technical service and support. The group sells directly to end-user customers in Australia and via a network of distributors into the Asian region.

Europe and the Middle East

The Group’s Europe-based business has its principle office in Singen, Germany with a second office in Hamburg Germany. The Europe based territory includes all countries in the European region, plus all Middle Eastern countries. The Group sells all of its product offerings in this region including sleep diagnostic systems, clinical EEG systems, brain monitoring systems, ultra sonic blood-flow systems, supplies and technical service and support. The Group sells its ultra-sonic blood-flow systems directly in Germany and all other products are sold via a network of distributors across the territory.

The following table represents revenue and profit information for reportable segments for the years ended 30 June 2011 and 30 June 2010

Operating Segment For the year ended 30 June 2011

$’000

		Australia
		and Asia
	USA	Pacific	Europe	Group
Sales to external customers	9,689	11,243	9,925	30,857
Other revenues	926	2,196	475	3,597
Intersegment sales	-	85	1,061	1,146
Total segment revenue	10,614	13,524	11,461	35,599
Inter-segment elimination	(926)	(2,281)	(1,536)	(4,742)
Total revenue and other income per the
Statement of Comprehensive Income	9,689	11,243	9,925	30,857
Segment result	(1,810)	894	1,206	290
Depreciation and amortisation				(1,052)
Finance cost				(413)
Other income				407
Net profit before income tax per the
Statement of Comprehensive Income				(768)
Segment assets
Operating assets	2,925	29,823	4,802	37,550
Intersegment eliminations	(68)	(14,284)	(91)	(14,443)
Total assets from continuing operations
per the Statement of Financial Position	2,857	15,539	4,711	23,107

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Notes to the consolidated financial statements for the year ended 30 June 2011

Note 2. Operating segment (continued)

Operating Segment For the year ended 30 June 2010

Operating Segment For the year ended 30 June 2010
				$’000
		Australia
		and Asia
	USA	Pacific	Europe	Group
Sales to external customers	11,212	11,428	9,725	32,365
Other revenues	-	97	927	1,024
Intersegment sales	876	2,915	425	4,216
Total segment revenue	12,088	14,440	11,077	37,605
Inter-segment elimination				(5,240)
Total revenue per the Statement of
Comprehensive Income				32,365
Segment result	(1,713)	2,526	472	1,285
Depreciation and amortisation				(545)
Finance costs				(572)
Other income				246
Net profit before income tax per the				414
Statement of Comprehensive Income
Segment assets
Operating assets	3,673	29,866	3,662	37,201
Intersegment eliminations	(68)	(15,231)	(91)	(15,390)
Total assets from continuing operations
per the Statement of Financial Position	3,605	14,635	3,571	21,811

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Compumedics Limited Notes to the consolidated financial statements for the year ended 30 June 2011

Note 3. Dividends

(Appendix 4E, Item 6)

No dividend has been declared or paid in the current or prior period

Dividend/distribution reinvestment plans (Appendix 4E item 7) NOT APPLICABLE

Note 4. Events occurring after reporting date

The company is not aware of any material matters that would impact the financial performance of the company at this time.

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Compumedics Limited Notes to the consolidated financial statements for the year ended 30 June 2011

- Note 5 Reconciliation of profit after income tax to net cash flow from operating activities

from operating activities
	2011 $’000 2010 $’000
Profit / (Loss) for the year Depreciation & amortisation Deferred tax asset Net exchange differences Change in operating assets and liabilities, net of effects from purchase of controlled entity Decrease (Increase) in receivables Decrease (Increase) in inventories (Decrease) Increase in payables (Decrease) Increase in deferred revenues (Decrease) Increase in tax provisions (Decrease) Increase in other provisions Net cash inflow/(outflow) from operating activities	81 414 1,052 543 (928) - 983 (237) (539) 915 (752) (1,184) 66 167 (186) (78) (188) -
	240 (86)
	(171) 454

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Compumedics Limited Supplementary Appendix 4E information for the year ended 30 June 2011

Net Tangible Asset Backing (Appendix 4E item 9)

Net Tangible Asset Backing (Ap	pendix 4E item 9)
	2011	2010
Net tangible asset backing per ordinary share	5.0 cents	5.0 cents

Controlled entities acquired or disposed of (Appendix 4E item 10)

No control was gained over any new entities nor control lost over any existing entities of the group.

Associates and Joint Venture entities (Appendix 4E item 11)

The company has no interest in any joint ventures at the date of this report.

Commentary on results (Appendix 4E item 14)

Earnings per share

Earnings per share improved with the underlying improvement in earnings for the Company already discussed.

Returns to shareholders

As per earnings per share commentary.

Significant features of operating performance

Comments already noted.

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Compumedics Limited Supplementary Appendix 4E information for the year ended 30 June 2011

Results of segments

Primary Segments:

The primary business sectors reflect the main geographical markets the business operates in. As already discussed the US market remains very tough and is the primary impact on this years trading result. This was partly offset by better performance out of the European market in the current financial year.

Trends in performance

The focus for the Company will be resuming the profitable growth of the Company by continuing to logically expand its market penetration in each of its existing key markets being sleep, brain and ultrasonic blood flow monitoring as the financial capacity of the Company allows for this.

Other factors that affected results in the period or which are likely to affect results in the future

All material matters have been discussed.

Foreign Accounting standards (Appendix 4E item 13)

Not applicable.

Audit (Appendix 4E items 15 - 17)

This report is based on accounts that are in the process of being audited.

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