PRO MEDICUS LIMITED — Call Transcript 2009

Jan 27, 2009

Attention ASX Company Announcements Platform Lodgement of Open Briefing[®]

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Pro Medicus Limited 450 Swan Street Richmond, Victoria 3121

Date of lodgement: 28-Jan-2009

Title: Open Briefing[®] . Pro Medicus. CEO on Earnings Update

Record of interview:

corporatefile.com.au

Pro Medicus Limited reported net profit of $7.93 million for the year ended June 2008, up 12.5 percent from the previous year, with earnings driven primarily by a strong performance in the Australian market. However, today you’ve indicated that profit for the first half ending December 2008 would be down by at least 15 percent compared with the previous corresponding period. What were the main reasons for the change in earnings direction?

CEO David Chambers

First-half results will be announced next month, and are yet to be finalised or of course audited. But at this point, net profit for the first half seems likely to be at least 15 percent lower than for the corresponding period last year.

The result reflects a number of significant costs we incurred during the half-year, some of which are one-offs. These costs related to: developing a greater autonomous presence in the US, such as salaries, legal costs and travel; pursuing R&D for our new generation technology; and M&A activity. We’ve previously flagged these items, so there will be no real surprises there.

What we didn’t anticipate was a client-led delay in the implementation timetable of a major project we believed would be completed by December 2008. We’ve now begun implementation but completion and full revenue recognition are now not expected until well in to the second half. As a result, revenue for the month of

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December 2008 was relatively weak compared with what was a very strong December 2007.

You should also remember that payments from Agfa-Gevaert, which was our licensee in the North American market, ceased as of March. Those payments represented more than A$2 million a year in revenue for us. As you know, we’ve now adopted a new model in the US, under which we’re selling our products directly to end users under our own brand name. The new model will take time to ramp up.

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Excluding the one-off costs, how are underlying earnings tracking versus your expectations and do you expect any impact on the underlying business over the remainder of the year as a result of the slowing economy?

CEO David Chambers

Excluding one-off items our earnings are running more or less on track with last year. The growth in the Australian market flattened out in the six months to December 2008. We hadn’t expected a repeat of the significant growth levels experienced in the Australian market in the June 2008 year, as we foreshadowed at our AGM in November.

North America has gone largely according to plan. We’ve always said that it would take time to ramp up our own operations there and whilst it’s early days, I believe we’ve made a pretty good start.

As for the effects of the overall economy, it’s incredibly difficult to predict other than to say traditionally healthcare is largely recession-proof. If the healthcare sector experiences a slowdown, it’s usually nowhere near as severe as in other industries and it tends to recover far more quickly.

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Will there be further one-off costs over the remainder of the current year?

CEO David Chambers

There will be some ongoing impact from the infrastructure costs involved in establishing our direct US presence, as well as our ongoing technology redevelopment effort, however these we anticipate will be well within our budgets.

We’ve also announced the acquisition of Visage Imaging today and have foreshadowed that there will be some additional operational costs in the integration period that will have some impact on EPS this financial year. After that we believe the acquisition will be EPS accretive.

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Can you comment on the performance of your North American business since it became independent of Agfa?

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CEO David Chambers

We’ve established our own team on the ground in the US and through its commendable efforts we’ve now put in place direct relationships across almost all our installed base, backed up by service maintenance agreements. So we have revenues flowing in the door and are rapidly positioning ourselves to recover our set-up costs. We’ve made a lot of progress in a short period of time but there’s still a lot of work yet to be done.

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You previously indicated it may take 12 to 18 months to build momentum for the North American business under the new sales model. Has there been any change to this outlook as a result of the slowdown in the US economy?

CEO David Chambers

There’s been some slowing in order placements, but we believe our earlier predictions of a 12 to 18 month build-up are still valid. We’ve already secured two new projects on a direct basis, which of course means that we enjoy higher margins than before as well as full margins on future service contracts attached to the projects.

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You’ve flagged significant investment this year in R&D relating to your new generation technology platform. What’s the time line for this project and how is it expected to contribute to earnings?

CEO David Chambers

We’re very focused on the development of a totally new generation platform that will propel us forward in both local and overseas markets. The project is going according to plan and we’re expecting to show the next iteration at the Radiology Society of North America event in Chicago in late November.

Whilst there will be many benefits stemming from our new generation platform including new areas of functionality, a key factor will be the reduced cost of ongoing development as we benefit from the latest in advanced software tools and methods.

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What are the longer-term growth opportunities for Pro Medicus in the current environment and will there be any change in your strategy as a result of the changed economic climate?

CEO David Chambers

We believe our prospects are still extremely bright. Today we announced the acquisition of Visage Imaging which may well be one of the biggest opportunities in our company’s history. We were able to secure this business at a time when asset prices have come down tremendously even taking into account the fall in the Australian dollar. The fall is asset prices has been far more than anyone would have predicted even six months ago, so the current economic climate has if anything worked to our advantage.

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corporatefile.com.au

Thank you David.

For more information about Pro Medicus, visit www.promedicus.com.au or call David Chambers on (+61 3) 9429 8800.

For previous Open Briefings by Pro Medicus, or to receive future Open Briefings by e-mail, visit www.corporatefile.com.au

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