Corporate News: MeVis Medical Solutions successfully defies adverse economic environment during the first half of 2009

Interim report 1st half-year 2009

  • 16% increase in revenues despite decline in demand due to consolidation effect
  • Successful cost management secures EBIT of EUR 0.5 million (H1 2008: EUR 0.9 million)
  • Consolidated profit amounts to EUR 0.2 million (H1 2008: EUR 0.9 million)
  • Significant increase of cash flow from operating activities to EUR 1.6 million (H1 2008: 0.67 million)
  • Positive impetus expected from three new products in the second half of the year

Bremen, August 28, 2009 – Despite ongoing buyer reluctance of clinical end users, MeVis Medical Solutions AG [ISIN: DE000A0LBFE4] increased its consolidated sales revenues by 16% during the first half of fiscal 2009 to the amount of approx. EUR 6.5 million (H1 2008: EUR 5.5 million). Revenues are spread across the segments of Digital Mammography, amounting to EUR 4.5 million (H1 2008: EUR 3.4 million), and Other Diagnostics of EUR 1.9 million (H1 2008: EUR 2.1 million).

The second quarter of the current fiscal year, like the first, was marked by purchasing restraint on the part of clinical end users due to the continuing global economic crisis. This has slowed our pace of growth. While consolidated sales revenues increased by 16% year-to-year, this is solely attributable to the positive consolidation effect resulting from the complete integration of the Hologic business into the MeVis Group. Had it not been for this consolidation, sales would have fallen by around 20% compared to the first half of 2008.

MeVis reported a significant year-to-year decrease in demand by its industry partners for software products in its Digital Mammography business segment. This correlates with the overall weakness of the market for Digital Mammography, which is due to reductions in capital budgets and spending, and long sales-cycles. Were it not for this poor performance, which had a negative effect on company sales in the Digital Mammography segment, sales growth would have been more significant in this highly profitable segment.

In contrast, the Other Diagnostics segment reported a decline in sales of only 8%. This segment now also includes MeVis’ new neuro diagnostic and surgical planning software which is marketed by OEM partner Invivo as DynaSuite™ Neuro - as well as several additional products under development. As expected, the associated high development expenses weighed heavily on the operating results of the segment. This burden was not fully offset at a consolidated level in the first half of the year as originally planned. This is attributed to the overall economic environment and, in particular, the distinct decline in demand in the Digital Mammography segment since Q4 2008.

“Accordingly, our operating EBIT margin at a consolidated level dropped to 7%“, says Christian H. Seefeldt, CFO of MeVis Medical Solutions AG. “With our promptly initiated cost-cutting measures we could successfully counter the weak overall sales performance and prevent group profitability from slipping further. For example, other operating expenses have been reduced by 19% year-to-year”.

The Group's net financial result, amounting to EUR 0.076 million (H1 2008: EUR 0.58 million), suffered considerably on account of the lower level of interest rates year-to-year as well as calculated interest on payment installments related to the acquisitions carried out in 2008. Accordingly, MeVis reports consolidated earnings for the period of only EUR 0.16 million (H1 2008: EUR 0.92 million), which corresponds to earnings per share of € 0.09 (H1 2008: EUR 0.67).

Our operating cash flow increased significantly from EUR 0.67 million in the first half of 2008 to EUR 1.6 million in the first half of 2009. This equates to approximately one quarter of consolidated revenues. As a result, the operating cash flow almost fully covered not only the company’s current investments but also investments in capitalized development costs for planned future corporate growth.

During the first half-year 2009 MeVis has introduced two new innovative products: The diagnostic software for the ACUSON S2000™ ABVS ultrasound breast scanner from Siemens and the diagnostic and interventional software DynaCAD® Prostate for Invivo. Additionally, the company further strengthened its market position in the magnetic resonance imaging segment by releasing the Syngo BreVis MRI diagnostic and interventional software application for Siemens.

“While continuing to pursue our growth strategy, we will increase our efforts in the second half of this year to improve results“, says Dr. Carl J.G. Evertsz, CEO of MeVis Medical Solutions AG. Such means include the introduction of further products and the expansion of existing sales partnerships. Currently, around 94% of the company’s consolidated revenues are generated through OEM distribution. Through this sales channel, if demand for medical equipment falls, sales of software licenses typically decline accordingly.

“By progressively building up new sales partnerships and expanding products which bear our own brand and trademark Visia™, we intend to open up alternative channels of distribution and after-market sales for our software applications“, says Thomas E. Tynes, President & CEO of MeVis Medical Solutions, Inc. and CMO of MeVis Medical Solutions AG. These after-market sales shall increasingly provide a complimentary source of incremental, high-margin revenues for the company. Maintenance revenues almost quadrupled in the first half of 2009 year-to-year amounting to EUR 1.1 million.

Evertsz: “Although we expect our new products to make an increasingly positive contribution to sales over the course of the second half of the year, the business environment will remain extremely tough for the MeVis Group for the rest of the year. We assume that sales will continue to fluctuate significantly from month to month. For that reason, we have decided not to issue any forecast for expected sales and results for MeVis Group in 2009.“

The company`s financial reports are available for downloading at our website.