Annual Report 2016 - SHL ?· 2 Dear Shareholders For SHL, 2016 was a year of major changes and extraordinary…

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  • SHL TeleMedicine Ltd.Ashdar Building90 Igal Alon St.Tel Aviv 67891IsraelTel. +972 3 561 2212Fax. +972 3 624 2414E-mail: shl@shl-telemedicine.comwww.shl-telemedicine.com

    Annual Report 2016

  • 1

    Contents2 | Letter from the Chairman of the Board and the CEO

    5 | Information for Investors

    7 | Corporate Governance 2016

    59 | Consolidated Financial Statement 2016

  • 2

    Dear Shareholders

    For SHL, 2016 was a year of major changes and

    extraordinary events, including on management,

    board and shareholder level, that continued into

    the first half of 2017.

    In the first half of 2016, following the

    termination of the merger agreement with

    Shanghai Jiuchuan Investment (Group) at

    the end of 2015, the company underwent a

    significant management and board change

    during the year and in the 2nd half of 2016, Mrs.

    Mengke Cai, the co-founder and Non-Executive

    Vice Chairman of Zhuhai Hokai Medical

    Instruments Co. Ltd (Hokai), acquired a 29.85%

    ownership of SHLs share capital from the then

    Controlling Shareholders, a group of investors

    under a common voting agreement consisting

    of Copper Valley Finance Ltd., Prime Finance

    Corporation, Eli Alroy and Barak Capital Ltd.

    Hokai has significant knowhow and access to

    the Chinese healthcare market and Mrs. Cais

    investment represents a strong trust in SHLs

    products, management and its value for the

    Chinese market.

    Letter to the Shareholders

    Following a review of the business and market

    opportunities, SHL management decided to

    focus on expanding our existing platforms

    in Germany and Israel, where we see an

    opportunity leveraging SHLs unique assets and

    market knowhow. In parallel, we are driving

    the growth of the smartheart platform, as it

    offers a lot of potential in various countries and

    market segments including the US and China

    and other global opportunities.

    We were pleased with the results of our

    Chronic Disease Management Programs which

    generated an income of EUR 5.3 million from

    cost savings under a contract in Germany,

    relating to the year 2015, thus further

    demonstrating the value delivered by SHL.

    One of the key priorities of 2016 was to

    streamline our operations and reduce our cost

    base. The reduction in costs will materialize in

    2017 and beyond.

    The financial results for the year were marked

    by extraordinary non-recurring items which

    have impacted SHLs equity.

  • 3

    In Germany, 2016 revenues reached USD

    20.7million up 30.2% on revenue of 2015 due to

    an income of USD 5.8 million from cost savings

    delivered under a Chronic Disease Management

    Services contract relating to the year 2015. On

    the other hand, the Company had to further

    adjust its estimates regarding two performance-

    based contracts with an economic benefit

    lower than previously estimated associated

    with service year 2015 and reduce its related

    income receivable by USD 0.9 million. In Israel,

    revenues were USD 19.6 million, down 7.1%

    compared to 2015. The decline is mainly related

    to ending service contracts with institutions and

    decline in income from private subscribers.

    In addition, the company conducted a thorough

    review of the financial accounts, as well of

    plans and projections with respect to SHLs

    future operations. In the course of this review

    a number of extraordinary non-recurring

    items have been identified and certain assets,

    including inventories, deferred taxes, fixed

    assets and intangible assets were impaired. Also,

    extraordinary financial and tax expenses were

    incurred due to a final tax judgement regarding

    previous years income tax assessment resulting

    in an additional tax liability to be recognized

    in 2016. In addition, SHL elected to change its

    accounting policy with regards to sales wages

    and commissions such that only the portion of

    sales compensation expenses that is incremental

    in obtaining subscription sales contracts is

    deferred. Management believes that this change

    in policy better reflects recent development in

    accounting guidance, resulting in a retroactive

    adjustment of USD 3.8 million, comprised of a

    write-off of USD 3.4 million in the 2015 equity

    opening balance, plus additional expenses of

    USD 0.4 million in 2015. The impact due to the

    change in accounting policy in 2016 is marginal.

    These extraordinary items negatively impact

    SHLs equity in the amount of USD 16.8 million.

    As a result of change in revenue estimates,

    extraordinary non-recurring items and

    additional income from cost savings delivered

    under a Chronic Disease Management Services

    contract in Germany, the Company recorded

    an Operating and Net loss in fiscal year 2016.

  • 4

    On an ongoing basis, SHL recorded revenues

    for the year of USD 40.5 million, an increase

    of 9.2% from 2015 revenues. Adjusted EBITDA

    amounted to USD 5.3 million and adjusted

    EBIT to USD 0.8 million in 2016 compared

    with adjusted LBITDA of USD 0.4 million

    and adjusted LBIT of USD 4.7 million in 2015.

    Operating cash flow for the year amounted to

    a deficit of USD 0.4 million, compared to cash

    received from operations of USD 4.0 million

    in 2015. Cash, cash equivalents and marketable

    securities amounted to USD 10.5 million at

    December 31, 2016.

    While 2016 was a year of changes and

    extraordinary events on many levels as

    aforementioned, more stability is expected from

    the new board and management. On June 25,

    2017 Mr. Xuewen Wu was elected as Chairman

    of the Board and on June 1, 2017 Mr. Yoav

    Rubinstein was elected as CEO, both of them

    signing this letter for the first time

    What comes next?

    SHLs businesses in Israel and Germany provide

    us with uniquely positioned assets in the area

    of remote patient management. In addition,

    the smartheart platform provides us with a

    unique opportunity to grow beyond these core

    territories leveraging our technological, clinical

    and operational knowhow. Alongside the growth

    initiatives, we need to continue to improve

    efficiency across the businesses while investing

    in the future to support our growth agenda.

    We have an excellent group of people in the

    organization and are confident in their ability to

    carry out this vision.

    On behalf of the Board of Directors and the

    management team, we thank all employees for

    their hard work and our business partners and

    shareholders for the trust they have placed in SHL.

    Sincerely,

    Xuewen Wu Yoav Rubinstein

    Chairman of the Board CEO

    * For Adjusted Financial Information and Reconciliation of Adjusted Financial Information pls. go to the Financial Overview Section on page ___.

  • Investors

    5

    Information for Investors

    Share price development

    ListingAll SHL shares are listed on SIX Swiss ExchangeTicker symbol: SHLTN

    Currency: CHF

    Listing date: November 15, 2000

    Ticker symbol: SMDCY

    Investor relationsSHL Telemedicine Ltd.

    Yoav Rubinstein, CEOEmail: yoavr@shl-telemedicine.com

    Yossi Vadnagra, Chief Financial OfficerEmail: yossiv@shl-telemedicine.com

    90 Igal Alon St., Tel Aviv 67891, IsraelTel. ++972 3 561 2212Fax: ++972 3 624 2414

    Capital structureThe issued share capital is divided into 10,491,213 registered shares with a par value of NIS 0.01 each (excluding 387,278 ordinary shares of NIS 0.01 par value each held by SHL)

    Significant shareholdersAs of December 31, 2016, SHL was aware of the following shareholders with more than 3% of all voting rights in the company. Number of % % Ordinary Including Excluding Shares Treasury Treasury Held shares shares

    Cai Mengke 3,247,075 29.85% 30.95%

    Alroy Group 2,507,608 23.05% 23.90%

    G.Z. Assets and Management Ltd. 921,533 8.47% 8.78%

    Himalaya Asset Management Limited 1,360,000 12.50% 12.96%

    SHL Treasury shares 387,278 3.56% -

    The above table of Significant Shareholders reflects both actual holdings as of December 31, 2016, after deducting from the total number of shares outstanding 387,278 Ordinary Shares held by SHL, and actual holding as of December 31, 2016 calculated including ordinary shares held by SHL, all as indicated above, but does not reflect holding on a fully diluted basis. All in accordance with notifications received by the Company from shareholders and the SAG registrar as of December 31, 2016.

    Statistics on SHL Telemedicine as at December 31, 2016

    Registered shares with a par value of NIS 0.01 each

    Securities number 1128957

    Number of shares* 10,491,213

    Market price high/low (CHF) 7.50/5.55

    Market capitalization high/low (CHF million) 78.7/58.2

    Market capitalization 31/12/16 (CHF million) 71.9

    Share capital nominal value (NIS) 104,912

    * Excluding 387,278 ordinary shares held by SHL.

  • 6

  • Corporate Governance 2016

  • Contents

    Corporate Governance

    9

    10 | Introduction

    12 | Group Structure and Shareholders

    16 | Capital Structure

    23 | Board of Directors

    36 | Senior Management

    40 | Compensation, Shareholdings and Loans

    53 | Shareholder Participation

    56