The Medical House PLC

Interim Results for the six months ended 31 December 2004
"Maiden pre-tax profit"

The Medical House PLC (“TMH”), (AIM:MLH) the orthopaedic devices and drug delivery company, announces its interim results for the six months ended 31 December, 2004.

• Financial Performance
• 100% increase in turnover to £4.5m (2003: £2.2m)
• Maiden Operating profit of £141,000 (2003: £267,000 loss)
• Maiden pre-tax profit of £46,000 (2003: £344,000 loss)
• Orthopaedic Instruments
• Record turnover of £4.35m (2003: £2.17m)
• Operating Profit increased to £710,000 (2003: £293,000)
• First supply agreement for TMH with DePuy, a division of J&J
• Current sales underpins group profitability
• Future capacity increase guaranteed by land purchase
• Drug Delivery Systems
• £4.3m deal with Serono, a top 10 global biotechnology company
• Sales ahead at £206,000 (2003: £50,000)
  

For further information:

The Medical House PLC tel: 0114 261 9011
Ian Townsend, Executive Chairman www.themedicalhouse.com

Buchanan Communications tel: 020 7466 5000
Tim Anderson / Rebecca Skye Dietrich /Lisa Baderoon

Business Review

Overview

The Medical House specialises in the development and manufacture of innovative medical devices.

Our principal operating businesses are:

1. Design and manufacturing surgical instruments, primarily for the orthopaedic market: Eurocut Limited
2. Drug Delivery Systems: Medical House Products Limited

We are pleased to report that both divisions produced a strong performance in the six months under review. It is very satisfying and pleasing to see the hard work and investment of previous years being rewarded by significant growth in sales and profits.

Group Financials

The Group is reporting its first interim profit at the pre-tax and operating levels since joining AIM in September 2000. Pre-tax profit is £46,000 compared to a loss for the same period in 2003 of £344,000. Operating profit is £141,000 (2003 : £267,000 loss). The profit is the result of the 100% increase in turnover compared to 2003. Turnover reached £4.5m up from £2.2m.

Orthopaedic Division : Eurocut

Our orthopaedic division performed very strongly. Sales were £4,350,000 (2003 £2,174,000). These higher sales resulted in a significant increase in operating profits at £710,000 (2003 £293,000). Margins were down slightly due to a higher proportion of work being subcontracted, in order to avoid production bottlenecks brought about by the record order book.

The improved performance comes as a result of the major investment programme carried out during the last two years. As a result of increasing the size of the production facility, together with significant investment in new plant, Eurocut has been able to benefit from the strong demand in the orthopaedic market. As well as a general increase in the number of orthopaedic procedures this division has gained from a growing trend towards image guided and minimally invasive procedures. We were very pleased to announce in January a supply agreement with Depuy whereby we will maintain stocks of their Image Guided System in return for guaranteed future orders. This has the benefit of securing supply for Depuy and securing future orders for the company. Success in this initiative will result in us seeking to introduce more products to this type of arrangement.

With the rapid growth in our orthopaedic business, we took the opportunity in January 2005 to acquire the adjacent land to our Newhall Road premises in Sheffield. The land cost £375,000 and we are currently awaiting building designs from our architects. Although the company may fund the initial development costs, it is anticipated that a sale and leaseback arrangement will enable the group to retain all its liquid resources for investment in working capital and new equipment.

Drug Delivery Division: Medical House Products

Sales in the six months to 31 December 2004 were well ahead at £206,000 (2003: £50,000). The increase is due to the improved level of sales of the mhi-500 mainly in the UK. However, during the course of 2005 the mhi-500 will be replaced with the SQ-Pen for which we have much greater international sales growth potential.

Under our Bioject licence agreement we are limited to selling the mhi-500 for insulin only, with no sales outside Europe including Egypt being allowed. On the other hand the SQ-Pen will be sold to a broader international market through our thirteen overseas distributors and, whilst they all have samples of the products, it is too early to say how the device will be received in each of their markets. Nevertheless, we expect sales of the SQ-Pen to develop steadily throughout 2005. Furthermore, we also expect sales of the SQ-Pen to benefit from the agreements we have with both Dechra and BioPartners. Little benefit however will be seen in the current financial year from sales to these two companies and it is expected that more meaningful sales will come in 2005/6 onwards.

The highlight of the period under review was the £4.3m development and supply agreement made with Serono, for the supply of the human growth hormone, using Medical House's needle-free injection device and related consumables. This agreement with Serono, a top 10 global biotechnology company, will have a significant impact on the future sales growth and reputation of Medical House Products.

Finally, we continue to be very positive about the prospects for our disposable auto-injector device (ASI) and discussions continue with a number of organisations for use of ASI in a variety of applications, including emergency use in the event of bio-terrorism attack.

Outlook for the Full Year

With a sizeable order book at Eurocut and increasing demand for our drug delivery systems we expect trading in the second half to continue to perform strongly. All the achievements we have made and continue to make would not be possible without a committed Board of Directors and workforce all of whom deserve our gratitude.

Lastly, may I once again thank all our shareholders for their continued support.

Ian Townsend
Executive Chairman
21 February 2005

Unaudited Profit and Loss Statement
for the six months ended 31 December 2004

Notes

1. The financial information does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The information for the year ended 30 June 2004 has been extracted from the statutory accounts of The Medical House PLC which carried an unqualified audit report and have been delivered to the Registrar of Companies.

2. Taxation has been provided at the estimated effective rate for the period.

3. The calculation of earnings per share is based on the profit after taxation and the weighted average number of ordinary shares in issue during the period (six months ended 31 December 2004: 59,626,091 shares, year ended 30 June 2004: 56,877,466 shares and the six months ended 31 December 2003: 55,222,071 shares).

4. Copies of this report are available to the public at the Company’s registered office, 201 Newhall Road, Attercliffe, Sheffield S9 2QJ and have been sent to shareholders.

5. Exceptional items in the year ended 30 June 2004 represent provisions for impairment against intangible assets (Hyperlyser) and goodwill.

Unaudited Consolidated Balance Sheet
as at 31 December 2004

Unaudited Consolidated Cash Flow Statement
for the six months ended 31 December 2004