Chairman's statement

FINANCIAL REVIEW

With additional new products having been added to NHS Contracts the Company’s performance continues to improve.

For the six months to 30 September 2008, the Company's turnover was £409,850 up 25.6.% (2007: £326,324) producing a gross profit of £200,206 up 41.5% (2007: £141,487). Gross margin for the current financial year has also improved, now 48.8% (2007: 43.4%) Administrative expenses were up 20.6% at £217,148 (2007: £179,981). The pre-tax loss was £57,821 (2007: £65,765) and the loss per ordinary share was 0.14 pence (2007: 0.21 pence).

Shareholders should note that due to both the nature of the sectors we operate in and that of our business, turnover for Sutherland Health Group remains weighted to the second half of the financial year.

OVERVIEW

In April 2008, the Company announced that it had signed Heads of Agreement to acquire Pasante Healthcare Ltd. This was an exciting opportunity for the Company that many saw as a natural acquisition for us. However the market conditions prevailing at the time meant that we were unable to complete the acquisition, as announced in our corporate update on 30th May 2008. The Board was naturally disappointed not to have completed the deal, but are delighted that the core business of the Group did not suffer a loss of turnover whilst this acquisition activity was happening, and in fact still managed to grow turnover by 25% in the first half of our year.

NHS MARKET

In our AGM statement on 30th September 2008 we announced to shareholders that the Group had seen the number of Condomania products on contract with NHS England increase from 13 to 21 giving a 100% listing of the Condomania® condom range.

We also announced in our AGM statement that the Sutherland® patient hygiene range has increased from 8 to 12 products on contract with NHS England, which has furthered our sales in this important and growing area of concern to the NHS.

The Thixo-D® Nutrition range has been put on contract for NHS Wales for a 3 year period commencing 1st September 2008 until 30th August 2011, enabling all hospitals in Wales to order our product via this contract.

Thixo-D® is the Company’s own trade mark registration for a rapid thickener for the management of Dysphagia which is the medical name for a swallowing problem. Dysphagia can be a long or short term condition causing coughing, spluttering, or even choking when swallowing thin liquids. Thixo-D® has been approved for prescription use and the Company has achieved distribution via major national wholesalers AAH and Unichem as well as regional pharmacy wholesalers.

It is our opinion that our strategy of working closely with health professionals to develop products that are needed or required within the NHS is working, and as we continue to grow our presence in the NHS, further market and new product opportunities are being presented to us to work on or consider.

FUNDRAISING

In June 2008, the Company announced it had embarked on a Placing of new ordinary shares and the offer of a £300,000 convertible loan note giving 9% interest to raise circa £500,000 in total for working capital to support sales growth, and to continue further new product development. The convertible loan note was closed by the Board when it had reached £106,000, but the placing of new ordinary shares is still in progress with shares being placed at 2p per share.
The Placing will remain open until further notice.

ACQUISITIONS

The Company continues to explore compatible acquisitions and, with the continued improvement in the Company’s trading it currently is experiencing it hopes to be in a position to make a suitable acquisition at the earliest opportunity.

JOHN FRENCH
CHAIRMAN

Sutherland Health Group plc
Unaudited profit and loss account
For the six months to 30 September 2008

There were no recognised gains or losses other than the loss for the financial period.


For further information on the Company visit www.sexualhealthgroup.com

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