Cegedim: First half shows promise for the future

Regulatory News:

Cegedim, an innovative technology and services company, generated consolidated first half 2015 revenues from continuing activities of €246.1 million, up 1.1% like for like and 3.2% on a reported basis compared with the same period in 2014. All Group divisions contributed to the reported increase.

EBITDA amounted to €40.3 million, up 10.4% compared with a year earlier. This EBITDA trend was attributable to the improvement at Health Insurance, HR and e-services, Cegelease and at the Activities not allocated division. The EBITDA margin increased by 107 basis points from 15.3% for the first six months of 2014 to 16.4% for the first six months of 2015.

EBIT before special items amounted to €19.2 million, up 9.4% compared with a year earlier. Thus, the EBIT margin before special items increased from 7.3% for the first six months of 2014 to 7.8% for the first six months of 2015.

Net financial debt fell by €338.5 million to €165.7 million mainly as a result of the divestment of its CRM and Strategic Data division to IMS Health for €396 million in cash⁽¹⁾ on April 1. As a result of the transaction, rating agency Standard and Poor’s upgraded Cegedim’s rating to BB-, with positive outlook.

As announced previously, the Group is expanding its international scope via targeted acquisitions. For example, on July 20, Cegedim strengthened its presence in software publishing for health and personal insurance in new countries with the acquisition of Activus in the UK.

The Group is preparing for its future by investing significantly in transitioning its offerings to cloud format, which will negatively affect revenues and profitability in the short term. Longer term, Cegedim will benefit from greater customer loyalty and a positive impact on profitability. At the same time, the Group is actively managing its debt.

Following the divestment of its CRM and Strategic Data division, the activities seasonality decreased. However it should be noted that the June 30, 2014 EBITDA represented 42% of the full-year EBITDA.

Cegedim reiterates its target of 2015 like-for-like revenue growth of 2.5% for continuing activities, and a 10.0% increase in EBIT before special items.

⁽¹⁾ This estimated amount is subject to joint review over a period of 180 business days starting March 31, 2015.

• Simplified income statement

In the first half of 2015, Cegedim generated consolidated revenues from continuing activities of €246.1 million, up 3.2% on a reported basis and 1.1% like for like compared with the same period in 2014. Acquisitions and divestments had virtually no effect, and currencies had a positive impact of 2.1%. Group revenues, including the Q1 revenues of the activities sold on April 1, 2015, came to €347.8 million, down 18.9% on a reported basis and up 2.1% like for like compared with the year-earlier period.

The decline in like-for-like revenues at the Healthcare Professionals division was more than offset by growth at the Health Insurance, HR and e-services and Cegelease divisions.

EBITDA increased by €3.8 million or 10.4% to €40.3 million; the margin increased from 15.3% for the first six months of 2014 to 16.4% for the first six months of 2015. This EBITDA trend was attributable to drops at the Healthcare professionals divisions being more than offset by EBITDA improvements at the Health Insurance, HR and e- services; Cegelease and at the Activities not allocated.

Depreciation increased by €2.2 million from €19.0 million in the first half of 2014 to €21.2 million in the first half of 2015. Special items at the end of June 2015 amounted to a charge of €4.2 million, compared with a charge of €1.3 million one year earlier. Most of these charges are linked to reorganizational costs tied to the computerization of doctors in the UK and fees related to the sale of the CRM and Strategic Data division to IMS Health.

EBIT before special items increased by 1.6 million or 9.4%, to €19.2 million with an increase in margin from 7.3% in the first half of 2014 to 7.8% to the first half of 2015.

The cost of financial debt decreased by €1.6 million, from €24.9 million at end of June 2014 to €23.3 million at end of June 2015. This decrease reflects the gain on financial investments and the positive impact of the restructuring of bond debt in 2014 and 2015.

Tax expense remained virtually stable climbing from a charge of €2.0 million at the end of June 2014 to a charge of €2.2 million at the end of June 2015.

Thus the consolidated net profit from continuing activities amounted to a loss of €9.5 million at the end of June 2015, compared with a €9.8 million loss a year earlier. The loss per share from continuing activities before special items was €0.4 at the end of June 2015, compared with a €0.6 loss at the end of June 2014. The consolidated net profit attributable to the Group amounted to a profit of €24.2 million at the end of June 2015 compared to a €17.4 million loss at the end of June 2014. This profit came from the adjustment of the result on disposal (see note 13 of the consolidated financial statements).

⁽²⁾ "Activities sold” on April 1, 2015, called "Activities held for sale” in 2014 and Q1 2015.

Analysis of business trends by division

• Key figures by division

• Health Insurance, HR and e-services

In the first half of 2015, division revenues came to €111.5 million, up 4.6% on a reported basis and like for like. Currencies had virtually no impact, and there were no acquisitions or divestments.

The Health Insurance, HR and e-services division represented 45.3% of consolidated revenues from continuing activities, compared with 44.7% during the same period a year earlier.

EBITDA came to €19.6 million, up €2.6 million or 15.6%. The margin came to 17.5% compared to 15.9% a year earlier.

These positive performances stem chiefly from:

• Cegedim SRH, the human resources specialist, and Cegedim e-business, which offers e-invoicing services. Both continue to add commercial successes and generate sustained revenue growth. The start of operations with several new clients is hurting these businesses’ profitability in the short term.
• Shifting a portion of Cegedim Assurances’ product range to the cloud, which is hurting revenue and profitability in the short term. Further out, the shift is expected to be slightly favorable in terms of margin. Despite the negative impact, EBITDA rose at Cegedim Assurances over the period.
• RNP, the specialist in traditional and digital displays for pharmacy storefronts in France, experienced a different timing of activity in Q2 than it did in 2014. Despite the adjustment, RNP’s EBITDA rose over the period.

The July 2015 acquisition of UK-based Activus, software publisher for health and personal insurance companies, has given Cegedim Assurances access to new markets (UK, US, Middle East, APAC, etc.).

• Healthcare Professionals

The division’s first half 2015 revenues came to €76.5 million, up 2.7% on a reported basis. The acquisition of SoCall and currency effects made positive contributions of 0.1% and 6.5%. Like-for-like revenues fell 3.9% over the period.

The Healthcare Professionals division represented 31.1% of consolidated revenues from continuing activities, on a par with the same period a year earlier.

EBITDA came to €12.5 million, down €2.7 million or 17.9%. Thus, the margin came to 16.3% compared to 20.4% a year earlier.

These performances stem chiefly from:

• Slowing at the UK doctor computerization activity. However, investments in developing a cloud offering for UK doctors – which hurt EBITDA over the period – are likely to help the business return to growth progressively.
• Growth at the US doctor computerization activity, with roll-out of the Revenue Cycle Management offering (RCM), which helps practices manage the process of obtaining reimbursement from US insurance companies. However, as a BPO activity, the RCM business needs to invest in human resources when it takes on new clients.
• Revenue and EBITDA growth at the doctor, nurse and physical therapist computerization activities in France, and at the medication database activity (Base Claude Bernard). The database’s revenues are also climbing in the UK.

It should be noted that the pharmacy computerization activity in France is experiencing a commercial rebound, helped in particular by the full web application launch of MSP (Mon Suivi Patient i.e monitoring my patient), which helps pharmacies keep track of regular patients. However, there is always a lag time between commercial successes and revenue recognition.

• Cegelease

The division’s first half 2015 revenues came to €56.1 million, up 0.5% on a reported basis and like for like. There were no acquisitions or divestments, and currencies had no impact.

The Cegelease division represented 22.8% of consolidated revenues from continuing activities, compared with 23.4% a year earlier.

EBITDA remained relatively stable compared to the same period last year at €8.1 million for the first six months of 2015. Thus, the margin remains relatively stable at 14.4% at the end of June about the same as a year earlier.

Revenue growth was mainly attributable to the start-up of new partnerships in the optical and dental fields, and to renewed growth at the pharmacy computerization activity in France.

The increased use of self-financing for financial lease contracts, principally in the second quarter, negatively affected revenues and EBITDA. As a reminder, margins are higher on self-financed contracts than on resold contracts, but the margin on resold contracts is recognized when the contract is signed, whereas in the case of self-financed contracts, the margin is recognized over the duration of the contract. However, the positive trend in financing conditions favorably impacted EBITDA in the second quarter and led the Group to reduce the share of self-financed contracts in the second half.

• Activities not allocated

The division’s first half 2015 revenues came to €1.9 million, up 18.9% on a reported basis and like for like. There were no acquisitions or divestments, and currencies had no impact.

The Activities not allocated represented 0.8% of consolidated revenues from continuing activities, on a par with the same period a year earlier.

EBITDA improved by €3.8 million or 106.7% to a amount of 0.2 million compared with a €3.6 million loss a year early. The margin rose 12.6% at the end of June 2015.

This favorable EBITDA trend reflects the cost-containment efforts and the impact of invoicing for IT services that are being provided to IMS Health.

Financial resources

Cegedim’s total consolidated balance sheet at June 30, 2015, was €873.4 million, a 24.0% decrease over December 31, 2014.

Goodwill on acquisition was up €178.0 million, at June 30, 2015 compared to €175.4 million at the end of 2014. This €2.6 million increase is chiefly attributable to appreciation of some foreign currencies compared to the euro, mainly that of the pound sterling, whose movement amounted to €2.9 million. Goodwill on acquisition represented 15.3% of total assets on June 30, 2015, compared to 20.4% at December 31, 2014.

Cash and cash equivalents came to €316.3 million at June 30, 2015, an increase of €272.3 million compared to December 31, 2014. This increase was principally due to the recognition of the selling price of the CRM and Strategic Data business to IMS Health, i.e. €324 million net of the cash positions of the divested companies, partly offset by the redemption of a total of €67.3 million of the 6.75% bond maturing in 2020 on the market, and by an increase in WCR

Shareholders’ equity fell €31.2 million to €186.8 million at the end of June 2015 compared to €218.1 million at the end of December 2014. This decrease stems from the decline in the group exchange gains/losses following the deconsolidation related to the disposal of the CRM and Strategic Data division to IMS Health. Shareholders’ equity came the 19.0% of total balance sheet on December 31, 2014, compared to 21.4% at the end of June 2015.

Net debt came to €165.7 million at the end of June 2015, down €338.5 million compared with end of 2014. This represented 88.7% of equity as of June 30, 2015.

Before the cost of net financial debt and taxes, operating cash flow was €41.6 million at the end of June 2015, compared to €43.9 million compared as of June 30, 2014.

Period highlights

• Disposal of the "CRM and Strategic Data” division to IMS Health

On April 1, 2015, Cegedim announced that it had completed the disposal of its CRM and Strategic Data division to IMS Health. The estimated selling price, determined in accordance with October 2014 agreements, amounts to €396 million. This estimated amount is subject to joint review over a period of 180 business days starting March 31, 2015.

• S&P has upgraded Cegedim’s rating to BB- with positive outlook

Following the announcement of the transaction, rating agency Standard and Poor’s upgraded Cegedim’s rating to BB-, with positive outlook, on April 13, 2015.

• Redemption of Cegedim bonds

During the second quarter of 2015, Cegedim redeemed on the market its 6.75% bond, maturing 2020, ISIN code XS0906984272, for a total principal amount of €60,889,000. The company then cancelled these bonds.

• Cancellation of factoring agreements

In the first half of 2014, the Group cancelled factoring agreements covering the divestment of client receivables, with no possibility of recourse, for a total of €38.0 million. These agreements amounted to €14.2 million at end-December 2014. The agreements dealt chiefly with companies sold to IMS Health.

• Favorable exchange rate movements

At end-June 2015, movements in exchange rates were positive, contributing €4.9 million to consolidated half year revenues from continuing activities.

• Buyback of Cegedim shares

In the second quarter, Cegedim bought back 25,419 shares for €0.9 million, excluding transactions made as part of the Group’s liquidity contract. These buybacks were made to fulfill bonus share distribution plans. As part of these plans, the company distributed to employees 32,140 of its own shares during the second quarter.

Apart from the items cited above, to the best of the company’s knowledge, there were no events or changes during the period that would materially alter the Group’s financial situation.

Significant post-closing transactions and events

• Redemption of the 7.0% 2015 bond

Cegedim redeemed the full amount of the €62.6 million remaining in circulation of the 7.0% 2015 bond upon maturity on July 27, 2015 (ISIN : FR0010925172).

• Redemption of Cegedim Bonds

Between July 1, 2015, and the release date of this document, Cegedim redeemed on the market its 6.75% bond, maturing April 1, 2020, ISIN code XS0906984272, for a total principal amount of €18,615,000. The company then cancelled these bonds. As a result, a total principal amount of €345,496,000.00 remains in circulation.

• Acquisition in the UK of Activus

On July 20th 2015, Cegedim announces the acquisition of 100% of Activus, one of the UK’s leading suppliers of health and protection insurance software. This deal gives Cegedim Assurances access to new markets (UK, US, Middle East, APAC, Africa,…) and strengthens its software offering for international clients. Activus generated revenue of around €7 million in 2014.

This move is part of the Group’s strategy of making bolt-on acquisitions to expand its international positions. The deal was financed with internal financing. It will contribute to its consolidated results starting in the second half of 2015.

• Competition Authority

On September 24, 2015, the Paris Court of Appeal rejected Cegedim’s request and upheld the Competition Authority decision of July 8, 2014. Because the fine was paid in full in September 2014, this decision has no impact on Cegedim’s accounts. Cegedim reserves the right to appeal this decision to the Court of Cassation.

Apart from the items cited above, to the best of the company’s knowledge, there were no post-closing events or changes that would materially alter the Group’s financial situation.

Outlook

For 2015, Cegedim confirms its expectation of like-for-like revenue growth from continuing activities of 2.5% and underlying EBIT growth of 10%.

The Group does not anticipate any significant acquisitions for 2015 and does not disclose profit projections or estimates.

Financial calendar

September 29, 2015, at 10:00 am

• SFAF meeting
  (24 rue de Penthièvre, 75008 Paris)

October 27, 2015 (after the stock market closes)

• Q3 2015 Revenue announcement

November 26, 2015 (after the stock market closes)

• Q3 2015 Results announcement

December 17, 2015 - 2:30 pm

• 6^th Investor Summit (Auditorium Cegedim, 17 rue de l’Ancienne Mairie, Boulogne-Billancourt)

Additional Information

The Audit Committee met on September 24^th, 2015. The Board of Directors met on September 25^th, 2015, to review the 2015 first half consolidated financial statements.

The First Half financial report, including management discussion and analysis, is available in the Finance section of Cegedim’s website:

• In French: http://www.cegedim.fr/finance/documentation/Pages/rapports.aspx
• In English:http://www.cegedim.com/finance/documentation/Pages/reports.aspx

This information is also available on Cegedim IR, the Group’s financial communications app for smartphones and iOS and Android tablets. To download the app, visit: http://www.cegedim.fr/finance/profil/Pages/CegedimIR.aspx.

Appendices

• Balance sheet

Assets

Liabilities

Income statement

Consolidated cash flow statement

(1) Selling price net of cash positions of the divested companies of the CRM and strategic data division on April 1, 2015.

• Glossary

Public company with share capital of 13,336,506.43 euros
Trade and Commercial Register: Nanterre B 350 422 622
www.cegedim.com

View source version on businesswire.com: http://www.businesswire.com/news/home/20150928006381/en/