Cegedim: revenues up 3.2% in the first half

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.

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. Note that the Healthcare professionals division’s performances improved over the course of the second quarter.

Cegedim continues to successfully transition its products over to SaaS model. However, the transition affected sales at Cegedim Assurances in the second quarter of 2015.

Greater use of self-financing in the second quarter of 2015 negatively affected the Q2 revenues of Cegelease. However, the value of new contracts is matching the pace forecast at the start of the year. The margin on self-financed contracts is higher, but is recorded over the duration of the contract.

As previously announced, the Group expanded its activities internationally via targeted acquisitions. On July 20, Cegedim strengthened its software publishing activity in the fields of health and personal protection insurance in new countries by acquiring Activus in the UK.

Cegedim announced the divestment of its CRM and strategic data division to IMS Health for €396 million in cash⁽¹⁾ on April 1. As a result, rating agency Standard & Poor’s upgraded its rating for Cegedim to BB- with a positive outlook.

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

• The change in revenues per division for the first half is as follows:

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 €348.1 million, down 18.8% on a reported basis and up 2.2% like for like compared with the year-earlier period.

⁽¹⁾This estimated amount is subject to joint review over a period of 180 business days.

• The change in revenues per division for the second quarter is as follows:

In the second quarter of 2015, continuing activities had revenues of €124.8 million, down 2.3% like-for-like compared with the same period in 2014. There were no acquisitions or divestments, and currencies had a positive impact of 2.1%, meaning revenues were virtually stable on a reported basis.

Given that the divestment occurred on April 1, 2015, revenues including activities held for sale came to €125.2 million.

Analysis of business trends 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.

In the second quarter of 2015, division revenues came to €57.5 million, up 1.3% on a reported basis and like for like. Currencies had virtually no impact, and there were no acquisitions or divestments.

This division is growing even though it is in the midst of transitioning part of its Insurance product range to SaaS model. In fact, Cegedim Assurances was the first company in France to win the highest level of Label Cloud certification from France IT for its ACTIV’ suite in SaaS form. Alongside this transition, in July 2015 the division acquired UK-based Activus, a publisher of health and personal protection insurance software. This acquisition will allow expansion into new markets, such as the UK, the USA, the Middle East, APAC, and Africa, among others. Lastly, RNP, a specialist in traditional and digital displays for pharmacy windows in France, experienced a different sequential trend in the second quarter of 2015 than it did in 2014. It is expected to make up the difference in the third quarter of 2015.

The third-party payment flow management activities of Cegedim Assurances experienced double-digit growth, as did the human resources solutions of Cegedim SRH and the electronic invoicing offerings at Cegedim e-business. In addition, iGestion saw a ramp-up among the clients it signed in 2014 for its range of outsourcing solutions covering all or part of the business processes of insurance companies, personal protection insurers and mutual insurers.

Sales momentum continued in the second quarter with the announcement of new clients, such as Euromaster at Cegedim SRH, and Bouygues Telecom and Henkel France at Cegedim e-business.

• 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.

In the second quarter of 2015, division revenues amounted to €39.4 million, a 4.6% increase on a reported basis. There were no acquisitions or divestments, and currencies made a positive contribution of 6.8%. Like-for-like revenues fell 2.1% over the period.

The decrease is chiefly attributable to slower activity in the UK. But investments in a Cloud offering aimed at UK physicians should restore the activity’s sales momentum over the coming months.

The rebound in sales momentum continues in the computerization of pharmacies in France, although there is always a lag between commercial successes and revenue recognition.

The decrease in revenues was partly offset by continuing robust growth in the computerization of physicians in France, Belgium, Spain and Romania, and in drug databases in France and the UK. As expected, the computerization of physicians in the US bounced back strongly in the second quarter.

Note that despite a demanding comparison, the revenue decline was only half what it was in the first quarter.

• 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, on a par with the same period a year earlier.

In the second quarter of 2015, division revenues came to €26.8 million, down 10.4% on a reported basis and like for like. There were no acquisitions or divestments, and currencies had no impact.

Revenues were down in Q2 2015 owing to greater use of self-financing for financial lease contracts. Revenue earned from self-financed contracts is recognized over the duration of the contract, unlike contracts that are resold, whose revenues are recognized immediately. As a reminder, margins are higher on self-financed contracts than on resold contracts. But again, the margin on resold contracts is recognized as soon as the contract is signed, whereas the margin on self-financed contracts is recognized over the duration of the contract.

• 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.

In the second quarter of 2015, division revenues came to €1.1 million, up 33.7% on a reported basis and like for like. There were no acquisitions or divestments, and currencies had no impact.

This increase was the result of invoicing for specific services that are being provided to IMS Health solely in the context of the sale of the CRM and strategic data activity on April 1, 2015.

Financial resources – 2^nd quarter 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.

• 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.

• 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.

• Favorable exchange rate movements

At end-June, movements in exchange rates were positive, contributing €2.6 million to consolidated second quarter revenues from continuing activities.

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

• Acquisition in the UK of Activus

On July 20^th 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 positively to the Group’s margins and to its consolidated results starting in the second half of 2015.

• 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).

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 28, 2015 (after the stock market closes)

• H1 2015 Results announcement

September 29, 2015

• SFAF meeting

October 27, 2015 (after the stock market closes)

• Q3 2015 Revenue announcement

November 26, 2015 (after the stock market closes)

• Q3 2015 Results announcement

Additional information

Complete financial information and a presentation on Cegedim’s second quarter revenue are available on our website: www.cegedim.com/finance.

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

• Revenues by division and by quarter^#:

# Figures rounded to the nearest unit

Year 2015

Year 2014

• By division and geographic zone, the distribution of revenues for the 1^st half of 2015 is as follows:

• By division and currency, the distribution of revenues for 1^st half of 2015 is as follows:

• Glossary

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