Cegedim: Profitability increased in 2013, near the top of the forecast range

Regulatory News:

Cegedim, a global technology and services company specializing in the healthcare field, posted a 2.1% reported and 0.5% organic drop in consolidated 2013 revenues, to €902.3 million. EBITDA rose 1.3% year on year to €115.7 million, for a margin of 17.3% compared with 16.7% in 2012.

Over the full year, organic revenue growth of the Healthcare professionals and Insurance and services divisions offset nearly the decline at the CRM and strategic data division. The EBITDA margins of the CRM & strategic data and Insurance and services divisions rose substantially, whereas that of the Healthcare professionals division was stable.

In the fourth quarter of 2013, Cegedim generated consolidated revenues of €254.0 million, down 2.6% on a reported basis and up 0.1% in organic terms. EBITDA of €65.2 million was virtually the same as in Q4 2012. The margin was 25.7%, compared with 25.1% in the year-earlier period. The main reason for the EBITDA stability was the weak performance of Cegedim Strategic Data (market research). We note that Group EBITDA generated in the fourth quarter of 2013 represented 41.9% of full year Group EBITDA.

Operating costs, defined as purchases used, external expenses and payroll costs, continued to decline over the fourth quarter as a result of cost-control measures implemented since 2011. Over the full year 2013, these costs fell by €22.3 million. At constant exchange rates, the fall came to €7.0 million. Thus, even though reported revenues fell by €19.5 million, EBITDA rose €2.0 million.

The Group continues to prioritize innovation; given its unique positioning, this allows Cegedim to anticipate the transformational shifts in the health market and maintain leadership positions in all of the markets in which it operates. This focus on innovation has enabled the Group to launch a number of new products and services that strengthen the Group’s ability to maintain its level of activity in 2014.

With conditions still in flux, Cegedim continues to prioritize debt reduction and is still pursuing efforts in order to improve its operating leverage. In 2014 the Group expects, at a minimum, stability for its revenues and operating margin.

• Simplified income statement

Over the full year 2013, Cegedim generated consolidated revenues of €902.3 million, down 2.1% on a reported basis and 0.5% like for like compared with the same period in 2012. Acquisitions and divestments had a positive net impact of 0.2% and currencies had a negative effect equal to 1.8%.

Operating profit from continuing operations came to €92.1 million, up 2.2% relative to 2012. The increase was chiefly the result of better operating profits from continuing operations at the CRM and strategic data and Insurance and services divisions, diminished somewhat by a marginally weaker Healthcare professionals division.

Following the H2 results, the Group revised its infinite growth projections downward notably for « market research » activities and for the US and French markets. As a consequence the Group recognized, at the end of December 2013, an impairment of goodwill of €63.3 million attributed to the CRM and Strategic Data division. The aim of this book entry is to revise the value of the balance sheet assets and has no impact on cash nor on the recovery of Group profitability before special items, which remain the Group’s priority. This impairment does impact on the annual operating income, which amounts to € 25.6 million in 2013. One shall note that an impairment of goodwill of € 115 million was recorded in the year 2012, without penalizing in 2013 the recovery of EBIT margin before special items, and the beginning of deleveraging.

The cost of financial debt rose by €15.9 million to €60.1 million, a 36.1% increase. This is primarily due to the €8.9 million premium paid in March 2013 to redeem a portion of the 2015 bond issue, a €3.1 million increase in loan interest payments, and a €2.3 million net impact of currency translation.

The consolidated net loss was €58.7 million, compared with an €85.3 million loss the year before, and the loss per share before special items came to €4.2, down from €6.1.

Analysis of business trends by division

• Key figures by division

In order to provide more relevant information on its divisions that more closely reflects its internal reporting, Cegedim will now report on four divisions: CRM and strategic data, Healthcare professionals, Insurance and services and Reconciliation (for more information, please see the glossary in the appendix).

• CRM and strategic data

In 2013, the division’s revenues came to €452.8 million, down 6.2% in reported terms. Acquisitions and divestments made a negative contribution of 0.4%, and currencies were also negative to the tune of 2.9%. Like-for-like revenues fell 3.0% over the period.

The CRM and strategic data division represented 50% of the Group’s consolidated revenues in 2013 compared with 52% a year earlier.

The drop in revenues, excluding the impact of divestments and negative currency translation effects, was chiefly the result of a fewer number of CRM users in mature countries and difficulties at the market research business, which were partly offset by growth in the number of CRM users in emerging countries, Compliance activities, and offerings related to the OneKey database.

EBITDA fell 2.0% to €62.7 million. The decrease is mainly a reflection of lower revenues, partly offset by (i) lower operating costs as a result of cost-control efforts, and (ii) very robust growth in offerings related to the OneKey database and compliance products. Thus, EBITDA fell by only €1.3 million even though revenues were down by €30.0 million. The EBITDA margin climbed by 59 bps to 13.2% from 11.8% a year earlier.

The launch of new Compliance offerings, CRM tools for the medical devices market, and services related to OneKey are promising sources of future growth. The Group continues to pursue its investment policy, which will soon enable Cegedim to enrich its range of products for the medical affairs market, among other areas.

• Healthcare professionals

The division’s reported 2013 revenues rose 0.6% to €288.8 million. Acquisitions continue to boost revenues, by 1.3%, and currencies had a negative impact of 1.1%. Like-for-like revenues rose 0.4% over the period.

The Healthcare professionals division represented 32% of consolidated Group revenues, compared with 31% the year before.

The increase in revenues, excluding acquisitions and currency translation, is mainly the result of stronger performances in the computerization of physicians, physical therapists and nurses in Europe, which were partly offset by pharmacists’ hesitancy to invest in a challenging economic climate.

EBITDA rose 0.5% to €59.7 million. This increase reflects, most importantly, better margins in the computerization of physicians in Europe, particularly in France. Thus, EBITDA margin was stable at 20.7%.

• Insurance and services

The division’s revenues came to €160.0 million in 2013, a 5.8% increase on both a reported and an organic basis. There were no divestments or acquisitions. Currency translation had only a marginal impact.

The Insurance and services division represented 18% of consolidated Group revenues, compared with 16% a year earlier.

Revenues were driven by stronger sales at all of the division’s businesses:

• Cegedim Assurances, leading provider of software and services for the personal insurance market and for third-party payment flow management, following an already good performance in 2012;
• Cegedim SRH, provider of human resources solutions, which continues to garner numerous commercial successes, resulting in double-digit growth; and
• Cegedim e-business, provider of electronic document solutions, which generated brisk growth owing to the ramp-up of SEPA business.

EBITDA rose 11.7% to €38.6 million. This increase was chiefly due to Cegedim e-business, whose electronic document solutions benefited from growing SEPA activity, and Cegedim SRH, which develops human resources management solutions. The EBITDA margin rose 127 bps to 24.1%.

• Reconciliation

The division’s revenues rose 49.3% to €0.6 million. Its contribution to Group revenues is not meaningful.

EBITDA fell to a loss of €5.3 million.

EBIT before exceptional items fell a loss of €6.4 million.

Financial resources

At 31 December 2013, Cegedim’s consolidated balance sheet totaled €1,221 million, down from the year-end 2012 figure, primarily because of a €63.3 million impairment of goodwill in the CRM and strategic data division in the fourth quarter of 2013. Shareholders’ equity shrunk by €79.4 million and represents 28.3% of total assets.

Acquisition goodwill, following the impact of the value impairment for intangible assets, amounted to €528.5 million, down from €613.7 million at the end of 2012. It represents 43.3% of total assets.

Cash and equivalents came to €67.0 million, up €23.5 million. Cash net of bank overdraft facilities came to €54.2 million.

Net financial debt was €462.0 million, versus €475.6 million at end-2012, meaning the Group reduced its debt by €13.6 million.

The Group was in compliance with all of its bank covenants at end-2013, with leverage of 2.68x compared with 2.80x at December 31, 2012.

Before net cost of financial debt and taxes, cash flow was €152.6 million, an €11.6 million increase over end-2012.

2013 highlights

On March 20^th, Cegedim issued a €300 million senior Reg S/144A bond with a coupon of 6.75% maturing April 1, 2020. The issue price was 100% of the nominal value. Cegedim used the proceeds to:

• Redeem 7% bonds maturing in 2015 as part of a redemption offer at a price of 108% on a principal amount of €111.5 million. Including accrued unpaid interest, the total amount was €121.5 million. There are €168.6 million in bonds still outstanding;
• Repay a term loan of €140 million;
• Repay amounts drawn on a revolving credit;
• Pay fees and charges related to these transactions.

On April 26^th, 2013, Standard and Poor’s upgraded its rating on Cegedim and its two bonds to "B+ with stable outlook”.

Following the appointment of Valérie Raoul-Desprez to replace Jacques-Henri David in January 2013, Cegedim Board of Directors welcomed, last September, Anne-Sophie Hérelle as the permanent representative of Bpifrance. Anne-Sophie Hérelle replaced Nicolas Manardo.

In November 2013, Cegedim acquired Webstar Health, the UK leader in health IT consulting and services for pharmacists. The deal adds to Cegedim’s expertise and experience in managing primary care services in UK pharmacies. Financed by internal financing, the acquired business represents annual revenues of around €1.2 million and will contribute to the Group’s consolidated figures from January 1, 2014.

In December 2013, Cegedim acquired certain assets from French company Kadrige, a pioneer in SaaS e-detailing and collaborative solutions. The deal strengthens Cegedim’s multi-channel offering with the addition of reliable and scalable solutions that fit seamlessly into its Mobile Intelligence CRM platform. The acquisition was financed by internal financing. The acquired assets represent annual revenues of around €2.5 million and will contribute to the Group’s consolidated figures from January 1, 2014.

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

To the best of the company’s knowledge, there have been no post-closing events or changes that would materially alter the Group’s financial situation.

Outlook

In a changing environment, Cegedim continues to prioritize debt reduction and is striving to improve its operational leverage.

For 2014, the Group expects at least stability in its revenues and operating margin.

Financial calendar

March 11, 2014 - 11h30am - Boulogne-Billancourt (France)

• SFAF meeting

April 29, 2014 (after the stock market closes)

• Q1 2014 Revenue announcement

May 27, 2014 (after the stock market closes)

• Q1 2014 Results announcement

July 29, 2014 (after the stock market closes)

• Q2 2014 Revenue announcement

September 18, 2014 (after the stock market closes)

• H1 2014 Results announcement

October 28, 2014 (after the stock market closes)

• Q3 2014 Revenue announcement

November 27, 2014 (after the stock market closes)

• Q3 2014 Results announcement

Additional information

The Audit Committee and the Auditors met on March 6^th, 2014. The Board of Directors and the Auditors met on March 7^th, 2014. Audit procedures have been performed and the 2012 Full-year statutory auditors’ report on the financial statements is forthcoming.

The financial information presented in this press release comes from Cegedim Full-year consolidated financial statements and will be fully available on the 2013 Reference Document at www.cegedim.com/finance soon.

Complete financial information is available on our website: www.cegedim.com/finance.

A presentation of Cegedim FY 2013 revenues is also available on the website.

Appendices

• Balance sheet

Assets

Equity and Liabilities

• Income statement

• Consolidated cash flow statement

Glossary