Cegedim: Revenues Grew in Third Quarter 2014

Regulatory News:

Cegedim, a global technology and services company specializing in the healthcare field, posted consolidated third quarter 2014 revenues of €213.9 million, up 1.4% on a reported basis and 1.0% on a Like-for-like basis relative to the same period in 2013.

All four divisions contributed to the positive L-f-l revenue growth in the third quarter. Over the first nine months of the year, the relative stability of L-f-l revenues is attributable to the decline at the Healthcare Professionals division, which was almost entirely offset by growth at the CRM and Strategic Data, Insurance and Services and GERS Activities and Reconciliation divisions. Note that the Healthcare Professionals division returned to positive L-f-l growth in the third quarter.

The definitive agreement regarding the sale of the CRM and Strategic Data division to IMS Health Inc. for a cash amount of €385 million⁽¹⁾ was signed in late October. Once the agreement was signed, rating agency Standard & Poor’s put the Group’s B+ rating positive CreditWatch.

Given the near stability in Like-for-like revenues over the first nine months, the Group is confident it will reach its 2014 targets.

• The change in revenues per division for the 3^rd quarter is as follows:

In the third quarter of 2014, Cegedim posted consolidated revenues of €213.9 million, up 1.4% on a reported basis and 1.0% Like-for-like relative to the same period in 2013. Acquisitions (Webstar in the UK and SoCall in France) and currency effects made positive contributions of respectively 0.1% and 0.2%.

• The change in revenues per division over 9 months is as follows:

Over the first nine months of 2014, Cegedim generated consolidated revenues of €642.6 million, down 0.9% on a reported basis and 0.2% Like-for-like relative to the same period in 2013. Acquisitions (Webstar in the UK and SoCall in France) made a positive contribution of 0.2%, whereas currencies had a negative impact of 0.8%.

Analysis of business trends by division

• CRM and Strategic Data

In the third quarter of 2014, division revenues came to €99.8 million, down 0.4% on a reported basis. Currencies had a negative impact of 0.7% and there were no acquisitions or divestments. Like-for-like revenues rose 0.3% over the period.

Over the first nine months of 2014, revenues came to €294.3 million, down 1.5% on a reported basis compared with the year-earlier period. Currencies had a negative impact of 2.3% and there were no acquisitions or divestments. Like-for-like revenues rose 0.9% over the period.

The CRM and Strategic Data division represented 45.8% of the Group’s consolidated revenues over the first nine months of 2014, compared with 46.1% over the same period a year ago.

The growth in revenues, excluding the negative currency impact, was chiefly attributable to emerging country growth, Compliance activities and OneKey database-related products in every region where the Group is present.

It should be noted that the market research activity experienced growth over the first nine months of 2014.

On 20 October 2014, Cegedim announced that it had signed a definitive agreement to sell this division to IMS Health Inc. for €385 million in cash⁽¹⁾ . The deal is expected to close early in the second quarter of 2015.

• Healthcare Professionals

In the third quarter of 2014, division revenues totaled €68.4 million, up 3.6% on a reported basis. The acquisitions of Webstar Health in the UK and SoCall in France had a positive impact of 0.5% on revenues, while currencies boosted the figure by 1.7%. Like-for-like revenues rose 1.5% over the period.

As announced, Q3 revenue growth was driven mainly by a less demanding comparison in physician computerization in the UK, and by robust growth in activities aimed at French physicians. It is worth noting the continued positive momentum at pharmacist software in France.

Over the first nine months of 2014, division revenues totaled €210.3 million, down 1.6% on a reported basis compared with the same period in 2013. Acquisitions and currencies made positive contributions of respectively 0.5% and 0.9%. Like-for-like revenues fell 3.0% over the period.

The Healthcare Professionals division represented 32.7% of the Group’s consolidated revenues over the first nine months of 2014, compared with 33.0% a year earlier.

• Insurance and Services

The division’s third-quarter revenues came to €38.4 million, up 2.2% both on a reported basis and Like-for-like. Currencies had virtually no impact and there were no acquisitions or divestments.

Revenues over the first nine months of 2014 came to €116.4 million, up 1.5% both on a reported basis and Like-for-like compared with the same period in 2013. Currencies had virtually no impact and there were no acquisitions or divestments.

The Insurance and Services division represented 18.1% of the Group’s consolidated revenues over the first nine months of 2014, compared with 17.7% in the same period a year earlier.

This increase was chiefly attributable to double-digit growth in third-party payer flow management, Cegedim SRH human resources solutions, and Cegedim e-business electronic invoicing activities. This growth was partially offset by weakness at the Cegedim Global Payments business caused by the transition from a perpetual license model to a SaaS offering.

• GERS Activities and Reconciliation

Division revenues totaled €7.3 million in the third quarter of 2014, a 1.3% increase both on a reported basis and Like-for-like. Currencies had a positive impact of 0.1% and there were no acquisitions or divestments.

Over the first nine months of 2014, revenues amounted to €21.6 million, up 1.8% on a reported basis and 1.9% Like-for-like relative to the same period in 2013. Currencies had a negative impact of 0.1% and there were no acquisitions or divestments.

The GERS Activities and Reconciliation division represented 3.4% of the Group’s consolidated revenues over the first nine months of 2014, compared with 3.3% a year earlier.

The division’s main source of revenue growth was the continued development of sales statistics for pharmaceutical products.

3rd quarter highlights

On July 8, 2014, competition authorities imposed a €5.7 million fine on Cegedim in response to a complaint filed by the Euris company accusing the group of unfair practices in France in the market for healthcare professional databases. Cegedim appealed this decision to the Paris Court of Appeals. The French Competition Authorities decision is enforceable, so Cegedim paid the full amount of the fine in October 2014.

However, the fine does not in any way jeopardize the terms of the deal with IMS Health. We note that this risk was cited in paragraph 4.3.24 of the 2013 Annual Report and in the prospectus that accompanied our bond issue in April.

Apart from the item 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

• Execution of a definitive purchase agreement for the CRM and Strategic Data division

On October 20, 2014, Cegedim announced that a definitive purchase agreement has been executed for its CRM and Strategic Data division with IMS Health Inc. for a cash price of €385 million⁽¹⁾.

The signing comes after the group successfully informed and consulted its works councils, receiving a positive opinion from all countries where the consultations were required; and after a unanimously positive vote from the Cegedim Board of Directors.

On October 1^st, 2014, the AMF confirmed that the contemplated transaction did not justify a compulsory buyout offer under Article 236-6 of its General Regulations. The activities concerned represent 47% of 2013 revenue (excluding intra-Group revenue), 42.8% of 2013 EBIT before special items, and 40.8% of 2013 EBITDA.

The operation will now be submitted to antitrust authorities for review, and it is anticipated that the closing will occur in early Q2 2015.

The proceeds will be used to repay debt, thus reinforcing the Cegedim balance sheet and P&L statement, resulting in a leverage ratio close to 1 and margin improvement based on 2013 pro forma figures. The transaction will, however, lead Cegedim to recognize, at the end of 2014, an accounting loss of approximately €180 million, with no impact on the Group's cash.

This transaction will allow Cegedim to refocus on software and databases for healthcare professionals and health insurance companies, and on its fast-growing multi-industry activities such as e-business, e-collaboration and outsourced payroll and HR management.

It should be noted that the financial statements closed at June 30, 2014, including the revenue figures published in this press release, continue to include all the data relating to the business activities targeted by the IMS Health Inc. proposal. IFRS 5, whose objective is to separately classify activities considered as held for sale, does not apply for the time being. As of September 30, 2014, the sale could only be considered "highly likely”, because Cegedim’s Board of Directors did not vote on the deal until mid-October. Furthermore, the activities cannot be considered to be "immediately available for sale in their present state” because their IT processing centers will have to be physically separated from those that handle the overall Group’s operating activities, and the assets housed within legal entities that encompass multiple activities will have to be split off.

⁽¹⁾ On a cash free debt free basis, subject to certain adjustments based on the Group's net debt at the date of completion, changes in net working capital and 2014 CRM and strategic data division revenue.

• Cegedim B+ rating placed on CreditWatch Positive by S&P

On October 24, 2014, once the definitive agreement on the sale of the CRM and Strategic Data division was signed, Standard & Poor’s placed the Cegedim B+ rating for its bonds on CreditWatch positive.

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.

Outlook

Cegedim is reconfirming its target for 2014 of at least stable revenue and operating margin from recurring operations.

For the second half of 2014, the Group expects a slight slowdown at the CRM and Strategic Data division, and a slight increase in activity at the other divisions. A less demanding comparison level for UK doctors software in the second half of 2014 and a restored order book for French pharmacist software activities point to more positive revenue developments in the second half of the year.

Following the execution of the definitive purchase agreements for the CRM and Strategic Data division the Group will be led to recognize, upon the closing of its 2014 accounts, an accounting loss of approximately €180 million, with no impact on the Group’s cash.

Financial calendar

November 27, 2014 (after the stock market closes)

• Q3 2014 Results announcement

December 16, 2014 - 2:30 pm to 5:30 pm (welcome coffee at 2:00 pm)

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

Additional information

Complete financial information is available on our website: www.cegedim.com/finance.
A presentation on Cegedim’s third quarter revenues is also available on the website.
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 2014

Year 2013

• 9 months 2014 revenues by division and region are as follows:

• 9 months 2014 revenues by division and currency are as follows:

• Glossary