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Cegedim: Mounting Evidence of a Return to Solid GrowthRegulatory News: Cegedim, a global technology and services company specializing in the healthcare field, posted consolidated revenues of €268.9 million in the fourth quarter of 2014, a 5.9% increase on a reported basis and a 5.1% gain Like-for-like (L-f-l) compared with the same period in 2013. As in the third quarter, all four divisions contributed to fourth quarter growth. Over the full year, the Like-for-like revenue growth was the result of a slight decline at the Healthcare professionals division being more than offset by growth at the CRM and strategic data, Insurance and services and GERS Activities and Reconciliation divisions. We note that the Healthcare professionals division's L-f-l growth accelerated compared with the previous quarter, and that the Insurance and services division experienced growth in every quarter of 2014. The definitive agreement to sell the CRM and strategic data division to IMS Health Inc. for a cash amount of €385 million(1) was signed in late October 2014. Once the agreement was signed, rating agency Standard & Poor's put the Group's B+ rating on CreditWatch positive. As a reminder, Cegedim will report its full year results under IFRS 5. The revenues of the "New Cegedim" will be slightly higher than the sum of the remaining divisions' revenues owing to a restatement of a portion of the intra-group sales conducted with the CRM and strategic data division.
In the fourth quarter of 2014, Cegedim generated consolidated revenues of €268.9 million, up 5.9% on a reported basis and 5.1% Like-for-like relative to Q4 2013. Acquisitions (Webstar in the UK and SoCall in France) and currencies had positive impacts of respectively 0.1% and 0.6%.
Over the full year 2014, Cegedim generated consolidated revenues of €911.5 million, up 1.0% on a reported basis and 1.3% Like-for-like relative to FY 2013. Acquisitions (Webstar in the UK and SoCall in France) had a positive impact of 0.1%, whereas currencies had a negative impact of 0.4%. Analysis of business trends by division
The division's fourth quarter 2014 revenues amounted to €133.2 million, up 6.6% on a reported basis. Currencies had a positive impact of 0.4%, and there were no acquisitions or divestments. Like-for-like revenues rose 6.2% over the period. This growth is attributable to double-digit growth in the following activities:
It is worth noting the positive momentum at the Mobile Intelligence's activity, and that the Sanofi Group has extended its supply contract with Cegedim for CRM and the OneKey database through April 2017. On October 20, 2014, Cegedim announced that it had signed a definitive agreement to sell this division to IMS Health Inc. for a cash price of €385 million(1). All significant competition authorities gave their approval and the transaction's closing is expected to take place early in the second quarter of 2015. Revenues for the full year 2014 came to €427.5 million; a 0.9% reported increase over the same period in 2013. Currencies had a negative impact of 1.5%, and there were no acquisitions or divestments. Like-for-like revenues rose 2.4% over the period. The CRM and strategic data division represented 46.9% of the Group's consolidated revenues in 2014 compared with 47% a year earlier.
The division's fourth quarter 2014 revenues came to €79.5 million, up 5.8% on a reported basis. The acquisitions of Webstar Health in the UK and SoCall in France boosted revenues by 0.3%, and currency effects added another 1.5%. Like-for-like revenue growth amounted to 3.9% over the period. This expected ramp-up in growth, already witnessed in the third quarter, was chiefly the result of a recovery in French pharmacist computerization, significant growth in UK pharmacist computerization, and robust growth in doctor computerization in Belgium, Spain, the US and France. However, the division did see a downturn in pharmacy window dressing activity in France and UK doctor computerization. Over the full year 2014, revenues rose 0.3% on a reported basis compared with 2013, to €289.8 million. Acquisitions and currencies made positive contributions of respectively 0.4% and 1.1%. Like-for-like revenues fell 1.2% over the period. The Healthcare professionals division represented 31.8% of consolidated revenues in 2014, compared with 32.0% a year earlier.
In the fourth quarter of 2014, the division generated revenues of €47.3 million, up 4.4% on a reported basis and 4.3% Like-for-like. Currencies had virtually no impact and there were no acquisitions or divestments. This growth stemmed principally from double-digit growth in third-party payer data processing and Cegedim SRH human resources solutions. The division's Cegedim e-business unit also saw growth in its electronic invoicing activity. These gains were partly offset by weakness at Cegedim Global Payments owing to the transition from a perpetual license model to the new SaaS (News - Alert) offering. Over the full year 2014, revenues rose 2.3% both on a reported basis and Like-for-like, to €163.7 million. Currencies had virtually no impact and there were no acquisitions or divestments. The Insurance and services division represented 18.0% of consolidated Group revenues in 2014 compared with 17.7% a year earlier.
The division generated fourth quarter 2014 revenues of €8.9 million, up 3.7% on both a reported and Like-for-like basis. Currencies had virtually no impact and there were no acquisitions or divestments. The division's revenue growth was mainly the result of continued development in sales statistics for pharmaceutical products. For the full year 2014, revenues amounted to €30.5 million, up 2.4% on a reported basis and 2.5% Like-for-like relative to FY 2013. Currencies had a negative impact of 0.1% and there were no acquisitions or divestments. The GERS Activities and Reconciliation division represented 3.3% of the Group's consolidated revenues in 2014, more or less unchanged compared with a year earlier. 2014 highlights
On April 7, 2014, Cegedim launched an additional bond offering of €100 million, upsized to €125 million on the issue date, of its 6.75% Senior Notes due 2020. Apart from the date and price of issuance (105.75% plus interest accrued since April 1, 2014), the new bonds are identical to the €300 million of 6.75% Senior Notes due in 2020 that the Group issued on March 20, 2013. It should be noted that Cegedim was able to issue at 5.60% compared to 6.75% one year earlier. The proceeds from the offering were used, among other things, to finance the redemption of €105,950,000 of outstanding bonds due 2015 (at a price of 108.102%), pay the premium and any related fees, and repay the bank overdraft facilities. As a result, the Group's current debt structure is as follows:
On April 15, 2014, Cegedim acquired the French company SoCall, which is based in France. Its core activity is providing secretarial and scheduling services for practices of healthcare professionals. The company manages incoming patient calls, messages, scheduling and records of past consultations for around 50 practices. Financed by internal financing, these activities represent annual revenues of less than €0.3 million and are part of the consolidation scope of Cegedim Group from Q2 2014.
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.
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 on a "cash-free, debt-free" basis and subject to certain adjustments dependent upon Group net debt on the completion date, changes in working capital requirement, and the CRM and strategic data activity's 2014 revenues. In late December 2014, the European Commission gave a green light to IMS Health's acquisition of the CRM and strategic data division. The decision is subject to IMS Health divesting its syndicated promotional audits business in Europe. Revenue in 2013 from this business was approximately $2 million. In addition to the Commission's approval, the waiting period for the U.S. antitrust review expired on December 5, 2014. 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 an accounting loss of approximately €180 million, at the end of 2014, 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. The sale of the CRM and strategic data business is now considered "highly likely". The Group will thus draw up its audited full year accounts under IFRS 5 to isolate the assets held for sale. The 2014 revenues reported in this press release do not yet reflect the application of this norm. They include all of the activities covered by the IMS Health Inc. bid. An analysis is currently being reviewed to measure the amount of intra-group sales generated with the division being sold, which will in the future be considered external sales. As planned, the transaction will take effect in April 2015.
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. Significant post-closing transactions and events 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 Now that the definitive purchase agreement has been signed, the sale of the CRM and strategic data division is considered "highly likely". The Group will thus draw up its audited full year accounts under IFRS 5 to isolate the assets held for sale. These accounts will include an accounting capital loss of around €180 million, with no impact on the Group's cash position. Cegedim will announce its outlook for 2015 when the FY 2014 earnings are released. Financial calendar
March 26, 2015 (after the stock market closes)
March 27, 2015 - 11h30am - Boulogne-Billancourt (France)
April 28, 2015 (after the stock market closes)
May 27, 2015 (after the stock market closes)
July 28, 2015 (after the stock market closes)
September 21, 2015 (after the stock market closes)
September 22, 2015
October 27, 2015 (after the stock market closes)
November 26, 2015 (after the stock market closes)
Additional information
Complete financial information is available on our website: www.cegedim.com/finance. Appendices
# Figures rounded to the nearest unit Year 2014
Year 2013
(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.
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