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Cegedim: Mounting Evidence of a Return to Solid Growth
[January 27, 2015]

Cegedim: Mounting Evidence of a Return to Solid Growth


Regulatory 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.

  • The change in revenues per division for the 4th quarter is as follows:




€ million   4th quarter 2014   4th quarter 2013   Q4 2014/2013 change
      Reported   L-f-l
CRM and Strategic Data 133.2 124.9 +6.6%   +6.2%
Healthcare Professionals 79.5 75.2 +5.8% +3.9%
Insurance and Services 47.3 45.3 +4.4% +4.3%
GERS Activities and Reconciliation   8.9   8.6   +3.7%   +3.7%
Group   268.9   254.0   +5.9%   +5.1%

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%.

  • The change in revenues per division over 2014 is as follows:
€ million   2014   2013   2014/2013 change
      Reported   L-f-l
CRM and Strategic Data 427.5 423.7 +0.9%   +2.4%
Healthcare Professionals 289.8 288.8 +0.3% (1.2)%
Insurance and Services 163.7 160.0 +2.3% +2.3%
GERS Activities and Reconciliation   30.5   29.8   +2.4%   +2.5%
Group   911.5   902.3   +1.0%   +1.3%

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

  • CRM and Strategic Data

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:

  • OneKey, in all of the geographic regions where it is present,
  • Compliance, chiefly in Europe, and
  • Market research, mainly in the US, France and Southern Europe.

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.

  • Healthcare Professionals

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.

  • Insurance and Services

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.

  • GERS Activities and Reconciliation

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

  • Refinancing operation

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:

  • €62.6 million of 7.00% bonds due July 27, 2015;
  • €425 million of 6.75% bonds due April 1, 2020;
  • €80 million of revolving credit due June 10, 2016, undrawn as of December 31, 2014;
  • Overdraft facilities.
  • Acquisition

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.

  • Competition authorities' fine

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.

  • 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 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.

  • 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.

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

The Group will hold a conference call today, January 27, 2015, at 6:15 pm in English (Paris time). The
call will be hosted by Jan Eryk Umiastowski, Cegedim Chief Investment Officer and Head of Investor
Relations.

A presentation of Cegedim 2014 Revenues is also available on the website:

http://www.cegedim.com/finance/documentation/Pages/presentations.aspx

   

Contact numbers:

 

France: +33 1 70 77 09 44

US: +1 866 907 5928

UK and others: +44 (0)20 3367 9453

No access code required

March 26, 2015 (after the stock market closes)

  • 2014 Results announcement

March 27, 2015 - 11h30am - Boulogne-Billancourt (France)

  • SFAF meeting

April 28, 2015 (after the stock market closes)

  • Q1 2015 Revenue announcement

May 27, 2015 (after the stock market closes)

  • Q1 2015 Results announcement

July 28, 2015 (after the stock market closes)

  • Q2 2015 Revenue announcement

September 21, 2015 (after the stock market closes)

  • H1 2015 Results announcement

September 22, 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 is available on our website: www.cegedim.com/finance.
A presentation on Cegedim's FY 2014 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 (News - Alert) 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

€ thousands   Q1   Q2   Q3   Q4   Total
CRM and Strategic Data   92,586   101,956   99,780   133,173   427,496
Healthcare Professionals 67,315 74,579 68,411 79,538 289,843
Insurance and Services 38,012 39,969 38,445 47,279 163,704
GERS Activities and Reconciliation   6,137   8,175   7,285   8,890   30,486
Group   204,050   224,679   213,920   268,880   911,529

Year 2013

€ thousands   Q1   Q2   Q3   Q4   Total
CRM and Strategic Data   96,690   101,845   100,193   124,943   423,672
Healthcare Professionals 71,961 75,672 66,016 75,194 288,844
Insurance and Services 37,192 39,850 37,617 45,306 159,965
GERS Activities and Reconciliation   7,021   6,996   7,188   8,570   29,775
Group   212,865   224,363   211,014   254,013   902,256
  • 2014 revenues by division and region are as follows:
    France   EMEA ex France   Americas   APAC
CRM and Strategic Data   29.5%   37.8%   23.6%   9.0%
Healthcare Professionals 72.8% 23.0% 4.2% -
Insurance and Services 99.5% 0.5% - -
GERS Activities and Reconciliation   90.3%   9.7%   -   -
Group   57.9%   25.5%   12.4%   4.2%
  • 2014 revenues by division and currency are as follows:
    Euro   USD   GBP   Others
CRM and Strategic Data   49.0%   19.8%   5.0%   26.2%
Healthcare Professionals 74.9% 4.2% 20.3% 0.6%
Insurance and Services 99.5% 0.0% 0.0% 0.5%
GERS Activities and Reconciliation   90.3%   0.0%   0.0%   9.7%
Group   67.7%   10.6%   8.8%   12.9%
  • Glossary

GERS Activities and Reconciliation: this division encompasses the activities the Group performs as the parent company of a listed entity, as well as the support it provides to the three operating divisions. The activities of GERS in France and Romania and the company Pharmastock were transferred from the CRM and strategic data division to the Reconciliation division, which was accordingly renamed GERS Activities and Reconciliation. This reorganization aims to simplify the reading of the Cegedim income statement in the event that the IMS Health proposal results in a favorable outcome. More information is available in the "Presentation of Cegedim's Divisions" section of the HY 2014 Financial Report.

 

EPS: Earnings Per Share is a specific financial indicator defined by the Group as the net profit (loss) for the period divided by the weighted average of the number of shares in circulation.

 

Operating expenses: defined as purchases used, external expenses and payroll costs.

 

Revenue at constant exchange rate: when changes in revenue at constant exchange rate are referred to, it means that the impact of exchange rate fluctuations has been excluded. The term "at constant exchange rate" covers the fluctuation resulting from applying the exchange rates for the preceding period to the current fiscal year, all other factors remaining equal.

 

Revenue on a Like-for-like basis: the effect of changes in scope is corrected by restating the sales for the previous period as follows:

 

• by removing the portion of sales originating in the entity or the rights acquired for a period identical to the period during which they were held to the current period;

 

• similarly, when an entity is transferred, the sales for the portion in question in the previous period are eliminated.

 

Life-for-like data: at constant scope and exchange rates.

 

Internal growth: internal growth covers growth resulting from the development of an existing contract, particularly due to an increase in rates and/or the volumes distributed or processed, new contracts, acquisitions of assets allocated to a contract or a specific project.

 

External growth: external growth covers acquisitions during the current fiscal year, as well as those which have had a partial impact on the previous fiscal year, net of sales of entities and/or assets.

 

EBIT: Earnings Before Interest and Taxes. EBIT corresponds to net revenue minus operating expenses (such as salaries, social charges, materials, energy, research, services, external services, advertising, etc.). It is the operating income for the Cegedim Group.

 

EBIT from recurring operations: this is EBIT restated to take account of non-current items, such as losses on tangible and intangible assets, restructuring, etc. It corresponds to the operating income from recurring operations for the Cegedim Group.

 

EBITDA: Earnings before interest, taxes, depreciation and amortization. EBITDA is the term used when amortization or depreciation and revaluations are not taken into account. "D" stands for depreciation of tangible assets (such as buildings, machines or vehicles), while "A" stands for amortization of intangible assets (such as patents, licenses and goodwill). EBITDA is restated to take account of non-current items, such as losses on tangible and intangible assets, restructuring, etc. It corresponds to the gross operating earnings from recurring operations for the Cegedim Group.

 

Net Financial Debt: this represents the Company's net debt (non-current and current financial debt, bank loans, debt restated at amortized cost and interest on loans) net of cash and cash equivalents and excluding revaluation of debt derivatives.

 

Free cash flow: free cash flow is cash generated, net of the cash part of the following items: (i) changes in working capital requirements, (ii) transactions on equity (changes in capital, dividends paid and received), (iii) capital expenditure net of transfers, (iv) net financial interest paid and (v) taxes paid.

 

Operating margin: defined as the ratio of EBIT/revenue.

 

Operating margin from recurring operations: defined as the ratio of EBIT from recurring operations/revenue.

 

Net cash: defined as cash and cash equivalent minus overdraft.

A propos de Cegedim :    

Fondée en 1969, Cegedim est une entreprise mondiale de technologies et de services spécialisée dans le domaine de la santé. Cegedim propose des prestations de services, des outils informatiques, des logiciels spécialisés, des services de gestion de flux et de bases de données. Ses offres s'adressent notamment aux industries de santé, laboratoires pharmaceutiques, professionnels de santé et compagnies d'assurance. Leader mondial du CRM santé, Cegedim est également un des premiers fournisseurs de données stratégiques consacrées à ce secteur. Cegedim compte près de 8 000 collaborateurs dans plus de 80 pays et a réalisé un chiffre d'affaires de 912 millions d'euros en 2014. Cegedim SA est cotée en bourse à Paris (EURONEXT : CGM).

Pour en savoir plus : www.cegedim.fr

Et suivez Cegedim sur Twitter (News - Alert) : @CegedimGroup

(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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