Cegedim: Focus on Innovation and Deleveraging

Cegedim: Focus on Innovation and Deleveraging

PARIS--(BUSINESS WIRE)-- Regulatory News:

First-half financial information at June 30, 2012

IFRS - Regulated information - Audited

• A remaining tough economic climate

• Extension of the Performance Improvement Program

• Management remains confident in respecting financial targets

Cegedim, a global technology and services company specializing in the healthcare field, generated consolidated first-half 2012 revenues of €453.3 million and operating income from continuing operations of €37.6 million.

After a broadly satisfactory first quarter, in line with internal objectives, the second quarter was hit by weaker economic conditions and an economic slowdown in many developed countries. This was particularly pronounced from June onwards. Against this backdrop, more clients adopted a wait-and-see position, which directly affected revenues.

The drop of revenues in H1 has a negative impact H1 EBITDA. In this tough climate, Cegedim remains confident in its future growth potential and maintained its focus on innovation and deleveraging, and extended its Performance Improvement Program.

Moreover, the Group considers it is able to meet its covenants as of December 2012 and has a satisfactory level of liquidity.

• Simplified income statement

Consolidated revenues came to €453.3 million, down 1.2% on a reported basis and down 2.7% like for like. Whereas the Healthcare Professionals and Insurance and Services sectors posted like-for-like growth of respectively 0.3% and 5.4%, CRM and Strategic Data sector revenues fell by 6.7%. The CRM solution users decrease during H1 2011 creates an unfavorable base effect, and was expanded in June 2012 with the wait-and-see position of clients regarding market studies.

EBITDA from continuing operations amounted to €68.3 million compared with €75.4 a year earlier. Operating income from continuing operations amounted to €37.6 million, down 9.2% from end-June 2011. It includes a moderate increase of €3 million (+1.3%) of payroll costs and an already appreciable decrease of external charge (€-2.4 million) that were chiefly linked to the reduction of external service providers. Purchases used up to €3.1 million, resulting from the Cegelease recovery. The margin from continuing operations thus goes from 9.0% to 8.3%, mainly because of the one point margin decrease of the CRM and strategic data sector.

The unfavorable variation of activity during H1 2012 in the CRM and strategic data sector, especially in mature countries of American and European zones, led the Group to update, on June 30, 2012, impairment tests on this sector. It shows up an estimated €115 million value loss. Thus, operating income amounts to a loss of €79.4 million.

Note that the cost of net financial debt remains stable at €21.6 million. On the other hand, the effective tax rate came to 17.1%, similar level to that of June 2010, compared to 5.5% at end-June 2011 leading to an €1.4 million increase of tax expense.

Consolidated net profit attributable to the owners of the parent came to a loss of €102.6 million and earnings per share came to €1.01, compared with €1.41 over the first six months of 2011.

Analysis of business trends by sector

• CRM and strategic data

First-half 2012 sector revenues came to €237.2 million, down 4.8% on a reported basis. The Pharmapost divestment had a negative impact on revenue growth of 0.5% thus currencies had a positive impact on revenues of 2.3%. As a result, H1 like-for-like* revenue was down by 6.7% relative to June 2011.

Operating income from continuing operations came to €4.2 million, a €2.8 million decrease over the year-earlier period. As a result, the margin from continuing operations was 1.8%, compared with 2.8% a year earlier.

Mature countries face rising healthcare costs that pose new challenges in an already difficult economic climate. As a result, countries are employing cost-curbing initiatives. These initiatives put constraints on pharmaceutical companies' budgets, which thus adjust downward the number of their medical sales representatives. Thus, about one third of the revenue of this sector is under pressure. This activity has high fixed costs and the impact on margin is rather direct. These penalizing factors specifically come out in Southern European countries (representing 11% of sector revenue).

Cegedim is able to compensate, at least partially, these negative impacts thanks to its products portfolio, its capacity of innovation and its worldwide position. For instance, the Group totally takes advantage of the expansion of emerging countries with, among other, the ram-up of China. In the 12 months ended March 2012, pharmaceuticals sales force levels in that country were up over 17% to 80,000, surpassing the US (72,000 medical reps) for the first time. The Cegedim Group is benefitting from this situation, especially in its market research division. Life sciences companies' strategies give priority to a targeting which help to better understand all factors in the drug decision prescription. This concern finds an answer in Cegedim very sharp offers that index interactions and influence networks within all of its interlocutors with a flexible and multifunctional solution. Cegedim's solutions meet these needs by enabling, for example, better targeting and segmentation strategies that optimize commercial productivity.

Cegedim continues to deliver a steady stream of innovation on these topics (Compliance, CRM on iPad, Multi-channel, etc.).

To adjust its cost structure to keep pace with the trend in sales, the Performance Improvement Program, affecting all areas of expenditure, is extended over the second half of 2012 with a full-year target of savings of around 10 million euros.

• Healthcare professionals

First-half sector revenues came to €143.2 million, up 2.1% on a reported basis compared with end-June 2011. Currency effects and acquisitions boosted revenues by respectively 1.5% and 0.3%.

Operating income from continuing operations came to €23.7 million, a 2.9% decrease over the year-earlier period. As a result, the margin from continuing operations was 16.6%, compared with 17.4% a year earlier. This light margin contraction is directly due to Cegelease activity increase and to RNP margin erosion. Meanwhile, French and UK pharmacists IT activity significantly raises in terms of revenue and margin.

This sector business lines include:

• CHS (Cegedim Healthcare Software), which houses software activities catering to pharmacists, physicians, paramedics and medication databases;

• Point-of-sale advertising in pharmacies and health & personal care shops with the RNP company;

• Financial leasing with the Cegelease company.

• Insurance and services

First-half 2012 sector revenues came to €72.9 million, up 5.5% on a reported basis. Roughly no currency or acquisition impact thus Like-for-like* revenues rose 5.4% over the period.

Operating income from continuing operations came to €9.6 million, down 2.8 over the year-earlier period. As a result, the margin from continuing operations was 13.1%, compared with 14.3% a year earlier.

Revenue was hampered by personal insurance companies' hesitancy in the second quarter. At the same time, online third-party payer management services and payroll and HR management services continue to grow at a brisk pace. These gaps, combined with the starting up of numerous clients with the SRH offer, which lead to costs in a first place, penalized H1 margin. Since July, the Group has noticed an activity recovery with health insurers and mutuals.

Financial resources

Cegedim's total consolidated balance sheet at June 30, 2012, was €1.279 billion, down by €115 million compared with end-2011. The dip is chiefly attributable to a €115 million depreciation of goodwill.

Cash and equivalents exceeded the amount of short-term (< 1 year) financial liabilities, at €57.3 million versus €73.1 million a six months earlier.

The balance sheet structure remain robust, with shareholders' equity representing 34% of the total balance sheet compared with 37% at December 31, 2011, a decrease of 16.5% due to the currency effects of €15.9 million, notably involving the dollar, and from an impairment of goodwill explained above.

Net financial debt was €471.2 million compared with €453.3 million six months earlier. The €17.9 million increase is principally attributable to a decrease of €15.8 million in the Group's cash position, reflecting directly the activity drop and a seasonal decline of working capital for €7.9 million. Net financial debt represents 109.4% of shareholders' equity, against 87.8% at end-2011. The Group complied with all of its covenants at end-June 2011. The Group remains confident to meet its convenants at end of December 2012.

At end-June 2011, available undrawn credit lines stood at €40 million.

After the net cost of financial debt and taxes, cash flow was €39.7 million, compared with €49.9 million at June 30, 2011, down €10.2 million reflecting the decrease in Group profitability.

The Group's working capital requirement increased by €7.9 million compared with end-December 2011, which is a seasonal recurring effect.

First-half highlights

To the best of the company's knowledge, there were no events or changes of the sort to significantly alter the Group's financial situation during the period. Given the level of activity at end of June, the Group considers it is able to meet its covenants at end of December 2012 and has a satisfactory level of liquidity.

• Divestment

Cegedim sold its Pharmapost subsidiary, one of France leading printers of drug information sheets, to the Chesapeake group on April 30, 2012 (see Press Release sent on May 4). Pharmapost, whose synergies with the Group were limited, contributed €5.9 million to Group consolidated revenues in 2011; its contribution to consolidated EBITDA was close to zero.

Significant post-closing transactions and events

On July 3, Cegedim announced the acquisition of ASP Line, France's fourth-largest publisher of pharmacist software, serving more than 1,300 pharmacies present around the country, thus strengthening Cegedim's leadership position in the pharmacy computerization market in France (see Release sent on July 3). Generating synergies with other Group's activities, this acquisition brings with it significant development potential for the years ahead.

Financed by internal financing, these activities represent annual revenues of around €9 million and will be part of the consolidation scope of Cegedim Group from July 1, 2012.

2012 outlook

After a second quarter dampened by the deteriorating economic climate, especially in Europe, the Group expects the economic environment to remain tough overall in the second half of the year.

Against this backdrop, the Group is extending its Performance Improvement Program, while continuing to prioritize innovation and deleveraging. The Group also confirms that it does not plan to make further acquisitions by the end of the year.

As a result, the Group is now expecting for 2012 a slightly increase in revenue combined with a very slightly decrease of its EBITDA compare with 2011.

Financial calendar

The Group will hold a conference call this evening, September 19, 2012, 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 Q2 2012 revenue will also be available on the website: http://www.cegedim.com/finance/documentation/Pages/presentations.aspx

September 20, 2012

• SFAF Meeting for 2012 HY Results

November 8, 2012 (after the stock market closes)

• 2012 Q3 Revenue release

Additional information

The Audit committees and the Board of Directors met in the presence of the Statutory Auditors on respectively September 18 and 19, 2012, to close the consolidated accounts for the first half of 2012. The accounts have been audited, and the audit reports certifying Cegedim's financial accounts will be published shortly.

The financial information presented in this press release is taken from the consolidated first-half accounts of Cegedim and will be available in their entirety in the First-Half Financial Report on the website, www.cegedim.fr/finance, on September 20, 2012.

A presentation of Cegedim's first-half results is also available on the website.

• Revenues by sector and by quarter^# :

# Figures rounded to the nearest unit

* at constant scope and exchange rates

Year 2012

Year 2011

• By sector of activity and geographic zone, the distribution of revenues for the 1^sthalf of 2012 is as follows:

• By sector of activity and currency, the distribution of revenues for 1^sthalf of 2012 is as follows:

• Balance sheet at June 30, 2012

Assets

Equity and Liabilities