Cegedim : 3rd Quarter 2016 Results

PRESS RELEASE

Quarterly Financial Information as of September 30, 2016 IFRS - Regulated Information - Not Audited

• Revenue up 4.9% like for like in Q3 2016

• Margins temporarily pinched by investments and the start of operations with BPO clients

• Positive net income of €3.4 million compared with a loss a year ago

• 2016 revenue target revised upward and 2016 EBITDA target maintained

Disclaimer: Pursuant to IAS 17 as it applies to Cegelease's activities, leases are now classified as financial leases, resulting in an adjustment to the quarterly 2015 figures published in 2015. Readers should refer to the last annexes of this press release for full details of the adjustments. All of the figures in this press release reflect the adjustments. Furthermore, the consolidated data presented in this press release relate to continuing activities, unless otherwise mentioned.

The revamp of the business model continues and will allow Cegedim to enjoy greater customer loyalty, closer client relationships, simpler operating processes, more robust offerings and stronger geographic positions. The changes now under way will also boost the share of recurring revenues, improve sales growth and predictability, and enhance the Group's profitability. Profitability has been negatively affected during this business model transition. Cegedim expects to begin seeing the initial positive impact of its investments, reorganizations and transformations in 2017, with a full impact in 2018.

As proof that its clients see the relevance of its new strategy, Cegedim is revising its 2016 revenue target upward once again, and reiterates its 2016 EBITDA target. However, there is a chance that recently signed BPO contracts could negatively affect profitability in the fourth quarter of 2016, since related revenues will not be recognized until 2017.

Cegedim

127 rue d'Aguesseau, 92100 Boulogne-Billancourt

Tel: +33 (0)1 49 09 22 00

www.cegedim.com

Public company with share capital of 13,336,506.43 euros SIRET 350 422 622 00141

1. C. S. Nanterre B 350 422 622 Page 1

   Simplified income statement

   9M 2016		9M 2015		Chg.
   Revenue	In €m	In %	In €m	In %	In %
   	318.3	100.0%	306.9	100.0%	+3.7%
   EBITDA	40.6	12.7%	52.3	17.0%	(22.4)%
   Depreciation	(25.3)	-	(22.4)	-	+12.7%
   EBIT before special items	15.3	4.8%	29.9	9.7%	(48.9)%
   Special items	(5.7)	-	(5.0)	-	+14.3%
   EBIT	9.6	3.0%	24.8	8.1%	(61.6)%
   Cost of net financial debt	(25.2)	-	(32.7)	-	(22.9)%
   Tax expenses	(1.4)	-	(2.5)	-	(42.8)%
   Consolidated profit from continuing activities	(15.5)	(4.9)%	(9.0)	(2.9)%	(72.9)%
   Net earnings from activities held for sale	(1.2)	-	32.2	-	n.m.
   Profit attributable to the owners of the parent	(16.8)	(5.3)%	23.2	7.6%	n.m.
   EPS before special items	(0.7)	-	(0.3)	-	(146.4)%

   Over the third quarter of 2016, Cegedim posted consolidated revenues of €102.8 million, up 2.6% on a reported basis. Excluding an unfavorable currency translation effect of 2.3%, revenues rose 4.9%. There were no disposals or acquisitions. In like-for-like terms the Health Insurance, HR and e-services division's revenues rose by 9.5%, whereas the Healthcare professionals division's revenues fell by 0.7%.

   In the first nine months of 2016, Cegedim posted consolidated revenues of €318.3 million, up 3.7% on a reported basis. Excluding an unfavorable currency translation effect of 1.4% and a 1.1% boost from acquisitions, revenues rose 4.0%. In like-for-like terms the Health Insurance, HR and e-services division's revenues rose by 9.5%, whereas the Healthcare professionals division's revenues fell by 2.3%.

   EBITDA declined by €11.7 million, or 22.4%, to €40.6 million. The first-nine month's margin fell to 12.7% from 17.0% a year earlier. The EBITDA trend was attributable to investments made in human resources and innovation in order to speed up the transition of software products to cloud-based formats and swiftly roll out the Group's new BPO offerings. It is worth noting that more than 80% of this decline occurred during the first half of 2016. Depreciation charges rose €2.9 million, from €22.4 million for the first nine months of 2015 to €25.3 million for the first nine months of 2016. Amortization of R&D expenses over the period amounted to 1.0 million. EBIT from recurring operations fell €14.6 million over the first nine months of 2016, or 48.9%, to €15.3 million. The margin fell from 9.7% for the first nine months of 2015 to 4.8% for the first nine months of 2016. Special items amounted to a €5.7 million charge over the first nine months of 2016 compared with a €5.0 million charge a year earlier. The increase was chiefly due to the increase in restructuring costs due to the implementation of new organizational structures. The net cost of financial debt amounted to €25.2 million over the first nine months of 2016 compared to €32.7 million for the first months of 2015, a decrease of €7.5 million, or 22.9%. It represented 7.9% of first nine months 2016 revenues, compared with 10.7% of first nine months 2015 revenues. This decline reflects lower interest expenses in the second and third quarters as a result of the debt restructuring carried out in January and March 2016. Tax amounted to €1.4 million for the first nine months of 2016, compared with €2.5 million for the first nine months of 2015, a decrease of €1.1 million, or 42.8%. This was chiefly due to the lack of corporate income tax.

   Thus, the consolidated net result from continuing activities came to a loss of €15.5 million at end-September 2016, compared with a loss of €9.0 million in the year-earlier period. Earnings per share before special items came to loss of

   €0.7 at end of September 2016, compared with a €0.3 loss a year earlier. Note that consolidated net result from continuing activities came to €3.4million profit in the third quarter, compared with a €0.7 million loss a year earlier.

   Analysis of business trends by division

   • Key figures by division

     I n €m Health Insurance, HR and e-services Healthcare Professionals

     Activities not allocated

     Cegedim

     Revenue EBIT

     9M 2016	9M 2015
     185.2	166.2
     130.8	138.0
     2.3	2.8
     318.3	306.9

     9M 2016	9M 2015
     15.4	18.0
     2.3	13.3
     (2.4)	(1.4)
     15.3	29.9

     before special items

     9M 2016	9M 2015
     26.8	29.9
     12.1	21.8
     1.6	0.6
     40.6	52.3

     EBITDA

   • Health insurance, HR and e-services

This significant revenue growth over the first nine months of 2016 was chiefly attributable to:

• Cegedim Insurance Solutions, driven by double-digit growth in its iGestion BPO activities and a brisk increase in third-party payment processing. The start of operations with new clients allowed the software and services business for the personal insurance segment to more than offset the effects of switching over to the cloud.

• Double-digit growth at Cegedim e-business following the start of operations with new clients on its Global Information Services SaaS platform for digital data exchanges, including payment platforms.

• The start of operations with numerous clients on the Cegedim SRH SaaS platform for human resources management, resulting in double-digit revenue growth.

  Over the first nine months of 2016, division EBITDA came to €26.8 million, down €3.1 million, or 10.4%. The EBITDA margin came to 14.5%, vs. 18.0% a year earlier. In the third quarter of 2016, division EBITDA came €9.0 million, slightly down €0.2 million, or 2.1%. The EBITDA margin came to 14.8%, vs. 16.6% a year earlier.

  The decline in EBITDA took place almost entirely in the first half of 2016, as third-quarter EBITDA was virtually stable. The decline in the first half was chiefly the result of:

• The start of operations with BPO clients for iGestion and Cegedim e-business;

• Cegedim Insurance Solutions switching its core products over to SaaS format, the start of operations with numerous new clients, and the start of new projects for existing clients;

• A difference in the timing of promotional campaigns in the first half of 2016 compared to 2015 for RNP; The impact was partially offset by Cegedim SRH's fine performance in processing third-party payment flows

  • Healthcare professionals

    Over the first nine months of 2016, division revenues came to €130.8 million, down 5.2% on a reported basis. Currency effects made a negative contribution of 2.9%. There was no impact from acquisitions or divestments. Like-for-like revenues fell 2.3% over the period. The Healthcare professionals division represented 41.1% of consolidated revenues from continuing activities, compared with 45.0% over the same period a year earlier. The division's Q3 2016 revenues came to €41.5 million, down 5.6% on a reported basis. Currency effects made a negative contribution of 4.9%. There was no impact from acquisitions or divestments. Like-for-like revenues fell 0.7% over the period.

    The decline in revenues over the first nine months of 2016 was mainly due to the following:

• A slowing in the UK doctor computerization business in anticipation of the early-2017 launch of a cloud-based offering. Marketing for that offering should restore sales momentum;

• The September 2016 release in France of the new Smart Rx offering - a comprehensive pharmacy management solution built around a hybrid architecture that combines local and cloud-based computing. The new solution allows networks amongst individual pharmacies and links with healthcare professionals. Thus, revenues at the French pharmacy business are likely to resume their growth in the next few months.

• The negative short-term impact of switching Belgian doctors over to SaaS format. These performances were offset mainly by a double-digit growth:

• At Pulse, driven by the RCM and EHR activities.

• In offerings for physical therapists and nurses in France.

  Over the first nine months of 2016, division EBITDA came to €12.1 million, down €9.6 million, or 44.3%. The EBITDA margin came to 9.3%, vs. 15.8% a year earlier. In the third quarter of 2016, division EBITDA came €4.7 million, slightly down €2.9 million, or 38.2%. The EBITDA margin came to 11.4%, vs. 17.3% a year earlier.

  The decline in EBITDA was chiefly attributable to investments made to ensure future growth. The Group was chiefly penalized by the investments it made in:

• France, to develop the new hybrid offering for pharmacies;

• The US, focusing on Revenue Cycle Management (RCM) activities and SaaS electronic health records (EHR);

• The UK, where it aims to have a cloud-based offering for UK doctors in 2017

  EBITDA felt a pinch in the short term from efforts to switch Belgian doctors over to SaaS format and reorganize the business in the US.

  • Activities not allocated

This trend reflects the return to a normal level of billing.

€4.7 million decrease, equal to 2.5%, was mainly attributable to the euro's appreciation against the British pound, for a total of €4.8 million. Acquisition goodwill represented 27.9% of the total balance sheet at September 30, 2016,