Cegedim : Half Year 2017 Earnings

PRESS RELEASE

Quarterly Financial Information as of June 30, 2017 IFRS - Regulated Information - Audited

• The business model transformation continues, in line with Group expectations

• Like-for-like revenues rose 6.4%

• EBITDA grew by 23.6%

• FY 2017 revenue target revised upward

Disclaimer: This press release is available in French and in English. In the event of any difference between the two versions, the original French version takes precedence. This press release may contain inside information. It was sent to Cegedim's authorized distributor on September 21, no earlier than 5:45 pm Paris time.

The following terms "business model transformation" and "BPO" are defined in the Glossary.

Starting June 30, 2017, the Group has decided to implement recommendation ANC 2013-03 of France's national accounting standards board, which allows companies to incorporate the income of equity-accounted affiliates in the consolidated operating result. Cegedim's 2016 financial statements have been restated as indicated in the accounting principles of our Half-Year Report.

Cegedim, an innovative technology and services company, posted consolidated H1 2017 revenues of €230.6 million, up 7.0% on a reported basis and 6.4% like for like compared with the same period in 2016. EBITDA came to €33.2 million in the first half of 2017, up 23.6% year on year. EBITDA margin improved to 14.4% in H1 2017, compared with 12.5% a year earlier.

The business model transformation that began in fall 2015 is starting to pay off, with more rapid like-for-like revenue growth and a return to EBITDA margin improvement in the first half of 2017.

Both operating divisions increased their revenues at comparable exchange rates and Group structure. Revenue grew by 9.8% at the Health insurance, HR and e-services division and 1.4% at the Healthcare professionals division.

Most of the EBITDA growth came from the Healthcare professionals division, which made an impressive recovery with the help of a favorable comparison. The Health insurance, HR and e-services division posted a marginal increase in EBITDA owing to the short-term headwinds of switching products over to SaaS and launching several new BPO offerings.

The business transformation plan, the development of BPO services, the switch to SaaS formats, and R&D efforts will result in greater customer loyalty, closer client relationships, simpler operating processes, more robust offerings and stronger geographic positions. The transformation is now well under way, so its full impact is likely to materialize in 2018.

Cegedim

137 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 SIREN 350 422 622

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

   Simplified income statement

   H1 2017		H1 2016		Chg.
   Revenue	€m	%	€m	%	%
   	230.6	100.0	215.5	100.0	+7.0%
   EBITDA	33.2	14.4	26.8	12.5	+23.6%
   Depreciation	(19.6)	(8.5)	(16.4)	(7.6)	+19.1%
   EBIT before special items	13.6	5.9	10.4	4.8	+30.6%
   Special items	(11.7)	(5.1)	(3.7)	(1.7)	+214.1%
   EBIT	1.9	0.8	6.7	3.1	(72.0)%
   Cost of net financial debt	(3.3)	(1.4)	(23.9)	(11.1)	(86.3)%
   Tax expenses	(2.3)	(1.0)	(1.7)	(0.8)	+36.8%
   Consolidated profit from continuing activities	(3.7)	(1.6)	(19.0)	(8.8)	(80.2)%
   Net earnings from activities held for sale	-	-	(0.8)	(0.4)	-
   Profit attributable to the owners of the parent	(3.8)	(1.6)	(19.8)	(9.2)	(81.0)%
   EPS before special items	0.0	-	(1.1)	-	(101.9)%
   Earnings per share	(0.3)	-	(1.4)	-	(81.0)%

   Consolidated revenues for the first half of 2017 amounted to €230.6 million, a 7.0% increase as reported. Excluding an unfavorable currency translation effect of 1.2% and a 1.8% boost from acquisitions, revenues rose 6.4%.

   Both of the divisions grew their like-for-like revenues. Health insurance, HR and e-services division revenues rose by 9.8%, and Healthcare professionals division revenues rose by 1.4%.

   EBITDA rose €6.3 million, or 23.6%, to €33.2 million. The margin also rose, from 12.5% in the first half of 2016 to 14.4% in the first half of 2017. The EBITDA performance was chiefly the result of higher personnel costs and external costs stemming from recruitment and interim staff brought on to help migrate products over to SaaS formats and develop new offerings. Depreciation and amortization costs rose €3.1 million to €19.6 million in the first half of 2017 compared with €16.4 million in the first half of 2016. Most of the increase was due to the amortization of €2.1 million of R&D expenses over the period. EBIT from recurring operations rose €3.2 million in the first half of 2017, or 30.6%, to €13,6 million. The margin improved to 5.9% in the first half of 2017 from 4.8% in the first half of 2016. Exceptional items amounted to an €11.7 million charge in H1 2017 compared with a €3.7 million charge a year earlier. The increase was mainly attributable to the impact of accelerated amortization of intangible fixed assets in the US amounting to €8.5 million. Without the accelerated amortization, exceptional items at June 2017 would have been virtually the same as at June 2016. Net cost of financial debt fell by €20.6 million, or 86.3%, to €3.3 million in the first half of 2017 compared with €23.9 million a year earlier. The decline reflects the positive impact of refinancing carried out in the first half of 2016. Tax costs came to €2.3 million in H1 2017, compared with a €1.7 million charge in H1 2016. The increase was chiefly due to better earnings at French subsidiaries whose results are consolidated with those of Cegedim for tax purposes.

   Thus, the consolidated net result from continuing activities came to a loss of €3.7 million at June 30, 2017, compared with a loss of €19.0 million in the year-earlier period. Net profit before special items came to €0.0 loss per share in the first half of 2017, compared with a €1.1 loss a year earlier. Earnings per share were a €0.3 loss compared with a €1.4 loss for the same period in 2016.

   Analysis of business trends by division

   • Key figures per division

     In € mi ll ion Health insurance, HR and e-services Healthcare professionals

     Activities not allocated

     Cegedim

     H1 2017	H1 2016
     140.3	124.6
     88.4	89.4
     2.0	1.6
     230.6	215.5

     H1 2017	H1 2016
     8.8	10.6
     8.0	2.0
     (3.2)	(2.2)
     13.6	10.4

     Revenue EBIT before special items

     H1 2017	H1 2016
     18.1	17.9
     15.4	8.5
     (0.3)	0.5
     33.2	26.8

     EBITDA

   • Health insurance, HR and e-services

This significant H1 2017 revenue growth, combined with slight EBITDA growth, was chiefly attributable to:

• Continued double-digit growth at Cegedim SRH, as work began with several new clients of the SaaS platform for HR management, which is temporarily impeding margin improvement.

• Strong sales momentum leading to the start of work with several new clients of the SaaS platform for electronic data exchange, Global Information Services, including payment and process digitalization platforms. Cegedim e-business posted double-digit revenue growth combined with strong improvement in profit margins.

• Double-digit growth in iGestion BPO activities for health insurers and mutual insurers. These launches are having a negative short-term effect on profitability.

• The continuation of positive trends - seen for several quarters now - in revenues of third-party payment processing services. On the other hand, developing products and services aimed at hospitals is having a negative short-term effect on profitability.

• Modest growth in software and services for the personal insurance market, despite the impact of switching to the SaaS format. However, the transition is having a negative short-term effect on the business' profitability.

  • Healthcare professionals

    The division's H1 2017 revenues fell by €1.0 million, or 1.1%, to €88.4 million, compared with €89.4 million in the first half of 2016. Currency effects had a negative impact of 2.5%. There was virtually no impact from acquisitions or divestments. Like-for-like revenues rose 1.4% over the period. The Healthcare professionals division represented 38.3% of consolidated Group revenues, compared with 41.5% over the same period a year earlier. EBITDA grew by €6.8 million, or 80.2%, to €15.4 million in the first half of 2017, compared with €8.5 million in the first half of 2016. EBITDA margin was 17.4% in H1 17, up from the 9.5% generated in H1 2016.

    This robust first-half performance was chiefly attributable to:

• The Pulse doctor computerization and revenue cycle management (RCM) business in the US. RCM is a BPO-type business and is growing rapidly, with double-digit growth over the first half. In spite of the strong development, EBITDA grew substantially owing to a favorable comparison.

• Robust revenue and profit growth in the computerization of doctors in France, Belgium and Spain.

• Good revenue and profit at the financial lease business, Cegelease.

• A brisk business in computerizing nurses, physical therapists, speech therapists, orthoptists, midwives and podiatrists in France.

• Renewed revenue growth in the second quarter for the computerization of pharmacists in France thanks to the new Smart Rx offering launched last year. The EBITDA trend is encouraging.

  This performance was partly offset by a decline in revenue and profitability for the computerization of doctors in the UK pending the release of a full SaaS version of that product. The first few modules were launched at the start of the year and have been very well received by the market.

  • Activities not allocated

The negative EBITDA trend was principally due to the impact of rent charges related to moving the corporate headquarters in 2016.

Acquisition goodwill amounted to €201.0 million at June 30, 2017, compared with €199.0 million at December 31, 2016. The €2.0 million increase, or 1.0%, was mainly due to the €3.1 million acquisitions of B.B.M. Systems and Adaptive Apps in the UK. The €3.1 million was partly offset by the euro's appreciation against certain foreign currencies, notably the Pound Sterling for €0.8 million. Acquisition goodwill represented 28.6% of the total balance sheet at June 30, 2017, compared with 28.1% at December 31, 2016.