Correction: Cegedim: H1 2020 Earnings
First-half financial information at June 30, 2020
IFRS – Regulated information – AuditedCegedim: First half impacted by the health crisis, rebound in activity expected in the second halfRevenue decreased by 3.9%Recurring operating income (1) declined by 50.1%Target is for nearly stable FY 2020 revenue and recurring operating income(1)Boulogne-Billancourt, France, September 24, 2020, after the market closeCegedim, an innovative technology and services company, posted consolidated, H1 2020 revenues of €236.2 million, down 3.9% on a reported basis and 2.5% like for like compared with the same period in 2019. Recurring operating income(1)came to €6.3 million, down 50.1% year on year.In like-for-like terms, revenue decreased at both operational divisions. The Health insurance, HR and e-services division revenue declined by 2.7% and Healthcare professionals division revenue, by 2.2%.Recurring operating income(1) declined at the Health insurance, HR and e-services division by €6.6 million but was virtually stable at a the Healthcare professionals division and Corporate and others division.Income statement summary(1) See the 2020 Interim Financial Report, Chapter 3 “Condensed consolidated interim financial statements”, Section 3.6, Note 2 on Alternative performance indicators and Note 6 “Segment reporting”.Consolidated revenue decreased by €9.6 million, or 3.9%, to €236.2 million in H1 2020, compared to €245.8 million for H1 2019. Currencies had virtually no impact and, excluding an unfavorable scope impact of 1.4pp, revenues fell 2.5%. Recurring operating income(1) decreased by €6.3 million, or 50.1%, to €6.3 million in H1 2020, compared with €12.6 million in H1 2019. The June 2020 figure represented 2.7% of revenue, compared with 5.1% in June 2019.Depreciation and amortization expenses decreased by €0.9 million, or 2.7%, to €31.9 million in H1 2020, compared with €32.8 million in H1 2019.EBITDA(1) decreased by €7.2 million, or 15.9%, to €38.2 million in H1 2020, compared with €45.5 million in H1 2019. EBITDA represented 16.2% of consolidated revenue in H1 2020, compared with 18.5% in H1 2019.Other non-recurring operating income and expenses(1) amounted to a charge of €6.2 million in H1 2020 compared with a charge of €16.3 million in H1 2019. Most of the yoy decrease are attributable to “Provisions for intangible asset obsolescence”. The 2020 figure is largely attributable to a €4.3 million impairment for certain intangible assets of the UK doctor software business stemming from previous acquisitions, and much of the 2019 figure is attributable to the sale of nearly all of the business activities of Pulse Systems Inc, which resulted in a €14.9 million charge.Cost of net financial debt remained relatively stable at €4.6 million in H1 2020, compared with €4.5 million in H1 2019. This stability reflects the debt structure and reduced use of the revolving credit facility (RCF).Tax came to a charge of €0.2 million in H1 2020 compared with a charge of €2.1 million in H1 2019, down €1.9 million or 89.8%. This change was principally the result of a decrease in taxes at the Group level and from a positive adjustment in deferred tax assets.As a result, consolidated net profit came to a loss of €4.6 million in H1 2020 compared with a loss of €10.2 million in H1 2019. Recurring net profit per share came to a loss of €0.2 in H1 2020 compared to a loss of €0.4 in H1 2019. Earnings per share were a loss of €0.3 in H1 2020 compared with a loss of €0.7 a year earlier.Analysis of business trends by division·Key figures by division·Health insurance, HR and e-servicesIn the first half of 2020, the Health insurance, HR and e-services division reported revenues of €160.3 million, down 1.3% on a reported basis and 2.7% like-for like. Currencies had virtually no impact and the acquisitions of Cosytec and NetEDI made a positive contribution of 1.4pp. Recurring operating income(1) decreased by €6.6 million, or 61.3%, to €4.1 million in H1 2020 compared to €10.7 million in H1 2019. The H1 2020 figure represented 2.6% of revenue, compared with 6.6% in H1 2019.Business was negatively affected by the pandemic across the board. BPO volumes dipped temporarily. Project-based activities were affected because implementation was delayed until the second half. C-Media (conventional and digital signage solutions for pharmacies) suspended all activity for one month because advertisers postponed their marketing spending.·Healthcare professionalsIn the first half of 2020, the Healthcare professionals division reported revenues of €74.1 million, down 9.1% on a reported basis and 2.2% like-for like. Currency translation had a negative impact of 0.1% and acquisitions and disposals had a negative impact of 6.8%, chiefly due to the sale of nearly all of the business activities of Pulse Systems Inc. in the US in August 2019. Recurring operating income(1) increased by €0.1 million, or 2.7%, to €3.0 million in H1 2020 compared to €2.9 million in H1 2019. The H1 2020 figure represented 4.1% of revenue, compared with 3.6% in H1 2019.This increase in recurring operating income(1) is chiefly attributable to the sale of nearly all of the business activities of Pulse Systems Inc. in August 2019 (which generated a €2.8 million recurring operating loss in H1 2019), to the virtual stability of the division’s recurring business, and to growth at: RESIP (BCB medication database), RM Ingénierie (allied health professional computerization in France), and the doctor software business in the UK. This performance was partially offset by costs at Maiia (online appointment scheduling and telemedicine), whose strong H1 growth will have a positive impact starting in the second half.
·Corporate and othersIn the first half of 2020, the Corporate and others division reported revenues of €1.7 million, stable on a reported basis and like-for like. Currencies and acquisitions had no impact. Recurring operating income(1) was relatively stable at a €0.9 million loss over H1 2020, compared with a €1.0 million loss in H1 2019.Balance sheet structureThe consolidated total balance sheet amounted to €870.0 million at June 30, 2020, a €61.4 million or 7.6% increase over December 31, 2019. This increase is mainly attributable to the €55.7 million increase in receivables linked to outsourced management contracts in the health insurance sector.Goodwill amounted to €186.0 million at June 30, 2020, compared with €192.7 million at December 31, 2019. This €6.7 million decrease, or 3.5%, was the result of assigning €4.1 million of goodwill from 2019 acquisitions to other identifiable assets, and of a €2.6 million currency impact. Goodwill represented 21.4% of the total balance sheet at June 30, 2020, compared with 23.8% at December 31, 2019.Cash and equivalents came to €26.1 million at June 30, 2020, a €2.9 million decrease compared to December 31, 2019. This decrease is chiefly attributable to the €2.6 million drop in prepaid income at the health insurance BPO business.Equity decreased by €10.3 million, or 5.1%, to €191.0 million at June 30, 2020, compared with €201.2 million at December 31, 2019.Total net financial liabilities(1) amounted to €176.1 million, down €4.4 million compared with 6 months ago. Total net financial liabilities(1) represented 92.2% of equity at June 30, 2020, compared with 89.7% at December 31, 2019.Cash flow after cost of net financial debt and taxes increased by €55.6 million to an inflow of €50.7 million at June 30, 2020, compared with an outflow of €4.9 million at December 31, 2019. The improvement in WCR is attributable to a €15 million boost from the postponement of social charges and rent payments as a result of efforts to mitigate the impacts of the Covid-19 crisis, the termination of non-recourse factoring agreements in December 2019 (€14.9 million impact at June 30, 2019), and the fluctuation in advances paid by client at the health Insurance BPO business.HighlightsApart from the items cited below, 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.·Tax
On February 21, 2018, Cegedim SA received official notice that the French tax authorities planned to perform an audit of its financial statements for the period from January 1, 2015, to December 31, 2016. After consultation with its lawyers and based on ample precedent, the Group believes that the adjustment is unwarranted. By appealing the case, we were able to obtain tax relief that brings the maximum possible amount of back taxes owed at June 30, 2020, to €8.5 million (vs. €9 million). Regarding the other points of disagreement, the Group has decided to explore its options for recourse before requesting an appeal. Cegedim still believes that there is not enough risk with respect to past deferred tax assets or to tax loss carryforwards recorded on its balance sheet as of June 30, 2020, (corresponding to €20 million of deferred tax) to jeopardize their valuation.Significant post-closing transactions and eventsNo significant events occurred between June 30, 2020, and September 24, 2020, when the Board of Directors authorized the condensed consolidated interim financial statements for issue.OutlookThe Group has a solid business model, a robust financial situation with a reasonable amount of leverage(1), no debt maturing before October 2024, an undrawn €65 million revolving credit facility, and an unused €11 million overdraft facility on the date this report was published.First-half revenues fell 2.5% like for like, and recurring operating profit fell 50.1%.The Group operates predominantly in the healthcare sector and expects business at its two operating divisions to rebound in H2 2020, with a return to organic growth in revenue and recurring operating income.Consequently, relative to 2019, Cegedim is looking for nearly stable FY 2020 revenue and recurring operating income. These targets may need to be revised if the Covid-19 crisis causes a severe tightening of public health restrictions after the first-half accounts are published.The Group does not expect any material acquisitions in 2020 and does not provide earnings estimates or forecasts.Additional informationThe Audit Committee met on September 23, 2020. The Board of Directors, chaired by Jean-Claude Labrune, approved the consolidated interim financial statements for 2020 at its meeting on September 24, 2020. The audit of the financial statements has been completed. The audit report has been issued. The 2020 Interim Financial Report will be available in a few days’ time on our website and on Cegedim IR, the Group’s financial communications app.2020 Financial calendar
Annex 1: Financial statements as of June 30, 2020·Assets as June 30, 2020At June 30, 2020, the Group’s cash position was positively impacted by €11 million, compared with a negative impact of €32.2 million at December 31, 2019, because prepaid income in the health insurance BPO activity was classified as “other current receivables” to reflect the special terms of some contracts.
·Liabilities and shareholders’ equity as of June 30, 2020
·Income statement as of June 30, 2020(1) See in the 2020 Interim Financial Report, Chapter 3 “Condensed consolidated interim financial statements”, Section 3.6, Note 2 on Alternative performance indicators and Note 6 “Segment reporting”.
·Consolidated cash flow statement as of June 30, 2020
Glossary
AttachmentCegedim_Earnings_HY2020_ENG
