Cegedim SA

PAR:CGM

Earnings Call Transcript 2019-Q3

[Operator]

Ladies and gentlemen, welcome to the Cegedim Q3 2019 Revenues Call. Today's conference is being recorded and will be available on the company website. This presentation will be followed by a Q&A session. I will now hand over to Mr. Pierre Marucchi, Managing Director of Cegedim. Sir, please go ahead.

[Pierre Marucchi, Deputy MD & Director]

Okay. Thank you. Hello, everybody. Before starting, I would like just to say a word. Usually, Jan Eryk Umiastowski is making those presentations. And he is temporarily sick, and that's the reason why I will make it today. So let's go on the Q3 revenue presentation. We have made EUR 118 million revenue on the Q3. This is 8.8% of growth. In this growth, we have 6.9%, which is organic growth. The structure growth comes from the acquisition mainly of the 2 company, XimanitX in Germany and BSV in France. If we look at the first 9 months' revenue, we see that we have made plus 1.3%, which is divided in 6.6% organic, 1.5% structure and 0.2% FX due to the dollar USD devaluation compared to euro. We have made EUR 364 million. As you can see, euro is 86.7%. We still have 2% of our revenue in U.S. dollars. This is the Pulse business. And we have sold the assets of those in the middle of August. So this percentage is going to decrease in the future. And next year, we will not make any business in the U.S. anymore. Usually, we present the business process outsourcing revenue trend because this kind of revenue is very specific in the sense that this is a full services revenue, and we need to we have a lot of people to provide the services to our clients. So the evolution of this kind of business has an impact on the P&L of the group. That's the reason why we make a specific slide on this business. As you can see, on the first 9 months of the year, we have made EUR 32 million, which is plus 20% compared to last year. And this has an effect on our headcount figures because we are hiring a lot of people to provide those services for the clients. So we have now 4,889 people, growing by 7% compared to end of last year. So now let's look at the spread of the revenue for our business units. We have 2 main business units: one, which is making business with the insurance companies; business in the HR area; electronic services; and data for pharmaceutical company. It has grown by 9.5%, 7.3% like-for-like, EUR 242 million. And as you can see for the beginning -- since the beginning of this year, every quarter has grown more than the quarter before. So this is why at the end of the year -- last year, we were having 60% of the global revenue made in this business unit. Now it is 66.5%. The Healthcare professional area, which is providing services to healthcare professionals, doctors, pharmacists, nurses, et cetera. This is now growing, which is different from what we had last year during the first 3 quarters where we were decreasing. We have made 6.3% growth, and in this growth, 5.5% is like-for-like. As you can see on the Q2, the second quarter, we had very big growth compared to the other, plus 10.2%. Part of it comes from the fact that we have built, specifically -- the specific developments to [indiscernible] in the United Kingdom. And this is a nonrecurring revenue. It's a once-off revenue, and it accounts for 1/3 of this plus 10%. So if we had not had this exceptional revenue, Q2 would have been a plus 7 and Q3 is plus 4.7. Next slide shows that almost -- most -- almost all of the businesses in Cegedim have participated to the growth. In the first -- third quarter, the unique area, which is not growing, but -- which is flat is the digital communication made into the French pharmacists. All of the other businesses have grown. In the Healthcare professional, which is 5.5% like-for-like growth. You can see that most of the businesses has grown, and we put the emphasis on the fact that mid-August, we have sold a client contracts of Pulse to Harris, which is a Canadian company, meaning that we will have -- we will not have any more -- any revenues in this business over the next month. Potential impact of Brexit, we think that we will have no big impact because all our costs are covered by our revenue, and the impact would be on the nets, so on the EBIT, if there is an impact of Brexit. At the beginning of the year, we said we would make plus 5%. We are not -- we are now very comfortable in the fact that we are going to have growth of more than 5% and EBITDA growing also more than 5% for the whole year. Then we have some appendix where we show the different figures we had in Q1, Q2 and Q3. So you can find all the figures that I presented in the past slides. If you have any questions, I would be happy to answer.

[Operator]

[Operator Instructions] We have our first question from Sébastien Bourget from Quaero Capital.

[Sébastien Bourget]

Just a few things. On your community press release, you mentioned Docavenue and a good performance that contribute to the growth. Could you please give some color about that?

[Pierre Marucchi, Deputy MD & Director]

In fact, it has a very positive impact in terms of growth, but it is a start-up business. So we have started this business really end of September last year. So of course, when we compare the 9 months of this year to last year, we have a strong growth. But this is less than EUR 1 million until now, revenue for the first 9 months. So it's a small business, but it is fast growing.

[Operator]

We have no further questions at this time. [Operator Instructions] We still have no further questions. [Operator Instructions] We have another question from Sébastien.

[Sébastien Bourget]

Okay. Because I'm the only one to ask a question, I ask a second one. Could you please give us some color about the French pharmacists? How the business is developing during the third quarter and what you expect for the fourth quarter as well?

[Pierre Marucchi, Deputy MD & Director]

So the French pharmacists business is returning. We were decreasing. We were losing market share last year. And since the beginning of Q3, we have a positive growth, and we are gaining clients more than we are losing clients. Until end of Q2, we were losing market share. So now we are -- since we have launched our new product, we are on the way to grow and to increase our market share. The growth for the next months will be, nevertheless, less than 5%. This is now -- it's a SaaS model. So we are billing a fixed fee per month, per client. So when we are signing the client, there is not a very big positive impact on the renew. All our businesses are now managed in that way. So we have a growth. We are gaining market share, but only next year, we will see a positive impact on the revenues. And the target for next year will be plus 5%. Is it good? Okay.

[Sébastien Bourget]

And another question concerning the U.K. and more specifically, England. The NHS England has released the new framework agreement, and you are one of the participants with Vision. Could you please let us know or give us more details about this new framework? And does it will change your business in England?

[Pierre Marucchi, Deputy MD & Director]

That impact will be only, I would say, end of next year because we have to launch the specific developments NHS is asking for. I think the first that will be end of March next year, and the second step is end of September next year. So the new organization where we are going to launch API, some bricks of the software, it will have an impact only, I would say, end of next year and mainly in 2021.

[Sébastien Bourget]

Okay. And...

[Pierre Marucchi, Deputy MD & Director]

No impact -- no impact on short term -- no short-term impact.

[Sébastien Bourget]

Yes, sure. But in the long term, are you happy with this new framework?

[Pierre Marucchi, Deputy MD & Director]

Yes, because we are very strong in Wales and Scotland, so we are very well installed, but we have lost some market share in England. And we see that as a way for us to improve our market shares because it's a new scheme. And since we have invested a lot in the R&D in Vision, we think it's a way for us to grow again. And I said before, it's a midterm target.

[Sébastien Bourget]

Yes, sure. I understand that. And another point about U.K. and England is that, as per my comprehension, they changed the revenue method. Before it was per practitioner or performances, and now, it will be per patient. What will be the impact for Cegedim?

[Pierre Marucchi, Deputy MD & Director]

We have made no simulation on that because we have lost so much market share, but we are more focused on the new -- the new way of making the business. So I must say I'm not really able to answer your question because I don't know the answer to your question because we have not made any budget to precisely -- that I can answer it.

[Sébastien Bourget]

Okay. Yes, I understand. The main focus is to turn around the business and gain market share.

[Pierre Marucchi, Deputy MD & Director]

And to have more and more doctors using our software.

[Operator]

We have a question from Charles Bordes from Kepler Cheuvreux.

[Charles Bordes, Equity Research Analyst]

I saw that BPO remained at a high level of growth during the quarter. I assume this is thanks to the BCAC contract. How sustainable in time is this growth rate? I mean when do you plan the growth to normalize a bit? And what do you consider to be a normative level for growth?

[Pierre Marucchi, Deputy MD & Director]

Okay. What is specific to this business in the insurance companies area is that it's a very small number of contracts, but each contract is very big. So we know that we are going to have growth -- a significant growth next year because we have just signed a new big contract with an insurance company. And the growth will be roughly the same as the today growth. We are not in a way to fix a normative percentage of our revenue in BPO because we are making this BPO business because it is asked by our clients, our clients in the insurance area. We know that those big organization, they need to be more and more efficient. And a way for them is to ask us to make most of their micro phase business into our organization. So difficult to make some revision of some simulation on the future. But we know that we are in a market, which we grow -- which will grow because we know that those organization are looking for providers able to manage their business, to lower cost in their internal organization.So I'm not able to tell you if in 5 years from now, we are going to make EUR 100 million in the BPO. But what we know is that it will be a big part of the growth of the next years.

[Charles Bordes, Equity Research Analyst]

Okay. Understood. And then another question, if I may. You added 8% growth over the first 9 months, yet the guidance remains unchanged. Are there any potential negative effects to fear in Q4? Because at the current pace of growth, the final number would be quite more than 5%. So is there any specific reason for guidance -- for the guidance being not upgraded?

[Pierre Marucchi, Deputy MD & Director]

Two specific reasons. First of all, we have stopped the Pulse business. It is an asset there. So there is no IFRS 5 effect. But we won't -- we will not make any revenue on the Q4 coming from Pulse. Last year, it was EUR 3 million. So we know that we start the Q4 at minus 3. Another point is that we have this exceptional invoice business made with NHS in June. And this will not come this year in Q4. And this was not far from EUR 1.5 million. So we know that the Q4 -- we are starting the Q4 with minus EUR 4.5 million compared to last year, because last year, the billing to NHS has been done in December. That's the reason why we think that Q4 will not be at 8% growth. Now if you -- if we take the last year Q4 revenue and we subtract for 4.5, and if we add 8% on that, then we come to growth for Q4 at 4.5%. That's the reason why we are not saying we are going to make plus 8 on the whole year. And we know that we will be at more than plus 5.

[Operator]

We have no further questions at this time. [Operator Instructions] We have no further questions. We still have no further questions. I give the floor back to Mr. Marucchi for the conclusion.

[Pierre Marucchi, Deputy MD & Director]

Okay. So thank you very much for having attending this presentation. Bye-bye.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you all for attending. You may now disconnect.