Cegedim SA (ALCGM) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Cegedim Full Year 2019 Revenue 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. At this time, I would like to turn the conference over to Mr. Jan Eryk Umiastowski, Cegedim Chief Investment Officer and Head of Investor Relations. Sir, please go ahead.

Thank you. Good morning, and good evening, everyone. Thank you for joining us to discuss Cegedim full year 2019 revenue. Before we begin, I would like to remind you that this presentation and conference call may constitute forward-looking statements. These forward-looking statements may include comments about our guidance, our expectations and prospects and are based on our view as of today, January 27, 2020. Any such statements and projection reflects various estimates and assumption by management concerning anticipated results. Additional information concerning important factors that may cause our results to differ materially from expectations and underlying assumptions, please refer to our registration document, specifically the Risk Factors section. We undertake no obligation to correct or update these forward-looking statements whether as a result of new information, further events or otherwise. Having this in mind, I will turn on Page 3 of the presentation. So in the fourth quarter of 2019, revenue increased by 6.5% on a like-for-like basis. This means excluding currency impact and acquisition and disposal. We have a negative impact of the structure as we have made some acquisitions, Ximantix, BSV, NetEDI, but also we've made the disposal of Pulse assets in August 2019. So this bring a negative 0.4%. In terms of revenue, we get a boost of EUR 2.1 million in 2019 from the acquisitions. And in 2018, we have made EUR 2.6 million from Pulse activity that is no longer in the group. On the currency impact, just the GBP for 0.2% positive impact. So -- and revenue increased by 6.3% to EUR 139.5 million. On the full year basis Revenue increased on a like-for-like basis, this means excluding currency impact and acquisition by 7%. We have a positive boost from acquisition and disposal of 0.6% and a slightly positive impact from the GBP of 0.1%. On acquisition and disposal, positive impact from acquisition of Ximantix, BSV, NetEDI that have a boost of roughly EUR 4 million -- EUR 6 million in 2019 and Pulse have made EUR 3.9 million in 2019. So this is mixed. At end of the day, reported growth for the full year, it's 7.7%. And for the first time, we -- since the disposal of CRM and Strategic Data, we have exceed EUR 500 million and we reached EUR 503.7 million of revenue for 2019, an increase of 7.7%. So now as we have made the disposal of the U.S. footprint, only 1.5%. And next year will be 0 in 2020. GBP around 10% and Europe is 87.2% of the revenue. In terms of BPO, we have seen a significant acceleration in Q4 from the BPO activity. So the BPO [ relate ] for the insurance business, but also for the human resources business and it's 50-50 between insurance and HR and the increase it's 40% in Q4, that means for the full year by an increase of 27% to EUR 45.5 million, so it's just below 10% of the total revenue of the group now on the BPO. However, [ even though ] we have this strong increase on the BPO activity, as you may see on Slide 6, the number of head count increased over the year '18 to '19, only by 8.4%, and we are very close to 5,000 people as a group. But we've been quite cautious and just a small increase of 8.4%. On Slide 7, in terms of breakdown of the growth of 7.7% on a reported basis. The first division health insurance, HR and e-services account for 68% of the revenue with an increase on a like-for-like basis of 8.6%, with a quite significant Q4 with an increase of 11.3%. So first here, there is a base effect. If you look on 2018, then you look on 2019, we see exactly the opposite trend in terms of growth rate, with an acceleration of the year. This is due to the BPO contract that we have signed at the end of Q4, that lead to an increase of revenue in Q4 -- Q2, but also in Q4, we have another significant BPO contract that did the second boost. We also see strong demand from -- for our other product, as we'll see in a few seconds. The second division that accounts for 32%, it's up by 4.2% on a like-for-like basis. This is quite significant. As we -- you may know and remember that in '16, '17 and '18, roughly this division went down and now it's up. You'll see that there is quite a swing in terms of growth rate over the quarters. The main reason is base effect compared to 2018. And the second fact is that from the NHS, we get the one-off revenue in 2018, was recorded in Q4, this explains the increase of revenue in Q4. And in 2019, this one-off from the NHS came in June 2019. This is also why you will see this boost in the second quarter. However, what is important to see on health care professionals is that over the year on a like-for-like basis, the increase is 4.2% for the segment. On Slide 8, so the growth came, as you all see, mainly from the first division that increased on a like-for-like basis by 8.6%. This came from the BPO activity, as I already explained, also from our third-party electronic payment. The Cegedim e-business, it's digitalization of all of the processes and also for order invoices. Cegedim SRH, the payroll activity. Cegedim data and advertisement at point of sales at pharmacy. All of this activity contribute to this increase of 8.6%. On the second division, as revenue increased by 4.2% on a like-for-like basis. We get -- first, what -- point was very strong increase on software for doctors in France and also for nurses in France. The second boost came from pharmacists in U.K. and Romania. The boost come -- also came from Docavenue, our booking appointment portal and also our teleconsultation activity that have significantly increased in 2019. And at least, you also get the boost from doctors in Romania and U.K., that have been quite successful in 2019 due to the release of new products. So really this turnover in the health care professionals division came from new products coming to the market, attractive products and new activity line teleconsultation. On Slide 9, we give some overview about the Brexit. So 10% of revenue, roughly 10% of EBITDA. All the cost in U.K., are local cost and local currency. So there is no risk [ of this. ] The second point is there is no major European health program at work in the U.K. and the last point, there is no clause in all of our contracts dealing with Brexit. So we have just a currency translation impact potentially on the P&L. In terms of Page 10, on our outlook for 2019. We have said early in 2019 that the full year revenue will increase by more than 5% on a like-for-like basis, and EBITDA will increase by more than 5%. At end of January, we can see that revenue increased by 7% on a like-for-like basis, so we are on track with our outlook. And we also raised a little bit our outlook for the EBITDA, saying that the EBITDA -- the increase in EBITDA in 2019 will be in line with the increase of revenue. And the first -- second [ event ] will be in March 19. After the market close, we'll release the full year 2019 results, with the full P&L and balance sheet and cash flow statement. And on March 20, there will be an analyst meeting in Cegedim offices. This concludes my presentation. I will now turn to our operator to open the line for the Q&A session.

[Operator Instructions] Well, we already have a question from Charles Bordes, Kepler Cheuvreux.

Just first question, a clarification on the EBITDA guidance, the growth in line with revenues. Does it mean reported revenues or like-for-like? So should we expect an EBITDA growth of 7%? Next question on Docavenue, you mentioned now it's a significant contributor. Is it possible to have a bit more color on that? And finally, you don't expect significant M&A in 2020, so do you have a smaller acquisition already in the pipeline and in which sectors would you be targeting?

Thank you, Charles. So for the EBITDA, first very important point is the growth rate on EBITDA is excluding the positive impact from the first application of IFRS 16. So really exclude this because if you take the IFRS 16 impact, it will be much more than that. So when we say in line with revenue, this is more close to the reported revenue than like-for-like, so more close to 7.7%. The second point is on Docavenue. On Docavenue where contribution, we started with 0 in 2018. So, of course, any increase, it's significant. However, it's more than EUR 1 million. And on the M&A, we have actually nothing in the pipeline. However, we're looking a lot of different potential target for the M&A. We know that this would be quite small acquisition, probably no more than EUR 20 million for the full year. But actually, at this stage, we absolutely have no target and nothing in the pipeline for acquisitions.

[Operator Instructions] Well, it seems that we have no further questions for the moment.

If there is no any other questions, you always can send me an e-mail or drop -- or call me on my phone and we'll be open to answer any questions, if you have in the future. I just want to remind you that the like-for-like revenue increased by 7% for the year with a 6.5% increase in Q4, with a strong recovery from the second division, health care professionals that grew by 4.2% over the year. And we expect EBITDA to increase by -- to around something like 7.7%. Thank you for listening to this conference call. And do not hesitate to drop me an e-mail if you have any further questions. Thank you.

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