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Edited Transcript of CGM.PA earnings conference call or presentation 19-Sep-19 4:15pm GMT

Half Year 2019 Cegedim SA Earnings Call

Boulogne Billancourt Cedex Sep 24, 2019 (Thomson StreetEvents) -- Edited Transcript of Cegedim SA earnings conference call or presentation Thursday, September 19, 2019 at 4:15:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jan Eryk Umiastowski

Cegedim SA - CIO, Head of IR & Director of Financial Communications

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Conference Call Participants

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* Patrick Jousseaume

Societe Generale Cross Asset Research - Head of Mid and Small caps Europe Research

* Sébastien Bourget

Quaero Capital SA - Head of Quaero Infrastructure and Managing Partner for Infrastructure

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Cegedim Half Year 2019 Earnings Call. Today's conference is being recorded and will be available on the company website. This presentation will be followed by questions-and-answer 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.

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [2]

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Good morning and good evening, everyone. Thank you for joining us to discuss Cegedim First Half 2019 Results. 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 expectation and prospect and are based on our view as of today, September 19, 2019. Any such statement and projection reflect values, estimates and assumptions by management concerning anticipated results, additional information concerning important factors that may cause our result to differ materially from expectation and underlying assumptions. Please refer to our registration document, specifically the risk section factors(sic) [Risk Factors section]. We undertake no obligation to correct or update these forward-looking statement whether as a result of new information, future events or otherwise.

Having this in mind, I will turn on Page 3 of this presentation. So first, I would make a quick overview of the business, what has happened at Cegedim. So at Cegedim, we get 3 business groups: Healthcare insurance, HR and e-services; Healthcare professionals; and Corporate and others. Cegedim is a dedicated tool for data, digital SaaS solution to the healthcare world and some expansion in other industry.

At end of June, we have 4,782 employees and we are present in more than 10 countries. We are listed and exhibited pharma company that is funded by the [fund] on 53%, free float is 46% and Cegedim, 1%. The number of people that connected to our network and using our solution: It's 152,000 doctors, this number excludes the U.S. doctors; 71,000 pharmacists; 43 million people in France are beneficiary for insurance company because we use telesystem for them and 48,000 on allied professionals. We would like to be, of course, bigger.

Our activity has 2 divisions: the first, Health insurance, HR and e-services, that represent 2/3 of the revenue; and 1/3 is Healthcare professional. You know exactly what are on those different divisions. On the first one, we get solutions for the insurers. We get all the Digital and data offer, the HR solutions, electronic invoicing, e-business. And second division, we get software for pharmacists, doctors, paramedics and medication database. I will came later on those figures.

And then to remind you, the different acquisitions that we have done since January 1. The first one was XimanitX in Germany. The goal is to increase our footprint, international footprint on e-business, electronic invoicing. This company is making EUR 2.2 million of revenue and this is profitable. And the goal is to expand in Germany our network of electronic invoicing. Then we have made the acquisition of BSV in February also for e-business. It's EUR 1.2 million, and it's really a management system for electronic invoicing. So it's very important, complementary of our existing portfolio, it's more technological aspect that we get from this. Then in March, we have done the acquisition for a company called RDV Medicaux. This is an online appointment scheduling website. This is in order to increase our footprint on Docavenue. Docavenue, it's an appointment website and also a Telemedicine application.

Then after June, we have continued acquisition in July. We have made the acquisition of Cosytec. Cosytec, it's a solution for our HR solution. It's EUR 1.3 million of revenue, and it's again a technological acquisition. We get a specific acquisition to manage and to make -- planning of people under some constraint, and this is really an optimization software. So it's very complementary from our existing solution and they are based in France.

And then in August, we have done an acquisition of a company called NetEDI. NetEDI, it's a leading U.K. provider for PEPPOL EDI order, and they work with NHS, so it's very interesting for us. Electronic invoicing, most of them are with the NHS. So it's complementary from our activity of electronic invoicing, but also from our activity with -- into healthcare segment where we deal with the NHS, of course. They have done EUR 2.8 million of revenue last year, and this is an acquisition of e-business.

So this is for the acquisition part, and I'm on Slide 11, then we have done some disposals. So we have -- so mostly all of the activity of our subsidiary based in the U.S., for software for doctors called Pulse, this have been done. We roughly received -- we get paid for this, so that paid roughly half of revenue generated last year. So we have revenue, it's EUR 11.3 million. And the goal is to focus really our activity in Europe, Europe including the U.K. We really want to expend in Europe and in U.K. We want to be bigger and it make more sense to spend the money that we have expanded last year in the U.S. We try to make significant mark. We have to be bigger to get to [great] software. Instead of trying to do this in the U.S., we think it's better to invest and to do this in Europe. So this is why we have made the disposal of the Pulse activity.

And then we come back later on different aspects neutral aspect of this disposal. We continue to invest strongly on innovation. So we spent EUR 24.6 million on capitalized R&D. So it's an increase compared to last year in the first half '18. However, as we have made the disposal of Pulse, this number will be lower in the second half of 2019. So at end of year '19, we will be below the level of 2018.

We continue to develop strongly on BPO so you'll see the number for the BPO, the BPO activity compared to last end of June '18 to June '19 have increased by 20% to EUR 21.5 million. This is 9% of revenue of the group revenue. So you see that in 2015 when we started this, we get to around 5%. And now it's around roughly 9% of the total of group revenue. And of course, the number of people also increased at Cegedim. It's an increase of 4.8% in the first half of 2019. Half of this increase, it's related to the Docavenue activity mostly, some are for R&D, and the remaining is for the development of the BPO activity.

On the Docavenue, we have now a complete solution for doctors, so online appointment solution for online or offline meetings and Telemedicine also. And on Telemedicine, we can do this on autonomous mode so the patient can direct -- directly connect with the physicians, or since April, now the patient can go to the retail pharmacy and assisted by the pharmacy, can perform teleconsultation with doctors. So we get now the benefit of our network of pharmacies that -- and the network of doctors, of course, this helped us spread our solution in France. And in the coming months, we'll also do Telemedicine-assisted diagnosis, visiting patient at home. So a quite significant development on Docavenue, on teleconsultation. We are quite happy with this development, and it's pointing in the right direction.

So now moving to -- and so the conclusion on this is that now Cegedim is really refocused on the core markets, this means Europe, including U.K. This is really our core market on healthcare, HR and electronic invoicing. We continue to strongly invest, and we have a completely new business model based on cloud and SaaS solution, digital, data and BPO. Moving now to the financial part. So then before we start the financial part, as you know, we have a new rules, a new norm that is called IFRS 16, and we have applied this IFRS 16 on our account, and this applied to the leases involving fixed payment. So for Cegedim, it's mostly the rent, that we run different buildings. So this is what we'll present as norm.

The second part is that we have not restated December 31 and June 30, 2018 accounts. So 2018 accounts have not been restated. However, we provide you with some rate for 2019 results at the end of the presentation.

The impact on net profit, it's roughly, virtually nothing, null. Revenue impact on EBITDA, so this have increased our EBITDA by EUR 7.9 million. This have also increased our depreciation and amortization by EUR 7.8 million, so on operating income, you get on here an improvement of EUR 0.1 million. A small impact on cost of net debt, EUR 0.7 million. Roughly no impact on taxes and no impact on consolidated profit.

On the balance sheet, we get an impact of EUR 67 million, so we get a liability of a lease. That is recognized, a lease liability. And as an asset, we have the right of use on our balance sheet. And roughly no impact, no significant impact on the shareholder equity.

On the cash flow statement, this is just another way of presenting the cash flow statement, but there is no impact on cash flow statements. Having this in mind, we turn on the next slide and the key operating performance.

So revenue came to EUR 245.8 million. This is an improvement by 8%. EBITDA moved from EUR 33.3 million to EUR 45.5 million and the margin moved from 14.6% to 18.5%. This is applying IFRS 16. If we exclude the impact of IFRS 16, EBITDA climbed to EUR 37.6 million with a margin of 15.3%, so still a significant improvement on EBITDA and on our margin.

Free cash flow from operation, we have a negative generation of free cash flow, EUR 35.8 million. And this is related to our working capital, and this is relating to -- related to our BPO activity and a different treatment of our BPO activity, and I will come back later on this.

On net debt, so we get an increase from EUR 108 million, total leverage of 1.4, EUR 233.6 million (sic) [EUR 232.6 million] and net leverage of 2.6, if we make the restatement and make something comparable. So excluding the IFRS impact, so net debt came to EUR 165.1 million on a leverage of 2. And again, most of this increase on the net debt, it's related to our BPO activity, and I will come later to this one. We move to the net debt page.

So on Page 19, you'll see revenue, an increase of 8%. On organic growth it is 6.4%. We get to positive impact from acquisition of BSV and XimanitX, 1.3%, and roughly no impact from currency, and still 86% of our revenue generated in euro, 2.3% in -- from the U.S., and of course, starting from September, as the disposal take place in August, disposal of Pulse, so starting from September, we'll no more see any U.S. impact on our P&L and balance sheet.

On Page 20, we just reminded you that 9% of our BPO revenue is generated by the BPO activity that is fast growing.

So in term of revenue, on Page 21, you'll see that 6.4% on a like-for-like basis, it's resulting from the growth of both divisions.

Health insurance, HR and e-services increased by 6.9%. So we still see an acceleration of growth compared to 6.4% in the Q1. So we have 7.4% in the second quarter, still strong growth on those division.

On Healthcare professional, we see a significant improvement on 5.9% on a like-for-like basis and this improvement is coming from U.K. doctors, from pharmacies, et cetera. So again, we have both divisions contributing to the growth of revenue.

Now moving to the EBITDA, as I mentioned, we move from EUR 33.3 million, we have generated EUR 18.2 million of revenue. We get roughly EUR 10 million more of costs for the payroll, is just the result of having more people for BPO, for R&D and for Docavenue. While external expenses also increased by 5%, on this external expense, we mostly -- we use temporary workers. So we have also increased the usage of external people to help us with our objectives so a EUR 5 million increase. Purchases used quite stable, others quite stable and then we get the impact of EUR 7.9 million of applying for the first time the IFRS 16 rules. So this means that EBITDA, excluding IFRS 16 were EUR 37.6 million, a margin of 15.3%. And with -- if we add the EUR 7.9 million, we're at 75 -- EUR 45.5 million, that is 18.5%.

Now we split by division. So if we move to the first division, Health insurance, HR and e-services, you'll see the revenue, we already talked about this. You see the EBITDA. So the EBITDA increase of EUR 24.2 million to EUR 26.7 million. However, if we exclude the impact of applying for the first time IFRS 16, the EBITDA decreased by EUR 1 million to EUR 23.2 million and of course a decrease of margin. And the decrease on EBITDA from the operating basis, it's really related to the fact that we are going to BCAC contract, the BPO of BCAC contract at the beginning of the year, generating a lot of BPO activities, meaning why we have this 20% increase on revenue, but of course this is loss making in the first months, so this is why we lost EUR 1 million of EBITDA in the first half of this year. We also get the negative impact from Cegedim e-business, the electronic invoicing, as we have hired more people to develop our solution and to make some improvement on the platform. This has been offset by some positive impact from our payroll activity and from the health insurance business outside France, so mostly in the U.K.

In the second division, on Page 24, so again revenue, you'll see some revenue-generating in the second quarter. And in terms of EBITDA, we moved from EUR 6.9 million, a margin of 9.1% to EUR 14.9 million, a margin of 18.5%. If we exclude the IFRS impact -- the first -- applying for the first time the IFRS 16 impact, we are at EUR 12.6 million, a margin of 15.4%. This is still a significant increase of margin. We are up double the generation of EBITDA in this division in the first half of 2019. And while we have been able to increase quite significantly our profitability, it's mostly because most of our software have been certified and have been available in different countries. And we see traction for our software mostly for doctors in all -- most of our existing countries. This is for U.K. mostly, we get a significant boost from U.K. doctors, we also get some revenue from the, from U.K. that are not really reclaiming this from the NHS. However, every year, we got some revenue from the NHS. We get traction also in France, from doctors in France, in Spain, and in the U.S. and we get in the first half some good news from doctors in the U.S. And in the U.S. mostly we also have reduced the number of employees to mostly capture the level of revenue, so reducing cost in the U.S. and the improvement in U.K., France and Spain. Pharmacy software also in France improved in terms of profitability and our medication database. This have been a bit -- a little bit, offset a little bit, by the fact that we have started our business at Docavenue. That is loss-making at this stage, as we get product before sales people want to see [content] doctors to use Telemedicine, develop Telemedicine, et cetera, and we're just starting making revenue on this. So Docavenue, it's still loss-making, and however, it's a division, it's up by roughly EUR 6 million -- median euro of EBITDA. After that, moving from EBITDA to the net earnings, we get depreciation expenses. Depreciation increased a little bit, but also we see an improve -- an increase due to the R&D depreciation as we have capitalized part of our R&D in the past, we need to make a depreciation as we activate this instead of selling it, so you'll see an increase on R&D depreciation. And also, you'll see the impact of applying IFRS 16 and the impact of EUR 7.8 million.

And then special items, move from EUR 9.6 million to EUR 16.3 million. However, on this EUR 16.3 million, we get EUR 14.8 million related to the Pulse disposal. As we have made Pulse disposal, of course, we need to make a write-off of the R&D that we get on our balance sheet. So this EUR 14.8 million, it's roughly, all of this -- most of it, it's related to the Pulse write-off. So excluding the Pulse impact on special items, if we have not made a disposal, you'll see that the special item has been down and be only of EUR 1.4 million. And this is no more, as we have ended the risk situation of the group, so special item, it's coming roughly down quite strongly.

Cost of net debt, we double roughly the level of cost of net debt from EUR 2.2 million to EUR 4.5 million. Again, we get a boost from IFRS 16 that added EUR 0.7 million on cost of debt. However, the main impact, it's coming from the time that last year we moved to fixed rate, but in the same time, we get longer maturity because we get a new (inaudible) use, so we situ the financing on Cegedim with a small increase of our cost of net debt.

And taxes increased -- taxes increased from EUR 0.8 million to EUR 2.1 million, is just reflecting the fact that we generate more profit in countries outside France, most of it.

So on Page 26, if we look quickly on our P&L, as you'll see the different impact. So the fact that we have this EUR 16.3 million of nonrecurring operating from special items and EUR 14.3 million is related to the Pulse disposal, this has led to negative earnings of EUR 10.2 million. Excluding this negative impact we would have been positive. And also I'll remind you that on EBITDA, we get a boost of EUR 7.9 million on depreciation of EUR 7.8 million, however, so that operating from roughly no impact. But most of the impact is on EBITDA and depreciation.

If we look to the generation of free cash flow. So you'll see that the cash flow before tax interest improved from EUR 28.3 million to EUR 43.1 million. However, the working capital requirement, we see a negative -- we needed more working capital by EUR 47.6 million. However, after that, tax payment remained quite flat. Acquisition of intangible just reflect the fact that we utilize more R&D, acquisition of tangible, quite stable. So the main reason for the free cash flow from operations to be negative of EUR 36 million is that we get negative impact from working capital of EUR 47.6 million. So why we get this negative impact in our working capital? First, we have decided to stop doing any factoring, so nonrecourse-based factoring. So it's again consolidated in our balance sheet and the consolation of it, yet a negative impact, the fact that we are cancelling this factoring, a negative impact of EUR 14.9 million in our working capital requirement in the first half of this year -- this is the first reason.

The second reason for this is coming from the fact that for the Health insurance BPO business, we get some advanced payment by our clients and then we make reimbursement of the patient. So roughly what we do, the patient go to see a doctors, pay your doctors, then request to be reimbursed by the insurance company. And when the insurance company have decided to outsource this activity to Cegedim. They give us some money, and we use this money to reimburse patients. So as you imagine quite easily, this money is not really our money. So EUR 15.8 million of our cash have been reclassified as the current client receivables. So it's no longer considered as cash. It's now classified as current client receivables. So this is the first thing. The second impact is that the level of cash that we have received in December, compared to the level of cash that we get at end of June, also decreased by EUR 15 million. So we get 2 negative impact of roughly EUR 30 million, 3-0, 15 -- a decrease of the cash that we get from the insurance company, and this came back in July, but after the June 30, and on the same time part of it has been reclassified from client receivables. So it's important to note is that, is just the fact that on the BPO activity for health insurance, when we make an activity of payment and reimbursement for them, we get this negative impact. And of course, once it's done, we think that in 2020, we no longer have some impact on working capital requirement as now it's excluded -- most of it, it's excluded from working capital.

So from the net debt, we've been at, on Page 28, we've been at EUR 108 million, leverage of 1.4. We get the impact of applying for the first time the IFRS 16, so a boost on net debt from EUR 67.5 million, then we get the negative impact of stopping the factoring activity, EUR 15 million. Then the fact that the level of cash that we receive from insurance company to do our BPO activity decreased by EUR 15 million, and the fact that another EUR 15 million have been classified as client receivables. Then we have made for EUR 11 million of acquisition. And this is really explaining, and of course, this is really explaining why our net debt increased to EUR 232.6 million, leverage of 2.6. And on a restated basis, so excluding the IFRS 16 impact, would be at EUR 165.1 million. Again, EUR 30 million of this it's related to BPO and another EUR 15 million from the factoring activity. So excluding this, you'll see that we have generated cash in the first half of this year. Again, the leverage of 2x, it's not the leverage that we use for banks, for our covenants. The leverage for covenant, it's around 1.4, as we exclude the subordinated metric from audit.

Moving on the next slide. Just to give you the balance sheet. So again the balance sheet have been affected by IFRS 16 as we have made no restatement of 2018. So of course, on tangible assets, we get the liability -- on tangible assets -- sorry, we get the right-of-use of EUR 66.9 million. And of course, this reflect on long-term debt and short-term debt of EUR 67 million. And on cash and cash equivalent, we get some cash moving from cash and cash equivalents to trade receivables, so the EUR 16 million moved on the stock.

And then moving to the outlook. So first on outlook I will make quickly on Page 31, some figures for Pulse. So Pulse generate last year EUR 11.3 million. This is EUR 5.6 million the first half of this year, we made the disposal in August. So this means that in our accounts of 2019, we'll get only 8 months of docs. On EBITDA, you'll see that last year this has made a negative impact of EUR 3.2 million and roughly no negative impact, no impact in 2019, as we have decreased the number of front payers of the company. And on operating income, you see that this was a negative impact of EUR 10 million last year, and EUR 18 million this year. But in this EUR 18 million, you'll get the fact that we have made some depreciation of goodwill, so not really comparable. And on R&D capitalization, EUR 5 million last year, EUR 2.3 million the first half, so roughly we should be at around EUR 4 million spent on R&D capitalized at end of August. And of course, this is what we're saying: That next year, so our capitalization of R&D will be down by EUR 5 million next year due to the fact that we have no longer Pulse in our scope.

On Brexit, nothing really to say. We operate in local currency, so we get revenue in sterling, we get all of our costs in sterling, in local, so just a translation impact on consolidated revenue and profit. And there is no specific U.K. health program in the U.K., so we expect the same subsidy to continue in the U.K., nothing really changed. And there is no clause dealing with Brexit impact on our contract with NHS or with doctors. U.K. is 10% of revenue and roughly 10% of EBITDA last year, we presented.

On outlook, what we have said in March and we reiterate just in June and July, was that we expect revenue and EBITDA to increase by 5%, both. And now we say that revenue will increase up more than 5%, EBITDA will increase more than 5% and EBITDA will grow faster than revenue this year. So we're upgrading our guidance.

And then on annexes, you will find some bridge on Page 37. Between on P&L, so you'll see 2018, 2019 restated as we have not applied the IFRS 16. The change, the impact of IFRS 16, the same for all division, the same on balance sheet. So you get all of this on this presentation. So this will end my formal presentation, and now I will ask our operator to open the line for the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have a first question from Patrick Jousseaume from Société Générale.

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Patrick Jousseaume, Societe Generale Cross Asset Research - Head of Mid and Small caps Europe Research [2]

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A few question on my side, first one is on the level of debt, including or excluding IFRS 16 that you expect for the end of the year, please? Second, on Pulse, what should we expect for the, I think there is 4 months of consolidation for -- on the second half? And finally, M&A. So have you made some acquisitions? Would you give us an idea of what we have paid for this acquisition, please?

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [3]

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Yes, Patrick. Thank you for -- so first on level of net debt. I'll just move to the slide up -- on this. You'll see that the application of first time IFRS 16 lead to EUR 67 million, 6-7, EUR 67 million of additional debt. And this would remain roughly the same for the full year. So the impact of IFRS 16 will be around EUR 67 million of additional debt. The fact that we have moved from cash, from -- the cash position to client receivables, up and down in the first half, so there will be no impact in the second half. So net debt would probably remain at the level of this year, and at end of December will be very close to end of June. And this is the first half -- the first fact.

For Pulse, so Pulse will be consolidated for 8 months as the disposal happened in August. So there will be roughly no impact on EBITDA, as the contribution of Pulse have been quite null, nil for this period. However, of course, this has led to a loss of EUR 18.2 million due to the fact that we have depreciation -- made some impairment of R&D on what remain on Pulse accounts. So now it's clean. There will be roughly no impact in the second half from the Pulse disposal.

And on M&A, so we have done a lot of acquisitions. We have spent in the first half EUR 11 million on acquisition. Now depending on acquisition, some of the acquisition, it's been at quite high multiples, 2x high. Although acquisition has been paid on half a year of revenue, so it's really depending on business, depending if it's a technological acquisition or it's more a development of a specific country for electronic invoicing so it's really a large spread between 0.5 to 2.6, depending on the business that we make acquisition.

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Patrick Jousseaume, Societe Generale Cross Asset Research - Head of Mid and Small caps Europe Research [4]

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So coming back to this -- my question on M&A, when I look at Slide 27, where are the EUR 11 million split between tangible and intangible, or what?

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [5]

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No, this EUR 11 million, it's not included in the...

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Patrick Jousseaume, Societe Generale Cross Asset Research - Head of Mid and Small caps Europe Research [6]

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Okay, sir, okay fine. And then for -- you had some acquisition that you have made in H2?

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [7]

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Yes.

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Patrick Jousseaume, Societe Generale Cross Asset Research - Head of Mid and Small caps Europe Research [8]

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And so EUR 11 million is H1, what should we expect for H2?

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [9]

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H2, you may expect half of it, so around EUR 5 million to EUR 6 million.

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Patrick Jousseaume, Societe Generale Cross Asset Research - Head of Mid and Small caps Europe Research [10]

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Okay. And I get that you will receive EUR 5 million from Pulse -- apart from this, so this is below Pulse, to make sure?

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [11]

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Around, yes.

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Patrick Jousseaume, Societe Generale Cross Asset Research - Head of Mid and Small caps Europe Research [12]

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Okay. So it means something of around mutual on H2?

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [13]

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Yes.

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Operator [14]

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We have a next question from Sebastian Bourget from Quaero Capital.

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Sébastien Bourget, Quaero Capital SA - Head of Quaero Infrastructure and Managing Partner for Infrastructure [15]

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Two question. One very quick, with -- on your guidance for the EBITDA. Could you please specify if it's excluding or including the positive impact of IFRS 16? And my second question would be related to Docavenue. So it's a very encouraging step that you mentioned to deploy your solution in home care. Could you let us know if you have already some contacts with big players in this area? And so, could you give us some figures about the numbers of doctors or the revenue you're generating with Docavenue?

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [16]

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Thank you for the question. So first on guidance, the guidance, it's excluding IFRS 16 impact. So this means that the EBITDA, excluding IFRS 16, will increase more than 5% and the increase of EBITDA will be higher than the increase of revenue, excluding IFRS 16. So no boost from IFRS 16. Really from the operation we have an acceleration of growth and this is why we have increased our guidance. On Docavenue, and the fact that we developed on the nurse market, and nurse visiting patients at home, is the fact that we really equipped most of the nurses in France with our solution. So to get the solution to be, to go, to make the planning of single patient to be reimbursed, et cetera. So we already have a pool of nurses, and we just provide them the solution to do Telemedicine. So we do not specifically need to make an agreement with some players. We already have contact with nurses and we of course have a pool of doctors. So when a nurse will go to these patients, the nurse know that there will be some doctors connected, that would -- can perform the teleconsultation. On figures on Docavenue, we have decided not to really a specific number at this time, as there is still some competition. And we'll wait a little bit, I think at the end of the year, this would be the proper time to deliver the first figure for that. But developing according to our plans, and ever since it's going in the right direction.

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Sébastien Bourget, Quaero Capital SA - Head of Quaero Infrastructure and Managing Partner for Infrastructure [17]

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Okay. Sorry, I was lost in translation. When you said home care, I was thinking about retirement home. Is that an area where you think to expand in?

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [18]

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This is something where we are looking. But at this time, we prefer to use our own network. So having patient can connect directly to the doctors, patient can connect to the doctor through a pharmacist or the patient can connect to a doctor through a nurse visiting the patient at home. This is our 3, movement that we're doing at this stage. After that, we will look on the default on retirement, on home care, et cetera. But at this stage we're more looking on the street, as we have direct access to doctors, pharmacists and nurses, it's more easy.

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Operator [19]

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We have a next question from [Eric Blass, Finance Connect].

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Unidentified Analyst, [20]

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Just some details about Pulse. In fact, if I understand well, your EBITDA is impacted about EUR 1.8 million in appreciation because the loss disappeared?

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [21]

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Yes. On Pulse, in the first half of this year, as you may see on Slide 31, 3-1, the EBITDA -- the impact of Pulse on EBITDA has been nil, so we have no impact on EBITDA from the Pulse. This is a fact. Why? Because we have reduced the staff at Pulse at -- early this year, in order to perform the sale of course, but we have reduced the number of staff so we have been able to be breakeven at EBITDA for Pulse. However, on operating income, we are really negative by EUR 18.2 million. And that we, if we look at recurring operating income, so excluding any exceptional items, we get a negative impact of EUR 3.3 million.

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Unidentified Analyst, [22]

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Okay. Just -- if we stay on the EBITDA, your Healthcare professional increased its EBITDA about EUR 5.7 million. In this EUR 5.7 million, there is the prediction of the loss of Pulse for EUR 1.8 million, is that right?

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [23]

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Yes.

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Unidentified Analyst, [24]

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Okay. On the other insurance health and so, you have a decrease of EUR 1 million. You said that it was due to the launch of BPO, and you say that there was a little more CapEx that is lost on Docavenue. You can give us an idea of the total of the 2 number in term of variation?

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [25]

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I think not. The biggest impacts on the first division and the decrease of EUR 1 million in EBITDA in the first division, it's really related to the BPO activity.

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Unidentified Analyst, [26]

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Okay. So we can say that Docavenue is staying at the same level of loss around?

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [27]

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Yes.

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Unidentified Analyst, [28]

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Okay, and...

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [29]

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We get some revenue off -- on Docavenue.

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Unidentified Analyst, [30]

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Yes, but you spend more money by the same time?

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [31]

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Yes. There is some increase on revenue.

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Unidentified Analyst, [32]

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And just to understand, you said that the debt would stay at the same level, excluding the IFRS 16 at the end of the year. But I understood that there was EUR 15 million which was paid in advance and you have to receive that from insurance. You told that it could come on July, but it was after the first day on June. It means that we can have a reduction of the debt by -- of EUR 15 million, or not?

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [33]

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Yes. So this is something very specific, that we get money from insurance company and we use this money to make payment to the patient. And of course, when we receive this money, we get to pitch and then we make payment. And then again, we receive some money, et cetera. And it's not easy to assess exactly when we receive money, so we can't have the peak in December '19 because the insurance company will give us some money. Or they can give us money in January 2, so this would mean '20. So we really can't give you any answer, it's complicated. So I'll prefer to say that the net debt will remain the same at end of December. And after that, we get -- we can get some positive impact on net debt because we get some advanced payment from insurance company in December.

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Unidentified Analyst, [34]

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And you said that the debt taken in account for your covenant is 1.20, is that right?

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [35]

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1.4.

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Unidentified Analyst, [36]

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One hundred point 4 --

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [37]

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1.4. So it's not -- it's the leverage. It's 1.4.

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Unidentified Analyst, [38]

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Okay. That's due to the events of shareholder -- is that due to the shareholder -- the difference between the 2 leverage?

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [39]

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Sorry?

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Unidentified Analyst, [40]

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I don't understand the -- you said that the covenant is 1.4, but the debt you take in account for this covenant is 1.55, or it's less because you have the advance stock to shareholder, which is working that I think, no?

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [41]

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No, no, no. It's just that on covenants for banks and for (inaudible), et cetera, the net debt, it's excluding the shareholder loans. So it's excluding the EUR 45 million -- so the net debt, it's lower by EUR 45 million.

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Unidentified Analyst, [42]

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So the net debt, taken into account for covenant is EUR 120 million, is that right?

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [43]

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Yes.

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Operator [44]

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Thank you. We have no other questions for the moment. (Operator Instructions)

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Jan Eryk Umiastowski, Cegedim SA - CIO, Head of IR & Director of Financial Communications [45]

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If there is no question, we'll end this presentation. But before I would like to remind you, some key takeaways. The first, revenue increased by 8%, EBITDA increased by 12.9%, excluding IFRS impact. If we include IFRS impact, this is an increase of 30.6%. The first division, a decline of EUR 1 million in EBITDA. This is roughly due to the fact that we have new BPO contract. And on the second division, we get an increase of EUR 5.7 million on EBITDA due to the improvement of our business for doctors in U.K., Spain, France and U.S. And this lead to an increase of our guidance for the full year, as now we expect revenue and EBITDA to increase more than 5% and EBITDA to increase faster than revenue. Thank you very much for listening. Have a happy day and happy evening. Thank you very much. Bye-bye.

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Operator [46]

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