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Ladies and gentlemen, good day, and welcome to the Cegedim web conference. The web 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, and thank you for joining us to discuss Cegedim's second quarter 2020 revenue. Just as a reminder, our earnings will be released on September 24. Before we begin, I would like to remind you -- just moving to slide second -- I'd 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 our prospects and are based on our view as of today, July 28, 2020. For additional information concerning important factors that may cause our results to differ materially from expectation and underlying assumption, please refer to our Universal Registration Document, specifically Chapter 7 on Risk Management. I would like to say that in this extremely challenging time, I share our support and solidarity with you and your families. At Cegedim, the health and safety of our colleagues, customer partners and the community in which we operate is our #1 priority.Having this in mind, I will now turn on Page 3 of this presentation. So this first half of the year have been split in 2 periods, as we may say, we may say a first period beginning from January to mid of March and the second period between -- and mid of March and end of June or mid-May, and the third period, I would say, June.In the first period, the revenue increased quite significantly, and then we get the lockdown related to the COVID-19 pandemic and that made that our revenue decrease quite significantly by 8%. Overall in the first half, were down close by 2.5%. So all of these numbers that you may see on Slide 3 are on a like-for-like basis. So 3.3% increase in the first quarter that has been affected just by, I would say, 2 weeks of lockdown. Then the second quarter we've been down by 8%. To make this on a full year basis, down by 2.5% and revenue coming to EUR 236.2 million for the first half of this year.Now if we look quarter-by-quarter, so taking second quarter revenue came to EUR 114.7 million, down 9.4%. In this 9.4%, 8 percentage organic like-for-like. Then we get 1.2% decrease due to the disposal of the assets, of the Pulse assets in the U.S. that have been just partly compensated by an increase coming from acquisition of Cosytec and NetEDI. And roughly no impact from currency that now -- are now owing to sterling.So if we move now on Slide 8 on first half situation, revenue came to EUR 236.2 million. So this is a decrease on a reported basis by 3.9%. That decrease of 3.9% can be broke down by 2.5% from organic and 1.4% mainly due to the disposal of the asset of the Pulse asset in the U.S., slightly compensated by the disposal (sic) [ acquisition ] of Cosytec and NetEDI and roughly no impact from currency.Now as you may see on the currency, roughly 88% of revenue are generated in the Eurozone, 10% in the U.K. and then we are 1.6% remaining. So 88% in euro and 10% in GBP.Now if we look by divisions, on the first division, Health Insurance, HR and e-services. In the first quarter, revenue on a like-for-like basis increased by 3%. In the second quarter, we have seen a decrease of 8.1% that lead on the first -- for the first half of the year decreased by 2.7%. If we look on the second quarter, which is a decrease on a reported basis by 6.7%, we get a like-for-like decrease of 8.1%, but we get a boost from acquisition of NetEDI and Cosytec by 1.4%.Just to remind you, NetEDI and Cosytec are 2 acquisitions done last year. NetEDI, and this is in the U.K. and making electronic invoicing in U.K., and Cosytec, which is a small acquisition done in France to help our payroll activity. So overall, a decrease only by 6.7%. So this lead -- if we look on the first half, on a like-for-like basis, decreased by 2.7%, a boost from acquisition by 1.4%, so this lead to a decrease of 1.3% on a reported basis for the first division in the first half of the year.If we now look for the reason of this decrease, so the main driver for the decrease of revenue in the second quarter for this division is related to Cegedim-Media, C-Media. That's making advertisement at point-of-sale at pharmacy, mainly on a digital way. Since mid-March to roughly beginning of June, we have seen a significant decrease in demand for advertisement campaign at pharmacy. There is 2 reasons for that. First one, as nobody moving to pharmacy, you do not make advertisement if nobody want to -- be able to see this advertisement campaign. And the second reason is that some pharmaceutical company do not want to advertisement during this complicated period. So this leads to roughly a decrease of, one may say, 90%, 9-0, 90% of revenue of this division during this period.The second impact on revenue came from our health -- third-party healthcare payment as we're making direct payment between insurance companies and patients, healthcare -- and healthcare professionals. During this lockdown, we have really seen a decrease for demand from health care from the patient, so less patients going to hospital, less patients going to see doctors, less patients going to go to the pharmacy to buy some drugs, et cetera. So we have seen a significant decrease in the volume of activity for reimbursement as there is less use of the health care.Since -- and mid-June, we have seen a partially recovered on third-party health get payment as people have just postponed some health care from, say, March, April, May to June, July, August, but probably in most of the case, in September and October. On advertisement, we expect some postponement from March, April, May to June, July and August. So we'll see in the coming months as how this moving.Of course, in this division, we also get some positive impact. So we have continued to see the BPO activity for the health care segment continue to increase and develop quite significantly. We have also seen our payroll activity continue to grow in the first and second quarter, electronic invoicing going to continue at brisky pace growing in the first and second quarter. And the Cegedim Health Data, all the data that are needed by pharmaceutical companies, government, health authorities to manage the health care system. Specifically during this period, we have seen quite strong demand from government to have access and to use our data. So 2 big drop on third-party payment and advertisement, but also some positive development in the first and second quarter, mainly for BPO, payroll, electronic invoicing and the data business.Now if we move to the second division, Healthcare professionals side. We are seeing in the first quarter, a quite significant increase on revenue on a like-for-like basis as our revenue increased by 4.1%. So this was quite significant increase compared to the past years where we have been a little bit down, and the segment has been little depressed. So we have seen a recovery in the first quarter by 4.1%.In the second quarter, we are down by 7.9%. So this lead to a performance for the first half of the year we're down by 2.2%. If we move quickly by quarter and we see on the second quarter, revenue decreased by 7.9% on a like-for-like basis, but also due to the fact that we have made the disposal of Pulse, Inc. into U.S., we have an additional decrease by 6.5%. So this has on a reported basis decreased by 14.8%, but mostly half of this decrease is just related to the fact that we have made the disposal of the Pulse business.So this [ kind of went ] on the first half of the year on a like-for-like basis, decreased by 2.2%, and of course, a decrease of 6.8% related to the fact that we have no longer have our U.S. activity. So on a reported basis, we are down by 9.1% in the first half. But roughly, the biggest part of this decrease is just related to the fact that we have made the disposal of the Pulse business last year in August.So if we try to see what happened during the first half of the year on this division, roughly all the activity in this division have been positive in the first quarter. And then we get -- this performance have been completely offset by this negative performance of the second quarter due to the lockdown of activity and mostly related to the pharmacy business in France and U.K. During this lockdown France and U.K., we've not been able to go in to see to visit pharmacies to make maintenance, to install new software.So if I take this, the France as an example, we have some new clients that are just waiting in 2020 in the second quarter, to have the new software, the new computers and then to make all the learning, how to use this and then deploy the [indiscernible], and we have been not able to do the [Technical Difficulty] clients from completion [indiscernible] this period and this led to this -- mostly to this decrease.However, in this division, we have been up on Maiia, the new name for Docavenue, to do the appointment scheduling -- online appointment scheduling and teleconsultation business that picked up quite strongly since beginning of March, with an acceleration, of course, in April and May, then the small decrease in July since more normal -- that situation become -- came back to some sort of more normal. And you remember that we have offered our teleconsultation model for free in March and April, and mid of May, and then we started to charge for this on roughly with a discount of 50%. So we did just some revenue part of July on this activity. So most of the revenue on teleconsultation will be recorded in the third quarter.Then we get our medication database that are developing quite well and is more and more used by health care professional, including pharmacies, doctors, hospitals. And then we have RM Ingénierie that is a solution for nurses, chiro practice, et cetera, that are developing quite well over this period also. So just to summarize, all of this led to a decrease on a like-for-like basis by 2.5%. So a quite resilient business during this period.Now moving quickly on Slide 9. Just remember you that we have a solid business model focusing largely on the health care sector. You may assess that something like 88% of our revenue are generated in the health space.Second, we have robust financial situation, reasonable leverage, no debt maturing before October '24. We have EUR 55 million of revolver facility completely undrawn, and we have EUR 24 million of overdraft facility that are unused at this time. So this give us an access to a lot of liquidity and with no major issue on our debt.Regarding the outlook for 2020, even it's a little bit early to assess what will happen in September, October or November, we may say that due to the fact that we are mostly in the health sector -- health care sector, mainly in Europe, mostly in Europe now, Europe, including U.K. and that we expect a recovery on term health third-party payment as people will need [ and unfortunately ] that. They will need to go to hospitals, to doctors, to pharmacists, et cetera. This will be important to -- there will be some recovery in second half. And also as the advertising business, we still also expect some recovery during summer mostly and then, of course, a quite positive second half of the year as normal.So if I take all of this together, we may assess that for 2020, our outlook on revenue, and this is just for revenue at this time, will be very close to revenue generated in 2019, closed by a little bit up or a little bit down, but roughly, we expect the same revenue in 2020 to compare it 2019. Of course, we'll need to adjust this outlook if health conditions in Europe significantly deteriorate in the second half of 2020.This conclude my presentation at this stage. I'll just remind you that on September 24, we will release 2020 outlook earnings. There will be an analyst meeting in Paris on September 25 and a conference call on September 24.And now I will turn the floor to the operator to open the line for the Q&A session. Thank you for listening.
[Operator Instructions] We already had a question from Charles Bordes from Kepler Cheuvreux.
First one, you are rather confident regarding a catch-up in advertising. Is it -- in H2. Is it something you are already observing in the month of July?Second question, is it possible to have a bit more details regarding BPO?And third one, regarding health care professionals, do you have some Software-as-a-Service offering in this segment, for doctors or even for pharmacists? Or is it still a traditional one?
Yes. Thank you, Charles, for your question. So first, yes, we are confident at this stage on third-party payment that you may understand why. And for the advertising business, our goal, while January and July and August, this is quite small months on business for advertisement, people originally do not make a lot of advertisement during the summer campaign and people going away for vacation, et cetera. And this year, we offer some discount and propose that some company that pharma company, cosmetic company are planning to do in the second quarter to move this in July and August as maybe less people going to vacation and then to also have access to the network during this period. And the second half of the year is quite full regarding entertainment. So it's complicated to move guidance from the first -- second quarter to the second half. However, we can move this from second quarter to the July, August period. And we already, in June, have seen some cosmetics company and pharma company interested to do some campaign in July, August compared to other year. So our book is quite high for July and August. So this is why we are confident to recover a significant part of the advertisement on this.The second part on BPO. Yes, BPO has grown mainly from the health, for insurance businesses. And related to the fact that we get some additional contracts from existing customers, which is not new customer, the existing customer have decided to move a little bit more of the business to us. So on the insurance, we have been high by roughly 25% in this first quarter. And for still the insurance business, we've been up by 11% in the second quarter. So roughly, this is 18% in the first half on BPO business for insurance. And of course, we get some slight decrease on BPO for the payroll activity. There have been less people in the company, so less need for BPO for payroll. So a small decrease on it compensated by a significant increase in insurance.However, you'll see that we've been helped by 25% in the first quarter and just 11% in the second quarter. This is also due to the fact that the patient are -- have been less use of the health care. So they have less gone to hospitals or doctors, et cetera. So they have less need for reimbursement.And the third one, I do not remember, this is related to the health care professionals segment. Maybe you may restate your question, please.
Yes. Do you already propose some Software-as-a-Service offering in the segment?
Yes. So all of our software and health care professional are now on SaaS and cloud. So the new software that you may access in France, in U.K., in Spain, in Romania are full SaaS solution, SaaS related. However, some customers still use the old license model. So we still have some customers using our license model and some customer using our SaaS model. So that your next question will be how many people have already moved to the SaaS?
Yes, of course.
Roughly, you may say that 40%, 45%. So a little less than half already using a SaaS solution and a little more than half of our customers are still using a license model. And we expect an acceleration of transition in the second half of the year. We have expected to move some pharmacists on the SaaS solution in the second quarter. But due to the lockdown period, we have been -- we needed to postpone some migration to the some license to SaaS that normally should have happened in April and May and that are now postponed to September, October.
And do you have already a time line for when you wish to be, for example, at 80% or 90% or even 100% of SaaS?
No. We do not have any time line on it as pharmacists or doctors are independent. They do not have plan to migrate on SaaS, et cetera, compared to big companies that have a clear planning of, okay, we'll move to this, we'll do that, et cetera, and we know exactly that at this date will be full on SaaS and cloud, et cetera. An individual pharmacist or doctors do not have such plan. So we need to convince them one by one. And if you oblige someone to migrate to SaaS, you probably lost this as a client because nobody wants to be forced to do something. So it will take some time before we will be able to migrate for them. However, all new functionality are released only on the SaaS model. So naturally, we're saying that -- and there is some regulation evolution trends, so we expect that naturally, most of them will move to SaaS in next 2 years.
We have another question from Johannes Ries from Apus Capital.
Yes, Jan Eryk, this is Johannes. Maybe I know you will bring -- you will report the final figures at 24th September, but maybe you can give us some insight already what you have done to account that balance, maybe it's the lower sales in some areas and the cost side, have you maybe short-term -- introduced short-term working? Have you done other measures? Have you also maybe had low adviser costs, like we have from -- because of the lockdown, which also on the positive side, helped at the bottom line?So for -- any indication what you have done and maybe how could you be -- maybe see the impact on the bottom line as a negative impact? You have more costs on the other side because of the pandemic, because you have maybe to move a lot of people to home office or -- worked smoothly. Only to get a feeling how you handle this. And what could be the impact from a direction without having a final figure already in there.
Yes. Thanks, Johannes, for your question. So yes, of course, I would say that roughly 80%, 85% of our workers have been working from home during this period. So we have been able to continue our activity roughly as normal, but it was more complicated in the first week of it. But however, without any interruption, we have seen some decrease of activity, of course, mainly on the commercial part. However, most of our team worked from home. So we'll be able to continue that activity.We have also been able to make some partial unemployment positions. So some people have been mainly on, as you may imagine, for the advertising business. Most of the people have been put on unemployment during this period. Then we have asked also people to take vacation during this period. So all of them are now ready to continue to work during -- and when we hope that there is some recovery on the pace.And the second fact, we, of course, get some positive impact on the cost structure due to the fact that roughly nobody traveled during April, May and June. So we have quite significant reduction in our travel cost. And -- however, if we expect that revenue will be quite close to the last year revenue and we get roughly the same cost structure as a group that there is quite some fixed costs related to payment, to payroll, to electronic invoicing, et cetera, roughly, we may expect that if revenue are quite close, normally, our EBITDA -- or EBIT should be quite close to the same as last year. There is no significant change in the cost structure even if -- of course, there have been some slowdown on activity and of course, we had some fixed costs. But this may have been compensated by less travel cost, less expenses also, et cetera, so.
Okay. Superb. Maybe a second question. There's a lot of discussions that after COVID maybe or as a result of COVID, the digitalization of the health system should maybe pushed forward and investments are made in the health system. Do you think you can benefit in any regard from this going forward?
There's 2 answer on that. As always, when something wrong happen, people say we need to accelerate on, keep on saying. During this case, people say we need to accelerate on digitalization, et cetera, et cetera. But after that, after saying that, you need to think, okay, how we need to do that. And from where we're taking money, because we've got some money, we need to take decision, et cetera. So yes, we expect some, I would say, more interest on digitalization on payroll, on electronic invoicing, people may be very interested by that.Health care also for the patient record or telemedicine, et cetera, that it will take a little bit more time that people may expect. And of course, this is not free. So you need to pay for this. And this is for development for new tools, et cetera. And need to find some money to finance this. So probably we'll get some acceleration on digitalization, but it will anyway take some times and there's probably not be at such high level as people may think today.
Maybe on your nonhealthcare business, especially on e-invoicing. Could there also be a push there because maybe you have seen people who working on a digitalized way have been more flexible during the COVID time?
Yes. So what we've seen is that once the lockdown came, some company realized that [ they can create ] an invoicing and send us invoicing to the clients, so they have been able to collect some cash and cash is very important for our company. So some of them just asked to move to electronic invoicing. But once they say we want electronic invoicing, they just realized that it's not like doing a PDF. It's more complicated because you still need to be connected to the accounting system, and you need to have a very clear rule on how you validate invoicing, how you make payment, et cetera, et cetera, et cetera. And this company just realized that it's not -- can be done in 1 day, you need to really make a clear process on invoicing coming in or coming out and before moving to digitalization.So on electronic invoicing, we expect some positive things on revenue mostly in 2021. Maybe a little slowdown in second half to -- just to the fact that some company will bankrupt or will have less activity, like travel agency, airlines, et cetera. But probably in 2021, we'll see an acceleration as more company will be interested in electronic invoicing. We will start to move on it. It will take between 6 and 9 months to make a clear process to move them to the process of electronic invoicing and to make implementation.
[Operator Instructions]
We have no further question. You may anyway, send me an e-mail or give me a phone call if you may have some additional questions. And I would like just to remind you before ending this presentation, the key takeaway. So revenue came up by 3.3% in the first quarter, down by 8% in the second. So half year, we are down by 2.5% on a like-for-like basis out of this. We expect some recovery on some of our activity that will lead to a quite stable revenue for 2020.Thank you for listening, and have a nice and happy day and happy evening. And if you are moving for vacation, have an happy vacation and holidays. Thank you very much for listening. Bye.
Ladies and gentlemen, this concludes today's conference. Thank you all for your participation. You may now disconnect.