Credit. IT Services. Very weak EBITDA and cash flow risk of covenant breach in 2012

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1 26/Sep/2011 Credit IT Services Half-year results CEGEDIM Very weak EBITDA and cash flow risk of covenant breach in 2012 Negative We reiterate our Sell on the EUR2015 bonds (maintained) Sector Sector weighting Underweight Market value Benchmark 7% Spread 765bp Sell Rating LT ST Outlook MDY NR NR nd S&P BB NR Negative Fitch NR NR nd Key financials ( m) e Revenues EBITDA FFO Adj. net debt Key Ratios e EBITDA margin (%) EBITDA/net int. (x) FFO/ Adj. net debt Ad Net debt/ebitda Analyst Juliano H Torii, CFA (44) juliano-hiroshi.torii@sgcib.com SG Bond Recommendation: We are growing increasingly concerned by the serious deterioration of Cegedim s underlying business, which is likely to be exacerbated by the approaching recession. Given the fragility of software companies when hit by a combination of economic weakness and company-specific problems, as illustrated by Alcatel-Lucent, Nokia and Thomson-Technicolor, we believe the ASW spreads of 765bp are still not enough to compensate for this risk. SG Credit Opinion: We maintain a Negative credit opinion. 1H 11 EBITDA declined by 22% yoy on the measure employed by us and the rating agencies, which includes an adjustment for capitalised costs EUR10m short of our initial expectations. Adjusted net debt/ebitda deteriorated sharply to 4.7x from 4.2x at YE2010. And the company has withdrawn its FY2011 guidance on the back of growing economic uncertainty and the risk that pharmaceutical companies could scale back their marketing activities later in the year. However, Cegedim expects a decline of net debt in 2H 11 as a result of seasonal factors. The software implementation problems of 1H 11 were the main reason behind the significant deterioration of EBITDA margins, though the marked increase in capitalised development costs has also contributed to the worsening of adjusted EBITDA. We now expect EBITDA to decline 16% in 2011, leading to a further deterioration of adjusted net debt/ebitda to 4.9x in 2H 11. We see growing risks to the company s ratings. The 1H 11 results mark a problematic deterioration of Cegedim s underlying profitability and business performance. We expect 2012 to remain difficult and unpredictable. Cegedim is currently being affected by three major problems: the implementation of the new software; unfavourable structural trends in its core pharmaceutical CRM market towards a reduction of the number of sales representatives and marketing expenses; and the deteriorating economic environment. While Cegedim has finally managed to address the flaw in its implementation technology in 1H 11, we expect the company to remain vulnerable to market share losses until early 2012 at least. The unfavourable structural trends in the market are likely to significantly reduce the number of potential corporate users of Cegedim s CRM services over time, and result in low to negative revenue growth. And Cegedim remains dependent on pharmaceutical marketing as an indirect driver of sales in the CRM division, and on software sales in the healthcare professionals division both sources of revenues would be very vulnerable in a recession. Cegedim s organic growth has dropped to almost nil in 1H 11, and the company is cutting back sharply on acquisitions due to its deteriorating credit metrics, so we can expect reported revenues to stagnate or contract in 2012/2013 unless we see a significant boost from the resolution of the implementation problems. As Cegedim s cost base is mostly fixed and inflexible in the short term, we could expect any revenue weakness to have a direct impact on EBITDA and cash flows with the risk of a covenant breach in The company indicated today that it would risk a covenant breach at reported EBITDA levels of EUR130m which we estimate at EUR30m less than our central scenario for 2012 adjusted EBITDA (see table). Assuming that costs remain unchanged, we estimate this would require a revenue decline of about 3.5% - not far from our central scenario. The company stated that it closed June 2011 at a leverage ratio of 2.6x and a coverage ratio of 5.1x for the purposes of the calculation of the covenants vs a limit of 3x and 4.5x respectively. However, as the covenants allow Cegedim to add capitalised development costs back in the calculation of the EBITDA, they can be considered very weak, and the company might have some room to play with it by changing its cost capitalisation policy. Societe Generale ( SG ) does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that SG may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a Macro Commodities Forex Rates Equity Credit Derivatives

2 single factor in making their investment decision. PLEASE SEE APPENDIX AT THE END OF THIS REPORT FOR THE ANALYST(S) CERTIFICATION(S), IMPORTANT DISCLOSURES AND DISCLAIMERS Cegedim credit metrics (in EUR millions) FY08 FY09 FY10 FY11e FY12e FY13e Group revenues Change % 3.0% 6.0% 1.4% -1.5% -0.1% EBITDA Margins % 16.2% 17.4% 15.1% 12.5% 12.6% 12.6% Cash interest Cash taxes /(-) other cash items FFO Changes in WC CF from operating activities CapEx As % sales -7.9% -3.6% -3.6% -3.6% -3.6% -3.6% RCF (CFO - CapEx) As % sales 6.5% 11.8% 8.9% 5.8% 4.8% 4.6% Disposals/(acquisitions) FCF (before div + buybacks) Dividends Buybacks Shareholder remuneration As % of FCF's 17.7% % 54.2% 42.9% 31.3% 33.0% New debt YTD/(redemptions) Net cashflows Cash and equivalents Gross debt reported Net debt (reported) EBITDA/interest coverage FFO/net debt 17.0% 33.5% 26.9% 17.7% 17.3% 17.9% Net debt-to-ebitda x 4.4x 2.7x 3.4x 4.1x 3.9x 3.6x Operating leases (NPV) PBO tax adjusted Other off B/S Adjusted gross debt RCF/adj. gross debt 6.9% 16.4% 12.3% 8.6% 7.4% 7.5% FFO/adj. gross debt 12.7% 21.5% 19.0% 13.3% 13.0% 13.5% Adj. gross debt-to-ebitda x 5.8x 4.2x 4.8x 5.4x 5.2x 4.8x Adjusted net debt RCF/adj. net debt 7.8% 20.3% 13.9% 9.5% 8.2% 8.2% FFO/adj. net debt 14.4% 26.6% 21.5% 14.8% 14.3% 14.6% Adj. net debt-to-ebitda x 5.2x 3.4x 4.2x 4.9x 4.7x 4.5x Adj. net debt-to-ebitda excluding EUR40m of trapped cash x Net debt/ebitda estimated for covenants of Jun 11 loans/rcf - breaches at 3x EBITDA/interest estimated for covenants of Jun 11 loans/rcf - breaches at 4.5x Source: SG Cross Asset Research 5.4x 3.6x 4.5x 5.2x 5.0x 4.8x 2.4x 2.7x 2.5x 2.4x 9.3x 4.8x 4.8x 5.1x

3 Cegedim capital structure (estimated) FCB (voting rights 64%) (economic interest 52%) EUR45m 2014 unsecured loan owed to FCB EUR80m Jun 2016 unsecured RCF (undrawn) EUR200m Jun 2016 unsecured amortizing loan EUR300m 2015 bond Cegedim SA Operating subsidiaries Source: SG Cross Asset Research Cegedim debt maturity profile after the recent loan refinancing (EURm) Bond EUR300m 7% due 27-Jul-15 EUR80m Jun 2016 RCF Loan EUR 200m due 2016 Source: SG Cross Asset Research Macro Commodities Forex Rates Equity Credit Derivatives

4 Cegedim CROSS ASSET RESEARCH CREDIT ANALYSIS GROUP Global Head of Research Head of Sector Research Head of Credit Research Deputy Head of Credit Research Patrick Legland Fabrice Theveneau Tim Barker Hervé Gay (33) (33) (44) (33) patrick.legland@sgcib.com fabrice.theveneau@sgcib.com tim.barker@sgcib.com herve.gay@sgcib.com Financials (Banks) Hank Calenti, CFA Stéphane Le Priol Jean Luc Lepreux (44) (33) (33) hank.calenti@sgcib.com stephane.lepriol@sgcib.com jean-luc.lepreux@sgcib.com Financials (Insurance) Rötger Franz (44) rotger.franz@sgcib.com Auto & Transportation Pierre Bergeron (33) pierre.bergeron@sgcib.com Consumers & Services Marc Blanc Torstein Jorstad (33) (44) marc.blanc@sgcib.com torstein.jorstadz@sgcib.com Industrials Roberto Pozzi Barbora Matouskova Bob Buhr (44) (44) (44) roberto.pozzi@sgcib.com barbora.matouskova@sgcib.com bob.buhr@sgcib.com Telecom & Media Juliano Hiroshi Torii, CFA Alejandro Núñez (44) (44) juliano-hiroshi.torii@sgcib.com alejandro.nunez@sgcib.com Utilities Hervé Gay (33) herve.gay@sgcib.com CROSS ASSET RESEARCH CREDIT STRATEGY GROUP Global Head of Research Patrick Legland (33) patrick.legland@sgcib.com Strategy Suki Mann (Head) Juan Esteban Valencia (44) (33) suki.mann@sgcib.com juan.valencia@sgcib.com ABS Jean-David Cirotteau (33) jean-david.cirotteau@sgcib.com 4 26/Sep/2011

5 Cegedim APPENDIX ANALYST CERTIFICATION The following named research analyst(s) hereby certifies or certify that (i) the views expressed in the research report accurately reflect his or her personal views about any and all of the subject securities or issuers and (ii) no part of his or her compensation was, is, or will be related, directly or indirectly, to the specific recommendations or views expressed in this report: Juliano H Torii, CFA EXPLANATION OF CREDIT RATINGS SG credit research may contain both a credit opinion of the company and ratings on individual bonds issued by the company. Credit Opinion: Positive: Indicates expectations of a general improvement of the issuer's credit quality over the next six to twelve months, with credit quality expected to be materially stronger by the end of the designated time horizon. Stable: Indicates expectations of a generally stable trend in the issuer's credit quality over the next six to twelve months, with credit quality expected to be essentially unchanged by the end of the designated time horizon. Negative: Indicates expectations of a general deterioration of the issuer's credit quality over the next six to twelve months, with the credit quality expected to be materially weaker by the end of the designated time horizon. Individual Bond Ratings: Buy: Indicates likely to outperform its iboxx subsector by 5% or more Hold: Indicates likely to be within 5% of the performance of its subsector Sell: Indicates likely to underperform its subsector by 5% or more CONFLICTS OF INTEREST This research contains the views, opinions and recommendations of Société Générale (SG) credit research analysts and/or strategists. To the extent that this research contains trade ideas based on macro views of economic market conditions or relative value, it may differ from the fundamental credit opinions and recommendations contained in credit sector or company research reports and from the views and opinions of other departments of SG and its affiliates. Credit research analysts and/or strategists routinely consult with SG trading desk personnel in formulating views, opinions and recommendations in preparing research. Trading desks may trade, or have traded, as principal on the basis of the research analyst(s) views and reports. Therefore, this research may not be independent from the proprietary interest of SG trading desks which may conflict with your interests. In addition, research analysts receive compensation based, in part, on the quality and accuracy of their analysis, client feedback, trading desk and firm revenues and competitive factors. As a general matter, SG and/or its affiliates normally make a market and trade as principal in fixed income securities discussed in research reports. IMPORTANT DISCLOSURES SG or its affiliates act as market maker or liquidity provider in the equities securities of Alcatel-Lucent, Nokia. SG or its affiliates expect to receive or intend to seek compensation for investment banking services in the next 3 months from Alcatel-Lucent, Cegedim. SG or its affiliates had an investment banking client relationship during the past 12 months with Cegedim, Technicolor. SGAS had a non-investment banking non-securities services client relationship during the past 12 months with Alcatel- Lucent. SGAS received compensation for products and services other than investment banking services in the past 12 months from Alcatel-Lucent. SGCIB received compensation for products and services other than investment banking services in the past 12 months from Alcatel-Lucent, Cegedim, Nokia. 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Credit. Insurance.

Credit. Insurance. 20/09/2011 Credit Insurance www.sgresearch.com Change of recommendation ALLIANZ SE Following the crowd Positive (maintained) Sector weighting Senior Subordinated Neutral Overweight The recent widening