Legrand S.A.

Antoine Burel - Executive Vice President and Group Chief Financial Officer

Gail Dubray - Deutsche Bank Andreas Willi - JPMorgan James Stettler - Barclays Lucie Carrier - Morgan Stanley Andre Kukhnin - Credit Suisse Alasdair Leslie - Societe Generale Graham Phillips - Jefferies Pascal Odca - Redburn Denis Molina - Morningstar

Thank you. Hello to all of you.

Then Francois Poisson and myself are happy to welcome you to the Legrand 2016 nine months results conference call. Let me first remind you that we have published today our press release, our financial report and a slideshow to which I will refer.

Those documents are available on the Legrand website. And our conference call is recorded and webcasted on our website.

Today I would like to begin with a kind of a brief introduction following which I will comment into more details of our 2016 nine month results, the ongoing development initiatives of the Group. And finally, close this presentation with the update of our 2016 target.

I start on Page 4. To me there are three main takeaways from our nine months achievements.

The first one is that 2016 nine months results are solid. Group sales rose plus 4.1% in total and nearly plus 7% excluding ForEx.

On the like-for-like basis, Group sales rose plus 2.1%, thanks to a very good plus 7% performance in the U.S., a rise in sales in mature Europe of plus 1.8%, with new economies, we recorded a slight decrease of minus 0.6%. I also remind you that sales growth benefited in the first half of 2016 from the favorable calendar effect of about one day.

And please note that most of this effect should be reversed in Q4. Moving on to profitability, adjusted operating profit was plus 5.7% in this first nine months of 2016 drive by good operating performance against a backdrop of rising sales.

We think that those good showings demonstrate our ability to create value. The second takeaway is that with a few the development of the Group.

We have continued to deploy our Eliot program notably by our connected offer and we are launching today Eliot in North America. We are also been very active in terms of M&A with eight deals closed since the beginning of the year totaling of EUR170 million of annual sales acquired.

The third main takeaway of this publication is that we update of our 2016 targets and I will come back on that at the end of my presentation. Okay, after this brief introduction, let’s start with an overview of sales in the first nine months on Page 6.

So as said, total sales were up plus 4.1%, reflecting number one a healthy organic growth of plus 2.1%. Number two, plus 4.6 rise coming from acquisitions.

And number three, an unfavorable price impact of 2.6%, mainly due to the decline of some new economic currency versus euro. Let me also add that based on the exchange rates observed in Q3, 2016 full year ForEx impact on sales would only be marginally better than the minus 2.6% recorded in the first nine months, but recent events are occurring.

Let me now go into more details regarding the like-for-like evolution of sales by reporting segment and please refer Page 7 and 8 of the slideshow. In France, organic change in sales in the first nine months of 2016 was minus 2.3%.

In the third quarter alone, the unfavorable calendar effect announced was more than offset by high demand from some distributors at the end of the quarter. Please note that in the fourth quarter, the basis for comparison could be demanding due notably to an unfavorable calendar effect.

Now about the market, leading indicator of new construction in France have improved. This positive trend and as already said, should only be reflected in Legrand’s activity with several quarter of lag.

I also remind you that residential new build activity represents 15% to 20% of our total saving funds. In Italy now, sales were up plus 3.8% for the first nine months of 2015 and on the like-for-like basis.

This good performance was in particular driven by two factors. First, the success of the launch of our Class 300X door entry system which I remind you is connected.

And second, one of products in energy distribution in H1 of 2016. In the rest of Europe on the like-for-like basis, sales were up plus 5.7% from 2015.

In major countries, we reported a healthy rise in sales in Southern Europe, Spain, Greece and Portugal, as we as in several other matured countries including Germany, Austria, Belgium and United Kingdom. Sale were also up in Eastern Europe but declined in Turkey where revenues were penalized by the political situation in the country, notably in the third quarter.

Moving now to North and Central America, where sales rose plus 6.5% on the like-for-like basis. In the U.S.

alone and on the year-to-date basis, we recorded plus organic growth in sales. This is supported by a favorable construction market and driven by the success of our Digital Lighting Management offering as well as good showings in the non-residential segment.

In the third quarter alone, we recorded very healthy growth in sales plus 9.3%. This was driven by one-off load-in in the retail business and the good sales quarter for businesses that recently joined the Group.

Excluding all of these one-off effects, organic growth in sales in the U.S. was in the neighborhood of plus 3% in both the Q3 and the first nine months of 2016.

Finally in the rest of the region of not R and Central America Legrand also reported a healthy rise in sales. Let me now talk about the Rest of the World where sales declined minus 2.2% on the like-for-like basis and vis-à-vis the same period of 2016 for the first nine months of 2016.

Growth recorded in India, Chile, Colombia and Morocco could not compensate declines in activity in Brazil and some countries in Asia and the Middle East too. And let me add specific comment about China which account for 4% of Group total sales during the first nine months of 2016, sales in China rose benefiting in the first half of the year from government supportive measures in the third quarter alone from a favorable basis for comparison.

This is for organic sales. Let me now say word on profitability on Page 9 where we compare nine months of 2016 to nine months of 2015 adjusted operating margin.

As I mentioned in my introduction the adjusted operating profit was up plus 5.7% as a result and as you can see on the slide adjusted operating margin including acquisitions came to 20% up 30 bps. Before acquisitions adjusted operating margin came to 20.2% versus 19.7% in the nine months of 2015, this 50 bps improvement in adjusted operating margin before acquisition is due to a good operating performance in the context of other role rising says at group level of course this is an aggregated view of the performance keeping in mind that we have businesses in about 90 countries that have pretty different economic and growth patterns.

And let's take the example of Q3 where we recorded a good growth in the U.S., good growth in Southern and Eastern Europe and on the contrary declining in Turkey and the Middle East this is an example. On Page 10, sorry on Page 10 let’s turn now to net income excluding minority interests where you see that this net income excluding minority was up at €426 million for the first nine months of 2016 this increase in the result was done thanks to good operating performance that I have just commented and it is partially offset by first rise in net financial expenses mainly due as you know to the issue to the - to the issue in December 2015 of a new bond to anticipate the refinancing of the bond maturing end of Feb 2017 it was an anticipation.

And nevertheless and all in all net financial expenses remains under control at less than 2% of sales. This is for the first element.

The second one is a rise in income tax expense due to a slight increase in our tax rate which continues in nevertheless to stand below what we call our non-achieved tax rate. Third in the nine months of 2016 Forex result is close to zero which is good, but we recorded a Forex gain in nine month of 2015.

And finally the amount the result of equity-accounted entities which considerably impact net results, we are talking here of a business starting from a such which will still require investment doing a few quarters before recording revenues. To sum up net income excluding minorities is up and stands at a healthy 11.5% of sales in the first nine months of 2016.

Moving to the last two indicators of the financial performance on Page 11 and Page 12. Then on Page 11 first.

As you all know regular or regular cash generation is a key feature of LeGrand’s business model, and it enables the group to sell finance is development. On the left hand side of the slide reminder of the key items driving high cash flow regeneration at LeGrand including hardest cash flow from operations and capital employed that are under control.

You see on the right hand side of the slide that normalized free cash flow came to health 13% of sales in the first nine months of 2016. On Page 12 now you will notice that net debt increased almost €350 million compared to the level of at the end of 2015.

As mentioned on the slide the rise and bad payment of the dividend of more €300 million and more than €400 million of investment in eight acquisitions as a comparison with the same period of 2015 we invested bit more than €200 million in external works. So overall solid results for the first nine months of 2016, and I would like now to elaborate on the second takeaway of this presentation regarding the ongoing development of the group.

I was start for that on Page 14 with the wrap up of our active external growth in the nine months of 2016. As announced early Feb LeGrand has actively pursued its strategy of self-financed bolt-on acquisition.

LeGrand as indeed made eight acquisitions since the beginning of the year totaling annual sales of over €170 million. I won’t go into details of each of them, but detailed presentations are available in appendix of the trade [ph] show.

But globally please note that those bolt-on acquisitions are very consistent with what we have been doing over the last few years. First we acquired a number one and number two positions and it prevents over 80% of total sales acquired with number one and number two position.

More than 80% of total sales acquired. And six out of the eight deals concluded are in new business segments.

To conclude on external growth, I would like to precise the based on the acquisitions already announced and they are likely date of consolidation, change in the scope of consolidation should boost 2016 full year of sales by over plus 4%. I am now moving to Page 15 regarding the deployment of Eliot program with some new initiatives in the field of the connected products.

You can see from the left hand side of the slide that after a successful launch of Eliot in France and Italy in 2015 we launched today Eliot in North America. And as you can see from the right hand side of the slide, we’ve participated CES unveiled in Paris in October.

And this is before taking part for the third year in the row in CES Las Vegas in Jan 2017. The message about the development of our connected offerings is that we are conducting a lot of initiatives and we are ahead of our development plan.

Now to finish my presentation I would like to move on Page 17 and talk about our updated targets. We say that based on our solid records in the first nine months and taking into account in the fourth quarter both and unfavorable calendar effect and historical usual margin seasonality, Legrand is updating the 2016 targets compared with initial targets set in Sep 2016 and is now aiming for organic change in sales of between 0% and plus 2% compared with an initial target of minus 2% to plus 2% and adjusted operating margin before acquisitions i.e.

at the 2015 scope on consolidation of between 19.3% and 19.6% of sales to be compared with an initial target of 18.5% to 19.5%. With this in mind, ladies and gentlemen Francois and I are now ready to open to questions.

Thank you.

Thank you very much. Good morning everybody.

I have a couple of questions, please. The first on the new guidance, I think the new margin guidance implies a margin that would be probably between flat and down year-on-year in Q4.

So what makes you think that the margin could actually come under pressure on the year-on-year basis at year-end? So that’s question number one.

Question number two is on your manufacturing setup in the U.S., I mean could you elaborate on this, perhaps indicate what share of the production or sourcing comes from first in Mexico and secondly China? Thanks very much.

Good morning, Gail. Then your first question is about our guidance and the profitability guidance.

First, your point is I think that you mention some of consolidate of this guidance, actually these not the case. And maybe to be clear on that let’s say that the full year objective of adjusted operating margin before acquisition to us very consistent and actually demanding.

If we take the high-end of 19.6%, it would imply maintaining the good nine months margin performance trend of 20.2% and take into account the historical seasonality of around minus 60 bps. And this is the reason why I would consider it as a demanding target given the expected calendar effect in Q4.

And as far as the low-end of the target is concerned, the low-end is 19.3%. It is also demanding as it means maintaining a high adjusted operating margin in a context of flat sales.

And this is the answer to your first question. Now your second question is about our situation or footprint in the U.S.

Maybe I would start by saying that we are not friends in the U.S but I may I can in the U.S. and our people there are American, our brands are American, our business are American.

Then this is maybe first important things to have in mind because we are U.S players that compete with other U.S players. It means that if the rules of the game and this is certainly what is behind your question, if these rules where have to change, it would apply to all competitors and we thing that Legrand would not be here specifically affected by that.

I would add that because it was your question, but our industrial footprint is certainly also consistent with one of our competitors. And this is - and it has to be analyzed maybe technology by technology.

And the big portion of our important components, electronics components that are slot in Asia. And because they are related to our new business activity which is a big part of the activity we have in the U.S.

and the same growth for our competitors. And it means that year and the model is same for all.

So senior electronic components means go to Asia and it means seems to me that it may continue as the skill is there. And this may be for the first part of your question or one part of your question about for seeing from Asia.

Now talking about sourcing from Mexico, it would present may be around 10% of our activity. I would complete my answer by saying that it seems to us that the differentiating factor of that explain our success in the U.S., our factor that are not going to change, if any changes would occur.

We talked about leadership are very good position in the U.S. We talk about innovation would also maybe add services, channel management and so on and so forth.

Then this is picture of the success of Legrand in the U.S. and the big move that we have done there and all over the country.

And I don’t know it will effect answer - if it answer directly your question, but it also seems to me that the program of Mr. Trump and his yesterday’s speech is more or less a pull economy speech and that was where we see for the market, by the market and it’s also good for us because our activity again is a U.S.

activity with the U.S. people and the U.S.

brands and products. And the economy was to be a supportive in the future.

It would be good news for Legrand.

Okay. Thanks very much.

You’re welcome, Gail.

Yeah. Good morning.

Thanks for your time. My first question is a follow-up to Gail’s question earlier on the guidance, I get the profit range relative to the organic range, but what would really need to happen for organic to go down to 0% for the full year, I mean do you see anything in your markets currently that would support that lower-end on the organic guidance for Q4?

And secondly, on the U.S. as we keep surprising on the upside and you always say it’s a kind of specific items and indicating that it may it can’t be maintain, but obviously at some point, we stop believing you and just expect this kind of meet high thing or it’s growths to continue, if anything specific you would want to highlight for the next few quarters, maybe should be aware of that growth lowering to market level or maybe even below due to the comparables?

And lastly on China, you mentioned Q3 had an easy comparable but what do you see sequentially on a more underling basis? Thank you.

Hey, good morning, Andreas. I’ll start with the guidance top line date.

Maybe the best way to answer your question is to be precise and talk about figures. And then in the first nine months of 2016, we report an organic change inside of plus 2.1% and it is made of H1 2016.

You may remember that we had plus 1.9% organic change in says including and as announced favorable calendar effect of around one day i.e. close to 1 point.

And the underlying trend of H1 of 2016, was about plus 1%. In Q3 of 2016, as the rise in sales - organic rise in sales is plus 2.5% and it will be from - to your second question but this 2.5% is including 6 points of what we would call all the performance in the U.S.

And I say that in the press release excluding all one-off effects, DLM, digital lighting management, projects load-in in retail, organic growth in the U.S. would have been in the neighborhood of a plus 3%.

And then extended to what we - what I call this is a six points of performance. And if you take these six points and you combine it with a share of Legrand sales made in the U.S.

when that is may be something in the range of 1.5 point at group level of positive impact coming from this extra situation. And the conclusion for Q3 is also that may be the underlying trend is about 1% organic growth for Legrand at group level and 1% in H1, 1% in Q3.

And the reason behind our full year digit target is to say that assuming that this underlying trend would continue in Q4 this 1%, but also taking into account the unfavorable calendar effect of close may be to something than two days. Q4 is a bit more little that than today, it’s may be 1.5 days but reported Q4 organic change in sales would be negative to Italy.

Then this is the Russia for having this 2.1% performance of organic change in sale at the end of September moving to 0% to plus 2% for the full year. If you do simple math because I think it was a part of your question, if we were to reach the low end of 0%, it would imply minus 6%.

And if you were to reach the high end minus 6% in Q4 and if were reach the high end of plus 2%, it would mean continuation of the performance of the first nine months which is not reasonable at this stage given the fact that again we have an underlying trend which is below what we have reported, also this reported figures are good and thank to good performance of the team. And second due to this unfavorable calendar effect that is have not to be ignored.

And this for the long explanation of our plan. Your send question was about the U.S.

activity moving forward then if we talk about the U.S. growth, what we say and what we have constantly say since the beginning of the year is that the underlying activity in the U.S.

is about 3%. And we have outperformed trends in market indicator and it was driven by I said again early by one of effects linked to the ongoing success of digital lighting management offering.

Then we talked about the highly energy efficient lighting control activity. Good showing in the number is onshore segment and this in the retail business.

And I think it’s reasonable to analyze in detail this performance to I would say split what is the underwriting trend and what are the one-off effects. So your question was about then what we are seeing ahead.

Then may be to answer to that it’s - for us we do not give any guidance today either for the Group, either for - not for region then for 2017. It’s absolutely too early to talk about that.

So, yes, you are right in saying that one-off effects activating, changing basis for comparison and this has to be taken into account, but even if our future performance was a bit effected by basis for comparison, it would not mean that for us any weakening of our position of trend in the U.S., it could be only mechanical. And yes, it’s important to take that into account when it comes to a project, any future activity.

Your third was about China. Then it’s an important to speak for I would say many people.

As far as Legrand is concerned, of course we do share but Chinese activity and what is going on in China, you also have in mind that China is around 4% of growth. That is the first point.

And second about the underlying trend, if we stay on this concept of underwriting trend, what we have said in the beginning of this year is that if we get rid of the government measure, we see profit in the market activity is concerned. And second is basis for comparison, it’s clear that the construction market in China remains I would say negative in terms of underwriting trend and should remain quite under pressure for some quarter.

Then again we have pressure there. We are making decisions based on that.

You know that when things are improving, we are investing a lot in concrete to catch the worlds. When things are under pressure, we are the team waiting for better moments that to reinvest.

Then longer term, we say about longer term, we think it’s a very good place to be for us because you all know the story about the size of population, the trend of urbanization that is going to drive certainly a good kind of the construction market longer term. In the short for the coming quarter, we consider that the China should continue to be a bit under pressure, this construction market is concerned.

Thank you very much for your detailed answers.

You are welcome.

Thank you and good morning all. Can you talk a bit about the pricing trends you are seeing, what the impact is going to be on the input pricing side going forward?

And can you just share a few thoughts on France and how you see that progressing heading into Q, obviously this quarter and heading into next year? Thank you.

Okay, good morning, James. If we start with the pricing trend then so you know the pricing is for us something important that I said of the Group.

You also know that pricing management all it’s actually a price inflation management. Then starting with figure pricing reported by complete for the first nine months of 2016 is slightly above 1%.

We say that the time of publication of H1 that part of this pricing, it is also due to some of compensation of energy in your country currency devaluation. And excluding this compensation let’s say our pricing is slightly below 1%.

And as you know at Legrand, pricing and that compensating of global inflation received with two main components. The first one and it will answer your question.

The first one is purchasing prices or cost of our consumptions. After all prices - commodity prices and component prices are actually done around 1% year-on-year.

This is for the first nine months of 2016. Please note also that on a sequential basis and as expected, we are above in Q3 a significant increase of some commodity prices that mainly steel but also copper.

And this is a trend that could continue even effect some of the commodity and components. And you know also that these some of quarter lag effect between the time of this kind of inflation and the time that when it effects our P&L.

And this is for consumption prices. And the second main component that is covered by pricing, when it comes to talk about inflation, global inflation on wage and here what inflation is of course remains positive then combining pricing back to the market with the emerging countries so I can’t see the evaluation, declining price in consumption but also this wage inflation that continued.

We end up at the little of the adjusted operating margin with very slight bonus on margin. And this was more or less same situation at the end of H1.

And moving forward because I talk about this segment should rise in commodity prices. You know we walk on a country by country basis on selling pricing policy is managed by our country manager by family products and we do we intend to continue is to pass in session received to the market and this is going to be walk by those country manager the end being to - at the end of the day or at the very bottom line of the P&L of LeGrand to try to cover this inflation received by price increases.

And this is what we intended to do for the coming quarters, but also we do it I think in mind that we have to remain competitive. Question was about France and maybe about the trend of the market then maybe a few comments on that.

First if we talk about the kind of the construction activity. There are some good signals and that has to become in - for the new build activity the number of rising starts in still on the rise and according to the French government data we talk about catalyst and see in the range of 7% to 8% growth as far as the late - lost data accounts on the data of Q3.

As far as the non-resi starts are concerned is maybe more unclear as the recent figures shows favorable signal for the payments, but unfavorable signals for staffs that’s the first point starting with figures. The second point which is important to have in mind is that it’s a reminder that you know that new represent about 40% of our funds sales for LeGrand of which 15% to 20% is in the resi space to put it another way resi new activity represents 15% to 20% of low cost sales in France, that’s the second point.

And maybe the third point which is also important is to say that the improvement in the leading indicator for the French construction market good news for LeGrand clear that you also know that it should only be reflected in a LeGrand’s activity we said all quarter of lag therefore impact in 2015 we finish would be limited and the real actual impact should be seen from 2017. And to sum up on the basis of what we read 2017 situation is at least would be better than what we have seen in 2016.

Perfect. Thank you.

You are welcome.

Hi Good morning gentlemen thanks for taking my question. I just have a couple of follow-ups.

First of our on the French business, I understand of course the lags due to the type of equipment you are supplying, but I was just trying to bridge the gap between your performance and if we look at the performance of one of your main distributor in France it seems that to some extent that distributor has been at growing you even though they are still in negative territory. So I would like to understand why it seems you are - you maybe lagging there even though you have said that’s at the end of the quarter you had a high demand from the distributor.

And to that is one on France it seems the margin has been to some extent slightly eroding for few quarters now, I remember that you had mentioned kind of investment going on and being booked in the French number. So I was just wondering whether there were since the case and for how long we're going to have that small investment drag on the profitability.

So that was question number one.

Good morning Lucie. I start with the comment about the comparison with the distributor performance and first sorry for this usual uncertainty not to comment statement for performance of our customer.

This being said look what the either excel is their performance is very good in France at 32%. And you also know that it’s very difficult to compare distributor when manufacture performance seen on a quarterly basis or even on a yearly basis and because we can have different business days impact products and end market, or wider, or distribution level we talk about cable edge back lighting activities that we are not usually thought France’s concern but not only in France.

And you can also have settings and difference that could also impact your performance vis-à-vis distributor of course level your performance vis-à-vis distributor you might remember what we say the beginning of next year or end of last year this perform carryover effect between Q4 205 and Q1 of 2016 the same went for 2014 and 2015. And then a lot of things are creating gap and the most important one being further the side of the market of the type of activities that are not same and that have not the same patterns in terms of goods.

This is for the comparison to excel. And clearly what is our statement today is that we are protecting our market share in France.

We are doing a good job on that, and we do not see any shoot follow in France as far as 2015 performance is concerned.

And just the question I have regarding the margin.

Yes, then concerning the margin if we start with figure. And I think you mentioned the fact that we would have say that margin performance with a bit affected for some quarter due to small investments that we are going them and that it would in your question what is it going to continue or not?

May be it’s important to me to answer in detail to your question. First the domestic France adjusted operating margin is well controlled, maybe this has to be credit of loss there is that it is very well controlling in the context of declining sense that’s the first point.

And if we look at figures reported France adjusted operating margin is 20.9% for the first nine months of 2016 and it compares to 22.5% in 2015. And it's clear and you are right on the reported basis what we report by reporting segment we have decline on 160 bps, but has explained how many times it’s important to remind that France margin is indeed made up of two parts.

The first one is group related activities, first we have a lot of intercompany sale, but we also have in France and we see whole countries thanks to SBUs and corporate functions and then we have lot of cost France P&L and those activities and their impact on Margin have to be seen globally at group level and not at the level of France. Then that you don't have this availability and looking at the reporting of LeGrand and it's important for us at each conference call to explain that.

And what matter as far as the France margin management is concerned is the second part of this activity we have in France which is the most important one which is the domestic activity and this domestic activity is under the responsibility of the France General Manager who have achieved about stable domestic margins in the first nine months of 2015 which is again a good relative performance given at 2.3% decline in reported sales in France. That answers your question?

Yes. And so if I can have a follow-up on that, I know there’s some intercompany exported activity from France.

I know this is also the case in Italy would you say that in Italy in the third quarter, the Italian profitability has benefitted maybe from some of the export activity or all the performance you’re saying in Italy this quarter really specific to the Italian market?

I would say both and here we have growth in Italy this year. Then you know what happens when growth come back, we have positive effect on margin.

It could be temporary but not mean that we are not going to keep a good ambition in terms of profitability of margin or profitability of our Italian domestic activity. But yeah, the profitability is very good and in Q3 of the first nine months, the profitability in Italy improved a bit and this improvement was partly due to the improvement, another good step of the team there of the domestic activity.

Now, you also know and this is what we have constantly said sorry is the when markets are improving, it’s very important to be vigilant in terms of investments to make sure that we catch the growth. And then longer term, we of course will continue to deliver a very good profitability in Italy.

This is the case today and this is what we intend to do. But in terms of leverage, it’s the growth as to continue, we have to be reasonable in terms of projection because it’s important also to invest in terms of expenses, innovation and so on to make sure that we are into catch growth.

And just maybe a one last maintenance question. You had a 20 bps solution from M&A on the margin in the first nine months, is it fair to assume the same level of delusion for the full year roughly?

Well, what we say and I think this memory is correct that we said the sensing at the end of H1 is that we seeing that the decision could be between minus 10 and minus 20 for the full year.

Thank you. Thank you very much.

You’re welcome.

Yes. Good morning, thanks very much for taking my questions.

Just firstly to come back to the U.S., could you help quantifying the kind a split of that over performance between a different categories, especially the loading of the retail channel? And then forward in connection to that you are launching Eliot right now, do you expect that to result in some distributors stocking up already this year by the year-end or should we think about this is kind of H1 2017 result impact?

Hey, good morning, Andre. It’s a bit difficult for me to give you more detail because of course we have the detail of our performance.

Then keep in mind that we have clearly said or quite clearly stated in our press release what was behind the solid performance. And yes the load-in in the retail activity is one portion quite significant in Q3.

And the ongoing performance in the non-resi segment for example those are digital and management activity is also due to option, but I will not give more detail because it’s a bit difficult for us as far the competition is concerned to be more specific on that. And talking about the Eliot, it’s very important step for us, because as you know that the U.S.

markets is U.S. market very receptive to this IoT activity or potential activity followed.

This is something than a new step which is important in the case of the Eliot program. As far as the impact on sales is concerned the coming quarter, I will not quantify because it’s very difficult to say.

What is very important for us is to make sure that we and this is what we have tried to do in the launch of Eliot in 2015 is to be I would say ahead of the trend and to conform finally this IoT evaluation of the facility into a bigger profitability for Legrand. And this is very important to understand that, thanks to IoT, our products and solution of digital and electrical infrastructure are much more appealing for the end user.

And end user could be in the B2C activity, but also in the B2B activity helping the end user to a stand in terms installation or to save energy. And here I am talking about the end user.

So it’s a typical market, the U.S. market where the Eliot program really well fit to our product offering.

And you maybe know the story of the digital lighting management, thanks to the digital lighting management. We have a good success in terms of setting the U.S.

for this year. This was my proceeding point about the other performance.

And this year, thanks to the fact that we are talking about connected products. And this is maybe something that to you on which you will find more detail in the rest of the deck.

And I remember what we said that time is that we already have said in the U.S and the digital lighting management is one example. But the aim of the launch of the Eliot program is more to deploy this concept of Eliot.

Eliot being electricity and IoT for data, to deploy this program, all over the world and all over the country of the Legrand to make sure that people will really focus on this very good of opportunity.

Got it. Thank you.

But just on timing of it, I think that’s what trust trying to get is a because you are launching it now in November and you see as in January next year, do expect this to be start, stocking out with the new products already this year or is it more of a Q1 next year, if they do, I am not quantifying the actual effect but just more on the timing of it would give a new experience in other countries?

Maybe I was not clear I’m sorry for that, but it’s really an ongoing process. We will launch products that we do as we have done for, it was the detail.

And we launch products every year sometimes a very big launch but here Eliot is not the launch of the product, Eliot is the launch of the program, it’s a worldwide program of Legrand and we continue and we have already launched products - connected products in the U.S. and will continue of course in the coming year.

But there is no specific launch of products associated to the launch of Eliot in the U.S. first.

And second, our participating to the CAS at Vegas is done to unveil a certain number of innovation that will fuel the launch of product in 2017, 2018 an so on. But we do not expect big move of the innovation with launch of given product.

It’s not an ongoing process that should produce a good set in the future for Legrand.

That’s very clear. Thank you.

And if I can just also double check on pricing versus inflation, in your guidance for 2016, what’s implied for that for Q4 full year, do you imply in that margin range guidance that you still have a small bonus from that pricing versus raw material balance or do you expect it to flatten out?

We expect to continue to have slight bonus. And well as I said bonus, we talk about few weeks, there is - we do not expect any change in the coming year or months.

Great. Thank you.

And final one actually on M&A dilution as well as previous question, just there was 20 bps in H1 and there was still 20 bps in nine months, but domestically the M&A contributions stepped up substantially. Is this just effect of the consolidation of what I think we discussed before in terms of more months in the quarter and then three coming in Q3 and therefore maybe dilution wasn’t as strong in Q3, because you can make more sales or is it actually new businesses that you are not consolidating on higher margin and therefore having less dilution because from these kind of more data points of acquired growth in H1, acquired growth nine months and dilution H1, dilution nine months implies that there wasn’t really dilution in Q3?

Right said, sharp point, Andre. First if we talk about the type of acquisition we have made.

We talk about very interesting businesses mostly I said in my presentation in new business segments with very good position from their market, respective market and what - is also one characteristic of those acquisition thanks to favorable position is that they have a very good profitability and it means that for example we are to try to understand - which in terms of build for example we have paid a bit more than €400 million for bit more than €170 million with a sale required then it could be seen as quite high multiple in sales, but actually it’s not a high multiple it’s just because we talk here about companies with a very good profitability. Interesting enough also is to look at I would call it the structure of the P&L, and we talk about businesses that requires high R&D resources and investments.

High SG&A to support the result, but they also have a very good gross margin, a very high gross margin and then at the end of the day they good profitability it’s a bit like the business unit you know we have now for years in the U.S. in the Digital Lighting Management here also we have a ratio of R&D and SG&A to sell that are much higher than the average of the rest of the activity, but also the same growth or the same growth for gross margin and the profitability is excellent.

So accounting of acquisition that we are made by LeGrand or whether by few quarters we have fall some of them and most of them very profitable business and this is the reason why bit more than 4%, 4.6% actually a slip of consolidation in sales for the first nine months we only have a good peso [ph] 20 bps of dilution at the operating margin level. Does that answer your question?

Yes, it does indeed. Thanks very much.

I just my line broke up when you said paid over was it €300 million or do you said for the €170 million of sales I was had an interruption on the line just what you said there?

I was - sorry I don’t know. What I was saying is that we have spent the €400 million in the first nine months of 2016 for acquiring eight companies for total sales of bit more than €170 million and I was just saying that if you look at sales multiple you can have one view that you also have to take into consideration the fact that we talk about companies with the high level of profitability then we have paid, I would say normal multiples has always going to do but I saw as a multiple of EBITDA, EBITDA’s concern.

That’s very clear. Thank you very much.

Thank you.

Hey, good morning. Few questions on North American lighting control and then a follow-up n France as well.

Firstly you’ve obviously consistently outperforming the North American end market and I was just wondering whether you can call out the growth specifically in lighting control including Digital Lighting Management and how that's developed over the past several quarters whether in fact it's actually accelerating now. And on lighting control is being a key focus and expansion for M&A and you’ve got a strong foundation of one stop or two.

In North America let’s say lighting controls now about 20% to 25% of sales and also just decision to expand in lighting control, is it most waited primarily by the prospect of the step change in regulatory driven demand or the potential really to lighting supply clearly more probably play in the development of IOT and buildings or maybe both, which do you see is a bigger opportunity? Thanks.

I would say maybe all what you're say this is our interest for us, the fact that the need for more energy efficient products is a very good idea you know sometimes we think that in energy savings is more concept than some similar really real. But it’s real if we talk about the Digital Lighting Management activity example of what sample that you code is the best one.

We are - the sales are driven by this energy savings and there are real and for people using buildings equipped with DLM products of LeGrand they are real setting then this is the very good driver. The second one which is very important is energy code and this is something that as and should continue to support sales of what step up products and systems in the U.S.

and certainly this is a concept this concept of energy code if we keep this U.S. way of talking a bit that is going to expand you know there are countries of the world and then this is the last really an area of interest and when you were saying is it something that in which we - is it an activity in which we do intend to continue to expend, yes and the acquisition of [indiscernible] this year is a very good demonstration we talk here some of what stop outside of the U.S.

that we see and this is a very good day for us in Europe now a new base. That should continue to be driven by fast by the fact that there is a good play back and we could it play that for people are using these kind of products and so going to do for energy savings is going to be a good driver for sales in the future.

I can I just a follow-up question just in terms of regionally concentrated the lighting material business is in the U.S. obviously what stop is based in based in California, maybe how much of your sales come from states have established and if it goes already life like California with seven to 24?

You mentioned California this is clearly is a main state that is applying energy codes today and they are very stringent in California, but it is a concept that is expending a year-after-year I know other states in the U.S. then I would say the game is not behind us, but certainly also will continue to be in front of us.

Now California was a very big state we there a very good market share and that we benefited from the synergy code. Longer term what do - we what we see for the U.S.

is that this expansion of energy code should continue not the west or sales and in many states.

That’s great. And just follow-up on France sorry I missed the start of the call, but did you specifically call out the calendar day impacts in France and then also just has the strong demand from distributors continued into Q4 as well?

Thank you.

First about the calendar effect maybe just work one thing which is important to have in mind is that when we talk about the calendar effect it - I would call it a safety calendar effect and then to be very clear on that for France for Q4 the expectation is too high to have two days less compared with Q4 of 2015. Now or for the second part of your question as we call it the extra demand of distributor the effect of this extra demand for the effect of the calendar effect is easier to analyze in Jan and live now it because what we have seen if we come back to extra demand of distributors we have seen this extra demand occurring in Q4 of 2014 we have seen it again in Q4 of 2015 then what we say that at this time is that we have next process coming from this extra demand with of course the counterparty in Q1 of the year after.

Is very difficult to say now what is going to happen in the fourth quarter and specifically in December. But the artwork shown either the trend will remain the same trying to reach some of added distributors and what happened in 2014 and then 2015 will happen again in 2016 then known impact in Q4 of 2016 from this extra demand or maybe the situation would be a bit different, but again it's very difficult to anticipate that and we will only have a clear view on that in 2017.

Okay thanks, very clear.

You’re welcome.

Yes, good morning all. My questions around cash flow and some of the items there, just on CapEx I concede it was around 2.2% of sales, can I talk a little bit about the ambition and you’ve given before about going up to sort of 3.5% perhaps at some point, what the timing of that could be and what would be the items that you're spending money on there, and related to that are there any sort of deferred costs on the acquisitions that have yet to come through?

Sorry I did not get your second question.

Just on the M&A you've had so far this current member for this any deferred acquisition costs or and maybe perhaps a little bit of what the pipeline could be on M&A going forward?

Okay, maybe if talking CapEx Graham, I’m not sure I understood your figure, because that what we have brought at the end of September 2016 is 2.5% and this is CapEx including capitalized R&D. And it compares to 2.3% last year this is what you will find the questions on the two figures then we have 20 bps more.

And the second comment which is important is that if you look at the past figure of the report let’s take 2015 end of September ratio was 2.3% and end of December the ratio was 2.8% then you see that you have effect on Cap Ex and being more CapEx that in the last part of the year. So and you were comparing that to 3% to 3.5% which guidance constantly confirm, then yes we stick to this some of guidance if you calculate like that, what we have said the time of the Investor Day of 2014 and Investor Day of 2016 is that we think that CapEx that LeGrand is under control and in effect because you can have some years with more CapEx and years with less CapEx is not something fully linear.

But in average we stick to these objectives or keeping our ratio of a 3% to 3.5% of CapEx. About your second question do we have and this is what I understand from your question, do we have any item spending as far as the cost to be paid to seller are concerned, no what when we are talking about the €400 million or more than €400 million paid this is what we have paid, but there is no pending topics in your question?

That's correct. Yeah okay.

And then I guess just what the pipeline looks like as far as M&A in the coming years?

And the pipeline you know it’s typical activity and sorry for this answer but on which absolutely impossible to give any guidance or target, because what we know is what and this is the reason why we use the concept of pipeline is that it is active, it means that we have many companies to which we talk to which we discussing internally to see if it would be a good feet in terms of strategy revenue synergies, cost synergies, but you know after that that discussion could be very long. We never know if we're going to close a deal in timeframe of a six months or six year maybe a bit too much but this is the to attend, no we did not give any guidance, but we can we can tell you is that we remain even active, we are demonstrating in 2016 that when seeing time poling in certain markets and the acquisition potential is back and then this is a very interesting.

And the last point. And just what may be reflecting in our adjusted operating reported for the first nine months of 2016 is does not only create sales and additional sales follow on but also true value in our adjusted operating profit, those acquisitions are very synergetic we look on.

Okay and just also perhaps as a follow-up on the CapEx. So if we look at in the third quarter was 2.2% percent if you include the R&D 2.8%, but in terms of yes, okay that it does pick up seasonally in the fourth quarter.

What sorts of projects are you investing in that are - is there a specific factory investments and what sort of timing do they have in terms of them potentially generating the new additional sales?

Again I'm not sure that my answer will fully answer your question, because it’s very difficult to be precise on that, but I would have exactly the same for good connect products, it’s an ongoing process, the CapEx investment is something we as I said earlier we can have some no CapEx in a given year above 3% the below for two year at the end of the day, we do not any specific projects, a single project that would change pattern of the sale in addition with those CapEx. Then to sum up the fact that we have more CapEx at the end of the year then at the beginning of the year pure seasonal effect people walking on that project and acquiring the CapEx on the second part of the year, but that's not imply that we expected or we forecast significant launch for the beginning of 2017 for them.

Okay. And I mean just finally then on R&D.

So the R&D sales have not stop a little bit, I think 4.6% expense in the P&L obviously the capitalizing some as well this was the quarter. I mean you made the point about some of the new acquisitions having businesses which do costs more to on the R&D side.

Divisionally in the profit regions that you report France, Italy, Europe, Rest of the World and North America in that what business is actually absorbing the higher R&D expenses in the P&L?

This is a very good point, you refer also to what I said earlier. To come to figure then this is I would say that you don't have access to directly but, if we talk about the ratio of R&D to sales it was4 .6% and we started this 4.6% in the first nine months of 2015 and for the first nine months of 2016 we talk about 4.9% that it 30 bps more.

On this - on new figure very important to understand where this evolution will come from. First maybe as a statement of course we remain evident [ph] on that and there is a no deviation and then how to understand that if you look at the variation of the increase of R&D cost comparing 2016 and 2015 close to two third of this R&D increase - cost increase is coming from the U.S.

and it is link to what I said earlier it is linked to two factor. First the recent U.S.

acquisition have a high level of R&D this is not an issue and they also have a high level of adjusted operating margin I said earlier and I could maybe exemplify that by two examples saying that in the recent acquisition we have Raritan and Luxul and they have R&D sales ratio in the high single digits. Then this is typically related to the activity, but on the other hand and what you just maybe the most important things to have in mind is that they have a good level of profitability.

This is for the impact of the recent acquisitions and grown on the organic perimeter and this is something is very well referring to earlier and this in Q&A session, there is a mix effect with some businesses with the high R&D needs, but sales are going faster than the group and faster than the rest of the activity in iron steel on the U.S. parameter again saying that two third of the increase of R&D is coming from the U.S.

parameter. And the main example is a building control system, which includes Wattstopper that we took out earlier.

And Wattstopper activity or the GLM activity is going in sales about three times faster than the average of the U.S. and this activity have R&D sales ratio about three times more than the rate of other U.S.

activities then you see there that the mix effect could be quite a significant. But there is no issue and this is the business also that has a very good level of profitability.

And it's an important question and important uncertain to understand finally what comes to that we have to be vigilant to control our ratio you mentioned the CapEx, you mentioned R&D, but also you can have I could call them external factor that are very sound of course as long as of course of the profitability is there that could generate a big picture and this is exactly the case comparing 016 to 2015.

Thank you very much for explaining that.

You are welcome now.

Yes, good morning. Just two follow-up questions, what is the real tax wage dropping in the U.S.

some amount. And second question what was the organic gross of Eliot over the first nine months of 2016?

Good morning Pascal. For the tax rate in the U.S.

you may know that U.S. has two layer, the first layer that is known by everybody which is the 35% and then we have to the 35% more regional I would call them particular 80, but it gives at the end of the day, and seeing close to 40% then it’s a high tax hike in the U.S.

And this is not something specific to LeGrand and absolutely the case for whole companies for their local business. There is something by interesting to understand is that Ian talking about the tax I would call it P&L tax rate and when it comes to talk about cash the situation is different because our acquisitions in the U.S.

are benefiting from a tax credit quite significant actually. And it is not reflected in the P&L for accounting consideration that are well known, but of course as it is a tax credit and a tax benefit it shows up in our free cash flow and this is something that you could find in the cash flow statement LeGrand you will see on the free cash flow statement of LeGrand the different effective of the real tax paid by LeGrand that you compare to the P&L statement where you find the P&L tax rate and free cash flow tax rate sorry to be compared to the P&L tax rate.

And interesting thing to have in mind is that in the U.S. you have the particular a tax rate which was quite high, but at the same time the fact that acquisitions thanks to the amortization of the goodwill and this is what is behind this cash tax benefit the effective tax paid is lower.

As far as the and maybe just to compete on that because what we saying to LeGrand statement you will see that for example we start from normative volume you know that we start from normative tax rate following at the level of the group of something in the range of 35% this is for the first step. You know that we had P&L tax rate that is below this normative tax rate height or 35% and the [indiscernible] is still the same we are saving opportunities in order to deliver or tax rate below this normative tax rate I know that we have implemented the net back concept that group level to manage the performance on the country-by-country level net back being after tax for the net economic profit.

And the step three to be consistent with what I’ve said earlier about what we pay effectively and it is reflected in our cash flow statement we are effectively paying tax rate I would call it a free cash flow tax rate which is below 30%. And this level our gap is mainly driven by acquisition and innovation and this is your first question?

Your second question was about the organic growth of other product we do not disclose that rather course of the year, but be confident that total sale that you may remember that after we brought total growth of 34% or bit more than 44% for the first year of the launch of a year. We intend to gain or be ahead of our hard map this year and deliver good figure, but we will come back on that at the time of those implication.

Okay.

Thank you. Just three quick questions.

One is following up on the tax question, how long do you expect to benefit from those tax losses you’re getting from the acquisitions is that going to be in the next couple of years. And then the second is in terms of Eliot how you position that versus competitive products, I mean do you see that there's something that you’re offering technologically that different or is it just really building on for the first move advantage with your relationships.

And then a third is on acquisitions you’re spending more on acquisitions now, are you paying higher multiples as a lot of I think competitors looking at startup companies as well and buying some of these smaller device manufacturers and other companies you may be viewing. So I’m just wondering if you think that prices are still reasonable.

Yes, good morning Denis. On the tax question I think your question was about what is going to happen in the future, I saw this tax benefit we have - will it continue it depends on local low it's still when you acquire companies in the U.S.

in the U.S. maybe the best example for us today.

You have this principle of goodwill depreciation that provide you with this benefit tax benefit and at the end of the day you pay less tax than you have in your I would say P&L or that you show in your tax income. Then as long as we will continue and that rules the game allows will remain the same will continue to have this gap between P&L, the tax P&L and therefore P&L tax that rewrite and the free cash flow tax rate I also say that part of this gap is not only due to acquisition part of it is also due to our items line innovation and innovation it is also a good thing to get tax credit.

Okay.

On Eliot, the point is if I understood correctly your question. There is no real competitive issue on that as far as pricing is concerned, what is very important with connected products is that it adds value in use for end users, for installers, for add savings and speed of installation, for installers, and savings for end users many savings for full facility manager because they're able to control full installation remotely of course helping to save a lot of money in terms of maintenance and so on.

It's also at comfort when we talk about our world don’t understand the class as we had with X an additional comfort for the end user and as long as you provide your customer with more value in use you are able to price a bit more your products and that was first point. The second point which is very important to understand is that Eliot and connected the move of LeGrand is not something we are doing in existing business.

We talk about what, we talk about having a very big offering following on in terms of electrical and digital products and solutions for infrastructure and then with the opportunity of the IOT and as well as Eliot program we add layer of connectivity or we connect those product that are useful because they are going to add value in news for end users. We add connectivity to in turn it then it means that the products remain the same for basic functionalities, very important basic functionalities for example switch on and off for the light and we add connectivity to Internet to add value in news for the end users, the it means that coming back to your question about pricing when you add this kind of connectivity depending on products you can add a portion of additional cost that we have to cut to the market.

But this is for us not so much an issue again as long as it is not a goal and it is only part of the products and so on that you really add value news for the end users. Your third question if I answered correctly to your second one is about acquisition.

What I say during this Q&A session is that today as far as LeGrand is concern and what we again reported in 2016 there is absolutely no deviation in terms of our space and we pay reasonable multiples and this is part of the criteria of the choice of the LeGrand when we come to decide for to go for an acquisition and we have financial criteria and we stick to them and the only difference you can have between one type of acquisition vis-à-vis another one is a potential growth of the acquisition, because it’s clear that when you pay multiple and people talks about multiple of EBIT or EBITDA you look at the current EBITDA of a company and of course we have to embed in our revolving to potential of this activity and need to look at historical figure to define that. But it is not a new concept, it always be the case and again looking at what has been done last year.

What had been done this year and the year before, there is absolutely no deviation in terms of multiple paid by the company.

Okay, great. Thank you so much.

You are welcome.

Okay. Then thank you to all of you for participating or haven’t participated to this LeGrand conference call and of course Francois and his team remains at your disposal biceps to of course if you have any further question to ask LeGrand.

Thank you very much for attention and speak to you soon. Good bye.