Legrand S.A.

Gilles Schnepp - Chairman and Chief Executive Officer Antoine Burel - Chief Financial Officer Francois Poisson - Investor Relations

William Mackie - Kepler Cheuvreux Graham Phillips - Jefferies & Co. Lucie Carrier - Morgan Stanley Martin Wilkie - Citigroup Gail Dubray - Deutsche Bank Jonathan Monsey - Exane BNP Paribas Alasdair Leslie - Societe Generale Corporate and Investment Banking Andreas Willi - J.P.

Morgan

Thank you. Very good morning to everyone.

And Antoine Burel, Francois Poisson and myself are happy to welcome you to the LeGrand 2017 half-year results conference call. That we have published today our press release, our financial statements and the slide show and I will refer to this slide show and all those documents are available on our website legrand.com.

And this conference call is recorded and webcasted on our website. Now referring to the slide show and I go straight to the agenda on Page 2.

I have one page for highlights and then Antoine will go through the analysis of the H1 2017 operating performance which we can qualify as solid, which allows us to fully confirm our guidance. And I will then take over to show that we have continued to build a great leading position during this semester, and then of course, we will start the Q&A session.

So I move to Page 4 and to save time I suggest that do not detail the content of this Page 4 of highlights. But the main takeaway is to say that we are obviously very pleased with the acceleration of growth so far in 2017 and also very pleased with the positive impact of this acceleration both on operating profit and cash flow.

With this better leave the stage to Antoine for a deep dive in our performance, Antoine?

Thank you, Gilles, and good morning to all participants. Then let’s start with an overview of sales on Page 6.

So as said by Gilles, we do confirm the acceleration of our sales growth with revenues growing in total plus 9.1%, including plus 1.6% favorable for ex effect. The steady growth comes from the ongoing acceleration of our two growth engines.

The first one organic growth was solid at plus 3.2% driven by both mature countries and new economies, which grew respectively plus 3% and plus 3.7% in the first half and there were fueled by ongoing product launches. Acquisition driven growth, the second quarter engine is stood at plus 4.1%, mainly driven by the carryover effect of 2016 acquisitions, and the first consolidation of OCL.

Now taking into account all acquisitions announced and they are likely consolidation date. The change in scope of consolidation should stand at around plus 7% in 2017 and close to plus 8% in 2018.

I remind you that Milestone and Server Technology have not yet been closed and those calculations of scope impact resume a consolidation starting September 1 for Milestone and Server Tech. Before getting into more details on organic growth by regions, two other comments here on sales, the first one relates to our organic growth.

I will like to remind you of the already announced unfavorable impact from sales, expected in the third quarter, due to impact mainly relate to calendar FX as well as to high basis of comparison in sales in particular in the U.S. My second comment relates to FX, applying average exchange rate for June 2017 to the second half.

The annual product effect for 2017 would be close to 0%. Please also note that since the end of the semester, so you’re strengthen and would this continue, this would make an internally conflux into a ForEx impact which would turn negative.

Let me now go into more details, regarding the like for like evolution of sales by reporting segment and please refer to Page 7 and 8 of the Slideshow. In France organic growth in sales came to plus 1.9% in the first half of 2017; we believe which is good relative performance, which was in particular supported by an increase new residential construction activity as well as a very slight raise in a renovation.

I remind you that new residential construction accounts for 15% to 20% of local sales in France. In Italy, like for like sales growth was plus 3.1%.

This good performance benefited from the ongoing success of new products and in particular our connected door entry system as well as the My Home Up home system offer and in addition we have launched in Q2, the Smarther connected thermostat, which has also been very well received by the market. Clearly these good achievements helped to more than offset the high basis for comparison of the first half of 2016.

This is for Italy, now in the west of Europe on Page 8 like for like sales growth was plus 5.5% compared to last year. Performances were solid in Eastern Europe with notably with robust growth such as in Russia and many mature countries also regarding sustained growth such as Spain, Greece, the Netherlands, the United Kingdom and Belgium.

In Turkey, sales retreated over the period. Moving now to North and Central America where sales were up 2.8% on an organic basis.

In the U.S. alone, we reported plus 2.4% organic growth.

This was driven in particular by good performance in home systems and user interfaces products. And over two years, sales were up plus 8% from the first half of 2015 showing a good relative performance and demonstrating the ongoing concerning of our position in the U.S., which is our first bucket in sales.

As said earlier, the calendar effects should be unfavorable in the third quarter in the U.S. And keep also in mind that in Q3 2016, organic growth stood at plus 9.3% benefiting from favorable one-off.

Excluding these effects, the rise in sales in Q3 2016 would have been in the neighborhood of 3% and this means that Q3 of 2016 is really a demanding basis for comparison. I move to rest of the world saying that where sales plus 3% on the like-for-like basis.

A number of countries recorded a good first half, is what the case for China, South Korea, Indonesia, the United Arab Emirates and also New Zealand. In India, sales were also up in 2017, although business slowed temporarily in the second quarter due to the enforcement of the GST low in July, 2017.

GST stands for Goods and Services Tax. We also mentioned that activity retreated in some countries such as Australia, Malaysia and Thailand.

Let me now talk about profitability on Page 9, where we compare H1 2017 adjusted operating margin to H1 2016 adjusted operating margin. As you can see adjusted operating margin before acquisitions came to 20.6% showing a rise of 50 bps of H1 2016.

This 50 bps improvement whether it’s from an ongoing good operating performance in the context of overall rising sales. Including acquisitions, the adjusted operating margin came to 20.4%.

On Page 10, talking now about value. Adjusted operating profit was up 10.9%.

This represents an increase of around €50 million, reflecting LeGrand's capacity to create value through profitable growth as well as our ongoing productivity initiative. Consistently with our model, by reacting quickly to adjust sales price in Q1 and Q2 when we did Luxul was able in the first quarter to offset, in absolute value, the inflation on raw material and component prices.

More precisely, Luxul selling prices increase was a bit more than 1.1%. As in 2016 and in Q1 2017 figure is excluding the impact on pricing of major currency fluctuations, mainly Russia and Brazil.

Now as far as raw material and components prices are concerned, they were up about 3.5%. And as you know change in raw material prices in 2017 is a developing story and we will continue to focus on it.

On Page 11, I move to net profit attributable to the Group. You see that it was up 11.5%.

This robust increase is mainly the result of the good operating performance and the decrease of financial cost. Moreover, in absolute value the income tax is up, but the tax rate is almost stable versus 2016.

Moving now to the last indicator of the financial performance on Page 12. As you well know, sustainable high cash generation is a key characteristic of the model of Luxul.

And in H1 2017, I can say that it’s a good demonstration of the statement. On the left hand side of the slide, a reminder of the main items driving a high cash flow generation at Luxul, it includes the robust cash flow from operations supported by in H1, good operating performance.

This cash flow from operation was at over 18% are close to €17 million of growth. We also mentioned that it includes €7.3 million of non-recurring cash gains from ForEx.

Moving to working capital requirement, it comments under control at 7.9% of sales and as far as CapEx are concerned you see that with we are up €11 million, 85% of the rise being dedicated to new products. Please also note that due to usual seasonality, CapEx is additionally higher in H2 then in H1.

Then finally, you see on the right hand side of the slide that normalized free cash flow came to more than €370 million in H1 of 2017. All those good operating showing not only double-digit growth in results and cash flow, according to us reflects the ongoing robust value creation delivered by the group.

And this is for the financial performance and now I hand it over again to Gilles.

Thank you, Antoine. Okay, I’m on Page 14 and I say again what I said in my introduction, which is we are very pleased with the performance of the semester with this acceleration in growth and all the positive impact it has on our operating performance despite the raw material inflation headwind.

And these being said, we are repeatedly flagged, they make an equal impact of the calendar days and high compare for Q3 and all-in-all we are in a position to fully confirm our targets, which are remind you is usual metrics fall in all organic growth in sale, which is for the full of 2017 between zero and 3% and for adjusted operating margin before acquisition of the range of 19.3% to 20.1%. So I move to Page 16, BM performance, these semester has also being very active with many initiatives relating to financing organic growth as well as acquisitions, acquisition is obviously Milestone, but not solidly Milestone.

And I will have slide then to commence our balance sheet to finish the presentation. The balance sheet, which will benefit from some leverage, thanks to the acceleration of acquisitions although it remains well under control and I know that some leverage in our balance sheet was something that many of you were expecting and it’s about to pattern.

So I move now to Page 18, and this slide is quite typical of the world of Luxul. It’s a unique combination of number of initiatives, which are procure during this semester that relate to very traditional product families like wiring devices with New Neptune in fall, so there is in South Africa many product families, which are part of new segments and referring to fiber optic or instances with equipped the over or the faster connector, also new technologies and new applications like the near field communication or induction charging, which are new application and all these is the reflection of really the expertise of Luxul to be able to manage about 100 of the product families throughout 90 plus countries.

And clearly our active reason of research and development expenses and all the productivity initiatives remember of the platforms that we continue to deploy, all these allows us to constantly revamp, renew, add products in our several of hundreds of thousands SKUs in hundreds of catalogs full out in the world. I move on to Page 19.

Innovation is not just about product, product development or product launches. It is also everything that comes with it, such as – and you see on this slide for instance here interoperability with our environment as a successfully tested during the semester with La Poste hub for instance.

Also the capacity to convey to the market those innovations prove many trainings, launch, events that can be a live online. Clearly this proximity with our trade partners is recognized expertise of LeGrand this is - of the company.

And I move now to acquisitions, straight to Page 21. Obviously big move of this semester, acquisitions have been very active, sometime happen that this way, you may have quite period before, after and then you guys concentration of deals on a certain period of time.

But beyond the quality of transaction that you see on Page 21, what really matters more is the quality of the assets, while do not repeat what we have said regarding each of these acquisitions. But in total, we are talking of 100% of these business acquired being supported by positive long-term megatrends and almost 80% of the sales associated with these acquisitions being in a leading position.

All-in-all and this is what Antoine referred to his presentation. We are talking of our seven point scope of consolidation effect for the full-year based on what has been announced.

Moving to a Page 22, now stepping back to Luxul at examples, simply examples of some of the relevant acquisition that we have made over the last few years and these slide shows precisely what megatrends support the acquired business and how solid the positions of those companies are and this is really the objective that we are in mind. Every time we thought attractive segments, which are hidden by long-term positive megatrends such as for AV infrastructure, Milestone, Middle Atlantic product world, communication, digitalization and for Datacom racks and enclosure, big data, data flows and also for the other ones.

And this is leader objective to start attractive segments and to find assets that own a great position in their feel of activity in their region, either individually when we buy a company such has Milestone or through the build approach like what we’ve done in assisted living by making over a number of year in few acquisitions for the precisely in the case of assisted living. And the result, this is on Page 23.

We like at LeGrand simple and straight forward metrics that reflects those objective, which I’ve referred to as both attractive segments and leaderships and the figures are quite impressive and trend also is impressive when you look at both where we can from – where we come from since 2006 and where we are in to that taking into account what we have announced. We’re talking of 69% of the sales of LeGrand being sold in their market, number one immediate challenger.

Number two in their market acquires 53% 10 years ago and the year presence in new business segments, which is new something that we have repeatedly highlighted in our values Investor Day coming from the 15% in 2006, including what we have announced. We’re talking of 38% that is in these new business segments and you have that both on the Page 23, direct announce of what we call new business segments and obviously these correlates strongly with the evolution of profitability of the Group.

I remind you that in 2006, the adjusted operating margin of Luxul using the metric of today were 16.2% and last year 19.5%. So the correlation between the improvements of the leadership position of LeGrand and the profitability is clear.

Now on Page 24 and the next three. Given the magnitude of the transaction, we have a reminder of the main characteristics of the Milestone transaction that we have announced on late June.

On this page – what we want to illustrate on this page 24 is the high similarity of the characteristics of Milestone compared to the Luxul, I would call it core historical activities. And this is two of the fundamentals of the industry and we are talking about the AV Industry compared to the Luxul core historical activities like the attractively, the mega trends that I refer to two pages before when I mentioned for the AV infrastructure communication and digitalization with new applications such as digital signage et cetera, also the high value attached to the products because of the risks associated with the application that it makes.

And therefore, the customer loyalty for this are really the tool fundamentals of this industry, but this is also tool of Luxul to the business in this world of AV products as compared to the core historical activities. If we refer to for instance the quest for leadership which was very much in the G&A of Milestone, and the passion for innovation, you remember that we mentioned when we announced the acquisition, the ratio of R&D to sales at Milestone being very close to the Groups average.

And also the high sensitivity to CSR to fix and we mentioned this on June 28. Moving to Page 25, the similarity of the industry and the approach naturally is to be found also in the financial performance of the Milestone which is very comparable to the LeGrand metrics, which actually is a bit higher than Luxul, with adjusted operating margin last year of 21% and free cash flow as a percentage of sales being 12.5%.

And you obviously have noted the correlation between the market share and margins for Luxul and the Group, we mentioned it few pages before. And at Milestone given that over three quarters of IFRS sales is made as a number one position in the market.

Now Page 26 reminds you of the main financial terms of the transaction with one item of importance which is this $400 million cash benefit coming from very standard goodwill amortization, which makes that our gross investment is $1.2 billion, but then we have this $400 million cash benefit which makes the net cash invested of $800 million, this is what you see on this page 26 on the left part of the chart. Whereas obviously for valuation purposes, we have used a present value of this $400 tax benefit using a prudent 7% discount rate which reduces, mechanically this benefit from $400 million to $200 million.

So although there is a new – I mean this tax benefit doesn’t impact either the income tax, the net income in IFRS P&L, although this had an impact of the full benefit of this $400 million and not the $250 million. The full benefit of the $400 million is to be seen on the free cash flow and this will start with an annual benefit of about $30 million.

Page 27, therefore the EBITDA multiple of nine which is shown in our publication is using an enterprise value of $950 million based on this discounted value of the tax benefit which I assure to. And in total all financial criteria of LeGrand four acquisitions are fully met and beyond this ratio of EV/EBITDA of 9 being an attractive multiple mid – I remind you mid-to-high single-digit acquisition on EPS before purchase price allocation and value creation within three to five years.

This to tell you that the acceleration of acquisition strategy at LeGrand this semester has been achieved without any compromise given on the quality of the assets required nor on the valuation metrics that we are committed to and that we will continue to commit to. Lastly, and I move to Page 29, I have one slide on our balance sheet to say that we are already completed and congratulations to Francois.

The financing of Milestone shortly after the announcement of the signing of the transaction are in very attractive conditions with balance sheet structure which will be very solid once Milestone will be completed. This is the stimulation that you have on this Page 29.

First, our debt profile is a very positive and solid with average gross debt maturity above seven years and over two thirds of the debt maturing from 2022 and beyond. And a strong balance sheet structure passed Milestone deal with net debt to EBITDA of less than – I remind you that this is including Euro bond issue that has been issued late June in two tranches for total of €1 billion, two tranches of €0.5 billion each, one for seven years at an attractive rate of 0.75%, and another tranche of €0.5 billion at 15 years maturity at a rate of 1.875, so very attractive rates to finance the acquisition of Milestone.

This ends the formal part of this presentation. Antoine and myself are now ready to take your questions.

Thank you for your attention.

Yes, very good morning to you and everybody. A couple of questions; first, could you help us understand your view on the development of pricing versus raw material and component prices for the year ahead, perhaps framing at least the extend to which you see raw material prices and components being headwind in percentage terms for the group.

How effectively you can offset that with pricing and should there be some momentum in the price development as we go into the second half of the year. And the second question relates to your M&A contributions.

Clearly there will be an acceleration in the second half. Are you at this stage able to help us clarify the level of potential dilution at least from your M&A in the second half of the year on to the operating profit to pre-year adjustments?

Thank you very much.

Yes, good morning, William. Well, I take your second question because that’s the first one and I leave it to Antoine for the first question.

And any contribution for the full-year has been estimated at plus 7%, this is what Antoine referred to. And the dilution impact is expected to be 20 basis points for the full-year.

Antoine?

Good morning, William. Very rapidly also and maybe you will ask for more development on where we manage selling price and inflation of raw material and components at LeGrand, but to be very synthetic – your question is about our expectations for purchasing then you know that we never answer preciously to this question, because we don’t know finally what the prices are going to be.

They are mostly negotiating on every quarter then it’s very difficult to say. And then not to talk about the fact that I mentioned during my presentation that today developing story in 2017.

What I can tell you is that at the stage, we hadn’t seen any inflation point in the rise of raw material and component prices and I’d say also we will continue to closing the [indiscernible] and if this inflation was to continue – was to be confirmed, we are confident in our ability to raise again in our offsetting prices. But as said many times, there might be one or two of whatever lag effect.

If you don’t say your question or I know that it’s not so precise, but I can’t tell you more than that.

And it does, yes, I understand the complexity of your business, perhaps is there anyway you can flesh out or give us an idea of your ability, the strength in certain markets or segments for you to raise prices at this point in the cycle, given we’re seeing raising demand trends and probably changes in supply demand balance. There must be in general at improving trend to transfer demand into to better prices?

Well, if I may take a real on these, our approach is a repricing in our market has always been a very responsible and long-term. So we’re not looking for sort of windows of opportunities.

We are the market would be a very booming and we would take advantage of these because that would create that setting in the market. So we’re always very trans behind with our partners in tied, explaining that when we raise prices is based on input prices that we are incurred and we are very predictable and very disability and our pricing is very high.

I don’t think that we went to play tricks with all markets. So this is why we’re confident, our capability to compensate long-term, whatever pricing environment we have to face and what company to regarding the one or two quarter lag.

There is something that doesn’t affect us long-term and so this is really a huge of LeGrand. It’s a pricing power, but it’s coupled with pricing discipline, now we said in the market.

Very clear, thank you.

You’re welcome William.

Yes, good morning. My two questions really I wanted to talk about France.

I know there was a working day impact in the second quarter, but the flat to slight down over organic growth there. I’d look the direct sales is only I can see the head of good second quarter.

Is this something in the product mix competition coming in from new entrance is why we’re getting a difference between your organic growth and maybe what be distributed to showing? A second question was really around currency.

Just looking at the rest of Europe and the rest of world businesses, can you talk about in the major countries in there that we need to be keeping a track off to understand what the translation impacts are coming through for those regions to trying full concept better? Thank you.

Yes. Good morning, Graham.

And if you wish I will take the first question on France and then I will handover to Antoine for currencies. As far as France is concerned I mean you know that compelling figures between manufacturers and between the manufacturers and distributors is always a bit tricky given that number of days, product launches, product coverage et cetera and may not be always the same.

We were pleased with our performance in the first semester of plus 1.9%. I’ll remind you that we are the one extra day in Q1 and one less day in Q2.

So we refer to this global performance of 1.9% being a good illustration of the trend. And I believe that looking at one quarter, it might be a misleading given that we typically lag between what the distributor would receive and what a manufacture would see.

If we see those orders and what we would see as orders for us. Now this being said, performance like I said in France has been outstanding for many years due to a number of initiative that they have taken to enlarge.

There is a business portfolio including renewable energy, HVAC et cetera is our initiative that have been very successfully implemented. As far as our performance for this semester compared to Rexel, if you are taking figures as they are, I mean not interesting for a number of days because they are not necessarily the same as the distributors and manufacturers.

We stand at 1.9% and Rexel stands at 1.8%, which I believe is in both cases very good performances. So probably that’s the best way to look at the situation better than looking at the quarter versus quarter even again the lack between what we see and what they see.

Antoine, you want to take about for France.

Good morning. I guess your question was about the main currency that could have any effect on the ForEx valuation for rest of Europe and rest of the world, but then for rest of Europe, I would quote the currency – the main country is concerned by currency valuation the UK, Russia and Turkey for rest of Europe and as far as the rest of the world is concerned, I would here quote Brazil and few other Latin American countries or South American countries like Chile, Colombia, Peru.

And in Asia, Australia, China or India and then it is for the set of countries that could have an impact on currency valuation are good level. There is the answer your question.

Okay. Thank you very much.

But just last one final thing perhaps about CapEx, you talked about having lower in the second half compared to the first half. Can you give a full-year guidance on CapEx and where specifically are you investing for growth on an organic basis?

Maybe just to correct a bit what you have said and maybe I was not during the presentation, but H2 is usually higher than H1, but this is just a single note effect that plays both in 2016 or 2017 that’s the first point. As far as the full-year is concerned, I would maybe stick to what we said in few publication before or during our Investor Day that we have an ambition of CapEx we set is 3% to 3.5%, that’s the first point.

And this ambition remains valid, but this is of course an average calculation. And you may remember that between 2012 and 2015 when average organic growth was about flat were consequently a bit less new products on sheet.

Our CapEx to sales ratio has been a bit below the low end of this range that’s 2.8% than the low end of 3%. And since 2016, we have entered a period of more supportive economic background and agenda of interesting innovative products.

In this kind of context, we could therefore be a bit above at the high end of the range and this could be the case for 2017 and time will tell after that. But all in all, we’ll reiterate well on some of the ambition of an average ratio of CapEx to sales within 3% to 3.5%.

Again, I think some may have moved ahead and some years below...

Okay. Sorry and where specifically reinvesting geographically with this CapEx?

It’s really across the board and there are occasionally larger investments, for instance in Russia, we are deploying a larger industrial base there to take advantage of localization and trade tariffs, which are expensive when exporting. So this is good move.

So occasionally it can increase for few quarters of the figures, which is in the case this year and probably next year. But there’s nothing specific neither in terms of technology, in terms of geographic buys, or so, it is just – I was referring to hundreds of thousands of SKUs at Luxul.

Obviously these 3% to 3.5% average ratio of CapEx to sale is and then at managing these portfolio of SKU. I mean actually this 3% to 3.5% this is quite an achievement.

There is the result of number of productive initiative including platforms both for electronic technical and for electronic products and components.

Okay. Thank you.

Welcome. But again refer to Graham regarding my ensue on France is the effect that again we would be very cautious when comparing figures of these trade partner to these other trade partner and many mentioned number of days et cetera.

So obviously this kind of an impact and I didn’t refer to copper, which for distributor is a very significant element given that they typically and this is typical of distributor. They have large cable – copper cable activity, which we are not involved with.

So that also at an impact and this I believe was highlighted in publication of – company which again is a good performance. That includes an impact of copper, which I believe was quarter that 1.1%, but that’s probably for the group.

I don’t know the breakdown for France, but it’s probably not [indiscernible].

Okay. Thank you.

Welcome.

Hello, good morning.

Good morning, Lucie.

Hi, good morning, guys. Sorry I had a problem in my headset.

Just a couple of question from my side and sorry to go back on the French topic, I understand I mean actually the sales of Rexel in the first half ex-calendar days. So kind of balance the first and second quarter, when more on 2.4%.

But not talking about the distributors. I was kind of wondering if you could give us some clarity because it’s not only necessarily in the last quarter that we seem to see a performance maybe bit lower than one of your larger distributor, but if we compare your data with Schneider Electric.

It also looks like it’s been lagging a little bit in France for a couple of quarter. So I was wondering if on the longer-term basis, not specifically on this quarter, you could give us a sense maybe, if you change slightly your strategy or if you seen some changes of dynamics in terms of the manufacturer – on the manufacturer side?

That’s question number one.

Okay, Lucie. Well, I'm glad that you're coming back on France because there might that been some misunderstanding or misinterpretation, probably miscommunication on our end on this performance.

But we believe that our quality performance in France is very good. And well again calendar days is something that each manufacturer can organized way it was because some distributors or some manufactures may have days that do not are the same because of inventory at the beginning of the year because of working on certain Saturdays to recoup days that may have to closed.

So the figures that we have used to compare Rexel to Luxul are again to be taken with a lot of caution even all this differences, but bluntly and as they read, but the figures were Francois, are you giving to me, so 1.9%…

1.9% probably 1.8%.

1.9% for Luxul versus 1.8% for Rexel, which takes into account, is 1.0 of copper. So I am sorry to insist, but I don’t see any element of underperformance followed of this semester.

And I may even said that although – again, it’s difficult to compare, I thing that the performance we got for the first semester is quite remarkable. Now you referred to Schneider, I mean we don’t want to compare it all to lead our Rexel because of their product coverage, cable nor to Schneider because of the debt of coverage.

But you asked me, so I have to answer to your question. And you say not specifically on this semester, but looking backwards, if you’re taking the performance of LeGrand for two-year, first semester of 2017 versus first semester of 2015 and this is published figure potentially.

We are taking of other group, 5.2% for LeGrand. This is H1 2017 to H1 2015 because we had in a whole 1.9% in H1 2016 to 2015 and 3.2% in 2017 to 2016 and published figures, which compared to the 5.2% for LeGrand over two years is 2.6% over the same two years.

Now I don’t have the figures for France, simply because we published our figures based on five geographical segments and they are not the same in the case of China, so unless you have information that I don’t have, this was not compared. Now if you want to compare what is variable publicly which is Western Europe, which is one way to answer your question, because there we have published figures.

Again answering your question about taking a step back and looking at longer period, not specifically in this semester. The same two-year performance for Western Europe, so now I move from group to Western Europe is for LeGrand – I mean that should be the same figure for group and for Western Europe is 5.2% over two years.

And from what we read in the publication of Schneider, the same 5.2% of the LeGrand is 3% for Schneider. Again, this is not the same that we made to LeGrand gaining market share and either be the direct sale based on the figures that are published nor of Schneider on the figures they published, because again, the product coverage is not the same.

So if you look at figures, you may say we gained market share. And I’m saying, no we’re not gaining market share.

Again Schneider or Rexel, we simply don’t have the same perimeter activities. But as this has been a recurrent topic for few quarters.

I believe that looking at figures helps.

Okay, I’m not sure we look exactly at the same figures. But just my second question was on North America?

I’m sorry Lucie, I’m stopping you because these days any miscommunication on our part, we need to solve this. So please tell me what figures you want, because I’m…?

Yes, so you’re saying your 1.9% for France included one working day positive in the first quarter and working day negative in the second quarter, which means at working days you are neutral, I’m guessing for the first half from this communication. And so if I look at Rexel data kind of excluding working days to working days neutral, this is 2.4% for the first half.

This is why I was saying that, I don’t think we would get the same. But I was not so much wanted focused on Rexel, but wanted more to compare versus Schneider where we seen in the building and partner division 4.2% organic growth in the quarter?

Yes. I know that the number of days are not the same and what is more relevant, this is without number of days or repeat of a semester.

It’s a questionable topic. As far as the building partner is concerned, which is again not information that we know it was because I think what we read and you asked for stepping back and looking at a period of longer than one semester.

Again, as you look at over two years, the LeGrand performance globally is 5.2%, which is what I referred to. And the performance of Schneider over two years for building partner is 5.4%.

So 5.2%, 5.4%, I don’t believe that you can do from that zero point – 2.0 difference over two years and you concluded all the more, so as you know you look at guidance that despite the fact that you may look at building our partners which are closer activities to local activities. They are not similar in either in terms of geographies nor in terms of the full product coverage, but again, the performance over two years is very similar, tech 0.2 points.

Okay. My second question was around North America, where of course, I mean you’ve had a long theory of tough comps for why now due to the performance.

I was wondering if you could comment about the trends in your different kind of sub-segment in North America considering that we see a little bit of lower growth number this quarter.

Yes. And again, we refer to the basis tough comparison and we are talking on our first semester which over two years is 8% growth, 8% growth is I mean better than the 3% annual growth that we see in our markets.

So this is something that is to be declining to account. Now as far as the market segments are concerned, I mean clearly the resi market continues to be positive and this has been a trend that has been going on for a number of years and we continue to see a positive trend and we don’t see at this stage any message of the market – from the market leading us to believe that things will start to slow.

And as far as the non-resi market is concerned which is above our sales and investment, we feel our sales are non-resi. We are talking of the market that has been globally positive and as obviously and especially when you are looking at short period of times, contrasted situation depending up on the resi goals, I mean the commercial part which is the offices as continue to be – to be buying back that.

As far as the other segments, it does depend from period to period. Globally for the non-resi market, although it’s less buying than the resi market, a continuation of the positive trend.

Thank you. And my last question was around – the strategy around innovation, R&D, the mix between R&D and M&A.

I just noticed that in the half year specifically the R&D ratio was down a little bit. I was just wondering if you – when you think about innovation bring new products whether you have move maybe bit more into doing this by acquisition of interesting and innovative targets and maybe doing a bit less R&D in house or whether this is just like an elements or we shouldn’t extrapolate the trend in the first half regarding the R&D sales ratio?

Well, this is your second answer; you see, I mean clearly we’re not really into this 4.8% a slight decrease versus the first semester of last year, any indication of shifting our strategy. We are really pushing strongly these two growth engines both innovation and acquisition because we believe there are opportunities in both camps and we are sticking to ambition of continuing to invest in research and development because this is something that is enhancing organic growth and we are demonstrating it in the first half of this year with this topline organic growth which is an element of satisfaction for LeGrand.

Okay, thank you very much for your answers.

Welcome Lucie.

Thank you. Good morning.

It’s Martin from Citi. Just a question on Italy, you mentioned some product related offering and launches boosting growth there, just if you could talk a little bit of both.

The timing of that was that during the quarter or should we expect a sort of similar impact into the second half. And also when I look at the margin in Italy and I know there is always a challenge with how you allocate costs to different countries as to whether or not those products boosted the margin or whether it was export from Italy into other parts of Europe, but if you could talk a little bit about the margin development in Italy as well?

That would be very helpful.

Good morning, Martin. Well the situation in Italy is an ongoing show, I mean they have been extremely successful in launching new products, [you made equal] that last year we mentioned the connected entry phone, the Classe 300X, which has been great success now.

Of course I mean the magnitude of these at the scale of Italy is of course limited because we’re talking one product, within one product family whereas in Italy we are covering many tens of product families, and the same as continued in 2017 with My Home Up which is heavy home system and also with the connected thermostat. So this is again within this Eliot denomination, a number of product initiatives that are very interesting because there are setting the stage for the market now to receive regularly innovation that are connected innovation, teaching to the market, the need to organize itself to promote those connected products.

Now these begin said, the performance of Italy has been achieved despite the normal accordance of some events products launch of course like 300x, which was last year, not this year. But also some large power products that we sale to utilities, which was stronger contribution in 2016 then it is in 2017.

So difficult to isolate, the impact of xyz launches and the pace of comp, but I would consider that Italy is a very good example of a situation where we are building the market by launching new products, new applications regardless the market environment because that the economic in Italy, the macro economy indicators remain – I would say positive but not enthusiastic. Antoine, would you like answer to Martin’s question on margins?

Yes. Good morning, Martin.

And maybe I can start we figures and then actively the margin Italy are very good in H2, 38% of adjusted operating margin for 2017 and compared with 35.9% last year. It’s more than two point improvement.

And as you likely say the big portion of Italy in the sale activity is dedicated to intercompany exportation and you also recall that it may impact although reported operating margin in Italy and this is clearly a factor of this improvement, not only that, but a big portion of the increase is due to an acceleration of intercompany exportation. In particular in Q1, Italy rest of Europe that did very good quarter and also good year of 2016 and number of products that are sold of Europe coming from Italy and this is a reason why it as helped the operating margin of Italy in the first semester and in particular in the first quarter.

But this is not the unleaded the driver for improvement, the domestic margin it also good, gross is good and this is something that Gilles as just commented and also productivity there are number of productivity Italy then both – I would say intercompany margin and domestic margin is good, but a big portion of the boost is coming from the intercompany side.

Okay that’s helpful. Thank you very much.

Thank you, Martin.

Thanks and good morning, everybody. I’ve actually two questions please.

The first one is on the structure of the management. Because over the past few years most of your acquisitions took place in the U.S., which I think as now become the groups, a largest market before France.

So is there any plan to better reflect to size of your U.S. operations in the structure and organization of management?

And also perhaps around these, do you consider that the local management there in the U.S. is big and experienced enough to handle the integration of all the recent acquisition.

So that was question number one and two, I guess. And I have just a small one for Antoine.

I noted that restructuring charges were lower than usual in Q2 and I was wondering if the guidance for the year-over-year was perhaps changed or not?

Good morning, Gail. So I’ll take your first two question, which is basically I’ll make it one question or one answer to your two questions.

One, you may remember for those who have been participating to the Investor Day that we held in July of last year at West Hartford, which is the center of our U.S. operations.

You remember meeting the values people in charge of our U.S. operations, and having opportunities to discuss with them.

Particularly our U.S. operations is to be organized through a set of divisions and you met actually most of the leaders of those divisions.

And because the divisions are – I would say focusing on the specific business entity and the head of these divisions have years is not delays I’ve experienced in this specific activity on looking on the EWS, which is wiring system, an integral wiring system, which is the legacy of Pass & Seymour and while know that mostly [indiscernible] that you met has been in this activity for more than two decades. And we are thinking of building control system from who you met in West Hartford has been in this activity, not solely at LeGrand, but in this activity also for decade.

And the like it’s same for all these division managers. So it’s very important to recognize that whenever we’re making an acquisition in the U.S.

being lighting, the Solarfective, the QMotion, the Datacom activity such as AFCO for instance. They’re all being left in a specific division and they’re not the same, so that we can have the real professional focus on the docking of those companies.

Now this is here at the division level. Now at the corporate level, you may remember that John was being with us for over a decade and has successful – very successfully developed our U.S.

operations, because when he is started in 2002, LeGrand America was a tiny operation with a much lower profitability. Yes the corporate structure that includes an M&A team, that includes transversal sanctions, such as operations, such as purchasing, finance of course, which allow him to feel benefit from the focus of the divisions, but also get the benefit of the transversal organizations.

So that if we buy copper, steel or whatever electronic within a division, we can then relate with what the other divisions are doing to take the benefit of the size that we represent in the U.S. And of course, having operations at the central level allows us to add in various locations can be in a U.S., can be in a Mexico or in Asia, site would be able to manage production and development for sale of the divisions to take advantage, again of the size.

So the long answer to your question is what I’ve just said. But the short answer is that we are very pleased with the organization that we have in place that has proven it’s track record.

And obviously, given the magnitude of the reinforcement over the last few quarters, days obviously, a number of addition to the organization that we are in order to better adopt all these great assets that are joining the group. Antoine?

Yes. Thank you, Gail.

Good morning. We usually say that it was look doing at LeGrand could range between €20 million to €30 million a year.

In the first half of 2017 being only at €5 million or €5.4 million, it will be bit below the usual range that I was referring to. Now this being said, I invite you to see it more globally combining those figures will other items because you know that when it comes to prepare or we can have some impact on inventory buildup and position that inventory.

Talking about productivity initiative, it would be one-off items or more structural items in order to doing. Again, I see it better to look at the combined that are below SG&A and for that what you can see in H1 of 2017 is that we are in line with the percentage of last year at 1.7%.

I don’t say something differently for [indiscernible] line family, but if you look at it more globally with all the operating items, I would that 2017 is a normal year, if I can say so and it is maybe an interesting answer for you in terms of that are for modeling whatever you want to model.

Sure, it is. Thanks very much Gill and Antoine.

Thank you.

Hi, yes. Good morning.

Thanks for taking my question. It’s Jonathan from Exane.

First of all just – I think in the first half there has been little bit chat about distributors, the risk than being disintermediated by online platforms specifically Amazon. I was just wondering if the likes of Amazon do takes share from the likes of Rexel, what that maybe means for your business what impact is, is the threat to your business, has it changed pricing power with online distributors versus traditional bricks and mortar distributors?

It feels like it would increase the price transparency across the market and not might be a negative field pricing power. Secondly, just on the deals in North America as was already commented it’s now materially larger part of Britain it used to be.

I think North and Central America is around the third of the group these days. Is that something you feel comfortable, but just sort of the regional mix of the group and maybe comment on what the European deal pipeline looks like now perhaps we could see some acceleration there in terms of the amount of M&A, or is this a split you are absolutely comfortable with?

Thank you.

Welcome. Good morning, Jonathan.

Okay, regarding the potential of large online player, I would trust say that what we have seen so far and successfully so is that the gradual and quite strong shift of traditional electrical distributors to take share in other channels being new verticals. And I referred earlier to Rexel being very successful in HVAC and in renewable energy, so that’s quite impressive.

But that’s under same also in terms of digital development where we manufacturers have developed very strong and complete digital contents such as extensive technical data, tutorials, videos et cetera that are being used by distributors to help electricians do their job on the day to day basis. And more importantly conveying innovation in a smooth way to those partners in China.

So therefore what we’ve said repeatedly over the last five years is that the digitalization of the world is offering two main consequences; the first one being obviously what you refer to which is priced on balance sheet which I believe is something that now is pretty much in the mind of everybody and accessible to everybody. So this priced on balance sheet don’t see something that is fact today and has been effect for probably or now I would say a couple of years.

And the other consequence is the what we call the long-term effect, which is something that we are relaying on the long-term hope for better mix in our product because that for tons of reasons, additional player in the market tend to concentrate their efforts on existing product changes sort of the valid type of product offering with us accessing digital information on products. So that was you to find a lot of the features that are not immediately in the mind of the type partners such as improved technology, functionalities better design et cetera.

So we believe that the price transparency has probably somewhat overshadowed the long-term positive effect of this long-term effect. What – we believe beyond these overall general finance is that for pure players.

It is quite challenge to be able to provide to partners in trade what goes with the product. Not in mind formal presentation, I refer to all what we do around the products being online or onsite and whoever would want as a pure player to be have credibility to be a partners in trade to electricians would need to invest in these report of innovation and services.

Pre-sale during the sale, after sale, service et cetera this is extremely important and loyalty of electricians, of installers these are very much in direct relationships is that service that or Rexel under West Coast et cetera provided to them. Second question, Jonathan and I think that’s five or 10 years ago and if I remember the probably your predecessor did highlight the issue and there were time when our in balance was flagged in our portfolio or geographies I mean if you go back 10, 15 years ago about 12 in new economies not our position was considered at two week and also in the U.S.

where we add less than 20% of our sales for number of years. And now we are the situation where if come back to when we were IPO that in 2006, which was a time during which some product will we are bit of France, Italian Company.

We today have about two-third of our sales in the U.S. that served of our sales in new economies and the rest in only other countries including of first Europe and France and Italy obviously, which are very interesting countries, all the more so has those countries are shown for Italy for two years and for France more recently rebound in the plan.

So I believe that this split of activity today is very balance. So I believe that we should have any buys in our approach both in terms of launching products or making acquisition to invest more in the U.S.

economies or Europe. I believe that today these internationalization of Luxul has been pretty much achieved and the actually ratios of Luxul look very similar to what we see for our major international case, which are joint companies and we add this handicapped five or 10 years ago, even more 15 years ago.

Today I believe that this has been sold, which I believe is good news. But clearly no intention to create any buys in the future to invest more in this or that region.

We will take the opportunities for the merits of the assets that we might acquire not as a consequence of their geographical exposure.

Okay, and just as quick follow-up, as growth has improved, with the outlook improvement in Europe is the pipeline there looking strong for deals?

You mean Europe or U.S.?

Europe.

Europe, I missed you. Yes, I mean in this €100 million or plus €100 billion plus euro of market that we consider how accessible market.

There are plenty of opportunities in countries other than the U.S., and this is good. So we’ve shown recently for instance, in Italy capability to develop this JV, to do this JV, and there are other opportunities that may exist, but again, this is not exactly your question, but I just want to insist on the fact that there has been a number of acquisitions, which in total represent that one you refer to 7% for this group effect this year.

Did you have – did you mention also the carryover effect for next year…

Yes, around 8%.

Around 8%, so this has been an exceptional period. Statistically, I mean given the experience I have in this period, the most of the acquisition and the discussion that we have always small to medium sized companies because half of the €100 billion are accessible market I referred to are in the hands of small to medium sized companies.

Thank you.

Welcome.

Hi, good morning. Just a follow-up question firstly on North and Central America.

So just and why those tough comps you have in the calendar effect you’ve highlighted Q3. I was wondering if you could confirm if there is any new product launches, plan for this quarter that can help offset by those negative effects, and especially into that if you could provide any kind of comment on the pace of ongoing product launches across the entire group, any color into H2 that would obviously be helpful to discuss.

It’s obviously been a key drives of fuelling up organic growth as you said. And then the second question, new business segments now account for the 38% of sales, too large I guess within that would be digital infrastructure, managing efficiency, obviously being investing in areas like datacenters, audio visual now and light control, haven’t seen so many deals in assisted living and home systems.

I was just wondering does that simply reflect a lack of opportunities might be the markets are still very fragmented. Maybe you could just updates on your reports and the pipeline in those areas?

Thanks.

Yes, good morning, Alasdair. Okay well, in the case of Italy, as far as public tranches are concern, we highlighted those that were important because Italy was one of the first countries where we’ve launched for instance the entry phone, but this has been launched in several countries since then.

And the [indiscernible] which will be launched in France and which will be gradually expanded in other countries. So this is typical situations, where we give you this information because it’s both in terms of product innovation and in terms of potential mid-term impact something that maybe a sensible.

Now frankly apart from these any product launch that we do at the level of the group is almost not noticeable. I mean we will not claim that neither in 2016 nor in 2017.

There has been any product launch that has significantly bisect one product to launch impacted our performance. So the reason for highlighting the Q3 in the U.S.

is that when we recall this, we immediately said don’t forget that this will be a tough compare because nobody is claiming and of course not at all that the U.S. market in our space is going 9.3% annually ongoing.

So that was an excellent performance due to mostly actually saying that mechanically represents a tough compare at some distributors, not electric distributors, but big boxers, and this was the reason. So this is way in our publication, we refer to the first semester over two years being 8%, which is an incredibly good performance.

And the fact that we have in four of our assets is Q3 figures which will mechanically make out Q3 2017 figure look not attractive as to be considered maybe at the end of the three quarter globally over two years, because this is what matters. And obviously, we don’t want to defend from doing good business because a year from today this will represent a tough compare, good business is good business.

What matters is our capability long-term to do well in our market and in the case of U.S. to do better than the market.

And you question regarding – actually on the page when I referred to assisted living or – I mean this is were just examples, that I refer to little long being active in one and all products, on this well obviously we don’t want to give you a long list of one and all products on this, but this is just to illustrate the buildup strategy on a given space. In the case of own system in Europe, we’ve reached a number two position.

This is highly profitable and well evolving market, so we are satisfied with our position if we have opportunities to make complements both organically and for acquisition, of course we will make it. But this is to say that this strategy to create switch box of activities on identified – sometimes very narrowed niches is so important because then its almost automatically translating to good margins and good position – sustainable good position in those various activities.

So do not consider that we are identified assisted living at some point then we have [indiscernible] any more, we have energized. That fairly on this activity, we have leaderships, I mean one or two and actually we are leaders in France and we are in Spain for instance, we are number two in the UK, so we have a very good positions globally in Europe, so we have no situation that needs us to absolutely to make another investment in this space, but obviously, if we have a possibility we will do it.

That’s great. So just a concern nothing really you can call on now for North America specifics in terms of new product launches that will benefit this quarter because obviously you’ve highlighted tough comps in the past and then perhaps surprise positively on growth because of kind of ongoing launches and good momentum?

Yes. Thank you for this comment.

It’s true that in the case of Italy for instance, we knew that we had a tough compare in H1 and we were able to overcome this. Well, in the U.S., we are talking about 9.3% in Q3.

We will do our best. And then also – we have also the calendar effect and that is ahead of us in Q3.

So this is why in a very transparent way we are always giving this and early signals, so that you can take this into account. And the same goes for Q1 and Q2 when analyzing Q2 globally for the goal which is I believe a very good feature if you take into account the calendar effect.

If you retreat Q1 from the positive calendar effect and Q2 from the negative calendar effect that makes a quite attractive Q2.

Thanks so much.

Welcome Alasdair. Thank you.

Yes. Good morning, everybody.

I have two questions please. First one on raw materials, you said you’ve kind of mostly or all of it offset by price actions in the first half of the year.

Historically, we have seen times of time delay, we have heard from the same from Schneider which offset 90% of the raw material price increase very quickly in the first half of the year. And something changed in the market in terms of their ability to quickly adjust for raw materials maybe quicker than the industry data in 2011, 2012 and you also have the raw materials headwinds.

And the second question on the balance sheet, you said may after a busy period you have look quite period, but is this the right deals, which it could also be larger would you willing to increase the leverage quite a big more from the current level or would that not be something that you are comfortable with?

Okay. Good morning, Andreas.

I will take maybe the second and I leave the first one to Antoine. I referred in my presentation to the balance sheet of all getting from leverage.

Some people will say finally because there was all some expectation for this. I remember that in 2011, we mentioned our ambition to invest roughly 400 million per year and actually we take into account what we’ve announced so far since 2011 we are about there slightly above.

And you may remember also that in our publication of the first semester or 2015, we have to come with slide showing the correlation between organic growth and acquisitions to give you and convey the message to you that you should not again desperate above the lack of opportunities this is very much related to the market environment and IT since we see the explanation of organic growth. We seen also an acceleration of opportunities and I insist in my presentation to say that this has not been done at the expense of neither the quality of asset that we are looking for, nor in terms of evaluation metrics, I believe that the figures that I have shown are quite convincing in that respect.

Now your question regarding whether we would welcome big deal or number of new deal and how far could we go in terms of balance sheet leverage. I believe that balance sheet leverage is shareholder friendly and we want to give that benefit to our shareholders.

No, of course there is a limit to this strategy, which is that LeGrand is always consider itself as an investment grade company and we don’t want to enter into strategy that could need us to loose these futures in this nature. So you may then make stimulation that will of course have temporary effect on our balance sheet.

But please keep mind that our priority is to stay investment grade, which I believe give you limit in the way we want to use our balance sheet to be sure that is any unforeseen events that would come from markets where to occur in the next few years and we would have the balance sheet to any of this headwinds and therefore this investment grade category I believe is very well suited to revolve. Antoine?

Thank you, Gilles. Good morning, Andreas.

To answer your question, I would start by saying that in H1, I maybe it was not clear on that. But I repeat what I have said is that we are able fully cover inflation received from raw material and components and thanks to pricing and its 100% coverage.

And it is in absolute value and maybe I can come back to LeGrand model, talking about pricing that we can have two kinds of scenario of goals – economic goals and scenario of no goals. If you are in the scenario one of economic growth, it was the case in 2010 and 2011and this is the case in 2017.

Raw material and component is often significant and the approach is to cover this inflation is absolute value by pricing and of course at the same time we have another benefit on our profitability this is the operating leverage of performance that these are driven by and when we are in a scenario two or scenario of no goals we will have normally or growth or even deflation and commodities or raw material in components and then we have pricing is a good way to cover all inflation received including inflation and wages and so on and then resilience of the adjusted operating margin. And if I remember correctly, your question was about is there any change finally our situation in terms of pricing capability with invite you may be to look at the 2011 full-year presentation, if I remember correctly we had slide showing that inflation and raw material in components was more than 6% and pricing was along 2.5% and you will of course we will in the situation of coverage an absolute value of this raw material and component inflation but not in all at you stand because the inflation was very strong.

In 2011 was in the scale of situation of scenario one 2017 also scenario one where we cover 100% of this inflation received central pricing. And again if we are to have led goes or less inflation on raw material, we would certainly be able to cover, not only natural value, but no change in the model, no change in temp of capability and when 2017 finally this kind of 2011 situation or 2010.

Thank you very much.

You’re welcome. End of Q&A

Okay. Thank you.

Well, thank you to everyone for participating and the team is available for any follow-up question that you may have. Okay have a good day.

Thank you.

Thank you. Good bye.