Legrand S.A.

Gilles Schnepp – Chairman and Chief Executive Officer Antoine Burel – Executive Vice President and Chief Financial Officer Benoit Coquart – Chief Executive Officer

Lucie Carrier – Morgan Stanley Martin Wilkie – Citi Alasdair Leslie – Societe Generale Andreas Willi – JP Morgan Andre Kukhnin – Credit Suisse Simon Toennessen – Berenberg James Stettler – Barclays Sebastien Gruter – Redburn Jon Mounsey – Exane BNP Paribas Gael de-Bray – Deutsche Bank Markus Mittermaier – UBS Dennis Dinkelmeyer – Goldman Sachs

Okay. Thank you, and good morning, everybody.

Welcome to the annual full year results presentation. This morning, we have an extended team.

So Benoit Coquart, our new CEO, is next to me together with Antoine Burel, CFO; and Francois Poisson, Investor Relation and Head of Financing. And we have also Patrice Soudan, Deputy CEO and Chief – and Head of Operations.

So good morning, everyone. We're going to use, as usual, the slide show that has been made available to you on the website, legrand.com.

You have also all the press releases and the consolidated accounts that are available as usual. So I suggest that we go straight to the agenda.

And we will, if you agree, start with the governance. And I will cover both the governance topics and the highlights.

And then, I will hand over to Antoine and Benoit, who will successively handle the rest of the presentation. And obviously, we will open up to Q&A session at the end of this presentation.

So moving to Page 4. So we have 2 changes in the governance, which are announced today.

The first one is effective today, which is the separation, on a long-term basis, of the offices of Chairman and Chief Executive Officer. So I remain Chairman of the Board and Benoit becomes Chief Executive Officer.

And we're announcing today something that will be effective only beginning of next year, January 1, 2019, when Patrice Soudan will leave the company. Antoine Burel, as you know well, will become Deputy CEO, in charge of Operations; and Franck Lemery will replace Antoine and become Chief Financial Officer.

Moving to Page 4 – 5, sorry, 5. So clearly, the management team that we show on this page and the next page has a proven track record within LeGrand.

Starting obviously with Benoit, who is from today the CEO of the company, he is talented and experienced leader at LeGrand. He has actually 21 years experience at LeGrand with a comprehensive set of responsibilities, which are listed on the slide, and I have personally known him for 20 years out of these 21 years at LeGrand.

And obviously, I'm very happy to see – to have seen all this evolution of his journey in the – at the Group and being very proud to see him today becoming the CEO of the Group. We'll, of course, have a chance to let Benoit introduce himself afterwards.

And then, moving on Page 6, someone that you know very well is Antoine, of course. And I'm really proud to see that Antoine will, next year, have a fantastic new opportunity to show all his capabilities, competencies, talents becoming Deputy CEO, in charge of Operations.

And Franck, that you may know less, but that you will gradually get to know who is going to become the CFO of the Group. It's interesting that 10 years ago, we had sort of a same move when Patrice Soudan, who was at that time the CFO became the Deputy CEO, in charge of Operations.

So he is still leading [indiscernible] sales at LeGrand somewhat at least 10 years later roughly, absolutely. And knowing the success that Patrice has had in his role as Deputy CEO and Head of Operations, I'm really confident in the new organization that we are going to have in place.

So next, Page 7. The separation of the offices of Chairman and of CEO has been proposed by myself and is fully supported by the Board of Directors.

And I believe this is important as it will allow the 2 respective duties to be really fully carried out by our respective people in charge. And as you know, it's in line with best corporate government – governance practices, and you know that we have proven in the past that we were very, very careful about adopting the best corporate governance practices.

It's a process that has been prepared for many, many years, discussing with both the board and the nomination and governance committee. And I believe it's the evidence of a successful process of preparing the best next-gen talents.

And this new management team is both new. It's next-gen, but it's highly skilled with on average 20 plus experience at LeGrand: 21 for Benoit; Antoine, 25; and positioning for Franck, it's also 23.

And obviously, all the team is and will be fully dedicated to make the most of LeGrand's outstanding assets. So this is it for governance.

I'll switch now to what is more traditionally what we do at this time of the year, which is the full year results. I'll just do the highlights and had over to Antoine after that.

Four main points. First of all, the main indicators that we consider a KPI at LeGrand all grew double digit, being sales, adjusted operating profit, net profit, normalized free cash flow.

And those indicators, for those were targets for 2017 have been fully met – I mean, fully met being either at the top of the guidance or even above the guidance. Moving to Page 10.

2017 is, I must say, behind us. What is important is to prepare the future.

And during this last year, we've been preparing the future by increasing investment in new products. It's very important that LeGrand plus 11%.

You know that Eliot, our connected product initiative, is doing very well in advance compared to our all plans. And we are proud to say that today we have over 70 product families that are connected product families.

And beyond this, you know that in the last 2 years, we've been accelerating acquisitions, taking advantage of the favorable economic environment that we have had. And we have made a total of 6 acquisitions in 2017, including, and this is the next point on Page 10, Milestone, which is of course a very significant acquisition, the largest actually we've ever made.

And we're glad to say that both performance for 2017 and potential are fully confirmed. And I will let Antoine comment the good figures that we are going to show for Milestone.

And obviously, after that, Benoit will comment on the objectives for 2018. With this, Antoine?

Thank you, Gilles. Then, good morning, ladies and gentlemen.

I start on Page 12 with one of the main takeaway of the financial performance of 2017. It is the double-digit growth in our main financial indicators, then plus 10% for sales; close to 13% for adjusted operating profit; a bit more than 13% for the net profit attributable to the Group, a KPI on which I will further elaborate in this presentation; and the last indicator is a normalized free cash flow, which is up close to 18% on 2016.

And we think that this set of numbers is a good illustration of the ability of the LeGrand model to generate growth and transform this growth into value. And I'm moving now to Page 13, which is also another interesting takeaway, taking a 3-year perspective.

You may remember that we talked in 2016 of an acceleration of the 2 growth engines of LeGrand, i.e., organic plus external growth. And this acceleration was clear moving from 2.1% in 2015 to 6.5% in 2016.

And it is even stronger in 2017 with 11.2% achievement. And it was not only growth, but it was profitable growth, as in parallel, the adjusted operating margin has moved from 19.3% in 2015 to 20% in 2017.

Then, I'm now moving to Page 15. And I'm going to talk into more detail about 2017 performance.

Then, first, we remind you on this page, the integrated targets of LeGrand, i.e., financial and extra-financial targets. The first one is organic growth in sales, the second one is adjusted operating margin before acquisitions and the third one is the – is our CSR roadmap achievement rate.

And on Page 16, now rapidly to tell you that I will cover the financial performance and the CSR performance. And then, hand over to Benoit for the value creation demonstration and dividend proposal.

Then, I move directly to Page 18. Then, let's start with this financial performance and more precisely with sales growth.

You see 3.1% organic growth in sales, i.e., and as said by Gilles, a performance slightly above the top end of our 2017 target. As far as the external growth is concerned, it contributed a strong 7.8% to the total growth in sales.

And finally, the ForEx impact on sales was negative 1.1% in 2017. And the combination of the 3 lines represents 10% total growth in sales in 2017.

Rapidly, 2 additional comments at this stage. The first one is for organic growth to remind you that the Q1 of 2017 was strong and represents a challenging basis for comparison, including negative calendar effect between 2017 and 2018.

It concerns with many regions, but in particular, the U.S. And the second additional comment on – is on the ForEx.

To tell you that based on average exchange rates observed in Jan 2018, the full year ForEx impact on 2018 sales should be around minus 4%, but it's also interesting to precise that it is with no impact expected on the margin. And coming back to this impact on sales, we expect around minus 6% in H1 and minus 2% in H2.

The mechanicals is – the mechanics are very simple. 5% variation up on the – 5% valuation of the euro vis-a-vis the U.S.

dollar imply around 1.7% ForEx impact on sales. Okay, then coming back to organic growth on Page 19 and in more detail by geographies.

I will comment rapidly as the key points are already mentioned on the slide. You will see that the organic growth is positive -- in positive territory in the 5 regions.

Starting with France, it is clearly a good year with a 3.2% organic growth. The new construction market was up, notably in the residential sector.

And as far as the renovation market is concerned, it experienced a very limited growth in 2017. Finally, in an overall supportive context, LeGrand recorded a good relative performance, in particular, thanks to its commercial initiatives and the success of its new products.

And we also mentioned on the slide that the 5.8% organic growth recorded in Q4 was driven by form of a one on – one-off rise in activity. In Italy now.

In Italy, we achieved another good year with 4% organic growth. The construction market was only slightly positive, but LeGrand sales were, as in France, supported by commercial initiatives.

And also, supported by the success of the new products, in particular, the connected Eliot products. Moving to page 20.

In the Rest of Europe, in total, we achieved 5.5% organic growth. We also would like to mention that the performance was not only driven by supportive economic conditions, but also by the initiatives of LeGrand teams.

In other result, we achieved a good relative performance in many major countries in new economies and let's also mention that in the UK, where sales represent less than 2.5% of Group sales, the organic growth is slightly up on a full year basis, but negative in H2 alone. Moving to North and Central America zone where we recorded 1.7% organic growth.

And you may have in mind that due to our 2016 overperformance in the U.S., one should also look at the organic growth over 2 years, which is 7.6%. Rapid focus on Milestone, and Benoit will comment Milestone in detail later in this – in his presentation, but to tell you that the 2017 performance is good with plus 3% organic growth, a performance at the top of the range announced in November 2017.

And finally, I would like to also mention the double-digit growth in Mexico and that's it for North and Central America. To finish with the Rest of the World, we recorded 3.1% organic growth in sales.

The performance was good in a number of countries, including India and China. And in Brazil, we've remained in negative territory due to local economic conditions.

That's it for sales. I move now to profitability on Page 21.

In a few words, first, we achieved 20.1% adjusted operating margin before acquisition, which is the top end of our 2017 guidance. Number two, it represents 60 bps improvement on 2016, of which 50 bps related to the good operating performance plus a net non-recurring 10 bps, principally coming from inventory buildup of manufacturing products.

Number three, the main driver for good operating performance is the operating leverage on cost, but it also demonstrates our ability to more than self-finance our growth initiatives, thanks to ongoing productivity initiatives. And then, overall, clearly, a good job done by countries and SBUs.

I finish my comment on this slide by saying that the dilution in margin from acquisitions was minus 10 bps, leading to an adjusted operating margin of 20% in 2017. On Page 22 now.

It is not a surprise that by generating profitable growth, it is translating into value creation. And you see that the adjusted operating profit was up close to 13% at €1.1 billion.

And an additional interesting point on – to mention on this slide, we confirm that the impact of the marked rise in raw material and component prices was more than offset in absolute value, thanks to adjustments in our price list, and also a very good job done by the company teams. On Page 23.

I'm going to talk about the net income, then I have 2 slides to comment on it. On page 23, starting with the net profitable attributable to the Group, you see that it was up more than 13% on 2016.

3 main drivers to this performance: first, the solid performance – or operating performance, sorry. Second, the decrease in financial charges.

We have progressively replacing historical financing by new ones that are much more cheaper, and to put it another way, with a ratio of net financing cost to sales was 1.8% in 2016 and up to 1.4% in 2017. And the third point to be mentioned is the non-recurring tax gain that we are going to comment on the next slides.

Then, I am on page 24. A lot of information on this slide, and I'm going to spend the necessary time to explain it.

At the bottom, you will be finding the net profitable – net profit, sorry, attributable to the Group that I've just commented, i.e., the 13.2% growth. The line in the middle is the adjusted net income attributable to the Group.

As in 2016, we have adjusted the net profit attributable to the Group, as it benefits from non-recurring favorable tax items. The total adjustment, which is basically the elimination of those non-recurring income tax profit, was €61.2 million in 2016 and €85.5 million in 2017.

And what are we talking about? In 2016, you may remember that the €61.2 million was mainly in relation with the announcements of a reduction from 33% to 28% of the corporate income tax in France.

It led to revaluation of deferred tax liabilities, mainly on trademarks and creating a favorable income tax profit. You also remember that we have adjusted it, as it is non-recurring and could be considered as a bit mechanical with no relation with the recurring performance.

2017 is even a bit more complex, as there are 3 items in the adjustment, 2 of the same type than in 2016 and 1 new. First, the announcement of the new reduction of income tax rate in France at 25% in 2022, then a new favorable impact of €26.4 million.

Second, the U.S. tax reform announcements with reduction of the federal income tax from 35% to 21% is creating the same kind of favorable net effect for a total of €40.8 million.

In other words, the U.S. tax reform is clearly beneficial to LeGrand, and I will come back on that in a minute.

And the third item, I'm sorry, it's a bit long, but necessary explanation, I think, which is a bit different. The third item is a refund in 2017 of the tax on dividends previously paid by LeGrand, which is net of an exceptional tax paid.

We talk here of non-recurring profit of €18.3 million. Then in total, €85.5 million positive impacts on LeGrand accounts in 2017.

A long story, but to sum up, you have understood that the fiscal reforms in France and the U.S. had significant non-recurring positive impact from our accounts in 2016 and 2017, but I will comment in a minute that it also has a good recurring impact looking ahead for LeGrand.

Before that, I'm now moving to the next and last level on this slide, which is the adjusted net profit attributable to the Group. Before the impact of the PPA of Milestone, as far as the impact of the PPA of Milestone is concerned, you know that we are talking about traditional cost following the purchase price allocation for an acquisition, and in particular, in the first year of the one-off impact linked to the reversal of the inventory step-up.

Those costs linked to the PPA are fully non-cash. And at this level of the adjusted net profit attributable to the Group before the Milestone PPA, we record a growth of 13.1%, which is also a good reading of the 2017 performance.

Okay, it was a bit long. I hope it is clear, and of course, I will come back on that if needed during the Q&A session.

I am now moving to Page 25. As said just before, due to the changes in the taxation rules in France and the U.S., they not only have non-recurring good impact in 2017, but they are going to have good recurring impact on LeGrand looking ahead.

And the first positive will come from the U.S. tax reform as soon as in 2018.

The net-net favorable effect should be around minus 11 points on the U.S. income tax rate of LeGrand, which would represent around minus 3 points on the Group income tax rate.

The calculation of the impact on Group income tax rate is done based on our U.S. 2017 results, including the full year impact of 2017 acquisitions.

Moving on to the impact of the announcement of the gradual reduction of the French income tax rate from 23% to 25% to – in 2022, we should expect here a favorable one point positive on the Group income tax rate by 2022. The calculation of the impact on Group income tax rate is also done based on our France 2017 results.

Thus, progressively, and all other things equal, a favorable impact of around four points on the Group income tax rates looking ahead. And we will have a pure cash counterparty on the impact of goodwill depreciation, but the net- net impact in cash for the Group will remain largely positive.

Talking about cash, I am moving to Page 26 with the free cash flow generation, and I will be now very fast on that because it is less complex to understand. The normalized free cash flow was up more than or close to 18%, a rise mainly driven by three positive.

One, the first – one, sorry, the growth of – in EBITDA – the growth in EBITDA was a good driver; the second is the reduction of financing cost; and the third is a fiscal goodwill amortization of Milestone, which is also a positive. Then, very good contribution or very good transformation or conversion of net income into free cash flow.

And to finish on the financial data, on Page 27, a word on the balance sheet of LeGrand with a net debt of €2.2 billion. Robust balance sheet with a net debt on EBITDA ratio of 1.8, and average gross debt maturity above 6 years and the gross debt fully financed with fixed rates.

That’s all for the financial performance. A word on CSR performance before handing over to Benoit.

On Page 29, you may have in mind that our roadmap started in 2014 and will end in 2018 with four focus points and 21 priorities. On Page 30, we show that the CSR roadmap achievement rate in 2017 is 122%.

And the key message here is that the five-year CSR roadmap is almost achieved in year four. Then, moving to page 31.

To give you a bit of detail by focus point. The first is user.

The four focus points are user, society, employees and environment. And the first one is user.

We show that thanks to innovative partnership. We are able to offer or to accelerate our referring in sustainable solutions and energy efficiency solution, and also well-being solutions.

Moving to society focus point, we mentioned our initiative with Electricians without Borders, but also the role of the LeGrand Foundation. And taking the example of the Electricians without Borders, the idea is to promote access to electricity for all.

On Page 32, a word about employees saying that LeGrand has launched Serenity On, a program aiming at bringing to all LeGrand employees a minimum health care by 2021. And we also mentioned here our attachment with full respect for human rights and diversity.

And finally, as far as the environment is concerned, also interesting to mention that by reducing its ecological footprint, in particular, by reducing its CO2 emission, LeGrand is also actively taking care about environment. Okay, that’s all for our financial and extra-financial performance.

Thank you very much for your attention. And now I hand over to Benoit.

Thank you, Antoine. Hello, ladies and gentlemen.

I would have preferred to meet you in person for this first contact, but obviously the priority was given to delivering as much information as possible of the result, but I’m sure that I will have the opportunity to meet you face-to-face in the weeks and months to come. So on Page 34, all targets, as already said by both Gilles and Antoine, are met.

Organic growth, the upper end of the guidance was plus 3%, we delivered plus 3.1%. On adjusted operating margin before acquisition, upper end of the guidance, 20.1%; we delivered 20.1%.

And as Antoine just said, on the CSR roadmap, we have an achievement rate of 122%, so we are almost – we delivered almost a result of the roadmap one year in advance. As a result, on page 35, we will propose to our General Meeting of Shareholders a dividend per share of €1.26, i.e., a payout of 54%.

So this was for 2017, good set of results. The important is – thing is also that not only we welcome delivering good results, but also on preparing the future with a number of investments.

I’ll go quickly through those investments. Obviously, I’ll be happy to comment more if you have any questions.

Page 37, there was some good results demonstrate that the LeGrand model works and works well. I know that you all know the model, so I will not spend much time on this slide.

I will rather focus on the investments we have made. Page 40, we have launched a number of new products.

You know how new products are important in the LeGrand’s strategy to grow. You have here a list of products and you see that it is spanning all LeGrand views.

And maybe just one focus on Page 41 on one of those products, which is very important because, as already described, digital infrastructure is a key part of our IoT strategy. It’s a key enabler for IoT strategy.

We’ve launched a new range named LCS3, the third generation of this system, which is – has been particularly reliable and safe, which we started to launch in a few countries in 2017 and that we will roll out in a number of countries in 2018 and 2019. So the new products also include on Page 42, the Eliot products.

I know that you’re already familiar with some of those products. For example, the Classe 300X the door entry system.

We have had a number of other initiatives in temperature control, in door bell, in EV charging. And the last product we’ll be launching is Celiane with Netatmo, a range of connected user interface, that we launched in France a couple of weeks ago and that we will also roll out in a number of countries in the months to come.

Eliot is an important piece of our strategy in the IoT. In 2015, we presented you a number of targets, a number of objectives.

The two main objectives were: number one, to grow the total sales of connected products double digit on average per year. And from 2014 to 2017, the average growth rate has been plus 28%, so we are ahead of our target.

And we also aimed at doubling the number of connected products, connected families of products from 20 in 2014 to 40 in 2020. And in 2017, we are more than midway because we have more than 30 connected product families.

So we are completely on track with our Eliot objectives. On the next page, Page 44, some of you may have visited the CES in Las Vegas months ago.

We announced, during this year, the launch of a partnership program, named Works at LeGrand, and which aims at proposing to a number of partners to join the club so that we can build a number of ecosystems in order to provide additional benefits for the end user. It is based on open communication languages, API and a very strong digital infrastructure, if I may say, with clouds and APIs.

We already have 20 partners, some of them are listed on this slide. And the two next slides provide examples of what those partnership can bring.

The first one, Page 45, with Celiane with Netatmo, which is already installed in a number of buildings. And the next one with two different – in two different verticals in the hotels with Samsung and Marriott and in the car with Renault.

The last one is interesting one because it shows that the ecosystems are moving a bit. Typically, it is now important not only to connect within the home, but also outside of the home.

And for example, this partnership aims at allowing the end user to do from his car screen whatever he can do from his door entry system or phone, for example, welcoming visitors, lighting his various rooms, raising the temperature and so on and so forth. This was for innovation.

Obviously, 2017 was a very active year in terms of acquisitions. As you know, we did six acquisitions.

And those acquisitions, as already mentioned, will provide us with a carryover effect of more than plus 7% in 2018. I’ll not comment on the acquisitions except milestones if we were in it.

But obviously, they are completely in line with our M&A strategy, focusing on leadership positions and new business segments. As far as Millstone is concerned, detailed plantation was made at the time of the acquisition.

It’s a very nice bite, if I may say. On this Page 49, the most important number is probably the last one, 75% of sale generated with products being in the number one position.

It’s an important number because you know that it is, as you heard of the LeGrand business model, to acquire and develop leadership positions providing potential synergies, margins and so on. It has supported, as is stated on Page 50, an enlargement in the LeGrand accessible market, which is now worth more than $115 billion.

So it’s a large playground, highly complementary from one product family to the other. On page 51, this acquisition picks all criteria for LeGrand interesting deal, attractive field of activity, leading market position, high value of core statutes of product, customer loyalty, innovative-driven business and an active CSR policy.

So it was, as already said, a very interesting transaction for LeGrand. Now looking at the key numbers on Page 52.

Milestone achieved sales of $478 million in 2017, an organic growth of plus 3%. So you’ll remember what was said at the time of the nine months result, we indicated that we were looking for growth, organic growth of Milestone to be between plus 2% and plus 3%, but we also indicated that the Milestone business had fluctuations due to the nature of the business of project-oriented vis-a-vis being also retail.

And that even though the total sales for 2017 would be comprised between plus 2% and plus 3%, it would be made of seven months outside of the scope of consolidation that would up significantly and 5 months during which the company would be in the LeGrand’s scope of consolidation where sales would be down. So that’s exactly what happened.

Sales were down plus 2.1% the last – minus 2.1% in the last five months of the year. But all in, including the 12 months, it is in the upper end of the objective at plus 3%.

And as far as the adjusted operating margin is concerned, it is 21.8% for the full of 2017, up 80 basis points compared to 2016. So on the next page, we have launched a number of synergies, and we completely confirm the amount of synergies that we indicated, i.e., between 1% and 5% of Milestone 2016 sales.

So you already know that we created a single AV division in North America putting together Milestone and Middle Atlantic Products, so mounts, automated screens and racks and cabinets building a complete plan of action for the AV. And we also, and this is new, built residential AV business unit putting together the CEDIA AV arms of many brands that we have in the U.S., CEDIA being the association of residential light commercial integrators.

So with all those brands, we are now in a position to accelerate our growth in the residential AV business. Last, we did a number of commercial and industrial initiatives, either physical.

You have on Page 55 a number of showrooms that we opened in 2017. Even though digital is increasingly important, operate in are – as in many physical still matter.

And on Page 56, we have a lot of digital initiatives around rich content, ETIM or BIM; around accessing oneness amongst our target clientele using the web social networks, so YouTube; and also digitalizing a number of processes, such as training, for example. So same on industrial initiatives on Page 57.

We have, if I may say, the traditional industrial initiatives, with an example given here, the localization of some manufacturing capabilities in Russia for user interface and energy distribution; and also a number of digital initiatives around Automated Guide Vehicle, Cobots and more. So on Page 58, an update on some key metrics that are important for LeGrand.

In 2017, we recorded annual sales in new business segment of more than – representing more than 38% of our sales. And our sales in products being either number one or two stood at 69%.

And once again, this number is extremely important in the LeGrand strategy. So to summarize, I believe we are publishing a good set [Audio Dip] at what they both, so Gilles and Antoine, said.

And we have positive news on M&A in terms of talking and in terms of carryover effect. We have positive news on taxes, and maybe Antoine will come back to that in more details if needed.

Now what is our guidance for 2018? You have it on Page 60.

Macroeconomic projections call for a still favorable economic environment. That’s what we are giving as informational input from a number of bodies.

And based on that, we intend to pursue a strategy of profitable growth. And our targets are: for organic growth in sales guidance between plus 1% and plus 4%; and for adjusted operating margin before acquisition, i.e.

at 2017 scope of consolidation, a margin between 20% and 20.5% of sales; and of course, we intend to pursue our strategy of value- creating acquisitions. That’s what we wanted to comment this morning with my colleagues.

Now I’ll be happy to hand over the floor for Q&A.

Hi, Good morning gentle men and friends. Thanks for taking my question.

I am also congratulations for the new role for Benoit and Franck. Maybe, if I may, I would like to start with the first question for Benoit.

You’ve been at the company for a long time. You know LeGrand very well.

I guess during that time, you have been able to make yourselves a view on how you would like, potentially one day, to lead this company. And so my first question is really, as you start in your CEO position, what is, from your standpoint, the key objectives or the slight change you want to impose at the company in your new role?

That’s question number one, and I’ll have two others.

Okay. Lucie, happy to take this question.

What is really important to understand is that LeGrand has a number of fundamentals, what we call its DNA. It’s a clear strategic orientation, a very clear business model, a clear way to grow through product innovation, through investment in the commercial people, through M&A – bolt-on M&A.

It has a strong financial discipline, as you know, top line, bottom line, capital employed and so on. It has a strong care to execution, with a lot of – we are hands-on people, delivering on plan and so on and so forth.

All that are not only Gilles’, let’s say, views on where the company should be. It’s really in the LeGrand DNA.

It has been there for decades. And it is also clearly my targets, my objectives and my way of developing the business.

So to make a long story short, not only I’ve been part of the adventure for 21 year, and everything that you have seen in the past year is also, of course, under the leadership of Gilles, but I have brought pieces to it, as Gilles, as Antoine, as Franck, as Patrice Soudan. But more importantly, all those assets, fundamentals, are key to the strategy of LeGrand, and I intend to fortify it with my – fortify them with my team to, of course, adapt them to a changing environment.

But they are also my fundamentals, my DNA, and I expect them to continue, of course.

Understood. The second question I had was around your Eliot initiative and kind of connected line of product.

Within that, I was wondering if you could comment on what is the software content proprietary to LeGrand as part of this initiative, if any. And then secondly, I was wondering if you could comment in terms of the replacement of those connected product, how you think about them in terms of a replacement cycle versus your most classical type of products.

So the Eliot piece is really made of a number of blocks, and typically, the firmware might be different from one piece of product to the other. Now we have built a digital infrastructure that allow all those blocks to be connected between them and with third parties.

So typically, for example, as part of this digital infrastructure, we are working on cloud, which is a well-known cloud, which is coming from Microsoft, which we have chosen because it was entering on – answering our needs in terms of security, soft – safety, ability to connect the product, openness and so on and so forth. Now we are – and this is at the heart of our Works with LeGrand program.

We are completely open to interface our product and our software with others. And typically, we believe that we are moving to what you call a world made of clouds.

So our cloud will be able to interoperate with third-party clouds, and it already does, so that the end user can decide, for example, to connect together a fridge, a thermostat and a connected doorbell, door entry, to command that by voice, and on the TV screen. If you want to do that, we have to be able to connect various clouds to ours, and this is typically what we are doing with Works with LeGrand.

So the software piece is not so important, if I may say. What is really important is to have the openness, interoperability between our system, our software, our cloud and the third party.

Instead – in terms of replacement cycle, we are not in the IoT business of changing the products every three months or every six months. Of course, when a connected door entry or connected switch is installed, the firmware has to be updated, and it is updated very regularly.

For example, to account for the fact that the boxes in a given room might change. So we don’t know yet what boxes – telecom boxes will be used in two months’ time or in two years’ time, so we need to be able to update the firmware in our product so that it can communicate with the boxes that will come out in two years.

Does it mean that the product will change? Does it mean that we will have, at some point, to take out from the wall the user interface or the door entry?

Not necessarily. So I will want you to believe that since we are moving from non-connected product in some product categories to connected product, we are moving from a cycle where products stay in a wall 30 years to a cycle where product would change every six months, this is not the case.

This being said, clearly, but it has been the case for decades, we – products are no longer staying in the wall for 30 years. And what we have to do is to develop products that can easily be fitted into the existing installation.

One of the key specificities of a door entry, for example, system is the fact that it can be – as connected door entry, is the fact that it can be installed in the same box as a non-connected door entry. So to make a long story short, of course, we are happy whenever we change products more regularly, but don’t believe that connected products will move us from a 10-, 12-, 15-year cycle to a six-months or one-year cycle, this is not the case.

Thank you. And my last question was around France specifically.

You mentioned in the release kind of a one-off demand effect in the fourth quarter, so I was wondering if you could give us a bit more granularity on how big it was and what it was precisely. And also, I know that the margin in France is down quite sharply versus last year.

I’m guessing maybe it’s due to increase investment, but also here, if you could give us a bit more color, that would be helpful.

So I’ll take the second part of the question. I’ll hand over to Antoine for the first one.

So you’re right to say that the margin, when looking at the numbers, in France is decreasing, decreasing in FY 2016 from – sorry, 21.4% in FY 2016 to 20% in FY 2017. Now, and I think this was already explained, it is important to understand that the French margin, as reported, is made of two different things.

It’s made of the margin on domestic activities, and those are the activities I was in charge until yesterday evening, so I know them pretty well. And I can tell you that on the domestic part, the business has done well in 2017 and that the margins are in line with last year.

And it is also made of the second part of all group-related activities from the BUs, from the corporate functions; and not benefiting specifically to France; it’s benefiting to the whole group. And this is a mix of the domestic activities, domestic margin and all those expenses, sale to subsidiaries and so on, that makes the French margin.

And that’s on the second part, i.e. group-related activities, that these ones is a one-off effect that Antoine will describe.

Good morning. Yes, there is a – and you’re right in saying that the variation of the margin is quite surprising, but it does not seem to do with some special investments or CapEx that would be related to this change in profitability.

It’s a mechanical effect relating to last year, and I will try to be clear. But this was due to a change of commercial organization between France and the Rest of the World in 2016 with a one-off move of cost at year-end from France to Rest of the World.

Another result, you may remember that in France, last year in Q4 of 2016, the adjusted operating margin before the operating items, that was up close to 600 basis point and due to this move of cost at year-end. And of course, it has created for this year a high nonrecurring basis for comparison.

And this is the main explanation of this variation of margin that could be a bit surprising. And also, I would like to mention that it works the other way around for Rest of the World.

With Q4 of 2016, if you also remember well, that was done last year vis-a-vis the year before due to this move of cost. And we have the counterparty effect this year with the strong performance of Rest of the World in Q4 of 2017 on top of lower operating expenses.

And to sum up, domestic margin was really under control and at a high level. Second, you have this – as Benoit was saying, this group-related activities.

And third, you have this mechanical one-off effect coming from Q4 of 2016.

Thank you. That’s very clear.

But I was also asking about what you mentioned in the presentation about the French building sector activity accelerated, fueled by your marked one-off rise in demand that drove organic growth in the fourth quarter. If you could kind of maybe explain what was this marked one-off rise in demand and how big it was.

I cannot clearly explain it in details, Lucie. The only point is that moving from 2% to 3% organic growth trend, that was a trend observed in the first three quarter in average, to close to 6% organic growth in sales in Q4.

We can imagine that we can have some sell-in, sell-out effect. But it’s quite the life of the business, and we have constantly said that from one quarter to the other, you can have this kind of effects.

But the message behind this one-off qualification is that we do not think, of course, that the trend today in France is close to 6% organic growth

Understand very clear, thank you gentlemen.

It’s Martin Wilkie from Citi. Just had a couple of questions.

But firstly is you – congratulations on the move and after a very successful tenure at leading LeGrand, and wish you well in your new role. The question I had, the first one was on the U.S.

markets. You’ve commented in the past that you’ve been expanding more into lighting controls.

A lot of the lighting players in North America have been commenting on very weak trends there. Now I appreciate you don’t do the fixtures, but you do a lot of stuff around those.

And I was just wondering if you could talk a little bit about are you seeing some of that weakness, do expect that part of the market to be soft in 2018 and just how you’re seeing that site. And the second question was just on pricing.

Obviously, you’ve had a great track record historically about putting pricing up before raw material increases. And obviously, with raw materials again having largely gone up in the second half of the year, just if you could talk a little bit about pricing expectations into 2018.

Thank you.

Benoit speaking. I’ll take the first question, and I’ll hand over to Antoine for the second one.

It is important to understand that in the U.S., we have a strategy which is extremely consistent. It’s the first point around lighting.

We are not eager to enter into the big lighting market. We are focusing on a number of complementary initiatives.

For example, we are active on present detector, automated lighting. We are present – active in natural management of natural lighting.

And we are active and we entered into a very specific subsegment of highly specified lighting for commercial building for architects. And we did this move because, in the U.S., you can combine the various solutions: switches, of course; dimmers, of course; automated lighting; natural lighting management, lighting fixtures highly specified to provide complete solutions for the installer and for the end user.

So we’re not in the big market, and we can only comment on those specific niches. And actually, if we look at our numbers, our lighting activity in the U.S.

in 2017 has been slightly up. And what would it be in 2018, of course, as you know, this is true for lighting as for our other businesses, we don’t have order book, so it’s far too early to comment on that.

But looking at the hard numbers, it has been slightly up in 2017. Now Antoine, maybe for pricing?

Yes, thank you, Benoit. And good morning Martin.

Starting maybe with inflation because your point was about the marked ones in prices of raw material and commodities and components. It was clearly a year of inflation in 2017.

Your point was also that everybody is expecting that to continue or at least, and this is maybe what you said, is that H2 was higher than H1, then we have this form of carryover effect of this inflation in winter – going through 2018. And we are fully conscious of that.

Coming back on 2017, we observed a bit more than 3.5% increase in our raw material and components, certainly a figure lower than the market itself because you know that we are very active in terms of productivity on those cost but a bit more than 3.5%. And it was more than covered in absolute value, thanks to a bit more than 1.3% selling price increase.

Then a good job done, as said during my presentation, in 2017. Moving forward there, maybe two to three points.

The first one, is that – and sorry for that, but you are used to that. We don’t know what is going to be the inflation next year.

As we have a big auction of our price – purchasing prices that are negotiated every quarter, that’s the first point. The second point is that, as usual, we have taken actions at the beginning of 2018 in terms of pricing in many countries.

It is under the responsibility of country manager because pricing is one of the tool in order to achieve the financial performance contract. And second, and – or third, sorry, and the last point is that – what I can tell you is that we are going to continue to monitor it closely and to adapt, react, if needed, over the course of the year.

Then to sum up, good reactivity in 2017, expected ongoing monitoring in 2018, but we don’t really have figures to provide with – to you with.

Okay, that’s great. Thank you, very much.

Hi, good morning. Just a couple of questions, please.

Firstly, just on the guidance. The like-for-like sales growth guidance for 2018, I appreciate low visibility dictates, obviously, some caution there.

But with the price increases likely to be higher than 1%, I imagine, in 2018 compensating for inflationary prices that you’ve just talked about and, I suppose, on the wage side of the equation as well. It obviously looks conservative, particularly at the low end.

I was just wondering, maybe another way of looking at this, are there any regions or segments we expect a decline in demand in 2018? I imagine maybe the UK might be one, but just to help us try and assess any potential negative drag on growth this year.

That’s my first question.

Okay, Alasdair, thank you for your question. Then your point was, finally, is the guidance for organic growth conservative given the inflation that we are observing today and the counterparty effect in terms of pricing then.

First, in 2017, this situation was already there, then we have a growth in 2017 that is embedding both volume and pricing. Second, just to remind you with that in 2016, the guidance was minus 2 to plus 2; in 2017, 0 to plus 3; now we are moving to plus 1 to plus 4, then this is to – an interesting trend, I would say so.

And it is also important to understand and that we have to keep this kind of market because, at the beginning of the year, nobody knows and that, finally, what is going to be a real trend of the activity. Then we have this bracket of three points.

Three points is exactly the same in there last year. It includes volume and price like in 2017.

We do not qualify it as conservative. We just say that – we are just saying that the 4% organic growth in sales would mean good economic conditions, including volume, pricing, what you were mentioning.

And I will also add to that ongoing operating leverage on adjusted margin. And as usual, the low end of the target is a scenario with less good economic conditions, fundamentally, what we have observed in 2017.

If you were to be in a declining macroeconomic scenario, then we have this 1% low end of the bracket with here also a bit of leverage compensated by a bit of consciousness that we’d also do in our guidance when we issue this guidance in February. Then I will not qualify it as conservative.

Again, minus 2 to plus 2 becoming 0 plus 3, becoming 1 plus – plus 1, plus 4 is a good trend. Second, it would mean still organic growth.

And I remind you what Benoit was saying. We have to add to that the carryover effect of acquisition.

We have to add to that the positive impact with this in – positive impact on the tax rate of LeGrand, three points of positive impact. If you do simple math, it is 4% on net results.

Then we have a form of a bench of good news for 2017, including this – 2018, sorry, including this guidance. And maybe it’s also worth to mention that we are at the beginning of the year.

Yes, as the economic trend is quite supportive, but we also have some countries in which we can have issues. Then I was mentioning during my presentation the UK as the Brexit impact – potential impact.

I was also saying that even if you’re in Brazil, we are expecting – I’m talking about the macroeconomic expectations – to go back in positive territory in terms of GDP. We know that we can have some lag effect.

And second, it has to be confirmed then this guidance also on back – this kind of evidence, and I think it is reasonable.

Thank you. Just had a follow-up question then on Eliot.

I was just wondering if you could give us a sense of where we stand on the rollout of Eliot across your key regions and geographies, really what the coverage now looks like from that perspective. And I’m not sure if it works like this, but whether after three years, you’ve achieved a certain critical mass or moved up the learning curve and developed the channels to the extent that this is really now a faster pace of innovation and rollouts to customers than before.

So really a question around [indiscernible]. Thanks.

Yes, it’s not that easy to answer your question because it really depends on the product. There are some products that are very country specific, some of the products that are really worldwide.

And as we do with our traditional products, [indiscernible] program, depends very much on the product category. If you look at the product like door entry, for example, door entry system, it’s a product which has already been launched in most of European countries and even beyond.

And as far as [indiscernible] business that move, it’s starting with France, then we’ll come Italy, then we’ll come 13 other countries. So it really depends on the product family.

What I would like to insist on is the fact that – and I’m coming back also to Lucie’s question – Eliot doesn’t change the rule of the game at LeGrand. Eliot, it’s bringing additional capabilities to our products.

But we’ve been launching products for decades in different product categories. And once again, some of them are country specific.

Some of them are region specific, some of them are worldwide. Some of them are for five countries.

Some of them are for 30 countries. And if this is the case for traditional product, this is also the case for Eliot products.

Last, we have a full pipeline of products that will come. I mentioned in my presentation that we are a little bit more than midway in terms of product families, more than 30.

And we said that we would have 40 product families launched by 2020, so it means that we still have about 10 product families to come in the years to come. So the game is far from being over in terms of product launch and product deployment.

Great. Thanks very much.

Good morning. Congratulations to all to your new roles, particularly to Gilles for the amazing track record the last 20 years plus at LeGrand.

My first question, the follow-up on France. What do you expect from the market underlying?

I mean, you mentioned the 5 – the 6% is not reflecting the market. And we have seen a relatively slow renovation market.

We expect that to pick up. It seems to have decoupled a bit from the improving GDP growth number in France.

Second question, on the end market outlook. You still had a bit of a decline in Brazil; also some Southeast Asian countries still weaker.

Maybe you can comment a bit what you see in those market also in terms of market versus market share and whether you see some signs of improvement, as some of the companies have reported. Maybe you could also comment on the Middle East and what you expect there.

And lastly, on Milestone, you have a very wide range of synergies. 1% to 5% of sales.

Now you’ve owned the business for almost 0.5 – over 0.5 year. Maybe you could narrow that range or explain why that range is still so wide.

Thank you.

Well, on France, it’s really difficult to say. What we have seen so far is that, obviously, the residential newbuild is doing well.

The commercial newbuild is a lot more erratic, so it really depends. You have different trends from one month to another.

And the renovation piece of it, which is an important part of our business, it’s 60% of our business in France, is extremely soft. And when we asked the market operators why it has been so soft, they tend to answer that it’s because of labor shortage, for example, and a lot of cautiousness.

France has registered a number of years of depressed environment to a market, and it seems like the market operators take a bit of time before hiring and investing. So we have clearly those mixed signals even though, in 2017, the environment has clearly been better.

What would it be in 2018? It’s really difficult to say so far.

But you have those three elements: residential newbuild doing very well; commercial newbuild being a bit more erratic; and still a softer renovation piece. And on Milestone, maybe, Antoine, you want to say a word on the synergies?

Okay, good morning. Okay.

And maybe we will have also to complete the question on Brazil in Q4, if I’m correct, Andreas. But as we introduced Milestone, I will continue on Milestone.

And you are right. Yes, the bracket 1% to 5% is quite a lot.

This is a fair statement. You also have mentioned that it was – or you did not say directly, but you can imagine it’s but normal at the very beginning of the talking to have this large market.

And yes, we intend to narrow it. And if things are going well, you can imagine that we are more shooting for moving towards the 5% than going down to the 1%.

Now it requires a lot of initiatives. Some have started, and this was explained by Benoit.

What was explained by Benoit on the CDA activity, the audio-video financial activity is mostly fueling sales and synergies. But we also say that we have merged the back office of Milestone and media electronic product with, you can imagine, regrouping of back-office teams with unique ERP.

Also, it takes time to make this kind of change, but all of that will provide us with good cost synergies. And to sum up, we will – we would be disappointed not moving towards the 5% ratio of 2016 sales, but this is not our habit to progressively change the target, then we keep this 1% to 5%.

But of course, we should – we try to drive everybody towards the high end of the target. It will take time.

You have to keep that in mind because I was mentioning that merging two teams, if you are doing your communication properly and your organization, too, it’s quite easy. Now continuing to drive two teams, and let’s take the example of a financial team with two ERPs, it’s nonsense because it’s not possible.

Then you also have to change the ERP, and it could take two to three years and progressively to implement this kind of changes. And if you do it the wrong way, and I’m sure you have many example on your side, talking about changing ERP, you can also damage or disorganize the model.

And we are doing that very properly in a smooth way to make sure that the model of Milestone, a fantastic model, 21% more operating margin is not going to be disorganized by the implementation of those synergies; and good synergies moving towards, we hope so, the 5% but will take time in terms of implementation to continue this good business model.

I’m still somewhat confused about France in terms of – I mean, if you look at housing permits or housing starts, it actually hasn’t improved anymore in 2017. So why would that keep expanding in 2018 if kind of leading indicators have been flat now for 15 months?

Well, the comment I was making on – it was not on the permits or housing starts. They were on the positive impact on the business of the newbuild, actually.

And you know that you have a time lag between the time you see the good statistics and the time it comes to have people ordering our products. So what we have seen in 2017 is a positive impact of the newbuild.

And I was a little bit mixed for the renovation, stating that the renovation piece of it, which is a big part of our business, maybe for labor shortage, has not been extremely supportive. That was my comment.

What will the newbuild statistics be in 2018? I have no clue, to make the long story short.

Thank you.

Firstly, on Eliot, to follow up on the growth rates, it looks like it slowed a little bit in 2017 versus the growth rate of 2016, and 2015, which, I guess, is natural given the program is – there’s some kind of lower maturity, and the base is increasing. But wonder how you think about this for the next sort of 3 years for 2018 to 2020, whether the growth rate that you achieved in 2017 is kind of the steady state or this just go for acceleration, or should it moderate further.

Okay. So don’t forget that the growth rate we are indicating is all-in, including FX and M&A.

So one year, you can have a sizable acquisition which is Eliot oriented; and another one, no. So it impacts clearly on the yearly numbers.

If you look at the organic growth of the Eliot program, it has been double digit. It wasn’t double digit last year, so it’s clearly growing at a nice pace.

Now the bigger the base will be, the tougher, of course, recording double-digit growth will also be. The important thing is that we see a very positive traction from the market.

I was mentioning a few products that were launched 1 year back and, clearly, that are meeting with great success. Door entry system, it’s double-digit growth in many countries, typically.

So no, we don’t see a deceleration in the growth rate of Eliot, and we are well in advance compared to our targets.

Got it. And the second question is on pricing.

I’ve got your answers to the previous questions before. What I wanted to follow up on is just on the timing, whether there is a risk of 2017-like effect, where H1 2017 started with a slight, I think, lag of price increases versus raw material inflation.

And then you caught up and overcompensate the second half so that you close the year with a full compensation. Is that the kind of shape we should think of for 2018?

Or is it going to be a bit more matched given that both price increases and raw material inflation have been more simultaneous over the last 12 to 18 months?

Andre, it’s very difficult for me to answer your question. The point is more a question of trends when, finally, inflation is up and progressively up.

You can understand that it takes a bit of time before compensating it or this inflation through prices because if you have, for example, an acceleration during H1, you can have some pricing initiatives beginning of H2 and if it is in H2 the year after. And in declining trends, you can have the counterparty effect.

And you continue to benefit from your historical pricing initiatives vis-a-vis a declining trend. And the feeling – or what I am feeling from your question is that – and then maybe this is something we all agree on, is that maybe the inflation on raw material and components is not over and could – if it could, I mean, if supportive, could continue, even accelerate in 2018.

And then we would be in that situation, in a context of 1 or 2 quarters, a lag effect before compensating – fully compensating. If it was to be stable, it would be easier to compensate, I would say, on a quarter-by- quarter basis.

And I don’t know if it answers your question, but this is the feeling you should have is that if the trend continue to increase, then you can have some lag effect. If the trend was to – or if the prices were to stabilize, we will not suffer from this kind of issue.

Right, right. So I guess if I – if my read of your answer is that Q1 from what you see from your input price agreements versus what you’ve done on price already, there shouldn’t be a gap.

Is that kind of a right interpretation or extension of your answer?

Not so obvious because when we talk about pricing management, you have to be ready 1 to 2 months before the quarter starts. And you have noticed that in Jan, we reached some record, for example, for copper.

And then, even if it is less strong today, it’s clear that this rally in copper prices of Jan was not anticipated when we issued our pricing list in November or beginning of December. And I’m not telling you that it should have a big impact, but it could have this kind of impact – of lag effect.

Got it. Got it.

Very helpful. And just on acquisitions, do you expect acquisition margin impact to be there on the bridge in 2018?

It sounds like with Milestone, profitability has expanded to versus the other assets you bought during 2017. It looks like it should be more or less neutral, just from what you’ve acquired so far, not thinking about what you may acquire down the line.

So I guess the question is what do you expect the margin impact from what’s already acquired in 2018? And also just to calibrate the model, what is the sort of calculated acquisition contribution that you have for 2018 from, again, the businesses already acquired, please?

I will start maybe by the second part. And as Benoit was saying in his presentation, we expect a bit more or at least 7% carryover effect in 2018 coming from acquisitions of 2017.

That’s the first point, and we have this growth in sales that is more or less certain coming from those with acquisitions of 2017, talking about growth in sales in 2018. And as far as the impact of margin is concerned, we expect it to be, and again, based on the acquisition announced, we expect it to be around minus 10 bps evolution coming from Milestone and a dilution, which is a usual dilution, coming from the other companies.

I will finish by saying that as in 2017, if you compare the growth coming from acquisitions to the dilution coming from acquisition, it is nonusual figure, if you can say so, vis-a-vis historical figures. Again, thanks to profitable companies, including Milestone, now we keep – we expect to keep a slight dilution next year based on 2017 acquisition, again, around minus 10 bps.

We’re talking about 7% growth in sales minus 10 bps dilution in margin.

Very clear thanks very much and sorry will miss the plus 7 cut off half way through sale. Thank you very much.

I’ll try to keep it brief. Just 2 questions.

Firstly, how do you think about the M&A pipeline for this year? Obviously, you just talked about the 7% impact and yes, you’ve done the majority of deals, quite large ones.

And obviously, lots of integration work to do there. Should we expect kind of from here onwards, just the acquisition impact to just slow down, let’s say, into the sort of second half of this year and then into 2019, because of, obviously, the size of the ones you’ve done so far?

And maybe, is there also a shift away maybe from the U.S., maybe more into Europe as we’ve seen, obviously, organic growth also picking up here in that particular region? And secondly, just on Eliot, sorry to come back on this.

But you’ve got about $0.5 billion of sales now, I think you’ve liked in the slide deck on connected products. It’s slightly less than 10% of your group sales.

How does the margin look like of that $0.5 billion right now relative to your group? Also taking maybe high investments into account, is it dilutive to the group overall in that particular part of the business yet?

So on M&A, clearly, we have pipeline with a lot of opportunities that we keep alive and the whole company is really geared at this objective. We have country managers meeting targets.

We have supportive teams for the strategic departments. And so it is an industrial process at LeGrand, which by the way, I know well, because I handled this department 7 years.

Now will some of those contacts, active contacts lead to a deal in 2018? It’s really hard to say.

And it really depends on what the seller has in mind. And what we can tell you is that the pipeline is full.

Is that strategically speaking? Obviously, you have more of those mid-sized opportunities than a bigger one.

You have more of those €10 million to €100 million target than Milestone bigger like – type of opportunities. So we are more likely to see, but it is a statistic observation.

We are more likely to see smaller deals than Milestone-type of transactions. But it’s extremely difficult to answer to your question because it’s not fully in our hands.

It also depends, of course, on what the sellers are likely to do. And it is the same question – or same answer as far as the geographical priorities are concerned.

And we are very happy with the acquisition we did in the U.S. last year.

It is true that many of the deals were U.S. But if there was a nice European opportunity that arise, we would have, of course, looked at it.

And if the financial conditions, the trading conditions were good, we would have done it. Same for 2018, 2019, 2020.

If there is a good opportunity in emerging country, in the U.S., in Europe, we’ll definitely look at it, whatever the country, if I may say. So to make the long story short, pipeline full of opportunities, more likely to see smaller deals.

Still very active. Obviously, still part of the new management strategy to do bolt-on M&A.

Will it lead to deals, of what size, where and when? Difficult to say.

As far as the Eliot question is concerned, Eliot, there is a sort of golden rule at LeGrand. And I’m sure that you’ve heard that many times is that profitability is linked to market share.

The higher market share you have in a given product family in a given country, the higher the profitability. And it has been the case for decades.

It is important to understand that Eliot is not a new product family. Eliot is a new layer, if I may say, in a given product family.

If you look, for example, at door entry, we like the example because of its commercial success. Door entry start with a chime.

Then you have analogic audio, then you have analogic video, digital video, video with face recognition, connected video. All that – and connected video being Eliot, of course, all that being part of the same family.

So golden rules still apply. If we have a good market share in a given country in door entry, including Eliot, we’ll have good market share.

And if not, then we’ll have to improve the market share. So there is not a clear or single answer to your question.

All that being led, managed by the country manager, and it is country manager’s responsibility at LeGrand. It was my responsibility until yesterday evening to manage the different profitability of the various product families to make sure at the end of the year that we maintain or improve our margin.

Thank you.

In terms of leverage, how comfortable you’re going up further and what would be the limits?

Good morning, James. Everybody is staring at me.

I’m supposed to answer your very simple question. Very synthetic, by the way.

I cannot answer that. And the point is that we have demonstrated that we are an industrial company.

We are a company that has fixed cost, then it’s clear that the more growth you have, the better the leverage is. Then I cannot fix any figures.

What we are continuing to do is to have this balanced approach between growth, profitability. And finally, what comes for you, if I’m correct, is that we create value.

And this is the obsession for the company now. And Benoit was telling that just before.

We have a very disciplined approach in terms of growth and profitability at group level. When I say at group level, it is actually in the hands of country manager that are all responsible for the profitability.

And if all the countries were to experience good economic conditions, yes, margins are expected to rise. Now, I would add – and I am less synthetic than you in your question, but I would add also some interesting points.

First, it’s clear that – and you know that, that we manage that very precisely. It means what?

It means that when you are in a country with very high market share in many product families, you can imagine France, Italy, many countries within the group, we are promoting as much as possible vis-a-vis the country, growth. Growth instead of leverage because it creates a lot of value and it is even relative at group level.

And when we are in a country with low market share and low profitability, then, of course, we ask for more leverage. But we also do that in a balanced way to make sure that we continue to gain market share because at the end of the day, this is what will transform this profitability into permanent profitability.

Then to sum up, I will not give you any figure. I would just tell you that we are going to continue to manage the business to make the most of what could be profitable growth, i.e.

value creation.

Great. My question was actually more around financial leverage.

So you ended the year at 1.8x. I’m just wondering how high you could go.

I mean, historically, you’ve been higher post the LBO, but could we see a number of 3, for example?

Your question was on the balance sheet. You should have said that to me before, it would be possible for me then, okay.

Now, the leverage 1.8, and I think that what was said by Gilles 2 years ago is to intend to remain well into 2 than it could go from 1 to 2, let’s say that.

Perfect thank you.

Two questions, if I may. The first one would be about the Q1.

You talked about tough comps. Is it related to the calendar effect, positive calendar effect you had in Q1 last year and the Milestone?

Or is there anything else to have in mind about Q1? And the second question would be about Celiane with Netatmo which has been launched in France early Jan.

What is the market reaction from electrician distributors on this product so far?

Okay. I’ll take the second question because I did the launch with my teams.

So it is far too early to have consistent results. You know that when we are launching a product, it has phasing in, into the distribution, the various network of distributions, and then the sell out and then the reorder from the plant and so on.

So the success of product really can be seen only after a few months. If not sometimes, after a few quarters.

So I don’t have hard figures to share. What I can tell you that you will find that a bit qualitative, and I encourage you maybe to ask your personal contractor or some friends you may have in the business.

We have had a lot of very, very positive traction, a lot of very, very positive input for many reasons because the range is extremely simple to install as simple as a switch and a circuit. Because all the benefit for the end user really correspond to what people are expecting.

For example, voice control. For example, the ability to get notification from the outside.

Because the range is nicely priced and allows you to do an installation starting with a few hundred euros of budget. So for all those reasons, whether for distributors, contractors or end users, the first feedback we get is extremely positive.

But once again, it’s far too early to give you more quantitative insights. As far as the Q1 question and the comparable, I’ll hand over to Antoine.

Your point was right. We have faced this calendar effect.

We expect to have close to 1 day less. When I say close, it’s in – on average across the board.

But let’s say, 1 day less in Q1 of 2018 vis-a-vis the same quarter of last year. And more specifically, on Milestone, although Milestone is close to $500 million, and the group is a €5.5 billion.

But for Milestone, and this is clearly explained on Page 16 of the press release, yes, we have a quite tough basis for comparison as Q1 of last year was up 9% from Jan to March. And to come back to the group, organic growth and the basis for comparison, the main effect could be 1 day, and 1 day could represent, on a given quarter 1.5 points.

There is nothing yet apart from calendar effect in Milestone, no geographies or, I mean, product launches which had a positive impact last year?

As Benoit said, no. It’s an ongoing process of our production – product launches.

Then no, I do not see any other significant product launches. And for Milestone, it is less the question of calendar effect than the nature of the business that was described by Benoit with this project and retail business driven.

But no, I do not see any other significant impact than the calendar effect.

Okay thank you.

Perhaps one maybe for Benoit. I guess, you’ve quite rightly taken the opportunity to point out to a large extent the DNA of LeGrand is your DNA as well.

But I just wonder, taking over, surely, is it really the case that absolutely nothing will change? It’s business as usual?

Is it not a change of emphasis? Or maybe can we expect a Capital Markets Day with your own strategy laid out?

And in the context of M&A and particularly, Milestone, obviously, Milestone is a lot more, I mean, a lumpier business than the traditional businesses within LeGrand. I wonder how having done that deal going forward, that – are we likely to see more like that, more businesses where there’s a bit more volatility through the quarters than the traditional LeGrand business?

No, Jonathan. LeGrand has very long tradition of transparency vis-a vis the financial community meeting regularly investors, analysts, doing Capital Days.

And of course, all that will remain. So yes, there will be at some point a Capital Day.

And yes, we will have the opportunity to meet very often. Will this Capital Day be about a new strategy, change in the business model and so on and so forth?

The answer is no. And the reason is what I explained.

And I’m completely in line with the strategy. I’ve participated to the strategy and to the business model in my various positions.

And I think that the strategy, business model, discipline as part of the LeGrand DNA should remain. So to make long story short, Capital Day, yes, because it is LeGrand’s tradition to meet regularly investors and explain what we are doing in great transparency.

But it will be about our initiatives, what we are doing in terms of growth. So do not expect a change in strategy.

As far – and yes, if I may add, before handing to Antoine, I was trying to remember your first question. When you say nothing will change, be careful.

LeGrand has been changing. If I – looking back at what LeGrand was, when I entered the company 21 years ago, I can tell you that it was a very different animal.

The market in which we operated was much smaller. We had probably half of the product family in which we are operating.

We had a lot less channels. We were Franco-Italian company, whereas now we really have 3 pillars: Europe, North America and new economies.

So LeGrand is very different from what it was. And I can tell you that in 20 years’ time, it will be very different from what it is today.

So things will change, but the basics, the fundamentals are really the reason why the company is successful, and we intend to develop that and to maintain that. Maybe Antoine will answer your second question.

I guess your second question, Jonathan, was about entering in businesses that are which says more volatile than the historical business of LeGrand. Now we just mentioned Milestone because Milestone is a big guy, and this volatility is quite strong at Milestone.

But it’s not form of deliberate move from LeGrand to enter in businesses that would be more volatile. It happened that Milestone had this feature, which is also very interesting feature as far as the synergies are concerned, the expectation of a value creation are concerned and so on and so forth.

But under the control of Benoit, I guess that we cannot say that moving ahead, we are going to have more and more businesses that are more volatile in sales.

And to add on what Antoine is saying, Milestone is not the first business we have within LeGrand that has this capability, that has this profile. We have many businesses in many countries that are – some of them are volatile, some of them are less volatile.

We emphasized this situation more volatility few months back because having only 5 months of Milestone to be consolidated in 2017, it was an important factor and an important data to give to investors. But this is not new to LeGrand to have businesses that are sometimes recording a plus 15 on one quarter and sometimes minus 10 on another.

We are facing that in many countries. And once again, this is country manager’s duty and responsibility to handle those situations.

Maybe just circling back to that first question. So sort of no change, obviously, in terms of financial discipline, et cetera.

But what about the kinds of deals you look to buy? Any sort of thoughts, maybe widening the end market you look into?

Obviously, you’ve avoided, in history, industrial low-voltage in contrast, I’d say, Schneider. No plans to expand anywhere.

Not direction or anything like that.

So in 2014, we did the Capital Days, and I had the pleasure to present as EVP Strategy and Development, the group strategy at that time. And I clearly explained that our strategy or part of our strategy was to expand into complementary phase of activities because we were increasing the size of our market.

We were going after complementary client, complementary channels because we were providing the group with an additional synergy potential and so on and so forth. And that’s what we’ve been doing since 2014.

We’ve entered into a number of new fields, and what we did with Milestone is a good example. So we intend to continue this part of the strategy.

Now obviously, you will understand that I can hardly comment on what we have in our strategic plan for obvious reasons. Neither can I comment on the potential targets that will help us to do those entries.

Now if you are asking me is industrial automation of great interest to LeGrand? I would answer no.

But I can hardly make more comments on the fields in which we’re interested. Hopefully, you will see that in the years to come.

Thank you.

Thanks. Good morning everyone.

Thanks for squeezing me in. I’m perhaps a question for Benoit.

Could you talk a bit about the role you had in establishing and implementing the Eliot strategy? And also perhaps could you discuss your main achievements in France in the past few years?

Thank you.

Well, when Eliot was built as a program in 2014, 2015, I was in charge of the group strategy. So I was part of the team with Patrice Soudan who is next to me, with Antoine, with a few country managers handling the responsibility to launch the Eliot program.

So we did together strategic planning of that, the priorities, the objectives. So I was definitely part of the team.

And the good thing is that moving from the first to your second question, I moved from the buildings the plan to implementing the plan. So as Head of France, as achievement and as I mentioned, for example, that I was with my team in charge of launching a number of Eliot products.

We mentioned door entry system, for example. We mentioned Celiane even though it’s new, the launch was a heavy preparation, heavy launch.

So to give you one number, we launched the door entry system, the door entry for last year and well, it’s double-digit growth. And 40% of the videophones that are sold now in France by LeGrand are connected to door entry.

So this is an achievement I’m proud of. Now, of course, I think that 2017 has been a good year for LeGrand in France.

We have recorded growth. The feedback I’m getting from the market is that we are gaining share.

It’s always difficult, and this is pity that we don’t have easy comps. I would have loved to have easy comps to tell you I’m doing much better than Mr.

X or Mrs. Y.

But the truth is that it’s extremely difficult to compare our performance resources because of the fact that we are all different animals with different portfolio. But the feedback I’m getting from the market is that we are doing very well in France in 2017, and it’s definitely a good achievement maintaining good margin at a nice level and growing the French business is a good achievement.

Well, now – so to make a long story short, part of Eliot moving from strategy to implementation and happy for the French team that we have gone back to grow as fast with good gains in share, of course, maintaining profitability and the economics of the French market.

That’s great. Thank you very much.

Yes, hi good morning everyone. Just a very quick one again on the Milestone synergies, the range from 1% to 5%.

What would we have to believe for the 5% to be realistic? Is that all within the various AV businesses that you have, so cost to start and sales synergies there?

Or is there a significant portion of cross-selling from other businesses that would have to happen for the 5% to be realistic? And then maybe just another way to answer – to ask a question around M&A strategy going forward.

You have said that smaller acquisitions more likely than larger ones. Does that mean that larger ones are off the table, I guess, like Milestone?

What areas or where do you see gaps in the current portfolio?

So, I’ll take the question on M&A, and I’ll let Antoine comment on the synergies. So clearly, a bigger deal – Milestone type of deal is not off the table.

Should a nice opportunity arise, and we have the strategic will, we have the financial capabilities, and we have the ability to do another type of those transactions. So my comment was not on the fact that we don’t like those deals.

If it meets all criteria, we’ll definitely look at it. My comment was on the fact that statistically speaking, you have more of those €50 million company out on the market than of those €500 million or $500 million companies on the market.

So it was a pure statistic comment. We have the ability to do bigger deals if they are interesting portfolio.

Now for the 1% to 5% synergy, I’ll hand over to Antoine.

And I understand – good morning, Markus. I understand that you are more expecting 5% than 1%.

I think that when – at the time of the publication of Milestone, John Selldorff, the Chairman and CEO of LeGrand North America, told that if we are to reach this 5%, of course, again a target on which the teams are working on, this 5% would certainly be 50% cost, 50% revenue synergies, cost synergies and revenue synergies. And 50-50 would be 40-50 or 50-40, I don’t know.

But this was the plan. Second, as far as the cost is concerned, I think that it is reachable, this kind of synergy.

Now again, it will take time, and this is – sorry to again maybe I have a long answer, but docking acquisition, this is a very tricky subject. We have some expertise, we think that – for that at LeGrand, but it’s clear that we take time and we make sure that the docking is fine-tune and this is for the cost.

And for revenue synergies, then it was, I think, explained also by John saying that you can have different types of synergies. Again, the combination of the AV integrator of Middle Atlantic Products and the ones of Milestone, very big numbers in the two companies.

Second, Benoit explained that we have just – the teams in the U.S. have just created this audio-video residential business unit.

Under the responsibility of the Head of Milestone, Scott Gill, and we expect also synergies coming from that. And third, and this is also something very progressive and this is exactly what we have done with acquisitions like Raritan to expand also internationally.

Milestone is not only a U.S. company, it’s also an international company with something like 10% or bit more – or around 10% of its sales outside of the U.S.

And it’s clear that the commercial network of LeGrand with a strong implementation in almost all countries of the world is also something that we are going to work on. But – then to sum up, 5% is certainly a scenario reachable.

Let’s say 50-50, maybe in terms of revenue synergies and cost synergies. Time will tell.

And third, it will take time, but this is not specific to Milestone. This is clearly the way we adopt companies at LeGrand.

Just one complementary comment, Markus, on what you called gap in portfolio. I wouldn’t like you to think that only strategy as far as M&A is concerned is to add product families, new product families.

Of course, it’s an important part of LeGrand strategy, but we also aim at complementing or improving existing market position, building up on existing market positions with M&A. Obviously, for very traditional market positions, we sometimes have significant market share.

So it’s difficult to find interesting opportunity to complement. But on a lot of product families in which we are already in, we are very eager to do buildup to add market share in the existing country or to extend into a new country.

So our M&A strategy is really geared at complementary field of activity and more traditional field of activity, and once again spanning all geographies, providing the targets are attractive.

Thank you very much.

Yes, for all again. Thanks very much for taking the follow-up said.

Firstly, just on Milestone and the tough comparison for Q1. This will be in the acquired line, right?

So it’s incorporated in the 7% calculation that you included. Is that the right thinking?

No, it’s – we talked about organic growth. And then when you – to explain clearly how it works.

When you talk about scope of consolidation, if it was your question, the scope of consolidation is based on the sales that was done the year before, the year before, to have a comparison that is not, of course, sales without the acquisition and say, we transform everything into organic growth. And to make it simple, if you acquire a company that is doing 100, you add 100 to historical sales as if the company was embedded in your perimeter.

And then you compare the sales that you are going to make the year after if it was to be 1% or 5%, you say – of course, you don’t say that you’re going 1% or 5% in organic. You’re going 5%.

It’s a 5% for the company – that’s the company that I’m talking about. And if it 95%, you are declining 5% organically.

And it’s important to understand that the scope of consolidation of Milestone for Q1 of 2018 will be, finally, the sales of Q1 2017. And we put in front of real sales of Q1 2018 a big basis for comparison which is the scope, the scope being the Q1 of 2017.

Is it clear?

Right. So we’re going to add the Q1 2017 sales of Milestone to Q1 2018 into scope, and the organic change will go into organic.

Is that the right way to think about this?

Q1 of 2017 will be scope, and then the achievement of Q1 2018. What will go – to put it another way.

If we were to achieve 105% in Q1 of 2018, we will see that the scope is 100%, if we achieved 100 last year in Q1 of 2015 and the organic growth is 5%.

Right. So for Milestone to have a weighting, a negative weighting on the organic growth in Q1 2018, it needs to be down organically year-on-year in Q1 2018 on Q1 2017?

It is exactly that, yes.

Okay. And is that what you think may happen given the plus 9% comp?

Absolutely, absolutely. And this is exactly that because, again, if I put it another way, if the normal level of business of Milestone is 100%.

Last year, we achieved 109%. And then, this become finally, the scope, which is the base on which we are going to compare Q1 of 2018 to calculate the organic growth.

Then we – if we achieved 105% in Q1 of 2018 which is a good performance for underlying business of 100%, we are going to compare 105% to 109%, which is the scope.

Great, thank you for clarifying. And I’m so sorry for the pain.

And on labor inflation, is your assumption for 2018 that is incorporated in your guidance different to what you experienced in 2017? Or do you expect a different level of labor inflation in 2018 versus 2017?

No, it’s not so. First, labor is between – we do not give a precise figure on that.

But labor is between 20% to 30% of sales, that’s the first point. And second – depending on concrete, of course.

And second, the inflation, the acceleration of inflation or deflation on salaries, even if we can think that in many countries, we have some pressure in terms of inflation, but not at LeGrand specifically. But more generally, I think it will not change our pricing strategy at a level that would change the guidance in that.

Great, thank you. And very last one, I promise is just on the Russian factory that you’re building.

Could you give us an idea of what sort of capacity addition it is, maybe kind of target number of employees just to get a rough idea. And do we need to think about this having some kind of a J-curve kind of ramp-up effect during 2018 on the rest of the world or something like that?

First, it’s the project that has started in 2017, and will continue at least until the end of H1 of 2019, something like that before being fully operational. It’s a long process of building a factory.

Second, it’s not really need of additional capacity. It’s a very good program that would provide us with productivity as we have a lot of products that are sold in Russia that are coming from France, from Italy with lead time, with supply chain cost and not to talk about the fact that Russian costs are very competitive.

And the idea of this investment is really a question of productivity. And also a question of commercial efficiency because, again, we are going to avoid lead times, and then be able to supply our customers with short-term deliveries.

And it’s clearly a program, which is LeGrand product and not – it’s not a question of expansion of capacity.

Very clear. Thank you very much for your time.

Hi, good morning. It’s actually Dennis Dinkelmeyer on Daniela’s line.

First of all, we also send our congratulations to the new and the old management team at LeGrand for successful tenure, and we look forward to work with Benoit and Franck in the future. I’d like to ask just one question to Benoit.

You’ve been the first – you’ve been LeGrand’s first Digital Officer, and we’ve talked extensively about the growth and the future of the online program. But one another aspect of your business that’s affected by digital technology is how the distribution of your products is changing.

Some of your distributors, like Rexel, have – been on large pushes into online distribution, and we see other companies potentially, like Amazon, potentially entering this market as well. I’d like to ask for your opinion, how this push is moving in the future?

And how is this affecting your ability to maintain your market shares and, potentially, your margins in the future? Thanks.

This is indeed a very interesting question, because you are right to mention that digitalization is not only about the products, but that it also has an impact, of course, as in many businesses, on the way we do our business and our processes and so on. What we have seen so far in the market is that our distributors do have a number of strengths that make them the premier choice, if I may say, for their clients.

Amongst those strengths, the ability to give technical advises. You have to keep in mind that we are in a very technical field, where the products are complex.

You have to handle hundreds of thousand of products with technical specificities, that sometimes work together, sometimes do not and so on. So this is typically an example of strong added value by our distributors.

The physical presence and all the service capabilities it gives to our distributors is also of great value for their customers. In France, you have some distributors – I mean, most professional distributors are able – when you are a contractor and when you are on site, you can order on your phone a product, which is missing for you to complete your work.

And it is available within two hours next door. So within two hours on distributor point of sale, which is 1- kilometer away or 2-kilometers away from your workplace.

So service capabilities, click-and-collect capabilities is also a strong capability they have with the customers, plus a number of also advantage. So what we have seen so far is that our traditional distributors are able to provide added value to the customers, and that you don’t have many customers going away from their traditional distributors.

So now how – this also true that you have a number of players, new players, coming in, being Amazon and others. You have also a number of specialized pure plays coming in.

On the LeGrand standpoint, this has always been our strategy to work with the channels that are active in a given market. Even though we still see, of course, electrical distributors are being extremely key to the market.

So of course, we’re already working with Amazon, already working with some of those pure players, as we are also working with other distributors. But what we see so far is that the traditional electrical distributors doing heavy investment on the web, are serving very well their clients.

And we are not seeing any significant change in the distribution landscape in most of the countries in which we operate.

Many thanks for your answer. Appreciate your color thank you.

Well, thank you to all of you. And once again, good result, good news on the tax front and on the M&A front.

And as a new CEO of the company and, of course, very eager to continue the nice story of LeGrand and eager with my team, Antoine, Franck and the rest of LeGrand to continue this nice development. And I’m personally eager to meet you in person in the days and months to come.

Thank you very much.