Legrand S.A.

Thank you. Hello everybody.

This is Benoît speaking. Franck Lemery, Ronan Marc and myself are happy to welcome you to the Legrand 2020 H1 Results Conference Call and Webcast.

Before we start, I hope that all of you, your relatives, and your colleagues are doing well and are in good health. Let me first remind you that we have published today our press release, our financial statements and a slide show, to which we will refer.

Those documents are available on the Legrand website. Please also note that this conference call is recorded and webcasted on our website.

I will start with a few opening remarks following, which Franck and I will comment into more details our first half results. So I begin on page [Author ID1: at Sat Aug 1 00:00:00 2020 ]4[Author ID1: at Sat Aug 1 00:00:00 2020 ] [Author ID1: at Sat Aug 1 00:00:00 2020 ] four [Author ID1: at Sat Aug 1 00:00:00 2020 ]of the deck with the three main takeaways of today's release.

First, against the backdrop of an unprecedented crisis, Legrand mobilized for all of its stakeholders in a balanced manner. Second takeaway is that our performance showed good resistance in the first half of 2020 in a very deteriorated environment where net sales fell by 12.2% and the adjusted operating margin stood at 17.5%, reflecting the many measures to adapt to the consequences of the crisis.

Third, capitalizing on its well-positioned product offering and fundamentals, Legrand is actively continuing the deployment of its model in a still uncertain environment. Let's now move to page six and start with an overview of group mobilization for all of its stakeholders.

Amid the health and economic crisis, Legrand's first priority was to protect employees and partners by deploying very early the most stringent health protocols possible and new ways of working. The second priority was to actively support customers in pursuing their business.

For that the group kept nearly all of its logistics and production centers open while maintaining customer support and services wherever it operates. Now on page 7, Legrand also continued to show solidarity to local communities in the fight against the impact of the health crisis with many initiatives from donating equipment to helping produce ventilators, and supporting communities that are the more exposed -- the most exposed sorry.

Finally in the spirit of responsibility and given the efforts the crisis requires, Legrand has made a balanced appeal to all stakeholders from management to employees but also partners, shareholders, civil society and government authorities. Let's now move to page 9 with an overview of sales.

So in a very deteriorated environment, sales fell by minus 12.2% in total for the first half of 2020. This trend resulted from an organic decline of minus 15.2% that was particularly marked in the second quarter across our main markets, which was offset by an increase in the scope of consolidation of plus 3.6%.

Based on acquisitions already completed and their likely dates of consolidation, the scope of consolidation should come to around plus 3% in fiscal year 2020. The impact of FX was negligible over the period.

If we apply, the exchange rates of the month of June 2020 to the last six months of the year, the theoretical impact of exchange rate fluctuations should come to around minus 1.5% for 2020 sales as a whole. Let me now go into more details regarding the like-for-like evolution of sales by geographical zone and I'm referring to pages 10 to 12 of the slide show.

So starting in Europe where organic sales were down by minus 16.7% in the first half of 2020. In Europe's major countries, sales declined by 19.7% including minus 31.8% in the second quarter alone.

Business was down in almost all countries due to the impact of the health crisis compounded by one-off factors relating to destocking by distributors. This decline was more marked in France, Italy and Spain, the hardest-hit markets by the pandemic in the area.

In Europe's new economies, sales were up plus 2.2% from the first half of 2019, and down minus 5.2% in Q2 alone. This comes from a slight decline in Eastern Europe and a rise in sales in Turkey thanks to ongoing projects.

In this deteriorated context in Europe, the offerings of the Eliot program but also the ones linked to assisted living, data centers, and DIY stores showed good resistance in a number of countries. Moving now to North and Central America, sales recorded an organic decline of minus 11.2% in H1 2020.

In the U.S., sales were down minus 10.1% compared with the first half of 2019 with minus 15.6% in Q2 alone. The six-month increase in sales of products for data centers including Busways and PDUs was not enough to offset declining sales observed in other regions.

Let me now move to the last zone with rest of the world where sales recorded minus 19.9% organic decline in the first half of 2020. In Asia Pacific, sales retreated minus 16.9% as they decreased in most countries including in China and India, while recording a slight increase in Australia.

In Q2 alone sales were down in Asia Pacific minus 13.7% with contrast from one market to another that including business halved in India and a marked rise in China. In South America, net sales fell by minus 29.3% in H1 with a minus 47.8% drop in Q2 due to the worsening epidemic.

In Africa and the Middle East sales were down minus 19% in H1 including minus 25.2% in Q2 alone. Let me now pass the mic to Franck for an overview of our financial performance.

Thank you, Benoit. Good morning to all of you.

I hope that you are all doing well. Let's start with profitability on Page 13.

As you can see in the first half of 2020, the adjusted operating profit came to €497 million i.e. minus 25% from the same period of last year.

Moving on Page 14 the H1 2020 adjusted operating margin came to 17.5%, meaning three points lower than in the first half of 2019. This includes a plus 0.4 points accretive impact of acquisition.

Therefore, before acquisition, adjusted operating margin was up 17.1% of sales. Given the steep and sudden decline in business volume, this limited decrease reflects the group's quick action in implementing adaptation measures.

More specifically, these result first from an efficient management of sales and purchase prices, second from a significant adjustment in cost and expenses with double-digit decline from first half of 2019 and partially due to one-off initiatives; and third from an increase in other income and expenses in particular restructuring costs reflecting the rollout of structural adaptation measures. Moving now to net profit on Page 15 this was down minus 31.2% from first half of last year.

This decline is mostly explained by a decrease in operating profit, followed by an unfavorable trend in net financial results. This was in part offset by a decrease in the absolute value of corporate income tax with a tax rate almost unchanged.

Moving now to the cash generation on Page 16. On the left-hand side you can see that cash flow from operation amounted to 15.7% of sales, less minus 2.1 – 2.5 points from the first half of 2019.

Additionally, working capital requirement came to 10.7% of the last 12 monthly sales, down minus 0.5 points on H1 2019. You can see on the right-hand side of the slide that normalized free cash flow stood at €470 million, i.e.

down minus 8.7% from last year at 16.6% of group sales. We are going now to the last item of the financial performance on Page 17.

The group's balance sheet at June 30, 2020 was very solid as first cash and cash equivalents stood at 2.7 billion and second net debt was 3.1 billion with a ratio to EBITDA very close to the level of H1 2019 and an extended maturity, thanks to the successful issue of a bond in May. These were the main points on our 2020 first half financial performance that I wanted to share with you.

They reflect the good resistance of the performance in the first half, notably thanks to the many initiatives taken rapidly to adapt to the consequences of the crisis. I give now back the mic to Benoit.

Thank you, Franck. Let's move now to the last part of this presentation with the continued deployment of the Legrand model.

Let's first start with Page 19 with a few words on perspectives. The outlook for the global health situation and the world economy remains particularly unpredictable.

In this context and subject to favorable trend in the global health situation, net sales in the second half of the year should see a sequential improvement compared with the second quarter. Now moving to Page 20.

We would like to emphasize that despite this uncertain context and relying on its fundamentals, Legrand is continuing to actively deploy its value-creating model. Five key areas are considered.

The first key area is detailed on Page 21 to 24, where you will see that the group is extending and promising its product catalog including items driven by structural trends linked to society, the environment and technologies. Page 21 with a few examples of offerings providing high energy efficiency for both residential and nonresidential buildings such as Drivia with Netatmo industry-leading connected electrical panel that we have just launched but also the digital lighting management or the Keor MOD UPS system, which reduce energy consumption and improve building's carbon footprint.

On the next page on Page 22, you can see some examples of our deep and innovative catalog for data centers, going from busways to PDUs and cabinets thus meeting every requirement for all kind of data centers. Moving to Slide 23, the group's offering also help enrich and secure the office space at work or at home, as they make it more connected, efficient, modular and safer.

On slide 24, we also show here how our catalog meets the needs for assisted living improved comfort at home but also for critical spaces such as health care buildings. Overall, and as demonstrated our offerings are perfectly positioned to meet the major changes the building industry is facing.

Now on Page 25 Legrand is also focusing on three other important fundamentals of its model. First, by maintaining its drive for innovation with many new products launched in the first half of 2020 and a sustained momentum for the geographical deployment of Eliot, 5.3% of the H1 2020 sales is dedicated to R&D.

Second, we pursue our disciplined M&A strategy by actively docking newly acquired companies and maintaining close contact with the leaders that would potentially join the group when conditions are right. Third, we are deploying many structural initiatives to adjust our cost base and strengthen our efficiency and agility, notably by rationalizing our footprint across the globe and through digitalization.

Now on page 26 and this will be the last part of this presentation, you know that CSR is a mirroring inherent part of the group's model and we confirmed our responsible commitment throughout the first half of the year. For example, we are accelerating the fight against climate change with the first commitment starting in 2022 aligned with the Paris agreement target of the 1.5 degrees Celsius increase.

Second, we are pursuing initiatives for diversity as a workplace and maintaining the highest standards for governance with the nomination of an independent chairwoman since July 1, 2020 and with the shortening of directors' term of office to three years. That's it for this release.

Now Franck, Ronan and of course I are ready to answer to the questions you may have. Thank you.

Hi. Good morning everyone.

Hope you are all well. Actually I have three questions.

I'll ask them maybe one at a time. But the first question I wanted to follow-up on your comment regarding some of the structural changes that you are doing in the business if you could give us a little bit more detail on whether you were already like very lean and optimized on your cost base before are these basically to stand still along with your around 20% sort of through-cycle margin or do you see these as incremental actions?

Hello Daniela, I hope you are fine too. So yes, we believe there are a number of structural changes that we can still do and are currently doing to our business.

I can remind you the number -- the figure we gave in the press release as far as restructuring expenses are concerned. On a yearly basis, we usually have let's say between €20 million to €25 million of restructuring expenses 20 to 25 that's the average of the last four or five years.

In H1 alone, we had restructuring expenses of €40 million which were well-balanced between Q1 and Q2. It was about €18 million in Q1 and €22 million in Q2.

So it means that yes we have still a lot of ideas as far structural changes are concerned. Maybe give you a few examples.

It can relate to the way we are organized. And for example, we have moved from seven BUs business units to four in a matter of a few weeks.

It can relate to a number of processes, we are trying to optimize and strengthen. It can relate to our footprint.

I can again give you a number. Since the beginning of the year, we have either closed or announced the closing of seven sites worldwide across the different continents, which is more or less twice the yearly pace we usually have.

If you look at the past let's say 10 years, we are usually closing three to four sites a year and we have already closed or announced the closing of seven sites. So yes, there are still a lot of changes that we can structural changes that we can do.

When it comes to the second part of your question, you will have noticed that even though we have suspended our 2020 guidance given the uncertainty -- and I may say a word about those uncertainties -- we haven't suspended our midterm model and our midterm guidance which is shooting for a 20% EBIT margin across the cycle.

Thank you. And my second point actually is a follow-up to this which relates to -- in the second half I mean I guess as you said sequential improvement versus Q2 is hoping we don't have the same sudden drop in sales.

Should we think about the second half as a bit more normalized on -- in terms of margin perspective obviously with the seasonality that we normally have every year in Q4? But shall we think that it's a more normalized environment do you think for margin?

Well it's -- I would love to answer to this question. What we have hinted in the press release is of course a floor.

So, when we said that H2 sales performance should be better than Q2, we see that as a floor. Now, will it be the same better or a lot better?

It's still a big question mark. And you perfectly know that the topline evolution has a significant impact on margin.

So there is some -- there are series of uncertainties on H2. I can remind you that we still have half of our sales approximately which are made in countries, which have not yet reached the peak of the epidemic; take U.S.

plus South America plus India. It's approximately close to half of our sales.

And in those countries, we have not yet reached the peak of the epidemic, not to mention the risk of the second wave. So there is a huge uncertainty as far as the health situation and economic situation is concerned.

We are not pessimistic. We are cautious.

We are doing the things which are necessary in order to cope with the uncertainty putting in place a number of short-term and midterm measures. But it's difficult for me to commit to anything in terms of top line and as a result to commit to anything in terms of bottom line.

Thank you. And then in terms of the working capital progression, I guess you had sales decreasing in the first half but there was still working capital consumption I guess.

Should we expect that now as usual in a still declining environment we will see a reversal? And can you cut still structurally maybe more inventories or sort of how should we think about working capital and cash going forward for the rest of the year?

Yes. So maybe let me describe what happened in H1 as far as working capital is concerned.

So number one -- our working capital requirements in H1 2020 stood at if my numbers are correct 10.7% of the last 12 months sales which we believe is not a bad performance. And you have several things playing.

Number one, we have a little bit more inventory than at the end of the year. The level of inventory-to-sales is about 14.8%.

It was I think 12.9% at the end of 2019. It was 14.4% at the end of the first semester 2019.

So slightly less inventory than at the end of H1 2019, but more inventory than at the end of full year 2019 and this was a strategy. Number one, we clearly told you at the end of 2019 that the level of inventory was very low.

And number two, we also said in Q1 that we would do whatever it takes to continue to provide a good service to our customers including by adding a little bit more inventory if needed. So that's what we did in H1.

We deliberately decided to put a bit more inventory on some selected product because we wanted to continue providing good service to our customers. The other items of the operating working capital are well under control including receivables with no issue coming from this.

Now we also have a negative impact coming from nonoperating working capital items so all other items which can have a sort of erratic evolution from one quarter to another. So to make a long story short the working capital requirements is well under control with a little bit more inventory.

And with receivables well under control and other items a little bit on the negative side. Well when it comes to H2 unfortunately Daniela, I will do more or less the same answer as for the EBIT margin.

It will a lot depend on the evolution of our sales and the mix geographical mix of our sales our mix of customers and so and so. So unfortunately I have no clear guidance to give you for H2 except that midterm, we are sticking to our model which is to have a ratio of free cash flow to sales between 30% and 40%.

Again we have not suspended our midterm guidance our midterm model. Now what can happen on a given short-term quarter depends on many effected factors that are not all of them under our control.

Just one clarification. I understand you mentioned you have no visibility for the whole of 2H, but you mentioned you've stepped up inventories towards the back end of the first half.

Should we read into that that at least the beginning of July is better than what June and 2Q has been?

No you shouldn't read neither that nor the interpret tie. It is just that you have to realize that the month of April as we said was down minus 41% which means that in some geographies -- big geographies for Legrand France, Italy and a few others sales were down as much as 60%, 70% on these given months.

And at that time we knew that things would improve. And indeed when looking at the group level April was minus 41, but May and June was already if I may say, minus 14 and when you are moving from minus 41 to minus 14, in some countries from minus 60, 70 to better numbers it is a stress you put on your factories and it's a stress you put on your service level.

And we have set up as a top priority to be able to serve our customers because we believe that this period of time are a period during which we can gain market shares, if you stay close to your customers and are providing good service to them. So as a result we have decided to put more inventories in order to cope with this acceleration let's say between the minus 41 and minus 14.

So don't read anything related to July. It's just -- in order to provide a good service in a quarter where by definition things got better because the deepest month was April.

All right. Thank you.

Yes, good morning. Supriya here and thank you for taking my question.

Just two from my end which -- a bit of a follow-on from the last question in terms of -- could you share a little bit more sort of granularity around the trend through the quarter in terms of growth trends through the quarter and what were the exit rates or maybe early July rates that you were looking at? And a little bit more around each of the regions and what's varying between let's say Europe or North America and rest of the world?

And my second one is related to the cost savings program or restructuring program. You did mention that there are certain temporary measures that you have taken as well in the quarter.

How much of this do you expect to reverse going into the second half? And would the sort of longer-term structural cost-saving measures that you're taking be enough to offset let's say the reversal of the temporary savings, and if there is if at all possible to provide any quantification of this?

Thank you.

Yes. I understand that you would love to understand within the quarter and going into July if we have a trend to give you.

But in our business really so most weekly or a monthly number do not mean anything. So first weekly.

We don't have a weekly consolidation. We are not a distributor.

So I'm not able to tell you what last week consolidated sales compared to the week before. Number two, if you zoom on a monthly number it can be impacted by so many factors that are not relevant.

Take for example the number of days, take stocking or destocking from the distributors. So the fact that we gave in Q1, the April sales was more to hint that Q2 is going to be a very difficult quarter rather than the start of a new exercise which would be to give you monthly numbers.

We believe that monthly numbers in our business might give you just the wrong indications of what's going on. So this being said what I can tell you zooming by geographies-by-geographies.

Europe, clearly the month of April it was not a surprise for you was the hardest hit by the lockdown measures and most of the month of April was closed in many geographies with the situation being even more difficult in Southern Europe where the lockdown measures were the strictest. So France, Italy, Spain and the situation was a bit better as we said in Northern Europe and in Eastern Europe.

And obviously, the European situation got progressively better in May and June along with the progressive ease of the lockdown measures. So the key driver behind the performance within the month of -- within Q2 was lockdown measures.

Strict and almost across the continent in April and a progressive lift in May. As far as -- and for the whole quarter as we said, Southern Europe was a lot more affected than Northern Europe which mattered a lot for Legrand.

To give you a flavor of our exposure to Southern and Northern Europe. Southern Europe let's say France, Italy, Spain represents approximately or represented last year approximately 25% of our sales worldwide.

So it's a big exposure to those three countries especially France and Italy. And it's approximately four times more than the exposure we have to Northern Europe.

So this was for Europe. North and Central America as you could see in the press release and especially in the U.S.

the situation was a bit less negative if I may say and the dip that we had was not as deep as the one we experienced in France, Italy and Spain. And there were even a number of businesses which were either up like data centers over the semester or only slightly down.

Like for example, the residential piece of our business typically were in devices. Resi was better than commercial in H1 or the product dedicated to energy efficiency like for example the DLM system that we put in the press release.

So those behaved better than the rest. But again, it's difficult to see a trend within the quarter.

And the rest of the world it's a very mixed situation. Well obviously, the most dramatic situation in Q2 is in Latin America and in India.

And in those two areas which represent cumulated 10% of our sales so it's a significant part of our sales, sales were down by about 50%. But again, with a strong correlation between the level of sales and the lockdown measures and most of the Latin American countries take Chile, take Peru were under very strict lockdown, same for India.

So again to make a long story short the situation is very different from one zone to another. And within those we have really to make the difference between countries and businesses.

But I wouldn't extrapolate a trend within the quarter except that the month of April was by far the most difficult month with minus 41% whether -- whereas May and June was minus 14%. As well -- as far as your second question is concerned yes we had on H1 especially in Q2 a number of one-off.

Some were positives, some were negatives. Amongst the positive one-offs well, travels -- travel expenses were almost zero in Q2 obviously nobody could travel.

We didn't have any convention or meetings. We did ask our people to take a number of day-off in France for example and you cannot do that over 12 or 24 months.

In some selected geographies, we did some furlough for example. So some of those measures are not all of them replicable over H2.

Now it's not a negative message, we are channeling to you. We believe that at the same time, we progressively have a number of structural measures that could positively impact our P&L starting from H2 and going into 2021.

So the strategy was clear. It's to do as much short-term savings as we can still preserving a number of topics.

For example, R&D ex in Q2. So for example R&D expenses are only slightly down in Q2 and in H1 in general.

We are doing a bit of pricing, but not too much and so on. And in H2 and in 2021, we expect to have the benefit of more structural.

This is the way we have managed our P&L so far.

Okay, that's great. And just a quick question, sorry.

Just could you share what's the exposure to data center as an end market as a percentage of sales?

Well, last year it was approximately 10%. Why do I say approximately, because we have about half of that, which are products, which are only going to data centers, like Busway, for example or PDUs.

And for those products, well, we know that each time we sell a PDU it's a sale, which is made to data centers but we also have a number of products. Take for example cable tray, switch gear, floor boxes and a few others, which can either be sold to data centers or to other verticals, office space, retail and so on.

And for those products we have to estimate how much of them are sold to the data center. So this 10% should be seen as an estimate and not as a very accurate number.

We are tracking month by month.

Sure, sure. Understood.

Thank you very much.

Good morning everybody. Thanks for taking my questions.

Can I try two please? The first one is really a follow-up on the working cap.

I mean, it looks like you've been less strict on inventories and payables than usual and then some of your peers in Q2. So can you just help me reconcile the apparent contradiction there seems to be between your relatively conservative guidance for sales in H2 and this buildup of inventories?

The second question I have is on the impact of acquisitions in Q2. So there was apparently an accretive effect of about 100 bps in Q2 alone.

So where did that come from? Thanks very much.

Well, I wouldn't say that our management of working capital has been loose or that we have changed our approach. We have as usual a strict management of working capital.

But again remember that we have clearly told you at the end of 2019, as well as at the end of Q1 2020 that our level of inventory was at an historical low and that you should expect it to increase. So it shouldn't come as a surprise that it effectively increased.

And at the same time as I said, we have set as a priority to serve our customers, and even if at the expense of having a little bit more inventory. We've got remote working.

We share the difficulty of remote working. I think all of us have some experience in this.

So again so no it's not that we are building up inventory or that -- it's really that we are coming from a low level of inventory at the end of 2019 and end of Q1. And number two, we really wanted to serve our customers.

Again, if you compare the level of inventory to sales from H1 2019 to H1 2020, it is slightly improving. As far as the second question is concerned, it is true indeed that we have an accretive impact of the acquisitions on our P&L.

I said 100 bps in Q2. So it's 40 bps in H1, when it is coming from two things there.

Number one, the fact that the group's margin is not at the sort of customary 30%. So as a result it's a little bit easier for the acquisition to be accretive.

Number two, the acquisitions that we have consolidated in H1 this is especially the case for universal electric are doing very well in terms both of top-line and in terms of bottom line. You remember universal it's this business of Busway for data centers.

Mostly in the U.S., but also selling increasingly outside of the U.S. So number one, the group margin excellent efficiency, which is lower than the usual 20%; and number two, a very good performance of the company that we are consolidating.

Now the question is, should you impact -- should you expect to have the same positive impact for H2? Well, of course, I cannot comment on the group margin excluding acquisitions, but be aware of two things.

Number one that it's not granted that the performance in H2 of the acquired and consolidated companies will be as good as the one in H1, which we believe is not necessarily sustainable. So be careful about that.

And number two as far specifically as Universal is concerned, you have a technical effect. Universal is consolidated over six months in H1.

It will be consolidated over three months for fiscal year 2020, because the way it was consolidated last year. So it's good news for H1, but don't extrapolate necessarily this number for the full year 2020.

Okay, understood. Can I just have a follow-up on the inventory equation?

Was there any positive impact on margins in Q2 coming from the rise in finished goods?

No it was extremely marginal so…

Marginal?

Marginal. In fact you shouldn't embed that into the model.

It has almost no impact.

Okay. Thanks very much.

Maybe it's also the opportunity for me to say a word on free cash flow because, of course, working capital is highly related to free cash flow. So you could see that our free cash flow, non-normalized free cash flow to sales is going down by 31%.

A couple of things that you should have in mind. So number one which is extremely important the basis for comparison for non-normalized free cash flow was extremely demanding.

In H1 2019 our sales was up 8% and our free cash flow was up 62.5%. So bear that in mind.

That's why we are -- we think that you'd rather look at the normalized free cash flow number one. Number two, even if you look at the non-normalized free cash flow, the free cash flow to sales is at 9.1% which is the second best year in the last five years.

So be careful when looking at the free cash flow because minus 31% might be due to saying that it's not a good performance, but at the end it's coming exclusively from the basis for comparison. We believe that the non-normalized free cash flow as well as the normalized free cash flow are quite healthy in H1.

Good morning gentlemen and thanks for taking my question. I guess, I just have a couple of follow-up at this stage.

One is, I was hoping you can maybe give us a little bit more details on how the European margin has evolved because obviously the topline decline is quite pronounced, but this is also the case to some extent in the rest of the world. But the drop we are seeing year-on-year on the margin is quite spectacular in Europe.

So, was there anything specific in your cost base that you couldn't adapt as well as you have in the rest of the world for instance? And how should we think about a step up?

How quickly do you think you can step that up?

Well, it is true indeed that European margins are going down more than the average of the group. Maybe give you -- I can maybe give you a few numbers to start with and I will then comment.

So, we said that our EBIT margin excluding acquisitions was down for H1 by 340 bps compared to last year moving from 20.5% to 17.1%. So this is for the group.

If we split that for each of the three zones, Europe again excluding acquisitions was down 540 bps. Legrand North and Central America was down 310 bps and rest of the world was up 100 bps.

So indeed you have Europe decrease in margin which is higher than the average of the group. There are three main reasons for that we see.

The first reason is that, the drop in sales was deeper than elsewhere. And not only the drop in sales was deeper than elsewhere, but we had again in some geographies on a given month, month of April, some countries which were down 60%, 70%.

In this context adjusting your cost base is of course difficult. Number two, we clearly have a negative mix impact between the countries.

And you know that countries like France and Italy for example are nicely profitable countries and they were down more than the rest of Europe and down more than the rest of the world. Number -- I mean the third explanation, we have been very careful in protecting our R&D capabilities because we're seeing that it's a myth in the Legrand business model and we should be able to launch a number of new products and continue to launch new products and benefit from the rebound whenever it comes.

I can give you to exemplify that two numbers. Our expenses for the whole group in H1 so production expenses and SG&A went down like-for-like by close to 11%, minus 7%.

Within those expenses, R&D expenses were only -- were almost flat. Second number, our average number of people in H1 2020 compared to H1 2019 was down by a group level by 8%, minus 8%.

Our R&D people was almost flat. So we have a deliberate strategy.

It's a little bit like what I was saying about inventory. We have a deliberate strategy of preserving our R&D capabilities.

And the fact is that Europe is a very big base for us, for R&D. So we have indeed protected as much as we could the R&D capabilities of Europe.

So those three reasons sales going down more than elsewhere mix between countries and R&D explain the reason why the margin dropped by 440 bps where the group margin was down 340 bps. A word maybe on MCA and rest of the world, where MCA is close to the group's average.

So nothing specifically to say. Rest of the world be careful that the increase in margin especially increase in gross margin is a bit technical.

It's coming from the fact that the group's -- I mean the zones manufacture for all the other zones of the group. So it's a bit artificially boosted by that.

But let's say business gross margin is going down and not going up. Now on -- and on top of that for the rest of the world you have a one-timer which we explained in Q1 because revenue that we sold a building in Chile for €15 million and it impact positively the EBIT.

So for us, the evolution in margin in Europe is not a concern. So it was expected actually.

And these three impacts were expected. Well going into H2 which is your question on the three topics, it's a question mark.

How much will sales evolve? What will the country mix be?

Well, as far as R&D expenses are concerned, we still expect to preserve that, but we have in front of that a number of structural initiatives that we are leading in Europe and which should help our cost base. So, same as for your colleagues, I'm not able to give you a clearer guidance on H2 for the European margin, because it depends on many inputs that we don't have.

Okay. Thank you very much.

My second question, I was hoping if you could comment a little bit on the trends you've seen in North America by kind of big segment for you in terms of activity. Non-resi or commercial residential and so on.

And also, what you're seeing now in data center because we are hearing some noise about maybe a bit of a slowdown in this area of the business as we go into the second half of the year. And I know you have talk about business fees.

Yeah, yeah. So we've clearly seen in the U.S.

that in H1 the resi piece of the business was a lot more supportive than the non-resi. And we have a couple of resi product ranges, which were only very slightly down for example.

Well, this being said, you know our exposure in the U.S., you know that close to 80% of our sales are made on non-resi and slightly more than 20% on resi. But yeah, there is a clear difference between resi which was more positively oriented and non-resi which was more difficult except data centers which for Legrand was up in the U.S.

in H1. And we haven't seen deceleration in data centers.

Well, it is also true that we are progressively – we are probably also gaining market share in data centers in the U.S. If I look at the other businesses, so basically you have three categories.

You have data centers, which are up then you have the traditional Legrand business and especially the resi part which is one digit down. You have energy efficiency products which is one digit down and then you have a couple of businesses which are going down more than – which are double-digit down which are basically lighting.

We are nothing structural. We confirm that we are very happy with our lighting fixtures positions, but it is a fact that some of our lighting units are operating in places, which were amongst the more difficult in terms of contamination.

And as a result, we did have to close some factories it was a bit more difficult to operate. And there are a number of businesses where we have for example a bit of backlog.

And AV is also being down double digits and again, nothing structural. It is coming from the fact that many customers were closed but – so this is a factor.

Data center up traditional Legrand business slightly down and the same for energy efficiency and lighting fixtures and AV down double-digit.

Yes. Thank you.

And my last question would be if you could give us the bridge between the raw material impact versus the price in the half year and quarter possibly?

Yeah. So in H1, our pricing was up plus 1%.

And the inflation of raw materials and components was about minus 1.6%. So we had indeed as you could compute a slight benefit coming from the difference between selling price and purchasing price.

Thanks a lot.

Yeah. Good morning.

Thanks for your time. My first question is a follow-up to the discussions around the profitability in Q2 or H1 overall.

Maybe you could help us understand a bit better in terms of the temporary benefits, if you could quantify those that you had in the quarter which would allow us to assess your profitability a little bit better compared to some of the competitors that have shown more margin resilience, but maybe have also relied much more on temporary measures. So that will be helpful.

On the earlier question as well on the M&A benefit on the 100 basis points you mentioned Universal. Should that basically become a negative in Q3 given the consolidation of Universal last year in Q3 that was for six months?

And did the net optimal consolidation in Q2 this year, which was three months versus six months in Q2 last year also have a material impact on that temporary 100 basis point positive? So that's just to better understand your margin performance in Q2.

And the second question is on the end market exposure maybe you could help us understand a bit more if you could put your non-residential exposure into categories that are more longer-term negatively affected by the virus: hotels non-food retail office things like that relative to other areas. Maybe you could give us some indication of how big basically the impaired end markets are in terms of post the virus?

Thank you.

Yes, Andreas, actually I will turn your two questions into four. So the temporary benefit and sort of sustainable margin for H1 comparison with peers impact of consolidation in Q3 – and I will leave this one to Franck, and end market exposure.

So starting with the first one it's difficult to quantify, but it hasn't had a huge impact on our margin. I want to make things clear.

Furthermore, as you have also a number of one-off negatives. I can give you one example, for example India.

In India, you have no – we had absolutely no ability as per the law to do a furlough short-term unemployment from there. So we had to pay full time our people for two months during the lockdown even though you had especially in April almost no sales.

So I wouldn't exaggerate the impact of the positive one-off in H1. And again, it didn't mean that we are negative for H2 and in our ability to manage our costs.

You know the Legrand model, we have country managers which are highly incentivized on the achievement of their financial performance contract which are given a lot of tools in order to manage their cost. So no quantification, but don't sort of exaggerate the impact of those positive one-off on our accounts.

Comparison with peers. Well it's not my job to compare the Legrand performance with our peers, it's yours.

I will give you maybe sort of a couple of methodological hints, if you may allow me. Number one, you have to compare apple-with-apple and not apple-with-banana.

So I remind you that our EBIT margin is olive. It includes of course all expenses related to COVID-19.

It includes all possible impairment of goodwill brands and whatsoever. It includes all restructuring expenses everything.

So when you compare Legrand performance with peers you should do it on a comparable basis. Second maybe comparison you should also take into account the difference in level of margins between the companies.

Legrand has a 17.5% EBIT margin in H1. Most of the listed peers that you would consider I guess in your comparison our company is around 10%.

ABB, it's 9 Schneider it's 11, Aten it's 9. So bear in mind when you are doing the comparison of those two methodological let's say hints that I gave you on the half EBIT which is olive and number two the global cost structure of the various company.

I'll now move to the fourth question and I will then turn to Franck for the question on the consolidation techniques. Well as far as the end market exposure broadly speaking and with sort of rough numbers because as I said most of the time, we don't know precisely where our products are going to we can split the Legrand sales between 20% which would be residential new build.

We believe midterm there's some potential because in a number of countries the case for emerging countries for example that is also the case for big countries like France for example. There is a lack of buildings, so midterm we believe that this residential new build should support our topline even though on a given quarter or a given year it can be a bit more difficult.

That's 20% of our sales is going to residential renovation. And that's one of the areas where we believe COVID-19 could have if I may say a positive impact because on many people have stayed at home for weeks and if not months and have discovered that they couldn't communicate.

They couldn't be -- couldn't remote work, they couldn't be remotely train because they didn't have a good network that they needed to equip a full room to have a nice office; blah, blah, blah. So all that could be let's say, prompted by the post COVID-19 situation.

So this works for resi 20% new, 20% renovation. Then we have about 10% of our sales going to data centers as I said which we believe are on an upward trend for quite a long time.

Then we have 20% going to other commercial building new where you have -- it's a mixed bag of many things. You have office space, retail, hospitality, education and a few others.

Well for this piece you may argue that there will be less need for square meters for offices for example which might be true even though with social distancing you might need some space. At the same time you have a number of sectors which will be boosted by the values on public plants education could be one of them or else.

Then you have 20% commercial renovation. And that's where for example the European innovation the wave could possibly help.

And more generally speaking the need for more energy-efficient building could be a good booster. And then the remaining 10% is a mix of industrial buildings, infrastructure and many other things.

So 40% resi, half new half renovation 10% data center, 40% commercial half new half renovation and 10% in industrial infrastructure. Except, the few verticals which I mentioned in my speech i.e.

data center, Eliot energy efficiency and DIY, it's difficult for Q2 to give you a precise trend between resi and resi commercial data center and so on just because the key driver behind the performance was more let's say the economy and the sanitary situation especially the magnitude of the lockdown measures rather than whether it's resi worldwide is better than commercial. Franck, I'm turning to you maybe for the M&A piece.

Yes, good morning. So about the M&A piece first let's remind the numbers.

On H1 the dilution is the gap between – that dilution is plus 40 and it's plus 100 on Q2 alone. So there are several factors.

The first one as mentioned by Benoit is that, we do not compare to the traditional 20% Legrand average. The second is a very strong performance at Universal.

And the third one as you hint, would be a mechanical impact being that on Q2 alone the Netatmo for example a dilutive company is not in the acquisition impact when Universal is. And if we project ourselves on the full year basis Universal account currently for six months out of the six in the acquisition impact, when it will impact only for one quarter in the acquisition impact of the year.

The rest of the Universal will be in the AOI including acquisition. So, that's the mechanical part.

And then what about how to compute an acquisition impact in H2 or Q3. Of course Universal will play negatively on Q3 alone.

But then the question mark is versus which profitability of Legrand you should compare and we have no guidance on that. Is it clear some business reason about in Universal?

So mechanical impact between Netatmo and in Universal and the basis of the baseline of Legrand which is not the same.

Thank you very much for your answers. Those were very clear.

Good morning. Thanks so much for taking my questions.

I firstly wanted to follow-up on the structural measures you're undertaking. And would ask whether you could ask whether you could give any indication on whether this kind of elevated level of restructuring activity will carry on into the second half or at least Q3?

Well, it's of course, difficult to give you a number for Q3 and Q4 because it depends on many factors including on the date of the announcement of our measures in H2. We expect additional restructuring measures to be announced and to be booked in H2 and there are a number of plans on which we are working.

Clearly, the yearly restructuring expenses will be higher than the 40 million we are booking in H1. Now, I cannot give you a number.

Will it be twice as much as that or will H2 numbers be half of what we have booked in H1? I'm not able to give you a number because it depends on many factors which are not yet announced.

Now, as far as the payback of those measures are concerned and what you could expect going forward, the payback is different from measures to measures. Take for example the U.S.

you usually have in the U.S. a very short payback when you are doing this kind of restructuring and for footprint, so for closing a site it has a much longer payback which can be three or four years.

So, it's difficult to give you one number of associated savings for H2 for 2021 because the payback of that measures is very different.

Thank you and thanks for anticipating my payback question. Could you just help us with the number of sites that you have in total globally?

And apologies if it's something that--

Yes, we have about 130 sites worldwide. And as I said the average pace on which we are closing sites is three to four usually per year because we are adding also sites every year with acquisitions and we are currently doubling the pace at least doubling the pace.

Thank you. And if I just move into this kind of thinking about the potentially new margin from these measures you're undertaking.

With the concept of thinking kind of three to four sites being closed as to generate recurring efficiency that usually deals with inflation together with the pricing that you achieve is normal then should we think about the 3% to 4% extra that you've done and whatever you do in the second half as the driver of potentially higher-margin for Legrand going forward compared to the past?

No, I think really that's what I said at the beginning of the call. We have not suspended our mid-term guidance which is about 20% EBIT.

And I think that mid-term the 20% EBIT reason is the right EBIT margin that -- for the group to at the same time create value for its shareholders and keeping its ability to invest in new products service to customers and so on. So, I wouldn't embed into the model the fact that we are shooting mid-term for higher-margin at 20%.

All the more as don't forget that we intend to resume actively acquisitions. And we have a lot of good ideas going forward for the quarters to come and the years to come as far acquisitions are concerned and acquisitions are usually dilutive on group's earnings.

They are not in H1. But if you look at the past 10 years on average, zero to 40 bps of yearly dilution is what you usually have when we acquire a company.

So, now I wouldn't embed in my model that new model that Legrand will shoot for 21% or 22% EBIT.

Thank you. That's very clear.

And I wanted to ask about pricing trends as well. Obviously, Q1 was very healthy and solid at 1%.

But maybe if you could talk just broadly about what you're seeing in terms of pricing trends for different product categories that you participate in that would be great.

Well, we -- there are two things; pricing -- I mean selling price and purchasing price. As far as selling price is concerned, we are confident on the fact that the full year 2020 will show positive selling price impact and we are working hard and our countries are working hard to manage smartly price.

So, you should expect to see price increases or price increasing in FY 2020. We don't expect a reversal of the trend you saw in H1.

By the way does it mean that we are not careful at keeping and developing our competitive position? No, on the contrary.

So, to achieve this plus 1% price increase, in H1 it is a mix of countries and product families in which we are increasing prices more than that, and countries or product families where we decrease prices. So again, we were very focused in H1, of course, on protecting our margins, but also on doing whatever it takes for us to leverage this period, to grow our market share.

And as a result, we didn't hesitate if needed to punctually being aggressive, on pricing. But overall, FY 2020 we should see a price increase.

As far as purchase price is concerned, then, it is a bit more complicated. Yes.

We have seen an improvement of purchase price between Q1 and Q2. Q1 purchase price was minus 1.1, Q2 purchase price was minus 2.3.

So we have seen an improvement. But going forward, big question mark and there are many, many things which are not under our control.

Take for example, the copper price -- copper price for many reasons including potential shortage in Chile, is now back to $6,500. The silver price is back to the pre-crisis level.

So it's a mixed bag of many things. And you could have -- the economic situation will impact, the potential shortage will impact.

So to make a long story short, confidence on the fact that there will be no reversal of H1 trend on pricing and that we will do, positive pricing for the full year and for H2. And more question mark on purchasing price, because it is not in our hands.

Very clear. Thank you.

And the final thing I wanted to follow-up on -- just on that comment you made on North America gains and market share gains in data center segment, could you give us a bit more color on this? Is it any particular customer category?

Is it kind of larger scale or more specified dedicated data centers?

Well, no specific -- not specifically on a type of customer, because we are present in data centers, on all type of customers. The so-called SuperNAP 8 data centers and so on.

But it is true that in terms of product families, two product families in which we have good evolution of market shares are the ones listed in the press release. So best way for data centers and smart panel, and those two product families having a very good performance then it tends to pull the other product families, such as connectivity and -- so in other words, share gains in those two product families.

Now in terms of verticals, it's difficult to set up a trend, except maybe that on the market itself hyperscale data centers are doing better than collocation. But otherwise, it's more a matter of market trend rather than Legrand market share gains.

Thank you. Thank you very much for your time.

Hi. Good morning.

So I just had a clarification question on the restructuring charges for North and Central America because it looks like it was 10 million for H1 overall and 11 million you'd already booked in Q1. So I guess there might be a gain or some kind of offset.

So I was just looking for the underlying restructuring charges perhaps in Q2. And then, kind of in the context of the comments you made on structural initiatives to adapt the cost base across the group.

Just wondering if you could kind of give us some insight into some of the things you're doing specifically in North America, in terms of site consolidation process improvements et cetera? Thank you.

Well, the fact that -- if your question is the fact that, North America booked early number of restructuring charges, it is also coming from the fact that, it's a bit easier. There are geographies where it's a bit easier and faster to launch restructuring plans and adaptation plans and the U.S.

is part of them. In the U.S.

you can decide a plan and launch it very quickly. And in the U.S.

part is made of two things. You have a very quick adaptation plan which was launched as early as Q1 and which had an impact including in Q2.

And which will have an impact in the coming quarter. And on top of that, you have on top of that, a number of footprint analyses which are currently being led and which could lead potentially to additional, restructuring charges.

Well, second question examples. Well we have closed the site in Turkey.

We have closed a small site in Switzerland. We have closed a site in Brazil.

We have closed the site in India. And we have a number of other of those initiatives coming in the coming quarters.

So it's a very traditional structural adaptation, where you are adjusting your footprint, reducing the number of people, revisiting your processes and stuff like that.

Thank you. Very clear.

And then just a follow-up really on data centers in the U.S., just following on your comments about hyperscale, Eaton as well said this week it was seeing a return of larger investment in hyperscale data centers. So it sounds like you're seeing that as well.

But would it be fair to say you kind of expect that, kind of area to accelerate into H2 as well? Thank you.

Well, I'd say, you have to ask our customers. So I have absolutely no clue.

And again, even on data centers the same rationale, as well apply. We have very limited visibility on what our customer is going to order.

So no I have absolutely no visibility. I cannot answer this question.

What I can tell you is that, midterm and there was a question I think it was from Lucie saying on the data center. Midterm we are strongly convinced that data center is a very good place to be.

And we have heavily invested to be a good player a leading player on this trade. So we have no doubt, that midterm it's a very good place to be number two -- number one.

Number two, we are covering all type of data centers so hyperscale, edge, corporates, colocation and so on. So whether one piece is going faster than the other, at the end, for us, it's more or less the same, because we have a good coverage of all type of data centers.

And number three, as a result of those two topics, we had in H1 a good performance in the U.S. in Europe and the rest of the world on that vertical.

Okay. Thank you.

Thanks, Benoît.

Thanks. This is Martin from Citi.

Just a couple of questions on your acquisition pipeline. Just to get a sense as to whether or not the crisis has either accelerated or slowed down the possibility of making deals?

Has the backdrop significantly changed? And then related to that, obviously, we've seen multiples for listed companies to increase a lot this year.

Are you finding that acquisitions are still reasonably priced? Are you lowering your hurdle rates, given the backdrop for interest rates, just to get some sort of sense as to how you see valuations on potential deals?

Thanks.

Well, the pace in our trade has slowed down. But this is not a surprise.

This is always the same situation in crisis times. And this one crisis is a bit special.

So, typically, at Legrand, we have been focusing more on our day-to-day performance, restructuring plans and preparing all the things for when the market will recover, rather than spending time chasing opportunities. And on the seller side, seller usually do not sell in such crisis periods and they are waiting for better times to come.

So, by definition there was a sort of slowdown in acquisitions. Does it mean that we have stopped contacting targets or filling the pipeline?

No. And we have given the clear instruction to country managers to keep entertaining very good relationship with 10, 15, 20 targets they have locally.

So that, whenever the target and ourselves will feel appropriate we'll be able to resume quickly very active acquisition policy. And I have myself kept in touch with a few owners.

So we have a pipeline which is as full as before. We have the midterm strategy to continue to be very active on acquisitions as before.

It is just that for a couple of months we're a bit cautious, because of the situation and so are the targets. Well, as far as pricing of deals are concerned, let's wait for us to do a bit more deals before commenting on the price, because the price of a deal is the price you pay at the time you strike a deal.

So I'm not able yet to answer your questions. What I can tell you is that the deals we have done take, for example, Universal and a few others in the past six to 12 months, had multiples which were consistent with the Legrand story.

What will it be going forward, we'll see. We've gone through a couple of crises historically and we have not seen multiples inflating a lot.

And we have always been able to stick to our model, i.e., accretion on EPS from year one, accretion on EPS from year five. So willingness to do more acquisitions, cautiousness because of the situation, but we will resume at some point.

And as far as multiples are concerned, let's wait for us to strike more deals before commenting.

Okay. Thank you very much.

To look at it another way, the fact that we have not done a deal since Focal Point which is only 24 months back. It's now two years back.

It's not coming from the fact that there are a lot of targets asking us to buy them, but the multiples wouldn't fit, it is more that we are and they are focusing on dealing with the crisis rather than entering into a process.

Okay. That’s very clear.

Thank you.

Yes. Good morning to you all.

I hope you’re well. A couple of questions please.

Looking at the gross margin development in the second quarter, there's nearly, I think, a 200 basis point drop. And when I look at the geographies, it seems that there was a 400 basis point drop between Q1 and Q2 in Europe, which was about the same year-on-year as well.

So a significant drop in the gross margin in Europe, less so in North America, but almost 200 basis points Q1 to Q2. So can you perhaps walk through what was happening in respect to perhaps mix relating to country or product, which resulted in such a change in the gross margin?

That's the first point. The second comes back to the market environment.

And perhaps, can you, in any way, share an assessment of where you think distributor stock levels are? I think in the past you've discussed perhaps the sell-in versus sell-out ratios that you're seeing in France or Italy.

And perhaps you could talk to that subject and where you think we are -- after such a period of volatility, where we are in respect to inventory levels through the supply chain. Thank you.

Okay. Let me first address your first question which is why did the European gross margin drop more than Group's.

And it is true actually that -- I said earlier that our EBIT level excluding acquisitions went down by 340 bps. And out of the 340 bps, 60 bps are coming from gross margin.

And the drop in the European gross margin like-for-like is approximately twice as much as 60 bps. So the gross margin in Europe is dropping twice as much in H1 than the Group.

Well, you find the explanation which I basically gave when I explained why the EBIT margin went down more in Europe than elsewhere. Number one the drop in sales was stronger than [Technical Difficulty] remind you that Q2 in Europe was down 28.2%.

Well we are an industrial company. So when you have -- we had ability to adjust down our expenses.

We did a lot of measures in order to save cost. But at some point, we also have some fixed costs which cannot be adjusted in a matter of days.

And I remember you that the drop in sales was very sudden. So it was more difficult to adapt in Europe than elsewhere just because the drop in sales was a lot steeper in Europe than elsewhere.

And number two you also have within Europe, the negative mix impact coming from the fact that France and Italy and Spain nicely profitable countries were down more than the average of the other European countries. So same reason the drop in gross margin which I believe was somehow limited in Europe in the context of such a strong drop in sales it's coming from the two factors strong drop in sales and the mix between the countries.

As far as the second question is concerned it was, yes as I said I would say selling price. It's always difficult to measure because our distributors usually do not communicate their exact stock level to us which is perfectly legitimate.

It's their working capital management not ours. What we can say is that in Western Europe especially and in countries like France and Italy there was significant destocking in April starting actually late March which is not a surprise and which is very consistent with what we have seen in periods of difficult economic situation and which actually is confirmed by what I have publicly claimed a number of distributors.

Now again I'm not able to quantify it and it didn't come as a surprise to Legrand because it is a very legitimate behavior in such a period of crisis. But again, Legrand being one of the most distributed brand in this industry if not the most distributed brand of the industry is suffering more than other players from this destocking.

Thank you, Benoît. Can I have a follow-up relating to your connected products program Eliot.

In the past you have separated that out and tracked performance. Can you speak to the development of the sales of the connected products rather than normal products or unconnected?

And also specifically how has Netatmo developed in this climate?

Well we have not actually separated those numbers on a half yearly basis, we communicate to that on a yearly basis. What I can tell you is that both Eliot as a whole and Netatmo specifically are doing significantly better than the average of the Group.

I can only share a number with you on Netatmo, it was interesting. Of course, we are tracking Netatmo top and bottom line.

But the most important number we are tracking at Netatmo is what we call the activation. How many products are effectively connected by the people.

So you buy I'll say a connected switch. At the time you enter your email address and that you connect it to the network poof, it rings a bell in our system.

And that's what we are tracking because this is really the business performance of Netatmo. Well interestingly net debt to activation went down only five weeks during the European lockdown.

Only five weeks and are up since and are up year-to-date. So it's not necessarily indicative of the sales we're going to do in the next two months but it gives you a flavor of the fact that even in the difficult times a small and nice company like Netatmo is able to grow its business presence, if not always itself its business presence amongst its customers which is revenues.

We'll give you more update I think for the full year 2020.

Thank you very much.

Hi, morning and just one left from me, if I could. I was interested to hear how you're thinking about product development and R&D focus.

And I mean, would you do things like would you consider accelerating smart home and datacom products maybe at the expense of slowing down investment in maybe some of the more challenged areas like hospitality and retail or are you treating this as a very one-off situation and you're not going to change your longer-term product planning and development?

Well, we are clearly – but it is not a new way of doing it at Legrand – we are clearly looking at our portfolio of products and pipeline of new products and making sure that they fit with our geographical priorities and business priorities. So we have 1000 of people and then 1000 SKUs, which are currently under review of potential financial development.

And we are adjusting that to what we see potentially in the next five years as being the most interesting segments to be. So take connected products.

Of course, we are progressively investing more on connected products then into non-connected products because we believe that those are products which do have some potential. Take energy efficiency, we are allocating an increasing part of our R&D efforts to energy efficiency products.

But again this is not a revolution compared to the way we are proceeding before the COVID-19 crisis. Every year we are making sure that we are adjusting our R&D portfolio to the most attractive market segments in the next five to 10 years.

So are we doing for our pipeline of acquisitions by the way, which is a very sort of active pipeline and we are making sure every year that we have enough interesting targets on segments which are of interest to Legrand segments, which are – which we see as priorities.

Thank you.

Well, thank you very much for taking the time to attend this call. And to those of you who are lucky enough to take a summer break, I wish you a good and relaxing break because it's still going to be again an interesting semester.

Thank you very much and I hope to talk to you soon. Thank you.