Legrand S.A.

Thank you. Good morning to all of you.

Franck, Ronan and myself are happy to welcome you to the Legrand's 2021 H1 results conference call and webcast. As you know 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 note, that this conference is recorded and webcasted on our website.

After a few opening remarks, Franck and I will comment into more details the first half results of 2021. I begin on page 4 with the three takeaways of today's release.

First takeaway in the first half we recorded a steep rise in sales of plus 21.9% year-on-year, or plus or 7% over two years. This performance was driven primarily by organic growth in sales of plus 22.6% or plus 3.9% over two years.

Adjusted operating margin came to 22% of sales. Net profit also increased by a very good plus 68% from the first half of 2020.

These achievements clearly confirms the continued improvement of Legrand competitive positions on its markets, as well as our capacity to take full advantage of opportunities for growth in buoyant segments linked to the building of tomorrow. They also testified to the relevance of Legrand's unique model for profitable and responsible value creation.

Second, on the back of the H1 very good showings but also a persistently uncertain health environment and strong and rising pressure on upstream supply chains Legrand is revising its full year targets. Third takeaway is regarding external growth.

Following three acquisitions we announced in early 2021, we are announcing today two new acquisitions in our core businesses as well as in electric mobility. Before entering into more details of the three takeaways, I would like to add that our group has also continued to strengthen its other fundamentals by investing in innovation, including rollout of a host of new products since the beginning of the year, and also confirmed its ESG commitments with the publication of our latest materiality survey results and the recent validation by SBTi of our carbon emission reduction trajectory, which is aligned on holding global warming to 1.5 degrees Celsius.

Now moving to page 6. Let's dive into sales trends recorded in the first half of the year.

Our revenues showed a steep rise in all regions with at group level, a strong organic growth of plus 22.6% over the period with very nice trends in both major countries at plus 19.4% and in new economies at plus 32.8%. Over two years, group organic sales grew plus 3.9%.

As I previously mentioned this reflects clear stronger positions in our markets. This performance is notably driven by good demand in residential and data center markets as well as connected products in many countries.

It is also the result of the moves we made since the beginning of the pandemic, for example, the fact that we give first priority on servicing our customers, continue to launch many marketing initiatives, keep an upbeat pace of innovation, and also step up all digitalization initiatives. Additionally acquisitions contributed to an increase in sales of plus 4.6% thanks to the operations we made in 2020.

Based on those the external growth for the full year would reach 2.5%. Exchange rates on the other hand had a negative impact of minus 4.9% for the first half.

Applying June average ForEx rate for the rest of the year these effects should theoretically be about minus 3% in 2021 as a whole. Let's move now to page 7 to go into more details regarding the like-for-like evolution of sales by geographical zone.

In Europe, organic sales were up plus 30.6% in the first half of 2021. In Europe, mature countries sales rose plus 32.1% with organic growth of plus 55.6% in the second quarter alone.

In the first six months of the year many countries in particular France and Italy reported sales up sharply from 2020. While benefiting from favorable basis for comparison these gains reflect many commercial successes, including user interfaces and power protection solutions in France, connected offering in Italy, and more broadly data center ranges in Europe.

Sales in Europe new economies were up plus 23% organically from the first half of 2020, and up plus 36.2% in the second quarter alone with very good showings in Turkey and in most countries in Eastern Europe. Moving now to North and Central America.

Organic sales increased plus 11.7% in the first half of 2021. In the US alone the organic rise in sales was plus 9.9% over the first half of the year and plus 15.3% in the second quarter alone.

Since the beginning of the year, business has been driven by sustained demand in residential offerings and in data centers. Sales in other non-residential applications were nearly unchanged over the first half from the first half of 2020.

Let me now move to the last zone with Rest of the World, where organic sales rose plus 31% in the first half of 2021. In Asia Pacific, sales rose plus 27.4% including plus 19.1% in the second quarter.

Over the six months period, China saw double-digit growth. In India, sales rose sharply but were nonetheless down over two years against a deteriorated pandemic background.

Sales rose in Australia. In Africa and the Middle East, sales rose plus 22.5% and were up plus 26.2% from the second quarter of 2020.

Over the six months period, sales rose in the Middle East and marked steep -- a very steep increase in Africa. Last in South America sales increased plus 55.6% in the first half and were up plus 126.4% in the second quarter with significant growth in many countries in the region.

On this note, I'm now passing the mic to Franck for an overview of our financial performance.

Thank you Benoît, and good morning to all of you. Going to page 8 now.

Adjusted operating margin before acquisitions in the first half came to 22.4%. This represents an increase of plus 4.9 points from the same period of 2020.

This increase in profitability reflects in particular the leverage linked to both sales growth and a selective resumption of costs. At the same time, the rise in raw material and component costs continued to accelerate.

It was close to plus 4% in the first quarter of 2021 and over plus 9% in the second quarter. Now, when acquisitions are taken into account, the adjusted operating margin for the first half of 2021 was a solid 22.0%.

All in all the adjusted operating profit was thus at €761 million up plus 53% from the first half of 2020. On Page 9, I'm now commenting the net profit attributable to the group.

It was up plus 68.5% compared with the first half of 2020. This performance reflects primarily a strong growth in operating profit.

In addition the financial results were favorable over the period. These favorable trends were partially, offset by an increase in the group's corporate income tax while the corporate tax rate was stable at 28.5% compared with the first half of 2020.

Moving now to the cash generation, on Page 10. As a percentage of sales, cash flow from operation was up plus 4.5 points at 20.2% of sales or €698 million.

The working capital requirement reached a historical low level. As you know, a better reading of the free cash flow generation should be done normalizing working capital requirement variation.

So on this basis on the right-hand side of the slide normalized free cash flow was €577 million. This means up plus 22.9% in the first half of the year.

This concludes the key topics of the Legrand 2021 first half, very good financial performance that I wanted to share with you today. I'm now passing the mic back to Benoît.

Thank you, Franck. Now moving to the second part of this presentation, for an update on the targets of the year.

We are on Page 12 now. Given very good first half showings but also persistently uncertain health environment and strong and rising pressure on upstream supply chains Legrand, is now aiming for the following full-year targets: organic growth in sales of at least plus 10%; a scope of consolidation effect of plus 3%; an adjusted operating margin of about 20% of sales including acquisitions consolidated in 2021.

As a reminder, the dilution of acquisitions is usually between minus 10 and minus 40 basis points. The group also aims to achieve at least 100% of its CSR road map for 2021 testifying to its ongoing deployment of a bold and exemplary ESG approach with a particular focus on the fight against global warming and the promotion of diversity.

Let's now move to the last part of the presentation regarding external growth on Page 14. Following the three acquisitions announced in early 2021 Champion One, Compose and Borri Legrand is continuing its strategy of targeted external growth with two new acquisitions announced today.

First, Ensto Building Systems, the Finnish leader in low-voltage solutions a company that offers a comprehensive range of electrical and digital infrastructure products with sales of around €120 million. With significant presence in Northern Europe, especially Scandinavia, Ensto Building Systems rounds out our existing strong positions in Southern and Eastern Europe.

The second company is Ecotap, a front-running Dutch specialist electrical vehicle chargers for homes businesses and public charging points. Its sales are expected at around €40 million in 2021 primarily, made in the Netherlands and in Germany.

These two new acquisitions strengthened group positions both in core businesses and in segments driven by the rise in green mobility and the fight against climate change. That's it for this release.

Franck and myself are now ready to open to questions. Thank you.

Hi, Good morning. I hope you can hear me well.

If I may ask two things actually. But first, I wanted to clarify on your second half the implied second half margin in your guidance seems much lower than you have ever had historically.

Can you just argue how much of that is just the statement of -- you've always said you just want to go to 20% over the medium-term, or any very specific headwinds that are particularly high in the second half? If you could quantify those.

And then just more a general question regarding price and raw materials and sort of whether -- what are you seeing in terms of like the ability to pass through? Shall we still assume that you can 100% pass these through over time with a lag like you've done in the past?

Just those two things, which I guess are related. Thank you.

Yes. Daniela, so if I take your two points on the first question as far as H2 is concerned I'll discuss both.

So let's say, top line and bottom line our guidance of at least plus 10% organic implies as you can compute it sort of floor, where H2 sales organically would be slightly down. And we believe that the more likely scenario is that the sales could range from let's say slightly down to slightly up in H2 compared to a strong plus 22.6% in H1.

The difference coming from a couple of factors. Well number one, of course, the basis for comparison.

You remember that our sales were down about 15% last year in H1 and they were down only minus 2.5% in H2. So we have a more demanding basis for comparison especially, in Q3 which was flat last year.

Number two, there are the usual uncertainties coming from the health situation even though it's always difficult to predict the consequences it can have. If you look at the past let's say, 18 months, there were countries in time during which the pandemic had a strongly negative impact on the top line.

Take for example, Western Europe in Q2 last year or India as an example. But there were other times during which light lockdown if I may say or like a few actually led to a surprisingly sort of surge in demand for residential products.

So it's a bit difficult to predict the impact the health situation can have but it's never a good news to have this kind of uncertainty. Third, we know that the residential market has been booming for almost a year now and nobody can predict how long it will last.

And with the opening of the economy it's possible that people reallocate part of their savings to other things than works at home. And the last piece which explains a softer if I may say H2 compared to H1 is clearly the scarcity of raw materials and components which did have some impact in Q2 not a big one and which is -- potentially, can have some impact also in H2.

The fact that it is an everyday's fight to get the raw materials and the right components to manufacture our products. So, all these set of facts explained that we are shooting for something ranging from a small decrease to a small increase in sales in H2.

As far as the profitability is concerned, you have rightly computed that our guidance of 20% adjusted EBIT margin all-in, so including the dilution from acquisition implies more or less 18% EBIT margin over H2. We need a 22% margin on H1.

It implies an 18% margin on H2 which is indeed a decrease in margin compared to the 20% or so we achieved H2 last year. Well, it is coming from a couple of factors where the one input which has significant influence and the profitability is obviously the price of raw materials and components.

We gave the sort of sequence in H1 close to plus 4% in Q1, more than plus 9% in Q2, and it's highly likely that it will have a double-digit negative impact on H2. And as you know raw mats and components, it's about one-third of our sales.

It's a significant part of our customer base. In front of that there are two things that we are doing.

We will do a bit more pricing in H2 than in H1. In H1, our pricing was plus 1.9%.

While it's always difficult to shoot a number for H2, but we have already started to implement a number of pricing actions which should lead us to achieve pricing let's say between plus 2% and plus 4% in H2. And at the same time, we are managing carefully our SG&A level to mitigate the impact of the increase of raw material components in our P&L.

Now, let's make it clear. We are not shooting to achieve at all cost a better margin than the one we are getting for in H2.

And our objective is clearly also to prepare year 2022, 2023, 2024 by doing a bit more pricing, but doing it carefully not just inflating prices without a lot of care and by cutting expenses that would be useful to grow. So, we are also in H2 preparing the growth of the year 2022.

2023. 2024.

That's our quick clear strategy. Now, if we look at the year 2021 as a whole, ultimately, if we do our target, we would achieve top line growth excluding FX of at least 13%, 10% plus 3%, at least 13% and an adjusted EBIT margin all-in of about 20% which would not only be above 2019 levels both for topline and for bottom-line and at the same time, completely consistent with our midterm guidance.

So, that's sort of the mechanics for H2 from a slight decrease to slight increase in organic growth and about 18% adjusted EBIT margin with a sort of the mix I explained between raw mats, pricing, and SG&A. Well, as far as the pricing raw mat the pricing and raw mat question is concerned so I gave the numbers but maybe I can repeat them again.

So, pricing for H1 was plus 1.9% and it was plus 1.10% in Q1, plus 1.9% in Q2. Raw mat, it was plus -- raw mat and components plus 6.7% in H1; close to plus 4% in Q1; a little bit more than plus 9% in Q2.

Those are the numbers. Well, you may wonder why didn't we do more pricing in Q2.

It was a deliberate strategy on our side. We didn't need to make the long story short.

We delivered as you could see a very nice margin in Q2. And we really want to manage our well-known pricing power on a very careful manner because again our objective is to fuel growth in the years to come to keep our competitiveness while maintaining at the same time the sort of long-term guidance of 20%.

We are not shooting for 21%, 22%, 23%. We're shooting for 20% as you know and as fast as possible growth in topline.

Does this answer your question Daniela?

Yes. Thank you very much.

Hi, good morning gentlemen. Thanks for taking my question.

The first one I was hoping if you could give us a little bit of color around the situation in non-residential in North America. I saw in your slide show you were mentioning that business was stable versus the first half of 2020.

Can you maybe comment on the recovery dynamics you are seeing there which so far haven't really materialized?

Yes sure. You are completely right to see it has not really materialized.

And the fact that it is broadly stable in H1 is clearly basis from let's say the easy if I may say basis for comparison in Q2. And you remember the sequence it was minus 20 in Q4 2020 against last year previous year sorry; minus 10 in Q1 this year; and plus in Q2.

But if you look at the sales themselves, we can hardly say that we see a clear improvement in sales sequential improvement in sales between Q1 and Q2. Now we see a number of positive signs not only in external indexes such as the famous architecture billing index, which is improving month-after-month, but also in our own non-residential business units.

We see the pipeline of projects piling up. We see the number of quotation increasing, but it is true that it is not yet materializing into sequential improvement in sales.

Our team's saying that it will come at some point, but it's not yet the case. And our sales in non-resi the US are still very, very significantly down compared to 2019.

So it is not yet materializing indeed.

Just on that if I can have a follow-up. Are you able maybe to, kind of, highlight which area you see most impacted whether this is on the commercial and institutional side of things?

And also are you seeing any update regarding state-driven energy code, which historically have been quite a big of a drive for your business?

Well, it's difficult to provide you with more clarity on the split between verticals because most of the time the products are the same whether they are sold in office buildings and education, hospitals and governmental buildings and so on. So we don't have a lot of clarity on whether one product is going to this or to that type of buildings.

What I can tell you is that it's across our product families. So we don't see a huge difference between product families.

When the product family is geared at non-resi building it has been under pressure for 1.5 years now. So it's about commercial AV, commercial wiring devices, floor boxes, lighting features and a few others.

But I don't have more color to give you. Maybe just one comment.

We are not very exposed to logistic centers. And it has been a piece of the non-resi, which has been doing pretty well since a couple of months.

When you look at the logistics center, you don't have lot of Legrand products that fit into it. We are more exposed to office buildings and to a lesser extent schools, governmental buildings and – house buildings.

And we are also quite exposed to big metros a little bit less exposed to the countryside. So we have a sort of specific exposure in non-resi, but unfortunately I cannot give you more color on that.

Just a word to say that I'm not pessimistic for the non-resi in the US. I think that in the quarters to come some improvements will materialize.

What I cannot tell you Lucie is how long it will take because it's not fully in my hands. And the time line between the good statistics in the architecture and architect billing index and actual sales can be 6 months, 12 months or 18 months depending on the type of building.

So it's not such a mechanical effect whereby it would be 3.5 months for example. So it will materialize at some point a question mark on when.

Well as far as building and energy code is concerned in the US well it is a never-ending game. So you have -- one could be replacing the other and being progressively implemented starting from a few states which are usually leaders in terms of green clean thinking and typically is West Coast in the US.

It is indeed having a long-term impact and it's sustaining our business. And if you look at businesses such as lighting controls or shade controls for example in the US it's not doing bad.

Well now the effect is not strong enough per se to compensate for depressed or difficult the residential markets. Now beyond codes there are a number of topics which make us positive on the non-residential market long-term in the US especially on the green side.

Number one, of course, the fact that the US joined back the Paris agreement which is indeed a new -- a positive sign. Number two, the fact that the various plans and especially the last one which was voted by the Congress.

So you have a couple of positive things about -- in building and the fact that overall local states metros are increasingly pushing the fight against global warming. So all that set a sort of positive spirit beyond codes for energy-saving solutions in the US.

Now again, the improvement in non-resi in the US will at some point materialize. It hasn't so far.

Thank you. And maybe a last one if I may.

I saw the working capital requirements were very, very low despite the strong growth that you have seen and possibly higher demand also in the second half. Is that because basically everything you kind of manufacture just goes out right away because of high demand, or how we should think about that in terms of the cash flow development for the second half?

Yes, yes. So you are completely right.

So the -- you should take the last 12 months the working capital ratio as a percentage of last 12 months sales is at 7.9%, which is indeed low. If you look at the past three years 2018, 2019, 2020 it was slightly above 10%.

So it's pretty low. We believe that it's coming from mainly two factors.

Number one, our inventory level or inventory -- return if you want is quite low compared to the last three or four months level of sales. Well, it's coming from the fact that it's difficult to get the raw mats and components.

It's difficult to cope with fast-growing demand. So we don't clearly have the ability to build our inventory up the way we should.

Number two, our accounts receivables increased a bit in H1 last year as a result of the crisis. And as a result we have quite a favorable basis for comparison for accounts receivables.

So those two factors are leading to this quite low level of working capital ratio which will somehow normalize in H2. We believe that the level of inventory should increase and we believe that in last year we tightened a bit the accounts receivables in H2.

So we don't believe that this level of working capital is sustainable. So, let's say, H1 non-normalized free cash flow is a bit inflated if I may say by those two factors.

Very clear. Thank you.

Thank you.

Thanks. Thanks very much.

Can you hear me?

Yes. Yes we can.

Okay. Okay.

Perfect. Thanks.

Thanks a lot. Good morning everybody.

I have three questions please. The first one is looking forward based on your discussions with installers, architects, distributors and so on, do you feel more optimistic about the residential or about the non-residential demand going into the second half?

The second question is on the expected demand in deterioration in the second half. Could you help us understand perhaps a bit better maybe give us a range on how much you're ready to invest in SG&A in the second half of the year in your willingness to fuel future demand?

And the final question I have is on the growth side of things. I mean, if I look at the performance in Q2 on a two-year basis growth was up 3%, right?

And the full year guidance of -- if I take the low end of it 10%, it does imply that the organic sales would only be flat compared to two years ago. So it basically implies a 5% sequential deterioration in activity in H2 versus H1.

So what's exactly the message here? I mean, do you really think that you were already running on peak demand in Q2?

Thank you very much.

Okay. So on the first question between resi and non-resi, well, it's difficult to sort of give a clear winner.

And on top of that it clearly depends on the geographies. My assumption is that at some point, the resi market which have been booming for a year, especially in Western Europe and in the US will cool down a little bit.

And this assumption is based on the fact that specialists believe that the surge in demand for residential products is coming from a number of factors basically the stay-at-home requirements. The fact that people had little possibility to spend their savings, because many activities were closed and with the sort of the opening of the economies.

And again, with the vaccination speeding up, people might be willing to spend part of their savings to travel go out dining and develop. So all that should at some point, lead to a sort of cooling down a bit of the residential market, which will remain very well oriented mid-term.

The question mark is the impact it will have on the next couple of quarters. But mid-term we believe that the COVID-19 has accelerated a number of trends, which are set to last stay from home cocooning and a number of other factors.

But at some point, we cannot expense forever a growth of 20%, 30% compared to previous year. As far as the non-residential market is concerned, you would probably have to make a difference between the geographies.

It's not in such a bad shape in Europe in a number of emerging countries. It is true that it has been quite depressed in the US as I was saying earlier.

And I believe that trend could possibly be the other way. So it could progressively improve.

It will progressively improve. I cannot set sort of a mid-term target for that, but I'm pretty optimistic on the fact that in the coming quarters the US and non-resi will catch up with the people returning to the office.

And by the way as we were seeing a year ago you can see that most of the people will return to the office not full time, but will. It will progressively lead a number of commercial offices to perform some renovation work, put some heavy systems, renovate lighting, features, do the buildings more energy efficient and so on and so forth.

So, now in 2022 if this is okay in H2 and in 2022, what will precisely be the growth rate of resi and non-resi? Well, I have no clue.

It depends on the geographies. Well, last one shouldn't forget data centers, which is as you know about 10% of our sales and about 20% of our sales in North America, which has been booming since the beginning of the year.

Well, in a given quarter, it can always be positively or negatively impacted by a big project a big customer. But mid-term it is a fantastic opportunity for Legrand to further accelerate the growth.

And I believe that the data center piece will keep growing in the quarters to come, because it is answering to structural needs for bandwidth capacity network of the various other countries. Second question expected margin for H2.

Well, I gave you the answer about 18%. Your spreadsheet are bigger than mine, so I will let you do the math.

But take double-digit increase in raw mats and components. Pricing in H2 take 2% to 4% pricing.

Take a little bit less restructuring than last year, because we are back to the sort of run rate of €30 million a year in restructuring. Take 10 to -- minus 10 to minus 40 bps in dilution coming from acquisition.

Take depending on new scenario a slight decrease to a slight increase in top line. And you will mechanically derive the evolution in the SG&A in H2.

And you will see that it is not a huge boost. We are not investing back into the business tens and tens of million euros.

This is not my point. My point is that rather than further cutting SG&A, I prefer to maintain SG&A at the current level and to possibly increase a little bit here and there in order to fuel growth.

So what are those investments, which are not extraordinary one-off investments, which are in the ordinary course of business investment if I may say? Well, it's sustaining the R&D efforts, it's investing into additional salespeople, and advertising expenses, and it is doing powerful, new product launches and so on and so forth.

So I'm not talking of one-off a huge investment into businesses, but the fact that I'm not -- I do not intend to further significantly cut SG&A in H2, because I believe it would be detrimental to the business in 2022, 2023 and 2024. Last if I may say, doesn't -- part of those SG&A additions if I may say will also be financed by the structural savings we made last year.

Don't forget that last year, we had restructuring expenses, which were close to €80 million against again a run rate of about €30 million. So almost three times a normal year.

So it has generated a number of savings and our objective is also to reinvest part of the savings into the business. So I think you have all the sort of moving parts Gael to make your computation.

As far as growth is concerned, I'll not -- I could come back on what I told Daniela, but the sort of slight decrease to slight increase in sales is coming from all those factors basis for comparison, which indeed doesn't come into play, if you are comparing over two years, but also pandemic residential with a question mark and scarcity of raw material and components. Well, now we'll see.

At the end, I want to answer for that Gael that even at the sort of floor of our guidance i.e. plus 10%, it will imply that we would have come back to 2019 level in just a year, which is pretty different from what we did in the last financial crisis.

So it took a lot of years to come back to the 2007 level of organic sales. So I think it will be a pretty healthy performance.

Okay. Thanks very much.

Thank you.

Good morning. Thank you very much for taking my questions.

Can I start with one on your data centers' exposure? Could you give us some idea of what growth rates you've achieved there in first half and then second quarter?

And also somewhat related to that, but a more broader question and kind of talking about your -- sort of related to your pricing strategy for second quarter. Could you let us know how you feel your market shares have evolved during the first half by region?

Well on the data center exposure, it's -- so it's about 10% of our sales. It's growing significantly faster than the average of the group all across the regions.

So we did a very good performance in the US and Europe and the Rest of the World. And if you want to have a bit more color on what type of products, what type of spaces in the data center, what is our strategy and so on, I can invite you to join our Capital Markets Days in September where we'll have a bit more time to discuss those things.

But I can confirm that in H1, it grew significantly faster than the rest of the group. Well as far as pricing in H2, I gave a sort of order of magnitude which is 2% to 4%.

Again, well you know Legrand, we would have the ability to do more than that, but we believe that it would be at the expense of our competitive position. And pricing is not mechanical.

It's not -- you don't wake up in the morning and increase prices by 2%. So it is a very professional and very tactical approach where you're looking product family by product family, country by country, customer by customer and you are playing all the leverage.

It can be pricing. It can be a discount to customers.

It can be rebates to distributors. So it has many components pricing and you are playing all those leverage with in mind the best compromise between profitability and competitiveness.

And we believe -- I believe that the best compromise for Legrand between competitivity and profitability for H2 is this sort of tactical 2% to 4% price increase in H2, which as you can compute will not be enough to offset the increase in -- probably not enough to offset the increase in raw material and components. But again, this is a deliberate decision in order to prepare 2021.

And again, it does not prevent us from reaching a 20% adjusted EBIT margin which is again our midterm guidance. As far as our competitive position is concerned on H1, well it's always a difficult question.

I could if I wish proudly compare Legrand with its -- what you may call its listed peers. And looking at the various regions, well we did probably better than everybody in Europe with 30.6%.

And I see that if I look at people like ABB; Schneider; Rexel; Signify again that's a little bit less than us. And for Americas, we are pretty well positioned even though we are not the fastest-growing company.

But if I compare to again Schneider, ABB, Hubbell if I guess that we are doing pretty well. But again, I'm insisting as always on the fact that comparing Legrand with its listed peers might not be the best measure of our market share because all those very reputable and nice company do not have the same scope of activity than Legrand.

I'll give you the same example as last time analysts love to compare us with Schneider for example where in the US only 25% of our sales are developing with Schneider which is a data center piece typically. So it's always difficult to look at our competitive position just comparing the numbers between Legrand and its so-called listed peers.

We did a much more interesting exercise. Every quarter we are doing what we call a quarterly performance review which is the review of our countries representing how much 90% or 95% of our sales.

And we are looking not only the financial performance of course, but we are also looking at all leverage of the performance, commercial marketing, industrial and so on and so forth. And following these two weeks' review which happened last week and the week before, I am very positive on the evolution of our market share in H1, obviously not in all countries and not in all product families market share.

It's a result of losses and gains. But the net of that in H1 is very good, very good in Europe, very good in -- especially in Western Europe including in core countries for Legrand such as France, such as Italy, such as even Germany which is smaller country for us such as Russia.

Good in the US and increasing in London resi actually. So the fact that non-resi is down about two years, it's not coming from a market share issue, but it's really a market perspective.

But when we are looking at products such as warning devices for example in the US or audio/video is doing well in terms of competitive position. And the Rest of the World it very depends on the countries.

There are two zones which -- or subzones which I can name as being very good in terms of market shares well in China -- it's China. We are up very significantly in China even over two years because we are up 17% of our terms in China.

So we are not a big player in China, but on the few verticals in which we operate namely warning devices, hotel business and data centers, we are doing very well. And second subzone, where we are growing fast, it's Africa.

It's Africa, where we are growing over two years almost 10%. So to answer your question and I understand that for an earnings standpoint, it's a bit difficult to really value that, because you don't have the granularity.

We have as far as markets are concerned, but it has been a pretty good amazing H1 in terms of market share.

That's really helpful, and detailed answer. Thank you.

May, I just ask the last one related to your acquisitions that you announced that's clearly EV charging focused? Could you maybe talk about, how the multiples on these deals compare to your normal applied growth multiples?

Well, I knew you would ask this question, because just for the anecdotes, but I was with the banker yesterday, who told me that the – an EV charging station company was sold for I think it was six times 2025 sales. Well, please be assured this is not multiples we've been paying.

So a couple of words on Ecotap, which is a very interesting company indeed. Together with the rest of our EV charging businesses namely the Legrand, one which is small but has been very – growing very nicely, but also the Ensto Building Systems piece, which has a couple of million euros in EV charging and Ecotap, altogether this would represent pro forma about 1% of Legrand Group sales.

So it's not a huge business, but it's a good platform to start with. And with Legrand plus Ensto plus Ecotap, we are covering now the full scope of products starting from light power residential reinforced sockets coming from Legrand to DC charging for public spaces with Ecotap.

So we have quite a broad range of products now, a broad range of customers. So not only we are selling to the traditional distributors, contractors, but also we have a lot of relationship with CPOs for example charging point operators, with a number of municipalities and public bodies and so on.

So I believe that, even though it's not big Ecotap plus Ensto plus Legrand, it is a very interesting platform to grow. Now to zoom on your question, Ecotap number one is a profitable company.

And in this space, you have a lot of usually loss-making companies, but this one is a profitable company like Ensto. Not as profitable as Legrand, of course, but reasonably profitable, if I may say.

And we are paying a multiple, which is slightly above Legrand's traditional multiples, or multiples that Legrand is traditionally paying for companies. But extremely reasonable and I can confirm that Ecotap as our other acquisitions, will be value-accretive.

So we will have EVA-positive within three to five years of consolidation. So slightly above the Legrand's traditional multiples but nothing crazy, and clearly, not the highest multiple we would – we had ever paid for a company.

Well, last point on Ecotap funny enough, because you may wonder whether it's a company that we could easily talk. I think we can for many good reasons.

We have a strong cultural proximity with this company. And while it is a bit, let's say an anecdote, but one of the two founders of Ecotap the CTO is actually a former Legrand employee.

So he worked for Legrand, Netherlands a couple of years. And about 10 years ago, he wanted to be an entrepreneur.

He wanted to have his own business. So he left Legrand.

He created his own company with a friend developed it and 10 years later, he decided to sell it back to Legrand. So it is a sort of evidence that we can culturally fit, because he is somebody who know us well.

He knows us well. And by the way, the company is headquartered in Boxtel, Netherlands which is the same city in which we are headquartered in Netherlands.

So, nothing crazy in terms of multiples.

Very helpful. Thank you very much for your time.

Yeah. Hi.

Good morning. It's Martin from Citi.

Just a couple of questions. The first one is going back to the growth outlook, and how we can think about it relative to 2019 levels because obviously Europe is a lot higher now than it was in 2019.

And I know your guidance for the year is at the group level not by region. But, is there a reason to believe that the European business should see a big deceleration in the second half given the strength that you've seen in the first half?

So that was the first question. And the second question was you've obviously been investing in growth areas and EV chargers this morning, we've seen it in the past on data centers and so forth.

You've made the comment now a couple of times that logistics and warehousing seems to be a white spot for you. Is that something that you need to move into given that presumably electrification and infrastructure rollout for warehousing is here to say?

Is that something that's an obvious area that you could then grow into? Thank you.

Yeah. Well, there's nothing specific in Europe compared to what I said a little bit earlier in this call.

Yes, indeed, Europe has been booming in H1, a lot higher than 2019. It's coming – well, it's coming from first resi, let's say, connected and data center while non-resi is a bit more supportive than in the US.

There's nothing specific in Europe except that the basis for comparison will somehow be pretty demanding, especially in Q4. And number two, the other factors that I was mentioning would also come into play.

The fact that, you can see that all across Europe, the opening of the economy and the society, if I may say, I mean, is pushing again people out of their home. They've been staying at home for almost a year, and so it's possible that the residential market will not be as supportive in H2, as it has been in H1.

So the same factors that will play elsewhere will also play in Europe. Now midterm, again, I remain extremely confident in the fact that, Europe will support our sales, number one, because structurally Europe will be positively impacted by a number of megatrends, including actually the stimuli plans that will come into play progressively.

And number two, we have a very strong position in Europe, which we are currently rolling out with Ensto Building Systems. And we've done a number of moves in the past years which some of them might not be very visible, which position us very well in terms of the new product, positioning and faster growth segments such as assisted living, data centers, green and a few others; the connected -- the smart home moves with Netatmo which is mostly European play; and sales of other connected products, a number of reorganization -- commercial reorganization; investment into digital and so on and so forth.

So midterm, I'm very confident that our European position will be a strong support for our top line growth. Well H2, you have all those factors that will come into play basis for comparison probably, I mean the health situation residential question mark; and again this scarcity of components which is always something we have to manage in Europe and elsewhere.

As far as warehousing is concerned, well in -- it is not that we don't think it's an interesting vertical. It is just that in terms of product families, if I may say which is probably closer to an industrial building than to residential or traditional non-residential building.

So, you don't have a lot of circuit breakers. You don't have a lot of connected products.

You don't have a lot of foreign devices. You don't have -- you have a bit of cable trade.

So it is just that the density if you may say -- I may say density of our products or the euro or dollar per square foot is smaller in warehousing than it is in other type of non-residential buildings. Now if we see the possibility to acquire an interesting product family which is a must in warehouse and which will interestingly be a good addition to a catalog, we will.

But frankly speaking it is just that the warehousing does not have a huge content in terms of technical and digital products. Now there are plenty of other verticals that are interesting.

Again, data center green assisted living connected work from home audio/video everywhere. I think we are backed up by enough megatrends to support our growth strategy in the next two to five years.

Yes. Good morning.

Thank you very much. Just a follow-up one on data centers.

You mentioned it's a very dynamic market obviously. Do you start to see some new competition here some new players wanting to grab a share of this market?

And what about competition pressure currently and notably on the pricing side? You mentioned this totality you got to increase pricing between 2% and 4% in H2.

Is it the case for data centers product as well?

Well so we have hundreds of competitors in data centers which are different from one product to another. So of course, you have the big guys that are active competitors such as Eaton Schneider Vertiv and a few others.

And you also have -- and they are usually the toughest competitors, if I may say a super specialist of a given application. So you have specialists in a continuous busbar or in PDUs and in fiber and in cabinets in racks and other products.

So it is a competition intense business as are other businesses. I haven't seen in the past couple of years a newcomer that would disrupt the business so that would make very significant inroads into this business which it's -- you have a lot of barriers to entry to data center which we are sometimes fighting against because we are not a contender in all fields of activities.

It is an area where reputation matter a lot because data center operator cannot take the risk of dealing with somebody which is not reliable. The depth of the product offering is extremely important.

The aftersales service is important many factors come into place. For example, price is not such an important factor in data centers.

Again, because when you are a data center operator, you cannot take the colocation or waiver you cannot take the risk of having your data center down even for two hours because you would have both a cheap product alternative. So you are more looking for reliability, technology, the service aftersales and before sales and then price.

I don't see a material difference in pricing between data center and other businesses, nor do I see different patterns in terms of profitability. So there are countries and product families, in which it is easier to increase prices than others in data center as elsewhere.

And in data centers, as elsewhere, you have product families in which you can have a 25% or 30% EBIT margin -- or where we have 25% to 30% EBIT margin, and there are product families in which we have 10% EBIT margin. So, no structural differences, neither in terms of pricing, nor in terms of margin between data center and the rest of our product offering.

Very clear. Thank you.

Good morning, gentlemen. Can you hear me?

Yes.

Thank you very much for the update on your own inventory situation. Are you able to give us a feel for what you're seeing at the distributor level?

I think if we go back to Q1, you were saying neither over or undersupplied. How that's looking currently?

And if we come back into sort of Rest of the World, how are you viewing your China growth as you look into the second half? Following the double-digit growth in Q2 as sort of comps get a little bit more difficult, are you expecting a slowdown there?

And if you can give us a feel for the different segments, and how you're seeing that within China as well?

Well, as far as distributors are concerned, if you look at H1, we are not seeing any material restocking at the distributor level. I'm sure that they would like to.

But given the sort of supply constraints we have been dealing with, it has been pretty difficult for distributors to build some inventory back. So, we're not seeing any significant inventory buildup.

Now this being said, since they destocked a lot in H1 2020 mechanically, the difference between a strong destocking in H1 2020 no stocking nor destocking in H1 2021, has of course a positive impact not top line mechanical. But we're not seeing any significant inventory building back.

And well of course, our distributors are -- we are working closely with them in order to anticipate as much as possible the level of demand. And servicing correctly our common customers, the contractors has been a joint challenge between our distributors and ourselves.

As far as the Chinese growth is concerned, well, we'll have of course in H2 a more demanding basis for comparison than in H1. You remember that Q1 2020, our sales in China were down 50%.

And they were up more than 10% over the remaining nine months of 2020. So we have a challenging basis for comparison or a more demanding basis for comparison for China in H2.

We are still, of course, shooting for growth. Well, the level of this growth will depend on many factors that we don't control.

So, I have no reason to -- no possibility to give you a lot more clarity on the level of growth we experienced in China and whether the growth will come mostly from resi and resi retail project or data centers than for the other part of the world. What I can tell you is that, the business which has been booming for Legrand in China and doing very well is mostly the project business.

The retail business, to the contrary of Europe for example, is not as booming as a project business, because of the many restrictions that remain in China for people to gather for shopping outside and so on and so forth. So the project business has been booming more than the retail business.

Will it still be the case in H2? And number two, the data center business has also been booming in China and with Chinese contracting company outside of China.

Will it still be the case in H2? We'll see.

Perfect. Thank you very much.

Well, I know that it's a busy day for you. Thank you very much for attending this call.

I didn't have any question on Ensto, but I can tell you that it's a very nice little Scandinavian Legrand, so very nice acquisition. I wish you a good day, and hopefully happy and relaxing summer break.

Thank you very much.

Bye.