Rexel S.A.

Patrick Berard - CEO Catherine Guillouard - CFO

Well, ladies and gentlemen, first of all, thank you for joining us today. Before I really start officially, some of you look at my face and find a slight distortion, don't worry; my brain is 100% correct.

It's simply that there is a French word for something which has a name, Zona and if you don't know how to translate, it's called in English, Shingles and which is nothing serious except you see there are some strange look on my face on the right side, okay. But everything else, the brain inside, is absolutely intact.

This being said, let's start and we will start with the presentation of last year results and the full year performance and Catherine will take over that part. Before we continue with the presentation, our strategic update and medium term ambitions, for which I will come back to the stage, and at the end of these two presentation, obviously, we open the floor to your questions and so that we have a constructive dialogue.

Catherine if you would like to join in order to comment on the Q4 and 2016 results. Thank you.

So, good morning to all of you. Let's talk first on the slide three with the highlights of the last quarter of the year.

The fourth quarter was characterized by sequential improvements in organic sales in all three geographies. In Q4, our sales stabilized after three quarters of decline and were flat on a constant and same-day basis.

This compares to a 3.7% decline in the previous quarter. Of course these improvements included an improvement in copper price, but sales also significantly improved sequentially excluding the copper effect from minus 2.9% in Q3 to a growth of 0.1% in Q4.

The improvement reflected better performance across the Board. In Europe first, sales were up 1.7% after a decline of 1.6% in Q3 and this performance was really mainly driven by France, which grew by 3.6%.

This reflects improvements in all three segments, i.e. non-resi, residential, and industry.

In North America, sales were down 2%, which is also an improvement vis-à-vis the 6% decline in Q3. The growth was due to the U.S.

where sales improved from a decline of 6.6% in Q3 to a more limited drop of 1.5% in Q4. This reflected also good construction activity and improving trends in oil and gas in the U.S.

In Asia-Pac, sales were down 1.9%, an improvement over the 5.6% decline in Q3. This was mainly driven by China.

China you remember has two quarters with double-digit decline and in Q4; the drop was limited to 1.9%, reflecting also improving trends in the industrial, automation, and solution product. Let's now turn slide four with the highlights of the full year.

Our full year performance was fully in line with our guidance as we got sales which amounted to slightly less than €13.2 billion. They were down 1.9% on a constant and same-day basis within the guidelines we provided, because it was a drop of at most 3%.

This drop included negative effects from copper of 0.9% on one hand and another hand, 0.9% decline from oil and gas. Organic sales reflected environment was remaining challenging throughout the most of the year and on reported basis, sales were down 2.8% impacted by a negative effect of 1.6% from currencies.

Concerning profitability, adjusted EBITDA amounted to almost €550 million, representing a margin of 4.2%. This too is in line with our guidance of an adjusted EBITDA margin of at least 4.1%.

Gross margin improved by 14 basis points to 24.2%, while OpEx deteriorated by 41 basis points, resulting in a net impact of 27 basis points on adjusted EBITDA margin. Regarding free cash flow, we generate high conversion rate of EBITDA in line with guidance of 69% before interest and tax and 42% after interest and tax.

Our financial structure at year end remained very sound with stable net debt and indebtedness ratio. Finally, our net income from continuing operation rose by 58% to a bit over €134 million.

If we are entering now in our geographic review on slide six, with Europe, which represents 54% of the Group sales, the slide details first, our sales performance in the last quarter. Overall, our Q4 sales stood at €1.8 billion, down 2.8% on a reported basis, but up 1.7% on a constant and same-day basis.

This is a return to growth and on a constant and same-day basis after two quarters of sales decline. So, as I have already mentioned, France drove most of the sequential improvement in Europe with sales up of 3.6%.

Germany continue to improve sequentially since the beginning of the year with sales up 1.2%. U.K., on the other hand, continues to be impacted by adverse market conditions since the Brexit vote and lower PV sales since the end of the feed-in tariffs at the end of December 2015.

Sales were down 7.9% of which 6.1% came from a 92% decrease in PV sales. Scandinavia overall was up 3.2%, very strong activity in Sweden that was up 10%, and Benelux, both countries put very solid strong -- solid growth; Belgium was up 5.5% and The Netherlands were up 18.4%.

Switzerland continue to be impacted by unfavorable market condition with a decline of 2%. Austria continue to grow we sales of plus 1.5%.

And finally, Southern European countries posted sales growth; Spain was down 8%, but impacted by export activity, because, in fact, domestic activity was more resilient. Italy was down 3.5% and Portugal, down 2.4%.

On slides seven you have a summary of the of the full year performance for Europe. So, in the full year, sales were broadly stable at almost €7.2 billion.

Gross margin was solid at 26.7%, broadly stable year-on-year. OpEx including depreciation rose by 2.8% or 53 bps as a percentage of sales.

The rise in OpEx included free effects. First, higher depreciation reflecting a rise in investment, notably in digital.

This represented an increase of €4.7 million and six basis points out of the overall 53 basis point increase in OpEx as a percentage of sales. It also reflects integration of Cordia that we consolidate as from January 2016 and was not accounted for a change in scope due to its relatively small size.

This represents another increase of €4.1 million and another six basis points out of the overall 53 basis points increase in OpEx as percentage of sales. And finally, higher salaries and benefits account for another 31 basis points out of the overall 53 basis points increase in OpEx as a percentage of sales, reflecting both inflation in salaries and some base effect from 2015.

Let's now move on slide eight, to North America, which represents 36% of Group sales. Overall, our Q4 sales stood at slightly below €1.3 billion, up 0.5% on a reported basis.

This was driven by positive currency effect and calendar. But they were down 2% on a constant and same-day basis.

Nevertheless, this represented a strong sequential improvement vis-à-vis the 6% organic growth posted in the previous quarter. The sequential improvement was mainly driven by the U.S.

dropped by only 1.5% compared to a 6.6% drop in Q3. Out of the 1.5% organic growth in the U.S., 1.5% is coming through lower oil and gas sales.

Nevertheless, it is worth mentioning that for the first time in Q4, oil and gas sales started to improve sequentially and another 1.6% were attributable to branch network optimization. Excluding both impacts, sales were up 1.6% in Q4, reflecting contrasting performance in our different business, i.e.

Rexel C&I and Platt posted growth supported by solid construction activity, Capital Light posted double-digit growth, boosted by new projects, and Automation business improved sequentially while remaining down year-on-year and other business and, predominantly, Gexpro, posted a combined drop in the mid-single-digit due to continued weak activity, notably in the industrial sector. As regards, Canada, sales were down 4%, in line with the drop posted in the previous quarter.

Out of this drop 1.7% were attributable to lower oil and gas sales and 1.5% was attributable to lower wind. Excluding both impacts, sales were down 0.8% in Q4, mainly reflecting weak sales to industry.

Let's now turn on slide nine, which is the full year performance in North America. In the full year, sales were down 4.1% to close to €4.7 billion.

Most of the drop was due to the industrial end market, including weak sales to the oil and gas segment. Oil and gas represented two percentage point over the 4.1% decrease.

Gross margin improved by 13 basis point to 22.1% of sales, mainly driven by an improvement in the U.S. OpEx including depreciation dropped by 2.3% or €20.3 million, reflecting measures announced last year.

And nevertheless they were 34 basis point as a percentage of sales because the drop did not fully offset the adverse effect of lower industrial activity, both in the U.S. and in Canada.

Adjusted EBITDA margin was resilient at 3.8% of sales representing a limited drop of 21 basis point year-on-year compared to the sales drop of 4.1%. Let's now move on slide 10, to Asia-Pacific, representing 10% of the Group sales.

Overall, our Q4 sales stood at slightly below €340 million, down 1.6% on a reported basis and 1.9% on a constant and same-day basis. This also represented a sequential improvement of over 5.6% organic growth posted in the previous quarter.

In Asia, sales were down 4.1% compared to 9% drop in Q3. China posted a strong sequential improvement, down only 1.9% versus double-digit decline in the two previous quarters.

This reflected better sales in industrial automation products and solutions. Southeast Asia continue to be impacted by the sharp drop in oil and gas activity and was down 16.8%.

The rest of Asia continue to grow by double-digits with sales up 19.9% in India and 14.3% in the Middle East. In the Pacific, sales also improved sequentially and were up 0.6% compared to minus 1.9% in Q3.

Australia was up 0.7% versus minus 2.6% in Q3, despite more challenging comparables. And New Zealand was broadly stable as project activity in the Auckland region offset the slowdown of rebuilding activity in the Christchurch region, which is now very close to completion.

Let's now turn on slide 11, which summarize full year performance in Asia-Pacific. In the full year, sales were down about 3% to slightly over €1.3 billion.

This reflected contrasting situation between Asia where sales were dropped by about 6% and the Pacific where sales were slightly up. Gross margin improved by 63 bps to 18% of sales, mainly driven by the Pacific region.

OpEx including depreciation dropped by 0.6%, a €1.3 million and nevertheless, they were up 37 basis points as a percentage of sales as the drop did not fully offset the sales decrease due to Asia. If we consider now the Group financial review on slide 13, you have our detailed sales in Q4 and full year on the right hand side of the table and the previous quarter, the three previous quarters on the left hand side of the table.

Group sales in the full year amounted to slightly less than €13.2 billion, down 2.8% on a reported basis. This 2.8% drop include negative currency effect of 1.6% -- points, which is the equivalent of €213 [ph] million and this is mainly due to the depreciation of the pound versus the euro.

On a constant and actual-day basis, sales were down 1.7% in the full year. As already commented, this was a significant improvement in Q4 with a limited drop of 0.5%.

The 1.7% drop on consent and actual-day basis include two elements; the first one is a negative copper effect of 0.9%, which has being gradually improving since Q2 and was almost flat in Q4, minus 0.1%. And on an average, OC [ph] positive calendar effect of 0.2% in the full year, with Q1, Q3, and Q4 negatively impacted, and Q2 positively impacted during the year.

On slide 14, you have the details of the profitability in the full year at Group level and by region. In the full year, our gross margin improved by 14 bps to 24.2% of sales and this improvement was mainly driven by North America and Asia-Pac.

They were up respectively 13 bps and 63 bps, while Europe was, in fact, broadly stable. OpEx including depreciation at Group level were only by 0.4%, which represents €10.6 million.

Out of this €10.6 million increase, there are two big elements, the main important one is the €7.2 million came from higher depreciation. It was up, the depreciation by 8% year-on-year, reflecting increasing investments in IT and digital.

And you have a €3.4 million pending from higher OpEx, which is only 0.1% year-on-year, but up 35 basis point as a percentage of sales, which go up by 1.7% during the year. We already obviously detailed original evolution so I will not repeat them.

I think it's worth to mention that we have a 25% prediction on corporate holdings and other cost, which fell from €36.6 million in full year 2015 to €27.3 million in full-year 2016. As a result, adjusted EBITDA stood at €549.8 million and margin was down 27 4.2% fully in line with our guidance.

If we are moving now to slide 15, this is our P&L for the full year. Let's start from our reported EBITDA of €539.6 million, down 5.8% year-on-year.

Our PPA amortization stood at €18.7 million versus €70 million in 2015. Other income and expense was strongly reduced from €176.5 million in 2015 to €124 million in 2016.

These included two things; important restructuring expenses of €59.3 million which were broadly stable versus 2015. And a goodwill impairment charge of €46.8 million, significantly down versus the €84.4 million in 2015.

China accounted for €38.3 million, out of the €46.8 million. Operating income stood at €397 million versus €379.4 million in 2015, up 4.6%.

Net financial expenses were also strongly reduced from €210 million in 2016 to €146.3 million in 2015. This is 30.3% decrease, which reflects two elements; the first is a change in one-off charges related to refinancing operations that amounted this year to €16.3 million versus €52.5 million in 2015.

And secondly, the reduction in interest expenses on gross debt from €125.5 million in 2015 to €146.3 million in 2016. Our average effective interest rate on gross debt decreased by 35 basis point this year from 3.89% to 3.54% in 2016 as a result obviously of the recent refinancing operation that we did during the year.

Income tax amounted to €116.4 million versus €84.4 million last year. The rise in income is simply due to the rising profit before tax.

As a result net income from continuing operation stood at €134.3 million versus €85 million in 2015, a sharp rise of 58%. The disposal of our Latin American operations represented in 2015 and remind to you everybody because it's a little bit old now, €69.3 million.

Consequently Group net income stood at €134.3 million versus €15.7 million in 2015, an eight-fold rise. Slide 16 shows that Rexel continue to generate solid free cash flow during the year.

In 2016, EBITDA conversion rate into free cash flow before interest and tax and after interest and tax were in line with guidance at 69% and 42% respectively. On average EBITDA conversion rate into free cash flow over the last five years are 77% before interest and tax and 43% after interest and tax.

This confirms are rights [ph] of structural capacity to generate high cash flow. We also continued to tightly manage our working cap as a percentage of sales and on a constant and adjusted basis, it stood at 10.2% at the end of 2016 versus 9.9% at the end of 2015.

This slight increase was mainly attributable to an increase in inventories and receivable at year end, partly offset by payables. This increase in inventories and receivables resulted from the sales recovery in the last quarter of the year, an effect that was notably amplified by acceleration in November and December compared to a weak third quarter.

If we look now slide 17, you had the bridge on the -- our net debt at the end of the year. So, let's start from the free cash flow before interest and tax of €439.1 million.

We have paid a net interest charge of €118.8 million and an income tax charge of €54.6 million. We pay-put in July 2016 the dividend €120.3 million, which was this year entirely pay in cash.

Net financial investments amounted to €91.6 million and before currency effect, our net debt was reduced by €42.2 million year-on-year, but we have a negative currency effect of €16.1 million and so then finally, the debt net was reduced by €26.1 million and stood at about €2.2 billion at year end, i.e. stable versus last year.

Our net debt to EBITDA ratio as calculated under the senior credit agreements term was stable at three times at year end and well below bank covenants. Slide 18 details our net debt at year end.

Our gross debt is mainly finance through bonds and securitization lines. We are currently financed through three bonds representing close to 53% of our gross debt and our securitization lines represented close to 39% of our gross debt.

Our senior credit facility is undrawn and constitute a reserve of €1 billion that we concept is necessary. The average effective interest rate on gross debt decreased by circa 35 bps this year from circa 3.9% in 2015 to circa 3.5% in 2016.

With both sound financial structure, we average maturity of around four years and we have no repayment at all before June 2020. We remain attentive to market opportunities to further enhance our financial structure obviously.

On slide 19, we present our proposed dividend from the 2016 financial year to be paid in 2017. Rexel, we propose to shareholders a stable dividend of €0.42 per share payable in cash early July 2017.

These remains subject to approval obviously of the Annual Shareholder Meeting that will be held in Paris, the 23 of May 2017. This dividend is in line with our policy of paying out at least 40% of the net recurring income representing this year 48 of pay-out versus 45 last year.

It offers 2.56% yield based on the share price at the end of 2016, which was €15.63. During the upcoming presentation of our strategic update, we will be obviously able to comment more on the cash allocation policy for the next year.

And now, I'll hand it back to Patrick for the 2017 outlook.

Thank you, Catherine. To make it short, I mean 2017 outlook, this is going back to growth and in term of sales and we foresee growth in the low single-digit.

The second element is the adjusted EBITDA where we foresee the growth in the mid to high single-digit and at same time is to have an indebtedness ratio below three times at year end. And as you will see later in the presentation of the Capital Market Day, all of this is in line with the medium term vision.

In order to give you a little bit update [ph]. What does it take into account?

It take into account first, I would say, economic and political uncertainties. We are not naïve.

We don't know exactly what the full year could be and I think if you could tell me more please feel free to share. We live with what we see very pragmatic and realistically.

But we live also by what we decide to do and we decide after two years of decline in sales, to target resuming organic growth with sales up in the low single-digit on a constant and same-day basis. We take market conditions into account as can be expected as of today and -- but also we take into account the first effect of the measures, which I will detail later in the second part of the presentation that we already took in order to revitalize our organic growth over the medium term.

In addition, we target a mid to high single-digit increase in adjusted EBITDA. These target reflects, on one hand, the expected growth which I have just mentioned, but also the first effect of the measure that I will get there later, which de facto improve operational and financial performance over the medium term in clear terms margin and cost.

Lastly, we target an indebtedness ratio of below three times at year end and this is also the first step into medium term improvement of that ratio and in order to strengthen our financial structure over the medium term. If you allow me to, at this moment, to stop with the 2016 and the first element of the 2017 outlook, it concludes our presentation of last year results.

I could propose you to take a short break. Here you have coffee and some elements for the break and take the opportunity to have all the questions that you may have on 2016 along with 2017 outlook at the end of the second part of the presentation, which will start in about 10 minutes for the Capital Market Day and the medium term outlook.

Thank you.