Rexel S.A.

Patrick Bérard – Chief Executive Officer Laurent Delabarre – Group Chief Financial Officer

Gail Dubray – Deutsche Bank Andre Kukhnin – Credit Suisse Lucie Carrier – Morgan Stanley James Stettler – Barclays PLC Alfred Glaser – ODDO BHF

[Foreign Language] For some reason I just felt like for once in my life being in France. Welcome to everyone, and welcome to this presentation of the results for Q4 and full-year 2017 and at the end of the presentation, we will also give you the 2018 outlook.

Let me start with the Q4 2017 and as you can see, the performance in this quarter is confirming the trend of the previous quarters which is an acceleration of our sales growth. And sales grows on one end the top line, but also in the 3 main regions of the world, 5.5% in Europe; plus 3.2% in North America; and plus 12.7% in Asia-Pac.

This is the sixth consecutive quarter of sales increase. And I have to give a thank you to all the teams who have embarked on the new strategy, who have embarked on regaining customers and we’ve done a lot of efforts to apply the strategy we have chosen 1 year ago or presented to you 1 year ago.

Later on, Laurent will come back on the detail on this geography. But at the end of the day, we also have in this quarter a gross margin of 24.5% which is a higher gross margin by 39 bps compared to the previous year.

In this quarter, this top line and margin allowed us to register plus 8.7% EBITA growth versus same quarter a year before, and an EBITA margin 20 bps higher at 4.7% as a standalone quarter. If we now move to the full-year 2017, and we’ll come back in detail, but just to give you the global view, we register all our numbers in line with our guidance.

First of all, €13.3 million sales which result in a 3.5% growth same-day basis, of which 1.4% is a copper effect. At the same time, the EBITA growth that we post is 6.1%, and should we have excluded pro forma the disposal of Southeast Asia which has happened in the last quarter, it’s 7.5% full-year.

Our EBITA margin registered an increase of 17 bps at 4.4% which all of these result in a recurring net income of plus 16.4% versus the previous year. At the same time, as we have promised and take action for, our indebtedness ratio is 2.8% below the profit we had mentioned before.

We will come back to this, but I wanted – and I will come myself toward the end in order to highlight even more the strategy that is underlying these numbers and what it means for 2018. The one thing I would like really to share with all of you, this is having reversed all the trends of the past in gross top line, in gross margin, in EBITA and in managing our debt.

Now I would like Laurent to comment on these numbers more in detail by geography and also by all the detail of the financial construction.

Thank you Patrick, and good morning everybody. So I will start this deep dive on the 2017 performance and then Patrick will update you on the strategy.

For those on the phone, I will start on Slide 6 by commenting on our performance by geography. In the full-year, we saw an acceleration of our sales momentum across all geography, and in Q4, our sales are dynamic in all our region with sales up 5.5% in Europe; 3.2% in North America; and 12.7% in Asia-Pac.

This confirm that our growth engine is functioning. Our 5.4% growth in Q4 is a result of a combination of positive factor, volume growth, but also price contribution of 1.1%, as well as better cable price.

This also reflects a more favorable macro environment in which we are operating, and the impact of course of all the strategic action we are implementing in key countries, notably in the U.S. in term of logistic organization and branch network expansion.

Let’s look now at our 3 geography starting with Europe on Slide 7. In Europe which represents 66% of our total revenue, our sales grew 5.5% in Q4 on a constant and same-day basis, and are solid in most of our major markets, supported by a broadly favorable environment.

The only major market in which we did not see sales growth this quarter was UK where we are continuing to adapt to challenging market conditions. Sales in all other key open markets were up.

Our growth in the region was driven by France where the efficiency of our business model allowed us to benefit from market growth, win new clients, then market share in the second half of the year. Sales rose by a strong 8.2% driven by all 3 end markets.

In Germany sales grew by 4.1% driven by strong sales to industry, notably cable sales which account for most of our growth. We posted double-digit growth in the Benelux with strong sales of BV sales in the Netherlands.

In the Nordics, Sweden remained the growth engine, up 11%, driven by medium constructor and installer as well as utility-related projects. On the next slide, on Slide 8, we come to North America representing 74% of group sales.

However, sale in the region were up 3.4%. This growth was mainly driven by Canada where we benefited from the sharp acceleration in activity with sales up 6.7%.

The oil & gas business saw strong sign of recovery in the quarter with sales rising by 77%. Commercial also posted high single-digit sales rise thanks to lighting and building installation contractors.

In the U.S. where our comparable base became more challenging in Q4, we posted 2.1% sales growth.

As in Q3, the business in the U.S. remained affected by disruption in the supply chain of a large supplier, and by the low wind and power projects which are more than offset by oil & gas up 25% in the quarter, and of course our proximity business.

The 17 branches and 18 counters we opened in the full-year accounted for 1.2% of our sales growth in Q4. Rounding out our geography overview, we come to Asia-Pac which accounts for 10% of our total sales on Slide 9.

This region posted another quarter of growth with sales up 12.7% on a constant and same-day basis despite the continued negative impact from Southeast Asia until the consolidated at the end of November, and excluding Southeast Asia, same-day organic growth would have been up 14.5% in the quarter. The very strong growth in Asia of 18.2% was driven by our industrial business in China, as well as very strong performance in the Middle East and India which benefited from the win of a large contract in the Middle East, as well as strong automation business in India.

The Pacific region posted solid 7.2% growth with a positive trend in Australia more than offsetting the negative evolution in New Zealand. Let me now drill down into our financial performance in Q4 and in the full-year.

As you can see on Slide 11, sales in the quarter stood at €3.4 billion. Reported sales in the quarter were down 1.5%, reflecting the combination of 3 negative effects; a currency effect of minus 3.6%, mainly from the weakening of the U.S.

dollar and British pound as is euro; a calendar effect of minus 2.7%; and a scope effect of minus 0.5% as a result of the disposal of our Southeast Asian activities. Please note that the scope effect for 2018 is estimated at minus 0.7% as you can see on appendix slide.

On a constant and same-day basis, sales were up 5.4% in Q4. As you see on the right-hand side of the slide, sales accelerate quarter after quarter throughout the year and sales were further boosted by the positive impact from copper price which represent 1.6% in Q4.

Lastly, a comment on our expectation in term of foreign exchange impact; on the back of the recent evolution, assuming that spot prices remain unchanged until the end of this year, we anticipate the full-year currency effect for 2018 to be a negative circa 3.8% on sales growth. On Slide 12, we present our profitability in Q4 by geography.

Overall, with adjusted EBITA of about €159 million in Q4, up 8.7%, our adjusted EBITA margin at group level rose by 26 basis points to 4.7% of sales mainly driven by Europe and Asia Pacific which offset the flat margin in North America. In Europe, gross margin stood at 26.9% of sales, up 41 basis points year-on-year thanks to better processing commissions in the UK following the merger of banners, which offset the unfavorable cable margin contribution in other country of minus 26 bps.

Adjusted EBITA grew by 76 basis points mainly thanks to the strong operating leverage in France. In North America, gross margin stood at 22.5% of sales.

This represents a 54 basis points improvement year-on-year coming from both U.S. and Canada, mainly thanks to better processing conditions and pricing initiatives, especially in our proximity business in the U.S.

This improvement was offset by OpEx in the U.S. reflecting the full impact of investments made in future growth including branch openings, counter resets, commercial actions and logistic initiatives.

In Asia-Pac, gross margin stood at 17.5% of sales. This represented a deterioration of 40 basis points year-on-year, impacted by the phasing of a project in Middle East.

However, adjusted EBITA margin improved by 104 basis points, mainly thanks to bad debt reversal, country mix, volume contribution and high cost control. In the full-year, our adjusted EBITA stood at €580.1 million, up 6.1% or 7.5% excluding Southeast Asia.

This is fully in line with our full-year 2017 target. Let’s now move to Slide 17 with our P&L statement for the full-year.

Let’s start from our reported EBITA of €594.3 million, up 10.1% year-on-year which benefited from a positive copper contribution. Other income and expense amounted to a negative €263 million in the full-year, versus minus €124 million in the same year last year.

This reflect 3 main impacts; restructuring cost of €44.1 million notably in the U.S. to switch to a more regional organization, but also in the UK and in Norway; second, goodwill impairment of €173.7 million in Germany, Finland and New Zealand as a result of an in-depth analysis of goodwill as announced in Q3.

And €68.7 million loss on disposal, including €57.6 million related to the disposal of Southeast Asia. Net financial expense restated for one-off charges notably related to refinancing operation in both years decreased by €17.8 million at €116.2 million largely reflecting lower average debt year-on-year and lower interest rates.

The average effective interest rate on gross debt decreased by 77 bps year-on-year in full-year 2017, it stood at 3.2% versus 3.5% in full-year 2016. Income tax is also lower mainly reflecting the lower profit before tax as well as non-cash one-off effect related to the revaluation of our before tax liabilities in the U.S., following the adoption of a new tax reform.

This was offset by non-tax-deductible charges from goodwill impairment and asset disposal. The effective tax rate stood at 40.5% above the normalized tax rate of about 75%.

Going forward and taking into account tax rate evolution in the U.S. but also in France, we expect our P&L tax rate to stand at around 73% in 2018, and around 71% in 2020 as you may know of course that the Q1 contribution of profit before tax in each geography remains unchanged.

As a result, net income stood at €104.9 million versus €174.3 million in 2016, a decrease of 21.9%. Recurring net income is up on the other side 16.4% to €291.2 million.

Slide 14 present our free cash flow before interest and tax for the full-year. Free cash flow before interest and tax in 2017 was an inflow of €384.3 million compared to an inflow of €479.1 million in 2016, mainly impacted by the working capital evolution which stand at 10.8% of sale in 2017 compared to 10.2% in 2016.

This increase reflects the rise in inventories which were up 2 days notably in the U.S. These higher inventories are to support a deeper/larger offer and the opening of branches, counters as presented during our Capital Market Day.

Net CapEx stood at €110.3 million with an increase in the share allocated to digitalization. On a full-year basis, CapEx dedicated to IT and digital increased by close to 12% in 2017 compared to 2016 and represent around 56% of 2017 total CapEx.

And we confirm our medium-term CapEx to be ranging between €100 million and €115 million per year. Our net debt, a little over €2 billion, improved by €131 million notably helped by a favorable currency effect.

On Slide 15, let’s take a closer look at the breakdown in maturities of our debt. This chart shows that we have no short-term maturity on our bonds with no significant repayment before June 2023 and an average maturity of about 4.5 years.

2017 has been a very active year on income of refinancing in order to capitalize on favorable market opportunities. Following the refinancing of our U.S.

bond in Q2, we issue a 2025 bond at 2.18% end of November. More recently, at the end of Jan in 2018, we refinanced our senior credit agreements and reduced the amount from €982 million to €860 million as well as the related cost.

The effective financial management is reflected in the average effective interest rate on gross debt, down 27 basis points year-on-year to 3.2%. For 2018 we expect financial reserve to be around €110 million with an interest rate close to 3.1%.

We are still maintaining strong financial flexibility with liquidity around €1.3 billion at the end of December including our un-drawn senior credit facility. On Slide 16 we present our proposed dividend for 2017 financial year to be paid in 2018.

Rexel will propose to shareholders a dividend of €0.42 per share, €0.02 higher than last year, payable in cash early July 2018. This remain of course subject to approval of the annual shareholders' meeting to be held in Paris on May 24, 2018.

The dividend is in line with our dividend policy of paying out at least 40% of recurring net income and represent exactly 44%. It offers 3.1% yield based on the share price of yesterday.

Let me now hand back to Patrick for an update on our strategic journey and his concluding remarks.

Thank you Laurent. I will not do another last year presentation that because we act exactly by what we said.

Use this slide, you can see on Page 18 that what we said about more customer, more SKU going digital and boost our sales for digital align all the incentive and KPIs of the people acting in the company and leverage the customer knowledge is the base by which we have turned the company into the numbers you have seen for 2017 and we will continue to do so throughout 2018. These pillars are fundamentally essential to us, essential to the market, essential to find our way in this very fast-changing environment.

The first pillar is accelerating organic growth, more customers, more SKU and in order to improve profitability and gain market share. It’s almost everywhere around the world that now we can measure it through the KPIs, the net customer gain because we lose customer every day and we gain customer every day and this is the net customer gains which counts because very often you may hear people saying we win customers, but how much do they lost, okay?

And therefore we measure the net, which is quite fundamental. We also see customer becoming multi-channel because our digital offering boosted digital to the same end to other customer coming through digital, we have the double effect, and obviously we align incentive and KPIs by which we run our business in order to get these two accelerated.

The second pillar that we said last year is to increase selectivity and capital allocation in order – and also to strengthen our financial structure. Key measures include active management of our portfolio.

We said it, you have seen the first happening. We have more to do and we have to be selective in our CapEx, selective in our geographies and activities.

We will continue to be selective and we will continue at the same time to deleverage and focus on value creation. The third pillar is to improve our operational and financial performance, while continuously upgrading our customer service, the level of service, there is never a limit to what is right to do in order to improve our customer service in order to generate more gross margin and in order to have better OpEx initiatives as well as the announcement of our operations in certain geographies where we are still a bit behind, Germany, Australia, UK is still margin room for maneuver.

In doing these three pillars, and what I have said last year, we have started delivering on our key priorities. Now if you go to the next page, Page 19, I will not come back to the growth pattern you have seen on the first when we opened up this session, but we have returned to effective organic growth and we will continue to look for that and gain market share and gain customers and increase our service to them in order to increase the stickiness of the existing base to our promise of delivery of a plan and also deliver to our suppliers an effective growth because if we grow, they grow, and if we grow, we win customers and if we win customer our margin improve on both sides, suppliers and obviously customers.

Also at the same time, and it may surprise some of you that we have increased our margin. We have not done growth at the cost of margin and this is very fundamental in this business.

And we have increased our margin by 16 bps at 24.4% and if I compare what we can read throughout the published mainly U.S. companies, they all posted a decrease in gross margin.

We don’t and we will not. With pricing initiatives, supplier policies very strict, the tier one supplier we work with everybody should make a contribution to proximity business increase, selectiveness in certain projects that the magic by which it’s very simple, difficult to do everywhere around the world, but this is why we increased our margin.

On the next one, the digital journey, this has been probably the subject I was asked to answer the most frequently in the last 12 months. And we do what we said we would do, we allocated significant percent of our CapEx, Laurent told you 56% and we will continue to do so.

We have added people, qualified people. When I say people these are full-time dedicated people in order to support, 68 people.

Our digital sales today have not reached €2 billion out of the €17 billion, but €1.9 billion. This as different forms, it could be web, it could be mobile, it could be EDI, but we have €1.9 billion digital sales today and 95% of the customer being digital are also active with us in the non-digital.

It’s really multi-channel. It accounts now for 14% of group sales and obviously it varies a lot depending on where around the world.

We are close to 60% in Switzerland; we are now in the 42%-43% in Austria; in Belgium we are somewhere about 33%-34% in Belgium. You see there are many places where we are already rather high proportion of digital and others we are just taking off ground and lots of potential still in France, in the U.S., in Canada, and in UK.

In doing also further we have improved our service level and we will continue to do more of this. We have developed and invested in automatic logistic service platform within certain branches in Norway, in Switzerland, in Sweden and we will do more around the world in putting in mega cities or close to mega markets our brand new service level fully automatized by which we can treat any order within a short period of time.

It’s a new wave of definition of the proximity service level by which we can serve extremely fast including the last mile. In doing so also because we have improved our proximity business and the proximity of products close to the customer, we have increased by two days our inventories, which is a must in order to do that and we redesigned the branch assortment in many places in the UK by merging three banners into one, or five into two.

Obviously we have redefined the assortment, but also in countries where we had a well-established assortment we need to redefine because IoT is coming, further geo industry is there and so on, therefore we are revisiting in France, in the U.S., in Nordics, in Germany, the proper assortment in order to improve and support our growth. And obviously we are introducing now new KPIs, of which Net Promoter Score by which we try to measure how customer satisfaction means to other customers.

The best thing is when a customer is your salesman because then he tells the other one while I’m working with Rexel, this is what they do for me. And this is – the Net Promoter Score is exactly by measuring it you know how much of your customer promotes to their friends or even if they fight against each other, they talk to each other and this is one of the best way they promote our success.

As part of the plan, we say that we would dispose of roughly €800 million sales in different geographies or activities depending, we have done – closed 17%. We are in the process of finishing the rest, which we – our – as a target remained to be finished by the end of this year.

When we look now into where are we performing well, obviously there are many places around the world that in each of them something has happened, nothing was granted. It was not a given.

And in France, this is obviously an important market for us, we regain momentum especially in the second half of the year by focusing on our key priorities, innovation. I’m glad to tell you that we have sold more than 4,000 very innovative some kind of a box to monitor homes, the 4,000 Energeasy connect, which obviously – it produced a lot of complementary products for each of them whether it was lighting, whether it was closing the homes and many other function of which we see, heating monitoring, and different functionalities with this so-called box.

We have pushed on digital content. We gathered from the supplier on the product side and we gathered from our CRM on the customer side a lot of good content in order to push the digital sales and we have made significant progress.

We have changed our KPIs for sales-force motivation, and in doing so, we got – we decided to take the most of the new momentum in the macro-economy positive that has happened in the second half of 2018, but we have decided to be the winner of this game, and therefore our sales-force has been re-motivated by KPIs in order to capture the good momentum of the market. It’s not because we are major player in the market that we should let the macro-economic favorable go to others.

And as a result, customer acquisition is showing net positive numbers quite significant, which result in a top line acceleration in Q4 and market share gain on the second half of the year. In Austria where we had two banners, we have reorganized our sales-force and the customer around two banners, much more specialized to be excellent in what they were supposed to do, one industry, one the more construction world.

And they have changed a lot of the component, heavily focusing on customers, multi-channel in each of them, 43% of sales digital and EDI for industry web shop for the construction and installer world. In Belgium, we have accelerated the multi-channel.

Belgium is a very fascinating place where you cannot travel, for 20 kilometers sometime of the day, you could spend an hour, therefore the digital offering including the chat, the advice in distance, you’re at a job site, you can – you really get the advice in order to install. This is something which is today really creating the growth at existing footprint.

And we have plus 18% of sales growth in digital and we have a real, real effective multi-channel. Most of the customers today are all multi-channel, physical presence, telephone, web chat, chat online and more.

Other changes during the year, the major change in the U. K.

where we had all the banners, Senate, WILTS, Newey & Eyre, PARKER and Denmans, Denmans being a proximity model which we kept as such with very distinct marketing active promotional offering posting good momentum and the order we have regrouped in one banner and none of the four names. This is – became the National Rexel banner offering.

In doing so, obviously we closed 15 branch because there was just overlapping. We have risk factors that support from 17 down to 11 DC or hubs in order to support this new Rexel network.

And in doing so, also we lost some customers in the transition mode. At the same time, we were able to regroup and consolidate supplier offering rather than having this thing won by banner, which has offsetted some of the impacts of the losses by gaining EBITA contribution from the supplier consolidation.

However, it becomes a delicate market. We will see how it will develop throughout the Brexit discussions which obviously put on hold a lot of projects momentum.

The proximity business is probably the one we will push more and more next year because so far this is the most reliable one. In the Netherlands, and remember it was a country which was posted as a difficult one.

We had to achieve a turnaround. We are doing very nicely this turnaround, very effectively.

Management has been reinforced, some changes, offer plan being structured, marketing alignment with the offer plan, the good footprint optimization and we have even done – we have asked the capabilities of our Belgium colleague with geo marketing to help at getting an improved geo marketing in Netherlands. And we are enhancing our digital and IT core model.

It accelerates quarter after quarter, month after month. We regain customers, supplying is going fast and number of clients also, therefore the full recovery is now coming.

In the U.S., and allow me to spend a little bit more time on the U.S. at least proportionally to the time I have spent myself last year, then we might be here at noon.

Now, jokes aside, the U.S. market is attractive definitely.

We had our banners. And the first thing that we found that was relevant to do and this is proving to be a right, was to use the best knowledge in the proximity business that we had through one of the banner Platt, and we had acquired Platt many years ago.

They had an excellent growth, excellent digital offering, multi-channel offering and a very state-of-the-art proximity business. In order to benefit from this, we have decided to have counter refresh in non-Platt banners using the Platt knowledge and we have done this at 48 counter fully refreshed.

When I say refreshed, it’s not painting the wall. This is redefining the assortment, going from 1,000 to 200,000 for 100 SKUs.

If it’s installer, 5,300. If it’s contractor, what kind of SKU do they need.

The total assortment, the leading gears, what do they need in term of complementary products, this is really redefining what is right to have in the right place in order to be at least as good as the best in the market. And we have done that.

This is what we call refresh counter and backlight counter openings in places where we have already fixed cost for projects and we were not benefiting from this fixed cost to gain proximity business, which we are doing now. At the same time, we had big holes in term of coverage of the market, therefore we have hired and we have introduced or we have changed if they were a non-performing one, but plus 320 sales reps.

Growth in digital, it’s – there’s still a lot to do. We have reached 7% of our sales, but digital is up plus 17%, 29% exactly, but this is accelerating because most of it has happened in the second part of the year, but this time we could really get this spread throughout the U.S.

and it’s the best territory you can imagine. Better service level in inventories, it’s a conscious decision that we took putting inventories in the U.S.

There is nothing you can do without having the products, the right products close to the customer and something I have mentioned last year, probably I had sometime underestimated how much we had to put here and there. At the end we have improved our on-time in full delivery.

But we had to put 10% increase in inventories and we had to have 90 people in our logistic centers in order to deliver on-time in full every evening which there is still more to gain, more to do on both sides efficiency and productivity, but out of this, we have re-established our service level to the customer without which we would not be able to grow. And in doing so, these 90 people left here in logistic, obviously now will allow to generate more restructuration to support the branch opening because we have opened branch.

The Platt counters, Platt-alike counter, the refresh counters because it’s backed up. And late in the year, whether you have seen or not, we have conducted a regionalization multi-banner.

Instead of running the business by banner where they were, we have identified the region where we wanted to be, the regions where we decided not to be and where we have conducted, we have restructured one regional president with a leading team like a country in Europe in eight different regions and they are in charge of all the banners in the region having the DCs in the region and having their growth pattern to achieve in each of these region. And this has happened at the end of the year.

We’re still there last week in order to meet five of these eight region structures to be sure that what they do, where they go, how they do and obviously being helped by the local team, central team that also empowering the local teams in order to go faster. An explanation I just promised to give throughout the year when people were asking me, what does it bring to make branch opening, where is your operating leverage?

And in 2017 we have opened 17 brand new branch, 18 Platt-like counters. If I take this where we can measure with enough distance many months is, what does it bring.

In fact in 2017 these openings were contributing to €24 million, which in 2018, full-year 2018 because none of them opened at the same time in 2017 we’ll make €62 million, this is our expectation, €62 million of sales. And whereby this year we register a minus €2 million EBITDA impact – EBITA impact in out of this opening, will contribute next year to €1.5 million.

And the breakeven return, the breakeven is between 12 months and 18 months depending where you are and it’s about – maturity is 24 to 30 months. I’m giving you this because next year, we will do the same number of opening in 2018, we know where in the regions, how to do, by whom, we assume and the supplier and the support, and the vendor support in order to continue this growth pattern that we all use these numbers to be putted in your models.

The regions, the regional footprint, you could see we focused on – let’s say even it’s sub-divided in sub-regions, but the two course, I will not comment more on this, but obviously that is demand, we have a minimum footprint to start from, we can accelerate, we have the DCs, we don’t need to open new DCs, we don’t need to have two years delay on the minimum infrastructure, that’s where we can really focus. It’s also in the south, around Texas, Colorado and New Mexico, Colorado is a place where the demand is high.

By the way it’s like the West Coast, many of the contractor of the West Coast are coming to this part of the U.S., this has the same customers, we follow our customers and they have the same expectation in term of service, of pricing, of offering, of vendor support and it will be the same there. These also are places where we are present in industry, we are present in the industry either in automation with Rockwell, and you know Rockwell has a very specific distribution system, we are and we are glad to be and we’ll continue to be and hopefully in the future more a major Rockwell distributor, whereby – and automation is a good business to be in right now on that side of the ocean.

And we are pretty strong there and we expect to be even stronger. 2018 outlook.

We expect further growth in a market environment that should remain favorable. We stay on the same geographies where we decided to invest and we will continue to invest.

This is all – is a priority, there is no debate, it’s not the – after the momentum we have created will just continue. It’s difficult to tell you something very new because it’s do better of the same at a better speed even if I can because everything we have done is a very solid base for the future.

Therefore, in term of ambition, we target at comparable scope of consolidation and exchange rates. Sales up in the low single-digits constant and same-day basis.

Mid to high single-digit increase in adjusted EBITA and a further improvement in the indebtedness ratio like we have done this year. I would like on that open up to the Q&A knowing that we have about 100 people online through the web or telephone that will join from now on and Laurent and myself, we will do our best to answer all your questions.

Thank you.

Good morning. [indiscernible] from Redburn.

I have two questions, first on the guidance of adjusted EBITA growth of mid to high single-digit, first of all I mean 2017 was mostly driven by – the margin expansion was driven by gross margin gains, could we see a better leverage on OpEx in 2018 and a lower contribution from gross margin gains of what you have baked in for the – in the guidance? Also on the guidance could we see some positive impact from the UK and Germany?

You don’t talk much about Germany in the slides. These two countries are in back half, could we see a better contribution of these countries in 2018?

And the final question is on be U.S. plan, you show I think 2% to 2.5% EBITA margin for the new branches in the U.S.

What is the ambition, could we see the new branches reaching a 5% or 6% or 7% EBITA margin when they are full-speed, is it the ambition? Thank you.

Thank you, for your question. I will start with the first one on the guidance.

Yes, indeed we have factored improvements in both gross margin and – for next year and also OpEx efficiency even if we’re not yet at full speed in the U.S. since we will continue to invest in the branch opening and counter refresh, but, yes, we will improve on that field.

On Germany?

On Germany, yes, we have a plan right now going on. We have major success in industry.

We will – we concentrate even more all our resources on the industrial side and some of you may hear in the trade press that sometimes there is agitation about the C&I, the smaller – let’s say where we don’t have always the right footprint compared to local competitors. Therefore, there is a restructuration going on in order to put all our resources on the industrial side, which is doing extremely well by the way, the one we have and hopefully the one in the future.

On the UK?

The UK, I don’t count on anything from the macro side, probably more headwinds than tailwinds. I can only count on what we have done and what we have done is rationalization of the network, simplification, and we will go for margin pricing for supplier consolidation and regain as much as we can in territories where we are good, some customer understanding that very large project and contractor, I don’t need to comment on the carry on case, we all know very well that is typical the example that the lack of demand in the project and construction – big contractor world is not where we would see the next two years in the UK Denmans is a great help.

Digital should be a great help. We start from low, we can gain more, we have to play each of our accounts right and stay focused and adjust the OpEx if need be in order to deliver by our project and guidance.

On the U.S. side, as you have seen on the slide, we are pleased with the first batch of opening of branches, that’s again a prototype industry depending on where are the location, but on those one we have good expectation and we believe that full-speed, yes, it can be in the 5% to 6% profitability range.

Any more question?

Thank you, good morning. Gail Dubray from Deutsche Bank.

I have actually two questions. The first one is related to the French market.

What were the key segments driving the growth acceleration this quarter in France and what’s the outlook for 2018 in particular in terms of the renovation side of the market? The second question is about the U.S.

I think your project business continues to suffer from some of the supply chain issues that one of your key suppliers has been facing for quite some time. I mean, do you have any insight right now in terms of how they are progressing on the turnaround on the progress of these logistics of solving these logistics problems?

It is obvious that the French market has never been as good for the last five years that it looks like now in the construction world, construction meaning housing mainly, vertical building. There is a lot of demand.

Housing permits are being free up and I consider 2018 almost full. By the way the number of man days available in order to go beyond does not exist.

We are tapped by the ability to construct or to install, whether it’s a plumber, whether it’s an electrician, whether – most of them, now it’s full. But at least we have a year ahead of us which is about the level of what we registered in the second half of last year.

Commercial building is much more, it really depends where. You have everybody expect a big boom in the Compari, in the tradition area.

At the same time you have portion of the country which are really stopped. And in the industrial site, I have not seen yet major projects of reindustrialization coming back, but probably there is a modernization, re-modernization of the existing industry which is about to start.

It’s late compared to Germany where further geo industry is really a strong wave, but many, many industrial – of our customers, industrial customer ask for quotation, they ask for demand. It’s a productivity-driven only, but they see probably a better outlook and they start to reinvest small-size limited projects that scattered all over the place which normally benefit to distribution if we go from quotes to order, we are in the quotes mode, quotation mode.

Our let’s say project business in the U.S., let’s be absolutely clear, Gexpro which we acquired from GE long time ago, like 2006 – 2006, Gexpro was named at that time GESCO, General Electric Supply Chain Organization which has been changed into Gexpro when we acquired, by the way very soon we have the last one [indiscernible] to GE in our name, but GE has closed factories and GE as a customer this year had a major negative impact on this because they closed factory. We had an agreement to supply them and you have GE as a supplier on one hand which has reduced and GE as a customer which has reduced.

And this is a GE activity which are being reduced. It is GE decision, is GE closing, is GE selling, GE has a supplier GIF which is in process of being sold to ABB that closing will happen end of Q2.

For the time being nothing changed and GE has not invested in GIS during years. The product range is old and except the fact that GE has a very good name in the U.S.

and a lot of installers have been trained by GE to install GE products, that’s the only thing which today makes still some business happen. But we suffer from this because they don’t have the latest gear line, they don’t have the latest competitive range and we have to wait until ABB will be able – after the closing, will be able to bring technology inside of transfer ABB product to GE and whatever they will do, and not industry creator, what they will do that it’s urgent for the one who distribute the products to have the support of the ABB and technology that would really close the gap in the GE range we suffered from and we suffered also from supply chain of GIS.

I will not give you numbers because I want to respect everybody, but it’s nothing when you are between – in the closing mode that the pipeline is really full and they had a Puerto Rico plant devastated and all we got – we suffered from all of the consequences of it. Fine.

Not fine for the numbers, but we have to live through this. By the way at the same time the market in the U.S.

is structured in such a way that you have a GD distributor, you don’t have competitive product from other vendors, vendors have their own alignment with distributors and they don’t come and say, oh, I will help you to rescue your customers. They take the Gexpro competitor and provide him product with in order to gain what the GE distributor cannot get.

GE as a customer, on our GE services entity in the U.S. a lot of businesses, a lot of projects, but orders of businesses has stopped this year.

By the way I will give you a number. If we would have got as a supplier and as a customer the same amount of business which is as in 2016, just a year before our sales growth in U.S.

would have been 1.7% higher than the 3.2% we have posted. I would come today and say we add 5%, but reality is we are not and there are no alternative short term to this situation.

That’s the clearest answer I can give you on that matter, but I think it’s complete. Any other question?

Yes. Good morning, [Indiscernible].

Could you just give us your view on current market situation more particularly in Asia where you have decided to go away from this region? And coming more to the disposals that you have announced, could you give us some view on what are your current KPIs or where you are looking at current situation in order to do these disposals?

Furthermore, and just coming back to M&A, could you just also give us an update on how you could act in the coming quarters in the current environment? And do you have some look, if I may say that way, on digital potential targets or specific areas where you may create with those who would like out to the digitalization on the plan you have on that side?

And here we start on the disposal. Asia was the platform that has strong lease of platform, the oil & gas downturn.

And we lost client and we knew that they will never come back. So we had earlier small activity that was bidding and that we could end of June.

And then we will review more in-depth the process and the rise to the conclusions that even the other assets, some of them were quite profitable. We are too small and not the critical mass so that we could keep them in the portfolio.

That’s why we moved to the disposal. As you have seen on Pacific slide with orders, mostly we have done this year, we added 17% of our disposal program.

The rest is ongoing for this region. I cannot comment more, but that process on track with the management presentation, lawyers and a bunch of people, experienced people working on that.

And hopefully we’d have more to say in the coming months. With respect to M&A, yes, we are strongly looking for new opportunity on the field.

We know that and you know that the market has always been consolidated and is very – still very fragmented today. The first area where we are looking at in order to consolidating our geographical footprint is clearly the U.S., so geographical footprint.

The other type of company we are looking at is the one that could enlarge our product offering, for example repurchasing from three years ago a company in the – that are coming to security product, and the sell is company on the value chain, we can bring down to speed up our evolution or digitalization. We have purchased for example in France a company called Esabora three or four years ago, which is developing a tablet to earn the quotation for the smaller contractor.

So that’s a very efficient tool, very efficient at France level and now we are rolling to the other European countries. On the criteria side, there are two things in our business, which I’m looking at.

Is there any way to have a cash-positive business because if not the distributor should not be in these markets. And there are structurally either certain activities within a market or certain markets where to be cash positive today between suppliers and customers and the nature of the business where if it’s that cash negative, we will not be in or we will not stay in.

We need our cash to grow, we need on our cash for other territories and we will not continue to be or decide to go into places where structurally it would be a cash negative business. Sometime it’s only a portion of the market, it’s only an activity within a market, sometime it’s a full market, it’s level 1 criteria.

Level 2 criteria is a market where we can sell value-added, so that there are decent margins by which we can invest and have return on sales and return on investment made. If it’s – there are markets which are really going down in term of margins, low-value products, very highly commoditized where professional distribution has very little value to bring, these markets are not the one even if it last, maybe in 5 or 10 years this may change, but there will be a time in 5 to 10 years to look at them.

For the time being they have commoditization on one end and value- added. Where there is a mix of the two, it makes sense because you can bring from commodity to value, but if there is no appetite or no purchasing power or no prescription which is being done in the direction of value-added selling, it’s not where professional distribution should go and definitely not for Rexel.

That give you some criteria to filter what we have, where we stay, where we would divest and where we will not go into. Okay.

Maybe now we can take the question from the conference call if any.

I’ll just go one at a time given we’re on the phone. Firstly on Germany just to follow up after that write-off that you had, is this now complete in terms of the restructuring process?

And what kind of level of investment do you envisage and is it incremental to what you’ve done in 2017 or is it sort of similar level?

Germany we are in – Germany is a country where everything is done with the [indiscernible] and in this special management style that needs to be aligned with all the stakeholders. It takes long sometime because everybody is asking, you make a pose, you make your break, you renegotiate, you go on like this.

It looks like long, but at the end of the day it’s done in a so-called smooth way. That’s why we are in.

If I would know exactly by when it’s over, I would tell you, I cannot. I would not put the discussion in jeopardy, you understand that.

Thank you for respecting that.

Absolutely.

Maybe one on the impairment of goodwill which is I would say more technical accounting stuff. Germany has been retake from the Hagemeyer acquisition back in 2007, which was acquired with people of more than 12 time.

And so based on the forecast on the level of goodwill, the reorganization taking a bit more time, we put ourselves more in the conservative side, and that’s why we posted these impairments.

And moving on to Nordics, you’ve obviously seen very strong growth there and that’s somewhat divergent from what we’ve seen some lead indicators on the construction activity. Could you just discuss in more detail what you’re seeing there by segments and maybe how that sort of goes into your outlook?

In the Nordics, the main growth – fast growth is in Sweden. And it’s mainly in the large cities by the way.

And we benefited and we took a lot of market share and we benefited from this growth and we were growing fast in Sweden, faster than in – for example, in Norway. But in Norway, we have a high market share and it’s very structured by customer groups, we have 200, 300, 400 installers being totally regrouped and you will negotiate with each of these group and you get it or you lose it.

And that same time, it’s 300 or 400 that you lose or you win in one day. Therefore we have a high market share and our top line may vary depending upon these negotiations.

On the other hand, we have a good logistic infrastructure, we have a good service and we know – we recognize that we are an important part of the Norwegian country or Asian. Therefore, yes, it goes up and down depending on these blocks, but at the end of the day it’s a resilient business for me.

Finland is a different story. Finland is – much more the market has suffered a lot from the ban put on the Russian exports now for many years in a row from certain major activity like Nokia falling down or reducing heavily there and we had to reorganize ourselves to go into the much smaller medium-sized customer, which we are doing, we are in the process of and we probably redeploy quite nicely right now.

There has been by the way a change of management recently in order to conduct that strategy.

Just last one for me and much broader one on that labor inflation, it’s something that some of your suppliers have been citing and just wondered how you see that evolving in 2018 versus 2017?

There is always a pressure on that side, especially when growth is there, but the main issue we have to cope with, this is a change of the profile of the people we are hiring. A 15 years old sales rep today would be replaced or not, but by a digital geek developer or somebody to help us grow in this world.

The value – nominal value is very different. The way to attract people is very different.

And we have to employ now much higher skilled people than 20 years ago or 10 years ago, and this is the main impact by which we have to drive a lot of productivity effort in order to keep our salaries and benefits as a percentage of gross margin at levels which are for us the key driver by which we make money or not and we make good money or not. Therefore it’s not so much the labor inflation per se.

This is a change of the mix in the quality of the people and the profile of the people and the nominal salary, but also the viable portion by which we will construct the remuneration which is changing a lot. And as I told you one of the way by which we run our business and still face that, this is productivity gains in order to allow that to happen in order to get the right scales for the future and salaries and benefits as a percentage on gross margin become a KPI by which we cap how much we can spend on it in order to accelerate and continued on one hand the transformation and on the other hand generate the results that we are promising to deliver.

Got it. Thank you very much.

I have 3 questions, I will go one at a time. The first question I had was around France and how was the product mix evolved because I remember couple of quarters ago you were highlighting that the market or the demand was improving, but of course depending where we are in the cycle the product mix is different and you mentioned specifically in your remark that France has contributed quite nicely to profitability.

So I was wondering if you could give us a bit more color here in terms of how profitability and how is the mix developing of course in the fourth quarter, but mainly as we go into 2018?

Product mix does not change that fast depending on the installer ability to take the new product and install them. These new products have a higher value, but it takes also more time to install and to make people comfortable with.

We live that through right now. There are many innovations coming through and it’s obviously prescription helps and we have in France good vendors, they are doing their job, whoever they are, in promoting the right products, the right norms, the future products and they do a lot of efforts.

However, the installer world is still a world where we need – as distributors we need to make the training to make their systems in order to get these new products at higher value being more systematically put in place. That’s by the way one of the value- added that we bring to the environment of electrical installation, electrical world.

It’s progressing. It’s with the diverse way around the country, but globally speaking, yes, we see an interest for more efficient and I can tell you without naming any of them because I would touch on the supplier world that any good innovation of the last 12 months is successful.

All the innovation we had to bring from the vendors we were able to bring in a very nice way Therefore, I hope in 2018 it will continue and probably we will see in the next 2 years an improvement in the quality of the offering. We’re also benefiting France from norms, technical norms, legal norms, you have to install this like that, you have do this like that.

I mean, this is a country of norms sometime we dislike as a citizen living in the country, but it help the industry because we cannot – installers cannot do whatever they want, they have to respect specially when it’s new a lot of norms and there are new norms coming out whether it’s cable; anti-smoke; anti-fire; anti-whatever and there are new norms coming at which helps putting the new products from a commodity, yesterday cable is some kind of a commodity being de-commoditized to some extent and the brand new technology digital linked to products, this is becoming a standard. Yes, it happens, it materialize.

One thing maybe if I can have a follow-up on that. Thanks for the color, but I was also wondering, I remember couple of quarters ago you were mentioning that as we were only at the beginning of a recovery cycle, you had a lot more cable sales let’s say than final overall change in, that of course also had some impact on the margin.

So as we have now progressed a little bit on the cycle I’m also wondering if you are seeing maybe some kind of product segments which are a bit more favorable for you in terms of ability to kind of maybe push the price or push this innovation?

Lucie, to answer your question what we see is around total funds in the middle of this year and we believe it will continue throughout next year also depending on the phases of the job sites we are still on cable or more lighting depending on where they are. But we believe that most of 2018 will still be strong.

Thank you very much. The second question I had was around the underlying strength that you think is happening is Asia Pacific.

The reason why I’m asking is it’s been historically a bit of a volatile geography for us and you also have project business, you mentioned one specifically in the Middle East. So when we look at the performance in the fourth quarter, you posted a very strong 12% same-day sales growth, but as we go into 2018 how should we think really of the underlying strength that you see in this region?

So in Asia-Pac have installed the Southeast Asia, we are left with China where we have many industrial business and where we are posting a double-digit growth. And the market is still there on the top line side, we believe that we’ll continue to grow next year.

And we have also in that region of Asia Middle East where we are on oil & gas project and specially one project that will continue throughout next year. And India where we are overall serving and there the market is very good, it is so good that we have also opened couple of branches second part of this year.

So we should have a good momentum on that front also next year.

Perfect, thank you. And then just the last question was to understand a bit better the rationalization process you are starting in the U.S.

First of all in terms of kind of the time of implementation, what you really expect out of that, either maybe in terms of savings or whether you think you will give significant focus to accelerate more the top line and I was just wondering as you kind of set up this region, is there – I mean is there going to be some maybe additional cost or OpEx to kind of set that up?

Issues I have a lot already, I am full on my plate, operational ones, but the benefit we see also. The benefit of the region is first the service level.

I will have disease with product which will serve 3 banners and not 1 banner that will turn better. I will have service level with standardization of the offering.

I will have more – higher fill-rate, reduction of short-takes. These are elements of good or bad service which makes customers stay or customer go, first benefit expected from the regionalization.

The second is the vendor support. Some vendors would like to see us stronger in certain regions.

In that moment they bring project or you see their sales- force visiting us much more often, discussing the proper plan. They offer the right pricing in order to gain because prices are not the same across the board, and therefore being more adapted and closer to them is another way of being more efficient.

Nothing will materialize overnight. I would be frank with you, I launched with all the management teams, it was launched in December.

I feel confident because I saw them last week that they understand exactly what they have to do. At the same time we do it without disturbing customers because otherwise we would fall back.

Therefore there is probably a transition of six months right now going on, to first secure every single customer, get the right people in place and develop nicely, complement – continue to do what we have done last year and improve our margin and getting new customers. I have difficulty to tell you today and in six months' time, it will be clear to me, there’s an acceleration process ahead of us or not through this regionalization.

The other thing which I have difficulty to tell you, but we will look into it, is how much of productivity we will gain. It’s not something which is easy to modernize, we have certain ideas, but obviously as part of it we try to get certain cost down, re-inject these expense into digital into the future of the company or some going to the go-down line, and at the same time accelerate the growth.

This – in six months time I would have a much better view of how these different levers materialize. For the time being we’ve launched, we have the support, understanding.

Vendors, customers see nothing, vendors support and our team is in place. It’s very early in the process.

Okay. Thank you very much.

Thank you, good morning all. Two questions from my side.

Can you talk a bit how

Maybe let’s go to the next question and we’ll come back to James afterwards.

Maybe we take a question from the room here waiting for James Stettler to reconnect.

Alfred Glaser from ODDO BHF. Could you give us some more outlook on the oil & gas business in the U.S.

and in Canada? Has been rebounding very nicely in both countries, how do you see 2018 year?

Do you see some CapEx projects coming back or not? And the second question on digitization, you mentioned the examples of Switzerland, Austria, Belgium digitalization or electronic ways to do business I think well-developed, but then in the U.S.

you are kind of on the opposite end of the range with a very low share of revenues in digitization. At which speed do you think you can ramp up the U.S.

business that is being executed digitally?

On the oil & gas, the U.S. recovery in oil & gas has started earlier than Canada, there is about six months difference in time.

We have seen further maintenance of existing facilities and very limited number of significant new projects. And if you allow me to say so, I have low appetite for making another boom in the oil & gas and then forget the rest, okay, meaning we’ll be selective on it.

But for the time being it’s not yet the option. In Canada I think a lot of us, we underestimated how much the global economy was dependent on oil & gas.

It’s not just the oil & gas projects per se, this is the global demand that is linked to the oil & gas activity and in certain regions and we see this demand coming up proportionally to the recovery in the oil & gas which is coming back. Therefore it gives me some hope that the global demand in Canada in the regions depending on the oil & gas activity will become more solid and sustainable if oil & gas continue to progress.

That’s my reading of the oil & gas and my – I give you my sense how I would like to benefit from it. The digitalization, the difference in the percentage is strictly dependent upon when they started.

The one which I mentioned to you started many years ago. We have to develop a minimum of commodity in order to accelerate in certain countries so that we were providing them with a website with certain functionalities.

This has been done which has allowed the U.S. to start French to migrate from what they had which was a local stand- down system.

And now each of this country, they have to take and do what is as a leading country have done before. They have to take the ownership of what do they put, how do they put digital marketing, how do they animate, how do they propose different things which is – it becomes – it’s back after phase one to more local adoption and adaptations in order to speed up to fit right first of all demand of the customer and also the level of competitiveness we need to have through the web.

There are countries where everybody is hiding in the web, our competitors and us. There’s no way to exist without that.

Holland, Netherlands is a good example. Belgium is a good example.

There are countries where, sorry to say that, whether it’s cultural or whether it’s because of something else, globally it’s low, it does not mean we should be low. But then we become the number one to bring the customer to change and the effort to change customer habits then is lower.

French is one of them. By the way, the Latin – in Europe, the Latin country are slower than the Nordics and slower than Belgium and Holland for example.

Now it’s not the reason not to, but it even goes throughout Switzerland. In Bern and the German part of Switzerland, it’s 70% in the – in Bern.

It’s 28%-30% in Geneva which is a French- speaking portion. Even there we see differences, therefore, yes, we push, we push whether it’s EDI for the industry or it’s web for the installer, and they speed, which cannot be the same everywhere, we recognize that.

It’s not a way not to do it. We have aligned the KPIs.

Sales-force have so many customers to switch over, they have so many customer to make connected customer. It’s fully driven internally by very strict motivation system, KPI measurement system and everything.

Now the results will come along. My dream would be obviously to be in the range of at least 45% to 50% in the next 2 or 3 years, but I know it’s a very hard job.

If we reach 25% to 30% in 18 months, it will be an extremely good results, extremely good results.

Okay?

Now you have people who are pure player, but they don’t have the same number of customers, and they don’t convey them too, they only get them upfront.

It’s a nice job to do.

Everything is a nice job in our company I know. I donaTMt know if James Stettler is back for his questions.

Please yes.

Great, thank you. It’s just a quick follow-up on Asia-Pac where we had the two one-off effects, the 40 basis points from the Middle Eastern project phasing and then there was bad debt reversals, so just wanted to double-check if the bad debt reversals are kind of a largely equivalent size at the 40 bps and whether both can be treated as a non-repeat?

Yes, in fact it is not very far, yes.

Okay, great thank you. And if I may just on regulation you’ve raised a very interesting point, I just wanted to ask if you see upcoming meaningful new regulation or regulation changes anywhere else across Europe, North America or Asia for you along the lines of what you talked about France where there was potential to de-commoditize what is and otherwise a commodity product?

We have these new norms for European countries on the product construction where the resistance to fire should be stronger, this impacted our cable sales which are 14% of our sales, which drives new product. That regulation is in force in France since July 1st for any new damage, but we can sell those products, we could sell them until the end of December of 2017.

So we had no specific issue on our inventory on that new norm and on the other side, it has driven new product which are more resistant to fire and that are slightly higher. And as compared to other competitor in France, we did specific training and yes, product discoverization with our customer and we had quite positive momentum on this thanks to this new norm.

That’s very interesting. And is that being rolled out across Europe or is this already rolled out across Europe?

Well, the norm is supposed to spread across Europe. The speed and date of enforcement are not the same from country to country.

The rules by which you can still use the old cables or have to use the new ones are not the same. Europe, there is one direction and there are many ways of going or not and we push our people to do it because this is a new step, new technology, but we have to fight every day, the one, the well-defined.

Therefore the effect in France is 100% done. It’s where it was the most important to be frank because this is where cable sales is done at let’s say good margin.

If you go to Germany and Austria where sales are done at copper value, copper value of the day and the margin is by far not the same, it has not the same impact obviously even if the norm would apply. Therefore the key market for us where it was critical to be sure we succeeded was France.

We did.

Got it, thank you very much.

No? Nobody in the room.

Well, allow me to say thank you to all of you and we will see directly or on the phone at the next results presentation. Thank you very much for coming.

Thank you very much for joining. Bye-bye.