Rexel S.A.

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

Andreas Willi - JPMorgan James Stettler - Barclays Lucie Carrier - Morgan Stanley Alfred Glaser - ODDO BHF Andre Kukhnin - Credit Suisse Timm Schulze-Melander - JPMorgan

Thank you. Good morning ladies and gentlemen.

Welcome to this presentation of Rexel’s first quarter 2018 performance. Today, I am with Laurent Delabarre, our Group CFO.

I will start with another view of the key highlights and detail our performance by geography and Laurent will present our financials in the quarter and I will then conclude confirming our 2018 outlook. And after that, we will be happy to take all your questions.

Our first quarter performance is in line with our expectations with same-day sales growth in every geography with strong cash flow generation and with stable recurring net income. We saw a solid performance in about three countries, notably France and in the U.S.

Our numbers clearly show the benefit of the transformation actions and investments we have carried out in the past 18 months, our start of the strategy trend we presented last year and demonstrate to our business model. Now let’s look in greater detail on slide three with the key financial highlights of our Q1 performance.

Our sales of almost €3.2 billion in the quarter were up 3.9% on the same-day basis rising in all three of our geographies in the quarter. At the same time, our gross margin was stable at 25.1% which is a positive achievement in the current environment.

As a result, our adjusted EBITDA margin at 4% was down 32 basis points, largely due to a lower absorption of our investment in FTE and IT as Q1 is seasonally a lower quarter in term of sales as well as cost inflation mostly rigid in some market. Recurring net income was stable at €68.2 million, thanks to a lower financial expenses through our active refinancing operations on lower taxes.

We improved our free cash flow by €18 million in the quarter, demonstrating the strength of our model and confirming that we are returning to higher cash conversion rates. Now if you go to the next page, we have posted solid same-day sales growth up +3.9% all three of our geographies posted growth with a practically strong performance in Asia Pac.

And we saw positive trends in our leading countries. This was achieved despite a lower contribution from copper based cable prices.

And Europe representing 57% of our sales revenue was up 2.8%. In North America which accounts for 34% of our business sales rose 3.5% and in Asia-Pac which accounts for the remaining 9% of the group, so it’s having a rise 12.9%.

On the next slide, you see that this quarter was marked by an improvement in performance in several key geographies. In France and in the U.S.

improved pricing condition and supplier concentration, we can see the improved cost mounting. It is practically fine to see that in the U.S.

our strategy delivering results. Our new regional and multi dyna organization implemented recently, I remember you that it was implemented in December.

It is also enhancing our performance, reinforcing our more customers mostly you approach. We also saw a better contribution to change profitability from the other geographies.

In the Netherlands, our strategy is focused on multi energy resulting in a double digit increase in sales at 13.3% and in China we also improved margin, thanks to strong sales and information. At the same time we faced some headwinds in the quarter, notably the carry over impact on our investments in FTE and IT in a quarter that is traditionally lower and cannot sell.

About half of our traditional effects in the quarter are related to investment in digital and people to boost future growth. We also faced wage and concentration and saw some countries specific situation notably a drop in sales in the U.K.

and Norway which we will detail in the next slide. Now let me go by geography, a little bit more detail.

On slide seven, let’s turn to Europe. Sales in our biggest region stood at €1.8 billion in the quarter at 2.8%.

As you see in the graph on the slide, we saw growth in most countries with the notable exception of the U.K. where sales were around 5.6% as a result of the combination of sales reorganization, 13 branch closures and unfavorable weather conditions.

In our home market of France which accounts for more than one third of our European sales, our revenue was 3.8% driven notably by the residential and user sales segment which were both up in mid-single digits. The efficiency of our business model has helped us to capture market growth.

Scandinavia, so overall growth of 1.6% reflecting the contrasting performance between countries. Finland posted double-digit growth of 15.2% and Sweden continued its strength with sales up 4.5%, while Norway was impacted by the loss of large contract and adverse weather conditions.

Switzerland posted solid 8.7% growth, thanks to solid momentum in the project business under a competitive environment and then Benelux also grew strongly with sales up 6.1% mainly thanks to the Netherlands at 13.3%, thanks to our focus on the growing multi energy segment. If you go to the slide after, North America.

I am very pleased to share that our sales growth of 3.5% to a little over €1 billion was driven by both Canada and the U.S. In the U.S.

where sales were up 3.2% we are increasing the benefit of the various initiatives we have put in place. We have gained more than 9000 customers, and recent branch openings are contributing 1.3% in regional sales.

We are seeing the positive commercial impact of our new organization in eight regions which we have been proved recently under the sole responsibility of [Jeff] Baker allowing us to reach more customers, drive efficiency and increase collaboration between banners which create opportunities to turn customers into multi banner accounts. In terms of end markets, residential is up in double-digits and commercial is up in mid-single digits.

Industries saw a positive contribution from oil and gas which was up 10% in the quarter. Our project business continued to be affected by lowering and power project with the last customer.

Canada saw a strong acceleration, with sales up 4.8% mainly driven by strong industrial sales notably in oil and gas and mining. Now, lets’ consider our geographical review with slide nine about Asia-Pac where our sales were up in double-digit and reached €284 million.

Both sub-regions showed solid growth. The Pacific region rose up 7.9% with growth in both Australia where all three end markets with positive momentum resulting in 9.4% sales growth and New Zealand whose revenue rose 1.1%.

Asia posted very solid 19.1% growth with China up 10.1% on the back of an excellent performance in industrial automation. We also saw a favorable dynamic in the Middle East and India as reported by the last project win in the Middle East and strong automation sales in India.

After that topline [Indiscernible] by geography, let me now hand over to Laurent for the review of the financial performance.

Thank you, Patrick and good morning to all of you. I will start on slide 11 with our sales numbers.

Let me point out that we restated out to [1.70] numbers for IFRS 15, the new IFRS rules related towards new recognition whether seen in an non-material 0.1% drop in sales to €3.3 billion. On a reported basis, our sales were down 4.2% in the quarter as a result of three unfavorable effects.

First, currency had an adverse impact of minus 6% mainly due to the depreciation of the U.S. and Canadian dollar versus Euro.

Second, Scope had a negative effect of 0.8% resulting from the recently divestments in Southeast Asia, third and finally Calendar had an impact in the quarter of minus 1.1% largely because system familiar this year. Concerning currency, we expect the foreign exchange effect to validate over the year and our forecast assuming spot rates remains unchanged with an impact of minus 3.8% unchanged in the full year 2018.

On the constant and same-day basis, our sales were up 3.9% also as shown on the chart on the right hand side of the slide we saw a lower positive contribution from copper price in this quarter of 0.8% that is 1.2% in the same quarter last year and 1.6% in Q4 of 2017. As shown also in the chart on the right hand side, we expect the next two quarters with regional favorable more in terms of this effect, while Q4 will be more challenging.

On slide 12, we turn to our profitability by region. Although with adjusted EBITDA of €127.2 million our adjusted EBITDA margin stood at 4%, a drop of 32 basis points coming from Europe, North America and corporate costs, as you have said, by an improvement in Asia Pacific.

As shared by Patrick, our increase in OpEx can mainly be explained by the carry over effect of our investment last year in people and [Indiscernible] in a seasonally low quarter in terms of sales as well as some inflation in our wages and cuts. In Europe, gross margin stood at €27.5 stable year-on-year.

The 25 digits point drop in adjusted EBITDA margin was due to wage on cost inflation in the region, lower volumes in U.K. and Norway and investments in People and IT which offset strong operating average in France.

In North America, gross margin improved by 32 basis points to 22.8%, thanks to better processing condition and pricing initiative in the U.S. especially in our opportunity business while investing in people and in new brand season.

Our sales growth in EBITDA margin in the region is attributable to an OpEx increase firstly to IFRS cost and in essence in our sales force in Canada which offsets operating average in the U.S. In Asia-Pacific we saw reverse movements.

Gross margin had sudden drop at this point due to phasing project in the Middle East and country mix with China growing faster than the rest of the region. Our EBITDA margin was up by 45 basis points thanks to better volumes and strict cost control.

Our copper costs were higher than last year mainly because of additional investments in IT and digital but also because of the non-recurring impact of long term incentives. On the full year basis, we earned [Indiscernible] cable at around €45 million.

On slide 13 we look at the bottom of our P&L. Let’s start from our reported EBITA of €125.4 million, down 13.4% including a one-off non-recurring copper effect of €1.8 million.

Other income and expense amounted to a negative €7.4 million including [Indiscernible] for €6.8 million. We confirm our full year restructuring expectation of around €15 million for 2018.

Our net financial expense improved €24.9 million affecting our net interest rate on our gross debt to 2.9% as a result of active refinancing activity as we will see later on. We also saw a drop in our income tax to €28 million as we benefitted from the positive impact of U.S.

tax reform. Our effective tax rate stood at 41.6% and we now expect our tax rate for 2018 to be around 32% excluding any one-off.

Net income was €60.7 million and our recurring net income was stable at €68.2 million. On slide 14, we turn to our balance sheet which reflects [Indiscernible] turning the quarter with improved cash flow and working capital that resulted in lower net debt.

Indeed as you see on the chart, our working capital improved by almost €103 million thanks to a staging effect in inventory build-up in 2017 in France and in the U.S. leading to lower payable.

Our free cash flow before interest and tax improved to a net flow of €119.2 million from our net flow of €206.7 million. We expect to return in 2018 to a higher level of cash conversion versus 2017 demonstrating the strength of our model.

Net capital expenditure was down to €23.1 million from €25.5 million in the same quarter last year. We confirm our full year 2018 CapEx should be close to €135.

Our net debt reduced by €215 million or 10% to €2.2 billion was also helped by a positive currency effect. On slide 15, we take a look at our financing and maturity situation.

In early 2018 we refinanced our senior credit agreement reducing its amount to €850 from €982 and also reducing the related cost. As shown on the chart and thanks to our active refinancing strategy in 2017.

We have no debt maturing fall in June 2018 and non-significant repayment before 2023, with an average of maturity of 4.3 years. As mentioned our average interest rate of gross debt is 2.9% which represent a growth of 33 basis points year-over-year.

We anticipate our full year financial cost to be around €110 million. We also maintained strong financial flexibility with liquidity of around €1.1 billion at the end of the quarter including our un-drawn senior credit facility.

I will now hand back to Patrick for his concluding remarks.

Thank you, Laurent. Let me conclude on slide 16 with our outlook.

We are continuing to execute on those strategy we presented last year. However our first quarter performance reflected charge we made and lot of their positive effects.

On the back of this performance we confirm our financial targets for the full year as presented in last February. Let me remind you that we target at constant scope of consolidate and exchange rates.

One, sales up in the low single digit on a constant and same day basis, two, a mid to high single digit increasing adjusted EBITDA, three, a further improvement in our net debt to EBITDA ratio. With this, we thank you for your attention and Laurent and myself are now will be very happy and ready to take your questions.

Thank you.

Hi. Good morning.

First question on Europe, I understand the investment in Digital, but should we assume that we keep going up in the coming quarters. Are you satisfied with the [chart level] And also contracted, I read to put it again to offset these and on this topic can you update us on the turnaround plan for Germany and what could be the impact on European margin if it's successful?

That's the first question. Thank you.

We will not decrease our investment in Digital whether it's Europe or non-Europe, Central because it's fundamental for the strategy of the future. It's fundamental because it’s a chosen concert decision to improve our digital content number of customers that are digitally connected to us and so on.

Therefore, yes, it will continue throughout the years in term of investment. Your question about Germany, Germany is in turnaround situation.

We are finalizing the detail of the portion on which we will best develop invest for the future and the portion where either for market condition or because of our [existing talent] point will be in the future. And we have 10% market share in the country.

We are rather strong in the South, but where we are the strongest is the strong industrial offering on which we decided to focus more heavily. Germany remains the larger and attractive country for that business, the core geography for Rexel.

Yes, we have some loss making businesses that we are currently addressing and we have ongoing discussion with our Brexit ensure familiar with this practice and that is why some time it takes longer than one could imagine. But Germany is offering good market industry, good partnership with key suppliers and we are refocusing on this portion of the market.

And how much of Germany's industry versus construction?

Consider that industry-owned product being sold to industry or to maintenance and so on, therefore industrial product is good half for what we sell.

And as a follow-up on France, certainly disappointing in Q1, I guess there is maybe some weather impact here as well or as developed the quarter and can you give us some color on April in the first few weeks are we still in this 4% gain of course?

I would tell you, France, everybody probably should take the numbers because especially in Q4 we had very high growth rate which said, because yet there is a good momentum, the market is good. We have the same footprint as in the last quarter.

We have the same figure. We have the same customer.

Nobody has become bad where it was good last quarter, let's consider. It continued to be good.

It continued to be solid. But there are two things that yet I would regret whether I didn't wanted to comment other people had done it before me.

And we have positive sales numbers with residential, up from 5.7%, non-resi lower and industry at 5.1%. At the same time, conscious decision was made to privilege the quality of the growth and not to go for gross actual pricing.

They are project in the country. They are placing in the country where there were some price battles especially on cable front where we decided that it's good to go for long term for suitable growth and not just for top line which I could have done and we decided not to.

And however, we serve our good customers in a very good way. And I do not worry at all about our activity in each country in the medium terms profitability.

As you know this is good profitable business and it continues to be and it does improved every day.

Thanks for that.

And we didn't want to – yes, we do not want to emphasize too much on the weather as it maybe a [Indiscernible] but it’s clear that in France and U.K. in Norway and we're first time in U.S.

we have some weather impact. There is also the phasing of Easter being in March this year, and all of that had slight impact on the topline and we see a good momentum in April on catch up in some of the countries.

And globally at group level the weather impact is €8 million on the topline.

Thanks for that.

Yes. Good morning.

It's Andreas. Thanks for your time.

I just wanted to focus on the U.S. market if you could help us a little bit maybe with the broader picture what's going on there and specifically for you between Gexpro which I guess was difficult and the rest of the business which is pretty good.

We've had some mix results from peers, Westcott, very good growth but a lot of gross margin pressure, and that had very poor results overall. How do you see the market overall in terms of kind of pricing, gross margins and how much did key industrial supply hit you again in the quarter compared to what it could have been without if you just look at excluding that business?

Thank you.

First of all, thank you Andreas and first of all, let me make a comment which is not [Indiscernible] comment but which is a real fundamental one. For the first time I can share with all of you today that I feel very confident – I was confident in our action, but I feel confident in the actions bringing result.

And what we have done and continue to do and continuous changes including the management changes that we have done are really getting everyday more solid, customers more happy, our salesforce more active and we improve our service level, our relationship to the vendors and so. Now there are a few situations which we mentioned some of them.

There are a few situation which still need to o fix now. Globally, the regionalization allows us to have a very effective much better support from our vendors because they are regionally organized.

Second, we benefit our customer without very early stage from they can become a multi-banner meaning would they want to get for one banner they could get an alternative from another banner or complimentary from other banners which in the more customers more SKU will help. One of the banner, Gexpro obviously by profile of the past and Gexpro GE suffer less now from GE IS performance which has been able in the last quarter to provide better supply chain than it was in the past.

On the other we offer a lot of what we already had in the last – in Q4 not now we are been full probably for the first half of each year which is a G as a customer, G as a customer which is not GIS is down by 34% prior to – it’s a [submitting] sales of 30 million and it contributes to minus 1.6% of the total U.S. sale.

Okay. Absent this, because G as a supplier we were able to reach first 8% which contributes to 0.3 percentage up in the total sales.

It's really G as a customer which is now the main issues. And it's an issue of a customer was reduced its activity, it's [Indiscernible] and as a result of being the first supplier to them we have suffered from.

And now GIS is still in the process of being acquired by ABB and we wait for the antitrust authorities to release in order to improve the Gexpro network capability [to form], but as I'm telling you at least short term, very short term we'll get better supply chain and the availability of product by G. But the big thing is G as a customer, and yes this is the only thing that's really impacted Gexpro today, otherwise the rest is really a credit rating in sale and we are fully [agreed] on to recently on the one – on the [Indiscernible].

We have open one branch and we have made [two Platt] counters in the beginning of this year. We will do our plan as we have shared with your last year as long as we see that the benefit of the previous year and carry over those in gross margin and as planned in the costing match the scenario that we have shared with you and so far it is a case.

Thank you very much.

To the question you had another element, I sorry, in your question there was price increase and cost margin in the U.S. There was a modest price increase around 145% in the U.S.

We work more on our own pricing system being on that in order to increase our margin. Hence we use the rollout of proximity model and the more and better service we provide in the branches to really improve our profitability through our locally one by one by having an active pricing strategy beyond the price increase of the suppliers, just to be complete, Willi.

Thank you.

Yes. Thank you.

Good morning all. If you look at the headwinds that you saw in the quarter in terms of freight, in terms of cost inflation in France, how much of that was expected and built in to your full-year model?

Also in terms of the -- another end market which has been quite tough. Could you talk a bit about what you're seeing in lighting, any light at the end of the tunnel?

And then just finally wind in the U.S. I do believe you said last quarter that that is now washing through, but you're still seeing headwinds.

How long are we're going to see these coming through your U.S. results?

Thank you.

There is one thing on the horizon in term of costing that yet freight is not – it's an inflationary component of our business. To the point that taking that seriously probably one thing new to me new one, I mean, I knew you was this, but we would probably adapt certain of the either the freight charges or the freight cost to be charged to the customer for certain part of the freight is probably on the horizon, not yet implement, but the freight is growing higher and faster.

Now how much was in our model? Some was in it, let's face it.

So far it’s a bit more than we thought and therefore we are taking actions on the short term to avoid having an issue on the fund. On the other hand we need probably to look into how much of capability to beat our business that you do shipment.

If you don't charge for the shipping than you don't charge enough for the shipping that would be an issue, and therefore freight cost for us as for others will be the one which could be the standard one, it could be for us and that should special freight which has to be charged more systematically. We will connect this as a model of the future which will reduce our freight by bringing the product closer to the customers so that customer would collect.

Their tendency in that, but this in medium terms, short term, we had in our model and it has been a little bit higher than we thought. On the light, the lighting part, the lighting beyond the fact that lighting is deflationary due to the LED, it goes beyond.

It goes beyond the fact that we have reach the moment where the LED length and the replacement has reach its peak. Now we are going into a let to be replaced and for the one already installed, no replacement coming because of a matter of life.

They are still few to come, so from technology especially in Europe where the timetable tells us should be replace a digit, but in the U.S. there is still lot to be done, but the lighting, its volume wise not increasing a lot.

Price wise deflationary and now it's full about lighting systems and solutions and we are participating to it. We have key vendors bringing solutions to the light and bringing fair recently has shown.

Its all about connected lighting. It’s all about lighting solutions, but the total industry has not yet set the price for how much to charge for a complete lighting solution.

It's probably an element of the industry where we are no longer in the old model and not yet in the new model. It's probably a year where structurally, there is a lot to be fixed and we participate to it.

On one hand we sell as much as we can, but we know that we bring complete solutions and brand new ones and they are – therefore it’s a second marketing to be put to the market.

Unlikely there was a question on the wind. In the U.S.

yes, there were non-renewal of GE Wind contract and that is an effect of [Indiscernible] topline of the U.S. That will be as most of our [Indiscernible] start to catch the base effect in the coming quarters.

Thank you.

Hi. Good morning.

And thanks for taking my question. I will have a couple.

The first one is a follow-up on the previous question regarding the investment impact from the margin. I understand that some of the impact is due to the fact that the first quarter is typically quite a small quarter and we've also had less working days.

So when we think of those impact of investment during the rest of the year or you expecting a similarly strong impact or in fact you should have much better cost absorption and the impact just kind of easing through the rest of the year? That's question number one.

Thank you, Lucie. We'll answer on this one.

Yes. We have the carryover of investments and we continue to increase in Q1 2018.

That is on quarter that as you know is a smallest of the year, so there is clearly [Indiscernible] on that. So on the next quarter it will better absorbed by the topline.

Basically if you look at decline in EBITDA of 30 bps we can identify couple of big building blocks. The first one is what we get from the additional topline that bring us an additional 40 bps on the EBITDA of this year and then we have impact of all investment that we've roughly set amount 35 to 40 bps headwind on the EBITDA margin.

Then we have the impact on the salary and benefit net of the couple of [Indiscernible] plan we profit in a bit. And then we have the rest which is mix of specific country situation, U.K., Norway, plus couple of one-off, we have reversal of [LTI] bonuses last year, [Indiscernible] I did not repeat.

And all of that the rest is roughly 20 bps.

Okay. That's very helpful.

So I understand that organically everything has kept equal just in terms of from your organic sale, the margin would have been 40 bps. That's very helpful.

My second question was around the guidance for EBITDA specifically adjusted EBITDA, can you may clarify this starting point from which we should calculate the 5% to 10% EBITDA expansion because I'm not sure exactly where we start with the different restatement. And when you think of the bridge from this first quarter to kind of reach your objective, you maybe point out at the different element that you think are going to be a bit more positive to support you and if you see kind of further risk?

Well, the starting point is a comparable figure of full-year last year, which is one that we put at [Indiscernible] than this year and that we restate from the disposal of Southeast Asia and when you put the plus and the minus we are at 570 which is very close from the 580 we had end of last year. And the main component of the improvement we'll have in EBITDA is of course the traction on the topline, plus the various initiatives that will bring other profit.

Plus the fact was that we have couple of restructuring that we'll have growing impact in the coming quarter to offset some of the inflation we have in our cost [Indiscernible].

Thank you. And then my last question was just around the disposal program.

I mean, I know you cannot give all information, but is it still on track to be finalized by the end of the year?

We still on track, we have couple of tracks on the same moment, so nothing is binding, so its too early to our commitment, but so it is on track.

Thank you very much.

Yes. Good morning everyone.

My first question is just on the U.K. obviously growth rates have been there quite slow for some time now in GE obviously the margin drag there.

How do you see the remaining sort of three quarters as obviously comp starting to get a bit easier still in the second quarter? And whether you expect the second half to be sort of similar weakness as the first?

I don't expect lot from if anything from market in term of volume, because I don't see let's changing pattern from the demand side. On the other hand, first quarter was hit by few things and sorry to put this because we should – I don't want to use it an excuse by far, this is an element of life, but we had bad weather in the U.K.

and you must that wasn't expected in a short quarter then if you have one or two day loss obviously you get immediately hurt by more than you sold which should not repeat in the – hopefully not in the spring and summer time and that would be I know that's very sensitive when a decrease – in the decreasing market when things like that happen it make the case even worst. This being said we have done the restructuring, it's behind us.

We are now in let's say, on finalizing on this how much do we get from it. And the organization is done.

The sales force is fully running in the combined way as we have said. We get the vendors report and we are continuing – first of all, get growth more in certain regions where the demand gaining market share where we are low, get vendors report which we do have and we will improve both in concentration and in the margin we generate and where we would have few potentially lost situation eventually on there, obviously we will immediately take actions up to we have recently done closing three on them.

On the total amount is not a major change but this is how we manage short term in a declining market in order to secure as much as we can EBITDA.

Thank you. And this…

And U.K. to be totally towards result on that, but it was the last big country on which we put our common Web shop [Indiscernible] in the end of last year.

So gradually and it still small figure but we see some adoption of the recaptured by our customer and this will help us in the next quarter or so.

Thank you for this. And the second question just on your oil and gas related business.

Its been up again quite nicely in the U.S, 10%, Canada 9%, can you just talk a bit more about the vertical that you selling into here and how you seen that developing? And also whether you expect those sort of growth rates to continue as we move obviously into the later part of this year?

Well, first of all, we benefit from this in the maintenance of [Indiscernible] past investment that this people have done. They reached onsite.

They're reopened. They increase, and they need maintenance.

We are not going to big project. We are not going even if they are few on the rise and its not the main thing.

It could create distortion of our activities, but we'll benefit from. The Canada – the Canadian industry is more dependent that everything thinks about this and when oil and gas is up we're benefiting oil and gas segment, but we benefit in the industry all see more globally, automation and the rest.

This is what's happened now. And in the U.S.

yes its uptick – it does reach uptick. We have a few specialist branches, location which are highly specialized and obviously they take their fair share of the market there.

Houston is a good example.

Yes. Canada is mainly on the midstream and in Canada its roughly 7% of our sale, in U.S.

it [Indiscernible] midstream and [6%] of our sales. And overall at a group level oil and gas is around 2.5% of sales.

Appreciated. Thank you very much.

Yes. Good morning.

Few questions. Could we start with price evolution, could you give us the sales price evolution possibly by region excluding the [Indiscernible]?

Yes. The price evolution excluding cable, at group level in the quarter is plus 1.2% and by region it is [1.20] to up 1.16 in North America and flat in Asia-Pac.

Thank you. And I wanted to ask you, on your guidance for this year, you indicated you plan to reduce the indebtedness ratio by the end of the year.

And if I remember properly, at one stage you said that you were targeting 2.5 times ratio. Is this still your target for this year?

It has never been our target for this year. It was a mid-term target for the group.

We didn't guide specifically on the indebtedness ratio because we want to and goal [Indiscernible] some flexibility we could find bolt on acquisition especially in the U.S. So based on what we have on we said that we will deleverage compared to the level of 2.8 we at this year, but without any précised year.

Okay. But assuming you don't do any acquisitions, do you think you could reach 2.5 times by the end of this year?

It is too early but we are in that range, yes.

Okay. And then a third question on your free cash generation, you said you would increase your cash conversion this year compared to last year.

Could you give a bit more color on this, how exactly this is spreading into improvement of operating cash flow and what would be the outlook for change in working cap this year?

Well, globally last year it was 56% which is the ratio of the conversion of EBITDA into a free cash flow before interest and that was strongly impacted by the decrease in inventory we made last year. And we are at a point where we reached the right levels with adjustable with the top level evolution so which we plan to be back to historical test conduction which are more between 60% to 70% and then there is yet an impact of three four months in EBITDA through the guidance you know and also a good control on the working capital, and probably a bit more CapEx than that [Indiscernible] as well.

Okay, thank you, that’s very clear. Thank you very much.

Hi, a question for Laurent, because you mentioned in the report that IFRS16 will have – could have a significant impact on the whole financial situation, could you give us some color on the expected P&L and balance sheet impact of this new norm you will adopt in 2019? Thank you.

We are very [Indiscernible] because everything is in process and we just selected for a tool to capture all our lease and for me and for a person on each side which we would also willing to have a good grasp on how we are renewing our lease across and especially the branch across the countries and on that side before coming to the accompanying task, I think it will be a key lever, because the key cannot tie, that we need combination we did it the footprint of our branches, but it will be probably a different branches, smaller internal here, biggest close to [Indiscernible] so this tool will address to capture any renewal of lease and we will have a more challenging debate with our country with that tool. Coming back to figure, it is important to note, in all our financing agreement we have a specific clauses whereby any accounting evolution should be attaining to account especially on [Indiscernible].

But from the preliminary study we made, the impact on the debt is quite significant. It’s around €800 million.

Then we have a strong [Indiscernible] on the EBITDA because we have no more rent since we have assets, which will be more than 100 bips positive impact on the EBITDA and there would be an impact, positive impact on the EBITDA as well because you have the financial component of the lease that will now be a financial charge. So it will be a couple of tons of bits, everything is graph figure, but [Indiscernible] on the EBITDA, good guy on the EBITDA, and at the end it will have a slight negative impact on the leverage ratio of a couple of turns we levered to fine tune this year.

Thank you. And did you incur some cost due to the renegotiation IT in 2018, ahead of this application?

Is it meaningful?

No.

Okay.

No, because so far we don’t – so far I mean and that [Indiscernible] that no direct on the way we are looking at our IT contract so far.

Okay, very helpful. Thank you, Laurent.

Good morning. Thanks so much for taking my questions sitting in.

Can I just firstly double check back to the profit bridge and the impact on margin in Q1 and how we can take up forward through the year. So if we take the investments impact that you mentioned of 35 to 40 basis points, if we take that as $12 million and run it at a quarterly run rate, would that be kind of a right way to think about it, why are all the others like salary and benefits of 15 bips should be the 15 bips per quarters will go forward and obviously the others we can calibrate according to our topline assumptions.

Am I in a right sort of framework of thinking here?

Yes, the investment there would be the filling of our opening of branches and with the guidance we give and the number that are being opened in Q1 it will be probably the investment, we’ll take a larger part inflation and what we’re doing with the [Indiscernible] I think it will go slightly. The inflation impact we need to get over quarter, the investment once we probably slightly increase due to the branch opening.

Thank you. So the branch is opening, could you remind me how many you did in Q1 out of the 20 that you planned for the year?

Yes, not significant. Just one opening and two plant control, but that’s not a mathematical approach.

You see we should have interphasing, we have site, we know how we grow and we’ll do what we said.

Okay, great. Thank you and apologies has been asked already.

I got bumped off halfway through, but on the Middle East project phasing that impacted Asia-Pac, could you give more detail on just, on the magnitude of this and by effect this is a Q1 effect, is that something I was going to carry on for a little while?

No, well it’s a large contract in the Middle East, but that’s a good impact on the topline but I would [Indiscernible] that it will run over later part of this year.

Got it, thank you. And lastly, just a very broad question on the U.S.

construction cycle, just would be really interested to hear how you view it at this stage and what you are hearing from your suppliers and your customers in terms of sentiment and their kind of intentions and plannings how they view it?

Well right now, first of all from the customer contact and point, right now there is no suffering of any kind. They have project, they ask for many quotations and always some of the people are really almost fully booked for the balance of the year in terms of job to be done.

Therefore we don’t see short term slow down and in the regions where we are I mean it will be I am not reflecting an entire U.S. market, discrepancies in our regions but in the regions where we are and we make most of our business.

We don’t notice slowdown. We were hurt in the northeast by weather conditions, but we were not hurt by a lower demand.

We can say that we don’t we are not influenced by the trade war, especially the steel and aluminum. It has no direct impact.

We don't source anything in China, we are purchasing and buying everything locally. And we have a very important thing, tax reform in U.S.

is giving a lot of money back to the company and this will be invested probably in a month over but also in productivity tools and that is all the product we are selling on that side, and we switch to our automation business that is posting quite interesting growth.

Great. Thank you very much for your time.

Yes, hi, it’s Timm Schulze and spec sales at JPMorgan. I just had one sort of house-keeping question.

You referenced GE and the change in demand, obviously there are a lot of moving parts there. Just want you to get your take, is this a cyclical and therefore sort of temporary demand shift or is there something more permanent and more structural in perhaps the way GE is changing its purchasing decisions?

Thank you.

I mean GE could answer better than me on what their future plan are. I know where they have reduced factories, closed factories.

We relocated, merged two into one. Therefore for me, its not short term aspect.

For me, it’s GE as a customer who will not come back to higher level. Now they could gain in certain businesses and we could benefit from it they grow But really, GE is a vast diversity of activities, and they have their own strategy, and they went through an entire restoration plan, which either manufacturing sites and the main one [Indiscernible] which is when they stop activities or close down or relocate and put this as I say merging and activities two into one and its reprofiling of GE which for me make it long lasting change in the demand.

Therefore we need to adjust ourselves, I take this for granted. It’s like this and nobody expected it to be done so quickly, year ago nobody was even talking about it.

Now GE has its own strategy. We were our main supplier for certain product, most of it was run in the last four months of last year and by the time we can compensate the developing of the customers despite the 9000 new customer we have many dealer.

On that particular GX Pro activity this is where we registered the hit and we need to compensate.

Got it. Very clear.

Thank you very much.

Well thank you first of all for having been with us whole day long. I would like Looking at the first reaction after we showed the results this morning, I think there has been a little bit of misunderstanding potentially which I would like to be sure it’s not.

When because everybody compared the 4% with the 4.3% of last year. For us the 4% was our expectation.

And it is our budget. And we knew we would this.

And the 4.3 of last year had something to do with the [Indiscernible] in 2016 and the 4% of this year has to do with our reality of life. Therefore, I want to tell you that I feel being online with our expectation because it was internally our plan just to help you in measuring where we are.

Thank you for your attention all of you and thank you for the quality of your questions. Thanks a lot.

Have a good day.