Rexel S.A.

First of all, good morning and thank you for having joined us today. We are here in that quarter of Rexel and on the line, we have many of our people following us around the world.

Therefore, when it comes to Q&A, there will be the Q&A from the room and Q&A from, I should say, the crowd. Before anything else, if I may ask you one thing, turn off your mobile.

There might be some interferences for the people who are coming by line. The - I'm very pleased to review today because we will present you the result for the previous year and the Q4.

Laurent Delabarre, our CFO, is here. I think me in order to bring you all to clarification, clarity to first of all, better understanding where we are, what we do, and also, giving an answer - precise answer to any question that you would like to raise.

The one thing I would like to start with is really to tell you where we are right and solid results and strategic advantage that we are making. And if you move to slide 3, let me say in a nutshell and I'm very pleased to tell you that first of all, we have done the job.

We are back on organic growth. This company was not an organic growth company.

And in the last 30 months, we have done 1 billion organic growth sales. It's something that has never been in our group, where we grew by acquisition, M&A, integration and when I took over, you remember, I was telling you we will go for organic growth.

The second thing which is quite key for me that everything that we've done so far and I remember all the questions you raised in the previous quarters about when do we see, is it ongoing, is it the macro, the operating leverage, you reinvest part of it, when does it come, fair question, I listened to all of them. But first of all, I would like to say here that it's profitable growth with lot to come and continuous effort because we grew more customers, more SKUs, more digital and with some densification with branch opening here and there, especially in the US, with transformation of certain countries that at the end of the day, it's the broadest organic growth, profitable growth.

We have made progress in every single country in all the countries regarding the service level. We are measuring now the customer satisfaction, the net promoter score KPIs in order to figure out how to improve the service to get even more customer, even more SKU and accelerating the digital interface to them.

Another big question I'm pleased to tell you is the US. During years we were not performing in the US and we couldn't capture the macroeconomic favorable trends.

In the last 24 months, and even accelerating in the last 12, the US results are significantly better, we are gaining share, we are growing organically, all the branches opening is exactly on track to provide results we expect them to bring and it's a very robust organization, redesign that we have done, agility locally, focusing by regions and really getting the support of both the customers and the vendors. Regarding France, which is very often a question by which you start telling us, yeah, you are dependent on France and should France becoming weaker, what's going to happen.

It is a cycle. In France, we are getting market share, we are continuing to grow, we are continuing to work on the margin side and we continue to post very good resilient, robust EBITDA.

And it's exactly on our plans. Regarding the disposal program, where in February '17, I was telling you that we are starting a divestment in certain regions whether we couldn't non-strategic or where we didn't had the condition to succeed and this is programmed is already at reach by the promise that we are delivering 25 bps EBITDA improvement as promised and we have reached 650 million, the initial program is over.

And the evolution of our model. At the time, you told that many times that there is threats coming from here, threat coming from there, our digital could take us out of the market.

I'm very glad to tell you we have made significant robust progress, more than 2 billion sales is being traded digitally. One out of four in Europe is made by digital trading.

We are implementing order evolution, which I will comment at a later stage of the presentation. We are on track to be one of the player in the digital field.

I wanted to put this as a nutshell as an opening remark, it's already I have highlighted some of which we've seen in the later slides, but I wanted to have this kind of a summary being presented to you, because if you back to February '17, that's where we are and we are there. Okay.

And I realize that some people could have some questions at the time, but it's good some time to be very transparent, where are we. And obviously the slide 4 is really supporting that.

We have consolidated our footprint, we have revamped the operating model and we strengthened the financial structure, which was another commitment. Let's go to, from a certain level of leverage, above 3 and we went down below 3 and we are now at 2.67 and we will continue to de-leverage ongoing further down.

And on the page 5, you have also the existing geographies, which we just finished in Q4, with the exits of the non-industrial business in China and therefore I am happy to tell you this program, the initial program is over. And we have done some acceleration in 2018 in terms of turnaround.

I took a conscious decision of getting a little bit of more power into restructure, which is reflected in our numbers in '18 in order to be safer for the future in an earlier stage. Therefore, we are divesting in Germany the C&I business in the North of Germany and we are only focusing on the industrial footprint in Germany plus C&I only in the south where we have the proper density in order to be robust.

We had to adjust similar elements in Spain, where we have closed the branches and reduced some of the warehouse's footprint in order to be more done and more present locally where they are better market and we have done and we are conducting some further downsizing in the UK in order to adapt to the situation, which we had to do once we had done the regrouping of the five banners in 2Q that was finished at the end of '17, early '18, therefore, we could then get to a better position to adjust to with the potential Brexit situation could mean or whatever it could be if you could help me on that front would be great. On the page 6, the one thing, which has revamped our printing model and we are continuing to do this every day, improving the business model per se definitely, more customer satisfaction, more customer modification we have not start, we have reached a certain level, this is proving the case and we continue and we accelerate, there is no reason, that is the only way to gain market share and to grow organically with the best result that we can get from there.

We are working also a lot on pricing initiatives along, it's not growth at the cost of margin, it has to be growth with robust and solid margin generation. We adjust the SKUs and we adapt the skills and the managerial model.

There has been many changes and some people ask why and if and so and what. It is a fact that going from a company making growth through acquisition and you go through organic, coming from conventional, going to more digital, coming from very independent banners to structural countries or sometimes cluster of obviously, there are lot of skills to be added and lots of managerial changes to be done.

We even changed the way we interface with our countries. We are doing deep dives, which are special, so one or two days where we go through one element and of which transformation into a more robust model, we look at the robustness, obviously, we look at the financial moment, but we look at the transformational changes, which needs to be done in that so that the future is better secured and this is working and it's well understood and it works well and we have the increasing multi-channel interaction which started to really be visible.

There is always a ramp up time, but I can say the last 12 months have been accelerating and we have invested in additional skills where we continue to do these and to do more and to accelerate, we on the right place where we wanted to be and obviously I have always more ambitious targets that the results are highly visible. And we are reinforcing through all of this our supplier relationship, this is a business where we have to make good to your customer, but to really share with value added, your suppliers, otherwise, life can - the robustness could not be very long term stable.

And this is what slide 6 is describing to you and which lead us to slide 7, where we strengthen - I say that for people being on line, allow me to say the paging of the - because of this, we strengthened the financial performance and this is very important because we will follow and continue to follow and continue to do and we have done deleveraging the balance sheet. As I told you, we come from 3.04 and we are down to 2.67 and we are continuing this further downwards, further down.

Streamlining central costs, we are taking out certain elements in the regional HQ or in central HQ or even the country management team in order to re-invest in the digital world, in order to re-invest in the transformation towards a future in terms of skills and teams and therefore, we are able now to have simple or simpler processes, we will continue to do more of this in order to free up resources to go to the digitalization. And also to have the financial performance because this is the kind of cost that we take out in order to get more leverage out of this, if we put them in the field.

And rebalancing the OpEx, first field coverage. The one thing which is essential for us to reach to more customer, more SKU is to have an increased salesfroce efficiency, not just through the tools, but through the quality of people, not through the number of people that are through ongoing productivity efforts in order to have enlarged customer portfolio for each of our skilled sales people, which is a first priority and the second is strengthening the digital program.

I think I've already given you a flavor of this. When it comes to the results, we got a successful execution, reflecting in the numbers.

You know the numbers of course, 3.5% of adjusted EBITA, 608.3 million EBITA, recurring net income continuously growing, and the one thing which you see on this chart on page 8, this is what I call the value creation chart, which was key to us. We are back now to average and to pass above the work line, the work and we were below the trading value for our shareholders on the long term means we have to be above and therefore, we have returned to be above the work level and it was critical for me and therefore I put it here as a benchmark by which now we enter into value creation above the work line.

And obviously, the EBITA margin and the deleveraging which I have already commented, you see the numbers here on the last 2 elements of the slide. 2018 achievements in absolute value.

We are at 13.3 billion, 13 billion, which is a plus 3.5% on same day basis. EBITA, 608 million, 608.3 million, which is another plus 6.1% comparable to the previous year, plus 6.1% year-on-year.

And recurring net income of plus 12.8, compared to previous year. The gross margin, very interesting the gross margin, because I keep this as an attrition line for the future to stay in the 24.7 range, which is really key.

When you grow, it's not done at the cost of the gross margin and this figure here are not representative of a trend. The adjusted EBITA margin, 4.6%, 10 bps above and indebtedness ratio, I already commented, which is 70 bps improvement year-on-year.

And these are the pictures and obviously now I will pass to Laurent so that he will give you more flavor about the numbers, about the geographies and I will come back in order to put the global picture of the future and the outlook.

I am on slide 10, which give us an overall view for strong Q4 performance. We just reflect the trend that Patrick commented, [Technical Difficulty] and more competitive company in its key markets.

The slide 10 for the sales and profitability improvement in Q4. Our sales grew for the ninth consecutive quarter, reaching nearly EUR3.5 billion.

This represents a same day growth of 1.9%, a satisfactory performance given the more challenging base effect we had this quarter, the negative contribution from copper and the impact of the transformation underway in Germany and Spain I would comment further. Confirming profitability, our adjusted EBITDA grew by close to 9% with a margin increase of 27 basis points on a comparable basis to 5%, driven by the strong performance in North America.

Recurring net income was up by a strong 9.7% in the quarter. From a more business point of view, I'd like to share with you two key highlights of this quarter.

First of all, thanks to our transformation efforts, our US business is back to sustainable growth. Second, we have repositioned our business in Germany 4Q on its more profitable segment.

This lays the foundation for future profitable growth. At the same time, we continue to restructure UK in a difficult market and Germany.

We also continue our disposal plan in Q4 with a sales of our retail and virtually all our commercial business in China. On the next slide, I'd like to comment on our top line growth in the full year.

On a reported basis, our 2018 sales were up 0.5% as a result of the positive 3.5% same day sales growth and positive calendar impact of 0.3. On the other side, we have two unfavorable effects plus scope with minus 0.7%, resulting from the divestment in the end of 2017 and currency for minus 2.5%, mainly due to the depreciation of the US, Canadian and Australian dollar and the Swedish kroner against the euro.

Concerning currency and assuming spot rates, we expect foreign exchange to have an impact of circa plus 1% on sales in the full year 2019. And concerning scope and taking into account the announced disposal in China, the expected 2019 impact stand at minus 0.4%.

Breaking down the sales growth by quarter, you see on the bar chart on the right hand side of the slide that we have posted growth every quarter, not just in 2018, although 9 consecutive quarters on a constant and same day basis. This achievement came in Q4, despite an increasing challenging comparable base over the year and the lower contribution from copper, which swung into negative territory at minus 0.3 compared to plus 1.6 in Q4 '17.

Let's now take a closer look at our top line performance by geography in the coming slide. On slide 13, you can see that we posted solid same day sales growth in Q4 at group level of plus 1.9%, up 3.1% excluding branch closure in Germany and Spain.

In Europe, representing 55% of our sales, revenue was down 0.8% on a difficult comparable basis with growth of 5.5% in Q4 '17. In North America, which accounted for 36% of our sales, it was a strong 6.9% and Asia Pac which account for the remaining 9%, sales were broadly flat at minus 0.1, but were positive at to account, as you remember, the disposal of automation business in Australia and we also have challenging, slightly more challenging base effect in Q4.

As shown on the slide, in December 2016, Rexel added almost EUR900 million of sales on an organic basis with all three of our geographic contributing, it's a big number, which is very close to that. Let's now look at each region, beginning on slide 14 with Europe.

Sales in our biggest region stood at EUR1.9 billion in the quarter, down 0.8% on a same day basis or up 1.2%, excluding Germany and Spain. In our core market of France, which accounts for more than one third of our European sales, our revenue were down minus 1.3% on a challenging base effect due to low export project and a temporary impact of lower activity in December.

Business was however in the quarter supported by good demand in residential, and industrial markets. We are also seeing positive trends in several key countries, including Switzerland, Benelux and Sweden.

Switzerland benefited from its strategy of focusing on project and grew by 6.9%. Benelux posted solid plus 13% growth with good momentum in Belgium, where we acquired.

And in the Netherlands as well, sales in Scandinavia were up 5.2% with robust growth in Sweden, up 5.4% thanks to public spending and large C&I business that more than offset negative trends in residential. In Germany, with the closure of the 17 branches in C&I in North at the end of September, our sales in the country were down 15.9%, however excluding this impact, our sales were broadly flat.

Lastly, in the UK, sales were up by 6.4%, mainly due to lower business with large C&I accounts and 33 branch closures. In a highly political uncertain politic context, we will continue our effort to control costs in the country.

On the next slide, as part of our strategic plan, we said we would turn around our operations in several key markets and I would like to focus on three of them. Germany first, we moved decisively with our operation on more profitable market segments with the closure of the 17 branches in C&I in the north at the end of September, our network rationalization is now completed.

We have also closed 2 of our five distribution centers and adapted cost base at H2. The industrial business is now at around 42% of sales in Germany and we have market share of between 20% to 30% in the region in which we are still present.

In Spain, we have adopted a more regional approach with a new organization around 5 region, the closure and merger of 16 branches and the new management team in place. We will be progressively implementing 4 hub and spoke in 2019, as we continue to optimize our logistics.

The measures in Germany and Spain should lead in 2019 to around 10 points of EBITDA margin increase at group level and reduction in sales estimated to around EUR140 million in 2019 compared to 2018. And in the UK, where new funded projects going to else, we have closed 33 branches to adapt to challenging market conditions and we are focusing on margin driven businesses.

On slide 16 now, we turn to North America, where sales grew by a strong 6% on a constant and same day business. Let's look in greater details at where we stand on our transformation in the US.

We are very pleased to report today that our Q4 performance provides another demonstration that our new regional approach in the US is posting clear results. Sales grew in high single digits for the third consecutive quarter, at plus 8.5%, confirming our regain ability to capture market growth and gain market share in specific regions.

The backlog is now back to normalcy level and will support 2019 sales growth. We have gained 3600 additional customer in the last 12 months, seen double digit growth in every single distribution in several key regions, notably Denver, California, Texas and Florida.

In addition, we have opened 48 new branches or campus in the launch of the plan in 2017 contributing to 2.4% on our Q4 sales growth and about 2% in the full year, in line with our objective. In Canada, sales were up 1.3%, driven by mining potash offsetting the non-renewal of a large wind project.

On slide 17, we focus more specifically through this on our US transformation, which again is playing off with acceleration of our profitable growth. As you know, we have reorganized our business in eight regions, reversing a past trend of branch closure, our 2017 plan calls for opening 100 branches or contracts in the medium term.

At the end of 2018, we are about half way there, but half of the opening branch and the other half is counter in to agencies. Those 48 openings is concentrated in our key priority region, notably Florida, Texas, California and the northwest where we have really a strong market presence already in the Northwest.

Let me highlight on slide 18, what we performed in Canada, where we are a market leader with 23% market share, operating through the largest network in the country with 190 branches in three banners, Westburne, Nedco and Rexel Atlantic. In Canada, we can say that our business is now firing on all cylinders.

From an organization point of view, we have transformed the management and team. From a regional point of view, business has picked up throughout the country.

From a banner point of view, performance is strong across the board. And from a segment perspective, we are seeing improvements in oil and gas and that has broadened our offshore segments.

We have a very strong business with Rockwell Automation in the country and we have recently been awarded an extension of best distributor in British Columbia. This has been reflected in our numbers, with 2018 sales up 3.6% on a same day basis.

So overall, if we look at North America, what's important to note is our adjusted EBITA in 2018 grew by a strong 18%. Moving on slide 19, with Asia Pacific where we are broadly stable, but are up 2.9% when we restate the impact of the disposal in Q2 '18 of our Rockwell Automation business in Australia.

In Australia, excluding the asset disposal, sales were down minus 1.8% on a more difficult base effect on lower commercial projects in public area. In Asian, sales were up by a strong 6.4%.

In China, despite a challenging base effect, sales effect were up 9.3%, reflecting good underlying demands in the industrial products and solution, more than offsetting the negative trends in our retail and commercial business, which we saw in Q4 2018. We also saw favorable dynamic impact in India, supported by strong automation sales.

On slide 20, we turn to our full year profitability, with our adjusted EBITA bridge. Adjusted EBITA was up 6.1% to EUR608.3 million, and margins stood at 4.6%.

Our 10 bps improvement in the full year on a comparable basis, is explained by the 50 basis point volume and price contribution resulting from our investments. In the quarter, sales price increased by 1.7% at group level, a higher number than in H1, showing good momentum in the pricing environment.

Our adjusted EBITA also reflects investments for future growth of 33 basis points. Lastly, productivity gains partly offset the cost inflation, notably in our wages and the like.

Please note that for 2019, as already mentioned, we expect our transformation in Germany and Spain to contribute to circa 10 basis points with a group adjusted EBITA margin improvement. Our priority will remain to further improve operating leverage while maintaining investments in digital.

On slide 21, we turn to our profitability by region. Overall, with the adjusted EBITA of EUR608.3 million in the full year, our adjusted EBITA margin stood at 4.6%, a 10 bps increase, coming mostly from North America and Asia Pacific.

In Europe, adjusted EBITA margin was down 19 basis points, impacted by transformation. The one we mentioned Germany, UK and Spain, a more competitive environment in Norway, which more than offset the very good performance in France and Benelux.

In North America, adjusted EBITA margin grew by 40 basis points to 4.2%, thanks to volume growth, positive pricing contribution and supplier concentration, which more than offset the cost inflation and the carryover effect of investments we made in people, IT and branch opening. In Asia Pacific, adjusted EBITA margin rose 64 basis points to 2%, thanks to volume and supplier concentration, offsetting the disposal of the Rockwell Automation business in Australia.

And our corporate growth stood at EUR30.7 million, reflecting investments in digital and strict cost control at H2 and this number is in line with our objective. On slide 22, let's look at the bottom line part of our P&L.

Let's start with our adjusted EBITA of EUR608.3 million, up 6.1%. Reported EBITA was lower at EUR600.4 million, up 1.1% year-on-year, briefly seeing mostly the impact of the non-recurring swing in copper prices.

Other income and expense amounted to a negative EUR174.9 million, including restructuring costs for EUR82.5 million, mostly related to the reorganization in Germany and Spain as well as goodwill impairments in Norway, Finland and Spain for nearly EUR62 million and also the asset impairment relating to our Chinese retail and commercial businesses disposal for EUR26 million. For 2019, we expect restructuring costs to be closer to a normalcy level of EUR45 million to EUR50 million every year.

Our net financial expense improved to EUR100.6 million. This is reflecting a reduction in average interest rate on our gross debt to 2.81% as a result of the active refinancing, especially the one done at the end of 2017.

We also saw a sharp increase in our net income tax to EUR157 million. Note that in 2017, our income tax benefited from a one-off gain from the US tax reform.

In 2018, our tax rate stand on 50.8%, sharply a growth of 33 normalcy level due to the non-deductibility of goodwill depreciation, asset impairments and restructuring expense in Germany and Spain, where deferred tax assets cannot be recognized yet. For 2019, we anticipate our normal tax rate to be between 32% and 33%, depending on the decision taken in front of the tax rate for 2019.

Net income was EUR152.3 million, up a solid 45.6% and our recurring net income grew strongly EUR328.1 million, up 12.8%. On slide 23, we turn to our cash flow statement.

Over the year, our free cash flow after interest and tax improved by EUR11 million to EUR191 million. Before interest and tax, our free cash flow was EUR357 million, EUR27 million below last year.

This resulted from several effects. Firstly, as mentioned earlier, an unfavorable year over year EUR22 million impact of copper, second a EUR32 million cash outs related to the restructuring plan in Germany and Spain.

Third, a higher outflow in working capital of EUR43.3 million, partly resulting from our decision to increase inventory in North America, we improved service level and support growth. As a consequence, our conversion of free cash flow before interest and tax into EBITA stood at 51%.

We expect to improve this conversion rate in 2019 to be closer to historical levels. Net capital expenditure was down to EUR93.8 million from EUR110.3 million in the same period last year.

This includes the proceeds from the disposal of our Rockwell Automation business in Australia and our growth CapEx stood at EUR122.1 million, in line with our objective. For 2019, we anticipate the CapEx level, as a percentage of sales to be around 1%.

Our net debt was reduced to close to EUR11 million, at 2 billion, also impacted by negative currency effects. On slide 24, let's take a closer look at the breakdown in maturities of our debt.

The chart shows that we have no short term maturities on our bond with no significant repayments before June 2023 following the 2017 refinancing. Our average maturity is 3.8 years.

Our debt can be split between securitization backed by our assets, bonds and the senior credit agreements. Our net debt to EBITDA ratio stand at 2.67 times at December 31, 2018, down 17 basis points year on year.

Our active financial management is reflected in the average effective interest rate on gross debt, down 37 basis points year-on-year to 2.81%. We also maintained strong financial flexibility with liquidity around EUR1.3 billion at the end of December, including our undrawn senior credit facility.

Our hedging policy protect us for the current volatile credit market conditions. We expect our recurring financial results for 2019 to be close to the 2018 level.

We also remain to market opportunities to further enhance our financial structure. On slide 25, we present our proposed dividend for the 2018 financial year we paid in 2019.

Rexel will propose to shareholder a dividend of EUR0.44 per share, EUR0.02 higher than last year payable in cash in early July 2019. This remains subject to approval of the general shareholder meeting we have in Paris on May 23, 2019.

The dividend represents a payout ratio of 41%, in line with our policy of paying out at least 40% of recurring net income. It's a 4.2% yield that is based on yesterday's share price.

On slide 26, I'd like to highlight two changes in our reporting that will impact 2019. First of all, I would like to take the opportunity to inform you that our board has decided to move to half year and full results with quarterly sales release in Q1 and Q3, rather than quarterly results.

This is in line with French market practice and will improve our personal efficiencies. Second, a few details on the adoption of our IFRS 16 accounting rules, which as you know relates to real estate.

We will start to report on the IFRS in H1 2019, providing comparable numbers for H1 2018. Our first estimate leads to the following impacts, an expected increase in net debt of EUR900 million, an increased EBITDA margin of 150 basis points, and interest in EBITDA margin of 30 basis points.

Our leverage ratio according to the tenure credit agreement definition will remain unchanged. Let me now hand back to Patrick for a look at our strategy for going forward and his concluding remarks.

Thank you, Laurent and I'm sure there will be question around this presentation later on, but for the time being, allow me to take you a little bit. You're still away from me, thank you.

The one thing on the road and it's not a new strategy, it is how we're going further in our improvement and at the same time becoming even more robust and more competitive because the environment is changing and the one thing I want to highlight, very often, we forget that this business as by in itself is right now generating the future growth. And it's getting to be a major, we are in a good business because they are now new avenues by which pros will come on top and both of the previous usage and IoT is not something totally neutral.

It brings a lot of IoT everywhere, but this require from the electrical installation, some evolution, some enrichment and solutions, new approach, but this is enriching and it's not just something that everybody can do, it also something that electricians are now embarking and will get the installations made. New safety norms are very key.

I mean, the more norm, the more safety, the more norm to measure to stop, to allow this to happen or to prevent things to happen. It's all an electrical, you can't take it by anyway, it's always - there are always electrical connectors, devices and way to adapt.

Quite importantly, something which very often we see by the end users, for example, electric cars and electric cars mean charging stations, so far, it's a device, it's a product. When you look at the installation, the change of the mainboard and the main kind of at the connection and the extension and the really dispatch and how to send information toward to your home and kind of stuff.

It's amazing how in terms of non-visible electrical equipment installation, this is slowly, but surely growing demand. But one more important thing, whether we took carbon free.

I know only one carbon free way of getting there, electrical. Now, electricity can be produced in one way or the other that every engine, carbon free, an engine in a factory, the way you get it done, the way we move and more of this, it's all electrical.

And for us, irrelevant from how electricity is being made, nuclear, wind, solar and more, we are at the other end of the chain and in that part of the chain, it means a lot of growing demand. And therefore very often we forget to look into it, but obviously there macroeconomic cycles but there is also a resilient growing demand for electrical products at the same time by structural support and evolution and various time, we forget about this, I've been long enough in that business to tell you that what is coming is more than what I have seen in the last 15 years.

The other thing which is very important is how do we tackle the evolution and the strategy that we are evolving towards and not forgetting what we have done and continuing what we have done, which is what I called the perform. What we have done is really trying, repair, go to growth and capture the growth, get money out of it, do the repair job that had to be done here and there or exit and this is all the point that you see on page 29.

We go to pricing and supplier improvement in the supplier relationship. The turnaround, the focus we already mentioned and there would be more probably, more portfolio, active portfolio management we made over years in terms of where do we stay, where do we develop, how do we increase there and a bit in another place, it could be geography, but it could still be also activity, it could be even product line and so that we are starting out what is good to be in, what is needed to be in for the long term and at the same time, where we need to get into it.

And there would be new activities, new services, new ways of making the performance happen and one of them is obviously the digital transformation, our internal one in order to gain more flexibility, more productivity and lower the fixed cost base and it could be obviously done by changing our own business model. We have initiated some of the moves, but there is more to do and probably in the coming quarters and year, we'll talk you more about our own personal transformation, medieval transformation how to generate ourselves more performance through this digital transformation.

At the same time, the business is in the transform mode and we need to capture and if you allow me to say, the line, the dark blue line on the - this is more EBITDA generation and the above line, if you compare to the work, this is a multiple line, if I make it simple, because we will be a much more data driven company, we will use all the huge, immense amount of data that we collect every day in order to make better decision, better assortment, better anticipation, where to put the resources, how to spend the money in order to get higher returns. This is what data driven means and there are a lot of programs going on right now and developments being made and hiring being made in order to be able to really get these done and it's being developed and embarked on as much as there would be improved services and adapted metrics to it.

In the moment, you measure data, you can get to new services and there is a whole range of potential ways by which we will monetize certain services, which are just building up today but very efficient to other tomorrow. It could be for our customers, could be with our vendors, it could be vis-à-vis maintenance companies, it could be many other partnering.

And obviously, there is a huge trend towards customization. During years, we were treating our customer base by nature, residential, industrial and so on.

Tomorrow, it's more by which service to provide to them in order to have them making a better job, it's no longer the product we take to them, this is a service we bring to them and the service being some logistic services, which we will continuously to improve, but much more individualized and customized services that better allows to provide sensitivity to price, sensitivity to marketing, sensitivity to innovation, sensitivity to different subjects, we're able now to capture and provide differently to each of our customer and we will do more of this. This customization process is probably the avenue of the future, so that we are getting in the value chain, even more finding our own value and space.

In doing so, on the page after, the dotted line is where we come from. We invested in acquisitions, we invested in growing the customer base and we are doing more customer or more SKU in an organic way, because it's a face by which we do organically.

At the same time, we are moving to value added distributer and what does it mean concretely speaking the more digital allow to have better assortment, predictive assortment, predictive churn in terms of management of the customer base, there is room for additional growth. How often do we lose our customer without being know and we need to work out to replace this one.

This is a B2B syndrome, which we are now tackling heavily in order to get a better leverage from our salesforce and process and back office optimization obviously, this is where we are doing more and more now. And the future, which we are paving the road to is really a future of customized individual value proposition through data driven and for example, we take care of very individualized customer experience in order to be able to propose and transact individually and very soon, if you go to our website, you will see that there is a personalization capability, which is already envisaged, which is now on the - even on the home page, some information we've been dedicated to the customer depending on this login, so that we are really getting now as fine-tuned as a retail business has been doing recently, we will do in the B2B world.

Just to give you a sense for and obviously segmented services and supplier relationship and trends in order to have a very good of the future and knowing where is my product, I can even find it, whether it's still at the supplier or already reaching in 20 minutes the door of our customers. This is kind of new business we're entering into it, it's a real service business in order to give with full view to the customer of their best need and their best - the best service we can provide to them.

We used to say internally that what is next best so far, and next best action. I mentioned this one or two times already and I'm really obsessed with all my team in order to get there, telling our customer and telling our salesforce, telling everybody on the phone, on the web, on the travelling, what is next best action and next best offer in order to be at the right time for the right people.

And regulating that data, we land past that, it's a fine a journey, it's also a journey of growth, I think it's also a journey and to the one who thought that some big players could really take me out of business, yes, it could have been, I don't know, because it didn't materialize so far and on the other end, we are joining this battle by moving ourselves into this field of digital competition, because it's another completion, fine, but we deliver this competition and this is what counts. We are not resisting, I'm not opposing, I'm not rejecting to the opposite.

It's a lot of fun to get there and bring all our customer base and our team into this new rules of the game if the future, fine. And obviously, in doing so, you can see, we tried to build even a competitive advantage while moving into it, and because just to be as good as is not good enough, we have to do a few things better than and some of those, we do some few things better than us.

Okay, and but we have to be in the right place and building competitive advantage means for us systematic web and EDI transaction, full digital content for customer enterprise, it looks trivial, but it's so rich, so complex, so difficult to get everything at the high quality, we are there, we are getting there. Seamless multi-channel customer experience, every customer at Rexel has.

The sales reps, branch attached to, but also login and EDI, somebody on the phone who is recognized by his login, when he calls, this is he, Mr. X, Y, Z, knowing immediately is an industry, always residentially talk to specialist, he's not somewhere on the phone with nobody knowing exactly who he is and what his needs are.

These are the kinds of customer experience we're getting to. And we may join forces on some marketplaces, we are not entitled to do everything by ourselves, we do the electrical installation and products, but if somebody medium term needs all the product that we are not entitled to make, we will join forces with certain market places to have complementary partnership and we are pushing this, for example, right now in Belgium.

And we are also in electrical vehicle partnership in Sweden, Australia, Switzerland, we are already participating to the evolution of this bubbling up markets. Now, the way to re-profile ourselves in all of this and continuing to do what we have done by migrating to being a service company without the proximity services that people require from our 2000 and so branches.

They need the proximity, they don't need to be excited, they need the number of outlets, close enough in order to give them the peak and pack from a logistic standpoint or the advice, but they need also the digital proximity. Getting to them through digital ways, this is getting the digital proximity as much as physical proximity in order to make sure that a customer stays in his environment.

And if I think right now for example, one of the things which is a key highlight, I take a country rather conservative when moving to digital because we had it for example in France, I mean now on Europe, it's much faster than the sales of Europe and France is in the middle and the number of transaction is rather low here in this country, in our business, okay. But recently, we got 40,000, slightly above 40,000 installers being in our digital ecosystem.

Only slightly one out of 4 plays every day with all that, but 33000 are coming every week, they need a quotation, they need product information, what they need, they come, they go in our digital environment and work with it and for me, this is really fundamental because this is a migration from physical to digital, it is first taking our customer base, our golden asset into our digital environment, so that they look for product, they look for a chat, they look for advice, they can get through the web, through DDI, through their phone or direct contact if they need in any point of physical proximity. And this is why I'm saying digital proximity to people who need project that would get dedicated services, dedicated logistics, because you need to deliver on time in full during the nights where the train is about to give you one hour of the train to go to the 27th floor of a building and let it falls and with that, we will have a lot of it, because nothing can be done during the day and kind of stuff.

These are services to be charged, to be done, but to be with our customer and the same customer may have need for proximity, they may have a need for project, or it may need for example for our best specialty business, specialty business in lighting, specialty business in datacom, specialty business in a geo solution like we do have with our IES in the US capital light or in France or more in different regions and countries. This is - I'm highlighting here the journey, which fueled our growth of today, even more will fuel our growth of tomorrow in a market which is by itself bringing new avenues.

Now, before I go even further down, I mean, artificial intelligence, we invest right now in artificial intelligence development. We are spending in some of them and we are spending money externally in order to get faster artificial intelligence report to run our business and there is critical back office to be done, steps, right now in the process of.

I'll give you an example, I mean, in this business, we receive tons of emails every day in order to get this and the whole thing is to get email to AI. And nobody touch and nobody - and it was done manually during years.

And these are the kind of things and changes, but on a broad scale, it looks simple, if you're alone. But on the scale of 2000 to 100 branches around the world and the lot of different culture and adoption in order to come and stand on and so on, and I'm very glad that we are embracing this and getting done.

It looks invisible. This is how we transform the company at this stage, in order to go to the next one, leveraging artificial intelligence from predictive analytics.

The more we can predict, the better we will spend our money at the right place at the right time. And I can tell you we are very encouraged because we have identified 16 different usage and transformation of the profile of the company the way we exist, of which two are being prioritized and being now developed and rolled out, we're beginning to do so and that we're more, because all of this will feed machine learning type of approach so that it's never ending progress in this first two and later on 16 avenues, by which we change our business model profile.

And efficiency, we live from more customer, more SKU, it means qualified sales force, intensive presence that's selective because productivity is key there and obviously the Salesforce is being highly helped in order to what I say, what is next best action, next best offer. And at the same time, we do not forget that we have a capital allocation policy that is needed in order to get shareholder value creation and shareholder support on the long run and organic growth to fund the core business and also some of the evolution I just mentioned.

The good dividend policy, predictable year-on-year and therefore we have committed to certain ratio and we will commit to continue to match them. Further de-leveraging because without M&A, because active management portfolio is always needed in a company in order to not to be loaded too late with something that you should have looked into differently and some selective acquisitions, some of what I have mentioned before whether it's digital or non-digital require selective acquisition and we will focus on digital M&A.

I mean who is the digital contributor to the billing intelligence modelling, who is a solid contributor and could be acquired for getting more in-depth into IoT. And who else could be a good one to be acquired in order to be faster in industry for the year and these are what we would be looking at.

But obviously always by very strict criteria. All of this to highlight on the future, what we have done, you got what the numbers are trending at, about where we are and we have done the year and now I give you a sense for the future, which brings me to the last page and last moment before the Q&A, the outlook.

And the outlook, as you can see it, consistent with our medium term ambition and assuming no material changes in the macroeconomic environment, we target for next year 2019, a comfortable scope of consolidation and exchange rates, with 2% to 4% same day sales growth, excluding an estimated unfavorable impact of 1% from branch closure in Germany and Spain in order to be sure everybody has the same way to calculate, the 5% to 7% increase in adjusted EBITA, and a further improvement in our indebtedness ratio, which is defined by net debt to EBITDA. And in saying that, I thank you for your time, your attention and hopefully we'll be able to answer all your questions from now on.

And can I take the first question in the room and just immediately after, we may move to the question on the web, but question from the room.

It's Andreas Willi from JPMorgan. I got a question on the profit rates for 2019.

You gave us the details for 2018 around investments and inflation and so on, maybe you could help us a bit with what to expect for 2019, both on the cost inflation side, which I guess will continue to put some pressure on labor inflation and so on, whether kind of the 30 bps productivity a year is a normal level we should also see next year in '19 and what you're going to do with investments, are we going to keep going at the same pace or is that slowing down?

Absent an inflation in pricing, they would cover the inflation in costing, which is still the case today, even if we see a little bit of potentially a change in the, so far in the equation there, I turn only on productivity gains in order to cover the inflation on cost. Not knowing what could come from our side, I will look internally in the company for productivity gains.

This is a budget that each of my country has to deliver, one piece of the equation. Yes.

We will continue to invest [indiscernible] I was investing in branches and branch opening with a playback profile that we've seen. I told you we invest now a little bit more in digital, which is less fixed assets, less and more probably a viable question to future.

But digital requires some investment, as I told - as I just said before. And the investments in digital sometime are more effective than CapEx.

This is different, because everything on the platform on the cloud and everything is on OpEx, and therefore I'm looking for even further productivity in order to finance some of this and we are going through the exercise also of selectivity within our own digital way, between conventional ERPs of yesterday to move to more digital application and type of stuff. I mean, what I have said about the outlook is changing the profile of this.

Now, yet there is inflation piece and therefore we are doing significant effort in accelerating, for example, the back office digitalization in actual ratings, because this is a way to get productivity gains. That's one of the rules.

My second question on North America, particularly the US, where you've had the strong turnaround in the last year. When you started as CEO, there were many questions on the role of North America within Rexel and whether you should look for example to consolidate the market with combining it with the US competitor, so your message is always very clear, the focus is to let value and turn it around.

Now, you have achieved a lot of that, are you more open to look at potential consolidation moves in the US or merging it with the peer or something like that. Or now that the business is doing well, it's kind of earned its place and it's a core of Rexel in the future.

My first answer is things have to be done at the right time. I still have the self-help to come in the US.

Everything we have done is rather recent. I have about 15 months of improvement, never forget that I will never forget that it was the day of Thanksgiving in '17, which is November when we went to regionalization.

It's only last year same time we are finalizing regional budgets and adjustments too. Meaning, we got all of this because we have done not just this, we have done many other stuff that we are getting there and we can capture more benefit of this in the sense that it's still going on and accelerating and that path has been for example in digital portion that we are rolling out throughout the country and we have all these benefits still to come.

The second thing about - the question about consolidation and therefore, today, I'm looking at it to be clear, because I'm looking at getting the results of everything we have done. I have also committed to the market to say, when I open branches, it's 18 months before you get the positive results in to our EBITA.

Some of them are not yet there and you know that the operating leverage has suffered so to speak suffered. I mean, it was really modest to an investment and you told me that all the time collectively and individually, which I fully understood and it was correct.

The time will come where we will have all these increased investments, more of the payback on our EBITA line. Now consolidation of the market, there are a few movements.

One of my competitor has acquired somebody recently, okay, fine. It's something we couldn't do, because it's [indiscernible] region.

I'm not going to have to sacrifice plat for something which is not better than plat. That's to make it simple and short.

Now, there are other things in the market going around, we're looking at different things. Title is rather 10 years of growth in the US.

And the second thing, and I'm not good enough to know if we're one year, two years before the cycle slowing down or turning. This is an element of I'm very produce, I always will tell you when I feel the cycle will turn, I would stop certain investment.

At the earlier signal, I will not commit, because I want to get this in the result and not continue to be on an exposed mode. And I'm continuing to watch carefully at this.

The second thing is more people would be very high today, very high people at maybe the high end of the cycle and at the same time, probably significant in size would put me back into corners where I am sure I want to go, because digital way is the one I don't want to miss. Now if I find very good highly digitalized and that could bring scale, presence, market share at a reasonable price, why not?

So far, I've not seen that.

[indiscernible] Just a follow-up question on the US. If I look at the number of branch opening in 2018 compared to 2017, there has been a sharp drop in '17 I think.

But I think that you are more and more cautious to getting this in North America. And was there still some stage in Texas, for instance, where you have lot of things to do, so what are your plans in terms of branch opening for next year?

There's a little bit of a semantic issue with branch opening and because it's really new and we have done more than 100 refresh, meaning staying at the same place, rebuilding assortment, you see that in the working cap. Because you put inventory, we put sales people and we are really rebuild from inside the strength of the model without always adding and investment wise, it's a bit lower.

Working capital wise, it's the same and the effect is shorter, which is always, for me, vis-a-vis a potential slowing down or whatever it may mean that when you want for the cycle coming to an end. It was a more prudent way of getting faster results.

That's the balance - the other thing is opening a branch, it takes people before anything else, to find good people right now in the US. Wow, it's not the easiest job.

It's by far one of the toughest. And right now, in our own company for the parameter we have, this year, I have to replace 1000 people, because the pension, because 1000, to find 1000 different caliber than the past, it's a hell of a job.

Therefore, yes, the branch which we see in the numbers is correct. It's a little bit hiding the fact that a refresh is getting a very different branch, different presence, different service, different skills, maybe more people and much more working cap to get the net promoter score up, because we have a long way to go to be yet at the level we would like to be in terms of services.

[indiscernible] and we are very cautious on our opening policy.

Your question about [indiscernible] with 320 branches around Texas. It's not about my better is tomorrow.

Because I will never be able to open 320 in Texas. And even by a company of that kind, I would buy assets.

I think I have enough of assets. And I need to gain market share, I need to get digital, I need to get a new stream of revenues and margin without adding too much assets.

Now, that I said for 0, there might be something good and bad to be done, but highly selected. I understand I'm pressing you a little bit because there is a strong belief that I had to do a few things, then fine and I tried to get the positive of, would we have done, we show you and we give you as much as we can detail so that you can better judge for your modeling, but I'm entering into a different world because today my partner so far has not yet been Amazon as everybody has tried to make me, [indiscernible] players, they are other people coming into our world, coming from outside and they play different roles.

Therefore, I have to move like I told you from the past without assets into a different world and I'm there.

Second question on digital sales, what was the percentage of revenue in 2018 coming from digital. I think you told in the presentation, but maybe I missed it.

2.1 billion of our sales. You could take an average margin, however it's PDI and industry and digital transaction, it tends to be a lower margin erosion business than the rest for the simple thing that you don't negotiate with a machine.

And if you take 18 months, 24 months, you are just surprised to each of the customers, because it's in the orange pricing, but it tends to be that there is less what we call the overwrite at the counter or the overwrite, people actually do something to me. At the end of the day, we talk through it.

And do you have targets in terms of percentage by region that you disclose?

No. We will not disclose yet, because it's moving.

There would be an asymptomatic moment, which we've seen, but I always have few examples that contradict what I would tell you, but they are exceptions. 70% in the ground region in Switzerland, 70.

But if you take Belgium and Netherlands, it's about 40%. The cost between 40 and 50 and above 50, it's started to be a little bit asymptomatic, but it's already in terms of productivity gains lowering the cost and again EBITDA increased growth proportionally with this when you reach this level.

[indiscernible]

Yeah. But we now try to have the first resource as of when, below 20 no effect.

You keep your cost and you have, because it's everybody doing a little bit of, but not enough of it. But, just anything pure player roughly.

This is what we see in Benelux and in our first countries. In the middle between 20% and 40%, well, is more an acceleration to get to the 40s, which you get even more benefit form the cost side, OpEx.

[indiscernible] Europe is 24%, already a very good performance in Europe and digital sales grew by almost 16% this year and the 2 billion represents around 15% of our total sales.

Alfred Glaser from ODDO BHF. Just on digital Patrick, you mentioned before that in fact you invest a lot in digital in the back office in order to improve productivity, what's your target in terms of productivity evolution for the whole group and into the next two years, could you explain a bit?

If I give you productivity, you will take my OpEx line, we look like to it on a generic mode and then you will come back and tell me, Patrick, two years ago, you told me this and that. Probably yeah and I recognize that.

And it's fair and I know to whom to write. Free size as you are, I'm sure.

I mentioned productivity gains, I need to make to offset the difference between inflation I pricing and inflation in costing going factor and pricing so far. And I have also to finance some of the transformation to digital, meaning it's probably a productivity effort superior to the one we ever did before.

If I don't digitalize the back office, it's impossible. Therefore, the must is digitalization, but digitization means something else.

It means different process. It's not order to cash, how many people that you take tomorrow, but you have to rethink the way you do it, opening an account, it has to be a one minute opening.

5 years ago, in our business, opening it was 5 days and this transformation will obviously have an impact on the way we do things. Now, there is a social dimension to everything, depending on the country.

When we did the restructuring in Germany, 100 people at the H2. We are almost two short, but I prefer to be two shorter and not have to do it again in 2 or 3 years' time with higher digitalization, just to give you a sense, through the restructuration, we also took care in where it was needed already having made the back office confirming.

Therefore, I don't give you a good number I understand. But I give you a sense for how I look at it, which we never had done like this so far.

It's first year we grew for this. We give you a sense that the OpEx increased because as I said, digitalization increased OpEx per se compared to CapEx of yesterday's.

This is cloud based, this is license not even - it's a lot of developments that we cannot by the way put as CapEx and we need to get. Therefore, sometimes, some of the margin generated by additional growth, which I try to minimize to be, so that it goes to the bottom line, at the same time, without compromising on this evolution.

In 2018, how much of your CapEx was digital related?

60%. Yes.

Because sometimes, we have to touch on the RP too, in order to make it happen for the future, 60%. Couple of years ago, it would have been 70% logistics.

And how much of your OpEx evolution was due to the investment in digital?

The IT and digital OpEx is roughly 8% of our tax and we saw in the bridge, it's 0.27 of the budget of investment in the 2018 bridge.

I was hoping you could, I was hoping you can maybe come back to the building blocks of your guidance and specifically the top line and I was curious to know whether you are factoring in there some potential to continue to outgrow to US market and whether you can comment on that, because when I compare your number for the fourth quarter specifically to what we are seeing elsewhere in the US, it seems that there is some form of outperformance here, so just to understand maybe the building blocks of the top line guidance please, that's the first question.

Nothing of the US. The top line guidance, the 1% is 140 million, this case the 140 million we extracted from Germany and Spain and if you take 1% or 140, therefore to avoid miscalculation, we made it clear here that this is without the - we have to take care of the 140 million that we not repeat this year in Germany and Spain for having the restructuration.

It's just 1% of our supply.

That is for the German and Spanish, 1% and for US, as we stated in the last part of the guidance, assuming no material change in the macroeconomic environment, today, we have strong momentum in the US, with quite high level of backlog. So we are, yes, the guidance is made on the assumption that we keep a good momentum on that one.

Thanks for the explanation on Spain and Germany. There was not so much in my question, but I'm trying to understand here how you think about the dynamics by geography to come up to the net 1%, 2%, 3% same day sales growth and whether within that, you are assuming some outperformance in the US market, because I think we cannot necessarily say that the US industrial demand or construction demand at the moment is growing 8% organically as you've done in the fourth quarter.

So this is why I was saying, it seems that there is some outperformance from your side and I'm just curious to understand how you see next year, i.e., 2019 from that standpoint?

I would never take and I know that this has been done at the end of '17. I would never take Q4 for normal trend.

Sometime, customer need to finish the job before year end. Sometime, people need to make their bonuses and they rush to get it done.

They are always slightly distortion. However, this year, I have to admit it has been a growing trend without ending space for any artificial kind of thing happening in Q4, especially in the US.

The US business, whether it's our customer or ourselves, is mentioned by the number of man days available. It's not the demand which is high or low.

By the way, today, you queue, 3, 4, 5, 6 months to get good electricians or contractor to do a commercial building. And by the way, this is why there is so much sub-contracting and this is why there are so many places in the US we are unionized that makes the whole thing much more expensive because the unions whether it's Miamis and San Francisco or New York are controlling the electricians installation world and not just the electricians, most of it is going into the construction work.

And it's booming, let's put it this way, it's booming. There is demand, it's probably fueled by the 15% of what Texas that was made available to the Americans, they had project it took a little bit of time to get a project out running and therefore we are on a solid trend and which we've seen in our backlog, we see in our demand.

And at the same time, we have freed up our resources and people are gaining market share, our people are gaining market share a little bit. But we come from so far, it hasn't been our case.

It's good to recur and gain a little bit on others. Yes.

We do. Yes.

We do. And not, if you've noticed, not at all at the cost of margin.

Some other people have done lower margin, higher volume. In the US, we have done higher volume, higher margin.

That's where we are and we are continuing.

My second question was around the inventory level. I just wanted to understand how much of the increase was due to the transition and the operational structure in the US and how much is maybe due as well to the fact that you are increasing the number of SKUs as well across the firm.

So just maybe to understand how much can be resolved fairly quickly and how much is maybe a little bit structural.

The one thing which had to be done, without which no growth would have existed, it's not an organization design that makes something happen. It should facilitate better.

And the first investment we did remember and everybody was scary about the effect was working capital and inventory and we have done a lot on inventory, because making product available was a condition to sell and having the right assortment is a condition to sell. On the quality side of this, for digital, we would do better and probably come to a better use of inventory money put in inventory, but it was the first fundamental break.

Now, it was not done at the same day everywhere around the States, we had to do it in the branches and one of the way to get it done and not exploding out of control was also ahead by regionalization, but regionalization is a way to put our hands around markets, which are no longer balanced, remember it was [indiscernible] other banners across the states and now we put these multi banner presence within a region so that we can put the right resources in the right place. This is a certain thing which we still had a negative effect last year, it was the GIS and the GE business, which was going down.

ABG has fixed the GIS in both terms has fixed the issues, but even beginning of last year, we were going down. Now on comparable, last year and this year, I still see that as being favorable to us, which is not the case for the one led dependent on GE and GIS.

In terms of my competitors, we are less dependent upon, meaning we got structural things to do, the GIS, the GE customer base to be replaced by other customers, because GE closed activities and we were their main supplier. 100 million and therefore we have to capture new customers, 100 million each time, it's not small fish.

And we are doing this and we have recovered from this. Now, you need also management and the way you manage your Salesforce or the way you manage these regions and by the way we've got a lot of layers in order to become very agile, to become short in terms of the decisions made and it goes too and myself, we spend a lot of time making sure this is the way we get things done.

My wife would tell you how many trips I have made, I would not comment on that. But believe me, this has been going down, fixing the bridge one by one.

Therefore, yes, there is a structural capability to embrace this market in its complexity. It's supplier, very complex, very different from Europe.

Pricing tends to be very complex, because you have visible pricing everywhere around the next. On the other end, you have a lot of specialty pricing and how does it fly and people going around and for every single tender, everybody comes with, I have done this, I have done that, okay.

At the same time, costing is high, man power rare. And go and get it fast.

Therefore, yes, we have adapted to this, we have changed our structure, changed the way of doing. We are building on our central blocks, projects through the project houses, proximity, physical and digital using the plat, extending too and specialty because I think energy solution, Capital Light continue to be good providers, take this, Capital Light.

Capital Light is a company who is a real turnkey project of lighting system for the malls. With the retail going to the right, [indiscernible] and not investing a lot.

Within a year, we had to reestablish this company to a new market and they became the specialist of car leadership, because this is where to sell cars, you need to add the lighting and all the system very effective, they did it and they are looking for what is next, because this is the ability by which we will grow in the US market, but at least, it's there, it's now in the DNA.

I'll try on the growth as well. I'm really interested to know what underlying end market forecast you have for North America and Europe within your guidance, i.e., what do you expect the markets to grow?

Market in Europe, the growth of the market in Europe are very contrasted by the way. I have to eliminate the UK.

First of all, I don't know and I don't expect any nice news. Therefore, better be prepared for, let's say, rather - but the market has slowed down significantly already in the UK.

I mean, people think the Brexit will be the beginning of in our business, one set of the market was financed by project that EU was financing and nobody knew whether it would be coming or not. I have a long list of projects that we probably never materialized.

And they are still open for three years, but have never been started. By the way, Rexel was pretty good in this project business and that's probably, still we have to restructure and get to something much leaner and much lower because other players were more approximated and we were more project.

And this project has two effects. The one leftover are low margin, forget, it's not contributing to what it should be or they are so uncertain and certainly I would like to be sure we are getting paid at the end.

In this case, it is something that nobody should forget. It has happened once, it may happen a few more time.

Therefore, we are highly selective and I'm looking for margin and not for volume. And I'm looking for results and not for market share.

There is the choice to be made there. And by the way, should any recession happen in one or the other country or slowing down in Europe, this is the way we will tackle the slowing down go for margin.

And then keep your salesforce and get the rest to leanest as you can. I think the chance to open this avenue, because people ask me, what are you going to do if you have the answer and we have the plan prepared everywhere and should we see that needed here or there or globally or locally, we do it, it's a way of life.

It's not a share, so what and we are doing it right now in the UK. And now the rest of the business, if I take Sweden, continues to grow.

Some people say it's the end of the cycle. I was recently - Sweden is [indiscernible] in our business, extensive industrial side outside.

It's 75% of the demand, of the growth. And when they look at this three, they are full of project, full of stuff, different nature, more innovation than brand new, but it's very good renovation to distributor.

It's even better than some news and Norway is very different. It's fragmented over the place and it's a different - totally different market.

Now when it comes to Germany, we have done restructuring. We need to go back to, let's say, normal market grows, because that's just such a cut and everything, I'm going to know more market growth, which is probably something in the range, 2 to 3 in the residential and even if the latest news on industry are a bit lower, it's still positive and we have market share to gain in industry, good partnering, good partnership with Siemens and a few other vendors who needs us in the field.

I mean, they - no reason to believe that what we have done is right. France, well my, French colleague who could tell you more, but I know this market a little bit too, and it's still on a high demand volume.

Now, is it going up to high growth on top of a significant volume? Probably not.

But we don't need a lot of growth here in this market, because we are looking for the right mix. We are in the right mix.

We have still pockets to grow. We are not our average market share everywhere, we are regional, there is demand in some places.

We can gain, we are going after, we are rebalancing the workforce, we are rebalancing the salesforce to grow on the projects where there is more to be done. It's very local now and when I say local or region.

And by the way, if there was a little bit of softening in December, there was no such thing in January.

Thank you very much for a detailed run through. Can I ask for a similar one across the US and Canada?

No. I'm not sure I fully understand the question.

I was really just interested in what market growth assumptions you have behind your guidance, i.e., what you expect the underlying markets to grow at and I think we now have a pretty decent idea on Europe and the segments there, so just interested in the other challenge in North America and the two components of that?

In the North American market, I have to compound it by the region we are in. And that would be very different.

I still expect on the both coasts to be a reasonably solid. Midwest, I don't know.

On the other end, Denver Valley and the South is booming, absolutely booming. It's a new California in commercial business and bringing a lot of people to come, but the more I look at the US, it's driven by local tax.

You have market doubling in five years by people moving because the tax are much lower in a place and if you follow the tax, you follow the demand. Now, and it goes by state and no longer by my region.

Within my region, I have certain state booming and others are more flattish and I am - and it goes fast. Now, globally, similar to last year, it's probably something not too far from what I can judge, but please and that's macroeconomic institutes, I will give you an indication, I don't give you a commitment.

This one. Asia, after we have re-dimensioned our business to industry, we go with the automation in industry and there is still a lot of demand for - internal demand in China because we are not in any other Asian markets anymore.

There is still good resilient demand in automation.

And we are in automotive, which could serve and we are in tier 2, tier 3 industrial segment.

A couple please. Firstly, when we think about your future initiatives and investments into digital, which will no doubt transform your business in the midterm, how should we think or how do you think about which core capabilities you need to develop in house to support predictive service or improve customer relation or logistics management and what do you think you can buy or continue to acquire cloud based or via CapEx investment from third parties.

So how should we look to you developing that skill set in digital and perhaps to talk about the impact on the physical assets you have over the next two or three years. And my second question, which you can just carry is relating to how you run the leverage or how you see the capital structure of the business mid-term.

Clearly, the message today is you will continue to reduce or de-lever the company, reduce debt, but what sort of level do you or the board think is the appropriate level of leverage within the group over the mid-term, if you have a target? Thank you.

We have targets, whether I will give you all, my targets, it's a different story, but we have our internal targets and I will answer this last one first. De-leveraging further down may require certain choices at some moment in time and - but it's a commitment.

The pace is more, it could be more accelerated at some moments. But the trend of this year, it's a good pace for the future.

The trend of decrease for this year, it's a good pace for the future. Now it does not go forever like this.

There is a moment for me, where we say it's good enough and it found. We are - I remember when I took over the job above three people say, ah, if you could be below would be good.

Then one year later, 2.5 was already, ah, you should be below and recently it's below 2 and where does it make sense, once you reach something in that range. Further down, it really depend on other, what will happen in the market on interest rates, on other things, but and then I face the market, which tells me, well, distribution B2B, you need to transform, but de-leverage also to be less sensitive to the cycle and kind of stuff, which I all understand.

It's a balancing. Therefore, I'm telling you, de-leveraging at the speed, at the pace of what we have done this year is for two or three years is not that thing to envisage.

Okay. Everything being equal, that's the best answer I can give you, as we speak.

Regarding the transformation and indirectly - and directly you touch on when do I get the physical footprint because I have more heavily digitalized. Until you're not at 40%, 45% of digital, difficult to really get something significant on your physical footprint reduction.

The other thing we can do and we are really doing now is rethinking with the physical presence means, meaning major building, 3000, 4000 square meter with so many things inside are no longer - absolutely no longer the right way by which we approach the market. Either, it's a place where of that size, which will like a semi hub, fully automatized or it's much smaller, but the presence I told of this proximity model may require more - much higher, not much, but a little bit higher number of outlet presence but probably one-third the size of what they are today.

When it comes to OpEx, it has a significant impact, if I would have one third less square meter to be paid, even if they are in more numbers about less. The manning is also different.

Manning over the phone require to consolidate skills on a few places, because it's giving advice, it's taking somebody of the phone, it takes three quarter of an hour to make a quotation, you need to have all the digital to have to be done. People try to work like this today and it's a different - it's a different setup and then, at that moment telephone lines for example and installation require CapEx and OpEx to increase because we need to get the right power to go through.

By the way, this business goes to big files, images, the technical business that is supporting us, we never talk about it, but this is one of the thing which goes up every day because power and very certainly 5G and 5G another set of equipment, which has a large span of about three years. Therefore, we gain a lot on one hand.

It rebalances on the other end. So the beginning of your question, which is the skills, it will be balanced between external and internal.

We will never be 100% internal because it goes too fast and to get the right skills and not to be on an obsolescence journey, we need to own some of it and we need to externalize and work with outside people. It's new because we have the news during decades to do everything by ourselves and therefore we need to select a few partners.

Not so many. Sometime, we test and that's good enough for we cannot find a proper way and we have to change, but we have to work with a shoe partner in platforming.

Do we host ourselves on an Azure platform of Microsoft or somebody else? But we need to choose once it's done, you need to work and get it on right and who is helping you doing it.

When it comes to predictive, you need to develop algorithms, we will never develop our own algorithm. They are specialists and they are language and they are skilled.

On the other one, we need to really understand which data should be provided, so that the algorithm can bring you the right output and the decision making. And recently, the people helping us were telling us of the total intensity, whether it should be translating to cost or into timing, the algorithm is only 10%.

The processes around and around the algorithm, the data, to bring the data and the quality of is another 20% to the algorithm, and in intensity, the onboarding, the usage 70%, meaning when you have 10% on the ongoing, consider and the cost of an algorithm, we know roughly what it is to get it written down by people tested and running. This is a certain amount of money.

You consider, it's around 10%. And the moment you put 2 million or 3 million in an algorithm, it means you will spend 25 million, getting this algorithm used every day by the population of Rexel.

Just to give you a flavor of what it means. And it's a new world, it's not direct or pack that you see on the P&L, it's people, you choose [Technical Difficulty] training, it's onboarding, it's effort, but it's a shift in the way we run our operating model.

Any other questions?

Just a question on your global footprints. Obviously, you mentioned or you answered the question earlier on the US, but elsewhere in the world, you've obviously cut back your 650 million or so of sales in Germany, Southeast Asia, China, and so forth.

When you look at your global geographical footprint now, are you happy with or has the world shifted again, since you set that target and are there other areas that you might consider or should we think that your footprint is no essentially where you'd like to have it? Thank you.

I think we have done enough of the repair mode. And now, we will come to sorting out in the future where it's good to be or less good to be, but not so much and also to be balanced and to be balanced means three things to me.

We have to have balance in which part of the world are doing better than others and not to be too dependent on one market. And therefore, first of all, Europe and US is very important to us to be balanced and growing more in the US to be more balanced with Europe and it's 55% Europe and 39% or something in US, rebalancing a little bit more would help.

And China, because - and China in specific, where we are today, it's good to be observed and it's also very needed for the second quartile. I have supplier relationship with require that we work together in different markets.

I cannot be with one and as to be the star in one market and not to be in other major market. Otherwise, we don't have a stable relationship and supplier relationship is not just a matter of volume and rebates and pricing.

It's a matter of having access to R&D, having access to partnership, what I call the co-platforming of the future in IoT on digital platforms, having access to certain developments, co-marketing, co-development and co-platforming are key in the relationship with the supplier. I could - I will not do it.

I could open a chapter on the evolution between the suppliers and the distribution of the future in terms of value chain, adding more end to end, working ways, not duplicating certain things like inventories, but working much more on the visibility and each other, how much we could gain in doing things like that. Therefore, if you don't have solid relationship with supplier, they will never allow this to happen and however it's highly needed to finance the future.

Just if I look from a cash standpoint, located in inventory that everybody should bring it down to have a higher score in serving the customer for lower inventory, global inventory, which only on end to end allow this to happen, which require five standardization, exchange of data on availability of product, which - and it goes quite far into each other system and I make it very concrete, but the third reason for me to stay or to keep this, except the rebalancing between US and Europe, which I would wish we could get as fast as we can, this is also further skilled and there are things developed in one continent that we can expand to the other one and vice versa. It's none other than digital world, it's no longer everybody in this corner, by far, not.

And we are learning things today in China, in industry automation, they are more advanced, except in Germany, they are more advanced than somebody else, the Chinese themselves. And on the other end, when you are working for Google campus in the Silicon Valley, you learn the building of the future before it's even done it in Europe and things like that.

And therefore, there is intelligence and richness in our business that you cannot get only by being present in one.

Thanks for taking the question. So just one.

So you've invested in working capital, especially in North America. Is that more to support growth or is the model of opening branches and counters inherently more capital working capital intense.

So should we also thing that the further branch openings in the US need similar investment in working capital?

Fortunately, a little, because, the branch opening is, we will be very cautious in our openings at the net balance and the comment in working capital is far less and the investment we have made over the last two years. So we think that the level today is even with the trade war, where we have bit of a starting on the side.

Any other questions?

Okay. No other questions in the room?

Well, I would like to - I think this is lunch time. Therefore, there is no question anymore and thank you for having taken the time.

Thank you for having joined whether by Skype phone or directly here in present and hopefully in the coming days for the one we will see on the road, we can clarify further questions to come. Thank you.