Organic growth in sales: +4.6%
Rise in adjusted operating profit: +14.5%
Increase in net income excluding minority
interests: +17.0%
Ongoing active external growth
2017 targets confirmed
Regulatory News:
Gilles Schnepp, Chairman and CEO of Legrand (Paris:LR),
commented:
“Sustained, profitable growth in the first
quarter of 2017
The growth momentum observed in 2016 continued in the first
quarter of 2017, with sustained organic growth in sales of +4.6%,
driven by all geographic regions but also benefiting from a
positive calendar effect and orders placed in advance by some
distributors.
The impact of the broader scope of consolidation on sales stood
at +3.9% and the exchange-rate effect was favorable at +2.0%. Total
Group sales rose by nearly +11%.
Adjusted operating profit came to €259.5 million, up €32.8
million or +14.5% from the first quarter of 2016, reflecting
Legrand’s capacity to create value through profitable growth.
Adjusted operating margin before acquisitions (at 2016 scope of
consolidation) stood at 19.8% of sales (19.7% including
acquisitions), compared with 19.1% in the first quarter of
2016.
Net result excluding minority interests is up +17.0% compared
with the first quarter of 2016.
Ongoing active external growth
As in 2016, Legrand is active in acquisitions and has already
announced the acquisitions of OCL, specialized in architectural
lighting solutions for commercial and high-end residential
buildings in the United States.
Legrand is pursuing this strategy of bolt-on1 acquisitions and
today announced the acquisition of Finelite2, an acknowledged
American player in specification-grade linear lighting fixtures for
non-residential buildings. With annual sales of approximately $200
million and around 465 employees, this targeted acquisition rounds
out the Group’s presence in lighting control in North America.
Legrand also announced the acquisition of AFCO Systems Group, a
US provider of Voice-Data-Image (VDI) cabinets for datacenters as
well as the signature of a joint venture agreement to purchase
Borri3, an Italian UPS4 specialist.
These acquisitions allow Legrand to further consolidate its
product offering in growing markets underpinned in particular by
societal evolutions.”
2017 targets confirmed
Based on Legrand’s strong showings in the first quarter of 2017,
but taking into account unfavorable effects on sales growth in
coming quarters (the counterpart of orders placed in advance by
some distributors in the first quarter and, as announced, (i) high
basis for comparison in Italy and the United States and (ii)
calendar effects), Legrand confirms its two targets5 for 2017.
Reminder: these two targets are organic growth in sales of
between 0% and +3% and adjusted operating margin before
acquisitions (at 2016 scope of consolidation) of between 19.3% and
20.1% of sales.
Legrand will also pursue its strategy of value-creating
acquisitions.
1 Small- to mid-size acquisitions that complement Legrand’s
activities.
2 Subject to standard conditions precedent.
3 As Legrand holds 49% of equity, Borri will be consolidated on
the equity method.
4 Uninterruptible Power Supply.
5 Readers are invited to refer to the press release announcing
full-year 2016 results for the complete presentation of Legrand’s
2017 targets.
Key figures
Consolidated data
(€ millions)(1)
1st quarter 2016
1st quarter 2017 Change Sales
1,189.6 1,318.8 +10.9% Adjusted operating
profit 226.7 259.5 +14.5% As % of sales 19.1% 19.7% 19.8% before
acquisitions(2) Operating profit 216.0 246.9 +14.3% As % of sales
18.2% 18.7% Net income excluding
minority interests 127.4 149.0 +17.0% As % of sales 10.7%
11.3% Normalized free cash flow 155.5 180.8
+16.3% As % of sales 13.1% 13.7% Free cash flow 37.4 83.1 +122.2%
As % of sales 3.1% 6.3% Net financial
debt at March 31 790.9 894.9 +13.1%
(1) See appendices to this press release for definitions and
reconciliation tables of indicators
(2) At 2016 scope of consolidation
Financial performance at March 31, 2017
Consolidated sales
First-quarter 2017 sales stood at €1,318.8 million, up nearly
+11% from the first quarter of 2016. This healthy rise was
generated as follows:
- +4.6% in organic growth driven by all
geographic regions, but also benefiting on the one hand from a
favorable calendar effect of around one day (contributing +1.6
points to the quarter’s growth) and on the other hand from orders
placed in advance by distributors in some countries following the
announcement by the Group of a rise in sales prices in the second
quarter related to the increase in raw material prices observed at
the beginning of the year. The effect of orders placed in advance
by distributors should reverse in the second quarter.Reminder: for
the rest of the year (i) the second and third quarters of 2016
represent a high basis for comparison in the United States and
Italy, and (ii) the calendar effect should be unfavorable (and more
marked in the second quarter in particular);
- +3.9% growth in scope of consolidation
due to acquisitions; and
- +2.0%1 favorable exchange-rate
effect.
Changes in sales by destination at constant scope of
consolidation and exchange rates broke down as follows by
region:
1st quarter 2017 / 1st
quarter 2016 France +4.1% Italy +1.9% Rest of Europe +8.8%
North and Central America +4.0% Rest of the World +4.0%
Total
+4.6%
1 When average April exchange rates are applied to the last
eight months of the year, the annual exchange-rate effect for 2017
is +1.8%.
These changes at constant scope of consolidation and exchange
rates are analyzed below by geographical region:
- France (17.0% of Group sales): organic growth in sales
in France came to +4.1% in the first quarter of 2017, benefiting
from a one-day favorable calendar effect. Reminder: an unfavorable
calendar effect should impact sales evolution for the rest of the
year. This will be particularly marked in the second quarter, with
an estimated impact of -2 days.
As anticipated, new construction activity - which accounts for
around 40% of sales in France - is increasing, while renovation
business remains almost flat.
- Italy (10.8% of Group sales): sales rose +1.9% at
constant scope of consolidation and exchange rates in Italy, with
particularly good showings in home systems, energy distribution and
cable management. Reminder: the second and third quarters of 2016
represent a demanding basis for comparison.
- Rest of Europe (18.1% of Group sales): sales rose +8.8%
from the first quarter of 2016 at constant scope of consolidation
and exchange rates. This good performance was driven by the
region’s mature countries recording double-digit organic growth as
a whole, with strong sales increases in Spain and the United
Kingdom in particular. New economies also reported a strong rise in
sales, as in Russia, which recorded a solid performance over the
period. In Turkey, sales were nearly stable in the first
quarter.
- North and Central America (29.4% of Group sales): sales
rose +4.0% in the first quarter of 2017 at constant scope of
consolidation and exchange rates.
Organic growth in the United States alone stood at +3.5%.
Reminder: (i) the calendar effect should be unfavorable for the
rest of the year and (ii) in the second quarter and - even more -
in the third quarter of 2016, organic growth in sales had benefited
from favorable one-offs representing a demanding basis for
comparison for 2017.Moreover, Mexico recorded double-digit growth
in sales.
- Rest of the World (24.7% of Group sales): organic
growth was +4.0% in the first quarter of 2017. As in 2016, trends
varied significantly from one country to the next. India and China
recorded, for instance, a good start to the year. These good
performances helped more than compensate for the retreat in
activity in Australia and Malaysia. Business in the Middle East
recorded a slight decrease over the period.
Adjusted operating profit and margin
A good operating performance against a backdrop of rising sales
set adjusted operating margin before acquisitions2 at 19.8% of
sales in the first quarter of 2017, up 0.7 points from the first
quarter of 2016. Including acquisitions, adjusted operating margin
stood at 19.7% of sales.
As a result, adjusted operating profit came to €259.5 million,
up +14.5%, or an increase of €32.8 million, reflecting the Group’s
capacity to create value through profitable growth.
More specifically, by reacting quickly to adjust sales prices at
the beginning of the year, Legrand was able in the first quarter to
offset in absolute value the impact of a marked rise in raw
material prices.
Further sales price increases are scheduled for the second
quarter to take into account the ongoing rise in raw material
prices.
Net income excluding minority interests
Legrand’s net income excluding minority interests for the first
quarter of 2017 stood at €149.0 million, up +17.0% from the first
quarter of 2016. This reflects:
- a good operating performance, with a
€30.9 million improvement in operating profit;
- a €1.8 million decline in net financial
expense and a €1.7 million favorable change in the foreign-exchange
result;
partially offset by:
- a €12.0 million rise in income tax
expense (the tax rate stood at 33.0%, almost stable compared with
the one recorded for the full-year 2016); and
- the result of equity-accounted entities
(-€0.8 million).
1 At 2016 scope of consolidation.
Cash generation
Cash flow from operations rose by over 20% in the first quarter
of 2017 to stand at €217.3 million, representing 16.5% of
sales.
Working capital requirement was under control and came to 8.0%
of sales for the last twelve months.
Industrial investments stood at €32.6 million - over €9 million
more than in the first quarter of 2016 - with nearly 58% dedicated
to new products reflecting the pace of innovation fueling current
and future Group growth.
Free cash flow was thus €83.1 million, representing an increase
of €45.7 million compared with the first quarter of 2016,
including:
- a good operating performance with
EBITDA, up €33.8 million;
- a favorable trend in realized
foreign-exchange gains, which totaled €8.0 million;
- an €11.4 million decrease in working
capital requirement excluding tax items;
- a €3.0 million improvement in other
cash items; partially offset by:
- an €8.2 million rise in investments net
of sales;
- a €1.4 million rise in interest paid;
and
- a €0.9 million rise in tax paid.
Normalized free cash flow came to €180.8 million over the
period.
Active ongoing external growth
As in 2016, Legrand is active in acquisitions and has already
announced the acquisition of OCL, specialized in architectural
lighting solutions for commercial and high-end residential
buildings in the United States. OCL has annual sales of around $15
million and some 60 employees.
Legrand is actively pursuing this strategy of bolt-on1
acquisitions and today announced three
new transactions:
- the acquisition of Finelite2, an
acknowledged US player in specification-grade linear lighting
fixtures for non-residential buildings (including offices,
hospitals, schools, government buildings and retail outlets).
Backed by manufacturing facilities and a broad commercial network
in the United States, Finelite offers innovative, high added-value
solutions and premium customer service.In a market underpinned by
rising demand for energy-saving solutions, this targeted
acquisition rounds out Legrand’s presence in lighting control in
North America, including wall-mounted controls (Pass &
Seymour), control panels (WattStopper), architectural lighting
solutions (Pinnacle and OCL) and management systems for light
intensity and chromatic quality3.Based in Union City (California),
Finelite has around 465 employees and annual sales of approximately
$200 million, primarily in North America;
- the purchase of AFCO Systems Group,
specialized in Voice-Data-Image (VDI) cabinets used by datacenters
in the United States, which strengthens Legrand’s positions in the
buoyant digital infrastructure market. AFCO Systems Group has
annual sales of around $23 million and approximately 110 employees;
and
- the signature of a joint venture
agreement to purchase Borri4, an Italian three-phase UPS5 producer
known for its customized solutions. Borri has annual sales of
around €60 million and around 200 employees; it is based in
Bibbiena in Italy.
Altogether, based on acquisitions announced and their likely
date of consolidation, changes in scope of consolidation should
boost Group sales by more than +3.5% in 2017 as a whole, and dilute
adjusted operating margin by around -0.2 points for the same
period.
1 Small- to mid-size acquisitions that complement Legrand’s
activities.
2 Subject to standard conditions precedent.
3 Through partnerships with Lumenetix and Bios Lighting, two US
lighting startups respectively specialized in color management and
biological cycles.
4 As Legrand holds 49% of equity, Borri will be consolidated on
the equity method.
5 Uninterruptible Power Supply.
Dividend
As announced on February 9, 2017 and in keeping with its balance
sheet structure and solid achievements in 2016, Legrand will ask
the General Meeting of Shareholders to be held on May 31, 2017 to
approve the payment of a €1.19 per-share dividend in respect of
2016, representing a payout8 of 56% (equivalent to the 2015
figure). The ex-dividend date will be on June 2, 2017 and the
dividend will be paid on June 6, 2017.
Dividend distribution paid in respect of 2016 will be effected
under the same conditions as that in respect of the two previous
years. That is to say, based on the number of shares in circulation
at April 30, 2017, by deduction from:
- Distributable1 income in an amount of
€0.792 per share on the one hand; and
- the “issue premium” account in an
amount of €0.402 per share on the other.
1 Based on adjusted net income excluding minority interests.
Adjusted net income excluding minority interests does not take into
account the favorable non-recurring accounting impact of a tax
income generated by the mechanical revaluation of deferred tax
liabilities on trademarks that resulted from the announcement of
reductions in the corporate income tax rate, mainly in France. This
€61.2m tax income is adjusted as it has no cash impact, and bears
no relationship to the Group’s performance.
2 Indicative figure only; may be modified depending on changes
in the number of shares entitling owners to distribution between
now and the payment date.
-----------------------
The Board adopted consolidated financial statements for
first-quarter 2017 at its meeting on May 9, 2017. These
consolidated financial statements, a presentation of 2017
first-quarter results and the related teleconference (live and
replay) are available at www.legrand.com.
Key financial dates:
- General Meeting of Shareholders: May
31, 2017
- Ex-dividend date: June 2,
2017
- Dividend payment: June 6,
2017
- 2017 first-half results: July 31,
2017“Quiet period1” starts July 3, 2017
- 2017 nine-month results: November 7,
2017“Quiet period1” starts October 7, 2017
Latest publications:
- Registration Document filed with AMF
and second integrated report published: March 31,
2017
ABOUT LEGRAND
Legrand is the global specialist in electrical and digital
building infrastructures. Its comprehensive offering of solutions
for commercial, industrial and residential markets makes it a
benchmark for customers worldwide. Drawing on an approach that
involves all teams and stakeholders, Legrand is pursuing its
strategy of profitable and sustainable growth driven by
acquisitions and innovation, with a steady flow of new
offerings—including Eliot* connected products with enhanced value
in use. Legrand reported sales of more than €5 billion in 2016. The
company is listed on Euronext Paris and is a component stock of
indexes including the CAC 40, FTSE4Good, MSCI World, Corporate
Oekom Rating, DJSI World, Vigeo Euronext Eurozone 120, Europe
120-France 20 and World 120, and Ethibel Sustainability Index
Excellence.(code ISIN
FR0010307819).http://www.legrand.com
*Eliot is a program launched in 2015 by Legrand to speed up
deployment of the Internet of Things in its offering. A result of
the group’s innovation strategy, Eliot aims to develop connected
and interoperable solutions that deliver lasting benefits to
private individual users and professionals.
http://www.legrand.com/EN/eliot-program_13238.html
Appendices
Glossary
Working capital requirement
Working capital requirement is defined as the sum of trade
receivables, inventories, other current assets, income tax
receivables and short-term deferred tax assets, less the sum of
trade payables, other current liabilities, income tax payables,
short-term provisions and short-term deferred tax liabilities.
Free cash flow
Free cash flow is defined as the sum of net cash from operating
activities and net proceeds from sales of fixed and financial
assets, less capital expenditure and capitalized development
costs.
Normalized free cash flow
Normalized free cash flow is defined as the sum of net cash from
operating activities—based on a normalized working capital
requirement representing 10% of the last 12 month’s sales and whose
change at constant scope of consolidation and exchange rates is
adjusted for the period considered—and net proceeds of sales from
fixed and financial assets, less capital expenditure and
capitalized development costs.
Organic growth
Organic growth is defined as the change in sales at constant
structure (scope of consolidation) and exchange rates.
Net financial debt
Net financial debt is defined as the sum of short-term
borrowings and long-term borrowings, less cash and cash equivalents
and marketable securities.
EBITDA
EBITDA is defined as operating profit plus depreciation and
impairment of tangible assets, amortization and impairment of
intangible assets (including capitalized development costs) and
impairment of goodwill.
Cash flow from operations
Cash flow from operations is defined as net cash from operating
activities excluding changes in working capital requirement.
Adjusted operating profit
Adjusted operating profit is defined as operating profit
adjusted for amortization of revaluation of intangible assets at
the time of acquisitions and for expense/income relating to
acquisitions and, where applicable, for impairment of goodwill.
CSR
Corporate Social responsibility.
Payout
Payout is defined as the ratio between the proposed dividend per
share for a given year, divided by the net income excluding
minority interests per share of the same year, calculated on the
basis of the average number of ordinary shares at December 31 of
that year, excluding shares held in treasury.
Calculation of working capital requirement
In € millions Q1 2016 Q1 2017
Trade receivables 595.6 652.9 Inventories 684.7 712.2
Other current assets 160.9 167.5 Income tax receivables 26.3 32.6
Short-term deferred taxes assets/(liabilities) 91.0 91.1 Trade
payables (507.8) (583.5) Other current liabilities (470.4) (523.1)
Income tax payables (59.7) (52.7) Short-term provisions
(89.0) (85.2)
Working capital requirement
431.6 411.8
Calculation of net financial debt
In € millions Q1 2016 Q1 2017
Short-term borrowings 373.9 450.8 Long-term
borrowings 1,509.0 1,146.9 Cash and cash equivalents
(1,092.0) (702.8)
Net financial debt
790.9 894.9
Reconciliation of adjusted operating profit with profit for
the period
In € millions Q1 2016 Q1 2017
Profit for the period 128.2
149.8 Share of profits (losses) of equity-accounted entities
0.0 0.8 Income tax expense 62.1 74.1 Exchange (gains)
/ losses 3.7 2.0 Financial income (2.4) (2.9) Financial expense
24.4 23.1
Operating profit 216.0
246.9 Amortization of revaluation of intangible
assets at the time of acquisitions and expense/income relating to
acquisitions 10.7 12.6 Impairment of goodwill 0.0 0.0
Adjusted operating profit 226.7
259.5
Reconciliation of EBITDA with profit for the period
In € millions Q1 2016 Q1 2017
Profit for the period 128.2
149.8 Share of profits (losses) of equity-accounted entities
0.0 0.8 Income tax expense 62.1 74.1 Exchange (gains)
/ losses 3.7 2.0 Financial income (2.4) (2.9) Financial expense
24.4 23.1
Operating profit 216.0
246.9 Depreciation and impairment of tangible assets
23.1 23.5 Amortization and impairment of intangible assets
(including capitalized development costs) and impairment of
goodwill 16.7 19.2
EBITDA 255.8
289.6
Reconciliation of cash flow from operations, free cash flow
and normalized free cash flow with profit for the period
In € millions Q1 2016 Q1 2017
Profit for the period 128.2
149.8 Adjustments for non-cash movements in assets and
liabilities: Depreciation, amortization and
impairment 40.4 43.1 Changes in other non-current assets and
liabilities and long-term deferred
Taxes
11.6 17.6 Unrealized exchange (gains)/losses 0.3 6.6 (Gains)/losses
on sales of assets, net 0.2 (0.5) Other adjustments 0.1
0.7
Cash flow from operations 180.8
217.3 Decrease (Increase) in working capital
requirement (120.3) (103.6)
Net cash provided from
operating activities 60.5 113.7
Capital expenditure (including capitalized development costs)
(23.3) (32.6) Net proceeds from sales of fixed and financial assets
0.2 2.0
Free cash flow 37.4
83.1 Increase (Decrease) in working capital
requirement 120.3 103.6 (Increase) Decrease in normalized working
capital requirement (2.2) (5.9)
Normalized free
cash flow 155.5 180.8
Scope of consolidation
2016 Q1 H1 9M
Full year Full consolidation method Fluxpower
Balance sheet only Balance sheet only 8 months
11 months Primetech Balance sheet only Balance
sheet only 8 months 11 months Pinnacle Architectural
Lighting Balance sheet only 5 months
8 months Luxul Wireless Balance sheet
only 5 months 8 months Jontek
Balance sheet only 5 months 8 months Trias
Balance sheet only Balance sheet only 8
months CP Electronics Balance sheet only
Balance sheet only 7 months Solarfective
Balance sheet only 5 months
Equity method TBS(1) 6 months 9
months 12 months
2017 Q1
H1 9M Full year Full
consolidation method Fluxpower 3 months 6 months
9 months 12 months Primetech 3 months 6
months 9 months 12 months Pinnacle Architectural
Lighting 3 months 6 months 9 months 12
months Luxul Wireless 3 months 6 months 9
months 12 months Jontek 3 months 6 months
9 months 12 months Trias 3 months 6
months 9 months 12 months CP Electronics 3
months 6 months 9 months 12 months
Solarfective 3 months 6 months 9 months
12 months OCL Balance sheet only 5 months 8
months 11 months AFCO Systems Group To
be determined To be determined To be determined
Finelite To be determined To be
determined To be determined
Equity method TBS(1)
3 months 6 months 9 months 12 months
Borri To be determined To be determined
To be determined
(1)Created together with a partner, TBS is to produce and sell
transformers and busways in the Middle East.
Disclaimer
This press release may contain forward-looking statements which
are not historical data. Although Legrand considers these
statements to be based on reasonable assumptions at the time of
publication of this release, they are subject to various risks and
uncertainties that could cause actual results to differ from those
expressed or implied herein.
Details on risks are provided in the Legrand Registration
Document filed with the Autorité des marchés financiers (Financial
Markets Authority, AMF), which is available on-line on the websites
of both AMF (www.amf-france.org) and Legrand (www.legrand.com).
No forward-looking statement contained in this press release is
or should be construed as a promise or a guarantee of actual
results, which are liable to differ significantly. Therefore, such
statements should be used with caution, taking into account their
inherent uncertainty.
Subject to applicable regulations, Legrand does not undertake to
update these statements to reflect events or circumstances
occurring after the date of publication of this release.
This press release does not constitute an offer to sell, or a
solicitation of an offer to buy Legrand shares in any
jurisdiction.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170509006898/en/
Investor relationsLegrandFrançois Poisson, +33 (1) 49 72
53 53francois.poisson@legrand.frorPress RelationsPublicis
ConsultantsRobert Amady/Vilizara LazarovaTel: +33 (0)1 44 82 46 31
/ +33 (0)1 44 82 46 34Mob: +33 (0)6 72 63 08 91 / +33 (0)6 26 72 57
14robert.amady@consultants.publicis.frvilizara.lazarova@consultants.publicis.fr
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