Legrand SA

Good morning, ladies and gentlemen, and welcome to today's Le Grand 2023 First Quarter Results Conference Call. All participants are in listen-only mode. There will be a question and answer session later. For your information, this conference is being recorded. At this time, I would like to hand the conference call over to CEO Mr. Benoit Cochart and CFO Mr. Frank Lemery. Please go ahead.

Thank you very much. Good morning, everybody. Benoit speaking. So Franck, Lemry, Roland-Marc, and myself are happy to welcome you to the Legrand Q1 2023 results conference call and webcast. Please note that this call is recorded. So as you know, we have published today our press release, our financial statements, and a slideshow to which we will refer. Those documents are available on the Legrand website. After a few opening remarks, we will comment the results into more details. Let me start with the key takeaways of this release on page 4 of the deck. First, Legrand reported a strong growth in sales for the quarter, up 9%. Second, the group delivered on the quarter a very robust growth in results and cash generation. So moving to page 6, I will start with an overview of sales. In Q1, we achieved a solid performance. Sales rose plus 9% to reach 2.15 billion euros, demonstrating again the group's resilience power in an uncertain, ever-changing environment. Sales grew organically by plus 7.4% in the first quarter. On top of organic growth, the scope effect was of plus 0.9%, including plus 1.3% linked to acquisitions and minus 0.4% linked to the net impact of the disengagement from Russia. Based on acquisitions announced and the likely date of consolidation, the full year impact should be around plus 1.5% in 2023, excluding the impact of disengagement from Russia. Last, the FX effect is almost flat on the quarter at plus 0.6% to sales for the year. Based on the average exchange rate in the month of April 2023, the full year impact on 2023 sales should be close to minus 3%. You will read on page 7 the key takeaways per geographies. Each of the three regions of the group achieved a solid developed growth despite weaknesses on the residential markets, which we believe will settle in the coming quarters or by 2024. We saw a very robust growth in our factory-expanding segments, i.e., energy efficiency offering, data centers, and connected products. These were the main comments I wanted to make on sales. I will now hand over to Franck for more color on our robust financial performance.

Thank you, Renoir, and good morning to all of you. I will start on page 9, commenting the operating margin. Before acquisitions and excluding Russia, we recorded a very high adjusted operating margin of 22.6% for Q1, representing a remarkable plus 2.3 points increase versus Q1 2022. The impact of acquisition and of Russia were, for each of them, minus 0.2 points. Therefore, the adjusted operating margin all-in for the quarter stood at 22.2%. The high profitability of the first quarter is driven by the gross margin. It is reflecting our firm control of expenses and sales prices in a persistently inflationary environment. Going now to page 10 with a focus on the strong value creation delivered on the first quarter, I will highlight two main points. First, with a net income of €330.5 million, representing 15.4% of our sales, earnings per share were up plus 28%. It benefited from the favorable trend of operating profit and financial results, as well as a lower income tax rate. The cash generated during the quarter is remarkable, with cash flow from operations up plus 19.8% at $434.6 million. Despite the continued strengthened coverage of inventory, free cash flow stood at 15.4% of sales and normalized free cash flow was up plus 22% at 18.1% of sales. The best-in-class level of profitability and cash generation highlight, first, the relevance of our model, and second, our resilience power. Moving now to page 11, regarding the balance sheet structure, we have a sound balance sheet, with net debt to EBITDA ratio standing at 1.2 at the end of Q1. Net debt at the end of the quarter amounts to 2.3 billion euros, with a gross net debt maturity at 4.4 years, of which more than 90% is at fixed rate. Moreover, we have the 2.5 billion euros available cash. In the current backdrop of interest rise, these financial items are key for the success of our acquisition policy and for value creation. This concludes the key highlights of Legrand Q1 2023 financial performance. And I'm now handing over back the mic to Benoît. Thank you, Franck. We can move now to page 13 regarding our full year targets.