Legrand SA

Good morning, ladies and gentlemen, and welcome to today's Legrand's 2026 Half-Year Results Conference Call. For your information, this conference is being recorded. All participants are in a listen-only mode. Later, there will be a question-and-answer session. At this time, I'd like to hand the call over to CEO, Mr. Benoît Coquart, and CFO, Mr. Franck Lemery. Please go ahead, sir.

Thank you very much. Good morning, everybody. Franck, Ronan, and myself are happy to welcome you to Legrand H1 2026 conference call and webcast. This morning, as usual, we published our press release, financial statements, and the slideshow that we will refer to during the call. After a few opening remarks, we'll comment on the results in more detail. Let me start on page four with the key highlights of the quarter. First, Legrand delivered another period of record sales growth together with continued excellent profitability. Second, we are continuing to implement our 2030 strategic roadmap with determination. Third, we are raising our full year 2026 targets. Moving to pages six and seven, I will start with an overview of sales. Self-delivered strong growth of plus 17.4% in H1 2026, excluding currency effects, comprising first, an organic growth of plus 9.8%, driven by data centers and energy transition-related offerings. Second, growth from acquisitions with a positive scope effect of plus 6.9%. Based on acquisitions announced and the likely dates of consolidation, the overall impact of acquisitions would be around plus 8% for the full year. The exchange rate effect was minus 3.7% in H1. Based on average exchange rates in June 2026, the full year currency effect would be around minus 1.5%. On page 7, you will find the key takeaways by geographies on a life-or-life basis. Europe sells down minus 2.4% in a building market that remains as expected contrasted. North and Central America increased sharply by plus 24.2% driven by strong success of data center and energy transition solutions in the US. Lastly, the rest of the world grew by plus 2.3% in the first half with significant growth in India and several other Asian countries, while activity in China remained soft. Despite the geopolitical situation, sales in the Middle East grew in each one. These were the main comments I wanted to make on sales. I will now hand over to Franck for more color on our financial performance.

Thank you, Benoît. And good morning to all of you. I will start on page 8 with adjusted operating profit. Profitability, despite inflationary pressure, remained very strong in H1 2026, with an adjusted operating margin of 20.8%. This is a high level, reflecting strong execution and adaptability, notably effective pricing and cost productivity, as well as the quality of our recent acquisitions. Going now to page 9, regarding value creation, First, net profit reached 698 million euros, up plus 11.2% versus H1 2025. This increase was driven primarily by higher operating profit, a slightly lower corporate income tax of 27.5%, and the negative evolution of the financial results. Second, free cash flow came to 488 million euros, represented 9% of sales. This is it for the key financial topics. I'm now handing over back to Benoît. Thank you, Franck.

So during the first half of the year, we actively deployed a strategic roadmap. Let's take three examples, data centers, acquisitions, and innovation. First, data centers on page 11. The group's strong organic growth in the first half was driven in particular by its data center business, which delivered organic growth of above plus 30%, and now accounts for 32% of Legrand's revenue. Legrand has built one of the broadest offerings in the industry, from on-site power generation to installation testing. Its portfolio includes more than 140,000 product references and a growing range of services, including engineering services, on-site support, testing, and commissioning. The group is particularly well positioned to support the development of high density AI data centers through scalable, highly engineered solutions tailored to the specific needs of hyperscalers, co-location, new cloud providers, and enterprise customers. Second example, acquisitions on page 13. So far in 2026, we already announced seven acquisitions so far, including one today in Finland. All are focused in Energy and digital transition further strengthening the group's leadership positions in high growth markets. They represent a combined annual revenue of around 450 million euros throughout the world. Third example, innovation on pages 15 and 16. As you know, innovation and regular new product launches have always been and remain a key priority for Legrand. You can see once again a continuous strong innovation momentum with the numerous product launches in all verticals since the beginning of the year. We can now move to page 18 with our full year 2026 targets. Confident in our action plans, we are raising our full year 2026 targets. Based on its first half performance and the current global macroeconomic environment, Legrand is now targeting the following in 2026. Self-growth excluding currency effects of between plus 16 and plus 19% versus plus 10 and plus 15% previously, comprising organic growth of between plus 8 and plus 10% versus plus 4 and plus 7% previously, and growth through acquisitions of around plus 8% versus between plus 6 and plus 8% previously. adjusted operating margin after acquisitions of between 20.5% and 21% of sales unchanged, a CSR achievement rate of at least 100% for the second year of its 2025-2027 roadmap. In conclusion, this first half highlights the strengths of our business model and the acceleration of momentum, strong growth, high profitability, and disciplined execution. Our capital market in September 29, 2026, in Singapore will be an opportunity to provide an update on our 2030 ambitions with a particular focus on data centers. We would be very happy to welcome you there. Those were the key topics of this release. I suggest that we switch now to Q&A. Thank you.

Thank you. We will now begin the question and answer session. To ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. To give more people the opportunity to ask questions, please limit yourselves to one question and one follow-up. We thank you for your understanding. One moment for this question. We will now take our first question from Andre Kutning from UBS. Please ask your question, Andre. Your line is open.

Yes, good morning. Thank you very much for taking my questions. Could we just start with comments on the data center-specific growth in the second half, if you could specify that for Americas and maybe and the rest of the world as well, please.

Well, so in the first half, as I said, the data center business grew a little bit more than plus 30% on a worldwide basis with a growth which was stronger in North America than elsewhere. As far as the full year is concerned, you know that three months back we were guiding for close to 20% now we believe that in full year basis our data center will grow between 25 and 30% organically for the full year which you can do the math but basically it means an H2 which would be between 20 and 30% so we expect to see the continuation of a strong growth in data center and I have to say that the pace is not slowing down we have very very solid orders A lot of discussions going on and we are quite optimistic, I have to say, for the next couple of months.

Got it, thank you. And if I may just ask, I think during the quarter you talked about working on the sidecar offering for the future 800V DC architectures. Could you talk about how long have you been working on that and when do you expect that to be commercially available? And given that I think this is seen as a sort of a transfer step between the current architectures and the full solid state setups, do you also intend to have an offering for what I think is going to be the battery rack in the full 800 VDC?

Well, André, I expected to have more questions on the results before getting into the LVDC Topic which the financial community is a bit sort of obsessed by. I don't want to be too exhaustive on that because we have a CMD end of September. We'll spend a day together and it will be the opportunity to go a lot deeper into those topics than during a call dedicated to the results. To make a long story short, yes, we are working on the full hybrid architecture, including the sidecar, and we are not late compared to what we can see on the market. And yes, of course, we are also working on the next step, which is a full LVDC, even though there's now a consensus on the market that it won't come before some time. I remind you the So those are the orders of magnitude that we've been we've been talking about for almost a year now and I can only note that more and more people are on the same page as us so yes we are working on both architecture hybrid architecture and LVDC to answer your question but once again we'll give you a lot more color in September and I hope André you will join us in Singapore of course yeah we'll be there thank you very much for taking the questions thank you thank you

We will now take our next question. And our next question comes from the line of Phil Buller of J.P. Morgan. Please ask your question. Phil, your line is open.

Hi, good morning. Thank you for the question. I'd like to start with another one on data center, if I may. It's 32% of your sales now, which is great on the one hand, but there are these growing concerns about a potential bubble, or at least the medium to longer term So perhaps you can share what you're seeing on the ground in terms of the medium term outlook. Are you concerned internally by the risk of a potential bubble beyond that near-term optimism? Just to start there, please.

Well, I've not heard much about a bubble as far as AI was concerned. I heard a lot about a bubble concerning potential valuations. What we see on the ground is that there's a huge demand which is not slowing down at all a sort of race to capacity which is happening with orders coming to be delivered in 26 some of them in 27 some of them in 28 and frankly speaking when I see the penetration rates of AI which is still very low and the disruption potential it has on so many sectors name software, traveling, financial services and many others. I think that we are just scratching the surface of what AI can bring as a benefit. And if we think that AI will be almost everywhere and will impact all sectors, then you need a lot more computing capacities than is currently available. So I'm not saying that we will grow 30% forever. We won't, of course. But I still see a very, very positive momentum for a couple of years. Here again, we'll try to give you a bit more color on what we see ahead of us in terms of gigawatt market growth and so on in September. But again, I don't see a reason why, given the low penetration rate of AI in many sectors, Why is the need for computing capabilities would slow down?

Yeah, that makes sense and it's very clear. Thank you. My follow-up is on the margin topic, really. So, clearly a solid performance in Q2 or H1, given what's going on in the world. But by geography, it's really the US that's driving that, or North America, I assume, driven by the data center leverage. But perhaps you can talk to the margins in Europe and the rest of the world year on year. How should we think about that evolution in the second half in the context of the unchanged margin? And are there any AI benefits that you can touch on that you're able to achieve internally as well? Thanks.

Well, as far as the margin is concerned, what happened in H1 is pretty clear. And you can see that we have 20 points decrease in operating margin, which is coming half organic, half basis point, sorry, 20 basis point decrease, half from acquisitions, half organic, with a gross margin, which is down 130 bps, coming mostly from acquisitions. And you know that the company we are acquiring tend to have a lower gross margin and lower LG&A base than the rest of the business. SG&A which has a positive impact of 90 bps on our profitability which is mostly mostly leverage and then other which has a slight positive impact of 20 bps with the level of restructuring in million euros which is similar to each one so this is for the group of course NCA North and South America has a very strong performance which which makes a lot of sense given the strong sales growth they are experiencing and it compensates the decrease in Europe and in and the rest of the world, which is suffering from software sales, especially that in Europe we are more integrated. Europe is bearing a number of central costs, holding costs, as well as global centres of innovation. So when you don't have top line impacting Europe, it has, of course, a negative impact on profitability. So this is for H1, no surprise, more or less a stable margin, let's say, with a lower gross margin, positive impact from SG&A and slightly positive impact from others. As far as H2 is concerned, frankly speaking, we'll see. It will depend on the top line evolution we will have in the three areas. The bottom line is that we are confirming that despite inflation approaches price, despite muted sales in Europe, despite the geopolitical situation which remains somehow uncertain, We are fully confirming our guidance in margin, i.e. an adjusted EBIT margin of between 20.5% and 21%. But again, to see the difference from one zone to another, let's wait for H2 to happen and let's wait for especially the top line in H2 to happen before commenting.

Thank you. Thanks.

Thank you. We will now proceed to the next question. And our next question comes from Danila Coster of Goldman Sachs. Please go ahead Danila, your line is open.

Hi, good morning. I will start my question and then I'll ask the follow-up after. But following up on this point on pricing into the second half, I guess that's within your round of control. If you could give us any idea of whether you've done any price increases in July or what do you see and especially differentiating between data centers and the rest would be very useful.

Well, it's difficult to differentiate from one zone to another, from one business to another. I can give you the global numbers. So our price effect was plus 2.9% in H1. So you can see the acceleration between Q1 and Q2. Q1 was at plus 2.1%. Q2 was at plus 3.6%. And globally, plus 2.9% for H1. And given the environment, especially the purchase price environment, We now expect a price effect for the full year, which could be up to around plus 3%, having in mind that the price increases started in H2 last year. So the basic comparison in terms of pricing is a bit more demanding. So we were expecting three months back to be between plus 2 and plus 3, and we are now confirming to be around plus 3, even the environment. Now, if the situation of purchase price, so price of raw metal components was to worsen for whatever reason, of course, we would keep our ability to do a bit more pricing. When we entered the year, we thought we would do plus one to plus two. Now we are shooting for plus three. And if it was in it, we could do more. This was for purchase price, for selling price. As far as purchase price is concerned, I can also give you the data. In H1, it was plus 3% purchase price, plus 2 in Q1, plus 4 in Q2. And we are now expecting an inflation to be probably a little bit higher than plus 4%. So expectations for the full year, purchase price of plus 4 plus, let's say. and selling price of about plus 3% excluding tariff. This is what we are shooting for. But again, should we need to do more selling price, we would do more depending on the environment.

Thank you. And then just as a follow-up in terms of the data center business, we're starting to see some announcements in Europe. I think we saw sort of SoftBank in France, but there's been others. I know that your portfolio is slightly different in Europe versus the US, but how should we think about this? Should we just imagine you benefiting the same way you did in the US, or there are some things we should keep in mind on the differences in the portfolio?

No benefits yet in 2026 so far because of the time difference between enhancement and actual data center setup. You know that because of permitting, because of access to electricity, access to the grid, it can take up to three, four, five years before a project is announced and and the time that the data center is effectively open and we are late cycling the center. We start to do some sales a few months before the data center is open. So we're not yet seeing the same amount of business as we see in the U.S. But it's not specific to Legrand. I mean, it's a whole market. Our core assumption is that it should help us in the years to come. But so far in 2026, the most... Exciting market, faster growing, remains the U.S. Now, the day it will come a bigger scale in Europe, it will be good news because theoretically we have the ability to sell more dollars per megawatt in Europe than in the U.S. because there are a number of product families that we have in Europe and not in the U.S. So it would be good news, but we are not seeing that yet. The vast majority of our business, of the market and of the growth is still coming from the US.

Got it. Thank you. We will now proceed to take our next question. And our next question comes from the line of George Featherstone of Barclays. Please ask your question, George. Your line is open.

Morning, everyone. Thanks for taking the question. First one would just be on the non-data center business and kind of a little bit of an update about what you're seeing there and what you're implying for the rest of the year in terms of that non-data center business and the growth embedded in that. Thanks.

Well, we're actually seeing an improvement between Q1 and Q2 in the building market. So the underlying building markets remain not very supportive and this is the case both in the US and in Europe which is not a surprise again because from the very beginning we told you that especially in Europe the statistics were supposed to show some market improvement but that it wouldn't come before the end of the year and that it still has to be demonstrated so it's not a surprise but no improvement between Q1 and Q2. The good news if I may say that within This building market, which remains somehow a bit depressed, we see a number of product families, especially those related to energy transition, which are doing better than the traditional so-called essential product families. So all products related to the purification. So for us, it's a transformer, circuit breakers, measure, load shedding, and a few others. are a few points better than light switches, lighting, AV, floor boxes, and all this kind of stuff. So it shows that even in a difficult building environment, we have some businesses that have the ability to overperform the market. What will it be for the rest of the year? Well, if we listen to specialists, most people expect The U.S. building market to remain quite depressed, and there's no short-term positive signals coming from the experts, especially in resi. Even though it's less than 10% of our sales now in the U.S., nobody expects the resi market to rebound in 26. Most experts believe that Europe should progressively improve. with a number of uncertainties related to consumer confidence, geopolitics, the cost of energy, blah, blah, blah, but at a slow pace. This is a sort of macro scenario. What have we included into our guidance? Well, as you could see, we have included data center market, strong growth, 25 to 30% like for life, and the rest of the business, growing low single digit as it grew in H1. So we haven't incorporated into our guidance a sharp rebound in the building market either in the US nor in Europe.

Okay, that's really helpful. Thank you. And then just a couple of follow-ups on the data and the conversations we've been having. First one would be, you spoke about confidence in the demand outlook. Are you able to put some context around that? Maybe give us a growth rate you're seeing in orders above the sales growth rate, for example. And then the second thing, on your acquisitions you've made there recently, there's perhaps a consistent theme forming, which is... You're buying more businesses within the testing and commissioning space. Can you perhaps talk to the opportunity that you're seeing there? Thank you.

Well, I'm not sure I can give you a lot more color on the data center growth by geography, by customers, by product types. I can maybe tell you that if we look at the product families, of course, when you grow more than 30%, it means that you have some product families growing 50, 60, 70, 100%. Those bring the most are probably cooling, testing, commissioning, and part of the powertrain. So they correspond to some of the acquisitions we've made in the last two or three years. But again, we are seeing very good growth and very solid order inflow across most of our product families. As far as the latest acquisitions are concerned, well, The objective was to build a significant market position in critical power in the US. And for those of you who know Legrand for quite some time, you know that we've been trying to enter the energy transition slash critical power in the US for quite some time. But this was a market which was occupied by big guys. And for years, we didn't find the right way to enter. Well, interestingly, Data centers provide us a very good entry point. And we've brought a number of companies active in powertrain. So power generation with turbine packaged in a container on site to do power generation whenever there's a backup power or as a main generator. Medium voltage with gear, low voltage with gear, busway, Busbar, testing and commissioning, the whole powertrain. And what is of interest is that most of the acquisitions have something like half of their sales in data center and half of their sales in the other type of verticals. Could be building, could be renewables, could be infra, could be industries, could be health. So by entering into the critical power in the US. We also enter into other verticals, and we have started to build a meaningful and significant position in energy transition in other verticals. So it's not only about testing and commissioning. It's mostly about critical power in the US, and it is a very interesting position, growing nicely, and not only growing nicely in data centers, but also growing nicely in other verticals. If I zoom on testing and commissioning, well, Aftron which is a company referred to as a world leader in load banks, has a very strong market share in the US and elsewhere. It will prove to be one of the most exciting acquisitions of Legrand. Very good multiple, very strong growth, very nice profitability, and indeed it is for us a way to be even more involved on the High density AI data center because when you have one gigawatt, two, three gigawatt data center, when you have a one megawatt rack, for example, which is liquid cooled, not only you need to test the loads, but you also need to test the liquid cooling systems. So the higher the density, the more liquid cooled the data center, the more testing you need, the more commissioning you need, and the more sales you will do. So it's a very, very, very interesting acquisition. But again, I hope, George, that you will come to Singapore because we'll have more opportunity to discuss that and we'll even display some of our products and we'll have some of our people so we'll be able to talk directly to them.

I'll certainly see you there. Thank you.

Thank you. We will now take our next question from the line of Max Yates from Morgan Stanley. Please go ahead, Max. Your line is open.

Thank you. Maybe if I could just start on the margins. So I noticed you had higher restructuring costs above the line this quarter. So I just wanted to ask about some of the moving pieces. What is your expectation for restructuring as we go through the full year? Was that a temporary kind of higher cost? Restructuring of Europe or is that something you expect to be higher for the full year and therefore a drag on margins? And then also if you could comment on whether there were any tariff refunds during the quarter because that's a consistent theme we've heard across a number of companies. Thank you.

Yeah, so as far as restructuring is concerned, well we're not much commenting by zone. At group level we had a restructuring of 33 million euros in H1 which was very much in line with what we had in H1 2025 because we had 34 million euros for structuring in H1 2025. So yes, we remain very active. Well, it's not a surprise to see a lot of restructuring in Europe because typically that's where we lack sales. And when our volumes are not growing, we tend, of course, to do restructuring, footprint optimization, blah, blah, blah. As far as the full year is concerned, Our main assumption is that it could be close in terms of million euros to 2025. I remind you that in 2025 it was 65 million euros. So I cannot commit on a precise number, but it will be around this number. As far as the tariff refund is concerned, well, tariff has become a very complex issue, I have to admit. So even though we are tracking that very carefully, Potential refund, whether you ask it or not, new tariff, tariff that are canceled, that are replayed. It has become a very, very complex topic. I have to say that in H1, tariff did not have a material impact, neither positive nor negative. And that's it. And if we can get a bit of refund, we will. But frankly speaking, it's not a strategic topic for us. It would be a one-time benefit. Not huge. So it is not a topic on which we are spending a lot of time. We are focusing on a lot more in the U.S. on how can we cope with this data center hypergrowth? How can we better serve our customers rather than on time? So we don't expect to have a very meaningful impact one way or the other on the 2026 accounts.

No, no, sure. I was just trying to understand whether the margin was clean or not.

I can answer, yes, the margins are clean.

Okay.

And they will be clean for the full year.

Okay. So the second question, and I think it was something kind of George was trying to get at, but you know I think you've previously talked about around six months visibility in your in your data center business you kind of talked earlier in the call about some of your orders were now kind of extending into 27 or maybe 28 could you maybe give us a feel of kind of how long your backlog is today has that meaningfully exposed and you know any any Commentary on, you know, how much of your revenues for 27 might already be locked in by your order backlog would be really helpful context. Thank you.

Well, I don't really like this concept of, you know, 27 being locked in by backlog because we've been consistently telling you that the backlog is more, you know, for us an indication for which customer we have to serve and when and and which supply chain investments we have to make in order to make sure that we deliver properly, more than a leading indicator of what our sales in 2027 is going to be. Because the backlog can be canceled, can be delayed, can be modified, can be... So, of course, we start to have orders for 2027. On some very specific businesses where the lead time are longer, we even have a few orders for 2028 and sometimes 2029, but does it give us a lot of visibility The answer is no, again, because we are not counting on this backlog to make our assumptions. What gives us confidence in the fact that the data center market will continue to grow, it's more the gigawatts that were announced for 27, 28 and beyond. There are tens and tens of gigawatts. and each time there is a gigawatt being built, I remind you that one gigawatt, we could potentially sell two to three billion euros of sales per gigawatt. So two to three million euros per megawatt. So this is more, these kind of leading indicators we are tracking rather than backlog because again, backlog can be changed. And by the way, the total capex from our customers and to this extent, The recent announcements from some of the hyperscalers and the fact that they were even increasing the CAPEX plan for 26, 27, 28 is quite a good news for Legrand, of course.

Excellent. Thank you very much.

We will now proceed to our next question. And our next question comes from Alistair Leslie from Bernstein. Please ask your question, Alistair. Your line is open.

Thank you. Good morning, everyone. So I wanted to follow up, I suppose, on what you were discussing previously around U.S. data center acquisitions, but maybe focusing more on the Gertz acquisition, your strategy there, but perhaps more in the context of how you're looking at the opportunity in prefabricated modular data centers now. Is the plan to develop dedicated Legrand power pods and maybe even kind of modular IT pods and and maybe also if you could reflect on how this fits in with that partnership you have with Siemens and Codalto. I guess maybe that's focused more on Europe. Maybe you could confirm that. And if you have any kind of estimate on how big the kind of modular prefabricated market in the US is right now, perhaps as a share of additions.

Thank you. It is a fact that prefab, even though within this world you have different type of systems, is gaining ground. because it helps our customers to shorten, I mean, to optimize their supply chain and to open faster data centers. So it's getting around worldwide. We do have already modular capabilities in other geographies. So in the US, for example, we are able to provide Genset modules with GERT, indeed, which are... gas-powered or diesel-powered, which can be used even as a main source of power, especially in zones such as Texas and elsewhere. We are also providing a skid, so pre-mounted critical power train with Kratos in the US. In Colombia, we have a unit fully dedicated to modules, which is called Technica, In Europe, we have a couple of units doing that, especially a new unit in Ireland called TESS, and so on and so forth. In Malaysia, we just acquired SRS, which has the ability to do skids and modules for power, media voltage and the voltage. So we have progressively acquired a number of capabilities to do modules, not to mention ability to do full HAC, hot air containment, including racks, busway, type of boxes and so on. So we do have these capabilities, not everywhere, but at least in the US, in Southeast Asia and in Europe. And it's part of the nice growth we have. It's not the only one. So that's it. I don't know what else I can tell you, except that once again, I will invite you to come to Singapore. And I feel that... It's probably the right time to do a CMD dedicated to data centers, given the number of questions we have. And again, you have the ability to talk face-to-face to the teams in charge of all those businesses, and they will give you as much information as you can, as you want, on those modules, skids, prefabricated product lines, and customer expectations.

Yeah, great. I look forward to that. Thank you, Benoît. Thank you.

We will now take our next question and our next question comes from Gail Debray from Deutsche Bank. Please go ahead Gail, your line is open.

Oh, thanks very much. Can I get back maybe to the question around the company's execution during the quarter? I mean, if there were any specific challenges beyond the price-cost dynamics that you've met to deliver that very strong growth in the quarter. And why specifically did you see both margins and pre-cash flow trending a bit down on your basis? and whether you expect that to reverse maybe more positively into the second half. So that's question number one.

Well, if I have to name one operating challenge, it would definitely be how to cope with the hyper growth of our data center business. Not to say that we have any margin issue in data center, but, you know, our teams are spending a lot of time You know, optimizing the supply chain, speeding up the development process of the product, shipping on time, sending people on site to help with installation and commissioning, and so on and so forth. So it has clearly been a challenge. Did it have an impact on cost? Yes, probably. Our cost is not as optimized as if we're growing 10%. When you grow 30% plus, which again means 50, 60, 70% in some geographies and in some product families, it comes with a number of additional costs. Now again, it's a pretty good news for Legrand. As far as the difference between Q1 and Q2, I will let maybe Franck to give you more color.

Yes, and especially on the cash flow, Gaël, good morning. The question you asked, so cash flow at the end of H1 is at 9%. H1 is always soft. 9% is not unusual, and you know very well why it is soft. At 9%, it's not unusual if I look back at the last years, almost one year out of two was below or equal 9%. It's a little bit soft on the back of higher working capital requirements, which are around 14%, where the typical working capital requirement for the group would be 12%. One-third of that is totally mechanical, you know, scope, conversion, all that. Two-thirds is, I wouldn't call that company execution, but the current backdrop, which is a little bit more inventory, a little bit more counter-receivable, and also on the opposite, a little bit more comparable. All that is the current picture, looking ahead on the full year basis, we really think that we will working cap will be normalized and accordingly a full year free cash flow should be the usual one between 13 to 15 percent.

So H1 is challenging of course in terms of managing the strong growth in data center but whether in terms of margin or in terms of cash flow nothing special and we are confirming for the for the profitability or 20.5 to 21% yearly guidance and we are confirming for the free cash flow the 13 to 15% long-term guidance.

Understood. And the second question is on the willingness to design and launch a power sidecar offering for 2027. I was wondering whether you have in your M&A pipeline Today, any specific targets in the rectifiers or battery backup segments?

Well, I don't know. You will understand that I cannot be too specific on our M&A pipeline. I will just answer that we have either internally or through contract manufacturing and subcontracting all the technical building blocks of a sidecar. So we have, and it might not be very obvious from the outside, but we have a lot of expertise in DC, in conversion. We are a UPS player, even though not a big one in data center, but we are a UPS player. We have, of course, a lot of capabilities in racking. So we have all the technological bricks, again, either organically or through subcontracting that we need to... to do a sidecar, which, by the way, is not, technologically speaking, something very, very complicated. Now, again, if your question is, will you guys continue to do acquisitions in the quarters to come, the answer is yes. Probably not at the same pace as the one we have had so far, which is almost a deal a month, but we continue to have a very large pipeline of opportunities in data center and elsewhere. Again, I can't be too specific on the countries or products, but we have Very large pipeline and we will continue to do nice deals at a very reasonable price. Maybe worth mentioning, you didn't ask the question, Gaël, but I know that you have the question in the back of your mind. We can add that the seven deals we have made so far in 2026 were paid less than 11 times 2025 EBIT. So probably less than 10 times 2026 EBIT. So it remains quite reasonable.

Impressive indeed. Thanks very much.

Thank you. We will now take our next question from the line of Martin Wilkie from City. Please ask your question, Martin. Your line is open.

Thank you, good morning. It's Martin at Citi. The question is just to come back to acquisitions. You've increased your acquisition impact guidance for the year. Just to check to start with, is that just based on the deals that you've already done? You list out a number that haven't yet been consolidated or you've said obviously the pace might slow a bit in coming months, but just to check if that guidance includes some future deals or just based on what you've already done so far. So that's the first question.

No, it's based on what we have already done so far. So there's no uncertainty. It could be 7.7, it could be 8.2, of course, but there's no uncertainty. The only uncertainty is how fast we will be able to consolidate them. Now, we will continue to make deals, but of course, if we close the deal in October, for example, or in November, you won't have much sales flowing into our 2026 P&L. So the 8% perimeter is based on the deals which have been announced so far, and should more deals come, they will more impact the 2027 perimeter than 2026.

Thanks, and that sort of leads on to my follow-on, because I think you know it's 32% of sales at data center, and I believe in the past you've said that you wouldn't really want it to go above around 40%, which a while ago seemed like a distant prospect, but now If you're adding a mid-single-digit percent to top line each year through acquisitions, many in data center, and that end market is clearly growing much faster than everything else, it's not impossible that you get to 40% of sales in data center sort of within the next couple of years. Is that a feeling that you still see or how should we think about how you're looking at the portfolio on a sort of two or three year view in terms of how big data center could become?

Thank you. Well, I would, if I were you, I would save this question for the CND because it's more a long-term question than a short-term one. But yes, of course, if the data center business continue to grow much faster than the rest and if we keep doing a lot of acquisitions in data center, could be more than 40%. Now, two comments. Number one, not all the acquisitions will be data center related. For the past three years, we deliberately wanted to focus on data center because we felt that we needed to build a position throughout the gray space and the white space. So we have targeted a number of spaces where we wanted to be including testing medium slash low voltage gensets. We also targeted a number of geographies, US, Europe, Asia, to make a long story short. Well, I'm not saying that we are all set, and we still have a lot of ideas of companies that could complement our setup, but we have done a lot of the job. and we have a product portfolio which is a lot more comprehensive than it was four years back. So to make a long story short, I don't believe that 100% or even 80% of our acquisitions would be data center related, number one. Number two, the data center business won't grow 25 to 30% every year. So we can discuss whether the growth rate long term is going to be 10, 15, or 20%, but it won't be 30% or 40%, which was the case last year. And hopefully, the building market will also rebound. So you have to put all that into your model. Now, would it be a bad use for Legrand if the data center business was to be a 40%, 42%, 44%? I don't believe it would. It would, I think, give us additional growth potential. and from an investor's standpoint, I think it would be good news more than bad news.

Great. Thank you very much.

Thank you. In the interest of time, please limit to one question at a time. We will now take our next question from the line of Alexander Virgo from Evercore ISI. Please go ahead.

Yeah, good morning, gentlemen. I wondered if you could just give us a little bit more of a sense on the North America business. I'm just trying to establish, I guess, going back to some of the earlier questions, growth from data centers versus growth from non-data centers. Because, I mean, it looks like even at 23, your non-DC business is growing pretty well, actually, probably a little bit stronger than I would have expected. So I'm just trying to get a sense of what's driving that, the breadth of the growth in the portfolio. and then just yeah if you could give us a little sense of color on DC in North America that would be super helpful.

Well yes the non-data center business is growing so the data center piece is growing more than plus 30 percent as I said the non-data center business is growing and within the non-data center business it's all it's not ready it's everything related to energy transition outside the regime. So again, it's all those verticals which we are now targeting, health, education, infra, industries, transportation, and so on and so forth. So complementary verticals that we have progressively added, either organically through the reallocation of some resources previously dedicated to office, or inorganically through some of the acquisitions dedicated to data center, which we have made, the GERTS, the Kratos, the Aftron, and so on. So energy transition in New Verticals, which is growing nicely. As far as the RSI, it remains quite depressed. But again, it's 10% for US sales. And as far as the office market is concerned, we are seeing no rebound to the office market. And the usual KPIs we are tracking Vacancy rates, for example, or square feet being built are not really improving. So we are successfully doing what we said a couple of years back we would do, i.e., we are repositioning the group in the U.S. not only into data centers, but also into other verticals than resi and office, and this repositioning has some benefits.

Very helpful. Thank you, Benoît.

Thank you. We will now take our next question from Eric Lemory from CICCIB. Please go ahead, Eric. Your line is open.

Yes. Hi. Good morning. A question on data center. Do you start to see some new players coming, challenging your position, especially in the U.S.? You know, players coming from, I don't know, other... Didier-Marie Burel, Benoît Coquart, lately at quite a healthy price on some liquid cooling assets. But otherwise, no, I mean, data center market has always been quite competitive, as competitive as a building market, actually, in the U.S. and elsewhere. You have a lot of tough guys, either big companies or smaller ones. But I haven't seen an increase in competitive intensity in data centers.

And if I may, a very quick follow-up.

You mentioned this energy transition solution, you know, very well oriented in the US. Do you see the same trend in Europe?

You know, nothing yet?

Yeah, it's better than essentials in Europe by a few percentage points, where it's not as... Spectacular, as you can see, in businesses such as HVAC because of the heat wave. So, for example, we're not selling air conditioning or we're not selling a heat pump, but we are selling the back-end infrastructure that supports HVAC, heat pump, or electrification. So, again, switchgear, transformers, and so on and so forth. So, yes, in Europe, if we look at... The minus 2% we are doing, actually the energy transition business is growing in Europe. And we like it to grow more, but it's growing, whereas the essential business is down.

Very clear. Thank you.

Thank you.

We will now proceed to take our next question from Aaron Ceccarelli from Bank of America. Please go ahead, Aaron. Your line is open.

Hello, good morning. Thanks for squeezing me in. I have one on M&A. You have deployed close to around a billion euros on acquisition in H1 alone. Given the increase in scarcity and valuation of quality data center assets, where do you still see opportunities to create value through M&A? And are there segments where you're simply unwilling to pay current market prices?

Well, I don't really know what you call current market price. For Le Grand, current market price are 10 times a bit. This is the price we are paying, right? So if the question is, do you see more opportunities to do M&A at 10, 11, 12 times EBIT, the answer is yes. We have a number of discussions going on at this level of price. So again, we don't intend to spend a billion euros per semester. and we've done a lot of acquisitions for the past 18 months. So the pace will slow down by definition. We won't have a parameter impact of 8% every year. But yes, we see a lot of opportunities at very reasonable prices. Why do we have so many opportunities? Well, it's because the model of Legrand is built his way. So we have a pipeline of 350 companies that we are tracking. We have relationship with everybody. We are paying reasonable prices, fair prices. We are very fast in executing deals. We are probably targeting animals which are probably smaller for many other players. So the sort of 50 to 100 million euro or dollar companies we are targeting are probably not in the scope of some of the other bigger-than-the-ground industry players. We are good at docking, and I have to say that the results of the company we acquired back in 2025 are very good, including Eftron, very, very good. Feel better than expected, to tell you the truth. So now, there's no reason why we would slow down. I mean, there's no reason why we would stop. We will slow down in terms of pace, but we won't stop. And you should expect to see more deals coming in the quarters to come. As far as the financial capabilities are concerned, we have a leverage at the end of June, which is 2.4 times EBITDA, which is a bit higher than our historical leverage, which was comprised between 1.5 and 2. But it's not a big deal. It remains a reasonable level of leverage. We are deleveraging fast when we oppose acquisitions, and it won't be an obstacle to do this. If we think that there's a very attractive company fitting well into a setup at reasonable prices, even with the level of leverage, we can of course do it. So yes, we will continue.

Thank you. If I may, just a quick follow-up on your busway business. You had a great success on developing the Starline brand to multi-million euros business. Now you acquired a smaller business in medium voltage switchgear, Kratos, at the beginning of this year. And the medium voltage switchgear is probably a little bit more consolidated market. It's less close to your core because it's medium voltage. We start to see some of the high voltage players coming to that market as well. So what does it actually take to win in MB switchgear? And do you think you are potentially able to replicate what you've done with Starline, with Kratos now?

I think there is a fundamental misunderstanding of what the competition in the market is, the data center market. And take, for example, medium voltage in the US. Well, you have a very few limited number of companies doing circuit breakers. You have basically the big four, which are doing medium and low voltage breakers. But then you have a lot of smaller companies integrating those breakers into their panels and doing highly engineered, customized, very technical panels for data center customers, but for other customers, incorporating the breakers from X, Y, or Z. And Kratos is one of them. Kratos does not have its own breaker capabilities, but it's integrating third-party breakers, could be AC, could be DC, into big, big panels, which are... you know, very complicated to do, delivered within a few weeks and serving the needs of data center. And this market is highly scattered with additional actually consolidation possibilities and the one having the relationship with the end customer is Kratos. Kratos is working with the design teams of its customers on specific design, on-demand design of very technical big panels, and then we'll incorporate the components from X, Y, or Z. And by the way, it has very nice margins. So this medium voltage market, as you call it, it's not one market with four big guys holding each 25%. It's a market with a number of component suppliers, some of them being the big names you know, and multiple smaller players very good, very technical, with a strong team of engineers, very good service, sometimes on-site service to do commissioning and testing, able to incorporate those components into subsystems which are very appreciated from customers. Now, if the question is, do you intend to grow Kratos 20, 30, 40% per year? Yes, of course, it's our objective. We have designed a business plan which incorporates a lot of growth for Kratos. And since the beginning of the year, well, the acquisition is quite recent, but since the beginning of the year, Kratos is growing very nicely and has another book which makes us very confident on the fact that the business plan we have designed at the time of the acquisitions will be meet or even beat, if I may say.

That's very helpful. Thank you very much.

Thank you. We will now take our next question from James Moore from Rothschild & Co. Research. Please go ahead, James. Your line is open.

Good morning. Thanks for the time. Benoît, you've said around 80% of the portfolio is protected from a move to 800 BDC. But as AI data center architectures evolve, do you expect OCP and other emerging standards to lead to a more open, multi-sourced ecosystem in which, as you said in the past, each sub-market is determined by the individual players? Or do you think value is going to concentrate into a smaller number of integrated power platforms?

I'm not sure. I'm not sure because, you know, take OCP, for example. It's a good example. So OCP, for those who don't know the market, OCP is a sort of common standard for racks which has been developed by a few hyperscalers. It's not because you have a common standard that you have commodification or concentration of the product family. For example, you have common standards in many product families. You have common standards in JAX, you have common standards in circuit breakers, you have common standards in many, many things. It did not lead to a concentration over a few market players because you have a lot of different ways to add value into an OCP rack. The rack itself gives you a certain ability to design differently from one player to another. the way everything is organized within the rack and then you have the components and so on and so forth. So I don't believe that any of those architecture, neither the OCP, the AC-DC hybrid model, 800 volt DCU, 1000 volt DCU, whatever, will lead to a concentration of players. I think it will bring some innovation to the market. It will probably give a sort of competitive advantage to those who already have the relationship with the hyperscalers, such as we do, to those who have already a large catalog, a large portfolio of products, to those who have the technology, or if they don't have it in-house, who have the supply chain to onboard easy this technology from third party. So that's why I'm very confident in our ability to be part of this new architecture. Now again, you know 100% of the orders everybody gets today not only Legrand but everybody gets on this market are based on the traditional AC architecture 100% even the orders which should be delivered in 27-28 so it's not for today it would be a good news because the more added value you bring to an architecture the more ability we have to sell products but again the penetration rate by 2030 which is within 4 years would still be limited Core Assumption, I remind you what I said at the beginning of the call, Core Assumption is 10-20% for hybrid, 2% for NVDC.

Very clear. Could I just follow up with one clarification or follow-up on Sidecar? Where specifically do you gain or lose content? Is the incremental opportunity primarily existing products, busway, protection, distribution, or is it entirely new product categories that you're now designing and might launch in Singapore or the likes?

Well, for us, it's mostly additional value. For the players who are in UPS, you would argue that with the sort of disaggregation of the end of the powertrain within the white space, this architecture needs no UPS, but this additional object, which is a sidecar. Well, I was telling you that we were a significant US player, but unfortunately, not in data centers. We are a significant UPS player, but not in data centers. We are a significant UPS player elsewhere, in commercial buildings, in health, hospitals, and hospitality, and so on and so forth. But in data centers, we've not really been able yet to enter the UPS space. So we have almost nothing to lose, because we're not selling UPS. We have only to gain, because there's this new object, which is a sidecar. Now it includes a number of components which we can either develop ourselves or once again source. Even in a powertrain, we're not doing all components. Even in a rack, we're not doing all components. We can either develop or buy. So it will mostly be an additional value for Le Grand. Now again, welcome to Singapore.

Look forward to it. Thank you.

Thank you. Due to time constraints, kindly limit yourself to one question. We will now take our next question, and the question comes from Ben Wuglow from Oxcap Analytics. Please go ahead, Ben. Your line is open.

Yeah, morning guys. Thank you for taking the question. It's a slightly blunt follow-up on some of the earlier discussions. What I'm trying to understand is not the direction but the magnitude on the European margin. 18% is the lowest level we've seen on your European margin since that COVID quarter. and that was against a completely different volume backdrop. Benoît, you talked about, I think maybe I understood it, but bearing maybe more central costs, we talked a little bit about volume, but is If we had to simplify, is this about just pricing and price cost? Is the bulk of that gap coming from price cost? And am I right to assume that the majority of that will be alleviated in the second half? Just understanding why it's down there, please.

Well, we'll let Franck take the question, Ben.

Thank you. Yes, Ben, it's very consistent with what Benoît said earlier. The 18%, if it were to be compared to last year, it's close to minus 5 points, so it's low. But the 5 points gross margin is holding well. SG&A with the pattern of Europe. It's not a question of adaptation, it's just some costs are located in Europe. SG&A is minus 30 bps roughly and then you have other operating items minus 140 and especially with the exceptional restructuring that we that we already quoted and which is very legitimate in Europe. Look at our sales. It's a legitimate adaptation with restructuring, which will deliver paybacks for the future. So on the gross margin side, Europe is doing the job in terms of pricing versus inflation. It's mostly LG&A, which are a bit more fixed than elsewhere,

and also a number of central coasts which will not cut because the European volumes are going down and restructuring. You may have heard, Ben, for example, that we are closing four sites in France. So even in a country like France, which tends to be a bit more sensitive than elsewhere, we are closing sites because we feel that we should continue to adapt to the reality of the building market, which is not yet recovering.

Understood. Thank you very much. I'll pass it on in the interest of time.

Thank you. We will now take our next question from the line of William Mackey from Cabler Sugar. Please go ahead, William. Your line is open.

Good morning. Thank you for making the time. Perhaps I'll just have the one question as a top-down conceptual. You've upgraded your organic growth guidance significantly, but you've left your operating profit expectations flat. How would you characterize the implied lack of operational gearing when you think about the various buckets including mix evolution, cost, and price realization?

Well, we did not expect when we entered the year to have leverage, even though we were shooting not for 8 to 10, but we were already shooting for significant organic growth increase. So you have different brackets. Well, you have, well, number one, the dilution from acquisitions, even if limited, we expect to have a slightly dilutive impact increase. on the margin from acquisitions in 2026. Number two, we have adjusted our price, as you know, and our target is, as usual, to compensate in value the increase in purchase price through pricing. It can have a slight negative impact on margin. It's not a problem. compensating in value, not necessarily in margin. Well, we have the one-off cost, which remains significant because we intend to keep doing restructuring. And then we have also all the inefficiencies that comes with the strong growth we are experiencing in data center, which is difficult to quantify, to be very candid, which we haven't quantified. But, you know, when you have a big customer asking your products to be delivered on site next week, well, sometimes you are doing plain instead of a ship. So altogether, these 8 to 10% organic growth or these 16 to 19% total growth will translate into indeed a margin between 30.5 and 21%. which is not that bad, which remains at a good level. Does it mean that we're not doing productivity? Well, the answer is no. I can share with you an interesting number for H1. So our volume is up by close to 7% in H1. Like for like number of people is flat. So yes, we are doing productivity and we intend to keep doing productivity. This is one of the reasons why we have significant exceptionals, but at the same time, we have a dilution in efficiencies, purchase price increasing, and so on and so forth.

Thank you. And specifically going back to the follow-up on the last question, your SG&A expense in Europe was up 50 million quarter on quarter, Q2 on last year, against less growth in Europe on revenue. How should we think about that? Is that a new base or should we think that there were some one-time charges for repositioning or provisioning or reserving which will reverse as we go into the second half of the year?

Globally speaking, all that is more or less run right with dedicated investment, for example, in R&D, in digital. So all that is preparing the future. There is just a single one-timer, which is the employee shareholder plan, which is eating only Q2. and the global, the total amount for that is a little bit above 10 million euros for the group. I will not disclose the number for Europe alone, but this is for the group. But this is the only one-timer, otherwise, as I said, we keep investing for the group in Europe. We are managing the total PNL.

Now, there's a couple of questions on the margin Europe. Is... The mountain Europe a problem for Legrand? The answer is no, clearly. We manage the mountain at group level. Whether we have a little bit more restructuring here, a little bit less here, because we are closing sites in France and maybe not in the US, and opening sites in the US. Whether the R&D costs in China or in India, all that for us, It's, as we say in French, right pocket, left pocket. What matters is the margin we're able to have at group level. And again, with 20.5% to 21%, it's a very healthy level of margin. And the priority, to make things clear, the priority for more than two years now has been put on delivering more growth, and especially more organic growth. because we feel that there is a historical opportunity for Legrand to accelerate its top-line potential which has been stuck at 1-3% for years and we've been able to reposition the group towards data center and energy transition and our objective is to grow the group as fast as possible while maintaining a satisfactory level of margin and a satisfactory level of free cash flow. It has been the target. The target has not been to improve margin for the past couple of years. And this is a deliberate decision, and I think it's in the interest of our customers and our shareholders.

William, I did not mention, because I hope it's clear for you, the number you quoted is not on a life-or-life basis. It's including acquisitions. And we have consolidated a few acquisitions in Europe. So organically...

In Europe, we have gross margin, which is a little bit under pressure, as elsewhere, but nothing significant. We have SG&A, which are not adjusted as much as you could think of for two reasons. A few went off, like the shouting plant, but it's not P cost, and number two, because it bears a lot of central costs. R&D... Management, AI, and so on and so forth. And last, more restructuring, because we are closing a number of sites in order to keep optimizing our cookies. Nothing to be worried about, and that's it. Very clear.

Thank you.

That's the end of the question and answer session. Thank you all very much for your questions. I'll now turn the conference back to Mr. Coucault for his closing comments.

Well, thank you very much for your time and for your questions. Should you have more questions, you have the whole team at your disposal to answer. And for those of you who are lucky enough to take a summer break, I wish you a good and relaxing break. Thanks a lot.

Thank you for your participation in today's conference. This does conclude the program you may now disconnect your lines.