Schneider Electric Sa

Welcome and thank you for standing by. At this time, all participants are in a listen-only mode until the question and answer session of today's conference. At any time, you may press star and the number 1 on your phone to poll for a question. If you need to withdraw your question, press star 2. I would like to inform all parties that today's conference is being recorded. If you have any objections, you may disconnect at this time. You may also choose your view on whether... Click on the layout tab on the upper right corner of your screen. Stack view allows you to see all speakers and side-by-side view allows you to see only the current speaker. I would now like to hand you over to our host, Mr. Amit Bhalla, Head of Investor Relations. Sir, you may begin.

Well, thank you, operator. Hello to everybody. Welcome. We're delighted that you can join us this morning in Europe, in fact, afternoon in Asia, which is where Our Chairman and CEO Jean Pascal Chiquard is dialing in from and we also of course have CFO Hilary Maxson joining us on the call. We will go through the first section on business highlights and strategic highlights and then Hilary will take us through the financial highlights. We'll make sure to keep enough time for Q&A towards the end of the call. Thank you again for joining. Just a quick reminder on the disclaimer as you would have seen on our slide. But I would like to pass the ball over to Jean-Pascal to take us through the strategic and business highlights.

Thank you, Amit. Thank you all for being with us today. Well, I hope wherever you are in the world, you are doing well. Here in Hong Kong is a bit of a special day because People in the West might not realize it, but we are on the eve of the new year. So it's very exciting to be sharing New Year's Eve with you. And I tell you, I'm even more excited because I'm so happy we live the year of the rats and associated germs and viruses. And we are now moving into the year of the bull, which from the stock market point of view means a great year. But when I look back to 2020, where I've been CEO of Schneider for roughly 15 years, and I've known two deep crises. One was 2009, and the other one is the one we experienced last year, which is not completely finished. And really, I think 2020 is more than an year of reaction for Schneider. It's the signature of the transformation, the profile of the company. If you dive back and go back in 2009, ourselves went down by 15%. Our profitability went down by three points. Fast forward in 2020, same kind of deep crisis, much more resilient profile, minus 5, actually minus 4.7 on the sales and we actually grew our operating margin and we signed a record cash flow which is almost double of the one we signed in 2009. So it's important for us to understand how much the transformation of Schneider has impacted the profile of the performance. So very fast on this slide to remind you that we are very focused on integrated company to business, energy management, industrial automation, which combining together support our customers in their solutions for sustainability and efficiency. All of that supported by our digital platform EcoStruxure that we launched in 2008. on the very balanced exposure in terms of end markets, being on data center 50%, industry and infrastructure 50%. Now, headline of 2020. I would say number one, 2020 has been the acid test of our purpose, our mission to our customers and to our societies. And we've proven that we are mission critical to many of the applications around the earth. Second point, high performance, and we're going to go into the detail of that today. On third, it's been more than a performance year. It's been an year of acceleration of our strategic transformation on many aspects, and I will go through the detail of this. So let's go on. First things first, on a very special year, our purpose is to empower all in the world, to make the most of our energy and resources, Leveraging technology to bridge progress on sustainability for all. We proved, I think, every day during the COVID crisis that we were helping and supporting our customers to make sure that life is on. And day by day, we are the digital partner of our customers for sustainability and efficiency. When I look back to 2020, it's been proven in every part of the world. 90% of the countries where we operate have technology. ranked us or classified us as mission-critical industries and have asked us to keep operating our factories, keep sending our service people on site to support critical applications like hospitals, data centers, critical networks of cities. We have also supported our customers to de-risk their operations and to remote operate them. This has also been an year of high performance and I'd like to focus on H2. Last time we spoke about our P&L was at the end of H1. And actually, H2 is already a recovered P&L. We grow in H2 by 1% respect to 2019. Both of our business are finding an increase of operating margin of 120 VIPs. And at the level of the group, by research of even more efficiency, we increase the EBIT margin by 140 VIPs. And when you look at the root causes of this great performance, we sell more products. That means what we've been doing systematically over the past years, which is to productize solutions that we have developed for our most advanced customers. Thank you for joining us. What we've seen also in H2 is a confirmation when we've reallocated resource to those that some segments were actually accelerated by the COVID. Residential, that's obvious. Non-office, non-hospitality building, speak about hospitals, logistics buildings, life science buildings, industrial buildings, a lot happening there. Data centers on networks accelerating, smart grids, on everything around machine manufacturers with a specific focus on things around packaged goods. And what we've seen also in 2020 and especially around the second part of the year is really a pivotal year with a world which is going to be more electrical, more digital, and more sustainable. Now, take a broader view to the year. Of course, our sales are going down by minus 4.7%, but we recover a lot from the H1, which was at minus 11%. Both of our businesses are delivering a very solid profitability, and the operating margin of the company is improving as well by 20%. Think about the contrast to what we had to experience in 2009. On the best quality signature or signature of quality of this year's execution, with our cash flow, which is breaking a record and falls a second time, is above $3 billion. Moving on, this performance is really based on a few factors. The first one I want to underline is the growing importance of software and services in our portfolio. are growing by 1% over the full year, 5% better, actually 6% better than the rest of the average of the group, with an acceleration of in Q4, plus 6%. And those business are really important because they increase the stickiness of our relationship with the customer, learnable recurring revenue, they are accretive in margin, They are the catalyst for growth because they pull through the sales of connected products which come with higher technological values than the rest of the catalog. We have all together to realize that this proportion of software and services is bound to increase following the acquisition that we have initiated and we are closing in 2021. Second base is a very resilient supply chain. I think it comes from the fact that our supply chain is both global on the one direction, but very regional on that we have fully pushed the digitization of the supply chain to be more reactive. So we find this year strong productivity in H2O. We are investing for resilience in some blind spots which have been revealed by the COVID. And we've been, over the year, really bolting on our relationship with suppliers because we have to work with them very closely to make sure that all of our supply chain is resilient. I'm very proud to announce that we've been progressing in the ranking of Gartner to the number one position in Europe and the number four position in the world, all industries compounded. And a large part of it is due to what we do in digitization and also in sustainability. On the other hand, in the supply chain, we keep growing. has taken up the ambition and we just launched a new program called Strive to boost the next level of performance in this field. Third pillar of our performance has been the agility in which we have innovated to transform the way we work. First with customers doing almost everything or a lot of things in digital, remote services, remote everything I would say, all the meetings with the customers, our innovation summits, Collaboration Practices have gone on digital in no time. And we have also transformed the way we work in the company. Frankly, it was not that of a revolution for us because in most of the places we had already hybrid workspace or work formula already operating. So all of our people were equipped to work from home. But we've really leveraged a lot our multi-hub organization, empowering our country presidents to take the right decisions in real time and in symbiosis with the local stakeholders. Very interesting also to see is that we've invested, as you know, in a lot of digital tools in the past 10 years. And we've seen tools like Adivas 3D, which is for the design of manufacturing and infrastructure collaborative design IGXO which is about ECAD on the M2 cloud-based platform of RIB for construction orchestration really taking off on accelerating with our customers as we were going through this very specific year. And what we've seen is that 2020 has been the biggest catalyzer of digital adoption. I really wish that 2021 will consolidate this adoption. And I see no way back to the way we are working. The future will be an hybrid between what we've learned in the past 12 months and what we used to do before. So... We've kept on being very active also in 2020 with projects. And you have here a list of examples. I just want to point on one which is very dear to me, which is what we do in Egypt to provide electricity to 20 million people in this fast-developing and populous country with state-of-the-art high-tech smart grid that we are putting into place. So that's about the headline. Strong performance based on strong fundamentals. Now 2020 has been also very specific year for us because we've made of it an year where we accelerated our strategic transformation. On the first point concerning that strategic transformation is of course acquisitions and partnerships. We acquired, we initiated directly or indirectly or closed the fundamental or the foundational acquisitions of Larsen Toubro of ProLite, RID, initiated OSI on ETAP and concluded a very strong partnership with Planon. And at the same time, it's not all about acquisition. We concluded numerous partnerships and then singled out two years. What we do with Autodesk in the field of Building Construction Digitization on Fortinet in the field of OT Cyber Security, making sure that our solutions are augmenting each other. So the acquisition of Larsen Turbo in India consolidates India as a very strong country for Schneider on next of our India team, the fourth global hub of Schneider, inclusive of product marketing, R&D, supply chain suppliers, and sales, and that validates a model which is extremely local and which has been extremely useful at a time of COVID when people cannot travel and things and situations to face were very different from one geography to the other one. The other acquisitions that we have either initiated or closed directly or indirectly together with Aviva are appearing on this table and they show the very strong reinforcement that we are aiming to achieve through this. ProLite, reinforcing our automation capability in food and beverage. The contemplated combination of Aviva on its unparalleled catalogue of functionalities together with the leading position of OSI in the field of ingestion and structuration of data. The fact that we complete our digital thread in the field of electrical CAD, ETAP potentially completing IGE on IP to form a unique chain of electrical design. on R&D on Planon, bringing cloud-based solution for construction orchestration on facility management optimization. In the case of Planon, I repeat, it's a partnership that is reinforced by a stake that we take in the company. So first point of strategic construction, acquisitions. Second point is really accelerating on digitization. And we see digitization accelerating in all our end markets. Smart buildings, data centers where we have a leading position, smart grids, industry 4.0. All of this is boosted by the convergence of technology disruption, 5G, which is multiplying the number of sensors, big data where we can put together a lot of data at a marginal cost, and AI that gives sense to the data. and that goes exactly in the direction of the world that we have prospected with you for the past many years of an all digital and all electric world. Our value proposition in digital is not only digital, it is bridging the world of IT and OT. When you speak about the Internet of Things, the unique value proposition of Schneider is It should be able to be operating in the digital space and in the real world of our customers, which is the physical space. And that goes with putting together connectable products, which are 25% of our business today as we speak, which connect into edge control systems, which control systems on site. The data collected by those connected products and those controls are given sense by an old portfolio of software and digital services, already today 7% of our business. And while those digital tools are put in on the monitoring, the installations of our customers, we are able to deliver a solution on the shop floor, in the facilities, through our field services, who are representing 10% of our business. So 50% of our business which is already in this flywheel of digital and services. The proof of the traction for this is that in 2020, which is an year of crisis for everybody in the world, we have increased the number of assets on the management. I mean, assets that our customers ask us to manage for them by 1.3 million new assets. growing the number by 46%, and we've seen also the community of people in Schneider Exchange, people who work on developing solutions on EcoStruxure, growing again in 2020. It's true that we propose for our customers a unique value proposition, an entire level of integration around the four dimensions, which is bridging together energy and automation systems, or energy and process efficiency, making systems completely transparent from endpoint to the cloud through EcoStruxure, providing a full suite for digitization of facility on manufacturing and infrastructure lifecycle from design and build to operate and maintain. And this is what I was describing, describing the added value of the acquisition we started in 2020. and finally allowing our customers to go from traditional way of managing a company side by side to an integrated company management through unified operation centers. So second strategic construction or acceleration is digitization. The third one is really a lot of innovation. And let me single out a few of them. EcoStruxure Automation Expert, which is a completely new approach to automation. I would call it software-defined automation, making the bridge between IT and OT much more natural and cutting the cost of designing and implementing automation systems. Another one is getting rid of SF6 in medium voltage with our Airset new line of products. And finally, I would like to underline all the new products we bring in low voltage for native connectivity or the system of systems that Aviva has developed for data centers with a unified operation centers for IT customers. 20 new lines of products which are coming to the market in H1 2021. At the same time as we innovate in technology, we bring innovation in the way we do business with our customers and we digitize the way we work with our natural partners, our distributors, our integrators. And from that point of view, the COVID year has been a massive accelerator of e-commerce, which for instance in 2020 represents one quarter of the sales we do with our distributors. We have already some countries where more than 50% of the sales we do with distributors are going through e-commerce. Fourth, I would say a key acceleration of 2020 is sustainability. First, inside Schneider. We finalized our three-year plan that we have explained to you, and we moved on to the next Schneider sustainability impact with an upped ambition, increased targets in all directions. We want to do 80% of our revenues in green revenues by 2025. We keep researching the assessment by external agencies and we've seen the ranking of Schneider keeping on increasing. We've been actually ranked in Davos two weeks ago as number one more sustainable company in the world. but at the same time as we apply and discover and innovate inside Schneider, we are becoming the digital partner of our customers for sustainability and you see here a few logos with whom we have A deeper relationship. Want to single out Walmart that engage us to work with hundreds of their suppliers to save one gigaton of carbon or the contracts that we or the partnership we initiated with Floresia on STMicroelectronics during 2020 to work bilaterally on technologies to become more sustainable. Finally, I would say that in 2020, we've not stopped building up the competency of our companies on recruiting people to prepare for the future. We often say at Schneider that great people make a great company, and people who join us join us because we have a meaningful mission, because we want to be the most inclusive workspace in the world. and because people who come at Schneider are locally empowered. They can impact decisions of the company. Doing all of this, we've certainly not lost sight of our shareholders. And would it be on a one-year period or three years period, on a peer group that we publicize in our annual report, we come as number one in terms of TSR. and we are going to propose at the next AGM the vote of a dividend of 2.6 euro per share which is an increase of two points respect to 2019 honoring a commitment of now 11 years of a progressive dividend as A return of our shareholders who have followed and supported all the strategic transformation of our company. So now that comes as an introduction on the headlines of 2020. Now I'd like to call Hilary to come and explain into more details what happened in our series.

Thanks, Don Pascal, and good morning, everyone. Great to be here with you to comment on our full year 2020 numbers and to give some thoughts on expected trends in 2021. I'll start with some highlights of what we believe has been a strong and defining year financially, demonstrating our agility and resilience. First, we finished with solid revenues of 25 billion euros, down only 4.7% organic, and marked by a strong rebound in the second half of the year. A key highlight for us was our gross margin performance, where we offset some of that negative year-over-year revenue performance on both an organic and inorganic basis. Also, we reacted swiftly on costs, Both tactical and structural to finish the year at plus 20 basis points organic in our adjusted EBITDA margin. Cash was also a highlight where we hit record free cash flow of $3.7 billion. And I'll speak further to ROCE later in the presentation and in more detail on all of the points. Turning to second half specifically, we saw strong rebounds, finishing at plus 1% sales growth organic, or 13.6 billion euros in sales, driven by positive performance in Asia Pacific and a turnaround across all other regions. We start to see positive scope impacts from our acquisitions of L&T, RIB, and ProLite, partially offset by 2019 disposals. and FX impacted us by minus 741 million on the full year in top line in 2020, mainly due to strengthening of the euro. Based on current estimations, we'd expect similar impact to top line in 2021 in the range of minus 6 to minus 700 million euros and impact to adjusted EBITDA of around minus 10 basis points. Energy Management had a strong turnaround in the second half, finishing with plus 1.8% organic sales evolution and plus 120 basis points organic on adjusted EBITDA margin. This performance was broad-based with most geographies contributing. Strong positive price actions impacted both sales and adjusted EBITDA positively. And in addition to price, revenues were boosted by continuous positive trends in residential construction and renovation, We also saw strength in pockets of non-residential building, particularly in healthcare, life science, and logistics, where we're focusing our efforts. The data center and market remains buoyant, with sales to data center increasing in the second half, including to edge customers. and we expect to return to year-over-year sales growth in data center in 2021. Oil and gas and mining continues to be impacted by lower oil price and delayed CapEx, while smart grid continues to be a point of key strength. We do see turnaround in demand trends in mining, although not yet impacting sales. And in contrast to the third quarter, we finished the year we estimate with around normal level of inventory at distributors worldwide. Industrial automation also showed positive momentum in the second half, finishing with minus 1.6% organic sales evolution and plus 120 basis points adjusted EBITDA margin. The discrete end markets remained resilient, including strong growth in China due to OEM demand. Process automation remains challenged, impacted by oil price and delayed CapEx. However, various segments remain strong, with good demand in consumer packaged goods, and a pickup in demand for mining as commodity prices increased. Aviva finished the year strongly, including the booking of several scheduled subscription renewals, and services were also strong, finishing at mid-single-digit growth. Focusing now specifically on the fourth quarter, energy management grew sales plus 1% organic, including notably in our two largest markets, China and the U.S. North America grew 3% organic with continued sequential quarterly improvement in the U.S. The U.S. continues to see particularly strong demand in residential with continued momentum in housing starts and in the DIY market. Residential U.S. was one of the few areas where we were impacted from a supply chain perspective earlier in 2020, and we continue to make progress in enhancing capacity and reducing backorders to meet the dynamic demand there. Despite lockdowns in various countries, sales in Western Europe increased by 1% organic, with good traction in residential and data center markets across most of the countries. Italy and Spain again experienced some impact from lockdowns, but at a much lower magnitude than the second quarter of 2020. The rest of the world was up 1% organic, with continued growth in Russia and South America. Plus, we started to see the revenues from the large smart grid project in Egypt that Jean-Pascal mentioned earlier. In Asia Pacific, high single-digit growth in China was offset by continued weakness in Southeast Asia and India, although both with some turnaround in momentum toward the end of the year. Indonesia remains particularly impacted due to the credit situation of its state-owned utility, where a specific turn to growth in the fourth quarter. Industrial automation continued with sequential improvement into the fourth quarter, with sales down minus 1% organic. Here the picture is a bit mixed geographically with strong double digit growth in China and growth in Australia driving Asia Pacific fourth quarter sales up 6% organic. India continued down but on a high base of comparison and with sequential improvement versus the Q3. Western Europe turned to growth at plus 3% organic for the quarter driven primarily by Aviva as well as sequential improvement in discrete automation in Germany. North America and rest of the world remained weak, down 12% and 7% respectively. The U.S. remained negative in OEM sales, but with some signs of stabilization during the quarter. And U.S. process automation continued with strong negative impact from disruption in oil and gas due to oil prices. In rest of world, Africa and Russia also still strongly impacted negatively in process automation, whereas South America continued strong growth in Q4, up sequentially from Q3, driven primarily by strength in OEM in Brazil. Turning now to our strategic pillars, and as mentioned by Jean Pascal earlier, we finished the year strong on both more products and more services and software. We also continue to focus on better systems where we kept margins primarily flat at plus 10 basis points despite minus 9% organic sales growth. In systems, we're shifting our focus from margin improvement, having improved gross margin by around 150 basis points over the last five years, to ensuring continued solid fundamentals across this business model to contribute to our mid- and longer-term ambitions. Better Systems is a good segue into my next slide, highlighting our gross margin performance over the past years. We finished 2020 with gross margin at 40.4%, a 12-year high. The plus 60 basis point organic move we saw in 2020 was in part due to mix, which we would expect to normalize in 2021. However, the underlying trend, an increase of plus 250 basis points and a track record of continuous improvement over the past five years, is driven by key drivers reflecting the quality of our business. First, we have a strong track record of net positive pricing over the cycle, a mix of tactical cost neutralization actions and value-based pricing. We've also consistently driven strong industrial productivity and we set an ambitious target of around 1 billion additional productivity as part of our margin progression plan between 2020 and 2022. And I mentioned in the prior slide our performance in better systems. Our gross margin performance has contributed to our strong adjusted EBITDA expansion over the past five years. with an impressive increase of plus 300 basis points and driving 6% compounded annual growth rate of our adjusted EBITDA over the past five years. I'll mention that this consistent margin expansion has been demonstrated in both low and high growth years, including a plus 20 basis point expansion in 2020 despite lower organic sales growth by minus 4.7%. So we continue to be quite confident in our trajectory to around 17% adjusted EBITDA margin by 2022. That's with applying current FX rates in 2021 and 2022. Turning now to the drivers of our plus 20 basis points margin expansion in 2020, we acted early on pricing in 2020 based on expectations of potential cost increases due to COVID. leading to gross pricing impacts of plus 188 million euros despite a positive RMI environment. We do expect RMI will turn negative in 2021 and we'll continue our pricing strategy to at least neutralize RMI over the cycle and focus on value-add pricing. We also saw an increase in productivity in the second half Do in part to increases in volume, but also our baseline productivity adjusting for COVID impacts was stronger than in prior years based on ongoing action plans, giving us confidence in our projected around a billion productivity for 2020 to 2022. Mix continued positive for the full year. However, we would expect this to normalize in 2021. As we see the geographies impacted in 2020 to emerge from specific lockdowns, and we begin to see better growth in our systems business. And our strong cost savings plan, I'll speak to this in more detail in a few slides, more than offset inflation and new investment. FX impacted our adjusted EBITDA margin by around minus 30 basis points. and others was at minus 179 million euros with some one-time items impacting including product risk provisions. Full year margin remained resistant in both businesses with continued progression in energy management at plus 30 basis points and industrial automation finishing at minus 30 basis points impacted by product mix. Due to strong cost actions, our support function costs decreased by 2.9%. However, we did choose to continue with strategic investments in key R&D programs, in services, and in cybersecurity. As mentioned previously, we remain focused on the evolution of our FFC to sales ratio across the cycle. Operational efficiency and effectiveness also remain a key point of focus for us to ensure our margin progression and to support our strategic investments. Here's the numbers behind our efficiency focus. First, we responded to the crisis quickly and with agility, driving tactical savings of around $200 million in the first half and continuing with savings in the second half for a total of around $300 million in tactical savings for the full year. This savings was primarily driven by reductions in travel, in-person events, and delays in hiring, so we'd expect it to primarily reverse in 2021. However, we're looking to transition some of this into ongoing savings by embracing new ways of working. As we phase down on tactical savings in the second half, we accelerated our structural savings programs. and we're on track to deliver cumulative structural savings of around a billion between 2020 and 2022. Of course, we don't expect this to translate 100% into our P&L as we'll be redeploying some savings into strategic investments, particularly in R&D. Turning now to net income, including scope and effects, our adjusted EBITDA is down minus 7%. Below the line, the lower impacts from loss on sales in 2019 were offset by higher M&A integration costs and higher restructuring in line with our expectations. Amortization of purchase price accounting intangibles increased due to L&T and RIB, and we'd expect this to increase further in 2021 with the full-year impacts from acquiring those businesses. In financial costs, our cost of net debt decreased, offset by a write-off of a subsidiary loan and lower dividends from equity investments. And our effective tax rate increased slightly, 22%, where we had some positive one-off impact related to a reversal of tax reserve. We would expect our effective tax rate in 2021 to still be between 22% and 24%. This all translates into net income of 2.1 billion euros and adjusted net income of 2.6 billion, down 12 and 11% respectively, and to adjusted EBITDA of 472. Free cash flow was a big focus for us throughout 2020 and a big highlight for the year. We finished 2020 with record free cash flow of 3.7 billion euros and a cash conversion ratio of 159%. Cash from operations net of CapEx was down 317 million or 10% due to lower results, but this was more than offset by 500 million in trade working capital driven partly by evolution in receivables and payables as would be expected with lower sales. However, we also improved day sales outstanding and days payable based on some initiatives we started in 2019. Inventory increased 153 million year over year as we continue to prepare for a demand uptick in 2021, but inventory days outstanding remains at average levels. Non-trade working capital was also positive for the year due to tax payment timing and VAT recovery plus some tactical actions. Although we'd expect some natural reversal of working capital in 2021, we expect to continue with healthy cash conversion ratio, and we have confidence in achieving our around $3 billion annual free cash flow across the cycle, and that excludes the lease accounting impacts. Turning now to our capital allocation priorities, as mentioned by Jean-Pascal, we remain very focused on return to shareholders. and we've proposed a progressive dividend for the 11th year in a row. We also remain focused on our strong investment grade credit rating and I'll speak to our debt ratios in a moment. In terms of portfolio, we had a busy year for acquisition in 2020 with a number of key transactions and partnerships that prepare our company for the future. We'll be focused on successfully integrating those acquisitions to realize the benefits to our customers and investors. In the near term, therefore, we expect only one or two potential smaller strategic bolt-ons or partnerships tied with our longer-term strategy. Disposals remain an important component of our strategy, and we continue to work on our previously announced 1.5 to 2 billion euros that's in sales with possible progress to share in the first half of this year. We do expect a ramp up in working capital that will impact our first half cash flows due to turnaround in demand versus last year. So we'll keep the share buyback program on hold in the near term. We'll update on timing of share buyback program as well as potential deployment of disposal proceeds in coming quarters. A quick note on our debt ratios. Net debt to adjusted EBITDA remains at a healthy one time at the end of 2020. even adjusting for third-party funds on our balance sheet for the minority portion of rights issuance performed by Aviva in November 2020 to support the OSI transaction. If we assume the OSI transaction occurred at the end of 2020, so no contribution from OSI to adjusted EBITDA, this ratio would have been at 1.5 times. This is historically on the high side for Schneider. However, based on our strong free cash flow generation and our disciplined capital allocation strategy, both ratings agencies reiterated our A-A3 credit rating after the announcement of the OSI transaction. ROCE is a key metric for us, particularly on our core business. Here we've shown an ROCE metric for 2020 adjusted for recent significant acquisitions, so excluding L&T and RIB both in the numerator and capital employed in the denominator. I think it's a good representation of our underlying business, and you'll see that even in a year like 2020, we have strong resilience in ROCE with only 10 basis points dilution down to 12% based on our strong free cash flow generation and expansion in profitability. Looking back at 2016, you can also see that positive evolution in ROCE in 2017 and 2019, while 2018 is impacted by the consolidation of Aviva. Using 2020 pro forma numbers, we would expect our announced acquisitions, including OSI, to result in an impact of around two points negative on our ROCE. L&T as a core acquisition is expected to be accretive, but will be more than offset by our software acquisitions of OSI and RIB. We'll continue to follow ROCE as a key metric, particularly on our core business where we expect continued positive progression in ROCE over time. And additionally, we follow the ROCE progression, profitability, and growth profile of all of our software businesses to ensure value from these future-oriented acquisitions. Lastly, I'll just mention an innovative sustainability-linked financing we issued in November 2020. ESG is key to Schneider's strategy and an important business driver for us. This recent sustainability-linked convertible bond reiterates our commitments and is tied to targets linked to carbon reduction for our customers, gender diversity, and harnessing the power of all generations. You'll recall we launched our new SSI program in November at our ESG Investor Day. and we raised the bar on our ambition through this program and the convertible bond is linked to those new ambitious targets under our new SSI program. With that, I'll turn back to Jean Pascal to discuss our 2021 expectations as well as longer term targets.

Thank you Hilary and congratulations for stepping in in your role in what you described as being one of the most intense years with Adam Schneider during my tenure at least. Well done. I will go now to 2021. I won't go through the detail of that busy slide. You have the document. But as we look at 2021, we see a landscape where while everybody hates it, we have all gotten used to live with the virus, with the COVID. There is a hope. on the deployment of vaccination, which is now coming forth. We have stimulus packages that were put in place by most of the countries where we operate to a level that we've never seen before in history, and a lot of that is going in the direction of a greener and smarter infrastructure, all those things that really we can serve and support at Schneider. We see, of course, some segments which are down, but many segments which are actually being reinforced by the crisis. Residential is an example. Technical buildings, we spoke about it. Data centers. All the critical networks of cities, and especially grids, which have to manage a level of viability not known before. All industries going for many reasons to more digitization. and on the top of it, many of the places where we operate have gone through lockdown, which is creating favorable camps for the future. Plus, as I explained, we've really changed, again, the profile of our portfolio and we'll keep doing so with divestment on leveraging the acquisition that we have started. Therefore, we are formulating the following guidance. A growth of the adjusted EVT inorganic in 2021 between 9% to 15% through a combination of organic revenue growth of 5% to 8% on an increase and improvement of our adjusted EVT margin by 60 bits to 100 bits. This is extremely consistent with the horizon and with the ambition we had expressed a few years ago of creating or developing a business profile with 3-6% of growth across the cycle. with an adjusted EBITDA margin around 17%. This is just a step. This is a milestone, but it's by no means a ceiling as we keep pushing on transforming the profile of our company towards more accretive and high-quality business and confirming also the yearly generation of cash flow around 3 billion euros. So what we are prospecting really in a very simple manner because what can be executed has to be spelled in a simple manner is an acceleration of the execution of our strategy around more products, more services, more software, and more sustainability, which is developing as a bigger activity at Schneider. All of this will generate more growth, more recurring revenues, margin improvement, cash flow generation, and make our model more and, of course, more shareholder return. With that, Amit, I hand over the mic back to you. Thank you all for your attention, and we are ready for questions.

Well, thank you, Jean-Pascal and Hilary as well. We will now move into the Q&A. I'm looking at the clock, so just to reassure everyone, we're not going to stop at the hour, and I want to make sure that, you know, we take several questions. But just sort of be respectful for the rest. I think there's a long list, so let's keep it to one question per analyst. And then if we have time permitting, we'll probably come back if it's possible. So with that, let's move to the Q&A, and operator, you can raise the first question.

Our first question comes from Andreas Willey from J.P. Morgan. Your line is now open.

Good morning to everybody. My one question is about cost developments into 2021. You already mentioned the raw material headwind. Over the cycle, you always more than compensate, but it's fair to assume that like in 2017 and 18, it will be a negative for the 2021 bridge. Maybe you can give some indication around that. And also on the cost side, we've seen currently a a pretty big shortage building for semiconductor chips. How could that potentially impact you on the cost side or delays or also then indirectly from customers that are affected from that? Thank you very much.

Jerry, you want to take the cost side?

Sure, so I'll get started on the cost side. I spoke to the fact that, of course, we see raw material headwinds facing us in 2021. And we've seen that and talked about it, I think, since even sort of mid-year of 2020. So we showed some past historical performance that we have there. And like you said, you know, you can see that we've been Thank you so much for joining us today. And from the point of view, the track record we had over the past two years in terms of net pricing is very encouraging.

On the side of the supply chain, while we are monitoring the situation in a very close manner, the fact that we have a globalized Supply Chain on a globalized purchasing is really helpful in the sense that we have a complete view of what is happening at the level of the company and we can mutualize our forces or our requests together to make sure we get a better attention of our suppliers. But we are going to stay, well, make no mistake, I mean, 2020 has been an everyday test of the resilience of the supply chains. And I think we've gotten better at understanding how to manage it together with our suppliers. That has made us closer to our suppliers. And as we go into 2021, that better transparency, that better proximity of our suppliers will be helpful.

All right. Thank you, Andreas. Next question.

Our next question comes from Ben Ugo. Your line is now open.

Good morning, everyone, and thank you for taking my question. It was really to just dig a little deeper into your trends in industrial automation in China in particular. Could you calibrate or just quantify a little bit more on the growth? When we say it's double digits, is it more 10% to 15%, 15% to 20% or something else? Just how strong was China automation during the period? And then I guess in the press release it mentions a kind of sequential moderation. Can you just tell us how that trend line is developing and why do you see a sequential moderation at the moment in China? And Jean-Pascal, given that it is Lunar New Year, what is the environment at the moment on the ground in terms of distributors restocking and let's call it general demand as we enter New Year? Thank you.

Well, I guess on the ground as we speak, probably most of China is having a festive dinner with their families. So we are probably the only one working as we speak in this part of the world. But now to answer your question, we see a very healthy level of business in China. And you know that China has been back to a normal level of operation for now some months. The impulse given also to the activation of the domestic economy is favorable to what is happening on the local market in every aspect. So we see a sustained dynamic here. Now, when you look at automation, double-digit, and it's a good double-digit. I don't want to be more precise than this. With different dynamics, very strong at the level of machine manufacturing on OEMs. I'm still a bit slow on resource business on continuous process, which is impacting a part of what we are doing in China. But overall, I stay positive and confident about the dynamics of 2021 in China.

That's very helpful. I'll pass it on for now. Thank you for your time. Thank you, Ben.

Next question.

I'm sorry, the next question comes from Jonathan Monse from Exane. Your line is now open.

Hi, yes, good morning. Thank you for letting me ask the question. So, picking one, I guess, maybe on the free cash flow guidance. I kind of think of you as a probably a cyclical growth company, so actually growing revenue and profit through the cycle. Your actual free cash flow guidance, I appreciate this year may be difficult for work and capital reasons, but the actual guidance is kind of 3 billion through the cycle. That doesn't really suggest a lot of growth in free cash flow, say, over the next three years. I mean, what do we really mean by 3 billion through the cycle? Surely, as profit grows, that pool of cash per annum It's just that the working capital will grow as well, Matt.

Larry?

Yes, so I think what I would say there, you know, we gave the $3 billion through the cycle. You can see this year, actually, trade working capital is quite positive for us and non-trade working capital, partly helping to drive the record free cash flows we have at the $3.7 billion. And while we won't give any guidance for free cash flow like usual, in 2021, we would expect certainly cash flow from operations to go up, like you said, with a normalization and a recovery in the year. Maybe some negative trends, though, in trade working capital and non-trade working capital as we ramp up for the increase in demand, so the opposite of this year. and also we have a number of plans like restructuring that will impact our non-trade working capital. So today I would say we're quite comfortable with the around 3 billion euros through the cycle. However, similar to the around 17%, I would say with the free cash flow as well, and you're right, that's not the end of the journey. And of course we would update as we go along.

Right. Thanks, John. We'll take the next question.

Our next question comes from Alistair Leslie. So Ty, to General, your line is now open.

Yeah, hi, thanks. Good morning. So just on the growth outlook, there's a kind of helpful summary on our markets on slide 49. Overall, lots of positives there, but maybe you can just talk a little bit about some of the weaker areas, some of the segments within non-res, perhaps also kind of process automation as well, which areas you're kind of most negative on or cautious on just to get a sense of How much of those kind of weigh on your growth and might influence the range you set for the group in 2021? And just a quick follow-on there. I think at the H1 stage, you said 20% of the group might be challenged over the next two to three years. Perhaps, are you a little bit more optimistic about that portion of the portfolio now, given the development in H2? Thank you.

Which one, sorry? Which part?

On the follow-on. Yeah. Which part of the portfolio have you mentioned? Sorry, I didn't.

So you highlighted the H1 stage on your presentation slides that maybe 20% of your portfolio was going to be a little bit more challenged over two to three years. I think, you know, the areas of building, infrastructure, et cetera. Okay. Sorry for that.

Yeah, quickly on the places of portfolio that are maybe the one where we are looking more attentively, there is everything which would be office or hospitality buildings, which have been probably affected by the crisis. We are not very much exposed to direct transportation, sports, and those kind of things, a little bit, but marginally. And when you look at that, we do 35% of our business in buildings, but one-third of that is residential and is rather accelerated by the COVID. The part of those buildings which is corresponding to, let's say, hotels and office buildings is less than 10%, all right? And we've not seen a complete absence of activity, especially people are retooling many of their office buildings or hotels to make them more healthy and better organized to adapt to the new conditions. But that's less than 10%. The other usual suspect somewhere in our portfolio at the moment, post-COVID, or during COVID, is oil and gas. On oil and gas, it's 7 to 8. You know that our exposure is not too extreme. It's mostly mid and downstream. First, I mean, the price of oil is coming back to a better level, and we see more projects coming back up. And second, the actors in this sector are really looking at their digitization for understanding better or improving their processes, getting more efficient, getting more sustainable also, and working for some of them together with us on their transition. Those, I would say, would be the two major segments that we are watching. On the rest, I already spoke of it, is a place of many places which are actually showing a rather positive dynamics.

All right. Thanks for the question, Alistair. We'll take the next one.

And our next question comes from Phil Buehler from Barenburg. Your line is now open.

Thanks. Hello, everyone. Thanks for taking my question. Jean-Pascal, it was interesting to hear your opening comments about the margin performance during the pandemic compared to where we were in the financial crisis. I guess the one thing that has always been pretty resilient even back then was the cash performance. But we now seem to be seeing a structural step up in the gross margin and the cash performance, which is obviously a good thing. I was wondering how both you and Hilary are thinking about the right level of balance sheet leverage going forward, which is always quite conservative in the past. But I know, Hilary, you commented on where leverage would have been had OSI completed already around one and a half times. But do you see now an opportunity to operate at a higher level of sustained leverage compared to the past to capture higher growth, given we've now seen this change in cash profitability? And how do you see leverage evolving in 2021 and 2022, given we've got these disposal efforts underway? I know you said that we talked about how the proceeds would be used in due course, but is there a ballpark that you can share in terms of the expected cash proceeds from those disposals, please?

Look, on the transformation of the profile of the company, I won't go into details because and probably you wouldn't be able to stop me on the topic but we have a more global presence and clearly in 2020 being very global and very balanced has been useful. Massive rebalancing of our end segments between building segment which was a majority of our exposure on infrastructure on industry that will be the beneficiary of many of the stimulus packages that we've done and of course the profile of our business has changed and we've complemented our franchise for products with strong activities and fast developing activities in services and software and we are just at the beginning of the journey. We still see a lot of runway in front of us to go to the next steps in rebalancing the portfolio. Now on the leverage I would say Just make a simple comment. We don't want to take risk on the financial part of the equation, but now I let ERI answer to the second part of the question.

Sure, thanks. So what I would say on the leverage side is actually 2020 is a great year where... Our strength in cash flow, our strength in gross margin, I think we were able to take the opportunity, for example, with some of these acquisitions that really put us on a great track for future ready. With that, though, like I said, we're getting closer to historically high debt ratios. Of course, the one I gave doesn't include the contribution from OSI, so it's a little bit sort of artificially high is the way that I would put it. In terms of capital allocation, like I said, the investment grade credit rating remains very important for us. I think that in the near term, we would expect to see a little bit of return to normalization of those debt ratios.

All right. Thank you, Phil. Let's move to the next question now. Yeah.

Okay, our next question comes from Guilherme Debray. Your line is now open. Oh, and from Georgia Spink.

Hey, Ho, thanks very much. Good morning, everybody. So the one question I have is about the software business and the growth of about 6% you reported in the fourth quarter. I just wanted to check how you account for the AVEVAS performance into this number. Does it fully reflect the 26% organic growth that we quoted yesterday? And if that's indeed the case, it looks like the trend in the other software and services categories has been rather negative. So could you just comment about this, please?

Hilary?

Sure, so the way that Aviva is consolidated into the group, however, we sell software between Schneider and Aviva, so there's an intercompany adjustment between ourselves, so that 26% is also accounting for some of the software that we would also count as internal within Schneider. So overall, you're right that that 6% includes a good performance from Aviva. It also includes our overall performance in services, which is more neutral. And then it includes our own internal software, which also continues to track well.

Yeah, if I want to reinforce, I think if you take a larger perspective, we've seen really... An acceleration in our software on Aviva, which has been the point of a lot of our attention, but there is much more at Schneider, and especially we've had very strong dynamics in Smart Grid, actually driving more of our software to the service of utilities. The place which is getting a lot of significant traction today are the digital services on the software attached to connected assets. on especially in the field of energy, there we see a significant fraction.

All right. Can I just? And actually, the services is a good level of growth in Q4. Okay. Sorry, you said? The next question please in the interest of time.

Our next question comes from Shane McKenna from Barclays. Your line is now open.

Good morning, everyone, and thank you for my question. Just on your data center business, notwithstanding, obviously, the tough comps from 2019, most of your peers have been calling out the strength of hyperscale in North America. Is that a trend that you're seeing, or is your growth in 2020 more broad-based? And as you look into next year, do you see a shift more towards sort of co-location, local edge, And also, if I can ask about your Chinese data center business, what sort of growth trends were you seeing there in the fourth quarter versus the high single-digit growth that you called out for EM? And finally, are you able to give us the current figure for data center and networks as a percentage of group sales? That would be great. Thanks.

Okay, as a percentage of group sales, we are speaking about if you take a combination of secure power technology and what we do in the field of data centers and network, because you have more and more inroads of those technologies in other spaces, around 15%, and it tends to be increasing in proportion as we go within the years. For the global market of IT on data centers, frankly, we remain very optimistic. We had a base of comparison which was a bit stronger in 2019. But at the end of the day, what we see is that there is an increase of traffic. There is an increase of storage. There is now an increase of AI on computing, which is generating new needs. There is actually a strong movement to complement the aggregation of data on large data centers with a movement to be close to the application, which is largely catalyzed by IoT on the need for low latency, but also for data residency, to complement hyperscale by edge computing on edge data centers. We are very well positioned here. and it's something we see everywhere. When I look at the proportion of the business that we do with Hyperscale, it tends to increase, but the growth that we see and the potential that we see is broad-based. It's across the board. So, we've been always at the forefront of this supply in energy and infrastructure to the IT industry. We have developed a complete offer like no other, including System of Systems by Aviva. We want to keep innovating with this industry and keep building bridges between IT and automation systems in other sectors.

I'm sorry, the China data center growth that you saw as we...

Frankly, I... I don't think it's particularly relevant and there is nothing specific there to be said about Q4 that would be materially different from the other quarters. The business of data centers keeps growing and showing.

Thanks for the question, Shane. Yeah, let's take the next question.

Our next question comes from James Moore of Redburn. Your line is now open.

Yes, hi everyone. This feels like a question for John Pascal. Remarkable job lifting margins in a down year. Great to hear you're on track for the 17% in 2022. I'm really interested in your phrase you keep using about how this is just a step. And it makes me ask if you can think ahead to the next step, if you could. And what do you think the correct entitlement margin for Schneider is? Three, four years, five years after that. And when you think about it, if you don't want to put a number on it, but I'm wondering if 20% is possible, what are the major areas of profitability upside beyond 2022 in your mind?

You know, as we are speaking about Chinese year, there is a proverb in China that says that the 10,000 leagues walk starts with the first step. And I come from, I would say, practical origin. So One step at a time, but at the end of the day, when you look at what we are operating, we are changing the profile of the company, and that relates to margin, and that relates to cash too. So the more we productize our business, we work in a deeper and broader manner with partners on access and scale out the reach of the technology. The more we complement which we use not to do Before, at all, we complement those products free of services and we go back to the install base in a world that needs this install base to be upgraded and is facing a lack of competency and shortage of possibilities to do so. The more those products are connected and they can be augmented with software, digital services on multiple possibilities, Based on that, we grow pure software to integrate the lifecycle of the installation of our customers. The more we are creating an activity, which is certainly more intense in R&D, but which is elevating the profile of margin on the rotation of the generation of cash flow. So that's the best answer I can produce. I mean, we're going to keep Pivoting on rotating our portfolio, you've seen in 2020 an intensified investment in the field of software. A large part of that driving in the future to more subscription and to more recurring revenue. At the same time, we're going to now execute on the divestment of a part of the portfolio, 1.5 to 2 billion, already done 600 million of activities which have a lower profile. And we want to keep working always on that reshaping of Schneider. So 17% is a step. Thank you very much. Then we still want the 10,000-league walk, right? Yes, thanks.

Thank you, James. Thanks for the question. Next question, please.

Our next question comes from Andre Kukunin from Credit Suisse. Your line is now open.

Good morning. Thank you for taking my questions and good afternoon, Jean-Pascal. I wanted to ask specifically about software and BIM within that. It sounds like 2021 will be more of a year of digestion of the deals and partnerships that have been struck already. But in BIM specifically, do you see yourself as now having got enough critical mass and the All the kind of pieces of that value chain covered with what you've got to build organically or is there still scope to add through acquisitions? And just related to that in terms of connecting the kind of design and operate part of Aviva BIM with and many others. How do you envisage that happening? What will be the package? Will be Aviva's package integrating RIB or the other way around?

Thank you for this question. Just focus on the first priority for us is to make sure that we digitize the electrical experience and we create Solid Plugs with other companies on the market. So you've seen us putting together Alty, IGXEO. Now we are pursuing ETAB. This is in process as we speak. And that is getting or that will be combined with everything we have at Schneider. And this is creating a really unique suite of digitization of the electrical cycle. We have initiated and it's public partnership with Autodesk to make sure that we would plug that unique capability together with the huge presence of Autodesk in that presence and with that we help each other and it's all good. RIB is really bringing for us a unique capability that plugs into multiple parts of Schneider. It's a platform of orchestration, costing, and scheduling of projects. And still we do a very large part of our business at Schneider with customers who deal with projects. So our customers are the natural target customers of RIB. And RIB is not only interacting with Aviva, it's of course a really interesting complement to E3D on the ALM of Aviva. So it augments in a very nice manner Aviva. Our teams are talking together. The teams of Aviva and the teams of RIB are talking together. and at the same time it has a huge number of plugs into our building-oriented and infrastructure-oriented business in the rest of Schneider and we're also building those plugs. But the first priority with RIB is really helping RIB to globalize and to deploy and to grow which we have started to do last year and we'll keep doing in 2021.

Thank you. All right. Thank you, Andre. I'm mindful of time, but I just want to make sure that we give probably another two or three questions. So let's go to the next question, operator.

Thank you. Our next question comes Guillermo Pinox from UBS. Your line is now open.

Thank you. Thank you for taking my question. Good morning, everybody. I wanted to maybe later focus a little bit on energy management and non-residential renovation trends. I think obviously some of the, let's say, non-specialized markets or the traditional commercial and office building renovation markets have been postponed in spending for a prolonged period of time. And I wonder first, what do you see in terms of activity levels on renovation on those particular segments in Q4? You know, what do you see as well in 2021 as this postponed spending probably comes back at some point in time in some sort of way or form? Thank you.

Guillermo, thank you for your question. I think we touched the subject multiple times during Hilary's and my presentation on already the answers that I provided on hospitality on commercial buildings. First, let's really realize which weight it has on our portfolio. So far, you've seen our figures in energy management and especially in H2. They are very resilient and showing good dynamics. As we look into 2021, you have to realize that for the 35% of business we do in the building, again, one-third is residential. and the rest is in majority non-commercial or non-hospitality buildings. That last segment is less than 10%. So those technical buildings actually for some of them have also some accelerated or some renewed dynamics. For offices on hospitality, trying to look for LCA, more flexible, reconfigure the space is creating opportunities. A large part of our building business anyway is around renovation, retrofit. Many of those buildings will get more electric, seeing for instance of the development of electric vehicles. that will have to be accommodated in the parking of buildings. You have a lot of new standards coming around the world to us that new buildings will be more electrical. That means more electricity and more potential for our offers. So all in all, between an acceleration of the residential, which is across the board, between more focus on offers, on a natural position on electricity, technical buildings on the fact that the rest of the buildings have to reconfigure. We certainly see that there will be some softness on new projects, but we see also opportunities, which makes that we are confirming our global guidance for 2021 for the whole group.

All right, thank you, Guillermo. We'll move to maybe the last one or two questions.

One thing I'd like to mention, you know that... For buildings, we've developed over time a very strong platform inclusive of controls. It's called EcoStruxure Building Operations and assorted of really powerful digital services. And what I see is that platform is taking market share at a time when buildings are digitizing. So the work that we've done over the past Let's say almost 20 years, 15 years, to converge the world of building control and the world of power distribution at a time when buildings are becoming more electric and digitizing the experience really to a new level and connecting it to subscription-based services is really a pain. It makes the digitization of existing buildings Very flexible and very effective. So I think in that space, we are, thanks to the electrification, gaining ground and gaining market share.

Right. Next question, please.

Next question is from Simon Tonison from Jefferies. Your line is open.

Yes. Good morning, everyone. My question is on capital allocation. If I wanted to be slightly critical, you could say that your dividend is only up 2% at the time when your free cash flow is 700 million above your target or 20% higher. In fact, the dividend years you provide is just about 2% and below your key European peers and below even US peers like Eaton or Emerson. Your buyback is still on hold. Thank you. Jerry, do you want to take that?

Sure. So on the dividend side, I would say that, you know, we've strongly been returning to shareholders. We chose to pay the dividend for 2019 quite early in the crisis in 2020 based on the strength of our cash flows. And we've chosen to, again, do an 11th year of progressive dividend for Thank you so much for joining us. Because we expect we might see some working capital ramp up with a ramp up in demand, H1 has a very low base of comparison, as you recall. So we can have some working capital trends in H1 that are much more negative than we'll see over the course of the whole year, I would say. But I also said that we will update on the disposal program. We expect to have updates. And then we'll update also on the share buyback program in the next quarters.

All right. Thank you, Simon.

Thanks for that. Yeah. Can I reinforce on that point? We have no problem to restitute cash flows to shareholders one way or the other. and Hilary explained very well why we are balancing the equation. I want to mention one thing. We can speak about it now, but last year in the middle of the crisis, we are the first, I think, company, at least in France, to maintain our dividend and to confirm it in the AGM. We are committed to our commitments, right? And we have to realize also that we live in a world where many stakeholders have been suffering during the past year. You're going to have questioning about our companies, about the balance of value. We are absolutely committed to, one, a progressive dividend, and second, to be giving back the money to shareholders when we are secure about the way to allocate our capital. At the same time, I think we have to realize that there is a world out there which is watching us, not Schneider, but all of us, and we have to be balanced in the way we allocate the capital in the short term.

Right. Thank you, Simon. I think we'll take one final question before we close. Operator, is there another question?

Yes, our final question comes from Wasi Rizbi from RBC Capital Markets. Your line is open.

Hi, yeah, good morning, and thanks for fitting me in. One left on smart grids, actually. I was quite interested in that Egypt contract, but also maybe it's hard for you to quantify because the scope and the products vary, but how big is smart grid to you now? How's that been growing, and what do you think the outlook is like? And I'm perhaps even more interested in How do you think your position versus your peers? Because you've got people who come at it from a generation perspective or a transmission or maybe just a pure software perspective. What's the key differentiator for you? And are there any gaps in your portfolio that you think would make you even stronger?

Okay. On our vision, on the grids, we've been very clear now for, well, since I've been appointed as CEO, that's probably 17 or 18 years, that we see the future of grid on the distribution side. because this is where the complexity is developing, right? It's between local and more and more decentralized intermittent sources of energy connecting with beyond the meter digital modulation and all of this needs to be orchestrated during Smart Grid. Frankly, 2020 has been a fantastic illustration of this where in a few days, in many countries, had had to reorganize from industry on building usages that were falling in consumption by 20 to 40% and had to accommodate with homes that were always full and were going up to 30 and 40%. So it has reminded everybody that who was digitized could do it, who was not was in big trouble. That's number one. So we are very clear that the place where things are happening is the distribution part, and this is where we have invested. When we have the full offer, and we have a growingly full offer, we have... The best, at least said by analysts, the best advanced distribution management system in the world. Look at the analysis that connects straight into our software and automation system of substation automation. We have GIS, we have AMR. If, when we conclude or when we close The acquisition of OSI. OSI and Aviva have both a very strong position with utilities, complementing the digital offer that we have in this space. And we are working every day with utilities to invent the new world of energy. and with supply technologies, their masses are operating their grids and really that shoulder-to-shoulder teamwork on those innovations is really important. And I believe that when you position the future of the game on the distribution side, we have a position which is really, really, really strong on getting stronger.

All right. Thank you, Vasi, and thank you, everyone. I think we have to, you know, we can go on for longer. But first of all, thanks, everyone, for the longer timeframe. I think it was important that we took extra questions and extra time for this full year results. We look forward to the digital roadshows management as well as IR, which are coming up in the coming days and weeks. And feel free to get in touch with us, and we can schedule interactions as required. With that, just wish everyone well. Pascal or Hilary, any closing remarks from your side?

Thank you all. It's been an incredible year. We are happy to report how we've dealt with it in terms of reactivity and in terms of actually accelerating our transformation. We look forward to being back with you to keep you informed about the evolution of this transformation. Thank you and have a good day. And Happy New Year, by the way. Happy New Year.

This concludes today's conference. Participants may now disconnect. And speakers, please stand by.