Schneider Electric Sa

Schneider Electric's half-year results. Thank you for standing by. At this time, participants are in a listen-only mode until the dedicated question and answer session of today's conference. At any time, you may press star, then the number one on your phone to poll for a question. If you need to withdraw your question, please press star and two. 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. I will now hand you over to Amit Bala, Head of Investor Relations. Please go ahead, sir.

All right. Thank you, operator. Good morning, everybody. Delighted to be with you today to report on our half year 2024 results. I'm joined by our CEO, Peter Herbeck, and our CFO, Hilary Maxson. We come to you from London today. The slides and the press release are both with you. We will go through the presentation and make sure to try to keep enough time for the Q&A. So with that, without any further ado, I hand it over to Peter.

Well, thank you very much, Amit, and good morning everybody from London. We've left Paris for the 33rd Olympic Games and we're here at the Aviva office. Very proud, actually, in H1. We've been named the most sustainable company in the world by the Time magazine and Statista. It goes in line with our stringent execution on our purpose and our mission. to create impact by empowering all to make the most out of energy and resources, bridging progress and sustainability for all. And as you know, at Schneider, we call this life is on. Well, this also translates into record revenues and accelerating in Q2, as you can see here. It was an all-time high for any quotas that we've delivered with €9.6 billion of revenue and organic growth of 7.1% for Q2, bringing us to H1 at €18.2 billion of revenue and the growth rate organic at 6.2%. Now for the businesses, you can see the acceleration that we have in energy management going from 8.9% organic growth in Q1 to now almost 10% in Q2. Now in industrial automation, you can also see a sequential improvement here from Q1 to Q2. with roughly minus 3.5%. But let me dive a little bit deeper where you can see the execution that we've done to deliver these strong results and the strong growth metrics that you see. Gross profit also up 8.8% organic to 7.9 billion euro at a stellar gross margin of 30%. 43.4 percent up 100 basis points and also up 100 basis points. Our adjusted EBITDA margin at 18.6 percent. Now, the adjusted EBIT at 3.4 billion euro up 12.2 percent organic and the adjusted net income at 2.2 billion also up 10 percent. That leaves us with an operating cash flow of 3.1 billion for H1, up 15%. Strong results, strong execution as we go ahead and on track to deliver what we've said at the Capital Markets Day for our midterm ambition 2027. And where we've said 7% to 10% CAGR over the period with a margin improvement of circa 50 bps CAGR over the period of time of the adjusted EBITDA margin. Now, the megatrends really work for us and they deliver structural growth as we see. We sure talk about data center and what it means to the company. It's been a very dynamic end market for us. Also, the geographies that we've been focusing on, you can see in the US, in the Middle East and in Africa and India, these are all perfect growth markets for us and leading the growth for the company. Now we'll be talking about the targeted capacity investments that are ongoing and what that means to us to meet the unprecedented demand that we're seeing. So strong progress also on our software business here at Aviva and all the software businesses that we've put together that are independent of our hardware business, if you will. So continuous innovation. We're also driving, you see how we're going to be doing that at the end of the day. And of course, artificial intelligence everywhere in the company, in our products and also with our clients. Now, we've been aligning many of our activities to those mega trends that are driving growth. If you look at digitization and AI, we've been all over the place in forums and talking with our clients and thought leaders in driving architectures forward to deliver on the AI. Climate change and energy transition, very, very important for us. Also in Europe, where we've built a new factory in Hungary, to drive and be ready for the energy performance and building directive that is enacted at the moment. Now, in respect to the evolution of wealth and the new global equilibrium, you have seen how active we've been in the Kingdom of Saudi Arabia in the Middle East and also in India. We've just inaugurated the largest campus for our people globally with 8,000 people in Bangalore. Now, let me remind you a little bit of the end markets where we're active and we see good development across all end markets supporting the medium growth term growth expectations that we have in the four end markets where we are. And, you know, as you would expect the and I start off with the industrial market. There is, of course, a little bit of uncertainty. A little bit of weakness in the market as we have said and seen before and it moves also as we expect and we'll talk about this a little bit more. The growth is of course carried by the investment that goes into infrastructure, into the grid. and then also into data center and networks where we continue to believe that there is a growth a strong growth momentum and we can actually see it in in the numbers now in in buildings and i've talked about the energy performance and buildings directive that is coming in in europe and will accelerate the renewal of buildings we've we've done a logic investment into planning where we've been owning minority before which we've now ramped up to 80% as the majority owner of that business and it will help us to be ideally positioned in buildings not only from a building management perspective, from an energy management perspective, but now also workplace and asset management, so an ideal addition for the group. Now, if you look at the global footprint and our unique positioning there and the unique business model with MultiHub, it really gives us a competitive advantage. I'm not going to go through the geographies that we've mentioned at the Capital Markets Day and how we want to materialize on it, just give you our view in H1. And as I said, US, India, Middle East, Africa, they're all growing double digit for us. So it's fabulous in H1. Now the capacity investment and resource deployment is of course linked to those growth markets and I'll be talking about that on this slide here. So we've carefully looked at where our investment ought to go and we said that the capital markets say that throughout the period we're going to be investing 2 billion euro in key geographies to be able to deliver to the growth. And, you know, we've talked about some of the supply chain issues that we've had in North America. And we've started to enhance capacity quite rigidly there and spend very responsibly to be able to deliver to this unprecedented growth opportunity. You see some of the factories where we've been investing. And as you would expect, there are, of course, some growth pains that come with it. as we're hiring new people, as we're ramping up new machinery, as we're building inventory and work with our suppliers to be able to deliver to this unprecedented positive situation that we have. Now, we've also said at the Capital Markets Day that until 2027, we want to drive up our R&D intensity to 7%. Now, we've reached 5.9% or 6%, as you can see on the slide, and it is showing in a lot of new offers that are coming in into growth markets with software-defined automation. energy management products that will go into infrastructure that go into data centers and that will also go into the buildings that that are that are coming back the grid built out is very important overall grid microgrid mini grids where we've done quite a few new packages and then also move into a systems business where we're showing new new offers all the way into into service Also, all of our top new offers that have come out in the market, 50% of those have AI built in to be able to help our customers respectively. So you can see that the money is in action and new products coming to fuel the growth. Now, our dedicated AI team that we've put together in a hub and also in our supply chain across the geographies and across the hubs where we're active, we're ramping up the number of of projects, 195 AI-powered use cases in the company and with clients to help us drive productivity, to help us drive customer satisfaction, to help us drive serving our clients in a better way. And then also, you know, AI-powered features that we've incorporated for our clients. Moving on to the software side, so digitization and AI. On the digitization side, the software remains, of course, core to our digital journey. And as you can see here, we're in Aviva today, where we've been driving forward the platform connect, an industrial platform to connect clients, to bring data to the cloud, to bring our offers to the cloud, to bring third-party software to the cloud. to drive one platform, one experience for our client to deliver on the digital twin. And of course it pays off and you can see the growth that we have in Aviva where we further progressing very well on the journey to subscription with an ARR growth of 16% for the last 12 months. So quite excellent. And also if you see a little bit the momentum that we have in the cloud with our revenues up 140% in H1 for the cloud offers that are, of course, sold as a service. A very strong cash conversion rate in the software, as you would expect as you come out of the valley that we've talked about many, many times. And I have a couple of clients here with whom we've had great wins in the last quarter with First Alpine, with the African Rainbow Mining Company, And then also with the Cooper company here. So in total, excellent results on the software side. And of course, you know, we're not named the most sustainable company by accident. It is also rigid execution on our SSI metrics. And I were well on track to reach our targets for 2024. A couple of examples here that we're very proud of driving decarbonization at. at our clients with 605 million tons of CO2 that we've been driving down or avoided. Then the trust where we work with our strategic suppliers in making a better environment plus 12 points and then the idea of bringing one million people in into electricity. We're making very, very good progress, respectively, and it's something that is deeply embedded in the company, respectively. A couple of customer examples. Of course, as we have the Olympics, I start off with how we've helped to decarbonize the Olympic Games with the acquisition that we've done last year, EcoAct, where we help to drive down the hard-to-abate areas with CO2 certificates, respectively. BlackRock in the buildings market in the U.S., and we've named them the sustainability impact maker. Their new building is well below... well below the energy usage of the average glass tower that's out there in New York. And it is another example of how you can create impact while you build or renew, respectively, fully digitized. All our EcoStruxure offers in that high rise are quite nice to see, respectively. The data centers, of course, we need to talk about, and we see projects in geographies that we haven't seen before. Here in the Kingdom of Saudi Arabia, I was able to visit that data center during my last trip. It's just out of Riyadh. built in a sustainable and future-proof way and rapidly expanding also in the kingdom respectively and then in industry here an example out of china where we're helping the want want holdings group that is focused on food and beverage to drive their digitization and dual climate goal that they have more than 30 sites that they have in in china and we're progressing in building those out As you would expect also, quite a few external recognitions that we've had in H1. We've talked about the Time magazine. It's also good to see that there are recognitions in respect to our drive for diversity, in respect to designing our product in a way that the clients have a great experience with them in the industrial design and many more of them respectively. Now, let me spend a second here on the summary. I think we're well equipped for value creation while promoting a sustainable future for all. At the Capital Markets Day, I've been speaking for the first time of the powerhouse of energy management and automation. And we've talked about the megatrends that will structurally drive growth for the company 7 to 10 percent in the respective time frame until 2027 and we're on a good track with those and we're executing according to our management priorities with a growth culture the sustainability that will drive forward software and our prosumer business of course the ai everywhere and and then, of course, the organic growth and expansion that we want to drive, respectively, of our franchise. Now, this goes, of course, coupled with an agile operating model, then, of course, respective deployment of capital in a very reasonable and responsible way, disciplined, as you would expect from us, and then, of course, a strong governance system respectively. The idea is, of course, to create total shareholder return and with that also a clear view on the ROSI that has also moved in the direction where we want to see it. So with that, I think a great H1 with a record performance in Q2 and many more details to it. Hilary, if you help me guide us through the numbers here.