Legrand

5.8% Legrand
Products and systems for electrical installations

LEGRAND STRENGTHENS ITS PROFITABLE GROWTH PROFILE

LEGRAND IN BRIEF

Why did we invest in Legrand?

As a world leader in products and systems for electrical installations, with 20% market share, Legrand offers 178,000 product references and a portfolio of nationally and globally known brands. Driven by its strong capacity for innovation, with more than 60% of its investments dedicated to new products in 2010, Legrand covers both the massmarket and the high-value segments. Whether in its sophisticated systems for digital connection and transmission, safety, design, user-comfort or environmental protection, Legrand stays one step ahead of market trends while developing innovative solutions for home systems and for managing lighting and energy efficiency. Legrand operates on a highly fragmented market with high barriers to entry, which means that it must offer a full range of multi-feature products and systems meeting various national electrical standards. Local standards and regulations raise the initial investment cost for any market entrant. The nature of the market also requires establishing relationships of trust with distributors, electrical installers and end-users.

What were the highlights of 2010?

Legrand’s 2010 sales saw growth of 8.7% to €3,890.5 million, up 3.6% on 2009 at constant scope of consolidation and exchange rates. Adjusted operating income rose 35.5% from 2009, to €784.1 million. Adjusted operating margin was boosted by operating leverage from sales growth and the full impact of reorganization programs already deployed. Despite the seasonality of fourth-quarter margins and the gradual rise in raw-material costs, Legrand reached its new 2010 target for adjusted operating margin of 20.2% versus 16.2% in 2009, setting a new profitability record. This business and profitability rebound illustrates the positive trend in Legrand’s growth profile with:
- 1/3 of sales now in new economies, where the group saw a 24% rise in 2010 ;
- nearly 20% of revenues now in new business segments (digital infrastructures ; energy efficiency, residential systems, etc.), where Group sales increased by 13% in 2010.
With R&D spending equaling between 4% and 5% of the group’s sales each year, innovation and new product launches continue to be essential growth drivers. These innovations meet strong market expectations in terms of optimizing electricity consumption or expanding access to electricity in new economies. Growth is also fueled by acquiring promising companies in order to access new markets or widen the product range. As of the second half of 2010, the group seized three opportunities, acquiring Inform, the leader for UPS* in Turkey, the switchgear unit of Indo Asian Fusegear, a major Indian electrical protection player and Meta System Energy, an Italian company specialized in modular UPS.

What is the outlook for development?

Legrand’s targets for 2011 are:
- 5% organic growth rounded out with acquisitions(1) ;
- adjusted operating margin equaling or exceeding 20%, including the impact of acquisitions(1).
The Group has set itself the following medium-term objectives:
- 10% total annual average growth in sales(2), driven by increasing exposure to new economies, which are expected to account for 50% of consolidated sales five years from now compared with one third today; expansion on new business segments that already account for nearly 20% of sales; and pursuit of targeted, self-financed acquisitions ;
- 20% average adjusted operating margin, including acquisitions(1).

* Uninterruptible Power Supply.
(1) Small to mid-size “bolt-on” acquisitions.
(2) Including like-for-like and acquisition-driven growth, excluding exchange-rate effects or major economic downturns.