Legrand: Healthy Resilience of Margins in the First Quarter of 2008

Regulatory News: Gilles Schnepp, Chairman and Chief Executive Officer of Legrand (Paris:LR), comments: "Legrand has demonstrated healthy resilience in the current context of economic slowdown. Excluding the impact on comparisons of calendar effects and the launch of new wiring device ranges in France at the beginning of 2007, organic sales growth in the first quarter reached 4.1% on a year, or 7% excluding changes in exchange rates and taking into account acquisitions. A main feature of business for the quarter was continued strong growth on emerging markets, where sales were up nearly 12% at constant scope of consolidation and exchange rates. Legrand has also stepped up the pace of acquisition-driven growth, acquiring four businesses since January this year. Two of these were on emerging markets: HDL, the leader for audio and video door entry phones in Brazil, and Estap, number one in Turkey for VDI/Datacom cabinets and enclosures. In addition, our capacity to adapt cost structures combined with continuing action to enhance productivity, including lean manufacturing organization, specialization of production sites, etc., have enabled Legrand to maintain margin levels in a less favorable economic environment. At this point, group achievements are on course overall despite an economic slowdown that has proved more marked than anticipated. In this context where trends are more difficult to identify, Legrand is reinforcing the resources deployed in the most promising markets, in particular emerging countries and energy efficiency. At the same time our group is focusing greater attention on spending as a whole, particularly in markets now slowing. In so doing, we are positioning ourselves to seize any expansion opportunities that may arise, with a view to meeting our growth targets and to reach an adjusted operating margin at a level close to that achieved in 2007.” Consolidated data   1st Quarter 2008   1st Quarter 2007   % change 2008/2007 (€ millions)             Sales   1,049.0   1,032.7   +1.6% Adjusted operating income (1) 187.6   185.1   +1.4% as % of sales 17.9%   17.9%     Operating income 175.0   169.4   +3.3% as % of sales   16.7%   16.4%     Net income (2) 113.8   92.4   +23.2% as % of sales   10.8%   8.9%     Free cash flow(3) 9.0   17.5     as % of sales   0.9%   1.7%     Net financial debt at March 31(4)   1,922   1,750   +9.8% (1) Figures restated for accounting entries relating to the acquisition of Legrand France in 2002 with no cash impact, which consisted of additional depreciation of revalued assets (€12.6 million and €15.7 million in 2008 and 2007, respectively). (2) Net income, group share. (3) Free cash flow is defined as the sum of net cash provided by operating activities and net proceeds of sales of fixed assets, less capital expenditure and capitalized development costs. (4) Net financial debt is defined as the sum of long-term borrowings and short-term borrowings less cash and cash equivalents and marketable securities. Performance to March 31, 2008 Sales: Legrand reported sales of €1,049 million, up 1.6% from the first quarter of 2007, while the rise at constant scope of consolidation and exchange rates was 1.4%. Consolidation of acquisitions contributed 2.9% to sales growth and variations in exchange rates had a negative impact of 2.6%. Excluding the impact on comparisons of calendar effects and the launch of new wiring device ranges Céliane, Mosaic and Batibox in the first quarter of 2007 in France, sales growth at constant scope of consolidation and exchange rates came to 4.1% and the increase in sales before variations in exchange rates was 7% in the first quarter. The geographical breakdown of sales growth by destination at constant scope of consolidation and exchange rates was as follows:   1st quarter 2008 / 1st quarter 2007 France -3.8% Italy +3.2% Rest of Europe +2.2% USA / Canada -3.4% Rest of the world +9.5% Total +1.4% - France: Excluding the impact on comparisons of the launch of new wiring device ranges Céliane, Mosaic and Batibox in the first quarter of 2007 and changes in the number of working days, sales rose 2.1% (compared with a 3.8% decline before adjustment). In particular, energy distribution and industrial applications made good showings. - Italy: Sales rose 3.2%, buoyed by strong performances in the industrial sector and the continued success of Axolute, offsetting a less favorable economic environment and a decline in the number of working days from the first quarter of 2007. - Rest of Europe: Sales were up 2.2%, driven by double-digit growth in Eastern Europe and healthy rises in Greece, Portugal and Switzerland, together offsetting slowing in Northern Europe and Spain. - United States/Canada: Sales were down 3.4%, with moderate growth on commercial segment and a vigorous rise in sales of value-added products partly offsetting a decline in the residential sector. Sales growth was in double digits for The Watt Stopper, number one for energy-efficient lighting controls, for Ortronics, specialized in VDI/Datacom systems, and for wire cable-tray systems. - Rest of the World: Sales benefited from strong momentum and were up 9.5%, driven by robust increases in Latin America, in Africa/Middle East, and in Asia. Vigorous growth in emerging countries: Sales growth at constant scope of consolidation and exchange rates remained strong on emerging markets at 12%. Business was on a particularly firm track in Brazil, Mexico, India and Russia. All told, the contribution of emerging markets to consolidated sales was up from 21% of sales in the first quarter of 2007 to 25% in the same period of this year. Acceleration of acquisition-driven growth: In the first four months of the year, Legrand acquired three companies, thus consolidating its positions on emerging markets and in the industrial and commercial sector: - HDLb , the leader for audio and video door entry phones in Brazil - Estap, number one for VDI/Datacom cabinets and enclosures in Turkey - PW Industries, a US firm specializing in ceiling cable-tray systems for commercial and industrial applications. The group is keeping up the momentum, announcing today the acquisition of Electrak, a UK leader for underfloor cable management solutions for commercial segments. Legrand, which already enjoys solid positions for ceiling cable-tray systems in the UK, is thus rounding out its product offering and strengthening its presence in the non-residential sector. Electrak reported sales of close to €20 million in 2007. These four newly-acquired businesses should generate sales totaling close to €100 million in 2008. To date, the consolidation of acquisitions should contribute approximately +4.5% to sales growth full year in 2008. Margin maintained and net income: Adjusted operating income came in at €187.6 million or 17.9% of sales, with margin thus on a par with that recorded in the first quarter of 2007. Holding margins steady in more difficult market conditions demonstrates Legrand’s capacity to adjust cost structures to changes in business pace. Net income group share came to €113.8 million or 10.8% of sales. Cash flow generation: Cash flow from operationsc came to €149.8 million or 14.3% of sales. Free cash flow for the first quarter of 2008 amounted to €9.0 million, reflecting usual seasonality effects. Dividend: As already announced, subject to the approval of the General Meeting of Shareholders on May 22, 2008, Legrand will pay out a dividend of €0.70 per share in respect of the 2007 financial year on June 3, 2008, up 40% from the previous year. Consolidated financial statements, a presentation of first-quarter results and the related teleconference (live and recorded) are available at www.legrandelectric.com. Key dates General Meeting of Shareholders: May 22, 2008 2008 first-half results: July 30, 2008 2008 nine-month results: November 6, 2008 ABOUT LEGRAND Legrand is the global specialist in products and systems for electrical installations and information networks where people live and work. Its comprehensive offering of solutions for use in commercial, industrial and residential markets makes it a benchmark for suppliers worldwide. Innovation for a steady flow of new products with high added value is a prime vector for growth. Backed by sound business and financial structures, Legrand is actively expanding its presence in fast-growing geographical zones and market segments that include lighting controls, energy savings and home automation, through a sustained stream of targeted, self-financed acquisitions and other initiatives. In 2007 Legrand employed 35,000 people around the globe and reported sales of €4.1billion, including 25% in emerging markets. The company is listed on Euronext Paris and is a component stock of indexes including the SBF120, FTSE4Good and MSCI World (ISIN code FR0010307819). www.legrandelectric.com a Impact of calendar effects and the launch of the new Céliane, Mosaic and Batibox wiring device ranges in France in Q1 2007 b Subject to the approval of the competent authorities c Cash flow from operations is defined as net cash provided by operating activities plus changes in working capital requirement