Legrand – 2023 first-half results
In a contracting building market, Legrand turned in a solid first half and revised its full-year targets upward
Very resilient first half
Sales: +4.9%, i.e. +6,0% excluding exchange rates
Adjusted operating margin: 22.2% of sales
Rise in net earnings per share: +19.0%
Free cash flow: €813.8 million, 18.9% of sales
2023 full-year targets revised
Sales growth (excluding exchange rates and Russia): +5% to +8%
Adjusted operating margin (before acquisitions and Russia): ~20.5% of sales
Benoît Coquart, Legrand’s Chief Executive Officer, commented:
“In a generally contracting building market, Legrand reported very solid results in the first six months of the year. Sales rose +4.9% with organic growth a resilient +4.6%, buoyed primarily by faster expanding segments including energy efficiency solutions, connected products and datacenters. Financial indicators remained very strong, with adjusted operating margin a high 22.2% of sales, free cash flow at €813.8 million, net profit equal to 15.2% of sales, and net earnings per share up 19.0%.
Our Group is actively pursuing growth and development initiatives, launching many new products and acquiring three companies since the beginning of the year—Encelium, Clamper, and Teknica in Chile, announced today—while continuing to optimize its cost structure.
These strong showings confirm once again the pertinence and resilience of our value-creating business model. Building on these achievements, we have revised our full-year targets upward.
Sustained deployment of our strategic roadmap, combined with underlying trends that include electrification, changing ways of living and working, digitization of uses, or energy-consumption monitoring, are boosting our faster expanding segments. As a result, we are targeting a full-year 2023 performance fully in line with our medium-term model of business growth and value creation.”
2023 full-year targets revised upward1
In 2023, the Group is pursuing the profitable and responsible development laid out in its strategic roadmap2 . Taking into account the world’s current macroeconomic outlook and excluding a major economic slowdown, Legrand has now set the following full-year targets for 2023:
- sales growth at constant exchange rates and excluding Russia impacts3 of between +5% and +8% (vs +2% and +6% initially), including a scope of consolidation effect of around +2%;
- an adjusted operating margin before acquisitions (at 2022 scope of consolidation), and excluding Russia and related impacts of around 20.5% of sales (vs around 20% initially);
- at least 100% CSR achievement rate for the second year of its 2022-2024 roadmap.
1 For more information, see Legrand press releases dated February 9 and May 4, 2023. 2 For more information, see Legrand press releases dated September 22, 2021 and March 29, 2022. 3 For more information, see Legrand press release dated January 25, 2023.
Financial performance at June 30, 2023
In the first half of 2023, sales rose a total of +4.9% from the same period of 2022, reaching €4,294.8 million.
Organic growth in sales was +4.6% over the period, including +2.4% in mature countries and +11.2% in new economies. In a contracting building market, these figures point to resilience buoyed by the faster expanding segments, by pricing power, and by the Group’s robust commercial performance.
The impact of broader scope of consolidation was +1.3%, including +1.8% linked to acquisitions and -0.5% to the net impact of the Group’s planned disengagement from Russia. Based on acquisitions made and their likely dates of consolidation, their overall impact should be close to +2% full year, excluding the impact of disengagement from Russia.
The exchange-rate effect on sales in the first half of 2023 was -1.0%. Based on the average exchange rates in June 2023 alone, the full-year exchange-rate effect on sales should be close to -2.5% in 2023.
Changes in sales by destination at constant scope of consolidation and exchange rates broke down as follows by region:
These changes are analyzed below by geographical region:
– Europe (42.7% of Group revenue): growth at constant scope of consolidation and exchange rates was +6.8% in the first half of 2023, driven by very strong growth in energy efficiency solutions and despite a residential market down in most geographies.
In Europe’s mature countries (36.4% of Group revenue), sales rose organically by +5.1% in the first half of 2023, including +1.6% in the second quarter alone, with on the first six months strong rises in countries including Italy, Spain and Germany. Sales were resilient in France, the Netherlands and the United Kingdom, while they edged down in Scandinavia.
Sales in Europe’s new economies rose +19.0% in the first half. In the second quarter alone, sales grew +13.7%, notably buoyed by strong growth in Turkey.
– North and Central America (38.1% of Group revenue): sales increased +0.4% from the first half of 2022 at constant scope of consolidation and exchange rates.
In the United States alone (34.6% of Group revenue), sales showed a decline of -0.3% in the first six months of the year, including -3.0% in the second quarter alone. In the first half of the year, a period that saw building markets lose ground overall, this reflected a double-digit fall in residential building and a slight retreat in offers targeting non-residential applications, trends that were offset in part by double-digit growth in sales to datacenters.
Over the first half, sales rose sharply in Canada and were almost unchanged in Mexico.
– Rest of the world (19.2% of Group revenue): sales marked an organic rise of +8.2% in the first half of 2023.
In Asia-Pacific (12.6% of Group revenue), sales rose +9.3% in the first half of the year and +9.0% in the second quarter alone. This good momentum reflects very sustained growth in India and moderate growth in China.
In Africa and the Middle East (3.6% of Group revenue), sales were up +14.6% in the first six months of the year and +16.5% in the second quarter. Over six months, sales trends were upbeat both in Africa and in the Middle East.
In South America (3.0% of Group revenue), in degraded economic conditions, sales were down -3.0% in the first half, linked in particular to Brazil, with a -3.3% decline in the second quarter alone.
Adjusted operating profit and margin
Adjusted operating profit for the first half of 2023 stood at €954.7 million, up +14.0% from the first half of 2022. This corresponds to an adjusted operating margin equal to 22.2% of sales for the period.
Before acquisitions (at 2022 scope of consolidation) and excluding Russia, adjusted operating margin for the first half of 2023 stood at 22.7% of sales, up +2.2 points from the first half of 2022.
The impacts of acquisitions and of Russia on adjusted operating margin in the first half of 2023 were respectively -0.3 points and -0.2 points.
Over this period, high profitability was driven by gross margin reflecting firm control of expenses and sales prices.
Value creation and solid balance sheet
Net profit attributable to the Group came to €650.9 million, up +18.8% from the first half of 2023 and equal to 15.2% of sales. This rise was due primarily to an increase in operating profit, the positive impact of financial results, and corporate income tax rate of 26.0%.
Net earnings per share stood at €2.45, for a rise of 19.0% from the first half of 2022.
Free cash flow came to 18.9% of sales over the period, to total €813.8 million, in a context of continued strengthened coverage of inventories that is expected to gradually return to normal. Normalized free cash flow was up +11.4% at 17.9% of sales.
The ratio of net debt to EBITDA1 stood at 1.2 on June 30, 2023. Legrand Group’s cash position stood at €2.9 billion, and the maturity of gross debt — with over 90% in fixed-rate instruments — was 4.6 years.
Legrand successfully completed2 a second series of sustainability-linked bonds indexed on the Group’s CSR targets. This fixed-rate issue totaled €700 million with a 6-year maturity.
1 Based on EBITDA for the past 12 months. 2 For more information, see Legrand press releases dated September 29, 2021 and May 23, 2022.
Continued initiatives in growth and development
Legrand continued to deploy its strategic roadmap through a range of growth and development initiatives that included:
- Targeted external growth with the announcement of a third acquisition since January: Teknica3 is a Chilean specialist notably in UPS (integrated solutions, equipment, services and maintenance) used in particular in datacenter and infrastructure solutions. Based in Santiago de Chile, Teknica has nearly 400 employees and generates annual sales of almost €45 million.
- The launch of many new products over the six-month period, testifying to the Group’s innovative capacity. Examples include:
- core infrastructure products ranges with the Allzy range of electrical wiring devices in India and MatixGO in Italy;
- in the faster expanding segments, the Linkeo PDU range (datacenters, energy efficiency) and the Netatmo smart Air Conditioning controller (energy efficiency, connected products).
- Continued improvement of operational performance, including, in North and Central America, the consolidation of five distribution centers in the United States and a new plant opened in Monterrey, Mexico.
- Investment in Partech Impact, an impact fund investing in entrepreneurial ventures in areas such as green mobility and assisted living.
3 Subject to standard conditions precedent.
The consolidated financial statements for the first half of 2023 were subject to a limited review by the Group’s auditors and were adopted by the Board of Directors at its meeting on July 28, 2023. These consolidated financial statements, a presentation of 2023 first-half results, and the related teleconference (live and replay) are available at www.legrandgroup.com.
KEY FINANCIAL DATES:
- 2023 nine-month results: November 8, 2023 “Quiet period1 ” starts October 9, 2023
- 2023 annual results: February 15, 2024 “Quiet period1 ” starts January 16, 2024
- General Meeting of Shareholders: May 29, 2024
1 Period of time when all communication is suspended in the run-up to publication of results.
Calculation of working capital requirement
Calculation of net financial debt
Reconciliation of adjusted operating profit with profit for the period
Reconciliation of EBITDA with profit for the period
Reconciliation of cash flow from operations, free cash flow and normalized free cash flow with profit for the period
Scope of consolidation
More information on Legrand: See the full profile on EMR Executive Services
More information on Benoît Coquart (CEO, Legrand): See the full profile on EMR Executive Services
More information on Franck Lemery (Executive Vice President Chief Financial Officer, Legrand): See the full profile on EMR Executive Services
More information on Encelium: https://encelium.com/ + Bringing ease and art to the experience of light. Encelium brings you advanced lighting management where you work, collaborate, play, heal, learn, shop, and more. We’re all about technology, but we focus on people first — listening to their problems and coming up with great solutions. We don’t just make life better for tenants and occupants. We enhance the experience of anyone who installs, controls, or uses interior lighting. That’s The Encelium Experience.
Encelium has annual sales of over $20 million
More information on CLAMPER: https://en.clamper.com.br/ + We are a company specialized in the development of Surge Protection Devices (DPS). We offer solutions that protect electronic equipment against damage caused by lightning and electrical surges.
Our purpose is to generate economy and sustainability, developing market-leading products. CLAMPER devices protect electronic equipment from electrical surges, guaranteeing functionality and increasing its useful life.
Founded in 1991, and with a 100% Brazilian organization, CLAMPER is a pioneer in its segment in the national market. CLAMPER products are rigorously tested in their own laboratory, capable of simulating a voltage 5x greater than the effects of a common lightning bolt on electrical appliances. Our team is made up of highly qualified professionals who travel the country giving lectures and training on standards, concepts and application of devices.
Based in Belo Horizonte, Clamper has over 600 employees and annual sales of nearly €40 million
More information on Teknica: https://www.teknica.cl/ + At Teknica Chile we deliver UPS & Power Quality Solutions and Services (Power Backup, Batteries, Generators), Precision and Industrial Air Conditioning (Precision Equipment, Backpack Type, Chillers, Adiabatic), Detection (Conventional and Intelligent Panels) & Extinguishing Fires (Clean Agents, Water Mist, Aerosol).
TEKNICA CHILE was founded in 1987, in order to provide operational continuity for its clients. Today it has a range of products and services in UPS & Power Quality, Power Distribution, Precise and Industrial Air Conditioning, as well as Fire Detection and Extinction for critical applications throughout Chile.
TEKNICA CHILE was acquired in 2006 by Holding ADF SA, a company whose shareholders, Domingo Cruzat Amunategui, Alfonso Mujica Vizcaya, Felipe Mujica Vizcaya and Martín Mujica Sotomayor have granted a hallmark of excellence and quality of service, transferring this into our corporate philosophy.
Today it is the largest integration company in the country, being able to integrate energy, climate and fire projects, granting important advantages in costs and process control to our clients, and managing more than 150 projects annually. Currently, we have more than 400 MVA in three-phase equipment installed and more than 1,500 equipment under a 7 x 24 maintenance contract, maintaining excellent Uptime and zero load drop .
Chilean specialist notably in UPS (integrated solutions, equipment, services and maintenance) used in particular in datacenter and infrastructure solutions. Based in Santiago de Chile, Teknica has nearly 400 employees and generates annual sales of almost €45 million.
- Approx. 400 Collaborators
- +30 years Experience
- +240 Projects executed per year
- +140 Active Contracts
- +2800 Equipment under maintenance contract
- +250 Integrations per year
- +17 Factory Certified Engineers
- +70 Support Technicians
More information on Alfonso Mujica (Owner, Teknica, Legrand): https://www.teknica.cl/nuestra-empresa/directorio/ + https://www.linkedin.com/in/alfonso-mujica-0ba00b9/
More information on Felipe Mujica (Owner, Teknica, Legrand): https://www.teknica.cl/nuestra-empresa/directorio/ + https://www.linkedin.com/in/felipe-mujica-79aa4230/
More information on Sunday Cruzat (Owner, Teknica, Legrand): https://www.teknica.cl/nuestra-empresa/directorio/
More information on Martin Mujica (CEO, Teknica, Legrand): See the full profile on EMR Executive Services
More information on Partech Impact: https://partechpartners.com/ + Partech is an investment platform for tech and digital companies, bringing together capital and resources to support entrepreneurs at all stages in Europe, North America, Africa and Asia.
Partech Impact an impact fund investing in entrepreneurial ventures in areas such as green mobility and assisted living.
EMR Additional Financial Notes:
- Major financial KPI’s since 2017 are available on EMR Executive Services under “Financial Results” and comparison with peers under “Market Positioning”
- Companies’ full profile on EMR Executive Services are based on their official press releases, quarterly financial reports, annual reports and other official documents like the Universal Registration Document.
- The Legrand Q2 2023 presentation can be found here: https://www.legrandgroup.com/sites/default/files/Documents_PDF_Legrand/Finance/2023/6m/Legrand_Slideshow_H12023_1690555950.pdf
- The Legrand Q2 2023 detailed Accounts can be found here: https://www.legrandgroup.com/sites/default/files/Documents_PDF_Legrand/Finance/2023/6m/Legrand_Half_year_financial_report_2023_EN_1690560759.pdf
- The Legrand Q4 2022 presentation can be found here: https://www.legrandgroup.com/sites/default/files/Documents_PDF_Legrand/Finance/2022/1Y/Legrand_Slideshow_FY2022_EN_1675864746.pdf
- The Legrand Q4 2022 detailed Accounts can be found here: https://www.legrandgroup.com/sites/default/files/Documents_PDF_Legrand/Finance/2022/1Y/Legrand_Consolidated_Financial_Statements_2022_1675864749.pdf
- Legrand Universal Registration Document 2022: https://www.legrandgroup.com/sites/default/files/Documents_PDF_Legrand/Finance/2023/autres/Legrand_URD_2022_EN_FV_1681315189.pdf