REXEL : SECOND-QUARTER AND HALF-YEAR 2017 RESULTS (unaudited)

SALES OF €6,665.9M IN H1, UP 2.4% ON A REPORTED BASIS

• Organic growth of 2.4%, including a positive calendar effect of 0.7% and a favorable copper effect of 1.1%
• On a constant and same-day basis, sales up 1.7% of which:
  • Europe: +2.4%, benefiting from accelerating growth in France at the end of H1
  • North America: +1.6%, supported by an improving environment in Canada in recent months
  • Asia-Pacific: -1.6%, as the solid growth in China was offset by a volume drop in South-East Asia

ADJUSTED EBITA AT €284.9M IN H1, UP 3.6% YEAR-ON-YEAR

• Improvement in gross margin, up 5bps at 24.5% of sales
• Improvement in adjusted EBITA margin, up 10bps at 4.3% of sales
• Operating leverage neutralized by investment to support growth in the US, volume drop in South-East Asia and temporary effects in France & the UK.

SOLID INCREASE IN REPORTED EBITA, UP 11.9%

FULL-YEAR FINANCIAL TARGETS CONFIRMED

¹ See definition in the Glossary section of this document

• Financial statements as of June 30, 2017 were authorized for issue by the Board of Directors on July 28, 2017. They were not audited by statutory auditors.
• The following terms: Organic sales, Reported EBITA, Adjusted EBITA, EBITDA, Recurring net income, Free Cash Flow and Net Debt are defined in the Glossary section of this document.
• Unless otherwise stated, all comments are on a constant and adjusted basis and, for sales, at same number of working days.

SALES

In Q2, sales were slightly down 0.2% year-on-year on a reported basis and up 2.8% on a constant and same-day basis, reflecting sequential improvement in all three geographies

In the first-half, sales were up 2.4% year-on-year on a reported basis and up 1.7% on a constant and same-day basis

In Q2, Rexel posted sales of €3,342.8 million, down 0.2% on a reported basis and up 2.8% on a constant and same-day basis, including a favorable copper effect of 1.1% of sales.

The 0.2% decrease in reported sales included:

•  A net positive currency effect of €2.2 million (+0.1% of last year's sales), mainly due to the appreciation of the US dollar against the euro, partly offset by the depreciation of the British pound;
•  A net negative effect of €12.9 million from changes in the scope of consolidation (-0.4% of last year's sales), mainly due to last year's divestment of our activities in Poland, Slovakia and the Baltics;
•  A negative calendar effect of 2.6 percentage points.

In the first-half, Rexel posted sales of €6,665.9 million, up 2.4% on a reported basis and up 1.7% on a constant and same-day basis, including a favorable copper effect of 1.1% of sales.

The 2.4% increase in reported sales included:

• A net positive currency effect of €39.3 million (+0.6% of last year's sales), mainly due to the appreciation of the US and Canadian dollars against the euro, partly offset by the depreciation of the British pound;
• A net negative effect of €38.9 million from changes in the scope of consolidation (-0.6% of last year's sales), mainly due to last year's divestment of our activities in Poland, Slovakia and the Baltics;
• A positive calendar effect of 0.7 percentage points.

Europe (54% of Group sales): +3.6% in Q2 and +2.4% in H1 on a constant and same-day basis

In Q2, sales in Europe decreased by 2.6% on a reported basis, including a negative calendar effect of 4.3%, a negative net scope effect of 0.6% (for €11.5m) and a negative currency effect of 1.3% (for €23.5m, mainly due to the depreciation of the British pound against the euro). On a constant and same-day basis, sales were up 3.6%.

Sales in most of our markets were in positive territory supported by a broadly favorable environment:  

• Sales in France (36% of the region's sales) were up 4.7%, with trends improving over the quarter mostly driven by residential and commercial activity;
• Sales in Scandinavia (13% of the region's sales) were up 4.3%, driven by strong 12.9% growth in Sweden;
• Sales in Germany (11% of the region's sales) were up 2.4%, mainly driven sales to the industry (notably cables);
• Benelux (9% of the region's sales) posted solid growth, with Belgium up 9.3% and The Netherlands up 15.4% thanks to sales of photovoltaic equipment (PV);

However, sales dropped in some markets:

• In the UK (12% of the region's sales), sales were down 0.9%, which nevertheless represented a sequential improvement compared to Q1 2017 (-3.2%). This sequential improvement was due to the end of the negative impact from sales of photovoltaic equipment (PV). In Q2 2017, PV has no impact vs. -1.3% in Q1 2017;
• In Switzerland (6% of the region's sales) sales were down 2.4%, impacted by continued unfavorable market conditions and competitive environment; 

North America (36% of Group sales): +1.9% in Q2 and +1.6% in H1 on a constant and same-day basis

In Q2, sales in North America were up 3.3% on a reported basis, including a negative calendar effect of 0.3%, a positive currency effect of 1.7% (for €20.0m, due to the appreciation of the American dollar against the euro) and a negative scope effect of €0.1m.

• USA (79% of the region's sales) posted sales up 1.0% on a constant and same-day basis, driven by:
  • Faster organic sales growth, especially in the Proximity business, offsetting negative trends in the Project business;
  • On the project side, while the O&G business is growing in double digits, we are affected by the non-renewal of a wind contract with a large contractor and by disruptions in the supply chain of a large supplier.
•  Canada (21% of the region's sales) returned to growth and posted sales up 5.3% on a constant and same-day basis, reflecting:
  • Sequential improvement mostly driven by positive momentum in the commercial end-market and good sales of automation products in Q2;
  • Strong demand for Wind in the quarter (contributing to 3.0% of sales growth), notably thanks to a large wind farm project; 
  • Subdued situation in O&G, nevertheless showing an improvement with O&G sales down 11% in Q2 compared to -26% in Q1 2017 and -23% in Q4 2016.

Asia-Pacific (10% of Group sales): +1.4% in Q2 and -1.6% in H1 on a constant and same-day basis

In Q2, sales in Asia-Pacific were up 0.3% on a reported basis, including a negative calendar effect of 2.3% and a positive currency effect of 1.7% (for €5.6m, mainly due to the appreciation of the Australian dollar against the euro). On a constant and same-day basis, sales were up 1.4%, reflecting contrasting situations:

• In Asia (51% of the region's sales) sales were up 3.1% on a constant and same-day basis, driven by China but strongly impacted by South-East Asia.
  • China (74% of Asia) posted solid growth with sales up 16.9% on a constant and same-day basis, helped by easier comps (-18.1% in Q2 2016) and reflecting increased sales of industrial automation products and solutions;
  • In South-East Asia (18% of Asia) sales were down 31.8% on a constant and same-day basis, largely attributable to a drop-in sale to the O&G industry;
  • Sales in the rest of Asia (8% of Asia) were up 6.5% on a constant and same-day basis, with India up 34.3% and the Middle East down 21.7%, due to a sharp drop in sales to the O&G industry.
• In the Pacific (49% of the region's sales), sales were slightly down (-0.3%) on a constant and same-day basis.
  • In Australia (82% of Pacific) sales were up 2.1% on a constant and same-day basis, reflecting sequential improvement (Q1 2017 was up 0.8%); strong sales to the residential end-market were partly offset by lower project sales;
  • In New Zealand (18% of Pacific) sales were down 9.6% on a constant and same-day basis, mainly due to a challenging base effect (+7.2% in Q2 2016) and delay in project business.

PROFITABILITY

Improved gross margin at 24.5% of sales

Adjusted EBITA margin of 4.3%, up 10bps

Reported EBITA up 11.9% year-on-year

In the first half, Group gross margin was up 5bps year-on-year, at 24.5% of sales and opex (including depreciation) amounted to 20.2% of sales, improving by 5bps.

• In Europe, gross margin stood at 27.1% of sales, stable year-on-year thanks to the positive effect of supplier concentration strategy that offset pressure mainly due to temporary effects in France (competitive environment in the cable) and in the UK (delays in price increase). Opex (including depreciation) amounted to 21.3% of sales, improving by 10bps due to strict cost control.
• In North America, gross margin stood at 22.4% of sales. It represented 20 basis-point improvement year-on-year coming from both US and Canada. This improvement was more than offset by opex (including depreciation) that deteriorated by 40bps, impacted by investments in future growth (branch/counter openings and commercial).
• In Asia-Pacific, gross margin stood at 17.9% of sales. It represented a 60 basis-point deterioration year-on-year, impacted by the drop recorded in Asia due to poor performance in SE Asia. Opex (including depreciation) amounted to 17.7% of sales, deteriorating by 40bps, mainly due to bad debt in Asia in Q1.
• At Corporate holding level, opex amounted to €5.7m, down 62.0% thanks to strict cost control and also helped by a non-recurring adjustment related to long-term incentives. 

As a result, adjusted EBITA margin in the first half stood at 4.3% of sales vs. 4.2% in H1 2016. This net improvement reflected:

• Improved adjusted EBITA margin in Europe at 5.7% of sales vs. 5.6% in H1 2016;
• Lower adjusted EBITA margin in North America, which stood at 3.4% of sales vs. 3.6% in H1 2016;
• Lower adjusted EBITA margin in Asia-Pacific, which stood at 0.2% of sales compared to 1.2% in H1 2016.

In the first half, reported EBITA stood at €292.0 million, up 11.9% year-on-year.

NET INCOME

Stable net income

Recurring net income up 4.0% year-on-year

Operating income in the first-half stood at €232.4 million, up 5.8% year-on-year.

• Amortization of intangibles resulting from purchase price allocation amounted to €9.7 million (vs. €9.2 million in H1 2016);
• Other income and expenses amounted to a net charge of €49.9 million (vs. a net charge of €32.0 million in H1 2016). They included:
  • €13.9 million of restructuring costs (vs. €23.0 million in H1 2016);
  • €12.8 million of goodwill impairment, related to operations in Finland;
  • €20.4m of loss on asset disposals and termination of business in SE Asia.

Net financial expenses in the first-half amounted to €63.3 million (vs. €76.9 million in H1 2016). Both periods included redemption charges related to refinancing operations. H1 2016 included a net charge of €10 million related to the early repayment of a €650m bond issued in 2013 at a coupon of 5.125%.  H1 2017 included a net charge of €6.3 million, related to early redemption of the remaining outstanding USD bond line issued in 2013 at coupons of 5.250%. Restated for those net charges, net financial expenses improved from €66.9 million in H1 2016 to €57.0 million in H1 2017. This largely reflected lower average debt year-on-year and lower average effective interest rate. The average effective interest rate decreased by 50 basis points year-on-year in H1 2017 to 3.2% on gross debt (vs. 3.7% in H1 2016).

Income tax in the first-half represented a charge of €72.7 million (vs. €47.0 million in H1 2016). The increase is mainly due to higher profit before tax and non-tax-deductible charges from goodwill impairment and asset disposal. The effective tax rate stood at 43.0% (vs. 32.9% in H1 2016).

As a result, reported net income in the first-half was up 0.7%, at €96.4 million (vs. €95.8 million in H1 2016).

Recurring net income in the first-half amounted to €139.3 million, up 4.0% from €134.0 million in H1 2016 (see appendix 2).

FINANCIAL STRUCTURE

Slight decrease in net debt

Indebtedness ratio at 3.3x at June 30, below banking covenant

In the first-half, free cash-flow before interest and tax was an outflow of €76.5 million (vs. an outflow of €6.8 million in H1 2016). This net outflow included:

• Gross capital expenditure of €51.4 million (vs. €53.4 million in H1 2016),

• An outflow of €320.3 million from change in working capital (vs. an outflow of €224.4 million in H1 2016). On a constant and adjusted basis, working capital as a percentage of sales increased by 90bps, from 10.8% at June 30, 2016 to 11.7% at June 30, 2017. This increase reflected the rise in inventories to support a deeper/larger offer and the opening of branches/counters, as presented at the Capital Market Day. In addition, the build-up in inventories is also explained by better sales momentum in major geographies.

At June 30, 2017, net debt stood at €2,306.7 million (vs. €2,380.2 million at June 30, 2016). Net debt was reduced by €73.5 million. It took into account:

• €51.8 million of net interest paid during the semester,
• €63.5 million of income tax paid during the semester,
• €(4.2) million of net financial investments during the semester,
• €63.9 million of positive currency effect.

At June 30, 2017, the indebtedness ratio (Net financial debt / EBITDA), as calculated under the Senior Credit Agreement terms, stood at 3.3x, compared to 3.2x at June 30, 2016 while below our covenant and reflecting traditional seasonality effect. Rexel confirms its commitment to be below 3.0x at December 31, 2017.

Rexel boasts a sound financial structure with strong financial flexibility, comfortable headroom vis-à-vis its bank covenant and an average debt maturity of 4.2 years, with no repayment before June 2022.

Rexel's first-half performance and expectations of further sales growth acceleration for the remainder of the year allow the Group to confirm its financial targets for the full year, as announced on February 13:

• Rexel targets resuming organic growth, with sales up in the low single digits (on a constant and same-day basis) after two years of decline;
• In addition, Rexel targets a mid to high single-digit increase in adjusted EBITA;
• Lastly, Rexel targets an indebtedness ratio (net-debt-to-EBITDA, as calculated under the Senior Credit Agreement terms) of below 3 times at December 31, 2017.

NB: The estimated impacts per quarter of (i) calendar effects by geography, (ii) changes in the consolidation scope and (iii) currency fluctuations (based on assumptions of average rates over the rest of the year for the Group's main currencies) are detailed in appendix 5.

October 27, 2017                            Third-quarter and nine-month results

The financial report for the period ended June 30, 2017 is available on the Group's website (www.rexel.com), in the "Regulated information" section, and has been filed with the French Autorité des Marchés Financiers.

A slideshow of the Q2 & H1 2017 results is also available on the Group's website.

Rexel, a worldwide expert in the professional multichannel distribution of electrical products and services for the energy world, addresses three main markets - residential, commercial and industrial. The Group supports its customers to be at their best in running their business, by providing a broad range of sustainable and innovative products, services and solutions in the field of technical supply, automation and energy management. Rexel operates through a network of some 2,000 branches in 32 countries, with more than 27,000 employees. The Group's sales were €13.2 billion in 2016.

Rexel is listed on the Eurolist market of Euronext Paris (compartment A, ticker RXL, ISIN code FR0010451203). It is included in the following indices: SBF 120, CAC Mid 100, CAC AllTrade, CAC AllShares, FTSE EuroMid, STOXX600. Rexel is also part of the following SRI indices: FTSE4Good, STOXX® (STOXX® Global ESG Impact, STOXX® Low Carbon indices Global, Europe et EURO), Ethibel Sustainability Index Excellence Europe and Dow Jones Sustainability Index Europe, in recognition of its performance in corporate social responsibility (CSR). For more information, visit Rexel's web site at www.rexel.com

FINANCIAL ANALYSTS / INVESTORS

PRESS

ORGANIC SALES, otherwise stated, is defined as sales on an actual-day basis.

REPORTED EBITA (Earnings Before Interest, Taxes and Amortization) is defined as operating income before amortization of intangible assets recognized upon purchase price allocation and before other income and other expenses.

ADJUSTED EBITA is defined as EBITA excluding the estimated non-recurring net impact from changes in copper-based cable prices.

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is defined as operating income before depreciation and amortization and before other income and other expenses. 

RECURRING NET INCOME is defined as net income adjusted for non-recurring copper effect, other expenses and income, non-recurring financial expenses, net of tax effect associated with the above items.

FREE CASH FLOW is defined as cash from operating activities minus net capital expenditure.

NET DEBT is defined as financial debt less cash and cash equivalents. Net debt includes debt hedge derivatives.

For appendices, please open the PDF file by clicking on the link at the end of the press release.