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Rexel — Interim / Quarterly Report 2011
Jul 27, 2011
1628_iss_2011-07-27_86922359-8e5e-4840-9adc-2d734d36bd79.pdf
Interim / Quarterly Report
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SECOND-QUARTER & HALF-YEAR 2011 RESULTS Financial statements at June 30, 2011 were authorised for issue by the Management Board on July 21, 2011.
SOLID PERFORMANCE IN Q2: CONTINUED GROWTH IN SALES, MARGINS AND PROFITS FULL-YEAR TARGETS CONFIRMED
CONTINUED SALES AND PROFIT GROWTH IN Q2
- Sales up 5.1% on a constant and same-day basis
- Gross margin improved by 10bps to 24.6%
- EBITA1 margin up 80bps to 5.7%
STRONG PERFORMANCE IN H1
- Sales up 6.1% on a constant and same-day basis and up 7.3% on a reported basis
- EBITA1 margin up 90bps to 5.3%
- Net income up 88% at €174m
STRENGTHENED FINANCIAL STRUCTURE
- Free cash flow before interest and tax of €123m in Q2
- Indebtedness ratio at 3.0x EBITDA at June 30, 2011
FULL-YEAR TARGETS CONFIRMED
- Improvement of EBITA1 margin by at least 50bps
- Free cash flow before interest and tax above €500m
| At June 30 | Q2 2011 | YoY Change | H1 2011 | YoY Change |
|---|---|---|---|---|
| On a reported basis | ||||
| Sales (€m) | 3,157.6 | +3.6% | 6,162.5 | +7.3% |
| % change organic same-day | +5.1% | +6.1% | ||
| EBITA (€m) | 174.1 | +17.6% | 333.8 | +29.7% |
| EBITA margin (as a % sales ) | 5.5% | +60bps | 5.4% | +90bps |
| Operating income (€m) | 157.7 | +26.2% | 308.8 | +44.3% |
| Net income (€m) | 87.2 | +38.3% | 173.7 | +87.9% |
| Free cash flow before interest and tax paid (€m) | 122.7 | -21.5% | 77.5 | -57.6% |
| Net debt end of period (€m) | 2,363.8 | +4.0% | ||
| On a constant and adjusted basis1 | ||||
| Gross profit (€m) | 775.9 | +5.5% | 1,522.8 | +6.7% |
| Gross margin (as a % sales) | 24.6% | +10bps | 24.7% | stable |
| EBITA (€m) | 179.1 | +22.2% | 325.7 | +29.4% |
| EBITA margin (as a % sales ) | 5.7% | +80bps | 5.3% | +90bps |
1 Constant and adjusted = at comparable scope of consolidation and exchange rates, excluding the non-recurring effect related to changes in copper-based cable prices and before amortization of purchase price allocation; an extract of financial statements is presented in Appendix.
Jean-Charles Pauze, Chairman of the Management Board and CEO, said:
"Rexel's performance since the beginning of the year enhances our confidence that we will achieve our full-year objectives.
In the second quarter, Rexel continued to deliver a solid performance, driven by further growth in sales and volumes while maintaining a strong focus on cost control.
We will continue, in the second half, to accelerate our strategy combining organic growth, through an expanded offer of value-added services and energy-efficient solutions, and selective acquisitions."
FINANCIAL REVIEW FOR THE PERIOD ENDED JUNE 30, 2011
Unless otherwise stated, all comments are on a constant and adjusted basis and, for sales, at same number of working days
Solid organic sales growth in Q2: +5.1% on a constant and same-day basis, despite a challenging base effect
In the second quarter, Rexel recorded sales of €3,157.6 million, up 3.6% on a reported basis and up 5.1% on a constant and same-day basis.
The 3.6% rise in sales on a reported basis included:
- A negative currency impact of €65.3 million (mainly due to the depreciation of the USD against the euro),
- A net positive impact of €23.8 million from changes in the scope of consolidation (acquisitions: €48.6m - divestments: €24.8m).
The 5.1% organic growth reflects continued improvement in sales trends given the tougher comparison basis (organic growth resumed at +2.3% in Q2 2010 after -5.7% in Q1 2010). It included a positive impact of 2.2 percentage points due to the rise in copper-based cable prices (compared to 3.0 percentage points in Q1 2011). Growth in volume was mainly driven by the industrial end-market in all the regions in which the Group operates. The residential and commercial end-markets showed some signs of improvement but remained weak.
In the half-year, Rexel recorded sales of €6,162.5 million, up 7.3% on a reported basis and up 6.1% on a constant and same-day basis.
The 7.3% rise in sales on a reported basis included:
- A positive currency impact of €13.9 million,
- A net positive impact of €25.4 million from changes in the scope of consolidation (acquisitions: €87.6m - divestments: €62.2m),
- A positive calendar impact of 0.4 percentage points.
The 6.1% organic growth included a positive impact of 2.6 percentage points due to the rise in copperbased cable prices.
Europe (59% of Group sales): +5.1% in Q2 and +5.6% in H1 on a constant and same-day basis
In France, sales were up 7.7% in the quarter, in line with the growth recorded in Q1 2011, driven by all three end-markets, notably the industrial one.
In the UK, sales were up 7.2% (after 1.5% in Q1 2011) and volumes were up year-on-year, thanks to targeted commercial initiatives and projects, in spite of an economic context that remains fragile.
In Germany, sales were down 7.3%. They were impacted more than in Q1 2011 by the unfavourable base effect of strong photovoltaic sales that were boosted in the first-half 2010 by tax incentives that expired on June 30, 2010. Excluding photovoltaic sales, Germany was up 6.3% in the quarter thanks to industrial endmarket activity, especially in the chemical sector.
Switzerland and Austria continued to post solid organic growth (respectively +8.4% and +4.6%) while Benelux and Eastern Europe posted double-digit growth (respectively +10.0% and +18.5%). In Scandinavia, sales rose by 5.2% with double-digit growth (+13.8%) in Finland, driven by contractors and utilities.
In Southern Europe, Spain and Italy recorded low single-digit declines (respectively -3.9% and -3.8%) while Portugal posted a 1.1% growth in sales.
North America (28% of Group sales): +5.7% in Q2 and +7.9% in H1 on a constant and same-day basis
In the US, Rexel continued to grow with sales up 4.6% in the quarter, on a constant and same-day basis. In an environment that remains uncertain, growth was driven by the industrial end-market, mainly in the energy and mining sectors. Energy efficiency, transportation, infrastructure, education and healthcare initiatives also contributed to positive sales evolution. Residential and commercial end-markets continued to be tough, with some segments showing signs of improvement.
In Canada, after the historic highs recorded in Q4 2010 and Q1 2011 (respectively +14.5% and +19.7%), growth returned to high single-digit figures (+8.4%). Growth was mainly driven by the industrial end-market, in particular in the mining and oil & gas sectors.
Asia-Pacific (10% of Group sales): +5.3% in Q2 and +6.6% in H1 on a constant and same-day basis
In the quarter, sales in Asia-Pacific were up 11.0% on a reported basis, including a positive impact of €8.1 million due to the consolidation, as from January 1st, 2011, of our acquisition in India, Yantra Automation, and of two acquisitions in China, Beijing Lucky Well Zhineng and Wuhan Rockcenter Automation. On a constant and same-day basis, sales were up 5.3%, driven by continued double-digit growth in China.
In Australia (over 60% of the region's sales), organic sales grew by only 1.8%, after 7.3% in Q1 2011. This slowdown was due to a challenging base effect and to the unfavourable impact of higher interest rates on the economic activity.
In New Zealand (over 10% of the region's sales), sales were impacted by a second earthquake in April and growth was limited to 1.2%.
In China (over 20% of the region's sales), sales posted double-digit growth (+16.0%), in line with Q1 2011, driven by strong performance in the industrial automation segment and despite very challenging comparables (organic growth in Q2 2010 stood at +27.6%).
Latin America and Other operating segments (3% of Group sales)
These operations, together with the unallocated corporate overheads, are reported in Rexel's consolidated financial statements under the "Other Operations" segment.
Latin America (2% of Group sales): +18.0% in Q2 and +24.0% in H1 on a constant and sameday basis
Latin American countries include Chile (consolidated since 1999) and Brazil (Nortel Suprimentos Industriais consolidated as from January 1, 2011).
Sales in Latin America amounted to €58.5 million in the quarter, including a positive impact of €27.4 million due to the consolidation of Nortel Suprimentos Industriais (Brazil) as from January 1st, 2011. On a constant and same-day basis, they were up 18.0%, reflecting double-digit growth in both Chile and Brazil.
Other operating segments (1% of Group sales)
Other operating segments include the remaining part of the ACE (Agencies Consumer Electronics) division acquired from Hagemeyer in 2008 that was not divested in 2010 and other businesses managed at Rexel Group level.
In the quarter, sales from the other operating segments amounted to €42.9m, down 56.9% on a reported basis, including a negative impact of €24.8 million due to the 2010 disposals of HCL Asia and Haagtechno.
Continuous improvement in earnings and profitability since the beginning of the year: EBITA1 margin up 90bps to 5.3% and reported EBITA up 30% to €334 million
In the quarter, EBITA1 margin stood at 5.7% vs. 4.9% in Q2 2010.
This 80 basis point improvement reflected:
- A 10bps improvement in gross margin1 : from 24.5% of sales in Q2 2010 to 24.6% in Q2 2011,
- A 70bps reduction in distribution and administrative expenses2 : from 19.6% in Q2 2010 to 18.9% in Q2 2011 (these expenses grew by only 1.4% while sales grew by 5.1%).
In the half-year, EBITA margin1 stood at 5.3% vs. 4.4% in H1 2010; this 90bps improvement mainly resulted from strict control of distribution and administrative expenses2 .
Reported EBITA reached €174.1 million in the quarter and €333.8 million in the half, up 29.7% year-onyear.
1 Constant and adjusted = at comparable scope of consolidation and exchange rates, excluding the non-recurring effect related to changes in copper-based cable prices and before amortization of purchase price allocation
2 including depreciation
Strong increase in operating income (+44%) and in net income (+88%)
In the half-year, operating income increased by 44.3% to €308.8 million, reflecting the strong rise in EBITA and reduced restructuring costs.
- Amortization of purchase price allocation amounted to €9.2 million (vs. €12.3 million in H1 2010),
- Other income and expenses amounted to a net charge of €15.8 million (vs. a net charge of €31.1 million in H1 2010). They included €9.1 million of restructuring costs (vs. €29.5 million in H1 2010) and €7.0 million of asset impairment (related to Hagemeyer Brands Australia, a non-core business that is part of the ACE division).
In the half-year, net income increased by 87.9% to €173.7 million (vs. €92.4 million in H1 2010).
- Net financial expenses amounted to €94.7 million (vs. €103.5 million in H1 2010). The average effective interest rate for the half stood at 6.9% (vs. 7.1% in H1 2010). Net financial expenses throughout the period benefited from the reduction applicable to the Senior Credit margin as the indebtedness ratio at the end of December 2010 was 3.19x (vs. 4.32x at the end of December 2009),
- Income tax represented a charge of €40.5 million (vs. €18.5 million in H1 2010),
- Share of profit in associates amounted to €0.1 million.
Free cash flow before interest and tax3 of €123m in Q2 and indebtedness ratio reduced to 3.0x at June 30
In the half-year, free cash flow before interest and tax3 was an inflow of €77.5 million, of which €122.7 million was generated during Q2 (in Q1, it was an outflow of €45.2m). The inflow in the half included:
- Net capital expenditure of €27.0 million (of which gross capital expenditure represented €44.4 million),
- A €237.4 million outflow from change in working capital, resulting from stronger sales.
Net debt stood at €2,363.8 at June 30, 2011, up €90.5 million vs. December 31, 2010. It included:
- €55.2 million of net financial investment (including the acquisitions of Nortel Suprimentos Industriais in Brazil, Yantra Automation and AD Electronics in India, Wuhan Rockcenter Automation and Beijing Zhongheng in China and Tegro in Germany),
- €71.4 million of net interest paid,
- €47.5 million of income tax paid,
- €19.2 million of dividends paid in cash,
- €44.4 million of favourable currency effect.
Indebtedness ratio (Net financial debt / EBITDA), as calculated under the Senior Credit Agreement terms, stood at 3.03x at June 30, 2011, vs. 3.19x December 31, 2010.
OUTLOOK
Thanks to its solid performance since the beginning of the year, Rexel confirms its full-year objectives…
- Improvement of EBITA4 margin by at least 50 basis points in 2011,
- Free cash flow before interest and tax above €500 million.
…and its three medium-term strategic priorities:
- Strengthen its market position through organic growth and acquisitions,
- Enhance its profitability and optimize capital employed to achieve its 2013 targets of an EBITA4 margin close to 6.5% and a return on capital employed close to 14%,
- Generate solid free cash flow.
3 Cash from operating activities minus net capital expenditure and before net interest and income tax paid
4 Constant and adjusted = at comparable scope of consolidation and exchange rates, excluding the non-recurring effect related to changes in copper-based cable prices and before amortization of purchase price allocation
CALENDAR
November 9, 2011 Third-quarter and 9-month 2011 results
FINANCIAL INFORMATION
The financial report for the period ended June 30, 2011 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 second quarter and half-year 2011 results is also available on the Company's website.
Rexel, a global leader in the distribution of electrical supplies, serves three main end markets: industrial, commercial and residential. The Group operates in 36 countries, with a network of some 2,200 branches, and employs 28,000 people. Rexel's sales were €12.0 billion in 2010. Its majority shareholders are an investor group led by Clayton, Dubilier & Rice, Eurazeo and BAML Capital Partners.
Rexel is listed on the Eurolist market of Euronext Paris (compartment A, ticker RXL, ISIN code FR0010451203). It is integrated in the following indices: SBF 120, CAC Mid 100, CAC AllTrade, CAC AllShares, FTSE EuroMid, FTSE4Good and STOXX600.
For more information, visit Rexel's web site at www.rexel.com
CONTACTS
FINANCIAL ANALYSTS / INVESTORS PRESS
+33 1 42 85 76 12 +33 1 42 85 76 28 [email protected] [email protected] +33 1 42 85 57 61 +33 1 53 96 83 92
Marc MAILLET Pénélope LINAGE-COHEN Florence MEILHAC Brunswick: Thomas KAMM fmeilha[email protected] [email protected]
Segment reporting – Constant and adjusted basis (*)
(*) Constant and adjusted = at comparable scope of consolidation and exchange rates, excluding the non-recurring effect related to changes in copper-based cables price and before amortization of purchase price allocation; the non-recurring effect related to changes in copper-based cables price was, at the EBITA level :
a profit of €5.0 million in Q2 2010 and a loss of €4.9 million in Q2 2011,
a profit of €12.8 million in H1 2010 and a profit of €8.1 million in H1 2011.
GROUP
| Constant and adjusted basis (€m) | Q2 2010 | Q2 2011 | Change | H1 2010 | H1 2011 | Change |
|---|---|---|---|---|---|---|
| Sales | 3,005.5 | 3,157.6 | +5.1% | 5,783.9 | 6,162.5 | +6.5% |
| on a constant basis and same days | +5.1% | +6.1% | ||||
| Gross profit | 735.2 | 775.9 | +5.5% | 1,427.1 | 1,522.8 | +6.7% |
| as a % of sales | 24.5% | 24.6% | +10bps | 24.7% | 24.7% | stable |
| Distribution & adm. expenses (incl. depreciation) | (588.6) | (596.8) | +1.4% | (1,175.4) | (1,197.1) | +1.8% |
| EBITA | 146.6 | 179.1 | +22.2% | 251.6 | 325.7 | +29.4% |
| as a % of sales | 4.9% | 5.7% | +80bps | 4.4% | 5.3% | +90bps |
| Headcount (end of period) | 28,717 | 28,344 | -1.3% | 28,717 | 28,344 | -1.3% |
EUROPE
| Constant and adjusted basis (€m) | Q2 2010 | Q2 2011 | Change | H1 2010 | H1 2011 | Change | |
|---|---|---|---|---|---|---|---|
| Sales | 1 765,7 | 1 853,9 | +5,0% | 3 429,2 | 3 641,4 | +6,2% | |
| on a constant basis and same days | +5,1% | +5,6% | |||||
| o/w | France | 584,8 | 629,8 | +7,7% | 1 152,7 | 1 251,2 | +8,5% |
| on a constant basis and same days | +7,7% | +7,7% | |||||
| United Kingdom | 211,9 | 223,3 | +5,4% | 448,7 | 463,6 | 3,3% | |
| on a constant basis and same days | +7,2% | +4,1% | |||||
| Germany | 243,6 | 226,3 | -7,1% | 443,0 | 428,2 | -3,3% | |
| on a constant basis and same days | -7,3% | -4,1% | |||||
| Scandinavia | 215,6 | 225,5 | +4,6% | 411,4 | 436,2 | +6,0% | |
| on a constant basis and same days | +5,2% | +5,6% | |||||
| Gross profit | 453,3 | 481,7 | +6,3% | 891,1 | 956,7 | +7,4% | |
| as a % of sales | 25,7% | 26,0% | +30bps | 26,0% | 26,3% | +30bps | |
| Distribution & adm. expenses (incl. depreciation) | (347,2) | (354,2) | +2,0% | (700,5) | (714,3) | +2,0% | |
| EBITA | 106,1 | 127,5 | +20,1% | 190,7 | 242,5 | +27,2% | |
| as a % of sales | 6,0% | 6,9% | +90bps | 5,6% | 6,7% | +110bps | |
| Headcount (end of period) | 16 756 | 16 597 | -0,9% | 16 756 | 16 597 | -0,9% |
NORTH AMERICA
| Constant and adjusted basis (€m) | Q2 2010 | Q2 2011 | Change | H1 2010 | H1 2011 | Change | |
|---|---|---|---|---|---|---|---|
| Sales | 835,3 | 883,2 | +5,7% | 1 601,8 | 1 729,0 | +7,9% | |
| on a constant basis and same days | +5,7% | +7,9% | |||||
| o/w | United States | 579,3 | 605,7 | +4,6% | 1 111,1 | 1 170,8 | +5,4% |
| on a constant basis and same days | +4,6% | +5,4% | |||||
| Canada | 256,1 | 277,5 | +8,4% | 490,7 | 558,3 | +13,8% | |
| on a constant basis and same days | +8,4% | +13,8% | |||||
| Gross profit | 179,8 | 189,6 | +5,4% | 346,0 | 367,2 | +6,1% | |
| as a % of sales | 21,5% | 21,5% | stable | 21,6% | 21,2% | -40bps | |
| Distribution & adm. expenses (incl. depreciation) | (154,5) | (152,6) | -1,2% | (307,8) | (306,5) | -0,4% | |
| EBITA | 25,4 | 37,0 | +45,8% | 38,2 | 60,7 | +59,0% | |
| as a % of sales | 3,0% | 4,2% | +120bps | 2,4% | 3,5% | +110bps | |
| Headcount (end of period) | 7 519 | 7 184 | -4,5% | 7 519 | 7 184 | -4,5% |
ASIA-PACIFIC
| Constant and adjusted basis (€m) | Q2 2010 | Q2 2011 | Change | H1 2010 | H1 2011 | Change | |
|---|---|---|---|---|---|---|---|
| Sales | 303,0 | 319,1 | +5,3% | 566,7 | 603,2 | +6,4% | |
| on a constant basis and same days | +5,3% | +6,6% | |||||
| o/w | Australia | 191,9 | 195,3 | +1,8% | 362,1 | 376,9 | +4,1% |
| on a constant basis and same days | +1,8% | +4,4% | |||||
| China | 60,6 | 70,6 | +16,6% | 107,8 | 125,5 | +16,5% | |
| on a constant basis and same days | +16,0% | +16,1% | |||||
| New Zealand |
35,6 | 36,0 | +1,2% | 66,8 | 66,7 | -0,2% | |
| on a constant basis and same days | +1,2% | -0,2% | |||||
| Gross profit | 65,1 | 69,5 | +6,8% | 123,4 | 132,4 | +7,3% | |
| as a % of sales | 21,5% | 21,8% | +30bps | 21,8% | 21,9% | +10bps | |
| Distribution & adm. expenses (incl. depreciation) | (48,1) | (50,5) | +5,0% | (93,0) | (99,3) | +6,7% | |
| EBITA | 17,0 | 19,0 | +11,8% | 30,4 | 33,1 | +8,8% | |
| as a % of sales | 5,6% | 6,0% | +40bps | 5,4% | 5,5% | +10bps | |
| Headcount (end of period) | 2 734 | 2 837 | 3,8% | 2 734 | 2 837 | +3,8% |
OTHER (LATIN AMERICA, OTHER OPERATING SEGMENTS + CORPORATE HOLDINGS)
| Constant and adjusted basis (€m) | Q2 2010 | Q2 2011 | Change | H1 2010 | H1 2011 | Change |
|---|---|---|---|---|---|---|
| Operating segments | ||||||
| Sales | 101.5 | 101.4 | -0.1% | 186.2 | 188.9 | +1.4% |
| on a constant basis and same days | -1.6% | +0.2% | ||||
| o/w Latin America |
48.1 | 58.5 | +21.6% | 86.2 | 109.5 | +27.0% |
| on a constant basis and same days | +18.0% | +24.0% | ||||
| ACE | 47.1 | 34.5 | -26.7% | 87.5 | 63.0 | -28.0% |
| on a constant basis and same days | -26.7% | -28.1% | ||||
| Gross profit | 37.0 | 35.2 | -4.9% | 66.6 | 66.4 | -0.2% |
| as a % of sales | 36.4% | 34.7% | -170bps | 35.8% | 35.2% | -60bps |
| Distribution & adm. expenses (incl. depreciation) | (30.7) | (29.7) | -3.3% | (61.4) | (58.8) | -4.2% |
| EBITA | 6.3 | 5.4 | -14.1% | 5.2 | 7.6 | +46.2% |
| as a % of sales | 6.2% | 5.3% | -90bps | 2.8% | 4.0% | +120bps |
| Headcount (end of period) | 1,038 | 1,084 | 4.4% | 1,038 | 1,084 | 4.4% |
| Corporate Holdings | ||||||
| EBITA | (8.2) | (9.8) | +19.6% | (12.8) | (18.2) | +42.1% |
| Headcount (end of period) | 670 | 642 | -4.2% | 670 | 642 | -4.3% |
Extract of Financial Statements
| Reported basis (€m) | Q2 2010 | Q2 2011 | Change | H1 2010 | H1 2011 | Change |
|---|---|---|---|---|---|---|
| Sales | 3 047,0 | 3 157,6 | +3,6% | 5 744,6 | 6 162,5 | +7,3% |
| Gross profit | 744,6 | 771,2 | +3,6% | 1 422,8 | 1 532,6 | +7,7% |
| as a % of sales | 24,4% | 24,4% | 24,8% | 24,9% | ||
| Distribution & adm. expenses (excl. depreciation) | (577,6) | (578,6) | +0,2% | (1 127,4) | (1 161,9) | +3,1% |
| EBITDA | 167,0 | 192,6 | +15,3% | 295,4 | 370,7 | +25,5% |
| as a % of sales | 5,5% | 6,1% | 5,1% | 6,0% | ||
| Depreciation | (19,0) | (18,5) | (38,0) | (36,9) | ||
| EBITA | 148,0 | 174,1 | +17,6% | 257,4 | 333,8 | +29,7% |
| as a % of sales | 4,9% | 5,5% | 4,5% | 5,4% | ||
| Amortization of purchase price allocation | (7,2) | (4,6) | (12,3) | (9,2) | ||
| Operating income bef. other inc. and exp. | 140,8 | 169,6 | +20,4% | 245,1 | 324,6 | +32,5% |
| as a % of sales | 4,6% | 5,4% | 4,3% | 5,3% | ||
| Other income and expenses | (15,9) | (11,9) | (31,1) | (15,8) | ||
| Operating income | 124,9 | 157,7 | +26,2% | 214,0 | 308,8 | +44,3% |
| Financial expenses (net) | (52,8) | (53,1) | (103,5) | (94,7) | ||
| Share of profit (loss) in associates | 1,5 | 1,0 | 0,4 | 0,1 | ||
| Net income (loss) before income tax | 73,6 | 105,6 | +43,5% | 110,9 | 214,2 | +93,1% |
| Income tax | (10,5) | (18,4) | (18,5) | (40,5) | ||
| Net income (loss) | 63,1 | 87,2 | +38,3% | 92,4 | 173,7 | +87,9% |
| Net income (loss) attr. to non-controlling interests | 0,3 | 0,3 | 0,4 | 0,4 | ||
| Net income (loss) attr. to equity holders of the parent | 62,8 | 86,9 | +38,4% | 92,0 | 173,3 | +88,4% |
Consolidated Income Statement
Sales and profitability by segment
| Reported basis (€m) | Q2 2010 | Q2 2011 | Change | H1 2010 | H1 2011 | Change |
|---|---|---|---|---|---|---|
| Sales | 3,047.0 | 3,157.6 | +3.6% | 5,744.6 | 6,162.5 | +7.3% |
| Europe | 1,744.5 | 1,853.9 | +6.3% | 3,365.3 | 3,641.4 | +8.2% |
| North America | 919.2 | 883.2 | -3.9% | 1,665.3 | 1,729.0 | +3.8% |
| Asia-Pacific | 287.4 | 319.1 | +11.0% | 523.1 | 603.2 | +15.3% |
| Other | 95.9 | 101.4 | +5.7% | 190.9 | 188.9 | -1.0% |
| Gross profit | 744.6 | 771.2 | +3.6% | 1,422.8 | 1,532.6 | +7.7% |
| Europe | 451.7 | 477.0 | +5.6% | 883.8 | 962.6 | +8.9% |
| North America | 198.8 | 188.8 | -5.0% | 362.7 | 369.0 | +1.7% |
| Asia-Pacific | 61.7 | 69.4 | +12.5% | 114.1 | 133.7 | +17.2% |
| Other | 32.4 | 36.0 | +11.1% | 62.1 | 67.3 | +8.4% |
| EBITA | 148.0 | 174.1 | +17.6% | 257.4 | 333.8 | +29.7% |
| Europe | 108.6 | 122.5 | +12.8% | 195.9 | 246.8 | +26.0% |
| North America | 27.2 | 36.2 | +33.1% | 41.3 | 62.3 | +50.8% |
| Asia-Pacific | 16.0 | 18.9 | +18.1% | 28.1 | 34.4 | +22.4% |
| Other | -3.9 | -3.5 | n/m | -8.0 | -9.7 | n/m |
Consolidated Balance Sheet
| Assets (€m) | December 31s t , 2010 |
June 30, 2011 | ||||
|---|---|---|---|---|---|---|
| Goodwill | 3,931.2 | 3,946.5 | ||||
| Intangible assets | 934.4 | 913.3 | ||||
| Property, plant & equipment | 245.4 | 258.2 | ||||
| Long-term investments(1) | 132.1 | 59.4 | ||||
| Investments in associates | 9.3 | 8.8 | ||||
| Deferred tax assets | 138.6 | 150.4 | ||||
| Total non-current assets | 5,391.0 | 5,336.6 | ||||
| Inventories | 1,203.1 | 1,206.2 | ||||
| Trade receivables | 2,022.0 | 2,176.2 | ||||
| Other receivables | 436.1 | 426.9 | ||||
| Assets classified as held for sale | 23.1 | 76.9 | ||||
| Cash and cash equivalents | 311.9 | 175.7 | ||||
| Total current assets | 3,996.2 | 4,061.9 | ||||
| Total assets | 9,387.2 | 9,398.5 |
| Total assets | 9,387.2 | 9,398.5 |
|---|---|---|
| Liabilities (€m) | December 31s t , 2010 |
June 30, 2011 |
| Total equity | 3,834.4 | 3,945.5 |
| Long-term debt | 2,463.5 | 1,923.8 |
| Deferred tax liabilities | 144.5 | 167.1 |
| Other non-current liabilities | 330.7 | 294.8 |
| Total non-current liabilities | 2,938.7 | 2,385.7 |
| Interest bearing debt & accrued interests | 122.0 | 614.3 |
| Trade payables | 1,866.2 | 1,827.0 |
| Other payables | 623.9 | 597.1 |
| Liabilities classified as held for sale | 2.0 | 28.9 |
| Total current liabilities | 2,614.1 | 3,067.3 |
| Total liabilities | 5,552.8 | 5,453.0 |
| Total equity & liabilities | 9,387.2 | 9,398.5 |
(1) Includes Fair value hedge derivatives for €0.3m at December 31, 2010 and for €1.4m at June 30, 2011
Change in Net Debt
| €m | Q2 2010 | Q2 2011 | H1 2010 | H1 2011 |
|---|---|---|---|---|
| EBITDA | 167,0 | 192,6 | 295,4 | 370,7 |
| Other operating revenues & costs(1) | (22,0) | (13,9) | (74,6) | (28,8) |
| Operating cash flow | 145,0 | 178,7 | 220,8 | 341,9 |
| Change in working capital | 18,3 | (36,2) | (20,4) | (237,4) |
| Gross capital expenditure | (11,8) | (26,0) | (23,7) | (44,4) |
| Disposal of fixed assets & other | 4,8 | 6,1 | 6,2 | 17,4 |
| Net capital expenditure | (7,0) | (19,9) | (17,6) | (27,0) |
| Free cash flow before interest and tax | 156,3 | 122,7 | 182,9 | 77,5 |
| Net interest paid / received | (42,4) | (38,2) | (87,0) | (71,4) |
| Income tax paid | (18,9) | (24,0) | (27,9) | (47,5) |
| Free cash flow after interest and tax | 95,0 | 60,5 | 68,0 | (41,4) |
| Net financial investment(2) | 9,9 | (5,9) | 11,3 | (55,2) |
| Dividends paid | 0,0 | (105,2) | 0,0 | (105,2) |
| Net change in equity | 1,3 | 84,3 | 6,9 | 88,4 |
| Other(3) | (5,5) | (5,2) | (21,3) | (21,5) |
| Currency exchange variation | (96,0) | (13,9) | (198,4) | 44,4 |
| Decrease (increase) in net debt | 4,7 | 14,6 | (133,5) | (90,5) |
| Net debt at the beginning of the period | 2 539,4 | 2 378,4 | 2 401,2 | 2 273,3 |
| Net debt at the end of the period | 2 534,7 | 2 363,8 | 2 534,7 | 2 363,8 |
(1) Includes restructuring outflows of €21.2 million in Q2 2010 and €13.8 million in Q2 2011 and €42.7 million in H1 2010 and €26.8 million in H1 2011
(2) H1 2011 includes the acquisitions of Nortel Suprimentos Industriais, Yantra Automation, AD electronics, Beijing
Zhongheng, Tegro and Wuhan Rockcenter Automation for €54.2million (net of cash)
(3) Q2 2011 includes a € (2.0) million adjustment to the High Yield Bond carrying value
Return on Capital Employed
| ROCE calculation | June 30, 2010 | June 30, 2011 |
|---|---|---|
| Goodwill | 3 994,5 | 3 946,5 |
| Intangible assets | 955,6 | 913,3 |
| Property, plant & equipment | 258,6 | 258,2 |
| Inventories | 1 227,8 | 1 206,2 |
| Trade receivables | 2 096,7 | 2 176,2 |
| Other receivables | 391,2 | 426,9 |
| Other non-current liabilities | -369,2 | -294,8 |
| Trade payables | -1 855,8 | -1 827,0 |
| Other payables | -556,5 | -597,1 |
| Reported capital employed | 6 142,9 | 6 208,4 |
| Restatement GW related to IPO | -1 322,0 | -1 322,0 |
| Capital employed used for ROCE calculation (1) | 4 820,9 | 4 886,4 |
| Operating inc. bef. other inc. & exp. pre-tax | 540,7 | 689,6 |
| Effective tax rate | 16,7% | 18,9% |
| Operating inc. bef. other inc. & exp. after tax (2) | 450,4 | 559,3 |
| ROCE after tax (2/1) | 9,3% | 11,4% |
Working Capital Analysis
| Constant basis (€m) | June 30, 2010 | June 30, 2011 |
|---|---|---|
| Sales (12 rolling months) | 11,984.9 | 12,144.8 |
| Net inventories | 1,227.8 | 1,206.2 |
| as a % of sales 12 rolling months | 10.2% | 9.9% |
| as a number of days | 46.2 | 45.1 |
| Net trade receivables | 2,096.7 | 2,176.2 |
| as a % of sales 12 rolling months | 17.5% | 17.9% |
| as a number of days | 54.3 | 54.4 |
| Net trade payables | 1,855.8 | 1,827.0 |
| as a % of sales 12 rolling months | 15.5% | 15.0% |
| as a number of days | 61.7 | 59.8 |
| Trade working capital | 1,468.6 | 1,555.4 |
| as a % of sales 12 rolling months | 12.3% | 12.8% |
| Non-trade working capital | -179.2 | -172.1 |
| Total working capital | 1,289.4 | 1,383.2 |
| as a % of sales 12 rolling months | 10.8% | 11.4% |
Appendix 4 Headcount and branches by geography
| FTEs | Change 30/06/2011 | ||||
|---|---|---|---|---|---|
| comparable | 30/06/10 | 31/12/2010 | 30/06/11 | vs.30/06/2010 vs.31/12/2010 | |
| Europe | 16,756 | 16,543 | 16,597 | -1% | 0% |
| USA | 5,390 | 5,054 | 4,964 | -8% | -2% |
| Canada | 2,129 | 2,201 | 2,220 | 4% | 1% |
| North America | 7,519 | 7,255 | 7,184 | -4% | -1% |
| Asia-Pacific | 2,734 | 2,748 | 2,837 | 4% | 3% |
| Latin America & Other Op. segments | 1,038 | 1,057 | 1,084 | 4% | 3% |
| Corporate holdings | 670 | 678 | 642 | -4% | -5% |
| Other | 1,708 | 1,735 | 1,726 | 1% | -1% |
| Group | 28,717 | 28,281 | 28,344 | -1% | 0% |
| Branches | 31/12/2010 | Change 30/06/2011 | ||||
|---|---|---|---|---|---|---|
| comparable | 30/06/10 | 30/06/11 | vs.30/06/2010 vs.31/12/2010 | |||
| Europe | 1,293 | 1,275 | 1,269 | -2% | 0% | |
| USA | 338 | 313 | 306 | -9% | -2% | |
| Canada | 209 | 210 | 209 | 0% | 0% | |
| North America | 547 | 523 | 515 | -6% | -2% | |
| Asia-Pacific | 294 | 293 | 298 | 1% | 2% | |
| Latin America & Other Op. segments | 66 | 66 | 67 | 2% | 2% | |
| Corporate holdings | 6 | 6 | 6 | - | - | |
| Other | 72 | 72 | 73 | 1% | 1% | |
| Group | 2,206 | 2,163 | 2,155 | -2% | 0% |
Senior Credit Agreement main terms
The €1.7 billion senior credit agreement, signed in December 2009, comprises two revolving credit facilities structured as follows:
- A three-year multi-currency revolving credit facility in an initial amount of €600 million, which will reduce to €400 million after one year and to €200 million after two years (Facility A);
- A five-year multi-currency revolving credit facility in an amount of €1,100 million (Facility B).
The applicable margins in the senior credit facilities are 50bps lower for Facility A and 25bps lower for Facility B than in the previous senior credit agreement. The margin level varies according to the same Indebtedness Ratio thresholds as in the previous senior credit agreement (IR = adjusted consolidated net debt to adjusted consolidated EBITDA of the last 12 months):
| Indebtedness Ratio (IR) |
IR sup. or equal to 5.0x |
IR sup. or equal to 4.5x and inf. to 5.0x |
IR sup. or equal to 4.0x and inf. to 4.5x |
IR sup. or equal to 3.5x and inf. to 4.0x |
IR sup. or equal to 3.0x and inf. to 3.5x |
IR sup. or equal to 2.5x and inf. to 3.0x |
IR inf. to 2.5x |
|---|---|---|---|---|---|---|---|
| Facility A | 4.25% | 3.50% | 3.00% | 2.50% | 2.00% | 1.75% | 1.50% |
| Facility B | 4.50% | 3.75% | 3.25% | 2.75% | 2.25% | 2.00% | 1.75% |
In addition, the margin applicable to both facilities shall be increased by an utilisation fee equal to:
- 25bps if the total amount drawn under both facilities is comprised between 33% and 66% of the total commitment;
- 50bps if the total amount drawn under both facilities equals or exceeds 66% of the total commitment.
The financial covenants related to the Indebtedness Ratio (IR) covenant, to the limitation of capital expenditure and to the limitation of dividend payment remain unchanged:
Commitment to keep indebtedness ratio below thresholds:
| Date | 30 june 2010 | 31 dec. 2010 | 30 june 2011 | 31 dec. 2011 | 30 june 2012 | Thereafter |
|---|---|---|---|---|---|---|
| Covenant | 5.15x | 4.90x | 4.50x | 4.00x | 3.75x | 3.5x |
- Commitment to suspend dividend payments as long as the Indebtedness Ratio equals or exceeds 4.00x;
- Commitment to limit capital expenditure to 0.75% of sales as long as the Indebtedness Ratio equals or exceeds 4.00x.
The senior credit agreement contains customary clauses for this type of agreement. These include clauses restricting the ability of Rexel Group companies to pledge their assets, carry out mergers or restructuring programs, borrow or lend money or provide guarantees. In particular, the Rexel Group has no restriction on acquisitions if the Indebtedness Ratio does not exceed 3.50x and has an acquisition basket of up to €200 million for each 12-months period if the Indebtedness Ratio equals or exceed 3.50x.
As the indebtedness ratio at June 30, 2011 stood at 3.03x, the limitations regarding dividend payment, capital expenditure and acquisitions do not apply.
DISCLAIMER
The Group is exposed to fluctuations in copper prices in connection with its distribution of cable products. Cables accounted for approximately 18% of the Group's sales, and copper accounts for approximately 60% of the composition of cables. This exposure is indirect since cable prices also reflect copper suppliers' commercial policies and the competitive environment in the Group's markets. Changes in copper prices have an estimated so-called "recurring" effect and an estimated so called "non-recurring" effect on the Group's performance, assessed as part of the monthly internal reporting process of the Rexel Group:
- the recurring effect related to the change in copper-based cable prices corresponds to the change in value of the copper part included in the sales price of cables from one period to another. This effect mainly relates to the Group's sales;
- the non-recurring effect related to the change in copper-based cables prices corresponds to the effect of copper price variations on the sales price of cables between the time they are purchased and the time they are sold, until all such inventory has been sold (direct effect on gross profit). Practically, the non-recurring effect on gross profit is determined by comparing the historical purchase price for copper-based cable and the supplier price effective at the date of the sale of the cables by the Rexel Group. Additionally, the nonrecurring effect on EBITA corresponds to the non-recurring effect on gross profit, which may be offset, when appropriate, by the non-recurring portion of changes in the distribution and administrative expenses (principally, the variable portion of compensation of sales personnel, which accounts for approximately 10% of the variation in gross profit).
The impact of these two effects is assessed for as much of the Group's total cable sales as possible, over each period. Group procedures require that entities that do not have the information systems capable of such exhaustive calculations to estimate these effects based on a sample representing at least 70% of the sales in the period. The results are then extrapolated to all cables sold during the period for that entity. Considering the sales covered, the Rexel Group considers such estimates of the impact of the two effects to be reasonable.
This press release may contain statements of future expectations and other forward-looking statements. By their nature, they are subject to numerous risks and uncertainties, including those described in the Document de Référence registered with the French Autorité des Marchés Financiers (AMF) on April 11, 2011 under number D.11-0272. These forward-looking statements are not guarantees of Rexel's future performance. Rexel's actual results of operations, financial condition and liquidity as well as development of the industry in which Rexel operates may differ materially from those made in or suggested by the forwardlooking statements contained in this release. The forward-looking statements contained in this communication speak only as of the date of this communication and Rexel does not undertake, unless required by law or regulation, to update any of the forward-looking statements after this date to conform such statements to actual results, to reflect the occurrence of anticipated results or otherwise.