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REXEL :Q1 2016 RESULTS (unaudited)

Q1 2016 RESULTS (unaudited)
SEQUENTIAL IMPROVEMENT IN SALES
RESILIENT PROFITABILITY
FULL-YEAR FINANCIAL TARGETS CONFIRMED

PARIS, April 29, 2016 (GLOBE NEWSWIRE) --

SEQUENTIAL IMPROVEMENT IN SALES

  • Sequential improvement in organic same-day sales in all three geographies
  • Organic same-day sales broadly stable (-0.2%), excluding the 1.2 percentage point negative copper effect
  • Resumption of growth in organic same-day sales in Europe, notably in France and The Netherlands, as well as in the Pacific region, notably in Australia

RESILIENT PROFITABILITY WITH ADJUSTED EBITA MARGIN AT 3.9% OF SALES

  • Solid gross margin in Europe
  • Strong reduction of opex in North America, mainly driven by the USA
  • Slight sequential improvement in profitability in Asia-Pacific

FULL-YEAR FINANCIAL TARGETS CONFIRMED

Key figures1 Q1 2016 YoY change
Sales €3,160.6m
On a reported basis -1.9%
On a constant and actual-day basis -2.0%
On a constant and same-day basis -1.4%
Adjusted EBITA €121.9m -7.1%
As a percentage of sales 3.9%
Change in bps as a % of sales -20bps
Reported EBITA €113.8m -10.0%
Operating income €93.0m -11.4%
Net income from continuing operations €38.8m +67.5%
Recurring net income €56.7m +13.5%
Free cash-flow before interest and tax from continuing operations €(194.9)m vs. €(141.9)m
Net debt at end of period €2,495.6m -5.9%

1 See definition in the Glossary section of this document

Rudy PROVOOST, Chairman of the Board of Directors and CEO, said:

"In Q1, we saw a sequential improvement in organic same-day sales in all three of our geographies. Both Europe and Asia-Pacific returned to growth, with positive trends in several key markets, notably France and Australia. In North-America, sales continued to reflect decline in the Oil & Gas market and pressure on related industrial segments. Sales in this region should improve over the next quarters, as the Oil & Gas impact, which began in the second quarter of last year, will gradually lessen.

Our profitability was in line with our expectations for the quarter, reflecting the beneficial effects of the action plans implemented in recent years. Our gross margin was broadly stable, sustained by solid margin in Europe, demonstrating the effectiveness of our pricing initiatives. Solid cost control in North America, particularly a strong reduction in opex in the USA, also contributed to delivering a resilient adjusted EBITA margin of 3.9% of sales.

While the market environment remains challenging, particularly in some industrial segments, Rexel is well positioned to seize opportunities related to construction in Europe, notably in France, where the incipient construction recovery augurs well for our activity in the second half. In this context, we confirm our full-year financial targets."

FINANCIAL REVIEW FOR THE PERIOD ENDED MARCH 31, 2016

  • Financial statements as of March 31, 2016 were authorized for issue by the Board of Directors on April 28, 2016. They are not audited by statutory auditors.
  • The following terms: 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
Broadly stable sales on a constant and same-day basis, excluding copper effect in Q1 2016, with Europe and Asia-Pacific returning to growth

Sequential improvement in organic same-day sales in all three geographies, despite a more negative copper effect

In the first quarter, Rexel posted sales of €3,160.6 million, down 1.9% on a reported basis and down 1.4% on a constant and same-day basis. Excluding the 1.2% negative impact due to the change in copper-based cable prices, sales were broadly stable on a constant and same-day basis (-0.2%).

The 1.9% drop in sales on a reported basis reflected:

  • A negative currency effect of €35.1 million (mainly due to the depreciation of the Canadian dollar and British pound, partially offset by the appreciation of the US dollar against the euro),
  • A positive scope effect of €38.1 million from recent acquisitions (Sofinther in France, Electro-Industrie en Acoustiek in Belgium, Zhonghao Technology in China and Brohl & Appell in the USA),
  • A negative calendar effect of 0.6 percentage points.

Europe (57% of Group sales): +0.3% on a constant and same-day basis

In the first quarter, sales in Europe increased by 0.5% on a reported basis and returned to growth on a constant and same-day basis (+0.3%). Excluding the copper effect, sales grew by 1.5% on a constant and same-day basis.

  • In France (36% of the region's sales), sales returned to growth. They were up 2.5% year-on-year, reflecting the favorable comparison base of Q1 2015 (-3.6%) but not yet reflecting the current improvement in housing starts that is expected to translate into Rexel's sales later in the year.
  • In the UK (14% of the region's sales), sales were down 1.1% on a constant and same-day basis. Excluding both the 45% drop in sales of photovoltaic equipment and the negative copper effect, sales were up 1.8%.
  • In Germany (11% of the region's sales), sales dropped by 3.0% including copper, but were broadly stable (-0.3%) excluding this effect. They improved sequentially over Q4 2015 (-4.7% including copper and -2.4% excluding copper).
  • In Scandinavia (12% of the region's sales), sales were broadly stable year-on-year (-0.1%). Sweden posted solid growth of +3.6% despite a very challenging base effect (+11.8% in Q1 2015) while sales in Norway were broadly stable (+0.2%) and sales in Finland (-9.1%) reflected the challenging base effect of Q1 2015 (+7.3%) as well as difficult macro-economic conditions.
  • The Netherlands returned to growth, with sales up 7.1%.
  • In other European countries, performance was as follows:
  • In Switzerland, sales were down 6.0%, still impacted by the negative effect of the Swiss Franc vs. the euro,
  • In Austria, sales posted a solid increase of 5.9%,
  • In Italy, sales were back to growth (+3.4%),
  • In Belgium, sales posted a slight decrease of -0.9%,
  • In Spain, sales dropped by 0.7%, reflecting lower export activity, while domestic activity was up 2.8%.

North America (34% of Group sales): -4.4% on a constant and same-day basis

In the first quarter, sales in North America were down 5.6% on a reported basis including a negative currency effect of €2.3m (mainly due to the depreciation of the Canadian dollar, which more than offset the appreciation of the American dollar against the euro). On a constant and same-day basis, sales were down 4.4%, improving sequentially vs. Q4 2015 (-6.5%), despite continued negative effects from lower sales to the Oil & Gas industry (minus 36% year-on-year) and lower cable sales (USD copper prices dropped by 20% year-on-year).

  • In the US (78% of the region's sales), sales were down 3.6%, of which:
  • 4.1 percentage points attributable to the 42% drop in sales to the Oil & Gas industry,
  • 2.2 percentage points attributable to lower cable sales,
  • 1.6 percentage points attributable to branch network optimization (part of a program of cost efficiency measures implemented in the USA and presented on July 29, 2015).

Excluding these three unfavorable effects, sales were up 4.3% in the quarter, reflecting good activity in the construction market.

  • In Canada (22% of the region's sales), sales were down 7.4%, of which:
  • 1.2 percentage points attributable to the 13% drop in sales to the Oil & Gas industry,
  • 1.1 percentage points attributable to the 91% drop in photovoltaic sales,
  • 1.7 percentage points attributable to the 26% drop in sales to the Mining industry.

Excluding these three unfavorable effects, sales were down 3.4% in the quarter, as, contrarily to the US, the construction market remained weak.

Asia-Pacific (9% of Group sales): +0.2% on a constant and same-day basis

In the first quarter, sales in Asia-Pacific were down 2.2% on a reported basis, including a negative effect of €14.5m from currencies, partly offset by a positive scope effect of €6.3m. On a constant and same-day basis, sales were up 0.2%, reflecting contrasting performance between Pacific and Asia.

  • In the Pacific (47% of the region's sales), sales were up 2.3%:
  • In Australia (c. 80% of Pacific), sales confirmed the continuous sequential improvement and were back to growth (+1.3%) for the first time since Q3 2011, despite a 1.6 percentage point negative impact attributable to a 15% drop in sales to the Mining industry,
  • In New Zealand (c. 20% of Pacific), sales posted solid growth of 6.6%.
  • In Asia (53% of the region's sales), sales were down 1.6%:
    • In China (c. 65% of Asia), sales dropped by 4.7%, reflecting tougher macro-economic conditions,
    • In South-East Asia (c. 25% of Asia), sales grew by 4.8%, despite lower sales (-22%) to the Oil & Gas industry,
    • In the Rest of Asia (c. 10% of Asia), sales increased by 4.9%, driven by a 18.4% growth in India, while activity in the Middle East dropped by 4.7% as a consequence of lower sales to the Oil & Gas industry.

PROFITABILITY

Solid gross margin at 24.7% in Q1, down only 5 bps year-on-year, mainly impacted by Asia-Pacific
Resilient adjusted EBITA of €121.9m, at 3.9% of sales

In the first quarter, gross margin stood at 24.7%, down 5 basis points year-on-year. Gross margin improved sequentially in all three geographies. Europe was stable and North America was resilient, while Asia-Pacific was down 70 basis points on a challenging comparable base, as Q1 2015, at 18.8%, was the strongest quarter last year.

In the first quarter, distribution and administrative expenses (including depreciation) stood at 20.9% of sales, up 15 basis points year-on-year as a percentage of sales. In North America, distribution and administrative expenses (including depreciation) were reduced by €12.3 million, of which c. 80% came from the USA. As a percentage of sales, they were stable despite the 5.6% drop in sales on an actual-day basis. In Europe, they increased by 20 basis points, reflecting investment to accompany the gradual recovery in sales as well as increased depreciation compared to Q1 2015. In Asia-Pacific, they increased by 40 basis points, mainly impacted by Asian countries.

As a result, adjusted EBITA margin in Q1 stood at 3.9% of sales, a 20 basis-point drop compared to a 2.0% drop in sales on a constant and actual day basis. It was down 110 basis points year-on-year in Asia-Pacific (9% of Rexel's sales) but resilient both in Europe and North America (91% of Rexel's sales).

In the first quarter, reported EBITA stood at €113.8 million, down 10.0% year-on-year.

NET INCOME

Net income from continuing operations up 67.5%, at €38.8m, driven by lower net financial expenses
Recurring net income up 13.5%, at €56.7m

Operating income stood at €93.0 million, down 11.4% year-on-year.

  • Amortization of intangibles resulting from purchase price allocation amounted to €3.9 million (vs. €4.3 million in Q1 2015).
  • Other income and expenses amounted to a net charge of €16.9 million (vs. a net charge of €17.2 million in Q1 2015). They included €13.6 million of restructuring costs (vs. €15.3 million in Q1 2015).

Net financial expenses amounted to €33.2 million in the quarter (vs. €69.6 million in Q1 2015). This significant drop reflected both the €19.6 million charge from early redemption of the 7% bonds, which impacted Q1 2015, and the lower average effective interest rate thanks to last year's refinancing operations. The average effective interest rate decreased by 70 basis points year-on-year: it stood at 3.8% on gross debt (vs. 4.5% in Q1 2015).

Income tax represented a charge of €20.9 million. The effective tax rate stood at 35.0% (vs. 34.6% in Q1 2015).

Net income from continuing operations rose by 67.5% to €38.8 million (vs. €23.2 million in Q1 2015).

As the disposal of our Latin American operations represented a loss of €2.5 million in Q1 2015, net income was up 87.8%, at €38.8 million (vs. €20.7 million in Q1 2015).

Recurring net income amounted to €56.7 million, up 13.5% year-on-year (see appendix 2).

FINANCIAL STRUCTURE

Net debt reduced by 5.9% year-on-year

In the quarter, free cash flow from continuing operations before interest and taxwas an outflow of €194.9 million (vs. an outflow of €141.9 million in Q1 2015). This net outflow included:

  • Gross capital expenditure of €26.6 million (vs. €26.0 million in Q1 2015),
  • An outflow of €287.1 million from change in working capital on a reported basis, reflecting the traditional seasonality of the business (vs. an outflow of €240.8 million in Q1 2015).

At March 31, 2016, net debt stood at €2,495.6 million, down 5.9% year-on-year (vs. €2,652.5 million at March 31, 2015).

It took into account:

  • €31.6 million of net interest paid,
  • €20.3 million of income tax paid,
  • €41.1 million of positive currency effect.

OUTLOOK

The overall economic environment remains challenging, particularly in some industrial segments. However, there are signs of construction recovery in some European countries, notably in France, which augur well for activity in the second half.

In this context, the full-year 2016 financial targets, announced on February 11, are confirmed:

  • Organic sales growth on a constant and same-day basis of between -3% and +1%
    • This sales guidance includes an estimated negative impact from copper prices of c. 1.1 percentage points (based on the assumption of average copper price of USD4,500/t in 2016)
    • Excluding this estimated negative impact, this corresponds to a sales guidance of between -1.9% and +2.1%
  • Adjusted EBITA margin of between 4.1% and 4.5%
  • Solid free cash-flow generation of:
    • Between 70% and 80% of EBITDA, before interest and tax
    • Between 35% and 45% of EBITDA, after interest and tax

CALENDAR

May 25, 2016 Shareholders' Meeting in Paris
July 29, 2016 Second-quarter and Half-year results
October 31, 2016 Third-quarter and 9-month results

FINANCIAL INFORMATION

The financial report for the period ended March 31, 2016 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 first-quarter 2016 results is also available on the Group's website.

ABOUT REXEL GROUP

Rexel, a global leader in the professional distribution of 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 2,100 branches in 35 countries, with c. 28,000 employees. The Group's sales were €13.5 billion in 2015.
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: DJSI Europe, FTSE4Good Europe & Global, EURO STOXX Sustainability, Euronext Vigeo Europe 120 and ESI Excellence Europe. Finally, Rexel is included on the Ethibel EXCELLENCE Investment Register in recognition of its performance in corporate social responsibility (CSR). For more information, visit Rexel's web site at www.rexel.com

CONTACTS

FINANCIAL ANALYSTS / INVESTORS

Marc MAILLET +33 1 42 85 76 12 marc.maillet@rexel.com
Florence MEILHAC +33 1 42 85 57 61 florence.meilhac@rexel.com

PRESS

Pénélope LINAGE +33 1 42 85 76 28 penelope.linage@rexel.com
Brunswick: Thomas KAMM +33 1 53 96 83 92 tkamm@brunswickgroup.com

GLOSSARY

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.

APPENDICES

Appendix 1: 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 loss of €4.4 million in Q1 2015 and a loss of €8.2 million in Q1 2016.

Appendix 2: Extract of Financial Statements

Consolidated Income Statement

Bridge Between Operating Income Before Other Income And Other Expenses And Adjusted EBITA

Recurring Net Income

Sales And Profitability By Segment

Consolidated Balance Sheet1

1 Net debt includes Debt hedge derivatives for €(29.8)m at March 31, 2016 and €(6.4)m at December 31, 2015. It also includes accrued interest receivables for €(2.5)m at March 31, 2016 and for €(0.7)m at December 31, 2015.

Change in Net Debt

1 Includes restructuring outflows of €16.6m in Q1 2015 and €8.0m in Q1 2016
2 Excluding settlement of fair value hedge derivatives

Appendix 3: Working Capital Analysis

Appendix 4: Headcount and branches by geography

Appendix 5: Calendar, scope and change effects on sales

Based on the assumption of the following average exchange rates:

  • 1€ = 1.13USD
  • 1€ = 1.48CAD
  • 1€ = 1.49AUD
  • 1€ = 0.79GBP

and based on acquisitions to date, 2015 sales should take into account the following estimated impacts to be comparable to 2016:

Q1 Q2e Q3e Q4e FYe
Calendar effect -0.6% +2.4% -0.7% -0.4% +0.2%
Scope effect €38.1m c.€20.4m c.€8.1m c.€(7.6)m c.€59.0m
Change effect -1.1% -3.0% -1.6% -1.9% -1.9%

DISCLAIMER

The Group is exposed to fluctuations in copper prices in connection with its distribution of cable products. Cables accounted for approximately 14% 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: i) 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; ii) 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 non-recurring 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.

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 document 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 7, 2016 under number D16-0299. 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 forward-looking 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.

The market and industry data and forecasts included in this document were obtained from internal surveys, estimates, experts and studies, where appropriate, as well as external market research, publicly available information and industry publications. Rexel, its affiliates, directors, officers, advisors and employees have not independently verified the accuracy of any such market and industry data and forecasts and make no representations or warranties in relation thereto. Such data and forecasts are included herein for information purposes only.

This document includes only summary information and must be read in conjunction with Rexel's Document de Référence registered with the AMF on April 7, 2016 under number D16-0299, as well as the consolidated financial statements and activity report for the 2015 fiscal year which may be obtained from Rexel's website (www.rexel.com).

Q1 2016 results (unaudited) http://hugin.info/143564/R/2008236/742717.pdf

HUG#2008236

Source:REXEL