LEGRAND / 2018 Registration document
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MANAGEMENT REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2018
OPERATING INCOME
Confirming Legrand’s medium-term value-creating model Confident in the soundness of its model and its ability to fuel lasting profitable growth, Legrand confirms its medium-term model: W assuming a buoyant economic backdrop and excluding exchange- rate effects, the Group intends to achieve annual growth in sales and adjusted operating profit of around +10%; W assuming a lackluster or unfavorable economic backdrop, Legrand will focus on protecting its model, profitability and generation of free cash flow.
Over a full economic cycle, and excluding any major economic slowdown, this model would result in average annual growth in sales above that of the Group’s reference markets, adjusted operating margin averaging around 20% of sales (1) , normalized free cash flow ranging on average between 13% and 14% of sales (4) , and an attractive dividend. Legrand also intends to continue rolling out an ambitious approach to CSR, driven by demanding roadmaps.
5.3 – OPERATING INCOME
5.3.1 – Introduction
The Group reports its finances and operating results on the basis of five operating segments that correspond to the region of origin of invoicing. Information concerning the results of operations and financial positions for each of these five operating segments is presented for 2017 and 2018 in note 2.1 to the consolidated financial statements shown in chapter 8 of this Registration Document. Each segment represents either a single country or the consolidated results of a number of countries and distinct markets. These five operating segments are: W France; W Italy; W Rest of Europe, mainly including Benelux, Germany, Iberia (including Spain and Portugal), Poland, Russia, Turkey and the UK; W North and Central America, including Canada, Mexico, the United States and Central American countries; and
W Rest of the World, mainly including Australia, China, India, Saudi Arabia and South America (including in particular Brazil, Chile and Colombia). Since local market conditions are the determining factors in business performance and net sales by zone, consolidated financial information for multi-country zones does not accurately reflect financial performance in each national market. Furthermore, products may be manufactured and sold locally or imported from or exported to another Group entity. These factors may make it difficult to compare results for different operating segments. Consequently, with the exception of information relating to net sales, the discussion of results below focuses primarily on consolidated results, with reference to national markets where these have a material impact on consolidated accounts.
(1) Without major acquisition and taking into account the implementation of IFRS 16 standard..
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LEGRAND
REGISTRATION DOCUMENT 2018
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