LEGRAND_REGISTRATION_DOCUMENT_2017

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MANAGEMENTREPORTONTHECONSOLIDATEDFINANCIALSTATEMENTSFORTHEFINANCIALYEARENDEDDECEMBER31,2017

Year-on-year comparison: 2017 and 2016

5.4.7 – Adjusted operating profit

W Rest of Europe : a 17.0% rise to €162.4million in 2017 compared with €138.8 million in 2016, representing 17.8% of net sales in 2017 compared to 16.4% in 2016; W North and Central America : a 26.2% rise to €358.5 million in 2017, compared with €284.1 million in 2016, representing 19.3% of net sales in 2017 compared with 19.0% in 2016; and W Rest of the World : a 15.2% rise to €189.0 million in 2017 compared with €164.0 million in 2016, representing 15.9% of net sales in 2017 compared to 14.0% in 2016. In 2017, adjusted operating margin before acquisitions (at 2016 scope of consolidation) stood at 20.1% of net sales, +0.6 point higher than the 2016 figure of 19.5% and reaching the top end of its target range (20.1%). Taking acquisitions into account, the Group’s adjusted operating margin came to 20.0% of net sales in 2017.

Adjusted operating profit is defined as operating profit adjusted for amortization and depreciation of revaluation of assets at the time of acquisitions and for other P&L impacts relating to acquisitions and, where applicable, for impairment of goodwill. Adjusted operating income rose 12.9% to stand at €1,104.9million in 2017 compared with €978.5 million in 2016, and broke down as follows by geographical zone (as indicated in 3.1, consolidated financial information for multi-country zones does not reflect the financial performance of each national market): W France : a 3.3% decline to €202.2 million in 2017 compared with €209.1 million in 2016, representing 20.0% of net sales in 2017 compared to 21.4% in 2016; W Italy : a 5.6% rise to €192.8 million in 2017 compared with €182.5 million in 2016, representing 35.4% of net sales in 2017 compared to 34.5% of net sales in 2016;

5.4.8 – Net financial expenses

Finance expenses stood at €92.1 million in 2017 compared with €101.3 million in 2016. Financial income came to €13.7 million in 2017 compared with €10.9 million in 2016. Net financial expenses decreased 13.3% in 2017 from the same period of 2016, accounting for 1.4% of net sales compared with 1.8% in 2016.

Net financial expenses principally correspond to financial expenses related to Yankee bonds; the 2010, 2011, 2012, 2015 and 2017 bond issues; the 2011 credit facility amended in 2014; and other bank borrowings (for a description of these arrangements, see paragraph 5 of this chapter), less financial income arising from the investment of cash and cash equivalents.

5.4.9 – Exchange gains and losses

Exchange gains and losses correspond mainly to translation differences recognized on settlement of foreign currency transactions, as well as the translation impact at the closing exchange rate of monetary assets and liabilities denominated in foreign currencies.

Exchange losses amounted to €8.3 million in 2017 compared with €6.5 million gains in the same period of 2016.

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REGISTRATION DOCUMENT 2017 - LEGRAND