2008 Registration Document - Rexel

In the year 2008, sales increased by 42.1% in Europecompared to 2007 and reached €7,166.6 million. Acquisitionsaccounted for a €2,508.8 million increase, essentiallydue to the acquisition of Hagemeyer, and divestmentsaccounted for a €341.7 million decrease, essentially relatedto the disposal of Rexel Germany and Kontakt Systeme inSwitzerland, while changes in exchange rates accountedfor a €33.4 million decrease. On a constant basis and samenumber of working days, the sales decreased by 0.7% inthe year 2008 as a result of the further deterioration ineconomics and copper-based cables price decreases inthe fourth quarter of 2008, with a 6.5% decrease, nearlyevery country posting a decrease.In France, sales amounted to €2,483.0 million in 2008,a 2.5% increase on a constant basis and same numberof working days. The Rexel Group estimates that itoutperformed the market on a full year basis. This growthnotably stemmed from small and medium contractors(approximately 30% of sales), with whom sales grewapproximately 5% in the year 2008. By product family, salesgrowth was driven by electrical installation equipments andclimate control, which increased by approximately 5% and10% respectively over the period. In the fourth quarter,sales increased by 1.3% on a constant basis and samenumber of working days.In the United Kingdom, sales amounted to €943.2 millionin the year 2008, a 3.1% decrease on a constant basis andsame number of working days. Rexel historical bannersposted a 0.4% decrease in the year despite poor marketconditions, mainly attributable to the development of smallcontractors in the commercial end-market and branchesopening, while the banners acquired from Hagemeyerrecorded a 4.2% decrease as they suffer from the downturnof the construction market and projects on hold. In thefourth quarter, sales in the United Kingdom decreased by9.7% on a constant basis and same number of workingdays affecting all banners.In Germany sales amounted to €771.3 million in the year2008, a 0.5% increase on a constant basis and samenumber of working days. This performance reflects theactivity of Rexel Germany for the first quarter of 2008only and the one of Hagemeyer Germany in the threelast quarters of 2008. In the first quarter of 2008, RexelGermany recorded a 1.1% sales decrease on a constantbasis and same number of working days resulting froma difficult environment in the south of the country andnegative cables sales evolution. In the last three quartersof 2008, Hagemeyer Germany recorded a sales growth of0.7% on a constant basis and same number of workingdays. Residential construction continued losing momentumand industrial end-market started slowing down particularlyin the automotive sector. Sales to industrial customers,which represented approximately 30% of total sales, stillrecorded a positive increase in the period. This was theresult of added-value service development to this marketsegment, through twenty industrial competence centers inGermany fully dedicated to assist the industrial customerbase. In the fourth quarter of 2008 sales decreased by 4.1%on a constant basis and same number of working daysimpacted by the slowdown of the market.In Scandinavia sales amounted to €707.2 million in theyear 2008, a 3.1% increase on a constant basis andsame number of working days, driven by Norway. Salesin Norway recorded a 9.2% increase mainly with largecontractors and MRO customers’ activity and despite amarket slowing down in residential and industrial areas,thus outperforming the market. In Sweden, increase insales amounted to 1.7% but started slowing down withlower sales to large projects and large accounts. Rexelestimates that it outperformed the market. The activitiesin Finland recorded 1.5% decrease in sales and are in adownturn trend, however succeeding in focusing on highadded value segments. In the fourth quarter of 2008, salesin Scandinavia decreased by 4.1% on a constant basis andsame number of working days starting being impacted bythe general economic slowdown.In the year 2008, gross profit amounted to €1,773.7 million,a 32.0% increase compared to 2007. On a constant basis,Adjusted gross margin was 25.4% of sales in the year2008, stable compared to 2007. On-going improvementswere offset by the favorable non-recurring effects in thefirst quarter of 2007. Excluding these effects, Adjustedgross margin in the year 2008 is estimated to be 20 basispoints higher than in 2007. In the fourth quarter of 2008,Adjusted gross margin was 20 basis points higher than inthe fourth quarter of 2007 on a constant basis, at 25.4%of sales. These performances are mainly due to favorablechanges in product and customer mix and from betterpurchasing terms, including synergies from the Hagemeyeracquisition.In the year 2008, distribution and administrative expensesamounted to €1,420.0 million, i.e. 19.8% of sales comparedto 19.2% in 2007. On a constant basis, Adjusted distributionand administrative expenses increased by 2.2%. Synergiesresulting from the integration of Hagemeyer are progressingin accordance with expectations. In order to adapt coststo the economic downturn, specific cost reduction actionswere implemented, whose full effect will only be reflectedin the coming months. Lease and maintenance expensesposted an above-inflation increase due to commercial andlogistic initiatives. In the logistics area, the implementationof a national distribution center in Austria, the transfer andimprovement of several logistic centers in France as wellas the sale and partial leaseback of 7 logistics platformsrepresenting 125,000 m 2 , resulted in the increase inexpenses. Adjusted personnel expenses remained stableon a constant basis. The number of employees wasreduced by 5.9% compared to December 31, 2007 on aconstant basis mainly in Spain and the United Kingdom,to 19,831 at December 31, 2008. Adjusted administrativeand distribution expenses decreased by 0.1% in the fourthquarter on a constant basis.REXEL 2008 | PAGE 75