2007 reference document - Legrand

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THE GROUP’S BUSINESS
Legrand’s business
technologically advanced products with higher added-value,
such as home automation systems, commercial lighting
control, VDI products and the development of solutions that
can be integrated into systems. Moreover, Legrand favors
the development of products that share a common platform,
thereby streamlining component production and reducing
production costs. In addition, Legrand anticipates the use
of its products around the world from the very time of their
development. Thus, Axolute’s wiring devices, which were
initially launched on the Italian market in September of 2005,
were sold in more than 45 countries in 2007. In 2007, more than
50 new product ranges were launched, covering the Group’s
various lines of business, with an increased focus on high-end
products and integrated solutions, including:
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command and control: the Céliane , Mosaic and Batibox
programs in France, the Mallia product range in Asia and
the Middle East, the Signature product range in the United
States, Zunis in South Korea and a new offering of enhanced,
energy-efficient emergency lighting management in the
United States,
energy distribution: the optimized distribution system
XL Part in Portugal, the Stop & Go automatic rearm circuitbreakers
in France, Italy and Spain, and DRX molded case
circuit breakers in India and Latin America,
cable management: Mosaic fl oor boxes in France, the launch
of Datamatix in Spain, the line of WMFB residential fl oor
boxes and the launch of Walkerfl ex modular connectors in
the United States,
VDI: the new range of Mighty Mo telecom enclosures,
the launch of 10 Giga Clarity high-density patch panels
(categories 5 and 6) and a new range of fiber optic
connectors;
accelerate growth through targeted and recurring acquisitions.
Legrand intends to continue to pursue targeted acquisitions
each year in order to accelerate its growth. Given the
fragmented nature of its market, the Group will continue to
focus on small- and medium-sized businesses. In addition,
the Group’s senior management team, which has strong
knowledge of local market participants, has cultivated close
relationships with market players and is frequently in contact
with companies it has identifi ed as potential targets.
Legrand will continue to review external growth opportunities
through a stringent selection process in order to ensure that
each acquisition:
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increases the Group’s local market share,
expands the Group’s product offering and its portfolio of
technologies, or
strengthens the Group’s presence on markets with high
growth potential, and
conforms to the Group’s fi nancial criteria (principally that the
purchase price corresponds on average to purchase price
multiples less than or equal to those applied to Legrand and
comparable companies in the same sector with a similar
market position and growth potential);
REFERENCE DOCUMENT 2007 - legrand
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develop added-value customer services. The Group also aims
to optimally leverage its brands by expanding its addedvalue
customer service offerings. Consequently, Legrand has
developed a number of added-value services, such as customer
call centers for households, electrical distributors and
electrical professionals in France. In addition, the Group offers
training sessions to electrical professionals and distributors
which are designed to introduce them to new product offerings
(particularly those with a high technological component),
expand their expertise and demonstrate installation methods.
Legrand also provides practical and detailed technical guides
for its products, including through Internet sites and specialized
software.
■ 5.1.5.2 - OPTIMIZE COST STRUCTURE TO IMPROVE
PRODUCTIVITY AND FLEXIBILITY
In order to improve its productivity and the fl exibility of its cost
structure, Legrand intends to capitalize on its operational
initiatives implemented over the last few years. In particular,
by relying on the organization of its production and product
development activities into four industrial divisions, Legrand is
looking to accelerate the specialization of its production sites,
the transfer of certain activities to lower-cost sites and countries,
the use of outsourcing and the realization of economies of scale.
This strategy has notably allowed an increase in the portion of the
production headcount located in low-cost countries from 31% of
total headcount in 2002 to 54% in 2007 (including the employees
of Kontaktor, Macse, TCL Wuxi and Alpes Technologies), thus
reducing production personnel costs from 16.1% of net sales in 2002
to 10.8% in 2007. These initiatives also enabled the Group to
improve the flexibility of its cost structure by increasing the
variable portion of its operating costs, which were considerably
more than half of total operating expenses in 2007.
Legrand intends to continue to optimize its purchasing productivity
based on initiatives launched in 2003 to centralize, globalize and
standardize its purchasing functions.
The implementation of these initiatives enabled production
costs reductions expressed as a percentage of annual net sales
from 20.4% in 2006 to 19.5% in 2007, thus contributing to the
improvement of operating margins.
■ 5.1.5.3 - INCREASE CASH FLOW AND OPTIMIZE
CAPITAL EMPLOYED
Legrand has structurally enhanced its ability to generate cash
fl ows by continuing strong growth in net sales, cost reductions,
optimization of Legrand’s investments and management of its
working capital requirements.
Through the systematic application of its “make or buy” approach
to all investment projects, the transfer of certain production
activities to countries with low capital costs and a reduction in
capital expenditure in connection with the specialization of its
production sites, Legrand has been able to reduce its ratio of
capital expenditure (including capitalized development expenses)
to net sales from 9% between 1990 and 2001 to 4% over the
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