Legrand Demonstrates Resilience with Strong Margins in H1 2024

Legrand, a leader in electrical and digital building infrastructures, has shown resilience in the first half of 2024, despite a minor decrease in sales. The company experienced a 0.7% decline in sales during the first half, driven by a 2.0% drop in organic growth. Notably, the second quarter marked a 1.5% increase in organic sales, largely fueled by the robust performance of the data centers segment.

Legrand has reaffirmed its targets for the full year, projecting low single-digit sales growth and an adjusted operating margin before acquisitions of 20.0% to 20.8% of sales. Additionally, the company announced five acquisitions expected to contribute over €200 million in annual sales.

### Key Insights
– Legrand’s sales declined 0.7% in H1 2024, with organic growth at -2.0%, partially offset by a 1.3% contribution from acquisitions.
– Organic sales increased by 1.5% in Q2, primarily from the data centers business.
– European sales fell by 3.2%, while the U.S. market grew by 1%. Other global markets saw a 3.1% decline.
– Legrand anticipates a full-year adjusted operating margin of 20.0% to 20.8% and low single-digit sales growth.
– Net profit for H1 stood at €578 million, with free cash flow amounting to €468 million, representing 11.1% of sales.
– The company has identified 350 potential acquisition targets, focusing on data centers.
– Wage inflation is expected to be around 5% for the entire year.

### Company Outlook
– Legrand is committed to innovation and has planned a Capital Markets Day in September 2024.
– It aims for free cash flow to sales ratio of 13% to 15% for the full year, likely skewing towards the lower end to support its growing data center business.

### Challenges
– Sales declines in European and other markets indicate difficult market conditions.
– Price increases have been minimal, at 0.2% in H1, and are expected to remain flat in Q2, with only slight increases anticipated in H2.
– The European residential market has not shown signs of improvement.

### Positive Developments
– The data centers segment is experiencing significant growth, indicated by strong incoming orders and quotes.
– The U.S. data center market shows potential for expansion, particularly in white space.

### Missed Expectations
– Despite acquisitions, sales saw a slight overall decrease of 0.7% in H1 2024.
– Recent acquisitions had a slight negative impact on margins due to incomplete consolidation.

### Executive Insights
CEO Benoît Coquart emphasized the strategic importance of the data center market and the acquisition of Davenham in Ireland. He expressed optimism about future growth in data centers and renovation markets, pending economic improvements. However, the company remains cautious about the Chinese market, not expecting recovery before the end of 2025.

In conclusion, Legrand has maintained strong margins and a positive outlook despite facing challenges in sales and market conditions. Its strategic focus on the data center sector and ongoing acquisitions position it well for future growth, even amid pressures such as wage inflation and a sluggish residential market in Europe. Further plans and insights are expected to be shared at the Capital Markets Day in September 2024.