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Schneider Electric — FY2019 Earnings Presentation

59 slides from Schneider Electric's earnings presentation, February 2020

  1. Slide 1: Record 2019 Performance: Revenue, Adj. EBITA, Net Income and Free Cash Flow

    Record 2019 Performance: Revenue, Adj. EBITA, Net Income and Free Cash Flow Medium-term margin ambition plan of c.+200bps in 3 years well on track © 2019 Schneider Electric, All Rights Reserved

  2. Slide 2: Disclaimer

    Disclaimer All forward-looking statements are Schneider Electric management’s present expectations of future events and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. For a detailed des

  3. Slide 3: Agenda

    4 2019 Business Highlights 12 Consistency – across strategy and execution 25 2019 Finance Highlights 44 Full Year 2020 Target 50 Appendix © 2019 Schneider Electric, All Rights Reserved | Page 3

  4. Slide 4: 2019 Business Highlights

    Appendix 2019 Business Highlights Photos: J.Deloy – SE Design Lab © 2019 Schneider Electric, All Rights Reserved | Page 4

  5. Slide 5: Record financial performance

    Record financial performance Setting all-time high levels Revenues Adj. EBITA Adjusted Net Income Free Cash Flow €27.2 billion €4.2 billion €2.9 billion €3.5 billion Up +4.2% org. Up +8.7% org. Up +14% Up +65% * Proposed dividend** Total Shareholder Return €2.55 per share +8.5% c. +60% in 2019 Rank:

  6. Slide 6: Both synergetic businesses contributing

    Both synergetic businesses contributing… Energy Management €27bn, +4.2% Industrial Automation Group FY 2019 revenues org. +5.2% +1.1%* 21 6 FY org. sales FY org. sales growth € € growth c.+80bps org. billion billion c.+30bps org. 18.4% 18.1% Adj. EBITA margin Adj. EBITA margin * +0.8% org. without a

  7. Slide 7: Energy Management - broadest portfolio in the industry delivers strong performance

    Energy Management - broadest portfolio in the industry delivers strong performance Key performance highlights • Good growth in Residential and small buildings, up mid-single digit €20.8bn • EcoStruxure for Commercial & Industrial Buildings (CIB) continues to grow 77% of Group FY 2019 revenues • Doub

  8. Slide 8: Energy Management: Growing in all regions

    Energy Management: Growing in all regions FY Org. growth N. America W. Europe Split of FY 2019 revenue by geography: 25% 32% 28% 15% Asia Pac. Rest of the World North America +8% Western Europe +3% • U.S. delivering double-digit growth, with strength • Growth in offers for Residential markets mainly

  9. Slide 9: Industrial Automation: Balanced, software driven & resilient industrial automation portfolio

    Industrial Automation: Balanced, software driven & resilient industrial automation portfolio Key performance highlights • Resilient growth from balanced portfolio across cycle €6.3bn • Process & hybrid offers (c.50% of IA revenue) grew mid-single digit, with 23% of Group FY 2019 revenues strong orde

  10. Slide 10: Industrial Automation: Resilience across regions from balanced portfolio

    Industrial Automation: Resilience across regions from balanced portfolio FY Org. growth N. America W. Europe Split of FY 2019 revenue by geography: 31% 20% 32% 17% Asia Pac. Rest of the World North America -2%* Western Europe -1% • U.S. down, mainly impacted by OEM weakness • France, Germany and U.K

  11. Slide 11: Total organic growth by region

    Total organic growth by region % Group revenues FY19 Org. growth NORTH AMERICA WESTERN EUROPE 29% +6% 26% +2% United States Canada Mexico France Germany United Kingdom Spain Italy REST OF WORLD ASIA PACIFIC 16% +4% 29% +4% China India Australia Indonesia Japan Russia South America Middle East Africa

  12. Slide 12: Consistency – across strategy and execution

    Appendix Consistency – across strategy and execution © 2019 Schneider Electric, All Rights Reserved | Page 12

  13. Slide 13: 2019 Highlights – we continue to deliver on our growth strategy pillars

    2019 Highlights – we continue to deliver on our growth strategy pillars DRAFT MORE MORE MORE BETTER PRODUCTS SERVICES SOFTWARE SYSTEMS +3%Org. Growth +8% Org. Growth Double-digit +5% +40 bps Org. Growth Gross Margin Org. Growth improvement © 2019 Schneider Electric, All Rights Reserved | Page 13

  14. Slide 14: More Products – leveraging digital innovation to enhance customer value

    More Products – leveraging digital innovation to enhance customer value INDUSTRIAL RESIDENTIAL & CIB reddot design IF Design Awards Winner 2019 Winner 2019 TeSyS ComPact Island NSXm EasergyP5 AvatarOnT German Design Award Loved By Parents Special 2019 Best Buy Platinum 2019 Plus X Award EcoStruxure

  15. Slide 15: More Services – tracking installed base and providing digital services

    More Services – tracking installed base and providing digital services FIELD SERVICES DIGITAL SERVICES SUSTAINABILITY SERVICES +7.5% Org. Growth Double-digit Org. Growth +9% Org. Growth 40%+ critical Smart Grid services growing Award to assets tracked double-digit Online community powered Award from

  16. Slide 16: More Digital – Enhancing capabilities across ecosystem

    More Digital – Enhancing capabilities across ecosystem Double-digit for our Increased digital … while advancing on software offerings ecosystem… our digital journey Double-digit growth in AVEVA - 2.9m Assets Under commercial synergies with accretive margin Management: c. +50% YoY >25% growth in e-co

  17. Slide 17: More Digital and Services, generating more recurring revenues

    More Digital and Services, generating more recurring revenues EcoStruxure (L2 & L3) – 15% Software & Services – 16% Edge control Software & Digital Services Field Services c.10% c.6% c.10% c.25% Customer stickiness of FY 2019 Recurring revenues revenues Growing faster than Margin Catalyst for growth

  18. Slide 18: Partner with our customers in their sustainability journey

    Partner with our customers in their sustainability journey c. 70% Green Revenues Green Innovation Sustainability services up +9% SF6-Free ~90M metric tons CO₂ Canada World First: Switchgear powered by air & digital 1st Major Food Company in the saved on World to be Carbon Neutral our customers' end

  19. Slide 19: Building complete efficiency solutions in targeted segment focus

    Building complete efficiency solutions in targeted segment focus BUILDINGS DATA CENTER INFRASTRUCTURE INDUSTRY Grand Central Saint-Lazare Green Data Center Stromnetz Berlin Al Canal Sugar Factory France Switzerland Germany Egypt Smart Building offer Data analytics & ADMS offers for Access to energy

  20. Slide 20: Developing a differentiated DNA

    Developing a differentiated DNA Measuring our progress in sustainability, social responsibility, innovation & performance Our Employer Value Proposition Our External Recognitions Sustainability People Innovation © 2019 Schneider Electric, All Rights Reserved | Page 20

  21. Slide 21: Proving our sustainability technologies and commitments at Schneider

    Proving our sustainability technologies and commitments at Schneider Schneider Sustainability Impact: 7.7/10 in Q4 (against December 2019 target of 7 / 10) Carbon commitments Trusted & committed partners Carbon neutrality in 2025 • Suppliers’ Human Rights & Environment commitment in our extended eco

  22. Slide 22: Delivering with consistency the “scale” phase of our strategic transformation

    Delivering with consistency the “scale” phase of our strategic transformation Build 2003-13 Integrate 2008-18 Scale 2016 onwards © 2019 Schneider Electric, All Rights Reserved | Page 22

  23. Slide 23: We have consistently delivered on our financial commitments

    We have consistently delivered on our financial commitments Exceeding the targets set in 2016 What we committed to (2017-2019) What we delivered Organic revenues ~3% on average¹ +4.7% org.² Organic Adj. EBITA +20bps to +50bps on average c. +70bps Organic growth Adj. EBITA +4% to +7% yearly average +

  24. Slide 24: Focus on shareholders return

    Focus on shareholders return Progressive dividend over 10 years Total Shareholder Return x2.5 +50% over 2017-2019 Rank: 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 #2 among direct peers¹ Progressive dividend (payout ratio of c.50%) 1. 11 peers as considered for long-term incentive plan; c

  25. Slide 25: 2019 Financial Highlights

    2019 Financial Highlights Appendix Strong portfolio delivering growth Photos: J.Deloy – SE Design Lab © 2019 Schneider Electric, All Rights Reserved | Page 25

  26. Slide 26: FY 2019 Financial highlights: growth in both businesses and all regions

    FY 2019 Financial highlights Growth in both businesses and all regions, executing on strategic priorities Strong revenue growth Sustained profit momentum Strong shareholder focus Revenues More Products More Services +4.2% +2.6% +7.8% Organic growth Organic growth Organic growth More Software More Ec

  27. Slide 27: Continued and consistent expansion of Group adj. EBITA margin

    FY 2019 Financial highlights Continued and consistent expansion of Group adj. EBITA margin Strong revenue growth Sustained profit momentum Strong shareholder focus Adj. EBITA Adj. EBITA margin Adj. Net Income +8.7% +70 bps € 2.9bn, +14% Organic growth Organic improvement Adj. EBITA margin: c.+280 bp

  28. Slide 28: Focus on shareholder returns, with strong cash generation

    FY 2019 Financial highlights Focus on shareholder returns, with strong cash generation and disciplined capital allocation Strong revenue growth Sustained profit momentum Strong shareholder focus Free cash-flow Share buyback Proposed 2019 DPS 2 € 3.5 bn € 0.3 bn € 2.55, +8.5% 121% normalized conversi

  29. Slide 29: Analysis of Change in Group Revenues (in €m)

    Revenue growth of +4.2% organic in 2019, with growth across all regions Analysis of Change in Group Revenues (in €m) Scope FX 27,158 Rest of World +5.6% -0.6% +2.0% North America +4% +6% Asia-Pacific Western Europe +4% Mainly due to the +2% consolidation of AVEVA and disposal of Pelco and 25,720 the

  30. Slide 30: Consistent improvement in Gross Margin

    Consistent improvement in Gross Margin – strong acceleration in H2 (+70bps organic) Gross Margin improves to 39.5%, up +250bps since 2015 Main drivers 39.5% 39.0% Strategically positioned toward 38.4% high value added 38.0% 37.0% Margin accretive Industrial Productivity 2015 2016 2017 2018 2019 Port

  31. Slide 31: H2 GM up +70bps organic thanks to strong productivity and RMI tailwind

    H2 GM up +70bps organic thanks to strong productivity and RMI tailwind Gross Margin Analysis of Change (%) 1.3 -0.2 -0.5 0.9 -0.4 39.7 -0.5 39.0 Acceleration of productivity in H2 Continued positive pricing Strong raw material tailwind (higher in H2) H2 2018 Net price1 Productivity FX R&D & Prod. Mi

  32. Slide 32: Organizational simplification and efficiency

    Organizational simplification and efficiency Industrial Productivity (€ bn) SFC - Operational Efficiency (€ bn) 6.5 6.2 0.1 0.5 -0.2 1.1 0.3 2019 2020 Target over FY 2018 Scope & FX Gross Invest. & FY 2019 3 years savings Inflation • Flexible and agile supply-chain • Efficiency on track – c.240m€ gr

  33. Slide 33: Deep-dive on Central Function and Digital Costs

    Deep-dive on Central Function and Digital Costs: Lean Corporate structure balanced by central investments in Digital & Marketing Central Function & Digital Costs – Central Function & Digital Cost 3-year trend by nature FY 2019 split of the 745mEUR (2.7% of sales) Corporate Costs Performance shares 3

  34. Slide 34: Adj. EBITA of €4.2bn and +70 bps organic margin improvement

    Strong performance with +9% organic growth in Adj. EBITA, exceeding target, leading to record-high Adj. EBITA of €4.2bn and +70 bps organic margin improvement Energy Management Industrial Automation In €m 2018 2019 Reported Organic change change Revenues 25,720 27,158 +5.6% +4.2% c.+80bps c.+30bps G

  35. Slide 35: FY Adj. EBITA up 9% organic thanks to volume, strong productivity and net price

    FY Adj. EBITA up 9% organic thanks to volume, strong productivity and net price Analysis of change of adjusted EBITA (in €m) 331 34 -120 295 -219 347 -139 4,238 -165 3,874 Continuous good level of productivity Reflect geographic mix • Pricing action carry-over. and stronger growth in Continued prici

  36. Slide 36: Strong profit growth: Record high Net Income of €2.4bn

    Strong profit growth: Record high Net Income of €2.4bn In €m 2018 2019 % change Including Pelco disposal, some asset impairments, along Adjusted EBITA 3,874 4,238 +9% with some M&A/integration costs Other income and expenses (103) (411) Broadly in line with €200m - €250m range on average Restructuri

  37. Slide 37: Strong operating cash flow at €3.5bn including IFRS 16

    Strong operating cash flow at €3.5bn including IFRS 16 (€3.2bn without) Analysis of debt change in €m 2018 2019 Includes €274m benefit from IFRS 16 Net debt at opening Dec 31 (4,296) (5,136) Supply chain capacity investment and capitalized Operating cash flow 3,405 4,012 R&D linked to new products C

  38. Slide 38: Record FCF generation for 2019

    Record FCF generation for 2019 – consequence of the underlying business quality Free cash-flow evolution (€m) From a €2bn to around €3bn FCF company 3,476 274 Strong FCF supported by operational margin IFRS 16 growth and inventory control leveraging end- to-end digital planning 2,206 2,253 2,045 2,1

  39. Slide 39: Balance sheet remains strong, committed to long-term capital discipline

    Balance sheet remains strong, committed to long-term capital discipline Net Debt / Adj. EBITDA Continued capital discipline 1.10x 1.08x 1.00x ▪ Retain a strong Investment Grade credit rating (upgrade 0.96x by Moody’s in Q4’19) 0.73x ▪ Progressive dividend and c. 50% net income payout ▪ Share buyback

  40. Slide 40: Good progress on portfolio optimization; stable approach to capital allocation

    Good progress on portfolio optimization; stable and consistent approach to capital allocation M&A in the core Disposal of non-core activities Acquisition of Larsen & Toubro E&A division Further progress in Q4 on actions toward the €1.5 billion - approved by Competition Commission of India €2.0 billi

  41. Slide 41: Consistent strategy delivering on several counts

    Consistent strategy delivering on several counts Topline Growth Profile – Growth over 5 years around 3% org. (last 3 years average 4.7% org.) / Across cycle target : 3% to 6% org. Continued Pricing Power – Net pricing in 2019 € 295 million Better Systems – Project selectivity, better tendering and e

  42. Slide 42: Proposed dividend: €2.55 per share, up +8.5%

    Proposed dividend: €2.55 per share, up +8.5% Progressive dividend policy (payout ratio c. 50%) c. +7.7% CAGR +25% 2.35 2.55 2.04 2.20 2016 2017 2018 20191 Dividend per share (€) 1: Subject to shareholder approval in AGM © 2019 Schneider Electric, All Rights Reserved | Page 42

  43. Slide 43: Total Shareholder Return +50%; SE #2 over a 3-year period

    Total Shareholder Return +50%; SE #2 over a 3-year period TSR 2017: +10% Ranking: N° 6 SE Ranking among 11 competitors, base 100: January 2017 TSR 2017-18: -4% Ranking: N° 5 TSR 2017-19: +50% Ranking: N° 2 c. +50% from Jan 1, 2017 to Dec 31, 2019 100 Jan 2017 Jan 2018 Jan 2019 Dec 2019 Factset: from

  44. Slide 44: Full Year 2020 Target

    Appendix Full Year 2020 Target Photos: J.Deloy – SE Design Lab © 2019 Schneider Electric, All Rights Reserved | Page 44

  45. Slide 45: 2020 – Expected market trends

    2020 – Expected market trends In its main markets, the Group currently expects the following trends: • In North America the Group anticipates that markets continue to be positive in 2020 though H1 would be impacted by the high base of comparison for Energy Management and the impact of certain large

  46. Slide 46: 2020 Targets

    2020 Targets In the current macro environment and incorporating the current view on impact of coronavirus, the Group expects positive growth in aggregate in 2020 as it continues to deploy its strategic priorities in key markets. In 2020, the Group therefore sets its targets as follows: • Revenue gro

  47. Slide 47: Reaffirming our Medium-Term margin ambition

    Reaffirming our Medium-Term margin ambition Over the years (2019- 2021), continue to focus on profitability levers within control, with an aim to improve adj. EBITA margin by c. +200 basis points (at constant FX), assuming no major change to the current macro-economic environment Levers for improvem

  48. Slide 48: Investor Relations ready to engage

    Investor Relations ready to engage Upcoming events: Proposing quarterly interaction with investors showcasing specific businesses, geographies or functions 17 March BoAML Global Industrials Conference, London 25 March JP Morgan Fifth Annual Global SRI Conference (IR), Paris 2 April Innovation Summit

  49. Slide 49: Appendix

    Appendix Appendix Photos: J.Deloy – SE Design Lab © 2019 Schneider Electric, All Rights Reserved | Page 49

  50. Slide 50: 2020 additional notes

    2020 additional notes • Foreign Exchange impact: Based on current rates, the FX impact on FY 2020 revenues is estimated to be around +€400 million. The FX impact at current rates on adjusted EBITA margin is expected to be around flat. • Scope: around -€400 million on 2020 revenues and c. +20bps on 2

  51. Slide 51: Key management messages

    Key management messages Group positioning – Digital Solutions for Energy Transition & Industry 4.0 Strategy – More products, More services, More software, Better systems Balanced portfolio – By geography, by end-market, from early to mid-late cycle Organic growth – Sustained growth to deliver Energy

  52. Slide 52: Schneider Sustainability Impact 2018 – 2020, Results as of Q4 2019

    Schneider Sustainability Impact 2018 – 2020, Results as of Q4 2019 Objective Beginning Results Results 12/2019 01/2018 Q3 2019 Q4 2019 Our megatrends 2015 – 2020 and targets 2018 – 2020 Overall Score of 10 7/10 3 7.08 7.77 CLIMATE 80% renewable electricity -- 45% 50% 10% CO2 efficiency in transporta

  53. Slide 53: Organic growth by region in Q4 2019 – Energy Management

    Organic growth by region in Q4 2019 – Energy Management % EM revenues Org. growth NORTH AMERICA WESTERN EUROPE 30% +3% 26% +2% United States Canada Mexico France Germany United Kingdom Spain Italy REST OF WORLD ASIA PACIFIC 17% +4% 27% +5% China India Australia Indonesia Singapore Russia South Ameri

  54. Slide 54: Organic growth by region in Q4 2019 – Industrial Automation

    Organic growth by region in Q4 2019 – Industrial Automation % IA revenues Org. growth NORTH AMERICA WESTERN EUROPE 20% -5% 30% -2% United States Canada Mexico France Germany United Kingdom Spain Italy REST OF WORLD ASIA PACIFIC 20% +14% 30% +4% China India Australia S. Korea Japan Russia South Ameri

  55. Slide 55: Adjusted Net Income calculation

    Adjusted Net Income calculation In €m FY2018* FY2019 Adjusted EBITA 3,874 4,238 Amortization of purchase accounting intangibles (171) (173) Financial Costs (310) (261) Income tax with impact from adjusted items (762) (836) Discontinued ops (23) (3) Equity investment & Minority Interests (36) (32) Ad

  56. Slide 56: ROCE Calculation

    ROCE Calculation ROCE Calculation 2019 P&L items Reported EBITA (1) 3,572 Restructuring costs (2) -255 Other operating income & expenses (3) -411 = Adjusted EBITA (4) = (1) - (2) - (3) 4,238 x Effective tax rate of the period1 (5) 22% = After - tax Adjusted EBITA (A) = (4) x (1-(5)) 3,306 2019 2018

  57. Slide 57: IFRS 16

    IFRS 16 In €m FY 2019 FY 2019 Impact (pre-IFRS 16) (IFRS16) Revenues 27,158 27,158 n/a Gross Profit Immaterial impact on P&L 10,735 10,735 n/a Adjusted EBITA 4,217 4,238 +€21m Margin % 15.5% 15.6% n/a Net neutral to cash flow, benefit to FCF, Financial Income/(loss) (222) (261) -€39m additional cost

  58. Slide 58: Investor Relations contacts

    Investor Relations contacts Amit Bhalla – Head of Investor Relations, Tel: +44 20 7592 8216, amit.bhalla@se.com Graham Phillips – Investor Relations Director, Tel: +44 20 7592 8288, graham.phillips@se.com Alban de Beaulaincourt – Investor Relations Director, Tel: +33 1 41 39 36 40, alban.de-beaulain

  59. Slide 59: Life Is On | Schneider

    Lifels On | Schneider GeElectric

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