by Patrick Berard, Rexel Group CEO
2015: A RESILIENT FULL-YEAR PERFORMANCE
In a persistently challenging business environment, Rexel posted a resilient full-year performance, with sales up 5.6% to €13.5bn on a reported basis and down 2.1% on a constant and same-day basis. The adjusted EBITA margin stood at 4.4%, while free cash flow before interest and tax was strong, with a conversion rate of 85% of EBITDA. In 2015, Rexel continued to optimize its footprint and streamline the organization around three geographies, Europe, North America and Asia-Pacific, while further upgrading its operational capabilities, most notably in the USA through the completion of its IT and logistics transformation program. The Group also moved forward with the execution of its asset disposal program and announced a few targeted acquisitions in line with its strategic priorities.
REXEL 2020 STRATEGY
In February of this year, the Group presented Rexel’s 2020 strategic plan at its Capital Markets Day in Paris. This plan presents a comprehensive roadmap for profitable growth and long-term value creation for all its stakeholders. In a rapidly changing world, powered by new megatrends, technologies and applications, Rexel’s unique market-leading footprint, genuinely differentiating customer-centric strategy, focused innovation in marketing, digital and supply chain and targeted accretive acquisition policy represent the four key business imperatives that will put the company at the forefront of its sector and create the conditions to seize future growth opportunities.
The Group’s 2020 strategic plan and ambition is part of a broader aspiration to create sustainable economic, environmental and human value for all of Rexel’s stakeholders. Over the 2016-2020 period, Rexel aims to grow sales faster than the market by delivering average annual organic sales growth of between 1% and 2%, while increasing adjusted EBITA at least twice as fast as sales growth and continuing to generate strong cash flow before interest and tax, with a conversion rate of between 70% and 80% of EBITDA. In order to complement organic growth with external growth, the Group will focus on making targeted accretive acquisitions with a total budget of some €1.5bn over the five-year period, in line with its cash allocation strategy. This level of investment could generate cumulated additional sales of over €2bn. Rexel will also continue to pay out an attractive dividend of at least 40% of recurring net income, in line with its pay-out policy.
Driving innovation in marketing, digital and supply chain is a critical success factor
Rexel has a strong franchise as a strategic partner for its suppliers and customers, with leading positions in major geographies and a balanced mix of end-markets. Today, the Group is using this market-leading position to leverage and capitalize on the growth opportunities offered by new mega trends, technologies, and applications. These trends include the energy transition, which is generating a broad spectrum of new business opportunities along the value chain; the Internet of Things, which is turning connectivity into a converging space of new digitally powered solutions for Rexel’s customers; and urbanization.
With more than 54% of the world’s population living in urban areas, the growing movement of people from rural to urban areas is changing the landscape of building renovation and new construction. Rexel’s proven track record and strategic focus in these areas will position the company in the coming years to outperform the market, thanks to targeted investments and enhanced capabilities.
A CUSTOMER-CENTRIC STRATEGY
The ongoing implementation of a digitally powered multi-channel customer-centric strategy is increasingly a source of competitive differentiation for Rexel. Its investments in e-business and its multi-channel model mean that the Group is able to generate gradually higher contact frequency with customers at multiple touch points, drive higher transaction values and offer continuously better service levels with increasingly connected customers.
Moreover, Rexel has articulated a very clear go-to-market model that underscores its transition from a generalist distributor into a multi-specialist value-added partner. By segmenting the market and mapping in detail the needs in the residential, non-residential and industrial space, Rexel has defined six customer delivery models with a very specific value proposition: small and medium-size contractors, medium and large-size contractors, electrical specialists, industrial automation products and solutions providers, industrial customers and maintenance companies, and Original Equipment Manufacturers (OEMs). These customer delivery models will become the architecture of the Group’s commercial efforts going forward.
INNOVATION IN MARKETING,
DIGITAL AND SUPPLY CHAIN
Rexel’s 2020 roadmap embraces innovation as a critical success factor along three vectors: in marketing, in digital and in supply chain. On the marketing front there are two major fields of focus, which confirm Rexel’s commitment to customer-centric innovation.
On the one hand, it is about investing in value-based pricing and project management systems and on the other hand, relates to the development of new value propositions, ranging from industrial automation and productivity solutions to the Rexel Energeasy applications in areas such as solar, energy storage or building automation (Energeasy Solar, Storage, Advisor).
In the digital area, a comprehensive e-business platform is in place to support Rexel’s digitally powered multi-channel business model, while new developments such as Rexel Digital Applications are providing contractors and installers with software-enabled tools to improve productivity.
On the operational side, the Group now has a new IT and Logistics platform in place, providing a springboard to further optimize its back office and supply chain performance for better productivity and customer service.
External growth represents a key component of the Rexel 2020 strategy roadmap. In that respect, the recent acquisitions Rexel has made are illustrative for its targeted accretive acquisition policy. In France, the Group acquired Sofinther, a multienergy player and Cordia, a security specialist distributor, both of which are good examples of this focused approach. The acquisition of Brohl & Appell, an industrial automation distributor in the US, also fits the bill, as is the case for the acquisition of Maxqueen in China in the datacom and building automation area. Looking ahead, Rexel will actively implement a two-pronged M&A strategy aimed at expanding into new growth areas and adjacencies and strengthening its position in key markets.
PEOPLE AND PLANET
The 21st United Nations Climate Change Conference held in Paris last December, and the numerous international, regional and local events in the 18 months leading up to it allowed Rexel to demonstrate its added value in promoting the large-scale adoption of energy efficiency, recognized as a critical lever in reducing CO2 emissions in the fight against climate change. Rexel continues to partner with like-minded companies and NGOs to drive progress in energy efficiency, including through the work of the Rexel Foundation for a better energy future. To date, 48 projects have been launched with a positive impact on the lives of more than 100,000 people living in 15 different countries. As previously reported, the Rexel Group is also a signatory to the United Nations Global Compact and is committed to incorporating its 10 key principles into its strategy and procedures, reporting on their implementation and promoting them to all of its partners. Rexel is also committed to ensuring continuous improvement, and wants to reaffirm its pledge to the Global Compact for the fifth consecutive year.
Rexel recognizes that innovation is inextricably linked with delivering a positive impact on society and the environment. This is why the Group is convinced that the advances in energy efficiency, smart solutions for industrial and building automation and the digital empowerment of end-users to optimize their energy management will allow it to continue to generate growth opportunities for its customers and to fully leverage the equity of the “Rexel, a world of energy” brand promise for all its stakeholders.