Viewpoints World leader in the low and ultra-low voltage electrical products

2009 business review Summary of steps taken to address the crisis Outlook for 2010

Sustainable development 2009 annual accounts

Viewpoints - Jean-Charles Pauze, Luis Marini-Portugal What do you think of Eurazeo’s assistance? J.-C. P.: Eurazeo entered Rexel’s capital in 2005. In the five years that ensued, we initially went through a phase of aggressive expansion, which lasted until 2008. During that time, we made several targeted acquisitions that allowed us to increase our market share and local profitability, and some more transformational and structuring operations, such as Gexpro in the United States in 2006 and Hagemeyer in Europe in 2008. For the latter, Eurazeo’s support as shareholder was very important. On the Hagemeyer acquisition, Eurazeo provided a temporary guarantee during the interval between the time the financing was set in place and when we were able to sell the assets that we could not keep. The second phase that we have been going through since 2008 has instead been focused on cost reductions to adapt to current economic conditions. Once again, the high quality of our discussions with Eurazeo helped enrich the formalization of our operating initiatives. What type of discussions do you have with Rexel? L. M.-P.: When we acquired a stake in Rexel alongside Clayton Dubilier & Rice and Merrill Lynch Global Private Equity in 2005, we wanted Rexel to become the undisputed leader in its market. We were looking at this leadership position from two angles. Firstly, we wanted Rexel to reinforce its market position, a strategy that we supported notably through acquisition, including those of Gexpro and Hagemeyer to cite the biggest. Secondly, we wanted to demonstrate Rexel’s ability to also become the industry standard in terms of quality of its offer and operational management, with, among other things, the development of its distributor brands and e-commerce. More recently, the resilience of the company’s margins and cash flow generation under very difficult market conditions showed just how firmly Rexel is rooted in its role as undisputed leader in its sector.

	Rexel – World leader in the low and ultra-low voltage electrical products

Rexel offers professionals in the electrical industry innovative solutions to improve the comfort, performance and energy efficiency of buildings. Its growth strategy is based on the spirit of commercial conquest, operational excellence and financial strength.

	2009 business review

In 2009, Rexel demonstrated the resilience and adaptability of its business model, and met or exceeded its targets:

• Revenues of €11.3 billion;
• EBITA margin of 4.0%;
• Debt of €2.4 billion as of December 31, more than €500 million less than the previous year.

Another highlight of the year was Rexel’s particularly strong generation of free cash flow: €880 million, or 11% more than in 2008. This increase was attributable notably to a very strict management of the group’s working capital and a great deal of selectivity in its operational investments. Given the state of the world economy, this was a quite satisfactory performance.

Lastly, Rexel strengthened its financial structure considerably. In December 2009 and January 2010, Rexel entirely refinanced its €2.7 billion senior credit agreement (maturing in 2012, of which €2.1 billion were drawn) through:

• The issue of €650 million in senior notes (maturing 2016);
• The establishment of a new €1.7 billion senior credit agreement (maturing 2014);
• The use of available cash.

In December 2009, Rexel also extended the maturity of its U.S. securitization program by two years, through December 2014.

	Summary of steps taken to address the crisis

The group’s responsiveness allowed it to lower operating expenses by €285 million during the year, or 11% of its 2008 cost base. This reduction was accelerated during the year to take account of the worsening economic situation. It was brought about primarily through the adjustment of operating expenses (especially logistics costs), the streamlining of the branch network and the right-sizing of personnel.

	Outlook for 2010

Under economic conditions that will remain difficult, in 2010 Rexel is expected to experience:

• A limited (low single-digit) erosion of its sales, on a comparable and same-day basis;
• An improvement of its operating margin compared to the 4.0% achieved in 2009;
• Free cash flow before interest and taxes of around €400 million.

In addition, Rexel has set a goal of using four strategies to strengthen its global leadership:

• Taking advantage of structural opportunities for further growth in priority sectors, which should generate approximately €400 million in additional revenues by 2012 (including lighting retrofit; solar and wind power in the area of renewable energies; and large projects, including public-private partnerships);
• Accelerating the evolution of its business model toward an offer more rich in solutions and services, targeting vertically- integrated customer segments, through multiple sales channels including e-commerce, which should represent nearly 10.5% of revenues in 2010;
• Improving profitability by continuing cost reduction initiatives;
• Continuing to generate strong free cash flow to further reduce debt and improve the group’s financial structure.

	Sustainable development

World leader, the Rexel Group has a dual environmental responsibility:

• As a company with long-term roots in the fabric of the local economy, which manages infrastructure and generates logistical flows, it takes internal measures to improve the management of its natural resources and the environmental impact of its activities;
• Moreover, by selling green-energy solutions, the Rexel Group plays an important role as opinion leader and thus contributes to improving the environmental efficiency of buildings around the world.

Rexel had set five key objectives for 2009:

• Heighten internal awareness of Rexel’s environmental commitments, with the release of a new version of the Environmental Charter;
• Optimize its environmental reporting process;
• Improve the collection and recycling of clean and customer waste;
• Reduce the impact of its transportation needs;
• Increase customer awareness of eco-efficient electrical products.

Rexel Eco-days

Launched in late 2009, this awareness campaign was designed to change employees’ everyday habits through actions that could be taken by all. It takes the form of “eco-days” weeks, during which targeted actions are conducted on topics such as paper, electricity, temperature control and travel. A “Go green at work” guide presenting best practices has been passed out in all of the stores to help employees with their eco-friendly actions.

Environmental Charter and Environmental Guide

Given to all employees to ensure that the group’s environmental policy is put into practice, the Environmental Charter and the Environmental Guide were updated in 2009 and translated into 20 languages. Rexel’s Charter defines 10 simple steps to be taken at the store level to improve environmental protection. The Guide is a true teaching tool that is designed to enable the stores to implement the initiatives outlined in the Charter. The implementation of these actions is monitored every year.

2009 annual accounts Summary income statement (under IFRS) (In millions of euros) 2008 2009 Change Revenues 12,864.5 11,307.3 -12.1% comparable basis and same days     -17.2% Gross profit 3,059.3 2,769.5 -9.5% Gross margin 23.8% 24.5%   Operating income before other income and expense (EBITA) 630.0 450.2 -28.5% EBITA margin 4.9% 4.0%   Consolidated balance sheet as of December 31, 2009 (In millions of euros) ASSETS   LIABILITIES AND EQUITY Goodwill 3,759.4 Equity 3,412.0 Intangible assets 927.8     Property, plant and equipment 261.6     Non-current financial assets 14.6 Non-current financial debt 2,677.3 Deferred tax assets 274.6 Other non-current liabilities 631.0 Total non-current assets 5,237.9 Total non-current liabilities 3,308.2 Inventories 1,141.4 Current borrowings and accrued interest 83.5 Trade accounts receivable 1,901.5 Trade accounts payable 1,676.0 Other assets and assets held for sale 414.5 Other liabilities and liabilities held for sale 575.1 Cash and cash equivalents 359.6 Total current liabilities 2,334.7 Total current assets 3,817.0 Total liabilities 5,642.9 Total assets 9,054.9 Total liabilities and equity 9,054.9