M. Jean-Charles Pauze | Chairman and Chief Executive Officer of Rexel In 2008, Rexel’s results underscore the strength of our business model and our reactivity. In an environment of great economic turmoil, Rexel has succeeded in raising its gross margin, maintaining its underlying profitability and generating high cash flow. In 2008, Rexel changed radically with the swift integration of the European assets of Hagemeyer, which strengthens our global leadership, raises our penetration of key accounts and improves our operating performance. 2009 will be difficult. In the short term, our priorities include safeguarding our margins and continuing to reduce the Group’s debt with a plan to slash costs by at least 110 million euros and by streamlining cashflow. Against this background, we thought it best to suspend the payment of a dividend this year. In the medium term, Rexel is well placed to grab the growth opportunities that turn up and continue to expand its leadership by developing its expertise in booming areas such as energy efficiency solutions and governmental and institutional projects.

Rexel, global leader in the distribution of electrical equipment and solutions, is present in 34 countries, with 2,400 agencies where it holds leading positions on its three principal markets: industrial, commercial and residential.

Number one in North America and in Asia Pacific, it also holds strong positions in Europe and particularly in France where it is the historic leader. Attentive to the needs of vastly different clients, installers of all sizes, industrial and commercial companies, administrations, Rexel provides them with an extensive array of increasingly innovative products and services. With a global market share estimated at 9%, on a sector that is still fragmented and with a strong potential, Rexel intends to be a driving force in the market consolidation.

Slight dip in activity In 2008, Rexel recorded revenues of 12,862 million euros, up 20.2% on a reported basis but down by 0.8% on a comparable same-day basis with a fourth quarter adversely affected by the economic climate. EBITA(2) margin compliance with objectives Despite the shrinking sales, Rexel maintained its EBITA margin of 5.4% (699 million euros): The gross margin rate increased by 20 basis points(3) to 24.3% thanks to the successful implementation of operational drivers, especially the streamlining of the supply chain, a favorable product mix and the first purchase synergies resulting from the integration of Hagemeyer; Administrative and commercial costs were firmly kept in check (+0.6% versus 2007 on comparable and adjusted basis) thanks to a strict cost control policy, underscoring the strong reactivity to the rapid changes in market conditions. In order to cope with the economic downturn, administrative and commercial costs were slashed in the fourth quarter by 3.3%. The Group’s employees fell by 6.0% during 2008, on a comparable basis. Net earnings, Group share for the year jumped 61.0% to level off at 230 million euros. Net available cash flow before interests and taxes rose by 17.7% to 789 million euros in 2008, reflecting a new reduction in working capital requirements expressed as a percentage of revenues at 12.6%, versus 13.0% as at December 31, 2007, on a comparable basis(4). Balance sheet with robust liquidity As at December 31, 2008, net debt stood at 2,932 million euros versus 1,607 million euros as at December 31, 2007. This increase reflects the acquisition of a large part of the European assets of Hagemeyer for 1,733 million euros. Rexel, which has set itself the priority of reducing its debt, produced in 2008, a high net available cash flow (493 million euros, up by 20% over the previous year). At the end of 2008, the Group’s liquidity stood at 1.3 billion euros, an amount significantly higher than the refund installments of the Senior Debt by the end of 2011, which has an outstanding of 790 million euros. (2) Operating income before other income and expenses, before depreciation of intangible assets recognized at the allocation of Hagemeyer’s acquisition price and excluding the non recurrent effect on inventories of copper-based product price fluctuations. (3) On a comparable and adjusted basis and by excluding the non recurring items of Q1 2007. (4) The ratio of working capital requirements expressed as a percentage of sales is calculated in 2008 by excluding the recurring effect of copper-based products price fluctuations. Outlook Given the sharp downturn in the economic environment, Rexel expects a significant decline of sales in 2009, reflecting the combined effect of shrinking volumes and the drop in copper price. In this tough economic environment, management focused on protecting margins, continuing to reduce the Group’s debt and anticipating growth opportunities; as a result, it intends to take far-reaching measures in 2009 aimed at: Accelerating the cost reductions implemented since 2007-2008 with a new savings plan of at least 110 million euros; Maximizing net cash flows, by continuing to focus on working capital requirements, by reducing gross operational investments by 25% and by suspending the dividend payment; Continue to grab selective organic growth opportunities in booming segments such as energy efficiency solutions, government and institutional projects, and key accounts.

As an electrical equipment distribution leader, Rexel is a foremost specifier for growthpotential products: solutions based on renewable energies (solar, wind, heat pump, etc.) and light and automation systems that promote the reduction of energy consumption.

In 2005, it drafted a formal environmental strategy within a Rexel charter and a sustainable development manual. These strategies are focused around two commitments: control the Group’s direct impacts and promote less energy intensive products. An action plan covering the waste management topics, product policy, customers offers and education is gradually deployed throughout the Group’s agencies. Its environmental performance is monitored via reporting, improved in 2008 by the deployment of a new data feedback electronic tool and a dedicated correspondents network, trained to use the new software. In 2009, the Rexel charter and the guide will be updated and deployed to all the Group’s sites and new employees. Initiatives to promote energy control will be reinforced with customers and employees.

Rexel also develops a long-term value creating social policy. In a decentralized context, the Group drives a comprehensive policy based on transparency, dialogue, employee profit sharing and dynamic career management. In 2008, 76 collective agreements were signed in the Group’s 34 countries and the European Works Council has extended its scope to five new countries. In order to rally employees around strong principles, Rexel has drafted ethical guidelines whose distribution and application are tracked by a network of “ethical” correspondents. Rexel is also very active in internal communication (studies of employee opinions, Induction days, Communication Weeks…) and career management (e-learning sites, career management platforms…). In 2009, it shall continue its efforts around major topics, in particular: the spread of good hygiene and safety practices, the launch of a Learning Center, site of the best HR development best practices, reinforcement of the ethical approach.

With respect to the Group’s societal policy, it is in line with a tradition of strong independence for countries. Rexel’s society problems are developed in economic and social areas close to its offices, linked to the local stakeholders. With respect to charity, donations are primarily allocated to medical research, charity works in developing countries or in the context of educational programs aimed at employees.

Key Performance indicators

• Carbon emissions ⁽¹⁾ linked to (i) consumptions (energy, fuel), (ii) to the end of life of packages and (iii) to wastes generated representing nearly 76,500 equivalent tons of carbon.
• Gender equality: 5% of women were promoted (5.9% men) and 73.6% of women received a raise (73.1% of the men).
• 58% of the Group’s employees are variable part in their compensation.
• 255,460 hours of training provided, representing more than 17 hours on average by trained employee.

(1) The carbon emission calculation was based on the (Agence Française de l’Environnement et de la Maîtrise de l’Energie) carbon® assessment method; the uncertainty linked to this method is about 11%.

Rexel, long-term environmental commitment

The Rexel Sustainable Development Charter serves as a reference tool for the Group’s daily professional decisions and actions. Accordingly, waste management and energy control at central to their concerns.

Within its agencies, Rexel educates its employees about selective collection and has developed initiatives to reduce energy consumption (low-energy bulbs, motion sensors, etc.).

Furthermore, the Charter defines actions regarding customer offers and product policy. Through its activity as electrical equipment retailer, Rexel promotes equipment and proposes specific product offers that help to energy savings or offer renewable energies (solar, wind and heat pump).

It also offers advice regarding the control of energy consumption.