Good morning, ladies and gentlemen, and welcome to today's Negron 2018 First Quarter Results Conference Call. All participants are in listen only mode. Later, there will be a question and answer session. For information, this conference is being recorded. At this time, I would like to hand the call over to CEO, Ms.
Benoit Coquiere and CFO, Mr. Andre Andrell. Sir, please go ahead.
Thank you. Hello, everybody. Benoit speaking. Antoine Bureau, Francois Postman, myself, happy to welcome you to the Legrand 2018 Q1 results conference call. Let me remind you that we have published today or press release or financial statements and a slide show, and we will refer to this slide show during this call.
So the documents are available on the LeGrande website. And as usual, please note that this conference call is recorded and webcasted on our website. So let me first start with an exact summary following which Antoine and I will comment into more details or reserves and achievement, I will first start on Page Four of the slideshow with the 3 main takeaways of 2 day CDs. The first takeaway is that 2018 Q1 performance is solid. Sales were up plus 9.6% of which, plus 3.9 percent organic, driven by both mature and new economies, More specifically, organic growth was very good in Italy and rest of Europe, partly due to one off effects.
Adjusted operating profit and net profit attributable to the group were up double digits and the solid results demonstrate once again Laurent's ability to generate profitable growth. 2nd takeaway, we have actively pursued a number of cross initiatives by continuing to launch new products, both non connected and connected And we have also continued to leverage on the geographical deployment of BOS International Programs and Egypt. The group also benefited from the successful overseas development of businesses recently acquired in North America. Finally, the 3rd main takeaway of this release is that Legrand confirms its targets for 2018. After this introduction, let's start with another view of the sales, and I'm going to Page 6 of the slideshow.
So as I said, we recorded a total rising sales of +9 0.6%. Our first growth driver is doing well with organic growth reaching a solid plus 3.9% in Q1, driven by healthy rises like for like in both new economies, sales were up +5.7 percent and in major countries where sales were up plus 3.2%. So the good showings benefited more specifically from very good growth in part 1 off recorded in Italy and in some economies in the rest of Europe. As you know, the group's 2nd cost driver is external growth, which stood at +14 percent in Q1 2018 and should amount to over plus 7% full year. Lastly, Forex impact as expected, is negative at minus 7.5percentinq1 2018 If we apply to the last 9 months of the year, the average ForEx observed in April 2018, then annual ForEx for 2018 would be around minus 5%.
On course, as you know, this is a theoretical computation. And of course, time will tell what will be the actual ForEx impact on sales on a full year basis. Let me now comment, with more details or like for like evolution of sales by reporting segments. I'm referring to pages 78 of the slideshow. Before going into detail, into European Countries on Page 7.
Let me first indicate that, all performance in Europe as a whole, so including France, Italy, and rest of Europe is very strong with a total organic growth recorded in Europe of +6.2 percent. Now moving into each zones. In France, organic growth in sales stood at +2 point 7 percent in Q1 2018, which is a good performance. Driven by a very positive momentum in energy distribution in home systems. New products also contributed to growth notably, the Celine with NetATMO range of connected user interface as well as range of structured cabin, which is called LCS3.
Moving to Italy, like for like sales growth was plus 6.3%. This is very good performance is supported by innovation including all the new products that were launched over the past quarters, which continued to perform well in Q1 2018. And our robust highs in sales in Q1 also benefited from a favorable basis for comparison effect. I remind you that for the full of 2017, we recorded like for like growth of +4 percent in sales and Q1 2017 alone was up only +.9%. Last reporting segment in Europe, the rest of Europe says we're up plus 9.3% like for like compared to the first quarter of 2017.
This is a very strong growth overall, driven by both mature and new economies with, notable increase in sales in countries like Spain, the Netherlands, Greece, and an activity, which was almost stable in the United Kingdom compared once again to Q1 2017. In new economies, we recorded very good showings overall in part 1 off, specifically in Turkey, Romania and Hungary. Now on Page 8, moving to North And Central America, sales rose, plus 1.7% like for like. So in the U. S, where sales were up plus 2.5%.
Performance was good in both user interface and lighting solutions, Q1 rising sales was also driven by solid achievements of Milestone, which grew mid single digit in Q1, in spite of a challenging basis for comparison. As I said in the previous publications, milestone has fluctuate businesses with ups and downs on a quarterly basis. And in Q1 2018, activity in retail was particularly strong. Finally, sales in Mexico retreated due to high basis for comparison in 2017. Maybe a side comment on Alexier.
If we combine organic growth and perimeter effect, Gross in North Central America, in local currency was almost up plus 50% between Q1 2017Q1 2018, which is obviously a very impressive achievement. Coming back to organic growth and talking now about the rest of the world, ARIA, in this area, sales rose plus 3.2 percent on a like for like basis. In a number of countries, we achieved double digit growth in sales, This is notably the case in China where we did very well in South Korea, in Peru, in Saudi Arabia and in Algeria. Sales in India declined due to high basis for comparison in Q1 2017. Last comment on Brazil and Colombia was sales decreased in Q1 2018.
Now I pass the mic to Antoine for an overview of our financial performance.
Thank you, Benoit, and good morning to all of you. I start with profitability on Page 9. Where we compare adjusted operating margin between Q1 2018 Q1 2017. And as you can see from the slide, adjusted operating margin before acquisitions came to 20.4% showing a rise of a plus 70 bps on Q1 of 2017. And in the context of growing sales, it mainly reflects first our good global operating performance and second, the group's ability to adjust its selling price is to inflection in raw materials and components.
And to put, figures on words on this slide last point, low growing selling prices were up plus 1.4% in Q1 2018, raw material and component policies were up plus 2.5%. And as said, it demonstrates our ability to have a good coverage of inflation on raw materials and components. But please note that we even benefited a slight bonus in Q1 due to a lag effect between an immediate selling price increase and a progressive ride in raw material and component prices. This is for the adjusted operating margin. On Pet 10, talking now that value adjusted operating profit was up +11.9 percent, reflecting legumes ability or capacity to create values for profitable growth.
Moving on to Page 11, another key indicator value creation, which is a net profit attributable to the group, you see that it was up plus 17.7 percent at EUR 175,000,000 for Q1 of 2018. And this strong increase is mainly the result of our robust operating performance, but not only. It also embed the decreased in net financial cost, in spite of higher debt, and it is thanks to very competitive recent refinancing conditions. And the last favorable item contributing to this performance in net profit is the group income tax rate. And as announced, our group tax rate is done by three points, thanks to the decrease in corporate taxation in the U.
S. Moving to the last indicator of my presentation on Page 12. As you all know, we also clearly focused on cash generation Our key indicator there is a normalized free cash flow. It was up 20 0.3% in the first quarter of 2018 to reach EUR 219,000,000, and this performance was mainly by the growth in cash flow from operations. On the left hand side of the slide and as far as working capital requirement is concerned, Please note that the rise in Q1 is mechanical as it compares to a low level of working capital requirement at December at the end of December 2017.
And this being said, at the end of Q1 2018, working capital requirement remains well under control at 9% of sales. And to sum up on my presentation, I believe that we report a good sale set of financial metrics in Q1 twenty eighteen and close to 10% growth in sales, significant improvement in adjusted operating margin, and also strong growth in adjusted operating profit, close to 12%, net profit, close to 18% and normalized free cash flow with +21 percent. Thank you. And I give now the mic back to Benoit.
Thank you, Antoine. Let's move now on to the next topic of our presentation. In other words, our ongoing growth initiatives, and I'm turning to Page 14. As shown on this slide, we remain very active in terms of new product launches in Q1, both on non connected products and on connected products, You have here a few examples of non connected products, products such as the Practi box cabinet in Brazil, Lojix, floor boxes, Tier plug UPS and many others. And as far as connected products are concerned, we launched, for example, Sedian with Net Moo, MosaiQiznet@mou, both in France and Iran in China.
A word on Stadium with NetApp move, because we talked about a lot about this range in last quarters. The new range has been very well received with already close to 2000 connected installations managed to our home plus control application. Is just a start, of course, but a very good and very encouraging start. On a broader basis on connected products, So deployment of other ADL products, such as a Class 300 X door entry system or the smart door thermostat, is also doing very well. Moving to Page 15, we are also successfully pursuing the deployment of international programs that we launched recently, including, for example, the high performance structured cabin system, LCS III and UPS systems.
In the meantime, we also did from the successful overseas development of Horizon, Finrite and Solar AffectIVE, all companies we acquired recently. Finally, on the right hand side of the slide, we announced today a very small, but nice deal in digital infrastructure for data centers in Germany, a deal that hounds out of existing positions in Europe, the U. S, and Asia. Coming now, to the last topic of this earnings release on Page 17, based on Q1 twenty eighteen achievements, Legrand confirms its targets for 2018, I. E.
Organic growth in sales of between +1 percent +4 percent and adjusted operating margin before acquisitions at 2017 scope of consolidation of between 20% 20.5% of sales. To conclude, Q1 2018 showed solid performance All growth initiatives are delivering well and will continue, of course, and lastly, we confirm our 2018 targets. With this in mind, Antoine Francois and myself are ready to answer any questions you may have. Thank you.
We have a first question from James Stettler from Barclays. Sir, please go ahead.
Yes, good morning all. Thank you for taking my questions. Can you talk a bit, give you a bit more color around Milestone and indeed how that has impacted the margin for the U. S. Operation?
Secondly, just on lighting controls, I mean, clearly a lot of your lighting peers are having more issues. You highlight lighting controls being positive driver in the U. S. In the quarter. Can you talk a bit about that?
And then finally, when you look at your top line guidance of 1% to 4%, I mean, versus when you set up the guidance in back in February, are you feeling more confident to be at the higher end or has that not changed at all? Thank you.
Hello, James. Benoit speaking. So on milestone, We are we recorded a good 2018 first quarter with, as I said, mid single digit growth in sales and a slight improvement in profitability. So it's a good quarter. We are just making this kind of a cautious statement saying be careful, do not over, read performance quarterly performance at Maestro because there is some variability in quarterly sales.
So QR is good. We are extremely positive on the docking of this company, which is a great addition to Legrand. But, of course, Maestro is not growing 14% over 2 years on the permanent basis. But once again, Q1 was strong and good. As far as the acquisition impact on the LNCA margins over Q1, it's neutral.
So, including all acquisitions, it has no impact on the LNCA margin. Second question as far as lighting control is concerned, I can confirm that both lengthy controls and lighting fixtures are recorded good growth in Q1 2018. It's always difficult to compare ourselves with peers, actually, because we are not in the big lighting segment, and we do not intend or pretend to fight against the big lighting players, we are active on a very specific niche in the U. S, which is the bus lighting controls and highly specified architecture lighting for commercial buildings. And this niche maybe represent 10 or 15 percent of the lighting market in North America.
So it's hard to compare our sales with other lighting companies or with lighting companies, and I wouldn't extrapolate that we are gaining a lot of market shares over those players just that we comparing April to April. But overall, our Q1 performance for lighting in the U S is very nice. As far as your question, the top line guidance is concerned, we insisted a bit in the release and in our comments on the fact that even though Q1 organic growth is good, it is impacted by some what we have qualified as 1 off typically Italy, the Q1 2017 was two points below the trend of the full year. So it gives a sort of theoretical advantage of two points for our performance. And number 2, as far as rest of Europe is concerned, we believe that the underlying markets are closer to the pace they had in 2017 than to 9%.
So, I like to do the math, but taking that into account, Q1 performance, is completely in line with our plus 1 to plus 4 guidance.
Thank you. Next question from Andreas Willey from JP Morgan. Sir, please go ahead.
Good morning, everybody. I have a couple of questions. I'd like to start with the recent press article that was about the market structure in France and competitive behavior, maybe if you want to use this opportunity to comment on that? 2nd question, you mentioned the acquisition dilution that didn't affect North America, but the 30 basis points overall was maybe a bigger number than I had expected. What should we expect for the full year?
And why was the dilution then so large in Q1? And if you look at North America, you elaborated on lighting and milestone having good results. And you mentioned Mexico, but what's the growth rate in kind of the core heritage Legrand U. S. Business outside basically milestone and lighting, which have been kind of acquired partly at least over the last few years.
Thank you very much.
Hello, Andreas. So I'll take question 1 and 3 and I will let Antoine answer on the dilution impact of acquisitions. As far as the first question is concerned, my answer is going to be extremely short. Because we do not comment on press articles. This being said, I, of course, should this be necessary?
I confirm that our sales policy is fully in compliance with competition now, obviously. On page, on page on, sorry, on question 3, as far as North America is concerned, let me maybe remind you the numbers. So if you take LNCA as a whole, our sales were up plus 1.7%. It should take the U. S.
Alone or sales, were up, plus 2.5%. Now it's always interesting to look at the performance over 2 years or sometimes even, even longer. And typically for the U. S, for example, q11 2017 was up 3.5%. So in the U.
S, over 2 years, our performance is going at a plus3percentperyearpace, which, if you compare to, other players, even though the comparison isn't easy because we all have different perimeter of activities, is a good performance. So I confirmed that we are not losing shares in the U. S. We are growing on average in the past 2 years at a 3% per year pace, which is good with many different units. Wiring devices is nicely up.
Lighting and milestone are up and you have other businesses amongst 10 or 15 businesses we have there that are a bit less supportive. And even sometimes going down for good reason that we know. So, overall, no warning, in the U S, we believe, both in terms of absolute terms and in terms of relative terms that our performance is good. So Mexican situation is a bit special. It is down in Q1, but we had a very strong start last year, plus we launched a nice new range in Mexico.
And we had a bit of inventory buildup at the distributor level at the end of the year. Our team screaming positive on Mexico, and we believe we're going to achieve a good year, but that's it. Now turning to Antoine for the, second question on dilution.
Yes, thank you, Benoit, and good morning, Andreas. First, I would start by saying that we have no issue there and effectively, we talked about 10 bps margin division expected from acquisition on a full year basis. This is what we said in February 2018. And I remind you that we took that also at that time that we were shooting for 7% scope effect on sales and 10 bps did we share on margin, 7% scope effect on sales. You may have noticed that in Q1 2018, the scope is not 7%.
It is 14 and twice the annual effect, just due to the seasonality of the acquisition in 2017, then mechanically, the 10 bps dilution become 20 bps. And on top of that, there is some seasonality observed in 2017 in the profitability the businesses we have acquired. And, we consider that this seasonality represents around 10 big spend. On this basis, the Q1 30 bps dilution is consistent with about 10 bps dilution on a full year basis and then which is still valid then to sum up a 10 bps, a full year dilution, 10 bps a scoop effect in Q1 and 14% versus 7% on a full year basis. And 3rd point, this seasonality observed in 2017 for around 10 days.
But this is also important to note that, this is also the reason why we that the performance in operating margin in Q1 should be read before acquisitions impact because, of course, taking to a concert in beep, 30 bps in Q1 and not 10 beats on a full year basis. It creates a form of gas on the operating margin analysis on a reported basis in Q1. Then to sum up, we consider that this analysis should be done before acquisition due to the seasonality in the margin dilution of of the
Next question from Lucy Karriya from Morgan Stanley. Madam, please go ahead.
One additional point to make sure that my long answer was actually understood on this object that what we say to sum up is that the 30 bps in Q1 is consistent with a 10 bps on a full year basis, okay? Thank you.
Good morning, gentlemen. Can you hear me?
Yes, Trushi. Hello. Good morning, Mr.
All right. Good morning. I have a couple of questions. The first one actually is a follow-up on, the one off effect you mentioned in rest of Europe in the for the rest of Europe segment in the first quarter. Can you give us maybe a bit more kind of color on what those one offs is and why you think they are not necessarily sustainable?
That's question number 1.
Maybe, Lucy, if you don't mind, maybe ask all your questions, and then we will address them.
Okay, sure. So that was the first question. The second one, I was curious to know whether you had seen some kind of restock effect in some specific geographies in the quarter because from some of your competitors or distributors, we've kind of heard of some restocking momentum. So I was wondering if you've seen that. And if so, how it had affected you.
And then the last question was around M And A. There has been, of course, some little laminate done in the first quarter. I was curious of your objectives now, whether you are a bit on a slow mode for 2018 as you integrate milestone or whether we should expect an acceleration in Eso. Considering you've done quite a lot of M and A in the U. S.
Over the last few years, Sure, maybe the other area or the new area of focus for you on the M and A side?
Okay. Thank you, Lucy. So typically, what we saw in Q1 in Rest of Europe in a few countries that are listed in the the press release are a number of effects, which we do not consider as being a recurring effect. For example, they've been in a few countries, a bit of inventory buildup from our distributors in this area. There was a couple of big projects all so.
And as a result, we do not believe that the 9% growth rate recorded in Zizaria is sustainable and that we should record such kind of high post rate for the full year. So no seeing, let's say, exceptional enough rate, it is just like that when zooming on a given quarter, and zooming on a given area, those kind of effects eventually build up big project, basic of comparison and so on can play. Moving to your second question. Yes, a bit of inventory buildup in a few countries in the rest of Europe area. Now we haven't seen in other geographies, anything meaningful in terms of restocking, talking actually from our distributors.
So it explains a little bit of the over performance in the rest of Europe area, but it does not coming to play for the other zones. As far as M and A is concerned, don't read the fact that we are announcing only a very small deal in Q1 as a sign of anything as far as our M and strategy is concerned, we remain, extremely eager to make deals. And we have a pipeline, which is full of opportunities. We are spending a lot of time reviewing opportunities, meeting targets, qualifying targets, negotiating with some of them. And I hope that we'll be able in the coming quarters to do more deals.
It is just that the timing is not fully in our hands. And you can have a 1 quarter, which many deals, and even last year, a quarter with a big one and quarters with very small deals and even no deals. It does not imply that we are decelerating as far as M and A is concerned. We remain on the acquisition mode in the U. S.
And elsewhere And if we find a good acquisition opportunity, fitting with our criteria, a good leader, good brand, good management team, solid product offering, with the ability to be docked within the ground, with a significant synergy potential, we will, of course, do it.
Thank you. Just if I can have a follow-up on the first one on the one off in rest of Europe. So I understand some big project and some inventory rebuilds. And I think you were suggesting earlier that you saw the underlying growth in the market was more around low single digit. Is that correct?
So how much do you think the inventory buildup kind of a contributed to the bridge from low single digit to the 9% organic growth?
So I was more implying, when commenting this area that the trend was the underlying trend was probably closer to the trend we experienced in the full year 2017, which, I remind you, was 5.5%. But Don't see that as a guidance, of course. This is just a qualitative comment on the fact that we do not believe this plus 9.3% is a sustainable growth rate.
And how much do you think was the the inventory buildup effect versus the project effect?
Part of the gap that I'm mentioning between the plus 9.3 percent we recorded in Q1 2018 and the plus 5.5% we recorded for the full of 2017. It's in the bag of all those, many small one offs that happened. Don't forget that this area is made of 40 countries, So it's difficult to identify only one phenomenon from one country. So it's part of the mixed bag of phenomenon that explains the gap between Q and performance full year 2017 performance.
Next question from Andre Kukin from Credit Suisse Securities.
I'll list them out in one go. So firstly, on the margin drivers, you mentioned that you exceeded raw materials inflation with price in Q1 because you raised prices early and raw material increase has been gradual. What's your expectation for the full year on that net price effect on the profit bridge? Secondly, on the margin drivers, just terms of labor inflation, you're seeing, whether it's kind of negotiated, for the start of the year, What is the level you're seeing and how does that compare to your expectations of that last year? And then another question I had was on Amazon Acquisition of Ring.
Does that now make them a direct competitor of your Eliot's connected doorbell offering? And does that change anything for you from perspective of Amazon as a channel or from any other perspectives? And very finally, on the last question I was asked calibrating that other Europe, you said 5.5, I've got 6.5 in the model. I just wanted to double check if 5.5 is what you see as the organic performance for 2017 for other Europe. Thanks very much.
So I'll take a question 3 and 4 and I will let out one answer on question 12. So for the first question, I confirmed that last year, growth, like for like, by destination, in the rest of Europe area, it was a plus 5.5%. So I don't know where your plus 6.5% maybe sales by origin, but sales by destination is clearly, that's what's in our press is in February plus 5 +5.5 percent organics, sorry. As far as YAM has an acquisition of Ring, 2 comments. Number 1, I believe that ring and lebron are not exactly in the same segment of the market, even though from outside my things as a product has the same, but I don't believe that is the case.
Ring is in the consumer electronic product, La Grange is in the infrastructure, professional grade, technical products, a bit for individual housing, but also for a flat apartments, ancillary and so forth, products that are embedded into the wall, connect to complete electrical infrastructure. So it's not exactly the same segment. So we don't see a ring as a direct editor to LeGrande. We rather see Ring as an additional door opener for products in a sense that the more companies will teach end users that it's good to have smarter products at home, the better it will be for the goal. And some of those customers that are contacted by Ring and by other players will buy out of the shells ring like products and some other will call the contractors to have professional grade installed products And if we are doing a good job, part of those products will come from LeBlanc.
So on a competitive landscape point of view, it's we don't really see Ring as a competitor. And as a result, we're not really impacted by the Ring acquisition from Amazon except that it will a little bit like it was with Google Nest. It will hopefully make more popular in the mind of end users that it's good to have smart connected products at the entrance as a gate rather than a dump doorbell. Now, second point, Amazon is, of course, also a customer of L'Orange, a growing customer, nice customers, small customer, that we are happy to have as a customer. Now turning to, maybe Antoine for question So two questions on the margin drivers.
You know, our typical answer, as far as anticipation of raw material and components inflation is, we don't really know that as we negotiate that on a quarterly basis and as such, then selling prices are 3rd, of course, we will follow this trend observed in raw material and component session. What we only said during this, presentation of weather is that we have benefited in Q1 of a slight bonus due to the fact that we negotiate some raw material prices in the quarter before any potential selling price increase, this is what we have done in Q4 of 2017, then a country manager of anticipated some price increase in Jan, and it happened that the raw material inflation was a bit lower than expected in Q1. But we try to be very consistent vis a vis the market on that. And what we say is that this bonus should not last because, of course, we we will be on a full year basis consistent between inflation received and selling prices increase. And that's the first point.
And maybe, to to try to quantify that, we are talking about a few €1,000,000 of bonus, but it's not so meaningful. That's the first point. And I hope it answers your question. The second one was about labor cost inflation. Two things.
Your question was about expectation and about comparison vis a vis last year. I can say that vis a vis last year, we are seeing in some countries a bit more labor inflation, and this is not specific to Legrande. You know that very well, it's question of the market practice or market situation, for example, labor shortage and second, was it anticipated by Legrand, mostly yes, and not by LeGrande, but by LeGrande as a country manager, And this labor inflation is fully embedded in the financial performance contract of country manager. And to sum up on this second question, yes, a bit of inflation above last year, everyone anticipation was done. And third, it is financed with a financial performance contract of a country manager.
Great. Thank you very much very clear.
Thank you, Alan.
Next question from Sebastian Grote from Redburn. Sir, please go ahead.
Question coming back to the one off because you are usually good at stressing the positives that boosted the performance. But less good at stressing the negative that as way in the quarter. So could you talk a bit about those negatives. I'm talking about the calendar, the weather effect may be everything that weigh on the quarterly performance.
No, I mean, it's it's a broad question. We don't believe for Q1 that there was as far as the number of the calendar is concerned, as the number of days it's always extremely difficult and not mechanical to hit the impact. And we can more easily do it once the quarter is completed, then, you know, computed that 30 clean advance. What we could see for Q1 2018 is that even though theoretically you had a few, minus one day here and there, it did not really play on the performance. So we don't believe that our performance was really negatively impacted by the number of days on the quarter.
But once again, with a cautious statement that it's always not mechanical in our trade and a bit difficult to it. For example, in the U. S, you had, one day less, did it have an impact on Q1? That's not what we feel, and that's not what was reported by our team. Now, and the same would go forward looking.
If you ask me, for example, what will be the impact of the calendar on the French market in Q2. You are not leaving in France, but I can tell you that the month of May is like a Greer cheese in France with a lot of days off here and there. It's extremely difficult. To know now, what will be the impact of those days off, we will have a lot more ability to comment when we'll comment Q2 performance. Now, as far as the other, negatives of the quarter are concerned, We mentioned a number of areas where our sales are down.
But even in these areas, we are not pessimistic. We are not worrying about our market shares. Take India, for example. India is a fantastic country for LeGrande. We have never recorded in India.
A negative, organic growth rate on a yearly basis. We've always recorded growth in India organically. We've always been able to find interesting complementary opportunities We have very solid market shares. We are we have nicely profitable operations there. So we are not worrying because Q1 is slightly down.
It's really coming from the basis for comparison, and we are extremely optimistic on our ability to record growth in India in 2018. Same would go for Brazil. Even if our sales are down in Brazil, we don't see that as a loss in market it's just that even though the macroeconomic environment is a bit better in Brazil, you still have a lot of uncertainties coming from political situation. And our market, it's still depressed, less depressed than it used to be 2 years back, but it's still depressed. So even in the areas where our sales are down, we are not negative on our market shares and we have action plans to recover in the quarters to come.
I don't know if it addresses your question.
Yes, yes. And just whether do you see, I mean, it would be like look at calendar, but have you seen weather impact in the U. S. For instance, in the quarter?
No, it's not specific teams in the U. S. So maybe a little bit in France, we hear here and there from some people that weather may have impacted Q1, but frankly speaking, it wasn't so clear. And forward looking, same comment, I would prefer to give you a straight answer saying, yes, the weather had the X impact or 0 impact calendar at XO 0 strikes France will have X OZERO. The reality is that it's a lot more difficult to read, our feeling for Q1 is that it did not have a very material impact on the main geographies.
So before going to the next question, let me remind you that you We have a question from Gael De Bray from Deutsche Bank. Sir, go ahead.
Very much, and good morning, everybody. I have two questions, please. The first one is about the growth difference between friends and Italy because Italy has now outgrown friends for perhaps 3 or 4 consecutive years despite the macro conditions not being comparatively much more supportive So I guess my question is how do you explain the gross difference between those two geographies? And the second question is more for Benoit. Is there anything you would like to change now in terms of the way the group operates I mean, basically are there any specific areas you'd like to improve either in terms of organization, in terms of structure geographies, businesses, well anything?
So, hello, Gail. As far as your first question is concerned, it's always difficult to compare from one country another because even though those 2 geographies are important and big geographies for LeGrande, because cumulated, they represented 25 percent of our sales last year. Our market position is not exactly the same. The market drivers are not the same. Market is not the same and so on and so forth.
The only hint I can give you is that for example, when you saw, the crisis, in 2008, 2009, and then the so called w in 2012, 2013, Italy, for example, decreased a lot more both the market and our operations in France. And so it is not completely surprising given, the difference in the downturn, if I may say, between France and Italy, to have Italy recording, higher growth than France. Now what is important is that for both countries, our relative performance versus competitors, even though, once again, it's difficult to really, analyze a relative position on only 1 quarter, it's much better to do it on a yearly basis or even over a more significant period of 2 or 3 years. But even if we zoom on the quarter, relative performance versus competitors, both in France and Italy is good. Coming to your second question, when I, to cover the position 3 months back, I clearly signal that I intended as much as possible to respect the basics of the business model of Florent because I, I am not only I contributed to build this business model in my various positions, but more importantly, I'm only convinced, as you see, the winning business model, both in terms of, top line, bottom line return on capital and ultimately share price and benefit for the shareholders.
So since I believe it is a winning model, I committed internally and vis a vis the financial community to work hard to implement an aspect and implement this business model. Of course, this does not imply that nothing will change and you always have a few people changes, slight changes in organization and so on and so forth. But this is the day to day life of a big company like Tigran, what is important for our shareholders, I think. And it was pretty much appreciated during the roadshows we did 2 months back is the fact that, as a CEO of this company, I will make sure that this winning model keeps working. You know, Gail, just as a side comment, I was in the roadshow and an investor told me, Avonois, interesting.
This is a bit boring. But he added, boring is good. So I'm not sure that our shareholders are expecting from the new management team to completely change the model.
Well, I guess I appreciate fully that the business model is a great business model and no one is going to argue against that. But I guess even in a great company like yours, there are always a few things that need to be even slightly improved maybe in terms of geographical positioning or in terms of businesses, maybe your presence in in production devices, circuit breakers and the likes, that sort of things that was more the syncing behind my question?
Well, you know, at Tigran, we have, medium term plans, which are, 5 year plans, which are structured, obviously, every year, from both a bottom up and top down approach, putting together our strategy team, the countries, the BUs, and we formalize this plan, which is which shows where we intend to go in terms of organic growth, in terms of new products, non connected, connected, Elliott, potential acquisition targets and so on. And definitely, I've been part of the elaboration of this midterm plan for years. I even owned this mid term plan when I was ahead of the strategic team at Legrand. This being said, This is obviously an internal plan, which we have which we do not disclose externally, but I hope that in the quarters to come, you'll see more developments into Elliott potentially more acquisitions and so on. So I'm sorry not to be more specific, but of course, the strategic direction within 5 years are something which which is a which is a plan.
And needless to say, this midterm plan is, of course, fully consistent with the Lagomoden.
Thank you. Next question from Martin Wilkie from Citi Investments Research. Sir, go ahead.
Yes, thank you. Good morning. It's Martin from Citi. Just one question on the UK business. You mentioned that the UK is relatively flat year on year, and I think it had been down very slightly in the second half of last year.
I mean, we're hearing from other companies in similar business areas that the UK is down. Mid single digit or even up to 10%. So I'm just wondering, similar to the question you had earlier in the U. S, is just a bit of the UK market that you're in? Or how come the UK seemingly so resilient for you when for many of your peers, it's it's a much weaker business?
Thank you.
No, it's always difficult once again to compare to peers and whether this kind of a factual comparison seems to be working for or against LeGrand we are always extremely cautious because you hardly compare April to April in our freight. What I can tell you is that our UK market is almost stable, on a basis for comparison, which wasn't easy we have very solid positions there in the number of businesses, not so much in the traditional Legrand business, we are, for example, very strong in what we call assisted living. We are also strong since the acquisition of CP Electronics in lighting controls, We're also strong in cable management. So we have solid leaderships, but of course, it doesn't make us immune from cycles. So our teams did a good job in Q1.
What will it be going forward is extremely difficult to read. And nobody can really predict what the impact of the Brexit will be. So our teams remains extremely, let's say, motivated to adapt should the market deteriorate, we will have the flexibility to adjust, but we can hardly tell you that the it is doing 0-5 plus 5. And we can, of course, hardly tell you what it will be going forward. Now remind that, the UK is less than 2.5% of our fares.
So even if the situation was to get worse, or to deteriorate, the impact on the Legrand sales and P and L and profit would be limited.
Okay. Thank you. Next question from William Mackie from Kepler Cheuvreux. Sir, please go ahead.
Yes. Good morning to everyone. Thank you for taking the questions. A follow-up on the trends in a number of your or your countries in emerging markets. Could you just describe the development within the Middle East?
I noticed you said that Saudi Arabia was up, which is a change in trend over a number of years given that the constraints that we've seen on a number of budgets there. So how that's generally trending in the Middle East, particularly Saudi. And also on top of that, if you've seen any effects in Russia from the geopolitical environment? Secondly, on structure, obviously 14% impact in Q1 and 7% guide for the full year. There's still a significant impact in the second quarter would you be able to guide on the level of structural impact or scope that you see Q2.
And lastly, I may have missed it when you discussed North America, but when we talk about America, could you just update us on how milestone developed in Q1? I noticed from the figures you gave at the end of last year, when you gave monthly organic growth of milestone, you talked about 9% growth in milestone in Q1 in 2017. So a tough comparison. So how did milestone compare within the U. S.
Figures in Q1 2018 versus 2017? Thank you.
Hello, William. So starting with you, I'll take question 1 and 3 and led the number 2 to twenty one. As far as the situation, Middle East is concerned, once again, be careful not to extrapolate what we are telling you as market trend, because especially on a given quarter where you can have a lot of different impacts that explains that performance. And on top of that, our market positioning might not be, might be on a few market segments. And not on the whole of the market, typically Saudi, for example, we are mostly active in cable management, and in the bit of worrying devices and protection products, but we hardly have the AT and IT product families that we sell at the group level.
But I confirm that Saudi is, growing nicely double digit and our teams remain pretty optimistic for the rest of the year, even though it's extremely difficult to predict, UAE is also up even though the pace of growth is slower than Saudi, but then you have different situations. Lee Bannon is in a good situation. It then depends on the countries, if you take Saudi and United Arab Emirates, Emirates, as Q1 was a good quarter. As far as your third question is concerned, you are right to recall that, Q1 2017 for milestone, even though the company wasn't consolidated at that time, was up 9%. So, last year, we said, be careful, the basis for comparison, going to be tough.
For Q1 twenty eighteen. Despite this difficult basis for comparison, sales were up mid single digit that Maestro in Q1, my sort of cautious statement earlier in the call was to say that It does not imply that milestone has a sustainable growth rate of about 14% or 15% over 2 years. That's not what we think. We think that, you still have a lot of variability from 1 quarter to another in the milestone business. So Q1 was very strong, notably due to the fact that we did very well in the retail piece of the market.
But again, don't take into account I think don't extrapolate that into the remaining 9 months of the year. Myestone is a very good business, very solid business, We've always talked of a growth rate of sustainable, a mid term growth rate or 2%, 3%, not 15%, not 7%, of course. And we also have, of course, the benefit of the synergies, a bit in the U. S, but a lot outside of the U. S, because part of the synergies will be to deploy, as we are doing with Horizon, for example, to deploy the milestone sales outside of the U.
S. So to make a long story short, good performance, in Q1 for milestone, grows mid single digit, but, the model remains extremely solid, but we variability from 1 quarter to another. Yeah, so you also had a question in Russia. Russia did pretty well in Q1 with a mid single digit growth. Our market positioning there.
It's extremely strong. What will it be for the rest of the year? Same comment as we usually do, no order book. And in a country like Russia, it's even harder to predict that in a lot of other countries. So difficult to say, but at least Q1 was up single digit, and it's a good performance.
Now, Antoine, maybe on question 2.
Yes. Good morning, William, very simple and said, and Q2 scope of conciliation should be more or less the same in Q1, then it would lead to close to 14% scope of consolidation for H1. And we expect H1 2 to be, 0 0 plus to have this average of 7% on a full year basis. This is quite consistent with the fact that our main acquisitions, were made last year, midyear.
Thank you very much. Just another clarification actually while you're there, if you could. I think the currency has obviously been a very big feature of Q1 and will be in the 1st part of Q2. And is moving quite a lot actually at the moment in the last few weeks. But what's your best assessment of the currency effects, whether there are any transactional as well as translational factors that may come up to challenge some of those financial contracts you have with all the countries?
This is a very good question, William. And this is something we have constantly remind you to market is that finally for Legrand, except fixed situation 2 to 3 years ago is a very strong appreciation of the dollar. But at that time, the margin of our LNC operation were less close to the average of the group than now. What we said at that time that we could have a slight effect on the profitability of the group is not the case today. We consider that despite the trend we have in currencies today, the impact on group profitability would be, not only limited, but equal to 0.
And the only impact we have is an impact of the translation and a mechanical impact due to the fact that we have operation outside the Eurozone and when consolidated our data into euro, we have dispensation effect. And to sum up, no transactional effect, no impact on margin, but just to make an equal effect due to this transaction of non euro operation into euro or your value.
Thank you. We don't have any question for the moment. We don't have
for having taking the time to attend this course call, should you have any follow-up questions on the Q1 results, please feel free to get in touch with Francois Antoine and myself. We'll be happy to give you more details. Thank you very much.
Thank you. Goodbye.
Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.