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54
The European market recovered during the year,
especially in the Nordic region.
Lastly, the market was very active in China, Southeast
Asia and the rest of the Asia-Pacific zone.
Residential
The Residential market, which enjoyed the strongest
growth rates in 2004, continued at a good, albeit
slightly slower pace in 2005.
Demand remained firm in Europe, especially in
France and the Nordic countries.
Overall, the US market maintained its strong momen-
tum, although housing starts began to stabilize.
The Australian market went through a noticeable
recession in 2005, but the downtrend ended late in the
year.
Transition to International
Financial Reporting Standards
(IFRS)
The Group has prepared annual consolidated finan-
cial statements in accordance with IFRS for the first
time for the year ended December 31, 2005.
In keeping with the recommendations of the French
securities regulator (AMF) during the transition period,
the impact of the changes in accounting policies and
methods on the French GAAP financial statements for
the year ended December 31, 2004 were presented in
the 2004 Annual Report. This information is also pre-
sented in the notes to the 2005 financial statements.
The 2004 figures presented in the comments below
have been adjusted for IFRS. Comments on the 2003
financial statements, prepared under French account-
ing standards and not restated to IFRS, are included
in the 2004 and 2003 Annual Reports registered by
the AMF under n° D05-0309 and D04-0322 respec-
tively.
Business and Statement of
Income highlights
Changes in the scope of consolidation
In 2005, the Group pursued its acquisitions-led growth
strategy, enhancing its positions in energy manage-
ment, industrial and building automation, ultra terminal
distribution and customized sensors.
Electrical Distribution
In February 2005, the Group broadened its presence
in energy management with the acquisition of the
Canadian company Power Measurement Inc. The
acquisition was finalized on April 14, 2005 and Power
Measurement Inc. has been fully consolidated since
that date.
On August 24, 2005, the Group acquired Juno Light-
ing Inc., leader in lighting equipment for the North
American business and residential markets. Juno
Lighting Inc. has been fully consolidated since that
date.
Automation & Control
In late May 2005, the Group increased its interest in
ELAU Administration GmbH from 49.1% to 100%. The
subsidiary has been fully consolidated since June 1,
2005.
Growth Platforms
On October 4, 2005, Schneider Electric acquired BEI
Technologies Inc., a manufacturer of customized sen-
sors. BEI Technologies has been fully consolidated
since October 1, 2005.
On July 29, 2005, Schneider Electric acquired ABS
EMEA, Invensys’ building automation division in
Europe and the Middle East. The company has been
fully consolidated since that date.
The year’s acquisitions added 286.4 million to annu-
al revenue and 40.1 million to annual operating prof-
it. This represents 2.8% of 2004 revenue and 3.1% of
2004 operating profit. The acquisitions generated an
average operating margin of 14% in 2005.
Taking into account the full-year contribution of com-
panies acquired and consolidated in 2004 (Kavlico
and Andover Controls, consolidated in second-half
2004) and the fact that there were no material dispos-
als in 2005, changes in the scope of consolidation had
a positive impact of 433.2 million on revenue and
66.7 million on operating profit in 2005. This corre-
sponds to 4.2% of 2004 revenue and 5.2% of 2004
operating profit.
Exchange rate trends
Fluctuations in the euro exchange rate raised consol-
idated revenue by 0.7%, or 74 million, and had a
negative impact on operating profit of 0.6%, or 8
million. This mainly reflects the euro’s depreciation
against the Canadian dollar, Brazilian real and Aus-
tralian dollar.
Revenue
Consolidated revenue totaled 11,678.8 million for the
year ended December 31, 2005, up 12.8% on a cur-
rent structure and currency basis from the year before.
The increase was driven by strong organic growth of
7.9% (i.e., on a constant structure and currency basis)
and a significant contribution from acquisitions.
Breakdown by region
Data by region includes the contribution from the
Growth Platforms.
Revenue in Europe rose 7.2% to 5,643 million on a
current basis. On a constant structure and currency
basis, the increase came to 5.3%.
In a mixed business environment, Schneider Electric
benefited from a gradual upturn in demand led by