Gentlemen, thank you for standing by, and welcome to the Q1 2018/2019 conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session, at which time, if you wish to ask a question, you will need to press star one on your telephone keypad. I must also advise you that today's conference is being recorded, Tuesday, 5th of February, 2019. I would now like to hand the conference over to your speaker for today, Kristian Villumsen . Thank you. Please go ahead.
Thank you very much, operator, good afternoon, and welcome to our Q1 2018-2019 conference call. My name is Kristian Villumsen . I'm the CEO of Coloplast, and I'm joined here in Humlebæk in Denmark by our CFO, Anders Skovgaard , and our investor relations team. It's a pleasure to participate my first call as CEO for Coloplast. I know many of you have been following our company for many years and know it well. Before we take a closer look at today's result, I would like to share some initial thoughts after my first two months as CEO. We'll then come back to the quarter, and we will open up for questions. Please turn to slide number three. Coloplast is a fantastic company, and it's a company in excellent shape.
It's a great honor to take over the CEO position of one of the best-performing and most profitable med tech companies in the world. Coloplast is also a company with a unique culture and a promising future. The current growth momentum across all major markets shows the strength of our strategy, which continues to drive demand for our products and services across the globe. I'm really excited to take over the lead of a company that's doing so well because it gives me time to make certain that we take the right decisions for the future. Going forward, it's our job to make this fantastic company even better and create more value for all our stakeholders, including our employees, shareholders, and most importantly, the consumers with intimate healthcare needs that we serve. The past two months have been busy.
I really wanted to gain a holistic view of the entire company, so I've spent a lot of time in meetings. I've spent time reviewing our businesses with our leadership teams and asking a lot of questions and mainly listening. I've spent time learning about the business areas that I'm less familiar with, urology care, wound and skin care, and also time with our global operations function. I've also assessed our R&D pipelines, and the headline is that I find them very encouraging. Poul Marcun , our new EVP of Chronic Care, joined the company a few weeks ago, and I'm working closely with him to hand over the day-to-day running of the chronic care business.
In my previous role, I was part of developing our current LEAD20 strategy, together with my colleagues in the executive management team. I've spent the past four years leading the implementation of the strategy in the Chronic Care business. You will certainly ask me what my initial priorities as CEO are. Well, first and foremost, the immediate path forward for myself and the broader management team will be to focus on executing on our LEAD20 strategy and delivering on our long-term guidance of 7%-9% organic growth and an EBIT margin of more than 30% in constant currencies. As I mentioned, Coloplast is in great shape. We will focus on execution and fine-tuning wherever and whenever needed to execute on LEAD20.
I also want to be clear that, like any other company, there are also areas that we can and must improve. My job, along with the rest of the management team, is to make this company even better together with our employees. The LEAD20 strategy takes us through 2020, and you can expect us to present our next strategy in the summer of 2020. We'll make sure that we remain a growth company. We'll continue to invest in building a strong consumer healthcare company with a strong focus on innovation, clinical and consumer preference, and a stronger voice with payers. I'll talk more about that in the future. We will initiate the strategy process for 2020 in the fall of this year. Right now, we're focused on executing the strategy we have.
Reflecting on our LEAD20 strategy, I would like to share some thoughts around three different areas. First, our innovation agenda, second, our consumer agenda. Finally, our investments into regional growth opportunities. Let me start with innovation. Back in 2014, I became responsible for the day-to-day running of the global commercial functions and the sales regions in ostomy care and continence care, as well as the innovation pipeline for both areas. Innovation remains the cornerstone of this company and key to attaining and maintaining category leadership and driving above-market growth. I'm a big believer in the power of clinically relevant products backed by strong marketing. Over the last few years, we've launched several innovative products that fit that bill, and we've moved the needle in our categories. These products are SenSura Mio Convex and SpeediCath Flex, to name a few.
This quarter, I'm very proud to launch SpeediCath Navi. SpeediCath Navi is our first dedicated emerging markets innovation. SpeediCath Navi is a single-use, hydrophilic male catheter with a flexible tip and insertion grip. The product has been specifically designed for our emerging markets region, where reimbursement is lower compared to our mature markets. The standard of care in emerging markets today is uncoated and reusable catheters. We're increasing our efforts to raise the standard of care to hydrophilic catheters in emerging markets, much like we're doing elsewhere in the world. We sell our SpeediCath standard catheters in emerging markets today, but there's a clear preference with some customers for so-called soft catheters. SpeediCath Navi addresses this preference head-on.
We will launch the product in half a dozen markets starting this year, and our strategic goal is to drive patient uptake, at a cost that supports full-time use. At our Capital Markets Day in September, we spoke about our Clinical Performance Program and our ambition to significantly raise the standard of care through clinically superior innovation. To achieve this, we're investing in new technologies, we're investing in digital healthcare, we're investing in market access and clinical trials to show improved clinical outcomes, all with the aim of obtaining price premiums for our new innovations. We believe we have a well-balanced innovation pipeline that can drive growth short, medium, and long term.
One of the important decisions I've made in my first two months as CEO has been to postpone the launch of SpeediCath BBT, a version of SpeediCath with a new coating technology called Bacteria Barrier Technology, which reduces the risk of inserting viable bacteria into the urethra and bladder. We originally planned to launch BBT because of the SpeediCath patent expiry in September 2 2017 as a mitigating action. The SpeediCath patent expiry did not have the negative impact on growth that we expected. On the contrary, we've continued to see solid growth on the SpeediCath standard product portfolio, driven in particular by the U.S. and emerging markets. I've therefore decided to include the BBT technology in our next generation catheter platform, which includes other technologies that we're working on as part of our Clinical Performance Program, instead of launching now.
We have a number of exciting innovations in the next platform, and I would like to bundle the new coating technology with these innovations to maximize our probability of clinical success and therefore also reimbursement success. We aim to deliver and document significant improvement in health outcomes, and our ambition is to prove a reduction in urinary tract infections, which would be a key breakthrough for our industry. I firmly believe that this reprioritization of the pipeline will result in better outcomes for users and more business impact, despite a later launch. We plan to launch in our next strategic period. Within the Clinical Performance Program for ostomy care, we're pushing ahead with pilot studies on new technologies, like we explained at the last Capital Markets Day. All this to say, we remain committed to innovation, and we remain committed to building superior products, and we're making good progress.
Let me now move to my next point, our consumer model. Through our global Coloplast Care and direct-to-consumer presence, we now have a consumer setup in over 30 countries and more than 1 million users in our database. Our consumer-centric approach has increased our relevance with consumers and the impact of new launches. You can see this in our numbers and market share gains across categories and across markets. We've strengthened our position as a consumer healthcare company further by establishing direct distribution in more markets. We now have direct distribution in our top five markets. We are focused on combining superior products and services to create a better experience for our customers. In the U.K., for example, we've integrated our home delivery services in Coloplast Charter with our Coloplast Care service and now offer this to provide more value for consumers, healthcare professionals, and the NHS.
This strategy is already yielding good results. In the long run, we firmly believe that we can increase our competitiveness further by combining superior products and services to a greater extent, to create more value for the system as a whole and for each of our customer groups. This brings me to my third and final point, our investments and regional growth opportunities. In November 2017, we issued a new long-term guidance to the market aimed at accelerating our organic investments to drive further growth. Last year was an investment year, and in Q1 this year, we've initiated a new wave of incremental investments. Innovation takes up a significant share of our investments, but we've also increased our commercial investments across business areas with a focus on key markets such as the U.S., China, and U.K.
Similar to last year, the incremental investments are balanced between initiatives that will drive growth in the short term and investments that aim to secure our competitiveness over the medium and long term. Looking at our geographical regions, Europe continues to drive a large share of our growth. We continue to invest in pockets of growth in Europe, but the bulk of our investments are going into the U.S. and emerging markets. Let me focus on the U.S. for one minute. This is the region where we have our largest growth opportunities. In Ostomy Care, the U.S. is an outlier in terms of market share. With SenSura Mio, we now have the broadest and strongest product portfolio ever. More and more hospitals recognize the technology, and we continue to see good wins. I'm encouraged by another key sole source win this quarter with The University of Chicago.
While this is not as big as Cleveland Clinic, they have similar prestige as an academic center, and their colorectal surgery specialty is ranked at the very top in the U.S. In continence care, the underlying demand for our products is solid, and we are clearly driving the shift in the market towards more advanced hydrophilic catheters. Despite the progress that's been made on both business areas, we still have a lot more work to do in the U.S., and we want more from our investments there. In emerging markets, we initiated several new investments last financial year across a number of markets that have yielded results. China represents 4% to 5% of group sales today. In Ostomy Care in China, we have a very strong position, and we've begun expanding the sales force again to cover a larger share of hospitals.
We're also investing to strengthen our direct-to-consumer business in China. We now have a new SVP for the emerging markets region on board. He's been tasked with developing the next plan for our next wave of investments in emerging markets. In Wound Care, we're executing on an organic plan to drive scale based on investing more in innovation and sales and marketing initiatives in selected regions. The advanced wound care market is one of our largest addressable markets, which I fundamentally find attractive. Silicone foams is the largest subcategory, with an attractive market growth of 5%-7%. In this category, we have a winning product with Biatain Silicon e. The product's 3DFit Technology continues to resonate well with healthcare professionals. It continues to drive market share gains.
It's a great result of how clinically relevant product innovation, backed by strong marketing, can drive growth and share. In Interventional Urology, we're pushing ahead with our strategy to scale the business over time while sustaining strong profitability. The business is posting solid growth, and we continue to invest in sales and marketing, primarily in the U.S., where we have category leadership in women's health and in men's health. On top of my agenda is securing that we create value every day. We track economic profit across all our business areas and markets to ensure that we're deploying resources in ways that enhance economic value and maximize shareholder returns, while we build a company that's strong for the medium and long term. We've built this discipline over many years, and it's part of our culture. I can say this will not change.
I'm optimistic about our potential for future growth. I believe that we have a great foundation in our people, processes, and not least, culture, which I believe that you see reflected in our performance. We'll have many more opportunities going forward for me to update you on our strategy and our ambitions. Let me now move to our financial results. Please turn to slide four. Today, we delivered a solid start to the year with 8% organic growth and 8% growth in reported EBIT. Our full year guidance is unchanged. Revenues for the first quarter grew 9% in Danish kroner and amounted to DKK 4.3 billion. Acquisitions of distribution companies contributed approximately 1% to reported growth. Currency developments reduced revenue by less than 1%. Please turn to slide five.
In Ostomy Care, organic growth and growth in Danish Krone were both 8% for the first quarter. Growth continues to be driven by our SenSura Mio and Brava supporting products in larger markets like the U.K. and France. SenSura Mio Convex continues to contribute solidly to our growth. We continue to receive positive feedback from healthcare professionals and users who've trialed our new ostomy appliance, SenSura Mio Concave. We've now secured reimbursement and launched this product in 14 countries. We've begun launching the new SenSura Mio Baby and Kids portfolio. The portfolio sets a new standard for pediatric Ostomy Care products. Just like the new hospital assortment, this portfolio should improve our position when competing for tenders and contracts. Our SenSura and Assura portfolio growth was driven by a satisfactory performance in emerging markets, particularly China and Brazil.
In Continence Care, organic growth was 8% for the first quarter. Growth in Danish kroner was 10%. The SpeediCath ready-to-use intermittent catheters continued to drive growth. Especially the compact catheters performed well in countries such as the U.S. and France. We continue to see healthy growth in the SpeediCath standard portfolio, in particular in the U.S. and emerging markets. SpeediCath Flex continues to contribute to growth in key markets like the U.S., U.K., and France. SpeediCath Flex Coudé Pro in the U.S. was the largest contributor to growth in the Flex portfolio this quarter. Products continue to be very well received. It will be a key growth driver going forward. We will launch an upgraded version of SpeediCath Flex across all markets during 2019. In this upgraded version, we've improved the packaging to provide easier opening and reclose.
We've also removed aluminum from the packaging, allowing us to reduce our environmental footprint, and we are now offering the product in two different sizes. Our Conveen collecting device portfolio posted positive growth due to satisfactory growth in France and the U.S. Finally, sales growth for Peristeen products remains satisfactory, driven by U.S. and France. In Interventional Urology, organic growth was 9% for the first quarter, and growth in Danish Krone was 11%. The growth was driven by sales of Titan penile implants and Altis single incision slings in the U.S. We see a satisfactory return on the large sales investments we made into the U.S. urology business last year, and we continue to invest also this year. Our endourology business saw satisfactory growth in especially France and Germany. In wound and skin care, organic growth and growth in Danish Krone were both 11% for the first quarter.
Organic growth for wound care in isolation was 10%. The growth in wound care was driven by the Biatain Silicone portfolio in Europe. Markets like the U.K. and France post solid growth. The newly launched Biatain Silicone sizes and shapes portfolio continues to contribute meaningfully to growth. The U.K., the NHS's clinical evaluation team have recently published an independent clinical review of foam dressings from different wound care suppliers in the U.K. market. The evaluation covered several parameters, including packaging, opening, clinical use, and disposal, and Coloplast Biatain Silicone rated very highly in all parameters, but the highest in the most important parameters of absorbance and total fluid capacity management. We believe this speaks to the strength of our portfolio and 3DFit Technology.
The U.S. skincare business detracted from growth in the first quarter due to a high comparison base last year, and contract manufacturing of Compeed contributed positively to growth due to low comparative numbers last year, which followed inventory reductions in connection with the sale of the Compeed brand from Johnson & Johnson to HRA Pharma. Turning to our geographical segments, we saw organic growth of 6% for the first quarter in our European markets. The growth continues to be satisfactory across the portfolio of countries, and in particular, in key markets like the U.K. and France. Organic revenue growth in other developed markets was 10% in Q1. The U.S. chronic care business posted double-digit growth, driven by new product launches and the continued upgrade of the catheter market to hydrophilics. Growth rates in Japan, Canada, and Australia remain satisfactory.
Revenue in emerging markets grew organically by 14% for the first quarter. Markets like China, Brazil, and Middle East continued to deliver satisfactory performance. With this, I will now hand over to Anders. Please turn to slide six.
Thank you, Kristian. Good afternoon, everyone. Reported revenue in Q1 increased by 9% compared to Q1 last year. Most of the growth was driven by organic growth, which contributed 8% to reported revenue. Acquisitions contributed 1% to reported revenue, resulting from the acquisitions of Lilial and Incocare in Q2 last year. Foreign exchange rate had a negative impact of less than 1% on reported revenue, primarily due to the depreciation in Argentinian peso and Brazilian real against the Danish kroner. Negative development was partly offset by a favorable development in US dollar against Danish kroner. Please turn to slide seven . Gross profit was up by 9% to around DKK 2.9 billion. This equals a gross margin of 67%, which was in line with last year.
The gross margin was positively impacted by operating leverage, driven by revenue growth as well as improvement in production efficiency. The gross margin was negatively impacted by the launch of new products, where the production economy is not yet fully optimized, as well as wage inflation in Hungary, restructuring costs, and acquisitions. Restructuring cost in the quarter amounted to DKK 17 million, related to the reduction of production employees in Denmark. The gross margin includes a negative impact from currencies of 30 basis points. The distribution to sales ratio came in at 29%, compared to 30% in Q1 last year. The 7% increase reflect increased investment across business areas and several markets, as Kristian explained earlier. The admin to sales ratio came in at 4% of sales on par with the recent trend.
The 21% increase was mainly related to timing of expense within IT and legal. My expectation for the full year is that the ratio will be around 4%. The R&D to sales ratio came in at 4% of sales, in line with last year. The 15% increase in R&D costs reflects a higher general activity level. We continued to invest this year to ensure compliance with the new EU Medical Device Regulation taking effect in May 2020. We can confirm that the notified bodies that we use for the certification of our products have given us confirmation that they will continue to service all the products codes needed for our products under the new EU Medical Device Regulation. Overall, this resulted in an increase in operating profit of 8%, corresponding to an EBIT margin of 30%.
The EBIT margin contains a negative impact from currencies of 30 basis points. Operating cash flow amounted to DKK 772 million, compared with DKK 1 billion last year. The decrease is primarily explained by an increase in tax payments due to lower tax deductions this year in connection with the U.S. mesh litigation. Cash flow from investing activities was impacted by the capacity expansion in machines to produce new and existing products, as well as the establishment of production facilities in Costa Rica. CapEx investments amounted to DKK 131 million for the quarter, down DKK 65 million compared to last year, due to timing of investments. As a result, the free cash flow was an inflow of DKK 658 million against DKK 819 million last year.
Our cash conversion in Q1, calculated as a 12-month trailing average, was the 99%. With respect to the mesh litigation in the U.S., we have settled more than 95% of the known cases. We still view the provision as sufficient, and we are in the final phase of the mesh litigation. To date, we have paid out DKK 4.8 billion of the total provision of DKK 5.25 billion. We are following the developments around Brexit in the U.K. closely. We remain committed to the U.K. market, and we have built up to eight weeks of stock to ensure that we have adequate supply on U.K. soil should there be a hard Brexit.
I would also like to mention that the second part of the approved share buyback program of DKK 500 million is expected to be initiated in Q2. On a separate note, the board of directors established a nomination and remuneration committee in December. The charter was approved at the board meeting today, and it's available now on our website. Please turn to slide eight. For 18 and 19, we continue to expect revenues to grow around 8% organically and 8%-9% in DKK. Acquisitions are expected to contribute 0.4 percentage points to reported growth. Our guidance assumes stable growth trends across our region, as well as continued positive impact from new product launches and commercial investments. Our guidance assumes an annual negative price pressure of up to 1 percentage point.
As highlighted in the previous quarters, a reimbursement review for Ostomy Care and Continence Care is currently underway in France. At this point, we don't have any new information concerning the impact and timing of the proposed cut, but we continue to expect that the impact will be in the second half of this financial year. We also expect a smaller reform in Switzerland and pricing pressure among health insurance companies in Holland. The guidance in Danish kroner is impacted by the appreciation of the US dollar against the Danish kroner. The currency impact is based on spot rates as of January, 31st. For 2018-2019, we continue to expect an EBIT margin of 30%-31% in constant currencies and around 31% in Danish kroner. The EBIT guidance in Danish kroner is impacted by the appreciation of the US dollar against the Danish kroner.
The currency impact is based on spot rates as of January 31st. On our operating expenses, we expect broadly stable trends into 2018-2019. We will again invest up to 2% of sales in incremental investment into innovation and sales and marketing initiatives in the U.K., emerging markets, and the U.S. across all business areas. Most of the incremental investments have been initiated in Q1, and I expect a quarterly phasing of investments similar to last year. Higher growth from our new product launches still means pressure on the gross margin. As previously communicated, we continue to relocate manufacturing out of Denmark to Hungary, and we will close the factory in Thisted and reduce the number of production workers in Denmark by approximately 200 people in 2018-2019.
As mentioned before, we now expect restructuring costs of approximately DKK 35 million this year, compared to DKK 50 million last year. We expect high single-digit rate inflation in Hungary in 2018 2019. Overall, our expectation is that the gross margin in fixed currencies will be in line with 2017 2018. The Global Operations Plan 4 is on track, and we are slightly ahead of the closure of the Dragsbæk factory in Denmark, which is now expected to close in June of this year. The plan is still expected to deliver an EBIT margin improvement of 100 basis points in 2019 2020 and 150 basis points in 2020 2021. We continue to expect our net financials to end the financial year 2018 2019 at minus DKK 75 million, primarily due to hedging losses on the U.S. dollar against Danish kroner.
CapEx guidance for 2018-2019 is expected to be around DKK 750 million and is driven by investment in more capacity for new and existing products, as well as the factory expansion in Costa Rica and a new distribution center in the U.K. Our effective tax rate is expected to be around 23%. This concludes our presentation. Thank you very much. Operator, we are now ready to take questions.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. If you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, you may press the hash key. Once again, ladies and gentlemen, star one if you wish to ask a question. The first question comes from the line of Veronika Dubajova from Goldman Sachs. Thank you. Please, your line is now open.
Good afternoon. Thank you for taking my questions. I will keep it to two, please. Kristian, first of all, on your investment priorities, I noticed you kind of broadly outlined very similar outlook for Coloplast as it had been prior to your leadership. You did call out U.K. in your prepared remarks, and I'm curious if your thoughts on putting more investment in terms of the feet on the street or on the ground in the U.K. have changed at all, and beyond the U.K., if there are any other markets where you might be thinking about the investment opportunity slightly differently to your predecessor? Then my second question is a broader question in terms of your appetite for M&A in the very short term.
Given that you are still getting your hands around the business, how would you feel about undertaking any potential larger, potentially larger transactions at this stage? Thank you.
Thank you, Veronika. Two great questions. Let me start with the first one. If you look at the investment priorities and the program that we've had for the U.K., historically, we built the position in the U.K., which is it's our largest subsidiary at this stage. It's probably the best example that we have of the connection between great products and good service, and a good use of our Coloplast Care program that we bring both to clinicians and to local payers and national payers, and it's working. We are posting really solid growth in the U.K. It's a strong contributor to European growth. We have, if you will, the long lights on for the U.K.
We're, of course, worried about Brexit and what that means in the short term, but we think the needs in the UK market are not changing. We are in the U.K. for the long haul, if you will. The list of investment areas that we're looking at is not changing in the short term. We have a strong focus, of course, on the U.S., and the investments that we have made there, that they need to bear fruit. This year, the focus is on a significant expansion on continence care. We're also investing on the access side. You know, I want those investments to bear fruit. We will also continue to invest in emerging markets.
You know, Veronica, that's close to my heart. We've talked about that before. We have a portfolio of investments that are going into EM. It's a bit more volatile, but we think there are good growth opportunities. We'll continue that program, and we now have Andrew Robinson, who joined us a few months back, who's in the process of putting together the next portfolio of growth opportunities. I am certainly a strong proponent of all the work that we're doing around innovation. Like I said in my opening remarks, I'm a big believer in the combination of clinically differentiated products backed by strong marketing. I think this is what we've undertaken.
We still need to bring those types of product to market, and we will not relent until we do that. So if you will, at, in the broad scheme of things, those things, I believe, are right, and I also want the investments that we've already made to go in that direction and deliver. M&A, I think my message will be what we've communicated for some time now, that we're open to M&A on the wound care side to scale the business. We're also open to product and technology acquisition in the wound care space. We are constantly looking at that.
If you look at what we've done on the distribution side, historically, in the business that I've been leading in chronic care, we're now forward integrated in top five markets. I don't see us acquiring any more distributors in the short run. We have the platforms that we need to have access in the market and start building the service offering that we want to. I don't see that on the horizon. Having said that, we're also open to, if you will, pragmatic acquisitions in the chronic care space that are related to product or technology. I hope that answers your questions.
That's very clear. Thank you.
Thank you. Your next question, Kim, is from the line of Annette Ladefoged. Thank you. You're from Handelsbanken. Your line is now open.
My first question is to you, BBT Technology. I just want to be sure that this postponement solely relates to commercial strategic aspects, and having confirmed that all registrations, studies, clinical trials, et cetera, has been performed and production are ready. My second question is in respect to U.K. I can see, and you also commented, that you have increased inventories from six to eight weeks, and inventories are now up by DKK 132 million in a quarter, maybe also related to product launches. I'd like to know how much of this is related to, I would say, preparation for Brexit.
In connection with Biatain, are you seeing consumer patients sort of collecting or hoarding, for example, catheters or ostomy bags ahead of Biatain? Is there any sort of fear of not being able to deliver in this respect? Thank you so much.
Thank you very much for the questions. Let me start with the first one on BBT. This is solely a call on, if you will, getting the most out of this technology for the investments that we've made. We have some really exciting things in the pipeline around our future, our future catheter platform. Like I said in my opening remarks, my judgment is that we are significantly more likely to be paid for that innovation if we bundle these innovations and use them to prove a clinical significance or clinically significant better outcomes. It's not about bringing capacity forward or anything like that. This is, this is a judgment on how we are most likely to make that this technology will actually make a difference.
It is ready now, you should look at this as a vote of confidence in the potential of the technology, we want to maximize the likelihood that it's actually going to matter. When it comes to the U.K., it's correct that we are now at eight weeks worth of inventory. The movements that you can see in our inventory figures for group are only slightly affected by what we're doing in the U.K. They have little connection with that. Of course, U.K. is a big market, but still, in the big scheme of things for the group, it takes up not that much share. We are concerned about Biatain as everybody else is with the level of uncertainty that that brings.
We are monitoring very closely the ordering patterns of the consumers in our Charter healthcare business in the U.K. We cannot see any hoarding patterns at this stage. We cannot see that. We've looked quite closely. I'd also say, maybe as a closing remark to that you cannot rule out that there is some level of a few patients meeting their clinician and persuading them that they should have an extra prescription. We cannot see it in the ordering patterns on any significant scale.
Okay. Thank you very much.
Annette, just to.
Yeah.
To your inventory, question.
Yeah.
Yes, we, it has increased in our first quarter, and it's also backed up by a decision we have made to increase our tax stocks on the most strategic product categories.
Okay. Thank you.
Thank you. Your next question comes from the line of Oliver Metzger from Commerzbank. Thank you. Your line is now open.
Hi. Thanks a lot for taking my question. My first one is on the higher administrative expenses. You mentioned higher IT and legal expenses. Can you just give us a feeling how admin expenses would be on a normalized base, and to which extent some pull forward effects might lead to a lower level for in the next quarters? My next question is on the wound care business. It's the highest growth we have seen for many quarters, which was at the end, also, pushed forward by the low base in Greece. If I do the math from last year, I knew, okay, the impact was roughly DKK 25 million, but if you look now for the underlying development, excluding Greece, could you share with us how the underlying trend currently is there?
In relation to the first question, Oliver Metzger, around the higher admin expenses in our first quarter, as I mentioned, it's due to higher IT expenses and also due to higher legal costs. We have decided to upgrade our infrastructure within the commercial part of the business, where we are replacing our CRM solution with a new one, that is having some impact on our IT expenses. For the year, you should expect that the overall admin costs will be in the level of the 4% of the revenue, as I have previously communicated.
To your question on wound care, we are very pleased with the growth here in Q1. You are, of course, right that there is some effect from the comparative from last year. Really, we can see that this growth comes out of Europe. It's very much driven by Biatain Silicone. I am very encouraged to see how this development plays out across, I think broadly across markets, but in particular in the U.K. and France. I spoke in my remarks also to the study that was done in the UK. The product works, and it's driving our growth, and it basically exemplifies, I think, work that I really like, which is it's clinically relevant.
It's got strong marketing. The marketing is easy to understand, and the, our team is driving that quite hard. You've heard of this notion of 3DFit Technology. It resonates well with clinicians and consumers. We're pleased to see that. I'm not suggesting that we're going to see the same growth rates for the rest of the year. Our expectation is probably in the neighborhood of mid to high single digit. I hope that answers your question.
Yes. Yes. Thank you very much.
Thank you. Your next question comes from the line of Kit Lee from Jefferies. Thank you. Your line is now open.
Oh, thank you. I have two, please. I guess firstly, just on, SenSura Mio, I think you mentioned that it's been launched in 14 countries. Just wondering, what the adoption rate is? Right now, are you seeing, compared to the total market opportunity, are we still early in the adoption cycle, or do you think that that's gonna ramp up as you get more familiar with the commercial launch? I guess, secondly, on Peristeen Plus , I think you relaunched the product back in May last year. Just wondering, have you managed to switch all patients who have been using the previous version to the current version now, or are you still going through that process?
Thank you very much for both questions. Let me address them in turn. I'm assuming that first question is about SenSura Mio Concave. That's in.
The Concave version, yeah.
Yes.
Yeah.
I'm very pleased with the launch. The launch is a bit ahead of plan, and it is giving a meaningful contribution to our growth. I want to stress that this is early. The way you need to think of this category is that it's new. We, if you will, we're the only one present with a product like that in the market. It's a type of product that doesn't get used in the acute setting, but it will be when people return to the clinical setting and have issues, or they run into issues in their home, and this becomes a problem-solver type product. We look at this as a, this is a long haul.
To your question, we're early in the adoption cycle, but we are slightly ahead of our plans. We're quite pleased with where it is. On Q Day, yes, we're through the conversion, so it's the new product that we have in the market now exclusively.
Okay. That's great. Thank you.
Thank you. The next question comes from the line of Niels Leth from Carnegie. Thank you. Please ask your question.
Good afternoon. First, a question on your cost base in Hungary, and to what extent wage inflation in Hungary is a visible cost burden to your cost of goods sold during the course of this year? Second question on how we should interpret the margin expansion to come from your COP 4 production plan. Just to be sure, the 150 basis points of margin expansion that comes on top of the 31% EBIT margin that you're guiding for this year. Thank you.
Niels, thanks for your question. In the relation to your first question around the cost base in Hungary, we are also this year seeing an increase in the base inflation. We are expecting the high single digits, as we have seen also last year. We are expecting that development for this year as well. In terms of the other question around the COP 4 plan, we have initiated the COP 4 plan, and we are on track. One of the big initiatives is to close down the innovation site, and that will be closed down by the end of this year. We're also working on our efficiency agenda, and are also expecting to have a positive effect from procurement.
The impact from this plan, I'm expecting that that will be around 100 basis points in 2020, and 150 basis points in 2021 on the EBIT margin. That's my expectation from the COP 4 plan.
We should not put it on top of the 31%?
My expectation, no, it should not be put on top. We are going to, of course, evaluate additional investment as we move into 2020 and to 2021.
Okay, thank you.
Thank you. Your next question comes from the line of Yi- Dan Wang from Deutsche Bank. Thank you. Please ask your question.
Okay, I have three questions. The first question is more of a big picture one. I mean, when I look at Coloplast since 2012, you have invested substantially more in R&D and in distribution versus your key competitors. The impact of these on the market has been relatively modest to date. I mean, clearly, some of the investments have not been productive, and it takes time to place the investment, and for the benefits to come through. My questions are, what proportion of the investments that you've placed have been productive or are expected to be productive? Whether we should expect more meaningful returns from these investments in time? If yes, would that be a short, mid, or long-term prospect?
Short being, you know, one to two years, mid, three to five, and longer term means five to 10 years. The second question is on the SenSura Mio Concave product. Can you comment on where you are in the U.S. with respect to that product? Finally, on France, you've called that one out for almost all of your business areas as being a country where you're getting strong growth. Can you just put some color around it and why that is, and how we should think about the potential pricing reviews that is potentially going to come through this year? Thank you.
Thank you, Yi-Dan, for your question. Let's start with the big picture. I buy the premise that we've been investing more, but, I don't buy the premise that it hasn't had an impact. I, when we look at the growth numbers, we're quite happy with that, and we also believe that we're taking share. We also can see that we've upped, we've upped the growth rate over the last seven quarters. We think definitely it's meaningful.
The investments that we made on the consumer and distribution side, I know from having looked at this very, very closely myself, when you look at categories like accessories or when you look at our product launch uptakes, it has real impact that you are in connection with thousands of consumers and can inform them about the products that are in the market and available for trial and repeat use. It does have an impact. Having said that, our investment portfolio will always have, I think, a good balance of things that we do to drive growth in the short term and the medium and long term. You're right that a number of the investments that we made, particularly on the innovation side, they still need to produce.
We still need to prove that the ambition that we've set for the Clinical Performance Program, that we can actually deliver meaningful innovations that we will get paid for. You can also see a number of the innovations that we, sorry, the investments that we've made on the capability front will relate to market access and medical marketing. You know, those are things that have, I'd say, medium-term type impact. But I, of course, expect that this will lead to tangible wins with payers and healthcare systems around the world that will become willing to pay for the innovation that we bring to market. I think that's how I would present my perspective on your first question.
U.S. on Concave, we're just getting started. We launched this January, very early days to talk about how things are going. I think I'll have something more meaningful to say in the coming quarters. We think the product is important also for the work that we do in the U.S. My hope, of course, is that we can make this subcategory of the ostomy portfolio matter when it comes to winning contracts and getting us more shares, so we become more relevant for the play around the play around GPO access. When it comes to France, it's true, we've had a very strong start to the year. We are, we're quite pleased with that. It's broad-based.
When you take the lid off the French business and look how the growth is across regions, it's also, it's also broad based. I don't know, I'd have to say, to what extent there's some tailwind from anything related to the reform. I don't believe so. I think simply the business has good momentum. I hope that answers your question, Yi-Dan.
Okay. Thank you.
Thank you. Once again, ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, you may press the hash key. Your next question comes from the line of Maja Pataki from Kepler. Thank you. Your line is now open.
Yes, hi, this is Maja from Kepler Cheuvreux. I also have two questions, please. One, with regard to your long-term guidance and the question that Niels asked with the, you know, with the savings that you're expecting. If we look at, you know, how the guidance has been readjusted over the last two to three years, we've seen, you know, a bit of an adjustment on the top line growth, narrowing of the range. We've seen the EBIT margin guidance coming down quite significantly, with last year, you setting a floor at saying EBIT margin, long-term EBIT margin would be greater than 30%. For 2019, we're expecting EBIT margin of 30%-31%. My question is: How is your thinking about the business?
If you see the opportunity to invest into growth, would you be willing to go below this 30% EBIT margin floor if you would expect to see a growth acceleration in the long run? That's question number one. The second question is, I believe that next week we do have the advisory committee in the U.S., looking at, female health products, also specifically looking at mesh products. Could you give us a bit of a view of what your thinking is around that? What kind of outcome would you expect to see? Can you remind us how much of your group revenues female health mesh product actually represents? Thank you very much.
In terms of your question around the long-term guidance, our long-term guidance is to deliver 7% to 9% organic growth and deliver an EBIT margin of more than 30%. No, we are not going below the 30%. We have said that we are willing to invest up to 2% of revenue into additional investments, both commercial investments and also innovation, as we have been talking to earlier at this call, and that's what we are focusing on.
The guidance for this year is the standard currency is 30%-31%, and around 31% in reported currencies, as, I'm expecting to have some tailwind from the U.S. dollar.
From my side, maybe just a few remarks to your questions around the FDA panel coming up here on the 12th of February. Maybe I should just start by reminding all of you who are participating that this is standard. This is standard in connection with PMA approval processes, and the product that is in question here from our women's health portfolio is a product called Restorelle. That also requires a PMA, and we submitted our PMA in 2017. The panel's job is to advise and provide recommendations to the FDA that the FDA may basically choose to use or disregard. Our women's health business is 25% of our urology business, but the product in question here is less than half a % of group revenue. We believe that the risk is quite manageable. Hope that answers your question.
Yes, thank you very much. It's very helpful. Just to clarify that I got it right. 30% is the absolute floor for your margin, and that, you know, with that, you can actually also do all the investments you would like to do?
Yeah. The floor of minimum of 30%, in standard currencies, that is the floor. We believe that we have enough capacity within the LEAD20 strategy to go for the investments that we see, both commercially, but also within our innovation agenda.
Okay, understood. Thank you very much.
Thank you. Your next question comes from the line of Virendra Chauhan from AlphaValue. Thank you. Your line is now open.
Hi, Kristian, there's a couple of questions on wound care. One, can you reconcile me, could you reconcile the wound and skincare performance for me? You say wound and skin in aggregate was up 11%, wound was up 10%, skin, you say, was detracting from performance. I've been unable to, you know, figure out, like, how do all the three add up?
Could I ask you to speak up a little bit? We can hardly hear you.
Okay. Can you hear me now? Is it better?
Yes.
Okay. Can you reconcile the wound and skin care growth rates for me? I see wound and skin is up 11%, wound is up 10%, but you said skin get detracted from performance. How do the three add up? That would be my first question, and I have another for you post that.
All right. Let me take your question. Our wound and skincare franchise consists of, you could say, three businesses. One business is our wound care, and as we have said, the growth has been 10% in our first quarter. The skincare business, we actually had a negative growth due to the fact that we had a high baseline. As you might recall, one of our competitors had a backorder problems, and we benefited from that last year. Then we have the third business, that's the contract manufacturing, so of the Compeed, where we had a poor start last year because of some destocking in the market. That has benefited us this year. Overall, the franchise is growing in the first quarter of 11%.
Okay. That clarifies my questions. I have second one on the wound and skin care margin, particularly. I see that there's been some kind of, you know, at least a 1.5 percentage point change in your segment profitability. Is that anything in particular driving that, or, and should that be, you know, sustainable going ahead?
Yeah. What you're looking at, that's our segment operating profit. that includes-
Yeah.
Our direct expenses. It does not include our, you can say, group costs. We are not allocating that out in our segment P&L. It's true that we are improving, and it's very much due to scale, and it's also due to that we have, over the last couple of years, moved out our silicone production from Denmark to Hungary.
Okay. That's be from my end. Thank you.
Now time for the last question.
Yes, sir. The last question comes from the line of Yi-Dan Wang. Thank you. From Deutsche Bank. Thank you. Your line is now open.
Thank you. I have a little bit more time. I'll follow up on the answer you gave to my question earlier. The question, Kristian, is not really whether we've seen the investments delivered. They've clearly delivered, but it's just how much they have delivered relative to the size of the investments that have been placed. I suppose to boil it down to the question is: Should we see meaningful pick-up in the amount of benefit from these investments over time?
You know, when you run an investment portfolio like we do, it adds up to over the course of, let's say, I think you went all the way back to 2012, right? It adds up to quite a few dozens of investments. Some of the, you know, some of them work better than others, clearly, and some of them pay back a lot more effectively than others. I would like to believe that we've become better at investing, certainly in the areas that we participated in for a long time. You know, when we make mistakes, we try to learn from them. I don't think I can confidently rule out that we'll make a mistake in the future. I think that that's what that will happen.
We continue to invest and, you know, the core of the, of the future program, Yi-Dan, does entail, you know, some uncertainty when it comes to building products that are clinically differentiated. That I think, I look at that is the cost of being a market leader and wanting to develop the category and beat the category to a place that it hasn't been. You know, of course, I would like to attach a high probability to that, but anyone who's looking at it from the outside will be skeptical until we deliver, and I also understand that.
The, you know, my dialogue with our teams is that we need to prove that what we talk about and what our strategy is actually matters, and of course, the ultimate proof is growth. Then growth is will be the proxy for whether, you know, we get the price pickup, and when we get clinicians to try, use, and hopefully love the product. Will we see a meaningful pickup? That's certainly our hope and what we're working toward, but, you know, the guidance remains the guidance.
Okay. Thank you. If you, if you look at the fundamentals of the industry, and the amount of investments you're placing, the growth that you hope to get, is the industry at a point where the returns from the investments you're placing are diminishing, essentially costing you far more to get the growth that you want going forward? Or is it a case where you make the investments, you can get very nice premiums for the clinical relevant products?
Yeah
That you can get, and therefore, the returns are comparable to what we have seen in the past?
This is probably one that we can debate at further length when we see each other in London. My personal view, Yi-Dan, is that this is. At this level of discussion, this becomes almost too conceptual to be meaningful. The answer is, it depends. If we strike a home run on one of the innovations that we're trying to build with clinical differentiated products, it will matter a lot. Of course, we have to strike a home run. There's nothing that's automatic about that. I cannot meaningfully attach a probability to it.
It's not our view that the investments that we're looking at now have a fundamentally different payback than what we've done before. When we look at all the you know, what I'd call the marginal investments or incremental investments, they look largely the same. Of course, when you start setting a new standard for clinical performance, you increase the level of uncertainty.
Okay.
I think that's how I'm gonna answer it now, and then we'll pick it up again when we see each other in London. All right?
Be great. Thank you. Thank you.
Okay. Thanks a lot. Thank you, everybody.
Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you all for participating. You may now disconnect.