Good morning, ladies and gentlemen. Just a few words about the fact that today, we will present the Rexel Fourth Quarter, The Full Year 2019 Performance. Laurent Del abarre, our Group CFO, is with me, and we will do our best to make it as clear as we can. We will start with a look at the highlights of our Q4 and full-year performance, by the way, which marks Rexel's third successive year of solid results. I will also touch on the great progress we have made on key initiatives of the strategy plan for today and for the future. Laurent will detail our performance by geography and our financials in Q4 and the full year. I will come back and conclude with a look at our priorities and the outlook for 2020.
After that, we will take all your questions and be as explicit as we can. Let's start together. 2029, this is the third year, a successive year of solid results in line with the plan. You can imagine that we are very satisfied with that. If you go to the next slide. In a nutshell, what does it mean, 2019? First of all, obviously, you have seen it, 2019, we have achieved the guidance in a more volatile year than we expected. We got the trade war with some unexpected effect and longer than we thought. It went from margin squeeze to rapid decrease in industrial demand in some key geographies, U.S., Germany and so on. We got the up and downs around the Brexit-related issues with a certain subdued environment.
These are few elements of the volatility which we were facing, I'm glad to say that we were able to do it by reacting fast to each of them. Second, all the inflection of the business model initiated in 2017, which is, may I repeat so, our organic development, organic growth, has translated into further sales growth outperformance, earnings growth, and value creation. We crossed the line of the €1 billion organic sales since December 2016. For me, it's a great achievement because it's like having added a large country to our activity. It's the equivalent of having added a Canadian activity of Rexel today. We got a double-digit growth in EPS since 2016. We got the ROCE above the WACC for the first time in five years, which is in term of value creation, the indicator which we needed to reach and to continue to make grow.
Obviously, we have, as promised, continued the improvement in the debt net ratio. These are the metrics by which we would rate as being a value creation, continued improvement, and preparing the future from the net debt ratio that now we start to have. We have generated strong free cash flow and the free cash flow conversion at 62.5% after two years of investment in inventories and restructuring in turnaround countries has been reached, and we are back to the more historical numbers. We have financed an increasingly data-driven journey, which has been already financed in the past and will be part of our 2020 and beyond execution. Obviously, we continue some active portfolio management. As you have read, we found an agreement to dispose of Gexpro services in the U.S. as it was signed in December.
If you take the full year 2019 guidance achieved on the page after, on the slide that you have seen now, to me, it's a continued growth in top line and growth in margin. It's not one at the cost of the other. Like previously, it's the two together. This is the formula by which we continue and we work every day, generating profitable growth, which obviously result in an improvement in EBITDA and also the recurring net income. At the same time, as I told you before, we are deleveraged by 20 basis points improvement. It is before the disposal of Gexpro Services, which would add a 10 basis points reduction to our indebtedness ratio when it comes to the final closing.
On page five on the slide, allow me to say and commend these three years of successful execution, that I am glad to say that organic growth was the right choice to make. That thanks to the team, and I thank them here in public, it was also a good execution. Doing so, it was a value creation with the ROCE coming above our WACC line. It is all execution measurements in same-day sales growth, in EBITDA margin, and in recurring net income. It is also the internet ratio coming down, which allows us to prepare the future. During previous meetings, exchange with all of you, we were talking about perform and transform. In talking about the perform, what does it mean? It means here, more than ever before, a leaner and more agile organization.
It is also the efficiency of our models as we have moved many bricks in the past. Here you have the cost adaptation to offset the industry slowdown in the U.S., which is an additional reactivity capabilities where we had to gain salaries and benefits, productivity to cope with what has happened in the second part of 2019. Efficiency of processes is a key matter for the future and for today. We are reducing the product returns, reducing the claims with our customer, reducing the inventory obsolescence that may come from inadequate inventories. We are reducing the risk by having a better pricing system. These are key elements of a distribution B2B company where a lot of efficiency is being produced. Obviously, this was something that came from many years of experience gathered. We are increased logistic productivity.
Here you have two examples through Sweden and Canada, but it is everywhere that we continue to improve the processes, the setup, the automation in order to get this done. More related to 2019, the leaner back office through automation, back office automation processes, one of them being end-to-end solution like email to EDI. Email to EDI, for example, was a way to free up resources in order to reallocate them. Resource reallocation was not in the DNA of Rexel. We are starting doing it so that all the digitalization process is aimed at reallocating resources to where we have a better leverage out of it. This is not just in certain countries, it is across the board. If you look at the automation in China, we have robots doing back office now tasks.
This is a good example of how we continuously manage our organization in order to bring the cost down and the allocation to the front. Which brings me to now the front. The front, this is as an example, how we wanted to be close to our customers, to good for the customer stickiness. In 2016, we had no real measurement how good we were in our relationship to the customer. The customer base is broad. It's 600,000 active customer around the world. They are not unique. They are quite different. We needed to understand them. They are in different segments. The willingness to pay is not the same. The requirement for the service is not the same. Therefore, we needed to understand all this detailed approach.
In 2019, we initially, the Net Promoter Score measurement, which is a key driver of the process design and the efficiency by which we serve them. It's not a measurement how good, if they are pleased with us, it's also how cost efficient we can be in order to serve the different demand. In 2019, it was so systematic, and we have an ongoing Net Promoter Score measurement so that now it comes live in 18 countries. It's a key driver of our processes of today and by the way, a fundamental piece, our digitalization of tomorrow. In 2020, it will be what we call full-fledged measurement, with also internal feedback so that we have a way by which we collect feedback in order to be like a machine learning. It's an organization learning and a machine learning capabilities because much more data being collected.
It's also how to be a data-driven entity, serving the customer and increase our Net Promoter Score because we become a very customer-centric company and less just relying on an efficient logistic capability. How does it translate? You see it on page eight. It translates also that the transform journey, the perform and the transform, when they will come together, will be even more efficient. Here you see already that the transform is providing performance. Who would have said a couple of years ago that at Rexel, we would have every second in Europe and every 30 seconds in the U.S. a digital order?
Who would have said a couple of years ago that we would dispose of two digital hubs, one in the U.S. and one in Europe based in France, with 150 data and digital experts in order to cope with the data handling and the huge amount of data in order to make better decisions? I don't want to go around this EUR 2.4 billion digital saves, which is going up almost 13% up. I just want to highlight for all of us that becoming a different company is now a reality when you look at all of this, because this is only a step. In certain countries, it's even more advanced. In others, it's catching up. This is a direction to go. We are leveraging machine learning, artificial intelligence to reduce customer churn. We have this solution deployed in six countries.
This year, it will enable to save up to EUR 30 million in annualized revenues. email to EDI is live in six countries. It will be expanded to nine, 73,000 digitalized orders are being passed through. It frees up time and it increase quality because machine don't create mistakes. These are the change which are also behind the results from 2019, There are more to come because as you can see, this is the beginning of this transform which brings perform. Now, I will come back with more on this. For the time being, let's go back to the financial review of the year and the Q4, I pass the work to Laurent.
Thank you, Patrick, good morning to everyone. Let's cover now the financial part of our performance. I will start on slide 10 by commenting our full year sales performance before looking afterwards at our Q4 number. Our full year sales stood at EUR 13.7 billion in 2019, up 2.8% on a reported basis and up 1.4% on a same day basis. Restated from branch closure in Germany and Spain, same day growth was significantly stronger at 2.4%. The calendar impact in the year was neutral, while the scope effect was a negative 0.4%, resulting from the sales in late 2018 of our non-industrial activities in China. As shown on the right-hand side of the slide, since the start of 2017, Rexel has added more than a billion EUR of sales on an organic basis, with all three of our geographies contributing.
That's a big number, as already commented by Patrick, equivalent to a country like Canada. On slide 11, you see the geographical breakdown of our sales, both in Q4 and in the full year. In Q4 2019 specifically, same day sales were down 0.5% due to the lower industrial demand in key geographies. It can also be explained in part by the fact that we posted 12 consecutive quarters of same day sales growth, so we start to face an increasingly challenging comparable base over time, as shown on the graph on the bottom of the slide. In addition, the last week of December was particularly low, but we were reassured by the early sales trend experienced in January 2020, gradually returning to a more normative level above 1%.
By geography, we posted growth of 0.3% in Q4 2019, both in Europe and in Asia Pac, while North America was down 1.8%, mainly due to a drop in the industrial end markets. Let's now look at each region, beginning with Europe on slide 12. Sales in our biggest region, accounting for 54% of our sales, stood at EUR 1.9 billion in the quarter, up 0.3% on a same day basis, mainly driven by France. Growth in our home market, which represents more than one-third of our European sales, was up by a very solid 4.6%, with good momentum in project and HVAC segments. We gained market share both in Q4 and in the full year. This growth reflects improved customer satisfaction as measured by gains in our NPS, enabled by increasing productivity and efficiency.
Our digital initiatives were also a key contributor to growth. Digital now accounts for 18.8% of French sales, up from 14.5% one year earlier, as we continue our evolution towards a data-driven company. We also saw positive trends in the Benelux countries, which grew by 3% in the quarter, while Scandinavia was down 2.5%. In the U.K., sales dropped by 7.4% in a challenging market. Sales were also impacted by greater customer selectivity, accounting for a fee - 4.2%, and 11 branch closure, which accounts for - 1.6%. Lastly, in Germany, sales were down 7%, mainly due to lower industrial demand. Activity in 2020 should benefit from the new linear organization we have put in place, the better service configuration, and the expansion of our customer base.
On slide 13, we turn to North America, where sales stood at EUR 1.3 billion, down 1.8% on a constant and same day basis. This reflects divergent trends between regions in the U.S. and Canada. In the U.S., sales in Q4 were down 2.7% due to single-digit decrease in both the industrial and commercial end markets. Conditions were especially challenging in the oil and gas segment, which was down by 10%. The light commercial and residential end market, on the other end, posted good growth, up a high single digit. We benefited from our investment in inventory, sales rep, and branch opening or renovation.
We opened 57 branches in the period 2017-2019. Branch openings had a positive impact of 1.1% in Q4 and 1.2% in a full year basis, in line with our target. In the U.S., we also announced in late December that we signed an agreement to sell our Gexpro Services business to LKCM Headwater Investments, Edgewater Investments. The activity we are disposing of represents around $260 million in sales, and around 400 FTEs. With this sales, we are refocusing our U.S. activities on our core electrical distribution business. For your model, we anticipate the closing to take place in Q1 2020. In line with our indication provided in the capital market day in 2017, Gexpro Services profitability is above country level and stand at circa 7%. On the other side, Canada saw good growth in Q4, up by 1.8%, driven by robust business with large commercial contractors and industrial customers.
On slide 14, we take a closer look at our performance in the U.S. by region. As you can see on the slide, we had a contrasting performance with still very good momentum in our business in the Northwest and California, where the proximity business performed strongly. Other region, more industrial one, recorded declining sales in Q4 on lower demand, mainly as a consequences of the trade war. We complete our geographic overview on slide 15 with Asia Pacific, where our sales were up 0.3 on a constant and same day basis, and up by a strong 3.2%, restated for a large project in the Middle East that boosted our Q4 2018 numbers. In the Pacific, sales were up 3.3% with a solid growth of 5.9% in Australia. This was driven by market outperformance in the residential market and good momentum industrial EPC.
This more than offset lower sales in New Zealand, mainly due to industrial and commercial markets. In Asia, sales were down by 2.5% or up 3.2%, restating from this Middle East project. China was up 1.2%, despite the more challenging environment. India was up in double digits, supported by strong automation sales. This allow us to mitigate the negative contribution of this Middle East project. On slide 16, we turn to our full-year profitability with our adjusted EBITDA bridge. Adjusted EBITDA was up 5.1% to EUR 685.1 million. Margin stood at 5%. Our 18 basis point improvement in the full year on a comparable basis is explained by volume and productivity gains and the first benefits of our digital investment, which more than offset cost inflation and investment for growth.
As you can see on the waterfall in greater details, the 49 basis points for productivity gains, mainly extracted in Germany, Spain, and U.K., more than offset our 34 basis points of cost inflation. The minus 25 basis points from investment for growth is in line with our commitments and illustrates the acceleration of our transformation. Our priority is to further improve operating leverage while maintaining investment in IT and digital. On slide 17, we turn to our profitability by region. Overall, with adjusted EBITDA up EUR 685.1 million in the full year, our adjusted EBITDA margin grew by 5.1%, fully in line with our target. The 18 basis points increase in margin comes from Europe, where adjusted EBITDA margin was up 25 basis points to 6.1%.
Gross margin improvement in France, greater business activity in the U.K., and positive country mix allowed us to offset the cost of our digital investment and to a lesser extent, higher transportation costs. North America's adjusted EBITDA was stable at 4.4%, as better pricing management was absorbed by our digital investment, cost inflation, the negative channel mix in Canada, and higher average number of FTE in the U.S. As you know, cost initiatives in the U.S. were initiated since mid-year, resulting in a lower number of FTE at the end of 2019 compared to the end of 2018. In Asia Pacific, adjusted EBITDA was down six basis points to 2.3%, reflecting lower profitability from a negative volume impact in New Zealand and investment in China to enter tier 2 and tier 3 cities.
Our corporate cost stood at EUR 22.3 million, an improvement over the EUR 30.9 million in 2018, with higher reallocation to creation of corporate hosted expense and lower corporate overheads. We anticipate corporate cost to be circa EUR 30 million in 2020. On slide 18, we look at the bottom line part of our P&L. Let's start with our adjusted EBITDA of EUR 685.1 million, up 5.1%. Reported EBITDA at EUR 677.5 million was up 7.1% year-over-year, thanks to positive currency impact. Other income and expense amounted to a negative EUR 176.8 million, including restructuring costs for EUR 32.6 million, mostly related to the end of the restructuring in Germany, Spain, and additional restructuring in U.K. and U.S., as well as goodwill impairments in Norway, New Zealand, U.K. and in Finland for EUR 118.1 million.
It also includes asset impairment related to our agreements signed to dispose of Gexpro Services and an export activity in Spain. For 2020, we anticipate restructuring costs to be close to our normative level, around EUR 45 million-EUR 50 million. Our net financial expense stood at EUR 165.3 million, reflecting a reduction in average net interest on our gross debt to 2.62% as a result of our active refinancing activity. Excluding one-off and Forex, our underlying financial expense stood at EUR 96.6 million versus EUR 97.7 million in 2018. On a similar basis and excluding one-off, we anticipate for 2020 our net financial expense to be close to EUR 90 million.
We saw a drop in our income tax to EUR 117.3 million, with an effective tax rate of 36.5%, impacted by the non-eligibility of our goodwill depreciation and asset impairment, offset by the release of a EUR 29.5 million tax reserve after a positive legal judgment. For 2020, we anticipate our normative tax rate to be between 32% and 33%. As a result, net income was up by a very strong 50.3% to EUR 203.8 million. Our recurring net income grew to EUR 341.2 million, up 7.5%. On slide 19, we turn now to our free cash flow statement. Over the year, our free cash flow before interest and tax was EUR 461.6 million, up a very solid EUR 110.3 million, mainly as a result of trade working capital management, which stood at 12.6% of sales versus 13% in 2018, thanks to better receivables and stable inventories.
As a consequence, our conversion of EBITDA after lease into free cash flow before interest and tax stood at 62.5%, marking a return to our historical normative level. Please also note that net CapEx was EUR 116.5 million, with a CapEx to sales ratio of about 0.9% and circa 62% of CapEx related to IT and digital. Our net debt was reduced by EUR 68.8 million to EUR 1.9 billion. Our net debt to EBITDA after lease ratio stood at 2.47X as at December 30th, 2019, down 20 basis points year-on-year. In 2020, we anticipate our free cash flow conversion to be closer to 65%. On slide 20, let's take a closer look at the breakdown in maturities of our debt.
The chart shows that we have no short-term maturity on our bonds, with no significant repayment before 2024, following the 2017 and March 2019 refinancing. Our average maturity has been extended to 4.2 years from 3.8 years last year. Our debt can be split between securitization backed by our assets, bonds, and a senior credit agreement. Our active financial management is reflected in the average effective interest rate on gross debt, down 18 basis points year-on-year to 2.62%. We also maintain strong financial flexibility with liquidity of around EUR 1.3 billion at the end of December, including our ongoing senior credit facility, which was recently extended by a year. We also remain attentive to market opportunities to further enhance our financial structure. On slide 21, we present our proposed dividend for 2019 financial year to be paid in 2020.
Rexel will propose to shareholders to increase the dividend by 9% to EUR 0.48 per share, EUR 0.04 higher than last year, payable in cash in early July 2020. This remains, of course, subject to approval of the annual shareholder meeting to be held in Paris on April 23rd. This dividend represents a payout ratio of 43%, in line with our policy of paying out at least 40% of our recurring net income. It offers a 4.1 yield based on yesterday's share price. With this, let me now hand back to Patrick to discuss our 2020 priorities.
Thank you, Laurent. What about 2020? If you look at where we come from, we have spent a lot of time in solving performance issues. You remember that we had two ways of looking at our journey. Addressing, focusing, using resources, capital allocation to do the U.S. turnaround, to get some assets disposal, to do pricing and margin reestablishment, Germany and Spain turnaround, et cetera. At the same time, we are paving the road to the future with some digitalization, robotization, proof of concept, some data-driven attempts here and there in order to figure out what was the potential to have and write a different company profile. 2020 will be the year when perform and transform converge to become one action, and the performance comes and will come more and more from transformation, of which digital transformation is a key driver.
We will no longer split the perform and transform approach because the perform components is a way by which Rexel will generate the further performance increase. If you go to the next page, in shifting business model that we've initiated, we are now at the change because it has resulted in a different value creation model. We move, if I can say so, from a former logistic heavy focused capabilities as a box mover, toward a customer-facing with an enriched offer of services and solutions. Rexel today, and you could look the same on the M&A fueled model, and we have demonstrated that we were able to get a good organic growth lasting development company. We were more, in many cases, below market growth.
Now we try to reinforce, and we succeeded in many places to reinforce how to capture attractive business and environmental mega trends, because it's a good business we are in. Rexel today becomes a different company with a different mix of leveraging factors. Rexel of yesterday, as I say, was more logistic capabilities recognized and depending on M&A to grow, but resulting also in fragmented DNAs, which was not the base by which we could go to digital, because digital is global DNA. We have changed that to the point that today we are a customer-focused company with an enriched offer of solution and services. We are increasingly data-driven and digital, reducing errors and inefficiencies, digital reinforcing customer stickiness, digital multiplying customer interfaces, and looking for personalized value creation at customers and with customers.
We work hard at serving and capturing customers for what they need the most, reliability that we anticipate for them, safe innovation solutions at adequate value and cost. What does it mean for 2020? We will capitalize on one end on our past, which should bring us, which is on the page 25, which will bring us self-help initiatives as well as get first results and improve profitability out of strategic initiatives. If you look at the ramp-up of the branches, if we look at leaner organization in U.S., but also in Germany, but also now in the U.K., these are the self-help initiative that will improve our profitable growth capabilities.
At the same time, in the self-help initiatives, we are already developed in 2018 and 2020, what we are rolling out in many countries, artificial intelligence-assisted customer churn, which now is in the hands of thousands of sales reps, image VDI in the commercial back office, so that we are faster in order to transform without quality issues any email to EDI, automatic order processing capabilities now being rolled out in six countries and to be extended further. These are elements by which we will benefit in 2020 from internal developments that will help now getting more sales at profitable level. It's all about serving the customer better with agile points of delivery. We have now new proximity in our hands, both in the U.S., in France, and it will roll out further.
We have the track and trace capability so that everybody can know at any time from a mobile in many countries and very soon around most of them, where is my order, when it should reach me, and increase our service level without having to talk on the phone, without having to find out where it is, without having to have a customer. By the way, it relates to what I told you before, Net Promoter Score. We have also new ways of improving our even very good models of today by entering into new area of excellence and deployment of branch assortment through artificial intelligence, helping the marketing to have exactly at every point what most of the customer needs. Getting the right pricing model through artificial intelligence, predictability of the willingness to pay to be now introduced in Germany.
We use data to switch from reactive to predictive sales actions. The next best offer, what is the customer should be proposed as the next best offer in order to increase our more SKU. You remember more customer, more SKU. This is how to leverage artificial intelligence capability to reach the more SKU. 84% of sales today are covered by customer churn at the end of next year. The rollout is fast, and I count a lot on this. Just to give you a good sense that would we have paved the route for start to be self-help, but also strategically a differentiator in the marketplace. We are de facto designing the next model in our most mature countries. France is an efficient model, Benelux is an efficient model.
The Northwest in the U.S. has always been a very efficient model, and just to name a few, and we even these ones, we change to the point of making them even more solid for the future. Obviously, in doing so, we leverage the scale effect in the biggest country. In doing so, we also get the set by which we will leapfrog the transformation in the country where we have paved the road by rationalization, closing branches or restoration like U.K. and Germany, and where we are bringing the new approach so that it becomes faster, a very efficient contributor to our improved results journey. Why do I tell you this? It's because if you look at the next one, France, it designs the next model. We talked a lot about our past in France, how solid it was, and so on.
We have seen that in 2019, they succeeded in having a good year above the market trends. Using AI to better predict customer needs, enhance customer satisfaction, increase customer stickiness are not just buzzwords. They are real ways of working data in the end, on a mobile, on a tablet, on a PC for everybody making daily decisions compared to yesterday efficiency. This is what is going throughout the organization. In doing so, we could also leverage new ways of doing business. Containers in good locations, lockers with digitally managed. We got 24/7 pickup rooms. Now you have the numbers, it's 100, obviously, it's only the beginning. There will be many more.
Allow me to say that we also, in term of software and services, if you remember the Energeasy Connect capabilities, we have sold in 2019, 10,000 of them, and we have reached the install base of 25,000, which makes us a very, probably one of the most distributed software and service management systems in the country. Just to give you a sense for what's going on in such countries, on the U.S. obviously on the page after, I'm so glad that with Jeff Baker and his team, we are able to roll out the best of what was developed, for example, in the former Platt for the one who remember the quality of this acquisition, which now becomes a standard way of going the proximity business around the states. We have done a lot on this.
They work very hard at getting the right metadata management system to make all of this compatible, which now we have a good base to foster Salesforce adoption of all analytical tools, Salesforce, Power BI, artificial intelligence tool, like the churn that I mentioned before. The next 18 months, obviously, we will see a major efficiency upside through the Salesforce in the U.S. I'm so glad also because we've invested, as part of what you see in our investment. There are 50 data and data science people now in a platform in the West Coast as much as we have on the other platform here in France. Therefore, this company, Rexel, is working for the digital on two legs, one in the U.S., one in Europe, both exchanging. It's one company, it's one set. It's not one benefiting or not from the other, like in the past.
When it comes to a more difficult situation of the past, Germany and U.K., and we now choose that after the restructuration, the path was not to go in the conventional way. The path is to go by cross the digital bridge and leapfrog so that we enter automatically now, like some other countries have been doing in other businesses, leapfrog the conventional step and go to the digital way. In Germany right now, we have changed the total Executive Committee in order to allow for that. We have leveraged analytical tools, the initiative deployed to improve internal efficiency. There are large users of email to EDI. Deploy segmented artificial intelligence pricing model for further rollout in Europe. There are a place where we have tested a little bit outside.
We have implemented there and the proof of concept is being done there, and now it's being rolled out so that they could leverage their pricing, artificial intelligence pricing adaptation capabilities. Just to show that conventional countries in the conventional, in the footprint of Rexel could become leaders also in the digital transformation. United Kingdom, we have done the closure of the branches in 2018 and 2019. We have changed now the organization. We have an efficient new team, some with long experience outside of the U.K., of which the two leaders, one being the CEO, which is the former Platt leader under Jeff Baker, and has been the head of Northwest, has come to the U.K.. Also, the commercial director, who had experience in Sweden, they went then to Australia, and then he has taken the challenge working with Edgar Ponte, the new CEO.
He has taken the challenge to reconstruct fast the U.K., and they will use a lot of the digital capability, track and trace, digital sales through the web of the rest of the group, and so on. Therefore, I will not repeat the journey expansion to the U.K. because it will be a different set of capabilities, but they both leapfrog through the digital bridge. Which brings me, this is a snapshot to tell you why, in 2020, we believe in having an outlook based on. First, we are in a good business. They are fundamental that sustain the electrical equipment we are in. Energy efficiency, IoT, safety norms, greater demand for carbon-free products, just to name a few, are really making the business we are in probably less cyclical than others, because there is a sustainable demand growing every day in many usage and many sectors of the economy.
Second, we will continue to push and be ahead of the journey in our 2030 environmental roadmap, after 2020 objective achieved ahead of plan on the environmental performance. It's not something to comply with. It's an element of the DNA. As much as we do digital on one hand, we do this on the other hand. It's a way of life. I'm pleased to report on these numbers. They are the results of so many thousands of people of the organization, that they will continue to be managed in this way actively, because it's another piece of the new DNA. Capital allocation is also now becoming a standard way by which we look at the business. What is needed for the organic growth to fund the core business, what is to respect our shareholders through a dividend policy, predictable, solid, and as it has been described by Laurent.
To maintain our view on acquisitions like being very selective, fueling just for the purpose of being bigger, if it would not serve the digital path, the environmental path, we would not do. In other terms, I'm looking at focused digital M&A or services or digital capabilities and always respecting our other components. Obviously, we continuously, I think we have proven the case, to deleverage further, and whether it is done by the good management of our capital allocation or opportunistically, depending on the release of some assets not strategic to our future, like Gexpro Services. Therefore, the 2020 outlook. Given the benefit from our initial digital investment strength and our conviction that Rexel's evolution towards a data-driven company will reinforce Rexel's positioning and contribute to market share gains and margin improvement. That's the overall theme.
The priority will be to continuously improve our adjusted EBITDA margin and free cash flow generation notwithstanding the challenging environment, it's a fact, while continuing to invest in digital transformation, it's a priority. It's not an option. In this environment of low sales growth and with a more challenging base effect in H1 because of 2019, we target for 2020 a comparable scope of consolidation and exchange rates. An adjusted EBITDA growth of between 2% and 5%, a free cash flow conversion of circa 65%, and further improvement of the indebtedness ratio. The formula is written here. That's how we are entering or we have entered into 2020, and that's by these lines and priorities that I have described before that we will generate our results in 2020.
Now to be more explicit on the new DNA, new company, new data-driven and its expansion and rollout, and how do we get into beyond 2020 ambition, we will present during in the course of 2020 on our next capital market day. I thank you for your time. We will now take all the needed time for your question and in order to bring all the clarification you need. Thank you very much.
Thank you. Ladies and gentlemen, we'll now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your first question comes from the line of Lucie Carrier. Please ask your question.
Hi, good morning, gentlemen. Thanks for taking my question. I have three questions, and I will go one at a time. The first one was actually more on the guidance. I see this year you are not providing a top-line guidance, but speaking of a low-growth environment, but still targeting an EBITA margin expansion from, if I understand well, the guidance. Can you maybe explain to us or maybe give us some of the building blocks on how we could potentially build from, let's say, no growth, maybe slightly negative growth or slightly positive growth to this margin expansion? Historically, this is not what we have seen at Rexel, and you are still talking about more investments in digital. Are you able maybe to help us calibrate this, or what gives you the confidence that that can be achieved?
A good calibration would require a good top-line vision, which is the only thing that nobody can bet on today. Therefore, we had a lot of intensive discussion about the top line. The top line can be ranging from below zero to much better, and it depends on elements which are totally out of my capability to predict. Collectively, we are on this line. The only thing we are sure of is what do we have as internal leverage in order to work on our EBITA. We have the margin, we have the pricing, and we have the cost structure. We have the prioritization of doing certain things or not. Meaning all initiatives on pricing will continue. All further initiative on costing, we are ready to take depending on how the business could be.
All initiatives on getting more out of the data-driven company, eliminating errors, getting better assortment, getting the right price for everybody, getting the reduction of returns, the reduction of claims, we will continue because every day they make our bottom line better and more robust. In clear terms, should nothing come from the market, everything should come to match this guidance from our internal decisions and our further absolute priority to be a data-driven company, to have data-driven employee behaviors, to have data-driven stickiness to the customers, should it be done at having less of other choices. I don't want to be paranoiac. If it would be more radical than anything has ever pushed it today, nobody can predict.
I'm ready to go for whether it's slightly negative or positive, because it will just be even forcing us more on the choice that we have been taking already in second half of 2019, and we manage monthly with all our 25 CEOs of the world, and that we have decided to be really acting along the line I have just mentioned to you.
Thank you very much. My second question was around Europe, not so much on the EBITA margin, which is up, of course, but if we look at the gross margin, which is up quite sharply, actually, over 50 basis points, I was wondering if you could give us some color on what has driven this improvement. Is it actually really the impact of digital and the increased penetration of digital, or is there other factors in play?
Laurent wants to comment on this.
Those are different elements. They are the self-help of our organization in Germany. There is a country mix inside. There are some supplier concentration, which drive for better pricing and better purchasing conditions. We have also a couple of pricing initiatives in a couple of countries, which also help us to improve the front margin.
We feel that in the lower performing country, going for the right way of acquiring market share in terms of mix, supplier concentration. It's not taking a customer at any cost. It's taking a customer that feeds the supplier massification that allows to get better commercial margin. Around Europe and even in the U.S., we have introduced a drop-through measurement, by which an incremental sales should have a higher drop-through and contribution to the operating leverage. Management starts to do this, to select, to develop, to gain, using this as a lever so that we improve the bottom line.
Thank you. Just my last question was whether you were able maybe to comment on how you see the current consolidation in North America among some of your competitors. Is that something that you see as a risk? I guess from your comments, it's clear you don't really want to follow something similar, but how this is impacting your industry?
I will tell you, these last two, Anixter and Wesco, knowing how often people have tried to marry us to Wesco and how often we have been looking ourselves at Anixter and de facto, and you remember the years where it was on the agenda, and everybody talked about it. It's obvious that there is always a minimum of good sense when these two come together. It will not take market away from us. They had potentially are not good reasons or bad reasons. I will not comment on this. Will this affect us severely? No. First of all, the market has a huge potential for further consolidation.
Second, there were big competitors, let's put it this way separately, and they will remain competitors even if they have combined, given the fact that one and the other have different products offering, that putting them together or whether they were independently going to the same markets before will not change radically this. There were a few other acquisitions in the U.S. where we looked carefully at whether there could be a game changer. If somebody acquires another one, but these ones we couldn't anyway, because it would have been refused by the antitrust authorities, for example, it's not a game changer. I don't see yet a game changer in all of this. Maybe it's because they are in also different market segments that I am in. We are heavy in industrial with the good and bad things. Wesco could be there, but with different brands.
They are not Rockwell, where we have our Rockwell APR. So far, it is not yet for us a major game changer.
Thank you.
Your next question comes to the line of Daniela Costa. Please ask your question.
Hi. Good morning. Thank you for taking my question. I have two. One, I guess sort of following up on one of the prior questions, regarding capital allocation and how shall we think about sort of, you're very clear you want to delever. You've also raised the dividend a bit more this year. The balance between those two things, and also your comment on there is still ample room for consolidation in the market, whether you have some leverage in mind on whether one gets more important than the other? That's my first question. The second question, would be very keen to hear a bit more regarding, you've talked about all your digital initiatives, and one of the initiatives I think you've explained over the past has been this more automated, smaller branches.
Can you give us a little bit more color on how you will roll out that? Where do we stand there, and how long will that take, and how will that impact financials going forward? A bit more on a medium-term perspective rather than necessarily on 2020. Thank you.
Laurent, you take the first part?
Yeah. On the leverage, we guide this year to continue to deleverage. We want to be around 2x , which will be very soon, with the disposal of Gexpro Services, we gain 0.1x . We'll be very close for that. It means that, in the near future, we would like to restart some M&A, dedicated M&A, especially on IT digital. The level is around 2x . We don't think with the cost of the money today, that to go further below would mean something for us. We prefer to invest the money. In terms of dividend guidance, we stick to what is today on the market is at least 40% of the recurring net income. What we have done this year is to have a dividend increase, very close to the recurring net income increase.
To your question on digital. Digital is not a big bank. It's a DNA transformation with some steps that we have obviously, different parts of the world to contribute to in the way we design craft before we roll out. Digital means first to be a data-driven company, which calls for data. Data we have millions every day. The question was, what do we do out of it? Therefore, we first started by putting data infrastructure, data commonalities, data definition, and we will continue to have data people in order to structure all of this and make a proper use of it. This has been done in the last two years in many places.
Remember the one when we commented to you, the beginning of MDM in the U.S. in order to get four banners having commonalities by which we could operate certain different ways of doing business than the banner, but the multi-banner regional approach. If this would not have been done, we would not have been able to restructure. This is just one good example that data structure, once commonly brought to a way we can use them, address them, is the base that is already bringing things because it was allowing, for example, in the U.S., a branch of a banner to benefit from having the access to the DC product availability of another banner. Otherwise, it would have been impossible. Some of the U.S. growth has been fueled by this efficiency.
This is why, for example, we have reached a point of no return, and to get at the same time the best of every banner and the best of being a regional and more local company. The next stage in data is what is our priority in order to make use of them. For example, there is the management. Now, it's not a revolution to say that Power BI by Microsoft is available to many people, but it's how people will use it. When thousands of such people wake up every morning, take their mobile and know exactly the margin and the volume that they have done the day before, and they will have to do in the three days after, you become a really data-driven company.
Just to give you a minimum of example, the way it is being done now, we have now probably half of the sales force around the world that can do this, and in the coming months, it is 90% that we're going to run. It change, obviously, the rituals, because it change the management rituals by which a branch manager or regional director or even a banner director is driving the sales force. Now, being a data-driven company change also, making the company more reactive, being more, for example, as I said to Lucie before, margin-driven and being more profitable growth-driven. Because it's nice to announce these things, but it's another thing to be able to drive it every day where it has to be done.
This is, for example, what has helped a lot in the course of 2019 in the U.S., when the tariffs at the end of 2018 created some margin squeeze three months later in different parts of the U.S.. If we would not have reacted differently and say, "Let's go for drop-through," and things like that, the results of 2019 would not have been there. Not in the same way, by far not. This is because we became that company that we have been able to do this. The next stage is something that we see now volume-wise, and we are rolling out. This is use of data, use of interface to the users by putting intelligent artificial capabilities, which are sometimes statistical predictive or sometimes very complex prediction in order to bring to the next level of efficiency.
Next level of efficiency means efficiency in the inventory to bring the right product to the right place. Having 2,400 proximity selling points and not one being exactly the same as his neighbor require that kind of excellence. It could be predictive when do we detect that a customer could be going to another distributor, what we call here in this presentation the churn. Now we have thousands of sales rep receiving on a very regular basis, the list of customer having a potential to churn, at which speed they should act on, and they're re-injecting the system, the nature of the action that they are undertaking in order. We measure, and the machine measures how good the action was, whether the same customer remain a churnable one or not.
Out of this, probably in the course of 2020, we will improve through machine learning how to now suggest that the root cause for which kind of an action. This is what I would call assistance to sell, assistance to time usage, assistance to priority for every sales rep. It's an assisted way, like you have in a car, assisted driving capabilities. Here now we have assisting selling capability. This is the data journey, this is the AI journey, and this is what we are in. Now, where is it useful? It's not useful everywhere, but for the proximity business, it is. The project business will be something different. The proxy business, what I have mentioned before, which is probably 60% or 70% our daily operational business in most of the countries will be assisted by that.
Just to give you ask for color, I give you color, flavor, and potential results. Now, the rollout speed, it's all about people adoption. People adoption is never an easy journey. I don't want to be the guy who would tell you, push the button and it works. No. It's creating case, use case. Therefore, now we embark in our Salesforce or next to the Salesforce, transformation directors. People who assist everywhere there is a blocking issue and so on. Now, life is such that always one-third of the people like it immediately, one-third of the people learn how to use it efficiently, and one-third are resisting.
When it comes to resisting too long, then we may not need to have people pushing on the brakes of the car. We will look for productivity efficiency, including certain decisions of living with the people who really make use of it and not living with people who would not do it. It's daily operational dimension I'm bringing in a color mode. This is a determination by which I try to make this company more efficient. Hello?
Yeah, no, that's great. Thank you. That answers my question.
Your next question comes from the line of Andre Kukhnin. Please ask your question.
Good morning. Thanks so much for taking my questions. I want to come back to guidance, first, and to the answer you gave to Lucie's question. Would I be fair to interpret it as that you'd expect to grow at the bottom end of your guidance range, 2% or EBITA in a slightly negative volume environment, and to deliver the top end in the more positive? Would that be fair? Especially in the context of one of your key supplier guidance today of -1% to +3%. Are we in the right ballpark in interpreting this right?
No.
Okay.
If I would be sure it would be the low end, I would have written circa 2%.
Okay.
Okay? If I would be sure I would be between 4% and 5%, I would have written at the top end of around a 5%. There are many balls in the air which are not in my hands. If I would write something with a clear operating leverage and firm elements on the top line, obviously I would be more precise. I'm working hard at telling you everything we do, everything we can, everything we have invested in, everything of the self-help, everything of the past, everything that we can still initiate will be made and depending on the global activity so far today, given the condition we could see in short term, live with, this is the best guidance of being between a 2% and a 5%.
Okay. Maybe I wasn't clear. This is not an attempt to try to pin some kind of top-line guidance on you. It's just more to get a sense of what the range of scenarios is behind the 2% and 5%. I was thinking if you said slightly negative and that'd be more consistent with the 2%, and the more positive consider the 5%. Maybe I'm.
Look.
Indeed everything could be wrong.
If I listen to you tell me if it's negative, is it more a 2%? If it's a positive, is it more a 5%? It's obvious that the less it is negative, the better it could be on the top line and kind of. The only thing, let's be clear. I count on my best given, the activity of today, okay? If the world collapse, it's a different story. It's not only my story. Given the existing condition, given what you have invested in and given the way we work and all the hypothesis that we have in action today for what it is in the today's environment, could bring me between a 2% and a 5%. I cannot tell you which end I would be.
It would be easier for all of us as a CEO of a company to predict, is not that I want not to predict. I think it's courageous enough today to tell you that given the existing conditions, we could be between two and a five. I don't want to cover my ass by telling you if it's -2% and +2% . I'm telling you today, if it stays as it is, we will be in this range.
I appreciate that. This was just more of an attempt to get more idea of what's behind it. If we put volumes aside, and if I imagine the profit bridge for 2020, then from what you said, it sounds like you expect a positive price contribution, would the actions continue to take place? The question, I guess, is that yes or no? Secondly, on that balance of productivity versus cost inflation, would it be fair to expect that to be in a net positive for 2020 as well, given what we know now about the rates for different cost items and the actions you take? Finally, the digital piece. I don't know if it's possible to weigh it up in terms of costs and benefits, of what's being invested in the initiatives versus what they're yielding.
If it is possible, what was that balance in 2019 and what is it looking like for 2020?
Yeah. Laurent will answer more specifically. Globally, in 2019, the pricing environment is a group level up 1.7% with, in Q4, excluding cable, around 2% global price inflation, a bit less than that in Europe and a bit more than that in the U.S.. Yes, we believe that the pricing environment will continue to be slightly positive. We will still face some cost inflation, salary and benefit, transportation cost, it's obvious, and we have a certain number of productivity initiative. The net will not be the positive of this year because this year was strongly driven by the big restructure we have done in end of 2018, Germany, Spain, second half of 2018. We are still ongoing restructure that have been performed last year that will continue to help us. It will be more balanced between cost inflation, productivity.
For the investment for growth in the 25 basis points we have this year, there was still the last opening of U.S. branches we have performed in H1. Then we said that the 57 branches we have opened is the right setup. This will not be there anymore. We will continue to invest in IT and digital, but probably, this amount will be between 20 and 25 basis points as it was this year, but fully IT digital driven. That's the kind of building blocks I can give you at this stage.
That's very helpful. Thank you. If I may slightly just change gears in terms of portfolio and further actions. Can you say that you're done on kind of the existing portfolio, or are there still considerations there across other countries? Maybe a quick update on Spain as part of that, where you have taken a lot of action. On the other hand, in terms of potential acquisitions, what I wanted to ask is, are whether you seeing any evidence of your smaller competitors now starting to kind of feel the heat from having to invest in what you've been investing and building capabilities that you've built. Therefore, facing the choice of whether taking that on the chin or coming to combine with the bigger players that have already done it. Just wondered if that's starting to happen or not yet.
By the way, there is one piece of your former question that was not yet answered, which is digital yield, which I have not forgotten. Digital yield is a way by which there is more and faster yield on each element of the business chain, correct procurement, which could mean more adequate inventory by adjustments. The yield in pricing is definitely in bips up. The yield in supply chain efficiency, how not to have scrap returns and even with return to a supplier, there's a cost associated with every line of return, every line of movement. The yield of digital is eliminating what I call errors and pollution and increasing the customer satisfaction.
Therefore, it helps on the margin side, it helps on the OpEx side, and it takes on the customer stickiness, which by the way, we can measure not just by Net Promoter Score, but by probably medium-term lowering the churn alerts. It's really bringing the business model to the highest level of efficiency with less people involved. In a company like Rexel, there are hundreds of people leaving the company each year to go into retirement. If we can take also advantage of productivity factors along these lines, obviously we enter into a new productivity level. The only one which will remain at constant level is our external sales force. All the rest is a candidate for becoming more efficient. Just to give you a feel for, it's difficult to put a number behind each of them.
We know that Image VDI is directed to release of back office people, but some of them we use for other tasks, which is more, for example, the churn, follow up on the churn so that they call the customer and so that the churn becomes a more active way by which we retain customers. If some people are candidates for leaving the company at the same time, it becomes a direct element that goes to the bottom line. Obviously in each of these digital initiatives, there is a potential for the two. I was back to your first question, was now with the capital allocation when it comes to acquisitions and so on.
Right.
We know, we learn that acquiring is easy, integrating is costly. If there is a very good one in the digital world that would accelerate my digital transformation or my presence in servicing around the IoT, service in other things, that would be an add-on without having a lot of synergies for which the money spent in the acquisition would make huge sense. If it is to acquire another me too, not yet digitalized, having a restructure of the supply chain. We have seen the movie many times and size count, but not at the cost of a very high restructuring capabilities in the conventional model. This is why I may stay cool. It's not that we don't have a vision. You see me very cool on many others concentration. Unless we would see a real need for making a move because there would be a game changer somewhere.
I have none on my agenda today to be clear, of this game changer. Given also the context of where we are today internally and the context of the market, without the driver of the sustainability of the demand in electrical equipment, if you go back to our slide of mega trend, and you will see that there are many things here which does not come through acquisition of me too distributors. There are service companies, there are software companies, there are other players that could help us in this game, but less me too.
Very clear. Thank you. On your existing portfolio, that part of the question? Thank you for following up on digital yield as well.
Yeah, I'm sorry, I forgot this part. Thank you to remind me. The initial portfolio commitment that we took, we did. This initial commitment, it does not mean it's done forever. When we say active portfolio, it's exactly what we are doing with Gexpro Services. It was a good company. It was doing 7% EBITDA FAI. It's a $250 million, $260 million one. It was not in the core strategically. Either we would have doubled, tripled, we would have had to acquire, there is very little synergy because they had very few electrical products in their offerings. There was no rush to do it. Strategically, it was not in our core business because everything I'm telling you, including the digital cost of transformation and everything else, has to apply to one business.
All we are doing for the electrical distribution could not apply to Gexpro Services. Other parts, other sets of data, other suppliers, other customers, more project-driven than flow business-driven, and so on. All the investments made couldn't benefit to them, which was a clear reason why there's a moment you say, "Wow, if they need to have a future and they need to make changes for them, it would require high-level and intensity of evolution changes, but only for them." Right now, I'm making the EUR 13.7 billion sales of electrical products and try to bring them to a different level of business elements, business components, digitally driven, which couldn't apply to the Gexpro Services. This is where it becomes an active portfolio component strategy, and there might be one coming in and others getting out. The coming in, I can tell you.
When you are a Rockwell Automation supplier APR owner in the U.S., there is always an active portfolio by which one day you get 300 APR sold to somebody else, and you acquire another one. It's about technical capabilities that you bring together. Supposingly, somebody is willing to sell, and supposedly you are eager to buy. Besides these two, active APR management system around Canada and U.S. has always been on the agenda. We don't make huge noise each time because it's just similar here and there, but that's the way to get better technical support in order to go into the Rockwell Automation APR logic. This is also a sub-component of an active portfolio management where we do it.
Very clear. Thank you very much. If I may, just one last very broad question on what your suppliers are doing in terms of moving into software for specification and lifecycle management. I wanted to ask whether that has yielded any change for you already in industrial automation products, where this started happening earlier, and I guess is accelerating. What you read from that into the more later moves, in the building space, in electrical products for buildings and what Schneider announced today, but also with a couple of precedents as well. Whether that would be different in buildings and what does it actually mean for you given where you are in the supply chain?
The digital acquisition to software, it's not digital. These are the software capabilities being acquired, whether it was in the past like AVEVA or whether it's today by Schneider, there are similar moves being made by many others. It's a natural move, technical move, technology move of this industry. By the way, it could be for photovoltaic with energy efficiency component of electrification. It is true in the industry. Some are doing by their own developments, more like cement. Others are doing by acquisition like we are seeing these days. We cannot not participate to it, we need to participate not by doing the same, by playing our role in the value chain, by being complementary too.
The way to be complementary too is also in order to address components in the same way. In Industry 4.0 approach, this is, for us, how to sell to our customers that capturing information, bringing to a device that bring them all, handle them all, put on the platform, whether it is a supplier platform, whether that we can use, and we have commitment to use, and we have ability to use, and they let us use in order to benefit from energy management system software, which we run, and then we restore the output to our own customers, which become an investment plan, which the customer will do with us so that we can provide the product in time and by stacks. This is, for example, what we do in a few places, in logistic centers, and we have started doing this on MindSphere with Siemens.
At the other end, when we work with Rockwell, and we have access, and we have the customer base we have access to, it's well known that they ask the distributor to equip with skills and people who can really make software diagnostic, equip install base diagnostic, run on a platform software, the SAP that they provide to all of us. By which we return to the customer with certain plans, improvement, depending whether it's budget under constraint, it's energy efficiency, it's security or investment to be made. By the way, in the U.S., you could ask Rockwell themselves, Rexel is the most advanced of all the APR distributors because we have 20% of our install base which is already pre-diagnosed. By the way, we shared that with them.
This is a result of 2019, and we are one of the most advanced, if not the most advanced, the broader in penetration of this software approach to our customer base. Now, it helps also being a good partner to them because we represent their product and activity, but we use their software, and we use also their platforms if we are not equipped by ourselves. You can easily imagine change. We can easily understand that when I was talking digital, there is also capabilities, human capabilities, understanding, interface to these companies that we need to adjust, and we are adjusting. The two I have mentioned is just good examples. It's the same with Schneider. It's the same with others. I mentioned Siemens, Rockwell. I don't want to eliminate any, therefore, please, it's not exclusive. It's just good example I wanted to bring to you.
If I tell you this is another shift by which the resilience of distribution, if you become a partner of this, it makes us long-term partner and more resilient. If we would just be a box mover, they don't need us as much as in the past. There is not one pushing the other one out. I see that as complementary skills in order to be able to act, because the granularity of the customer base require efforts to be shared, who does what. We have the access to the granularity. We have to have standard package by which we can use them in a granular mode and return in a centralized way in order to feed the investment of all the improvements, because it's more ongoing permanent improvement that a customer needs.
When it comes to the construction world, and here I was more on the industry, the construction world is just at the edge, not the edge software approach, the edge at the beginning of the so-called BIM. The BIM will change the industry or parts of the industry because a BIM article, so to speak, and the BIM database will not be an SKU database. It will be function driven. You solve a function, and around this function, we aggregate components which at the end become SKUs. It's aggregated into a BIM object. We work at being supplier of BIM object. In order to feed the software and the acquisition announced today is in this direction.
That is part of the discussion we will have over the months, season, next two years, because nothing is immediate, but it's done in two weeks and probably we need upgrade around with Timax, with this supplier, but it could be tomorrow with another one. How can we fit to the best so that it is an increasing demand by which we will penetrate the market? This is the name of the game to be in the market growth, market change, and gain market shares. This is why our database, what I have mentioned before, the master data management bases and the data layers and all this infrastructure that we have put money into, will give us access to be a partner of such moves that the suppliers are making.
By the way, industry was at a certain stage, building new construction or heavier renovation through contractors is a natural next step. There is more features in this one. They have the new construction, they have the repair mode, there is energy efficiency, there is safety. It's done differently, but it will come also lower and closer to the multi-family homes or multi-housing buildings. That's a natural move.
Very interesting. Thank you very much to both of you, Patrick and Laurent.
Thank you.
Your next question comes from the line of Martin Wilkie. Please ask your question.
Thank you. Good morning. It's Martin from Citi. Just a couple of questions. The first one was, you alluded that your branch openings in the U.S. have now reached the level that you want. In the past, you talked about the time for the branches to come up to sort of a natural scale and profitability. In terms of thinking about how we see that improve over the next couple of years, does that give you a bigger benefit in 2021 than it does in 2020? That was the first question. The second question was, you mentioned on your holding costs that you've reallocated some towards the divisions. Just to understand, what was moved into divisions, what was the reason behind that, and what costs are still left in the corporate side? Thank you.
The profitability of branch pattern that we gave you at the early stage of the development, and by the way, we had only a sample of branches, has proven to be right. Some are faster, some are longer. Statistically speaking, it's exactly the pattern. We have about 30, Laurent can be more precise than me on exactly the results. At least I can tell you it was the right view. Laurent, you can give more color.
Yeah. This holding costs are of two parts, what you call the central cost, which are the transformation cost, mostly IT and digital. This one, we think that by mutualizing the approach centrally, it's cheaper and more efficient and quicker than by developing it in each country, as explained by Patrick. We have the European hub and the U.S. one, and on the European side, most of the costs are hosted centrally and then are reinvoicing to the country. In 2019, we invoiced more than in 2018 because we have onboarded more countries. When we invoice the country, we have a kind of set up cost for AI solution, which explains that our reinvoicing was a bit higher this year than last year. The second pillar of this holding cost is the corporate overhead.
I would say the key function we need to operate a group like ours. On this we have some productivity digitalization at our level on the different function, and we were able to drive the cost a bit down this year. On the NBO, the 57, they will probably be adjusted by a couple, but no more big opening of branch. The first one from 2017 are very close to maturity, but then we have the 2018 and 2019, which will continue to grow. It takes about, depending on the site, 12-18 months to break even and another 12 months to bring it to the average level of a good branch. We still have a start of our self-help, as described by Patrick, for 2020.
Great. That's very helpful. Thank you.
Next question from the line of Sebastian Gutter. Please ask your question.
Hi, good morning. Just a question on below the line items. I see a EUR 24 million non-recurring expenses related to several items. You usually not exclude those items from your adjusted EBIT. I appreciate the transparency on that. When you get for EUR 45 million-EUR 50 million restructuring charges, can we expect other non-recurring expenses as well, or this is it? Thank you.
While this other operating expense is a line where we have different things that are not restructuring costs as such, but are specific one-off, which, due to their size, are eligible to this other income and expense line in order to present a kind of more normative EBITDA. It is fully disclosed. It is disclosed in our financial statement. We have couple of different issue in one of our country, which is New Zealand. There are also some severance costs in other country. There is a true up of a pension plan in the U.S. in one region. A couple of other things. Globally, the EUR 50 million we guide for is also including most of what is in this line.
Okay. Everything came in H2? There was none in H1?
The biggest came in H2, yeah.
Okay. Follow-up question was on China. You had a big project that boosted the performance of the country in 2019. Do you have, in the pipelines, such project that could help the top line also in 2020? Otherwise, we could see a significant drop of the Chinese business in 2020.
Well, this big contract was with a plane manufacturer and was close to the end in Q4, and probably we have limited follow-up deliveries for 2020. It is over. We have other projects in the pipeline, but nothing is fully confirmed yet. Yes, we could have a very set impact on the top line.
Next year. We are continuing to go there, the industry is not slowing down so much yet. We are mainly on tier 2, tier 3 cities, but we are holding quite well, and we have different action plan for 2020. We are quite confident for China. On the coronavirus, none of our people have been injured. We have around 800 people in China, 15 Wuhan. So far, they will gradually come back to work next week. Total China is only 4% of the group sales, so on that side, we don't feel we will be impacted so much.
Thank you. Very clear. Thanks.
Your next question comes to the line of Andreas Aureli. Please ask your question.
Good morning. Back to your time. Two questions, please. The first one on the performance H1 versus H2 in 2020. In 2019, we had quite a strong weighting towards H2, which you had signaled also early on. Do you expect a more balanced performance in 2020 in your base case, or is there something we need to take into account when we look at H1 versus H2 profit growth? The second question on tax. With your kind of low 30%s tax rate, you pay among the highest tax rate in the sector. We have seen some reductions in the U.S. and France and so on. Why is your tax rate quite a bit higher than most other companies? Is there any potential to improve that further?
Let me take the profile H1/H2, and Laurent probably more adequate than me on the tax rate. The H1 last year was fueled by tariffs increase in the U.S., push of demand, people trying to get the investment done. No recession yet in industry, which came only after summer. No margin squeeze, which was corrected in the H2, so that the H1 level last year was really strong. Yes, we take into our own account, okay? It's a good suggestion to take into account that the top line H1 this year do not benefit from the same support from the market, because we are more starting the year a la H2 profile, industry demand at the level where we ended up the year, compared to something much more higher in the H1 previous year.
This fueled the fact that it have corrective action in the six months after, always come back somewhere in the middle also. I meet a lot of people in the industry. Some are telling me, "Yeah, the industry demand is not bad. By the way, we do more quotation kind of stuff." Nobody knows really how fast it would come back to a more normalized level. There was a peak, there was a surge, there was a push, there was the tax reform in the U.S. that fueled the investments. Once it's done, obviously, you have a little bit of a hold behind until it comes back to a normal level. This pattern, if it would be in a stable world, we would have some profile. Given the uncertainties on many other things, nobody commit anymore to when will come a more normalized level.
The gap between H2 and H1 is to be foreseen.
On the tax rate, when you take the average of our country, we are at 29%, with big contributors such as France, that the tax rate will decrease next year. We're still at 34%. That is weighting quite a lot. Between the legal rates and the effective rates, we have every year the impact of our goodwill impairments that have no tax benefits. They are just increasing the effective tax rate, because they are not deductible by definition. This year, this has been offset by litigation, very old litigation that we gain and for which we had a reversal of close to EUR 30 million. Yes, overall, because of that, every year, last year the effective rate was 53%, now it's 37%. The legal from the country is at 30%.
That's why when we guide on a normative level, we are between 32%-33%.
Thank you very much.
Once again, for questions, please press star one on your telephone.
Well, first of all, I think if no more questions are coming, I would like first to thank you for your attention. Second, I really appreciate it through your question that we were able to explicit even more our view and what we are doing. Obviously, it will be always a pleasure either to meet you or to come together for further explanations, either on roadshows or on specific meetings. Thank you, and have a good day. Bye-bye. In the name of all of us.