Good morning, ladies and gentlemen. Thank you for standing by. Welcome to today's first quarter sales publication 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 and wait for your name to be announced. I would now like to hand the conference over to your speaker today, Laurent Delabarre. Please go ahead.
Good morning, ladies and gentlemen. Welcome to our first quarter 2019 sales call. I am with Ludovic Debailleux, our Head of Investor Relations. As you know, we decided last year, in line with French market practice, to switch to quarterly sales in Q1 and Q3 and half-yearly and full year results. This presentation will focus on our sales performance, about which we will provide some greater color. I will start by focusing on some key highlights, then take you through our geographical performance. Before the outlook and the Q&A session, I'll also come back to some achievements in the quarter, including the refinancing operation and the progress we made in sustainable development. Let's start now with this presentation. Let me begin on slide three with the key highlights of our Q1 sales.
Rexel posted another strong quarter with sales growing for the 10th consecutive period to reach EUR 3.3 billion supported by North America, two European countries, and China. This represents same day growth of 3.1%, or 5.1% if we exclude the effect of the asset disposals and turnaround measures. Indeed, the transformation measures we took in Germany and Spain to refocus our business had a 1.7% unfavorable impact on our sales. While the disposal of the Rockwell Automation business in Australia had an additional 0.3% negative impact. This strong performance comes despite an unfavorable copper contribution in the quarter of -0.5%, while copper had a positive impact of 0.8% in the comparable period last year. Our underlying business trend is really solid. Our strong Q1 performance reflects the continued successful implementation of our strategic plan, which, as you know, contains two simultaneous aspects, perform and transform.
On slide four, I will focus on the perform part, which is delivering satisfactory results in all of its key pillars. We are gaining more customers in more geographies and providing more SKUs. This has allowed us to post market share gains in major geographies, including France, the U.S., Canada, and the Nordics, all the while improving our service level and customer satisfaction. We are now implementing Net Promoter Score, or NPS, in eight European countries to closely track customer satisfaction. Second, we are enhancing our industrial value proposition in two ways. First, by adding new sales and technical competencies in the segment, but also by strengthening our industrial business offering in all three geographies, as illustrated by the recent refocus of operations in Germany and China, as well as in the U.S.
Finally, we are also getting an increasing contribution from the self-help measures we have implemented to drive growth. We are seeing positive momentum in Germany and Spain as a result of their repositioned business and a good ramp-up in sales in the U.S. for the 52 branches that have been opened since 2017. The refresh of the existing networks as well as recovery underway at Gexpro. The second aspect of our strategic plan is our transform strategy to enhance customer experience and productivity, on which I will now focus on slide five. In Q1, digital revenue increased by 30.8% and now represents 17.2% of total sales. This percentage is even higher in Europe, where digital represents nearly one quarter of our total sales. We are putting in place the latest generation of sophisticated digital tools to improve our business operations.
Track and trace is now fully operational in three different countries, representing 45% of our sales in the region, and our ambition is to increase this to eight countries, representing 70% of European sales by year-end. This deployment comes with improved IT know-how in order to be able to interact with outsourced delivery services to ensure an enhanced customer experience. Also, our email-to-EDI functionality is ramping up and is already used for 80 large customers in France. This email-to-EDI initiative contributed to the 130 basis points improvement in EDI sales in the quarter in France. As part of our digital transformation, we are also rolling out predictive analytics tools in France, Belgium, the Netherlands, and Austria with deployment of the newly launched Culture Index in France.
On slide seven, we take a closer look at our Q1 sales performance, which, as you see on the graph on the top right-hand side on the slide, represents our 10th consecutive quarter of same day growth. At EUR 3.3 billion, our sales are up 4.2% on a reported basis and up 3.1% on a same day basis. We benefited in the quarter from a positive currency effect of 2.4%, thanks to the euro's appreciation versus the U.S. dollar, while facing an unfavorable scope effect of 0.4% and a negative calendar impact of 1%. Please note that the calendar impact will remain negative in Q2 at -0.5% and will reverse in H2 2019. This calendar effect will impact negatively our H1 adjusted EBITDA growth by circa 2%, which will be reversed at group level in H2.
Concerning currency and assuming spot rates remain unchanged, we expect foreign exchange to have an impact of +1.6% on sales in full year 2019. Concerning scope and taking into account previously announced disposals, the expected 2019 impact stands at -0.4%. As mentioned earlier, copper's contribution was unfavorable 0.5%, the second consecutive quarter with a negative copper effect. With the recent copper price increase to close to 6,400 USD per ton, we expect similar negative impact in Q2 and a favorable impact in H2, assuming no further fluctuation in copper price. Turning to slide eight, you see that we posted sales growth in two of our three geographies. In North America, which accounts for 37% of our sales, same day sales were up by a very strong 8.5%.
In Europe, which represents 55% of our sales, same day growth was 0.4% or 3.4% restated for the branch closure effects in Germany and Spain. In Asia Pacific, accounting for the remaining 8% of our revenue, sales dropped 1.9%, but were up 1.9% restating for the disposal of our local automation business in Australia. Sales were also up strongly in China, as we will see shortly. Let's now look at our sales by geography, starting on slide nine with Europe. With sales of EUR 1.8 billion, Europe is up by 0.4% on a constant and same day basis in Q1. However, if we exclude the impact of branch closure in Germany and Spain, growth was 3.4%, demonstrating good momentum in key countries and the positive effect of the turnaround measures we have implemented.
In our home market of France, which accounts for more than one third of our European sales rose 2.7%, with good momentum in our project and specialty business. We continue to gain market share in France. In Germany, sales were up by 3.6%, restated from the closure of the 17 branches in Q3 of last year as part of our plan to focus our operation on the industrial segment. The U.K. continues to be a difficult market. Sales were down 7.5%, reflecting our decision to be more selective to protect our margin and the effect of 30 branch closures, including 13 in the quarter. Elsewhere in Europe, we saw very good trends, notably in the Benelux countries, with double-digit growth at 13.3%, but also in the Nordics at 6.8% and Switzerland up 4.2%.
In North America on slide 10, we continue to see strong growth, reflecting both the positive effect of our transformation in the U.S. with a more regional customer-centric approach. Also robust activity in Canada. Overall, in the region, sales were up 8.5% on a constant and same day basis, reaching EUR 1.2 billion. In the U.S., representing 80% of our North American activity, sales were up in high single digits from the third consecutive quarter at +9.8%. Our new business approach and various business initiatives continue to drive market outperformance. By end market, industrial is up in double digits. Residential and commercials are also strongly up. Our investment in sales reps, inventory, branch opening, and branch refresh are clearly paying off. We have added 1.1% in sales from the 52 branch openings in 2017, as well as 2,700 new customers in the last 12 months.
In Canada, we also saw good growth of 3.4%, driven by the commercial and industrial end markets, notably mining potash. We have a solid backlog, notably thanks to transportation and commercial infrastructure projects. On slide 11, we take a closer look at how our regionalized approach in the U.S., now divided in 8 regions, is paying off in terms of growth and market share gains. Our electrical distribution business is growing in double digits in key regions such as California, Texas, Florida, the Denver area, while facing lower growth in the Midwest and in the eastern part of the country. We round up our geographic overview on slide 12 with Asia Pacific, where sales were down 1.9% on a constant and same day basis, but we're actually up 1.9%, excluding the Rockwell Automation business in Australia that we disposed of at the end of April 2018.
Also restated from that disposal, sales in Australia were up 2.7%, driven by industry. Overall, in Pacific, sales were down 4.8% on a reported basis, but up 2.3% restated for the Australian disposal. In Asia, sales were up 1.5% and up by a strong 8.2% in China, despite the challenging base effect. We have focused our business on promising markets and are seeing good results in that country. Asia was also impacted by the non-repeat of a large contract in Middle East that brought EUR 7 million in Q1 of last year. On slide 13, we wanted to share more with you on our product mix and performance by key product categories in Q1. As you can see, our two key categories, building automation and industrial automation, performed well in the quarter, both in terms of pricing and volume.
After years of decline in pricing, lighting saw broadly stable pricing and volume in the quarter. As for cable, pricing was down as a result of their close correlation with copper price, but was more than offset by the positive volume effect. As you know, beyond our product offering, as part of the evolution of its business model, Rexel is increasingly moving towards a provider of solution and services. For example, data allows us to track the performance of our supplier in selected product categories and thus adapt our product offerings. In the industrial segment, we offer end-to-end solutions for smaller customers who don't have direct access to suppliers. In addition, in the lighting space, we provide energy efficiency solutions. On slide 14, we take a look at our breakdown of our debt maturity after the recent refinancing operation that occurred in late February.
We successfully refinanced our 2023 bonds with a EUR 600 million issue at 2.75%, maturing in June 2026. We have no debt repayment before June 2024, and our average maturity has been extended by around half a year to about four years. This refinancing helps us optimize our financing cost and mitigate the slight increase in short-term interest rates. We expect our recurring 2019 financial results to be slightly below EUR 100 million, assuming no major volatility in currency or interest rates. Sustainability is a key priority for Rexel, and on slide 15, we detail a few highlights. Rexel is included in a number of leading sustainability indexes, and in 2018, we gained two ranks in the DJSI, the Dow Jones Sustainability Index.
The group's effort also in fighting climate change were recognized by the CDP, the Carbon Disclosure Project, which gave Rexel an A grade in 2018 versus a B in 2017. Rexel is included in the list of 137 companies that are the most engaged in the fight against climate change globally. Rexel was rated gold by EcoVadis, with a grade of 71 out of 100. This puts Rexel among the top 5% of companies evaluated by EcoVadis and among the top 1% in its industry. On slide 16, we wanted to update you on a few changes in our management team. In a continued effort to ensure that our management team is a very operational one, our CEO, Patrick Berard, recently announced a few new appointments to our executive committee.
Roger Little, the CEO of Rexel Canada, has joined the Executive Committee to provide greater North America weight alongside Jeff Baker, the CEO of the U.S. Pierre Benoit also joined the Comex and added responsibility for the U.K. to his previous function in charge of Benelux, Belgium, and the Netherlands. Nathalie Wright, who is in charge of Group IT and Digital Transformation, has added oversee of the Nordics countries to her responsibilities. They join Sébastien Thierry, Corporate Secretary, Frank Waldmann, Director of Human Resources, Eric Gauthier, CEO of Asia Pacific, and myself as members of our eight-person Executive Committee reporting to Patrick. Let me now conclude on slide 17 with our outlook. Nothing in the current environment led us to change the guidance we provide in February.
Consistent with our medium-term ambition and assuming no material change in the macroeconomic environment, we target for 2019 a comparable scope of consolidation and exchange rate, a 2%-4% same day sales growth, excluding an estimated unfavorable impact of 1% on 2019 from branch closures in Germany and Spain. A 5%-7% increase in adjusted EBITDA. A further improvement of the net debt to EBITDA ratio. That ends my presentation. Thank you very much for your attention. I'm now happy to take your questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, 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 [Ben Zekiris. Please ask your question.
Good morning. Thank you very much for taking my question. You mentioned that you've outperformed the market in the U.S. and that you've continued to take market share in France. I was wondering how you see the kind of underlying end market developing in these two regions, and more broadly, whether you've seen any changes in your expectations in terms of growth in different geographies versus when you first issued your 2019 guidance. That would be my first question.
Thank you for your question. First, on France. We are really happy by the performance of France in Q1. We can see that the residential market is slightly still up despite all the macro indicator you can read. Our growth was mostly driven by the non-residential market, fueled by our large national customer and also by our industrial sales. We are quite happy and so far so good for 2019. We don't see any negative signal so far. Midterm, we will be helped also by all the large infrastructure project such as Grand Paris and Olympic Games that are going to support the construction market and business in France, probably more in 2020. It is a soft quotation yet, this will show into our figure next year.
With respect to the U.S., you have seen over the weekend the release of the GDP of the fourth quarter, the market is really very strong, and we are grasping market share in that environment through all the various initiatives we have taken for more than 2 years now. Clearly, our backlog at a very high level, and we are very confident for 2019.
Okay. Thank you. That's very helpful. My second question is around your digital revenue. They've been clearly growing quite well. They now represent a quarter of your sales in Europe, and I was wondering whether you could update us on how you see the digital side of the business growing in coming quarters, and whether you see that growth coming from any geography specifically. If you could perhaps touch on some of the digital investments you've made and perhaps any productivity gains to kind of offset that, as you've mentioned in previous calls, that would be much appreciated.
Well, the growth is mostly driven by European countries and countries such as France, which were compared to the average of Europe a bit behind despite very good system. It was more a question of adoption. Really, for example, France has a growth of 40% of digital sales in the quarter. Whole of Europe is above the group. We are ramping up in our key countries in Europe. North America, we're starting from a slightly lower base because digital sales is around 10% in those countries, but they are growing also significantly. All together, it's well appropriated around our countries. We are quite happy that it's a top priority for us, and it cascaded on all the level of our organization so that we can push as much as we can to grow this figure.
Thank you. Just a very quick follow-up. How do you see the level of investments that goes into this digital side of your business progressing?
Well, in line with what we said. I mean, key priority on the CapEx side, roughly 1% of our sales. IT and digital represent roughly two-third, we will continue on that. On the OpEx side, it is still a large part of the investment. You have seen that we had a bridge on the EBITDA in 2018, we will continue also on the OpEx side to make sure we can fund the journey.
Thank you very much.
Thank you. Your next question comes from the line of Andre Kukhnin. Please ask your question.
Good morning. Thanks for your time. I just wanted to follow up on your comments earlier on the U.S., which were clearly the outstanding growth this quarter. Maybe you could help us understand it a bit better in terms of what was the contribution of price, particularly also some kind of pass-through of tariffs, raw materials, and what was the volume growth in the U.S.? You said earlier, very confident, a good backlog, but you are also facing now tougher comps as of Q2. Would you expect growth to moderate, or is the momentum basically strong enough to maintain this kind of high single-digit organic growth in the U.S.?
First, the pricing environment is good. We have a bit more inflation than in Q4. We are excluding cable around 3% price impact in North America in Q1. The trade war has not brought any bad things. The increase in March did not happen, and it has so far a very limited impact on our business. Pricing is one. Second is all the initiatives around the branch, the additional branch. We opened four branches in Q1 2019, but we have the benefit of the 48 we had opened up to the end of last year. That is bringing 1.1% in Q1, and it will continue all over the year to contribute positively. We did what we call the refresh, which is a repositioning of the offer plan and inventory in the branches.
We refresh around 25% of the branches there, and with additional SKU and inventory, we see a good traction on the sales side. We had some headwinds in the past. GIS, the headwinds is behind us. It is not at full development capability, but it is improving. Logistic supply chain is not fully operational but really improving, and GIS will be a self-help for 2019. Also, GIS, it is a supplier. On the customer side, the GE impact, we were really at a quite low basis last year. In 2019, we have a better momentum. We are growing with GE as a customer, especially on the wind. We have a lot of positive signal, and the economy is facing a lack of manpower.
The ultimate peak has never been reached, and we see that there are still a lot of business, and it should probably continue for the most part of 2019. Our team locally are very optimistic at this moment.
My follow-up would be in terms of the branch openings. Given the better demand, should we expect to see a pickup again in branch openings in the U.S. over the next 12 months?
The existing network will contribute around this 1%. On the other side, we are quite vigilant into the opening of branches and with the success of the refresh, which are carrying a far stronger payback. The 100 openings, we are ultimately, and for which we are at 52 today, probably we will not go up to that figure. We are tactical. It's a case-by-case review. Patrick is spending still a lot of his time in the U.S. making sure that with the local management, they take the right decision.
Thank you very much.
Thank you. The next 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. I will go one at a time. The first one is a bit of a follow-up on the visibility you have. I think you've already commented extensively around the strength of the business you've seen in the U.S. I was hoping if you could give us maybe a bit more indication in terms of the current trading and visibility you have in Europe and in Asia Pacific. Also because some of the macro data we are seeing, of course, around Europe is not necessarily positive. Just wanted to have your feedback on that. That's my first question.
Thank you, Lucie Carrier. Based on what we can see again in April, North America, again, we are quite positive. We have also, compared to Europe, some backlog, which give us some visibility, and our backlog are at still a very high level, even historical level in Canada. In Europe, so far, I commented France. Germany probably when you look at the macro indicators are slowing down. With all the restructuring we have done and the refocusing into Sienna in the south part of the business and also on industry, we are a mid-size player now. You see that we have some traction. The rest of Europe with the visibility we have is okay so far in April. You can question U.K., the market is sluggish, and as already commented by Patrick Berard in February, we want to be very cautious in that environment.
We have reduced our footprint, we have closed some branches, and we wanted to be smaller but more profitable. We had a huge approach to be very selective on the customer base. That is why the top line is so shy because we have increased price, and we have been really more selective on our customer base. Overall, based on the view on April, we continue to be quite optimistic for the rest of the year. That was your first question?
Yes. The second one, thank you for providing the sales mix slide, which I think is a new slide. I was just wondering, now that you kind of provide that, can you comment maybe in terms of whether that mix could be positive for earnings momentum? How should we think about that? Because you just provide kind of the mix and the weight, but we don't really have any indication in terms of what it represents for the earnings. Considering it's a new slide, we don't really have a track record on this.
Well, the breakdown of the product mix is something that was communicated in the annual report. We added the visibility on price, volume, and service. As you know, we wanted to move into a data and service-driven company. The link between product and services is important to understand. Really what is important is the price environment. We were coming from years of very low inflation and even some strong deflation in product group like lighting. It's important to see on the lighting side that we are close to reach a floor, and now the decrease in price are less and less. With building installation, it's our biggest group of products. Here, it's important to see that the pricing environment is up after years of flattish price effect. We start to see some inflation coming from the supplier that we are passing through.
Industrial automation, we discussed that it's a strategic pillar for us. We want to continue to reinforce our expertise in that. With the backbone of strong country, I mean, North America, which is a third distributor of Rockwell product. Germany and China being very strong with Siemens. We are the third distributor of Siemens in China. You see that on those line of products, with all the new activity around service and solution, we are progressing. Pricing is positive and volume as well. We wanted to bring in this slide the fact that there are services associated with those products.
Some of them already embedded in the price of the product, but that is why the customer is willing to go through us, because it's not only a product, but it's all the Rexel ecosystem, and other that are billed to the customer in some line of businesses. For example, as an illustration, service and solution are already representing 10% of the automation business in Canada. It's small in the global Rexel galaxy, but it shows that we are trending into building more and more services. That was your second-
Yeah.
Yeah.
Thank you. Just the last question is more for the model. Thanks for the slide on the refinancing operation. I was just wondering if we should kind of add an exceptional cost related to this refinancing, because it had been the case in the past, and whether you could give us the quantification of any potential exceptional cost here.
Yeah. There is a EUR 21 million one-off cost on financial charges with, of course, a direct cash impact this year.
Thank you.
Yeah. It was good. I mean, the rates we get was very exactly with that. The net present value of the operation is north of EUR 20 million. It was a very good refinancing operation.
Thank you.
Thank you. Next question comes from the line of Martin Wilkie. Please ask your question.
Thanks. It's Martin from Citi. The first question was just coming back to the U.K., I appreciate you've got to be nimble if the market changes. Just on your current plan, on the branch closures that you announced in Q1, are there additional branch closures already targeted during Q2? Should we see it that what you've closed up until the end of March is sort of your new baseline in terms of just thinking about growth in the U.K. going forward? That was the first question. Thanks.
Thank you. On that field, year-to-date, compared to a year ago, we closed 30 branches. There is no huge process to close a lot of branches in U.K. We have small branches, so tactically, at the end of the lease, if we have a good opportunity with a short payback to close a branch, we may have some adjustments. No big reorganization projects foreseen so far. The game is the selectivity of the customer base. Also with the help, Pierre Benoit, you have seen, Pierre Benoit is a very hands-on guy, having about the same kind of profile than Patrick of turning around businesses and has been very successful in Belgium and then in the Netherlands. He's putting his feet on the ground in U.K., reworking the product offering, all the customer data, and making sure that we can rebound in U.K.
Maybe slight adjustment of the footprint, no big closure process.
Okay. Thank you. Perhaps a second question, just coming back to GEIS. You mentioned it's improving, and it will also be a self-help for 2019. Now, obviously we know from ABB, the new owner, that they see it as a self-help from their side. Just to clarify, is there a self-help from your side as well? Do you need to do things to the Gexpro, to the distribution route for GEIS? When you're talking about self-help, do you mean in terms of the products and what ABB is doing? Thank you.
Well, we are one of their top distributor in the U.S. It's a matter of having the right product offering. They are switching GEIS product and filling them with ABB product. It was a matter last year of product availability with a bit of supply chain disruption, especially in one plant in Monterrey in Mexico. That is improving yet, not at full efficiency or what we would like to have, but improving to last year. I mean for us, GEIS is a very important supplier, and we have to make sure that we are giving a better momentum. Probably, it will take time, but we are confident.
Okay. Thank you very much.
Thank you. Next question comes from the line of Alfred Glaser. Please ask your question.
Yes, good morning. I wanted to ask you about pricing, excluding cable. Could you comment a bit more in detail by region how the prices have evolved? I would like to know if you could give some more color on France. The Q1 numbers have been quite good, better than the market, actually. How long do you expect you can go on outgrowing the market in France? Do you have enough projects in your backlog to do so? Could you give us some color on these items, please?
Good morning, Alfred. On the pricing effect, in Q1, in Europe, we are close to 1%, a bit lower than in Q4. In North America, we are higher than in Q4, close to 3%. In Asia Pac, we are at 1%. The mix of that give a group at 1.6%. I'm talking inflation, excluding cable, of course. In terms of evolution in France, we have a very healthy top line. I remind you that in Q4, there was a big effect with an export contract, and that's why the top line was a bit shy. There was some disruption, a bit with the gilets jaunes and the cutoff of the Christmas vacation. This Q4 was a bit low. Q1 in France is very good. The market is there, but we gain market share.
It means that the team has done some very good job. We are quite pushy. We have some great evolution. I pointed out on the digital sales evolution, that are now at 16% of total sales. The adoption is paying. We have a great result with some large national customer, which help us in the non-residential market. It's mainly non-resi and industry. Resi is growing but at a lower pace. Overall, we are very satisfied with their performance in France.
All right. Thanks a lot
Thank you. Next question comes from the line of William Mackie. Please ask your question.
Yes. Good morning to you, Laurent, and all. A couple of questions, if I could. First of all, with regard to the restructuring this year, when we think of branch closures in the U.K. and then some ongoing transition and transformation costs across Europe, can you just give us an idea of if there's any change or at least what you're thinking with regard to the non-recurring cost in the current year for the transformation of the underlying business? Secondly, on digital, great to see the acceleration. Just a couple of questions. Firstly, have you observed any changes or what sort of changes do you observe as your customers transition onto the digital platform with their buying behavior? Is it in different product groups? Are there different volumes or quantities which might explain some of the market share gain?
Also with regard to digital, how simply do you explain such a big difference between the penetration in Europe, if we exclude Switzerland and North America? Why is there such a big difference? Perhaps how can you catch up with that digital penetration difference between the two regions? Lastly, on mix with regard to profitability, I know this is a sales call, but last year we had the profit mix. Last year's figures incorporated obviously the drag relating to the branches in Germany and Spain, and also perhaps some drag from limited price effects. When we look at this, the revenue mix in your Q1, is it right to interpret that this is favorable for gross margin and margin mix year-over-year because of the elimination of cost, but also because of a positive move in pricing and mix?
Okay. Thank you for your question. I will take it one by one. The first one on the restructuring, you have noticed that last year we had EUR 90 million restructuring cost because of the big restructuring in Germany and Spain. What we guide in February call is that this year we will come back to a more normative restructuring envelope of circa EUR 50 million. There are no big, I would say, big country in the radar in terms of big downsizing so far factored in our projection. With respect to digital, what is key is that it is improving the loyalty and the fidelity of the customer. When we reach, and in the case, not in all our country, but in some of them, because shopping with Rexel is easy. This easiness is driving some kind of fidelity of the customer.
We can see that as in a lot of businesses, share of wallet of a connected customer is higher than a non-connected one. Of course, the growth of the digital sales has a part of cannibalization on the existing outside sales, but it sales that are easier to grab and are then easier to operate in our system, less manual interfaces. At the end, they are driving a good profitability. The penetration rate between Europe and North America is very much linked to the mix of the business, whereby in North America, there are a lot of industrial sales that require, of course, less of digital web shop solutions. That is why there is such a gap. Clearly, we can still improve. In North America, all together is around 10%, and probably we can still double this figure.
In Europe, we are at 25% digital sales, and probably we can add still at least 10% on top of this 24% in the midterm. That is a first milestone we have, and as pointed out, it is really a key priority. We are improving our tools. We have a common web shop on the SAP ABAP platform that we are rolling over our countries. We are developing tools around the web shop to improve the efficiency of the business. I commented on track and trace, something very observed when you are in the B2C. In the B2B, it is not everywhere. We are improving that field. I commented also on email-to-EDI, which allow us to do the business in a more smoother way with our customer. The third question. The mix of profitability
In Germany?
Will, can you please repeat your question? Your last question, please.
Of course. Sorry.
Yes, sorry. Sorry, I've got it. Sorry.
Okay.
You're right. We don't sell Germany and Spain. The downsizing part has been made end of Q3 last year. We get rid of loss-making business, yes, it has a positive impact this year. We guide in February and explain that those two countries will bring an additional 10 basis points at group level in term of EBITDA margin. This is ramping up all over 2019, with the contribution that will be growing over the quarter, with the H2 contribution a bit higher than the H1.
Thank you very much.
Thank you. Our last question comes from the line of Pierre Bosset. Please ask your question.
Yes, good morning. Two questions, if I may. I just would like to know if you have an update on the IFRS 16. In your annual report, you mentioned a potential EUR 0.9 billion additional debt. Do you have any more details on the consequences of IFRS 16 on your account? Second question, it's just a follow-up on France. Is Patrick Berard still managing France directly, or do you plan to have, at some point, someone in charge of France? Thank you.
Okay. IFRS 16, it's very important to note that IFRS 16 had no impact on the guidance we provide in February, because we are on gross percentage. The impact on IFRS 16, we discuss the IFRS 16 at the end of June for the first time, with the comparison of the 2018 figure. The debt impact is around EUR 900 million. The EBITDA impact, because you get rid of the rent, is 150 basis points on the EBITDA. On the EBITA, you are adding back the depreciation, it reduce impact. The impact on the EBITA is 33 basis points. Then below the EBITA, you are adding back financial expense. It has a very limited impact on the net results. I have also the question on the cash flow statement.
We will present cash out on rate expense, it will have no impact on the cash flow statement. On the net debt to EBITDA, the debt will be considered as IFRS lease debt. That will be excluded for the calculation of the ratio.
Okay.
Okay. With respect to France is a very strong contribution to the group, and Patrick has a lot of proximity physically and sentimentally on this platform, that he knows very well. Yes, he's still spending quite some time on that country. He has set in place a very strong team of complementary young people, very experienced. We have a very strong commercial director. We have a very strong IT and CFO in charge of finance and IT. We have a very strong HR and a good logistic guy. There is a very close team that get along very well together, and that is, at this stage, managed by Patrick. Yes. He's working. When you see the performance, I think it's very good to be like that. There are really a high potential into that French team.
Okay. Thank you, Laurent.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone keypad. There are no further questions at this time. Please continue.
Well, thank you very much for attending this call. Happy to report for the first time on the third evolution at Rexel and to share with you this performance. We are all committed to this strategy of the combination of perform and transform. We'll be happy to report more in detail at the end of July. Wishing you a great day. Thank you. Bye-bye.
Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect. Speaker, please stand by.