Good afternoon, and welcome to KONE's Q4 and Full Year 2019 Results Presentation. My name is Sander Kalle, and I'm the Head of Investor Relations. As usual, I have here with me our President and CEO, Henrik Henrich and CFO of the hall. Please proceed.
Thank you, Sandler, and also a warm welcome on my behalf. And I'm very happy to be able to present again good progress for KONE during year 2019. If you look at how our year finished last year in Q4, we had a continued good growth in all regions and all businesses with a great sales growth that we had in the beginning of the year continued that I'm very happy about. Also, we had clear profitable growth. Our adjusted EBIT margin improved clearly now again in Q4.
And we also had a very important milestone in that we launched a really groundbreaking new era, I would say, in our industry with the launch of our DX Class elevators. And the final highlight is that our Board of Directors have today made a proposal to the Annual General Meeting that for last year, we would pay a dividend of €1.70 per Class B share. As usual, I'll start with the key financial figures. Some highlights for the Q4 last year as well as the market outlook, and then I will hand over to Ilkka Hara to guide you with a deeper into our financial performance. And then finally, I'll talk about the outlook for this year.
So let's start with Q4. We had solid sales growth and our margins improved. Our orders received were a solid €2,000,000,000 growth of 2.6% or 0.7% in comparable currencies. Our order book is also strong at over €8,000,000,000 about flat year over year. And our sales reached EUR 2,685,000,000,000, growth of 9.9%, so if you look at comparable currency, 7.9%.
I would again say that if you look at the economic environment, I believe that this is a good growth. Operating income grew by almost 22 percent to €356,000,000 and our key financial metric, our adjusted EBIT, grew by 15% to EUR 367,500,000. Gross margin improved from 13.1% to 13.7%, a clear profitable growth now in the 4th quarter. In the beginning of the year, we have had very strong cash flow, and that's continued also at the end of the year. Very strong cash conversion, €386,000,000 in total, good growth year over year.
But 1 quarter is always a very short period of time, and now we have a full year to look at our progress, and we can see that we have made progress during the year. Our orders received grew nicely to €8,400,000,000 growth of 5.9 percent in comparable currencies. And again, I believe if you look at the environment, overall in the world, this is a good growth. Our sales were just short of €10,000,000,000 Growth of 10% for Incontargo currencies, a very strong 8.2%. Operating income reached €1,192,000,000 and the adjusted EBIT grew by 11.3 percent to €137,000,000 and margin improved slightly from 12.3% to 12.4%.
As we have been called, remember, our margin in the first half of the year still declined slightly, but now in the second half of the year, we had a clear improvement. So overall, a pretty good outcome, I would say. Cash flow, a very strong €1,500,000,000 and our earnings per share, €1,800,000 compared to €0.63 the year before. You all know that our development activity at KONE during the past years has been very active. We've been executing on our winning with customer strategy.
We've been executing on our Accelerate program. And I would say that I'm very happy about the commitment, motivation and forward looking drive for Connex employees. We can see that in the period of change, they have continued to focus on our customers. We have continued to focus on looking forward and driving a positive change, and that I'm very pleased about. And I think all of our employees have done, again, a great job to take the company forward.
That I'm very happy about. Then a few highlights for 2019. You can see that the focus on delivering value to our customers and investing in differentiation is delivering results. And we can then concretely see this from the fact that the average value of our service contracts has now, in the past couple of years, turned to growth from actually a slight decline in a for a very long period of time before that. So we can see that the value we're delivering to our customers is improving.
And the same thing is also happening now in our new equipment business. And of course, it's all about the service mindset. It's about the new service and solutions, and it's our reputation as a reliable partner. And I think that, that is absolutely critical. When we look at feedback from our customers, the fact that we have seen as a reliable and reputable partner is very important to our customers.
Important highlight also now in the last quarter was the opening of our new factory in Chennai. That really gives us great opportunities to continue our strong progress in India. If we look at India over longer term, we can see that, that has really the best opportunities from an urbanization perspective. And therefore, this new factory, which is really world class, is enabling strong development and strong growth for the future for us. And the final highlights I want to bring up is that we know that KONE, we have had a strong focus on sustainability.
That has been one of our 5 strategic targets already for many, many years. And we know that we have the most energy efficient elevators in the market, which, of course, helps our customers reduce their energy consumption. I'm also very pleased that we have, again, got very strong recognition for our work towards sustainability. As the only company in our industry, we have a CDP A rating for climate change. No other company in our industry is on the CDP A list.
Also, Corporate NICE every year publishes their lists of world's 100 most sustainable companies. Again, that's the only company in our industry. We are on that list at number 32. So again, these are external recognitions, while at KONE, we always look very pragmatically at what we do. Of course, external recognitions like this gives us, again, motivation to continue our work and continue to be a leader in sustainability.
Then a few business metrics for last year. In total, last year, we booked orders for 173,000 new elevators and escalators, and we could see that the average value, as I mentioned, grew a bit. Our maintenance base increased by 5%, and we had higher growth in monetary value. Our total service business grew at 7%. So continued good growth overall.
Perhaps the most exciting development, though, during the Q4 was the launch of our DX class elevators. This is a totally new era for elevators in our industry. It's a new era because it's a solution that is upgradable throughout the life cycle of a building through software. So what is special with these elevators? These are the 1st elevators in the industry that comes with connectivity built in.
You can say, why is that special? It's special because we can automatically once you have a DxGras Elevator, when a customer's needs change or we come out with a new service, our customers can automatically start subscribing for this new service. We can activate it remotely through our digital platform. We are talking on both Connect services as well as third party services that can be activated for our customers. For example, our 20 fourseven Connected Services, we can now automatically activate when our customers want to take them into use, but we can also take into use 3rd party services.
We have some examples such as a company called BlindSquare, provides services for visually impaired people, how they can navigate through buildings. Or we can activate services for robotics delivery companies in buildings, can buy our APIs, move through the building. These are just some examples. And as new services come or our customers' needs change, we can bring new services online. These elevators also bring a totally new user experience that's customizable.
It's multi sensory through design, through lights. And actually, we can even change the moods during the day or before the season of the building or whatever our customers want to have. We also have a lot of smart materials, anti stain, anti scratch and of course, now very topical antibacterial surface materials with a whole new design and lighting selection. But not all, also, these are something that we can be a much better partner for smart buildings. The planning tools, really next generation, makes it much easier for architects, planners, how they can utilize Kona's elevators in their buildings.
But also we can support smarter projects and project management as well as better connectivity in the smart building systems. So it's not only a new product, it's a whole new system that we are bringing to our customers that we can keep modern throughout the life cycle even when needs and requirements for our customers change. So again, delivering on our promise through digital solutions to bring outcomes that meet the individual needs of our customers, again, a big step in that direction. Because of the good development we have had and we can see the solid outlook we have for the future, our Board of Directors has proposed to increase our dividend to €1.70 per share. That continues our strong dividend payout, now 94% earnings from overall earnings per share, and it's equivalent to a dividend yield of 2.9% if we compare it to the share price at the end of the year.
So that is Kona's development and some of our highlights. We will then talk shortly about the markets. Incoming markets in the last quarter grew slightly. North America, stable at a good level Europe, Middle East and Africa, a lot of variation within the market, but overall, slight growth and Asia Pacific, also a lot of variation between the market, but growth driven by China and some markets in Southeast Asia. India now pretty stable, but overall, slight growth.
In the service markets, very much the same trends we've seen before. North America, growing both in maintenance and monetization slightly, exactly same trends in Europe, Middle East and Africa. And in services, Asia Pacific continues to be a very strong market for growth in both maintenance and particularly modernization. There, we can see that Chinese modernization markets are really starting to pick up in a very nice way. What about China?
Chinese property markets in the Q4, in units order, they were slightly up year on year. And also, we have seen now a more stable pricing environment during Q4, but largely during last year, of course, after many years of very tight pricing environment there. Overall, government has continued to support the economic activity through the infrastructure market that we know. So therefore, metros, railway lines have been very active, and of course, the markets in those segments for us. However, there continues to be restrictions in virtually all of the 100 largest cities.
And we can see that the reason for these restrictions is to make sure that markets stay stable and don't grow too fast. The construction activity at the group level and also what has helped is the liquidity situation for large developers have clearly improved towards the end of the year. If I remember at the beginning of the year, that was clearly a challenge to growth for developers, but we've seen an easing of liquidity and also better access to bond market for many of the large developers. Real estate investments up about 7.3% to December last year. And while residential sales volumes are pretty flat, we could see that new starts up 8.3%, which, of course, bodes well for the future, and new home price is up about in the 70 largest cities, about 6.8% in December.
We can see that the government policy of keeping a moderate growth in sales prices has been quite successful again. The feature that we talked a lot about is consolidation amongst the top property developers. That continues. And we can see that the top 100 developers, they already represent roughly 50% of all construction market by area, and it's starting to approach 3 quarters in terms of value. So really strong, the consolidation, but I think we are I don't think I know we are in a pretty good position here.
So that is about KONE's performance in summary are some of our highlights in our markets. And with that, I'd like to hand over to Ilkka to dive a bit deeper into our financial performance. Very good. Thank you, Henrik, and also a warm welcome on my behalf to this Q4 results announcement webcast. I'll go through our financials more in detail and starting with orders received.
Well, we've seen, as in all of our financials, actually, the positive development continuing in the Q4 of our of the year. Orders received reached EUR 1,988,000,000, which represents 2.6% growth in the quarter and a total for the year of 7.7% growth. We continue to see clear growth in the volume business. However, in the major project business, it was there's less growth in the 4th quarter. There's always fluctuations in the major project side.
But overall, on a comparable currency basis, our orders received grew 0.7% in the quarter. If we look at the large Chinese market, orders in units were slightly down. However, if we look at value, we saw clear growth in our orders achieved from a monetary value perspective. Both pricing contributed positively as well as mix to that development. So good development also in the Chinese market.
We've been focused on the pricing, and that's visible also in our development there. Also, when it comes to pricing, we continued to see in the 4th quarter the margin of our orders received improving slightly. So we continue to see the pricing work that we've been doing contributing positively also to our orders received margin. Good development there. And if you look at sales, our sales for the quarter reached SEK 2,685,000,000, up 9.9% compared to last year.
And for the full year, that represents 10% growth for the sales. We continue to see strong sales growth in all businesses, and growth in comparable currencies was 7.9% for the quarter. If you look at from a geographical perspective, the strongest growth in the quarter was in Americas at 12.7%. EMEA grew 8%, and Asia Pacific grew 5.4%. China growth was clearly higher than that, and the rest of the Asia Pacific grew less.
From a business perspective, modernization grew the fastest, so 9.5% growth in our modernization business. New equipment grew at 8.7%. If we look at the maintenance business, we continue to see good growth at 6% for the quarter. Then looking at our adjusted EBIT, where we continue to see strong profitable growth for the business. Our adjusted EBIT reached SEK367,000,000, which is up 15% compared to last year's 4th quarter.
And also, more importantly, we'll continue to see our EBIT adjusted EBIT margin continuing to improve, reaching 13.7%, so a 60 basis point improvement compared to last year as we saw also in the 3rd quarter. So continued good performance there. Growth had a positive contribution to our profit, but also, as said, profitability improved, and currencies had an €8,000,000 impact to our profits. We look at the Accelerate program. The costs related to the program restructuring costs were SEK 11,000,000 in 4th quarter.
And if we look at the whole year, now that we're at the end of 2019, we saw more than CHF 50,000,000 of savings from the Accelerate program. So not only are we seeing, out of the 3 targets, being more been able to be more customer centric, improving the speed of rolling out our new service and solutions, but also the efficiency is coming through as we expected now that we're in the last year of the program for that. And lastly, cash flow. So maybe to me, this is the highlight of our results for 2019. Our cash flow reached €1550,000,000,000 And our cash conversion continued to be strong throughout the year.
Net working capital contributed positively, and we continue to see the strong development in our advanced issuances as well as progress payments from our customers. It's good to note that IFRS 16 accounting standard had a positive impact of €119,000,000 to our cash flow. But regardless of that, the development was strong in 2019, and that continued in the 4th quarter as well. With that, I'll hand over back to Henrik to go to market and business outlook for 2020. Thank you, Hakan.
So that's, of course, about history. Now it's about looking forward, and that's what we like to do. 2019 is now in the bag, and now it's about how we deliver another strong year for KONE in the year 2020. Let's start with the markets. We expect that new equipment markets will be relatively stable or grow slightly in 2020.
However, the coronavirus outbreak creates a clear uncertainty to this outlook. In China, we expect the markets to be relatively stable or grow slightly. And of course, this is the market where we have the most uncertainty because of the virus outbreak. For the rest of Asia Pacific, we expect the markets to grow slightly, India return to growth and growth in Southeast Asia. Nuclear markets in North America, Europe, Middle East and Africa are expected to be rather stable but at a good level.
In maintenance, very much same trends we've seen so far, growth in all markets, slight growth in Europe and North America and strong growth in a good growth in Asia Pacific. And the modernization, same thing here, slight growth in North America, Europe and Latin Africa, but strong growth in Asia Pacific to continue. That's about the markets. And then our outlook. We expect our sales to grow by 0% to 6% in comparable currencies compared to 2,009, And we expect our EBIT to be in the range of €1,250,000,000 to 1,400,000,000 And then we expect currencies to remain about the same level where we are today.
If that happens, we could have positive impact of maybe €15 ish million We continue to have many drivers that are boosting our results, such as the improved margin of our orders received that we had in 2019. It's the fact that our service business continued to develop nicely and grow, and also the Accelerate program continues to contribute. However, there are also, as always, some matters that are burning our results, such as labor and subcontracting cost increases, both in Europe and in Asia, but partly also North America. But also, the fact that we are constantly investing more in our capability to sell and deliver new digital services and solutions, but as well, how we're building up that capability and systems within KONE. But that's, of course, a positive investment, in my view, because we can see a very good payback for that.
And then what's worrying our result is the outbreak of the coronavirus. So what do we know about the coronavirus and the impact for KONE? First of all, we have 2 principal objectives at KONE when it comes to dealing with this situation. 1st, naturally, the health and welfare of our employees. We have about 20,000 employees in China, so that is our 1st priority.
So clearly, also priority is to make sure that we can continue to serve our customers in this situation. We have a lot of hospitals and other similar buildings that we are servicing, and of course, critical that they continue to work. So we are, of course, giving instructions, helping our people locally how to deal with this to stay healthy and safe. If you look at the impact, that is still unclear, but we already know now that there will be an impact on our business in the Q1 of the year. For example, in Kunshan and Nanshong, where we have our 2 factories in China, We know that in those cities and those areas that the Chinese New Year holiday have been extended by 1 week.
So we had planned to reopen our production on the 31st January following the Chinese New Year break. But we know in those areas now, holiday has been extended by week, and the earliest we can start is on the 8th or 9th February. So we are losing at least 1 week of output. We also don't know exactly yet when our customers' installation sites will reopen. So if this is the full impact that it's a weak delay, we believe that there will be an impact in the Q1, but we can probably recuperate much of that rest of the year.
However, the situation develops very rapidly, so we don't know what the impact will be eventually and how customer sites will reopen and so forth. But this is what we know at the moment. So we are, of course, dealing with the situation and making sure that we can serve our customers and support our people there. So in summary, Australia execution is very well on track. We can see from our development that our competitiveness is strong.
We can see the value per service contract, the value and average price for new equipment is improving. That is a message from our customers that we're delivering value to them that I'm very happy about. We expect to continue our profitable growth in 2020. That is what our outlook says and that we very strongly believe in. And we will continue to invest in renewing ourselves to constantly be able to deliver better and better outcomes to our customers to drive even further differentiation.
So with that, I'm very happy to open the lines for questions.
Yes. So let's start taking questions from the telephone line. Operator, please.
Thank you. We'll take our first question from Gilpinue of UBS. Please go ahead.
Can you hear me?
Yes, go ahead.
So I was saying that sorry to hear about the impact from the coronavirus in China. I wish everyone is safe and that no one is impacted by this corner or anywhere. But anyway, going to the questions that I had, it relates most to pricing and it relates to tender activity at the moment in the market. We've been hearing that some local players are starting now to become a bit more aggressive on pricing despite the fact that in the past, Western brands probably were more price leaders within the market. Is that something that should be concerning for the Chinese market in 2020, I.
E, e, pricing becoming as the market slows down, pricing becoming a bit tougher as we go forward?
I cannot predict how pricing will be going forward. I mean, we do not comment on pricing we all have different phases. So I we all have different phases. So I wouldn't say that there's been a marked difference. Clearly, always someone who has more growth ambitions than others, as we also do, of course, have growth ambitions in the market.
What we've experienced now over the past year is that pricing has stabilized. And I believe that the reason for that is that many of the players in China, actually, margins start to be quite low for many players, and that usually gives a floor. We continue to have good margins given our competitiveness in the market. So I'm not expecting, at least in the short term, any major difference, and we haven't seen any significant changes. Maybe there's been some individual companies that are growing very, very fast.
But that's, of course, if you grow fast, there are many reasons for that.
Thank you. And with regards to the Southern European aftermarket operations, would you also comment on the competitive landscape there, especially I think in the context of the new innovation and software launches? Would you say that this prevents competition entering into the elevator market to the extent that it was in the past?
I would say that we have, of course, we continue to have strong competition in the elevated market. I think you always have innovations that come in the industry. We are, as always, driving a lot of innovation in the market. But as you know, you come with a new solution, you always have competitors very close by or competitors come with new solutions, and you think about how do you react, how do you make something that creates even more value. So I think that the competitive dynamics are definitely there, and there will always be different ways for the companies to compete.
So I'm not seeing a big change to what we've seen so far.
We'll now take our next question.
To Guillermo, to your point, I mean, what is our objective? We continue to invest in innovation. We continue to find new ways of adding value to our customers, and that's what we are on all the time. And that is how we can continue to improve the value we deliver to our customers.
We'll now take our next question from Lucy Carrier of Morgan Stanley.
Hi, good afternoon, gentlemen. Thanks for taking my question. I will try to limit myself to 3, and I will go one at a time. The first one was on the guidance. I understand, of course, you're ending the year with a backlog, which is about flat.
But when we look at the bottom end of the guidance for top line and for EBIT, it looks like basically you at the lower end, you wouldn't be expecting any margin expansion whatsoever in 2020. And considering a better margin in the order books, considering probably less adverse effects from raw material and the FX benefit, I was wondering if you can maybe kind of quantify to some extent some of the other headwinds that you see and that pushes you maybe to kind of guide in this way?
Well, we haven't guided margin. I mean, as I mentioned, in the end, what we do expect is to continue to grow profitably in the year 2020. What I would say is that if you are at the lower end of the guidance, and of course, there is more uncertainty in the market, that's why we have a little bit broader guidance range than usual at the moment. I would say, of course, you have less leverage in the company than just because you always have costs that are growing anyway. So I think always the more you grow, the more you get also leverage and have ability to expand margins.
But our expectation and our target for this year clearly is to grow profitably.
Thank you very much. My second question, actually, you were alluding to that around the leverage. If I kind of look at it, I was wondering if there's any structural change in either your operations, the way you operate, the cost structure, because the drop through doesn't seem really to be picking up versus what I would call previous level, historical level, even though this year you've had an absolutely remarkable organic growth and the drop through seems actually pretty limited if we look at it on a full year basis. So is there any change around the dynamics there that explain that the leverage is now much, much lower than what it used to be even though in period of high growth?
Jocco, do you want to start, I can then Yes. Well, maybe I'll start. So first, we discussed this talk through in previous calls and meetings as well. And there's always fluctuations quarter by quarter there. So it's not as easy in real life.
But if you look at the margin
and Sorry, I meant for the full year. Sorry, I meant for the full year on the leverage, not just for the quarter.
Yes. I hear you. But if you look at the development in our margin, so clearly, in the second half of the year, we started to see a more positive development from a margin perspective, and it was more challenging in the first half. We start to see positive impact coming through, 1st from a combination of pricing versus raw materials having an impact. And also start to see more of the savings coming through.
From a drop through point of view, there's always country and business line mix, which is clouding it a bit. But clearly, from a margin expansion point of view, we're going towards the right direction as such. Just to build on that, if you go back, Lisa, I can't remember now exactly how many quarters. There are now a few quarters we've said that our orders received have improved. And before that, they were stable.
And before that, they were declining. So clearly, it's really what's coming through our order book now are the 1st stable margins in the orders received, which has helped us and then leverage, improve our margins now during the second half. And now what we're saying in our outlook is that what's helping our margins in this year is, of course, are the better orders received margins that we have booked during last particularly during the second half of last year.
But does that imply because historically, a lot of the margin momentum or the positive mix across the group was also driven by the fact that China was more above average, I would say, profitability. China was particularly strong this year from a sales standpoint. So does that suggest that from a mix standpoint, when you say there's differences in terms of country mix of business variation that China is maybe not as favorable as what it used to be?
The past, remember the times before 2015, 2016. Clearly, we were at the higher level in pricing, and that has impacted margins as well. It continues to be above the group, but not as much as it used to be in the past. So that's part of the answer. Yes.
I mean clearly, as you know, Lucie, that in the past years, I mean, we continue to have good margins in China, probably slightly above group average. But if we go back 4 years, 5 years, our margins were clearly higher than group average. So clearly that those years, we came down in margin as China. We continued at a good level, but we used to be at an excellent level there.
Understood. And just my last question on China then, if I may. What do you hear in terms of the conversation in the market? Because we have seen, of course, infrastructure being boosted on the back of all of the concern on trade tension. Now the trade tension, I wouldn't say that they have disappeared, but they have certainly stabilized with the deal.
Is there a concern maybe that some of the stimulus on infrastructure and some of I wouldn't say stimulus on the property, on residential property, but clearly we have seen some loosening of restriction in some cities. Is there a concern that now that the trade tension has stabilized, we might have a bit left of a tailwind here in terms of governmental policy?
I think we have to see how governmental policy evolves. I'm not going to speculate what decisions they may or may not take there. I would say that the outlook we have at the moment seems that there continues to be very high activity on the infrastructure side. So I believe it will be another active year in that market, maybe not as fast growth as last year, but at least at a good level. What we can see what is the difference between now and perhaps a year ago is the overall liquidity situation for developers.
It is better both from ability to issue bonds and also general market liquidity. So there are a few things that are maybe better, a few things a bit worse. But overall, expected care is a more prolonged impact from the coronavirus. We expect the market to be stable or could even slightly grow.
Thank you very much.
Thank you. We'll now take our next question from Andre Kukhnin of Credit Suisse. Please go ahead.
Good afternoon. Thanks so much for taking my questions. I will go one at a time as well. Can you talk about the NOK6 guidance first just to understand how much is kind of the coronavirus effect in that? I don't know if you can answer by telling us what it would have been had it not broken out while you were coming up with guidance.
And what is the kind of line of thinking there to the new equipment part of the business given that maintenance and modernization pieces, I think, are kind of largely underwritten for the year, I'd dare to say. So if you could maybe start talking about that, that would be great.
Well, I won't speculate what guidance may or may have been in other situations. We would always give guidance based on what our business and what the environment looks like. But if you look at the Q1, as I mentioned, there will be an impact. It's a little bit too early still to estimate that exactly because, for example, we don't know exactly when customer sites will reopen, will there be a delay to that or not. If there's only 1 week, then as I mentioned, it will be an impact in Q1 and not the rest of the year.
If it's gone, it could be a longer impact. But we are talking about a couple of tens of 1,000,000 on the results side, the impact from here.
That's
Andres, that number can fluctuate still a fair bit based on the how long it will take. And that's what we do now at the very early stage. For the full year, we assume that there's very little visibility for the full year. Yes.
Right. Right now, I appreciate that. And obviously, it's extreme uncertainty and extreme side development. It's just when we look at your business predictability in the past and look back to 'nine, for example, when your backlog did shrink and your orders were down double digits, full on year, you generated 1% growth. I know there was a few factors there that really helped, but it just seems interesting to find out what kind of underlines the lower end of your guidance range in terms of macro assumptions so that we can compare it to our own?
Well, I think
the only thing which I would highlight, if you think about our sales guidance from 0% to 6% is that what has been something which has been a strength in 2019 where we see very strong deliveries in China. So actually, our order book quotation has increased a bit in China, and that's something where we see then a strong sales in 2019. For 2020, we don't assume that, that will change, but it will mean that we have less visibility than we've had in the past, which is something a bit of a change compared to the past.
Got it. Thank you. I appreciate it. And then on the the other question I had was on the comment you made on contract prices or unit prices increasing across new equipment and service globally. I wondered if you could talk more about that.
In service, is this the digital services effect that is adding to it or the new KONE Care? And the comment on new equipment prices or ASPs increasing is quite interesting. We kind of thought about that specifically for China, but it seems to be now a broader development. So I wonder if you could give us more color on that, please.
So when we look at of course, when you look at the whole service portfolio and you look at average prices per service contract, of course, the change is always very, very small because we have a large portfolio behind it. I think the key message is that if you look at the history, we always had a very slight decline year over year because of mix and because of many different reasons. Now actually, we've seen we've been able to turn it in the past couple of years. And I think that's an important achievement. And why have we done that?
Of course, it's all the things you talked about. It's making sure that we serve our customers really well. We have our new Connect Air. We have our 20 fourseven Connected Services. All of these contributed.
And as I said, the changes are, if you look at the whole portfolio, very small, but it's still the direction. It's the right one. And that is what gives us confidence that what we're doing is really taking us in the right direction. Clearly, also on new equipment, as you know, in many countries, costs, particularly installation in many in the Western world, installation is a very significant part of the cost, has increased a lot. But despite that, we've been able to slightly increase margins, and that means that prices have gone up.
And we have been able to demonstrate to our customers the value that we deliver. And I think that is always really where the proof is, you get a premium for your service and solutions or not.
Got it. And last question I had is on the new product offering that you launched in December, the DX range, how kind of substantial is this in the context of overall KONI offers? And does it span your kind of entire elevator product offering? Or is this specific to a certain segment? And does it come with any degree of additional investment that you expect to incur in 2020?
So it spans both our monospace and unit range ranges. So you can say it's the volume offering that it covers at the moment, which is, of course, the biggest part to our what we sell. We're starting in Europe. We will start with some Asian countries later this year and then bring it across the world. And I believe it's actually very substantial.
It brings a totally new flexibility and ability for our customers to upgrade as their needs change or as they feel that they need better or more services. So it is really, in that sense, a totally new era that we're bringing really the elevated world into the digital era. So that, I'm very, very excited about. Of course, when you launch something like this, you have several investments. That's partly what I talked about.
To sell a system, an outcome like this is different than selling products. So we're investing a lot in training and developing our people. We're investing more in many areas to be able to deliver this. And that is what I talked about, some additional costs. But we can see already what we've done in the countries where the early with this is that, that is an investment that I think has a better good payback.
So happy about those type of investments.
And if I may just follow-up on this again to just for us to be able to scale the degree of innovation in this new offer, Would this be comparable to, say, your last product refresh when I recall you did that when your existing offer was already quite competitive, but you decided to push with the new level? Or is this kind of substantial as maybe the machine room with elevator that you came out with? Or is this just more of a kind of facelift add on?
It's more than a it's absolutely more than a facelift. And as I said, it brings now an ability to bring individual outcomes to our customers. And this is what we will sell from here on. So it's definitely much more than a facelift. It's more of a digital innovation rather than mechanical innovation, which the monospace was whole setup and the whole system back then.
So I believe that this is an important innovation, which, again, is going to help our competitive investment and be able to drive a premium. And we can see that even before this launch, our competitors was good. If you look at our growth, if you look at our pricing, which we have achieved with our current before this offering, we have been in good shape. But that is what we need to do constantly. You need to constantly bring in out new generations to stay ahead because we have some very tough competitors out there who are not standing still.
And therefore, we're not standing still, and we are moving forward all the time.
Great. Thank you very much, Henrik and Aker.
Thank you.
Thank you. We'll now take our next question from James Moore of Redburn. Please go ahead.
Yes. Hi, everyone. Henrik, Ilkka and Sanna. I've got a few questions, and I'll go one at a time as well if I can. Starting with Accelerate, I think you've talked about €40,000,000 of restructuring for 2020.
I think you've done €128,000,000 So that's now €168,000,000 in total when you originally talked about €100,000,000 is it fair to say you've delivered €60,000,000 of savings so far with €10,000,000 in 2018, €50,000,000 in 2019 and now we have another €50,000,000 in 2020, so 110% in total. Or is it that there are more savings that this will drive that will drop in 2021? So I just would like to get the scope of savings for the existing. And longer term, should we see annual restructuring charges of €40,000,000 a year? Or is this the new normal?
Well, Matt, maybe I'll start. So first, this is the last year of Accelerate. So the program, as such, will stop at end of 2020. And as said, so we are making good progress in the whole program. And we are doing savings.
If I look at where we are at the end of 2019, so we were cumulatively around about €75,000,000 of savings from the program and expect to get continued good savings, about €50,000,000 in 2020. And like you said, so the total cost for the program are estimated to be a bit more than €150,000,000 at the end of 2020. And nothing drops into 2021? Of the savings. You still have some cost that you incurred in 2020, the benefits also into 2021.
I mean, that's pretty clear. So I think both costs and the benefits are a little bit more than we originally expected. I think overall, therefore, ratio of roughly 1:1 is pretty much intact. We'll be ongoing. I think our commitment is this is the last year.
We have this program. And I think in this world, you need to do constant renewal and restructuring as we all have done. So I can't estimate what an ongoing is, but this program will end at the end of this year. Very helpful. And on your digital solutions and services, you were helpful in saying that could be a bit of a drag on profit this year.
I was a bit confused what you were saying on the service margin, that service margin fell for some time but are now up with digital. I wondered if you could help us with the numbers on what the collective revenue and revenue growth was for COVID Care and 20 fourseven in the full year of 2019. You talked about 1 being a bit above 5% of maintenance, 1 being a bit below in the past. Have we exceeded 10% of maintenance sales yet on those 2, which would be EUR 320,000,000 of revenue? And whatever the EBIT loss was in 2019, could you scale that?
And I'm trying to understand whether the loss in 2020 you're trying to signal will be a bigger loss than that in 2019 or still a loss, but less of a loss. I understand you're in investment mode for something that's growing very excitingly, but just like to try and size the picture. Okay. Well, first, let me clarify a few questions. I think there were many things in your question, but I didn't say that margins have been declining.
I said that the average if you look at Silco portfolio, correct, the average contract revenue per unit had historically been slightly fighting down, and partly was mixed because of more in Asia and so forth rather than U. S. And Europe. And of course, then in South Europe, a very tough pricing environment. That is what we've been able to turn that doesn't mean that margins have been down.
We could still have with productivity, have delivered a better margin. Then 20 fourseven Connected Services and NewConnect Care, we are in both less than 10% penetration. But in new Connect Care, it's actually growing very nicely. But you use that, you change your contract when you either renegotiate your contract or you convert. And what we do in Europe, new contracts, that is what is signed on this contract.
We are not proactively going to change existing contracts that customer is happy to this new way. So that's why it takes time for us, but it's actually growing very nicely and at the pace we had expected. It's still in Europe, it probably has a over 10% penetration today, but not globally because we already started in Europe. 20 47 connected services, we have a penetration. And here, we look at what we have commercially sold as a service to our customers, about 5% penetration of our service base.
It's clear that we then have a much broader base of connected units. That's over 300,000. But when we talk about 20 fourseven connected services, the penetration, we talk specifically about that specific service and how much we have sold as a commercial service to our customers. And in terms of the impact on EBIT, is it a significant negative? Does that negative get worse before it gets better?
I would say that if you look at specifically 20 fourseven connected services, we're probably pretty breakeven on that at the moment. But then, of course, we have many, many new things that are coming and many, many new things where capabilities are building up. So therefore, it's a slight headwind. But I still think when we look at that as an example, we can see that you do get payback pretty quickly. And lastly, if I could, there'd be lots of press stories.
And I understand you'll probably be able to say almost to 0, maybe even 0. But could you confirm that Kona is still in the running for the elevator consolidation with the private equity partner that's been discussed? And if so, could you give us any indication on a timetable on when the bidding rounds that are reported to be in a second bidding round may finish and when we may or may not learn some more? Well, as we have very clearly said before, we don't comment on speculations or rumors in this and who we may or may not work with. What I can confirm is that we continue to be very interested in the asset.
We think that we are objectively a very good partner and a very good buyer for that asset given the complementary footprint that we have, given how we could scale digital services in large group and also the synergies we could create. So we continue to be very interested. We then have to see how this process goes forward. I can't. I'm not going to comment on any timetable that you have to and whatever decisions Thyssenkrupp may do.
They, of course, talked about multiple different alternatives that they have. So they have to make clearly, they have to make their decisions, and they're in charge of process. So I'm not going to comment anymore on a timetable. Very helpful. Thank you.
Thank you. We'll now take our next question
I just wanted to ask on two things to round up maybe some of the commentary. On the commentary on your investments in more technology and digital and some of the initiatives that you've been talking about, when you mean that
you're going to continue to invest, do you mean R and D to sales will keep step will step up from here or that we just sort of have reached the run rate of
R and D to sales to consider going forward? And then I wanted
to ask on raw materials.
I might have missed, but I didn't hear any comments regarding that. And I guess given some of the evolution on steel prices, why would we not be seeing a tailwind in 2020 from raw materials?
Maybe you want to start. Yes, I'll start and then do that. So your question first. So we talked about previously on the R and D, but that actually, we feel more stable as a percentage of sales. So there's some absolute growth, but as a percentage of sales, similar in 2020 than we've seen in 2019.
When we talked about the investments to digital, it's more about go to market and selling capabilities and training our people to have those future capabilities to enable it. So it's a bit 2 different things. And then when it comes to raw materials question, so we are seeing raw materials at this stage for 2020 more neutral, so not the tailwind or headwind. If we look at where the prices are and where we have better visibility, it's in the first half. So it's more neutral.
Maybe there's a potential for seeing more increases in latter part of the year, but let's see how the prices develop in that one. But so far, it's more neutral for 2020. I think as Yirka mentioned, it's R and D. And I think to be completely frank here, our R and D expenditure doesn't capture everything we invest in digital. So we probably have to look at that in the future because when you think about digital, there's parts and R and D part of that.
But as Yuka mentioned as well, there's a huge part of building capabilities, building ways of working and all of that. And that is as substantial as anything you do on technique and technology side. And that is not captured in our R and D expenditure per se. So that's why we are calling it out separately.
We'll now take our next question from Klas Bergland of Citi. Please go ahead.
Yes. Hi, Hendrik Enelke. It's Klas from Citi. So on the operational gearing, so obviously one difference this time I would have thought is the higher cost inflation looking at contractors and the investments in digital. So a question on this, please.
Sales growth in the quarter, solid at 8%. Margin is now up 60 basis points, similar magnitude as in the Q3. Could we talk about the different components a bit more? It seems like the cost side was worse than you perhaps thought at the midyear stage. In the quarter, you'll get off the wage inflation year over year and the cost of contracting.
And how much on top of this annualized should we expect for 2020? For 2019, so if we look at the last half, I wouldn't say that it was much different than what we expected as such, very much aligned with what we expected. What we have commented previously is that if we look at the from a margin comment perspective, we always use the best view we have for the cost when we make the comment. If we look at in the past, it is true that the cost increased more than we expected, but that's more looking at the past. Other than that, I think we did actually, in 2019, we very much aligned development for the second half what we expected.
But turning to 2020, obviously, I mean, if you go back a couple of years, we didn't have the labor shortages on the contracting side. So obviously, that is a new factor to take into account when you look at the drop through. When you look at the 2020 outlook, to what extent I mean, you were very helpful before in terms of like, yes, it might be €20,000,000 to €30,000,000 in the bridge on the contracting side. Could you perhaps help us a little bit on the moving parcels of FY 'nineteen? Yes.
That's fair. So if I think about the impact of cost from both labor and subcontracting, it is not only the inflation percentage when it comes to that. So there is, yes, the increase in cost. But it's also if you don't have enough installation capacity, for example, then you get a bit more over time, a bit less efficiency than you normally would get, and that plays a role as well. But we're talking about some tens of 1,000,000 if we look at the impact in 2020 coming from labor cost and subcontracting cost increases.
Okay. My second one is on digital coming here. I hear you on the investment side, Henrik, but I'm interested to hear on the top line impact. I think last time you said digital boosted maintenance sales by around 1%. What was the impact this quarter?
And could you comment again on the level of connectivity? I understand that monetization of IoT is different compared to the level of connectivity. But that 300,000 number, could we get a sense a little bit region by region? It will be really helpful. I don't have exactly region by region on that now.
If I look at all of our new services that we said that they probably increased sales growth by a percentage point very roughly. I don't think it was that different for last quarter. Probably the largest number of connected units would be where the highest penetration rates would be in Europe to get in earliest, yes, and with many other services. Okay. My very final one is on Accelerate coming back here.
Iike, I mean, obviously, we're towards the end of the program, and we now have more color on the payback. What is the scope now when you've learned through the program, what is the scope to accelerate number 2, I. E, to launch another Accelerate when you look at the scope within the business?
So I
guess we won't stop developing on a forward post Accelerate. The main purpose for Accelerate was that we've had a strategy winning with customers that we've got a good response. And in order to be able to really drive it forward as fast as possible, then the Accelerate program was put in place. And it really is more of a transformation program as we were developing going forward. Going forward, this is the last year of Accelerate, and we'll continue developing Kona forward.
But as program, it will stop. Let's get this
done first,
Thank you.
We'll now take our next question from Edward Perry. Please go ahead.
Yes, good afternoon and thank you for taking my questions. Just starting back in China, what trends are you seeing across different segments of the residential market here, namely sort of Tier 1, Tier 2 versus Tier 3, Tier 4 cities?
That should be the probably higher tier cities that have developed better. And particularly, if we look at the area of 5, 6 mega clusters in China at the moment, and that's where we see most of the growth. And they are clustered around the largest cities and then satellite cities to those. That's where we see most of the growth. Of course, Southern China has perhaps been fastest growing, but we've seen growth in all Tier 1 cities in the past year and Tier 2 as well.
Okay. And I guess back
to margins as well. I mean if
we're not if we're going to
think about margins further forward over the next few years, I suppose 2020 beyond, and of course, the 16% target, which does still stand, do we need to see a return to those China and the equipment margins of 2015 to 2016 to get there? Or are high levels still achievable through alternative means such as those internal efficiencies and digital service penetration?
Well, if you think about our target, so we believe that we can get there even without returning to the levels where we were in China. And if you think about the aim, obviously, we want to drive input margin in China, but clearly, it's a long way to get to where they used to be. But we are seeing good progress from a margin perspective with the new services as a revenue stream but also as a way for us to continue to drive efficiency and productivity in the business. But at the heart of it, growth helps us. Growth in our services business helps us to drive towards the margin target and also the fact that we've been able to continue to differentiate in all of the businesses, which is reflected in what Hendrik talked about in the price per unit discussion.
But it's also good to remember that in our business without balance sheet, the margin is important target, but at the same time, with a low capital tied up to the business, the absolute is also important. So it's important to drive absolute profit improvement for the business. So it's a bit we need to balance between the 2 targets.
Thank you.
Thank you. We'll now take our next question from Lars Bralson of Barclays. Please go ahead.
Hi, Henrik, Ilkka, Sanna. Sorry, I was a bit late on the call, but I want to revert back, I'm sorry, to the bridge for 2020 and specifically the labor inflation you're facing. Ilkka, I think I heard you say a few tens of 1,000,000 on top of 2019. So just to be clear, are we talking something to the tune of EUR 150,000,000 EUR 160,000,000 of sort of total wage inflation. I'm just trying to think of that against a total wage bill of sort of EUR 3,500,000,000 or so.
That will be about 5%. It's quite material, of course. And related to that, Henrik, I mean, what are the bottlenecks you're facing in installation capacity? Is it in China? And are there sort of more structural issues there?
And if that market continues to grow, should we continue to face these headwinds in your Chinese new installation business?
Let me first answer, kind of Scott's question. You can handle then the cost question. If you look at many countries in Europe, you look at China, it is clear that improving productivity in what we do will be important in the future because there is and will be scarcity of employees. You can see from our demographics in China, but also, we can see that who are we competing with for getting the best employees for that type of a job today, There are delivery firms that employ a lot of people and who we may compete with. So we have to compete and our subcontractors have to compete with a much broader pool of potential employers in a broader service economy in China.
But we believe that, that's something that can be dealt with partly through making sure that the way we do our work and our subcontractors do the work is good and also through further productivity. And we believe that there is a lot that can be done in that area. There have been pockets in Europe where, for example, the just growth has been restricted by just how much available capacity there has been. And I think, frankly, this is going to continue to be a driver also in the future in many countries. But again, how are we dealing with it?
We're dealing with just much better planning, driving the productivity, bringing new measures and so forth. So I think it's possible. But what we've seen in the short term is that costs have gone up. And maybe to add to that, so when we comment on the incremental labor cost inflation, so obviously, there's always inflation. And if I look at the past, for example, Asia, we've seen quite a strong inflation in labor cost for quite some time.
But when we are when I'm picking it up as a separate topic, it's more that we're seeing something which is out of the trend that we've seen and as an incremental headwind rather than the normal. And that's particularly, I would say, Europe is one where the inflation has been relatively low now, clearly, more than we've seen in the past.
I understand. Ilkka, sorry to belabor the point, but you were saying incremental. So of course, what we're talking about and the way I have thought about it historically is roughly 3% on your total wage bill gets me to €100,000,000 I think 2019, we talked about a few extra tens of 1,000,000, call it 130,000,000. It sounds like now we're talking about another tens of 1,000,000 to the 150,000,000, EUR 160,000,000 levels. I just want to make sure in absolute terms in our bridge, not incremental, but for the total wage bill that comes through in 2020, that is roughly the order of magnitude?
It's a bad estimate. Of course, the grid always is simply find many things, but I think that's a good estimate. And on digital investment, if
I can just be clear again on the earlier question, what is that, I mean, the incremental headwind coming through in 2020 from an absolute standpoint, your go to market, your training, etcetera? I mean, I think we've talked about adding sort of a €50,000,000 annual spend around R and D and digital. What is the incremental headwind coming through in 2020, if I can?
So in the past, we clearly had R and D and IT coming up. We talked about 50 basis point increase as a percentage of sales, but it's been more stable in last year, and that's what we continue also for 2020. But when we talk about this incremental investment, it's a few tens of millions that we're talking about. That's clear. Thanks, both.
Thank you. We'll now take our next question from Tom Skogman of Carnegie. Please go ahead.
Yes. This is Tom Skogman from Carnegie. I have two questions. If I start with the first one now. I wonder about this margin development, both in 2019 and what you comment for 2020, just on a regional basis.
So was the margin kind of down in or up in China in 2019? And when you look at your guidance for 2020 and based on these comments that pricing has improved, do you expect the margin to improve, especially in some certain geography?
China improved slightly last year, yes.
And in 2020, is the price improvement especially going to lift the China margin again then? Or is it more evenly spread?
I think more evenly spread, particularly China and many European countries. Yes. I would say that we've been making good progress in a number of markets in pricing, not only in China.
And I assume there was also a significant improvement in Americas in 2019 when you have how big growth in delivery volumes are?
North America performed strongly last year again. I would say from a margin perspective, perhaps had been even better in the years before, but we to have very good performance in our North America operation last year.
Okay. And then about this new elevator model, can you help me to understand whether there are some energy savings in the new model as well as another sales argument or whether it's hard to get new savings there? And then on the cost side, how much will the cost of goods sold go down for a basic model, this model basically on the product side but also on the installation side?
So this is more of a value driven launch rather than a cost driven launch. So you should more think about value and what freedom we can get for it. I think that is really the essence of this. It has more technological features than old elevators. Of course, when we bring more intelligence into elevators, we bring better predictability into them.
Always, that is good for sustainability and for energy efficiency. Specifically, in this, we have not had a big leap in energy efficiency. That is something actually we've done every year and we continue to do every year as part of basic improvement of our products. So this launch, you can say, it has more to do with experience for our customers and users is the big thing with this launch.
So there is no big kind of leap in installation efficiency that would mitigate the labor cost inflation, for instance?
That's I would say that is something that has been constantly part of our ongoing development, but not a step change here, no.
We'll now take our next question from Martin Flucicher of Kepler Cheuvreux. Please go ahead.
Thank you for my question. And I've got 3 and I'll take 1 at a time. Starting off with EMEA and apologies if I missed this one because I was kicked out of the line earlier on. Just coming back to the new equipment orders in EMEA, those declined clearly in Q4. Can you talk a little bit about the main drivers for this development?
That was my first question.
Again, as Ilkka mentioned, for orders to see it overall, it was really a question of less major projects. That was actually the same thing across regions.
Okay. Then my second question would be on the of land acquisition area in China. I realize in Q4, it was up a little bit, I think around
6% or so. But overall, it
was down by around 11% in 2019. Now do your have your customers also reduced their land acquisition area? And if yes, have we seen an impact towards the end of the year in terms of their land banks?
The understanding we have from our large customers is that actually they have ample land bank to develop, but that is not a bottleneck for them in capacity. I think what we've seen is that their turnaround times are becoming faster and faster. So from the time you buy your land to the fact that you have your plants ready, you break ground and you order your elevators or any other equipment for that matter. And that is also what we have seen that lead times in China, for us as well, has clearly shortened. And one of the competitive advantages we have in China is that we have a very short lead time from order to delivery, and that is something that many of these large developers expect nowadays, that there are many of them whose business model is very much about speed.
And therefore, our understanding is that LandBank and has not been a kind of bottom line to growth.
Okay. And then my final question. If I look at NBS data to China, property inventories are back on the rise again with floor space buildings sold only flat in 2019. Is this a point of concern for you? Or is it just too early still to draw any conclusions on the new equipment market?
Not at this level, it's a concern. We think the markets, particularly where they're growing, are quite healthy. 1 always has to go quite deep to see where are these and where the market is growing and where is the demand. So the outlook at the moment that we see for the coming year looks pretty solid. Of course, as I mentioned, that this coronavirus outbreak could have an impact.
So is at least early and you're going to have an impact. But what is the longer term impact? We don't know.
Thank you. We'll now take our next question from James Moore of Redburn. Please go ahead. I do apologize. We're taking a question from Magnus Kruber of UBS.
Please go ahead.
Henrik, Ilkka, Nynaeze from UBS on behalf of Guillermo. Just a follow-up on the coronavirus impact comment. I think you mentioned a couple of tens of millions impact on EBIT in Q1. Was that right? And is that part of your full year EBIT guidance?
That is part of our full year EBIT guidance. It is that is the impact. But as I said, that is if we have a weak delay, we could see something like that. If it's then prolonged, it could be something more. So based on what we see today, we believe it's part of our guidance impact.
But then again, we can't predict what the situation will be. Of course, what we can see and what I think is good is that we can see that the authorities have taken very swift and determined action to contain it.
Got it. And would you say this impact would sort of scale in line nearly with the amount of time it takes to resolve?
Yes. Got it.
Thank you so much.
Thank you.
Thank you. We'll now take our next question from James Moore of Redburn. Please go ahead.
Thanks for taking the follow-up. I just wanted to get back into China, if I could, and ask a bit about Giant KONE versus the KONE brand. Last time, I did an update on those with local accounts. I think Giant was roughly 25% of your units, but 20% of revenues and margins were 13%, 14% back when you were making maybe 20% in China as a whole. I just wondered whether the share of revenue and units is broadly similar these days or whether the large developers who I sense are trading up has meant that its share has become a smaller part of your China portfolio.
I guess the margin difference can't be the same as it was. But would it be fair to say that the Kona margin has come down similar to the Kona the giant margins come down similar to the Kona margin? Or how should we think about profitability between your brand structure? It's clear that over the past 2 years, the KONE brand has grown somewhat faster. So the ratio will have changed a little bit, but it's not materially different between the 2.
Yes, we have higher margins in the KONE brand than in the Giant KONE brand overall.
Thank you. We'll take our next question from Andre Kukhnin of Credit Suisse. Please go ahead.
Thank you very much for taking the follow-up. I wanted to come back to digital and thank you for the 2 data points. Could you comment on how the ASV has developed for specifically digital offer through 2019? Has there been any change?
No, it's been pretty stable with overall pricing for it.
Right. And is that ASP different in Asia versus Europe? Or given the difference in maintenance contract values?
It is slightly different, not massively. China is a lower level, but rest of the world, not massive differences. But of course, there are also differences market to market based on the competitive situation and so forth.
Got it. And the 5% that you mentioned for the paid digital penetration, could you give us an idea where that was at the beginning of the year of 2019?
It's of course, it was quite it was low. So the biggest price of the business that we have been doing some percentages. But clearly, most of the growth has been in 2019. We think about the rollout. And it's also one where we started when we talked about it a couple of years ago with Europe, it's been then rolled out.
And March of the morning continues to be growing throughout the year. And what we see in those markets, it takes actually almost a year to really get them to, for marketing efforts, training employees, getting customers used to it, being able to redemonstrate the value. It takes usually a year and then scaling up starts faster. So that's what we can see in many European countries. A little early.
They're actually doing quite nicely in terms of growth right now.
Right, right. So yes, the final bit I had on this was just actually alluding to that is that it seems to imply that from what you've just said, the attachment rate is around kind of 50%, if I look at your new service contract signed and versus the kind of addition to the paid digital service units. They seem to give out 1 half of what roughly I think you signed in terms of service contracts. Is that broadly right? And has that changed as a ratio throughout 2019 in Europe?
What I would say slightly differently is that perhaps the best hit rates we have in new installation, new conversions, then hit rates depend quite a lot on segment outside of that, which will be sell to existing customers. And if there is quite a lot, but clearly, overall, the best
the kind of like for like countries? I mean, I'm not saying about countries where you launched during 2019, but in countries where you already had at the beginning of 2019, did it change through the year?
Clearly, of course, it's improving. That's why we are able to scale the services and grow them quite fast now.
And very final one, if I may. I wanted to just double check on your North America and EMEA new equipment market outlook for stable. It seems a little bit conservative vis a vis the broader construction indicators like permitting and starts and ABIs and dodge. So just wanted to check, is there a particular segment or mix that lead you to that? Or do you see anything in the indicators that is not real?
Actually, if you look at the ADI in the U. S, it's actually been hovering around 50 or actually slightly below 50. So that is clearly indication there. You haven't had much. It fluctuates every month.
But overall, on average, it's been slightly below 50. In Europe, it varies a lot, the growth. So you have growing markets, but you also have markets that are contracting. So overall, we think its markets are pretty stable.
Thank you. This concludes today's question and answer session. At this time, I would like to turn the conference back over to the speakers for any additional or closing remarks. Thank you.
Thank you. A lot of questions today. Many thanks for those. And we are, of course, available to answer any further questions later. But with this, I think we'll close the Q and A session at this point.
So have a nice rest of the week.
Thank you.