Morning, everybody. Welcome to another Croda webcast. As usual, Steve and Jez, and then some Q&A. We'll try and canter through the slides, if you don't mind. We've got them in front of you and the announcement as well. Of course, Q&A very important these days, so we'll take your questions as and when they come. It's been a strong year of progress for the group. We're really happy with the shape of the business. You know, top-line momentum continues. Margin improvement driven by innovation again, and grow- profits growing faster than sales. You know, nice shape to the business. Vintage Croda in many ways. That leads to strong cash generation. Most of our EBITDA converts to cash, and we're using that cash wisely in technology acquisitions primarily.
We've acquired Biosector, which expands our high-value portfolio in Health Care. Really exciting acquisition, which I'll come on to later on. On top of that, there's a shareholder return, a special dividend, GBP 150 million, GBP 1.15 per share. In numbers, core business in constant currency sales up 3.8%, margin improvement 50 basis points, and EPS growth just south of 9%. If you look at the shape of the growth underneath, broad-based growth, we would say is what we look for. You know, it's driven commercially by strong consumer sales growth. Personal Care up 6.8%. Life Sciences, 2.8% when you include the API contract, of course that's now We've had four quarters of that as a negative in the numbers in growth in Life Sciences, as we would expect.
It's similar to Personal Care at 6.7%. The Life Sciences business is very good business for Croda. More moderate growth with Performance Technologies. Across the regions, they're all growing, which is good. Its standout performance, again, is Asia for the company. You know, 7%, we've been very pleased with the recovery in Latin America too, up 9% as well. Growth, again, continues to go up. A lot of hard work involved in that, 28.2% now. You know, more intellectual property in the business, more secure businesses, reducing cyclicality. You know, we're in a better place at the end of the year than we are at the start of the year. Just taking you through the numbers in the sectors. You know, Personal Care, we've been really pleased, again, with the sub-sectors.
There's three sub-sectors there. They're all growing mid to high single digits. Been really pleased with that performance. Yeah, all of them, healthy growth. All regions in Personal Care are growing too behind that. No weakness around the world. The interesting stat through the MNCs are coming back, but they're coming back with a lot of rich technology growth. We've just been coded into one or two big product launches with the multinationals and some of the biggest brands in the world, reformulated by Croda for them with our ingredients in. We're really pleased. That should continue the growth profile across this year as they roll, one or two of them roll this out through their global franchise into 2020. Also on beauty formulation.
Because of that growth coming, you know, it's been mid-single-digit sales growth, it has a minor impact on mix, but the gross margin levels in these formulation businesses is improving all the time. There's a modest mix impact. As a reminder to you all, we just want stable margins here, but we want healthy sales growth. That's what we're getting. This business screens for 33%-34% margins. We would expect margins to be in that period with sales growth, you know, 3%-5% going forward into 2019. If you look at the, as we stretch the growth, you know, we've got this NPP sales growth, which is really strong in this business. That's probably the standout number in the pack.
Up 13% this year in Personal Care. You know, outstanding performance in NPP. It's marching towards maybe 50%. You know, it's 43% now, but in a couple years we won't be far away from 50%. Half this business, 50% of this business in protected technologies. You know, it's a great franchise. We're investing heavily in technologies. We like technologies, but in a Croda way, where we're watching the cost base as well, and we're making sure that profit growth can still come through. Actives, we've doubled our capabilities in France, Sederma, IRB, on stream now, not just production, but R&D. In terms of R&D, we're expanding Brazil and South Africa, getting close to local consumers, local customers.
We've opened a new biotechnology laboratory in the U.K. more recently, and we've got multiple digital projects looking to target our indie, the next generation, customers, indie customers. Personal Care in very good shape. If you look at Life Sciences, in very good shape too. There's a couple of one-offs there. You know, sales have grown despite the PAR effect, 2.8%, which is pleasing. Behind that is good sales growth in Health Care, driven by these high purity excipients, and good broad-based growth across our crop business as well through the year. That's driving healthy sales growth. In terms of the profits, yeah, profits are up 3.1%, and that includes a carrying cost of about GBP 5 million from Plant Impact in there, as you've seen in the release.
Despite that GBP 5 million, you know, we're still growing our profits, and we expect that to moderate through 2019. Jez will talk to you in more detail about that. The impact on margin on Plant Impact is 1.5% in that. It just shows you the pace of the margin improvement in the rest of the business, and that's something to call out. We've been really pleased with the acquisition, as we say. I'll come on to Biosector separately. seed enhancement, Incotec, doubled its profit, more than doubled its profit over the first three years of Croda ownership. We've just started with that business. We're in good shape with that business. We expect that profit growth to continue. Well over GBP 10 million worth of profit in that business now.
You know, Plant Impact, as I said, we're working on streamlining Plant Impact, and it's all about sales growth in that business. It's biostimulants, it's the future of crop care, you know, exciting opportunities there. Life Sciences is in good shape. Performance Technologies, a hat trick, Sergio Agüero type performance. Three successive years of double digit sales growth. You know, really profit growth, really pleased with that. You know, one, two years is good, three years is outstanding. Really, really pleased. It, yeah, it's starting to impress upon Jez and myself the need to invest in this business wisely over the next two or three years. It's a good business. It stands foursquare with anything out there in terms of those returns in industrial markets. Really good.
220 basis points increase in return on sales, up to 18.7%. You know, we'd love 220 basis points increase this year. I don't think we'll get that, we will get margin improvement. We should get margin improvement moderating, we should see sales growth increasing as well to partly offset that. Investing in a lot of good technologies, in particular, energy technologies looks the exciting business in the next year or two. You know, driven by reduction in carbon emissions, big sustainability legislation coming, you know, it's gonna create more opportunities for the group. In good place, Performance Technologies. All around, we're pleased with the performance from 2018, we turn into the year in good shape.
Let me stop there and hand over to Jez.
Morning, everybody. Okay, let's start with the income statement. Sales up to just short of GBP 1.4 billion. That's an increase of 2.9% overall for the group in constant currency. Operating profit, about twice that effect, up 5.8% on the adjusted basis of constant currency. Small reduction in net interest and the overall profit before tax up 6.2% in constant currency to a reported GBP 331.5 million. Looking at the IFRS profit, the difference between those two is the amortization of intangibles. We've got an exceptional item of just under GBP 5 million in 2018. That's for the guaranteed minimum pension adjustment following the Lloyds Bank case.
I'm sure you're seeing that in quite a lot of other companies as well. A relatively small adjustment for us for that GMP effect. Adjusted EPS up by 8.8%. That reflects a lower tax rate, primarily driven by the reduced tax rate in the U.S., that we reported on a year ago. We see that rate going forward just under 25% effective tax rate as a sustainable rate going forward for the group. We'll keep that benefit. As Steve said, we've increased the proposed dividend for the full year by 7.4% to GBP 0.87. In addition, we have the special dividend of GBP 1.15, GBP 150 million. Looking at the sales bridge.
Just decomposing that 2.9% increase in constant currency sales. Beginning with Industrial Chemicals. Industrial Chemicals, we continue to demarket where we can the by-product streams that are within the Industrial Chemicals business. Clearly, we're always quite comfortable for that number to go down because that's the low value product that we make as a by-product of our main business. Steve said, really encouraging solid growth in the core business, adding nearly GBP 38 million, around GBP 38 million of sales. We have a first small contribution from the technology-led acquisitions that we made. Those sales of GBP 8.8 million driven by IonPhasE, primarily, acquisition we did in December 2017. A small impact from the early stage sales from Plant Impact.
The rest of the acquisitions are technology only at this point. No sales involved in those. Overall, that gives us 2.9% constant currency. We have the impact of currency translation. In 2018, reversing the trend of the previous couple of years, we saw Sterling stronger, particularly in the first half, although slightly stronger second half as well. That reduced the reported sales by 1.9% to give us 1% growth in reported currency. If we then look at that on a profit bridge basis, the underlying growth there much faster than the sales growth, so 7.5% profit growth, driven out of the core business. You see a reverse here in terms of the impact of the technology investments.
That's a loss of just under GBP 6 million, as Steve said, very much driven by Plant Impact, the rest being fairly close to neutral. If we combine those two effects, you can see the 5.8% growth. That's the shape we wanna get. 2.9% constant currency sales growth, 5.8% profit growth. That's a good shape for us. We apply the foreign exchange effect of -2.7%, an overall adjusted operating profit in reported currency up 3.1%. If we look at the sectors by, in constant currency now. First of all, Personal Care, really steady growth. The engine of the group in terms of the driving us forward.
Really good to see that profit growth come through almost 5% in constant currency. As Steve said, Life Sciences, good performance, given that we have the two headwinds of the Plant Impact losses and the API exit, of course. We had GBP 12 million roughly of sales in APIs in 2017, completely replaced in 2018. That profit performance is really good, demonstrates the strength of Life Sciences going forward. As Steve said, you know, third year of double-digit growth in both percentage and millions of pounds for Performance Technologies, really good to see that. On Industrial Chemicals, a small reduction in profit there, primarily driven by some difficult conditions in China, which impacted Sipo, because of issues around the rapeseed harvest over there.
We think that will reverse progressively through 2019. Small negative there. Finally, the currency translation effect from the FX headwind. Turning to EPS, a really strong EPS growth reflecting both sales and margin growth here. Overall, you can see the 6.2% constant currency PBT growth. That was roughly equally split between the 2.9% sales growth, so the volume effect there, and then price mix. You know, a good improvement in operating margin from improved mix across the business, particularly in Performance Technologies, driving that growth there. Giving us 6.2% overall.
The tax rate benefit, 2.6% to give us 8.8% constant currency growth in EPS overall before we take account of the FX effect. Very strong EPS performance. Looking at a few of the other key financials. First of all, top left, we have the capital investment. As usual, I've split that between the North America biosurfactant plant, which we completed in 2018. You can see that spend slowed down significantly. Most of that was in the first half year, GBP 33 million. In, we've just shown you everything else that we do in the group. All the other spend on replacement of kit, but also the growth projects that we're running.
We have growth projects running at the moment in Health Care, in high purity excipients, in Smart Materials within Performance Technologies. That's all funded within that GBP 70 million. As a guide going forward, we're expecting 2019 CapEx to be around about GBP 80 million sterling. As a result of the lower CapEx and also reduced tax, particularly in the U.S., associated with building the plant, we saw a steady improvement in the second half year in free cash flow. That's got further to go in 2019 because we've only got sort of half of the benefit there, but a good improvement in free cash flow. Leverage broadly flat around 1.1x at the end of the year ahead of the special dividend.
On the pension side, very minimal deficit there in the context of something over GBP 1 billion of some liabilities. The important thing on pensions is we have no cash deficit funding payments for the U.K. scheme, which is the key scheme in pensions. Finally, just to touch on some of the other components that are going on that have some impact on 2019. The ECO plant, that's our biosurfactant plant in North America, that we've been building for several years, and that's completed from the build point of view, so no more CapEx to go through on that. However, about six weeks into production at the end of last year, we had a small leak of ethylene oxide, which caused us to shut the plant down.
We traced that to a faulty gasket that had been fitted. What we are doing is checking every other part of the installation to make sure that that problem hasn't been replicated anywhere. We know the plant works well. However, we need to do this in a safe manner. Our best view on startup is that we'll do that around the mid-year in 2019. That will have two impacts against what we've guided you to previously. First of all, we indicated that we expected to make about a GBP 3 million profit in 2019 on this plant. That's basically picking up the margin that our current petrochemical suppliers make on the product that we buy in from them and that we're now gonna make ourselves.
That GBP 3 million profit I expect to be halved. Basically, we'll just have that in the second half of the year, if we hit the mid-year start up. About a GBP 1.5 million impact on the profit side. Of course, we have operating costs that we're carrying while the plant isn't running, and those are about GBP 2 million per quarter. If we start at the mid-year, there'll be about a GBP 4 million headwind on operating costs. Overall, compared with where we were when we talked last time, about a GBP 5.5 million, overly precise, but about a GBP 5.5 million impact on 2019 profit from the delayed start up. After that, it should just be timing.
You know, we should catch up and get the products, the new green products, which is the exciting part of this launch. On technology investments, we expect the loss that we had in 2018, primarily around Plant Impact to roughly halve. We had about a GBP 6 million loss, as I showed you on the previous slide. We expect that to be about a GBP 3 million loss in 2019 as we steadily build sales. We expect to be in break-even certainly by 2020. No presentation will be complete without an accounting standard. 2019, we adopt IFRS 16 on leases.
No material impact on the P&L from our adoption of leases, but we do bring about GBP 45 million of leased assets onto the balance sheet, basically properties, warehouses and so forth. So that will increase the debt by GBP 45 million. That's 0.1 of a term of leverage. Fairly small and obviously non-cash from there. Finally, just to give you some guidance there. Those are the average rates that we had on USD and EUR. We probably have about 60% USD, 40% EUR exposure. Right now, Sterling running a little weaker on USD, a little stronger on EUR. As of today, our currency effect would be zero.
Of course, there's a lot of water to flow under that particular bridge before we get to the end of 2019. It will be what it will be. Okay, I'll pass back to Steve for strategy.
Thanks, Jez. Let's take you into the future. As usual, we're investing in the future. We're stretching the growth. It's growing the core, stretching the growth. As a reminder, I keep saying to the board, it's not a Pilates class, part of Croda's strategy. We are investing in innovation is something that's really important to Croda, investing in innovation Croda style. Let me try and shine a light on that. You've seen these six growth buckets before. I just want to spend time on the four highlighted there. Just bring to life that this growth in innovation which is driving this margin improvement, it doesn't happen overnight. There's a lot of hard work behind the scenes. You know, just first step, you know, this is just looking at the internal R&D model in Croda.
We call it the organic R&D model. We've doubled our capabilities in the last four years. You know, 34 laboratories over 17 countries. We're trying to move the R&D brain around the world, connecting to local customers. We've more than doubled our capability in Asia, trebled in North America, and quadrupled in Latin America. That's driving greater local discussions with our customers, their products, their formulations with their team in our laboratories with our ingredients. You know, a perfect model to innovate with them. We're getting a lot of local traction and a lot of good growth. No surprise that we're starting to see good international growth across our emerging markets as well. Yeah, you've seen this as well before, but it's just to highlight the point that there's three legs of R&D growth.
The organic R&D in the sort of top right is the traditional way that Croda's always looked at our innovation. It's internal innovation. It's 100% through the Croda R&D teams working with our sales and marketing teams. You know, over the years, we've added open innovation and technology investment. We're developing a big ecosystem around that, we're working with many partners now around the world. In open innovation, it's university establishments, far and wide. It's industry specialists, startup companies, and we've got some great traction. Very modest investment needed, you get a lot of brainpower, we're renting a lot of brainpower in. They're working on, often some projects that we, bilateral or trilateral projects with our customers and actually some suppliers as well.
Lots of funding available, we're internationalizing that as we roll this out. At the pace of technology investment is increasing too. All of that's adding to this, you know, Croda's got high margins, big intellectual property. It's all about defensive business, but growing in the manner you would expect us to do. The output of that leads to all of that, you know, increased IP, high margins, strong cash generation. You know, it's a model that's delivered year on year, we expect that to continue. If you just look at the stats, some quite interesting stats now. You know, for technology investment, you know, we've done 10 over the last few years, four last year. If you look at the new technologies that we've acquired, it's growing at pace, 250%.
Perhaps the most important one is the bottom left. You know, if you look at the partners we've got now, we've got 463 partners now, you know, sixfold increase in the last five years. These are really intellectual academic partners as well as entrepreneurial partners as well. That's really driving this program underneath. We're very pleased with the leading indicators. If you put that in a funnel, call it the R&D pipeline, we risk weight adjust that, and we can see that in the pipeline for the next three to five years is about 20% sales growth going forward. For a specialty chemical company, that's where it should be. It's significantly more than 20%.
The interesting thing as well with that, not just the number is historically, it used to just all be in one blob called R&D. Now we've got open innovation and technology investment really starting to play through the numbers, and you'll start to see that in a minute. You know, we're really pleased that actually, if there's a take-home message from this slide is not all of the innovation has to come from Croda. You know, we need our partners to help us boost that innovation, and we're starting to get that. Through the sectors, you know, lots of new products which I won't bore you with. Great doubling of NPP sales in the last six years. Personal Care has benefited more from our R&D rollout around the world than any other business.
You know, as we start to connect in those emerging countries, you know, we're getting a lot of powerful engagement with customers. A great example is the case study in Japan. You know, Japan for Croda has been a good growth market. It's always been a big personal care base, but it's been growing about GDP for many years. We turbocharged the laboratory investment there over the last two or three years, put more people in, yet modest in Croda terms, but significant in local terms. You know, you can see some of the engagement numbers. 80% increase in customer contact, 120% increase in projects, we shouldn't be surprised we're getting big double-digit sales growth. We've had that for the last two years in Japan.
That model is something that we're replicating, whether it's Brazil, South Africa, and so on. You know, Personal Care in a very good shape. More and more of the growth in Personal Care will go local, that's for sure. Small, medium-sized customers growing at pace with lots of niche products on the market for country-specific end users. In Life Sciences, it's about acquisitions. We're really interested in looking to turbocharge we call it the breadth and the depth of our technologies. This is probably the most exciting business for the next three to five years in terms of the growth profile. Top left is what we've done with Incotec. I mean, you've heard our story about Incotec, which at Phase 1 was to reposition that business, which we've done.
You know, it's pretty simple stuff, is pointing the R&D at the customers rather than at the factory, globalizing it through our selling network, and pricing the products in a manner that we would expect from these type of technologies. You know, we've more than doubled the profitability, and we're at phase I. We expect that to continue. This is a good, solid, strong growth driver in markets which are growing higher than GDP, you know, which is what we want. The other point I'd draw out is Biosector. You know, these vaccine adjuvants, great business that we bought. Very similar, along the same lines as Incotec. You know, undervalued technology, in very sensitive applications. These products go into about 75% of all vaccines around the world.
You know, if I'm a betting man, we think probably it's gonna be more vaccines around the world in the next 5-10 years than there is today. They'll be incorporated in them. Particularly the human vaccine. They were leaders in human vaccine adjuvants, and we like the growth rates. The compound growth rate is for the next six, seven years. You know, we expect, you know, good growth from that business as we go forward. Usual stuff, make sure the R&D is pointed to the customer rather than the factory, and also make sure we globalize it through the selling network. You know, we like businesses like this, and we're on the lookout for more and more.
Life Sciences, we want, as I've reminded you a few times, we want this sector to be, in absolute terms, as profitable as Personal Care as quickly as we can, and we see no reason why it can't. You get to Performance Technologies. If there's a line for Performance Technologies, all about specialization. It's bringing experts into the business and bringing sophisticated equipment into the business as well to help us drive that NPP growth. I think a good example there is the new lubricant testing laboratory in Singapore. It's called the Tribology Lab. I have to look that up. We did, Jez and myself, but tribology, so it's all about lubricant testing. We're bringing experts into the field and quite rightly, trying to position this business at a high-tech business as well. Very important.
Lots of good growth in other areas too. Finally, digital. I mean, digital, you've got digital in all of your businesses like we have. What does digital really mean? It means lots of different things to everybody. For Croda, it means one thing simply it's connecting better to our customers, making life easier for our customers. We've got a great customer intimacy model with them, but we believe that can be even more sophisticated as we use digital technologies. Looking at different channels to connect with them. We think there's a new customer base out there that's untapped from Croda, and we're using digital and digital strategies to hunt those out and bring new growth to the company. That's really important. Also actually a new product development.
You know, it's starting to speed up new product development. A good example is high throughput screening in our Liverpool formulation lab. You know, now we can stability test formulations which used to take three months will take two hours now. You know, if you start to replicate that into your Personal Care business, you start to think actually, you know, we can move forward with product launches in a much swifter time than we could have done in the past. Starting to really have a positive effect on our new product pipeline too as well. Really important. We're deliberately vague with this because we don't want to tell you too much about it. When it becomes exciting, really exciting, then we'll talk to you.
You know, we've created a digital excellence, center of excellence in the group, with some modest investment, but, you know, big impact potentially. You know, that will roll out through the course of this year too. Digital is becoming an important enabler for Croda. See it as an enabler, but it's trying to connect better with customers and sort of the message from digital for the group. You know, if I try and pull it all together, you know, this, you know, the take-home message from the innovation is, you know, we've got this broad R&D base internationalized now connecting with local customers, and we've now got three legs to R&D. We've got internal innovation, and we add to that open innovation and technology acquisitions. That's driving accelerated innovation. You can see that in the numbers.
Nothing better to show you is than that last stat, 2,000 new customers in the last two years. That model of R&D in the local countries is picking up new customers all the time, and we're increasing intellectual property all the time as well. We're starting to see that open innovation projects are playing their part in the numbers as are technology acquisitions as well. You know, in good shape, and the leading indicators would say that there's no reason why that can't continue through the next three to five years. You know, we just wanna keep propelling this forward. The center of our value is innovation. Let's not forget that. Just turning to outlook. We're in pretty good shape, you know, delivering strong performance. All the sectors are in good shape. We can say that.
All the regions are in good shape as well in Croda too. We're investing in stretching the growth in our modest way and excess capital you see as we, as we're disciplined on making sure we, the capital allocation policy is delivered, excess capital returned. Outlook for the year is, you know, we're pretty confident with the year. It's uncertain out there, but in terms of the shape of our growth, we should expect a similar year to 2018. Let me stop there and take your question. Gunther . You're always first, aren't you?
Trying to. Gunther Zechmann from Bernstein. Can I kick off with two? First off, can you update us how the year has started for you and how we should think about the growth guidance that you've given for the full year, bearing in mind current trading and comps from last year? How would you think about phasing throughout 2019? Then the second on the M&A strategy. You said mainly focused on Life Sciences. You've done a relatively sizable special dividend as well. Is that a continuation of small technology add-ons, or is there anything more lumpy that we should think about?
Okay. I mean, the trading, I mean, how to look at trading for 2019 is very similar shape to what we've seen in 2018. You know, in our minds, it's sort of if you look at it's 3% to 5% sales growth. Yeah, with a bit of margin improvement, that should deliver, you know, a little bit more profit improvement. That's the sort of model for Croda. More second half weighted than first half because of the tough comparators, we would say. In the first half, you know, you can look at the numbers, the reverse of 2018, actually. There's no slowdown in Personal Care, for example, in the second half of the year.
You know, it's just a comps, it was a comps issue second half to the year before. That's how you should look at it. I think in terms of the sectors behind that, you know, we expect Personal Care 3% to 5% within that average. We expect Life Sciences to be probably 5% to 7% this year, and we expect Performance Technologies probably 1% to 2%, you know, along the, towards the bottom end. With margin improvement. We still think margin improvement, but definitely in Performance Technologies and probably a little bit of margin improvement in Life Sciences as well. Shape of that in good. We've started as we would expect, we're bringing into the new year significant margin improvement story from Q4 as well.
While sales were slightly light in quarter four, margins were very strong in quarter. We're very pleased about that, and a lot of that is just the hard work that's going on with this innovation, this innovation model. That was the first point. M&A strategy. Look, I mean, you know, we, nothing big and lumpy. Don't expect that. I mean, we like Incotec-type acquisitions, more of that type Biosector. You know, we're targeting a niche area that is perhaps not in, we're not in at the moment. It's allowing us to globalize this through the network. You know, it's of that magnitude and of that size. You know, it's whether or not we can pick them up at the speed.
The M&A strategy is around Life Sciences and the top of Personal Care as well, you know. If we look at the cash generation in the business over the next three, five years, you know, it's very strong. We're through the, as a reminder to everybody, we're through the capital ramp from the ECO plant. You know, that cash generation, we're just thinking about how do we put that best to use over the period. You know, if we, with Incotec, we can double the profit in about three years, you know, why can't we do that with others as well? Of course, we can. We're interested to do that, but in our own way.
Just a quick follow-up on Incotec. You will drive that business now that it's at 20% EBIT margin more for volume growth. Is that?
Well, I mean, for growth now. We should see sales growth, consistent sales growth and more margin improvement as well coming through. You know, we're there without it being firing on all cylinders, I would say. You know, we're now Classically, we're investing in Incotec, so R&D labs investment in North America and China. You know, we're expecting continued growth in that business. Adam.
Couple of questions maybe related to Jez's area. One on cash flow and the other on Brexit risk. On, on cash flow, am I right in thinking that in the statement you talked about a unexpected increase in inventory, which you're working to reduce in the coming year? I wonder if you could just sort of talk about the context behind that. In the, in the context of Brexit, what are the hard Brexit implications for the WTO costs that you might incur, and what would be the strategy to defray those? Perhaps on the, on the working capital side, what would be the implications for working capital, and perhaps some safety inventory?
Thanks. Thanks, Adam. On cash flow, we had a GBP 69 million increase in working capital. Part of that is explained by the end of the ECO project, because clearly, when you're doing a big construction, you're always carrying quite a chunk of capital creditors. Clearly, at the end of the project, those clear through. About a third of that increase of capital creditors, about a third was receivables, which is a function of the normal growth in the business and receivables days. Looks fine. Really, there's about a GBP 25 million increase in inventory, and that's higher than we would expect it to be. That's really the area I would target for 2019, where we're just making sure that that inventory comes back under, you know, back to the right level.
I mean, our model is one where we primarily make to stock, so we have a lot of inventory close to customers around the world, which is to make sure we can deliver, you know, service in, you know, 8,000 different products. Nevertheless, just felt that it just crept higher than it needed to be. Now, of course, in the short term, coming to your second question, we are actually increasing inventories somewhat anyway. I think that by the end of March, we'll probably be carrying about GBP 20 million-GBP 25 million of extra inventory in a combination of raw materials and finished goods.
Raw materials in the U.K., 'cause obviously it's the U.K. production sites that we're concerned about with a hard Brexit, having enough raw materials, particularly, you know, for the items that come in from overseas, EU particularly. Then, of course, having finished goods, but they tend to be out in continental European warehouses. We're just running some additional safety stocks couple weeks on top of the normal level of cover that we have. Clearly, one would hope that they had cleared through, certainly, you know, by the time we're reporting the year-end and maybe by the half year. They're just a little bit of contingency planning around the hard Brexit.
In terms of the impacts overall, The key flows for us are we have, you know, we make about GBP 225 million of sales value in our U.K. plants. Some of that stays in the U.K., not very much, 'cause the U.K. is only 4% of our total group sales. About GBP 90 million of those sales go from the U.K. to the EU. We have about GBP 30 million coming from the EU sites, plants to the U.K. Those are the flows that we're focused on. About GBP 120 million in flows, and we estimate the WTO effect would be between 3%-5%.
Maybe something of the order of GBP 5 million, GBP 6 million if we ended up in a tariff situation on a hard Brexit. Some of that would be defrayed quite clearly. I mean, you know, we would need to discuss those with customers in terms of those additional costs associated with that. A relatively small number in the context of the group, I think is the key thing. Our contingency planning is all around. You know, we don't see Brexit as a big issue for us, but clearly a hard Brexit and issues at borders, at ports is really what our contingency planning is trying to protect, just to make sure we can keep service levels high to customers in both the U.K. and the E.U.
Hopefully, well, hopefully, we won't go there and, but, you know, we've put the plans in place to try and make sure that we can manage through any disruption.
Andrew.
Thanks. Andrew Stott, UBS. Just a couple things, both on Life Sciences, Steve. I noted in Ashland's release that they've put in a lot of new capacity in excipients, and they had a huge growth rate in Q4. I'm just wondering were there any short-term and medium-term implications of that, or are we talking about different categories? That's the first question. The second question was, I'm not too clear on how the Brenntag Biosector acquisition fits in to Life Sciences. Is it a standalone business unit going forward, or are there some soft synergies there?
Yeah. Okay. I mean, Ashland, it's the Health Care business is in different areas really to Croda. Dental fixatives and the like. There are some excipients in there. I mean, where it is consistent with Croda is the end markets, some of the customers that they're working with. Most of it is, you know, is independent of ours, but it probably tells you that there's quite a lot of growth in the Health Care arena generally, I would say. You know, if you can find it, there's definitely growth there. No real overlap with Croda, I would say by and large. Separately, your Brenntag question. I mean, Brenntag would be a standalone business. Look at it like a high purity excipient business that we've got already. It's got all the hallmarks of that.
Undervalued intellectual property, a dedicated team. There will be some back office synergies as you'd expect from that business. There's a bit of, a bit of cost probably coming out, but not much. It's all about growth. You know, we really like it. Brenntag would be the first to tell you that. Brenntag bought this business not for this part. It was for the distribution arm many years ago, if you read back through the backstory. This business has been really just plodding along, it needs a bit of investment, but it just needs to internationalize and globalize and point it in the right direction. Crucial mission critical ingredients in lots of the biggest vaccines in the world. Big customers and small customers. We like the customer base.
We like the fact it's going into really expensive, finished products. We are, you know, excited about the possibility there. Run separately, but we then see it as another leg of Health Care, really. Charlie.
Thank you. Yeah, Charlie Webb, Morgan Stanley. Just a question, perhaps building on that, the last question there, around the contribution from some of these small bolt-ons and technology acquisitions. Perhaps you can help us with the first Biosector one. What do you expect in 2019? Where do you see you can take that business over the next few years? Also perhaps Plant Impact as well. You know, we were talking about perhaps it can break even this year. Now, not so much the case. How should we see that kind of into 2020 and where we're going?
Fine. I mean, you know, when we look at businesses of this shape or size, you know, we're looking to effectively double the profitability in three years, is sort of our mantra. Incotec is a great example. Nothing happens. I mean, a lot happens in year one, financially, not much happens. Year one is a positioning year because we've got to get the samples to customers in a different way. We've got to price the product in a slightly different way, we've got to look at sort of the marketing data in a different way. That all takes the year to position. Year two and three is when we start to really grow these businesses, it was exactly the same with Incotec.
Biosector will be a positioning year, 2019, with more significant growth beyond that, 2021. Margin improvement, sales growth as well. Plant Impact, I mean, much the same. When we set out Plant Impact is really, we bought advanced research, so we're into biostimulants. The market's moving to biostimulants. We're in early with biostimulants. You know, the way to look at that for 2019 is it just needs sales growth. You know, we've got the cost base where we need it. We've got the samples out to customers. Given it's into a crop end market, sometimes it takes a little bit longer to get products through the approval stage. We think sales will start to come through in the second half of the year rather than the first half.
I mean, the way to look at it from numbers, you know, it's probably carrying a GBP 5 million loss this year. You know, what do we think, Jez? GBP 2 million? Around GBP 2 million? Yeah, if we're, GBP 2 million loss. It's gonna be, there's gonna be a delta positive improvement, but it's not gonna break even, but it's probably start to break even in the second half of the year.
Just on IMPs, anything there?
Well, we can go through it more if you want, I mean, it will be you know, we expect that to be positive, turning positive. You know, small positive improvement. I mean, when you add them all together, they start to have, you know, play their role. It's technology led. Some of it's advanced research, some of it is businesses are just growing current businesses. When we add it together, they all have their role to play. The only real impact we're calling out is the Plant Impact one, 'cause we knew that when we bought it. It's unusual, but it's absolutely the right thing for Crop Protection for the next five, 10 years.
Sebastian.
Just have a question on your innovation pipeline. The more than 20% sales growth that you're indicating there over the next three to five years, how much of that is substituting existing products, and how much of that is really incremental new products?
Good, good question. I mean, most of it is on top. It's supplementary. It's not trying to destroy. I mean, we're very good at destroying our own technology to replace it with our own. You know, the vast majority of that is new on the market for new niches. A lot of what we're working with this, what I'd call the ecosystem landscape that we've got now, is on new. It's creating new markets, rather than destroying existing ones. I would say the major proportion is new. Yes.
Could you benchmark the mix of C rop Protection versus seed care in Life Sciences? Could you talk a little bit about how the reception of the biosurfactants, I mean, what the customer reception is, and how we should think about margin impact over three to five years?
Okay. Well, I'll let Jez do the first one, but let me chip in first on the bio biosurfactants. I mean, you know, it's frustrating that we've got this delay, but, you know, absolutely the most important thing for the group is the safety of our people and just making sure we bring this back online in a disciplined, forensic way. We're pleased with the progress there. Even more pleased with the customer reception's been outstanding. You know, as we get towards the launch, you know, we've been engaging with a lot of the biggest brands in the world, but also a lot of the small and medium-sized players. Broad-based, mainly in consumer, if we're honest. You know, there's no surprise there.
Not just in Personal Care, it's in the home care area as well, you would see in Performance Technologies. Very engaging, we're already into some early stage and medium stage discussions with brand managers about how they position the product. You know, we're very, very confident. The team are very confident that we would hit the ground running with that. It's just it's gonna be a second half effect rather than a first half effect now, which is the sort of message from today. Jez, you wanna talk about the maps on the Biosector? We should look at margins and then-
Yeah, sorry.
Back to the mix.
Could you just clarify your question before I answer?
Can you talk about your ag exposure, the split between the seed protection and the crop chemical?
Yeah. Essentially, the Crop Protection side of the business, the above the ground sort of crop spraying really is probably now about twice the size of the seed enhancement business. Seed is up and coming as a, you know, generally stronger growth. Although, you know, we're seeing sort of mid-single digit growth in the Crop Protection area outside of the current issues in North America between, and then caused, I think, by the North America/China uncertainties and over trade. You know, we are seeing very consistent growth. Indeed, over the last five years, you know, Crop Protection has been pretty much our fastest-growing organic sort of business. Crop continues to grow well, but the seed enhancement opportunity is stronger. Then, of course, we have the biostimulant as the third leg of crop.
We think that can be meaningful in a few years' time. Martin, didn't recognize you there.
BC. Just back on Life Sciences and the sort of expansion into the pharma, vaccine, drug delivery area. We're familiar obviously with the emphasis you've put on agrochemicals, but there now seems to be more mention of the world of drugs generally. Obviously those are very different end markets, but presumably potentially much larger. Is there an increased emphasis on building your position in the pharmaceutical industry now alongside ag? Or is it just opportunistic as and when these smaller deals become available?
No, I mean, the delivery. I mean, we, you know, we spent a lot of time mapping the Sustainable Development Goals onto Croda's business. We haven't really talked about it today, but we're spending an awful lot of time on what does that really mean for Croda in the next five or 10 years, and you're gonna hear a lot more about that. One of the best businesses to be in, we think, for Croda going forward, apart from where we are now, is accelerating into what I'd call the whole life science space. You know, that's as broad as it sounds. Up in the Health Care arena, you know, there's quite a lot of nice opportunities in pharmaceuticals.
You know, I look at vaccines for the next 10, 20 years, and, you know, if you're a betting man, is there gonna be more vaccines in the world in the next, you know, 10, 20 years? I think so. You know, the American government just legislated recently that shingles vaccine should be administered to everybody over 55. You know, great for some of the big companies. You know, you start to look at some big legislation moves like that, you think, "Well, that's great." You know what I mean? It's gonna be, you know, they need adjuvants, and they're the only people that can supply some of them. You know, well-positioned for that. We probably need to bring to life our Life Sciences strategy in more detail with you all, which we will do.
You know, it's got an excitement about it that we, you know, which is classic Croda, which we quite like. Yeah.
Steve, if I could just add a couple points. Yeah. I think, you know, we got into the Health Care area in the sort of standard excipients and in the oral care area and so forth. I think over the last few years, we've seen this growth in, you know, the, in the complexity of drug molecules. When we look at the development, drug development pipeline in terms of what that needs from high purity excipients, that's becoming incredibly exciting for us, which is why we're doubling the capacity in North America for production and we're adding an additional purification technology.
We feel that this is a very exciting space, and therefore, if we can do the same as we've done in crop, which is to grow, find adjacencies and grow more legs, I think that's really exciting and 1 of the reasons that, you know, we do find the Life Sciences space, you know, very exciting and the, and the idea that it could be generate as much profit as Personal Care in due course. It's got a great franchising model as well. You know, it's not just selling prices, it's about license agreements as well. There's potential for lucrative profit shares on top, you know, a bit like what we had with Par, the API contract.
That's what, you know, we're great with adding value, but we think there's another there may be another value stream that we can capture in pharmaceuticals as well.
Hello. Nicola Tang from Exane. Can I ask a question on Personal Care, which we haven't talked about yet very much today? Would you be able to talk a bit about the split between volume and price that you've seen through the year? 'Cause you talked about, you know, significant improvement in formulations, but was that mainly volume? You also talked about the significant pickup in NPP, so was there good price? You also talked about some of the multinationals rolling out some products in 2019 and 2020. How do you expect that to impact both volume but also margin? As you mentioned, it might be margin dilutive.
Well, let me do point two, and Jez can do the mix. I mean, just on the multinational, I mean, of course, we're, you know, we have private relationships with them, we can't talk about it. There's two big global rollouts that are ongoing now. You know, they're in the numbers from 2018, these global rollouts started in the early part of 2018, they're likely to roll out through 2020, shows you how big these are. As one of the big multinationals, you know, you can guess one of the five or six, we, you know, we can't say any more than that. I mean, margin's very similar. The margins in there are similar to what we declare, 33%, 34%.
You know, you'd expect that to come. It's not diluted in that respect. It should boost, as we said, it continues to boost sales growth. You know, it's not just a multinational story anymore in Personal Care. There's a lot of good growth everywhere else too. That will continue. Well, both of them will continue through 2019 into 2020 in the rollout. You know, they tend to, these big companies tend to look at region. They globalize the rollout by individual regions. We've gone halfway around the world. They now need to go halfway around the world with their 2019 program into 2020. Jez on the mix.
Yeah, Nicola, the about 3% price mix, about 4% volume in the Personal Care growth. The price mix obviously the key thing to draw out there is it's not really a raw material effect. You know, we haven't seen particularly raw material inflation apart from in individual sort of pockets of materials. That's very much reflecting this drive in NPP. Basically enriching the quality of the portfolio. On the volume, 4%, you know, strongest growth in the beauty actives, as we generally expect, the top end of Personal Care.
The really encouraging thing over the last 18 months has been the beauty formulation business growing consistently because, of course, that is, you know, 60% of our total sales in Personal Care, and that's particularly where the multinationals, you know, play. The encouraging part is that volume growth is very broad-based. We've got growth in Personal Care across all three customer groups and across all three businesses, and that's a really strong position for us to be in.
Hi. Theodora Joseph of Goldman Sachs. I have a question on your technology acquisition. You mentioned that you have actually identified quite a number of exciting opportunities within the space for 2019. I'm just wondering if the magnitude of loss from Plant Impact, is this considered an anomaly, or should we expect that as you continue making these acquisitions, that we should factor this into your bottom line as well?
Yeah. I mean, it's unusual, but we knew about it beforehand. You know, it was serendipity in many ways that that business came available. It just ran out of cash. We knew that we're probably buying it a year or two earlier than the market wanted the product. You know, and we knew there was a sort of cost overhang because of that. They're more, you know, don't expect too much like that. I mean, most of our businesses that we're buying like that, we call them advanced research, so Nautilus, Enza, the things that we're disruptive technologies for the future, the carrying costs are nothing really. You know, you're buying a few chemists, and you're buying, or biochemists or dermatologists, but you're buying patents really.
They're pretty small scale. What we expect to do pretty quickly is turn them into, you know, products for and commercialize them. You know, if there are one-offs, there may be one-offs going forward, but, you know, they'll be few and far between. If there are, we'll call them out when they come.