Welcome to another day in stock market paradise. I don't even want to ask another question, I won't bother. Today, Lily and I will be joined by Iain Percival, the Managing Director of Essentra Packaging, who will talk a bit about the progress in the last two or three years and the outstanding job he and the team are doing. I have a number of my colleagues around, please feel free to collar us afterwards. Normal format, I'll start by giving an overview. Lily will do a deep dive into the numbers. I will actually talk a bit about the long-term.
When we were in more restructure mode, it was all about the short-term, but we have a hugely exciting business with a fantastic wealth of opportunities, and just try and bring that to life and give you an insight, perhaps, into how the business has evolved strategically as well as operationally. Three key messages, ladies and gents. In the course of 2019, we have significantly simplified, focused this group. We've gone from effectively nine businesses to three global divisions. As I will try and demonstrate, and as Iain will try and demonstrate in the context of Packaging, I think the key is that all divisions are now set well and are beginning to demonstrate organic and inorganic growth. The final thing, notwithstanding some uncertainties, et cetera, is that the underlying performance has been in line or a smidgen ahead of expectations.
When I talked at the interims, I said that we're entering chapter three. Let me remind you what the chapters were. Chapter one was really about saying, we have a business with immaterial downward trend. We need to stabilize that. Additionally, we actually need to figure out what these businesses are capable of and how they can look in the future. That was chapter one. Chapter two was really about continuing the stability journey, getting an inflection point, and actually saying, what do we want to be? What do we want this portfolio of businesses to look like? In the context of that activity, 2019 was very significant. It saw four disposals, it saw three acquisitions, and it saw the announcement of the China joint venture. As I will demonstrate later, we believe that the divisions are on track against our strategic milestones.
I think we've earned the right not just to assess ourselves on how we're performing against backward-looking financial parameters, but it's actually also about saying, as we build the next one, two, three, four, five years, are we on track? Just a quick canter through each of the businesses. Obviously, we'll go into more detail. Components, which you will recall, is primarily linked to the performance of the whole industrial production industry, actually held revenue and margins steady. It is a fantastic business, and its resilience and actually the quality of performance in its customer service angle really did ensure that it held well despite downward pressure from a declining industrial production environment. The three acquisitions that we've done, Micro Plastics, Hertila, and most recently, Innovative Components, are all on track. If you take Micro Plastics, the longest standing acquisition of this period, it's actually exceeding our financial expectations.
Filters, I have been talking to you about the game changers. I said that by December 2019, we would decide whether to fish or cut bait on each of those. Fortunately, we have caught fish of varying sizes, but we do have progress, substantive progress, on all three, and we can talk more about that in a minute, and the margins are held stable. Iain will justify this big statement that this is the best overall performance in packaging since 2015, and I'm delighted to say that Nekicesa, the acquisition that we did in Spain in September, is doing well. Our stability agenda, getting the basics right. Again, I will dimensionalize that, because that has continued its progress on all metrics in all businesses. At the beginning of last year, we started this business process redesign project.
I said, yes, it was about going from 46 or 47 ERP systems to one. It was also about taking the opportunity to. This isn't an IT project. This is actually about designing processes that are joined up, that are efficient, and will enable us to pursue this growth agenda. Linked to that, we will be looking at our G&A expenses. We'll be looking at how we work smart rather than hard. I'll be talking more about that at the interims. Underlying the financials are in line with expectations and underlying profit growth. The thing to remember is that when you look at 2018 versus 2019, we have net sold GBP 8.5 million , GBP 9 million or so million of profit. That's the net of the disposals in year. We will come and hopefully show to you, we expect further progress in 2020 strategically, financially, and operationally.
If you look at the numbers, obviously Lily will cover this in infinitely more detail, 1.5% on an underlying basis in revenue, I'll put that in some kind of historic context. At a headline, 5.2% operating profit down on an underlying basis, 2% up reported operating profit of GBP 80 versus GBP 47. We had a lot of one-off adjustments in 2018. You can see therefore that the reported basic EPS, 14.7 versus 9.3. Net debt is two times after IFRS 16, 1.9 times before. We are maintaining the dividend at GBP 20.7 for the full year. It has been a busy year. Just to walk you through some of the events. In January, we sold the first of what was the specialist components businesses, Fire Protection Technologies. We acquired the balance, which was 49% of our filters, a joint venture in Dubai.
In June, we sold our extrusion business in Holland. We acquired Innovative Components in Chicago and Costa Rica, and we sold Speciality Tapes. June was a particularly busy month for Katrina there. We followed that up by a relatively small divestment of our Card Solutions business. First acquisition in a long time in packaging with Nekicesa, Iain will talk about that. What we did was also transferred Tear Tapes into Filters and moved our Industrial Supply distribution business into Components. The former reflecting the fact that there's a strong overlap in customers. Tear Tapes largest customer base is the tobacco MNCs, and we're already seeing the benefits of actually being able to offer and talk about a broader portfolio, and Reid has gone into Components. Excitingly, we announced the JV in Xiamen at the end of November. I said that I'd try and contextualize this.
You can see at the group level, underlying revenue at -9% became -2%, became +1.4 and +1.5. From the low point of 8.2% operating margin, we continue to increase there. On an underlying, going on to Packaging, in the lower half, you can see that from -9% we have gone up to 5.5%. The financial metrics that we put around the recovery journey on Packaging are 200 basis point- 250 basis point margin and 5%-6% sales. Iain and the team have delivered that, and you can see there we had a 200 bit improvement 2018 on 2017, and then we had a 270 bit improvement. As we will talk later, we remain on track for our stated target of getting to industry standard margins of 8%-10% in 2021.
I'll just spend a little bit of time, if I may, talking about what's been going on in Components and Filters before I hand over to Iain. Excluding Reid, so the bit that was transferred in positive revenue on a like-to-like basis and operating margin broadly maintained. The whole essence of this business is supplying small quantities of small components exactly when the customer needs it and what we call hassle-free service provision. As you see about halfway down, our service levels on time in full have improved by almost two full percentage points to 94.3%. That has been given the complexity of supply chain and given we have no improved systems, that is very major progress. What's really encouraging as well is this NPS, that's Net Promoter Score, which is a measure of customer satisfaction, a record score of 41.
Broadly, I think received wisdom is that if you're anywhere above 30, you tend to be in market share gain territory. Just calling out one particular product category, which we got into through the acquisition of a company called Mesan in Turkey, Access Hardware, and you can see a little picture of it at the bottom right there. Particularly strong, and interestingly enough, the Innovative Components product range is very complementary, and I'll talk about that in a second. This is a business with 10s of 1,000s of products and 10s of 1,000s of customers. Whilst they do not purchase online. Our customers, if they want to find the right spacer bar, the right nylon screw or whatever, will, in the vast majority of instances, go online. Actually having a good state-of-the-art website was a particularly critical challenge.
We invested some GBP 5 million or so in 2019 and have deployed into 10 countries, which is about now, we are up to about three quarters of our revenue. It is like night and day. That we have had very, very positive feedback from. What that does is it enables us, which is probably the single thing if we were going to make anything right, which is cross-selling of categories. We have a whole range of different categories and customers actually need most of the products. Our ability to sell cable management and caps and plugs to the same customer is the simplest, easiest way to make progress. It is so much easier to sell more to an existing customer than to procure new customers.
We talked about the importance of hassle-free service, of actually having the right product in the right place at the right time, and our logistics infrastructure is vitally important for that. There are lots and lots of manufacturers that need distributors. There are lots of distributors that source from other manufacturers. What we have and what makes our business model unique is we have world-class capabilities, both in manufacturing and warehouse. Clearly you can do that through knowhow and through, if you like, the insight of your people, but actually having the infrastructure in place, and you can see there our Houston, Texas warehouse, and it is soon to be joined by a new one in about five months time in Germany. This will simply just enhance our capabilities, and in the Brexit context, it will reduce our reliance on our Kidlington, Oxford warehouse.
We talked about the improvement in service, talked about the fact that all acquisitions are doing well. It is important that we keep doing those kind of Innovative Components type deals. Typically, I've talked to a lot of you about this, we will buy at 7x or 8x multiple. We'll try and get that to 5x or 6x multiple after synergies. If you look at the value that is ascribed on the sum of the parts basis by the analyst community, many of whom are here today, it tends to be valued about 12x or 13x. We refer to it internally as doing a Bunzl. Effectively what we do is we build up a pipeline of invariably private companies, small, mid-cap, and foster those relations. At some time or other, there will be an opportunity to do something structural with them.
The other point, we're one year into our five-year program. We are starting with the financial procurement and then from an operational point of view, our Components business. In that context, the milestones that we set for ourselves in the first year are on track. We talked about Innovative Components. It's in Schaumburg in Chicago. What does it make? It makes knobs, pins and handles. They're not a particularly exciting company, I'm sorry, but that kind of thing really does turn us on. What does it do? It complements particularly that Access Hardware stuff that I told you about. What it does for Innovative Components, they had 10,000 customers for their products, now they have 110,000 customers. We had 90,000 product lines to offer, now we have 100,000 product lines. Order of magnitude. What it also does is adds manufacturing capability in Costa Rica.
There is a phenomenally talented pool of very well-trained young people in Costa Rica. That's a real asset for us in the future. Filters underlyingly a marginal decline in sales, underlyingly much better than the overall tobacco market. The key drivers of that twofold, one of which is China. The joint venture that we announced was important both offensively, also defensively. China perceives the tobacco industry as very important strategically. It provides 8% of all of the Chinese government's income. As we've seen in other strategically important industries, it's looking to internalize it. The fact is that we were selected, blessed by the Chinese state, obviously in a working and in partnership with four of the largest provincial manufacturers. That's a really exciting opportunity and a counterbalance to this internalization trend.
The other point, Lily will talk about it, is that there were some challenging market conditions. Frankly, we chose in light of some compliance issues to actively walk away from business because we would rather lose revenue than compromise the standards and ethics that we set for ourselves. Excluding that Middle East, this business actually showed a positive growth. The really intelligent thing is with the game changers, we believe that for the medium to long term, mid-single digit growth is the kind of par for the course that we can expect in that business, and fitness has done that for the last decade and a half. We talked about the fact that on October the first we integrated Tear Tapes into the division. The expertise has helped improve the operational performance. It is 50% or so reliant on the tobacco industry.
If you look at things like refill tabs, if you look at the kind of ripper tape that you use on Amazon, there is a clear and an emerging and a very distinct trend to broadening that product portfolio without losing focus on the core of that business. I talked about the fact that the China JV had been signed. We had our first major outsourcing over six years, with order magnitude GBP 10 million per annum. I'm delighted to say that this week, we have also had another large outsourcing award with another major MNC, and there are other discussions going on as well. In the next generation product, for those of you who perhaps are not familiar, there are really two kinds of product, one of which is heat-not-burn, or THP, depending on which vocabulary you prefer, and vaping.
The exciting thing, particularly about heat-not-burn, is it's basically a filter with a little bit of reconstituted tobacco. I cannot think of a manufacturer in this space that we are either not providing product to or doing pilot developments with. Clearly, we can only grow as fast as that market is. It isn't a significant part at the moment, but it does also give us strategic optionality and almost strategic hedging. The basics, we talked about stability, strategy and growth. The operational KPIs, and I'll put some numbers around it later, do underpin the fact that we can claim to be genuinely world-class. Just as, if you like, a strategic footnote, we, along with one of the MNCs, is the largest manufacturer now of special filters in the world.
In early January, before you all back away from me, and it's in Xiamen, where there are precisely zero cases recorded, I had the pleasure of formally opening the joint venture led by Fujian Tobacco. You can see in the bottom chart there that although China has about 20% of the world's population, it has 45% of the cigarettes, 5.3 trillion, and the Chinese manage to get through 2.3 billion of those, I believe, something like that, 2.4 billion. Quite a lot of cigarettes. We will own the 49% shareholding, but we have management control, and we will be able to consolidate. The really exciting thing is what we have, and it's the penultimate bullet point in the brackets there. The penetration of special cigarettes is about 4%. It's 4 times that in the rest of the world. Why is that important?
It's important because the whole strategy of China is to increase the revenue it gets by upgrading the product mix. By going from standard cigarettes to ones that have nice shapes or have capsules or slims or super slims or whatever. If you think about the potential there, we derive less than 10% of our sales from a market that, if it goes to normal levels of penetration, should grow fourfold. That truly is a game changer. The plan there is to start with product development and sales, and then we should have manufacturing operational within 12 months. Until then, we will continue to serve it as an export market out of Thailand and Indonesia. That's a little bit about components and filters.
Before we hand over to Lily to do the numbers, I'll ask Iain to come up, please, and tell us about what's been going on in the last few years.
Thanks very much, Paul.
There you go.
After three years, to be able to stand here and say that 2019 was Packaging's best ever year, as you said, it is a pretty bold statement. I hope I am going to do justice and explain just why, not just me, but we believe in our team, that we are delivering the best performance. Importantly, we have got the momentum to continue to drive this business forward. Just the headlines. When we look at the business in 2019, across the broad range of business metrics, not just financials, commercial, operational, people. All of those metrics are moving in the right direction, and I will take some time shortly just to take you through the examples of that. In terms of the headlines, though, Paul already mentioned 2019, we delivered on our commitment of top-line growth of between 5% and 6%, 5.6%.
Remember, we're in the pharmaceutical and beauty secondary packaging markets. These markets typically in packaging are growing at between 2%-3%. Growth of 5%-6% is significantly ahead of the market. Converting that top-line growth profitably into margin improvement, again, for the second year running, delivering more than the 200 basis points, margin improvement. Great results financially. I think we have to say, still a lot of work to do. The momentum that we are building, and we have been building actually for three years, is what's giving us confidence that we're on track to deliver that commitment of getting back to industry average margins by the end of 2021, the 8%-10%. As I reflect what are the things, the drivers that we are focusing on in packaging that is really helping us achieve this turnaround. In simple terms, it's three things.
It's about rebuilding and has been about rebuilding our relationships with our customers, many major pharmaceutical players, many major beauty players, rebuilding those relationships, capturing the growth as a result. It's about focusing on operational excellence, making sure we're doing the basics of quality and service and responsiveness, but doing them exceptionally well. Driving cost savings and efficiency through our 24 manufacturing plants. Last, but by no means least, it's about making sure we reengage with our people who have become quite disenfranchised as I came into the business in 2017, quite disenfranchised by the difficult and complex integration from Clondalkin since 2015. Those are the three drivers, focus on customer, operational excellence, and people. Let me take a few minutes just to add some color as to why I believe we're moving in the right direction on all three. Let's start with the customer.
As I mentioned, many of our customers, major global pharmaceutical and beauty organizations. What do they want? They want strong, capable, reliable suppliers that are able to service their demands and be responsive to their demands wherever in the world they're operating. What we've been doing, actually, even since 2017, as soon as I came in, I spent a lot of time listening to some of our customers. I can tell you the meetings we had back in 2017, Paul was in with me, and many of them, they were far from comfortable. They were telling us a very clear message, "Look, we do want Essentra. We do want you to be a good supplier to us, but right now you're not. You need to fix your basics.
If you can do that, you can grow." Of course, we've been fixing the basics underneath the stability agenda, getting our quality and service right. I'll talk about that in a minute. We also wanted to put in place key account management. What does that mean? It's about putting cross-functional teams in front of our customers to really understand across supply chain, finance, procurement, technical operations, what are the needs of the customer? What is it that they want from their suppliers? How can we, as Essentra Packaging, respond to those needs by identifying a few key projects that we will then work on collaboratively with our customers. Many of those projects relate to the second key theme, which has been around investing in our design hub capability. It's our innovation, our process, and product development center, where we're taking those customer needs and converting them.
For example, developing tamper-evident labels to help our customers on Falsified Medicines Directive. For example, helping our customers on how they generate and produce artwork. Finally, it can be things like going to customer sites and helping our customers make our packaging run more efficiently on their packing lines. Those are examples, real examples of listening to customer needs, translating them through our capability, which we've been investing in, into real tangible results. This focus on listening to the customer, understanding the customer, translating that into real, tangible, value-added, delivery of projects is a key theme that we believe is part of our success. Why are we able to grow faster than the market? Certainly, that success is something we believe has momentum. Now that it's in place, we continue to drive those key things forward. Turning to operational excellence.
Again, from a customer perspective, what is it that they want? They want great quality. Well, we've been measuring quality weekly at every site, ever since the beginning of 2017, having a weekly review of quality performance, understanding where it's not meeting expectations, what are the actions that we need to resolve. This is a big focus. You remember, we're talking about 24 manufacturing sites, all of which are being focused on a weekly basis, for quality service. By doing that process, rigorously following up on quality, identifying root cause of quality issues, implementing corrective actions, we have been able to improve our quality by almost 50% in the last three years, and you'll see a slide later. In terms of agility and service, our reputation actually is a responsive supplier.
To give you a statistic, last year in 2019, we supported our customers with more than 500 new product launches. What does that mean? It means very often we get the artwork delivered to our sites on a Friday. The approval tends to come from the regulators on a Friday afternoon. By Monday, we're trying to deliver product to our customers so that they can pack, fill, and get it into their supply chains, and ultimately, whether it's to a consumer or a patient, get that product into the market to help consumer and patients. Product launches and responsiveness and agility is a real key theme and a key value driver for our customers, and we're very good at it and we've got a good reputation. On the day-to-day side of delivery, our on-time in-full performance improved again, last year, 96.6% across 24 manufacturing sites.
Actually, many of our sites are delivering 98% week in, week out. That's world-class service performance. Great service, great agility, focus on quality, key parts of helping drive that operational excellence. The last point, how do we make sure we drive efficiency from our assets? In this case, the chart is showing you the dramatic improvement that we made in our Americas operations during 2019. Really, this is a program that we put in place back in 2017. You can see we invest in training our people. More than 600 of our employees, that's around 20% of our employees, have been trained in lean techniques, how to help get more out of our existing assets. Some fantastic results. I'll just pick one example.
In Greensboro, which is a literature site in the U.S., a team put together, after this training, so shop floor employees supported by continuous improvement experts, over the course of the year, improved the changeover time of the main press by 10 minutes. 10 minutes doesn't sound a lot. 10 minutes when you're changing over six, eight, 10 times a day, that's an hour, an hour and a half to be able to produce more product out of the same asset at the same cost base. That's an example of driving efficiency, and we're doing that at 24 manufacturing sites. Again, it's not something that's new, specific to 2019. Focus on quality, focus on service and responsiveness, and driving efficiency, that you can see the momentum that is building and we're really gaining momentum.
Finally, last but by no means least, on the people side, when I came in in 2017, it was evident that we needed to re-energize the leadership team. You can see the statistics. More than 50% of the senior leadership team in packaging are new. That complements the talents that already existed in our packaging team. For example, the commercial directors in both Europe and the Americas, highly experienced packaging and pharmaceutical packaging individuals. They know the customers, they know the markets, they know our products. Very quick to boost the capability and the relationship with the customer. Really bringing together and building a really high-performing, capable senior leadership team. Talking to engagement, I know Paul talks in these a lot about engagement, and really value making Essentra sites better places to work. We're really proud in packaging. Every year we've been improving our engagement score.
That's just a number. What sits behind the number is listening to our employees through the survey, identifying three or four actions at every site that we take together with those employees to make those sites, those offices, better places to work, and then delivering on those actions. You said, we did. By doing that, we are improving, and it's tangible. When I go to town halls, it's tangible the amount of engagement that we get from our employees. They're positive, they're motivated, they want to learn, they want to drive this business forward. Finally, on health and safety. We all in Essentra believe that one accident is one too many. We all need to go home safe. What's really encouraging are the 1,000s of observations that our employees are making of their environment to help stop an accident before it happens.
The hundreds of Kaizen events, improvement events, to make their workplaces safer. As a result of that, again, in 2019, we improved our safety performance. It's still ultimately that keeping people safe, making sure that we're engaged, and making sure that we invest and have the right capable skills, key part of how we're driving this improvement in the business. Highlight for me last year, and for all of us in the Packaging team, was the acquisition of Nekicesa. Fantastic business. Great business to bring into the Packaging family. Based in Spain, it gives us the market-leading position in the Spanish market, an important European pharmaceutical market. It brings with it value-added capability, serialization, digital capability.
This is stuff that our customers demand, not just in Spain, but we can use that capability elsewhere in the network, and a fantastic and highly talented management and workforce team to complement our existing talent. Really, it hit the sweet spot on so many angles, and you can see the picture. The only slight down point for a Man United fan was having to go to Real Madrid and spend the first day there welcoming the Nekicesa team to our family, and really sharing between each other what we're trying to achieve. A fantastic day, and you can see the picture there. Again, a great example of starting an integration off in the right way and learning some of the lessons, perhaps from the past.
I hope I've given a flavor and some examples of what underpins the turnaround and the success that we're driving in packaging. It's about the focus on our customers, putting them at the heart of our business. It's about continuing to drive the operational excellence, and it's about really engaging with our people. If we continue to do those three things right, we're still a way from our target, but we're confident we've got the momentum. We're doing the right things, and we're going to get back to that 8%-10% margin. Thank you. I'll hand over to Lily.
Thank you.
Thank you.
Morning, ladies and gentlemen. Glad to be here. Before we get down to numbers for 2019, let me take a moment to reflect on the year for Essentra. As Paul has already mentioned, we had high volume of very successful corporate and business development activities. As a result, our group structure was substantially simplified. Look, as a result of activities, we also last year, you would recall, we disposed just over GBP 100 million of annualized revenue, about GBP 15 million of annualized trading profit, which make it somehow difficult when you do year-on-year comparison. Among that, I would say I'm really pleased with the robust profit delivery, and I'm really pleased with the strong balance sheet position. If you look at it, we delivered both underlying top-line growth and underlying bottom-line growth. Our margin was 9%, 20 basis points improvement.
A strong cash conversion at 82%. We have invested in working capital, supporting Iain's growth, supporting Brexit mitigation, and also supporting the outsourcing deal in Future starting next year. Strong cash at 82%. Now moving down to balance sheet, net debt 2 times after IFRS 16. We recently put in a refinancing for the $ 80 million. If you look at it, Paul has already mentioned dividend maintained at GBP 0.207. We also have steady improvement on growth. Now, among all the positives, it was really disappointing to see the sanction market compliance failures in our Filters business. The impact on the group is immaterial, and I will provide more details in my section a bit later. Turning on to the income statement. At a summary level, underlying revenue growth by 1.5% and 20 basis points margin expansion.
Adjusted EPS at GBP 0.203, a reduction of just under 10% on constant ForEx. The reduction was largely driven by the disposal activities I mentioned. Both Paul and Iain have already mentioned the performance by division, I just pick up a few salient points from my perspective. Clearly a strong performance in packaging, 5.6% underlying growth, thanks to those measures Iain has just outlined in terms of commercial, operational, and people. Despite the macroeconomic uncertainty and also subdued PMI performance, Components delivered a really resilient top-line performance, thanks much to the pricing management. Future's revenue was a modest decline. Paul has already mentioned. I just want to highlight, we implemented a very strict control and compliance framework that delayed certain orders, and our withdrawal from certain customer relationships had a negative impact on the top-line growth.
To Paul's point, we delivered it brilliantly. Overall, a 1.5% growth. I just want to mention both acquisitions performed well in the year. Turning on to operating profit by division. Underlying operating profit grew by 2% with a 9% margin. This was delivered with the 200 basis points margin expansion in Packaging as expected, and 21.3% resilient margin in Component, helped by pricing management offsetting market volume decline. We have seen some margin dilution from the integration of the Reid business and also the Innovative Components acquisition. A flat RP margin for futures, thanks for further operations excellence improvement and offsetting some of the creative margin dilution. I want to point it out to you, the central services cost was just under GBP 29 million. This was GBP 1 million better than my guidance that I spoke about last August.
You would recall that we had highlighted there is about GBP 2.5 million central costs unallocated as a result of Specialist Components business being dissolved. The true like-for-like increase on the central cost from 2018- 2019 was largely driven by higher IT depreciation costs following the investment in cyber and also IT infrastructure. We have put in some new and upgraded skill set in the center to support the business. As Paul mentioned, we will start rolling out our BPR program in the second half of this year. We are commencing a review on our G&A cost. I am expecting our central services cost in 2020 to be broadly in line with 2019. Moving on to the bottom half of the income statement. Financing charge GBP 14.5 million, about GBP 3.6 million higher than 2018.
The big reason there was there's GBP 2 million on IFRS 16 change, and the remainder is because of higher GBP-denominated debt. I'm expecting this number to be broadly flat or with moderate decline in 2020. Effective tax rate 19.9%, firmly in the region of what we guided. For 2020, we expect it to be 19%-20%. We're watching the government budget closely. A minority interest in 2019 reflected a full year of our India JV and a quarter of our Dubai JV. Coming into 2020, it will reflect two JVs, not Dubai JV, but the China JV, as Paul mentioned. So we expect to consolidate our China JV, or it will impact the minority interest line. I have talked about adjusted P&L. Let me spend a moment on our exceptional costs. Sorry.
In 2019, we reported exceptional gain of GBP 15 million, just over GBP 15 million, and largely that's driven by very successful divestments we've implemented during the year, GBP 15.9 million. Now as I mentioned in the interim, the cash tax associated with this was high because the tax base was lower than the accounting base. The benefit was realized in previous years. We also spent a couple of million pounds on other restructuring costs and some integration costs. If you add everything else on the page, there's a credit of GBP 1.6 million. GBP 9 million of credit for certain property provisions relieved was offset by certain costs recognized by the group in relation to the, I mentioned, investigation in the sanction compliance area in the futures division.
Our commitment to ensure a comprehensive review of the past business conduct and full cooperation with the US government is reflected on the number on the page that we spent GBP 3.6 million during the investigation and providing remedial actions. As a result of the investigation, we have made a voluntary disclosure to the Office of Foreign Assets Control, and our discussions with US government continue. Guided by our external professional advisors, we have recognized an estimated GBP 3.3 million financial penalties in our book. We have reviewed our balance sheet carefully, and we repaired GBP 1.6 million specific items from the balance sheet. The time and money we spent is significant in terms of enhancing the processes and conducting the review. The business response has been robust, a very comprehensive compliance transformation program. It is designed to ensure future business safety.
A step change has started, and I'm confident that our compliance culture will continue to strengthen. I covered P&L, both adjusted and exceptional. Moving on to cash flow. As I said in the beginning, 82% cash conversion. A few factors I want to draw your attention to. The operating cash flow adjusted of GBP 72 million. Beyond the aforementioned disposal effect, we also invested working capital supporting in helpline growth. We also invested finished goods, supporting a Brexit mitigation. We also had spent GBP 7 million extra CapEx supporting the first outsourcing deal in filters. Which actually make our CapEx slightly over our guidance of GBP 55 million this year. After paying interest and tax, our free cash flow was GBP 41 million. Linking to my statement of strong balance sheet position at the beginning, our net debt ratio was 2 times after IFRS 16.
Our net debt reduced by about GBP 8.5 million during the year. Our free cash flow in 2019, we recognize temporarily did not cover the full amount of dividend payment within the year. Let me repeat the reasons. There was a disposal. There was four disposals happen in the year. I just remind you, annualized basis, that's GBP 15 million trading profit. Net working capital support, top-line growth as credited, supporting finished goods and component to do Brexit mitigation. Also the GBP 7 million actual investment in Filter's outsourcing deal. With that, continue to drive for growth agenda, and Iain continue to deliver the 5% top-line growth and 200 basis points- 250 basis points margin expansion. We are expecting to rebuild the dividend cover from the P&L perspective, and also we're expecting to get close to if not 100 cash cover by the end of this year.
Wrap everything together, ROIC. It's really pleasing to see in the last three years, ROIC has steadily improving on an adjusted basis. I am confident that we have the right setup to further improve this measure on a steady basis. Why am I saying that? This is underpinned by our very rigorous capital allocation policy. Lately, we established an investment committee process to actually approve all major CapEx spend across group. Let me just summarize my section here. Overall, I would say it has been a very active year for Essentra, and during which all businesses have taken some big steps forward. The group has maintained a strong financial position, and we look forward to delivering further progress this year. With that, I'll hand you back to Paul to discuss further on growth agenda.
Thank you, Lily. Thank you, Iain. If as a Manchester United supporter, you're still drawing attention to Real Madrid, I think you've missed something. You don't look at the table. Growth has to be, you have to earn the right to grow, and you have to get the basics. Otherwise, all you do is you increase the size of the cataclysm when everything unwinds. We talk about stability, strategy, and growth. I'm probably going to retire honorably these slides henceforth because as is demonstrated, I think now we're world-class in many. Dimensionalizing world-class through death by PowerPoint is probably not a productive strategy going ahead. Bear with me very briefly. We've had over the last two years a 50% reduction in both the number and intensity of lost time incidents, as Iain said. That's still 32% too many. As is so much better.
Services is critical. You can see there every division has progressed 96.6% in packaging, 94.3% OEE, and 98.5% in filters. We won't take our eye off it, but actually OEE as a measure now is not the key one. It's when the lead times. We now look to shrink the lead times whilst holding the OEE stable. Quality. This is the incident rate. It's good that it's going down. You can see components has halved. Filters has reduced by a factor of three. Packaging has halved in three years. One of the self-inflicted goals that I talked about in February 2017 was an underinvestment in IT. There are two aspects to that. There's the kind of plumbing with the basics of our IT prevent our factories working or not. Then there's, if you like, the value-added applications. In the former category, can we just do it?
You can see there, let's measure the major incidents. A major incident is an IT issue that closes down a factory or a main function for an hour or more. You can see in two years that's come down by 75%. There is an impact on morale, but also there's a cost benefit of that. Employee engagement, I'm delighted to say we are now probably 65th percentile. We've still got a long way to go. We were probably about 6.5th percentile in 2016. Huge progress there. Oshin, who is in the audience, came in as group HRD and has brought a wealth of experience and skill and has really started building up an outstanding function. How we are managing things now, and you can see that in the bottom right, is the seven-stage employee life cycle from attracting all the way through to people moving on.
Mary Reilly, who has been appointed as board employee champion and has been fantastically zealous in getting out, taking the pulse of our people and really also actively that independent feel to the board as to what our people are really thinking, and sustainability. I'll talk about that in one minute. It would be fair to say that we are part of the way through developing that strategy and those measures, and I'm hopeful that at the time of the interims or maybe slightly later on that we'll be able to be very much more precise. There is a new Sustainability Committee that coordinates at the top of the pyramid all of our activities in ESG. It is not only the right thing to do, but it is the right thing to do.
We are very much linking our initiatives in four areas on the bottom right chart there to those various UN Sustainable Development Goals about responsible resources and energy and climate, so the environmental aspect, people and community, responsible supply chain. We basically process lots and lots of materials from a vast range of global suppliers, and we supply them to 100s of 1,000s of global customers and increasingly focusing on the responsibility of that such as, for instance, the development of environmentally responsible cigarette filters through to potential recycling schemes for things like one-off caption plugs in the auto industry, just two examples of work that we are doing in this area. The other key enabler, and please just focus on the left-hand side. What are the benefits of this business program?
Business Process Redesign program, as you recall, is a five-year program starting with components and then finance and purchasing from a functional point of view. We are succeeding at the moment in spite of our systems rather than with the assistance of our systems. For a company of our size to have 40 flavors of ERP is bonkers with a capital B. That is probably the critical self-inflicted goal that we have still to address what it will do as well, and hopefully I've been able to kind of cover that a bit and the introduction of the benefits as well, is enable the strategy. If we acquire, when we acquire businesses and components for packaging, being able to slot them in.
If we want to make material improvement now on net working capital, it's about joining up and lean and having the ability through a single ERP system to treat our global network, for instance, packaging as a virtual factory. I think how do we get to the next stage of asset utilization and drive up that ROIC overall profit improvement? It's all about lean and redesigning our business model. If we look further ahead, take each of them in turn, components. These were the strategic milestones that we set ourselves. I've talked about the digital platform rollout, a self-assessment there of various milestones and where we think that we are. What is important for 2020? I've talked about this vital muscle in cross-selling, continuing to gain market share.
If you recall, the formula that I said for this business is industrial production output plus 4%, and that's 2%-3% from price, 1%-2% from market share gain. As you can see, the improved pricing discipline which is led by Amir, who's now moved and joined the dark side at Essentra with us here actually delivered well in that space. What is also important is to continue to both increase the functionality and the coverage of the new website. For me, I'm a real sucker for that people who bought this also buy this Amazon type functionality. That's, if you like, the smartest way to facilitate and encourage cross-selling. That will be in the next wave when we go to version 2.0. If you take filters, again, pretty much hitting all the key strategic milestones. What are the challenges there?
Really build on this China joint venture. The opportunity to grow our business in China by a factor of 5- 10 I think is very material. Let's look at the size of the market, look at the inside track we have through endorsement by CNTC and these partnerships, and that 4% penetration compared to the mid-teens penetration in the rest of the world of special products. Outsourcing opportunities, clearly, we've landed a second one tomorrow, and the team has landed a second one this week. To continue to develop these next-generation products. Iain and the teams, he's talked a lot about those. What are the key things? Operational agility. We are so sort of different from a standard, say, consumer goods packaging company. Their back size might be in the $1 million, in the 10s of 1,000s.
It's all about high service levels, high responsiveness, and that customer dialogue to solve problems. I'll give you one example. The most regular query we have at the moment in our design hubs, how do you design plastic out and how do you design cardboard in? It's very much about focusing on the reusability. Hitherto, it's been how do you make it cheaper using less, but I think Iain is fair to say that's the major request we're getting at the moment, and that's fantastic. It's both doing the right thing and also benefiting us, and we are pretty much unique in our ability to do that. Maybe there's one other company in the world that could. It's about really using that key account management structure and design hub to continue this 5%, 6%, 7% growth.
If I look ahead, notwithstanding the macro context, I think that our foundations are increasingly strong. Look, we do have an even stronger hand of cards than we had when I took over in 2017. We've given examples now of customer franchise. People in containers would not give us outsourcing deals worth 10s of millions if they didn't trust us implicitly. I've hopefully shown you that we are class-leading in every business now operationally. You've seen examples of employee engagement and an enhanced pipeline. This is very much the basis across the group now, a kind of five-legged stool, if you can have a five-legged stool, on which we will be building. Yes, of course, there is macro uncertainty at the moment, which has been exacerbated by COVID-19. Please recall the fact that effectively, cigarettes and medicine are broadly non-cyclical.
Yes, we do see that volatility, although we proved our ability to hold in a tough market in components. We expect strategic, financial, and operational progress. We cannot do anything particularly about COVID-19 or industrial production, but what we can do is pull that wealth of levers that are in our control. Again, I won't repeat all of that, but three messages. We are a very, very different, more focused set of global divisions. Those divisions have done all the basics, have the strategies, have the people, have the customer franchise to continue to grow, and underlying the robust performance which nets or maybe margin exceeded expectations. With that, I will take questions, the only two taboo subjects are Manchester United and COVID-19. Anything else, I will happily. James, good morning.
Morning. James Dawson, Numis. I've got three all on filters as it happens.
Sure.
Firstly, can you give us a little bit more background on the compliance issue that Lily talked about and how it was identified and whether there is a risk of further similar compliance issues being uncovered over the course of time? Secondly, on the outsourcing contract that you've trailed today, that you signed this month, how big is that and are there any CapEx investment requirements up front for that contract? Thirdly, just wanted to appreciate this is one of the taboo subjects you've mentioned, but on the China agenda. I think you said that you would anticipate producing first shipments towards the end of 2020. Clearly with the COVID-19 situation, what is the likelihood that that gets delayed and by how long?
Let me do those in reverse. We are continuing to do all of the development work for the China joint venture. If you said, what do I think? Assuming things in the next two, three months stabilize, I reckon you're looking at becoming operational in the first quarter or so of 2021. That's about a two-month delay. It'd be my best guess, who knows what's going to happen with COVID-19. The second outsourcing deal is for at least three years, order of magnitude is GBP 30-ish million. It's broadly the same per annum. It's a minimum of three years. There is no CapEx required. The nature, I'm not sure whether that's sub judice. I've got John in the room. I'll have a go, you just go like that if I'm saying anything too much. Yeah.
It relates to, as we say, the filters and in particular, as we said, it's focused on the Middle East. Having said that, James, what we have done is scrub and review every single possible area of similar risk, whether within that division or in other divisions in kind of theoretical populist territories. We're very comfortable that there is nothing else of that nature. We have put a thorough program, I reckon that we are as, if you like, sensitized and with rigorous compliance processes and review process and approval process as it's almost humanly possible to do. Could I say nothing would ever happen ever again? No. Would I say that it is as clean as any business? Yes. The nature really is in two categories.
There were two individuals who, without reasons of personal gain, as we believe it, if you like, acted in an inappropriate manner. Secondly, there was, in a limited number of instances, a breakdown in the review processes that allowed, if you like, a breach of the ethical standards and legal standards that we expect. Does that clear it, James?
That's it.
Okay. Charles.
Morning, Charles Hall , Peel Hunt. Just two questions on components. You talked about MPS exceeding expectations. Can you give a bit of color as to when that's coming in terms of either sales or margins or operational improvement?
Micro Plastics.
Yep. Secondly, on pricing, is that 2%- 3% of price improvement already baked in? As in you've already put the numbers into the process. It's scary, I'm sure that comes through this year. You commented about Ningbo being back up and running next week. What does that actually mean? Is that a full productive capacity with all your people back? What's the state of orders for that plant?
It will be at 95% capacity. There are nine individuals who are still stuck in Wuhan or whatever. We do track on a regular basis the wellbeing and status of all of our individuals, and I'd like to say everybody is safe and accounted for, and nobody has developed anything. Yes, we will be at 95% of it being back to full tilt on Monday. On Micro Plastics, it effectively is at the level now in terms of margin, having been half that level of the division. What was the third question, Charles, sorry?
Pricing.
Pricing. The reference I made was to 2019, but we are confident that 2020 will follow that pattern as well.
Just lastly, on the roll out of the online platforms, you mentioned got up to 70%.
Yeah
-of revenue. How quickly do you think you'll get up to 100%?
We won't focus on getting it up to 100%. Then we will increase it in two or three other key territories, and then we will focus on doing version 2, because there's actually more leverage in taking it 85% and increasing the efficacy of the 85%, rather than taking it to some of our deeper-tier, perhaps smaller markets. Does that answer your question? Thank you. Over to Tom.
Morning, Tom Sykes from Deutsche Bank. One question just following on from the answer you gave on the lack of CapEx in the outsourcing deal that you announced. Could you maybe sort of help us bridge to a better cash conversion? When you look at the growth opportunities that you have, how capital-intensive do you think those are? You're obviously running at quite a high level of CapEx now, just how we should think about kind of bridge to the better cash conversion.
I think clearly we had a Brexit stock build and the outsourcing, that's probably GBP 10 million or so of non-recurring cash, Tom. We will have profit growth now. Remember we did sell quite a lot, but now you'll begin to see annualized acquisitions and underlying profit growth. I'm very confident with the one obvious caveat. CapEx. Look, if we think that cash conversion is primacy, then we can continue to drive those strategies with a marginally reduced CapEx. I think that the BPR will have a kind of peak expenditure in the next year or so, and then as we deploy, it becomes less capital intensive. I think also we'll try and do things like work on our cash tax bill, et cetera. There's multiple levers.
If the world obviously goes really, really bearish, we will act appropriately. We have levers, we can be more draconian. What we don't want to do, having got the strategies and the building blocks in place, is really to compromise that. In terms of working capital, we have been supporting Iain in terms of doing that, particularly with expenses and product ranges and the customer base.
Okay. Thank you very much. Thank you very much for the packaging presentation as well. Just one assumes you're not at 4% margin in every single facility. It obviously skews. You've got 24 facilities. Maybe give us a little bit of color about how skewed is the incremental improvement going to be? Are there particular facilities, particular end markets, particular customers that you're addressing, which are going to make a disproportionate impact to that incremental change in the packaging business?
The key drive of the recovery is the chart that Iain showed, which was the OEE. It's how much we fill our factories. We do have variations in OEE, but we still have for the runway of over the next two years, we have scope to improve across all of the OEE. There are some sites that are probably due a kind of review of or continuing the review and doing kind of customer margin. If you recall, I said before that there were some customers at a gross margin level who are kind of making nothing or even marginally negative because we priced contracts historically with no cognizance of what the true cost of manufacture was, Tom. I think it's across the board.
If Iain gets that 65 up to 68 or something like that would be, when I go into meetings, I say roughly two-thirds of the margin improvements comes from operational gearing, something like that.
Obviously you're comfortable therefore that the assets which are at a lower level of utilization are servicing end markets which are growing enough and have enough market share gain for you to be able to get that incremental growth.
Absolutely. Yeah, absolutely. I mean, the key statistic is we deal with 19 of the top 20 pharma and medical products companies in the world. We have a 4% market share. We could continue that growth and not get another customer. That doesn't mean we're not going to try and get any smaller customers. Share of wallet creates a similar story to components with cross-selling, actually. I would trade share of wallet for any new customer any day. Yeah.
Thank you.
Anybody else? James, you always come back for seconds. Oh, Michelle.
Obviously, you had a very busy year last year. Now you have a bit of time on your hands, have you got some pipeline of acquisitions to keep you busy this year? Secondly, on packaging, you talked about India in the past as being an area of interest, where have your thoughts gotten on that?
The answer is yes, we do have discussions going on and the team with the divisional heads and Katrina are kind of using the. It doesn't really feel like quiet time at this moment, but using that quiet time to build. Scott Fawcett will be spending a week or two going around Italy and Germany, for instance, in April. Not more than a week, necessarily. Yes, we are making progress. If I take what's important on each division, total is about, I think four things, but those three main changes plus, I really do want us to make progress in environmentally responsible focus. Packaging, yes, we might contemplate something. Iain and the team have a lot to do making Mexico work. I wouldn't see anything until later in the year. Yes, we are having discussions in India.
For components, it's China. For packaging, it's India, I'm hopeful that we could do, not least because our customers want it. The customer overlap with one or two of the companies that we have is very significant. Components, yes, but I'd rather that if they're going to burn calories, they burn them on really landing the business process redesign, building out the website, and focusing on cross-selling and therefore market share gain. Yes, we are talking in three different continents to potential new members of the family, shall we say. Contrary to your perceptions, we still have quite a lot to do on the day job. If you see me on the beach or whatever at 11:00 A.M., you can call. Anything else?
Okay. Thank you very much.
Indeed. We normally go into cyberspace and say, could the clever people at the back check if there's anything in cyberspace? I'm looking. Nobody's waving. Okay. For those of you, I'm sure are firm, there'll be tea and coffee and we'll be here answering any questions. Thank you.