Good morning, everyone, and welcome. I'd also like to extend a welcome to all of those who are joining us on the audio webcast. I'm Nicholas Anderson, Group Chief Executive, and I'm joined here today by our CFO, Kevin Boyd. I will introduce the 2018 full year results. Kevin will explain the financial details, and later, I will again take you through the operations and outlook, maintaining the format that you're already accustomed to. Following all of that, we will be happy to take questions from the room. We are very pleased to report organic growth of over 7% in 2018 , well ahead of global industrial production growth. Total revenues grew by more than 15%. The adjusted operating profit increased by more than 12%, both on a reported and on an organic basis.
The adjusted operating profit margin was 23.0%, a 60 basis point decline due to the currency headwinds and the anticipated full year dilutionary effect from the acquisitions. On an organic basis, the group's operating profit margin increased 120 basis points to 25.2%. Strong organic sales growth was achieved in all three businesses: in Specialties, Watson-Marlow, and Chromalox. I will take you through the segmental results in detail shortly, and I also want to highlight that the integration of Gestra and Chromalox progressed as planned, and both companies are performing in line with our overall expectations. These acquisitions expanded sales by 12% and profit by 6%. The group's net debt at year-end was GBP 235.8 million , representing a 0.8 x EBITDA.
Subject to approval at the AGM on May 15th, the total dividend will increase by 14% to GBP 1.00 per share, and with that, I will now hand you over to Kevin.
Thanks, Nick, and good morning, everyone. As always, the numbers that we will be discussing today are the adjusted results. There are a number of adjusting items this year, and the largest relates to the disposal of HygroMatik. You'll find details of these in the appendices. As Nick said, our organic sales growth was over 7%, with all our reporting segments delivering growth. The impact of currency fluctuations was much less marked in 2018 than in the previous two years, although this year it was a headwind, reducing sales by 2%. The exchange impact on operating profit was higher, reducing profit by 4%, with roughly 2/3 translational and one-third transactional. Net finance expense increased to GBP 10.3 million, primarily as a result of having a full year at post-acquisition debt levels.
IAS 19 pension interest fell slightly to GBP 2 million, and in total, we anticipate a similar charge this year as debt rises with the acquisition of Thermocoax, and we adopt IFRS 16. The overall tax rate dropped 150 basis points to 27.6% as a result of the tax reforms in the U.S. However, going forward, we are anticipating that the tax rate will increase to somewhere in the region of 29% as a result of changes in our internal financing structures and the forecast mix of adjusted profits. And finally, earnings per share increased 13% to 250 pence. This bridge details a GBP 155 million increase in sales to a total for the year of GBP 1.153 billion. Approximately 93% of our sales are outside the U.K.
In 2018 , sterling modestly strengthened against the majority of currencies we do business in. As a result, sales were lower by GBP 21 million due to FX. Organic growth in the Steam Specialties business of GBP 41 million was just under 7%, which compares with just under 5% in 2017 . We've called out organic growth in the Americas due to the Argentine currency devaluation. Excluding this GBP 4.4 million, organic growth in the steam business was just over 6%. Watson-Marlow had another strong performance with 9% organic growth, contributing GBP 22 million.
Incrementally, acquisitions and disposal added a net 12% in the year, comprising the four additional months of Gestra, which joined the group in May 2017 , six months of Chromalox, which joined in July 2017, and one month less of HygroMatik, which left the group at the end of November of 2018 . The net effect of this was an additional GBP 113 million of sales in the year. This next bridge highlights the movements in adjusted operating profit for the year. Starting on the left, adjusted operating profit in 2017 was GBP 235.5 million. Exchange movements decreased profits by GBP 9.7 million, GBP 6.3 million translational, and GBP 3.4 million transactional.
The full year effects of the Gestra and Chromalox acquisitions added GBP 13.9 million, while one month less of HygroMatik reduced profits by GBP 300,000. The Steam Specialties business delivered GBP 25.1 million organic profit growth, with the Americas experience a benefit of GBP 5.2 million from the Argentine currency devaluation, which led to large price increases and in-country foreign exchange gains in Argentina. Watson-Marlow continued to perform strongly, delivering GBP 8.1 million organic profit growth. Excluding the effects of currency and acquisitions and disposal, we saw an improvement in operating profit of GBP 25.5 million, and Nick will take you through the details of this in a moment. This next chart shows operating margin progression over the last 10 years.
Reported margins fell by 60 basis points to 23.0% due to the dilutive effect of a full year of the 2017 acquisitions, the disposal, and currency effects. If we exclude the Gestra and Chromalox acquisitions from both 2017 and 2018, at constant currency, the margin rose 120 basis points to 25.2%. In the Steam Specialties business, the margin increased by 30 basis points to 23.2%, with the full year dilutive effect of Gestra and currency being offset by operational gearing and the gain in Argentina. On an organic constant currency basis, the margin increased by 120 basis points in Steam Specialties. In Watson-Marlow, the margin fell back 40 basis points due to currency. On an organic constant currency basis, the margin actually increased by 50 basis points.
Excluding HygroMatik, which we disposed of at the end of November 2018, and this year's profit boost from Argentina, the margin in 2018 was 22.5%, 50 basis points below the 23.0% reported. During 2019, while continuing to invest for growth, we will look to recover this delta with margin improvements from all three businesses. Turning now to cash. Operating profit to operating cash conversion was 91%, up from last year's 86%. This was due to good control of working capital, despite a growth in inventories in the acquisitions, as they expand their direct sales channels and improve customer responsiveness. On a constant currency basis, excluding acquisition and disposals, working capital as a percentage of sales reduced by 270 basis points.
Going forward, we would expect our working capital as a percentage of sales to increase slowly, as Gestra and Chromalox expand the proportion of their revenues that go through direct sales channels. Capital spend grew by 13%, reflecting growth in the business and a full year of Gestra and Chromalox. This year, we have separated out capital disposals, as it is an unusually large amount, reflecting the sale of our Singapore office and the sale and temporary leaseback of the largest Aflex plant. For 2019 , we'd expect capital expenditure to increase to approximately GBP 65 million , to include the majority of the cost of Aflex's new combined facility that we're building. Free cash flow for the period was GBP 173.8 million , up 28% on the previous year.
The sale of HygroMatik at the end of the year contributed GBP 51.5 million, and we ended the year with net debt of GBP 235.8 million, equivalent to 0.8 x EBITDA. The group remains committed to maintaining a strong balance sheet, and including the additional debt taken on to acquire Thermocoax, we expect the ratio of net debt to EBITDA to be in the region of one at the end of the current year. This slide shows our ten-year dividend history, showing compound annual growth of 12%. We have a record of 51 years of dividend progress, stretching back to 1967, and over that period, the compound annual growth was 11%. We have a progressive dividend policy, where dividend payments follow underlying earnings per share growth while maintaining prudent levels of dividend cover.
In 2018 , we are proposing an increase in the final dividend of 15%. This brings the total dividend for the year to GBP 1.00, an increase of 14%, and maintains dividend cover of 2.5 x. Our capital allocation policy remains unchanged. Our first priority is to invest in ourselves for organic growth. Our second priority is to look for suitable bolt-on or related acquisitions. And then, should net balances, net cash balances accumulate with no significant acquisition in sight, we would seek to return cash to shareholders by way of special dividends, as we did in 2010 , 2012 , and 2014 . However, to be clear, in the near term, we look to reduce our debt levels prior to any return of capital.
This last finance slide looks at the various drivers that influence the operating margin, showing for each item whether they had a positive, negative, or neutral effect on margin. You're all very familiar with this slide, and I wish to remind you that the purpose of each arrow is to provide a purely directional indication of the effect. There's no intent to quantify the impact on margin by each driver, as these can vary over time and between different drivers. In 2019, the two drivers that we see change over 2018 are currency and the impact of acquisitions. If currency exchange rates are maintained throughout 2019, we would not expect a material impact. However, with Brexit imminent, that is a very big if, and the situation is very uncertain.
Acquisitions should also not have a material effect on margins this year, as while the disposal of HygroMatik was slightly dilutive, the inclusion of Thermocoax is mildly accretive, and just for your sake, we're modeling that Thermocoax joins us in the second half of the year, the start of the second half of the year. The net effect of this graph is that we expect to see group margins remain broadly flat, as improvements in the operations counteract the non-recurrence of the Argentine effect and the result of losing HygroMatik. I'll now hand you back to Nick, who will take you through the operations and outlook. Thank you.
Thank you, Kevin. Consistent with previous presentations, I will now cover three main themes with you today. Firstly, I will cover our markets and performance in 2018 . Later, I will share some notable areas of progress, as well as three new customer case studies, and to end, I will summarize the key points and the outlook for 2019 before opening for your questions. You are already familiar with this graph that tracks the quarterly evolution of the annual industrial production growth rates we refer to as IP. As you all know, IP is the best predictor of our markets. Today, I should like to highlight two observations. The first point is that global IP growth slowed to 3.3% in 2018 .
While 3.3% is still a very good level of global IP growth, it represents a 30 basis points decline from the 3.6% growth recorded in 2017. My second observation is that an even stronger global IP growth slowdown is forecasted for 2019. As Oxford Economics' latest forecast indicate a 70 basis points decline to 2.6%. It is still very early in the year, however, I would not be surprised if that IP slowdown increases during 2019, given the higher levels of uncertainty encountered globally. Starting our segmental analysis with the Steam Specialties, Europe, Middle East, and Africa, which includes over 85% of Gestra's revenues. Organic sales were up 4% of constant currency, and operating profit was down 1% organically.
We experienced good organic sales growth in the UK, Germany, Italy, Spain, the Middle East, and Africa. This was partly offset by a small decline in France, that faced a tough comparison to 2017, and in other smaller European markets. The integration of Gestra continues progressing well, and overall performance remains in line with our acquisition plans. In 2018, the total Gestra revenues were up a strong 10%. For EMEA, the additional eight months of Gestra added GBP 29.4 million to sales and raised profits by GBP 3.9 million. The divestment of HygroMatik on the thirtieth of November reduced sales by GBP 1.1 million and profits by GBP 300,000.
During the first 11 months of 2018 , HygroMatik sales were GBP 12.9 million, with an operating profit of GBP 3.8 million. As anticipated, operating profit margins declined 120 basis points organically, due to the increased revenue investments for growth. Including Gestra, trading margins declined by 160 basis points to 20.1%. We remain well-placed and confident of further progress in this region for 2019 , despite increased market uncertainties. In the Asia Pacific segment, organic sales were up 7%, while operating profit was up 13% organically. Currency headwinds reduced sales and profits by 1%, which was offset by similar contributions from Gestra's small presence in the region. China performed strongly in 2018 .
Japan, Australia, and Southeast Asia were also ahead of prior year, while Korea was flat against a strong 2017. Underlying maintenance and operational demand remained robust across the region, while larger project sales were also ahead of the prior year. Strong growth continued in our direct sales and manufacturing company in India, with overall performance remaining in line with our expectations. Our regional distribution center in Singapore, established in 2017 to serve the Southeast Asia and Australasia, is already improving customer service through increased availability and faster response times, contributing to the region's good organic growth in 2018. Operating profit margins expanded by 140 basis points to 27.5%.
Excluding Gestra, trading margins improved by 150 basis points organically, as we benefit from operational gearing, active price management strategies, increased self-generated projects, and a higher proportion of locally manufactured products. We remain well-placed to make further progress in this important region as we continue investing in the implementation of our strategy, despite increased macroeconomic uncertainties. Turning now to the Americas, overall organic sales were up 12%, while operating profit was up 40% organically. Excluding the benefits from Argentina's stronger than expected devaluation in 2018 , organic sales and profit were up 8% and 20% respectively. In North America, organic sales grew a solid 5%. Spirax Sarco USA performed well as strong growth in the direct sales channels supplemented increased demand from distributors. Latin America achieved 22% organic sales growth.
Excluding the GBP 4.4 million sales uplift from Argentina's US dollar-denominated pricing, organic sales growth in Latin America was 14%. Brazil and Colombia performed strongly, while sales growth in Argentina was flat in real terms, despite the challenging market conditions. Gestra, that has a small presence in this region, enjoyed strong double-digit organic growth in 2018, expanding sales growth in the Americas by 2%. Hiter Controls, the Brazilian valve business acquired in July 2016, also had strong double-digit growth and achieved double-digit profit margin in 2018. Operating profit margin was up 280 basis points to 23.6%. Organically, the margin was up by 490 basis points.
However, excluding the GBP 5.2 million benefit from Argentina's stronger devaluation, the organic margin was up 200 basis points to 21.0%, benefiting from operational gearing, active price management strategies, and good cost controls. We remain well-positioned to achieve further progress in 2019 across the Americas, despite continued uncertainties. Chromalox achieved sales of GBP 154.6 million in 2018, ahead of our expectations at the time of the acquisition and beating the expectations we shared at our last interim presentation in August. For reference purposes, sales were up 9% at constant currency compared to the full year 2017, with the year-end order book expanding by 11%. All of this growth came from the underlying maintenance and repair orders, as well as strong growth from the small improvement projects.
The integration continues progressing well, and we stepped up our revenue investments to underpin sustainable organic growth for the medium to long term. These investments include extra direct sales resources globally, seven new sales offices across EMEA, Latin America, and the USA West Coast, as well as launching 14 new products in 2018. We also stepped-up expenditure to improve health, safety, and sustainability, and respond to manufacturing efficiencies and bottlenecks exposed by the very strong demand growth. Operating profit of GBP 22.8 million was 10% lower at constant currency than the comparable period of 2017, as we stepped up revenue and capital investments in support of the current and future sales growth while addressing the manufacturing growth pains. The operating profit margin was 14.7%, maintaining the margin already reported for the first half of the year.
The Chromalox performance in 2018 remains in line with our overall expectations and confirms our good medium and long-term prospects for this business. Watson-Marlow's organic sales grew 9%, with strong contributions from all geographic regions. Currency headwinds reduced reported sales growth to 7%. Sales growth was strong across the Pharma & Biotechnology sector, that accounts for over 40% of Watson-Marlow's global revenues. Good sales growth continued in the food and beverage sector, driven by the innovative MasoSine Certa pump, as well as the environmental sector, due to the extended Qdos pump range. Aflex Hose, acquired in November 2016, has integrated well and is performing strongly, with sales and profit ahead of plan and of prior year. Recently opened sales companies in Ireland, Canada, and the UAE also performed strongly.
In January 2018 , we acquired a small pre-revenue company in Germany to continue expanding the technical capabilities of our peristaltic pumping technologies, further boosting our product development expenditures. Operating profit increased by 11% organically, despite increased revenue investments for growth, while currency headwinds reduced the reported profit growth to 6%. The reported operating profit margin declined 40 basis points to 32.0% due to the currency headwinds. Organically, operating profit margin was up by 50 basis points, as operational gearing and efficiency improvements outpaced the strategic investments for growth. Watson-Marlow's strong organic growth drivers remain solid, and our continued investment in this business positions us well for further growth. During 2018 , we successfully advanced the implementation of our group-wide strategies and achieved notable progress on multiple fronts.
The Spirax Sarco Academy now has more than 1,200 users globally and continues to roll out training modules to customer-facing sales engineers and sales support staff in over 60 countries and in 16 different languages. The academy's web-based platform is also being extended to drive group-wide training programs on health and safety, sustainability, ethics, anti-bribery, and corruption to over 5,200 users globally. We continued our geographic expansion, establishing 5 new operating companies. Spirax Sarco opened new trading companies in Hungary, Romania, and Maghreb. Watson-Marlow started trading locally in the UAE, and Chromalox established a new trading company in Brazil.
Additionally, Gestra established a direct sales presence in Brazil, the Middle East, Southeast Asia, and Korea, while Chromalox established a direct sales organization in the West Coast of the United States and added direct sales engineers in Chile, Norway, Sweden, Spain, and the UAE, that are located within existing Spirax Sarco offices. Our state-of-the-art manufacturing facility in Spirax Sarco, India, has started supplying sister companies across the Steam Specialties business, significantly increasing their manufacturing output volumes. We released 21 innovative new products across all three of our businesses, as we leveraged increased revenue and capital investments in new product development. Lastly, in order to maintain strategic focus on our three core businesses, in November 2018 , we divested HygroMatik for EUR 59 million , representing a trailing EBITDA multiple of 12.5.
On the eighteenth of February 2019, we announced that we had entered exclusive negotiations to acquire the Thermocoax group of companies for EUR 158 million consideration. This will be the first add-on to our Chromalox business that was acquired in July 2017. Thermocoax designs and manufactures highly engineered electrical thermal solutions for critical applications in high added value industries, where the cost of a solution is secondary concern to reliability and performance. Headquartered in Paris, France, Thermocoax has manufacturing facilities in France, Germany, and the USA, and employs over 300 people. Operating through a direct sales model, 2018 revenues reached EUR 49.8 million, mostly to major equipment manufacturers in Europe and the USA.
Adjusted EBITDA 2018 was EUR 12.9 million, and the enterprise value of EUR 158 million represents a trailing EBITDA multiple of 12.2 x. Thermocoax products and technologies will significantly enhance and extend the capabilities of our electric heating business, broaden our customer base, and strengthen growth prospects in Europe and the USA. Subject to the usual regulatory approvals, we expect completion to occur during the second quarter, and for this deal to be accretive to group earnings in 2019. Consistent with previous results announcements, we have included three new customer case studies to help illustrate how our products, services, and self-generating sales strategies underpin organic growth in our three niche engineering businesses.
Full details of these customer case studies can be found in our upcoming annual report, so I will only highlight the main aspects of them here with you today. The first customer case study comes from Watson-Marlow in the USA and describes how our recently launched Quantum 600 bioprocessing pump has reduced by 2/3 the processing time required in the virus purification, filtration, and concentration process of a biopharmaceutical customer. This is another fine example of how our products help customers achieve significant process improvements and cost savings, while preserving the integrity and quality of their product. Today's second case study comes from Spirax Sarco India, where our application engineers designed a bespoke solution to improve the efficiency of a rice mill's dehusking process.
The customer was experiencing frequent plant shutdowns and a higher breakage of rice grains during their milling process, which impacted the quality of the rice they produced and lowered the price the mill could obtain for their product. Our bespoke solution reduced the customer's scrap rates, saved water and energy, improved the quality of their rice grains, and increased the customer's revenues. Today's final customer case study comes from Chromalox in the USA. Our innovative temperature management system, which includes line sensing technology, self-regulating heat tracing cables, and IntelliTrace temperature control panels, ensured a much safer and reliable solution for the customer's LNG processing plant. Also, the customer saved $300,000 during the installation phase and over $200,000 per annum of operating costs.
In summary, with regards to 2018 , we are very pleased to report revenue growth of over 15%, with strong organic growth of over 7% across the Steam Specialties and Watson-Marlow businesses. The group operating profit grew by more than 12% on both an organic and reported basis. The group operating profit margin was 23.0%, and excluding the Gestra and Chromalox, the organic operating profit margin expanded by 100 basis points to 25.2%. The integration of Gestra and Chromalox continued progressing well, and their overall performance remains in line with our expectations. Sales in both companies were better than anticipated, which allowed for an acceleration of the revenue and capital investments that will underpin further growth. In 2019 , global industrial production growth rates are forecasted to slow down further.
We anticipate organic sales growth for the group to moderate in 2019 , off a base adjusted for the divestment of HygroMatik and the devaluation-driven sales uplift in Argentina. We also anticipate that the group adjusted operating profit margin in 2019 will be at a very similar level to 2018 , despite the absence of the higher margin HygroMatik and the devaluation-driven boost from Argentina. Assuming no significant deterioration in trading conditions, the board expects to make further progress in 2019 . Okay, well then, thank you very much, everybody, for your attention. Nice to see you all again.