Ladies and gentlemen, welcome to the SGS 2019 full year results conference call and live webcast. I am Alice, the conference call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. In the interest of time, kindly limit yourself to two questions. Webcast viewers may submit their questions in writing by the relative field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Toby Reeks, Senior Vice President of Investor Relations at SGS auditorium in Geneva. He will now be joined into the conference room.
Dominik, if you'd like to start the presentation.
Sure.
Sure, Toby. Thank you very much. Ladies and gentlemen, good afternoon, and welcome again to the presentation of our full year 2019 results. As usual, I will start with the highlight of our full year performances, then I will hand it over to Dominik to give you a more detailed walkthrough of the financial results, and then I will come back to give an outlook and guidance for 2020. Let me start on that slide. Total revenue grew by 1.2% at constant currency, while the organic growth was 2.6%. Our adjusted operating income stands at CHF 1,063 million, a 4.6% increase compared to 2018. Profit for the period stands at CHF 702 million, an increase of 1.7% compared to last year, and the free cash flow from operation amounts to CHF 870 million, compared to CHF 796 million in 2018.
Our ROIC has improved to 25.5% for the last 12 months. The board of directors is proposing a dividend of CHF 80 per share, an increase from CHF 78 in 2018. This slide shows a little bit the KPIs that we have established in terms of growth, stability, profit, and the long-term value creation of our portfolio for our shareholders. We expect to be able to maintain or improve this performance going forward. Just to give you an indication on what we've done over the last few years. During 2019, we remained disciplined and focused on our capital allocation, deploying it in line with our long-term objectives. During the year, we made 11 acquisitions in six business lines in order to strengthen our portfolio.
The largest of those acquisitions, Maine Pointe, in the U.S., and together with the Linkage, which was the first acquisition we made in 2016, enhance our capability and our strength in the operational consulting area and add additional value to our customers, not just the CBE customers, but across the board of our customer base. Four acquisitions were made in EHS. Floriaan B.V. increase expertise in the fire consulting. Our global laboratory network has been strengthened with the addition of PT WLN Indonesia in Indonesia and Forensic Analytical Laboratories in the U.S. DMW Environmental Safety support our growth in the health and safety sector. This one is based in the U.K. I'll talk about that. After the full year closure, we also announced an additional acquisition in the area of Consumer Retail Services in the U.S. It's Thomas J. Stephens.
It's a company which is specialized in clinical research in the safety and efficacy of cosmetic and personal healthcare products. Combined with HRL, that is an acquisition made a couple of years ago, this would enhance our capabilities and the competence and the service offering in the U.S. market. These are quite good additions to our expansion to the U.S. market. During the 2019 exercise, we also made four disposals. We mentioned earlier through the Petroleum Services Corporation, which is a larger one. We also made the disposal toward end of last year with the vehicle inspection in the U.S. as well, and also dispose of our P2 activities in the Netherlands. The ones that we have not highlighted too much were the small legacy licenses activities that we had in Italy that we dispose of during the first half of this year, I believe.
It's also a rather small unit, and we have not flagged this one. If you take the four disposal together, we are more or less around the CHF 250 million of revenue. This is in line from the numbers I have highlighted during the 2018 investor stage in terms of disposal strategy. Besides acquisition and disposal, the SGS group is continuing to invest in new sectors to position ourselves for the long-term evolutions. A couple of examples just to highlight, our cyber laboratories strategy. We have mentioned that already in the half years. This is a strong development, and the progress in terms of expansion in Europe and in the U.S. is according to our plan. A second development in terms of new business is our Semiconductor industry. We have the new strategy in terms of Semiconductor industry, especially in China.
Some of you that has been with us during the Investor Day of 2019 last year in Taipei, have seen some of the activities that we're performing there. We're trying to expand these kind of similar activities in the Chinese market, which is a quite fast-growing segment. Those two developments, cybersecurity connectivity, interoperability, cybersecurity and data analytics, all that is really in term of development for the long term strategy of the SGS Group. On that, I'm going to hand over to Dominik to go through the financial reviews, and I come back with an update for each of the business line.
Thank you, Frankie. Good afternoon, ladies and gentlemen. I will start with the overview of the financial highlights for 2019. Frankie already mentioned operating highlights in his introduction with revenues of CHF 6.6 billion and adjusted operating income of CHF 1.063 billion. Revenue for the group in constant currency increased by 1.2%, driven by the organic growth in the majority of our segments of 2.6%, partly offset by the net effect of acquisitions and disposals. The adjusted operating income increased by 4.6% in constant currency to CHF 1.063 billion, leading to a margin increase of 50 basis points to 16.1% in 2019.
The strong increase in operating income of 18% in constant currency is a result of the CHF 259 million gain of the disposal of PSC, net of transaction costs in the U.S., partly compensated by provisions for individual taxes considered in the first half 2019, a goodwill impairment of CHF 21 million considered in the first half of 2019. The structuring costs of CHF 89 million, while the vast majority is related to the structural cost optimization program executed in the second half of 2019, and impairment of fixed and intangible assets of CHF 24 million considered in the second half of 2019. The operating profit in 2018, so the year before, was negatively impacted by CHF 47 million in relation to the overstatement of revenues in Brazil. The effective tax rate increased from 24% in the prior year to 31% in 2019.
The increase in the tax rate is due to valuation allowance on DTAs, as disclosed in the first half of 2019. Subsequently, net profit after minority interest increased by 2.6% to CHF 660 million in fiscal year 2019. We posted a moderate organic growth of 2.6%, while acquisitions added 1.1% and the disposals had a negative impact of 2.5%, leading to constant currency growth rate of 1.2%. The negative currency impact of 2.8% was due to a strengthening of the Swiss franc against all major currencies, with the exception of the U.S. dollar. Moving on to the revenue growth by business. Agri Food & Life achieved solid organic growth of 3.8%. Growth in trade and logistic was good, in food solid, and life delivered moderate growth. Our growth in Minerals decelerated as expected throughout the year, leading to a solid organic revenue growth rate of 3.7%.
The growth was primarily driven by the Trade and Geochemistry business, while metallurgy and plant operations declined as a result of delayed projects in a softer market. Organic growth in Oil, Gas & Chemicals was 2.9%. Weight was broadly stable despite a more competitive environment and pricing pressure in several jurisdictions. Upstream achieved strong double-digit growth and strong growth was also achieved in oil conditioning monitoring, while the non-inspection related testing services was stable. Consumer and Retail continues to grow strongly, delivering an organic growth of 5.4%. The strongest growth driver was the Electrical and Electronics business. Growth in Softlines was solid, benefiting from new customers and strong performance of new sourcing countries, including Vietnam, Turkey, Indonesia, and Cambodia, while China remained stable. Hardline achieved strong growth benefiting from increased volume of activity with e-retailers and other e-platforms. CBE delivered double-digit growth of 13.2%, driven by acquisitions.
The organic growth of 1.5% in fiscal year 2019 reflects the fact that we returned to good growth in the later part of the year after the transition period. After a strong first half in Industries & Environment, organic revenues in the second half 2019 declined by 2%, leading to moderate organic growth of 2.3% in our Industries & Environment business. The slowdown in the second half reflects the reduction of exposure to value destroying businesses, leading subsequently to a very strong margin and profit increase. Good organic growth of 4.6% was achieved in Environment, Health and Safety, driven by strong growth in field and monitoring services, as well as health and safety services, while growth in the laboratory services was solid. Organic revenue and transportation declined by 3.7%, driven by weaker demand in field services, mainly related to the supply chain certification as suppliers completed their certification to the new standard.
Regulated services were impacted by reduced volumes on some programs, the completion of a contract, and increased competition in Spain. Revenues in GIS declined organically by 4.8%, reflecting an unexpected change in government policies on import duties in Ghana, as well as lengthy implementation and enforcement of recently signed government contracts, particularly in the e-waste monitoring solution, SGS Renovo. From a regional point of view, organic growth in Europe, Africa, and Middle East was modest with 1.6%. Eastern Europe and Middle East delivered strong high single-digit growth. Growth in North Central Europe was solid, while growth in Africa was held back by the weakness in our GIS and Transportation business. Americas posted organic revenue growth of 2.3%, driven by strong growth in South Central America, and here in particular in Peru, Colombia, and Brazil. While growth in North America was broadly stable.
The good organic growth in Asia Pacific of 4.4% continued to be driven by strong growth in China, Korea, and Vietnam, while growth in Australia was solid, and it was moderate in Taiwan and Japan. Hong Kong and Thailand declined slightly. The development of the headcount is well controlled and contributes strongly to a higher productivity level. At the end of December 2019 versus December 2018, FTEs decreased 4.8%, driven by organic additions of 1.4% and the impact from acquisitions of 0.5%, more than offset by the reduction related to the cost optimization program of 2.3%. The disposals had an impact of -4.4%. From a regional point of view, all regions improved their productivity. The highest productivity increase was achieved in the America segment, which is a function of the structural cost optimization program achieved, but also the impact of the disposal of PSC.
The adjusted operating income increased at constant currency by 4.6%, which reflects the organic increase of 4.8% as the impact of acquisitions and disposals almost offset each other. Currency had an adverse impact of 3.4%, leading to an increase of 1.2% in actual rate and the period under review. The adjusted operating margin Agri Food & Life declined by 20 basis points to 16% on a constant currency basis, impacted by less favorable geographic mix for Agri Food and continued investments to increase capacity and capabilities in the laboratory networks. Margins in Minerals increased strongly by 19 basis points to 17% on a constant currency basis, driven through efficiency benefits and a disciplined pricing structure. Oil, Gas & Chemicals improved margins also very strongly by 180 basis points in constant currency.
The increase is a function of the implemented cost control measures, strong improvement in the Upstream business, and a significant shift in business mix following the disposal of PSC business in the U.S. and the Netherlands. Our most profitable segment, CIS, saw the margin decline of 10 basis points to 25.7% on a constant currency basis. Good margin increases in E&E were offset by strategic investments in new technologies and in cybersecurity. Despite the difficult post-ISO transition market conditions, the adjusted operating income margin in CBE increased by 40 basis points to 20.4% on a constant currency basis, driven by efficiency gains and the diversification into technical consultancy. The significant margin increase of 300 basis points to 12% in constant currency in the industrial business is a result of active portfolio management and structural cost optimization across regions and various management layers.
Adjusted operational income margin, EHS, increased by 150 basis points to 12.4% on a constant currency basis, driven by the operational leverage as well as the benefits resulting from the restructuring of our U.S. operations. The margin decline in T ransportation business is due to the loss of higher margin contract in the regulated and the certification segment. The significant margin decline in the GIS business is primarily related to substantial collection delays, mainly in Haiti and Ghana. Moving on to the balance sheet. The balance sheet per December 2019 compared to the balance sheet per end of 2018 considers the change in relation to IFRS 16, lease accounting standard, and IFRIC 23, which addresses the interpretation of uncertainty over income taxes. Both accounting standards are effective as of January 1st, 2019.
The increase in PP&E of CHF 568 million is explained by the recognition of the right of use assets, which amounted to CHF 611 million as of December 31st, given the introduction of IFRS 16. Out of the lease liabilities of CHF 644 million at the end of December 2019, CHF 154 million are considered as short, while the remaining amount is considered as long-term lease liability. Subsequent to the introduction of IFRIC 23, CHF 40 million was recognized in current tax liability as adjustments in the equity. The increase in goodwill is primarily due to the consolidation of the balance sheet of Maine Pointe. Unbilled revenues, work in progress, as well as trade receivables were reduced compared to the prior year, supporting the strong development of net working capital.
The net debt position for FY 2019 stands at CHF 1.4 billion, considering IFRS 16 or CHF 764 million excluding IFRS 16 compared to CHF 772 million in the prior year. Operating cash flow increased from CHF 1.074 billion last year to CHF 1.149 billion this year. Given the introduction of IFRS 16, the payment of lease liabilities and its interest of CHF 195 million is now shown in the financing activities. The outflow for working capital was with CHF 3 million minor, while we had in the prior year an inflow of CHF 95 million. Taxes paid increased from CHF 265 million the prior year to CHF 306 million. Net investment in fixed assets were with CHF 279 million on a similar level as last year. Cash consideration for acquisitions increased to CHF 169 million, while we had at the same time a strong inflow from disposals of CHF 333 million.
We paid dividends of CHF 589 million in the first half 2019 and paid back the Swiss Franc Bond , which was due in the first half 2019 for a consideration of CHF 375 million. The management of net working capital continues to be a very strong feature of SGS. After strongly improving the operational net working capital in the prior year to 0.6% of revenues, we continue to further improve the net working capital as percent of revenues to 0.3%, which is primarily related to strong management of unbilled revenues, work in progress, as well as the trade receivable position. CapEx for 2019 was at 4.4% on a similar level like last year. For 2020, we expect an acceleration towards the higher 4% area supporting our growth initiatives.
While our margin expansion in the first half 2019 was with 20 basis points held back by bad debt provisions, we achieved in the second half 2019 a strong margin uplift of 90 basis points despite a deceleration of organic revenue growth. The improvement in the second half of 2019 is primarily related to the structural cost optimization program and the disposal of the PSC business. While the positive impact of IFRS 16 was offset by bad debt provision, for which we expect collection to improve in the year 2020. We are pleased to confirm that the cost optimization program aiming at simplifying the business by eliminating duplications and reducing layers within our organization was fully executed at year-end. The incurred cost for the program stand at CHF 73 million, pretty in line with the estimate provided of CHF 75 million.
We expect annualized recurring savings of above CHF 90 million, out of which CHF 15 million are already achieved in the second half 2019. The full benefit of the program will be realized in the course of the first quarter. The implemented EVA recovery plans started to contribute positively to our recent performance, benefiting from considered closures, but also underlying improvements within the businesses in scope. In respect of active portfolio management. We recently strengthened our portfolio with the acquisition of Stephens in the U.S., especially in the cosmetic segment. The disposal of the pre-owned vehicle inspection operations in the U.S. will strengthen our return profile, especially in the U.S. Finally, we expect a solid cash inflow from the disposal of the non-core activity related to pest control in the first quarter 2020. In summary, our financial performance for 2019 looks as follows: We achieved an organic growth of 2.6%.
Our adjusted EBIT increased by 4.6% in constant currency, resulting in a margin increase of 50 basis points to 16.1%. The profit for the period increased by 1.7% to CHF 702 million. The board is proposing a dividend of CHF 80 per share. Before I hand back to Frankie, I would like to take the opportunity to thank all our colleagues around the world for their commitment, their dedication, and their hard work to achieve the set of results which we present today. Thank you.
Thank you, Dominik. Let me walk you through each of the business lines in terms of outlook for 2020. Let me start with Agriculture, Food & Life. It's always difficult to predict crop and trading conditions for the agricultural sectors. For the moment, from what we've seen, we're looking at a similar market condition as in 2019. Testing and auditing activities for food are expected to remain good moving to 2020. Life sciences should recover from some short-term contract delays and accelerate back to normal growth level in 2020. On the overall for AFL, I'm looking at an acceleration of growth in 2020. Minerals. The Minerals sectors was under pressure moving to second half of 2019. I am expecting the situation to be similar moving into 2020.
Exploration is expected to be relatively subdued in 2020, but our Geochem on site laboratory strategy should provide good stability and predictable volume, and the same is expected for my trade service portfolio. Overall for Minerals, I'm looking at a slightly lower growth in 2020 than 2019 considering the overall market situation. For Oil, Gas & Chemicals, OGC overall market condition remains soft. However, the trade activities remain stable in H2. Conditions should be similar moving into 2020. Upstream activity should provide some good upside momentum with new contracts expected in Africa and Middle East. Overall for OGC, I'm expecting an underlying growth level similar to 2019 for excluding PSC. A good growth indicator is second half of 2019 for you to consider. Consumer and Retail.
Again, assuming that the tension between the U.S. and China stays at the current level, I'm expecting the performance of CRS in 2020 to be similar to 2019. The portfolio mix may change slightly with faster growth in cosmetic and personal care and 5G testing, and mixed growth in the more traditional softline and hardline sectors. CBE, Certification and Business Enhancement. For CBE, the effect of the ISO 9001:2015 transition should be fully behind us moving into 2020. The pipeline for our operational consulting activity is very strong. Overall, I'm expecting a strong growth for CBE in 2020. Industries & Environment. As Dominik just mentioned now, the focus of Industries & Environment in 2019 was to rebuild its portfolio and a focus on improving profitability. Looking at the strong marginal performances in H2, I think we have achieved this goal. The level of margin is sustainable and will increase further.
Considering our strategic decision to discontinue several maintenance contract in South America, the closure of our pipeline and non-destructive activities in the U.S., Also the additional discontinuation of several low profit contracts in Europe during second half of 2019, I'm expecting the growth of industrial to be negatively impacted until Q3 2020. Health, Environment, Safety. EHS had a overall strong year in 2019. Market conditions are not expected to change significantly in 2020. Together with the additional competence acquired through the four acquisition of 2019, I'm expecting a strong 2020 for EHS similar to the level that we have seen in 2019. GIS, Government Institutional Services. As Dominik mentioned as well, in these sections, we have faced some long delay in implementation of several projects, especially related to SGS Renovo, the e-waste programs in Africa. The result for H2 was certainly disappointing.
Moving to 2020, we have better visibility on startup of several smaller new contracts but remain cautious with the implementation of some of the larger ones that did not happen in 2019. I am rather cautious for the first half of the year, improving the second half. Overall, I'm looking at a soft full-year growth for GIS. Transportations. The regulated and fuel services is still under transition period and ending of contract in the U.S. and more competitive landscape in Europe with changes of market conditions. This should be a drive for the growth in 2020, but should improve throughout the year. The testing activity should see some good growth with additional testing capacity in Germany and India coming on stream. Overall, I'm looking at a broadly flat growth and improvement compared to last year. Just some additional remarks about transportations.
As part of our strategic business review, I have decided to break down our Transportation business unit into four strategic segments and integrate them with all the business lines. The larger regulated business will go on the GIS, while the testing and field activities will be integrated with Industrial. Consumer will absorb some of the testing activities related to chemistry and on-board electronics, while CBE will absorb the certificate activities. The purpose of this change is really to optimize our market approach. For instance, for our regulatory services, our customers being the government, it is natural that we focus one of our business unit, GIS, to deal with this client base and try to optimize our synergy across the different government departments. There is also a geographical synergy between those two businesses.
For the remainder of the transportation activities such as aerospace, automotive testing, and rail, these will be joined by our industrial services. As we evolve in our strategy, it is clear to me that the conversions between the broader material testing or industrial and the more specific material testing or transportations will converge together under this logic for optimizing the operational delivery of those activities. The labs at the operational level have been merged, and we will develop the transportation unit under Industrials to do the sales process. With these changes, we will now be reporting separately on Transportation starting the first half of 2020. Before I go into the outlook guidance for 2020- 2019, just in term of margins.
In terms of margin for all the business lines, considering the optimization plan, the efficiency schemes that we have put in place, like the World Class Services, our constant dashboard review, and optimization of our portfolio, I'm expecting all the business lines to improve their margin in 2020, and I will remain very confident regarding our 17% adjusted operating income margin for the end of 2020 exercise. In terms of guidance, based on what I just mentioned per business line, I'm looking at a solid organic growth, a higher adjusted operating income, and a robust cash flow for 2020. To conclude, I would like also to thank my colleagues at the Operations Council, and most of them are here, and the whole entire SGS group for achieving this set of solid results.
Also, I would like to thank all of them for their commitment to uphold our group sustainability culture. SGS has been a pioneer in driving sustainability practices in the TIC sector, and our inclusion in the FTSE4Good indexes, our carbon neutral status, and our leading position in the Dow Jones Sustainability Index are a reflection of our dedication to make a difference in this area of sustainability. We believe that our strong financial result and our clear commitment to sustainability and ESG position SGS as a leader in the testing inspection sustainability industry and help to create long-term value for SGS employees, customers, shareholders, and society in general. To conclude my presentations, just to remind you on the outlook 2020 in term of plan, which is the last year of our 2016-2020 plan. A solid organic growth, mid-single-digit organic growth.
In fact, accelerated M&A, AOI margin at least 17%, strong cash flow conversions return, strong ROE return on invested capital, solid dividend distribution, at least maintain it in line with improvement in adjusted net earning. Again, we're really focused in delivering those 2020 plan, but we're also looking at our next strategic growth in term of evolutions. We are looking forward to present these plans with you later on this year.
I think now we'll move on to Q&A. We'll start in the room, and then we'll go to the conference call, and then if there are any questions on the webcast, I'll just check. No, I don't know. We will read those out, too. Who would like to go first in the room?
For questions, star and one.
Barclays. Just firstly, can you give a sense of the exit rate in terms of organic growth? If you can break down the second half between the quarters. What does that imply for first half performance, organic perspective? Secondly, on margin, it looks like M&A contributed about 40 basis points of margin expansion in the second half of the year. Should we roll that into the first half? With cost savings delivering 110 basis points, are there any offsetting investments that we should be taking into account when trying to work out the margins of this year?
Yeah. Basically, we're not commenting on exit rates, more for cyclical companies like staffing companies. In general, as you know, during the second half of the year, the growth rate slowed a bit down. This was the reason why we guided the growth a bit lower towards the investor days, it picked up a little bit again. Obviously, if you think about let's say the 1.7%, which we have in the second half of the year. It's a clear deceleration from the 3.5%, a lot of these things are also done on purpose, like in the industrial business. You definitely have to see this re-accelerating throughout next year, because second half will be easier comp in that respect. Growth rate should accelerate, much more towards the second half of the year.
If you take Frankie's comment about industrial, where we expect definitely the first half still a revenue decline. Also for GIS, coming from the more -4.8% back to growth will take some time. It's definitely more in that direction. If we look to the margin increase, if you look in the second half, we had 90 basis points improvement. If you take this 90 basis points, you can say the CHF 50 million gives you around the 50 basis points. Obviously, from a one-way point of view, we are not with CHF 50 million fully there, but this will happening in Q1. You have the uplift of CHF 75 million at least, which is roughly 110 basis points, and this should be pretty equal spread because the program is implemented.
Basically, as of January, we should have the whole benefits, and I would say from a margin increase, should be pretty strong in the first half. From the 90 basis points, around the 50 is structural. 30 basis points is still, let's say, the benefit coming from the mix of selling PSC. This mix is still happening in the first half. From this point of view, it should be a strong margin uplift in the first half.
Any offsets?
The cost optimization has really come down to the bottom line. Obviously, we're doing here and there investments, but it's not something where we now have to say we have to accelerate a lot. We have other cost measures underlying productivity. SGS always improve productivity every year. Obviously, part of this productivity will be also invested. We're also looking for more CapEx this year than last year, but it should not by any means put at risk 7%+ margin target.
Thank you very much.
It's Alex Mees here from JPMorgan. Firstly, in consumer, you've called out 5G as being an area of positivity for you. I wonder if you can just give some color as to how that accelerates through 2020, if indeed it does accelerate. Secondly, on GIS, I wonder if you can comment on the materiality of the issues in Haiti and Ghana, and whether the business has to change its business practices at all to respond to issues like this in the future. Thirdly, apologies if I missed it, but I wonder if you provided a reconciliation of the segmental performance in 2019 with transportation pushed into the other sectors. Thank you.
Let me just answer the first question about 5G. You know what? 2019 and 2020 are the transition years for the different technology. You hear a lot about 5G on the market, especially on the mobile phone sectors. I think this is where the transition is happening. The 4G technology will still remain technology. You can see an increase of, I will not call them prototypes, but I think we call over this period. It's more a mainstream product coming in the next 18 months. It's been tested today. They will be hitting the market in the next 18 months, and we're starting to see an emergence of that. I think the 5G increase will really come for the use into the broader industrial environment versus the consumer goods only.
This is going to come in the next, I would say, two years plus, where this is going to be implemented across the broader spectrum. For timing, I would say it's really at the early stage. When you look at in terms of investment, we invested to a certain extent in 2019 and will be having additional investment in the network for 5G capabilities in 2020.
On the GIS performance, if you look to the margin decline last year of a bit more than 10%, you can attribute roughly 70% of this margin decline, or can calculate absolute profit, to a change in bad debt provision. Increase in bad debt provision. The biggest part is for Haiti and Ghana. There are a couple of other contracts as well, but the biggest part is Haiti and Ghana. For Haiti, we have put allowance on the complete receivables.
We put the receivable to zero. We have with both the government discussions, good discussions. We are confident we receive money, but it will most likely take a bit of time. On the contracts, in general, if you look to a lot of our contracts, they are much more and more supplier-funded. They are not government-funded. If you look, for example, the Cameroon contract, it's very clear that we get our fee based on the flow and not rely that we get paid from the government. Haiti especially is a legacy contract where this change was so far we were not able to achieve this change. In general, the model, I would say, was already quite changed in that respect that on all the new contracts, that they are much more funded by, let's call it participant suppliers than by government.
The two big ones where the situation is a bit different is Haiti and Chile. Regarding transportation, you want to know roughly the split or?
When the pro forma numbers will be available effectively for the analysts. That'll be in due course, I think answer that question.
If you want to know roughly revenue split, I can give it, but yeah.
I'm sure that'll help their models. I was going to look for the numbers.
Let's say we have now to put it in the right structure and you get it well ahead of H1 numbers.
Thank you very much. Who would like to go next? Why don't we start at the front? Tom's easy, actually. A reminder, two questions. Tom, hold it close to your mouth, please.
Thank you for the advice on how to use the microphone. You mentioned that CapEx may increase, and I didn't quite decipher all that you said about the leases and what was going into the PPE, but it does look like organically you were flat to slightly down again in terms of the movement in PPE, which is like the third, fourth year or so in a row. Part of that is the CapEx optimization. You're only really growing by inflation, it looks like. Maybe there's a bit of volume, how can you give us some confidence that you can actually commit capital and grow as you're committing that capital and not just on M&A, please? On the Minerals business, could you maybe just go through the potential ups and downs in that outlook for you for Minerals?
It does seem like the production outlook is a little bit less certain than it was, and maybe your business mix has obviously changed a bit in that division. How comfortable can we feel that you'll, as you said, expect to see margins go up in each division, but the margin would go up or you get EBIT improvement in Minerals, please?
First to the CapEx. If I look to it, we definitely have had a lot of focus on several key topics like 5G, like Semiconductor business, but also areas of Upstream where we have strong growth, where we definitely spent more CapEx. Looking to the pipeline and looking what we discussed in the operational council, it should definitely kick in into this year. Maybe 2019, we were thinking it was coming a bit earlier, and sometimes this project takes some time until we get all the components. It's very clear that the CapEx will accelerate, and this is primarily related to a large extent, investments in E&E within CRS. Given the growth opportunities we are seeing, we have a good pipeline of on-site labs for Minerals. It sometimes depends, of course, whether we get the award from the client, but we are very successful in this area.
There we see some pickup and our Upstream business in Oil, Gas & Chemicals has shown very strong performance throughout last year with double-digit growth, and there's a good pipeline of customers. We do think CapEx and percentage of revenue will pick up this year. Higher 4% area.
4.5%-5%
last year we had 4.4% and October higher 4%, so maybe 50 basis points.
Go on. Final question, yeah.
Second question from Tom. There's a lot of moving parts in the Mineral sector, it's difficult for me to give you a overall summary. We say you look at it, for example, the copper explorations investment has increased while the gold investment has decreased because of the price fluctuations. What is important for us is our strategy for the on-site laboratories is a stabilizing factor. We have two of the new labs coming on board, which just came on board toward end of 2019, which add additional volumes for 2020. We have two additional is supposed to come on board. We signed. It's going to come on board in 2020. While we are going to see probably an impact on our more commercial geochem lab, which is getting volume from all over the place. If the overall volume decreases, we may have less volumes.
The bulk of what we do is also linked to our on-site strategy. This will keep a good level of visibility on the kind of volume progression. More we have of those projects, more we'll have the revenue and expansion. Likewise, for the trade activities, from what we see so far in term of the flow and in term of contract, we are quite comfortable that we're going to be pretty okay in term of growth. All in all, with the soft expansions into our more commercial lab versus a more stable portfolio in the on-site laboratories as well as the trading unit, we see that we're probably a little bit short of the DCS growth, but not that far off.
Thank you. Shall we go to Rory? While Rory's getting ready to answer the question, can I remind the people on the webcast, if they would like to ask a question, they need to submit it by typing it in. Thank you.
Yeah. Ooh, it's very close. You've done one round of EVA recovery meetings so far. Just interested to hear what you've learned about that 8% of your business that you said was EVA negative. What have you found out? Will those businesses need more restructuring? Any change in future disposal plans, when will you update us on that? Secondly, do you think that the shifting supply chains in Asia will further accelerate growth in the frontier markets like Vietnam you mentioned this year? Whether you're thinking about redeploying capacity away from China in your own business to support the growth in those markets.
I'll start with the question regarding EVA. We have this clear recovery plans like I outlined at the investor days. Basically, we considered several closures. They are too small or too hard to sell, so to say, right? We closed several of them. Whole units which are under this EVA recovery plan, they do on the last 12-month basis, less revenue than they did some months ago, but the negative EVA improved a lot. We have the negative EVA of this portfolio is actually, since we started, it's reduced by one-third, which was so far primarily a function of either cost savings. Obviously, it happened more or less also at the same time, like the structural cost optimization program. Some of these things were kind of driven by the cost optimization program and benefiting on the EVA side.
I also think if you look to unbilled revenue, and WIP, there is definitely more attitude to get the things billed. You see this in the balance sheet, it's improving. Especially in the last couple months, so I do think it has some impact also on working capital.
Looking at your second question in terms of capital deployment. Actually, China has been a strong driver for us in 2019, and we expect that to carry on in 2020. Interestingly, is that the domestic market is developing really fast. Just some indications I mentioned, so about 55% of what we do in China is already linked to a domestic market. This is probably increase further some of the international supply chain migrate to the other countries. I don't expect to have to redeploy the capacity we have in China. We probably reuse that to serve the local domestic market, and the Chinese government has committed, and we see the changes of opening up additional categories for the product sectors to play while entities.
In terms of capital for the rest of Asia, we're just going to spend more in Vietnam, in Indonesia, in Malaysia, where we see a lot of opportunities, not necessarily all in consumer goods. China will still be important. We see a lot of opportunities. Vietnam is being one of the large opportunities. The growth is high double digits, and we don't see that slowing down.
Thanks very much. Ed? Which one? Ed two will come after.
It's Ed Stanley from Morgan Stanley. On slide 15, I'm interested on your CHF 15 million of realized cost savings. When you talk about 2,260 heads taken out of the business, how much of that CHF 15 million is the heads, versus how much is coming down from lab closures, for example?
For the savings, 85% is related to headcount for the whole program. You see in the work, 2,200 people, because obviously some people who are at the company until the end of last year, they're still employed. There will be additional more than 500 leaving. The total headcount reduction will be roughly 2,800. 85% of the savings are personal cost related. The other 15% are other closure costs, lower rent, no depreciation.
Okay. Thank you. The second question follows on from Rory's, I guess on domestic versus export China. Can you give us any figures on how fast each of those are growing given APAC is quite a large proportion of the overall group growth rate last year? To what extent you may or may not be planning for disruption in China given what's going on there?
We don't want to give exact growth numbers for domestic and international. The only thing I can say is that considering the tariff issues, the headwinds that we have with the North American market, the domestic market has been growing faster than the international market, this is why you're also seeing the fact that this percentage of domestic versus international is actuating. Again, not necessarily all related to consumer goods. The domestic market is also about Environmental Health and Safety, I ndustrial, Food Products. This is also a diversification of our strategy in China, which is a good addition to the two focus consumer goods activities that we had in the past. If you look at the current situation, I guess you're talking about the coronavirus. We're monitoring the situation. It's too early for me to give you an impact assessment.
Obviously, the first week of all the movement is happening in China was in the middle of the Chinese New Year holidays. In terms of impact for that particular week was rather minimal because all the operation was anyway off on vacations. Certainly, the latest announcement by the government to extend on the country, to extend the holidays from the initial days to the 3rd of February on some of those provinces and the cities extending that to the 9th of February, will have an impact on us in the February results. We're still monitoring. I guess we will have to wait for more news. If the situation stands as it is today, I would say the impact would be mainly on our February result because we have one less week of activities.
As the situation develops, I will come back to you if there's further impact, and we're looking at this in a very serious way to make sure that we minimize the impact.
Thank you. Finally, Ed.
Thanks. Ed from Citi. Two questions, please. First of all, roughly, what percentage of divisional revenue did the various contracts that had the bad debtors in 2019 comprise of 2019 revenue, please?
Very small. If you look to it, the debt provision in some cases, like Haiti, is 100% provided, right? In terms of revenues, they are not that big, right?
It's several years' worth of revenue that you've provided for?
No. The outstanding, we have a clear grid system, so you provide as you go. Let's say if a government is not paying you, provide the full revenue, which is outstanding, right? It's not a massive amount, right?
Okay. Thank you. I just want to understand a little bit more about your thinking, if I might. You're putting the vehicle inspection contracts into GIS. Is that right? Yeah. Could you talk through your thought process around that? That seems like a lot of challenges for one division. I know Roger is not here, so maybe he's busy sorting some of those out, but just talk a little bit through that, please.
I think he's on his way to Haiti from some of the issues. No, to look through it, we were more focused on the tendering process because all the process of the sales and tendering is with the government structure. This is where we were focusing on. Once the contract is accepted and delivery is done, the delivery is typically handled by the affiliate themselves. The involvement of the business structure is to a much lesser extent. At this point on, once the contract or the concession has been assigned, it's really the operational activities that kicks in, so the business managers do not focus on that. The vision of trying to create at the government level is important. I'll give you an example.
For example, some of the activities that we do in the trade could be combined with some of the activities we do on the service side and so on. We see sometimes twice the same ministry for different reasons. The idea was we to combine all that into one single portfolio management with the different ministry at the country level, and the execution would be handled by the country. It's not going to be major. Roger would not be going around trying to understand how each one of those stations is going to work. Roger.
Thank you very much. We've got one more in the room. Caroline?
Thank you. I'm wondering just technically on the other non-recurring items that totaled CHF 165 million. You enumerated the PSC gain. I'm wondering, first of all, the tax provision on the gain of CHF 33 million, is that netted or is that included in the tax expense?
The gain of the PSC disposal is shown in the tax expense.
Okay. I'm just trying to reconcile, coming from the CHF 259 million gain, you had less the CHF 24 million impairment of fixed and intangible assets, less the CHF 10 million defined benefit.
Yeah.
How do you then get down to CHF 165 million? I think you did all your provisioning excluding for your bad debts, that's not in these other non-recurring.
No, of course. It's the following situation. You have the CHF 259 million to start with, then the CHF 33 million provision for taxes is not related to PSC. These were tax provisions for indirect taxes considered in the first half of this year. They are not related to PSC. The taxes on PSC, they're shown in the income tax line. These are basically provisions which are indirect tax, which are basically in the EBIT. You have the impairment of CHF 24 million for fixed and intangible assets. You have around CHF 10 million for the Swiss pension obligation, and then there are other items which we not line by line disclose here, that you come to the CHF 165 million remaining income.
We can go through in more detail later if you like.
Sure.
Right. Let's move out of the room and onto the webcast, please. One quick moment. Okay, well, why don't we go to the question that was on the webcast then very quickly. That is asking about GIS and Ghana, and given the payment issues we've had there, does it affect any other cash flow in Ghana specifically? Very simply, it doesn't. There you go. Nice and easy. Are we ready to go to the webcast? Conference call, sorry. Yeah, sorry. Go ahead.
The first question coming from the conference call comes from George Gregory from Exane BNP Paribas. Please go ahead.
Good afternoon, everyone. I have three questions, please. Firstly, just looking at the profit contribution from acquisitions, specifically in the second half, it looked a bit lower than I would have expected given the first-time contribution of Maine Pointe. Was there anything offsetting that, perhaps first-time integration cost, please? Secondly, in AFL, I think from your comments suggests that both food and life decelerated in the second half. I am wondering if there was anything in particular behind that. Finally, Dominik, I think you mentioned that 70% of the margin decline in GIS can be ascribed to the collection delays, the provisions. Could you just clarify that, just check that my calculation of what was a 40 basis point headwind this year is correct, please? Thank you.
Maybe, should I take the first and last one?
Yeah. That's fine.
If we first look to the acquisition impact, Maine Pointe is a bit below our expectation for the second half of the year. We have a, let's say, very good project book for 2020, but it's fair to say that it was slightly lower in the second half of last year, assuming, obviously, our partner is still 40%, but also very busy with the deal, instead of focusing completely on his business. There's a bit of timing issue, I would say. It's a bit lower, but in general, we are convinced it goes in the right direction, hits the numbers which we expect for 2020. Certainly some impacts are there on top, maybe a bit of cost of integration as well. It's true, it's a bit below expectation.
What I said regarding GIS, we have bad debt provisions. You take the results and you basically look, okay, the results or the performance of the business, the revenue decrease, how much of the earnings decline of 40% is related to bad debt provision, and what's the underlying reduction? If you look to this, basically 70% out of the earnings decline is explained by higher bad debt provisions compared to the prior year. I hope this clarifies.
Yep, thank you.
All right.
Maybe one word, obviously, you need to consider here that while we have the normal aging for this project, we have taken on top the decision to completely put allowance on the Haiti receivable, given the fact that we have not recorded any, let's say, collection throughout last year.
If I go-
Okay.
George, if I go to the question on the Food & Life, I would say there's nothing major there. If you look at life sciences, we had, I would say, some short-term issues in terms of manpower retentions in one of the affiliates, because they are evolving into a pharmaceutical hub. Sometimes we do lose some of our employees to our customer base. In that particular case, we have lost a little bit more than we were expecting. These are not unusual situations, and we have managed to catch up the situation pretty fast. We should expect this to be back on track for 2020. The food, I would say, is up and down.
Some of the softer market, like in Germany, where I think the current market situations, with a bit of tighter market conditions, makes that our customers are looking at typically tighter in terms of volumes and so on. Nothing major, I would say. Again, the situation will come back on track. I do not see that as a major issue for the Agri Food & Life activities in 2020.
Thank you very much. I don't think there is another question on the conference call, but can I check there is? No. Okay. Well, also, I'd like to say that don't think by staying in at home and dialing in, you get three questions. That's not part of the deal. Anyway, I'd like to invite you all. We would like to invite you all upstairs for a cocktail, and thank you very much.