Good morning, welcome to the Victorian Plumbing Group plc full year's result presentation, year ending FY 2023. I'm going to run through the agenda for today. We've got myself, Mark Radcliffe, the CEO, and Dan Barton, CFO here. We'll start with a FY 2023 overview and strategic focus, moving on to a review of the financials, and then a quick look at the investor position, environmental, social, and governance. Some information on the warehouse transformation, FY 2024 current trading and outlook, and then finishing up with some time for Q&A. Okay, so we'll start with the FY 2023 overview. Just a quick summary of the strategic progress and operational performance in the UK in FY 2023. So strategic progress, successful replatforming of our website in December 2022, improved functionality and scalability.
Introduction of the newly designed website structure in July 2023 to give prominence to our expanding categories. Currently enhancing our website search functionality to include AI, which will look to boost our customer journey. Release of the Victorian Plumbing app in October 2023, finally. A new partnership with Bolton Wanderers Football Club as their title and front shirt sponsor. A bold new marketing campaign launched in December 2022, Boss Your Bathroom. Operational KPIs. Total number of orders increased by 6% to 932,000, driving the overall revenue growth in FY 2023. Average order value remained in line with FY 2022, at GBP 306 per order. Marketing spend as a percentage of revenue decreased to 27.8%, reflecting an improving brand awareness. We continue to be rated excellent and maintained our Trustpilot score of 4.5%.
Trade revenue grew by 13% to GBP 59.5 million in FY 2023, representing 21% of the group's revenue. The tiles and lighting revenue grew by 35% to GBP 7.3 million. Strategic focus. Our strategy remains unchanged, with the team focused on three growth drivers. Core bathroom to consumers. We're the number one U.K. bathroom retailer, driving the shift to the market from offline to online. Growing our core bathroom products and accessories to consumers in the U.K. through our marketing, market-leading online platform. Further meaningful market share gains to be made as we continue to increase our brand awareness. Medium-term opportunity remains to translate our domestic success into carefully selected international markets. Expansion categories. Increasing our growth in expansion categories, tiles, décor, heating, and kitchen accessories, by increasing prominence on our newly designed website.
Leveraging our successful business model to increase sales of complementary products alongside our core bathrooms. Extending our product ranges in each category, including the development of bespoke tile designs, made easy when we finally get into our new distribution center in Lancashire. Trade customers, maximize, maximizing our growing trade customer base. Broadening our marketing approach to specifically target trade customers. Extending our product range to ensure we have relevant products for all trade customers. Release of the new Victorian Plumbing app to make ordering products easier. Resilience of our operating model. Our FY 2023 financial performance demonstrates the resilience of our business model and competitive advantage, underpinning our confidence in the profit growth. One-stop solution for all consumers. Unrivaled product range and excellent availability, more than 34,000 products from over 130 brands.
Both third-party and own brand products, side by side, offering a variety of prices to suit all budgets. Growing brand awareness. We have a strong balance sheet and unrivaled approach to marketing. Strong balance sheet protects us against near-term uncertainty with sustainable net cash and strong cash generation. Well-established global supplier relationships navigate supplier challenges and secure sufficient stock to satisfy consumer demand. Ongoing relentless marketing strategy, consisting of bold marketing campaigns and leading in paid search. Transformation. The new 444,000 sq ft distribution center in Lancashire, with a semi-automated design to improve efficiency in our operations. This forms part of a larger project to transform our warehouse operation. Continued development of our online platform and bespoke warehouse management system. I'll hand over to Dan, sorry, for the financials now.
Thanks, Mark. So I'm going to step through the financial highlights over the next eight slides, and we'll start off with the income statement. So unpacking the P&L at a high level, really just to set the scene for the detail to come in the following slides. We closed the year with FY 2023 growth of 6%, from just under GBP 270 million to just over GBP 285 million. Gross profit grew by 11% from GBP 121 million to GBP 135 million, with strong gross margin progression as we ended the year at 47%, which was up from 45% in the prior year, and will be a key theme as I move through these slides. Adjusted EBITDA grew by 22% to just short of GBP 24 million.
We continue improvement in net margin as well, up from 7%-8% in the year. That growth in profit falls through to adjusted diluted EPS, post factoring in some interest income on cash deposits and taking into account increasing U.K. corporation tax rates, to deliver an improvement of 24%, up from 3.8 pence-4.7 pence. So this provides capacity to propose a progressive full-year ordinary dividend of 1.4 pence per share, up from 1.1 pence in the previous year. As the subtitle calls out, in the slide, our financial performance is in line with market expectations. I'm really pleased with that, as we sit here today. So let's look then at where the top-line growth comes from, and go into some of that detail.
So I'm going to start with the right hand of the slide, and with orders, and really reinforcing Mark's point earlier. The order volume growth of 6% has driven the increase in the year-end revenue. The rate of growth in orders has been consistent throughout the year. It's also worth noting that this level of orders is a company record, and both these points indicate further market share gain. The graph beneath that shows AOV flat year-over-year at 306 GBP per order, and it has been a tale of two halves, with H1 delivering 3% year-over-year growth and H2 reflecting a 3% year-over-year decline. And this is symptomatic of our customers trading down the range, which I'll cover shortly when we, once we gross profit and product mix.
So, pivoting back across the left of the slide, and we can see from the table at the bottom, the trade impact has had for both consumer and the trade channel, with the growth slowing from lower AOVs and trade, a little bit of the fulfillment of post-COVID order backlog being worked through, some of which we think has moved back in recent weeks. So trade with the higher AOVs and increased repeatability now represents 21% of the group's revenue, up from 20% in the prior year, and we're excited for further share gain in this area following recent tech advancements. And once in our new shed, we'll be better placed to improve the trade person experience environment as also. So building on the slide then, and moving towards our category expansion plan.
We're really happy to have recorded a 35% growth in tiles and lighting. It's up from GBP 5 million to just short of GBP 7.5 million. We've made lots of progress internally on this front, some of which Mark will unpack later, but it's great from my position to see that matched in the figures, with more to come. So very excited about expansion categories. It's interesting to note also that the items per basket flattened out after three years of small declines. I think that's a testament to the range becoming a bit more one-stop. You know, not just in the bathroom, but beyond to other parts of the home. And the features we've got, the new features on the website, you know, should help drive that further. So it all comes from a small base, of course, and we are alive to that.
Lack of space currently constrains us in expansion categories, but it becomes a non-issue once we get into the new shed we're operating. That's why FY 2024 is so key. It's probably worth just reflecting on the TAM for tiles. Just to give a bit of color, you've got GBP 1.4 billion TAM. Clearly, we're a very small part of that, and online penetration, we think, is around 10%. You know, if you look at what the business has done, it's grown online share from offline, and we think that that's an area that's ripe. So when we think about growing into the new shed, that's definitely a key component to it. Take our online presence and do what we did in bathroom into that space.
So the headline statement then on product mix is a three percentage point shift to own brand products, which now represents 78% of revenue, and that's up from 75% in the prior year. Now, we signaled this change during the interim, and it did continue at pace to the full year and into the current year. And Mark touched on it up front, but I really can't emphasize our USP enough, that the unrivaled range and availability with the SKUs, the timeliness with the in-stocks, it really does set us apart from the competition, and we're proud to offer something for all of our customers. Whatever their affordability point in tough times or in good, we'll stand by the customer. And just really blessed as a CFO in this company with the resilient model that suits every environment.
You know, enables growth via orders to take market share, which continues, and we're proud of, but also continues to improve gross margins. You can see that with the arrow on the graph on the left. So the GBP 20 million increase or 10% growth in own brand products has boosted gross profits. You can probably do the math, about GBP 5 million, and, you know, both graphs to the right set out the margin differential between the two product types, and that's therefore what drives what we've seen in the results. So we were first mover on price, and unlike our competition, we don't pursue discount strategies. But with the FX and the shipping and the mix change that we've seen, it's all driven a really healthy gross margin.
You can see that gross margin increase, sorry, gross profit increase of 11% with the margin progression there of two percentage points year-over-year. First graph on the left... but I did think it was worth setting out the progression in half-yearly increments, graph on the right. And that shows the H2 margin that we exit with of 49%, which is a return to the rate during COVID restrictions, and positions the business well in the current financial year. Quite a busy slide here, but I'm just gonna draw your attention to the rate of growth of our underlying costs in the table to the bottom left of the slide.
So pleased to see the rate of growth in our cost base reduce from 12% to 9%, and this is despite continued aggression in marketing, particularly in paid, investment in our brand. Hopefully, you've all seen our advert pop up much more recently. Inflationary dynamics in wages. We saw yesterday the National Minimum Wage increase again, another 10%, and the expensive short-let rental costs that we need to support the current growth. And all this is necessary prior to the completion of the ongoing warehouse transformation, but you can see the benefit beyond. So the benefit of the spend, especially marketing, can be seen in improved brand awareness. That's up 60% to 64%, and that drives reduction in CAC as consumer and traders arrive at our site without incurring that PPC cost.
As we said at the half year, and I'll probably keep saying until we're in, you know, the benefits that the warehouse transformation helps unlock will aid further growth in both profits and repeat. So bringing it all together, pleased to see the trend upwards in adjusted EBITDA in both absolute and net margin terms, in line with market expectations and a step in the right direction as we look to double-digit net margin in the medium term. The adjusted EBITDA net margin bridge sets out the components that takes us from 7.3% in the prior year to 8.3% at the end of FY 2023. The growth margin factors described are eaten a little by the people costs, although we see this as temporary as we reduce operational gearing going forward. Can't reinforce enough the gross margin point, which we feel is sticking.
Moving then to adjusted PBT. So the theme just described continues, with adjusted PBT progressing in similar fashion to adjusted EBITDA, albeit boosted as such by some interest receivable versus interest cost in the prior year. Really reflects with the returns made in using some of that cash on the balance sheet. So taking the leverage of our competitors and turning it to an advantage for us. So growth of 29% or GBP 4.6 million in adjusted PBT, with the margin at this level increasing to 7%, is encouraging. Just a technical aside, on the EPS for a moment and a spirit of transparency, and to provide clarity, we have a small definition change that has no bearing on the story, and a very inconsequential change to the number itself, but I think just to aid transparency following some feedback from yourselves last year.
So the denominator that we've used now links to total issued share capital at the end of the balance sheet date. That moves us away from the complexity of the weighted average-driven calc. It is the most conservative measure, and it has a small GBP 0.001 impact if you were to use your measure on both periods. So I think going forward, it'll just help us all anchor in easily and avoid that complexity. So the number itself, then, we've seen it grow from GBP 0.038 in the prior year to GBP 0.047 in FY 2023, which is growth of 24%. It's lower than that we see in adjusted PBT. Of course, that's due to increasing corporation tax rates.
And as a sign of our confidence in the cash generation in the business, we've stepped down our cover ratio from 3.5x EPS cover to 3.4x in proposing our final dividend of 0.95 pence, which takes the full year DPS to 1.4, which compares to 1.1 in the prior year and growth of 27%. No special dividend is proposed as we preserve cash for the CapEx to come as part of our warehouse transformation, beyond which we will assess, of course, in line with our policy, the surplus cash that we expect to generate. Okay. To cash flow. So delighted with continuing strong cash generation, hovering around the 7% mark, with an increase in free cash flows of 13%, up to GBP 16.1 million.
Effective stock management has maintained stock value year-over-year, despite the growth, growth in orders, and that's resulted in a minimal working capital outflow. We continue to value the relationship with the supply chain. It's a testament to the business that has been built, and we adopt industry-leading practices to strengthen our relationships with manufacturing partners and others for the future. This saw a small working capital outflow as part of normal BAU timing differences associated with this stance. Exceptional cash flow of GBP 0.6 million, as we work through, relates to warehouse, legal, and governance fees. Tax cash paid is lower than you might expect when comparing to the P&L.
Just remember that there's the benefit from the fully expensing allowances that relate to the spend on the warehouse, and lots more of that to come through in FY 2024. Of course, the beloved deferred tax balances mean that the P&L has kind of smoothed out, but from a cash perspective, we get that benefit, which, which does help. While routine CapEx continues to grow in line with the investment in the business, in particular in our technology team and the fantastic work they do, to keep us at the forefront of the industry, we do also now begin to see exceptional CapEx for the warehouse, which I'll cover later. Dividends paid cover the ordinary and special dividend from FY 2022 and the interim dividend from FY 2023.
And the lease payments are flat on the property held, with a lease greater than one year, as the more expensive and increasing short let costs taken in OpEx, that flows directly to EBITDA. Again, I'm giving the color and detail because of the changes to come. So this leaves net cash at GBP 46.4 million, up 2%, and despite the investment in dividends. And a reminder, and I'll never apologize for saying it, that, you know, once more, the reverence for cash in this business, that it has, together with stock management, it really sits at the heart of the decision-making within the team. The strength of the balance sheet provides us with the flexibility, so we do feel blessed in the choices we've got and the options as we navigate, you know, the macro volatility that we see.
I did just want to draw that out. From our understanding, back to you for competitive positions.
Thanks, Dan. Delivering our strategy as planned, hitting our marketing objectives with efficiency and improving brand awareness. You'll see from the graphs that our brand awareness has increased year-over-year. This is partly to do with the new campaign that we launched, Boss Your Bathroom, and hopefully, as I mentioned, you may have seen this. This is only in its beginnings, of the overall story that we've got planned for this new creative. So yeah, as you can see from the graph, we're the only major retailer to have grown brand awareness in that period. That new campaign we've launched, it's, you know, quite brand distinctive and aimed at the homeowner, 25+, as a target audience.
But again, we never really take ourselves too seriously with our marketing. It's always memorable and slightly different to what everybody else in the market does. So, you know, just a continuation of our brand feel that we've always had. Marketing efficiency driven by a focus on, you know, market share gains and efficient spend from the in-house PPC team. As always, I mean, we've you know, always led the way in paid search, and we continue to be as efficient as is possible to be, and at the same time, embracing that line of marketing. It is a continuation of what's the future will look like for most online businesses, is to embrace that area of marketing. We do that extremely well.
Again, all in-house, which, you know, is one of my key parts to running the business, is to keeping lots of these things in-house, where we make the most effort and become the most efficient as a result. Moving on to driving awareness, through distinction. Again, just putting this new creative that we have, Boss Your Bathroom, really high quality, creative, and there's a lot more to come on this. This is, just the beginning of the story and this new brand feel. Yeah, exciting as to what we'll do over the next couple of years and where we'll take this, you know, even through from the trade and the consumer. There's different angles that we've got planned with this, so you'll see a lot more of that as we go through the next two financial periods at least.
A new area of sponsorship and marketing for ourselves with the sports. Again, this is just the beginning. We want to make a step into the sports arena, with sponsorship, and we've, we chose a local club, Bolton Wanderers, which is, very close to our new distribution center, so it, it works quite well for many reasons. But it also gives us an opportunity to test sports sponsorship and, and make sure that we understand, both the contracts and, and the potential of these. But we, again, in the future, we've got plans to move that further up into more, more high-profile sporting events and teams. So yeah, just a, an extension of this overall Boss Your Bathroom campaign, and reaching new audiences.
I think it will be particularly helpful to the trade element of our business and the growth plans we have for that. Again, we've got lots of exciting plans to take this sports sponsorship and aid the trade audience reach. Moving on, our supply chain and customer offering, as Dan said through his parts, that, you know, that one-stop solution when considering a bathroom, as we always have been. Our extensive range of products, deep trusted relationships with suppliers and hardworking team ensure we maintain our excellent rating with Trustpilot and these various other review platforms. Unrivaled product range, excellent availability, the key points to most people who make a decision on purchase is availability. When we have it, have you got it? We tick both of those boxes.
We've developed over 25 of our own brands using in-house product development team, all exclusively available on the Victorian Plumbing website. We've got local experts and partners internationally on the ground to solve any potential supply issues, which again, is another key advantage against our competition. We've invested quite a lot of time and effort into having a good position there, in China in particular, it makes us have that contact and on the ground response to any issues that might occur. Moving on. Technology developments. We continue to develop our bespoke platforms to advance our functionality and improve the consumer's experience. Again, some of this typical of our business, that we like to keep all this in-house. We've got a considerably sized IT team working relentlessly to improve and develop many parts of our business.
So we've got the website development, you know, there's releases and improvements made to the website almost weekly now. Very small, but incrementally, they all add up to make a difference, hopefully, to conversion. That's the target, as always. You may have seen the website change through the year. We now have four menus across the top, giving equal prominence to all of our categories. Consumer is very much aware of our range, the expansiveness of it. So the bathrooms, tiles, and the other categories all have the same weight, from a customer point of view, and it also allows us to expand those categories with the menu systems, further. Again, just highlighting our seriousness to take on those categories, and to make serious inroads into market share within those categories.
Artificial intelligence is a big subject for a lot of businesses now. We don't really see it as a new thing that we must embrace. It's just part of our business's growth, our development. We're extremely keen on the subject, and one we've been working on it for quite some time, actually. So the first part of the AI that's been rolled out is within the search on the site. The AI, it's constantly collecting data and evolving on an hourly basis, almost. So the search improves by the data that's collected and how our consumers react to the data that is shown. So we're learning a lot, and that's the. We've already seen an improvement in conversion on the back of the release.
And the fact that that's in its very beginnings, and it's continuing to learn and improve literally by hour by hour, it's quite encouraging. We've really made a good decision way back, probably 18 months ago, to start work on this. So, I'm really pleased to have seen that release now on its way to proving what it can do. The Victorian Plumbing app, there's been quite a few delays to this. So the original plan to get it out was probably March, like, early this year. It's now finally released in October, in its first version. It's only the initial stages of this. Again, there's lots more releases to come. Next big one in January, which will be releasing with lots of new features that will aid the trade element of the app.
But the app is released now and working and being used by consumers. Again, a lot of work's gone into this in the background, but with lots more to come. The bespoke systems that power our business in the background, in particular, the bespoke warehouse management system, there's a considerable amount of work going on by our IT team on this front. We've got a new wave picking machine that we've built, again, using AI. That's under test at the moment and getting ready for our new warehouse operation. Again, keeping this in-house gives us real good control and customization, that these systems are built to suit our business and not something off the shelf and a universal that doesn't quite normally work as best as it can.
So, again, we're really confident about what that's going to do for us in the future and the efficiencies it will bring. I'll move on back to Dan for the environmental and social movements.
Thank you, Mark. So we made big strides this year with our ESG program. I'm gonna just call out a number of them on the screen, I'm particularly proud of. I think the first is progressing the level of the Scope 1 and 2 reporting. We need that benchmark in order for us to know where carbon's coming from, and where we can then, in our plans for the future, do the sensible things for sustainability, and work with the third parties that we've got helping us with this. But a 10% reduction in tons of CO2 produced per GBP million of revenue, from 1.85 to 1.66. In the year, we've transitioned all our electricity contracts to 100% renewable electricity contracts, which has really helped to power the drive.
From a D&I perspective, we've increased the proportion of women in the leadership position to 26%. But there's a good respect for diversity, diversity of thought and opinion from different sources within the decision-making. It's what makes it a great place to work. Proud to have reduced our median and mean hourly gender pay gaps are important. And we also introduced new policies and enhanced benefits to support our employees. So death in service benefits, enhanced company sick pay, as well as introducing mental health champions. So just looking after our workforce, it's important. You know, we wouldn't be here without them, and we're doing those things to help make things better. The other is the appointment of some key roles.
These roles on paper, you know, they sit there as bullet points, but governance is important, in particular, as we set up for growth. There is good governance in the way that the business operates. Prior to IPO, it's formalized through that IPO process. It continues to strengthen, so it feels safe and solid as we step through. And these roles do really help. I'm so pleased with that. And then it's not just the sexiness of the front end that Mark just talked to in terms of development. Obviously, the website's super important, but we've also just gone through a program of change in our finance systems. So we've come off Sage 200, would you believe? And we're now on Microsoft BC.
And, you know, as many of you will know, that that's just as important and just protects us from anything untoward going on as we do grow. So yeah, lots of investment coming through in those areas. So they were the things that I wanted to call out on ESG. The warehouse transformation. Let's go dive into the chronology and timetable and just to give you a bit more flavor on the numbers. Just a reminder of the benefits, some of which we've covered, but it's worth shouting out again. It just removes that capacity constraint to support future growth. We're a GBP 300 million business today. This enables to really kind of step up, you know, into GBP 500 million, GBP 600 million revenue. But it enhances the customer experience.
We'll be able to look at next day ordering, and it gives us the space, crucially, for the expansion categories, tiles and decor, heating, and kitchen accessories. The four tabs that you see on the website, the products that we've got, the know-how, all of the things that are there, we can, we can get behind. Significant efficiency improvement. It's music to my ears. Replaces that margin, dilutive, expensive, short-term rental cost that just impedes margin progression currently. It facilitates scalability and increased efficiency to support the growth following the introduction of semi-automation. I mean, Mark and the wider team, our Managing Director, Steph, have got lots of experience in growing and moving up a level in warehouses. A great comfort from my perspective.
Both, both yourself and Steph plugged in and working through it, and that semi-automation approach, I really buy into is the right one for the efficiency gain we'll get, and it protects us from going too far in and then not getting them, as I know you've seen in many other scenarios with warehouse moves. And then just doing more of what we do under one roof. Really hard to quantify where that bears out, but, you know, reduced shunting between buildings, improved ways of working under one roof, more effective logistics. It all has financial performance benefit, it has ESG benefits. It makes it a better place to work, and it's exactly where we want to be. And I've called out some of those ESG credentials. We're exploring some solar design for the very large roof.
I think it's 10 football pitches. It's one of those that you can't really get a feel from the photographs until you go, which one day we'll hopefully facilitate. Increased facilities, gym, canteen, et cetera, for the work. Costa Coffee. Costa Coffee. So I gave a flavor of some of the photographs, but it's upon us now, and, you know, soon enough we'll be in there, and we'll be showing you around. So moving on to the timetable and the chronology. So we took practical completion this year, and a legal completion on the fourth of October. That's going to give rise, or has already given rise to a circa GBP 45 million right of use asset with a corresponding lease liability.
You don't need me to kind of educate you on the madness of IFRS 16. But you know, what we'll have is the associated depreciation over the life of the lease, together with the buildup of interest, expense, and corresponding cash flows, and that will replace the short let OpEx that's currently going through. Now, all of that complexity will actually land afterwards, so this year will double run, and we're double running for a period of circa 12 months, which gives rise to the GBP 8 million of double running costs. And that's to enable us to do the transition in a safe way and to make sure that the customer journey isn't impacted as we step through this.
I'm sure Mark would agree that you would challenge us to do that sooner than we've set out, but that's the position I think we're taking. In terms of fit out then and CapEx, so I did talk to a seven and 19 split between 2023 and 2024. The timing of the invoicing around the CapEx is such that it's now two and 2024, so no change. All on track, all on budget. Just don't want to jinx it really and kind of say too much, but it's going well. We're very happy. And over the course of the next kind of six months, we'll have more to say and give you more updates on progress.
But very much in and the fit out has, you know, is on in earnest, as you can see from the wrapping photos set out. Well, that's the winding up to Mark. So FY 2024 current trading outlook. So it is early in the year, and we know about the volatility in consumer and the backdrop we sit in. But we have had a positive start to FY 2024, with continued revenue growth and gross profit margin progression versus the comparative period last year. The opening of the new DC in 2024 will remove space constraints, unlock growth potential, and create efficiency, and all of which supports the delivery of the medium-term outlook. We continue to focus on our long-term goals and are making good progress across all strategic growth areas.
That's underpinned by our market share gains in recent years, but also currently, and we are confident in the future growth prospects of the group.