So everyone can sort of see us. I'm glad you're there and set up. You can stay on mute for another couple of minutes, and then I'll ask you to come and join us. Mark's on as well, but on mute. Thanks. Good morning, everybody. Thank you for joining us for Victorian Plumbing Group's half-year results presentation. I'm joined by Dan, and hopefully Mark can flip his video on as well at VPHQ. This morning, Mark and Dan will be taking us through the results presentation, and we will then open up for Q&A after that. This session is going to be recorded. To that end, Mark, if you could join us on video, please. I will hit the record button. Daniel, hear an automated voice saying this webinar is being recorded, and then please go ahead.
We're already on video, just so you know.
Even better. Morning. Welcome to Victorian Plumbing's half-year result presentation for the six months ending 31st of March 2025. Presenting to you today, myself, Mark Radcliffe, CEO, and Dan Barton, CFO. I'll kick off with a quick summary of the H1 so far with our strategic progress and operational highlights. Transition to new warehouse. The new warehouse infrastructure is complete, albeit we're still optimizing the operational software that we have, the WMS, and some automation. With regards to the transition from other space and getting things up and running here, that's all complete. Victoria Plumb website and brand, that was all closed and the website redirected in November 2024. We got exited the infrastructure and the building in by the end of January 2025. That's kind of all historic now and almost forgotten internally. We've got continued investment in the brand.
Lots going on, but notably the new creative featuring some celebrity talent. We have now a soundbite, recognized soundbite to go with the brand for some of the radio work that we are doing, which is a new area for us that we have been working on for quite some time. Operationally, revenue GBP 152.7 million, which is plus 6%. We are continuing to outperform the wider RMI market. Trade revenue has pleasingly grown by 12% to GBP 36.1 million, which represents 24% of revenue. Towels and Decor, again, growing very healthily, 36% growth in that period to GBP 7.6 million, which I think represents about 5% of revenue now and is continuing to grow at very healthy margins. We have exited at plus 40% growth just recently. That is moving along significantly and hopefully more good news to come on that as we both get to the end of the year as well.
I'll hand over to Dan now to do a review of the financials. Dan?
Thanks, Mark. Good morning, everyone. Lots to cover in what has been a busy, positive, and progressive six-month period. Just some housekeeping before I dive into the financials for Victorian Plumbing Group. As reported in January, as Mark just said, Victoria Plumb is now discontinued, resulting in its performance being separately identified in its own column for the one month of trade in October. In line with the way the business is being run, we will focus on the group position throughout this deck as we believe that this gives a better like-for-like comparison going forward. In terms of headlines, we are delighted with the growth of 6% during the period, boosted by 9% in Q2, with each month beating the last as the many growth initiatives take hold since we became fully operational in our new warehouse infrastructure in the new year.
Adjusted EBITDA grew by 15% to over GBP 15 million, with adjusted EBITDA margin one percentage point ahead of the previous period. Adjusted PBT grew by 3%, and the adjusted PBT margin held flat as the non-cash costs of the new lease accounting under IFRS 16 flowed through. Volume is 10% up period over period to well over 500,000 million orders, an all-time record in a market that is subdued. It depends on which measure you look at in the market, but during the period, it is between 8% below or 8% decline and 1% above in that same period. Clearly, some of this is because of the acquisition of Victoria Plumb, but to bridge the gap to the wider market, it is evident that we continue to take further market share gain organically, with volume growth up 3% on half to 2024.
That's despite a slower start in Q1 as we finalize the transition to our new warehouse infrastructure. The graph to the right clearly shows the accelerating growth rates in revenue in Q2. AOV reduced by 4% period over period as customers continue to shift to purchasing our own brand product, which yields a higher margin. Own brand product mix is now 81%, which is up 2 percentage points on H1 2024 and marginally ahead of H2 2024. Trade revenue continues to grow in double digits with over GBP 36 million of revenue in the period, another record high for the group and driving more items per basket, also at a record high of 3.28, up 5% period over period for the group. It's worth pausing here to highlight that trade has grown by 73% in a five-year period from 15% of the group's revenue to now just shy of 25%.
Consumer growth of 4% is particularly welcome in the tough trading environment that we continue to operate in. Towels and Decor is a key area of growth for the group. We are encouraged by our latest results, which highlight a 36% increase in revenue and 17% versus H2 of the prior year. As Mark said, we've plenty more to come in a large addressable market with relatively low but growing online penetration estimated at around a tenth of the market versus bathroom at a third. The shift to own brand versus the prior period supports a slightly improved or higher underlying margin that is offset by the now discontinued lower margin business traded through Victoria Plumb. Gross margin in both own brand and third party remained similar to the previous period at 54% and 33% respectively.
Despite well-documented increasing geopolitical tension and global financial market volatility, we haven't observed no material change in gate prices from China, though we continue to work closely with our suppliers to maximize financial performance alongside our growth. Recent jumping in cable rates and some small improvement in shipping rates if maintained bodes well, but there does remain a significant level of unpredictability in these areas, so we are exercising caution for any forecasted upside. Slide nine covers marketing cost and clearly shows improvement in our online marketing efficiency during the period from 26.7% of revenue to 25.3%. It should be noted that we do continue to see volatility in CPC, volume, and pricing.
Consistent with previous announcements, we continue to reinvest a large proportion of this efficiency into brand to improve our brand awareness and educate the consumer about our offering, which is particularly important for our tiles and decor ambition. This graph on slide 10 shows the significant improvement in our prompted brand awareness and the strategic importance of investing in our brand creative and efficient media campaigns, with the gap clearly narrowing between us and the competition. Carefully selected investment in football and snooker sponsorship, alongside creative media partnerships with household names like Peter Crouch, further improve awareness with customers in both the consumer and trade channels.
Quite a busy slide, but taking people first, we can see an increase in cost over the period of 19%, which is driven by about 10% of national living wage increases effective from April 2024, and an increase in average FTE of 7% as we transition to our new warehouse infrastructure during the period. Operational productivity is beginning to emerge as we refine our ways of working in our new warehouse, and the introduction of semi-automation will help us further in the future, though this future financial benefit is increasingly being eroded by the above inflationary increases in national insurance contribution and further national living wage increases effective from April 2025. Savings in property and other overheads reflect the exit of expensive short-term-let properties following the transition to the new warehouse.
That was the graph to the right, and this bridges the adjusted EBITDA margin from H1 2024 to H1 2025 and illustrates that the benefit of marketing efficiency and the reduction in expensive third-party rentals, totaling circa 2 percentage points, is offset by a 1 percentage point increase in people costs, resulting in an improved H1 2025 margin of 10%. Some technical accounting to work through now on this slide. Let's start with the finance costs. Net finance income of GBP 0.3 million in H1 2024 compares to a net finance cost of GBP 0.7 million in H1 2025, a swing of GBP 1 million as a result of two factors.
The first factor, amounting to GBP 0.2 million, relates to a reduction of interest received on the reduced cash held on the balance sheet as a consequence of the significant non-recurring cash outflows in the past 12 months, which, of course, relate to the fit out of the new warehouse and the acquisition and discontinuation of Victoria Plumb. The second factor, amounting to GBP 0.8 million and reflecting one quarter's worth of expense, relates to the introduction of imputed interest incurred on the GBP 45 million increase in lease liabilities, recognized in accordance with IFRS 16, relating to the 20-year lease on the new warehouse. The cash outflow associated with this expense is GBP 1.3 million during the period. Next up is depreciation expense, which has increased by circa GBP 0.7 million from GBP 2 million in H1 2024 to GBP 2.7 million in H1 2025.
This increase also reflects one quarter's worth of expense and relates primarily to the depreciation of the right of use asset, also recognized in accordance with IFRS 16 on the 20-year lease on the new warehouse and the depreciation of the non-recurring fit-out CapEx. No cash flow has been, is, or will be associated with the depreciation of the right of use asset in any historic, current, or future period as that cash outflow matches the finance expense. The cash outflow for the fit-out of the warehouse was suffered largely in the full year 2024, so the prior year, and accordingly, no cash outflow is recorded in any future period or this. Maintenance CapEx going forward will be approximately GBP 6 million, which compares to annualized depreciation and amortization of around GBP 9 million.
The graph to the right then reflects the extra expense and shows the adjusted PBT increasing by 3% to GBP 11.8 million and a flat adjusted PVC margin period over period. Thankfully, cash trends are a little more intuitive and provide a positive indication of the strength of the group's performance and trends cut through the complexity of IFRS 16 lease counting and the year-end transition and a year of transition, I should say. 50% growth in free cash flow to just short of GBP 13 million is up from GBP 9 million in the previous period and showcases the immediate benefit of the investments that we have made. Free cash flow margin, defined as free cash flow divided by revenue, is 8% in the current period versus 6% in the previous period.
The bridge on slide 15 shows that without the non-recurring closure costs relating to Victoria Plumb and some small other exceptional outflows relating to the warehouse transformation together, totaling about GBP 10 million, is all now complete and the business is well set to continue to improve shareholder return from this point. We have achieved a lot in the past 12 months. We have acquired and subsequently closed Victoria Plumb. We have successfully transitioned into our new warehouse infrastructure. We have accelerated growth in our trade channel and tiles and decor category, invested in our brand and improved our brand awareness, continued to generate increasing cash returns, and maintained a fortress balance sheet with no external indebtedness. The board, in light of these achievements and when considering the future cash generation of the group, has approved an update to the capital allocation policy to enhance shareholder return.
We will continue to prioritize growth in our core bathroom category using our digital and brand marketing prowess, together with dedicated operating investment in our trade channel, tiles and decor, and other expansion categories, more of which will be explained by Mark shortly. Alongside this priority to grow, we will continue to deliver increasing shareholder return via progressive dividend growth, and to that end, we have reduced our target cover range. Previously, the range was 3-3.5 times cover. In our updated policy, it is now 2.25-3 times adjusted EPS cover. Applying this to the current financial year results in a 35% increase in the interim dividend per share to GBP 2.7 In parallel to investing for growth and our progressive dividend, and with no significant capex requirements in the short to medium term, we have the flexibility also to complete opportunistic M&A in expansion categories.
Now, over to Mark for an update on our strategy.
Thanks, Dan. Looking at Q1, as we've already spoken about, we had the closure of the Victoria Plumb website and the redirect. Obviously, the transition to the warehouse was completed in Q1. In Q2, we had some new creative, not many things launched from a marketing perspective, but that was the most notable one. Free tile samples to aid that area of growth. There is a lot of automation from a software perspective going on in the background for that to sort of streamline and increase the efficiency of the way tile samples are ordered and delivered to customers. A lot of packaging and advertising has gone with that to, again, bring customers and help convert from free tile sample to an order. There is a lot of tracking going on.
It's quite an advanced little module in itself, although it sounds from the title is fairly uncomplicated. It's quite a scientific process to see how our work in making the process very slick then translates to an order. We've got various things on the packaging, including QR codes to take them straight to the product, for example. There is a whole tracking process that goes on. A lot of education going on in that area now, but it's accelerated the consumer interaction with ourselves on that category, which is very helpful. The next day delivery cutoff, we've been gradually increasing it, like we said we would over time since the warehouse came online in sort of December, January. We've gradually added an hour each every couple of months. We are now all up to 4:00 P.M., which is equal to the best out there.
Going from mid-12, mid-day historically previous years to 4:00 P.M. is quite a big step up. I think going forward, we'll see the benefit of that for both consumer and trade customers. There's still more to come on that front where the trade customers will benefit from this further with the free next delivery service that we've been talking about for some time. That's currently going through its integration and programming as we speak, with the anticipated launch of that in the next few weeks. Digital trade credit was another advance where we've integrated it into the trade login app and website, both where they can now apply for trade credit and benefit from an accounting tool integrated, very, very slick.
We have seen customers embracing that and utilizing that with some good openings and good credit limits issued by the third party that we use for that. Hopefully, over time, that will also add to more conversion and more support for trade growth going on for Q3 and Q4. As always, we are continuously investing, looking for ways to move forward. The job never stops. As you know, we are very entrepreneurial in our approach as a business. Sponsorship is probably the area that I think we pride ourselves mostly on. We are continuing to look at sports sponsorship. We have got Wimbledon coming up as one particular noteworthy thing where we are going to sponsor quite a few matches there. That is just, again, just proof of our continued area of working in sports areas, sports sponsorship in order to promote trade and just general brand awareness, which is good.
Obviously, we've got the new strategic opportunity for the group with MFI, which I think we'll come to in more detail later on. There we are, MFI. Probably aware of the brand. Most people are, certainly from a certain age, but what it meant previously is not a focus for ourselves. What we are doing is relaunching this, reinventing what I believe MFI, if it was still trading, should or would have become, adapting to the new world that we're in and the way consumers shop and browse for products. MFI, it's a very recognizable, easy to remember domain. The TAM for the homewares is large. I think it's GBP 20 billion, which is a very large addressable market for ourselves.
Given our experience in this sector, in both retail and online, the marketing side of things, product sourcing, leading the way with the fashion and design in the bathroom market, as we have done historically, we feel very confident about moving into this area. It has been something that we have been talking about, thinking about, and working on for about a year now. We have decided finally to take this forward. Here we are announcing it. I hope it is well received. We are very happy and confident about what we are about to do with this. We have got a lot of experience to apply to it. This is my personal point of view. We are always talking about, we are always working on things in the background. There is a lot that we see opportunity-wise, and this is an opportunity being seized. It is quite immature from an online perspective.
There are people out there starting to move into this area over and above the, obviously, the very well-known brand of Dunelm. This is a new area from an online perspective, which is kind of underserved. We are going to address that and take this to the heights that we, to match our ambitions with our other area of bathroom market, we're trying to take a considerable market share over the period that we're running this. Yeah, it was quite pleasing when we acquired this domain. I think there's a lot to be learned from the brand and the use and how efficient it can be, certainly from a marketing cost perspective. The brand's very memorable, easy to arrive at, and there'll be a lot of education on how that compares to our existing brands, Victorian Plumbing.
It'd be nice to see them side by side and how efficient, a short and easy to remember brand can be. It's an accelerated start with this because it's already a recognized brand. And even if it's not a recognized brand, it's one that's easily recalled. We've got lots of marketing initiatives planned with this. The marketing department's extremely excited about to get going with this. We've got a lot of ambition. It doesn't deter from anything that we do with Victorian Plumbing in any shape or form. This is addition. We've added additional resources. This is not taking away anything from what we do with our bathroom market. This is something, again, I've said in the past, if we're ever going to take on something new, we will not take any resources from our existing operations. It is all additional resources.
I think Dan has accounted for that in some of the costs that we're seeing in the initial part of this. So yeah, a lot to be positive about on that front. Current trading, is this you, Dan? It is.
Thank you, Mark. Go on then. So momentum in Q2 further improved in April with double-digit revenue growth during the month. Looking forward, the rate of growth is expected to reduce from mid-May as the group laps the acquisition of Victoria Plumb, such that revenue growth is expected to be between 4-6% by the end of the financial year. The benefits of the strategic progress made in the period, together with the efficient marketing spend environment that we were operating in, supports our confidence in delivering the full-year adjusted EBITDA, excluding MFI, which was in line with market expectation.
Taking into account the MFI sell and launch costs, full-year adjusted PBT is expected to be between GBP 21 million and GBP 22 million. I appreciate there's a lot to get through in this statement, so include the table there and in the R&S for ease. Alongside this, the board also took the opportunity in the medium term, the next slide, just to look at the outlook and where we are. For the three-year period to September 2028, assuming no improvement in the consumer backdrop in RMI or changing the competitive landscape, the board anticipates that Victorian Plumbing, excluding MFI, will continue to take market share with revenue growth year on year in the mid-single digits.
Adjusted EBITDA margin for Victorian Plumbing, excluding MFI, is expected to improve from the end of 2025 as efficiencies are realized in our new infrastructure, though this is tempered by a continuation of above-inflationary people cost dynamics and the introduction of extended producer responsibility levies from the Environment Agency. The latter expected to be circa GBP 1.5 million per annum, and they are effective from April 2025. Forecasting MFI at this stage without any history is challenging. As an entrepreneurial business, we will react and adapt over time. Notwithstanding this, our current expectation is for MFI to incur the same overall loss in FY2026 as expected in FY 2025. Additional guidance will be provided following the MFI consumer launch in half on FY 2026. I
think we now move into Q&A. Thank you. Thank you, Dan. Thank you, Mark.
If anyone online could please raise their hand if they'd like to ask a question. Gents, our first question comes from John Stevenson at Peel Hunt. John, if you take yourself off mute, please go ahead.
Okay, hopefully you can hear me. Morning, guys. I've got a thought on MFI, I guess, if we can, just a question to get us going. Can you talk about the offer, Mark, in terms of what does it look like at launch, I guess? How much range breadth do you need? What ultimately does it look like? Is this going to be all own brand, or is there going to be an element of sort of third-party and dropship over time? Do you sort of flesh out what it looks like? Is there going to be furniture in there as well? I guess a few questions wrapped in one.
Yeah, I mean, we won't be investing heavily in the launch until we've got a good product range. We're well into working on this. This is not start today sort of thing. From a product perspective, we're starting with a dropship model for a majority of products, but that's only a short-term solution in order to get things off the ground as soon as possible. There will be a mix. Some of the larger products will probably be dropship just while we get things going, but the range will be considerable. We're not doing this as a small project. We've got really strong ambitions with this. The product range is critical.
Just as you have seen what we did with Victorian Plumbing with our range, making sure that we have products for all budgets and within each category, we are going to be investing heavily in the range itself to make sure there is something for everybody. A lot of fashion and style involved in this, more so than VP. I mean, obviously, we have— So engrossed. Sorry, I thought there was another question coming through then. Yeah, sorry, that distracted me. You were asking about the range, which is going to be considerable. The launch that you quite rightly identified is going to be a mix of dropship as well as shipping direct from here. One of the warehouses that we have here has been repurposed, or two of them, actually. One of them ready. One of them is already currently bringing stock in.
Another one is ready for the future, the near future. It's a whole product. It will all be own brand, generally. I don't think there'll be much third-party brand. There isn't a great deal of third-party brands out there for this category. So branded products. There will be our own brands that we'll be creating within that, but that's obviously still our own brand mix. Yeah, was there any other questions?
Just, yeah, just is furniture part of this? Yeah. Yep. Perfect. And just, I suppose, just on trade, can you talk about now how frequency is changing? Obviously, as you've now been able to sort of build out the offer, build out the proposition, put credit in, are you starting to see more people trade more frequently?
I don't know. I've not actually looked at it to see how the frequency is a frequency increase.
I don't know if Dan's got any numbers on that. I'm not sure. I haven't heard it being spoken about. We are just focusing on just improving the offering overall. As a result, naturally, these things should improve. It might sound like I'm not looking at something in detail, but it doesn't really matter if that makes sense from my perspective because we're doing everything right to make sure that the offering is as best as it could be. If that then becomes the order frequency increases, it should naturally do so because of the work we're doing. We're constantly rolling out more tech on the app, for example, more facilities for the traders to use.
The next-day delivery offering up to 4:00 P.M. is helpful, but obviously, the free-for-all trade customers over a certain order value, a very low order value number is the next step, which we're still waiting to launch. We've got probably another three or four weeks before that goes live, which will be, I think, will have probably the biggest influence on repeat order. The range is already there, always has been. It's just an education process, and you can see the build on it. It's all on the back of the facility here. This warehouse coming online, we're able to—we're released to trying things and doing things that we haven't been able to do for years. Nothing happens overnight. I find now, as the business has got larger, time passes more quickly, and everything seems to take longer.
That would be my assessment of how it feels in my head now when we're doing anything. Time seems to fly, and everything seems to take longer historically. Once we get this free next-day delivery for all trade customers, I think we'll see another step forward in addition to the organic growth that we're seeing. The team is large enough to take on the growth going forward. All positive, really. There's a rollout continuously of advances on the app, like I just mentioned, and they all just keep chipping away and adding to the proposition. Thank you.
I'd add to that, John, it's multifaceted, the growth and where it's come from.
A little bit of kind of higher frequency, but also, in particular, the trade credit, a little bit of AOV, so where they engage with us with the credit, order sizes are going up. We are learning more now about this customer through the different things we have introduced. Let's not forget, I think it is really important, this half is really a tale of two quarters. There is a quarter of us standing up the warehouse, and we have successfully through that. There is a quarter of us deploying initiatives, all of which have totaled the growth, but they are all very early stage. The trade credit, I think we launched in February. We have only just come through April. A lot of the data sets around some of this are nascent, but growing. Clearly, as Mark said, overall, the growth is there.
We're not overly excited by individual data sets just now. We're just trying new things and watching the growth come through, recognizing that in a lot of areas, we've only had a month or two's worth of trade under our belt.
There are just so many options, isn't there, for us that need to be thrown into the mix that are just logical and obvious. Once you get to the point where the big pieces have been thrown in, we can start looking at these data sets and see what has an influence, but nothing's trial and error with them. It's all like, "We need to do this. We've been waiting for ages to do it. Let's get on with it." It will result in improvements, as we're seeing.
This is the easy run, I suppose, now of where we introduce these things that we've been waiting to do for years.
Okay, brilliant. Thanks, everyone.
Thanks, John. Our next question comes from Matthew McEachern [at Singer Capital Market Matthew,] please go ahead.
Thanks, Alex. Morning, Mark. Morning, Dan. Can you hear me okay? Yes. Yeah. A couple of questions. I'm going to dance around a bit, so apologies for that. Just a quick one on the trade credit that you've launched. Just wondering if you give us a flavor as to the margin cost of that. Is that kind of low single-digit % that it's costing you? Just some vague idea would be helpful on that. It's fairly small.
It's about one percentage point in revenue.
And so not really a feature in terms of dilution to the ongoing margin.
It's just the overall trade mix in that sense that's delivering the dilution. Okay, thanks for that. The rest of my question is really on MFI. And I'm wondering, Alec, would you be kind enough to pull the slide back up, which was the MFI brand recognition awareness, just whilst we talk about this? So I'm assuming you've done some of your own surveys in terms of what the brand means. Have you got anything more sort of qualitative in terms of what customers think, what consumers think about the MFI brand in their mind? It's been such a long while since it actively traded.
Yeah, I mean, my response to this might not be taken completely positively from everybody. I don't care. It is a really—the fact that it's known a brand is what you make of it.
I mean, it's got history, yes, but there's such a big gap with its history to where we are now. Whether it was positive or negative in someone's mind, it is only a small proportion of the market. What I'm looking at is what it means and what we communicate this brand is now in this modern day. I think the fact that there's a 49% awareness there is really helpful because we're starting from not starting from zero. We're starting from something that people will either remember, have heard of before, they'll have maybe traded it, purchased from the brand historically. The way that we deliver the brand and the way that we educate the market that it's around, it's new, it's reinvented, this is a new offering is all opportunity for us. It's fantastic. Most importantly, from my perspective, is MFI's three letters.
It's an extremely short, easy-to-remember recall domain. I think there's hopefully, and what I'm gambling on is such—I hate to use the word gamble—is that there's marketing efficiency that will come through on this. I'm looking to put them side by side: Victorian Plumbing, MFI, and what does it mean having such an easy memorable domain to arrive at? How much will that circumvent some of the Google costs that we speak about that exist for all online businesses? There is some education that will go on here, and there's a bit of trial that's going to go on, and I'm looking forward to seeing what it means. Hopefully, we'll be able to sort of map out what we feel will happen with the marketing in the coming months and years as we get going with this. Really exciting from my perspective. Can't wait.
I'm absolutely desperate to get to this billion revenue mark, and I'm always trying to think constantly of ways to get there and get there as soon as possible. Victorian Plumbing is moving in the right direction always. This is now an addition. Really interesting market. We've got all this wonderful experience. We're in such a strong position as a business. I think I always say in all the meetings, we're always working on something in the background. We never stand still. No matter what the consumer's doing, what the market's doing, what the world's doing, we're never sitting there waiting for things. We're just getting on with life, I suppose. We're all very young within this business, I guess, and we've just got energy, and this is just part of the energy. We've got this brand and this domain. Let's utilize it. Let's go for it.
It's the first time I've seen something where I wanted to do something different and have another brand that would hopefully educate us on a few things. So yeah, there's lots more to come that I think we'll learn from this that might adapt our approach in the future. I mean, thanks for that.
I think just the surprising thing for many of us on this call will probably be that 49% brand awareness is probably comparable to what Victorian Plumbing was at, maybe—I'm going to have to guess here—maybe 18 months ago?
No, I think it was much higher than that. It was slightly diluted because of the Victoria Plumb brand. But yeah, I think we've been in the high 50s for—but yeah, you're not far off.
You're right. It's not far off.
I mean, it's quite surprising. Yeah.
It's about making sure that there'll be a story and a brand voice that we will create here. We've already done it. It's already done in the background. We know what we're doing with this, how it's going to look, and what it's going to mean to customers. Again, we're very experienced with that, with what we've done with VP plan. We've learned over the last 20 years how to develop a brand and make sure that people understand it and recognize it. It'll have its own flavor, and the way that we present it and the way that we do our marketing is going to be quite adventurous, as always. I'm really looking forward to seeing what happens. I think there'll be a lot of interest in it to see what it means now. Now it's back, and people will be looking at it.
We're not doing this again. It won't be a half attempt. We are going to run with this. Once we get everything in place, we will be moving forward quite rapidly.
I mean, I think we've proven that, Mark, because of what we've done in tiles and decor, which is just one example of what we've delivered over the course of the last 12 months. Let's not forget, we've also launched Stonehouse Studios, which won't come to mind and doesn't have anywhere near the brand awareness, but that's in our tile range. Whether you think positively or negatively about the brand equity in MFI, we'll each have a view. Compared to when we launched Stonehouse Studios, and this is clearly blue sky. It's interesting. Everybody I've spoken to this morning, you can imagine that the phone's been going off. Everybody has a view. Everybody knows it.
That is very, very powerful in this space when you look at the others in there. It is the entrepreneurial spirit that Mark's thought to and the qualitative side. There is also somebody having a view is really powerful. It is up to us, as we have said, we are reinventing it to mean something that fits today. Yeah.
No, that is useful. Just a couple of quick more questions still on MFI. Just in terms of the last mile and the customer delivery, do you envisage doing anything different to how you are operating the core business? I mean, I think most people will be familiar with some challenges that other businesses have had over time, and it is clearly a really important part in terms of the customer satisfaction journey. Any thoughts on that at this stage?
It will be more two-man delivery for the larger goods, yes.
Not something that we do not do with VP so much. I mean, it is available as an upgrade at VP, at Victorian Plumbing, sorry. This will have more of an option for a two-man delivery for some of the larger furniture. There will probably be a better experience on delivery in this market. Again, just like every part of this, we have gained so much experience doing what we do already. The product really is not that different to what we do now. It is large—some of it is large. It is in the home. We kind of know what we are doing, both with sourcing the product from a factory, quality, design, all of these elements, and then handling the good, both in our operational side and to the customer. We know where we are going with this.
There's not much that we haven't decided on and we don't know at this point. I mean, some of it will be trial and error, some elements of it, as naturally with any business, and there will be some adapting done over time. We've got a lot of what we need from an asset perspective. I just want to say asset, both resources and experience, to run with this. This dropship option that we're starting with really is just to kick things off sooner rather than later. It's not our preferred way of doing it. In fact, I hate the idea of it, but it gets us going and gets us kicked off with a larger range sooner rather than later. That's what's motivated that approach. In an ideal world, we'd have brought absolutely everything into the warehouse and started like that.
But this is a safer kickoff doing with a part dropship solution.
Brilliant. Thanks, guys. That's very helpful. Matthew.
Our next question comes from Caroline Gulliver at Equity Development. Caroline, please go ahead.
Morning, guys. Yes, I have apologies to keep going on about this, but it is a few more questions on MFI. And I've heard everything you said already. Just in terms of the product range, you mentioned furniture, you mentioned homewares. Just for clarification, are you going to be doing kitchen furniture as well as part of that? You mentioned two-man delivery and so forth. And then just from a— Sorry, Carol. Yep. And then just from a pricing perspective, you mentioned sort of having different price levels, but are you thinking more sort of a high-promotion business or more of an EDLP business?
With regards to your question on kitchen furniture, do you mean kitchens?
Yeah, like kitchen cabinets as opposed to not ovens and cookers, but kitchen furniture.
It's not at the moment within the range, no. That's never going to be the case and how if we ever did kitchens, where it would sit, but at the moment, MFI doesn't include kitchen furniture now.
Two-man delivery for sort of larger items might be things like beds, tables. Yeah, yeah. Sofas as well. Okay.
Just from a— old-fashioned casual sofa type. We're not going to become a sofa company as such. It's part of the range. There'll be considerable options, but we won't be a sofa specialist, if that makes sense.
Got it. Got it. Just from a pricing perspective, any thoughts?
Yeah, it will be just the same as we've done with VP.
The model will include ranges both at the high end and the low and then, again, the mids. It'll be an evolution of range. No matter what the budget is, there will be options for people through on the bedding. There will be the more budget, what you might call trade bedding, which is plain white, plain simple colors up to the design-led, more fashion, more expensive options. It's kind of what you would expect to see within a substantial range of products for the home. There will be options at both ends. Yeah, it won't be—we're not just going for super exclusive or super budget. It's going to cover all areas.
Okay. Obviously, you mentioned the dropship model to start with, but with the aspiration to go more sort of own-label-led. You mentioned obviously increasing labor.
Have you identified a design team, or have you got thoughts about doing design in-house and how many people you need and that kind of thing? Are they already in place, or are they still to be hired?
Yeah, we've got some elements already in place. Certainly on the product acquisition side, we've got a team in place. From a design perspective, we do have resource already within the business that caters for VP. So we can utilize, and we are utilizing some of that as we speak. I'm sure it'll have its own dedicated team in time. It's more on the product acquisition side at the moment now, where we've taken on some experienced talent from other similar businesses that have been helping for a short while now to acquire products. The dropship option really is just to accelerate the opening and the launch of this.
It's not our way of doing things. It's not how the VP model works, and this is not how MFI is going to work. It is just simply to aid the process of us getting going. Also to grab some experience. We're not going to be too arrogant to say that we know everything about this sector. We don't. There are going to be some learnings. The dropship model helps with that. We should very quickly understand what the customer is looking for. We've got some data to extract from the site, once it from search and various other things from Google about what customers are looking for, the latest trends and fashions. Again, we've got some idea, but there'll be confirmations as we get it launched based on how the consumer uses the site and what products they view and purchase.
There will be some quick learnings, and then they'll be applied to take it forward.
Yeah. Thank you. That's really helpful. Just finally, in terms of you've obviously said it's quite difficult to forecast profitability at this stage. In terms of any upfront costs, sort of operating costs that you need to front-load, or is it more just you're going to get the dropship model, get some cash coming in, and build from there?
Yeah, the stock coming in, I think Dan has accounted for that in that period, for us buying stock and bringing stock in. The dropship is only a part of the model. There is stock arriving continuously. That's coming with a cost. There's nothing other than—I mean, I don't know how Dan's going to account for this. I'll leave Dan to do all this. He's very capable.
Obviously, we're utilizing some warehouse space that we no longer use for VP, which is the intelligent way to do this because, again, we've got resources, so let's use them. I'm guessing Dan's accounting for that somewhere in his costs. Obviously, there'll be staffing costs and things. It is all very, very low and low risk. Yeah, I'm not worried about any of those elements. Dan, if you want to elaborate on any of that?
Yeah, I think the cost base, Caroline, it's two-fold. It's property and it's people initially. There were properties we were going to exit, which obviously would have driven a benefit into the group that now isn't there. That's the extra cost. We know these buildings, and we've used them before. It does make sense, and it does cater for growth.
We do not have the constraints that a normal startup would have. We are leveraging some of the benefits that already exist within the group. And it is people. You put those people in, and you pay them before the sales come in and before you start to generate. It is people cost. They are the two big ones. The rest of it is kind of as the business grows. We have obviously given guidance to the GBP 3 million of cost into FY 2026. When you run a startup business, and I know you all know this, but it is worth going through. You target the loss, right? If the revenue comes in quicker, we will put more cost in to drive the revenue further. If the revenue is slightly slower, then we will manage it. Essentially, we have got to kind of power that up.
The initial kind of lump cost is people and property. We do not know the marketing. We have talked about customer economics. It is clear to me that customer economics in this category look more favorable than in the bathroom category. There is higher repeatability. There is more order frequency. The brand is short and snappy. The domain name is small. All of that talks to greater customer economics. Yourself and your peer group will all have a different view as to how that comes in. Obviously, we have ours. Time will tell. Once we get trading, we will understand those things more. There will be a little bit of brand, but part of the benefit of the name is that it is already very well known, hence the dropship. You cannot soft launch MFI. You can soft launch Stonehouse Studios.
MFI is going to, when we get going with the consumer, it's going to be well known and picked up, so.
Yeah. Good luck. It sounds really interesting.
Thanks, Caroline.
Thanks, Caroline. Our next question, and I think last question comes from Ben at Doitzer Newmis. Ben, please. Oh, no. He's changed his mind. No, he's back. Ben, please. Hold on. Please go ahead.
Hi. Sorry. One last one on MFI, if I could. I'm just keen to understand what you think the biggest challenges might be when competing with the more established brands you think can really get people excited about the brand and comfortable shopping online again. We missed part of what you said there. So what we also got there at the end was, can we get people excited about shopping with the brand again? So you're talking about historically the MFI brand, did you say?
Hello? Can you hear me? I can hear you. Yeah, sorry. I can't hear me, but go on. Yeah. I was just wondering what you think the biggest challenges are when competing against the more established homeware brands today. What do you think you can do to get people really excited about the MFI brand and comfortable shopping fully online?
Yeah. Our marketing approach, our out-of-home offline marketing, the way that we'll be presenting the brand, I think will get people excited naturally. I think it's going to be quite a young and vibrant brand. The marketing that goes with it is going to be quite fashion-led. It's going to give a really good feel from the off. I think it's going to be interesting. People will want to know what it means and what it's about.
We've spent some time over the last few months really getting excited about how we're going to present this from a marketing point of view. I think that's going to be helpful in establishing the excitement and what it's about. We're working really hard on making sure that visually, when they arrive at the site, they are inspired. We've learned a lot about inspiring people to shop and then the inspiration part. This is, as you know, a fashion-led business. I'm trying to talk it down a little bit, but in reality, we're really enthusiastic about this, and we're putting a lot of our experience into it. We've got real big expectations for about where this goes long term. We're not starting from ground zero. We're going to kick the ground running with this from an experience point of view and what was presented.
It's going to look like a very well-established long-term business from the off. It's not going to look like a new venture from a consumer point of view. It's going to look, when it's launched and you see it, you'll see what I mean. It's going to look like a very well-experienced business from a consumer point of view. I think confidence will be in, I think conversion will show quite quickly as people will shop with it confidently based on how it's presented, both on the marketing and from a website point of view. These are some of the really exciting elements to it. Again, it feels easy, if I'm honest, because of what we've done and the struggles we've had with VP in the past. All of that experience has been applied, and this feels like a very easy model to build.
Okay. Great. Thank you.
Yeah. Thanks, Ben. Got one more, sorry, from Tom Fraine at Shore Capital. Tom, please go ahead.
Hi both. Just on the MFI brand, was part of the rationale for building a very large warehouse with considerable spare capacity at this stage? Was that a key reason for it, or were you always going to kind of eventually fill that anyway? This warehouse—
sorry to interrupt—I just want to cover that question before you go on to another so I do not forget. This warehouse was for VP. This is not for MFI. We have got big ambitions for VP, for Victorian Plumbing. This warehouse was built for VP. The MFI domain came as part of the acquisition of Victoria Plumb. And I decided, along with others here, that we are going to utilize that.
It's got a wonderful opportunity from a brand perspective, but it doesn't affect our plans and our growth ambitions with Victorian Plumbing. This building will not be utilized for MFI at all, other than the fact that I'm sitting in this building now, and I could be technically included in part of the MFI and maybe Dan as well because he's obviously just the finances. That's the only part of this building, this new warehouse would have with MFI.
Okay. Thanks. Just on the reason for choosing to go into furniture and other product areas, we thought that starts sort of boded very well for online sales of furniture, which we've actually used as a proxy for some of the things you sell in bathrooms, given they're large and bulky.
What were the other reasons for choosing to enter these product areas and were there others that you had considered?
Yeah. There's a lot of other areas of the home that we can't service within the Victorian Plumbing site without clouding over. There's only so many pages you can have within your brochure, I guess. There's only so much space you can merchandise. We've really merchandised that site well for the categories that we cater. As anything else might start to cloud things, it looked like a really nice opportunity for us to be able to go up through all the areas in the home that we're really excited about.
MFI, and like I said earlier, there's a bit of a marketing test going on here as well at the same time about what this short to easy to recall, easy to arrive at brand means from an efficiency point of view, something I'm personally looking at and I've been thinking about for a long time about how we can find ways to circumvent some of the, naturally, some of this Google cost that exists. Not to say it's going to result in that, but it's just there is an element of experiment going on with that at the same time. Most importantly, we're now able to embrace other areas of the home fully. It is really the homewares area, excluding obviously the bathroom area, which we've got covered, is a huge TAM.
If you look at what the success Dunelm's had in the past and currently, it's an area that's, from a shopping perspective, there's a lot of impulse buying done as well as planned. It's a really interesting category. There's lots of opportunity from a fashion perspective to embrace and to lead the market with. There's just so many areas in it. It kind of gives us things to aim for and to go after now, even more so. We like staying busy. This kind of fills any gaps that may have materialized in the future. Again, I've said in meetings historically, each time we do a half-year and full-year update that we never stand still, and this is just part of us not standing still. I want to fill our time and our ability completely. This is part of that.
I mean, you look at the medium-term guidance in bathroom, right? It's mid-single digit. And that's linked to a consumer that, despite each time we come out, there's green shoots of optimism, just still isn't buying big ticket. Eventually, that will change. There might be an exit from bathroom. You can't stand still. You've got to keep looking for revenue. We're selling bathrooms at A, B, C, 1 as a demograph. That's homeowners, right? The MFI product will be sold to homeowners and those that rent. You know this because that's the bigger TAM, and that's all part of the feature. It's a way of getting into new, you can get new customers as well as those that shop with Victorian Plumbing. There are different characteristics. If you look at the market for some of the home wear accessories, it's doing better than bathroom.
Now, that will always be the case. The bathroom market and big ticket will return. When it does, there will be a different kind of, there will be a different set of numbers for bathroom, will not there? Out the back of that market. We are big in that online space, and therefore, we are geared to consumer in that space. We are not here, Tom. We can control our own destiny. We can control and grow on the things we can do.
This is all about us. Obviously, building this facility here has kind of unlocked a lot of things for us, given us capacity to do things. If we were sitting here now without this announcement that we were doing something else, we would be boring, would not we? We have got to be adventurous. I guess, I think, Dan, you mentioned this in time.
There is an entrepreneurial spirit that exists within this organization. The staff are excited about it. It's just more things for us to do and go forward. There's an energy on the back of it. There's always been an energy because of our growth that's existed within Victorian Plumbing and all the areas we're looking at currently. Now we're adding another piece of energy. We're becoming a group, I think, that is what we're talking about here. We've got big ambitions for what the group can achieve. This is now a piece of that. We're not going to embarrass ourselves and fail with this. We are going to take it forward and deliver interesting growth. Our half-year and full-year announcements will become even more interesting now, I think, with more to talk about.
Great. Thanks very much. Thanks, gents.
We are one minute away from the hour. So, Mark and Dan, I hand back to you for any closing comments to close out the call.
I'm okay, Dan. I think I've said as much as I probably would like to say on that. Thank you for the questions. Thank you for listening to the presentation. Dan, anything you want to say to close?
No, just thanks, everyone. Appreciate a lot today, Jess. So yeah, we'll be in touch soon. Great.
Have a good day, everyone. Thank you.
Thanks.
Thanks both.