Good morning, everyone, and welcome to the DFS Financial Year 2022 interim results presentation. I'm Tim Stacey, Group CEO, and I'm here with Mike Schmidt, our Group CFO. Our presentation today will cover three areas. Firstly, I'll provide an update on our strategic progress, as well as summarizing our key highlights from the first half of the year. Secondly, Mike will present the financial overview. Finally, I'll present my operational update. Now we're looking forward to sharing our future strategy and ambitions with you at our Capital Markets Day 2022. In this session, we plan to set out our new ambition to lead furniture retailing in the digital age through our new pillars and platform strategy.
We will also set out the building blocks towards our new medium-term revenue ambition of GBP 1.4 billion, which is underpinned by our growth plans and generates strong capital returns potential over the coming years. Now, stepping back for a moment and reflecting on our growth as a group over the last five years. We have seen substantial sustainable growth over the past five years by our combination of market share gains, acquisitions, online growth, and new showroom rollouts. Our scale has now increased to circa GBP 1.15 billion of revenues, evidenced by the last 12 months of order intake. Our investments in the Sofa Delivery Company and manufacturing capacity through new manufacturing partnerships are now enabling us to support the increased scale of our business.
We saw quarter two delivered revenues exceed quarter one by 24%, and this momentum has continued into the second half of the year. Our strong order bank remains over GBP 175 million higher on a revenue equivalent basis than the pre-pandemic comparator, giving increased resilience in the current year and through into financial year 2023. This, combined with our increased revenues, our strong cash position, and our powerful infrastructure, means that we are well positioned for the future. Now we've made good strategic progress despite the challenging external environment, establishing our new size of business as well as overcoming significant external operational pressures. We are now prioritizing our investment in our profit-enabling platforms to drive future performance and shareholder returns. I wanted to highlight three financial headlines without stealing any of Mike's thunder.
Delivered revenues from continued operations have increased by 17.4% versus the pre-pandemic comparator. Underlying profit before tax and brand amortization grew 33% versus pre-pandemic levels. Our cash generation has been very strong, with GBP 123 million of free cash flow generated over the last 18 months. As a consequence, I'm pleased to announce that we intend to return approximately GBP 80 million of capital to shareholders over the next 12-month period. Encouragingly, we've seen continued top-line order intake momentum in the 10 weeks post the Christmas period compared to pre-pandemic levels. This is despite having to absorb and pass through double-digit retail price increases as a result of the well-documented cost of goods and freight price inflation. Our ability to offset these cost increases illustrates the strength of our group as the market leader.
We've seen double-digit increases in both value and volume across both the DFS and Sofology brands post-Christmas, underpinning our belief that our integrated retail model is the right model for the upholstery market. I'll now pass over to Mike, who will present the financial overview.
Morning. I'll start, as usual, with an overview of our key financials. In looking at our progress in financial performance, I would say it's important to look back to pre-pandemic periods to see progress against a normal comparator. Overall, we therefore have delivered revenues of GBP 561.1 million in the half, which is a significant 17.4 percentage points of growth relative to the pre-pandemic period and GBP 22.1 million of underlying profit before tax and brand amortization, which is up 33.1%. The prior year first half was distorted by the impact of rates relief, but also because we had lower logistics disruption and a wave of deliveries in the early weeks of the period as we restarted delivery operations following lockdown one. While the exceptional prior year profit was very welcome, it really isn't the meaningful comparator.
Our leverage ratios have reduced to 1x, and we have a robust balance sheet and outlook through to the end of the year that will underpin the capital return plans I will come on to talk about. In looking at the drivers of performance in the half and in how this shapes our thinking for the second half, I will start with looking at the gross margin progression. It is immediately observable in the chart on the right-hand side of this page that the gross margin rate has come down by 3.7 percentage points overall versus the prior year to 53.5%. This does, however, risk being a somewhat misleading data point. I illustrate this by showing the same bridge in total cash gross margin terms on the left-hand side.
First of all, looking at that chart, we saw a cash gross margin reduction of GBP 24 million overall. Of that, GBP 14 million relates to a reduction in volumes, including in our own internal manufacturing. As you can see on the right-hand side, almost GBP 9 million relates to one-off disruption. The cash impact of cost price increases that will repeat in future years of GBP 15.9 million has therefore almost entirely been offset within the half through range management and price increases of GBP 14.5 million. That being said, looking at the right-hand side, the chart on the right-hand side, passing those price increases through without a margin markup has diluted our reported margin by a net 1.7%.
It is worth emphasizing that as we look at trading in the second half of the year, we now see all cost inflation having been fully covered by our range and pricing activity, and this does give us confidence on expectations for the second-half trading. Particularly, given that, as Tim has highlighted, we are seeing increases in order intake volumes as well as value. Disruption, which I touched on earlier, was very significant in the half, at GBP 8.7 million or a 1.4 percentage points impact on margin. This relates to inbound logistics issues that are not expected to recur in the second half, and indeed that we haven't seen since early January.
In particular, the largest element relates to the significant number of our containers held at UK. ports in the period and incremental HGV costs while we flowed them through to our congested CDC warehouses. With the opening of our three larger hub warehouses now and greater predictability on Far East shipping being seen, we see these costs reverting to more usual run rates in future. Overall, although there is a notable step down in gross margin rate, importantly, the underlying cash gross profit per transaction has been protected. Going into the second half with our continuing progress on cost price pass through, despite further inflation, particularly in shipping rates, we would expect to see gross margins starting to grow again.
Looking at our operating costs, we see our operating cost base as a percentage of sales reducing as revenues increase, with a cost to sales ratio of 49.5% across the half. That compares to 53.8% pre-pandemic. Within that, around GBP 6.1 million is true growth in our cost base. That is some inflation of GBP 4.6 million, which for context is just less than 2 percentage points for the overall cost base. We have GBP 1.5 million net investment in the capability of our infrastructure, principally within logistics. Disruption was very significant in the period, GBP 12.1 million in total. Importantly, we don't foresee incurring this level of cost again, and half two run rates for incremental cost are much lower.
In particular, we saw increased costs for customer services support that have since normalized. They were triggered by a larger order bank and lead time unpredictability, leading to more customer contacts. It also does reflect elevated operating costs in our final mile logistics as we cope with sickness absence levels over the period that were running at an average of 10 percentage points. Rate suspension in the prior year provided around a GBP 12 million offset, and we will see a similar impact in the second half as we complete annualizing the end of the full suspension of this tax. Looking forward, we do expect that inflation will continue to be a pressure point. Around one-third of our overall operating costs are people costs, where we will see just less than a 4% increase over the next 12 months.
While other categories will vary, we are also seeing inflation in other key line items such as marketing, fuel, energy costs. While helpfully, some other categories, such as rent and rates, provide something of an offset. Regardless, in terms of an overall picture, we would look and expect to protect future cash profits by continuing to adjust our range and pricing approach. Given the scale that we're operating with, we expect to be advantaged in this rebalancing relative to smaller industry competitors. Moving on to our cash flow. We saw our normal first half, second half working capital trend with a slight outflow in the period as we reduced order book, as we fulfilled our pre-Christmas orders.
We incurred GBP 30 million on CapEx, including finally settling the Sofology earn out agreement in the half for less than GBP 5 million, bringing the overall enterprise value for the acquisition to a little less than GBP 30 million. We also returned a total of GBP 27 million of capital through a final dividend of GBP 19 million and also GBP 8 million spent on share buybacks that will avoid shareholder dilution from employee share schemes in future. Despite the overall growth in net debt for the period, we see the closing balance sheet position as robust. Given our outlook, we believe we can support capital returns in the second half of the year. Tim touched on recent order intake and trading. This is a view on its conversion to revenues through the year.
You can see that our rate of deliveries has accelerated relative to the prior year, and that the order bank we hold provides significant resilience. That all being said, the full financial year outturn will depend on the throughput and predictability seen in the final fifteen weeks or so we have left. Given the operating challenges in the first half, we ended the period just over one week behind our production and delivery targets. We have been working in recent weeks to catch this up, and while, as you can see from the graph, we are making some headway, to date, this remains a challenging goal given that COVID still does remain with us.
Furthermore, like the whole world, we have been shocked and horrified by the invasion of Ukraine. We recognize it does pose an industry-wide risk to the price and availability on some of our particular raw materials, for example, timber and cardboard packaging, and also it does represent a risk or a constraint on some particular manufacturer's capacity. If overall disruption from in the remaining half of the year is minimal and production and deliveries flow smoothly, we do still have an unchanged outlook for 2022 financial year. If disruption is greater, there will be a shortfall in revenue and profits in financial year 2022, but we believe that these will just drop into the first quarter of financial year 2023. Overall, therefore, we would expect the picture to balance over financial year 2022 and financial year 2023 combined.
You can see this on the next slide, where we narrow the range of the three scenarios previously presented. Given the macroeconomic context, we have narrowed the range downwards, and we now target revenues of between GBP 1.15 billion and GBP 1.2 billion, which will deliver profit before tax between GBP 66 million and GBP 85 million. I'd re-emphasize here that to the extent the profits are not recognized in financial year 2022, we still expect them to come through in financial year 2023, and we do still see financial year 2022 as delivering significant growth in profits relative to the pre-pandemic periods. We do also then expect a tailwind or offset going into financial year 2023. With this good profit performance and momentum, we see the potential for a significant return of capital to shareholders.
We therefore announce today an interim dividend of GBP 0.037 that brings the ordinary dividend up to GBP 0.112 over the last 12 months, and we do expect to hold or grow this in the future. We also will pay an additional special dividend of GBP 0.10, and we will today begin a share buyback of up to GBP 25 million. In total, we will be returning over a 12-month period, GBP 80 million of cash to shareholders, which is around 14% of our current market capitalization, and we expect strong future shareholder returns to be similarly underpinned by our profit margins on negative working capital and our disciplined capital investment. Given we will have a bit more about the future prospects of our group in our Capital Markets Day today, I will hand back to Tim to run through some more operational details.
Thanks, Mike. I'll spend some time now walking you through our operational and strategic progress in more detail. First, a quick summary of the three key highlights of our operational progress across the first half of the financial year. Number one, we have established a new scale of our business through a combination of market share gains, new showrooms, online growth, and market growth, which supports our new revenue base of GBP 1.15 billion. Number two, we've made good progress with our manufacturing capacity, supply chain, and delivery network, overcoming significant operational pressure in half one, with weekly production and deliveries now broadly at our target levels. Finally, number three, we're making disciplined investment for future growth, prioritizing our new strategic pillars and platforms. I'll now cover each of these operational drivers in more detail.
As previously mentioned, our new scale of business is now established with the last twelve months of revenue equivalent order intake of over GBP 1.15 billion. Based on the proprietary Barclays market data, we see evidence of market share increases of over 2% in calendar year 2021. As the blue line on the graph shows, there was a small drop in market share in November versus the two-year comparator. This was caused by our increased supplier lead times, meaning that cutoff dates for customers receiving their orders pre-Christmas were much earlier than in previous years. However, this bounced back in line with the pre-pandemic comparator in December, and share growth has continued into H2. A key driver of this new scale has come from our investment in the DFS Store Format Transformation Program.
The blue bar on the table at the bottom of this slide illustrates the progress we've made in rolling out the new DFS format. By the end of half one, we'd rolled out across 37 locations. The new formats result in greater than 5% increase in like-for-like sales and generate a sub 2-year average payback. This program will continue with plans to transform a further 20-25 stores in the next 12 months and then continue the rollout through our full store estate where appropriate by the end of FY 2024. The new showroom rollout at Sofology has also continued at pace, with 7 new showrooms added in the last 12 months. We have now opened 17 Sofology showrooms since acquiring the business in November 2017.
Now, in order to support the new scale of business, we have added new manufacturing partnerships across the world, including an exclusive partnership in the UK. with the world's largest furniture manufacturer. This has significantly increased our potential production capacity. The increased scale of our business is being fulfilled by our enlarged final mile logistics network following our recent operational investment in the Sofa Delivery Company. This includes the creation of three new large hub warehouses to consolidate our inbound deliveries and improve outbound efficiencies. Progress across the first half of the financial year was limited, however, by the industry-wide supply chain and manufacturing disruption, particularly in quarter one. We saw significant international shipping, UK. logistics, and manufacturing disruption in half one, and especially, as I mentioned, in quarter one. Absence levels in our distribution centers were impacted by the COVID pandemic, are at around 10%.
To mitigate the impact of this disruption, the group substantially boosted its resources on its customer service functions to seek to support the delivery of the best possible customer service during this time. We've also observed cost of goods inflation of 6% in the half. Now this has been successfully mitigated by retail price increases and smart range management. The need to temporarily increase the size of our call center and in-home service teams, as well as increased operational spend as a result of shipping and U.K. logistics and manufacturing disruption, has resulted in approximately GBP 12 million of one-off operating costs in the half. Encouragingly, though, as we entered quarter two, we did see delivered revenues increase with growth, gross delivered sales up 24% in quarter two versus quarter one as a result of numerous actions to increase capacity and throughput.
This momentum is carrying into quarter three. I now want to talk about how we will make disciplined investment in our group pillars and platforms for future growth to drive future profits and shareholder returns. We will continue to expand into the home market, specifically beds and mattresses, dining room, and the living room accessories markets, with the aim of gaining circa 4% market share of a circa GBP 5 billion total addressable market. We also plan to continue to invest in improving our data platforms to drive marketing efficiency and help improve our investment decisions, and thereby unlock new growth and further market share gains. We're also delighted to announce a GBP 15 million investment over the next 3 years in our own U.K. manufacturing facilities to improve efficiency and increase capacity through automation and workflow productivity.
We look forward to sharing further details at our capital markets event. Now I want to update you on the consultation we are entering into on the potential closure of our Netherlands operation. We've carefully reviewed the performance of our Netherlands operations established in 2014. While a pathway to profitability was identified from the current annual losses of GBP 2 million per annum, the relative financial returns and execution risks of this strategy look weak compared to other choices for capital utilization within the U.K. and ROI markets. We therefore intend to consult potentially affected colleagues fully in line with the Netherlands employment laws on the potential closure of this operation, and we will announce an update in due course once the consultation is complete.
Should a decision be taken to exit the Netherlands, we would expect that we would remain responsible for circa GBP 10 million of future cash liabilities that we will seek to mitigate, with some additional non-cash impairments also being recognized. We do, however, expect the potential to wind down our order book and stockholding in an orderly fashion, releasing some offsetting cash. In summary, across the first half of the financial year, we've delivered a strong performance in sales and profits with a 17% revenue growth and 33% PBT growth against the pre-pandemic comparator levels. This is against a backdrop of industry-wide operational challenges as a result of COVID disruption. We have a resilient order book as well as a robust balance sheet, which underpins our capital returns program that Mike's announced earlier.
Looking forward into the second half and beyond, trading and deliveries have started strongly following a successful winter trading period, and we've now established our new scale of business at GBP 1.15 billion of revenue. We've also set out our medium-term ambition to grow our revenues to GBP 1.4 billion through our new strategy. Our avenues for further growth will come from continuing to roll out new Sofology showrooms as well as the continued investment in the DFS store transformation program. We will look to increase our presence in the home market, and we will invest in our data platforms and technologies to drive further market share gains. For FY 2022, we've narrowed the range of profits based on the latest delivery profile, but it's key to stress that any unrealized profit in FY 2022 will flow into 2023.
I'd like to end by thanking our colleagues and our customers and our wider stakeholders for their continued support during this incredibly challenging period. Thank you very much for listening today. I look forward to taking your questions later.