Good morning, everyone. Welcome to our Financial Year 2023 Interim Results Presentation. I'm Tim Stacey, DFS Group CEO, and I'm pleased to be here today with John Fallon, our new CFO, who joined the business in November. Our plan for today is for myself to provide a brief overview of the first half of the year. John will cover the financials. I'll update you on our strategic progress with some concluding thoughts. John will join me at the end to take questions from analysts. In terms of half one, I'm pleased to report that the group has extended its long track record of achieving market share gains in a challenging market to what are now record levels.
This has gone some way toward alleviating the impact of the weaker market that we observed in 2022 overall. Those share gains built throughout the period, with the group delivering strong order intake growth in the Q2. The order intake momentum has continued through the important Winter sale period. Profit margins have reduced over the last year due to a combination of significant cost increases and our commercial strategy to ensure that we continued to offer great value for customers in an environment where consumer discretionary spending was clearly under pressure. We have, however, improved our gross margins in the first half of this year from a low point in half two of FY 2022, and further still in the second half to date.
Cost headwinds are reducing, and in some cases reversing, and we expect our upward gross margin trajectory to continue as we execute our gross margin build back plan. Profit will be second half weighted based on our current forecast order intake performance, together with the improvements in gross margin and in line with consensus expectations for the year. I'll now provide a brief overview of the market conditions and our performance. The market size for upholstery in the UK for the calendar year 2022 is estimated by GlobalData to be around GBP 3.3 billion. That's broadly in line with 2021, and that reflects higher average order values that include the sector-wise retail price increases we've seen in order to offset the high cost inflation.
In volume terms, looking at a number of different sources, we estimate that market volumes are down around 15% over the last six months relative to the pre-pandemic period of FY 2019. The group has continued to grow its market share, especially in this half, where our share gains accelerated to reach a record of 38% in value terms. This is supported by both our proprietary Barclaycard dataset and also GlobalData, and represents a record share for the group. We do believe, though, that there's still plenty of opportunity to grow our share significantly given the highly fragmented market that we operate in. We've seen some pure plays and a large number of independent retailers drop out of the market, continuing a long-term trend, and we expect that to continue.
We also strongly believe that to win in the upholstery market, we need a strong physical and digital model. We continue to invest in these areas and our supporting platforms to further strengthen our market-leading position. I wanted to summarize for you three areas that we're focusing on as a business. The first is to drive profitable growth. We see this coming from three areas. Firstly, by continuing to grow our share in the upholstery market. As I've stated, we've got a track record of growing share in difficult economic cycles. We expect to develop our share further by investing in our DFS proposition, completing our Sofology national showroom rollout plan, probably from the likely exit of smaller competitors. Secondly, driving average order values in upholstery through improved product mix, innovation, and selective retail price increases.
Thirdly, by executing our home growth strategy, the first phase of which is to focus on the GBP 3 billion UK beds and mattress category, which I'll come on to discuss later. The second focus area is to rebuild our gross margins back to pre-COVID levels. Through FY 2015 when we first floated to FY 2019, we averaged around a 58% gross margin, and we held that within quite a tight range. Since then, we've experienced significant levels of cost inflation that we've sought to pass on to the consumer on a pound-for-pound basis. We've already implemented a number of initiatives to rebuild margin in areas such as range development, using our scale to improve our sourcing opportunities. We've changed our interest-free credit offer, and as I said, we've put some selective retail price changes through.
We do have a significant tailwind from freight rates normalizing and reduced supply chain disruption that will mitigate the impact of things like higher interest rates going forward, and also the future dollar rate in FY 2024. More on that later from John. The third area of focus is cost control. Our annual operating costs, excluding cost of goods, is around half a billion GBP, and we've experienced around an average of 5% inflation here. We're taking action to mitigate this and to lower our costs in absolute terms wherever possible. We will, however, ensure that our growth agenda is protected, ensuring that appropriate levels of investment are made for the future. I'll now hand over to John, who will run you through the numbers.
Thanks, Tim. Morning, everybody. I'm John Fallon, new Group Chief Financial Officer, and I can honestly say I'm delighted to have joined the DFS team. I'd like to start today by just sharing a brief summary of my reflections on the business so far. My first observations are more acknowledgments of the positive progress that Tim and the senior team have continued to make over the last few years, strengthening the overall customer proposition to be what is a clear market leader in sofas and upholstery. At the heart of the proposition are genuinely high-quality products and exclusive brand partnerships, which are delivered through a market-leading omnichannel experience. All of which has been backed by a strong track record of innovation across both the online platform as well as investments in our showroom formats.
For sure, there are more opportunities, and I'm encouraged by that too. In particular, I can see relative upside for Sofology as we start to focus on using better customer data and digital marketing to improve that brand's proposition. The group clearly also benefits from market-leading scale. At around 38% of the upholstery market, that's more than three times the revenues of our next biggest competitor. That is already unlocking efficiencies and value for our customers that our competitors can't match. I believe we can leverage that scale further across our costs and our margins, and have recently initiated a further detailed review of our cost base. It's also reassuring to find a business that is well invested in to support future growth.
As the market normalizes, I believe we're very well placed to deliver significant growth in revenues, profits and returns, supported by our highly cash generative model. In terms of new growth markets, home, starting with beds and mattresses, is a clear and compelling adjacent opportunity where we can build on our existing capabilities. Perhaps more than anything else, as I've reflected, I found myself coming back to the culture and the values of the company, which is one of the reasons I was attracted to the business. A lot of companies talk about culture, but in DFS I feel it is a genuine special ingredient that run through the entire organization. There's strong levels of engagement, collaboration, and ambition. I also believe that shows up in the quality of the customer experience in our showrooms and on our websites.
Lots to like, and lots of opportunity to create further value. Moving on to our financial performance for the first half, and starting with an overview of the results. First thing to acknowledge is the consumer environment through the first half has continued to be weak, and market demand has been relatively low. We estimate market order volumes were down by around 15% compared to pre-pandemic levels. As Tim mentioned earlier, in that context, the group has continued its track record of market share growth through the period, which has helped contribute to our revenue performance. Group revenue was up 9.4% compared to FY 2019, which was the last full year prior to the pandemic, it was down slightly year-on-year.
Revenue in the period also included GBP 20 million from the partial unwind of our elevated order bank at the start of the period. Adjusting for this, revenue growth would have been 5.3% versus FY 2019. Underlying profit before tax and amortization of GBP 7.1 million was a decrease on last year, impacted by the lower revenues, inflationary cost increases, and investments in future growth, most notably to support the growth in our beds and mattresses ranges. A stronger Q2 performance on order intake, which I'll come back to later, combined with our made to order lead times, means that our end of half order bank remained elevated, equivalent to around GBP 4 million of profit. We're expecting the order bank to normalize and to realize that profit in the second half.
Full year profit delivery will be weighted to the second half, supported by improvements in sales and profit margins, in part as cost headwinds begin to subside or in some cases, reverse. More on that later. Leverage stands at 1.7 times, which is outside our target range of 0.5 to 1 times. We continue to operate with plenty of headroom on our covenants. I'll come back to our capital distribution policy and dividends later in the update. Looking at revenue performance. Gross sales, which is based on orders delivered to our customers, was 9.6% higher than FY 2019, around 5.5% after removing the benefit of the elevated order bank I mentioned earlier. Digital sales participation remained strong at 24%.
That's around 40% higher than the levels we were seeing before COVID, reinforcing the value of our omnichannel proposition. The sales growth compared to FY 2019 was supported by average order value growth in the late teens, offsetting mid-single digit declines in order volumes. Both DFS and Sofology brands saw positive growth compared to FY 2019. In DFS, it was encouraging to see beds and mattresses online sales growth of 70% year-over-year, supported by marketing and logistics investments, together with new exclusive branded bed ranges. In Sofology, we've now added 15 new showrooms since FY 2019, which is continuing to support total growth. The like-for-like sales performance in Sofology has remained below FY 2019 levels after being disproportionately impacted by the supply chain delays across 2020 and 2021.
Since then, we've invested in our Sofology operations and service levels have now stabilized, leaving the brand well placed to recover the lost ground. Revenues which are reported after the deduction of VAT and the cost of providing interest-free credit and warranties were 9.4% higher than FY 2019. That's marginally lower than gross sales growth due to the rises in Bank of England interest rates, which we were able to partially offset by securing better rates with our financing partners. Before I move on to discuss margins, I want to share more on the trend we're seeing in our order intake performance. As we've described in previous updates, after a volatile FY 2022, the Q1 of this financial year proved to be tougher than expected with low levels of market demand.
However, the market did improve in the Q2, we improved at a faster rate, delivering quarter to order growth of 16.3% versus FY 2019. That did leave our order bank elevated, as I mentioned earlier. GBP 4 million of profit will reverse in the second half. As you can see in the blue shaded bar, we have seen that positive momentum continue through Q3 to date, supported by strong order intake levels across the important Winter sale period. However, market outlook and consumer demand does remain uncertain. Over the last two weeks post-Winter sale, we've seen our order intake growth reduce to around 4% for FY 2019. Delivery of our full year guidance assumes order growth returns to Q3 today average levels from Easter through to the end of the year.
Overall, we're seeing that order growth trend though translating into record market share performance as you heard earlier from Tim, up to 38% for the first half based on both our proprietary Barclaycard deposit data and the read from GlobalData. That compares to the last read at the end of FY 2022 of 36%. Moving on to gross margin. Our gross margin for the half was 53.8%, up 30 basis points year-on-year, and up 190 basis points from the second half of FY 2022, which we consider to be the low point in the current cycle. The year-on-year improvement came from a reduction in the prior year costs associated with port and haulier-related disruption, together with increases to average order values as a result of range innovation and some retail price increases.
All of which has more than offset the ongoing but now diminishing inflationary headwinds across our cost of goods and freight. Freight rates did remain high at $8,000 per container through most of calendar year 2022, before starting to reduce from October, which left the average rate across the first half still higher year-on-year. Finally, on margin, interest-free credit costs, which are linked to the Bank of England base rate, were contained to a year-on-year increase of GBP 6 million in the period, supported by favorable contract rates. Furthermore, to help mitigate the impact of base rate increases going forward, we recently reduced the maximum credit period to 36 months, which we believe remains a highly attractive customer offer.
Still on gross margins, we remain focused on continuing to recover gross margin percent back towards historical average levels of 58%. That recovery is on track, supported by improvements we are reporting for the first half of this year and the additional improvements underway in the second half. We currently expect gross margins in the second half to average around 56%, supported by those lower freight rates, in addition to further range optimization and some retail price increases. On freight rates for the calendar year 2023, we are now contracted at less than $2,000 for the year, which is broadly in line with pre-pandemic levels. We start to get the full benefit of those lower rates on inbound orders received in early March, and then the full annualized benefit will fall into FY 2024, supporting further margin progress next financial year.
Separately, we're continuing to review our sourcing and manufacturing strategy to unlock new opportunities to leverage our scale and lower the costs of the ranges we buy from our suppliers. All of which gives confidence that gross margins of 58% as we exit FY 2024 into FY 2025 are a realistically achievable target for us. Moving on to operating costs. Operating costs in the period covering all the costs between gross margin and PBT increased from GBP 274.5 million, which represented 49.3% of revenues, to GBP 285.8 million or 52.5% of revenues. That increase was driven by four main factors. Firstly, ongoing inflationary headwinds across predominantly wages and logistics and supply chain-related costs.
Secondly, higher interest costs due to a combination of the rise in rates and the increased drawdown of our RCF facility. Thirdly, investment in new showrooms, warehouse capacity and our beds and mattresses proposition, all of which will support future growth in the future. Finally, the ending of prior year business rates relief, which added GBP 2 million to our costs year-on-year. Those increases were partially offset by year-on-year cost savings, predominantly in our Sofa Delivery Company, after completion of the integration of the DFS and Sofology logistics operations. We've also seen a reduction in prior year costs associated with inbound supply chain disruption in FY 2022. Net bank debt increased to GBP 135.6 million from GBP 90 million at the end of last year.
This was driven by the lower first half profits, working capital normalizing due to a reduction in the elevated order bank, plus the share buybacks and dividends in respect of cash generation in the prior periods. Cash CapEx incurred in the period totaled GBP 19.6 million as we continued to invest to support our growth objectives. This included spend on two new Sofology showrooms, as well as refits of a further three DFS showrooms and investments in beds and mattresses selling space in six showrooms. We also continued to invest in digital and data initiatives that will support future sales and cost efficiencies, that's something that Tim will elaborate on further later. We continue to expect that for the full year, cash CapEx will be around GBP 35 million.
Leverage at the end of the period was 1.7 times outside our target range of 0.5-1 times, which brings me on to capital distributions and dividend. First thing to say is that following a review of the existing capital distributions policy, we're today updating the policy to move to a simpler earnings-per-share cover-based calculation for ordinary dividends. That replaces the underlying adjusted cash flow-based calculation, which I know had the potential to be a little more opaque and harder to forecast. The EPS coverage defined by that updated policy is between 2.25 times and 2.7 times. Our net debt leverage target remains unchanged. We also intend to target special returns as and when leverage is projected to fall and stay below 0.5 times.
Based on the new policy, the interim dividend will be 1.5 pence with a projected total ordinary dividend of 4.5 pence based on 2.5x cover, and subject to delivery of our FY 2023 profit guidance. For the avoidance of doubt, the projected ordinary dividend under the old policy would have been at a similar level, in fact, slightly lower than the four and a half pence based on the midpoint of the 40%-50% of underlying cash flow calculation. In terms of our outlook for next year and the medium term as well, the consumer outlook as I started with, and therefore, market demand remains hard to forecast. Our FY 2023 profit guidance of GBP 30 million-GBP 35 million reflects that, and is in line with market consensus.
Profit delivery will be weighted to the second half due to the stronger revenues, the unwind of the first-half closing order bank, and as we deliver on track improvements in gross margin and the cost base. Importantly, as we look to the future, our record market share leaves us well-positioned to grow profits and deliver strong returns when market volumes start recovering as they will. We're focused on rebuilding our gross margins. We're undertaking a further review of our cost base, while at the same time continuing to invest to support future growth. With that, I'll now pass back to Tim.
Thanks, John. I'll now provide a brief update on our strategic progress. I'll start with our three pillars and then move on to the supporting platforms. First then, our DFS pillar. This is the larger of the two core retail brands, and it's performed relatively well in the period, growing its market share significantly. Now, over the last few years, DFS has been successfully transitioning its proposition to appeal to a broader customer base through enhancements across its entire customer journey through sector-leading innovation and marketing, continued product development, and investment in our retail channels and our people. Our new marketing campaign called What's Your Thing? has continued throughout 2022, shifting the focus away from price and offers to a colorful and engaging demonstration of the broad range of sofa styles that DFS has to offer.
This campaign has contributed to driving record levels of brand connection scores. Our digital marketing efforts have been recognized by some renowned digital powerhouses. In fact, DFS have established a successful partnership with Meta that has recently proved that our campaigns not only drive online sales but have a halo of impact in in-store sales too. A measurement shows Meta drove an 8% uplift in offline sales. This omnichannel activity positions us as one of Meta's most advanced retail partners in the sector. Our strategic range development continues at pace, and we've launched innovative models with hidden storage, heated seats, and reclining memory functions, and these are performing really well and driving average order values. We continue on our mission to create circularity in our product development through our Grand Designs collaboration, where we're using recycled fabrics and sustainable materials.
We continue to invest in our showroom formats with our transformation program now rolled out across 50 locations. I'm pleased to report that we continue to see strong sales uplift of over 5% versus control and short payback periods of under two years on the most recently refurbished showrooms. Finally, on the DFS brand, we continue to refine our workforce optimization solution, which uses a number of data sources and AI to help ensure that we have the right number of showroom colleagues working at the right times of day, and this has improved our in-store conversion. It's our belief that the DFS brand has never been in stronger health and is well set for further growth as and when the market returns to normal. Moving on to Sofology now.
Sofology has become a household name following sustained marketing investments since our acquisition of the business in late 2017. Using well-known celebrities in its adverts, such as Lena Dunham and Carter, to help bring imagination to life, the campaign has helped contribute to Sofology achieving its highest ever levels of brand awareness. Sofology has also started to collaborate with TV stars, such as the architect George Clarke, to create sustainable design-led ranges such as the Gaia pictured here. This adds to the growing number of sustainable base ranges in its Sustainable Edit collection, which feature fabrics made from recycled waste, fillings that are recycled or recyclable to support a circular approach to product development. We've also continued to integrate the brand into the group and develop shared platforms.
The best example of this is the creation of The Sofa Delivery Company, which has enabled scale benefits and lower delivery costs for the group. Sofology is well-placed to grow market share going forward. Moving on to the home pillar. We've made good progress in developing our strategy to grow our share of the home market. The first phase is to develop our proposition in the GBP 3 billion beds and mattress market as we target a 4% market share. We launched our first ever beds advert, which increased awareness of our proposition, and we've been able to utilize our existing upholstery exclusive brand partnerships with the likes of French Connection, Grand Designs, Joules, and Cath Kidston to expand these offerings into upholstered bed frames.
We are focusing our efforts on developing the proposition through the DFS online channels, and our beds and mattress online order intake growth is up 70% year on year. We also use our showroom digital tools, such as our Swoosh large format screens and tablets, to successfully sell home ranges through our showrooms. We are trialing the use of some retail space to include a beds and mattress section. We expanded our partnership with our third-party provider to deliver not only our stocked products from our Milton Keynes Distribution Centre but also a drop ship solution for beds and mattresses, which enables us to deliver at scale into this expanding product category.
Having established the supply chain foundations and developed the product proposition, we plan to accelerate our investment in marketing to drive awareness and growth in the beds and mattresses market focused on the digital channels. Our three pillars are supported by our platforms. I'll just pick out some highlights before going into a bit more detail on technology and data. From a sourcing and manufacturing viewpoint, we've just recently completed an investment in our Doncaster manufacturing site to alter the layout and improve the production process and productivity levels. Following the group's growth in market share, we are revisiting our supplier mix with a view to evolving and optimizing it, and we're currently engaging with a number of new potential partners. ESG considerations will play a crucial part in the decision-making process going forward.
As mentioned earlier, our logistics integration program is now complete, with our Sofa Delivery Company distribution centers now receiving and delivering orders for both retail brands, driving cost savings, but also customer service improvements. Finally, people and culture. The DFS Group has always been a people business, and we've developed our employee value proposition to ensure we remain an attractive employer to work for. Whilst ensuring that our pay levels are competitive, we also provide a number of other benefits, which include our recently launched subsidized private health offering, which is accessible to all of our workforce, support for menopause and men's health issues, and free flu vaccinations. We've sought to share best practice across the group, create consistency in service, and increase efficiencies by integrating back office support functions such as finance, HR, and technology. We believe there remains a further opportunity to generate additional synergies.
Moving on to technology and data. We continue to develop our Integrated Retail Intelligence System, or IRIS for short, which brings together over 35 different data sources to create one unified view of the customer. This solution incorporates machine learning and decision-making and process automation in order to gain insights across the whole customer journey, which we can then leverage to drive efficiencies and growth. Some highlights are as follows. In order to get the best possible return from our marketing investment, we've reviewed and overhauled our approach to customer segmentation to ensure that we have a consistent approach across our retail pillar brands. Using CACI Acorn demographic data, combined with research on attitudinal behaviors, it's enabling us to refine our proposition for each customer segment.
We're working with our media partners to create specific media profiles for each segment to aid smarter and better targeting. We're also in the process of mapping our new customer segmentation by postcode to align to store catchments. Using retail sales data, we can then better understand where we under or over index in local markets. Over the last few years, we developed our Intelligent Lending Platform, or ILP, and we launched this in DFS last year. ILP speeds up the process and the likelihood of customers gaining the credit that is right for them and helps increase conversion at busy trading times in the showrooms. We're now rolling this out for Sofology in the coming year.
We're also investing heavily in internal capability across both IT development as well as colleague training, starting with a data literacy program in The Sofa Delivery Company. This will put us in a great position to exploit the ever-evolving data set. Turning to ESG. We launched our ESG strategy in September 2020 with a strong focus on sustainability and the environment using our The Sofa Cycle approach. A real highlight in half one has been the launch in Sofology of the Gaia range, which takes a completely circular approach to product innovation. This product supports flexibility from a customer point of view in terms of style, longevity through servicing, as well as value retention in the raw materials that we use.
We know we have a lot to do to develop this vision of circularity, but this type of innovation is a really good example that strengthens our belief that our net zero ambition will be achievable in the long term. We're working collaboratively with our supplier partners as our transition plan to net zero will be dependent on innovation across the entire value chain to create a low carbon future for the industry as a whole. Moving on to colleagues. It's important to us that we attract and retain a diverse set of colleagues who feel welcome and valued. We've implemented specific diversity and inclusion-related training courses and engagement events, we are successfully embedding an everyone welcome mindset across the group.
We've also launched our Breakthrough Driver School initiative, which offers warehouse colleagues and 3.5 ton drivers the opportunity to be trained to become 7.5 ton drivers. With over 90 colleagues enrolled and 50+ successful graduates, this scheme is proving incredibly successful in terms of solving an operational challenge for us, also providing a great career opportunity for newly qualified drivers. With regards to governance, last year, the board introduced the Responsible and Sustainable Business Committee, which is chaired by our Senior Independent Director, Alison Hutchinson. This committee is really helping us shape our approach and review our progress across all fronts of ESG. In the last six months, we've completed our climate scenario analysis to support our TCFD disclosures. Our focus in the next 12 months will be ensuring that our transition plans are fully reflected and costed into our strategy.
To sum up then, I've been with the business nearly 12 years now. I'm very privileged to be CEO for nearly 5 years. Stepping back from all of the short-term issues, I actually believe we're in the strongest position we've ever been in terms of our market share of the upholstery market, and we're gonna come through this economic cycle in really good shape. DFS as a brand is in really good shape, and the Sofology and Home areas offer great opportunities for further growth. I think we've got a strong operational grip of the business. We're seeing significant improvements in terms of efficiencies and customer service scores, as all the supply chain disruption that we experienced in the past has gone. We're rebuilding gross margins, as John outlined, and we expect profits this year to be in line with consensus.
I think in the medium term, we have real confidence that we're well placed to grow both revenues and profits. To that end, I sort of wanted to conclude by highlighting this slide that we used last year in the Capital Markets Day in March 2022. We stand by our medium-term ambition to grow our revenues to GBP 1.4 billion. To operate at an 8% PBT margin, generating post-tax free cash flows of 75%+. Clearly, the last year or so has been challenging for all sorts of external reasons, but we're confident the group is incredibly well-placed to take advantage of more normal trading conditions as and when that happens, to leverage our strengths and our scale, and generate strong returns and cash flows in the future.
I want to conclude by saying a huge thank you to every single colleague in our business for their extraordinary efforts over this last few years and commitment to the cause. I'll now invite John back up, and we'll take some analyst questions. Thank you .
Morning, Michael Benedict from Berenberg. I have three-ish, if that's okay.
Three-ish.
Firstly, can you remind us how big the beds and mattresses business is now as a percentage of sales, just so we can get a feel of how sort of material that growth is for group numbers? Secondly, on interest-free credit, can you remind us what the uptake has been given the new interest rate environment? I think it's previously been two-thirds-ish. Have you seen peers move their credit offer as well? Lastly, John, your reflections at the start were largely positive, like you say. I guess is there anything you're looking to change or do differently in the business? That'd be great.
In terms of beds and mattresses or home overall for us, it's around about 5% of our total order intake in the year. Beds and mattresses is the big majority of that. Our focus is through the online channels, particularly through DFS. As we've now, as I said, we've sorted the product proposition, position. The website is strong. We're now building our awareness through marketing, so we can see some good trajectory for growth there. ILP, the uptake on ILP has settled back down to pretty much pre-pandemic levels, so 60% credit, 40% cash. Immediately post-pandemic, that was 50/50.
I think that seems to have settled, and we haven't seen any impact at all of the change of moving from 48 to 36 months, other than obviously reduced subsidy costs for us as a business. Most of the peers have changed beforehand, so we believe it's a very strong offer, relatively. John, reflections?
Yeah, I think, as I said at the start, genuinely a lot to like coming in. You know, I mean it when I sort of say that the progress that's been made is, you know, testament to what the team have done, particularly getting the proposition to where it's at. Some of the innovation, I think, and the investment in innovation in the front end really stands out. I think in terms of opportunities, you mentioned it a little bit, I think, you know, given the scale that we've got as a business, I feel that we've got opportunity to work that scale harder, both in terms of our manufacturing and sourcing strategy so that we are buying as well as we possibly can, and that's something that's in our thinking.
Tim talked about it a little bit earlier as well. Equally, I think on the cost base as well. I think there are opportunities for us to similarly buy better, look at specifications, you know, remove duplication that just allow us to leverage that scale a little bit harder. Separate to that, I think that from a processes perspective, we can simplify and centralize a lot of the back office type processes. I talked a bit about the innovation at the front end. Don't think we necessarily kept up at the back end. It's not a surprise given the evolution of the organization. That's a priority that I've got to, you know, continue to improve and make the business more efficient in that way, too.
I think, back, we've got Jonathan from Peel Hunt online.
Yeah. Morning. Morning, gents. A couple from me.
Yeah.
First you just in terms of DFS in the proposition, I think, you know, all things to all men, you know, strong at the value end, strong at the quality end. Where are we on Sofology with that? Is there still some sort of change or evolution still ahead of us? And then secondly, I know that the guidance is to hit consensus, but you have sort of narrowed the range down from a 30-40, to 30-35. Slightly to the bottom end. What was behind that? I mean, obviously, you've had a couple of weeks where trading wasn't quite as strong. Is that what sways you, or is there something else that has perhaps tickled you down a little bit?
Morning, Jonathan. I think, yeah, I think with Sofology, there probably is there's a lot of work happening in terms of the brand position and the product development. I expect to see in the next sort of year, 18 months, the products really moving forward in terms of innovation. Already some great new products lining up on the floor. I know that Emma and the team are working quite heavily on that. The marketing's working really well for us in terms of brand awareness. The in-store opportunities are strong. We've got 57 stores, and our plan would be over the medium term to get towards 70. I think we've got growth opportunities there, and it's really about focusing on the products and making sure that we've got that clear water between DFS and Sofology.
That's probably where we're at, Jonathan. I think they've done a huge amount of fantastic work on the customer service and operational grip in this last 18 months, and we're seeing some really good scores coming through from a customer point of view. I think in terms of the second question regarding the range, I mean, John can elaborate a little bit further. It's just literally we're kind of now 15 weeks out from our year end, and as you get closer, you can start to see all the different moving parts coming together. The last couple of weeks have been a little bit softer in terms of order intake. We'd expect that post the winter sale. Coming out of winter sale, which was incredibly strong for DFS, in fact, the best ever winter sale at DFS.
You'd expect a bit of a dip down, but we are starting to see it normalize back to the trends that we've seen for the last 24, 25 weeks. It's just that as you add all the moving parts together, we're just getting a bit clearer about the range, that's all. Nothing fundamental that we've seen in the consumer behavior in terms of a pattern change versus the last sort of 24 or 25 weeks. Anything to add?
I think it is just reflected in an additional bit of caution given proximity now to year-end and line of sight to everything that we have got. Don't think there's an expectation of a fundamental ongoing shift. You know, we've seen a sustained period of time now from a consumer behavior and demand through quarter two and quarter three to date. Think as we move back towards Easter and customers have got reasons to shop and to sell and buy again, should I say, then I think we'll see it return back onto the levels that we've seen. That's what we're assuming.
Yeah. Andy?
Thanks very much. Andrew Wade from Jefferies. You mentioned in the presentation and you have indeed before that one of multiple reasons, but one of the contributors to your share gain has been the fact that you pass through inflation on a pound-for-pound basis, which has perhaps been more customer beneficial than some of your competitors have done. Do you see any potential for there to be a bit of pressure on your share position as you try to rebuild margin, maybe get some of that back in price where competitors have already done it? You'll be the first one.
Yeah. I think, when you look at the evolution of the margin going forward, you know, a lot of it is already baked in as a result of some of the impacts that are reversing. Obviously, freight is the big standout one, also some of the disruption costs. Yes, we've made some selective price increases along the way as well. They've not been material even more recently, not material, particularly in our low single digits. I think in the round, you know, the proposition for all the reasons we've sort of talked about and described is the overall winning formula taken all together. You know, we'd still, you know, retain that confidence in the proposition being a winning one in the context of the overall market.
You know, that's not speaking for what everybody else may or may not choose to do.
Yeah. I mean, we've seen the share gains accelerate through the half. If you looked at September, October, you know, it's grown. I think And we look obviously on a weekly basis about what all our competitors are doing, and we firmly believe we've got a very strong offer, relatively. You know, our target back in 2015 was to get to 40%, and nobody believed that we could do that. We're now standing here thinking, yeah, we feel very confident we can maintain that and even grow it, Andy.
Need a new target. The next one, I mean, you sort of touched on the answer to this already, but I'm gonna ask anyway. You know, the Q2, Q3 run rate was about +16%.
Yeah.
You talked about the last few weeks, last couple of weeks, few weeks being around the +4%, but your budget is for it to return back to the +16%. Sort of what gives you the confidence that it's gonna step up back up from 4% to 16%? I appreciate you've partly answered it, but you've already started to see a bit of it.
We were starting to see a bit of it, and it's only been a couple of weeks. You know, we've had 24, 25 weeks of that sort of level on average of 16%. We know that the average order values relative to 2019 are high teens. We're not seeing any change in consumer behavior in terms of footfall and web traffic, et cetera. I just think we're in that period where we've come out of Winter Sale before Easter, which is a good timing for us this year. We've got an extra bank holiday as well. I think we've got lots of reasons to believe the offer is strong. We've got good marketing and good offers through Easter.
I think we're looking at that, and that's why we've kind of looked at the projections and come up with the numbers we've suggested today.
Okay, thanks. The last one, in the OpEx bridge there, you sort of pointed to GBP 12 million of efficiencies. Appreciate some of that sort of around non-repeat of disruption last year, but sort of interested as to how much more we should be looking at that on that like sort of going forward.
Yeah.
You talk about the cost review in train.
Yeah. I think we've pretty much just kicked that off. I mean, when I, you know, Tim and I both discussed this and said it was a good opportunity, a fresh look at the cost base. We're about four weeks into that review, so we're at a stage where we're really analyzing all of that addressable cost base. We'll certainly look to bring back in September more detail to share in terms of both the quantum and areas of opportunity.
I think if I kind of at this stage look at where key areas of opportunity are, I think, you know, group synergies and continuing on the journey of maximizing group synergies, which clearly done some of, I think GNFR, both in terms of supplier base, consolidating that, removing duplication, you know, reviewing cost prices, specification. There's plenty to go at in that area still. I think on property costs as well, the team have already done some really good work that'll evolve over the next two to three years as we move through lease renewals.
Then again, as I mentioned earlier, and you look at some of the operating models, there's still opportunities to simplify and automate things that we do at the back end of the business as opposed to the front end that, you know, should, you know, naturally yield opportunities as well. As I said, we'll come back in September and share more in terms of what that could look like. Like you said, our aspiration is to be at least enough to offset some of the future inflationary pressures, and hopefully start to reverse some of that too.
Brilliant. Thank you.
Any more questions from the floor or online? Mike's got another one.
Thanks. Yeah, just 1 quick follow-up. The Sofa Delivery Company, I guess, what are your latest thoughts on making that available to third parties? If you did choose to do that, how much more investment would be required?
Well, not a lot more investment. All of the infrastructure and the technology is all set up, so we can take more volume. We have been delivering on behalf of Sofa Workshop as an independent brand in the past successfully. At this stage, Mike, we're not actively looking to sort of take on third parties, but it could be something we do in the future and hence why we've set it up in that way. I think the team have done a tremendous job through all of the supply chain disruption in the last few years to do the integration at the same time and come out the other side.
We're seeing, you know, really good performance in terms of van utilization, but NPS as well, and Net Promoter scores for customers. I think it's a great asset for the group, and one we'd look to kind of exploit and develop going forward. Any more questions? Anything online or done? Okay. Well, thanks very much for coming along, battling through the train strikes, tube strikes, et cetera, and appreciate that. To everybody online, hopefully see you soon. Thank you.
Thank you.