Hello, and welcome to the results presentation for the Grafton Group plc for the six months ended June 2022. I'm Gavin Slark, I'm the Group CEO, and I'm joined today by David Arnold, who is our Group CFO. As usual, I will just take you through some first half highlights. David will give you the details of the financial presentation, and then I shall come back at the end and talk you through the strategic outlook and how we see the market going forward. In terms of the first half of 2022, I do believe we are now seeing the benefits of the geographic diversification across the group and the portfolio management that we've carried out in recent times.
An excellent performance from our distribution businesses in Ireland and the Netherlands, supported of course by the contribution this year from IKH in Finland, which came in with a 13% operating margin, really underlying the quality of the investment that we made in Finland during last year. Profitability in Selco and Woodie's was lower relative to last year against the exceptional performances that we had. Remembering, of course, particularly in Ireland, that during H1 last year, we still had very significant retail restrictions in place, but Woodie's was designated as an essential retailer. We have got a double-digit operating margin in all of our operating segments, completely consistent with the targets that we put out at the Capital Markets Day last year, along with a very strong adjusted return on capital employed of almost 19%.
On a pre-IFRS 16 basis, we have net cash of over GBP 520 million, and that gives us real significant optionality going forward in terms of both organic and acquisitive investment opportunities. We have made further progress on our sustainability agenda, which I will talk more about in just a moment. In terms of 2022 in the first half of the year, you'll see the details on the screen in front of you there, with revenue slightly higher than what it was, or 12% higher than what it was in the first half of 2021. Adjusted operating profit and EPS at GBP 151 million and 49.5p respectively, slightly lower than last year, as we'd anticipated based on the normalization of those very high-performing businesses last year.
We are proposing an increase in the dividend to 9.25p, an increase of almost 9% over the same period last year. As I mentioned earlier, the net cash on the balance sheet compared to the same period last year, obviously significantly enhanced by the divestment of the GB traditional merchanting business that we carried out in the second half of 2021. Adjusted operating profit margin at 11.5%, significantly stronger than it had been in prior years. Obviously, that return on capital employed as well, although slightly down on 2021, still very much within our target range up there at 18.8%. On our sustainability agenda, I'm delighted to say that Rosie Howes is going to be joining the group very shortly as our new Group Head of Sustainability.
She has huge experience in this area, particularly from a retail background, and we're really looking forward to working with Rosie during the second half of the year. We've also completed our second Carbon Disclosure Project submission for 2021, and we're continuing across the whole of the group to develop our sustainability systems to make sure that not only we're taking the right actions, but that we can measure and manage those actions in a very clear way. CPI Mortars has installed its first solar panels on one of its factories, following on from the installations in both Woodie's and T G Lynes. That's a project again that we'll continue to look at going forward to see where we can implement solar across more of the properties within the Grafton Group. We're also running some of our commercial fleet on HVO.
As many of you will be aware, there really isn't an electric alternative for very large heavy good vehicles at the moment. Using HVO across some of the fleet is a way of significantly reducing the emissions across what is a very difficult area to try and manage. Our new debt funding includes incentives connected to the achievement of targets aligned to the group's sustainability strategy. At that point, I'll pass you over to David, who will take you through the details of the financial performance.
Thank you, Gavin, and welcome everyone. Group revenue was 12% higher at GBP 1.15 billion. Adjusted operating profit, pre-property profit of GBP 132.6 million was 7% lower than the first half of last year. The property profit was GBP 18.5 million, and this was attributable to the disposal of two properties, previously part of the GB traditional merchanting business, which realized cash proceeds of GBP 24 million. Adjusted operating profit was GBP 151.1 million. The net finance cost of GBP 7.7 million was lower with the benefit of a lower interest charge on gross borrowings and interest received on the cash deposits arising from the disposal of GB traditional merchanting at the end of last year.
Adjusted profit before tax was slightly lower than the comparative period at GBP 143.4 million. Let's now look at the movements in revenue and operating profit for the first half of the year compared to the first half of last year. You'll also find at the back of the presentation the same bridges replicated compared with the first half of 2019, as we think it's helpful to consider the comparison against pre-pandemic trading too. Returning to this slide and looking at the GBP 125 million of revenue increase in the first half of the year, GBP 39 million of the increase arose from organic growth and GBP 102 million from acquisitions. The largest of these was the acquisition of IKH, which completed in July last year and represented just under GBP 70 million of sales.
The euro was approximately 3% weaker on average through the first half, and so we had an exchange adjustment of GBP 16 million in revenue. This slide analyzes the increase of GBP 39 million in organic revenue, which we delivered in the first half of last year. As we expected and had previously flagged, we saw the normalization of DIY sales in the first half of this year compared with the exceptional levels of demand which we experienced through the COVID affected period in the first six months of last year. In the retail segment, Woodie's saw a reduction in like-for-like sales by GBP 35 million, and this shift in demand also had a bearing elsewhere, but particularly in the U.K., where Selco also saw lower levels of spending by the serious DIY segment.
Irish Distribution saw exceptional growth with sales GBP 47 million ahead of the same period last year. Both the Netherlands and manufacturing saw good organic growth in revenue. The net increase of GBP 8 million from branch openings came from four new Selco and three new Leyland branches that opened in 2021 and 2022. Turning to the movement in reported adjusted operating profit, this slide bridges from 2021's reported figure of GBP 157.8 million, adjusts for a small amount relating to our adopted treatment of acquisition expenses, and then bridges to our reported first half 2022 adjusted operating profit of GBP 151.1 million.
I'll look at the reduction in operating profit from like-for-like business in more detail in a moment, but you can see that acquisitions contributed an additional GBP 14 million to operating profit, with IKH representing GBP 8.9 million of this. We were really pleased with the performance of our newly acquired businesses and the contribution made by our new colleagues in the first half of the year. Looking at the GBP 22.8 million reduction in operating profit in our like-for-like business, you can see that as we expected and had flagged, the biggest element arose in Woodie's with a reduction of GBP 19.5 million. We also saw a reduction of GBP 9.6 million in the U.K., largely in Selco, with operating profit down on last year's record level due to the decline in volumes from DIY customers.
A small contraction in their gross margin, which saw gross margins return to their pre-pandemic levels and an increase in operating costs. We were really pleased with the performances in the Irish and Dutch distribution businesses, which both saw really good profit growth in their like-for-like business. There was a modest decline in profitability in the manufacturing businesses. I've also drawn out GBP 2.7 million of movement in one-off costs. These relate to non-recurring management fee income received in the first half of last year in respect of the GB traditional merchanting businesses and some costs expensed on acquisitions research work on our target markets. In U.K. distribution, first half revenue was 3.6% higher than the same period last year. We saw significant price inflation, with Selco experiencing cost price increases of 19% in the first half, led in particular by timber price increases.
The first half of the year saw a return to a more normal proportion of sales from trade activity and a lower level of spending by the serious DIY community, which in turn led to a normalization in sales mix and in turn, gross margins. The overall U.K. operating margin was a double-digit 11%, and we were very pleased with the contribution from MacBlair in Northern Ireland, together with their recent acquisitions, which added revenue of GBP 9 million in the period. In Ireland, Chadwicks saw two distinct phases to trading in the first six months of the year. If you recall, we saw quite severe COVID restrictions on construction activity in the first quarter of 2021, and then in the second quarter, as construction was allowed to resume, we saw a surge in sales in our trade customers and a decline in proportion of DIY activity.
Those movements are reflected in overall like-for-like revenue growth of 19.5% and a decline in the gross margin in the first half of this year with the return to a more normalized mix of customers. In Ireland, the key indicators remain positive, and although activity in the RMI and DIY markets is moderating, the new housing market remains robust. Our two most recent acquisitions in Ireland, Proline and Sitetech, both performed ahead of plan and have settled into the group extremely well. A really strong operating margin of 12.4% was delivered by the Chadwicks team, 80 basis points higher than the same period last year. The Netherlands performed consistently well during the pandemic and was the least affected by COVID of any of our markets.
We saw good growth in the first half of the year, with average daily like-for-likes up 7.5%, driven by price inflation with volumes broadly flat. We saw strong demand in the residential and commercial new build sectors, delivering another six months of steady profit growth. Rex, our latest acquisition, delivered a very positive performance, which together with Hofsté', expanded our geographic coverage into the northeast region of the Netherlands. We were delighted with the reported operating margin of 12.5%, which was up by 170 basis points on the same period last year.
IKH was acquired on the first of July last year, and we were pleased with the way that the business and teams have integrated into Grafton. We see the business as a good platform for further growth in the Nordics, and whilst performance in the first half was down a little on last year as a result of unseasonal mild weather in the winter, as well as weaker consumer confidence following the outbreak of the Ukrainian conflict, we like what we see of these markets so far and think that there is further opportunity for growth here. The business delivered GBP 8.9 million of operating profit in the first half at a good operating margin of 13.2%. The Woodie's business in Ireland delivered a good first-half performance as trading returned to more normalized levels.
It's important to remember that for the early months in the first half of last year, most of Irish retail was required to close, but Woodie's was deemed an essential retailer. In the first half of this year, as expected, we saw a lower number of transactions in the comparable period last year, but we were pleased that the average transaction value proved resilient and was only down modestly. The first-half operating profit of GBP 13.9 million was 46% higher than the GBP 9.5 million reported for the first half of 2019, and the operating margin was a very creditable 11.7%. The Woodie's team continues to progress in their digital development, with revenue growing by 2/3 since 2019. Turning to our manufacturing businesses, CPI Euromix saw good growth in revenue.
Although operating profit was behind the prior year due to higher input costs and a more challenging trading environment. Although the business had a record number of silos on site, we're still not seeing the same level of throughput as we saw before the pandemic, which tells us that housing output per site is still not back to 2019 levels for the customers we serve. StairBox saw strong growth in revenue, and to support the continued expansion of the business, we've leased an additional property very close to their existing premises. We saw very good demand from housing RMI trade customers, and the business is on track to deliver some 27,000 staircases this year, enough to replace all the staircases of a town the size of Royal Leamington Spa in the U.K. Turning now to the balance sheet and a few points here.
We saw further investment into working capital in the first six months of the year, and I've broken down the analysis further here. Net working capital increased by just under GBP 48 million, with most of this increase related to the like-for-like business. We saw an increase in inventories, which reflected the twin effects of inflation and our continued investment to ensure good product availability for our customers. This increase was funded by an increase in trade creditors. Trade debtors overall increased by just under GBP 54 million, with the largest element being in Chadwicks, where we saw a significant increase in trade activity in the first half. As we proceed through the second half, we'll be managing working capital closely to ensure we're aligned with activity levels as well as keeping a firm eye on product pricing and availability.
You'll also see in the balance sheet that the pension position improved by GBP 19 million and moved from a deficit of GBP 11.5 million to a surplus of GBP 7.7 million. Net cash, including leases, was GBP 73.5 million, and our adjusted return on capital employed was 18.8%, down very slightly from the 19.4% reported for the previous full financial year. Turning briefly to the cash flow and cash generated from operations. You can see here the most notable movement was the increase in working capital of GBP 39.4 million compared to an inflow last year of GBP 37.7 million and a reflection of a more normalized operating environment. Free cash flow in the period was GBP 121.7 million and represented just over 80% of adjusted operating profit.
The cash dividend was GBP 52.7 million and was lower than the first half of last year because that included the payment of both the second interim dividend for 2019 and the final dividend for 2020. We spent GBP 43.9 million on share repurchases as part of our GBP 100 million share buyback. This GBP 100 million buyback is funded from the free cash flow pre-development spend that we expect to generate in the current financial year. Finally, a few elements of technical guidance for the full year. We completed the material property disposals we expect this year in the first half, so we aren't expecting further property profit in the second half of the year.
Depreciation and amortization is forecast to be approximately GBP 90 million-GBP 95 million or around GBP 40 million on an old money pre-IFRS 16 basis. We're currently expecting our gross replacement spend to broadly match the old money depreciation charge of GBP 40 million and gross development spend to be around GBP 35 million. The net finance charge is expected to be approximately GBP 15 million, though this will be influenced by, among other things, the timing of any acquisitions and further increases in interest rates.
Finally, we estimate the tax rate for the full year to be 17.3%, although over the next few years this will trend upwards towards approximately 22%, given the currently enacted increase in the U.K. corporation tax rate in 2023 and the likely increase in Ireland for multinational groups from 12.5% to 15% at some stage in the future. Before I hand back to Gavin, I just wanted to say that this is the 18th and last results presentation, which the two of us are making together as Gavin steps down as Grafton CEO at the end of the year. I just wanted to say how much I've enjoyed working with Gavin over the last nine years.
He leaves a tremendous legacy for the business, which we're all proud to take forward, and we'd like to all wish him the very best for the future. Gavin, back to you for the last time.
Thank you, David.
Obviously, over the last couple of years, there's been an awful lot of moving parts in terms of Grafton, not only with the pandemic, but also with significant divestments and significant acquisitions. I felt it was worth a moment just comparing the first half of 2022 back to the first half of 2019 on an absolute basis. You'll see there from that slide that the revenue within the group was actually over 1/5 lower than compared to that same period. However, the really important thing here is the quality of the business that we have today compared to what we had in 2019. If you look at the adjusted operating profit there, you will see it's an increase of over 1/3 to EUR 132 million.
Our adjusted earnings per share has increased by more than 50%, and an over 40% rise in the dividend that we've paid out during that time. If you look at the balance sheet I mentioned earlier, on a pre-IFRS basis that we had over GBP 500 million of cash on the balance sheet. Moving to a post-IFRS basis, then you can see that we've moved from a debt situation of GBP 540 million to having over GBP 73 million pounds of cash on the balance sheet, a movement of over GBP 600 million pounds.
Also, significant improvements in the operating margin and the return on capital employed, which you'll remember have been really key metrics for us over a number of years, moving the operating margin from 6.9% to 11.5%, and the return on capital employed moving up from 12.9% to 18.8%. I think even though there's been a lot of moving parts during that time, you can see a significant improvement in the underlying quality of the performance of the Grafton Group. I mentioned at the very beginning that I thought that our geographical diversity was a really important component of the group going forward.
You'll see from this slide, from a revenue basis, that over 20% of our revenue now comes from the Netherlands and Finland, which is a significant move away from where we had been a few years ago. If you look at the next slide in terms of operating profit, you'll see that there is a very similar pattern there. I think that this geographical diversity giving us real movement in terms of the customer base that we have in terms of the end markets that we serve, not only has been really important in the performance in the first half of 2022, but also is really important aspects of Grafton going forward in the years to come.
The strong cash generation, which has been a significant characteristic of Grafton for a number of years, and the strength of the balance sheet does give us real optionality. We will continue to follow the disciplined approach that we have to capital allocation. If you look at the first half of this year, we've spent GBP 45 million on acquisitions, GBP 52 million on paying dividend to shareholders, and over GBP 43 million so far in terms of the share buyback. Very much in line with what we outlined we would do earlier in the year, and as I said, very much keeping that disciplined approach to capital deployment that we've executed over a number of years and will continue to do so as a group going forward.
In terms of future group development, we'll continue to look at organic development, and we will continue to look at developing the branch networks in Selco, in Leyland SDM, in the Netherlands, and in Finland. That organic growth is a really important part of the plan going forward. As David mentioned, we've also invested into the future growth of StairBox, putting extra facility in place very close to their existing factory, enabling them to grow now as well as in the future. In terms of acquisitions, we did complete some acquisitions during the first half of this year with Sitetech, a specialist business in Ireland, the Wood Floor Warehouse, which predominantly operates in Northern Ireland, and also Rex, which operates in the Netherlands. We are continuing to progress discussions with potential acquisition targets right now and will continue to do so going forward.
There is certainly no change in the acquisition strategy of Grafton moving into next year. In terms of current trading, I think it is fair to say that our distribution businesses have seen a slightly weaker trading period than we anticipated during July and August, partially impacted by the hot weather and also by holidays, which had been restricted during 2019 and 2020. You can see there in terms of U.K. distribution in the first few weeks of the second half, a slight decrease compared to where we were in the same period last year. Ireland, still showing growth. The Netherlands, still showing growth. I think it's also important to remember that over the past few years, the Dutch business really has been a very stable performer within Grafton Group during 2019, 2020 and 2021.
On Finland, obviously, we didn't own the business during the first half of 2021, so we're only measuring the period from July 1st to August 14th. You'll see there is a downturn in terms of 10% compared to the same period last year. We're delighted with how the Finnish business is integrating with into the group, but no doubt that consumer confidence in Finland has been more affected than the U.K. by the impact of the war in Ukraine. We are now seeing with stabilization of the retail business in Ireland, Woodie's showing growth coming through, which I think for a high margin, high performing business, gives us a lot of confidence that Woodie's has come out of the other side of the retail normalization in Ireland and will continue to be a strong business moving forward.
Similarly, improvements in our manufacturing businesses, which as David highlighted earlier from a margin perspective, very important contribution to the group going forward. In terms of the summary and the outlook, we think the first half has shown a good trading performance and really emphasized the importance of our diversified earnings base. There is absolutely no doubt that the outlook for our market is weaker than we came into the year, given the prevailing headwinds.
We remain on track to deliver the full year expectations for this year, and that remains dependent, obviously, on the usual seasonal upturn that we anticipate during September, going through to the end of November. As we stand here today, we're not changing any of our expectations for the end of the year. Final points. We do believe that Grafton has a really strong portfolio of resilient businesses with excellent market positions. The group has got a very long track record of disciplined capital allocation. That's a policy that the whole board has signed up to, and that will absolutely carry on going forward. The strength of the balance sheet gives us excellent optionality, whether that be returning money to shareholders, investing in organic growth, or looking at acquisitions going forward. We're very, very well-placed to continue to outperform throughout the cycle.
Thank you for your time and attention this morning. Thank you for your continued interest in Grafton, and we will move to our Q&A session. Thank you.
As a reminder, to ask a telephone question, please signal by pressing star one on your telephone keypad. We will now take our first question from David O'Brien from Goodbody. Please go ahead.
Morning, guys. Thanks for taking my question three, if that's okay. Firstly, just on Ireland, encouraging to see normalization. We talked about already within the retail and business and the outlook for distribution as well looks pretty solid. But maybe you could give us a little bit more color on what to expect from that region into H2 and beyond, please. Overall, you've noted softer trading in distribution in July and August, as everyone has seemingly hit for the beach. I just wonder how has the competitive backdrop around pricing evolved through that period as well? Or can you give us a bit of insight on what you're seeing? Then just finally on CapEx, I think about EUR 25 million for the first half, but we're guiding for EUR 75 for the full year.
Is that just timing or, you know, what are the development plans for the second half of the year? Generally, how do you approach capital deployment in what is a more uncertain macro backdrop?
Okay. Morning, David. It's David here. Let me pick up the first one just around Ireland and a bit more color on what to expect. As you saw in the first half results, I mean, the biggest element of normalization was as expected in Woodie's. If you cast your mind back to the first half of last year, obviously, when Woodie's was deemed an essential retailer, one of the few retailers in Ireland that was open for business, we saw an extraordinary performance within Woodie's. Once effectively retail more widely was then open for business, actually, we did see quite a sort of rapid normalization. I think from a comparative perspective, in the second half of this year, we're up against a sort of a more normal trading period.
I think if you listen to the presentation which we did, that year-on-year performance against 2019 or the half year on half year performance against 2019, I think is really important because the level of profit in Woodie's was up almost 50% against the first half of 2019. I think we genuinely were really pleased to hang on to a higher level of average transaction value, notwithstanding the fact that as expected, the transaction numbers came down. How do we think about the second half of the year? Well, important period for Woodie's is naturally Christmas. You know, that's always a very big trading period for the group. It particularly was last year.
I think you know, we saw a huge amount of activity and perhaps some of that was a response to the pandemic and a desire to you know, spend money on the house home and have a really good Christmas. I think Christmas will be a key trading month, but I think Woodie's will be very well set up to be able to address that. I don't think that Ireland is necessarily immune from the same levels of some of the pressures on disposable income and spend that we see elsewhere. I think our sense overall is that the Irish economy is better positioned than perhaps other countries in Europe.
Indeed, I think the forecast for Ireland to be the strongest performing economy in Europe, that feels when we look across the geographies, like an appropriate forecast. I think there's more of a spring in the step when you talk to people in Ireland than perhaps, say, in the U.K. I think the outlook for Woodie's, for the balance of the year, I think we're pretty positive about it on a sort of like for like basis. I think if we're looking at Chadwicks, you know, a very strong first half performance from Chadwicks, particularly if we looked at the components of a good performance from the steel business.
Chadwicks is the biggest steel stockholder in Ireland, and we saw a significant performance and good activity in there. I think as we go into the second half of the year, as we've seen across all our geographies, you know, that DIY strength that we saw, particularly in the first half of 2021, that has softened. You know, we've seen it in quite profound shift in terms of mix. First half of last year, for example, almost half of the sales in Chadwicks were collected. That's now down to a little over 40%, which is much more in keeping with normal. So that's had a bearing on the gross margin as we have previously explained. I think, you know, that we see a continuation of that trend.
We see the trade market, particularly into new house build remaining resilient. I think that tracks into next year as well. I think we see that strength in the new housing market, but we could see a bit more softness around the DIY and areas related to consumer spend. I think in terms of competitive backdrop, Gavin, do you wanna pick that one up?
Yeah. I mean, you know, we've always operated in a competitive environment. Every market we operate, there's always price sensitivity. Obviously inflation's played a big part in pricing as we've gone through the first half of this year, second half of last year. Hopefully we'll see that start to normalize as we go through the second half. It varies tremendously by product group, by geography, and by customer sectors. Obviously, you know, you look at things like timber and steel. We've seen really significant price movements on timber and steel. In recent weeks and months, the price of timber has started to come back. I don't think the pricing environment per se has changed very much at all. You know, we've always had some good, strong competitors.
It's always been a competitive pricing environment. I don't believe that the pricing of our competitors has changed significantly during the first half of this year. Do you wanna pick up the CapEx point, David?
Yeah. Just on CapEx, David. I mean, I think if you look at the cash flow, particularly if you look at it in the presentation from a replacement CapEx perspective, we net off asset disposals, and obviously we had a couple of significant property sales that we made in the first half of this year, which realized cash proceeds of a little under GBP 25 million. So that's the net figure. We quote the gross figure in terms of our expected spend of GBP 40 million on replacement and GBP 35 million into development spend. In that development spend, we sort of roughly spent about half in the first half.
In the second half, that development spend is continuing to be focused on areas such as expansion of Selco and new Selco branches, further investment in terms of Chadwicks and the estate there. We've just, for example, had quite a significant refit at our steel warehouse, so we've put a replacement roof on that, for example. It tends to be that sort of projects and growing the organic estate or the estate organically. I think from a replacement perspective, you know, that tends to be very influenced by spending on things like the fleet and property. Fleet is a bit more lumpy and quite difficult to predict at the moment because of some of the time delays around the fleet.
You know, that may slip slightly into next year. That's in terms of the capital spend. How do we think about capital allocation in sort of slightly tougher times? Look, you know, we're absolutely here for the long term. The really important thing from our business perspective is that we continue to invest into our brands and making them a stronger and a better business so that, you know, when we start to emerge from some of the tougher times, that we're even better placed to provide a really good offering to our customers. That's what we've always done historically. You go back to the global financial crisis and you look at Chadwicks, for example, you know, that emerged from the global financial crisis, an even stronger player than when it went into it.
Look, I think, with the balance sheet that we've got, we've got good opportunities to continue to make sure that for the longer term, the proposition is really strong and compelling.
That's great. Cheers. Thanks very much.
We will now take our next question from Aynsley Maymon from Investec. Please go ahead.
Thanks very much. I think I've got three as well, actually. Just firstly, on acquisitions, wondered if you could just give us a bit of color there. I mean, what does the pipeline look like? And obviously, given you're leaving at the end of the year, Gavin, macro outlook's a bit more uncertain. Should we assume that nothing kind of major will be done on the acquisition front until into next year? And secondly, just on margins, obviously very good performance in both Ireland distribution and the Netherlands the first half, around 12.5%. Is there anything kind of abnormally positive in there on the gross margin front? You've talked about some of the kind of price benefits there, or is that type of margin sustainable for the full year? And then just maybe exploring a little bit more on the U.K.
Obviously fell off 5%, so 5% like-for-like in the half, in the second half to date. Again, is that kind of what you're seeing some of the volume maybe on that trade side and new housing slip away a bit? Or is it pricing? I mean, just a bit more color around what you think is going on in the U.K. Or is it just everybody's on holiday? Thanks.
Brilliant. Thanks, Aynsley. As far as the acquisitions are concerned, I mean, look, acquisitions have played a really important part in Grafton's development, you know, for a long time, and I'm sure they'll play a really important part going forward. I'm here until the end of the year, as you said, but, you know, we are still having conversations around acquisitions. We have visited businesses recently. We've got more plans to visit businesses in the coming weeks and the acquisition strategy and the plan is very much something that is bought into by the whole board and the whole of the executive team, and definitely not just me. I think it's a case of we've always said, you know, buy the right business at the right time, at the right price.
That very much stays very much the focus. I can't sit here and say that we definitely won't make an acquisition between now and the end of the year, in the same way that I can't say we definitely will. You know, there are certainly active discussions taking place, but we'll make sure that if we do make a move, it's a good business with a good management team in a good market, as we always said it would be.
If I could just pick up the piece around margins in Ireland and the Netherlands. As you say, Aynsley, I mean, a really strong performance in the first half of the year with sort of 12.4%, 12.5% operating margins. I don't think our view of where the long-term margins for those business tends to change and, you know, we've always said sort of somewhere around about 10%. I think we'll start to see in the second half of the year that will normalize. The first half of both of those businesses, I think, did benefit from some one-offs. For example, in the case of Ireland, as I've already mentioned, you know, very strong performance from the steel business.
You know, that's not likely to be quite as strong in the second half of the year. I think if you take the Netherlands, you know, there was an element around stock gains. I think, you know, when it comes to stock gains, we probably see more material improvement in the U.K. and Ireland or more material stock gains in the U.K. and Ireland last year because we saw that very rapid shift to a high inflationary environment. The product set in the Netherlands hasn't seen quite that level of inflation, but it's been catching up more recently, which is why I think that, you know, there's an element of stock gains in the first half, which has supported that margin. Equally a level of rebates associated with some of the acquisitions.
You know, we've had good collection on some of those rebates. I would tend to think that in terms of the second half of the year, you know, both of those businesses will end up, you know, coming back, heading back more towards that sort of 10% level and influenced again in Ireland, particularly by the mix of customer and products that we sell. In terms of the U.K. and our experience to date, I would always caution at this point of the year, you know, we're looking at effectively six weeks of like for likes, which can be quite difficult and influenced by, you know, hot days this year compared to not hot days last year.
I think, I suppose the one thing that I would take is when you look across all our geographies, all our management teams are saying the same thing, which is we've all been surprised by the level of holidays that are being taken by our customers and by our customer's customer. You know, looking at the numbers, I do think there's quite a heavy degree of holiday influence in there. It is difficult to unpick from that where the underlying sits. I think our view of the U.K. in the second half of the year from an inflation perspective is that we do expect inflation to moderate.
Our sort of latest thinking is it's more likely to be high single digit inflation, perhaps rather than the level of 19%, for example, that Selco saw in the first half. Part of that inflation will be influenced by timber. It's a big product category for Selco, and we've seen some softness in timber pricing in the summer period. I think we're more into high single digit price environment. As a consequence, I think from a like for like basis through that September to November trading period, you know, an element of volume like for like volume reduction on the same period last year is our expectation.
All very clear. Thank you very much.
Cheers. Thanks, Aynsley.
We will now take our next question from Will Jones from Redburn. Please go ahead.
Morning. I'll try three as well if I can. Just first one, just picking up on that pricing comment, David. Would you have a view on what pricing will be sequentially second half on first perhaps? Are we kind of flattening off now with some stuff going up and some stuff going down, month to month? Just any comments there would be great. Second one was just whether you'd given any thought about potential requirement for any fixed cost cuts in, even if modest in any of your businesses. The last one was just around the buyback really. I think you're nearly done on the EUR 100 million, just given A, the balance sheet and B, the share price. Would you be open to that more being done in the current year beyond the EUR 100 million?
Is it something you'll rethink about at the start of 2023? Thanks.
Okay. Well, let me pick up the view on sequential inflation. I guess in terms of sequential inflation, I suppose I'd best describe it as up a bit. I couldn't give you an exact table.
Yeah.
That's the CFO's accurate scientific approach. Look, I think if you think that our current expectations are high single digit in the second half of this year, and I think about product categories, I think overall probably, you know, we're still talking about a modest level of inflation on what we saw in the first half, taking into account that we still see, you know, some quite strong product inflation in some product categories, particularly those that are linked to energy. Equally, we see softness in something like timber, where actually stock levels for the U.K. as a whole are relatively high at the moment. I think that that's the view. In terms of fixed cost cuts, look, we're not looking at anything on cutting our fixed costs.
We constantly look at have we got the right level of costs to serve our customers and do the best for our customers? It's something that the management teams are always looking at. You know, we're always pretty nimble on this. Largely speaking, you know, we are a pretty fixed cost base. You know, it tends to be from a variable cost perspective, you know, it tends to be around people and it tends to be around vehicles. You know, you need both of those things to continue to maintain high levels of service. Yeah, look, absolutely in the current inflationary environment, we are being generally tight on costs. In terms of buyback, are we open to do more? Yeah, look, I mean, we'll always keep our options open.
You know, we're very disciplined in how we think about capital allocation. We certainly don't rule anything out. So look, it's still under constant review. The GBP 100 million buyback that we committed to was effectively, as we said at the time, you know, it was funded from our estimates of free cash flow for the current year. Effectively, we'll have executed that buyback over the GBP 100 million over the next couple of days. So yeah, look, we keep it under constant review. I think the thing that I would say, though, is, you know, with the balance sheet in the position that it is. I think that's, you know, it's a tremendous position if times get tougher, you know, that's great.
It means that we can have the confidence to continue to do the right thing for the long term in terms of investing in our business, focusing on what do we need to do to improve what we offer our customers, and productivity improvement. I think that, you know, that's really important. Equally, you know, tough times always throw out opportunities, and I'd much rather sit here with the capacity to be able to jump on good opportunities that emerge. Yeah, I think that's where we sit at the moment against on the sort of buyback point.
Thank you.
We will now take our next question from Flor O'Donoghue from Davy. Please go ahead.
Thank you. Good morning, everyone. Just a couple from me. Just sticking maybe with the cost side of things, just wondering what you are seeing in terms of staff costs at the present, given everything that's happening with cost of living, et cetera. Secondly, David, just wondering in terms of the rise in central costs in H1, is that something we need to think about annualizing or is there a one-off in there? Then also I guess on the financing side, just wondering, is there anything you can tell us about the terms around the refinancing you did there, I think it was this month.
Maybe just if I can on StairBox, just be interested to hear your thoughts around the expansion of it as you've outlined, in terms of the scale of that, in terms of what it could maybe bring to the business, you know, in relation to its capacity, et cetera?
Yeah. I mean, Hi, Flor O'Donoghue, it's Gavin Slark. In terms of StairBox, I mean, look, it's StairBox. When we bought it, we thought it was a really good business. It's actually turned out to be a better business than we probably initially thought. The performance has been really strong. The management team are an excellent group of people who really understand their business, and they were getting up towards capacity. I think putting the extra unit in place, which literally is across the road on the same industrial estate in Stoke-on-Trent, you know, getting up to 27,000 staircases this year is a huge number. I think it's a business that over the next, you know, 3, 5, 7 years, there is definitely potential there to see that business grow further.
We still don't really do volume staircases, you know, into house builders. We've got, I think, the biggest deal that we did in the first half of the year was probably 12 staircases to one customer, but it's still very much about one-off bespoke, custom-built staircases. Great business and really pleased to invest in that extra unit to give it the capacity to grow going forward because the management team there have got very good plans to grow the business, develop it, and make it better than what it is. Yeah, really good acquisition, performing really well, and happy to invest in its future.
Just in terms of picking up the other points, in terms of terms on the refinancing, I mean, I won't get into the details of what we're paying in terms of margins and commitment fees, but needless to say, it's very competitive. We have a really great collection of relationship banks that have supported us over the years. We were delighted to secure that refinancing. I mean, I suppose one of the interesting elements is that it is a sustainability-linked refinancing, and we have three targets in there. One is around carbon emissions. One is around diversity, which is about increasing the proportion of females within the business. The final one is around the contribution to the community. Those three elements are really important to the group.
They're really important and align with our broader sustainability target. Actually, I think pulling them into the refinancing and having that linkage in there is actually very supportive for the business and, you know, gives us something to work with. That's in terms of the refinancing. In terms of the rise in central costs, you may see it in terms of the presentation, but we separately called out there was about GBP 2.7 million delta in terms of one-off costs and income, which we against the first half of last year. Very roughly about half of that was to do with management income, which we had in the first half of 2021, which related to the old Grafton Merchanting GB business.
The other half was related to some work which we've had done, some research work, just around our target markets. Those elements therefore are absolutely one-off costs. You know, I think in terms of central costs, typically, I suspect probably in terms of your models, you've got somewhere around about GBP 14 million -GBP 15 million for the current year, and that sort of feels like the sort of right space to be in terms of ongoing. On the cost side, in terms of staff costs, look, it's something we're acutely aware of. We manage it within each of the individual businesses because there are clearly different levels of inflation within our different geographies. Equally, there are different arrangements for settling costs locally.
For example, the Netherlands tends to have a linkage to national wage agreements, for example. Equally, we've got a different composition to the colleague base in terms of average pays. We're absolutely working with each of our businesses and each of the MDs to make sure that we recognize the pressure that sits on staff costs. Staff costs in general represent about 15% of our revenue. In very round terms, last year, it was about GBP 320 million to give you some context to that. You know, it comes back, perhaps to Will's previous question around looking at costs.
We'll constantly look at how can we manage to continue to focus on improving productivity to mitigate some of that inflationary cost increase in terms of pay raises. Hopefully that's done you, Flo.
Very clear. Thanks, David. Thanks, Gavin.
Cheers.
Thanks.
We will now take our next question from Ami Galla from Citigroup. Please go ahead.
Yeah, thank you. Just a couple of follow-ups from me. The first one was, as you look at your acquisition pipeline, has vendor expectations and pricing changed at all since the start of the year? The second one was, really on Selco. Are there any regional variations in trading that we can gauge from the sort of July and August trading period so far?
On the acquisition front, I would say the short answer to your question is probably no. I think if you're buying privately owned businesses, and certainly family-owned businesses, they do tend to have a value in their mind. They have a value in their mind for the long term. I think if you look at valuations in the public arena, then obviously they move quite significantly. I think the privately owned businesses, it takes much longer for those price expectations to move than you would see in the PLC arena. The short answer to your question is no, not really. We haven't really seen price expectations change.
I think just on the regional variations point, I mean, nothing, I think as I sort of pains to point out, July and August, you know, statistically we need to be a bit careful about drawing too many conclusions from it. I would say the evidence is as it was in the first half from a Selco perspective, which actually from a relative perspective, we saw a stronger performance from the stores around London and the Southeast than the regions.
I think, you know, part of that was a reflection of that DIY element that probably has a more impact on a sort of local regional Selco store than perhaps it might have in the likes of, say, a Selco in Walthamstow or Croydon or Sutton, which will have a much more significant proportion of, you know, underlying tradesmen and jobbing builders.
That's helpful. Thank you.
Thanks, Ami.
We will now take our next question from Clyde Lewis from Peel Hunt. Please go ahead.
Morning, folks. Two from me, if I may. One, I'll just come back to Selco, I suppose, and it'd be really interesting to hear your experience around the number of active accounts and how that's evolved over the last sort of 6-8 months. You know, thinking partly sort of, you know, Brexit impact, but also sort of, you know, the tightness in the labor markets around the sort of overall construction and various trades. That was the first question. The second one was on CPI Euromix, and I'm just sort of intrigued to maybe hear a little bit more about how the order book and the inquiry levels has sort of evolved a little bit over the last couple of months in particular.
Yeah, sure. Morning, Clyde. Just on the sort of number of active accounts. Actually, number of active accounts have been pretty stable, and I think what we see from those active trading accounts is actually they've remained pretty resilient. I think the bit that has been the softer element has been that sort of the account that was established literally to do a one-off job in the back garden, if I can describe it that way. Those smaller value jobs is perhaps the area where we've seen a bit more weakness, which I think gives us the confidence and the underpin that actually that core customer base continues to trade pretty resiliently. I think on the CPI Euromix and what are we seeing there, a good pipeline.
You know, we've got a record number of silos out on site, and you know, when we look at the order books or rather the forward sales position of our end customers, you know, the big house builders, the forward sales position looks very good, you know, and the house builders are working hard to try to turn those forward sales into cash, which is great news for CPI. I think the thing is, the evidence that we would say, though, is that actually, when you look at the throughput through each individual silo on site, it's still not back to the level of activity that it was back in 2019.
I don't think that production levels are quite at the level that they were in 2019, but we've got lots of silos on site and, you know, we're confident of the outlook there for CPI.
Okay. Perfect. Thanks, David.
Thanks, Clyde.
We will now take our next question from Chris Millington from Numis. Please go ahead.
Thank you. Morning, Gavin. Morning, David.
Morning, Chris.
Sorry if I missed it, but morning, John. Sorry if I missed it, but did you comment on what the price volume mix was in July, August? That's the first one I've got. The second one I've got really is just about the cost of branch expansion, and we've heard about quite a tight land market out there. We've seen some big, you know, build cost moves. I mean, could that impact your IRR going forward in the likes of Selco? And then the last one just follows on from Ami's question before on vendor expectations. I mean, would you have an issue with paying a premium valuation for an acquisition versus Grafton's valuation as we stand at the moment?
Let's start in reverse order then, if I may, Chris. I mean, I think in terms of vendor expectations, I think the important thing is that we're here for the long term and, you know, a good asset that we think will add value over the long term, we would be prepared to buy, and we may well have to pay a higher premium than Grafton is currently valued at. We each have our own views on whether the Grafton valuation is right or wrong. You know, we naturally, when we do an acquisition, we look at it through, as you'd expect, a whole variety of different lenses, one of which might be related to, well, how does it look against current multi-market multiples?
Equally, we need to look at it in terms of the longer-term value that we think it's gonna bring to the Group. So yeah, that absolutely, we'd be very clear on that.
Understood.
I think the second element is in terms of expansion and how we think about opportunities there and the impact on the IRR. Yes. I mean, look, it can impact upon the IRR if what we're ending up with is either a bigger capital cost at the front end or alternatively a higher rent on a property. Of course, typically in Selco's case, it's around rent. I suppose in that regard, probably, I think there may well be a few more opportunities that might emerge over the next year or two than perhaps we might have seen over the last year or two.
The reason I say that is, you know, if you go back to when I first started in the group, then actually Selco was buying industrial units, and it was in a relatively unloved sector of the property market. I mean, I distinctly remember we actually took over one previous parcel depot that...
Mm.
That wasn't being used at that time. I, you know, I think that was the environment then. Of course, over the last few years, we've seen that intensity around last mile distribution. Industrial and warehousing has become at a much more of a premium. I think, though, that you know, what we're seeing from a property point of view, and that element of the property market, is a little bit of the froth coming out of that. You know, we hear the likes of Amazon say that perhaps they might have overexpanded. I think that we may well see a few more opportunities emerge.
Yeah, in the same way that when we look at acquisitions, we look at them through a variety of lenses, equally, we do when we're looking at new branch openings as well. Your first question, which was around price volume mix and did we give any commentary around that in terms of the sort of first few weeks of trading in July and August, and the answer to that is we haven't. I mean, I can give you a pretty definitive view on what inflation was in the first half. It's quite difficult to unpick it in a relatively limited period of trading, I'm afraid.
Understood. Thanks for that, David.
Yeah, thanks, Chris.
We will now take our next question from Sam Cullen from Peel Hunt. Please go ahead.
Once again, just a couple, hopefully cleanup ones. Can you just remind us how big September to November typically is on a sales and profit basis for the group? That's the first one. Then secondly, looking into 2023, if you see volumes continue to weaken, and we think about some commodities rolling over and the stocking gains you alluded to this year and last, how do we think about potential sort of price deflation in the tighter volume market next year?
Let me deal with that September to November piece. You know, typically, if we divide the year into the sort of seasons, September to November is sort of typically from a revenue perspective, slightly less than that really important March to May period. You know, you're talking about in terms of proportion of overall revenue in the year, you know, it might be 1% less. March to May, 27%. The autumn season, more like 26% from a sales perspective, and then I'll let you do the math in terms of how that drops down.
Typically, if you go back, and of course it's always hard to find a normal year, but typically we have tended to be a bit more second half weighted in profitability than we have in terms of the first half. You know, when you look at your own consensus analyst forecasts, at the moment, we've got a slightly lower level of profit than we have in the first half. I guess we've got what would be the natural balance of the business, which overall would tend to be a bit second half weighted against a slightly lower level of profit that's currently being forecast.
Equally, you know, the day count that we've got for that September to November period compared to, say, that important spring trading period, we've got slightly more days, and yet we're expecting slightly lower levels of activity. I think we've taken a fair view at this point in time in terms of how we see that, the normal seasonal pickup. It's all to play for in September and October in truth. In terms of 2023, you know, what would be our take if we see volumes weakening? You know, what might be the impact in terms of price? Look, I think that will all depend upon how the competitive backdrop looks, how, quite frankly, the level of the overall inventory might look in 2023.
I think, you know, what we'll see is over the course of the second six months of this year, I think we'll start to see industry inventory levels will tend to adjust and normalize relative to where activity levels sit. But as is common and as we plan for every year in the business, you know, we have to be responsive to it, and we will respond to whatever is thrown at us in terms of volumes or pricing environment. We're very focused as a business. The important thing for us is to focus on maximizing that gross margin percentage. You know, we know that's hugely influential in terms of what drives, what falls down to the bottom line. That will continue to be our focus as we go into 2023.
Great. Thank you.
Thanks, Sam.
There seem no further questions over the telephone. I would like to turn the conference back to the speakers for any additional or closing remarks.
Thank you very much. Now look, hopefully you guys understand where we are in terms of the business. I think if you really wanna put a summary around it, we would say again, that sort of operationally, financially, strategically, business is in a really, really good place, very well equipped and very able to take whatever headwinds come towards us, and the whole of the board feeling very confident about the future of Grafton. Thank you for your time and your interest this morning. Thank you for your time and support over the many years from many of you that I've been involved in Grafton. I hope you all stay well, stay safe, and enjoy the rest of the summer.