Good morning, and thank you for taking the time to join us today for the Greggs interim presentation. The agenda today will be in the usual format, I will outline the half year performance that we've announced today. I will then hand over to Richard, who will take us through the financial performance, after which I will then provide an operational and strategic review, and I will finish with our current trading and outlook for the year. We have delivered a continued strong performance in the first half of the year, and are making good progress on our strategic priorities. As you can see on the slide, sales are up, total sales just over 21%, and that is 16% on a like-for-like basis.
Underlying pre-tax profits have increased by just over 14% to GBP 63.7 million. We have an exceptional net income of GBP 16.3 million as a result of the settlement of our COVID business interruption insurance claim. We've announced an increased interim dividend of 0.16 pence. In terms of our strategic progress, it's pleasing that we continue to remain positive with regards to the net shop openings. We've now grown our shop estate to 2,378 shops as at the first of July. That is 94 net new opening, 94 new shop openings, 44 closures, giving us 50 net new openings in the first half. We continue to make good progress with our evening day part, it remains the fastest growing day part within the business.
It now accounts for 8.3% of our company managed sales. That's increased from 6.5% in the first half of 2022. Our digital progress continues. We now have over 1,300 shops offering our customers delivery via Just Eat. We also have a trial with a second delivery partner, which is progressing well. Our brand health and our market share continues to grow. The proportion of overall transactions that now comes through the Greggs App has grown to 10.6% from 5.2% at the same time last year. We're really pleased with the continued strong performance, underpinned by the strategic priorities and the growth we make on those. I will now hand over to Richard to take us through the financial performance.
Super. Thanks, Roisin. If I can just start off by turning you to page five of the presentation, the income and expenditure overview. Fairly standard presentation in many respects, and you can see the numbers that Roisin's just quoted in terms of sales and underlying profit growth. Then we've got this exceptional insurance gain, which just to, just to explain the nature of that. The sharp-eyed amongst you may remember there was a GBP 2.5 million credit back in the pandemic year of 2020, which was an initial payout that we had for our business interruption insurance cover. At the time, we actually felt there was a bigger claim to be made, and we've been sort of in dispute with our insurer since then.
There was a court case that we participated in last year, which ruled in the favor of us and some other policy holders. We've been going through the process then of resolving between us and the insurer, based on the judge's guidance, what would be a fair compromise. We've now got to that point, which has resulted in an additional GBP 16.3 million after costs, credit to the P&L. Obviously, that's a one-off, and in reality, it relates to the 2020 year. The income tax charge is higher than we've seen for a while.
Obviously, the income, the rate of corporation tax kicked up in April, that's a factor, and you can see that in the underlying earnings per share, ahead 4.5%, and that reflects a higher effective rate of tax this year versus last year. If we move into the sales trends, then on page six, you can see the like-for-like growth in company-managed shops by quarter. We've given you the history for last year as well, you can see the tail of the pandemic effect in Q1 2022. What we thought was a cleaner read as we came through Q2 and Q3 last year, although the one thing just to pull out in Q3, obviously, the Queen's funeral involved a day's closure. That affects that figure by about 1%.
You would have expected it more like 10% last year on a clean basis. We had a very strong end of year, partly because we were lapping the Omicron period from the year before, partly because price inflation was starting to feed into the numbers, because we put prices up in both May and October last year. Also, it was a very strong Christmas trading pattern, the way Christmas fell. The run into Christmas led to a very strong pattern of trade. We're pleased with the way Q1 started and reflected in our earlier statement this year, that there was still some of that Omicron comp in the numbers, which was helping things.
Then you can see in Q2, we've moved from a, I think it was a 17% like-for-like in Q1 to 15% in Q2. Partly, that reflects price inflation starting to annualize out again as we lapped the first of those increases in May. Underlying that, there is strong volume through the piece, and that is the result of some of the initiatives we've been taking, which I'll just go on to show you now. On slide seven, you see the extension of a chart we first used back at the prelims in March, which describes the contribution that we're seeing from the strategic growth drivers that we, we, we laid out to you a couple of years ago. Just to explain the axes on these charts, slightly different.
On the left-hand axis, that's the proportion of our sales that come through either the evening day part or the delivery channel, which is what the bars are. The blue, yellow, and green elements relate to the left-hand side. On the right-hand side, it's an overlay that says what proportion of our transactions are now being scanned by customers using the Greggs App as they transact with us. What you can see is that the delivery element in the daytime, the yellow bit, has stabilized and is now growing broadly in line with the growth in the overall business. The stronger progression is the evening walk-in sales, which is the blue element of the bar, which taking a greater % of the daily sales progressively each quarter.
We're starting to see some little green shoots in terms of having some inroads to delivery in the evening, which is one of the things we feel could be a, you know, a, a more significant contributor in time if people start to think of Greggs and access us beyond the on-the-go market during the evening. Those are progressing nicely in line with what we'd hoped, and probably the stellar performance really has been the Greggs App, which I think is, you know, gone faster than any of us might have hoped. We had a very concerted campaign on this in terms of marketing in the fourth quarter of last year.
Particularly with our staff this year, we've had a kind of an internal campaign to encourage people to promote the App to customers. As you come through the till, they'll be asking you whether you've got the App, whether you're gonna use the App, and encouraging people to participate and explaining to them the benefits of doing so. That's been progressing really well. If you move from sales then back to profit and margin. Slide 8 describes the overall sort of dynamics in the P&L, which are quite complex, largely driven by cost and price inflation. There's quite a lot going on, and this is probably, if anything, an oversimplification of what we're seeing, but I'll try and sort of draw out the key features.
Gross margin down by 1.6 percentage points year-over-year, that's the factor of significant food inflation in the system. We've got a lot of food inflation coming through in the overall mix, but we're recovering through our pricing, the net cost inflation on the business overall. Obviously, food is running at a much higher rate, and so you see the dilution in the gross margin figure. That's starting to annualize now, we would expect a more stable position on that going forward. You then get the opposite in distribution and selling costs, where cost inflation in that area is running below the level of price inflation. Also, you then have the operational gearing effect of that additional volume.
Where we're driving additional volume through, through the Greggs App, during the evening day part, et cetera, you see that in there. You've also got some of the associated costs, so the marketing expenditure that pushes that, the additional wage costs that go with having staff available for customers in that late day, day part. Then a very similar story with administrative expenses, where, again, you are over-recovering both in terms of price recovery and the additional volume going through the support costs in the business. The other line to pull out then is the finance expense, which has benefited from interest rates rising. I mean, Greggs is a net beneficiary of interest rates being higher because we've been carrying cash into this investment program.
Of course, you know, the rate that we're earning on those deposits has increased quite materially over the last six months or so. Overall, a 50 basis point reduction in the margin for the first half. Some of that is purely mathematical in that if you are passing through higher levels of price recovery on your top line, then obviously the denominator in that ratio is accelerating. You get this sort of temporary position where you've got a dilution in the overall margin, which I think in the medium term, you start to see come back as inflation eases. Things like that drag that I mentioned in terms of shop wages, investing for the evening trade.
Again, one of those sort of more temporary aspects that we should see some recovery from, as that part of the market matures. If we think about cost inflation then, on page 9, you can see the traditional pie chart that describes our cost base. I think one of the notable things about it, actually, if you were to reflect back a couple of years, is that green section is growing, so the food and packaging cost is a bigger proportion of the overall, as inflation has crept into those numbers. Equally, energy and fuel is a slightly bigger segment, and the people cost is reduced only because of the impact of inflation.
If we just, just walk around it, energy and fuel, there's still inflation in the numbers, but we did have a very good hedge that protected us last year. We kind of rode through the worst of the peak that people experienced in energy costs last year, and we've been progressively extending cover. We've now got about 70% of the second half covered in, in respect to electricity, which is the very biggest element of that. In food and packaging, it's still been a very significant rate of year-on-year inflation in the first half, but we can see that starting to ease now, and we expect it to ease progressively through the second half. We'd still see probably sort of low to mid-single-digit inflation in food coming out of the, the balance of the year.
It's not gone altogether, but the rate that we're seeing is much more modest. We've got about four months cover sitting here today, so we've got reasonable visibility of what we'll be paying for the second half, with a few open positions still as well. On people costs, we obviously sort of have pretty good visibility there. Eight percent is the overall wage and salary inflation that we should see this year based on the pay awards that are in place. Shop occupancy costs continue to be a positive story, where the strength of the Greggs covenant and our ability to renegotiate rents with landlords is progressively improving the shop occupancy cost ratio.
If you look to the right-hand side, we've summarized in a box there what we think the overall impact will be across the whole cost base. We expect now that the overall cost inflation in the business will be about 9%. Previous guidance was in the range 9-10, so you can see we've kind of come down to the lower end of that range. You can see the splits as well. Our experience in the first half was 11% cost inflation, which, you know, in historic terms, is exceptionally high. We see that more like 7% is our best estimate for the second half. Turning then to capital expenditure on page 10.
We, we've committed GBP 85 million in the first half of the year, which is twice the level of 2022, and you can see where the money's been going in terms of greater rate of new company-managed shop openings. A step up in the refurbishment program, which is something that we'd really hit the pause button on through the pandemic, and we're starting to gear up the team to catch up with the pace we should be moving at on refurbishments. And then some significant expenditure in the supply chain as well, where we've been working, predominantly at our, our site at Balliol Park, where we're building the fourth manufacturing line for our iconic bakes and sausage rolls.
Also starting to refurbish, a couple of, and extend a couple of, distribution centers, which Roisin will talk about later. That's feeding in, and you can see in the outlook for the year that we still expect to spend about GBP 200 million this year, creating extra short-term capacity in both distribution and in, our manufacturing side, but also, accelerating and maintaining the, the rate of shop openings. We still expect about 150 new shop openings for the year as a whole. In the context of that, I think, you know, because, because it's a bigger CapEx year, we've had a number of people saying, "Well, you know, won't this affect returns on the business?" A bit of, a bit of question from shareholders and from, from some of yourselves on, on how we see that.
I thought it was worth just pausing and just talking about that for a while. Return on capital employed is one of the key metrics in the business. It's actually embedded in the way we incentivize management. Anybody who's a beneficiary of our share option scheme will know that almost half of the performance criteria in that relate to return on capital employed. It's something we manage through an investment board, which I chair regularly through the year, and we use it to cascade the principles of earning a return on the money you invest in the business, right through anyone who's making decisions on CapEx. On the retail side, we use a return on investment metric.
We look for a cash return of about 25% on the money that we invest in our retail shops. Typically, what we've been finding for a number of years now is that we get more like 30%, and you get to that level of maturity in 2 or 3 years. There's always a second year effect after we've opened a shop, even in, even in some of the more mature areas for Greggs. The other thing that I think to say is that the nature of the pipeline of shops we're opening is that they tend to have a return on investment, which is above the average for the group. As we target some of these new locations that Roisin will talk about, they tend to have a higher than average return on investment.
One of the things we hope is that that is a support for return on capital employed as we go forward. In the supply chain, it's about capacity utilization. We're probably at a bit of a high point historically at the moment, because we've been really using up a lot of the legacy capacity that we created in the last phase of supply chain expansion. Indeed, we've been spilling over into third-party supply for a number of areas. That's going to normalize in the years ahead as we bring on board extra capacity, as I've just described. Two or three years from now, we're going to lay down some of the bigger sites, which will provide the platform for the medium-term growth as well.
I think that's likely to have a modest impact on ROCE 2 or 3 years from now. I think that's an obvious assumption, but it's going to support those long-term growth ambitions that we have. Fundamentally, the supply chain model is highly efficient. It earns a good return, and I see no reason why that wouldn't continue to be the case as we then start to deploy that capacity in a bigger estate. Also, importantly, like-for-like growth, because, you know, the rate we are growing and the ambitions we have to push more growth through the existing estate will actually take up capacity in our supply chain, as well as the process of opening new shops. Finally, on liquidity, tax, and dividends.
As ever, Greggs is a great cash generator, and you can see the inflow in the first half of GBP 73 million after lease payments, and that's up on GBP 65 million the year before. We're, as I said earlier, carrying cash into the investment program, and we had GBP 139 million in the bank as at the half year point. I've mentioned the exceptional gain. That actually came in in early July, so it's not in the half year cash balance. Then in reserve behind us, we have this revolving credit facility, which net of the minimum liquidity, gives us an additional GBP 70 million, should we need it. On the tax side, a slight increase to guidance on the corporation tax rate for this year and this year only.
This relates to the Chancellor's announcement of the full expensing of capital expenditure, which came through in the budget in the spring. The effect of that is that although we get a cash flow benefit from being able to expense more of our capital expenditure this year, it defers the tax later down the road, when the tax rate will be higher than it is now. Quite a clever little move. There we are. There's a deferred tax cost that's hit this year. We, we did say 24%, we're now guiding to 24.9% for this year. Longer term, no change. We expect the forward guidance rate to be 26%, which is 1% above the headline rate, and that reflects the level of disallowables in our capital program.
Then finally, on dividends, we've advanced the dividend in line with the progression in earnings per share, so a GBP 0.01 increase to GBP 0.16 pence. We would expect to apply the normal process to the full year dividend, when we will, will aim to be two times covered by earnings for the full year. With that, I'll hand you back to Roisin, and be back for questions later.
Thanks, Richard. I'll now spend a few minutes just taking you through the ambitious plans to drive the strategic growth opportunities, bring some color to how we're progressing as we move to become a multi-channel food on-the-go brand. If I just take each pillar in turn, so we start with estate. We continue to drive our opening program at pace. We find opportunities for exciting new shop openings, relocating some of our sites to bigger and better locations, which allows us to service all the new growth channels. And refitting our shops, as Richard talked about, getting back to make sure that we have the ambition to serve our customers wherever, whenever, and however they want. So far this year, we have already opened 94 new shops.
We've closed 44. That gives us a 2,378, as at the 1st of July, with 50 net new openings. The phasing of shop closures this year has been particularly weighted towards the first half. We still have a strong new shop pipeline. We're confident that we will open 150 net new shops this year. Why are we so confident? Well, the confidence is underpinned by a recent success in catchments, where we've said before we're underrepresented, so that's areas such as retail parks, that's railway stations, that's airports, roadside, petrol forecourts, and supermarkets. As Richard mentioned earlier, what we are seeing as we open these new opportunities, they enhance our return on investment in these shops. They do provide us with a clear opportunity for significantly more than 3,000 shops across the UK.
The franchise opportunities continue to be important to us, because they expand the reach of the brand, and we now work with 16 corporate partners, helping us reach those catchments that we can't access directly. We've also made great progress on relocating our shops to better sites, which provides us with the capability to service new channels. Our expectation is that we will deliver 40 relocations this year. Our most recent opening, just last Monday, was at Gatwick Airport South Terminal, where we will be there to welcome those customers arriving from their journeys, and that shop will open 24 hours a day. On to Evening. Evening continues to be a significant opportunity for us, as it's the largest segment of the food to go market, and one where we just take literally just over 1% of market share.
Really pleasing to say that our evening sales now have grown to 8.3% of the total day. That's up from 6.5% at the same time last year. We've achieved that by opening more shops into that evening day part, focusing on our menu, so that's particularly our hot food offering, our pizza slices, our pizza sharing boxes, and our hot sweet treats, and also offering the delivery service to customers in the evening. We know that the evening food to go market is dominated by grab and go, and delivery. Therefore, we are really well placed to serve those customers and continue to grow the evening business. Our suburban shops offer significant opportunity to reach those customers that want their delivery at home.
Greggs pizza and the value meal deal that we offer are particular favorites in the evening, along with the hot sweets, and we're really working hard on our marketing investment to make sure that we grow the brand awareness that Richard talked about, to make sure that we become top of mind when you think about the evening and our great value deals. On to our digital channels, and delivery remains a really important opportunity for us. As you saw from Richard, it continues to grow in proportion to the business. Sits around 5% of the business currently, and we now offer delivery from over 1,300 of our shops to our customers, and we have got a second delivery aggregator that we are trialing with just now, and that is progressing well.
It's not just about delivery, so on digital, it is also about click and collect, and we've been continuing to improve the journey for our click and collect customers. That's making it as easy as possible to use our click and collect functionality, and then when you turn up at the shop, making it really clear that you can skip the queue, go to the front, collect your order, and go. We believe through personalization and the sheer convenience of this channel, that we will grow participations in our customers' use of this channel. Onto broadening our customer appeal, driving loyalty, which continues to be really important, and you saw in the chart that Richard shared, just how well that is doing for us. We continue to increase the marketing investment, so that's to raise awareness of the brand and encourage participation in the Greggs App.
Our brand health and our market share continue to grow, very importantly, especially in this tough market, we are still ranked number one for value. We now have over 10% of our shop visits that are scanned via the Greggs App, and that's up from just over 5% at the same point last year. We know that customers that use the App increase their visit frequency, and this frequency is proving to be even higher than we had forecast in our initial trials. That's why Richard referred to the work we're doing with our colleagues about Love Our App, and really driving the conversation with our customers.
CRM activity continues to be a key area of focus to ensure that we both onboard our customers successfully, and then once they are part of the loyalty club, we can make sure that we tailor the communications and make sure that we land communication that's appropriate to them. They then shop more with us, and then we can reward their loyalty. We do continue to learn on this agenda. I think we've said a number of times before, we're still quite new into this whole area of data analytics, understanding our customers better, and then the nudging that we can do to really drive that behavior. We've got a team, a small team of experts at the center that are working hard on that data analytics capability. Really important, at the heart of Greggs, is our menu development.
These are some of the items we've brought to our customers to continue to offer that choice and expand the offerings when they visit us. The new flatbread range is performing particularly well. We have brought back the sweet chili chicken noodle salad. That continues to expand the range of healthy options that we have for our customers. Our Vegan Mexican Chicken-free Bake was the latest addition to our plant-based range. We continue to trial new products and choices that excite our customers, because that's at the heart of Greggs. We've recently done some work on hot wraps and over ice drinks. They are performing particularly well, and our customers are loving them. On to the investment we're making in driving our capacity for growth. We are progressing well with the supply chain investments to expand that future capacity.
As Richard mentioned, we are on track with the fourth manufacturing savory line at Balliol Park in Newcastle. We will commission that at the back end of this year, and that will allow us to bring more iconic sausage rolls and bakes to our customers. We have commenced the redevelopment at our Birmingham distribution center, and the work to extend Amesbury in Wiltshire will start shortly. As a result of those investments in the distribution centers, that will then allow us to add an extra 300 shops capacity by the end of next year. We're also making good progress in identifying the site for the national distribution center, and also the additional manufacturing and storage, frozen storage facilities, again, that we need in terms of capacity for growth for the future.
As I previously outlined, our plans will take place on a phased basis. As you've heard from Richard, we plan to maintain our track record of capital, strong returns in capital, which as Richard said, is a key management metric and has a lot of focus. As you would expect, investment in technology continues to be critical. This year, so far, we have rolled out new EPOS tills across the estate, which allows us to improve our management of both pricing and promotions, for our customers. The Greggs Pledge continues to be really important for us. As a business that has always prided itself in doing the right thing, we're delighted with the continued focus and progress that we make against our commitments in the Greggs Pledge, which is our approach to ESG.
Clearly, this continues to get ever more important, and our teams work extremely hard on this. We continue to progress with the opening of our Greggs new outlets. We have, so far this year, opened a further three, and that allows us to both reduce food waste, but also support those local communities. We are increasing the use of biogas at our production sites, and that will help us to reduce our reduction in Scope two emissions. We are now focusing on what will the commitments be beyond this version of the Greggs Pledge. That, for us, will be Greggs Pledge 2.0. Just looking forward, we have got strong trading momentum that has continued into the second half of the year.
As Richard says, the rate of cost inflation is starting to ease, and we do expect that trend to continue throughout this year. We are pleased to confirm we're trading in line with our plan, but we're making good progress against the ambitious strategic objectives as we set out to grow both frequency of customer visits and our new channels. The board's expectation for the full year outcome are unchanged. In summary, we're making good progress. We continue to realize the many opportunities that are out there to become a significantly larger multi-channel business. On that point, I will draw the presentation to a close. Thanks, everyone, for your time today. Nice to see you all.