Hello. Welcome to Headlam Group's interim results for the six months ending 30th of June, 2022. I'm Chris Payne, Group Chief Executive. Just the first slide actually is the thirty years of Headlam. We just added the thirty years to that to note that Headlam is actually in its 30th anniversary. I'll come back to that point because it has some meaning in a slide at the moment, but it's great to be able to present the results in Headlam's 30th year. Just the agenda. We've got a few things here just to cover a little bit about us, a summary of the financials for the first half of 2022, and I'll give perhaps a bit more time to talking through an update on the strategy and how we're progressing on ESG.
Then I'll close with a view on current trading, and the outlook for the year. About us. This is Headlam on a page. I mentioned earlier, the 30th anniversary. Now, 66 businesses across the UK. Many of those are regional floor covering businesses, and some of those have been around for over 100 years. There's a real great sort of depth of heritage among the business. As I said, 30 years for Headlam as a group, but many of the businesses in the group have been around for much longer. That just sort of shows the age and depth of quality of the business that we've got around the UK in particular. We've got national scale, and we've mentioned 21 distribution centers and hubs here.
Without calling out all of the boxes on this page, I think what it does show is we've got strength in depth, we've got breadth of service, and we've got that real kind of quality, organization, behind us. I think what it does show is that there's a number of opportunities for growth. Many of those are called out, on the later slides as well. So just turning to the financials, there's a few points here to mention. I think one thing it's probably worth saying straight out is it's quite a tough economic, market at the moment, and we've got some cost pressures, we've got demand pressures.
It is pleasing to be able to report some first half results, which albeit slightly behind in terms of revenue, we are actually up slightly year-over-year in terms of profitability. Many of these points I'll come back to in slides very shortly. Just at a high level, what we have seen is a slight shift towards the European business who perform slightly better than the UK. A slight shift towards the commercial part of the market, away from residential, which I'll come back to. We've seen a sort of temporary uplift in the gross margin that we've seen coming through as a result of the inflation that we've seen on our supply of goods, and that's helped us mitigate some of the cost pressures we've seen further down the income statement in terms of costs.
You'll see in a slide later on that the cost impact has been quite significant, but we've largely been able to mitigate that so far. It's worth saying just towards the end of this slide, we do refer to the sort of, again, strength of the business. We've got some undrawn banking facilities, so we remain in net funds, and we're also going to announce a proposed ordinary dividend at the half year, which reflects the progressive nature and the year-on-year improvement of our profitability. This is a slide that we put up. It's our UK daily sales chart, which is presented on a like for like basis. This is, as I say, something that we produce every year. The reason we do that is to show consistency.
The last couple of years, of course, I've been mentioning how inconsistent the trading performance has been, as we saw the impact of COVID in 2020 and of course, 2021 also affected in Q1, where we saw a shift of demand from Q1 to Q2. What we've seen in 2022 is a relatively flat performance, and it's followed a sort of similar pattern to what we've seen in previous years, but it has remained a slightly more flat profile. That's to reflect a couple of things really. One is the residential weakness that we've seen, and I'll come back to. Secondly, we've seen an offset and an improvement in the performance of the commercial side of the business.
All that's done really is had a sort of flattening performance profile, over the course, of the first half. Just turning to the income statement. Many of these lines I'll actually detail out a little bit more detail on coming slides. Revenue and the profit bridge that we talk to on, gross profit, operating profit, I'll come back to in slides. What it does show is that there is a relatively consistent performance on revenue, a slight improvement in margin, and a slight improvement in profit despite the cost headwinds. I also pull out non-underlying items on here, which I'll come back to with a slide very shortly.
This slide calls out our revenue bridge, and it bridges the revenue that we had in the first half from 2021 to the revenue we had in the first half of 2022. The two key things it does pull out is the U.K. revenue and the Continental Europe revenue and the difference between like for like and other changes. If I just cover the U.K. first. This is where we've seen difficult markets, and we've seen some like for like reductions in volume. Unfortunately, also we've had a reduction in working days, which hasn't helped. That leaves our U.K. revenue slightly lower than we've seen in the prior year. The offset of that is Continental Europe, as I mentioned earlier. We've seen a slight swing towards Continental Europe.
Now in Continental Europe, we've seen like for like positivity, and that's largely driven by the French business, which is still delivering on its change program that it was going through the last couple of years, and that really has delivered some great returns in recent times. Secondly, the Dutch market has been slightly stronger than the UK market, and the Dutch market has continued to perform well locally. When you add those two together, it does mean that the revenue is largely flat, albeit slightly lower. We've seen this shift from the UK towards Europe. What's that done to profit? Over the page, we can talk to the impact on profit.
This slide in particular pulls out the impact that we've seen of inflation and the price inflation that we've seen coming through on our cost of goods. I mentioned earlier the residential softness in demand and that being offset by inflation, and you can see that being played out on this slide. This bridges the operating profit from 2021 to 2022, and we can see that gross margin effect of reduction in gross profit from the reduction in volume being just offset and slightly more than offset by the price inflation we've seen. Non-underlying items is a pulled out item, again, dominated this year for the first time by the insurance proceeds we have received in the first half following the fire at our Kidderminster distribution center at the back end of last year.
That fire, we took a relatively large write-off to write-down of the equipment in the building last year, and we're starting to see that come through in cash now. As usual, that will take a little bit of time to come through, so most of the proceeds we've received so far relate to the loss of stock and equipment, and we expect a bit more to come. Just turning to cash flows, quite a lot of movements here, but there's two real features, two main features that stand out on the cash flow statement. One is around the investment in inventory, and we talked about sort of building stock to protect against the product supply issues and the rising inflation that we anticipated.
We had a stock build towards the end of last year, and we've continued to build stock into this, and that's also been resulted in a pay down of creditor payments that we had at the end of last year. There was a buildup of payables at the end of last year, which we've paid down this year. That's resulted in a net working capital outflow. The second part of the cash flow you can see is the return to shareholders. There were 3 payments made to shareholders in the first half. One was the final dividend from 2021, one was a special dividend from 2021, and we've gone through our process of the share buyback that's continued throughout the first half of 2022.
Those three elements together make up the GBP 25.8 million that you can see on the cash flow statement. Balance sheet, I mentioned the sort of strength in depth of our business. It's a key feature of the business, and that remains the case. We do have a strong underpin on the balance sheet through owning our freeholds. Typically, all of the distribution centers are owned by the business, and that does create a freehold property portfolio worth in excess of GBP 100 million, and that underpins the fixed assets parts of the balance sheet. We also have this depth of inventory that I mentioned, and we've been building that inventory to protect against supply issues that we've seen in the last 12 months and also in anticipation of the price increases coming through.
Of course, the other aspect of that is that there has been inflation in that stock, so that stock number that's now reflected in our balance sheet is at the higher price that we've paid in recent months. There are undrawn banking facilities. I mentioned the fact that we remain in net funds, and I've got a slide, in a moment where I do talk about what the net funds have done, during the course of the first half. This is a slide that I do like to produce because it shows what the trading looks like and the impact on cash throughout the period. We don't just produce a half year and a full year number. What you can see here is it's a fairly consistent pattern that you see year on year.
For the first time, what I've done is added a sort of dotted line, if you like, to the performance for 2022, which shows what the impact has been of this return to shareholders that we announced at the end of last year. That's had an impact of clearly reducing net funds, but without that additional return, the net funds position would have been slightly higher. We expect that pattern to continue for the rest of the year. Just turning to strategy and an update on our ESG actions. Strategy first. This is a slide that I've shared before. The main feature of this slide really is to break out our target audience. Bottom half of the slide shows the work that we did to analyze the marketplace, and we've broken that marketplace down into seven key customer groups.
On the left-hand side of the slide are the traditional retailers that our regional businesses with all that great heritage and service proposition would have typically served and still do. On the right-hand side of the slide are the customer groups that we're now targeting to expand into, and this is where we've got low market share. This slide, again, has been the feature of much of the conversation within the business, and I've talked to how we're going to use this to grow our business in the future. A really key slide for us to focus our growth activity on. Again, this is a slide which shows the sort of driving force of our strategy at the moment.
We've got trade counters, multiple retailers, the investment that we're making in the digital and e-commerce side of our business to enable the growth into these new spaces, and then what we're doing with our own product brands. Real progress on these features, but the two on the left are the ones we've spent most time talking about in the past, and we've got some slides that call out the developments that we've seen in the first half of the year. Trade counters, we've got some pictures there four trade counters that have been newly refurbished. Just as a reminder, this is taking our network of 50-odd trade counters, and we're looking to nearly double that to ninty over the course of the coming years.
The fifty that we have will be completely refurbished and invested in so that they have a common look and feel akin to the pictures that you see on the right-hand side of this slide. Relatively modest level of capital required for each of the developments, and we've been quite ambitious at doing this over a relatively short period of time. We're looking to roll these sites out completely in the next couple of years. What we've seen is, in particular, the performance of the new sites have really outperformed the sites that were uninvested and indeed outperformed the rest of the business.
The revenue, for example, is up year-on-year on those sites that we've invested in, which clearly is contrasting with the results that I talked about for the group for the first half as a whole. We are on track to deliver those sites that we talked about. We'll have 30 invested sites this year. That will rise to 60 the following year and then ninty after that. We've got a really strong pipeline. We've got a team looking at these sites, a team that have developed a blueprint, and as you can see, we're rolling those out, across the country as we speak.
We've appointed a new MD of trade counters and the purpose of that was to get him in early to really add some focus and drive and turn this into a commercial organization that's gonna give us GBP 200 million worth of revenue that we've identified in the course of the coming years. Multiple retailers, I talked about this in depth at the year-end, and I'm pleased to say that we've actually made some great progress in this space. We've identified a number of new customers, we've made propositions to those businesses, and we've secured new customers in the period. That's fantastic news, and we've pulled out a handful of names here.
Oak Furnitureland, I talked about at the year-end. It's great to be able to announce that we've now got a nationwide contract in place with Homebase as well, delivering a number of products in there, and I've got a little bit more detail on that in the slide in a moment. This demonstrates that we are implementing our strategy that we've laid out, and we are going after that part of the market where we've got relatively low share. Just calling out Homebase and one of the top ten UK house builders that we've delivered a contract for this year. Homebase, two-year contract, started this year. Now that's a nationwide contract delivering a relatively modest number of product SKUs, but the good news there is that we're able to scale that up.
We're able to leverage our national network and offer our expertise to a UK leading retailer. The house builder, again, we mentioned that this was a target audience for us. Great to be able to report that we have secured a contract with one of the top 10 house builders in the UK. Early days, we've only just recently signed that contract, and we've got our first sites and our first plots to be able to put product into in Q3. We should be able to see some revenue coming through in the second half. Again, very exciting, gives us an opportunity to prove this is a new customer group, give us the opportunity to target further growth in the coming years.
I mentioned around the investment in the enabling of sort of digital and e-commerce underpinning to some of these customers. We talked in the past about developing our new app, which is now available for download on the App Store and Google Play, which is great news. We have also invested in being able to sort of plug into some of these new customers so that they're now able to load their orders electronically. They don't have to use the telephone. Of course, much of our orders still come in a more traditional way because we've still got the vast number of our customers are in that traditional retail space. We've increased the percentage of our sales being received via an electronic channel to 26% of our sales.
We had a target of thirty this year, so we're getting there, up from 11% in 2019. We are seeing that start to come through. The app, as I said, is now up and running. We're seeing sales at just under GBP four million coming through that channel, but again, that's just one feature of the investment that we're making in our sort of digital footprint, if you like. I mentioned products and brands, and this is something that we've probably not talked a huge amount about in the past, but it's something that is important to make us aware in the consumers' minds and in the presence of the retailers. We've got a number of product brands that span quite a range of price points.
Again, that's important in today's marketplace, and I'll come back to that in a moment. Our price points would be from less than GBP 10 a meter right up to over GBP 150 a meter, depending on what the product is, what the brand is, and what the quality is. We're able to serve the entire sort of spectrum of the marketplace, really. We've got some brands that we're investing in that consumers might be aware of, and we've got some brands that we're investing in digitally, so we're improving the websites, launching sort of media campaigns, making it more aware in the marketplace. That's something that we've seen deliver a good impact in the market on. Everyroom is a great product that we've now put into the marketplace, a good quality product at an affordable price.
Consumer feedback and customer feedback has been really positive. That's now available across the country. Importantly, we are able to put out sort of free stands to our retailers who can really embrace this. We're well-stocked, ready for sales in this space. This was a real targeted product to recognize the need for us to address that sort of a more affordable end of the market. Good product, well-received, and is now out for sale. Turning to an update on our ESG strategy and the progress we've been making this year, and I'll also cover some of the appointments at the board. E, S, and G, again, I'll remind everyone those are three different things. Turning to the environmental side, we have been working on our actions and plans towards achieving net zero by 2035.
We've been rolling out things like installing additional solar panels on the roofs of our DCs. We've been ordering and developing low emission vehicles, and we're now operating our first electric van in Scotland, for example. On the social, we've been working very hard to develop a community-wide scheme, if you like, to support the community that we're in. It's called My Headlam Community, and that looks at developing charitable support, volunteering days at food banks and the like, just to really reflect the fact that we are a regional business and we operate in our local communities. We've just addressed some of the pay and benefits for people across the business, whether it's just enhanced pension benefits. We've moved people to the National Living Wage, for example.
From a recognition perspective, we have launched a new scheme where we're really celebrating success of people who have gone above and beyond, whether it's performance, behaving just the way that we just wish people to behave and doing that extra, going the extra mile, and recognizing that. We've also launched a long service scheme for people who've been in the business for a long time and shown that sort of loyalty to Headlam, and that's something new for this year as well. On the ESG, we've now got our ESG committee that's established. It's executive committee, but also attended by a non-executive director. Real progress on the ESG front. Turning to the board, we've appointed Karen Hubbard, who started first of September.
She joins us with twenty five years plus experience in lots of different businesses and retail and in particular in sort of e-commerce and digital. I'm sure she'll be a great support to me and the executive team as we develop that part of our strategy. On the CFO, Patrick Butcher remains our interim CFO as we continue the search for a permanent CFO. Again, progress is going well there, so hopefully we'll be able to update a little bit further on that soon. Turning to current trading and the outlook, I think the summary of this is really more of the same. I think the economic outlook is quite difficult to predict and quite gloomy, I think. You know, you've got these cost pressures. Residential demand remains a bit challenging.
However, we do see this sort of continued strength in the commercial sector. We've seen that continuing into July and August, which is offsetting the weakness that continues on the residential sector. Much of the same, a very similar sort of trading performance that we've seen in the first half. I think that therefore the strategy that we're pursuing to stretch into new markets and develop this sort of footprint of trade counters remains on track and remains the right thing to do. Difficult market, but I think all the things that we're doing are the right things and puts us in really good stead for when the markets change and those headwinds may become following winds. Just in summary then, to close out, I think we've got this really solid, good quality business.
You know, we're market leading. We've got this sort of strength, depth of balance sheet and coverage across the UK in particular. We are investing in the network. We are investing in new strategies to go after new customers. We've added some capability into the team. We've got people now heading up the trade counter business. We've made investments in the e-commerce and digital footprint, including a new CIO. I just think it shows that we are well positioned to take advantage of the market when it improves and we're doing the right things to implement our strategy as we speak. That brings us to the end of the presentation and thanks for joining.