Good morning, ladies and gentlemen, and, welcome to Marshalls plc's 2022 first half year results. First half year results, should I say. It's also the first time we'll be actually announcing results which include, obviously, the Marley acquisition, which has now been part of the business for the first two months, certainly in the half year. My plan today is I'll cover the highlights. I then wanna spend a little bit of time talking about the new divisional structure that we're actually reporting on for the first time, which we hope will give a bit more clarity to the results and be able to give people a better understanding of the markets where we're operating in. Justin will come up and cover obviously the financial performance.
I'll come back and talk about the markets, the key drivers in each one, and then we'll have an update on our five-year strategy, obviously ESG, and at the end, there's an opportunity to ask whatever questions any of you would like to do. First of all, coming to the results. The results are actually a record performance in terms of on turnover and profit for the group. Certainly from our point of view, what I'm gonna talk about today is the adjusted results. Justin will explain the difference in the adjusted results and the statutory results, obviously most of it following the acquisition. As you can see here, the sales are up some 17%. On a like-for-like basis, they're up 7%, if you take obviously the trading of Marley out. The profits are up some 15%.
EPS is up 5%. It's a smaller number because obviously more shares have been issued in terms of doing the acquisition, but even with the new shares, they're still up 5%. The dividend that we're actually gonna be paying, the interim dividend is up some 21%, again, at the record level. Obviously, the net debt has risen. That's in line with the acquisition and obviously what we were planning to do then, and Justin will talk about some of that as we go through. Obviously, from our point of view, the acquisition of Marley we believe is truly transformational for the group. It further diversifies the group coverage of different sectors of the construction market, which is a strategy we've been pursuing, and I'll talk a little bit more about later.
Certainly from a business performance, it's been performing very, very well. Certainly from the point of view of the business, in the RMI, it has been performing very strong where there's less discretionary spend there. Obviously, people have to change their roof. Also, from a point of view of integration, that's been tracking on line with the plans of everything we've put through. There's a strong cultural link, we believe, between the companies. Obviously, one of the things we identified was the opportunity in operations, and we still believe that opportunity is there to get enhanced performance effectively, therefore giving bigger capacity to what we've got, and we're working our way through that, and obviously that gives us opportunities to increase the revenue. Certainly from a logistics and purchasing, we're looking at opportunities there to putting the two businesses together.
What does that mean in terms of, from our point of view, buying things and obviously distribution-wise across the country? We've also identified other opportunities for potential new products. Brick slips is something that's been talked about for some time. The brick slip, we believe the right way to make that is on a tile machine, and obviously our brick division would very much like that product to add to its current portfolio. We're looking at that and entering into obviously being able to do a concrete brick slip. We think that's got a big opportunity. We're also at the moment close to signing off a new concrete tile line to be installed, which will obviously give extra capacity as well. The acquisition's going very positively and very strongly. As I said, I wanted to talk a little bit about the divisions.
We've made some changes, obviously, as a business. First of all, we're trying to report today in three different divisions. We've got Marshalls Landscape Products, which makes up our commercial landscape products, our domestic landscape products, and international. That was really the core of, I guess, Marshalls historically. You've then got Marshalls Building Products, which has our civils and drainage. This is the business that obviously looking at all the drainage. This is our acquisitions from CPM in the past. We've then got Bricks and Masonry, which includes the acquisition of Edenhall, put together with the Marshalls part. You've then got our Mortars and Screed and our Aggregates. You've then got Marley Roofing Products, which is made up of concrete and clay tiles.
It's made up of the timber battens, components, accessories, and then Viridian, the solar solution that's offered. We are reporting the numbers obviously in that way. What you can also see is how we used to report, which is really a domestic market. We put everything into public sector and commercial, which included the acquisitions of Edenhall and CPM, and then you add international. We think this hopefully gives better clarity in terms of on that business. Obviously, as well as having the divisions is what markets do they operate in. Again, we're giving that information by we're splitting now from new build, commercial/infrastructure, and private housing RMI. Our intention going forward is to show all of the results in that area.
If you look at the first half, I would say what we've seen is strong business from obviously a new build, strong from infrastructure commercial, and we've seen some caution in the discretionary spending of RMI, which is obviously more in the landscape part than others. Really, we're expecting that to continue in the second half of the year. If I look at what does that mean from the business point of view, if you take the three segments as we reported, then what you've got is roughly 50% of the turnover is obviously in landscape products, and then there's a quarter of the business is in each of the other areas of obviously the building products and also Marley.
If you look at the segments that we're in and where we're selling, as you can see here, what you've got roughly is a split of almost 40% in new build and obviously commercial, and then roughly 20% in terms of our RMI. From that point of view, we think and we hope this gives easier clarity to understand our business. If you look at the changes that's gone on in the business, and as I said, from our point of view, what we've looked at over the years is trying to see how can we increase the exposure if you take from the marketplace.
Showing here 2013, I guess picking that because it's when I joined the company, what you can see is we've actually changed the exposure we have, particularly away from obviously just in landscaping, but also the effect of you know, the domestic part, which we accept is obviously the discretionary part. If you look forward to 2022, what you can see is the actual domestic landscaping is now 15% of the group, whereas it used to be 31% of the group. From that point of view, it obviously has changed. Now we're not saying that because we see that as a negative section. Actually, if you go back to 2021, that was our fastest-growing business.
What it really is trying to highlight is from a construction point of view, we believe we cover all the different factors of it, and obviously one of the key exposures from our point of view is to make sure we're getting the best out of that business, in the relevant areas of what we operate in. Hopefully it gives some clarity. With that, I'd like to hand over to Justin, who's going to go through the financial numbers.
Thank you, Martyn, and good morning, everybody. I'm going to talk through the detail of the financial performance for the first half of the year, and I'll do that in the new segmental reporting format that Martyn's just taken us through. I'll then talk through the key features of our cash flow performance during the same period before moving on to an update of the impact that the acquisition of Marley has had on the group's balance sheet and our funding position. I'll then touch on our capital allocation priorities and close with some comments on our interim dividend. Now before I go into the detail, it's probably just worth highlighting that the profitability measures that we report within this presentation are stated after adding back various adjusting items in order to show the underlying performance of the business.
It's those adjusted results that the board uses to assess performance and also to assess dividend payments. Adjusting items in the first half of the year were GBP 20.7 million, and they comprise the acquisition costs associated with the Marley deal. That was about GBP 14.6 million. The unwinding of a technical accounting adjustment made to state inventory at fair value. Again, associated with the Marley deal, and that was GBP 3.9 million. And then finally, the amortization of intangible assets that arise on the acquisition of subsidiaries, and that was GBP 2.2 million. And further detail of those items are set out at page 51 on the deck if you've got some interest in that information. Turning now to the business's performance and starting with revenue.
This slide sets out a revenue bridge between 2021 and the current financial year, and it's split between our new reporting segments. Overall, as Martyn touched on earlier, group revenues increased by 17%, and that includes the benefit of the Marley acquisition for the post-acquisition period. However, on a like-for-like basis, revenue growth within our businesses was at a more modest rate of 7% during the period. Now, the key drivers of growth were a strong performance by Marshalls Building Products, the benefit of the Marley acquisition, and that was partially offset by a softer performance from Marshalls Landscape Products, and that really reflects its exposure to private housing RMI. Turning now to operating profit, which increased by GBP 6.4 million or 15% during the period.
The chart on this slide sets out again a walk from the 2021 result through to the current year. The key drivers of performance were that strong growth in profitability in Marshalls Landscape Products, a GBP 8.6 million contribution from Marley in the post-acquisition period. That was offset by a weaker performance from Marshalls Landscape Products, where volumes were lower year-on-year. Operating margins were marginally lower than 2021 at 13.8%, and that reflects a stronger performance in Marshalls Building Products, the benefit of Marley's structurally higher margins, and that was offset by a weaker performance within the Landscape Products business. I'm now going to talk through the segmental results for each of the reporting segments. Now this slide sets out revenue, operating profit, and operating margin for Marshalls Landscape Products.
As Martin touched on earlier, that comprises our commercial and domestic landscaping businesses, landscape protection, and our international businesses. Revenue in this segment contracted by 1% year-on-year, and that reflects its relatively high exposure to private housing RMI, which was weaker than in 2021. That reflects a normalization of household expenditure priorities, decline in consumer confidence, and the impact of inflationary pressures on household budgets. We also saw continued cost inflation within this business, so it continued to be a key feature. We were successful in being able to pass those costs on through the supply chain with no adverse impact on profitability. Therefore, the reduction in profitability during the period of GBP 5.5 million arose from lower sales and production volumes, which impacted both gross margins and the operational efficiency of our manufacturing facilities.
Those factors resulted in a 2.4 percentage point compression in operating margins to 13.8%. Moving on now to Marshalls Building Products, which comprises our Mortars and, our civils and drainage, bricks and masonry, Mortars and screeds, and aggregates businesses. Now, activity levels in those segments continued to be very positive during the first half of the year, and we saw a particularly strong demand for our bricks and masonry products. That led to a 21% increase in revenues compared to last year. We also delivered a very strong improvement in segment operating profit, so a GBP 4 million improvement to GBP 13 million. That reflects the proactive management of inflationary pressures along with strong commercial leadership. Those factors resulted in an improvement in margins of 2.3 percentage points to 13.6%.
Turning now to Marley, which manufactures and supplies a range of concrete and clay roof tiles, timber battens, and integrated solar panels. This business has traded positively during the post-acquisition period, delivering sales growth of 18% compared to the corresponding period in 2021. That reflects the good backdrop in both new build housing and commercial infrastructure and industrial end markets. The fact that its private housing RMI business is much less discretionary than, say, our landscape products business. Marley delivered a profit of GBP 8.6 million in the period, and that reflects the proactive management of inflationary pressures, some benefits of operational leverage, and the fact that we focused on margins rather than volumes in our timber batten business. The margin performance was very strong at 24.2%, which is structurally higher than the Marshalls businesses.
Now, this slide sets out the profit and loss account from operating profit through to earnings and earnings per share. You can see that the operating profit growth of 15% flowed through to a slightly slower rate of growth at the profit before tax levels. That was up 13%. That reflects additional finance costs associated with the debt taken on to part fund the Marley acquisition. The effective tax rate in the period was just over 19%, and that's a couple of percentage points lower than last year. As a result of that, profit after tax or earnings increased by 16%. As that flows down into earnings per share, we saw growth there of 6%, and that reflects the additional shares that we issued to part fund the Marley acquisition. Moving on now to cash flow.
Cash flow from operating activities was a little weaker in 2022 than last year, and that reflects additional investment in net working capital, the largest component of which was an increase in inventories. That reflects the transition to the Marshalls business being ex-stock again. Net capital expenditure was GBP 7.8 million, and that was a little bit lower than our original expectations, which reflects some change in phasing of spend during the year and a reduction in our overall expectations for spend. We will see a ramp up in the second half of the year as we spend more on the new Dual Block plant, and we expect the first line to be operational of that new factory in early Q4. Overall, we expect expenditure on CapEx now to be in the region of GBP 25 million-GBP 30 million.
The cash flow statement also includes some significant items in respect of the Marley acquisition, including both the issuance of new equity and the drawdown of new debt facilities. That's being used to finance the acquisition-related cash flows. Overall, we've seen an increase in net debt of GBP 211 million. Reported net debt at the end of June was GBP 252 million, and on a pre IFRS 16 basis was GBP 208 million. Moving on now to funding and liquidity. We used a conservative capital structure in order to fund the acquisition of Marley, with more than 60% of the consideration being funded through the issuance of new equity.
We also drew down a new term loan of GBP 210 million and replaced our existing revolving credit and overdraft facilities with a new GBP 160 million RCF. That gives us total debt facilities of GBP 370 million with a four-year term, and they're being priced at SONIA plus 165 basis points. We've got very significant cover against the covenants that sit within the banking agreements, with interest cover sat at 52 times compared to a covenant of more than 3 times. Pro forma net debt to EBITDA at 1.4x , and that compares to a covenant of less than 3 times. Gearing remains relatively conservative at 36%, and on a pre IFRS 16 basis, that's 29%.
At the end of June, we've got very significant headroom against our debt facilities of GBP 80 million. Turning now to the post-acquisition balance sheet. I guess the first thing to draw out on this slide is the very significant increase in net assets. Around about GBP 360 million increase. That principally reflects the new equity issued to part fund the Marley acquisition. Intangible assets have increased by GBP 450 million, and that's split broadly evenly between brands and customer relationships, both of which are being amortized, and goodwill, which in accordance with accounting standards isn't amortized.
Net working capital increased by GBP 58 million. That was driven by a combination, broadly split evenly, of the impact of the Marley working capital coming into the group balance sheet and additional investment in Marley's working capital. Again, as I mentioned earlier, that's largely in inventories. As touched on the last slide, net debt has increased to GBP 252 million, and that reflects the funding, or part funding, of the acquisition of Marley. Now turning to our capital allocation priorities, and I'm sure you'll all be familiar with this slide. We've used it many times before, and our capital allocation policy remains unchanged.
The first priority is to continue to invest in organic growth opportunities, and as mentioned earlier, we expect to spend between GBP 25 million and GBP 30 million on CapEx this year, with the flagship project being the new Dual Block plant at St. Ives. We'll continue to invest in R&D and new product development, and we expect to spend similar amounts in those areas as previous years with a very clear focus on low carbon products. We operate a progressive dividend policy, and we aim to maintain 2x cover of adjusted earnings over the business cycle. We continue to be very interested in selective acquisitions.
In the short term, they will be bolt-on, and we'll be very interested in businesses that we see in attractive markets that are good businesses and will add value to our customer offer and to our shareholders. Finally, supplementary dividends will be considered, but only when levels of net debt have been reduced to materially lower levels than those reported at the half year. Finally, moving on to dividends. I'm pleased to be able to report that the board has considered the robust trading performance in the first half of the year, the benefits of the Marley acquisition and the strength of the group's balance sheet, and has decided to declare an interim dividend of GBP 0.057 per share, and that's an increase of 21% year-on-year.
That reflects the application of our dividend policy of 2x cover of adjusted earnings and has the usual phase in between the interim and final payments. With that, I'll hand back to Martyn.
Okay. Thank you, Justin. What I'd like to do now is come on and talk obviously about the market, the market that we're operating in. The CPA have done a revised forecast, and it has been reduced in terms of in some of the key areas, but is still showing growth both for this year and the subsequent two years in terms of going forward. As always, with the CPA, you have to look within that detail to understand the forecast. What you can see here is, as always, you've got different growth rates in different sectors. What you can see from a point of view here is commercial and infrastructure is very strong.
House building is remaining good, and the only one that has actually gone negative is in the RMI, which again, we can see obviously from our own part of the business. The key, though, is understanding that there are real growth sectors and making sure our job is to make sure we follow those sectors to get our growth, obviously, in the business. There are factors out there today. I mean, one of them you hear a lot about is job vacancies. You know, we can see that from our own facilities, where we've never had an issue in terms of filling jobs, and now it's become more challenging. We do get back to the numbers, but certainly you have to work harder at it.
If you look at construction in general, I mean, there's now 400,000 people less working in construction than there were back in the peak, and the number of vacancies is at an all-time high. That is having an effect in different parts of the business. It does have an effect on, obviously, installation capacity of some of the parts that we see in the business. We see that within our own register, where the registered installer is struggling sometimes to get full manning. What that means for small businesses is they actually install less. 'Cause even though RMI, as we said, is down, we're seeing that factor. When we look at the registered installer order books, they're still at historical, you know, record highs ever since COVID. I mean, we used to say that 12 weeks was quite long.
We're up at the moment to 17 weeks. What we are seeing is that is being factored by obviously less gangs are working, not less companies. We would have roughly 1,000 companies on the register, and they'd operate 2,000 gangs. That's about 10% down in the gangs that are operating. That has affected and obviously that lengthens order books. There is still a healthy demand for effectively domestic product in the marketplace today. From our point of view, obviously what we wanna do is increase that capacity. The reason we think there's a strong demand is today there's no doubt, if you look in the national picture, that the inflation and pressures are giving lots of pressure.
If you look in the national picture, as the numbers are showing here, there's up to 2.2 million people have less disposable income than GBP 30 a month. In fact, nearly 1.7 million have no disposable income. If you look at the other part, in what we call our core consumers, what you can see here is there's still over 2.5 million people have over GBP 2,000 a month disposable income. In the area where people are making this investment, the funds are obviously still there and still available. If you look at obviously disposable income and savings ratios, the savings ratios have reduced in the current situation, but they've reduced really back to normal. There still means there's a lot of money being saved from obviously in the lockdown periods.
Our consumers and customers effectively are spending savings. What we're seeing even within our own product split is the DIY market and the sort of lower income market of our products is lower, and the higher one is still relatively strong. We are seeing that, and it is obviously having an effect in the domestic business, but I still believe the underlying demand is there. One of the challenges is to increase the capacity of installation. In the ABI, this is where we look obviously from our point of view, particularly at, obviously projects as they're awarded and then looking at what does that mean as a consequence. We say it's a lagged measurement. The reason for that is if you think about it, obviously, landscaping and now roofing come at the end of projects.
From their point of view, we look forward to projects already there now and see that in a year's time we'll be doing that. What this is showing, and this is very, very strong, is obviously commercial, residential, roads are particularly strong. What we can see when we're doing drainage products, for instance, that that means in 18 months or 15 months' time, we'll be doing landscaping and roofing products in those same projects. That is still strong. If you look at the number of housing completions, again, the market has been strong. We know the housing market, and you see through the house builders, are basically sold out for all of 2022. Many sold out in the first quarter, second quarter of 2023. What that means is the amount of houses obviously being built is still relatively strong from where it's been.
The other factor for us is obviously what type of houses are being built. There's definitely more and more houses, the both detached and semi-detached houses, are being built in the country and less flats. In simple terms, that's more roofs and more landscaping per plot than obviously what you have with flats and apartments. Again, there are elements of the market which we see as strong and are remaining strong. The other one, obviously from our point of view, is looking in the new housing in terms of output and what that means. If you look at the plans and the plots for the next 12 months, there's growth there. Obviously, house builders are trying to manage those plots and manage what they're doing.
We can see there's been a lot of new starts in the last six months, particularly obviously we see that from our drainage products, which have been doing very well. That bodes well for the future in terms of obviously those as they come to completion. Now, five-year strategy, if you take from our point of view, we came out with a five-year strategy, which we called the 2020 Plan some time ago. That saw us forecasting we could grow our EBITDA from some GBP 50 million to GBP 100 million, which was achieved. We came out with this, our new five-year strategy about three years ago, and the idea was it would grow another GBP 50 million. Obviously because of the acquisition, we've accelerated that forward and we're at those numbers.
What I thought today would be of interest is to actually show some of. We've got eight pillars within our five-year strategy, to give you some update on a few of those. The first one, obviously, we've said is operational excellence. As Justin mentioned earlier, we've got a new dual block plant, some GBP 24 million investment coming into our St. Ives facility. That'll be operational in the fourth quarter. Now, this gives us many different options of products that we manufacture with different materials, different finishes. We'll be doing all of it in-line. Today we manufacture many of these products. We take them offline. We then do what we call secondary processing, repackage them. This will be done in one operation, so it'll be much more efficient. The finish is also gonna be completely different.
We'd have the ability to do face mix, which we talked about in the past, so a different material on the top to the bottom. Some of the plant is gonna be powered by renewable energy. We're using solar panels. Certainly from our point of view, looking at the aesthetic of the product is we think can lead to a much better offer in this area, and I'll talk a little bit more about why I think that's even gonna be even more important going forward. Obviously from our point of view, looking at how can we minimize curing, how can we increase the strength of the product. In simple terms for our products, if you can increase the strength, you can usually remove some of the cement.
If you can remove some of the cement, you take out cost, you take out carbon, and obviously from our point of view, we see that as a big opportunity. This, we believe, is a bit of a game changer from our point of view in the marketplace. We'll have products that nobody else can produce at quite competitive prices, and we think there's gonna be a massive benefit to the group. Another area we've talked about in the past is digital. What I wanted to do today is try and focus on how do you monetize digital? How do you actually make money out of it? Now, one of the areas we're looking at, we've mentioned before and moving much closer to doing now is called Drop Ship.
Drop Ship is the ability for a merchant to effectively today. A merchant online will show what stock they've got, quite often only in the branch that you're actually logged into. What Drop Ship gives them the opportunity is to offer the whole Marshalls range in that branch. If they haven't got it in stock, we will deliver it from one of our facilities right across the country on one of our vehicles, and what we can do is give them a completely different offering to the consumer. Obviously, from our point of view, the benefit is we get to sell more of our products, we get to sell the full range of our products, but that is becoming something that's gonna be quite unique.
We'll be the only person who can do it because of our logistics setup, and we think it gives the merchants we're working with a massive advantage in the market. We're also looking at an opportunity in marketplace, so where we have our own online offering, the potential to offer high-end garden furniture, different parts that we physically don't need to touch, but it comes part of obviously the offering which you're doing. Customers are asking for more and more content. They're looking from their point of view of understanding when you make a choice, what's it gonna look like? We have apps where you can do visualization in your own garden. You can take a photograph of your garden. You can then drop in it different products that we make to get some idea of what they look like.
These are real life experiences from their point of view to help them make these decisions. Then looking a bit further ahead in some of our products like drainage and potentially solar, how can we use sensors to actually identify when flooding is gonna occur? What sort of water is actually passing through? What can we do with obviously with the use of solar? There's a lot of opportunity, I think, in terms of moving that forward. The other part we've talked about is one of our pillars was obviously the mergers and acquisition strategy. We've now done 3 companies. We've brought in, if you go all the way back to the group, the group when I joined, we were making roughly GBP 7 million profit. This year if you look at the consensus, we're at GBP 100 million.
Now we've had organic growth in that period. We've also helped with the acquisition growth. We brought in a drainage business. We brought in a concrete brick business. We've now brought in a roofing business. This helps us. If you look at what we're trying to do in construction, in previously, we'd have only ever supplied the landscape products to these type of, accommodations. We're now giving a much broader area. From our point of view we believe doing those efficiently, we now got our, drainage business at record profit levels. We got our brick business at record profit levels, and we're confident that Marley will go to record profit levels. They all come on top of organic and have allowed us to have the growth we've seen in the recent years.
ESG, we've talked about ESG in the past, and it's obviously very important from a group point of view and continues to be so. We very much look at how do you create effectively a better net positive future. Everyone's focusing obviously on carbon reduction. We followed the UN strategic goals as part of obviously the platform of what we've built this up. We've used the Marshalls Way, and we're trying to make it standard for our business effectively to do this on a day-by-day basis. Now, you'll hear lots of people talk about ESG. Nobody is gonna present and say that they're not active in doing everything in it. The reality is from our point of view is you've got to actually start off, if you want to do this, having science-based targets, we truly believe that.
You've got to get there for all of your products, carbon monitored and signed off by third party, which is where you come to actually agree on the targets that you're gonna try and reduce. If you haven't done that with respect, that's all you're saying is words because there's nothing proving that you're actually doing it. We were the first company to get this signed off from our point of view in the construction sector. We've got those targets. They are there, and obviously from our point of view, we're trying to achieve those on a year-by-year basis, and we're very confident we can do it. I do think that's gonna accelerate in the next few years as to when companies are doing this by.
You'll hear many people talk about different dates of when they're doing it, but in reality, it's gonna, in my opinion, grow and grow. I do think the Science Based Targets is what's gonna really drive this. Now, the key from our point of view then is adopting that into what does that mean on a yearly basis. We've done that within our own management targets, within our own incentives. We're making sure everybody in the business understands how do you remove the carbon. You've got to remove it in things you can control. You've also got to work sometimes with suppliers, how you take that out. We are confident in terms of how we can do that. Most importantly, we're being effectively analyzed by a third party who is signing this off on a yearly basis. It's absolutely critical.
Now, the one thing for the ESG has not yet impacted in my view, is the ability to see what products you sell and how you're selling these. Now, we've done some studies, and this is just an update on this. This is looking at the typical product carbon footprint from cradle to grave, which again, is the right measurement, not cradle to gate as some people do. If you take that today and using a base of 100, which defines U.K. concrete made in a local area, and you look at it, then effectively importing stone from China and India is 5 times more carbon in it than manufacturing that concrete locally. If you effectively bring in ceramics, it's 3.5 times. If you even use stone in our own quarries, it's higher.
What this is moving the whole market to, in our view, is more and more concrete products in the future. The Dual Block plant, hand in hand with this, will create products which look like stone, which look like ceramics, which ironically, have been trying to look like themselves for years as well. It's almost going full circle. I do believe with the investment we're making, this is a way we can commercialize carbon. This isn't just about signing off targets. This is actually then going to a house builder, then going to a local authority, then going to a private investor and saying, "We can offer you a lower carbon solution than the one you have." At the moment, house building is all being about energy targets. That's gonna change to embedded carbon that's in that footprint. Having concrete bricks is gonna help.
Obviously, from our point of view, the products in reducing that carbon is gonna help that house builder. Obviously, accreditations and validations, I mean, as I said earlier, I believe there's too many. It's a bit like the Wild West at the moment. From an ESG point of view, we have to follow all of them, so you can't pick. I do think this will get consolidated going forward. Certainly, I think when they started to become audited and the audit companies get involved, some of these will win and some of them not necessarily won't. From our point of view, we follow them all. We've got the accreditation. We've got the right numbers coming through in them.
Obviously, from our point of view, we'll continue to do that, and I hope continue to lead in that area. In summary, I suppose from today, you know, from our point of view, we've seen strong growth. We think the acquisition was really important. It's been a great acquisition, and as all we've had in, I mean, owning it for a period, is actually been more delighted with what we've bought and learning in that place. We think there's even more to come. As we said, in terms of from a Marley point of view, the revenue's been very strong. They are performing significantly ahead of where they were, which makes obviously whatever you buy it for as a lower multiple.
As we've said a few times today, there is weakening in some of the parts of the market, in domestic, home market. Improvement, particularly at that lower end, where I think people are worried obviously about discretionary spend and probably worried about what they see in the news. There is still strong demand at the higher end. As always in construction, you have some areas that are stronger and some areas that are weaker. That's the whole purpose for me of the strategy. If you take our civils and drainage, you take our bricks and masonry, they're at record levels and growing, and we're investing more into it. Certainly, from our point of view, Marley has helped us with that and given us more diversification. There are strong sectors in the market.
New build housing, I know the sector, people keep banging on about concerns. It is still a very, very strong marketplace today in which we're operating. Certainly, water management and infrastructure is carrying on. The ESG, as I've said, is embedded throughout obviously all of the business, and we see that as really positive with the science-based targets. Capital investment, you know, we've made acquisitions, but we'll still do record capital investment. The GBP 24 million plant is going to be a fantastic addition from our point of view. New product development is gonna be very much pitched at carbon. We want lower carbon products. As Justin mentioned, the balance sheet is still strong from our point of view. We're still conservative. We will pay that down with the strong cash that we generate as a business.
The interim dividend up 21%. This is the highest dividend the group has ever paid at that stage, and that's positive. We carry on doing that as profits obviously grow. As we've said today, the board is still expecting to deliver in line with market expectations. We've also announced we're doing a Capital Markets Day on the September 22nd, and that's in Marley's Burton facility, which obviously there'll be invites to analysts and shareholders alike. That's the end of the formal presentation. I'm happy to take any questions. Obviously, questions from the room, but also questions, I know there's quite a few people online with some challenges in terms of traveling today, as we all know. Aynsley. For the people offline, if you could say who you are when you're asking the question, that'd be great.
Sure. Great. Thanks. Aynsley Lammin from Investec. I think I've just got two, actually. First, I wondered if you could just give a bit of kind of your view on the current trends you're seeing in cost inflation, you know, the key components, the kind of transportation, energy, labor, cement, and how do you expect that to unfold kind of into next year? Then secondly, just coming back on the landscaping business, obviously, revenue was only down 1%, but profits fell 15%. It seems you kind of offset the cost inflation very well, and it's all volume. Are you able just to give us a bit of a feel for how much volumes were down? On the domestic side, you know, presumably lots of people did work during the pandemic.
You know, how much do volumes need to fall to get back to what you may consider to be a normalized 2019 level or pre-pandemic? Thanks.
Yeah, I mean, well, the first point, I suppose the inflationary part is for us, the biggest inflation things we've seen is cement, obviously energy and then labor, obviously paying our own people. Those are the increases. Going forward, I'd anticipate, obviously, there'll be a pay increase this year for our people and obviously the workforce exactly like everybody else is obviously struggling with the 10%. We're not anticipating it to be a low demand. On the other hand, you've got energy costs. While we've got obviously coverage going forward, that will unwind over time. Energy will definitely increase. I'm fairly sure that will have a consequence in things like cement going forward.
We anticipate more cost increases coming forward, probably less than they were, I'd say, in the last 15 months because we had some exceptional things like container prices out of the Far East doubled themselves. I think there'll be more inflation that will lead to obviously us having to manage the price, but I still remain confident we can do that. I think the second part, as you say, the landscaping in the domestic side particularly has had good price increase recovering cost. Therefore, as you say, the volume obviously is down. I think in that sense, in that area, it's probably a double-digit down, but it was, as you say, double-digit up probably the year before.
In terms of coming back to the base number, I mean, we've talked many times before, the peak of our domestic business was back in 2003, 2004. We are still 25% below that, in terms of where we are. Now, that was a different time when people were funding it differently, I think through mortgage equity withdrawal. Those are an awful lot of patios and driveways out there from some 20-odd years ago, which need replacing. I think fundamentally, there will always be a strong demand for the product. I think today our first challenge is the installer capacity.
I think secondly is that area of the market where the householder is feeling the pinch and is sitting there possibly deciding, "Well, I might wait and see what's coming." I think there's still a fundamental demand for the products in those categories, but I think we're in a period at the moment where people are sitting on their hands and they're worried, and you can understand why.
Just kind of volumes for this year, you expect what would they look like relative to 2019? Are they still down or?
I'd say if you take where we're heading at the moment, they'll probably be a little bit less, I would have said, in domestic than 19, but, and nowhere near the peak of last year. Any more questions in the room? Could we perhaps ask if online, if anybody wants to ask a question? I think if you can register that then it'd be easy enough to come through.
A reminder to ask a question over the phone, please signal by pressing star one. We have a question from Chris Millington from Numis. Please go ahead. Your line is open.
Thank you. Morning, and apologies I can't be there, courtesy of South Western Railway. A few if I can, please. I just wonder if you could first comment just on sustainable margins and returns in the various different divisions? Obviously, there's been quite big moving, you know, elements within it this year. I just wonder if you could just give us a feel kind of where you feel this should all be settling? That's number one. Second one, has there been any change in merchant stocking behavior more recently?
The third one I wanted to ask really is just whether or not you've seen any big change in product mix, probably more so in the domestic market, just in light of obviously the high inflation and the cost of living squeeze, and whether or not people are starting to trade down or, you know, back to your point before, because you're seeing stronger demand from a higher end market, is that leading to a shift the other way?
Yeah. I mean, if you take on margins, I think we would say the margins in our landscaping products are depressed because what we've had there is the reduction and therefore the consequent reduction in the manufacturing areas. Obviously that's something we have to address in terms of that cost base. That's suppressed those. I think if you take the building products, that's been on a growth trajectory really since we bought those businesses. As you know, they were lower margin than the business we had. From our point of view, I see that as a growth thing and it's got more to go. I think if you take from a Marley point of view, I mean, their margins are very strong. They're doing better than we originally had planned.
I think the only one I'd see change in the medium long term would be a recovery of the landscape one, when you readdress the cost base to effectively the demand. I think in that sense. I think your second question was on merchants. Obviously, if the marketplace softens, then you'd expect the builders merchants to destock. You always have a double whammy effectively when it's going down, as you have a double benefit when it's going up. In that sense, I'd imagine the merchants, or I know they will obviously be looking at readdressing their stock levels to a different volume. Yes, they would have been not just the market, but they would have been within our numbers also that sort of reduction. The third question was?
Face mix.
The mix of products, I think the one thing we've seen in domestic, Chris, is natural stone went up so high. I mean, if you take the marketplace, the way it used to be pitched was ceramic was the premium priced product, followed by stone, followed by effectively concrete. Almost overnight, stone has doubled in price because, instead of paying GBP 1,000, sorry, instead of paying $800 for a container, we're paying $10,000 for a container. So that has doubled the price of stone. What you found now is stone is priced higher than ceramic. So I'd say what you've seen is less stone and more ceramic, which from our point of view isn't brilliant because we have a bigger share of stone, 'cause obviously some of the ceramic players are there.
In the medium term and come back, I believe the winner out of all of this will be concrete. Because what ceramic is now gonna have is when the hedges change on the gas prices, they're gonna have significant cost increases coming through, which will probably take them back above stone. But what it's doing, even with cement increased costs, concrete is gonna be significantly lower as a solution than those two solutions. Short term, I'd say ceramic growth over stone.
That's very clear. Thank you for that.
Okay. I don't know if there's any more questions online.
Sam Cullen. Yes, we have Sam Cullen from Peel Hunt. Please go ahead.
Yeah. Morning, everyone. Also at home, courtesy of Southern in this case. I've got three also. An extension on that last question, really, on the gross margin or gross profit change you kind of called out in the landscaping business. Can you walk us through the differing kind of gross margin profiles of the major products you have in that business? I'm guessing, it's kind of partly related to what you just said around kind of the reduced level of stone coming through? Secondly, just on the capability to add further capacity in concrete bricks and the demand profile there, that'd be interesting hear. The last question really is on ESG and your points on the kind of cradle-to-grave versus cradle-to-gate debate.
Do you feel that you're winning the kind of cradle-to-grave debate and that will continue to move forward and put you in a better position? Thanks.
Yeah. Do you want to just answer the first one on the margins?
On the gross margins. Our highest gross margins are on the products that we manufacture, and low gross margins on those that we buy in. As we have a shift either towards or away from concrete, that will influence the overall profitability. The key driver of the reduction in profitability this year is really volume. It's not mix, particularly in the domestic business.
Yeah. I think your second question was on concrete bricks, Sam. I mean, one of the things we said when we bought the brick business, we obviously have a very low market share, that a block paving plant can make concrete bricks with very little investment, and it's literally a head change. We did that successfully this year. We were in Maltby, where we have now 100% making concrete bricks, which used to be a block paving line. We have ordered in tooling or molds, as we call them, which will come in in the fourth quarter for another two machines that we have. Yes, we can increase our concrete brick capacity in line with if there's a reduction in block paving. That flexibility, I think helps us enormously.
I think your last question was on cradle to grave. I mean, that argument for me will be, can only end one way, 'cause you can't just ignore the fact that what you're shipping. That's like saying we're only measuring like the carbon of the product when in China, when it's actually taken out of a quarry, and we're ignoring the carbon of shipping it all that distance, which is probably four times higher than taking it out. I think eventually logic will persist, and certainly if you talk to people like the Science Based Targets and you talk with the Carbon Trust, it is only cradle to grave. I think the argument will win out.
I do think it's coming that way and will continue to, 'cause logically it's the only answer.
It's certainly the direction of travel that we're seeing and pronouncements from the likes of the CMA around, I guess statements which could be perceived as being greenwashing. Certainly very much focused on cradle to grave rather than cradle to gate. I think we will win that argument. I think momentum is building.
Okay.
Thank you.
Are there any more questions online?
Yes, sir. We have a question from Ross Harvey from Davy. Please go ahead.
Hi. Morning, guys. Thanks for taking the questions from my side. I've got two. Firstly, can you give us a sense of the volume decline in landscape product itself, and maybe comment on the volume price dynamics in building products as well? And secondly, maybe one for Justin on the working capital outflow. Obviously, increased inventory was part of that. What does that look like for H2, and are you in a position where you're trying to reduce that inventory levels and, you know, perhaps manage it into the year end?
Shall I go first?
Yeah.
I mean, throughout the presentation, I touched on the working capital increase and focus there on inventory. There are a couple of other components to the working capital increase as well. One of which is that we've got more cash tied up in receivables. That just reflects the growth of the business. The aging profile of those receivables is in really good shape. The other aspect is that we have had a cash outflow from the settlement of a variety of creditors in the first half of the year.
There were a couple which equate to about GBP 6 million relating to the acquisitions that we did back in 2017 and 2018, and they're sort of final releases from escrows, et cetera. The other factor is that, at the half year, actually our trade creditor balances were just relatively low, and that just reflects some seasonality, which will reverse. In terms of the overall stock balances, stock is a little bit higher than we anticipated. We got a little bit more imported inventory in particular than we planned to have. We'd expect by the time we get to the end of the year that that will have reduced somewhat.
I don't see further increases in inventory in the second half of the year. Indeed, I'd expect to see some modest reductions in inventory levels.
Yeah. I think your first question was talking about volume and obviously pricing. As we've said, I mean if you take the pricing, we've sort of achieved over double digit. If the volume, you can almost work out effectively what that's at. It's. I'd say in domestic it is down, as I said, by double digit. Again, if you compare back, we were up 18% the previous year. That's why the difference is I think in Aynsley's question is the profit is much greater than the sales, because the sales is masking the volume side of it. Obviously that doesn't give you the same volume to manufacture and the like.
I think it's in that category, as I said, it's certainly double digits in both, up in price and down in volume, particularly in the domestic.
Yeah. Thanks very much, guys.
Okay. Are there any more questions online?
Very good. No further questions in the phone queue.
Okay. Well, I think it just suffice to say thank you very much for everybody. It's been a bit clunky today, probably down to the rail service, but we got there in the end anyway. Thanks so much for your time.
Thank you.