Good morning, and I was gonna say good morning, ladies and gentlemen, but I'm faced with a room of gentlemen, but there may be some ladies online. Welcome to Marshalls' 2022 results presentation. 2022 saw us make a transformational acquisition of the Marley Group. We've seen that group has come into Marshalls, and from our point of view, we're really pleased with what we've done, and we'll obviously talk about that in some detail in a second. Despite the difficult market, we believe we've performed well, we've come out with record numbers, and we certainly believe we're well-placed for when the market starts to recover, which we'll talk about too. The plan today is I'm gonna talk about the highlights obviously of the year, what's happened. Justin's gonna talk through the financial performance.
I'll then come back on to talk about the market, the outlook, what we're doing strategically. Obviously, give an update on ESG, which we still see as absolutely critical to the business. After the summary and outlook, there's an opportunity to take questions, and today we'll take questions both from within the room, but also for those people who are online. If we look at the numbers, first of all, what we can see is from the financial point of view, the revenues were up some 22%. Now, these numbers include 8 months trading of Marley, and obviously we're aware of that. Still with that going forward, we've had a 31% increase in operating profit, 23% increase in PBT.
As you can see, the EPS is up 7%, even with more shares which have been issued, and the full year dividend coming in at up, 9%. All of those numbers are records for the Marshalls Group. From our point of view, we see that performance is very positive. What you can also see is the net debt has come down to GBP 190 million. That is 1.3x EBITDA from a pre-IFRS 16 point of view. We see that as really positive, and what we believe we want to get to, and we'll talk about today, is how we think we can get that down relatively quickly, certainly by the end of next year, if not sooner, to below 1x, where the Group has always gone before.
If you look from a point of view of the highlights of 2022, the first point, as I said at the beginning, is the acquisition of Marley. Marley is the market leading, pitch roof manufacturer in the UK. From our point of view, obviously they've come on board, and that's looked really, really positive. We've also seen record performances. We bought two businesses prior to Marley. We bought CPM and we bought Edenhall, one in drainage and one in concrete bricks. In 2022, they had their best operating years ever in terms of sales and profit. We see that as a real positive. What that means is not only have you bought the business for them to add to you, but we're also adding to their performance.
The brick business in particular, which we bought, which is a slow market, a low market share in the UK of some 4% when we bought it, has grown to 6%. Last year, the facing bricks, which are the bricks which we're really trying to make the impact on, 10 of the top 12 house builders built houses using our facing bricks. If you go back to when we bought the business, that was only 1 or 2 of the top 12. There's big improvements being made and going through. In fact, the other 2, we believe, will be making houses this year with the 2. As I say, from our point of view, we've seen a record performance, obviously against a weak performance in the Marshalls Landscape Products, which I'll come on to.
What we have seen as well is a dual block plant being installed in our St. Ives factory in Cambridgeshire. I've got a short video today to show you about that. We think this is a really exciting development. It underpins our new product development going forward. From our point of view, we think that'll give us a big opportunity to grow our market share and bring products to the market hasn't seen before. Obviously, there were challenges in 2022, which we've had to overcome and operate within. The first one is inflation coming back double-digit in the UK, which has not been seen for a number of years. Energy prices have been feeding in.
Obviously, from an energy price point of view, what that means is that's fueled things like our cement manufacturers to have to increase prices. What you've seen is normally we'd have an increase in costs once a year. That would normally need an increase in prices once a year. What we saw last year was numerous increases, which put pressure on, obviously, in the marketplace of how that goes through. We've also seen labor shortages. For the first time that I can remember in my time in the company, in our factories and facilities, it was more difficult to recruit people than what we've seen before. That was obviously then has impacts in terms of installation and the rest. Interest rate rises, obviously when the government had the turmoil with the, with the budget, which there's another one today, which hopefully won't have the same effect.
Obviously we saw that have an effect on consumer confidence, that have an effect on interest rates. When that happens, people decide not to do anything if they don't have to. We saw that particularly from our point of view in the domestic landscaping business. We have to acknowledge, obviously, that's a discretionary spend. If people are concerned, if people are panicking, they stop spending the money, and we saw that. We saw the volumes come back by one-third. This is actually following a year of nearly 20% growth the previous year coming out of COVID. It was a big change. It wasn't necessarily seen, and that gave obviously issues in terms of managing from a capacity, from a cost point of view.
The big message from my point of view, I'm not saying exactly when, but that market will come back. I mean, that is a very unusual drop. The market performance will come. The top level of the market actually stayed up there. It was more the medium and the lower entry point where people obviously were seeing the cost increases, the energy increases, which had the biggest effect. I think from that point of view, that has a, you know, has a big impact, and we'll talk about it. If you talk from our, the business, I mean, the graphs and the idea of the pie chart is to show you that if you go back to Marshalls as it was pre our acquisition strategy and diversification, then that impact would have been much bigger. It used to represent 37% of our turnover.
It's down now to below 20% of our turnover. The impact wasn't as great as we've diversified into other areas, which is obviously important from our point of view. You know, input price inflation was recovered through price, so we didn't lose on the costing, but we have to acknowledge that it has an effect on demand. The ultimate from our point of view is stone. Stone which we import and sell in the market, which is about a third of our domestic supply, effectively went up 100% in price to the end consumer, and that was the shipping cost became more than the actual product cost. We passed that on. We had the 100%, but effectively we saw over 40% reduction in demand. You can't say that it doesn't affect demand. It obviously does.
The positive thing is where we are today is the stone prices are actually back to where they were. The container prices have come all the way back down and that will manage it. I do believe we'll see a rebound in some of those areas. Obviously the acquisition of Marley, I mean it's a transformational acquisition from our point of view, and we see that as absolutely really positive. Marley, what has that done to our mix of business? I mean, there'd be no change in our exposure in house building. Marley is about 40%, same as the Marshalls group. What it's done is a bigger exposure in the commercial sector, particularly because of the social housing work it does and less in the RMI.
It's also important to understand in the RMI where they're coming from their point of view is repair and maintenance. It's not the case obviously that, you know, if your roof is leaking, if your roof has failed, you can't ignore it. It's not a discretionary spend of, say, landscaping is. From that point of view, again, it's more resilient and that's obviously a big positive. The significant solar PV last year as we thought was coming, Part L legislation came through to put pressure and now new house builders from June, they've got 12 months effectively until this June. They've got to build houses with energy efficiency schemes in them. It's gonna be solar panels, or it's gonna be heat pumps. If you take Scotland, which is a number of years ahead of us, the result has been solar panels.
Nearly 85%, 90% of houses are now built with those. If you take in England and Wales, it's been historically 8% or 9%, so a significant increase is gonna come in that area. This business we will see significant growth in. Last year was about GBP 28 million. I see that it'll get up to GBP 100 million in a relatively quite short period. The integration tracking is in line. As we said at the time when we bought the business, we thought there were opportunities within operations. Simon Bourne, who's here today as our COO, has taken responsibility for all their facilities. What we're seeing there is an opportunity focusing on the people, plant and the process, exactly what we've done before in Marshalls. We've seen early results which are positive. The efficiencies are going up.
We believe we can get efficiency improvements, which is cost savings, and we can release potential extra capacity if it's needed for the products there. We're now working on logistics and purchasing in those areas. Certainly from our point of view, we see opportunities. The other way around as well, we're trying to use Marshalls lead in ESG credentials in these areas. We're trying to make sure we got the products from Marley, understanding what we can do, how we reduce the carbon, and how we've rolled that across from their point of view. The big issue from my point of view and the big emphasis I guess in our presentations, is we believe the group is definitely more resilient and a better group with the acquisition of Marley. Marley's joined Marshalls on a permanent basis.
It's not a case of buying it to look as an opportunity and we think that's added there. From our point of view, we're very happy with the way it's been trading and the way it is currently trading. I'll just hand over to Justin Lockwood to talk about the financial numbers.
Thank you, Martyn Coffey. Good morning, everybody. I'm going to talk through our financial performance for 2022. I'll give you an update on our funding and liquidity position, some comments on the balance sheet, I'll explain some modest changes that we've made to our capital allocation policy before closing on our final dividend proposal. Turning to revenues, this chart sets out a revenue bridge between 2021 and 2022. It's split between our reporting segments. Overall, as Martyn touched on earlier, revenue growth was 22% for the year, that includes the benefit of Marley. On a like-for-like basis though, revenue growth was much more modest at 1%.
Within that we saw strong growth within the Building Products division of 17% and a GBP 132 million contribution from Marley. Within the Landscape Products business, we saw a 7% contraction in revenues. Turning now to operating profit. The chart on this slide sets out the component parts of the 31% increase in operating profit, and we closed the year at GBP 101.1 million. Within that, again, Marshalls Building Products delivered a very strong improvment in its profitability of GBP 7.2 million. We had a GBP 34.4 million contribution from Marley in the post-acquisition period. That was partially offset by Marshalls Landscape Products, where we saw operating profit reduced by GBP 17.1 million, so weaker performance there.
If we look at the margin performance, margins overall for the group increased by 1 percentage point to 14.1%. That reflects some margin improvement in Building Products. The benefit of Marley's structurally higher margins and that was partially offset by a weaker margin performance in Marshalls Landscape Products. Now I think it's worth drawing out here that these results are stated after a number of adjusting items. It's done that way in order to show the underlying performance of the group. The board uses underlying numbers in order to assess the performance of the business and when it comes to making dividend payments. The total adjusting items during the year were GBP 52.3 million. They come into 3 buckets.
A series of charges related to the acquisition of Marley, the amortization of intangible assets, that appeared on acquisition, so things like customer lists and brands. Then finally, some restructuring and impairment charges. Now the important thing here is that when we look at this from a cash perspective. Those adjusting items are £17.4 million. There's a lot of accounting charges in there. The cash element, GBP 17.4 million. That principally relates to charges associated with the Marley acquisition. Advisor fees of about GBP 15 million, and then there's about two and a half million GBP worth of redundancy costs from an exercise that we did in the second half of the year. There's more details on those items on page 42 of the year, of the deck, if you're interested in understanding what they are.
I'll now move on to more information on each of the operating segments. This slide sets out revenue, operating profit, and operating margin for Marshalls Landscape Products. As a reminder, that comprises our commercial and domestic landscaping businesses, landscape protection, and our international businesses. This segment encounters some pretty tough trading conditions during the year, with weak private housing RMI activity and product price inflation that's impacted customer demand for our products across all end markets. Against this backdrop, revenue is contracted by 7%. That was principally driven by a reduction in domestic volumes of around about a third. That reflects reductions in real incomes and depressed consumer confidence and a reprioritization of household expenditure.
That reduction in volume was partially offset though by the price increases that were put in place in order to recover input cost inflation. Looking at the operating profit, as mentioned earlier, that reduced by GBP 17.1 million to GBP 45.3 million. That reflects the lower volumes and the impact they had both on gross profits and on the manufacturing efficiency of our factories. That impact was more pronounced in the second half of the year as we saw a more significant reduction in volumes, and we took actions in order to reduce production in order to manage inventory levels. We also took decisive action to ensure that we had a balance between our manufacturing capacity and cost base and the reduced levels of market demand.
That resulted in a restructuring exercise that took GBP 10 million of costs out of the business from the start of 2023. Overall, these factors resulted in some compression in operating margins of 3.2 percentage points to 11.5%. Looking into the medium term, we expect to see margins in this segment increase to at least 15%. That's on the basis of volumes recovering and the very significant operational leverage impact that will have on this division. Moving on now to Marshalls Building Products, which comprises our civils & drainage, bricks and masonry, mortars, sands and aggregates businesses. The market backdrop for this segment was actually very positive during the year, with good growth in new build housing and in commercial infrastructure.
It doesn't really have a great deal of exposure to private housing RMI. We saw particularly good demand for our concrete bricks and our mortars. Although we did see some slowing of activity and demand in our drainage business in the fourth quarter of last year, and that's because of the very strong correlation it has to new housing starts. Overall, this results in revenue growth of 17% for the year. Operating profit increased by GBP 7.2 million to GBP 26.8 million in the year, and that reflects some very good management of inflationary pressures, but also good control of the overhead base, which increased at a much slower rate than the revenue growth. Overall operating margins improved by 2 percentage points to 13.9%.
Moving on to Marley, which traded very well in the post-acquisition period and contributed GBP 132 million of revenues, which represents 6% growth on a comparative basis. That was driven by a particularly strong performance by the integrated solar business. That's reflective of the good market backdrop that we saw in both new build housing and commercial infrastructure. The fact, as Martyn touched on earlier, that the private housing RMI business of this segment is actually much less discretionary than, say, landscape products. Segment operating profit for the year was GBP 34.4 million, that's a 1% increase year-on-year. There's a slight compression of margins that we've seen year-on-year, that reflects a higher proportion of a slightly lower margin solar products in the sales mix.
Overall, segment operating margin was 26%. In the medium term, we expect that to trade in the range of 20%-25% as we see a greater mix of integrated solar in the overall revenue pool. This slide now sets out the profit and loss account from operating profit through to earnings. At the first point to draw on here is the profit before tax increased by 23%, and that's slightly lower than the rate of operating profit growth of 31%. That reflects the incremental finance costs associated with the debt that we took on to partially fund the Marley acquisition.
It's worth just pointing out at this stage that around 70% of the term loan was hedged through a series of instruments that we put in place in June of last year at a SONIA rate of about 3%. That's starting to give us some protection against the increase in base rates that we've already seen and will continue to do so going forward. The effective tax rate for the period was 18.9%. That's pretty much in line with the U.K. headline rate of 19%. It's a little bit lower than the effective tax rate last year.
As a consequence, profit after tax increased by 26% compared to the 23% increase in PBT. When we get down to EPS, we saw an increase of 7%, and that reflects the higher profit after tax, but obviously the increase in number of shares that we now have following the Marley acquisition. Turning now to cash flow. We delivered a good cash conversion performance during the year, with 91% of EBITDA being converted into operating cash flow. What that represents is a very strong performance in the second half of the year, which is being driven by two factors. Firstly, an increased focus on inventories, and secondly, the benefits of our usual working capital cycle that moves on a seasonal basis.
Capital expenditure, that was GBP 28.7 million, that was in line with the guidance that we gave at the half year. The principal area of expenditure was the dual block plants, as Martyn mentioned, we'll show you a video of that in operation shortly. We got very significant acquisition-related cash flows, GBP 196 million, that represents the cash paid for the business, less the equity raised during the year. Dividends increased by GBP 21 million, that reflects higher dividends per share and the increase in number of shares in issue. Together with the fact that the final dividend from 2020, which was paid in 2021, was actually relatively modest.
Overall, net debt increased by GBP 196 million, which is effectively the debt that was taken on in order to fund the acquisition. Now moving to funding and liquidity. When we put the capital structure in place for the acquisition of Marley, we did that on a conservative basis, and we funded over 60% of the consideration through the issuance of equity. We also drew down on a GBP 210 million term loan, and took the opportunity to replace some existing bilateral revolving credit facilities with a syndicated revolving credit facility of GBP 160 million. The total debt facilities are GBP 370 million, and they have a 4-year term.
Net debt at the end of the year was GBP 236.6 million, but on an pre-IFRS 16 basis was GBP 191 million. We've got very significant headroom against our covenants with interest cover of 16 times against a covenant minimum of 3 times, and net debt to EBITDA of 1.35 times against a covenant maximum of 3 times. Gearing was relatively modest at 35.8%, and we've got very significant headroom of GBP 120 million against our bank facilities. This slide, it sets out a variety of measures which are focused on a combination of working capital, management, returns, and balance sheet strength.
You can see by looking at the debt to days, credit to days, and inventory return, they're all in good shape in a historical context. Return on capital employed was 13.3%, that's lower than the performance for last year, which was reflective of the weakness in Marshalls Landscape Products, but also the impact of the Marley deal on that particular metric. You can see that overall net assets increased to GBP 661 million, largely as a result of the equity issuance. Now, you should remember the Marshalls businesses, including Marley, are all cash generative, as I touched on earlier. We expect that organic cash generation to be used to drive rapid deleveraging of the balance sheet.
Indeed, we're targeting the pre IFRS 16 net leverage will reduce to around about 1 times by December 2024. That's from organic cash flow. There may also be opportunities to release capital from sites that we're no longer using, and we've got an active program of evaluating that at the moment. Now moving on to capital allocation. We've made a modest change to our capital allocation policy during the year. Whilst the board continues to be comfortable with the post-transaction leverage, in the context of the challenging macro environment, we've chosen to prioritize deleveraging over any significant M&A activity until net debt to EBITDA has been reduced to around about 1 times.
Within the policy, our first priority continues to be to invest in organic growth opportunities, and we expect capital investment this year to be around about 25 million, but that to reduce to around about 20 million next year. That's because we'll complete the spend on the dual block plant, which is GBP 4 million-5 million in the current year. We'll continue to invest in R&D and a new product development. The real focus there will be on low carbon products. Martyn will touch on some of that in detail a little later. There's no change to our dividend policy, which is to maintain cover of 2 times adjusted earnings.
Indeed, our final, dividend proposal for the year of GBP 9.9 pence, which will result in a full year dividend of GBP 15.6 pence, is in line with that policy. I touched on earlier that, we'll look to prioritize deleveraging, but we will continue to look at bolt-on acquisition opportunities where we see good businesses in markets that will provide additional products to our product range, and will deliver good returns for our shareholders. There'll be no significant M&A until that leverage is down at 1 times EBITDA. With that, I'll hand back to Martyn.
Thanks, thanks, Justin. What I'd like to do now is talk about obviously the market, the market that we're obviously operating in. We use the CPA, and the CPA have come out with their obviously winter forecast. What it's showing is a 4.7% reduction in construction for 2023, before a small recovery in 2024. Within the numbers, what it's showing is that first half will be harder, and the second half will start to show some recovery. What we're seeing and what we understand, we believe it is in the right ballpark. If you look within that, obviously the big debate and discussion is about new house building. The forecast at the moment is an 11% reduction in new houses being built in 2023.
Obviously from our point of view, we've had to use some number, and that's the number we've been using in terms of going forward. The big thing here with house building is, to me, there's a short-term issue which has come about effectively by interest rates rises, by obviously inflation, both of which are forecast to come down this year. It's anticipated they'll come down fairly quickly. If you look at obviously the chart on the right-hand side, you can see house building, every single target ever been set in the UK, we've missed by some distance. There's still a chronic under supply of house building. I believe that once the market corrects itself, which it'll be on its way to doing this year, then we will see a recovery in this area quite rapidly.
Obviously, from a commercial and infrastructure point of view, the CPAs say in this year slight decline. As you know, in previous years, we tend to use this ABI Contract Value Awards. These are contracts already awarded. We tend to look 12 months ahead as to what that is, and we see about 3% positive in this area. I think in this factors, you know, we're seeing today, if you take in London, you got Battersea, you got Nine Elms, you got Sloane Square, you got the redevelopment of Birmingham and the back of HS2. You've got from our point of view with Marley, the social housing contracts that are coming forward. Commercial is today still a very robust area and has signs of positive growth.
We all know that the U.K.'s infrastructure plans could be many, many decades before we correct all of those. Obviously, private housing RMI, from that point of view, is further decline is forecast of about 9% by the CPA. I think in some of this, we saw this last year. I mean, the landscaping, because it's discretionary, would be at the first forefront. People when they start panicking and the first decision is not to spend money. We use the Marshalls Register. Obviously, if the Marshalls Register is at the top end of our, what I call high end in terms of installation. These are professional installers whose, yes, it's come down slightly, but it's still above where the historical numbers have been pre-COVID. Again, this is still a heavy demand.
People who want to spend the money and want to go ahead. If anything, it's been labor holding that back, and that still remains positive. The graph on the right-hand side is talking about the age profile of the UK housing stock. 65% of the houses are from 1974 or before. If you take from a Marley point of view, concrete roofs are due to last about 50 years. We believe there's a massive pent-up demand that's gonna come through in the next few years of work in these areas. Again, we think, you know, as the housing stock is aging, the demand is only gonna go one way.
If you look from strategy and what is it we're obviously focusing on, first of all, at the group level, obviously, we've got two market leading brands now, Marshalls and Marley, so we continue to invest in those. Those are the main brands that people in the specification world understand. The focus from both businesses, and this was one of the attractions in the acquisition, is they both focus on specification selling. What is that? That means getting on any job before it comes out for tender, before it comes out for contract, working with specifiers, developers, giving them solutions, which obviously carry our brand, which is very, very important to us. Be easy to deal with and enhance customer service. One lesson that Marshalls are learning from Marley is they've got a much more simplified offer to the marketplace. What does a simplified offer mean?
Simpler for the customer, yes, there's a lot less people doing customer order entry. There's a lot less people doing accounts receivable because the business is a lot simpler. We try to take those lessons and apply them back into Marshalls and doing that. Obviously, from an ESG point of view, ESG is growing. ESG, I would say for many years we've been doing, and there hasn't been the direct commercial benefits, but that is coming. The demand is definitely there. House builders have been focused on energy. That's why solar panel, heat pumps have been the focus of Part L. The next one is going to be the embedded carbon in the house, and that's going to change the discussion completely. We believe we'll be at the forefront of that. Also maintaining operational flexibility and right sizing.
I mean, last year we saw a drop that people hadn't forecast. We had to take action in a very short period. We mothballed one of our facilities in Sandy. That was a GBP 10 million cost saving, we've got to get faster at doing that. Every business, I think, has to respond to the marketplaces. I'm not sure how many years you stand here talking about unusual circumstances. It's been Brexit, it's been COVID, it's been recession. I think it's becoming the norm. Obviously, as we said, for the group, deleveraging the balance sheet is absolutely critical and important, but it's not phasing us. From our point of view, it'll happen in a very natural way, and that was the attraction from our point of view in doing the acquisition in the first place.
If you look within the groups, obviously the Marshalls Landscape Products is still a critical part of this business. As Justin said, getting it back to 15% operating margin remains a real goal for us and very, very achievable in my view. The full commissioning of the dual block plant is absolutely critical for us in the new products we'd be able to offer. The new products the market can't buy today, the market wants these products, and we can produce them in a very cost-efficient way, which I'm gonna show you a video of in a minute. The improving customer service, as we said, not only is it a case of simplifying, but also automated. In this industry, you'd be genuinely surprised at how many times we're entering orders physically, not entering them for, obviously, electronically from the customer.
We're trying to change that and change that dramatically. The digital strategy I talked about in the past in landscaping of Dropship is now in with the major merchants, both national and independents, we're looking at it. What this is in simple case is if you go online to looking for a product for Marshalls today, before this, you'd effectively have been looking at the stock in that yard of the branch that you were nearest to when you went online, not even looking across the network. What this allows you to do is to see the whole range of Marshalls, whether it's in stock or not in stock. If it's not in stock, we will deliver it anywhere in the country. From that point of view, it's a different experience for the person buying digitally.
I think once they've had that experience, they won't go back to the other way. This is a big breakthrough. Remembering we are unique in this. Other people can't do this 'cause they haven't got the distribution spots that we've got. We can get anywhere in the U.K. within 2 hours from our facilities in the way we've set it up. Other people would have to ship many, many miles and hours. Obviously, from our point of view, the flexibility, the cost base, as we've said, we have to match capacity, and Simon did that very efficiently at the end of last year, and we have to be flexible. We've taken the cost base down, but we haven't actually taken the capacity completely out. The plant is mothballed.
There are 4 block plants sitting there that could be fired back up to make concrete, to make bricks, and that is really important. Obviously, the delivering the cost benefit from a new mix design. We've now got 2 factories. We will have 5 factories soon, which we've invested in, which can manufacture products effectively with less cement in it, so less carbon in it, to our own unique designs. It's a fantastic investment. It pays back in less than 2 years, and we will roll that out to all of our facilities. What I'd like to do now is just to show you a video, a short video of the facility that we've just brought online in St. Ives. Marshalls St.
Ives dual block plant is the first of its kind in the U.K., providing nearly double the output of a single plant, controlled by 1 operator with enhanced safety systems, resulting in minimal intervention and handling. A solar array system will generate over 690,000 kWh of energy every year, meaning 17% of the energy used at St. Ives comes from a renewable source, supporting our sustainability strategy. Batching. At the start of the production process, the bespoke batching system is capable of mass production and smaller batch runs of high-value products. The combination of several cement silos and 24 aggregate bins provides a breadth of aesthetics, including low carbon alternatives, whilst offering bulk storage to overcome the current supply challenges. Mixing and molding. Operational flexibility enables each machine to simultaneously produce products of different color, shape, size, and family.
The innovative color blending technologies will provide extensive color combinations. The first system produces a multitude of random or repeating blends, while the second disperses different colors in a sequence to create a granite aesthetic. Both deliver vast product choices with shorter lead times and lower carbon footprints than imported natural products. Curing. The KRAFT QuadriX curing system consistently cures products 30% faster than traditional methods, as combined heating and auto-fog systems accurately control temperature and humidity, providing long-lasting product quality. Finishing. This is the final stage before packaging, where secondary processing equipment is used to alter the aesthetic and function of the paving. The in-line, all-in-one bespoke secondary processing machine provides several traditional and unique finishes, enhancing the product to offer even more customer choice efficiently.
Overall, the dual block machine provides Marshalls with additional capacity for new value-add products that are more sustainable and meet our strategic goals and objectives. The dual block plant is now operational, and we certainly planning to doing customers and potentially investors to have a look at this, and I think it's a real game changer for us in the business. The building products, obviously, we talk about low carbon, and one of the biggest benefits that we've got as a product is our concrete facing bricks. The concrete facing brick has 50% of the carbon, effectively of a clay brick, as it's analyzed from cradle to grave. If you look at that so far, our growth of bricks has really been a case of being competitive and being pricing. The carbon game has not really been played, but it will be.
When that comes, there's a massive benefit to the house builder that's gonna come from this. We're also looking at carbon sequestration. This is how you inject or introduce carbon dioxide into the process effectively to remove carbon. What you're doing is you're speeding up the curing. You effectively getting to the point where you can take out the negativity of carbon that comes from cement. From our point of view, we've put it into our one factory at the moment, Grove in South Wales. That's operational, and we'll be looking at in 2023, and that's to further reduce the carbon content. Again, customer service, it applies to this business the same as it did to the other one. Certainly here, in terms of the operational demand, it's different idea to what we're doing, obviously, in landscaping.
Here, the issue is, as we grow our brick business, and we're very confident we'll keep growing it, then we can convert assets we've got today to make bricks. As I said before, we've got 4 block plants available, all of which could be converted to make bricks if we want to, which would be more equivalent of actually manufacturing more bricks than we currently make. From that point of view, there's no big capital-intensive investment that's needed to do this. I think going forward, we have the demand profile ready to go. Also in our water management offer. In our water management, we're looking there where we can enhance the product offering that we've got. We're offering, obviously, from a drainage point of view, but there are some key products that we think we could manufacture that today we're not supplying.
The NPD is quite critical for that business too. If you look from the roofing products point of view, the key here, and this became apparent when we were looking at buying this business, is Marley do not just make roof tiles, they sell roofs. Effectively, they're unique in this position. They're the only ones who have the battens, they're only ones who have the solar panels, and the only ones who can offer the fully integrated solution. They can offer that with 15-year warranties. From a social housing point of view, an RMI point of view, or even a house builder's point of view, that's a big selling point. As they've done that, they've seen a profitable growth because obviously that gives confidence to the consumer.
They've been doing that, obviously, the next new panel, next building block to that is solar panels. With Part L legislation, as I said earlier, the potential year is very, very big. The key from our point of view is it's not just coming in new build. Social housing, and now looking at this, social housing would have sort of projects where you've renewal of roofs so many years, 50 years. That's being shortened because they know by doing this, they can give energy efficiency to the tenants. The demand here is gonna be very, very big. We're at a great place in this. We're developing and training at the moment, roofers to do this instead of just electricians. We think this is gonna be a real significant growth area, as I said, for the business going forward.
Obviously, doing the production facilities, there's opportunities. As we identified, we believe we can identify those and free them up. That gives us two benefits. In the short term, a cost benefit. In the medium term, a capacity benefit from existing sites. We think that's a real big opportunity. From an ESG point of view, there's risks and opportunities we use in Marshalls' experience in this area on both sourcing and obviously from production. We think that can give big benefits in this too. ESG is, as we've said before, ESG is not new, and it's not new to Marshalls. We've been doing this for 22, 23 years. We started with sourcing. We're looking at carbon. We moved on from our point of view in terms of tax and what we've done in fair pay.
We're the first to do science-based targets. We're now the first in terms of, from our point of view, doing the TCFD reporting. We've been leading in this way for many years. It's not a new thing for us. If you take in now, what does that mean? We've committed obviously to carbon reduction. We've looked from a point of view, we're working with the UN, right from the beginning, really in understanding what we're doing, but we try to explain it internally as is to do the right thing. Why would you not do it? What we've seen in that key is leadership. What I believe we're gonna see more of is commercial benefits that's gonna come through from that point of view. What does that mean? We're still gonna go for net zero.
From Marshalls' point of view, we committed to do that by 2030. Obviously, that's gotta be revisited with Marley, which is further behind, but the same commitment is there. The Marshalls journey, we achieved the carbon reduction this year. We see health and safety as absolutely critical for obviously for our people. The is obviously growing and is important, human rights. From our point of view, it's about science-based targets driving carbon reduction. My view is this is coming, and it's only gonna grow in importance, and it's gonna have a big significant effect in our industry. The one area is gonna come quicker than others in manufacturing is now when you produce a product, you're meant to produce an EPD, an environmental product declaration that says how much carbon is in it. You can't just make this up.
It's gotta be third-party accredited. These are given to all contractors, manufacturers, installers, architects when they're doing designs, so they understand what they're doing. When we've done these measurements, we can look against competitors. The product here is a landscaping product. We're 40% lower than the competition. That's a mixture of getting a lower design because we use less cement in our designs. Also we have a big advantage geographically by being closer to the customers, because obviously you're putting carbon in when you're shipping. Concrete is a heavy product. Also from our point of view, in things like bricks. This will grow. I think you'll hear a lot more about EPDs as obviously we go forward in the construction industry.
In terms of summary and outlook, if you look at it, you know, sort of starting, I guess, from the bottom up, we believe this group is very well-positioned. Obviously for the markets, at the moment in a difficulty, I think those markets difficulty has been a sort of short-term creation, which will recover. If you take from our point of view following the acquisition, we think we're in a very strong position. It's certainly more resilient. We've exposed ourselves to different areas. Marley is not only performing very well, but it's probably more resilient than all of the businesses we have because you have to do something, obviously, about the roofs.
If you take from our numbers in terms of what we're reporting, they're at record levels, as we said at the beginning, and it's taken the group, in my view, to a higher level completely. The business is very cash generative. You know, 90% of EBITDA is not unusual. If we carry on with those performances, we deleverage anyway, which is exactly what happened with previous acquisitions, where we deleverage back to zero. We certainly believe we can get to below 1 times by the end of next year. The current market conditions are challenging in obviously the first few months, we believe of this year, and we see that. We do see there's gonna be improvements. That doesn't stop us making strategic developments, doing self-help. We've taken GBP 10 million out of our cost base to address a number of those issues.
The ESG, I believe, will give commercial benefits. You will get to a point where there'll be a price for a low carbon product. There'll be a lower price effectively for one that has more carbon in it. That benefit will come through. I think the big issue and the big debate, obviously in our area, we're in the construction sector and we're exposed to three areas. The reality today is there's a structural deficit in new housing, and that's gonna have to be addressed and will have to be addressed ongoing once obviously interest rates settle down. The housing stock in the UK is very old. As we said, 65% is over 50 years old. That's not gonna change, particularly if you're not building as well at the, at the right numbers. That's gonna be with us for a long time.
Obviously, the U.K. infrastructure is definitely in need of investment and repair, and that is actually going ahead, and we're seeing the benefits of that. I still believe medium term, long term, the construction sector has not gone into a recession like the 2008. It's gone into a blip, which has been affected by short-term economics and will recover, in my view, relatively quickly. That's the end of the formal presentation. If I can ask Justin to come onto the stage, I'm more than happy to answer any questions. If we start in the room, because obviously we recording this, if you could say who you are and what area there is a microphone so that the people off can catch it as well.
Hi, Robert Chantry from Berenberg. Thanks for the presentation. Just 3 questions from me. Firstly, on new build, clearly a few headwinds there. Could you just talk through some of the factors to mitigate the slowdown in terms of your ability to kind of take share of wallet and kind of manage through this period? Secondly, in landscape products, clearly again, a tough year in the second half of last year. Could you just help us understand the margin dynamics for 2023 and 2024 in terms of drop-through mix, cost savings, how they play out in terms of that margin in that division? Thirdly, just on market structure, clearly you've got a high share in both the kind of Marshalls and Marley.
Um-
Assets, you're seeing weak demand. Can you just give us an update on what the competitive environment is doing? Any exits or any PE firms being opportunistic trying to buy those assets up? Are there any big changes in the competitive environment you face in those areas? Thanks.
I'll go first and third, and you can do the second one, if that makes sense. If I remember them. Yeah, I think if you take the market dynamics, I mean, in house building, I mean, what you're seeing is obviously you've got the national house builders who are talking about the volumes from their point of view. I mean, we shouldn't forget that there's also mid-size house builders who, from our, from what we can see, are carrying on in the volumes. I mean, the national house builders obviously will affect the volumes they make. We saw a slowdown in January of new starts. I do think there are two factors to be taken into account. One, the weather, which has always impacted. When it's cold and when it's freezing, then effectively you can't hit the ground.
Secondly, because of this Part L legislation, there's been a lot of new builds started, which again, they want to get started by June of this year to avoid having to do the more expensive build, which they're gonna have to do to conform to Part L. I think there's some dynamics at play. I mean, we're obviously watching and seeing what the volumes are. At the moment, what we see is the volumes coming through are okay. but we're not being, you know, laid back about this. We've built a case on 11% reduction this year, which is significant. If it's greater than that, obviously it'll have an impact. I think the house building is still to be seen.
The critical period, I guess, for house building is coming up in the March-April period when, you know, what is gonna be the real demand? If people, I think, get stability and get more confidence that they know what interest rates are, then people can make a decision. I mean, the thing to remember is still buying a house is cheaper than renting. The issue is putting the deposit down and getting a mortgage. I think the underlying demand is there. I think in your third point, yes, we've obviously Marshalls and Marley are the market leaders. There's been no private equity entrance into building materials. The private equity entrance has been all into merchants, and there's been quite a bit of that with, I think, Justin being the most recent.
Yes, there's a lot of activity there, and we obviously have to see how that plays out. In the building materials section, there hasn't been. The competitors, I don't think from our point of view, both in the roofing and in the landscaping, are doing what we're doing. They're not investing in the ESG. They're certainly not building dual block plants. Again, what we focus on is trying to make ourselves as difficult as possible to compete with, and the key for that is, I believe, specification. If you get the specifications, that's all the competition have to compete with after that is price, and that becomes difficult. In that sense, I think, you know, we keep doing that. We're not seeing anything dramatic in that.
In terms of landscape product margins, in the short term, I'd expect them to remain under pressure. What we have here, I mean, the site that you saw the video of there is pretty typical of our landscape product site, so they're very well invested. What that means is that you have a pretty significant drop through when revenues drop away because you've got a relatively high fixed cost base. Not too many people wandering around those factories working there. What we really need to see is a recovery of the demand profile. When we see that recovery, we'll see a very rapid improvement in margins.
In the short term, I'd expect them to remain under pressure until we see that recovery in volumes.
Okay. Thank you.
Thanks. Aynsley Lammin from Investec. I think I've got three as well, actually. Firstly on the pricing cost inflation, just wondered how you're thinking about this year. Obviously last year you said came up, you know, a bit of an issue for demand. Are you aiming to pass on all the cost inflation? How much of that has to be passed on? Secondly on the 10% like for like for in January, February, wonder if you could just talk between, is that fairly evenly spread, kind of between Building Products, Marley and Landscaping? Any different trends within those? On cost savings, if new housing is down, say 25%-30%, not the kind of 11%, have you got still opportunity to take out costs like you did the GBP 10 million last year within the, you know, the overall group? Thanks.
Yeah. I think, if you take your first question was about price and inflation. I think we're still seeing costs going up from a point of view of cement through energy. Effectively, we're seeing obviously, costs going up from labor point of view. I don't think that's gonna change. I think it has without doubt slowed down compared to where it was last year. I'm not anticipating every 3 months having changes in that, we've had a cost increase from January. We've had a price increase from January, which has gone into the market, most of which is held. We're also very conscious of obviously if volumes aren't great, then it's harder to hold and keep price. From that point of view, we're also looking at initiatives how do we reduce cost.
I think the market has changed in the sense of I don't see 22 being repeated of continual price chasing and volumes, material shortages and all the like. I think that's calmed down, but I think inflation on building materials is there. There has been talk that people think it'll come back and become negative. In our sector, I just don't see that. The cement manufacturer's investment strategy today is to remove carbon from cement. The only way to remove carbon from cement is carbon capture. Carbon capture is very, very expensive, and I'm sure they're not gonna do it for charity. From their point of view, if they make this investment, there will be cost increases. Obviously, there's a benefit in the carbon side. I think in that sense, I don't think it'll go away.
If you take... Sorry, I think it was maybe your third question. I'll come back. The issue in terms of from a house building point of view, obviously, if the number is bigger, then there's a drop off in demand, then yes, we have plans in terms of we could do. We still have long-term views of what we've talked about in the past, of investments like the dual block plant. One of the benefits that gives you is bigger sites that can make more. You can keep your geographical footprint, and you don't necessarily need as many sites, and that's still there. We would not take decisions that weren't long-term the right decisions, but we could accelerate some of those to do that, would be the response. Sorry, Alan, is it the second one?
January. Yeah. The across the divisions, the weakest performance in Landscape Products, and I guess what you need to remember there is that if we go back 12 months, what we're actually seeing in that part of the business was the strongest part of trading that we had. On the back of shortages in 2021, what we saw in the early part of 2022 was lots of demand from merchants who were stocking up ahead of what they thought was going to be a normal season. The revenue performance in that business was pretty strong in the first quarter. It got weaker in the second quarter, and then deteriorated quite dramatically in the third quarter as merchants started to de-stock.
Those comparatives get easier as we pass through the years. In terms of the Building Products business, that was marginally down year-on-year, but not significantly. Roofing was broadly in line year-on-year.
I think this year, just on top of that, what we'll see is a different half one, half two split to normal because last year, the half two basically was running even below the market demand to compensate for the overbuying in the first half. It's gonna be an unusual measurement against the year, I think.
Thank you, Clyde Lewis at Peel Hunt. I think I've got three here for me. Martyn, I think you mentioned GBP 28 million in solar sales. Was that for the 12 months or for the 8 months that you own Marley?
That was the 12.
That's for the 12 months.
Yeah.
Okay, perfect. Thank you. You also flagged up the sort of the simplification process that you can see in Marley and you're trying to get it across to Marshalls. Can you help us a little bit in terms of the potential benefits that you can sort of potentially achieve? Clearly, it's not gonna be a 6 or 12-month. It'll probably last a little bit longer. I mean, is it sort of 3, 5, 10 million GBP sort of impact that you think you can see from that?
If you look at it today, I mean, what we've got is, I mean, a simple comparison, I suppose the headline numbers from our point of view is we've looked at, say, customer service entry, we've looked at accounts receivable and obviously prorated it to turnover. There's about probably a 3 to 4 times of factor there. That's, you know, a number of heads which are employed either that you don't need to do that or you can deploy to do other things. The potential for me is very, very big. You're talking in the low GBP millions in that sense. It's not just the benefit directly to that cost. It's also the ease of dealing with.
For many years, I was always told that we were very complicated in Marshalls and that gave us our enhanced price. Buying Marley, that's proved that's not true. From that point of view, we have to simplify the, the way of doing business with us. There's a big benefit.
A similar sort of question around Dropship. I mean, we come back 12 months' time, what would be a success from your point of view in terms of sort of Dropship? you know, in terms of sort of trying to get the merchants adopting it and presumably you'd expect to see not just sales growth, but obviously, hopefully a better mix coming through, which is clearly would be helpful in terms of margins as well.
The unknown at the moment, Clyde, is in the building material sector. you know, with respect to the whole market, it's still very transactional, walk into the store, you know, get place your order in the morning, do a lot of manual stuff. The key is when that changes, how much will people take that up? All those same people, I'm sure are all on Amazon and doing all of these things anyway, so it's not like it's new. Today, there's just not the opportunity to do that. it's difficult to say how big is it gonna be. In my personal view, I think it'll grow exponentially once it kicks off.
Once you get used to the fact, technically you can go on your phone and you can order what you want, and you know when you get a date of when it's all gonna be delivered, that's gonna simplify the whole process and it should grow and grow and grow quite quickly. We're in with the national merchants, we're in with some of the independents. What's success, I guess, in the short term, coming from the where we are, probably a few % of turnover. What do I think is achievable? Probably 30%, 40% in the future, in my view. I think it will change the way people do business. Now some of that's also gonna be dependent, which is out of our control on other materials.
If obviously you can only order certain materials in this way and you can't order the other materials you need for the same job, then the benefit is gonna be slower before it comes in. If you've still gotta go in and physically order the other things then, I think it will stimulate that change. The industry has to change.
If I can sneak in a fourth as well. The installer weeks obviously sort of come back in a bit. Over the last couple of years, you've talked about sort of installers either struggling or not wanting to bring on extra gangs to give them more capacity. What's the feedback from them so far this year on that sort of front?
Labor has eased. It is not as difficult as it was, certainly from their point of view. For them, I mean, if we're struggling in the factory and we pay good salaries, I mean, the guys who are doing this, they genuinely would tell you stories if you train somebody for three days and they don't come in for the fourth. They were getting very frustrated. I mean, the other thing to bear in mind is if house building volumes drop, you know, that means, you know, what does that mean? That means there's an awful lot of contractors who are not working on new build housing. Well, they're available to work in other areas. If you're a ground worker working in commercial, you could lay a patio or you could learn, do a driveway.
There is the potential of feeding in capacity from other places as well.
Can I just take one more? CPM.
See you put a microphone in a Welshman's hand.
Oh, I know, I know. Where's the committee? Where's the committee?
Is probably at the start of most of the processes for sort of certainly new housing, clearly. What's the inquiry sort of position look like through the start of the year? Has that been improving? I mean, we've certainly been hearing the house builders, you know, getting better sales rates. Things have obviously improved. Mortgage rates, confidence, et cetera, have come back. Has that fed into a better inquiry rate into CPM?
Each month the answer is yes. January was bad, but we shouldn't forget the weather. The weather does have a big impact in obviously doing footwork and doing all these things in housing. February had recovery. March is looking better. You'd expect that this time of year. you know, I'll remind everybody that the house builders have to get to a certain level of development to avoid extra cost by this June, or they're gonna miss the Part L. you know, it will, in my view, feed some of that demand. The key is, I think at the moment, people don't know. I mean, you know, I read the same reports, and house builders seem to be selling at a better rate, but the critical period, I guess, is March and April.
Take the microphone off him, I would now. Yeah.
Thanks. Toby Thorrington, Equity Development. Could you just tell us what proportion of the portfolio is currently has EPD certification, and how common it is at the moment for specifiers to ask for that in the tender?
EPD information at the moment is I think we've only got in our landscaping products. In our landscaping products we've got most of those products either fully qualified. You have to get somebody to sign it off to be official. We certainly will have all of landscaping done relatively shortly. I'd say in terms of at the moment in contracts, it's very, very little. At the moment you're offering it as an additional thing, it's coming.
I think what we're actually seeing is that local authorities are more focused on this than commercial developers at the moment.
I guess playing into that slightly, could you talk a little bit about sort of new product development? It's always a mainstay of the Marshalls business, either in terms of materials or processes perhaps.
I'd split the new product into two things really. One is about carbon. We're trying to obviously have carbon reduction. We're trying to do that. We have. The board were up last week, having a look in one of our factories where we've got three different products we're making at the moment without cementing, which are, you know, looking really encouraging and giving big benefits obviously from a carbon footprint point of view. I think that is one stage of new product development. The other stage is very much linked to the, what you saw earlier on the new dual block plant. I mean, one of the products coming out there is effectively a copy of a granite product. Granite today predominantly in the world is sourced from China.
The carbon footprint to bring in that from there to here is a nightmare. The cost is obviously prohibitive. If you look at this product from our point of view, you could imagine us having a product that potentially would sell at 65%, 70% of the what the granite would sell at. For us, massively enhancing our margins, and from a carbon footprint, probably about 20% of the granite. I think getting those products likes to replace stone is a big benefit. We make a much better return on manufactured product than we ever will in buying it and selling.
If you just link that back to your earlier question, that is the carbon content's just gonna become increasingly important. That's where we'll drive the commercial benefit ultimately.
In the first bucket, where you're talking about decarbonization compared to, say, in landscape products is probably more of a structural element to it and the carbon side. Is the accreditation period, approval period longer to get new products with a different composition?
Not really. The type tests are the same. I mean, in our products, the type test tends to be obviously on how strong it is, how long it's gonna last. You can do accelerated life cycle testing. I don't think it's any different in that sense. It's particularly less when the customers and consumers are asking for it. I think this, as this grows, we can specify to British Standards in terms of strength and everything, and people will be prepared to use it, obviously, as long as you stand behind it.
Thank you.
Thank you.
Morning. Chris Millington at Numis. Can I ask a first question just around margins? You know, you touched on it before, Justin. There's quite high drop through in Landscaping. I mean, would we expect a different profile in either Marley or Building Products? Just on that subject, is there a target margin for Building Products? You've given us a bit of a steer for the other ones.
Okay. I'll do one at a time. Okay. Yeah. In terms of margins though, the Landscape Products factories are more automated than Marley and the Building Products factories, and therefore you've got more opportunities to take cost out of those factories should you see a reduction in demand. The drop through margins, this is before you start taking action on Landscape Products, are gonna be somewhere between 40%-45%, whereas on Building Products and Marley, it's, it'll be in the 30%-35% range. In terms of the medium-term view on margins for Building Products, we'd like to see that north of 15%.
I think the key part of that is it also works the other way. Landscaping, in my view, will not stay where it is, and when it comes back, you should have exactly the same, the opposite effect.
I was gonna ask that. I thought Clyde had used most of the questions before. Next one's just on bricks. Can you just talk about relative pricing there versus clay? Do you think a driver last year was availability 'cause it did feel quite tight, or do you think it was carbon was the big driver there?
At the moment, if you take from bricks point of view, our pricing in general terms has been at market minus a couple of percent has been the historical position. I personally don't think that will be the long-term position. I think it should be plus with the carbon situation, but we're not there. The demand at the moment is not coming from the carbon. The demand is coming, in my view, from availability, from the product portfolio. I mean, one of the issues you have is your range of products you can make is actually quite big because to set up concrete and do changes is not like changing a clay factory, which obviously has a continuous run part of it. I think the flexibility, the offering, availability has been the key to those drivers.
Going through with different house builders. I mean, you know, we're not shying away. Years and years ago, there were issues with concrete bricks being heavier, being more difficult to lay. You've got to literally work with the house builder, you've got to work with the bricklayer. You prove and disprove all of those things. It's the same weight. It's the same type to lay. Once you get that, it's treated as a normal product. The carbon is to come. The house builders today have all been focused on Part L, that's now in place. The next thing will be the embodied carbon in the build. That's where, I believe you get an enhancement in using a concrete brick, not an alternative.
Final one's just about domestic volumes. I mean, down a third, obviously a massive move. Where would you see domestic volumes in a historic context now? 'Cause they never really fully recovered from that sort of 2004 peak. Just curious kind of about how it looks in the historic context.
I mean, if you go back, as you say, the peak of all time was 2004. I think there's been some changes which have are semi-permanent. We were talking this the other day, that I think block paving a new driveway is not as popular now as it was then, not just a cost point of view. I think that is one element that did drop off that never fully recovered. I think with the latest drop, it's taken us back to about, well, if you take last year, probably now 40% down on the peak. It's a substantial drop, but it's also now from a patio point of view. We can see in where we sell out and what products we sell, what's happened. It's definitely at the element where you're a house owner.
You'd like to do the work in the garden, the heating bills have gone really Your mortgage has gone up. I'm sitting on my hands. The demand hasn't gone away, but they've stopped spending in that area. At the top end, it's carried on. You can see that with Marshalls Register. It's at that medium end, obviously, house owners, they're in there, they like to do the garden, and they, I'm stopping. I still believe when the stability comes back and people know where they are and inflation comes down and everything with interest rates, that will come back. History says it always has.
Thank you.
Thanks. I guess just a bit more of an open question on Martyn. I'm sorry, Robert Chantry at Berenberg. In terms of what you feel you've learned from them, you talked about the way they go to market in terms of simplification. They've clearly got a great margin at 26%. They've kind of got exciting solar rollout. What more strategically, when you sit down, have you learned from them and think you could do better or differently in the broader Marshalls business?
Yeah, I think they've done something that we've talked about in Marshalls in the past and been unable to do, and it has set some subtle differences, is in selling a roof is to me like selling a patio. You know, selling a patio in a box is selling a roof. What I mean by that is you sell everything that you need to do it. Now, we've not ever been able to do all of that, and it's a little bit different. The design side of it and that element gives some issues. Today, I think there's bits that certainly what Marley do, in my view, very, very well, is they've understood that it's about a solution, not about a product. I think for Marshalls, we've got to get more and more to that.
One of the things we're challenging is, you know, for me, we've had a lot of inquiries we get, for instance, on the website where somebody will come on, our historical approach to this has been we get over 1 million hits. People will say, "I'm looking for a patio. Look, can you help me?" Basically. The process in the past has been to send them the nearest three registered installers by their postcode with the numbers and the emails and everything to do it. Following that up, only about 50% even respond. We've actually taken somebody who was interested, they've gone on our website, and we've to me, let down 50% of those people.
I want us to start taking that inquiry, and we book the appointment, we book the arrangement, we get the registered installer to call, and if they don't, we get a different person to call. We enact more. I think they give the consumer customer in the different areas, in my opinion, a better experience than what we have. That's back to the simplified offer, doing the thing. If somebody's gone to the effort of going on your website, don't let them go until, you know, you completely see and if you can satisfy that demand. If there are no more questions in the room, are there any questions online? We did try and set the system up to be able to do that.
As a reminder, to ask a question, please signal by pressing star one. First question comes from Ross Harvey, from Davy. Please go ahead.
Hi, guys. morning. I've got 3 questions if I can as well. First is.
1 question.
In relation to landscape product.
Sorry, can we do one question at a time, and then we haven't got to try and remember the three, if you could?
Sounds good. Sounds good.
Okay.
Yeah. I'll kick off with the landscape products pricing. I'm just wondering, maybe for Justin, what's the annualization effect from increases you put through in 2022? What are the increases you've put through this year? Just Martyn, has there been any kind of pushback on any of the pricing that you've seen there? I know you mentioned that the higher end products have held up better than the medium and lower end. Just, you know, what sort of customer feedback have you had on pricing?
In terms of the price increase this year is high single digits. The annualized effect will probably add another 5 percentage points or so onto that. I think without a doubt, it is becoming more difficult to pass those prices on through the channel. I think, you know, 2022, we did a really good job of that. You saw, for example, in new build housing, build cost inflation of around 8%, which was reflective of, you know, our products going in there. That market's gonna get tighter and that becomes more difficult.
I think our commercial guys have done a good job landing the prices that they have in the first 2 months of the year.
I think in answer to your question as well, we always get feedback on a price increase.
I can imagine. Secondly, just on Martyn, I know the solar margin you would have mentioned in the past would have been lower than the likes of clay tiles, and you obviously source the panels from China, you had shipping cost issues and then the weaker pound. I'm just wondering, in terms of the normalization that you've seen there in terms of shipping costs and currency, et cetera, et cetera, have you been able to work any kind of margin benefit from that normalization? Or are you trying to contain prices possibly to try and accelerate the penetration of solar? I'm just wondering on the margin and the price there.
There's quite a few moving parts there and, you know, we saw some pretty significant swings in the sterling US dollar FX rate last year. We tend to keep our pricing commitments pretty short within solar, and we're trying to match them with forward contracts so that we can manage the overall margin. We're trying to manage the margins there to between 15% and 20% on a gross margin basis. Yeah, this market will grow very rapidly, and we want to keep a good market share of that.
We're also conscious that we wanna make sure the margins are in the right place.
Yeah. Very helpful. Thank you, Justin. Just final one, just in terms of Belgium, I know there was some impairments of 22. Do you mind just running us through quickly what the key drivers were there?
Okay. The Belgium business has come off the back of a couple of very positive years in 2020 and 2021. In 2022, it had a difficult time. We've talked about the reduction in volumes across the domestic business of around a third. Pretty much the whole of the Belgium business is a domestic business. It swung from producing profits for a couple of years to producing a loss. That just triggered, from an accounting perspective, an impairment review. We processed that and wrote down some of the assets in the Belgium balance sheet.
Great. Thanks both.
Okay. Are there any more questions online?
Our next question comes from Graeme Kyle from Shore Capital. Please go ahead.
Thank you. Morning, guys. Thanks for the presentation. Just two from me, please. The first one is on concrete bricks. What resistance are you seeing to concrete bricks from local planners, both for new build and for RMI projects, and how do you expect this to evolve?
I think if you take the planners and the feedback we get, Graeme, is, you know, people that you have to spend time with them, you have to obviously work through with them. I mean, the reality is, I mean, if I brought in this room concrete and clay bricks and put them in front of you, I'd take a fair bet that a number of people wouldn't know one from the other. I think there's again, you've got to use the examples, you've got to go through, show them. I mean, it's all obviously about appearance and color. I don't think planners are particularly bothered of what the material is that makes it. It's more a case of getting their approval. It's the same issue that they have with all planners.
Yes, you have to work your way through it. I don't see it as it should be anything against concrete bricks 'cause they don't care about the material side of it.
Okay, thanks. Second question, this may have been covered, apologies if it has. Just in Landscape Products, should we expect further cost reduction measures this year given volumes are likely to be down again?
Yeah. I mean, if you take from our point of view, I mean, that's a constant issue. At the end, you know, one of the challenges we always have in operations is every year, how do you take cost out? Cost can be materials, it can be mixes, it can be efficiencies. Absolutely. I mean, if you're not getting volume growth, then you have to look at the cost efficiency. That would be normal. Yes, there are programs in place for that.
Okay, thank you.
There are currently no further questions.
Okay. Well, as we come to an end, I think we've tried to answer all the questions. Thanks so much today. I know for all the people in the room with no tubes, I'm impressed how many people got here. Thanks so much for your time.
Thank you.
Thank you.