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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
With that, so welcome. Happy to be here, Joe Vorih, CEO of Genuit. As you all know, I've met many of you over the course of the last 6 months, just coming up on 6 months here. And I thought I'd start by just a few reflections on what I found since I've arrived, absolutely delighted to be here. Definitely have made a great choice and joined a fantastic team that I think is working extremely well. As you could probably imagine, it has been a busy 6 months. I have traveled all over. I have been to just about all of our sites have 1 or 2 left.
I'm actually going to be at our Permavoid business in Netherlands on Monday. So I'll just really have one more factory to get to in Italy. Met a lot of people. I've been to our -- a lot of our sites have had town halls and a lot of one-to-ones around our business. I really listen to and understood the perspective of our Genuit people.
I've been visiting with customers, some industry experts, which is, of course, really stimulating because their challenges become opportunities for us to add value, of course. I have even gotten quite hands on. When I was at [ Adey ], I actually took a bit out and put my jeans on and actually build filters on one of their lines for a bit. And there were no quality returns from those filters built, I understand.
I did also get a chance to go up and actually see one of our Blue Green roofs in action, so 1 of the Permavoid solutions. So there's so much to do, but I feel that it's been a really good chance to kind of get hands on with the business. And I have to say in terms of impressions, I'm absolutely encouraged by the levers and the opportunities I see around the business to both grow organically, to improve our cost structure and to add really sensible and strategic M&A.
All of this is really to make sure that the work that we've started, the work that is in place to really fundamentally improve the fabric of the business. So that we're positioned well for sustainable growth that, that will be solid and show through. The last thing I'd like to add is that I thought it's intelligent that we start a good strategic refresh that's compelling work. It's underway and when complete, I look forward to sharing those details more fully.
So let's jump into it. So I'd start by saying, look, we delivered about a 7.6% year-on-year growth. That was pleasing, of course. Importantly, when you look underneath that, what was really pleasing was the fact that we've made good progress in strengthening the core of the business, and that is shown through.
Strong pricing showed through. Again, Paul will take you through in more depth. But that was a commitment that we've made to you. It did that strong pricing offset a minor reduction in market-driven volumes. It was not share loss. And you can also see the impact throughout the discussion today where we have been very focused on better margin business and making smart management decisions.
In terms of pricing, we were very clear that there was a historical price lag between when we put prices in place when we actually saw them flow through to the bottom line. We were also clear that we were going to fix that. And that's been a big focus for Matt and myself and the entire team over the last 6 months, and I'm back to tell you that job done.
We have a much stronger commercial focus, and we believe that we're in an excellent position going forward to continue to be very agile in responding and controlling pricing to our benefit. There were a couple of specific headwinds. Paul will come into these in more detail. First, we did have a cyber incident It actually affected our new air business. It was quite limited in scope. And it was actually -- we've since accelerated the rollout of a really great cybersecurity suite that unfortunately hadn't made its way to newer yet, but we've since actually accelerated that and the business is much better protected today.
There is some backlog as a result of that disruption that's carrying into H2. But again, Paul will talk more about that. Clearly, we see that incident is behind us. There is also, as all of you know well, a well-publicized boiler shortage here in the U.K. Our 80 business has about 2/3 of the market supplying new filters to protect those boilers as they're installed.
Clearly, if the boilers can't be installed at pace, mind you, there's substantial pent-up demand then obviously, we're a bit off track in terms of selling those new filters. However, the Adey business is doing extremely well, a good management team, they're on top of it. And other parts of the business, as I'll share with you some examples are growing very well. So despite all of these headwinds or these headwinds, we've made solid margin progression, particularly in the second quarter.
And I think, as Paul takes you through, you'll see that quality start to show through. Of course, it wouldn't be a Genuit update without a focus on our sustainability. This is absolutely core to what we do and we are investing and on track to meet our 2025 targets that we've laid out. and we further solidified those and illuminated the path to net zero with our SBTi, our Science-Based Targets that will be coming out and registered in the next few weeks. They've been approved by the Board, and we're already building the plans to execute those.
So overall, a solid start to H2. Look, whilst I'm mindful of the uncertain macroeconomic environment, I'm very encouraged by the momentum and the efforts of the team to improve the quality of the business. The order books are where we would expect them to be at this point in the year, and we anticipate meeting our full year expectations. With that introduction, let me turn it over to Paul to take you through the numbers.
Okay. Well, thank you, Joe. So if we turn to Slide 6, I'll take you through the financial highlights. The group achieved an underlying operating profit or EBIT of GBP 47.4 million after the effects of the cyber instance and national shortage boilers that Joe has talked about and with these impacts totaling some GBP 7 million of profit. Underlying operating profit would have been some GBP 54 million for the half year. Yet despite all of this, we achieved sequential month-to-month improvement in group operating margin percentages through that robust price leadership and Genuit still has strong order books that gives confidence for the second half of the year.
As for the group's financial position, at the end of June, leverage was in line with expectations at 1.5x EBITDA, and I'm pleased to announce that we have launched a new sustainability linked loan with our existing syndicate of banks with sustainability targets consistent with previously announced 2025 ESG targets, namely a 62% use of recycled, a 66% reduction in carbon dioxide intensity and 5% of our workforce in structured trading programs, the so-called 5% club.
We also have the benefit of a private placement facility of GBP 150 million, of which GBP 25 million is now committed. Now Slide 7 summarizes the group's profit and loss where revenue growth through taking price leadership position in the market was partially offset by a modest decline in volumes of circa 4%, and gains what was a strong comparative in the first half of 2021 as the group was still bouncing back with the tailwind of a post-lockdown pent-up demand.
The cyber instance and constraints on upstream boiler manufacturing have reduced revenues by circa GBP 11 million, and we expect a good portion of this to come back in the second half, particularly associated with the post cyber incident recovery. This instant proved the catalyst and provide the imports for the group to review its cyber defenses in a very short space of time, accelerate existing upgrade plans and some of these costs are contained in underlying expenses with a smaller proportion being charged to exceptionals.
Outside of these impacts, SG&A cost growth was modest and indeed flat on a like-for-like basis in a highly inflationary period. As we said, we intended to achieve in March, the group has achieved sequential monthly operating margin growth in the second quarter and with those margins being greater than the prior year. This gives confidence for the second half. Going forward, we continue to review and constrain our cost base in order to enhance our resilience going forward in what will perhaps be slightly more uncertain times.
Now I hope Slide 8 will make things a little bit clearer. The waterfall charts many of you should be familiar with. The top row is showing the walk-through of revenue from last year to this, and the bottom row is underlying operating profit or EBIT. And if I go from left to right on the columns and just talk you through them.
In normal inflationary times, we used to say we would compensate for inflation in absolute pound note terms, and this would have a margin dilutive effect in the past. Clearly, we have shifted the paradigm to more substantial price increases to try to sustain margin through price leadership as well as our COO, working tirelessly with the business to reduce the amount of time between when inflation bites and when we have effective price increases in the market.
The price leadership benefit was offset by this modest decline in volume of some 4%. The 3 acquisitions from the last year show an operating profit margin of 20% and with the business being 90% U.K. based, the currency effects are relatively negligible for our group.
Now we've included a columnar subtotal, if you like, after taking into account conscious management decisions to improve the quality of the business and prevent the excessive pre-price increase loading we saw last year, which increased the lag effect of those price increases themselves. Excluding the distinct effects of the cyber instant and upstream boiler manufacturing constraints caused by component shortages, operating margins would have been circa 16.5% with underlying operating profit at just over half consensus for the full year of GBP 54 million.
What this means for the second half and the outlook for the full year is that we expect to recover a majority of the lost business after the cyber incident, some mitigation from Adey and that the volumes decisions we've taken to improve the quality of the business have now largely played out. We will continue to recover input cost inflation through price increases in a number of our businesses through the second half of this year. And we've also embarked on several self-help initiatives to improve the cost efficiencies in the group.
Now Slide 9 reconciles EBIT to statutory profit by breaking down underlying items. There has been an uptick in amortization of intangibles after last year's acquisitions and they include some severance costs or management redundancies as well as external costs for dealing with the cyber incident. It's worth reminding ourselves that the large debit of GBP 6.5 million in 2021 came about from a revaluation of deferred tax balances after the announced increase in statutory tax rates by the government.
Now for Slide 10 and cash flows. And just a couple of highlights. First of all, net CapEx of GBP 7.5 million is net of proceeds for the disposal of our car fleet and its leasing back. as part of our effort to renew the car policy to encourage the large-scale phasing out of internal combustion engines in our car fleet. This project has been successful with a significant uptake of electrical vehicles and hybrids by Genuit employees.
More widely, we intend gross CapEx for the year to be circa GBP 40 million. We're also showing a GBP 2.6 million spent on acquiring an installation business called Keytec. And I'll say a little bit more about that later. You'll see an increase of GBP 37 million of working capital, and this is broken down more fully on the next slide, Slide 11.
It was driven partly by significant inflation, some supply chain issues upstream of us, particularly with respect to boiler manufacturing the effects on production of the cyber incident as well as more modest increase in inventory levels in selected areas to improve customer service, most notably through more OTIF deliveries.
As for the banking facility shown on Slide 12, I already mentioned earlier our transition to a 4-year sustainability-linked loan, which I'm particularly proud, but that happened in the past week. The new loan is combined with a 7-year uncommitted private placement shelf facility, where we have GBP 25 million committed at the moment. As at the half year, the old Revolving Credit Facility had significant headroom and the covenants did not come close to touching the sites. Financing costs, we anticipate being around GBP 5 million for the full year this year and the underlying tax rate is forecast to be just over 18% for 2022.
If we move to Slide 13 and just look at our performance, firstly in the Residential Systems segment, we saw 6.1% like-for-like revenue growth in the first half of this year. And I contend that's a pretty good robust performance given everything we've had to face.
Underlying operating profit up 4.2% at GBP 37.3 million with a marginally lower operating margin of 18.8%, but it is worth emphasizing we had this strong sequential month-to-month growth in operating margin during the second quarter. Without the effects of the upstream boiler manufacturing constraints on cyber, operating margin would have been closer to 19.7% for this segment. The CPA's latest forecast still shows new house building slightly ahead of last year with RMI slightly down off what was a record level in 2021.
We remain confident of our position within RMI, particularly as there is a mix shift towards retrofitting technologies that improve heating efficiency in the current high-cost environment and away from other types of RMI spend.
In the Commercial, Infrastructure Systems segment on Slide 14, a there was like-for-like revenue growth of 5.2%, adjusting for acquisitions only. But this segment was disproportionately affected by the cyber incident and should bounce back strongly when the business recovers in the second half. The CPA forecasts are much more robust for this segment with infrastructure being particularly strong.
We made this small acquisition in this space in the first half, a North Bucks-based business called Keytec, that specializes in the installation of water management systems and it's geographically complementary to Solitec a business we acquired as a part of the Alderburgh acquisition in 2019. Now with that, I'll return to Joe, who'll take us through more fully the business overview. Thank you.
Thank you, Paul. All right. So if we could turn to the business overview then. Let me start just by reminding everybody sort of what it is that we're doing and why it is that we expect to outperform the markets through the cycle. First of all, that market outperformance is really by focusing very much on a solution set, which helps address key needs in the environment for quite a long time.
We've been focused on legacy material substitution. So this is putting in plastic piping, for example, in place of concrete piping in large installations, Increasingly, that legacy material substitution is also increasingly being focused on the greening of the products that go in there.
So as you see, everybody start to focus on their Scope 3 emissions reductions, they'll be increasingly interested in making sure that the products they are using in building buildings and in putting in civil engineering projects are actually the lowest carbon footprint materials possible. For us, that's like an extension on our legacy material substitution. However, in terms of the long-term growth drivers, they're even more compelling.
You'll see resilient drainage factors in heavily into what we do, for example, in our businesses that I'll show you some examples later. So this will be Polystorm, many of our Alderburgh business, Keytec, which we just mentioned, those are all part of a more resilient drainage solution.
Clean indoor air is very important, right? And certainly coming out of the pandemic we saw as we return to work and return to offices, upgrade work, which is very much focused on filtering and improving the quality of the air.
Green urbanization. The reality is, as climate change continues to heat up our environment, the impact of greening our cities of making them much more livable and workable is extremely important and where Permavoid as an example, with our Blue Green roofs solutions plays heavily. And of course, the trend to net zero, the march to net zero means that we have to have low and no carbon solutions, not only for building and constructing but also for operating those buildings, which comes down to energy efficiency, lower carbon heating solutions and all.
So I think it's safe to say, right? This is a really good time. I mean, we're right here with the headlines around drought, right, followed by rains and the need for avoiding flooding and storm water. It's why you can see, as Paul said, the Keytec business and the Alderburgh [indiscernible] counterparts are extremely busy right now. So it is very much a good time to be focused on what is our core mission.
If you turn the page -- by reference, I think it's helpful. We're members of the Construction Products Association, I thought I'd just share one graph. And really just a couple of takeaways. We'll go into all the details, and we did put a few more graphs in the appendix for your use. But despite the fact that there's some short-term uncertainty, we still remain below 2019 levels. the CPA, which publishes a full year forecast, not a half year forecast, does continue to update them. They are expecting some full year growth this year, obviously.
We would expect to see more of that come through. And Importantly, over the next several years, they're expecting us to continue to go back toward the 2.7% sort of growth that's been expected in the market over time. What's driving that, right? Structural housing shortage, very prominent in the U.K., far from being adequately addressed and, of course, the investment in climate mitigation and adaptation.
Two examples of being better exposed to subsegments that are important are for example, the increased RMI focus on energy efficiency by consumers and homeowners and storm water mitigation, which what may be a smaller part of larger infrastructure projects, but absolutely becoming more critical.
If you go to the next page, I thought it would be good to share just a couple of examples of some wins and successes that we're having across the group. Top left is for those of you who had been following us a bit, would recognize as an underfloor heating installation Nu-Heat has seen incredible growth in the first half of the year, particularly from the RMI market. This was not a strong area in the past where most underfloor heating and air source heat pump solutions were going to new homes. Of course, they still are going into new homes.
And with the new building standards coming out, that will be one of the most readily available and preferred solutions. But increasingly, as consumers open their energy bills and they start wondering about how they can improve the energy vision there in their house, they're increasingly interested in retrofitting air source heat pumps and underfloor heating.
Nu-Heat has seen their lead generation up 20% this year, continues to outperform with sales of underfloor heating up 15% just in the first half. On the top right, you'll see Adey actually has released what's called Pro Check. It may not look exciting, it looks a bit like a pool testing kit, but what it really is, is to test the quality of the water that's circulating in your heating system.
So if you -- in your house, have a gas boiler and a radiator heating system, could be actually underfloor heating as well. But if you have a circulating water heating system, the quality of that water, the degradation of the presence of magnetite and sludge can actually reduce the efficiency of the overall system resulting in higher energy bills.
This is a kit which can be used on site and give you an instant feedback on the quality of that water and whether or not what we call a MagnaCleanse process. The additives that you can put into the system, all will help you lower your energy bills. You can imagine this is quite popular right now. And this can be done either by a highly technical DIYer or your local heating contractor. That, too, is one of the examples of where Adey has seen a significant uptick in volume despite the new boiler issues.
On the bottom left, this is actually a very substantial Polystorm installation in the Middle East. Really 2 pieces here. It's an example of the scale of the storm water mitigation projects that you see there. This is built outside of a building there. It's a small picture, but that goes on for the entire length of the building. It also highlights the fact that the Middle East has been a strong growth market. And beyond that, while we're 40% up in our core Polypipe businesses there year-to-date, we've also seen, as an example, with Adey because of their energy efficiency focused, they're up 6% in Europe, and they're up over 20% in the U.S. so far this year.
Bottom right, this is actually an Alderburgh Keytec installation. So this is a good example of what would be installed in say, a new housing development where it used to be a field, it's now a few thousand homes. And because that field is now not able to absorb water because there's a lot of hard surface and structure on it, you have to put these types of mitigation systems, which means that when the rains arrive, they can be absorbed quickly into these systems and then over time, reintroduced into the natural environment or released in a controlled fashion. This is key to, again, climate adaptation in our future.
On the next page, I've got 2 examples of some ongoing investments. On the left, this looks just like our terracotta colored plastic piping that you're familiar with. And it is, except that the center core of that is now fully recycled content, that allows these products to now be 65% recycled plastic with the current guidelines. This is a new installation we've put in our Building Services business down in Aylesford. Actually be there, I'm going to take a look at it on Friday. As that comes online in the second half, that actually is about 1/4 of the remaining gap between where we are today at recycled content and getting to our 62% goal by 2025. It's a sizable investment. It obviously will pay off very handsomely and reduce the Scope 3 emissions for all of our customers.
On the right, it's important that we invest in the core. This is actually -- we've got a program this year to spend about GBP 18 million of capital of up to date, more energy-efficient and more productive equipment. It's well underway. Obviously, it's going to be second half biased. But that is in process in our building products facilities in and around Doncaster.
As I said before, sustainability remains at the core of our growth strategy and the way we operate our business. Just a quick recap, you'll see some of the statistics, Paul has mentioned these as well. But we're bringing together this really strong progress that we've already been making toward our 2025 goals. We've added on top of that the SBTi targets, the Science-Based Targets, which will further reinforce and illuminate the path to net zero. And as Paul mentioned, the sustainability linked loan on top of our existing LTIP commitments for our leadership team, this is core to what we do, and we've made really good progress this year on this.
So if I could then just summarize, we think we're very well positioned to outperform through the cycle with the structural housing challenges with a shift to more energy efficiency and when the need for strong climate and adaptation and mitigation strategies. There's never been a better time to be focused on these growth drivers. So overall, we've made a solid start to H2. I'm certainly mindful of the macroeconomic environment, but I'm very encouraged by the momentum. The fundamental progress we've made in improving the quality of the business. As I said, the orders are -- order books are where we'd expect them to be coming into the second half, and we do anticipate meeting full year expectations.
So thank you. With that, we are ready for questions. As I said, please do wait for the microphone. [ Mia ] will bring that around so that our guests who are online can also hear questions well.
It's Pam Liu from Morgan Stanley. I have 3 questions, please. So the first one is on price cost and margin. So if we exclude the effect of one-off in supply chain bottleneck, your H1 margin would be at par with H1 last year. My question is, why didn't you do the price increase even higher given you're catching up anyway? Because what we have seen with plastic pipe manufacturer across Europe or in other geographies that they have overcompensated the cost inflation in H1. So just want to know what is the thinking behind that? And how -- would you be able to comment on how your product price sits today versus competitors? Second question, do you see any change to actual distributors' inventory management? Do you see any signs of destocking? Third question, so can you talk a bit about the integration of your recent acquisitions? So I'm particularly interested in any revenue synergies within your product portfolio? So for example, can we put Nu-Heat and Adey together, et cetera?
Do you want to take the first 2? I will take the third one.
Yes. Okay. Well, in terms of -- if we go -- if we think about that waterfall chart we talked through, the first block there, you see that we've got a benefit on revenue year-on-year of GBP 37.6 million. That's after including this modest volume decline of 4%. So the pricing benefit is something like GBP 50 million. And if you do the drop through of about 1/3 of that volume decline, which 4% is GBP 12 million, the 1/3 of that is GBP 4 million against the [ 5.3. ] I told you we've actually got a GBP 9 million benefit drop-through from pricing. So the key message is that in H1, we actually have achieved the objective, which is to compensate for inflation as we understand it, okay? As far as where we are compared to competition, we have led with price increases generally for some time now. And generally speaking, others have followed. There have been very, very few outliers. I think what we have seen is that -- so I'm actually -- we joke, some of them actually follow where the ink is still wet on our price announcement. Others might take a few weeks to do so. But generally speaking, everyone has followed, and we're not a particular outlier in any one place. So that's us versus competition.
As far as destocking, I've not seen and Joe, I don't think this is the case. I've not seen any evidence of wide-scale destocking going on. Of course, I've seen 1 or 2 merchants doing some adjustments to their stock levels, but I've not seen a wholesale destocking out there.
And on revenue synergies, I think you picked up on the fact that this is an opportunity that lies ahead for us. Nu-Heat and Adey is a good example. I mean, Adey and Nu-Heat are working together to make that actually part of the air source heat pump solution going forward. They're, of course, recently working together. So we've certainly -- I think Matt and I would certainly view that as a significant upside for us going forward.
Another one I would highlight is Nu-Heat and Nuaire. And as part of -- they're both part of the climate and ventilation solution to meet the building standards for the future homes, right? One of the things you'd be looking for is, of course, a well-insulated house, but you want to make sure that the climate and ventilation solutions inside the house are working together. This is a good opportunity where if you switch to air source heat pumps underfloor heating, a mechanical ventilation heat recovery system or MVHR, which Nuaire makes is really key to provide ventilation in the well-insulated house, but not losing the thermal efficiency by essentially just sending that hot air out and bringing cold air in, you actually recover some of that heat. And so those 2 systems will work quite well together.
So good observation. I think there's plenty of upside for us as we bring these businesses from essentially great individual businesses into much more of a group, there is more top line synergy to be had.
Christen Hjorth from Numis. Three from me, if that's okay. First of all, just touching on the margins again. Obviously, I think consensus, you've sort of reiterated expectations suggest an uptick in margins in H2 clearly. Just a bit more color on that Q2 margin. Anything that you can provide us with some confidence around it. know you sort of talked about it being up year-on-year, but any parameters that you can provide there would be helpful. Second, just -- you ran through, Paul, the price increase in the first half at GBP 50 million. If we sort of look at a percentage terms, I think that's around 17%. I mean is that sensible for the full year in terms of price increases? Or given that the price came in Q2, would price for the full year overall be higher than that? And obviously, we're lapping some price increases last year as well.
And then the third one is just on the decision to reduce volumes. Obviously, some of that capacity has come back. Just a bit more color on what the potential use of that spare capacity could be going forward?
Okay. First 2, I'll take the last one.
Okay. I'll be very, very clear. Q2 -- just to give a bit of context for those who perhaps not so familiar. Q1, we had full-throated inflation, and we haven't yet got that price increase effective in the market, and it started to come in effectively at end of March into April, May and June. So you saw a very healthy margin starting to appear.
So in April, I'll be very explicit, we achieved an operating margin of over 16%, 16.5%. In May, it was higher, 18.5%. And in June, it was higher still. So those sorts of margins compare very favorably with historical margins before the pandemic. So that is encouraging, okay. Now a slight caveat. Our margins do fluctuate because of volume changes, okay? So when you enter the city season, July, August, they go down, but when all this finishes, they come back up again. But clearly, that sort of margin performance in Q2, that sequential improvement as well. It is encouraging and gives us some confidence, gives us confidence for the second half. So hopefully, that helps.
In terms of the price increase full year, yes, it's about 17%. We've still got the run-through benefit into H2 from the price increases already made. And plus, we've got the new price increases coming through as we speak. So overall, you can expect annualized a similar sort of level to what you've seen in H1 if that helps. Joe?
And on your question around reducing volumes, making decisions using the capacity. First thing I'd highlight, and Paul did mention this part of that is just avoiding the ahead ordering that happened ahead of price increases, right? So that's just making sure that we get the price increases quickly. That, of course, accounts for a portion of that. But you're absolutely right. There are cases where we just don't believe that the business was really well suited by selling perhaps a lower-value product.
And so as we were able to do this, we were able to do 3 things, really. One is focus on improving service levels. Of course, we came off a very busy season last year, right? So improving service levels to customers, that has to be job 1, right? Focusing on implementing more of our higher recycled content products, right, that gives us the turnaround time and a little bit of slack in the system to be able to go do that, which is, of course, very important for the long term. And to focus just on products where we actually have a higher value differentiation and therefore, can come in and sustain higher prices in the long term.
Jon Bell, Deutsche Bank. I think I've got 3. The first one, you've made a series of acquisitions in recent years, some big, some small. I just wonder what areas are most attractive to you right now in terms of infills. Second one is on cyber. Could you give us a bit more color on your customers' reaction to that? It sounds like most stayed loyal with the revenues dropping into H2. But any color you can give appreciated. And the third one is on labor supply. We've got the great resignation. We've got the shrinkage in the size of the working population. How are you dealing with that across your sites?
Sure. Let's see. I guess, I can take all 3 of them, if you want, unless you want to do anything. Well, let me tell you what, let me answer and then, Paul, if you want to add in. On the M&A, I mean, we have. We've -- last year, we acquired, of course, 80, which took us much more into protecting, home heating solutions, making them more efficient. Nu-Heat, which, of course, was a low-carbon alternative to home heating, very important, right. Plura, which really was an innovative smaller acquisition, which gives us more ways to contribute to the green urban-built environment. And then, of course, most recently with Keytec, which while small, really helped reinforce our ability to do whole projects around storm water mitigation.
I think these themes are quite logical themes. So as you go forward, we're much more interested in finding solutions that actually are technologies and product offerings that would actually expand our ability to either drive the sort of revenue synergies that Pam was asking about or further increase the energy efficiency of both the sort of buildings that are either commercially built or are residential. So similar themes, I think we'll be looking for. The other thing that is, of course, very interesting is we do portions of the storm water and flood mitigation solutions today. There clearly is more around that, too, and that's a wide-ranging area.
I'd say that's all I'll say for now. I mean, we'll definitely be getting back -- we are planning, as I think had mentioned or if I hadn't, a Capital Markets Day in the fall. And I think that would be a great time to discuss that more fulsomely.
In terms of the cyber incident, the reality is this happened in the middle of the first half. It was a very, very busy period for cyber attacks, as discussed with a few of you upstream. It was contained. We communicated very proactively with our customers. Our customers tend to be working on longer projects in that business. We didn't lose any customers that we're aware of through that. So they understand they've taken stride. And as long as what I found is as long as we're very proactive, we communicate them what's going on and we look out for their best interest, it is unfortunately a reality of doing business today, and they've stayed with us.
In terms of labor supply, I'd say at this point, turnover for us is about where it has been sort of in the high single digits level. It's something we're mindful of going forward, and I think dovetails well with our commitment to the 5% club, and really restoring and I should say, increasing because we've always done this focus on graduate schemes, apprentices. I think we mentioned in the past, forming the driver academy as we do employ quite a lot of HGV drivers, massive shortages HGV drivers. So as a result, we actually are upscaling drivers with lower class of licenses and training in our own academy so that we can solve that problem.
It's, I think, in the end, build a great business, make sure it's a great place to work, value our people. And we'll continue to attract the kind of talent we need even in a more challenging environment. Sam, do you have 3 questions?
I've got 4 actually.
Okay.
One of them is pretty factual, so it should be quite straightforward. So the first one, going back on kind of the whatever is the fifth column on Slide 6, your volume decisions. So how much of that is kind of permanent volumes that you're not going to be doing again because it's deemed too low a margin in the new world of pricing? And then an extension to that, how should we therefore think about the previous sort of 18.5% normalized margin? It should be higher given you're getting rid of lower-margin work on a kind of 2-, 3-year view. That's the first kind of 2-part question. The second question is on the cyberattack and just a clarification that the GBP 4.5 million, presumably that's inclusive of the GBP 1 million to SG&A, which you won't be getting back in the second half. So you will get back GBP 3.5 million or GBP 3 million or whatever I guess.
Coerect. Answered that one already, yes.
Yes, good. Adey. And then -- how are you kind of selling the benefits of an Adey MagnaClean system to consumers? If you got -- if you're an existing kind of old Victorian house, which is expensive to heat. I have no idea what MagnaClean might save me a year. I suspect it's more than GBP 115 it's going to cost me to buy it at Screwfix. How do you get that message across to continue to retrofit them into the homes? And then the second couple, just on the Vitality Index, obviously picked up a lot this year versus last year, it's ahead of your target. Are there any products we need to be thinking about that will be rolling off in the next 12 months that you'll need to replace to get -- to maintain your sales at 25%? And then the last one is just on cost-of-living measures and whether you're doing anything for your staff in the current environment and should we think about wage bills increasing?
So that's 5 questions.
I was going to say.
A couple of 2 parters in there.
So everyone, think of any questions you want to ask before lunch? Let's see, why don't you cover the volumes. You already did the cyber costs, I'll come back on the selling benefits and then you can cover vitality and cost living, How's that?
Okay. So that [ 16.7 ]. I'd say the greater part of it actually was associated with the stock loading that happened last year. So it's essentially sucking volume out of H2 into H1. That's probably the largest single component of it.
So in terms of the walking away from business because of low profitability, that's probably a lesser component. So I wouldn't overly play an uptick in operating margin just yet, Sam. You've got to bring yields down first before we can talk about putting it back up again. I think it's an honest answer. So but it really was about the huge effort that the chat behind you did to actually stop those sorts of practices. As you know, there's sort of a massive amount of price increase [indiscernible] that went on.
In terms of -- yes, the selling benefits. So this is actually a part of as we shift from just new home installations where we have relationships with 3 of the top 4 boiler manufacturers who actually see the benefit of having our protection systems to actually preserve and make it easier for them to warrant the performance of the other customers.
From a consumer side, this is, of course, it's a great time, right? And so in some of the homebuilding shows, we're educating contractors that when they go and they do this and they find a home solution or a home system that is [indiscernible] up, right, and has a sludge in it. If they're able to fully -- there's really a couple step process. They do the project, right? Then they do a MagnaCleanse process, which is an on-site sort of cleansing process, right? And then they add additives in the filter to keep it at top. It's not unusual to see high single-digit, low double-digit type efficiency pickups. And of course, when you see the size of the home heating bills that pays for itself quite handily.
So it's one of those things that the primary avenue for education is actually at the contractor level, at the HVAC contractor level, although we do have point-of-sale DIY making those same points and I think one of you, I think Pam in the room was actually at one of the shows where she got to see that firsthand. And hopefully, Pam, I think you saw that message loud and clear. Yes?
Yes.
Good. So that's it. I mean, obviously, it's a great message. And since we can get that out, the product does pretty well sell for themselves.
Yes, Vitality Index. So of the key measures that we have, I guess what we've learned having adopted these ESG measures is that vitality is lumpy, right? You do get these things dropping off, as you've rightly said, and things don't have to come on. What I'll say is that we have a senior manager in our business who reports to exec, he's got the accountability to track that and make sure that we've got good data to understand ahead of time what products will be coming off and then making sure that we've got the timing right in terms of new products coming on.
So it will always fluctuate a little bit. So it just so happens, it has gone up 26% at the moment. It could well come down to 24%, 23% before going back up again. So it will always be a bit lumpy. You'll appreciate that the time lines of product development are sometimes a bit difficult to manage in that respect, so you will get that lumpiness going forward. But we're certainly very happy with the overall trajectory of the Vitality Index, and we're pretty confident about hitting the -- or exceeding even the ultimate goal of 25% by 2025.
I would just add that, I mean, this is across the whole group with a lot of different products. So there isn't any 1 large product family that's going to typically really tank that number. And so as we do more R&D and actually spread it across the group, it will actually become -- it's a lot of big numbers that will help that.
Portfolio effect. As far as cost of living, we -- first things first, we set the salary increases at the beginning of the year. We have an annual pay rounds. So the increases were set probably just before the big inflationary headlines hit the papers. The next round of negotiations towards the end of the year starts in the autumn. So we'll also be watching very closely what the possible impact will be on people, et cetera. What I probably would expect to see might be a slight uptick in staff turnover. But we'll obviously review that situation as we get through the year. But yes, I mean, when we get to the end of the year, also get to the autumn or the fall, we will expect quite rightly some bigger demands for increases.
I guess the only thing I would add to that is that in the end, what's most important is we've got to be mindful of what's going on with our employees, do the right thing for them, build the company for the future and focus on really productivity and efficiency to help offset those costs over time.
Other questions? I think we got the end of your list, Sam.
More questions? Okay. Anything online?
Yes. So we've got a few in. The first is from [ Flora Donahue ] who asks, what are you seeing in input cost trends as her first question. And then secondly, can you remind us of the operating leverage in the business in relation to volume sensitivity? And what are the levers in a scenario where end markets are weaker?
Operating leverage. What was the third one?
What are the levers in a scenario where end markets are weaker?
Okay. What was the first one?
What are you seeing in input cost trends Yes.
Input cost trends, operating leverage when volume changes and levers to deal with that volume change if it happens. Do you want to go through those and I'll circle back if needed?
Yes. Okay. Input costs. So if you look at our entire cost base, that's every debit from revenue down to net profit. The greatest part is raw materials, of course. It's a very significant part of our cost base. We have -- if you remember those charts we showed at year-end, very significant increases, very steep lines. I think I showed in March that PVC Prime single biggest category of raw material increased last year by 55%. In more recent weeks and months that, that has ameliorated slightly, i.e. they're still -- we're seeing increases, but they are much, much less. The graph is much less steep than it was last year. So that's true. But we're not yet seeing a wide-scale deflation or anything like that.
It's worth noting, by the way, that those price increases we did, we never went down the route of surcharging, which is what some competitors have done. Surcharging, of course, is very expedient. But what goes up, comes down very quickly. We have contractual price increases, so they will be stickier if and when deflation starts to happen.
In terms of operating leverage, we've said all along that our cost base has a significant variable component to it. And the reason for that is unlike perhaps a brick manufacturer are 300-or-so machines, extrusion machines, the molding machines can be switched off, mothballed very, very quickly to reflect change in volume, okay? So that does show that we have that resilience in terms of preserving our pricing margin if there is a volume decline that could happen. So that's the strength of the business, I would say. So the cost base is dominated by all variable, semi-variable components that is fixed. What's the last one? The levers?
Yes, in a scenario where markets are weaker.
Yes. So you only have to go back to history and see what happens like 10 years ago when the financial crisis happened. I mean, the more recent crises are probably less instructive because of the suddenness that the pandemic -- the lockdowns happened. But if you go back to earlier times when the financial crisis, you can see the business was resilient, they were able to mothball and shut down machines very, very quickly, and preserve a lot of margin. So that is the principal sort of activity you expect to see if there was a steep volume decline.
Maybe the only thing I would add to that -- thank you for the question, Flora, is that, as I've said and we've alluded to as we've -- as Matt and I have come into the business and worked with the leadership team, we definitely see untapped potential to further improve our cost structure. And while that actually has nothing to do with the downturn. It's a really good place to be heading into any softness if it were to materialize with that work already in progress.
All right. And then another one for [ Mark Atkinson ] who asks, with reference to the new building regulations that came into effect on the 15th of June. Has this had an immediate effect on demand?
Yes, I can give you one concrete example. One of the things that's come in is that filtration protection solutions are now required as part of the new building standard, which, of course, will be a good tailwind for our Adey business. So that's one, probably the most tangible recent example. Of course, I mean, already -- we've already talked about air source heat pumps being a higher presence. So in general, it's just a very good tailwind for all of our -- both new build -- for our new-build operations. Anything else?
One from [ Guy Crossland ] who asked what proportion of your plastic used at Polypipe is renewable?
Is that renewable recycle or circular?
It says here renewable.
Okay. Well, let's just take both, right? Today, we're just about half of the plastic that we use is recycled content. But the vast majority, virtually all of what we do is actually recyclable after it's been used. Now the product lines are actually quite long, right? And some of these underground drainage pipes may have a 50- or 100-year service life. But the beauty of the type of plastics that we use and do is that it is a circular product. And I think you'll see that as we actually start to certify these products and people start to appreciate that both recycled input and the ability to fully recycle leads for one of the best possible alternatives as we all move to lower carbon footprint. Anything else online?
No.
Okay. Good. Anything else in the room?
So look, thank you very much for coming. I appreciate it. As I said, I'm really delighted to have joined the group. I thank the members of the executive team who are here. We're really excited about the long-term ability of the group to perform. And as I said, I think we have quite a lot of levers to pull both in driving long-term growth into those structural tailwinds and to make sure that we can improve the cost structure of the business and to eventually continue to look for some great M&A. All of this is a more resilient group than perhaps we were 6 months, a year or 2 years ago. And we're very excited to continue down this path.
We will get details of the Capital Markets Day out shortly. It will be in the autumn. As my English colleagues like to remind me, we don't say fall. But I think it will be an exciting session, and we're really looking forward to hosting you all. Details to follow.
With that, thank you very much. Thank you.
Thank you.