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Okay. Good morning and welcome to everyone. And I think you all know who I am, David knight. I'm joined by Chris Muir, our CFO; and Alan Smith, our Non-Exec Chairman. We're just now going to take you through the presentation. So on slide -- we'll start on Slide 3 if that's okay for everybody. We continued to grow our position as a value retailer. We're really building around the outstanding value, quality and choice. And these are still the same key areas that we're looking at as part of the business, so delivering that profitable, sustainable growth, improving the quality of earnings, improving resilience and increasing shareholder returns. I'm sure that's what everybody wants. So we're all in the same place. So let's just move to Slide 4 on the highlights. Further growth in the first half with like-for-likes of plus 1.5% and 2 years at 4.5%. The store portfolio remains very stable with 100 stores. And Trustpilot, we still got 5 stars. Underlying profit has increased by GBP 300,000. And dividend, again, we've increased it by 3.8%. Cash continues to build, and I'm sure that will be an area you're interested in, and we're building that resilience. Chris is now going to take us through all the numbers.
So just before we go into Slide 6, just so everyone is aware, we've -- as you'll see in the announcement, we've plussed House of Fraser, which we exited at the end of January, as a discontinued operation. So in the profit and loss account, now it's just the core ScS business. We have in the notes to the prelim, there is a Note 15, which discloses the profit on the turnover from House of Fraser for this period last year, this period this year and the full year last year. So we have helped people understand the core business that's going forward. Okay. So I'd just like to turn to Slide 6. So again just to confirm, these are all ScS numbers. So you look at gross sales, we're up 1.2%, slightly subdued in HY1, because we had a tough P11 and P12 last year mainly because of the warm weather and the World Cup. So as we reported last year second half, we saw a slight decline. Now because we deliver goods on average 7 or 8 weeks after we've taken the order, that hits us this year with lots of deliveries in the first half. EBITDA in the ScS only business again up nearly 10% to GBP 3.4 million. I think the thing for me, if you look at that Slide 6, as you can see where we come from EBITDA in the core ScS business. We had nothing in the first half to Jan '17. And now we're up to GBP 3.4 million, so great progress in the last 2 years. Earnings per share, again, is in line with the improvements we've seen in EBITDA. Gross margin, we've seen it -- it's gone from 44.7% to 44.9%. The main moving parts are, we have improved the level of information we have in the business. It's allowed us to help move some of the, let's say, less performing stores up a little bit as well as some improvement in in-store selling. What we will see in the second half, though, is, as we've noted in the statement, is because we -- about 50% of our business is on interest-free credit and the impact of increases in LIBOR over the last 4, 5 months. We'll start to see that second half margin will be similar to what we saw last year in the first half. So we'll see a slight decline in gross margin in the second half, but again, in line with what the markets have got out there. If you look at the cash generation from operating activities, now in the first half, we've always seen inflow because of our winter sale. So at the end of January, we have a fair proportion, we've got GBP 25 million of customer deposits. So we always get this first half inflow and movement in working capital. The other thing that's happened this year is because we've exited House of Fraser, we've seen some other inflows from working capital, things like selling off the stock. We did have a debt balance with House of Fraser, which is unwound. So we've seen a little bit of a one-off benefit in the first half. But predominantly, most of that benefit is from the normal movement we see every half year. As David said, we increased dividend 3.8% to 5.5p. We've again said in the statement, our intention is to pay 1/3, 2/3. So you can sort of work out that we're aiming for about 16.5p for the year, which is in line again with the market consensus.Just moving to Slide 7. So as I touched on earlier, all of these charts and these are sales channels within the ScS business. We're impacted by the poor trading at the end of last year. So flooring was down slightly. We are starting to see a number of our customers who are shopping in store and then going home and ordering online. So that online furniture split is starting to be a little bit muddier, is probably the best way to put it. But -- and we are seeing people who start their journey obviously online and then come in on -- in store to acquire the product. So those 2 are becoming interchangeable as we move to that omnichannel model. Flooring we've seen increase 1.4%, again, not as quite as much growth that we've seen historically, but we understand from others that the flooring market is particularly tough at the moment, so to still see some growth was encouraging. Online, our fastest growing area of the business, there's been a lot of work done. And I will -- David, he's going to cover that later on, on what we're doing and what we've done so far and actually our plans about going forward, because there's more investment coming. But we still see the website is turning around 5% of our turnover. We still see as a key research tool for our customers when they're spending nearly GBP 1,600 when they come in store, that they do like to sit on the product. It's a big purchase for our core customer, but it's an area where we've continued to invest in.Just moving to EBITDA bridge. So again, this is continuing operations only. So again, this is only ScS. So the gross margin increased 1.5%, in part driven by more revenue, but also part driven by an improvement in the actual gross margin percentage that we're selling at. There's been a little bit of an impact of -- we have a lower average order value, but positively for us, even though we've seen that average order value come down, we've increased the gross margin. Distribution is up 5.5% versus the prior year. This is predominately driven by volume. Turnover is up a little bit. But if you think about, our AOV is down by around 4%. We've had to deliver more orders to get to that turnover. So we have seen an increase in our distribution costs. There has been some cost inflation there a little bit around wage and a little bit around property. We're seeing it. There's a bit more competition for distribution and warehousing sites across the U.K. Slightly -- we're seeing a slight reduction in the retail cost of the footprint, but an increase in distribution. Marketing costs, as we've always done in the past, we flex this with turnover. If we see that the campaigns are making a good return, we will reinvest that money. We've seen increase of GBP 0.2 million, so pretty much in line with what we've seen with regards to our turnover increase in the period. Payroll has got 2 main parts to it. We have our performance related piece and we have our costs of semi-variable. Semi-variable is actually up GBP 0.8 million at the half time, and that's prominently driven by -- we've had an increase in -- because of auto-enrollment, that rate has gone from 1% to 2% that we pay as a contribution. We've always had an impact of the national living wage. We also gave to our more junior members of the team a cost of living wage increase in the year. So we're seeing a bit of increase in that area. The one thing we did see a reduction is in performance pay was down GBP 0.4 million. And if you compare to the previous slides where EBITDA grew significantly last year and we -- this time last year, we were running at positive 2.2% like-for-like. The bonuses we've given to our teams is being lower at this time this year than last year, which is what we would expect. And then final one, the reduction in property costs or other costs such as largely property, and there's 2 in there. Heat and light has gone up. The cost of that has increased. But actually, we've seen a reduction in our rents and rates. So in our retail store network, we've started to see small reductions in the cost of our stores that we're running. Okay. So moving to the next slide, Slide 9. So this is a slide we've put in -- we've put out now and for the last 2 or 3 presentations, and it was almost a request from talking to shareholders and the analysts around what is the flexible cost nature of the business. So it's been a similar graphic actually for the last couple of years. We continue to have 75% of the cost as variable. All orders are made-to orders, and we don't hold stock in the business. We have some display stock in the showrooms, but we don't build thousands of units on a chance that a customer will like them. So everything is a special order. That means our costs are very variable. If you look at the semi-variable element, payable cost is a big part, which we've talked about. And then if you look at the fixed costs, which we just touched on earlier, that's the rent and rates, the heat and light. Now we've seen GBP 0.2 million reduction this year in that. The main fixed cost is obviously the rent and the rates and that we've been working with our landlords. And when we come to renewal to try and reduce that average tenure of the leases, which we'll cover in a couple of slides, we've had some improvement in that over the last few years.So just looking at some of the moving parts on cash flow on Slide 10. So EBITDA of GBP 3 million, that's the ScS profit of GBP 3.4 million less the House of Fraser cost. So in House of Fraser, we -- pre-redundancy cost, we made a small loss at EBITDA, but then we had the exit cost from a number of people who left the business. We did manage to redeploy a number of those people within the ScS core business, but we couldn't do -- couldn't accommodate all of them, and actually some moved on. The -- if you look at CapEx this year and if anyone has been in the stores recently, we have refurbished all of the flooring departments. They've been in place for over 5 years now, and we felt that it was time for a refresh. So of that GBP 2.2 million, about GBP 0.75 million of that relates to the flooring department refurbishments. And actually we've simplified the way they look and Dave will touch a little bit on that later the benefits we see that bring us. And the other thing that Dave will touch on later in a bit more detail is we start to invest a little bit more in mobile technology. We've introduced some technology into our aftercare team, into our distribution team and there's some we're ongoing throughout our -- technology into our retail team as well. So some investments in there. [Link Up] we've touched on. It's largely driven by the increase in deposits. So the half year, we're nearly up GBP 30 million, which is normal at this time of the year, but also we've seen some working capital inflows from the closure of HoF as we've turned that stock into cash. Dividends, they relate to the last year's final, so the GBP 4.4 million, so no surprise there. And then tax and other. So there is a bit of tax and there is a little bit of an interest inflow in there. Tax we pay just above the standard rate of tax. We have a few disallowables, and that's in line with prior year. So again, no real change from that. I think the final thing just touching on our cash flow just for those -- I think most people are probably aware of this, but we have a negative -- what's called negative working capital model. So most of that -- 50% of our customers buy using credit card or cash and 50% buy using interest-free credit or a credit option. Whoever is buying the product, we'll take a deposit from. So if you're paying in cash or credit card, we will take deposits at the time of the order, just the stock order. We will then take the final balance before we deliver the product to the customer, so we have all the cash before we deliver the goods. And then on average, we pay our suppliers around 45 days after delivery. So we have this -- it's called the negative working capital model, but it's actually quite positive for our cash flow. With regards to finance, again, once we -- we get the cash in about 3 working days of delivering that product. So in all instances, we have had the money for that goods before we've paid our suppliers. Okay. So Slide 11. It feels like it's getting more important, this resilience slide. It's something, again, we introduced probably 1.5 years ago, given obviously, the political influence uncertainty. It's something we continue to focus on. If you look at the last 3 years, we've generated GBP 36 million from '15 to '19. So we're sitting with GBP 62.5 million on the balance sheet at the end of January. On top of this, we also have GBP 12 million committed facility with Lloyds, which runs through November '21. So I suppose if you look at like on the left-hand side of that slide and the cash and the committed facility, we feel we're in pretty good shape. We spent the last few years getting this business in a good shape with regards to resilience. Obviously, there's uncertain times out there, but we feel like we've put a -- we've been in a great position to deal with that uncertainty as and when it comes. If you look to the graph to the right, the store lease tenure, this is what we touched on earlier. We have been working with landlords. And as we renew leases, we are generally taking 10-year leases. So in the past, they would have been a longer tenure. So as you'd expect, the average lease tenure has drifted down. We were at around 9.5 in 2015. And then half year in 2019, we're at 6.3. Now yes, there's a fixed cost, but the low you can get is 10-year, means it allows us to be a little bit more nimble in some of the sites.Okay. So final slide before I hand over to David is just a little bit of overview of House of Fraser. So those who will be aware who -- House of Fraser, the old business, went to administration in August '18. It was then the assets and business were acquired by Sports Direct. We had a number of meetings with Sports Direct. Ultimately, we agreed we'd exit concessions by the end of January '19. As you can see from the trading update in the November -- sorry the Note 15 in the report, you will see there is little impact actually of House of Fraser this year or even last year. The loss in this year after taking into account the realty cost was GBP 0.1 million, which was again fairly small in the context of the group. We've also shown as a discontinued operation. I think by the end of probably 12 months before August, there was taken a lot of management time and focus. There was a lot of changes going on in that business, as you'd imagine. So actually now, it just gives us the ability to refocus in the core ScS business. But also as you've seen recently with the -- where we look at Sofa.com, it gives us some capacity to look for opportunities in the market if they arise and obviously at the right value. Okay. I'd just pass it over to Dave.
Okay, we'll move to Slide 14. This is our mission statement, and really we're driving the strategy through this. So it's a very clear message across the entire business. And so we truly want our customers to have a really excellent experience, and we do want to bring them the outstanding value, quality and choice. And we remain very, very focused on that. I think if we look at Slide 15, these are really the ingredients that we're using to ensure that we're doing that. We know the customer exceptionally well. Therefore, we know how to satisfy them, how to motivate them. And we're very much doing that. So it's a wide, wide choice. So looking at range, it's a large choice with really strong promotional offers. We'll share some ads with you a little bit later. The brands bring credibility to the business. So these are third-party famous brands together with our own brands. Location of the stores, we're looking for that real destination where a customer can come to the park. They will see many of our competitors. Many of our competitors will also have driven traffic to the park for us. So very important that the customer can come, park the car, it's a one-stop. They can believe there's a lot of choice and can make a decision. We've created exceptionally easy ways for them to pay. And what that enables them to do through the long interest-free, it makes the whole store available to the majority of customers, so they can take a long monthly payment and have something perhaps a little more aspirational than they originally were looking for.We've been very focused on Trustpilot and ensuring the customer feels very confident shopping with us. So that 5-star rating. And online, and we'll go into online in a little bit more detail shortly, but really the key area of that is showcasing the product and making it very easy for consumers to shop either online or in a store. So moving now on to Slide 16. Some of you, who were here back in October, we talked about the launch of our 3-year strategy, which we actually launched in spring '18. And that produced really 7 key areas for the business to focus on and drive the business forward for growth. So I'm now just going to take you through each of those 7 priorities and give you a flavor for what we've actually been doing. So moving to Slide 17. We all know that great people make great businesses, and this is an area that has been our #1 priority and continues to be that. We made 2 really key appointments last summer. One was a new HR Director, Mark Sherburn, who joined the business. Formally he had been at DFS for 14 years and latterly at Fabb as their HR Director working with Lord Kirkham. And John Pattison who joined us as our Commercial Director, again, last summer. His background is value supermarkets, and he has brought a lot of organization skill to the business already, having only been with us a few months. But together, that team are working on how we make sure we've got absolutely the right people. We want to attract them, we want to train them, and we want to retain them. So we're being very focused, as I say, on that.We've also launched a new website, the recruitment. It's a much more modern in its feel. It actually has some staff on there, talking about the role that they play in the business, trying to make it more accessible and attract people just with great personalities that want to serve a customer and have a great -- help the customer have a great experience in store particularly. And we've got a lot of that going on, and it's very simple to apply. You are all welcome to try. We're looking for people in the South and -- if you like to try part-time or full-time. We also during 2018, we did a full survey, so a huge uptick from our almost 2,000 employees. And they actually gave us real insight into what are things that we could improve, and we've taken them onboard. They were particularly around the whole communication, very difficult to communicate with 2,000 people. But again, John and Mark are helping us do that. Much more around training and that whole team working together in each area. So we're seeing improvements in that, and there's a lot more to come. And we're seeing a small improvement in staff retention, but really I think you're going to see more and more of that as we move this whole thing forward.Moving to Slide 18. Clearly, we need the customers and we need them to have a great experience. As we've already said, we continued with the 5-star Trustpilot. I mean, it's a huge, huge endorsement for the business and a real confidence, particularly if customers are feeling uncertain. And we've been focused on Trustpilot for probably over 2 years now, but what we're seeing is it's gathering more momentum. When we talked to you in October, we had about 100,000 reviews, and we're now at 135,000 reviews. So in the last 6 months, we've seen it grow significantly and still maintained that Trustpilot score. We've also seen the customer satisfaction score move up a little. So again, very, very, very pleasing. Chris touched on the technology earlier. We've now fully implemented root optimization through Paragon. On service, we've introduced Kirona, which is a bit like the [ gas pod ] come around or you get a parcel delivered and you have to sign for it, so it's paperless. But it's actually planning the route. So if you called in right now, and we needed to get out to see you today, we could actually drop that in to the route for the day, so we could get out to you very, very quickly. So it's actually also optimizing, we're seeing an improvement in the number of jobs getting completed. The other benefit is that when our reporters visited you, if there's an issue, he can actually get that report back to the office immediately. And therefore, we can start actioning it today. So much better experience for the customer. We've actually introduced fleXipod as well. And this is where, again, a bit like in a parcel delivered, it's actually planning your whole delivery. And when we come into your home, we get you to sign something about this size. But the benefit also is we take a photograph in your home, so we can ensure whether the van has taken away all the packaging, that we've delivered the care kit, if you've ordered a care kit as well as the furniture and that it looks great in your room and it's in A1 condition. So -- and again, if you've got an issue with a foot or something, you can just take a photograph of it, we can order a foot and we can have one delivered to you the next day. So again, massively improving the customer experience. It's all paperless. So it's modernized the experience for the customer. It's improved the efficiency of the business. So really, really exciting, and we've got a lot more technology coming that we'd be able to talk to you about in the summer around the actual experience in store. We're currently piloting something right now. So moving to the product. Wide range, so we're on Slide 19. And it is all about bringing value with every single price point. We have the famous brands, so we've got La-Z-Boy, best-selling recliners in the world. And we've got G Plan, got real historic background in the U.K., so very well known brand and also adds to the credibility of our ScS brand. We've introduced -- we have 2 house brands, which we introduced a few years ago, one being Endurance, which is a real value product, very hardwearing, very family friendly, and we've seen real growth in that brand over the past 18 months. And then we have SiSi, which is a white label Italian leather look, so competing with people like Natuzzi, et cetera. So really, really strong brand offer. We are becoming a home of brands in our sector both in furniture and in flooring, and you'll see the flooring logos when we get to that slide. Our core range really is all about driving promotions, driving reasons to shop now and bringing that value again at every price point. Chris touched on earlier, 50% of our customers pay cash, 50% of them take credit, but it does give them -- give all of our customers the accessibility to long-term interest-free credit. The product is completely exclusive. So particularly as you look at people now doing research online, looking -- searching for product online, no one can actually take our product and hack the margin. We also -- we've done an excellent job with the customer, and they're trying to shop around they can't find that product anywhere else, so they have got to shop with us. So very important, that whole exclusivity. We're also -- and this is an area that John has also been looking at, it's how we ensure all of the product arrives exactly to its lead time. And he's been working with the suppliers to ensure that we get the inbound absolutely on time, so the customer has no queries during the process of actually getting delivery. It's also making us more efficient with central arranging and managing the inflow, again, as the business is growing. You can see we've seen a small improvement in that whole customer satisfaction area.So moving over to Slide 20. We have 13 major sofa suppliers. We've worked with all of these suppliers for a very long time. That's really enabled us to work very closely with them on developing new product. Again, they now know our customer very well, so we can work closely with them.We purchase everything in sterling. I think we're supposed to be leaving the EU or something out, somebody mentioned. We have no exchange rate issues at all, because we buy everything in sterling. So when we place the order with the supplier -- when we place an order with the customer and the supplier, we know what the margin is. We also -- when we saw the euro and the pound collapse when Brexit was first announced, we were able to -- our full order book we knew what the margin was in it, we were completely protected. And we were then able to work with the suppliers about not taking a price increase, reengineering some of the product that we were able to keep all those price points. So we didn't -- we were much less affected than many businesses, I'm sure, around exchange rates, which again, very important. Our Far East product, we don't bring in directly ourselves. We bring it in through U.K. suppliers. There's really 2 benefits. The first one is we don't have that whole logistical and lack of and focus taken away from what we do. They actually manage that whole process for us. And secondly, because it's a U.K. supplier, they know what the U.K. consumer is looking for, so we can work very closely with them on U.K. design and the product that we're actually looking for.We have no minimum purchasing commitment. So we will buy a new model. We will work with them. We'll put it on the -- in the showroom. If it sells, absolutely fantastic. If for some reason it doesn't sell, then we will just clear that stock, we've given them no volume commitment. So there is no stock risk on us actually trying new looks, new models. 95% of our product is special order. So just a small amount of stock, so that would be the clearance of models that didn't work, all the refresh of models that have worked, where we're getting a new display model in or if we have the small number of returns or customers that have canceled an order, but 95% is special order, which works to the point Chris is making around the negative working capital model.You can see on here where the product is coming from, still 60% the U.K., 35% from the Far East, and then just 4% from -- actually directed from Europe, and that is mainly the Italian leather look product.So driving sales densities. Again, those of you who've been with us for a number of years, this is a focus that really -- this is a journey we've really been on since 2009 and since the difficulties that we had in '08. And this is about, back to this Chris' point, around fixed cost and actually variable cost. We've been very focused on growing the sales densities, and we've actually grown by over 60% since 2011. So you can see that they've marginally gone up in this period. But really this has been partly driven by the average order value coming off slightly. We probably would have seen a slightly greater increase. So the average order value has come off 4%. But what I think it's important to recognize is we've actually seen gross margins improve. So this hasn't been about us discounting more. This has been about us bringing real value to the customer and really driving those promotions and create positive like-for-likes without giving away margin.Footfall has also come off a little, but really this we believe is people doing more research online and the importance of improving the web. And we're going to touch on that on the next slide. On new -- I'll just touch on new stores. You can see the store network that we have, very, very solid. You know that we have a tiny handful that actually we would exit. So we're very happy with the store portfolio overall. We are still looking for new opportunities, but they really have got to give us a 3-year payback and they've got to be in the top 1/3 of performance. So we're not looking for anything that dilutes any of our key indicators.So moving on to advertising. We made the spend work very, very hard. It's all a value-led message. We're giving you a reason to come and shop right now. If you're in the market today, today is the very best day you could be in the market. If you're not shopping today, if you're shopping tomorrow, funnily enough, tomorrow will also be the best day you've ever been in the market. So we're making it work, as I say, we make it work really, really hard. But very, very important that we are bringing the customer real value, real quality and really at a great price. And I think actually, we'll just show -- we'll show the ads now if we can.This is a campaign that's currently running. This is -- the first ad you're going to see is our core ad, and then we'll see the brand ad.[Presentation]
So as I say, it's all about value, it's all about urgency. We have a brand version of this commercial as well, which Darren is going to show us now.[Presentation]
Thanks. We've had the whole media mix reviewed by Ebiquity. And they said, we were buying exceptionally well on the mix of advertising where we're advertising, again, was very, very good. We've seen a move to a more digital, but particularly social media over the past 12 months, and that really is reinforcing the ads. It's making -- creating a bit more awareness of the promotion and improving our reach. So moving on to the website. Clearly, this is a market -- this is an area that we've really got to get ourselves on the front foot with. And we actually decided just over a year ago to bring a lot more in-house. We've created a fantastic web team, who would now be able to be much more nimble and do a number of things. We also appointed a new company to build those new websites, and we've been working with them now for 9 months. And actually we spent the first 6 months with them understanding our business and really looking and testing various areas. So they created, for instance, a new checkout screen. And they created actually 2 or 3 of those. And they have tested which one is going to be the best. They've looked at other areas on the old site so that when they build the new site, it will actually be incorporated into the new site. It is going to be much more mobile-friendly, because 60% of the customers now are viewing the site initially on a mobile. And so we really need to move this area on. We have also now built a photographic studio, and so we brought that in-house. We brought CGI where we can create lots of different colors of a product in-house, whereas we were -- we were actually using a company in Paris to do it for us originally. So we're much more nimble now with what we can do, how we can get the photography absolutely right. The photography you see in those commercials actually was done in our new studio, so it will bring costs down. That you won't necessarily see us saving, because what we will be doing is we'll be reinvesting that money into more digital advertising. So we're going to make the money in that whole area work much harder for us and help us drive more customers. The new website we plan to have live during the summer and well ahead of our autumn trading. So very, very exciting area for us right now, and we look forward to again sharing that with you later in the year.So moving to flooring. And we understand that the market has been a bit tough in this area. However, we've really kept our foot on the gas in this area, and we want to continue to develop it. We've seen 2-year like-for-like of plus 7.5%. And we were voted Interiors Monthly's national flooring retailer of the year in 2018, and that I believe is from consumers and from manufacturers. We've become a very serious player with a number of these manufacturers. They can see huge opportunities for growth with us. And again, just to remind you, I think, global, say the market is worth almost GBP 2 billion, so still very, very immature for us and a real area that we can continue to grow.Chris touched on earlier, we've modernized all of the flooring departments. We've invested about GBP 0.75 million in this area, and it really helped us massively that we've made all of the lectern stands, all of the display stands and now the same size throughout the whole department. So we can monitor every one of those lectern stands as to which color is selling on it, what it's position in the department, because we've created a matrix for it. We can actually now, as we're promoting ranges, we can bring them forward. So we can really move them around. And again, this is something that John with his eye lens on supermarkets has introduced, and we're seeing real positive progress on that. You've also seen the average order value continue to increase. This is something that's been growing over the past few years. If we want to grow and if we want to really be serious and become a real serious player in this area, we believe we needed to relook at the processes, because as Chris said, it's 5 years ago that we really put our best foot forward in flooring. It was time to do review of this area. And actually we've brought in 2 or 3 senior people with huge length of experience, places like Carpetright, Storeys that actually can help us develop the area, because the back office and the fitting is so, so critical. And actually I'll touch on it on the next slide, but we may as well tell you now, what we've actually done is in each distribution central, we've actually built a staircase and an area. And if -- to be a fitter for those, even though you're self-employed, you have to now come in and be tested. And we want to make sure that you actually can do a really, really brilliant job in the customers' home. So before you can now work for us, you have to pass the test. So we're looking for that consistency around quality, because that customer can actually buy a whole house of carpet with us. And actually, if you look at a 7-year cycle on a sofa, the customer can actually spend more with us on flooring in that 7-year cycle doing on an entire house than they will on a sofa with us, because the average ticket we're already at nearly GBP 700. So you can imagine once you start adding other rooms on very quickly, you've got that maturity and that growth from the business. And the last touch point is the fitting. So very important. We -- on slide 25, we do have a large offering on a very small footprint. So over 120 ranges in store. If you enter into a Carpetright, that's a similar number as to what you would see in the front area of the Carpetright. However, we don't hold any stock. The model works exactly the same as the sofa model. So we can offer 5,000 SKUs. We can offer a very quick delivery on them, because we're dealing with all of the key suppliers. But what we don't do is we don't have the overhead that goes with it around cutting, holding stock, et cetera. We don't create any remnants, because literally, we just buy cut lengths sold-to-order for the customer. So again, we're actually -- we can see that we can get this brilliant choice without any stock exposure.And we've touched on the fitters. And there's some of the brands that some of you may be familiar with that we're dealing with. Okay. Moving on to Slide 26. Chris has really covered this through his financial slides, but I would just highlight the gross profit margin increase, the underlying EBITDA that's continued to build. And you can see what's been achieved in the last -- in the half year for the last 3 years. And we're continuing to build that cash. So just moving to Slide 27. We believe very strong like-for-likes in the first 33 weeks at 2.9%. 2 years, that's 4.6%. Turnover has grown in flooring, by -- over 2 years by 7.5%. The growth of online at 44%. But just to remind you all, it really is about the research, it really is about being that showcase for the business. And when you're competing with somebody like DFS, they were spending about GBP 80 million a year on advertising, and we're spending GBP 20 million. Our strategy has got to be like we like to -- enjoy sitting next to them on a store. We actually want to sit next to them online. And actually it's an opportunity to create this new website that really, really does have standout. So online, very, very important going forward. We believe we've made great progress on the strategy that we've implemented. Whilst there is other things going on around us, we're very, very focused on our business on actually how we're going to continue to grow and develop it. And you've seen the growth in our interim dividend at 5.5p, 3.8% increase. I think that covers the presentation. There is just -- network, just shows you where the stores are, et cetera, in the back. And we'll take any questions.
It's Jonathan Pritchard of Peel Hunt. 2 slightly left-field ones. Firstly, you mentioned Sofa.com. Can you just talk us through what happened there, why you thought it was a good fit, et cetera? And second, I do pick up in the market that Furniture Village perhaps had a bit of stockpiling coming into the next few weeks. Obviously, I understand the strategy you have on stock. But was that something that you've considered and may have moved to?
Okay. On the Sofa.com front, the reality is I believe we were a great home for Sofa.com. I think we could have done an absolutely excellent job with it. It really brought us the House of Fraser demographic, which we currently don't have. It secondly gave us an opportunity to introduce another brand inside our ScS stores, so becoming even more of a home of brands and perhaps attracting that other demographic into the stores. And thirdly, it gave us a manufacturing facility out in Poland, which I must say I visited, and it was excellent and I think we could have helped them hugely with efficiencies within that factory. The real issue was, Jonathan, we looked at how much we were prepared to pay for it. And unfortunately, we couldn't secure it at the price we believed was the right business decision. And therefore, unfortunately, we didn't get it. I do still firmly believe that we were for that business the right fit, because we brought that whole experience of furniture to it. With regard to -- you said Furniture Village is stockpiling.
Yes, building up a bit of stock position ahead of Brexit case.
Right, right. I think we have spoken to each of the suppliers regarding supply. And actually they have got additional ingredients in, if you like. We've never really gone into stock. And actually we've looked at which parts could -- might come in due from the Far East, et cetera, as well. We don't believe that we need to actually create that stockpile. If anybody is going to hold stock, it should be the supplier, because why would we want to use our cash? They are our manufacturers, when all said and done. So it's over to them. And as a key customer to them, they need to ensure that they've got themselves in the right position. As part of our choice of offer is you can buy any combination. So typically, on a showroom, we would have a corner group, a sofa and a chair. The customer can have 3 sizes of chair, they can have different back cushions on every sofa and corner group we have. They can have a 3 corner 1, a 2 corner 2, a 2 corner 1, a 3 corner 1 going the other way, a 3 corner 3. So actually on recliners, you can have -- manually, you can have power. You can have it just in the left hand and in the right hand. And I'm not quite sure -- and you can -- on top of that on La-Z-Boy, you can have in about 300 covers. So it's quite difficult to work out what you stockpile. So I think we very much have got it over to the supplier, and we have had written assurance from the suppliers around this whole area. And clearly, we're monitoring the situation. I mean, that stock could end up being 3 years old, couldn't it? I mean, by the time we actually -- when will we exit? So no. And the other thing is we have tried and -- we have tried on selling stock. We've actually tried a program of having express delivery. And unless it's right at the very bottom end, that GBP 299, the customer actually doesn't want that. They want to feel it's being made for them. They want to feel it's bespoken, they've chosen it and they've picked dark feet instead of light -- oh, I missed the feet. And they either want dark feet or light feet or chrome feet. So they want to actually feel it, even -- and I think that is one of our USPs that even at GBP 299 the customer has choice of cover, choice of feet, choice of cushion. So that's the only time we've ever found express, and then it was marginal. And no problem. Anyone? Oh, Clive?
Clive Black from Shore Capital. Can you talk to us about your estate again? You've got about 100 stores in GB. You gave us a feel for what criteria you would use. So how should we look at the next 12 to 24 months in terms of how your estate will evolve on the expansion side? And then maybe also what sort of tail -- every retailer has got a tail. What sort of tail are you sitting on and that tail be cut, so to speak?
I think if you look at the -- we're at 100 currently. In the next 12 to 24 months, do we think it will change much from that? I think there'll maybe a couple of new openings, but as a couple of sites, we'd probably aim to close. So I think footprint-wise, I don't think it'll change. Again, what we're looking for is an improvement in that sales dense per square foot and obviously profit per store. If you looked at our tail, it's probably, as Dave said, handfuls of 4 or 5 stores that don't really make the return we want them to. But I don't think, overall, in the next 2 or even 3 years, we'll see that estate grow significantly or reduce significantly. So it's fine-tuning rather than a big change.
David Jeary, Progressive. Just following a little bit on property. I know some of the notes [ put it away on ] the dreaded IFRS 16. I was just wondering if you could elaborate a little bit more on when we might know when you've decided on that. And also you alluded to facts and circumstances that may impact on that, if you could just...
So the key thing -- we've been through the exercise in every single lease we've got. So we know what will end up on the balance sheet. So it's generally we've got some cars in there, but it's the store portfolio. So as we said in the statements, we've got GBP 160 million plus of leases that will end up on the balance sheet. The -- we'll repeat that exercise. We did it recently, as you could imagine, for on the board. We'll do that again. The biggest thing that we're debating at the moment is the discount factor. Now there's a number of retailers who have announced and some have gone with quite a low discount factor and some have gone with a slightly higher one. So because we're fortunate to some extent that we're one of the later people to report, we can have a view of other retailers before we finalize that. But that's the only thing that's left. We've got all leases. We've got all the information. It's around that deciding with the help of backing up orders, what we think the appropriate discount factor is, because it's by lease and it's quite difficult when you've got a leases potentially 20 years old to work out what the discount rate should have been at that point. So it's a piece of work we're going through. Now as I said, there's been a number of people that have started to talk about that. And there appears to be different views on what the discount factor basis calculation should be. So -- but what we do know is that GBP 160 million plus will end up on the balance sheet. It will change the way our -- it won't change our cash, obviously, the cash will be the cash, and it'll be around can we give the right disclosure, so people can work out the EBITDA again. But that first transition year will be challenging, and it will see a little bit of volatility.
[indiscernible] from FINCAP. 3 questions, please. Firstly, the slide where you're talking about building your team, is there any obvious competency gaps now within, say, the layer of 20 people underneath you that you still need to fill, given what you set out as your growth strategy for the next few years? The second question is the DFS presentation last week, when they did this external, their strategic review, they conducted external benchmarking and identified some emerging competitive threats and they highlighted specifically Wayfair. I just wonder whether you can comment on that, whether you see that as an emerging vulnerability there? When DFS commented, it was really up against that Dwell format? And then the third one is probably really for Chris. Just to understand a little bit more about this initiative to get some of the performance up on the underperforming stores. How many were in that cohort? And I just want to understand what those initiatives were exactly, whether you can spread them to the wider chain? And what was the data that you've been be able to unlock to get there? So just some more thoughts. And is that just a onetime hit? Or is there much more to go? So those are the 3.
I'll do the last one first. Is that..
If you want to. I'll try to remember the first 2.
So if you look at the underperforming stores we talk about, we have 100 stores, and we have lots and lots of reports, as you can imagine, lots of numbers. But what we did is, we -- probably now 2 years ago, we brought in a new head of reporting and beefed up the team, which are looking forward looking and a little bit history. And what we realized that actually, as you can imagine with any 100-store portfolio, some are doing some things very well, some are doing a lot -- some people are doing a lot of things very well. And actually, there's other areas, which are what we class as low-hanging fruit and some areas for improvement. So when we look at our gross margins, it's not just a product we sell, it's do we sell upgrades, do we sell care kits, do we sell warranty, how much finance do we sell and not just do we sell finance, do we sell at the right tenure, yes? Some stores are better at -- customer -- we're encouraged to make sure customers walk out with 48 months' worth of debt, we need to try and minimize that. So some stores are better than others. So probably at this time last year, we started with almost a lower quartile and drew a line and said, right, all these stores and there was about 12 at the time, we said, oh, we classes as like a red, amber, green. And we said, actually, what are the 4 or 5 levers that we could help them with some training and specific interventions to nudge them up. Now we ended -- we started with 12, and then by the end of the year, we ended up with 2. Now that doesn't mean we really got 2 to deal with now, because we've got moved the bar up again. So again, we'll have a bottom quartile, which will focus on the bottom 12. So it's just constantly trying to improve that in-store selling piece, moving people from certain products to another, is there a slightly higher price point, which gives a slightly better value, better quality. So it's a constant piece of that. The one thing we are bringing in, which David roughly alluded to was, we're bringing in a new API system. So rather than it being PDF files going out to report, it'll be a lot more interactive, a lot more color code, a lot more graphical so that it'll start with David and go down to the branch managers. So in the morning, they'll be able to tell -- actually, the day before, did they have a good day, yes or no, who sold well, who could have sold a bit better. So it's just trying -- we've got all the data we need, but actually it's the way we present it can be a little more insightful to drive a few more actions. So we will always look to improve the markup, as we would call it, in stores and working with -- it's hand-in-glove with that priority #1. Have we got the right people, have we got right managers, have we got the right results to help them train people? Because people don't come to work to do a poor job, it's just they need sometimes some help and guidance from us. So I think we will continue to aim for that. But to us, if we want to continue to become promotional, then we've got a bit of pain coming from the increase in the interest cost because of the movement in LIBOR. We need to continue to improve the selling in store to try and offset some of that. So nothing groundbreaking, I'm afraid, just some basics and a bit better information.
Okay. I think on people, I'm really proud, Peter, of the group that we've actually got together now, that we've got this really great balance of people that are homegrown and people who are bringing new ideas. So I think John and Mark are great examples that they've been able to join us, and the established team have really had a very open mind around things that they've talked about. We really don't have an area now where we're out there looking headhunting or recruiting to fill any senior positions. We've got a really, really great team. You may recall a couple of years ago, we brought somebody in from Carpetright to head up flooring. I'd say we've now got the new HR person. We've got John from a commercial point of view who replaced our previous Sales Director MD role. And I think we're in really great shape. As Chris said, brought somebody into head of the reporting. We brought somebody in last year who had really great experience from Optical Express and Sage on the -- to head up the website. And so no, we -- I think we're in great shape people-wise. And for the next stage of the business is development. On Wayfair, I mean, clearly that -- they're advertising a lot, which is fantastic news, because they're driving people to the web. And actually, this is again, in my view, an opportunity for us to show even more product, really drive people to online. I mean, ideally, they would open stores near us and drive more traffic to the parks. They're very much, I suspect, taking on the people like Loaf and MADE, and to some degree within DFS, probably Dwell and Sofa Workshop, much more than the core product. We need to really remember that our core customer, they're spending on average GBP 1,600. They have one living area. This is a major investment for them. They're making decision in many cases whether to buy a sofa or new flooring or go on holiday. And actually, they want to actually come to the bricks and mortar, come to the stores, see the product, get that expert advice, be able to look at all them colors and all them combinations, which you can't do online. So I think I actually see them in the opposite light. Anybody who is stimulating home as a priority, that's really important. The danger is not keeping up with them regarding the web and SEO searches, et cetera. And this is an area, I feel confident we can move forward. We're in a great place, because we've got the right people and -- to enable us to do it. So I didn't read that comment from DFS. But certainly, they've obviously done some research, and they believe that's important. I mean, Wayfair have grown significantly in the last 12 months. We've reported positive performance. So I think I'd probably worry about it more if we hadn't.Anybody has got any other questions? Thanks, everybody. Sorry, sorry, sorry. You were in my blind spot.
It's okay. I'm Hannah Thomson from GlobalData. Can I ask you a question about product mix? You said a decrease in upholstered furniture sales in ScS stores of 0.2%. Can I ask about other financial categories, specifically dining room furniture?
Hannah, we have a really only a very, very small offering in dining. We really are the sofa carpet specialists.
The performance of...
I think if you look at last year -- if you look at probably 24 months ago, we did make a conscious effort to bring a bit more dining in. So I think when we looked at the numbers last year, we've seen some growth in the dining. But now that's annualized. So it's -- we still have a much better range than we had 2 years ago, but we're not seeing any different growth than the ones -- different than to what we see in furniture.
Anybody, anymore for -- anymore ? Thanks, everybody.