BUILDERS MERCHANT and DIY group Grafton posted a 2 per cent rise in first-half revenues as sluggish consumer behaviour in the Republic and UK hit the home improvement and building supplies markets.

Group turnover rose to €997 million in the first six months, compared with €979 million a year earlier. More favourable weather conditions benefited the company during the first half, but the rate of growth slowed in the second quarter.

“As expected, the pace of growth has slowed from the weather-related improvement experienced in the first quarter,” said Davy analyst Robert Gardiner.

“Sales growth at end-April was 4 per cent, implying that group sales in the May-June period declined by 1.8 per cent year on year.”

He attributed the decline to the deterioration in the group’s Irish businesses.

In the UK, where Grafton generated more than two-thirds of its revenue last year, average daily like-for-like sterling turnover rose by about 4.7 per cent.

However, declining incomes and falling employment in the Irish market gave rise to “challenging trading conditions” as spending on home improvements and DIY declined and turnover fell by about 6 per cent.

At the end of April turnover was down only 2.6 per cent, indicating a significant slowdown in May and June.

“The trading environment in the group’s key markets is proving slow to recover to more normal conditions in light of the continuation of weak mortgage lending and low levels of consumer confidence,” Grafton said.

“However, the group continues to significantly improve its trading performance from the historically low levels of the recession.”

Mr Gardiner said: “The statement is broadly as we expected, although the sharp deterioration in the Irish business in May and June is clearly negative. This suggests that our full-year sales forecasts may prove optimistic.”

However, Davy added that it was maintaining its “neutral” stock rating at this time.

Shares in Grafton closed at €3.05, down 29 cent. – (Additional reporting, Reuters)