TOUGH TRADING conditions and sterling's weakness have hit sales at the builders' merchant and DIY group that owns Atlantic Homecare and Woodie's.

Builders' supplies and DIY specialist Grafton Group said in an interim management statement yesterday that turnover fell 14.5 per cent to €2.35 billion in the 10 months to October 2008.

Dublin-listed Grafton has operations in Britain and Ireland. The group blamed tough trading conditions in both markets, combined with sterling's 13.6 per cent decline against the euro, for the fall in sales.

Excluding the impact of sterling's weakness, Grafton pointed out that turnover was down 6 per cent in constant currency terms.

Turnover from its British operations actually grew 1.5 per cent in sterling terms during the period. While house-building fell, repair, maintenance and improvement (RMI) activity supported sales.

"The downward pressure on the RMI market activity, already evident since the spring, gathered pace as the year developed, resulting in a decline of 6 per cent in like-for-like sales in the 10 months," the statement said.

"Declining house prices, restrictions on the availability of mortgages and reduced growth in real disposable incomes put customers under pressure to cut back on housing-related expenditure and investment."

In Ireland, turnover was down 18 per cent, while like-for-like sales fell 19 per cent. Increased borrowing costs and tightening credit availability aggravated the housing market slump, which, Grafton said, has been under way for almost two years.

"The impact of the decline in housing starts and completions on the Irish merchanting business has been partly offset by market share gains and reasonable levels of activity in the RMI and non-residential new-build markets," its statement said.

Falling consumer confidence, a result of the weak jobs market and a decline in spending power, hit turnover at Grafton's DIY businesses.

Grafton said its managers would continue to focus on a cost-cutting plan designed to deliver savings of €30 million a year. It also expects that lower capital and acquisition spending will benefit cash flow.

Along with its Irish DIY chains, Grafton supplies builders and plumbers in Ireland and Britain.