Grafton has reiterated its commitment to further acquisitions in the UK market after a better than expected performance from its latest UK subsidiary, Jackson Building Centres.

At the company's annual meeting in Dublin, executive chairman Mr Michael Chadwick said Grafton had a "healthy pipeline of potential acquisitions under active consideration". When the building supplier's group bought out Jackson Building Centres last March for €144.2 million, there were concerns among some analysts that the group had paid too much for the UK retail chain. But yesterday's company trading statement said the subsidiary, which dominates 2 per cent of the building supply market in the UK, was "trading ahead of expectations".

Investors welcomed the upbeat statement that forecast "further growth" in the year ahead and by mid-afternoon the company's share price had nudged up by 5 cent.

Mr John Mattimoe, an analyst with Merrion stockbrokers, said: "Grafton has grown substantially over the last number of years through strategic and bolt-on acquisitions. Its commitment to this strategy gives the market confidence that the company can continue to grow in the future."

However, Grafton's consolidated presence in the UK market has left its earnings vulnerable to the recent sterling depreciation against the euro.

Mr Chadwick denied that this currency fluctuation would significantly dent profits. He said: "Our profits are growing and continue to grow. One effect of the change in the exchange rate may mean that our profits will grow less quickly even though the underlying business is growing fast.

"Virtually all of our borrowings are in sterling so we pay almost all of our interest in sterling and that acts as a hedge against changes in the exchange rates." The UK is now Grafton's most important market and Merrion stockbrokers believe the sterling downward trend presents the biggest challenge to Grafton in the months ahead.

However Mr Mattimoe noted that the group's profits and earnings per share had improved on last year's performance. He said this growth, coupled with the company's interest rate payments on borrowings in the UK, should be enough to mitigate against the weakening sterling.

Grafton's turnover for last year was up by €163 million on the previous year to €1,152 million, while profit before tax rose to €80 million from €67 million in 2001.