DIY and builders merchants group Grafton said yesterday that sales were up 12.5 per cent at €1.6 billion in the first six months of the year. It has also spent €42 million on the purchase of six builders' merchant businesses, five in the UK and one in the Republic.

Grafton, which owns the Atlantic Homecare and Woodies DIY chains, issued a trading statement for the first six months of the year yesterday.

"The group expects strong double-digit earnings growth for the period, driven by improving returns in the UK and by an ongoing good performance in the context of slower growth in the Irish merchanting market.

"The improved conditions in the UK merchanting market in the second half of 2006 continued into 2007 and like-for-like sales increased by mid single-digit percentage in the half year.

"A return to growth in this market has been reflected favourably in group earnings."

It added that the Irish DIY business performed strongly during the first six months of the year, supported by strong consumer spending.

"The three stores that were opened during 2006 traded ahead of expectations," it added.

Executive chairman Michael Chadwick told The Irish Times yesterday that the group expected conditions in the Republic to be "more challenging" because of a slowdown in house building. He acknowledged that the market for supplying building repair and maintenance remained strong.

Mr Chadwick said all the acquisitions were small.

However, the companies have added €60 million to group turnover and added 21 branches. Grafton also opened 10 new outlets.

The companies it bought included Classic Hardware in Leeds, Frontline Bathrooms in Yorkshire and Wright's in Buckinghamshire.

Despite the good news, investors largely sold the stock yesterday, leaving it down 61 cents, almost 6 per cent at €9.94 on the Dublin market last night.