A strong performance from its British operations has helped building materials and DIY group Grafton to record a 16 per cent rise in first-half profits.

The company, which made three acquisitions in the British market since June, now trades from more than 200 locations in Britain.

Overall, profit before tax and exceptionals was up by 16 per cent to €31.6 million while turnover rose by 14 per cent to €535 million.

The company said it remained positive about its future prospects and expected profitability in the second half to be ahead of last year.

It is not paying an interim dividend. Instead, it will redeem one redeemable share of each Grafton unit for 3.75 cent per share, an increase of 15 per cent on last year's interim dividend.

Earlier this year the group issued 10 redeemable shares for every share held and plans to repurchase them as another means of distributing income to shareholders.

The British business, which Grafton believes will be the principal driver of growth going forward, accounted for 69 per cent of total turnover in the first half and 61 per cent of operating profits.

Turnover in Britain rose by 22 per cent to €370.6 million, while operating profits were up by 40 per cent to €23.2 million.

By contrast, Grafton's Irish operations had a tough time in the first half as they adjusted to the slowdown in the construction sector, which the company does not expect to return to growth this year. Turnover was down by 1 per cent to €164.2 million, while operating profits fell by 13 per cent to €15 million.

"We see growth at more modest levels going forward," said managing director Mr Norman Kilroy.

Lower turnover, combined with higher payroll and insurance costs, pushed margins in its Irish business down to 9.1 per cent from 10.4 per cent.

While its merchanting business in the Republic suffered, with revenues down by 5.6 per cent to €103.5 million, its retail operations turned in a stronger performance.

Woodies reported sales growth of 10 per cent to €45.8 million with like-for-like sales growth of 7 per cent. Following the opening of stores in Newbridge and Tralee, there are now 14 Woodies stores in the Republic.

Grafton believes there are still opportunities for growth in the Irish DIY market, which has recently attracted British chain B&Q, as spending in this area remains lower than in Britain and elsewhere. It has acquired a property on the Naas Road in Dublin for future development.

Meanwhile, it has a healthy pipeline in Britain where it plans to continue to focus on small, bolt-on acquisitions. It says the market there remains very fragmented, with around 30 per cent of merchanting firms still in the hands of independent, family-run businesses.

Although the results were slightly ahead of market expectations, Grafton shares closed seven cents lower at €4.25 in a generally weaker market.