The Arnotts department store group has reported slower than expected trading in the first six months of the year, blaming the extensive building at its flagship store for some disruption in trade.

Half-year figures issued yesterday report a 9 per cent rise in pre-tax profits to £2.6 million in the six months to the end of July. This is below analysts' forecasts, which had predicted full-year profits of around £7.5 million. The weaker performance hit the share price, which dropped 2p to close at 438p.

Arnotts' managing director, Mr Seamus Duignan, insists that he remains comfortable with market forecasts for the full year, stressing that he expects trading to pick up strongly over the next six months.

"Barring any unforeseen circumstances, we should put in a very solid performance in 1997," he said.

The complete redevelopment of its flagship Dublin store, which will include a car park and will expand its shop floor, was on target to be completed by the end of October, Mr Duignan said. The car park, which will be leased by a third party, is due to open next month and the new-look Arnotts is expected to substantially boost the group's earnings.

Sales at the Arnotts group, which includes its two city centre shops, Boyers in North Earl Street and an outlet in the Stillorgan shopping centre, showed a 5 per cent increase to £31.9 million compared with £30.3 million in the corresponding 1996 half year. Its concession or franchise outlets within the store contributed around 20 per cent of the group's total sales, accounting for £6.9 million of group turnover. Mr Duignan said the extensive redevelopment had disrupted business in the Henry Street store. "We lost some space to it and had to move some departments to temporary locations, but it is hard to quantify the overall impact of this on sales," he said.

All of its outlets - except its Stillorgan store - performed well, according to Mr Duignan. He was optimistic that the planned redevelopment of the Stillorgan shopping centre would boost sales there in the medium term.

As a result of the building work, the group is exempt from paying tax on its earnings, boosting its results. This helped to push earnings per share up to 14.7p compared with half-year earnings of 10.9p in 1996. The board has declared an interim dividend of 4p per £1 ordinary shares to shareholders, an increase of 6.67 per cent on last year.