DIY chain Homebase has reported a pretax loss of €612,000 for the year to the end of February 2006 despite a significant increase in home improvement spending across the economy.

The company's turnover was up to €51 million from €32 million, but a variety of factors prevented the sales increase translating into a profit. The company said turnover was up because of greater consumer spending and investment. The DIY and home improvement sector is benefitting from money released via the SSIAs.

The key reason for the pretax loss was extra costs associated with three new stores. The company said, however, that the performance in some existing stores was "static" and general cost inflation played a significant part in the final results. No dividend was recommended.

The company said customer satisfaction was also a key concern and surveys on this subject had shown improvements recently.

Despite the higher spending levels on DIY over recent years, several companies in the industry have reported disappointing results recently. Many of the companies are posting strong revenues, but costs are eating up their profits.

British-owned chain B&Q recently reported a collapse in profits at its Irish unit in spite of strong revenue growth, which brought its sales above €90 million after fewer than four years in the market.

While the opening of new mini-warehouse outlets in Cork, Limerick, Naas and Athlone helped drive revenues 56 per cent higher to €90.43 million in the year to January 2006, B&Q suffered a 48 per cent drop in pretax profits to €2.1 million in the same period.

However, the worsening performance did not deter the chain's parent, Kingfisher, from taking a €9.52 million dividend from the Irish unit last year.

In accounts filed in the Companies Office, the directors of B&Q said its financial position was "satisfactory" given difficulties in its trading environment.

"Trading performance for the year was disappointing, despite the opening of new stores. As a consequence of the downturn in consumer spending and the challenging trading environment experienced, the company suffered a reduction in profitability," the directors said.