Underlying pre-tax profits at hardware merchant Grafton Group increased by 3 per cent last year to €42.3 million

Grafton, which operates the Woodies, Chadwick and Atlantic Homeware brands in Ireland, said revenues increased by 3 per cent to €2.05 billion in the year to the end of December.

Operating profit increased by 13 per cent to €54.7 million, after a €2.2 million amortisation charge, and adjusted earnings per share were 15.4 cent.

Grafton Group incurred restructuring charges of €12.7 million and a charge of €19.4 million in respect of “a small number of onerous leases” and related asset impairment primarily in the Irish retailing businesses.

UK merchanting branches increased turnover by 4.0 per cent to €1.46 billion, Grafton said, and operating profit before restructuring costs in the UK increased by 3.5 per cent to €59.9 million.

Turnover in Grafton’s Irish merchanting branches fell by 6.4 per cent to €306.8 million but operating profit increased by 12.5 per cent to €4.1 million.

It said savings of €50 million had been realised in the Irish merchanting business in the three years to the end of 2011 through cost reductions and branch consolidations.

"These savings were critical to maintaining profitability in response to sharp declines in volumes and should result in significant operational leverage when the Irish merchanting market recovers."

Grafton Group said the economy in Ireland had stabilised but that the immediate outlook was challenging “due to pressure on disposable incomes, concerns about employment prospects and very tight credit conditions”.

It expects demand to remain weak in the Irish merchanting and DIY businesses in 2012.

Grafton said its dividend increased to 4.75 cent, 7.5 cent for the year, up 7.1 per cent on 2010 and that net debt was reduced to €225.9 million from €255.1 million a year earlier.

Grafton Group chief executive Gavin Slark said the group would continue to focus on margin enhancement, cost management and cash generation and evaluate value adding expansion opportunities in 2012.

Shares in Grafton Group were trading at €3.20 at 10am, down 2.6 per cent.