Grafton Group (LON:GFTU) , the Irish based builders merchant and manufacturing group, saw its figures take a tumble in the early part of the year as bad weather impacted on already fragile market conditions. Nevertheless, a resurgence in new house building in the company’s core UK market gave investors confidence that it was heading in the right direction, with the shares rising by 2.9% to 3.5p.

Grafton operates merchanting outlets including Buildbase and Plumbase and runs the Woodie’s DIY and In-House retail centres in Ireland as well as the Euromix mortar manufacturing business. Year-on-year sales during January fell by €25m as a result of poor weather but UK trading, which accounts for 70% of Grafton’s turnover, picked up with like-for-like growth in each of the following months. In Ireland, sales continues to be below levels achieved in 2009 but the rate of decline reduced.

Group turnover for the first four months was €617m, down €22m on the same period in 2009, although UK merchanting sales in sterling increased by 4% in the three months to the end of April. In turn, it said it was optimistic that the positive effects of a stronger UK house building market would continue.

Elsewhere, Grafton incurred rationalisation costs in the first three months of €1.7m, against €4.1m last year, which it said would result in annualised savings of €4.2m. It also remains in negotiations over refinancing some of its debt, with talks scheduled to reach a conclusion in the third quarter of this year.

In March, Grafton revealed that sales had slipped by 25% to €1.98bn in the year to December 31, 2009 as demand for its products fell away. As a result, pre-tax profits plummeted by 78% to €13.6m and the company was forced to take measures to strip €85m out of its annual cost base. Today, it said the benefit of a recent return to growth in turnover, combined with the significant cost reduction and stronger market positions had been reflected in an improved operating performance.

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