Grafton Group said yesterday that trading in the first four months of the year had been in line with expectations.
"The group continues to be confident about the prospects for its Irish and UK businesses and is well placed to participate in the further consolidation of the UK and Irish merchanting markets," chief executive and chairman Michael Chadwick told shareholders.
While trading in the UK merchanting market remained soft, he said the Irish business had enjoyed "an excellent start to the year". The company recorded strong like-for-like sales growth across its Chadwicks and Heiton Buckley divisions, while Davies and Garvey's, both of which were acquired at the end of 2005, were performing ahead of expectations, Mr Chadwick said.
Its Irish DIY business had a satisfactory performance, as DIY sales continued to grow despite increased competition.
However, shares in Grafton shed 11 cent, or nearly 1 per cent, to €11.09, with the fall attributed to comments that the UK market remained challenging.
Grafton said that although like-for-like sales would be below the levels seen in the first half of 2005, it expected overall sales to be up due to both acquisitions and organic growth.
Since the start of the year, the group has made four bolt-on acquisitions, at a cost of less than £10 million (€14.6 million), and opened six merchanting branches.
It expects trading to improve in the second half of the year as the British economy picks up.
During the meeting, Mr Chadwick fielded complaints from shareholders in relation to the company's dividend and its failure to split the roles of chairman and chief executive.
Richard Hewat, a former chief executive of Heiton Holdings, the company acquired by Grafton last year, argued for a higher dividend, saying that at 4.3 times Grafton's dividend cover was excessive and the dividend yield too low.
Mr Chadwick said the board was committed to substantially increasing the dividend, which has risen by 20 per cent for a number of years.
"We will continue to increase the distribution but I can't say at what rate because that is due to a variety of factors.
"I don't think you should expect to see any huge drop in cover. It may well fall but changes are likely to be gradual rather than huge," he said.
Another shareholder complained that the company did not comply with best practice in corporate governance given that Mr Chadwick combines the roles of chairman and chief executive, while certain non-executive directors have been on the board for longer than the recommended nine years.
Mr Chadwick said the board was very much aware that it was not in line with a number of the guidelines.
"We are aggressively moving toward what some shareholders might regard as a more acceptable structure," he said.
The company took another step in this direction yesterday with the appointment of a new non-executive director. Mr Peter Wood, who has served as chief executive of both Ellis & Everard and UK distribution group BSS, will join the board from July 1st.
