Heiton was treated to a round of analyst upgrades yesterday after it reported strong trade in the second half of last year and looked ahead "with confidence" to 2004.

The company's first pre-close trading update pointed to "good progress" in profit growth for the six months to the end of April, as well as "robust cash generation" over the year.

The merchanting group also said it would be seeking to expand through bolt-on acquisitions in the Republic and the UK over coming months as it beds down a new company structure adopted last summer.

Heiton's chief executive, Mr Leo Martin, said the firm's second-half performance had been underpinned by continued strength in both house-building and DIY.

The firm's ability to insulate itself from the developing global steel shortage through innovative sourcing was a particular boon, according to Mr Martin.

He said the restructuring of the firm's previously troubled UK division was continuing to bear positive results against a benign economic backdrop.

Expansion in the UK through bolt-on acquisitions is "on the agenda" for the firm, Mr Martin said. Purchases in the Republic are also likely, he said. A bolt-on acquisition in the merchanting sector would typically cost €5-€10 million but Heiton's debt levels would allow it to spend up to €100 million.

Heiton currently draws about 85 per cent of its profits from the Republic and the remainder from the UK, but is trying to reduce the Irish bias to about 70 per cent. This strategy will act as a comfort to commentators who regard the firm as overly reliant on the vagaries of the domestic housing market.

Shares in Heiton held up well in a weak Irish market yesterday, shedding just one cent to close at €4.96. Analysts at Merrion Stockbrokers upgraded their earnings per share forecasts on the stock by 4 per cent to 51.5 cents for the past year.

Davy, Heiton's broker, said the group, which is trading at a 20 per cent discount to its competitor, Grafton, was "one of the cheapest stocks on the Irish market".