Grafton Group Executive Chairman Michael Chadwick

Grafton Group plc, the builders merchants and DIY group with operations in the UK and Ireland, in an Interim Management Statement, for the four months ended 30 April 2008, in advance of the Company's Annual General Meeting today, said that  group sales in the four months to 30 April declined by 8 per cent to €944 million and reflects the adverse translation impact of a twelve per cent decline in sterling against the euro. Irish sales fell by 16 per cent. Group profit before tax was, as expected, significantly down compared to the very strong performance in the first four months of 2007.

Grafton said in the UK, the residential repair, maintenance and improvement (RMI) market has demonstrated resilience despite lower investment and spending on housing due to tightening in the availability of finance secured on property. The Group's UK Merchanting business experienced positive trading conditions in the first quarter with low single digit growth in like for like sales. Market conditions weakened in April compared to strong growth in April 2007 and like for like UK sales fell. Overall UK sales increased by ten per cent in sterling in the four months. Ongoing development of the UK Merchanting business continued with the completion of five acquisitions trading from eleven branches with an annual turnover of approximately £40 million and the opening of eleven branches.

In Ireland the reduction in new residential construction which started in the second half of 2007 gathered pace as housing output adjusts to a more sustainable level. The sharp fall in housing starts and completions has, as expected, led to a more difficult trading environment for the Irish Merchanting business. The Irish RMI market appears to be holding up well and non-residential construction remains strong.

Grafton said that growth in consumer spending in Ireland moderated from the high rates of recent years despite generally favourable income and employment conditions. Turnover in the Irish Retailing business was lower due to the more subdued retail environment and the absence of the very favourable weather that stimulated exceptionally strong demand in March and April 2007. The new store in Carrick-on-Shannon which opened in March traded ahead of expectations.

Growth in the UK economy is expected to moderate and the RMI market is likely to become more challenging as the year develops.

"Contributions from acquisitions and scale related sourcing and cost synergies should help limit the impact on profit of market weakness. In Ireland low growth in the economy is forecast due largely to the downturn in the residential construction market and slowdown in the international economy. A programme to achieve scale related synergies and bring costs more into line with lower volumes without compromising the market positions and medium term prospects of the Group's businesses is ongoing. The Group's strong financial position and cash flow leave it well placed to cope with these more challenging markets," Grafton said.