Grafton Group, the builders merchant and DIY retailer, has reported improved economic conditions both in Ireland and in the UK.

In a trading update today, the company has posted an 8% increase in revenue for the year to the end of December. 

Its UK and Irish merchanting businesses both recorded growth, with the final quarter of the year seeing a notable pick-up in Ireland.

The company pointed to early indications that the new housing market had returned to modest growth after six years of contraction.

Grafton, which owns the Woodies and Atlantic Homecare DIY chains, said there was a noticeable improvement in sentiment but that consumers are still relatively cautious about their finances. It reported modest growth in retail in recent months.

The group said it remains on course to report full year operating profits in line with its expectations.

"Activity levels benefitted from an improvement in economic conditions as the year developed and trading in the final months of the year provided further evidence that the recovery underway in the Group’s markets has started to take hold," the company stated in today's trading update.