Builders merchanting and DIY group Grafton has announced a 13% increase in revenue for 2016 to just over £2.5 billion - a new high for the company.

Grafton said its adjusted group operating profit for the year to the end of December rose by 12% to £142m. Pre-tax profits for 2016 were up 14% to £136.2m.

The company said a second interim dividend of 9 pence per share was approved to give a total dividend for the year of 13.75 pence. This is up 10% on the total dividend of 12.5 pence paid in 2015.

The group's UK merchanting business - its biggest revenue generator - finished out the year on a positive note following two quarters of weaker demand due to subdued activity in the UK housing market. 

Its Irish merchanting operations also put in a very strong performance in the year with double digit revenue growth for the third year in a row.

Grafton said that demand in the merchanting and DIY market should continue to be underpinned by gains in employment and increased disposable income.

"The outlook for investment in the construction sector is favourable with forward looking indicators pointing to an increase in house building and non-residential construction," it added.

The company's chief executive Gavin Slark said that 2016 represented an overall strong financial performance despite challenging trading conditions in the traditional UK merchanting market. 

"While uncertainties remain about the UK economy, the recovery in the Irish and Netherlands markets is forecast to continue.  The group's very cash generative operations and strong balance sheet leave it well positioned to invest in areas where we see good opportunities for growth," Mr Slark added.

Breaking down its divisions, Grafton said that its Merchanting segment - which makes up 92% of group revenue - reported a 8.3% increase in operating profits to £135.2m, while revenue moved 13% higher to £2.290 billion.

Within this division, revenues at its UK merchanting rose by 6.6% to £1.771 billion while operating profits fell almost 6% to £99.7m as growth eased in the second part of the year due to uncertainty over the near term outlook for the UK economy after the Brexit vote. 

Operating profits at Grafton's Irish merchanting business jumped by 44.6% to £27.1m while revenue rose 26.7% to £347.7m as the division reported double digit revenue growth for the third year in a row.

Grafton said revenue growth in Ireland was mainly stimulated by strong demand in the residential RMI (Renovation Maintenance Improvement) market despite a decline in housing deals to 2% of the housing stock. 

It pointed out that this is estimated to be half the level expected in a property functioning market.

The company also noted that non-residential new build and RMI activity improved from a low base after a long time of under investment. It saw a pick-up in demand across most segments of the market including technology, energy, hotels, offices and agriculture.

Grafton said that Irish revenue growth was broadly based across its branch network as the market recovery gained momentum outside of Dublin and the country's other cities.

The company said that three new Chadwicks branches are due to open in Dublin in the first quarter of 2017, which will increase the network to 47, including 20 in the Dublin area. 

In its retail segment - which makes up 6% of group revenue - Grafton said that revenues rose by 19.5% to €157.1m while operating profits surged 119% to €7.3m.

Grafton said that the Woodie's DIY chain saw "significant profit growth" for the second year in a row on the back of a recovering retail market in Ireland. 

The company also said today that it has made some changes in its Belgian business, adding that the business there can be sustainably profitable in the medium term.

It added that it sees opportunities for consolidation, acquisition and greenfield openings in the Netherlands. 

Grafton shares are up over 9% in London trade today.