Irish DIY retailers could see sales grow by over 20% to 1.9bn between now and the end of 2007 as they reap the benefits of the anticipated post-SSIA spending spree, the report says.

Davy analyst Florence O'Donoghue, estimates that the DIY market is currently worth .1.6bn. Davy's previous research on the likely spending and investment patterns following the end of the government-backed special savings incentive scheme assumed that 20% of the SSIA money will be spent between 2006 and 2007. That represents a cash injection of 3.2bn and O'Donoghue believes the DIY sector is a "very plausible target for SSIA money".

DIY retailers have found themselves in a win-win situation in recent years thanks to a consumer spending boom and the unique dynamics of the Irish property market.

Record numbers of housing completions means a constant stream of customers looking to furnish and fit out new homes. The Irish housing stock has risen by over a third over the last 10 years, expanding the market for DIY operators. At the same time, existing homeowners have built up equity in their houses thanks to a booming property market and many are tapping into that equity to refurbish and build extensions.

"Strong economic performance provided an ideal platform for the expansion of the DIY market. Moreover, the market was underdeveloped, with average DIY spend historically lagging the UK by over 10%, " O'Donoghue says.

According to figures from the Central Statistics Office, cited in the Davy report, growth in spending on items in the "hardware, paints and glass" category has significantly exceeded growth in retail spending generally over the last five years. Last year, for example, retail sales grew by 4.9% but spending on hardware, paints and glass grew by 11.1%.

Keen to take advantage of the favourable economic climate, the leading players in the DIY market have expanded rapidly over that period.

"Roughly speaking, the DIY market in Ireland expanded by some 40% between 2002 and 2005, with store capacity doubling, " O'Donoghue says.

In 2003 the leading players Atlantic Homecare, Woodies, B&Q and Homebase had 33 shops between them accounting for 1.2m sq ft of retail space.

Since then, in the space of just two years, they have added another 18 outlets, nearly doubling their retail capacity to 2.3m sq ft in the process. In the meantime another DIY chain, the Dairygold-owned 4Home, has entered the market, opening four shops and planning a further 26 over the next three years.

Even if 10% of that 3.2bn is spent on refurbishment, house extensions or in furnishing and fitting out new homes that represents a 320m windfall for the DIY market. "This equates to 20% of estimated current annual DIY spend in Ireland. Even though such an investment would be spread over 2006 and 2007 it would nevertheless act as a powerful injection for the sector, " says O'Donoghue.

On a pro-forma basis, the biggest beneficiary of that injection would be Grafton.

Through Atlantic Homecare and Woodies, O'Donoghue estimates that Grafton has a 15% share of the Irish DIY retailing market. Grafton is expected to report 2005 sales of 250m through the 42 outlets, accounting for a quarter of the company's Irish revenue and 10% of overall group revenue, according to Davy's forecasts.

Grafton's growth prospects in DIY have been hit in recent years, however, by a significant increase in the level of competition in the market.

The arrival of large format retailer B&Q in the Republic and the growing ambition of other players, including new arrival 4Home, have had a noticeable impact on Grafton's business. Like-for-like sales growth has slowed down rapidly as competition has intensified.

The arrival of Ikea, which submitted a planning application for a site in Ballymun last week and hopes to be upand-running in 2007, will add further spice. The flat-pack furniture specialist is not a DIY retailer per se but its 300,000 sq ft Dublin store is likely to put pressure on existing players in certain areas of their business, such as furniture, shelving and lighting.

Despite the changes to the competitive landscape the factors which have underpinned the DIY boom are still present, says O'Donoghue, which bodes well for Grafton in the years ahead.