Clothing and home furnishings retailer Laura Ashley yesterday offered its first dividend in nine years after a 39 per cent rise in annual pre-tax profits.

Shares soared 13 per cent to hit their highest level in 20 months as the group said its strategy of slimming down fashion to focus on home products continued to pay off.

The board's decision to pay a dividend of 0.5p a share "represents a major milestone in the recovery of the business", Laura Ashley said.

The group, famous for its floral fabrics, said sales for the year to January 28 dropped 11.6 per cent £211.1 million, largely due to the planned reduction in fashion in the UK.

However, like-for-like UK retail sales for the ten weeks to April soared 11.2 per cent on last year, thanks mainly to an improvement in the quality of the reduced fashion ranges, the group said.

Clothing accounts for 17 per cent of the business in the UK, while furniture, home accessories and decorating accounts for the rest.

Laura Ashley said the better-than-expected pre-tax profits of £6.1 million for the year was largely due to cost cutting, the move away from fashion to home and increased efficiency.

Lillian Tan, chief executive, said: "Although the retail market remains challenging, we believe our enhanced product offering, increased productivity and new format store opening programme will enable us to increase top line sales in 2006."

Laura Ashley has 180 stores in the UK - 78 selling clothing and home products and the rest selling home products only. Ten new home stores were opened throughout the year.

Mail order and e-commerce now represents 13 per cent of the total UK retail business, the group said.

While mail order sales were down 10.2 per cent on the year, internet sales rose 45.8 per cent, reflecting "the general market trend towards ecommerce at the expense of more traditional direct sales channels", Laura Ashley said.

Last month, the group relaunched its website which now has 328,000 registered customers.

Overseas, Laura Ashley said franchise revenues fell by 14.7 per cent to £22.1 million due to the reduced fashion ranges. Clothing represents around 60 per cent of total franchise sales.

Laura Ashley has 210 franchised stores in 28 countries.

The group took the decision to trim its fashion business after a number of turbulent years, during which 450 staff lost their jobs. ..SUPL: