Carpetright staged a decisive recovery in the second half of its year to April as activity and confidence in the housing market revived.
During the second six months sales picked up to £235.9 million, £9.3 million more than in the same months a year earlier. Underlying profits jumped to £34.6 million from £22.1 million in the first six months when sales had fallen back to £215.5 million.
Including profits from managing Carpetright's property portfolio, the full-year pretax total came to £64.2 million, 11.4 per cent down on 2004/05. Sales were 2 .4 per cent lower at £451.4, million.
"Following a difficult first half we have delivered a significant improvement in our second-half sales and operating profits," said Lord Harris of Peckham, Carpetright's chairman and chief executive.
"The development of our property portfolio continues to produce good cash flow and profits which, combined with strong underlying cash flow, allows us to increase our dividend by 4.3 per cent."
A final pay-out of 30p gives shareholders 49p for the year. That is covered only 1.17 times by underlying earnings per share of 57.5p, or 1.33 times by basic earnings.
"This is below the group's stated policy to maintain dividend cover at 1.5 times, but reflects the board's confidence in the group's ongoing cash generating ability," Carpetright stated.
The shares nudged 9p higher to 1239p, 19 times the year's earnings, where they yield just under four per cent.
Looking ahead, Lord Harris said: "Although customers remain cautious, I am confident that the group is well placed to grow in our existing markets and continues to look at opportunities to develop new markets.
"Our strategy of providing a comprehensive offer with the widest product range, best prices and excellent customer service will enable us to continue to expand our business and deliver sustainable growth for shareholders."
Carpetright opened 67 stores in the UK and the Irish Republic during the year and closed 30, leaving it with 440 at the end of April. Yesterday it re-iterated a medium-term target of 550, including an expansion of its concession business in House of Fraser.
There are another 98 stores in continental Europe, including two in Poland, a new market for Carpetright. It expects this Polish venture to become profitable once it has about ten stores there.
Investec analyst Matthew McEachran said: "This statement confirms that both the UK business and its overseas division are well placed to grow profits going forward, particularly as product markets improve."