LONDON -- Laura Ashley (LSE: ALY.L) jumped 1.4 pence, or 6%, to 24.25 pence in early London trade this morning after announcing half-year profits had improved by 14%.

The home furnishings retail chain said first-half sales had gained 8% to 145 million pounds, which in turn helped profits increase from 7.3 million pounds to 8.3 million pounds. The group claimed U.K. retail sales had advanced 6% while online revenues had surged 21%. Best-selling items included bed linen and lighting.

Laura Ashley also said its balance sheet was "strong" with a 28 million pound net cash position, and described its stock position as "clean." The first-half dividend was held at 1 pence per share.

Commenting on the results, Tan Sri Dr. K. P. Khoo, Laura Ashley's chairman, said:

Our multi-channel and international strategies have continued to develop, increase and add significant value to our business, with the website now including extra functionality that has significantly enhanced our customer shopping experience. As a British brand, we are very proud that over 40% of our sales come from product manufactured in the UK.

As we enter the second half of the year, we have seen the momentum of the first half of the year maintained with U.K. like-for-like sales growth of 4.2% for the 32 weeks to 8 September 2012. While we remain mindful of the broader consumer environment and its challenges, we are confident that this progress can be maintained.

Today's statement from Laura Ashley underpins City earnings forecasts of 2 pence per share for the full year, which places the 24.25 pence shares on a P/E of about 12. That does not look too expensive given the group's recent progress, positive outlook and debt-free balance sheet.

Indeed, capitalized at less than 200 million pounds, Laura Ashley is the type of promising smaller company that could be overlooked by many City funds. However, the share may well be suitable for some enterprising private investors, who can accept the potential higher risks and rewards that small caps can offer.

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