DFS Furniture pledged to continue its expansion drive after strong annual figures showed it remain-ed cushioned from the economic downturn.

The group, which operates from 60 stores, including one in Hove, saw underlying pre-tax profits surge seven per cent to £53.6 million in the year to August 3 with strong demand in the second half of the year helping like-for-like sales to rise four per cent.

DFS said the extended Golden Jubilee holiday had boosted the performance, although its sales growth continued into the new financial year.

Executive chairman Graham Kirkham said he was confident of further progress but warned uncertain economic conditions and increased competition could still have a bearing on future results.

He said: "Providing there is no fundamental change in the overall economic climate, I take a positive view of our prospects."

Mr Kirkham pledged to stick by the company's target of opening bet-ween 15 and 20 new stores in a three-year period.

To keep up with the expansion, DFS has identified the possibility of doubling production capacity at its factory near Doncaster and is already working on extending a facility in Nottinghamshire.

The company said its balance sheet remained strong, although it continued to set aside money in case it has to pay for VAT that Customs and Excise had been claiming.

Court cases centring on whether furniture retailers that sell goods on interest-free deals are liable for VAT stretch back several years and have still to be settled.

But DFS was able to release £17 million back into its profit and loss account earlier this year because it has been told the amount was no longer recoverable.