Shares in Pacific Brands have surged after the Bonds underwear owner cheered shareholders by reintroducing dividend payments and forecast a full year profit.

The clothing retailer’s sales rose 8.6 per cent to $425.3 million in the first half with all of its major brands enjoying growth, including undergarments brands Berlei, Bonds  and bedlinen brand Sheridan.

Company CEO, David Bortolussi, said their strategy of “simplifying the company to focus on a higher quality, simplified business with greater growth potential and a strong balance sheet, is working.”

The sales growth helped return Pac Brands to the black with a $24.3 million net profit for the six months to December 31, compared to a $108.7 million loss a year ago.

The company will pay an interim dividend of 1.6 cents per share, fully franked – its first payout for shareholders in two years.

“At our full year results and AGM, I said F15 marked a turning point in the sales and earnings trajectory of Pacific Brands and I am pleased that our 1H16 results have demonstrated it. Sales and earnings were up in every operating group,” Bortolussi said.

He added, “this, with our strong cash flow and increased net cash position, have enabled us to reinstate dividends with a payout ratio of 60 per cent.”

Shares in Pacific Brands jumped by 18 per cent in early trade and were 6.5 cents, or 8.3 per cent, higher at 84.5 cents at 12:31 p.m. Bortolussi said the positive momentum has continued into the second half with sales up eight per cent in the past six weeks.

Bortolussi gave a more specific full year guidance with expectations that earnings before interest and tax (EBIT) will land between $73 million and $75 million.

“This first half result demonstrates that our strategy is working with strong growth in sales, earnings and returns,” he said.

“We have commenced our price increases as planned and have made substantial progress in mitigating currency headwinds.”

Pacific Brands has spent the past few years undergoing a major restructure that has seen it focus on a smaller number of brands and shifting from being just a manufacturer and wholesaler to also being a retailer.

Bonds’ sales rose 14 per cent in the first half, driven by growth at its own stores.

Sheridan sales were up 10.2 per cent, with same store sales up nine per cent.

Want more Inside Retail? Subscribe to Inside Retail Weekly now and get our premium print publication delivered to your door every week.