DISCOUNT retailer Matalan has shown there is still good money to be made from cheap clothes, as improved margins helped the store group increase its profits by 72 per cent in the past six months.

Matalan said pre-tax profits had risen to £35m in the 26 weeks to August 26, compared with £20.4m at the same point last year. Turnover rose to £256.3m, against £162m.

Group chairman John Hargreaves said: "The business has continued to grow strongly in the first half of the year, driven by strong like-for-like sales and sales from new, extended and re-sited stores."

The group said the strong results meant it was now the sixth largest clothing retailer in the UK, rising from its tenth position at the same point last year.

Matalan's store expansion programme has also been gathering pace, with recent development in the North-East.

Since March, it has opened seven new stores, while a further 16 stores are due to open in the second half of the financial year. This compares to seven stores opened in the second half of last year.

Matalan landed the coveted prize of Retailer of the Year earlier this year, and it already boasts six out-of-town sites in the region, from Kingston Park, Newcastle in the north down to the Clifton Moor complex just outside York.

It has already said that new staff will be required at the stores, which employ between 45 and 80 people, as demand for well-known brands at the knock-down prices it offers continues to grow.

Teh increase in profits means shareholders will pick up an interim dividend of 1.75p, a 75 per cent jump on last time's 1p.

The discount retailer said it had entered into an agreement to launch a credit card with National Australia Group Europe bank, offering a five per cent APR rate forall Matalan purchases.

Tests on the new card are expected to commence n the next few weeks and Matalan will offer its customers trial personal loans from January next year.

Matalan is also testing a home shopping catalogue in 10 stores offering a wider range of goods than those stocked in the shop