British designer label Paul Smith has paid out a £3.4m dividend after a bumper year in which profits hit the £25m mark.

Sir Paul Smith, who founded the iconic menswear business in the 1960s, took home £2m with the remainder of the pay-out going to Itochu, the Japanese business which manufactures and sells his collections in Asia.

According to figures filed at Companies House, profits rose £3m to £25m in the year to June 30. Group sales rose to £174m from £168m, driven by new shop openings.

However, the business said that wholesale orders fell off during the year and trading was challenging in the Japanese market.

In a statement, the business said it “continued to grow total sales, with a reduction in wholesale orders being more than offset by increased retail sales resulting from new shops, as well as increased like-for-like sales in existing shops and the internet.

“Despite a difficult Japanese market, royalty sales have remained strong.” Smith said the performance was “very pleasing given the challenging economic climate”. The highest paid director, thought to be Smith, took home a £3.3m salary.

Paul Smith has 15 shops and concessions in the UK and 200 shops worldwide, in markets including Japan, Paris, Milan, New York and Hong Kong.

Smith, who controls the company as both deisgner and chairman, sold a 40% stake in the company to Itochu in 2006.