Walker Greenbank, the maker of Harlequin and Zoffany wallpaper, did better than expected last year as wallpaper came back into vogue.
Shares in the company jumped almost 8% to 47.25p today as it said profits for the year to January 31 will beat City expectations.
All four of its wallpaper brands - Harlequin, Sanderson, Morris and Zoffany - are selling well.
Harlequin, which costs between £24 and £29 a roll, has proved the biggest hit with customers, with revenues soaring by more than 30%.
The handprinted, £50 a roll Zoffany brand, formerly the jewel in the crown, has recovered from four years of decline and will record its first year of growth.
Last year saw the Milton Keynes-based company move into the black for the first time in six years. Its fortunes have improved thanks to a shift in consumer taste away from minimalism, with people increasingly opting for wallpaper and fabric rather than paint.
Chief executive, John Sach, talked of a "spectacular turnaround". He said: "Walker Greenbank had a very difficult seven years where it lost a spectacular amount of money.
The fashion started changing two or three years ago - there was a move back to colour and pattern. Minimalism is kind of dead."
He predicted that printed fabric, which has also been in decline, will make a comeback like wallpaper in the next couple of years.
The firm was catapulted into the limelight nine years ago when it supplied £300-a-roll Pugin wallpaper to the lord chancellor, Lord Irvine of Lairg, for the £650,000 refurbishment of his apartment in the Houses of Parliament. The Pugin wallpaper was made by a business that has since been sold by Walker Greenbank.
The group produces a similar handblock print wallpaper for £100 to £150 a roll which it sells mainly to Americans.
Mr Sach sees the US market as a big opportunity in the future, and the firm already has a showroom in New York.
House broker Teather & Greenwood immediately upgraded its estimates after today's announcement.
Analyst Stephen Thomas added £1m to turnover for the current year and, reflecting an improvement in margins, nudged up operating profits by £170,000. But he left his underlying pretax profit forecast unchanged at £1.5m as he assumes that spending on marketing and brand development will rise.
Profits are set to rise to £2.5m next year. As part of an extensive restructuring, Walker Greenbank slashed its ballooning pension deficit through a buyback scheme from £11m in 2005 to £6m last July.
It is also tackling its debt mountain, which amounted to £9.9m in July.