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Last Updated: Friday, 10 March 2006, 16:58 GMT
Energy costs to hit Greggs profit
Sausage roll
Sales growth has slowed in recent months
The UK's largest bakery chain, Greggs, has warned that higher energy costs are set to eat into its profits this year.

Greggs said its total energy bill was set to increase by 5m this year, and it was "unlikely" to achieve the same level of profit seen in 2005.

The company reported a profit of 50.2m for 2005, up 5% on the previous year.

Greggs, which operates more than 1,300 bakeries, said profits in the first nine weeks of the year had been "materially" below last year's level.

By the close of trade, shares in Greggs were down 545 pence, or 11.8%, at 4058p.

Cost cuts

In November last year, Greggs had warned that tough conditions on the UK's High Streets had slowed sales growth.

2006 looks set to be the most challenging year the group has faced for some considerable time
Sir Michael Darrington, Greggs managing director

Unveiling its annual results, Greggs - which also operates outlets under the Bakers Oven brand - said that the trends seen in the second half of 2005 had continued into 2006.

It said it was seeking to lessen the impact of the sales slowdown and higher energy prices by cutting costs across the group and finding more cost-effective ways of lifting sales.

Over 2005 as a whole, like-for-like sales - which strip out the impact of store openings and closures - rose by 4%. However, in the first half of the year, Greggs had seen like-for-like sales increase by 5.2%, while in the second half, underlying growth slowed to 2%.

"2006 looks set to be the most challenging year the group has faced for some considerable time," said managing director Sir Michael Darrington.

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