High Street bakery chain, Greggs (LON:GRG) reported group sales in the half-year to 3rd July increased 2.9% to £321m (2009: £312m). Like-for-like sales grew 0.7%, in line with expectations of marginally positive like-for-like sales growth over the year. Operating profit increased 13.1% to £18.5m (2009: £16.3m), benefiting from the change in the start and end dates of the first half as a result of our 53-week accounting period in 2009. Operating margin improved to 5.7% (2009: 5.2%). Adjusting for the change in the start and end dates of the first half, there was an underlying increase in operating profit of 4% with net margin remaining stable. The cost environment in the first half remained in line with our expectations with increases in fuel and wage costs partly mitigated by deflation in energy prices. Profit before taxation increased 12.3% to £18.6m (2009: £16.5m). This includes net finance income of £95,000 (2009: £192,000). There were no property or other exceptional gains in either period.

Diluted earnings per share were 12.7p (2009: 11.3p), an increase of 12.4%. The Board has declared an increased interim dividend of 5.5p per share (2009: 5.2p), a rise of 5.8%.

Greggs opened 26 new shops during the first half and closed eight, giving a total of 1,437 at the end of the half year.
Total capital expenditure during the first half was £12.4m (2009: £10.4m), reflecting the increased rate of shop openings and refurbishments and these will gather pace in the second half.

Ken McMeikan, CEO, said: 'We have delivered a resilient first half performance under challenging conditions with total sales growth of 2.9% and marginally positive like-for-like sales growth, in line with our expectations. Our accelerated shop opening and refit programmes are progressing as planned, and delivering encouraging early results. We are now set to commence the first phase of our supply chain investment programme.

'The pressure on the trading environment looks likely to increase in the second half and we remain focused on managing costs tightly. We now expect an increase in ingredient cost inflation in the second half of the year, following the recent rise in wheat prices.

'Despite the challenging trading environment, I believe that Greggs remains on track to deliver another year of progress.'

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