High street baker Greggs today shrugged off the impact of soaring raw material costs to deliver a 12% hike in underlying pre-tax profits to £49 million.
Despite the improvement in 2007 results, the sandwich and pasty retailer said it was still facing "substantial pressure" from the cost of energy and key ingredients, including flour, vegetable oils and meat.
The Newcastle-based group has mitigated the impact of cost increases through product price rises and greater efficiency. The company also revealed improved trading at the start of this year, with like-for-like sales in the ten weeks to March 8 up 6.2%, higher than the 5.3% increase throughout last year. Total group sales increased 6.4% to £586 million in 2007.
Greggs said it has already seen benefits from the introduction of recent changes including longer opening hours during the week and an expansion in Sunday openings.
Greggs announced today it had begun the search for a successor for managing director Sir Michael Darrington, 66, who has led the company for 24 years.
Sir Michael oversaw the company's stock market listing in 1984 and was knighted in 2004 in recognition of his services to business and to the community in the North East. Since flotation, shares in the company have risen from 135p to a high of 5360p last year.
Shares were up more than 1% at 4300p today as it announced a 20.7% increase in its total dividend to 140p a share, its 23rd year of consecutive dividend growth. Basic pre-tax profits rose 27.1% to £51 million as the company earned a one-off profit of £2.2 million from the sale of bakery sites in Newcastle, Glasgow and Manchester.
The company also hailed the success of a £3 million national advertising campaign featuring Phoenix Nights comedian Paddy McGuinness and its extended product range, including healthier options, such as wraps and salads.
Chairman Derek Netherton said the company was pleased with the initial results of the three-year strategy aimed at boosting brand awareness. He said: "Having laid the foundations in 2007 for the growth of Greggs as a national brand, we will implement our plans to improve products, shops and service during the current year.
"Overall I expect that 2008 will be another year of steady progress for the group and will confirm that we have established a strong platform for future growth."
Greggs operates more than 1,350 outlets across UK under the Greggs fascia and its Bakers Oven brand, which typically also include a cafe.
It said its store opening programme accelerated during the second half of the year, with the company adding at net 32 shops during 2007.