Bakery chain Greggs has announced a fall in full-year profits, after a rise in energy costs and falling sales during warm weather made 2006 its toughest trading year for a decade.
The company, which employs nearly 2,500 people in the Midlands, saw pre-tax profit fall 19.8 per cent to #40.2 million in 2006 compared with the #43 million predicted by analysts.
This was partially due to the #3.5 million cost of restructuring subsidiary Bakers Oven in the North and Scotland, which came in #1 million over budget because of unexpectedly high property costs.
The company's energy bill was up #4.5 million on 2005, and the unusually hot weather put customers off Greggs' range of sandwiches, pastries and doughnuts.
Greggs managing director Sir Michael Darrington said flat sales in the first half of the year were down to warm weather putting customers off prepared food.
"Trading conditions during 2006 were the most demanding that we have encountered for well over a decade, and these were reflected in our disappointing like-for-like sales performance," said Sir Michael.
"The flat like-for-like sales trend of the first half continued for longer than we had expected in the second half, partly because of the effects of an exceptionally hot summer," he added.
Sales at the bakers, which has more than 1,300 outlets across the UK, rose again in December and the first months of 2007, with three million sausage rolls a week sold at Greggs throughout the festive season.
This resurgence of sales at the end of the trading year meant like-for-like sales actually increased by 0.5 per cent.
At the same time, the company went through a period of review, with the appointment of new retail director Raymond Reynolds, and the introduction of extended product ranges and opening hours at stores.
And 2007 would see further improvement to the brand, including further promotion of their new healthy eating options, the company said.
Chairman Derek Netherton said: "In our programme to strengthen and develop the Greggs brand, the emphasis this year will be very much on evaluating and learning from the results of our trials, along with the steady and progressive adoption of best practice across the business."
The company said it expected further restructuring to cost an additional #4 million this year, but Mr Netherton said he believed the increasing sales "would fund that quite comfortably".
It currently has a total of 1,336 outlets in the UK, and hopes to open about 50 new stores this year. It denied rumours it was planning to buy sandwich chain Benjys, saying it preferred to see business grow organically.