Greggs has been forced to cut 200 jobs following the poor performance of its Bakers Oven divisions in the North of England and Scotland over a number of years.
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These divisions will now be integrated with the Greggs brand, with 49 of the 63 Bakers Oven shops in these two regions transferred and rebranded as Greggs.
In addition, 14 shops will be closed and supply arrangements changed, resulting in closure costs of around GBP2.5m (US$4.77m), but increasing annual profits by GBP1.25m in the next financial year.
The company will continue Bakers Oven operations in the Midlands and South, where it is generating good returns on investment.
Greggs posted a sales increase of 3.1% to GBP243.1m and level like-for-like sales for the first half of 2006, attributed to slowing of consumer expenditure, a growing consumer interest in healthier eating and a proliferation of competing takeaway formats.
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By GlobalDataOperating profit was GBP2.8m during the six-month period, 19.6% lower than the GBP11.4m made during the 2005’s period.
The Greggs board has also declared an increased interim dividend of 38 pence per share, a rise of 5.6%.
Greggs managing director Sir Michael Darrington said: “Our interim results reflect the combination of flat like-for-like sales and substantially increased costs, particularly for energy, that we highlighted in our last results announcement and at our AGM in May.
“These impacts have been mitigated by successful initiatives to reduce other costs. We are also seeking to drive turnover growth through new product launches, and are beginning trials of a number of other innovations to extend the reach and appeal of our brands.”
In its outlook, the company said it expected operating results in the second half to be closer to those of the comparable period of last year, with earnings per share to benefit from its continuing share buyback programme.
“I am confident that the group is well placed to compete and prosper in the future, and to leverage the great fundamental strengths it enjoys in its brands, assets, products and people,” added Darrington.
