Greggs steams higher on hot results and tasty investment plan

Greggs has serving up strong final results and said it was closing three of its 12 bakeries, in Twickenham, Edinburgh and Sleaford, as part of a new £100m investment programme to help it increase its outlets "substantially" beyond 2,000.

After annual profits steamed 25% higher to £73m, the pasty and sandwiches seller forked out a 21.2p final dividend to lift the total ordinary payout 30%, on top of a 20p special dividend paid during the year.

Revenues, as had been disclosed previously, were up 5.2% to £835.7m, with like-for-like sales confirmed at 4.7%, up from 4.5% the year before.

Diluted earnings per share were 295 higher at 55.8p. Net cash stood at £42.9m by the year's end.

After a review of the business, the FTSE 250 baker said it wanted to rejig the supply chain over the next five years in order to grow operational capacity.

Closing three bakeries is expected to result in 355 roles becoming redundant with the total investment of around £100m designed create new "manufacturing centres of excellence" and ramp up its number of UK outlets.

Greggs said 2016 had started well, with like-for-like sales up 4.2% in the eight weeks to 27 February and total sales ahead 6.8%.

"The consumer outlook remains positive with disposable incomes expected to grow further in 2016," noted chief executive Roger Whiteside.

He added that after controlling costs effectively in 2015 there were further efficiencies to be scraped out in the year ahead to balance a 5% wage increase agreed with shop staff to an hourly rate of £7.47, above the new National Living Wage (NLW).

"Wage costs will increase above the rate of general inflation but food input costs are again likely to be deflationary for the first half of the year," he added.

Analysts at Peel Hunt noted that LFL sales in 2016 had recovered strongly from lows in the fourth quarter "and we are starting to see some price inflation being added to the mix to take account for increases in NLW".

Shares in Greggs were up 15.5% to 1,195p by 1010 GMT on Tuesday.