Shares in Greggs were down in morning trading on the FTSE 250 after the baker reported a rise in pre-tax profits in the half year ended 3 July. The group also said it expected a rise in "ingredient costs" due to droughts in Russia pushing up wheat prices.
During the half-year period sales increased 2.9 per cent to £321 million, while like for like sales were up 0.7 per cent.
Pre-tax profit was reported as being up 12.3 per cent to £18.6 million, while the company said it would be increasing its interim dividend by 5.8 per cent to 5.5 pence per share.
Greggs said that its net cash at the end of the period was £24.6 million, up from £14.9 million at the end of the same period last year, following a £4.5 million share buyback.
In the half year period there was a net increase in store numbers of 18.
Ken McMeikan, Chief Executive of Greggs, 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."
By 11:15 shares in Greggs were down 3.11 per cent on the FTSE 250 to 420.00 pence per share.