High Street bakery chain Greggs plc (LON:GRG) reported a decline in first half profit, reflecting charges related to the restructuring of its manufacturing operations in an effort to improve efficiency.
Pre-tax profit in the six months to 1 July 2017 came to £19.4mln, compared to £25.4mln the same period a year ago, due to exceptional costs of £8.7bn for its overhaul.
Greggs is closing manufacturing operations and shutting bakeries across the UK as it switches its focus to selling more food on the go. In the first half, the group closed 19 stores and opened 61 new shops, most of which were franchise units.
The group expects to recognise one-off costs between £9mln and £10mln in the fiscal year 2017 as part of its £100mln restructuring of its manufacturing and distribution operations.
READ: Greggs warns of uncertain outlook as rising inflation begins to bite consumers
But the overall cost expected to arise from the reshaping of the business remains in line with Gregg’s previous guidance, so the company has left its forecasts for the full year unchanged.
On the back of its changes, which included adding more options to its balanced choice menu, sales in the first half rose 7.4% to £453mln. Company managed shop like-for-like sales rose 3.4%, boosted by breakfast deals, salads and cold pressed juices.
Net cash inflow from operating activities fell to £34.0mln from £44.7mln the previous year and the firm ended the period with a cash balance of £19.9mln, down from £35.0mln last year.
The interim dividend was lifted 8.4% to 10.3p.
Looking ahead to the second half, the company said it has made a “good start” and is confident that its business overhaul will deliver profitable growth.
However, Greggs was cautious on the impact of rising inflation on disposable incomes and the economic uncertainty surrounding Brexit.
“Over the year as a whole we expect to deliver results in line with our previous expectations as well as further progress against our strategic plan,” said chief executive Roger Whiteside.
Shares fell 0.44% to 1,097p in morning trading.