Retail baker Greggs reported it had been hit by a 60% year-on-year increase in energy costs, as it posted its premiminary results for 2005 last week.

The baker came to the end of of a three-year electrity contract last October and, since then has seen “significantly higher increases than most people in the market”, said MD Sir Michael Darrington. Greggs is a bigger user of electricity than gas, but its gas bill has risen a similar amount, he told British Baker. He said he expects energy costs to rise by a further £5m year-on-year across this year. Greggs will take out extended cover when the energy price is right, he said.

The firm, which has over 1,300 stores in the UK, saw pre-tax profits rise by 5% to a record £50.2 million in the year to December 31, 2005, up from £47.8m the year before, despite rising energy costs.

Like-for-like sales were up by 4% in 2005, although growth in the second half slowed. The chain has suffered from a proliferation of competition in the market, said Sir Michael.

Tesco and Marks & Spencer have become much more visible on the high street, he said, and Greggs is also competing with Subway and back-street and side-street sandwich shops “The market is not expanding and new shops are opening, so there is slightly less for everybody,” he said.

Greggs is planning to make 60 store openings in 2006, adding a net 35 stores, less than the net 56 it opened in 2005. Greggs also has five shops in Belgium, where sales are also growing rapidly. Although it is “still lear-ning” it is “quietly encouraged” by performance in Belgium, Sir Michael said, and intends to open two more shops there.

Greggs also plans to introduce ranges with lower fat and calorie content by summer, as

the health debate gathers momentum. Greggs never cate-red for the Atkins diet “fad”, but

“the healthy eating approach is going to be with us for the future”, Sir Michael predicted.