A BETTER-than-expected performance from Baker's Oven enabled Greggs to

report annual profits well ahead of City expectations at #12m before

tax. This pushed up the shares 50p to 1118p.

Baker's Oven was loss-making before it was acquired by Greggs but the

lower cost structure and stock mix at Greggs has enabled it to be turned

round and it made an operating profit of #1.9m.

The acquisition boosted Gregg's retail chain to 930 shops. There was

underlying sales growth in Greggs of 1%. Its sales of bread and rolls

continued to be affected by the availability of cut-price alternatives

but there was good demand for its sandwiches and savoury products.

During the year 20 Greggs shops were opened. Nine of the 424 Baker's

Oven outlets acquired were closed in the year with a few others also

likely to close. Despite the acquisition and record capital expenditure

of #15m, Greggs remains in a strong financial position with net debt of

only #600,000 at the year-end.

The larger-than-expected 27.8% rise in the total dividend to 23p had

City analysts scurrying to upgrade their 1995 profit forecasts.