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Bakery chain Greggs notched up rising sales and profits last year as it warned of the prospect of rising inflation in the UK economy.

The FTSE 250 group reported a 4.2 per cent rise in like-for-like sales in the year calendar ending in December – a slight dip from the 4.7 per cent growth reported in 2015 – with pre-tax profits growing by £2.1m to £75.1m in the period.

Greggs said its healthier “balanced choice” range of foodstuffs – which are under 400 calories – now made up 10 per cent of its total sales, as it continues to diversify its options away from its traditional sausage rolls and steak bakes.

The company once again, however, warned of “greater economic uncertainty” in the UK and the prospect of higher inflation pinching its margins.

Consumer price inflation in the UK is expected to average 2.7 per cent this year on the back of the fall in sterling after the Brexit vote, with Greggs adding it experienced inflationary input costs in the fourth quarter of the year.

“The UK consumer outlook is more challenging than we have seen in recent years, with industry-wide pressures emerging in commodities as well as labour costs”, said Roger Whiteside, chief executive.

Greggs total sales rose 7 per cent to £894.2m and the company will propose a final dividend of the year of 31p – up from 28.6p. The group said it had transformed 92 per cent of its stores into its “food-on-the-go format” and opened 145 new shops last year, closing 79.

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