Baker Greggs saw profits fall in 2008 as the impact of higher energy and foodstuff costs ate into margins but shares moved higher after it raised its dividend and announced plans to carry out a share split to make the group more accessible to investors.

The group – which operates in more than 1,100 stores across the UK – revealed operating profit had fallen 7.2% to £44.3 million in 2008, while pre-tax profits overall fell 7.8% to £45.2 million, even though sales had climbed by 7.1% to £628 million, or by 4.4% on a like for like basis.

Chairman Derek Netherton said the fall in profits was a result of a 'challenging year' in which the company had to deal with 'substantial increases' in energy and ingredient costs, amid declining consumer confidence.

However, despite lower profits, the group opted to raise it's dividend by 6.4% to 149p per share, marking its 24th consecutive year of dividend growth.

The group also announced its plans to carry out a share split – whereby each existing share will be split into ten new shares – in an effort to make them more accessible to other investors, in particular small shareholders and its own employees.

The share split will need to be approved at the company's Annual General Meeting (AGM) in May.

The company's rising like for like sales are a sign of consumers continuing to save money where they can, opting for lower cost food.

Netherton said: 'Our ability to achieve sustained like-for-like growth under these difficult conditions affirmed the fundamental strengths of the Greggs proposition.'