GREGGS yesterday said it would generate a £2m profit from the sale of its Carricks Bakery site in Newcastle.

The bakery chain has exchanged contracts, subject to planning permission, with Bett Homes (North-East), which plans to redevelop the land at Cowgate for housing.

The news came as Greggs reported improving sales but admitted that the long-awaited recovery had come later than expected and with additional costs.

The Newcastle-based group said like-for-like sales were up two per cent in the six weeks to December 9, compared with a 0.2 per cent increase in the previous 19 weeks and no improvement in the first six months of the year.

Greggs, which has more than 1,000 shops under the Greggs and Bakers Oven brands, has suffered from changing eating trends and falling demand during the hot weather.

It axed 14 shops and cut 200 jobs in August following poor sales at it Bakers Oven shops in northern England and Scotland. Six stores closed in the North-East with the loss of at least 85 jobs.

Yesterday, Greggs said the cost of the closures will be £1.25m more than the £2.5m originally expected, but added that the restructuring will add at least £1.25m to profits from next year.

The sale of the Carricks Bakery site will add a further £2m in property profit to the 2007 accounts.

Greggs closed the bakery in September 2005 as part of plans to streamline its operations and focus production activity at its Gosforth facility.

Developer Bett Homes has submitted plans to Newcastle City Council for the erection of 51 houses and a three-storey apartment block, which will be considered next month.

Greggs also said it had appointed Greggs of Scotland managing director Raymond Reynolds as retail director to "drive the development of a stronger, more unified and customer-focused Greggs brand throughout the UK".

Group managing director Sir Michael Darrington said: "By focusing on the development and marketing of a unified national brand, we aim to make the whole Greggs business more responsive, increasing our ability to meet new competitive challenges by delivering to our customers exactly what they want, when they want it."

As part of its brand development, Greggs said it would expand its Healthier Options range of low-fat wraps and salads and undertake a number of trials of trading hours.