Morrison still in a pickle

That strategy is focused on slashing prices, improving store layouts, cutting promotional activity and launching a loyalty card - all funded by £1bn of cost savings that management expect to squeeze from the business over the next few years. It's also selling of a lot of its freehold property. It disposed of £280m-worth in the period and expects to realise some £400m-£500m this year, rising to £1bn by 2017. In terms of the cost savings, £105m was saved in the half year as Morrison axed 3,000 jobs, reduced packaging costs and cut product ranges.

The group plans to support roughly £300m-worth of price cuts this year and has already slashed prices on more than 1,200 products by up to 17 per cent. Mr Philips said that the deflationary effect of these price cuts, particularly in the second quarter, was partly to blame for the huge decline in like-for-like sales. "You have to look through the like-for-likes for the real story," he explained.

He added that it was "early days" but sensed the business was getting back on the "front foot", with improved cash flow and working capital. "We have taken radical action," he said. "We made the right calls early and the whole business responded well." However, Mr Philips warned that an improved sales performance wasn't likely before the end of the second half.

Moreover, Mr Philips pointed out that the increase in the half-year dividend - by far the biggest surprise in the results - reflected the board's confidence in the group's strong financial position, future cash generation and strategy.

Broker Shore Capital expects full-year pre-tax profit of £325m, giving EPS of 10p (from £719m and 28.2p in 2013-14).