Morrison slashes dividend

Chairman Andrew Higginson said the pace of change and decision-making would accelerate when new chief executive David Potts takes over next week. He said the focus would be on improving the core supermarket estate with a "relentless focus on customers", investing cost savings back into products, price and service. As for online, it would "take time to grow", while the convenience store rollout would be pulled back significantly because one-third of the existing portfolio "hasn't really worked". He said Morrisons needed to get the proposition right and improve site selection before "putting the accelerator down".

Morrisons is 12 months into a three-year plan to take £1bn of annual costs out of the business. Last year it delivered £224m of savings, mostly through operational efficiency gains. Capital spending also halved and working capital was reduced, boosting cashflow and helping shrink the debt pile.

However, the group incurred £68m of one-off costs relating to restructuring, launching online, unveiling a loyalty card and disposing of the Kiddicare business. It also took a whopping £1.27bn impairment against the property value of its supermarkets. If you exclude this charge, Morrisons actually made a pre-tax profit of £345m, down from £719m last year.

The good news is that the decline in like-for-like sales slowed over the year, from 7 per cent in the first quarter to just 2.6 per cent in the fourth. The rate of decline in the number of items per basket also improved over the course of the year.

Pre-tax profit forecasts for the current financial year range from £200m to £450m, with the consensus figure falling at £307m, giving EPS of 13p.