By James Davey
LONDON (Reuters) - Morrisons reported its lowest annual profit in eight years on Thursday, Britain's fourth biggest supermarket hurt by a fierce industry price war and warning investors it would cut its dividend.
The profit slump, a third straight decline, reflects Morrisons' decision last year to spend 1 billion pounds ($1.50 billion) on price cuts over three years to stem the loss of shoppers to discounters Aldi and Lidl.
The results illustrate the huge task facing the firm's new boss, former Tesco (LONDON:TSCO) executive David Potts, in restoring the Bradford, northern England, based group, to health when he starts work on Monday.
Shares in Wm Morrison (LONDON:MRW) Supermarkets are down 12 percent year-on-year, though they have risen 17 percent over the last three months on recovery hopes. They slipped 0.5 percent to 205.3 pence at 0905 GMT.
Morrisons, which trails market leader Tesco, Wal-Mart (NYSE:WMT)'s Asda and Sainsbury's in annual sales, reported an underlying pretax profit of 345 million pounds ($516 million) in the year to Feb. 1.
That was broadly in line with analysts' average forecast of 342 million pounds but a big fall on the figure of 719 million pounds made in 2013-14.
The company also wrote down the value of its property portfolio by 1.3 billion pounds, due to the tough market conditions. As a result it posted an overall loss before tax of 792 million pounds.
TOUGH TIMES
"Last year's trading environment was tough, and we don't expect any change this year," said Chairman Andrew Higginson.
Chief Financial Officer Trevor Strain told reporters the firm was comfortable with analysts' consensus underlying profit forecast for 2015-16 of 387 million pounds.
Potts takes over when Tesco is showing signs of recovery under its new boss Dave Lewis who has been in the job for six months.
Despite the slump in profit, Morrisions is paying a total dividend of 13.65 pence for the full year, up 5 percent. However, it signalled lower future payouts, guiding to a dividend of not less than 5 pence per share for 2015-16.
"We believe that this is a sensible course of decision-making by the board, so assisting the de-leveraging process and providing resource for Potts," said Shore Capital analyst Clive Black.
Tesco has said it will not pay a final dividend this year, while Sainsbury's has indicated it will reduce payouts.
Morrisons will also slow down the roll-out of 'M local' convenience stores and review the format. Twenty three 'M local' stores will close in the 2015-16 year.
"Under (Potts') leadership, we will focus on building trading momentum and being more like the Morrisons our customers expect," said Higginson. The firm will invest more in price cuts.
"Success measures will be simple –- more customers buying more from us," he added. ($1 = 0.6663 pounds)