Morrison 'to stay on' despite £313m loss

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The Independent Online

Sir Ken Morrison is planning to stay on as chairman of Wm Morrison for the next "two to three years" to oversee the grocer's recovery, after it slumped to a £313m annual loss after its botched integration of the £3bn takeover of Safeway.

The group hopes to have a new chief executive lined up by its May annual meeting but has so far struggled to convince any of its candidates to take the job with Sir Ken still in the chair. Its failure to find a replacement for Bob Stott, the incumbent, meant that a three-year plan unveiled yesterday to boost margins and cut costs underwhelmed the City, hitting its shares and profit forecasts for next year.

Sir Ken claimed the group was "over the worst" but left analysts puzzled as to how he intended to rebuild a company destroyed by taking on more than it could handle when it acquired Safeway two years ago. Shares in the group fell 6 per cent to 197.5p.

Unveiling the group's long-awaited "optimisation" plan, Richard Pennycook, the new finance director, warned: "There is no golden bullet to fire, no raft of double running costs to take out, no huge untapped synergy gains to pursue."

Instead he said recouping 90 basis points of lost gross margin and slicing £60m from distribution and central costs was about "getting back to the day job". The company cannot fine-tune its revival plan until it has a new chief executive in place, according to analysts.

Morrisons reported a slight improvement in current trading, with an increase of 3.2 per cent in underlying sales excluding fuel in the seven weeks to 19 March. But this was below the expectations of some analysts. Philip Dorgan, at Panmure Gordon, said: "There was nothing there to suggest that margins will bounce back dramatically because they need sales growth and the sales number was not great."

The group warned its attempts to save £30m on distribution would be hampered by its lack of depots in the South-west after its recent closure of one in Bristol. Until it opens a new one, possibly not until 2009, it will be travelling "too far" to service its stores in the South, Mr Stott said.

Excluding the £374.4m of exceptional charges in the 12 months to 29 January, pre-tax profits were £61.5m, down from £332.2m the previous year. The company also wrote down the value of the Safeway asset base by £103m.