Supermarket chain Morrisons unveiled a three-year recovery plan yesterday after its its first loss in 107 years.
The cost of integrating and converting the Safeway stores that Yorkshire-based Morrisons paid £3 billion for in 2004, resulted in a loss of £312.9 million at the pretax level in the year to January 29.
That contrasted with a profit of £193 million at the same level the previous year.
Stripping out £374.4 million of costs showed that the company generated an operating profit of £111.5 million, 56 per cent down on the previous £256.2 million surplus.
Same-basis pretax profit f ell by 68 per cent to £61.5 million, the results statement showed.
That was firmly at the lower end of the £50 million to £150 million range that Morrisons indicated in its profits warning last June.
Turnover was in line with last time at £12.1 billion.
Investors voiced dismay at the extent of the financial damage that the Safeway deal has wreaked upon the once rock-solid Yorkshire grocer.
Morrisons, now the country's fourth largest supermarket, said it had set itself a goal of eliminating £30 million of central costs and stripping a further £30 million out of its distribution network by 2009.
Many employees who leave the group will not be replaced this year as Morrisons strives to save six million "staff hours" in its stores.
It also promised to strengthen margins by up to 90 percentage points and to compete with rivals on price to get sales moving forward again.
Chairman Sir Ken Morrison said: "The results are the out-come of an extremely challenging year."
But he insisted that strong foundations had been put in place for the future of the g roup, which took on 5.5 million new customers when it swallowed Safeway in 2004 and converted 220 of its stores.
"The optimisation plan outlined lays out the steps we need to take over the next three years to enable the company to apply and adapt where necessary the original Morrisons model to the new, larger business," Sir Ken said.
"I am confident that the plan will quickly deliver significant improvements in performance."
Chief executive Bob Stott said the recent cull of 2,500 jobs through the closure of three depots, including at Aylesford in Kent and Bristol, formed part of the turnaround process.
But he insisted that there were no plans to make further staff redundant.
Mr Stott said: "It's a programme of moving from a business that was in a state of massive change to one with a steady estate of stores and driving efficiencies, which is normal in retail.
"There is no redundancy programme."
The headache of a glut of stock that was left over from its takeover of Safeway had been dealt with and would not recur, the company added.
A sign that Morrisons was starting to put its troubles behind it was visible in a 3.2 per cent increase in like-for-like sales during the seven weeks to March 19 compared with the 2.8 per cent growth seen at Christmas.
Market sentiment was summed up by Tim Attenborough, an analyst with Exane Securities, who said: "Last year was a lost year for Morrison's.
"This report was never going to be about last year's numbers, it's about what they can do going forward and the shape of the margin recovery."
Fred George of Williams de Broe added: "On balance, it's disappointing and below expectations"