Morrisons’ underlying pre-tax profit has plunged by more than half in its half-year results but the grocer says it has made “good progress” in its three-year ‘self-help’ plan.

The grocer’s underlying pre-tax profit was down 51% to £181m in the half year to August 3 and pre-tax profit fell to £239m from £344m because of the “tough” industry conditions as it undergoes a three-year transformation.

Total turnover in the period fell 4.9% to £8.5bn and like-for-likes slumped 7.4%.

Morrisons chief executive Dalton Philips said: “Although it is too early to see the benefits of the three-year plan in the sales line, Morrisons is getting back on the front foot, and implementing change and innovation at real pace throughout the business.

“We are meeting the challenges of structural change with decisive action and are on track to become a more distinctive value retailer for the next generation of grocery retail.”

Morrisons reported a strengthened cash flow, £531m better than last year, while operating working capital improved £145m in the first half.

Morrisons said property disposals of £280m generated £54m profits.

The grocer has also secured a new £300m bond and £1.35bn revolving credit facility.

Morrisons said the £1bn self-help programme revealed in March is on track, while it also plans to launch a loyalty card “soon”.

Since March, Morrisons said it is introducing a simplified in-store management structure and it has reduced the product range by 2,000 SKUs. It has also invested in lowering prices to drive volume recovery - Morrisons said margin had improved and in the second quarter items per basket were 480 bps up than the same time last year, while product items were 760 bps better off.

It also cut the number of items on promotion by 13% against last year. It added that the online roll-out and expansion of its convenience format M Local are both “progressing well”.

Morrisons chairman Sir Ian Gibson said: “Conditions are tough, and the industry is going through unprecedented change.

“Our first-half results reflect the reset of the business we announced in March. Morrisons is now well underway with building the foundations for a better future.

“The board is confident of the new strategy and Morrisons financial position remains strong.

“In line with the policy we set out in March, we are increasing the interim dividend by 5% to 4.03p, and confirm our commitment to pay a total dividend for 2014/15 of not less than 13.65p.”

Morrisons said it was “confident” it will generate £2bn of cash and £1bn of cost savings over three years. And while like-for-like sales need to improve it said there were “some encouraging initial trends”.  

Morrisons added that full-year profit expectations are on track and it expects underlying pre-tax profit to be in the range of £325m to £375m after £65m of new business development costs and £70m of one-off costs.

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