Sales and profits at Morrisons have fallen again - but the supermarket management is talking confidently about progress made so far, and guided on future dividends in an effort to woo shareholders.
Morrisons' share price was down 2.5 per cent in mid-morning trading, however, as investors digested the news that this year's dividend was being slashed by nearly two-thirds.
Total turnover fell 4.1 per cent to £16.1bn in the year to 31 January, with underlying profit before tax dropping 26 per cent to £302m - the mid point of what had been guided (£295m to £310m).
Profit before tax actually reversed from a loss of £792m in 2014 to a positive £217m. Net debt was sliced by £594m to £1.75bn.
Like-for-likes dropped two per cent although there were signs of improvement in the second half, with fourth quarter sales up 0.1 per cent, despite ongoing issues with food price deflation.
The supermarket is recommending a final dividend of 3.5p, taking the full year total dividend to 5p - a 63 per cent drop on last year's figure of 13.7p.
It has also guided on future dividends, saying: "The board recognises the importance of sustainable dividends to shareholders. From 2016/17, we will be paying a dividend covered around two times by underlying earnings per share."
Why it's interesting
Morrisons is very much still in the early days of its turnaround, but it has had a few PR wins in the last fortnight, being promoted back into the FTSE 100 after a quarter of relegation, and revealing a game-changing partnership with Amazon.
It is expecting the current financial year to result in its £1bn three-year cost savings target being realised.
"The turnaround will take time and will continue to require sustained investment in the proposition. We also expect to exceed our three-year targets for £600m operating working capital improvement and £1bn property disposal proceeds," it said.
As a nod to its tie-up with Amazon, Morrisons has also guided on being able to produce incremental profits of £50m-£100m "from broader business opportunities we have identified within online, manufacturing, wholesale, popular and useful services, and from lower interest costs".
In the medium-term free cash flow should be "at least £300m better than first guided", with operating working capital improvement at least £800m, up from £600m previously, and property disposal proceeds at least £1.1bn, up from £1bn.
What Morrisons said
Chairman Andrew Higginson said: "The board is pleased to be announcing that future dividends will be covered around two times by earnings per share, which is a policy that aligns shareholder returns with the long-term performance of the company.
"The team made good progress during the year, with lower debt once again a highlight. We are on track to deliver improved future profits and returns for shareholders."
Chief executive David Potts added: "By improving the shopping trip for customers, we have started the journey to turnaround the business and make our supermarkets strong. Our listening programme is informing and shaping the six priorities that are now driving the improvements that customers are noticing.
"Our strong balance sheet and cash flow provide the platform for turnaround and growth, but what makes us truly unique as food maker and shopkeeper is the personality and dedication of our thousands of colleagues. I am confident these strengths will help us fix, rebuild and grow Morrisons."
What analysts said
Shore Capital analysts said Potts and co had "moved mountains over the last year, securing Morrisons' survival in our view".
"Given that the executive team was only fully completed in December 2015, that stabilisation has been a remarkable achievement to our minds," the team added.
Steve Clayton, head of equity research at Hargreaves Lansdown, said the retailer was "heading in the right direction".
"There is however no sign of an end to deflation in food pricing; Morrison is firmly in the sights of Aldi and Lidl and if it is to repel their threat, its value focus must be relentless. But debts are falling as the group focuses on cash, and Morrison's financial position looks secure enough," he added. "Morrison has potential but it still faces many challenges, not least the absence of a convenience offer of any scale, and being seriously behind the curve in its online offering."
However, not everyone was convinced.
Stifel analysts said the outlook given for the current financial year was "a cautious message on the core business, citing the need for “required investment in the proposition”.
"We think this is consistent with consensus which implies very modest underlying progress this year," they added.
John Ibbotson of retail consultancy Retail Vision, was less equivocal.
“While Morrisons' numbers have started to improve, and Potts is doing a good job, it’s hard to believe we are entering a new era for the struggling grocer," he said. "Morrisons may be back in the FTSE 100 and it may have teamed up with Amazon, but many will argue its core business is still mutton dressed as lamb."
Morrisons has started on the road to recovery - but there is still a long way to go.