SUPERMARKET chain Sainsbury said its recovery programme was paying off as it posted a 14 per cent jump in annual profits after two years of decline.

Chief executive Sir Peter Davis, who took charge of the business two years ago, said the group was making strong progress in delivering on its promises, but sales growth had slowed in recent weeks.

Like-for-like sales across Sainsbury supermarkets in the recent financial year to March 30 were up by 6.3 per cent once petrol forecourt takings were stripped out.

Sir Peter said Sainsbury was still seeing sales growth but "at a slower rate" given the tough comparative figures recorded a year ago when the group's revival was beginning to take shape. Total sales in the year to March 30 from continuing operations climbed 7.4 per cent to £18.2bn. Pre-tax profits increased to £627m before one-off costs, compared with £549m a year ago.

Sir Peter said the slower sales growth in recent weeks reflected market conditions and some "turbulence" from the loss of the Air Miles franchise to rival Tesco.

But he said: "It is still early in the quarter to be saying anything, we still have the Jubilee Weekend and the football to come.

"We are still in the premier league, we are half-way through the recovery programme and we are quite confident about the ways things are going."

Sir Peter instigated a three-year recovery programme to take Sainsbury back to its roots following its dramatic fall from grace under his predecessor Dino Adriano.

Celebrity chef Jamie Oliver was brought on board to advertise new food ranges such as Taste the Difference and the group launched a drive to "reinvigorate" its stores and win back customers.

A cost reduction programme was also put in place and Sir Peter said he had now upped the target by £100m to £700m for the three years to March 2004 after saving £170m in the recent financial year.

Savings came from buying and productivity efficiencies and helped net margins in the business rise from 3.7 per cent to 3.8 per cent in the past 12 months, still behind the leaders in the sector.

Shareholders will get a total dividend of 14.84p per share.