SUPERMARKET chain Morrisons posted its first annual loss yesterday and immediately announced a three-year plan to improve its flagging fortunes.

The group, which is based in Bradford, saw profits fall 81 per cent in the wake of its £3bn takeover of Safeway.

Morrisons announced that it lost £312.9m in the year to January 29, after costs of nearly £375m arising from the Safeway merger.

Excluding the cost of integrating Safeway, pre-tax profits were £61.5m, which was at the lower end of the £50m-to-£150m guidance Morrisons gave in a profits warning last June.

Earnings were sharply lower than the £332.2m profits the supermarket banked last year.

In its restructuring plan, the fourth largest UK supermarket set targets of eliminating £30m of central costs and another £30m in 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 and compete with rivals on price so that it could boost sales, which totalled £12.1bn in the 12 months to January 29.

Chairman Sir Ken Morrison told reporters yesterday: "The results we are presenting are the outcome of an extremely challenging year for Morrisons."

But he said that strong foundations had been put in place for the future of the group, which took on 5.5 million new customers when it bought Safeway in 2004 and converted 220 of its stores.

He said: "The optimisation plan 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.

"I am confident that the plan will quickly deliver significant improvements in performance."

Chief executive Bob Stott said the recent loss of 2,500 jobs after the closure of three depots, including at Aylesford, in Kent, and Bristol, formed part of the turnaround process.

But he said there were no plans for any further redundancies.

Mr Stott said: "It is 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."

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 - an acceleration on the 2.8 per cent growth seen over Christmas.