MARKS and Spencer slashed its dividend payment by a third as it reported a 40 per cent drop in full-year profits.

M&S said heavy discounting and price reductions in the recession had seen profits slump to £604.4m – leaving behind last year’s triumphant result when profits jumped above £1 billion for the first time in a decade.

M&S boss Sir Stuart Rose said the year had been a “difficult” one, but added: “It has not got any worse.”

The retailer said in light of an “uncertain economic outlook” it had decided to cut its full-year dividend payment to investors by 33 per cent. It is the first time it has made a cut since 2000 and the move is likely to disappoint the firm’s army of small shareholders.

But Sir Stuart said the move was “common sense” in the circumstances.

Like-for-like UK sales for the full year to March 28 were down 5.9 per cent, including a 6.9 per cent drop in general merchandise and a five per cent decline in food.

In January M&S announced plans to axe up to 1,230 jobs through the closure of 26 stores – including a Simply Food outlet in Colmore Row, Birmingham.