B&Q owner Kingfisher has slashed its dividend by half and warned investors that things could get worse before they get better.
The gloom came as the DIY giant unveiled its third successive fall in annual profits. Underlying pre-tax profits of £386m during 2007 were almost three per cent lower than the previous year.
Chief executive Ian Cheshire said the 50 per cent dividend cut was necessary in the tougher trading conditions as the group focused on tight cash control and reducing debts.
Mr Cheshire said: "No business can fully shield itself from economic cycles and given the current state of the financial markets, most commentators are expecting the short-term outlook to worsen before it improves."
Mr Cheshire, who took over in January, said his main focus would be on generating more cash from Kingfisher's retail businesses under a reshaped management structure.
He will also slow the pace of capital investment in the group, with spending geared towards projects offering the best returns.
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In the UK, where the group also trades as Screwfix and Trade Depot, Kingfisher said the home improvement market weakened in the second half of the year.
But the B&Q chain produced its first like-for-like sales growth after three years of decline, with comparative sales up 0.6 per cent.
Retail profits fell 20 per cent to £131m after spending on its new stores but it added that early trading signals from its revamped sites were encouraging.
Kingfisher is moving away from its traditional aisle-based format to a more modern layout displaying the group's kitchen and bathroom wares more extensively.
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