Troubled supermarket giant Morrisons has admitted trading is still being affected by problems relating to its £3 billion takeover of Safeway.

The Bradford company, which has been dogged by uncertainty since completing the deal, yesterday issued a third profit warning inside 12 months. It said the costs associated with running the two chains simultaneously were higher and were likely to continue longer than the market was expecting.

The news followed speculation over recent days and weeks about the scale of the problems involved with the takeover.

But the firm did insist that the conversion process was progressing well in a move which reassured analysts.

In its statement yesterday, the firm said: "The board of Morrisons announced, at the time of its preliminary results, that it expected operating margins to show some improvement in the current year, albeit modest and not apparent until the second half of the year.

"Whilst the sales performance of the group in aggregate has made good progress since the preliminary results announcement, the performance of the group overall remains heavily impacted by the temporary dual running costs of distribution, administration and IT functions necessary to the conversion process.

"The board now considers that these duplicate costs will remain higher and take longer to eliminate than the market is currently anticipating.

"No significant reduction is expected until the completion of the programme to convert the acquired Safeway units to the Morrisons format in November 2005.

"The conversion process is proceeding well and sales from converted stores are very encouraging, providing the framework for a significant improvement in performance in 2006/7. However, it is clear that these costs will cause operating margins to run significantly short of last year's level for much of 2005."

Morrisons issued its last profit warning in mid-March when it said that accounting issues at Safeway were forcing it to take a £40 million provision in its results.

Shortly afterwards, as the company unveiled pre-tax profits of £297.1 million, finance director Martin Ackroyd said he was quitting his post following pressure from analysts.

Yesterday, Morrisons said it would provide a further update at its annual general meeting in Bradford on May 26 when it would also reveal more about its search for a new finance director and new non-executive directors.

Meanwhile, talks are to be held to resolve a dispute involving workers in Morrisons' delivery depots.

The GMB union had threatened to ballot its 2,000 members at Warrington, Cheshire and Aylesford in Kent in a row over contracts of employment.

Acting general secretary Paul Kenny said: "Morrisons have now offered talks to resolve the issues arising from the takeover of Safeway. We welcome the company's offer of talks and hope that the negotiations are productive."

Stockbroker Matt Mason, from Leeds-based Redmayne-Bentley, said: "The warning on profits was widely anticipated in the market as recent news flow and reports on the supermarket continued to be negative.

"The integration of the Safeway fascia is still proving costly and, despite management believing profitability would increase during 2005, this has not been the case.

"Higher costs are expected to cause the operating margin to worsen and consequently 2005's profit to shrink. Management are assuming the costs of running a dual structure will be eliminated by 2005 and profitability will increase in 2006 and 2007."