Wm Morrison said yesterday that a £1 billion sale of investment properties had been put on hold because of the credit squeeze.

Richard Pennycook, the finance director, said that the company had reached a stage where it was ready to invite offers from third parties but that discussions had been affected by problems in the debt markets.

“In the current environment, we have held back from the next step. We are under no pressure to undertake this move and we will only go ahead if it is in the best interests of shareholders,” he said, adding that Morrison would keep the market under review.

The supermarket’s decision follows the collapse of a number of other significant property deals in the past few months, including a £4.6 billion joint venture between Mitchells & Butlers, the pubs operator, and Robert Tchenguiz, the property entrepreneur.

Sir Ken Morrison, the chairman of the retailer, said that Morrison had plenty of other projects in hand and that he was not concerned by the postponement of the property sale.

“I don’t think it was ever a priority and I don’t think we have missed the boat. There are other ships passing and the property is still there,” he said.

Shares in Morrison dipped 6¼p to 271½p yesterday as some analysts were disappointed by the news, which offset positive reaction to a better than expected rise in first-half profits and underlying sales.

Pre-tax profits before one-off property gains rose 57 per cent to £247 million as Morrison cut back on distribution, energy and staff costs and improved margins by 1.6 per cent, at the top end of expectations.

Sales rose 2.8 per cent to £6.01 billion as both the number of customers and the amount they spent on each visit increased. However, Mr Pennycook gave warning that Morrison had been forced to cut prices dramatically over the summer and that this trend was likely to continue into the second half as the competitive environment remained tough.

He added that Morrison would raise its marketing spend in the second half as it attempts to build its image as a high-quality fresh foods retailer. An advertising campaign featuring Nick Hancock, the comedian, and Alan Hanson, the football commentator, will be launched this year.

Capital expenditure will also be higher with £360 million expected to be spent in the second half compared with £140 million in the first.

Marc Bolland, the chief executive, said that Morrison would benefit from the introduction over the next few months of improved ranges, including 4,000 new product lines, with extended organic, premium and healthy eating ranges as well as a rebranded low-price range.

Mr Bolland is also revamping stores to increase the impact of made-in-store and fresh foods. He said that those stores already revamped were performing well.

Analysts were impressed by a 3 per cent rise in underlying sales in the seven weeks to September 16, indicating that sales had quickly recovered after the impact of an E. coli outbreak in some of the chain’s Scottish stores.

Morrison continues to face a tough, competitive environment, and will face a dramatic change in culture when Sir Ken steps down as chairman next year after four decades heading the business.

Yesterday the septuagenarian refused to rule out a sale of his 10.7 per cent stake when he retires.

“I’ll wait until I see the effect of today’s meeting and how analysts think, and keep matters under review, as always. I’m not ruling it in or out,” Sir Ken said.

The Morrison family has a shareholding of 15.5 per cent in the company and analysts said that a sale of the shares could drive value for the business because they were likely to go to a strategic investor.

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