Debenhams today slashed its dividend and its store opening programme in a desperate attempt to hoard cash and pay off its £1 billion debt mountain.

In the face of tumbling profits and diving sales over the past few weeks, chief executive Rob Templeman admitted his focus is now to reduce Debenhams' borrowings, which have weighed heavily on a share price that has crashed 75% over the past few weeks.

The group today reported a 16% dive in profits to £110 million in the year to the end of August, a 12 months which saw a creditable sales performance compared with several of its rivals, with like-for-likes down just 0.9%.

However, the slump in like-for-likes in the first six weeks of Debenhams' new financial year saw the board take an axe to the shareholder payout.

The final dividend of just 0.5p takes the divi for the year to 3p compared with the 6.3p paid out last year.

"The board has taken a view on the dividend in the light of trading through 2008 and on its current view of prospects for 2009," said Templeman. "We have taken the view that we would prefer to conserve money for the new store openings that we will do."

Dividends paid out last year totalled £54 million and the cut in payout could save as much as £30 million.

Earlier this year Debenhams finance director Chris Woodhouse set a target of net debt reduction of £140 million.

However, according to latest figures from Debs, its debt mountain has been cut by just £22 million over the past year, from £1.016 billion to £994 million. Templeman said cost reductions should save up to £35 million this year while capital expenditure, primarily on new store openings, will be cut by nearly a third, or £40 million to £90 million.

In the first nine months of 2008 Debenhams opened 11 new stores but, despite previous plans for aggressive expansion, it expects now to open only another 11 stores over the next three years, with one of those in the next fortnight at the new giant Westfield shopping mall in Shepherd's Bush. "This is all about getting the strategic health and the financial health right for Debenhams," said Templeman.

"Strategically our customers are saying they like our products and they like our stores. What we need to do now is address the deleveraging of this business. Previously the market liked the amount of debt we had taken on. The market, however, has now changed its mind on debt."