Retailer Morrisons' financial performance has been affected by IT regulation issues following its acquisition of Safeway.

The problems relate to a new accounting system that Safeway installed a month before the acquisition without Morrisons' knowledge.

'This is the type of issue people underestimate before going into an acquisition - they just don't spend the time integrating the businesses together. It didn't form part of the due diligence,' Iain McDonald, retail analyst at broker Numis, told Computing.

Morrisons published its 2005 financial results yesterday (Wednesday) following a profit warning issued last week. The retailer says a financial shortfall is attributable to outstanding Safeway supplier rebates, following the integration problems last year.

'This shortfall...follows issues encountered with the Safeway accounting systems during 2004,' the company said.

Rebates are commonplace in the retail sector and involve a supplier offering a discount to retailer customers, based on the volume of business over the year. The supplier gives the retailer a rebate or discount on the cost of buying its products if its sales exceed expectations.

'If there had been accounts system changes over the year Morrisons would not have been able to easily prove what it had bought,' said Teresa Jones, senior analyst at research firm Butler Group.

Martin White, former supply chain director at Sainsbury's and now working as an independent consultant, said: 'Safeway was making assumptions about what volume of sales it would deliver to its suppliers.

'And it is difficult merging accounting systems at the best of times, with different product definitions and categories, and so on. But the basic, core data needs to be sorted through. I'd call this a straight integration mess.'