Add pensions to Sainsbury's basket of woe

AMID the welter of bad news about Sainsbury's bungled attempt to find a chairman, its loss of market share and strategic direction, shareholders are in line for another dollop of disaster.

When the group announces results this week, it is also expected to give more details of the latest actuarial review of its pension schemes.

This is unlikely to make happy reading for investors or employees.

The company has benefited from a partial pensions holiday over the past three years, thanks to the £350m surplus thrown up by the review of April 2000. Its latest accounts, however, revealed a deficit of £800m based on the new FRS17 accounting rules. Equity markets have cheered up since then, so the deficit has probably improved to £600m.

Now the latest review is unlikely to come up with anything that harsh. But even if, like Marks & Spencer, which uses the same actuarial consultant, the deficit is 20% lower than the FRS17 calculation, which still leaves the group with a hole approaching £480m that will have to be plugged, according to a research note for RBC Capital Markets by pensions expert John Ralfe.

Sainsbury's was paying about £88m to service its schemes. But any actuarial deficit has to be made good over the average life of employee members - about ten to 12 years. Even if it again forces its workforce and pensioners to pay more and take reduced benefits, that suggests Sainsbury's long-suffering shareholders will not escape the pain.

Unless, of course, new chief executive Justin King borrows an idea from his former employer, M&S, and puts the whole potentially damaging controversy on the backburner by issuing several hundred million pounds worth of bonds to repair - for now at least - the damage.

Trust me, I'm a Footsie boss

THEY may be greedy and many of them clearly have only the haziest idea of what they are supposed to do, but can the word of a Footsie boss be trusted? It should be a ludicrous question given that they are responsible for thousands of jobs and billions of pounds of investors' money.

But last week I found myself doubting the word of one chief executive, Charles Allen of ITV - and, sadly, not for the first time.

Last Monday, the group announced it had struck a deal to buy SMG's stake in GMTV. My colleague, Jon Rees, had only the previous Friday night been given Allen's personal assurance that ITV had no immediate designs on SMG's stake. And ITV's explanation that the whole thing had happened very quickly over the weekend and Allen was as surprised as anyone, strains credibility.

The excuse is harder to accept as Allen has form. Nearly two years ago his company spokesman repeatedly told Financial Mail that a lead we were pursuing - that Steve Morrison, chief executive of Granada, where Allen was chairman, was about to quit - was untrue. Shortly after, Morrison's resignation was announced.

Then Allen constantly denied he was about to shut ITV Digital. In the week when Carlton and Granada announced their merger in October 2002, he told a senior BBC editor that the story was rubbish. Days later, the closure of ITV digital - with the loss of £1.2bn of shareholders funds - was announced.

This may, of course, simply be a lack of aptitude in his dealings with the Press. But now Allen has ambitions to acquire ITN, the prestigious news service.

It is to be hoped his media skills improve before then.

No compensation

ARTHUR Andersen, the defunct accountancy group, was last Monday fined £1.1m for failures in auditing Wickes, the DIY group that crashed in 1996 when a £17m fraud was discovered. In addition, two Andersen partners were each fined £25,000. Though Wickes managed to survive and was eventually sold to Focus, shareholders were badly burned. Yet will they see any of this money to compensate for their losses? Not on your life.

Like the £3.3m fine imposed on the then Coopers & Lybrand resulting from its audit work at Robert Maxwell's publishing empire, the money will go seamlessly into the coffers of the Joint Disciplinary Scheme, the accountancy watchdog.

On the same day on the other side of the Atlantic, and in a different league in terms of making reparations, Citigroup said it would pay $2.5bn to settle a class action related to its involvement in WorldCom. Other banks are expected to follow suit, increasing the 'pot' available for out-of-pocket shareholders to possibly $5bn.

Class actions are frowned upon in the UK, but the logic of imposing a fine that merely enriches the trade association of the offending organisation and does nothing to benefit injured investors is hard to fathom.