Bending it like Bloomer

THE twists and turns at the Prudential would do credit to Wayne Rooney. But one doubts if investors in the Pru would see the four-year captaincy of the Pru by Jonathan Bloomer in quite the same light.

His reign at the top, in succession to the luckless Sir Peter Davis, has been festooned with surprises, not many of them pleasant.

There was the failed bid for American General, at the worst point of the bear market, followed by the first dividend cut in the insurance giant's history. Then there was the battle over the Pru's own bonus structure, with Bloomer being pinned back by shareholders. Not to mention the reckless expansion by Egg into France followed by the botched auction of the internet bank.

We were all convinced that the future of the Pru was an overseas story in the Far East and North America. Britain had become too difficult a climate for long-term savings.

Now we are told it's all terrific here and everyone should be enthusiastic about a £1bn rights issue. If this is what counts for strategic thinking we should all be worried.

One should have guessed that the Pru was due for some fund raising. Had it pulled off a coup and sold Egg, it would not have been necessary. But when it was unable to achieve anything but a firesale price, the parent needed to raise capital for growth where it could.

It is not alone among the insurers. Legal & General's rights issue of a couple of years back was at an even bigger discount to the Pru.

Standard Life is abandoning mutual status in the belief it will be able to raise the capital it needs. Royal & SunAlliance has rebuilt capital through hefty disposals and a rights issue. That leaves Aviva, where sales of American offshoots have shored up capital. Pru believes that Britain's long-term savings industry has turned the corner.

It cites a series of regulatory changes, including the 1.5% charge cap on simpler products, the ability to distribute more widely now the industry is moving from a tied to a more open model, and even Gordon Brown's tax changes for pensions. This looks a compelling case.

What a shame Bloomer waited until he dropped a £1bn bombshell into the Footsie before letting us in on his secret.

Great expectations

JUSTIN King at least has the good grace to recognise that the company he is running has gone to hell in a hand basket. But whether the new slogan 'making Sainsbury's great again' really sends a positive message is less clear.

It harkens towards the past rather than the future. Winning back the leadership it has surrendered, first to Tesco and then to Asda, over the last decade, may be impossible. Indeed, Sainsbury now has an enhanced Wm Morrison snapping at its heels too.

But King does not have a wholly disastrous legacy. Like-for-like sales are in the black at 1.8%, even if they are flattered by petrol. There is an element of 'kitchen sink' about King's write-offs of £550m, covering everything from IT to property.

As noted here yesterday, this does have the look about it of what Archie Norman did at Asda (King's former employer) when he first took over. From there on in it was recovery all the way with the right incentives, something Sainsbury is putting in place.

A good deal of what King proposes is sensible. The problem is in the stores, so moving 3,000 people into grocery and slashing head office costs does makes sense. Fixing a corrupted supply chain is essential.

Whether Sainsbury still has the ability to trade on a 'quality' brand image is more difficult.

There may be no more cheap TV sets blocking the aisles but arguably rivals, notably Tesco, closed the quality and variety gap with Sainsbury long ago. The promise to increase sales by £2.5bn over the next three years is one of those fanciful projections which also littered Stuart Rose's strategic presentation at M&S.

Someone should have warned both of them - as Unilever, BT and others could testify - that setting specific targets is giving a hostage to fortune.

This may well be the last roll of the dice for the Sainsbury family which holds 35% of the equity. They are being asked to make a personal sacrifice along with all shareholders (including me) with the cut in the dividend.

But if Sainsbury does not become great again, then expect them to cut and run.

One suspects that one of the reasons the family has stuck with it is that the biggest holder Lord Sainsbury is tied up on the government front bench in the Lords.

He may be unwilling to make any irrevocable decisions until he is free from such responsibilities.