Clementi gets Chinese burn

TRIPS to the Far East are not arranged at short notice. But this may not have been the best of times for Prudential bigwigs Jonathan Bloomer and David Clementi to be on the road.

In their absence, pressure for a coup is starting to build among investors. Until now, Clementi, a former deputy governor of the Bank of England, was thought to be immune from the City whispering campaign against Bloomer.

But some senior figures are starting to question the judgment of a chairman who has given his chief executive too much rope.

The immediate cause of dissatisfaction is the surprise £1bn rights issue and the sudden discovery of how wonderful a savings market Britain has become.

But these are but the latest twists and turns in a saga which saw Pru mess up the sale of internet bank egg and misjudge the opposition to its own executive pay plan.

Admittedly, the Pru is doing well in Asia, where the company is hosting a four-day analysts' meeting to reiterate long-term growth prospects.

But it is in the home market that its strategy is being tested. The Pru believes it is well placed to benefit from the liberalised distribution regime in Britain, but it is Legal & General that has picked up the Bradford & Bingley business.

There are pockets of support for Bloomer in the City. Kingmaker Fidelity is still keeping its powder dry. But around the lunch tables the conversation had switched from whether Bloomer would survive to who would succeed him.

Michael McLintock, who came to Pru when Sir Peter Davis bought M&G, is an early bookies' favourite but his hauteur could count against him. Mark Tucker, who left the Pru for HBOS when Bloomer took over, is seen as a choice.

Given the speed at which events are moving, Bloomer might be wise to cut his Asian junket short.

Audit revolution

NEXT year's switch to international accounting standards is going to require a sea change in thinking for companies and analysts.

In much the same way as FRS17 revolutionised pension fund accounting, so the adoption of international audit rules will dramatically alter the profits profiles of many of our major companies.

Much of the focus has been on stock options which, instead of being spread around like confetti, will have to be charged directly against above-the-line profits. Big changes are also certain on the way that goodwill is measured.

This is going to make a dramatic difference to heavy Footsie stocks like Vodafone. At present, the world's largest mobile operator writes off around £15bn of goodwill each year in accordance with existing conventions. It will not be able to do that any more.

Instead, it will only be able to write down the difference in valuation between the net present value of the goodwill and its estimate of future value.

As a result, a great deal of the goodwill in Vodafone's balance sheet will remain there. The impact on the presentation of Vodafone's results will be huge. Instead of making a below-theline loss, after the write- offs, Vodafone is going to be creating cash profits in oil company-like proportions.

Like BT before it and BP and Shell this year, the financial press are going to start measuring Vodafone profits by the minute or hour because they will be so large. We can expect Vodafone, like BP, to engage in hefty share buyback operations to mop up some of the cash and take some of its enormous float out of circulation.

It is likely to offer shareholders some real uplift in the dividend, which particularly appeals to private investors. So far much of the coverage of the switch in accounting standards has focused on procedural problems, notably the sheer difficulty that insurers are having in bringing the figures out in time.

The real challenge is going to be for investor relations departments, which are going to have to explain far greater volatility in reported results to analysts and the media. Prepare for the fireworks.

Bush's rally

IT is fashionable to criticise George W Bush for being as destructive to the American economy as he has been to Iraq.

But he managed to lead Wall Street out of the darkness of 9/11, which closed down the New York Stock Exchange and his dividend tax cuts helped the Dow Jones to rally and hold above the 10,000 level.

Bush's role in restoring financial confidence - which has benefited all of us with pension funds - should not be underestimated, budget deficit or not.

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