Comment: Grace’s revamp gives Aegon a fighting chance

By TERRY MURDEN
Published on 10/08/2012 00:00

ADRIAN Grace’s two-year transformation of Aegon’s UK operations reached another milestone with improved second-quarter figures that show the business is heading in the right direction.

No-one is pretending that the Dutch-owned business has suddenly found a land full of riches following the completion of its cost-cutting and restructuring programme, but Grace is now focused on building some momentum behind his growth strategy.

It won’t be easy as there are obvious headwinds to tackle: the macro-economy is weak and impacting on new business which was down on the same quarter last year; the new regulatory environment is burdensome and complex.

Grace, who took over as chief executive from Otto Thoresen, masterminded the extensive overhaul of the business starting with a review in 2010 to understand what was going wrong, followed by last year’s painful job losses and restructuring. Some businesses were closed, others offloaded.

Costs, legacy issues, new platforms and a newly-hired top team of executives have been dealt with one by one. “Now we’re in a good place,” he tells me. But there is no complacency, only an acknowledgement of how far the business has come in a short time and how, with its lower cost base and rebalanced proposition, it stands a better chance of securing its position in the market.

Unfortunately, it comes at a time of weak economic conditions at home and overseas and with little certainty as to how and when the euro crisis in particular will resolve itself.
After years of speculation about the future of the UK business, parent group boss Alex Wynaendts told analysts yesterday that Aegon has no intention of pulling out.

Of course, no-one can ever say never, and some believe the turnaround has made Aegon UK an attractive target.

Whether or not predators come knocking on the door the focus will be on proving its critics wrong.

All hands on wheel, but no way out of the jam

NOTHING seems to be going right for Chancellor George Osborne and the Bank of England governor, Sir Mervyn King.

Britain’s trade deficit hit a record high in June, all but wiping out hopes that exporters would lead Britain out of recession.

Added to dreadful second-quarter GDP figures and King’s forecast for zero growth this year, there ain’t much to cheer the economic wonks in the Treasury who will surely start to agitate for a shift in focus.

Osborne and King will no doubt regard the slowdown in demand from Europe as further evidence that the problems in the eurozone are holding Britain back.

But their case does not stack up, given that some of the eurozone countries are growing faster than Britain. This will only encourage government critics to press for more monetary stimulus, generous tax cuts and at least a temporary rise in public spending.

Perhaps there’s life in the old dog yet

HMV was meant to follow Woolworths and one or two other famous old high street names into the retail graveyard.

But after a traumatic period of restructuring and selling assets, the music retailer is still with us.

What we don’t know is how sustainable its “recovery” will prove to be. Outgoing chief executive Simon Fox was talking up its prospects yesterday despite another loss, claiming it was stable and had the support of its suppliers, banks and others who have helped turn around its fortunes.

New boss Trevor Moore should oversee a return to profit, aided by the demise of Game and the renegotiation of supplier contracts. He has a new banking facility in place to ease worries over the debt.

Analysts and investors are not so confident and are concerned about the level of debt in the business. The gains from Game could be short-lived as there was no uplift from the failure of Zavvi.

There is also no getting away from the external pressures from online and supermarket rivals who have smashed into its market.

Fox leaves HMV in better shape, but it faces a struggle to get back to full fitness.