cityam 2012-11-22.pdf

LLOYDS hopes it can save tens of millions of pounds by sending in turnaround experts to combat the horde of zombie firms plaguing the economy and bank balance sheets. But KPMG yesterday warned that thousands of struggling firms could starve to death, running out of cash over the next year if the economy does not improve, particularly in the retail and construction sectors. Zombies are firms that are barely staying afloat, only surviving thanks to low interest rates but unable to pay off their debts. Lloyds has arranged for 100 small zombies to get help as part of its tie- up with the Institute for Turnaround – something usually only within the financial reach of bigger firms. It hopes shaking up their business model will give firms long-term hope and create a healthy bank customer. “If nothing is done, it would mean a loss of tens of millions or hundreds of millions in bad debts, as well the wider harm of peopl e losin g their jobs , ” Ll oyds ’ Duncan Par kes tol d City A.M. “So Lloyds will see a benefit of several millions from this.” The bank has up to 500 more firms it hopes to save through the same process. And Llo yds’ st aff hav e an additional incentive to rescue the businesses – their bonuses are in part related to the number of firms turned around successfully. destroying value, they have misman- aged Autonomy,” Lynch said, adding that he had not been informed of the allegations until HP’s statement was released on Tuesday. The US compa ny’s shock writedown was largel y attributed to Autono my allegedly inflating revenue and profit figures, something which HP had apparently not noticed when it pored over Autonomy’s books before buying it in October last year. But Lynch strongly denied that his firm had doc- tored the figures. He told Channel 4: “I totally reject that allegation. Auto nomy has always bee n very clear about its accounting and what we have done is make sure that we have always been transparent.” He said that a change in culture at HP under Whitman, who was drafted in following the departure of Leo Apotheka r short ly after the deal, was responsible for Autonomy’s disap- Zombies can only just stay aliv e because of very low interest rates BUS INESS WITH PERSONALITY New help for zombie firms as debts bite Autonomy founder Mike Lynch claimed he had been made a scapegoat for HP’s failings MIKE Lynch, the founder of British software giant Autonomy, yesterday hit out at the chief executive of Hewlett-Packard (HP) over claims the US company had been lied to during its $11bn (£6.9bn) acquisition of Lynch’s firm last year. The former Auton omy boss, who was forced out of HP in May, denied any wrongdoing, rejected claims that Autono my’s figures had been inflat- ed, and said he had been made a scapegoat for HP’s failures. His comments, made in a series of interviews yesterday, painted a vastly different picture of the reasons for HP’s $8.8bn Tuesday writedown over the Autonomy acquisition, which had come alongside a disappointing set of results and had pushed the US company’s shares down to decade lows. HP boss Meg Whitman had accused former management at the firm of “serious accounting improprieties” and a “willful effort...to inflate the underlying financial metrics”, but Lynch yesterday rebuffed the allegations and accused Whitman of “grab- bing fo r str aws”. “This is a company that has deliv- ered its worst results in years and I’m not going to be HP’s scapegoat for a company that’s in utter disarray,” Lynch told Sky News yesterday. “HP came in with about 300 people, crawled over everything and found nothing wrong. And you know why? Because there was nothing wrong. “The writedown is due to them pointing performance since the deal, the exit of many senior staff, and Tuesda y’s wr itedo wn. “What has happened since [the deal] is that the business has been very badly mismanag ed, much of the tal- ent has left and that has led to the business being writte n down. They have got to open up to the fact that they, in a year, destroyed value which was cr eated over 10 y ears, ” he s aid. Lynch, who founded Autonomy in 1996, took it public in 2000, and pock- eted £500m from its sale, said he would conside r his option s rega rding a formal response “as soon as we get some detail”. His comments came as his firm’s former auditor Deloitte moved to dis- tance itself from the situation. “Deloitte categorically denies that it had any knowledge of any accounting improprieties or misrepresentations in Autonomy’s financial statements. We cond ucted our audit wor k in full compliance with regulation and pro- fessional standards,” it said. Whitman h ad said on Tue sday that HP had scrutinised the accounts audited by Deloitte when conducting due diligence on the deal. “Deloitte is not exactly ‘Brand X’ accounting firm. It would be a little challenging to go in and assume: ‘Hey we’ve got to double-check Deloitte’,” she had said. It also emerged yesterday that the matter was being investigated by the Federal Bureau of Investigation, which is working with the US Securities and Exchange Commission. HP did not comment yesterday . www.cityam.com FREE BENITEZ TAKES HELM AFTER C HELSEA WIELD AXE (AGAIN) FTSE 100 ▲5,752.03 +3.93 DOW ▲12,836.89 +48.38 NASDAQ ▲2,926.55 +9.87 £/$ 1.57 unc £/€ 1.24 unc €/$ 1.27 unc BY JAMES TITCOMB UK TECH BOSS: MY SIDE OFTHE STORY RAFA GETS THE BLUES ISSUE 1,766 THURSDAY 22 NOVEMBER 2012 UK’S DEFICIT RISES AGAIN See Page 3 See David Hellier in The Forum Page 23; Trevor Steven, Sport Page 30 EXCLUSIVE BY TIM WALLACE Certified Distribution 01/10/12 til 28/10/12 is 129,297

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