Finance function hunts for cheaper location

Diageo has in the past year doubled the size of its shared service centre in
Hungary, from 250 to 525, staff while Cadbury Schweppes is rumoured to be
looking to outsource its finance and IT departments to Ireland.

The trend towards shared service centres and other cost saving measures in
finance is such that the major accounting practices have set up new ‘advisory’
divisions to cater to the new desire for advice on the best way of locating and
sourcing finance work.

Marieanne Newton, a director in KPMG’s financial management division, said
that there were many companies mulling over the option as they felt the pinch in
a competitive market place.

‘Companies are coming under increasing cost pressures. There are differing
degrees but there’s definitely activity in the oil and gas sector, technology
companies and the FMCG market. We’re seeing an increase in outsourcing and
offshoring.’

Diageo’s shared service centre, set up in 2001, handles the company’s finance
and accounting for the drinks giants’ subsidiaries in countries including Great
Britain, Ireland, Holland, Germany, Scandinavia, Belgium, Switzerland, the US
and Australia.

The centre initially housed routine back office functions when it opened in
2002, that alone leading to a cost saving of between 40% and 50%.

Voted the best shared services centre in Europe by the shared service and
outsourcing network in 2004, the function has saved the company tens of millions
of pounds.

Cadbury Schweppes is planning to move some of its finance function to Ireland
in a more standard outsourcing deal, according to reports. The company has based
treasury functions in Ireland before and was involved in a landmark tax case to
establish the tax position of profits earnt in the business.

Asked whether there was a decision in the pipeline a Cadbury’s Schweppes
spokesperson refused to comment: ‘It’s not something that we’d be prepared to
discuss externally.’

Newton says that outsourcing may not be for everyone. ‘It’s a case of buyer
beware. Companies must understand what they are are giving away and who they are
offering it to.

‘If you’re looking for advice, don’t ask somebody that offers technology
integration and outsourcing as a service because the answer you get won’t be a
surprise. For every success story, there’s one that didn’t go so well,’ she
said.

COMPANY REPORTS

End of the tunnel

Channel Tunnel operator
Eurotunnel
has unveiled a debt restructuring plan aimed at placating its creditors and
staving off collapse. Under the deal, existing shareholders would have a minimum
13% stake in a new company that would make an offer for Eurotunnel’s shares
early next year. The move comes nearly three months after the firm was granted
bankruptcy protection in a French court. Creditors will have to vote on the
proposals before the end of November. Eurotunnel, which is currently £6.2bn in
the red, will go into administration if the scheme is rejected.

Kreinberg comes clean

David Kreinberg, former chief financial officer of voicemail software company
Comverse, has become the first major executive to plead guilty to conspiracy and
securities fraud in connection with options backdating.

After giving himself up to the FBI in August, Kreinberg entered into a
plea-bargain with federal prosecutors, as the Securities and Exchange Commission
announced that he had also agreed to pay $2.4m (£1.26m) to settle civil fraud
charges. His plea clears the way for Kreinberg to testify against former chief
executive Jacob ‘Kobi’ Alexander, who is fighting extradition from Namibia to
the US.

Refco man charged

Robert C. Trosten, former CFO of foreign exchange company Refco, has been
charged with defrauding investors in a scheme which resulted in a loss of more
than $1bn (£533m). In a US District Court in Manhattan, Trosten was also charged
with assisting Phillip R Bennett, formerly Refco’s chief executive officer, in
allegedly hiding hundreds of millions of dollars of debt owed to Refco by a
company controlled by Bennett. Trosten denies any wrongdoing.

‘Robert Trosten denies that he intentionally engaged in any fraud and looks
forward to establishing his innocence at trial,’ his lawyer, Robert Morvillo,
was reported as saying.