Zombie infestation blights channel

Analyst Plimsoll identifies more than 100 undead UK resellers in sore need of investment and impetus

Grave situation: the 132 zombie firms in the UK channels have debts averaging 51 per cent of turnover

The channel is infested with more than 100 "zombies", with numerous debt-laden resellers doing nothing more than surviving hand to mouth, according to analyst Plimsoll.

The research house claims there are 132 such firms in the UK channel, with debts averaging 51 per cent of turnover. Plimsoll characterises these businesses as zombies, existing only to pay off debt and watch their losses spiral out of control. Many take up to 80 days to settle their bills, about double the industry average, said the analyst.

Plimsoll claims zombies operate with an oppressively high cost base that stymies growth plans. But outside investment could revitalise many, and Plimsoll has identified 76 as tempting targets for takeover. Of the 23 UK distributors singled out as zombies, 14 have been picked as good acquisitions.

David Pattison, senior analyst for the research firm, said: "Some of these companies, stuck in a zombie state because of their balance sheet, have lots of potential for new owners to turn it around."

Pattison claimed the first priority for all zombies should be to get short-term finances under control by slashing costs and stemming losses. Convincing banks or other financial backers to maintain support is crucial, he said. But some will not be so lucky, and for those unable to attract a buyer, the writing is on the wall.

“Most have simply had their day and a combination of aging assets, rising losses and increasing debts mean they are unlikely to attract a suitor before the receivers are called," said Pattison. "They will be forced back into negotiations with their lenders to buy more time but their future does not look good."