One in six VARs in ‘danger’ zone

Plimsoll alluded to Charles Darwin’s work, asserting only the most adaptable VARs will survive this year

One in six of the UK’s top resellers are in financial jeopardy, a new report from Plimsoll has claimed.

The market watcher has given 168 of the UK’s 1,000 largest VARs a ‘danger’ rating, due to their high level of debts and profitability issues.

Seventy-eight of those in the danger zone increased their debts last year and now carry almost twice the level of debt Plimsoll recommends. The research also found that 112 are losing money as they have failed to respond to changes in their cost-sales ratio as the downturn bites.

Almost half (80) have been in business for more than 10 years and Plimsoll claimed that many of the old guard are failing to acclimatise to the modern reseller market.

Plimsoll senior analyst David Pattison argued that the market is overdue a clear out.

“The reality is, for many of these 168 danger businesses, their problems go back years, certainly long before the current UK slowdown, yet they have failed to fix their problems,” he said.

“In his work The Origin of Species, Darwin recognised that extinction was an integral part of evolution, survival going to those most responsive to change.”

However, Pattison stressed that half of the UK’s largest VARs were in rude financial health.

“There are 510 terrific companies who can compete fiercely on price, and are largely debt free while holding their margins. Most are operating at the height of productivity. These will be the ones to watch in the next period,” he said.