Top VARs 2017 analysis: Profit of doom

When we introduced a profit component into Top VARs last year, we were pleasantly surprised to discover that the industry's collective bottom line was on the rise.

Unfortunately, that trend appears to have reversed in this year's report - which was launched online yesterday - with average (mean) operating profit margins falling from 4.36 to 3.42 per cent across the 95 firms* that disclosed the figure for their last two financial years.

Of that 95, 57 saw their margins fall year on year, while only 38 saw them rise.

Collectively, these firms posted operating profit of £308m in their most recent annual accounts, compared with £376m a year earlier.

That represents 2.9 per cent of their collective revenues, down from 3.9 per cent a year earlier.

Median profit margins - perhaps the most meaningful figure given that the data is skewed by one or two outliers - also fell, from 3.2 to 2.6 per cent, and the full spread of results is shown in the graph below.

It would be easy to lay the blame at the door of last June's referendum result, and indeed some firms did just that in their

annual commentaries. Stone partly attributed its fall in gross profits

to "Brexit aftershocks", while Excitech said currency fluctuations in the wake of the vote had increased its cost of sale.

The reality will of course be more complex, but with market conditions seemingly improving in recent quarters it would be tough to bet against a margin rebound next year.