Trustmarque 2013 numbers show top- and bottom-line declines

Restated prior-year accounts take £2m hit after revenue-recognition changes

VAR Trustmarque endured a drop in sales and profitability last year, while changes to its accounting practices also put a £2m hole in the prior year's restated numbers.

Accounts for Trustmarque Solutions Ltd reveal that the company's turnover for the 16-month period to the end of 2013 stood at £157m. This figure is £27m higher than the top-line posted in FY12, but represents a 10 per cent pro rata decline.

The directors' report reveals that, in a tough government spending environment, the company made moves to diversify its business mix last year.

"A proportion of the group's revenue is from the public sector, which continues to experience significant downward pressure on expenditure," says the report. "Whilst the Trustmarque strategy has mitigated the impact to date, and noting that IT expenditure is often an efficient way of reducing overall costs, a downturn in public sector expenditure in IT could impact the business adversely. Over the past year the business has significantly expanded its sales into the corporate customer segment, reducing the reliance from its traditional public sector base."

Pre-tax profit for the year came in an £2.7m, a drop of about a quarter on the prior-year figure. This equates to a fall in pre-tax margins from 2.7 to 1.7 per cent. However, reduced tax payments meant the net bottom line actually rose by almost £100,000 to a little less than £2.4m. Total shareholders' funds as of the end of 2013 stood at £22.4m, some £2.4m higher than they were at FY12 year-end.

The reseller's 2012 fiscal numbers were restated following a change in auditor which resulted in the company implementing different revenue-recognition policies. The restatement hit the numbers to the tune of £2m. This comprises a reduction of £479,000 in recognised revenue, £1m less in recognition of costs, and a £521,000 impairment of supplier income.

The new revenue recognition policies ultimately created a funding gap for the reseller, and its owner Dunedin Partners - which backed a £43m management buyout last year - decided it wanted out last month. Having given management about a week to find new investment or face the possibility of insolvency proceedings, outsourcing firm Liberata swooped in to acquire the business.

The directors' report states: "The strategic fit between Trustmarque and Liberata is compelling and creates both an increased market opportunity for Trustmarque and long-term stability. The acquisition fully aligns with Trustmarque's strategy of growing services revenue and creating sustainable, profitable growth."