Trustmarque report reveals pre-Liberata finances

Loss before tax was £3.7m for the seven months to the end of 2013

A report filed with Companies House by Trustmarque's former parent company Project Lennon Topco (PLT) has unveiled a snapshot of the reseller's finances before it was rescued from administration by Liberata.

According to the document, which was filed last month, for the seven months to 31 December 2013, gross profit for the period was £7.2m on turnover of £62m over the same time frame. But the firm posted a loss before tax of £3.7m after admin expenses and interest payments were taken into account.

In June 2013, Trustmarque Group was acquired by PLT, which acted as a holding company for the firm. Late that month, its then-backer Lloyds Development Capital sold the firm to Dunedin Partners – as part of an MBO led by Scott Haddow and Angelo Di Ventura – with a view to grow services revenue through investments and acquisitions.

But following the change in private-equity backing, new auditor KPMG reviewed accounting estimates which – mainly due to revenue-recognition reporting – led to changes in previous-reported EBITDA and eventually the need for increased investments in PLT, the report said. PLT was acquired by Liberata in September last year.

According to the strategic report in the document filed with Companies House, which was signed by Liberata chief financial officer Martin Trainer, Trustmarque is set to flourish under the business processes firm.

But the report identified that the shaky public sector market could be a possible risk to the business.

"A proportion of the group's revenue is from the public sector which continues to experience significant downward pressure on expenditure," the report said. "While 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 on IT could impact the business adversely."

Towards the end of last year, government-focused resellers admitted they were nervous that the upcoming general election could result in a slowdown in public sector spending thanks to purdah – a six-week pre-election period where government tightens its purse strings.

The report added that Trustmarque is looking to mitigate possible public sector issues.

"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," it said.

On top of this, the report pointed to high competition in the VAR space as another possible risk.

"The market in which the group operates is highly competitive [and] as a result, there is constant downward pressure on margins," it said.

"The business has however established itself as a credible and well-regarded value-added reseller and mitigates the risk of competitive pressure through leading with services or wrapping service propositions around licensing provision.

"The acquisition by Liberata will further strengthen its scale and market position."