Saturday, June 11, 2011

How I helped Sir Brian Souter and Stagecoach!

I have a confession to make and I’m not sure that my progressive friends will forgive me. Today we learn that the controversial Scottish Nationalist Brian Souter, founder with his sister Ann Gloag of the bus and train giant Stagecoach, is to be knighted. These two are among the richest people in Scotland – and I have to admit that I played a part in getting them there! Here’s the story.

Back in the mid-1980s I was the Commercial manager for the oil company Shell in Scotland. My job was to manage Shell’s business with a wide range of industrial and commercial customers and I had a team of sales representatives and other staff focused on this task. It was in some ways a difficult time for business north of the border. Mrs Thatcher’s rule hit particularly hard on the Scots and many Scottish businesses, including some quite famous ones, went under. Various grades of fuel were crucial to keep the wheels of industry turning and my job was heavily involved in making judgment calls as to whether we should trade with businesses in financial difficulties. Few, even the largest, were immune from the troubles and the miners’ strike in 1984/5 brought particular problems across the whole business sector.

It was at this time that my Representative for the Dundee area came to see me with a ticklish problem. He was a good salesman and he had built up a good working relationship with a business which was growing quite rapidly and which was run by two clever and entrepreneurial young Scots - Souter and Gloag! Stagecoach in those days was a small Bus and Coach Company operating mainly in Scotland but hoping to benefit from the Conservative Government’s privatisation of the public transportation sector. Scheduled bus businesses in Scotland and the rest of the UK had been mainly publicly owned – often by local authorities. Stagecoach was predicated on the premise that this would change and that private companies, like theirs, would soon have the chance to get a share of the cake – if not all of it!

My Rep had done a good job in gaining a large share of Stagecoach’s business – including the crucial Shell credit card which the bus drivers used to buy fuel on long journeys when they were away from their home base in Dundee. For Shell it was good business. On the road sales gave a margin premium over bulk sales – but it was potentially a bit dodgy if transport operators got into financial difficulties, which they often did. Bad debts could build up rapidly if credit card use was uncontrolled. My reps story was as follows. Stagecoach had over-stretched itself. They had a lot of debt needed for financing their vehicles and high outgoings on fuel, leasing and staff costs. It was a well-managed business but in difficult times their ambitions were outstripping their capability to fund what they wanted. In short they were in a classic cash flow bind. The banks were being unhelpful and the company was seeking extended credit to keep afloat. I went with my rep to see Souter and Gloag and was impressed by their vision and by the fact that much of their business, in good times, was a cash business. Millions of low value transactions every day kept the money rolling in – but it just wasn’t enough at a time when the Bank rate was 12% and financing was really problematic. I had basically two choices. I could withdraw credit and ask for cash settlement for all transactions – that would almost certainly have forced the company into liquidation as fuel was such a high percentage of their outgoings. Or I could extend credit and be flexible over payments. I took the decision to support the company although it was quite a risk – the monthly outgoings were of the order of £100,000 and even more than that could have been at risk in the event of a default. However Stagecoach’s business model seemed robust and there was no doubting the energy and ambition of their two owners.

Well the rest, as they say, is history. My rep and I kept a close eye on Stagecoach for the next year or so but gradually their financial position improved and before I left Scotland in 1986 they were paying on normal terms – and their business continued to grow. Had they gone under in 1984 perhaps they would have re-appeared later in a different guise. Who knows? But many other Scottish businesses did perish and it was a long time before there was a truly healthy economic climate in the country. Souter and Gloag worked immensely hard to build their business and, in retrospect, I’m glad that I took the decision I did to keep them afloat. They were a significant employer in Dundee and across Scotland and that was another reason why it seemed at the time the right thing to do.

So Sir Brian I wish you well! I wonder if you remember the story I have told here. And whether you would acknowledge that a Sassenach from an Anglo-Dutch multinational played a wee part in your success!


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